<PAGE> 1
As filed with the Securities and Exchange Commission on April 25, 1997
Registration No. 2-86084
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Form N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 16 (X)
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 13 (X)
NYLIAC MFA SEPARATE ACCOUNT-II
(Exact Name of Registrant)
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
(Name of Depositor)
51 Madison Avenue, New York, New York 10010
(Address of Depositor's Principal Executive Office)
Depositor's Telephone Number: (212) 576-7000
Linda M. Reimer, Esq.
New York Life Insurance and Annuity Corporation
51 Madison Avenue
New York, New York 10010
(Name and Address of Agent for Service)
Copy to:
Michael Berenson, Esq. Michael J. McLaughlin, Esq.
Jorden Burt Berenson & Johnson, LLP Senior Vice President
1025 Thomas Jefferson St., N.W. and General Counsel
Suite 400 East New York Life Insurance Company
Washington, D.C. 20007 51 Madison Avenue
New York, New York 10010
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b) of Rule 485.
- ---
X on May 1, 1997 pursuant to paragraph (b) of Rule 485.
- ---
60 days after filing pursuant to paragraph (a)(1) of Rule 485.
- ---
on ___________ pursuant to paragraph (a)(1) of Rule 485.
- ---
75 days after filing pursuant to paragraph (a)(2) of Rule 485.
- ---
on ___________ pursuant to paragraph (a)(2) of Rule 485.
- ---
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
Registrant has registered an indefinite amount of the securities being offered
pursuant to this Registration Statement. On February 25, 1997, Registrant filed
its Form 24F-2 for Registrant's most recent fiscal year.
<PAGE> 2
CROSS REFERENCE SHEET
INFORMATION REQUIRED IN A PROSPECTUS
Item of Form N-4 Prospectus Caption
- ---------------- ------------------
1. Cover Page Cover Page
2. Definitions Definitions
3. Synopsis Policy Owner and Fund Expenses;
Questions and Answers About the
Facilitator (R)
4. Condensed Financial Information Condensed Financial Information
5. General Description of Registrant, New York Life Insurance and
Depositor and Portfolio Companies Annuity Corporation;
The Variable Accounts;
MainStay VP Series Fund, Inc.;
Voting Rights
6. Deductions and Expenses Charges and Deductions;
Policy Owner and Fund Expenses;
Federal Tax Matters; Distributor of
the Policies
7. General Description of Variable The Policies; Distributions Under
Annuity Contracts the Policy; Voting Rights;
Charges and Deductions; The Fixed
Account
8. Annuity Period Income Payments
9. Death Benefit Distributions Under the Policy
10. Purchases and Contract Value Accumulation Period
11. Redemptions Surrenders and Withdrawals;
Income Payments;
Cancellations
12. Taxes Federal Tax Matters
13. Legal Proceedings Statement of Additional Information-
Legal Proceedings
14. Table of Contents of the Statement of Statement of Additional Information
Additional Information
83190-10
<PAGE> 3
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Statement of Additional
Item of Form N-4 Information Caption
- ---------------- -----------------------
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information & History Not Applicable
18. Services Safekeeping of Variable Account
Assets
19. Purchase of Securities Being Offered Distributor of the Policies
20. Underwriters Distributor of The Policies
21. Calculation of Performance Data Investment Performance Calculations
22. Annuity Payments Valuation of Accumulation Units
23. Financial Statements Financial Statements
<PAGE> 4
NYLIAC MFA SEPARATE ACCOUNT I
NYLIAC MFA SEPARATE ACCOUNT II
PROSPECTUS
FOR THE
FACILITATOR(R)*
MULTI-FUNDED RETIREMENT ANNUITY POLICIES
OFFERED BY
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A DELAWARE CORPORATION)
51 MADISON AVENUE, NEW YORK, NEW YORK 10010
This prospectus describes the Multi-Funded Retirement Annuity Policies
("Policies" or, individually, "Policy") offered by New York Life Insurance and
Annuity Corporation ("NYLIAC"). The Policies are primarily designed to assist
individuals in their retirement planning regardless of whether the individual is
covered under a plan which qualifies for special federal income tax treatment.
Two types of Policies are described in this prospectus: A Single Premium
Policy and a Flexible Premium Policy. Sales of both types of Policies have been
discontinued, however, purchase payments are still being accepted under
outstanding Policies. For Policies issued under plans that qualify for special
federal income tax treatment for the participant, premium payments ("Purchase
Payments") under either type of Policy may be allocated in whole or in part to
the NYLIAC MFA Separate Account I ("Variable Account I"). For Policies that do
not qualify for special federal income tax treatment, Purchase Payments may be
allocated to the NYLIAC MFA Separate Account II ("Variable Account II").
Prior to the Retirement Date, the Policy Owner may direct that Purchase
Payments accumulate on a completely variable basis, a completely fixed basis, or
a combination variable and fixed basis. Annuity payments ("Income Payments") for
Qualified Policies may be elected to be received on a completely variable basis,
completely fixed basis, or a combined variable and fixed basis; Income Payments
for Non-Qualified Policies can be received on a fixed basis and, subject to
state filing and review, on a variable basis or on a combined variable and fixed
basis. The Policy Owner also has significant flexibility in determining the
frequency and amount of each Purchase Payment and the Retirement Date on which
Income Payments are scheduled to commence. The Policy Value can be withdrawn in
whole or in part before the Retirement Date, although in certain circumstances
withdrawals are subject to a surrender charge and tax penalty. The Policy
provides the flexibility necessary to permit a Policy Owner to devise an annuity
that best fits his or her needs.
Both Variable Account I and Variable Account II (collectively, the "Variable
Accounts") invest their assets in shares of the MainStay VP Series Fund, Inc.
(the "Fund"), a mutual fund registered under the Investment Company Act of 1940.
The Fund has available to the Variable Accounts three investment Portfolios: the
MainStay VP Growth Equity Portfolio, the MainStay VP Bond Portfolio, and the
MainStay VP Cash Management Portfolio (the "Eligible Portfolios" or the
"Portfolios"). The Policy Value will vary in accordance with the investment
performance of the Portfolios selected by the Policy Owner, and the Policy Owner
bears the entire investment risk for any amounts allocated to the Variable
Accounts.
This Prospectus sets forth the information that a prospective investor
should know before investing. A Statement of Additional Information about the
Policies and Variable Accounts is available free by writing NYLIAC at the
address above or by calling (800) 343-2952. The Statement of Additional
Information, which has the same date as this Prospectus, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. The
table of contents of the Statement of Additional Information is included at the
end of this Prospectus.
THIS PROSPECTUS MUST BE ATTACHED TO A CURRENT
PROSPECTUS FOR THE MAINSTAY VP SERIES FUND, INC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE
THE DATE OF THIS PROSPECTUS IS MAY 1, 1997
*FACILITATOR(R) IS NYLIAC'S REGISTERED SERVICE MARK FOR THE POLICIES AND IS NOT
MEANT TO CONNOTE PERFORMANCE.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS........................ 3
POLICY OWNER AND FUND EXPENSES..... 5
QUESTIONS AND ANSWERS ABOUT THE
FACILITATOR...................... 7
CONDENSED FINANCIAL INFORMATION.... 13
FINANCIAL STATEMENTS............... 18
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION AND THE VARIABLE
ACCOUNTS......................... 19
New York Life Insurance and
Annuity Corporation........... 19
The Variable Accounts............ 19
The Portfolios................... 20
Additions, Deletions, or
Substitutions of
Investments................... 20
Reinvestment..................... 21
THE POLICIES....................... 21
Purpose of Policies.............. 21
Purchase Payments................ 22
Total Disability Benefit Rider... 22
Transfers........................ 23
Accumulation Period.............. 23
(a) Crediting of Net Purchase
Payments.............. 23
(b) Valuation of Accumulation
Units................. 23
Policy Owner Inquiries........... 24
CHARGES AND DEDUCTIONS............. 24
Surrender Charges................ 24
Exceptions to Surrender Charges.. 25
Other Charges.................... 25
Taxes............................ 27
DISTRIBUTIONS UNDER THE POLICY..... 27
Surrenders and Withdrawals....... 27
(a) Surrenders................ 28
(b) Partial Withdrawals....... 28
(c) Periodic Partial
Withdrawals................ 28
(d) Hardship Withdrawals...... 28
<CAPTION>
PAGE
----
<S> <C>
Cancellations.................... 29
Retirement Date.................. 29
Death Before Retirement.......... 29
Income Payments.................. 30
(a) Election of Income Payment
Options............... 30
(b) Fixed Income Payments..... 31
(c) Variable Income
Payments................... 31
(d) Value of Variable Income
Payments.............. 32
(e) Other Methods of
Payment.................... 32
(f) Legal Developments
Regarding Income
Payments.............. 33
(g) Proof of Survivorship..... 33
Delay of Payments................ 33
Designation of Beneficiary....... 33
Restrictions Under the Texas
Optional Retirement Program... 34
Restrictions Under Internal
Revenue Code Section
403(b)(11).................... 34
THE FIXED ACCOUNT.................. 34
(a) Interest Crediting........ 34
(b) Surrender Charges......... 34
(c) Transfers to Investment
Divisions............. 35
(d) General Matters........... 36
FEDERAL TAX MATTERS................ 36
Introduction..................... 36
Taxation of Annuities in
General....................... 36
Qualified Plans.................. 38
(a) Section 403(b) Plans...... 38
(b) Individual Retirement
Annuities............. 38
(c) Corporate Pension and
Profit-Sharing Plans
and H.R. 10 Plans..... 38
(d) Deferred Compensation
Plans................. 39
DISTRIBUTOR OF THE POLICIES........ 39
VOTING RIGHTS...................... 39
STATEMENT OF ADDITIONAL
INFORMATION...................... 41
</TABLE>
2
<PAGE> 6
DEFINITIONS
ACCUMULATION PERIOD--The period between the initial Purchase Date and the
Retirement Date.
ACCUMULATION UNIT--An accounting unit used to calculate the Policy Value prior
to the Retirement Date. Each Investment Division of each Variable Account has a
distinct Accumulation Unit value.
AGE--Age on the nearest birthday.
ALLOCATION ALTERNATIVES--The Investment Divisions of the applicable Variable
Account and the Fixed Account constitute the Allocation Alternatives.
ANNUITANT--A person whose life determines the duration of Income Payments
involving life contingencies, and upon whose death, prior to the Retirement
Date, benefits under the Policy are paid.
ANNUITY UNIT--An accounting unit used to calculate Variable Income Payments.
BENEFICIARY--The person to whom benefits may be paid upon the Policy Owner's or
the Annuitant's death. In the event a Beneficiary is not designated, the Policy
Owner or the estate of the Policy Owner is the Beneficiary.
BUSINESS DAY--Generally, any day on which NYLIAC is open and the New York Stock
Exchange is open for trading. We are closed on national holidays, Martin Luther
King, Jr. Day and the Friday after Thanksgiving. In addition, we may choose to
close on the day immediately preceding or following a national holiday. Our
Business Day ends at 4:00 p.m. Eastern Time or the closing of the New York Stock
Exchange, if earlier.
ELIGIBLE PORTFOLIOS ("PORTFOLIOS")--The available mutual fund Portfolios of the
MainStay VP Series Fund, Inc. The MainStay VP Series Fund, Inc. currently has
three separate Portfolios available to the Variable Accounts: the MainStay VP
Growth Equity Portfolio, the MainStay VP Bond Portfolio, and the MainStay VP
Cash Management Portfolio.
FIXED ACCOUNT--Assets of NYLIAC that are not segregated in any of the separate
accounts of NYLIAC.
FIXED INCOME PAYMENTS--Income Payments having a guaranteed amount.
FUND--MainStay VP Series Fund, Inc. ("MainStay VP Series Fund" and, formerly,
"New York Life MFA Series Fund, Inc.").
INCOME PAYMENTS--Periodic payments made by NYLIAC to the Payee.
INVESTMENT DIVISION ("DIVISION")--A division of each of the Variable Accounts.
There will be a separate Investment Division in each Variable Account for Single
and Flexible Premium Policies corresponding to each Eligible Portfolio. Each
Investment Division invests exclusively in shares of a specified Eligible
Portfolio.
NET PURCHASE PAYMENT--A Purchase Payment less any premiums for riders and less
any required state premium tax.
NON-QUALIFIED POLICIES--Policies that do not qualify for special federal income
tax treatment.
NYLIAC ("WE," "US," "OUR")--New York Life Insurance and Annuity Corporation,
which is a wholly-owned Delaware subsidiary of New York Life Insurance Company.
PAYEE--The person designated to receive payments under an Income Payment option.
The Payee may be the Policy Owner, the Annuitant, a Beneficiary or any person
designated by the Policy Owner.
3
<PAGE> 7
POLICY ANNIVERSARY--An anniversary of the Policy Date.
POLICY DATE--The date established when a Policy is issued, from which subsequent
Policy Years, months and anniversaries are measured, unless otherwise indicated.
POLICY OWNER ("YOU," "YOUR")--The person designated as the owner in the Policy
(or surviving spouse of the Policy Owner who is named as Beneficiary, or as
Beneficiary and Contingent Annuitant, and who becomes the new Policy Owner), or
as subsequently changed, and upon whose death prior to the Retirement Date
benefits under the Policy may be paid. Generally, NYLIAC will not issue a Policy
to joint owners. However, if NYLIAC makes an exception and issues a jointly
owned policy, ownership rights and privileges under the Policy must be exercised
jointly and benefits under the Policy will be paid upon the death of any joint
owner.
POLICY VALUE--The sum of the values on any day during the Accumulation Period of
the Accumulation Units, plus the amounts in the Fixed Account and interest
credited on such amounts.
POLICY YEAR--A year commencing on the Policy Date. Subsequent Policy Years begin
on each Policy Anniversary, unless otherwise indicated.
PURCHASE DATE--The Business Day on which a Purchase Payment is received by us
and credited under the Policy.
PURCHASE PAYMENTS--The premiums paid by the Policy Owner to NYLIAC.
QUALIFIED POLICIES--Policies issued under plans that qualify for special federal
income tax treatment.
RETIREMENT DATE--The date Income Payments are scheduled to begin under the
Policy.
SERVICE OFFICE--An office authorized by NYLIAC to receive applications and/or
Purchase Payments for the Policies.
VALUATION PERIOD--A period, consisting of one or more days, from one Valuation
Time to the next succeeding Valuation Time.
VALUATION TIME--The time of the close of the New York Stock Exchange (currently
4:00 p.m. Eastern Time) on any day on which the New York Stock Exchange is open.
VARIABLE ACCOUNT I--NYLIAC MFA Separate Account I, a segregated asset account
established by NYLIAC to receive and invest Net Purchase Payments paid under
Qualified Policies.
VARIABLE ACCOUNT II--NYLIAC MFA Separate Account II, a segregated asset account
established by NYLIAC to receive and invest Net Purchase Payments paid under
Non-Qualified Policies.
VARIABLE INCOME PAYMENTS--Income Payments that have no predetermined or
guaranteed dollar amount. Variable Income Payments will vary in amount depending
upon the investment experience of the Growth Equity Portfolio. The Policy Value
you tell us to apply to provide Variable Income Payments under either Single or
Flexible Premium Policies will be used to purchase Annuity Units in the Common
Stock Investment Division for Single Premium Policies. The amount of Variable
Income Payments will increase or decrease according to the value of the Annuity
Units which reflects the investment experience of that Common Stock Investment
Division.
4
<PAGE> 8
POLICY OWNER AND FUND EXPENSES
NYLIAC MFA SEPARATE ACCOUNTS
FLEXIBLE PREMIUM POLICIES
(SALES OF FLEXIBLE PREMIUM POLICIES WERE DISCONTINUED AS OF SEPTEMBER 1, 1989)
<TABLE>
<CAPTION>
COMMON MONEY
STOCK BOND MARKET
------ ----- ------
<S> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Load(a)
(as a % of amount withdrawn)........................ 7% 7% 7%
Annual Policy Fee...................................... Lesser of $30 Per Policy
or 1% of the Policy Value.
VARIABLE ACCOUNT ANNUAL EXPENSES
(as a % of average account value)
Mortality and Expense Risk Fees..................... 1.25% 1.25% 1.25%
Administration Fees................................. 0.50% 0.50% 0.50%
Total Variable Account Annual Expenses.............. 1.75% 1.75% 1.75%
MAINSTAY VP SERIES FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT
(as a % of average account value)
Management Fees..................................... 0.25% 0.25% 0.25%
Administration Fees................................. 0.20% 0.20% 0.20%
Other Expenses...................................... 0.13% 0.13% 0.19%
Total Fund Annual Expenses(b)....................... 0.58% 0.58% 0.64%
</TABLE>
- ------------
(a) The contingent deferred sales load percentage declines from 7% in the first
four Policy Years to 1% in the tenth Policy Year with no charge thereafter.
(See "Surrender Charges" on page 24.)
(b) An expense reimbursement agreement which limited "Other Expenses" to 0.17%
annually was in effect until December 31, 1996. "Other Expenses" and "Total
Fund Annual Expenses" have been restated to reflect the absence of this
limitation in 1996.
The purpose of this Table is to assist the Policy Owner in understanding
the various costs and expenses that a Policy Owner will bear directly and
indirectly. The Table reflects charges and expenses of the Variable Account as
well as the Fund for the year ended December 31, 1996; charges and expenses may
be higher or lower in future years. For more information on the charges
described in this Table see Charges and Deductions on page 24 and the Fund
Prospectus which accompanies this Prospectus. Premium taxes will be deducted
from some Policies, in accordance with state law.
EXAMPLES
A Policy Owner would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets:
1. If you surrender your Policy at the end of the applicable time
period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Common Stock............................... $ 105 $ 177 $ 241 $379
Bond....................................... $ 105 $ 177 $ 241 $379
Money Market............................... $ 106 $ 179 $ 244 $384
</TABLE>
2. If you do not surrender or annuitize your Policy:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Common Stock............................... $ 34 $ 104 $ 176 $367
Bond....................................... $ 34 $ 104 $ 176 $367
Money Market............................... $ 35 $ 106 $ 179 $373
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
EXPENSES AND THE ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN THOSE SHOWN.
5
<PAGE> 9
POLICY OWNER AND FUND EXPENSES
NYLIAC MFA SEPARATE ACCOUNTS
SINGLE PREMIUM POLICIES
(SALES OF SINGLE PREMIUM POLICIES WERE DISCONTINUED AS OF DECEMBER 19, 1994)
<TABLE>
<CAPTION>
COMMON MONEY
STOCK BOND MARKET
------ ----- ------
<S> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Load(a)
(as a % of Policy Value withdrawn)..................... 7 % 7 % 7 %
VARIABLE ACCOUNT ANNUAL EXPENSES
(as a % of average account value)
Mortality and Expense Risk Fees........................ 1.25 % 1.25% 1.25 %
Total Variable Account Annual Expenses................. 1.25 % 1.25% 1.25 %
MAINSTAY VP SERIES FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average account value)
Management Fees........................................ 0.25 % 0.25% 0.25 %
Administration Fees.................................... 0.20 % 0.20% 0.20 %
Other Expenses......................................... 0.13 % 0.13% 0.19 %
Total Fund Annual Expenses(b).......................... 0.58 % 0.58% 0.64 %
</TABLE>
- ------------
(a) The sales charge percentage declines from 7% during the first Policy Year to
1% in the seventh Policy Year with no charge thereafter. There are a number
of exceptions to the surrender charges, including, that no surrender charge
will be imposed if the amount withdrawn in any year is 10% or less of the
beginning Policy Value. (See "Exceptions to Surrender Charges" on page 24.)
(b) An expense reimbursement agreement which limited "Other Expenses" to 0.17%
annually was in effect until December 31, 1996. "Other Expenses" and "Total
Fund Annual Expenses" have been restated to reflect the absence of this
limitation in 1996.
The purpose of this Table is to assist the Policy Owner in understanding
the various costs and expenses that a Policy Owner will bear directly and
indirectly. The Table reflects charges and expenses of the Variable Account as
well as the Fund for the year ended December 31, 1996; charges and expenses may
be higher or lower in future years. For more information on the charges
described in this Table see Charges and Deductions on page 24 and the Fund
Prospectus which accompanies this Prospectus. Premium taxes will be deducted
from some Policies, in accordance with state law.
EXAMPLES
A Policy Owner would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets:
1. If you surrender your Policy at the end of the applicable time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Common Stock................................ $ 91 $ 113 $ 135 $216
Bond........................................ $ 91 $ 113 $ 135 $216
Money Market................................ $ 92 $ 115 $ 138 $223
</TABLE>
2. If you do not surrender or annuitize your Policy:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Common Stock................................ $ 19 $ 58 $ 100 $216
Bond........................................ $ 19 $ 58 $ 100 $216
Money Market................................ $ 19 $ 60 $ 103 $223
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
EXPENSES AND THE ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN THOSE SHOWN.
6
<PAGE> 10
QUESTIONS AND ANSWERS ABOUT THE FACILITATOR(R)
NOTE: THE FOLLOWING SECTION CONTAINS BRIEF QUESTIONS AND ANSWERS ABOUT THE
FACILITATOR. REFERENCE SHOULD BE MADE TO THE BODY OF THIS PROSPECTUS FOR MORE
DETAILED INFORMATION. ALSO, "YOU" OR "YOUR" REFERS TO THE POLICY OWNER; "WE,"
"US" OR "OUR" REFERS TO NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION.
1. WHAT IS THE FACILITATOR?
Facilitator is the name of the Multi-Funded Retirement Annuity Policies
offered by NYLIAC. Such policies may be either Single Premium or Flexible
Premium Policies. (See "The Policies" at page 21). Depending upon the type of
Policy (Single Premium or Flexible Premium) and its purpose (Qualified or
NonQualified), Net Purchase Payments may be allocated to one or more of the
Investment Divisions of each of the Variable Accounts. The Variable Accounts in
turn invest in shares of the Fund. The Policy Value will vary in amount
according to the investment results of the Investment Divisions selected. Net
Purchase Payments may also be allocated, in whole or in part, to the Fixed
Account.
2. WHAT IS A RETIREMENT ANNUITY AND WHY MAY BENEFITS VARY?
A retirement annuity provides payments for the life of an Annuitant (or an
Annuitant and another person, the "Joint Annuitant") with a guaranteed number of
Income Payments or for an ascertainable sum. Annuity payments which remain the
same throughout the payment period are referred to in this prospectus as "Fixed
Income Payments." Annuity payments which vary in accordance with the investment
experience of the Growth Equity Portfolio are referred to in this prospectus as
"Variable Income Payments." The Policy Value you tell us to apply to provide
Variable Income Payments under either Single or Flexible Premium Policies will
be used to purchase Annuity Units in the Common Stock Investment Division for
Single Premium Policies. The amount of Variable Income Payments will increase or
decrease according to the value of the Annuity Units which reflects the
investment experience of that Common Stock Investment Division. Fixed Income
Payments will always be the same specified amount. (See "Income Payments" at
page 30.)
3. WHAT ARE THE AVAILABLE ALLOCATION ALTERNATIVES?
As selected by the Policy Owner, Net Purchase Payments are allocated to one
or more of the following Allocation Alternatives:
(a) Variable Accounts
Variable Account I is used for Qualified Policies, and Variable
Account II for Non-Qualified Policies. Each of the Variable Accounts
consists of three Investment Divisions for Single Premium Policies and
three for Flexible Premium Policies.
The Investment Divisions of the Variable Accounts invest
exclusively in shares of the Fund, a diversified, open-end management
investment company with three separate portfolios available for
investment under the Policies (the "Eligible Portfolios"):
<TABLE>
<CAPTION>
CORRESPONDING
INVESTMENT DIVISION ELIGIBLE PORTFOLIO
--------------------- -------------------------------------
<S> <C>
Common Stock Division MainStay VP Growth Equity Portfolio
Bond Division MainStay VP Bond Portfolio
Money Market Division MainStay VP Cash Management Portfolio
</TABLE>
7
<PAGE> 11
Each Investment Division of the Variable Accounts will invest
exclusively in the corresponding Eligible Portfolio. The three
Investment Divisions, together with the Fixed Account, constitute the
Allocation Alternatives that generally are available under each type of
Policy. For Non-Qualified Policies, the Common Stock Investment Division
is not available in New York.
(b) Fixed Account
Net Purchase Payments or portions of Net Purchase Payments
allocated to the Fixed Account will reflect a fixed interest rate. (See
"The Fixed Account" at page 34.)
4. CAN AMOUNTS BE TRANSFERRED AMONG THE ALLOCATION ALTERNATIVES?
Prior to 30 days before the Retirement Date, transfers of the value of
Accumulation Units in one Investment Division to another Investment Division
within the applicable Variable Account, or to the Fixed Account, are permitted.
The minimum amount which may be transferred generally is $1,000 for Single
Premium Policies or $500 for Flexible Premium Policies. Transfers may be limited
to no more than four in any one Policy Year. (See "Transfers" at page 23.)
Transfers may also be made from the Fixed Account to the Investment
Divisions but only in certain situations. (See "The Fixed Account" at page 34.)
5. WHAT ARE THE CHARGES OR DEDUCTIONS?
For Single Premium Policies, there is no anniversary charge for policy
administration expenses or daily charges for administrative services.
During the Accumulation Period for Flexible Premium Policies, a charge for
Policy administration expenses will be made once each year on the Policy
Anniversary if on that date the total cash value does not equal or exceed
$10,000. This charge will be the lesser of $30 or 1% of the Policy Value at the
end of the Policy Year. In addition, during the Accumulation Period, Flexible
Premium Policies will be subject to a daily charge for administrative services
equal to .50%, on an annual basis, of the daily asset value of the applicable
Variable Account. (See "Other Charges" at page 25.)
All Policies are subject to a daily charge for certain mortality and
expense risks assumed by NYLIAC. This charge is equal, on an annual basis, to
1.25% of the daily net asset value of the applicable Variable Account. (See
"Other Charges" at page 25.)
Although there is no deduction from Purchase Payments for sales charges, a
contingent deferred sales charge ("surrender charge") may be imposed on any
partial withdrawal or surrender of the Policies. The amount of the charge under
a Single Premium Policy declines from 7% during the first Policy Year to 1%
during the seventh Policy Year, with no charge thereafter. For Single Premium
Policies, four additional Purchase Payments may be made each Policy Year and
Policy Years apply separately for each additional Purchase Payment. In the case
of Flexible Premium Policies, this charge is imposed, as a percentage of the
amount withdrawn, during the first ten years after the policy is issued; the
applicable percentage declines from 7% in the first four Policy Years to 1% in
the tenth Policy Year, with no charge thereafter. (See "Surrender Charges" at
page 24 and "Exceptions to Surrender Charges" at page 25.)
8
<PAGE> 12
Finally, the value of the Fund shares reflects management fees (0.25% of
the aggregate daily net assets of the Fund for the available Portfolios)
administration fees (0.20% of the aggregate daily net assets of the Fund) and
other expenses deducted from the assets of the Fund. (See the prospectus for New
York Life MFA Series Fund, Inc., "The Fund and its Management.")
6. WHAT ARE THE MINIMUM AND MAXIMUM ADDITIONAL PURCHASE PAYMENTS?
Any additional Purchase Payments under a Non-Qualified or Qualified Single
Premium Policy must be at least $2,000 and may be limited to four in any one
Policy Year.
For a Flexible Premium Policy, Purchase Payments (of at least $40 each) can
be made at any interval or by any method we make available. The available
methods of payment are direct payments to NYLIAC, and preauthorized monthly
deductions from bank checking accounts and public or private employee payroll
deductions. For Non-Qualified Flexible Premium Policies, the maximum Purchase
Payments (excluding the premium amounts for any riders) in each Policy Year is
the greater of (a) twice the Purchase Payments scheduled to be paid in the first
Policy Year, or (b) $7,500. In effect, you set the maximum payment when the
Policy is applied for. However, Purchase Payments scheduled for the first Policy
Year could not exceed $4,999.
Purchase Payments under Qualified Flexible Premium Policies, and Purchase
Payments and additional Purchase Payments under Qualified Single Premium
Policies, may not be more than the amount permitted by law for the plan
indicated in the application for the Policy.
We reserve the right to limit the dollar amount of any Purchase Payment.
7. HOW ARE NET PURCHASE PAYMENTS ALLOCATED AMONG THE ALLOCATION
ALTERNATIVES?
You may allocate Net Purchase Payments to any of the Allocation
Alternatives each time you make a Purchase Payment, except in New York where the
Common Stock Investment Division is not available for Non-Qualified Policies.
You do not need to make allocations to each Allocation Alternative. Moreover,
you may raise or lower the percentages of the Net Purchase Payment (which must
be in whole number percentages) allocated to each Allocation Alternative at the
time you make a Purchase Payment. The minimum amount which may be allocated to
any one Allocation Alternative is $1,000 for a Single Premium Policy and $10 for
a Flexible Premium Policy.
8. WHAT HAPPENS IF PURCHASE PAYMENTS FOR A FLEXIBLE PREMIUM POLICY ARE NOT
MADE?
In the event that no Purchase Payment is received for two or more years in
a row and both (a) the total Purchase Payments for the Policy, less any partial
withdrawals and any surrender charges, and (b) the Policy Value, are less than
$2,000, we reserve the right, subject to any applicable state insurance law or
regulation, to terminate the Policy by paying you the Policy Value in one sum.
We will notify you in your annual report of our intention to exercise this right
on the 90th day following that Policy Anniversary unless a Purchase Payment is
received before the end of that 90-day period. Unless the Policy is terminated,
it can be continued until the Retirement Date.
9
<PAGE> 13
9. CAN MONEY BE WITHDRAWN FROM THE POLICY PRIOR TO THE RETIREMENT DATE?
Yes, withdrawals ($100 minimum) may be made. We will pay you all or part of
the Policy Value when we receive your written request before the Retirement Date
and while the Annuitant is living. However, a withdrawal or surrender may be
subject to a surrender charge as explained under Question 5 at page 8, and/or a
penalty tax. (See "Distributions Under the Policy" at page 27 and "Federal Tax
Matters" at page 36.)
10. HOW WILL INCOME PAYMENTS BE DETERMINED ON THE RETIREMENT DATE?
Income Payments under Qualified Policies can be either variable, fixed, or
a combination of both. Income Payments under Non-Qualified Policies can be
received on a fixed basis and, subject to state filing and review processes, on
a variable basis or a combination of both. The Owner elects the type of
payments.
There are a number of ways to determine and receive Income Payments. They
include monthly payments for a specified number of years, an annuity for life
with payments guaranteed for a minimum of 5, 10, 15 or 20 years or a joint and
survivor annuity.
Fixed Income Payments will always be in the same specified amount. However,
the amount of Variable Income Payments will increase or decrease according to
the investment experience of a Common Stock Investment Division. The Policy
Value you tell us to apply to provide Variable Income Payments under either
Single or Flexible Premium Policies will be used to purchase Annuity Units in
the Common Stock Investment Division for Single Premium Policies. The amount of
Variable Income Payments will increase or decrease according to the value of the
Annuity Units which reflects the investment experience of that Common Stock
Investment Division. (See "Income Payments" at page 30.)
11. WHAT IF THE ANNUITANT BECAME TOTALLY DISABLED?
If you applied for and have a Total Disability Benefit rider included in
your Flexible Premium Policy, it will provide for the crediting of benefit
amounts as Net Purchase Payments to your Policy during the period of the
Annuitant's total disability. There is an additional charge for this rider. (See
"Total Disability Benefit Rider" at page 22.)
12. WHAT HAPPENS IF THE ANNUITANT DIES BEFORE THE RETIREMENT DATE?
In the event the Annuitant dies before the Retirement Date, we will pay the
Beneficiary named in the Policy an amount equal to the greater of (a) the Policy
Value or (b) the total Purchase Payments less any partial withdrawals, surrender
charges, and premium amounts paid for riders. However, if the Policy Owner is
the Annuitant and the Policy Owner/Annuitant's spouse is the Beneficiary and
Contingent Annuitant, see Questions & Answers 13 & 14. (Also see "Death Before
Retirement" at page 29 and "Federal Tax Matters" at page 36.)
13. WHAT HAPPENS IF THE POLICY OWNER DIES BEFORE THE RETIREMENT DATE?
In the event the Policy Owner dies before the Retirement Date, we will pay
the Beneficiary named in the Policy an amount equal to the greater of (a) the
Policy Value or (b) the total Purchase Payments less any partial withdrawals,
surrender charges, and premium amounts paid for riders. Generally we will not
issue a Policy unless the Policy Owner and Annuitant are the same person. (There
are exceptions, however--for example, if the Policy Owner is to be a
non-individual such as a trust or corporation.) However, if the Policy Owner is
not the Annuitant but the Policy Owner's spouse is the Beneficiary, or if the
10
<PAGE> 14
Policy Owner/Annuitant's spouse is the Beneficiary and Contingent Annuitant, the
proceeds can be paid to the surviving spouse on the death of the Policy Owner
prior to the Retirement Date, or the Policy can continue with the surviving
spouse as the new Policy Owner. (See "Death Before Retirement" at page 29 and
"Federal Tax Matters" at page 36.)
14. WHAT IS A CONTINGENT ANNUITANT?
Previously, a Contingent Annuitant could be named in the application for a
Non-Qualified Policy. (Qualified Policies do not provide for the naming of a
Contingent Annuitant.) The Contingent Annuitant, who generally must be the
spouse of the Annuitant, is the person who becomes the Annuitant at the death of
the "Primary Annuitant" before the Retirement Date if the Policy Owner is still
living. The Primary Annuitant is the person named as the Annuitant in the
application for a Non-Qualified Policy. Currently, the Policies do not provide
for the naming of Contingent Annuitants.
15. WHAT ABOUT VOTING RIGHTS?
You may instruct NYLIAC how to vote shares of the Fund held by your
Variable Account. (See "Voting Rights" at page 39.)
16. HOW IS THE PAST INVESTMENT PERFORMANCE OF THE VARIABLE ACCOUNTS
CALCULATED?
From time to time, NYLIAC may advertise yields and total returns for the
Investment Divisions of the Variable Accounts. In addition, NYLIAC may advertise
the effective yield of the Money Market Investment Divisions. These figures will
be based on historical information for various periods of time measured from the
date the Investment Division commenced operations. They are not intended to
indicate future performance.
The yield of the Money Market Investment Divisions refers to the annualized
income generated by an investment in that Investment Division over a specified
seven-day period. The yield is calculated by assuming that the income generated
for that seven-day period is generated each seven-day period over a 52-week
period and is shown as a percentage of the investment. The effective yield is
calculated similarly but, when annualized, the income earned by an investment in
that Investment Division is assumed to be reinvested. The effective yield will
be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
The yield of a Bond Investment Division refers to the annualized income
generated by an investment in the Investment Division over a specified
thirty-day period. The yield is calculated by assuming that the income generated
by the investment during that thirty-day period is generated each thirty-day
period over a 12-month period and is shown as a percentage of the investment.
The total return of a Bond or Common Stock Investment Division refers to
return quotations assuming an investment has been held in the Investment
Division for various periods of time including, but not limited to, one year,
five years, ten years and a period measured from the date the Investment
Division commenced operations. The total return quotations will represent the
average annual compounded rates of return that would equate an initial
investment of $1,000 to the redemption value of that investment (after deduction
of any applicable surrender charge) as of the last day of each of the periods
for which total return quotations are provided.
11
<PAGE> 15
The yield calculations do not reflect the effect of any surrender charge
that may be applicable to a particular Policy. To the extent that the surrender
charge is applicable to a particular Policy, the yield of that Policy will be
reduced.
For additional information regarding yields and total returns calculated
using the standard formats briefly described above, please refer to the
Statement of Additional Information.
NYLIAC may from time to time also disclose average annual total return in
non-standard formats and cumulative total return for the Investment Divisions.
The non-standard average annual total return and cumulative total return will
assume that no surrender charge is applicable. NYLIAC may from time to time also
disclose yield, standard total returns, and non-standard total returns for the
Portfolios of the MFA Series Fund, but only if the performance data for the
Portfolios is accompanied by comparable data for the corresponding Investment
Division in equal prominence.
All non-standard performance data will only be disclosed if the standard
performance data for the same period, as well as for the required periods, are
also disclosed. For additional information regarding the calculation of other
performance data, please refer to the Statement of Additional Information.
12
<PAGE> 16
CONDENSED FINANCIAL INFORMATION
VARIABLE ACCOUNT I
The following Accumulation Unit values and the number of Accumulation Units
outstanding for each Investment Division for the period from 1984 through 1996
have been audited by Price Waterhouse LLP, independent accountants, whose report
on the related financial statements appears in the Statement of Additional
Information. This information should be read in conjunction with the financial
statements and notes thereto for the years ended December 31, 1996 and 1995,
which appear in the Statement of Additional Information. Per unit data is based
on average monthly units outstanding during the period.
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 23, 1984* TO DECEMBER 31, 1984
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/23/84.... $9.79 $9.79 $10.25 $10.24 $10.16 $10.16
Accumulation Unit value as of 12/31/84... $9.65 $9.60 $11.20 $11.15 $10.99 $10.93
Number of units outstanding as of
12/31/84............................... 110,607 103,538 54,212 53,620 50,248 64,613
<CAPTION>
JANUARY 1, 1985 TO DECEMBER 31, 1985
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/85..... $ 9.65 $ 9.60 $11.20 $11.15 $10.99 $10.93
Accumulation Unit value as of 12/31/85... $11.79 $11.68 $13.42 $13.29 $11.73 $11.61
Number of units outstanding as of
12/31/85............................... 428,513 710,550 371,990 338,363 84,625 131,467
<CAPTION>
JANUARY 1, 1986 TO DECEMBER 31, 1986
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/86..... $11.79 $11.68 $13.42 $13.29 $11.73 $11.61
Accumulation Unit value as of 12/31/86... $12.01 $11.83 $15.07 $14.85 $12.35 $12.17
Number of units outstanding as of
12/31/86............................... 2,459,061 3,626,426 1,993,244 2,262,947 182,666 209,949
<CAPTION>
JANUARY 1, 1987 TO DECEMBER 31, 1987
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/87..... $12.01 $11.83 $15.07 $14.85 $12.35 $12.17
Accumulation Unit value as of 12/31/87... $11.70 $11.47 $15.06 $14.76 $13.01 $12.75
Number of units outstanding as of
12/31/87............................... 3,174,755 5,534,150 1,927,300 3,065,027 557,777 573,381
</TABLE>
13
<PAGE> 17
<TABLE>
<CAPTION>
JANUARY 1, 1988 TO DECEMBER 31, 1988
----------------------------------------------------------------
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
--------- --------- --------- --------- --------- ---------
Accumulation Unit value as of 1/1/88..... $11.70 $11.47 $15.06 $14.76 $13.01 $12.75
<S> <C> <C> <C> <C> <C> <C>
Accumulation Unit value as of 12/31/88... $13.50 $13.17 $16.10 $15.70 $13.82 $13.48
Number of units outstanding as of
12/31/88............................... 2,593,056 5,503,878 1,654,124 3,202,898 539,844 833,372
<CAPTION>
JANUARY 1, 1989 TO DECEMBER 31, 1989
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/89..... $13.50 $13.17 $16.10 $15.70 $13.82 $13.48
Accumulation Unit value as of 12/31/89... $16.76 $16.27 $17.81 $17.28 $14.93 $14.48
Number of units outstanding as of
12/31/89............................... 2,342,502 5,283,687 1,698,812 3,263,694 785,457 1,194,270
<CAPTION>
JANUARY 1, 1990 TO DECEMBER 31, 1990
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/90..... $16.76 $16.27 $17.81 $17.28 $14.93 $14.48
Accumulation Unit value as of 12/31/90... $15.54 $15.01 $18.87 $18.22 $15.96 $15.41
Number of units outstanding as of
12/31/90............................... 2,214,950 5,254,923 1,674,155 3,259,172 1,046,450 1,346,706
<CAPTION>
JANUARY 1, 1991 TO DECEMBER 31, 1991
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/91..... $15.54 $15.01 $18.87 $18.22 $15.96 $15.41
Accumulation Unit value as of 12/31/91... $20.61 $19.80 $21.69 $20.84 $16.70 $16.04
Number of units outstanding as of
12/31/91............................... 2,284,837 5,220,704 1,783,401 3,241,712 938,476 1,318,974
<CAPTION>
JANUARY 1, 1992 TO DECEMBER 31, 1992
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/92..... $20.61 $19.80 $21.69 $20.84 $16.70 $16.04
Accumulation Unit value as of 12/31/92... $22.90 $21.90 $23.19 $22.17 $17.07 $16.32
Number of units outstanding as of
12/31/92............................... 2,766,943 5,343,557 2,112,825 3,248,734 815,708 1,114,559
<CAPTION>
JANUARY 1, 1993 TO DECEMBER 31, 1993
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/93..... $22.90 $21.90 $23.19 $22.17 $17.07 $16.32
Accumulation Unit value as of 12/31/93... $25.73 $24.48 $25.51 $24.26 $17.36 $16.51
Number of units outstanding as of
12/31/93............................... 2,913,244 5,373,561 2,166,420 3,200,206 684,440 828,045
</TABLE>
14
<PAGE> 18
<TABLE>
<CAPTION>
JANUARY 1, 1994 TO DECEMBER 31, 1994
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/94..... $25.73 $24.48 $25.51 $24.26 $17.36 $16.51
Accumulation Unit value as of 12/31/94... $25.72 $24.34 $24.34 $23.03 $17.81 $16.85
Number of units outstanding as of
12/31/94............................... 2,852,828 5,351,888 1,851,148 2,989,443 489,793 691,078
<CAPTION>
JANUARY 1, 1995 TO DECEMBER 31, 1995
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/95..... $25.72 $24.34 $24.34 $23.03 $17.81 $16.85
Accumulation Unit value as of 12/31/95... $32.81 $30.90 $28.44 $26.78 $18.57 $17.48
Number of units outstanding as of
12/31/95............................... 2,674,820 5,051,929 1,570,132 2,773,811 443,723 637,190
<CAPTION>
JANUARY 1, 1996 TO DECEMBER 31, 1996
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/96..... $32.81 $30.90 $28.44 $26.78 $18.57 $17.48
Accumulation Unit value as of 12/31/96... $40.34 $37.80 $28.66 $26.85 $19.26 $18.05
Number of units outstanding as of
12/31/96............................... 2,485,512 4,660,979 1,292,105 2,419,661 350,349 512,967
</TABLE>
- ------------
* Effective date of original registration statement.
VARIABLE ACCOUNT II
The following Accumulation Unit values and the number of Accumulation Units
outstanding for each Investment Division for the period from 1984 through 1996
have been audited by Price Waterhouse LLP, independent accountants, whose report
on the related financial statements appears in the Statement of Additional
Information. This information should be read in conjunction with the financial
statements and notes thereto for the years ended December 31, 1996 and 1995,
which appear in the Statement of Additional Information. Per unit data is based
on average monthly units outstanding during the period.
<TABLE>
<CAPTION>
FOR THE PERIOD JANUARY 23, 1984
TO DECEMBER 31, 1984*
------------------------------------------
BOND MONEY MARKET
INVESTMENT DIVISIONS INVESTMENT DIVISIONS
-------------------- --------------------
SINGLE FLEXIBLE SINGLE FLEXIBLE
PREMIUM PREMIUM PREMIUM PREMIUM
POLICIES POLICIES POLICIES POLICIES
--------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Accumulation Unit value as of 1/23/84.... $10.23 $10.23 $10.16 $10.16
Accumulation Unit value as of 12/31/84... $11.25 $11.16 $10.99 $10.93
Number of units outstanding as of
12/31/84............................... 68,315 20,493 99,371 25,693
</TABLE>
15
<PAGE> 19
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 18, 1985* TO DECEMBER 31, 1985
JANUARY 1, 1985 TO DECEMBER 31, 1985
----------------------------------------------------------------
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
--------- --------- --------- --------- --------- ---------
Accumulation Unit value beginning of
period................................. $10.00 $10.00 $11.25 $11.16 $10.99 $10.93
<S> <C> <C> <C> <C> <C> <C>
Accumulation Unit value as of 12/31/85... $11.79 $11.68 $13.47 $13.31 $11.73 $11.61
Number of units outstanding as of
12/31/85............................... 553,232 62,905 858,915 95,436 130,129 41,998
<CAPTION>
JANUARY 1, 1986 TO DECEMBER 31, 1986
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/86..... $11.79 $11.68 $13.47 $13.31 $11.73 $11.61
Accumulation Unit value as of 12/31/86... $12.01 $11.83 $15.13 $14.87 $12.35 $12.17
Number of units outstanding as of
12/31/86............................... 3,637,419 391,373 4,112,082 386,725 242,590 54,590
<CAPTION>
JANUARY 1, 1987 TO DECEMBER 31, 1987
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/87..... $12.01 $11.83 $15.13 $14.87 $12.35 $12.17
Accumulation Unit value as of 12/31/87... $11.70 $11.47 $15.12 $14.78 $13.01 $12.75
Number of units outstanding as of
12/31/87............................... 3,924,474 544,419 3,098,546 430,626 723,476 89,337
<CAPTION>
JANUARY 1, 1988 TO DECEMBER 31, 1988
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/88..... $11.70 $11.47 $15.12 $14.78 $13.01 $12.75
Accumulation Unit value as of 12/31/88... $13.50 $13.17 $16.16 $15.73 $13.82 $13.48
Number of units outstanding as of
12/31/88............................... 2,660,790 517,898 2,410,480 425,492 689,116 106,127
<CAPTION>
JANUARY 1, 1989 TO DECEMBER 31, 1989
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/89..... $13.50 $13.17 $16.16 $15.73 $13.82 $13.48
Accumulation Unit value as of 12/31/89... $16.76 $16.27 $17.87 $17.31 $14.93 $14.48
Number of units outstanding as of
12/31/89............................... 2,227,862 486,052 2,256,246 407,608 928,897 145,821
</TABLE>
16
<PAGE> 20
<TABLE>
<CAPTION>
JANUARY 1, 1990 TO DECEMBER 31, 1990
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/90..... $16.76 $16.27 $17.87 $17.31 $14.93 $14.48
Accumulation Unit value as of 12/31/90... $15.54 $15.01 $18.94 $18.25 $15.96 $15.41
Number of units outstanding as of
12/31/90............................... 2,053,173 469,198 2,131,300 379,901 1,140,319 160,350
<CAPTION>
JANUARY 1, 1991 TO DECEMBER 31, 1991
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/91..... $15.54 $15.01 $18.94 $18.25 $15.96 $15.41
Accumulation Unit value as of 12/31/91... $20.61 $19.80 $21.77 $20.87 $16.70 $16.04
Number of units outstanding as of
12/31/91............................... 2,131,325 452,668 2,280,073 366,317 1,008,342 145,561
<CAPTION>
JANUARY 1, 1992 TO DECEMBER 31, 1992
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/92..... $20.61 $19.80 $21.77 $20.87 $16.70 $16.04
Accumulation Unit value as of 12/31/92... $22.90 $21.90 $23.28 $22.20 $17.07 $16.32
Number of units outstanding as of
12/31/92............................... 2,819,763 450,395 2,833,731 361,717 1,051,672 116,833
<CAPTION>
JANUARY 1, 1993 TO DECEMBER 31, 1993
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/93..... $22.90 $21.90 $23.28 $22.20 $17.07 $16.32
Accumulation Unit value as of 12/31/93... $25.73 $24.48 $25.60 $24.30 $17.36 $16.51
Number of units outstanding as of
12/31/93............................... 3,212,290 451,814 3,085,495 329,502 696,844 89,155
<CAPTION>
JANUARY 1, 1994 TO DECEMBER 31, 1994
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/94..... $25.73 $24.48 $25.60 $24.30 $17.36 $16.51
Accumulation Unit value as of 12/31/94... $25.72 $24.34 $24.43 $23.07 $17.81 $16.85
Number of units outstanding as of
12/31/94............................... 3,185,075 443,527 2,533,048 302,955 603,513 76,118
<CAPTION>
JANUARY 1, 1995 TO DECEMBER 31, 1995
----------------------------------------------------------------
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>
Accumulation Unit value as of 1/1/95..... $25.72 $24.34 $24.43 $23.07 $17.81 $16.85
Accumulation Unit value as of 12/31/95... $32.81 $30.90 $28.54 $26.82 $18.57 $17.48
Number of units outstanding as of
12/31/95............................... 2,964,118 428,464 2,176,703 276,158 638,761 66,541
</TABLE>
17
<PAGE> 21
<TABLE>
<CAPTION>
JANUARY 1, 1996 TO DECEMBER 31, 1996
----------------------------------------------------------------
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
--------- --------- --------- --------- --------- ---------
Accumulation Unit value as of 1/1/96..... $32.81 $30.90 $28.54 $26.82 $18.57 $17.48
<S> <C> <C> <C> <C> <C> <C>
Accumulation Unit value as of 12/31/96... $40.34 $37.80 $28.76 $26.89 $19.26 $18.05
Number of units outstanding as of
12/31/96............................... 2,844,305 395,139 1,809,261 237,839 392,968 52,058
</TABLE>
- ------------
* Effective date of original registration statement.
FINANCIAL STATEMENTS
The audited financial statements of NYLIAC (including the auditor's report
thereon) for the fiscal years ended December 31, 1996, 1995 and 1994 and of
Variable Accounts I and II (including the auditor's report thereon) for the
years ended December 31, 1996 and 1995 are included in the Statement of
Additional Information.
* * *
This Prospectus describes only the variable aspects of the Policies, except
where fixed aspects are specifically mentioned. See the Policy itself for a
description of the fixed aspects.
18
<PAGE> 22
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
AND THE VARIABLE ACCOUNTS
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
New York Life Insurance and Annuity Corporation ("NYLIAC") is a stock life
insurance company incorporated in Delaware in 1980. NYLIAC is licensed to sell
life, accident and health insurance and annuities in the District of Columbia
and all states. In addition to the Policies described in this prospectus, NYLIAC
offers other life insurance policies and annuities. NYLIAC's Financial
Statements are found in the Statement of Additional Information.
NYLIAC is a wholly-owned subsidiary of New York Life Insurance Company
("New York Life"), a mutual life insurance company founded in New York in 1845.
New York Life had consolidated total assets amounting to $78.8 billion at the
end of 1996, and is authorized to do business in all states, the District of
Columbia and the Commonwealth of Puerto Rico. New York Life has invested in
NYLIAC, and will occasionally make additional contributions to NYLIAC to the
extent necessary to maintain capital and surplus in accordance with state
requirements.
THE VARIABLE ACCOUNTS
Each of the Variable Accounts (segregated asset accounts of NYLIAC) was
established in May 1983, pursuant to resolutions of the NYLIAC Board of
Directors. The Variable Accounts are registered as unit investment trusts with
the Securities and Exchange Commission under the Investment Company Act of 1940,
but such registration does not signify that the Securities and Exchange
Commission supervises the management, or the investment practices or policies,
of the Variable Accounts. The Variable Accounts meet the definition of "separate
account" under the federal securities laws.
Although the assets of each of the Variable Accounts belong to NYLIAC,
these assets are held separately from the other assets of NYLIAC, and are not
chargeable with liabilities incurred in any other business operations of NYLIAC
(except to the extent that assets in the Variable Accounts exceed the reserves
and other liabilities of that Variable Account). The income, capital gains and
capital losses incurred on the assets of the Variable Accounts are credited to
or are charged against the assets of those Variable Accounts, without regard to
the income, capital gains or capital losses arising out of any other business
NYLIAC may conduct. Therefore, the investment performance of the Variable
Accounts is entirely independent of both the investment performance of NYLIAC's
Fixed Account and the performance of any other separate account.
Each of the Variable Accounts currently has six Investment Divisions, three
of which invest Flexible Premium Policy Net Purchase Payments and three of which
invest Single Premium Policy Net Purchase Payments solely in the corresponding
eligible Portfolios of the Fund. The Eligible Portfolios are the Growth Equity
Portfolio, the Bond Portfolio and the Cash Management Portfolio.
Additional Investment Divisions may be added at the discretion of NYLIAC.
19
<PAGE> 23
THE PORTFOLIOS
The assets of each Eligible Portfolio are separate from the others and each
such Portfolio has different investment objectives and policies. As a result,
each Eligible Portfolio operates as a separate investment fund and the
investment performance of one Portfolio has no effect on the investment
performance of any other Portfolio.
THERE IS NO ASSURANCE THAT ANY OF THE ELIGIBLE PORTFOLIOS WILL ATTAIN THEIR
RESPECTIVE STATED OBJECTIVES.
The Fund's shares are also available to certain separate accounts funding
variable life insurance policies offered by NYLIAC. This is called "mixed
funding". Although we do not anticipate any inherent difficulties arising from
mixed funding, it is theoretically possible that, due to differences in tax
treatment or other considerations, the interest of owners of various Contracts
participating in the Fund might at some time be in conflict. The Board of
Directors of the Fund, the Fund's investment advisers, and NYLIAC are required
to monitor events to identify any material conflicts that arise from the use of
the Fund for mixed funding. For more information about the risks of mixed
funding, please refer to the Fund prospectus.
The Eligible Portfolios of the relevant Funds, along with their investment
advisers, are listed in the following table:
<TABLE>
<CAPTION>
<S> <C> <C>
FUND INVESTMENT ADVISERS ELIGIBLE PORTFOLIOS
MainStay VP Series MacKay-Shields Financial MainStay VP Cash
Fund, Inc. Corporation Management
MainStay VP Series New York Life Insurance MainStay VP Growth Equity
Fund, Inc. Company MainStay VP Bond
</TABLE>
Please refer to the attached prospectus of the Fund for a complete
description of the Fund, the investment advisers, and the Portfolios. The Fund
prospectus should be read carefully before any decision is made concerning the
allocation of Net Purchase Payments to an Investment Division corresponding to a
particular Eligible Portfolio.
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
NYLIAC retains the right, subject to any applicable law, to make additions
to, deletions from, or substitutions for, the Eligible Portfolio shares held by
any Investment Division. NYLIAC reserves the right to eliminate the shares of
any of the Eligible Portfolios and to substitute shares of another portfolio of
the Fund, or of another registered open-end management investment company, if
the shares of the Eligible Portfolios are no longer available for investment,
or, if in NYLIAC's judgment, investment in any Eligible Portfolio would become
inappropriate in view of the purposes of the Variable Accounts. To the extent
required by the Investment Company Act of 1940, substitutions of shares
attributable to a Policy Owner's interest in an Investment Division will not be
made until the Policy Owner has been notified of the change. Nothing contained
herein shall prevent the Variable Accounts from purchasing other securities for
other series or classes of policies, or from effecting a conversion between
series or classes of policies on the basis of requests made by Policy Owners.
Each of the Variable Accounts currently has six Investment Divisions, three
of which invest Flexible Premium Policy Net Purchase Payments and three of which
invest Single
20
<PAGE> 24
Premium Policy Net Purchase Payments solely in the corresponding Eligible
Portfolios of the Fund. NYLIAC may also establish additional Investment
Divisions for each of the Variable Accounts. Each additional Investment Division
will purchase shares in a new portfolio of the Fund or in another mutual fund.
New Investment Divisions may be established when, in the sole discretion of
NYLIAC, marketing, tax, investment or other conditions so warrant. Any new
Investment Divisions will be made available to existing Policy Owners on a basis
to be determined by NYLIAC. NYLIAC may also eliminate one or more Investment
Divisions, if, in its sole discretion, marketing, tax, investment or other
conditions so warrant.
In the event of any such substitution or change, NYLIAC may, by appropriate
endorsement, make such changes in the Policies as may be necessary or
appropriate to reflect such substitution or change. If deemed to be in the best
interests of persons having voting rights under the Policies, the Variable
Accounts may be operated as management companies under the Investment Company
Act of 1940, may be deregistered under such Act in the event such registration
is no longer required, or may be combined with one or more other separate
accounts.
REINVESTMENT
All dividends and capital gain distributions from Eligible Portfolios are
automatically reinvested in shares of the distributing Portfolio at their net
asset values on the payable date.
THE POLICIES
PURPOSE OF POLICIES
The Policies described in this prospectus are designed to establish
retirement benefits for two types of purchasers.
The first type of purchaser is one who is eligible to participate in, and
purchases a Policy for use with, any one of the following: (1) pension, profit
sharing, or annuity plans qualified under Sections 401 and 403(a) of the
Internal Revenue Code (the Code): (2) annuity purchase plans adopted by certain
private tax-exempt organizations and certain state-supported educational
institutions under certain circumstances under Section 403(b) of the Code; (3)
individual retirement annuities (IRAs) meeting the requirements of Section
408(b) or 408(k) of the Code; or (4) deferred compensation plans with respect to
service for state and local governments (and certain other entities) under
Section 457 of the Code. Policies purchased by these individuals for use with
these plans are referred to as "Qualified Policies." (See "Federal Tax Matters"
at page 36.)
The second type of purchaser is one who purchases a Policy other than those
described above. Policies purchased by these individuals are referred to as
Non-Qualified Policies.
To the extent amounts under the Policies are allocated to the Investment
Divisions of the Variable Accounts, the Policies are intended to provide a sum
at retirement which will tend to have reflected changes in the cost of living
before retirement, without the necessity of paying supplementary premiums to
match any increase in living costs which might occur during those years. The
Policy Value will fluctuate based on the investment experience of the Investment
Divisions selected by the Policy Owner. NYLIAC does not guarantee the
21
<PAGE> 25
investment performance of the Variable Accounts or of the Fund, and the Policy
Owner bears the entire investment risk with respect to amounts allocated to the
Investment Divisions of the Variable Accounts. There is no assurance that the
investment objectives will be achieved. Accordingly, amounts allocated to the
Investment Divisions of the Variable Accounts are subject to the risks inherent
in the securities markets and, specifically, to price fluctuations of the shares
of the Fund.
PURCHASE PAYMENTS
In all cases, up to four additional Purchase Payments may be made to Single
Premium Policies in any Policy Year. Each additional Purchase Payment must be at
least $2,000.
For Flexible Premium Policies, Purchase Payments (of at least $40 each) may
be made at any interval, or by any method NYLIAC makes available. The currently
available methods of payment are direct payments to NYLIAC, and pre authorized
monthly deductions from bank checking accounts and public or private employee
payroll deductions. Although the Policy Owner plans a schedule of Purchase
Payments for Non-Qualified Flexible Premium Policies, Purchase Payments may be
made at any time before the Retirement Date and while the Annuitant and the
Policy Owner are living, and may be increased or decreased at any time, provided
that the aggregate amount of Purchase Payments for any Policy Year (excluding
any premium amounts for riders) may not be more than the greater of (a) twice
the Purchase Payments scheduled to be paid in the first Policy Year or (b)
$7,500. However, Purchase Payments scheduled for the first Policy Year may not
exceed $4,999.
For Qualified Policies, the Purchase Payments made in any Policy Year may
not be more than the amount permitted by the plan or by law for the plan
indicated in the application for the Policy. NYLIAC reserves the right to limit
the dollar amount of any Purchase Payment.
If no Purchase Payments are made under a Flexible Premium Policy for two or
more Policy Years in a row, and both (a) the total Purchase Payments made, less
any partial withdrawals and any surrender charges, and (b) the Policy Value, are
less than $2,000, then NYLIAC may, in its sole discretion, subject to any
applicable state insurance law or regulation, cancel the Policy and pay the
Policy Owner the Policy Value. (See "Cancellations" at page 29.)
The Purchase Date (the date the Purchase Payment is credited to the Policy)
for a subsequent Purchase Payment is the Business Day on which it is received at
NYLIAC's Service Office.
TOTAL DISABILITY BENEFIT RIDER
NYLIAC will credit a benefit amount as a Net Purchase Payment for the
Policy when proof is furnished that the Annuitant has been totally disabled for
at least 6 consecutive months if the rider is in force. No benefit amounts will
be credited to the Policy after the Retirement Date or, if earlier, after the
Policy Anniversary on which the Annuitant is Age 65. Currently, this Rider is
not being offered and the information here and in the Statement of Additional
Information relates only to existing Riders.
22
<PAGE> 26
TRANSFERS
Prior to 30 days before the Retirement Date, amounts may be transferred
between Investment Divisions of the same Variable Account or to the Fixed
Account, without charge. The minimum value of Accumulation Units that may be
transferred from one Investment Division to another Investment Division within
the Variable Accounts, or to the Fixed Account, is the lesser of (i) $1,000 for
Single Premium Policies or $500 for Flexible Premium Policies or (ii) the total
value of the Accumulation Units in the Investment Division. The remaining
Accumulation Units in the Investment Division must have a value of at least
$100. If, after an ordered transfer, the value of the remaining Accumulation
Units in an Investment Division would be less than $100, it will be included in
the transfer. NYLIAC reserves the right to limit the number of transfers to no
more than four in any one Policy Year.
Depending on state filing and review processes, transfers may also be made
from the Fixed Account to the Investment Divisions in certain situations. (See
"The Fixed Account" at page 34.)
Transfer requests must be in writing on a form provided by NYLIAC.
Transfers from Investment Divisions will be made based on the Accumulation Unit
values at the end of the Valuation Period during which NYLIAC's Service Office
receives the transfer request. (See "Delay of Payments" at page 33.)
ACCUMULATION PERIOD
(a) Crediting of Net Purchase Payments
The Policy Owner may allocate a portion of each Net Purchase Payment to one
or more Allocation Alternatives as long as such portions are in whole number
percentages, except in New York where the Common Stock Investment Division is
not available for Non-Qualified Policies. The minimum amount that may be
allocated to any one Allocation Alternative is $1,000 for a Single Premium
Policy and $10 for a Flexible Premium Policy.
That portion of each Net Purchase Payment allocated to a designated
Investment Division of a Variable Account under both Single Premium and Flexible
Premium Policies is credited to the Policy in the form of Accumulation Units.
The number of Accumulation Units credited to a Policy is determined by dividing
the amount allocated to each Investment Division by the Accumulation Unit value
for that Investment Division for the Valuation Period during which the Purchase
Payment is received at NYLIAC's Executive Office or at a Service Office. The
value of an Accumulation Unit will vary in accordance with the investment
experience of the Portfolio in which the Investment Division invests. The number
of Accumulation Units credited to a Policy will not, however, change as a result
of any fluctuations in the value of an Accumulation Unit. (See "The Fixed
Account" at page 34 for a description of interest credited thereto.)
(b) Valuation of Accumulation Units
The value of Accumulation Units is expected to increase or decrease from
Valuation Period to Valuation Period. The value of Accumulation Units in each
Investment Division will change daily to reflect the investment experience of
the corresponding Portfolio as well as the daily deduction of the risk charges
(and any charges or credits for taxes). The Statement of Additional Information
contains a detailed description of how the Accumulation Units are valued.
23
<PAGE> 27
POLICY OWNER INQUIRIES
Policy Owner inquiries should be addressed to New York Life Insurance and
Annuity Corporation, 51 Madison Avenue, N.Y., N.Y. 10010, or made by calling
(212) 576-7243.
CHARGES AND DEDUCTIONS
SURRENDER CHARGES
Since no deduction for a sales charge is made from Purchase Payments, a
surrender charge (sometimes referred to as a contingent deferred sales charge)
is imposed on certain partial withdrawals and surrenders to cover certain
expenses relating to the sale of the Policies, including commissions to
registered representatives and other promotional expenses. The surrender charge
is measured as a percentage of the amount withdrawn or surrendered. The
surrender charge may apply to amounts applied under certain Income Payment
options.
In the case of a surrender, the surrender charge is deducted from the
amount paid to the Policy Owner. In the case of a partial withdrawal, surrender
charges are deducted from the remaining value of the Allocation Alternatives
from which Policy Owners direct NYLIAC to make partial withdrawals. If the
remaining value in an Allocation Alternative is less than the necessary
surrender charge, the remainder of the charge will be deducted from the amount
withdrawn from that Allocation Alternative.
For Single Premium Policies, the surrender charge is 7% of the amounts
withdrawn during the first Policy Year after the initial Purchase Payment is
made. The amount of the charge declines 1% for each additional Policy Year so
there is no charge after the seventh Policy Year, as shown in the following
chart. A surrender charge will be made for amounts withdrawn from an additional
Purchase Payment during the first seven Policy Years following that payment. For
each additional Purchase Payment, the second Policy Year begins on the first
anniversary of such additional Purchase Payment, and so on.
AMOUNT OF SURRENDER CHARGE
<TABLE>
<CAPTION>
POLICY YEAR CHARGE
-------------------------------------------------------------------- ------
<S> <C>
1................................................................... 7%
2................................................................... 6%
3................................................................... 5%
4................................................................... 4%
5................................................................... 3%
6................................................................... 2%
7................................................................... 1%
8 and later......................................................... 0%
</TABLE>
Under a Single Premium Policy, a partial withdrawal will be made from the
Allocation Alternatives from which Policy Owners direct NYLIAC to make partial
withdrawals, from the
value attributable to the earliest Purchase Payment(s), in the order in which
they were made. Surrender charges are deducted in the same manner.
For Flexible Premium Policies, the surrender charge is 7% of the amounts
withdrawn or surrendered during the first four Policy Years. The amount of the
charge declines 1% for each additional Policy Year, until the tenth Policy Year,
after which no charge is made, as shown in the following chart:
24
<PAGE> 28
AMOUNT OF SURRENDER CHARGE
<TABLE>
<CAPTION>
POLICY YEAR CHARGE
-------------------------------------------------------------------- ------
<S> <C>
1-4................................................................. 7%
5................................................................. 6%
6................................................................. 5%
7................................................................. 4%
8................................................................. 3%
9................................................................. 2%
10................................................................. 1%
11 and later....................................................... 0%
</TABLE>
EXCEPTIONS TO SURRENDER CHARGES
There are a number of exceptions to the imposition of a surrender charge.
First, under a Single Premium Policy, no surrender charge will be applied if the
total amount withdrawn in any Policy Year is 10% or less of the Policy Value at
the beginning of that Policy Year (the surrender charge will be applied to
amounts withdrawn in a Policy Year that are in excess of 10% of the Policy Value
at the beginning of that Policy Year). The amount that may be withdrawn under
this exception may be limited by prior transfers from the Fixed Account to the
Variable Accounts. (See "The Fixed Account" at page 34.) Second, no surrender
charge will be applied if a withdrawal or surrender of at least $2,000 is made
and the entire amount is applied under certain Income Payment options in the
Policy. However, if within 7 years for Single Premium Policies or 10 years for
Flexible Premium Policies, as measured from the Policy Date, any unpaid amount
applied under such Income Payment options is withdrawn, a surrender charge will
be applied to the amount withdrawn. Third, no surrender charge will be applied
if NYLIAC cancels the Policy. (See "Cancellations" at page 29.) Fourth, no
surrender charge will be applied when proceeds are paid on the death of the
Policy Owner or the Annuitant. Finally, in no event may the aggregate surrender
charges under a Policy exceed 8.5% of the total Net Purchase Payments. (See "The
Fixed Account" at page 34 for additional exceptions to the imposition of a
surrender charge.)
OTHER CHARGES
During the Accumulation Period for Flexible Premium Policies, NYLIAC
imposes certain charges which have been set at a level to recover no more than
the cost for providing policy administration services in connection with the
processing of periodic Purchase Payments. A charge for policy administration
expenses will be made once each Policy Year on the Policy Anniversary if on that
date the total cash value does not equal or exceed $10,000. This charge will be
the lesser of $30 or 1% of the Policy Value at the end of the Policy Year. This
charge is intended to offset the additional administrative expenses of billing,
collecting, processing, and confirming Purchase Payments for Flexible Premium
Policies. It is also intended to offset the cost of establishing and maintaining
the available methods of payment. (See "Purchase Payments" at page 22.) It will
be deducted from each Allocation Alternative in proportion to its percentage of
the Policy Value on the Policy Anniversary.
In addition, during the Accumulation Period, Flexible Premium Policies will
be subject to a daily charge for administrative services equal to .50%, on an
annual basis, of the daily net asset value of the applicable Variable Account.
This charge is intended to offset the additional administrative service expenses
of Flexible Premium Policies including:
25
<PAGE> 29
(i) processing changes in future Purchase Payment allocations, (ii) providing
Net Purchase Payment histories and the appropriate unit valuations associated
with those Purchase Payments, and (iii) providing Policy Owners with the more
extensive annual notices and other notices required for many Flexible Premium
Policies.
Larger Flexible Premium Policies may bear a portion of the cost of
administering smaller Flexible Premium Policies because the charge deducted for
administrative services expenses is a percentage of net asset value.
For Single Premium Policies, there is no anniversary charge for policy
administration expenses or daily charge for administrative services.
Administrative costs are lower for Single Premium Policies. However, in all
cases, a $2,000 minimum additional Purchase Payment as compared with a $480
minimum scheduled yearly Purchase Payment, $40 minimum payable at any time for
Flexible Premium Policies is required. Therefore, administrative expenses for
Single Premium Policies as a percentage of the Purchase Payment remitted are
relatively insignificant when compared to Flexible Premium Policy expenses.
For Flexible Premium and Single Premium Policies, NYLIAC also imposes risk
charges to compensate it for bearing certain mortality and expense risks under
the Policies. The Policies contain guaranteed minimum monthly fixed Income
Payment amount tables. NYLIAC promises to continue to make Income Payments to
each Annuitant, determined according to those tables and other provisions
contained in the Policy, regardless of how long the Annuitant lives and
regardless of how long all Annuitants as a group live. Thus, neither an
Annuitant's own longevity nor a greater improvement in life expectancy than that
anticipated in those tables will have an adverse effect on the Income Payments
received under the Policy. Therefore, the Annuitant is relieved of the risk of
outliving the fund accumulated for retirement. That risk is NYLIAC's. A risk
also arises from NYLIAC's guarantee that if the Annuitant or the Policy Owner
dies prior to the Retirement Date, an amount will be paid to the Beneficiary
which will be equal to the greater of (a) the sum of all Purchase Payments less
any partial withdrawals and surrender charges made before notification of death,
and less premium amounts for any riders; or (b) the Policy Value. (See "Death
Before Retirement" at page 29.) These risks are termed the mortality risk. In
addition, NYLIAC assumes the risk that the annual charges may be insufficient to
cover the actual costs incurred by NYLIAC for providing policy administration
services to Policy Owners and Annuitants. Moreover, NYLIAC does not anticipate
that the surrender charges on withdrawals and surrenders will generate
sufficient funds to pay the distribution expenses. If these charges are
insufficient to cover the expenses, the deficiency will be met from NYLIAC's
general corporate funds, including the amount derived from the risk charge. For
assuming these risks, NYLIAC makes a daily charge equal to a percentage of the
value of the net assets in the Variable Accounts. This charge is equal, on an
annual basis, to 1.25% (of which .75% is attributable to mortality risks and
.50% to expense risks) of the daily net asset values in the case of Single
Premium Policies, and 1.75% (of which .75% is attributable to mortality risks,
.50% to expense risks, and .50% for the administrative services described above)
in the case of Flexible Premium Policies. If these charges are insufficient to
cover actual costs and assumed risks, the loss will fall on NYLIAC. Conversely,
if the charge proves more than sufficient, any excess will be added to the
NYLIAC surplus.
NYLIAC guarantees that these charges will not be increased.
26
<PAGE> 30
The value of the assets in the Variable Accounts will reflect the value of
Fund shares and therefore the fees and expenses paid by the Fund, which are
described in the Fund's prospectus.
TAXES
NYLIAC will, where such taxes are imposed by state law, deduct premium
taxes relative to the Policy either (i) when a Purchase Payment is received,
(ii) when a surrender or cancellation occurs, or (iii) at the Retirement Date.
Applicable premium tax rates depend upon such factors as the Policy Owner's
current state of residency, and the insurance laws and the status of NYLIAC in
states where premium taxes are incurred. Current premium tax rates range from 0
to 3.5%. Applicable premium tax rates are subject to change by legislation,
administrative interpretations or judicial acts.
Under present laws, NYLIAC will incur state and local taxes (in addition to
the premium taxes described above) in several states. At present, these taxes
are not significant. If they increase, however, NYLIAC may make charges for such
taxes.
NYLIAC does not expect to incur any federal income tax liability
attributable to investment income or capital gains retained as part of the
reserves under the Policies. (See "Federal Tax Matters" at page 36.) Based upon
these expectations, no charge is being made currently to the Variable Accounts
for corporate federal income taxes which may be attributable to the Variable
Accounts.
NYLIAC will review the question of a charge to the Variable Accounts for
corporate federal income taxes periodically. Such a charge may be made in future
years for any federal income taxes incurred by NYLIAC. This might become
necessary if the tax treatment of NYLIAC is ultimately determined to be other
than what NYLIAC currently believes it to be, if there are changes made in the
federal income tax treatment of annuities at the corporate level, or if there is
a change in NYLIAC's tax status. In the event that NYLIAC should incur federal
income taxes attributable to investment income or capital gains retained as part
of the reserves under the Policies, the Policy Value of the Policies would be
correspondingly adjusted by any provision or charge for such taxes.
DISTRIBUTIONS UNDER THE POLICY
SURRENDERS AND WITHDRAWALS
The Policy Owner may make partial withdrawals, periodic partial
withdrawals, hardship withdrawals or surrender the Policy to receive part or all
of the Policy Value under both Flexible and Single Premium Policies, at any time
before the Retirement Date and while the Annuitant is living, by sending a
written request to NYLIAC. The amount available for withdrawal is the Policy
Value at the end of the Valuation Period during which the surrender or
withdrawal request is received (established periodic partial withdrawal request
date for periodic partial withdrawals) at NYLIAC's Service Office, less any
surrender charges, any applicable policy fee and any premium taxes required by
law to be deducted. If at the time the Policy Owner makes a withdrawal or
surrender request, he or she has not provided NYLIAC with a written election not
to have federal income taxes withheld, NYLIAC must by law withhold such taxes
from the taxable portion of any surrender or withdrawal, and remit that amount
to the federal government. In addition, some states have enacted legislation
requiring withholding. All surrenders or withdrawals will be paid within seven
days of
27
<PAGE> 31
receipt of all documents (including documents necessary to comply with federal
and state
tax law) in connection with a request or of the periodic partial withdrawal
request date, subject to postponement in certain circumstances. (See "Delay of
Payments" at page 33.)
Since the Policy Owner assumes the investment risk with respect to amounts
allocated to the Variable Accounts and because certain surrenders or withdrawals
are subject to a surrender charge and premium tax deduction, the total amount
paid upon surrender of the Policy (taking into account any prior withdrawals)
may be more or less than the total Purchase Payments made.
Surrenders and withdrawals may be taxable transactions, and the Internal
Revenue Code provides that a 10% penalty tax may be imposed on certain early
surrenders or withdrawals. (See "Federal Tax Matters--Taxation of Annuities in
General" at page 36.)
(a) Surrenders
A surrender charge and any premium tax required by law, if applicable, will
be deducted from the amount paid. The proceeds will be paid in a lump sum to the
Policy Owner unless the Policy Owner elects a different Income Payment method.
(See "Income Payments" at page 30.)
(b) Partial Withdrawals
The minimum amount that can be withdrawn is $100. The amount will be
withdrawn from the Allocation Alternatives in accordance with the Policy Owner's
request.
If the value in any of the Allocation Alternatives from which the
withdrawal is being made is less than or equal to the amount requested from that
Allocation Alternative, NYLIAC will pay the entire value of that Allocation
Alternative, less any surrender charge that may apply, to the Policy Owner. The
Policy Owner must tell NYLIAC how a partial withdrawal is to be allocated among
the Allocation Alternatives.
(c) Periodic Partial Withdrawals
Policy Owners may arrange for periodic partial withdrawals on a monthly,
quarterly or
semi-annual basis. The surrender charge, 10% penalty tax and provisions
applicable to partial withdrawals apply to periodic partial withdrawals. (See
above.)
A confirmation notice will indicate when a withdrawal has resulted in the
near or actual exhaustion of funds in one or more of the Allocation
Alternatives. In that connection, when a periodic partial withdrawal amount
exceeds the amount remaining in one or more of the Allocation Alternatives and
there is no indication of an alternate Allocation Alternative, a check will be
sent out for less than the scheduled amount and future payments will cease until
new Policy Owner instructions have been received designating new periodic
partial withdrawal Allocation Alternatives.
(d) Hardship Withdrawals
Under certain Qualified Policies, the Plan Administrator may allow, in its
sole discretion, certain withdrawals it determines to be "hardship withdrawals."
The surrender charge, 10% penalty tax and provisions applicable to partial
withdrawals apply to hardship withdrawals. For Single Premium Policies the
surrender charge will only be applied to any amounts withdrawn in any Policy
Year which, when added to all other surrender charge free withdrawals in that
Policy Year, exceed 10% of the Policy Value.
28
<PAGE> 32
CANCELLATIONS
NYLIAC may, in its sole discretion, subject to any applicable state
insurance law or regulation, cancel a Flexible Premium Policy if no Purchase
Payments are made for 2 or more Policy Years in a row, and both (a) the total
Purchase Payments made, less any partial withdrawals and any surrender charges,
and (b) the Policy Value, are less than $2,000. If such a cancellation occurs,
NYLIAC will pay the Policy Owner the Policy Value.
Similarly, NYLIAC may, in its sole discretion, subject to any applicable
state insurance law or regulation, cancel Single Premium Policies that have a
Policy Value of less than $2,000, and pay the Policy Owner the Policy Value.
We will notify the Policy Owner in the annual report of our intention to
exercise these rights on the 90th day following that Policy Anniversary, unless
a Flexible Premium Policy Purchase Payment or Single Premium Policy additional
Purchase Payment is received before the end of that 90-day period.
RETIREMENT DATE
The Policy Owner specifies a Retirement Date. The Retirement Date is the
day that Income Payments are scheduled to commence under the Policy unless the
Policy has been surrendered or an amount has been paid as proceeds to the
designated Beneficiary prior to that date. The Policy Owner may defer the
Retirement Date to any Policy Anniversary before the Annuitant will be Age 75 or
to a later date agreed to by NYLIAC, provided that written notice of the request
is received by NYLIAC at least one month before the last selected Retirement
Date. The Retirement Date and Income Payment method for Qualified Policies may
also be controlled by endorsements, the plan, or applicable law.
DEATH BEFORE RETIREMENT
If the Annuitant (which, for Non-Qualified Policies, includes any named
Contingent Annuitant who is alive at the death of the Primary Annuitant before
the Retirement Date) dies prior to the Retirement Date, an amount will be paid,
as of the date proof of death and all requirements necessary to make the payment
are received, as proceeds to the designated Beneficiary. That amount will be the
greater of: (a) the sum of all Purchase Payments less any partial withdrawals,
and surrender charges made before notification of death, and less premium
amounts for any riders; or (b) the Policy Value. This formula guarantees that
the amount paid will at least equal the sum of all Purchase Payments (less any
partial withdrawals and surrender charges on such partial withdrawals and
premium amounts for riders), independent of the investment experience of the
Variable Accounts. The Beneficiary may receive the amount payable in a lump sum
or under one of the Income Payment options.
If a Policy Owner of a Policy issued after January 18, 1985, dies before
the Retirement Date, the Policy will no longer be in force and we will pay as
proceeds to the Beneficiary an amount which is the greater of "(a)" or "(b)" as
they are described in the preceding paragraph. Payment will be made in a lump
sum to the Beneficiary unless the Policy Owner has elected or the Beneficiary
elects otherwise in a signed written notice which gives us the facts that we
need. If such an election is properly made, all or part of these proceeds will
be:
(i) applied under options 1A or 1B. (See "Income Payments" at page
30.) However, any unpaid amount remaining under options 1A or 1B at the end
of the five-
29
<PAGE> 33
year period following the Owner's death will be paid in one lump sum to the
Beneficiary; or
(ii) used to purchase an immediate annuity for the Beneficiary who
will be the owner and annuitant. Payments under the annuity or under any
other method of payment we make available must be for the life of the
Beneficiary, or for a number of years that is not more than the life
expectancy of the Beneficiary at the time of the Policy Owner's death (as
determined for federal tax purposes), and must begin within one year after
the Policy Owner's death.
The value of the proceeds will be determined at the end of the Valuation
Period during which death occurs.
For Policies issued after January 18, 1985, if the Policy Owner and the
Annuitant are not the same person and the Policy Owner's spouse is the
Beneficiary, or if the Policy Owner and the Annuitant are the same individual
and the Policy Owner's spouse is the Beneficiary and the Contingent Annuitant,
the proceeds can be paid to the surviving spouse if the Policy Owner dies before
the Retirement Date or the Policy can continue with the Policy Owner's surviving
spouse as the new Policy Owner. Generally, NYLIAC will not issue a Policy to
joint owners. However, if NYLIAC makes an exception and issues a jointly owned
Policy, ownership rights and privileges under the Policy must be exercised
jointly and benefits under the Policy will be paid upon the death of any joint
owner. (See "Federal Tax Matters--Taxation of Annuities in General" at page 36.)
If the Annuitant and Joint Annuitant, if any, die after the Retirement
Date, NYLIAC will pay the sum required by the Income Payment option in effect.
Any distribution or application of Policy proceeds will be made within 7
days after NYLIAC receives all documents (including documents necessary to
comply with federal and state tax law) in connection with the event or election
that causes the distribution to take place, subject to postponement in certain
circumstances. (See "Delay of Payments" at page 33.)
INCOME PAYMENTS
(a) Election of Income Payment Options
Income Payments can be either variable, fixed or a combination of both. At
any time before the Retirement Date, the Policy Owner may change the Income
Payment option or request any other method of payment agreeable to NYLIAC. If an
Income Payment option is chosen which depends on the continuation of the life of
the Annuitant or of a Joint Annuitant, proof of birth date may be required
before Income Payments begin. For Income Payment options involving life income,
the actual age of the Annuitant or of a Joint Annuitant will affect the amount
of each payment. Since payments to older annuitants are expected to be fewer in
number, the amount of each annuity payment shall be greater.
In the event that an Income Payment option is not selected, NYLIAC will
make monthly Income Payments which will go on for as long as the Annuitant lives
(10 years guaranteed) in accordance with Income Payment option 3A and the
Annuity Benefit section of the Policy.
Under Income Payment options involving life income, the Payee may not
receive Income Payments equal to the total Purchase Payments if the Annuitant
dies before the actuarially predicted date of death.
30
<PAGE> 34
For Income Payment options not involving life contingencies (options 1A,
1B, 2A, 2A-V or 2B below), NYLIAC bears no mortality risk notwithstanding the
mortality risk charge collected by NYLIAC. (See "Other Charges" at page 25.)
(b) Fixed Income Payments
The Policy Owner (or the Beneficiary upon the death of the Annuitant, or
the Policy Owner prior to the Retirement Date) may choose to have Income
Payments made under any of the Fixed Income Payment options described below:
1A. Interest Accumulation. NYLIAC credits interest (at least 3 1/2%
per year) on the funds remaining under this Income Payment option. This
amount can be withdrawn at any time in sums of $100 or more. Interest is
paid to the date of withdrawal on sums withdrawn.
1B. Interest Payment. NYLIAC pays interest once each month (at an
effective rate of at least 3% per year), every 3 months or 6 months, or
once each year, as chosen, based on the funds remaining under this Income
Payment option.
2A. Income for Elected Period. NYLIAC makes monthly Income Payments
for the number of years elected. When asked, NYLIAC will state in writing
what each Income Payment would be, if made every 3 months or 6 months, or
once each year.
2B. Income of Elected Amount. NYLIAC makes Income Payments of the
elected amount monthly, every 3 months or 6 months, or once each year, as
chosen, until all proceeds and interests have been paid. The total Income
Payments made each year must be at least 5% of the proceeds placed under
this Income Payment option. Each year NYLIAC credits interest of at least 3
1/2% on the funds remaining under the Income Payment option.
3A. Life Income-Guaranteed Period. NYLIAC makes an Income Payment each
month during the lifetime of the Payee. Income Payments do not change, and
are guaranteed for 5, 10, 15, or 20 years, as chosen, even if the Payee
dies sooner.
3B. Life Income-Guaranteed Total Amount. NYLIAC makes an Income
Payment each month during the lifetime of the Payee. Income Payments do not
change, and are guaranteed until the total amount paid equals the amount
placed under this Income Payment option, even if the Payee dies sooner.
3C. Life Income-Joint and Survivor. NYLIAC makes an Income Payment
each month while one or both of the two Payees are living. Income Payments
do not change, and are guaranteed for 10 years, even if both Payees die
sooner.
(c) Variable Income Payments
For Qualified Policies and, depending on state filing and review processes,
for Non-Qualified Policies, the Policy Owner (or the Beneficiary upon the death
of the Annuitant or the Policy Owner prior to the Retirement Date) may also
elect to have a portion or all of the Policy Value used to provide Income
Payments under one of the Variable Income Payment options described below:
2A-V. Income for Elected Period. NYLIAC makes monthly Income Payments
for the number of years elected. The current value of any remaining Income
Payments
31
<PAGE> 35
may be withdrawn in whole or in part at any time before the expiration of
the number of years elected.
3A-V. Life Income-Guaranteed Period. NYLIAC will make an Income
Payment each month during the lifetime of the Payee. Income Payments will
be made for a guaranteed period of 5, 10, 15, or 20 years, as elected, even
if the Payee dies sooner.
3C-V. Life Income-Joint and Survivor. NYLIAC will make an Income
Payment each month during the joint lifetime of two Payees, and continuing
for the remaining lifetime of the survivor. Income Payments will be made
for a guaranteed period of 10 years, even if both Payees die sooner.
(d) Value of Variable Income Payments
The value of Variable Income Payments will reflect the investment
experience of the Common Stock Investment Division. The Policy Value you tell us
to apply to provide Variable Income Payments under either Single or Flexible
Premium Policies will be used to purchase Annuity Units in the Common Stock
Investment Division for Single Premium Policies. The amount of Variable Income
Payments will increase or decrease according to the value of the Annuity Units
which reflects the investment experience of that Common Stock Investment
Division. The annuity tables in the Policy, which are used to calculate the
value of Variable Income Payments, are based on an "assumed investment result"
of 4% (3 1/2% if the Policy is issued for delivery in Florida or Texas). If the
actual net investment experience exactly equals the "assumed investment result,"
then the Variable Income Payments will remain the same (equal to the first
Income Payment). However, if actual investment experience exceeds the "assumed
investment result," then the Income Payments will increase; conversely, if
actual experience is worse, the Income Payments will decrease.
If a higher "assumed investment result" were used, the first Income Payment
would be larger, but subsequent payments would increase more slowly or decrease
more quickly.
The value of all payments (both fixed and variable) will be greater for
shorter guaranteed periods than for longer guaranteed periods, and greater for
life annuities than for joint and survivor annuities, because they are expected
to be made for a shorter period.
The method of computation of Variable Income Payments is described in more
detail in the Statement of Additional Information.
(e) Other Methods of Payment
If NYLIAC agrees, the Policy Owner (or the Beneficiary upon the death of
the Annuitant, or the Policy Owner prior to the Retirement Date) may choose to
have Income Payments made under some other method of payment.
A Payee receiving payments under Income Payment options 1A, 1B, 2A, 2A-V or
2B may later elect (with NYLIAC's permission) to have any unpaid amount placed
under another method of payment.
If a Payee dies on or after the Retirement Date, any unpaid Policy proceeds
must be paid under the method of payment being used as of the date of the
Payee's death. (For certain restrictions on methods of payment, see "Federal Tax
Matters" at page 36.)
32
<PAGE> 36
(f) Legal Developments Regarding Income Payments
Income Payment options involving life income are based on annuity tables
that provide the same benefit payments to men and women of the same age. In some
states, however, the use of such tables is restricted to Policies affected by
the 1983 Supreme Court decision in Arizona Governing Committee v. Norris. In
those states, Income Payment options involving life income will be based on
annuity tables that provide different benefit payments to men and women of the
same age, unless NYLIAC is requested to endorse the policy to use unisex
actuarial tables in order to comply with the intent of the Norris decision. If a
Policy is to be used in connection with an employment-related retirement or
benefit plan, consideration should be given, in consultation with legal counsel,
to whether the Policy should be endorsed to use unisex actuarial tables.
In addition, legislation was introduced in Congress which, had it been
enacted, would have required the use of tables that do not vary on the basis of
sex for some or all annuities. Currently, several states have enacted such laws.
(g) Proof of Survivorship
Satisfactory proof of survival may be required, from time to time, before
any Income Payments or other benefits will be paid. The proof will be requested
at least 30 days prior to the next scheduled benefit payment date.
DELAY OF PAYMENTS
Payment of any amounts due from the Variable Accounts under the Policy will
occur within seven days of the date NYLIAC receives all documents (including
documents necessary to comply with federal and state tax law) in connection with
a request unless:
1. The New York Stock Exchange is closed for other than usual weekends
or holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the Securities and Exchange
Commission; or
3. The Securities and Exchange Commission permits a delay for the
protection of security holders.
For the same reasons, transfers from the Variable Accounts to the Fixed
Account may be delayed.
DESIGNATION OF BENEFICIARY
The Policy Owner may select one or more Policy Beneficiaries and name them
in the application. Thereafter, before the Retirement Date and while the
Annuitant is living, the Policy Owner may change the Beneficiary by written
notice to NYLIAC. If before the Retirement Date, the Annuitant dies before the
Policy Owner and no Beneficiary for the proceeds or for a stated share of the
proceeds survives, the right to the proceeds or shares of the proceeds passes to
the Policy Owner. If the Policy Owner is the Annuitant, the proceeds pass to the
Policy Owner's estate.
However, if the Policy Owner who is not the Annuitant dies before the
Retirement Date, and no Beneficiary for the proceeds or for a stated share of
the proceeds survives, the right to the proceeds or shares of the proceeds pass
to the Policy Owner's estate.
33
<PAGE> 37
RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM
Section 36.105 of the Texas Educational Code permits participants in the
Texas Optional Retirement Program (ORP) to withdraw or surrender their interest
in a variable annuity contract issued under the ORP only upon (1) termination of
employment in the Texas public institutions of higher education, (2) retirement
or (3) death. Accordingly, a participant in the ORP (or the participant's estate
if the participant has died) will be required to obtain a certificate of
termination from the employer before the account can be redeemed.
RESTRICTIONS UNDER INTERNAL REVENUE CODE SECTION 403(B)(11)
Distributions attributable to salary reduction contributions made in years
beginning after December 31, 1988 (including the earnings on these
contributions), as well as to earnings in such years on salary reduction
accumulations held as of the end of the last year beginning before January 1,
1989, may not begin before the employee attains age 59 1/2, separates from
service, dies or becomes disabled. The plan may also provide for distribution in
the case of hardship. However, hardship distributions are limited to amounts
contributed by salary reduction; the earnings on such amounts may not be
withdrawn. Even though a distribution may be permitted under these rules (e.g.
for hardship or after separation from service), it may nonetheless be subject to
a 10% additional income tax as a premature distribution. To the extent that
these limitations on distributions conflict with the redeemability provisions of
the Investment Company Act, NYLIAC relies upon the November 28, 1988 SEC
"No-Action" letter for exemptive relief.
Under the terms of your plan you may have the option to invest in other
403(b) funding vehicles, including 403(b)(7) custodial accounts. You should
consult your plan document to make this determination.
THE FIXED ACCOUNT
The Fixed Account includes all of NYLIAC's assets except those assets
allocated to separate accounts. NYLIAC has sole discretion to invest the assets
of the Fixed Account subject to applicable law. An interest in the Fixed Account
is not registered under the Securities Act of 1933, and the Fixed Account is not
registered as an investment company under the Investment Company Act of 1940.
Accordingly neither the Fixed Account nor any interests therein are generally
subject to the provisions of these statutes, and NYLIAC has been advised that
the staff of the Securities and Exchange Commission has not reviewed the
disclosures in this Prospectus relating to the Fixed Account.
(a) Interest Crediting
NYLIAC guarantees that it will credit interest at an effective rate of at
least 4% to Net Purchase Payments or portions of Net Purchase Payments allocated
or transferred to the Fixed Account under the Policies. NYLIAC may, AT ITS SOLE
DISCRETION, credit a higher rate of interest to the Fixed Account, or to amounts
allocated or transferred to the Fixed Account.
(b) Surrender Charges
Surrender charges may be applied to withdrawals from the Fixed Account.
(See "Surrender Charges" at page 24.) In addition to the "Exceptions to
Surrender Charges"
34
<PAGE> 38
described at page 25, subject to any applicable state insurance law or
regulation, a surrender charge will not be imposed on any amount which is
withdrawn from the Fixed Account if on any Policy Anniversary the interest rate
set for that amount falls more than three percentage points below the rate which
was set for the immediately preceding Policy Year, and the Policy Owner, within
60 days after that Policy Anniversary, withdraws part or all of that amount
allocated to the Fixed Account. (For Single Premium Policies, this determination
is made independently, for each additional Purchase Payment or portion of each
additional Purchase Payment transferred to the Fixed Account, on the anniversary
of each such Purchase Payment; for Flexible Premium Policies, NYLIAC reserves
the right to set a separate yearly interest rate and period for which this rate
is guaranteed for amounts transferred to the Fixed Account.)
(c) Transfers to Investment Divisions
Depending on state filing and review processes, amounts may be transferred
from the Fixed Account to the Variable Account Investment Divisions up to 30
days prior to the Retirement Date, subject to the following conditions.
1. An amount may be transferred from the Fixed Account to the
Investment Divisions if, on any Policy Anniversary, the interest rate set
for that amount falls more than three percentage points below the rate
which was set for the immediately preceding Policy Year, and the Policy
Owner, within 60 days after that Policy Anniversary, makes a request for
such transfer. There is no minimum transfer requirements under this
condition.
2. For Single Premium Policies, during the first seven Policy Years
following the Purchase Payment to which an amount to be transferred is
attributed, an amount equal to 10% or less of the Policy Value at the
beginning of the Policy Year may be transferred during that Policy Year
from the Fixed Account to the Investment Divisions. However, any amount so
transferred will reduce, by an equivalent amount, the total amount that may
be withdrawn during that Policy Year from the Policy Value under the first
exception to the imposition of surrender charges described at "Exceptions
to Surrender Charges" at page 24. In addition, any amount withdrawn during
a Policy Year under that first exception to the imposition of a surrender
charge will limit subsequent amounts that may be transferred under this
condition in that same Policy Year. For each Purchase Payment, the second
Policy Year begins on the first anniversary of that Purchase Payment, and
so on.
3. For Flexible Premium Policies, except as stated in (c)1 above,
transfers are not permitted from the Fixed Account during the first ten
Policy Years.
4. Transfers of at least the minimum amount are permitted, for Single
Premium Policies, after the first seven Policy Years following the Purchase
Payment to which an amount to be transferred is attributed, or, for
Flexible Premium Policies, after the first ten Policy Years. The minimum
amount that may be transferred from the Fixed Account to the Investment
Divisions is the lesser of (i) $1,000 for Single Premium Policies or $500
for Flexible Premium Policies or (ii) the cash value (accumulation value)
of the Fixed Account attributed to that Purchase Payment for Single Premium
Policies or the total value of the Fixed Account for Flexible Premium
Policies. (Additionally, for Flexible Premium Policies, the remaining
values in the Fixed Account must be at least $100. If, after a contemplated
transfer, the remaining values in the
35
<PAGE> 39
Flexible Premium Policy Fixed Account would be less than $100, that amount
may be included in the transfer.)
For both Single and Flexible Premium Policies, NYLIAC reserves the right to
limit the total number of transfers to no more than four in any one Policy Year.
NYLIAC also reserves the right to limit the dollar amount of any such transfers.
(See "Transfers" at page 23.)
Transfer requests must be in writing on a form provided by NYLIAC.
(d) General Matters
Payments of any amount due from the Fixed Account may be delayed.
See the Policy itself for details and a description of the Fixed Account.
FEDERAL TAX MATTERS
INTRODUCTION
The Qualified Policies were designed for use by individuals in retirement
plans which are intended to qualify as plans qualified for special income tax
treatment under Sections 219, 401, 403, 408 or 457 of the Internal Revenue Code
of 1986 (the "Code"). The ultimate effect of federal income taxes on the Policy
Value, on Income Payments and on the economic benefit to the Policy Owner, the
Annuitant or the Beneficiary depends on the type of retirement plan for which
the Qualified Policy is purchased, on the tax and employment status of the
individual concerned and on NYLIAC's tax status. The following discussion
assumes that Qualified Policies are used in retirement plans that qualify for
the special federal income tax treatment described above. THE FOLLOWING
DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. This discussion is not
intended to address the tax consequences resulting from all of the situations in
which a person may be entitled to or may receive a distribution under a Policy.
Any person concerned about these tax implications should consult a competent tax
adviser before making a Purchase Payment. This discussion is based upon NYLIAC's
understanding of the present federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to the
likelihood of continuation of the present federal income tax laws or of the
current interpretations by the Internal Revenue Service. Moreover, no attempt
has been made to consider any applicable state or other tax laws except with
respect to the imposition of any state premium taxes.
TAXATION OF ANNUITIES IN GENERAL
The following discussion assumes that the Policies will qualify as annuity
contracts for federal income tax purposes. The Statement of Additional
Information discusses such qualifications.
Section 72 of the Code governs taxation of annuities in general. NYLIAC
believes that an annuity contract owner generally is not taxed on increases in
the value of a policy until distribution occurs either in the form of a lump sum
received by withdrawing all or part of the cash value (accumulation value)
(i.e., "withdrawals") or as Income Payments under the Income Payment option
elected. The exception to this rule is that generally, an owner of any deferred
annuity contract who is not a natural person must include in income any increase
in the excess of the Policy Owner's Policy Value over the Policy Owner's
36
<PAGE> 40
investment in the contract during the taxable year with respect to Purchase
Payments made after February 28, 1986. However, there are some exceptions to
this exception and you may wish to discuss these with your tax counsel. The
taxable portion of a distribution (in the form of an annuity or lump sum
payment) is generally taxed as ordinary income. For this purpose, the
assignment, pledge, or agreement to assign or pledge any portion of the Policy
Value generally will be treated as a distribution.
In the case of a withdrawal or surrender distributed to a participant or
beneficiary under a Qualified Policy (other than a Qualified Policy used in a
retirement plan that qualifies for special federal income tax treatment under
Section 457 of the Code as to which there are special rules), a ratable portion
of the amount received is taxable, generally based on the ratio of the
investment in the contract to the total Policy Value. The "investment in the
contract" generally equals the portion, if any, of any Purchase Payments paid by
or on behalf of an individual under a Policy which is not excluded from the
individual's gross income. For Policies issued in connection with qualified
plans, the "investment in the contract" can be zero. A special rule may apply to
such surrenders or withdrawals from Qualified Policies with respect to
investment in the contract as of December 31, 1986.
Withdrawal and annuity payments generally are subject to federal income tax
withholding. However, recipients generally may elect not to have tax withheld
from distributions, except that withholding is mandatory with respect to certain
distributions from section 401(a), 403(a) and 403(b) plans.
Generally, in the case of a withdrawal under a Non-Qualified Policy before
the annuity starting date, amounts received are first treated as taxable income
to the extent that the Policy Value immediately before the withdrawal exceeds
the "investment in the contract" at that time. Any additional amount withdrawn
is not taxable.
Although the tax consequences may vary depending on the Income Payment
option elected under the Policy, in general, only the portion of the Income
Payment that represents the amount by which the Policy Value exceeds the
"investment in the contract" will be taxed; after the investment in the Policy
is recovered, the full amount of any additional Income Payments is taxable. For
Variable Income Payments, in general the taxable portion (prior to recovery of
the investment in the contract) is determined by a formula which establishes a
specific dollar amount of each Income Payment that is not taxed. The dollar
amount is determined by dividing the "investment in the contract" by the total
number of expected periodic payments. For Fixed Income Payments, in general,
there is no tax on the portion of each payment which represents the same ratio
that the "investment in the contract" bears to the total expected value of the
Income Payments for the term of the payments; however, the remainder of each
Income Payment is taxable until the recovery of the investment in the contract,
and thereafter the full amount of each annuity payment is taxable. If death
occurs before full recovery of the investment in the contract, the unrecovered
amount may be deducted on the annuitant's final tax return.
In the case of a distribution pursuant to a Qualified or Non-Qualified
Policy, there may be imposed a penalty tax equal to 10% of the amount treated as
taxable income. The Penalty tax is not imposed in certain circumstances,
including, generally, distributions: (1) made on or after the date on which the
taxpayer is actual age 59 1/2, (2) made as a result of the Policy Owner's death
or disability, or (3) received in substantially equal installments as a life
annuity.
37
<PAGE> 41
All non-qualified, deferred annuity contracts entered into after October
21, 1988 issued by NYLIAC (or its affiliates) to the same Policy Owner during
any calendar year are to be treated as one annuity contract for purposes of
determining the amount includible in an individual's gross income. In addition,
there may be other situations in which the Treasury Department may conclude
(under its authority to issue regulations) that it would be appropriate to
aggregate two or more annuity contracts purchased by the same Policy Owner.
Accordingly, a Policy Owner should consult a competent tax advisor before
purchasing more than one Policy or other annuity contract.
A transfer of ownership of a Policy, or designation of an annuitant or
other beneficiary who is not also the Policy Owner, may result in certain income
or gift tax consequences to the Policy Owner that are beyond the scope of this
discussion. A Policy Owner contemplating any transfer or assignment of a Policy
should contact a competent tax adviser with respect to the potential tax effects
of such a transaction.
QUALIFIED PLANS
The Qualified Policy is designed for use with several types of qualified
plans. The tax rules applicable to participants and beneficiaries in such
qualified plans vary according to the type of plan and the terms and conditions
of the plan itself. Special favorable tax treatment may be available for certain
types of contributions and distributions (including special rules for certain
lump sum distributions). Adverse tax consequences may result from contributions
in excess of specified limits, distributions prior to age 59 1/2 (subject to
certain exceptions), distributions that do not conform to specified minimum
distribution rules, aggregate distributions in excess of a specified annual
amount, and in certain other circumstances. Therefore, NYLIAC makes no attempt
to provide more than general information about use of the Policies with the
various types of qualified plans. Policy Owners and participants under qualified
plans as well as Annuitants and Beneficiaries are cautioned that the rights of
any person to any benefits under qualified plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the Policy issued in connection therewith. Purchasers of Policies for use with
any qualified plan should seek competent legal and tax advice regarding the
suitability of the Policy therefor.
(a) Section 403(b) Plans. Under Section 403(b) of the Code, payments
made by public school systems and certain tax exempt organizations to
purchase annuity policies for their employees are excludable from the gross
income of the employee, subject to certain limitations. However, such
payments may be subject to FICA (Social Security) taxes.
(b) Individual Retirement Annuities. Sections 219 and 408 of the Code
permit individuals or their employers to contribute to an individual
retirement program known as an "Individual Retirement Annuity" or "IRA",
including an employer-sponsored Simplified Employee Pension or "SEP".
Individual Retirement Accounts are subject to limitations on the amount
which may be contributed and deducted and the time when distributions may
commence. In addition, distributions from certain other types of qualified
plans may be placed into an Individual Retirement Accounts on a
tax-deferred basis.
(c) Corporate Pension and Profit-Sharing Plans and H.R. 10
Plans. Sections 401(a) and 403(a) of the Code permit corporate employers
to establish various
38
<PAGE> 42
types of retirement plans for employees, and self-employed individuals to
establish qualified plans for themselves and their employees. Such
retirement plans may permit the purchase of the Policies to provide
benefits under the plans.
(d) Deferred Compensation Plans. Section 457 of the Code, while not
actually providing for a qualified plan as that term is normally used,
provides for certain deferred compensation plans with respect to service
for state governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities and tax exempt
organizations which enjoy special treatment. The Policies can be used with
such plans. Under such plans, a participant may specify the form of
investment in which his or her participation will be made. All such
investments, however, are owned by, and are subject to, the claims of the
general creditors of the sponsoring employer.
DISTRIBUTOR OF THE POLICIES
NYLIFE Distributors Inc. ("NYLIFE Distributors"), 51 Madison Avenue, New
York, New York 10010, is the principal underwriter and the distributor of the
Policies and is an indirect wholly-owned subsidiary of New York Life. The
maximum commission paid to registered representatives of broker-dealers who have
entered into dealer agreements with NYLIFE Distributors is 3 1/2%. From time to
time, NYLIFE Distributors may enter into a special arrangement with a
broker-dealer, which provides for the payment of higher commissions to such
broker-dealer in connection with sales of the Policies. Purchasers of Policies
will be informed prior to purchase of any applicable special arrangement.
VOTING RIGHTS
To the extent required by law, the Eligible Portfolio shares held in the
Variable Accounts will be voted by NYLIAC at special shareholder meetings of the
Fund in accordance with instructions received from persons having voting
interests in the corresponding Investment Division. If, however, the Investment
Company Act of 1940 or any regulation thereunder should be amended, or if the
present interpretation thereof should change, and as a result, NYLIAC determines
that it is allowed to vote the Eligible Portfolio shares in its own right,
NYLIAC may elect to do so.
As a result of a change in Maryland law, the Fund is no longer required to
hold routine annual stockholder meetings. The Fund's Board of Directors has
decided not to hold routine annual stockholder meetings. Special stockholder
meetings will be called when necessary. Not holding routine annual meetings will
result in Policy Owners having a lesser role in governing the business of the
Fund.
The number of votes which are available to a Policy Owner will be
calculated separately for each Investment Division of the Variable Accounts.
That number will be determined by applying his or her percentage interest, if
any, in a particular Investment Division to the total number of votes
attributable to the Investment Division.
Prior to the Retirement Date, the Policy Owner holds a voting interest in
each Investment Division to which Policy Value is allocated. The number of votes
which are available to a Policy Owner will be determined by dividing the Policy
Value attributable to an Investment Division by the net asset value per share of
the applicable Eligible Portfolios.
39
<PAGE> 43
After the Retirement Date, the person receiving Variable Income Payments
has the voting interest. The number of votes after the Retirement Date will be
determined by dividing the reserve for such Policy allocated to a Common Stock
Investment Division by the net asset value per share of the Growth Equity
Portfolio. After the Retirement Date, the votes attributable to a Policy
decrease as the reserves allocated to a Common Stock Investment Division
decrease. In determining the number of votes, fractional shares will be
recognized.
The number of votes of the Eligible Portfolio which are available will be
determined as of the date coincident with the date established by that Portfolio
for determining shareholders eligible to vote at the meeting of the Fund. Voting
instructions will be solicited by written communication prior to such meeting in
accordance with procedures established by the Fund.
Fund shares as to which no timely instructions are received will be voted
in proportion to the voting instructions which are received with respect to all
Policies participating in that Investment Division. Voting instructions to
abstain on any item to be voted upon will be applied on a pro rata basis to
reduce the votes eligible to be cast.
Each person having a voting interest in an Investment Division will receive
proxy material, reports and other materials relating to the appropriate Eligible
Portfolio.
40
<PAGE> 44
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more
details concerning the subjects discussed in this Prospectus. The following is
the Table of Contents for that Statement:
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE POLICIES......................................................................... 2
INVESTMENT PERFORMANCE CALCULATIONS.................................................. 4
NEW YORK LIFE MFA SERIES FUND, INC. ................................................. 8
GENERAL MATTERS...................................................................... 8
FEDERAL TAX MATTERS.................................................................. 9
DISTRIBUTOR OF THE POLICIES.......................................................... 10
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS............................................... 10
STATE REGULATION..................................................................... 10
RECORDS AND REPORTS.................................................................. 11
LEGAL PROCEEDINGS.................................................................... 11
INDEPENDENT ACCOUNTANTS.............................................................. 11
OTHER INFORMATION.................................................................... 11
FINANCIAL STATEMENTS................................................................. F-1
</TABLE>
41
<PAGE> 45
The Facilitator:
A contemporary retirement annuity
for dynamic financial times
YOUR STATEMENTS OF
ADDITIONAL INFORMATION
LOGO
<PAGE> 46
NYLIAC MFA SEPARATE ACCOUNT I
NYLIAC MFA SEPARATE ACCOUNT II
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
FACILITATOR(R)*
MULTI-FUNDED RETIREMENT ANNUITY POLICIES
OFFERED BY
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A DELAWARE CORPORATION)
MAY 1, 1997
This Statement of Additional Information is not a prospectus. Much of the
information contained in this Statement of Additional Information expands upon
subjects discussed in the current Facilitator Prospectus. Accordingly, this
Statement should be read in conjunction with the current Facilitator Prospectus,
dated May 1, 1997, which may be obtained by calling NYLIAC at (212) 576-7243, or
writing to New York Life Insurance and Annuity Corporation at 51 Madison Avenue,
New York, New York 10010. Terms used in the current Facilitator Prospectus are
incorporated in this Statement.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE POLICIES.................................................................. 2
Total Disability Benefit Rider........................................... 2
Valuation of Accumulation Units.......................................... 2
Computation of Variable Income Payments.................................. 3
Contingent Annuitant..................................................... 4
INVESTMENT PERFORMANCE CALCULATIONS........................................... 4
Money Market Investment Division......................................... 4
Bond Investment Division Yields.......................................... 5
Bond and Common Stock Standard Total Return Calculations................. 6
Other Performance Data................................................... 7
MAINSTAY VP SERIES FUND, INC. ................................................ 8
GENERAL MATTERS............................................................... 8
FEDERAL TAX MATTERS........................................................... 9
Taxation of New York Life Insurance and Annuity Corporation.............. 9
Tax Status of the Policies............................................... 9
DISTRIBUTOR OF THE POLICIES................................................... 10
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS........................................ 10
STATE REGULATION.............................................................. 10
RECORDS AND REPORTS........................................................... 11
LEGAL PROCEEDINGS............................................................. 11
INDEPENDENT ACCOUNTANTS....................................................... 11
OTHER INFORMATION............................................................. 11
FINANCIAL STATEMENTS.......................................................... F-1
</TABLE>
* Facilitator(R) is NYLIAC's registered service mark for the Policies and is not
meant to connote performance.
<PAGE> 47
THE POLICIES
The following provides additional information about the Policies, to
supplement the description in the Prospectus, which may be of interest to some
Policy Owners.
TOTAL DISABILITY BENEFIT RIDER
As described in the Prospectus, the Total Disability Benefit Rider credits
benefit amounts as Net Purchase Payments if the Annuitant is totally disabled
for at least six consecutive months. No benefit amounts will be credited to the
Policy after either the Retirement Date or, if earlier, the Policy Anniversary
on which the Annuitant is Age 65. The Annuitant is considered to be totally
disabled if unable to perform his or her own occupation. The total disability
must be caused by an injury or sickness that first occurs after the rider was
issued. However, after total disability has lasted for two years, the Annuitant
will be deemed to be totally disabled only if unable to perform any occupation
for which he or she is reasonably suited based on education, training and work
experience. NYLIAC will not credit any benefit amounts in connection with the
following disabilities; (i) those that start prior to the Annuitant's fifth
birthday; (ii) those that are caused by an intentionally self-inflicted injury;
or (iii) those that are caused by act of war.
The benefit amount for each month during a period of total disability will
be determined as follows: (a) if total disability began 60 or more months after
the rider is issued, the amount is one-sixtieth of the Basic Plan Premiums
(Purchase Payments less premium amounts paid for riders) paid or credited within
the 60 months before the disability began; (b) if total disability starts more
than 12 but within 60 months after the rider is issued, the amount is the total
of the Basis Plan Premiums paid or credited while the rider was in effect
divided by the number of full and partial months that the rider was in effect;
(c) if total disability began within 12 months after the rider was issued, the
amount will be the smaller of the total scheduled Basic Plan Premiums for the
first Policy Year divided by 12 or the total Basic Plan Premiums paid while the
rider was in effect divided by the number of full and partial months that the
rider was in effect. However, for a Flexible Premium Non-Qualified Policy, the
benefit amount will never be more than $1,250 in any policy month. For a
Flexible Premium Qualified Policy, the benefit amount will never be more than
the greater of $2,500 in any policy month or the pro rata monthly amount
permitted by law for the applicable tax qualified plan. (See "Federal Tax
Matters-Qualified Plans" at page 38 of the Prospectus.)
For Non-Qualified Policies, only total disabilities of the Primary
Annuitant (the person named as the Annuitant in the application for a Policy)
are covered. However, previously, if the Contingent Annuitant became the
Annuitant, the Policy Owner could apply to NYLIAC to have a new rider included
in the Policy to cover the Contingent Annuitant. New sales of the Total
Disability Rider have been discontinued.
VALUATION OF ACCUMULATION UNITS
Accumulation Units are valued separately for each Investment Division of
each Variable Account. The method used for valuing Accumulation Units in each
Investment Division is the same. The value of each Accumulation Unit was
arbitrarily set as of the date operations began for the Investment Division.
Thereafter, the value of an Accumulation Unit of an Investment Division for any
Valuation Period equals the value of an Accumulation Unit in that Investment
Division as of the immediately preceding Valuation Period multiplied by the "Net
Investment Factor" for that Investment Division for the current Valuation
Period.
2
<PAGE> 48
The Net Investment Factor for each Investment Division for any Valuation
Period is determined by dividing (a) by (b) and subtracting (c) from the result,
where:
(a) is the result of:
(1) the net asset value per share of the Eligible Portfolio shares
held in the Investment Division determined at the end of the current
Valuation Period, plus
(2) the per share amount of any dividend or capital gain
distribution made by the Eligible Portfolio for shares held in the
Investment Division if the "ex-dividend" date occurs during the current
Valuation Period, plus or minus (only in the case of Variable Account II
Investment Divisions),
(3) a charge or credit, if any, for taxes; and
(b) is the net result of:
(1) the net asset value per share of the Eligible Portfolio shares
held in the Investment Division determined as of the end of the
immediately preceding Valuation Period, plus or minus (only in the case
of Variable Account II Investment Divisions),
(2) a charge or credit, if any, for taxes; and
(c) is a factor representing the charges deducted from the applicable
Investment Division on a daily basis. For Flexible Premium Policies the
factor is equal, on an annual basis, to 1.75% of the daily net asset value
of Variable Accounts I and II, respectively. This factor represents a
charge of 1.25% for mortality and expense risks (of which .75% is
attributable to mortality risks and .50% to expense risks) and a charge of
.50% for administrative services. For Single Premium Policies, such factor
is equal, on an annual basis, to 1.25% of the daily net asset value of
Variable Accounts I and II, respectively, and represents the charge for
mortality and expense risks (of which .75% is attributable to mortality
risks and .50% to expense risks). (See "Other Charges" at page 25 of the
Prospectus.)
The Net Investment Factor may be greater or less than one. Therefore, the
value of an Accumulation Unit in an Investment Division may increase or decrease
from Valuation Period to Valuation Period.
COMPUTATION OF VARIABLE INCOME PAYMENTS
Monthly Income Payments paid by NYLIAC on a variable basis are computed as
follows. The Policy Value (or portion of the Policy Value used to provide
Variable Income Payments) is applied under the table contained in the Policy
corresponding to the payment method elected by the Policy Owner. This will
produce a dollar amount which is the first monthly payment.
In order to determine subsequent monthly payments, the Policy is credited
with Variable Annuity Units in the Investment Divisions of the Variable Accounts
corresponding to the Growth Equity Portfolio. The Policy Value you tell us to
apply to provide Variable Income Payments under either Single or Flexible
Premium Policies will be used to purchase Annuity Units in the Common Stock
Investment Division for Single Premium Policies. The amount of Variable Income
Payments will increase or decrease according to the value of the Annuity Units
which reflects the investment experience of that Common Stock In vestment
Division. The number of Annuity Units credited is determined by dividing the
first
3
<PAGE> 49
monthly payment by the value of one Annuity Unit on the Retirement Date.
Thereafter, each monthly payment is calculated by multiplying the number of
Annuity Units so credited by the value of an Annuity Unit on the last Business
Day that is at least 10 calendar days prior to the date of that monthly payment.
For Variable Income Payment options, the value of Annuity Units in the
Common Stock Investment Division is determined each Business Day by multiplying
the Annuity Unit Value for the immediately preceding Business Day by the product
of:
(i) the Net Investment Factor for the Common Stock Investment Division
adjusted to reflect a factor of 1.25% for the mortality and expense risk
charges deducted from the Variable Account on a daily basis, and
(ii) a discount factor of .99989255 (.99990575 if the Policy is issued
for delivery in Florida or Texas) to recognize the assumed investment
result. Under these Policies, the assumed investment result is 4% (3 1/2%
if the Policy is issued for delivery in Florida or Texas). If the Net
Investment Factor of the Common Stock Investment Division exceeds the
assumed investment result on an annual basis, monthly payments will be
increased. If the Net Investment Factor is less, monthly payments will
decrease.
CONTINGENT ANNUITANT
As described in the Prospectus, the Contingent Annuitant, who generally
must be the spouse of the Annuitant, is the person who becomes the Annuitant at
the death of the "Primary Annuitant" before the Retirement Date if the Policy
Owner is still living. The Primary Annuitant is the person named as the
Annuitant in the application for a Non-Qualified Policy.
If prior to the Retirement Date, while the Policy Owner is still living, a
Contingent Annuitant is alive at the death of the Primary Annuitant, the
proceeds of a Non-Qualified Policy will not become payable to the Beneficiary at
the death of the Primary Annuitant; instead, the Policy will continue in force
and the proceeds will become payable upon the death of the Contingent Annuitant,
before the Retirement Date, or upon the death of the Policy Owner if earlier.
All Policy Owner rights and the benefits provided under the Policy will continue
in effect during the lifetime of the Contingent Annuitant, as provided in the
Policy, as if the Contingent Annuitant were the Annuitant, except for the Total
Disability Benefit Rider. (See "Total Disability Benefit Rider" at page 22 of
the Prospectus and at page 2 of this Statement of Additional Information.) After
the Policy is issued, the Contingent Annuitant may be deleted but not changed.
The named Contingent Annuitant will be considered deleted if a Policy would
not be treated as an annuity for federal income tax purposes should the
Contingent Annuitant become the Annuitant. Currently, the Policies do not
provide for the naming of Contingent Annuitants. (See "Federal Tax Matters" at
page 36 of the Prospectus.)
INVESTMENT PERFORMANCE CALCULATIONS
MONEY MARKET INVESTMENT DIVISION
In accordance with regulations adopted by the Securities and Exchange
Commission, if NYLIAC discloses the Money Market Investment Division's current
annualized yield for a seven-day period, it is required to do so in a manner
which does not take into consideration
4
<PAGE> 50
any realized or unrealized gains or losses on shares of the Cash Management
Portfolio of the Fund or on its portfolio securities. This current annualized
yield is computed by determining the net change (exclusive of realized gains or
losses on the sale of securities and unrealized appreciation and depreciation)
in the value of a hypothetical account having a balance of one unit of the Money
Market Investment Division at the beginning of such seven-day period, dividing
such net change in account value by the value of the account at the beginning of
the period to determine the base period return and annualizing this quotient on
a 365-day basis. The net change in account value reflects the deductions for
administrative services (for Flexible Premium Policies) and the mortality and
expense risk charge and income and expenses accrued during the period. Because
of these deductions, the yield for the Money Market Investment Division of a
Variable Account will be lower than the yield for the Cash Management Portfolio
of the Fund.
The Securities and Exchange Commission also permits NYLIAC to disclose the
effective yield of the Money Market Investment Division for the same seven-day
period, determined on a compounded basis. The effective yield is calculated by
compounding the unannualized base period return by adding one to the base period
return, raising the sum to a power equal to 365 divided by 7, and subtracting
one from the result.
The yield on amounts held in a Money Market Investment Division normally
will fluctuate on a daily basis. Therefore, the disclosed yield for any given
past period is not an indication or representation of future yields or rates of
return. The Money Market Investment Division's actual yield is affected by
changes in interest rates on money market securities, average portfolio maturity
of the Cash Management Portfolio, the types and quality of portfolio securities
held by the Cash Management Portfolio, and its operating expenses.
For the seven-day period ending December 31, 1996, the Money Market
Investment Divisions' annualized yields were 4.22% and 3.65% respectively, for
Single Premium and Flexible Premium Policies (both Variable Account I and
Variable Account II). For the same period, the effective yields were 4.30% and
3.71% respectively, for Single Premium and Flexible Premium Policies (both
Variable Account I and Variable Account II).
BOND INVESTMENT DIVISION YIELDS
NYLIAC may from time to time disclose the current annualized yield of the
Bond Investment Division for 30-day periods. The annualized yield of a Bond
Investment Division refers to the income generated by the Investment Division
over a specified 30-day period. Because the yield is annualized, the yield
generated by an Investment Division during the 30-day period is assumed to be
generated each 30-day period. The yield is computed by dividing the net in
vestment income per accumulation unit earned during the period by the price per
unit on the last day of the period, according to the following formula:
- ----- YIELD % 2((a-b+1)(6)-1)
cd
Where: a = net investment income earned during the period by the Portfolio
attributable to shares owned by the Bond Investment Division.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of accumulation units outstanding during
the period.
d = the maximum offering price per accumulation unit on the last day of
the period.
5
<PAGE> 51
Net Investment Income will be determined in accordance with rules
established by the Securities and Exchange Commission. Accrued expenses will
include all recurring fees that are charged to all Policy Owner accounts. The
yield calculations do not reflect the effect of any surrender charges that may
be applicable to a particular Policy. Surrender charges range from 7% to 0% of
the amount of Policy Value withdrawn depending on the elapsed time since the
Policy was issued.
Because of the charges and deductions imposed by the Variable Account the
yield for the Investment Divisions will be lower than the yield for the
corresponding Portfolio of the Fund. The yield on amounts held in the Investment
Divisions normally will fluctuate over time. Therefore, the disclosed yield for
any given past period is not an indication or representation of future yields or
rates of return. The Bond Investment Division's actual yield will be affected by
the types and quality of portfolio securities held by the Bond Portfolio of the
Fund, and its operating expenses.
For the 30-day period ended December 31, 1996, the annualized yields for
the Bond Investment Divisions were 4.81% and 4.27% respectively, for Single
Premium Policies and Flexible Premium Policies (both Variable Account I and
Variable Account II).
BOND AND COMMON STOCK STANDARD TOTAL RETURN CALCULATIONS
NYLIAC may from time to time also disclose average annual total returns for
one or more of the Bond or Common Stock Investment Divisions for various periods
of time. Average annual total return quotations are computed by finding the
average annual compounded rates of return over one, five and ten year periods
that would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)(n) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one, five, or ten-year period, at the end of the
one, five, or ten-year period (or fractional portion thereof).
All recurring fees that are charged to all Policy Owner accounts are recognized
in the ending redeemable value. The average annual total return calculations
will reflect the effect of surrender charges that may be applicable to a
particular period.
For the one, five, and ten year periods ending December 31, 1996, and the
period from January 23, 1984 to December 31, 1996, respectively, the average
annual total returns for the Single Premium Policies for the Bond Investment
Division were -6.28%, 5.09%, 6.64%, and 8.26%, respectively, for Variable
Account I, and -6.28%, 5.09%, 6.64%, and 8.31%, respectively, for Variable
Account II. For the same periods, the average annual total returns for Flexible
Premium Policies for the Bond Investment Division were -6.74%, 3.91%, 6.00%, and
7.73%, respectively, for Variable Account I, and -6.74%, 3.91%, 6.00%, and
7.75%, respectively, for Variable Account II.
For the one, five, and ten year periods ending December 31, 1996, and the
period from January 23, 1984 to December 31, 1996, respectively, the average
annual total returns for the Single Premium Policies for the Common Stock
Investment Division were 14.35%,
6
<PAGE> 52
13.68%, 12.88%, and 11.56%, respectively, for Variable Account I. For the same
periods, the average annual total returns for Flexible Premium Policies for the
Common Stock Investment Division were 13.78%, 12.41%, 12.21%, and 11.00%,
respectively, for Variable Account I.
For the one, five, and ten year periods ending December 31, 1996, and the
period from January 18, 1985 to December 31, 1996, respectively, the average
annual total returns for the Single Premium Policies for the Common Stock
Investment Division were 14.35%, 13.68%, 12.88%, and 11.51%, respectively, for
Variable Account II. For the same periods, the average annual total returns for
Flexible Premium Policies for the Common Stock Investment Division were 13.78%,
12.41%, 12.21%, and 10.87%, respectively, for Variable Account II.
OTHER PERFORMANCE DATA
NYLIAC may from time to time also disclose average annual total returns in
a non-standard format in conjunction with the standard format described above.
The nonstandard format will be identical to the standard format except that the
surrender charge percentage will be assumed to be 0%.
Using the nonstandard format, for the one, five, and ten year periods
ending December 31, 1996, and the period from January 23, 1984 to December 31,
1996, respectively, the average annual total returns for the Single Premium
Policies for the Bond Investment Division were 0.78%, 5.73%, 6.64%, and 8.26%,
respectively, for Variable Account I, and 0.78%, 5.73%, 6.64%, and 8.31%,
respectively, for Variable Account II. For the same periods, the average annual
total returns for Flexible Premium Policies for the Bond Investment Division
were 0.28%, 5.20%, 6.10%, and 7.73%, respectively, for Variable Account I, and
0.28%, 5.20%, 6.10%, and 7.75%, respectively, for Variable Account II.
For the one, five, and ten year periods ending December 31, 1996, and the
period from January 23, 1984 to December 31, 1996, respectively, the average
annual total returns for the Single Premium Policies for the Common Stock
Investment Division were 22.96%, 14.38%, 12.88%, and 11.56%, respectively, for
Variable Account I. For the same periods, the average annual total returns for
Flexible Premium Policies for the Common Stock Investment Division were 22.34%,
13.81%, 12.32%, and 11.00%, respectively, for Variable Account I.
For the one, five, and ten year periods ending December 31, 1996, and the
period from January 18, 1985 to December 31, 1996, respectively, the average
annual total returns for the Single Premium Policies for the Common Stock
Investment Division were 22.96%, 14.38%, 12.88%, and 11.51%, respectively, for
Variable Account II. For the same periods, the average annual total returns for
Flexible Premium Policies for the Common Stock Investment Division were 22.34%,
13.81%, 12.32%, and 10.95%, respectively, for Variable Account II.
NYLIAC may from time to time also disclose cumulative total returns in
conjunction with the standard format described above. The cumulative returns
will be calculated using the following formula assuming that the surrender
charge percentage will be 0%.
7
<PAGE> 53
CTR = ERV/P-1
Where: CTR = the cumulative total return net of an Investment Division recurring
charges for the period
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the one, five, or ten-year period, at the end
of the one, five or ten-year period (or fractional portion
thereof)
P = a hypothetical initial payment of $1,000.
All non-standard performance data will only be advertised if the standard
performance data for the same period, as well as for the required periods, is
also disclosed.
MAINSTAY VP SERIES FUND, INC.
The MainStay VP Series Fund, Inc. (the Fund) is registered with the
Securities and Exchange Commission as a diversified open-end management
investment company, but such registration does not signify that the Commission
supervises the management, or the investment practices or policies, of the Fund.
The Fund currently issues its shares only to the Separate Accounts of
NYLIAC. Shares are sold and redeemed at the net asset value of the respective
Portfolio of the Fund.
GENERAL MATTERS
NON-PARTICIPATING. The Policies are non-participating; no dividends are
payable.
MISSTATEMENT OF AGE OR SEX. If the Annuitant's stated age, sex or both in
the Policy are incorrect, NYLIAC will change the benefits payable to those which
the Purchase Payments would have purchased for the correct age and sex. Sex is
not a factor when annuity benefits are based on unisex annuity payment rate
tables. (See "Income Payments--Legal Developments Regarding Income Payments" at
page 33 of the Prospectus.)
ASSIGNMENTS. If permitted by the plan or by law for the plan indicated in
the application for the Policy, a Non-Qualified Policy or any interest in it,
may be assigned by the Policy Owner prior to the Retirement Date and during the
Annuitant's lifetime. NYLIAC will not be deemed to know of an assignment unless
it receives a copy of a duly executed instrument evidencing such assignment.
Further, NYLIAC assumes no responsibility for the validity of any assignment.
(See "Federal Tax Matters--Taxation of Annuities in General" at page 36 of the
Prospectus.)
MODIFICATION. NYLIAC may not modify the Policy without the consent of the
Policy Owner except to make the Policy meet the requirements of the Investment
Company Act of 1940, or to make the Policy comply with any changes in the
Internal Revenue Code or as required by the Code or by any other applicable law
in order to continue treatment of the Policy as an annuity.
INCONTESTABILITY. The Policy will not be contested after it has been in
force during the lifetime of the Annuitant for 2 years from the Policy Date.
8
<PAGE> 54
FEDERAL TAX MATTERS
TAXATION OF NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
NYLIAC is taxed as a life insurance company under Part I of Subchapter L of
the Internal Revenue Code of 1986 (the "Code"). Since the Variable Accounts are
not entities separate from NYLIAC, and their operations form a part of NYLIAC,
they will not be taxed separately as "regulated investment companies" under
Subchapter M of the Code. Investment income and realized net capital gains on
the assets of the Variable Accounts are reinvested and are taken into account in
determining the Policy Value. As a result, such investment income and realized
net capital gains are automatically retained as part of the reserves under the
Policy. Under existing federal income tax law, NYLIAC believes that Variable
Account investment income and realized net capital gains should not be taxed to
the extent that such income and gains are retained as part of the reserves under
the policy.
TAX STATUS OF THE POLICIES
Section 817(h) of the Code requires that the investments of the Fund must
be "adequately diversified" in accordance with Treasury regulations in order for
the policies to qualify as annuity contracts under Section 72 of the Code. The
Variable Accounts, through the Fund, intend to comply with the diversification
requirements prescribed by the Treasury under Treasury Regulation Section
1.817-5, which affect how the Fund's assets may be invested. Although NYLIAC is
affiliated with the Fund's investment advisers, it does not control the Fund or
the Portfolios' investments.
Although the Treasury Department has issued regulations on the
diversification requirements such regulations do not provide guidance concerning
the extent to which Policy owners may direct their investments to particular
subaccounts of a Variable Account, or the permitted number of such subaccounts.
It is unclear whether additional guidance in this regard will be issued in the
future. It is possible that if such guidance is issued, the Policy may need to
be modified to comply with such additional guidance. For these reasons, NYLIAC
reserves the right to modify the Policy as necessary to attempt to prevent the
Policy Owner from being considered the owner of the assets of the Variable
Accounts or otherwise to qualify the Policy for favorable tax treatment.
The Code also requires that non-qualified annuity contracts issued after
January 18, 1985, contain specific provisions for distribution of the policy
proceeds upon the death of any Policy Owner. In order to be treated as an
annuity contract for federal income tax purposes, the Code requires that such
Policies provide that (a) if any Policy Owner dies on or after the Retirement
Date and before the entire interest in the Policy has been distributed, the
remaining portion must be distributed at least as rapidly as under the method in
effect on the Policy Owner's death; and (b) if any Policy Owner dies before the
Retirement Date, the entire interest in the Policy must generally be distributed
within 5 years after the Policy Owner's date of death. These requirements will
be considered satisfied if the entire interest of the Policy is used to purchase
an immediate annuity under which payments will begin within one year of the
Policy Owner's death and will be made for the life of the Beneficiary or for a
period not extending beyond the life expectancy of the Beneficiary. The Owner's
Beneficiary is the person to whom ownership of the Policy passes by reason of
death and must be a natural person. If the Beneficiary is the Policy Owner's
surviving spouse, the Policy may be continued with the surviving spouse as the
new Policy Owner. Non-qualified Policies issued after January 18, 1985, contain
provisions
9
<PAGE> 55
intended to comply with these requirements of the Code. No regulations
interpreting these requirements of the Code have yet been issued and thus no
assurance can be given that the provisions contained in such Policies issued
after January 18, 1985, satisfy all such Code requirements. The provisions
contained in non-qualified Policies issued after January 18, 1985, will be
reviewed and modified if necessary to assure that they comply with the Code
requirements when clarified by regulation or otherwise.
Withholding of federal income taxes on the taxable portion of all
distributions may be required unless the recipient elects not to have any such
amounts withheld and properly notifies NYLIAC of that election. Different rules
may apply to United States citizens or expatriates living abroad. In addition,
some states have enacted legislation requiring withholding.
Even if a recipient elects no withholding, special withholding rules may
require NYLIAC to disregard the recipient's election if the recipient fails to
supply NYLIAC with a "TIN" or taxpayer identification number (social security
number for individuals) or if the Internal Revenue Service notifies NYLIAC that
the TIN provided by the recipient is incorrect.
DISTRIBUTOR OF THE POLICIES
NYLIFE Distributors Inc. ("NYLIFE Distributors"), the distributor of the
Policies, will offer the Policies on a continuous basis. NYLIFE Distributors is
registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc. The maximum commission payable to
registered representatives of broker-dealers who have entered into dealer
agreements with NYLIFE Distributors is set forth in the prospectus. From time to
time, NYLIFE Distributors may enter into a special arrangement with a broker-
dealer, which provides for the payment of higher commissions to such
broker-dealer in connection with sales of the Policies. Purchasers of Policies
will be informed prior to purchase of any applicable special arrangement.
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS
Title to assets of the Variable Accounts is held by NYLIAC. The assets are
kept physically segregated and held separate and apart from NYLIAC's general
corporate assets. Records are maintained of all purchases and redemptions of
Eligible Portfolio shares held by each of the Investment Divisions.
STATE REGULATION
NYLIAC is a stock life insurance company organized under the laws of
Delaware, and is subject to regulation by the Delaware State Insurance
Department. An annual statement is filed with the Delaware Commissioner of
insurance on or before March 1 of each year covering the operations and
reporting on the financial condition of NYLIAC as of December 31 of the
preceding calendar year. Periodically, the Delaware Commissioner of Insurance
examines the financial condition of NYLIAC, including the liabilities and
reserves of the Variable Accounts.
In addition NYLIAC is subject to the insurance laws and regulations of all
the states where it is licensed to operate. The availability of certain policy
rights and provisions
10
<PAGE> 56
depends on state approval and/or filing and review processes. Where required by
state law or regulation, the Policies will be modified accordingly.
RECORDS AND REPORTS
All records and accounts relating to the Variable Accounts will be
maintained by NYLIAC. As presently required by the Investment Company Act of
1940 and regulations promulgated thereunder, NYLIAC will mail to all Policy
Owners at their last known address of record, at least semi-annually after the
first Policy Year, reports containing such information as may be required under
that Act or by any other applicable law or regulation.
LEGAL PROCEEDINGS
In 1995, NYLIAC and New York Life settled a class action related to the
sale of whole life and universal life insurance policies from 1982 through 1994.
In entering into the settlement, NYLIAC specifically denied any wrongdoing. The
settlement was approved by the judge, and has now been upheld on appeal,
including a recent refusal by the New York State Court of Appeals to permit a
discretionary appeal from the Appellate Division. The lone appellant has
recently filed two motions in the trial court seeking to enjoin implementation
of the settlement and to renew his objections to the settlement. The lone
appellant may file a writ of certiorari in the United States Supreme Court
during the prescribed statutory period.
There are also actions in various jurisdictions by individual policyowners
who either did or did not exclude themselves from the settlement of the
nationwide class action; and in each of two jurisdictions a purported class
action claiming to include numerous policyowners who excluded themselves from
the settlement of the nationwide class action; and in one jurisdiction a
purported class action claiming to include numerous policyowners who did not
exclude themselves from the class action. Most of these actions seek substantial
or unspecified compensatory and punitive damages.
NYLIAC is also a defendant in other individual and alleged class actions
arising from its insurance, investment and/or other operations, including
actions involving retail sales practices. Most of these actions also seek
substantial or unspecified compensatory and punitive damages. NYLIAC is also
from time to time involved as a party in various governmental, administrative,
and investigative proceedings and inquiries.
Given the uncertain nature of litigation and regulatory inquiries, the
outcome of the above cannot be predicted. NYLIAC nevertheless believes that the
ultimate liability that could result from such litigation and proceedings would
not have a material adverse effect on NYLIAC's financial position; however, it
is possible that settlements or adverse determinations in one or more actions or
other proceedings in the future could have a material adverse effect on NYLIAC's
operating results for a given year.
INDEPENDENT ACCOUNTANTS
The annual financial statements of the Variable Accounts and NYLIAC are
audited by Price Waterhouse LLP, independent accountants, whose reports appear
herein. The financial statements included in this Statement of Additional
Information have been
11
<PAGE> 57
included in reliance on the reports of Price Waterhouse LLP, given on the
authority of said firm as experts in auditing and accounting.
OTHER INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Policies discussed in this Statement of Additional Information. Not all of the
information set forth in the registration statement, amendments and exhibits
thereto has been included in this Statement of Additional Information.
Statements contained in this Statement of Additional Information concerning the
content of the Policies and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the Securities and Exchange
Commission.
12
<PAGE> 58
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-1
<PAGE> 59
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1996
<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: $87,473,904; $145,892,369;
$38,026,649; $63,967,539;
$6,770,208; $9,299,114,
respectively)....................... $100,593,598 $176,992,094 $ 37,148,841 $ 65,268,125 $ 6,770,029 $ 9,298,677
LIABILITIES:
Liability for mortality and expense
risk charges........................ 325,388 803,882 122,050 295,934 22,911 41,966
------------ ------------ ------------ ------------ ------------ ------------
Total equity...................... $100,268,210 $176,188,212 $ 37,026,791 $ 64,972,191 $ 6,747,118 $ 9,256,711
============ ============ ============ ============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units
outstanding: 2,485,512; 4,660,979;
1,292,105; 2,419,661; 350,349;
512,967, respectively............. $100,268,210 $176,188,212 $ 37,026,791 $ 64,972,191 $ 6,747,118 $ 9,256,711
============ ============ ============ ============ ============ ============
Variable accumulation unit value.... $ 40.34 $ 37.80 $ 28.66 $ 26.85 $ 19.26 $ 18.05
============ ============ ============ ============ ============ ============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<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....................... $ 856,659 $ 1,514,029 $ 2,374,861 $ 4,161,364 $ 377,535 $ 494,436
Mortality and expense risk charges.... (1,177,151) (2,928,117) (504,792) (1,196,893) (96,095) (175,981)
----------- ----------- ----------- ----------- ----------- -----------
Net investment income (loss)...... (320,492) (1,414,088) 1,870,069 2,964,471 281,440 318,455
----------- ----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS):
Proceeds from sale of investments..... 11,294,281 17,774,424 8,734,067 10,818,647 3,631,367 3,177,219
Cost of investments sold.............. (8,120,587) (12,534,545) (7,941,746) (10,921,834) (3,631,608) (3,177,432)
----------- ----------- ----------- ----------- ----------- -----------
Net realized gain (loss)
on investments.................. 3,173,694 5,239,879 792,321 (103,187) (241) (213)
Realized gain distribution received... 12,396,168 21,908,560 -- -- -- --
Change in unrealized appreciation
(depreciation) on investments....... 4,212,928 8,090,871 (2,518,451) (2,886,635) 205 172
----------- ----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments.... 19,782,790 35,239,310 (1,726,130) (2,989,822) (36) (41)
----------- ----------- ----------- ----------- ----------- -----------
Decrease attributable to funds of
New York Life Insurance and Annuity
Corporation retained by Separate
Account............................. (29,535) (73,374) (1,918) (4,673) (292) (837)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in total
equity
resulting from operations....... $ 19,432,763 $ 33,751,848 $ 142,021 $ (30,024) $ 281,112 $ 317,577
=========== =========== =========== =========== =========== ===========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-2
<PAGE> 60
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNT I
TAX-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-3
<PAGE> 61
STATEMENT OF CHANGES IN TOTAL EQUITY
For the years ended December 31, 1996
and December 31, 1995
<TABLE>
<CAPTION>
COMMON STOCK
INVESTMENT DIVISIONS
---------------------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES
----------------------------- -----------------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
-------------------------------------------------------
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment income (loss)........................ $ (320,492) $ (3,292) $ (1,414,088) $ (733,385)
Net realized gain (loss) on investments............. 3,173,694 1,549,773 5,239,879 3,154,362
Realized gain distribution received................. 12,396,168 7,100,263 21,908,560 12,654,150
Change in unrealized appreciation (depreciation)
on investments.................................... 4,212,928 10,947,712 8,090,871 19,256,110
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation retained by
Separate Account.................................. (29,535) (44,474) (73,374) (111,339)
------------ ------------ ------------ ------------
Net increase in total equity resulting
from operations................................. 19,432,763 19,549,982 33,751,848 34,219,898
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments...................... 892,545 1,213,447 5,245,235 5,234,054
Policyowners' surrenders............................ (10,349,553) (6,756,440) (19,870,464) (12,469,978)
Policyowners' annuity and death benefits............ (756,854) (534,923) (1,053,485) (678,373)
Net transfers from (to) Fixed Account............... 1,306,116 21,551 768,815 (615,468)
Transfers between Investment Divisions.............. 1,984,443 887,552 1,256,201 117,970
------------ ------------ ------------ ------------
Net contributions and withdrawals................. (6,923,303) (5,168,813) (13,653,698) (8,411,795)
------------ ------------ ------------ ------------
Increase (decrease) in total equity............. 12,509,460 14,381,169 20,098,150 25,808,103
TOTAL EQUITY:
Beginning of year................................... 87,758,750 73,377,581 156,090,062 130,281,959
------------ ------------ ------------ ------------
End of year......................................... $100,268,210 $ 87,758,750 $176,188,212 $156,090,062
============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-4
<PAGE> 62
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNT I
TAX-QUALIFIED POLICIES
<TABLE>
<CAPTION>
BOND MONEY MARKET
INVESTMENT DIVISIONS INVESTMENT DIVISIONS
--------------------------------------------------------------- ----------------------------------------------
FLEXIBLE
SINGLE PREMIUM FLEXIBLE PREMIUM SINGLE PREMIUM PREMIUM
POLICIES POLICIES POLICIES POLICIES
----------------------------- ----------------------------- ----------------------------- ------------
1996 1995 1996 1995 1996 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
$ 1,870,069 $ 2,203,508 $ 2,964,471 $ 3,342,684 $ 281,440 $ 363,129 $ 318,455
792,321 584,378 (103,187) (272,632) (241) (166) (213)
-- -- -- -- -- -- --
(2,518,451) 4,226,104 (2,886,635) 7,776,856 205 43 172
(1,918) (14,183) (4,673) (31,512) (292) (1,080) (837)
------------ ------------ ------------ ------------ ------------ ------------ ------------
142,021 6,999,807 (30,024) 10,815,396 281,112 361,926 317,577
------------ ------------ ------------ ------------ ------------ ------------ ------------
418,803 312,128 2,261,015 2,608,819 41,170 19,436 370,550
(6,143,986) (4,577,494) (9,830,346) (6,561,741) (1,160,675) (1,151,937) (2,213,470)
(515,470) (694,688) (494,572) (475,571) (49,194) (231,786) (82,067)
(94,904) (823,395) (73,881) (437,499) (45,276) (103,637) (158,369)
(1,426,456) (1,619,254) (1,137,466) (527,103) (558,653) 623,707 (118,735)
------------ ------------ ------------ ------------ ------------ ------------ ------------
(7,762,013) (7,402,703) (9,275,250) (5,393,095) (1,772,628) (844,217) (2,202,091)
------------ ------------ ------------ ------------ ------------ ------------ ------------
(7,619,992) (402,896) (9,305,274) 5,422,301 (1,491,516) (482,291) (1,884,514)
44,646,783 45,049,679 74,277,465 68,855,164 8,238,634 8,720,925 11,141,225
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 37,026,791 $ 44,646,783 $ 64,972,191 $ 74,277,465 $ 6,747,118 $ 8,238,634 $ 9,256,711
============ ============ ============ ============ ============ ============ ============
<CAPTION>
1995
<S> <C> <C>
$ 428,934
(127)
--
(32)
(2,021)
426,754
557,513
(1,650,793)
(95,856)
(151,317)
409,133
(931,320)
(504,566)
11,645,791
$ 11,141,225
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-5
<PAGE> 63
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1996
<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: $101,385,032;
$12,871,308; $53,653,224;
$6,374,079; $7,591,517; $943,859,
respectively)....................... $115,143,660 $ 15,004,340 $ 52,213,434 $ 6,425,481 $ 7,591,417 $ 943,834
LIABILITIES:
Liability for mortality and
expense risk charges................ 370,015 67,789 170,745 29,154 23,490 4,428
------------ ------------ ------------ ------------ ------------ ------------
Total equity...................... $114,773,645 $ 14,936,551 $ 52,042,689 $ 6,396,327 $ 7,567,927 $ 939,406
============ ============ ============ ============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units
outstanding: 2,844,305; 395,139;
1,809,261; 237,839; 392,968;
52,058, respectively.............. $114,742,531 $ 14,936,551 $ 52,042,689 $ 6,396,327 $ 7,567,927 $ 939,406
Annuity reserve....................... 31,114 -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total equity...................... $114,773,645 $ 14,936,551 $ 52,042,689 $ 6,396,327 $ 7,567,927 $ 939,406
============ ============ ============ ============ ============ ============
Variable accumulation
unit value........................ $ 40.34 $ 37.80 $ 28.76 $ 26.89 $ 19.26 $ 18.05
============ ============ ============ ============ ============ ============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<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....................... $ 983,884 $ 128,224 $ 3,322,804 $ 408,975 $ 458,468 $ 53,423
Mortality and expense risk charges.... (1,325,111) (247,816) (707,417) (118,424) (116,554) (19,018)
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss)...... (341,227) (119,592) 2,615,387 290,551 341,914 34,405
------------ ------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED
GAIN (LOSS):
Proceeds from sale of investments..... 10,605,696 1,961,260 11,711,830 1,222,954 6,584,306 561,229
Cost of investments sold.............. (7,742,517) (1,230,507) (10,826,130) (1,121,022) (6,584,524) (561,266)
------------ ------------ ------------ ------------ ------------ ------------
Net realized gain (loss)
on investments.................. 2,863,179 730,753 885,700 101,932 (218) (37)
Realized gain distribution received... 14,237,172 1,855,445 -- -- -- --
Change in unrealized appreciation
(depreciation) on investments....... 5,082,531 378,417 (3,278,935) (396,619) 195 33
------------ ------------ ------------ ------------ ------------ ------------
Net gain (loss)
on investments.................. 22,182,882 2,964,615 (2,393,235) (294,687) (23) (4)
------------ ------------ ------------ ------------ ------------ ------------
Decrease attributable to funds of
New York Life Insurance and Annuity
Corporation retained by Separate
Account............................. (33,143) (6,179) (2,743) (460) (399) (94)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in total
equity
resulting from operations....... $ 21,808,512 $ 2,838,844 $ 219,409 $ (4,596) $ 341,492 $ 34,307
============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-6
<PAGE> 64
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNT II
NON-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-7
<PAGE> 65
STATEMENT OF CHANGES IN TOTAL EQUITY
For the years ended December 31, 1996
and December 31, 1995
<TABLE>
<CAPTION>
COMMON STOCK
INVESTMENT DIVISIONS
---------------------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES
----------------------------- -----------------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
-------------------------------------------------------
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment income (loss)........................ $ (341,227) $ (10,049) $ (119,592) $ (58,948)
Net realized gain (loss) on investments............. 2,863,179 2,489,623 730,753 138,428
Realized gain distribution received................. 14,237,172 7,872,933 1,855,445 1,072,648
Change in unrealized appreciation (depreciation)
on investments.................................... 5,082,531 11,564,609 378,417 1,711,806
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation retained by
Separate Account.................................. (33,143) (49,713) (6,179) (9,270)
------------ ------------ ------------ ------------
Net increase in total equity resulting
from operations................................. 21,808,512 21,867,403 2,838,844 2,854,664
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments...................... 395,084 345,599 334,233 371,025
Policyowners' surrenders............................ (7,029,217) (5,331,579) (1,361,255) (690,221)
Policyowners' annuity and death benefits............ (1,776,084) (1,295,150) (361,605) (117,738)
Net transfers from (to) Fixed Account............... 1,824,875 311,136 53,354 (34,766)
Transfers between Investment Divisions.............. 2,267,603 (568,982) 194,671 58,486
------------ ------------ ------------ ------------
Net contributions and withdrawals................. (4,317,739) (6,538,976) (1,140,602) (413,214)
------------ ------------ ------------ ------------
Increase (decrease) in total equity............. 17,490,773 15,328,427 1,698,242 2,441,450
TOTAL EQUITY:
Beginning of year..................................... 97,282,872 81,954,445 13,238,309 10,796,859
------------ ------------ ------------ ------------
End of year........................................... $114,773,645 $ 97,282,872 $ 14,936,551 $ 13,238,309
============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-8
<PAGE> 66
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNT II
NON-QUALIFIED POLICIES
<TABLE>
<CAPTION>
BOND MONEY MARKET
INVESTMENT DIVISIONS INVESTMENT DIVISIONS
--------------------------------------------------------------- ----------------------------------------------
FLEXIBLE
SINGLE PREMIUM FLEXIBLE PREMIUM SINGLE PREMIUM PREMIUM
POLICIES POLICIES POLICIES POLICIES
----------------------------- ----------------------------- ----------------------------- ------------
1996 1995 1996 1995 1996 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
$ 2,615,387 $ 3,069,116 $ 290,551 $ 332,483 $ 341,914 $ 434,612 $ 34,405
885,700 769,078 101,932 52,904 (218) (244) (37)
-- -- -- -- -- -- --
(3,278,935) 5,816,926 (396,619) 703,884 195 90 33
(2,743) (19,557) (460) (3,167) (399) (1,281) (94)
------------ ------------ ------------ ------------ ------------ ------------ ------------
219,409 9,635,563 (4,596) 1,086,104 341,492 433,177 34,307
------------ ------------ ------------ ------------ ------------ ------------ ------------
293,618 132,616 162,387 179,154 144,933 (56,872) 45,316
(6,156,264) (5,471,413) (801,419) (596,836) (5,114,726) (1,529,749) (223,883)
(1,864,016) (1,043,226) (203,473) (162,820) (145,938) (772,632) (29,102)
224,591 (114,572) (15,179) (34,305) (84,802) (427,125) (3,919)
(2,803,497) (2,887,818) (147,893) (53,558) 566,995 3,467,375 (46,777)
------------ ------------ ------------ ------------ ------------ ------------ ------------
(10,305,568) (9,384,413) (1,005,577) (668,365) (4,633,538) 680,997 (258,365)
------------ ------------ ------------ ------------ ------------ ------------ ------------
(10,086,159) 251,150 (1,010,173) 417,739 (4,292,046) 1,114,174 (224,058)
62,128,848 61,877,698 7,406,500 6,988,761 11,859,973 10,745,799 1,163,464
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 52,042,689 $ 62,128,848 $ 6,396,327 $ 7,406,500 $ 7,567,927 $ 11,859,973 $ 939,406
============ ============ ============ ============ ============ ============ ============
<CAPTION>
1995
<S> <C> <C>
$ 45,793
(20)
--
3
(217)
45,559
40,406
(175,538)
(15,216)
(9,527)
(4,928)
(164,803)
(119,244)
1,282,708
$ 1,163,464
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-9
<PAGE> 67
NOTES TO FINANCIAL STATEMENTS
NOTE 1-- Organization and Accounting Policies:
- --------------------------------------------------------------------------------
N
ew 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 December 31, 1996 and December
31, 1995 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.
F-10
<PAGE> 68
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):
- --------------------------------------------------------------------------------
A
t December 31, 1996, 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........................... 5,399 9,500 2,896 5,088 6,770 9,299
Identified cost*........................... $87,474 $145,892 $38,027 $63,968 $ 6,770 $ 9,299
SEPARATE ACCOUNT II (NON-QUALIFIED
POLICIES)
Number of shares........................... 6,180 805 4,071 501 7,592 944
Identified cost*........................... $101,385 $12,871 $53,653 $ 6,374 $ 7,592 $ 944
</TABLE>
* The cost stated also represents the aggregate cost for Federal income tax
purposes.
Transactions in MainStay VP Series Fund, Inc. shares for the year ended
December 31, 1996, 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.................................. $16,462 $24,647 $ 2,816 $ 4,461 $ 2,136 $ 1,284
Proceeds from sales........................ 11,294 17,774 8,734 10,819 3,631 3,177
SEPARATE ACCOUNT II (NON-QUALIFIED
POLICIES)
Purchases.................................. $20,212 $ 2,559 $ 3,987 $ 503 $ 2,277 $ 336
Proceeds from sales........................ 10,606 1,961 11,712 1,223 6,584 561
</TABLE>
- --------------------------------------------------------------------------------
NOTE 3--Mortality and Expense Risk Charges:
- --------------------------------------------------------------------------------
S
eparate 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:
- --------------------------------------------------------------------------------
S
eparate 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.
F-11
<PAGE> 69
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5-- Cost to Policyowners (in 000's):
- --------------------------------------------------------------------------------
A
t December 31, 1996, 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).... $29,860 $46,553 $11,215 $25,583 $ 2,004 $ 3,729
Accumulated net investment income............ 2,954 562 25,006 38,040 4,772 5,578
Accumulated net realized gain (loss)
on investments and realized gain
distributions received..................... 54,535 98,485 1,838 356 (1) (1)
Unrealized appreciation (depreciation)
on investments............................. 13,120 31,100 (878) 1,301 -- --
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation
retained by Separate Account............... (201) (512) (154) (308) (28) (49)
-------- -------- -------- -------- -------- --------
Net amount applicable to Policyowners........ $100,268 $176,188 $37,027 $64,972 $ 6,747 $ 9,257
========= ========= ========= ========= ========= =========
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Cost to Policyowners (net of withdrawals).... $39,317 $ 3,773 $15,895 $ 1,706 $ 1,949 $ 239
Accumulated net investment income............ 3,046 70 35,329 4,389 5,656 709
Accumulated net realized gain (loss)
on investments and realized gain
distributions received..................... 58,872 9,005 2,519 294 (1) --
Unrealized appreciation (depreciation)
on investments............................. 13,759 2,133 (1,440) 51 -- --
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation
retained by Separate Account............... (220) (44) (260) (44) (36) (9)
-------- -------- -------- -------- -------- --------
Net amount applicable to Policyowners........ $114,774 $14,937 $52,043 $ 6,396 $ 7,568 $ 939
========= ========= ========= ========= ========= =========
</TABLE>
F-12
<PAGE> 70
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNTS I AND II
TAX-QUALIFIED AND NON-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-13
<PAGE> 71
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--Unit Transactions (in 000's):
- --------------------------------------------------------------------------------
T
ransactions in accumulation units for the years ended December 31, 1996 and
December 31, 1995 were as follows:
<TABLE>
<CAPTION>
COMMON STOCK INVESTMENT DIVISIONS
-----------------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES
------------------------- -------------------------
1996 1995 1996 1995
-----------------------------------------------------
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Units issued on premium payments.......................... 25 42 154 191
Units redeemed on surrenders.............................. (298) (246) (599) (464)
Units redeemed on annuity and death benefits.............. (4) (4) (6) (9)
Units issued (redeemed) on net transfers from (to)
Fixed Account........................................... 36 -- 22 (22)
Units issued (redeemed) on transfers between
Investment Divisions.................................... 52 30 38 4
----- ----- ----- -----
Net decrease.......................................... (189) (178) (391) (300)
Units outstanding, beginning of year...................... 2,675 2,853 5,052 5,352
----- ----- ----- -----
Units outstanding, end of year............................ 2,486 2,675 4,661 5,052
===== ===== ===== =====
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Units issued on premium payments.......................... 13 12 10 14
Units redeemed on surrenders.............................. (219) (201) (48) (28)
Units redeemed on annuity and death benefits.............. (22) (26) (2) (2)
Units issued (redeemed) on net transfers from (to)
Fixed Account........................................... 51 9 2 (1)
Units issued (redeemed) on transfers between
Investment Divisions.................................... 56 (15) 5 1
----- ----- ----- -----
Net increase (decrease)............................... (121) (221) (33) (16)
Units outstanding, beginning of year...................... 2,965 3,186 428 444
----- ----- ----- -----
Units outstanding, end of year............................ 2,844 2,965 395 428
===== ===== ===== =====
</TABLE>
F-14
<PAGE> 72
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
--------------------- --------------------- --------------------- ---------------------
1996 1995 1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------
15 4 86 105 2 (5) 21 33
(234) (192) (391) (274) (63) (69) (129) (100)
(4) (7) (3) (7) (2) (6) -- (1)
(3) (25) (3) (18) (2) (6) (9) (9)
(52) (61) (43) (21) (29) 40 (7) 23
----- ----- ----- ----- ----- ----- ----- -----
(278) (281) (354) (215) (94) (46) (124) (54)
1,570 1,851 2,774 2,989 444 490 637 691
----- ----- ----- ----- ----- ----- ----- -----
1,292 1,570 2,420 2,774 350 444 513 637
===== ===== ===== ===== ===== ===== ===== =====
7 6 6 7 8 (3) 3 2
(257) (224) (36) (28) (277) (110) (14) (11)
(29) (23) (2) (3) (2) (17) (1) --
8 (6) -- (1) (5) (24) -- --
(97) (109) (6) (2) 30 189 (3) --
----- ----- ----- ----- ----- ----- ----- -----
(368) (356) (38) (27) (246) 35 (15) (9)
2,177 2,533 276 303 639 604 67 76
----- ----- ----- ----- ----- ----- ----- -----
1,809 2,177 238 276 393 639 52 67
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
F-15
<PAGE> 73
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--Selected Per Unit Data+:
- --------------------------------------------------------------------------------
T
he following table presents selected per accumulation unit income and
capital changes (for an accumulation unit outstanding throughout each year)
with respect to each Investment Division of Separate Account I and Separate
Account II:
<TABLE>
<CAPTION>
SINGLE PREMIUM POLICIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
COMMON STOCK INVESTMENT DIVISIONS 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
---------------------------------------------
SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year..................................... $32.81 $25.72 $25.73 $22.90 $20.61
Net investment income (loss)...................................... (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)............. 7.65 7.09 (0.04) 2.77 2.24
------ ------ ------ ------ ------
Unit value, end of year........................................... $40.34 $32.81 $25.72 $25.73 $22.90
====== ====== ====== ====== ======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Unit value, beginning of year..................................... $32.81 $25.72 $25.73 $22.90 $20.61
Net investment income (loss)...................................... (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)............. 7.65 7.09 (0.04) 2.76 2.23
------ ------ ------ ------ ------
Unit value, end of year........................................... $40.34 $32.81 $25.72 $25.73 $22.90
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM POLICIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
---------------------------------------------
SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year..................................... $30.90 $24.34 $24.48 $21.90 $19.80
Net investment loss............................................... (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)............. 7.19 6.70 (0.05) 2.64 2.18
------ ------ ------ ------ ------
Unit value, end of year........................................... $37.80 $30.90 $24.34 $24.48 $21.90
====== ====== ====== ====== ======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Unit value, beginning of year..................................... $30.90 $24.34 $24.48 $21.90 $19.80
Net investment loss............................................... (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)............. 7.19 6.70 (0.05) 2.64 2.18
------ ------ ------ ------ ------
Unit value, end of year........................................... $37.80 $30.90 $24.34 $24.48 $21.90
====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during each year.
F-16
<PAGE> 74
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNTS I AND II
TAX-QUALIFIED AND NON-QUALIFIED POLICIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINGLE PREMIUM POLICIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
BOND INVESTMENT DIVISIONS 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
---------------------------------------------
SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year..................................... $28.44 $24.34 $25.51 $23.19 $21.69
Net investment income............................................. 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)............. (1.07) 2.80 (2.39) 0.93 0.10
------ ------ ------ ------ ------
Unit value, end of year........................................... $28.66 $28.44 $24.34 $25.51 $23.19
====== ====== ====== ====== ======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Unit value, beginning of year..................................... $28.54 $24.43 $25.60 $23.28 $21.77
Net investment income............................................. 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)............. (1.08) 2.80 (2.36) 0.88 0.08
------ ------ ------ ------ ------
Unit value, end of year........................................... $28.76 $28.54 $24.43 $25.60 $23.28
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM POLICIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
---------------------------------------------
SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year..................................... $26.78 $23.03 $24.26 $22.17 $20.84
Net investment income............................................. 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)............. (1.07) 2.59 (2.34) 0.89 0.23
------ ------ ------ ------ ------
Unit value, end of year........................................... $26.85 $26.78 $23.03 $24.26 $22.17
====== ====== ====== ====== ======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Unit value, beginning of year..................................... $26.82 $23.07 $24.30 $22.20 $20.87
Net investment income............................................. 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)............. (1.06) 2.60 (2.33) 0.97 0.24
------ ------ ------ ------ ------
Unit value, end of year........................................... $26.89 $26.82 $23.07 $24.30 $22.20
====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during each year.
F-17
<PAGE> 75
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--Selected Per Unit Data+ (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINGLE PREMIUM POLICIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
MONEY MARKET INVESTMENT DIVISIONS 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
---------------------------------------------
SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year..................................... $18.57 $17.81 $17.36 $17.07 $16.70
Net investment income............................................. 0.69 0.76 0.45 0.29 0.37
------ ------ ------ ------ ------
Unit value, end of year........................................... $19.26 $18.57 $17.81 $17.36 $17.07
====== ====== ====== ====== ======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Unit value, beginning of year..................................... $18.57 $17.81 $17.36 $17.07 $16.70
Net investment income............................................. 0.69 0.76 0.45 0.29 0.37
------ ------ ------ ------ ------
Unit value, end of year........................................... $19.26 $18.57 $17.81 $17.36 $17.07
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM POLICIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
---------------------------------------------
SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year..................................... $17.48 $16.85 $16.51 $16.32 $16.04
Net investment income............................................. 0.57 0.63 0.34 0.19 0.28
------ ------ ------ ------ ------
Unit value, end of year........................................... $18.05 $17.48 $16.85 $16.51 $16.32
====== ====== ====== ====== ======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Unit value, beginning of year..................................... $17.48 $16.85 $16.51 $16.32 $16.04
Net investment income............................................. 0.57 0.63 0.34 0.19 0.28
------ ------ ------ ------ ------
Unit value, end of year........................................... $18.05 $17.48 $16.85 $16.51 $16.32
====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during each year.
F-18
<PAGE> 76
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of New York Life Insurance and
Annuity Corporation and the MFA Policyowners:
In our opinion, the accompanying statements of assets and liabilities, and the
related statements of operations and of changes in total equity and the selected
per unit data present fairly, in all material respects, the financial position
of the New York Life Insurance and Annuity Corporation MFA Separate Account I
and New York Life Insurance and Annuity Corporation MFA Separate Account II
(which are comprised of the Single and Flexible Premium Policies Common Stock
Investment Divisions, the Single and Flexible Premium Policies Bond Investment
Divisions and the Single and Flexible Premium Policies Money Market Investment
Divisions) at December 31, 1996, the results of each of their operations for the
year then ended, the changes in each of their total equity for each of the two
years in the period then ended and the selected per unit data for each of the
five years in the period then ended in conformity with generally accepted
accounting principles. These financial statements and selected per unit data
(hereafter referred to as "financial statements") are the responsibility of
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of investments at December 31, 1996, with the MainStay VP Series
Fund, Inc., provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 19, 1997
F-19
<PAGE> 77
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
<S> <C> <C>
-----------------
<CAPTION>
(IN MILLIONS)
<S> <C> <C>
ASSETS
Fixed maturities
Available for sale, at fair value.......................................................... $11,854 $12,237
Held to maturity, at amortized cost........................................................ 647 566
Equity securities............................................................................ 70 70
Mortgage loans............................................................................... 1,113 1,003
Real estate.................................................................................. 151 141
Policy loans................................................................................. 464 435
Other long-term investments.................................................................. 17 17
------- -------
Total investments...................................................................... 14,316 14,469
Cash and cash equivalents.................................................................... 236 326
Deferred policy acquisition costs............................................................ 691 511
Other assets................................................................................. 252 236
Separate account assets...................................................................... 2,445 1,444
------- -------
Total assets........................................................................... $17,940 $16,986
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Policyholders' account balances.............................................................. $13,163 $12,853
Future policy benefits....................................................................... 251 233
Policy claims................................................................................ 57 81
Deferred income taxes........................................................................ 47 156
Other liabilities............................................................................ 333 591
Separate account liabilities................................................................. 2,403 1,396
------- -------
Total liabilities...................................................................... 16,254 15,310
STOCKHOLDER'S EQUITY
Capital stock -- par value $10,000
(20,000 shares authorized, 2,500 issued and outstanding)................................... 25 25
Additional paid in capital................................................................... 480 480
Net unrealized gains on investments.......................................................... 68 227
Retained earnings............................................................................ 1,113 944
------- -------
Total stockholder's equity............................................................. 1,686 1,676
------- -------
Total liabilities and stockholder's equity............................................. $17,940 $16,986
======= =======
</TABLE>
See accompanying notes to financial statements.
F-20
<PAGE> 78
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1995 1994
<S> <C> <C> <C>
--------------------------
<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Universal life and annuity fees.................................................... $ 234 $ 224 $ 194
Net investment income.............................................................. 1,048 1,012 1,014
Net realized investment gains (losses)............................................. 65 38 (41)
Other income....................................................................... 58 71 57
------ ------ ------
Total revenues............................................................... 1,405 1,345 1,224
------ ------ ------
EXPENSES
Interest credited to policyholders' account balances............................... 723 742 609
Policyholder benefits.............................................................. 117 168 154
Operating expenses................................................................. 299 239 278
------ ------ ------
Total expenses............................................................... 1,139 1,149 1,041
------ ------ ------
Income before Federal income taxes................................................... 266 196 183
Federal income taxes
Current............................................................................ 121 84 97
Deferred........................................................................... (24) (8) (10)
------ ------ ------
Total Federal income taxes................................................... 97 76 87
Net income........................................................................... $ 169 $ 120 $ 96
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE> 79
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1995 1994
<S> <C> <C> <C>
--------------------------
<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C>
Statutory capital and surplus, beginning of year as previously reported.............. $ -- $ -- $ 780
Cumulative effect of comprehensive change in basis of accounting (Note 2)............ -- -- 532
------ ------ ------
Stockholder's equity, beginning of year as adjusted.................................. 1,676 1,141 1,312
Net income........................................................................... 169 120 96
Change in unrealized gains and losses on investments................................. (159) 415 (197)
Dividends paid to stockholder........................................................ -- -- (70)
------ ------ ------
Stockholder's equity, end of year.................................................... $1,686 $1,676 $1,141
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-22
<PAGE> 80
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
<S> <C> <C> <C>
--------------------------
<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.......................................................................... $ 169 $ 120 $ 96
Adjustments to reconcile net income to net cash provided by (used for) operating
activities:
Depreciation and amortization..................................................... (18) (26) (43)
Capitalization of deferred policy acquisition costs............................... (151) (126) (111)
Amortization of deferred policy acquisition costs................................. 107 86 139
Policyholder expense charge....................................................... (188) (183) (168)
Interest credited to policyholders' account balances.............................. 723 742 609
Net realized investment (gains) losses............................................ (65) (38) 41
Deferred income taxes............................................................. (24) (8) (10)
Decrease in net separate account assets........................................... 6 17 2
(Increase) decrease in other assets and other liabilities......................... (127) 308 (179)
(Decrease) increase in policy claims.............................................. (24) 8 19
Increase (decrease) in future policy benefits..................................... 18 (80) 33
------- ------- -------
Net cash provided by operating activities..................................... 426 820 428
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of available for sale fixed maturities........................... 5,787 2,370 3,120
Proceeds from maturity of available for sale fixed maturities....................... 1,505 930 1,266
Proceeds from maturity of held to maturity fixed maturities......................... 141 103 160
Proceeds from sale of equity securities............................................. 47 40 25
Proceeds from repayment of mortgage loans........................................... 143 244 138
Proceeds from sale of real estate................................................... 55 13 16
Proceeds from other invested assets................................................. 4 31 --
Cost of available for sale fixed maturities acquired................................ (7,447) (4,320) (4,605)
Cost of held to maturity fixed maturities acquired.................................. (95) (162) (135)
Cost of equity securities acquired.................................................. (43) (12) (1)
Cost of mortgage loans acquired..................................................... (280) (320) (139)
Cost of real estate acquired........................................................ (35) (14) (54)
Cost of other invested assets acquired.............................................. (8) (5) (16)
Policy loans........................................................................ (29) (25) (31)
Securities sold under agreements to repurchase (net)................................ (37) (168) 105
------- ------- -------
Net cash used in investing activities............................................. (292) (1,295) (151)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits.......................................................................... 1,069 1,252 1,153
Withdrawals....................................................................... (562) (751) (793)
Net transfers to separate accounts................................................ (733) (238) (172)
Other, net.......................................................................... -- (52) (70)
------- ------- -------
Net cash (used in) provided by financing activities........................... (226) 211 118
------- ------- -------
Effect of exchange rate changes on cash and cash equivalents.......................... 2 (1) 1
------- ------- -------
Net (decrease) increase in cash and cash equivalents.................................. (90) (265) 396
Cash and cash equivalents, beginning of year.......................................... 326 591 195
------- ------- -------
Cash and cash equivalents, end of year................................................ $ 236 $ 326 $ 591
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-23
<PAGE> 81
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1--Nature of Operations
- --------------------------------------------------------------------------------
N
ew York Life Insurance and Annuity Corporation ("NYLIAC") is a direct,
wholly owned subsidiary of New York Life Insurance Company ("New York
Life"). NYLIAC offers a wide variety of interest sensitive insurance and
annuity products to a large cross section of the insurance market. NYLIAC
markets its products in all 50 of the United States, the District of Columbia
and Taiwan, primarily through its agency force. In addition, NYLIAC markets
Corporate Owned Life Insurance through independent brokers and brokerage general
agents.
NOTE 2--Significant Accounting Policies
- --------------------------------------------------------------------------------
Basis of Presentation
T
he accompanying financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP"). The preparation of
financial statements of life insurance enterprises requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements. Actual results may
differ from estimates.
Comprehensive Change in Basis of Accounting
In 1996, NYLIAC adopted Financial Accounting Standards Board ("FASB")
Interpretation No. 40 "Applicability of Generally Accepted Accounting Principles
to Mutual Life Insurance and Other Enterprises," as amended by Statement of
Financial Accounting Standards ("SFAS") No. 120 "Accounting and Reporting by
Mutual Insurance Enterprises and by Insurance Enterprises for Certain
Long-Duration Participating Contracts," effective for fiscal years beginning
after December 15, 1995. Prior to the effective date of the Interpretation,
NYLIAC, consistent with industry practice, issued financial statements in
accordance with statutory accounting practices which were considered GAAP for
mutual life insurance companies and their life insurance subsidiaries.
Interpretation No. 40 establishes a new definition of GAAP for mutual life
insurance companies and their life insurance subsidiaries. Under the
Interpretation, financial statements of mutual life insurance companies and
their life insurance subsidiaries which are prepared on the basis of statutory
accounting practices, are no longer characterized as in conformity with GAAP.
As a result, NYLIAC has prepared financial statements for the year ended
December 31, 1996 in accordance with GAAP. Financial statements for the years
ended December 31, 1995, 1994 and 1993, which were previously prepared on the
basis of statutory accounting, have been restated in accordance with GAAP. The
cumulative effect of the comprehensive change in basis of accounting of $532
million has been recorded as an increase in the beginning of year equity for the
year ended December 31, 1994, the earliest year presented herein (See Note 14
for a reconciliation of NYLIAC's statutory surplus and statutory net income with
stockholder's equity and net income on a GAAP basis).
Investments
Fixed maturity investments, which NYLIAC has both the ability and the intent
to hold to maturity, are stated at amortized cost. Investments identified as
available for sale are reported at fair value. Unrealized gains and losses on
available for sale securities are reported in equity, net of deferred taxes and
related adjustments. The cost basis of fixed maturities is adjusted for
impairments in value deemed to be other than temporary, with the associated
realized loss reported in net income. Equity securities are carried at fair
value. Unrealized gains and losses related to such securities are reflected in
equity, net of deferred taxes and related adjustments. Realized losses are
recognized in net income for other than temporary declines in fair value.
Mortgage loans are carried at unpaid principal balances, net of impairment
allowances, and are generally secured. Investment real estate, which NYLIAC has
the intent to hold for the production of income, is carried at depreciated cost
net of write-downs for other than temporary declines in fair value. Properties
held for sale are carried at the lower of cost or fair value less estimated
selling costs. Policy loans are stated at the aggregate balance due. The
carrying amount approximates fair value since loans on policies have no defined
maturity date and reduce amounts payable at death or surrender. Cash equivalents
include investments that have maturities of 90 days or less at date of purchase
and are carried at amortized cost, which approximates fair value. Short-term
investments are included in fixed maturities on the balance sheet, and are
carried at amortized cost, which approximates fair value.
Derivative financial instruments used by NYLIAC to hedge exposure to interest
rate and foreign currency fluctuations are accounted for on an accrual basis.
Realized gains and losses related to contracts that are effective hedges on
specific assets are deferred and recognized in net income in the same period as
gains and losses on the hedged assets. Amounts payable or
F-24
<PAGE> 82
Investments (Continued)
receivable under interest rate, currency and commodity swap agreements and
interest rate floor agreements are recognized as investment income or expense
when earned. Premiums paid for interest rate floor agreements are amortized into
interest expense over the life of the agreement. Unamortized premiums are
included in other assets in the balance sheet. Unrealized gains and losses on
foreign currency forward exchange contracts are reported in equity. Realized
gains and losses are recognized in net income upon termination or maturity of
the contracts.
Deferred Policy Acquisition Costs
The costs of acquiring new business and certain costs of issuing policies that
vary with and are primarily related to the production of new business have been
deferred and recorded as an asset in the balance sheet. These consist primarily
of commissions, certain expenses of underwriting and issuing contracts, and
certain agency expenses. Acquisition costs for universal life and annuity
contracts are amortized in proportion to estimated gross profits over the
effective life of these contracts, which is assumed to be 25 years for universal
life contracts and 15 years for annuities. Changes in assumptions are reflected
in the current year's amortization.
The carrying amount of the deferred policy acquisition cost asset is adjusted
at each balance sheet date as if the unrealized gains or losses on investments
associated with these insurance contracts had been realized and included in the
gross profits used to determine current period amortization. The increase or
decrease in the deferred policy acquisition cost asset due to unrealized gains
or losses is recorded in stockholder's equity.
Recognition of Income and Related Expenses
Amounts received under universal life and annuity contracts are reported as
deposits to policyholders' account balances. Revenues from these contracts
consist of amounts assessed during the period for mortality and expense risk,
policy administration and surrender charges. Policy benefits and claims that are
charged to expense include benefit claims incurred in the period in excess of
related policyholders' account balances.
Policyholders' Account Balances
Policyholders' account balances on universal life and annuity contracts are
equal to cumulative deposits plus credited interest less withdrawals.
Federal Income Taxes
NYLIAC is a member of a group which files a consolidated Federal income tax
return with New York Life. The consolidated income tax provision or benefit is
allocated among the members of the group in accordance with a tax allocation
agreement. The tax allocation agreement provides that each member of the group
is allocated its share of the consolidated tax provision or benefit determined
on a separate company basis. Current Federal income taxes are charged or
credited to operations based upon amounts estimated to be payable or recoverable
as a result of taxable operations for the current year. Adjustments to such
estimates are recorded in net income. Deferred income tax assets and liabilities
are recognized for the future tax consequence of temporary differences between
financial statement carrying amounts and income tax bases of assets and
liabilities.
Current Federal income taxes include a provision for NYLIAC's allocable share
of the equity base tax applicable to mutual life insurance companies and their
subsidiaries. The amount recorded is based on NYLIAC's estimate of the
differential earnings rate used to compute the equity base tax.
Reinsurance
NYLIAC enters into reinsurance agreements in the normal course of its
insurance business to reduce overall risk. NYLIAC remains liable for reinsurance
ceded if the reinsurer fails to meet its obligation on the business it has
assumed. NYLIAC evaluates the financial condition of its reinsurers to minimize
its exposure to significant losses from reinsurer insolvencies.
Separate Accounts
NYLIAC has established separate accounts with varying investment objectives
which are segregated from NYLIAC's general account and are maintained for the
benefit of separate account contractholders and NYLIAC. Separate account assets
are stated at market value. The liability for separate accounts represents
contractholders' interests in the separate account assets, including accumulated
net investment income and realized and unrealized gains and losses on those
assets.
F-25
<PAGE> 83
Fair Values of Financial Instruments
Fair values of various assets and liabilities are included throughout the
notes to financial statements. Specifically, fair value disclosure of fixed
maturities, short-term investments, cash equivalents, equity securities and
mortgage loans is reported in Note 2 -- Significant Accounting Policies and Note
3 -- Investments. Fair values for policyholders' account balances are reported
in Note 5 -- Insurance Liabilities. Fair values for derivative financial
instruments are included in Note 10 -- Derivative Financial Instruments and Risk
Management. Fair values for repurchase agreements are included in Note 11 --
Commitments and Contingencies.
Business Risks and Uncertainties
The development of liabilities for future policy benefits and deferred policy
acquisition costs for NYLIAC's products requires management to make estimates
and assumptions regarding mortality, morbidity, lapse, expense and investment
experience. Such estimates are primarily based on historical experience and
future expectations of mortality, morbidity, expense, persistency and investment
assumptions. Actual results could differ from those estimates. Management
monitors actual experience, and where circumstances warrant, revises its
assumptions and the related estimates for liabilities for future policy benefits
and deferred policy acquisition costs.
NYLIAC's investments are primarily comprised of fixed maturities and mortgage
loans. Significant changes in prevailing interest rates and geographic
conditions may adversely affect the timing and amount of cash flows on such
investments, as well as their related values. A significant decline in the
market value of these investments could have an adverse affect on NYLIAC's
balance sheet.
NYLIAC regularly invests in mortgage-backed securities and other securities
subject to prepayment and call risk. Significant changes in prevailing interest
rates may adversely affect the timing and amount of cash flows on such
securities. In addition, the amortization of market premium and accretion of
market discount for mortgage-backed securities is based on historical experience
and estimates of future payment experience on the underlying mortgage loans.
Actual prepayment speeds will differ from original estimates and may result in
material adjustments to amortization or accretion recorded in future periods.
As a subsidiary of a mutual life insurance company, NYLIAC is subject to a tax
on its equity base. The rates applied to NYLIAC's equity base are determined
annually by the Internal Revenue Service ("IRS") after comparison of mutual life
insurance company earnings for the year to the average earnings of the 50
largest stock life insurance companies for the prior three years. Due to the
timing of earnings information, estimates of the current year's tax must be made
by management. The ultimate amounts of equity base tax incurred may vary
considerably from the original estimates.
NOTE 3-- Investments
- --------------------------------------------------------------------------------
Fixed Maturities
F
or publicly traded fixed maturities, estimated fair value is determined
using quoted market prices. For fixed maturities without a readily
ascertainable market value, NYLIAC has determined an estimated fair value
using either a discounted cash flow approach (including provisions for
credit risk, generally based upon the assumption such securities will be held to
maturity) or a proprietary matrix pricing model.
At December 31, 1996 and 1995, the maturity distribution of fixed maturities
was as follows (in millions):
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
--------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
Due in one year or less............................................. $ 489 $ 491 $ 755 $ 762
Due after one year through five years............................... 3,019 3,039 2,782 2,850
Due after five years through ten years.............................. 2,122 2,151 1,642 1,736
Due after ten years................................................. 2,030 2,091 1,795 1,967
Asset-backed securities:
Government or government agency................................... 2,866 2,916 4,089 4,233
Other............................................................. 1,168 1,166 657 689
------- ------- ------- -------
Total Available for Sale.................................... $11,694 $ 11,854 $11,720 $ 12,237
======= ======= ======= =======
</TABLE>
F-26
<PAGE> 84
Fixed Maturities (Continued)
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
--------------------------------------------
<S> <C> <C> <C> <C>
HELD TO MATURITY
Due in one year or less............................................. $ 24 $ 24 $ 29 $ 29
Due after one year through five years............................... 192 194 232 237
Due after five years through ten years.............................. 235 241 208 221
Due after ten years................................................. 100 105 67 75
Asset-backed securities............................................. 96 96 30 31
---- ---- ---- ----
Total Held to Maturity...................................... $ 647 $660 $ 566 $593
==== ==== ==== ====
</TABLE>
At December 31, 1996 and 1995, the distribution of gross unrealized gains and
losses on investments in fixed maturities was as follows (in millions):
<TABLE>
<CAPTION>
1996
------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Treasury and U.S. Government corporations and agencies........ $ 1,243 $ 24 $ 7 $ 1,260
U.S. agencies, state and municipal................................. 2,561 64 15 2,610
Foreign governments................................................ 191 13 1 203
Corporate.......................................................... 6,531 131 47 6,615
Other.............................................................. 1,168 19 21 1,166
------- ---- --- -------
Total Available for Sale................................... $11,694 $251 $ 91 $ 11,854
======= ==== === =======
HELD TO MATURITY
Corporate.......................................................... $ 551 $ 15 $ 2 $ 564
Asset-backed securities............................................ 96 -- -- 96
------- ---- --- -------
Total Held to Maturity..................................... $ 647 $ 15 $ 2 $ 660
======= ==== === =======
</TABLE>
<TABLE>
<CAPTION>
1995
------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Treasury and U.S. Government corporations and agencies........ $ 1,840 $ 82 $ 2 $ 1,920
U.S. agencies, state and municipal................................. 3,563 150 8 3,705
Foreign governments................................................ 318 26 1 343
Corporate.......................................................... 5,342 249 11 5,580
Other.............................................................. 657 33 1 689
------- ---- --- -------
Total Available for Sale................................... $11,720 $540 $ 23 $ 12,237
======= ==== === =======
HELD TO MATURITY
Corporate.......................................................... $ 536 $ 26 $ -- $ 562
Asset-backed securities............................................ 30 1 -- 31
------- ---- --- -------
Total Held to Maturity..................................... $ 566 $ 27 $ -- $ 593
======= ==== === =======
</TABLE>
Equity Securities
Estimated fair value for equity securities, substantially all of which have a
readily ascertainable market value, has been determined using quoted market
prices.
At December 31, 1996 and 1995, the distribution of gross unrealized gains and
losses on equity securities is as follows (in millions):
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---------------------------------------
<S> <C> <C> <C> <C>
1996..................................................................... $63 $ 8 $1 $ 70
1995..................................................................... $45 $ 28 $3 $ 70
</TABLE>
F-27
<PAGE> 85
Mortgage Loans
NYLIAC's mortgage loans are diversified by property type, location and
borrower. Mortgage loans are collateralized by the related property and
generally approximate 75% of the property's value at the time the original loan
is made. The carrying value of mortgage loans was $1,113 million and $1,003
million at December 31, 1996 and 1995, respectively.
The fair market value of the mortgage loan portfolio at December 31, 1996 and
1995, is estimated to be $1,194 million and $1,103 million, respectively. Market
values are determined by discounting the projected cash flow for each individual
loan to determine the current net present value. The discount rate used
approximates the current rate for new mortgages with comparable characteristics
and similar remaining maturities.
At December 31, 1996, contractual commitments to extend credit under
commercial mortgage loan agreements amounted to approximately $25 million, all
at a fixed market rate of interest. These commitments are diversified by
property type and geographic region.
Allowances related to mortgage loans were $20 million at December 31, 1996 and
1995. The activity in the allowances as of December 31, 1996 and 1995, is
summarized below (in millions):
<TABLE>
<CAPTION>
1996 1995
-------------
<S> <C> <C>
Beginning balance.................................................................................. $20 $19
Charged to net loss................................................................................ (1) (5)
Principal write-offs............................................................................... 1 6
--- ---
Ending balance..................................................................................... $20 $20
=== ===
</TABLE>
Impaired mortgage loans along with specific allowances for losses as of
December 31, 1996 and 1995, were as follows (in millions):
<TABLE>
<CAPTION>
1996 1995
-------------
<S> <C> <C>
Impaired mortgage loans with provisions for losses................................................. $39 $51
Provision for losses............................................................................... (14) (13)
---- ----
Net impaired mortgage loans........................................................................ $25 $38
==== ====
</TABLE>
NYLIAC accrues interest income on impaired loans to the extent it is deemed
collectible (delinquent less than 90 days) and the loan continues to perform
under its original or restructured contractual terms. Interest income on problem
loans is generally recognized on a cash basis. Cash payments on loans in the
process of foreclosure are generally treated as a return of principal.
At December 31, 1996 and 1995, the distribution of the mortgage loan portfolio
by property type and geographic region was as follows (in millions):
<TABLE>
<CAPTION>
1996 1995
---------------
<S> <C> <C>
PROPERTY TYPE:
Office building................................................................................ $ 643 $ 639
Retail......................................................................................... 235 184
Apartments..................................................................................... 179 151
Other.......................................................................................... 56 29
------ ------
Total.................................................................................... $1,113 $1,003
====== ======
GEOGRAPHIC REGION:
Central........................................................................................ $ 246 $ 207
Pacific........................................................................................ 133 131
Middle Atlantic................................................................................ 377 365
South Atlantic................................................................................. 307 273
New England.................................................................................... 33 12
Other.......................................................................................... 17 15
------ ------
Total.................................................................................... $1,113 $1,003
====== ======
</TABLE>
F-28
<PAGE> 86
Real Estate
At December 31, 1996 and 1995, NYLIAC's real estate portfolio consisted of the
following (in millions):
<TABLE>
<CAPTION>
1996 1995
-------------
<S> <C> <C>
Investment......................................................................................... $105 $101
Acquired through foreclosure....................................................................... 39 40
Real estate joint ventures......................................................................... 7 --
---- ----
Total real estate.......................................................................... $151 $141
==== ====
</TABLE>
Accumulated depreciation on real estate was $5 million at December 31, 1996
and 1995. Depreciation expense for 1996, 1995 and 1994, totaled $3 million, $3
million and $2 million, respectively.
NOTE 4--Investment Income and Capital Gains and Losses
- --------------------------------------------------------------------------------
T
he components of net investment income for the years ended December 31,
1996, 1995 and 1994, were as follows (in millions):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
------------------------
Fixed maturities....................................................................... $ 920 $ 904 $ 890
Equity securities...................................................................... 3 3 5
Mortgage loans......................................................................... 93 82 86
Real estate............................................................................ 21 19 16
Policy loans........................................................................... 37 35 31
Other.................................................................................. 6 4 13
------ ------ ------
Gross investment income............................................................ 1,080 1,047 1,041
Investment expenses.................................................................... (32) (35) (27)
------ ------ ------
Net investment income.............................................................. $1,048 $1,012 $1,014
====== ====== ======
</TABLE>
For the years ended December 31, 1996, 1995 and 1994, realized investment
gains and losses computed under the specific identification method are as
follows (in millions):
<TABLE>
<CAPTION>
1996 1995 1994
---------------- ---------------- ----------------
GAINS LOSSES GAINS LOSSES GAINS LOSSES
-----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fixed maturities.......................................... $100 $ (64) $ 62 $ (32) $ 98 $(132)
Equity securities......................................... 22 (1) 16 (7) 5 (1)
Mortgage loans............................................ 15 (19) 15 (19) 1 (5)
Real estate............................................... 6 (3) 1 (1) 1 (4)
Derivative instruments.................................... 46 (41) 102 (102) 4 (14)
Other..................................................... 7 (3) 9 (6) 7 (1)
---- ----- ---- ----- ---- -----
Subtotal................................................ $196 $(131) $205 $(167) $116 $(157)
---- ----- ---- ----- ---- -----
Net realized investment gains (losses).................... $65 $38 $(41)
=== === ===
</TABLE>
F-29
<PAGE> 87
NOTE 4--Investment Income and Capital Gains and Losses (Continued)
- --------------------------------------------------------------------------------
Stockholder's equity at December 31, 1996 and 1995, includes net unrealized
gains and losses as follows (in millions):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
-------------
Net unrealized gains on investments before adjustments............................................ $163 $ 535
Related adjustments:
Deferred policy acquisition costs............................................................... (60) (196)
Policyholder liabilities........................................................................ 2 9
Deferred Federal income taxes................................................................... (37) (121)
---- ----
(95) (308)
Net unrealized gains on investments included in stockholder's equity.............................. $68 $ 227
==== ====
</TABLE>
Changes in net unrealized gains and losses on investments were as follows (in
millions):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
--------------
Net unrealized gains (losses) on investments before adjustments:
Beginning of year.............................................................................. $ 535 $ (477)
End of year.................................................................................... 163 535
---- ----
Net change..................................................................................... (372) 1,012
Change in related adjustments:
Deferred policy acquisition costs.............................................................. 136 (391)
Policyholder liabilities....................................................................... (7) 17
Deferred Federal income taxes.................................................................. 84 (223)
---- ----
Change in unrealized gains on investments........................................................ (159) 415
Net unrealized gains (losses) on investments at beginning of year................................ 227 (188)
---- ----
Net unrealized gains on investments at end of year............................................... $ 68 $ 227
==== ====
</TABLE>
NOTE 5--Insurance Liabilities
- --------------------------------------------------------------------------------
Policyholders' Account Balances
N
YLIAC's annuity contracts are primarily deferred annuities. The carrying
value, which approximates fair value, of NYLIAC's liabilities for deferred
annuities at December 31, 1996 and 1995, was $7,345 million and $7,559
million, respectively.
NOTE 6--Separate Accounts
- --------------------------------------------------------------------------------
N
YLIAC maintains seven non-guaranteed, registered separate accounts for its
variable deferred annuity and variable life products with assets of $2,445
million and $1,444 million at December 31, 1996 and 1995, respectively.
NYLIAC maintains investments in the registered separate accounts of $42
million and $48 million at December 31, 1996 and 1995, respectively. The assets
of the separate accounts, which are carried at market value, represent
investments in shares of the New York Life sponsored MainStay VP Series Fund and
seven nonproprietary funds.
F-30
<PAGE> 88
NOTE 7--Deferred Policy Acquisition Costs
- --------------------------------------------------------------------------------
A
n analysis of deferred policy acquisition costs for the years ended December
31, 1996, 1995 and 1994, is as follows (in millions):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
----------------------
Balance at beginning of year before adjustment for unrealized (gains) losses on
investments............................................................................ $ 707 $ 667 $ 695
Current year deferral.................................................................... 151 126 111
Amortized during year.................................................................... (107) (86) (139)
------ ------ ------
Balance at end of year before adjustment for unrealized (gains) losses on investments.... 751 707 667
Adjustment for unrealized (gains) losses on investments.................................. (60) (196) 195
------ ------ ------
Balance at end of year................................................................... $ 691 $ 511 $ 862
====== ====== ======
</TABLE>
NOTE 8--Federal Income Taxes
- --------------------------------------------------------------------------------
T
he components of the net deferred income tax liability as of December 31,
1996 and 1995, are as follows (in millions):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
-------------
Deferred Tax Assets:
Future policy benefits.......................................................................... $114 $ 105
Employee benefits............................................................................... 26 43
Other........................................................................................... 36 9
---- ----
Gross deferred tax assets..................................................................... 176 157
---- ----
Deferred Tax Liabilities:
Deferred policy acquisition costs............................................................... 161 110
Investments..................................................................................... 54 191
Other........................................................................................... 8 12
---- ----
Gross deferred tax liabilities................................................................ 223 313
---- ----
Net deferred tax liability.................................................................... $(47) $(156)
==== ====
</TABLE>
The gross deferred tax asset relates to temporary differences that are
expected to reverse as net ordinary deductions. Management believes that
NYLIAC's taxable income in future years will be sufficient to realize the
deferred tax benefits and therefore, no valuation allowance has been recorded.
Set forth below is a reconciliation of the Federal income tax rate to the
effective tax rate for 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
---------------------
Statutory Federal income tax rate......................................................... 35.0% 35.0% 35.0%
Equity base tax....................................................................... 3.2 -- 11.7
Investments in employee stock option loans............................................ (.7) (1.3) (1.4)
Other................................................................................. (.9) 5.2 3.3
---- ---- ----
Effective tax rate.................................................................... 36.6% 38.9% 48.6%
==== ==== ====
</TABLE>
NYLIAC's Federal income tax returns are routinely audited by the IRS and
provisions are made in the financial statements in anticipation of the results
of these audits. The IRS has completed audits through 1990. There were no
material effects on NYLIAC's results of operations as a result of these audits.
NYLIAC believes that its recorded income tax liabilities are adequate for all
open years.
F-31
<PAGE> 89
NOTE 9--Reinsurance
- --------------------------------------------------------------------------------
A
group reinsurance agreement between NYLIAC and New York Life was approved by
the New York State Insurance Department in 1981 and was terminated effective
December 31, 1995. Under the terms of the agreement, NYLIAC assumed the
liabilities for group health long-term disability policies issued by New York
Life. Cash settlements were made between the companies as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1996 1995 1994
<S> <C> <C> <C>
---------------------
Premiums due.............................................................................. $-- $(32) $(33)
Benefit reimbursement..................................................................... 22 20 18
Experience refund......................................................................... 4 8 16
--- --- ---
Net settlement paid (received) by NYLIAC.................................................. $26 $(4) $ 1
=== === ===
</TABLE>
As a result of the termination of the group reinsurance agreement between
NYLIAC and New York Life, NYLIAC transferred $119 million in fixed maturities to
New York Life during 1996 as payment for the policy liabilities related to
disability claims covered under the group reinsurance contract. At December 31,
1995, NYLIAC had established a liability of $119 million for this payment.
NOTE 10--Derivative Financial Instruments and Risk Management
- --------------------------------------------------------------------------------
N
YLIAC uses derivative financial instruments to manage interest rate,
currency and market risk. These derivative financial instruments include
foreign currency forward exchange contracts, interest rate floors, and
interest rate and commodity swaps. NYLIAC does not engage in derivative
financial instrument transactions for the purpose of trading.
Notional or contractual amounts of derivative financial instruments provide
only a measure of involvement in these types of transactions and they do not
represent the amounts exchanged between the parties engaged in the transaction.
The amounts exchanged are determined by reference to the notional amounts and
other terms of the derivative financial instruments which relate to interest
rates, exchange rates, or other financial indices.
Interest Rate Risk Management
NYLIAC enters into various types of interest rate contracts primarily to
minimize exposure of specific assets held by NYLIAC to fluctuations in interest
rates.
The following table summarizes the notional amounts and credit exposures of
interest rate related derivative transactions (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------------------- ---------------------
NOTIONAL CREDIT NOTIONAL CREDIT
AMOUNT EXPOSURE AMOUNT EXPOSURE
<S> <C> <C> <C> <C>
---------------------------------------------
Interest Rate Swaps............................................... $57,000 $992 $50,000 --
Floors............................................................ $150,000 $120 $150,000 --
</TABLE>
Interest rate swaps are agreements with other parties to exchange, at
specified intervals, the difference between fixed-rate and floating-rate
interest amounts calculated by reference to an agreed upon notional amount. Swap
contracts outstanding at December 31, 1996 are between eight years, eight months
and fourteen years, four months in maturity. At December 31, 1995 such contracts
were between ten months and eight years, seven months in maturity. NYLIAC does
not act as an intermediary or broker in interest rate swaps.
F-32
<PAGE> 90
Interest Rate Risk Management (Continued)
The following table shows the type of swaps used by NYLIAC and the weighted
average interest rates. Average variable rates are based on the rates which
determine the last payment received or paid on each contract; those rates may
change significantly, affecting future cash flows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
-------------------
Receive -- fixed swaps -- Notional amount (in thousands).................................... $57,000 $15,000
Average receive rate...................................................................... 7.19% 7.93%
Average pay rate.......................................................................... 5.92% 7.39%
Pay -- fixed swaps -- Notional amount (in thousands)........................................ -- $35,000
Average pay rate.......................................................................... -- 7.46%
Average receive rate...................................................................... -- 6.02%
</TABLE>
During the term of the swap, net settlement amounts are recorded as investment
income or expense when earned. Fair values of interest rate swaps were $569,000
and ($2,000,000) at December 31, 1996 and 1995, respectively, based on quoted
market prices.
Interest rate floor agreements entitle NYLIAC to receive amounts from
counterparties based upon the difference between a strike price and current
interest rates. Such agreements serve as hedges against declining interest rates
on a portfolio of assets. Amounts received during the term of interest rate
floor agreements are recorded as investment income.
At December 31, 1996 and 1995, unamortized premiums on interest rate floors
amounted to $522,000 and $597,000, respectively. Fair values of such agreements
were $120,000 and $395,000 at December 31, 1996 and 1995, respectively, based on
quoted market prices.
NYLIAC is exposed to credit-related losses in the event that a counterparty
fails to perform its obligations under contractual terms. The credit exposure of
derivative financial instruments is represented by the sum of fair values of
contracts with each counterparty, if the net value is positive, at the reporting
date.
NYLIAC deals with highly rated counterparties and does not expect the
counterparties to fail to meet their obligations. NYLIAC has controls in place
to monitor credit exposures by limiting transactions with specific
counterparties within specified dollar limits and assessing the future
creditworthiness of counterparties. NYLIAC uses master netting agreements and
adjusts transaction levels, when appropriate, to minimize risk.
Foreign Exchange Risk Management
NYLIAC enters into foreign currency forward exchange contracts and foreign
currency swaps primarily as a portfolio hedge against foreign currency
fluctuations. The purpose of NYLIAC's foreign currency hedging activities is to
protect it from the risk that the value of foreign currency denominated
investments will be adversely affected by changes in exchange rates.
NYLIAC's foreign currency forward exchange contracts involve the exchange of
two currencies at a specified future date and at a specified price. The average
term of the contracts is three to six months.
The table below summarizes, by major currency, the contractual amounts of
NYLIAC's foreign currency forward exchange contracts. The amounts represent the
U.S. dollar equivalent of commitments to buy and sell foreign currencies,
translated at December 31, 1996 and 1995 exchange rates (in thousands):
<TABLE>
<CAPTION>
1996 1995
------------------ -----------------
BUY SELL BUY SELL
<S> <C> <C> <C> <C>
---------------------------------
Japanese Yen.................................................................. $ -- $14,000 $ -- $ 49,000
Italian Lire.................................................................. -- 9,000 -- 21,000
French Francs................................................................. -- 8,000 -- 24,000
Other......................................................................... 4,000 43,000 -- 107,000
------ ------- --- --------
$4,000 $74,000 $ -- $201,000
====== ======= === ========
</TABLE>
F-33
<PAGE> 91
Foreign Exchange Risk Management (Continued)
The fair values of foreign currency forward exchange contracts at December 31,
1996 and 1995 were $1 million and $(3) million, respectively, based on current
market rates.
NYLIAC is exposed to credit-related losses in the event of non-performance by
counterparties, which could result in an unhedged position. NYLIAC deals with
highly rated counterparties and does not expect the counterparties to fail to
meet their obligations under the contracts. For contracts with counterparties
where no master netting arrangement exists, in the event of default on the part
of the counterparty, credit exposure is defined as the fair value of contracts
in a gain position at the reporting date. Credit exposure to counterparties,
where a master netting arrangement is in place in the event of default is
defined as the net fair value, if positive, of all outstanding contracts with
each specific counterparty. The credit exposure of NYLIAC's foreign currency
forward exchange contracts at December 31, 1996 and 1995 was $1,000,000 and
$137,000, respectively.
NOTE 11--Commitments and Contingencies
- --------------------------------------------------------------------------------
Litigation
I
n 1995, NYLIAC and New York Life settled a class action related to the sale
of whole life and universal life insurance policies from 1982 through 1994.
In entering into the settlement, NYLIAC specifically denied any wrongdoing.
The settlement was approved by the judge, and has now been upheld on appeal,
including a recent refusal by the New York State Court of Appeals to permit a
discretionary appeal from the Appellate Division. The lone appellant has
recently filed two motions in the trial court seeking to enjoin implementation
of the settlement and to renew his objections to the settlement. The lone
appellant may file a writ of certiorari in the United States Supreme Court
during the prescribed statutory period.
There are also actions in various jurisdictions by individual policyowners who
excluded themselves from the settlement of the nationwide class action; and in
each of two jurisdictions a purported class action claiming to include numerous
policyowners who excluded themselves from the settlement of the nationwide class
action. Most of these actions seek substantial or unspecified compensatory and
punitive damages.
NYLIAC is also a defendant in other individual and alleged class actions
arising from its insurance, investment and/or other operations, including
actions involving retail sales practices. Most of these actions also seek
substantial or unspecified compensatory and punitive damages. NYLIAC is also
from time to time involved as a party in various governmental, administrative,
and investigative proceedings and inquiries.
Given the uncertain nature of litigation and regulatory inquiries, the outcome
of the above cannot be predicted. NYLIAC nevertheless believes that the ultimate
liability that could result from such litigation and proceedings would not have
a material adverse effect on NYLIAC's financial position; however, it is
possible that settlements or adverse determinations in one or more actions or
other proceedings in the future could have a material adverse effect on NYLIAC's
operating results for a given year.
Loaned Securities and Repurchase Agreements
NYLIAC participates in a secured lending program for the purpose of enhancing
income on securities held. At December 31, 1996, $826 million ($1,222 million at
December 31, 1995) of NYLIAC's bonds were on loan to others, but were fully
collateralized in an account held in trust for NYLIAC. Such assets reflect the
extent of NYLIAC's involvement in securities lending, not its risk of loss.
NYLIAC enters into agreements to sell and repurchase securities for the
purpose of enhancing income on securities held. Under these agreements, NYLIAC
obtains the use of funds from a broker for approximately one month. The
liability reported in the balance sheet at December 31, 1996 of $50 million ($86
million at December 31, 1995) is considered to be fair value. The investments
acquired with the funds received from the securities sold are primarily included
in cash and cash equivalents in the balance sheet.
NOTE 12--Related Party Transactions
- --------------------------------------------------------------------------------
N
o dividends were declared or paid to New York Life in 1996 or 1995. In 1994,
NYLIAC declared and paid a dividend of $70 million to New York Life. This
dividend was paid from current year earnings, as permitted by the Delaware
Insurance Department.
New York Life provides NYLIAC with services and facilities for the sale of
insurance and other activities related to the business of insurance. NYLIAC
reimburses New York Life for the identified costs associated with these services
and facilities
F-34
<PAGE> 92
NOTE 12--Related Party Transactions (Continued)
- --------------------------------------------------------------------------------
under the terms of a Service Agreement between New York Life and NYLIAC. Such
costs, amounting to $191 million for the year ended December 31, 1996 ($166
million for 1995 and $147 million for 1994) are reflected in operating expenses
and net investment income in the accompanying Statement of Income.
NOTE 13--Supplemental Cash Flow Information
- --------------------------------------------------------------------------------
A
s a result of the reinsurance agreement with New York Life discussed in Note
9, NYLIAC transferred $119 million in fixed maturities to New York Life
during 1996.
Federal income taxes paid were $146 million, $57 million, and $105 million
during 1996, 1995 and 1994, respectively.
Interest paid was $3 million, $2 million and $2 million during 1996, 1995 and
1994, respectively.
NOTE 14--Reconciliations Between Statutory Accounting and GAAP
- --------------------------------------------------------------------------------
A
ccounting practices used to prepare statutory financial statements for
regulatory filings of life insurance companies differ in certain instances
from GAAP. The following chart reconciles NYLIAC's statutory capital and
surplus determined in accordance with accounting practices prescribed by the
Delaware Insurance Department with stockholder's equity on a GAAP basis, and the
cumulative effect of adopting GAAP as of January 1, 1994 (in millions):
<TABLE>
<CAPTION>
CUMULATIVE
YEAR ENDED EFFECT
DECEMBER 31, OF ADOPTING GAAP
---------------------------- ----------------
1996 1995 1994 JANUARY 1, 1994
<S> <C> <C> <C> <C>
----------------------------------------------
Statutory Capital and Surplus.................................... $ 998 $ 878 $ 845 $ 780
------ ------ ------ ------
Adjustments:
Deferred policy acquisition costs.............................. 691 511 862 694
Asset valuation reserve........................................ 164 137 105 79
Investment related............................................. 151 511 (490) (7)
Interest maintenance reserve................................... 35 26 20 55
Non-admitted assets............................................ 31 26 23 17
Policyholder liabilities....................................... (262) (187) (203) (184)
Deferred income taxes.......................................... (47) (156) 59 (55)
Employee benefit liabilities................................... (63) (61) (61) (60)
Other.......................................................... (12) (9) (19) (7)
------ ------ ------ ------
Total adjustments............................................ 688 798 296 532
------ ------ ------ ------
Total GAAP Stockholder's Equity.................................. $1,686 $1,676 $1,141 $1,312
====== ====== ====== ======
</TABLE>
F-35
<PAGE> 93
NOTE 14--Reconciliations Between Statutory Accounting and GAAP (Continued)
- --------------------------------------------------------------------------------
The following chart reconciles NYLIAC's statutory net income determined in
accordance with accounting practices prescribed by the Delaware Insurance
Department with net income on a GAAP basis (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1996 1995 1994
<S> <C> <C> <C>
---------------------
Statutory Net Income...................................................................... $148 $95 $166
---- ---- ---
Adjustments:
Deferred policy acquisition costs....................................................... 44 40 (28)
Deferred income taxes................................................................... 24 8 10
Interest maintenance reserve............................................................ 9 6 (35)
Investment related...................................................................... 1 (11) --
Policyholder liabilities................................................................ (54) (4) (14)
Other................................................................................... (3) (14) (3)
---- ---- ---
Total Adjustments................................................................. 21 25 (70)
---- ---- ---
GAAP Net Income........................................................................... $169 $120 $96
==== ==== ===
</TABLE>
Financial statements prepared on the statutory basis of accounting vary from
those prepared under GAAP, primarily as follows: (1) the costs related to
acquiring business, principally commissions and certain policy issue expenses
are charged to income in the year incurred, whereas under GAAP they would be
deferred and amortized over the periods benefitted; (2) funds received under
deposit-type contracts are reported as premium income, whereas under GAAP, such
funds are recorded as a liability; (3) life insurance reserves are based on
different assumptions than they are under GAAP; (4) life insurance companies are
required to establish an Asset Valuation Reserve ("AVR") by a direct charge to
surplus to offset potential investment losses, whereas, under GAAP, the AVR is
not recognized and any allowances for losses on investments would be deducted
from the assets to which they relate and would be charged to income; (5)
investments in fixed maturities are generally carried at amortized cost or
values prescribed by the National Association of Insurance Commissioners
("NAIC"); under GAAP, investments in fixed maturities, which are available for
sale or held for trading, are generally carried at market value, with changes in
market value charged against equity or reflected in earnings; (6) realized gains
and losses resulting from changes in interest rates on fixed income investments
are deferred in the interest maintenance reserve ("IMR") and amortized into
investment income over the remaining life of the investment sold, whereas under
GAAP, the gains and losses are recognized in income at the time of sale; and (7)
deferred Federal income taxes are not provided for as they are under GAAP.
The New York State Insurance Department recognizes only statutory accounting
practices for determining and reporting the financial condition and results of
operations of an insurance company, and for determining its solvency under the
New York Insurance Law. No consideration is given by the Department to financial
statements prepared in accordance with generally accepted accounting principles
in making such determinations.
At December 31, 1996 and 1995, admitted assets on a statutory basis were
$17,099 million and $15,977 million, respectively, and total liabilities were
$16,101 million and $15,099 million, respectively, which included policy
reserves of $13,099 million and $12,821 million, respectively.
F-36
<PAGE> 94
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
New York Life Insurance and Annuity Corporation
I
n our opinion, the accompanying balance sheets and the related statements of
income, of changes in stockholder's equity and of cash flows present fairly,
in all material respects, the financial position of New York Life Insurance
and Annuity Corporation at December 31, 1996 and 1995, and the results of its
operations and its cash flows for the three years in the period ended December
31, 1996, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 2, the Company changed its accounting policies to adopt
pronouncements of the Financial Accounting Standards Board in 1996.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York
April 16, 1997
F-37
<PAGE> 95
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements
All Required financial statements are included in Part B of this
Registration Statement.
b. Exhibits.
(1)- Resolutions of the Board of Directors of New York Life
Insurance and Annuity Corporation ("NYLIAC") authorizing
establishment of the Separate Accounts - previously filed as
Exhibit 1.A(1) to the Registration Statement on Form S-6 and
re-filed in accordance with Regulation S-T, 17 CFR 232.102(e)
as Exhibit b.(1) to Post-Effective Amendment No. 17 to the
registration statement on Form S-6 for NYLIAC MFA Separate
Account-I (File No. 2-86083).
(2)- Not applicable.
(3)- (a) Distribution Agreement between NYLIFE Securities, Inc. and
NYLIAC - previously filed as Exhibit 1.(3)(a) to
Post-Effective Amendment No.1 to the Registration Statement on
Form S-6 and re-filed in accordance with Regulation S-T, 17
CFR 232.102(e) with Post-Effective Amendment No. 4 to the
registration statement on Form S-6 for NYLIAC Variable
Universal Life Separate Account-I (File No. 33-64410).
(b) Distribution Agreement between NYLIFE Distributors, Inc.
and NYLIAC - previously filed as Exhibit 3(b) to
Post-Effective Amendment No.5 to the registration statement on
Form N-4 for NYLIAC Variable Annuity Separate Account-I (File
No. 33-53342).
(c) Form of Agreement among New York Life Insurance Company,
NYLIFE Securities Inc., NYLIAC and its agent (and referenced
Agent's Contract)-Previously filed as Exhibit 1.(3)(b) to
Pre-Effective Amendment No. 1 to the Registration Statement on
Form S-6 and re-filed in accordance with Regulation S-T, 17
CFR 232.102(e) as Exhibit b.(3)c to Post-Effective Amendment
No. 17 to the registration statement on Form S-6 for NYLIAC
MFA Separate Account-I (File No. 2-86083).
(4)- (a) Specimen Non-Qualified Flexible Premium Policy -
Previously filed as Exhibit 1.A(5)(a) to the
Registration Statement on Form S-6 and filed herewith
in accordance with Regulation S-T, 17 CFR 232.102(e).
(b) Specimen Non-Qualified Single Premium Policy -
Previously filed as Exhibit 1.A(5)(b) to the
Registration Statement on Form S-6 and filed herewith
in accordance with Regulation S-T, 17 CFR 232.102(e).
(5)- Form of Application for a Policy - previously filed as Exhibit
1(10) to Pre-Effective Amendment No. 1 to the Registration
Statement on Form S-6 and re-filed in accordance with
Regulation S-T, 17 CFR 232.102(e) as Exhibit b.(5) to
Post-Effective Amendment No. 17 to the registration statement
on Form S-6 for NYLIAC MFA Separate Account-I (File No.
2-86083)
(6)(a)- Certificate of Incorporation of NYLIAC - previously filed as
Exhibit 1.A.(6)(a) to the Registration Statement on Form S-6
and re-filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit
C-1
<PAGE> 96
1.(6)(a) to the initial registration statement on Form S-6 for
NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I (File No. 333-07617).
(b)- By-Laws of NYLIAC - previously filed as Exhibit 1.A.(6)(b) to
the Registration Statement on Form S-6 and re-filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit
1.(6)(b) to the initial registration statement on Form S-6 for
NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I (File No. 333-07617).
(7)- Not applicable.
(8)- Service Agreement between New York Life Insurance Company and NYLIAC
(including Amendments)- Previously filed as Exhibit 1.8 to
Post-Effective Amendment No. 1 to the Registration Statement on Form
S-6 and re-filed in accordance with Regulation S-T, 17 CFR 232.102(e)
as Exhibit b.(8) to Post-Effective Amendment No. 17 to the registration
statement on Form S-6 for NYLIAC MFA Separate Account-I (File No.
2-86083).
(9)- Opinion and Consent of Robert J. Hebron, Esq. - filed herewith.
(10)- (a) Consent of Price Waterhouse, LLP - filed herewith
(b) Powers of Attorney for the Directors and Officers of NYLIAC -
previously filed as Exhibit 1.(9)(c) to to Pre-Effective
Amendment No. 2 to the registration statement on Form S-6 for
NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I (File No. 333-07617) for the following:
Jay S. Calhoun, Vice President, Treasurer and Director
(Principal Financial Officer)
Richard M. Kernan, Jr., Director
Robert D. Rock, Senior Vice President and Director
Frederick J. Sievert, Executive Vice President and Director
Stephen N. Steinig, Senior Vice President, Chief Actuary
and Director
Seymour Sternberg, President and Director (Principal
Executive Officer)
(c) Power of Attorney for Maryann L. Ingenito, Vice President and
Controller (Principal Accounting Officer) previously filed as
Exhibit 1.(9)(d) to Pre-Effective Amendment No. 1 to the
registration statement on Form S-6 for NYLIAC Corporate
Sponsored Variable Universal Life Separate Account-I (File No.
333-07617).
(11)- Not applicable.
(12)- Not applicable.
(13)- Not applicable.
(14)- Financial Data Schedule - filed herewith.
C-2
<PAGE> 97
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR.
The business address of each director and officer of NYLIAC is 51 Madison
Avenue, New York, NY 10010.
Directors:
----------
Jay S. Calhoun Vice President and Treasurer
Richard M. Kernan, Jr.
Robert D. Rock Senior Vice President
Frederick J. Sievert Executive Vice President
Stephen N. Steinig Senior Vice President and Chief Actuary
Seymour Sternberg President
Officers:
---------
Seymour Sternberg President
Frederick J. Sievert Executive Vice President
Michael Callahan Senior Vice President
Marc J. Chalfin Senior Vice President
Michael Gallo Senior Vice President
Solomon Goldfinger Senior Vice President
Phillip J. Hildebrand Senior Vice President
Jean E. Hoysradt Senior Vice President
Robert Hynes Senior Vice President
Gerald Kaplan Senior Vice President and Tax Counsel
Paul Morris Senior Vice President
Frank J. Ollari Senior Vice President
Robert D. Rock Senior Vice President
Stephen N. Steinig Senior Vice President and Chief Actuary
Thomas J. Warga Vice President and General Auditor
Jay S. Calhoun Vice President and Treasurer
Ralph P. Casale Vice President
William Y. Cheng Vice President
Patrick Colloton Vice President
Henry Ciapas Vice President
John A. Cullen Vice President and Assistant Controller
Melvin J. Feinberg Vice President
Jane L. Hamrick Vice President and Actuary
Celia M. Holtzberg Vice President
Maryann L. Ingenito Vice President and Controller
Himi L. Kittner Vice President
David J. Krystel Vice President
Thomas S. McArdle Vice President
Daniel J. McKillop Vice President
John R. Meyer Vice President
Michael M. Oleske Vice President and Associate Tax Counsel
Lawrence R. Stoehr Vice President
Richard W. Zuccaro Vice President and Assistant Controller
George J. Trapp Secretary
<PAGE> 98
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR
REGISTRANT
The Depositor, NYLIAC, is a wholly-owned subsidiary of New York Life
Insurance Company ("New York Life"). The Registrant is a segregated asset
account of NYLIAC. The following chart indicates persons presumed to be
controlled by New York Life+, unless otherwise indicated. Subsidiaries of other
subsidiaries are indented accordingly, and ownership is 100% unless otherwise
indicated.
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
- ---- --------------- -----------------
<S> <C> <C>
Aegis Technologies, Inc.(1) Delaware
MainStay Institutional Funds Inc.(2)(formerly New York Life Maryland
Institutional Funds, Inc.)[open end investment company]
MainStay VP Series Fund, Inc.(3) Maryland
New York Life Fund, Inc.(3) New York
New York Life Insurance and Annuity Corporation Delaware 100%
New York Life Irrevocable Trust of 1996(4) New York N/A
NYLIFE Inc. New York 100%
Eagle Strategies Corp.
Greystone Realty Corporation Delaware
Greystone Realty Management, Inc. Delaware
MacKay-Shields Financial Corporation Delaware
MainStay Shareholder Services Inc. Delaware
MSC Holding, Inc. (formerly Magnus Software Georgia
Corporation)(85.43%)
Monitor Capital Advisors, Inc. Delaware
New York Life Benefit Services, Inc. Massachussetts
ADQ Insurance Agency, Inc. Massachussetts
New York Life Capital Corporation Delaware
New York Life International Investment Inc. Delaware
Monetary Research Ltd. Bermuda
NYL Management Limited (formerly Quorum Capital United Kingdom
Management Limited)
New York Life Worldwide Holding, Inc. Delaware
</TABLE>
- ----------
+ By including the indicated corporations in this list, New York Life is
not stating or admitting that said corporations are under its actual
control; rather, these corporations are listed here to ensure full
compliance with the requirements of this Form N-4.
- ----------
(1) A Certificate of Dissolution was filed for this Company on April 9,
1996. Pursuant to Delaware law, the Company's existence is "continued" for a
period of three years following dissolution for purposes of winding up.
Therefore, this Company is included here for informational purposes only.
(2) This entity is an unaffiliated registered investment company as to
which New York Life and/or its subsidiaries perform investment management,
administrative, distribution and underwriting services. It is not a subsidiary
of New York Life but is included here for informational purposes only.
(3) New York Life serves as investment adviser to these entities, the
shares of which are held of record by separate accounts of New York Life (in the
case of New York Life Fund, Inc.) and New York Life Insurance and Annuity
Corporation ("NYLIAC") (for MainStay VP Series Fund, Inc.). New York Life
disclaims any beneficial ownership and control of these entities. New York Life
and NYLIAC as depositor of said separate accounts have agreed to vote their
shares as to matters covered in the proxy statements in accordance with voting
instructions received from holders of variable annuity and variable life
insurance policies at the shareholders meeting of these entities. They are not
subsidiaries of New York Life but are included here for informational purposes
only.
(4) An unaffiliated trust formed solely for the purpose of holding
shares of New York Life Settlement Corporation. It is not a subsidiary of New
York Life but is included here for informational purposes only.
<PAGE> 99
[NYLIFE Inc. entry continued]
<TABLE>
<S> <C>
New York Life Worldwide Capital, Inc. Delaware
New York Life Worldwide Development, Inc. Delaware
New York Life Worldwide (Bermuda) Ltd. Bermuda
New York Life Insurance Worldwide Ltd. Bermuda
New York Life (U.K.) Limited(5) (99.97%) United Kingdom
Life Assurance Holding Corporation Limited (31.25%) United Kingdom
Windsor Life Assurance Company Limited United Kingdom
Gresham Life Assurance Society Limited United Kingdom
Windsor Construction Company Limited United Kingdom
Japan Gamma Asset Management Limited(6) (33.345%) Japan
KOHAP New York Life Insurance Ltd. (51%) South Korea
P.T. Asuransi Jiwa Sewu-New York Life (50.2%) Indonesia
GEO New York Life, S.A. (49%) Mexico
NYL Trust Company New York
NYLCO, Inc. New York
NYLICO Inc. (formerly New York Life Capital Corp.) New York
NYLIFE Administration Corp. (doing business as NYLACOR) Texas
NYLIFE Depositary Corporation Delaware
NYLIFE Structured Asset Management Company Texas
Ltd. (16.67%; NYLIFE SFD Holding Inc. owns the
remaining 83.33%)
NYLIFE Distributors Inc. Delaware
NYLIFE Equity Inc. Delaware
NYLIFE Funding Inc. Delaware
NYLIFE HealthCare Management, Inc. Delaware
Express Scripts, Inc. (46.3% of total combined stock and Delaware
89.6% of the voting rights)
Great Plains Reinsurance Company Arizona
Practice Patterns Science, Inc. Delaware
ESI Canada Holdings, Inc. Canada
ESI Canada, Inc. Canada
Express Scripts Vision Corporation Delaware
IVTx of Houston, Inc. Texas
IVTx of Dallas, Inc. Texas
PhyNet, Inc. Delaware
NYLCare Health Plans, Inc. (formerly Sanus Corp. Health Delaware
Systems)
New York Life and Health Insurance Company Delaware
Avanti Corporate Health Systems, Inc. Delaware
Avanti Health Systems, Inc. Texas
Avanti of the District, Inc. Maryland
Avanti of Illinois, Inc. Illinois
Avanti of New York, Inc. New York
Avanti of New Jersey, Inc. New Jersey
NYLCare Health Plans of the Mid-Atlantic, Inc. Maryland
(formerly HealthPlus, Inc.) (80%; Physicians
Health Services Foundation, Inc. owns 20%)
Physicians Health Services Foundation, Inc. Maryland
</TABLE>
- ----------
(5) One share was given to a Nominee as required by British law.
(6) Based on the percentage of ownership as well as the lack of
"control" by New York Life, this entity is not considered a subsidiary of New
York Life but is included here for informational purposes only.
<PAGE> 100
NYLIFE Inc. entry continued]
<TABLE>
<CAPTION>
<S> <C>
Lonestar Holding Co. Delaware
Lone Star Health Plan, Inc. (90%; NYLCare Texas
Health Plans, Inc. owns 10%)
NYLCare Health Plans of the Gulf Coast, Inc. Texas
(formerly Sanus Health Plan, Inc.)
Prime Provider Corp. New York
Prime Provider Corp. of Texas Texas
NYLCare of Connecticut, Inc. (formerly Sanus of Connecticut
Connecticut, Inc.)
Sanus Dental Plan of New Jersey, Inc. New Jersey
NYLCare Dental Plans of the Southwest, Inc. Texas
(formerly Sanus Dental Plan of Texas, Inc.)
NYLCare Health Plans of New York, Inc. (formerly New York
Sanus Health Plan of Greater New York, Inc.)
NYLCare Health Plans of Connecticut, Inc. Connecticut
(formerly Sanus Health Plan of Connecticut, Inc.)
NYLCare Health Plans of the Midwest, Inc. Illinois
(formerly Sanus Health Plan of Illinois, Inc.)
NYLCare Health Plans of New Jersey, Inc. New Jersey
(formerly Sanus Health Plan of New Jersey, Inc.)
NYLCare of Texas, Inc. (formerly Sanus of Texas, Inc.) Texas
NYLCare Passport PPO of the Southwest, Inc. Texas
(formerly Sanus Preferred Physicians, Inc.)
NYLCare Preferred Services, Inc. (formerly Sanus Maryland
Preferred Services, Inc.)
Sanus Preferred Providers West, Inc. California
Sanus Preferred Services of Illinois, Inc. Illinois
NYLCare Health Plans of the Southwest, Inc. Texas
(formerly Sanus Texas Health Plan, Inc.)
WellPath of Arizona Reinsurance Company Arizona
(formerly Sanus Reinsurance Company)
NYLCare Health Plans of Louisiana, Inc. Louisiana
(formerly Sanus Louisiana Health Plan, Inc.)
(99.8%; Patrick D. Seiter and E. L. Henry each
own .1% of the remaining stocks)
NYLCare of New England, Inc. (formerly Sanus of Delaware
Maine, Inc.)
Sanus - Northeast, Inc. Delaware
NYLCare HealthPlans of Maine, Inc. Maine
NYLCare NC Holdings, Inc. Delaware
WellPath Community Health Plans, L.L.C. (50%; North Carolina
Duke Medical Strategies, Inc. owns
remaining 50%)
WPCHP Holdings, Inc. (formerly Delaware
Sanus-New England, Inc.)
WellPath Preferred Services, L.L.C. (99%; North Carolina
WPCHP Holdings, Inc. owns other 1%)
WellPath Select Holdings, L.L.C. (99%; North Carolina
WPCHP Holdings, Inc. owns other 1%)
WellPath of Carolina, Inc. (formerly Sanus of North Delaware
Carolina, Inc.)
WellPath Select, Inc. (formerly WellPath Community North Carolina
Health Plans, Inc.)
Sanus of New York and New Jersey, Inc. New York
NYLCare Health Plans of Pennsylvania, Inc. (formerly Pennsylvania
</TABLE>
<PAGE> 101
[NYLIFE Inc. entry continued]
<TABLE>
<S> <C> <C>
Sanus Health Plans of Pennsylvania, Inc.)
Docservco, Inc. New York
The ETHIX Corporation Delaware
ETHIX Great Lakes, Inc. Michigan
ETHIX Mid-Atlantic, Inc. Pennsylvania
PriMed, Inc. New Jersey
ETHIX Midlands, Inc. Delaware
ETHIX Mid-Rivers, Inc. Missouri
ETHIX Northwest Public Services, Inc. Washington
ETHIX Northwest, Inc. Washington
NYLCare Health Plans Northwest, Inc. Washington
(formerly NYLCare Plus, Inc.)
ETHIX Pacific, Inc. Oregon
ETHIX Risk Management, Inc. Oregon
ETHIX Southeast, Inc. North Carolina
ETHIX Southwest, Inc. Texas
Benefit Panel Services, Inc. (33 1/3% owned by California
MassMutual Holding Company Two
MSC, Inc. and 33 1/3% owned by Anthem
Companies, Inc.)
VivaHealth, Incorporated California
One Liberty Plaza Holdings, Inc. Delaware
NYLIFE Realty Inc. Delaware
CNP Realty Investments, Inc. Delaware
NYLIFE Refinery Inc. Delaware
NYLIFE Resources Inc. Delaware
NYLIFE Securities Inc. New York
NYLIFE SFD Holding Inc. (formerly NAFCO Inc.) Delaware
NYLIFE Structured Asset Management Company, Ltd. Texas
(83.33%; NYLIFE Depositary Corp. owns the
remaining 16.67%)
NYLINK Insurance Agency Incorporated Delaware
NYLINK Insurance Agency of Alabama, Incorporated Alabama
NYLINK Insurance Agency of New Mexico, Incorporated New Mexico
NYLTEMPS Inc. Delaware
NYLIFE Insurance Company of Arizona Arizona 100%
The MainStay Funds(7)(formerly MacKay-Shields MainStay Series Massachussetts
Fund)[open end investment company]
</TABLE>
- ----------
(7) This entity is an unaffiliated registered investment company for
which New York Life subsidiaries perform investment management, administrative,
distribution and underwriting services. It is not a subsidiary of New York Life
but is included here for informational purposes only.
<PAGE> 102
ITEM 27. NUMBER OF CONTRACTOWNERS.
As of January 31, 1997, there were approximately 14,436 owners of
Non-Qualified Policies offered under NYLIAC MFA Separate Account-II
ITEM 28. INDEMNIFICATION
Reference is made to Article VIII of the Depositor's By-Laws.
New York Life maintains Directors and Officers Liability/Company
Reimbursement ("D&O") insurance which covers directors, officers and trustees of
New York Life, its subsidiaries, and its subsidiaries and certain affiliates
including the Depositor while acting in their capacity as such. The total annual
aggregate of D&O coverage is $100 million applicable to all insureds under the
D&O policies. There is no assurance that such coverage will be maintained by New
York Life or for the Depositor in the future as, in the past, there have been
large variances in the availability of D&O insurance for financial institutions.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Depositor pursuant to the foregoing provisions, or otherwise, the Depositor
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Depositor of expenses incurred
or paid by a director, officer or controlling person of the Depositor in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Depositor will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Investment companies (other than the Registrant) for which NYLIFE
Distributors Inc. is currently acting as underwriter:
NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I
NYLIAC MFA Separate Account-I
NYLIAC Variable Annuity Separate Account-I
NYLIAC Variable Annuity Separate Account-II
NYLIAC Variable Annuity Separate Account-III
NYLIAC Variable Universal Life Separate Account-I
NYLIAC Variable Universal Life Separate Account-II
NYLIAC VLI Separate Account
(b) Directors and Officers.
The business address of each director and officer of NYLIFE Distributors Inc. is
300 Interpace Parkway, Parsippany, New Jersey, 07054.
Names of Directors and Officers Positions and Offices with Underwriter
------------------------------- --------------------------------------
Frank M. Boccio Director
Jefferson C. Boyce Director, President and
Chief Executive Officer
Robert E. Brady Director and Vice President
Michael G. Gallo Director
Phillip J. Hildebrand Director
Alice T. Kane Director
Robert D. Rock Director
Walter W. Ubl Director and Senior Vice President
Thomas J. Warga Senior Vice President and
General Auditor
Richard W. Zuccaro Tax Vice President
Robert E. Brady Vice President
Jay S. Calhoun Vice President and Treasurer
David J. Krystel Vice President
Linda M. Livornese Vice President
<PAGE> 103
John H. O'Byrne Vice President and Chief Compliance Officer
Frank Mistero Vice President
Anthony W. Polis Vice President and Chief Financial Officer
Louis H. Adasse Corporate Vice President
Paul C. Miller Corporate Vice President
Thomas J. Murray Corporate Vice President
Phyllis Zwarick Corporate Vice President
Arphielia Arizmendi Assistant Vice President
Antoinette B. Cirillo Assistant Vice President
George R. Daoust Assistant Vice President
Geraldine Lorito Assistant Vice President
Nancy Brenner Secretary
Mark A. Gomez Assistant Secretary
(c) Commissions and Other Compensation
<TABLE>
<CAPTION>
Name of New Underwriting Compensation on
Principal Discounts and Redemption or Brokerage
Underwriter Commissions Annuitization Commission Compensation
----------- ---------------- --------------- ---------- ------------
<S> <C> <C> <C> <C>
NYLIFE
Distributors Inc. -0- -0- -0- -0-
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records required to be maintained by Section 31(a) of
the 1940 Act and the rules under it are maintained by NYLIAC at its home office,
51 Madison Avenue, Room 0150, New York, New York 10010; New York Life - Records
Division, 110 Cokesbury Road, Lebanon, New Jersey 08833 and with Iron Mountain
Records Management, Inc. at both 8 Neptune Drive, Poughkeepsie, New York 12601
and Route 9W South, Port Ewen, New York 12466-0477.
ITEM 31. MANAGEMENT SERVICES - Not applicable.
ITEM 32. UNDERTAKINGS - Not applicable.
REPRESENTATION AS TO THE REASONABLENESS OF AGGREGATE FEES AND CHARGES
New York Life Insurance and Annuity Corporation ("NYLIAC"), the
sponsoring insurance company of the NYLIAC MFA Separate Account-II, hereby
represents that the fees and charges deducted under the Facilitator Multi-Funded
Retirement Annuity Policies are reasonable in relation to the services rendered,
the expenses expected to be incurred and the risks assumed by NYLIAC.
SECTION 403(B) REPRESENTATIONS
Registrant represents that it is relying on a no-action letter dated
November 28, 1988, to the American Council of Life Insurance (Ref. No. IP-6-88)
regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment Company Act of
1940, in connection with redeemability restrictions on Section 403(b) Policies,
and that paragraphs numbered (1) through (4) of that letter will be complied
with.
<PAGE> 104
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of this Amendment to the
Registration Statement and has caused this Amendment to the Registration
Statement to be signed on its behalf, in the City and State of New York on this
25th day of April, 1997.
NYLIAC MFA SEPARATE ACCOUNT-II
(Registrant)
By /s/David J. Krystel
---------------------------------
David J. Krystel
Vice President
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
(Depositor)
By /s/David J. Krystel
---------------------------------
David J. Krystel
Vice President
As required by the Securities Act of 1933, this Amendment to the Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
Jay S. Calhoun* Vice President, Treasurer and Director
(Principal Financial Officer)
Maryann L. Ingenito* Vice President and Controller
(Principal Accounting Officer)
Richard M. Kernan, Jr.* Director
Robert D. Rock* Senior Vice President and Director
Frederick J. Sievert* Executive Vice President and Director
Stephen N. Steinig* Senior Vice President, Chief Actuary and Director
Seymour Sternberg* President and Director (Principal Executive
Officer)
*By /s/David J. Krystel
--------------------
David J. Krystel
Attorney-in-Fact
April 25, 1997
S-1
<PAGE> 105
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
(4)(a) Specimen Non-Qualified Flexible Premium Policy
(4)(b) Specimen Non-Qualified Single Premium Policy
(9) Opinion and Consent of Robert J. Hebron, Esq.
(10)(a) Consent of Price Waterhouse, LLP
(14) Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit (4)(a)
Specimen Non-Qualified Flexible Premium Policy
<PAGE> 2
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A Delaware Corporation)
The Corporation The New York Life Insurance and Annuity Corporation will pay the
benefits of this policy in accordance with its provisions. The pages which
follow are also a part of this policy.
ANNUITY BENEFIT. ON THE RETIREMENT DATE, THE CASH VALUE WILL BE APPLIED TO
PROVIDE A MONTHLY ANNUITY, AS STATED IN THE ANNUITY BENEFIT SECTION. BENEFITS
PROVIDED BY THIS POLICY, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE
ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO AMOUNT.
Payment of Premiums. At any time before the retirement date, and while the
Annuitant is living, premiums of at least $40 can be paid at any interval or by
any method we make available, subject to the Maximum Premium provision. The
amount and interval of scheduled premiums, as stated in the application for this
policy, are shown on the Policy Data page.
Flexible Premium Multi-Funded Retirement Annuity.
Monthly Annuity Payments Begin on the Retirement Date Premiums Can be Paid
During Annuitant's Lifetime. Benefits Based on the Performance of the Separate
Account are Variable and are not Guaranteed as to Dollar Amount.
Policy is Non-Participating
Annual Report to Owner. An annual report in connection with this policy will be
provided to the owner. The report will tell the owner how much cash value there
is, as of the most recent policy anniversary. It will also give the owner any
other facts required by state law or regulation.
SUITABILITY OF POLICY. IF IT IS EXPECTED THAT THE ONLY PREMIUM THAT WILL BE PAID
IS A SUBSTANTIAL SINGLE PREMIUM THIS POLICY MAY NOT BE SUITABLE FOR YOUR NEEDS.
This policy is executed as of the date of issue shown on the Policy Data page.
/S/ J. B. Underhill
- ----------------------------
President
/s/ Franklin Ciaccio
- ----------------------------
Secretary
Countersignature
983-190
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
ANNUITANT JOHN DOE AGE 35 MALE
POLICY NUMBER S2 000 000
POLICY DATE OCTOBER 1,1983
OWNER THE ANNUITANT
SCHEDULED
PREMIUMS AT ANNUAL INTERVALS AS FOLLOWS
Beginning as of
Mo. Day Year
10 - 1 - 1983 $1000 THE PREMIUM
10 - 1 - 2013 (AGE 65) THE RETIREMENT DATE. PREMIUMS CEASE.
DATE OF ISSUE OCTOBER 1,1983
POLICY DATA NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
</TABLE>
PAGE 2
83190-2
<PAGE> 4
WE & YOU
In this policy, the words "we", "our" or "us" refer to New York Life Insurance
and Annuity Corporation, and the words "you" or "your" refer to the owner of
this policy.
When you write to us, please include the policy number, the Annuitant's full
name, and your current address.
CONTENTS
POLICY DATA
Policy identification and specifications / 2
ANNUITY BENEFIT
Monthly annuity payments starting on the retirement date; Deferment of
retirement date; Death before retirement / 4
CONTINGENT ANNUITANT
Named Contingent Annuitant; Death of Annuitant / 4
POLICY OWNERSHIP
Rights of the Owner; Successor Owner; Change of Ownership / 4-5
BENEFICIARY
How to name or change Beneficiaries; Death of Beneficiary / 5
PREMIUMS
Payment of Premiums; Maximum Premium; Net Purchase Payments; Purchase Date; What
happens if premiums are not paid; Allocation of Net Purchase Payments; Change of
Allocation / 5-6
CASH VALUE AND PARTIAL WITHDRAWALS
Cash value available and how it can be used; Service and surrender charges / 6-7
SEPARATE ACCOUNT
Description of Separate Account; Accumulation Units; Transfers Between
Investment Divisions and to the Fixed Annuity / 7-8
FIXED ANNUITY
Description of Fixed Annuity; Bail Out; Transfers from Separate Account
Investment Divisions / 8
PAYMENT OF POLICY PROCEEDS
Alternate ways in which proceeds of the policy may be paid; Methods of Payments
/ 9-10
GENERAL PROVISIONS
Entire Contract; Application; Incontestability; Dates; Age and Sex; Policy
Changes; Assignment; Protection Against Creditors; Payments to Corporation;
Deferment; Conformity with Law; Non-participating Policy; Reports to Owner / 11
APPLICATION
Attached to the Policy.
RIDERS OR ENDORSEMENTS (IF ANY)
Attached to the Policy.
PAGE 3
83190-3
<PAGE> 5
ANNUITY BENEFIT
Annuity Benefit We will make annuity payments to you each month starting on the
retirement date shown on the Policy Data page, if the Annuitant is living, and
if this policy is in force on that date.
On the retirement date, we determine the amount of each monthly payment. We do
this by applying the cash value of the policy, less any state premium tax that
is payable, under Option 3A in the Payment of Policy Proceeds section of this
policy. Payments are based on the sex and the age of the Annuitant, as well as
the appropriately adjusted annuity payment rate in effect on the retirement
date. The amount of each monthly payment for the Annuitant's adjusted age on
that date will not be less than the guaranteed minimum monthly amount based on
the Option 3A Table in this policy. Payments are guaranteed for a period of 10
years (120 payments), and will go on for as long as the Annuitant lives. If the
Annuitant dies before the end of the guaranteed period (or, the Contingent
Annuitant if one was designated and the Primary Annuitant died before the
retirement date), we will make these payments to you for the rest of that
period, or if you die before the end of the guaranteed period, we will make
these payments to the beneficiary for the rest of that period.
Alternatively, you may elect, on or before the retirement date, to have annuity
payments made on a different basis. In that case, all or part of the cash value
may be placed under one or more of the optional methods of payment described in
the Payment of Policy Proceeds section of this policy.
Deferment of Retirement Date You can have the retirement date shown on the
Policy Data page deferred to any policy anniversary before the Annuitant is age
75, or to a later date if we agree. We must receive your signed request at least
one month before the date to be deferred.
Death Before Retirement When we have proof that the Annuitant has died before
the retirement date (or, the Contingent Annuitant if one was designated and the
Primary Annuitant died before the retirement date), we will pay an amount as
proceeds to the beneficiary. That amount will be the greater of (a) or (b),
where:
(a) is the cash value of this policy; and
(b) is the total premiums paid for this policy, less any partial
withdrawals and any surrender charges made before death, and
less any premiums paid for any riders.
Please read this policy for full details.
CONTINGENT ANNUITANT
Named Contingent Annuitant The Contingent Annuitant, if one was named, is the
person who becomes the Annuitant at the death of the Primary Annuitant before
the retirement date. The Primary Annuitant is the person named as the Annuitant
in the application for this policy. A Contingent Annuitant can only be named
in the application for this policy. After the policy is issued, the Contingent
Annuitant may be deleted.
No Contingent Annuitant may be named:
(a) after the policy is issued,
(b) after the Contingent Annuitant is deleted,
(c) after the Contingent Annuitant becomes the Annuitant, or
(d) If the Contingent Annuitant dies before the Annuitant.
Death of Annuitant If a Contingent Annuitant is alive at the death of the
Primary Annuitant, the proceeds of the policy, as described in the Death Before
Retirement provision, will only be paid to the beneficiary upon the death of the
Contingent Annuitant. All other rights and benefits under the policy will
continue in effect during the lifetime of the Contingent Annuitant, as provided
in the policy, as if the Contingent Annuitant were the Annuitant.
POLICY OWNERSHIP
Owner In this policy, the words "you" or "your" refer to the owner of the
policy. As the owner, you have all rights of ownership in this policy while the
Annuitant is living. These rights include the right to receive annuity payments
or to name a payee to receive the payments. To exercise these rights, you do not
need the consent of any successor owner or beneficiary, the Annuitant or the
Contingent Annuitant..
Successor Owner A successor owner can be named in the application, or in a
notice you sign which give us the facts that we need. The successor owner will
become the new owner when you die, if you die before the Annuitant. If no
successor owner survives you and you die before the Annuitant, your estate will
become the new owner.
Change of Ownership You can change the owner of this policy, from yourself to a
new owner, in a notice you sign which gives us the facts that we need. When this
change takes effect, all rights of ownership in this policy will pass to the new
owner.
PAGE 4
83190-4
<PAGE> 6
POLICY OWNERSHIP (continued)
When we record the facts about a change of owner or successor owner, the change
will take effect as of the date you signed the notice, subject to any payment we
made or action we took before recording the change. We may require that the
change be endorsed in the policy. Changing the owner or naming a new successor
owner cancels any prior choice of successor owner, but does not change the
beneficiary or the Annuitant, or delete any Contingent Annuitant.
BENEFICIARY
Naming of Beneficiary The beneficiary is as stated in the application, or as
subsequently changed in accordance with the Change of Beneficiary provision.
One or more beneficiaries can be named in the application or, while the
Annuitant is living, in a notice you sign which gives us the facts that we need.
If more than one beneficiary is named, they can be classed as first, second and
so on. If 2 or more are named in a class, their shares in any amount payable can
be stated. No amount will be payable to a beneficiary if the Annuitant dies
after the end of a guaranteed period.
The stated shared of any amount payable to a beneficiary will be paid to any
first beneficiaries who survive the Annuitant. If no first beneficiaries
survive, payment will be made to any surviving in the second class, and so on.
Those who survive in the same class have an equal share in any amount payable,
unless the shares are stated otherwise.
Change of Beneficiary While the Annuitant is living, you can change a
beneficiary in a notice you sign which gives us the facts that we need. When we
record a change, it will take effect as of the date you signed the notice,
subject to any payment we made or action we took before recording the change.
Death of Beneficiary If a beneficiary who is receiving annuity payments dies,
each remaining payment will be paid to those in the same class who are alive
when that payment becomes due. If the last beneficiary in a class to receive
payments dies, each remaining payment will be paid to those in the next class
who are alive when that payment becomes due, and so on. When the last
beneficiary to receive these payments dies, we will pay the present value at
that time of any remaining payments in a single sum to the estate of that
beneficiary. The present value of any remaining payments is always less than the
total of those payments.
If no beneficiary for any amount payable, or for a stated share, survives the
Annuitant, the right to this amount or this share will pass to you. If you are
the Annuitant, this right will pass to your estate. If any beneficiary dies at
the same time as the Annuitant, or within 15 days after the death of the
Annuitant, but before we receive proof of the Annuitant's death, we will pay any
amount payable as though that beneficiary died first.
PREMIUMS
Payment of Premiums At any time before the retirement date while the Annuitant
is living, and before settlement of the policy under the Payment of Policy
Proceeds section, basic plan premiums of at least $40 (excluding the premium
amounts for any riders) can be paid at any interval or by any method we make
available. The amount and interval of scheduled premiums, as stated in the
application for this policy, are shown on the Policy Data page.
Instead of paying premiums, you can surrender this policy for its cash value, as
stated in the Cash Value and Partial Withdrawals section. Maximum Premium The
basic plan premiums (this excludes the premium amounts for any riders) paid in
each policy year may not be more than the greater of (a) or (b) where:
(a) is twice the basic plan premiums scheduled to be paid in the
first policy year, and
(b) is $7,500.
Net Purchase Payments Each net purchase payment is defined as the basic plan
premium paid or any total disability benefit amount credited for this policy,
less any state premium tax required by law or regulation to be deducted from a
premium payment.
Purchase Date Net purchase payments will be credited to the policy as of the
purchase date. The purchase date is the date on which the premium is received at
our Executive Office or at a service office, unless it is received on a day
which is not a business day. In that case, the purchase date will be the next
business day.
If a premium is received before the policy is issued, the purchase date for the
premium will be no later than 2 business days after the premium is received, at
our Executive Office or at a service office, with the completed requirements and
application which gives us the facts that we need to issue the policy.
A business day is any day on which the New York Stock Exchange is open for
trading.
PAGE 5
83190-5
<PAGE> 7
PREMIUMS (continued)
Corporation's Rights to Terminate Policy It may happen that no premium has been
paid for 2 or more years in a row and both (a) the total premiums paid for this
policy, less any partial withdrawals and any surrender charges, and (b) the cash
value, are less than $2,000. If so, we have the right to terminate this policy
by paying you the cash value in one sum.
If this policy is not so terminated, it can be continued until the retirement
date. Annuity payments, based on the cash value on that date, will be made as
stated in the Annuity Benefit section.
Allocation of Net Purchase Payments Net purchase payments may be applied to the
Fixed Annuity and/or to one or more of the following Separate Account Investment
Divisions or to any other Separate Account Investment Division which may be
established by us for this policy:
Bond
Money Market
The allocation percents for the first and any later net purchase payments are as
requested in the application.
Change of allocation You may change the allocation for net purchase payments to
the Fixed Annuity and/or among the Investment Divisions. You must tell us in a
notice you sign which gives us the facts that we need. Payments received after
the date on which we receive your notice will be applied on the basis of the new
allocation. You must indicate what percent of each net purchase payment to
allocate to the Fixed Annuity and/or among one or more of the Investment
Divisions (making a total of 100%). Each percent may be either zero or any whole
number. The minimum amount of a net purchase payment that may be allocated to
any one Investment Division or to the Fixed Annuity is $10.
CASH VALUE AND PARTIAL WITHDRAWALS
Cash Value On any day on or before the retirement date, the cash value of this
is based on the following:
(a) the net purchase payments allocated to and any amounts transferred to
the Fixed Annuity, plus interest credited; less any prior partial
withdrawals, any surrender charges on those withdrawals, and any
service charges; plus
(b) the sum of, the current accumulation unit values for each of the
Investment Divisions of the Separate Account multiplied by the number
of accumulation units held in the respective Investment Divisions.
When you ask us, we will tell you how much cash value there is. At any time
before the retirement date, after this policy has a cash value, you can
surrender it for that value, less any surrender charge that may apply.
This policy has no cash value after the retirement date.
Service Charge Once each year on the policy anniversary, on or before the
retirement date, a charge will be made for policy administration expenses. This
charge will be the lesser of $30 or 1% of the cash value at that time. It will
be deducted from the Fixed Annuity and from each Investment Division in
proportion to their percentage of the total policy cash value on that policy
anniversary.
Partial Withdrawals After this policy has sufficient cash value, we will pay you
any part as a partial withdrawal ($100 minimum) when we receive your written
request before the retirement date, and while the Annuitant is living. During
the first 10 policy years, a surrender charge will be made as shown in the table
below. When you request a partial withdrawal you must tell us how it is to be
allocated among the Fixed Annuity and/or the Investment Divisions. If your
request for a partial withdrawal from the Fixed Annuity and/or an Investment
Division is greater than the amount in that Fixed Annuity and/or Investment
Division, we will pay you the entire value of that Fixed Annuity and/or
Investment Division, less any surrender charge that may apply. Surrender Charge
A surrender charge may be made each time a partial withdrawal of the cash value
is made, or when the policy is surrendered for its cash value. Cash value
determinations are made as of the date we receive your request at our Executive
Office or at a service office. The amount of this charge, if any, will be a
percentage, as shown in the table below, of the amount withdrawn or of the
surrender proceeds.
In no event will the aggregate surrender charge applied under the policy exceed
8.5% of the total net purchase payments. A surrender charge will not be applied
to any amount withdrawn from the Fixed Annuity under the terms of the Bail Out
provision.
PAGE 6
83190-6
<PAGE> 8
CASH VALUE AND PARTIAL WITHDRAWALS (continued)
If surrender occurs or if a partial withdrawal is made on or after the second
policy anniversary, no surrender charge will be made if the entire amount is at
least $2,000 and is placed under Option 2A, 2B, 3A, 3B or 3C in the Payment of
Policy Proceeds section of this policy. If Option 2A or 2B is elected, the
period elected must be at least 5 years or more. If, within 10 years measured
from the policy date, any unpaid amount we still have of the original amount
placed under Option 2A or 2B is withdrawn, a surrender charge will be applied to
the amount withdrawn. A surrender charge will also be applied to the amount
placed under Option 2A or 2B if the minimum period elected ends within 10 years
measured from the policy date.
<TABLE>
<CAPTION>
Policy Per- Policy Per-
Year centage Year centage
<S> <C> <C> <C>
1 7% 7 4%
2 7 8 3
3 7 9 2
4 7 10 1
5 6 11 and later 0
6 5
</TABLE>
For the rates in this table, the second policy year begins on the first policy
anniversary, the third policy year begins on the second policy anniversary, and
so on.
SEPARATE ACCOUNT
Separate Account We have established and we maintain the Separate Account under
the laws of the state of Delaware. Any realized or unrealized income, net gains
and losses from the assets of the Separate Account are credited or charged
against it without regard to our other income, gains or losses. Assets are put
in the Separate Account for this policy, as well as for other multi- funded
retirement annuity policies. The Separate Account invests its assets in shares
of one or more mutual funds. Fund shares are purchased, redeemed and valued on
behalf of the Separate Account.
The Separate Account is divided into Investment Divisions. We reserve the right
to add or remove any Investment Division of the Separate Account.
The assets of the Separate Account are our property. There are Separate Account
assets which equal the reserves and other contract liabilities of the Separate
Account. Those assets will not be chargeable with liabilities arising out of any
other business we conduct. We reserve the right to transfer assets of an
Investment Division, in excess of the reserves and other contract liabilities
with respect to that Investment Division, to another Investment Division or to
our General Account.
We will determine the value of the assets of the Separate Account on each day
during which the New York Stock Exchange is open for trading. The assets of the
Separate Account will be valued at fair market value, as determined in
accordance with a method of valuation which we established in good faith.
We also reserve the right to transfer assets of the Separate Account, which we
determine to be associated with the class of policies to which this policy
belongs, to another separate account. If this type of transfer is made, the term
"Separate Account," as used in this policy, shall then mean the separate account
to which the assets were transferred.
We also reserve the right, when permitted by law; to:
(a) deregister the Separate Account under the Investment Company
Act of 1940;
(b) manage the Separate Account under the direction of a committee
at any time;
(c) restrict or eliminate any voting rights of policyowners or
other persons who have voting rights as to the Separate
Account; and
(d) combine the Separate Account with one or more other separate
accounts.
Change in Investment Objective or Policy of a Mutual Fund If required by law or
regulation, an investment policy of the Separate Account will not be changed
unless approved by the appropriate insurance official of the state of Delaware
or deemed approved in accordance with such law or regulation. If so required,
the process for obtaining such approval is filed with the insurance official of
the state or district in which this policy is delivered.
Accumulation Units The interest of this policy in the Separate Account prior to
the date on which the annuity benefits become payable is represented by
accumulation units. The dollar value of accumulation units for each Investment
Division may change from day to day reflecting the investment experience of the
Investment Division.
Net purchase payments allocated to the Investment Divisions will applied to
provide accumulation units in those Investment Divisions. The number of
accumulation units purchased in an Investment Division will be determined by
dividing the net purchase payment, or any part of that payment applied to that
Investment Division, by the value of an accumulation unit for that Division on
the purchase date.
PAGE 7
83190-7
<PAGE> 9
SEPARATE ACCOUNT (continued)
The value of an accumulation unit in each Investment Division was established at
$10.00 as of the date operations began for that Division. The value of an
accumulation unit on any business day is determined by multiplying the value of
that unit on the immediately preceding business day by the Net Investment Factor
for the valuation period. The valuation period is the period from the close of
the immediately preceding business day to the close of the current business day.
Net Investment Factor The Net Investment Factor for this policy, for any
Investment Division of the Separate Account for the valuation period, is
determined by dividing (a) by (b) and subtracting (c) from the result, where:
(a) is the result of:
(1) the net asset value of a fund share held in the
Separate Account for that Investment Division
determined at the end of the current valuation
period, plus
(2) the per share amount of any dividend or capital gain
distributions made by the fund for shares held in the
Separate Account for that Investment Division if the
ex-dividend date occurs during the valuation period,
plus or minus
(3) a charge or credit for taxes, for which a reserve
must be maintained, determined by the Corporation to
have resulted from the investment operations of the
Investment Division.
(b) is the net result of:
(1) the net asset value of a fund share held in the
Separate Account for that Investment Division
determined as of the end of the immediately preceding
valuation period, plus or minus
(2) a charge or credit for taxes, for which a reserve
must be maintained, for the immediately preceding
valuation period.
(c) is a factor representing the mortality and expense risk fee,
and administrative charges. This factor is equal, on an annual
basis, to 1.75% of the daily net asset value of a fund share
held in the Separate Account for that Investment Division.
The Net Investment Factor may be greater or less than one, therefore, the
accumulation unit value may increase of decrease.
Transfer Between Investment Divisions and to the Fixed Annuity Prior to 30 days
before the retirement date you may transfer accumulation units from one
Investment Division to another within the Separate Account or to the Fixed
Annuity. If you want to transfer Accumulation Units, you must tell us in a
notice you sign which gives us the facts that we need. The minimum amount which
may be transferred is the lesser or $500 or the entire value of the accumulation
units in the Investment Division from which the transfer is being made. The
remaining accumulation units in the Division must have a value of at least $100.
If, after a transfer, the value of the remaining accumulation units in an
Investment Division would be less than $100, we have the right to include that
amount as part of the transfer. We reserve the right to limit transfers between
Investment Divisions and to the Fixed Annuity to no more than 4 in any one
policy year.
FIXED ANNUITY
Fixed Annuity Payments applied to and any amounts transferred to the Fixed
Annuity will reflect a fixed interest rate. The amount of interest credited will
be based on a rate which we set, in advance, at least once a year. This rate
will never be less than 4% per year.
Bail Out If, on any policy anniversary, the interest rate we set for the Fixed
Annuity is more than 3 percentage points lower than the rate which was set for
the immediately preceding policy year, you have the right to withdraw the cash
value of the Fixed Annuity without that amount being subject to a surrender
charge. Your written request for withdrawal of this amount must be made within
60 days of that policy anniversary.
We reserve the right to set a separate policy anniversary and interest rate for
any amount transferred to the Fixed Annuity. If we do this, then for the purpose
of this provision, the first policy year for the amount transferred ends on the
first policy anniversary for that transfer, the second policy year for that
amount ends on the second policy anniversary for that transfer, and so on.
Transfer from Separate Account Investment Divisions No transfers may be made
from the Fixed Annuity to the Separate Account Investment Divisions. Transfers
from the Separate Account to the Fixed Annuity are subject to the minimum
amount, transfer limitations and requirements indicated in the Transfer Between
Investment Divisions and to the Fixed Annuity provision of the Separate Account
section.
We reserve the right to limit the amount transferred to the Fixed Annuity from
the Separate Account Investment Divisions.
PAGE 8
83190-8
<PAGE> 10
PAYMENT OF POLICY PROCEEDS
Payment If the Annuitant is living and this policy is in force on the retirement
date, we will make the annuity payments under Option 3A as stated in the Annuity
Benefit section, or if elected, all or part of the cash value may be placed
under one or more of the options described in this section. Before the
retirement date, if the Annuitant dies or if you surrender this policy, we will
pay any proceeds in one sum, or if elected, all or part of these proceeds may be
placed under one or more of the options described in this section. If we agree,
the proceeds may be placed under some other method of payment instead.
Any proceeds paid in one sum because of the Annuitant's death will bear interest
compounded each year from the date of death to the date of payment. We set the
interest rate each year. This rate will be at least 3 1/2% per year.
Election of Optional Method of Payment While the Annuitant is living, and if we
agree, you can elect or change an option. You can also name or change one or
more beneficiaries who will be the payee or payees under that option. After the
Annuitant dies, any person who is to receive payment in one sum (other than an
assignee) can elect an option and name payees.
The person who elects an option can name one or more successor payees to receive
any unpaid amount we have at the death of a payee. Naming these payees cancels
any prior choice of a successor payee.
A payee who did not elect the option does not have the right to advance or
assign payments, take the payments in one sum, or make any other change.
However, the payee may be given the right to do one or more of these things if
the person who elects the option tells us in writing and we agree.
Change of Option If we agree, a payee who elects Option 1A, 1B, 2A or 2B may
later elect to have any unpaid amount we still have, or the present value of any
elected payments, placed under some other option described in this section.
Payees Only individuals who are to receive payments in their own behalf may be
named as payees or successor payees, unless we agree to some other payee. We may
require written proof of the age or the survival of a payee.
It may happen that when the last surviving payee dies, we still have an unpaid
amount, or there are some payments which remain to be made. If so, we will pay
the unpaid amount, with interest to the date of payment, or pay the present
value of the remaining payments, to that payee's estate in one sum.
The present value of any remaining payments is based on the interest rate used
to compute them, and is always less than the total of those payments.
Minimum Payment When the initial payment would be less than $20 per month, we
may pay any unpaid amount or present value in one sum.
Premium Tax If any amount is placed under Option 3A, 3B or 3C on the retirement
date or when this policy is surrendered, we will deduct from that amount any
state premium tax that is payable at that time.
Methods of Payment
Options 1A and 1B. Proceeds at Interest The policy proceeds may be left with us
at interest. We set the interest rate each year. This rate will be at least 3
1/2% per year.
1A. Interest Accumulation
We credit interest each year on the amount we still have. This amount can be
withdrawn at any time in sums of $100 or more. We pay interest to the date of
withdrawal on sums withdrawn.
1B. Interest Payment
We pay interest once each month, every 3 months or 6 months, or once each year,
as chosen, based on the amount we still have.
Options 2A and 2B. Elected Income
We make equal payments once each month, every 3 months or 6 months, or once each
year, as chosen, for an elected period of years or for an elected amount. We set
the interest rate for these options each year. This rate will be at least 3 1/2%
per year. If the rate is more than 3 1/2%, we will increase each payment to
reflect this.
2A. Income for Elected Period We make the payments for the number of
years elected. Monthly payments based on 3 1/2% interest are shown in the Option
2A Table.
OPTION 2A TABLE
Minimum Monthly Payment per $1,000 of Proceeds
<TABLE>
<CAPTION>
Years Years Years Years
<S> <C> <C> <C>
1 $84.65 5 $18.12 9 $10.75 15 $7.10
2 43.05 6 15.35 10 9.83 20 5.75
3 29.19 7 13.38 11 9.09 25 4.96
4 22.27 8 11.90 12 8.46 30 4.45
</TABLE>
When asked, we will state in writing what each payment would be, if made every 3
months or 6 months, or once each year.
PAGE 9
83190-9
<PAGE> 11
PAYMENT OF POLICY PROCEEDS (continued)
2B. Income of Elected Amount
We make payments of the elected amount until all proceeds and interest have been
paid. The total payments made each year must be at least 5% of the proceeds
placed under this option. Each year we credit interest of at least 3 1/2% on the
amount we still have.
Options 3A, 3B, and 3C. Life Income
We make equal payments each month during the lifetime of the named payee or
payees. Payments are based on the appropriately adjusted annuity payment rate in
effect when the first payment is due, but will not be less than the
corresponding minimum amount based on the tables for Options 3A, 3B and 3C in
this policy. These minimum amounts are based on the 1971 Individual Annuity
Mortality Table with projection, and with interest compounded each year at 4%.
When asked, we will state in writing what the minimum amount of each monthly
payment would be under these options. It is based on the sex and the adjusted
age of the payee or payees. To find the adjusted age in the year the first
payment is due, we increase or decrease the payee's age at that time, as
follows:
<TABLE>
<CAPTION>
1985 & 2026 &
earlier 1986-95 1996-2010 2011-25 later
<S> <C> <C> <C> <C>
+2 +1 0 -1 -2
</TABLE>
3A. Life Income - Guaranteed Period
We make a payment each month during the lifetime of the payee. Payments do not
change, and are guaranteed for 5, 10, 15, or 20 years, as chosen, even if that
payee dies sooner.
3B. Life Income - Guaranteed Total Amount
We make a payment each month during the lifetime of the payee. Payments do not
change, and are guaranteed until the total amount paid equals the amount placed
under this option, even if that payee dies sooner.
3C. Life Income - Joint and Survivor
We make a payment each month while both or one of the two payees are living.
Payments do not change, and are guaranteed for 10 years, even if both payees die
sooner.
OPTION 3A TABLE
Minimum Monthly Payment per $1,000 of Proceeds
<TABLE>
<CAPTION>
Payee's MALE FEMALE
Adjusted Guaranteed Period Guaranteed Period
Age 5 Yrs 10 Yrs 15 Yrs 20 Yrs 5 Yrs 10 Yrs 15 Yrs 20 Yrs
<S> <C> <C> <C> <C> <C> <C> <C> <C>
60 $ 5.66 $ 5.56 $ 5.38 $ 5.16 $ 5.21 $ 5.16 $ 5.07 $ 4.95
61 5.79 5.67 5.48 5.23 5.32 5.26 5.16 5.02
62 5.93 5.79 5.57 5.29 5.43 5.37 5.26 5.09
63 6.08 5.92 5.67 5.36 5.55 5.48 5.35 5.16
64 6.24 6.06 5.78 5.42 5.69 5.60 5.46 5.24
65 6.41 6.20 5.88 5.48 5.83 5.73 5.55 5.31
66 6.59 6.35 5.98 5.54 5.99 5.87 5.67 5.38
67 6.78 6.50 6.09 5.60 6.16 6.02 5.79 5.45
68 6.99 6.67 6.19 5.66 6.34 6.18 5.90 5.52
69 7.21 6.83 6.30 5.71 6.54 6.35 6.02 5.58
70 7.44 7.01 6.40 5.75 6.75 6.52 6.13 5.64
71 7.69 7.19 6.50 5.80 6.98 6.70 6.25 5.69
72 7.96 7.37 6.60 5.84 7.23 6.89 6.36 5.74
73 8.24 7.56 6.69 5.87 7.49 7.09 6.47 5.79
74 8.55 7.75 6.78 5.90 7.78 7.29 6.58 5.82
75 8.86 7.94 6.86 5.92 8.08 7.50 6.68 5.86
80 10.71 8.86 7.18 5.99 9.92 8.52 7.06 5.96
85 12.98 9.58 7.31 6.00 12.16 9.30 7.24 5.99
& over
</TABLE>
OPTION 3B TABLE
Minimum Monthly Payment per $1,000 of Proceeds
<TABLE>
<CAPTION>
Payee's Payee's
Adjusted Adjusted
Age Male Female Age Male Female
<S> <C> <C> <C> <C> <C>
60 $ 5.36 $ 5.04 69 $ 6.56 $ 6.12
61 5.47 5.13 70 6.73 6.28
62 5.58 5.23 71 6.92 6.46
63 5.69 5.33 72 7.11 6.64
64 5.82 5.45 73 7.32 6.84
65 5.95 5.56 74 7.55 7.05
66 6.09 5.69 75 7.78 7.27
67 6.24 5.82 80 9.22 8.61
68 6.39 5.97 85 & over 11.25 10.37
</TABLE>
OPTION 3C TABLE
10 YEAR GUARANTEED PERIOD
Minimum Monthly Payment per $1,000 of Proceeds
<TABLE>
<CAPTION>
Male Payee's Female Payee's Adjusted Age
Adjusted Age 60 65 70 75 80
<S> <C> <C> <C> <C> <C>
60 $ 4.72 $ 4.96 $ 5.17 $ 5.34 $ 5.45
65 4.87 5.20 5.52 5.80 6.00
70 4.99 5.41 5.86 6.30 6.65
75 5.09 5.56 6.15 6.78 7.31
80 5.18 5.68 6.36 7.15 7.89
</TABLE>
PAGE 10
83190-10
<PAGE> 12
GENERAL PROVISIONS
Entire Contract The entire contract consists of this policy, any attached riders
or endorsements, and the attached copy of the application. Only our Chairman,
President, Secretary, or one of our Vice Presidents can change the contract, and
then only in writing. No change will be made in the contract unless you agree to
it in writing. No Registered Representative is authorized to change this policy,
or to change or waive any provisions of this policy.
Application In issuing this policy, we have relied on the statements made in the
application. All such statements are deemed to be representations and not
warranties. We assume these statements are true and complete to the best of the
knowledge and belief of those who made them. No statement made in connection
with the application will be used by us to void the policy unless that statement
is a material misrepresentation and is part of the application.
Incontestability We will not contest this policy after it has been in force
during the lifetime of the Annuitant for 2 years from the date of issue.
Please refer to the Incontestability of Rider provision that may be in any rider
or riders attached to this policy.
Dates Policy years, months, and anniversaries are measured from the policy date,
except where otherwise provided.
Age and Sex In this policy when we refer to a person's age on any date, we mean
his or her age on the birthday which is nearest that date. If a date on the
Policy Data page is based on an age that is not correct, we may change the date
to reflect the correct age.
If the age or sex of the Annuitant is not correct as stated, any amount payable
under this policy will be what the premiums paid would have purchased at the
correct age and sex.
If we pay too little or too much because the age or sex was not correct as
stated, we will increase or reduce a later payment or payments to adjust for the
error. Any adjustment will include interest, at 6% per year, from the date of
the wrong payment to the date the adjustment is made.
Policy Changes If we agree, you may have riders added to this policy.
Assignment While the Annuitant is living, you can assign this policy or any
interest in it. If you do this, your interest, and anyone else's, is subject to
that of the assignee. As owner, you still have the rights of ownership that have
not been assigned.
An assignee may not named or delete a Contingent Annuitant, may not change the
Annuitant, the owner or the beneficiary, and may not elect or change an optional
method of payment. Any amount payable to the assignee will be paid in one sum.
We must have a copy of any assignment. We will not be responsible for the
validity of an assignment. It will be subject to any payment we make or other
action we take before we record it.
Protection Against Creditors Except as stated in the Assignment provision,
payments we make under this policy are, to the extent the law permits, exempt
from the claims, attachments, or levies of any creditors.
Payments to Corporation Any payment made to us by check or money order must be
payable to New York Life Insurance and Annuity Corporation. When asked, we will
give a countersigned receipt, also signed by our President or Secretary, for any
premium paid to us.
Deferment We will pay any partial withdrawals or surrender proceeds within 7
days after we receive all requirements that we need. However, it may happen that
the New York Stock Exchange is closed for trading (other than the usual weekend
or holiday closings), or the Securities and Exchange Commission restricts
trading or determines that an emergency exists. If so, it may not be practical
for us to determine the investment Divisions and to the Fixed Annuity, and
determination or payment of partial withdrawals or surrender proceeds.
When permitted by law, we may defer paying any partial withdrawals or surrender
proceeds for up to 6 months from the withdrawal or surrender date. Interest will
be paid on any amount deferred for 30 days or more. This rate will be at least
4% per year.
Conformity with Law This policy is subject to all laws which apply.
Non-participating Policy This is non-participating policy, on which no
dividends are payable.
Reports to Owner An annual report in connection with this policy will be
provided to you within 30 days after a policy anniversary. This report will
show, as of that anniversary, the number and value of the accumulation units
held in each of the Investment Divisions of the Separate Account as well as the
value of the Fixed Annuity. It will also give you any other facts required by
law or regulation.
PAGE 11
83190-11
<PAGE> 13
New York Life Insurance
and Annuity Corporation
Executive Office 372 - Park Avenue South
New York, NY 10010
A Stock Company Incorporated in Delaware
Flexible Premium Multi-Funded Retirement Annuity Monthly Annuity Payments Begin
on the Retirement Date. Premiums can be Paid During Annuitant's Lifetime.
Benefits Based on the Performance of Separate Account are Variable and are not
Guaranteed as to dollar Amount.
Policy is Non-Participating.
983-190
<PAGE> 1
Exhibit (4)(b)
Specimen Non-Qualified Single Premium Policy
<PAGE> 2
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A Delaware Corporation)
The Corporation The New York Life Insurance and Annuity Corporation will pay
the benefits of this policy in accordance with its provisions. The pages
which follow are also a part of this policy.
ANNUITY BENEFIT. ON THE RETIREMENT DATE, THE CASH VALUE WILL BE APPLIED TO
PROVIDE A MONTHLY ANNUITY, AS STATED IN THE ANNUITY BENEFIT SECTION. BENEFITS
PROVIDED BY THIS POLICY, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE SEPA-
RATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO AMOUNT.
Single Premium Multi-Funded Retirement Annuity.
Monthly Annuity Payments Begin on the Retirement Date Single Premium Payable
as Shown on Policy Data Page. Benefits Based on the Performance of the
Separate Account are Variable and are not Guaranteed as to Dollar Amount.
Policy is Non-Participating
Annual Report to Owner. An annual report in connection with this policy will
be provided to the owner. The report will tell the owner how much cash value
there is, as of the most recent policy anniversary. It will also give the
owner any other facts required by state law or regulation.
This policy is executed as of the date of issue shown on the Policy Data
page.
/s/ J. B. Underhill
-------------------
President
/s/ Franklin Ciaccio
--------------------
Secretary
Countersignature
983-191
<PAGE> 3
ANNUITANT JOHN DOE AGE 35 MALE
POLICY NUMBER S2 000 000
POLICY DATE OCTOBER 1, 1983
OWNER THE ANNUITANT
PREMIUMS
Mo. Day Year
10 - 1 - 1983 $10,000.00 THE SINGLE PREMIUM.
10 - 1 - 2013 (AGE 65) THE RETIREMENT DATE.
DATE OF ISSUE OCTOBER 1, 1983
POLICY DATA NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION
PAGE 2
83191-2
<PAGE> 4
WE & YOU In this policy, the words "we", "our" When you write to us, please
or "us" refer to New York Life include the policy number,
Insurance and Annuity Corporation, the Annuitant's full name,
and the words "you" or "your" refer and your current address.
to the owner of this policy.
CONTENTS POLICY DATA Policy identification and
specifications / 2
ANNUITY BENEFIT Monthly annuity payments starting on the
retirement date;
Deferment of retirement date; Death
before retirement / 4
CONTINGENT ANNUITANT Named Contingent Annuitant;
Death of Annuitant / 4
POLICY OWNERSHIP Rights of the Owner; Successor Owner;
Change of Ownership / 4-5
BENEFICIARY How to name or change Beneficiaries;
Death of Beneficiary / 5
PURCHASE Initial Purchase Payment; Additional
PAYMENTS Purchase Payments; Net Purchase
Payments; Purchase Date; Allocation of
Net Purchase Payments; Change of
Allocation / 5-6
CASH VALUE AND Cash value available and how it can be
PARTIAL WITHDRAWALS used; Corporation's Right to Terminate
Policy; Surrender Charge / 6-7
SEPARATE ACCOUNT Description of Separate Account;
Accumulation Units; Transfers Between
Investment Divisions and to the Fixed
Annuity / 7-8
FIXED ANNUITY Description of Fixed Annuity; Bail Out;
Transfers from Separate Account
Investment Divisions / 8
PAYMENT OF Alternate ways in which proceeds
POLICY PROCEEDS of the policy may be paid; Methods of
Payment / 9-10
GENERAL PROVISIONS Entire Contract; Application;
Incontestability; Dates; Age and Sex;
Policy Changes; Assignment; Protection
Against Creditors; Payments to
Corporation; Deferment; Conformity with
Law; Non-participating Policy; Reports
to Owner / 11
APPLICATION Attached to the Policy.
RIDERS OR Attached to the Policy.
ENDORSEMENTS
(IF ANY)
PAGE 3
83191-3
<PAGE> 5
ANNUITY Annuity Benefit We will make annuity payments to you each month
BENEFIT starting on the retirement date shown on the Policy Data page,
if the Annuitant is living, and if this policy is in force on that
date. On the retirement date, we determine the amount of each
monthly payment. We do this by applying the cash value of the
policy, less any state premium tax that is payable, under Option
3A in the Payment of Policy Proceeds section of this policy.
Payments are based on the sex and the age of the Annuitant, as
well as the appropriately adjusted annuity payment rate in effect
on the retirement date. The amount of each monthly payment for the
Annuitant's adjusted age on that date will not be less than the
guaranteed minimum monthly amount based on the Option 3A Table in
this policy. Payments are guaranteed for a period of 10 years (120
payments), and will go on for as long as the Annuitant lives. If
the Annuitant dies before the end of the guaranteed period (or,
the Contingent Annuitant if one was designated and the Primary
Annuitant died before the retirement date), we will make these
payments to you for the rest of that period, or if you die before
the end of the guaranteed period, we will make these payments to
the beneficiary for the rest of that period.
Alternately, you may elect, on or before the retirement date, to
have annuity payments made on a different basis. In that case, all
or part of the cash value may be placed under one or more of the
optional methods of payment described in the Payment of Policy
Proceeds section of this policy.
Deferment of Retirement Date You can have the retirement date
shown on the Policy Data page deferred to any policy anniversary
before the Annuitant is age 75, or to a later date if we agree. We
must receive your signed request at least one month before the
date to be deferred.
Death Before Retirement When we have proof that the Annuitant has
died before the retirement date (or, the Contingent Annuitant if
one was designated and the Primary Annuitant died before the
retirement date), we will pay an amount as proceeds to the
beneficiary. That amount will be the greater of (a) or (b), where:
(a) is the cash value of this policy; and
(b) is the total premiums paid for this policy, less any
partial withdrawals and any surrender charges made before
death, and less any premiums paid for any riders.
Please read this policy for full details.
CONTINGENT Named Contingent Annuitant The Contingent Annuitant, if one was
ANNUITANT named, is the person who becomes the Annuitant at the death of the
Primary Annuitant before the retirement date. The Primary
Annuitant is the person named as the Annuitant in the application
for this policy. A Contingent Annuitant can only be named in the
application for this policy. After the policy is issued, the
Contingent Annuitant may be deleted.
No Contingent Annuitant may be named:
(a) after the policy is issued,
(b) after the Contingent Annuitant is deleted,
(c) after the Contingent Annuitant becomes the Annuitant, or
(d) If the Contingent Annuitant dies before the Annuitant.
Death of Annuitant If a Contingent Annuitant is alive at the death
of the Primary Annuitant, the proceeds of the policy, as described
in the Death Before Retirement provision, will only be paid to the
beneficiary upon the death of the Contingent Annuitant. All other
rights and benefits under the policy will continue in effect
during the lifetime of the Contingent Annuitant, as provided in
the policy, as if the Contingent Annuitant were the Annuitant.
POLICY Owner In this policy, the words "you" or "your" refer to the
OWNERSHIP owner of the policy. As the owner, you have all rights of
ownership in this policy while the Annuitant is living. These
rights include the right to receive annuity payments or to name a
payee to receive the payments. To exercise these rights, you do
not need the consent of any successor owner or beneficiary, the
Annuitant or the Contingent Annuitant.
Successor Owner A successor owner can be named in the application,
or in a notice you sign which gives us the facts that we need. The
successor owner will become the new owner when you die, if you die
before the Annuitant. If no successor owner survives you and you
die before the Annuitant, your estate will become the new owner.
PAGE 4
83191-4
<PAGE> 6
POLICY Change of Ownership You can change the owner of this policy, from
OWNERSHIP yourself to a new owner, in a notice you sign which gives us the
(continued) facts that we need. When this change takes effect, all rights of
ownership in this policy will pass to the new owner.
When we record the facts about a change of owner or successor
owner, the change will take effect as of the date you signed the
notice, subject to any payment we made or action we took before
recording the change. We may require that the change be endorsed
in the policy. Changing the owner or naming a new successor owner
cancels any prior choice of successor owner, but does not change
the beneficiary or the Annuitant, or delete any Contingent
Annuitant.
BENEFICIARY Naming of Beneficiary The beneficiary is as stated in the
application, or as subsequently changed in accordance with the
Change of Beneficiary provision.
One or more beneficiaries can be named in the application or,
while the Annuitant is living, in a notice you sign which gives us
the facts that we need. If more than one beneficiary is named,
they can be classed as first, second and so on. If 2 or more are
named in a class, their shares in any amount payable can be
stated. No amount will be payable to a beneficiary if the
Annuitant dies after the end of a guaranteed period.
The stated shared of any amount payable to a beneficiary will be
paid to any first beneficiaries who survive the Annuitant. If no
first beneficiaries survive, payment will be made to any surviving
in the second class, and so on. Those who survive in the same
class have an equal share in any amount payable, unless the shares
are stated otherwise.
Change of Beneficiary While the Annuitant is living, you can
change a beneficiary in a notice you sign which gives us the facts
that we need. When we record a change, it will take effect as of
the date you signed the notice, subject to any payment we made or
action we took before recording the change.
Death of Beneficiary If a beneficiary who is receiving annuity
payments dies, each remaining payment will be paid to those in the
same class who are alive when that payment becomes due. If the
last beneficiary in a class to receive payments dies, each
remaining payment will be paid to those in the next class who are
alive when that payment becomes due, and so on. When the last
beneficiary to receive these payments dies, we will pay the
present value at that time of any remaining payments in a single
sum to the estate of that beneficiary. The present value of any
remaining payments is always less than the total of those
payments.
If no beneficiary for any amount payable, or for a stated share,
survives the Annuitant, the right to this amount or this share
will pass to you. If you are the Annuitant, this right will pass
to your estate. If any beneficiary dies at the same time as the
Annuitant, or within 15 days after the death of the Annuitant, but
before we receive proof of the Annuitant's death, we will pay any
amount payable as though that beneficiary died first.
PURCHASE Initial Purchase Payment The initial purchase payment is the
PAYMENTS premium paid for this policy. This payment must be made during the
lifetime of the Annuitant.
Additional Purchase Payments At any time before the retirement
date while the Annuitant is living and before settlement of the
policy under the Payment of Policy Proceeds section, additional
purchase payments may be made. The maximum number of additional
purchase payments is 4 per policy year. We reserve the right to
limit the dollar amount of any additional purchase payments.
Net Purchase Payments Each net purchase payment is defined as the
purchase payment paid, less any state premium tax required by law
or regulation to be deducted when a purchase payment is received.
Purchase Date Net purchase payments will be credited to the policy
as of the purchase date. The purchase date is the date on which a
payment is received at our Executive Office or at a service
office, unless it is received on a day which is not a business
day. In that case, the purchase date will be the next business
day.
If the initial purchase payment is received before the policy is
issued, the purchase date will be no later than 2 business days
after the payment is received at our Executive Office or at a
service office, with the completed requirements and application
which gives us the facts that we need to issue the policy.
A business day is any day on which the New York Stock Exchange is
open for trading.
PAGE 5
83191-5
<PAGE> 7
PURCHASE Allocation of Net Purchase Payments Net Purchase payments may be
PAYMENTS applied to the Fixed Annuity and/or to one or more of the
(continued) following Separate Account Investment Divisions or to any other
Separate Account Investment Division which may be established by
us for this policy:
Bond Money
Market
The allocation percents for the initial and any additional net
purchase payments are as requested in the application.
Change of Allocation You may change the allocation for net
purchase payments to the Fixed Annuity and/or among the Investment
Divisions. You must tell us in a notice you sign which gives us
the facts that we need. Payments received after the date on which
we receive your notice will be applied on the basis of the new
allocation. You must indicate which percent of each net purchase
payment to allocate to the Fixed Annuity and/or amount one or more
of the Investment Divisions (making a total of 100%). Each percent
may be either zero or any whole number. The minimum amount of a
net purchase payment that may be allocated to any one Investment
Division or to the Fixed Annuity is $1,000.
CASH VALUE Cash Value On any day on or before the retirement date, the cash
AND PARTIAL value of this is based on the following:
WITH-
DRAWALS
(a) the initial net purchase payment, and any additional net
purchase payments, allocated to any amounts transferred to
the Fixed Annuity, plus interest credited; less any prior
partial withdrawals and any surrender charges on those
withdrawals; plus
(b) the sum of, the current accumulation unit values for each
of the Investment Divisions of the Separate Account
multiplied by the number of accumulation units held in the
respective Investment Divisions.
When you ask us, we will tell you how much cash value there is. At
any time before the retirement date, after this policy has a cash
value, you can surrender it for that value, less any surrender
charge that may apply.
This policy has no cash value after the retirement date.
Partial Withdrawals After this policy has sufficient cash value,
we will pay you any part as a partial withdrawal ($100 minimum)
when we receive your written request before the retirement date,
and while the Annuitant is living. During the first 7 policy years
for each net purchase payment, a surrender charge will be made as
shown in the table below. When you request a partial withdrawal
you must tell us how it is to be allocated among the Fixed Annuity
and/or the Investment Divisions. Partial withdrawals will be
deducted and any surrender charges will be applied in the
following sequence: first, from any value in the Fixed Annuity or
Investment Divisions attributed to the initial net purchase
payment, then from any value in the Fixed Annuity or Investment
Divisions attributed to the first additional net purchase payment,
then from any value in the Fixed Annuity or Investment Divisions
attributed to the second additional net purchase payment, and so
on.
If your request for a partial withdrawal from the Fixed Annuity
and/or an Investment Division is greater than the amount in that
Fixed Annuity and or/ Investment Division, we will pay you the
entire value of that Fixed Annuity and/or Investment Division,
less any surrender charge that may apply.
Corporation's Right to Terminate Policy It may happen that partial
withdrawals, together with any surrender charges, reduce the
policy cash value to less than $2,000. If so, we have the right to
terminate the policy and pay you the cash value in one sum.
If this policy is not so terminated, it can be continued until the
retirement date. Annuity payments, based on the cash value on that
date, will be made as stated in the Annuity Benefit section.
Surrender Charge A surrender charge may be made each time a
partial withdrawal of the cash value is made, or when the policy
is surrendered for its cash value. Cash value determinations are
made as of the date we receive your request at our Executive
Office or at a service office. A surrender charge will not be made
if the total amount withdrawn during a policy year is 10%, or less
than 10%, of the policy cash value at the beginning of that year.
The amount of this charge, if any, will be a percentage, as shown
in the table below, of the amount withdrawn or of the surrender
proceeds in excess of 10% of the policy cash value at the
beginning of the policy year.
In no event will the aggregate surrender charge applied under the
policy exceed 8.5% of the total net purchase payments. A surrender
charge will not be applied to any amount withdrawn from the Fixed
Annuity under the terms of the Bail Out provision.
PAGE 6
83191-6
<PAGE> 8
CASH VALUE If surrender occurs or if a partial withdrawal is made on or after
AND PARTIAL the second policy anniversary, no surrender charge will be made
WITH- if the entire amount is at least $2,000 and is placed under
DRAWALS Option 2A, 2B, 3A, 3B or 3C in the Payment of Policy Proceeds
(continued) section of this policy. If Option 2A or 2B is elected, the period
elected must be at least 5 years or more. If, within 10 years
measured from the policy date, any unpaid amount we still still
have of the original amount placed under Option 2A or 2B is
withdrawn, a surrender charge will be applied to the amount
withdrawn. A surrender charge will also be applied to the amount
placed under Option 2A or 2B if the minimum period elected ends
within 7 years measured from the policy date.
<TABLE>
<CAPTION>
Policy Per- Policy Per-
Year centage Year centage
<S> <C> <C> <C>
1 7% 5 3%
2 6 6 2
3 5 7 1
4 4 8 and later 0
</TABLE>
For the purpose of this provision and for the rates in this table,
the second policy year begins on the first policy anniversary, the
third policy year be- gins on the second policy anniversary, and
so on, for the initial net purchase payment. For each additional
net purchase payment, the second policy year begins on the first
anniversary of each additional net purchase payment, the third
policy year begins on the second anniversary of the additional
net purchase payment, and so on.
SEPARATE Separate Account We have established and we maintain the Separate
ACCOUNT Account under the laws of the state of Delaware. Any realized or
unrealized income, net gains and losses from the assets of the
Separate Account are credited or charged against it without regard
to our other income, gains or losses. Assets are put in the
Separate Account for this policy, as well as for other multifunded
retirement annuity policies.
The Separate Account invests its assets in shares of one or more
mutual funds. Fund shares are purchased, redeemed and valued on
behalf of the Separate Account. The Separate Account is divided
into Investment Divisions. We reserve the right to add or remove
any Investment Division of the Separate Account.
The assets of the Separate Account are our property. There are
Separate Account assets which equal the reserves and other
contract liabilities of the Separate Account. Those assets will
not be chargeable with liabilities arising out of any other
business we conduct. We reserve the right to transfer assets of an
Investment Division, in excess of the reserves and other contract
liabilities with respect to that Investment Division, to another
Investment Division or to our General Account.
We will determine the value of the assets of the Separate Account
on each day during which the New York Stock Exchange is open for
trading. The assets of the Separate Account will be valued at fair
market value, as determined in accordance with a method of
valuation which we established in good faith.
We also reserve the right to transfer assets of the Separate
Account, which we determine to be associated with the class of
policies to which this policy belongs, to another separate
account. If this type of transfer is made, the term "Separate
Account," as used in this policy, shall then mean the separate
account to which the assets were transferred.
We also reserve the right, when permitted by law; to:
(a) deregister the Separate Account under the Investment
Company Act of 1940;
(b) manage the Separate Account under the direction of a
committee at any time;
(c) restrict or eliminate any voting rights of policyowners or
other persons who have voting rights as to the Separate
Account; and
(d) combine the Separate Account with one or more other
separate accounts.
Change in Investment Objective or Policy of a Mutual Fund If
required by law or regulation, an investment policy of the
Separate Account will not be changed unless approved by the
appropriate insurance official of the state of Delaware or deemed
approved in accordance with such law or regulation. If so
required, the process for obtaining such approval is filed with
the insurance official of the state or district in which this
policy is delivered.
Accumulation Units The interest of this policy in the Separate
Account prior to the date on which the annuity benefits become
payable is represented by accumulation units. The dollar value of
accumulation units for each Investment Division may change from
day to day reflecting the investment experience of the Investment
Division. Net purchase payments allocated to the Investment
Divisions will applied to provide accumulation units in those
Investment Divisions. The number of accumulation units purchased
in an Investment Division will be determined by dividing the net
purchase payment, or any part of that payment applied to that
Investment Division, by the value of an accumulation unit for that
Division on the purchase date.
PAGE 7
83191-7
<PAGE> 9
SEPARATE The value of an accumulation unit in each Investment Division was
ACCOUNT established at $10.00 as of the date operations began for that
(continued) Division. The value of an accumulation unit on any business day
is determined by multiplying the value of that unit on the
immediately preceding business day by the Net Investment Factor
for the valuation period. The valuation period is the period from
the close of the immediately preceding business day to the close
of the current business day.
Net Investment Factor The Net Investment Factor for this policy,
for any Investment Division of the Separate Account for the
valuation period, is determined by dividing (a) by (b) and
subtracting (c) from the result, where:
(a) is the result of:
(1) the net asset value of a fund share held in the
Separate Account for that Investment Division
determined at the end of the current valuation period,
plus
(2) the per share amount of any dividend or capital gain
distributions made by the fund for shares held in the
Separate Account for that Investment Division if the
ex-dividend date occurs during the valuation period,
plus or minus
(3) a charge or credit for taxes, for which a reserve must
be maintained, determined by the Corporation to have
resulted from investment operations of the Investment
Division.
(b) is the net result of:
(1) the net asset value of a fund share held in the
Separate Account for that Investment Division
determined as of the end of the immediately preceding
valuation period, plus or minus
(2) a charge or credit for taxes, for which a reserve must
be maintained, for the immediately preceding valuation
period.
(c) is a factor representing the mortality and expense risk
fee. This factor is equal, on an annual basis, to 1.25% of
the daily net asset value of a fund share held in the
Separate Account for that Investment Division.
The Net Investment Factor may be greater or less than one,
therefore, the accumulation unit value may increase of decrease.
Transfer Between Investment Divisions and to the Fixed Annuity
Prior to 30 days before the retirement date you may transfer
accumulation units from one Investment Division to another within
the Separate Account or to the Fixed Annuity. If you want to
transfer Accumulation Units, you must tell us in a notice you sign
which gives us the facts that we need. The minimum amount which
may be transferred is the lesser of $1,000 or the entire value of
the accumulation units in the Investment Division from which the
transfer is being made. The remaining accumulation units in the
Division must have a value of at least $100. If, after a transfer,
the value of the remaining accumulation units in an Investment
Division would be less than $100, we have the right to include
that amount as part of the transfer. We reserve the right to limit
transfers between Investment Divisions and to the Fixed Annuity to
no more than 4 in any one policy year.
FIXED Fixed Annuity Payments applied to and any amounts transferred to
ANNUITY the Fixed Annuity will reflect a fixed interest rate. The amount
of interest credited will be based on a rate which we set, in
advance, at least once a year. This rate will never be less than
4% per year.
Bail Out If, on the anniversary for a net purchase payment, or for
any part of a net purchase payment allocated to, or for any amount
transferred to the Fixed Annuity, the interest rate we set for
that payment or transfer to the Fixed Annuity is more than 3
percentage points lower than the rate set for the immediately
preceding policy year, you have the right to withdraw the portion
of the Fixed Annuity cash value attributed to that payment or
transfer, without that amount being subject to a surrender charge.
Your written request for withdrawal of this amount must be made
within 60 days of the anniversary of that payment or transfer to
the Fixed Annuity.
For the purpose of this provision, a policy year ends on the
policy anniversary of the initial net purchase payment or any part
of that payment allocated to the Fixed Annuity. For any additional
net purchase payment, or any part of that payment allocated to the
Fixed Annuity, or for any amount transferred to the Fixed Annuity,
a policy year ends on an anniversary of that payment or transfer.
Transfer from Separate Account Investment Divisions No transfers
may be made from the Fixed Annuity to the Separate Account
Investment Divisions. Transfers from the Separate Account to the
Fixed Annuity are subject to the minimum amount, transfer
limitations and requirements indicated in the Transfer Between
Investment Divisions and to the Fixed Annuity provision of the
Separate Account section.
PAGE 8
83191-8
<PAGE> 10
PAYMENT Payment If the Annuitant is living and this policy is in force on
OF POLICY the retirement date, we will make the annuity payments under
PROCEEDS Option 3A as stated in the Annuity Benefit section, or if elected,
all or part of the cash value may be placed under one or more of
the options described in this section. Before the retirement date,
if the Annuitant dies or if you surrender this policy, we will pay
any proceeds in one sum, or if elected, all or part of these
proceeds may be placed under one or more of the options described
in this section. If we agree, the proceeds may be placed under
some other method of payment instead.
Any proceeds paid in one sum because of the Annuitant's death will
bear interest compounded each year from the date of death to the
date of payment. We set the interest rate each year. This rate
will be at least 3 1/2% per year.
Election of Optional Method of Payment While the Annuitant is
living, and if we agree, you can elect or change an option. You
can also name or change one or more beneficiaries who will be the
payee or payees under that option. After the Annuitant dies, any
person who is to receive payment in one sum (other than an
assignee) can elect an option and name payees.
The person who elects an option can also name one or more
successor payees to receive any unpaid amount we have at the death
of a payee. Naming these payees cancels any prior choice of a
successor payee.
A payee who did not elect the option does not have the right to
advance or assign payments, take the payments in one sum, or make
any other change. However, the payee may be given the right to do
one or more of these things if the person who elects the option
tells us in writing and we agree.
Change of Option If we agree, a payee who elects Option 1A, 1B, 2A
or 2B may later elect to have any unpaid amount we still have, or
the present value of any elected payments, placed under some other
option described in this section.
Payees Only individuals who are to receive payments in their own
behalf may be named as payees or successor payees, unless we agree
to some other payee. We may require written proof of the age or
the survival of a payee.
It may happen that when the last surviving payee dies, we still
have an unpaid amount, or there are some payments which remain to
be made. If so, we will pay the unpaid amount, with interest to
the date of payment, or pay the present value of the remaining
payments, to that payee's estate in one some.
The present value of any remaining payments is based on the
interest rate used to compute them, and is always less than the
total of those payments.
Minimum Payment When the initial payment would be less than $20
per month, we may pay any unpaid amount or present value in one
sum.
Premium Tax If any amount is placed under Option 3A, 3B or 3C on
the retirement date or when this policy is surrendered, we will
deduct from that amount any state premium tax that is payable at
that time.
Methods of Payment
Options 1A and 1B. Proceeds at Interest The policy proceeds may be
left with us at interest. We set the interest rate each year. This
rate will be at least 3 1/2% per year.
1A. Interest Accumulation
We credit interest each year on the amount we still have. This
amount can be withdrawn at any time in sums of $100 or more. We
pay interest to the date of withdrawal on sums withdrawn.
1B. Interest Payment
We pay interest once each month, every 3 months or 6 months, or
once each year, as chosen, based on the amount we still have.
Options 2A and 2B. Elected Income
We make equal payments once each month, every 3 months or 6
months, or once each year, as chosen, for an elected period of
years or for an elected amount. We set the interest rate for these
options each year. This rate will be at least 3 1/2% per year. If
the rate is more than 3 1/2%, we will increase each payment to
reflect this.
2A. Income for Elected Period
We make the payments for the number of years elected. Monthly
payments based on 3 1/2% interest are shown in the Option 2A
Table.
OPTION 2A TABLE
Minimum Monthly Payment per $1,000 of Proceeds
<TABLE>
<CAPTION>
Years Years Years Years
<S> <C> <C> <C>
1 $84.65 5 $18.12 9 $10.75 15 $7.10
2 43.05 6 15.35 10 9.83 20 5.75
3 29.19 7 13.38 11 9.09 25 4.96
4 22.27 8 11.90 12 8.46 30 4.45
</TABLE>
When asked, we will state in writing what each payment would be,
if made every 3 months or 6 months, or once each year.
PAGE 9
83191-9
<PAGE> 11
PAYMENT 2B. Income of Elected Amount
OF POLICY We make payments of the elected amount until all proceeds and
PROCEEDS interest have been paid. The total payments made each year must
(continued) be at least 5% of the proceeds placed under this option. Each year
we credit interest of at least 3 1/2% on the amount we still have.
Options 3A, 3B, and 3C. Life Income We make equal payments each
month during the lifetime of the named payee or payees. Payments
are based on the appropriately adjusted annuity payment rate in
effect when the first payment is due, but will not be less than
the corresponding minimum amount based on the tables for Options
3A, 3B and 3C in this policy. These minimum amounts are based on
the 1971 Individual Annuity Mortality Table with projection, and
with interest compounded each year at 4%.
When asked, we will state in writing what the minimum amount of
each monthly payment would be under these options. It is based on
the sex and the adjusted age of the payee or payees. To find the
adjusted age in the year the first payment is due, we increase or
decrease the payee's age at that time, as follows:
<TABLE>
<CAPTION>
1985 & 2026 &
earlier 1986-95 1996-2010 2011-25 later
<S> <C> <C> <C> <C>
+2 +1 0 -1 -2
</TABLE>
3A. Life Income - Guaranteed Period
We make a payment each month during the lifetime of the payee.
Payments do not change, and are guaranteed for 5, 10, 15, or 20
years, as chosen, even if that payee dies sooner.
3B. Life Income - Guaranteed Total Amount
We make a payment each month during the lifetime of the payee.
Payments do not change, and are guaranteed until the total amount
paid equals the amount placed under this option, even if that
payee dies sooner.
3C. Life Income - Joint and Survivor
We make a payment each month while both or one of the two payees
are living. Payments do not change, and are guaranteed for 10
years, even if both payees die sooner.
OPTION 3A TABLE
Minimum Monthly Payment per $1,000 of Proceeds
<TABLE>
<CAPTION>
Payee's MALE FEMALE
Adjusted Guaranteed Period Guaranteed Period
Age 5 Yrs 10 Yrs 15 Yrs 20 Yrs 5 Yrs 10 Yrs 15 Yrs 20 Yrs
<S> <C> <C> <C> <C> <C> <C> <C> <C>
60 $ 5.66 $ 5.56 $ 5.38 $ 5.16 $ 5.21 $ 5.16 $ 5.07 $ 4.95
61 5.79 5.67 5.48 5.23 5.32 5.26 5.16 5.02
62 5.93 5.79 5.57 5.29 5.43 5.37 5.26 5.09
63 6.08 5.92 5.67 5.36 5.55 5.48 5.35 5.16
64 6.24 6.06 5.78 5.42 5.69 5.60 5.46 5.24
65 6.41 6.20 5.88 5.48 5.83 5.73 5.55 5.31
66 6.59 6.35 5.98 5.54 5.99 5.87 5.67 5.38
67 6.78 6.50 6.09 5.60 6.16 6.02 5.79 5.45
68 6.99 6.67 6.19 5.66 6.34 6.18 5.90 5.52
69 7.21 6.83 6.30 5.71 6.54 6.35 6.02 5.58
70 7.44 7.01 6.40 5.75 6.75 6.52 6.13 5.64
71 7.69 7.19 6.50 5.80 6.98 6.70 6.25 5.69
72 7.96 7.37 6.60 5.84 7.23 6.89 6.36 5.74
73 8.24 7.56 6.69 5.87 7.49 7.09 6.47 5.79
74 8.55 7.75 6.78 5.90 7.78 7.29 6.58 5.82
75 8.86 7.94 6.86 5.92 8.08 7.50 6.68 5.86
80 10.71 8.86 7.18 5.99 9.92 8.52 7.06 5.96
85 12.98 9.58 7.31 6.00 12.16 9.30 7.24 5.99
& over
</TABLE>
OPTION 3B TABLE
Minimum Monthly Payment per $1,000 of Proceeds
<TABLE>
<CAPTION>
Payee's Payee's
Adjusted Adjusted
Age Male Female Age Male Female
<S> <C> <C> <C> <C> <C>
60 $ 5.36 $ 5.04 69 $ 6.56 $ 6.12
61 5.47 5.13 70 6.73 6.28
62 5.58 5.23 71 6.92 6.46
63 5.69 5.33 72 7.11 6.64
64 5.82 5.45 73 7.32 6.84
65 5.95 5.56 74 7.55 7.05
66 6.09 5.69 75 7.78 7.27
67 6.24 5.82 80 9.22 8.61
68 6.39 5.97 85 & over 11.25 10.37
</TABLE>
OPTION 3C TABLE
10 YEAR GUARANTEED PERIOD
Minimum Monthly Payment per $1,000 of Proceeds
<TABLE>
<CAPTION>
Male Payee's Female Payee's Adjusted Age
Adjusted Age 60 65 70 75 80
<S> <C> <C> <C> <C> <C>
60 $ 4.72 $ 4.96 $ 5.17 $ 5.34 $ 5.45
65 4.87 5.20 5.52 5.80 6.00
70 4.99 5.41 5.86 6.30 6.65
75 5.09 5.56 6.15 6.78 7.31
80 5.18 5.68 6.36 7.15 7.89
</TABLE>
PAGE 10
83191-10
<PAGE> 12
GENERAL Entire Contract The entire contract consists of this policy,
PROVISIONS any attached riders or endorsements, and the attached copy of the
application. Only our Chairman, President, Secretary, or one of
our Vice Presidents can change the contract, and then only in
writing. No change will be made in the contract unless you agree
to it in writing. No Registered Representative is authorized to
change this policy, or to change or waive any provisions of this
policy.
Application In issuing this policy, we have relied on the
statements made in the application. All such statements are deemed
to be representations and not warranties. We assume these
statements are true and complete to the best of the knowledge and
belief of those who made them. No statement made in connection
with the application will be used by us to void the policy unless
that statement is a material misrepresentation and is part of the
application.
Incontestability We will not contest this policy after is has been
in force during the lifetime of the Annuitant for 2 years from the
date of issue. Please refer to the Incontestability of Rider
provision that may be in any rider or riders attached to this
policy.
Dates Policy years, months, and anniversaries are measured from
the policy date, except where otherwise provided.
Age and Sex In this policy when we refer to a person's age on any
date, we mean his or her age on the birthday which is nearest that
date. If a date on the Policy Data page is based on an age that is
not correct, we may change the date to reflect the correct age.
If the age or sex of the Annuitant is not correct as stated, any
amount payable under this policy will be what the premiums paid
would have purchased at the correct age and sex.
If we pay too little or too much because the age or sex was not
correct as stated, we will increase or reduce a later payment or
payments to adjust for the error. Any adjustment will include
interest, at 6% per year, from the date of the wrong payment to
the date the adjustment is made.
Policy Changes If we agree, you may have riders added to this
policy.
Assignment While the Annuitant is living, you can assign this
policy or any interest in it. If you do this, your interest, and
anyone else's, is subject to that of the assignee. As owner, you
still have the rights of ownership that have not been assigned.
An assignee may not name or delete a Contingent Annuitant, may not
change the Annuitant, the owner or the beneficiary, and may not
elect or change an optional method of payment. Any amount payable
to the assignee will be paid in one sum.
We must have a copy of any assignment. We will not be responsible
for the validity of an assignment. It will be subject to any
payment we make or other action we take before we record it.
Protection Against Creditors Except as stated in the Assignment
provision, payments we make under this policy are, to the extent
the law permits, exempt from the claims, attachments, or levies of
any creditors.
Payments to Corporation Any payment made to us by check or money
order must be payable to New York Life Insurance and Annuity
Corporation. When asked, we will give a countersigned receipt,
also signed by our President or Secretary, for any premium paid to
us.
Deferment We will pay any partial withdrawals or surrender
proceeds within 7 days after we receive all requirements that we
need. However, it may happen that the New York Stock Exchange is
closed for trading (other than the usual weekend or holiday
closings), or the Securities and Exchange Commission restricts
trading or determines that an emergency exists. If so, it may not
be practical for us to determine the investment experience of the
Separate Account. In that case, we may defer transfers among the
Investment Divisions and to the Fixed Annuity, and determination
or payment of partial withdrawals or surrender proceeds.
When permitted by law, we may defer paying any partial withdrawals
or surrender proceeds for up to 6 months from the withdrawal or
surrender date. Interest will be paid on any amount deferred for
30 days or more. This rate will be at least 4% per year.
Conformity with Law This policy is subject to all laws which
apply.
Non-participating Policy This is non-participating policy, on
which no dividends are payable.
Reports to Owner An annual report in connection with this policy
will be provided to you within 30 days after a policy anniversary.
This report will show, as of that anniversary, the number and
value of the accumulation units held in each of the Investment
Divisions of the Separate Account as well as the value of the
Fixed Annuity. It will also give you any other facts required by
law or regulation.
PAGE 11
83191-11
<PAGE> 13
New York Life Insurance
and Annuity Corporation
Executive Office - 372 Park Avenue South
New York, NY 10010
A Stock Company Incorporated in Delaware
Single Premium Multi-Funded Retirement Annuity Monthly Annuity Payments Begin on
the Retirement Date. Single Premium Payable as Shown on Policy Data Page.
Benefits Based on the Performance of Separate Account are Variable and are not
Guaranteed as to dollar Amount.
Policy is Non-Participating.
983-191
<PAGE> 1
Exhibit (9)
Opinion and Consent of Robert J. Hebron, Esq.
<PAGE> 2
[NEW YORK LIFE LOGO]
NEW YORK LIFE INSURANCE COMPANY
51 Madison Avenue, New York, NY 10010
(212) 576-5149 Fax: 212 447-4268
ROBERT J. HEBRON
Vice President and
Associate General Counsel
April 15, 1997
New York Life Insurance
and Annuity Corporation
51 Madison Avenue
New York, NY 10010
RE: NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNT-II
Ladies and Gentlemen:
This opinion is furnished in connection with the filing by New York
Life Insurance and Annuity Corporation ("NYLIAC") of Post-Effective Amendment
No. 16 to the registration statement on Form N-4 ("Registration Statement")
under the Securities Act of 1933, as amended, of NYLIAC MFA Separate Account-II
("Separate Account-II"). Separate Account-II receives and invests premiums
allocated to it under a multi-funded variable retirement annuity policy
("Annuity Contract"). The Annuity Contract is offered in the manner described in
the Registration Statement.
In my capacity as Vice President and Associate General Counsel for New
York Life Insurance Company, I have authority to assist the General Counsel in
supervising and administering the general business affairs of the Office of the
General Counsel, including authority to act with respect to any matter within
his authority or responsibility relating to legal affairs. This would include
general supervision of NYLIAC=s legal affairs. In this capacity, I am familiar
with Separate Account-II, which was established as of May 27,1983, pursuant to a
resolution adopted by the Board of Directors of NYLIAC for a separate account
for assets applicable to the Annuity Contract, pursuant to the provisions of
Section 2932 of the Delaware Insurance Code. In addition, I have made such
examination of the law and have examined such corporate records and such other
documents as I consider appropriate as a basis for the opinion hereinafter
expressed. On the basis of such examination, it is my professional opinion that:
<PAGE> 3
New York Life Insurance
and Annuity Company
April 15, 1997
Page 2
1. NYLIAC is a corporation duly organized and validly existing under the laws
of the State of Delaware.
2. Separate Account-II is an account established and maintained by NYLIAC
pursuant to the laws of the State of Delaware, under which income, capital
gains and capital losses incurred on the assets of Separate Account-II are
credited to or charged against the assets of Separate Account-II without
regard to the income, capital gains or capital losses arising out of any
other business which NYLIAC may conduct.
3. The Annuity Contracts have been duly authorized by NYLIAC and, when sold in
jurisdictions authorizing such sales, in accordance with the Registration
Statement, will constitute validly issued and binding obligations of NYLIAC
in accordance with their terms.
4. Each owner of an Annuity Contract will not be subject to any deductions,
charges, or assessments imposed by NYLIAC other than those provided in the
Annuity Contract.
I consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/Robert J. Hebron
-------------------
Robert J. Hebron
Vice President and
Associate General Counsel
<PAGE> 1
Exhibit (10)(a)
Consent of Price Waterhouse, LLP
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 16 to the registration
statement on Form N-4 (the "Registration Statement") of our report dated April
16, 1997, relating to the financial statements of New York Life Insurance and
Annuity Corporation, and of our report dated February 19, 1997, relating to the
financial statements and selected per unit data of New York Life Insurance and
Annuity Corporation MFA Separate Accounts I & II, which appear in such Statement
of Additional Information, and to the incorporation by reference of our reports
into the Prospectus which constitutes part of this Registration Statement. We
also consent to the reference to us under the heading "Independent Accountants"
in such Statement of Additional Information and to the reference to us under the
heading "Condensed Financial Information" in such Prospectus.
PRICE WATERHOUSE, LLP
1177 Avenue of the Americas
New York, New York
April 16, 1997
<PAGE> 3
Exhibit (14)
Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NYLIAC MFA
SEPARATE ACCOUNT-II FINANCIAL STATEMENTS AND NOTES THERETO AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES THERETO.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> NYLIAC MFA SEPARATE ACCOUNT II; COMMON STOCK
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 12,871,308
<INVESTMENTS-AT-VALUE> 15,004,340
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 15,004,340
<TOTAL-ASSETS> 15,004,340
<PAYABLE-FOR-SECURITIES> 67,789
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 67,789
<TOTAL-LIABILITIES> 67,789
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,097,708
<SHARES-COMMON-STOCK> 395,139
<SHARES-COMMON-PRIOR> 428,464
<ACCUMULATED-NII-CURRENT> 70,166
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,005,429
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,133,032
<NET-ASSETS> 14,936,551
<DIVIDEND-INCOME> 1,983,668
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 253,995
<NET-INVESTMENT-INCOME> (119,592)
<REALIZED-GAINS-CURRENT> 730,753
<APPREC-INCREASE-CURRENT> 378,417
<NET-CHANGE-FROM-OPS> 2,838,843
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (33,324)
<ACCUMULATED-NII-PRIOR> 189,758
<ACCUMULATED-GAINS-PRIOR> 6,419,232
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NYLIAC MFA
SEPARATE ACCOUNT-II FINANCIAL STATEMENTS AND NOTES THERETO AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES THERETO.
</LEGEND>
<SERIES>
<NUMBER> 02
<NAME> NYLIAC MFA SEPARATE ACCOUNT II; BOND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 6,374,079
<INVESTMENTS-AT-VALUE> 6,425,480
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 6,425,480
<TOTAL-ASSETS> 6,425,480
<PAYABLE-FOR-SECURITIES> 29,154
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29,154
<TOTAL-LIABILITIES> 29,154
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,400,923
<SHARES-COMMON-STOCK> 237,839
<SHARES-COMMON-PRIOR> 276,158
<ACCUMULATED-NII-CURRENT> 4,389,268
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 294,459
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 51,402
<NET-ASSETS> 6,396,327
<DIVIDEND-INCOME> 408,975
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 118,884
<NET-INVESTMENT-INCOME> 290,550
<REALIZED-GAINS-CURRENT> 101,932
<APPREC-INCREASE-CURRENT> (396,619)
<NET-CHANGE-FROM-OPS> (4,597)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> (38,319)
<NET-CHANGE-IN-ASSETS> 4,098,717
<ACCUMULATED-NII-PRIOR> 192,527
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NYLIAC MFA
SEPARATE ACCOUNT-II FINANCIAL STATEMENTS AND NOTES THERETO AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES THERETO.
</LEGEND>
<SERIES>
<NUMBER> 03
<NAME> NYLIAC MFA SEPARATE ACCOUNT II; MONEY MARKET
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 943,859
<INVESTMENTS-AT-VALUE> 943,834
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 943,834
<TOTAL-ASSETS> 943,834
<PAYABLE-FOR-SECURITIES> 4,428
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,428
<TOTAL-LIABILITIES> 4,428
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 905,098
<SHARES-COMMON-STOCK> 52,058
<SHARES-COMMON-PRIOR> 66,541
<ACCUMULATED-NII-CURRENT> 708,514
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (58)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (25)
<NET-ASSETS> 939,406
<DIVIDEND-INCOME> 53,423
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 19,111
<NET-INVESTMENT-INCOME> 34,405
<REALIZED-GAINS-CURRENT> (37)
<APPREC-INCREASE-CURRENT> 33
<NET-CHANGE-FROM-OPS> 34,307
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (14,483)
<ACCUMULATED-NII-PRIOR> 674,108
<ACCUMULATED-GAINS-PRIOR> (20)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
