NYLIAC MFA SEPARATE ACCOUNT II, 485BPOS, 1998-04-16

NYLIAC MFA SEPARATE ACCOUNT II
485BPOS, 1998-04-16

Previous: NYLIAC MFA SEPARATE ACCOUNT I, 485BPOS, 1998-04-16

Next: AXIOHM TRANSACTION SOLUTIONS INC, DEF 14A, 1998-04-16

<PAGE> 1

As filed with the Securities and Exchange Commission on April 16, 1998

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. 17 [ X ]

and

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 14 [ 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

Carol Yee, 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:

Peter E. Panarites, Esq. Michael J. McLaughlin, Esq.
Freedman, Levy, Kroll & Simonds Senior Vice President
1050 Connecticut Avenue and General Counsel
Suite 825 New York Life Insurance Company
Washington, D.C. 20036 51 Madison Avenue
New York, New York 10010

Approximate Date of Proposed Public Offering: Continuous

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, 1998 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.

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Title of Securities Being Registered:

Units of interest in a separate account under variable annuity
contracts.

<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
<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

THE FACILITATOR

A CONTEMPORARY RETIREMENT ANNUITY
FOR DYNAMIC FINANCIAL TIMES

PROSPECTUS

MAINSTAY

VP SERIES FUND, INC.

May 1, 1998

New York Life Insurance
and Annuity Corporation
MFA Separate Accounts I
and II

MainStay

VP Series Fund, Inc.

Distributor:
NYLIFE Distributors
Inc.
Member NASD

NEW YORK LIFE
INSURANCE
AND ANNUITY
CORPORATION
<PAGE> 5

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 or by calling the
Service Center that services your Policy. (See page 11.) 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, 1998

*FACILITATOR(R) IS NYLIAC'S REGISTERED SERVICE MARK FOR THE POLICIES AND IS NOT
MEANT TO CONNOTE PERFORMANCE.
<PAGE> 6

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........ 12
FINANCIAL STATEMENTS................... 15
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION AND THE VARIABLE
ACCOUNTS............................. 16
New York Life Insurance and Annuity
Corporation....................... 16
The Variable Accounts................ 16
The Portfolios....................... 16
Additions, Deletions, or
Substitutions of Investments...... 17
Reinvestment......................... 17
THE POLICIES........................... 17
Purpose of Policies.................. 17
Purchase Payments.................... 18
Total Disability Benefit Rider....... 18
Transfers............................ 18
Accumulation Period.................. 19
(a) Crediting of Net Purchase
Payments................... 19
(b) Valuation of Accumulation
Units...................... 19
Policy Owner Inquiries............... 19
CHARGES AND DEDUCTIONS................. 19
Surrender Charges.................... 19
Exceptions to Surrender Charges...... 20
Other Charges........................ 20
Taxes................................ 21
DISTRIBUTIONS UNDER THE POLICY......... 22
Surrenders and Withdrawals........... 22
(a) Surrenders.................... 22
(b) Partial Withdrawals........... 22
(c) Periodic Partial
Withdrawals..................... 23
(d) Hardship Withdrawals.......... 23
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Cancellations........................ 23
Retirement Date...................... 23
Death Before Retirement.............. 23
Income Payments...................... 24
(a) Election of Income Payment
Options.................... 24
(b) Fixed Income Payments......... 24
(c) Variable Income Payments...... 25
(d) Value of Variable Income
Payments................... 25
(e) Other Methods of Payment...... 26
(f) Legal Developments Regarding
Income Payments............ 26
(g) Proof of Survivorship......... 26
Delay of Payments.................... 26
Designation of Beneficiary........... 26
Restrictions Under the Texas Optional
Retirement Program................ 27
Restrictions Under Internal Revenue
Code Section 403(b)(11)........... 27
THE FIXED ACCOUNT...................... 27
(a) Interest Crediting............ 27
(b) Surrender Charges............. 27
(c) Transfers to Investment
Divisions.................. 28
(d) General Matters............... 28
FEDERAL TAX MATTERS.................... 28
Introduction......................... 28
Taxation of Annuities in General..... 29
Qualified Plans...................... 30
(a) Section 403(b) Plans.......... 30
(b) Individual Retirement
Annuities.................. 30
(c) Corporate Pension and Profit-
Sharing Plans and H.R. 10
Plans........................ 30
(d) Deferred Compensation Plans... 30
DISTRIBUTOR OF THE POLICIES............ 30
VOTING RIGHTS.......................... 31
STATEMENT OF ADDITIONAL INFORMATION.... 31
</TABLE>

2
<PAGE> 7

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.

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.

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.

3
<PAGE> 8

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
for trading.

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> 9

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 for the fiscal year ended December 31, 1997)
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............................. 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 19.)

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, 1997; 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 19 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> 10

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 for the fiscal year ended
December 31, 1997)
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............................. 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 20.)

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> 11

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.

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 17). 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 24.)

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>

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 27.)

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 18.)

7
<PAGE> 12

Transfers may also be made from the Fixed Account to the Investment
Divisions but only in certain situations. (See "The Fixed Account" at page 27.)

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 20.)

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 20.)

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 19 and "Exceptions to Surrender Charges" at page 20.)

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 the
MainStay VP 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
<PAGE> 13

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. 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 22 and "Federal Tax
Matters" at page 28.)

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 24.)

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 18.)

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 23 and "Federal Tax Matters" at page 28.)

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
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 23 and
"Federal Tax Matters" at page 28.)

9
<PAGE> 14

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 Funds in which you have a
voting interest through the Variable Accounts. (See "Voting Rights" at page 31.)

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.

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 the yield calculations, please
refer to the Statement of Additional Information.

NYLIAC may from time to time also calculate average annual total return 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 calculate yields,
standard total returns, and non-standard total returns for the Portfolios of the
MainStay VP 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.

10
<PAGE> 15

17. HOW DO I CONTACT NYLIAC?

For general inquiries and written requests, Policy Owners may contact their
agent or the Service Center that services their Policy. The Service Center for
your Policy is listed on your quarterly or confirmation statements.

<TABLE>
<CAPTION>
SERVICE CENTER ADDRESS PHONE NUMBER
-------------- ------- ------------
<S> <C> <C>
Atlanta Service Center P.O. Box 4869 (800) 695-5645
Atlanta, GA 30032

Cleveland Service Center P.O. Box 6916 (800) 695-9873
Cleveland, OH 44101

Dallas Service Center P.O. Box 539 (800) 695-1314
Dallas, TX 75221

West Coast Service Center P.O. Box 5085 (800) 695-9962
San Ramon, CA 94583
</TABLE>

11
<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 each fiscal year ended December 31,
presented below, 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 Separate Accounts' financial statements and notes thereto,
which appear in the Statement of Additional Information.

<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
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Accumulation Unit value as of 1/1/88......... $11.70 $11.47 $15.06 $14.76 $13.01 $12.75
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
</TABLE>

12
<PAGE> 17

<TABLE>
<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>

<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
<CAPTION>
JANUARY 1, 1997 TO DECEMBER 31, 1997
---------------------------------------------------------------------
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 1/1/97......... $40.34 $37.80 $28.66 $26.85 $19.26 $18.05
Accumulation Unit value as of 12/31/97....... $50.50 $47.08 $31.03 $28.93 $20.02 $18.66
Number of units outstanding as of 12/31/97... 2,249,437 4,165,714 1,089,905 2,006,615 265,537 405,438
</TABLE>

VARIABLE ACCOUNT II

13
<PAGE> 18

<TABLE>
<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
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
--------- --------- --------- --------- --------- ---------
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
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
--------- --------- --------- --------- --------- ---------
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
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
--------- --------- --------- --------- --------- ---------
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
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
--------- --------- --------- --------- --------- ---------
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
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
--------- --------- --------- --------- --------- ---------
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
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
--------- --------- --------- --------- --------- ---------
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>

14
<PAGE> 19

<S> <C> <C> <C> <C> <C> <C>
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
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

JANUARY 1, 1997 TO DECEMBER 31, 1997
---------------------------------------------------------------------
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 1/1/97......... $40.34 $37.80 $28.76 $26.89 $19.26 $18.05
Accumulation Unit value as of 12/31/97....... $50.50 $47.08 $31.15 $28.98 $20.02 $18.66
Number of units outstanding as of 12/31/97... 2,637,755 367,664 1,514,468 202,918 340,280 40,605
</TABLE>

FINANCIAL STATEMENTS

The audited financial statements of NYLIAC (including the auditor's report
thereon) for the fiscal years ended December 31, 1997, 1996 and 1995 and of
Variable Accounts I and II (including the auditor's report thereon) for the
years ended December 31, 1997 and 1996 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.

15
<PAGE> 20

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 is a wholly-owned subsidiary of New York Life Insurance Company
("New York Life"), a mutual life insurance company doing business in New York
since 1845. NYLIAC held assets of $20.1 billion at the end of 1997. 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.

Year 2000 Readiness--The computer systems we use to process all Policy
transactions and valuations need to be modified to accommodate the changeover to
Year 2000. These modifications are necessary for us to be able to continue to
administer the Policies in Year 2000 and later. As is the case with most systems
projects, risks and uncertainties exist, and a project could be delayed. We are,
however, working to make these systems modifications, and we expect that the
necessary changes will be completed on time and in a way that will result in no
disruption to our Policy servicing operations.

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.

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.

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

16
<PAGE> 21

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:

<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.

The Variable Accounts currently have 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. 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

17
<PAGE> 22

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 28.)

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 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 23.)

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.

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

18
<PAGE> 23

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 requirements, transfers may also be made from the Fixed
Account to the Investment Divisions in certain situations. (See "The Fixed
Account" at page 27.)

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 Business Day during which NYLIAC's Service Office
receives the transfer request. (See "Delay of Payments" at page 26.)

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 on the Business Day 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 27 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 separate
account charges (and any charges or credits for taxes). The Statement of
Additional Information contains a detailed description of how the Accumulation
Units are valued.

POLICY OWNER INQUIRIES

Policy Owner inquiries should be addressed to the Service Center that
services your Policy. (See page 11.)

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 the partial withdrawals are made. 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

19
<PAGE> 24

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:

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 27.) 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 23.) 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 27 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

20
<PAGE> 25

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 18.) 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: (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 23.) 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 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's
general funds.

NYLIAC guarantees that these charges will not be increased.

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.

21
<PAGE> 26

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 28.) 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 on the Business Day 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 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 26.)

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 29.)

(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 24.)

(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.

22
<PAGE> 27

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 page 22.)

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.

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

23
<PAGE> 28

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" below.)
However, any unpaid amount remaining under options 1A or 1B at the end of
the five-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 29.)

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 26.)

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.

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 20.)

(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.

24
<PAGE> 29

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.

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 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.

25
<PAGE> 30

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 28.)

(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.

26
<PAGE> 31

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.

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 19.) In addition to the "Exceptions to
Surrender Charges" described at page 20, 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.)

27
<PAGE> 32

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 20. 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 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 18.)

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

28
<PAGE> 33

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
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. The law requires the use of
special simplified methods to determine the taxable amount of payments that are
based in whole or in part on the Annuitant's life and that are paid from
qualified retirement plans under Section 401(a) and from qualified annuities and
Tax Sheltered Annuities under Sections 403(a) and 403(b).

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.

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

29
<PAGE> 34

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 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. Such investments
are generally owned by, and are subject to, the claims of the general
creditors of the sponsoring employer, except that Section 457 plans of
state and local government must be held and used for the exclusive benefit
of participants and beneficiaries in a trust or annuity contract.

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% of Purchase
Payments or such other special arrangements, which may provide for the payment
of higher commissions to a broker-dealer in connection with sales of the
Policies. Purchasers of Policies will be informed prior to purchase of any
applicable special arrangement.

30
<PAGE> 35

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.

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.

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
MAINSTAY VP SERIES FUND, INC. .............................. 6
GENERAL MATTERS............................................. 6
FEDERAL TAX MATTERS......................................... 7
DISTRIBUTOR OF THE POLICIES................................. 8
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS...................... 8
STATE REGULATION............................................ 8
RECORDS AND REPORTS......................................... 8
LEGAL PROCEEDINGS........................................... 8
INDEPENDENT ACCOUNTANTS..................................... 9
OTHER INFORMATION........................................... 9
FINANCIAL STATEMENTS........................................ F-1
</TABLE>

31
<PAGE> 36

(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 37

The Facilitator:
A contemporary retirement annuity
for dynamic financial times
YOUR STATEMENTS OF
ADDITIONAL INFORMATION

LOGO
<PAGE> 38

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
51 MADISON AVENUE, ROOM 2105
NEW YORK, NY 10010 Bulk Rate
U.S. Postage
PAID
Secaucus, NJ
Permit No. 38

LOGO
Printed on
recycled
paper

VLI18711 (598)
<PAGE> 39

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, 1998

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, 1998, which may be obtained by calling NYLIAC at the Service Center
that services your Policy (see page 11 of the Prospectus.) 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................................... 3
INVESTMENT PERFORMANCE CALCULATIONS......................... 4
Money Market Investment Division....................... 4
Bond Investment Division Yields........................ 4
Bond and Common Stock Standard Total Return
Calculations.......................................... 5
Other Performance Data................................. 5
MAINSTAY VP SERIES FUND, INC. .............................. 6
GENERAL MATTERS............................................. 6
FEDERAL TAX MATTERS......................................... 7
Taxation of New York Life Insurance and Annuity
Corporation........................................... 7
Tax Status of the Policies............................. 7
DISTRIBUTOR OF THE POLICIES................................. 8
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS...................... 8
STATE REGULATION............................................ 8
RECORDS AND REPORTS......................................... 8
LEGAL PROCEEDINGS........................................... 8
INDEPENDENT ACCOUNTANTS..................................... 9
OTHER INFORMATION........................................... 9
FINANCIAL STATEMENTS........................................ F-1
</TABLE>

* Facilitator(R) is NYLIAC's registered service mark for the Policies and is not
meant to connote performance.
<PAGE> 40

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 30 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.

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

2
<PAGE> 41

(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 20 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 Investment
Division. The number of Annuity Units credited is determined by dividing the
first 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
3
<PAGE> 42

Annuitant, except for the Total Disability Benefit Rider. (See "Total Disability
Benefit Rider" at page 18 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 28 of the Prospectus.)

INVESTMENT PERFORMANCE CALCULATIONS

MONEY MARKET INVESTMENT DIVISION

NYLIAC calculates the Money Market Investment Division's current annualized
yield for a seven-day period in a manner which does not take into consideration
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.

NYLIAC also calculates the effective yield of the Money Market Investment
Division for the same seven-day period 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, 1997, the Money Market
Investment Divisions' annualized yields were 4.41% and 3.84% respectively, for
Single Premium and Flexible Premium Policies (both Variable Account I and
Variable Account II). For the same period, the effective yields were 4.51% and
3.91% 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
investment 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.

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

4
<PAGE> 43

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, 1997, the annualized yields for
the Bond Investment Divisions were 5.19% and 4.65% 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 calculate 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, 1997, and the
period from January 23, 1984 to December 31, 1997, respectively, the average
annual total returns for the Single Premium Policies for the Bond Investment
Division were 0.71%, 5.35%, 7.50%, and 8.27%, respectively, for Variable Account
I, and 0.71%, 5.35%, 7.49%, 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 0.20%, 4.17%, 6.85%, and 7.73%,
respectively, for Variable Account I, and 0.20%, 4.18%, 6.86%, and 7.75%,
respectively, for Variable Account II.

For the one, five, and ten year periods ending December 31, 1997, and the
period from January 23, 1984 to December 31, 1997, respectively, the average
annual total returns for the Single Premium Policies for the Common Stock
Investment Division were 16.41%, 16.42%, 15.75%, and 12.48%, 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 15.83%,
15.11%, 15.05%, and 11.92%, respectively, for Variable Account I.

For the one, five, and ten year periods ending December 31, 1997, and the
period from January 18, 1985 to December 31, 1997, respectively, the average
annual total returns for the Single Premium Policies for the Common Stock
Investment Division were 16.41%, 16.42%, 15.75%, and 13.45%, 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 15.83%,
15.11%, 15.05%, and 12.75%, respectively, for Variable Account II.

OTHER PERFORMANCE DATA

NYLIAC may from time to time also calculate 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 not be reflected.

Using the nonstandard format, for the one, five, and ten year periods
ending December 31, 1997, and the period from January 23, 1984 to December 31,
1997, respectively, the average annual total returns for the Single Premium
Policies for the Bond Investment Division were 8.29%, 6.00%, 7.50%, and 8.27%,
respectively, for Variable Account I, and 8.29%, 6.00%, 7.49%, 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

5
<PAGE> 44

7.75%, 5.47%, 6.96%, and 7.73%, respectively, for Variable Account I, and 7.75%,
5.47%, 6.96%, and 7.75%, respectively, for Variable Account II.

For the one, five, and ten year periods ending December 31, 1997, and the
period from January 23, 1984 to December 31, 1997, respectively, the average
annual total returns for the Single Premium Policies for the Common Stock
Investment Division were 25.17%, 17.13%, 15.75%, and 12.48%, 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 24.55%,
16.54%, 15.17%, and 11.92%, respectively, for Variable Account I.

For the one, five, and ten year periods ending December 31, 1997, and the
period from January 18, 1985 to December 31, 1997, respectively, the average
annual total returns for the Single Premium Policies for the Common Stock
Investment Division were 25.17%, 17.13%, 15.75%, and 13.45%, 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 24.55%,
16.54%, 15.17%, and 12.84%, respectively, for Variable Account II.

NYLIAC may from time to time also calculate 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 not be reflected.

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. 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 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 26 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 29 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.

6
<PAGE> 45

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. If the Owner is not a natural person, these "death of Owner"
rules apply when the primary Annuitant is changed. Non-qualified Policies issued
after January 18, 1985, contain provisions 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.

7
<PAGE> 46

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.

For the year ended December 31, 1995, the aggregate amount of underwriting
commissions paid to NYLIFE Distributors Inc. was $1,090,927, of which $545,464
was retained by them. For the year ended December 31, 1996, the aggregate amount
of underwriting commissions paid to NYLIFE Distributors Inc. was $1,170,817, of
which $585,409 was retained by them. For the year ended December 31, 1997, the
aggregate amount of underwriting commissions paid to NYLIFE Distributors Inc.
was $1,221,372, of which $610,686 was retained by them.

The offering is on a continuous basis.

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 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 nationwide class action brought
in New York State court 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 been upheld on appeal.

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 a purported class action claiming to include
numerous policyholders in one jurisdiction who did not exclude themselves from
the nationwide class action. The certification by a non-New York State court of
a purported class action claiming to include numerous policyholders in that
state who excluded themselves from the settlement of the nationwide class action
was recently reversed by an intermediate appellate court; plaintiffs filed a
motion for rehearing in the intermediate appellate court and the motion was
denied. Plaintiffs may file a petition with the highest court within the
statutory

8
<PAGE> 47

time allowed to do so. Most of these actions seek substantial or unspecified
compensatory and punitive damages.

NYLIAC is also a defendant in other individual suits arising from its
insurance (including variable contracts registered under the federal securities
law), 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,
after provisions made in the financial statements, 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 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.

9
<PAGE> 48

FINANCIAL STATEMENTS

F-1
<PAGE> 49

STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1997

LIABILITIES:
Liability for mortality and expense
risk charges........................ 364,589 879,977 110,107 264,134 17,371 35,570
------------ ------------ ------------ ------------ ------------ ------------
Total equity...................... $113,587,325 $196,122,663 $ 33,820,426 $ 58,054,860 $ 5,315,548 $ 7,567,063
============ ============ ============ ============ ============ ============

TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units
outstanding: 2,249,437; 4,165,714;
1,089,905; 2,006,615; 265,537;
405,438, respectively............. $113,587,325 $196,122,663 $ 33,820,426 $ 58,054,860 $ 5,315,548 $ 7,567,063
============ ============ ============ ============ ============ ============
Variable accumulation unit value.... $ 50.50 $ 47.08 $ 31.03 $ 28.93 $ 20.02 $ 18.66
============ ============ ============ ============ ============ ============
</TABLE>

STATEMENT OF OPERATIONS
For the year ended December 31, 1997

<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....................... $ 793,224 $ 1,371,335 $ 2,126,470 $ 3,656,404 $ 301,746 $ 436,429
Mortality and expense risk charges.... (1,357,340) (3,302,747) (436,839) (1,057,682) (73,665) (148,906)
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss)...... (564,116) (1,931,412) 1,689,631 2,598,722 228,081 287,523
------------ ------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED
GAIN (LOSS):
Proceeds from sale of investments..... 13,764,635 25,532,727 6,874,618 12,595,614 3,022,885 3,583,718
Cost of investments sold.............. (9,548,813) (16,582,457) (6,681,562) (11,626,909) (3,022,997) (3,583,957)
------------ ------------ ------------ ------------ ------------ ------------
Net realized gain (loss)
on investments.................. 4,215,822 8,950,270 193,056 968,705 (112) (239)
Realized gain distribution received... 14,771,244 25,537,359 95,013 163,372 -- --
Change in unrealized appreciation
(depreciation) on investments....... 5,780,475 8,692,840 766,951 705,665 184 342
------------ ------------ ------------ ------------ ------------ ------------
Net gain on investments........... 24,767,541 43,180,469 1,055,020 1,837,742 72 103
------------ ------------ ------------ ------------ ------------ ------------
Decrease attributable to funds of
New York Life Insurance and Annuity
Corporation retained by Separate
Account............................. (51,898) (126,748) (6,734) (16,251) (391) (1,000)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in total equity
resulting from operations....... $ 24,151,527 $ 41,122,309 $ 2,737,917 $ 4,420,213 $ 227,762 $ 286,626
============ ============ ============ ============ ============ ============
</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> 50
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNT I
TAX-QUALIFIED POLICIES

(THIS PAGE INTENTIONALLY LEFT BLANK)

F-3

<PAGE> 51

STATEMENT OF CHANGES IN TOTAL EQUITY
For the years ended December 31, 1997
and December 31, 1996

<TABLE>
<CAPTION>
COMMON STOCK
INVESTMENT DIVISIONS
------------------------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES
------------------------------ ------------------------------
1997 1996 1997 1996
------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment income (loss).................... $ (564,116) $ (320,492) $ (1,931,412) $ (1,414,088)
Net realized gain (loss) on investments......... 4,215,822 3,173,694 8,950,270 5,239,879
Realized gain distribution received............. 14,771,244 12,396,168 25,537,359 21,908,560
Change in unrealized appreciation (depreciation)
on investments................................ 5,780,475 4,212,928 8,692,840 8,090,871
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation
retained by Separate Account................. (51,898) (29,535) (126,748) (73,374)
------------ ------------ ------------ ------------
Net increase (decrease) in total equity
resulting from operations.................. 24,151,527 19,432,763 41,122,309 33,751,848
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments.................. 754,147 892,545 4,629,389 5,245,235
Policyowners' surrenders........................ (11,263,827) (10,349,553) (27,429,297) (19,870,464)
Policyowners' annuity and death benefits........ (1,293,819) (756,854) (1,085,309) (1,053,485)
Net transfers from (to) Fixed Account........... 504,772 1,306,116 1,204,503 768,815
Transfers between Investment Divisions.......... 466,315 1,984,443 1,492,856 1,256,201
------------ ------------ ------------ ------------
Net contributions and withdrawals............. (10,832,412) (6,923,303) (21,187,858) (13,653,698)
------------ ------------ ------------ ------------
Increase (decrease) in total equity......... 13,319,115 12,509,460 19,934,451 20,098,150
TOTAL EQUITY:
Beginning of year............................... 100,268,210 87,758,750 176,188,212 156,090,062
------------ ------------ ------------ ------------
End of year..................................... $113,587,325 $100,268,210 $196,122,663 $176,188,212
============ ============ ============ ============
</TABLE>

The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.

F-4
<PAGE> 52
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNT I
TAX-QUALIFIED POLICIES

<TABLE>
<CAPTION>
BOND MONEY MARKET
INVESTMENT DIVISIONS INVESTMENT DIVISIONS
----------------------------------------------------- -----------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES POLICIES POLICIES
------------------------- ------------------------- ------------------------- -------------------------
1997 1996 1997 1996 1997 1996 1997 1996
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,689,631 $ 1,870,069 $ 2,598,722 $ 2,964,471 $ 228,081 $ 281,440 $ 287,523 $ 318,455
193,056 792,321 968,705 (103,187) (112) (241) (239) (213)
95,013 -- 163,372 -- -- -- -- --
766,951 (2,518,451) 705,665 (2,886,635) 184 205 342 172
(6,734) (1,918) (16,251) (4,673) (391) (292) (1,000) (837)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
2,737,917 142,021 4,420,213 (30,024) 227,762 281,112 286,626 317,577
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
149,719 418,803 1,770,297 2,261,015 53,680 41,170 335,693 370,550
(4,949,859) (6,143,986) (10,332,134) (9,830,346) (1,892,719) (1,160,675) (2,748,767) (2,213,470)
(262,993) (515,470) (511,771) (494,572) (15,502) (49,194) (72,602) (82,067)
(13,052) (94,904) (186,189) (73,881) (212,192) (45,276) (76,561) (158,369)
(868,097) (1,426,456) (2,077,747) (1,137,466) 407,401 (558,653) 585,963 (118,735)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(5,944,282) (7,762,013) (11,337,544) (9,275,250) (1,659,332) (1,772,628) (1,976,274) (2,202,091)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(3,206,365) (7,619,992) (6,917,331) (9,305,274) (1,431,570) (1,491,516) (1,689,648) (1,884,514)
37,026,791 44,646,783 64,972,191 74,277,465 6,747,118 8,238,634 9,256,711 11,141,225
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$33,820,426 $37,026,791 $58,054,860 $64,972,191 $ 5,315,548 $ 6,747,118 $ 7,567,063 $ 9,256,711
=========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>

The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.

F-5

<PAGE> 53

STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1997

LIABILITIES:
Liability for mortality and
expense risk charges................ 425,880 77,724 154,784 26,607 22,063 3,400
------------ ------------ ------------ ------------ ------------ ------------
Total equity...................... $133,196,029 $ 17,309,690 $ 47,172,717 $ 5,879,913 $ 6,811,807 $ 757,853
============ ============ ============ ============ ============ ============

TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units
outstanding: 2,637,755; 367,664;
1,514,468; 202,918; 340,280;
40,605, respectively.............. $133,196,029 $ 17,309,690 $ 47,172,717 $ 5,879,913 $ 6,811,807 $ 757,853
============ ============ ============ ============ ============ ============
Variable accumulation
unit value........................ $ 50.50 $ 47.08 $ 31.15 $ 28.98 $ 20.02 $ 18.66
============ ============ ============ ============ ============ ============
</TABLE>

STATEMENT OF OPERATIONS
For the year ended December 31, 1997

<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....................... $ 930,130 $ 120,998 $ 2,978,917 $ 370,143 $ 373,764 $ 42,719
Mortality and expense risk charges.... (1,562,468) (287,660) (614,630) (105,909) (91,197) (14,578)
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss)...... (632,338) (166,662) 2,364,287 264,234 282,567 28,141
------------ ------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED
GAIN (LOSS):
Proceeds from sale of investments..... 13,859,102 2,006,128 10,081,051 1,148,539 3,438,177 441,023
Cost of investments sold.............. (10,078,568) (1,333,735) (9,717,571) (1,057,741) (3,438,217) (441,040)
------------ ------------ ------------ ------------ ------------ ------------
Net realized gain (loss)
on investments.................. 3,780,534 672,393 363,480 90,798 (40) (17)
Realized gain distribution received... 17,319,759 2,253,166 133,101 16,538 -- --
Change in unrealized appreciation
(depreciation) on investments....... 7,321,265 835,447 995,883 73,994 129 27
------------ ------------ ------------ ------------ ------------ ------------
Net gain on investments........... 28,421,558 3,761,006 1,492,464 181,330 89 10
------------ ------------ ------------ ------------ ------------ ------------
Decrease attributable to funds of
New York Life Insurance and Annuity
Corporation retained by Separate
Account............................. (59,410) (11,378) (9,453) (1,640) (466) (99)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in total equity
resulting from operations....... $ 27,729,810 $ 3,582,966 $ 3,847,298 $ 443,924 $ 282,190 $ 28,052
============ ============ ============ ============ ============ ============
</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> 54
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNT II
NON-QUALIFIED POLICIES

(THIS PAGE INTENTIONALLY LEFT BLANK)

F-7

<PAGE> 55

STATEMENT OF CHANGES IN TOTAL EQUITY
For the years ended December 31, 1997
and December 31, 1996

<TABLE>
<CAPTION>
COMMON STOCK
INVESTMENT DIVISIONS
------------------------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES
------------------------------ ------------------------------
1997 1996 1997 1996
------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment income (loss)........................ $ (632,338) $ (341,227) $ (166,662) $ (119,592)
Net realized gain (loss) on investments............. 3,780,534 2,863,179 672,393 730,753
Realized gain distribution received................. 17,319,759 14,237,172 2,253,166 1,855,445
Change in unrealized appreciation (depreciation)
on investments.................................... 7,321,265 5,082,531 835,447 378,417
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation retained by
Separate Account.................................. (59,410) (33,143) (11,378) (6,179)
------------ ------------ ------------ ------------
Net increase (decrease) in total equity resulting
from operations................................. 27,729,810 21,808,512 3,582,966 2,838,844
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments...................... 698,016 395,084 265,718 334,233
Policyowners' surrenders............................ (9,979,186) (7,029,217) (1,552,399) (1,361,255)
Policyowners' annuity and death benefits............ (1,846,691) (1,776,084) (201,003) (361,605)
Net transfers from (to) Fixed Account............... 1,261,793 1,824,875 41,777 53,354
Transfers between Investment Divisions.............. 558,642 2,267,603 236,080 194,671
------------ ------------ ------------ ------------
Net contributions and withdrawals................. (9,307,426) (4,317,739) (1,209,827) (1,140,602)
------------ ------------ ------------ ------------
Increase (decrease) in total equity............. 18,422,384 17,490,773 2,373,139 1,698,242
TOTAL EQUITY:
Beginning of year..................................... 114,773,645 97,282,872 14,936,551 13,238,309
------------ ------------ ------------ ------------
End of year........................................... $133,196,029 $114,773,645 $ 17,309,690 $ 14,936,551
============ ============ ============ ============
</TABLE>

The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.

F-8
<PAGE> 56
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNT II
NON-QUALIFIED POLICIES

<TABLE>
<CAPTION>
BOND MONEY MARKET
INVESTMENT DIVISIONS INVESTMENT DIVISIONS
--------------------------------------------------------- ---------------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES POLICIES POLICIES
--------------------------- --------------------------- --------------------------- ---------------------------
1997 1996 1997 1996 1997 1996 1997 1996
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 2,364,287 $ 2,615,387 $ 264,234 $ 290,551 $ 282,567 $ 341,914 $ 28,141 $ 34,405
363,480 885,700 90,798 101,932 (40) (218) (17) (37)
133,101 -- 16,538 -- -- -- -- --
995,883 (3,278,935) 73,994 (396,619) 129 195 27 33
(9,453) (2,743) (1,640) (460) (466) (399) (99) (94)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
3,847,298 219,409 443,924 (4,596) 282,190 341,492 28,052 34,307
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
195,193 293,618 104,100 162,387 (11,970) 144,933 22,330 45,316
(6,748,806) (6,156,264) (808,651) (801,419) (1,228,154) (5,114,726) (118,945) (223,883)
(1,409,901) (1,864,016) (109,111) (203,473) (31,260) (145,938) (1,760) (29,102)
57,010 224,591 (17,535) (15,179) (43,738) (84,802) (4,291) (3,919)
(810,766) (2,803,497) (129,141) (147,893) 276,812 566,995 (106,939) (46,777)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(8,717,270) (10,305,568) (960,338) (1,005,577) (1,038,310) (4,633,538) (209,605) (258,365)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(4,869,972) (10,086,159) (516,414) (1,010,173) (756,120) (4,292,046) (181,553) (224,058)
52,042,689 62,128,848 6,396,327 7,406,500 7,567,927 11,859,973 939,406 1,163,464
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 47,172,717 $ 52,042,689 $ 5,879,913 $ 6,396,327 $ 6,811,807 $ 7,567,927 $ 757,853 $ 939,406
============ ============ ============ ============ ============ ============ ============ ============
</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> 57

NOTES TO FINANCIAL STATEMENTS

NOTE 1-- Organization and Accounting Policies:
- --------------------------------------------------------------------------------
New York Life Insurance and Annuity Corporation MFA Separate Account I
("Separate Account I") and New York Life Insurance and Annuity Corporation
MFA Separate Account II ("Separate Account II") were established on May 27,
1983, under Delaware law by New York Life Insurance and Annuity Corporation, a
wholly-owned subsidiary of New York Life Insurance Company. These accounts were
established to receive and invest net premium payments under Qualified
Multi-Funded Retirement Annuity Policies ("Separate Account I") and
Non-Qualified Multi-Funded Retirement Annuity Policies ("Separate Account II")
issued by New York Life Insurance and Annuity Corporation.
Separate Account I and Separate Account II are registered under the Investment
Company Act of 1940, as amended, as unit investment trusts. The assets of
Separate Account I and Separate Account II are invested exclusively in shares of
the MainStay VP Series Fund, Inc. (formerly, "New York Life MFA Series Fund,
Inc."), a diversified open-end management investment company, and are clearly
identified and distinguished from the other assets and liabilities of New York
Life Insurance and Annuity Corporation. Effective December 19, 1994, sales of
all such Policies were discontinued.
There are six Investment Divisions within both Separate Account I and Separate
Account II, three of which invest Single Premium Policy net premium payments and
three of which invest Flexible Premium Policy net premium payments. The Common
Stock Investment Divisions invest in the Growth Equity Portfolio, the Bond
Investment Divisions invest in the Bond Portfolio, and the Money Market
Investment Divisions invest in the Cash Management Portfolio. Net premium
payments received are allocated to the Investment Divisions of Separate Account
I or Separate Account II according to Policyowner instructions. In addition, the
Policyowner has the option to transfer amounts between the Investment Divisions
of Separate Account I and Separate Account II and the Fixed Account of New York
Life Insurance and Annuity Corporation.
No Federal income tax is payable on investment income or capital gains of
Separate Account I or Separate Account II under current Federal income tax law.
Security Valuation--The investment in the MainStay VP Series Fund, Inc. is
valued at the net asset value of shares of the respective fund portfolios.
Security Transactions--Realized gains and losses from security transactions
are reported on the identified cost basis. Security transactions are accounted
for as of the date the securities are purchased or sold (trade date).
Distributions Received--Dividend income and capital gain distributions are
recorded on the ex-dividend date and reinvested in the corresponding portfolio.
Annuity Reserves--The reserves are computed for currently payable contracts in
accordance with rates taken from approved valuation mortality tables. The
assumed interest rate is 4%, unless issued in Florida or Texas where the rate is
3 1/2%. Separate Account II Common Stock Investment Division for Single Premium
Policies had variable annuity unit values as of December 31, 1997 and December
31, 1996 of $2.90 and $2.41, 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> 58
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
MFA SEPARATE ACCOUNTS I AND II
TAX-QUALIFIED AND NON-QUALIFIED POLICIES

NOTE 2--Investments (in 000's):
- --------------------------------------------------------------------------------
At December 31, 1997, the investment in the MainStay VP Series Fund, Inc. by
the respective Investment Divisions of Separate Account I and Separate
Account II is as follows:

<TABLE>
<CAPTION>
GROWTH EQUITY CASH MANAGEMENT
PORTFOLIO BOND PORTFOLIO PORTFOLIO
---------------------- ---------------------- ----------------------
COMMON STOCK BOND MONEY MARKET
INVESTMENT DIVISIONS INVESTMENT DIVISIONS INVESTMENT DIVISIONS
---------------------- ---------------------- ----------------------
SINGLE FLEXIBLE SINGLE FLEXIBLE SINGLE FLEXIBLE
PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM
POLICIES POLICIES POLICIES POLICIES POLICIES POLICIES
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Number of shares........................... 5,610 9,700 2,582 4,437 5,333 7,603
Identified cost*........................... $95,052 $157,210 $34,041 $56,313 $ 5,333 $ 7,603
SEPARATE ACCOUNT II (NON-QUALIFIED
POLICIES)
Number of shares........................... 6,579 856 3,601 449 6,834 761
Identified cost*........................... $112,542 $14,419 $47,771 $ 5,781 $ 6,834 $ 761
</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, 1997, were as follows:

<TABLE>
<CAPTION>
GROWTH EQUITY CASH MANAGEMENT
PORTFOLIO BOND PORTFOLIO PORTFOLIO
---------------------- ---------------------- ----------------------
COMMON STOCK BOND MONEY MARKET
INVESTMENT DIVISIONS INVESTMENT DIVISIONS INVESTMENT DIVISIONS
---------------------- ---------------------- ----------------------
SINGLE FLEXIBLE SINGLE FLEXIBLE SINGLE FLEXIBLE
PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM
POLICIES POLICIES POLICIES POLICIES POLICIES POLICIES
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Purchases.................................. $17,127 $27,900 $ 2,696 $ 3,972 $ 1,586 $ 1,888
Proceeds from sales........................ 13,765 25,533 6,875 12,596 3,023 3,584
SEPARATE ACCOUNT II (NON-QUALIFIED
POLICIES)
Purchases.................................. $21,236 $ 2,881 $ 3,836 $ 465 $ 2,681 $ 258
Proceeds from sales........................ 13,859 2,006 10,081 1,149 3,438 441
</TABLE>

- --------------------------------------------------------------------------------
NOTE 3--Mortality and Expense Risk Charges:
- --------------------------------------------------------------------------------
Separate Account I and Separate Account II are charged for administrative
services provided for Flexible Premium Policies, and Single and Flexible
Premium Policies are charged for the mortality and expense risks assumed by
New York Life Insurance and Annuity Corporation. These charges are made daily
at an annual rate of 1.25% of the daily net asset value for Single Premium
Policies and 1.75% of the daily net asset value for Flexible Premium Policies of
each Investment Division. The amounts of these charges retained in the
Investment Divisions represent funds of New York Life Insurance and Annuity
Corporation. Accordingly, New York Life Insurance and Annuity Corporation
participates in the results of each Investment Division ratably with the
Policyowners.

- --------------------------------------------------------------------------------
NOTE 4--Distribution of Net Income:
- --------------------------------------------------------------------------------
Separate Account I and Separate Account II do not expect to declare dividends
to Policyowners from accumulated net investment income and realized gains.
The income and gains are distributed to Policyowners as part of withdrawals
of amounts (in the form of surrenders, death benefits, transfers, or annuity
payments) in excess of the net premium payments.

F-11

<PAGE> 59
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 5-- Cost to Policyowners (in 000's):
- --------------------------------------------------------------------------------
At December 31, 1997, the cost to Policyowners for accumulation units
outstanding, with adjustments for net investment income, market appreciation
(depreciation) and deduction for expenses is as follows:

<TABLE>
<CAPTION>
COMMON STOCK BOND MONEY MARKET
INVESTMENT DIVISIONS INVESTMENT DIVISIONS INVESTMENT DIVISIONS
---------------------- ---------------------- ----------------------
SINGLE FLEXIBLE SINGLE FLEXIBLE SINGLE FLEXIBLE
PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM
POLICIES POLICIES POLICIES POLICIES POLICIES POLICIES
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Cost to Policyowners (net of withdrawals).... $19,028 $25,366 $ 5,271 $14,246 $ 345 $ 1,752
Accumulated net investment income (loss)..... 2,390 (1,369) 26,695 40,639 5,000 5,866
Accumulated net realized gain (loss)
on investments and realized gain
distributions received..................... 73,522 132,972 2,126 1,488 (1) (1)
Unrealized appreciation (depreciation)
on investments............................. 18,900 39,793 (111) 2,006 -- --
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation
retained by Separate Account............... (253) (639) (161) (324) (28) (50)
------- ------- ------- ------- ------- --------
Net amount applicable to Policyowners........ $113,587 $196,123 $33,820 $58,055 $ 5,316 $ 7,567
======== ======== ======= ======= ======= ========
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Cost to Policyowners (net of withdrawals).... $30,009 $ 2,562 $ 7,178 $ 745 $ 911 $ 31
Accumulated net investment income (loss)..... 2,414 (96) 37,693 4,654 5,939 737
Accumulated net realized gain (loss)
on investments and realized gain
distributions received..................... 79,972 11,931 3,015 402 (1) --
Unrealized appreciation (depreciation)
on investments............................. 21,080 2,968 (444) 125 -- --
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation
retained by Separate Account............... (279) (55) (269) (46) (37) (10)
-------- ------- ------- ------- ------- --------
Net amount applicable to Policyowners........ $133,196 $17,310 $47,173 $ 5,880 $ 6,812 $ 758
======== ======= ======= ======= ======= ========
</TABLE>

F-12
<PAGE> 60

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> 61
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 6--Unit Transactions (in 000's):
- --------------------------------------------------------------------------------
Transactions in accumulation units were as follows:

<TABLE>
<CAPTION>
COMMON STOCK INVESTMENT DIVISIONS
-----------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES
----------------------- -----------------------
1997 1996 1997 1996
-----------------------------------------------------
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Units issued on premium payments............................ 17 25 112 154
Units redeemed on surrenders................................ (270) (298) (663) (599)
Units redeemed on annuity and death benefits................ (6) (4) (6) (6)
Units issued (redeemed) on net transfers from (to)
Fixed Account............................................. 11 36 27 22
Units issued (redeemed) on transfers between
Investment Divisions...................................... 11 52 35 38
----- ----- ----- -----
Net decrease............................................ (237) (189) (495) (391)
Units outstanding, beginning of year........................ 2,486 2,675 4,661 5,052
----- ----- ----- -----
Units outstanding, end of year.............................. 2,249 2,486 4,166 4,661
===== ===== ===== =====
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Units issued on premium payments............................ 16 13 6 10
Units redeemed on surrenders................................ (233) (219) (38) (48)
Units redeemed on annuity and death benefits................ (28) (22) (2) (2)
Units issued (redeemed) on net transfers from (to)
Fixed Account............................................. 28 51 1 2
Units issued (redeemed) on transfers between
Investment Divisions...................................... 11 56 6 5
----- ----- ----- -----
Net decrease............................................ (206) (121) (27) (33)
Units outstanding, beginning of year........................ 2,844 2,965 395 428
----- ----- ----- -----
Units outstanding, end of year.............................. 2,638 2,844 368 395
===== ===== ===== =====
</TABLE>

F-14
<PAGE> 62
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
------------------- ------------------- ------------------- -------------------
1997 1996 1997 1996 1997 1996 1997 1996
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5 15 65 86 3 2 18 21
(170) (234) (390) (391) (96) (63) (151) (129)
(6) (4) (5) (3) (1) (2) (3) --
(1) (3) (7) (3) (11) (2) (4) (9)
(30) (52) (76) (43) 21 (29) 32 (7)
----- ----- ----- ----- ----- ----- ----- -----
(202) (278) (413) (354) (84) (94) (108) (124)
1,292 1,570 2,420 2,774 350 444 513 637
----- ----- ----- ----- ----- ----- ----- -----
1,090 1,292 2,007 2,420 266 350 405 513
===== ===== ===== ===== ===== ===== ===== =====
7 7 4 6 (1) 8 1 3
(248) (257) (31) (36) (63) (277) (6) (14)
(29) (29) (2) (2) (1) (2) -- (1)
2 8 (1) -- (2) (5) -- --
(27) (97) (5) (6) 14 30 (6) (3)
----- ----- ----- ----- ----- ----- ----- -----
(295) (368) (35) (38) (53) (246) (11) (15)
1,809 2,177 238 276 393 639 52 67
----- ----- ----- ----- ----- ----- ----- -----
1,514 1,809 203 238 340 393 41 52
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>

F-15

<PAGE> 63
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 7--Selected Per Unit Data+:
- --------------------------------------------------------------------------------
The following table presents selected per accumulation unit income and
capital changes (for an accumulation unit outstanding throughout each 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 1997 1996 1995 1994 1993
------------------------------------------------------
<S> <C> <C> <C> <C> <C>

SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year............................... $40.34 $32.81 $25.72 $25.73 $22.90
Net investment income (loss)................................ (0.24) (0.12) -- 0.03 0.06
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 10.40 7.65 7.09 (0.04) 2.77
------ ------ ------ ------ ------
Unit value, end of year..................................... $50.50 $40.34 $32.81 $25.72 $25.73
====== ====== ====== ====== ======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Unit value, beginning of year............................... $40.34 $32.81 $25.72 $25.73 $22.90
Net investment income (loss)................................ (0.23) (0.12) -- 0.03 0.07
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 10.39 7.65 7.09 (0.04) 2.76
------ ------ ------ ------ ------
Unit value, end of year..................................... $50.50 $40.34 $32.81 $25.72 $25.73
====== ====== ====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
FLEXIBLE PREMIUM POLICIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997 1996 1995 1994 1993
------------------------------------------------------
<S> <C> <C> <C> <C> <C>

SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year............................... $37.80 $30.90 $24.34 $24.48 $21.90
Net investment loss......................................... (0.44) (0.29) (0.14) (0.09) (0.06)
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 9.72 7.19 6.70 (0.05) 2.64
------ ------ ------ ------ ------
Unit value, end of year..................................... $47.08 $37.80 $30.90 $24.34 $24.48
====== ====== ====== ====== ======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Unit value, beginning of year............................... $37.80 $30.90 $24.34 $24.48 $21.90
Net investment loss......................................... (0.43) (0.29) (0.14) (0.09) (0.06)
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 9.71 7.19 6.70 (0.05) 2.64
------ ------ ------ ------ ------
Unit value, end of year..................................... $47.08 $37.80 $30.90 $24.34 $24.48
====== ====== ====== ====== ======
</TABLE>

+ Per unit data based on average monthly units outstanding during each year.

F-16
<PAGE> 64
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 1997 1996 1995 1994 1993
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>

SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year............................... $28.66 $28.44 $24.34 $25.51 $23.19
Net investment income....................................... 1.42 1.29 1.30 1.22 1.39
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 0.95 (1.07) 2.80 (2.39) 0.93
------ ------ ------ ------ ------
Unit value, end of year..................................... $31.03 $28.66 $28.44 $24.34 $25.51
====== ====== ====== ====== ======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Unit value, beginning of year............................... $28.76 $28.54 $24.43 $25.60 $23.28
Net investment income....................................... 1.42 1.30 1.31 1.19 1.44
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 0.97 (1.08) 2.80 (2.36) 0.88
------ ------ ------ ------ ------
Unit value, end of year..................................... $31.15 $28.76 $28.54 $24.43 $25.60
====== ====== ====== ====== ======
</TABLE>

SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year............................... $26.85 $26.78 $23.03 $24.26 $22.17
Net investment income....................................... 1.18 1.14 1.16 1.11 1.20
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 0.90 (1.07) 2.59 (2.34) 0.89
------ ------ ------ ------ ------
Unit value, end of year..................................... $28.93 $26.85 $26.78 $23.03 $24.26
====== ====== ====== ====== ======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Unit value, beginning of year............................... $26.89 $26.82 $23.07 $24.30 $22.20
Net investment income....................................... 1.20 1.13 1.15 1.10 1.13
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 0.89 (1.06) 2.60 (2.33) 0.97
------ ------ ------ ------ ------
Unit value, end of year..................................... $28.98 $26.89 $26.82 $23.07 $24.30
====== ====== ====== ====== ======
</TABLE>

+ Per unit data based on average monthly units outstanding during each year.

F-17

<PAGE> 65
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 1997 1996 1995 1994 1993
------------------------------------------------------
<S> <C> <C> <C> <C> <C>

SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year............................... $19.26 $18.57 $17.81 $17.36 $17.07
Net investment income....................................... 0.76 0.69 0.76 0.45 0.29
------ ------ ------ ------ ------
Unit value, end of year..................................... $20.02 $19.26 $18.57 $17.81 $17.36
====== ====== ====== ====== ======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Unit value, beginning of year............................... $19.26 $18.57 $17.81 $17.36 $17.07
Net investment income....................................... 0.76 0.69 0.76 0.45 0.29
------ ------ ------ ------ ------
Unit value, end of year..................................... $20.02 $19.26 $18.57 $17.81 $17.36
====== ====== ====== ====== ======
</TABLE>

SEPARATE ACCOUNT I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year............................... $18.05 $17.48 $16.85 $16.51 $16.32
Net investment income....................................... 0.61 0.57 0.63 0.34 0.19
------ ------ ------ ------ ------
Unit value, end of year..................................... $18.66 $18.05 $17.48 $16.85 $16.51
====== ====== ====== ====== ======
SEPARATE ACCOUNT II (NON-QUALIFIED POLICIES)
Unit value, beginning of year............................... $18.05 $17.48 $16.85 $16.51 $16.32
Net investment income....................................... 0.61 0.57 0.63 0.34 0.19
------ ------ ------ ------ ------
Unit value, end of year..................................... $18.66 $18.05 $17.48 $16.85 $16.51
====== ====== ====== ====== ======
</TABLE>

+ Per unit data based on average monthly units outstanding during each year.

F-18
<PAGE> 66

REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of New York Life Insurance and
Annuity Corporation and the MFA Policyowners:

In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations, 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,
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, 1997, and the results of each of their operations, the changes
in each of their total equity, and the selected per unit data for each of the
periods presented in conformity with generally accepted accounting principles.
These financial statements and the selected per unit data (herein referred to as
the "financial statements") are the responsibility of management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with 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, which included confirmation of investments at
December 31, 1997 with the MainStay VP Series Fund, Inc., provide a reasonable
basis for the opinion expressed above.

PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 23, 1998

F-19
<PAGE> 67

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholder of
New York Life Insurance and Annuity Corporation

In our opinion, the accompanying balance 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, 1997 and 1996, and the results of its
operations and its cash flows for the three years in the period ended December
31, 1997, 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 overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed above.

Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York
February 13, 1998

F-20
<PAGE> 68

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
------- -------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Fixed maturities
Available for sale, at fair value...................... $12,170 $11,854
Held to maturity, at amortized cost.................... 801 647
Equity securities........................................... 83 70
Mortgage loans.............................................. 1,305 1,113
Real estate................................................. 151 151
Policy loans................................................ 481 464
Other long-term investments................................. 20 17
------- -------
Total investments................................. 15,011 14,316
Cash and cash equivalents................................... 773 236
Deferred policy acquisition costs........................... 688 691
Other assets................................................ 345 252
Separate account assets..................................... 4,315 2,445
------- -------
Total assets...................................... $21,132 $17,940
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Policyholders' account balances............................. $13,716 $13,163
Future policy benefits...................................... 276 251
Policy claims............................................... 55 57
Deferred taxes.............................................. 93 47
Other liabilities........................................... 727 333
Separate account liabilities................................ 4,303 2,403
------- -------
Total liabilities................................. 19,170 16,254
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......................... 157 68
Retained earnings........................................... 1,300 1,113
------- -------
Total stockholder's equity........................ 1,962 1,686
------- -------
Total liabilities and stockholder's equity........ $21,132 $17,940
======= =======
</TABLE>

See accompanying notes to financial statements.
F-21
<PAGE> 69

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,
------------------------
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Universal life and annuity fees........................ $ 267 $ 234 $ 224
Net investment income.................................. 1,066 1,048 1,012
Investment gains, net.................................. 126 65 38
Other income........................................... 82 58 71
------ ------ ------
Total revenues.................................... 1,541 1,405 1,345
------ ------ ------
EXPENSES
Interest credited to policyholders' account balances... 748 723 742
Policyholder benefits.................................. 141 117 168
Operating expenses..................................... 352 299 239
------ ------ ------
Total expenses.................................... 1,241 1,139 1,149
------ ------ ------
Income before Federal income taxes.......................... 300 266 196
Federal income taxes:
Current................................................ 114 121 84
Deferred............................................... (1) (24) (8)
------ ------ ------
Total Federal income taxes........................ 113 97 76
------ ------ ------
Net income.................................................. $ 187 $ 169 $ 120
====== ====== ======
</TABLE>

See accompanying notes to financial statements.
F-22
<PAGE> 70

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,
------------------------
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Stockholder's equity, beginning of year..................... $1,686 $1,676 $1,141
Net income.................................................. 187 169 120
Change in unrealized gains and losses on investments........ 89 (159) 415
------ ------ ------
Stockholder's equity, end of year........................... $1,962 $1,686 $1,676
====== ====== ======
</TABLE>

See accompanying notes to financial statements.
F-23
<PAGE> 71

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,
----------------------------
1997 1996 1995
-------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income................................................ $ 187 $ 169 $ 120
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... (43) (18) (26)
Net capitalization of deferred policy acquisition
costs................................................ (85) (44) (40)
Universal life and annuity fees........................ (202) (188) (183)
Interest credited to policyholders' account balances... 748 723 742
Net realized investment gains.......................... (126) (65) (38)
Deferred income taxes.................................. (1) (24) (8)
Decrease in net separate account assets................ 30 6 17
Decrease (increase) in other assets and other
liabilities.......................................... 126 (127) 308
(Decrease) increase in policy claims................... (2) (24) 8
Increase (decrease) in future policy benefits.......... 25 18 (80)
-------- ------- -------
Net cash provided by operating activities......... 657 426 820
-------- ------- -------
Cash Flows from Investing Activities:
Proceeds from sale of available for sale fixed
maturities............................................. 13,378 5,787 2,370
Proceeds from maturity of available for sale fixed
maturities............................................. 1,137 1,505 930
Proceeds from sale of held to maturity fixed securities... 3 -- --
Proceeds from maturity of held to maturity fixed
maturities............................................. 112 141 103
Proceeds from sale of equity securities................... 140 47 40
Proceeds from repayment of mortgage loans................. 220 143 244
Proceeds from sale of real estate......................... 24 55 13
Proceeds from other invested assets....................... 16 4 31
Cost of available for sale fixed maturities acquired...... (14,391) (7,447) (4,320)
Cost of held to maturity fixed maturities acquired........ (281) (95) (162)
Cost of equity securities acquired........................ (163) (43) (12)
Cost of mortgage loans acquired........................... (413) (280) (320)
Cost of real estate acquired.............................. (4) (35) (14)
Cost of other invested assets acquired.................... (25) (8) (5)
Policy loans.............................................. (17) (29) (25)
Securities sold under agreements to repurchase (net)...... 134 (37) (168)
-------- ------- -------
Net cash used in investing activities............. (130) (292) (1,295)
-------- ------- -------
Cash Flows from Financing Activities:
Policyholders' account balances:
Deposits............................................... 1,228 1,069 1,252
Withdrawals............................................ (176) (562) (751)
Net transfers to the separate accounts.................... (1,040) (733) (238)
Other, net................................................ -- -- (52)
-------- ------- -------
Net cash provided (used) by financing
activities...................................... 12 (226) 211
-------- ------- -------
Effect of exchange rate changes on cash and cash
equivalents............................................... (2) 2 (1)
-------- ------- -------
Net increase (decrease) in cash and cash equivalents........ 537 (90) (265)
-------- ------- -------
Cash and cash equivalents, beginning of year................ 236 326 591
-------- ------- -------
Cash and cash equivalents, end of year...................... $ 773 $ 236 $ 326
======== ======= =======
</TABLE>

See accompanying notes to financial statements.
F-24
<PAGE> 72

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1997 AND 1996

NOTE 1 -- NATURE OF OPERATIONS

New York Life Insurance and Annuity Corporation ("NYLIAC"), is a direct,
wholly owned subsidiary of New York Life Insurance Company ("New York Life")
domiciled in the State of Delaware. NYLIAC offers a wide variety of interest
sensitive insurance and annuity products to a large cross section of the
insurance market. NYLIAC markets its products in all 50 of the United States,
the District of Columbia and Taiwan, primarily through its agency force. In
addition, NYLIAC markets Corporate Owned Life Insurance through independent
brokers and brokerage general agents.

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP"). The preparation of financial
statements of life insurance enterprises requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements. Actual results may differ from estimates.

INVESTMENTS

Fixed maturity investments, which NYLIAC has both the ability and the
intent to hold to maturity, are stated at amortized cost. Investments identified
as available for sale are reported at fair value. Unrealized gains and losses on
available for sale securities are reported in stockholder's equity, net of
deferred taxes and related adjustments. The cost basis of fixed 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 with related unrealized gains and losses reflected in
stockholder's equity, net of deferred taxes and related adjustments. Realized
losses are recognized in net income for other than temporary declines in the
fair value of equity securities. Mortgage loans are carried at unpaid principal
balances, net of impairment reserves, and are generally secured. Investment real
estate, which NYLIAC has the intent to hold for the production of income, is
carried at depreciated cost net of write-downs for other than temporary declines
in fair value. Properties held for sale are carried at the lower of cost or fair
value less estimated selling costs. Policy loans are stated at the aggregate
balance due, which approximates fair value since loans on policies have no
defined maturity date and reduce amounts payable at death or surrender. Cash
equivalents include investments that have maturities of 90 days or less at date
of purchase and are carried at amortized cost, which approximates fair value.
Short-term investments include investments that have maturities of between
91-365 days at date of purchase. They are included in fixed maturities on the
balance sheet, and are carried at amortized cost, which approximates fair value.

F-25
<PAGE> 73

INVESTMENTS -- (CONTINUED)
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 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.

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 the contracts, which is assumed to be 25 years for
universal life contracts and 15 years for annuities. Changes in assumptions are
reflected in the current year's amortization.

The carrying amount of the deferred policy acquisition cost asset is
adjusted at each balance sheet date as if the unrealized gains or losses on
investments associated with these insurance contracts had been realized and
included in the gross profits used to determine current period amortization. The
increase or decrease in the deferred policy acquisition cost asset due to
unrealized gains or losses is recorded in 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 and
charges.

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 and any adjustments to
such estimates from prior years. Deferred income tax assets and liabilities are
recognized for the future tax consequence of temporary differences between
financial statement carrying amounts and income tax bases of assets and
liabilities.

Current Federal income taxes include a provision for NYLIAC's share of the
equity base tax applicable to mutual life insurance companies and their
subsidiaries. The amount recorded is based on NYLIAC's estimate of the
differential earnings rate (the actual rate will be announced at a later date by
the Internal Revenue Service ("IRS")) used to compute the equity base tax.

F-26
<PAGE> 74

REINSURANCE

NYLIAC enters into reinsurance agreements in the normal course of its
insurance business to reduce overall risk. NYLIAC remains liable for reinsurance
ceded if the reinsurer fails to meet its obligation on the business it has
assumed. NYLIAC evaluates the financial condition of its reinsurers to minimize
its exposure to significant losses from reinsurer insolvencies.

SEPARATE ACCOUNTS

NYLIAC has established separate accounts with varying investment objectives
which are segregated from NYLIAC's general account and are maintained for the
benefit of separate account policyholders and NYLIAC. Separate account assets
are stated at market value. The liability for separate accounts represents
policyholders' interests in the separate account assets. For its registered
separate accounts, these liabilities include accumulated net investment income
and realized and unrealized gains and losses on those assets, and generally
reflect market value. For its guaranteed, non-registered separate accounts, the
liability represents amounts due policyholders pursuant to the terms of the
binder agreements.

FAIR VALUES OF FINANCIAL INSTRUMENTS

Fair values of various assets and liabilities are included throughout the
notes to financial statements. Specifically, fair value disclosure of fixed
maturities, short-term investments, cash equivalents, equity securities and
mortgage loans is reported in Note 2 -- Significant Accounting Policies and Note
3 -- Investments. Fair values for policyholders' account balances are reported
in Note 5 -- Insurance Liabilities. Fair values for derivative financial
instruments are included in Note 10 -- Derivative Financial Instruments and Risk
Management. Fair values for repurchase agreements are included in Note
11 -- Commitments and Contingencies.

BUSINESS RISKS AND UNCERTAINTIES

The development of policy reserves and deferred policy acquisition costs
for NYLIAC's products requires management to make estimates and assumptions
regarding mortality, morbidity, lapse, expense and investment experience. Such
estimates are primarily based on historical experience and future expectations
of mortality, morbidity, expense, persistency and investment assumptions. Actual
results could differ from those estimates. Management monitors actual
experience, and where circumstances warrant, revises its assumptions and the
related estimates for policy reserves and deferred policy acquisition costs.

NYLIAC regularly invests in mortgage loans, mortgage-backed securities and
other securities subject to prepayment and call risk. Significant changes in
prevailing interest rates and/or geographic conditions may adversely affect the
timing and amount of cash flows on such securities, as well as their related
values. In addition, the amortization of market premium and accretion of market
discount for mortgage-backed 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 IRS after comparison of mutual life insurance company earnings
for the year to the average earnings of the 50 largest stock life insurance
companies for the prior three years. Due to the timing of earnings information,
estimates of the current year's tax rate must be made by management. The
ultimate amounts of equity base tax incurred may vary considerably from the
original estimates.

F-27
<PAGE> 75

RECENT ACCOUNTING PRONOUNCEMENTS

During 1997 the FASB issued SFAS 130, "Reporting Comprehensive Income"
which establishes standards for the reporting and display of comprehensive
income and its components. Comprehensive income is composed of two items -- "net
income" and "other comprehensive income". Other comprehensive income includes
all changes in equity from nonowner sources (e.g., unrealized holding gains and
losses on available for sale securities).

This Statement requires that the Company classify items of other
comprehensive income according to their nature and present each item separately
in the financial statement in which other comprehensive income is reported. This
Statement also requires that the accumulated balance of other comprehensive
income be reported as a separate item in the equity section of the balance
sheet. This Statement is effective for the 1998 financial statements of the
Company. Reclassification of financial statements for earlier periods provided
for comparative purposes is required. Adoption of this Statement will have no
effect on reported net income or stockholder's equity.

NOTE 3 -- INVESTMENTS

FIXED MATURITIES

For publicly traded fixed maturities, estimated fair value is determined
using quoted market prices. For fixed maturities without a readily ascertainable
market value, NYLIAC has determined an estimated fair value using either a
discounted cash flow approach (including provisions for credit risk) or a
proprietary matrix pricing model.

At December 31, 1997 and 1996, the maturity distribution of fixed
maturities was as follows (in millions):

<TABLE>
<CAPTION>
1997 1996
------------------------ ------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
AVAILABLE FOR SALE COST FAIR VALUE COST FAIR VALUE
------------------ ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Due in one year or less.................. $ 480 $ 482 $ 489 $ 491
Due after one year through five years.... 3,053 3,099 3,019 3,039
Due after five years through ten years... 2,156 2,230 2,122 2,151
Due after ten years...................... 2,425 2,608 2,030 2,091
Asset-backed securities:
Government or government agency..... 2,271 2,324 2,866 2,916
Other............................... 1,411 1,427 1,168 1,166
------- ------- ------- -------
Total Available for Sale............ $11,796 $12,170 $11,694 $11,854
======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
1997 1996
------------------------ ------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
HELD TO MATURITY COST FAIR VALUE COST FAIR VALUE
---------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Due in one year or less.................. $ 30 $ 30 $ 24 $ 24
Due after one year through five years.... 225 239 192 194
Due after five years through ten years... 226 240 235 241
Due after ten years...................... 224 238 100 105
Asset-backed securities.................. 96 97 96 96
------- ------- ------- -------
Total Held to Maturity.............. $ 801 $ 844 $ 647 $ 660
======= ======= ======= =======
</TABLE>

F-28
<PAGE> 76

FIXED MATURITIES -- (CONTINUED)
At December 31, 1997 and 1996, the distribution of gross unrealized gains
and losses on investments in fixed maturities was as follows (in millions):

<TABLE>
<CAPTION>
1997
-------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
AVAILABLE FOR SALE COST GAINS LOSSES FAIR VALUE
------------------ --------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government
corporations and agencies............... $ 1,066 $ 36 $ 1 $ 1,101
U.S. agencies, state and municipal........ 1,946 42 2 1,986
Foreign governments....................... 237 19 -- 256
Corporate................................. 7,136 276 12 7,400
Other..................................... 1,411 20 4 1,427
------- ---- --- -------
Total Available for Sale............. $11,796 $393 $19 $12,170
======= ==== === =======
HELD TO MATURITY
----------------

Corporate................................. $ 705 $ 42 $-- $ 747
Other..................................... 96 1 -- 97
------- ---- --- -------
Total Held to Maturity............... $ 801 $ 43 $-- $ 844
======= ==== === =======
</TABLE>

<TABLE>
<CAPTION>
1996
-------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
AVAILABLE FOR SALE COST GAINS LOSSES FAIR VALUE
------------------ --------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government
corporations and agencies............... $ 1,243 $ 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
======= ==== === =======
</TABLE>

<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
HELD TO MATURITY COST GAINS LOSSES FAIR VALUE
---------------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Corporate................................. $ 551 $ 15 $ 2 $ 564
Other..................................... 96 -- -- 96
------- ---- --- -------
Total Held to Maturity............... $ 647 $ 15 $ 2 $ 660
======= ==== === =======
</TABLE>

F-29
<PAGE> 77

EQUITY SECURITIES

Estimated fair value for equity securities has been determined using quoted
market prices. At December 31, 1997 and 1996, 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>
1997...................... $66 $25 $8 $83
1996...................... $63 $ 8 $1 $70
</TABLE>

MORTGAGE LOANS

NYLIAC's mortgage loans are diversified by property type, location and
borrower, and are generally collateralized by the related property. The carrying
value of mortgage loans was $1,305 million and $1,113 million at December 31,
1997 and 1996, respectively.

The fair market value of the mortgage loan portfolio at December 31, 1997
and 1996 is estimated to be $1,408 million and $1,194 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, 1997, contractual commitments to extend credit under
commercial and residential mortgage loan agreements amounted to approximately
$108 million, all at a fixed market rate of interest. These commitments are
diversified by property type and geographic region.

The provision for losses on mortgage loans was $14 million and $20 million
at December 31, 1997 and 1996, respectively. The activity in the specific and
general provision as of December 31, 1997 and 1996 is summarized below (in
millions):

<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Beginning balance.................................. $20 $20
Reductions credited to operations.................. (1) (1)
Direct writedowns.................................. -- 9
Recoveries of amounts previously charged off....... (5) (8)
--- ---
Ending balance..................................... $14 $20
=== ===
</TABLE>

Impaired mortgage loans along with specific provisions for losses as of
December 31, 1997 and 1996, were as follows (in millions):

<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Impaired mortgage loans with provisions for
losses.......................................... $19 $ 39
Provision for losses.............................. (8) (14)
--- ----
Net impaired mortgage loans....................... $11 $ 25
=== ====
</TABLE>

F-30
<PAGE> 78

MORTGAGE LOANS -- (CONTINUED)
NYLIAC accrues interest income on impaired loans to the extent it is deemed
collectible and the loan continues to perform under its original or restructured
contractual terms. Interest income on problem loans is generally recognized on a
cash basis. Cash payments on loans in the process of foreclosure are generally
treated as a return of principal.

At December 31, 1997 and 1996, the distribution of the mortgage loan
portfolio by property type and geographic region was as follows (in millions):

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Property Type:
Office building.......................... $ 601 $ 643
Retail................................... 255 235
Apartments............................... 187 179
Residential.............................. 172 18
Other.................................... 90 38
------ ------
Total............................... $1,305 $1,113
====== ======
Geographic Region:
Central.................................. $ 250 $ 246
Pacific.................................. 145 133
Middle Atlantic.......................... 426 377
South Atlantic........................... 362 307
New England.............................. 73 33
Other.................................... 49 17
------ ------
Total............................... $1,305 $1,113
====== ======
</TABLE>

REAL ESTATE

At December 31, 1997 and 1996, NYLIAC's real estate portfolio consisted of
the following (in millions):

<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Investment....................................... $103 $105
Acquired through foreclosure..................... 19 39
Real estate joint ventures and limited partnerships 29 7
---- ----
Total real estate...................... $151 $151
==== ====
</TABLE>

Accumulated depreciation on real estate was $8 million and $5 million at
December 31, 1997 and 1996, respectively. Depreciation expense totaled $3
million for each of the years ended December 31, 1997, 1996 and 1995.

F-31
<PAGE> 79

NOTE 4 -- INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES

The components of net investment income for the years ended December 31,
1997, 1996 and 1995, were as follows (in millions):

<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Fixed maturities..................... $ 961 $ 920 $ 904
Equity securities.................... 6 3 3
Mortgage loans....................... 96 93 82
Real estate.......................... 18 21 19
Policy loans......................... 39 37 35
Other................................ 1 6 4
------ ------ ------
Gross investment income......... 1,121 1,080 1,047
Investment expenses.................. (55) (32) (35)
------ ------ ------
Net investment income...... $1,066 $1,048 $1,012
====== ====== ======
</TABLE>

For the years ended December 31, 1997, 1996 and 1995, realized investment
gains computed under the specific identification method are as follows (in
millions):

<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- --------------
GAINS LOSSES GAINS LOSSES GAINS LOSSES
----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
Fixed maturities....................... $172 $ (83) $100 $ (64) $ 62 $ (32)
Equity securities...................... 9 (4) 22 (1) 16 (7)
Mortgage loans......................... 12 (8) 15 (19) 15 (19)
Real estate............................ 3 (2) 6 (3) 1 (1)
Derivative instruments................. 80 (71) 46 (41) 102 (102)
Other.................................. 19 (1) 7 (3) 9 (6)
---- ----- ---- ----- ---- -----
Subtotal.......................... $295 $(169) $196 $(131) $205 $(167)
---- ----- ---- ----- ---- -----
Investment gains, net.................. $126 $65 $38
===== ==== ====
</TABLE>

During 1997, one fixed maturity investment that had been classified as held
to maturity was sold due to credit deterioration. The investment had an
amortized cost of $2,791,000, and the sale resulted in a realized gain of
$14,000.

F-32
<PAGE> 80

NOTE 4 -- INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES -- (CONTINUED)
Stockholder's equity at December 31, 1997 and 1996 includes net unrealized
gains as follows (in millions):

<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Net unrealized gains on investments before adjustments...... $ 382 $ 163
----- -----
Related adjustments:
Deferred policy acquisition costs...................... (148) (60)
Policyholder liabilities............................... 7 2
Deferred Federal income taxes.......................... (84) (37)
----- -----
(225) (95)
----- -----
Net unrealized gains on investments included in
stockholder's equity...................................... $ 157 $ 68
===== =====
</TABLE>

Changes in net unrealized gains and losses on investments were as follows
(in millions):

<TABLE>
<CAPTION>
1997 1996
---- -----
<S> <C> <C>
Unrealized gains (losses) on investments:
Beginning of year...................................... $163 $ 535
End of year............................................ 382 163
---- -----
Net change............................................. 219 (372)
Change in related adjustments of balance sheet accounts:
Deferred policy acquisition costs...................... (88) 136
Policyholder liabilities............................... 5 (7)
Deferred Federal income taxes.......................... (47) 84
---- -----
Change in unrealized gains on investments................... 89 (159)
Net unrealized gains on investments at beginning of year.... 68 227
---- -----
Net unrealized gains on investments at end of year.......... $157 $ 68
==== =====
</TABLE>

NOTE 5 -- INSURANCE LIABILITIES

POLICYHOLDERS' ACCOUNT BALANCES

NYLIAC's annuity contracts are primarily deferred annuities. The carrying
value, which approximates fair value, of NYLIAC's liabilities for deferred
annuities at December 31, 1997 and 1996, was $7,150 million and $7,345 million,
respectively.

NOTE 6 -- SEPARATE ACCOUNTS

NYLIAC maintains nine non-guaranteed, registered separate accounts for its
variable deferred annuity and variable life products. NYLIAC maintains
investments in the registered separate accounts of $12 million and $42 million
at December 31, 1997 and 1996, respectively. The assets of the separate
accounts, which are carried at market value, represent investments in shares of
the New York Life sponsored MainStay VP Series Fund and other nonproprietary
funds.

In addition, in 1997 two guaranteed, non-registered separate accounts were
established for universal life insurance policies. These accounts provide a
minimum guaranteed interest rate with a market value adjustment imposed upon
certain surrenders. The assets of these separate accounts are carried at market
value.

F-33
<PAGE> 81

NOTE 7 -- DEFERRED POLICY ACQUISITION COSTS

An analysis of deferred policy acquisition costs (DAC) for the years ended
December 31, 1997, 1996 and 1995 is as follows (in millions):

<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Balance at beginning of year before adjustment for
unrealized gains on investments........................... $751 $ 707 $ 667
Current year additions...................................... 200 151 126
Amortized during year....................................... (115) (107) (86)
Balance at end of year before adjustment for unrealized
gains on investments...................................... 836 751 707
Adjustment for unrealized gains on investments.............. (148) (60) (196)
---- ----- -----
Balance at end of year...................................... $688 $ 691 $ 511
==== ===== =====
</TABLE>

NOTE 8 -- FEDERAL INCOME TAXES

The components of the net deferred tax liability as of December 31, 1997
and 1996 are as follows (in millions):

<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Future policyholder benefits........... $153 $131
Employee and agents benefits........... 49 44
Other.................................. 6 16
---- ----
Gross deferred tax assets......... 208 191
==== ====
Deferred tax liabilities:
Deferred policy acquisition costs...... 147 161
Investments............................ 149 68
Other.................................. 5 9
---- ----
Gross deferred tax liabilities.... 301 238
---- ----
Net deferred tax liability........ $ 93 $ 47
==== ====
</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.

F-34
<PAGE> 82

NOTE 8 -- FEDERAL INCOME TAXES -- (CONTINUED)
Set forth below is a reconciliation of the Federal income tax rate to the
effective tax rate for 1997, 1996 and 1995:

<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate............. 35.0% 35.0% 35.0%
Equity base tax............................... 3.3 3.2 --
Tax-exempt income............................. (.5) (.7) (1.3)
Other......................................... (.1) (.9) 5.2
---- ---- ----
Effective tax rate............................ 37.7% 36.6% 38.9%
==== ==== ====
</TABLE>

NYLIAC's Federal income tax returns are routinely examined by the IRS and
provisions are made in the financial statements in anticipation of the results
of these audits. The IRS has completed audits through 1993. 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.

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 through 1996 as follows
(in millions):

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Premiums due..................................... $-- $(32)
Benefit reimbursement............................ 22 20
Experience refund................................ 4 8
--- ----
Net settlement paid (received) by NYLIAC......... $26 $ (4)
=== ====
</TABLE>

As a result of the termination of the group reinsurance agreement between
NYLIAC and New York Life, NYLIAC transferred $119 million in 1996 as payment for
the reserves held to support the claims of the disabled lives covered under the
group reinsurance contract. At December 31, 1995, NYLIAC had established a
liability of $119 million for this payment.

On April 1, 1997 NYLIAC, under the terms of an assumption reinsurance
agreement, acquired certain bank owned life insurance policies that had been
issued by Confederation Life Insurance Company. In conjunction with this
transaction, NYLIAC recorded a liability for policyholder account balances of
$278 million, and received cash of $245 million and a note receivable of $11
million. The difference of $22 million between the liability recorded and the
assets received has been recorded as DAC, which will be amortized over the
remaining life of the policies, assumed to be 25 years.

F-35
<PAGE> 83

NOTE 10 -- DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

NYLIAC 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 has not engaged in derivative financial instrument
transactions for speculative purposes.

Notional or contractual amounts of derivative financial instruments provide
only a measure of involvement in these types of transactions and do not
represent the amounts exchanged between the parties engaged in the transaction.
The amounts exchanged are determined by reference to the notional amounts and
other terms of the derivative financial instruments which relate to interest
rates, exchange rates, or other financial indices.

NYLIAC is exposed to credit-related losses in the event that a counterparty
fails to perform its obligations under contractual terms. The credit exposure of
derivative financial instruments is represented by the sum of fair values of
contracts with each counterparty, if the net value is positive, at the reporting
date.

NYLIAC deals with highly rated counterparties and does not expect the
counterparties to fail to meet their obligations. NYLIAC has controls in place
to monitor credit exposures by limiting transactions with specific
counterparties within specified dollar limits and assessing the future
creditworthiness of counterparties. NYLIAC uses master netting agreements and
adjusts transaction levels, when appropriate, to minimize risk.

INTEREST RATE RISK MANAGEMENT

NYLIAC enters into various types of interest rate contracts primarily to
minimize exposure of specific assets held by NYLIAC to fluctuations in interest
rates.

The following table summarizes the notional amounts and credit exposures of
interest rate related derivative transactions (in thousands):

<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
NOTIONAL CREDIT NOTIONAL CREDIT
AMOUNT EXPOSURE AMOUNT EXPOSURE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest Rate Swaps........................ $125,000 $2,973 $ 57,000 $992
Interest Rate Floors....................... $150,000 $ 251 $150,000 $120
</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, 1997 are between seven years, eight months
and twenty years in maturity. At December 31, 1996 such contracts were between
eight years, eight months and fourteen years, four months in maturity. NYLIAC
does not act as an intermediary or broker in interest rate swaps.

F-36
<PAGE> 84

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>
1997 1996
-------- -------
<S> <C> <C>
Receive -- fixed swaps -- Notional amount (in thousands).... $125,000 $57,000
Average receive rate................................... 6.64% 7.19%
Average pay rate....................................... 5.70% 5.92%
</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 $2,973,000 and $569,000 at December 31, 1997 and 1996, 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, 1997 and 1996, unamortized premiums on interest rate floors
amounted to $447,000 and $522,000, respectively. Fair values of such agreements
were $251,000 and $120,000 at December 31, 1997 and 1996, respectively, based on
quoted market prices.

COMMODITY RISK MANAGEMENT

NYLIAC has certain bond investments with interest payments linked to prices
of commodities such as gold and crude oil. NYLIAC has entered into commodity
swaps with a total notional amount of $18,000,000 as a hedge against commodity
risks. The credit exposure of these swaps is $3,021,000 at December 31, 1997.

NOTE 11 -- COMMITMENTS AND CONTINGENCIES

LITIGATION

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 a purported class action claiming to include
numerous policyowners in one jurisdiction who did not exclude themselves from
the nationwide class action. The certification by a non-New York State court of
a purported class action claiming to include numerous policyowners in that state
who excluded themselves from the settlement of the nationwide class action was
recently reversed by an intermediate appellate court; plaintiffs have filed a
motion for rehearing in the intermediate appellate court. Most of these actions
seek substantial or unspecified compensatory and punitive damages.

F-37
<PAGE> 85

LITIGATION -- (CONTINUED)
NYLIAC is also a defendant in other individual suits arising from its
insurance (including variable contracts registered under the federal securities
law), 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.

LOANED SECURITIES AND REPURCHASE AGREEMENTS

NYLIAC participates in a securities lending program for the purpose of
enhancing income on securities held. At December 31, 1997, $659 million ($826
million at December 31, 1996) of NYLIAC's bonds were on loan to others, but were
fully collateralized in an account held in trust for NYLIAC.

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 (included in other liabilities) at
December 31, 1997 of $184 million ($50 million at December 31, 1996)
approximates 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

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 under the terms of a Service Agreement between New York Life and
NYLIAC. Such costs, amounting to $247 million for the year ended December 31,
1997 ($191 million for 1996 and $166 million for 1995) are reflected in
operating expenses and net investment income in the accompanying Statement of
Income.

NOTE 13 -- SUPPLEMENTAL CASH FLOW INFORMATION

As 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 $126 million, $146 million, and $57 million
during 1997, 1996 and 1995, respectively.

Interest paid was $5 million, $3 million and $2 million during 1997, 1996
and 1995, respectively.

F-38
<PAGE> 86

NOTE 14 -- RECONCILIATIONS BETWEEN STATUTORY ACCOUNTING AND GAAP

Accounting 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 surplus determined in
accordance with accounting practices prescribed by the Delaware State Insurance
Department with stockholder's equity on a GAAP basis (in millions):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Statutory Surplus......................................... $1,089 $ 998 $ 878
------ ------ ------
Adjustments:
Deferred policy acquisition costs.................... 688 691 511
Investment related................................... 377 151 511
Asset valuation reserve.............................. 165 164 137
Interest maintenance reserve......................... 105 35 26
Non-admitted assets.................................. 59 31 26
Policyholder liabilities............................. (330) (262) (187)
Deferred taxes....................................... (93) (47) (156)
Employee benefit liabilities......................... (66) (63) (61)
Other................................................ (32) (12) (9)
------ ------ ------
Total adjustments............................... 873 688 798
------ ------ ------
Total GAAP Stockholder's Equity........................... $1,962 $1,686 $1,676
====== ====== ======
</TABLE>

The following chart reconciles NYLIAC's statutory net income determined in
accordance with accounting practices prescribed by the Delaware State Insurance
Department with net income on a GAAP basis (in millions):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory Net Income.................................... $134 $148 $ 95
---- ---- ----
Adjustments:
Deferred policy acquisition costs.................. 63 44 40
Investment related................................. 92 1 (11)
Interest maintenance reserve....................... (14) 9 6
Policyholder liabilities........................... (84) (54) (4)
Deferred taxes..................................... (1) 24 8
Other.............................................. (3) (3) (14)
---- ---- ----
Total Adjustments............................. 53 21 25
---- ---- ----
GAAP Net Income......................................... $187 $169 $120
==== ==== ====
</TABLE>

F-39
<PAGE> 87

NOTE 14 -- RECONCILIATIONS BETWEEN STATUTORY ACCOUNTING AND GAAP -- (CONTINUED)
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 reserve 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; (8)
certain assets are considered non-admitted and excluded from assets in the
balance sheet, whereas they are included 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, 1997 and 1996, on a statutory basis, admitted assets were
$20,059 million and $17,099 million, respectively, and total liabilities were
$18,970 million and $16,101 million, respectively, which included policy
reserves of $13,666 million and $13,099 million, respectively.

NYLIAC is restricted as to the amounts it may pay as dividends to New York
Life. The maximum amount of dividends which can be paid by a Delaware insurance
company to its stockholders may not exceed that part of its available and
accumulated surplus funds which is derived from net operating profits and
realized capital gains. Such available and accumulated funds at December 31,
1997 were $584 million.

F-40
<PAGE> 88
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) Resolution of the Board of Directors of New York Life Insurance and
Annuity Corporation ("NYLIAC") authorizing establishment of the
Separate Account - Previously filed as Exhibit (1) to Registrant's
initial Registration Statement on Form S-6, re-filed in accordance with
Regulation S-T, 17 CFR 232.102(e) as Exhibit (1) to Post-Effective
Amendment No. 17 to the registration statement on Form N-4 for NYLIAC
MFA Separate Account-I (File No. 2-86083), and incorporated herein by
reference.

(2) Not applicable.

(3)(a) Distribution Agreement between NYLIFE Securities, Inc. and NYLIAC -
Previously filed as Exhibit (3)(a) to Registrant's Post-Effective
Amendment No. 1 to the Registration Statement on Form S-6, re-filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (3)(a) to
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), and incorporated herein by reference.

(3)(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), and incorporated herein by
reference.

(3)(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 (3)(b) to Pre-Effective Amendment No. 1
to Registrant's Registration Statement on Form S-6, re-filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (3)(c) to
Post-Effective Amendment No. 17 to the registration statement on Form
N-4 for NYLIAC MFA Separate Account-I (File No. 2-86083), and
incorporated herein by reference.

(4)(a) Specimen Qualified Flexible Premium Policy - Previously filed as
Exhibit (5)(a) to Registrant's initial Registration Statement on Form
S-6, re-filed in accordance with Regulation S-T, 17 CFR 232.102(e) as
Exhibit (4)(a) to Registrant's Post-Effective Amendment No. 16 on Form
N-4, and incorporated herein by reference.

(4)(b) Specimen Qualified Single Premium Policy - Previously filed as Exhibit
(5)(b) to Registrant's initial Registration Statement on Form S-6,
re-filed in accordance with Regulation S-T, 17 CFR 232.102(e) as
Exhibit (4)(b) to Registrant's Post-Effective Amendment No. 16 on Form
N-4, and incorporated herein by reference.

(5) Form of Application for a Policy - Previously filed as Exhibit (10) to
Registrant's Pre-Effective Amendment No. 1 on Form S-6, re-filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (5) to
Post-Effective Amendment No. 17 to the registration statement on Form
N-4 for NYLIAC MFA Separate Account-I (File No. 2-86083), and
incorporated herein by reference.

(6)(a) Certificate of Incorporation of NYLIAC - Previously filed as
Exhibit(6)(a) to Registrant's initial Registration Statement on Form
S-6, re-filed in accordance with Regulation S-T, 17 CFR 232.102(e) as
Exhibit (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), and incorporated herein by reference.

C-1
<PAGE> 89

(6)(b)(1)By-Laws of NYLIAC - Previously filed as Exhibit (6)(b) to the initial
registration statement on Form S-6 for NYLIAC MFA Separate Account-I
(File No. 2-86083), re-filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (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), and incorporated herein by
reference.

(6)(b)(2)Amendments to By-Laws of NYLIAC - Previously filed in accordance with
Regulation S-T, 17 CFR 232.102(e) as Exhibit (6)(b) to Pre-Effective
Amendment No. 1 to the registration statement on Form S-6 for NYLIAC
Variable Universal Life Separate Account-I (File No. 333-39157), and
incorporated herein by reference.

(7) Not applicable.

(8) Service Agreement between New York Life Insurance Company and NYLIAC
(including Amendments) - Previously filed as Exhibit (8) to
Registrant's Post-Effective Amendment No. 1 on Form S-6, re-filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8) to
Post-Effective Amendment No. 17 to the registration statement on Form
N-4 for NYLIAC MFA Separate Account-I (File No. 2-86083), and
incorporated herein by reference.

(9) Opinion and Consent of Jonathan E. Gaines, Esq. - filed herewith.

(10)(a) Consent of Price Waterhouse LLP - filed herewith.

(10)(b) Powers of Attorney for the Directors and Officers of NYLIAC -
Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e)
as Exhibit (9)(c) to 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, and
incorporated herein by reference:

Jay S. Calhoun, Vice President, Treasurer and Director (Principal
Financial Officer)
Richard M. Kernan, Jr., Director
Robert D. Rock, Senior Vice President and Director
Frederick J. Sievert, President and Director (Principal Executive
Officer)
Stephen N. Steinig, Senior Vice President, Chief Actuary and Director
Seymour Sternberg, Director

(10)(c) Power of Attorney for Maryann L. Ingenito, Vice President and
Controller (Principal Accounting Officer) - Previously filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(d) to
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), and incorporated herein by reference.

(10)(d) Power of Attorney for Howard I. Atkins, Executive Vice President
(Principal Financial Officer) - Previously filed as Exhibit 8(d) to
Pre-Effective Amendment No. 1 to the registration statement on Form S-6
for NYLIAC Variable Universal Life Separate Account-I (File No.
333-39157), and incorporated herein by reference.

(11) Not applicable.

(12) Not applicable.

(13) Schedule of Computations - Previously filed as Exhibit 13 to
Post-Effective Amendment No. 7 to the registration statement on Form
N-4 for NYLIAC Variable Annuity Separate Account-I (File
No. 33-53342), and incorporated herein by reference.

(14) Not applicable.

C-2
<PAGE> 90
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.

<TABLE>
<CAPTION>
Name: Title:
<S> <C>
Seymour Sternberg Director
Richard M. Kernan, Jr. Director
Frederick J. Sievert Director and President
Robert D. Rock Director and Senior Vice President
Jay S. Calhoun Director, Senior Vice President and Treasurer
Stephen N. Steinig Director, Senior Vice President and Chief Actuary
Howard I. Atkins Executive Vice President and Chief Financial Officer
Michael L. Callahan Senior Vice President
Marc J. Chalfin Senior Vice President
John J. DiNiro 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
Gerald Kaplan Senior Vice President and Tax Counsel
Richard D. Levy Senior Vice President
Paul Morris Senior Vice President
Michael J. Nocera Senior Vice President
Frank J. Ollari Senior Vice President
Anne F. Pollack Senior Vice President
Steven Ray Senior Vice President
Thomas J. Warga Senior Vice President and General Auditor
Edward C. Wilson Senior Vice President and Chief Sales Officer
William Cheng Vice President
Limin Chu General Manager and President of Taiwan Branch
Henry Ciapas Vice President
Patrick Colloton Vice President
John A. Cullen Vice President and Assistant Controller
Lisa O. Cullity Vice President
Sheila K. Davidson Vice President
Melvin J. Feinberg Vice President
Jane L. Hamrick Vice President and Actuary
Celia M. Holtzberg Vice President
Robert Hynes Vice President
Maryann L. Ingenito Vice President and Controller
Himi L. Kittner Vice President
David Krystel Vice President
Thomas S. McArdle Vice President
Daniel J. McKillop Vice President
John R. Meyer Vice President
William H. Mowat Vice President
Michael M. Oleske Vice President and Associate Tax Counsel
Andrew N. Reiss Vice President and National Sales Manager
Lawrence R. Stoehr Vice President
Richard W. Zuccaro Vice President
George J. Trapp Secretary
</TABLE>

C-3
<PAGE> 91
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.

Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
Aegis Technologies, Inc.(1) Delaware

MainStay Institutional Funds Inc.(2) Maryland

MainStay VP Series Fund, Inc.(3) Maryland

New York Life Fund, Inc.(3) New York

New York Life Insurance and Annuity Corporation Delaware

New York Life Irrevocable Trust of 1996(4) New York N/A
</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.

<TABLE>

<S> <C> <C>
NYLIFE Inc. New York
Eagle Strategies Corp. Arizona
Greystone Realty Corporation Delaware
Greystone Realty Management, Inc. Delaware
MacKay-Shields Financial Corporation Delaware
MainStay Shareholder Services, Inc. Delaware
MSC Holding, Inc. Georgia 85.43%
Monitor Capital Advisors, Inc. Delaware
</TABLE>

- --------

(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 depositors 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.

C-4
<PAGE> 92
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
(NYLIFE Inc. subsidiaries cont.)
New York Life Benefit Services, Inc. Massachusetts
ADQ Insurance Agency, Inc. Massachusetts
New York Life Capital Corporation Delaware
New York Life International Investment Inc. Delaware
Monetary Research Ltd. Bermuda
NYL Management Limited United Kingdom
Japan Gamma Asset Management Limited(5) Japan 33.345%
New York Life Worldwide Holding, Inc. Delaware
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(6) United Kingdom 99.97%
Life Assurance Holding Corporation Limited United Kingdom 31.25%
Windsor Life Assurance Company Limited United Kingdom
Windsor Construction Company Limited United Kingdom
KOHAP New York Life Insurance Ltd. South Korea 51%
P.T. Asuransi Jiwa Sewu-New York Life Indonesia
GEO New York Life, S.A. Mexico 49%
NYLIFE Administration Corp. (doing business as NYLACOR) Texas
NYLIFE Depositary Corporation Delaware
NYLIFE Structured Asset Management Company Ltd. Texas 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. Delaware 46.3% of total
combined stock and
89.6% of the voting
rights
Express Scripts Vision Corporation Delaware
Great Plains Reinsurance Company Arizona
Practice Patterns Science, Inc. Delaware 80%
ESI Canada Holdings, Inc. Canada
ESI Canada, Inc. Canada
IVTx of Houston, Inc. Texas
IVTx of Dallas, Inc. Texas
PhyNet, Inc. Delaware
NYLCare Health Plans, Inc. Delaware
</TABLE>

- --------

(5) Based on the percentage of ownership as well as the lack of
"control" by New York Life over management or policies of this company, this
entity is not considered a subsidiary of New York Life but is included here for
informational purposes only.

(6) One share is held by NYLIFE, Inc., a Nominee, as required by
British law.

C-5
<PAGE> 93
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
(NYLIFE Inc. subsidiaries cont.)
New York Life and Health Insurance Company Delaware
Avanti Corporate Health Systems, Inc. Delaware
Avanti Health Systems of Texas, Inc. Texas
Avanti of the District, Inc. Maryland
Avanti of Illinois, Inc. Illinois
Avanti of New York, Inc. New York
MBS IPA, Inc. New York
Avanti of New Jersey, Inc. New Jersey
NYLCare Health Plans of the Mid-Atlantic, Inc. Maryland 80%; Physicians
Health Services
Foundation, Inc.
owns 20%
Physicians Health Services Foundation, Inc. Maryland
Lonestar Holding Co. Delaware
Lone Star Health Plan, Inc. Texas 90%; NYLCare
Health Plans, Inc.
owns 10%
NYLCare Health Plans of the Gulf Coast, Inc. Texas
Prime Provider Corp. New York
Prime Provider Corp. of Texas Texas
NYLCare of Connecticut, Inc. Connecticut
Sanus Dental Plan of New Jersey, Inc. New Jersey
NYLCare Dental Plans of the Southwest, Inc. Texas
NYLCare Health Plans of New York, Inc. New York
NYLCare Health Plans of Connecticut, Inc. Connecticut
NYLCare Health Plans of the Midwest, Inc. Illinois
NYLCare Health Plans of New Jersey, Inc. New Jersey
NYLCare of Texas, Inc. Texas
NYLCare Passport PPO of the Southwest, Inc. Texas
NYLCare Preferred Services, Inc. Maryland
Sanus Preferred Providers West, Inc. California
Sanus Preferred Services of Illinois, Inc. Illinois
NYLCare Health Plans of the Southwest, Inc. Texas
NYLCare Health Plans of Louisiana, Inc. Louisiana 99.8%; Patrick D.
Seiter and
E. L. Henry each
own .1% of the
remaining stocks
NYLCare of New England, Inc. Delaware
Sanus - Northeast, Inc. Delaware
NYLCare Health Plans of Maine, Inc. Maine
NYLCare NC Holdings, Inc. Delaware
WellPath Community Health Plans, L.L.C. North Carolina Duke Medical
Strategies, Inc.
holds 50%;
50% LLC interest
WPCHP Holdings, Inc. Delaware
</TABLE>

C-6
<PAGE> 94
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
(NYLIFE Inc. subsidiaries cont.)
WellPath Preferred Services, L.L.C. North Carolina 99%; WPCHP
Holdings, Inc. owns
other 1%
WellPath Select Holdings, L.L.C. North Carolina WPCHP Holdings,
Inc. holds 1%;
99% LLC Interest
WellPath Select, Inc. North Carolina
WellPath of Carolina, Inc. Delaware
WellPath of Arizona Reinsurance Company Arizona
Sanus of New York and New Jersey, Inc. New York
NYLCare Health Plans of Pennsylvania, Inc. Pennsylvania
Docservco, Inc. New York
The ETHIX Corporation Delaware
ETHIX Great Lakes, Inc. Michigan
ETHIX Mid-Atlantic, Inc. Pennsylvania
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
ETHIX Pacific, Inc. Oregon
ETHIX Risk Management, Inc. Oregon
ETHIX Southeast, Inc. North Carolina
ETHIX Southwest, Inc. Texas
Benefit Panel Services, Inc. California 33 1/3% owned
by Mass Mutual
Holding Company
Two MSC, Inc. and
33 1/3% owned by
Anthem Companies,
Inc.
BPS Health Plan Administrators California
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. 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 Hawaii, Incorporated Hawaii
NYLINK Insurance Agency of Massachusetts, Incorporated Massachusetts
</TABLE>

C-7
<PAGE> 95
<TABLE>
<CAPTION>

Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
(NYLIFE Inc. subsidiaries cont.)
NYLINK Insurance Agency of New Mexico, Incorporated New Mexico

NYLTEMPS Inc. Delaware

New York Life Trust Company New York

NYLIFE Insurance Company of Arizona Arizona

NYLINK Insurance Agency of Ohio, Incorporated(7) Ohio

NYLINK Insurance Agency of Oklahoma, Incorporated(8) Oklahoma

NYLINK Insurance Agency of Texas, Incorporated(9) Texas

The MainStay Funds(10) Massachusetts
</TABLE>

ITEM 27. NUMBER OF CONTRACT OWNERS

As of January 31, 1998, there were approximately 12,652 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

- --------

(7) This affiliated corporation is organized to conduct the business of
NYLINK Insurance Agency Incorporated in the state of Ohio.

(8) This affiliated corporation is organized to conduct the business of
NYLINK Insurance Agency Incorporated in the state of Oklahoma.

(9) This affiliated corporation is organized to conduct the business of
NYLINK Insurance Agency Incorporated in the state of Texas.

(10) 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.

C-8
<PAGE> 96
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 UNDERWRITERS

(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 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.

<TABLE>
<CAPTION>
Names of Directors and Officers Positions and Offices with Underwriter
------------------------------- --------------------------------------
<S> <C>
Frank Mistero Director and President
Frank M. Boccio Director
Jefferson C. Boyce Director
Michael G. Gallo Director
Phillip J. Hildebrand Director
Alice T. Kane Director
Robert D. Rock Director
Stephen C. Roussin Director
Walter W. Ubl Director and Senior Vice President
Robert E. Brady Director and Vice President
Sheila K. Davidson Chief Compliance Officer
Thomas J. Warga Senior Vice President and General Auditor
Jay S. Calhoun Vice President and Treasurer
David J. Krystel Vice President
Linda M. Livornese Vice President
John H. O'Byrne Vice President
Anthony W. Polis Vice President and Chief Financial Officer
Richard W. Zuccaro Tax Vice President
Louis H. Adasse Corporate Vice President
Thomas J. Murray Corporate Vice President
Phyllis Zwarick Corporate Vice President
Arphiela Arizmendi Assistant Vice President
Antoinette B. Cirillo Assistant Vice President
George R. Daoust Assistant Vice President
</TABLE>

C-9
<PAGE> 97
<TABLE>
<CAPTION>
Names of Directors and Officers Positions and Offices with Underwriter
------------------------------- --------------------------------------
<S> <C>
Geraldine Lorito Assistant Vice President
Nancy Brenner Secretary
Mark A. Gomez Assistant Secretary
</TABLE>

<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 -

Registrant hereby undertakes:

(a) to file a post-effective amendment to this registration statement
as frequently as is necessary to ensure that the audited financial statements
in the registration statement are never more than 16 months old for so long as
payments under the variable annuity contracts may be accepted;

(b) to include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a post card or similar
written communication affixed to or included in the prospectus that the
applicant can remove to send for a Statement of Additional Information;

(c) to deliver any Statement of Additional Information and any
financial statements required to be made available under this Form promptly
upon written or oral request.

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.

C-10
<PAGE> 98
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
16th day of April, 1998.

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 by the following persons in the capacities and on the
date indicated.

Howard I. Atkins* Executive Vice President (Principal
Financial Officer)

Jay S. Calhoun* Vice President, Treasurer and
Director

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* President and Director (Principal
Executive Officer)

Stephen N. Steinig* Senior Vice President, Chief
Actuary and Director

Seymour Sternberg* Director

*By /s/ David J. Krystel
--------------------
David J. Krystel
Attorney-in-Fact
April 16, 1998
<PAGE> 99
EXHIBIT INDEX

Exhibit
Number Description

(9) Opinion and Consent of Jonathan E. Gaines, Esq.

(10)(a) Consent of Price Waterhouse LLP.

<PAGE> 1
Exhibit (9)

[NEW YORK LIFE INSURANCE COMPANY LOGO]

NEW YORK LIFE INSURANCE COMPANY
51 Madison Avenue, New York, NY 10010
(212) 576-3763

JONATHAN E. GAINES
Vice President and
Associate General Counsel

April 16, 1998

Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, D. C. 20549

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. 17
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 flexible premium multi-funded variable retirement annuity policy
("Annuity Contract"). The Annuity Contract is offered in the manner described in
the Registration Statement.

In connection with this opinion, 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 opinion that:

1. NYLIAC is a corporation duly organized and validly existing under
the laws of the State of Delaware.

2. Separate Account-II is a separate account established and maintained
by NYLIAC pursuant to Section 2932 of the Delaware Insurance Code,
under which the income, gains and losses, realized or unrealized,
from assets allocated to Separate Account-II shall be credited to or
charged against Separate Account-II, without regard to other income,
gains or losses of NYLIAC.

<PAGE> 2

Securities and Exchange Commission
April 16, 1998
Page 2

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 a 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/ JONATHAN E. GAINES

Jonathan E. Gaines
Vice President and
Associate General Counsel

<PAGE> 1
Exhibit (10)(a)

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the use in the Statement of Additional Information constituting
part of this Post-effective Amendment No. 17 to the registration statement on
Form N-4 (the "Registration Statement") of our report dated February 13, 1998,
relating to the financial statements of New York Life Insurance and Annuity
Corporation, and of our report dated February 23, 1998, relating to the
financial statements and selected per unit data of New York Life Insurance and
Annuity Corporation MFA Separate Accounts I and 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 15, 1998