<PAGE> 1
As filed with the Securities and Exchange Commission on April 22, 1999
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. 19 [ X ]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 16 [ 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, 1999 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 Separate 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 Separate Account
Assets
19. Purchase of Securities Being Offered Distributor of the Policies
20. Underwriters Distributor of The Policies
21. Calculation of Performance Data Investment Performance Calculations
22. Annuity Payments Valuation of Accumulation Units
23. Financial Statements Financial Statements
<PAGE> 4
NYLIAC MFA SEPARATE ACCOUNT I
NYLIAC MFA SEPARATE ACCOUNT II
PROSPECTUS
FOR THE
FACILITATOR(R)*
MULTI-FUNDED RETIREMENT ANNUITY POLICIES
ISSUED 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
which New York Life Insurance and Annuity Corporation ("NYLIAC") issues. We
designed the policies primarily to assist individuals with their long-term
retirement planning needs.
This prospectus describes two types of policies: a single premium policy
and a flexible premium policy. We have discontinued sales of both types of
policies. However, we will still accept purchase payments under outstanding
policies. We will allocate purchase payments to NYLIAC MFA Separate Account I
for both types of policies issued under plans that qualify for special federal
income tax treatment. We will allocate purchase payments to the NYLIAC MFA
Separate Account II for both types of policies issued under plans that do not
qualify for special federal income tax treatment.
Prior to the date your income payments begin, you may direct that purchase
payments accumulate on a variable, fixed, or a combination variable and fixed
basis. When you decide to start receiving income payments from a policy issued
in connection with an employee plan that qualifies for special federal income
tax treatment, you may receive them on a variable, fixed, or a combination
variable and fixed basis. For a policy that is not issued in connection with an
employee retirement plan for special federal income tax treatment, you may
receive income payments on a fixed basis, and on a variable or a combination
variable and fixed basis subject to state filing and review. You also have
significant flexibility in determining the frequency and amount of each purchase
payment and the date income payments begin. You can withdraw money from your
policy before income payments begin. In certain circumstances, withdrawals may
be subject to a surrender charge and tax penalty.
Both separate accounts invest their assets in shares of the MainStay VP
Series Fund, Inc. (the "Fund"). The Fund offers three separate portfolios
available for investment under your policy: the MainStay VP Growth Equity
Portfolio, the MainStay VP Bond Portfolio, and the MainStay VP Cash Management
Portfolio (the "Eligible Portfolios" or the "Portfolios"). Your policy's value
will vary in accordance with the investment performance of the Portfolios you
select. You also bear the entire investment risk for any amounts allocated to
the separate accounts.
You should read this prospectus carefully and keep it for future reference.
To learn more about the policies, you can obtain a copy of the Statement of
Additional Information ("SAI") dated May 1, 1999. The SAI has been filed with
the Securities and Exchange Commission and is incorporated by reference into
this prospectus. The table of contents for the SAI appears at the end of this
prospectus. For a free copy of the SAI, you should call the Service Center that
services your policy. We have listed the phone numbers for our Service Centers
on page 10 of this prospectus.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1999
*FACILITATOR(R) IS NYLIAC'S REGISTERED SERVICE MARK FOR THE POLICIES AND IS
NOT MEANT TO CONNOTE PERFORMANCE.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS............................ 3
POLICY OWNER AND FUND EXPENSES......... 4
QUESTIONS AND ANSWERS ABOUT THE
FACILITATOR.......................... 6
CONDENSED FINANCIAL INFORMATION........ 11
FINANCIAL STATEMENTS................... 14
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION AND THE SEPARATE
ACCOUNTS............................. 15
New York Life Insurance and Annuity
Corporation....................... 15
The Separate Accounts................ 15
The Portfolios....................... 15
Additions, Deletions, or
Substitutions of Investments...... 16
Reinvestment......................... 16
THE POLICIES........................... 16
Purpose of Policies.................. 16
Purchase Payments.................... 17
Total Disability Benefit Rider....... 17
Transfers............................ 17
Accumulation Period.................. 18
(a) Crediting of Net Purchase
Payments................... 18
(b) Valuation of Accumulation
Units...................... 18
Policy Owner Inquiries............... 18
CHARGES AND DEDUCTIONS................. 18
Surrender Charges.................... 18
Exceptions to Surrender Charges...... 19
Other Charges........................ 19
Taxes................................ 20
DISTRIBUTIONS UNDER THE POLICY......... 21
Surrenders and Withdrawals........... 21
(a) Surrenders.................... 21
(b) Partial Withdrawals........... 21
(c) Periodic Partial
Withdrawals..................... 21
(d) Hardship Withdrawals.......... 21
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Cancellations........................ 22
Retirement Date...................... 22
Death Before Retirement Date......... 22
Income Payments...................... 23
(a) Election of Income Payment
Options.................... 23
(b) Fixed Income Payments......... 23
(c) Variable Income Payments...... 24
(d) Value of Variable Income
Payments................... 24
(e) Other Methods of Payment...... 24
(f) Legal Developments Regarding
Income Payments............ 25
(g) Proof of Survivorship......... 25
Delay of Payments.................... 25
Designation of Beneficiary........... 25
Restrictions Under the Texas Optional
Retirement Program................ 25
Restrictions Under Internal Revenue
Code Section 403(b)(11)........... 25
THE FIXED ACCOUNT...................... 26
(a) Interest Crediting............ 26
(b) Surrender Charges............. 26
(c) Transfers to Investment
Divisions.................. 26
(d) General Matters............... 27
FEDERAL TAX MATTERS.................... 27
Introduction......................... 27
Taxation of Annuities in General..... 27
Qualified Plans...................... 28
(a) Section 403(b) Plans.......... 29
(b) Individual Retirement
Annuities.................. 29
(c) Corporate Pension and Profit-
Sharing Plans and H.R. 10
Plans........................ 29
(d) Deferred Compensation Plans... 29
DISTRIBUTOR OF THE POLICIES............ 29
VOTING RIGHTS.......................... 29
STATEMENT OF ADDITIONAL INFORMATION.... 30
</TABLE>
2
<PAGE> 6
DEFINITIONS
ACCUMULATION UNIT--An accounting unit used to calculate the value of a policy
prior to the date Income Payments begin. Each Investment Division of the
Separate Accounts has a distinct Accumulation Unit value.
ALLOCATION ALTERNATIVES--The Investment Divisions of the applicable Separate
Account(s) 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 date Income
Payments are to begin, we pay benefits under the policy.
ANNUITY UNIT--An accounting unit we use to calculate Variable Income Payments.
BENEFICIARY--The person or entity having the right to receive the death benefit
set forth in the policy. In the event a Beneficiary is not designated, you or
your estate 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.
FIXED ACCOUNT--An account that is credited with a fixed interest rate which
NYLIAC declares and is not part of the Separate Accounts.
FIXED INCOME PAYMENTS--Income Payments having a guaranteed amount.
INCOME PAYMENTS--Periodic payments NYLIAC makes to the Payee.
INVESTMENT DIVISION ("DIVISION")--The variable investment options available with
your policy. There will be a separate Investment Division in each Separate
Account for single and flexible premium policies corresponding to each Eligible
Portfolio. Each Investment Division invests exclusively in shares of a specified
Eligible Portfolio.
NON-QUALIFIED POLICIES--Policies that are not available for use in connection
with employee retirement plans that qualify for special federal income tax
treatment.
PAYEE--The person designated to receive payments under an Income Payment option.
The Payee may be you, the Annuitant, a Beneficiary or any person you designate.
POLICY ANNIVERSARY--An anniversary of the Policy Date.
POLICY DATE--The date established when we issue your policy, from which
subsequent Policy Years, months and anniversaries are measured.
POLICY YEAR--A year starting on the Policy Date. Subsequent Policy Years begin
on each Policy Anniversary, unless otherwise indicated.
PURCHASE DATE--The Business Day on which we receive and credit a purchase
payment under the policy.
QUALIFIED POLICIES--Policies issued under plans that qualify for special federal
income tax treatment.
SEPARATE ACCOUNT(S)--NYLIAC MFA Separate Account I and NYLIAC MFA Separate
Account II, the segregated asset accounts we established to receive and invest
purchase payments under the policies.
VARIABLE INCOME PAYMENTS--Income Payments that have no predetermined or
guaranteed dollar amount.
3
<PAGE> 7
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 Service Charge.............................. Lesser of $30 Per Policy
or 1% of the Policy's Value.
SEPARATE 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 Separate 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, 1998)
Management Fees........................................ 0.25% 0.25% 0.25%
Administration Fees.................................... 0.20% 0.20% 0.20%
Other Expenses......................................... 0.06% 0.07% 0.09%
Total Fund Annual Expenses............................. 0.51% 0.52% 0.54%
</TABLE>
- ------------
(a) The sales load percentage declines from 7% in the first four Policy Years to
1% in the tenth Policy Year with no charge after the tenth Policy Year. (See
"Surrender Charges" on page 18.)
We provide this table to help you understand the various costs and expenses
that you will bear directly and indirectly. The table reflects charges and
expenses of the Separate Accounts and the Fund for the year ended December 31,
1998. Charges and expenses may be higher or lower in future years. For more
information on the charges reflected in this table see Charges and Deductions on
page 18 and the Fund prospectus which accompanies this prospectus. We may deduct
premium taxes from some policies, where premium taxes are imposed by 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 stated time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Common Stock................................................ $105 $176 $238 $372
Bond........................................................ $105 $176 $238 $373
Money Market................................................ $105 $176 $239 $375
</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................................................ $ 33 $102 $173 $360
Bond........................................................ $ 34 $102 $173 $361
Money Market................................................ $ 34 $103 $174 $363
</TABLE>
YOU SHOULD NOT CONSIDER THESE EXAMPLES TO BE REPRESENTATIONS OF PAST OR FUTURE
EXPENSES AND THE ACTUAL EXPENSES THAT YOU PAY MAY BE GREATER OR LESS THAN THOSE
SHOWN.
4
<PAGE> 8
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%
</TABLE>
<TABLE>
<S> <C> <C> <C>
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value)
Mortality and Expense Risk Fees........................ 1.25% 1.25% 1.25%
Total Separate 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, 1998)
Management Fees........................................ 0.25% 0.25% 0.25%
Administration Fees.................................... 0.20% 0.20% 0.20%
Other Expenses......................................... 0.06% 0.07% 0.09%
Total Fund Annual Expenses............................. 0.51% 0.52% 0.54%
</TABLE>
- ------------
(a) The sales load is based on the length of the time each purchase payment is
in the policy before it is withdrawn. The sales load percentage declines
from 7% during the first Policy Year that a purchase payment is in the
policy to 1% in the seventh Policy Year. There are a number of exceptions to
the surrender charges, including, that there is no surrender charge if the
amount withdrawn in any Policy Year is 10% or less of the policy's value at
the beginning of that Policy Year. (See "Exceptions to Surrender Charges" on
page 18.)
We provide this table to help you understand the various costs and expenses
that you will bear directly and indirectly. The table reflects charges and
expenses of the Separate Account and the Fund for the year ended December 31,
1998. Charges and expenses may be higher or lower in future years. For more
information on the charges reflected in this table see Charges and Deductions on
page 18 and the Fund prospectus which accompanies this prospectus. We may deduct
premium taxes from some policies, where premium taxes are imposed by 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................................................ $90 $111 $131 $209
Bond........................................................ $91 $112 $133 $212
Money Market................................................ $91 $112 $133 $212
</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................................................ $18 $ 56 $ 96 $209
Bond........................................................ $18 $ 57 $ 98 $212
Money Market................................................ $18 $ 57 $ 98 $212
</TABLE>
YOU SHOULD NOT CONSIDER THESE EXAMPLES TO BE REPRESENTATIONS OF PAST OR FUTURE
EXPENSES AND THE ACTUAL EXPENSES THAT YOU PAY MAY BE GREATER OR LESS THAN THOSE
SHOWN.
5
<PAGE> 9
QUESTIONS AND ANSWERS ABOUT THE FACILITATOR(R)
NOTE: THE FOLLOWING SECTION CONTAINS BRIEF QUESTIONS AND ANSWERS ABOUT THE
FACILITATOR. YOU SHOULD REFER 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. These policies may be either single premium or flexible
premium policies. (See "The Policies" at page 16). Depending upon the type of
policy (single premium or flexible premium) and its purpose (Qualified or
Non-Qualified), you may allocate purchase payments to one or more of the
Investment Divisions of each of the Separate Accounts and the Fixed Account. The
Separate Accounts in turn invest in shares of the Fund. The policy's value will
fluctuate according to the performance of the Investment Divisions selected.
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 a set dollar amount. In this prospectus, we refer to
annuity payments which remain the same throughout the payment period as "Fixed
Income Payments" and annuity payments which vary as "Variable Income Payments."
When you are scheduled to receive Variable Income Payments, we will use the
policy's value to purchase Annuity Units in the Common Stock Investment
Division. The amount of Variable Income Payments will increase or decrease
according to the value of the Annuity Units which reflects the performance of
that Common Stock Investment Division. Fixed Income Payments will always be the
same specified amount. (See "Income Payments" at page 23.)
3. WHAT ARE THE AVAILABLE ALLOCATION ALTERNATIVES?
You can allocate your purchase payments to one or more of the following
Allocation Alternatives:
(a) Separate Accounts
Each of the Separate Accounts consists of three Investment
Divisions for single premium policies and three for flexible premium
policies.
The Investment Divisions of the Separate Accounts invest
exclusively in shares of the Fund. The Fund is a diversified, open-end
management investment company. The three Investment Divisions and their
corresponding Eligible Portfolios are as follows:
<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>
When you allocate a purchase payment to one of the Investment
Divisions, the Separate Account will invest your payment exclusively in
shares of the corresponding Eligible Portfolio of the Fund. For
Non-Qualified Policies, the Common Stock Investment Division is not
available in New York.
(b) Fixed Account
Purchase Payments allocated to the Fixed Account will reflect a
fixed interest rate. (See "The Fixed Account" at page 26.)
4. CAN AMOUNTS BE TRANSFERRED AMONG THE ALLOCATION ALTERNATIVES?
You can transfer all or part of your Accumulation Unit value between
Investment Divisions or from the Investment Divisions to the Fixed Account at
least 30 days before the date Income Payments are scheduled to begin. The
minimum amount you can transfer generally is $1,000 for single premium policies
or $500 for flexible premium policies. We reserve the right to limit the number
of transfers to no more than four in any one Policy Year. (See "Transfers" at
page 17.)
You may also make transfers from the Fixed Account to the Investment
Divisions, but only in certain situations. (See "The Fixed Account" at page 26.)
6
<PAGE> 10
5. WHAT CHARGES ARE ASSESSED AGAINST THE POLICY?
The policies are also subject to a daily charge for certain mortality and
expense risks NYLIAC assumes. This charge is equal, on an annual basis, to 1.25%
of the daily net asset value of the applicable Separate Account. (See "Other
Charges" at page 19.)
For single premium policies, there is no annual charge for policy services
or daily charges for administrative services.
For flexible premium policies, we will deduct an annual charge for policy
services once each year on the Policy Anniversary if on that date the total cash
value is below $10,000. This charge will be the lesser of $30 or 1% of the
policy's value at the end of the Policy Year. In addition, we will deduct a
daily charge for administrative services equal to .50%, on an annual basis, of
the daily asset value of the applicable Separate Account. (See "Other Charges"
at page 19.)
We also impose a surrender charge on partial withdrawals or surrenders of
the policies. This charge is assessed as a percentage of the amount withdrawn or
surrendered. For single premium policies, we keep track of each purchase payment
and assess a charge based on the length of time such payment is in your policy
before it is withdrawn. You may make up to four additional purchase payments
each Policy Year on a single premium policy. The surrender charge is 7% of the
amount withdrawn or surrendered during the first Policy Year that a purchase
payment is in your policy. The surrender charge declines 1% for each additional
Policy Year that a purchase payment is in your policy, as shown in the following
chart:
<TABLE>
<CAPTION>
POLICY YEAR OF PURCHASE PAYMENT SURRENDER CHARGE
- ------------------------------- ----------------
<S> <C>
1 .......................................................... 7%
2 .......................................................... 6%
3 .......................................................... 5%
4 .......................................................... 4%
5 .......................................................... 3%
6 .......................................................... 2%
7 .......................................................... 1%
8 and later................................................. 0%
</TABLE>
For purposes of calculating the surrender charge, we treat withdrawals as
coming from the oldest purchase payment first (on a first-in, first-out basis).
For flexible premium policies, the surrender charge is 7% of the amount
withdrawn or surrendered during the first four Policy Years. The surrender
charge declines 1% for each Policy Year until the tenth Policy Year. There is no
charge after the tenth Policy Year, as shown in the following chart:
<TABLE>
<CAPTION>
POLICY YEAR SURRENDER CHARGE
- ----------- ----------------
<S> <C>
1-4 ........................................................ 7%
5 .......................................................... 6%
6 .......................................................... 5%
7 .......................................................... 4%
8 .......................................................... 3%
9 .......................................................... 2%
10 ......................................................... 1%
11 and later................................................ 0%
</TABLE>
(See "Surrender Charges" at page 18 and "Exceptions to Surrender Charges" at
page 19.)
Finally, the value of the Fund shares reflects management fees,
administration fees and other expenses deducted from the assets of the Fund.
(See the Fund prospectus for details.)
6. WHAT ARE THE MINIMUM AND MAXIMUM ADDITIONAL PURCHASE PAYMENTS?
You can make additional purchase payments under a Non-Qualified or
Qualified single premium policy of at least $2,000. We may limit additional
purchase payments to four in any one Policy Year.
For a flexible premium policy, you can make purchase payments of at least
$40 each at any time. You have a choice of sending purchase payments directly to
NYLIAC or through pre-authorized monthly
7
<PAGE> 11
deductions from bank checking accounts and employee payroll deductions. For
Non-Qualified flexible premium policies, the maximum purchase payments we accept
in each Policy Year (excluding any amounts for riders) 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 you apply for the
policy. However, you cannot schedule total purchase payments for the first
Policy Year that 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.
7. HOW ARE PURCHASE PAYMENTS ALLOCATED AMONG THE ALLOCATION ALTERNATIVES?
When you make a purchase payment, you may allocate it to any of the
Allocation Alternatives (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. You may also raise or lower the
percentages (which must be in whole number percentages) that you allocate to
each Allocation Alternative when you make a purchase payment. The minimum amount
which you can allocate to any one Allocation Alternative is $1,000 for a single
premium policy and $10 for a flexible premium policy.
8. WHAT HAPPENS IF PURCHASE PAYMENTS FOR A FLEXIBLE PREMIUM POLICY ARE NOT
MADE?
If we do not receive a purchase payment for a period of two years and both
(a) the total purchase payments for the policy, less any partial withdrawals and
any surrender charges, and (b) the policy's value, are less than $2,000, we
reserve the right to terminate the policy. We will notify you in your annual
report of our intention to exercise this right on the 90th day following that
Policy Anniversary if we do not receive a purchase payment from you before the
end of that 90-day period. If we terminate your policy, we will pay you the
policy's value in one lump sum.
9. CAN I WITHDRAW MONEY FROM THE POLICY BEFORE MY INCOME PAYMENTS ARE
SCHEDULED TO BEGIN?
You may make withdrawals from your policy before your Income Payments are
scheduled to begin and while the Annuitant is alive. Your withdrawal requests
must be in a form that is acceptable to us. Under most circumstances, the
minimum partial withdrawal is $100. Withdrawals may be subject to a surrender
charge. In addition, you may have to pay income tax and a 10% penalty tax may
apply if you are under the age of 59 1/2. (See "Distributions Under the Policy"
at page 21 and "Federal Tax Matters" at page 27.)
10. HOW WILL INCOME PAYMENTS BE MADE?
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, on a variable
basis or a combination of both. In either case, you select the type of payments.
Fixed Income Payments will always be in the same specified amount. The
amount of Variable Income Payments will increase or decrease according to the
performance of the Common Stock Investment Division. (See "Income Payments" at
page 23.)
11. WHAT IF THE ANNUITANT BECAME TOTALLY DISABLED?
If you have a Total Disability Benefit rider included in your flexible
premium policy, we will credit benefit amounts as 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
17.)
12. WHAT HAPPENS IF THE ANNUITANT DIES BEFORE INCOME PAYMENTS BEGIN?
If the Annuitant dies before Income Payments begin, we will pay the
Beneficiary under the policy an amount equal to the greater of:
(a) the policy's value or
(b) the total of all purchase payments made, less any partial
withdrawals, surrender charges, and premium amounts paid for riders.
However, if you are the Annuitant and your spouse is the Beneficiary and
Contingent Annuitant, see Questions & Answers 13 & 14. (Also see "Death Before
Retirement Date" at page 22 and "Federal Tax Matters" at page 27.)
8
<PAGE> 12
13. WHAT HAPPENS IF I DIE BEFORE INCOME PAYMENTS BEGIN?
In the event you die before Income Payment begins, we will pay the
Beneficiary under the policy an amount equal to the greater of:
(a) the policy's value or
(b) the total of all purchase payments made, less any partial
withdrawals, surrender charges, and premium amounts paid for riders.
If you are not the Annuitant but your spouse is the Beneficiary, or if your
spouse or the Annuitant's spouse is the Beneficiary and Contingent Annuitant, we
can pay the proceeds to the surviving spouse on your death prior to the date
Income Payments are scheduled to begin. The surviving spouse can also choose to
continue as the new policy owner. (See "Death Before Retirement Date" at page 22
and "Federal Tax Matters" at page 27.)
14. WHAT IS A CONTINGENT ANNUITANT?
Previously, in the application for a Non-Qualified Policy, you could name a
Contingent Annuitant. The Contingent Annuitant, who generally must be the spouse
of the Annuitant, is the person who becomes the new Annuitant at the death of
the Annuitant if (a) Income Payments have not begun and (b) you are still
living. Currently, the policies do not provide for the naming of Contingent
Annuitants.
15. WHAT ABOUT VOTING RIGHTS?
You can instruct NYLIAC how to vote shares of the Funds in which you have a
voting interest through the Separate Accounts. (See "Voting Rights" at page 29.)
16. HOW IS THE PAST INVESTMENT PERFORMANCE OF THE SEPARATE ACCOUNTS
CALCULATED?
We may advertise yields and total returns for the Investment Divisions. In
addition, we may advertise the effective yield of the Money Market Investment
Divisions. We base these figures 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.
YIELDS. 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. We calculate the yield by assuming that the income
generated for that seven-day period is generated each seven-day period over a
52-week period. The current yield is shown as a percentage of the investment. We
calculate the effective yield similarly but, when annualized, we assume the
income earned by an investment in the Money Market Investment Division is
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 Bond Investment Division over a specified
thirty-day period. We calculate the yield 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. The current yield is shown as a percentage of the
investment.
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.
TOTAL RETURN CALCULATIONS. The total return of a Bond or Common Stock
Investment Division refers to return quotations assuming an investment has been
held in the Bond or Common Stock 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,
assuming an initial investment of $1,000 is surrendered at the end of the
periods shown. The figures will reflect all Separate Account and Fund annual
expenses.
We may from time to time also calculate average annual total return and
cumulative total return for the Investment Divisions that does not reflect the
deduction of any surrender charges. We may from time to time also calculate
yields, standard total returns, and non-standard total returns for the
Portfolios of the MainStay
9
<PAGE> 13
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.
We will show non-standard performance data only if the standard performance
data for the same period, as well as for the required periods, are also shown.
For additional information regarding the calculation of other performance data,
please refer to the Statement of Additional Information.
17. HOW DO I CONTACT NYLIAC?
For general inquiries and written requests, you can contact your agent or
the Service Center that services your 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>
10
<PAGE> 14
CONDENSED FINANCIAL INFORMATION
NYLIAC MFA SEPARATE 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 PricewaterhouseCoopers LLP, independent
accountants, whose report on the related financial statements appears in the
Statement of Additional Information. You should read this information in
conjunction with the Separate Accounts' financial statements and notes thereto,
which appear in the Statement of Additional Information.
<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 $16.10 $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
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 $17.81 $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
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 $18.87 $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
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 $21.69 $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
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 $23.19 $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
</TABLE>
11
<PAGE> 15
<TABLE>
<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
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 $28.44 $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
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 $28.66 $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
JANUARY 1, 1998 TO DECEMBER 31, 1998
---------------------------------------------------------------------
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 1/1/98......... $50.50 $47.08 $31.03 $28.93 $20.02 $18.66
Accumulation Unit value as of 12/31/98....... $63.13 $58.57 $33.44 $31.02 $20.80 $19.29
Number of units outstanding as of 12/31/98... 1,933,808 3,643,423 931,798 1,700,099 211,707 345,170
</TABLE>
NYLIAC MFA SEPARATE ACCOUNT II
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 PricewaterhouseCoopers LLP, independent
accountants, whose report on the related financial statements appears in the
Statement of Additional Information. You should read this information in
conjunction with the Separate Accounts' financial statements and notes thereto,
which appear in the Statement of Additional Information.
<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
</TABLE>
12
<PAGE> 16
<TABLE>
<CAPTION>
JANUARY 1, 1991 TO DECEMBER 31, 1991
---------------------------------------------------------------------
COMMON STOCK BOND MONEY MARKET
INVESTMENT DIVISIONS INVESTMENT DIVISIONS INVESTMENT DIVISIONS
--------------------- --------------------- ---------------------
SINGLE FLEXIBLE SINGLE FLEXIBLE SINGLE FLEXIBLE
PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM
POLICIES POLICIES POLICIES POLICIES POLICIES POLICIES
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Accumulation Unit value as of 1/1/91......... $15.54 $15.01 $18.94 $18.25 $15.96 $15.41
Accumulation Unit value as of 12/31/91....... $20.61 $19.80 $21.77 $20.87 $16.70 $16.04
Number of units outstanding as of 12/31/91... 2,131,325 452,668 2,280,073 366,317 1,008,342 145,561
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
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>
13
<PAGE> 17
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1998 TO DECEMBER 31, 1998
---------------------------------------------------------------------
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 1/1/98......... $50.50 $47.08 $31.15 $28.98 $20.02 $18.66
Accumulation Unit value as of 12/31/98....... $63.13 $58.57 $33.57 $31.07 $20.80 $19.29
Number of units outstanding as of 12/31/98... 2,355,547 327,219 1,321,028 177,293 305,721 44,207
</TABLE>
FINANCIAL STATEMENTS
The audited financial statements of NYLIAC (including the auditor's report)
for the fiscal years ended December 31, 1998, 1997 and 1996 and of the Separate
Accounts (including the auditor's report) for the years ended December 31, 1998
and 1997 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.
14
<PAGE> 18
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
AND THE SEPARATE 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 we describe 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 $25.117 billion at the end of 1998. 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--We rely upon various computer systems to process all
policy transactions and valuations. These systems are being adjusted to enable
us to continue to administer the policies in Year 2000 and later. As is the case
with most systems projects, risks and uncertainties exist, in part due to our
reliance on systems that belong to service providers who are not affiliated with
NYLIAC.
We are devoting substantial resources to make all necessary systems
modifications, and have received assurances from our service providers that they
are taking all necessary steps to address Year 2000 modifications with respect
to the computer systems that they use. Although we cannot give you guarantees,
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 SEPARATE ACCOUNTS
Each of the Separate Accounts was established in May 1983, pursuant to
resolutions of the NYLIAC Board of Directors. The Separate Accounts are
registered as unit investment trusts with the Securities and Exchange Commission
under the Investment Company Act of 1940. This registration does not signify
that the Securities and Exchange Commission supervises the management, or the
investment practices or policies, of the Separate Accounts.
Although the assets of each of the Separate Accounts belong to NYLIAC,
these assets are held separately from our other assets. Each Separate Account's
assets are not chargeable with liabilities incurred in any of NYLIAC's other
business operations (except to the extent that assets in the Separate Accounts
exceed the reserves and other liabilities of that Separate Account). The income,
capital gains and capital losses incurred on the assets of each Separate Account
is credited to or charged against the assets of that Separate Account, 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
Separate Accounts is entirely independent of both the investment performance of
the Fixed Account and any other separate account of NYLIAC.
Each of the Separate Accounts consists of three Investment Divisions for
flexible premium policies and three for single premium policies. In each case,
each Investment Division invests solely in the corresponding Eligible Portfolios
of the Fund. The Eligible Portfolios are the MainStay VP Growth Equity
Portfolio, the MainStay VP Bond Portfolio and the MainStay VP Cash Management
Portfolio.
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.
WE OFFER NO ASSURANCE THAT ANY OF THE ELIGIBLE PORTFOLIOS WILL ATTAIN THEIR
RESPECTIVE STATED OBJECTIVES.
The Fund's shares are also available to certain separate accounts funding
variable life insurance policies offered by NYLIAC. This is called "mixed
funding". Although we do not anticipate any inherent difficulties arising from
mixed funding, it is theoretically possible that, due to differences in tax
treatment or other considerations, the interest of owners of various contracts
participating in the Fund might at some time be in conflict. The Board of
Directors of the Fund, the Fund's investment advisers, and NYLIAC are required
to monitor events to identify any material conflicts that arise from the use of
the Fund for mixed funding. For more information about the risks of mixed
funding, please refer to the Fund prospectus.
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<PAGE> 19
The Eligible Portfolios, along with their investment advisers, are listed
in the following table:
<TABLE>
<CAPTION>
<S> <C> <C>
FUND INVESTMENT ADVISERS ELIGIBLE PORTFOLIOS
MainStay VP Series MacKay-Shields Financial MainStay VP Cash
Fund, Inc. Corporation Management
MainStay VP Series Madison Square Advisors, MainStay VP Growth Equity;
Fund, Inc. Inc. 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. You should
read the Fund prospectus before any decision is made concerning the allocation
of 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. We
may do this if the shares of the Eligible Portfolios are no longer available for
investment, or, if we believe, investment in any Eligible Portfolio would become
inappropriate in view of the purposes of the Separate Accounts. To the extent
required by law, substitutions of shares attributable to your interest in an
Investment Division will not be made until you have been notified of the change.
This does not prevent the Separate Accounts from purchasing other securities for
other series or classes of policies, or from processing a conversion between
series or classes of policies on the basis of requests made by policy owners.
We may establish additional Investment Divisions for each of the Separate
Accounts. Each additional Investment Division will purchase shares in a new
portfolio of the Fund or in another mutual fund. We may establish new Investment
Divisions, in our sole discretion, due to marketing, tax, investment or other
conditions. We will make any new Investment Divisions available to existing
policy owners on a basis we determine. We may also eliminate one or more
Investment Divisions, if, in our sole discretion, marketing, tax, investment or
other conditions so warrant.
In the event of any substitution or change, NYLIAC may, by appropriate
endorsement, make such changes in the policies to reflect such substitution or
change. If deemed to be in the best interests of persons having voting rights,
the Separate 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 are variable. This means that to the extent amounts under the
policies are allocated to the Investment Divisions, the policy's value will
fluctuate based on the performance of the Investment Divisions you select.
NYLIAC does not guarantee the performance of the Separate Accounts or of the
Fund, and you bear the entire investment risk with respect to amounts allocated
to the Investment Divisions. We provide no assurance that the investment
objectives of the Investment Divisions will be achieved. Accordingly, amounts
you allocate to the Investment Divisions are subject to the risks inherent in
the securities markets and, specifically, to price fluctuations of the shares of
the Fund.
We designed the policies described in this prospectus primarily to
establish retirement benefits for two types of purchasers.
16
<PAGE> 20
The first type of purchaser is one, other than those described below, who
purchases a policy to provide supplemental retirement income. Policies purchased
by these individuals are referred to as "Non-Qualified Policies."
The second type of purchaser is one who is eligible to participate in, and
purchases a policy for use with, any one of the following:
(1) pension, profit sharing, or annuity plans qualified under Sections
401 and 403(a) of the Internal Revenue Code (the Code):
(2) annuity purchase plans adopted by certain private tax-exempt
organizations and certain state-supported educational institutions
under certain circumstances under Section 403(b) of the Code;
(3) individual retirement annuities (IRAs) meeting the requirements of
Section 408(b) or 408(k) of the Code; or
(4) deferred compensation plans with respect to service for state and
local governments (and certain other entities) under Section 457 of
the Code.
We refer to policies purchased by these individuals for use with these
plans as "Qualified Policies." (See "Federal Tax Matters" at page 27.)
PURCHASE PAYMENTS
For single premium policies, you can make up to four additional purchase
payments in any Policy Year. Each additional purchase payment must be at least
$2,000.
For flexible premium policies, you can make purchase payments of at least
$40 each at any time by any method NYLIAC makes available. The currently
available methods of payment are direct payments to NYLIAC, pre-authorized
monthly deductions from bank checking accounts and employee payroll deductions.
Although you plan a schedule of purchase payments for Non-Qualified flexible
premium policies, you can make purchase payments at any time before the date
Income Payments are scheduled to begin and while the Annuitant and the policy
owner are living. You can increase or decrease your purchase payments at any
time as long as the total amount of purchase payments for any Policy Year
(excluding any amounts for riders) are not more than the greater of (a) twice
the purchase payments scheduled to be paid in the first Policy Year or (b)
$7,500. However, you may not schedule total purchase payments for the first
Policy Year that 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 as
indicated in the application for the policy. We reserve the right to limit the
dollar amount of any purchase payment.
If we do not receive purchase payments under a flexible premium policy for
a period of two Policy Years, and both (a) the total purchase payments made,
less any partial withdrawals and any surrender charges, and (b) the policy's
value, are less than $2,000, then we may, in our sole discretion, subject to any
applicable state insurance law or regulation, cancel the policy. If we terminate
your policy, we will pay you the policy's value in one lump sum. (See
"Cancellations" at page 22.)
TOTAL DISABILITY BENEFIT RIDER
If you applied for and have a Total Disability Benefit Rider included in,
and in force under, your flexible premium policy, we will credit a benefit
amount as a purchase payment for your policy when you provide proof to us that
the Annuitant has been totally disabled for at least 6 consecutive months. We
will not credit benefit amounts to the policy after Income Payments begin or, if
earlier, after the Policy Anniversary on which the Annuitant is age 65.
Currently, we are not offering this rider and the information here and in the
Statement of Additional Information relates only to existing riders.
TRANSFERS
You may transfer amounts between Investment Divisions of the same Separate
Account or to the Fixed Account, without charge at least 30 days before Income
Payments are scheduled to begin. The minimum
17
<PAGE> 21
amount that may be transferred from one Investment Division to another
Investment Division, 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 the value of the remaining Accumulation Units in an
Investment Division would be less than $100 after you make a transfer, we will
transfer the entire value unless we determine otherwise. We reserve the right to
limit the number of transfers to no more than four in any one Policy Year.
Depending on state requirements, you may also make transfers from the Fixed
Account to the Investment Divisions in certain situations. (See "The Fixed
Account" at page 26.)
Transfer requests must be in writing on a form we provide. We will make
transfers from Investment Divisions based on the Accumulation Unit values at the
end of the Business Day on which we receive the transfer request. (See "Delay of
Payments" at page 25.)
ACCUMULATION PERIOD
(a) Crediting of purchase payments
You can allocate a portion of each purchase payment to one or more
Allocation Alternatives 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 you may allocate to any one Allocation
Alternative is $1,000 for a single premium policy and $10 for a flexible premium
policy.
We credit that portion of each purchase payment you allocate to an
Investment Division to the policy in the form of Accumulation Units. We
determine the number of Accumulation Units credited to a policy by dividing the
amount allocated to each Investment Division by the Accumulation Unit value for
that Investment Division on the Business Day we receive the purchase payment.
The value of an Accumulation Unit will vary depending on 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 26 for a description of interest credited thereto.)
(b) Valuation of Accumulation Units
We expect the value of Accumulation Units to increase or decrease from one
day to the next. 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
Your inquiries should be addressed to the Service Center that services your
policy. (See page 10.)
CHARGES AND DEDUCTIONS
SURRENDER CHARGES
Since no deduction for a sales charge is made from purchase payments, we
impose a surrender charge on certain partial withdrawals and surrenders of the
policies. We measure the surrender charge as a percentage of the amount
withdrawn or surrendered. The surrender charge may apply to certain Income
Payment options.
If you surrender your policy, we deduct the surrender charge from the
amount paid to you. In the case of a partial withdrawal, we deduct surrender
charges 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, we deduct the remainder
of the charge from the amount withdrawn from that Allocation Alternative.
For single premium policies, we keep track of each purchase payment and
assess a charge based on the length of time such payment is in your policy
before it is withdrawn. You may make up to four additional
18
<PAGE> 22
purchase payments each Policy Year on a single premium policy. The surrender
charge is 7% of the amount withdrawn or surrendered during the first Policy Year
that a purchase payment is in your policy. The surrender charge declines 1% for
each additional Policy Year that a purchase payment is in your policy, as shown
in the following chart:
<TABLE>
<CAPTION>
POLICY YEAR OF PURCHASE PAYMENT SURRENDER 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, for purposes of calculating the surrender
charge, we treat withdrawals as coming from the value attributable to the oldest
purchase payment first (on a first-in, first-out basis). Therefore, surrender
charges may apply to any earnings on those purchase payments.
For flexible premium policies, the surrender charge is 7% of the amount
withdrawn or surrendered during the first four Policy Years. The surrender
charge then declines 1% for each Policy Year until the tenth Policy Year so that
there is no charge after the tenth Policy Year, as shown in the following chart:
<TABLE>
<CAPTION>
POLICY YEAR SURRENDER 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
We will not assess a surrender charge:
(a) under a single premium policy, on amounts you withdraw in any one
Policy Year which do not exceed 10% of the policy's 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 Investment
Division) (See "The Fixed Account" at page 26);
(b) when you make a withdrawal or surrender of at least $2,000 and the
entire amount is applied under certain Income Payment options in the policy
(however, if within seven years after the Policy Date, in the case of
single premium policies, or ten years after the Policy Date, in the case of
flexible premium policies, any unpaid amount applied under such Income
Payment option is withdrawn, a surrender charge will be applied to the
amount withdrawn) (See "Income Payments" at page 23);
(c) if NYLIAC cancels the policy;
(d) when we pay proceeds upon the death of the policy owner or the
Annuitant; and
(e) if the aggregate surrender charges under a policy will exceed 8.5%
of the total purchase payments.
In addition, we will not assess a surrender charge to withdrawals from the Fixed
Account in situations described under "The Fixed Account" at page 26.
OTHER CHARGES
(a) Mortality and Expense Risk Charges
Prior to the date Income Payments are scheduled to begin, NYLIAC imposes
risk charges to compensate it for bearing certain mortality and expense risks
under the policies. This charge is equal, on an annual basis,
19
<PAGE> 23
to 1.25% of the average daily net asset value of the applicable Separate Account
and is deducted daily. We guarantee that these charges will not increase. If
these charges are insufficient to cover actual costs and assumed risks, the loss
will fall on NYLIAC. If the charges are more than sufficient, we will add any
excess to our general funds.
The mortality risk assumed is the risk that Annuitants as a group will live
for a longer time than our actuarial tables predict. As a result, we would be
paying more Income Payments than we planned. We also assume a risk that the
mortality assumptions reflected in our guaranteed annuity payment tables, shown
in each policy, will differ from actual mortality experience. Lastly, we assume
a mortality risk that, at the time of death, the guaranteed minimum death
benefit will exceed the policy's Accumulation Value. The expense risk assumed is
the risk that the cost of issuing and administering the policies will exceed the
amount we charge for these services.
(b) Administration Fee
Prior to the date Income Payments are scheduled to begin for flexible
premium policies, we impose an administration fee to cover the cost of providing
policy administration services. This charge is equal, on an annual basis, to
.50% of the average daily net asset value of the applicable Separate 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 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 expenses is a percentage
of net asset value.
(c) Policy Service Charge
For flexible premium policies, we deduct an annual policy service charge
each Policy Year on the Policy Anniversary if on that date the policy's value is
less than $10,000. This charge is the lesser of $30 or 1% of the policy's value
at the end of the Policy Year or on the date of surrender, whichever is
applicable. We deduct the annual policy service charge from each Allocation
Alternative in proportion to its percentage of the policy's value on the Policy
Anniversary. This charge covers the costs for providing services under the
policy such as collecting, processing and confirming purchase payments and
establishing and maintaining the available methods of payment.
(d) Fund Charges
The value of the assets of the Separate Accounts will indirectly reflect
the Fund's total fees and expenses. The Fund's total fees and expenses are not
part of the policy. They may vary in amount from year to year. These fees and
expenses are described in detail in the Fund's prospectus.
TAXES
NYLIAC may, where premium taxes are imposed by state law, deduct such taxes
from your policy either (i) when a purchase payment is received, (ii) when a
surrender or cancellation occurs, or (iii) when Income Payments begin.
Applicable premium tax rates depend upon such factors as your current state of
residency, and the insurance laws and NYLIAC's status in states where premium
taxes are incurred. Current premium tax rates range from 0% to 3.5%. Applicable
premium tax rates are subject to change by legislation, administrative
interpretations or judicial acts.
Under present laws, NYLIAC will also 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 27.) Based upon
these expectations, no charge is being made currently for corporate federal
income taxes which may be attributable to the Separate Accounts. Such a charge
may be made in future years for any federal income taxes NYLIAC incurs.
20
<PAGE> 24
DISTRIBUTIONS UNDER THE POLICY
SURRENDERS AND WITHDRAWALS
You can make partial withdrawals, periodic partial withdrawals, hardship
withdrawals or surrender the policy to receive part or all of the policy's
value, at any time before Income Payments begin and while the Annuitant is
living, by sending a written request to NYLIAC. The amount available for
withdrawal is the policy's value on the Business Day on which we receive the
surrender or withdrawal request (except in the case of periodic partial
withdrawals, for which the amount available for withdrawal is the policy's value
on the established periodic partial withdrawal request date) less any surrender
charges, any applicable policy fee and any premium taxes required by law to be
deducted. If you have not provided us with a written election not to withhold
federal income taxes at the time you make a withdrawal or surrender request,
NYLIAC must by law withhold such taxes from the taxable portion of any surrender
or withdrawal. We will remit that amount to the federal government. In addition,
some states have enacted legislation requiring withholding. We will pay all
surrenders or withdrawals within seven days of receipt of all documents
(including documents necessary to comply with federal and state tax law) in
connection with a withdrawal request or of the periodic partial withdrawal
request date, subject to postponement in certain circumstances. (See "Delay of
Payments" at page 25.)
Since you assume the investment risk with respect to amounts allocated to
the Separate 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 27.)
(a) Surrenders
We will deduct a surrender charge and any premium tax required by law, if
applicable, from the amount paid. We will pay the proceeds to you in a lump sum
unless you elect a different Income Payment method. (See "Income Payments" at
page 23.)
(b) Partial Withdrawals
The minimum amount that can be withdrawn is $100. The amount will be
withdrawn from the Allocation Alternatives in accordance with your request.
If a requested partial withdrawal is greater than the value in the
Allocation Alternative from which you make the withdrawal, we will pay the
entire value of that Allocation Alternative, less any surrender charge that may
apply. You must tell us how to allocate a partial withdrawal among the
Allocation Alternatives.
(c) Periodic Partial Withdrawals
You 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
"Charges and Deductions" at page 18.)
Our confirmation notice will indicate when a withdrawal has resulted in the
near or actual exhaustion of money 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, we will send out
a check for less than the scheduled amount and will cease future payments until
we receive new instructions designating new Allocation Alternatives from which
we can make the withdrawal.
(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
21
<PAGE> 25
other withdrawals which were not subject to a surrender charge in that Policy
Year, exceed 10% of the policy's value.
CANCELLATIONS
If we do not receive any purchase payments under a flexible premium policy
for a period of two Policy Years, and both (a) the total purchase payments made,
less any partial withdrawals and any surrender charges, and (b) the policy's
value, are less than $2,000, we reserve the right to terminate your policy
subject to any applicable state insurance law or regulation.
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. We may pay the policy's value to you in one
lump sum.
We will notify you in your annual report of our intention to exercise these
rights on the 90th day following that Policy Anniversary, unless an additional
purchase payment is received before the end of that 90-day period. If such a
cancellation occurs, we will pay you the policy's value in one lump sum.
RETIREMENT DATE
The Retirement Date is the day that Income Payments are scheduled to begin
unless you surrender the policy or we pay an amount as proceeds to the
designated Beneficiary prior to that date. You specify the Retirement Date. You
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 we receive
written notice of the request 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 DATE
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, we will pay an amount as
proceeds to the designated Beneficiary, as of the date we receive proof of death
and all requirements necessary to make the payment. 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's 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). The Beneficiary may
receive the amount payable in a lump sum or under one of the Income Payment
options.
If the 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 above. Payment will be made in a lump sum to the Beneficiary
unless the policy owner has elected or the Beneficiary elects otherwise in a
signed written notice which gives us the information that we need. If such an
election is properly made, all or part of these proceeds will be:
(i) applied under options 1A or 1B. (See "Income Payments" at page
23.) However, we will pay any unpaid amount remaining under options 1A or
1B at the end of the five-year period following the policy owner's death in
one lump sum to the Beneficiary; or
(ii) used to purchase an immediate annuity for the Beneficiary who
will be the policy 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.
We determine the value of the proceeds at the end of the Business Day
during which death occurs.
For policies issued after January 18, 1985, if (a) the policy owner and the
Annuitant are not the same person and the policy owner's spouse is the
Beneficiary, or (b) the policy owner and the Annuitant are the same individual
and the policy owner's spouse is the Beneficiary and the Contingent Annuitant,
we will pay the proceeds to the surviving spouse if the policy owner dies before
the Retirement Date or the surviving
22
<PAGE> 26
spouse can continue the policy as the new policy owner. Generally, we 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 we will pay benefits under the policy upon the death of
any joint owner. (See "Federal Tax Matters--Taxation of Annuities in General" at
page 27.)
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.
We will make any distribution or application of policy proceeds 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 25.)
INCOME PAYMENTS
(a) Election of Income Payment Options
You may select Income Payments that are either variable, fixed or a
combination of both. At any time before the Retirement Date, you may change the
Income Payment option or request any other method of payment we agree to. If an
Income Payment option is chosen which depends on the continuation of the life of
the Annuitant or of a Joint Annuitant, we may require proof of birth date 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 should be greater.
In the event that an Income Payment option is not selected, we will make
monthly Income Payments which will go on for as long as the Annuitant lives (10
years guaranteed even if the Annuitant dies sooner) 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, 2B or 2A-V below), NYLIAC bears no mortality risk notwithstanding the
mortality risk charge collected by NYLIAC. (See "Other Charges" at page 19.)
(b) Fixed Income Payments
You (or the Beneficiary upon your death or the death of the Annuitant 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 money remaining under this Income Payment option. You can
withdraw this amount at any time in sums of $100 or more. We pay interest
to the date of withdrawal on sums withdrawn.
1B. Interest Payment. NYLIAC pays interest once each month (at an
effective rate of at least 3% per year), every 3 months or 6 months, or
once each year, as chosen, based on the money 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 interest 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 money 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.
23
<PAGE> 27
3B. Life Income-Guaranteed Total Amount. NYLIAC makes an Income
Payment each month during the lifetime of the payee. Income Payments do not
change, and are guaranteed until the total amount paid equals the amount
placed under this Income Payment option, even if the payee dies sooner.
3C. Life Income-Joint and Survivor. NYLIAC makes an Income Payment
each month while one or both of the two payees are living. Income Payments
do not change, and are guaranteed for 10 years, even if both payees die
sooner.
(c) Variable Income Payments
You (or the Beneficiary upon your death or the death of the Annuitant prior
to the Retirement Date) may also elect to have a portion or all of your policy's
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. You may withdraw the current value of any
remaining Income Payments 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. NYLIAC will make
Income Payments 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. NYLIAC will make Income
Payments 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. You tell us the amount of
the policy's value to apply to provide Variable Income Payments. We will
purchase Annuity Units in the Common Stock Investment Division. The amount of
Variable Income Payments will increase or decrease according to the value of the
Annuity Units which reflects the investment experience of that Common Stock
Investment Division. The annuity tables in the policy, which are used to
calculate the value of Variable Income Payments, are based on an "assumed
investment result" of 4% (3 1/2% if the policy is issued for delivery in Florida
or Texas). If the actual net investment experience exactly equals the "assumed
investment result," then the Variable Income Payments will remain the same
(equal to the first Income Payment). However, if actual investment experience
exceeds the "assumed investment result," then the Income Payments will increase.
Conversely, if actual experience is worse, the Income Payments will decrease.
If a higher "assumed investment result" were used, the first Income Payment
would be larger, but subsequent payments would increase more slowly or decrease
more quickly.
The value of all payments (both fixed and variable) will be greater for
shorter guaranteed periods than for longer guaranteed periods, and greater for
life annuities than for joint and survivor annuities, because the payments are
expected to be made for a shorter period.
We describe the method of computation of Variable Income Payments in more
detail in the Statement of Additional Information.
(e) Other Methods of Payment
If NYLIAC agrees, you (or the Beneficiary upon your death or the death of
the Annuitant 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, 2B or
2A-V 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, we will pay any unpaid
policy proceeds 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 27.)
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(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, you should consider, in consultation with legal counsel, 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
We may require satisfactory proof of survival, from time to time, before we
pay any Income Payments or other benefits. We will request the proof at least 30
days prior to the next scheduled benefit payment date.
DELAY OF PAYMENTS
We will pay any amounts due from the Separate Accounts under the policy
within seven days of the date we receive 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 ("NYSE") is closed for other than usual
weekends or holidays, or trading on the NYSE 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, we may delay transfers from the Separate Accounts to
the Fixed Account.
DESIGNATION OF BENEFICIARY
Before the date Income Payments are scheduled to begin and while the
Annuitant is living, you may change the Beneficiary by written notice to NYLIAC.
You may name one or more Beneficiaries. If prior to the date Income Payments are
scheduled to begin, (a) the Annuitant dies before you and (b) 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 you. If you are the Annuitant, the
proceeds pass to your estate.
However, if the policy owner who is not the Annuitant dies before Income
Payments begin, 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, we will require a participant in the ORP (or the participant's
estate if the participant has died) to obtain a certificate of termination from
the employer before the policy is surrendered.
RESTRICTIONS UNDER INTERNAL REVENUE CODE SECTION 403(B)(11)
An employee may not begin distributions attributable to salary reduction
contributions, including the earnings on these contributions, made in years
beginning after December 31, 1988 before the employee attains age of 59 1/2,
separate from service, dies or becomes disabled. An employee also may not begin
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<PAGE> 29
distributions attributable to earnings in such years on salary reduction
accumulations held as of the end of the last year beginning before January 1,
1989 if the employee is under 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 still be subject to a 10% penalty tax as a
premature distribution. To the extent that these limitations on distributions
conflict with the redeemability provisions of the Investment Company Act of
1940, 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 the Separate Accounts. NYLIAC has sole discretion to invest the
assets of the Fixed Account subject to applicable law. The Fixed Account is not
registered under the federal securities laws and is generally not subject to
their provisions. Furthermore, 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 purchase payments or portions of purchase payments allocated or
transferred to the Fixed Account. 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
We may apply surrender charges to withdrawals from the Fixed Account. (See
"Surrender Charges" at page 18.) In addition to the "Exceptions to Surrender
Charges" described at page 19, subject to any applicable state insurance law or
regulation, we will not impose a surrender charge on any amount withdrawn from
the Fixed Account if (a) 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 (b) you withdraw part or all of
that amount allocated to the Fixed Account within 60 days after that Policy
Anniversary. (For single premium policies, we make this determination
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, we reserve the right to
set a separate yearly interest rate and period for which this rate is guaranteed
for amounts transferred to the Fixed Account.)
(c) Transfers to Investment Divisions
Depending on state filing and review processes, we may transfer amounts
from the Fixed Account to the Investment Divisions up to 30 days prior to the
date Income Payments are scheduled to begin, subject to the following
conditions.
1. You may transfer an amount 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 you make a transfer request
within 60 days after that Policy Anniversary. 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, you may transfer up to 10% of the policy's value at the
beginning of the Policy Year Divisions. However, the amount you transfer
will reduce, by an equivalent amount, the total amount that you may
withdraw during that Policy Year from the policy's value under the first
exception to the imposition of surrender charges described under
"Exceptions to Surrender Charges" at page 19. In addition, any amount you
withdraw during a Policy Year under that first exception to the imposition
of a surrender charge will limit subsequent amounts that you may transfer
from the Fixed Account under this condition.
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<PAGE> 30
3. For flexible premium policies, except as stated in (c)1 above, we
do not permit transfers from the Fixed Account during the first ten Policy
Years.
4. For single premium policies, we permit transfers of at least the
minimum amount after the first seven Policy Years following the purchase
payment to which an amount to be transferred is attributed. For flexible
premium policies, we permit transfers of at least the minimum amount after
the first ten Policy Years. The minimum amount that you may transfer 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 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 value in the Fixed Account must be at least $100. If, after a
transfer, the remaining value in the Fixed Account would be less than $100,
we may include that amount in the transfer.
For both single and flexible premium policies, we reserve the right to
limit the total number of transfers to no more than four in any one Policy Year.
We also reserve the right to limit the dollar amount of any transfers. (See
"Transfers" at page 17.)
You must make transfer requests in writing on a form NYLIAC provides.
(d) General Matters
We may delay payments of any amount due from the Fixed Account. 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 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's value, on
Income Payments and on the economic benefit to you, the Annuitant or the
Beneficiary depends on the type of retirement plan for which the Qualified
Policy is purchased. It also depends 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 our
understanding of the present federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to the
likelihood of continuation of the present federal income tax laws or of the
current interpretations by the Internal Revenue Service. Moreover, this
discussion does not take into consideration 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 a policy 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 policy's value (i.e., "withdrawals") or as Income
Payments under the Income Payment option elected. The exception to this rule is
that, generally, a policy owner who is not a natural person must include in
income any increase in the excess of the policy's 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. 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's 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
27
<PAGE> 31
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
Income Payments begin, amounts received are first treated as taxable income to
the extent that the policy's 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's 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.
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 issued by NYLIAC (or its
affiliates) after October 21, 1988 to the same policy owner during any calendar
year are to be treated as one annuity contract for purposes of determining the
amount includible in an individual's gross income. In addition, there may be
other situations in which the Treasury Department may conclude (under its
authority to issue regulations) that it would be appropriate to aggregate two or
more annuity contracts purchased by the same policy owner. Accordingly, a policy
owner should consult a competent tax advisor before purchasing more than one
policy or other annuity contract.
A transfer of ownership of a policy, or designation of an annuitant or
other beneficiary who is not also the policy owner, may result in certain income
or gift tax consequences to the policy owner that are beyond the scope of this
discussion. A policy owner contemplating any transfer or assignment of a policy
should contact a competent tax adviser with respect to the potential tax effects
of such a transaction.
QUALIFIED PLANS
The Qualified Policy is designed for use with several types of qualified
plans. The tax rules applicable to participants and Beneficiaries in such
qualified plans vary according to the type of plan and the terms and conditions
of the plan itself. Special favorable tax treatment may be available for certain
types of contributions and distributions (including special rules for certain
lump sum distributions). Adverse tax consequences may result from contributions
in excess of specified limits, distributions prior to age 59 1/2 (subject to
certain exceptions), distributions that do not conform to specified minimum
distribution rules, aggregate distributions in excess of a specified annual
amount, and in certain other circumstances. Therefore, this discussion only
provides general information about use of the policies with the various types of
qualified plans. Policy owners
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<PAGE> 32
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. Policy owners under qualified plans should seek competent legal and
tax advice regarding their particular circumstances.
(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" plan.
Individual Retirement Annuities 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 Annuities 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 governments 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. It 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.
VOTING RIGHTS
The Fund is not required and typically does not 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.
To the extent required by law, the Eligible Portfolio shares held in the
Separate Accounts will be voted by NYLIAC at special shareholder meetings of the
Fund in accordance with instructions we receive from persons having voting
interests in the corresponding Investment Division. If, however, the federal
securities laws is amended, or if its present interpretation should change, and
as a result, NYLIAC determines that it is allowed to vote the Eligible Portfolio
shares in its own right, we may elect to do so.
The number of votes which are available to you will be calculated
separately for each Investment Division. That number will be determined by
applying your percentage interest, if any, in a particular Investment Division
to the total number of votes attributable to the Investment Division.
Prior to the date Income Payments are scheduled to begin, you hold a voting
interest in each Investment Division to which you have money allocated. The
number of votes which are available to you will be determined by dividing the
policy's value attributable to an Investment Division by the net asset value per
share of the applicable Eligible Portfolios.
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<PAGE> 33
After the date Income Payments are scheduled to begin, the person receiving
Variable Income Payments has the voting interest. The number of votes 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. 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 established by the Fund. Voting instructions will be
solicited by written communication prior to such meeting in accordance with
procedures established by the Fund.
If we do not receive timely instructions, we will vote those shares 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 ("SAI") is available which contains
more details concerning the subjects discussed in this prospectus. The following
is the Table of Contents for the SAI:
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 SEPARATE ACCOUNT ASSETS...................... 8
STATE REGULATION............................................ 8
RECORDS AND REPORTS......................................... 8
LEGAL PROCEEDINGS........................................... 8
INDEPENDENT ACCOUNTANTS..................................... 9
OTHER INFORMATION........................................... 9
FINANCIAL STATEMENTS........................................ F-1
</TABLE>
- --------------------------------------------------------------------------------
To obtain a Facilitator SAI, please call or send in this request form to the
Service Center that services your policy.
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip
30
<PAGE> 34
The Facilitator:
A contemporary retirement annuity
for dynamic financial times
YOUR STATEMENTS OF
ADDITIONAL INFORMATION
LOGO
<PAGE> 35
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, 1999
This Statement of Additional Information ("SAI") is not a prospectus. This
SAI contains information that expands upon subjects discussed in the current
Facilitator prospectus. You should read the SAI in conjunction with the current
Facilitator prospectus, dated May 1, 1999. You may obtain a copy of the
prospectus by calling or writing NYLIAC at the Service Center that services your
policy (see page 10 of the prospectus.) Terms used but not defined in the SAI
have the same meaning as in the current Facilitator prospectus.
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................................. 6
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 SEPARATE 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> 36
THE POLICIES
The following provides additional information about the policies, to
supplement the description in the prospectus.
TOTAL DISABILITY BENEFIT RIDER
As described in the prospectus, the Total Disability Benefit Rider credits
benefit amounts as purchase payments if the Annuitant is totally disabled for at
least six consecutive months. No benefit amounts will be credited to the policy
after Income Payments begin or, if earlier, the Policy Anniversary on which the
Annuitant is age 65. The Annuitant is considered to be totally disabled if he or
she is 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 he or she is 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 28 of the prospectus.)
For Non-Qualified Policies, only total disabilities of the Annuitant are
covered. 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 Benefit Rider
have been discontinued.
VALUATION OF ACCUMULATION UNITS
Accumulation Units are valued separately for each Investment Division of
each Separate 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
Business Day equals the value of an Accumulation Unit in that Investment
Division as of the immediately preceding Business Day multiplied by the "Net
Investment Factor" for that Investment Division for the current Business Day.
We determine the Net Investment Factor for each Investment Division for any
period from the close of the preceding Business Day to the close of the current
Business Day ("Valuation Period") is determined by the following formula:
(a/b) - c
Where:(a) = 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
2
<PAGE> 37
during the current Valuation Period, plus or minus (only in the
case of NYLIAC MFA Separate Account II Investment Divisions),
(3) a charge or credit, if any, for taxes;
(b) = 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 NYLIAC MFA Separate Account II
Investment Divisions),
(2) a charge or credit, if any, for taxes; and
(c) = 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 the Separate Accounts. For single premium
policies, the factor is equal, on an annual basis, to 1.25% of the
daily net asset value of the Separate Accounts.
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 on a variable basis are computed as follows. The
policy's value (or portion of the policy's 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 Annuity Units in the Investment Divisions of the Separate Accounts
corresponding to the Growth Equity Portfolio. The policy value you tell us to
apply to provide Variable Income Payments will be used to purchase Annuity Units
in the Common Stock Investment Division. 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 date Income Payments begin.
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 value of the Annuity Unit 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 Separate 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
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 Income Payments begin 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 date Income Payments begin, while the policy owner is still
living, the Contingent Annuitant is alive at the death of the Primary Annuitant,
the proceeds of a Non-Qualified Policy will not be paid to the Beneficiary at
the death of the Primary Annuitant. Instead, the policy will continue in force
and the proceeds will be paid upon the death of the Contingent Annuitant or upon
the death of the policy owner if earlier. All policy owner rights and the
benefits provided under the policy will continue during the lifetime of the
Contingent Annuitant, as provided in the policy, as if the Contingent Annuitant
were the Annuitant, except for the Total Disability Benefit Rider. (See "Total
Disability Benefit Rider" at page 17 of the prospectus and at
3
<PAGE> 38
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 27 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. We compute this current
annualized yield 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 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. We calculate the
effective yield 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, 1998, the annualized yields
for the single premium policies for the Money Market Investment Division were
4.22% for NYLIAC MFA Separate Account I and 4.23% for NYLIAC MFA Separate
Account II. For the same period, the annualized yields for the flexible premium
policies for the Money Market Investment Division were 3.65% for NYLIAC MFA
Separate Account I and 3.73% for NYLIAC MFA Separate Account II.
For the seven-day period ending December 31, 1998, the effective yield for
the single premium policies for the Money Market Investment Division was 4.31%
for NYLIAC MFA Separate Accounts I and II. For the same period, the effective
yields for the flexible premium policies for the Money Market Investment
Division were 3.72% for NYLIAC MFA Separate Account I and 3.79% for NYLIAC MFA
Separate 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. We compute the yield 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:
a-b 6
YIELD = 2((---+1) -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.
4
<PAGE> 39
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 particular policy. Surrender charges range from 7% to 0% of
the amount withdrawn depending on the elapsed time since the policy was issued.
Because of these charges and deductions 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, 1998, the annualized yields for
the Bond Investment Divisions were 3.57% and 3.07% respectively, for single
premium policies and flexible premium policies.
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. We compute the average annual total return 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:
n
P(1+T) = 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, 1998, and the
period from January 23, 1984 to December 31, 1998, respectively, the average
annual total returns for the single premium policies for the Bond Investment
Division were 0.22%, 4.92%, 7.60%, and 8.23%, respectively, for NYLIAC MFA
Separate Account I, and 0.22%, 4.92%, 7.60%, and 8.27%, respectively, for NYLIAC
MFA Separate Account II. For the same periods, the average annual total returns
for flexible premium policies for the Bond Investment Division were -0.28%,
3.75%, 6.96%, and 7.70%, respectively, for NYLIAC MFA Separate Account I, and
- -0.28%, 3.75%, 6.96%, and 7.72%, respectively, for NYLIAC MFA Separate Account
II.
For the one, five, and ten year periods ending December 31, 1998, and the
period from January 23, 1984 to December 31, 1998, respectively, the average
annual total returns for the single premium policies for the Common Stock
Investment Division were 16.27%, 18.93%, 16.76%, and 13.28%, respectively, for
NYLIAC MFA Separate Account I. For the same periods, the average annual total
returns for flexible premium policies for the Common Stock Investment Division
were 15.69%, 17.60%, 16.06%, and 12.71%, respectively, for NYLIAC MFA Separate
Account I.
For the one, five, and ten year periods ending December 31, 1998, and the
period from January 18, 1985 to December 31, 1998, respectively, the average
annual total returns for the single premium policies for the Common Stock
Investment Division were 16.27%, 18.93%, 16.76%, and 14.24%, respectively, for
NYLIAC MFA Separate Account II. For the same periods, the average annual total
returns for flexible premium policies for the Common Stock Investment Division
were 15.69%, 17.60%, 16.06%, and 13.55%, respectively, for NYLIAC MFA Separate
Account II.
5
<PAGE> 40
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 will not be reflected.
Using the non-standard format, for the one, five, and ten year periods
ending December 31, 1998, and the period from January 23, 1984 to December 31,
1998, respectively, the average annual total returns for the single premium
policies for the Bond Investment Division were 7.76%, 5.56%, 7.60%, and 8.23%,
respectively, for NYLIAC MFA Separate Account I, and 7.76%, 5.56%, 7.60%, and
8.27%, respectively, for NYLIAC MFA Separate Account II. For the same periods,
the average annual total returns for flexible premium policies for the Bond
Investment Division were 7.23%, 5.04%, 7.06%, and 7.70%, respectively, for
NYLIAC MFA Separate Account I, and 7.23%, 5.04%, 7.06%, and 7.72%, respectively,
for NYLIAC MFA Separate Account II.
For the one, five, and ten year periods ending December 31, 1998, and the
period from January 23, 1984 to December 31, 1998, respectively, the average
annual total returns for the single premium policies for the Common Stock
Investment Division were 25.02%, 19.66%, 16.76%, and 13.28%, respectively, for
NYLIAC MFA Separate Account I. For the same periods, the average annual total
returns for flexible premium policies for the Common Stock Investment Division
were 24.40%, 19.06%, 16.18%, and 12.71%, respectively, for NYLIAC MFA Separate
Account I.
For the one, five, and ten year periods ending December 31, 1997, and the
period from January 18, 1985 to December 31, 1998, respectively, the average
annual total returns for the single premium policies for the Common Stock
Investment Division were 25.02%, 19.66%, 16.76%, and 14.24%, respectively, for
NYLIAC MFA Separate Account II. For the same periods, the average annual total
returns for flexible premium policies for the Common Stock Investment Division
were 24.40%, 19.06%, 16.18%, and 13.63%, respectively, for NYLIAC MFA Separate
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. Dividends are not
paid.
MISSTATEMENT OF AGE OR SEX. If the Annuitant's stated age and/or sex 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 25 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 before Income Payments begin
6
<PAGE> 41
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 27 of the Prospectus.)
MODIFICATION. NYLIAC may not modify the policy without your consent 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.
FEDERAL TAX MATTERS
TAXATION OF NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
NYLIAC is taxed as a life insurance company. Because the Separate 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 Separate Accounts are reinvested and are taken into account
in determining a policy's 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
Separate 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
Separate Accounts, through the Fund, intend to comply with the diversification
requirements prescribed 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 Separate 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, we reserve 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
Separate 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 Income Payments
begin 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
Income Payments begin, 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. Thus, no
assurance can be given that the provisions contained in such policies issued
after January 18, 1985 satisfy all such Code requirements. The
7
<PAGE> 42
provisions contained in Non-Qualified Policies issued after January 18, 1985
will be reviewed and modified if necessary to assure that they comply with the
Code requirements when clarified by regulation or otherwise.
Withholding of federal income taxes on the taxable portion of all
distributions may be required unless the recipient elects not to have any such
amounts withheld and properly notifies NYLIAC of that election. Different rules
may apply to United States citizens or expatriates living abroad. In addition,
some states have enacted legislation requiring withholding.
Even if a recipient elects no withholding, special withholding rules may
require NYLIAC to disregard the recipient's election if the recipient fails to
supply NYLIAC with a "TIN" or taxpayer identification number (social security
number for individuals) or if the Internal Revenue Service notifies NYLIAC that
the TIN provided by the recipient is incorrect.
DISTRIBUTOR OF THE POLICIES
NYLIFE Distributors Inc. ("NYLIFE Distributors") is the distributor of the
policies. 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. For the year
ended December 31, 1996, 1997 and 1998, the aggregate amount of underwriting
commissions paid to NYLIFE Distributors Inc. was $1,170,817, $1,221,372 and
$1,285,844, respectively, of which $585,409, $610,686 and $642,922,
respectively, was retained by them.
The policies are sold and premium payments are accepted on a continuous
basis.
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
The Separate Accounts hold title to the assets of the Separate Accounts.
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 Separate 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
NYLIAC maintains all records and accounts relating to the Separate
Accounts. As presently required by the federal securities laws, NYLIAC will mail
to you at your last known address of record, at least semi-annually after the
first policy year, reports containing such information as may be required under
the federal securities laws or by any other applicable law or regulation.
LEGAL PROCEEDINGS
NYLIAC is a defendant in individual and/or alleged class action suits
arising from its agency sales force, insurance (including variable contracts
registered under the federal securities law), investment, retail securities
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 which cannot be predicted, NYLIAC nevertheless believes that, after
provisions made in the financial statements, the ultimate
8
<PAGE> 43
liability that could result from litigation and proceedings would not have a
material adverse effect on NYLIAC's financial position; however, it is possible
that settlements or adverse determinations in one or more actions or other
proceedings in the future could have a material adverse effect on NYLIAC's
operating results for a given year.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, independent accountants, audited the annual
financial statements of the Separate Accounts and NYLIAC. Their reports appear
in this Statement of Additional Information. The financial statements included
in this Statement of Additional Information have been included in reliance on
the reports of PricewaterhouseCoopers LLP, given on the authority of said firm
as experts in auditing and accounting.
OTHER INFORMATION
NYLIAC filed a registration statement 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. We have not
included all of the information set forth in the registration statement,
amendments and exhibits the registration statement has been included in this
Statement of Additional Information. We intend the statements contained in this
Statement of Additional Information concerning the content of the policies and
other legal instruments to be summaries. For a complete statement of the terms
of these documents, you should refer to the instruments filed with the
Securities and Exchange Commission.
9
<PAGE> 44
NYLIAC MFA SEPARATE ACCOUNTS-I
TAX-QUALIFIED POLICIES
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK BOND MONEY MARKET
INVESTMENT INVESTMENT INVESTMENT
DIVISIONS DIVISIONS DIVISIONS
--------------------------- --------------------------- ---------------------------
SINGLE FLEXIBLE SINGLE FLEXIBLE SINGLE FLEXIBLE
PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM
POLICIES POLICIES POLICIES POLICIES POLICIES POLICIES
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment in MainStay VP Series Fund,
Inc., at net asset value............ $122,483,942 $214,355,903 $ 31,254,831 $ 52,974,920 $ 4,416,677 $ 6,687,629
LIABILITIES:
Liability to New York Life Insurance
and Annuity Corporation for
mortality and expense risk
charges............................. 401,740 972,199 96,113 234,324 13,925 28,290
------------ ------------ ------------ ------------ ------------ ------------
Total equity...................... $122,082,202 $213,383,704 $ 31,158,718 $ 52,740,596 $ 4,402,752 $ 6,659,339
============ ============ ============ ============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units
outstanding: 1,933,808; 3,643,423;
931,798; 1,700,099; 211,707;
345,170, respectively............. $122,082,202 $213,383,704 $ 31,158,718 $ 52,740,596 $ 4,402,752 $ 6,659,339
============ ============ ============ ============ ============ ============
Variable accumulation unit value.... $ 63.13 $ 58.57 $ 33.44 $ 31.02 $ 20.80 $ 19.29
============ ============ ============ ============ ============ ============
Identified Cost of Investment........... $ 92,259,039 $157,084,526 $ 31,256,758 $ 51,422,131 $ 4,416,645 $ 6,687,598
============ ============ ============ ============ ============ ============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1998
<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....................... $ 894,167 $ 1,562,249 $ 1,634,385 $ 2,757,329 $ 234,618 $ 344,988
Mortality and expense risk charges.... (1,460,503) (3,510,922) (398,446) (960,075) (57,254) (118,097)
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss)...... (566,336) (1,948,673) 1,235,939 1,797,254 177,364 226,891
------------ ------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED
GAIN (LOSS):
Proceeds from sale of investments..... 20,959,131 30,743,835 7,905,044 10,446,433 1,981,587 2,056,000
Cost of investments sold.............. (14,600,914) (17,733,882) (7,666,341) (9,305,325) (1,981,584) (2,056,085)
------------ ------------ ------------ ------------ ------------ ------------
Net realized gain (loss)
on investments.................. 6,358,217 13,009,953 238,703 1,141,108 3 (85)
Realized gain distribution received... 9,090,185 15,881,971 802,262 1,353,476 -- --
Change in unrealized appreciation
(depreciation) on investments....... 11,324,734 17,478,811 108,930 (453,461) 27 126
------------ ------------ ------------ ------------ ------------ ------------
Net gain on investments........... 26,773,136 46,370,735 1,149,895 2,041,123 30 41
------------ ------------ ------------ ------------ ------------ ------------
Decrease attributable to funds of
New York Life Insurance and Annuity
Corporation retained by Separate
Account............................. (70,695) (170,653) (5,876) (14,113) (549) (1,129)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in total equity
resulting from operations....... $ 26,136,105 $ 44,251,409 $ 2,379,958 $ 3,824,264 $ 176,845 $ 225,803
============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-1
<PAGE> 45
STATEMENT OF CHANGES IN TOTAL EQUITY
For the years ended December 31, 1998
and December 31, 1997
<TABLE>
<CAPTION>
COMMON STOCK
INVESTMENT DIVISIONS
------------------------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES
------------------------------ ------------------------------
1998 1997 1998 1997
------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment income (loss).................... $ (566,336) $ (564,116) $ (1,948,673) $ (1,931,412)
Net realized gain (loss) on investments......... 6,358,217 4,215,822 13,009,953 8,950,270
Realized gain distribution received............. 9,090,185 14,771,244 15,881,971 25,537,359
Change in unrealized appreciation (depreciation)
on investments................................ 11,324,734 5,780,475 17,478,811 8,692,840
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation
retained by
Separate Account.............................. (70,695) (51,898) (170,653) (126,748)
------------ ------------ ------------ ------------
Net increase in total equity resulting
from operations............................. 26,136,105 24,151,527 44,251,409 41,122,309
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments.................. 867,915 754,147 3,915,025 4,629,389
Policyowners' surrenders........................ (17,529,095) (11,263,827) (31,093,451) (27,429,297)
Policyowners' annuity and death benefits........ (328,002) (1,293,819) (909,451) (1,085,309)
Net transfers from (to) Fixed Account........... 636,061 504,772 887,298 1,204,503
Transfers between Investment Divisions.......... (1,288,107) 466,315 210,211 1,492,856
------------ ------------ ------------ ------------
Net contributions and withdrawals............. (17,641,228) (10,832,412) (26,990,368) (21,187,858)
------------ ------------ ------------ ------------
Increase (decrease) in total equity......... 8,494,877 13,319,115 17,261,041 19,934,451
TOTAL EQUITY:
Beginning of year............................... 113,587,325 100,268,210 196,122,663 176,188,212
------------ ------------ ------------ ------------
End of year..................................... $122,082,202 $113,587,325 $213,383,704 $196,122,663
============ ============ ============ ============
</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> 46
NYLIAC MFA SEPARATE ACCOUNT-I
TAX-QUALIFIED POLICIES
<TABLE>
<CAPTION>
BOND MONEY MARKET
INVESTMENT DIVISIONS INVESTMENT DIVISIONS
--------------------------------------------------------- ---------------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES POLICIES POLICIES
--------------------------- --------------------------- --------------------------- ---------------------------
1998 1997 1998 1997 1998 1997 1998 1997
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,235,939 $ 1,689,631 $ 1,797,254 $ 2,598,722 $ 177,364 $ 228,081 $ 226,891 $ 287,523
238,703 193,056 1,141,108 968,705 3 (112) (85) (239)
802,262 95,013 1,353,476 163,372 -- -- -- --
108,930 766,951 (453,461) 705,665 27 184 126 342
(5,876) (6,734) (14,113) (16,251) (549) (391) (1,129) (1,000)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
2,379,958 2,737,917 3,824,264 4,420,213 176,845 227,762 225,803 286,626
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
380,797 149,719 1,248,734 1,770,297 22,211 53,680 256,021 335,693
(6,440,695) (4,949,859) (9,697,341) (10,332,134) (1,384,586) (1,892,719) (1,679,773) (2,748,767)
(97,091) (262,993) (254,292) (511,771) 1,261 (15,502) (68,684) (72,602)
117,867 (13,052) 129,666 (186,189) (5,137) (212,192) 1,871 (76,561)
997,456 (868,097) (565,295) (2,077,747) 276,610 407,401 357,038 585,963
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(5,041,666) (5,944,282) (9,138,528) (11,337,544) (1,089,641) (1,659,332) (1,133,527) (1,976,274)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(2,661,708) (3,206,365) (5,314,264) (6,917,331) (912,796) (1,431,570) (907,724) (1,689,648)
33,820,426 37,026,791 58,054,860 64,972,191 5,315,548 6,747,118 7,567,063 9,256,711
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 31,158,718 $ 33,820,426 $ 52,740,596 $ 58,054,860 $ 4,402,752 $ 5,315,548 $ 6,659,339 $ 7,567,063
============ ============ ============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-3
<PAGE> 47
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK BOND MONEY MARKET
INVESTMENT INVESTMENT INVESTMENT
DIVISIONS DIVISIONS DIVISIONS
--------------------------- --------------------------- ---------------------------
SINGLE FLEXIBLE SINGLE FLEXIBLE SINGLE FLEXIBLE
PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM PREMIUM
POLICIES POLICIES POLICIES POLICIES POLICIES POLICIES
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investment in MainStay VP
Series Fund, Inc., at net asset
value............................... $149,190,568 $ 19,251,450 $ 44,482,903 $ 5,532,735 $ 6,377,846 $ 856,228
LIABILITIES:
Liability to New York Life Insurance
and Annuity Corporation for
mortality and expense risk
charges............................. 483,514 87,245 141,467 24,168 19,890 3,344
------------ ------------ ------------ ------------ ------------ ------------
Total equity...................... $148,707,054 $ 19,164,205 $ 44,341,436 $ 5,508,567 $ 6,357,956 $ 852,884
============ ============ ============ ============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units
outstanding: 2,355,547; 327,219;
1,321,028; 177,293; 305,721;
44,207, respectively.............. $148,707,054 $ 19,164,205 $ 44,341,436 $ 5,508,567 $ 6,357,956 $ 852,884
============ ============ ============ ============ ============ ============
Variable accumulation
unit value........................ $ 63.13 $ 58.57 $ 33.57 $ 31.07 $ 20.80 $ 19.29
============ ============ ============ ============ ============ ============
Identified Cost of Investment........... $112,825,145 $ 14,601,743 $ 44,532,714 $ 5,468,593 $ 6,377,794 $ 856,226
============ ============ ============ ============ ============ ============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1998
<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....................... $ 1,086,899 $ 140,042 $ 2,312,094 $ 287,274 $ 327,897 $ 37,952
Mortality and expense risk charges.... (1,737,232) (313,787) (570,421) (98,795) (80,029) (12,993)
------------ ------------ ------------ ------------ ------------ ------------
Net investment income (loss)...... (650,333) (173,745) 1,741,673 188,479 247,868 24,959
------------ ------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED
GAIN (LOSS):
Proceeds from sale of investments..... 19,129,549 2,903,786 8,322,044 1,017,783 2,489,402 412,858
Cost of investments sold.............. (13,735,713) (1,854,558) (8,185,830) (890,941) (2,489,385) (412,855)
------------ ------------ ------------ ------------ ------------ ------------
Net realized gain on
investments..................... 5,393,836 1,049,228 136,214 126,842 17 3
Realized gain distributions
received............................ 11,049,518 1,423,685 1,134,926 141,013 -- --
Change in unrealized appreciation
(depreciation) on investments....... 15,285,530 1,681,228 394,096 (61,254) 23 1
------------ ------------ ------------ ------------ ------------ ------------
Net gain on investments........... 31,728,884 4,154,141 1,665,236 206,601 40 4
------------ ------------ ------------ ------------ ------------ ------------
Decrease attributable to funds of
New York Life Insurance and Annuity
Corporation retained by Separate
Account............................. (83,962) (15,209) (8,365) (1,451) (758) (121)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in total equity
resulting from operations....... $ 30,994,589 $ 3,965,187 $ 3,398,544 $ 393,629 $ 247,150 $ 24,842
============ ============ ============ ============ ============ ============
</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> 48
NYLIAC MFA SEPARATE ACCOUNT-II
NON-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-5
<PAGE> 49
STATEMENT OF CHANGES IN TOTAL EQUITY
For the years ended December 31, 1998
and December 31, 1997
<TABLE>
<CAPTION>
COMMON STOCK
INVESTMENT DIVISIONS
------------------------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES
------------------------------ ------------------------------
1998 1997 1998 1997
------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment income (loss)........................ $ (650,333) $ (632,338) $ (173,745) $ (166,662)
Net realized gain (loss) on investments............. 5,393,836 3,780,534 1,049,228 672,393
Realized gain distribution received................. 11,049,518 17,319,759 1,423,685 2,253,166
Change in unrealized appreciation (depreciation) on
investments....................................... 15,285,530 7,321,265 1,681,228 835,447
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation retained by
Separate Account.................................. (83,962) (59,410) (15,209) (11,378)
------------ ------------ ------------ ------------
Net increase in total equity resulting from
operations...................................... 30,994,589 27,729,810 3,965,187 3,582,966
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments...................... 13,517 698,016 219,509 265,718
Policyowners' surrenders............................ (14,197,642) (9,979,186) (1,843,270) (1,552,399)
Policyowners' annuity and death benefits............ (1,742,537) (1,846,691) (239,308) (201,003)
Net transfers from (to) Fixed Account............... 1,087,585 1,261,793 (34,395) 41,777
Transfers between Investment Divisions.............. (644,487) 558,642 (213,208) 236,080
------------ ------------ ------------ ------------
Net contributions and withdrawals................. (15,483,564) (9,307,426) (2,110,672) (1,209,827)
------------ ------------ ------------ ------------
Increase (decrease) in total equity............. 15,511,025 18,422,384 1,854,515 2,373,139
TOTAL EQUITY:
Beginning of year..................................... 133,196,029 114,773,645 17,309,690 14,936,551
------------ ------------ ------------ ------------
End of year........................................... $148,707,054 $133,196,029 $ 19,164,205 $ 17,309,690
============ ============ ============ ============
</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> 50
NYLIAC MFA SEPARATE ACCOUNT-II
NON-QUALIFIED POLICIES
<TABLE>
<CAPTION>
BOND MONEY MARKET
INVESTMENT DIVISIONS INVESTMENT DIVISIONS
--------------------------------------------------------- ---------------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES POLICIES POLICIES
--------------------------- --------------------------- --------------------------- ---------------------------
1998 1997 1998 1997 1998 1997 1998 1997
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,741,673 $ 2,364,287 $ 188,479 $ 264,234 $ 247,868 $ 282,567 $ 24,959 $ 28,141
136,214 363,480 126,842 90,798 17 (40) 3 (17)
1,134,926 133,101 141,013 16,538 -- -- -- --
394,096 995,883 (61,254) 73,994 23 129 1 27
(8,365) (9,453) (1,451) (1,640) (758) (466) (121) (99)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
3,398,544 3,847,298 393,629 443,924 247,150 282,190 24,842 28,052
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(83,812) 195,193 82,767 104,100 24,345 (11,970) 14,107 22,330
(6,156,145) (6,748,806) (730,095) (808,651) (998,881) (1,228,154) (147,788) (118,945)
(600,364) (1,409,901) (132,284) (109,111) (53,573) (31,260) (120) (1,760)
281,773 57,010 4,704 (17,535) 12,618 (43,738) 1,306 (4,291)
328,723 (810,766) 9,933 (129,141) 314,490 276,812 202,684 (106,939)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(6,229,825) (8,717,270) (764,975) (960,338) (701,001) (1,038,310) 70,189 (209,605)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(2,831,281) (4,869,972) (371,346) (516,414) (453,851) (756,120) 95,031 (181,553)
47,172,717 52,042,689 5,879,913 6,396,327 6,811,807 7,567,927 757,853 939,406
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 44,341,436 $ 47,172,717 $ 5,508,567 $ 5,879,913 $ 6,357,956 $ 6,811,807 $ 852,884 $ 757,853
============ ============ ============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-7
<PAGE> 51
NOTES TO FINANCIAL STATEMENTS
NOTE 1-- Organization and Accounting Policies:
- --------------------------------------------------------------------------------
N
YLIAC MFA Separate Account-I ("Separate Account-I") and NYLIAC MFA Separate
Account-II ("Separate Account-II") were established on May 27, 1983, under
Delaware law by New York Life Insurance and Annuity Corporation, a
wholly-owned subsidiary of New York Life Insurance Company. These accounts were
established to receive and invest net premium payments under Qualified
Multi-Funded Retirement Annuity Policies ("Separate Account-I") and Non-
Qualified Multi-Funded Retirement Annuity Policies ("Separate Account-II")
issued by New York Life Insurance and Annuity Corporation.
Separate Account-I and Separate Account-II are registered under the Investment
Company Act of 1940, as amended, as unit investment trusts. The assets of
Separate Account-I and Separate Account-II are invested exclusively in shares of
the MainStay VP Series Fund, Inc., a diversified open-end management investment
company, and are clearly identified and distinguished from the other assets and
liabilities of New York Life Insurance and Annuity Corporation. Effective
December 19, 1994, sales of all such Policies were discontinued.
There are six Investment Divisions within both Separate Account-I and Separate
Account-II, three of which invest Single Premium Policy net premium payments and
three of which invest Flexible Premium Policy net premium payments. The Common
Stock Investment Divisions invest in the Growth Equity Portfolio, the Bond
Investment Divisions invest in the Bond Portfolio, and the Money Market
Investment Divisions invest in the Cash Management Portfolio. Net premium
payments received are allocated to the Investment Divisions of Separate
Account-I or Separate Account-II according to Policyowner instructions. In
addition, the Policyowner has the option to transfer amounts between the
Investment Divisions of Separate Account-I and Separate Account-II and the Fixed
Account of New York Life Insurance and Annuity Corporation.
No Federal income tax is payable on investment income or capital gains of
Separate Account-I or Separate Account-II under current Federal income tax law.
Security Valuation--The investment in the MainStay VP Series Fund, Inc. is
valued at the net asset value of shares of the respective fund portfolios.
Security Transactions--Realized gains and losses from security transactions
are reported on the identified cost basis. Security transactions are accounted
for as of the date the securities are purchased or sold (trade date).
Distributions Received--Dividend income and capital gain distributions are
recorded on the ex-dividend date and reinvested in the corresponding portfolio.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
F-8
<PAGE> 52
NYLIAC MFA SEPARATE ACCOUNTS-I AND -II
TAX-QUALIFIED AND NON-QUALIFIED POLICIES
NOTE 2--Investments (in 000's):
- --------------------------------------------------------------------------------
At December 31, 1998, 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........................... 5,187 9,077 2,363 4,005 4,417 6,688
Identified cost*........................... $92,259 $157,085 $31,257 $51,422 $ 4,417 $ 6,688
SEPARATE ACCOUNT-II (NON-QUALIFIED
POLICIES)
Number of shares........................... 6,318 815 3,363 418 6,378 856
Identified cost*........................... $112,825 $14,602 $44,533 $ 5,469 $ 6,378 $ 856
</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, 1998 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.................................. $11,808 $17,608 $ 4,882 $ 4,415 $ 1,065 $ 1,141
Proceeds from sales........................ 20,959 30,744 7,905 10,446 1,982 2,056
SEPARATE ACCOUNT-II (NON-QUALIFIED
POLICIES)
Purchases.................................. $14,019 $ 2,037 $ 4,947 $ 578 $ 2,033 $ 508
Proceeds from sales........................ 19,130 2,904 8,322 1,018 2,489 413
</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-9
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5-- Cost to Policyowners (in 000's):
- --------------------------------------------------------------------------------
At December 31, 1998, 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).... $ 1,386 $(1,623) $ 230 $ 5,108 $ (745) $ 618
Accumulated net investment income (loss)..... 1,824 (3,318) 27,931 42,436 5,178 6,093
Accumulated net realized gain (loss) on
investments and realized gain distributions
received................................... 88,971 161,864 3,167 3,982 (1) (1)
Unrealized appreciation (depreciation) on
investments................................ 30,225 57,271 (2) 1,553 -- --
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation
retained by Separate Account............... (324) (810) (167) (338) (29) (51)
-------- -------- -------- -------- -------- --------
Net amount applicable to Policyowners........ $122,082 $213,384 $31,159 $52,741 $ 4,403 $ 6,659
======== ======== ======== ======== ======== ========
SEPARATE ACCOUNT-II (NON-QUALIFIED POLICIES)
Cost to Policyowners (net of withdrawals).... $14,527 $ 451 $ 947 $ (20) $ 209 $ 101
Accumulated net investment income (loss)..... 1,763 (270) 39,435 4,842 6,187 762
Accumulated net realized gain (loss) on
investments and realized gain distributions
received................................... 96,415 14,404 4,286 670 (1) --
Unrealized appreciation (depreciation) on
investments................................ 36,365 4,650 (50) 64 -- --
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation
retained by Separate Account............... (363) (71) (277) (47) (37) (10)
-------- -------- -------- -------- -------- --------
Net amount applicable to Policyowners........ $148,707 $19,164 $44,341 $ 5,509 $ 6,358 $ 853
======== ======== ======== ======== ======== ========
</TABLE>
F-10
<PAGE> 54
NYLIAC MFA SEPARATE ACCOUNTS-I AND -II
TAX-QUALIFIED AND NON-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-11
<PAGE> 55
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--Unit Transactions (in 000's):
- --------------------------------------------------------------------------------
T
ransactions in accumulation units were as follows:
<TABLE>
<CAPTION>
COMMON STOCK INVESTMENT DIVISIONS
-----------------------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES
----------------------- -----------------------
1998 1997 1998 1997
-----------------------------------------------------
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (TAX-QUALIFIED POLICIES)
Units issued on premium payments............................ 15 17 76 112
Units redeemed on surrenders................................ (316) (270) (611) (663)
Units redeemed on annuity and death benefits................ (3) (6) (8) (6)
Units issued (redeemed) on net transfers from (to)
Fixed Account............................................. 12 11 17 27
Units issued (redeemed) on transfers between
Investment Divisions...................................... (23) 11 3 35
----- ----- ----- -----
Net decrease............................................ (315) (237) (523) (495)
Units outstanding, beginning of year........................ 2,249 2,486 4,166 4,661
----- ----- ----- -----
Units outstanding, end of year.............................. 1,934 2,249 3,643 4,166
===== ===== ===== =====
SEPARATE ACCOUNT-II (NON-QUALIFIED POLICIES)
Units issued (redeemed) on premium payments................. 1 16 4 6
Units redeemed on surrenders................................ (258) (233) (38) (38)
Units redeemed on annuity and death benefits................ (30) (28) (2) (2)
Units issued (redeemed) on net transfers from (to)
Fixed Account............................................. 19 28 (1) 1
Units issued (redeemed) on transfers between
Investment Divisions...................................... (14) 11 (4) 6
----- ----- ----- -----
Net increase (decrease)................................. (282) (206) (41) (27)
Units outstanding, beginning of year........................ 2,638 2,844 368 395
----- ----- ----- -----
Units outstanding, end of year.............................. 2,356 2,638 327 368
===== ===== ===== =====
</TABLE>
F-12
<PAGE> 56
NYLIAC MFA SEPARATE ACCOUNTS-I AND -II
TAX-QUALIFIED AND NON-QUALIFIED POLICIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND INVESTMENT DIVISIONS MONEY MARKET INVESTMENT DIVISIONS
----------------------------------------- -----------------------------------------
SINGLE PREMIUM FLEXIBLE PREMIUM SINGLE PREMIUM FLEXIBLE PREMIUM
POLICIES POLICIES POLICIES POLICIES
------------------- ------------------- ------------------- -------------------
1998 1997 1998 1997 1998 1997 1998 1997
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12 5 42 65 1 3 14 18
(202) (170) (331) (390) (68) (96) (90) (151)
(1) (6) (3) (5) -- (1) (2) (3)
4 (1) 4 (7) -- (11) -- (4)
29 (30) (19) (76) 13 21 18 32
----- ----- ----- ----- ----- ----- ----- -----
(158) (202) (307) (413) (54) (84) (60) (108)
1,090 1,292 2,007 2,420 266 350 405 513
----- ----- ----- ----- ----- ----- ----- -----
932 1,090 1,700 2,007 212 266 345 405
===== ===== ===== ===== ===== ===== ===== =====
(2) 7 3 4 1 (1) 1 1
(192) (248) (27) (31) (48) (63) (9) (6)
(18) (29) (2) (2) (3) (1) -- --
9 2 -- (1) 1 (2) -- --
10 (27) -- (5) 15 14 11 (6)
----- ----- ----- ----- ----- ----- ----- -----
(193) (295) (26) (35) (34) (53) 3 (11)
1,514 1,809 203 238 340 393 41 52
----- ----- ----- ----- ----- ----- ----- -----
1,321 1,514 177 203 306 340 44 41
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
F-13
<PAGE> 57
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 1998 1997 1996 1995 1994
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year............................... $50.50 $40.34 $32.81 $25.72 $25.73
Net investment income (loss)................................ (0.27) (0.24) (0.12) -- 0.03
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 12.90 10.40 7.65 7.09 (0.04)
------ ------ ------ ------ ------
Unit value, end of year..................................... $63.13 $50.50 $40.34 $32.81 $25.72
====== ====== ====== ====== ======
SEPARATE ACCOUNT-II (NON-QUALIFIED POLICIES)
Unit value, beginning of year............................... $50.50 $40.34 $32.81 $25.72 $25.73
Net investment income (loss)................................ (0.26) (0.23) (0.12) -- 0.03
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 12.89 10.39 7.65 7.09 (0.04)
------ ------ ------ ------ ------
Unit value, end of year..................................... $63.13 $50.50 $40.34 $32.81 $25.72
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM POLICIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1998 1997 1996 1995 1994
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year............................... $47.08 $37.80 $30.90 $24.34 $24.48
Net investment loss......................................... (0.50) (0.44) (0.29) (0.14) (0.09)
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 11.99 9.72 7.19 6.70 (0.05)
------ ------ ------ ------ ------
Unit value, end of year..................................... $58.57 $47.08 $37.80 $30.90 $24.34
====== ====== ====== ====== ======
SEPARATE ACCOUNT-II (NON-QUALIFIED POLICIES)
Unit value, beginning of year............................... $47.08 $37.80 $30.90 $24.34 $24.48
Net investment loss......................................... (0.50) (0.43) (0.29) (0.14) (0.09)
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 11.99 9.71 7.19 6.70 (0.05)
------ ------ ------ ------ ------
Unit value, end of year..................................... $58.57 $47.08 $37.80 $30.90 $24.34
====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during each year.
F-14
<PAGE> 58
NYLIAC MFA SEPARATE ACCOUNTS-I AND -II
TAX-QUALIFIED AND NON-QUALIFIED POLICIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SINGLE PREMIUM POLICIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
BOND INVESTMENT DIVISIONS 1998 1997 1996 1995 1994
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year............................... $31.03 $28.66 $28.44 $24.34 $25.51
Net investment income....................................... 1.25 1.42 1.29 1.30 1.22
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 1.16 0.95 (1.07) 2.80 (2.39)
------ ------ ------ ------ ------
Unit value, end of year..................................... $33.44 $31.03 $28.66 $28.44 $24.34
====== ====== ====== ====== ======
SEPARATE ACCOUNT-II (NON-QUALIFIED POLICIES)
Unit value, beginning of year............................... $31.15 $28.76 $28.54 $24.43 $25.60
Net investment income....................................... 1.23 1.42 1.30 1.31 1.19
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 1.19 0.97 (1.08) 2.80 (2.36)
------ ------ ------ ------ ------
Unit value, end of year..................................... $33.57 $31.15 $28.76 $28.54 $24.43
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM POLICIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1998 1997 1996 1995 1994
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year............................... $28.93 $26.85 $26.78 $23.03 $24.26
Net investment income....................................... 0.98 1.18 1.14 1.16 1.11
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 1.11 0.90 (1.07) 2.59 (2.34)
------ ------ ------ ------ ------
Unit value, end of year..................................... $31.02 $28.93 $26.85 $26.78 $23.03
====== ====== ====== ====== ======
SEPARATE ACCOUNT-II (NON-QUALIFIED POLICIES)
Unit value, beginning of year............................... $28.98 $26.89 $26.82 $23.07 $24.30
Net investment income....................................... 1.00 1.20 1.13 1.15 1.10
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 1.09 0.89 (1.06) 2.60 (2.33)
------ ------ ------ ------ ------
Unit value, end of year..................................... $31.07 $28.98 $26.89 $26.82 $23.07
====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during each year.
F-15
<PAGE> 59
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 1998 1997 1996 1995 1994
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year............................... $20.02 $19.26 $18.57 $17.81 $17.36
Net investment income....................................... 0.78 0.76 0.69 0.76 0.45
------ ------ ------ ------ ------
Unit value, end of year..................................... $20.80 $20.02 $19.26 $18.57 $17.81
====== ====== ====== ====== ======
SEPARATE ACCOUNT-II (NON-QUALIFIED POLICIES)
Unit value, beginning of year............................... $20.02 $19.26 $18.57 $17.81 $17.36
Net investment income....................................... 0.78 0.76 0.69 0.76 0.45
------ ------ ------ ------ ------
Unit value, end of year..................................... $20.80 $20.02 $19.26 $18.57 $17.81
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FLEXIBLE PREMIUM POLICIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1998 1997 1996 1995 1994
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (TAX-QUALIFIED POLICIES)
Unit value, beginning of year............................... $18.66 $18.05 $17.48 $16.85 $16.51
Net investment income....................................... 0.63 0.61 0.57 0.63 0.34
------ ------ ------ ------ ------
Unit value, end of year..................................... $19.29 $18.66 $18.05 $17.48 $16.85
====== ====== ====== ====== ======
SEPARATE ACCOUNT-II (NON-QUALIFIED POLICIES)
Unit value, beginning of year............................... $18.66 $18.05 $17.48 $16.85 $16.51
Net investment income....................................... 0.63 0.61 0.57 0.63 0.34
------ ------ ------ ------ ------
Unit value, end of year..................................... $19.29 $18.66 $18.05 $17.48 $16.85
====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during each year.
F-16
<PAGE> 60
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 Single and Flexible Premium Policies Common Stock, the Single and
Flexible Premium Policies Bond, and the Single and Flexible Premium Policies
Money Market Investment Divisions (constituting the New York Life Insurance and
Annuity Corporation MFA Separate Account-I and the New York Life Insurance and
Annuity Corporation MFA Separate Account-II) at December 31, 1998, 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, 1998 with the
MainStay VP Series Fund, Inc., provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 19, 1999
F-17
<PAGE> 61
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1997
------- -------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Fixed maturities
Available for sale, at fair value $13,081 $12,170
Held to maturity, at amortized cost 725 801
Equity securities 100 83
Mortgage loans 1,622 1,305
Real estate 116 151
Policy loans 491 481
Other long-term investments 26 20
------- -------
Total investments 16,161 15,011
Cash and cash equivalents 948 773
Deferred policy acquisition costs 859 688
Other assets 297 345
Separate account assets 6,852 4,315
------- -------
Total Assets $25,117 $21,132
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Policyholders' account balances $14,709 $13,716
Future policy benefits 315 276
Policy claims 60 55
Deferred taxes 101 93
Other liabilities 992 727
Separate account liabilities 6,792 4,303
------- -------
Total Liabilities 22,969 19,170
STOCKHOLDER'S EQUITY
Capital stock -- par value $10,000
(20,000 shares authorized, 2,500 issued and outstanding) 25 25
Additional paid in capital 480 480
Accumulated other comprehensive income 201 157
Retained earnings 1,442 1,300
------- -------
Total stockholder's equity 2,148 1,962
------- -------
Total liabilities and stockholder's equity $25,117 $21,132
======= =======
</TABLE>
See accompanying notes to financial statements.
F-18
<PAGE> 62
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,
--------------------------
1998 1997 1996
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Universal life and annuity fees $ 293 $ 271 $ 236
Net investment income 1,115 1,066 1,048
Investment gains, net 56 126 65
Other income 122 78 56
------ ------ ------
Total revenues 1,586 1,541 1,405
------ ------ ------
EXPENSES
Interest credited to policyholders' account balances 784 748 723
Policyholder benefits 175 141 117
Operating expenses 405 352 299
------ ------ ------
Total expenses 1,364 1,241 1,139
------ ------ ------
Income before Federal income taxes 222 300 266
Federal income taxes:
Current 97 114 121
Deferred (17) (1) (24)
------ ------ ------
Total Federal income taxes 80 113 97
------ ------ ------
Net income $ 142 $ 187 $ 169
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-19
<PAGE> 63
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997 1996
----- ----- ------
(IN MILLIONS)
<S> <C> <C> <C>
Net Income $142 $187 $ 169
Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized holding gains arising during period 79 -- --
Unrealized holding gains arising during period,
including reclassification adjustments -- 89 (159)
Less: reclassification adjustment for gains included
in net income 35 -- --
---- ---- -----
Other comprehensive income 44 89 (159)
---- ---- -----
Comprehensive income $186 $276 $ 10
==== ==== =====
</TABLE>
See accompanying notes to financial statements.
F-20
<PAGE> 64
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,
--------------------------
1998 1997 1996
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Stockholder's equity, beginning of year $1,962 $1,686 $1,676
Net Income 142 187 169
Other comprehensive income 44 89 (159)
------ ------ ------
Stockholder's equity, end of year $2,148 $1,962 $1,686
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE> 65
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,
------------------------------
1998 1997 1996
------- -------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 142 $ 187 $ 169
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2 (43) (18)
Net capitalization of deferred policy acquisition costs (192) (85) (44)
Universal life and annuity fees (198) (202) (188)
Interest credited to policyholders' account balances 784 748 723
Net realized investment gains (56) (126) (65)
Deferred income taxes (17) (1) (24)
(Increase) decrease in net separate account assets (42) 30 6
Increase (decrease) in loaned securities 425 -- --
(Increase) decrease in other assets and other
liabilities (90) 126 (127)
Increase (decrease) in policy claims 4 (2) (24)
Increase (decrease) in future policy benefits 39 25 18
------- -------- -------
Net cash provided by operating activities 801 657 426
------- -------- -------
Cash Flows from Investing Activities:
Proceeds from sale of available for sale fixed maturities 5,325 13,378 5,787
Proceeds from maturity of available for sale fixed
maturities 1,610 1,137 1,505
Proceeds from sale of held to maturity fixed securities -- 3 --
Proceeds from maturity of held to maturity fixed
maturities 102 112 141
Proceeds from sale of equity securities 77 140 47
Proceeds from repayment of mortgage loans 238 220 143
Proceeds from sale of real estate and other invested
assets 47 40 59
Cost of available for sale fixed maturities acquired (7,670) (14,391) (7,447)
Cost of held to maturity fixed maturities acquired (49) (281) (95)
Cost of equity securities acquired (83) (163) (43)
Cost of mortgage loans acquired (558) (413) (280)
Cost of real estate and other invested assets acquired (20) (29) (43)
Policy loans (10) (17) (29)
Securities sold under agreements to repurchase (net) (45) 134 (37)
------- -------- -------
Net cash used in investing activities (1,036) (130) (292)
------- -------- -------
Cash Flows from Financing Activities:
Policyholders' account balances:
Deposits 1,493 1,189 929
Withdrawals (1,151) (1,235) (1,188)
Net transfers from the separate accounts 67 58 33
------- -------- -------
Net cash provided (used) by financing activities 409 12 (226)
------- -------- -------
Effect of exchange rate changes on cash and cash equivalents 1 (2) 2
------- -------- -------
Net increase (decrease) in cash and cash equivalents 175 537 (90)
------- -------- -------
Cash and cash equivalents, beginning of year 773 236 326
------- -------- -------
Cash and cash equivalents, end of year $ 948 $ 773 $ 236
======= ======== =======
</TABLE>
See accompanying notes to financial statements.
F-22
<PAGE> 66
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 -- NATURE OF OPERATIONS
New York Life Insurance and Annuity Corporation ("NYLIAC") is a direct,
wholly owned subsidiary of New York Life Insurance Company ("New York Life")
domiciled in the State of Delaware. NYLIAC offers a wide variety of interest
sensitive insurance and annuity products to a large cross section of the
insurance market. NYLIAC markets its products in all 50 of the United States,
the District of Columbia and Taiwan, primarily through its agency force. In
addition, NYLIAC markets Corporate Owned Life Insurance through independent
brokers and brokerage general agents.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP"). The preparation of financial
statements of life insurance enterprises requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements. Actual results may differ from estimates.
Certain reclassifications have been made to the 1997 and 1996 financial
statements to conform to the current year presentation.
INVESTMENTS
Fixed maturity investments, which NYLIAC has both the ability and the
intent to hold to maturity, are stated at amortized cost. Investments identified
as available for sale are reported at fair value. Unrealized gains and losses on
available for sale securities are reported in stockholder's equity, net of
deferred taxes and related adjustments. The cost basis of fixed maturity and
equity securities are adjusted for impairments in value deemed to be other than
temporary, with the associated realized loss reported in net income. Equity
securities are carried at fair value with related unrealized gains and losses
reflected in stockholder's equity, net of deferred taxes and related
adjustments. Mortgage loans are carried at unpaid principal balances, net of
impairment reserves, and are generally secured. Investment real estate, which
NYLIAC has the intent to hold for the production of income, is carried at
depreciated cost net of write-downs for other than temporary declines in fair
value. Properties held for sale are carried at the lower of cost or fair value
less estimated selling costs. Policy loans are stated at the aggregate balance
due, which approximates fair value since loans on policies have no defined
maturity date and reduce amounts payable at death or surrender. Cash equivalents
include investments that have maturities of 90 days or less at date of purchase
and are carried at amortized cost, which approximates fair value. Short-term
investments that have maturities of between 91-365 days at date of purchase are
included in fixed maturities on the balance sheet and are carried at amortized
cost, which approximates fair value.
Derivative financial instruments hedging exposure to interest rate
fluctuation on available for sale securities are accounted for at fair market
value. Unrealized gains and losses are reported in stockholder's equity, net of
deferred taxes and related adjustments. Amounts payable or receivable under
interest rate and commodity swap agreements and interest rate floor agreements
are recognized as investment income or expense when earned. Premiums paid for
interest rate floor agreements are amortized into interest expense over the life
of the agreement. Unamortized premiums are included in other assets in the
balance sheet. Realized gains and losses are recognized in net income upon
termination or maturity of the contracts.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business and certain costs of issuing policies
that vary with and are primarily related to the production of new business have
been deferred and recorded as an asset in the balance sheet. These consist
primarily of commissions, certain expenses of underwriting and issuing
contracts, and certain agency expenses. Acquisition costs for universal life and
annuity contracts are amortized in proportion to
F-23
<PAGE> 67
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
DEFERRED POLICY ACQUISITION COSTS -- (CONTINUED)
estimated gross profits over the effective life of the contracts, which is
assumed to be 25 years for universal life contracts and 15 years for annuities.
Changes in assumptions are reflected in the current year's amortization.
The carrying amount of the deferred policy acquisition cost asset is
adjusted at each balance sheet date as if the unrealized gains or losses on
investments associated with these insurance contracts had been realized and
included in the gross profits used to determine current period amortization. The
increase or decrease in the deferred policy acquisition cost asset due to
unrealized gains or losses is recorded in comprehensive income.
RECOGNITION OF INCOME AND RELATED EXPENSES
Amounts received under universal life and annuity contracts are reported as
deposits to policyholders' account balances. Revenues from these contracts
consist of amounts assessed during the period for mortality and expense risk,
policy administration and surrender charges. Policy benefits and claims that are
charged to expenses include benefit claims incurred in the period in excess of
related policyholders' account balances.
POLICYHOLDERS' ACCOUNT BALANCES
Policyholders' account balances on universal life and annuity contracts are
equal to cumulative deposits plus credited interest less withdrawals and
charges.
FEDERAL INCOME TAXES
NYLIAC is a member of a group which files a consolidated Federal income tax
return with New York Life. The consolidated income tax provision or benefit is
allocated among the members of the group in accordance with a tax allocation
agreement. The tax allocation agreement provides that NYLIAC is allocated its
share of the consolidated tax provision or benefit determined generally on a
separate company basis. Current Federal income taxes are charged or credited to
operations based upon amounts estimated to be payable or recoverable as a result
of taxable operations for the current year and any adjustments to such estimates
from prior years. Deferred income tax assets and liabilities are recognized for
the future tax consequence of temporary differences between financial statement
carrying amounts and income tax bases of assets and liabilities.
Current Federal income taxes include a provision for NYLIAC's share of the
equity base tax applicable to mutual life insurance companies and their
insurance subsidiaries. The amount recorded is based on NYLIAC's estimate of the
differential earnings rate ("DER") (the actual rate will be announced at a later
date by the Internal Revenue Service ("IRS")) used to compute the equity base
tax.
REINSURANCE
NYLIAC enters into reinsurance agreements in the normal course of its
insurance business to reduce overall risk. NYLIAC remains liable for reinsurance
ceded if the reinsurer fails to meet its obligation on the business it has
assumed. NYLIAC evaluates the financial condition of its reinsurers to minimize
its exposure to significant losses from reinsurer insolvencies.
SEPARATE ACCOUNTS
NYLIAC has established separate accounts with varying investment objectives
which are segregated from NYLIAC's general account and are maintained for the
benefit of separate account policyholders and NYLIAC. Separate account assets
are stated at market value. The liability for separate accounts represents
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 includes interest credited to the policies.
F-24
<PAGE> 68
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of various assets and liabilities are included throughout the
notes to financial statements. Specifically, fair value disclosure of fixed
maturities, short-term investments, cash equivalents, equity securities and
mortgage loans is reported in Note 2 -- Significant Accounting Policies and Note
3 -- Investments. Fair values for policyholders' account balances are reported
in Note 5 -- Insurance Liabilities. Fair values for derivative financial
instruments are included in Note 10 -- Derivative Financial Instruments and Risk
Management. Fair values for repurchase agreements are included in Note
11 -- Commitments and Contingencies.
BUSINESS RISKS AND UNCERTAINTIES
The development of policy reserves and deferred policy acquisition costs
for NYLIAC's products requires management to make estimates and assumptions
regarding mortality, morbidity, lapse, expense and investment experience. Such
estimates are primarily based on historical experience and future expectations
of mortality, morbidity, expense, persistency and investment assumptions. Actual
results could differ from those estimates. Management monitors actual
experience, and where circumstances warrant, revises its assumptions and the
related estimates for policy reserves and deferred policy acquisition costs.
NYLIAC regularly invests in mortgage loans, mortgage-backed securities and
other securities subject to prepayment and/or call risk. Significant changes in
prevailing interest rates and/or geographic conditions may adversely affect the
timing and amount of cash flows on such securities, as well as their related
values. In addition, the amortization of market premium and accretion of market
discount for mortgage-backed 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.
ACCOUNTING CHANGES
During 1997, the Financial Accounting Standard Board ("FASB") issued SFAS
130, "Reporting Comprehensive Income" which establishes standards for the
reporting and display of comprehensive income and its components. Comprehensive
income is defined as net income adjusted for changes in stockholder's equity
resulting from events other than net income.
This Statement was adopted for the 1998 NYLIAC financial statements. The
1997 and 1996 financial statements were not restated to report the
reclassification adjustments separately from unrealized gains (losses) which
arose during the period. Adoption of this Statement had no effect on reported
net income or stockholder's equity.
RECENT ACCOUNTING PRONOUNCEMENTS
The FASB recently issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (Statement). This Statement establishes new
GAAP accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, and for hedging activities.
This Statement is effective for the 2000 financial statements of the Company.
NYLIAC is currently evaluating what impact, if any, this Statement will have on
its financial results.
This Statement requires that derivatives be reported in the balance sheet
at their fair value, regardless of any hedging relationship that may exist.
Accounting for the gains or losses resulting from changes in the values of those
derivatives would depend on the use of the derivative and whether it qualifies
for hedge accounting. Changes in fair value of derivatives that are not
designated as hedges or that do not meet the hedge accounting criteria will be
reported in earnings.
F-25
<PAGE> 69
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 3 -- INVESTMENTS
FIXED MATURITIES
For publicly traded fixed maturities, estimated fair value is determined
using quoted market prices. For fixed maturities without a readily ascertainable
market value, NYLIAC has determined an estimated fair value using either a
discounted cash flow approach, including provisions for credit risk generally
based upon the assumption such securities will be held to maturity, or a
proprietary matrix pricing model.
At December 31, 1998 and 1997, the maturity distribution of fixed
maturities was as follows (in millions):
<TABLE>
<CAPTION>
1998 1997
----------------------- -----------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
AVAILABLE FOR SALE COST FAIR VALUE COST FAIR VALUE
- ------------------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Due in one year or less $ 518 $ 521 $ 480 $ 482
Due after one year through five years 3,473 3,533 3,053 3,099
Due after five years through ten years 1,804 1,885 2,156 2,230
Due after ten years 3,028 3,235 2,425 2,608
Asset-backed securities:
Government or government agency 2,080 2,121 2,271 2,324
Other 1,740 1,786 1,411 1,427
------- ------- ------- -------
Total Available for Sale $12,643 $13,081 $11,796 $12,170
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
HELD TO MATURITY
- ----------------
<S> <C> <C> <C> <C>
Due in one year or less $ 27 $ 28 $ 30 $ 30
Due after one year through five years 225 291 225 239
Due after five years through ten years 219 228 226 240
Due after ten years 193 207 224 238
Asset-backed securities 61 62 96 97
------- ------- ------- -------
Total Held to Maturity $ 725 $ 816 $ 801 $ 844
======= ======= ======= =======
</TABLE>
At December 31, 1998 and 1997, the distribution of gross unrealized gains
and losses on investments in fixed maturities was as follows (in millions):
<TABLE>
<CAPTION>
1998
---------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
AVAILABLE FOR SALE COST GAINS LOSSES FAIR VALUE
- ------------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government
corporations and agencies $ 1,006 $ 45 $ 1 $ 1,050
U.S. agencies, state and municipal 1,927 39 4 1,962
Foreign governments 234 22 -- 256
Corporate 7,736 338 47 8,027
Other 1,740 48 2 1,786
------- ---- --- -------
Total Available for Sale $12,643 $492 $54 $13,081
======= ==== === =======
HELD TO MATURITY
Corporate $ 664 $ 91 $ 1 $ 754
Other 61 1 -- 62
------- ---- --- -------
Total Held to Maturity $ 725 $ 92 $ 1 $ 816
======= ==== === =======
</TABLE>
F-26
<PAGE> 70
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
FIXED MATURITIES -- (CONTINUED)
<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>
EQUITY SECURITIES
Estimated fair value of equity securities has been determined using quoted
market prices for publicly traded securities and a matrix pricing model for
private placement securities. At December 31, 1998 and 1997, 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>
1998 $76 $27 $3 $100
1997 $66 $25 $8 $ 83
</TABLE>
MORTGAGE LOANS
NYLIAC's mortgage loans are diversified by property type, location and
borrower, and are generally collateralized by the related property.
The fair market value of the mortgage loan portfolio at December 31, 1998
and 1997 is estimated to be $1,728 million and $1,408 million, respectively.
Market values are determined by discounting the projected cash flows for each
loan to determine the current net present value. The discount rate used
approximates the current rate for new mortgages with comparable characteristics
and similar remaining maturities.
At December 31, 1998 and 1997, contractual commitments to extend credit
under commercial and residential mortgage loan agreements amounted to
approximately $76 million and $108 million, respectively, 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 $1 million and $14 million
at December 31, 1998 and 1997, respectively. The activity in the specific and
general reserves as of December 31, 1998 and 1997 is summarized below (in
millions):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Beginning Balance $14 $20
Reductions credited to operations (5) (1)
Recoveries of amounts previously written-down (8) (5)
--- ---
Ending Balance $ 1 $14
=== ===
</TABLE>
F-27
<PAGE> 71
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
MORTGAGE LOANS -- (CONTINUED)
Impaired mortgage loans along with specific provisions for losses as of
December 31, 1998 and 1997, were as follows (in millions):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Impaired mortgage loans with provisions for losses $-- $19
Provision for losses -- (8)
-- ---
Net impaired mortgage loans $-- $11
== ===
</TABLE>
NYLIAC accrues interest income on impaired loans to the extent it is deemed
collectible and the loan continues to perform under its original or restructured
contractual terms. Interest income on problem loans is generally recognized on a
cash basis. Cash payments on loans in the process of foreclosure are generally
treated as a return of principal.
At December 31, 1998 and 1997, the distribution of the mortgage loan
portfolio by property type and geographic region was as follows (in millions):
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Property Type:
Office building $ 753 $ 601
Retail 330 255
Apartments 187 187
Residential 247 172
Other 105 90
------ ------
Total $1,622 $1,305
====== ======
Geographic Region:
Central $ 359 $ 250
Pacific 211 145
Middle Atlantic 451 426
South Atlantic 418 362
New England 121 73
Other 62 49
------ ------
Total $1,622 $1,305
====== ======
</TABLE>
REAL ESTATE
At December 31, 1998 and 1997, NYLIAC's real estate portfolio consisted of
the following (in millions):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Investment $105 $103
Acquired through foreclosures 11 19
Real estate joint ventures and limited partnerships -- 29
---- ----
Total real estate $116 $151
==== ====
</TABLE>
Accumulated depreciation on real estate at December 31, 1998 and 1997, was
$12 million and $8 million, respectively. Depreciation expense totaled $3
million in 1998, 1997 and 1996.
F-28
<PAGE> 72
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 4 -- INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES
The components of net investment income for the years ended December 31,
1998, 1997 and 1996, were as follows (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Fixed maturities $ 972 $ 961 $ 920
Equity securities 7 6 3
Mortgage loans 116 96 93
Real estate 15 18 21
Policy loans 40 39 37
Other 9 1 6
------ ------ ------
Gross investment income 1,159 1,121 1,080
Investment expenses (44) (55) (32)
------ ------ ------
Net investment income $1,115 $1,066 $1,048
====== ====== ======
</TABLE>
For the years ended December 31, 1998, 1997 and 1996, realized investment
gains computed under the specific identification method are as follows (in
millions):
<TABLE>
<CAPTION>
1998 1997 1996
-------------------- --------------------- --------------------
GAINS LOSSES GAINS LOSSES GAINS LOSSES
----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed maturities $ 87 $(29) $172 $ (83) $100 $ (64)
Equity securities 7 (7) 9 (4) 22 (1)
Mortgage loans 16 (8) 12 (8) 15 (19)
Real estate 6 (2) 3 (2) 6 (3)
Derivative instruments -- -- 80 (71) 46 (41)
Other 3 (17) 19 (1) 7 (3)
---- ---- ---- ----- ---- -----
Subtotal $119 $(63) $295 $(169) $196 $(131)
---- ---- ---- ----- ---- -----
Investment gains, net $56 $126 $65
=== ==== ===
</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.
Stockholder's equity at December 31, 1998 and 1997 includes net unrealized
gains as follows (in millions):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net unrealized gains on investments before adjustments $472 $382
---- ----
Related adjustments
Deferred policy acquisition costs (169) (148)
Policyholder liabilities 6 7
Deferred Federal income taxes (108) (84)
---- ----
(271) (225)
---- ----
Net unrealized gains on investments included in
Stockholder's equity $201 $157
==== ====
</TABLE>
F-29
<PAGE> 73
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 4 -- INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES -- (CONTINUED)
Changes in net unrealized gains and losses on investments were as follows
(in millions):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Unrealized gains (losses) on investments:
Beginning of year $382 $163
End of year 472 382
---- ----
Net change 90 219
Change in related adjustments of balance sheet accounts:
Deferred policy acquisition costs (21) (88)
Policyholder liabilities (1) 5
Deferred Federal income taxes (24) (47)
---- ----
Change in unrealized gains on investments 44 89
Net unrealized gains on investments at beginning of year 157 68
---- ----
Net unrealized gains on investments at end of year $201 $157
==== ====
</TABLE>
NOTE 5 -- INSURANCE LIABILITIES
NYLIAC's annuity contracts are primarily deferred annuities. The carrying
value, which approximates fair value, of NYLIAC's liabilities for deferred
annuities at December 31, 1998 and 1997, was $6,905 million and $7,150 million,
respectively.
NOTE 6 -- SEPARATE ACCOUNTS
NYLIAC maintains eight non-guaranteed, registered separate accounts for its
variable deferred annuity and variable life products. NYLIAC maintains
investments in the registered separate accounts of $54 million and $12 million
at December 31, 1998 and 1997, respectively. The assets of the separate
accounts, which are carried at market value, represent investments in shares of
the New York Life sponsored MainStay VP Series Fund and other non-proprietary
funds.
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. At December 31, 1998, no policies had yet been issued for one of these
separate accounts.
NOTE 7 -- DEFERRED POLICY ACQUISITION COSTS
An analysis of deferred policy acquisition costs (DAC) for the years ended
December 31, 1998, 1997 and 1996 is as follows (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Balance at beginning of year before adjustment for
unrealized gains on investments $ 836 $ 751 $ 707
Current year additions 286 200 151
Amortized during year (94) (115) (107)
Balance at end of year before adjustment for
unrealized gains on investments 1,028 836 751
Adjustment for unrealized gains on investments (169) (148) (60)
------ ----- -----
Balance at end of year $ 859 $ 688 $ 691
====== ===== =====
</TABLE>
F-30
<PAGE> 74
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 8 -- FEDERAL INCOME TAXES
The components of the net deferred tax liability as of December 31, 1998
and 1997 are as follows (in millions):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Future policyholder benefits $196 $153
Employee and agents' benefits 53 49
Other -- 6
---- ----
Gross deferred tax assets 249 208
==== ====
Deferred tax liabilities:
Deferred policy acquisition costs 168 147
Investments 174 149
Other 8 5
---- ----
Gross deferred tax liabilities 350 301
---- ----
Net deferred tax liability $101 $ 93
==== ====
</TABLE>
The gross deferred tax asset relates to temporary differences that are
expected to reverse as net ordinary deductions. Management believes that
NYLIAC's taxable income in future years will be sufficient to realize the
deferred tax benefits and therefore, no valuation allowance has been recorded.
Set forth below is a reconciliation of the Federal income tax rate to the
effective tax rate for 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Equity base tax 1.7 3.3 3.2
Tax exempt income (.5) (.5) (.7)
Other (.2) (.1) (.9)
---- ---- ----
Effective tax rate 36.0% 37.7% 36.6%
==== ==== ====
</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
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.
NOTE 10 -- DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
NYLIAC uses derivative financial instruments to manage interest rate,
commodity and market risk. These derivative financial instruments include
interest rate floors and interest rate and commodity swaps. NYLIAC has not
engaged in derivative financial instrument transactions for speculative
purposes.
F-31
<PAGE> 75
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 10 -- DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT -- (CONTINUED)
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 and 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>
1998 1997
-------------------- --------------------
NOTIONAL CREDIT NOTIONAL CREDIT
AMOUNT EXPOSURE AMOUNT EXPOSURE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest Rate Swaps $125,000 $9,125 $125,000 $2,973
Floors $150,000 $ 748 $150,000 $ 251
</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, 1998 are between six years, eight months
and nineteen years in maturity. At December 31, 1997 such contracts were between
seven years, eight months and twenty years in maturity. NYLIAC does not act as
an intermediary or broker in interest rate swaps.
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>
1998 1997
-------- --------
<S> <C> <C>
Receive - fixed swaps - Notional amount (in thousands) $125,000 $125,000
Average receive rate 6.64% 6.64%
Average pay rate 5.65% 5.70%
</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 $9,125,000 and $2,973,000 at December 31, 1998 and 1997, 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, 1998 and 1997, unamortized premiums on interest rate floors
amounted to $372,000 and $447,000, respectively. Fair values of such agreements
were $748,000 and $251,000 at December 31, 1998 and 1997, respectively, based on
quoted market prices.
F-32
<PAGE> 76
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
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 in both 1998 and 1997. The credit exposure of these swaps was $1,290,000
and $3,021,000 at December 31, 1998 and 1997, respectively.
NOTE 11 -- COMMITMENTS AND CONTINGENCIES
LITIGATION
NYLIAC is a defendant in individual and/or alleged class action suits
arising from its agency sales force, insurance (including variable contracts
registered under the federal securities law), investment, retail securities
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 which cannot be predicted, NYLIAC nevertheless believes that, after
provisions made in the financial statements, the ultimate liability that could
result from litigation and proceedings would not have a material adverse effect
on NYLIAC's financial position; however, it is possible that settlements or
adverse determinations in one or more actions or other proceedings in the future
could have a material adverse effect on NYLIAC's operating results for a given
year.
LOANED SECURITIES AND REPURCHASE AGREEMENTS
NYLIAC participates in a securities lending program for the purpose of
enhancing income on securities held. At December 31, 1998 and 1997, $571 million
and $659 million, respectively, of NYLIAC's fixed maturities and equity
securities were on loan to others, but were fully collateralized in an account
held in trust for NYLIAC. Such assets reflect the extent of NYLIAC's involvement
in securities lending, not NYLIAC's risk of loss.
NYLIAC enters into agreements to sell and repurchase securities for the
purpose of enhancing income on securities held. Under these agreements, NYLIAC
obtains the use of funds from a broker for approximately one month. The
liability reported in the balance sheet (included in other liabilities) at
December 31, 1998 of $139 million ($184 million at December 31, 1997)
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 $342 million for the year ended December 31,
1998 ($247 million for 1997 and $191 million for 1996) are reflected in
operating expenses and net investment income in the accompanying Statement of
Income.
In 1998, NYLIAC sold a Corporate Owned Life (COLI) policy to its parent,
New York Life Insurance Company, for $250 million in premium. The policy was
sold on the same basis as policies sold to unrelated customers.
F-33
<PAGE> 77
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 13 -- ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated Other Comprehensive Income is as follows (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997 1996
----- ----- ------
<S> <C> <C> <C>
Unrealized gains on securities:
Beginning balance $157 $ 68 $ 227
Current period change 44 89 (159)
---- ---- -----
Ending balance $201 $157 $ 68
==== ==== =====
</TABLE>
The related tax effects allocated to Other Comprehensive Income are as
follows (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
--------------------------------------
TAX
BEFORE-TAX (EXPENSE) NET-OF-TAX
AMOUNT OR BENEFIT AMOUNT
---------- ---------- ----------
<S> <C> <C> <C>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during
period $123 $(44) $79
Less: reclassification adjustment for gains
(losses) in net income 54 (19) 35
---- ---- ---
Other Comprehensive Income $ 69 $(25) $44
==== ==== ===
</TABLE>
NOTE 14 -- SUPPLEMENTAL CASH FLOW INFORMATION
Federal income taxes paid were $67 million, $126 million, and $146 million
during 1998, 1997 and 1996, respectively.
Total interest paid was $27 million, $35 million and $10 million during
1998, 1997 and 1996, respectively.
NOTE 15 -- 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,
--------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Statutory Surplus $1,095 $1,089 $ 998
------ ------ ------
Adjustments:
Deferred policy acquisition costs 859 688 691
Investment related 458 377 151
Asset valuation reserve 197 165 164
Interest maintenance reserve 120 105 35
Non-admitted assets 66 59 31
Policyholder liabilities (447) (330) (263)
Deferred taxes (101) (94) (47)
Employee benefit liabilities (79) (74) (72)
Other (20) (23) (2)
------ ------ ------
Total adjustments 1,053 873 688
------ ------ ------
Total GAAP Stockholder's Equity $2,148 $1,962 $1,686
====== ====== ======
</TABLE>
F-34
<PAGE> 78
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 15 -- RECONCILIATIONS BETWEEN STATUTORY ACCOUNTING AND GAAP -- (CONTINUED)
The following chart reconciles NYLIAC's statutory net income determined in
accordance with accounting practices prescribed by the Delaware State Insurance
Department with net income on a GAAP basis (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Statutory Net Income $ 10 $134 $148
----- ---- ----
Adjustments:
Deferred policy acquisition costs 192 63 44
Investment related 19 7 2
Interest maintenance reserve 15 70 9
Policyholder liabilities (110) (84) (62)
Deferred taxes 17 1 24
Other (1) (4) 4
----- ---- ----
Total Adjustments 132 53 21
----- ---- ----
GAAP Net Income $ 142 $187 $169
===== ==== ====
</TABLE>
Financial statements prepared on the statutory basis of accounting vary
from those prepared under GAAP, primarily as follows: (1) the costs related to
acquiring business, principally commissions and certain policy issue expenses
are charged to income in the year incurred, whereas under GAAP they would be
deferred and amortized over the periods benefitted; (2) funds received under
deposit-type contracts are reported as premium income, whereas under GAAP, such
funds are recorded as a liability; (3) life insurance reserves are based on
different assumptions than they are under GAAP; (4) life insurance companies are
required to establish an Asset Valuation Reserve ("AVR") by a direct charge to
surplus to offset potential investment losses, whereas under GAAP, the AVR is
not recognized and any 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 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; (7) deferred
federal income taxes are not provided for as they are under GAAP; and (8)
certain assets are considered non-admitted and are excluded from assets in the
balance sheet, whereas they are included under GAAP.
The Delaware Insurance Department recognizes only statutory accounting
practices for determining and reporting the financial condition and results of
operations of an insurance company, and for determining its solvency under the
Delaware Insurance Law. No consideration is given by the Department to financial
statements prepared in accordance with generally accepted accounting principles
in making such determinations.
At December 31, 1998 and 1997 on a statutory basis, admitted assets were
$23,351 million and $20,059 million respectively, and total liabilities were
$22,256 million and $18,970 million, respectively, which included policy
reserves of $14,626 million and $13,666 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 statutory surplus funds which is derived from net operating profits
and realized capital gains. Such available and accumulated funds at December 31,
1998 were $590 million.
F-35
<PAGE> 79
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 and comprehensive 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, 1998 and 1997, and
the results of its operations and its cash flows for the three years in the
period ended December 31, 1998, 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.
PRICEWATERHOUSECOOPERS LLP
1177 Avenue of the Americas
New York, New York 10036
March 9, 1999
F-36
<PAGE> 80
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> 81
(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 PricewaterhouseCoopers 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.
(10)(e) Power of Attorney for Certain Directors of NYLIAC - Previously filed as
Exhibit 10(e) to Post-Effective Amendment No. 6 to the registration
statement on Form N-4 for NYLIAC Variable Annuity Separate Account-III
(File No. 33-87382), and incorporated herein by reference for the
following:
George J. Trapp, Director
Frank M. Boccio, Director
Phillip J. Hildebrand, Director
Michael G. Gallo, Director
Solomon Goldfinger, Director
Howard I. Atkins, Director
(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> 82
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
George J. Trapp Director
Frank M. Boccio Director
Robert D. Rock Director and Senior Vice President
Howard I. Atkins Director, Executive Vice President and Chief Financial Officer
Michael Gallo Director, Senior Vice President
Solomon Goldfinger Director, Senior Vice President
Phillip J. Hildebrand Director, Senior Vice President
Jean E. Hoysradt Senior Vice President
Gary G. Benanav Executive Vice President and Chairman of Taiwan Branch
Jay S. Calhoun Senior Vice President and Treasurer
Judith E. Campbell Senior Vice President and Chief Information Officer
Shiela K. Davidson Senior Vice President
Richard D. Levy Senior Vice President
Michael J. McLaughlin Senior Vice President and General Counsel
Michael J. Nocera Senior Vice President
Frank J. Ollari Senior Vice President
Anne F. Pollack Senior Vice President
Stephen N. Steinig Senior Vice President and Chief Actuary
Thomas J. Warga Senior Vice President and General Auditor
Edward C. Wilson Senior Vice President and Chief Sales Officer
William Cheng Vice President
Limim 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
Melvin J. Feinberg Vice President
Jane L. Hamrick Vice President and Actuary
David A.K. Harland Vice President and Secretary
Robert E. Hebron Vice President
Celia J. 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 Tax Counsel
Danny Ramjit Vice President and CFO Taiwan Branch
Andrew N. Reiss Vice President and National Sales Manager
Joel Steinberg Vice President and Actuary
Lawrence R. Stoehr Vice President
Richard W. Zuccaro Vice President
</TABLE>
C-3
<PAGE> 83
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR
REGISTRANT
The Depositor, NYLIAC, is a wholly-owned subsidiary of New York Life Insurance
Company ("New York Life"). The Registrant is a segregated asset account of
NYLIAC. The following chart indicates persons presumed to be controlled by New
York Life(+), unless otherwise indicated. Subsidiaries of other subsidiaries are
indented accordingly, and ownership is 100% unless otherwise indicated.
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
Aegis Technologies, Inc.(1) Delaware
MainStay Institutional Funds Inc.(2) Maryland
MainStay VP Series Fund, Inc.(3) Maryland
New York Life Insurance and Annuity Corporation Delaware
New York Life Irrevocable Trust of 1996(4) New York N/A
NYLIFE Inc. New York
Avanti Corporate Health Systems, Inc. Delaware
Avanti of the District, Inc. Maryland
Avanti of New Jersey, Inc. New Jersey
Docservco, Inc. New York
Eagle Strategies Corp. Arizona
Greystone Realty Corporation Delaware
Greystone Realty Management, Inc. Delaware
MacKay-Shields Financial Corporation Delaware
Madison Square Advisers, Inc. Delaware
MainStay Management, Inc. Delaware
MainStay Shareholder Services Inc. Delaware
MSC Holding, Inc. Georgia 85.43%
Monitor Capital Advisors, Inc. Delaware
New York Life Benefit Services, Inc. Massachusetts
</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 this entity, the
shares of which are held of record by separate accounts of NYLIAC. New York Life
disclaims any beneficial ownership and control of this entity. 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. It is not
a subsidiary of New York Life, but is 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.
- ------------------------------------
(+) 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.
C-4
<PAGE> 84
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
(NYLIFE Inc. subsidiaries cont.)
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
Taiyo Life Gamma Asset Management Ltd(5) Japan 16.7%
New York Life International Investment Asia Ltd. Mauritius
New York Life International, 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.) Ltd.(6) United Kingdom 99.97%
Life Assurance Holding Corporation Limited United Kingdom 23%
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 50.2%
GEO New York Life, S.A. Mexico 49%
New York Life Trust Company New York
NYLIFE Administration Corp. 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 HealthCare Management, Inc. Delaware
Express Scripts, Inc. Delaware 44.8% of total
combined stock and
89.1% 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
</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> 85
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
(NYLIFE Inc. subsidiaries cont.)
WellPath of Arizona Reinsurance Company Arizona
NYLCare NC Holdings, Inc.
WellPath Community Health Plans, L.L.C. North Carolina Duke Medical
Strategies, Inc. holds
50%; 50% LLC interest
WPCHP Holdings, Inc. Delaware
WellPath Preferred Services, L.L.C. North Carolina 99.9%; WPCHP
Holdings, Inc. owns
other 11%
WellPath Select Holdings, L.L.C. North Carolina WPCHP Holdings,
Inc. holds 11%;
99% LLC Interest
WellPath Select, Inc. North Carolina
WellPath of Carolina, Inc. 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 Southeast, Inc. North Carolina
Benefit Panel Services, Inc. California 50%; 50%
owned by
Anthem Companies,
Inc.
BPS Health Plan Administrators California
VivaHealth, Incorporated California
One Liberty Plaza Holdings, Inc. Delaware
NYLIFE Refinery 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-6
<PAGE> 86
<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
NYLINK Insurance Agency of Ohio, Incorporated(7) Ohio
NYLINK Insurance Agency of Oklahoma, Incorporated(7) Oklahoma
NYLINK Insurance Agency of Texas, Incorporated(7) Texas
NYLTEMPS Inc. Delaware
NYLIFE Insurance Company of Arizona Arizona
The MainStay Funds(8) Massachusetts
</TABLE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of January 31, 1999, there were approximately 11,102 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 $150 million applicable to all insureds under the
D&O policies. There is no assurance that such coverage will be maintained by New
York Life or for the Depositor in the future as, in the past, there have been
large variances in the availability of D&O insurance for financial institutions.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Depositor pursuant to the foregoing provisions, or otherwise, the Depositor
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Depositor of expenses incurred
or paid by a director, officer or controlling
- --------
(7) This entity is an unaffiliated insurance agency for which New
York Life and its subsidiaries perform administrative services. It is not a
subsidiary of New York Life but is included for informational purposes only.
(8) 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-7
<PAGE> 87
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 M. Boccio Director
Jefferson C. Boyce Director
Michael G. Gallo Director
Phillip J. Hildebrand Director
Robert D. Rock Director
Stephen C. Roussin Director and Senior Vice President
Robert E. Brady Director and Vice President
Mark Gordon 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
Arphiela Arizmendi Assistant Vice President
Antoinette B. Cirillo Assistant Vice President
George R. Daoust Assistant Vice President
Geraldine Lorito Assistant Vice President
Mark A. Gomez Secretary
Ronald M. Jamison Assistant Secretary
Lori S. Whittaker Assistant Secretary
</TABLE>
C-8
<PAGE> 88
(c) Commissions and Other Compensation
<TABLE>
<CAPTION>
Name of New Underwriting Compensation on
Principal Discounts and Redemption or Brokerage
Underwriter Commissions Annuitization Commission Compensation
<S> <C> <C> <C> <C>
NYLIFE Distributors
Inc. -0- -0- -0- -0-
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records required to be maintained by Section 31(a) of
the 1940 Act and the rules under it are maintained by NYLIAC at its home office,
51 Madison Avenue, Room 0150, New York, New York 10010; New York Life - Records
Division, 110 Cokesbury Road, Lebanon, New Jersey 08833 and with Iron Mountain
Records Management, Inc. at both 8 Neptune Drive, Poughkeepsie, New York 12601
and Route 9W South, Port Ewen, New York 12466-0477.
ITEM 31. MANAGEMENT SERVICES - Not applicable.
ITEM 32. UNDERTAKINGS -
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-9
<PAGE> 89
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant certifies that it has caused this Amendment to the
Registration Statement to be signed on its behalf, in the City and State of New
York on this 19th day of April, 1999.
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 and Director
(Principal Financial Officer)
Frank M. Boccio* Director
Michael G. Gallo* Director
Solomon Goldfinger* Director
Phillip J. Hildebrand* 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)
Seymour Sternberg* Director
George J. Trapp* Director
*By /s/ David J. Krystel
--------------------
David J. Krystel
Attorney-in-Fact
April 19, 1999
<PAGE> 90
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
(9) Opinion and Consent of Jonathan E. Gaines, Esq.
(10)(a) Consent of PricewaterhouseCoopers LLP
</TABLE>
<PAGE> 1
[NEW YORK LIFE LOGO]
The Company You Keep 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 19,1999
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
COMPANY ACT FILE NUMBER: 811-03830
SECURITIES ACT FILE NUMBER: 2-86084
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. 19
to the registration statement on Form N-4 ("Registration Statement") under the
Securities Act of 1933, as amended, of NYLIAC MFA Separate Account-II ("Separate
Account-II"). Separate Account-II receives and invests premiums allocated to it
under a multi-funded variable retirement annuity policy ("Annuity Contract").
The Annuity Contract is offered in the manner described in the Registration
Statement.
In 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 19, 1999
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
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-effective Amendment No. 19 to registration
statement on Form N-4 (the "Registration Statement") of our report dated March
9, 1999, relating to the financial statements of New York Life Insurance and
Annuity Corporation, and of our report dated February 19, 1999, 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" and the reference to us under the heading "Condensed Financial
Information" in such Prospectus.
PRICEWATERHOUSECOOPERS LLP
1177 Avenue of the Americas
New York, New York
April 16, 1999
