<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 14, 2000
REGISTRATION NO. 2-86082
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 28 [X]
AND
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 29 [X]
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MAINSTAY VP SERIES FUND, INC.
(FORMERLY KNOWN AS NEW YORK LIFE MFA SERIES FUND, INC.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
51 MADISON AVENUE, NEW YORK, NEW YORK 10010
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER: (212) 576-7000
------------------
JOSEPH McBRIEN, ESQ.
51 MADISON AVENUE
NEW YORK, NEW YORK 10010
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
PAUL S. STEVENS
DECHERT PRICE & RHOADS
1775 EYE STREET, N.W.
SUITE 1100
WASHINGTON, D.C. 20006
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
[ ] Immediately upon filing pursuant to paragraph (b) of Rule 485
[X ] On May 1, 2000, pursuant to paragraph (b)(1)(v) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[X] on May 1, 2000 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.
------------------
<PAGE> 2
MainStay VP Series Fund, Inc. Prospectus May 1, 2000
- --------------------------------------------------------------------------------
-
<TABLE>
<S> <C>
MAINSTAY VP SERIES FUND, INC.
OFFERS 15 PORTFOLIOS
Growth
Capital Appreciation Portfolio........ page A-5
Eagle Asset Management Growth Equity
Portfolio........................... page A-6
Growth Equity Portfolio............... page A-7
Indexed Equity Portfolio.............. page A-8
International Equity Portfolio........ page A-9
Lord Abbett Developing Growth
Portfolio........................... page A-10
Growth & Income
American Century Income & Growth
Portfolio........................... page A-11
Convertible Portfolio................. page A-12
Dreyfus Large Company Value
Portfolio........................... page A-13
Total Return Portfolio................ page A-14
Value Portfolio....................... page A-15
Income
Bond Portfolio........................ page A-16
Government Portfolio.................. page A-17
High Yield Corporate Bond Portfolio... page A-19
Cash Management Portfolio............. page A-20
</TABLE>
(Neither) the Securities and Exchange
Commission nor any state securities
commission has approved or disapproved of
these securities or passed upon the
accuracy or adequacy of this prospectus.
Any representation to the contrary is a
criminal offense.
A-1
<PAGE> 3
WHAT'S INSIDE?
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE FUND AND THE SEPARATE ACCOUNTS.......................... A-3
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND
PRINCIPAL RISKS: AN OVERVIEW.............................. A-4
MORE ABOUT INVESTMENT STRATEGIES AND RISKS.................. A-21
THE FUND AND ITS MANAGEMENT................................. A-23
Investment Advisers.................................... A-23
Portfolio Managers -- Biographies...................... A-24
Administrator.......................................... A-25
PURCHASE AND REDEMPTION OF SHARES........................... A-25
TAXES, DIVIDENDS AND DISTRIBUTIONS.......................... A-26
Taxes.................................................. A-26
Dividends and Distributions............................ A-26
GENERAL INFORMATION......................................... A-27
Custodian.............................................. A-27
Performance and Yield Information...................... A-27
FINANCIAL HIGHLIGHTS........................................ A-28
</TABLE>
------------------------
A-2
<PAGE> 4
THE FUND AND THE SEPARATE ACCOUNTS
- --------------------------------------------------------------------------------
This Prospectus describes the shares offered by MainStay VP Series Fund, Inc.
(the "Fund"). The Fund, a diversified open-end management investment company, is
a Maryland corporation organized on June 3, 1983.
The Fund issues for investment fifteen separate classes of capital stock, each
of which represents a separate portfolio of investments--the MainStay VP Capital
Appreciation Portfolio ("Capital Appreciation"), the MainStay VP Cash Management
Portfolio ("Cash Management"), the MainStay VP Convertible Portfolio
("Convertible"), the MainStay VP Government Portfolio ("Government"), the
MainStay VP High Yield Corporate Bond Portfolio ("High Yield Corporate Bond"),
the MainStay VP International Equity Portfolio ("International Equity"), the
MainStay VP Total Return Portfolio ("Total Return"), the MainStay VP Value
Portfolio ("Value"), the MainStay VP Bond Portfolio ("Bond"), the MainStay VP
Growth Equity Portfolio ("Growth Equity"), the MainStay VP Indexed Equity
Portfolio ("Indexed Equity"), the MainStay VP American Century Income & Growth
Portfolio ("American Century Income & Growth"), the MainStay VP Dreyfus Large
Company Value Portfolio ("Dreyfus Large Company Value"), the MainStay VP Eagle
Asset Management Growth Equity Portfolio ("Eagle Asset Management Growth
Equity") and the MainStay VP Lord Abbett Developing Growth Portfolio ("Lord
Abbett Developing Growth") (each a "Portfolio" and collectively the
"Portfolios"). In many respects, each Portfolio resembles a separate fund. At
the same time, in certain important respects, the Fund is treated as a single
entity.
Shares of the Portfolios are currently offered to certain Separate Accounts to
fund variable annuity policies and variable life insurance policies issued by
New York Life Insurance and Annuity Corporation ("NYLIAC") (collectively,
"Policies" and individually, "Policy").
The terms "shareholder" or "shareholders" in this Prospectus refer to the
Separate Accounts, and the rights of the Separate Accounts as shareholders are
different from the rights of an owner of a Policy ("Owner"). The rights of an
Owner are described in the Policy. The current prospectus for the Policy (which
is attached at the front of this Prospectus) describes the rights of the
Separate Accounts as shareholders and the rights of an Owner. The Separate
Accounts invest in shares of the Portfolios in accordance with allocation
instructions received from Owners.
The current prospectus for the Policy describes the Policy and the relationship
between changes in the value of shares of the Portfolios and the benefits
payable under a Policy.
A-3
<PAGE> 5
Investment Objectives, Principal Investment Strategies
and Principal Risks: An Overview
This prospectus discusses 15 Portfolios which invest for varying combinations of
income and capital appreciation. Each of the Portfolios pursues somewhat
different strategies to achieve its objective, but all of the equity Portfolios
invest, under normal market conditions, primarily in equity securities and all
of the fixed income Portfolios invest, under normal market conditions, primarily
in debt or fixed income securities.
Publicly held corporations may raise needed cash by issuing or selling equity
securities to investors. When you buy stock in a corporation you become part
owner. The Portfolios may buy equity securities through principal stock
exchanges, such as the New York Stock Exchange or the American Stock Exchange,
or in the over-the-counter market. There are many different types of equity
securities, including stocks, convertible securities, American Depositary
Receipts and others. Investors buy equity securities to make money through
dividend payments and/or selling them for more than they paid.
Both governments and private companies may raise needed cash by issuing or
selling debt securities to investors. The Portfolios may buy debt securities
directly from those governments and companies or in the secondary trading
markets. There are many different types of debt securities, including bonds,
notes, debentures and others. Some pay fixed rates of return; others pay
variable rates. Interest may be paid at different intervals. Some debt
securities do not make regular interest payments, but instead are initially sold
at a discount to the principal amount to be paid at maturity. The amount of
interest paid is subject to many variables, including creditworthiness of the
issuer, length of maturity of the security, market factors, and the nature of
the debt instrument. Each of the Portfolios described in this prospectus invests
in particular types of debt securities, consistent with its own investment
objective and strategies which are described in the succeeding pages of this
prospectus.
NOT INSURED
An investment in the Portfolios is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Cash Management Portfolio seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by investing in
the Portfolio.
YOU COULD LOSE MONEY
Before considering one or more investments, you should understand that you could
lose money.
NAV WILL FLUCTUATE
The value of Portfolio shares, also known as the net asset value (NAV), will
fluctuate based on the value of the Portfolio's holdings. Security values
change. Investment in common stocks and other equity securities is particularly
subject to the risks of changing economic, stock market, industry and company
conditions and the risks inherent in management's ability to anticipate such
changes that can adversely affect the value of a Portfolio's holdings. In the
case of debt securities, security values change when interest rates change.
Generally when interest rates go up, the value of a debt security goes down and
when interest rates go down, the value of a debt security goes up. Other
factors, such as changes in how the market views the creditworthiness of an
issuer, changes in economic or market conditions, changes in relative values of
currencies, the risks inherent in management's ability to anticipate such
changes, and changes in the average maturity of a Portfolio's investment can
also affect security values and Portfolio share price.
MORE INFORMATION
The next section of this prospectus gives you more detailed information about
the investment objectives, policies, principal investment strategies, principal
risks, performance and expenses of each of the Portfolios offered in this
prospectus. Please review it carefully.
A-4
<PAGE> 6
CAPITAL APPRECIATION PORTFOLIO
INVESTMENT OBJECTIVE -- The Capital Appreciation Portfolio's investment
objective is to seek long-term growth of capital. Dividend income, if any, is an
incidental consideration.
PRINCIPAL INVESTMENT STRATEGIES -- The Portfolio normally invests in common
stock of companies with investment characteristics such as:
- - participation in expanding product or service markets
- - increasing unit sales volume
- - increasing return on investment
- - growth in revenues and earnings per share superior to that of the average of
common stocks comprising indices such as the Standard & Poor's 500 Composite
Price Index (S&P 500)
INVESTMENT PROCESS -- The Portfolio maintains a flexible approach towards
investing in various types of companies as well as types of securities,
including common stocks, preferred stocks, warrants and other equity securities,
depending upon the economic environment and the relative attractiveness of the
various securities markets.
As a result, the Portfolio may invest in any other securities which, in the
judgment of MacKay Shields LLC ("MacKay Shields"), the Portfolio's Adviser, are
ready for a rise in price, or expected to undergo an acceleration in growth of
earnings. The latter could occur because of special factors such as new
management, new products, changes in consumer demand or changes in the economy.
PRINCIPAL RISKS -- Investment in common stocks and other equity securities is
particularly subject to the risk of changing economic, stock market, industry
and company conditions which can adversely affect the value of the Portfolio's
holdings. Opportunities for greater gain often come with greater risk of loss.
Some of the securities may carry above-average risk compared to common stock
indexes such as the Dow Jones Industrial Average and the S&P 500.
The principal risk of growth stocks is that investors expect growth companies to
increase their earnings at a certain rate which is generally higher than the
rate expected for non-growth companies. If these expectations are not met, the
market price of the stock may decline significantly, even if earnings showed an
absolute increase. Growth company stocks also typically lack the dividend yield
that can cushion stock prices in market downturns.
PAST PERFORMANCE
The bar chart and table indicate some of the risks of investing in the Portfolio
by showing changes in its performance over the life of the Portfolio and by
showing how the Portfolio's average annual total returns for one year, five
years and the life of the Portfolio compare to those of a broad-based securities
market index. Separate account and contract charges are not reflected in the bar
chart. If they were, returns would be less than those shown. As with all mutual
funds, past performance is not necessarily an indication of how the Portfolio
will perform in the future.
<TABLE>
<CAPTION>
<S> <C> <C>
CAPITAL APPRECIATION PORTFOLIO QUARTER/YEAR RETURN
Highest Return/Best Quarter 4/98 26.65
Lowest Return/Worst Quarter 3/98 -8.33
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<S> <C> <C> <C>
SINCE
1 YEAR 5 YEARS INCEPTION 1/29/93
Capital Appreciation
Portfolio 25.41 28.10 22.06
S&P 500 Index* 21.04 28.56 21.66
</TABLE>
* "S&P 500(R)" and "500" are trademarks of The McGraw-Hill Companies, Inc. The
S&P 500 Index is an unmanaged index and is widely regarded as the standard for
measuring large-cap U.S. stock market performance. Results assume the
reinvestment of all income and capital gain distributions.
[BAR CHART]
<TABLE>
<CAPTION>
Annual total returns (12/31)
<S> <C>
94 -4.38
95 35.78
96 18.75
97 23.49
98 38.14
99 25.41
</TABLE>
A-5
<PAGE> 7
EAGLE ASSET MANAGEMENT GROWTH EQUITY PORTFOLIO
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE -- The Eagle Asset Management Growth Equity Portfolio's
investment objective is to seek growth through long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES -- The Portfolio normally invests at least 65%
of the Portfolio's total assets in U.S. common stocks. A majority of the Eagle
Asset Management Growth Equity Portfolio's total assets will be invested in
common stock with market capitalization of greater than $5 billion at the time
of purchase.
INVESTMENT PROCESS -- The Portfolio invests in common stocks that Eagle Asset
Management, Inc., the Portfolio's Sub-Adviser, believes have sufficient
long-term growth potential to offer above average long-term capital
appreciation. Companies in which the Portfolio invests will normally have at
least one of the following characteristics at the time of purchase:
- - expected earnings-per-share growth greater than the average of the S&P 500, or
- - expected revenue growth greater than the average of the S&P 500, or
- - relatively high return on equity.
Those securities that satisfy these quantitative criteria are then subjected to
extensive fundamental analysis which focuses primarily on:
- - the sustainability of the company's competitive advantage,
- - the strength of its management team and, in particular, whether it has
suitable experience, a clearly articulated vision and a history of strategic
execution, and
- - the ability of the company to improve its market share and thereby drive
earnings growth
PRINCIPAL RISKS -- Investment in common stocks and other equity securities is
particularly subject to the risk of changing economic, stock market, industry
and company conditions which can adversely affect the value of the Portfolio's
holdings.
The principal risk of growth stocks is that investors expect growth companies to
increase their earnings at a certain rate which is generally higher than the
rate expected for non-growth companies. If these expectations are not met, the
market price of the stock may decline significantly, even if earnings showed an
absolute increase. Growth company stocks also typically lack the dividend yield
that can cushion stock prices in market downturns.
PAST PERFORMANCE
The bar chart and table indicate some of the risks of investing in the Portfolio
by showing changes in its performance over the life of the Portfolio and by
showing how the Portfolio's average annual total returns for one year and the
life of the Portfolio compare to those of a broad-based securities market index.
Separate account and contract charges are not reflected in the bar chart. If
they were, returns would be less than those shown. As with all mutual funds,
past performance is not necessarily an indication of how the Portfolio will
perform in the future.
<TABLE>
<CAPTION>
<S> <C> <C>
EAGLE ASSET MGMT GROWTH EQUITY QUARTER/YEAR RETURN
PORTFOLIO
Highest Return/Best Quarter 4/99 44.97
Lowest Return/Worst Quarter 3/98 -11.84
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<S> <C> <C>
SINCE
1 YEAR INCEPTION 5/1/98
Eagle Asset Mgmt Growth Equity
Portfolio 65.50 49.14
S&P 500 Index* 21.04 19.80
</TABLE>
* "S&P 500(R)" and "500" are trademarks of The McGraw-Hill Companies, Inc. The
S&P 500 Index is an unmanaged index and is widely regarded as the standard for
measuring large-cap U.S. stock market performance. Results assume the
reinvestment of all income and capital gain distributions.
[GRAPH]
<TABLE>
<CAPTION>
<S> <C>
Annual total return (12/31) 99 65.50
</TABLE>
A-6
<PAGE> 8
GROWTH EQUITY PORTFOLIO
INVESTMENT OBJECTIVE -- The Growth Equity Portfolio's investment objective is to
seek long-term growth of capital, with income as a secondary consideration.
PRINCIPAL INVESTMENT STRATEGIES -- The Portfolio normally invests in common
stocks of larger capitalization, well managed companies which appear to have
better than average potential for capital appreciation.
INVESTMENT PROCESS -- The Portfolio will seek to identify companies which, in
the opinion of Madison Square Advisors LLC, the Portfolio's Adviser, are
considered to represent good value based on historical investment standards,
including price/book value ratios and price/earnings ratios. The Portfolio is
managed with a growth/value orientation which is determined by market
conditions. The Adviser uses a "top-down" approach which assesses the
macroeconomic environment to determine sector weightings.
PRINCIPAL RISKS -- Investment in common stocks and other equity securities is
particularly subject to the risk of changing economic, stock market, industry
and company conditions which can adversely affect the value of the Portfolio's
holdings.
The principal risk of growth stocks is that investors expect growth companies to
increase their earnings at a certain rate which is generally higher than the
rate expected for non-growth companies. If these expectations are not met, the
market price of the stock may decline significantly, even if earnings showed an
absolute increase. Growth company stocks also typically lack the dividend yield
that can cushion stock prices in market downturns.
The principal risk of investing in value stocks is that the value stocks in
which the Portfolio invests may never reach what the Adviser believes is their
full value or that they may even go down in value.
PAST PERFORMANCE
The bar chart and table indicate some of the risks of investing in the Portfolio
by showing changes in its performance over a ten year period and by showing how
the Portfolio's average annual total returns for one, five and ten years compare
to those of a broad-based securities market index. Separate account and contract
charges are not reflected in the bar chart. If they were, returns would be less
than those shown. As with all mutual funds, past performance is not necessarily
an indication of how the Portfolio will perform in the future.
<TABLE>
<CAPTION>
<S> <C> <C>
GROWTH EQUITY PORTFOLIO QUARTER/YEAR RETURN
Highest Return/Best Quarter 4/99 23.35
Lowest Return/Worst Quarter 3/90 -14.90
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<S> <C> <C> <C>
1 YEAR 5 YEARS 10 YEARS
Growth Equity Portfolio 29.96 27.38 18.53
S&P 500 Index* 21.04 28.56 18.21
</TABLE>
* "S&P 500(R)" and "500" are trademarks of The McGraw-Hill Companies, Inc. The
S&P 500 Index is an unmanaged index and is widely regarded as the standard for
measuring large-cap U.S. stock market performance. Results assume the
reinvestment of all income and capital gain distributions.
[Growth Equity Fund Bar Chart]
<TABLE>
<CAPTION>
Annual total returns (12/31)
<S> <C>
90 -6.19
91 33.62
92 12.42
93 13.71
94 1.20
95 29.16
96 24.50
97 26.75
98 26.59
99 29.96
</TABLE>
A-7
<PAGE> 9
INDEXED EQUITY PORTFOLIO
INVESTMENT OBJECTIVE -- The Indexed Equity Portfolio's investment objective is
to seek to provide investment results that correspond to the total return
performance (and reflect reinvestment of dividends) of publicly traded common
stocks represented by the S&P 500 Index.
PRINCIPAL INVESTMENT STRATEGIES -- The Portfolio normally invests at least 80%
of its total assets in stocks in the S&P 500 Index, to the extent feasible, in
the same proportion as they are represented in the S&P 500 Index.
INVESTMENT PROCESS -- Unlike other funds, which generally seek to beat market
averages index funds seek to match their respective indices. No attempt is made
to manage the portfolio in the traditional sense using economic, financial and
market analysis. Monitor Capital Advisors LLC, the Portfolio's Adviser, uses
statistical techniques to determine which stocks are to be purchased or sold to
replicate the S&P 500 Index to the extent feasible. From time to time,
adjustments may be made in the Portfolio's holdings because of changes in the
composition of the S&P 500 Index, but such changes should be infrequent.
The correlation between the performance of the Portfolio and the S&P 500 Index
is expected to be at least 0.95. A correlation of 1.00 would indicate perfect
correlation, which would be achieved when the net asset value of the Portfolio,
including the value of its dividend and capital gains distributions, increases
or decreases in exact proportion to changes in the S&P 500 Index.
The Portfolio's investments also include S&P 500 Index futures which are used to
replicate the S&P 500 Index and for cash management purposes.
PRINCIPAL RISKS -- Investment in common stocks and other equity securities is
particularly subject to the risk of changing economic, stock market, industry
and company conditions which can adversely affect the value of the Portfolio's
holdings. If the value of the S&P 500 Index declines, the net asset value of
shares of the Portfolio will also decline. The Portfolio's ability to mirror the
S&P 500 Index may be affected by, among other things, transactions costs,
changes in either the makeup of the S&P 500 Index or number of shares
outstanding for the components of the S&P 500 Index, and the timing and amount
of contributions to, and redemptions from, the Portfolio by shareholders.
Consistent with its principal investment strategies, the Portfolio's investments
include DERIVATIVES such as futures. The Portfolio may lose money using
derivatives. The use of derivatives may increase the volatility of the
Portfolio's net asset value and may involve a small investment of cash relative
to the magnitude of risk assumed.
- ------------
"Standard & Poor's(R)", "S&P(R)", "500", "Standard & Poor's 500" and "S&P
500(R)" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed
for use by Monitor Capital Advisors LLC. Standard & Poor's does not sponsor,
endorse, sell or promote the Portfolio or represent the advisability of
investing in the Portfolio. The S&P 500 is an unmanaged index and is considered
to be generally representative of the U.S. stock market. Typically, companies
included in the S&P 500 Index are the largest and most dominant firms in their
respective industries.
PAST PERFORMANCE
The bar chart and table indicate some of the risks of investing in the Portfolio
by showing changes in its performance over the life of the Portfolio and by
showing how the Portfolio's average annual total returns for one year, five
years and the life of the Portfolio compare to those of a broad-based securities
market index. Separate account and contract charges are not reflected in the bar
chart. If they were, returns would be less than those shown. As with all mutual
funds, past performance is not necessarily an indication of how the Portfolio
will perform in the future.
<TABLE>
<CAPTION>
<S> <C> <C>
INDEXED EQUITY PORTFOLIO QUARTER/YEAR RETURN
Highest Return/Best Quarter 4/98 21.46
Lowest Return/Worst Quarter 3/98 -9.97
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<S> <C> <C> <C>
SINCE
1 YEAR 5 YEARS INCEPTION 1/29/93
Indexed Equity Portfolio 20.70 28.12 21.15
S&P 500 Index* 21.04 28.56 21.66
</TABLE>
* "S&P 500(R)" and "500" are trademarks of The McGraw-Hill Companies, Inc. The
S&P 500 Index is an unmanaged index and is widely regarded as the standard for
measuring large-cap U.S. stock market performance. Results assume the
reinvestment of all income and capital gain distributions.
[Indexed Equity Fund Bar Chart]
<TABLE>
<CAPTION>
Annual total returns (12/31)
<S> <C>
94 0.76
95 36.89
96 22.42
97 32.84
98 28.49
99 20.70
</TABLE>
A-8
<PAGE> 10
INTERNATIONAL EQUITY PORTFOLIO
INVESTMENT OBJECTIVE -- The International Equity Portfolio's investment
objective is to seek long-term growth of capital by investing in a portfolio
consisting primarily of non-U.S. equity securities. Current income is a
secondary objective.
PRINCIPAL INVESTMENT STRATEGIES -- The Portfolio normally invests at least 65%
of its total assets in a diversified portfolio of equity securities of issuers,
wherever organized, who do business mainly outside the United States.
Investments will be made in a variety of countries, with a minimum of five
countries other than the United States. This includes countries with established
economies as well as emerging market countries that MacKay Shields LLC, the
Portfolio's Adviser, believes present favorable opportunities.
INVESTMENT PROCESS -- In pursuing the Portfolio's investment strategy, the
Adviser seeks to identify investment opportunities by beginning with country
selection. Local currencies are then assessed for upside potential and downside
risk. Finally, individual securities are evaluated based on the financial
condition and competitiveness of individual companies. In making investments in
foreign markets, the Adviser considers several factors including prospects for
currency exchange, interest rates, inflation, relative economic growth and
governmental policies.
As part of its investment strategy, the Portfolio may buy and sell currency on a
spot basis and enter into foreign currency forward contracts for hedging
purposes or to increase the Portfolio's investment return. In addition, the
Portfolio may buy foreign currency options, securities and securities index
options, foreign currency options, and enter into swap agreements and futures
contracts and related options. These techniques may be used for any legally
permissible purpose including to increase the Portfolio's returns.
PRINCIPAL RISKS -- Investment in common stocks and other equity securities is
particularly subject to the risk of changing economic, stock market, industry
and company conditions which can adversely affect the value of the Portfolio's
holdings.
Since the Portfolio principally invests in FOREIGN SECURITIES, it will be
subject to various risks of loss that are different from risks of investing in
securities of U.S. based companies. These include losses due to fluctuating
currency values, less liquid trading markets, greater price volatility,
political and economic instability, less publicly available issuer information,
changes in U.S. or foreign tax or currency laws, and changes in monetary policy.
The risks are likely to be greater in emerging market countries than in
developed market countries.
The Portfolio's investments include DERIVATIVES such as options, futures,
forwards, and swap agreements. The Portfolio may use derivatives to try to
enhance returns or reduce the risk of loss (hedge) of certain of its holdings.
Regardless of the purpose, the Portfolio may lose money using derivatives. The
derivatives may increase the volatility of the Portfolio's net asset value and
may involve a small investment of cash relative to the magnitude of risk
assumed.
PAST PERFORMANCE
The bar chart and table indicate some of the risks of investing in the Portfolio
by showing changes in its performance over the life of the Portfolio and by
showing how the Portfolio's average annual total returns for one year and the
life of the Portfolio compare to those of a broad-based securities market index.
Separate account and contract charges are not reflected in the bar chart. If
they were, returns would be less than those shown. As with all mutual funds,
past performance is not necessarily an indication of how the Portfolio will
perform in the future.
<TABLE>
<CAPTION>
<S> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO QUARTER/YEAR RETURN
Highest Return/Best Quarter 4/99 20.35
Lowest Return/Worst Quarter 3/98 -13.31
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<S> <C> <C>
SINCE
1 YEAR INCEPTION 5/1/95
International Equity Portfolio 28.06 15.49
Morgan Stanley Capital
International EAFE Index* 26.96 12.46
</TABLE>
* The Morgan Stanley Capital International Europe, Australia, Far East
Index -- the EAFE Index -- is an unmanaged, capitalization-weighted index
containing approximately 1,200 equity securities of companies located outside
the U.S.
[International Equity Fund Bar Chart]
<TABLE>
<CAPTION>
Annual total returns (12/31)
<S> <C>
96 10.54
97 5.17
98 23.11
99 28.06
</TABLE>
A-9
<PAGE> 11
LORD ABBETT DEVELOPING GROWTH PORTFOLIO
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE -- The Lord Abbett Developing Growth Portfolio's investment
objective is to seek long-term growth of capital through a diversified and
actively-managed portfolio consisting of developing growth companies, many of
which are traded over the counter.
PRINCIPAL INVESTMENT STRATEGIES -- Normally, the Portfolio invests primarily in
the common stocks of companies with long-range growth potential, particularly
smaller companies considered to be in the developing growth phase. This phase is
a period of swift development, when growth occurs at a rate rarely equaled by
established companies in their mature years. The Portfolio looks for companies
in this phase and, under normal circumstances, will invest at least 65% of its
total assets in securities of such companies. Developing growth companies are
almost always small, often young (in relation to the large companies which make
up the Standard & Poor's 500 Stock Index), and their shares are frequently
traded over the counter. Having, in Lord, Abbett & Co.'s, the Portfolio's
Sub-Adviser, view, passed the pitfalls of the formative years, these companies
may now be in a position to grow rapidly in their market. However, the actual
growth of a company cannot be foreseen and it may be difficult to determine in
which phase a company is presently situated. In addition, the Portfolio may
invest in companies which are in their formative years.
PRINCIPAL RISKS -- Investment in common stocks and other equity securities is
particularly subject to the risk of changing economic, stock market, industry
and company conditions which can adversely affect the value of the Portfolio's
holdings.
The principal risk of growth stocks is that investors expect growth companies to
increase their earnings at a certain rate which is generally higher than the
rate expected for non-growth companies. If these expectations are not met, the
market price of the stock may decline significantly, even if earnings showed an
absolute increase. Growth company stocks also typically lack the dividend yield
that can cushion stock prices in market downturns.
Although small-company stocks offer significant appreciation potential, they
generally carry more risk than larger companies. Generally, small companies rely
on limited product lines and markets, financial resources, or other factors, and
may lack management depth or experience. This may make them more susceptible to
setbacks or economic downturns.
Small-company stocks tend to be more volatile in price, have fewer shares
outstanding and trade less frequently than other stocks. Therefore,
small-company stocks often are subject to wider price fluctuations. Many small-
company stocks are traded over the counter and are not traded in the volume
typical of stocks listed on a national securities exchange.
Opportunities for greater gain often come with greater risk of loss. The stocks
of Developing Growth Companies may carry above-average risk compared to common
stock indexes such as the S&P 500 Index.
PAST PERFORMANCE
The bar chart and table indicate some of the risks of investing in the Portfolio
by showing changes in its performance over the life of the Portfolio and by
showing how the Portfolio's average annual total returns for one year and the
life of the Portfolio compare to those of a broad-based securities market index.
Separate account and contract charges are not reflected in the bar chart. If
they were, returns would be less than those shown. As with all mutual funds,
past performance is not necessarily an indication of how the Portfolio will
perform in the future.
<TABLE>
<CAPTION>
<S> <C> <C>
LORD ABBETT DEVELOPING GROWTH QUARTER/YEAR RETURN
PORTFOLIO
Highest Return/Best Quarter 4/98 26.10
Lowest Return/Worst Quarter 3/98 -22.04
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<S> <C> <C>
SINCE
1 YEAR INCEPTION 5/1/98
Lord Abbett Developing Growth
Portfolio 32.19 12.50
S&P 500 Index* 21.04 19.80
</TABLE>
* "S&P 500(R)" and "500" are trademarks of The McGraw-Hill Companies, Inc. The
S&P 500 Index is an unmanaged index and is widely regarded as the standard for
measuring large-cap U.S. stock market performance. Results assume the
reinvestment of all income and capital gain distributions.
[Bar Chart]
<TABLE>
<CAPTION>
<S> <C>
Annual total return (12/31) 99 32.19
</TABLE>
A-10
<PAGE> 12
AMERICAN CENTURY INCOME & GROWTH PORTFOLIO
- ------------------------------------------------------------------------------
INVESTMENT OBJECTIVE -- The American Century Income & Growth Portfolio's
investment objective is to seek dividend growth, current income and capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES -- The Portfolio normally invests in equity
securities of the 1,500 largest companies traded in the United States (ranked by
market capitalization).
INVESTMENT PROCESS -- American Century Investment Management, Inc., the
Portfolio's Sub-Adviser, uses quantitative management strategies in pursuit of
the Portfolio's investment objective.
Quantitative management combines two investment approaches. The first is to rank
stocks based on their relative attractiveness. The attractiveness of a stock is
determined analytically by using a computer model to combine measures of a
stock's value and measures of its growth potential. Examples of valuation
measures include stock price to book value and stock price to cash flow ratios
while examples of growth measures include the rate of growth of a company's
earnings and changes in analysts' earnings estimates.
The second step is to use a technique referred to as portfolio optimization.
Using a computer the Sub-Adviser constructs a portfolio (i.e., company names and
shares held in each) which seeks the optimal tradeoff between the risk of the
portfolio relative to a benchmark (i.e., the S&P 500) and the expected return of
the portfolio as measured by the stock ranking model. With respect to the
Portfolio, the portfolio optimization includes targeting a dividend yield that
exceeds that of the S&P 500.
PRINCIPAL RISKS -- Investment in common stocks and other equity securities is
particularly subject to the risk of changing economic, stock market, industry
and company conditions which can adversely affect the value of the Portfolio's
holdings.
PAST PERFORMANCE
The bar chart and table indicate some of the risks of investing in the Portfolio
by showing changes in its performance over the life of the Portfolio and by
showing how the Portfolio's average annual total returns for one year and the
life of the Portfolio compare to those of a broad-based securities market index.
Separate account and contract charges are not reflected in the bar chart. If
they were, returns would be less than those shown. As with all mutual funds,
past performance is not necessarily an indication of how the Portfolio will
perform in the future.
<TABLE>
<CAPTION>
<S> <C> <C>
AMERICAN CENTURY INCOME & GROWTH QUARTER/YEAR RETURN
PORTFOLIO
Highest Return/Best Quarter 4/98 21.99
Lowest Return/Worst Quarter 3/98 -11.36
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<S> <C> <C>
SINCE
1 YEAR INCEPTION 5/1/98
American Century Income & Growth
Portfolio 17.59 16.40
S&P 500 Index* 21.04 19.80
</TABLE>
* "S&P 500(R)" and "500" are trademarks of The McGraw-Hill Companies, Inc. The
S&P 500 Index is an unmanaged index and is widely regarded as the standard for
measuring large-cap U.S. stock market performance. Results assume the
reinvestment of all income and capital gain distributions.
[Bar Chart]
<TABLE>
<CAPTION>
<S> <C>
Annual total return (12/31) 99 17.59
</TABLE>
A-11
<PAGE> 13
CONVERTIBLE PORTFOLIO
INVESTMENT OBJECTIVE -- The Convertible Portfolio's investment objective is to
seek capital appreciation together with current income.
PRINCIPAL INVESTMENT STRATEGIES -- The Portfolio normally invests at least 65%
of its total assets in such "convertible securities" as bonds, debentures,
corporate notes, preferred stocks or other securities that are convertible into
common stock or the cash value of a stock or a basket or index of equity
securities.
The Portfolio takes a flexible approach by investing in a broad range of
securities of a variety of companies and industries. The Portfolio may invest
without restriction in securities rated BB or B by S&P or Ba or B by Moody's,
or, if unrated, that are judged to be of comparable quality by MacKay Shields
LLC, the Portfolio's Adviser.
The balance of the Portfolio may be invested in non-convertible debt or equity
securities or U.S. Government securities or may be invested or held in cash or
cash equivalents.
INVESTMENT PROCESS -- In selecting convertible securities for purchase or sale,
the Adviser takes into account a variety of investment considerations, including
credit risk, projected interest return and the premium for the convertible
security relative to the underlying common stock.
RISKS -- The value of debt securities fluctuates depending upon various factors,
including interest rates, issuer creditworthiness, market conditions and
maturities. Investment in common stocks and other equity securities is
particularly subject to the risk of changing economic, stock market, industry
and company conditions which can adversely affect the value of the Portfolio's
holdings. The total return for a convertible security will be partly dependent
upon the performance of the underlying common stock into which it can be
converted.
Principal investments include high yield debt securities (sometimes called "junk
bonds") which are generally considered speculative because they present a
greater risk of loss than higher quality debt securities. These securities pay a
premium -- a high interest rate or yield -- because of this increased risk of
loss. These securities can be also subject to greater price volatility.
PAST PERFORMANCE
The bar chart and table indicate some of the risks of investing in the Portfolio
by showing changes in its performance over the life of the Portfolio and by
showing how the Portfolio's average annual total returns for one year and the
life of the Portfolio compare to those of a broad-based securities market index.
Separate account and contract charges are not reflected in the bar chart. If
they were, returns would be less than those shown. As with all mutual funds,
past performance is not necessarily an indication of how the Portfolio will
perform in the future.
<TABLE>
<CAPTION>
<S> <C> <C>
CONVERTIBLE PORTFOLIO QUARTER/YEAR RETURN
Highest Return/Best Quarter 4/99 18.33
Lowest Return/Worst Quarter 3/98 -11.30
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<S> <C> <C>
SINCE
1 YEAR INCEPTION 10/1/96
Convertible Portfolio 41.98 19.38
First Boston Convertible
Securities Index* 33.51 19.44
</TABLE>
* The First Boston Convertible Securities Index generally includes 250-300
issues -- convertibles must have a minimum issue size of $50 million; bonds
and preferreds must be rated B- or better by S&P; and preferreds must have a
minimum of 500,000 shares outstanding. Eurobonds are also included if they are
issued by U.S.-domiciled companies, rated B- or higher by S&P, and have an
issue size of greater than $100 million.
[Convertible Portfolio Bar Chart]
<TABLE>
<CAPTION>
Annual total returns (12/31)
<S> <C>
97 15.43
98 4.49
99 41.98
</TABLE>
A-12
<PAGE> 14
DREYFUS LARGE COMPANY VALUE PORTFOLIO
- ------------------------------------------------------------------------------
INVESTMENT OBJECTIVE -- The Dreyfus Large Company Value Portfolio's investment
objective is capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES -- The Portfolio normally invests at least 65%
of its total assets in equity securities of large capitalization domestic and
foreign issuers which are characterized as "value" companies. Value companies
are those The Dreyfus Corporation, the Portfolio's Sub-Adviser, believes are
underpriced according to certain financial measurements of their intrinsic worth
or business prospects, such as price to earnings or price to book ratios. Equity
securities consist of common stocks, convertible securities and preferred
stocks. The Portfolio's economic sector weightings generally approximate those
of the Russell 1000 Value Index.
INVESTMENT PROCESS -- In choosing stocks, the Sub-Adviser uses proprietary
computer models to identify stocks that appear favorably priced and that may
benefit from the current market and economic conditions. The Sub-Adviser then
reviews these stocks for factors that could signal a rise in price, such as: new
products or markets; opportunities for greater market share; more effective
management; or positive changes in corporate structure or market perception.
The Portfolio typically sells a stock when it is no longer considered a value
company, appears less likely to benefit from the current market and economic
environment, shows deteriorating fundamentals or falls short of the
Sub-Adviser's expectations.
PRINCIPAL RISKS -- Investment in common stocks and other equity securities is
particularly subject to the risk of changing economic, stock market, industry
and company conditions which can adversely affect the value of the Portfolio's
holdings.
The principal risk of investing in value stocks is that the value stocks in
which the Portfolio invests may never reach what the Sub-Adviser believes is
their full value or that they may even go down in value. In addition, different
types of stocks tend to shift in and out of favor depending on market and
economic conditions and therefore the Portfolio's performance may be lower or
higher than that of funds that invest in other types of equity securities (such
as those emphasizing growth stocks).
In searching for attractive large company value stocks, the Portfolio may invest
a portion of its assets in FOREIGN SECURITIES, which will be subject to various
risks of loss that are different from risks of investing in securities of U.S.
based companies. These include losses due to fluctuating currency values, less
liquid trading markets, greater price volatility, political and economic
instability, less publicly available issuer information, changes in U.S. or
foreign tax or currency laws, and changes in monetary policy. The risks are
likely to be greater in emerging market countries than in developed market
countries.
The Portfolio, at times, may invest in derivative securities, such as options
and futures, and in foreign currencies. It may also sell short, which involves
selling a security it does not own in anticipation of a decline in the market
price of the security. When employed, these practices are used primarily to
hedge the Portfolio's investments, but may be used to increase returns; however,
such practices may reduce returns or increase volatility. Derivatives can be
illiquid, and a small investment in certain derivatives could have a potentially
large impact on the Portfolio's performance.
The Portfolio can buy securities with borrowed money (a form of leverage), which
could have the effect of magnifying the Portfolio's gains or losses.
PAST PERFORMANCE
The bar chart and table indicate some of the risks of investing in the Portfolio
by showing changes in its performance over the life of the Portfolio and by
showing how the Portfolio's average annual total returns for one year, five
years and the life of the Portfolio compare to those of a broad-based securities
market index. Separate account and contract charges are not reflected in the bar
chart. If they were, returns would be less than those shown. As with all mutual
funds, past performance is not necessarily an indication of how the Portfolio
will perform in the future.
<TABLE>
<CAPTION>
<S> <C> <C>
DREYFUS LARGE COMPANY VALUE PORTFOLIO QUARTER/YEAR RETURN
Highest Return/Best Quarter 4/98 17.33
Lowest Return/Worst Quarter 3/99 -10.53
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<S> <C> <C>
SINCE
1 YEAR INCEPTION 5/1/98
Dreyfus Large Company Value
Portfolio 6.73 5.73
Russell 1000(R) Value Index* 7.35 6.12
</TABLE>
* Russell 1000(R) Value Index consists of the stocks in the Russell 1000(R)
Index (comprising the 1,000 largest U.S.-based companies measured by total
market capitalization) with the lowest price-to-book ratios, comprising 50% of
the market capitalization of the Russell 1000(R).
[Bar Chart]
<TABLE>
<CAPTION>
<S> <C>
Annual total return (12/31) 99 6.73
</TABLE>
A-13
<PAGE> 15
TOTAL RETURN PORTFOLIO
INVESTMENT OBJECTIVE -- The Total Return Portfolio's investment objective is to
realize current income consistent with reasonable opportunity for future growth
of capital and income.
PRINCIPAL INVESTMENT STRATEGIES -- The Portfolio normally invests a minimum of
30% of its net assets in equity securities and a minimum of 30% of its net
assets in debt securities. A majority of the Portfolio's equity securities will
normally consist of stocks of companies with growth in revenues and earnings per
share superior to that of the average of common stocks comprising indices such
as the S&P 500 at the time of purchase. The Portfolio will also invest in stocks
and other equity securities which it believes to be undervalued.
It is contemplated that the Portfolio's long-term debt investments will consist
primarily of securities which are rated A or better by S&P or Moody's or, if
unrated, deemed to be of comparable creditworthiness by MacKay Shields LLC, the
Portfolio's Adviser. Principal debt investments include U.S. government
securities, mortgage-related and asset-backed securities. Mortgage-related
securities (including mortgage-backed securities) are debt securities whose
values are based on underlying pools of mortgages. These securities may be
issued by U.S. governmental entities or private investors. The values of
asset-backed securities are based on underlying pools of other receivables. As
part of the Portfolio's principal strategies, the Adviser may use mortgage
dollar roll transactions or investment practice. In a mortgage dollar roll
transaction, the Portfolio sells a mortgage-backed security to another party and
agrees to buy a similar security from the same party at a set price at a later
date.
INVESTMENT PROCESS -- The Portfolio maintains a flexible approach by investing
in a broad range of securities, which may be diversified by company, by industry
and by type.
PRINCIPAL RISKS -- Since the Portfolio may allocate its assets among equity and
debt securities, it therefore has some exposure to the risks of both stocks and
bonds. Investment in common stocks and other equity securities is particularly
subject to the risks of changing economic, stock market, industry and company
conditions which can adversely affect the value of the Portfolio's holdings. The
value of debt securities fluctuate depending upon various factors, including
interest rates, issuer creditworthiness, market conditions and maturities.
Consistent with its principal investment strategies, the Portfolio's investments
include DERIVATIVES such as mortgaged-related and asset-backed securities. The
Portfolio may use derivatives to try to enhance returns or reduce the risk of
loss (hedge) of certain of its holdings. Regardless of the purpose, the
Portfolio may lose money using derivatives.
The principal risk of MORTGAGE DOLLAR ROLLS is that the security the Portfolio
receives at the end of the transaction is worth less than the security the
Portfolio sold to the same counterparty at the beginning of the transaction.
PAST PERFORMANCE
The bar chart and table indicate some of the risks of investing in the Portfolio
by showing changes in its performance over the life of the Portfolio and by
showing how the Portfolio's average annual total returns for one year, five
years and the life of the Portfolio compare to those of a broad-based securities
market index. Separate account and contract charges are not reflected in the bar
chart. If they were, returns would be less than those shown. As with all mutual
funds, past performance is not necessarily an indication of how the Portfolio
will perform in the future.
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL RETURN PORTFOLIO QUARTER/YEAR RETURN
Highest Return/Best Quarter 4/98 16.87
Lowest Return/Worst Quarter 2/94 -4.36
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<S> <C> <C> <C>
SINCE
1 YEAR 5 YEARS INCEPTION 1/29/93
Total Return Portfolio 17.02 20.31 15.94
S&P 500 Index* 21.04 28.56 21.66
</TABLE>
* "S&P 500(R)" and "500" are trademarks of The McGraw-Hill Companies, Inc. The
S&P 500 Index is an unmanaged index and is widely regarded as the standard for
measuring large-cap U.S. stock market performance. Results assume the
reinvestment of all income and capital gain distributions.
[Total Return Portfolio Bar Chart]
<TABLE>
<CAPTION>
Annual total returns (12/31)
<S> <C>
94 -3.99
95 28.33
96 12.08
97 17.79
98 27.13
99 17.02
</TABLE>
A-14
<PAGE> 16
VALUE PORTFOLIO
INVESTMENT OBJECTIVE -- The Value Portfolio's investment objective is to realize
maximum long-term total return from a combination of capital growth and income.
PRINCIPAL INVESTMENT STRATEGIES -- The Portfolio normally invests at least 65%
of its total assets in common stocks that:
- - MacKay Shields LLC, the Portfolio's Adviser, believes were "undervalued"
(selling below their value) when purchased;
- - typically pay dividends, although there may be non-dividend paying stocks if
they meet the "undervalued" criteria; and
- - are listed on a national securities exchange or are traded in the
over-the-counter market.
INVESTMENT PROCESS -- Usually, stocks deemed by the Portfolio's Adviser to be at
full value will be replaced with new, "undervalued" stocks. When assessing
whether a stock is undervalued, the Adviser considers many factors and will
compare the market price to:
- - the company's "book" value;
- - estimated value of the company's assets (liquidating value);
- - cash flow; and
- - to a lesser extent will also look at trends and forecasts such as growth rates
and future earnings.
The Portfolio is not designed or managed primarily to produce current income.
PRINCIPAL RISKS -- Investment in common stocks and other equity securities is
particularly subject to the risk of changing economic, stock market, industry
and company conditions which can adversely affect the value of the Portfolio's
holdings.
The principal risk of investing in value stocks is that they may never reach
what the Adviser believes is their full value or that they may even go down in
value. In addition, different types of stocks tend to shift in and out of favor
depending on market and economic conditions and therefore the Portfolio's
performance may be lower or higher than that of funds that invest in other types
of equity securities (such as those emphasizing growth stocks).
PAST PERFORMANCE
The bar chart and table indicate some of the risks of investing in the Portfolio
by showing changes in its performance over the life of the Portfolio and by
showing how the Portfolio's average annual total returns for one year and the
life of the Portfolio compare to those of a broad-based securities market index.
Separate account and contract charges are not reflected in the bar chart. If
they were, returns would be less than those shown. As with all mutual funds,
past performance is not necessarily an indication of how the Portfolio will
perform in the future.
<TABLE>
<CAPTION>
<S> <C> <C>
VALUE PORTFOLIO QUARTER/YEAR RETURN
Highest Return/Best Quarter 2/99 13.72
Lowest Return/Worst Quarter 3/98 -14.07
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<S> <C> <C>
SINCE
1 YEAR INCEPTION 5/1/95
Value Portfolio 8.80 13.99
S&P 500 Index* 21.04 27.49
</TABLE>
* "S&P 500(R)" and "500" are trademarks of The McGraw-Hill Companies, Inc. The
S&P 500 Index is an unmanaged index and is widely regarded as the standard for
measuring large-cap U.S. stock market performance. Results assume the
reinvestment of all income and capital gain distributions.
[Value Portfolio Bar Chart]
<TABLE>
<CAPTION>
Annual total returns (12/31)
<S> <C>
96 23.22
97 22.89
98 -4.14
99 8.80
</TABLE>
A-15
<PAGE> 17
BOND PORTFOLIO
INVESTMENT OBJECTIVE -- The Bond Portfolio's investment objective is to seek the
highest income over the long term consistent with preservation of principal.
PRINCIPAL INVESTMENT STRATEGIES -- The Portfolio normally invests at least 75%
of its total assets in debt securities which have a rating within the four
highest grades as determined by either S&P or Moody's, in obligations (whether
or not rated) of the United States Government and its agencies and
instrumentalities or temporarily in money market instruments (including
repurchase agreements) and cash.
Madison Square Advisors LLC is the Portfolio's Adviser.
PRINCIPAL RISKS -- The value of debt securities fluctuate depending upon various
factors, including interest rates, issuer creditworthiness, market conditions
and maturity. Investments in the Portfolio are not guaranteed even though some
of the Portfolio's investments are guaranteed by the U.S. government or its
agencies or instrumentalities.
PAST PERFORMANCE
The bar chart and table indicate some of the risks of investing in the Portfolio
by showing changes in its performance over a ten year period and by showing how
the Portfolio's average annual total returns for one, five and ten years compare
to those of a broad-based securities market index. Separate account and contract
charges are not reflected in the bar chart. If they were, returns would be less
than those shown. As with all mutual funds, past performance is not necessarily
an indication of how the Portfolio will perform in the future.
<TABLE>
<CAPTION>
<S> <C> <C>
BOND PORTFOLIO QUARTER/YEAR RETURN
Highest Return/Best Quarter 2/95 6.37
Lowest Return/Worst Quarter 1/94 -2.97
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<S> <C> <C> <C>
1 YEAR 5 YEARS 10 YEARS
Bond Portfolio -1.53 7.30 7.60
Merrill Lynch Corporate and*
Government Master Index -2.05 7.60 7.69
</TABLE>
* The Merrill Lynch Corporate and Government Master Index is an unmanaged index
consisting of issues of the U.S. Government and its agencies as well as
investment-grade corporate securities. Results assume the reinvestment of all
income and capital gains distributions.
[Bond Portfolio Bar Chart]
<TABLE>
<CAPTION>
Annual total returns (12/31)
<S> <C>
90 7.36
91 16.27
92 8.26
93 11.40
94 -3.39
95 18.31
96 2.05
97 9.65
98 9.12
99 -1.53
</TABLE>
A-16
<PAGE> 18
GOVERNMENT PORTFOLIO
INVESTMENT OBJECTIVE -- The Government Portfolio's investment objective is to
seek a high level of current income, consistent with safety of principal.
PRINCIPAL INVESTMENT STRATEGIES -- The Portfolio normally invests at least 65%
of its total assets in U.S. government securities. It may invest up to 35% of
its total assets in mortgage-related and asset-backed securities or other
securities that are not U.S. government securities. Mortgage-related securities
(including mortgage-backed securities) are debt securities whose values are
based on underlying pools of mortgages. These securities may be issued by U.S.
governmental entities or private investors. The values of asset-backed
securities are based on underlying pools of other receivables.
INVESTMENT PROCESS -- In pursuing the Portfolio's investment strategies, MacKay
Shields LLC, the Portfolio's Adviser, uses a combined approach to investing,
analyzing economic trends, as well as factors pertinent to particular issuers
and securities.
The Portfolio's principal investments are debt securities issued or guaranteed
by the U.S. government and its agencies and instrumentalities. These securities
include U.S. Treasury bills (maturing in one year or less), notes (maturing in
1-10 years) and bonds (generally maturing in 10 or more years), as well as
Government National Mortgage Association mortgage-backed certificates and other
U.S. government securities representing ownership interests in mortgage pools
such as securities issued by the Federal National Mortgage Association and by
the Federal Home Loan Mortgage Corporation. Principal investments also include
floaters and inverse floaters as well as money market instruments and cash
equivalents. Floaters are debt securities with a variable interest rate that is
tied to another interest rate such as a money market index or Treasury bill
rate. The interest rate on an inverse floater resets in the opposite direction
from the market rate of interest to which the inverse floater is indexed. As
part of the Portfolio's principal strategies, the Adviser may use a variety of
investment practices such as mortgage-dollar roll transactions, transactions on
a when-issued basis and portfolio securities lending. In a mortgage dollar roll
transaction the Portfolio sells a mortgage-backed security from its portfolio to
a another party, and agrees to buy a similar security from the same party at a
later date. A when-issued security is a security that, although authorized, has
not yet been issued. The price (or yield) of such security is fixed at the time
of purchase but delivery and payment take place at a later date.
PRINCIPAL RISKS -- The value of debt securities fluctuates depending upon
various factors, including interest rates, issuer creditworthiness, market
conditions and maturity. Investments in the Portfolio are NOT GUARANTEED, even
though some of the Portfolio's investments are guaranteed by the U.S. government
or its agencies or instrumentalities.
Principal investments also include DERIVATIVES such as floaters and inverse
floaters and mortgaged-related and asset-backed securities. The Portfolio may
use derivatives to try to enhance returns or reduce the risk of loss (hedge) of
certain of its holdings. Regardless of the purpose, the Portfolio may lose money
using derivatives. The derivatives may increase the volatility of the
Portfolio's net asset value.
The Portfolio's use of investment practices such as mortgage dollar rolls,
forward commitments, transactions on a when-issued basis and securities lending
also presents certain risks. The principal risk of MORTGAGE DOLLAR ROLL
TRANSACTIONS is that the security the Portfolio receives at the end of the
transaction is worth less than the security the Portfolio sold to the same
counterparty at the beginning of the transaction. The principal risk of
WHEN-ISSUED SECURITIES is that the security will be worth less when it is issued
than the price the Portfolio agreed to pay when it made the commitment. The
principal risk of SECURITIES LENDING is that the financial institution that
borrows securities from the Portfolio could go bankrupt and the Portfolio might
not be able to recover the securities or their value.
A-17
<PAGE> 19
PAST PERFORMANCE
The bar chart and table indicate some of the risks of investing in the Portfolio
by showing changes in its performance over the life of the Portfolio and by
showing how the Portfolio's average annual total returns for one year, five
years and the life of the Portfolio compare to those of a broad-based securities
market index. Separate account and contract charges are not reflected in the bar
chart. If they were, returns would be less than those shown. As with all mutual
funds, past performance is not necessarily an indication of how the Portfolio
will perform in the future.
<TABLE>
<CAPTION>
<S> <C> <C>
GOVERNMENT PORTFOLIO QUARTER/YEAR RETURN
Highest Return/Best Quarter 2/95 5.52
Lowest Return/Worst Quarter 1/96 -2.46
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<S> <C> <C> <C>
SINCE
1 YEAR 5 YEARS INCEPTION 1/29/93
Government Portfolio -1.74 6.96 5.53
Lehman Brothers
Government Bond Index* -2.23 7.44 6.02
</TABLE>
* The Lehman Brothers Government Bond Index includes issues of the U.S.
government and agencies thereof, as well as fixed rate debt-issues that are
rated investment grade by Moody's, S&P, or Fitch, in that order, with at least
one year to maturity.
[Government Portfolio Bar Chart]
<TABLE>
<CAPTION>
Annual total returns (12/31)
<S> <C>
94 -1.84
95 16.72
96 2.28
97 9.48
98 9.00
99 -1.74
</TABLE>
A-18
<PAGE> 20
HIGH YIELD CORPORATE BOND PORTFOLIO
INVESTMENT OBJECTIVES -- The High Yield Corporate Bond Portfolio's investment
objective is to maximize current income through investment in a diversified
portfolio of high yield, high risk debt securities which are ordinarily in the
lower rating categories of recognized rating agencies (that is, rated Baa to B
by Moody's or BBB to B by S&P). Capital appreciation is a secondary objective.
PRINCIPAL INVESTMENT STRATEGIES -- The Portfolio normally invests at least 65%
of its total assets in corporate debt securities including all types of high
yield debt securities, domestic and foreign corporate debt securities that are
ordinarily rated in the lower rating categories of Moody's (Baa and below) and
S&P (BBB and below) or that are unrated but that are considered by MacKay
Shields LLC, the Portfolio's Adviser, to be of comparable quality.
INVESTMENT PROCESS -- In pursuing the Portfolio's investment strategy, the
Adviser seeks to identify investment opportunities based on the financial
condition and competitiveness of individual companies. The Portfolio's principal
investments include domestic corporate debt securities, Yankee
(dollar-denominated) debt securities, zero coupon bonds and U.S. government
securities. Zero coupon bonds are debt obligations issued without any
requirement for the periodic payment of interest. They are issued at a
significant discount to face value and tend to be more volatile than
conventional debt securities. The Portfolio may invest up to 25% of its total
assets in equity securities.
PRINCIPAL RISKS -- The value of debt securities fluctuates depending upon
various factors, including interest rates, issuer creditworthiness, market
conditions and maturity. The Portfolio principally invests in HIGH YIELD DEBT
SECURITIES (sometimes called "junk bonds") which are generally considered
speculative because they present a greater risk of loss, including default, than
higher quality debt securities. The securities in these categories pay a
premium--a high interest rate or yield--because of the increased risk of loss.
These securities can be also subject to greater price volatility.
Investment in common stocks and other equity securities is particularly subject
to risks of changing economic, stock market, industry and company conditions
which can adversely affect the value of the Portfolio's holdings.
Since the Portfolio invests in FOREIGN SECURITIES, it can be subject to various
risks of loss that are different from the risks of investing in securities of
U.S. based companies. These include losses due to fluctuating currency values,
less liquid trading markets, greater price volatility, political and economic
instability, less publicly available information about issuers, changes in U.S.
or foreign tax or currency laws, and changes in monetary policy. These risks are
likely to be greater in emerging market countries than in developed market
countries.
PAST PERFORMANCE
The bar chart and table indicate some of the risks of investing in the Portfolio
by showing changes in its performance over the life of the Portfolio and by
showing how the Portfolio's average annual total returns for one year and the
life of the Portfolio compare to those of a broad-based securities market index.
Separate account and contract charges are not reflected in the bar chart. If
they were, returns would be less than those shown. As with all mutual funds,
past performance is not necessarily an indication of how the Portfolio will
perform in the future.
<TABLE>
<CAPTION>
<S> <C> <C>
HIGH YIELD CORPORATE BOND PORTFOLIO QUARTER/YEAR RETURN
Highest Return/Best Quarter 1/99 6.45
Lowest Return/Worst Quarter 3/98 -7.26
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98
<S> <C> <C>
SINCE
1 YEAR INCEPTION 5/1/95
High Yield Corporate Bond Portfolio 12.84 11.86
First Boston High Yield Index* 3.28 8.15
</TABLE>
* The First Boston High Yield Index is a market-weighted index that includes
publicly traded bonds rated below BBB by S&P and Baa by Moody's.
[High Yield Corporate Bond Bar Chart]
<TABLE>
<CAPTION>
Annual total returns (12/31)
<S> <C>
96 17.16
97 13.03
98 2.66
99 12.84
</TABLE>
A-19
<PAGE> 21
CASH MANAGEMENT PORTFOLIO
INVESTMENT OBJECTIVE -- The Cash Management Portfolio's investment objective is
to seek as high a level of current income as is considered consistent with the
preservation of capital and liquidity.
PRINCIPAL INVESTMENT STRATEGIES -- MacKay Shields LLC is the Portfolio's
Adviser. The Portfolio invests in short-term dollar-denominated securities,
maturing in 397 days (13 months) or less. The weighted average portfolio
maturity will not exceed 90 days. These securities may include U.S. government
securities; bank and bank holding company obligations such as CDs and bankers'
acceptances; commercial paper which is short-term; unsecured loans to
corporations; other corporate loans of one year or less; and dollar-denominated
loans to U.S. and foreign issuers and securities of foreign branches of U.S.
banks such as negotiable CDs, also known as Eurodollars. These securities may be
variable rate notes, floating rate notes and mortgage-related and asset-backed
securities. Mortgage-related securities (including mortgage-backed securities)
are debt securities whose values are based on underlying pools of mortgages.
These securities may be issued by U.S. governmental entities or private
investors. The values of asset-backed securities are based on underlying pools
of other receivables. Variable rate notes are debt securities that provide for
periodic adjustments in their interest rate. Floaters are debt securities with a
floating rate of interest that is tied to another interest rate such as a money
market index or Treasury bill rate. All securities purchased by the Portfolio
must meet the requirements of Rule 2a-7 of the Investment Company Act of 1940
which are designed to mitigate the risk of loss. There must be a reasonable
expectation that at any time until the final maturity of a floating or variable
rate instrument or the period remaining until the principal amount can be
recovered through demand, the market value of the floating or variable rate
instrument will approximate its amortized cost.
PRINCIPAL RISKS -- An investment in the Portfolio is NOT INSURED OR GUARANTEED
by the Federal Deposit Insurance Corporation or any other government agency.
Although the Portfolio seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Portfolio. This
could occur because of highly unusual market conditions or a sudden collapse in
the creditworthiness of a company once believed to be an issuer of high-quality,
short-term securities.
Since the Portfolio invests in dollar denominated FOREIGN SECURITIES, it can be
subject to various risks of loss that are different from risks of investing in
securities of U.S. based issuers. These include political and economic
instability, less publicly available issuer information and changes in U.S. or
foreign tax or currency laws.
The Portfolio's principal investments include DERIVATIVES such as variable rate
instruments, floaters and mortgage-related and asset-backed securities. If the
Adviser is wrong about its creditworthiness assessments, expectations of changes
in interest rates or market conditions, as a result of an investment or its use
of derivatives the Portfolio could suffer a loss.
PAST PERFORMANCE
The bar chart and table indicate some of the risks of investing in the Portfolio
by showing changes in its performance over the life of the Portfolio and by
showing how the Portfolio's average annual total returns for one year, five
years and the life of the Portfolio compare to those of a broad-based securities
market index. Separate account and contract charges are not reflected in the bar
chart. If they were, returns would be less than those shown. As with all mutual
funds, past performance is not necessarily an indication of how the Portfolio
will perform in the future.
<TABLE>
<CAPTION>
<S> <C> <C>
CASH MANAGEMENT PORTFOLIO QUARTER/YEAR RETURN
Highest Return/Best Quarter 2/95 1.40
Lowest Return/Worst Quarter 1/94 0.70
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
<S> <C> <C> <C>
SINCE
1 YEAR 5 YEARS INCEPTION 1/29/93
Cash Management Portfolio 4.84 5.16 4.63
Lipper Money Market Funds
Index* 4.74 5.10 4.58
</TABLE>
* The Lipper Money Market Funds Index is an equally weighted performance index
adjusted for capital gains distributions and income dividends of the largest
qualifying funds in the investment objective. The funds invest in high-quality
financial instruments rated in the top two grades with a dollar-weighted
average maturity of less than 90 days.
[Cash Management Portfolio Bar Chart]
<TABLE>
<CAPTION>
Annual total returns (12/31)
<S> <C>
94 3.82
95 5.59
96 4.95
97 5.25
98 5.18
99 4.84
</TABLE>
A-20
<PAGE> 22
MORE ABOUT INVESTMENT STRATEGIES AND RISKS
- --------------------------------------------------------------------------------
-
Information about each Portfolio's principal investments, investment practices
and principal risks appears at the beginning of the prospectus. The information
below further describes the principal investments, investment practices and
risks pertinent to a Portfolio.
DERIVATIVE SECURITIES
The value of derivatives is based on certain underlying equity or fixed-income
securities, interest rates, currencies or indexes. They may be hard to sell and
are very sensitive to changes in the underlying security, interest rate,
currency or index, and as a result can be highly volatile. If an Adviser or
Sub-Adviser is wrong about its expectations of changes in interest rates or
market conditions, the use of derivatives could result in a loss.
In addition, the leverage associated with inverse floaters, a type of
derivative, may result in greater volatility in their market value than other
income-producing securities. With respect to mortgage-backed and asset-backed
securities, if interest rates fall, the underlying mortgages and debt may be
paid off reducing the value of a Portfolio's investments.
FOREIGN SECURITIES
Foreign investments could be more difficult to sell than U.S. investments. They
also may subject a Portfolio to risks different from investing in domestic
securities. Investments in foreign securities involve difficulties in receiving
or interpreting financial and economic information, possible imposition of
taxes, higher brokerage and custodian fees, possible currency exchange controls
or other government restrictions, including possible seizure or nationalization
of foreign deposits or assets. Foreign securities may also be less liquid and
more volatile than U.S. securities. There may also be difficulty in invoking
legal protections across borders. In addition, investment in emerging market
countries presents risks in greater degree than those presented by investment in
foreign issuers in countries with developed securities markets and more advanced
regulatory systems.
Some foreign securities are issued by companies organized outside the United
States and are traded only or primarily in trading markets outside the United
States. These foreign securities can be subject to most, if not all, of the
risks of foreign investing. Some foreign securities are issued by companies
organized outside the United States but are traded in U.S. securities markets
and are denominated in U.S. dollars. For example, American Depositary Receipts
and shares of some large foreign-based companies are traded on principal U.S.
exchanges. Other securities are not traded in the United States but are
denominated in U.S. dollars. These securities are not subject to all the risks
of foreign investing. For example, foreign trading market or currency risks will
not apply to dollar denominated securities traded in U.S. securities markets.
Many of the foreign securities in which the Portfolios invest will be
denominated in foreign currencies. Changes in foreign exchange rates will affect
the value of securities denominated or quoted in foreign currencies. Exchange
rate movements can be large and can endure for extended periods of time,
affecting either favorably or unfavorably the value of the Portfolios' assets. A
Portfolio may, however, engage in foreign currency transactions to attempt to
protect itself against fluctuations in currency exchange rates in relation to
the U.S. dollar. See "Risk Management Techniques."
LENDING OF PORTFOLIO SECURITIES
Portfolio securities may be lent to brokers, dealers and financial institutions
to realize additional income under guidelines adopted by the Board of Directors.
The risks in lending portfolio securities, as with other extensions of credit,
consist of possible loss of rights in the collateral should the borrower fail
financially. In determining whether to lend securities, a Portfolio's Adviser or
Sub-Adviser will consider all relevant facts and circumstances, including the
creditworthiness of the borrower.
MORTGAGE-BACKED AND
ASSET-BACKED SECURITIES
Mortgage-backed and asset-backed securities are derivative securities whose
value is based on underlying pools of loans that may include interests in pools
of lower-rated debt securities, consumer loans or mortgages, or complex
instruments such as collateralized mortgage obligations and stripped
mortgage-backed securities. The value of these securities may be significantly
affected by changes in interest rates, the market's perception of issuers and
the creditworthiness of the parties involved. The Adviser's or Sub-Adviser's
ability to correctly forecast interest rates and other economic factors
correctly will impact the success of investments in mortgage-backed and
asset-backed securities. Some securities may have a structure that makes their
reaction to interest rate changes and other factors difficult to predict, making
their value highly volatile. These securities may also be subject to prepayment
risk and if the security has been purchased at a premium the amount of some or
all of the premium may be lost in the event of prepayment.
RISK MANAGEMENT TECHNIQUES
Various techniques can be used to increase or decrease a Portfolio's exposure to
changing security prices, interest rates, currency exchange rates, commodity
prices or other
A-21
<PAGE> 23
factors that affect security values. These techniques may involve derivative
transactions such as buying and selling futures contracts and options on futures
contracts, entering into foreign currency transactions (such as forward foreign
currency exchange contracts and options on foreign currencies) and purchasing
put or call options on securities and securities indexes.
These practices can be used in an attempt to adjust the risk and return
characteristics of their portfolios of investments. When a Portfolio uses such
techniques in an attempt to reduce risk it is known as "hedging". If a
Portfolio's Adviser or Sub-Adviser judges market conditions incorrectly or
employs a strategy that does not correlate well with the Portfolio's
investments, these techniques could result in a loss, regardless of whether the
intent was to reduce risk or increase return. These techniques may increase the
volatility of a Portfolio and may involve a small investment of cash relative to
the magnitude of the risk assumed. In addition, these techniques could result in
a loss if the counterparty to the transaction does not perform as promised.
SWAP AGREEMENTS
Certain of the Portfolios may enter into interest rate, index and currency
exchange rate swap agreements to attempt to obtain a desired return at a lower
cost than a direct investment in an instrument yielding that desired return.
Whether a Portfolio's use of swap agreements will be successful will depend on
whether the Adviser correctly predicts movements in interest rates, indexes and
currency exchange rates. Because they are two-party contracts and because they
may have terms of greater than seven days, swap agreements may be considered to
be illiquid. Moreover, with swap agreements the other party could go bankrupt
and a Portfolio could lose the value of the security it should have received in
the swap. See "Tax Status" in the SAI for information regarding the tax
considerations relating to swap agreements.
WHEN-ISSUED SECURITIES AND
FORWARD COMMITMENTS
Debt securities are often issued on a when-issued basis. The price (or yield) of
such securities is fixed at the time a commitment to purchase is made, but
delivery and payment for the when-issued securities take place at a later date.
During the period between purchase and settlement, no payment is made by the
Portfolio and no interest accrues to the Portfolio. The market value of the
when-issued securities on the settlement date may be more or less than the
purchase price payable at settlement date. Similarly, a Portfolio may commit to
purchase a security at a future date at a price determined at the time of the
commitment. The same procedures for when-issued securities will be followed.
RISKS OF INVESTING IN HIGH YIELD SECURITIES
("JUNK BONDS")
Debt securities rated lower than Baa by Moody's or BBB by S&P or, if not rated,
determined to be of equivalent quality by the Adviser are sometimes referred to
as junk bonds and are considered speculative.
Investment in high yield bonds involves special risks in addition to the risks
associated with investments in higher rated debt securities. High yield bonds
may be regarded as predominantly speculative with respect to the issuer's
continuing ability to meet principal and interest payments. Moreover, such
securities may, under certain circumstances, be less liquid than higher rated
debt securities.
TEMPORARY DEFENSIVE INVESTMENTS
In times of unusual or adverse conditions, for temporary defensive purposes each
Portfolio may invest outside the scope of its principal investment focus. During
this time, the Portfolio may not invest in accordance with its investment
objective or investment strategies. As a result, there is no assurance that the
Portfolio will achieve its investment objective. Under such conditions, each
Portfolio may invest without limit in money market and other investments and as
described in the next section of the prospectus. In addition, under such
conditions, the International Equity Portfolio may invest without limit in
equity securities of U.S. issuers and bonds and the High Yield Corporate Bond
Portfolio may invest without limit in securities rated A or higher by Moody's or
S&P and in U.S. government securities.
PORTFOLIO TURNOVER
Portfolio turnover measures the amount of trading a Portfolio does during the
year. The portfolio turnover for each Portfolio is found in the Financial
Highlights section. The use of certain investment strategies may generate
increased portfolio turnover. Portfolios with high turnover rates (over 100%)
often have higher transaction costs (which are paid by the Portfolio).
A-22
<PAGE> 24
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
-
The Board of Directors supervises the business affairs and investments of each
Portfolio, which are managed on a daily basis by each Portfolio's Adviser or
Sub-Adviser.
INVESTMENT ADVISERS
MacKay Shields LLC, 9 West 57th Street, New York, NY 10019, is the investment
adviser to the Capital Appreciation, Cash Management, Convertible, Government,
High Yield Corporate Bond, International Equity, Total Return and Value
Portfolios. MacKay Shields is a wholly-owned subsidiary of New York Life Asset
Management LLC and an indirect wholly-owned subsidiary of New York Life. MacKay
Shields was incorporated in 1960 as an independent investment advisory firm and
was privately held until 1984 when it became an autonomously managed subsidiary
of New York Life. MacKay Shields became a Delaware limited liability company in
1999. As of December 31, 1999, MacKay Shields managed over $34 billion in
assets, primarily for institutional clients.
Madison Square Advisors LLC, 51 Madison Avenue, New York, NY 10010, is the
investment adviser to the Bond and Growth Equity Portfolios. Madison Square
Advisors is a wholly-owned subsidiary of New York Life Asset Management LLC and
an indirect subsidiary of New York Life. Madison Square became a Delaware
limited liability company in 1999. It replaced New York Life as investment
adviser to the Bond and Growth Equity Portfolios pursuant to a Substitution
Agreement dated May 1, 1999. The substitution had no effect on investment
personnel, investment strategies or fees of the Portfolio. As of December 31,
1999 Madison Square Advisors managed over $2.2 billion in assets.
New York Life Insurance Company, 51 Madison Avenue, New York, NY 10010, is the
investment adviser to the American Century Income & Growth, Dreyfus Large
Company Value, Eagle Asset Management Growth Equity and Lord Abbett Developing
Growth Portfolios. New York Life manages other assets, including assets held in
its own general account and various separate accounts amounting to over $21.3
billion as of December 31, 1999.
Monitor Capital Advisors LLC, 504 Carnegie Center, Princeton, NJ 08540, is the
investment adviser to the Indexed Equity Portfolio. As of December 31, 1999,
Monitor managed over $5.82 billion in assets. Monitor, which was incorporated in
1988, is a wholly-owned subsidiary of New York Life Asset Management LLC and an
indirect wholly-owned subsidiary of New York Life. Monitor Capital became a
Delaware limited liability company in 1999.
Pursuant to the Investment Advisory Agreement for each Portfolio, MacKay
Shields, Madison Square Advisors, New York Life or Monitor is subject to the
supervision of the Directors and, in conformity with the stated policies of each
Portfolio, continuously manages the portfolio of each Portfolio that it advises,
including the purchase, retention and disposition of securities and other
supervision of its assets, and maintains certain records relating thereto. New
York Life, with the approval of the Board of Directors, selects and employs
Sub-Advisers for the Portfolios it manages, monitors the Sub-Advisers'
investment programs and results, and coordinates the investment activities of
the Sub-Advisers to help ensure compliance with regulatory restrictions. The
Sub-Advisers, subject to the supervision of New York Life, are responsible for
deciding which portfolio securities to purchase and sell for their respective
Portfolios and for placing those Portfolios' portfolio transactions. New York
Life pays the fees of each Portfolio's Sub-Adviser. The Sub-Advisory Agreements
can be terminated by New York Life or by the Directors in which case they would
no longer manage the Portfolio.
For the fiscal year ended December 31, 1999, the Fund, on behalf of each
Portfolio, paid MacKay Shields, Madison Square Advisors, New York Life or
Monitor an aggregate fee for the investment advisory services performed at an
annual percentage of the average daily net assets of that Portfolio as follows:
<TABLE>
<CAPTION>
ANNUAL RATE
-----------
<S> <C>
Capital Appreciation Portfolio.............. .36%
Cash Management Portfolio................... .25%
Convertible Portfolio....................... .36%
Government Portfolio........................ .30%
High Yield Corporate Bond Portfolio......... .30%
Indexed Equity Portfolio.................... .10%
International Equity Portfolio.............. .60%
Total Return Portfolio...................... .32%
Value Portfolio............................. .36%
American Century Income & Growth
Portfolio................................. .50%
Bond Portfolio.............................. .25%
Dreyfus Large Company Value Portfolio....... .60%
Eagle Asset Management Growth Equity
Portfolio................................. .50%
Growth Equity Portfolio..................... .25%
Lord Abbett Developing Growth Portfolio..... .60%
</TABLE>
SUB-ADVISERS. Each Sub-Adviser is employed by New York Life, subject to
approval by the Board of Directors, and the shareholders of the applicable
Portfolio. New York Life recommends Sub-Advisers to the Fund's Board of
Directors based upon its continuing quantitative and qualitative evaluation of
the Sub-Adviser's skill in managing assets using specific investment styles and
strategies.
A-23
<PAGE> 25
Each Sub-Adviser has discretion to purchase and sell securities for the assets
of its respective Portfolio in accordance with that Portfolio's investment
objectives, policies and restrictions. For these services, the Sub-Advisers are
paid a monthly fee by New York Life, not the Portfolios (see the SAI for a
breakdown of fees.) Although the Sub-Advisers are subject to general supervision
by the Fund's Board of Directors and New York Life, these parties do not
evaluate the investment merits of specific securities transactions.
American Century Investment Management, Inc., whose principal place of business
is American Century Tower, 4500 Main Street, Kansas City, Missouri 64111, serves
as Sub-Adviser to the American Century Income & Growth Portfolio.
The Dreyfus Corporation, whose principal place of business is 200 Park Avenue,
New York, New York 10166, serves as Sub-Adviser to the Dreyfus Large Company
Value Portfolio. The Dreyfus Corporation is an indirect wholly owned subsidiary
of Mellon Bank Corporation, which provides a comprehensive range of financial
products and services.
Eagle Asset Management, Inc., whose principal place of business is St.
Petersburg, Florida, serves as Sub-Adviser to the Eagle Asset Management Growth
Equity Portfolio. Eagle Asset Management is a wholly owned subsidiary of Raymond
James Financial, Inc., which together with its subsidiaries, provides a wide
range of financial services to retail and institutional clients.
Lord, Abbett & Co., whose principal place of business is 90 Hudson Street,
Jersey City, New Jersey 07032-3973, serves as Sub-Adviser to the Lord Abbett
Developing Growth Portfolio.
PORTFOLIO MANAGERS -- BIOGRAPHIES
MAUREEN MCFARLAND -- Ms. McFarland has managed the International Equity
Portfolio since 1998. Ms. McFarland is a Director at MacKay Shields. She joined
MacKay-Shields in 1997 as Currency Overlay Manager in the Global Division. Prior
to joining the company, Ms. McFarland was employed at Brown Brothers Harriman &
Co., where she was the Team Leader of the Global Fixed Income Area.
EDWARD MUNSHOWER -- Mr. Munshower has managed the Government Portfolio since
inception, and the Total Return Portfolio since 1999. Mr. Munshower is a
Director of MacKay Shields. He joined MacKay Shields as a fixed income
investment specialist in 1985 after having been an investment analyst for New
York Life Insurance Company.
CHRISTOPHER HARMS -- Mr. Harms has managed the Government Portfolio since April
1999. Mr. Harms joined MacKay Shields as a Director in 1991 with more than 10
years prior investment management and research experience. Prior to joining the
firm, Mr. Harms was employed at Bear Stearns in the Asset Management Division as
a fixed income portfolio manager.
JOSEPH PORTERA -- Mr. Portera has managed the International Equity Portfolio
since 1998. Mr. Portera is a Managing Director of MacKay Shields specializing in
international bonds. He returned to MacKay Shields in December 1996 after
working at Fiduciary Trust Company International as a portfolio manager in
international bonds. Mr. Portera joined MacKay Shields in 1991.
JAMES AGOSTISI -- Mr. Agostisi has managed the Growth Equity Portfolio since
1994. Mr. Agostisi is a Director--Portfolio Management of Madison Square
Advisors. He is also a Director of New York Life Asset Management as of April
2000. He has 14 years of investment experience at New York Life and has been a
Director--Portfolio Management of Madison Square Advisors since its
establishment.
RUDOLPH C. CARRYL -- Mr. Carryl has managed the Capital Appreciation and Total
Return Portfolios since inception. Mr. Carryl is a Managing Director of MacKay
Shields. He joined MacKay Shields as a Director in 1992 with 12 years of
investment management and research experience. Mr. Carryl was Research Director
and Senior Portfolio Manager at Value Line, Inc. from 1978 to 1992.
JEFFERSON C. BOYCE -- Mr. Boyce has managed the Indexed Equity Portfolio since
March 1999. Mr. Boyce has been Chairman and Chief Executive Officer of Monitor
Capital since 1997. Prior to that he was Senior Vice President of Monitor
Capital from 1992 to 1997. Mr. Boyce is also a Senior Vice President of New York
Life and serves as an officer and/or director of various other subsidiaries and
affiliated entities of New York Life.
STEPHEN KILLIAN -- Mr. Killian has managed the Indexed Equity Portfolio since
February 1999. Mr. Killian is a Vice President with portfolio management
responsibility for international equity funds, active quantitative equity
portfolios and development of quantitative strategies at Monitor Capital. He
joined Monitor Capital in 1997 after being a Partner and Senior Portfolio
Manager at RhumbLine Advisers from 1992 to 1997. Mr. Killian is a candidate in
the CFA Program.
PATRICIA S. ROSSI -- Ms. Rossi has managed the Growth Equity Portfolio since
1995. Ms. Rossi is Managing Director--Portfolio Management of Madison Square
Advisors. She is also a Managing Director of New York Life Asset Management as
of April 2000. She joined New York Life in 1995 as Head of Public Equities and
has been a Managing Director--Portfolio Management of Madison Square Advisors
since its establishment. Ms. Rossi has over 20 years of investment management
and research experience. Prior to joining New York Life, Ms. Rossi was a
portfolio manager for the United Church of Christ--Pension Boards.
A-24
<PAGE> 26
RICHARD ROSEN -- Mr. Rosen has managed the Value Portfolio since January 1999.
Mr. Rosen is a Managing Director of MacKay Shields and specializes in equity
securities. He joined MacKay Shields in January 1999 after working as a Managing
Director and equity portfolio manager at Prudential Investments.
DONALD E. MORGAN -- Mr. Morgan is a Managing Director and head of the High Yield
Division at MacKay Shields. He joined MacKay Shields in 1997 as an Associate
Director, and was promoted to Director in 1999 and to Managing Director in 2000.
Prior to joining MacKay Shields, he was a High Yield Analyst with Fidelity
Management & Research. Prior thereto, he was an Engineer at QuesTech Inc. Mr.
Morgan became a Chartered Financial Analyst in 1998, and has 7 years experience
in investment management and research.
STEPHEN J. MCGRUDER -- Mr. McGruder has managed the Lord Abbett Developing
Growth Portfolio since its inception and has been a portfolio manager at Lord,
Abbett since May 1995. He previously served as Vice President of Wafra Investor
Advisory Group from October 1988. Mr. McGruder has been in the investment
business since 1969.
JOHN SCHNIEDWIND -- Mr. Schniedwind has managed the American Century Income &
Growth Portfolio since its inception. He is Senior Vice President and Group
Head -- Quantitative Equity, at American Century which he joined in 1982.
KURT BORGWARDT -- Mr. Borgwardt has managed the American Century Income & Growth
Portfolio since its inception. He joined American Century in 1990 and has served
as the Director of Quantitative Equity Research since then.
TIMOTHY M. GHRISKEY -- Mr. Ghriskey is the Portfolio Manager of the Dreyfus
Large Company Value Portfolio and has been with Dreyfus since July 1995. From
1988 to June 1995 Mr. Ghriskey was Vice President and Associate Managing Partner
of Loomis, Sayles & Company.
ASHI PARIKH -- Mr. Parikh has managed the Eagle Asset Management Growth Equity
Portfolio since April 1999. He is Managing Director and Portfolio Manager for
the large capitalization Growth Equity Program at Eagle. Mr. Parikh joined Eagle
in 1999 from Banc One Investment Advisors, Inc., where he was Managing Director
of their Growth Equity Team. He joined Banc One Corporation in 1992 and Banc One
Investment Advisors in 1994.
ALBERT R. CORAPI, JR -- Mr. Corapi has managed the Bond Portfolio since 1990. He
joined Madison Square Advisors as a Portfolio Manager in 1997. He is also a
Director of New York Life Asset Management as of April 2000. He joined the
Investment Department of New York Life in 1985.
EDMUND C. SPELMAN -- Mr. Spelman has managed the Convertible Portfolio since
September 1999 and has managed the Capital Appreciation and Total Return
Portfolios since inception. Mr. Spelman is a Managing Director at MacKay Shields
and specializes in equity securities. He joined MacKay Shields in 1991 after
working as a securities analyst at Oppenheimer & Co., Inc. from 1983 to 1990.
THOMAS WYNN -- Mr. Wynn has managed the Convertible Portfolio since 1997. Mr.
Wynn is a director at MacKay Shields. He joined MacKay Shields in 1995 as a
research analyst. He was previously a portfolio manager at Fiduciary Trust for
nine years and has over 12 years experience in investment management and
research.
ADMINISTRATOR
NYLIAC (the "Administrator"), 51 Madison Avenue, New York, NY 10010, a
corporation organized under the laws of the State of Delaware and a wholly-owned
subsidiary of New York Life, is the Administrator for the Portfolios. NYLIAC
has, pursuant to a subadministration agreement, retained MainStay Management
LLC, an indirect wholly-owned subsidiary of New York Life, to perform certain of
the services to be provided by NYLIAC pursuant to the terms of the
Administration Agreement.
Under the Administration Agreement for each Portfolio, NYLIAC administers the
Portfolios' business affairs, subject to the supervision of the Directors and,
in connection therewith, furnishes the Portfolios with office facilities and is
responsible for ordinary clerical, recordkeeping and bookkeeping services and
for the financial and accounting records required to be maintained by the
Portfolios, excluding those maintained by the Portfolios' Custodian, except
those as to which the Administrator has supervisory functions, and other than
those being maintained by the Advisers.
The Fund, on behalf of each Portfolio, pays the Administrator a monthly fee for
the services performed and the facilities furnished by the Administrator at an
annual rate of .20% of the average daily net assets of each Portfolio.
The payment of the investment management and the administration fees, as well as
other operating expenses, will affect the Indexed Equity Portfolio's ability to
track the S&P 500 exactly.
PURCHASE AND REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
-
Shares in each of the Portfolios are offered to and are redeemed by the Separate
Accounts at a price equal to their respective net asset value per share. No
sales or
A-25
<PAGE> 27
redemption charge is applicable to the purchase or redemption of the Portfolios'
shares.
The Fund determines the net asset value per share of each Portfolio on each day
the New York Stock Exchange is open for trading. Net asset value per share is
calculated as of the close of the New York Stock Exchange (normally 4:00 p.m.
Eastern time) for each Portfolio for purchases and redemptions of shares of each
Portfolio by dividing the current market value (amortized cost in the case of
the Cash Management Portfolio) of total Portfolio assets, less liabilities, by
the total number of shares of that Portfolio outstanding.
Certain Portfolios invest in securities that are primarily listed on foreign
securities exchanges that trade on weekdays or other days when the Fund does not
price shares. As a result, the net asset value of those Portfolios' shares may
change on days when shareholders will not be able to purchase or redeem their
shares.
In some cases, the Policies may be sold to policy owners who independently
utilize the services of a third party advisor offering asset allocation and/or
market timing services. NYLIAC may honor transfer and withdrawal instructions
from such asset allocation and market timing services if it has received
authorization to do so from the policy owner participating in the service.
We do not endorse, approve or recommend such services in any way and you should
be aware that fees paid for such services are separate from and in addition to
fees paid under the Policies.
Because the amounts associated with some of these transactions may be unusually
large, they may disrupt the management of a portfolio. Accordingly, the
portfolios reserve the right to not accept transfer instructions which are
submitted by any person, asset allocation and/or market timing services on
behalf of Policy owners. We will exercise this right only in accordance with
uniform procedures that we may establish from time to time and that will not
unfairly discriminate against similarly situated policyowners.
TAXES, DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
-
TAXES
Each Portfolio intends to elect to qualify as a "regulated investment company"
under the provisions of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). If each Portfolio qualifies as a "regulated investment
company" and complies with the appropriate provisions of the Code, each
Portfolio will be relieved of federal income tax on the amounts distributed.
Federal tax laws impose a four percent nondeductible excise tax on each
regulated investment company with respect to an amount, if any, by which such
company does not meet specified distribution requirements. Each Portfolio
intends to comply with such distribution requirements and therefore does not
expect to incur the four percent nondeductible excise tax.
In order for the Separate Accounts to comply with regulations under Section
817(h) of the Code, each Portfolio will diversify its investments so that on the
last day of each quarter of a calendar year, no more than 55% of the value of
each Separate Accounts' proportionate share of the assets owned by each of the
regulated investment companies in which it owns shares is represented by any one
investment, no more than 70% is represented by any two investments, no more than
80% is represented by any three investments, and no more than 90% is represented
by any four investments. For this purpose, securities of a single issuer are
treated as one investment and each U.S. Government agency or instrumentality is
treated as a separate issuer. Any security issued, guaranteed, or insured (to
the extent so guaranteed or insured) by the U.S. Government or an agency or
instrumentality of the U.S. Government is treated as a security issued by the
U.S. Government or its agency or instrumentality, whichever is applicable.
Since the sole shareholders of the Fund will be separate accounts, no discussion
is included herein as to the federal income tax consequences at the shareholder
level. For information concerning the federal income tax consequences to
purchasers of the Policies, see the attached prospectus for the Policy.
DIVIDENDS AND DISTRIBUTIONS
The Cash Management Portfolio (which seeks to maintain a constant net asset
value of $1.00 per share) will declare a dividend of its net investment income
daily and distribute such dividend monthly; a shareholder of that Portfolio
begins to earn dividends on the next business day following the receipt of the
shareholder's investment by the Portfolio. Each Portfolio other than the Cash
Management Portfolio declares and distributes a dividend of net investment
income, if any, annually. Shareholders of each Portfolio, other than the Cash
Management Portfolio, will begin to earn dividends on the first business day
after the shareholder's purchase order has been received. Distributions
reinvested in shares will be made after the first business day of each month
following declaration of the dividend. Each Portfolio will distribute its net
long-term capital gains, if any, after utilization of any capital loss
carryforwards after the end of each fiscal year. The Portfolios may declare an
additional distribution of investment income and capital gains in October,
A-26
<PAGE> 28
November or December (which would be paid before February 1 of the following
year) to avoid the excise tax on income not distributed in accordance with the
applicable timing requirements.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
-
CUSTODIAN
For the Capital Appreciation, Cash Management, Convertible, Government, High
Yield Corporate Bond, International Equity, Total Return, Value, American
Century Income & Growth, Dreyfus Large Company Value, Eagle Growth Equity, Lord
Abbett Developing Growth, and Indexed Equity Portfolios, The Bank of New York,
90 Washington Street, New York, New York 10286 is the custodian of the
Portfolios' assets. For the Bond and Growth Equity Portfolios, The Chase
Manhattan Bank, N.A. (formerly Chemical Bank), 3 Chase Metro Tech Center,
Brooklyn, New York 11245 is the custodian of the Portfolios' assets.
PERFORMANCE AND YIELD INFORMATION
From time to time, the Fund may advertise yields and total returns for the
Portfolios. In addition, the Fund may advertise the effective yield of the Cash
Management Portfolio. These figures will be based on historical information and
are not intended to indicate future performance. Information on the calculation
of performance data is included in the SAI.
A-27
<PAGE> 29
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
-
The following financial highlights table is intended to help you understand the
Portfolios' financial performance for the past five years or, if shorter, the
period of a Portfolio's operations. Certain information reflects financial
results for a single portfolio share. The total returns in the table represent
the rate that an investor would have earned on an investment in that portfolio
(assuming reinvestment of all dividends and distributions). This information has
been audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, are included in the Fund's Statement of Additional
Information, which is available upon request.
<TABLE>
<CAPTION>
CAPITAL APPRECIATION CASH MANAGEMENT
PORTFOLIO PORTFOLIO
-------------------------------------------------------- -------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31,
-------------------------------------------------------- -------------------
1999 1998 1997 1996 1995 1999 1998
---------- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF
PERIOD............... $ 30.61 $ 22.39 $ 18.39 $ 15.49 $ 11.45 $ 1.00 $ 1.00
---------- ---------- -------- -------- -------- -------- --------
Net investment income
(loss)............... (0.02)(c) 0.03 0.00(a) 0.01 0.06 0.05 0.05
Net realized and
unrealized gain
(loss) on
investments.......... 7.79 8.51 4.31 2.90 4.04 -- --
---------- ---------- -------- -------- -------- -------- --------
Total from investment
operations........... 7.77 8.54 4.31 2.91 4.10 0.05 0.05
---------- ---------- -------- -------- -------- -------- --------
Less dividends and
distributions:
From net investment
income............. -- (0.03) (0.00)(a) (0.01) (0.06) (0.05) (0.05)
From net realized
gain on
investments........ (1.40) (0.29) (0.31) -- -- -- --
---------- ---------- -------- -------- -------- -------- --------
Total dividends and
distributions........ (1.40) (0.32) (0.31) (0.01) (0.06) (0.05) (0.05)
---------- ---------- -------- -------- -------- -------- --------
NET ASSET VALUE AT END
OF PERIOD............ $ 36.98 $ 30.61 $ 22.39 $ 18.39 $ 15.49 $ 1.00 $ 1.00
========== ========== ======== ======== ======== ======== ========
Total investment
return#.............. 25.41% 38.14% 23.49% 18.75% 35.78% 4.84% 5.18%
RATIOS (TO AVERAGE NET
ASSETS)/ SUPPLEMENTAL
DATA:
Net investment income
(loss)............. (0.05%) 0.11% 0.00%(b) 0.09% 0.57% 4.79% 5.05%
Net expenses......... 0.62% 0.64% 0.65% 0.73% 0.73% 0.51% 0.54%
Expenses (before
reimbursement)..... 0.62% 0.64% 0.65% 0.75% 0.90% 0.51% 0.54%
Portfolio turnover
rate................. 37% 27% 34% 16% 35% -- --
Net assets at end of
period (in 000's).... $1,848,514 $1,236,864 $763,079 $503,622 $244,536 $454,470 $231,552
<CAPTION>
CASH MANAGEMENT CONVERTIBLE
PORTFOLIO PORTFOLIO
----------------------------- ---------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED OCT. 1,
DECEMBER 31, DECEMBER 31, 1996** TO
----------------------------- --------------------------- DEC. 31,
1997 1996 1995 1999 1998 1997 1996
-------- -------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF
PERIOD............... $ 1.00 $ 1.00 $ 1.00 $ 10.33 $ 10.76 $ 10.27 $ 10.00
-------- -------- ------- ------- ------- ------- -------
Net investment income
(loss)............... 0.05 0.05 0.05 0.49 0.51 0.44 0.10
Net realized and
unrealized gain
(loss) on
investments.......... -- -- -- 3.81 (0.02) 1.12 0.29
-------- -------- ------- ------- ------- ------- -------
Total from investment
operations........... 0.05 0.05 0.05 4.30 0.49 1.56 0.39
-------- -------- ------- ------- ------- ------- -------
Less dividends and
distributions:
From net investment
income............. (0.05) (0.05) (0.05) (0.49) (0.52) (0.44) (0.10)
From net realized
gain on
investments........ -- -- -- (1.46) (0.40) (0.63) (0.02)
-------- -------- ------- ------- ------- ------- -------
Total dividends and
distributions........ (0.05) (0.05) (0.05) (1.95) (0.92) (1.07) (0.12)
-------- -------- ------- ------- ------- ------- -------
NET ASSET VALUE AT END
OF PERIOD............ $ 1.00 $ 1.00 $ 1.00 $ 12.68 $ 10.33 $ 10.76 $ 10.27
======== ======== ======= ======= ======= ======= =======
Total investment
return#.............. 5.25% 4.95% 5.59% 41.98% 4.49% 15.43% 3.89%
RATIOS (TO AVERAGE NET
ASSETS)/ SUPPLEMENTAL
DATA:
Net investment income
(loss)............. 5.13% 4.92% 5.44% 4.52% 5.19% 5.13% 5.14%*
Net expenses......... 0.54% 0.62% 0.62% 0.71% 0.72% 0.73% 0.73%*
Expenses (before
reimbursement)..... 0.54% 0.64% 0.94% 0.71% 0.72% 0.78% 1.46%*
Portfolio turnover
rate................. -- -- -- 264% 209% 217% 15%
Net assets at end of
period (in 000's).... $140,782 $118,347 $87,839 $94,834 $57,711 $39,768 $15,464
</TABLE>
- ------------
* Annualized.
** Commencement of operations.
# The total investment return quotations reflected above do not reflect
expenses incurred by the Separate Accounts or in connection with the
Policies. Including such expenses in these quotations would have reduced
such returns for all periods shown. Total return is not annualized.
(a) Less than one cent per share.
(b) Less than one-hundredth of a percent.
(c) Per share data based on average shares outstanding during the period.
A-28
<PAGE> 30
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
-
<TABLE>
<CAPTION>
GOVERNMENT HIGH YIELD CORPORATE BOND
PORTFOLIO PORTFOLIO
------------------------------------------------- -------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------------------------------------- -------------------
1999 1998 1997 1996 1995 1999 1998
-------- -------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD.... $ 10.27 $ 9.83 $ 9.59 $ 10.01 $ 9.21 $ 10.92 $ 11.73
-------- -------- ------- ------- ------- -------- --------
Net investment income.... 0.53 0.45 0.67 0.65 0.75 1.31 1.08
Net realized and
unrealized gain (loss)
on investments......... (0.71) 0.44 0.24 (0.42) 0.80 0.07 (0.76)
Net realized and
unrealized gain (loss)
on foreign currency
transactions........... -- -- -- -- -- 0.01 (0.00)(a)
-------- -------- ------- ------- ------- -------- --------
Total from investment
operations............. (0.18) 0.89 0.91 0.23 1.55 1.39 0.32
-------- -------- ------- ------- ------- -------- --------
Less dividends and
distributions:
From net investment
income............... (0.53) (0.45) (0.67) (0.65) (0.75) (1.32) (1.09)
From net realized gain
on investments....... -- -- -- -- -- (0.23) (0.04)
From net realized gain
on investments and
foreign currency
transactions......... -- -- -- -- -- -- --
In excess of net
investment income.... -- -- -- -- -- (0.06) --
In excess of net
realized gain on
investments.......... -- -- -- -- -- (0.01) --
-------- -------- ------- ------- ------- -------- --------
Total dividends and
distributions.......... (0.53) (0.45) (0.67) (0.65) (0.75) (1.62) (1.13)
-------- -------- ------- ------- ------- -------- --------
NET ASSET VALUE AT END OF
PERIOD................. $ 9.56 $ 10.27 $ 9.83 $ 9.59 $ 10.01 $ 10.69 $ 10.92
======== ======== ======= ======= ======= ======== ========
Total investment
return#................ (1.74%) 9.00% 9.48% 2.28% 16.72% 12.84% 2.66%
RATIOS (TO AVERAGE NET
ASSETS)/ SUPPLEMENTAL
DATA:
Net investment
income............... 5.47% 5.50% 6.71% 6.66% 7.80% 11.33% 9.93%
Net expenses........... 0.59% 0.63% 0.63% 0.67% 0.67% 0.57% 0.58%
Expenses (before
reimbursement)....... 0.59% 0.63% 0.63% 0.71% 0.82% 0.57% 0.58%
Portfolio turnover
rate................... 328% 405% 345% 304% 592% 93% 151%
Net assets at end of
period (in 000's)...... $171,055 $119,021 $73,755 $73,123 $64,812 $684,956 $569,813
<CAPTION>
HIGH YIELD CORPORATE BOND INTERNATIONAL EQUITY
PORTFOLIO PORTFOLIO
------------------------------- -------------------------------------------------
FOR THE YEAR ENDED MAY 1, FOR THE YEAR ENDED MAY 1,
DECEMBER 31, 1995** TO DECEMBER 31, 1995** TO
------------------- DEC. 31, ------------------------------------- DEC. 31,
1997 1996 1995 1999 1998 1997 1996 1995
-------- -------- --------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD.... $ 11.61 $ 10.55 $ 10.00 $ 12.40 $ 10.31 $ 10.65 $ 10.20 $ 10.00
-------- -------- ------- ------- ------- ------- ------- -------
Net investment income.... 0.85 0.59 0.37 0.11 0.23 1.06 0.44 0.64
Net realized and
unrealized gain (loss)
on investments......... 0.65 1.22 0.61 3.46 2.20 0.27 0.06 0.01
Net realized and
unrealized gain (loss)
on foreign currency
transactions........... -- -- -- (0.12) (0.05) (0.78) 0.56 0.05
-------- -------- ------- ------- ------- ------- ------- -------
Total from investment
operations............. 1.50 1.81 0.98 3.45 2.38 0.55 1.06 0.70
-------- -------- ------- ------- ------- ------- ------- -------
Less dividends and
distributions:
From net investment
income............... (0.84) (0.59) (0.37) -- (0.23) (0.89) (0.60) (0.06)
From net realized gain
on investments....... (0.54) (0.16) (0.04) -- -- -- -- --
From net realized gain
on investments and
foreign currency
transactions......... -- -- -- (0.32) -- -- (0.01) (0.44)
In excess of net
investment income.... -- -- -- (0.05) (0.06) -- -- --
In excess of net
realized gain on
investments.......... -- -- (0.02) -- -- -- -- --
-------- -------- ------- ------- ------- ------- ------- -------
Total dividends and
distributions.......... (1.38) (0.75) (0.43) (0.37) (0.29) (0.89) (0.61) (0.50)
-------- -------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE AT END OF
PERIOD................. $ 11.73 $ 11.61 $ 10.55 $ 15.48 $ 12.40 $ 10.31 $ 10.65 $ 10.20
======== ======== ======= ======= ======= ======= ======= =======
Total investment
return#................ 13.03% 17.16% 10.06% 28.06% 23.11% 5.17% 10.54% 6.96%
RATIOS (TO AVERAGE NET
ASSETS)/ SUPPLEMENTAL
DATA:
Net investment
income............... 8.84% 8.59% 10.02%* 0.78% 1.13% 1.25% 1.01% 1.07%*
Net expenses........... 0.59% 0.67% 0.67%* 1.07% 0.97% 0.97% 0.97% 0.97%*
Expenses (before
reimbursement)....... 0.59% 0.71% 1.25%* 1.07% 1.17% 1.25% 1.51% 2.51%*
Portfolio turnover
rate................... 153% 149% 95% 37% 57% 61% 16% 14%
Net assets at end of
period (in 000's)...... $424,567 $205,001 $43,314 $72,339 $38,006 $30,272 $34,509 $14,631
</TABLE>
- ------------
* Annualized.
** Commencement of operations.
# The total investment return quotations reflected above do not reflect
expenses incurred by the Separate Accounts or in connection with the
Policies. Including such expenses in these quotations would have reduced
such returns for all periods shown. Total return is not annualized.
(a) Less than one cent per share.
A-29
<PAGE> 31
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
-
<TABLE>
<CAPTION>
TOTAL RETURN VALUE
PORTFOLIO PORTFOLIO
---------------------------------------------------- -------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31,
---------------------------------------------------- -------------------
1999 1998 1997 1996 1995 1999 1998
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD... $ 19.99 $ 16.47 $ 14.56 $ 13.26 $ 10.58 $ 13.96 $ 16.09
-------- -------- -------- -------- -------- -------- --------
Net investment income... 0.39 0.38 0.37 0.30 0.31 0.20 0.24
Net realized and
unrealized gain (loss)
on investments........ 3.00 4.07 2.21 1.30 2.69 1.03 (0.90)
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations............ 3.39 4.45 2.58 1.60 3.00 1.23 (0.66)
-------- -------- -------- -------- -------- -------- --------
Less dividends and
distributions:
From net investment
income.............. (0.39) (0.38) (0.36) (0.30) (0.32) (0.19) (0.24)
From net realized gain
on investments...... (0.63) (0.55) (0.31) -- -- -- (1.23)
-------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions......... (1.02) (0.93) (0.67) (0.30) (0.32) (0.19) (1.47)
-------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE AT END
OF PERIOD............. $ 22.36 $ 19.99 $ 16.47 $ 14.56 $ 13.26 $ 15.00 $ 13.96
======== ======== ======== ======== ======== ======== ========
Total investment
return#............... 17.02% 27.13% 17.79% 12.08% 28.33% 8.80% (4.14%)
RATIOS (TO AVERAGE NET
ASSETS)/SUPPLEMENTAL
DATA:
Net investment
income.............. 1.88% 2.20% 2.46% 2.52% 3.06% 1.30% 1.60%
Net expenses.......... 0.58% 0.60% 0.60% 0.69% 0.69% 0.63% 0.65%
Expenses (before
reimbursement)...... 0.58% 0.60% 0.60% 0.71% 0.81% 0.63% 0.65%
Portfolio turnover
rate.................. 133% 158% 125% 175% 253% 74% 69%
Net assets at end of
period (in 000's)..... $821,531 $644,361 $446,624 $332,897 $194,893 $331,473 $319,743
<CAPTION>
VALUE INDEXED EQUITY
PORTFOLIO PORTFOLIO
------------------------------- ------------------------------------------------------
FOR THE YEAR ENDED MAY 1, FOR THE YEAR ENDED
DECEMBER 31, 1995** TO DECEMBER 31,
------------------- DEC. 31, ------------------------------------------------------
1997 1996 1995 1999 1998 1997 1996 1995
-------- -------- --------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD... $ 13.90 $ 11.58 $ 10.00 $ 25.89 $ 20.58 $ 16.10 $ 13.53 $ 10.38
-------- -------- ------- ---------- -------- -------- -------- --------
Net investment income... 0.21 0.17 0.10 0.28 0.26 0.27 0.24 0.27
Net realized and
unrealized gain (loss)
on investments........ 2.94 2.52 1.58 5.06 5.58 4.99 2.79 3.55
-------- -------- ------- ---------- -------- -------- -------- --------
Total from investment
operations............ 3.15 2.69 1.68 5.34 5.84 5.26 3.03 3.82
-------- -------- ------- ---------- -------- -------- -------- --------
Less dividends and
distributions:
From net investment
income.............. (0.21) (0.17) (0.10) (0.28) (0.26) (0.27) (0.24) (0.28)
From net realized gain
on investments...... (0.75) (0.20) -- (0.45) (0.27) (0.51) (0.22) (0.39)
-------- -------- ------- ---------- -------- -------- -------- --------
Total dividends and
distributions......... (0.96) (0.37) (0.10) (0.73) (0.53) (0.78) (0.46) (0.67)
-------- -------- ------- ---------- -------- -------- -------- --------
NET ASSET VALUE AT END
OF PERIOD............. $ 16.09 $ 13.90 $ 11.58 $ 30.50 $ 25.89 $ 20.58 $ 16.10 $ 13.53
======== ======== ======= ========== ======== ======== ======== ========
Total investment
return#............... 22.89% 23.22% 16.76% 20.70% 28.49% 32.84% 22.42% 36.89%
RATIOS (TO AVERAGE NET
ASSETS)/SUPPLEMENTAL
DATA:
Net investment
income.............. 1.78% 2.10% 2.57%* 1.13% 1.30% 1.75% 2.14% 2.52%
Net expenses.......... 0.65% 0.73% 0.73%* 0.36% 0.38% 0.39% 0.47% 0.47%
Expenses (before
reimbursement)...... 0.65% 0.79% 1.45%* 0.36% 0.38% 0.39% 0.50% 0.62%
Portfolio turnover
rate.................. 48% 41% 20% 3% 4% 5% 3% 5%
Net assets at end of
period (in 000's)..... $264,179 $120,415 $24,429 $1,521,085 $946,785 $496,772 $223,945 $105,171
</TABLE>
- ------------
* Annualized.
** Commencement of operations.
# The total investment return quotations reflected above do not reflect
expenses incurred by the Separate Accounts or in connection with the
Policies. Including such expenses in these quotations would have reduced
such returns for all periods shown. Total return is not annualized.
A-30
<PAGE> 32
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
-
<TABLE>
<CAPTION>
GROWTH EQUITY PORTFOLIO
------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------
1999 1998 1997 1996 1995
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF
YEAR............................. $ 23.62 $ 20.31 $ 18.63 $ 17.22 $ 14.69
---------- -------- -------- -------- --------
Net investment income.............. 0.16 0.19 0.16 0.18 0.22
Net realized and unrealized gain
(loss) on investments............ 6.89 5.21 4.74 4.06 4.06
---------- -------- -------- -------- --------
Total from investment operations... 7.05 5.40 4.90 4.24 4.28
---------- -------- -------- -------- --------
Less dividends and distributions:
From net investment income....... (0.16) (0.19) (0.16) (0.18) (0.22)
From net realized gain on
investments.................... (2.73) (1.90) (3.06) (2.65) (1.53)
---------- -------- -------- -------- --------
Total dividends and
distributions.................... (2.89) (2.09) (3.22) (2.83) (1.75)
---------- -------- -------- -------- --------
NET ASSET VALUE AT END OF YEAR..... $ 27.78 $ 23.62 $ 20.31 $ 18.63 $ 17.22
========== ======== ======== ======== ========
Total investment return #.......... 29.96% 26.59% 26.75% 24.50% 29.16%
RATIOS (TO AVERAGE NET
ASSETS)/SUPPLEMENTAL DATA:
Net investment income............ 0.63% 0.84% 0.80% 0.98% 1.29%
Net expenses..................... 0.49% 0.51% 0.50% 0.58% 0.62%
Expenses (before
reimbursement)................. 0.49% 0.51% 0.50% 0.58% 0.91%
Portfolio turnover rate............ 71% 69% 103% 104% 104%
Net assets at end of year (in
000's)........................... $1,312,905 $996,736 $759,054 $564,685 $427,507
<CAPTION>
BOND PORTFOLIO
-------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF
YEAR............................. $ 13.23 $ 13.14 $ 12.83 $ 13.42 $ 12.09
-------- -------- -------- -------- --------
Net investment income.............. 0.78 0.74 0.88 0.87 0.88
Net realized and unrealized gain
(loss) on investments............ (0.99) 0.46 0.35 (0.59) 1.33
-------- -------- -------- -------- --------
Total from investment operations... (0.21) 1.20 1.23 0.28 2.21
-------- -------- -------- -------- --------
Less dividends and distributions:
From net investment income....... (0.78) (0.74) (0.88) (0.87) (0.88)
From net realized gain on
investments.................... (0.00)(a) (0.37) (0.04) -- --
-------- -------- -------- -------- --------
Total dividends and
distributions.................... (0.78) (1.11) (0.92) (0.87) (0.88)
-------- -------- -------- -------- --------
NET ASSET VALUE AT END OF YEAR..... $ 12.24 $ 13.23 $ 13.14 $ 12.83 $ 13.42
======== ======== ======== ======== ========
Total investment return #.......... (1.53%) 9.12% 9.65% 2.05% 18.31%
RATIOS (TO AVERAGE NET
ASSETS)/SUPPLEMENTAL DATA:
Net investment income............ 5.86% 5.86% 6.42% 6.31% 6.55%
Net expenses..................... 0.50% 0.52% 0.50% 0.58% 0.62%
Expenses (before
reimbursement)................. 0.50% 0.52% 0.50% 0.58% 0.91%
Portfolio turnover rate............ 161% 206% 187% 103% 81%
Net assets at end of year (in
000's)........................... $287,361 $277,392 $228,949 $226,375 $235,030
</TABLE>
- ------------
# The total investment return quotations reflected above do not reflect
expenses incurred by the Separate Accounts or in connection with the
Policies. Including such expenses in these quotations would have reduced
such returns for all periods shown.
(a) Less than one cent per share.
A-31
<PAGE> 33
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
-
<TABLE>
<CAPTION>
AMERICAN CENTURY DREYFUS LARGE
INCOME & GROWTH PORTFOLIO COMPANY VALUE PORTFOLIO
-------------------------------------- --------------------------------------
FOR THE YEAR ENDED MAY 1, 1998** FOR THE YEAR ENDED MAY 1, 1998**
DECEMBER 31, 1999 TO DEC. 31, 1998 DECEMBER 31, 1999 TO DEC. 31, 1998
------------------ ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD..... $ 10.91 $ 10.00 $ 10.23 $ 10.00
------- ------- ------- -------
Net investment income
(loss).................. 0.08 0.05 0.08 0.05
Net realized and
unrealized gain (loss)
on investments.......... 1.83 0.91 0.61 0.23
------- ------- ------- -------
Total from investment
operations.............. 1.91 0.96 0.69 0.28
------- ------- ------- -------
Less dividends and
distributions:
From net investment
income................ (0.08) (0.05) (0.08) (0.05)
From net realized gain
on investments........ -- -- -- --
------- ------- ------- -------
Total dividends and
distributions........... (0.08) (0.05) (0.08) (0.05)
------- ------- ------- -------
NET ASSET VALUE AT END OF
PERIOD.................. $ 12.74 $ 10.91 $ 10.84 $ 10.23
======= ======= ======= =======
Total investment
return#................. 17.59% 9.60%(b) 6.73% 2.83%(b)
RATIOS (TO AVERAGE NET
ASSETS)/SUPPLEMENTAL
DATA:
Net investment income
(loss)................ 0.89% 1.20%* 0.90% 1.02%*
Net expenses............ 0.85% 0.85%* 0.95% 0.95%*
Expenses (before
reimbursement)........ 0.92% 1.30%* 1.00% 1.39%*
Portfolio turnover rate... 51% 34% 121% 98%
Net assets at end of
period
(in 000's).............. $64,142 $30,167 $30,608 $18,918
<CAPTION>
EAGLE ASSET MANAGEMENT LORD ABBETT DEVELOPING
GROWTH EQUITY PORTFOLIO GROWTH PORTFOLIO
-------------------------------------- --------------------------------------
FOR THE YEAR ENDED MAY 1, 1998** FOR THE YEAR ENDED MAY 1, 1998**
DECEMBER 31, 1999 TO DEC. 31, 1998 DECEMBER 31, 1999 TO DEC. 31, 1998
------------------ ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD..... $ 11.78 $ 10.00 $ 9.21 $ 10.00
------- ------- ------- -------
Net investment income
(loss).................. (0.01)(c) 0.01 (0.05)(c) (0.01)
Net realized and
unrealized gain (loss)
on investments.......... 7.71 1.78 2.81 (0.78)
------- ------- ------- -------
Total from investment
operations.............. 7.70 1.79 2.76 (0.79)
------- ------- ------- -------
Less dividends and
distributions:
From net investment
income................ (0.00)(a) (0.01) -- --
From net realized gain
on investments........ (0.93) -- (0.03) --
------- ------- ------- -------
Total dividends and
distributions........... (0.93) (0.01) (0.03) --
------- ------- ------- -------
NET ASSET VALUE AT END OF
PERIOD.................. $ 18.55 $ 11.78 $ 11.94 $ 9.21
======= ======= ======= =======
Total investment
return#................. 65.50% 17.85%(b) 32.19% (7.90%)(b)
RATIOS (TO AVERAGE NET
ASSETS)/SUPPLEMENTAL
DATA:
Net investment income
(loss)................ (0.04%) 0.11%* (0.54%) (0.35%)*
Net expenses............ 0.85% 0.85%* 0.95% 0.95% *
Expenses (before
reimbursement)........ 0.87% 1.28%* 1.04% 1.50% *
Portfolio turnover rate... 203% 31% 59% 12%
Net assets at end of
period
(in 000's).............. $65,089 $18,467 $32,100 $15,867
</TABLE>
- ------------
* Annualized.
** Commencement of operations.
# The total investment return quotations reflected above do not reflect
expenses incurred by the Separate Accounts or in connection with the
Policies. Including such expenses in these quotations would have reduced
such returns for all periods shown. Total return is not annualized.
(a) Less than one cent per share.
(b) Total return is not annualized.
(c) Per share data based on average shares outstanding during the period.
A-32
<PAGE> 34
MORE INFORMATION ABOUT THE PORTFOLIOS IS AVAILABLE FREE UPON REQUEST:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Provides more details about the Portfolios. A current SAI is incorporated by
reference into the prospectus and has been filed with the SEC.
ANNUAL/SEMIANNUAL REPORTS
Provides additional information about the Portfolios' investments and include
discussions of market conditions and investment strategies that significantly
affected the Portfolios' performance during the last fiscal year.
TO OBTAIN INFORMATION:
Write to MainStay VP Series Fund, Inc., 51 Madison Avenue, New York, NY, 10010,
or call 1-800-598-2019.
You can obtain information about the Portfolios (including the SAI) by visiting
the SEC's Public Reference Room in Washington, D.C. (phone 1-202-942-8090). You
may visit the SEC's website at http://www.sec.gov or you may send your written
request and a duplicating fee to the SEC's Public Reference Section, Washington,
D.C. 20549-6009, after paying a duplicating fee, send an electronic request to
[email protected].
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN, OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR THE INVESTMENT ADVISERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
[RECYCLE LOGO]
The Mainstay VP Series Fund, Inc.
SEC File Number: 811-03833
<PAGE> 35
MAINSTAY VP SERIES FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
------------------------
This Statement of Additional Information is not a prospectus. Much of the
information contained in this Statement of Additional Information expands upon
subjects discussed in the Fund's current Prospectus. Accordingly, this Statement
of Additional Information should be read in conjunction with the Fund's current
Prospectus, dated May 1, 2000, which may be obtained by calling the Fund at
(800) 598-2019, or writing the Fund at 51 Madison Avenue, New York, NY 10010.
Terms used in the Fund's current Prospectus are incorporated in this Statement.
Portfolios described in this Statement of Additional Information may not be
available in all NYLIAC products.
------------------------
TABLE OF CONTENTS
PAGE
MAINSTAY VP SERIES FUND, INC. INVESTMENT POLICIES..............................5
FUNDAMENTAL INVESTMENT POLICIES APPLICABLE TO THE MAINSTAY
VP CAPITAL APPRECIATION, CASH MANAGEMENT, CONVERTIBLE,
GOVERNMENT, TOTAL RETURN, VALUE AND INDEXED EQUITY
PORTFOLIOS...........................................................5
FUNDAMENTAL INVESTMENT POLICIES APPLICABLE TO THE MAINSTAY
VP HIGH YIELD CORPORATE BOND PORTFOLIO...............................6
FUNDAMENTAL INVESTMENT POLICIES APPLICABLE TO THE MAINSTAY
VP INTERNATIONAL EQUITY PORTFOLIO....................................8
FUNDAMENTAL INVESTMENT POLICIES APPLICABLE TO THE MAINSTAY
VP BOND ("BOND") AND MAINSTAY VP GROWTH EQUITY
("GROWTH EQUITY") PORTFOLIOS.........................................9
FUNDAMENTAL INVESTMENT POLICIES APPLICABLE TO THE
DREYFUS LARGE COMPANY VALUE PORTFOLIO...............................10
FUNDAMENTAL INVESTMENT POLICIES APPLICABLE TO THE
AMERICAN CENTURY INCOME & GROWTH PORTFOLIO..........................12
FUNDAMENTAL INVESTMENT POLICIES APPLICABLE TO THE
LORD ABBETT DEVELOPING GROWTH PORTFOLIO.............................13
FUNDAMENTAL INVESTMENT POLICIES APPLICABLE TO THE
EAGLE ASSET MANAGEMENT GROWTH EQUITY PORTFOLIO......................14
<PAGE> 36
ADDITIONAL NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
APPLICABLE TO CERTAIN PORTFOLIOS....................................15
OTHER INVESTMENT POLICIES OF THE HIGH YIELD CORPORATE BOND
PORTFOLIO...........................................................20
OTHER INVESTMENT POLICIES OF THE BOND AND GROWTH EQUITY..................20
OTHER INVESTMENT POLICIES OF THE GOVERNMENT PORTFOLIO....................22
OTHER INVESTMENT POLICIES OF THE CASH MANAGEMENT PORTFOLIO...............23
OTHER INVESTMENT POLICIES OF THE CONVERTIBLE PORTFOLIO...................25
OTHER INVESTMENT POLICIES OF THE DREYFUS LARGE COMPANY
VALUE PORTFOLIO.....................................................26
OTHER INVESTMENT POLICIES OF THE EAGLE ASSET MANAGEMENT
GROWTH EQUITY PORTFOLIO.............................................28
OTHER INVESTMENT POLICIES OF THE HIGH YIELD CORPORATE BOND PORTFOLIO.....30
OTHER INVESTMENT POLICIES OF THE INDEXED EQUITY PORTFOLIO................31
OTHER INVESTMENT POLICIES OF THE INTERNATIONAL EQUITY PORTFOLIO..........32
CERTAIN INVESTMENT PRACTICES COMMON TO TWO OR MORE PORTFOLIOS............33
ARBITRAGE ...............................................................34
CASH EQUIVALENTS.........................................................34
DEBT SECURITIES..........................................................34
FLOATERS AND INVERSE FLOATERS............................................35
HIGH YIELD SECURITIES....................................................35
ZERO COUPON BONDS........................................................36
SHORT SALES AGAINST THE BOX..............................................37
REPURCHASE AGREEMENTS....................................................37
REVERSE REPURCHASE AGREEMENTS............................................38
LENDING OF PORTFOLIO SECURITIES..........................................38
BORROWING ...............................................................38
FOREIGN SECURITIES.......................................................40
FOREIGN CURRENCY TRANSACTIONS............................................41
BRADY BONDS .............................................................43
WHEN-ISSUED SECURITIES...................................................44
MORTGAGE-RELATED AND OTHER ASSET-BACKED SECURITIES.......................45
OPTIONS ON SECURITIES....................................................50
FUTURES TRANSACTIONS.....................................................56
SECURITIES INDEX OPTIONS.................................................64
ADDITIONAL INVESTMENT POLICIES APPLICABLE TO THE
INTERNATIONAL EQUITY PORTFOLIO......................................65
SWAP AGREEMENTS..........................................................65
STATE INSURANCE LAW REQUIREMENTS.........................................66
PORTFOLIO TURNOVER.......................................................67
MANAGEMENT OF THE FUND........................................................67
COMPENSATION TABLE............................................................70
INVESTMENT ADVISERS......................................................70
ADMINISTRATION AGREEMENTS................................................72
PORTFOLIO BROKERAGE......................................................73
DETERMINATION OF NET ASSET VALUE..............................................73
<PAGE> 37
HOW PORTFOLIO SECURITIES WILL BE VALUED..................................74
INVESTMENT PERFORMANCE CALCULATIONS...........................................75
CASH MANAGEMENT PORTFOLIO YIELD..........................................75
CONVERTIBLE, GOVERNMENT, HIGH YIELD CORPORATE BOND
AND BOND PORTFOLIOS YIELD...........................................76
TOTAL RETURN CALCULATIONS................................................76
PURCHASE AND REDEMPTION OF SHARES.............................................78
TAXES ........................................................................79
GENERAL INFORMATION...........................................................79
CODE OF ETHICS................................................................82
LEGAL COUNSEL.................................................................82
INDEPENDENT ACCOUNTANTS.......................................................82
APPENDIX A....................................................................83
<PAGE> 38
MAINSTAY VP SERIES FUND, INC. INVESTMENT POLICIES
Each Portfolio has a separate investment objective or objectives which it
pursues through separate investment policies as described in the Prospectus and
below. The following discussion elaborates on the presentation of the
Portfolios' investment policies contained in the Prospectus.
FUNDAMENTAL INVESTMENT POLICIES APPLICABLE TO THE MAINSTAY VP CAPITAL
APPRECIATION, CASH MANAGEMENT, CONVERTIBLE, GOVERNMENT, TOTAL RETURN,
VALUE AND INDEXED EQUITY PORTFOLIOS
The investment objectives and investment restrictions set forth below
apply to the MainStay VP Capital Appreciation ("Capital Appreciation"), MainStay
VP Cash Management ("Cash Management"), MainStay VP Convertible ("Convertible"),
MainStay VP Government ("Government"), MainStay VP Total Return ("Total
Return"), MainStay VP Value ("Value") and MainStay VP Indexed Equity ("Indexed
Equity") Portfolios and are fundamental policies of each of these Portfolios;
i.e., they may not be changed with respect to a Portfolio without a majority
vote of the outstanding shares of that Portfolio.
None of the above-designated Portfolios will:
(1) invest more than 5% of the value of the total assets of a
Portfolio in the securities of any one issuer, except in U.S. Government
securities;
(2) purchase the securities of any issuer if such purchase would cause
more than 10% of the voting securities of such issuer to be held by a Portfolio,
except that this restriction does not apply to U.S. Government securities;
(3) borrow money (except from banks on a temporary basis for
extraordinary or emergency purposes), issue senior securities (except as
appropriate to evidence indebtedness that a Portfolio is permitted to incur)
and/or pledge, mortgage or hypothecate its assets, except that a Portfolio may
(i) borrow money or enter into reverse repurchase agreements, but only if
immediately after each borrowing there is asset coverage of 300%, (ii) enter
into transactions in options, forward currency contracts, futures and options on
futures as described in the Prospectus and in this Statement of Additional
Information (the deposit of assets in escrow in connection with the writing of
secured put and covered call options and the purchase of securities on a
when-issued or delayed-delivery basis and collateral arrangements with respect
to initial or variation margin deposits for futures contracts and related
options contracts will not be deemed to be pledges of a Portfolio's assets), and
(iii) to secure permitted borrowings, pledge securities having a market value at
the time of pledge not exceeding 15% of the cost of a Portfolio's total assets;
(4) act as underwriter of the securities issued by others, except to
the extent that purchases of securities, in accordance with a Portfolio's
investment objectives and policies directly from the issuer thereof and the
later disposition thereof, may be deemed to be underwriting;
-5-
<PAGE> 39
(5) purchase securities if such purchase would cause more than 25% in
the aggregate of the market value of the total assets of a Portfolio to be
invested in the securities of one or more issuers having their principal
business activities in the same industry, provided that there is no limitation
in respect to investments in U.S. Government securities and except that more
than 25% of the market value of the total assets of the Cash Management
Portfolio will be invested in the securities of banks and bank holding
companies, including certificates of deposit and bankers' acceptances. For the
purposes of this restriction, telephone companies are considered to be a
separate industry from gas or electric utilities, and wholly-owned finance
companies are considered to be in the industry of their parents if their
activities are primarily related to financing the activities of the parents;
(6) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts
(other than securities of companies that invest in or sponsor those programs and
except futures contracts, including but not limited to contracts for the future
delivery of securities and futures contracts based on securities indexes or
related options thereon), each Portfolio reserving the freedom of action to hold
and to sell real estate acquired for any Portfolio as a result of the ownership
of securities. Forward foreign currency exchange contracts, options on currency,
currency futures contracts and options on such futures contracts are not deemed
to be investments in a prohibited commodity or commodity contract for the
purpose of this restriction; or
(7) lend any funds or other assets, except that a Portfolio may,
consistent with its investment objectives and policies: (i) invest in debt
obligations including bonds, debentures or other debt securities, bankers'
acceptances and commercial paper, even though the purchase of such obligations
may be deemed to be the making of loans; (ii) enter into repurchase agreements;
and (iii) lend its portfolio securities in accordance with applicable guidelines
established by the Securities and Exchange Commission ("SEC") and any guidelines
established by the Fund's Board of Directors; or
(8) issue senior securities, except as appropriate to evidence
indebtedness that a Portfolio is permitted to incur and except for shares of
existing or additional series of the Fund.
"Value" for the purposes of all investment restrictions shall mean the
value used in determining a Portfolio's net asset value.
FUNDAMENTAL INVESTMENT POLICIES APPLICABLE TO THE MAINSTAY VP HIGH YIELD
CORPORATE BOND PORTFOLIO
The investment restrictions set forth below apply to the MainStay VP High
Yield Corporate Bond ("High Yield Corporate Bond") Portfolio and are fundamental
policies of this Portfolio; i.e., they may not be changed with respect to the
Portfolio without a majority vote of the outstanding shares of the Portfolio.
The High Yield Corporate Bond Portfolio will not:
-6-
<PAGE> 40
(1) invest more than 5% of the value of its total assets in the
securities of any one issuer, except U.S. Government securities;
(2) purchase the securities of any issuer if such purchase would cause
more than 10% of the voting securities of such issuer to be held by the
Portfolio;
(3) borrow money except from banks on a temporary basis for
extraordinary or emergency purposes, and no purchases of securities will be made
while such borrowings exceed 5% of the value of the Portfolio's assets, or
pledge, mortgage or hypothecate its assets, except that, to secure permitted
borrowings, it may pledge securities having a market value at the time of pledge
not exceeding 15% of the cost of the Portfolio's total assets, and except in
connection with permitted transactions in options, futures contracts and options
on futures contracts;
(4) act as underwriter of the securities issued by others, except to
the extent that the purchase of securities in accordance with the Portfolio's
investment objectives and policies directly from the issuer thereof and the
later disposition thereof may be deemed to be underwriting;
(5) purchase securities if such purchase would cause more than 25% in
the aggregate of the market value of the total assets of the Portfolio to be
invested in the securities of one or more issuers having their principal
business activities in the same industry, provided that there is no limitation
in respect to investments in U.S. Government securities (for the purposes of
this restriction, telephone companies are considered to be a separate industry
from gas or electric utilities, and wholly owned finance companies are
considered to be in the industry of their parents if their activities are
primarily related to financing the activities of the parents) except that up to
40% of the Portfolio's total assets, taken at market value, may be invested in
each of the electric utility and telephone industries, but it will not invest
more than 25% in either of those industries unless yields available for four
consecutive weeks in the four highest rating categories on new issue bonds in
such industry (issue size of $50 million or more) have averaged in excess of
105% of yields of new issue long-term industrial bonds similarly rated (issue
size of $50 million or more);
(6) issue senior securities, except as appropriate to evidence
indebtedness that a Portfolio is permitted to incur and except for shares of
existing or additional series of the Fund;
(7) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts
(except futures contracts, including but not limited to contracts for the future
delivery of securities and futures contracts based on securities indexes or
related options thereon), the Fund reserving the freedom of action to hold and
to sell real estate acquired for any Portfolio as a result of the ownership of
securities. Forward foreign currency exchange contracts, options on currency,
currency futures contracts and options on such futures contracts are not deemed
to be an investment in a prohibited commodity or commodity contract for the
purpose of this restriction; or
-7-
<PAGE> 41
(8) make loans to other persons, except loans of portfolio securities
and except to the extent that the purchase of debt obligations and the entry
into repurchase agreements in accordance with such Portfolio's investment
objectives and policies may be deemed to be loans.
FUNDAMENTAL INVESTMENT POLICIES APPLICABLE TO THE MAINSTAY VP
INTERNATIONAL EQUITY PORTFOLIO
The investment restrictions set forth below apply to the MainStay VP
International Equity ("International Equity") Portfolio and are fundamental
investment policies; i.e., they may not be changed with respect to this
Portfolio without a majority vote of the outstanding shares of that Portfolio.
The International Equity Portfolio may not:
(1) invest in a security if, as a result of such investment, more than
25% of its total assets would be invested in the securities of issuers in any
particular industry, except that this restriction does not apply to securities
issued or guaranteed by the U.S. Government or its agencies or instrumentalities
(or repurchase agreements with respect thereto);
(2) invest in a security if, with respect to 75% of its total assets,
more than 5% of its total assets would be invested in the securities of any one
issuer, except that this restriction does not apply to securities issued or
guaranteed by the U.S. Government, it agencies or instrumentalities;
(3) invest in a security if, with respect to 75% of its assets, it
would hold more than 10% of the outstanding voting securities of any one issuer,
except that this restriction does not apply to U.S. Government securities;
(4) purchase or sell real estate, including real estate limited
partnership interests (although it may purchase securities secured by real
estate or interests therein, or securities issued by companies which invest in
real estate, or interests therein);
(5) purchase or sell commodities, commodities contracts, or oil, gas
or mineral programs or interests in oil, gas or mineral leases (other than
securities of companies that invest in or sponsor those programs), except that,
subject to restrictions described in the Prospectus and elsewhere in this
Statement of Additional Information (i) this Portfolio may enter into futures
contracts and options on futures contracts and may enter into forward foreign
currency contracts and foreign currency options; and (ii) may purchase or sell
currencies on a spot or forward basis and may enter into futures contracts on
securities, currencies or on indexes of such securities or currencies, or any
other financial instruments, and may purchase and sell options on such futures
contracts;
(6) borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that the Portfolio may (i) borrow from banks or
enter into reverse repurchase agreements, but only if immediately after each
borrowing there is asset coverage of 300%, and (ii) enter into transactions in
options, forward currency contracts, futures and options on futures as described
in the Prospectus and in this Statement of Additional Information (the deposit
of assets in escrow in connection with the writing of secured put and covered
call options and the purchase of securities on
-8-
<PAGE> 42
a when-issued or delayed delivery basis and collateral arrangements with respect
to initial or variation margin deposits for futures contracts and related
options contracts will not be deemed to be pledges of the Portfolio's assets);
(7) lend any funds or other assets, except that the Portfolio may,
consistent with its investment objective and policies: (i) invest in debt
obligations including bonds, debentures or other debt securities, bankers'
acceptances and commercial paper, even though the purchase of such obligations
may be deemed to be the making of loans; (ii) enter into repurchase agreements;
and (iii) lend its portfolio securities in accordance with applicable guidelines
established by the SEC and any guidelines established by the Company's
Directors;
(8) act as an underwriter of securities of other issuers, except to
the extent that in connection with the disposition of portfolio securities, it
may be deemed to be an underwriter under the Federal securities laws; or
(9) issue senior securities, except as appropriate to evidence
indebtedness that the Portfolio is permitted to incur and except for shares of
existing or additional series of the Fund.
FUNDAMENTAL INVESTMENT POLICIES APPLICABLE TO THE MAINSTAY VP BOND
("BOND") AND MAINSTAY VP GROWTH EQUITY ("GROWTH EQUITY") PORTFOLIOS
In addition to the fundamental investment policies set forth above,
neither Portfolio will:
(1) purchase securities on margin or otherwise borrow money or issue
senior securities, except that any Portfolio may (a) borrow up to 5% of the
value of its total assets from banks for extraordinary or emergency purposes
(such as to permit the Portfolio to honor redemption requests which might
otherwise require the sale of securities at a time when that is not in the
Portfolio's best interest), or (b) obtain such short-term credits as it needs
for the clearance of securities transactions. A Portfolio will not purchase
investment securities while borrowings are outstanding and, in addition, the
interest which must be paid on any borrowed money will reduce the amount
available for investment. Reverse repurchase agreements are not considered
"borrowings" for purposes of this restriction, and, to the extent permitted by
applicable law, the Portfolios may enter into such agreements;
(2) lend money, except that a Portfolio may purchase privately placed
bonds, notes, debentures or other obligations customarily purchased by
institutional or individual investors (which obligations may or may not be
convertible into stock or accompanied by warrants or rights to acquire stock),
provided that such loans will not exceed 10% of the net asset value of each
Portfolio. Repurchase agreements and publicly traded debt obligations are not
considered "loans" for purposes of this restriction, and a Portfolio may enter
into such purchases in accordance with its investment objectives and policies
and any applicable restrictions. A Portfolio may also make loans of its
securities of up to 20% of the value of the Portfolio's total assets;
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<PAGE> 43
(3) underwrite the securities of other issuers, except where, in
selling portfolio securities, the Fund may be deemed to be an underwriter for
purposes of the Securities Act of 1933 (the "1933 Act") when selling securities
acquired pursuant to paragraph 2 above;
(4) purchase securities in order to exercise control over the
management of any company, or to cause more than 25% of a Portfolio's total
assets to consist of (a) securities other than securities issued or guaranteed
by the U.S. Government, its agencies and instrumentalities) which, together with
other securities of the same issuer owned by the Portfolio, constitute more than
5% of the value of the Portfolio's total assets or (b) voting securities of
issuers more than 10% of whose voting securities are owned by the Fund;
(5) make an investment if this would cause more than 25% of the value
of the Portfolio's total assets to be invested in securities issued by companies
principally engaged in any one industry except that this restriction does not
apply to securities issued or guaranteed by the U.S. Government, its agencies
and instrumentalities. Neither utilities nor energy companies are considered to
be a single industry for purposes of this restriction. Instead, they will be
divided according to their services. For example, gas, electric and telephone
utilities will each be considered a separate industry;
(6) write or purchase any put options or engage in any combination of
put and call options;
(7) make short sales of securities;
(8) invest in commodities or commodity contracts;
(9) buy or sell real estate or mortgages, except that the Portfolios
may invest in shares of real estate investment trusts and of other issuers that
engage in real estate operations, and in public sold mortgage backed
certificates in accordance with their investment objectives and policies; or
(10) issue senior securities, except as appropriate to evidence
indebtedness that a Portfolio is permitted to incur and except for shares of
existing or additional series of the Fund. Except for those investment policies
of a Portfolio specifically identified as fundamental in this Statement of
Additional Information, all other investment policies and practices described in
the Prospectus and this Statement of Additional Information may be changed by
the Directors without the approval of shareholders.
FUNDAMENTAL INVESTMENT POLICIES APPLICABLE TO THE DREYFUS LARGE COMPANY
VALUE PORTFOLIO
The investment restrictions set forth below apply to the Dreyfus Large
Company Value Portfolio and are fundamental policies of this Portfolio, i.e.,
they may not be changed without a majority vote of the outstanding shares of the
Portfolio.
The Dreyfus Large Company Value Portfolio will not:
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<PAGE> 44
(1) invest in a security if, as a result of such investment, more than
25% of its total assets would be invested in the securities of issuers in any
particular industry, except that this restriction does not apply to securities
issued or guaranteed by the U.S. Government or its agencies or instrumentalities
(or repurchase agreements with respect thereto);
(2) invest in a security if, with respect to 75% of its net assets, more
than 5% of its total assets would be invested in the securities of any one
issuer, except that this restriction does not apply to securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities;
(3) invest in a security if, with respect to 75% of its net assets, it
would hold more than 10% of the outstanding voting securities of any one issuer,
except that this restriction does not apply to U.S. Government securities;
(4) invest in commodities, except that the Portfolio may purchase and
sell options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices;
(5) purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but the Fund may purchase and
sell securities that are secured by real estate or issued by companies that
invest or deal in real estate or real estate investment trusts;
(6) borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the value of the
Portfolio's total assets), except that the entry into options, forward
contracts, futures contracts, including those relating to indices, and options
on futures contracts or indices shall not constitute borrowing, and except that
this restriction does not prohibit borrowing for purposes of leveraging up to
the limits permitted under the 1940 Act;
(7) make loans to others, except through the purchase of debt obligations
and the entry into repurchase agreements. However, the Portfolio may lend its
portfolio securities in an amount not to exceed 33-1/3% of the value of its
total assets. Any loans of portfolio securities will be made according to
guidelines established by the Securities and Exchange Commission and the
Company's Board;
(8) act as an underwriter of securities of other issuers, except to the
extent the Portfolio may be deemed an underwriter under the 1933 Act, by virtue
of disposing of portfolio securities;
(9) issue any senior security (as such term is defined in Section 18(f)
of the 1940 Act), except to the extent (i) that purchases and sales of options,
forward contracts, futures contracts, puts and calls may be deemed to give rise
to a senior security; (ii) except as appropriate to evidence indebtedness that
the Portfolio is permitted to incur and (iii) except for shares of existing or
additional series of the Fund; or
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<PAGE> 45
(10) purchase securities on margin, but the Portfolio may make margin
deposits in connection with transactions in options, forward contracts, futures
contracts, including those relating to indices, and options on futures contracts
or indices.
FUNDAMENTAL INVESTMENT POLICIES APPLICABLE TO THE AMERICAN CENTURY INCOME
& GROWTH PORTFOLIO
The investment restrictions set forth below apply to the American Century
Income & Growth Portfolio, and are fundamental policies of this Portfolio; i.e.,
they may not be changed with respect to the Portfolio without a majority of the
outstanding shares of the Portfolio.
The American Century Income & Growth Portfolio will not:
(1) lend any security or make any other loan if, as a result, more than
33-1/3% of the fund's total assets would be lent to other parties, except (a)
through the purchase of debt securities in accordance with its investment
objective, policies and limitations, or (b) by engaging in repurchase agreements
with respect to portfolio securities;
(2) invest for purposes of exercising control over management;
(3) issue senior securities, except as permitted under the Investment
Company Act of 1940 (the "1940 Act");
(4) act as an underwriter of securities by others, except to the extent
that the fund may be considered an underwriter within the meaning of the 1933
Act in the disposition of portfolio securities;
(5) borrow any money, except that the fund may borrow money for temporary
or emergency purposes (not for leveraging or investment) in an amount not
exceeding 33-1/3% of the portfolio's total assets (including the amount
borrowed) less liabilities (other than borrowings);
(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments; provided that this policy shall
not prohibit the fund from purchasing or selling options, futures contracts,
options on futures, or from investing in securities or other instruments backed
by physical commodities;
(7) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments provided that this policy shall not prevent
the Portfolio from investment in securities or other instruments backed by real
estate or securities of companies that deal in real estate or are engaged in the
real estate business; or
(8) concentrate its investments in securities of issues in a particular
industry (other than securities issued or guaranteed by the U.S. government or
any of its agencies or instrumentalities).
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<PAGE> 46
FUNDAMENTAL INVESTMENT POLICIES APPLICABLE TO THE LORD ABBETT DEVELOPING
GROWTH PORTFOLIO
The investment restrictions set forth below apply to the Lord Abbett
Developing Growth Portfolio, and are fundamental policies of this Portfolio;
i.e., they may not be changed with respect to the Portfolio without a majority
of the outstanding shares of the Portfolio.
The Lord Abbett Developing Growth Portfolio will not:
(1) borrow money, except that (i) the Portfolio may borrow from banks (as
defined in the 1940 Act in amounts up to 33-1/3% of its total assets (including
the amount borrowed), (ii) the Portfolio may borrow up to an additional 5% of
its total assets for temporary purposes, (iii) the Portfolio may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities and, (iv) the Portfolio may purchase securities on
margin to the extent permitted by applicable law;
(2) pledge its assets (other than to secure such borrowings, or to the
extent permitted by the Fund's investment policies, as permitted by applicable
law);
(3) engage in the underwriting of securities, except pursuant to a merger
or acquisition or to the extent that, in connection with the disposition of its
portfolio securities, it may be deemed to be an underwriter under federal
securities laws;
(4) make loans to other persons, except that the acquisition of bonds,
debentures or other debt securities and investment in government obligations,
commercial papers, pass-through instruments, certificates of deposit, bankers
acceptances, repurchase agreements or any similar instruments shall not be
subject to this limitation and except further that the Portfolio may lend its
portfolio securities, provided that the lending of portfolio securities may be
made only in accordance with applicable law;
(5) buy or sell real estate (except that the Portfolio may invest in
securities directly or indirectly secured by real estate or interests therein or
issued by companies that invest in real estate or interests therein) commodities
or commodity contracts (except to the extent the Portfolio may do so in
accordance with applicable law and without registering as a commodity pool
operator under the Commodity Exchange Act as, for example, with futures
contracts);
(6) invest in a security if, with respect to 75% of its total assets,
more than 5% of its total assets would be invested in the securities of any one
issuer, except that this restriction does not apply to securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities;
(7) invest in a security if, with respect to 75% of its assets, it would
hold more than 10% of the outstanding voting securities of any one issuer,
except that this restriction does not apply to U.S. Government securities;
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<PAGE> 47
(8) invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding securities of the
U.S. Government, its agencies and instrumentalities); or
(9) issue senior securities to the extent such issuance would violate
applicable law.
FUNDAMENTAL INVESTMENT POLICIES APPLICABLE TO THE EAGLE ASSET MANAGEMENT
GROWTH EQUITY PORTFOLIO
The investment restrictions set forth below apply to the Eagle Asset
Management Growth Equity Portfolio; i.e., they may not be changed with respect
to the Portfolio without a majority of the outstanding shares of the Portfolio.
The Eagle Asset Management Growth Equity Portfolio will not:
(1) invest with respect to 75% of the Portfolio's total assets, more
than 5% of that Portfolio's assets in securities of any one issuer other than
the U.S. Government or its agencies and instrumentalities, or purchase more
than 10% of the voting securities of any one issuer;
(2) purchase securities if, as a result of such purchase, more than 25%
of the value of the Portfolio's total assets would be invested in the
securities of any one industry (except securities issued by the U.S.
Government, its agencies and instrumentalities);
(3) borrow money except as a temporary measure for extraordinary or
emergency purposes, and except that the Portfolio may enter into reverse
repurchase agreements in an amount up to 33 1/3% of the value of its total
assets in order to meet redemption requests without immediately selling
portfolio securities.
(4) issue senior securities, except as permitted by the investment
objective and policies and investment limitations of the Portfolio;
(5) underwrite the securities of other issuers, except that the Portfolio
may underwrite to the extent that in connection with the disposition of
portfolio securities, the Portfolio may be deemed to be an underwriter under
federal securities laws; or
(6) invest in commodities, commodity contracts or real estate (including
real estate limited partnerships), except that the Portfolio may purchase
securities issued by companies that invest in or sponsor such interests, and may
purchase and sell options, forward contracts, futures contracts, including those
related to indices, and options on futures contracts or indices.
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<PAGE> 48
ADDITIONAL NON-FUNDAMENTAL INVESTMENT RESTRICTIONS APPLICABLE TO CERTAIN
PORTFOLIOS
In addition to the fundamental investment policies described above, the
Fund has also adopted the following investment policies for the Capital
Appreciation, Cash Management, Convertible, Government, High Yield Corporate
Bond, Total Return, Value and Indexed Equity Portfolios which, unlike those
described above, may be changed without shareholder approval.
None of the designated Portfolios will:
(1) enter into repurchase agreements or purchase any "illiquid
securities," illiquid securities being defined to include securities subject to
legal or contractual restrictions on resale (other than restricted securities
eligible for resale pursuant to Rule 144A under the 1933 Act) if, as a result
thereof, more than 15% of the net assets of a Portfolio (10% with respect to the
Cash Management, High Yield Corporate Bond and Value Portfolios) taken at market
value would be, in the aggregate, invested in repurchase agreements maturing in
more than seven days and illiquid securities or securities which are not readily
marketable, (including over-the-counter options considered by the Board of
Directors of the Fund not to be readily marketable);
(2) invest assets in securities of other open-end investment companies
(except in connection with a merger, consolidation, reorganization or
acquisition of assets), but, to the extent permitted by the 1940 Act, a
Portfolio may invest in shares of money market funds if double advisory fees are
not assessed, may invest up to 5% of its assets in closed-end investment
companies (which would cause a Portfolio to pay duplicate fees), and may
purchase or acquire up to 10% of the outstanding voting stock of a closed-end
investment company (foreign banks or their agencies or subsidiaries and foreign
insurance companies are not considered investment companies for the purposes of
this limitation);
(3) purchase warrants of any issuer, except on a limited basis when, as a
result of such purchases by a Portfolio, no more than 2% of the value of the
Portfolio's total assets would be invested in warrants which are not listed on
the New York Stock Exchange or the American Stock Exchange, and no more than 5%
of the value of the total assets of a Portfolio may be invested in warrants
whether or not so listed, such warrants in each case to be valued at the lesser
of cost or market, but assigning no value to, and excluding from these
limitations, warrants acquired by a Portfolio in units with or attached to debt
securities;
(4) purchase securities of other investment companies, except to the
extent permitted by the 1940 Act or in connection with a merger, consolidation,
acquisition or reorganization;
(5) purchase securities on margin or make short sales, (except short
sales against the box) except in connection with arbitrage transactions or
unless, by virtue of its ownership of other securities, it has the right to
obtain securities equivalent in kind and amount to the securities sold and,
except that a Portfolio may obtain such short-term credits as may be necessary
for the clearance of purchases and sales of securities and in connection with
transactions involving forward foreign currency exchange contracts; or
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<PAGE> 49
(6) purchase or sell any put or call options or any combination thereof,
except that a Portfolio may purchase and sell or write (i) options on any
futures contracts into which it may enter, (ii) put and call options on
currencies, securities indexes and covered put and call options on securities,
and (iii) may also engage in closing purchase transactions with respect to any
put and call option position it has entered into provided, however, that the
Capital Appreciation, Convertible, High Yield Corporate Bond, Total Return and
Value Portfolios may not write any covered put options if, as a result, more
than 25% of a Portfolio's net assets (taken at current value) would be subject
to put options written by such Portfolio, and the Government Portfolio may not
write any covered put options on U.S. Government securities if as a result more
than 50% of its total assets (taken at current value) would be subject to put
options written by such Portfolio.
In addition, the Convertible Portfolio will not invest more than 5% of
its total assets in securities rated less than B by S&P or Moody's, or if
unrated, that are judged to be of comparable quality by MacKay-Shields.
In addition, the Total Return Portfolio may not invest more than 20% of
the value of its investments in debt securities rated below A. Securities rated
below A must, however, be rated at least Ba by Moody's or BB by S&P, or, if
unrated, be deemed to be of comparable quality by MacKay Shields.
In addition, the High Yield Corporate Bond Portfolio may invest no more
than 20% of its net assets in securities rated lower than B by Moody's or S&P,
or, if unrated, considered to be of comparable quality by MacKay Shields.
In addition, the International Equity Portfolio may not:
(1) purchase or retain securities of any issuer if, to the knowledge of
this Portfolio, any of the Directors or officers of the Fund, or any of the
directors or officers of the Portfolio's investment adviser, individually own
more than 1/2 of 1% of the outstanding securities of the issuer and together own
beneficially more than 5% of such issuer's securities;
(2) invest more than 5% of the value of its total assets in securities of
issuers (other than issuers of Federal agency obligations) having a record,
together with predecessors or unconditional guarantors, of less than three
years;
(3) (i) purchase securities that may not be sold without first being
registered under the 1933 Act, other than Rule 144A securities determined to be
liquid pursuant to guidelines adopted by the Fund's Board of Directors, (ii)
enter into repurchase agreements having a duration of more than seven days,
(iii) purchase loan participation interests that are not subject to puts, (iv)
purchase instruments lacking readily available market quotations ("illiquid
instruments"), or (v) purchase or sell over-the-counter options, if as a result
of the purchase or sale, the Portfolio's aggregate holdings of restricted
securities, repurchase agreements having a duration of more than seven days,
loan participation interests that are not subject to puts, illiquid instruments,
and over-the-counter options
-16-
<PAGE> 50
purchased by the Portfolio and the assets used as cover for over-the-counter
options written by the Portfolio exceed 15% of the Portfolio's net assets;
(4) purchase securities of an investment company, except (i) in
connection with a merger, consolidation, reorganization or acquisition of
assets, or (ii) to the extent permitted by the 1940 Act, and then only
securities of money market funds (where the Portfolio's investment adviser
undertakes to forego the fees they would otherwise receive on the assets so
invested and where there is no commission or profit to a sponsor or dealer other
than the customary broker's commission that may result from such purchase) or
securities of a closed-end investment company (where there is no commission or
profit to a sponsor or dealer other than the customary broker's commission that
may result from such purchase); provided, however, that foreign banks or their
agencies or subsidiaries and foreign insurance companies are not considered
investment companies for the purposes of this limitation as permitted by the
1940 Act;
(5) invest in other companies for the purpose of exercising control;
(6) sell securities short, except for covered short sales or unless it
owns or has the right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in options, futures and
forward contracts are deemed not to constitute short sales of securities;
(7) purchase securities on margin, except that the Portfolio may obtain
such short-term credits as are necessary for the clearance of transactions, and
provided that margin payments in connection with futures contracts and options
on futures contracts shall not constitute the purchase of securities on margin;
(8) purchase warrants, valued at the lower of cost or market, in excess
of 5% of the Portfolio's net assets. Included within that amount, but not to
exceed 2% of net assets, are warrants whose underlying securities are not traded
on principal domestic or foreign exchanges (warrants acquired by the Portfolio
in units or attached to securities are not subject to these restrictions); or
(9) acquire or retain the securities of any other investment company if,
as a result, more than 3% of such investment company's outstanding shares would
be held by the Portfolio, more than 5% of the value of the Portfolio's total
assets would be invested in shares of such investment company or more than 10%
of the value of the Portfolio's assets would be invested in shares of investment
companies in the aggregate, except in connection with a merger, consolidation,
acquisition, or reorganization.
The following non-fundamental investment restrictions apply to the
Dreyfus Large Company Value Portfolio. The Dreyfus Large Company Value Portfolio
may not:
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<PAGE> 51
(1) purchase securities of any company having less than three years'
continuous operations (including operations of any predecessor) if such purchase
would cause the value of the Portfolio's investments in all such companies to
exceed 5% of the value of its total assets;
(2) invest in the securities of a company for the purpose of exercising
management or control, but the Portfolio will vote the securities it owns in its
portfolio as a shareholder in accordance with its views;
(3) pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
purchase of securities on a when-issued or forward commitment basis and the
deposit of assets in escrow in connection with writing covered put and call
options and collateral and initial or variation margin arrangements with respect
to options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices;
(4) purchase, sell or write puts, calls or combinations thereof, except
as described in the Portfolio's Prospectus and this Statement of Additional
Information;
(5) enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid if, in
the aggregate, more than 15% of the value of the Portfolio's net assets would be
so invested; or
(6) purchase securities of other investment companies, except to the
extent permitted under the 1940 Act.
The following non-fundamental investment restrictions apply with respect
to the Lord Abbett Developing Growth Portfolio. The Lord Abbett Developing
Growth Portfolio may not:
(1) borrow in excess of 5% of its gross assets taken at cost or market
value, whichever is lower at the time of borrowing, and then only as a temporary
measure for extraordinary or emergency purposes;
(2) make short sales of securities or maintain a short position except to
the extent permitted by applicable law;
(3) invest knowingly more than 15% of its net assets (at the time of
investment) in illiquid securities, except for securities qualifying for resale
under Rule 144A of the 1933 Act, deemed to be liquid by the Board of Directors;
(4) invest in securities of other investment companies as defined in the
1940 Act, except as permitted by applicable law;
(5) invest in securities of issuers which, with their predecessors, have
a record of less than three years of continuous operation, if more than 5% of
the Portfolio's total assets would be invested
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<PAGE> 52
in such securities (this restriction shall not apply to mortgaged-backed
securities, asset-backed securities or obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities);
(6) hold securities of any issuer when more than 1/2 of 1% of the
securities of such issuer are owned beneficially by one or more of the
Portfolio's officers or directors or by one or more partners of the Portfolio's
underwriter, Investment Adviser or Sub-Adviser if these owners in the aggregate
own beneficially more than 5% of such securities of such issuer;
(7) invest in warrants if, at the time of acquisition, its investment in
warrants, valued at the lower of cost or market, would exceed 5% of the
Portfolio's total assets (included within such limitation, but not to exceed 2%
of the Portfolio's total assets, are warrants which are not listed on the New
York or American Stock Exchange or a major foreign exchange);
(8) invest in real estate limited partnership interests or interests in
oil, gas or other mineral leases, or exploration or development programs, except
that the Portfolio may invest in securities issued by companies that engage in
oil, gas or other mineral exploration or development activities; or
(9) write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except to the extent permitted in the Portfolio's
Prospectus and this Statement of Additional Information, as they may be amended
from time to time.
The Eagle Growth Equity Portfolio has adopted the following
non-fundamental investment restrictions. The Portfolio may not:
(1) invest more than 10% of the value of its net assets in securities
that are subject to restrictions on resale or are not readily marketable without
registration under the 1933 Act and in repurchase agreements maturing in more
than seven days;
(2) sell any securities short or purchase any securities on margins but,
may obtain such short-term credits as may be necessary for clearance of
purchases and sales of securities, and may make short sales "against the box"
and make margin deposits in connection with its use of options, futures
contracts, forward currency contracts and other financial instruments; or
(3) invest in the securities of other investment companies, except by
purchase in the open market where no commission or profit to a sponsor or dealer
results from the purchase other than the customary broker's commission, or
except when the purchase is part of a plan or merger, consolidation,
reorganization or acquisition.
(4) enter into repurchase agreements or purchase any "illiquid
securities," illiquid securities being defined to include securities to legal or
contractual restrictions on resale (other than restricted securities eligible
for resale pursuant to Rule 144A under the 1933 Act) if, as a result thereof,
more than 10% of the net assets of the Portfolio taken at market value would be
in the aggregate, invested
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<PAGE> 53
in repurchase agreements maturing in more than seven days and illiquid
securities or securities which are not readily marketable, (including
over-the-counter options considered by the Board of Directors of the Fund not to
be readily marketable).
OTHER INVESTMENT POLICIES OF THE HIGH YIELD CORPORATE BOND PORTFOLIO
Corporate debt securities may bear fixed, contingent, or variable rates
of interest and may involve equity features, such as conversion or exchange
rights or warrants for the acquisition of stock of the same or a different
issuer, participations based on revenues, sales or profits, or the purchase of
common stock in a unit transaction (where corporate debt securities and common
stock are offered as a unit).
Under normal market conditions, not more than 25% of the value of the
Portfolio's total assets will be invested in equity securities, including common
stocks, preferred stocks, warrants and rights.
When and if available, debt securities may be purchased at a discount
from face value. However, the Portfolio does not intend to hold such securities
to maturity for the purpose of achieving potential capital gains, unless current
yields on these securities remain attractive. From time to time the Portfolio
may purchase securities not paying interest or dividends at the time acquired
if, in the opinion of MacKay Shields, such securities have the potential for
future income (or capital appreciation, if any).
Since shares of the Portfolio represent an investment in securities with
fluctuating market prices, the value of shares of the Portfolio will vary as the
aggregate value of the Portfolio's portfolio securities increases or decreases.
Moreover, the value of the debt securities that the Portfolio purchases may
fluctuate more than the value of higher rated debt securities. These lower rated
fixed income securities generally tend to reflect short-term corporate and
market developments to a greater extent than higher rated securities which react
primarily to fluctuations in the general level of interest rates. Changes in the
value of securities subsequent to their acquisition will not affect cash income
or yields to maturity to the Portfolio but will be reflected in the net asset
value of the Portfolio's shares.
OTHER INVESTMENT POLICIES OF THE BOND AND GROWTH EQUITY
In addition to the fundamental investment policies described above, the
Fund has also adopted the following investment policies, which unlike those
described above, may be changed without shareholder approval.
Neither of the Portfolios will:
(1) write or purchase any call options;
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<PAGE> 54
(2) purchase the securities of other investment companies, unless it
acquires them as part of a merger, consolidation, acquisition of assets or
reorganization;
(3) pledge or mortgage assets, except that a Portfolio may pledge up to
10% of the total value of its assets to secure permissible borrowings;
(4) purchase interests in oil, gas or other mineral exploration or
development programs, but the Portfolios may purchase securities of issuers who
deal or invest in such programs;
(5) purchase securities of foreign issuers if the purchase would cause
more than 10% of the value of the Portfolio's total assets to be invested in
such securities; or
(6) enter into repurchase agreements or purchase any "illiquid
securities," illiquid securities being defined to include securities subject to
legal or contractual restrictions on resale (other than restricted securities
eligible for resale pursuant to Rule 144A under the 1933 Act) if, as a result
thereof, more than 10% of the net assets of a Portfolio taken at market value
would be, in the aggregate, invested in repurchase agreements maturing in more
than seven days and illiquid securities or securities which are not readily
marketable, (including over-the-counter options considered by the Board of
Directors of the Fund not to be readily marketable).
In addition, the Bond Portfolio may not:
(1) invest more than 25% of its total assets in debt securities which are
rated lower than the four highest grades as determined by Moody's or S&P, but
which are rated at least B, or in convertible debt securities or preferred or
convertible preferred stocks; or
(2) invest directly in common stocks, but it may retain up to 10% of its
total assets in common stocks acquired by conversion of fixed income securities
or exercising warrants purchased together with such securities.
The following is more detailed information regarding subjects addressed
in the Fund's current Prospectus.
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<PAGE> 55
OTHER INVESTMENT POLICIES OF THE GOVERNMENT PORTFOLIO
Mortgage-Backed Securities. Government National Mortgage Association
("GNMA") certificates are mortgage-backed securities representing part ownership
of a pool of mortgage loans. These loans, issued by lenders such as mortgage
bankers, commercial banks and savings and loan associations, are either insured
by the Federal Housing Administration ("FHA") or guaranteed by the Veterans
Administration. A "pool" or group of such mortgages is assembled, and, after
being approved by GNMA, is offered to investors through securities dealers. Once
approved by GNMA, the timely payment of interest and principal on each mortgage
is guaranteed by GNMA and backed by the full faith and credit of the U.S.
Government. GNMA certificates differ from bonds in that principal is paid back
monthly by the borrower over the term of the loan rather than returned in a lump
sum at maturity. GNMA certificates are called "pass-through" securities because
both interest and principal payments (including prepayments) are passed through
to the holder of the certificate. Upon receipt, principal payments may be used
for the purchase of additional GNMA certificates or other securities permitted
by the Portfolios' investment policies and restrictions.
In addition to GNMA certificates, the Portfolio may invest in
mortgage-backed securities issued by the Federal National Mortgage Association
("FNMA") and by the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA, a
federally chartered and privately-owned corporation, issues mortgage-backed
pass-through securities which are guaranteed as to timely payment of principal
and interest by FNMA. FHLMC, a corporate instrumentality of the U.S. Government,
issues participation certificates which represent an interest in mortgages from
FHLMC's portfolio. FHLMC guarantees the timely payment of interest and the
ultimate collection of principal. Securities guaranteed by FNMA and FHLMC are
not backed by the full faith and credit of the U.S. Government.
If either fixed or variable rate pass-through securities issued by the
U.S. Government or its agencies or instrumentalities are developed in the
future, the Portfolios reserve the right to invest in them.
Privately Issued Mortgage-Related Securities. The Portfolio may also
invest in mortgage-related securities ("CMOs") which are issued by private
entities such as investment banking firms and companies related to the
construction industry. The mortgage-related securities in which the Portfolio
may invest may be: (i) privately issued securities which are collateralized by
pools of mortgages in which each mortgage is guaranteed as to payment of
principal and interest by an agency or instrumentality of the U.S. Government;
(ii) privately issued securities which are collateralized by pools of mortgages
in which payment of principal and interest is guaranteed by the issuer and such
guarantee is collateralized by U.S. Government securities; and (iii) other
privately issued securities in which the proceeds of the issuance are invested
in mortgage-backed securities and payment of the principal and interest is
supported by the credit of an agency or instrumentality of the U.S. Government.
The Portfolio will not invest in any privately issued CMOs that do not meet the
requirements of Rule 3a-7 under the 1940 Act if, as a result of such investment,
more than 5% of a Portfolio's net assets would be invested in any one CMO, more
than 10% of the Portfolio's net assets
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would be invested in CMOs and other investment company securities in the
aggregate, or the Portfolio would hold more than 3% of any outstanding issue of
CMOs.
The Portfolio may also invest in securities collateralized by mortgages
or pools of mortgages the issuer of which has qualified to be treated as a "real
estate mortgage investment conduit" ("REMIC") under the Internal Revenue Code of
1986, as amended (the "Code"). CMOs and REMICs may offer a higher yield than
U.S. Government securities, but they may also be subject to greater price
fluctuation and credit risk. In addition, CMOs and REMICs typically will be
issued in a variety of classes or series, which have different maturities and
are retired in sequence. Privately issued CMOs and REMICs are not government
securities nor are they supported in any way by any governmental agency or
instrumentality. In the event of a default by an issuer of a CMO or a REMIC,
there is no assurance that the collateral securing such CMO or REMIC will be
sufficient to pay principal and interest. It is possible that there will be
limited opportunities for trading CMOs and REMICs in the over-the-counter
market, the depth and liquidity of which will vary from issue to issue and from
time to time.
OTHER INVESTMENT POLICIES OF THE CASH MANAGEMENT PORTFOLIO
The Portfolio may invest its assets in U.S. dollar-denominated securities
of U.S. or foreign issuers and in securities of foreign branches of U.S. banks,
such as negotiable certificates of deposit (Eurodollars). Since the Portfolio
may contain such securities, an investment therein involves investment risks
that are different in some respects from an investment in a fund which invests
only in debt obligations of U.S. domestic issuers. Such risks may include future
political and economic developments, the possible imposition of foreign
withholding taxes on interest income payable on the securities held in the
Portfolio, possible seizure or nationalization of foreign deposits, the possible
establishment of exchange controls or the adoption of other foreign governmental
restrictions which might adversely affect the payment of the principal of and
interest on securities in the Portfolio.
All of the assets of the Portfolio will generally be invested in
obligations which mature in 397 days or less and substantially all these
investments will be held to maturity; however, securities collateralizing
repurchase agreements may have maturities in excess of 397 days. The Portfolio
will, to the extent feasible, make portfolio investments primarily in
anticipation of or in response to changing economic and money market conditions
and trends. The dollar-weighted average maturity of the Portfolio's portfolio
may not exceed 90 days. Consistent with the provisions of a rule of the SEC, the
Portfolio invests only in U.S. dollar-denominated money market instruments that
present minimal credit risk and, with respect to 95% of its total assets,
measured at the time of investment, that are of the highest quality.
MacKay-Shields shall determine whether a security presents minimal credit risk
under procedures adopted by the Fund's Board of Directors. A money market
instrument will be considered to be highest quality (1) if rated in the highest
rating category (i.e., Aaa or Prime-1 by Moody's Investors Service, Inc.
("Moody's"), AAA or A-1 by Standard & Poor's Corporation ("S&P")) by: (i) any
two nationally recognized statistical rating organizations ("NRSROs") or, (ii)
if rated by only one NRSRO, by that NRSRO, if issued by an issuer that received
a short-term rating from an NRSRO with respect to a class of debt obligations
that is comparable in priority and security and that are rated in the highest
rating category by (i) any two NRSROs or, (ii) if rated by only one
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NRSRO, by that NRSRO, and whose acquisition is approved or ratified by the Board
of Directors; (3) an unrated security that is of comparable quality to a
security in the highest rating category as determined by MacKay-Shields; (4) (i)
with respect to a security that is subject to any features that entitles the
holder, under certain circumstances, to receive the approximate amortized cost
of the underlying security or securities plus accrued interest "Demand Feature"
or obligations of a person other than the issuer of the security, under certain
circumstances, to undertake to pay the principal amount of the underlying
security plus interest "Guarantee", the Guarantee has received a rating from an
NRSRO or the Guarantee is issued by a guarantor that has received a rating from
an NRSRO with respect to a class of debt obligations that is comparable in
priority and security to the Guarantee, with certain exceptions, and (ii) the
issuer of the Demand Feature or Guarantee, or another institution, has
undertaken promptly to notify the holder of the security in the event that the
Demand Feature or Guarantee is substituted with another Demand Feature or
Guarantee; (5) if it is a security issued by a money market fund registered with
the SEC under the 1940 Act; or (6) if it is a Government Security. With respect
to 5% of its total assets, measured at the time of investment, the Portfolio may
also invest in money market instruments that are in the second-highest rating
category for short-term debt obligations (i.e., rated Aa or Prime-2 by Moody's
or AA or A-2 by S&P).
The Portfolio may not invest more than 5% of its total assets, measured
at the time of investment, in securities of any one issuer that are of the
highest quality, except that the Portfolio may exceed this 5% limitation with
respect to 25% of its total assets for up to three business days after the
purchase of securities of any one issuer, and except that this limitation shall
not apply to U.S. government securities or securities subject to certain
Guarantees. Immediately after the acquisition of any Demand Feature or
Guarantee, the Portfolio, with respect to 75% of its total assets, shall not
have invested more than 10% of its assets in securities issued by or subject to
Demand Features or Guarantees from the institution that issued the Demand
Feature or Guarantee, with certain exceptions. In addition, immediately after
the acquisition of any Demand Feature or Guarantee (or a security after giving
effect to the Demand Feature or Guarantee) that is not within the highest rating
category by NRSROs, the Portfolio shall not have invested more than five percent
of its total assets in securities issued by or subject to Demand Features or
Guarantees from the institution that issued the Demand Feature or Guarantee. The
Portfolio may not invest more than the greater of 1% of its total assets or one
million dollars, measured at the time of investment, in securities of any one
issuer that are in the second-highest rating category, except that this
limitation shall not apply to U.S. Government securities or securities subject
to certain Guarantees. In the event that an instrument acquired by the Portfolio
is downgraded or otherwise ceases to be of the quality that is eligible for the
Portfolio, MacKay-Shields, under procedures approved by the Board of Directors
shall promptly reassess whether such security presents minimal credit risk shall
recommend to the Valuation Committee of the Board of Directors ("the Valuation
Committee") that the Portfolio take such action as it determines is in the best
interest of the Portfolio and its shareholders. The Valuation Committee, after
consideration of the recommendation of the MacKay Shields and such other
information as it deems appropriate, shall cause the Portfolio to take such
action as it deems appropriate, and shall report promptly to the Board of
Directors the action it has taken and the reasons for such action.
Pursuant to the rule, the Portfolio uses the amortized cost method of
valuing its investments, which facilitates the maintenance of the Portfolio's
per share net asset value at $1.00. The amortized cost method, which is normally
used to value all of the Portfolio's portfolio securities, involves
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initially valuing a security at its cost and thereafter amortizing to maturity
any discount or premium, regardless of the impact of fluctuating interest rates
on the market value of the instrument.
The Directors have also established procedures designed to stabilize, to
the extent reasonably possible, the Portfolio's price per share as computed for
the purpose of sales and redemptions at $1.00. Such procedures include review of
the Portfolio's portfolio by the Directors, at such intervals as they deem
appropriate, to determine whether the Portfolio's net asset value calculated by
using available market quotations or market equivalents (the determination of
value by reference to interest rate levels, quotations of comparable securities
and other factors) deviates from $1.00 per share based on amortized cost.
The extent of deviation between the Portfolio's net asset value based
upon available market quotations or market equivalents and $1.00 per share based
on amortized cost will be periodically examined by the Directors. If such
deviation exceeds 1/2 of 1%, the Directors will promptly consider what action,
if any, will be initiated. In the event the Directors determine that a deviation
exists which may result in material dilution or other unfair results to
investors or existing shareholders, they will take such corrective action as
they regard to be necessary and appropriate, including the sale of portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity; withholding part or all of dividends or payment of
distributions from capital or capital gains; redemptions of shares in kind; or
establishing a net asset value per share by using available market quotations or
equivalents. In addition, in order to stabilize the net asset value per share at
$1.00, the Directors have the authority (1) to reduce or increase the number of
shares outstanding on a pro rata basis, and (2) to offset each shareholder's pro
rata portion of the deviation between the net asset value per share and $1.00
from the shareholder's accrued dividend account or from future dividends.
The Portfolio may hold cash for the purpose of stabilizing its net asset
value per share. Holdings of cash, on which no return is earned, would tend to
lower the yield on the Portfolio's shares.
The Portfolio may also, consistent with the provisions of the rule,
invest in securities with a face maturity of more than thirteen months, provided
that the security is either a variable or floating rate U.S. Government
security, or a floating or variable rate security with certain demand or
interest rate reset features.
OTHER INVESTMENT POLICIES OF THE CONVERTIBLE PORTFOLIO
In selecting convertible securities for purchase or sale, MacKay Shields
takes into account a variety of investment considerations, including credit
risk, projected interest return and the premium for the convertible security
relative to the underlying common stock.
During the fiscal year ended December 31, 1999, based upon the
dollar-weighted average ratings of the Portfolio holdings at the end of each
month in the Portfolio's fiscal year, the Portfolio had the following
percentages of its net assets invested in securities rated in the categories
indicated (all ratings are by S&P):
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4.57% in securities rated AAA
4.04% in securities rated AA
5.49% in securities rated A
7.57% in securities rated BBB
2.78% in securities rated BB
26.92% in securities rated B
5.76% in securities rated CCC
10.88% in cash and cash equivalents
31.99% in equity securities
These figures are intended solely to provide disclosure about the
Portfolio's asset composition during its fiscal year ended December 31, 1999.
The asset composition after this time may or may not be the same as represented
by such figures. In addition, the categories reflect ratings by S&P, and ratings
assigned by Moody's may not be consistent with ratings assigned by S&P or other
credit rating services, and MacKay Shields may not necessarily agree with a
rating assigned by any credit rating agency.
OTHER INVESTMENT POLICIES OF THE DREYFUS LARGE COMPANY VALUE PORTFOLIO
The Portfolio may invest in convertible securities. Convertible
securities may be converted at either a stated price or stated rate into
underlying shares of common stock. Convertible securities have characteristics
similar to both fixed-income and equity securities. Convertible securities
generally are subordinated to other similar but non-convertible securities of
the same issuer, although convertible bonds, as corporate debt obligations,
enjoy seniority right of payment to all equity securities, and convertible
preferred stock is senior to common stock of the same issuer. Because of the
subordination feature, however, convertible securities typically have lower
ratings than similar non-convertible securities.
The Portfolio may invest in the securities of foreign issuers in the form
of American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs")
and other forms of depositary receipts. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a United States bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. EDRs, which are sometimes referred to as Continental Depositary
Receipts ("CDRs"), are receipts issued in Europe typically by non-United States
bank and trust companies that evidence ownership of either foreign or domestic
securities. Generally, ADRs in registered form are designed for use in the
United States securities markets and EDRs and CDRs in bearer form are designed
for use in Europe.
A warrant is an instrument issued by a corporation which gives the holder
the right to subscribe to a specified amount of the corporation's capital stock
at a set price for a specified period of time. The Portfolio may invest up to 5%
of its net assets in warrants, except that this limitation does not apply to
warrants purchased by the Portfolio that are soled in units with, or attached
to, other securities. Included in such amount, but not limited to exceed 2% of
the value of the Portfolio's net assets, may be warrants which are not listed on
the New York or American Stock Exchange.
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The Portfolio may invest in securities issued by closed-end investment
companies. The Portfolio's investment in such securities, subject to certain
exceptions, currently is limited to: (i) 3% of the total voting stock of any one
investment company, (ii) 5% of the Portfolio's total assets with respect to any
one investment company, and (iii) 10% of the Portfolio's total assets in the
aggregate. Investments in the securities of other investment companies may
involve duplication of advisory fees and certain other expenses.
The Portfolio may invest in obligations issued or guaranteed by one or
more foreign governments or any of their political subdivisions, agencies or
instrumentalities that are determined by the Sub-Adviser to be of comparable
quality to the other obligations in which the Portfolio may invest. Such
securities also include debt obligations of supranational entities.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the World Bank), the European Coal and Steel Community, the Asian
Development Bank and the InterAmerican Development Bank.
The Portfolio may purchase certificates of deposit, time deposits,
bankers acceptances and other short-term obligations issued by domestic banks,
foreign subsidiaries or foreign branches of domestic banks, domestic and foreign
branches of foreign banks, domestic savings and loan associations and other
banking institutions. With respect to such securities issued by foreign
subsidiaries or foreign branches of domestic banks, and domestic and foreign
branches of foreign banks, the Portfolio may be subject to additional investment
risks that are different in some respect from those incurred by a fund which
invests only in debt obligations of U.S. domestic issuers.
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven days)
at a stated interest rate.
Bankers' acceptances are credit instruments evidencing the obligation of
a bank to pay a draft drawn on it by a customer. These instruments reflect the
obligation both of the bank and the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
The Portfolio may invest in commercial paper. Commercial paper consists
of short-term, unsecured promissory notes issued to finance short-term credit
needs. The commercial paper purchased by the Portfolio will consist only of
direct obligations which, at the time of their purchase, are (a) rated not lower
than Prime-1 by Moody's Investors Service, Inc. ("Moodys"), A-1 by Standard &
Poor's Ratings Group ("S&P"), F-1 by Fitch Investors Service, L.P. ("Fitch") or
Duff-1 by Duff & Phelps Credit Rating Co. ("Duff"), (b) issued by companies
having an outstanding unsecured debt issue currently rated at least Aa3 by
Moody's or AA by S&P, Fitch or Duff, or (c) if unrated,
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determined by the Sub-adviser to be a of comparable quality to those rated
obligations which may be purchased by the Portfolio.
The Portfolio may invest up to 15% of the value of its net assets in
securities as to which a liquid trading market does not exist, provided such
investments are consistent with the Portfolio's investment objective. Such
securities may include securities that are not readily marketable, such as
certain securities that are subject to legal or contractual restrictions on
resale, repurchase agreements providing for settlement in more than seven days
after notice, and certain privately negotiated, non-exchange traded options and
securities used to cover such options. As to these securities, the Portfolio is
subject to a risk that should the Portfolio desire to sell them when a ready
buyer is not available at a price the Portfolio deems representative of their
value, the value of the Portfolio's net assets could be adversely affected.
OTHER INVESTMENT POLICIES OF THE EAGLE ASSET MANAGEMENT GROWTH EQUITY
PORTFOLIO
Up to 35% of its total assets may be invested in common stocks of foreign
issuers, American Depository Receipts ("ADRs"), foreign currency transactions
with respect to underlying common stocks, preferred stock, investment grade
securities convertible into common stock, futures contracts, options on equity
securities or equity security indexes, rights or warrants to subscribe for or
purchase common stock, obligations of the U.S. Government, its agencies or
instrumentalities (including repurchase agreements thereon) and in securities
that track the performance of a broad-based securities index. The Portfolio may
invest in sponsored and unsponsored ADRs. ADRs are receipts typically issued by
a U.S. bank or trust company evidencing ownership of the underlying securities
of foreign issuers. Generally, ADRs, in registered form, are denominated in U.S.
dollars and are designed for use in the U.S. securities markets. Thus, these
securities are not denominated in the same currency as the securities into which
they may be converted. ADRs are subject to many of the risks inherent in
investing in foreign securities, including confiscatory taxation or
nationalization, and less comprehensive disclosure requirements for the
underlying security. In addition, the issuers of the securities underlying
unsponsored ADRs are not obligated to disclose material information in the
United States and, therefore, there may be less information available regarding
such issuers and there may not be a correlation between such information and the
market value of the ADRs. ADRs are considered to be foreign securities by the
Portfolio for purposes of certain investment limitation calculations.
The Portfolio also may invest in sponsored or unsponsored European
Depository Receipts ("EDRs"), Global Depository Receipts ("GDRs"), International
Depository Receipts ("IDRs") or other similar securities representing interests
in or convertible into securities of foreign issuers ("Depository Receipts").
EDRs and IDRs are receipts typically issued by a European bank or trust company
evidencing ownership of the underlying foreign securities. GDRs are issued
globally for trading in non-U.S. securities markets and evidence a similar
ownership arrangement. Depository Receipts may not necessarily be denominated in
the same currency as the underlying securities into which they may be converted.
As with ADRs, the issuers of the securities underlying unsponsored Depository
Receipts are not obligated to disclose material information in the United States
and,
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therefore, there may be less information available regarding such issuers and
there may not be a correlation between such information and the market value of
the Depository Receipts. Depository Receipts also involve the risks of other
investments in foreign securities, as discussed below.
The Portfolio may invest in bankers' acceptances, which are short-term
credit instruments used to finance commercial transactions. Generally, an
acceptance is a time draft drawn on a bank by an exporter or an importer to
obtain a stated amount of funds to pay for specific merchandise. The draft is
then "accepted" by a bank that, in effect, unconditionally guarantees to pay the
face value of the instrument on its maturity date. The acceptance may then be
held by the accepting bank as an asset, or it may be sold in the secondary
market at the going rate of interest for a specified maturity. Although
maturities for acceptances can be as long as 270 days, most acceptances have
maturities of six months or less.
The Portfolio may invest in bank certificates of deposit ("CDs"). The
Federal Deposit Insurance Corporation is an agency of the U.S. Government that
insures the deposits of certain banks and savings and loan associations up to
$100,000 per deposit. The interest on such deposits may not be insured if this
limit is exceeded. Current federal regulations also permit such institutions to
issue insured negotiable CDs in amounts of $100,000 or more, without regard to
the interest rate ceilings on other deposits. To remain fully insured, these
investments currently must be limited to $100,000 per insured bank or savings
and loan association. Investments in CDs are made only with domestic
institutions with assets in excess of $1 billion.
The Portfolio may invest in commercial paper that is limited to
obligations rated Prime-1 or Prime-2 by Moody's Investors Services, Inc.
("Moody's") or A-1 or A-2 by Standard & Poor's Ratings Services (S&P).
Commercial paper includes notes, drafts or similar instruments payable on demand
or having a maturity at the time of issuance not exceeding nine months,
exclusive of days of grace or any renewal thereof.
The Portfolio may not purchase or otherwise acquire any illiquid security
if, as a result, more than 10% of its net assets (taken at current value) would
be invested in securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on resale.
Over-the-counter ("OTC") options and their underlying collateral are currently
considered to be illiquid investments. The Portfolio may sell OTC options and,
in connection therewith, segregate assets or cover its obligations with respect
to OTC options that it writes. The assets used as cover for OTC options written
by the Portfolio will be considered illiquid unless OTC options are sold to
qualified dealers who agree that the Portfolio may repurchase any OTC option it
writes at a maximum price to be calculated by a formula set forth in the option
agreement. The cover for an OTC option written subject to this procedure would
be considered illiquid only to the extent that the maximum repurchase price
under the formula exceeds the intrinsic value of the option.
The Portfolio may invest in preferred stock. A preferred stock is a blend
of the characteristics of a bond and common stock. It can offer the higher yield
of a bond and has priority over common stock in equity ownership, but does not
have the seniority of a bond and its participation in the issuer's growth may be
limited. Preferred stock has preference over common stock in the receipt of
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dividends and in any residual assets after payment to creditors should the
issuer be dissolved. Although the dividend is set at a fixed annual rate, in
some circumstances it can be changed or omitted by the issuer.
The Portfolio may invest in Standard and Poor's Depository Receipts
("SPDRs") and other similar index securities ("Index Securities"). Index
Securities represent interests in a fixed portfolio of common stocks designed to
track the price and dividend yield performance of a broad-based securities
index, such as the Standard & Poor's 500 Composite Stock Price Index.
The Portfolio may purchase rights and warrants, which are instruments
that permit the Portfolio to acquire, by subscription, the capital stock of a
corporation at a set price, regardless of the market price for such stock.
Warrants may be either perpetual or of limited duration. There is a greater risk
that warrants might drop in value at a faster rate than the underlying stock.
The Portfolio currently does not intend to invest more than 5% of its net assets
in warrants.
OTHER INVESTMENT POLICIES OF THE HIGH YIELD CORPORATE BOND PORTFOLIO
Debt securities in which this Portfolio may invest include all types of
debt obligations of both domestic and foreign issuers, such as bonds,
debentures, notes, equipment lease certificates, equipment trust certificates,
conditional sales contracts, commercial paper and U.S. Government securities
(including obligations, such as repurchase agreements, secured by such
instruments). Debt securities may have fixed, variable or floating (including
inverse floating) rates of interest.
The Portfolio may invest up to 40% of the value of its total assets in
each of the electric utility and telephone industries, but will not invest more
than 25% in either of those industries unless yields available for four
consecutive weeks in the four highest rating categories on new issue bonds in
such industry (issue size of $50 million or more) have averaged in excess of
105% of yields of new issue long-term industrial bonds similarly rated (issue
size of $50 million or more). Concentration of the Portfolio's assets in these
industries may subject the Portfolio to greater price volatility and lessen the
benefits of reducing risk typically associated with greater asset
diversification.
MacKay Shields seeks to reduce risk through diversification, credit
analysis and attention to current developments and trends in both the economy
and financial markets. In addition, investments in foreign securities may serve
to provide further diversification.
During the fiscal year ended December 31, 1999, based upon the
dollar-weighted average ratings of the Portfolio's holdings at the end of each
month in the Portfolio's fiscal year, the Portfolio had the following
percentages of its net assets invested in securities rated in the categories
indicated (all ratings are by S&P):
0.29% in securities rated AAA
2.54% in securities rated BBB
11.37% in securities rated BB
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53.98% in securities rated B
12.21% in securities rated CCC
1.18% in securities rated CC
0.01% in securities rated C
0.08% in securities rated D
0.89% in unrated securities
8.05% in cash and cash equivalents
9.40% in equity securities
These figures are intended solely to provide disclosure about the
Portfolio's asset composition during its fiscal year ended December 31, 1999.
The asset composition after this time may or may not be the same as represented
by such figures. In addition, the categories reflect ratings by S&P, and ratings
assigned by Moody's may not be consistent with ratings assigned by S&P or other
credit rating services, and MacKay Shields may not necessarily agree with a
rating assigned by any credit rating agency.
For temporary defensive purposes the Portfolio may invest more than 25%
of its total assets in U.S. Government securities during periods of abnormal
market conditions. Also, for temporary defensive purposes, the Portfolio may
invest without limit in corporate debt securities rated A or higher by Moody's
or S&P whenever deemed appropriate by MacKay Shields in response to market
conditions.
OTHER INVESTMENT POLICIES OF THE INDEXED EQUITY PORTFOLIO
Monitor, the Portfolio's investment adviser, seeks to provide investment
results which mirror the performance of the S&P 500. Monitor attempts to achieve
this objective by investing in all stocks in the S&P 500 in the same proportion
as their representation in the S&P 500. The Portfolio will be managed using
mathematical algorithms to determine which stocks are to be purchased or sold to
replicate the S&P 500 to the extent feasible. From time to time, adjustments may
be made in the Portfolio's portfolio because of changes in the composition of
the S&P 500, but such changes should be infrequent. The correlation between the
performance of the Indexed Equity Portfolio and the S&P 500 is expected to be at
least 0.95. A correlation of 1.00 would indicate perfect correlation, which
would be achieved when the net asset value of the Portfolio, including the value
of its dividend and capital gains distributions, increases or decreases in exact
proportion to changes in the S&P 500. Unlike other funds which generally seek to
beat market averages, often with unpredictable results, index funds seek to
match their respective indexes. No attempt is made to manage the Portfolio in
the traditional sense using economic, financial and market analysis.
Monitor believes the indexing approach described above is an effective
method of duplicating percentage changes in the S&P 500. It is a reasonable
expectation that there will be a close correlation between the Portfolio's
performance and that of the S&P 500 in both rising and falling markets. The
Portfolio's ability to track the S&P 500, however, may be affected by, among
other things, transaction costs, changes in either the composition of the S&P
500 or number of shares outstanding for the components of the S&P 500, and the
timing and amount of shareholder contributions and redemptions, if any.
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Although the Portfolio normally seeks to remain substantially fully
invested in securities in the S&P 500, the Portfolio may invest temporarily in
certain short-term money market instruments. Such securities may be used to
invest uncommitted cash balances or to maintain liquidity to meet shareholder
redemptions. These securities include: obligations issued or guaranteed by the
U.S. Government or any of its agencies or instrumentalities or by any of the
states, repurchase agreements, reverse repurchase agreements, securities of
money market funds, time deposits, certificates of deposit, bankers' acceptances
and commercial paper. The Portfolio also may borrow money for temporary or
emergency purposes, purchase securities on a when-issued basis, and enter into
firm commitments to purchase securities.
"Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500",
and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use by Monitor. The S&P 500 is an unmanaged index and is widely
regarded as the standard for measuring large-cap U.S. stock market performance.
Results assume the reinvestment of all income and capital gain distributions. An
investment cannot be made directly into an index. The Indexed Equity Portfolio
is not sponsored, endorsed, sold or promoted by S&P, and S&P makes no
representation regarding the advisability of investing in the Indexed Equity
Portfolio.
The Indexed Equity Portfolio is not sponsored, endorsed, sold or promoted
by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"). S&P
makes no representation or warranty, express or implied, to the owners of the
Portfolio, or any member of the public regarding the advisability of investing
in securities generally or in the Portfolio particularly or the ability of the
S&P 500 Index to track general stock market performance. S&P's only relationship
to Monitor is the licensing of certain trademarks and trade names of S&P and of
the S&P 500 Index, which is determined, composed and calculated by S&P without
regard to Monitor or the Funds. S&P has no obligation to take the needs of
Monitor or the owners of the Portfolio into consideration in determining,
composing or calculating the S&P 500 Index. S&P is not responsible for and has
not participated in the determination of the prices and amount of the Portfolio
or the timing of the issuance or sale of the Portfolio or in the determination
or calculation of the equation by which the Portfolio is to be converted into
cash. S&P has no obligation or liability in connection with the administration,
marketing or trading of the Portfolio.
S&P does not guarantee the accuracy and/or the completeness of the S&P
500 Index, or any data included therein and S&P shall have no liability for any
errors, omissions, or interruptions therein. S&P makes no warranty, express or
implied, as to results to be obtained by Monitor, owners of the Portfolio, or
any other person or entity from the use of the S&P Index or any data included
therein. S&P makes no express or implied warranties, and expressly disclaims all
warranties of merchantability or fitness for a particular purpose or use with
respect to the S&P 500 Index or any data included therein. Without limiting any
of the foregoing, in no event shall S&P have any liability for any special,
punitive, indirect, or consequential damages (including lost profits), even if
notified the possibility of such damages.
The inclusion of a security in the S&P 500 Index in no way implies an
opinion by the index sponsors or Standard & Poor's as to the attractiveness of
that security as an investment. The Indexed Equity Fund is not sponsored by or
affiliated with the sponsor of its index.
[/R]
OTHER INVESTMENT POLICIES OF THE INTERNATIONAL EQUITY PORTFOLIO
In making investment decisions for this Portfolio, MacKay Shields will
consider such factors as prospects for relative economic growth, government
policies influencing exchange rates and business considerations, and the quality
of individual issuers. In addition, in managing the Portfolio assets,
MacKay Shields will determine in its good faith judgment:
1. The country allocation among the international equity markets;
2. The currency exposure (asset allocation across currencies); and
3. The diversified security holdings within each equity market.
The Portfolio has no present intention of altering its general policy of
investing, under normal conditions, in foreign equity securities. However, under
exceptional conditions abroad or when it is believed that economic or market
conditions warrant, the Portfolio may, for temporary defensive purposes, invest
part or all of its portfolio in equity securities of U.S. issuers; notes and
bonds which at the time of their purchase are rated BBB or higher by S&P or Baa
or higher by Moody's (see Appendix A "Ratings of Debt Securities").
The Portfolio also may invest in foreign securities in the form of ADRs,
European Depository Receipts (EDRs), Global Depository Receipts (GDRs),
International Depository Receipts (IDRs) or other similar securities convertible
into securities of foreign issuers. ADRs (sponsored or unsponsored) are receipts
typically issued by a U.S. bank or trust company evidencing ownership of the
underlying foreign securities. Most ADRs are traded on a U.S. stock exchange.
Issuers of unsponsored ADRs are not contractually obligated to disclose material
information in the U.S. and, therefore, there may not be a correlation between
such information and the market value of the unsponsored ADR. EDRs and IDRs are
receipts typically issued by a European bank or trust company evidencing
ownership of the underlying foreign securities. GDRs are receipts issued by
either a U.S. or non-U.S. banking institution evidencing ownership of the
underlying foreign securities.
To hedge the market value of securities held, proposed to be held or
sold, or relating to foreign currency exchange rates, the Portfolio may enter
into or purchase securities or securities index options, foreign currency
options, and futures contracts and related options with respect to securities,
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indexes of securities or currencies. The Portfolio also may buy and sell
currencies on a spot or forward basis. Subject to compliance with applicable
rules, futures contracts and related options may be used for any legally
permissible purpose, including as a substitute for acquiring a basket of
securities and to reduce transaction costs. The Portfolio also may purchase
securities on a when-issued or forward commitment basis and engage in portfolio
securities lending. The Portfolio may use all of these techniques (1) in an
effort to manage cash flow and remain fully invested in the stock and currency
markets, instead of or in addition to buying and selling stocks and currencies,
or (2) in an effort to hedge against a decline in the value of securities or
currencies owned by it or an increase in the price of securities which it plans
to purchase.
MacKay Shields believes that active currency management can enhance
portfolio returns through opportunities arising from interest rate differentials
between instruments denominated in different currencies and/or changes in value
between currencies. Moreover, MacKay Shields believes active currency management
can be employed as an overall portfolio risk management tool. For example, in
its view, foreign currency management can provide overall portfolio risk
diversification when combined with a portfolio of foreign securities, and the
market risks of investing in specific foreign markets can at times be reduced by
currency strategies which may not involve the currency in which the foreign
security is denominated.
CERTAIN INVESTMENT PRACTICES COMMON TO TWO OR MORE PORTFOLIOS
The Portfolios can use various techniques to increase or decrease their
exposure to changing security prices, interest rates, currency exchange rates,
commodity prices or other factors that affect security values. These techniques
may involve derivative transactions such as buying and selling futures contracts
and options on futures contracts, entering into foreign currency transactions
(such as forward foreign currency exchange contracts and options on foreign
currencies) and purchasing put or call options on securities indexes.
The Portfolios can use these practices in an attempt to adjust the risk
and return characteristics of their portfolios of investments. When a Portfolio
uses such techniques in an attempt to reduce risk it is known as "hedging". If a
Portfolio's investment adviser judges market conditions incorrectly or employs a
strategy that does not correlate well with the Portfolio's investments, these
techniques could result in a loss, regardless of whether the intent was to
reduce risk or increase return. These techniques may increase the volatility of
a Portfolio and may involve a small investment of cash relative to the magnitude
of the risk assumed. In addition, these techniques could result in a loss if the
counterparty to the transaction does not perform as promised.
Except as otherwise noted below, the following description of investment
practices is applicable to all of the Portfolios.
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ARBITRAGE
Each Portfolio may sell in one market a security which it owns and
simultaneously purchase the same security in another market or it may buy a
security in one market and simultaneously sell it in another market, in order to
take advantage of differences between the prices of the security in the
different markets. Although the Portfolios do not actively engage in arbitrage,
such transactions may be entered into only with respect to debt securities and
will occur only in a dealer's market where the buying and selling dealers
involved confirm their prices to the Portfolio at the time of the transaction,
thus eliminating any risk to the assets of a Portfolio. Such transactions, which
involve costs to a Portfolio, may be limited by the policy of each Portfolio to
qualify as a "regulated investment company" under the Code.
CASH EQUIVALENTS
Each of the Portfolios may invest in cash or cash equivalents, which
include, but are not limited to: short-term obligations issued or guaranteed as
to interest and principal by the U.S. Government or any agency or
instrumentality thereof (including repurchase agreements collateralized by such
securities); obligations of banks (certificates of deposit, bankers' acceptances
and time deposits) which at the date of investment have capital, surplus, and
undivided profits (as of the date of their most recently published financial
statements) in excess of $100,000,000, and obligations of other banks or savings
and loan associations if such obligations are federally insured; commercial
paper which at the date of investment is rated A-1 by S&P, or P-1 by Moody's or,
if not rated, is issued or guaranteed as to payment of principal and interest by
companies which at the date of investment have an outstanding debt issue rated
AA or better by S&P or Aa or better by Moody's; short-term corporate obligations
which at the date of investment are rated AA or better by S&P or Aa or better by
Moody's; and other debt instruments not specifically described if such
instruments are deemed by the Directors to be of comparable high quality and
liquidity. In addition, the International Equity Portfolio may invest in foreign
cash and cash equivalents.
DEBT SECURITIES
Debt securities may have fixed, variable or floating (including inverse
floating) rates of interest. To the extent that a Portfolio invests in debt
securities, it will be subject to certain risks. The value of the debt
securities held by a Portfolio, and thus the net asset value of the shares of a
Portfolio, generally will fluctuate depending on a number of factors, including,
among others, changes in the perceived creditworthiness of the issuers of those
securities, movements in interest rates, the average maturity of a Portfolio's
investments, changes in relative values of the currencies in which a Portfolio's
investments are denominated relative to the U.S. dollar, and the extent to which
a Portfolio hedges its interest rate, credit and currency exchange rate risks.
Generally, a rise in interest rates will reduce the value of fixed income
securities held by a Portfolio, and a decline in interest rates will increase
the value of fixed income securities held by a Portfolio.
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FLOATERS AND INVERSE FLOATERS
Each Portfolio, other than the Capital Appreciation, Value, Growth
Equity, American Century Income and Growth, and Indexed Equity Portfolios, may,
to the extent permitted by law, invest in floating rate debt instruments
("floaters"). The interest rate on a floater is a variable rate which is tied to
another interest rate, such as a money-market index or Treasury bill rate. The
interest rate on a floater resets periodically, typically every six months.
While, because of the interest rate reset feature, floaters provide a Portfolio
with a certain degree of protection against rises in interest rates, a Portfolio
will participate in any declines in interest rates as well.
Each Portfolio, other than the Capital Appreciation, Cash Management,
Government, Value, Growth Equity, American Century Income and Growth, and
Indexed Equity Portfolios may, to the extent permitted by law, invest in
leveraged inverse floating rate debt instruments ("inverse floaters"). The
interest rate on an inverse floater resets in the opposite direction from the
market rate of interest to which the inverse floater is indexed. An inverse
floater may be considered to be leveraged if, as interest rates change, interest
payments on the floater change by a greater proportion. The higher degree of
leverage inherent in inverse floaters is associated with greater volatility in
their market values. Accordingly, the duration of an inverse floater may exceed
its stated final maturity. Duration is the sensitivity of the price of a
security to changes in interest rates. Certain inverse floaters may be deemed to
be illiquid securities for purposes of the Portfolios' limitation on investments
in such securities.
HIGH YIELD SECURITIES
Securities rated lower than Baa by Moody's or lower than BBB by S&P or,
if not rated, of equivalent quality, are sometimes referred to as "high yield"
(or "junk") bonds. In addition, securities rated Baa are considered by Moody's
to have some speculative characteristics. Owners should consider the following
risks associated with high yield bonds before investing in the Convertible, High
Yield Corporate Bond, Total Return and Bond Portfolios.
Investment in high yield bonds involves special risks in addition to the
risks associated with investments in higher rated debt securities. High yield
bonds may be regarded as predominantly speculative with respect to the issuer's
continuing ability to meet principal and interest payments. Analysis of the
creditworthiness of issuers of high yield bonds may be more complex than for
issuers of higher quality debt securities, and the ability of a Portfolio to
achieve its investment objective may, to the extent of its investment in high
yield bonds, be more dependent upon such creditworthiness analysis than would be
the case if the Portfolio were investing in higher quality bonds.
Legislation designed to limit the use of high yield bonds in corporate
transactions may have a material adverse effect on a Portfolio's NAV and
investment practices. In addition, there may be special tax considerations
associated with investing in high yield bonds structured as zero coupon or
payment-in-kind securities. A Portfolio records the interest on these securities
annually as income even though it receives no cash interest until the security's
maturity or payment date.
High yield bonds may be more susceptible to real or perceived adverse
economic and competitive industry conditions than higher grade bonds. The prices
of high yield bonds have been
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found to be less sensitive to interest-rate changes than more highly rated
investments, but more sensitive to adverse economic downturns or individual
corporate developments. A projection of an economic downturn or of a period of
rising interest rates, for example, could cause a decline in high yield bond
prices because the advent of a recession could lessen the ability of a highly
leveraged company to make principal and interest payments on its debt
securities. If the issuer of high yield bonds defaults, a Portfolio may incur
additional expenses to seek recovery. In the case of high yield bonds structured
as zero coupon or payment-in-kind securities, the market prices of such
securities are affected to a greater extent by interest rate changes, and
therefore tend to be more volatile than securities which pay interest
periodically and in cash.
The secondary market on which high yield bonds are traded may be less
liquid than the market for higher grade bonds. Less liquidity in the secondary
trading market could adversely affect the price at which a Portfolio could sell
a high yield bond, and could adversely affect and cause large fluctuations in
the daily net asset value of the Portfolio's shares. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may decrease
the values and liquidity of high yield bonds, especially in a thinly traded
market.
The use of credit ratings as the sole method for evaluating high yield
bonds also involves certain risks. For example, credit ratings evaluate the
safety of principal and interest payments, not the market value risk of high
yield bonds. Also, credit rating agencies may fail timely to change credit
ratings to reflect subsequent events. If a credit rating agency changes the
rating of a portfolio security held by a Portfolio, the Portfolio may retain the
portfolio security if MacKay-Shields or New York Life deems it in the best
interest of the Portfolio's shareholders.
ZERO COUPON BONDS
The Portfolios may purchase zero coupon bonds, which are debt obligations
issued without any requirement for the periodic payment of interest. Zero coupon
bonds are issued at a significant discount from face value. The discount
approximates the total amount of interest the bonds would accrue and compound
over the period until maturity at a rate of interest reflecting market rate at
the time of issuance. Because interest on zero coupon bonds is not distributed
on a current basis but is, in effect, compounded, zero coupon bonds tend to be
subject to greater market risk than interest paying securities of similar
maturities. The discount represents income, a portion of which a Portfolio must
accrue and distribute every year even though the Portfolio receives no payment
on the investment in that year. Zero coupon bonds tend to be more volatile than
conventional debt securities.
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SHORT SALES AGAINST THE BOX
A short sale is a transaction in which the Portfolio sells a security it
does not own in anticipation of a possible decline in market price. A short sale
"against the box" is a short sale where, at the time of the short sale, the
Portfolio owns or has the right to obtain securities equivalent in kind and
amount. The Capital Appreciation, Convertible, Developing Growth, Eagle Growth
Equity, Government, High-Yield Corporate Bond, International Equity, Dreyfus
Large Company Value, Total Return, Value, and Indexed Equity Portfolios may only
enter into short sales against the box for, among other reasons, to hedge
against a market decline in the value of the security owned or to defer
recognition of a gain or loss for Federal income tax purposes on the security
owned by the Portfolio. Short sales "against the box" will be limited to no more
than 5% of the Portfolio's net assets (25% with respect to the Convertible and
the Dreyfus Large Company Value Portfolios).
If the value of a security sold short against the box increases, the
Portfolio would suffer a loss when it purchases or delivers to the selling
broker the security sold short. If a broker, with which the Portfolio has open
short sales, were to become bankrupt, a Portfolio could experience losses or
delays in recovering gains on short sales. The Portfolios will only enter into
short sales against the box with brokers they believe are creditworthy.
REPURCHASE AGREEMENTS
The Portfolios may enter into repurchase agreements, including foreign
repurchase agreements, with any member bank of the Federal Reserve System or a
member firm of the National Association of Securities Dealers, Inc. As a matter
of operating policy, the Lord Abbett Developing Growth Portfolio will not invest
more than 10% of the value of its assets in repurchase agreements maturing in
more than seven days. A repurchase agreement, which provides a means for a
Portfolio to earn income on uninvested cash for periods as short as overnight,
is an arrangement under which the purchaser (i.e., a Portfolio) purchases a U.S.
Government or other high quality short-term debt obligation (the "Obligation")
and the seller agrees, at the time of sale, to repurchase the Obligation at a
specified time and price. A repurchase agreement with foreign banks may be
available with respect to government securities of the particular foreign
jurisdiction. The custody of the Obligation will be maintained by a Portfolio's
Custodian, or another custodian as agent for the Portfolio and the Portfolio's
counterparty. The repurchase price may be higher than the purchase price, the
difference being income to a Portfolio, or the purchase and repurchase prices
may be the same, with interest at a stated rate due to a Portfolio together with
the repurchase price upon repurchase. In either case, the income to a Portfolio
is unrelated to the interest rate on the Obligation subject to the repurchase
agreement.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a
loan from a Portfolio to the seller of the Obligation. It is not clear whether a
court would consider the Obligation purchased by a Portfolio subject to a
repurchase agreement as being owned by a Portfolio or as being collateral for a
loan by a Portfolio to the seller. In the event of the commencement of
bankruptcy or insolvency proceedings with respect to the seller of the
Obligation before repurchase of the Obligation under a repurchase agreement, a
Portfolio may encounter delays and incur costs before being able to sell the
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security. Delays may involve loss of interest or decline in price of the
Obligation. If the court characterizes the transaction as a loan and a Portfolio
has not perfected a security interest in the Obligation, a Portfolio may be
required to return the Obligation to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, a Portfolio would be
at the risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt instrument purchased for the Portfolios,
each Portfolio's Adviser seeks to minimize the risk of loss from repurchase
agreements by analyzing the creditworthiness of the obligor, in this case the
seller of the Obligation. Apart from the risk of bankruptcy or insolvency
proceedings, there is also the risk that the seller may fail to repurchase the
security. In the event of the bankruptcy of the seller or the failure of the
seller to repurchase the securities as agreed, a Portfolio could suffer losses,
including loss of interest on or principal of the security and costs associated
with delay and enforcement of the repurchase agreement. However, if the market
value of the Obligation subject to the repurchase agreement becomes less than
the repurchase price (including accrued interest), a Portfolio will direct the
seller of the Obligation to deliver additional securities so that the market
value of all securities subject to the repurchase agreement equals or exceeds
the repurchase price. The Directors have delegated to each Portfolio's Adviser
or Sub-Adviser the authority and responsibility to monitor and evaluate the
Portfolio's use of repurchase agreements, including identification of sellers
whom they believe to be creditworthy and have authorized the Portfolios to enter
into repurchase agreements with such sellers.
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REVERSE REPURCHASE AGREEMENTS
Each Portfolio may enter into reverse repurchase agreements, including
foreign reverse repurchase agreements. These agreements involve the sale of debt
securities (obligations) held by a Portfolio, with an agreement to repurchase
the obligations at an agreed upon price, date and interest payment. The proceeds
will be used to purchase other debt securities either maturing, or under an
agreement to resell, at a date simultaneous with or prior to the expiration of
the reverse repurchase agreement. Reverse repurchase agreements will be
utilized, when permitted by law, only when the interest income to be earned from
the investment of the proceeds from the transaction is greater than the interest
expense of the reverse repurchase transaction. When a Portfolio enters into such
an agreement, it will establish a segregated account with the Fund's Custodian
in which it will maintain cash or cash equivalents or other liquid high grade
debt obligations equal in value to the repurchase price (which price will
already include interest charges). If the buyer of the debt securities pursuant
to the reverse repurchase agreement becomes bankrupt, realization upon the
underlying securities may be delayed and there is a risk of loss due to any
decline in their value. Reverse repurchase agreements will not extend for more
than 30 days nor will such agreements involve more than 10% of the net assets of
a Portfolio.
This practice is not for investment leverage but solely to facilitate
management of the investment portfolio by enabling the Portfolio to meet
redemption requests when the liquidation of portfolio instruments would be
inconvenient or disadvantageous. However, a Portfolio may not purchase
additional portfolio investments once borrowed funds exceed 5% of total assets.
When effecting reverse repurchase agreements, Portfolio assets in an amount
sufficient to make payment for the obligations to be purchased will be
segregated by the Custodian and on the Portfolio's records upon execution of
the trade and maintained until the transaction has been settled. During the
period any reverse repurchase agreements are outstanding, to the extent
necessary to assure completion of the reverse repurchase agreements, a
Portfolio will restrict the purchase of portfolio instruments to money market
instruments maturing on or before the expiration date of the reverse repurchase
agreements. Interest paid on borrowed funds will not be available for
investment. The Portfolio will liquidate any such borrowings as soon as
possible and may not purchase any portfolio instruments while any borrowings
are outstanding (except as described above).
LENDING OF PORTFOLIO SECURITIES
Each Portfolio, except the Cash Management Portfolio, may seek to
increase its income by lending portfolio securities, in accordance with
procedures adopted by the Board of Directors, to certain broker-dealers and
institutions. A Portfolio would have the right to call a loan and obtain the
securities loaned at any time generally on less than five days' notice. For the
duration of a loan, a Portfolio would continue to receive the equivalent of the
interest or dividends paid by the issuer on the securities loaned and would also
receive compensation from the investment of the collateral. A Portfolio would
not, however, have the right to vote any securities having voting rights during
the existence of the loan, but a Portfolio would call the loan in anticipation
of an important vote to be taken among holders of the securities or of the
giving or withholding of their consent on a material matter affecting the
investment. This practice could result in a loss or a delay in recovering the
Portfolio's securities from the borrower if the borrower were to fail
financially and the collateral is insufficient to replace the full amount of the
loaned securities. The borrower would be liable for the shortage, but recovery
by the Portfolio cannot be assured.
BORROWING
A Portfolio may borrow from a bank, but only for temporary or emergency
purposes. This borrowing may be unsecured. The 1940 Act requires a Portfolio to
maintain continuous asset coverage (that is, total assets including borrowings,
less liabilities exclusive of borrowings) of 300% of the amount borrowed. If the
300% asset coverage should decline as a result of market fluctuations or other
reasons, a Portfolio may be required to sell some of its portfolio holdings
within three days to reduce the debt and restore the 300% asset coverage, even
though it may be disadvantageous from an investment standpoint to sell
securities at that time and could cause the Portfolio to be unable to meet
certain requirements for qualification as a regulated investment company for
Federal tax
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purposes. To avoid the potential leveraging effects of a Portfolio's borrowings,
a Portfolio will repay any money borrowed in excess of 5% of its total assets
prior to purchasing additional securities. Borrowing may exaggerate the effect
on a Portfolio's net asset value of any increase or decrease in the market value
of the Portfolio's portfolio securities. Money borrowed will be subject to
interest costs which may or may not be recovered by appreciation of the
securities purchased. A Portfolio also may be required to maintain minimum
average balances in connection with such borrowing or to pay a commitment or
other fee to maintain a line of credit; either of these requirements would
increase the cost of borrowing over the stated interest rate. The Dreyfus Large
Company Value Portfolio may engage in leveraging in an effort to increase
returns. Leveraging by means of borrowing will exaggerate the effect of any
increase or decrease in the value of portfolio securities on the Portfolio's net
asset value; money borrowed will be subject to interest and other costs (which
may include commitment fees or the cost of maintaining minimum average balances,
or both), which may or may not exceed income received from the securities
purchased with the borrowed funds. The use of borrowing tends to result in a
faster than average movement, up or down, in the net asset value of the
Portfolio's shares. The Portfolio also may be required to maintain minimum
average balances in connection with such borrowing or to pay commitment or other
fees to maintain a line of credit; either of these requirements would increase
the cost of borrowing over the stated interest rate.
FOREIGN SECURITIES
Each Portfolio, except the Government Portfolio, may invest in U.S.
dollar-denominated and non-dollar denominated foreign debt securities (including
those issued by the Dominion of Canada and its provinces and other securities
which meet the criteria applicable to that Portfolio's domestic investments),
and in certificates of deposit issued by foreign banks and foreign branches of
United States banks, to any extent deemed appropriate by the Adviser or
Sub-Adviser. The Bond, Growth Equity and Lord Abbet Developing Growth Portfolios
may purchase foreign securities up to a maximum of 10% of the Portfolio's total
assets. The Indexed Equity Portfolio will invest in foreign securities to the
extent that foreign securities are included in the S&P 500. Under current SEC
rules relating to the use of the amortized cost method of portfolio securities
valuation, the Cash Management Portfolio is restricted to purchasing U.S.
dollar-denominated securities, but it is not otherwise precluded from purchasing
securities of foreign issuers.
Securities of foreign issuers, particularly nongovernmental issuers,
involve risks which are not ordinarily associated with investing in securities
of domestic issuers. These risks include changes in interest rates, in currency
exchange rates, and currency exchange control regulations. In addition,
investments in foreign countries could be affected by other factors, including
the unavailability of financial information or the difficulty of interpreting
financial information prepared under foreign accounting standards, less
liquidity and more volatility in foreign securities markets, the possibility of
expropriation, the possibility of heavy taxation, the impact of political,
social or diplomatic developments, limitations on the movement of funds or other
assets of a Portfolio between different countries, difficulties in invoking
legal process abroad and enforcing contractual obligations, and the difficulty
of assessing economic trends in foreign countries. Further, to the extent
investments in foreign securities are denominated in currencies of foreign
countries, a Portfolio may be affected
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favorably or unfavorably by changes in currency exchange rates and in exchange
control regulations and may incur costs in connection with conversion between
currencies.
FOREIGN CURRENCY TRANSACTIONS
Each Portfolio, except the Cash Management Portfolio and the Government
Portfolio, may, to the extent it invests in foreign securities, enter into
forward foreign currency exchange contracts in order to protect against
uncertainty in the level of future foreign currency exchange rates. It is not
expected that the Indexed Equity Portfolio will engage in any foreign currency
transactions. A Portfolio will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or through entering into forward contracts
to purchase or sell foreign currencies. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days (usually less than one year)
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts are traded in the interbank market
conducted directly between traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the difference (the spread) between the price at which they are buying and
selling various currencies.
Normally, consideration of the prospect for currency parities will be
incorporated in a longer term investment decision made with regard to overall
diversification strategies. However, each of the current Advisers and
Sub-Advisers believes that it is important to have the flexibility to enter into
such forward contracts when each determines that the best interest of a
Portfolio will be served. Generally, the Advisers and Sub-Advisers believe that
the best interest of a Portfolio will be served if a Portfolio is permitted to
enter into forward contracts under specified circumstances. First, when a
Portfolio enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may desire to "lock in" the U.S. dollar
price of the security. By entering into a forward contract for the purchase or
sale, for a fixed amount of U.S. dollars, of the amount of foreign currency
involved in the underlying security transaction, a Portfolio will be able to
insulate itself from a possible loss resulting from a change in the relationship
between the U.S. dollar and the subject foreign currency during the period
between the date on which the security is purchased or sold and the date on
which payment is made or received, although a Portfolio would also forego any
gain it might have realized had rates moved in the opposite direction. This
technique is sometimes referred to as a "settlement hedge" or "transaction
hedge."
Second, when the Adviser or Sub-Adviser believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of some or all
of a Portfolio's portfolio securities denominated in such foreign currency. Such
a hedge (sometimes referred to as a "position hedge") will tend to offset both
positive and negative currency fluctuations, but will not offset changes in
security values caused by other factors. A Portfolio also may hedge the same
position by using another currency (or a basket of currencies) expected to
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perform similarly to the hedged currency, when exchange rates between the two
currencies are sufficiently correlated ("proxy hedge"). The precise matching of
the forward contract amounts and the value of the securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. With respect to positions that constitute "transaction" or
"position hedges" (including "proxy hedges"), a Portfolio will not enter into
forward contracts to sell currency or maintain a net exposure to such contracts
if the consummation of such contracts would obligate a Portfolio to deliver an
amount of foreign currency in excess of the value of a Portfolio's portfolio
securities or other assets denominated in that currency (or the related
currency, in the case of a proxy hedge).
Finally, a Portfolio may enter into forward contracts to shift its
investment exposure from one currency into another currency that is expected to
perform better relative to the U.S. dollar. This type of strategy, sometimes
known as a "cross-hedge," will tend to reduce or eliminate exposure to the
currency that is sold, and increase exposure to the currency that is purchased,
much as if a Portfolio had sold a security denominated in one currency and
purchased an equivalent security denominated in another. Cross-hedges protect
against losses resulting from a decline in the hedged currency, but will cause a
Portfolio to assume the risk of fluctuations in the value of the currency it
purchases.
At the consummation of the forward contract, a Portfolio may either make
delivery of the foreign currency or terminate its contractual obligation to
deliver the foreign currency by purchasing an offsetting contract obligating it
to purchase at the same maturity date the same amount of such foreign currency.
If a Portfolio chooses to make delivery of the foreign currency, it may be
required to obtain such currency for delivery through the sale of portfolio
securities denominated in such currency or through conversion of other assets of
a Portfolio into such currency. If a Portfolio engages in an offsetting
transaction, a Portfolio will realize a gain or a loss to the extent that there
has been a change in forward contract prices. Closing purchase transactions with
respect to forward contracts are usually effected with the currency trader who
is a party to the original forward contract.
A Portfolio's dealing in forward contracts will be limited to the
transactions described above. Of course, a Portfolio is not required to enter
into such transactions with regard to its foreign currency-denominated
securities and will not do so unless deemed appropriate by the Adviser. A
Portfolio generally will not enter into a forward contract with a term of
greater than one year.
In cases other than transactions which constitute "transaction hedges" or
"position hedges" (including "proxy hedges"), a Portfolio will place cash not
available for investment or liquid debt securities (denominated in the foreign
currency subject to the forward contract) in a segregated account in an amount
equal to the value of a Portfolio's total assets committed to the consummation
of forward currency exchange contracts entered into as a hedge against a
substantial decline in the value of a particular foreign currency. If the value
of the securities placed in the segregated account declines, additional cash or
securities will be placed in the account by a Portfolio on a daily basis so that
the value of the account will equal the amount of a Portfolio's commitments with
respect to such contracts.
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It should be realized that this method of protecting the value of a
Portfolio's portfolio securities against a decline in the value of a currency
does not eliminate fluctuations in the underlying prices of the securities. It
simply establishes a rate of exchange which can be achieved at some future point
in time. It also reduces any potential gain which may have otherwise occurred
had the currency value increased above the settlement price of the contract.
A Portfolio's foreign currency transactions may be limited by the
requirements of Subchapter M of the Code for qualification as a regulated
investment company.
The Advisers and Sub-Advisers believe active currency management can be
employed as an overall portfolio risk management tool. For example, in their
view, foreign currency management can provide overall portfolio risk
diversification when combined with a portfolio of foreign securities, and the
market risks of investing in specific foreign markets can at times be reduced by
currency strategies which may not involve the currency in which the foreign
security is denominated.
BRADY BONDS
The Convertible, High Yield Corporate Bond and Total Return Portfolios
may each invest a portion of its assets in Brady Bonds, which are securities
created through the exchange of existing commercial bank loans to sovereign
entities for new obligations in connection with debt restructurings under a debt
restructuring plan introduced by former U.S. Secretary of the Treasury, Nicholas
F. Brady (the "Brady Plan"). Brady Plan debt restructurings have been
implemented in several countries, including Mexico, Uruguay, Venezuela,
Argentina, Costa Rica, Nigeria, the Philippines, Bulgaria, the Dominican
Republic, Bolivia, Ecuador, Niger, Poland and Jordan (collectively, the "Brady
Countries"). In addition, Brazil, Peru and Panama have concluded a Brady-like
plan. It is expected that other countries will undertake a Brady Plan debt
restructuring in the future.
Brady Bonds have been issued only recently and, accordingly, do not have
a long payment history. Brady Bonds may be collateralized or uncollateralized,
are issued in various currencies (primarily the U.S. dollar) and are actively
traded in the over-the-counter secondary market.
U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed
rate par bonds or floating rate discount bonds, are generally collateralized in
full as to principal by U.S. Treasury zero coupon bonds having the same maturity
as the Brady Bonds. Interest payments on these Brady Bonds generally are
collateralized on a one-year or longer rolling-forward basis by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of interest payments or, in the case of floating rate bonds, is
initially equal to at least one year's interest payments based on the applicable
interest rate at that time and is adjusted at regular intervals thereafter.
Certain Brady Bonds are entitled to "value recovery payments" in certain
circumstances, which in effect constitute supplemental interest payments but
generally are not collateralized. Brady Bonds are often viewed as having three
or four valuation components: (i) the collateralized repayment of principal at
final maturity; (ii) the collateralized interest payments; (iii) the
uncollateralized interest payments; and (iv)
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any uncollateralized repayment of principal at maturity (these uncollateralized
amounts constitute the "residual risk").
Most Mexican Brady Bonds issued to date have principal repayments at
final maturity fully collateralized by U.S. Treasury zero coupon bonds (or
comparable collateral denominated in other currencies) and interest coupon
payments collateralized on an 18-month rolling-forward basis by funds held in
escrow by an agent for the bondholders. A significant portion of the Venezuelan
Brady Bonds and the Argentine Brady Bonds issued to date have principal
repayments at final maturity collateralized by U.S. Treasury zero coupon bonds
(or comparable collateral denominated in other currencies) and/or interest
coupon payments collateralized on a 14-month (for Venezuela) or 12-month (for
Argentina) rolling-forward basis by securities held by the Federal Reserve Bank
of New York as collateral agent.
Brady Bonds involve various risk factors including residual risk and the
history of defaults with respect to commercial bank loans by public and private
entities of countries issuing Brady Bonds. There can be no assurance that Brady
Bonds in which a Portfolio may invest will not be subject to restructuring
arrangements or to requests for new credit, which may cause the Portfolio to
suffer a loss of interest or principal on any of its holdings.
Brady Bonds are not considered U.S. Government securities. In light of
factors, including the history of defaults with respect to commercial bank loans
by public and private entities of countries issuing Brady Bonds, investments in
Brady Bonds are to be viewed as speculative.
WHEN-ISSUED SECURITIES
Each Portfolio may from time to time purchase securities on a
"when-issued" basis. Debt securities are often issued in this manner. The price
of such securities, which may be expressed in yield terms, is fixed at the time
a commitment to purchase is made, but delivery of and payment for the
when-issued securities take place at a later date. Normally, the settlement date
occurs within one month of the purchase. During the period between purchase and
settlement, no payment is made by the Portfolio and no interest accrues to the
Portfolio. To the extent that assets of a Portfolio are held in cash pending the
settlement of a purchase of securities, that Portfolio would earn no income;
however, it is the Fund's intention that each Portfolio will be fully invested
to the extent practicable and subject to the policies stated herein. Although
when-issued securities may be sold prior to the settlement date, each Portfolio
intends to purchase such securities with the purpose of actually acquiring them
unless a sale appears desirable for investment reasons.
At the time the Fund makes the commitment on behalf of a Portfolio to
purchase a security on a when-issued basis, it will record the transaction and
reflect the amount due and the value of the security in determining the
Portfolio's net asset value. The market value of the when-issued securities may
be more or less than the purchase price payable at the settlement date. The
Directors do not believe that a Portfolio's net asset value or income will be
exposed to additional risk by the purchase of securities on a when-issued basis.
Each Portfolio will establish a segregated account in which it will
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maintain liquid assets at least equal in value to commitments for when-issued
securities. Such segregated securities either will mature or, if necessary, be
sold on or before the settlement date.
MORTGAGE-RELATED AND OTHER ASSET-BACKED SECURITIES
Each Portfolio, except the American Century Income & Growth and Indexed
Equity Portfolios, may purchase asset-backed and mortgage-backed securities.
Asset-backed and mortgage-backed securities are securities which derive their
value from underlying pools of loans that may include interests in pools of
lower-rated debt securities, consumer loans or mortgages, or complex instruments
such as collateralized mortgage obligations and stripped mortgage-backed
securities. The value of these securities may be significantly affected by
changes in interest rates, the market's perception of issuers and the
creditworthiness of the parties involved. The ability of a Portfolio to
successfully utilize these instruments may depend in part upon the ability of
the Adviser to forecast interest rates and other economic factors correctly.
Some securities may have a structure that makes their reaction to interest rate
changes and other factors difficult to predict, making their value highly
volatile. These securities may also be subject to prepayment risk and if the
security has been purchased at a premium the amount of the premium would be lost
in the event of prepayment.
Mortgage-related securities are interests in pools of mortgage loans made
to residential home buyers, including mortgage loans made by savings and loan
institutions, mortgage bankers, commercial banks and others. Pools of mortgage
loans are assembled as securities for sale to investors by various governmental,
government-related and private organizations (see "Mortgage Backed Securities,"
below). The Portfolios may also invest in debt securities which are secured with
collateral consisting of mortgage-related securities (see "Collateralized
Mortgage Obligations," at page 47), and in other types of mortgage-related
securities. The International Equity Portfolio will not purchase
mortgage-related securities or any other assets which in the opinion of
MacKay-Shields are illiquid, if, as a result, more than 15% of the value of this
Portfolio's assets will be illiquid.
MORTGAGE-BACKED SECURITIES. Interests in pools of mortgage-related
securities differ from other forms of debt securities, which normally provide
for periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates. Instead, these securities provide a monthly
payment which consists of both interest and principal payments. In effect, these
payments are a "pass-through" of the monthly payments made by the individual
borrowers on their residential mortgage loans, net of any fees paid to the
issuer or guarantor of such securities. Additional payments are caused by
repayments of principal resulting from the sale of the underlying residential
property, refinancing or foreclosure, net of fees or costs which may be
incurred. Some mortgage-related securities (such as securities issued by the
Government National Mortgage Association) are described as "modified
pass-through" securities. These securities entitle the holder to receive all
interest and principal payments owed on the mortgage pool, net of certain fees,
at the scheduled payment dates regardless of whether or not the mortgagor
actually makes the payment.
Payment of principal and interest on some mortgage-backed securities (but
not the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U.S. Government (in the case of securities guaranteed by
GNMA); or guaranteed by agencies or instrumentalities of the U.S. Government (in
the case of securities guaranteed by FNMA or FHLMC, which are supported only by
the discretionary authority of the U.S. Government to purchase the agency's
obligations). Mortgage-backed securities created by non-governmental issuers
(such as commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers) may be
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and letters of credit, which may be
issued by governmental entities, private insurers or the mortgage poolers.
The principal governmental guarantor of mortgage-related securities is
the Government National Mortgage Association ("GNMA"). GNMA is a wholly-owned
U.S. Government corporation within the Department of Housing and Urban
Development. GNMA is authorized to guarantee, with the full faith and credit of
the U.S. Government, the timely payment of principal and interest on securities
issued by institutions approved by GNMA (such as savings and loan institutions,
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commercial banks and mortgage bankers) and backed by pools of FHA-insured or
Veterans Administration-guaranteed mortgages.
Government-related guarantors (i.e., not backed by the full faith and
credit of the U.S. Government) include the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a
government-sponsored corporation owned entirely by private stockholders. It is
subject to general regulation by the Secretary of Housing and Urban Development.
FNMA purchases conventional (i.e., not insured or guaranteed by any government
agency) residential mortgages from a list of approved sellers/servicers which
include state and federally chartered savings and loan associations, mutual
savings banks, commercial banks, credit unions and mortgage bankers.
Pass-through securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA but are not backed by the full faith and credit
of the U.S. Government.
FHLMC was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. It is a
government-sponsored corporation formerly owned by the twelve Federal Home Loan
Banks and now owned entirely by private stockholders. FHLMC issues Participation
Certificates ("PCS") which represent interests in conventional mortgages from
FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and
ultimate collection of principal, but PCS are not backed by the full faith and
credit of the U.S. Government.
Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers also
create pass-through pools of conventional residential mortgage loans. Such
issuers may, in addition, be the originators and/or servicers of the underlying
mortgage loans as well as the guarantors of the mortgage-related securities.
Pools created by such non-governmental insurers generally offer a higher rate of
interest than government and government-related pools because there are no
direct or indirect government or agency guarantees of payments in the
non-governmental pools. However, timely payment of interest and principal of
these pools may be supported by various forms of insurance or guarantees,
including individual loan, title, pool and hazard insurance and letters of
credit. The insurance and guarantees are issued by governmental entities,
private insurers and the mortgage poolers. Such insurance and guarantees and the
creditworthiness of the issuers thereof will be considered in determining
whether a mortgage-related security meets a Portfolio's investment quality
standards. There can be no assurance that the private insurers, or guarantors
can meet their obligations under the insurance policies or guarantee
arrangements. The Portfolios may buy mortgage-related securities without
insurance or guarantees if, through an examination of the loan experience and
practices of the originator/servicers and poolers, each Portfolio's investment
adviser determines that the securities meet the Portfolio's quality standards.
Although the market for such securities is becoming increasingly liquid,
securities issued by certain private organizations may not be readily
marketable. No Portfolio will purchase mortgage-related securities or any other
assets which in the opinion of the Portfolio's Adviser or Sub-Adviser are
illiquid if, as a result, more than 15% of the value of the Portfolio's total
assets (10% with respect to the Cash Management Portfolio, Growth Equity
Portfolio and Bond Portfolio) will be illiquid.
Early repayment of principal on mortgage backed securities (arising from
prepayments of principal due to sale of the underlying property, refinancing, or
foreclosure, net of fees and costs
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which may be incurred) may expose a Portfolio to a lower rate of return upon
reinvestment of principal. Also, if a security subject to prepayment has been
purchased at a premium, the value of the premium would be lost in the event of
prepayment. Like other fixed-income securities, when interest rates rise, the
value of a mortgage-related security generally will decline; however, when
interest rates are declining, the value of mortgage-related securities with
prepayment features may not increase as much as other fixed-income securities.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOs"). A CMO is a hybrid between a
mortgage-backed bond and a mortgage pass-through security. Similar to a bond,
interest and prepaid principal is paid on a CMO, in most cases, semiannually.
CMOs may be collateralized by whole mortgage loans, but are more typically
collateralized by portfolios of mortgage pass-through securities guaranteed by
GNMA, FHLMC, or FNMA, and their income streams.
CMOs are structured into multiple classes, each bearing a different
stated maturity. Actual maturity and average life will depend upon the
prepayment experience of the collateral. CMOs provide for a modified form of
call protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity class receive principal only after the first call has been
retired. An investor is partially guarded against a sooner than desired return
of principal because of the sequential payments.
In a typical CMO transaction, a corporation ("issuer") issues multiple
series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering
are used to purchase mortgages or mortgage pass-through certificates
("Collateral"). The Collateral is pledged to a third-party trustee as security
for the Bonds. Principal and interest payments from the Collateral are used to
pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C bonds
all bear current interest. Interest on the Series Z Bond is accrued and added to
principal and a like amount is paid as principal on the Series A, B, or C Bonds
currently being paid off. When the Series A, B, and C Bonds are paid in full,
interest and principal on the Series Z Bond begins to be paid currently. With
some CMOs, the issuer serves as a conduit to allow loan originators (primarily
builders or savings and loan associations) to borrow against their loan
portfolios.
FHLMC COLLATERALIZED MORTGAGE OBLIGATIONS ("FHLMC CMOs"). FHLMC CMOs are
debt obligations of FHLMC issued in multiple classes having different maturity
dates which are secured by the pledge of a pool of conventional mortgage loans
purchased by FHLMC. Unlike FHLMC PCS, payments of principal and interest on the
FHLMC CMOs are made semiannually, as opposed to monthly. The amount of principal
payable on each semiannual payment date is determined in accordance with FHLMC's
mandatory sinking fund schedule, which, in turn, is equal to approximately 100%
of FHA prepayment experience applied to the mortgage collateral pool. All
sinking fund payments in the CMOs are allocated to the retirement of the
individual classes of bonds in the order of their stated maturities. Payment of
principal on the mortgage loans in the collateral pool in excess of the amount
of FHLMC's minimum sinking fund obligation for any payment date are paid to the
holders of the CMOs as additional sinking fund payments. Because of the
"pass-through" nature of all principal payments received on the collateral pool
in excess of FHLMC's minimum sinking fund requirement, the rate at which
principal of the CMOs is actually
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repaid is likely to be such that each class of bonds will be retired in advance
of its scheduled maturity date.
If collection of principal (including prepayments) on the mortgage loans
during any semiannual payment period is not sufficient to meet FHLMC's minimum
sinking fund obligation on the next sinking fund payment date, FHLMC agrees to
make up the deficiency from its general funds.
Criteria for the mortgage loans in the pool backing the CMOs are
identical to those of FHLMC PCS. FHLMC has the right to substitute collateral in
the event of delinquencies and/or defaults.
OTHER MORTGAGE-RELATED SECURITIES. Other mortgage-related securities
include securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property, including CMO residuals or stripped mortgage-backed
securities. Other mortgage-related securities may be equity or debt securities
issued by agencies or instrumentalities of the U.S. Government or by private
originators of, or investors in, mortgage loans, including savings and loan
associations, homebuilders, mortgage banks, commercial banks, investment banks,
partnerships, trusts and special purpose entities of the foregoing.
CMO RESIDUALS. CMO residuals are derivative mortgage securities issued by
agencies or instrumentalities of the U.S. Government or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial banks, investment banks and special
purpose entities of the foregoing.
The cash flow generated by the mortgage assets underlying a series of
CMOs is applied first to make required payments of principal and interest on the
CMOs, and second to pay the related administrative expenses of the issuer. The
residual in a CMO structure generally represents the interest in any excess cash
flow remaining after making the foregoing payments. Each payment of such excess
cash flow to a holder of the related CMO residual represents income and/or a
return of capital. The amount of residual cash flow resulting from a CMO will
depend on, among other things, the characteristics of the mortgage assets, the
coupon rate of each class of CMO, prevailing interest rates, the amount of
administrative expenses and the prepayment experience on the mortgage assets. In
particular, the yield to maturity on CMO residuals is extremely sensitive to
prepayments on the related underlying mortgage assets, in the same manner as an
interest-only ("IO") class of stripped mortgage-backed securities. See "Stripped
Mortgage-Backed Securities." In addition, if a series of a CMO includes a class
that bears interest at an adjustable rate, the yield to maturity on the related
CMO residual will also be extremely sensitive to changes in the level of the
index upon which interest rate adjustments are based. As described below with
respect to stripped mortgage-backed securities, in certain circumstances a
Portfolio may fail to recoup fully its initial investment in a CMO residual.
CMO residuals are generally purchased and sold by institutional investors
through several investment banking firms acting as brokers or dealers. The CMO
residual market has only very recently developed and CMO residuals currently may
not have the liquidity of other more established securities trading in other
markets. Transactions in CMO residuals are generally completed only after
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careful review of the characteristics of the securities in question. In
addition, CMO residuals may or, pursuant to an exemption therefrom, may not have
been registered under the 1933 Act, as amended. CMO residuals, whether or not
registered under such Act, may be subject to certain restrictions on
transferability, and may be deemed "illiquid" and subject to a Portfolio's
limitations on investment in illiquid securities.
STRIPPED MORTGAGE-BACKED SECURITIES. Stripped Mortgage-Backed Securities
("SMBS") are derivative multi-class mortgage securities. SMBS may be issued by
agencies or instrumentalities of the U.S. Government, or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose entities
of the foregoing.
SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. A common type of SMBS will have one class receiving some of the interest
and most of the principal from the mortgage assets, while the other class will
receive most of the interest and the remainder of the principal. In the most
extreme case, one class will receive all of the interest (the "IO" class), while
the other class will receive all of the principal (the principal-only or "PO"
class). The yield to maturity on an IO class is extremely sensitive to the rate
of principal payments (including prepayments) on the related underlying mortgage
assets, and a rapid rate of principal payments may have a material adverse
effect on a Portfolio's yield to maturity from these securities. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, a Portfolio may fail to fully recoup its initial investment in these
securities even if the security is in one of the highest rating categories.
Although SMBS are purchased and sold by institutional investors through
several investment banking firms acting as brokers or dealers, these securities
were only recently developed. As a result, established trading markets have not
yet developed and, accordingly, these securities may be deemed "illiquid" and
subject to a Portfolio's limitations on investment in illiquid securities.
OTHER ASSET-BACKED SECURITIES. Similarly, the Advisers and Sub-Advisers
expect that other asset-backed securities (unrelated to mortgage loans) will be
offered to investors in the future. Several types of asset-backed securities
have already been offered to investors, including Certificates for Automobile
Receivables (SM) ("CARS(SM)"). CARS(SM) represent undivided fractional interests
in a trust ("trust") whose assets consist of a pool of motor vehicles retail
installment sales contracts and security interests in the vehicles securing the
contracts. Payments of principal and interest on CARS(SM) are passed-through
monthly to certificate holders, and are guaranteed up to certain amounts and for
a certain time period by a letter of credit issued by a financial institution
unaffiliated with the trustee or originator of the trust. An investor's return
on CARS(SM) may be affected by early prepayment of principal on the underlying
vehicles' sales contracts. If the letter of credit is exhausted, the trust may
be prevented from realizing the full amount due on a sales contract because of
state law requirements and restrictions relating to foreclosure sales of
vehicles and the obtaining of deficiency judgments following such sales or
because of depreciation, damage or loss of a vehicle, the application of Federal
and state bankruptcy and insolvency laws, or other factors. As a result,
certificate holders may experience delays in payments or losses if the letter of
credit is exhausted.
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Consistent with a Portfolio's investment objective and policies, the
Adviser or Sub-Adviser also may invest in other types of asset-backed
securities.
OPTIONS ON SECURITIES
Each Portfolio, except the Cash Management, Bond and Growth Equity
Portfolios, may purchase put or call options which are traded on an Exchange or
in the over-the-counter market. In addition, the Capital Appreciation,
Convertible, Government, High Yield Corporate Bond, American Century Income &
Growth, Dreyfus Large Company Value, Total Return, and Value Portfolios may
purchase puts and calls, other than "protective puts" in which the security to
be sold is identical or substantially identical to a security already held by
the Portfolios or to a security which the Portfolios have a right to purchase,
with a value of up to 5% of such Portfolios' respective net assets. The Capital
Appreciation, Convertible, High Yield Corporate Bond, Total Return, and Value
Portfolios may each purchase protective puts (in which the security to be sold
is identical or substantially identical to a security already held by the
Portfolio or to a security which the Portfolio has the right to purchase) with a
value of up to 25% of such Portfolios' respective net assets. The American
Century Income & Growth and Dreyfus Large Company Value Portfolios may each
purchase protective puts with a value of up to 20% of its net assets. The Eagle
Growth Equity Portfolio may also purchase protective puts. Options traded in the
over-the-counter market may not be as actively traded as those listed on an
Exchange. Accordingly, it may be more difficult to value such options and to be
assured that they can be closed out at any time. The Portfolios will engage in
such transactions only with firms of sufficient creditworthiness so as to
minimize these risks.
The Portfolios may purchase put options on securities to protect their
holdings in an underlying or related security against a substantial decline in
market value. Securities are considered related if their price movements
generally correlate with one another. The purchase of put options on securities
held in the portfolio or related to such securities will enable a Portfolio to
preserve, at least partially, unrealized gains occurring prior to the purchase
of the option on a portfolio security without actually selling the security. In
addition, a Portfolio will continue to receive interest or dividend income on
the security.
The Portfolios may also purchase call options on securities the
Portfolios intend to purchase to protect against substantial increases in prices
of such securities pending their ability to invest in an orderly manner in such
securities. In order to terminate an option position, the Portfolios may sell
put or call options identical to those previously purchased, which could result
in a net gain or loss depending on whether the amount received on the sale is
more or less than the premium and other transaction costs paid on the put or
call option when it was purchased.
WRITING CALL OPTIONS. Any Portfolio, except the Cash Management, Bond or
Growth Equity Portfolios, may sell ("write") covered call options on the
portfolio securities of such Portfolio in an attempt to enhance investment
performance; however the Capital Appreciation, Convertible, Government, High
Yield Corporate Bond, Total Return, and Value Portfolios may write covered call
options with respect to no more than 25% of the value of their respective net
assets. The American Century Income & Growth and the Dreyfus Large Company Value
Portfolios may write covered call options with respect to no more than 20% of
the value of their respective net assets. A call option sold by a Portfolio is a
short-term contract, having a duration of nine months or less, which gives the
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purchaser of the option the right to buy, and the writer of the option (in
return for a premium received) the obligation to sell the underlying security at
the exercise price upon the exercise of the option at any time prior to the
expiration date, regardless of the market price of the security during the
option period. The Portfolio covers options it has sold by holding a position in
the underlying securities (the usual practice in the case of a call) or by other
means which would permit timely satisfaction of the Portfolio's obligations as
writer of the option, such as by depositing in a segregated account liquid
assets equal in value to the exercise price of the option (the usual practice in
the case of a put). A Portfolio's purpose in selling covered options is to
realize greater income than would be realized on portfolio securities
transactions alone. Even a Portfolio that is not designed to generate income
might benefit from selling covered options when the Adviser or Sub-Adviser
believes that little risk is involved.
A call option may be covered by, among other things, the writer's owning
the underlying security throughout the option period, or by holding, on a
share-for-share basis, a call on the same security as the call written, where
the exercise price of the call held is equal to or less than the price of the
call written, or greater than the exercise price of a call written if the
difference is maintained by a Portfolio in liquid assets in a segregated account
with its custodian.
A Portfolio will write covered call options both to reduce the risks
associated with certain of its investments and to increase total investment
return through the receipt of premiums. In return for the premium income, a
Portfolio will give up the opportunity to profit from an increase in the market
price of the underlying security above the exercise price so long as its
obligations under the contract continue, except insofar as the premium
represents a profit. Moreover, in writing the call option, the Portfolio will
retain the risk of loss should the price of the security decline, which loss the
premium is intended to offset in whole or in part. A Portfolio, in writing call
options, must assume that the call may be exercised at any time prior to the
expiration of its obligations as a writer, and that in such circumstances the
net proceeds realized from the sale of the underlying securities pursuant to the
call may be substantially below the prevailing market price. Covered call
options and the securities underlying such options will be listed on national
securities exchanges, except for certain transactions in options on debt
securities and foreign securities.
A Portfolio may protect itself from further losses due to a decline in
value of the underlying security or from the loss of ability to profit from
appreciation by buying an identical option, in which case the purchase cost may
offset the premium. In order to do this, a Portfolio makes a "closing purchase
transaction"--the purchase of a call option on the same security with the same
exercise price and expiration date as the covered call option which it has
previously written on any particular security. A Portfolio will realize a gain
or loss from a closing purchase transaction if the amount paid to purchase a
call option in a closing transaction is less or more than the amount received
from the sale of the covered call option. Also, because increases in the market
price of a call option will generally reflect increases in the market price of
the underlying security, any loss resulting from the closing out of a call
option is likely to be offset in whole or in part by unrealized appreciation of
the underlying security owned by a Portfolio. When a security is to be sold from
a Portfolio's portfolio, a Portfolio will first effect a closing purchase
transaction so as to close out any existing covered call option on that
security.
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A closing purchase transaction may be made only on a national or foreign
securities exchange (an "Exchange") which provides a secondary market for an
option with the same exercise price and expiration date. There is no assurance
that a liquid secondary market on an Exchange or otherwise will exist for any
particular option, or at any particular time, and for some options no secondary
market on an Exchange or otherwise may exist. If a Portfolio is unable to effect
a closing purchase transaction involving an exchange-traded option, a Portfolio
will not sell the underlying security until the option expires or a Portfolio
delivers the underlying security upon exercise. A closing purchase transaction
for an over-the-counter option may be made only with the other party to the
option.
Each Portfolio pays brokerage commissions and dealer spreads in
connection with writing covered call options and effecting closing purchase
transactions, as well as for purchases and sales of underlying securities. The
writing of covered call options could result in significant increases in a
Portfolio's portfolio turnover rate, especially during periods when market
prices of the underlying securities appreciate. Subject to the limitation that
all call and put option writing transactions be covered, the Portfolios may, to
the extent determined appropriate by the Advisers, engage without limitation in
the writing of options on U.S. Government securities.
PURCHASING CALL OPTIONS. Each Portfolio, except the Cash Management, Bond
and Growth Equity Portfolios, may purchase call options on any securities in
which it may invest in anticipation of an increase in the market value of such
securities. The purchase of a call option would entitle the Portfolio, in
exchange for the premium paid, to purchase a security at a specified price upon
exercise of the option during the option period. The Portfolio would ordinarily
realize a gain if the value of the securities increased during the option period
above the exercise price sufficiently to cover the premium. The Portfolio would
have a loss if the value of the securities remained below the sum of the premium
and the exercise price during the option period.
WRITING PUT OPTIONS. Each Portfolio, except the Cash Management, Bond and
Growth Equity Portfolios, may also write covered put options. A put option
written by a Portfolio is "covered" if a Portfolio maintains liquid assets with
a value equal to the exercise price in a segregated account with its custodian;
however, the Capital Appreciation, Convertible, High Yield Corporate Bond, Total
Return and Value Portfolios may not write any covered put options, if, as a
result, more than 25% of a Portfolio's total assets (taken at current value)
would be subject to put options written by such Portfolio. The American Century
Income & Growth and Dreyfus Large Company Value Portfolios may not write covered
put options if, as a result, more than 20% of their total assets (taken at
current value) would be subject to put options written by such Portfolio. The
Government Portfolio may not write any covered put options on U.S. Government
securities if, as a result, more than 50% of its total assets (taken at current
value) would be subject to put options written by such Portfolio. A put option
is also "covered" if a Portfolio holds, on a share-for-share basis, a put on the
same security as the put written, where the exercise price of the put held is
equal to or greater than the exercise price of the put written, or less than the
exercise price of the put written if the difference is maintained by a Portfolio
in liquid assets in a segregated account with its custodian.
The premium that a Portfolio receives from writing a put option will
reflect, among other things, the current market price of the underlying
security, the relationship of the exercise price to
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such market price, the historical price volatility of the underlying security,
the option period, supply and demand and interest rates.
The Portfolios may effect a closing purchase transaction to realize a
profit on an outstanding put option or to prevent an outstanding put option from
being exercised. The Portfolios also may effect a closing purchase transaction,
in the case of a put option, to permit the Portfolios to maintain their holdings
of the deposited U.S. Treasury obligations, to write another put option to the
extent that the exercise price thereof is secured by the deposited U.S. Treasury
obligations, or to utilize the proceeds from the sale of such obligations to
make other investments.
If a Portfolio is able to enter into a closing purchase transaction, a
Portfolio will realize a profit or loss from such transaction if the cost of
such transaction is less or more than the premium received from the writing of
the option. After writing a put option, a Portfolio may incur a loss equal to
the difference between the exercise price of the option and the sum of the
market value of the underlying security plus the premium received from the sale
of the option.
In addition, the Portfolios may also write straddles (combinations of
covered puts and calls on the same underlying security). The extent to which the
Portfolios may write covered call options and enter into so-called "straddle"
transactions involving put or call options may be limited by the requirements of
the Code for qualification as a regulated investment company and the Fund's
intention that each Portfolio qualify as such. Subject to the limitation that
all call and put option writing transactions be covered, the Portfolios may, to
the extent determined appropriate by the Advisers, engage without limitation in
the writing of options on U.S. Government securities.
PURCHASING PUT OPTIONS. Each Portfolio, except the Cash Management, Bond
and Growth Equity Portfolios, may purchase put options on any securities in
which it may invest in anticipation of a decline in the market value of such
securities. The purchase of a put option would entitle the Portfolio, in
exchange for the premium paid, to sell a security at a specified price upon
exercise of the option during the option period. The put options purchased by
the Portfolio may include, but are not limited to, "protective puts" in which
the security to be sold is identical or substantially identical to a security
already held by the Portfolio or to a security which the Portfolio has the right
to purchase. The Portfolio would ordinarily recognize a gain if the value of the
securities decreased during the option period below the exercise price
sufficiently to cover the premium. The Portfolio would recognize a loss if the
value of the securities remained above the difference between the premium and
the exercise price.
SPECIAL RISKS ASSOCIATED WITH OPTIONS ON SECURITIES. Exchange markets in
U.S. Government securities options are a relatively new and untested concept,
and it is impossible to predict the amount of trading interest that may exist in
such options. The same types of risk apply to over-the-counter trading in
options. There can be no assurance that viable markets will develop or continue
in the United States or abroad. The hours of trading for options on securities
may not conform to the hours during which the underlying securities are traded.
To the extent that the options markets close before the markets for the
underlying securities, significant price and rate movements can take place in
the underlying markets that cannot be reflected in the options markets.
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If a put or call option purchased by a Portfolio is not sold when it has
remaining value, and if the market price of the underlying security, in the case
of a put, remains equal to or greater than the exercise price, or, in the case
of a call, remains less than or equal to the exercise price, a Portfolio will
not be able to exercise profitably the option and will lose its entire
investment in the option. Also, the price of a put or call option purchased to
hedge against price movements in a related security may move more or less than
the price of the related security. A Portfolio will not purchase a put or call
option if, as a result, the amount of premiums paid for all put and call options
then outstanding would exceed 10% of the value of the Portfolio's total assets.
The purchase and writing of options involves certain risks. During the
option period, the covered call writer has, in return for the premium received
on the option, given up the opportunity to profit from a price increase in the
underlying securities above the exercise price, but, as long as its obligations
as a writer continue, has retained the risk of loss should the price of the
underlying security decline. A covered put writer assumes the risk that the
market price for the underlying security will fall below the exercise price, in
which case the writer could be required to purchase the security at a higher
price than the then-current market price of the security. In both cases, the
writer has no control over the time when it may be required to fulfill its
obligation as a writer of the option. Once an option writer has received an
exercise notice, it cannot elect a closing purchase transaction in order to
terminate its obligation under the option and must deliver or purchase the
underlying securities at the exercise price.
OPTIONS ON FOREIGN CURRENCIES. Each Portfolio, except the Cash
Management, Government, Bond and Growth Equity Portfolios may, to the extent
that it invests in foreign securities, purchase and write options on foreign
currencies for hedging purposes in a manner similar to that of a Portfolio's
transactions in currency futures contracts or forward contracts. For example, a
decline in the dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, a Portfolio may purchase put
options on the foreign currency. If the value of the currency does decline, that
Portfolio will have the right to sell such currency for a fixed amount of
dollars which exceeds the market value of such currency, resulting in a gain
that may offset, in whole or in part, the negative effect of currency
depreciation on the value of a Portfolio's securities denominated in that
currency.
Conversely, if a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, a Portfolio may purchase call options on such currency.
If the value of such currency does increase, the purchase of such call options
would enable a Portfolio to purchase currency for a fixed amount of dollars
which is less than the market value of such currency, resulting in a gain that
may offset, at least partially, the effect of any currency-related increase in
the price of securities a Portfolio intends to acquire. As in the case of other
types of options transactions, however, the benefit a Portfolio derives from
purchasing foreign currency options will be reduced by the amount of the premium
and related transaction costs. In addition, if currency exchange rates do not
move in the direction or to the extent anticipated, a Portfolio could sustain
losses on transactions in foreign currency options which would deprive it of a
portion or all of the benefits of advantageous changes in such rates.
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A Portfolio may also write options on foreign currencies for hedging
purposes. For example, if a Portfolio anticipates a decline in the dollar value
of foreign currency-denominated securities due to declining exchange rates, it
could, instead of purchasing a put option, write a call option on the relevant
currency. If the expected decline occurs, the option will most likely not be
exercised, and the diminution in value of portfolio securities will be offset by
the amount of the premium received by a Portfolio.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, a
Portfolio could write a put option on the relevant currency. If rates move in
the manner projected, the put option will expire unexercised and allow a
Portfolio to offset such increased cost up to the amount of the premium. As in
the case of other types of options transactions, however, the writing of a
foreign currency option will constitute only a partial hedge up to the amount of
the premium, and only if rates move in the expected direction. If unanticipated
exchange rate fluctuations occur, the option may be exercised and a Portfolio
would be required to purchase or sell the underlying currency at a loss which
may not be fully offset by the amount of the premium. As a result of writing
options on foreign currencies, a Portfolio also may be required to forego all or
a portion of the benefits which might otherwise have been obtained from
favorable movements in currency exchange rates.
A call option written on foreign currency by a Portfolio is "covered" if
that Portfolio owns the underlying foreign currency subject to the call or
securities denominated in that currency or has an absolute and immediate right
to acquire that foreign currency without additional cash consideration (or for
additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other foreign currency held in its portfolio. A
call option is also covered if a Portfolio holds a call on the same foreign
currency for the same principal amount as the call written where the exercise
price of the call held (a) is equal to or less than the exercise price of the
call written or (b) is greater than the exercise price of the call written if
the amount of the difference is maintained by a Portfolio in liquid assets in a
segregated account with its Custodian.
As with other kinds of options transactions, however, the writing of an
option on foreign currency will constitute only a partial hedge up to the amount
of the premium received and a Portfolio could be required to purchase or sell
foreign currencies at disadvantageous exchange rates, thereby incurring losses.
The purchase of an option on foreign currency may constitute an effective hedge
against exchange rate fluctuations, although, in the event of rate movements
adverse to a Portfolio's position, a Portfolio may forfeit the entire amount of
the premium plus related transaction costs. Options on foreign currencies to be
written or purchased by a Portfolio will be traded on U.S. and foreign exchanges
or over-the-counter. A Portfolio also may use foreign currency options to
protect against potential losses in positions denominated in one foreign
currency against another foreign currency in which the Portfolio's assets are or
may be denominated. There can be no assurance that a liquid market will exist
when a Portfolio seeks to close out an option position. Furthermore, if trading
restrictions or suspensions are imposed on the options markets, a Portfolio may
be unable to close out a position.
Currency options traded on U.S. or other exchanges may be subject to
position limits which may limit the ability of a Portfolio to reduce foreign
currency risk using such options. Over-the-counter options differ from traded
options in that they are two-party contracts with price and other
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terms negotiated between buyer and seller and generally do not have as much
market liquidity as exchange-traded options. Foreign currency exchange-traded
options generally settle in cash, whereas options traded over-the-counter may
settle in cash or result in delivery of the underlying currency upon exercise of
the option.
FUTURES TRANSACTIONS
The Convertible, Lord Abbett Developing Growth, Eagle Growth Equity,
Government, High Yield Corporate Bond, International Equity, Dreyfus Large
Company Value and Total Return Portfolios may purchase and sell futures
contracts on debt securities and on indexes of debt securities to hedge against
anticipated changes in interest rates that might otherwise have an adverse
effect upon the value of a Portfolio's portfolio securities. Each of such
Portfolios may also enter into such futures contracts in order to lengthen or
shorten the average maturity or duration of the Portfolio's portfolio. For
example, a Portfolio may purchase futures contracts as a substitute for the
purchase of longer-term debt securities to lengthen the average duration of a
Portfolio's portfolio of fixed-income securities. The Capital Appreciation,
Convertible, Lord Abbett Developing Growth, Eagle Growth Equity, High Yield
Corporate Bond, American Century Income & Growth, International Equity, Dreyfus
Large Company Value, Total Return, Value, and Indexed Equity Portfolios may
purchase and sell futures contracts on stock index futures to hedge the equity
portion of those Portfolios' securities portfolios with regard to market
(systematic) risk (involving the market's assessment of overall economic
prospects), as distinguished from stock-specific risk (involving the market's
evaluation of the merits of the issuer of a particular security). These
Portfolios may also purchase and sell other futures when deemed appropriate, in
order to hedge the equity or non-equity portions of their portfolios. In
addition, each Portfolio except the Cash Management, Government, Bond and Growth
Equity Portfolios may, to the extent it invests in foreign securities, enter
into contracts for the future delivery of foreign currencies to hedge against
changes in currency exchange rates. Each of the Portfolios, except the Cash
Management, Bond and Growth Equity Portfolios, may also purchase and write put
and call options on futures contracts of the type into which such Portfolio is
authorized to enter and may engage in related closing transactions. In the
United States, all such futures on debt securities, debt index futures, stock
index futures, foreign currency futures and related options will be traded on
exchanges that are regulated by the Commodity Futures Trading Commission
("CFTC"). Subject to applicable CFTC rules, the Portfolios also may enter into
futures contracts traded on the following foreign futures exchanges: Frankfurt,
Tokyo, London and Paris, as long as trading on the aforesaid foreign futures
exchanges does not subject a Portfolio to risks that are materially greater than
the risks associated with trading on U.S. exchanges.
A futures contract is an agreement to buy or sell a security or currency
(or to deliver a final cash settlement price in the case of a contract relating
to an index or otherwise not calling for physical delivery at the end of trading
in the contract), for a set price in a future month. In the United States,
futures contracts are traded on boards of trade which have been designated
"contract markets" by the CFTC. Futures contracts trade on these markets through
an "open outcry" auction on the exchange floor. Currently, there are futures
contracts based on long-term U.S. Treasury bonds, Treasury notes, GNMA
certificates, three-month U.S. Treasury bills, three-month domestic bank
certificates of deposit, major foreign currencies, a municipal bond index and
various stock indexes. When interest rates are changing and portfolio values are
falling, the sale of futures contracts can offset a decline
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in the value of a Portfolio's current portfolio securities. When interest rates
are changing and portfolio values are rising, the purchase of futures contracts
can secure better effective rates or prices for the Portfolio than might later
be available in the market when the Portfolio makes anticipated purchases. The
purchase of futures contracts can also be used as a substitute for the purchase
of longer-term securities to lengthen the average maturity or duration of a
Portfolio's portfolio. Similarly, a Portfolio can sell futures contracts on a
specified currency to protect against a decline in the value of such currency
and its portfolio securities which are denominated in such currency. A Portfolio
can purchase futures contracts on foreign currency to fix the price in U.S.
dollars of a security denominated in such currency that a Portfolio has acquired
or expects to acquire.
When a purchase or sale of a futures contract is made by a Portfolio, a
Portfolio is required to deposit with its custodian (or broker, if legally
permitted) a specified amount of cash or U.S. Government securities ("initial
margin"). The margin required for a futures contract is set by the exchange on
which the contract is traded and may be modified during the term of the
contract. The initial margin is in the nature of a performance bond or good
faith deposit on the futures contract which is returned to a Portfolio upon
termination of the contract assuming all contractual obligations have been
satisfied. Each Portfolio expects to earn interest income on its initial margin
deposits. A futures contract held by a Portfolio is valued daily at the official
settlement price of the exchange on which it is traded. Each day a Portfolio
pays or receives cash, called "variation margin," equal to the daily change in
value of the futures contract. This process is known as "marking to market."
Variation margin does not represent a borrowing or loan by a Portfolio, but is
instead a settlement between a Portfolio and the broker of the amount one would
owe the other if the futures contract expired. In computing daily net asset
value, each Portfolio will mark to market its open futures positions. If the
price of a futures contract changes more than the price of the securities or
currencies, the Portfolio will experience either a loss or gain on the futures
contracts which will not be completely offset by changes in the price of the
securities or currencies which are the subject of the hedge. In addition, it is
not possible to hedge fully or perfectly against currency fluctuations affecting
the value of securities denominated in foreign currencies because the value of
such securities is likely to fluctuate as a result of independent factors not
related to currency fluctuations.
A Portfolio is also required to deposit and maintain margin with respect
to put and call options on futures contracts written by it. Such margin deposits
will vary depending on the nature of the underlying futures contract (and the
related initial margin requirements), the current market value of the option,
and other futures positions held by a Portfolio.
Positions taken in the futures markets are not normally held until
delivery or final cash settlement is required, but are instead liquidated
through offsetting transactions which may result in a gain or a loss. While
futures positions taken by a Portfolio will usually be liquidated in this
manner, a Portfolio may instead make or take delivery of underlying securities
or currencies whenever it appears economically advantageous to a Portfolio to do
so. A clearing organization associated with the exchange on which futures are
traded assumes responsibility for closing-out transactions and guarantees that
as between the clearing members of an exchange, the sale and purchase
obligations will be performed with regard to all positions that remain open at
the termination of the contract.
FUTURES ON DEBT SECURITIES. A futures contract on a debt security is a
binding contractual commitment which, if held to maturity, will result in an
obligation to make or accept
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delivery, during a particular future month, of securities having a standardized
face value and rate of return. By purchasing futures on debt
securities--assuming a "long" position--a Portfolio will legally obligate itself
to accept the future delivery of the underlying security and pay the agreed-upon
price. By selling futures on debt securities--assuming a "short" position--it
will legally obligate itself to make the future delivery of the security against
payment of the agreed-upon price. Open futures positions on debt securities will
be valued at the most recent settlement price, unless such price does not appear
to the Directors to reflect the fair value of the contract, in which case the
positions will be valued by or under the direction of the Directors.
Hedging by use of futures on debt securities seeks to establish, more
certainly than would otherwise be possible, the effective rate of return on
portfolio securities. A Portfolio may, for example, take a "short" position in
the futures market by selling contracts for the future delivery of debt
securities held by a Portfolio (or securities having characteristics similar to
those held by a Portfolio) in order to hedge against an anticipated rise in
interest rates that would adversely affect the value of a Portfolio's portfolio
securities. When hedging of this character is successful, any depreciation in
the value of portfolio securities will be substantially offset by appreciation
in the value of the futures position.
On other occasions, a Portfolio may take a "long" position by purchasing
futures on debt securities. This would be done, for example, when a Portfolio
intends to purchase particular securities and it has the necessary cash, but
expects the rate of return available in the securities markets at that time to
be less favorable than rates currently available in the futures markets. If the
anticipated rise in the price of the securities should occur (with its
concomitant reduction in yield), the increased cost to a Portfolio of purchasing
the securities will be offset, at least to some extent, by the rise in the value
of the futures position taken in anticipation of the subsequent securities
purchase. A Portfolio may also purchase futures contracts as a substitute for
the purchase of longer-term securities to lengthen the average duration of the
Portfolio's portfolio.
A Portfolio could accomplish similar results by selling securities with
long maturities and investing in securities with short maturities when interest
rates are expected to increase or by buying securities with long maturities and
selling securities with short maturities when interest rates are expected to
decline. However, by using futures contracts as a risk management technique,
given the greater liquidity in the futures market than in the cash market, it
may be possible to accomplish the same result more easily and more quickly.
SECURITIES INDEX FUTURES. A securities index futures contract does not
require the physical delivery of securities, but merely provides for profits and
losses resulting from changes in the market value of the contract to be credited
or debited at the close of each trading day to the respective accounts of the
parties to the contract. On the contract's expiration date, a final cash
settlement occurs and the futures positions are simply closed out. Changes in
the market value of a particular stock index futures contract reflect changes in
the specified index of equity securities on which the contract is based. A stock
index is designed to reflect overall price trends in the market for equity
securities.
Stock index futures may be used to hedge the equity portion of a
Portfolio's securities portfolio with regard to market (systematic) risk, as
distinguished from stock-specific risk. The
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Portfolios may enter into stock index futures to the extent that they have
equity securities in their portfolios. Similarly, the Portfolios may enter into
futures on debt securities indexes to the extent they have debt securities in
their portfolios. By establishing an appropriate "short" position in securities
index futures, a Portfolio may seek to protect the value of its portfolio
against an overall decline in the market for securities. Alternatively, in
anticipation of a generally rising market, a Portfolio can seek to avoid losing
the benefit of apparently low current prices by establishing a "long" position
in securities index futures and later liquidating that position as particular
securities are in fact acquired. To the extent that these hedging strategies are
successful, a Portfolio will be affected to a lesser degree by adverse overall
market price movements, unrelated to the merits of specific portfolio
securities, than would otherwise be the case. A Portfolio may also purchase
futures on debt securities or indexes as a substitute for the purchase of
longer-term debt securities to lengthen the average duration of a Portfolio's
debt portfolio.
CURRENCY FUTURES. A sale of a currency futures contract creates an
obligation by a Portfolio, as seller, to deliver the amount of currency called
for in the contract at a specified future time for a specified price. A purchase
of a currency futures contract creates an obligation by a Portfolio, as
purchaser, to take delivery of an amount of currency at a specified future time
at a specified price. A Portfolio may sell a currency futures contract, if the
Adviser anticipates that exchange rates for a particular currency will fall, as
a hedge against a decline in the value of a Portfolio's securities denominated
in such currency. If the Adviser anticipates that exchange rates will rise, a
Portfolio may purchase a currency futures contract to protect against an
increase in the price of securities denominated in a particular currency a
Portfolio intends to purchase. Although the terms of currency futures contracts
specify actual delivery or receipt, in most instances the contracts are closed
out before the settlement date without the making or taking of delivery of the
currency. Closing out of a currency futures contract is effected by entering
into an offsetting purchase or sale transaction. To offset a currency futures
contract sold by a Portfolio, a Portfolio purchases a currency futures contract
for the same aggregate amount of currency and delivery date. If the price in the
sale exceeds the price in the offsetting purchase, a Portfolio is immediately
paid the difference. Similarly, to close out a currency futures contract
purchased by a Portfolio, a Portfolio sells a currency futures contract. If the
offsetting sale price exceeds the purchase price, a Portfolio realizes a gain,
and if the offsetting sale price is less than the purchase price, a Portfolio
realizes a loss.
A risk in employing currency futures contracts to protect against the
price volatility of portfolio securities denominated in a particular currency is
that changes in currency exchange rates or in the value of the futures position
may correlate imperfectly with changes in the cash prices of a Portfolio's
securities. The degree of correlation may be distorted by the fact that the
currency futures market may be dominated by short-term traders seeking to profit
from changes in exchange rates. This would reduce the value of such contracts
for hedging purposes over a short-term period. Such distortions are generally
minor and would diminish as the contract approached maturity. Another risk is
that the Adviser could be incorrect in its expectation as to the direction or
extent of various exchange rate movements or the time span within which the
movements take place.
OPTIONS ON FUTURES. For bona fide hedging and other appropriate risk
management purposes, the Portfolios, except the Cash Management, Bond and Growth
Equity Portfolios, also may purchase and write call and put options on futures
contracts which are traded on exchanges that are
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licensed and regulated by the CFTC for the purpose of options trading, or,
subject to applicable CFTC rules, on foreign exchanges. A "call" option on a
futures contract gives the purchaser the right, in return for the premium paid,
to purchase a futures contract (assume a "long" position) at a specified
exercise price at any time before the option expires. A "put" option gives the
purchaser the right, in return for the premium paid, to sell a futures contract
(assume a "short" position), for a specified exercise price at any time before
the option expires.
Upon the exercise of a "call," the writer of the option is obligated to
sell the futures contract (to deliver a "long" position to the option holder) at
the option exercise price, which will presumably be lower than the current
market price of the contract in the futures market. Upon exercise of a "put,"
the writer of the option is obligated to purchase the futures contract (deliver
a "short" position to the option holder) at the option exercise price, which
will presumably be higher than the current market price of the contract in the
futures market. When an entity exercises an option and assumes a long futures
position, in the case of a "call," or a short futures position, in the case of a
"put," its gain will be credited to its futures margin account, while the loss
suffered by the writer of the option will be debited to its account. However, as
with the trading of futures, most participants in the options markets do not
seek to realize their gains or losses by exercise of their option rights.
Instead, the writer or holder of an option will usually realize a gain or loss
by buying or selling an offsetting option at a market price that will reflect an
increase or a decrease from the premium originally paid.
Options on futures contracts can be used by a Portfolio to hedge
substantially the same risks and for the same duration and risk management
purposes as might be addressed or served by the direct purchase or sale of the
underlying futures contracts. If a Portfolio purchases an option on a futures
contract, it may obtain benefits similar to those that would result if it held
the futures position itself.
The purchase of put options on futures contracts is a means of hedging a
Portfolio's portfolio against the risk of rising interest rates, declining
securities prices or declining exchange rates for a particular currency. The
purchase of a call option on a futures contract represents a means of hedging
against a market advance affecting securities prices or currency exchange rates
when a Portfolio is not fully invested or of lengthening the average maturity or
duration of a Portfolio's portfolio. Depending on the pricing of the option
compared to either the futures contract upon which it is based or upon the price
of the underlying securities or currencies, it may or may not be less risky than
ownership of the futures contract or underlying securities or currencies.
In contrast to a futures transaction, in which only transaction costs are
involved, benefits received in an option transaction will be reduced by the
amount of the premium paid as well as by transaction costs. In the event of an
adverse market movement, however, a Portfolio will not be subject to a risk of
loss on the option transaction beyond the price of the premium it paid plus its
transaction costs, and may consequently benefit from a favorable movement in the
value of its portfolio securities or the currencies in which such securities are
denominated that would have been more completely offset if the hedge had been
effected through the use of futures.
If a Portfolio writes options on futures contracts, a Portfolio will
receive a premium but will assume a risk of adverse movement in the price of the
underlying futures contract comparable to that involved in holding a futures
position. If the option is not exercised, a Portfolio will realize a gain in
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the amount of the premium, which may partially offset unfavorable changes in the
value of securities held by or to be acquired for a Portfolio. If the option is
exercised, a Portfolio will incur a loss in the option transaction, which will
be reduced by the amount of the premium it has received, but which may partially
offset favorable changes in the value of its portfolio securities or the
currencies in which such securities are denominated.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the underlying securities or the currencies in
which such securities are denominated. If the futures price at expiration is
below the exercise price, a Portfolio will retain the full amount of the option
premium, which provides a partial hedge against any decline that may have
occurred in a Portfolio's holdings of securities or the currencies in which such
securities are denominated.
The writing of a put option on a futures contract is analogous to the
purchase of a futures contract. For example, if a Portfolio writes a put option
on a futures contract on debt securities related to securities that a Portfolio
expects to acquire and the market price of such securities increases, the net
cost to a Portfolio of the debt securities acquired by it will be reduced by the
amount of the option premium received. Of course, if market prices have
declined, a Portfolio's purchase price upon exercise may be greater than the
price at which the debt securities might be purchased in the securities market.
While the holder or writer of an option on a futures contract may
normally terminate its position by selling or purchasing an offsetting option of
the same series, a Portfolio's ability to establish and close out options
positions at fairly established prices will be subject to the maintenance of a
liquid market. The Portfolios will not purchase or write options on futures
contracts unless the market for such options has sufficient liquidity such that
the risks associated with such options transactions are not at unacceptable
levels.
LIMITATIONS ON PURCHASE AND SALE OF FUTURES CONTRACTS AND OPTIONS ON
FUTURES CONTRACTS. The Portfolios which engage in transactions in futures
contracts and related options do so only for bona fide hedging and other
appropriate risk management purposes, and not for speculation. A Portfolio will
not enter into a futures contract or futures option contract if, immediately
thereafter, the aggregate initial margin deposits relating to such positions
plus premiums paid by it for open futures option positions, less the amount by
which any such options are "in-the-money," would exceed 5% of a Portfolio's
total assets. A call option is "in-the-money" if the value of the futures
contract that is the subject of the option exceeds the exercise price. A put
option is "in-the-money" if the exercise price exceeds the value of the futures
contract that is the subject of the option.
When purchasing a futures contract, a Portfolio will maintain with its
custodian (and mark-to-market on a daily basis) liquid assets that, when added
to the amounts deposited with a futures commission merchant as margin, are equal
to the market value of the futures contract. Alternatively, a Portfolio may
"cover" its position by purchasing a put option on the same futures contract
with a strike price as high or higher than the price of the contract held by a
Portfolio.
When selling a futures contract, a Portfolio will maintain with its
custodian (and mark-to-market on a daily basis) liquid assets that, when added
to the amount deposited with a futures
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<PAGE> 95
commission merchant as margin, are equal to the market value of the instruments
underlying the contract. Alternatively, a Portfolio may "cover" its position by
owning the instruments underlying the contract (or, in the case of an index
futures contract, a portfolio with a volatility substantially similar to that of
the index on which the futures contract is based), or by holding a call option
permitting a Portfolio to purchase the same futures contract at a price no
higher than the price of the contract written by a Portfolio (or at a higher
price if the difference is maintained in liquid assets with a Portfolio's
custodian).
When selling a call option on a futures contract, a Portfolio will
maintain with its custodian (and mark-to-market on a daily basis) cash, U.S.
Government securities, or other highly liquid debt securities that, when added
to the amounts deposited with a futures commission merchant as margin, equal the
total market value of the futures contract underlying the call option.
Alternatively, a Portfolio may cover its position by entering into a long
position in the same futures contract at a price no higher than the strike price
of the call option, by owning the instruments underlying the futures contract,
or by holding a separate call option permitting a Portfolio to purchase the same
futures contract at a price not higher than the strike price of the call option
sold by a Portfolio.
When selling a put option on a futures contract, a Portfolio will
maintain with its custodian (and mark-to-market on a daily basis) cash, U.S.
Government securities, or other highly liquid debt securities that equal the
purchase price of the futures contract, less any margin on deposit.
Alternatively, a Portfolio may cover the position either by entering into a
short position in the same futures contract, or by owning a separate put option
permitting it to sell the same futures contract so long as the strike price of
the purchased put option is the same or higher than the strike price of the put
option sold by a Portfolio.
In order to comply with applicable regulations of the CFTC pursuant to
which the Portfolios avoid being deemed a "commodity pool," the Portfolios are
limited in their futures trading activities to positions which constitute "bona
fide hedging" positions within the meanings and intent of applicable CFTC rules,
or to positions which qualify under an alternative test. Under this alternative
test, the "underlying commodity value" of each long position in a commodity
contract in which a Portfolio invests may not at any time exceed the sum of: (1)
the value of short-term U.S. debt obligations or other U.S. dollar-denominated
high quality short-term money market instruments and cash set aside in an
identifiable manner, plus any funds deposited as margin on the contract; (2)
unrealized appreciation on the contract held by the broker; and (3) cash
proceeds from existing investments due in not more than 30 days. "Underlying
commodity value" means the size of the contract multiplied by the daily
settlement price of the contract.
The requirements for qualification as a regulated investment company also
may limit the extent to which a Portfolio may enter into futures, futures
options or forward contracts. See "Tax Status."
RISKS ASSOCIATED WITH FUTURES AND FUTURES OPTIONS. There are several
risks associated with the use of futures contracts and futures options as
hedging techniques. A purchase or sale of a futures contract may result in
losses in excess of the amount invested in the futures contract. There can be no
guarantee that there will be a correlation between price movements in the
hedging vehicle and in the Portfolio's securities being hedged. In addition,
there are significant
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differences between the securities and futures markets that could result in an
imperfect correlation between the markets, causing a given hedge not to achieve
its objectives. The degree of imperfection of correlation depends on
circumstances such as variations in speculative market demand for futures and
futures options on securities, including technical influences in futures trading
and futures options, and differences between the financial instruments being
hedged and the instruments underlying the standard contracts available for
trading in such respects as interest rate levels, maturities and
creditworthiness of issuers. A decision as to whether, when and how to hedge
involves the exercise of skill and judgment, and even a well-conceived hedge may
be unsuccessful to some degree because of market behavior or unexpected interest
rate trends.
Futures exchanges may limit the amount of fluctuation permitted in
certain futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses.
There can be no assurance that a liquid market will exist at a time when
a Portfolio seeks to close out a futures or a futures option position, and that
Portfolio would remain obligated to meet margin requirements until the position
is closed. In addition, many of the contracts discussed above are relatively new
instruments without a significant trading history. As a result, there can be no
assurance that an active secondary market will develop or continue to exist.
It is also possible that, when a Portfolio has sold stock index futures
to hedge its portfolio against a decline in the market, the market may advance
while the value of the particular securities held in the Portfolio's portfolio
may decline. If this occurred, the Portfolio would incur a loss on the futures
contracts and also experience a decline in the value of its portfolio
securities. The Portfolios do not intend to use U.S. stock index futures to
hedge positions in securities of non-U.S. companies. In the case of a futures
contract on an index, the amount of cash is equal to a specific dollar amount
times the difference between the price at which the agreement is made and the
value of an index at the close of the last trading day of the contract. No
physical delivery of the underlying securities in the index is made.
In addition to the risks that apply to all options transactions, there
are several special risks relating to options on futures contracts. The ability
to establish and close out positions in such options will be subject to the
development and maintenance of a liquid market in the options. It is not certain
that such a market will develop. Although the Portfolios generally will purchase
only those options for which there appears to be an active market, there is no
assurance that a liquid market on an exchange will exist for any particular
option or at any particular time. In the event no such market exists for
particular options, it might not be possible to effect closing transactions in
such options with the result that a Portfolio would have to exercise options it
has purchased in order to realize any profit and would be less able to limit its
exposure to losses on options it has written.
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SECURITIES INDEX OPTIONS
The Portfolios, except the Bond and Growth Equity Portfolios, may
purchase call and put options on securities indexes, including European and
American options, for the purpose of hedging against the risk of unfavorable
price movements adversely affecting the value of a Portfolio's securities.
Unlike a securities option, which gives the holder the right to purchase or sell
specified securities at a specified price, an option on a securities index gives
the holder the right to receive a cash "exercise settlement amount" equal to (i)
the difference between the exercise price of the option and the value of the
underlying securities index on the exercise date, multiplied by (ii) a fixed
"index multiplier."
A securities index fluctuates with changes in the market values of the
securities so included. For example, some securities index options are based on
a broad market index such as the S&P 500 Index or the N.Y.S.E. Composite Index,
or a narrower market index such as the S&P 100 Index. Indexes may also be based
on an industry or market segment such as the AMEX Oil and Gas Index or the
Computer and Business Equipment Index. Options on stock indexes are currently
traded on the following exchanges, among others: The Chicago Board Options
Exchange, New York Stock Exchange, and American Stock Exchange. Options on
other types of securities indexes, which do not currently exist, including
indexes on debt securities, may be introduced and traded on exchanges in the
future. If such options are introduced, the Portfolios will not purchase them
until they have appropriately amended or supplemented the Prospectus or
Statement of Additional Information, or both.
The effectiveness of hedging through the purchase of securities index
options will depend upon the extent to which price movements in the portion of
the securities portfolio being hedged correlate with price movements in the
selected securities index. Perfect correlation is not possible because the
securities held or to be acquired by a Portfolio will not exactly match the
securities represented in the securities indexes on which options are based. In
addition, the purchase of securities index options involves essentially the same
risks as the purchase of options on futures contracts. The principal risk is
that the premium and transaction costs paid by a Portfolio in purchasing an
option will be lost as a result of unanticipated movements in prices of the
securities comprising the securities index on which the option is based.
A Portfolio may sell securities index options prior to expiration in
order to close out its positions in securities index options which it has
purchased. A Portfolio may also allow options to expire unexercised.
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ADDITIONAL INVESTMENT POLICIES APPLICABLE TO THE INTERNATIONAL EQUITY
PORTFOLIO
In addition to the investment policies set forth above, the International
Equity Portfolio may enter the following transactions described below:
SWAP AGREEMENTS
The International Equity Portfolio may enter into interest rate, index
and currency exchange rate swap agreements for purposes of attempting to obtain
a particular desired return at a lower cost to the Portfolio than if the
Portfolio had invested directly in an instrument that yielded that desired
return or for other portfolio management purposes. Swap agreements are two party
contracts entered into primarily by institutional investors for periods ranging
from a few weeks to more than one year. In a standard "swap" transaction, two
parties agree to exchange the returns (or differentials in rates of return)
earned or realized on particular predetermined investments or instruments. The
gross returns to be exchanged or "swapped" between the parties are calculated
with respect to a "notional amount," i.e., the return on or increase in value of
a particular dollar amount invested at a particular interest rate, in a
particular foreign currency, or in a "basket" of securities representing a
particular index. Commonly used swap agreements include (i) interest rate caps,
under which, in return for a premium, one party agrees to make payments to the
other to the extent that interest rates exceed a specified rate, or "cap," (ii)
interest rate floors, under which, in return for a premium, one party agrees to
make payments to the other to the extent that interest rates fall below a
specified level, or "floor," and (iii) interest rate collars, under which a
party sells a cap and purchases a floor or vice versa in an attempt to protect
itself against interest rate movements exceeding given minimum or maximum
levels. The "notional amount" of the swap agreement is only a fictive basis on
which to calculate the obligations which the parties to a swap agreement have
agreed to exchange. The Portfolio's obligations (or rights) under a swap
agreement will generally be equal only to the net amount to be paid or received
under the agreement based on the relative values of the positions held by each
party to the agreement (the "net amount"). The Portfolio's obligations under a
swap agreement will be accrued daily (offset against any amounts owing to the
Portfolio) and any accrued but unpaid net amounts owed to a swap counterparty
will be covered by the maintenance of a segregated account consisting of liquid
assets to avoid any potential leveraging of the Portfolio's portfolio. The
Portfolio will not enter into a swap agreement with any single party if the net
amount owed or to be received under existing contracts with that party would
exceed 5% of the Portfolio's assets.
Whether the Portfolio's use of swap agreements will be successful in
furthering its investment objective will depend on the Adviser's ability
correctly to predict whether certain types of investments are likely to produce
greater returns than other investments. Because they are two party contracts and
because they may have terms of greater than seven days, swap agreements may be
considered to be illiquid. Moreover, the Portfolio bears the risk of loss of the
amount expected to be received under a swap agreement in the event of the
default or bankruptcy of a swap agreement counterparty. The Adviser will cause
the Portfolio to enter into swap agreements only with counterparties that would
be eligible for consideration as repurchase agreement counterparties under the
Portfolio's repurchase agreement guidelines. Certain restrictions imposed on the
Portfolios by the Internal Revenue Code may limit the Portfolio's ability to use
swap agreements. The swaps market is a relatively new market
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and is largely unregulated. It is possible that developments in the swaps
market, including potential government regulation, could adversely affect the
Portfolio's ability to terminate existing swap agreements or to realize amounts
to be received under such agreements.
Certain swap agreements are exempt from most provisions of the Commodity
Exchange Act ("CEA") and, therefore, are not regulated as futures or commodity
option transactions under the CEA, pursuant to regulations approved by the
Commodity Futures Trading Commission ("CFTC") effective February 22, 1993. To
qualify for this exemption, a swap agreement must be entered into by "eligible
participants," which includes the following, provided the participants' total
assets exceed established levels: a bank or trust company, savings association
or credit union, insurance company, investment company subject to regulation
under the 1940 Act, commodity pool, corporation, partnership, proprietorship,
organization, trust or other entity, employee benefit plan, governmental entity,
broker-dealer, futures commission merchant, natural person, or regulated foreign
person. To be eligible, natural persons and most other entities must have total
assets exceeding $10 million; commodity pools and employee benefit plans must
have assets exceeding $5 million. In addition, an eligible swap transaction must
meet three conditions. First, the swap agreement may not be part of a fungible
class of agreements that are standardized as to their material economic terms.
Second, the creditworthiness of parties with actual or potential obligations
under the swap agreement must be a material consideration in entering into or
determining the terms of the swap agreement, including pricing, cost or credit
enhancement terms. Third, swap agreements may not be entered into and traded on
or through a multilateral transaction execution facility.
This exemption is not exclusive, and participants may continue to rely on
existing exclusions for swaps, such as the Policy Statement issued in July 1989
which recognized a safe harbor for swap transactions from regulation as futures
or commodity option transactions under the CEA or its regulations. The Policy
Statement applies to swap transactions settled in cash that (1) have
individually tailored terms, (2) lack exchange style offset and the use of a
clearing organization or margin system, (3) are undertaken in conjunction with a
line of business, and (4) are not marketed to the public.
STATE INSURANCE LAW REQUIREMENTS
Applicable state insurance laws and regulations permit NYLIAC to invest
the assets allocated to NYLIAC's variable annuity and variable life insurance
separate accounts in mutual funds, which are the investments contractually
permitted by the Policies. As a Delaware insurance company doing business in New
York, NYLIAC is required by section 4240 of the New York Insurance Law to invest
such assets prudently. Subject to the direction of the Directors, the Advisers
and Sub-Advisers will make investments satisfying this requirement for each
Portfolio. In addition, the Fund will comply with restrictions contained in any
other insurance laws in order that the assets of NYLIAC's separate accounts may
be invested in Portfolio shares.
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PORTFOLIO TURNOVER
Each Portfolio has a different expected annual portfolio turnover rate,
which is calculated by dividing the lesser of purchases or sales of portfolio
securities during the fiscal year by the monthly average of the value of the
Portfolio's securities (excluding from the computation all securities, including
options, with maturities or expiration dates at the time of acquisition of one
year or less). A high portfolio turnover rate generally involves correspondingly
greater brokerage commission expenses, which must be borne directly by the
Portfolios. Turnover rates may vary greatly from year to year as well as within
a particular year and may also be affected by cash requirements for redemptions
of each Portfolio's shares and by requirements which enable the Fund to receive
certain favorable tax treatments.
For the years ending December 31, 1999, December 31, 1998 and December
31, 1997, the portfolio turnover rate for each of the following Portfolios was
as follows: Capital Appreciation Portfolio, 37.47%, 27.35% and 34.38%,
respectively; Convertible Portfolio, 263.77%, 209.48% and 217.35%, respectively;
Government Portfolio, 328.12%, 405.06% and 344.99%, respectively; High Yield
Corporate Bond Portfolio, 93.27%, 151.42% and 153.19%, respectively;
International Equity Portfolio, 37.47%, 57.13% and 60.94%, respectively; Total
Return Portfolio, 132.58%, 157.56% and 124.72%, respectively; Value Portfolio,
74.02%, 69.10% and 48.19%, respectively; Bond Portfolio, 161.42%, 205.66% and
187.20%, respectively; Growth Equity Portfolio, 71.45%, 69.06% and 102.86%,
respectively; and Indexed Equity Portfolio, 2.97%, 4.04% and 5.21%,
respectively. With respect to the Cash Management Portfolio, the portfolio
turnover rate for the years ending December 31, 1999, December 31, 1998 and
December 31, 1997 as calculated in accordance with applicable SEC regulations,
was 0%. For the year ending December 31, 1999, the portfolio turnover rate for
American Century Income & Growth, Dreyfus Large Company Value, Eagle Asset
Management Growth Equity and Lord Abbett Developing Growth Portfolios was
51.10%, 121.46%, 203.03% and 59.10%, respectively. For the period May 1, 1998
(commencement of operations) through December 31, 1998, the unannualized
portfolio turnover rate for American Century Income & Growth, Dreyfus Large
Company Value, Eagle Asset Management Growth Equity and Lord Abbett Developing
Growth Portfolios was 33.54%, 98.32%, 31.27% and 11.79%, respectively. A
turnover rate in excess of 100% is likely to result in a Portfolio's bearing
higher costs.
MANAGEMENT OF THE FUND
The Board of Directors oversees the management of the Fund and elects
its officers. The Fund's officers are responsible for the day-to-day operations
of the Fund.
The directors and executive officers of the Fund and their principal
occupations for the past five years are set forth below.
<TABLE>
<CAPTION>
Position(s) Held With Principal Occupation(s) During Past Five Years
Name and Address** Age Registrant
<S> <C> <C> <C>
</TABLE>
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<PAGE> 101
<TABLE>
<S> <C> <C> <C>
Michael J. Drabb 66 Director Executive Vice President of O'Brien Asset Management,
Inc., from August 1993 to date, Executive Vice
President of The Mutual Life Insurance Company of
New York ("MONY") from May 1989 to April 1992. Mr.
Drabb is also a Director of the following Corporations:
New York Life Settlement Corporation, MONY Series
Fund, and U.S. Food Services, Inc.
Jill Feinberg 45 Director Consultant, Jill Feinberg & Company from 1989 to date.
Ms. Feinberg is also a Director of New York Life
Settlement Corporation.
Daniel Herrick 79 Director Treasurer and Executive Officer, National Gallery of
Art, Washington, D.C. from December 1985 to June 1995.
Richard M. Kernan, Jr.* 58 Chairman of the Executive Vice President and Chief Investment Officer
Board, Chief and Director of New York Life Insurance Company from
Executive Officer and September 1995 to date; Executive Vice President
Director prior thereto.
Anne F. Pollack* 44 President, Chief Senior Vice President of New York Life Insurance
Administrative Company from March 1992 to date.
Officer and Director
Robert D. Rock* 45 Vice President and Senior Vice President in charge of the Individual
Director Annuity Department of New York Life Insurance Company
March 1991 to date.
Roman L. Weil 58 Director Professor of Accounting and Sigmund E. Edelstone
Professor of Accounting, Graduate School of Business,
University of Chicago, from September 1976 to present,
Visiting Professor of Law, Stanford University Law
School, from September 1990 to August 1996.
John A. Weisser, Jr. 58 Director Managing Director of Salomon Brothers,
Inc., from May 1971 through June 1995.
<CAPTION>
OFFICERS (OTHER THAN DIRECTORS)
Position(s) Held With Principal Occupation(s) During Past Five Years
Name and Address** Age Registrant
<S> <C> <C> <C>
John A. Flanagan 53 Treasurer Vice President of New York Life Insurance Company 1999
to date; Treasurer of the Strong Funds and Senior Vice
President of the Strong Capital Management, Inc. from
1997 to 1998; Partner, PricewaterhouseCoopers from 1994
to 1997.
Richard Levy 42 Controller Senior Vice President of New York Life Insurance
Company, September 1997 to date; Partner and head of
national tax practice for financial institutions at
Coopers & Lybrand 1996 to 1997; Senior Vice President
and Director of Tax Accounting at Midatlantic
Corporation from 1983 to 1996.
</TABLE>
- ------------------------
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<PAGE> 102
* Directors identified with an asterisk are considered to be interested
persons of the Fund within the meaning of the 1940 Act because of their
affiliation with New York Life. None of the directors and executive
officers of the Fund owns any stock of the Fund.
** The address of each director and executive officer is 51 Madison Avenue,
New York, New York 10010.
For services rendered to the Fund during the fiscal year ended December
31, 1999, the directors received an aggregate of $232,000 from the Fund as
directors' fees. Each director of the Fund who is not an interested person of
the Fund currently receives a fee of $35,000 per year plus $1,500 for each
meeting attended, and is reimbursed for out-of-pocket expenses incurred in
connection with attending meetings. No director or officer of the Fund who is
also a director, officer or employee of New York Life is entitled to any
compensation from the Fund for services to the Fund. The following Compensation
Table reflects all compensation paid by the Fund for the year ended December 31,
1999, for each of the following persons:
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<PAGE> 103
COMPENSATION TABLE
<TABLE>
<CAPTION>
Name of Person, Position Aggregate Pension or Estimated Annual Total Compensation
Compensation Retirement Benefits Upon From Registrant and
From Registrant Benefits Accrued Retirement Fund Complex Paid to
as Part of Fund Directors
Expenses
<S> <C> <C> <C> <C>
Michael J. Drabb, Director $44,000 $ 0 $ 0 $ 44,000
Jill Feinberg, Director $50,000 0 0 50,000
Daniel Herrick, Director $44,000 0 0 44,000
Richard M. Kernan, Jr., Director 0 0 0 0
Anne F. Pollack, Director 0 0 0 0
Robert D. Rock, Director 0 0 0 0
Roman L. Weil, Director $44,000 0 0 44,000
John A. Weisser, Jr., Director $50,000 0 0 50,000
========
TOTAL $232,000
========
</TABLE>
INVESTMENT ADVISERS
Pursuant to the Investment Advisory Agreements for the Capital
Appreciation, Cash Management, Government, High Yield Corporate Bond,
International Equity, Total Return Value and Indexed Equity Portfolios, dated
December 15, 1996 and the Investment Advisory Agreement for the Convertible
Portfolio dated August 22, 1996, MacKay Shields or Monitor, each subject to the
supervision of the Directors of the Fund and in conformity with the stated
policies of each Portfolio of the Fund, manages the investment operations of the
respective portfolios that it advises and the composition of each such
Portfolio's portfolio, including the purchase, retention, disposition and loan
of securities. Pursuant to an Investment Advisory Agreement dated December 15,
1996, New York Life previously performed these services for the Bond and Growth
Equity Portfolios. Pursuant to a Substitution Agreement dated May 1, 1999,
between New York Life and Madison Square Advisors, these services are currently
performed for the Bond and Growth Equity Portfolios by Madison Square Advisors.
New York Life Asset Management LLC ("NYLAM") was organized as a Delaware
limited liability company in 1999. A holding company, it is a wholly owned
subsidiary of New York Life Insurance Company. NYLAM is the parent of MacKay
Shields, Monitor, and Madison Square Advisers.
Each Investment Advisory Agreement will remain in effect for two years
following its effective date, and will continue in effect thereafter only if
such continuance is specifically approved at least annually by the Directors, or
by vote of a majority of the outstanding voting securities of the particular
Portfolio (as defined in the 1940 Act and in a rule under the Act) and, in
either case, by a majority of the Directors who are not parties to the
Investment Advisory Agreements or interested persons of any such party.
The Advisers have each authorized any of their directors, officers and
employees who have been elected or appointed as directors or officers of the
Fund to serve in the capacities in which they
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<PAGE> 104
have been elected or appointed. In connection with the services it renders,
MacKay Shields, New York Life or Monitor bears the salaries and expenses of all
of its personnel.
Other than as imposed by law, the Investment Advisory Agreements provide
that MacKay Shields, New York Life, Monitor or Madison Square Advisors shall not
be liable to the Portfolios for any error of judgment by MacKay Shields, New
York Life, Monitor or Madison Square Advisors for any loss sustained by the
Funds or NYLIFE Securities LLC, except in the case of willful misfeasance, bad
faith, gross negligence or reckless disregard of duty. Each Agreement also
provides that it shall terminate automatically if assigned, and that it may be
terminated without penalty by either party upon no more than 60 days nor less
than 30 days written notice.
New York Life serves as Investment Adviser to the Dreyfus Large Company
Value, American Century Income & Growth, Lord Abbett Developing Growth and Eagle
Growth Equity Portfolios pursuant to an Investment Advisory Agreement, subject
to the supervision of the Directors of the Fund and in conformity with the
stated policies of the Portfolios, and administers the Portfolios' business
affairs and has investment advisory responsibilities. As described more fully
below, the Investment Adviser has delegated day to day Portfolio management
responsibilities to certain Sub-Advisers.
The Investment Advisory Agreement will remain in effect for two years
following its effective date, and will continue in effect thereafter only if
such continuance is specifically approved at least annually by the Directors or
by vote of a majority of the outstanding voting securities of each of the
Portfolios (as defined in the 1940 Act and in a rule under the Act) and, in
either case, by a majority of the Directors who are not "interested persons" of
the Fund or the Investment Adviser (as the term is defined in the 1940 Act).
New York Life has authorized any of its directors, officers and employees
who have been elected or appointed as Directors or officers of the Fund to serve
in the capacities in which they have been elected or appointed.
The Investment Advisory Agreement provides that New York Life shall not
be liable to a Portfolio for any error in judgment by New York Life or for any
loss sustained by a Portfolio, except in the case of New York Life's willful
misfeasance, bad faith, gross negligence or reckless disregard of duty. The
Investment Advisory Agreement also provides that it shall terminate
automatically if assigned and that it may be terminated without penalty by
either party upon no more than 60 days' nor less than 30 days' written notice.
Pursuant to Sub-Advisory Agreements between New York Life and each of
American Century Investment Management, on behalf of the American Century Income
& Growth Portfolio; the Dreyfus Corporation, on behalf of the Dreyfus Large
Company Value Portfolio; Eagle Asset Management, on behalf of the Eagle Growth
Equity Portfolio; and Lord Abbett, on behalf of the Lord
-71-
<PAGE> 105
Abbett Developing Growth Portfolio (each a "Sub-Adviser" and collectively, the
"Sub-Advisers"), the Sub-Advisers have been delegated day-to-day responsibility
for the investment decisions of the Portfolios. The Sub-Advisers, subject to the
supervision of the Directors of the Fund and New York Life and in conformity
with the stated policies of each of the Portfolios and the Fund, manage their
respective Portfolios, including the purchase, retention, disposition and loan
of securities.
The Sub-Advisory Agreements will remain in effect for two years following
their effective date, and will continue in effect thereafter only if such
continuance is specifically approved at least annually by the Director or by a
vote of the majority of the outstanding voting securities of each of the
Portfolios (as defined in the 1940 Act in a rule under the Act) and, in either
case, by a majority of the Directors who are not "interested persons" of the
Fund, the Investment Adviser or any Sub-Adviser (as the term is defined in the
1940 Act).
The amount of the Advisory and Sub-Advisory fees paid were as follows:
During the period from 1/1/99 to 12/31/99, the amount paid to MacKay
Shields LLC was $12,546,796; the amount paid to Madison Square Advisors LLC was
$3,469,316; the amount paid to Monitor Capital Advisors LLC was $1,219,981; the
amount paid to American Century Investment Management, Inc. was $229,261; the
amount paid to The Dreyfus Corporation was $148,816; the amount paid to Eagle
Asset Management, Inc. was $151,698; and the amount paid to Lord, Abbett & Co.
was $127,201.
During the period from 1/1/98 to 12/31/98, the amount paid to MacKay
Shields was $8,888,074; the amount paid to New York Life Insurance Co. was
$2,772,640; the amount paid to Monitor Capital Advisors was $706,796; the amount
paid to American Century Investment Management Inc. was $57,696; the amount paid
to The Dreyfus Corporation was $51,477; the amount paid to Eagle Asset
Management, Inc. was $42,942; and the amount paid to Lord, Abbett & Co. was
$42,697.
During the period from 1/1/97 to 12/31/97, the amount paid to MacKay
Shields was $5,977,175; the amount paid to New York Life Insurance Co. was
$2,226,880; and the amount paid to Monitor Capital Advisors was $353,437.
<TABLE>
<CAPTION>
Portfolio Advisory fees paid 1999 Subadvisory 1998 Subadvisory 1997
- --------- ------------------ ---- ----------- ---- ----------- ----
<S> <C> <C> <C> <C> <C> <C>
Capital Appreciation $ 5,271,133 - $ 3,408,702 - $ 2,304,963
Cash Management 809,273 - 446,059 - 315,441
Convertible 251,961 - 183,491 - 104,695
Government 486,400 - 272,355 - 213,390
High Yield Corporate Bond 1,920,756 - 1,550,514 - 928,565
International Equity 324,223 - 207,680 - 191,069
Total Return 2,287,643 - 1,691,827 - 1,249,328
Value 1,195,407 - 1,127,376 - 669,824
Bond 731,761 - 619,671 - 559,158
Growth Equity 2,737,555 - 2,153,029 - 1,667,722
Indexed Equity 1,219,981 - 706,796 - 353,437
American Century Income & Growth + 229,261* 183,409 57,696* 46,157 N/A
Dreyfus Large Company Value + 148,816* 124,013 51,477* 42,898 N/A
Eagle Asset Management Growth Equity + 151,698* 136,269 42,942* 38,648 N/A
Lord Abbett Developing Growth + 127,201* 106,001 42,697* 35,581 N/A
+ Commenced operations May 1, 1998. * Gross advisory fee - includes subadvisory fee.
</TABLE>
ADMINISTRATION AGREEMENTS
NYLIAC ("Administrator") acts as administrator for the Portfolios
pursuant to Administration Agreements dated December 15, 1995. NYLIAC has
entered into an Administration Agreement Supplement for the Convertible
Portfolio dated August 22, 1996 and Administration Agreement Supplements each
dated May 1, 1998 for each of the American Century Income & Growth Portfolio,
the Dreyfus Large Company Value Portfolio, the Eagle Asset Management Growth
Equity Portfolio, and the Lord Abbett Developing Growth Portfolio. The
Administrator has authorized any of its directors, officers and employees who
have been elected or appointed as directors or officers of the Fund to serve in
the capacities in which they have been elected or appointed. In connection with
its administration of the business affairs of the Portfolios, and except as
indicated in the Prospectus, the Administrator bears the following expenses:
(a) the salaries and expenses of all personnel of the Fund and the
Administrator, except the fees and expenses of Directors not affiliated
with the Administrator or the Advisers; and
(b) all expenses incurred by the Administrator in connection with
administering the ordinary course of the Portfolios' business, other than
those assumed by the Fund.
Under a separate agreement, New York Life has granted the Fund the right
to use the "New York Life" name and service marks and has reserved the right to
withdraw its consent to the use of such name and marks by the Fund at any time,
and to grant the use of such name and marks to other users.
The Portfolios paid administration fees to the Administrator as Follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED 12/31/99 YEAR ENDED 12/31/98 YEAR ENDED 12/31/97
- --------------------------------------------------------------------------------------------------------------------------------
FUND ADMINISTRATION ADMINISTRATION ADMINISTRATION ADMINISTRATION ADMINISTRATION ADMINISTRATION
FEE PAID FEE REIMBURSED FEE PAID FEE REIMBURSED FEE PAID FEE REIMBURSED
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bond $ 585,409 $ 0 $ 495,736 $ 0 $ 447,326 $ 0
- --------------------------------------------------------------------------------------------------------------------------------
Capital App. 2,928,407 0 1,893,724 0 1,280,480 0
- --------------------------------------------------------------------------------------------------------------------------------
Cash Mgmt. 647,4l8 0 356,847 0 252,353 0
- --------------------------------------------------------------------------------------------------------------------------------
Convertible 139,979 0 101,940 0 58,164 14,863
- --------------------------------------------------------------------------------------------------------------------------------
Government 324,267 0 181,570 0 142,260 0
- --------------------------------------------------------------------------------------------------------------------------------
Growth Equity 2,190,044 0 1,722,424 0 1,334,178 0
- --------------------------------------------------------------------------------------------------------------------------------
High Yield 1,280,504 0 1,033,723 0 619,043 0
Corp. Bond
- --------------------------------------------------------------------------------------------------------------------------------
Indexed Equity 2,439,961 0 1,413,592 0 706,874 0
- --------------------------------------------------------------------------------------------------------------------------------
International 108,074 0 69,227 68,891 63,690 90,428
Equity
- --------------------------------------------------------------------------------------------------------------------------------
Total Return 1,429,777 0 1,057,391 0 780,830 0
- --------------------------------------------------------------------------------------------------------------------------------
Value 664,115 0 626,320 0 372,124 0
- --------------------------------------------------------------------------------------------------------------------------------
American 91,704 32,564 23,079* 52,305* N/A N/A
Century Income
& Growth
- --------------------------------------------------------------------------------------------------------------------------------
Dreyfus Large 49,605 12,431 17,159* 37,765* N/A N/A
Co. Value
- --------------------------------------------------------------------------------------------------------------------------------
Eagle Asset Mgmt. 60,679 6,980 17,177* 37,332* N/A N/A
- --------------------------------------------------------------------------------------------------------------------------------
Lord Abbett 42,401 18,322 14,232* 39,109* N/A N/A
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*For the period from May 1, 1998 (commencement of the portfolio's operations)
through December 31, 1998.
-72-
<PAGE> 106
PORTFOLIO BROKERAGE
The Advisers or, with respect to the Dreyfus Large Company Value
Portfolio, American Century Income & Growth Portfolio, Lord Abbett Developing
Growth Portfolio, and Eagle Growth Equity Portfolio, Sub-Advisers, determine
which securities to buy and sell for the Fund, select brokers and dealers to
effect the transactions, and negotiate commissions. Transactions in equity
securities will usually be executed through brokers that will receive a
commission paid by the Portfolio for which the transaction is executed. Fixed
income securities are generally traded with dealers acting as principals for
their own account without a stated commission. The dealer's margin is reflected
in the price of the security. Money market instruments may be traded directly
with the issuer. Underwritten offerings of stock and intermediate and long term
debt securities may be purchased at a fixed price including an amount of
compensation to the underwriter. From time to time, NYLIFE Securities, Inc. may
execute transactions in equity securities on behalf of the Portfolios. Such
commissions may be charged against all Portfolios, with the exception of the
Cash Management Portfolio.
In placing orders for securities transactions, each Adviser's or
Sub-Adviser's policy is to obtain the most favorable price and efficient
execution available. In order to obtain the brokerage and research services
described below, higher commissions may sometimes be paid.
When selecting broker-dealers to execute portfolio transactions, each
Adviser or Sub-Adviser considers many factors including the rate of commission
or size of the broker-dealer's "spread," the size and difficulty of the order,
the nature of the market for the security, the willingness of the broker-dealer
to position, the reliability, financial condition, general execution and
operational capabilities of the broker-dealer, and the research, statistical and
economic data furnished by the broker-dealer to the Adviser or Sub-Adviser. The
Advisers or Sub-Advisers use these services in connection with all their
investment activities, including other investment accounts they advise.
Conversely, brokers or dealers which supply research may be selected for
execution of transactions for such other accounts, while the data may be used by
the Advisers or Sub-Advisers in providing investment advisory services to the
Fund.
For the years ending December 31, 1999, December 31, 1998 and December
31, 1997, the Fund paid total brokerage commissions of $3,586,133; $3,573,208
and $2,902,769, respectively. No brokerage commissions were paid to affiliates
of the Fund.
DETERMINATION OF NET ASSET VALUE
The Fund determines the net asset value per share of each Portfolio on
each day the New York Stock Exchange is open for trading. Net asset value per
share is calculated as of the first close of the New York Stock Exchange
(normally 4:00 p.m. Eastern Time) for each Portfolio for purchases and
redemptions of shares of each Portfolio by dividing the current market value
(amortized cost in the case of the Cash Management Portfolio) of total Portfolio
assets, less liabilities, by the total number of shares of that Portfolio
outstanding.
-73-
<PAGE> 107
HOW PORTFOLIO SECURITIES WILL BE VALUED
Portfolio securities of the Cash Management Portfolio are valued at their
amortized cost, which does not take into account unrealized securities gains or
losses. This method involves initially valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any premium paid or
discount received.
Portfolio securities of each other Portfolio are valued (a) by appraising
other common and preferred stocks which are traded on the New York Stock
Exchange at the last sale price on that Exchange on the day as of which assets
are valued or, if no sale occurs, at the mean between the closing bid price and
asked price; (b) by appraising other common and preferred stocks as nearly as
possible in the manner described in clause (a) if traded on any other exchange,
including the National Association of Securities Dealers National Market System
and foreign securities exchanges; (c) by appraising over-the-counter common and
preferred stocks quoted on the National Association of Securities Dealers
(NASDAQ) system (but not listed on the National Market System) at the bid price
supplied through such system; (d) by appraising over-the-counter common and
preferred stocks not quoted on the NASDAQ system and securities listed or traded
on certain foreign exchanges whose operations are similar to the U.S.
over-the-counter market at prices supplied by a pricing agent selected by the
Adviser to be representative of market values at the first close of business of
the New York Stock Exchange; (e) by appraising debt securities at prices
supplied by a pricing agent selected by the Adviser, which prices reflect
broker-dealer-supplied valuations and electronic data processing techniques if
those prices are deemed by the Adviser to be representative of market values at
the close of business of the New York Stock Exchange; (f) by appraising options
and futures contracts at the last sale price on the market where any such option
or futures contract is principally traded; and (g) by appraising all other
securities and other assets including over-the-counter common and preferred
stocks not quoted on the NASDAQ system, securities listed or traded on certain
foreign exchanges whose operations are similar to the U.S. over-the-counter
market and debt securities for which prices are supplied by a pricing agent but
are not deemed by the Adviser to be representative of market values, but
excluding money market instruments with a remaining maturity of 60 days or less
and including restricted securities and securities for which no market quotation
is available, at fair value in accordance with procedures approved by the
Directors. Money market instruments held by the Portfolios with a remaining
maturity of 60 days or less will be valued by the amortized cost method unless
such method does not represent fair value. Forward foreign currency exchange
contracts held by the Portfolios are valued at their fair market values
determined on the basis of the mean between the last current bid and asked
prices based on dealer or exchange quotations.
Portfolio securities traded on more than one U.S. national securities
exchange or foreign securities exchange are valued at the last sale price on the
business day as of which such value is being determined at the close of the
exchange representing the principal market for such securities. The value of all
assets and liabilities expressed in foreign currencies will be converted into
U.S. dollar values at the mean between the buying and selling rates of such
currencies against U.S. dollars last quoted by any major bank. If such
quotations are not available, the rate of exchange will be determined in
accordance with policies established by the Board of Directors. The Fund
recognizes dividend income and other distributions on the ex-dividend date,
except that certain dividends from foreign securities are recognized as soon as
the Fund is informed after the ex-dividend date.
-74-
<PAGE> 108
Trading in securities on European and Far Eastern securities exchanges
and over-the-counter markets is normally completed well before the close of
business on each business day in New York (i.e., a day on which the New York
Stock Exchange is open for trading). In addition, European or Far Eastern
securities trading generally in a particular country or countries may not take
place on all business days in New York. Furthermore, trading takes place in
Japanese markets on certain Saturdays and in various foreign markets on days
which are not business days in New York and on which the Portfolios' net asset
values are not calculated. Such calculation does not take place
contemporaneously with the determination of the prices of the majority of the
portfolio securities used in such calculation. Events affecting the values of
portfolio securities that occur between the time their prices are determined and
the close of the New York Stock Exchange will not be reflected in the
Portfolios' calculation of net asset values unless the Adviser deems that the
particular event would materially affect net asset value, in which case an
adjustment will be made.
INVESTMENT PERFORMANCE CALCULATIONS
CASH MANAGEMENT PORTFOLIO YIELD
In accordance with regulations adopted by the SEC, the Fund is required
to compute the Cash Management Portfolio'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 its portfolio securities. This current
annualized yield is computed by determining the net change (exclusive of
realized gains and losses on the sale of securities and unrealized appreciation
and depreciation) in the value of a hypothetical account having a balance of one
share of the Cash Management Portfolio 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 SEC also permits the Fund to disclose the effective yield of the Cash
Management Portfolio for the same seven-day period, determined on a compounded
basis. The effective yield is calculated by compounding the unannualized base
period return by adding one to the base period return, raising the sum to a
power equal to 365 divided by 7, and subtracting one from the result.
The Cash Management Portfolio intends to maintain a constant net asset
value of $1.00 per share, but there can be no assurance that it will be able to
do so. The yield on amounts held in the Cash Management Portfolio 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 Cash Management Portfolio'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. Therefore, the yield
for any period should not be considered representative of the yield for any
future period.
For the seven-day period ending December 31, 1999, the Cash Management
Portfolio yield was 5.37%, and the effective yield was 5.51%.
-75-
<PAGE> 109
CONVERTIBLE, GOVERNMENT, HIGH YIELD CORPORATE BOND AND BOND PORTFOLIOS
YIELD
The Fund may from time to time disclose the current annualized yield of
the Convertible, Government, High Yield Corporate Bond and Bond Portfolios for
30-day periods. The annualized yield of these Portfolios refers to the income
generated by the Portfolio over a specified 30-day period. Because the yield is
annualized, the yield generated by the Portfolio during the 30-day period is
assumed to be generated each 30-day period. The yield is computed by dividing
the net investment income per share earned during the period by the price share
on the last day of the period, according to the following formula:
6
2[(a - b +1) - 1]
YIELD = -----
cd
Where: a = dividends and interest earned during the period by the
Portfolio;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the period; and
d = the maximum offering price per share on the last day of the period.
Net investment income will be determined in accordance with rules
established by the SEC. Accrued expenses will include all recurring fees that
are charged to all shareholder accounts.
The yield calculations do not reflect the effect of any charges that may
be applicable to a particular Policy or separate account. Because of the charges
and deductions imposed by the Separate Accounts, the yield realized by Owners in
the Investment Divisions of the Separate Accounts will be lower than the yield
for the corresponding Portfolio of the Fund. The yield on amounts held in any
Portfolio 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. Each of the Convertible, Government, High Yield Corporate Bond
and Bond Portfolios' actual yield will be affected by the types and quality of
portfolio securities held by the respective Portfolio, and its operating
expenses.
TOTAL RETURN CALCULATIONS
The Fund may from time to time also disclose average annual total returns
for the Capital Appreciation, Convertible, Lord Abbett Developing Growth,
Government, High Yield Corporate Bond, American Century Income & Growth,
International Equity, Dreyfus Large Company Value, Total Return, Value, Bond,
Growth Equity, and Indexed Equity Portfolios for various periods of time.
Average annual total return quotations are computed by finding the average
annual compounded rates of return over one, five and ten year periods that would
equate a hypothetical initial amount invested to the ending redeemable value,
according to the following formula:
P(1 + T)(n) = ERV
Where:P = a hypothetical initial payment of $1,000;
-76-
<PAGE> 110
T = average annual total return;
n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the one, five, or
ten-year at the end of the one, five, or ten-year
period (or fractional portion thereof).
All recurring fees that are charged by the Fund to all shareholder
accounts are recognized in the ending redeemable value. The average annual total
return calculations for the Portfolio will not reflect the effect of charges
that may be applicable to a particular Policy.
For the one, five and ten-year periods ending December 31, 1999, the
average annual total returns for the Bond Portfolio were -1.53%, 7.30% and
7.60%, respectively.
For the one, five and ten year periods ending December 31, 1999, the
average annual total returns for the Growth Equity Portfolio were 29.96%, 27.38%
and 18.53%, respectively. For the one-year period ending December 31, 1999, the
average annual total returns for the Capital Appreciation, Cash Management,
Government, Total Return and Indexed Equity Portfolios were 25.41%, 4.84%,
- -1.74%, 17.02%, and 20.70%, respectively. For the five-year period ending
December 31, 1999, the average annual total returns for the Capital
Appreciation, Cash Management, Government, Total Return and Indexed Equity
Portfolios were 28.10%, 5.16%, 6.96%, 20.31% and 28.12%, respectively. For the
period beginning January 29, 1993 (inception date) through December 31, 1999,
the average annual total returns for the Capital Appreciation, Cash Management,
Government, Total Return and Indexed Equity Portfolios were 22.06%, 4.63%,
5.53%, 15.94%, and 21.15%, respectively. For the one year period ending December
31, 1999, the annual total returns for the High Yield Corporate Bond,
International Equity and Value Portfolios were 12.84%, 28.06%, and 8.80%,
respectively. For the period beginning May 1, 1995 (inception date) through
December 31, 1999, the average annual total returns for the High Yield Corporate
Bond, International Equity and Value Portfolios were 11.86%, 15.49% and 13.99%,
respectively. For the one year period ending December 31, 1999, the average
annual total return for the American Century Income & Growth, Convertible,
Dreyfus Large Company Value, Eagle Asset Management Growth Equity, and Lord
Abbett Developing Growth portfolios was 17.59%, 41.98%, 6.73%, 65.50% and
32.19%, respectively.
The yield and total return calculations of the Portfolios do not reflect
the effect of the charges that may be applicable to a particular Policy or
Separate Account. Such charges will reduce the net yield and total return of
that Policy. Performance figures for a Portfolio will only be advertised if the
comparable figures for the Policy are included in the advertisement.
-77-
<PAGE> 111
PURCHASE AND REDEMPTION OF SHARES
The Portfolios currently offer their shares to NYLIAC for allocation to
NYLIAC's Separate Accounts. The Separate Accounts are used to fund multi-funded
retirement annuity policies and variable life insurance policies issued by
NYLIAC. Shares of the Portfolios may be sold to NYLIAC separate accounts funding
both variable annuity contracts and variable life insurance policies and may be
sold to affiliated life insurance companies of NYLIAC, including New York Life.
The Fund currently does not foresee any disadvantages to Owners arising from
offering the Fund's shares to separate accounts funding both life insurance
policies and variable annuity contracts. Due, however, to differences in tax
treatment or other considerations, it is theoretically possible that the
interests of owners of various contracts participating in the Fund might at some
time be in conflict. However, the Board of Directors and insurance companies
whose separate accounts invest in the Fund are required to monitor events in
order to identify any material conflicts between variable annuity contract
owners and variable life policy owners. The Board of Directors will determine
what action, if any, should be taken in the event of such a conflict. If such a
conflict were to occur, one or more insurance company separate accounts might
withdraw their investment in the Fund. This might force the Fund to sell
securities at disadvantageous prices. The Portfolios do not presently intend to
offer their shares directly to the public.
The Fund is required to redeem all full and fractional shares of the Fund
for cash. The redemption price is the net asset value per share next determined
after the receipt of proper notice of redemption.
The right to redeem shares or to receive payment with respect to any
redemption may be suspended only for any period during which trading on the New
York Stock Exchange is restricted as determined by the SEC or when such Exchange
is closed (other than customary weekend and holiday closings) for any period
during which an emergency exists, as defined by the SEC, which makes disposal of
a Portfolio's securities or determination of the net asset value of each
Portfolio not reasonably practicable, and for any other periods as the SEC may
by order permit for the protection of shareholders of each Portfolio.
Investment decisions for each Portfolio are made independently from those
of the other Portfolios and investment companies advised by the respective
Advisers. However, if such other Portfolios or investment companies are prepared
to invest in, or desire to dispose of, securities of the type in which the
Portfolio invests at the same time as a Portfolio, available investments or
opportunities for sales will be allocated equitably to each. In some cases, this
procedure may adversely affect the size of the position obtained for or disposed
of by a Portfolio or the price paid or received by a Portfolio.
-78-
<PAGE> 112
TAXES
Each Portfolio of the Fund intends to elect to qualify as a "regulated
investment company" under the provisions of Subchapter M of the Internal Revenue
Code of 1986 (the "Code"). If each Portfolio qualifies as a "regulated
investment company" and complies with the appropriate provisions of the Code,
each Portfolio will be relieved of federal income tax on the amounts
distributed.
To qualify for treatment as a regulated investment company, a Fund
generally must, among other things: (a) derive in each taxable year at least
90% of its gross income from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of securities or
foreign currencies, and other income (including gains from certain options,
futures, and forward contracts) derived with respect to its business of
investing in securities or foreign currencies; (b) diversify its holdings so
that at the end of each quarter of the taxable year, (i) at least 50% of the
market value of a Fund's assets is represented by cash, cash items, U.S.
Government securities, the securities of other regulated investment companies
and other securities, with such other securities of any one issuer limited for
the purposes of this calculation to an amount not greater than 5% of the value
of the Fund's total assets and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
securities or the securities of other regulated investment companies), or of
two or more issuers which the Fund controls and which are engaged in the same
or similar trades or businesses or related trades or businesses; and (C)
distribute in each taxable year at least 90% of the sum of its investment
company taxable income and its net tax-exempt interest income. If a Fund does
not meet all of these Code requirements, it will be taxed as an ordinary
corporation and its distributions (to the extent of available earnings and
profits) will be taxed to shareholders as ordinary income (except to the extent
a shareholder is exempt from tax).
Because the Fund is used to fund variable life insurance and variable
annuity contracts, each Portfolio intends to meet the diversification
requirements imposed by Subchapter L of the Code so that these Contracts will
qualify as life insurance and annuities, as disclosed more fully under the
heading "Taxes" in the Prospectus. Compliance with the regulations is tested as
of the last day of each calendar year quarter. There is a thirty (30) day period
after the end of each calendar year quarter in which to cure any non-compliance.
Generally, in order to avoid a 4% nondeductible excise tax, each
Portfolio must distribute to its shareholders during the calendar year the
following amounts:
- 98% of the Portfolio's ordinary income for the calendar year;
- 98% of the Portfolio's capital gain net income (all capital gains,
both long-term and short-term, minus all such capital losses), all
computed as if the Portfolio were on a taxable year ending October 31
of the year in question and beginning the previous November 1; and
- any undistributed ordinary income or capital gain net income for the
prior year.
The excise tax generally is inapplicable to any regulated investment
company whose sole shareholders are either tax-exempt pension trusts or
separate accounts of life insurance companies funding variable contracts.
Although each Portfolio believes that it is not subject to the excise tax, the
Portfolios intend to make the distributions required to avoid the imposition of
such a tax.
The discussion of "Taxes" in the Prospectus, in conjunction with the
foregoing, is a general summary of applicable provisions of the Code and U.S.
Treasury Regulations now in effect as currently interpreted by the courts and
the Internal Revenue Service. The Code and these Regulations, as well as the
current interpretations thereof, may be changed at any time.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on June 3, 1983. The Fund
was formerly known as the New York Life MFA Series Fund, Inc. On August 22,
1996, the Fund's name was changed to its present form. The authorized capital
stock of the Fund consists of 5,000,000,000 shares of common stock, par value
$0.01 per share. The shares of common stock are divided into fifteen classes,
each corresponding to a different Portfolio.
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<PAGE> 113
The shares of the Portfolios are eligible for investment by the Separate
Accounts. There exist 3,200,000,000 unclassified shares which may be issued as
an addition to one or more of the above classes or to any new class or classes
of shares as determined by the Fund's Board of Directors. The Fund has no
present plans to issue shares of any additional classes. The shares of each
Portfolio, when issued, will be fully paid and nonassessable, will have no
preference, conversion, exchange or similar rights, and will be freely
transferable.
Each issued and outstanding share in a Portfolio is entitled to
participate equally in dividends and distributions declared by such Portfolio.
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<PAGE> 114
Each class of stock will have a pro rata interest in the assets of the
Portfolio to which the stock of that class relates and will have no interest in
the assets of any other Portfolio. If any assets, liabilities, revenue or
expenses are not clearly allocable to a particular Portfolio (such as fees for
non-interested Directors or extraordinary legal fees), they will be allocated as
determined by the Directors.
In the unlikely event that any Portfolio incurs liabilities in excess of
its assets, the other Portfolios could be held liable for such excess.
All shares of common stock, of whatever class, are entitled to one vote,
and votes are generally on an aggregate basis. However, on matters where the
interests of the Portfolios differ, the voting is on a Portfolio-by-Portfolio
basis. Approval or disapproval by the shares in one Portfolio on such a matter
would not generally be a prerequisite to approval or disapproval by shares in
another Portfolio; and shares in a Portfolio not affected by a matter generally
would not be entitled to vote on that matter. Examples of matters which would
require a Portfolio-by-Portfolio vote are changes in fundamental investment
policies of a particular Portfolio and approval of the investment advisory
agreement.
The vote of a majority of the Fund shares (or of the shares of any
Portfolio) means the vote, at any special meeting, of the lesser of (i) 67% or
more of the outstanding shares present at such meeting, if the holders of more
than 50% of the outstanding shares are present or represented by proxy, or (ii)
more than 50% of the outstanding shares of the Fund (or of any Portfolio).
The Board of Directors has decided not to hold routine annual
stockholders' meetings. Special stockholders' meetings will be called whenever
one or more of the following is required to be acted on by stockholders pursuant
to the 1940 Act: (i) election of directors; (ii) approval of investment advisory
agreement; or (iii) ratification of selection of independent accountants. Not
holding routine annual meetings results in Policy Owners having a lesser role in
governing the business of the Fund.
NYLIAC is the legal owner of the shares and as such has the right to vote
to elect the Board of Directors of the Fund, to vote upon certain matters that
are required by the Investment Company Act of 1940 to be approved or ratified by
the shareholders of a mutual fund and to vote upon any other matter that may be
voted upon at a shareholders' meeting. However, in accordance with its view of
present applicable law, NYLIAC will vote the shares of the Fund at special
meetings of the shareholders of the Fund in accordance with instructions
received from Owners. The current prospectus for the Policy more fully describes
voting rights of an Owner.
The initial capital for the Portfolios was provided by NYLIAC separate
accounts. The equity of NYLIAC in the separate accounts is represented by its
ownership of accumulation units in the separate accounts. Such accumulation
units were acquired for investment and can be disposed of only by redemption.
NYLIAC has agreed not to redeem its accumulation units of any separate account
until such time as this can be done without any significant impact upon the
separate account.
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<PAGE> 115
CODE OF ETHICS
The Fund has adopted a Code of Ethics governing personal trading
activities of all Directors, officers of the Fund and persons who, in connection
with their regular functions, play a role in the recommendation of any purchase
or sale of a security by the Fund or who obtain information pertaining to such
purchase or sale or who have the power to influence the management or policies
of the Fund or an investment adviser, unless such power is the result of their
position with the Fund or investment adviser. Such persons are generally
required to preclear all security transactions with the Fund's Compliance
Officer or such officer's designee and to report all transactions on a regular
basis. Subject to these restrictions, these persons are permitted to invest in
securities, including securities that may be purchased or held by the Fund. The
Fund has developed procedures for administration of the Code under Rule 17j-1.
LEGAL COUNSEL
Legal advice regarding certain matters relating to the Federal securities
laws has been provided by Dechert Price & Rhoads, Washington, D.C.
INDEPENDENT ACCOUNTANTS
The financial statements of the Fund for the year ended December 31,
1999, including the financial highlights for each of the periods presented
appearing in the 1999 Annual Report to shareholders and the report thereon of
PricewaterhouseCoopers LLP, independent accountants, appearing therein, are
incorporated by reference in the statement of additional information.
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New
York 10036, has been selected as independent accountants of the Fund. The
Fund's Annual Report, which is incorporated by reference in this SAI, has been
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountant, given on the authority of said firm as experts in
auditing and accounting.
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<PAGE> 116
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
MOODY'S INVESTORS SERVICE, INC.
Corporate and Municipal Bond Ratings Aaa: Bonds which are rated Aaa are
judged to be of the best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edged." Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than the Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade
obligations, (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classified from Aa through Caa. The modifier 1 indicates that the issue ranks in
the higher end of its generic rating category; the modifier 2 indicates a
midrange ranking; and the modifier 3 indicates that the issue ranks in the lower
end of its generic rating category.
Advance refunded issues that are secured by escrowed funds held in cash,
held in trust, reinvested in direct noncallable United States government
obligations or noncallable obligations unconditionally guaranteed by the U.S.
government are identified with a hatchmark (#) symbol, i.e., #Aaa.
Moody's assigns conditional ratings to bonds for which the security
depends upon the completion of some act or the fulfillment of some condition.
These are bonds secured by: (a) earnings of projects under construction; (b)
earnings of projects unseasoned in operating experience; (c) rentals that begin
when facilities are completed; or (d) payments to which some other limiting
condition attaches. The parenthetical rating denotes probable credit stature
upon completion of construction or elimination of basis of condition, e.g.,
Con.(Baa).
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<PAGE> 117
Municipal Short-Term Loan Ratings
MIG 1/VMIG 1: This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
MIG 3/VMIG 3: This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.
MIG 4/VMIG 4: This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.
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<PAGE> 118
SG: This designation denotes speculative quality. Debt instruments in this
category lack margins of protection.
Corporate Short-Term Debt Ratings
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations which have an original maturity not
exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
PRIME 3: Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial
leverage. Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime
rating categories.
3
<PAGE> 119
STANDARD & POOR'S
- --------------------------------------------------------------------------------
Corporate and Municipal Long-Term Debt Ratings
Investment Grade
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA: Debt rated AA differs from the highest rated issues only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: Debt rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB: Debt rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
Speculative Grade
Debt rated BB, B, CCC, CC, and C is regarded as having significant
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest.
While such debt will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposures to adverse
conditions.
BB: Debt rated BB is less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
B: Debt rated B is more vulnerable to nonpayment than obligations rated BB,
but the obligor currently has the capacity to meet its financial commitment on
the obligation. Adverse business, financial or economic conditions will likely
impair the obligor's capacity or willingness to meet its financial commitment on
the obligation.
CCC: Debt rated CCC is currently vulnerable to nonpayment and is dependent
upon favorable business, financial and economic
4
<PAGE> 120
conditions for the obligor. In the event of adverse business, financial or
economic conditions, the obligor is not likely to have the capacity to meet its
financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may be used to cover a situation where a bankruptcy
petition has been filed or a similar action has been taken, but debt service
payments are continued.
D: Debt rated D is in payment default. The D rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such payments will be
made during such grace period. The D rating will also be used upon the filing
of a bankruptcy petition, or the taking of similar action, if debt service
payments are jeopardized.
Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Debt obligations of issuers outside the United States and its territories
are rated on the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the obligor but do not take into
account currency exchange and related uncertainties.
Short-Term Rating Definitions
A-1: A short-term obligation rated 'A-1' is rated in the highest category
by Standard & Poor's. The obligor's capacity to meet its financial commitment
on the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.
A-2: A short-term obligation rated 'A-2' is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to
meet its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated 'A-3' exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
5
<PAGE> 121
B: A short-term obligation rated 'B' is regarded as having significant
speculative characteristics. The obligor currently has the capacity to meet its
financial commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.
C: A short-term obligation rated 'C' is currently vulnerable to nonpayment
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation.
D: A short-term obligation rated 'D' is in payment default. The 'D' rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The 'D'
rating also will be used upon the filing of a bankruptcy petition or the taking
of a similar action if payments on an obligation are jeopardized.
6
<PAGE> 122
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS
(a)(1) Articles of Incorporation of Registrant -- Filed herewith.
(a)(2) Articles Supplementary -- Filed herewith.
(a)(3) Articles of Amendment -- Filed herewith.
(b) By-laws of Registrant -- Filed herewith.
(c) Form of Specimen certificate for shares of common stock of newly
created Portfolios -- Filed herewith.
(d)(1) Form of Investment Advisory Agreement with MacKay Shields LLC and
amendment thereto -- Filed herewith.
(d)(2) Form of Investment Advisory Agreement with Monitor Capital
Advisors LLC and amendment thereto -- Filed herewith.
(d)(3) Form of Investment Advisory Agreement with New York Life
Insurance Company -- Filed herewith.
(d)(4) Form of Sub-Advisory Agreement between New York Life and American
Century Investment Management, Inc. -- Previously filed as Exhibit
5(d) to Post-Effective Amendment No. 25.
(d)(5) Form of Sub-Advisory Agreement between New York Life and the Dreyfus
Corporation -- Previously filed as Exhibit 5(e) to Post-Effective
Amendment No. 25.
(d)(6) Form of Sub-Advisory Agreement between New York Life and Eagle
Asset Management -- Previously filed as Exhibit 5(f) to
Post-Effective Amendment No. 25.
(d)(7) Form of Sub-Advisory Agreement between New York Life and Lord,
Abbett & Co. -- Previously filed as Exhibit 5(g) to Post-Effective
Amendment No. 25.
(d)(8) Form of Substitution Agreement between New York Life and Madison
Square Advisors LLC -- previously filed as Exhibit (d)(8) to
Post-Effective Amendment No. 26 (and amendment thereto filed
herewith).
(e) None.
(f) None.
(g) Form of Custodian Agreement -- Previously filed as Exhibit 8 to
Pre-Effective Amendment No. 1.
(h)(1) Form of Stock Sale Agreement -- Filed herewith.
(h)(2) Form of Stock License Agreement relating to the use of the New
York Life name and service marks -- Filed herewith.
(i) Opinion and Consent of Counsel -- Previously filed as Exhibit (i) to
Post-Effective Amendment No. 27.
(j)(1) Consent of PricewaterhouseCoopers LLP -- Filed herewith.
<PAGE> 123
(k) None.
(l) Form of Initial Stock Subscription Letter -- Previously filed as
Exhibit 13(a) to Pre-Effective Amendment No. 1.
(l) Form of Investment Undertaking -- Previously filed as Exhibit
13(b) to Pre-Effective Amendment No. 1.
(m) None.
(n) None.
(o) None.
(p) MainStay VP Series Fund, Inc. Code of Ethics -- Filed herewith.
(p)(1) American Century Investments Code of Ethics -- Filed herewith.
(p)(2) Eagle Asset Management, Inc. Code of Ethics -- Filed herewith.
(p)(3) Lord, Abbett & Co. Code of Ethics -- Filed herewith.
(p)(4) The Dreyfus Corporation Code of Ethics -- Filed herewith.
(p)(5) Mackay Shields LLC Code of Ethics -- Filed herewith.
(p)(6) Monitor Capital Advisors LLC Code of Ethics -- Filed herewith.
(p)(7) NYLIFE Distributors, Inc. Code of Ethics -- Filed herewith.
(q) Powers of Attorney for the Directors of MainStay VP Series Fund, Inc.
-- Filed herewith.
<PAGE> 124
Item 24. PERSONS CONTROLLED OR UNDER COMMON CONTROL WITH REGISTRANT
Shares of the Registrant are currently offered only to separate
accounts of New York Life Insurance and Annuity Corporation ("NYLIAC"), a
wholly-owned subsidiary of New York Life Insurance Company ("New York Life"),
for allocation to, among others, NYLIAC Variable Annuity Separate Account-I and
NYLIAC Variable Annuity Separate Account-II (the "Separate Accounts"); NYLIAC
MFA Separate Account I and NYLIAC MFA Separate Account II and VLI Separate
Account and NYLIAC LifeStages Annuity Separate Account (the "Variable
Accounts"); and NYLIAC Variable Universal Life Separate Account-I and NYLIAC
Variable Universal Life Separate Account-II (the "VUL Accounts," collectively
with the Separate Accounts and the Variable Accounts, the "Accounts"). The
Accounts are segregated asset accounts of NYLIAC. NYLIAC has provided the
initial investment in the Accounts; and its affiliates, New York Life, MacKay
Shields, Madison Square and Monitor, serve as investment advisers to the
Portfolios.
<PAGE> 125
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>
MainStay Institutional Funds Inc.(1) Maryland
The MainStay Fund, Inc.(2) Maryland
New York Life Insurance and Annuity Corporation Delaware
New York Life Irrevocable Trust of 1996(3) New York N/A
NYLIFE LLC New York
Avanti Corporate Health Systems, Inc. Delaware
Avanti of the District, Inc. Maryland
Eagle Strategies Corp. Arizona
</TABLE>
- --------
(1) 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.
(2) 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.
(3) 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-1A.
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<PAGE> 126
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
(NYLIFE LLC subsidiaries cont.)
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(4) Japan 16.7%
New York Life (U.K.) Ltd.(5) 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
New York Life Trust Company New York
New York Life Administration Corp. Texas
NYLIFE Structured Asset Management Company Ltd. Texas
NYLIFE HealthCare Management, Inc. Delaware
Express Scripts, Inc. Delaware 39.4% of total
combined stock and
89.6% of the voting
rights
Express Scripts Vision Corporation Delaware
Great Plains Reinsurance Company Arizona
Practice Patterns Science, Inc. Delaware 80%
ESI Canada Holdings, Inc. Canada
ESI Canada, Inc. Canada
Diversified Pharmaceutical Services (P.R.), Inc. Puerto Rico
Diversified Pharmaceutical Services, Inc. Minnesota
Diversified NY IPA, Inc. New York
ESI/VRX Sales Development Co. Delaware
Express Scripts Specialty Distribution Services, Inc. Delaware
ESI Utilization Management Co. Delaware
ESI Claims, Inc. Delaware
ESI Mail Pharmacy Service, Inc. Delaware
IVTx, Inc. Delaware
Value Health, Inc. Delaware
Value Rx of Michigan, Inc. Michigan
Your Pharmacy.com, Inc. Delaware
</TABLE>
- --------
(4) 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.
(5) One share is held by NYLIFE LLC, a Nominee, as required by
British law.
C-5
<PAGE> 127
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
(NYLIFE LLC subsidiaries cont.)
WellPath of Arizona Reinsurance Company Arizona
NYLCare NC Holdings, Inc. Delaware
WellPath Community Health Plans LLC North Carolina Duke Medical
Strategies, Inc. holds
75%; 25% LLC interest
Wellpath of Carolina, Inc. Delaware
ETHIX Southeast, Inc. North Carolina
WPCHP Holdings, Inc. Delaware
WellPath Preferred Services, LLC North Carolina 99.9%; WPCHP
Holdings, Inc. owns
other 0.1%
WellPath Select Holdings, LLC North Carolina WPCHP Holdings,
Inc. holds 0.1%;
99.9% LLC Interest
WellPath Select, Inc. North Carolina
NYLIFE Refinery Inc. New York
NYLIFE Securities Inc. New York
NYLIFE Structured Asset Management Company, Ltd. Texas 83.33%; NYLIFE
Depositary Corp.
owns the remaining
16.67%
Prime Provider Corp. New York
Prime Provider Corp. of Texas Texas
NYLINK Insurance Agency Incorporated Delaware
NYLINK Insurance Agency of Alabama, Incorporated Alabama
NYLINK Insurance Agency of Hawaii, Incorporated Hawaii
NYLINK Insurance Agency of Idaho, Incorporated Idaho
NYLINK Insurance Agency of Massachusetts, Incorporated Massachusetts
NYLINK Insurance Agency of Montana, Incorporated Montana
NYLINK Insurance Agency of Nevada, Incorporated Nevada
</TABLE>
C-6
<PAGE> 128
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
(NYLIFE LLC, subsidiaries cont.)
NYLINK Insurance Agency of New Mexico, Incorporated New Mexico
NYLINK Insurance Agency of Ohio, Incorporated(6) Ohio
NYLINK Insurance Agency of Oklahoma, Incorporated(6) Oklahoma
NYLINK Insurance Agency of Texas, Incorporated(6) Texas
NYLINK Insurance Agency of Washington, Incorporated Washington
NYLINK Insurance Agency of Wyoming, Incorporated Wyoming
NYLTEMPS Inc. Delaware
New York Life Asset Management LLC Delaware
MainStay Management LLC Delaware
New York Life Benefit Services LLC Delaware
Monitor Capital Advisors LLC Delaware
New York Life International Investment Asia Ltd. Mauritius
Madison Square Advisors LLC Delaware
NYLCAP Manager LLC Delaware
New York Life Capital Partners LLC Delaware
MainStay Shareholder Services, Inc. Delaware
MacKay Shields LLC Delaware
MacKay Shields Domestic General Partner LLC
NYLIFE Distributors, Inc. Delaware
New York Life Asset Management Operating Company LLC Delaware
NYLIFE Insurance Company of Arizona Arizona
The MainStay Funds(7) Massachusetts
New York Life International, Inc. Delaware
New York Life Worldwide Capital, Inc. Delaware
New York Life Insurance Worldwide Ltd. Bermuda
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 International India Fund LLC Mauritius 90%
NYLI-VB Asset Management Co. LLC Mauritius 90%
La Buenos Aires New York Life Seguros de Vida S.A. Argentina 40%
La Buenos Aires New York Life Seguros de Retiro Argentina 40%
Maxima S.A. AFJP Argentina 40%
New York Life Insurance (Philippines), Inc. Philippines
</TABLE>
- ------------------
(6) 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.
(7) This entity is an unaffiliated registered investment company for
which New York Life susidiaries 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> 129
ITEM 25. INDEMNIFICATION
(a) Maryland Law and By-Laws.
Under Maryland law and Registrant's By-Laws, the Registrant is required
to indemnify its directors (and former directors) and hold them harmless from
damages and expenses in connection with legal proceedings or threatened legal
proceedings by reason of their service to the Registrant. The Registrant,
however, is not required or hold harmless directors as a result of certain forms
of serious misconduct. The Registrant also may (and in limited circumstances is
required to) indemnify and hold harmless officers from damages and expenses in
connection with legal proceedings or threatened legal proceedings by reasons of
their services to Registrant.
Notwithstanding the foregoing, in no event will any payment be made to
indemnify or hold harmless any director or officer (or former director or
officer) for amounts incurred as a result of such director's or officer's
willful misfeasance, bad faith, gross negligence or reckless disregard of duties
in the conduct of his or her office.
The applicable Maryland statute provides that an officer or director
(or former officer of director) shall be indemnified to such further extent as a
court may deem fair and reasonable under the circumstances, provided that the
indemnification shall be limited to expenses, if the proceeding is by or in the
right of the Registrant, or if the officer or director has been adjudged liable
on the basis of improper receipt of personal benefit.
(b) Insurance.
Under an endorsement to a directors and officers liability/corporation
reimbursement ("D&O") insurance policy issued to New York Life by National Union
Fire Insurance Company of Pittsburgh, Pa., directors and officers of the
Registrant, New York Life and its subsidiaries are insured on a claims-made
basis for certain liabilities, which they may incur in such capacity.
Directors and officers of the Registrant, New York Life and its
subsidiaries are also insured on a claims made basis for certain liabilities,
which they may incur in such capacity under D&O insurance policies issued to New
York Life by Sargasso Mutual Insurance Company Ltd., an off-shore insurer owned
by U.S. Life Insurance Companies.
(c) Undertaking.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in said
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses
<PAGE> 130
incurred or paid by a director, officer, or controlling person of the Registrant
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 Registrant 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 said Act and will be governed by the final adjudication
of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
The business of MacKay Shields, Monitor, Madison Square and New York
Life is summarized under "Investment Advisers" in the Prospectus constituting
Part A of this Registration Statement, which summary is incorporated herein by
reference.
The business or other connections of each director and officer of
MacKay Shields, Monitor, Madison Square and New York Life active in investment
management is currently listed in the investment adviser registration on Form
ADV for MacKay Shields (File No. 801-5594), Monitor (File No. 801-34412), New
York Life (File No. 801-19525), and Madison Square Advisors (File No.
801-55061), and are hereby incorporated herein by reference.
ITEM 27. PRINCIPAL UNDERWRITERS
Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31 (a) of the 1940 Act and the rules thereunder are maintained at the
offices of the Registrant and of New York Life. The address of each,
respectively, is 51 Madison Avenue, New York, New York 10010 and at Cokesbury
Road, Lebanon, New Jersey 08833.
ITEM 29. MANAGEMENT SERVICES
None.
ITEM 30. UNDERTAKINGS
The Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
<PAGE> 131
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
investment Company Act of 1940, the Registrant certifies that this
Post-Effective Amendment No. 28 to the Registration Statement meets the
requirements for effectiveness pursuant to Rule 485(b) under the Securities Act
of 1933, as amended, and has duly caused this amendment to be signed on its
behalf by the undersigned, thereto duly authorized in the City of New York and
State of New York, on the 14th day of April, 2000.
MainStay VP Series Fund, Inc.
(Registrant)
By* /s/ ROBERT D. ROCK
-----------------------------
ROBERT D. ROCK
VICE PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been duly signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
MICHAEL J. DRABB* Director
JILL FEINBERG* Director
DANIEL HERRICK* Director
RICHARD M. KERNAN, JR.* Chairman of the Board
(Chief Executive Officer)
ANNE F. POLLACK* President and Director
(Chief Administrative Officer)
ROBERT D. ROCK* Vice President and Director
ROMAN L. WEIL* Director
JOHN D. WEISSER* Director
JOHN A. FLANAGAN* Treasurer
(Principal Financial Officer)
*By /s/ ROBERT D. ROCK
- --------------------------------------------
ROBERT D. ROCK,
Attorney-in-Fact
April 14, 2000
* Executed pursuant to one or more powers of attorney filed herewith.
</TABLE>
<PAGE> 132
EXHIBITS
(a)(1) Articles of Incorporation of Registrant
(a)(2) Articles Supplementary
(a)(3) Articles of Amendment
(b) By-laws of Registrant
(c) Form of Specimen certificate for shares of common stock of newly
created Portfolios
(d)(1) Form of Investment Advisory Agreement with MacKay Shields LLC and
amendment thereto
(d)(2) Form of Investment Advisory Agreement with Monitor Capital
Advisors LLC and amendment thereto
(d)(3) Form of Investment Advisory Agreement with New York Life
Insurance Company
(h)(1) Form of Stock Sale Agreement
(h)(2) Form of Stock License Agreement relating to the use of the New
York Life name and service marks
(j)(1) Consent of PricewaterhouseCoopers LLP
<PAGE> 133
(p) MainStay VP Series Fund, Inc. Code of Ethics
(p)(1) American Century Investments Code of Ethics
(p)(2) Eagle Asset Management, Inc. Code of Ethics
(p)(3) Lord, Abbett & Co. Code of Ethics
(p)(4) The Dreyfus Corporation Code of Ethics
(p)(5) Mackay Shields LLC Code of Ethics
(p)(6) Monitor Capital Advisors LLC Code of Ethics
(p)(7) NYLIFE Distributors, Inc. Code of Ethics
(q) Powers of Attorney for the Directors of MainStay VP Series Fund, Inc.
<PAGE> 1
Exhibit (a)(1)
ARTICLES OF INCORPORATION
OF
NEW YORK LIFE MFA SERIES FUND, INC.
ARTICLE I
THE UNDERSIGNED, Franklin Ciaccio, whose post office address is 372
Park Avenue South, New York, New York 10010, being at least 18 years of age,
does hereby act as an incorporator, under and by virtue of the Maryland General
Corporation Law authorizing the formation of corporations, and with the
intention of forming a corporation.
ARTICLE II
NAME
The name of the Corporation is NEW YORK LIFE MFA SERIES FUND, INC.
ARTICLE III
PURPOSE AND POWERS
The purpose or purposes for which the Corporation is formed and the
business or objects to be transacted, carried on and promoted by it are as
follows:
(1) to conduct and carry on the business of an investment
company of the management type;
(2) to hold, invest and reinvest its assets in securities or
other investments, and in connection therewith to hold part or all of
its assets in cash;
(3) to issue and sell shares of its own capital stock in such
amounts and on such terms and conditions, for such purposes and for
such amount or kind of consideration now or hereafter permitted by the
Maryland General Corporation Law and
<PAGE> 2
by these Articles of Incorporation, as its Board of Directors may
determine;
(4) to redeem, retire, purchase or otherwise acquire, hold,
dispose of, resell, transfer, reissue or cancel (all without the vote
or consent of the stockholders of the Corporation) shares of its
capital stock, in any manner and to the extent now or hereafter
permitted by the Maryland General Corporation Law and by these Articles
of Incorporation;
(5) to engage in any or all other lawful business for which
corporations may be incorporated under the Maryland General Corporation
Law; and
(6) to do any and all such further acts or things and to
exercise any and all such further powers or rights as may be necessary,
incidental, relative, conducive, appropriate or desirable for the
accomplishment, carrying out or attainment of any of the foregoing
purposes or objects; and to do any and all such acts, either as
principal or in the capacity of agent, broker, factor, contractor or
otherwise.
The Corporation shall be authorized to exercise and enjoy all the
powers, rights and privileges granted to, or conferred upon, corporations by the
Maryland General Corporation Law now or hereafter in force, and the enumeration
or the foregoing shall not be deemed to exclude any powers, rights or privileges
so granted or conferred.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post-office address of the principal office of the Corporation in
Maryland is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore,
Maryland 21202. The resident agent
2
<PAGE> 3
of the Corporation in Maryland is The Corporation Trust Incorporated, a Maryland
corporation, and the post-office address of the resident agent is 32 South
Street, Baltimore, Maryland 21202.
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is ONE BILLION (1,000,000,000)
shares, par value One Cent ($0.01) per share, having an aggregate par value of
TEN MILLION DOLLARS ($10,000,000). Three Hundred Million (300,000,000) of such
shares shall be issued in the following classes (or "series") of common stock
comprising One Hundred Million (100,000,000) shares each, and bearing the
following designations, subject however, to the authority herein granted to the
Board of Directors to increase or decrease any such number of shares:
(i) Common Stock Portfolio
(ii) Bond Portfolio
(iii) Money Market Portfolio
The balance of Seven Hundred Million (700,000,000) shares may be issued in any
class or classes, each comprising such number of shares and having such
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption as shall be fixed and determined, from time to time, by resolution or
resolutions providing for the issuance of such shares adopted by the Board of
Directors, to whom authority to fix and determine the same is hereby expressly
granted (all without the vote or consent of the stockholders of the
Corporation).
(2) The Board of Directors is hereby authorized (subject to applicable
laws) to change
3
<PAGE> 4
the designation of any class, and to increase or decrease the number of shares
of any class, but the number of shares of any class shall not be decreased by
the Board of Directors below the number of shares thereof then outstanding. The
Board may classify or reclassify any unissued shares into one or more classes
that may be established and designated from time to time.
(3) The holders of each share of stock of the Corporation shall be
entitled to one vote for each full share, and a fractional vote for each
fractional share of stock, irrespective of the class, then standing in his name
on the books of the Corporation. On any matter submitted to a vote of the
stockholders, all shares of the Corporation then issued and outstanding and
entitled to vote shall be voted in the aggregate and not by class, except (i)
when otherwise required by law, and (ii) if the Board of Directors, in its sole
discretion, determines that any matter concerns only one or more particular
classes, it may direct that only holders of that class or those classes may vote
on the matter.
(4) The Corporation may issue shares of stock in fractional
denominations to the same extent as its whole shares, and shares in fractional
denominations shall be shares of stock having proportionately, to the respective
fractions represented thereby, all the rights of whole shares, including without
limitation, the right to vote, the right to receive dividends and distributions
and the right to participate upon liquidation of the Corporation, but excluding
the right to receive a stock certificate representing fractional shares.
(5) Each share of stock of a class shall have the same rights,
privileges and preferences with respect to the assigned assets of such class and
shall be entitled to participate equally in any dividends as may be declared as
each other share of stock of that class. Each fractional share of stock of a
class shall have proportionately the same rights, privileges and
4
<PAGE> 5
preferences to the assigned assets of such class as a whole share and shall
participate proportionately in dividends as declared.
(6) Each class of stock of the Corporation shall have the following
powers, preferences or other special rights, except as the Board of Directors
may provide in classifying or reclassifying any unissued shares of such stock
and except as may be otherwise provided herein, and the qualifications,
restrictions, and limitations thereof shall be as follows:
(i) all consideration received by the Corporation for the
issue or sale of shares of stock of a particular class, together with
all assets in which such consideration is invested or reinvested, all
income, earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds in
whatever form, shall constitute assets of that class, as opposed to
other classes of the Corporation, subject only to the rights of
creditors, and are herein referred to as assets "belonging to" that
class. Any assets, income, earnings, profits, and proceeds thereof, and
funds or payments which are not readily identifiable as belonging to
any particular class, shall be allocated by or under the supervision of
the Board of Directors to and among any one or more of the classes
established and designated, from time to time, in such manner and on
such basis as the Board of Directors, in its sole discretion, deems
fair and equitable;
(ii) the Board of Directors may, from time to time, declare
and pay dividends or distributions, in stock or in cash, on any or all
classes of stock, the amount of such dividends and distributions and
the payment of them being wholly in the discretion of the Board of
Directors, giving due consideration to the interests of the Corporation
as a
5
<PAGE> 6
whole. Pursuant to the foregoing:
(a) dividends or distributions on shares of any class of stock
shall be paid only out of surplus or other lawfully available assets
determined by the Board of Directors as belonging to such class; and
(b) inasmuch as the Corporation intends to qualify as a
"regulated investment company" under the Internal Revenue Code of 1954,
as amended, or any successor or statute comparable thereto, and
regulations promulgated thereunder, and inasmuch as the computation of
net income and gains for Federal income tax purposes may vary from the
computation thereof on the books of the Corporation, the Board of
Directors shall have the power in its discretion to distribute in any
fiscal year as dividends, including dividends designated in whole or in
part as capital gains distributions, amounts sufficient in the opinion
of the Board of Directors, to enable the Corporation to qualify as a
regulated investment company and to avoid liability for the Corporation
for Federal income tax in respect of that year. In furtherance, and not
in limitation of the foregoing, in the event that a class of shares has
a net capital loss for a fiscal year, and to the extent that a net
capital loss for a fiscal year offsets net capital gains from one or
more of the other classes, the amount to be deemed available for
distribution to the class or classes with the net capital gain may be
reduced by the amount offset;
(iii) the assets belonging to any class of stock shall be
charged with the liabilities in respect to such class, and shall also
be charged with its share of the general liabilities of the Corporation
in proportion to the net asset value of the
6
<PAGE> 7
respective classes before allocation of general liabilities. However,
the decision of the Board of Directors as to the amount of assets and
liabilities belonging to the Corporation, and their allocation to a
given class or classes shall be final and conclusive;
(iv) in the event of the liquidation of the Corporation, the
stockholders of each class that has been established and designated
shall be entitled to receive, as a class, the excess of the assets
belonging to that class over the liabilities belonging to that class.
The assets so distributable to the stockholders of any particular class
shall be distributed among such stockholders in proportion to the
number of shares of that class held by them and recorded on the books
of the Corporation. Any assets not readily identifiable as belonging to
any particular class shall be allocated by or under the supervision of
the Board of Directors to and among any one or more of the classes
established and designated, as provided herein. Any such allocation by
the Board of Directors shall be conclusive and binding for all
purposes; and
(v) all shares of stock of the Corporation shall have the
redemption rights provided for in Article VII.
(7) The shares of stock of the Corporation are issued and sold, and all
persons who shall acquire stock of the Corporation shall acquire the same,
subject to the condition and understanding that the provisions of these Articles
of Incorporation, as from time to time amended, shall be binding upon them.
7
<PAGE> 8
ARTICLE VI
PROVISIONS FOR DEFINING, LIMITING, AND REGULATING
CERTAIN POWERS OF THE CORPORATION AND OF
THE DIRECTORS AND STOCKHOLDERS
(1) The number of directors of the Corporation shall be five (5), which
number may be increased or decreased pursuant to the By-Laws of the Corporation
but shall never be less than the minimum number required by the Maryland General
Corporation Law. The names of the directors who shall act until the first annual
meeting and until their successors are duly elected and qualify are:
John H. Fischer
Daniel Herrick
William E. Keiter
James Quigg Newton, Jr.
Donald K. Ross
(2) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance, from time to time, of shares of capital stock, whether
now or hereafter authorized, for such consideration as the Board of Directors
may deem advisable (all without the vote or consent of the stockholders of the
Corporation).
(3) No holder of stock of the Corporation shall, as such holder, have
any pre-emptive or other right to purchase or subscribe for any shares of the
capital stock of the Corporation or any other security of the Corporation which
it may issue or sell (whether out of the number of shares authorized by these
Articles of Incorporation, or out of any shares of the capital stock of the
Corporation acquired by it after the issuance thereof, or otherwise) other than
such right, if any, as the Board of Directors, in its discretion, may determine.
(4) The business and affairs of the Corporation shall be managed under
the direction
8
<PAGE> 9
of the Board of Directors which shall have and may exercise all powers of the
Corporation, except those powers which are by law, by these Articles of
Incorporation or by the By-Laws, conferred upon or reserved to the stockholders.
In furtherance and not in limitation of the powers conferred by law, the Board
of Directors shall have the power:
(i) to make, alter and repeal the By-Laws of the Corporation;
and
(ii) from time to time, to set apart out of any assets of the
Corporation otherwise available for dividends a reserve or reserves for
working capital or for any other proper purpose or purposes, and to
reduce, abolish or add to any such reserve or reserves, from time to
time, as the Board of Directors may deem to be in the best interests of
the Corporation, and to determine, in its discretion, what part of the
assets of the Corporation available for dividends in excess of such
reserve or reserves shall be declared as dividends and paid to the
stockholders of the Corporation.
(5) Notwithstanding any provision of the Maryland General Corporation
Law requiring a greater proportion than a majority of the votes of all classes
or of any class of the stock of the Corporation entitled to be cast in order to
take or authorize any action, any such action may be taken or authorized upon
the concurrence of a majority of the aggregate number of votes entitled to be
cast thereon, subject to applicable laws and regulations as from time to time in
effect, or rules or orders of the Securities and Exchange Commission or any
successor thereto.
(6) Any determination made in good faith and, so far as accounting
matters are involved, in accordance with generally accepted accounting
principles, by or pursuant to the direction of the Board of Directors, as to the
amount of the assets, debts, obligations, or liabilities of the Corporation, as
to the amount of any reserves or charges set up and the propriety thereof, as to
the time of or purpose for creating such reserves or charges, as to the use,
alteration or cancellation of any reserves or charges (whether or not any debt,
obligation or liability
9
<PAGE> 10
for which such reserves or charges shall have been created shall have been paid
or discharged or shall be then or thereafter required to be paid or discharged),
as to the establishment or designation of procedures or methods to be employed
for valuing any asset of the Corporation and as to the value of any asset, as to
the allocation of any asset of the Corporation to a particular class or classes
of the stock of the Corporation, as to the funds available for the declaration
of dividends and as to the declaration of dividends, as to the charging of any
liability of the Corporation to a particular class or classes of the stock of
the Corporation, as to the number of shares of any class or classes of the
outstanding stock of the Corporation, as to the estimated expense to the
Corporation in connection with purchases or redemptions of its shares, as to the
ability to liquidate investments in orderly fashion, or as to any other matters
relating to the issue, sale, purchase or redemption or other acquisition or
disposition of investments or shares of the Corporation, or the determination of
the net asset value per share of shares of any class of the stock of the
Corporation, shall be final and conclusive.
ARTICLE VII
REDEMPTION OF SHARES
(1) Each holder of shares of capital stock of the Corporation
shall be entitled to require the Corporation to redeem all or any part of the
shares of capital stock of the Corporation standing in the name of such holder
on the books of the Corporation, at the redemption price of such shares, as in
effect from time to time, subject to the right of the Board of Directors of the
10
<PAGE> 11
Corporation to suspend the right of redemption of shares of capital stock of the
Corporation or postpone the time of payment of such redemption price in
accordance with provisions of applicable law. The redemption price of shares of
capital stock of the Corporation shall be the net asset value thereof as
determined by, or pursuant to the direction of the Board of Directors of the
Corporation, from time to time, in accordance with the provisions of applicable
law, less such redemption fee or other charge, if any, as may be fixed by
resolution of the Board of Directors of the Corporation. Redemption shall be
conditional upon the Corporation having funds legally available therefor.
Payment of the redemption price shall be made in cash or by check on current
funds, or in assets other than cash, by the Corporation, at such time and in
such manner as may be determined, from time to time, by the Board of Directors
of the Corporation.
(2) If the Board of Directors determines that the net asset value per
share of any class or classes of the stock of the Corporation should remain
constant, the Corporation may declare, pay and credit as dividends daily the net
income of the Corporation (which may include or give effect to realized and
unrealized gains and losses, as determined in accordance with the accounting and
portfolio valuation policies of the Corporation) allocated to that class. If the
amount so determined for any day is negative, the Corporation may, without the
payment of monetary compensation but in consideration of the interest of the
Corporation and its stockholders in maintaining a constant net asset value per
share of the class, redeem pro rata from all the stockholders of record of
shares of the class or classes at the time of such redemption (in proportion to
their respective holdings thereof) such number of outstanding shares of the
class, or fractions thereof, as shall be required to permit the net asset value
per share of the class to remain constant.
11
<PAGE> 12
(3) If, in the sole determination of the Board of Directors, the
continuation of the offering of the shares of any one or more classes is no
longer in the best interests of the Corporation, i.e., due to changed market
conditions, the development of regulatory problems or low participation in a
class of stock of the Corporation, the Corporation may cease the offering of
such shares and may, by majority vote of the Board of Directors, require the
redemption of all outstanding shares of stock of such class or classes, upon
thirty (30) days prior written notice to the stockholders, all subject to the
requirements of these Articles of Incorporation, applicable securities laws and
regulations and the Maryland General Corporation Law.
ARTICLE VIII
INDEMNIFICATION
The Corporation shall indemnify its currently acting and former
directors and officers to the maximum extent permitted by the Maryland General
Corporation Law.
ARTICLE IX
AMENDMENT
The Corporation reserves the right to alter, amend, or repeal any
provisions contained in these Articles of Incorporation, from time to time,
including any amendment which alters the contract rights of any outstanding
stock, at any time in the manner now or hereafter prescribed by the laws of
Maryland, and all rights conferred herein upon the stockholders of the
Corporation are granted subject to such reservation.
IN WITNESS WHEREOF, the undersigned incorporator of NEW YORK LIFE MFA
SERIES FUND, INC. hereby executes the foregoing Articles of Incorporation and
acknowledges
12
<PAGE> 13
the same to be his act.
Dated: May 31, 1983 ______________________________
Franklin Ciaccio
372 Park Avenue South
New York, New York 10010
13
<PAGE> 1
MAINSTAY VP SERIES FUND, INC.
ARTICLES SUPPLEMENTARY
MainStay VP Series Fund, Inc., a Maryland corporation registered as an
open-end investment company under the Investment Company Act of 1940 and having
its principal office in Baltimore City, Maryland (formerly New York Life MFA
Series Fund, Inc. and hereinafter called the "Corporation"), hereby certifies to
the State Department of Assessments and Taxation of the State of Maryland that:
FIRST: The total number of shares of capital stock which the
Corporation shall have the authority to issue is increased to five billion
(5,000,000,000) shares of par value of one cent ($0.01) per share and of
aggregate par value of fifty million dollars ($50,000,000).
SECOND: Pursuant to the authority granted to the Board of Directors in
Sections (1) and (2) of Article Fifth of the Corporation's Article of
Incorporation, as amended, there are hereby established and designated four
additional classes (or "series") of common stock as follows: one hundred million
(100,000,000) shares are hereby classified as MainStay VP American Century
Income & Growth Portfolio; one hundred million (100,000,000) shares are hereby
classified as MainStay VP Dreyfus Large Company Value Portfolio; one hundred
million (100,000,000) shares are hereby classified as MainStay VP Eagle Asset
Management Growth Equity Portfolio; and one hundred million (100,000,000) shares
are hereby classified as MainStay VP Lord Abbett Developing Growth Portfolio.
THIRD: The preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemptions of the shares of common stock of each of the MainStay VP American
Century Income & Growth Portfolio, MainStay VP Dreyfus Large Company Value
Portfolio, MainStay VP Eagle Asset Management Growth Equity Portfolio and
Mainstay VP Lord Abbett Developing Growth Portfolio as set forth in Articles
Fifth and Sixth of the Corporation's Articles of Incorporation, as amended, and
shall be subject to all provisions of the Articles of Incorporation, as amended,
relating to the shares of the Corporation generally.
<PAGE> 2
FOURTH: Immediately prior to the effectiveness of these Articles
Supplementary, the number of authorized shares indicated in Article Fifth of the
Corporation's Articles of Incorporation, as amended, was two billion
(2,000,000,000).* Immediately prior to the effectiveness of these Articles
Supplementary the MainStay VP Cash Management Portfolio was allocated
600,000,000 shares of common stock; MainStay VP Bond Portfolio; MainStay VP
Convertible Portfolio; MainStay VP Growth Equity Portfolio; MainStay High Yield
Corporate Bond Porfolio; MainStay VP International Equity Portfolio, and
MainStay VP Value Portfolio were each allocated 100,000,000 shares of common
stock; and MainStay VP Capital Appreciation Portfolio; MainStay VP Government
Portfolio; MainStay VP Indexed Equity Portfolio; and MainStay VP Total Return
Portfolio were each allocated 50,000,000 shares of common stock. The Board of
Directors' power to classify and reclassify any unissued shares is not changed
by these Articles Supplementary.
FIFTH: The foregoing amendment to the Corporation's Articles of
Incorporation was approved pursuant to Article V, Section 2, by the entire Board
of Directors of the Corporation at a meeting on February 10, 1998.
IN WITNESS WHEREOF, MainStay VP Series Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its President and
attested by its Secretary on April 29, 1998.
ATTEST: MAINSTAY VP SERIES FUND, INC
BY: /s/ SARA L. BADLER BY: /s/ RICHARD M. KERNAN, JR.
----------------------------- -------------------------------
Sara L. Badler Richard M. Kernan, Jr.
Secretary Chairman
THE UNDERSIGNED, Chairman of MainStay VP Series Fund, Inc., who executed
on behalf of the Corporation the foregoing Articles Supplementary of which this
certificate is made a part,
-2-
The shares had a par value of one cent ($0.01) per share and an aggregate par
value of twenty million dollars ($20,000,000).
<PAGE> 3
hereby acknowledges that these Articles Supplementary are the act of the
Corporation, that to the best of his knowledge, information and belief the
matters and facts set forth herein relating to the authorization and approval of
the Articles Supplementary are true in all material respects and that this
statement is made under the penalties of perjury.
By: /s/ RICHARD M. KERNAN, JR.
--------------------------------
Richard M. Kernan, Jr.
Chairman
<PAGE> 4
MAINSTAY VP SERIES FUND, INC.
ARTICLES SUPPLEMENTARY
MainStay VP Series Fund, Inc., a Maryland corporation registered as an
open-end investment company under the Investment Company Act of 1940 and having
its principal office in Baltimore City, Maryland (formerly New York Life MFA
Series Fund, Inc. and hereinafter called the "Corporation"), hereby certifies to
the State Department of Assessments and Taxation of the State of Maryland that:
FIRST: Pursuant to the authority granted to the Board of Directors in
Sections (1) and (2) of Article Fifth of the Corporation's Article of
Incorporation, as amended, the amount of shares classified as MainStay VP Cash
Management shares is increased from two hundred million (200,000,000) to six
hundred million (600,000,000).
SECOND: The preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemptions of the shares of common stock of the MainStay VP Cash Management
Portfolio is as set forth in Articles Fifth and Sixth of the Corporations's
Articles of Incorporation, as amended, and shall be subject to all provisions of
the Articles of Incorporation, as amended, relating to the shares of the
Corporation generally.
THIRD: Immediately prior to the effectiveness of these Articles
Supplementary, the number of authorized shares indicated in Article Fifth of the
Corporation's Articles of Incorporation, as amended, was two billion
(2,000,000,000). Immediately prior to the effectiveness of these Articles
Supplementary the MainStay VP Cash Management Portfolio was allocated
200,000,000 shares of common stock; MainStay VP Bond Portfolio; MainStay VP
Convertible Portfolio; MainStay VP Growth Equity Portfolio; Mainstay VP High
Yield Corporate Bond Portfolio; MainStay VP International Equity Portfolio; and
MainStay VP Value Portfolio were each allocated 100,000,000 shares of common
stock; and MainStay VP Capital Appreciation Portfolio; MainStay VP Government
Portfolio; MainStay VP Indexed Equity Portfolio; and MainStay VP Total Return
Portfolio were each allocated 50,000,000 shares of common stock. The
<PAGE> 5
Board of Directors' power to classify and reclassify any unissued shares is not
changed by these Articles Supplementary.
FOURTH: The foregoing amendment to the Corporation's Articles of
Incorporation was approved pursuant to Article V, Section 2, by the entire Board
of Directors of the Corporation at a meeting on May 13, 1997.
IN WITNESS WHEREOF, MainStay VP Series Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its President and
attested by its Secretary on May 19, 1997.
ATTEST: MAINSTAY VP SERIES FUND, INC
BY: /s/ A. Thomas Smith BY: /s/ Anne F. Pollack
---------------------- ----------------------
A. Thomas Smith Anne F. Pollack
Secretary President
THE UNDERSIGNED, President of MainStay VP Series Fund, Inc., who
executed on behalf of the Corporation the foregoing Articles Supplementary of
which this certificate is made a part, hereby acknowledges that these Articles
Supplementary are the act of the Corporation, that to the best of her knowledge,
information and belief the matters and facts set forth herein relating to the
authorization and approval of the Articles Supplementary are true in all
material respects and that this statement is made under the penalties of
perjury.
BY: /s/ Anne F. Pollack
----------------------
Anne F. Pollack
President
- 2 -
<PAGE> 6
NEW YORK LIFE MFA SERIES FUND, INC.
ARTICLES SUPPLEMENTARY
New York Life MFA Series Fund, Inc., a Maryland Corporation registered
as an open-end investment company under the Investment Company Act of 1940 and
having its principal place of business in Baltimore, Maryland (the
"Corporation"), certifies to the State Department of Assessments and Taxation of
Maryland that:
FIRST: Pursuant to the authority granted to the Board of Directors in
Sections (1) and (2) of Article Fifth of the Corporation's Articles of
Incorporation, as amended, there is hereby established and designated one
additional class (or "series") of common stock, as follows: one hundred million
(100,000,000) shares of the Corporation are hereby classified as Convertible
Portfolio shares.
SECOND: The total number of shares of capital stock which the
Corporation has the authority to issue remains two billion (2,000,000,000)
shares of par value of one cent ($.01) per share and of the aggregate par value
of twenty million dollars ($20,000,000).
THIRD: The preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemptions of the shares of common stock of the Convertible Portfolio is as set
forth in Articles Fifth and Sixth of the Corporation's Articles of
Incorporation, as amended, and shall be subject to all provisions of the
Articles of Incorporation, as amended, relating to shares of the Corporation
generally.
FOURTH: Immediately prior to the effectiveness of these Articles
Supplementary, the number of authorized shares indicated in Article Fifth of the
Corporation's Articles of Incorporation, as amended, was two billion
(2,000,000,000) shares of par value of one cent ($0.01) per share and of the
aggregate par value of twenty million dollars ($20,000,000). Immediately prior
to the effectiveness of these Articles Supplementary, the Cash Management
Portfolio was allocated 200,000,000 shares of common stock; the Growth Equity
Portfolio, the Bond Portfolio, the High Yield Corporate Bond Portfolio, the
International Equity Portfolio, the Money Market and the Value Portfolio were
each allocated 100,000,000 shares of common stock; and the Capital Appreciation
Portfolio, the Indexed Equity Portfolio, the Total Return Portfolio and the
Government Portfolio were each allocated 50,000,000 shares of common stock. The
Board of Directors' power to classify and reclassify any unissued shares is not
changed by these Articles Supplementary.
FIFTH: Immediately prior to the effectiveness of these Articles
Supplementary, the Money Market Portfolio was allocated 100,000,000 shares of
common stock and the Board of Directors, on behalf of the Corporation, wish to
correct these Articles to correctly reflect that the Money Market Portfolio was
merged into the Cash Management
<PAGE> 7
Portfolio, and the combined Portfolio was allocated 200,000,000 shares of common
stock.
SIXTH: The foregoing amendments to the Corporation's Articles of
Incorporation was approved pursuant to Article V, Section 2, by the entire Board
of Directors of the Corporation at a meeting held on August 22, 1996.
IN WITNESS WHEREOF, NEW YORK LIFE MFA SERIES FUND, INC. has caused these
presents to be signed in its name and on its behalf by its President and
attested by its Secretary on this 28 day of August, 1996.
ATTEST NEW YORK LIFE MFA SERIES
FUND INC.
By: /s/ A. Thomas Smith By: /s/ Anne F. Pollack
---------------------- ----------------------
Secretary President
THE UNDERSIGNED, President of New York Life MFA Series Fund, Inc., who
executed on behalf of the Corporation the foregoing Articles Supplementary of
which this certificate is made a part, hereby acknowledges that these Articles
Supplementary are the act of the Corporation, that to the best of her knowledge,
information and belief the matters and facts set forth herein relating to the
authorization and approval of the Articles Supplementary are true in all
material respects and that this statement is made under the penalties of
perjury.
BY: /s/ Anne F. Pollack
----------------------
President
<PAGE> 8
NEW YORK LIFE MFA SERIES FUND, INC.
ARTICLES SUPPLEMENTARY
New York Life MFA Series Fund, Inc., a Maryland corporation having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of the State of Maryland that:
FIRST: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940.
SECOND: The Corporation currently has eight classes of shares
designated as the: Common Stock Portfolio; Bond Portfolio; Money Market
Portfolio; Capital Appreciation Portfolio; Indexed Equity Portfolio; Total
Return Portfolio; Government Portfolio; and Cash Management Portfolio.
THIRD: The Corporation is herewith changing the name of the Common
Stock Portfolio to Growth Equity Portfolio.
FOURTH: The change of the name of the Corporation's class was
approved pursuant to Article V, Section 2, by a vote of a majority of the
corporation's Board of Directors at a meeting on March 16, 1994.
<PAGE> 9
IN WITNESS WHEREOF, New York Life MFA Series Fund, Inc. has caused these
presents to be signed in its name and on its behalf by its President and
attested by its Secretary on March 28, 1994.
ATTEST: NEW YORK LIFE MFA SERIES FUND, INC
BY: /s/ SHELDON WINICOUR BY: /s/ ANNE F. POLLACK
------------------------ ------------------------------
Sheldon Winicour Anne F. Pollack
Assistant Secretary President
THE UNDERSIGNED, President of New York Life MFA Series Fund, Inc., who
executed on behalf of the Corporation the foregoing Articles Supplementary of
which this certificate is made a part, hereby acknowledges that these Articles
Supplementary are the act of the Corporation, that to the best of her knowledge,
information and belief the matters and facts set forth herein relating to the
authorization and approval of the Articles Supplementary are true in all
material respects and that this statement is made under the penalties of
perjury.
BY: /s/ ANNE F. POLLACK
-----------------------------
Anne F. Pollack
President
- 2 -
<PAGE> 10
ARTICLES SUPPLEMENTARY
OF 1-27-93 at 900am
NEW YORK LIFE MFA SERIES FUND, INC.
WHEREAS, Article 5 of NEW YORK LIFE MFA SERIES FUND, INC.
("Corporation") Articles of Incorporation, as amended authorizes the Corporation
to issue 1,000,000,000 shares of Common Stock at a par value of ONE CENT
($0.01) per share and an aggregate par value of $10,000,000.00;
WHEREAS, said Article 5 of the Corporation's Articles of Incorporation, as
amended, states that the shares of the Corporation's Common Stock shall be
divided into classes to be known as portfolios;
WHEREAS, said Article 5 of the Corporation's Articles of Incorporation, as
amended, authorizes the Board of Directors of the Corporation to establish the
portfolios and to define the preferences, rights, voting power, restrictions or
qualifications and the investment policies and objectives for any such
portfolio; and
WHEREAS, said Article 5 also authorizes the Board of Directors to classify
or reclassify any, unissued shares between such portfolios.
NOW, THEREFORE, the Corporation having its principal office in Maryland,
hereby certifies to the Maryland Department of Assessments and Taxation that:
FIRST: Pursuant to the Authority granted the Board of Directors in Article
5 of Articles of Incorporation, as amended, 700,000,000 shares of the
Corporation's authorized Common Stock, with a par value of one cent ($.01), have
been classified by the Board of Directors into the portfolios listed below in
the amounts indicated:
Common Stock Portfolio 100,000,000 Shares
Bond Portfolio 100,000,000 Shares
Money Market Portfolio 100,000,000 Shares
Capital Appreciation Portfolio 50,000,000 Shares
Indexed Equity Portfolio 50,000,000 Shares
Total Return Portfolio 50,000,000 Shares
Government Portfolio 50,000,000 Shares
Cash Management Portfolio 200,000,000 Shares
<PAGE> 11
SECOND: The preferences, rights, voting powers, restrictions and
qualifications of the shares of the above-referenced portfolios are as follows:
(a) All such shares of Common Stock shall be freely transferable.
(b) Dividends or distributions on shares of any portfolio, whether
payable in shares or cash, shall be paid only out of earnings, surplus or other
assets belonging to such portfolio.
(c) Where a vote of the holders of the shares of any particular
portfolio, or of more than one portfolio, is required as to any matter by the
1940 Act or Maryland law, only the holders of shares of such portfolio or
portfolios, voting by portfolio, shall be entitled to vote upon such proposal.
(d) In all other respects, the rights, preferences, voting power,
restrictions and qualifications of the above-referenced Common Stock are set
forth in Article 5 and 6 of the Corporation's Articles of Incorporation.
THIRD: The classification of the Corporation's authorized shares as set
forth in these Articles Supplementary has effected no change in the authorized
capital of the Corporation.
IN WITNESS WHEREOF, NEW YORK LIFE MFA SERIES FUND, INC. has caused these
presents to be signed in its name and on its behalf by a majority of its
Directors and its corporate seal to be hereunto affixed and attested by its
Secretary this 12th day of January, 1993.
ATTEST NEW YORK LIFE MFA SERIES FUND, INC.
[SIG] By: /s/ RICHARD M KERMAN JR.
- ---------------- -------------------------------
Secretary Chairman
[SIG]
------------------------------
[SIG]
------------------------------
[SIG]
------------------------------
[SIG]
------------------------------
<PAGE> 12
THE UNDERSIGNED, Chairman of NEW YORK LIFE MFA Series Fund, Inc., who executed
on behalf of said Corporation the foregoing Articles Supplementary, of which
this certification is made a part, hereby acknowledges, in the name and on
behalf of the said Corporation, the foregoing Articles Supplementary to be the
corporate act of said Corporation and further certifies that to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects under
penalties of perjury.
RICHARD M KERMAN JR.
--------------------
Chairman
<PAGE> 1
(a)(3)
NEW YORK LIFE MFA SERIES FUND, INC.
ARTICLES OF AMENDMENT
New York Life MFA Series Fund, Inc., a Maryland corporation having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of the State of Maryland that:
FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940.
SECOND: The Articles of Incorporation of the Corporation are hereby
amended by striking out Article II and inserting in lieu thereof:
ARTICLE II
NAME
The name of the corporation is MainStay VP Series Fund, Inc. (the
"Corporation").
THIRD: The Corporation currently has eleven classes of shares designated
as the Growth Equity Portfolio; Bond Portfolio; Capital Appreciation Portfolio;
Indexed Equity Portfolio; Total Return Portfolio; Government Portfolio; High
Yield Corporate Bond Portfolio; International Equity Portfolio; Value Portfolio;
Cash Management Portfolio and Convertible Portfolio.
FOURTH: The Corporation is herewith changing the name of the Growth
Equity Portfolio to MainStay VP Growth Equity Portfolio; the Bond Portfolio to
MainStay VP Bond Portfolio; the Capital Appreciation Portfolio to MainStay VP
Capital Appreciation Portfolio; the Indexed Equity Portfolio to MainStay VP
Indexed Equity Portfolio; the Total Return Portfolio to MainStay VP Total Return
Portfolio; the Government Portfolio to MainStay VP Government Portfolio the
High Yield Corporate Bond Portfolio to MainStay VP High Yield
<PAGE> 2
Corporate Bond Portfolio; the International Equity Portfolio to MainStay VP
International Equity Portfolio; the Value Portfolio to MainStay VP Value
Portfolio; the Cash Management Portfolio to MainStay VP Cash Management
Portfolio; and the Convertible Portfolio to MainStay VP Convertible Portfolio.
FIFTH: The foregoing amendment to the Corporation's Articles of
Incorporation and the change of the name of each of the Corporation's classes
was approved pursuant to Article V, Section 2, by the entire Board of Directors
of the Corporation at a meeting held on August 22, 1996 and in accordance with
Section 2-605(a)(4) under Title 2 of Corporations and Associations of the
Annotated Code of Maryland.
IN WITNESS WHEREOF, New York Life MFA Series Fund, Inc. has caused these
Articles of Amendment to be signed in its name and on its behalf by its
President and attested by its Secretary on August 28, 1996.
ATTEST: NEW YORK LIFE MFA SERIES FUND, INC.
By: /s/ A. Thomas Smith By: /s/ Anne F. Pollack
-------------------------- ---------------------------
A. Thomas Smith Anne F. Pollack
Secretary President
THE UNDERSIGNED, President of New York Life MFA Series Fund, Inc., who
executed on behalf of the Corporation the foregoing Articles of Amendment of
which this certificate is made a part, hereby acknowledges that these Articles
of Amendment are the act of the Corporation, that to the best of her knowledge,
information and belief the matters and facts set forth herein relating to the
authorization and approval of the Articles of Amendment are true in all material
respects and that this statement is made under the penalties of perjury.
BY: /s/ Anne F. Pollack
---------------------------
Anne F. Pollack
President
<PAGE> 1
Exhibit (b)
BY-LAWS
OF
NEW YORK LIFE MFA SERIES FUND, INC.
ARTICLE I
Meetings of Stockholders
Section 1. Annual Meeting. There shall be no annual meeting of the
stockholders of the Corporation. Any business of the Corporation that must be
submitted to the stockholders shall be transacted at a special meeting of
stockholders pursuant to Section 4 of this Article.
Section 2. Special Meetings. Special meetings of the stockholders,
unless otherwise provided by law or by the Charter, may be called for any
purpose or purposes by a majority of the Board of Directors, the Chairman of the
Board or the President.
Section 3. Place of Meeting. The annual meeting and any special meeting
of the stockholders shall be held at such place within the United States as the
Board of Directors may from time to time determine.
Section 4. Notice of Meeting; Waiver of Notice. Notice of the place,
date and time of the holding of each special meeting of the stockholders and the
purpose or purposes of each special meeting shall be given personally or by
mail, not less than 10 or more than 90 days before the date of such meeting, to
each stockholder entitled to vote at such meeting and to each other stockholder
entitled to notice of the meeting. The Board of Directors may fix, in advance, a
record date which shall not be less than 10 nor more 90 days before the date of
such meeting.
<PAGE> 2
Notice by mail shall be deemed to be duly given when deposited in the United
States mail addressed to the stockholder at his address as it appears on the
records of the Corporation, with postage thereon prepaid.
Notice of any meeting stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and place unless the Board of Directors, after the adjournment, shall fix a
new record date for an adjourned meeting, or the adjournment is for more than
120 days after the original record date, notice of such adjourned meeting need
not be given if the time and place to which the meeting shall be adjourned were
announced at the meeting at which the adjournment is taken.
Section 5. Quorum. At all meetings of the stockholders, the holders of
a majority of the shares of stock of the Corporation entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as otherwise provided by statute or by the
Charter or these By-Laws. In the absence of a quorum no business may be
transacted, except that the holders of a majority of the shares of stock present
in person or by proxy and entitled to vote may adjourn the meeting from time to
time to a date not more than 120 days after the original record date, without
notice other than announcement thereat except as otherwise required by these
By-Laws, until the holders of the requisite amount of shares of stock shall be
so present. At any such adjourned meeting at which a quorum may be present any
business may be transacted which might have been transacted at the meeting as
originally called.
2
<PAGE> 3
When a quorum is once present to organize a meeting, it is not broken by the
subsequent withdrawal of any stockholder.
Section 6. Organization. At each meeting of the stockholders, the
Chairman of the Board, or in his absence or inability to act, the President, or
in the absence or inability to act of the Chairman of the Board and the
President, a Vice-President, shall act as chairman of the meeting. The
Secretary, or in his absence or inability to act, any person appointed by the
chairman of the meeting, shall act as secretary of the meeting and keep the
minutes thereof.
Section 7. Order of Business. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.
Section 8. Voting. Except as otherwise provided by statute or the
Charter, each holder of record of shares of stock of the Corporation having
voting power shall be entitled at each meeting of the stockholders to one vote
for every share of such stock standing in his name on the record of stockholders
of the Corporation as of the record date determined pursuant to Section 4 of
this Article.
Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except in those cases where such proxy states that it is
irrevocable and where an irrevocable proxy is permitted by law. Except as
otherwise provided by statute, the
3
<PAGE> 4
charter or these By-Laws, any corporate action to be taken by vote of the
stockholders shall be authorized by a majority of the total votes cast at a
meeting of stockholders by the holders of shares present in person or
represented by proxy and entitled to vote on such action.
If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute or
these By-Laws, or determined by the chairman of the meeting to be advisable, any
such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or his proxy, if there be such proxy, and
shall state the number of shares voted.
Section 9. Inspectors. The Board may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
request of any stockholder entitled to vote thereat shall, appoint inspectors.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath to execute faithfully the duties of inspector at such meeting with
stock impartiality and according to the best of his ability. The inspectors
shall determine the number of shares outstanding and the voting power of each,
the number of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
result, and do such acts as are proper to conduct the election or vote in
fairness to all stockholders. On request of the chairman of the meeting or any
stockholder entitled to vote thereat, the inspectors shall make a
4
<PAGE> 5
report in writing of any challenge, request or mater determined by them and
shall execute a certificate of any fact found by them. No director or candidate
for the office of director shall act as inspector of an election of directors.
Inspectors need not be stockholders.
Section 10. Consent of Stockholders in Lieu of Meeting. To the fullest
extent permitted by law, whenever any action is required or permitted to be
taken at a meeting of stockholders by law, by the Charter or by By-Laws, such
action may be taken without a meeting, without prior notice and without a vote
of stockholders, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of all outstanding stock having voting power. The
Board of Directors may fix, in advance, a record date to express consent to any
corporate action in writing, not more than 90 days prior to any other action. If
no such record date is fixed, the record date shall be the date on which the
first written consent is received.
ARTICLE II
Board of Directors
Section 1. General Powers. Except as otherwise provided in the Charter,
the business and affairs of the Corporation shall be managed under the direction
of its Board of Directors. The Board may exercise all the powers of the
corporation and do all such lawful acts and things as are not by statute or the
Charter directed or required to be exercised or done by the stockholders.
Section 2. Number of Directors. The number of directors shall be fixed
from time to time by resolution of the Board of Directors adopted by a majority
of the Directors then in office;
5
<PAGE> 6
provided, however, that the number of directors shall in no event be less than
the minimum number required by the Maryland General Corporation Law nor more
than nine. Any vacancy created by an increase in directors may be filled in
accordance with Section 6 of this Article II. No reduction in the number of
directors shall have the effect of removing any director from office prior to
the expiration of his term unless such director is specifically removed pursuant
to Section 5 of this Article II at the time of such decrease. Directors need not
be stockholders.
Section 3. Election and Term of Directors. Except as otherwise provided
in Section 4 and 5 of this Article, the Directors shall be elected by the
stockholders to hold office for a term consisting of an indefinite number of
years. Each Director shall hold office until a successor has been elected and
has qualified, or until such Director's earlier death, resignation or removal.
At each meeting of the stockholders for the election of Directors, at which a
quorum is present, the Directors shall be elected by a plurality of the votes
cast by the holders of shares entitled to vote in such election. The Board of
Directors shall select one of its members to serve as Chairman of the Board. The
Chairman shall preside at all meetings of the Board of Directors and all
meetings of stockholders.
Section 4. Resignation. A Director of the Corporation may resign at any
time by giving written notice of his resignation to the Board or the Chairman of
the Board or the President, a Vice-President or the Secretary. Any such
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, immediately upon its
receipt; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
6
<PAGE> 7
Section 5. Removal of Directors. Any Director of the Corporation may be
removed with or without cause by the stockholders by a vote of a majority of the
votes entitled to be cast for the election of Directors at any meeting of
stockholders, duly called and at which a quorum is present.
Section 6. Vacancies. Any vacancies in the Board, whether arising from
death, resignation, removal, an increase in the number of Directors or any other
cause, shall be filled by vote of the majority of the Directors then in office
even though such majority is less than a quorum, provided that no vacancies
shall be filled by action of the remaining Directors, if after the filling of
said vacancy or vacancies, less than two-thirds of the Directors then holding
office shall have been elected by the stockholders of the Corporation. In the
event that at any time there is a vacancy in any office of a Director which
vacancy may not be filled by the remaining Directors, a special meeting of the
stockholders shall be held as promptly as possible and in any event within sixty
days, for the purpose of filling said vacancy or vacancies. Any Directors
elected or appointed to fill a vacancy shall hold office only until the next
meeting of stockholders of the Corporation and until a successor shall have been
chosen and qualifies or until his earlier resignation and removal.
Section 7. Place of Meetings. Meetings of Board may be held at such
place as the Board may from time to time determine or as shall be specified in
the notice of such meeting.
Section 8. Regular Meetings. There will be no annual meeting of the
Board of Directors. The Board from time to time may provide for the holding of
other regular meetings and fix the place (which may be within or without the
State of Maryland) and time of such
7
<PAGE> 8
meetings. Notice of regular meetings need not be given, except that if the Board
shall change the time or place of any regular meeting, notice of such action
shall be promptly communicated personally or by telephone or sent by first class
mail, telegraph, radio or cable, to each Director who shall have not been
present at the meeting at which such action was taken, addressed to such
Director at such Director's residence, usual place of business or other address
designated with the Secretary for such purpose.
Section 9. Regular Meetings. Regular meetings of the Board may be held
without notice at such time and place as may be determined by the Board of
Directors. No notice of a regular meeting need be given.
Section 10. Special Meetings; Notice. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board or the
President, or in the absence or disability of both, by any Vice-President, or by
the Secretary at the request of any two Directors, at such place (within or
without the State of Maryland) as may be specified in the respective notices or
waivers of notice of such meeting. Except as otherwise provided by law, a notice
of each special meeting, stating the time and place thereof, shall be mailed to
each Director addressed to such Director's residence, usual place of business,
or other address designated with the Secretary for such purpose, at least two
business days before the special meeting is to be held, or shall be sent to such
Director at such place by telegraph, radio or cable, or delivered personally or
by telephone not later than the day before the day on which such meeting is to
be held. Notice may be waived in accordance with Section 11 of this Article.
8
<PAGE> 9
Section 11. Waiver of Notice of Meetings. Notice of any special meeting
need not be given to any director who shall, either before or after the meeting,
sign a written waiver of notice or who shall attend such meeting. Except as
otherwise specifically required by these By-Laws, a notice or waiver of notice
of any meeting need not state the purposes of such meeting.
Section 12. Quorum and Voting. One-third, but not less than two, of the
members of the entire Board shall be present in person at any meeting of the
Board in order to constitute a quorum for the transaction of business at such
meeting, and except as otherwise required by statute, the Charter, these
By-Laws, or other applicable laws and regulations, the act of a majority of the
Directors present at any meeting at which a quorum is present shall be the act
of the Board; provided, however, that the approval of any contract with an
investment adviser or principal underwriter, as such terms are defined in the
Investment Company Act of 1940, as amended, which the Corporation enters into or
any renewal or amendment thereof, the approval of the fidelity bond required by
the Investment Company Act of 1940, as amended, and the selection of the
Corporation's independent public accountants shall each require the affirmative
vote of a majority of the directors who are not parties to any such contract or
interested persons of any such party so long as the Corporation is subject to
the provisions of the Investment Company Act of 1940, as amended. In the absence
of a quorum at any meeting of the Board, a majority of the Directors present
thereat may adjourn such meeting to another time and place until a quorum shall
be present thereat. Notice of the time and place of any such adjourned meeting
shall be given to the Directors who were not present at the time of the
adjournment and, unless such time and place were announced at the meeting at
which the adjournment was taken,
9
<PAGE> 10
to the other Directors. At any adjourned meeting at which a quorum is present,
any business may be transacted which might have been transacted at the meeting
as originally called.
Section 13. Organization. The Board shall, by resolution adopted by a
majority of the entire Board, designate a Chairman of the Board, who shall
preside at each meeting of the Board. In the absence or inability of the
Chairman of the Board to preside at a meeting, the President, or, in his absence
or inability to act, another Director chosen by a majority of the Directors
present, shall act as chairman of the meeting and preside thereat. The Secretary
(or, in his absence or inability to act, any person appointed by the Chairman)
shall act as secretary of the meeting and keep the minutes thereof.
Section 14. Written Consent of Directors in Lieu of a Meeting. Any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the consents are filed with the minutes of the proceedings of the
Board or Committee.
Section 15. Compensation. Directors may receive compensation for
services to the Corporation in their capacities as Directors or otherwise in
such manner and in such amounts as may be fixed from time to time by the Board.
Section 16. Manner of Acting. To the extent consistent with law, the
Charter and the By-Laws, the Board of Directors may adopt such rules and
regulations for the conduct of meetings of the Board and for the management of
the property, affairs and business of the
10
<PAGE> 11
Corporation as the Board may deem appropriate. Members of the Board of Directors
or of any Committee thereof may participate in a meeting of the Board or of such
Committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence in
person at such meeting.
ARTICLE III
Committee
Section 1. Executive Committee. The Board may, by resolution adopted by
a majority of the entire Board, designate an Executive Committee consisting of
two or more of the Directors of the Corporation, which committee shall have and
may exercise all the powers and authority of the Board with respect to all
matters other than:
(a) the recommendation to stockholders of any action
requiring authorization of stockholders pursuant to
statute or the Charter;
(b) the filling of vacancies on the Board of Directors;
(c) the fixing of compensation of the Directors for
serving on the Board or on any committee of the
Board, including the Executive Committee;
(d) the approval or termination of any contract with an
investment adviser or principal underwriter, as such
terms are defined in the Investment Company Act of
1940, as amended, or the taking of any other action
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<PAGE> 12
required to be taken by the Board of Directors by the
Investment Company Act of 1940, as amended;
(e) the amendment or repeal of these By-Laws or the
adoption of new By-Laws;
(f) the amendment or repeal of any resolution of the
Board which by its terms may be amended or repealed
only by the Board;
(g) the declaration of dividends;
(h) the approval of any merger or share exchange which
does not require shareholder approval; and
(i) the issuance of capital stock of the Corporation,
except to the extent permitted by the Maryland
General Corporation Law.
The Executive Committee shall keep written minutes of its proceedings
and shall report such minutes to the Board. All such proceedings shall be
subject to revision or alteration by the Board; provided, however, that third
parties shall not be prejudiced by such revision or alteration.
Section 2. Other Committee of the Board. The Board of Directors may
from time to time, by resolution adopted by a majority of the whole Board,
designate one or more other committees of the Board, each such committee to
consist of such number of Directors and to have such powers and duties as the
Board of Directors may, be resolution, prescribe.
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<PAGE> 13
Section 3. General. One-third, but not less than two, of the members of
any committee shall be present in person at any meeting of such committee in
order to constitute a quorum for the transaction of business at such meeting,
and the act of a majority present shall be the act of such committee. The Board
may designate a chairman of any committee and such chairman or any two members
of any committee may fix the time and place of its meetings unless the Board
shall otherwise provide. In the absence or disqualification of any member of any
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. The Board shall
have the power at any time to change the membership of any committee, to fill
all vacancies, to designate alternate members to replace any absent or
disqualified member, or to dissolve any such committee. Nothing herein shall be
deemed to prevent the Board from appointing one or more committee consisting in
whole or in part of persons who are not directors of the Corporation; provided,
however, that no such committee shall have or may exercise any authority or
power of the Board in the management of the business or affairs of the
Corporation.
ARTICLE IV
Officers, Agents and Employees
Section 1. Term and Titles. The officers of the Corporation shall be
elected or appointed by the Board of Directors and shall hold office at the
pleasure of the Board or until the election or appointment and the qualification
of a successor. There shall be Chairman of the
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<PAGE> 14
Board, a President, one or more Vice-President, a Secretary and Treasurer. The
President shall be chosen from among the members of the Board of Directors. The
Board of Directors may also elect or appoint such other officers and agents,
having such titles and with such responsibilities (including but not limited to
Assistants of the titles previously mentioned) as it deems appropriate. The
Board of Directors from time to time may delegate to the chief executive the
power to appoint each such officers or agents and prescribe their respective
rights, terms of office, authorities and duties. Any two or more offices may be
held by the same person, except the offices of President and Vice-President, but
no officer shall act in more than one capacity to execute, acknowledge or verify
any instrument required by law to be executed, acknowledged or verified in more
than one capacity.
Section 2. Chief Executive Officer. The Board of Directors may from
time to time determine who among the officers and in what order, shall act as
chief executive officer. In the absence of such determination the President
shall be the chief executive officer. Subject to the control of the Board and to
the extent not otherwise prescribed by these By-Laws, the chief executive
officer shall supervise the carrying out of the policies adopted or approved by
the Board, shall exercise a general supervision and superintendence over all the
business and affairs of the Corporation and shall possess such other powers and
perform such other duties as may be incident to the office of chief executive
officer.
Section 3. Resignations. Any officer may resign at any time by
delivering a signed notice of resignation to the Board of Directors, the
Chairman of the Board, the President, a Vice President or the Secretary. Such
resignation shall take effect upon the later of delivery or the
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<PAGE> 15
date specified therein. Any vacancy occurring in any office of the Corporation
by death, resignation, removal or otherwise, may be filled by the Board at any
regular or special meeting.
Section 4. Removal of Officer, Agent or Employee. Any officer, agent or
employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate such power of removal as
to agents and employees not elected or appointed by the Board of Directors. Such
removal shall be without prejudice to such person's contract rights, if any, but
the appointment of any person as an officer, agent or employee of the
Corporation shall not of itself create contract rights.
Section 5. Vacancies. A vacancy in any office, whether arising from
death, resignation, removal or any other cause, may be filled for the unexpired
portion of the term of the office which shall be vacant, in the manner
prescribed in these By-Laws for the regular election or appointment to such
office.
Section 6. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer in respect of other officers under his control.
Section 7. Bonds or other Security. If required by the Board, any
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety or sureties as the Board may require.
Section 8. The President. The President shall have the following powers
and duties:
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<PAGE> 16
(a) to be the chief operating officer of the Corporation, and, subject
to the direction of the Board of Directors and (if the President is not also the
chief executive officer) the chief executive officer, to have general charge of
the operations of the business, affairs and property of the Corporation and
general operations of its officers, employees and agents; and
(b) subject to these By-Laws the President shall exercise all powers
and perform all duties incident to the office of president and chief operating
officer of a corporation, and shall exercise such other powers and perform such
other duties as from time to time may be assigned to the President by the Board
or by the chief executive officer (if the President is not also the chief
executive officer).
Section 9. The Vice President. Each Vice-President shall exercise such
powers and perform such duties as from time to time may be assigned to such Vice
president by the Board of Directors, the chief executive officer or the
President. In the absence or during the disability of the President, the
Vice-President designed by the Board of Directors or by the President, or if no
such designation shall have been made, then the senior ranking Vice-President
present shall perform all the duties of the President and, when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President.
Section 10. The Treasurer. Except as may otherwise be provided by the
Board of Directors, the Treasurer shall have the following powers and duties:
(a) to have charge and supervision over and be responsible for the
moneys, securities, receipts and disbursements of the Corporation;
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<PAGE> 17
(b) to cause the moneys and other valuable effects of Corporation to be
deposited in the name and to the credit of the Corporation in such banks or
trust companies of with such other depositories as shall be selected in
accordance with Article IX of these By-Laws;
(c) to cause the moneys of the Corporation to be disbursed by checks or
drafts (signed as provided in Article X of these By-Laws) upon the authorized
depositories of the Corporation and cause to be taken and preserved proper
vouchers for all moneys disbursed;
(d) to render to the Board of Directors or the chief executive officer
whenever requested, a statement of the financial condition of the Corporation
and of all the financial transactions of the Corporation;
(e) to be empowered from time to time to require from all officers or
agents of the Corporation reports or statements giving such information as the
Treasurer may desire with respect to any and all financial transactions of the
Corporation; and
(f) to perform all duties incident to the office of Treasurer, and such
other duties as from time to time may be assigned to the Treasurer by the Board
of Directors, the chief executive officer or the President.
Section 11. The Secretary. Except as may otherwise be provided by the
Board of Directors, the Secretary shall have the following powers and duties:
(a) to keep or cause to be kept a record of all the proceedings of the
meetings of the stockholders and of the Board of Directors;
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<PAGE> 18
(b) to cause all notices to the Board of Directors and stockholders to
be duly given in accordance with the provisions of these By-Laws and as required
by law;
(c) to be the custodian of the records and of the seal of the
Corporation. The Secretary may cause such seal (or a facsimile thereof) to be
affixed to all instruments the execution of which on behalf of the Corporation
under its seal shall have been duly authorized in accordance with these By-Laws,
and when so affixed may attest the same;
(d) to have charge of the stock books and ledgers of the Corporation
and to cause the stock and transfer books to be kept in such manner as to show
at any time the number of shares of stock of the Corporation of each class
issued and outstanding, the names (alphabetically arranged) and the addresses of
the holders of record of such shares, the number of shares held by each holder
and the date as of which each became such holder of record;
(e) to perform, in general, all duties incident to the office of
Secretary and such other duties as may be given to the Secretary by these
By-Laws or as may be assigned to the Secretary from time to time by the Board of
Directors, the chief executive officer or the President; and
(f) to the extent consistent with law, the Secretary may from time to
time delegate performance of any one or more of the foregoing powers and duties,
or powers and duties otherwise conferred upon the Secretary by these By-Laws, to
one or more officers, agents or employees of the Corporation.
Section 12. Delegation of Duties. In the case of the absence of any
officer of the Corporation, or for any other reason that the Board may deem
sufficient, the Board may confer
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<PAGE> 19
for the time being the powers of duties, or any of them, of such officer upon
any other officer or upon any director.
Section 13. Authority and Duties of Officers. The officers of the
Corporation shall have such authority and shall exercise such powers and perform
such duties as may be specified in these By-Laws or to the extent not so
provided, by the chief executive officer and other officers acting pursuant to
the chief executive officer's authority, except that in any event each officer
shall exercise such powers and perform such duties as may be required by law.
The chief executive officer may at any time suspend any officer, other than an
officer who is a Director, from any duties and authority for a period not
exceeding 90 days.
ARTICLE V
Indemnification
(a) The Corporation shall indemnify or advance any expenses to
Directors and Officers to the extent permitted or required by the Maryland
General Corporation Law, provided, however, that the Corporation shall only be
required to indemnify or advance expenses to any person other than a Director,
to the extent specifically approved by resolution adopted by the Board of
Directors in accordance with applicable law.
(b) The indemnification provided hereunder shall continue as to a
person who has ceased to be a Director or Officer and shall inure to the benefit
of the heirs, executors and administrators of such a person. (
c) Nothing contained in this Article shall be construed to protect any
Director or officer of the Corporation against any liability to the Corporation
or its security holders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross
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<PAGE> 20
negligence or reckless disregard of duties involved in the conduct of his office
("Disabling Conduct"). The means for determining whether indemnification shall
be made shall be (i) a final decision on the merits by a court or other body
before whom the proceeding was brought that the person to be indemnified
("Indemnitee") was not liable by reason of Disabling Conduct, or (ii) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that the Indemnitee was not liable by reason of Disabling Conduct, by
(a) the vote of a majority of a quorum of Directors who are neither "interested
persons" of the Corporation nor parties to the proceeding ("Disinterested
Non-Party Directors"), (b) independent legal counsel in a written opinion.
(d) Nothing contained in this Article shall be construed to permit the
advancement of legal expenses for the defense of a proceeding brought by the
Corporation or its security holders against a Director or officer of the
Corporation unless an undertaking is furnished by or on behalf of the Indemnitee
to repay the advance unless it is ultimately determined that he is entitled to
indemnification, and the Indemnitee complies with at least one of the following
conditions: (i) the Indemnitee shall provide a security for his undertaking,
(ii) the Corporation shall be insured against losses arising by reason of any
lawful advances, or (iii) a majority of a quorum of the Disinterested Non-Party
Directors, or any independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the Indemnitee
ultimately will be found entitled to indemnification.
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ARTICLE VI
Capital Stock
Section 1. Stock Certificates. Each holder of stock of the Corporation
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the Board, representing the number of shares of
stock of the Corporation owned by him, provided, however, that certificates for
fractional shares will not be delivered in any case. The certificates
representing shares of stock shall be signed by or in the name of the
Corporation by the President or a Vice-President and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed with
the seal of the Corporation. Any or all of the signatures or the seal on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate shall be issued, it may be issued by the Corporation with the same
effect as if such officer, transfer agent or registrar were still in office at
the date of issue.
Section 2. Transfer of Shares. Transfer of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent or
transfer clerk, and on surrender of the certificate or certificates, if issued,
for such shares properly endorsed or accompanied by a duly executed stock
transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of such share or shares for all purposes, including,
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<PAGE> 22
without limitation, the rights to receive dividends or other distributions, and
to vote as such owner, and the Corporation shall not be bound to recognize any
equitable or legal claim to or interest in any such share or shares on the part
of any other person.
Section 3. Regulations. The board may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It any appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
Section 4. Lost, Destroyed or Mutilated Certificates. The holder of any
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof shall
allege to have been lost or destroyed or which shall have been mutilated, and
the Board may, in its discretion, require such owner or his legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
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Section 5. Fixing of a Record Date for Dividends and Distributions. The
Board may fix, in advance, a date not more than ninety days preceding the date
fixed for the payment of any dividend or the making of any distribution or the
allotment of rights to subscribe for securities of the Corporation, or for the
delivery of evidences of rights or evidence of interests arising out of any
change, conversion or exchange of common stock or other securities, as the
record date for the determination of the stockholders entitled to receive any
such dividend, distribution, allotment, rights or interests, and in such case
only the stockholders of record at the time so fixed shall be entitled to
receive such dividend, distribution, allotment, rights or interests.
ARTICLE VII
Seal
The seal of the Corporation shall be in the form adopted by the Board
of Directors. The seal may be used by causing it or a facsimile thereof to be
impressed, affixed or reproduced, or to place the word "(seal)" adjacent to the
signature of the authorized officer of the Corporation, or in any other lawful
manner.
ARTICLE VIII
Fiscal Year
Section 1. Fiscal Year. Unless otherwise determined by the Board, the
fiscal year of the Corporation shall end on the 31st day of December in each
year.
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<PAGE> 24
Section 2. Books and Records. Except to the extent otherwise required
by law, the books and records of the Corporation shall be kept at such place or
places (within or without the State of Maryland) as may be determined from time
to time by the Board of Directors.
ARTICLE IX
Depositories and Custodians
Section 1. Depositories. The funds of the Corporation shall be
deposited with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
Section 2. Custodians. All securities and other investments shall be
deposited in the safekeeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every arrangement
entered into with any bank or other company for the safekeeping of the
securities and investments of the Corporation shall contain provisions complying
with all applicable law, rules and regulations.
ARTICLE X
Execution of Instruments and Borrowing of Money
Section 1. Execution of Instruments. Except as may otherwise be
provided in a resolution adopted by the Board of Directors, the Chairman of the
Board, the President, or any Vice-President may enter into any contract or
execute and deliver any instrument and affix the corporate seal in the name and
on behalf of the Corporation. Any Vice-President designated by a
24
<PAGE> 25
number or a word or words added before or after the title Vice-President to
indicate rank or responsibilities, but not an Assistant Vice-President, shall be
a Vice-President for the purposes of this Article. The Board may authorize any
other officer, employee or agent to enter into any contract or execute and
deliver any instrument and affix the corporate seal in the name and on behalf of
the Corporation. Any such authorization may be general or limited to specific
contracts or instruments.
Section 2. Checks, Notes, Draft, etc. Checks, notes, drafts,
acceptances, bills of exchange and other orders or obligations for the payment
of money shall be signed by such officer of officers or person or persons as the
Board of Directors by resolution shall from time to time designate.
Section 3. Sale of Transfer of Securities. Stock certificates, bonds or
other securities at any time owned by the Corporation may be held on behalf of
the Corporation or sold, transferred or otherwise disposed of subject to any
limits imposed by Article VI of these By-Laws and pursuant to authorization by
the Board and, when so authorized to be held on behalf of the Corporation or
sold, transferred or otherwise disposed of, may be transferred from the name of
the Corporation by the signature of the President or a Vice-President or the
Treasurer or the Assistant Treasurer or the Secretary.
Section 4. Loans. No loan or advance shall be contracted on behalf of
the Corporation, and no note, bond or other evidence of indebtedness shall be
executed or delivered in its name, except as may be authorized by the Board of
Directors. Any such authorization may be general or limited to specific loans or
advances, or notes, bonds or other evidences of
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<PAGE> 26
indebtedness. Any officer or agent of the Corporation so authorized may effect
loans or advances on behalf of the Corporation and in return for any such loans
or advances may execute and deliver notes, bonds or other evidences of
indebtedness of the Corporation.
Section 5. Voting as Securityholder. The Chairman of the Board, the
President and such other person or persons as the Board of Directors may from
time to time authorize, shall each have full power and authority on behalf of
the Corporation, to attend any meeting of securityholders of any corporation in
which the Corporation may hold securities, and to act, vote (or execute proxies
to vote) and exercise in person or by proxy all other rights, powers and
privileges incident to the ownership of such securities, and to execute any
instruments expressing consent to or dissent from any action of any such
corporation without a meeting, subject to such restrictions or limitations as
the Board of Directors may from to time impose.
Section 6. Facsimile Signatures. The Board of Directors may authorize
the use of a facsimile signature or signatures on any instrument. If any officer
whose facsimile signature has been placed upon any form of instrument shall have
ceased to be such officer before such instrument is issued, such instrument may
be issued with the same effect as if such person had been such officer at the
time of its issue.
ARTICLE XI
Amendments
All By-Laws of the Corporation, whether adopted by the Board of
Directors or the stockholders, shall be subject to amendment or repeal, and new
By-Laws may be made, by the
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<PAGE> 27
affirmative vote of the holders of a majority of the outstanding shares of stock
of the Corporation entitled to vote. All By-Laws of the Corporation, other than
this Section and any other Section that provides it may be amended or repealed
only the stockholders, whether adopted by the Board of Directors or the
stockholder, shall be subject to amendment or repeal and new By-Laws may be made
by resolution adopted by a majority of the whole Board of Directors provided,
however that By-Laws which by their terms are subject to amendment or repeal
only the stockholders shall prevail over new By-Laws made by the Board of
Directors. Notwithstanding anything herein to the contrary, no amendment or
repeal of Article V of these By-Laws shall affect adversely any then existing
rights of any Director or Officer.
27
<PAGE> 1
[LOGO] Incorporated under the Laws of the State Of Maryland [LOGO]
NEW YORK LIFE MFA SERIES FUND, INC.
AUTHORIZED ISSUE 2,000,000,000 SHARES
PORTFOLIO
$100,000,000
PAR VALUE $.01 EACH
This Certifies that______________________________________________is the owner of
________________________________________________________________________________
fully paid and non-assessable Shares
of the Portfolio of New York Life MFA Series Fund, Inc.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized Attorney upon surrender of this Certificate properly
endorsed.
The Corporation will furnish to any stockholder, on request and without
charge, a full statement of the designations and any preferences, conversion,
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the stock of each
class which the Corporation is authorized to issue.
Witness the seal of the Corporation and the signatures of its
duly authorized officers.
Dated_________________________
______________________________ __________________________________
Secretary - Treasurer President
<PAGE> 1
(d)(1)
AMENDMENT
TO
MASTER INVESTMENT ADVISORY AGREEMENT
WHEREAS, MacKay-Shields Financial Corporation ("MacKay") is a party to a
master investment advisory agreement with the MainStay VP Series Fund, Inc.
(the "Fund") dated December 15, 1996 (the "Agreement");
WHEREAS, MacKay has converted from a corporation to a limited liability
company under Delaware law;
WHEREAS, New York Life Insurance Company, the ultimate parent of MacKay,
recommended to the Board of Directors of the Fund (the "Board") at its meeting
on August 17, 1999 that the Board approve an amendment to the Agreement to
reflect the conversion of MacKay to a limited liability corporation; and
WHEREAS, the Board did so approve such amendment;
NOW THEREFORE, the parties hereby agree as follows:
Effective as of October 1, 1999, the Agreement is hereby amended to delete
each reference to MacKay-Shields Financial Corporation in its entirety and
replace it with MacKay Shields LLC.
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be
executed by their duly authorized officers hereunto duly attested as of the
date and year written below.
Dated: November __, 1999
MainStay VP Series Fund, Inc.
By:
- ---------------------------- -----------------------------
Attest
- ---------------------------- -----------------------------
Title Title
<PAGE> 2
MacKay Shields LLC
By:
- ---------------------------- -----------------------------
Attest
- ---------------------------- -----------------------------
Title Title
<PAGE> 3
MASTER INVESTMENT ADVISORY AGREEMENT
Agreement, made as of the 15th day of December, 1996 between MainStay VP
Series Fund, Inc., a Maryland corporation (the "Company"), and MacKay-Shields
Financial Corporation (the "Adviser").
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the shares of common stock of the Company (the "Shares") are
divided into separate series (the "Funds"), each of which is established
pursuant to a written instrument executed by the Directors of the Company, and
the Directors may from time to time terminate such series or establish and
terminate additional Funds; and
WHEREAS, the Company desires to retain the Adviser to render investment
advisory services to the Company with regard to such Funds as shall be
designated in supplements to this Agreement, and the Adviser is willing to
render such services;
NOW, THEREFORE, the parties agree as follows:
1. Appointment. The Company hereby appoints the Adviser to sit as
investment adviser to such Funds as shall be designated in supplements to the
Agreement for the period and on the terms set forth in the Agreement. The
Adviser accepts such appointment and agrees to render the services herein
described, for the compensation herein provided.
2. Investment Advisory Services. Subject to the supervision of the
Directors of the Company, the Adviser shall manage the investment operations of
each Fund and the composition of the portfolio of each Fund, including the
purchase, retention and disposition thereof, in accordance with the investment
objectives, policies and restrictions specified in the currently effective
prospectus and statement of additional information (the "Prospectus") and
subject to the following understandings:
(a) The Adviser shall provide supervision of each Fund's
<PAGE> 4
investments and determine from time to time what investments or securities will
be purchased, retained, sold or lent by each Fund, and what portion of each
Funds's assets will be invested or held uninvested as cash.
(b) The Adviser shall use its best judgment in the performance of its
duties under this Agreement.
(c) The Adviser, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the Articles of Incorporation,
By-Laws and Prospectus of the Company and with the instructions and directions
of the Directors of the Company and will conform to and comply with the
requirements of the 1940 Act and all other applicable Federal and state laws
and regulations.
(d) The Adviser shall determine the securities to be purchased or sold by
each Fund and will place orders pursuant to its determinations with or through
such persons, brokers or dealers (including NYLIFE Securities Inc.) in
conformity with the policy with respect to brokerage as set forth in a Fund's
Prospectus or as the Directors may direct form time to time. It is recognized
that, in providing each Fund with investment supervision of the placing of
orders for portfolio transactions, the Adviser will give primary consideration
to securing the most favorable price and efficient execution. Consistent with
this policy, the Adviser may consider the financial responsibility, research and
investment information and other services provided by brokers or dealers who
may effect or be a party to any such transaction or other transactions to which
other clients of the Adviser may be a party. It is understood that neither the
Company nor the Adviser has adopted a formula for allocation of the Company's
investment transaction business. It is also understood that it is desirable for
the Company that the Adviser have access to supplemental investment and market
research and security and economic analyses provided by certain brokers who
may execute brokerage transactions at a higher cost to the Company than may
result when allocating brokerage to other brokers on the basis of seeking the
most favorable price and efficient execution. Therefore, the Adviser is
authorized to place orders for the purchase and sale of securities for each
Fund with such brokers, subject to review by the Company's Directors from time
to time with respect to the extent and continuation of this practice. It is
understood that the services provided by such brokers may be useful to the
Adviser in connection with its services to other clients.
-2-
<PAGE> 5
On occasions when the Adviser deems the purchase or sale of a security to
be in the best interest of the Funds as well as other clients, the Adviser, to
the extent permitted by applicable laws and regulations, may, but shall be
under no obligation to, aggregate the securities to be so sold or purchased in
order to obtain the most favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of the securities so purchased or
sold, as well as expenses incurred in the transaction, will be made by the
Adviser in the manner it considers to be the most equitable and consistent with
its fiduciary obligations to the Funds and to such other clients.
(e) The Adviser shall maintain all books and records with respect to the
Funds' securities transactions required by the provisions or rules or
regulations of the Securities and Exchange Commission (the "SEC") under Section
31(a) of the 1940 Act and shall render to the Company's Directors such periodic
and special reports as the Directors may reasonably request.
(f) The Adviser shall provide the Funds' Custodian on each business day
with information relating to the execution of all portfolio transactions
pursuant to standing instructions.
3. Authorization to Serve in Dual Capacities. The Adviser shall
authorize and permit any of its directors, officers and employees who may be
elected or appointed as Directors or officers of the Company to serve in the
capacities in which they are elected or appointed. Services to be furnished by
the Adviser under this Agreement amy be furnished through the medium of any of
such directors, officers, or employees.
4. Ownership of Records. The Advisor shall keep the Funds' books and
records required to be maintained by it pursuant to paragraph 2 hereof. The
Adviser agrees that all records which it maintains for the Funds are the
property of the Funds, and it will surrender promptly to the Funds any of such
records upon the Funds' request; provided that the Adviser may at its own
expense make and retain copies of such records. The Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2 as promulgated by the
Commission under the 1940 Act any such records as are required to be maintained
by the Adviser pursuant to paragraph 2 hereof.
5. Fees. In consideration of the services to be rendered by the Adviser
pursuant to this Agreement, each Fund shall pay the Adviser a monthly fee based
on the average daily value (as
-3-
<PAGE> 6
determined on each business day at the time set forth in the Prospectus of the
Fund for determining net asset value per share) of the net assets of the Fund
during the preceding month at the annual rates set forth in a supplement to this
Agreement with respect to each Fund. If the fees payable to the Adviser pursuant
to this paragraph 5 begin to accrue before the end of any month or if this
Agreement terminates before the end of any month, the fees for the period from
that date to the end of that month or from the beginning of that month to the
date of termination, as the case may be, shall be prorated according to the
proportion which the period bears to the full month in which the effectiveness
or termination occurs. For purposes of calculating the monthly fees, the value
of the net assets of a Fund shall be computed in the manner specified in the
Fund's Prospectus for the computation of net asset value. For purposes of this
Agreement, a "business day" is any day on which the New York Stock Exchange is
open for trading with the exception of Christmas Eve and the Friday after
Thanksgiving.
6. Expenses. During the term of this Agreement the Adviser will pay (i)
the salaries and expenses of all its personnel, and (ii) all expenses incurred
by it in managing the investment operations of each Fund other than those
assumed by the Administrator of the Company or the Company pursuant to the
Administration Agreement between the Company and the Administrator or by the
Administrator or other third party under a separate agreement or arrangement.
7. Liability. The Adviser shall not be liable for any error of judgment
for any loss suffered by the Funds in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
8. Duration and Termination. This Agreement shall continue in effect
with respect to each Fund for a period of one year from the date hereof and from
year to year thereafter, but only so long as such continuance is specifically
approved at least annually with respect to each Fund in conformity with the
requirements of the 1940 Act and the Rules thereunder; provided, however, that
this Agreement may be terminated with respect to a Fund at any time, without the
payment of any penalty, by vote of a majority of the Directors of the Company or
by vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of such Fund, or by the Adviser at any time, without the payment of
any
-4-
<PAGE> 7
penalty, upon sixty (60) days written notice to the other party. This Agreement
shall terminate automatically in the event of its assignment (as defined in the
1940 Act).
9. Services to Other Clients. Nothing in this Agreement shall limit or
restrict the right of any of the Adviser's directors, officers, or employees
who may also be a Director, officer or employee of the Company to engage in
other business or to devote his time and attention in part to management or
other aspects of any business, whether of a similar or a dissimilar nature, nor
limit or restrict the Adviser's right to engage in any other business or to
render services of any kind to any other corporation, trust, firm, individual or
association.
10. Use of Name. It is understood that the name "MainStay" or any
derivative thereof or logo associated with that name is the valuable property of
New York Life Insurance Company and its affiliates, and that the Company has the
right to use such name or derivative or logo only with the approval of New York
Life Insurance Company. Upon notification by New York Life Insurance Company to
cease to use such name, the Company (to the extent that it lawfully can) will
cease to use such name or any other name indicating that the Company is advised
by or otherwise connected with New York Life Insurance Company or any
organization which shall have succeeded to its business.
11. Miscellaneous. (a) Nothing herein will be construed as constituting
the Adviser as an agent of the Company.
(b) This agreement may be amended by mutual consent,
but the consent of each Fund, if required, must be obtained in conformity with
the requirements of the 1940 Act and the rules thereunder.
(c) Any notice or other communication required to be
given pursuant to this Agreement shall be deemed duly given if delivered or
mailed by registered mail, postage prepaid, (1) to the Adviser at 9 West 57th
Street, New York, New York 10019, Attention: Jeffrey Platt; or (2) to the
Company at 51 Madison Avenue, New York, New York 10010, Attention: President.
(d) This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(e) If any provision of this Agreement shall be
-5-
<PAGE> 8
held or made invalid by a court decision, statue, rule or otherwise, the
remainder of this Agreement shall not affected thereby and, to this
extent, the provisions of this Agreement shall be deemed to be severable.
(f) The captions in the Agreement are included
for convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
MainStay VP Series Fund, Inc.
By: /s/ Anne F. Pollock
--------------------------------
Name: Anne F. Pollack
Title: President
MacKay-Shields Financial Corporation
BY: /s/ Ravi Akhoury
--------------------------------
Name: Ravi Akhoury
Title: Chairman and CEO
-6-
<PAGE> 9
AMENDMENT
TO
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
WHEREAS, MacKay-Shields Financial Corporation ("MacKay") is a party to a
master investment advisory agreement with the MainStay VP Series Fund, Inc.
(the "Fund") dated December 15, 1996 (the "Agreement");
WHEREAS, MacKay also is a party to a supplement to the Agreement dated
December 15, 1996 on behalf of the Capital Appreciation Portfolio (the
"Supplement");
WHEREAS, MacKay has converted from a corporation to a limited liability
company under Delaware law;
WHEREAS, New York Life Insurance Company, the ultimate parent of MacKay,
recommended to the Board of Directors of the Fund (the "Board") at its meeting
on August 17, 1999 that the Board approve an amendment to the Agreement to
reflect the conversion of MacKay to a limited liability corporation; and
WHEREAS, the Board did so approve such amendment;
NOW THEREFORE, the parties hereby agree as follows:
Effective as of October 1, 1999, the Supplement is hereby amended to
delete each reference to MacKay-Shields Financial Corporation in its entirety
and replace it with MacKay Shields LLC.
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be
executed by their duly authorized officers hereunto duly attested as of the
date and year written below.
Dated: November , 1999.
------
MainStay VP Series Fund, Inc.
- ------------------------- By:
Attest ---------------------------
- ------------------------- ---------------------------
Title Title
<PAGE> 10
MacKay Shields LLC
By:
- ------------------------- ------------------------
Attest
- ------------------------- ------------------------
Title Title
<PAGE> 11
MainStay VP SERIES FUND, INC.
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
CAPITAL APPRECIATION PORTFOLIO
AGREEMENT made as of the 15th day of December, 1996, by and between
MainStay VP Series Fund, Inc. (the "Company") and MacKay-Shields Financial
Corporation (the "Adviser").
WHEREAS, the Company is an open-end management investment company,
organized as a Maryland corporation, and consists of such separate investment
series as have been or may be established and designated by the Directors of
the Company from time to time;
WHEREAS, a separate class of shares of the Company is offered to
investors with respect to each investment series;
WHEREAS, the Company has adopted a Master Investment Advisory Agreement
("Master Agreement") dated December 15, 1996, pursuant to which the Company has
appointed the Adviser to provide the investment advisory services specified in
that Master Agreement; and
WHEREAS, Capital Appreciation Portfolio (the "Fund") is a separate
investment series of the Company.
NOW, THEREFORE, the Directors of the Company hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Company hereby adopts the
Master Agreement with respect to the Fund, and the adviser hereby acknowledges
that the Master Agreement shall pertain to the Fund, the terms and conditions of
such Master Agreement being hereby incorporated herein by reference.
2. The Term "Fund" as used in the Agreement shall, for purposes of this
Supplement, pertain to the Fund.
3. As provided in the Master Agreement and subject to further conditions
as set forth therein, the Fund shall pay the Adviser a monthly fee based upon
the average daily value (as
<PAGE> 12
determined on each business day at the time set forth in the Prospectus for
determining net asset value per share) of the net assets of the fund during the
preceding month at the annual rate of 0.36% of the Fund's average daily net
assets.
4. This Supplement and the Master Agreement (together, the "Agreement")
shall become effective with respect to the Fund on December 15, 1996 and shall
continue in effect with respect to the Fund for a period of one year from the
date hereof and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually in conformity with the
requirements of the Investment Company Act of 1940 (the "1940 Act") and the
rules thereunder. This Agreement may be terminated with respect to the Fund at
any time, without payment of any penalty, by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act) or by
vote of a majority of the Company's Board of Directors, or by the Adviser at any
time, without the payment of any penalty, on not more than sixty (60) days' nor
less than thirty (30) days' written notice to the other party. This Agreement
shall terminate automatically in the event of its assignment (as defined in the
1940 Act).
MAINSTAY VP SERIES FUND, INC., on behalf
of CAPITAL APPRECIATION PORTFOLIO
By: /s/ ANNE F. POLLACK
--------------------------
Name: Anne F. Pollack
Title: President
MACKAY-SHIELDS FINANCIAL CORPORATION
By: /s/ RAVI AKHOURY
--------------------------
Name: Ravi Akhoury
Title: Chairman and CEO
-2-
<PAGE> 13
AMENDMENT
TO
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
WHEREAS, MacKay-Shields Financial Corporation ("MacKay") is a party to a
master investment advisory agreement with the MainStay VP Series Fund, Inc. (the
"Fund") dated December 15, 1996 (the "Agreement");
WHEREAS, MacKay also is a party to a supplement to the Agreement dated
December 15, 1996 on behalf of the Cash Management Portfolio (the "Supplement");
WHEREAS, MacKay has converted from a corporation to a limited liability
company under Delaware law;
WHEREAS, New York Life Insurance Company, the ultimate parent of MacKay,
recommended to the Board of Directors of the Fund (the "Board") at its meeting
on August 17, 1999 that the Board approve an amendment to the Agreement to
reflect the conversion of MacKay to a limited liability corporation; and
WHEREAS, the Board did so approve such amendment;
NOW THEREFORE, the parties hereby agree as follows:
Effective as of October 1, 1999, the Supplement is hereby amended to
delete each reference to MacKay-Shields Financial Corporation in its
entirety and replace it with MacKay Shields LLC.
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be
executed by their duly authorized officers hereunto duly attested as of the date
and year written below.
Dated: November __, 1999.
MainStay VP Series Fund, Inc.
By:
- -------------------- --------------------
Attest
- -------------------- --------------------
Title Title
<PAGE> 14
MacKay Shields LLC
By:
- -------------------- --------------------
Attest
- -------------------- --------------------
Title Title
<PAGE> 15
MAINSTAY VP SERIES FUND, INC.
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
CASH MANAGEMENT PORTFOLIO
AGREEMENT made as of the 15th day of December, 1996, by and between
MainStay VP Series Fund, Inc. (the "Company") and MacKay-Shields Financial
Corporation (the "Adviser").
WHEREAS, the Company is an open-end management investment company,
organized as a Maryland corporation, and consists of such separate investment
series as have been or may be established and designated by the Directors of the
Company from time to time;
WHEREAS, a separate class of shares of the Company is offered to
investors with respect to each investment series;
WHEREAS, the Company has adopted a Master Investment Advisory Agreement
("Master Agreement") dated December 15, 1996, pursuant to which the Company has
appointed the Adviser to provide the investment advisory services specified in
that Master Agreement; and
WHEREAS, Cash Management Portfolio (the "Fund") is a separate investment
series of the Company.
NOW, THEREFORE, the Directors of the Company hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Company hereby adopts
the Master Agreement with respect to the Fund, and the Adviser hereby
acknowledges that the Master Agreement shall pertain to the Fund, the terms and
conditions of such Master Agreement being hereby incorporated herein by
reference.
2. The term "Fund" as used in the Agreement shall, for purposes of
this Supplement, pertain to the Fund.
3. As provided in the Master Agreement and subject to further
conditions as set forth therein, the Fund shall pay the Adviser a monthly fee
based upon the average daily value (as
<PAGE> 16
determined on each business day at the time set forth in the Prospectus for
determining net asset value per share) of the net assets of the Fund during the
preceding month at the annual rate of 0.25% of the Fund's average daily net
assets.
4. This supplement and the Master Agreement (together, the
"Agreement") shall become effective with respect to the Fund on December 15,
1996 and shall continue in effect with respect to the Fund for a period of one
year from the date hereof and from year to year thereafter, but only so long as
such continuance is specifically approved at least annually in conformity with
the requirements of the Investment Company Act of 1940 (the "1940 Act") and the
rules thereunder. This agreement may be terminated with respect to the Fund at
any time, without payment of any penalty, by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act) or by
vote of a majority of the Company's Board of Directors, or by the Adviser at any
time, without the payment of any penalty, on not more than sixty (60) days' nor
less than thirty (30) days' written notice to the other party. This Agreement
shall terminate automatically in the event of its assignment (as defined in the
1940 Act).
MAINSTAY VP SERIES FUND, INC., on behalf
of CASH MANAGEMENT PORTFOLIO
By: /s/ ANNE F. POLLACK
--------------------------
Name: Anne F. Pollack
Title: President
MACKAY-SHIELDS FINANCIAL CORPORATION
By: /s/ RAVI AKHOURY
--------------------------
Name: Ravi Akhoury
Title: Chairman and CEO
-2-
<PAGE> 17
AMENDMENT
TO
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
WHEREAS, MacKay-Shields Financial Corporation ("MacKay") is a party to a
master investment advisory agreement with the MainStay VP Series Fund, Inc.
(the "Fund") dated December 14, 1994 (the "Agreement"), which Agreement was
restated as of December 15, 1996;
WHEREAS, MacKay also is a party to a supplement to the Agreement dated
August 22, 1996 on behalf of the Convertible Portfolio (the "Supplement");
WHEREAS, MacKay has converted form a corporation to a limited liability
company under Delaware law;
WHEREAS, New York Life Insurance Company, the ultimate parent of MacKay,
recommended to the Board of Directors of the Fund (the "Board") at its meeting
on August 17, 1999 that the Board approve an amendment to the Agreement to
reflect the conversion of MacKay to a limited liability corporation; and
WHEREAS, the Board did so approve such amendment;
NOW THEREFORE, the parties hereby agree as follows:
Effective as of October 1, 1999, the Supplement is hereby amended to delete
each reference to MacKay-Shields Financial Corporation in its entirety and
replace it with MacKay Shields LLC.
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be
executed by their duly authorized officers hereunto duly attested as of the
date and year written below.
Dated:November __, 1999.
MainStay VP Series Fund, Inc.
___________________________ By: _____________________________
Attest
___________________________ _____________________________
Title Title
<PAGE> 18
MacKay Shields LLC
___________________________ By: ______________________________
Attest
___________________________ ______________________________
Title Title
<PAGE> 19
NEW YORK LIFE MFA SERIES FUND, INC.
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
CONVERTIBLE PORTFOLIO
AGREEMENT made as of the 22nd day of August, 1996, by and
between New York Life MFA Series Fund, Inc. (the "Company") and
MacKay-Shields Financial Corporation (the "Adviser").
WHEREAS, the Company is an open-end management investment
company, organized as a Maryland corporation, and consists of such
separate investment series as have been or may be established and
designated by the Directors of the Company from time to time;
WHEREAS, a separate class of shares of the Company is offered
to investors with respect to each investment series;
WHEREAS, the Company has adopted a Master Investment Advisory
Agreement ("Master Agreement ") dated December 15, 1994, pursuant
to which the Company has appointed the Adviser to provide the
investment advisory services specified in that Master Agreement;
and
WHEREAS, Convertible Portfolio (the "Fund") is a separate
investment series of the Company.
NOW, THEREFORE, the Directors of the Company hereby take the
following actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Company
hereby adopts the Master Agreement with respect to the Fund, and
the Adviser hereby acknowledges that the Master Agreement shall
pertain to the Fund, the terms and conditions of such Master
Agreement being hereby incorporated herein by reference.
2. The term "Fund" as used in the Agreement shall, for
purposes of this Supplement, pertain to the Fund.
3. As provided in the Master Agreement and subject to
further conditions as set forth therein, the Fund shall pay the
Adviser a monthly fee based upon the average daily value (as
<PAGE> 20
determined on each business day at the time set forth in the
Prospectus for determining net asset value per share) of the net
assets of the Fund during the preceding month at the annual rate of
0.36% of the Fund's average daily net assets.
4. This Supplement and the Master Agreement (together, the
"Agreement") shall become effective with respect to the Fund on
August 22,1996 and shall continue in effect with respect to the
Fund until December 15, 1997, and from year to year thereafter only
so long as the continuance is specifically approved at least
annually in conformity with the requirements of the Investment
Company Act of 1940 (the "1940 Act") and the rules thereunder. This
Agreement may be terminated with respect to the Fund at any time,
without payment of any penalty, by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940
Act) or by vote of a majority of the Company's Board of Directors,
or by the Adviser at any time, without the payment of any penalty,
on not more than sixty (60) days' nor less than thirty (30) days'
written notice to the other party. This Agreement shall terminate
automatically in the event of its assignment (as defined in the
1940 Act).
NEW YORK LIFE MFA SERIES FUND, INC., on
behalf of CONVERTIBLE PORTFOLIO
By: _________________________________
Title: President
MACKAY-SHEILDS FINANCIAL CORPORATION
By: _________________________________
Title: CEO
<PAGE> 21
AMENDMENT
TO
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
WHEREAS, MacKay-Shields Financial Corporation ("MacKay") is a party to a
master investment advisory agreement with the MainStay VP Series Fund, Inc. (the
"Fund") dated December 15, 1996 (the "Agreement");
WHEREAS, MacKay also is a party to a supplement to the Agreement dated
December 15, 1996 on behalf of the Government Portfolio (the "Supplement");
WHEREAS, MacKay has converted from a corporation to a limited liability
company under Delaware law;
WHEREAS, New York Life Insurance Company, the ultimate parent of MacKay,
recommended to the Board of Directors of the Fund (the "Board") at its meeting
on August 17, 1999 that the Board approve an amendment to the Agreement to
reflect the conversion of MacKay to a limited liability corporation; and
WHEREAS, the Board did so approve such amendment;
NOW THEREFORE, the parties hereby agree as follows:
Effective as of October 1, 1999, the Supplement is hereby amended to delete
each reference to MacKay-Shields Financial Corporation in its entirety and
replace it with MacKay Shileds LLC.
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be
executed by their duly authorized officers hereunto duly attested as of the date
and year written below.
Dated: November __, 1999.
MainStay VP Series Fund, Inc.
_____________________________ By: ______________________________
Attest
_____________________________ ______________________________
Title Title
<PAGE> 22
MacKay Shields LLC
_____________________________ By: ____________________________________
Attest
_____________________________ ____________________________________
Title Title
<PAGE> 23
MAINSTAY VP SERIES FUND, INC.
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
GOVERNMENT PORTFOLIO
AGREEMENT made as of the 15th day of December, 1996, by and between MainStay
VP Series Fund, Inc. (the "Company") and MacKay-Shields Financial Corporation
(the "Adviser").
WHEREAS, the Company is an open-end management investment company, organized
as a Maryland corporation, and consists of such separate investment series as
have been or may be established and designated by the Directors of the Company
from time to time;
WHEREAS, a separate class of shares of the Company is offered to investors
with respect to each investment series;
WHEREAS, the Company has adopted a Master Investment Advisory Agreement
("Master Agreement") dated December 15, 1996, pursuant to which the Company has
appointed the Adviser to provide the investment advisory services specified in
that Master Agreement; and
WHEREAS, Government Portfolio (the "Fund") is a separate investment series
of the Company.
NOW, THEREFORE, the Directors of the Company hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Company hereby adopts the
Master Agreement with respect to the Fund, and the Adviser hereby acknowledges
that the Master Agreement shall pertain to the Fund, the terms and conditions of
such Master Agreement being hereby incorporated herein by reference.
2. The term "Fund" as used in the Agreement shall, for purposes of this
Supplement, pertain to the Fund.
3. As provided in the Master Agreement and subject to further conditions as
set forth therein, the Fund shall pay the Adviser a monthly fee based upon the
average daily value (as
<PAGE> 24
determined on each business day at the time set forth in the Prospectus for
determining net asset value per share) of the net assets of the Fund during the
preceding month at the annual rate of 0.30% of the Fund's average daily net
assets.
4. This Supplement and the Master Agreement (together, the "Agreement")
shall become effective with respect to the Fund on December 15, 1996 and shall
continue in effect with respect to the Fund for a period of one year from the
date hereof and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually in conformity with the
requirements of the Investment Company Act of 1940 (the "1940 Act") and the
rules thereunder. This Agreement may be terminated with respect to the Fund at
any time, without payment of any penalty, by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act) or by
vote of a majority of the Company's Board of Directors, or by the Adviser at
any time, without the payment of any penalty, on not more than sixty (60) days'
nor less than thirty (30) days' written notice to the other party. This
Agreement shall terminate automatically in the event of its assignment (as
defined in the 1940 Act).
MAINSTAY VP SERIES FUND, INC., on behalf
of GOVERNMENT PORTFOLIO
By: /s/ ANNE F. POLLACK
------------------------------------
Name: Anne F. Pollack
Title: President
MACKAY-SHIELDS FINANCIAL CORPORATION
By: /s/ RAVI AKHOURY
------------------------------------
Name: Ravi Akhoury
Title: Chairman and CEO
-2-
<PAGE> 25
AMENDMENT
TO
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
WHEREAS, MacKay-Shields Financial Corporation ("MacKay") is a party to a
master investment advisory agreement with the MainStay VP Series Fund, Inc. (the
"Fund") dated December 15, 1996 (the "Agreement");
WHEREAS, MacKay also is a party to a supplement to the Agreement dated
December 15, 1996 on behalf of the High Yield Corporate Bond Portfolio (the
"Supplement");
WHEREAS, MacKay has converted from a corporation to a limited liability
company under Delaware law;
WHEREAS, New York Life Insurance Company, the ultimate parent of MacKay,
recommended to the Board of Directors of the Fund (the "Board") at its meeting
on August 17, 1999 that the Board approve an amendment to the Agreement to
reflect the conversion of MacKay to a limited liability corporation; and
WHEREAS, the Board did so approve such amendment;
NOW THEREFORE, the parties hereby agree as follows:
Effective as of October 1, 1999, the Supplement is hereby amended to delete
each reference to MacKay-Shields Financial Corporation in its entirety and
replace it with MacKay Shields LLC.
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be
executed by their duly authorized officers hereunto duly attested as of the date
and year written below.
Date: November __, 1999.
MainStay VP Series Fund, Inc.
By:
- --------------------------- ---------------------------------
Attest
- --------------------------- ---------------------------------
Title Title
<PAGE> 26
MacKay Shields LLC
By:
- --------------------------- ---------------------------------
Attest
- --------------------------- ---------------------------------
Title Title
<PAGE> 27
MAINSTAY VP SERIES FUND, INC.
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
HIGH YIELD CORPORATE BOND PORTFOLIO
AGREEMENT made as of the 15th day of December, 1996, by and between MainStay
VP Series Fund, Inc. (the "Company") and MacKay-Shields Financial Corporation
(the "Adviser").
WHEREAS, the Company is an open-end management investment company, organized
as a Maryland corporation, and consists of such separate investment series as
have been or may be established and designated by the Directors of the Company
from time to time;
WHEREAS, a separate class of shares of the Company is offered to investors
with respect to each investment series;
WHEREAS, the Company has adopted a Master Investment Advisory Agreement
("Master Agreement") dated December 15, 1996, pursuant to which the Company has
appointed the Adviser to provide the investment advisory services specified in
that Master Agreement; and
WHEREAS, High Yield Corporate Bond Portfolio (the "Fund") is a separate
investment series of the Company.
NOW, THEREFORE, the Directors of the Company hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Company hereby adopts the
Master Agreement with respect to the Fund, and the Adviser hereby acknowledges
that the Master Agreement shall pertain to the Fund, the terms and conditions of
such Master Agreement being hereby incorporated herein by reference.
2. The term "Fund" as used in the Agreement shall, for purposes of this
Supplement, pertain to the Fund.
3. As provided in the Master Agreement and subject to further conditions as
set forth therein, the Fund shall pay the Adviser a monthly fee based upon the
average daily value (as
<PAGE> 28
determined on each business day at the time set forth in the Prospectus for
determining net asset value per share) of the net assets of the Fund during the
preceding month at the annual rate of 0.30% of the Fund's average daily net
assets.
4. This Supplement and the Master Agreement (together, the "Agreement")
shall become effective with respect to the Fund on December 15, 1996 and shall
continue in effect with respect to the Fund for a period of one year from the
date hereof and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually in conformity with the
requirements of the Investment Company Act of 1940 (the "1940 Act") and the
rules thereunder. This Agreement may be terminated with respect to the Fund at
any time, without payment of any penalty, by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act) or by
vote of a majority of the Company's Board of Directors, or by the Adviser at any
time, without the payment of any penalty, on not more than sixty (60) days' nor
less than thirty (30) days' written notice to the other party. This Agreement
shall terminate automatically in the event of its assignment (as defined in the
1940 Act).
MAINSTAY VP SERIES FUND, INC., on behalf
of HIGH YIELD CORPORATE BOND PORTFOLIO
By: /s/ ANNE F. POLLACK
------------------------------------
NAME: Anne F. Pollack
TITLE: President
MACKAY-SHIELDS FINANCIAL CORPORATION
By: /s/ RAVI AKHOURY
-------------------------------------
NAME: Ravi Akhoury
TITLE: Chairman and CEO
-2-
<PAGE> 29
AMENDMENT
TO
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
WHEREAS, MacKay-Shields Financial Corporation ("MacKay") is a party to a
master investment advisory agreement with the MainStay VP Series Fund, Inc. (the
"Fund") dated December 15, 1996 (the "Agreement");
WHEREAS, MacKay also is a party to a supplement to the Agreement dated
December 15, 1996 on behalf of the International Equity Portfolio (the
"Supplement");
WHEREAS, MacKay has converted from a corporation to a limited liability
company under Delaware law;
WHEREAS, New York Life Insurance Company, the ultimate parent of MacKay,
recommended to the Board of Directors of the Fund (the "Board") at its meeting
on August 17, 1999 that the Board approve an amendment to the Agreement to
reflect the conversion of MacKay to a limited liability corporation; and
WHEREAS, the Board did so approve such amendment;
NOW THEREFORE, the parties hereby agree as follows:
Effective as of October 1, 1999, the Supplement is hereby amended to delete
each reference to MacKay-Shields Financial Corporation in its entirety and
replace it with MacKay Shields LLC.
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be
executed by their duly authorized officers hereunto daily attested as of the
date and year written below.
Dated November__, 1999.
MainStay VP Series Fund, Inc.
By:
- ---------------------------- ----------------------------
Attest
- ---------------------------- ----------------------------
Title Title
<PAGE> 30
MacKay Shields LLC
By:
- ---------------------------- ----------------------------
Attest
- ---------------------------- ----------------------------
Title Title
<PAGE> 31
MAINSTAY VP SERIES FUND, INC.
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
INTERNATIONAL EQUITY PORTFOLIO
AGREEMENT made as of the 15th day of December, 1996, by and between
MainStay VP Series Fund, Inc. (the "Company") and MacKay-Shields Financial
Corporation (the "Adviser").
WHEREAS, the Company is an open-end management investment company,
organized as a Maryland corporation, and consists of such separate investment
series as have been or may be established and designated by the Directors of the
Company from time to time;
WHEREAS, a separate class of shares of the Company is offered to investors
with respect to each investment series;
WHEREAS, the Company has adopted a Master Investment Advisory Agreement
("Master Agreement") dated December 15, 1996, pursuant to which the Company has
appointed the Adviser to provide the investment advisory services specified in
that Master Agreement; and
WHEREAS, International Equity Portfolio (the "Fund") is a separate
investment series of the Company.
NOW, THEREFORE, the Directors of the Company hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Company hereby adopts the
Master Agreement with respect to the Fund, and the Adviser hereby acknowledges
that the Master Agreement shall pertain to the Fund, the terms and conditions of
such Master Agreement being hereby incorporated herein by reference.
2. The term "Fund" as used in the Agreement shall, for purposes of this
Supplement, pertain to the Fund.
3. As provided in the Master Agreement and subject to further conditions
as set forth therein, the Fund shall pay the Adviser a monthly fee based upon
the average daily value (as
<PAGE> 32
determined on each business day at the time set forth in the Prospectus for
determining net asset value per share) of the net assets of the Fund during the
preceding month at the annual rate of 0.60% of the Fund's average daily net
assets.
4. This Supplement and the Master Agreement (together, the "Agreement")
shall become effective with respect to the Fund on December 15, 1996 and shall
continue in effect with respect to the Fund for a period of one year from the
date hereof and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually in conformity with the
requirements of the Investment Company Act of 1940 (the "1940 Act") and the
rules thereunder. This Agreement may be terminated with respect to the Fund at
any time, without payment of any penalty, by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act) or by
vote of a majority of the Company's Board of Directors, or by the Adviser at any
time, without the payment of any penalty, on not more than sixty (60) days' nor
less than thirty (30) days' written notice to the other party. This Agreement
shall terminate automatically in the event of its assignment (as defined in the
1940 Act).
MAINSTAY VP SERIES FUND, INC., on behalf
of INTERNATIONAL EQUITY PORTFOLIO
By: /s/ ANNE F. POLLACK
-------------------------------------
Name: Anne F. Pollack
Title: President
MACKAY-SHIELDS FINANCIAL CORPORATION
By: /s/ RAVI AKHOURY
-------------------------------------
Name: Ravi Akhoury
Title: Chairman and CEO
-2-
<PAGE> 33
AMENDMENT
TO
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
WHEREAS, MacKay-Shields Financial Corporation ("MacKay") is a party to a
master investment advisory agreement with the MainStay VP Series Fund, Inc. (the
"Fund") dated December 15, 1996 (the "Agreement");
WHEREAS, MacKay also is a party to a supplement to the Agreement dated
December 15, 1996, on behalf of the Total Return Portfolio (the "Supplement");
WHEREAS, MacKay has converted from a corporation to a limited liability
company under Delaware law;
WHEREAS, New York Life Insurance Company, the ultimate parent of MacKay,
recommended to the Board of Directors of the Fund (the "Board") at its meeting
on August 17, 1999 that the Board approve an amendment to the Agreement to
reflect the conversion of MacKay to a limited liability corporation; and
WHEREAS, the Board did so approve such amendment;
NOW THEREFORE, the parties hereby agree as follows:
Effective as of October 1, 1999, the Supplement is hereby amended to delete
each reference to MacKay-Shields Financial Corporation in its entirety and
replace it with MacKay Shields LLC.
IN WITNESS WHEREOF, the parties hereto have cause this amendment to be
executed by their duly authorized officers hereunto duly attested as of the date
and year written below.
Dated: November __, 1999.
MainStay VP Series Fund, Inc.
________________________________ By: __________________________________
Attest
________________________________ __________________________________
Title Title
<PAGE> 34
MacKay Shields LLC
_____________________________ By: _________________________________
Attest
_____________________________ _________________________________
Title Title
<PAGE> 35
MAINSTAY VP SERIES FUND, INC.
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
TOTAL RETURN PORTFOLIO
AGREEMENT made as of the 15th day of December, 1996, by and
between MainStay VP Series Fund, Inc. (the "Company") and
MacKay-Shields Financial Corporation (the "Adviser").
WHEREAS, the Company is an open-end management investment
company, organized as a Maryland corporation, and consists of such
separate investment series as have been or may be established and
designated by the Directors of the Company from time to time;
WHEREAS, a separate class of shares of the Company is offered
to investors with respect to each investment series;
WHEREAS, the Company has adopted a Master Investment Advisory
Agreement ("Master Agreement") dated December 15, 1996, pursuant to
which the Company has appointed the Adviser to provide the
investment advisory services specified in that Master Agreement;
and
WHEREAS, Total Return Portfolio (the "Fund") is a separate
investment series of the Company.
NOW, THEREFORE, the Directors of the Company hereby take the
following actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Company
hereby adopts the Master Agreement with respect to the Fund, and the Adviser
hereby acknowledges that the Master Agreement shall pertain to the Fund, the
terms and conditions of such Master Agreement being hereby incorporated herein
by reference.
2. The term "Fund" as used in the Agreement shall, for
purposes of this Supplement, pertain to the Fund
3. As provided in the Master Agreement and subject to
further conditions as set forth therein, the Fund shall pay the
Adviser a monthly fee based upon the average daily value (as
<PAGE> 36
determined on each business day at the time set forth in the
Prospectus for determining net asset value per share) of the net
assets of the Fund during the preceding month at the annual rate of
0.32% of the Fund's average daily net assets.
4. This Supplement and the Master Agreement (together, the
"Agreement") shall become effective with respect to the Fund on
December 15, 1996 and shall continue in effect with respect to the
Fund for a period of one year from the date hereof and from year to
year thereafter, but only so long as such continuance is
specifically approved at least annually in conformity with the
requirements of the Investment Company Act of 1940 (the "1940
Act") and the rules thereunder. This Agreement may be terminated with
respect to the Fund at any time, without payment of any penalty, by
vote of a majority of the outstanding voting securities of the Fund
(as defined in the 1940 Act) or by vote of a majority of the
Company's Board of Directors, or by the Adviser at any time,
without the payment of any penalty, on not more than sixty (60)
days' nor less than thirty (30) days' written notice to the other
party. This Agreement shall terminate automatically in the event of
its assignment (as defined in the 1940 Act).
MAINSTAY VP SERIES FUND, INC., on behalf
of TOTAL RETURN PORTFOLIO
By: /s/ ANNE F. POLLACK
-------------------------------------
Name: Anne F. Pollack
Title: President
MACKAY-SHIELDS FINANCIAL CORPORATION
By: /s/ RAVI AKHOURY
------------------------------------
Name: Ravi Akhoury
Title: Chairman and CEO
-2-
<PAGE> 37
AMENDMENT
TO
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
WHEREAS, MacKay-Shields Financial Corporation ("MacKay") is a party to a
master investment advisory agreement with the MainStay VP Series Fund, Inc. (the
"Fund") dated December 15, 1996 (the "Agreement");
WHEREAS, MacKay also is a party to a supplement to the Agreement dated
December 15, 1996 on behalf of the Value Portfolio (the "Supplement");
WHEREAS, MacKay has converted from a corporation to a limited liability
company under Delaware law;
WHEREAS, New York Life Insurance Company, the ultimate parent of MacKay,
recommended to the Board of Directors of the Fund (the "Board") at its meeting
on August 17, 1999 that the Board approve an amendment to the Agreement to
reflect the conversion of MacKay to a limited liability corporation; and
WHEREAS, the Board did so approve such amendment;
NOW THEREFORE, the parties hereby agree as follows:
Effective as of October 1, 1999, the Supplement is hereby amended to delete
each reference to MacKay-Shields Financial Corporation in its entirety and
replace it with MacKay Shields LLC.
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be
executed by their duly authorized officers hereunto duly attested as of the date
and year written below.
Dated: November __, 1999.
MainStay VP Series Fund, Inc.
________________________________ By: _____________________________
Attest
________________________________ _____________________________
Title Title
<PAGE> 38
MacKay Shields LLC
- ------------------------------ By: -------------------------------
Attest
- ------------------------------ -------------------------------
Title Title
<PAGE> 39
MAINSTAY VP SERIES FUND, INC.
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
VALUE PORTFOLIO
AGREEMENT made as of the 15th day of December, 1996, by and between
MainStay VP Series Fund, Inc. (the "Company") and MacKay-Shields Financial
Corporation (the "Adviser").
WHEREAS, the Company is an open-end management investment company,
organized as a Maryland corporation, and consists of such separate investment
series as have been or may be established and designated by the Directors of the
Company from time to time;
WHEREAS, a separate class of shares of the Company is offered to investors
with respect to each investment series;
WHEREAS, the Company has adopted a Master Investment Advisory Agreement
("Master Agreement") dated December 15, 1996, pursuant to which the Company has
appointed the Adviser to provide the investment advisory services specified in
that Master Agreement; and
WHEREAS, Value Portfolio (the "Fund") is a separate investment series of
the Company.
NOW, THEREFORE, the Directors of the Company hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Company hereby adopts the
Master Agreement with respect to the Fund, and the Adviser hereby acknowledges
that the Master Agreement shall pertain to the Fund, the terms and conditions of
such Master Agreement being hereby incorporated herein by reference.
2. The term "Fund" as used in the Agreement shall, for purposes of this
Supplement, pertain to the Fund.
3. As provided in the Master Agreement and subject to further conditions
as set forth therein, the Fund shall pay the Adviser a monthly fee based upon
the average daily value (as
<PAGE> 40
determined on each business day at the time set forth in the Prospectus for
determining net asset value per share) of the net assets of the Fund during the
preceding month at the annual rate of 0.36% of the Fund's average daily net
assets.
4. This Supplement and the Master Agreement (together, the "Agreement")
shall become effective with respect to the Fund on December 15, 1996 and shall
continue in effect with respect to the Fund for a period of one year from the
date hereof and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually in conformity with the
requirements of the Investment Company Act of 1940 (the "1940 Act") and the
rules thereunder. This Agreement may be terminated with respect to the Fund at
any time, without payment of any penalty, by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act) or by
vote of a majority or the Company's Board of Directors, or by the Adviser at any
time, without the payment of any penalty, on not more than sixty (60) days' nor
less than thirty (30) days' written notice to the other party. This Agreement
shall terminate automatically in the event of its assignment (as defined in the
1940 Act).
MAINSTAY VP SERIES FUND, INC., on behalf
of VALUE PORTFOLIO
By: /s/ ANNE F. POLLACK
-------------------------------------
Name: Anne F. Pollack
Title: President
MACKAY-SHIELDS FINANCIAL CORPORATION
By: /s/ RAVI AKHOURY
-------------------------------------
Name: Ravi Akhoury
Title: Chairman and CEO
-2-
<PAGE> 1
(d)(2)
AMENDMENT
TO
MASTER INVESTMENT ADVISORY AGREEMENT
WHEREAS, Monitor Capital Advisors, Inc. ("Monitor") is a party to a master
investment advisory agreement with the MainStay VP Series Fund, Inc. (the
"Fund") dated December 15, 1996 (the "Agreement");
WHEREAS, Monitor has converted from a corporation to a limited liability
company under Delaware law;
WHEREAS, New York Life Insurance Company, the ultimate parent of Monitor,
recommended to the Board of Directors of the Fund (the "Board") at its meeting
on August 17, 1999 that the Board approve an amendment to the Agreement to
reflect the conversion of Monitor to a limited liability corporation; and
WHEREAS, the Board did so approve such amendment;
NOW THEREFORE, the parties hereby agree as follows:
Effective as of October 1, 1999, the Agreement is hereby amended to delete
each reference to Monitor Capital Advisors, Inc. in its entirety and
replace it with Monitor Capital Advisors LLC.
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be
executed by their duly authorized officers hereunto duly attested as of the date
and year written below.
Dated: November ____, 1999
MainStay VP Series Fund, Inc.
By:
- ---------------------- -------------------------------
Attest
- --------------------- -------------------------------
Title Title
<PAGE> 2
Monitor Capital Advisors LLC
By:
- -------------------- ------------------------------
Attest
- -------------------- ------------------------------
Title Title
<PAGE> 3
MASTER INVESTMENT ADVISORY AGREEMENT
Agreement, made as of the 15th of December, 1996 between MainStay VP
Series Fund, Inc., a Maryland corporation (the "Company"), and Monitor Capital
Advisors, Inc. (the "Adviser").
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the shares of common stock of the Company (the "Shares") are
divided into separate series (the "Funds"), each of which is established
pursuant to a written instrument executed by the Directors of the Company, and
the Directors may from time to time terminate such series or establish and
terminate additional Funds; and
WHEREAS, the Company desires to retain the Adviser to render investment
advisory services to the Company with regard to such Funds as shall be
designated in supplements to this Agreement, and the Adviser is willing to
render such services;
NOW, THEREFORE, the parties agree as follows:
1. Appointment. The Company hereby appoints the Adviser to act
as investment adviser to such Funds as shall be designated in supplements to
the Agreement for the period and on the terms set forth in the Agreement. The
Adviser accepts such appointment and agrees to render the services herein
described, for the compensation herein provided.
2. Investment Advisory Services. Subject to the supervision of
the Directors of the Company, the Adviser shall manage the investment
operations of each Fund and the composition of the portfolio of each Fund,
including the purchase, retention and disposition thereof, in accordance with
the investment objectives, policies and restrictions specified in the currently
effective prospectus and statement of additional information (the "Prospectus")
and subject to the following understandings:
(a) The Adviser shall provide supervision of each Fund's
investments and determine from time to time what investments or securities will
be purchased, retained, sold or lent by each Fund, and what portion of each
Fund's assets will be invested or held
<PAGE> 4
uninvested as cash.
(b) The Adviser shall use its best judgment in the performance of
its duties under this Agreement.
(c) The Adviser, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Articles of
Incorporation, By-Laws and Prospectus of the Company and with the instructions
and directions of the Directors of the Company and will conform to and comply
with the requirements of the 1940 Act and all other applicable Federal and
state laws and regulations.
(d) The Adviser shall determine the securities to be purchased or
sold by each Fund and will place orders pursuant to its determinations with or
through such persons, brokers or dealers (including NYLIFE Securities Inc.) in
conformity with the policy with respect to brokerage as set forth in a Fund's
Prospectus or as the Directors may direct from time to time. It is recognized
that, in providing each Fund with investment supervision of the placing of
orders for portfolio transactions, the Adviser will give primary consideration
to securing the most favorable price and efficient execution. Consistent with
this policy, the Adviser may consider the financial responsibility, research
and investment information and other services provided by brokers or dealers
who may effect or be a party to any such transaction or other transactions to
which other clients of the Adviser may be a party. It is understood that
neither the Company nor the Adviser has adopted a formula for allocation of the
Company's investment transaction business. It is also understood that it is
desirable for the Company that the Adviser have access to supplemental
investment and market research and security and economic analyses provided by
certain brokers who may execute brokerage transactions at a higher cost to the
Company than may result when allocating brokerage to other brokers on the basis
of seeking the most favorable price and efficient execution. Therefore, the
Adviser is authorized to place orders for the purchase and sale of securities
for each Fund with such brokers, subject to review by the Company's Directors
from time to time with respect to the extent and continuation of this practice.
It is understood that the services provided by such brokers may be useful to
the Adviser in connection with its services to other clients.
On occasions when the Adviser deems the purchase or sale of a
security to be in the best interest of the Funds as well as other clients, the
Adviser, to the extent permitted by applicable laws
2
<PAGE> 5
and regulations, may, but shall be under no obligation to, aggregate the
securities to be so sold or purchased in order to obtain the most favorable
price or lower brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as expenses incurred
in the transaction, will be made by the Adviser in the manner it considers to
be the most equitable and consistent with its fiduciary obligations to the
Funds and to such other clients.
(e) The Adviser shall maintain all books and records with respect
to the Funds' securities transactions required by the provisions or rules or
regulations of the Securities and Exchange Commission (the "SEC") under Section
31(a) of the 1940 Act and shall render to the Company's Directors such periodic
and special reports as the Directors may reasonably request.
(f) The Adviser shall provide the Funds' Custodian on each
business day with information relating to the execution of all portfolio
transactions pursuant to standing instructions.
3. Authorization to Serve in Dual Capacities. The Adviser shall
authorize and permit any of its directors, officers and employees who may be
elected or appointed as Directors or officers of the Company to serve in the
capacities in which they are elected or appointed. Services to be furnished by
the Adviser under this Agreement may be furnished through the medium of any of
such directors, officers, or employees.
4. Ownership of Records. The Adviser shall keep the Funds' books
and records required to be maintained by it pursuant to paragraph 2 hereof.
The Adviser agrees that all records which it maintains for the Funds are the
property of the Funds, and it will surrender promptly to the Funds any of such
records upon the Funds' request; provided that the Adviser may at its own
expense make and retain copies of such records. The Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2 as promulgated by the SEC
under the 1940 Act any such records as are required to be maintained by the
Adviser pursuant to paragraph 2 hereof.
5. Fees. In consideration of the services to be rendered by the
Adviser pursuant to this Agreement, each Fund shall pay the Adviser a monthly
fee based on the average daily value (as determined on each business day at the
time set forth in the Prospectus of the Fund for determining net asset value
per share) of the net assets of the Fund during the preceding month at the
3
<PAGE> 6
annual rates set forth in a supplement to this Agreement with respect to each
Fund. If the fees payable to the Adviser pursuant to this paragraph 5 begin to
accrue before the end of any month or if this Agreement terminates before the
end of any month, the fees for the period from that date to the end of that
month or from the beginning of that month to the date of termination, as the
case may be, shall be prorated according to the proportion which the period
bears to the full month in which the effectiveness or termination occurs. For
purposes of calculating the monthly fees, the value of the net assets of a Fund
shall be computed in the manner specified in the Fund's Prospectus for the
computation of net asset value. For purposes of this Agreement, a "business
day" is any day on which the New York Stock Exchange is open for trading with
the exception of Christmas Eve and the Friday after Thanksgiving.
6. Expenses. During the term of this Agreement the Adviser will
play (i) the salaries and expenses of all its personnel, and (ii) all expenses
incurred by it in managing the investment operations of each Fund other than
those assumed by the Administrator of the Company or the Company pursuant to
the Administration Agreement between the Company and the Administrator or by
the Administrator or other third party under a separate agreement or
arrangement.
7. Liability. The Adviser shall not be liable for any error of
judgment or for any loss suffered by the Funds in connection with the matters
to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or from reckless disregard by it of its obligations and duties under
this Agreement.
8. Duration and Termination. This Agreement shall continue in
effect with respect to each Fund for a period of one year from the date hereof
and from year to year thereafter, but only so long as such continuance is
specifically approved at least annually with respect to each Fund in conformity
with the requirements of the 1940 Act and the Rules thereunder; provided,
however, that this Agreement may be terminated with respect to a Fund at any
time, without the payment of any penalty, by vote of a majority of the
Directors of the Company or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of such Fund, or by the Adviser at any
time, without the payment of any penalty, upon sixty (60) days written notice
to the other party. This Agreement shall terminate automatically in the event
of its assignment (as defined in the 1940 Act.)
4
<PAGE> 7
9. Services to Other Clients. Nothing in this Agreement shall
limit or restrict the right of any of the Adviser's directors, officers, or
employees who may also be a Director, officer or employee of the Company to
engage in any other business or to devote his time and attention in part to the
management or other aspects of any business, whether of a similar or a
dissimilar nature, nor limit or restrict the Adviser's right to engage in any
other business or to render services of any kind to any other corporation,
trust, firm, individual or association.
10. Use of Name. It is understood that the name "MainStay" or any
derivative thereof or logo associated with that name is the valuable property
of New York Life Insurance Company and its affiliates, and that the Company has
the right to use such name or derivative or logo only with the approval of New
York Life Insurance Company. Upon notification by New York Life Insurance
Company to cease to use such name, the Company (to the extent that it lawfully
can) will cease to use such name or any other name indicating that the Company
is advised by or otherwise connected with New York Life Insurance Company or
any organization which shall have succeeded to its business.
11. Miscellaneous. (a) Nothing herein shall be construed as
constituting the Adviser as an agent of the Company.
(b) This Agreement may be amended by mutual consent, but
the consent of each Fund, if required, must be obtained in conformity with the
requirements of the 1940 Act and the rules thereunder.
(c) Any notice or other communication required to be
given pursuant to this Agreement shall be deemed duly given if delivered or
mailed by registered mail, postage prepaid, (1) to the Adviser at 504 Carnegie
Center, Princeton, New Jersey 08540, Attention: James Mehling; or (2) to the
Company at 51 Madison Avenue, New York, New York 10010, Attention: President.
(d) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(e) If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby and, to this extent, the
provisions of this Agreement shall be deemed to be severable.
5
<PAGE> 8
(f) The captions in the Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
IN WITNESS WHEREOFF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
MainStay VP Series Fund, Inc.
By: /s/ ANNE F. POLLACK
--------------------------------
Name: Anne F. Pollack
Title: President
Monitor Capital Advisors, Inc.
BY: /s/ JAMES A. MEHLING
--------------------------------
Name: James A. Mehling
Title: President
6
<PAGE> 9
AMENDMENT
TO
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
WHEREAS, Monitor Capital Advisors, Inc. ("Monitor") is a party to a master
investment advisory agreement with the MainStay VP Series Fund, Inc. (the
"Fund") dated December 15, 1996 (the "Agreement");
WHEREAS, Monitor also is a party to a supplement to the Agreement dated
December 15, 1996 on behalf of the Indexed Equity Portfolio (the "Supplement");
WHEREAS, Monitor has converted from a corporation to a limited liability
company under Delaware law;
WHEREAS, New York Life Insurance Company, the ultimate parent of Monitor,
recommended to the Board of Directors of the Fund (the "Board") at its meeting
on August 17, 1999 that the Board approve an amendment to the Agreement to
reflect the conversion of Monitor to a limited liability corporation; and
WHEREAS, the Board did so approve such amendment;
NOW THEREFORE, the parties hereby agree as follows:
Effective as of October 1, 1999, the Supplement is hereby amended to delete
each reference to Monitor Capital Advisors, Inc. in its entirety and
replace it with Monitor Capital Advisors LLC.
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be
executed by their duly authorized officers hereunto duly attested as of the
date and year written below.
Dated: November __, 1999
MainStay VP Series Fund, Inc.
By:
- ---------------------------- -----------------------------
Attest
- ---------------------------- -----------------------------
Title Title
<PAGE> 10
Monitor Capital Advisors LLC
By:
- ---------------------------- -----------------------------
Attest
- ---------------------------- -----------------------------
Title Title
<PAGE> 11
MAINSTAY VP SERIES FUND, INC.
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
INDEXED EQUITY PORTFOLIO
AGREEMENT made as of the 15th day of December, 1996 by and between MainStay
VP Series Fund, Inc. (the "Company"), and Monitor Capital Advisors, Inc. (the
"Adviser").
WHEREAS, the Company is an open-end management investment company,
organized as a Maryland corporation, and consists of such separate investment
series as have been or may be established and designated by the Directors of
the Company from time to time;
WHEREAS, a separate class of shares of the Company is offered to investors
with respect to each investment series;
WHEREAS, the Company has adopted a Master Investment Advisory Agreement
("Master Agreement") dated December 15, 1996, pursuant to which the Company has
appointed the Adviser to provide the investment advisory services specified in
that Master Agreement; and
WHEREAS, The Indexed Equity Portfolio (the "Fund") is a separate
investment series of the Company.
NOW, THEREFORE, the Directors of the Company hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Company hereby adopts
the Master Agreement with respect to the Fund, and the Adviser hereby
acknowledges that the Master Agreement shall pertain to the Fund, the terms and
conditions of such Master Agreement being hereby incorporated herein by
reference.
2. The term "Fund" as used in the Agreement shall, for purposes of this
Supplement, pertain to the Fund.
3. As provided in the Master Agreement and subject to further conditions
as set forth therein, the Fund shall pay the Adviser a monthly fee based upon
the average daily value (as
<PAGE> 12
determined on each business day at the time set forth in the Prospectus for
determining net asset value per share) of the assets of the Fund during the
preceding month at the annual rate of 0.10% of the Fund's average daily net
assets.
4. This Supplement and the Master Agreement (together, the "Agreement")
shall become effective with respect to the Fund on December 15, 1996 and shall
continue in effect with respect to the Fund for a period of one year from the
date hereof and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually in conformity with the
requirements of the Investment Company Act of 1940 (the "1940 Act") and the
rules thereunder. This Agreement may be terminated with respect to the Fund at
any time, without payment of any penalty, by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act) or by
vote of a majority of the Company's Board of Directors, or by the Adviser at
any time, without the payment of any penalty, on not more than sixty (60) days'
nor less than thirty (30) days' written notice to the other party. This
Agreement shall terminate automatically in the event of its assignment (as
defined in the 1940 Act).
MAINSTAY VP SERIES FUND INC., on behalf
of INDEXED EQUITY PORTFOLIO
By: /s/ ANNE F. POLLACK
-------------------------------------
Name: Anne F. Pollack
Title: President
MONITOR CAPITAL ADVISORS, INC.
By: /s/ JAMES A. MEHLING
-------------------------------------
Name: James A. Mehling
Title: President
-2-
<PAGE> 1
(d)(3)
MASTER INVESTMENT ADVISORY AGREEMENT
Agreement, made as of the 15th day of December, 1996 between MainStay VP
Series Fund, Inc., a Maryland corporation (the "Company"), and New York Life
Insurance Company (the "Adviser").
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the shares of common stock of the Company (the "Shares") are
divided into separate series (the "Funds"), each of which is established
pursuant to a written instrument executed by the Directors of the Company, and
the Directors may from time to time terminate such series or establish and
terminate additional Funds; and
WHEREAS, the Company desires to retain the Adviser to render investment
advisory services to the Company with regard to such Funds as shall be
designated in supplements to this Agreement, and the Adviser is willing to
render such services;
NOW, THEREFORE, the parties agree as follows:
1. Appointment. The Company hereby appoints the Adviser to act as
investment adviser to such Funds as shall be designated in supplements to the
Agreement for the period and on the terms set forth in the Agreement. The
Adviser accepts such appointment and agrees to render the services herein
described, for the compensation herein provided.
2. Investment Advisory Services. Subject to the supervision of the
Directors of the Company, the Adviser shall manage the investment operations of
each Fund and the composition of the portfolio of each Fund, including the
purchase, retention and disposition thereof, in accordance with the investment
objectives, policies and restrictions specified in the currently effective
prospectus and statement of additional information (the "Prospectus") and
subject to the following understandings:
(a) The Adviser shall provide supervision of each Fund's investments and
determine from time to time what investments or
<PAGE> 2
securities will be purchased, retained, sold or lent by each Fund, and what
portion of each Fund's assets will be invested or held uninvested as cash.
(b) The Adviser shall use its best judgment in the performance of its
duties under this Agreement.
(c) The Adviser, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the Articles of Incorporation,
By-Laws and Prospectus of the Company and with the instructions and directions
of the Directors of the Company and will conform to and comply with the
requirements of the 1940 Act and all other applicable Federal and state laws
and regulations.
(d) The Adviser shall determine the securities to be purchased or sold by
each Fund and will place orders pursuant to its determinations with or through
such persons, brokers or dealers (including NYLIFE Securities Inc.) in
conformity with the policy with respect to brokerage as set forth in a Fund's
Prospectus or as the Directors may direct from time to time. It is recognized
that, in providing each Fund with investment supervision of the placing of
orders for portfolio transactions, the Adviser will give primary consideration
to securing the most favorable price and efficient execution. Consistent with
this policy, the Adviser may consider the financial responsibility, research
and investment information and other services provided by brokers or dealers
who may effect or be a party to any such transaction or other transactions to
which other clients of the Adviser may be a party. It is understood that
neither the Company nor the Adviser has adopted a formula for allocation of the
Company's investment transaction business. It is also understood that it is
desirable for the Company that the Adviser have access to supplemental
investment and market research and security and economic analyses provided by
certain brokers who may execute brokerage transactions at a higher cost to the
Company than may result when allocating brokerage to other brokers on the basis
of seeking the most favorable price and efficient execution. Therefore, the
Adviser is authorized to place orders for the purchase and sale of securities
for each Fund with such brokers, subject to review by the Company's Directors
from time to time with respect to the extent and continuation of this practice.
It is understood that the services provided by such brokers may be useful to
the Adviser in connection with its services to other clients.
2
<PAGE> 3
On occasions when the Adviser deems the purchase or sale of a security to
be in the best interest of the Funds as well as other clients, the Adviser, to
the extent permitted by applicable laws and regulations, may, but shall be
under no obligation to, aggregate the securities to be so sold or purchased in
order to obtain the most favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of the securities so purchased
or sold, as well as expenses incurred in the transaction, will be made by the
Adviser in the manner it considers to be the most equitable and consistent with
its fiduciary obligations to the Funds and to such other clients.
(e) The Adviser shall maintain all books and records with respect to the
Funds' securities transactions required by the provisions or rules or
regulations of the Securities and Exchange Commission (the "SEC") under Section
31(a) of the 1940 Act and shall render to the Company's Directors such periodic
and special reports as the Directors may reasonably request.
(f) The Adviser shall provide the Funds' Custodian on each business day
with information relating to the execution of all portfolio transactions
pursuant to standing instructions.
3. Authorization to Serve in Dual Capacities. The Adviser shall
authorize and permit any of its directors, officers and employees who may be
elected or appointed as Directors or officers of the Company to serve in the
capacities in which they are elected or appointed. Services to be furnished by
the Adviser under this Agreement may be furnished through the medium of any of
such directors, officers, or employees.
4. Ownership of Records. The Adviser shall keep the Funds' books and
records required to be maintained by it pursuant to paragraph 2 hereof. The
Adviser agrees that all records which it maintains for the Funds are the
property of the Funds, and it will surrender promptly to the Funds any of such
records upon the Funds' request; provided that the Adviser may at its own
expense make and retain copies of such records. The Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2 as promulgated by the SEC
under the 1940 Act any such records as are required to be maintained by the
Adviser pursuant to paragraph 2 hereof.
5. Fees. In consideration of the services to be rendered by
3
<PAGE> 4
the Adviser pursuant to this Agreement, each Fund shall pay the Adviser a
monthly fee based on the average daily value (as determined on each business
day at the time set forth in the Prospectus of the Fund for determining net
asset value per share) of the net assets of the Fund during the preceding month
at the annual rates set forth in a supplement to this Agreement with respect to
each Fund. If the fees payable to the Adviser pursuant to this paragraph 5
begin to accrue before the end of any month or if this Agreement terminates
before the end of any month, the fees for the period from that date to the end
of that month or from the beginning of that month to the date of termination,
as the case may be, shall be prorated according to the proportion which the
period bears to the full month in which the effectiveness or termination
occurs. For purposes of calculating the monthly fees, the value of the net
assets of a Fund shall be computed in the manner specified in the Fund's
Prospectus for the computation of net asset value. For purposes of this
Agreement, a "business day" is any day on which the New York Stock Exchange is
open for trading with the exception of Christmas Eve and the Friday after
Thanksgiving.
6. Expenses. During the term of this Agreement the Adviser will pay (i)
the salaries and expenses of all its personnel, and (ii) all expenses incurred
by it in managing the investment operations of each Fund other than those
assumed by the Administrator of the Company or the Company pursuant to the
Administration Agreement between the Company and the Administrator or by the
Administrator or other third party under a separate agreement or arrangement.
7. Liability. The Adviser shall not be liable for any error of judgment
or for any loss suffered by the Funds in connection with the matters to which
this Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
8. Duration and Termination. This Agreement shall continue in effect
with respect to each Fund for a period of one year from the date hereof and
from year to year thereafter, but only so long as such continuance is
specifically approved at least annually with respect to each Fund in conformity
with the requirements of the 1940 Act and the Rules thereunder; provided,
however, that this Agreement may be terminated with respect to a Fund at any
time, without the payment of any penalty, by vote of a majority of the
Directors of the Company or by vote of a majority of the
4
<PAGE> 5
outstanding voting securities (as defined in the 1940 Act) of such Fund, or by
the Adviser at any time, without the payment of any penalty, upon sixty (60)
days written notice to the other party. This Agreement shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
9. Services to Other Clients. Nothing in this Agreement shall limit or
restrict the right of any of the Adviser's directors, officers, or employees
who may also be a Director, officer or employee of the Company to engage in any
other business or to devote his time and attention in part to the management or
other aspects of any business, whether of a similar or a dissimilar nature, nor
limit or restrict the Adviser's right to engage in any other business or to
render services of any kind to any other corporation, trust, firm, individual
or association.
10. Use of Name. It is understood that the name "MainStay" or any
derivative thereof or logo associated with that name is the valuable property
of New York Life Insurance Company and its affiliates, and that the Company has
the right to use such name or derivative or logo only with the approval of New
York Life Insurance Company. Upon notification by New York Life Insurance
Company to cease to use such name, the Company (to the extent that it lawfully
can) will cease to use such name or any other name indicating that the Company
is advised by or otherwise connected with New York Life Insurance Company or
any organization which shall have succeeded to its business.
11. Miscellaneous. (a) Nothing herein shall be construed as constituting
the Adviser as an agent of the Company.
(b) This Agreement may be amended by mutual consent, but the
consent of each Fund, if required, must be obtained in conformity with the
requirements of the 1940 Act and the rules thereunder.
(c) Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to the Adviser at 51 Madison Avenue, New
York, New York 10010, Attention: Executive Vice President; or (2) to the
Company at 51 Madison Avenue, New York, New York 10010, Attention: President.
(d) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
5
<PAGE> 6
(e) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(f) The captions in the Agreement are included for convenience
of reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year first
above written.
MainStay VP Series Fund, Inc.
By: /s/ ANNE F. POLLACK
-------------------------
Name: Anne F. Pollack
Title: President
New York Life Insurance Company
BY: [SIG]
--------------------------
Name:
Title:
6
<PAGE> 7
MAINSTAY VP SERIES FUND, INC.
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
AMERICAN CENTURY INCOME & GROWTH PORTFOLIO
AGREEMENT made as of the 1st day of April 1998, by and between MainStay VP
Series Fund, Inc. (the "Company") and New York Life Insurance Company
(the "Adviser").
WHEREAS, the Company is an open-end management investment company,
organized as a Maryland corporation, and consists of such separate investment
series as have been or may be established and designated by the Directors of
the Company from time to time;
WHEREAS, a separate class of shares of the Company is offered to investors
with respect to each investment series;
WHEREAS, the Company has adopted a Master Investment Advisory Agreement
("Master Agreement") dated December 15, 1996, pursuant to which the Company has
appointed the Adviser to provide the investment advisory services specified in
that Master Agreement; and
WHEREAS, American Century Income & Growth Portfolio (the "Fund") is a
separate investment series of the Company.
NOW, THEREFORE, the Directors of the Company hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Company hereby adopts the
Master Agreement with respect to the Fund, and the Adviser hereby acknowledges
that the Master Agreement shall pertain to the Fund, the terms and conditions of
such Master Agreement being hereby incorporated herein by reference.
2. The term "Fund" as used in the Agreement shall, for purposes of this
Supplement, pertain to the Fund.
3. As provided in the Master Agreement and subject to further conditions
as set forth therein, the Fund shall pay the
<PAGE> 8
Adviser a monthly fee based upon the average daily value (as determined on
each business day at the time set forth in the Prospectus for determining net
asset value per share) of the net assets of the Fund during the preceding month
at the annual rate of 0.50% of the Fund's average daily net assets.
4. This Supplement and the Master Agreement (together, the "Agreement")
shall become effective with respect to the Fund on May 1, 1998. This Supplement
shall supercede the termination provision of the Master Agreement and shall
continue in effect with respect to the Fund until December 15, 1999, and from
year to year thereafter, but only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the Investment
Company Act of 1940 (the "1940 Act") and the rules thereunder. This Agreement
may be terminated with respect to the Fund at any time, without payment of any
penalty, by vote of a majority of the outstanding voting securities of the Fund
(as defined in the 1940 Act) or by vote of a majority of the Company's Board of
Directors, or by the Adviser at any time, without the payment of any penalty,
on not more than sixty (60) days' nor less than thirty (30) days' written
notice to the other party. This Agreement shall terminate automatically in the
event of its assignment (as defined in the 1940 Act).
MAINSTAY VP SERIES FUND, INC., on
behalf of AMERICAN CENTURY INCOME
& GROWTH PORTFOLIO
By:
-----------------------------
Name:
Title:
NEW YORK LIFE INSURANCE COMPANY
By:
----------------------------
Name:
Title:
<PAGE> 9
MAINSTAY VP SERIES FUND, INC.
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
DREYFUS LARGE COMPANY VALUE PORTFOLIO
AGREEMENT made as of the 1st day of April 1998, by and between MainStay VP
Series Fund, Inc. (the "Company") and New York Life Insurance Company (the
"Adviser").
WHEREAS, the Company is an open-end management investment company,
organized as a Maryland corporation, and consists of such separate investment
series as have been or may be established and designated by the Directors of
the Company from time to time;
WHEREAS, a separate class of shares of the Company is offered to
investors with respect to each investment series;
WHEREAS, the Company has adopted a Master Investment Advisory Agreement
("Master Agreement") dated December 15, 1996, pursuant to which the Company has
appointed the Adviser to provide the investment advisory services specified in
that Master Agreement; and
WHEREAS, Dreyfus Large Company Value Portfolio (the "Fund") is a separate
investment series of the Company.
NOW, THEREFORE, the Directors of the Company hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Company hereby adopts the
Master Agreement with respect to the Fund, and the Adviser hereby acknowledges
that the Master Agreement shall pertain to the Fund, the terms and conditions
of such Master Agreement being hereby incorporated herein by reference.
2. The term "Fund" as used in the Agreement shall, for purposes of this
Supplement, pertain to the Fund.
3. As provided in the Master Agreement and subject to further conditions
as set forth therein, the Fund shall pay the
<PAGE> 10
Adviser a monthly fee based upon the average daily value (as determined on each
business day at the time set forth in the Prospectus for determining net asset
value per share) of the net assets of the Fund during the preceding month at
the annual rate of 0.60% of the Fund's average daily net assets.
4. This Supplement and the Master Agreement (together, the "Agreement")
shall become effective with respect to the Fund on May 1, 1998. This Supplement
shall supercede the termination provision of the Master Agreement and shall
continue in effect with respect to the Fund until December 15, 1999, and from
year to year thereafter, but only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the
Investment Company Act of 1940 (the "1940 Act") and the rules thereunder.
This Agreement may be terminated with respect to the Fund at any time, without
payment of any penalty, by vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act) or by vote of a majority
of the Company's Board of Directors, or by the Adviser at any time, without the
payment of any penalty, on not more than sixty (60) days' nor less than thirty (
(30) days' written notice to the other party. This Agreement shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
MAINSTAY VP SERIES FUND, INC., on
behalf of DREYFUS LARGE COMPANY
VALUE PORTFOLIO
By:
----------------------------
Name:
Title:
NEW YORK LIFE INSURANCE COMPANY
By:
-----------------------------
Name:
Title:
<PAGE> 11
MAINSTAY VP SERIES FUND, INC.
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
EAGLE ASSET MANAGEMENT GROWTH EQUITY PORTFOLIO
AGREEMENT made as of the 1st day of April 1998, by and between MainStay VP
Series Fund, Inc. (the "Company") and New York Life Insurance Company (the
"Adviser").
WHEREAS, the Company is an open-end management investment company,
organized as a Maryland corporation, and consists of such separate investment
series as have been or may be established and designated by the Directors of
the Company from time to time;
WHEREAS, a separate class of shares of the Company is offered to investors
with respect to each investment series;
WHEREAS, the Company has adopted a Master Investment Advisory Agreement
("Master Agreement") dated December 15, 1996, pursuant to which the Company has
appointed the Adviser to provide the investment advisory services specified in
that Master Agreement; and
WHEREAS, Eagle Asset Management Growth Equity Portfolio (the "Fund") is a
separate investment series of the Company.
NOW, THEREFORE, the Directors of the Company hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Company hereby adopts
the Master Agreement with respect to the Fund, and the Adviser hereby
acknowledges that the Master Agreement shall pertain to the Fund, the terms and
conditions of such Master Agreement being hereby incorporated herein by
reference.
2. The term "Fund" as used in the Agreement shall, for purposes of this
Supplement, pertain to the Fund.
3. As provided in the Master Agreement and subject to further conditions
as set forth therein, the Fund shall pay the
<PAGE> 12
Adviser a monthly fee based upon the average daily value (as determined on each
business day at the time set forth in the Prospectus for determining net asset
value per share) of the net assets of the Fund during the preceding month at
the annual rate of 0.50% of the Fund's average daily net assets.
4. This Supplement and the Master Agreement (together, the "Agreement")
shall become effective with respect to the Fund on May 1, 1998. This Supplement
shall supercede the termination provision of the Master Agreement and shall
continue in effect with respect to the Fund until December 15, 1999, and from
year to year thereafter, but only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the
Investment Company Act of 1940 (the "1940 Act") and the rules thereunder. This
Agreement may be terminated with respect to the Fund at any time, without
payment of any penalty, by vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act) or by vote of a majority of
the Company's Board of Directors, or by the Adviser at any time, without the
payment of any penalty, on not more than sixty (60) days' nor less than thirty
(30) days' written notice to the other party. This Agreement shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
MAINSTAY VP SERIES FUND, INC., on
behalf of EAGLE ASSET MANAGEMENT GROWTH
EQUITY PORTFOLIO
By:
-----------------------------------
Name:
Title:
NEW YORK LIFE INSURANCE COMPANY
By: -----------------------------------
Name:
Title:
<PAGE> 13
MAINSTAY VP SERIES FUND, INC.
INVESTMENT ADVISORY
AGREEMENT SUPPLEMENT
LORD ABBETT DEVELOPING GROWTH PORTFOLIO
AGREEMENT made as of the 1st day of April 1998, by and between MainStay VP
Series Fund, Inc. (the "Company") and New York Life Insurance Company (the
"Adviser").
WHEREAS, the Company is an open-end management investment company,
organized as a Maryland corporation, and consists of such separate investment
series as have been or may be established and designated by the Directors of
the Company from time to time;
WHEREAS, a separate class of shares of the Company is offered to investors
with respect to each investment series;
WHEREAS, the Company has adopted a Master Investment Advisory Agreement
("Master Agreement") dated December 15, 1996, pursuant to which the Company has
appointed the Adviser to provide the investment advisory services specified in
that Master Agreement; and
WHEREAS, Lord Abbett Developing Growth Portfolio (the "Fund") is a separate
investment series of the Company.
NOW, THEREFORE, the Directors of the Company hereby take the following
actions, subject to the conditions set forth:
1. As provided for in the Master Agreement, the Company hereby adopts
the Master Agreement with respect to the Fund, and the Adviser hereby
acknowledges that the Master Agreement shall pertain to the Fund, the terms and
conditions of such Master Agreement being hereby incorporated herein by
reference.
2. The term "Fund" as used in the Agreement shall, for purposes of this
Supplement, pertain to the Fund.
3. As provided in the Master Agreement and subject to further conditions
as set forth therein, the Fund shall pay the
<PAGE> 14
Adviser a monthly fee based upon the average daily value (as determined on each
business day at the time set forth in the Prospectus for determining net asset
value per share) of the net assets of the Fund during the preceding month at
the annual rate of 0.60% of the Fund's average daily net assets.
4. This Supplement and the Master Agreement (together, the "Agreement")
shall become effective with respect to the Fund on May 1, 1998. This Supplement
shall supercede the termination provision of the Master Agreement and shall
continue in effect with respect to the Fund until December 15, 1999, and from
year to year thereafter, but only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the
Investment Company Act of 1940 (the "1940 Act") and the rules thereunder. This
Agreement may be terminated with respect to the Fund at any time, without
payment of any penalty, by vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act) or by vote of a majority of
the Company's Board of Directors, or by the Adviser at any time, without the
payment of any penalty, on not more than sixty (60) days' nor less than thirty
(30) days' written notice to the other party. This Agreement shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
MAINSTAY VP SERIES FUND, INC., on
behalf of LORD ABBETT DEVELOPING GROWTH
PORTFOLIO
By:
-----------------------------------
Name:
Title:
NEW YORK LIFE INSURANCE COMPANY
By: -----------------------------------
Name:
Title:
<PAGE> 1
(h)(1)
STOCK SALE
AGREEMENT
The Agreement dated as of November 1, 1983, between NEW YORK LIFE INSURANCE
AND ANNUITY CORPORATION, a stock company organized under the laws of Delaware
("NYLIAC"), and NEW YORK LIFE MFA SERIES FUND, INC., a corporation organized
under the laws of Maryland (the "MFA Series Fund"):
WITNESSETH:
WHEREAS, the MFA Series Fund will serve as the investing medium for
separate accounts established by NYLIAC ("Separate Accounts") under Section 2932
of the Delaware Insurance Code; and
WHEREAS, the MFA Series Fund desires to sell its shares to the Separate
Accounts, to NYLIAC itself and to organizations approved by NYLIAC (the Separate
Accounts, NYLIAC and the other organizations being herein collectively called
"Prospective Purchasers"); and
WHEREAS, some of the Prospective Purchasers now desire to purchase shares
of the MFA Series Fund and other Prospective Purchasers may desire to do so.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and other good and valuable consideration the receipt
whereof is hereby acknowledged, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Sales of Shares to Prospective Purchasers. The MFA Series Fund will sell
its shares at the "net asset value" of such shares (as defined in the
preliminary prospectus, dated August 24, 1983,
<PAGE> 2
-2-
forming part of the registration statement of the MFA Series Fund (No. 2-86082
under the Securities Act of 1933) to such of the Prospective Purchasers as shall
request the MFA Series Fund to sell its shares to them. Such sales will be made
by the MFA Series Fund in such amounts as may be requested from time to time by
the Prospective Purchasers at the net asset value as next determined after any
such request is received by the MFA Series Fund. The MFA Series Fund will take
such steps as may be necessary to provide a sufficient number of its shares to
meet the requests of the Prospective Purchasers. Neither NYLIAC nor any of the
other Prospective Purchasers shall be under any obligation to purchase shares
of the MFA Series Fund at any time or in any amount.
2. No Sales to Others; Redemptions. The MFA Series Fund will not, so long
as this Agreement remains in effect,
(a) sell its shares to any person other than Prospective Purchasers;
or
(b) change the terms and conditions for the redemption of its shares
set forth in the preliminary prospectus referred to in paragraph 1.
3. Termination of Agreement. This Agreement may be terminated at any time
by NYLIAC on 360 days' written notice to the MFA Series Fund or by the MFA
Series Fund on 360 days' written notice to NYLIAC.
<PAGE> 3
-3-
4. Notices. Any notice under this Agreement shall be in writing and if to
the MFA Series Fund, delivered or mailed postage prepaid to it at 372 Park
Avenue South, New York, New York 10010, or at any other address that the
MFA Series Fund may hereafter designate by written notice to NYLIAC, and
if to NYLIAC, delivered or mailed postage prepaid to it at 51 Madison
Avenue, New York, New York 10010, or at any other address that NYLIAC may
hereafter designate by written notice to the MFA Series Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their corporate name, and their respective corporate seals to be
affixed and attached, all as of the date first above written.
NEW YORK LIFE INSURANCE
AND ANNUITY CORPORATION
[Corporate Seal] By
-----------------------------
President
Attest:
[SIG]
- -------------------------------
Assistant Secretary
NEW YORK LIFE MFA SERIES FUND, INC.
By [SIG]
-----------------------------
President
Attest:
[SIG]
- -------------------------------
Assistant Secretary
<PAGE> 1
(h)(2)
LICENSE AGREEMENT
Agreement, dated as of November 1, 1983, between NEW YORK LIFE INSURANCE
COMPANY, ("New York Life"), a New York corporation, and NEW YORK LIFE MFA SERIES
FUND, INC., (the "MFA Series Fund"), a Maryland corporation.
1. General. New York Life, having engaged in the life insurance business
under its present name since 1849, has the sole ownership right to the name
"New York Life Insurance Company" or any other name or trade name containing the
words "New York Life."
New York Life presently uses and is the sole owner of a logotype,
containing the words "New York Life", in the form set forth as Exhibit "A" (such
logotype, together with any variation thereof containing the words "New York
Life, is referred to as "Logo"), and has spent substanial sums of money
advertising and promoting the Logo.
The MFA Series Fund, an open-end diversified management investment company
of the series type, was established in connection with the issuance of multi-
funded annuity contracts by New York Life Insurance and Annuity Corporation
("NYLIAC"), a wholly-owned subsidiary of New York Life. It is anticipated that
New York Life will act as investment adviser to MFA Series Fund, in accordance
with the terms of an Investment Advisory Agreement ("Investment Advisory
Agreement") between MFA Series Fund and New York Life. It is further anticipated
that all the shares of common stock of MFA Series Fund will be purchased by
separate accounts of NYLIAC, pursuant to a Stock Purchase Agreement, between MFA
Series Fund and NYLIAC ("Stock Purchase Agreement"). The MFA Series Fund was
<PAGE> 2
-2-
permitted to use the words "New York Life" in its corporate name pursuant to the
approval of the Board of Directors of New York Life, subject to its agreement to
those terms and conditions contained therein.
2. Grant of License, Right and Authority. New York Life grants to MFA
Series Fund, on a non-exclusive basis, the license, right and authority to use
the words "New York Life" in the name of MFA Series Fund, and the words "New
York Life" and the Logo in the conduct of its business ("License"), subject to
the following terms and conditions:
(a) New York Life reserves all other rights in its corporate name and
Logo and in any part or variation of such name or Logo, including, without
limitation, the license, right and authority, in its sole discretion, to
grant the use of such name and Logo to one or more other entities, whether
or not such entities are affiliated with New York Life and whether or not
any such entity is or may be a competitor of MFA Series Fund; and MFA
Series Fund shall not have any right to grant any sub-license, right or
authority to use the words "New York Life" or the Logo except as expressly
provided in paragraph 3;
(b) New York Life reserves the right, upon 30 days' written notice to
MFA Series Fund to terminate the License, by requesting MFA Series Fund to
change its name to a name not containing the words "New York Life" and to
discontinue using, in connection with its business, the Logo and the words
"New York Life", and MFA Series Fund agrees to comply with such request;
and
(c) MFA Series Fund agrees that in the event New York Life ceases to
act as investment adviser to MFA Series Fund for any
<PAGE> 3
-3-
reason whatsoever, or the Investment Advisory Agreement is terminated, or
the Stock Purchase Agreement is terminated, the License shall likewise be
deemed terminated and MFA Series Fund will immediately change its name to a
name containing the words "New York Life" and will immediately discontinue
using, in connection with its business, the words "New York Life" and the
Logo.
In the event the License is terminated under clause (b) or (c) of this
paragraph 2, and MFA Series Fund fails promptly to take that action required
thereunder, there shall be deemed to be no adequate remedy at law available to
New York Life and New York Life shall be entitled to such injunctive and other
appropriate equitable relief.
3. Licensing of other Entities. In recognition of the ownership by New
York Life of the Logo and the words "New York Life", whether contained in a name
or used in any other manner, and the reservation by New York Life, in its
absolute discretion, of the right to grant the use thereof to any one or more
entities, as provided in paragraph 2, without any consultation with or consent
or approval from MFA Series Fund, upon the request of New York Life, MFA Series
Fund will take such corporate action and execute and deliver such consents,
approvals or other instruments or documents as may be necessary or appropriate,
in the sole opinion of New York Life, in order to facilitate the organization or
qualification of any such entity or to enable it to use, in connection with its
business, the Logo, the name of "New York Life" and any name containing the
words "New York Life."
4. Binding Nature of Agreement. This Agreement shall be binding upon MFA
Series Fund, its directors, officers, stockholders, creditors, successors and
assigns.
<PAGE> 4
-4-
5. Assignment. This Agreement may not be assigned, whether by merger,
consolidation or otherwise, by either party without the prior written consent of
the other party.
6. Notices. Any notice under this Agreement shall be in writing and, if
to MFA Series Fund, delivered or mailed postage prepaid to MFA Series Fund at
372 Park Avenue South, New York, New York, 10010, or at any other address that
MFA Series Fund may hereafter designate by written notice to New York Life,
and, if to New York Life, delivered or mailed postage prepaid to New York Life,
at 51 Madison Avenue, New York, New York, 10010, or at any other address that
New York Life may hereafter designate by written notice to MFA Series Fund.
7. Heading. The headings contained in this Agreement are included for
convenience and shall not be deemed to constitute a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their corporate names, and their respective corporate seals to be
affixed and attested, all as of the date first above written.
NEW YORK LIFE INSURANCE COMPANY
By [SIG]
(Corporate Seal) -----------------------------
President
[SIG]
- ----------------------------
Secretary
NEW YORK LIFE MFA SERIES FUND, INC.
By [SIG]
------------------------------
President
Attest:
[SIG]
- ----------------------------
Assistant Secretary
<PAGE> 1
(j)(i)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated February 22, 2000, relating to the
financial statements and financial highlights which appear in the December 31,
1999 Annual Report to Shareholders of MainStay VP Series Fund, Inc., which is
also incorporated by reference into the Registration Statement. We also consent
to the references to us under the headings "Financial Highlights" and
"Independent Accountants" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
April 10, 2000
<PAGE> 1
MAINSTAY VP SERIES FUND, INC.
CODE OF ETHICS
Adopted as of August 18, 1998
Pursuant to Rule 17j-1
Under the Investment Company Act of 1940 as amended
I. INTRODUCTION AND APPLICATION
The MainStay VP Series Fund, Inc. (the "Fund") recognizes the
importance of high ethical standards in the conduct of its business and requires
that this Code of Ethics (the "Code") be observed by each Access Person (defined
below in Section III(A)). This Code is intended to apply to the Company's
officers and directors and other Access Persons who are employees of any
affiliate of the Fund, including its investment advisers. This Code does not
apply to investment advisers that are not affiliates of New York Life Insurance
Company. An unaffiliated investment adviser that enters into a sub-advisory
agreement to provide investment management services to a Fund will be expected
to have adopted and to comply with its own code of ethics. All recipients of the
Code are directed to read it carefully, retain it for future reference and abide
by the rules and policies set forth herein. Any questions concerning the
applicability or interpretation of such rules and policies, and compliance
therewith, should be directed to the Secretary of the Fund.
Each Access Person is under a duty to exercise his or her authority and
responsibility for the benefit of the Fund and its shareholders, to place the
interests of the shareholders first and to refrain from having outside interests
conflicting with the interests of the Fund and its shareholders. Each such
person must avoid any circumstances which might adversely affect or appear to
affect his or her duty of complete loyalty to the Fund and its shareholders in
the discharge of his or her responsibilities, including the protection of
confidential information and corporate integrity. Each Access Person must
abstain from participation (or any other involvement) in "insider trading" in
contravention of any applicable law or regulation. The reputation of the Fund
and its affiliates for trustworthy financial services is a valuable asset which
all Access Persons are expected to preserve and protect.
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<PAGE> 2
All personal securities transactions must be conducted consistent with
the Code and in such a manner as to avoid any actual or potential conflict of
interest or any abuse of an individual's position of trust and responsibility.
All persons must abide by the fundamental standard that the Fund's personnel
should not take inappropriate advantage of their positions.
While compliance with the provisions of the Code is anticipated,
Access Persons should be aware that in response to any violations, the Fund will
take whatever action is deemed appropriate under the circumstances including,
but not necessarily limited to, dismissal of such Access Person. Technical
compliance with the Code's procedures will not automatically insulate from
scrutiny trades which show a pattern of abuse of an individual's fiduciary
duties to the Fund.
II. PURPOSE
This Code has been adopted by the Board of Directors of the Fund in
accordance with Rule 17j-1(b) under the Investment Company Act of 1940, as
amended (the "1940 Act"). Rule 17j-1 (a copy of which is attached as Exhibit A)
generally prohibits fraudulent or manipulative practices with respect to
purchases or sales of securities held or to be acquired by investment companies,
if effected by persons associated with such companies. The purpose of this Code
is to provide regulations and procedures consistent with the Act, Rule 17j-1 and
recommendations contained in the May 9, 1994 Report of the Advisory Group on
Personal Investing of the Investment Company Institute. The basic tenets of Rule
17j-1:
(A) It is unlawful for any Access Person or principal underwriter
for the Fund, or any affiliated person of an investment
adviser of or principal underwriter for the Fund in connection
with the purchase or sale, directly or indirectly, by such
person of a security held or to be acquired by the Fund:
(1) To employ any device, scheme or artifice to defraud
the Fund;
(2) To make to the Fund any untrue statement of a
material fact or to omit to state to the Fund a
material fact necessary in order to make the
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<PAGE> 3
statements made, in light of the circumstances under
which they are made, not misleading;
(3) To engage in any act, practice, or course of business
which operates or would operate as a fraud or deceit
upon the Fund; or
(4) To engage in any manipulative practice with respect
to the Fund.
III. DEFINITIONS
(A) "Access Person" means:
(1) any Director or officer of the Fund;
(2) any employee of an affiliate of the Fund or its Investment
Advisers, who, in connection with his or her regular functions
or duties, makes, participates in, or obtains information
regarding the purchase or sale of a security by the Fund, or
whose functions relate to the making of any recommendations
with respect to any purchase or sale of a security by the
Fund; and
(3) any other natural person, if any, who has the power to
exercise a controlling influence over the management or
policies of the Fund or of an Investment Adviser, unless such
power is solely the result of his or her position with the
Fund, and who obtains information concerning recommendations
made to the Fund with regard to the purchase or sale of a
security.
(B) "Beneficial Ownership" means ownership of securities or
securities accounts by or for the benefit of a person, or such
person's "family member," including any account in which the
employee, or family member of that person holds a direct or
indirect beneficial interest, retains discretionary investment
authority or exercises a power of attorney. The term "family
member" means any person's spouse, child or other relative,
whether related by blood, marriage or otherwise, who either
resides with, or is financially
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<PAGE> 4
dependent upon, or whose investments are controlled by that
person. The term also includes any unrelated individual whose
investments are controlled and whose financial support is
materially contributed to by the person, such as a
"significant other."
(C) "Compliance Officer" shall mean the person appointed by the
Fund's Board of Directors to administer the Code and shall
include other persons such as, for example, Investment Adviser
personnel, designated by the Compliance Officer to administer
the Code.
(D) "Independent Director" means a Director of the Fund who is not
an "interested person" of the Fund within the meaning of
Section 2(a)(19) of the 1940 Act. The Secretary of the Fund
will inform each Director whether he or she is an Independent
Director.
(E) "Investment Adviser" means an entity listed in the Fund's
current prospectus that provides advice to the Fund with
respect to the purchase and sale of securities.
(F) "Investment Personnel" means any person who in connection with
his or her regular functions or duties makes, participates in
or recommends the purchase or sale of a security for the Fund.
(G) "Portfolio Manager" means a person entrusted with the direct
responsibility and authority to make investment decisions
affecting the Fund.
IV. COMPLIANCE PROCEDURES
(A) Conflicts of Interest
(1) Each Access Person has the duty to disclose to the
Fund and, if such person is an officer, director or
employee of an Investment Adviser, to the Investment
Adviser any interest whatsoever that he or she may
have in any firm, corporation, or business unit with
which he or she is called upon to deal as a part of
his or her assigned duties with the Fund or an
Investment Adviser or
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<PAGE> 5
any other activity that the Access Person reasonably
believes presents a potential conflict of interest.
This disclosure should be timely so that the Fund may
take such action concerning the conflict as deemed
appropriate by the Secretary or the Compliance
Officer.
(2) Investment Personnel may not accept gifts, other than
de minimis gifts, from persons doing business with or
on behalf of the Fund.
(3) Investment Personnel may not serve on the board of
directors of a publicly traded company or any
business organized for profit other than New York
Life Insurance Company or an affiliated company
unless prior authorization is obtained from the
Compliance Officer. Such authorization will be based
on a determination that the business of such
corporation does not conflict with the interests of
the Fund and that service would be consistent with
the best interests of the Fund and its shareholders
and is not prohibited by law. If such service is
authorized, procedures must be in place to isolate
investment personnel serving as directors of outside
entities from those making investment decisions on
behalf of the Fund.
(B) Preclearance of Personal Securities Transactions
(1) An Access Person must obtain prior approval from the
Compliance Officer before purchasing or selling,
directly or indirectly, any security in any account
over which the Access Person exercises Beneficial
Ownership.
(2) An Independent Director, or a non-Independent
Director who is not an officer of the Fund, New York
Life Insurance Company or any of its affiliates, need
only obtain prior approval from the Compliance
Officer before purchasing or selling a security in
any account over which the Independent Director
exercises Beneficial
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<PAGE> 6
Ownership if he or she has actual knowledge at the
time of the purchase or sale that such security is
being considered for purchase or sale by the Fund or
is being purchased or sold by the Fund. A security is
"being considered for purchase or sale" when a
recommendation to purchase or sell a security has
been made and communicated to an Access Person or,
with respect to the person making the recommendation,
when such person considers making such a
recommendation.
(3) Access Persons are not required to preclear the
following transactions:
(a) Purchases or sales of securities effected in
any account which is managed on a
discretionary basis by a person other than
such Access Person and with respect to which
such Access Person does not in fact
influence or control such transactions;
(b) Purchases which are part of an automatic
dividend or distribution reinvestment plan;
(c) Purchases effected upon the exercise of
rights issued by an issuer pro rata to all
holders of a class of its securities, to the
extent such rights were acquired from such
issuer, and sales of such rights so
acquired; or
(d) Purchases or sales of shares of registered
open-end investment companies (commonly
referred to as "mutual funds"); OR
(e) PURCHASES OR SALES OF UNIT INVESTMENT TRUSTS
("UITS") WHICH HOLD SECURITIES IN PROPORTION
TO AN INDEX.
(C) Other Rules Relating to Personal Securities Transactions
(1) Investment Personnel may not participate in any
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<PAGE> 7
initial public offering of securities in any account
over which they exercise Beneficial Ownership except
with the express written prior approval of the
Secretary of the Fund.
(2) Investment Personnel who have obtained prior approval
and made an investment in a private placement must
disclose that investment to the Compliance Officer,
and, as applicable, to other relevant Investment
Personnel or any officer of the Fund if they play a
part in any subsequent consideration of an investment
by the Fund in that issuer and such Investment
Personnel continues to hold such investment. Under
such circumstances, the Fund's decision to purchase
securities of the private placement issuer should be
subject to independent review by Investment Personnel
with no investment in the issuer.
(3) No Access Person may execute a securities transaction
in any account over which he or she exercises
Beneficial Ownership on a day when the Fund has a
pending "buy" or "sell" order in that same security
until such order is executed or withdrawn. If the
Access Person is an employee of an Investment
Adviser, this restriction shall apply only to those
securities being bought or sold by the Fund managed
by that Investment Adviser. However, if the Access
Person has actual knowledge of securities being
bought or sold by the Fund managed by a different
Investment Adviser, the Access Person shall be
subject to this restriction with respect to such
securities. An Independent Director is subject to
this section (3) only if he or she has actual
knowledge that the Fund has a pending "buy" or "sell"
order in that same security.
(4) No Portfolio Manager may execute a personal
securities transaction within fewer than seven
calendar days before and after the Fund which he or
she manages trades in that security.
(5) Investment Personnel may not profit from the purchase
and sale or sale and purchase of the
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<PAGE> 8
same (or equivalent) securities within 60 calendar
days.
(6) Any profits realized from transactions prohibited by
this Code, including, among other things, any profits
realized from a personal securities transaction
executed during the periods proscribed in (3), (4) or
(5) immediately set forth above, must be disgorged to
the Fund.
V. REPORTING AND MONITORING
(A) Each Access Person shall submit to the Compliance Officer a
report on the form attached as Exhibit B or a similar form
provided by the Compliance Officer covering the matters
included in the form. The report must list transactions in any
security in which such Access Person has, or by reason of such
transaction acquires or disposes of, any Beneficial Ownership
in the security.
Reports shall be delivered to the Compliance Officer not later
than 10 days after the end of the calendar quarter in which a
transaction to which the report relates was effected. The
Compliance Officer shall maintain such reports and such other
records as are required by Rule 17j-1 under the Investment
Company Act of 1940.
(B) An Independent Director of the Fund need only report a
transaction if such Director, at the time of that transaction,
knew or, in the ordinary course of fulfilling his official
duties as a Director of the Fund, should have known that,
during the 15-day period immediately preceding or following
the date of the transaction by such Director, such security is
or was purchased or sold by the Fund.
(C) Each Access Person must direct his or her broker to provide to
the Compliance Officer copies of confirmations of all personal
securities transactions (including transactions in accounts in
which the Access Person has beneficial ownership) on a timely
basis and to provide copies of all periodic statements for all
securities accounts over which the Access
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<PAGE> 9
Person exercises Beneficial Ownership.
(D) The Compliance Officer shall monitor personal trading activity
of all Access Persons pursuant to procedures established under
this Code.
(E) All Investment Personnel shall be required to disclose all
securities subject to their Beneficial Ownership upon hire or
upon the assumption of duties which fall within the definition
of Investment Personnel and on an annual basis thereafter on
the form attached as Exhibit C or on a similar form provided
by the Compliance Officer covering the matters included on the
form.
(F) All reports furnished pursuant to this Section will be
maintained on a confidential basis and will be reasonably
secured to prevent access to such records by unauthorized
personnel.
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<PAGE> 10
(G) Each Access Person shall complete an annual certification in
the form attached as Exhibit D (or as revised from time to
time) that he or she has received, read and understood the
Code and that he or she is subject to and has complied with
each of the Code's provisions applicable to such person.
(H) The Compliance Officer shall prepare an annual report for the
Board of Directors which, at a minimum summarizes the existing
procedures concerning personal investing and any changes in
the procedures made during the year; identifies any violations
requiring significant remedial action during the past year;
and identifies any recommended changes in existing
restrictions or procedures.
VI. EXCEPTIONS
The Compliance Officer, in consultation with internal legal counsel for
the Funds and the Local Compliance Officer, if applicable, may grant
written exceptions to provisions of the Code in circumstances which
present special hardship. The exceptions may be granted to individuals
or classes of individuals with respect to particular transactions,
classes of transactions or all transactions. Exceptions shall be
structured to be as narrow as is reasonably practicable with
appropriate safeguards designed to prevent abuse of the exception. Any
exception which is granted shall be reported to the Board of Directors
at the next regularly scheduled meeting of the Directors.
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<PAGE> 11
EXHIBIT B
QUARTERLY SECURITIES TRANSACTION REPORT
FOR THE QUARTER ENDED _____________________
This report is submitted by _________________________(print name).
I certify that the transactions listed below are the only transactions
effected in securities of which I had Beneficial Ownership as defined in Section
________of the Code of Ethics during the quarter ended_________________________.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
DATE OF TYPE OF TITLE OF NO. OF PRINCIPAL BROKER/
TRANSACTION TRANSACTION SECURITY SHARES AMOUNT PRICE DEALER
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
P = Purchase
S = Sale
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<PAGE> 12
E = Exercise of Option
-------------------------------
Signature
EXHIBIT C
ANNUAL SECURITIES HOLDING REPORT
FOR THE YEAR ENDED DECEMBER 31, ____
This report is submitted by _________________________(print name).
I certify that the Securities listed below are the only securities of
which I had beneficial ownership as of the year ended December 31, _____.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
TITLE/TYPE OF SECURITY NO. OF SHARES PRINCIPAL AMOUNT
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
Page 12
<PAGE> 13
-------------------------------
Signature
Page 13
<PAGE> 14
ANNUAL CERTIFICATION OF
COMPLIANCE WITH THE CODE OF ETHICS OF
THE MAINSTAY VP SERIES FUND, INC.
I, ______, hereby certify that I have received The MainStay VP Series
Fund, Inc. Code of Ethics Adopted as of November 11, 1997, pursuant to Rule
17j-1 under the Investment Company Act of 1940 as amended (the "Code") and that
I have read and understood the Code. I further certify that I am subject to the
Code and have complied with each of the Code's provisions to which I am subject.
------------------------------
Name:
Position:
- ---------------------
Date
<PAGE> 15
THE MAINSTAY VP SERIES FUND, INC.
COMPLIANCE PROCEDURES PURSUANT TO THE
CODE OF ETHICS ADOPTED AS OF
UNDER THE INVESTMENT COMPANY ACT OF 1940 AS AMENDED
The Compliance Officer shall clear the following transactions when
requested by an Access Person:
(1) Purchases or sales of U.S. government securities, bankers'
acceptances, bank certificates of deposit or commercial paper.
(2) Purchases or sales of securities which are not eligible for
sale or purchase by the Fund.
(3) Purchases or sales of securities which receive the prior
approval of the Compliance Officer (such Officer having no personal interest in
such purchases or sales) because such purchases or sales are not likely to have
any economic impact on the Fund or on its ability to purchase or sell securities
of the same class or other securities of the same issuer.
(4) Any securities transaction, or series of related transactions,
involving either (i) 500 shares or less in the aggregate, if the issuer has
market capitalization (outstanding shares multiplied by the current price per
share) greater than $1 billion or (ii) less than _% of the issuer's market
capitalization.
(5) Purchases or sales of securities which are not on the
restricted list prepared by ----------------- reflecting securities which they
are considering for purchase or sale or for which there is an outstanding buy or
sell order.
(6) Purchases or sales of securities (except for securities
purchased in connection with an initial public offering) which are not eligible
for sale or purchase by the Fund as approved by the Fund's Compliance Officer.
<PAGE> 1
EXHIBIT (p)(1)
[LOGO AMERICAN CENTURY]
AMERICAN CENTURY INVESTMENTS
WORKING WITH INTEGRITY...
CODE OF ETHICS
Terms that are in BOLD ITALICS in the text are defined in Appendix 1.
I. PURPOSE OF CODE.
The Code of Ethics establishes rules that govern personal investment
activities of American Century employees, officers and directors, including
members of their immediate family.(1) The Directors of American Century's
registered investment companies (our "Fund Clients"(2)) who are not
"interested persons" (the "Independent Directors") are covered under
separate Codes applicable only to them.
II. WHY DO WE HAVE A CODE OF ETHICS?
A. INVESTORS HAVE PLACED THEIR TRUST IN AMERICAN CENTURY.
American Century is entrusted with the money of other people for
investment purposes. These investors are our "Clients"; our Fund
Clients are simply our biggest Client group. We cannot afford to
breach this trust. The Code of Ethics is one safeguard which helps us
to ensure that we will not breach our Clients' trust in us.
B. AMERICAN CENTURY WANTS TO PROTECT ITS CLIENTS.
We have a duty to place the interests of our Clients first and to
avoid even the appearance of a conflict of interest. This is how we
earn and keep our Clients' trust. We must conduct ourselves and our
personal SECURITIES transactions in a manner that does not create a
conflict of interest with our Clients or take unfair advantage of the
relationship with them. We will hold ourselves to the highest ethical
standards.
C. AMERICAN CENTURY WANTS TO GIVE YOU FLEXIBLE INVESTING OPTIONS.
Management believes that American Century's mutual funds provide a
broad range of investment alternatives for any investment portfolio.
We therefore do not encourage active trading by our employees; we
encourage employees to place their investable assets in our mutual
funds. We recognize, however, that individual needs differ and that
there are other attractive investment opportunities. We want to give
you and your family flexibility to invest, without jeopardizing
relationships with our Clients.
- --------
(1) See Appendix 2 for an explanation of the family members and others
included within this Code of Ethics.
(2) See Schedule A for a listing of all of our Fund Clients.
<PAGE> 2
AMERICAN CENTURY INVESTMENTS CODE OF ETHICS
D. FEDERAL LAW REQUIRES THAT WE HAVE A CODE OF ETHICS
The Investment Company Act of 1940 and the Investment Advisers Act of
1940 require that we have in place safeguards to prevent behavior and
activities that might disadvantage our Clients. These safeguards are
embodied in this Code of Ethics.(3)
- ----------
(3) Rule 17j-1 under the Investment Company Act of 1940 and Rule 204-2 under
the Investment Advisers Act of 1940 serve as a basis for much of what is
contained in American Century's Code of Ethics.
<PAGE> 3
AMERICAN CENTURY INVESTMENTS CODE OF ETHICS
III. DOES THE CODE OF ETHICS APPLY TO YOU?
Yes! The principles contained in the Code of Ethics must be observed by all
employees (including contract personnel). However, there are different
categories of restrictions on personal investing activities. The category
in which you have been placed generally depends on your job function,
although unique circumstances may prompt us to place you in a different
category. The range of categories is as follows:
Fewest Restrictions [ARROW] Most Restrictions
NON-ACCESS PERSON ACCESS PERSON INVESTMENT PERSON PORTFOLIO PERSON
The standard profile for each of the categories is described below:
A. PORTFOLIO PERSONS.
Portfolio Persons are those employees entrusted with direct
responsibility and authority to make investment decisions affecting
one or more Client portfolios.
B. INVESTMENT PERSONS.
Investment Persons are financial analysts, investment analysts,
traders and other employees who provide information or advice to a
portfolio management team or who help execute the portfolio management
team's decisions.
C. ACCESS PERSONS.
You are an Access Person if your job normally involves any of the
following:
- the purchase or sale of SECURITIES for Client portfolios;
- any function which relates to the making of recommendations with
respect to such purchases or sales of SECURITIES for Client
portfolios; OR
- access to information regarding the purchase or sale of
SECURITIES for Client portfolios.
In addition, you are an Access Person if you are any of the following:
- an officer or "interested" director of our Fund Clients; OR
- an officer or director of American Century Investment Management,
Inc.
D. NON-ACCESS PERSONS.
If you are an officer, director, employee or contractor of any of
American Century's companies AND you do not fit into any of the above
categories, you are a Non-Access Person. Because you normally do not
receive confidential information about Client portfolios, you are
subject only to American Century's Code of Business Conduct.
<PAGE> 4
AMERICAN CENTURY INVESTMENTS CODE OF ETHICS
IV. RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES.
As you are aware, you are prohibited by federal law from investing based on
material nonpublic information which you receive from any source. This
includes any confidential information which may be obtained by Portfolio,
Investment and Access Persons regarding the advisability of purchasing or
selling specific securities on behalf of Clients. You are expected to abide
by the highest ethical and legal standards in conducting your personal
SECURITIES transactions. For more information, please consult American
Century's INSIDER TRADING POLICY.
A. PRECLEARANCE OF PERSONAL SECURITIES TRANSACTIONS
Before either of the following things happen:
- the purchase or sale of a SECURITY for your own account; OR
- the purchase or sale of a SECURITY for an account for which you
are a BENEFICIAL OWNER
you must follow the following preclearance procedures:
1. IS THE SECURITY A "CODE-EXEMPT SECURITY"?
Check Appendix 3 to see if the SECURITY is listed as a
CODE-EXEMPT SECURITY. If it is, then you may execute the
transaction. Otherwise, proceed to the next step.
2. PRECLEAR THE TRANSACTION WITH THE LEGAL DEPARTMENT'S COMPLIANCE
GROUP.
There are two ways to do this:
a. E-mail your request to "LG-Personal Security Trades" (or
[email protected], if sending
from outside American Century's Lotus Notes system), and
provide the following information:
- Issuer name;
- Ticker symbol or CUSIP number;
- Type of security (stock, bond, note, etc.);
- Maximum expected dollar amount of proposed transaction;
AND
- Nature of transaction (purchase or sale)
b. Use the "PTRA" routine in the CICS system and enter your
request at the Personal Trade System screen.
3. IF YOU RECEIVE PRECLEARANCE FOR THE TRANSACTION (4):
You have 5 business days to execute your transaction.
- ----------
(4) How does American Century determine whether to approve or deny your
preclearance request? See Appendix 4 for a description of the process.
<PAGE> 5
AMERICAN CENTURY INVESTMENTS CODE OF ETHICS
B. ADDITIONAL RESTRICTIONS
[INVESTMENT AND PORTFOLIO PERSONS]
1. Initial Public Offerings.
You cannot acquire SECURITIES issued in an INITIAL PUBLIC
OFFERING.
2. Private Placements.
Before you acquire any SECURITIES in a private placement, you must
obtain approval from American Century's Chief Investment
Officer(5). We will help with this process if you send your
request to LG-Personal Security Trades. Once you receive approval,
you cannot participate in any subsequent consideration of an
investment in that issuer for any of our Clients.
3. Short-Term Trading Profits.
You cannot profit from any purchase and sale, or sale and
purchase, of the same (or equivalent) SECURITIES within sixty (60)
calendar days.
C. BLACKOUT PERIOD
[PORTFOLIO PERSONS]
If you are a Portfolio Person, you may not purchase or sell a SECURITY
within seven (7) days before and after a Client portfolio that you
manage executes a trade in that SECURITY.
V. REPORTING REQUIREMENTS.
A. QUARTERLY REPORT OF SECURITIES TRANSACTIONS
Each quarter you will be asked to verify the transactions you have
made for your personal accounts. This will come to you in the form of
an e-mail message containing the trades about which we have been
informed through your broker's duplicate confirmations. If the report
contained in the e-mail to you is correct, you need only to indicate
so by clicking the appropriate button in the message. If the message
is incomplete or otherwise incorrect, you must provide the following
information about each transaction omitted from the message:
- The date of the transaction, the description and number of
shares, and the principal amount of each SECURITY involved;
- The nature of the transaction, that is, purchase, sale or any
other type of acquisition or disposition;
- The transaction price; AND
- ----------
(5) If you are the Chief Investment Officer, you must receive your approval
from the General Counsel.
<PAGE> 6
AMERICAN CENTURY INVESTMENTS CODE OF ETHICS
- The name of the broker, dealer or bank through whom the
transaction was effected.
B. DUPLICATE CONFIRMATIONS
You must instruct your broker-dealer to send duplicate confirmations
of all transactions in such accounts to:
American Century Companies, Inc.
P.O. Box 410141
Kansas City, MO 64141
Attention: Compliance
Please note that "your broker-dealer" includes both of the following:
- a broker or dealer with whom you have a SECURITIES brokerage
account; AND
- a broker or dealer who maintains an account for a person whose
trades you must report because you are a BENEFICIAL OWNER.
C. REPORT OF SECURITIES HOLDINGS AND BROKERAGE ACCOUNTS
When you first become subject to the Code of Ethics as an Access,
Investment or Portfolio Person, you must provide us with a list of all
SECURITIES subject to this Code for which you are a registered owner
or in which you have a BENEFICIAL OWNERSHIP interest and the financial
services provider through whom they are held. You will be asked to
provide a revised version of this list annually.
VI. CAN THERE BE ANY EXCEPTIONS TO THE RESTRICTIONS?
Yes. The General Counsel or his or her designee, upon consultation with
your manager, may grant limited exemptions to specific provisions of the
Code on a case-by-case basis.
A. HOW TO REQUEST AN EXEMPTION
E-mail a written request to "LG-Personal Security Trades" (or
[email protected] if sending from
outside American Century's Lotus Notes system), detailing your
situation.
B. FACTORS CONSIDERED
In considering your request, the General Counsel or his or her
designee will grant your exemption request if he or she is satisfied
that:
- your request addresses an undue personal hardship imposed on you
by the Code of Ethics;
- your situation is not contemplated by the Code of Ethics; and
- your exemption, if granted, would be consistent with the
achievement of the objectives of the Code of Ethics.
<PAGE> 7
AMERICAN CENTURY INVESTMENTS CODE OF ETHICS
C. EXEMPTION REPORTING
All exemptions granted must be reported to the Boards of Directors of
our Fund Clients. The Boards of Directors may choose to delegate the
task of receiving and reviewing reports to a Committee comprised of
Independent Directors.
VII. CONFIDENTIAL INFORMATION.
All information about Clients' SECURITIES transactions, actual or
contemplated, is confidential. You must not disclose, except as required by
the duties of your employment, SECURITIES transactions of Clients, actual
or contemplated, or the contents of any written or oral communication,
study, report or opinion concerning any SECURITY. This does not apply to
information which has already been publicly disclosed.
VIII. CONFLICTS OF INTEREST.
You must receive prior written approval from our Clients and/or the
Independent Directors of our Fund Clients, as appropriate, to do any of the
following:
- negotiate or enter into any agreement on a Client's behalf with any
business concern doing or seeking to do business with the Client if
you, or a person related to you, has a substantial interest in the
business concern;
- enter into an agreement, negotiate or otherwise do business on the
Client's behalf with a personal friend or a person related to you; OR
- serve on the board of directors of, or act as consultant to, any
publicly traded corporation.
IX. WHAT HAPPENS IF YOU VIOLATE THE RULES IN THE CODE OF ETHICS?
You may be subject to serious penalties.
A. THE PENALTIES WHICH MAY BE IMPOSED INCLUDE:
- formal warning;
- restriction of trading privileges;
- disgorgement of trading profits;
- fine; AND/OR
- suspension or termination of employment.
B. PENALTY FACTORS
The factors which may be considered when determining the appropriate
penalty include, but are not limited to:
- the harm to Client interests;
- the extent of unjust enrichment;
- the frequency of occurrence;
- the degree to which there is personal benefit from unique
knowledge obtained through employment with American Century;
<PAGE> 8
AMERICAN CENTURY INVESTMENTS CODE OF ETHICS
- the degree of perception of a conflict of interest;
- evidence of fraud, violation of law, or reckless disregard of a
regulatory requirement; AND/OR
- the level of accurate, honest and timely cooperation from the
person subject to the Code.
If you have any questions about the Code, do not hesitate to ask a
member of management or Compliance.
X. ANNUAL CERTIFICATION OF COMPLIANCE WITH THE CODE
As a condition of your employment, you will be asked to certify annually:
- that you have read this Code of Ethics;
- that you understand this Code of Ethics; AND
- that you have complied with this Code of Ethics.
XI. AMERICAN CENTURY'S QUARTERLY REPORT TO FUND DIRECTORS
American Century management will prepare a quarterly report to the Board of
Directors of each Fund Client of any violation of this Code of Ethics
requiring significant sanctions.
<PAGE> 9
AMERICAN CENTURY INVESTMENTS CODE OF ETHICS
APPENDIX 1: DEFINITIONS
1. "BENEFICIAL OWNERSHIP"
See "Appendix 2: What is Beneficial Ownership?".
2. "CODE-EXEMPT SECURITY"
A "code-exempt security" is a security in which you may invest without
preclearing or reporting such transactions with American Century. The list
of Code-Exempt Securities appears in Appendix 3.
3. "INITIAL PUBLIC OFFERING"
"Initial public offering" means an offering of securities for which a
registration statement has not previously been filed with the SEC and for
which there is no active public market in the shares.
4. "PRIVATE PLACEMENT"
"Private placement" means an offering of securities in which the issuer
relies on an exemption from the registration provisions of the federal
securities laws, and usually involves a limited number of sophisticated
investors and a restriction on resale of the securities.
5. "SECURITY"
A "security" includes a great number of different investment vehicles.
However, for purposes of this Code of Ethics, "security" includes any of
the following:
- note,
- stock,
- treasury stock,
- bond,
- debenture,
- evidence of indebtedness,
- certificate of interest or participation in any profit-sharing
agreement,
- collateral-trust certificate,
- preorganization certificate or subscription,
- transferable share,
- investment contract,
- voting-trust certificate,
- certificate of deposit for a security,
- fractional undivided interest in oil, gas or other mineral rights,
- any put, call, straddle, option, or privilege on any security
(including a certificate of deposit) or on any group or index of
securities (including any interest therein or based on the value
thereof), or
- any put, call, straddle, option, or privilege entered into on a
national securities exchange relating to foreign currency, or
- in general, any interest or instrument commonly known as a "security,"
or
<PAGE> 10
AMERICAN CENTURY INVESTMENTS CODE OF ETHICS
- any certificate of interest or participation in, temporary or interim
certificate for, receipt for, guarantee of, future on or warrant or
right to subscribe to or purchase, any of the foregoing.
<PAGE> 11
AMERICAN CENTURY INVESTMENTS CODE OF ETHICS
APPENDIX 2: WHAT IS "BENEFICIAL OWNERSHIP"?
1. ARE SECURITIES HELD BY FAMILY MEMBERS OR DOMESTIC PARTNERS "BENEFICIALLY
OWNED" BY ME?
Probably. As a general rule, you are regarded as the beneficial owner
of securities held in the name of
- your spouse or domestic partner;
- your minor children;
- a relative who shares your home; OR
- any other person IF:
- You obtain from such securities benefits substantially similar to
those of ownership. For example, if you receive or benefit from
some of the income from the securities held by your spouse, you
are the beneficial owner; OR
- You can obtain title to the securities now or in the future.
2. ARE SECURITIES HELD BY A COMPANY I OWN ALSO "BENEFICIALLY OWNED" BY ME?
Probably not. Owning the securities of a company does not mean you
"beneficially own" the securities that the company itself owns. However,
you will be deemed to "beneficially own" these securities if:
- The company is merely a medium through which you (by yourself or with
others) in a small group invest or trade in securities; AND
- The company has no other substantial business.
In such cases, you and those who are in a position to control the company
will be deemed to "beneficially own" the securities owned by the company.
3. ARE SECURITIES HELD IN TRUST "BENEFICIALLY OWNED" BY ME?
Maybe. You are deemed to "beneficially own" securities held in trust if any
of the following is true:
- You are a trustee and either you or members of your immediate family
have a vested interest in the income or corpus of the trust;
- You have a vested beneficial interest in the trust; OR
- You are settlor of the trust and you have the power to revoke the
trust without obtaining the consent of all the beneficiaries.
As used in this section, the "immediate family" of a trustee means:
- A son or daughter of the trustee, or a descendent of either;
- A stepson or stepdaughter of the trustee;
- The father or mother of the trustee, or an ancestor of either;
- A stepfather or stepmother of the trustee; and
- A spouse or domestic partner of the trustee.
For the purpose of determining whether any of the foregoing relationships
exists, a legally adopted child of a person is considered a child of such
person by blood.
<PAGE> 12
AMERICAN CENTURY INVESTMENTS CODE OF ETHICS
4. ARE SECURITIES IN PENSION OR RETIREMENT PLANS "BENEFICIALLY OWNED" BY ME?
Probably not. Beneficial ownership does not include indirect interest
by any person in portfolio securities held by a pension or retirement
plan holding securities of an issuer whose employees generally are the
beneficiaries of the plan.
However, your participation in a pension or retirement plan is
considered beneficial ownership of the portfolio securities if you can
withdraw and trade the securities without withdrawing from the plan.
5. EXAMPLES OF BENEFICIAL OWNERSHIP
SECURITIES HELD BY FAMILY MEMBERS OR DOMESTIC PARTNERS
Example 1: Tom and Mary are married. Although Mary has an independent
source of income from a family inheritance and segregates her funds from
those of her husband, Mary contributes to the maintenance of the family
home. Tom and Mary have engaged in joint estate planning and have the same
financial adviser. Since Tom and Mary's resources are clearly significantly
directed towards their common property, they shall be deemed to be the
beneficial owners of each other's securities.
Example 2: Mike's adult son David lives in Mike's home. David is
self-supporting and contributes to household expenses. Mike is a beneficial
owner of David's securities.
Example 3: Joe's mother Margaret lives alone and is financially
independent. Joe has power of attorney over his mother's estate, pays all
her bills and manages her investment affairs. Joe borrows freely from
Margaret without being required to pay back funds with interest, if at all.
Joe takes out personal loans from Margaret's bank in Margaret's name, the
interest from such loans being paid from Margaret's account. Joe is a
significant heir of Margaret's estate. Joe is a beneficial owner of
Margaret's estate.
Example 4: Bob and Nancy are engaged. The house they share is still in
Nancy's name only. They have separate checking accounts with an informal
understanding that both individuals contribute to the mortgage payments and
other common expenses. Although Nancy is the only one employed by American
Century, Bob is a beneficial owner and subject to the Code of Ethics.
SECURITIES HELD BY A COMPANY
Example 5: ABC is a holding company with five shareholders owning equal
shares in the company. Although ABC Company does no business on its own, it
has several wholly-owned subsidiaries which invest in securities. Stan is a
shareholder of ABC Company. Stan has a beneficial interest in the
securities owned by ABC Company's subsidiaries.
<PAGE> 13
AMERICAN CENTURY INVESTMENTS CODE OF ETHICS
SECURITIES HELD IN TRUST
Example 6: John is trustee of a trust created for his two minor children.
When both of John's children reach 21, each shall receive an equal share of
the corpus of the trust. John is a beneficial owner of the trust.
Example 7: Jane is trustee of an irrevocable trust for her daughter. Jane
is a director of the issuer of the equity securities held by the trust. The
daughter is entitled to the income of the trust until she is 25 years old,
and is then entitled to the corpus. If the daughter dies before reaching
25, Jane is entitled to the corpus. Jane is a beneficial owner of the
trust.
<PAGE> 14
AMERICAN CENTURY INVESTMENTS CODE OF ETHICS
APPENDIX 3: CODE-EXEMPT SECURITIES
Because they do not pose a possibility for abuse, some securities are exempt
from American Century's Code of Ethics. The following is the current list of
"Code-Exempt Securities":
- - Mutual funds (open-end funds)
- - Closed-end funds
- - Bank Certificates of Deposit
- - U.S. government securities (such as Treasury notes, etc.)
- - Securities which are acquired through an employer-sponsored automatic
payroll deduction plan
- - securities purchased through dividend reinvestment programs
- - commercial paper;
- - bankers acceptances; AND
- - Futures contracts (and option contracts) on the following:
- Standard & Poor's 500 Index; or
- Standard & Poor's 100 Index
- - High quality short-term debt instruments, including repurchase agreements.
A "high quality short-term debt instrument" means any instrument that has a
maturity at issuance of less than 366 days and that is rated in one of the
two highest rating categories by a nationally recognized rating
organization.
- - NASDAQ 100 Shares (Ticker QQQ)
We may modify this list of securities at any time, please send an e-mail to
"LG-Personal Security Trades" to request the most current list.
<PAGE> 15
AMERICAN CENTURY INVESTMENTS CODE OF ETHICS
APPENDIX 4: HOW DOES THE PRECLEARANCE PROCESS WORK?
An employee in the "LG-Personal Security Trades" message group will enter your
request into our mainframe system. Your request is then subjected to the
following tests.
STEP 1: DE MINIMIS TRANSACTION TEST
- - Is the security issuer's market capitalization greater than $1 billion?
- - Will your proposed transaction, together with your other transactions in
the security for the current calendar quarter, be less than $10,000?
- - Does the security trade on a national securities exchange or market, such
as the New York Stock Exchange (NYSE) or National Association of Securities
Dealers Automated Quotation System (NASDAQ)?
If the answer to ALL of these questions is "YES", the system will generate a
message and send it to you approving your proposed transaction.
If the answer to ANY of these questions is "NO", then your request is subject to
Step 2.
STEP 2: OPEN ORDER TEST
- - Is there an open order for that security for any Client?
If "YES", the system will send a message to you to DENY the personal trade
request.
If "NO", then your request is subject to Step 3.
STEP 3: FOLLOW LIST TEST
- - Does any account or Fund own the security?
- - Does the security appear on the computerized list of stocks American
Century is considering to purchase for a Client?
If the answer to BOTH of these questions is "NO", the system will send a message
to you to APPROVE your proposed transaction.
If the answer to EITHER of these questions is "YES", then your request is
subject to Step 4.
STEP 4: PRESENT INTENTIONS TEST
The system sends a message to our trading desk in Kansas City which identifies
the security described in your preclearance request. A trading desk
representative then contacts a representative from each of the portfolio
management teams asks if any portfolio manager is considering buying or selling
the security within the next five (5) business days.?
If ALL of the portfolio management teams respond "NO", your request will be
APPROVED (unless you are a Portfolio Person, see Step 5).
If ANY of the portfolio management teams respond "YES", your request will be
DENIED.
<PAGE> 16
AMERICAN CENTURY INVESTMENTS CODE OF ETHICS
- --------------------------------------------------------------------------------
STEP 5: PORTFOLIO PERSONS ONLY
The General Counsel or his/her designee must approve your request before an
APPROVAL or a DENIAL message is sent to you.
THE PRECLEARANCE PROCESS CAN BE CHANGED AT ANY TIME TO ENSURE THAT THE GOALS OF
AMERICAN CENTURY'S CODE OF ETHICS ARE ADVANCED.
<PAGE> 17
AMERICAN CENTURY INVESTMENTS CODE OF ETHICS
- --------------------------------------------------------------------------------
SCHEDULE A
INVESTMENT MANAGER:
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
THE FUND CLIENTS:
AMERICAN CENTURY CALIFORNIA TAX-FREE AND MUNICIPAL FUNDS
AMERICAN CENTURY CAPITAL PORTFOLIOS, INC.
AMERICAN CENTURY GOVERNMENT INCOME TRUST
AMERICAN CENTURY INTERNATIONAL BOND FUNDS
AMERICAN CENTURY INVESTMENT TRUST
AMERICAN CENTURY MUNICIPAL TRUST
AMERICAN CENTURY MUTUAL FUNDS, INC.
AMERICAN CENTURY PREMIUM RESERVES, INC.
AMERICAN CENTURY QUANTITATIVE EQUITY FUNDS
AMERICAN CENTURY STRATEGIC ASSET ALLOCATIONS, INC.
AMERICAN CENTURY TARGET MATURITIES TRUST
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
AMERICAN CENTURY WORLD MUTUAL FUNDS, INC.
<PAGE> 18
AMERICAN CENTURY INVESTMENTS CODE OF ETHICS
<PAGE> 1
EXHIBIT (p)(2)
EAGLE ASSET MANAGEMENT, INC.
CODE OF ETHICS
A. Important General Prohibitions
The specific provisions and reporting requirements of this Code are
concerned with certain investment activities of "Access Persons," as herein
defined, who may benefit by, or interfere with, the purchase and sale of
securities by an "investment company," as defined herein. Rule 17j-1 (the
"Rule") under the Investment Company Act of 1940 (the "Act") prohibits an access
person of an investment adviser from using information concerning the
investments or investment intentions of an investment company, or from using
their ability to influence such investment intentions, for personal gain or in a
manner detrimental to the interest of an investment company. Specifically, the
Rule makes it unlawful, and it shall be a violation of this Code, for an access
person, directly or indirectly, in connection with the purchase or sale of a
security held or to be acquired by an investment company:
1. to employ any device, scheme or artifice to defraud the investment
company;
2. to make to the investment company (or its agents or affiliates) any
untrue statement of a material fact, or to omit to state to the investment
company (or its agents or affiliates) a material fact necessary in order
to make the statements made, in light of the circumstances under which
they are made, not misleading;
3. to engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon the investment company; or
4. to engage in any manipulative practice with respect to the
investment company.
B. Definitions
1. Access Person. The term "access person" means any director, officer,
or advisory person of Eagle Asset Management, Inc. ("Eagle").
2. Investment Company. The term "investment company" means a company
registered as such under the Investment Company Act of 1940 and for which Eagle
is the investment adviser.
3. Advisory Person. The term "advisory person" of Eagle means (a) any
employee of Eagle (or of any company in a control relationship to Eagle) who, in
connection with his or her regular functions or duties, makes, participates in,
or obtains information
<PAGE> 2
regarding the purchase or sale of a security by an investment company, or whose
functions relate to the making of any recommendations with respect to such
purchases or sales; and (b) any natural person in a control relationship to
Eagle who obtains information concerning recommendations made to an investment
company with regard to the purchase or sale of a security.
4. Beneficial Ownership. "Beneficial ownership" shall be interpreted in
the same manner as it would be in determining whether a person is subject to the
provisions of Section 16 of the Securities Exchange Act of 1934 and the rules
and regulations thereunder. "Beneficial ownership" includes accounts of a
spouse, minor children and relatives resident in the access person's home, as
well as accounts of another person if by reason of any contract, understanding,
relationship, agreement or other arrangement the access person obtains therefrom
benefits substantially equivalent to those of ownership. Access person should
contact the designated compliance officer regarding any questions they have
concerning what constitutes beneficial ownership.
5. Control. The term "control shall have the same meaning as that set
forth in Section 2(a)(9) of the Investment Company Act of 1940. A natural person
shall be presumed not to be a "control person for this purpose, unless a
contrary determination is made by the Securities and Exchange Commission.
6. Purchase or Sale of a Security. "Purchase or sale of a security"
includes, inter alia, the writing of an option to purchase or sell a security.
7. Security. The term 'security' shall have the same meaning as set
forth in Section 2(a)(36) of the Investment Company Act of 1940, except that it
shall not include securities issued by the Government of the United States,
bankers' acceptances, bank certificates of deposit, commercial paper and shares
of registered open-end investment companies. Any questions as to whether a
particular investment constitutes a "security" should be referred to the
designated compliance officer.
8. Designated Compliance Officer. The term "designated compliance
officer" shall mean the Eagle officer(s) designated by Eagle's President as
being responsible for receiving reports or notices and performing such other
duties as required by this Code of Ethics.
C. Prohibited Transactions.
1. Purchases and Sales of a Security. Transactions which are prohibited
under the rules of Eagle's Employee Security Transaction Guidelines, which are
incorporated herein by reference, shall be considered prohibited transactions
for access persons under this Code.
2
<PAGE> 3
D. Exempt Transactions.
Exempt transactions shall include:
1. Purchases or sales in any account over which the access person has
no direct or indirect influence or control.
2. Purchases or sales which are non-volitional on the part of either
the access person or an investment company.
3. Purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities to the extent such rights
were acquired from such issuer, and sales of such rights so acquired.
4. Purchases or sales which receive the prior approval of Eagle's
Compliance Officer, pursuant to Eagle's Employee Security Transaction
Guidelines, which are incorporated herein by reference.
E. Reporting.
1. In accordance with the reporting requirements of the Employee
Security Transaction Guidelines, every access person shall report to the
designated compliance officer the following information with respect to
transactions in any security in which such access person has, or by reason of
such transaction acquires, any direct or indirect beneficial ownership in the
security:
(a) The date of the transaction, the title and the number of shares, and
the principal amount of each security involved;
(b) The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(c) The price at which the transaction was effected; and,
(d) The name of the broker, dealer, or bank with or through whom the
transaction was effected.
2.(a) A person who becomes an access person on or after March 1, 2000 must
file an initial holdings report with the designated compliance officers within
10 days of becoming an access person. The report will contain the following
information:
3
<PAGE> 4
(i) The title, number of shares and principal amount of each
security in which the access person had any direct or indirect
beneficial ownership when the person became an access person;
(ii) The name of any broker, dealer or bank with whom the access
person maintained an account in which any securities were held
for the direct or indirect benefit of the access person as of
the date the person became an access person; and
(iii) The date that the report is submitted by the access person.
(b) Every access person must submit an annual holdings report containing
the following information (which must be current as of a date no
more than 30 days before the date of the report):
(i) The title, number of shares and principal amount of each
security in which the access person had any direct or indirect
beneficial ownership;
(ii) The name of any broker, dealer or bank with whom the access
person maintains an account in which any securities are held
for the direct or indirect benefit of the access person; and
(iii) The date that the report is submitted by the access person.
3. Any report pursuant to this Section E. shall not be construed as an
admission by the person making the report that he or she has any direct or
indirect beneficial ownership in the security to which the report relates.
4. The designated compliance officer shall review all reports to
determine if a violation has occurred. Upon finding a material violation, the
officer shall submit a report to the Chief Compliance Officer of Eagle, who
shall review the events to determine what remedial action, if any, will be
recommended to the President of Eagle.
F. Sanctions.
Upon discovering a violation of this Code, Eagle may impose such sanctions
as it deems appropriate, including inter alia, a letter of censure, suspension
or termination of the employment of the violator. All material violations of
this Code and any sanctions imposed with respect thereto shall be reported
periodically to the board of directors of the investment company with respect to
whose securities the violation occurred.
4
<PAGE> 1
EXHIBIT (p)(3)
LORD, ABBETT & CO.
LORD ABBETT-SPONSORED FUNDS
AND
LORD ABBETT DISTRIBUTOR LLC
CODE OF ETHICS
I. Statement of General Principles
The personal investment activities of any officer, director, trustee or
employee of the Lord Abbett-sponsored Funds (the Funds) or any partner or
employee of Lord, Abbett & Co. (Lord Abbett) will be governed by the
following general principles: (1) Covered Persons have a duty at all times
to place first the interests of Fund shareholders and, in the case of
employees and partners of Lord Abbett, beneficiaries of managed accounts;
(2) all securities transactions by Covered Persons shall be conducted
consistent with this Code and in such a manner as to avoid any actual or
potential conflict of interest or any abuse of an individual's position of
trust and responsibility; and (3) Covered Persons should not take
inappropriate advantage of their positions with Lord Abbett or the Funds.
II. Specific Prohibitions
No person covered by this Code, shall purchase or sell a security, except
an Excepted Security, if there has been a determination to purchase or
sell such security for a Fund (or, in the case of any employee or partner
of Lord, Abbett, for another client of Lord Abbett), or if such a purchase
or sale is under consideration for a Fund (or, in the case of an employee
or partner of Lord Abbett, for another client of Lord Abbett), nor may
such person have any dealings in a security that he may not purchase or
sell for any other account in which he has Beneficial Ownership, or
disclose the information to anyone, until such purchase, sale or
contemplated action has either been completed or abandoned.
III. Obtaining Advance Approval
Except as provided in Sections V and VI of this Code, all proposed
transactions in securities (privately or publicly owned) by Covered
Persons, except transactions in Excepted Securities, should be approved
consistent with the provisions of this Code in advance by one of the
partners of Lord Abbett. In order to obtain approval, the Covered Person
must send their request via e-mail to Isabel Herrera, or in her absence,
Chrissy DeCicco, who will obtain a partner's approval. After approval has
been obtained, the Covered Person may act on it within the next seven
business days, unless he sooner learns of a contemplated action by Lord
Abbett. After the seven business days, or upon hearing of such
contemplated action, a new approval must be obtained.
Lord, Abbett & Co. Code of Ethics, November 1999
<PAGE> 2
Furthermore, in addition to the above requirements, partners and employees
directly involved must disclose information they may have concerning
securities they may want to purchase or sell to any portfolio manager who
might be interested in the securities for the portfolios they manage.
IV. Reporting and Certification Requirements; Brokerage Confirmations
(1) Except as provided in Sections V and VI of this Code, within 10 days
following the end of each calendar quarter each Covered Person must
file with Ms. Herrera a signed Security Transaction Reporting Form.
The form must be signed and filed whether or not any security
transaction has been effected. If any transaction has been effected
during the quarter for the Covered Person's account or for any
account in which he has a direct or indirect Beneficial Ownership,
it must be reported. Excepted from this reporting requirement are
transactions effected in any accounts over which the Covered Person
has no direct or indirect influence or control and transactions in
Excepted Securities. Ms. Herrera is responsible for reviewing these
transactions promptly and must bring any apparent violation to the
attention of the General Counsel of Lord Abbett.
(2) Each employee and partner of Lord Abbett will upon commencement of
employment and annually thereafter disclose all personal securities
holdings and annually certify that: (i) they have read and
understand this Code and recognize they are subject hereto; and (ii)
they have complied with the requirements of this Code and disclosed
or reported all securities transactions required to be disclosed or
reported pursuant to the requirements of this Code.
(3) Each employee and partner of Lord Abbett will direct his brokerage
firm to send copies of all confirmations and all monthly statements
directly to Ms. Herrera.
(4) Each employee and partner of Lord Abbett who has a
Fully-Discretionary Account (as defined in Section VI) shall
disclose all pertinent facts regarding such Account to Lord Abbett's
General Counsel upon commencement of employment. Each such employee
or partner shall thereafter annually certify on the prescribed form
that he or she has not and will not exercise any direct or indirect
influence or control over such Account, and has not discussed any
potential investment decisions with such independent fiduciary in
advance of any such transactions.
V. Special Provisions Applicable to Outside Directors and Trustees of the
Funds
The primary function of the Outside Directors and Trustees of the Funds is
to set policy and monitor the management performance of the Funds'
officers and employees and the partners and employees of Lord Abbett
involved in the management of the Funds. Although they receive complete
information as to actual portfolio transactions,
Lord, Abbett & Co. Code of Ethics, November 1999 2
<PAGE> 3
Outside Directors and Trustees are not given advance information as to the
Funds' contemplated investment transactions.
An Outside Director or Trustee wishing to purchase or sell any security
will therefore generally not be required to obtain advance approval of his
security transactions. If, however, during discussions at Board meetings
or otherwise an Outside Director or Trustee should learn in advance of the
Funds' current or contemplated investment transactions, then advance
approval of transactions in the securities of such company(ies) shall be
required for a period of 30 days from the date of such Board meeting. In
addition, an Outside Director or Trustee can voluntarily obtain advance
approval of any security transaction or transactions at any time.
No report described in Section IV (1) will be required of an Outside
Director or Trustee unless he knew, or in the ordinary course of
fulfilling his official duties as a director or trustee should have known,
at the time of his transaction, that during the 15-day period immediately
before or after the date of the transaction (i.e., a total of 30 days) by
the Outside Director or Trustee such security was or was to be purchased
or sold by any of the Funds or such a purchase or sale was or was to be
considered by a Fund. If he makes any transaction requiring such a report,
he must report all securities transactions effected during the quarter for
his account or for any account in which he has a direct or indirect
Beneficial Ownership interest and over which he has any direct or indirect
influence or control. Each Outside Director and Trustee will direct his
brokerage firm to send copies of all confirmations of securities
transactions to Ms. Herrera, and annually make the certification required
under Section IV(2)(i) and (ii). Outside Directors' and Trustees'
transactions in Excepted Securities are excepted from the provisions of
this Code.
It shall be prohibited for an Outside Director or Trustee to (i) trade on
material non-public information, or (ii) trade in options with respect to
securities covered by this Code without advance approval from Lord Abbett.
Prior to accepting an appointment as a director of any company, an Outside
Director or Trustee will advise Lord Abbett and discuss with Lord Abbett's
Managing Partner whether accepting such appointment creates any conflict
of interest or other issues.
If an Outside Director or Trustee, who is a director or an employee of, or
consultant to, a company, receives a grant of options to purchase
securities in that company (or an affiliate), neither the receipt of such
options, nor the exercise of those options and the receipt of the
underlying security, requires advance approval from Lord Abbett. Further,
neither the receipt nor the exercise of such options and receipt of the
underlying security is reportable by such Outside Director or Trustee.
Finally, neither the receipt nor the exercise of such options shall be
considered "trading in options" within the meaning of the preceding
paragraph of this Section V.
Lord, Abbett & Co. Code of Ethics, November 1999 3
<PAGE> 4
VI. Additional Requirements relating to Partners and Employees of Lord Abbett
It shall be prohibited for any partner or employee of Lord Abbett:
(1) To obtain or accept favors or preferential treatment of any kind or
gift or other thing having a value of more than $100 from any person
or entity that does business with or on behalf of the investment
company---no partner or employee shall have any ownership interest
in a brokerage firm;
(2) to trade on material non-public information or otherwise fail to
comply with the Firm's Statement of Policy and Procedures on Receipt
and Use of Inside Information adopted pursuant to Section 15(f) of
the Securities Exchange Act of 1934 and Section 204A of the
Investment Advisers Act of 1940;
(3) to trade in options with respect to securities covered under this
Code;
(4) to profit in the purchase and sale, or sale and purchase, of the
same (or equivalent) securities within 60 calendar days (any profits
realized on such short-term trades shall be disgorged to the
appropriate Fund or as otherwise determined);
(5) to trade in futures or options on commodities, currencies or other
financial instruments, although the Firm reserves the right to make
rare exceptions in unusual circumstances which have been approved by
the Firm in advance;
(6) to engage in short sales or purchase securities on margin;
(7) to buy or sell any security within seven business days before or
after any Fund (or other Lord Abbett client) trades in that security
(any profits realized on trades within the proscribed periods shall
be disgorged to the Fund (or the other client) or as otherwise
determined);
(8) to subscribe to new or secondary public offerings, even though the
offering is not one in which the Funds or Lord Abbett's advisory
accounts are interested;
(9) to become a director of any company without the Firm's prior consent
and implementation of appropriate safeguards against conflicts of
interest.
In connection with any request for approval, pursuant to Section III of
this Code, of an acquisition by partners or employees of Lord Abbett of
any securities in a private placement, prior approval will take into
account, among other factors, whether the investment opportunity should be
reserved for any of the Funds and their shareholders (or other clients of
Lord Abbett) and whether the opportunity is being offered to the
individual by virtue of the individual's position with Lord Abbett or the
Funds. An individual's investment in privately-placed securities will be
disclosed to the Managing Partner of Lord Abbett if such individual is
involved in consideration of an
Lord, Abbett & Co. Code of Ethics, November 1999 4
<PAGE> 5
investment by a Fund (or other client) in the issuer of such securities.
In such circumstances, the Fund's (or other client's) decision to purchase
securities of the issuer will be subject to independent review by
personnel with no personal interest in the issuer.
If a spouse of a partner or employee of Lord Abbett who is a director or
an employee of, or a consultant to, a company, receives a grant of options
to purchase securities in that company (or an affiliate), neither the
receipt nor the exercise of those options requires advance approval from
Lord Abbett or reporting. Any subsequent sale of the security acquired by
the option exercise by that spouse would require advance approval and is a
reportable transaction.
Advance approval is not required for transactions in any account of a
Covered person if the Covered Person has no direct or indirect influence
or control ( a "Fully-Discretionary Account"). A Covered person will be
deemed to have "no direct or indirect influence or control" over an
account only if : (i) investment discretion for the account has been
delegated to an independent fiduciary and such investment discretion is
not shared with the employee, (ii) the Covered Person certifies in writing
that he or she has not and will not discuss any potential investment
decisions with such independent fiduciary before any transaction and (iii)
the General Counsel of Lord Abbett has determined that the account
satisfies these requirements. Transaction in Fully-Discretionary Accounts
by an employee or partner of Lord Abbett are subject to the post-trade
reporting requirements of this Code.
VII. Enforcement
The Secretary of the Funds and General Counsel for Lord Abbett (who may be
the same person) each is charged with the responsibility of enforcing this
Code, and may appoint one or more employees to aid him in carrying out his
enforcement responsibilities. The Secretary shall implement a procedure to
monitor compliance with this Code through a periodic review of personal
trading records provided under this Code against transactions in the Funds
and managed portfolios. The Secretary shall bring to the attention of the
Funds' Audit Committees any apparent violations of this Code, and the
Audit Committees shall determine what action shall be taken as a result of
such violation. The record of any violation of this Code and any action
taken as a result thereof, which may include suspension or removal of the
violator from his position, shall be made a part of the permanent records
of the Audit Committees of the Funds. The Secretary shall also prepare an
annual report to the directors or trustees of the Funds that (a)
summarizes Lord Abbett's procedures concerning personal investing,
including the procedures followed by partners in determining whether to
give approvals under Section III and the procedures followed by Ms.
Herrera in determining pursuant to Section IV whether any Funds have
determined to purchase or sell a security or are considering such a
purchase or sale, and any changes in those procedures during the past
year, and (b) identifies any recommended changes in the restrictions
imposed by this Code or in such procedures with respect to the Code and
Lord, Abbett & Co. Code of Ethics, November 1999 5
<PAGE> 6
any changes to the Code based upon experience with the Code, evolving
industry practices or developments in the regulatory environment.
The Audit Committee of each of the Funds and the General Counsel of Lord
Abbett may determine in particular cases that a proposed transaction or
proposed series of transactions does not conflict with the policy of this
Code and exempt such transaction or series of transactions from one or
more provisions of this Code.
VIII. Definitions
"Covered Person" means any officer, director, trustee, director or
trustee emeritus or employee of any of the Funds and any partner or
employee of Lord Abbett. (See also definition of "Beneficial Ownership.")
"Excepted Securities" are shares of the Funds, bankers' acceptances, bank
certificates of deposit, commercial paper, shares of registered open-end
investment companies and U.S. Government securities.
"Outside Directors and Trustees" are directors and trustees who are not
"interested persons" as defined in the Investment Company Act of 1940.
"Security" means any stock, bond, debenture or in general any instrument
commonly known as a security and includes a warrant or right to subscribe
to or purchase any of the foregoing and also includes the writing of an
option on any of the foregoing.
"Beneficial Ownership" is interpreted in the same manner as it would be
under Section 16 of the Securities Exchange Act of 1934 and Rule 16a-1
thereunder. Accordingly, "beneficial owner" includes any Covered Person
who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares a direct or
indirect pecuniary interest (i.e. the ability to share in profits derived
from such security) in any equity security, including:
(i) securities held by a person's immediate family sharing the
same house (with certain exceptions);
(ii) a general partner's interest in portfolio securities held by a
general or limited partnership;
(iii) a person's interest in securities held in trust as trustee,
beneficiary or settlor, as provided in Rule 16a-8(b); and
(iv) a person's right to acquire securities through options, rights
or other derivative securities.
"Gender/Number" whenever the masculine gender is used herein, it includes
the feminine gender as well, and the singular includes the plural and the
plural includes the singular, unless in each case the context clearly
indicates otherwise.
Lord, Abbett & Co. Code of Ethics, November 1999 6
<PAGE> 1
CONFIDENTIAL INFORMATION AND
SECURITIES TRADING POLICY
<PAGE> 2
CONTENTS
- -----------------------------
<TABLE>
<CAPTION>
Page
<S> <C> <C>
INTRODUCTION ............................................................................ 1
PART I
APPLICABLE TO ALL ASSOCIATES
SECTION ONE
CONFIDENTIAL INFORMATION.................................................... 2
-Types of Confidential Information.......................................... 2
-Rules for Protecting Confidential Information.............................. 3
-Supplemental Procedures.................................................... 4
SECTION TWO
INSIDER TRADING AND TIPPING................................................. 5
-Legal Prohibitions......................................................... 5
-Mellon's Policy............................................................ 6
SECTION THREE
RESTRICTIONS ON THE FLOW OF INFORMATION
WITHIN MELLON (THE "CHINESE WALL").......................................... 7
-Rules for Maintaining the Chinese Wall..................................... 7
-Reporting Receipt of Material Nonpublic Information........................ 8
-Functions "Above the Wall"................................................. 9
-Supplemental Procedures.................................................... 9
SECTION FOUR
RESTRICTIONS ON TRANSACTIONS IN MELLON SECURITIES...........................10
-Beneficial Ownership.......................................................11
SECTION FIVE
RESTRICTIONS ON TRANSACTIONS IN OTHER SECURITIES............................12
SECTION SIX
CLASSIFICATION OF ASSOCIATES................................................14
-Insider Risk Associate.....................................................14
-Investment Associate.......................................................15
-Other Associate............................................................15
PART II
APPLICABLE TO INSIDER
RISK ASSOCIATES ONLY ............................................................................16
-Prohibition on Investments in Securities of Financial
Services Organizations....................................................16
-Conflict of Interest.......................................................17
-Preclearance for Personal Securities Transactions..........................17
-Personal Securities Transactions Reports...................................19
-Confidential Treatment.....................................................19
</TABLE>
CONFIDENTIAL INFORMATION AND SECURITIES TRADING POLICY-019 04/12/00
<PAGE> 3
<TABLE>
<S> <C> <C>
PART III
APPLICABLE TO INVESTMENT
ASSOCIATES ONLY ............................................................................20
-Special Standards of Conduct for Investment Associates.....................20
-Preclearance for Personal Securities Transactions..........................21
-Personal Securities Transactions Reports...................................23
-Confidential Treatment.....................................................24
PART IV
APPLICABLE TO OTHER
ASSOCIATES ONLY ............................................................................25
-Preclearance for Personal Securities Transactions..........................25
-Personal Securities Transactions Reports...................................25
-Restrictions on Transactions in Other Securities...........................25
-Confidential Treatment.....................................................26
PART V
APPLICABLE TO NONMANAGEMENT
BOARD MEMBERS ............................................................................27
-Nonmanagement Board Member.................................................27
-Standards of Conduct for Nonmanagement Board Member........................27
-Preclearance for Personal Securities Transactions..........................28
-Personal Securities Transactions Reports...................................29
-Confidential Treatment.....................................................29
GLOSSARY DEFINITIONS.................................................................30
INDEX OF EXHIBITS ............................................................................33
</TABLE>
CONFIDENTIAL INFORMATION AND SECURITIES TRADING POLICY-019 04/12/00
<PAGE> 4
INTRODUCTION
- -----------------------
Mellon Bank Corporation ("Mellon") and its associates, and
the registered investment companies for which The Dreyfus
Corporation ("Dreyfus") and/or Mellon serves as investment
adviser, sub-investment adviser or administrator, are
subject to certain laws and regulations governing the use
of confidential information and personal securities
trading. Mellon has developed this Confidential Information
and Securities Trading Policy (the "Policy") to establish
specific standards to promote compliance with applicable
laws. Further, the Policy is intended to protect Mellon's
business secrets and proprietary information as well as
that of its customers and any entity for which it acts in a
fiduciary capacity.
The Policy set forth procedures and limitations which
govern the personal securities transactions of every Mellon
associate and certain other individuals associated with the
registered investment companies for which Dreyfus and/or
Mellon serves as investment adviser, sub-investment adviser
or administrator. The Policy is designed to reinforce
Mellon's reputation for integrity by avoiding even the
appearance of impropriety in the conduct of Mellon's
business.
Associates should be aware that they may be held personally
liable for any improper or illegal acts committed during
the course of their employment, and that "ignorance of the
law" is not a defense. Associates may be subject to civil
penalties such as fines, regulatory sanctions including
suspensions, as well as criminal penalties.
Associates outside the United States are also subject to
applicable laws of foreign jurisdictions, which may differ
substantially from U.S. law and which may subject such
associates to additional requirements. Such associates must
comply with applicable requirements of pertinent foreign
laws as well as with the provisions of the Policy. To the
extent any particular portion of the Policy is inconsistent
with foreign law, associates should consult the General
Counsel or the Manager of Corporate Compliance.
Any provision of this Policy may be waived or exempted at
the discretion of the Manager of Corporate Compliance. Any
such waiver or exemption will be evidenced in writing and
maintained in the Risk Management and Compliance
Department.
Associates must read the Policies and MUST
COMPLY with them. Failure to comply with
the provisions of the Policies may result
in the imposition of serious sanctions,
including but not limited to disgorgement
of profits, dismissal, substantial
personal liability and referral to law
enforcement agencies or other regulatory
agencies. Associates should retain the
Policies in their records for future
reference. Any questions regarding the
Policies should be referred to the Manager
of Corporate Compliance or his/her
designee.
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CONFIDENTIAL INFORMATION AND SECURITIES TRADING POLICY-019 04/12/00
<PAGE> 5
PART I - APPLICABLE TO ALL ASSOCIATES
- -----------------------------
SECTION ONE
CONFIDENTIAL INFORMATION
As an associate you may receive information about Mellon,
its customers and other parties that, for various reasons,
should be treated as confidential. All associates are
expected to strictly comply with measures necessary to
preserve the confidentiality of information.
TYPES OF CONFIDENTIAL INFORMATION - Although it is
impossible to provide an exhaustive list of information
that should remain confidential, the following are examples
of the general types of confidential information that
associates might receive in the ordinary course of carrying
out their job responsibilities.
- Information Obtained from Business Relations - An associate
might receive confidential information regarding customers
or other parties with whom Mellon has business
relationships. If released, such information could have a
significant effect on their operations, their business
reputations or the market price of their securities.
Disclosing such information could expose both the associate
and Mellon to liability for damages.
- Mellon Financial Information - An associate might receive
financial information regarding Mellon before such
information has been disclosed to the public. It is the
policy of Mellon to disclose all material corporate
information to the public in such a manner that all those
who are interested in Mellon and its securities have equal
access to the information. Disclosing such information to
unauthorized persons could subject both the associate and
Mellon to liability under the federal securities laws.
- Mellon Proprietary Information - Certain nonfinancial
information developed by Mellon - such as business plans,
customer lists, methods of doing business, computer
software, source codes, databases and related documentation
- constitutes valuable Mellon proprietary information.
Disclosure of such information to unauthorized persons
could harm, or reduce a benefit to, Mellon and could result
in liability for both the associate and Mellon.
- Mellon Examination Information - Banks and certain other
Mellon subsidiaries are periodically examined by regulatory
agencies. Certain reports made by those regulatory agencies
are the property of those agencies and are strictly
confidential. Giving information from these reports to
anyone not officially connected with Mellon is a criminal
offense.
- Portfolio Management Information - Portfolio management
information relating to investment accounts or funds
managed by Mellon or Dreyfus, including investment
decisions or strategies developed for the benefit of
investment companies advised by Dreyfus, is for the benefit
of such account or fund. Disclosure or exploitation of such
information by an associate in an unauthorized manner may
cause detriment to such accounts or funds and may subject
the associate to liability under the federal securities
laws.
2
CONFIDENTIAL INFORMATION AND SECURITIES TRADING POLICY-019 04/12/00
<PAGE> 6
RULES FOR PROTECTING CONFIDENTIAL INFORMATION - The
following are some basic rules to follow to protect
confidential information.
- Limited Communication to Outsiders - Confidential
information should not be communicated to anyone outside
Mellon, except to the extent they need to know the
information in order to provide necessary services to
Mellon.
- Limited Communication to Insiders - Confidential
information should not be communicated to other associates,
except to the extent they need to know the information to
fulfill their job responsibilities and their knowledge of
the information is not likely to result in misuse or a
conflict of interest. In this regard, Mellon has
established specific restrictions with respect to material
nonpublic information in order to separate and insulate
different functional areas and personnel within Mellon.
Please refer to Section Three, "Restrictions on The Flow of
Information Within Mellon" (The "Chinese Wall").
- Corporate Use Only - Confidential information should be
used only for Corporate purposes. Under no circumstances
may an associate use it, directly or indirectly, for
personal gain or for the benefit of any outside party who
is not entitled to such information.
- Other Customers - Where appropriate, customers should be
made aware that associates will not disclose to them other
customers' confidential information or use the confidential
information of one customer for the benefit of another.
- Notification of Confidentiality - When confidential
information is communicated to any person, either inside or
outside Mellon, they should be informed of the
information's confidential nature and the limitations on
its further communication.
- Prevention of Eavesdropping - Confidential matters should
not be discussed in public or in places, such as in
building lobbies, restaurants or elevators, where
unauthorized persons may overhear. Precautions, such as
locking materials in desk drawers overnight, stamping
material "Confidential" and delivering materials in sealed
envelopes, should be taken with written materials to ensure
they are not read by unauthorized persons.
- Data Protection - Data stored on personal computers and
diskettes should be properly secured to ensure they are not
accessed by unauthorized persons. Access to computer files
should be granted only on a need-to-know basis. At a
minimum, associates should comply with applicable Mellon
policies on electronic data security.
3
CONFIDENTIAL INFORMATION AND SECURITIES TRADING POLICY-019 04/12/00
<PAGE> 7
- Confidentiality Agreements - Confidentiality agreements to
which Mellon is a party must be complied with in addition
to, but not in lieu of, this Policy. Confidentiality
agreements that deviate from commonly used forms should be
reviewed in advance by the Legal Department.
- Contact with the Public - All contacts with institutional
shareholders or securities analysts about Mellon must be
made through the Investor Relations Division of the Finance
Department. All contacts with the media and all speeches or
other public statements made on behalf of Mellon or about
Mellon's businesses must be cleared in advance by Corporate
Affairs. In speeches and statements not made on behalf of
Mellon, care should be taken to avoid any implication that
Mellon endorses the views expressed.
SUPPLEMENTAL PROCEDURES - Mellon entities, departments,
divisions and groups should establish their own
supplemental procedures for protecting confidential
information, as appropriate. These procedures may include:
- establishing records retention and destruction policies;
- using code names;
- limiting the staffing of confidential matters (for example,
limiting the size of working groups and the use of
temporary employees, messengers and word processors); and
- requiring written confidentiality agreements from certain
associates.
Any supplemental procedures should be used only to protect
confidential information and not to circumvent appropriate
reporting and recordkeeping requirements.
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CONFIDENTIAL INFORMATION AND SECURITIES TRADING POLICY-019 04/12/00
<PAGE> 8
SECTION TWO
INSIDER TRADING AND TIPPING
LEGAL PROHIBITIONS - Federal securities laws generally
prohibit the trading of securities while in possession of
"material nonpublic" information regarding the issuer of
those securities (insider trading). Any person who passes
along the material nonpublic information upon which a trade
is based (tipping) may also be liable.
"Material" - Information is material if there is a
substantial likelihood that a reasonable investor would
consider it important in deciding whether to buy, sell or
hold securities. Obviously, information that would affect
the market price of a security would be material. Examples
of information that might be material include:
- a proposal or agreement for a merger, acquisition or
divestiture, or for the sale or purchase of substantial
assets;
- tender offers, which are often material for the party
making the tender offer as well as for the issuer of the
securities for which the tender offer is made;
- dividend declarations or changes;
- extraordinary borrowings or liquidity problems;
- defaults under agreements or actions by creditors,
customers or suppliers relating to a company's credit
standing;
- earnings and other financial information, such as large or
unusual write-offs, write-downs, profits or losses;
- pending discoveries or developments, such as new products,
sources of materials, patents, processes, inventions or
discoveries of mineral deposits;
- a proposal or agreement concerning a financial
restructuring;
- a proposal to issue or redeem securities, or a development
with respect to a pending issuance or redemption of
securities;
- a significant expansion or contraction of operations;
- information about major contracts or increases or decreases
in orders;
- the institution of, or a development in, litigation or a
regulatory proceeding;
- developments regarding a company's senior management;
- information about a company received from a director of
that company; and
- information regarding a company's possible noncompliance
with environmental protection laws.
This list is not exhaustive. All relevant circumstances
must be considered when determining whether an item of
information is material.
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<PAGE> 9
"Nonpublic" - Information about a company is nonpublic if
it is not generally available to the investing public.
Information received under circumstances indicating that it
is not yet in general circulation and which may be
attributable, directly or indirectly, to the company or its
insiders is likely to be deemed nonpublic information.
If an associate can refer to some public source to show
that the information is generally available (that is,
available not from inside sources only) and that enough
time has passed to allow wide dissemination of the
information, the information is likely to be deemed public.
While information appearing in widely accessible sources -
such as newspapers - becomes public very soon after
publication, information appearing in less accessible
sources - such as regulatory filings - may take up to
several days to be deemed public. Similarly, highly complex
information might take longer to become public than would
information that is easily understood by the average
investor.
MELLON'S POLICY - Associates who possess material nonpublic
information about a company - whether that company is
Mellon, another Mellon entity, a Mellon customer or
supplier, or other company - may not trade in that
company's securities, either for their own accounts or for
any account over which they exercise investment discretion.
In addition, associates may not recommend trading in those
securities and may not pass the information along to
others, except to associates who need to know the
information in order to perform their job responsibilities
with Mellon. These prohibitions remain in effect until the
information has become public.
Associates who have investment responsibilities should take
appropriate steps to avoid receiving material nonpublic
information. Receiving such information could create severe
limitations on their ability to carry out their
responsibilities to Mellon's fiduciary customers.
Associates managing the work of consultants and temporary
employees who have access to the types of confidential
information described in this Policy are responsible for
ensuring that consultants and temporary employees are aware
of Mellon's policy and the consequences of noncompliance.
Questions regarding Mellon's policy on material nonpublic
information, or specific information that might be subject
to it, should be referred to the General Counsel.
6
CONFIDENTIAL INFORMATION AND SECURITIES TRADING POLICY-019 04/12/00
<PAGE> 10
SECTION THREE
RESTRICTIONS ON THE FLOW OF
INFORMATION WITHIN MELLON
(THE "CHINESE WALL")
As a diversified financial services organization, Mellon
faces unique challenges in complying with the prohibitions
on insider trading and tipping of material nonpublic
information and misuse of confidential information. This is
because one Mellon unit might have material nonpublic
information about a company while other Mellon units may
have a desire, or even a fiduciary duty, to buy or sell
that company's securities or recommend such purchases or
sales to customers. To engage in such broad-ranging
financial services activities without violating laws or
breaching Mellon's fiduciary duties, Mellon has established
a "Chinese Wall" policy applicable to all associates. The
"Chinese Wall" separates the Mellon units or individuals
that are likely to receive material nonpublic information
(Potential Insider Functions) from the Mellon units or
individuals that either trade in securities - for Mellon's
account or for the accounts of others - or provide
investment advice (Investment Functions).
Examples of Potential Insider Functions - Potential Insider
Functions include, among others, certain commercial
lending, corporate finance, and credit policy areas.
Insider Risk Associates (see Section Six, "Insider Risk
Associates") should consider themselves to be in Potential
Insider Functions unless their particular job
responsibilities clearly indicate otherwise.
Examples of Investment Functions - Investment Functions
include, among others, securities sales and trading,
investment management and advisory services, investment
research and various trust or fiduciary functions.
RULES FOR MAINTAINING THE "CHINESE WALL" - Without the
prior approval of the General Counsel, material nonpublic
information obtained by anyone in a Potential Insider
Function should not be communicated to anyone in an
Investment Function. To reduce the risk of material
nonpublic information being communicated, communications
between these associates in these functions must be limited
to the maximum extent consistent with valid business needs.
Particular rules -
- File Restrictions - Associates in Investment Functions must
not have access to commercial credit files, corporate
finance files, or any other Potential Insider Function
files that might contain material nonpublic information.
All such files that contain material nonpublic information
should be marked as "Confidential" and, if feasible,
segregated from nonconfidential files.
- Electronic Data - Associates in Investment Functions must
not have access to personal computer or word processing
files of associates in Potential Insider Functions.
- Meetings - Associates in Investment Functions must not
attend meetings between customers and associates in
Potential Insider Functions unless appropriate steps have
been taken to ensure that material nonpublic information
will not be disclosed or discussed.
- Committee Service - Without the prior approval of the
General Counsel, associates other than those "Above the
Wall" (see page 9) must not serve simultaneously on a
committee having responsibility for any Investment Function
and a committee having responsibility for any Potential
Insider Function.
- Information Requests - Requests for nonmaterial information
or public information across the "Chinese Wall" should be
made in writing to an appropriate associate in the
applicable area. Associates sending or receiving such a
request should resolve any questions regarding the
7
CONFIDENTIAL INFORMATION AND SECURITIES TRADING POLICY-019 04/12/00
<PAGE> 11
materiality or nonpublic nature of the requested
information by consulting their department head, who will
contact the General Counsel, as appropriate.
- Information Backflow - Associates should take care to avoid
inadvertent backflow of information that may be interpreted
as the prohibited communication of material nonpublic
information. For example, the mere fact that someone in a
Potential Insider Function, such as a mergers and
acquisitions specialist, requests information from an
associate in an Investment Function could give the latter
person a clue as to possible material developments
affecting a customer.
- Customers - Associates in Investment Functions must not
state or imply to customers that associates making
decisions or recommendations will have the benefit of
information from Mellon's Potential Insider Functions. When
appropriate, associates should inform customers of Mellon's
"Chinese Wall" policy.
- Conflicts of Interest - Associates should not receive or
pass on any information that would create an undue risk of
Mellon or any associate having a conflict of interest or
breaching a fiduciary obligation.
REPORTING RECEIPT OF MATERIAL NONPUBLIC INFORMATION -
Associates in Investment Functions who receive any
suspected material nonpublic information must report such
receipt promptly to their department or entity head. A
department or entity head who receives information believed
to be material and nonpublic should report the matter
promptly to the General Counsel. If the General Counsel
determines that the information is material and nonpublic,
the affected department or entity will:
- immediately suspend all trading in the securities of the
issuer to which the information applies, as well as all
recommendations with respect to such securities. The
suspension will remain in effect as long as the information
remains both material and nonpublic.
- notify the General Counsel before resuming transactions or
recommendations in the affected securities. The General
Counsel will advise as to possible further steps, including
ascertaining the validity and nonpublic nature of the
information with the issuer of the securities; requesting
the issuer of the securities, or other appropriate parties,
to disseminate the information promptly to the public if
the information is valid and nonpublic; and publishing the
information.
In certain circumstances, the department or entity head may
be able to demonstrate conclusively that the receipt of the
material nonpublic information has been confined to an
individual or small group of individuals and that measures
other than those described above will comparably reduce the
likelihood of trading on the basis of the information.
These measures might include temporarily relieving
individuals of responsibility for any Investment Functions
and preventing any contact between those individuals and
associates in Investment Functions. In these circumstances,
the department head, with the approval of the General
Counsel, may take those measures rather than the measures
described above.
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FUNCTIONS "ABOVE THE WALL" - Some functions at Mellon are
deemed to be "Above the Wall." For example, members of
senior management, Auditing, Risk Management and
Compliance, and the Legal Department will typically need to
have access to information on both sides of the "Chinese
Wall" to carry out their job responsibilities. These
individuals cannot rely on the procedural safeguards of the
"Chinese Wall" and, therefore, need to be particularly
careful to avoid any improper use or dissemination of
material nonpublic information.
SUPPLEMENTAL PROCEDURES - As appropriate, certain Mellon
departments or areas, such as Mellon Trust, should
establish their own procedures to reduce the possibility of
information being communicated to associates who should not
have access to that information.
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SECTION FOUR
RESTRICTIONS ON TRANSACTIONS
IN MELLON SECURITIES
Associates who engage in transactions involving Mellon
securities should be aware of their unique responsibilities
with respect to such transactions arising from the
employment relationship and should be sensitive to even the
appearance of impropriety.
The following restrictions apply to all transactions in
Mellon's publicly traded securities occurring in the
associate's own account and in all other accounts over
which the associate could be expected to exercise influence
or control (see provisions under "Beneficial Ownership"
below for a more complete discussion of the accounts to
which these restrictions apply). These restrictions are to
be followed in addition to any restrictions that apply to
particular officers or directors (such as restrictions
under Section 16 of the Securities Exchange Act of 1934).
- Short Sales - Short sales of Mellon securities by
associates are prohibited.
- Sales Within 60 Days of Purchase - Sales of Mellon
securities within 60 days of acquisition are prohibited.
For purposes of the 60-day holding period, securities will
be deemed to be equivalent if one is convertible into the
other, if one entails a right to purchase or sell the
other, or if the value of one is expressly dependent on the
value of the other (e.g., derivative securities).
In cases of extreme hardship, associates (other than senior
management) may obtain permission to dispose of Mellon
securities acquired within 60 days of the proposed
transaction, provided the transaction is pre-cleared with
the Manager of Corporate Compliance and any profits earned
are disgorged in accordance with procedures established by
senior management. The Manager of Corporate Compliance
reserves the right to suspend the 60-day holding period
restriction in the event of severe market disruption.
- Margin Transactions - Purchases on margin of Mellon's
publicly traded securities by associates is prohibited.
Margining Mellon securities in connection with a cashless
exercise of an employee stock option through the Human
Resources Department is exempt from this restriction.
Further, Mellon securities may be used to collateralize
loans or the acquisition of securities other than those
issued by Mellon.
- Option Transactions - Option transactions involving
Mellon's publicly traded securities are prohibited.
Transactions under Mellon's Long-Term Incentive Plan or
other associate option plans are exempt from this
restriction.
- Major Mellon Events - Associates who have knowledge of
major Mellon events that have not yet been announced are
prohibited from buying and selling Mellon's publicly traded
securities before such public announcements, even if the
associate believes the event does not constitute material
nonpublic information.
- Mellon Blackout Period - Associates are prohibited from
buying or selling Mellon's publicly traded securities
during a blackout period, which begins the 16th day of the
last month of each calendar quarter and ends three business
days after Mellon publicly announces the financial results
for that quarter. In cases of extreme hardship, associates
(other than senior management) may request permission from
the Manager of Corporate Compliance to dispose of Mellon
securities during the blackout period.
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BENEFICIAL OWNERSHIP - The provisions discussed above apply
to transactions in the associate's own name and to all
other accounts over which the associate could be expected
to exercise influence or control, including:
- accounts of a spouse, minor children or relatives to whom
substantial support is contributed;
- accounts of any other member of the associate's household
(e.g., a relative living in the same home);
- trust accounts for which the associate acts as trustee or
otherwise exercises any type of guidance or influence;
- Corporate accounts controlled, directly or indirectly, by
the associate;
- arrangements similar to trust accounts that are established
for bona fide financial purposes and benefit the associate;
and
- any other account for which the associate is the beneficial
owner (see Glossary for a more complete legal definition of
"beneficial owner").
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SECTION FIVE
RESTRICTIONS ON TRANSACTIONS
IN OTHER SECURITIES
Purchases or sales by an associate of the securities of
issuers with which Mellon does business, or other third
party issuers, could result in liability on the part of
such associate. Associates should be sensitive to even the
appearance of impropriety in connection with their personal
securities transactions. Associates should refer to the
provisions under "Beneficial Ownership" (Section Four,
"Restrictions on Transactions in Mellon Securities"), which
are equally applicable to the following provisions.
The Mellon Code of Conduct contains certain restrictions on
investments in parties that do business with Mellon.
Associates should refer to the Code of Conduct and comply
with such restrictions in addition to the restrictions and
reporting requirements set forth below.
The following restrictions apply to all securities
transactions by associates:
- Credit or Advisory Relationship - Associate may not buy or
sell securities of a company if they are considering
granting, renewing or denying any credit facility to that
company or acting as an adviser to that company with
respect to its securities. In addition, lending associates
who have assigned responsibilities in a specific industry
group are not permitted to trade securities in that
industry. This prohibition does not apply to transactions
in securities issued by open-end investment companies.
- Customer Transactions - Trading for customers and Mellon
accounts should always take precedence over associates'
transactions for their own or related accounts.
- Front Running - Associates may not engage in "front
running," that is, the purchase or sale of securities for
their own accounts on the basis of their knowledge of
Mellon's trading positions or plans.
- Initial Public Offerings - Mellon prohibits its associates
from acquiring any securities in an initial public offering
("IPO").
- Margin Transactions - Margin trading is a highly leveraged
and relatively risky method of investing that can create
particular problems for financial services employees. For
this reason, all associates are urged to avoid margin
trading.
Prior to establishing a margin account, the associate must
obtain the written permission of the Manager of Corporate
Compliance. Any associate having a margin account prior to
the effective date of this Policy must notify the Manager
of Corporate Compliance of the existence of such account.
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All associates having margin accounts, other than described
below, must designate the Manager of Corporate Compliance
as an interested party on that account. Associates must
ensure that the Manager of Corporate Compliance promptly
receives copies of all trade confirmations and statements
relating to the account directly from the broker. If
requested by a brokerage firm, please contact the Manager
of Corporate Compliance to obtain a letter (sometimes
referred to as a "407 letter") granting permission to
maintain a margin account. Trade confirmations and
statements are not required on margin accounts established
at Dreyfus Investment Services Corporation for the sole
purpose of cashless exercises of employee stock options. In
addition, products may be offered by a broker/dealer that,
because of their characteristics, are considered margin
accounts but have been determined by the Manager of
Corporate Compliance to be outside the scope of this Policy
(e.g., a Cash Management Account which provides overdraft
protection for the customer). Any questions regarding the
establishment, use and reporting of margin accounts should
be directed to the Manager of Corporate Compliance.
Examples of an instruction letter to a broker are shown in
Exhibits B1 and B2.
- Material Nonpublic Information - Associates possessing
material nonpublic information regarding any issuer of
securities must refrain from purchasing or selling
securities of that issuer until the information becomes
public or is no longer considered material.
- Naked Options, Excessive Trading - Mellon discourages all
associates from engaging in short-term or speculative
trading, in trading naked options, in trading that could be
deemed excessive or in trading that could interfere with an
associate's job responsibilities.
- Private Placements - Associates are prohibited from
acquiring any security in a private placement unless they
obtain the prior written approval of the Preclearance
Compliance Officer (applicable only to Investment
Associates), the Manager of Corporate Compliance and the
associate's department head. Approval must be given by all
appropriate aforementioned persons for the acquisition to
be considered approved. After receipt of the necessary
approvals and the acquisition, associates are required to
disclose that investment when they participate in any
subsequent consideration of an investment in the issuer for
an advised account. Final decision to acquire such
securities for an advised account will be subject to
independent review.
- Scalping - Associates may not engage in "scalping," that
is, the purchase or sale of securities for their own or
Mellon's accounts on the basis of knowledge of customers'
trading positions or plans or Mellon's forthcoming
investment recommendations.
- Short-Term Trading - Associates are discouraged from
purchasing and selling, or from selling and purchasing, the
same (or equivalent) securities within 60 calendar days.
With respect to Investment Associates only, any profits
realized on such short-term trades must be disgorged in
accordance with procedures established by senior
management.
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SECTION SIX
CLASSIFICATION OF ASSOCIATES
Associates are engaged in a wide variety of activities for
Mellon. In light of the nature of their activities and the
impact of federal and state laws and the regulations
thereunder, the Policy imposes different requirements and
limitations on associates based on the nature of their
activities for Mellon. To assist the associates in
complying with the requirements and limitations imposed on
them in light of their activities, associates are
classified into one of three categories: Insider Risk
Associate, Investment Associate and Other Associate.
Appropriate requirements and limitations are specified in
the Policy based upon the associate's classification.
INSIDER RISK ASSOCIATE -
You are considered to be an Insider Risk Associate if you
are:
- employed in any of the following departments or functional
areas, however named, of a Mellon entity other than Dreyfus
(see Glossary for definition of "Dreyfus"):
<TABLE>
<S> <C>
- Auditing - International
- Capital Markets - Leasing
- Corporate Affairs - Legal
- Credit Policy - Mellon Business Credit
- Credit Recovery - Middle Market
- Credit Review - Portfolio and Funds Management
- Domestic Corporate Banking - Risk Management and Compliance
- Finance - Strategic Planning
- Institutional Banking - Wholesale, Administration and
Operations
</TABLE>
- a member of the Mellon Senior Management Committee,
provided that those members of the Mellon Senior Management
Committee who have management responsibility for fiduciary
activities or who routinely have access to information
about customers' securities transactions are considered to
be Investment Associates and are subject to those
provisions of the Policy pertaining to Investment
Associates;
- employed by a broker/dealer subsidiary of a Mellon entity
other than Dreyfus;
- an associate in the Stock Transfer business unit and have
been specifically designated as an Insider Risk Associate
by the Manager of Corporate Compliance; or
- an associate specifically designated as an Insider Risk
Associate by the Manager of Corporate Compliance.
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INVESTMENT ASSOCIATE -
You are considered to be an Investment Associate if you
are:
- a member of Mellon's Senior Management Committee who, as
part of his/her usual duties, has management responsibility
for fiduciary activities or routinely has access to
information about customers' securities transactions;
- a Dreyfus associate;
- an associate of a Mellon entity registered under the
Investment Advisers Act of 1940;
- employed in the trust area of Mellon and:
- have the title of Vice President, First Vice
President or Senior Vice President; or
- have access to material, confidential information
regarding securities transactions by or on behalf of
Mellon customers; or
- an associate specifically designated as an Investment
Associate by the Manager of Corporate Compliance.
OTHER ASSOCIATE -
You are considered to be an Other Associate if you are an
associate of Mellon Bank Corporation or any of its direct
or indirect subsidiaries who is not either an Insider Risk
Associate or an Investment Associate.
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PART II - APPLICABLE TO INSIDER
RISK ASSOCIATES ONLY
- -------------------------------
PROHIBITION ON INVESTMENTS IN SECURITIES OF FINANCIAL
SERVICES ORGANIZATIONS
You are prohibited from acquiring any security issued by a
financial services organization if you are:
- a member of the Mellon Senior Management Committee. For
purposes of this restriction only, this prohibition also
applies to those members of the Mellon Senior Management
Committee who are considered Investment Associates.
- employed in any of the following departments of a Mellon
entity other than Dreyfus (see Glossary for definition of
"Dreyfus"):
<TABLE>
<S> <C>
- Strategic Planning - Finance
- Institutional Banking - Legal
</TABLE>
- an associate specifically designated by the Manager of
Corporate Compliance and informed that this prohibition is
applicable to you.
Financial Services Organizations - The term "security
issued by a financial services organization" includes any
security issued by:
<TABLE>
<S> <C>
- Commercial Banks - Bank Holding Companies
(other than Mellon) (other than Mellon)
- Thrifts - Savings and Loan Associations
- Insurance Companies - Broker/Dealers
- Investment Advisory Companies - Transfer Agents
- Shareholder Servicing Companies - Other Depository Institutions
</TABLE>
The term "securities issued by a financial services
organization" DOES NOT INCLUDE securities issued by mutual
funds, variable annuities or insurance policies. Further,
for purposes of determining whether a company is a
financial services organization, subsidiaries and parent
companies are treated as separate issuers.
Effective Date - The foregoing restrictions will be
effective upon adoption of this Policy. Securities of
financial services organizations properly acquired before
the later of the effective date of this Policy or the date
of hire may be maintained or disposed of at the owner's
discretion.
Additional securities of a financial services organization
acquired through the reinvestment of the dividends paid by
such financial services organization through a dividend
reinvestment program (DRIP) are not subject to this
prohibition, provided your election to participate in the
DRIP predates the later of the effective date of this
Policy or date of hire. Optional cash purchases through a
DRIP are subject to this prohibition.
Within 30 days of the later of the effective date of this
Policy or date of becoming subject to this prohibition, all
holdings of securities of financial services organizations
must be disclosed in writing to the Manager of Corporate
Compliance. Periodically, you will be asked to file an
updated disclosure of all your holdings of securities of
financial services organizations.
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CONFLICT OF INTEREST - No Insider Risk Associate may engage
in or recommend any securities transaction that places, or
appears to place, his or her own interests above those of
any customer to whom investment services are rendered,
including mutual funds and managed accounts, or above the
interests of Mellon.
PRECLEARANCE FOR PERSONAL SECURITIES TRANSACTIONS - All
Insider Risk Associates must notify the Manager of
Corporate Compliance in writing and receive preclearance
before they engage in any purchase or sale of a security.
Insider Risk Associates should refer to the provisions
under "Beneficial Ownership" (Section Four, "Restrictions
on Transactions in Mellon Securities"), which are equally
applicable to these provisions.
Exemptions from Requirement to Preclear - Preclearance is
not required for the following transactions:
- purchases or sales of Exempt Securities (see Glossary);
- purchases or sales of municipal bonds;
- purchases or sales effected in any account over which an
associate has no direct or indirect control over the
investment decision-making process (e.g., nondiscretionary
trading accounts). Nondiscretionary trading accounts may
only be maintained, without being subject to preclearance
procedures, when the Manager of Corporate Compliance, after
a thorough review, is satisfied that the account is truly
nondiscretionary;
- transactions that are non-volitional on the part of an
associate (such as stock dividends);
- the sale of stock received upon the exercise of an
associate stock option if the sale is part of a "netting of
shares" or "cashless exercise" administered by the Human
Resources Department (for which the Human Resources
Department will forward information to the Manager of
Corporate Compliance);
- the automatic reinvestment of dividends under a DRIP
(preclearance is required for optional cash purchases under
a DRIP);
- purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of securities, to
the extent such rights were acquired from such issuer;
- sales of rights acquired from an issuer, as described
above; and/or
- those situations where the Manager of Corporate Compliance
determines, after taking into consideration the particular
facts and circumstances, that prior approval is not
necessary.
Requests for Preclearance - All requests for preclearance
for a securities transaction shall be submitted to the
Manager of Corporate Compliance by completing a
Preclearance Request Form (see Exhibit C1).
The Manager of Corporate Compliance will notify the Insider
Risk Associate whether the request is approved or denied,
without disclosing the reason for such approval or denial.
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Notifications may be given in writing or verbally by the
Manager of Corporate Compliance to the Insider Risk
Associate. A record of such notification will be maintained
by the Manager of Corporate Compliance. However, it shall
be the responsibility of the Insider Risk Associate to
obtain a written record of the Manager of Corporate
Compliance's notification within 24 hours of such
notification. The Insider Risk Associate should retain a
copy of this written record.
As there could be many reasons for preclearance being
granted or denied, Insider Risk Associates should not infer
from the preclearance response anything regarding the
security for which preclearance was requested.
Although making a preclearance request does not obligate an
Insider Risk Associate to do the transaction, it should be
noted that:
- preclearance authorization will expire at the end of the
third business day after it is received (the day
authorization is granted is considered the first business
day);
- preclearance requests should not be made for a transaction
that the Insider Risk Associate does not intend to make;
and
- Insider Risk Associates should not discuss with anyone
else, inside or outside Mellon, the response they received
to a preclearance request.
Every Insider Risk Associate must follow these procedures
or risk serious sanctions, including dismissal. If you have
any questions about these procedures you should consult the
Manager of Corporate Compliance. Interpretive issues that
arise under these procedures shall be decided by, and are
subject to the discretion of, the Manager of Corporate
Compliance.
Restricted List - The Manager of Corporate Compliance will
maintain a list (the "Restricted List") of companies whose
securities are deemed appropriate for implementation of
trading restrictions for Insider Risk Associates.
Restricted List(s) will not be distributed outside of the
Risk Management and Compliance Department. From time to
time, such trading restrictions may be appropriate to
protect Mellon and its Insider Risk Associates from
potential violations, or the appearance of violations, of
securities laws. The inclusion of a company on the
Restricted List provides no indication of the advisability
of an investment in the company's securities or the
existence of material nonpublic information on the company.
Nevertheless, the contents of the Restricted List will be
treated as confidential information to avoid unwarranted
inferences.
To assist the Manager of Corporate Compliance in
identifying companies that may be appropriate for inclusion
on the Restricted List, the department heads of sections in
which Insider Risk Associates are employed will inform the
Manager of Corporate Compliance in writing of any companies
they believe should be included on the Restricted List,
based upon facts known or readily available to such
department heads. Although the reasons for inclusion on the
Restricted List may vary, they could typically include the
following:
- Mellon is involved as a lender, investor or adviser in a
merger, acquisition or financial restructuring involving
the company;
- Mellon is involved as a selling shareholder in a public
distribution of the company's securities;
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<PAGE> 22
- Mellon is involved as an agent in the distribution of the
company's securities;
- Mellon has received material nonpublic information on the
company;
- Mellon is considering the exercise of significant
creditors' rights against the company; or
- The company is a Mellon borrower in Credit Recovery.
Department heads of sections in which Insider Risk
Associates are employed are also responsible for notifying
the Manager of Corporate Compliance in writing of any
change in circumstances making it appropriate to remove a
company from the Restricted List.
PERSONAL SECURITIES TRANSACTIONS REPORTS
- Brokerage Accounts - All Insider Risk Associates are
required to instruct their brokers to submit directly to
the Manager of Corporate Compliance copies of all trade
confirmations and statements relating to their account. An
example of an instruction letter to a broker is contained
in Exhibit B1.
- Report of Transactions in Mellon Securities - Insider Risk
Associates must also report in writing to the Manager of
Corporate Compliance within ten calendar days whenever they
purchase or sell Mellon securities if the transaction was
not through a brokerage account as described above.
Purchases and sales of Mellon securities include the
following:
DRIP Optional Cash Purchases - Optional cash purchases
under Mellon's Dividend Reinvestment and Common Stock
Purchase Plan (the "Mellon DRIP").
Stock Options - The sale of stock received upon the
exercise of an associate stock option unless the sale is
part of a "netting of shares" or "cashless exercise"
administered by the Human Resources Department (for which
the Human Resources Department will forward information to
the Manager of Corporate Compliance).
It should be noted that the reinvestment of dividends under
the DRIP, changes in elections under Mellon's Retirement
Savings Plan, the receipt of stock under Mellon's
Restricted Stock Award Plan and the receipt or exercise of
options under Mellon's Long-Term Profit Incentive Plan are
not considered purchases or sales for the purpose of this
reporting requirement.
An example of a written report to the Manager of Corporate
Compliance is contained in Exhibit A.
CONFIDENTIAL TREATMENT
THE MANAGER OF CORPORATE COMPLIANCE WILL USE HIS OR HER
BEST EFFORTS TO ASSURE THAT ALL REQUESTS FOR PRECLEARANCE,
ALL PERSONAL SECURITIES TRANSACTION REPORTS AND ALL REPORTS
OF SECURITIES HOLDINGS ARE TREATED AS "PERSONAL AND
CONFIDENTIAL." HOWEVER, SUCH DOCUMENTS WILL BE AVAILABLE
FOR INSPECTION BY APPROPRIATE REGULATORY AGENCIES AND BY
OTHER PARTIES WITHIN AND OUTSIDE MELLON AS ARE NECESSARY TO
EVALUATE COMPLIANCE WITH OR SANCTIONS UNDER THIS POLICY.
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<PAGE> 23
PART III - APPLICABLE TO
INVESTMENT ASSOCIATES ONLY
- ---------------------------
Because of their particular responsibilities, Investment
Associates are subject to different preclearance and
personal securities reporting requirements as discussed
below.
SPECIAL STANDARDS OF CONDUCT FOR INVESTMENT ASSOCIATES
Conflict of Interest - No Investment Associate may
recommend a securities transaction for a Mellon customer to
whom a fiduciary duty is owed, or for Mellon, without
disclosing any interest he or she has in such securities or
issuer (other than an interest in publicly traded
securities where the total investment is equal to or less
than $25,000), including:
- any direct or indirect beneficial ownership of any
securities of such issuer;
- any contemplated transaction by the Investment Associate in
such securities;
- any position with such issuer or its affiliates; and
- any present or proposed business relationship between such
issuer or its affiliates and the Investment Associate or
any party in which the Investment Associate has a
beneficial ownership interest (see "Beneficial Ownership"
in Section Four, "Restrictions On Transactions in Mellon
Securities").
Portfolio Information - No Investment Associate may divulge
the current portfolio positions, or current or anticipated
portfolio transactions, programs or studies, of Mellon or
any Mellon customer to anyone unless it is properly within
his or her job responsibilities to do so.
Material Nonpublic Information - No Investment Associate
may engage in or recommend a securities transaction, for
his or her own benefit or for the benefit of others,
including Mellon or its customers, while in possession of
material nonpublic information regarding such securities.
No Investment Associate may communicate material nonpublic
information to others unless it is properly within his or
her job responsibilities to do so.
Short-Term Trading - Any Investment Associate who purchases
and sells, or sells and purchases, the same (or equivalent)
securities within any 60-calendar-day period is required to
disgorge all profits realized on such transaction in
accordance with procedures established by senior
management. For this purpose, securities will be deemed to
be equivalent if one is convertible into the other, if one
entails a right to purchase or sell the other, or if the
value of one is expressly dependent on the value of the
other (e.g., derivative securities).
Additional Restrictions For Dreyfus Associates and
Associates of Mellon Entities Registered Under The
Investment Advisers Act of 1940 ONLY ("40 Act Associates")
- Outside Activities - No 40 Act associate may serve on the
board of directors/trustees or as a general partner of any
publicly traded company (other than Mellon) without the
prior approval of the Manager of Corporate Compliance.
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<PAGE> 24
- Gifts - All 40 Act associates are prohibited from accepting
gifts from outside companies, or their representatives,
with an exception for gifts of (1) a de minimis value and
(2) an occasional meal, a ticket to a sporting event or the
theater, or comparable entertainment for the 40 Act
associate and, if appropriate, a guest, which is neither so
frequent nor extensive as to raise any question of
impropriety. A gift shall be considered de minimis if it
does not exceed an annual amount per person fixed
periodically by the National Association of Securities
Dealers, which is currently $100 per person.
- Blackout Period - 40 Act associates will not be given
clearance to execute a transaction in any security that is
being considered for purchase or sale by an affiliated
investment company, managed account or trust, for which a
pending buy or sell order for such affiliated account is
pending, and for two business days after the transaction in
such security for such affiliated account has been
effected. This provision does not apply to transactions
effected or contemplated by index funds.
In addition, portfolio managers for the investment
companies are prohibited from buying or selling a security
within seven calendar days before and after such investment
company trades in that security. Any violation of the
foregoing will require the violator to disgorge all profit
realized with respect to such transaction.
PRECLEARANCE FOR PERSONAL SECURITIES TRANSACTIONS - All
Investment Associates must notify the Preclearance
Compliance Officer (see Glossary) in writing and receive
preclearance before they engage in any purchase or sale of
a security.
Exemptions from Requirement to Preclear - Preclearance is
not required for the following transactions:
- purchases or sales of "Exempt Securities" (see Glossary);
- purchases or sales effected in any account over which an
associate has no direct or indirect control over the
investment decision-making process (i.e., nondiscretionary
trading accounts). Nondiscretionary trading accounts may
only be maintained, without being subject to preclearance
procedures, when the Preclearance Compliance Officer, after
a thorough review, is satisfied that the account is truly
nondiscretionary;
- transactions which are non-volitional on the part of an
associate (such as stock dividends);
- the sale of stock received upon the exercise of an
associate stock option if the sale is part of a "netting of
shares" or "cashless exercise" administered by the Human
Resources Department (for which the Human Resources
Department will forward information to the manager of
Corporate Compliance);
- purchases which are part of an automatic reinvestment of
dividends under a DRIP (Preclearance is required for
optional cash purchases under a DRIP);
- purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of securities, to
the extent such rights were acquired from such issuer;
- sales of rights acquired from an issuer, as described
above; and/or
- those situations where the Preclearance Compliance Officer
determines, after taking into consideration the particular
facts and circumstances, that prior approval is not
necessary.
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<PAGE> 25
Requests for Preclearance - All requests for preclearance
for a securities transaction shall be submitted to the
Preclearance Compliance Officer by completing a
Preclearance Request Form. (Investment Associates other
than Dreyfus associates are to use the Preclearance Request
Form shown as Exhibit C1. Dreyfus associates are to use the
Preclearance Request Form shown as Exhibit C2.)
The Preclearance Compliance Officer will notify the
Investment Associate whether the request is approved or
denied without disclosing the reason for such approval or
denial.
Notifications may be given in writing or verbally by the
Preclearance Compliance Officer to the Investment
Associate. A record of such notification will be maintained
by the Preclearance Compliance Officer. However, it shall
be the responsibility of the Investment Associate to obtain
a written record of the Preclearance Compliance Officer's
notification within 24 hours of such notification. The
Investment Associate should retain a copy of this written
record.
As there could be many reasons for preclearance being
granted or denied, Investment Associates should not infer
from the preclearance response anything regarding the
security for which preclearance was requested.
Although making a preclearance request does not obligate an
Investment Associate to do the transaction, it should be
noted that:
- preclearance authorization will expire at the end of the
day on which preclearance is given;
- preclearance requests should not be made for a transaction
that the Investment Associate does not intend to make; and
- Investment Associates should not discuss with anyone else,
inside or outside Mellon, the response the Investment
Associate received to a preclearance request.
Every Investment Associate must follow these procedures or
risk serious sanctions, including dismissal. If you have
any questions about these procedures, consult the
Preclearance Compliance Officer. Interpretive issues that
arise under these procedures shall be decided by, and are
subject to the discretion of, the Manager of Corporate
Compliance.
Restricted List - Each Preclearance Compliance Officer will
maintain a list (the "Restricted List") of companies whose
securities are deemed appropriate for implementation of
trading restrictions for Investment Associates in their
area. From time to time, such trading restrictions may be
appropriate to protect Mellon and its Investment Associates
from potential violations, or the appearance of violations,
of securities laws. The inclusion of a company on the
Restricted List provides no indication of the advisability
of an investment in the company's securities or the
existence of material nonpublic information on the company.
Nevertheless, the contents of the Restricted List will be
treated as confidential information in order to avoid
unwarranted inferences.
In order to assist the Preclearance Compliance Officer in
identifying companies that may be appropriate for inclusion
on the Restricted List, the head of the
entity/department/area in which Investment Associates are
employed will inform the appropriate Preclearance
Compliance Officer in writing of any companies that they
believe should be included on the Restricted List based
upon facts known or readily available to such department
heads.
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CONFIDENTIAL INFORMATION AND SECURITIES TRADING POLICY-019 04/12/00
<PAGE> 26
PERSONAL SECURITIES TRANSACTIONS REPORTS
- Brokerage Accounts - All Investment Associates are required
to instruct their brokers to submit directly to the Manager
of Corporate Compliance copies of all trade confirmations
and statements relating to their account. Examples of
instruction letters to a broker are contained in Exhibits
B1 and B2.
- Report of Transactions in Mellon Securities - Investment
Associates must also report in writing to the Manager of
Corporate Compliance within ten calendar days whenever they
purchase or sell Mellon securities if the transaction was
not through a brokerage account as described above.
Purchases and sales of Mellon securities include the
following:
DRIP Optional Cash Purchases - Optional cash purchases
under Mellon's Dividend Reinvestment and Common Stock
Purchase Plan (the "Mellon DRIP").
Stock Options - The sale of stock received upon the
exercise of an associate stock option unless the sale is
part of a "netting of shares" or "cashless exercise"
administered by the Human Resources Department (for which
the Human Resources Department will forward information to
the Manager of Corporate Compliance).
It should be noted that the reinvestment of dividends under
the DRIP, changes in elections under Mellon's Retirement
Savings Plan, the receipt of stock under Mellon's
Restricted Stock Award Plan, and the receipt or exercise of
options under Mellon's Long-Term Profit Incentive Plan are
not considered purchases or sales for the purpose of this
reporting requirement.
An example of a written report to the Manager of Corporate
Compliance is contained in Exhibit A.
- Statement of Securities Holdings - Within ten days of
receiving this Policy and on an annual basis thereafter,
all Investment Associates must submit to the Manager of
Corporate Compliance a statement of all securities in which
they presently have any direct or indirect beneficial
ownership other than Exempt Securities, as defined in the
Glossary. Investment Associates should refer to "Beneficial
Ownership" in Section Four, "Restrictions on Transactions
in Mellon Securities," which is also applicable to
Investment Associates. Such statements should be in the
format shown in Exhibit D. The annual report must be
submitted by January 31 and must report all securities
holdings other than Exempt Securities. The annual statement
of securities holdings contains an acknowledgment that the
Investment Associate has read and complied with this
Policy.
- Special Requirement with Respect to Affiliated Investment
Companies - The portfolio managers, research analysts and
other Investment Associates specifically designated by the
Manager of Corporate Compliance are required within ten
calendar days of receiving this Policy (and by no later
than ten calendar days after the end of each calendar
quarter) to report every transaction in the securities
issued by an affiliated investment company occurring in an
account in which the Investment Associate has a beneficial
ownership interest. The quarterly reporting requirement may
be satisfied by notifying the Manager of Corporate
Compliance of the name of the investment company, account
name and account number for which such quarterly reports
must be submitted.
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CONFIDENTIAL INFORMATION AND SECURITIES TRADING POLICY-019 04/12/00
<PAGE> 27
CONFIDENTIAL TREATMENT
THE PRECLEARANCE COMPLIANCE OFFICER WILL USE HIS OR HER
BEST EFFORTS TO ASSURE THAT ALL REQUESTS FOR PRECLEARANCE,
ALL PERSONAL SECURITIES TRANSACTION REPORTS AND ALL REPORTS
OF SECURITIES HOLDINGS ARE TREATED AS "PERSONAL AND
CONFIDENTIAL." HOWEVER, SUCH DOCUMENTS WILL BE AVAILABLE
FOR INSPECTION BY APPROPRIATE REGULATORY AGENCIES, AND BY
OTHER PARTIES WITHIN AND OUTSIDE MELLON AS ARE NECESSARY TO
EVALUATE COMPLIANCE WITH OR SANCTIONS UNDER THIS POLICY.
DOCUMENTS RECEIVED FROM DREYFUS ASSOCIATES ARE ALSO
AVAILABLE FOR INSPECTION BY THE BOARDS OF DIRECTORS OF
DREYFUS AND BY THE BOARDS OF DIRECTORS (OR TRUSTEES OR
MANAGING GENERAL PARTNERS, AS APPLICABLE) OF THE INVESTMENT
COMPANIES MANAGED OR ADMINISTERED BY DREYFUS.
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<PAGE> 28
PART IV - APPLICABLE TO
OTHER ASSOCIATES ONLY
- ---------------------------
PRECLEARANCE FOR PERSONAL SECURITIES TRANSACTIONS - Except
for private placements, Other Associates are permitted to
engage in personal securities transactions without
obtaining prior approval from the Manager of Corporate
Compliance (for preclearance of private placements, use the
Preclearance Request Form shown as Exhibit C1.)
PERSONAL SECURITIES TRANSACTIONS REPORTS - Other Associates
are not required to report their personal securities
transactions other than margin transactions and
transactions involving Mellon securities as discussed
below. Other Associates are required to instruct their
brokers to submit directly to the Manager of Corporate
Compliance copies of all confirmations and statements
pertaining to margin accounts. Examples of an instruction
letter to a broker are shown in Exhibit B1.
Report of Transactions in Mellon Securities - Other
Associates must report in writing to the Manager of
Corporate Compliance within ten calendar days whenever they
purchase or sell Mellon securities. Purchases and sales of
Mellon securities include the following:
- DRIP Optional Cash Purchases - Optional cash purchases
under Mellon's Dividend Reinvestment and Common Stock
Purchase Plan (the "Mellon DRIP").
- Stock Options - The sale of stock received upon the
exercise of an associate stock option unless the sale is
part of a "netting of shares" or "cashless exercise"
administered by the Human Resources Department (for which
the Human Resources Department will forward information to
the Manager of Corporate Compliance).
It should be noted that the reinvestment of dividends under
the DRIP, changes in elections under Mellon's Retirement
Savings Plan, the receipt of stock under Mellon's
Restricted Stock Award Plan and the receipt or exercise of
options under Mellon's Long-Term Profit Incentive Plan are
not considered purchases or sales for the purpose of this
reporting requirement.
An example of a written report to the Manager of Corporate
Compliance is contained in Exhibit A.
RESTRICTIONS ON TRANSACTIONS IN OTHER SECURITIES
Margin Transactions - Prior to establishing a margin
account, Other Associates must obtain the written
permission of the Manager of Corporate Compliance. Other
Associates having a margin account prior to the effective
date of this Policy must notify the Manager of Corporate
Compliance of the existence of such account.
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CONFIDENTIAL INFORMATION AND SECURITIES TRADING POLICY-019 04/12/00
<PAGE> 29
All associates having margin accounts, other than described
below, must designate the Manager of Corporate Compliance
as an interested party on each account. Associates must
ensure that the Manager of Corporate Compliance promptly
receives copies of all trade confirmations and statements
relating to the accounts directly from the broker. If
requested by a brokerage firm, please contact the Manager
of Corporate Compliance to obtain a letter (sometimes
referred to as a "407 letter") granting permission to
maintain a margin account. Trade confirmations and
statements are not required on margin accounts established
at Dreyfus Investment Services Corporation for the sole
purpose of cashless exercises of Mellon employee stock
options. In addition, products may be offered by a
broker/dealer that, because of their characteristics, are
considered margin accounts but have been determined by the
Manager of Corporate Compliance to be outside the scope of
this Policy (e.g., a Cash Management account which provides
overdraft protection for the customer). Any questions
regarding the establishment, use and reporting of margin
accounts should be directed to the Manager of Corporate
Compliance. An example of an instruction letter to a broker
is shown in Exhibit B1.
Private Placements - Other Associates are prohibited from
acquiring any security in a private placement unless they
obtain the prior written approval of the Manager of
Corporate Compliance and the Associate's department head.
Approval must be given by both of the aforementioned
persons for the acquisition to be considered approved.
As there could be many reasons for preclearance being
granted or denied, Other Associates should not infer from
the preclearance response anything regarding the security
for which preclearance was requested.
Although making a preclearance request does not obligate an
Other Associate to do the transaction, it should be noted
that:
- preclearance authorization will expire at the end of the
third business day after it is received (the day
authorization is granted is considered the first business
day);
- preclearance requests should not be made for a transaction
that the Other Associate does not intend to make; and
- Other Associates should not discuss with anyone else,
inside or outside Mellon, the response they received to a
preclearance request.
Every Other Associate must follow these procedures or risk
serious sanctions, including dismissal. If you have any
questions about these procedures you should consult the
Manager of Corporate Compliance. Interpretive issues that
arise under these procedures shall be decided by, and are
subject to the discretion of, the Manager of Corporate
Compliance.
CONFIDENTIAL TREATMENT
THE MANAGER OF CORPORATE COMPLIANCE WILL USE HIS OR HER
BEST EFFORTS TO ASSURE THAT ALL REQUESTS FOR PRECLEARANCE,
ALL PERSONAL SECURITIES TRANSACTION REPORTS AND ALL REPORTS
OF SECURITIES HOLDINGS ARE TREATED AS "PERSONAL AND
CONFIDENTIAL." HOWEVER, SUCH DOCUMENTS WILL BE AVAILABLE
FOR INSPECTION BY APPROPRIATE REGULATORY AGENCIES AND OTHER
PARTIES WITHIN AND OUTSIDE MELLON AS ARE NECESSARY TO
EVALUATE COMPLIANCE WITH OR SANCTIONS UNDER THIS POLICY.
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<PAGE> 30
PART V - APPLICABLE TO
NONMANAGEMENT BOARD MEMBER
- ----------------------------
NONMANAGEMENT BOARD MEMBER -
You are considered to be a Nonmanagement Board Member if
you are:
- a director of Dreyfus who is not also an officer or
employee of Dreyfus ("Dreyfus Board Member"); or
- a director, trustee or managing general partner of any
investment company who is not also an officer or employee
of Dreyfus ("Mutual Fund Board Member").
The term "Independent" Mutual Fund Board Member means those
Mutual Fund Board Members who are not deemed "interested
persons" of an investment company, as defined by the
Investment Company Act of 1940, as amended.
STANDARDS OF CONDUCT FOR NONMANAGEMENT BOARD MEMBER
Outside Activities - Nonmanagement Board Members are
prohibited from:
- accepting nomination or serving as a director, trustee or
managing general partner of an investment company not
advised by Dreyfus, without the express prior approval of
the board of directors of Dreyfus and the board of
directors/trustees or managing general partners of the
pertinent Dreyfus-managed fund(s) for which a Nonmanagement
Board Member serves as a director, trustee or managing
general partner;
- accepting employment with or acting as a consultant to any
person acting as a registered investment adviser to an
investment company without the express prior approval of
the board of directors of Dreyfus;
- owning Mellon securities if the Nonmanagement Board Member
is an "Independent" Mutual Fund Board Member, (since that
would destroy his or her "independent" status); and/or
- buying or selling Mellon's publicly traded securities
during a blackout period, which begins the 16th day of the
last month of each calendar quarter and ends three business
days after Mellon publicly announces the financial results
for that quarter.
Insider Trading and Tipping - The provisions set forth in
Section Two, "Insider Trading and Tipping," are applicable
to Nonmanagement Board Members.
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<PAGE> 31
Conflict of Interest - No Nonmanagement Board Member may
recommend a securities transaction for Mellon, Dreyfus or
any Dreyfus-managed fund without disclosing any interest he
or she has in such securities or issuer thereof (other than
an interest in publicly traded securities where the total
investment is less than or equal to $25,000), including:
- any direct or indirect beneficial ownership of any
securities of such issuer;
- any contemplated transaction by the Nonmanagement Board
Member in such securities;
- any position with such issuer or its affiliates; and
- any present or proposed business relationship between such
issuer or its affiliates and the Nonmanagement Board Member
or any party in which the Nonmanagement Board Member has a
beneficial ownership interest (see "Beneficial Ownership",
Section Four, "Restrictions on Transaction in Mellon
Securities").
Portfolio Information - No Nonmanagement Board Member may
divulge the current portfolio positions, or current or
anticipated portfolio transactions, programs or studies, of
Mellon, Dreyfus or any Dreyfus-managed fund, to anyone
unless it is properly within his or her responsibilities as
a Nonmanagement Board Member to do so.
Material Nonpublic Information - No Nonmanagement Board
Member may engage in or recommend any securities
transaction, for his or her own benefit or for the benefit
of others, including Mellon, Dreyfus or any Dreyfus-managed
fund, while in possession of material nonpublic
information. No Nonmanagement Board Member may communicate
material nonpublic information to others unless it is
properly within his or her responsibilities as a
Nonmanagement Board Member to do so.
PRECLEARANCE FOR PERSONAL SECURITIES TRANSACTIONS -
Nonmanagement Board Members are permitted to engage in
personal securities transactions without obtaining prior
approval from the Preclearance Compliance Officer.
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<PAGE> 32
PERSONAL SECURITY TRANSACTIONS REPORTS -
- "Independent" Mutual Fund Board Members - Any "Independent"
Mutual Fund Board Members, as defined above, who effects a
securities transaction where he or she knew, or in the
ordinary course of fulfilling his or her official duties
should have known, that during the 15-day period
immediately preceding or after the date of such
transaction, the same security was purchased or sold, or
was being considered for purchase or sale by Dreyfus
(including any investment company or other account managed
by Dreyfus), are required to report such personal
securities transaction. In the event a personal securities
transaction report is required, it must be submitted to the
Preclearance Compliance Officer not later than ten days
after the end of the calendar quarter in which the
transaction to which the report relates was effected. The
report must include the date of the transaction, the title
and number of shares or principal amount of the security,
the nature of the transaction (e.g., purchase, sale or any
other type of acquisition or disposition), the price at
which the transaction was effected and the name of the
broker or other entity with or through whom the transaction
was effected. This reporting requirement can be satisfied
by sending a copy of the confirmation statement regarding
such transactions to the Preclearance Compliance Officer
within the time period specified. Notwithstanding the
foregoing, personal securities transaction reports are not
required with respect to any securities transaction
described in "Exemption from the Requirement to Preclear"
in Part III.
- Dreyfus Board Members and "Interested" Mutual Fund Board
Members - Dreyfus Board Members and Mutual Fund Board
Members who are "interested persons" of an investment
company, as defined by the Investment Company Act of 1940,
are required to report their personal securities
transactions. Personal securities transaction reports are
required with respect to any securities transaction other
than those described in "Exemptions from Requirement to
Preclear" on Page 21. Personal securities transaction
reports are required to be submitted to the Preclearance
Compliance Officer not later than ten days after the end of
the calendar quarter in which the transaction to which the
report relates was effected. The report must include the
date of the transaction, the title and number of shares or
principal amount of the security, the nature of the
transaction (e.g., purchase, sale or any other type of
acquisition or disposition), the price at which the
transaction was effected and the name of the broker or
other entity with or through whom the transaction was
effected. This reporting requirement can be satisfied by
sending a copy of the confirmation statement regarding such
transactions to the Preclearance Compliance Officer within
the time period specified.
CONFIDENTIAL TREATMENT
THE PRECLEARANCE COMPLIANCE OFFICER WILL USE HIS OR HER
BEST EFFORTS TO ASSURE THAT ALL PERSONAL SECURITIES
TRANSACTION REPORTS ARE TREATED AS "PERSONAL AND
CONFIDENTIAL." HOWEVER, SUCH DOCUMENTS WILL BE AVAILABLE
FOR INSPECTION BY APPROPRIATE REGULATORY AGENCIES AND OTHER
PARTIES WITHIN AND OUTSIDE MELLON AS ARE NECESSARY TO
EVALUATE COMPLIANCE WITH OR SANCTIONS UNDER THIS POLICY.
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<PAGE> 33
GLOSSARY
- ---------------------------
DEFINITIONS
- APPROVAL - written consent or written notice of
nonobjection.
- ASSOCIATE - any employee of Mellon Bank Corporation or its
direct or indirect subsidiaries; does not include outside
consultants or temporary help.
- BENEFICIAL OWNERSHIP - securities owned of record or held
in the associate's name are generally considered to be
beneficially owned by the associate.
Securities held in the name of any other person are deemed
to be beneficially owned by the associate if by reason of
any contract, understanding, relationship, agreement or
other arrangement, the associate obtains therefrom benefits
substantially equivalent to those of ownership, including
the power to vote, or to direct the disposition of, such
securities. Beneficial ownership includes securities held
by others for the associate's benefit (regardless of record
ownership), e.g. securities held for the associate or
members of the associate's immediate family, defined below,
by agents, custodians, brokers, trustees, executors or
other administrators; securities owned by the associate,
but which have not been transferred into the associate's
name on the books of the company; securities which the
associate has pledged; or securities owned by a corporation
that should be regarded as the associate's personal holding
corporation. As a natural person, beneficial ownership is
deemed to include securities held in the name or for the
benefit of the associate's immediate family, which includes
the associate's spouse, the associate's minor children and
stepchildren and the associate's relatives or the relatives
of the associate's spouse who are sharing the associate's
home, unless because of countervailing circumstances, the
associate does not enjoy benefits substantially equivalent
to those of ownership. Benefits substantially equivalent to
ownership include, for example, application of the income
derived from such securities to maintain a common home,
meeting expenses that such person otherwise would meet from
other sources, and the ability to exercise a controlling
influence over the purchase, sale or voting of such
securities. An associate is also deemed the beneficial
owner of securities held in the name of some other person,
even though the associate does not obtain benefits of
ownership, if the associate can vest or revest title in
himself at once, or at some future time.
In addition, a person will be deemed the beneficial owner
of a security if he has the right to acquire beneficial
ownership of such security at any time (within 60 days)
including but not limited to any right to acquire: (1)
through the exercise of any option, warrant or right; (2)
through the conversion of a security; or (3) pursuant to
the power to revoke a trust, nondiscretionary account or
similar arrangement.
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<PAGE> 34
With respect to ownership of securities held in trust,
beneficial ownership includes ownership of securities as a
trustee in instances where either the associate as trustee
or a member of the associate's "immediate family" has a
vested interest in the income or corpus of the trust, the
ownership by the associate of a vested beneficial interest
in the trust and the ownership of securities as a settlor
of a trust in which the associate as the settlor has the
power to revoke the trust without obtaining the consent of
the beneficiaries. Certain exemptions to these trust
beneficial ownership rules exist, including an exemption
for instances where beneficial ownership is imposed solely
by reason of the associate being settlor or beneficiary of
the securities held in trust and the ownership, acquisition
and disposition of such securities by the trust is made
without the associate's prior approval as settlor or
beneficiary. "Immediate family" of an associate as trustee
means the associate's son or daughter (including any
legally adopted children) or any descendant of either, the
associate's stepson or stepdaughter, the associate's father
or mother or any ancestor of either, the associate's
stepfather or stepmother and his spouse.
To the extent that stockholders of a company use it as a
personal trading or investment medium and the company has
no other substantial business, stockholders are regarded as
beneficial owners, to the extent of their respective
interests, of the stock thus invested or traded in. A
general partner in a partnership is considered to have
indirect beneficial ownership in the securities held by the
partnership to the extent of his pro rata interest in the
partnership. Indirect beneficial ownership is not, however,
considered to exist solely by reason of an indirect
interest in portfolio securities held by any holding
company registered under the Public Utility Holding Company
Act of 1935, a pension or retirement plan holding
securities of an issuer whose employees generally are
beneficiaries of the plan and a business trust with over 25
beneficiaries.
Any person who, directly or indirectly, creates or uses a
trust, proxy, power of attorney, pooling arrangement or any
other contract, arrangement or device with the purpose or
effect of divesting such person of beneficial ownership as
part of a plan or scheme to evade the reporting
requirements of the Securities Exchange Act of 1934 shall
be deemed the beneficial owner of such security.
The final determination of beneficial ownership is a
question to be determined in light of the facts of a
particular case. Thus, while the associate may include
security holdings of other members of his family, the
associate may nonetheless disclaim beneficial ownership of
such securities.
- "CHINESE WALL" POLICY - procedures designed to restrict the
flow of information within Mellon from units or individuals
who are likely to receive material nonpublic information to
units or individuals who trade in securities or provide
investment advice. (see pages 12-14).
- CORPORATION - Mellon Bank Corporation.
- DREYFUS - The Dreyfus Corporation and its subsidiaries.
- DREYFUS ASSOCIATE - any employee of Dreyfus; does not
include outside consultants or temporary help.
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<PAGE> 35
- EXEMPT SECURITIES - Exempt Securities are defined as:
- securities issued or guaranteed by the United States
government or agencies or instrumentalities;
- bankers' acceptances;
- bank certificates of deposit and time deposits;
- commercial paper;
- repurchase agreements; and
- securities issued by open-end investment companies.
- GENERAL COUNSEL - General Counsel of Mellon Bank
Corporation or any person to whom relevant authority is
delegated by the General Counsel.
- INDEX FUND - an investment company which seeks to mirror
the performance of the general market by investing in the
same stocks (and in the same proportion) as a broad-based
market index.
- INITIAL PUBLIC OFFERING (IPO) - the first offering of a
company's securities to the public.
- INVESTMENT COMPANY - a company that issues securities that
represent an undivided interest in the net assets held by
the company. Mutual funds are investment companies that
issue and sell redeemable securities representing an
undivided interest in the net assets of the company.
- MANAGER OF CORPORATE COMPLIANCE - - the associate within
the Risk Management and Compliance Department of Mellon
Bank Corporation who is responsible for administering the
Confidential Information and Securities Trading Policy, or
any person to whom relevant authority is delegated by the
Manager of Corporate Compliance.
- MELLON - Mellon Bank Corporation and all of its direct and
indirect subsidiaries.
- NAKED OPTION - an option sold by the investor which
obligates him or her to sell a security which he or she
does not own.
- NONDISCRETIONARY TRADING ACCOUNT - an account over which
the associated person has no direct or indirect control
over the investment decision-making process.
- OPTION - a security which gives the investor the right but
not the obligation to buy or sell a specific security at a
specified price within a specified time.
- PRECLEARANCE COMPLIANCE OFFICER - a person designated by
the Manager of Corporate Compliance, to administer, among
other things, associates' preclearance request for a
specific business unit.
- PRIVATE PLACEMENT - an offering of securities that is
exempt from registration under the Securities Act of 1933
because it does not constitute a public offering.
- SENIOR MANAGEMENT COMMITTEE - the Senior Management
Committee of Mellon Bank Corporation.
- SHORT SALE - the sale of a security that is not owned by
the seller at the time of the trade.
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<PAGE> 36
INDEX OF EXHIBITS
- --------------------------------
EXHIBIT A SAMPLE REPORT TO MANAGER OF CORPORATE COMPLIANCE
EXHIBIT B SAMPLE INSTRUCTION LETTER TO BROKER
EXHIBIT C PRECLEARANCE REQUEST FORM
EXHIBIT D PERSONAL SECURITIES HOLDINGS FORM
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<PAGE> 37
EXHIBIT A
- --------------------------------
SAMPLE REPORT TO MANAGER OF CORPORATE COMPLIANCE
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------
MELLON INTEROFFICE
MEMORANDUM
Date: From: Associate
To: Manager, Corporate Compliance Dept:
Aim #:
Aim #: 151-4342 Phone:
Fax:
-------------------------------------------------------------------------------
RE: REPORT OF SECURITIES TRADE
Type of Associate: ____________ Insider Risk
____________ Investment
____________ Other
Type of Security: ____________ Mellon Bank Corporation
____________ Mellon Bank Corporation - optional cash
purchases under Dividend Reinvestment
and Common Stock Purchase Plan
____________ Mellon Bank Corporation - exercise of an
employee stock option
Attached is a copy of the confirmation slip for a securities trade I engaged in on
_____________________, 19xx.
or
On _____________________, 19xx, I (purchased/sold) _______________________
shares of ___________________________ through (broker). I will arrange
to have a copy of the confirmation slip for this trade delivered to you as soon
as possible.
- --------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 38
EXHIBIT B1
- --------------------------------
FOR NON-DREYFUS ASSOCIATES
- --------------------------------------------------------------------------------
Date
Broker ABC
Street Address
City, State ZIP
Re: John Smith & Mary Smith
Account No. xxxxxxxxxxxxx
In connection with my existing brokerage accounts at your firm
noted above, please be advised that the Risk Management and
Compliance Department of Mellon Bank should be noted as an
"Interested Party" with respect to my accounts. They should,
therefore, be sent copies of all trade confirmations and account
statements relating to my account.
Please send the requested documentation ensuring the account
holder's name appears on all correspondence to:
Manager, Corporate Compliance
Mellon Bank
P.O. Box 3130
Pittsburgh, PA 15230-3130
Thank you for your cooperation in this request.
Sincerely yours,
Associate
cc: Manager, Corporate Compliance (151-4342)
- --------------------------------------------------------------------------------
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<PAGE> 39
EXHIBIT B2
- --------------------------------
FOR DREYFUS ASSOCIATES
- --------------------------------------------------------------------------------
Date
Broker ABC
Street Address
City, State ZIP
Re: John Smith & Mary Smith
Account No. xxxxxxxxxxxxx
In connection with my existing brokerage accounts at your firm
noted above, please be advised that the Risk Management and
Compliance Department of Dreyfus Corporation should be noted as an
"Interested Party" with respect to my accounts. They should,
therefore, be sent copies of all trade confirmations and account
statements relating to my account.
Please send the requested documentation ensuring the account
holder's name appears on all correspondence to:
Compliance Officer at The Dreyfus Corporation
200 Park Avenue
Legal Department
New York, NY 10166
Thank you for your cooperation in this request.
Sincerely yours,
Associate
cc: Dreyfus Compliance
- --------------------------------------------------------------------------------
36
CONFIDENTIAL INFORMATION AND SECURITIES TRADING POLICY-019 04/12/00
<PAGE> 40
EXHIBIT C1
- --------------------------------
<TABLE>
<S> <C>
PRECLEARANCE REQUEST FORM Non Dreyfus Associates
==================================================================================================
To: Manager, Corporate Compliance 151-4342 (All Insider and Other Associates)
Designated Preclearance Compliance Officer (All Investment Associates excluding Dreyfus)
- --------------------------------------------------------------------------------------------------
Associate Name: Title: Date:
- --------------------------------------------------------------------------------------------------
Phone #: AIM #: Social Security #: Department:
- --------------------------------------------------------------------------------------------------
==================================================================================================
ACCOUNT INFORMATION
- --------------------------------------------------------------------------------------------------
Account Name: Account Number: Name of Broker/Bank:
- --------------------------------------------------------------------------------------------------
Relationship to registered owner(s) (if other than associate)
- --------------------------------------------------------------------------------------------------
I hereby request approval to execute the following trade in the above account:
==================================================================================================
TRANSACTION DETAIL
- --------------------------------------------------------------------------------------------------
Buy: Sell: Security/Contract: No. of Shares:
- --------------------------------------------------------------------------------------------------
If sale, date acquired: Margin Transaction: Initial Public Offering: Private Placement:
[ ] Yes [ ] Yes [ ] Yes
- --------------------------------------------------------------------------------------------------
==================================================================================================
DISCLOSURE STATEMENT
- --------------------------------------------------------------------------------------------------
I hereby represent that, to the best of my knowledge, neither I nor the registered account holder
is (1) attempting to benefit personally from any existing business relationship between the issuer
and Mellon or any Mellon-related fund or affiliate; (2) engaging in any manipulative or deceptive
trading activity; (3) in possession of any material non-public information concerning the security
to which is request relates.
- --------------------------------------------------------------------------------------------------
Associate Signature: Date:
- --------------------------------------------------------------------------------------------------
==================================================================================================
COMPLIANCE OFFICER USE ONLY
- --------------------------------------------------------------------------------------------------
Approved: Disapproved: Authorized Signatory: Date:
- --------------------------------------------------------------------------------------------------
Comments:
- --------------------------------------------------------------------------------------------------
Note: This preclearance will lapse at the end of the day on ____________________, 19__.
If you decide not to effect the trade, please notify me.
- --------------------------------------------------------------------------------------------------
Date: By:
- --------------------------------------------------------------------------------------------------
</TABLE>
37
CONFIDENTIAL INFORMATION AND SECURITIES TRADING POLICY-019 04/12/00
<PAGE> 41
EXHIBIT C2
- --------------------------------
<TABLE>
<S> <C>
PRECLEARANCE REQUEST FORM Dreyfus Associates Only
==================================================================================================
To: Dreyfus Compliance Officer
- --------------------------------------------------------------------------------------------------
Associate Name: Title: Date:
- --------------------------------------------------------------------------------------------------
Phone #: AIM #: Social Security #: Department:
- --------------------------------------------------------------------------------------------------
==================================================================================================
ACCOUNT INFORMATION
- --------------------------------------------------------------------------------------------------
Account Name: Account Number: Name of Broker/Bank:
- --------------------------------------------------------------------------------------------------
Relationship to registered owner(s) (if other than associate)
- --------------------------------------------------------------------------------------------------
I hereby request approval to execute the following trade in the above account:
==================================================================================================
TRANSACTION DETAIL
- --------------------------------------------------------------------------------------------------
Buy: Sell: Security/Contract: Symbol:
- --------------------------------------------------------------------------------------------------
Amount: Current Market Price: If sale, date required: Margin Transaction:
- --------------------------------------------------------------------------------------------------
Is this a New Issue? Is this a Private Placement?
[ ] Yes [ ] No [ ] Yes [ ] No
- --------------------------------------------------------------------------------------------------
Reason for Transaction, identify source:
- --------------------------------------------------------------------------------------------------
==================================================================================================
DISCLOSURE STATEMENT
- --------------------------------------------------------------------------------------------------
I hereby represent that, to the best of my knowledge, neither I nor the registered account holder
is (1) attempting to benefit personally from any existing business relationship between the issuer
and Mellon or any Mellon-related fund or affiliate; (2) engaging in any manipulative or deceptive
trading activity; (3) in possession of any material non-public information concerning the security
to which is request relates.
- --------------------------------------------------------------------------------------------------
Associate Signature: Date:
- --------------------------------------------------------------------------------------------------
==================================================================================================
COMPLIANCE OFFICER USE ONLY
- --------------------------------------------------------------------------------------------------
Approved: Disapproved: Authorized Signatory: Date:
- --------------------------------------------------------------------------------------------------
Comments:
- --------------------------------------------------------------------------------------------------
Note: This preclearance will lapse at the end of the day on ____________________, 19__.
If you decide not to effect the trade, please notify me.
- --------------------------------------------------------------------------------------------------
Date: By:
- --------------------------------------------------------------------------------------------------
</TABLE>
38
CONFIDENTIAL INFORMATION AND SECURITIES TRADING POLICY-019 04/12/00
<PAGE> 42
EXHIBIT D1
- --------------------------------
Return to: Manager, Corporate Compliance
Mellon Bank
P.O. Box 3130
Pittsburgh, PA 15230-3130
STATEMENT OF SECURITY HOLDINGS
As of________________________________
1. List of all securities in which you, your immediate family, any
other member of your immediate household, or any trust or estate
of which you or your spouse is a trustee or fiduciary or
beneficiary, or of which your minor child is a beneficiary, or any
person for whom you direct or effect transactions under a power of
attorney or otherwise, maintain a beneficial ownership - (see
Glossary in Policy). If none, write NONE. Securities issued or
guaranteed by the U.S. government or its agencies or
instrumentalities, bankers' acceptances, bank certificates of
deposit and time deposits, commercial paper, repurchase agreements
and shares of registered investment companies need not be listed.
IF YOUR LIST IS EXTENSIVE, PLEASE ATTACH A COPY OF THE MOST RECENT
STATEMENT FROM YOUR BROKER(s), RATHER THAN LIST THEM ON THIS FORM.
-------------------------------------------------------------------------
NAME OF SECURITY TYPE OF SECURITY AMOUNT OF SHARES
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2. List the names and addresses of any broker/dealers holding
accounts in which you have a beneficial interest, including the
name of your registered representative (if applicable), the
account registration and the relevant account numbers. If none,
write NONE.
-------------------------------------------------------------------------
NAME OF
BROKER/ REGISTERED ACCOUNT ACCOUNT
DEALER ADDRESS REPRESENTATIVE REGISTRATION NUMBER(s)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
I certify that the statements made by me on this form are true, complete
and correct to the best of my knowledge and belief, and are made in good
faith. I acknowledge I have read, understood and complied with the
Confidential Information and Securities Trading Policy.
-------------------------------------------------------------------------
Date: Printed Name:
-------------------------------------------------------------------------
Signature:
-------------------------------------------------------------------------
39
CONFIDENTIAL INFORMATION AND SECURITIES TRADING POLICY-019 04/12/00
<PAGE> 43
EXHIBIT D2
- --------------------------------
Return to: Compliance Officer at the Dreyfus Corporation
200 Park Avenue
Legal Department
New York, NY 10166
STATEMENT OF SECURITY HOLDINGS
As of
1. List of all securities in which you, your immediate family, any
other member of your immediate household, or any trust or estate
of which you or your spouse is a trustee or fiduciary or
beneficiary, or of which your minor child is a beneficiary, or any
person for whom you direct or effect transactions under a power of
attorney or otherwise, maintain a beneficial interest. If none,
write NONE. Securities issued or guaranteed by the U.S. government
or its agencies or instrumentalities, bankers' acceptances, bank
certificates of deposit and time deposits, commercial paper,
repurchase agreements and shares of registered investment
companies need not be listed. IF YOUR LIST IS EXTENSIVE, PLEASE
ATTACH A COPY OF THE MOST RECENT STATEMENT FROM YOUR BROKER(s),
RATHER THAN LIST THEM ON THIS FORM.
-------------------------------------------------------------------------
NAME OF SECURITY TYPE OF SECURITY AMOUNT OF SHARES
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2. List the names and addresses of any broker/dealers holding
accounts in which you have a beneficial interest, including the
name of your registered representative (if applicable), the
account registration and the relevant account numbers. If none,
write NONE.
-------------------------------------------------------------------------
NAME OF
BROKER/ REGISTERED ACCOUNT ACCOUNT
DEALER ADDRESS REPRESENTATIVE REGISTRATION NUMBER(s)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
I certify that the statements made by me on this form are true, complete
and correct to the best of my knowledge and belief, and are made in good
faith. I acknowledge I have read, understood and complied with the
Confidential Information and Securities Trading Policy.
-------------------------------------------------------------------------
Date: Printed Name:
-------------------------------------------------------------------------
Signature:
-------------------------------------------------------------------------
40
CONFIDENTIAL INFORMATION AND SECURITIES TRADING POLICY-019 04/12/00
<PAGE> 1
MACKAY-SHIELDS FINANCIAL CORPORATION
PERSONAL INVESTMENT POLICY
I. IN GENERAL
MacKay-Shields Financial Corporation ("MSFC") owes an
undivided loyalty to its clients. MSFC also recognizes the
need to permit its employees reasonable freedom with respect
to their personal investment activities. It is important to
accommodate in an appropriate way which (a) acknowledges the
possibility of conflict between these duties and (b) sets
forth standards to assure that the primary duty of loyalty to
its clients is fulfilled.
This policy ("Policy") supersedes and replaces in full any
earlier policies on the subjects regulated.
The Policy has been implemented by MSFC although securities
purchased or sold for clients ordinarily trade in a
sufficiently broad market to permit transactions for clients
or personal accounts to be completed without any appreciable
impact on the market for such securities.
Any questions which arise relating to the Policy should be
referred to the General Counsel or Chief Compliance Officer
("CCO"). If necessary, any final determination may be made by
the Chairman or President in consultation with the General
Counsel or CCO. This Policy is applicable to all employees
and directors.*
II. RECORD KEEPING, AND REPORTING REQUIREMENTS
1. Personal Record Keeping
Each employee of MSFC is to maintain records adequate
to establish that the individual's personal
investment decisions did not involve a conflict with
the requirements of the Policy. If there is any
question as to whether a proposed transaction might
involve a possible violation of the Policy, the
transaction should be discussed in advance with the
General Counsel or CCO.
2. Pre-Clearance Reporting Requirement
Each employee shall file with the General Counsel or
CCO, a request ("Request")
- -----------------------
* Because they are subject to compliance policies of affiliates
and not involved in the detailed day to day management of
MSFC, members of the board of directors of MSFC who are not
employees of MSFC are required hereunder solely to complete
and file the reports required in accordance with Part II 3a
(1).
<PAGE> 2
in substantially the form of Exhibit A before
completing any transaction in securities ("Personal
Securities") in any account over which the employee
exercises beneficial ownership*; provided, however,
that a Request need not be filed with respect to any
transaction (a) effected in any account which is
managed on a discretionary basis by a person other
than such employee and with respect to which such
employee does not in fact influence or control such
transactions or (b) in securities listed in Part III
1(1-4) which do not require prior approval. All
Personal Securities transactions are, of course,
subject to all other MSFC compliance policies
relating to personal trading.**
3. Other Reporting Requirements
a) Statutory
MSFC is required under the Investment Advisers Act of
1940 and Investment Company Act of 1940 to keep
records of transactions in securities in which its
directors and employees have direct or indirect
beneficial ownership. The following reporting
requirements have been adopted to enable MSFC to
satisfy these requirements:
1. Each director and employee shall file with
the General Counsel or CCO, a report in
substantially the form of Exhibit B
("Quarterly Report"), within 10 days
following the end of each calendar quarter in
which a transaction occurs in Personal
Securities, other than those listed in Part
III(1-4). The Quarterly Report must be filed
for transactions in any security in which a
director or an employee has, or by reason of
such transaction acquires or disposes of, any
beneficial ownership. An individual may
report a transaction and, at the same time,
declare that reporting the transaction shall
not be construed as an admission that the
individual has any direct or indirect
beneficial ownership in the security. Each
director and employee must sign and print the
date of submission on their Quarterly Report.
- -----------------------
* "Beneficial Ownership" means ownership of securities or
securities accounts by or for the benefit of a person, or such
person's "family member", including any account in which the
employee, or family member of that person holds a direct or
indirect beneficial interest, retains discretionary investment
authority or exercises a power of attorney. The term "family
member" means any persons spouse, child or other relative,
whether related by blood, marriage or otherwise, who either
resides with, or is financially dependent upon, or whose
investments are controlled by that person. The term also
includes any unrelated individual whose investments are
controlled and whose financial support is materially
contributed to by the person, such as a "significant other."
** See MSFC compliance policies entitled "Restricted List",
"Partnership Investments", "Code of Ethics", and "Inside
Information"
Page 2
<PAGE> 3
2. Each employee of MSFC must annually execute
an acknowledgment with respect to the Policy
in substantially the form of Exhibit C.
b) Additional Quarterly Reporting
Each employee shall file with the General Counsel or
CCO, as part of the Quarterly Report, the names and
affiliations of family members* who are employed in
the securities or commodities industries and who
might be in a position to benefit directly or
indirectly from the activities of MSFC's personnel in
the discharge of their duties.
c) Duplicate Confirmations
Each employee shall arrange for prompt filing by the
broker, dealer and, if possible, bank (only applies
to bank accounts used substantially as brokerage
accounts) with the General Counsel or CCO of
duplicate confirmations of all trades of personal
securities and quarterly account statements. The
duplicates shall be mailed to MacKay-Shields
Financial Corporation, 9 West 57th Street, 37th
Floor, New York, New York 10019, Attention: General
Counsel or CCO.
d) Accounts List
Each employee shall be required to complete a list in
substantially the form of Exhibit D setting forth
each brokerage account (and each bank account which
is used substantially as a brokerage account) name,
number, and the name of each firm through which
transactions are directed with respect to all
accounts in which the individual may have beneficial
ownership. Each individual shall keep this list
current by listings in the Quarterly Report.
III. STATEMENT OF RESTRICTIONS
1. Pre-Clearance
To help prevent front running and insider trading
abuses, particularly with respect to thinly traded
securities, no employee of MSFC may purchase or sell,
directly or indirectly, Personal Securities (except
pursuant to the next paragraph) without prior
approval of the General Counsel or CCO. The final
determination shall be noted by the General Counsel
or CCO on the Request and dated and communicated to
the employee who submitted the request. The
authorization provided by the General Counsel or CCO
is effective, unless revoked, until the
- -----------------------
* For purposes of this Policy, family members include the
individual's spouse, minor children, parents or any relative
of the individual or the individual's spouse who is sharing
the individual's home.
Page 3
<PAGE> 4
end of business on the next business day. If the
Personal Securities transaction is not placed within
that period, a new authorization must be obtained.
Subject to the other restrictions set forth in this
Part III and other applicable MacKay-Shields
compliance policies relating to personal trading,
transactions in the following securities only shall
not require prior approval of the General Counsel or
CCO:
1. Bank Accounts
2. Bank Certificates of Deposit
3. Registered Open-End Mutual Fund Shares
4. Treasury Obligations
5. Unit Investment Trusts that hold securities
in proportion to an index
2. Front Running
No employee of MSFC may effect any transaction in
Personal Securities which MSFC is purchasing or
selling for any client or proposes to purchase or
sell for any client if such transaction would in any
way conflict with, or be detrimental to, the interest
of the client. Each employee should consult the
other restrictions set forth in this Part III and the
MSFC policies entitled "Restricted List and Daily
Open Trades Lists", "Partnership Investments", "Code
of Ethics" and "Inside Information" before making any
trades in Personal Securities.
In order to implement the preceding paragraph and to
minimize the possibility of conflicts of interest,
the following rules are hereby made applicable to all
transactions by employees in Personal Securities:
1. No Personal Securities may be purchased or
sold if (i) there are any unexecuted orders
to purchase or sell such securities for
clients of MSFC in the hands of MSFC or (ii)
any purchases or sales of such securities
have been made for MSFC client accounts in
the prior seven calendar days or can
reasonably be anticipated for MSFC client
accounts in the next seven calendar days.
The CCO or the General Counsel may make an
exception to this rule in the event that the
contemplated transaction involves (i) 500
shares or less in the aggregate and the
issuer has market capitalization (outstanding
shares multiplied by the current market price
per share) greater than $5 billion; or (ii)
less than .0001% of the issuer's market
capitalization, with a maximum of 500 shares
that may be traded within any seven-day
period.
2. No Personal Securities may be purchased or
sold if such purchase or sale is effected
with a view to making a profit from a change
in the price of such security resulting from
anticipated transactions by or for MSFC's
clients.
A DESIGNATED INDIVIDUAL FROM THE MSFC
COMPLIANCE DEPARTMENT WILL CONSULT WITH
PORTFOLIO MANAGERS AND TRADERS IN THE FIXED
INCOME, EQUITY
Page 4
<PAGE> 5
AND CONVERTIBLE DIVISIONS TO ENSURE COMPLIANCE
WITH THESE LIMITATIONS.
3. Use of Brokerage for Personal or Family
Benefit
No employee may, for direct or indirect
personal or family members benefit, execute a
trade with a broker by using the influence
(implied or stated) of MSFC or any director's
or employee's influence (implied or stated)
with MSFC.
4. No Personal Trades Through MSFC's Traders
No Personal Securities trades may be effected
through MSFC's traders. Employees must
effect such trades through their personal
broker-dealers.
5. Initial Public Offerings
No initial public offering of securities may
be purchased for any account in which an
employee has beneficial ownership, except
with the express written prior approval by
the General Counsel or CCO.
6. Private Placements
No private placement securities may be
purchased for any account in which an
employee has beneficial ownership, except
with the express written prior approval by
the General Counsel or CCO. All employees
who have obtained prior approval and made an
investment in a private placement must
disclose that investment if that employee
plays a part in any subsequent consideration
of an investment in the issuer by client
accounts. Under such circumstances, MSFC's
decision to purchase securities of the
private placement issuer will be subject to
an independent review by investment personnel
with no investment in the issuer.
7. Restricted and Watch Lists
No employee may make a personal trade in
securities of an issuer listed on the
Restricted List. Please refer to the MSFC
policies entitled, "Restricted List," for
specific guidelines on when issuers of
securities are to be placed on the Restricted
List. Securities on the Watch List will be
dealt with on a case by case basis. A
designated individual from the MSFC
Compliance Department will compare issuers
listed on the Restricted and Watch Lists to
ensure compliance with this limitation.
8. Inside Information
Employees may not trade on inside information
(i.e., material and non-public information)
or communicate such information to others.
However, inside information matters must be
raised immediately with the General Counsel
or CCO. Please refer to the MSFC policy
entitled, "Inside Information," for specific
guidelines governing inside information.
Page 5
<PAGE> 6
9. Maximum Trades Per Quarter
Employees will be allowed to execute a
maximum of fifty trades per calendar quarter;
however, exceptions may be approved by the
General Counsel or CCO on a case-by-case
basis.
10. Sixty Day Holding Period
No employee may profit from the purchase and
sale or sale and purchase of the same (or
equivalent) security. Exceptions may be made
for emergency trades if approved by the
General Counsel or CCO.
IV. SANCTIONS
Upon discovering a violation of the Policy, MSFC may impose
sanctions as it deems appropriate, including, among other
sanctions, reversal of any trade, reallocation of trades to
client accounts or suspension or termination of the employment
of the violator.
V. REVIEW BY GENERAL COUNSEL OR CCO
The General Counsel or CCO will review Personal Securities to
verify that the Policy is being followed. The results of this
review will be set forth in a quarterly summary report. The
report shall specify any related concerns and recommendations
and be accompanied by appropriate exhibits.
VI. RESPONSIBILITIES OF THE COMPLIANCE COMMITTEE
The Compliance Committee will review quarterly the summary
report of the General Counsel or CCO and shall take
appropriate action.
Page 6
<PAGE> 7
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK-PRODUCT
MACKAY-SHIELDS FINANCIAL CORPORATION
CODE OF ETHICS
This Code of Ethics (the "Code") has been issued by MacKay-Shields Financial
Corporation ("MSFC") in order to set forth (i) applicable guidelines and
procedures to promote ethical practices, (ii) a reference to The Code of Ethics
and Standards of Professional Conduct applicable to financial analysts and
other appropriate purposes and, (iii) a representative example of and to
supplement other existing codes of ethics applicable with respect to mutual
funds managed by MSFC. All recipients of the Code are to read it carefully,
retain it for reference and abide by the Code. Please refer to the MSFC policy
entitled, "Personal Investment Policy," which follows this Code, for specific
guidelines governing personal investments effected by MSFC employees.
MSFC requires that the applicable standards be observed by employees. An
employee may not evade the provisions of the Code by having another person,
including a friend or relative, act or fail to act in a manner in which the
employee is prohibited.
I. GUIDELINES AND PROCEDURES
Guidelines
MSFC requires the highest standards of ethical conduct on the part of
employees.
Each employee is under a duty to exercise his or her authority and
responsibility for the benefit of MSFC and may not have outside
interests conflicting with the interests of MSFC. Each person must
avoid any circumstance which might adversely affect or appear to
affect MSFC or its clients or his or her duty of complete loyalty to
MSFC in the discharge of his or her responsibilities, including with
respect to the protection of confidential information and MSFC's
reputation for trustworthy financial service.
Each employee has the duty to disclose to MSFC any interest that he or
she may have in any firm, corporation or business unit which is not
affiliated or participating in any joint venture or partnership with
MSFC or its affiliates.* Disclosure should be timely so that
- -----------------------
* Affiliates shall mean any corporation controlling, controlled by or
under common control with, MSFC.
<PAGE> 8
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK-PRODUCT
MSFC may take action concerning any possible conflict as it deems
appropriate. It is recognized, however, that MSFC has or may have
business relationships with many organizations and that a relatively
small interest in publicly traded securities of an organization does
not necessarily give rise to a conflict of interest. Therefore, the
following proceduresand the Annual Questionnaire have been adopted and
approved by MSFC.
Procedures
a) It is considered generally incompatible with an employee's
duties to MSFC to assume the position of director of a
corporation. A report should be made by an employee to MSFC
of any invitation to serve as a director of a corporation
which is not an affiliate and the person must receive the
approval of the General Counsel or Chief Compliance Officer
("CCO") prior to accepting any such directorship.
b) Except as approved by the General Counsel or CCO; it is
considered generally incompatible with the duties of an
employee of MSFC to act as an officer, general partner,
consultant, agent, representative or employee of any other
business, other than an affiliate.
c) Except as approved by the General Counsel or CCO, employees
may not have a monetary interest, as principal, co-principal,
agent or beneficiary, directly or indirectly, or through any
substantial interest in any other corporation or business
unit, in any transaction involving MSFC, subject to the same
exceptions as are specifically permitted under law.
d) An Annual Questionnaire, substantially in the form of Exhibit
A shall be circulated by the General Counsel or CCO to each
employee, for completion and filing with the General Counsel
or CCO once a year. Each such employee shall supplement the
Annual Questionnaire as necessary to reflect any material
change between annual filings.
e) Gifts/entertainment from third parties that do business with
MSFC, its affiliates, or its clients and exceed a value of
$100 must be approved by the employee's Division Head.
Registered representatives of NYLIFE Securities Inc. and
Investment Personnel for the mutual funds are prohibited from
accepting gifts/entertainment valued at more than $100 per
year. Please refer to the MSFC policy entitled, "Payments to
or from Third Parties", for specific guidelines governing
gifts/entertainment from third parties.
f) Employees are to disclose to the General Counsel or CCO all
personal securities holdings upon commencement of employment.
Page 8
<PAGE> 9
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK-PRODUCT
II. THE CODE OF ETHICS AND STANDARDS OF PROFESSIONAL CONDUCT -- FOR
FINANCIAL ANALYSTS
The Code of Ethics and Standards of Professional Conduct applicable to
financial analysts are set forth as Exhibit B. MSFC requires that
each of its financial analysts comply with the provisions of that code
and standards.
III. MUTUAL FUND CODE OF ETHICS AND SUPPLEMENT THERETO
Attached as Exhibit C is a representative example of the code of
ethics applicable with respect to the mutual funds managed by MSFC.
To supplement the attached code applicable with respect to the
MainStay Funds, MainStay Institutional Funds, Inc. and the MainStay
VP Series Fund, Inc. (in the aggregate the "Mainstay, Institutional
and VP Codes"), the following supplement has been approved by MSFC's
Compliance Committee:
Supplement to the Mainstay, Institutional and VP Codes
MSFC, in general and relating, without limitation, to the MainStay,
Institutional and VP Funds, recognizes the importance of high ethical
standards in the conduct of its business and requires that the
MainStay, Institutional and VP Codes be observed by each Access Person
(as defined in the Mainstay, Institutional and VP Codes).
IV. ACKNOWLEDGMENT
Each employee must certify annually, in substantially the form of
Exhibit D, that he or she has read and understood, and that they are
subject to and have compiled with, the Code and receipt of benefits
policy.
V. SANCTIONS
Upon discovering a violation of the Code, MSFC may impose such
sanctions as it deems appropriate, including, amongother sanctions,
reversal of any trades, reallocation of trades to client accounts or
suspension or termination of the employment of the violator.
VI. REVIEW BY GENERAL COUNSEL OR CCO
The General Counsel or CCO will undertake a quarterly review with
respect to the Code to verify that the Code is being followed. The
results of this review will be set forth in a quarterly report. The
report shall specify any related concerns and recommendations and be
accompanied by the appropriate exhibits.
Page 9
<PAGE> 10
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK-PRODUCT
VII. RESPONSIBILITIES OF THE COMPLIANCE COMMITTEE
The Compliance Committee will review quarterly the summary report of
the General Counsel or CCO and shall take appropriate action.
Page 10
<PAGE> 1
MONITOR CAPITAL ADVISORS, INC.
CODE OF ETHICS
I. INTRODUCTION AND APPLICATION
Monitor Capital Advisors LLC (the "Company") recognizes the
importance of high ethical standards in the conduct of its business and
requires that this Code of Ethics (the "Code") be observed by each Access
Person (defined below in Section III(A)) except as set forth immediately below.
This Code is intended to apply to the Company's officers and directors and
other Access Persons who are employees of any affiliate of the Company. All
recipients of the Code are directed to read it carefully, retain it for future
reference and abide by the rules and policies set forth herein. Any questions
concerning the applicability or interpretation of such rules and policies, and
compliance therewith, should be directed to the Compliance Officer of the
Company.
Each Access Person is under a duty to exercise his or her
authority and responsibility for the benefit of the Company and their
shareholders, to place the interests of the shareholders first and to refrain
from having outside interests conflicting with the interests of the Company and
their shareholders. Each such person must avoid any circumstances which might
adversely affect or appear to affect his or her duty of complete loyalty to the
Company and their shareholders in the discharge of his or her responsibilities,
including the protection of confidential information and corporate integrity.
Each Access Person must abstain from participation (or any other involvement)
in "insider trading" in contravention of any applicable law or regulation. The
reputation of the Company and their affiliates for trustworthy financial
services is a valuable
Page 1 of 12
<PAGE> 2
asset which all Access Persons are expected to preserve and protect.
All personal securities transactions must be conducted
consistent with the Code and in such a manner as to avoid any actual or
potential conflict of interest or any abuse of an individual's position of
trust and responsibility. All persons must abide by the fundamental standard
that the Company's personnel should not take inappropriate advantage of their
positions.
While compliance with the provisions of the Code is
anticipated, Access Persons should be aware that in response to any violations,
the Company will take whatever action is deemed appropriate under the
circumstances including, but not necessarily limited to, dismissal of such
Access Person. Technical compliance with the Code's procedures will not
automatically insulate from scrutiny trades which show a pattern of abuse of an
individual's fiduciary duties to the Company.
II. PURPOSE
This code has been adopted by the Board of Directors of the
Company.
(A) It is unlawful for any Access Person in connection
with the purchase or sale, directly or indirectly, by
such person of a security held or to be acquired by
the Company:
(1) To employ any device, scheme or
artifice to defraud the Company;
(2) To make to the Company any untrue
statement of a material fact or to
omit to state to the Company a
material fact necessary in order to
make the statements made, in light
of the circumstances under which
they are made,
Page 2 of 12
<PAGE> 3
not misleading;
(3) To engage in any act, practice, or
course of business which operates or
would operate as a fraud or deceit
upon any of the Company; or
(4) To engage in any manipulative
practice with respect to the
Company.
III. DEFINITIONS
(A) "Access Person" means:
(1) any Director or officer of the
Company;
(2) any employee of an affiliate of the
Company, who, in connection with his
or her regular functions or duties,
makes, participates in, or obtains
information regarding the purchase
or sale of a security by the
Company, or whose functions relate
to the making of any recommendations
with respect to any purchase or sale
of a security by the Company; and
(3) any other natural person, if any,
who has the power to exercise a
controlling influence over the
management or policies of the
Company, unless such power is solely
the result of his or her position
with the Company, and who obtains
information concerning
recommendations made to the Company
with regard to the purchase or sale
of a security.
(B) "Beneficial Ownership" means ownership of securities
or securities accounts by or for the benefit of a
person, or such person's "family member," including
any
Page 3 of 12
<PAGE> 4
account in which the employee, or family member of
that person holds a direct or indirect beneficial
interest, retains discretionary investment authority
or exercises a power of attorney. The term "family
member" means any person's spouse, child or other
relative, whether related by blood, marriage or
otherwise, who either resides with, or is financially
dependent upon, or whose investments are controlled
by that person. The term also includes any unrelated
individual whose investments are controlled and whose
financial support is materially contributed to by the
person, such as a "significant other."
(C) "Compliance Officer" shall mean the person appointed
by the Company's Board of Directors to administer the
Code.
(D) "Investment Personnel" means any person who in
connection with his or her regular functions or
duties makes, participates in or recommends the
purchase or sale of a security for the Company.
(E) "Portfolio Manager" means a person entrusted with the
direct responsibility and authority to make
investment decisions affecting the Company.
IV. COMPLIANCE PROCEDURES
(A) Conflicts of Interest
(1) Each Access Person has the duty to disclose
to the Company any interest whatsoever that
he or she may have in any firm, corporation,
or business unit with which he or she is
called upon to deal as a part of his or her
Page 4 of 12
<PAGE> 5
assigned duties with the Company or any other
activity that the Access Person reasonably
believes presents a potential conflict of
interest. This disclosure should be timely
so that the Company may take such action
concerning the conflict as deemed appropriate
by the Compliance Officer.
(2) Investment Personnel may not accept gifts,
other than de minimis gifts, from persons
doing business with or on behalf of the
Company.
(3) Investment Personnel may not serve on the
board of directors of a publicly traded
company or any business organized for profit
other than New York Life Insurance Company or
an affiliated company unless prior
authorization is obtained from the Compliance
Officer. Such authorization will be based on
a determination that the business of such
corporation does not conflict with the
interest of the Company and that service
would be consistent with the best interests
of the Company and their shareholders and is
not prohibited by law. If such service is
authorized, procedures must be in place to
isolate investment personnel serving as
directors of outside entities from those
making investment decisions on behalf of the
Company.
(B) Preclearance of Personal Securities Transactions
(1) An Access Person must obtain prior approval
from the Compliance Officer before purchasing
or selling, directly or indirectly, any
security in any
Page 5 of 12
<PAGE> 6
account over which the Access Person
exercises Beneficial Ownership.
(2) Access Persons are not required to preclear
the following transactions:
(a) Purchases or sales of securities
effected in any account which is
managed on a discretionary basis by
a person other than such Access
Person and with respect to which
such Access Person does not in fact
influence or control such
transactions;
(b) Purchases which are part of an
automatic dividend or distribution
reinvestment plan;
(c) Purchases effected upon the exercise
of rights issued by an issuer pro
rata to all holders of a class of
its securities, to the extent such
rights were acquired from such
issuer, and sales of such rights so
acquired; or
(d) Purchases or sales of shares of
registered open-end investment
companies (commonly referred to as
"mutual Company").
(C) Other Rules Relating to Personal Securities
Transactions
(1) Investment Personnel may not participate in
any initial public offering of securities in
any account over which they exercise
Beneficial Ownership except with the express
written prior approval of the Compliance
Officer of the Company.
Page 6 of 12
<PAGE> 7
(2) Investment Personnel who have obtained prior
approval arid made an investment in a private
placement must disclose that investment to
the Compliance Officer, and, as applicable,
to other relevant Investment Personnel or any
officer of the Company if they play a part in
any subsequent consideration of an investment
by the Company in that issuer and such
Investment Personnel continues to hold such
investment. Under such circumstances, the
Company's decision to purchase securities of
the private placement issuer should be
subject to independent review by Investment
Personnel with no investment in the issuer.
(3) No Access Person may execute a securities
transaction in any account over which he or
she exercises Beneficial Ownership on a day
when the Company has a pending "buy" or
"sell" order in that same security until such
order is executed or withdrawn.
(4) No Portfolio Manager may execute a personal
securities transaction within fewer than
seven calendar days before and after any
portfolio which he or she manages trades in
that security.
(5) Investment Personnel may not profit from the
purchase and sale or sale and purchase of the
same (or equivalent) securities within 60
calendar days.
(6) Any profits realized from transactions
prohibited by this Code, including,
Page 7 of 12
<PAGE> 8
among other things, any profits realized from
a personal securities transaction executed
during the periods proscribed in (3), (4) or
(5) immediately set forth above, must be
disgorged to the Company.
V. REPORTING AND MONITORING
(A) Each Access Person shall submit to the Compliance
Officer a report on the form attached as Exhibit B or
a similar form provided by the Compliance Officer
covering the matters included in the form. The
report must list transactions in any security in
which such Access Person has, or by reason of such
transaction acquires or disposes of, any Beneficial
Ownership in the security.
Reports shall be delivered to the Compliance Officer
not later than 10 days after the end of the calendar
quarter in which a transaction to which the report
relates was effected. The Compliance Officer shall
maintain such reports and such other records as are
required
(B) Each Access Person must direct his or her broker to
provide to the Compliance Officer copies of
confirmations of all personal securities transactions
(including transactions in accounts in which the
Access Person has beneficial ownership) on a timely
basis and to provide copies of all periodic
statements for all securities accounts over which the
Access Person exercises Beneficial Ownership.
(C) The Compliance Officer shall monitor personal trading
activity of all Access Persons pursuant to procedures
established under this Code.
Page 8 of 12
<PAGE> 9
(D) All Investment Personnel shall be required to
disclose all securities subject to their Beneficial
Ownership upon hire or upon the assumption of duties
which fall within the definition of Investment
Personnel and on an annual basis thereafter on the
form attached as Exhibit C or on a similar form
provided by the Compliance Officer covering the
matters included on the form.
(E) All reports furnished pursuant to this Section will
be maintained on a confidential basis and will be
reasonably secured to prevent access to such records
by unauthorized personnel.
(F) Each Access Person shall complete an annual
certification in the form attached as Exhibit D (or
as revised from time to time) that he or she has
received, read and understood the Code and that he or
she is subject to and has complied with each of the
Code's provisions applicable to such person.
(G) The Compliance Officer shall prepare an annual report
for the Board of Directors which, at a minimum
summarizes the existing procedures concerning
personal investing and any changes in the procedures
made during the year; identifies any violations
requiring significant remedial action during the past
year; and identifies any recommended changes in
existing restrictions or procedures.
VI. EXCEPTIONS
The Compliance Officer, in consultation with internal legal
counsel for the Company may grant written exceptions to provisions of the Code
in circumstances which present special
Page 9 of 12
<PAGE> 10
hardship. The exceptions may be granted to individuals or classes of
individuals with respect to particular transactions, classes of transactions or
all transactions. Exceptions shall be structured to be as narrow as is
reasonably practicable with appropriate safeguards designed to prevent abuse of
the exception. Any exception which is granted shall be reported to the Board
of Directors at the next regularly scheduled meeting of the Directors.
Page 10 of 12
<PAGE> 11
LIST OF ACCESS PERSONS AT MONITOR CAPITAL
The following Monitor Capital employees are classified as 'Access Persons':
Dorothy Foggie
Nicole Hoffman
Sajey Kurumunda
Laurie Gaeta
Lynn Gibson
The following Monitor Capital employees are classified as 'Investment
Personnel':
None
The following Monitor Capital employees are classified as 'Portfolio Managers':
Jefferson Boyce
Stephen Killian
Jonathan Swaney
Francis Ok
Clark Maxam
Harvey Fram
Simon Liu
Page 11 of 12
<PAGE> 12
ANNUAL CERTIFICATION OF
COMPLIANCE WITH THE CODE OF ETHICS FOR MONITOR CAPITAL ADVISORS
I, _______________________________, hereby certify that I have
received Monitor Capital Advisors Code of Ethics and that I have read and
understood the Code. I further certify that I am subject to the Code and have
complied with each of the Code's provisions to which I am subject.
-----------------------------------
Name:
Position:
Date:
----------------
Page 12 of 12
<PAGE> 1
NYLIFE DISTRIBUTORS INC.
51 MADISON AVENUE
NEW YORK, NY 10010
CODE OF ETHICS
REGARDING CONFLICT OF INTERESTS
AND STANDARDS OF ETHICAL INTEGRITY
NYLIFE Distributors Inc. (the "Corporation") acknowledges the importance
of high ethical standards in the conduct of its business and requires that the
applicable standards be observed by the following "Affiliated Persons," namely
(a) each of its officers, employees, members and directors, and (b) any persons
affiliated with or otherwise authorized to represent the Corporation who acquire
any confidential information in which the Corporation or any direct or indirect
parent, subsidiary or affiliate corporation has an interest. New York State
Insurance Department Regulation No. 115 (11 New York Codes, Rules & Regulations
81-2.2) requires the Corporation to codify these standards. All recipients of
this Code of Ethics ("Code") are directed to read it carefully, retain it for
future reference and abide by the rules and policies set forth herein. Any
questions concerning the applicability or interpretation of such rules and
policies, and compliance therewith, should be directed to:
NYLIFE Distributors Inc.
51 Madison Avenue
New York, New York 10010
Attention of the Secretary
While compliance with the provisions of this Code is anticipated,
Affiliated Persons
1
<PAGE> 2
should be aware that in response to any violations, the Corporation will take
whatever action it deems appropriate under the circumstances.
STATEMENT OF POLICY ON CONFLICT OF INTERESTS
AND STANDARDS OF ETHICAL INTEGRITY
The purpose of this statement is to reaffirm the Corporation's policy in
the area of Conflict of Interests and Standards of Ethical Integrity, and to
provide a current statement of the Corporation's rules and guidelines, as well
as procedures for their implementation.
The Corporation requires the highest standards of ethical conduct on the
part of Affiliated Persons subject to the provisions of the Code, including,
without limitation, abstention from participation (or any other involvement) in
"insider trading" in contravention of any applicable laws or regulation. The
reputation of New York Life Insurance Company ("New York Life") and its
affiliates for trustworthy financial service is a valuable asset which all
Affiliated Persons are expected to preserve and protect.
Each Affiliated Person is under a duty to exercise his or her authority
and responsibility for the benefit of the Corporation and may not have outside
interests conflicting with the interests of the Corporation. Each such person
must avoid any circumstances which might adversely affect or appear to affect
his or her duty of complete loyalty to the Corporation and its affiliated
entities in the discharge of his or her responsibilities, including the
protection of confidential information and corporate integrity.
Each Affiliated Person has the duty to disclose to the Corporation any
interest whatsoever
2
<PAGE> 3
that he or she may have in any firm, corporation, or business unit (which is not
affiliated or participating in any joint venture or partnership with the
Corporation or with New York Life) with which he or she is called upon to deal
as a part of his or her assigned duties with the Corporation. Such disclosure
should be timely so that the Corporation may take such action concerning the
conflict as it deems appropriate. It is recognized, however, that the
Corporation has or may have business relationships with many companies and other
profit-making organizations and that a person's relatively small interest in
publicly traded securities of such an organization does not necessarily give
rise to a conflict of interests. Therefore, the following Rules and Procedures
and the form of Annual Questionnaire have been approved and adopted by the
Corporation:
GENERAL RULES AND PROCEDURES
1. Generally, it is considered compatible with an Affiliated Person's
duties to the Corporation to assume the position of director of a corporation
for profit, provided that the business of such corporation does not conflict
with the interest of the corporation or any corporation controlling, controlled
by or under common control with this Corporation (i.e., an "affiliate(d)"
corporation), and that such directorship is not prohibited by the New York
Insurance Law, or any federal or other applicable law. However, reports should
be made to the Corporation of any invitation to serve as a director of a
corporation for profit and such persons must receive the approval of this
Corporation prior to accepting any such directorship.
2. It is considered generally incompatible with the duties of an officer,
employee, agent or other representative of the Corporation to act as an officer,
general partner, consultant,
3
<PAGE> 4
agent, representative, or employee of any business organized for profit, other
than New York Life or an affiliated entity of the Corporation or New York Life.
3. The Code prohibits the directors and officers of New York Life or the
Corporation from being pecuniarily interested, as principal, co-principal, agent
or beneficiary, directly or indirectly, or through any substantial interest in
any other corporation or business unit, in any transaction involving the
Corporation, subject to the same exceptions as are permitted by the New York
Insurance Law for directors and officers of New York Life, and those described
below.
4. The Code does not necessarily prohibit the directors, officers,
members, or other personnel of this Corporation who are otherwise unaffiliated
with New York Life, from being pecuniarily interested in any transactions that
are in the ordinary course of business of the Corporation, provided that such
transactions:
are usual and customary in relations between an institution and its
directors or officers, or are at arm's-length with respect to its Affiliated
Persons;
do not violate any provisions of the New York Insurance Law; and
are disclosed to the Board of Directors of New York Life and of the
Corporation in accordance with the procedures established hereunder.
5. A questionnaire, substantially in the form annexed (and as revised
from time to time with the approval of the Board of Directors or the Chief
Executive Officer of the Corporation) shall be circulated by the Secretary to
(a) each Director and Officer of the Corporation, and (b) such other Affiliated
Persons whose activities on behalf of the Corporation
4
<PAGE> 5
are determined by the Board of Directors, the Chief Executive Officer or counsel
to warrant submission of periodic compliance reports hereunder, for completion
and filing with the Secretary in January of each year, and shall be supplemented
promptly by each responding Affiliated Person to reflect any material change in
responses occurring or discovered between annual filings.
6. The Secretary shall review responses to all questionnaires and any
supplements thereto and report to the Board of Directors of the Corporation and
(through the Office of its Vice President and Secretary) to the Board of
Directors of New York Life, to their respective Chief Executive Officers, and to
the office of the General Counsel of New York Life, any material conflict of
interests which has not been resolved in accordance with this Code and any
willful failure promptly to disclose any apparent conflicts of interests
thereunder.
SPECIAL RULES FOR PERSONS INVOLVED IN FINANCIAL MATTERS
All Affiliated Persons involved in the financial matters of the
Corporation have a special element of responsibility and loyalty with regard to
the current and prospective financial and fiscal operations and planning of the
Corporation. They are expected to comply fully with the general rules applicable
to Affiliated Persons, but in addition have the responsibility and duty to see
to it that (a) the current and prospective financial operations of the
Corporation and its financial planning, (b) material non-public information
obtained in the course of any investment matters, contemplated investment
transactions or other business activities by the Corporation or New York Life or
any of their affiliates, and (c) any data which may be deemed to be "inside
5
<PAGE> 6
information" by any determination, rule, regulation, law or decision of, or
pertaining to, the United States Securities and Exchange Commission or any
similar or successor agency, are kept confidential, and are not disclosed to
anyone who is not properly concerned with them as part of his or her regular
duties with the Corporation, New York Life or any of their affiliates, except as
otherwise provided in accordance with due process of law or compliance with
regulatory authorities in the proper exercise of their jurisdiction.
6
<PAGE> 7
"INSIDE INFORMATION"
All Affiliated Persons of the Corporation, without regard to their
status, responsibilities or involvement in any financial matters, are obligated
to maintain awareness of and to conduct themselves in compliance with the
standards governing "Securities Trading and Material Inside (Non-Public)
Information," as now in effect and currently published at pages 47-50,
inclusive, of Corporate Policy Guidelines adopted by New York Life and
distributed to its personnel under date of March 10, 1988, copies of which are
on file with and may be obtained on request from the Secretary of the
Corporation, all of which standards, as from time to time amended and hereafter
in effect, are incorporated herein by reference and adopted as the Corporate
Policy Guidelines of and for this Corporation.
7
<PAGE> 8
NYLIFE Distributors Inc.
NAME
TITLE OR POSITION
QUESTIONNAIRE ON CONFLICT OF INTERESTS
1. Please list any officership, directorship, trusteeship or material
employment which you (or any dependent relative) hold in any corporations,
associations or partnerships for profit, any mutual companies or in any
Subsidiary* of New York Life Insurance Company ("New York Life") or NYLIFE
Distributors Inc. (the "Corporation"). If you do not have any, please insert
"NONE" below. (If the following space is insufficient, please attach a complete
list following your signature page.)
2. (a) Please list any substantial financial interest (such as 1% or more
of the outstanding stock or other equity or ownership interests) you (or any
dependent relative) may have in any business unit which you know is a supplier
of or soliciting orders for sales or services to the Corporation or to New York
Life or to any Subsidiary*. If you do not have any, please insert "NONE" below.
- --------
* The term "Subsidiary", as used herein, includes NYLIFE Distributors
Inc. (the "Corporation") and all corporations over which either the
Corporation or New York Life, directly or indirectly, with power to vote,
owns, controls or holds a majority of the voting securities of such
corporation, or possesses the power to direct or cause the direction of
the management and policies of an entity, whether through the ownership
of voting securities, by contract or otherwise.
8
<PAGE> 9
(a) Please list any substantial financial interest (such as 1% or more of
the outstanding stock or other equity or ownership interests) you (or any
dependent relative) may have in any business unit which you know is doing
business with the Corporation or New York Life or any Subsidiary*, other than
suppliers referred to above. If you do not have any, please insert "NONE" below.
2. Please list the names (not amount of the holding) of any corporations
or business units in which you (or any dependent relative) have a substantial
financial interest (such as 1% or more of the outstanding stock or other equity
or ownership interests) and in which, to your knowledge, the Corporation or New
York Life or a Subsidiary* has an investment. If you do not have any, please
insert "NONE" below. (If the following space is insufficient, please attach a
complete list following your signature page.)
3. Please list the names of any corporations or business units in the
following categories in which you (or any dependent relative) may have any
interest or financial holding. (The amount of holding or the number of shares of
stock need not be listed.) If you do not have any, please insert "NONE" below.
(a) Any company, other than New York Life or a Subsidiary*, whose
principal business is the issuance and sale of life insurance, annuities
or accident and health insurance policies, or the provision of financial
or health services or products. Do not include interests in policies,
annuities or health insurance contracts. If any common stock holding in
this category is 1% or more of the outstanding stock, please so
indicate.
9
<PAGE> 10
Any life insurance or health insurance agency, brokerage or
insurance consultant firm other than a Subsidiary* of New York Life.
(b) Any mortgage loan correspondent of New York Life or any other
concern engaged primarily in the business of buying, selling or
servicing real estate mortgages. (Do not include mortgages upon property
owned by you, or personal investments in real estate investment trusts.)
(c) Any investment banking firm, brokerage firm or other business unit
engaged primarily in the business of buying and selling securities. (Do
not include brokerage or similar accounts or investments in mutual
funds.)
(If any of the spaces above are insufficient, please attach a
complete list following your signature page.)
4. Please list the names of any business firms in which you (or any
dependent relative) have an interest or financial holding and which have
property which to your knowledge is subject, in whole or in part, to a real
estate mortgage held by the Corporation or New York Life or a Subsidiary*. If
you do not have any, please insert "NONE" below. (If the following space is
insufficient, please attach a complete list following your signature page.)
5. Please list or summarize any financial interest you (or any dependent
relative) have which, in your opinion, affects or might appear to affect
adversely the discharge of your duties and responsibilities to the Corporation,
New York Life or any Subsidiary*. If you do not have any, please insert "NONE"
below. (If the following space is insufficient, please attach a complete list
following your signature page.)
10
<PAGE> 11
6. Supplemental Reporting Obligations. If a material change occurs in
any matters reported in this Questionnaire or new circumstances are discovered
evidencing any conflict of interests or other deviations from the Code of Ethics
governing Affiliated Persons of the Corporation, the undersigned hereby
undertakes promptly to file with the Secretary an appropriate amendment or
supplement to this Questionnaire until it is superseded by the next completed
Annual Questionnaire.
11
<PAGE> 12
INITIALS
7. Short Form Responses: By initialing the applicable box, the
undersigned certifies current compliance
with the Code of Ethics and the absence
of any Conflict of Interests except as
described on the attached page(s).
Initials
No exceptions to the foregoing.
Date: , 2000
(Signature of Affiliated Person)
Name:
(Print or Type Below Signature)
Title or Position:
<PAGE> 1
POWER OF ATTORNEY
I, the undersigned director of the MainStay VP Series Fund, Inc. (the
"Fund"), hereby constitute Thomas English, Joseph McBrien, Linda Reimer and
Robert Rock, and each of them singly, my true and lawful attorneys with full
power to them and each of them to sign for me, and in my name, registration
statements applicable to the Fund, and any and all amendments thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and the states.
Witness my hand on the date set forth below.
Signature Date
--------- ----
/s/ Michael J. Drabb 2/15/00
- -------------------- -------
Michael J. Drabb
<PAGE> 2
POWER OF ATTORNEY
I, the undersigned director of the MainStay VP Series Fund, Inc. (the
"Fund"), hereby constitute Thomas English, Joseph McBrien, and Linda Reimer and
Robert Rock, and each of them singly, my true and lawful attorneys with full
power to them and each of them to sign for me, and in my name, registration
statements applicable to the Fund, and any and all amendments thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and the states.
Witness my hand on the date set forth below.
Signature Date
--------- ----
/s/ Robert Rock 3/2/00
- -------------------- ------
Robert Rock
<PAGE> 3
POWER OF ATTORNEY
I, the undersigned director of the MainStay VP Series Fund, Inc. (the
Fund"), hereby constitute Thomas English, Joseph McBrien, Linda Reimer and
Robert Rock each of them singly, my true and lawful attorneys with full power to
them and each of them to sign for me, and in my name, registration statements
applicable to the Fund, and any and all amendments thereto, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission and the states.
Witness my hand on the date set forth below.
Signature Date
/s/ Jill Feinberg 2/15/00
- -------------------- -------
Jill Feinberg
<PAGE> 4
POWER OF ATTORNEY
I, the undersigned director of the MainStay VP Series Fund, Inc. (the
Fund"), hereby constitute Thomas English, Joseph McBrien, and Linda Reimer and
Robert Rock, each of them singly, my true and lawful attorneys with full power
to them and each of them to sign for me, and in my name, registration
statements applicable to the Fund, and any and all amendments thereto, and to
file the same, with all exhibits thereto and other documents In connection
therewith, with the Securities and Exchange Commission and the states.
Witness my hand on the date set forth below
Signature Date
/s/ Daniel Herrick 2/28/00
- -------------------- -------
Daniel Herrick
<PAGE> 5
POWER OF ATTORNEY
I, the undersigned director of the MainStay VP Series Fund, Inc. (the
"Fund"), hereby constitute Thomas English, Joseph McBrien, Linda Reimer and
Robert Rock, and each of them singly, my true and lawful attorneys with full
power to them and each of them to sign for me, and in my name, registration
statements applicable to the Fund, and any and all amendments thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and the states.
Witness my hand on the date set forth below.
Signature Date
/s/ Richard M Kernan, Jr. 2/15/00
- ------------------------- -------
Richard M. Kernan, Jr.
<PAGE> 6
POWER OF ATTORNEY
I, the undersigned director of the MainStay VP Series Fund, Inc. (the
"Fund"), hereby constitute Thomas English, Joseph McBrien, Linda Reimer and
Robert Rock, and each of them singly, my true and lawful attorneys with full
power to them and each of them to sign for me, and in my name, registration
statements applicable to the Fund, and any and all amendments thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and the states.
Witness my hand on the date set forth below.
Signature Date
/s/ Anne F. Pollack 2/29/00
- -------------------- -------
Anne F. Pollack
<PAGE> 7
POWER OF ATTORNEY
I, the undersigned director of the MainStay VP Series Fund, Inc. (the
"Fund"), hereby constitute Thomas English, Joseph McBrien, Linda Reimer and
Robert Rock, and each of them singly, my true and lawful attorneys with full
power to them and each of them to sign for me, and in my name, registration
statements applicable to the Fund, and any and all amendments thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and the states.
Witness my hand on the date set forth below.
Signature Date
/s/ Roman L. Weill 2/15/00
- -------------------- -------
Roman L. Weill
<PAGE> 8
POWER OF ATTORNEY
I, the undersigned director of the MainStay VP Series Fund, Inc. (the
"Fund"), hereby constitute Thomas English, Joseph McBrien, Linda Reimer and
Robert Rock, and each of them singly, my true and lawful attorneys with full
power to them and each of them to sign for me, and in my name, registration
statements applicable to the Fund, and any and all amendments thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and the states.
Witness my hand on the date set forth below.
Signature Date
/s/ John Weisser 2/15/00
- -------------------- -------
John Weisser
<PAGE> 9
POWER OF ATTORNEY
I, the undersigned Treasurer of the MainStay VP Series Fund, Inc. (the
"Fund"), hereby constitute Thomas English, Joseph McBrien, Linda Reimer and
Robert Rock, and each of them singly, my true and lawful attorneys with full
power to them and each of them to sign for me, and in my name, registration
statements applicable to the Fund, and any and all amendments thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and the states.
Witness my hand on the date set forth below.
Signature Date
/s/ John A. Flanagan 3/14/00
- -------------------- -------
John A. Flanagan
