<PAGE> 1
As filed with the Securities and Exchange Commission on April 16, 1998
Registration No. 33-53342
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Form N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 7 [ X ]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 8 ( X )
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-I
(Exact Name of Registrant)
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
(Name of Depositor)
51 Madison Avenue, New York, New York 10010
(Address of Depositor's Principal Executive Office)
Depositor's Telephone Number: (212) 576-7000
Carol Yee, Esq.
New York Life Insurance and Annuity Corporation
51 Madison Avenue
New York, New York 10010
(Name and Address of Agent for Service)
Copy to:
Peter E. Panarites, Esq. Michael J. McLaughlin, Esq.
Freedman, Levy, Kroll & Simonds Senior Vice President
1050 Connecticut Avenue and General Counsel
Suite 825 New York Life Insurance Company
Washington, D.C. 20036 51 Madison Avenue
New York, New York 10010
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485.
[X] on May 1, 1998 pursuant to paragraph (b) of Rule 485.
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
[ ] on ___________ pursuant to paragraph (a)(1) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered:
Units of interest in a separate account under variable annuity contracts.
<PAGE> 2
CROSS REFERENCE SHEET
INFORMATION REQUIRED IN A PROSPECTUS
<TABLE>
<CAPTION>
Item of Form N-4 Prospectus Caption
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<S> <C>
1. Cover Page Cover Page
2. Definitions Definitions
3. Synopsis Fee Table
4. Condensed Financial Information Condensed Financial Information
5. General Description of Registrant, New York Life Insurance and Annuity
Depositor and Portfolio Companies Corporation; The Portfolios; The Separate
Accounts; Voting Rights
6. Deductions and Expenses Charges and Deductions; Fee Table; Federal
Tax Matters; Distributor of the Policies
7. General Description of Variable The Policies; Distributions Under the Policy;
Annuity Contracts Voting Rights; Charges and Deductions; The
Fixed Account
8. Annuity Period Income Payments
9. Death Benefit Distributions Under the Policy
10. Purchases and Contract Value Policy Application and Premium Payments;
Accumulation Period
11. Redemptions Surrenders and Withdrawals; Income Payments;
Cancellations
12. Taxes Federal Tax Matters
13. Legal Proceedings Statement of Additional Information - Legal
Proceedings
14. Table of Contents of the Statement of Table of Contents for the Statement of
Additional Information Additional Information
</TABLE>
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INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Statement of Additional
Item of Form N-4 Information Caption
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<S> <C>
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information & History Not Applicable
18. Services Safekeeping of Separate Account Assets
19. Purchase of Securities Being Offered Distributor of the Policies
20. Underwriters Distributor of the Policies
21. Calculation of Performance Data Investment Performance Calculations
22. Annuity Payments Valuation of Accumulation Units
23. Financial Statements Financial Statements
</TABLE>
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NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-I
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-II
PROSPECTUS DATED MAY 1, 1998
FOR THE
NEW YORK LIFE LIFESTAGES(SM) FLEXIBLE PREMIUM VARIABLE ANNUITY
(FORMERLY NAMED NYLIAC VARIABLE ANNUITY)
OFFERED BY
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A DELAWARE CORPORATION)
51 MADISON AVENUE, NEW YORK, NEW YORK 10010
This Prospectus describes individual flexible premium variable retirement
annuity policies offered by New York Life Insurance and Annuity Corporation
("NYLIAC"). The policies are primarily designed to assist individuals in their
retirement planning, and can be used with plans that do and plans that do not
qualify for special federal income tax treatment. Premium payments accumulate on
a tax-deferred basis and their value can be later distributed under a number of
different methods. The policies offer flexible premium payments, access to cash
value through partial withdrawals (although certain withdrawals may be subject
to a surrender charge and/or tax penalty), a choice of when income payments will
commence, and a guaranteed payment of premiums (or the policy's value, if
greater) to the beneficiary if the owner or annuitant dies before income
payments have commenced. The policies also offer a choice of premium allocation
alternatives, including a guaranteed interest option and the twenty-six separate
account variable investment divisions listed below.
<TABLE>
<S> <C>
-- MainStay VP Capital Appreciation
-- MainStay VP Cash Management
-- MainStay VP Convertible
-- MainStay VP Government
-- MainStay VP High Yield Corporate Bond
-- MainStay VP International Equity
-- MainStay VP Total Return
-- MainStay VP Value
-- MainStay VP Bond
-- MainStay VP Growth Equity
-- MainStay VP Indexed Equity
-- American Century Income & Growth*
-- Dreyfus Large Company Value*
-- Eagle Asset Management Growth Equity*
-- Lord Abbett Developing Growth*
-- Alger American Small Capitalization
-- Calvert Social Balanced
-- Fidelity VIP II Contrafund
-- Fidelity VIP Equity-Income
-- Janus Aspen Series Balanced
-- Janus Aspen Series Worldwide Growth
-- MFS Growth With Income Series*
-- MFS Research Series*
-- Morgan Stanley Emerging Markets Equity
-- T. Rowe Price Equity Income*
-- Van Eck Worldwide Hard Assets*
</TABLE>
*These investment divisions will be available to accept premium payments
beginning June 1, 1998.
We do not guarantee the investment performance of these investment divisions,
which involve varying degrees of risk.
This Prospectus provides information that a prospective investor should
know before investing. Please read it carefully and retain it for future
reference. This Prospectus is not valid unless attached to current prospectuses
for the MainStay VP Series Fund, Inc., the Alger American Fund, the Calvert
Variable Series, Inc., the Fidelity Variable Insurance Products Fund II, the
Fidelity Variable Insurance Products Fund, the Janus Aspen Series, the MFS
Variable Insurance Trust, the Morgan Stanley Universal Funds, Inc., the T. Rowe
Price Equity Series, Inc. and the Van Eck Worldwide Insurance Trust.
Registration statements relating to the policies and the separate accounts
have been filed with the Securities and Exchange Commission. A Statement of
Additional Information, dated May 1, 1998, is incorporated herein by reference.
The Statement of Additional Information is available free by writing NYLIAC at
the address above or by calling (800) 598-2019. The table of contents for the
Statement of Additional Information is included at the end of this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
DEFINITIONS............................ 3
FEE TABLE.............................. 6
QUESTIONS AND ANSWERS ABOUT NEW YORK
LIFE LIFESTAGES(SM) FLEXIBLE PREMIUM
VARIABLE ANNUITY..................... 11
FINANCIAL STATEMENTS................... 17
CONDENSED FINANCIAL INFORMATION........ 18
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION AND THE SEPARATE
ACCOUNTS............................. 20
New York Life Insurance and Annuity
Corporation....................... 20
The Separate Accounts................ 20
The Portfolios....................... 20
Additions, Deletions or Substitutions
of Investments.................... 22
Reinvestment......................... 22
THE POLICIES........................... 22
Purpose of Policies.................. 22
Types of Policies.................... 23
Policy Application and Premium
Payments.......................... 23
Issue Ages........................... 23
Transfers............................ 24
Procedures for Telephone Transfers... 24
Dollar Cost Averaging................ 24
Automatic Asset Reallocation......... 25
Interest Sweep....................... 25
Accumulation Period.................. 26
(a) Crediting of Premium
Payments.................... 26
(b) Valuation of Accumulation
Units....................... 26
Owner Inquiries...................... 26
CHARGES AND DEDUCTIONS................. 26
Surrender Charges.................... 26
Amount of Surrender Charge........... 27
Exceptions to Surrender Charges...... 27
Other Charges........................ 27
Group and Sponsored Arrangements..... 28
Taxes................................ 28
DISTRIBUTIONS UNDER THE POLICY......... 29
Surrenders and Withdrawals........... 29
(a) Surrenders.................... 29
(b) Partial Withdrawals........... 29
(c) Periodic Partial
Withdrawals................. 29
(d) Hardship Withdrawals.......... 30
Required Minimum Distribution
Option............................ 30
Cancellations........................ 30
Annuity Commencement Date............ 30
Death Before Annuity Commencement.... 30
Income Payments...................... 31
(a) Election of Income Payment
Options..................... 31
(b) Other Methods of Payment...... 31
(c) Proof of Survivorship......... 31
Delay of Payments.................... 32
Designation of Beneficiary........... 32
Restrictions Under Internal Revenue
Code Section 403(b)(11)........... 32
Loans................................ 32
Riders............................... 33
(a) Living Needs Benefit
Rider....................... 33
(b) Unemployment Benefit Rider.. 33
THE FIXED ACCOUNT...................... 33
(a) Interest Crediting............ 34
(b) Bail-Out...................... 34
(c) Transfers to Investment
Divisions................... 34
FEDERAL TAX MATTERS.................... 34
Introduction......................... 34
Taxation of Annuities in General..... 35
Qualified Plans...................... 36
(a) Section 403(b) Plans.......... 36
(b) Individual Retirement
Annuities................... 36
(c) Roth Individual Retirement
Annuities................... 36
(d) Deferred Compensation
Plans....................... 36
DISTRIBUTOR OF THE POLICIES............ 36
VOTING RIGHTS.......................... 37
TABLE OF CONTENTS FOR THE STATEMENT OF
ADDITIONAL INFORMATION............... 39
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NYLIAC DOES NOT AUTHORIZE ANY
INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS OR ANY ATTACHED SUPPLEMENT
THERETO OR IN ANY SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY NYLIAC.
2
<PAGE> 6
DEFINITIONS
ACCUMULATION PERIOD--The period before the Annuity Commencement Date and during
the lifetime of the Annuitant.
ACCUMULATION UNIT--An accounting unit used to calculate the Accumulation Value
prior to the Annuity Commencement Date. Each Investment Division of each
Separate Account has a distinct Accumulation Unit value.
ACCUMULATION VALUE--The Variable Accumulation Value, if any, plus the Fixed
Accumulation Value, if any, of an account for any Valuation Period.
AGE--The attained age on last birthday.
ALLOCATION ALTERNATIVES--The Investment Divisions of the applicable Separate
Account and the Fixed Account.
ANNUITANT--The person named in the application and whose life determines the
annuity payments.
ANNUITY COMMENCEMENT DATE--The date on which the first annuity payment under the
Policy is to be made.
BENEFICIARY--The person or entity having the right to receive the death benefit
set forth in the Policy and who is the "designated beneficiary" for purposes of
Section 72 of the Internal Revenue Code in the event of the Annuitant's or the
Owner's death.
BUSINESS DAY--Generally, any day on which NYLIAC is open and the New York Stock
Exchange is open for trading. We are closed on national holidays, Martin Luther
King, Jr. Day and the Friday after Thanksgiving. In addition, we may choose to
close on the day immediately preceding or following a national holiday. Our
Business Day ends at 4:00 p.m. Eastern Time or the closing of the New York Stock
Exchange, if earlier.
CORPORATION ("NYLIAC," "WE," "US," "OUR")--New York Life Insurance and Annuity
Corporation, which is a wholly-owned Delaware subsidiary of New York Life
Insurance Company.
ELIGIBLE PORTFOLIOS ("ASSET MANAGEMENT PORTFOLIOS")--The available mutual fund
Portfolios of the Funds. The MainStay VP Series Fund currently has fifteen
Portfolios available for investment by the Investment Divisions of the Separate
Accounts: the MainStay VP Capital Appreciation, MainStay VP Cash Management,
MainStay VP Convertible, MainStay VP Government, MainStay VP High Yield
Corporate Bond, MainStay VP International Equity, MainStay VP Total Return,
MainStay VP Value, MainStay VP Bond, MainStay VP Growth Equity, MainStay VP
Indexed Equity, MainStay VP American Century Income & Growth, MainStay VP
Dreyfus Large Company Value, MainStay VP Eagle Asset Management Growth Equity
and MainStay VP Lord Abbett Developing Growth Portfolios. The Alger American
Fund has one Portfolio available to the Separate Accounts: the Alger American
Small Capitalization Portfolio. The Calvert Variable Series has one Portfolio
available to the Separate Accounts: the Calvert Social Balanced Portfolio
("Calvert Social Balanced Portfolio"). The Fidelity Funds have two Portfolios
available to the Separate Accounts: the Contrafund Portfolio of the Fidelity
Variable Insurance Products Fund II ("Fidelity VIP II Contrafund Portfolio") and
the Equity-Income Portfolio of the Fidelity Variable Insurance Products Fund
("Fidelity VIP Equity-Income Portfolio"). The Janus Aspen Series has two
Portfolios available to the Separate Accounts: the Balanced Portfolio of the
Janus Aspen Series ("Janus Aspen Series Balanced Portfolio") and Worldwide
Growth Portfolio of the Janus Aspen Series ("Janus Aspen Series Worldwide Growth
Portfolio"). The MFS Variable Insurance Trust has two Portfolios available to
the Separate Accounts: the MFS Growth With Income Series of the MFS Trust ("MFS
Growth With Income Series") and the MFS Research Series of the MFS Trust ("MFS
Research Series"). The Morgan Stanley Fund has one Portfolio available to the
Separate Accounts: the Emerging Markets Equity Portfolio ("Morgan Stanley
Emerging Markets Equity Portfolio"). The T. Rowe Price Equity Series has one
Portfolio available to the Separate Accounts: the T. Rowe Price Equity Income
Portfolio ("T. Rowe Price Equity Income Portfolio"). The Van Eck Worldwide
Insurance Trust has one Portfolio available to the Separate Accounts: the Van
Eck Worldwide Hard Assets Portfolio ("Van Eck Worldwide Hard Assets Portfolio").
FIXED ACCOUNT--Assets in the Fixed Account are not part of the Separate Accounts
of NYLIAC. The Accumulation Value of the Fixed Account is supported by assets in
the General Account of the Corporation, which are subject to the claims of its
general creditors.
FIXED ACCUMULATION VALUE--The sum of premiums and transfers allocated to the
Fixed Account, plus interest credited, less amounts withdrawn.
FIXED INCOME PAYMENTS--Income Payments having a guaranteed amount.
3
<PAGE> 7
FUNDS (EACH, INDIVIDUALLY, A "FUND")--The MainStay VP Series Fund, Inc.
("MainStay VP Series Fund" and, formerly, "New York Life MFA Series Fund,
Inc."), the Alger American Fund ("Alger American Fund"), the Calvert Variable
Series, Inc., ("Calvert Variable Series"), the Fidelity Variable Insurance
Products Fund and the Fidelity Variable Insurance Products Fund II
(collectively, the "Fidelity Variable Insurance Products Funds" or the "Fidelity
Funds"), the Janus Aspen Series ("Janus Aspen Series"), the MFS Variable
Insurance Trust ("MFS Trust"), the Morgan Stanley Universal Funds, Inc. ("Morgan
Stanley Fund"), the T. Rowe Price Equity Series, Inc. ("T. Rowe Price Series")
and the Van Eck Worldwide Insurance Trust ("Van Eck Trust").
INCOME PAYMENTS--Periodic payments made by NYLIAC to the Payee.
INVESTMENT DIVISION ("DIVISION")--A division of each of the Separate Accounts.
Each Investment Division invests exclusively in shares of a specified Eligible
Portfolio.
ISSUE DATE--The date the Policy is executed.
NON-QUALIFIED POLICIES--Policies that do not qualify for special federal income
tax treatment.
OWNER ("YOU,""YOUR")--The person(s) or entity designated as the owner in the
Policy, or as subsequently changed, and upon whose death prior to the Annuity
Commencement Date benefits under the Policy may be paid. If NYLIAC issues a
jointly owned Policy, ownership rights and privileges under the Policy must be
exercised jointly and benefits under the Policy will be paid upon the death of
any joint owner.
PARTIAL WITHDRAWAL--Any part of the Accumulation Value paid to you, at your
request, in accordance with the terms of the Policy.
PAYEE--A recipient of payments under the Policy.
POLICY--The flexible premium multi-funded variable retirement annuity policy
offered by NYLIAC that is described in this Prospectus.
POLICY ANNIVERSARY--An anniversary of the Policy Date displayed on the Policy
Data Page.
POLICY DATA PAGE--Page 2 of the Policy, containing the Policy specifications.
POLICY DATE--Is shown on the Policy Data Page. Policy Years and Anniversaries
are measured from this date.
POLICY YEAR--A year commencing on the Policy Date. Subsequent Policy Years begin
on each Policy Anniversary, unless otherwise indicated.
PREMIUM PAYMENT--An amount paid to the Corporation as consideration for the
benefits provided by the Policy.
PURCHASE DATE--The Business Day on which a Premium Payment is received by us and
credited under the Policy.
QUALIFIED POLICIES--Policies issued under plans that qualify for special federal
income tax treatment.
REQUIRED MINIMUM DISTRIBUTION--An amount the Internal Revenue Code requires the
Owners of certain Qualified Policies to withdraw each year generally commencing
with the year the Owner reaches age 70 1/2. For IRA and TSA Owners, NYLIAC
offers a Required Minimum Distribution Option. Under this Option, NYLIAC will
calculate and process the annual Required Minimum Distribution for such Policies
beginning at age 70 1/2 when required by the Code.
SEPARATE ACCOUNT--Separate Account I or Separate Account II, collectively the
Separate Accounts.
SEPARATE ACCOUNT I--NYLIAC Variable Annuity Separate Account-I, a segregated
asset account established by NYLIAC to receive and invest Premium Payments paid
under Non-Qualified Policies.
SEPARATE ACCOUNT II--NYLIAC Variable Annuity Separate Account-II, a segregated
asset account established by NYLIAC to receive and invest Premium Payments paid
under Qualified Policies.
4
<PAGE> 8
SURRENDER CHARGE--An amount charged by the Corporation each time a Partial
Withdrawal of the Accumulation Value is made, or when the Policy is surrendered
for its Accumulation Value, during the first nine (9) years of the Policy.
VALUATION PERIOD--The period, consisting of one or more days, from one Valuation
Time to the next succeeding Valuation Time.
VALUATION TIME--The time of the close of the New York Stock Exchange (currently
4:00 p.m. Eastern Time) on any day on which the New York Stock Exchange is open
for trading.
VARIABLE ACCUMULATION VALUE--The sum of the products of the current Accumulation
Unit value(s) for each of the Investment Divisions multiplied by the number of
Accumulation Units held in the respective Investment Divisions.
5
<PAGE> 9
FEE TABLE
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD MAINSTAY VP
CAPITAL CASH MAINSTAY VP MAINSTAY VP CORPORATE INTERNATIONAL
APPRECIATION MANAGEMENT CONVERTIBLE GOVERNMENT BOND EQUITY
------------ ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales
Load(a)
(as a % of amount withdrawn).... 7% 7% 7% 7% 7% 7%
Transfer Fee...................... NYLIAC reserves the right to charge up to $30 for each transfer in excess of 12
transfers per Policy Year.
Annual Policy Fee................. Lesser of $30 per Policy or 2% of the Accumulation Value, for Policies with less
than $10,000 of Accumulation Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value)
Mortality and Expense Risk Fees... 1.20% 1.20% 1.20% 1.20% 1.20% 1.20%
Administration Fees............... 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%
Total Separate Account Annual
Expenses...................... 1.30% 1.30% 1.30% 1.30% 1.30% 1.30%
FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT
(as a % of average net assets for
the fiscal year ended December
31, 1997)(k)
Advisory Fees..................... 0.36% 0.25% 0.36% 0.30% 0.30% 0.60%
Administration Fees............... 0.20% 0.20% 0.20% 0.20% 0.20% 0.20%
Other Expenses.................... 0.09% 0.09% 0.17%(b) 0.13% 0.09% 0.17%(b)
Total Fund Annual Expenses...... 0.65% 0.54% 0.73%(b) 0.63% 0.59% 0.97%(b)
<CAPTION>
MAINSTAY VP
TOTAL MAINSTAY VP MAINSTAY VP
RETURN VALUE BOND
----------- ----------- -----------
<S> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales
Load(a)
(as a % of amount withdrawn).... 7% 7% 7%
Transfer Fee...................... NYLIAC reserves the right to charge up to $30 for each transfer in excess of 12
transfers per Policy Year.
Annual Policy Fee................. Lesser of $30 per Policy or 2% of the Accumulation Value, for Policies with less
than $10,000 of Accumulation Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value)
Mortality and Expense Risk Fees... 1.20% 1.20% 1.20%
Administration Fees............... 0.10% 0.10% 0.10%
Total Separate Account Annual
Expenses...................... 1.30% 1.30% 1.30%
FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT
(as a % of average net assets for
the fiscal year ended December
31, 1997)(k)
Advisory Fees..................... 0.32% 0.36% 0.25%
Administration Fees............... 0.20% 0.20% 0.20%
Other Expenses.................... 0.08% 0.09% 0.05%
Total Fund Annual Expenses...... 0.60% 0.65% 0.50%
</TABLE>
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(a) The contingent deferred sales load percentage declines from 7% in the first
three policy years to 1% in the ninth policy year with no charge
thereafter. Certain exceptions may apply. See "Surrender Charges" on page
26.
(b) These numbers reflect an expense reimbursement agreement effective through
December 31, 1998 limiting "Other Expenses" to 0.17% annually. In the
absence of the expense reimbursement arrangement, the "Total Fund Annual
Expenses" for the year ending December 31, 1997 would have been 0.78% and
1.25% for the MainStay VP Convertible and the MainStay VP International
Equity Portfolios, respectively.
6
<PAGE> 10
FEE TABLE--(CONTINUED)
<TABLE>
<CAPTION>
EAGLE
MAINSTAY MAINSTAY AMERICAN DREYFUS ASSET LORD ALGER
VP VP CENTURY LARGE MANAGEMENT ABBETT AMERICAN
GROWTH INDEXED INCOME & COMPANY GROWTH DEVELOPING SMALL
EQUITY EQUITY GROWTH(g) VALUE(g) EQUITY(g) GROWTH(g) CAPITALIZATION
-------- -------- --------- -------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred
Sales Load(a)
(as a % of amount withdrawn)....... 7% 7% 7% 7% 7% 7% 7%
Transfer Fee......................... NYLIAC reserves the right to charge up to $30 for each transfer in excess of 12
transfers per Policy Year.
Annual Policy Fee.................... Lesser of $30 per Policy or 2% of the Accumulation Value, for Policies with less than
$10,000 of Accumulation Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value)
Mortality and Expense Risk Fees...... 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20%
Administration Fees.................. 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%
Total Separate Account Annual
Expenses........................... 1.30% 1.30% 1.30% 1.30% 1.30% 1.30% 1.30%
FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT
(as a % of average net assets for the
fiscal year ended December
31,1997)(k)
Advisory Fees........................ 0.25% 0.10% 0.50% 0.60% 0.50% 0.60% 0.85%
Administration Fees.................. 0.20% 0.20% 0.20% 0.20% 0.20% 0.20% --
Other Expenses....................... 0.05% 0.09% 0.15%(j) 0.15%(j) 0.15%(j) 0.15%(j) 0.04%
Total Fund Annual Expenses........... 0.50% 0.39% 0.85% 0.95% 0.85% 0.95% 0.89%
<CAPTION>
CALVERT FIDELITY
SOCIAL VIP II
BALANCED CONTRAFUND
-------- ----------
<S> <C> <C>
OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred
Sales Load(a)
(as a % of amount withdrawn)....... 7% 7%
Transfer Fee......................... NYLIAC reserves the right to charge up to $30 for each transfer in excess of 12
transfers per Policy Year.
Annual Policy Fee.................... Lesser of $30 per Policy or 2% of the Accumulation Value, for Policies with less than
$10,000 of Accumulation Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value)
Mortality and Expense Risk Fees...... 1.20% 1.20%
Administration Fees.................. 0.10% 0.10%
Total Separate Account Annual
Expenses........................... 1.30% 1.30%
FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT
(as a % of average net assets for the
fiscal year ended December
31,1997)(k)
Advisory Fees........................ 0.69%(c) 0.60%
Administration Fees.................. -- --
Other Expenses....................... 0.12%(c) 0.11%
Total Fund Annual Expenses........... 0.81%(c) 0.71%(d)
</TABLE>
- ------------
(c) These fees are based on expenses for the fiscal year 1997, and have been
restated to reflect an increase in transfer agency expenses of 0.01%
expected to be incurred in 1998. The "Advisory Fee" includes a performance
adjustment which could cause the fee to be as high as 0.85% or as low as
0.55%, depending on performance. "Other Expenses" reflect an indirect fee
of 0.03%. "Total Fund Annual Expenses" after reductions for fees paid
indirectly would have been 0.78%.
(d) A portion of the brokerage commissions that these Portfolios pay was used
to reduce the Portfolios' annual expenses. In addition, these Portfolios
have entered into arrangements with their custodian and transfer agent
whereby interest earned on uninvested cash balances was used to reduce
custodian and transfer agent expenses. Including these reductions, the
"Total Fund Annual Expenses" would have been 0.68% for the Fidelity VIP II
Contrafund Portfolio and 0.57% for the Fidelity VIP Equity-Income
Portfolio.
7
<PAGE> 11
FEE TABLE--(CONTINUED)
<TABLE>
<CAPTION>
JANUS MFS MORGAN
FIDELITY JANUS ASPEN GROWTH STANLEY T. ROWE VAN ECK
VIP ASPEN SERIES WITH MFS EMERGING PRICE WORLDWIDE
EQUITY- SERIES WORLDWIDE INCOME RESEARCH MARKETS EQUITY HARD
INCOME BALANCED GROWTH SERIES(g) SERIES(g) EQUITY INCOME(g) ASSETS(g)
-------- -------- --------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred
Sales Load(a)
(as a % of amount withdrawn)....... 7% 7% 7% 7% 7% 7% 7% 7%
Transfer Fee......................... NYLIAC reserves the right to charge up to $30 for each transfer in excess of 12 transfers
per Policy Year.
Annual Policy Fee.................... Lesser of $30 per Policy or 2% of the Accumulation Value, for Policies with less than
$10,000 of Accumulation Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value)
Mortality and Expense Risk Fees...... 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20%
Administration Fees.................. 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%
Total Separate Account Annual
Expenses........................... 1.30% 1.30% 1.30% 1.30% 1.30% 1.30% 1.30% 1.30%
FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT
(as a % of average net assets for the
fiscal year ended December
31,1997)(k)
Advisory Fees........................ 0.50% 0.76% 0.66% 0.75% 0.75% -- 0.85%(h) 1.00%
Administration Fees.................. -- -- -- -- -- 0.25% -- --
Other Expenses....................... 0.08% 0.07% 0.08% 0.25% 0.13% 1.50% -- 0.17%(i)
Total Fund Annual Expenses........... 0.58%(d) 0.83%(e) 0.74%(e) 1.00% 0.88% 1.75%(f) 0.85% 1.17%
</TABLE>
- ------------
(e) A reduced "Advisory Fee" schedule was put into effect on July 1, 1997. The
"Advisory Fee" reflects the new rate applied to net assets as of December
31, 1997. "Other Expenses" are based on gross expenses of the Fund shares
before expense offset arrangements for the fiscal year ended December 31,
1997. Janus Capital Corporation ("JCC") has agreed to reduce the "Advisory
Fee" for each Portfolio to the extent that such fee exceeds the effective
rate of the Janus retail fund corresponding to such Portfolio. JCC may
terminate this fee reduction at any time upon 90 days' notice to the Board
of Trustees of the Janus Aspen Series. Other waivers, if applicable, are
first applied against the "Advisory Fee" and then against "Other Expenses."
Absent such waivers or reductions, "Advisory Fees," "Other Expenses" and
"Total Fund Annual Expenses" for the fiscal year ended December 31, 1997
would have been: 0.77%, 0.06% and 0.83%, respectively, for the Janus Aspen
Series Balanced Portfolio and 0.72%, 0.09% and 0.81%, respectively, for the
Janus Aspen Series Worldwide Growth Portfolio.
(f) "Morgan Stanley Asset Management Inc. has agreed to a reduction in its
"Advisory Fees" and to reimburse the Portfolio for "Other Expenses" if
such fees would cause the "Total Fund Annual Expenses" to exceed 1.75% of
average daily net assets. This fee reduction agreement may be terminated
by Morgan Stanley Asset Management Inc. at any time without notice. Absent
such reductions, it is estimated that "Advisory Fees", "Other Expenses"
and "Total Fund Annual Expenses" would be 1.25%, 2.62% and 4.12%,
respectively.
(g) As of the date of this Prospectus, the sale of Policies offering these
Investment Divisions had not begun. These Investment Divisions will be
available to accept Premium Payments beginning June 1, 1998. The Fund
Annual Expenses are based on estimated amounts for the current fiscal year.
(h) The "Advisory Fees" include the ordinary expenses of operating the Fund.
(i) "Other Expenses" are net of soft dollar credit. Without such credit,
"Other Expenses" would have been 0.18% and "Total Fund Annual Expenses"
would have been 1.18%.
(j) These numbers reflect an expense reimbursement agreement effective through
December 31, 1999 limiting "Other Expenses" to 0.15% annually.
(k) The fees and charges were provided by the Fund or its agents, which are
based on 1997 expenses and may reflect estimated changes.
8
<PAGE> 12
The purpose of this Table is to assist the Owner in understanding the
various costs and expenses that an Owner will bear directly and indirectly. The
Table reflects charges and expenses of the Separate Accounts as well as the
Funds; charges and expenses may be higher or lower in future years. For more
information on the charges described in this Table see Charges and Deductions at
page 26 and the Fund Prospectuses which accompany this Prospectus. NYLIAC may,
where premium taxes are imposed by state law, deduct premium taxes on surrender
of the Policy or on the Annuity Commencement Date.
EXAMPLES(1)
An Owner would pay the following expense on a $1,000 investment in one of
the Investment Divisions listed, assuming a 5% annual return on assets:
1. If you surrender your Policy at the end of the applicable time
period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
MainStay VP Capital Appreciation......................... $88.74 $142.23 $178.08 $271.19
MainStay VP Cash Management.............................. $87.69 $139.08 $172.71 $259.89
MainStay VP Convertible.................................. $89.51 $144.52 $181.95 $279.33
MainStay VP Government................................... $88.55 $141.66 $177.10 $269.14
MainStay VP High Yield Corporate Bond.................... $88.16 $140.51 $175.15 $265.05
MainStay VP International Equity......................... $91.80 $151.37 $193.53 $303.36
MainStay VP Total Return................................. $88.27 $140.81 $175.65 $266.08
MainStay VP Value........................................ $88.74 $142.23 $178.08 $271.19
MainStay VP Bond......................................... $87.30 $137.94 $170.77 $255.77
MainStay VP Growth Equity................................ $87.30 $137.94 $170.77 $255.77
MainStay VP Indexed Equity............................... $86.25 $134.77 $165.38 $244.31
American Century Income & Growth......................... $90.65 $147.95 -- --
Dreyfus Large Company Value.............................. $91.61 $150.80 -- --
Eagle Asset Management Growth Equity..................... $90.65 $147.95 -- --
Lord Abbett Developing Growth............................ $91.61 $150.80 -- --
Alger American Small Capitalization...................... $91.04 $149.09 $189.69 $295.41
Calvert Social Balanced.................................. $90.27 $146.81 $185.83 $287.40
Fidelity VIP II Contrafund............................... $89.31 $143.95 $180.99 $277.30
Fidelity VIP Equity-Income............................... $88.07 $140.22 $174.67 $264.01
Janus Aspen Series Balanced.............................. $90.46 $147.38 $186.81 $289.43
Janus Aspen Series Worldwide Growth...................... $89.60 $144.81 $182.45 $280.35
MFS Growth With Income Series............................ $92.09 $152.23 -- --
MFS Research Series...................................... $90.94 $148.81 -- --
Morgan Stanley Emerging Markets Equity................... $99.26 $173.39 $230.35 $377.64
T. Rowe Price Equity Income.............................. $90.65 $147.95 -- --
Van Eck Worldwide Hard Assets............................ $93.72 $157.05 -- --
</TABLE>
2. If you annuitize your Policy at the end of the applicable time
period:
<TABLE>
<S> <C> <C> <C> <C>
MainStay VP Capital Appreciation......................... $88.74 $ 74.21 $126.94 $271.19
MainStay VP Cash Management.............................. $87.69 $ 70.83 $121.30 $259.89
MainStay VP Convertible.................................. $89.51 $ 76.66 $131.02 $279.33
MainStay VP Government................................... $88.55 $ 73.60 $125.92 $269.14
MainStay VP High Yield Corporate Bond.................... $88.16 $ 72.37 $123.86 $265.05
MainStay VP International Equity......................... $91.80 $ 83.99 $143.21 $303.36
</TABLE>
- ------------
(1) For purposes of calculating these Examples, the annual policy administration
fee has been expressed as an annual percentage of assets based on the
average size of Policies having an Accumulation Value of less than $10,000
on December 31, 1997. This calculation method reasonably reflects annual
policy fees applicable to Policies having an Accumulation Value of less than
$10,000, but does not reflect that no annual policy fees are applicable to
Policies having an Accumulation Value of $10,000 or greater. This means that
the fees would be slightly less if your Policy has an Accumulation Value of
$10,000 or greater on the Policy Anniversary or date of surrender.
9
<PAGE> 13
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
MainStay VP Total Return................................. $88.27 $ 72.69 $124.39 $266.08
MainStay VP Value........................................ $88.74 $ 74.21 $126.94 $271.19
MainStay VP Bond......................................... $87.30 $ 69.61 $119.25 $255.77
MainStay VP Growth Equity................................ $87.30 $ 69.61 $119.25 $255.77
MainStay VP Indexed Equity............................... $86.25 $ 66.22 $113.58 $244.31
American Century Income & Growth......................... $90.65 $ 80.33 -- --
Dreyfus Large Company Value.............................. $91.61 $ 83.39 -- --
Eagle Asset Management Growth Equity..................... $90.65 $ 80.33 -- --
Lord Abbett Developing Growth............................ $91.61 $ 83.39 -- --
Alger American Small Capitalization...................... $91.04 $ 81.55 $139.16 $295.41
Calvert Social Balanced.................................. $90.27 $ 79.11 $135.10 $287.40
Fidelity VIP II Contrafund............................... $89.31 $ 76.05 $130.01 $277.30
Fidelity VIP Equity-Income............................... $88.07 $ 72.06 $123.35 $264.01
Janus Aspen Series Balanced.............................. $90.46 $ 79.73 $136.13 $289.43
Janus Aspen Series Worldwide Growth...................... $89.60 $ 76.97 $131.55 $280.35
MFS Growth With Income Series............................ $92.09 $ 84.91 -- --
MFS Research Series...................................... $90.94 $ 81.25 -- --
Morgan Stanley Emerging Markets Equity................... $99.26 $107.57 $181.95 $377.64
T. Rowe Price Equity Income.............................. $90.65 $ 80.33 -- --
Van Eck Worldwide Hard Assets............................ $93.72 $ 90.08 -- --
</TABLE>
3. If you do not surrender your Policy:
<TABLE>
<S> <C> <C> <C> <C>
MainStay VP Capital Appreciation......................... $24.11 $ 74.21 $126.94 $271.19
MainStay VP Cash Management.............................. $22.98 $ 70.83 $121.30 $259.89
MainStay VP Convertible.................................. $24.93 $ 76.66 $131.02 $279.33
MainStay VP Government................................... $23.90 $ 73.60 $125.92 $269.14
MainStay VP High Yield Corporate Bond.................... $23.49 $ 72.37 $123.86 $265.05
MainStay VP International Equity......................... $27.38 $ 83.99 $143.21 $303.36
MainStay VP Total Return................................. $23.60 $ 72.69 $124.39 $266.08
MainStay VP Value........................................ $24.11 $ 74.21 $126.94 $271.19
MainStay VP Bond......................................... $22.58 $ 69.61 $119.25 $255.77
MainStay VP Growth Equity................................ $22.58 $ 69.61 $119.25 $255.77
MainStay VP Indexed Equity............................... $21.45 $ 66.22 $113.58 $244.31
American Century Income & Growth......................... $26.15 $ 80.33 -- --
Dreyfus Large Company Value.............................. $27.17 $ 83.39 -- --
Eagle Asset Management Growth Equity..................... $26.15 $ 80.33 -- --
Lord Abbett Developing Growth............................ $27.17 $ 83.39 -- --
Alger American Small Capitalization...................... $26.56 $ 81.55 $139.16 $295.41
Calvert Social Balanced.................................. $25.74 $ 79.11 $135.10 $287.40
Fidelity VIP II Contrafund............................... $24.72 $ 76.05 $130.01 $277.30
Fidelity VIP Equity-Income............................... $23.39 $ 72.06 $123.35 $264.01
Janus Aspen Series Balanced.............................. $25.94 $ 79.73 $136.13 $289.43
Janus Aspen Series Worldwide Growth...................... $25.03 $ 76.97 $131.55 $280.35
MFS Growth With Income Series............................ $27.69 $ 84.91 -- --
MFS Research Series...................................... $26.46 $ 81.25 -- --
Morgan Stanley Emerging Markets Equity................... $35.33 $107.57 $181.95 $377.64
T. Rowe Price Equity Income.............................. $26.15 $ 80.33 -- --
Van Eck Worldwide Hard Assets............................ $29.42 $ 90.08 -- --
</TABLE>
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
PERFORMANCE OR EXPENSES AND THE ACTUAL EXPENSES PAID OR PERFORMANCE ACHIEVED MAY
BE GREATER OR LESS THAN THOSE SHOWN.
10
<PAGE> 14
QUESTIONS AND ANSWERS ABOUT NEW YORK LIFE
LIFESTAGES(SM) FLEXIBLE PREMIUM VARIABLE ANNUITY
NOTE: THE FOLLOWING SECTION CONTAINS BRIEF QUESTIONS AND ANSWERS ABOUT NEW
YORK LIFE LIFESTAGES(SM) FLEXIBLE PREMIUM VARIABLE ANNUITY. REFERENCE SHOULD BE
MADE TO THE BODY OF THIS PROSPECTUS FOR MORE DETAILED INFORMATION.
1. WHAT IS NEW YORK LIFE LIFESTAGES(SM) FLEXIBLE PREMIUM VARIABLE ANNUITY
New York LifeStages(SM) Flexible Premium Variable Annuity is the name of
the variable retirement annuity policies offered by NYLIAC. Premium Payments may
be allocated to one or more of the Investment Divisions of each of the Separate
Accounts or to the Fixed Account. The Separate Accounts in turn invest in shares
of the Eligible Portfolios of the Funds. The Accumulation Value will vary in
amount according to the investment results of the Investment Divisions selected
and the interest credited on the Fixed Accumulation Value.
2. WHAT ARE THE AVAILABLE ALLOCATION ALTERNATIVES?
As selected by the Owner, Premium Payments are allocated to one or more of
the following Allocation Alternatives:
(a) SEPARATE ACCOUNTS
Separate Account I is used for Non-Qualified Policies, and Separate
Account II is used for Qualified Policies. Each of the Separate Accounts
consists of twenty-six Investment Divisions.
The Investment Divisions of the Separate Accounts invest
exclusively in shares of the Funds, each an open-end management
investment company. The MainStay VP Series Fund has fifteen Eligible
Portfolios available for investment through the Investment Divisions of
the Separate Accounts: the MainStay VP Capital Appreciation Portfolio,
the MainStay VP Cash Management Portfolio, the MainStay VP Convertible
Portfolio, the MainStay VP Government Portfolio, the MainStay VP High
Yield Corporate Bond Portfolio, the MainStay VP International Equity
Portfolio, the MainStay VP Total Return Portfolio, the MainStay VP Value
Portfolio, the MainStay VP Bond Portfolio, the MainStay VP Growth Equity
Portfolio, the MainStay VP Indexed Equity Portfolio, the MainStay VP
American Century Income & Growth Portfolio, the MainStay VP Dreyfus
Large Company Value Portfolio, the MainStay VP Eagle Asset Management
Growth Equity Portfolio and the Mainstay VP Lord Abbett Developing
Growth Portfolio. The Alger American Fund has one Eligible Portfolio
available through the Investment Divisions of the Separate Accounts: the
Alger American Small Capitalization Portfolio. The Calvert Variable
Series has one Eligible Portfolio available through the Investment
Divisions of the Separate Accounts: the Calvert Social Balanced
Portfolio. The Fidelity Funds have two Eligible Portfolios available to
the Separate Accounts: the Fidelity VIP II Contrafund and Fidelity VIP
Equity-Income Portfolios. The Janus Aspen Series has two Eligible
Portfolios available to the Separate Accounts: the Janus Aspen Series
Balanced and Janus Aspen Series Worldwide Growth Portfolios. The MFS
Trust has two Eligible Portfolios available to the Separate Accounts:
the MFS Growth With Income Series and MFS Research Series. The Morgan
Stanley Fund has one Eligible Portfolio available to the Separate
Accounts: the Morgan Stanley Emerging Markets Equity Portfolio. The T.
Rowe Price Series has one Eligible Portfolio to the Separate Accounts:
the T. Rowe Price Equity Income Portfolio. The Van Eck Trust has one
Eligible Portfolio available to the Separate Accounts: the Van Eck
Worldwide Hard Assets Portfolio. Each Investment Division of the
Separate Accounts will invest exclusively in the corresponding Eligible
Portfolio.
(b) FIXED ACCOUNT
Premium Payments or portions of Premium Payments allocated to the
Fixed Account will reflect a fixed interest rate. (See "The Fixed
Account" at page 33.)
3. CAN AMOUNTS BE TRANSFERRED AMONG THE ALLOCATION ALTERNATIVES?
Prior to 30 days before the Annuity Commencement Date, transfers of the
value of Accumulation Units in one Investment Division to another Investment
Division within the applicable Separate Account, or to the Fixed Account, are
permitted.
The minimum amount which may be transferred generally is $500, unless we
agree otherwise. Unlimited transfers are permitted each Policy Year, although
NYLIAC reserves the right to charge up to $30 per transfer for each transfer
after the first twelve in a given Policy Year. (See "Transfers" at page 24.)
11
<PAGE> 15
For transfers made from the Fixed Account to the Investment Divisions, see
"The Fixed Account" at page 33. In addition, Owners can request transfers
through the Automatic Asset Reallocation, Dollar Cost Averaging or Interest
Sweep options described at pages 24 and 25 of this Prospectus.
4. WHAT ARE THE CHARGES OR DEDUCTIONS?
During the Accumulation Period for the Policies, a charge for Policy
administration expenses will be made once each year on the Policy Anniversary or
upon Policy surrender if on that date the Accumulation Value does not equal or
exceed $10,000. This charge will be the lesser of $30 or 2% of the Accumulation
Value at the end of the Policy Year or on the date of surrender. All Policies
are subject to a daily charge for policy administration expenses equal, on an
annual basis, to .10% of the daily net asset value of the applicable Separate
Account. (See "Other Charges" at page 27.)
All Policies are subject to a daily charge for certain mortality and
expense risks assumed by NYLIAC. This charge is equal, on an annual basis, to
1.20% of the daily net asset value of the applicable Separate Account. (See
"Other Charges" at page 27.)
Although there is no deduction from Premium Payments for sales charges, a
Surrender Charge (sometimes referred to as a contingent deferred sales charge)
may be imposed on certain Partial Withdrawals or surrenders of the Policies.
This charge is imposed, as a percentage of the amount withdrawn, during the
first nine years after the Policy is issued; the applicable percentage declines
from 7% in the first three Policy Years to 1% in the ninth Policy Year, with no
charge thereafter. For all Policies, the Surrender Charge will only be applied
to any amounts withdrawn in any Policy Year which, when aggregated with any
other withdrawals during such Policy Year, exceed 10% of the Accumulation Value
at the time of surrender. For Policies with accumulated Premium Payments of
$100,000 or more, the greater of 10% of the Policy's Accumulation Value or the
Accumulation Value of the Policy less the accumulated Premium Payments can be
withdrawn in any Policy Year without charge. (See "Surrender Charges" at page 26
and "Exceptions to Surrender Charges" at page 27.)
Finally, the value of the shares of each Fund reflects advisory fees,
administration fees and other expenses deducted from the assets of each Fund.
(See the Fund prospectuses which are attached to this Prospectus.)
5. WHAT ARE THE MINIMUM INITIAL AND MAXIMUM ADDITIONAL PREMIUM PAYMENTS?
Unless we permit otherwise, the minimum initial Premium Payment for
Qualified Policies is as follows: (a) $50 per month or a $2,000 single premium
for tax-sheltered annuities; (b) $1,200 initial Premium Payment plus
pre-authorized monthly deductions of $65 per month, or pre-authorized monthly
deductions of $165 per month or a $2,000 single premium for IRAs; (c) $50 per
month for Deferred Compensation plans; and (d) $600 initial Premium Payment, or
$50 per month if part of a pre-authorized billing arrangement, for Simplified
Employee Pension plans. For Non-Qualified Policies, the minimum initial Premium
Payment is a $5,000 single premium or a $2,500 deposit plus $50 per month as
either a pre-authorized monthly deduction or as part of a pre-authorized monthly
billing arrangement. Premium Payments on any policy (of at least $50 each or
such lower amount as we may permit) can be made at any interval or by any method
we make available. The available methods of payment are direct payments to
NYLIAC, and pre-authorized monthly deductions from bank, credit union or similar
accounts and public or private employee payroll deductions. The maximum
aggregate amount of Premium Payments is $1,000,000, without our prior approval.
For Policies issued for delivery in New York from August 1995 to August
1997, the following minimum initial and maximum additional Premium Payment
requirements apply:
For Non-Qualified Policies, the minimum single Premium Payment is $2,500
plus $50 per month as either a pre-authorized monthly deduction or as part
of a pre-authorized monthly billing arrangement. The maximum total dollar
amount of Premium Payments in any Policy Year may not exceed $4,999.99.
For Tax-Sheltered Annuity (TSA) Policies, Section 457 Deferred Compensation
Plan Policies, Simplified Employee Pension (SEP) Plan Policies and any
other Qualified Policies, Premium Payments may only be made through a
pre-authorized billing arrangement. The maximum dollar amount of scheduled
Premium Payments may not exceed the applicable annual Plan Limit as
specified in the Internal Revenue Code.
For TSA Transfer Premium Payments made to an existing TSA Policy, the
maximum dollar amount of Transfer Premium Payments in the first Policy Year
may not exceed $1,999.99. For any additional TSA Transfer Premium Payments
made in the second or subsequent Policy Years, the maximum total dollar
amount of annual Transfer Premium Payments may not exceed $4,999.99.
12
<PAGE> 16
For Individual Retirement Annuity (IRA) Policies, the minimum Premium
Payment is $1,200 initial and $100 scheduled under a pre-authorized monthly
deduction arrangement, or $165 scheduled under a pre-authorized monthly
deduction arrangement, or $2,000 lump sum. For any additional Premium
Payments made in the second or subsequent Policy Years, the maximum total
dollar amount of annual Premium Payments may not exceed $4,999.99.
Premium Payments under Qualified Policies may not be more than the amount
permitted by law for the plan indicated in the application for the Policy. We
reserve the right to limit the dollar amount of any Premium Payment.
6. HOW ARE PREMIUM PAYMENTS ALLOCATED AMONG THE ALLOCATION ALTERNATIVES?
Initial Premium Payments are held in the MainStay VP Cash Management
Investment Division for 15 days after the Policy Issue Date and are then
allocated to the Investment Divisions of the Separate Accounts and to the Fixed
Account as selected by you. You may allocate each Premium Payment in up to 18
Investment Divisions plus the Fixed Account. (See "Automatic Asset Reallocation"
at page 25.) Moreover, you may raise or lower the percentages of the Premium
Payment (which must be in whole number percentages) allocated to each Allocation
Alternative at the time you make a Premium Payment. However, any change to your
allocations may not result in the Accumulation Value being allocated to more
than 18 Investment Divisions plus the Fixed Account. The minimum amount which
may be allocated to any one Allocation Alternative is $25, or such lower amount
as we may permit. We reserve the right to limit the amount of a Premium Payment
that may be allocated to any one Allocation Alternative and the number of
Investment Divisions to which your Accumulation Value may be allocated.
7. WHAT HAPPENS IF PREMIUM PAYMENTS ARE NOT MADE?
In the event that no Premium Payment is received for two or more years in a
row and both (a) the total Premium Payments for the Policy, less any Partial
Withdrawals and any Surrender Charges, and (b) the Accumulation Value, are less
than $2,000, we reserve the right, subject to any applicable state insurance law
or regulation, to terminate the Policy by paying you the Accumulation Value in
one sum. We will notify you of our intention to exercise this right and give you
90 days to make a Premium Payment. Unless the Policy is terminated, it can be
continued until the Annuity Commencement Date.
8. CAN MONEY BE WITHDRAWN FROM THE POLICY PRIOR TO THE ANNUITY COMMENCEMENT
DATE?
Yes, withdrawals ($500 minimum, unless we agree otherwise or as part of a
Periodic Partial Withdrawal or a Required Minimum Distribution) may be made. We
will pay you all or part of the Accumulation Value when we receive your written
request before the Annuity Commencement Date and while the Annuitant is living.
However, a withdrawal or surrender may be subject to a Surrender Charge if the
Policy is surrendered during the first nine years after it is issued, as
explained under Question 4 at page 12, may be a taxable transaction, and may be
subject to a 10% penalty tax if the Owner is under age 59 1/2. (See
"Distributions Under the Policy" at page 29 and "Federal Tax Matters" at page
34.)
9. HOW WILL INCOME PAYMENTS BE DETERMINED ON THE ANNUITY COMMENCEMENT DATE?
Income Payments under Qualified and Non-Qualified Policies will be on a
fixed basis. We do not currently offer a variable income payment option.
Payments under the Life Income Payment Option will always be in the same
specified amount and will be paid over the life of the Annuitant with a
guarantee of 10 years of payments, even if the Annuitant dies sooner. (See
"Income Payments" at page 31.)
10. WHAT IS A LIFE INCOME PAYMENT OPTION?
A retirement annuity provides periodic payments for the life of an
Annuitant (or an Annuitant and another person, the "Joint Annuitant") with a
guaranteed number of Income Payments or for an ascertainable sum. Income
Payments which remain the same throughout the payment period are referred to in
this Prospectus as "Fixed Income Payments". Fixed Income Payments will always be
the same specified amount. (See "Income Payments" at page 31.)
11. WHAT HAPPENS IF THE OWNER OR ANNUITANT DIES BEFORE THE ANNUITY
COMMENCEMENT DATE?
In the event the Owner or Annuitant dies before the Annuity Commencement
Date, we will pay the Beneficiary named in the Policy an amount equal to the
greater of (a) the Accumulation Value, less any outstanding loan balance under
the Policy, or (b) the sum of all Premium Payments made less any outstanding
loan balance, less any Partial Withdrawals and Surrender Charges previously
imposed. However, if the Beneficiary is the spouse of
13
<PAGE> 17
the Annuitant or Owner, see Question 12 below. (Also see "Death Before Annuity
Commencement" at page 30 and "Federal Tax Matters" at page 34.)
12. WHAT HAPPENS IF YOUR SPOUSE IS THE BENEFICIARY?
If your spouse is the Beneficiary and you die before the Annuity
Commencement Date, the Policy may, if the Policy is a Non-Qualified Policy, an
IRA, TSA or SEP, be continued with your spouse as the new Owner and, if you are
also the Annuitant, your spouse will be the new Annuitant. If you are not the
Annuitant and the Annuitant dies, you may continue the Policy with you as the
new Annuitant if you are the Annuitant's spouse and the Beneficiary. If you or
your spouse chooses to continue the Policy, no death benefit proceeds will be
paid as a consequence of your death, or the Annuitant's death.
13. CAN THE POLICY BE RETURNED AFTER IT IS DELIVERED?
The Policy contains a provision which permits cancellation by returning it
to us, or to the registered representative through whom it was purchased, within
10 days of delivery of the Policy or such longer period as required under state
law. The Owner will then receive from us the greater of (i) the initial Premium
Payment; or (ii) the Accumulation Value on the date the Policy is received by
us, without any deduction for Premium Taxes or a Surrender Charge.
14. WHAT ABOUT VOTING RIGHTS?
You may instruct NYLIAC how to vote shares of the Funds in which you have a
voting interest through the Separate Account. (See "Voting Rights" at page 37.)
15. HOW WILL INVESTMENT PERFORMANCE OF THE SEPARATE ACCOUNTS BE CALCULATED?
YIELDS. The yield of the MainStay VP Cash Management Investment Division
refers to the annualized income generated by an investment in that Investment
Division over a specified seven-day period. The yield is calculated by assuming
that the income generated for that seven-day period is generated each seven-day
period over a 52-week period and is shown as a percentage of the investment. The
effective yield is calculated similarly but, when annualized, the income earned
by an investment in that Investment Division is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment. For the seven-day period ending
December 31, 1997, the MainStay VP Cash Management Investment Division's yields
for Separate Account-I and Separate Account-II were both 4.36%, and the
effective yields were both 4.45%.
The yield of the MainStay VP Government, MainStay VP High Yield Corporate
Bond or MainStay VP Bond Investment Divisions refers to the annualized income
generated by an investment in that Investment Division over a specified
thirty-day period. The yield is calculated by assuming that the income generated
by the investment during that thirty-day period is generated each thirty-day
period over a 12-month period and is shown as a percentage of the investment.
For the 30-day period ended December 31, 1997, the annualized yields for the
MainStay VP Government, MainStay VP High Yield Corporate Bond and MainStay VP
Bond Investment Divisions were 4.08%, 6.25% and 4.60% for Separate Account-I,
respectively, and 4.08%, 6.25% and 4.60% for Separate Account-II, respectively.
The yield calculations do not reflect the effect of any Surrender Charge
that may be applicable to a particular Policy. To the extent that the Surrender
Charge is applicable to a particular Policy, the yield of that Policy will be
reduced. Past performance is no indication of future performance. For additional
information regarding the yields described above, please refer to the Statement
of Additional Information.
TOTAL RETURN CALCULATIONS. The following tables below present performance
data for the MainStay VP Capital Appreciation, MainStay VP Cash Management,
MainStay VP Convertible, MainStay VP Government, MainStay VP High Yield
Corporate Bond, MainStay VP International Equity, MainStay VP Total Return,
MainStay VP Value, MainStay VP Bond, MainStay VP Growth Equity, MainStay VP
Indexed Equity, Alger American Small Capitalization, Calvert Social Balanced,
Fidelity VIP II Contrafund, Fidelity VIP Equity-Income, Janus Aspen Series
Balanced, Janus Aspen Series Worldwide Growth and Morgan Stanley Emerging
Markets Equity Investment Divisions of Separate Account-I for periods ending
December 31, 1997. The average annual total return (if surrendered) data reflect
all Separate Account and Fund annual expenses shown in the Fee Table which
appears on pages 6, 7 and 8. The average annual total return (if surrendered)
figures assume that the Policy is surrendered at the end of the periods shown.
Thus, they reflect the deduction of any applicable surrender charges. The annual
policy fee, which is charged to Policies with less than $10,000 of Accumulation
14
<PAGE> 18
Value, is not reflected. This fee, if applicable, would effectively reduce the
rates of return credited to a particular Policy. The average annual total return
(no surrenders) does not reflect the deduction of any surrender charges. All
rates of return presented include the reinvestment of investment income,
including interest and dividends.
Certain Portfolios existed prior to the date that they were added to an
Investment Division of the Separate Accounts. For periods prior to May 1, 1995,
when the MainStay VP Bond, MainStay VP Growth Equity and Calvert Social Balanced
Investment Divisions commenced operations, and for periods prior to October 1,
1996, when the Alger American Small Capitalization, Fidelity VIP II Contrafund,
Fidelity VIP Equity-Income, Janus Aspen Series Balanced and Janus Aspen Series
Worldwide Growth Investment Divisions commenced operations, the performance of
the Investment Divisions was derived from the performance of the corresponding
Portfolios, modified to reflect the Separate Account and Fund annual expenses as
if the Policy had been available during the periods shown. There is no
performance information for the American Century Income & Growth, Dreyfus Large
Company Value, Eagle Asset Management Growth Equity, Lord Abbett Developing
Growth, MFS Growth With Income Series, MFS Research Series, T. Rowe Price Equity
Income and Van Eck Worldwide Hard Assets Investment Divisions because they were
not available under the Policies as of the date of this Prospectus. The results
shown are not an estimate or guarantee of future investment performance for the
Investment Divisions in the tables below.
SEPARATE ACCOUNT-I
AVERAGE ANNUAL TOTAL RETURN
(FOR PERIODS ENDED DECEMBER 31, 1997)
-------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD MAINSTAY VP
CAPITAL CASH MAINSTAY VP MAINSTAY VP CORPORATE INTERNATIONAL
INVESTMENT DIVISIONS: APPRECIATION MANAGEMENT CONVERTIBLE GOVERNMENT BOND EQUITY
- --------------------------------------------- ------------ ---------- ----------- ----------- ------------ -------------
PORTFOLIO INCEPTION DATE: 1/29/93 1/29/93 10/1/96 1/29/93 5/1/95 5/1/95
- ---------------------------------------------
INVESTMENT DIVISION INCEPTION DATE: 1/29/93 1/29/93 10/1/96 1/29/93 5/1/95 5/1/95
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN (IF SURRENDERED)
1 Year....................................... 14.21% -2.65% 6.76% 1.26% 4.54% -2.73%
3 Year....................................... 22.31% 1.70% -- 5.60% -- --
5 Year....................................... -- -- -- -- -- --
10 Year...................................... -- -- -- -- -- --
Since Portfolio Inception.................... 15.90% 2.19% 8.04% 4.02% 11.02% 4.23%
Since Investment Division Inception.......... 15.90% 2.19% 8.04% 4.02% 11.02% 4.23%
AVERAGE ANNUAL TOTAL RETURN (NO SURRENDERS)
1 Year....................................... 21.89% 3.89% 13.93% 8.06% 11.57% 3.81%
3 Year....................................... 24.18% 3.93% -- 7.92% -- --
5 Year....................................... -- -- -- -- -- --
10 Year...................................... -- -- -- -- -- --
Since Portfolio Inception.................... 16.85% 3.15% 13.80% 4.99% 13.64% 6.80%
Since Investment Division Inception.......... 16.85% 3.15% 13.80% 4.99% 13.64% 6.80%
</TABLE>
15
<PAGE> 19
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP CALVERT
TOTAL MAINSTAY VP MAINSTAY VP GROWTH INDEXED SOCIAL
INVESTMENT DIVISIONS: RETURN VALUE BOND EQUITY EQUITY BALANCED
--------------------- ----------- ----------- ----------- ----------- ----------- --------
PORTFOLIO INCEPTION DATE: 1/29/93 5/1/95 1/23/84 1/23/84 1/29/93 9/2/86
- ----------------------------------------------
INVESTMENT DIVISION INCEPTION DATE: 1/29/93 5/1/95 12/15/93 12/15/93 1/29/93 5/1/95
- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN (IF SURRENDERED)
1 Year........................................ 8.95% 13.66% 1.42% 17.24% 22.86% 11.07%
3 Year........................................ 15.59% -- 6.06% 23.32% 27.16% 17.03%
5 Year........................................ -- -- 4.98% 16.15% -- 10.42%
10 Year....................................... -- -- 7.46% 15.12% -- 10.96%
Since Portfolio Inception..................... 11.06% 19.53% 8.66% 12.43% 17.35% 9.77%
Since Investment Division Inception........... 11.06% 19.53% 3.64% 17.58% 17.35% 14.65%
AVERAGE ANNUAL TOTAL RETURN (NO SURRENDERS)
1 Year........................................ 16.27% 21.31% 8.24% 25.12% 31.12% 18.54%
3 Year........................................ 17.67% -- 8.38% 25.15% 28.89% 19.07%
5 Year........................................ -- -- 5.95% 17.07% -- 11.44%
10 Year....................................... -- -- 7.46% 15.12% -- 10.96%
Since Portfolio Inception..................... 12.11% 21.85% 8.66% 12.43% 18.26% 9.77%
Since Investment Division Inception........... 12.11% 21.85% 4.83% 18.85% 18.26% 17.14%
</TABLE>
<TABLE>
<CAPTION>
MORGAN
JANUS ASPEN STANLEY
ALGER AMERICAN JANUS ASPEN SERIES EMERGING
SMALL FIDELITY VIP II FIDELITY VIP SERIES WORLDWIDE MARKETS
INVESTMENT DIVISIONS: CAPITALIZATION CONTRAFUND EQUITY INCOME BALANCED GROWTH EQUITY
--------------------- -------------- --------------- ------------- ----------- ----------- --------
PORTFOLIO INCEPTION DATE: 9/20/88 1/3/95 10/9/86 9/13/93 9/13/93 10/1/96
- ---------------------------------------
INVESTMENT DIVISION INCEPTION DATE: 10/1/96 10/1/96 10/1/96 10/1/96 10/1/96 10/1/96
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN (IF SURRENDERED)
1 Year................................. 3.03% 14.83% 18.50% 12.94% 12.99% -7.23%
3 Year................................. 15.11% -- 22.03% 17.39% 22.67% --
5 Year................................. 10.17% -- 17.74% -- -- --
10 Year................................ -- -- 15.22% -- -- --
Since Portfolio Inception.............. 17.67% 24.72% 13.03% 13.57% 20.26% -6.37%
Since Investment Division Inception.... -1.18% 16.89% 19.59% 11.43% 13.45% -6.37%
AVERAGE ANNUAL TOTAL RETURN (NO SURRENDERS)
1 Year................................. 9.96% 22.55% 26.46% 20.53% 20.58% -0.99%
3 Year................................. 17.21% -- 23.90% 19.41% 24.53% --
5 Year................................. 11.19% -- 18.61% -- -- --
10 Year................................ -- -- 15.22% -- -- --
Since Portfolio Inception.............. 17.67% 26.52% 13.03% 14.79% 21.32% -1.37%
Since Investment Division Inception.... 4.10% 23.14% 25.98% 17.39% 19.52% -1.37%
</TABLE>
For periods commencing on or after the dates when the respective Investment
Divisions commenced operations, the average annual total return (if surrendered)
figures may be referred to as "standardized" performance, prepared under the
method prescribed by the Securities and Exchange Commission when advertising
performance information. It is noted that all average annual total return (if
surrendered) figures have been prepared on the basis of this method, but are
considered "non-standardized" for periods prior to the dates on which the
respective Investment Divisions commenced operations. The average annual total
return (no surrender) figures are all considered "non-standardized." For
additional information regarding the total return calculations described above,
please refer to the Statement of Additional Information.
16. ARE POLICY LOANS AVAILABLE?
If you have purchased your Policy in connection with a tax-sheltered
annuity "TSA" (Section 403(b)) Plan, you may be able to borrow some of your
Accumulation Value subject to certain conditions. (See "Loans" at page 32.)
16
<PAGE> 20
17. HOW DO I CONTACT NYLIAC?
<TABLE>
<CAPTION>
GENERAL INQUIRIES AND WRITTEN REQUESTS PREMIUM PAYMENTS AND LOAN PAYMENTS
-------------------------------------- ----------------------------------
<S> <C> <C>
Regular NYLIAC Variable Product Services NYLIAC Variable Product Services
Mail Madison Square Station P.O. Box 19289
P.O. Box 922 Newark, NJ 07195-0289
New York, NY 10159
Express NYLIAC Variable Product Services NYLIAC Variable Product Services
Mail 51 Madison Avenue 51 Madison Avenue
Room 452 Room 452
New York, NY 10010 New York, NY 10010
Customer Service (800) 598-2019
and Unit Values
</TABLE>
FINANCIAL STATEMENTS
The audited financial statements of NYLIAC (including the auditor's report
thereon) for the fiscal years ended December 31, 1997, 1996 and 1995, and of the
Separate Accounts (including the auditor's report thereon) for the years ended
December 31, 1997 and 1996 are included in the Statement of Additional
Information.
17
<PAGE> 21
CONDENSED FINANCIAL INFORMATION
The following Accumulation Unit values and the number of Accumulation Units
outstanding for each Investment Division for each fiscal year ended December 31
presented below have been audited by Price Waterhouse LLP, independent
accountants, whose report on the related financial statements appears in the
Statement of Additional Information. Values and units shown are for full year
periods, except where indicated. This information should be read in conjunction
with the Separate Accounts' financial statements and notes thereto which appear
in the Statement of Additional Information.
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL APPRECIATION CASH MANAGEMENT
--------------------------------------------------- ------------------------------
1997 1996 1995 1994 1993(a) 1997 1996 1995
-------- -------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning
of period)........................ $17.66 $15.07 $11.24 $11.91 $10.00 $ 1.12 $ 1.08 $ 1.04
Accumulation Unit value (end of
period)........................... $21.53 $17.66 $15.07 $11.24 $11.91 $ 1.16 $ 1.12 $ 1.08
Number of units outstanding (in
000s) (end of period)............. 11,857 10,890 7,852 5,702 2,239 25,689 24,436 19,554
SEPARATE ACCOUNT II
Accumulation Unit value (beginning
of period)........................ $17.66 $15.07 $11.24 $11.91 $10.00 $ 1.12 $ 1.08 $ 1.04
Accumulation Unit value (end of
period)........................... $21.53 $17.66 $15.07 $11.24 $11.91 $ 1.16 $ 1.12 $ 1.08
Number of units outstanding (in
000s) (end of period)............. 10,312 8,675 5,852 3,787 1,402 27,559 20,142 15,539
<CAPTION>
MAINSTAY VP
CASH MANAGEMENT
------------------
1994 1993(a)
-------- -------
<S> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning
of period)........................ $ 1.01 $ 1.00
Accumulation Unit value (end of
period)........................... $ 1.04 $ 1.01
Number of units outstanding (in
000s) (end of period)............. 19,630 15,549
SEPARATE ACCOUNT II
Accumulation Unit value (beginning
of period)........................ $ 1.01 $ 1.00
Accumulation Unit value (end of
period)........................... $ 1.04 $ 1.01
Number of units outstanding (in
000s) (end of period)............. 15,647 10,677
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CONVERTIBLE GOVERNMENT
------------------ ---------------------------------------------------
1997 1996(d) 1997 1996 1995 1994 1993(a)
-------- ------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of period)..... $10.32 $10.00 $11.76 $11.65 $10.11 $10.44 $10.00
Accumulation Unit value (end of period)........... $11.76 $10.32 $12.71 $11.76 $11.65 $10.11 $10.44
Number of units outstanding (in 000s) (end of
period).......................................... 636 154 2,749 3,177 3,281 3,686 2,843
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of period)..... $10.29 $10.00 $11.76 $11.65 $10.11 $10.44 $10.00
Accumulation Unit value (end of period)........... $11.73 $10.29 $12.71 $11.76 $11.65 $10.11 $10.44
Number of units outstanding (in 000s) (end of
period).......................................... 452 74 1,904 2,122 2,020 2,351 1,623
<CAPTION>
MAINSTAY VP
HIGH YIELD
CORPORATE BOND
-----------------------------
1997 1996 1995(c)
-------- -------- -------
<S> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of period)..... $12.62 $10.91 $10.00
Accumulation Unit value (end of period)........... $14.08 $12.62 $10.91
Number of units outstanding (in 000s) (end of
period).......................................... 9,539 5,449 1,446
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of period)..... $12.60 $10.89 $10.00
Accumulation Unit value (end of period)........... $14.06 $12.60 $10.89
Number of units outstanding (in 000s) (end of
period).......................................... 5,215 2,841 778
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP
INTERNATIONAL MAINSTAY VP
EQUITY TOTAL RETURN
----------------------------- ------------------------------
1997 1996 1995(c) 1997 1996 1995
-------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of period)....... $11.48 $10.53 $10.00 $15.10 $13.65 $10.77
Accumulation Unit value (end of period)............. $11.92 $11.48 $10.53 $17.55 $15.10 $13.65
Number of units outstanding (in 000s) (end of
period)............................................ 751 674 165 9,720 9,369 7,579
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of period)....... $11.49 $10.53 $10.00 $15.10 $13.65 $10.77
Accumulation Unit value (end of period)............. $11.93 $11.49 $10.53 $17.55 $15.10 $13.65
Number of units outstanding (in 000s) (end of
period)............................................ 553 426 112 7,911 7,185 5,450
<CAPTION>
MAINSTAY VP MAINSTAY VP
TOTAL RETURN VALUE
------------------ -----------------------------
1994 1993(a) 1997 1996 1995(c)
-------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of period)....... $11.37 $10.00 $13.98 $11.50 $10.00
Accumulation Unit value (end of period)............. $10.77 $11.37 $16.96 $13.98 $11.50
Number of units outstanding (in 000s) (end of
period)............................................ 6,584 3,067 4,277 2,522 658
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of period)....... $11.37 $10.00 $14.02 $11.53 $10.00
Accumulation Unit value (end of period)............. $10.77 $11.37 $17.01 $14.02 $11.53
Number of units outstanding (in 000s) (end of
period)............................................ 4,441 1,805 3,186 1,754 435
</TABLE>
18
<PAGE> 22
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
BOND GROWTH EQUITY
--------------------------------------------------- ------------------------------
1997 1996 1995 1994 1993(b) 1997 1996 1995
-------- -------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period).................................. $11.18 $11.10 $ 9.51 $9.97 -- $16.07 $13.08 $10.26
Accumulation Unit value (end of period)... $12.10 $11.18 $11.10 $9.51 -- $20.11 $16.07 $13.08
Number of units outstanding (in 000s) (end
of period)............................... 2,249 2,080 1,733 961 -- 4,307 3,085 1,831
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period).................................. $11.18 $11.10 $ 9.51 $9.97 $10.00 $16.07 $13.08 $10.26
Accumulation Unit value (end of period)... $12.10 $11.18 $11.10 $9.51 9.97 $20.11 $16.07 $13.08
Number of units outstanding (in 000s) (end
of period)............................... 1,655 1,591 1,314 641 3 3,451 2,336 1,403
<CAPTION>
MAINSTAY VP
GROWTH EQUITY
------------------
1994 1993(b)
-------- -------
<S> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period).................................. $10.27 $10.00
Accumulation Unit value (end of period)... $10.26 $10.27
Number of units outstanding (in 000s) (end
of period)............................... 881 2
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period).................................. $10.27 $10.00
Accumulation Unit value (end of period)... $10.26 $10.27
Number of units outstanding (in 000s) (end
of period)............................... 514 3
</TABLE>
<TABLE>
<CAPTION>
ALGER AMERICAN CALVERT
MainStay VP SMALL SOCIAL
Indexed Equity CAPITALIZATION BALANCED
--------------------------------------------------- ------------------ --------
1997 1996 1995 1994 1993(a) 1997 1996(d) 1997
-------- -------- -------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period).................................. $17.41 $14.41 $10.66 $10.72 $10.00 $ 9.56 $10.00 $12.87
Accumulation Unit value (end of
period).................................. $22.83 $17.41 $14.41 $10.66 $10.72 $10.52 $ 9.56 $15.26
Number of units outstanding (in 000s) (end
of period)............................... 6,724 4,768 3,677 3,236 2,187 722 129 154
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period).................................. $17.41 $14.41 $10.66 $10.72 $10.00 $ 9.56 $10.00 $12.89
Accumulation Unit value (end of
period).................................. $22.83 $17.41 $14.41 $10.66 $10.72 $10.51 $ 9.56 $15.28
Number of units outstanding (in 000s) (end
of period)............................... 5,616 3,783 2,983 2,567 1,819 551 55 138
<CAPTION>
CALVERT
SOCIAL
BALANCED
------------------
1996 1995(c)
-------- -------
<S> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period).................................. $11.58 $10.00
Accumulation Unit value (end of
period).................................. $12.87 $11.58
Number of units outstanding (in 000s) (end
of period)............................... 69 24
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period).................................. $11.59 $10.00
Accumulation Unit value (end of
period).................................. $12.89 $11.59
Number of units outstanding (in 000s) (end
of period)............................... 61 12
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
FIDELITY JANUS ASPEN SERIES
VIP II FIDELITY VIP SERIES WORLDWIDE
CONTRAFUND EQUITY-INCOME BALANCED GROWTH
------------------ ------------------ ------------------ ------------------
1997 1996(d) 1997 1996(d) 1997 1996(d) 1997 1996(d)
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period).................................. $10.58 $10.00 $10.55 $10.00 $10.14 $10.00 $10.36 $10.00
Accumulation Unit value (end of
period).................................. $12.97 $10.58 $13.34 $10.55 $12.22 $10.14 $12.50 $10.36
Number of units outstanding (in 000s) (end
of period)............................... 1,844 240 1,138 77 802 94 2,632 256
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period).................................. $10.38 $10.00 $10.47 $10.00 $10.16 $10.00 $10.38 $10.00
Accumulation Unit value (end of
period).................................. $12.72 $10.38 $13.25 $10.47 $12.25 $10.16 $12.52 $10.38
Number of units outstanding (in 000s) (end
of period)............................... 1,542 91 788 51 600 39 2,159 100
<CAPTION>
MORGAN STANLEY
EMERGING
MARKETS EQUITY
------------------
1997 1996(d)
-------- -------
<S> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period).................................. $ 9.93 $10.00
Accumulation Unit value (end of
period).................................. $ 9.83 $ 9.93
Number of units outstanding (in 000s) (end
of period)............................... 452 78
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period).................................. $10.00 $10.00
Accumulation Unit value (end of
period).................................. $ 9.90 $10.00
Number of units outstanding (in 000s) (end
of period)............................... 391 26
</TABLE>
- ------------
(a) For the period January 29, 1993 (commencement of operations) through
December 31, 1993.
(b) For the period December 15, 1993 (commencement of operations) through
December 31, 1993.
(c) For the period May 1, 1995 (commencement of operations) through December
31, 1995.
(d) For the period October 1, 1996 (commencement of operations) through
December 31, 1996.
19
<PAGE> 23
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
AND THE SEPARATE ACCOUNTS
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
New York Life Insurance and Annuity Corporation is a stock life insurance
company incorporated in Delaware in 1980. NYLIAC is licensed to sell life,
accident and health insurance and annuities in the District of Columbia and all
states. In addition to the Policies described in this Prospectus, NYLIAC offers
other life insurance policies and annuities.
NYLIAC is a wholly-owned subsidiary of New York Life Insurance Company
("New York Life"), a mutual life insurance company doing business in New York
since 1845. NYLIAC held assets of $20.1 billion at the end of 1997. New York
Life has invested in NYLIAC, and will, in order to maintain capital and surplus
in accordance with state requirements, occasionally make additional
contributions to NYLIAC.
Year 2000 Readiness -- The computer systems we use to process all Policy
transactions and valuations need to be modified to accommodate the changeover to
Year 2000. These modifications are necessary for us to be able to continue to
administer the Policies in Year 2000 and later. As is the case with most systems
projects, risks and uncertainties exist, and a project could be delayed. We are,
however, working to make these systems modifications, and we expect that the
necessary changes will be completed on time and in a way that will result in no
disruption to our Policy servicing operations.
THE SEPARATE ACCOUNTS
Each of the Separate Accounts was established as of October 5, 1992,
pursuant to resolutions of the NYLIAC Board of Directors. The Separate Accounts
are registered as unit investment trusts with the Securities and Exchange
Commission under the Investment Company Act of 1940, but such registration does
not signify that the Securities and Exchange Commission supervises the
management, or the investment practices or policies, of the Separate Accounts.
Although the assets of each of the Separate Accounts belong to NYLIAC,
these assets are held separately from the other assets of NYLIAC, and are not
chargeable with liabilities incurred in any other business operations of NYLIAC
(except to the extent that assets in the Separate Accounts exceed the reserves
and other liabilities of that Separate Account). The income, capital gains and
capital losses incurred on the assets of the Separate Accounts are credited to
or are charged against the assets of those Accounts, without regard to the
income, capital gains or capital losses arising out of any other business NYLIAC
may conduct. Therefore, the investment performance of the Separate Accounts is
entirely independent of both the investment performance of NYLIAC's Fixed
Account and the performance of any other separate account.
Each of the Separate Accounts currently has twenty-six Investment Divisions
which invest Premium Payments solely in the corresponding Eligible Portfolios of
the relevant Fund. Additional Investment Divisions may be added at the
discretion of NYLIAC.
THE PORTFOLIOS
The assets of each Eligible Portfolio are separate from the others and each
such Portfolio has different investment objectives and policies. As a result,
each Eligible Portfolio operates as a separate investment fund and the
investment performance of one Portfolio has no effect on the investment
performance of any other Portfolio.
THERE IS NO ASSURANCE THAT ANY OF THE ELIGIBLE PORTFOLIOS WILL ATTAIN THEIR
RESPECTIVE STATED OBJECTIVES
The Funds' shares are also available to certain separate accounts funding
variable life insurance policies offered by NYLIAC. This is called "mixed
funding." Shares of the Alger American Fund, the Calvert Variable Series, the
Fidelity Funds, the Janus Aspen Series, the MFS Trust, the Morgan Stanley Fund,
the T. Rowe Price Series and the Van Eck Trust may also be available to separate
accounts of insurance companies unaffiliated with NYLIAC and, in certain
instances, to qualified plans. This is called "shared funding." Although we do
not anticipate any inherent difficulties arising from mixed and shared funding,
it is theoretically possible that, due to differences in tax treatment or other
considerations, the interests of owners of various contracts participating in
the Funds might at some time be in conflict. The Board of Directors/Trustees of
each Fund, each Fund's
20
<PAGE> 24
investment advisers, and NYLIAC are required to monitor events to identify any
material conflicts that arise from the use of the Funds for mixed and shared
funding. For more information about the risks of mixed and shared funding please
refer to the relevant Fund prospectus.
NYLIAC renders certain services to Owners of the Policies in connection
with the investment of Premium Payments in the Investment Divisions, which, in
turn, invest in the Eligible Portfolios. These services include, among others,
providing information about the Eligible Portfolios. We receive a service fee
from the investment advisers or other service providers of some of the Funds in
return for providing services of this type. Currently, NYLIAC receives service
fees at annual rates ranging from .10% to .21% of the aggregate net asset value
of the shares of some of the Eligible Portfolios held by the Investment
Divisions.
The Eligible Portfolios of the relevant Funds, along with their investment
advisers, are listed in the following table:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FUND INVESTMENT ADVISERS ELIGIBLE PORTFOLIOS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MainStay VP Series Fund, Inc. MacKay-Shields Financial MainStay VP Capital Appreciation;
Corporation MainStay VP Cash Management;
MainStay VP Convertible;
MainStay VP Government;
MainStay VP High Yield Corporate Bond;
MainStay VP International Equity;
MainStay VP Total Return;
MainStay VP Value
- ----------------------------------------------------------------------------------------------------------------------------
MainStay VP Series Fund, Inc. Monitor Capital Advisors, Inc. MainStay VP Indexed Equity
- ----------------------------------------------------------------------------------------------------------------------------
MainStay VP Series Fund, Inc. New York Life Insurance Company MainStay VP Bond;
MainStay VP Growth Equity;
MainStay VP American Century Income &
Growth(1);
MainStay VP Dreyfus Large Company Value(1);
MainStay VP Eagle Asset Management Growth
Equity(1);
MainStay VP Lord Abbett Developing Growth(1)
- ----------------------------------------------------------------------------------------------------------------------------
The Alger American Fund Fred Alger Management, Inc. Alger American Small Capitalization
- ----------------------------------------------------------------------------------------------------------------------------
Calvert Variable Series, Inc. Calvert Asset Management Company Calvert Social Balanced
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Variable Insurance Fidelity Management and Research Fidelity VIP II Contrafund
Products Fund II Company
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Variable Insurance Fidelity Management and Research Fidelity VIP Equity-Income
Products Fund Company
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series Janus Capital Corporation Janus Aspen Series Balanced;
Janus Aspen Series Worldwide Growth
- ----------------------------------------------------------------------------------------------------------------------------
MFS Variable Insurance Trust Massachusetts Financial Services MFS Growth with Income Series(1);
Company MFS Research Series(1)
- ----------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, Morgan Stanley Asset Management Morgan Stanley Emerging Markets Equity
Inc. Inc.
- ----------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Series, Inc. T. Rowe Price Associates, Inc. T. Rowe Price Equity Income(1)
- ----------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust Van Eck Associates Corporation Van Eck Worldwide Hard Assets(1)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Available under the Policies beginning June 1, 1998.
Please refer to the attached prospectuses of the respective Funds for a complete
description of the Funds, the investment advisers and the Portfolios. The Funds'
prospectuses should be read carefully before any decision is made concerning the
allocation of Premium Payments to an Investment Division corresponding to a
particular Eligible Portfolio.
21
<PAGE> 25
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
NYLIAC retains the right, subject to any applicable law, to make additions
to, deletions from, or substitutions for, the Eligible Portfolio shares held by
any Investment Division. NYLIAC reserves the right to eliminate the shares of
any of the Eligible Portfolios and to substitute shares of another portfolio of
a Fund, or of another registered open-end management investment company, if the
shares of the Eligible Portfolios are no longer available for investment, or if
in NYLIAC's judgment, investment in any Eligible Portfolio would become
inappropriate in view of the purposes of the Separate Accounts. To the extent
required by the Investment Company Act of 1940, substitutions of shares
attributable to an Owner's interest in an Investment Division will not be made
until the Owner has been notified of the change. Nothing contained herein shall
prevent the Separate Accounts from purchasing other securities for other series
or classes of policies, or from effecting a conversion between series or classes
of policies on the basis of requests made by Owners.
Each of the Separate Accounts currently has twenty-six Investment Divisions
which invest Premium Payments solely in the corresponding Eligible Portfolios of
the Funds. NYLIAC may also establish additional Investment Divisions for each of
the Separate Accounts. Each additional Investment Division will purchase shares
in a new portfolio of a Fund or in another mutual fund. New Investment Divisions
may be established when, in the sole discretion of NYLIAC, marketing, tax,
investment or other conditions so warrant. Any new Investment Divisions will be
made available to existing Owners on a basis to be determined by NYLIAC. NYLIAC
may also eliminate one or more Investment Divisions, if, in its sole discretion,
marketing, tax, investment or other conditions warrant.
In the event of any such substitution or change, NYLIAC may, by appropriate
endorsement, make such changes in the Policies as may be necessary or
appropriate to reflect such substitution or change. If deemed to be in the best
interests of persons having voting rights, the Separate Accounts may be operated
as management companies under the Investment Company Act of 1940, may be
deregistered under such Act in the event such registration is no longer
required, or may be combined with one or more other separate accounts.
REINVESTMENT
All dividends and capital gain distributions from Eligible Portfolios are
automatically reinvested in shares of the distributing Portfolio at their net
asset values on the payable date.
THE POLICIES
PURPOSE OF POLICIES
The Policies described in this Prospectus are designed to establish
retirement benefits for two types of purchasers.
The first type of purchaser is one who is eligible to participate in, and
purchases a Policy for use with, any one of the following: (1) annuity plans
qualified under Section 403(a) of the Internal Revenue Code (the "Code"); (2)
annuity purchase plans adopted by certain private tax exempt organizations and
certain state supported educational institutions under certain circumstances
under Section 403(b) of the Code; (3) individual retirement annuities ("IRAs")
meeting the relevant requirements of Sections 408 or 408A of the Code; or (4)
deferred compensation plans with respect to service for state and local
governments (and certain other entities) under Section 457 of the Code. Policies
purchased by these individuals for use with these plans are referred to as
"Qualified Policies." (See "Federal Tax Matters" at page 34.)
The second type of purchaser is one, other than those described above, who
purchases a Policy to provide supplemental retirement income. Policies purchased
by these individuals are referred to as "Non-Qualified Policies."
The Accumulation Value will fluctuate based on the investment experience of
the Investment Divisions selected by the Owner and the interest credited on the
Fixed Accumulation Value. NYLIAC does not guarantee the investment performance
of the Separate Accounts or of the Funds, and the Owner bears the entire
investment risk with respect to amounts allocated to the Investment Divisions of
the Separate Accounts. There is no assurance that the investment objectives will
be achieved. Accordingly, amounts allocated to the Investment Divisions of the
Separate Accounts are subject to the risks inherent in the securities markets
and, specifically, to price fluctuations of the shares of the Funds.
22
<PAGE> 26
TYPES OF POLICIES
The Policies are only offered on the lives of individual Annuitants. Only
Flexible Premium Policies are available (for which additional Premium Payments
can be made). They may be either Qualified Policies or Non-Qualified Policies.
POLICY APPLICATION AND PREMIUM PAYMENTS
Individuals wishing to purchase a Policy must complete an application and
provide an initial Premium Payment which will be sent to NYLIAC. For salary
reduction plans, the application is sent to NYLIAC and the Policy becomes part
of a pre-authorized billing arrangement. If the application can be accepted in
the form received, the initial Premium Payment will be credited within two
Business Days after receipt. If the initial Premium Payment cannot be credited
within five Business Days after receipt by NYLIAC because the application is
incomplete, NYLIAC will contact the applicant and explain the reason for the
delay and will offer to refund the initial Premium Payment immediately, unless
the applicant consents to NYLIAC's retaining the initial Premium Payment and
crediting it as soon as the necessary requirements are fulfilled. Acceptance is
subject to NYLIAC's rules and NYLIAC reserves the right to reject any
application or initial Premium Payment. NYLIAC's rules generally require that
only one Owner be named. However, there are exceptions to these rules, such as
when the application is related to certain exchanges of in-force annuities in
accordance with Section 1035 of the Internal Revenue Code.
Initial Premium Payments allocated to the Fixed Account or to Investment
Divisions of the Separate Accounts will be allocated to the MainStay VP Cash
Management Investment Division until 15 days after the Policy Issue Date.
Thereafter, Premium Payments will be allocated in accordance with the Owner's
instructions. Subsequent Premium Payments are credited to the Policy at the
close of the Business Day on which they are received at NYLIAC. Premium Payments
may be allocated in up to 18 Investment Divisions plus the Fixed Account.
Moreover, the percentages of the Premium Payments (which must be in whole number
percentages) allocated to each Allocation Alternative may be increased or
decreased at the time a Premium Payment is made. However, any change to the
Policy's allocations may not result in the Accumulation Value being allocated to
more than 18 Investment Divisions plus the Fixed Account.
Unless we provide otherwise, the minimum initial Premium Payment for
Qualified Policies is as follows: (a) $50 per month or a $2,000 single premium
for tax-sheltered annuities; (b) $1,200 initial Premium Payment plus
pre-authorized monthly deductions of $100 per month, or pre-authorized monthly
deductions of $165 per month or a $2,000 single premium for IRAs; (c) $50 per
month for Deferred Compensation plans; and (d) $600 initial Premium Payment, or
$50 per month if part of a pre-authorized billing arrangement, for Simplified
Employee Pension plans. For Non-Qualified Policies, the minimum initial Premium
Payment is a $5,000 single premium or a $2,500 Premium Payment plus $50 per
month as either pre-authorized monthly deduction or as part of a pre-authorized
monthly billing arrangement. Premium Payments (of at least $50 each or such
lower amount as we may permit) may be made at any interval, or by any method
NYLIAC makes available. The currently available methods of payment are direct
payments to NYLIAC, and pre-authorized monthly deductions from bank, credit
union or similar accounts and public or private employee payroll deductions.
Premium Payments may be made at any time before the Annuity Commencement Date
and while the Annuitant and the Owner are living provided that the aggregate
amount of Premium Payments may not be more than $1,000,000, without our prior
approval.
For Qualified Policies, the Premium Payments made in any Policy Year may
not be more than the amount permitted by the plan or by law for the plan
indicated in the application for the Policy. NYLIAC reserves the right to limit
the dollar amount of any Premium Payment. NYLIAC also reserves the right in its
discretion to accept Premium Payments less than $50, provided such discretion is
exercised in a non-discriminatory manner.
If no Premium Payments are made under a Policy for two or more Policy Years
in a row, and both (a) the total Premium Payments made, less any Partial
Withdrawals and any Surrender Charges, and (b) the Accumulation Value, are less
than $2,000, then NYLIAC may, in its sole discretion, subject to any applicable
state insurance law or regulation, cancel the Policy and pay the Owner the
Accumulation Value. (See "Cancellations" at page 30.)
ISSUE AGES
Non-Qualified Policies can be issued if both the Owner and the Annuitant
are not older than age 85 (age 78 in Pennsylvania and age 80 in New York) and we
will accept additional Premium Payments until either the Owner or the Annuitant
reaches the age of 85, unless we agree otherwise. For IRA, TSA and SEP plans,
the Owner and Annuitant must be the same. Qualified Policies can be issued if
the Owner/Annuitant is between the ages of
23
<PAGE> 27
18-80 and we will accept additional Premium Payments until the Owner/Annuitant
reaches the age of 80, unless otherwise limited by the terms of a particular
plan or unless we agree otherwise.
TRANSFERS
Prior to 30 days before the Annuity Commencement Date, amounts may be
transferred between Investment Divisions of the same Separate Account or to the
Fixed Account. Except in connection with transfers made pursuant to the Dollar
Cost Averaging, Automatic Asset Reallocation or Interest Sweep options, the
minimum value of Accumulation Units that may be transferred from one Investment
Division to other Investment Divisions within the Separate Accounts, or to the
Fixed Account, is the lesser of (i) $500 or (ii) the total value of the
Accumulation Units in the Investment Division. The amount(s) transferred to
other Investment Divisions must be a minimum of $25 for each Investment
Division. Except in connection with the Dollar Cost Averaging, Automatic Asset
Reallocation or Interest Sweep options, if, after an ordered transfer, the value
of the remaining Accumulation Units in an Investment Division or Fixed Account
would be less than $500, the entire value will be transferred unless NYLIAC in
its discretion determines otherwise. There is no charge for the first twelve
transfers in any one Policy Year. NYLIAC reserves the right to charge up to $30
for each transfer in excess of twelve, subject to any applicable state insurance
law requirements. Any transfer made in connection with the Dollar Cost
Averaging, Automatic Asset Reallocation and Interest Sweep options will not
count as a transfer toward the twelve transfer limit. In addition to transfers
made in connection with the Interest Sweep option, transfers may be made from
the Fixed Account to the Investment Divisions in certain other situations. (See
"The Fixed Account" at page 33.)
Transfer requests must be in writing on a form approved by NYLIAC or by
telephone in accordance with established procedures. (See "Procedures for
Telephone Transfers" below.) Transfers from Investment Divisions will be made
based on the Accumulation Unit values at the end of the Valuation Period during
which NYLIAC receives the telephone transfer request, or at the end of the
Business Day if NYLIAC receives a written request. (See "Delay of Payments" at
page 32.)
PROCEDURES FOR TELEPHONE TRANSFERS
Owners may effect telephone transfers in two ways. All Owners may directly
contact a service representative. Owners may also request access to an
electronic service known as a Voice Response Unit (VRU). The VRU permits the
unassisted transfer of monies among the Investment Divisions and/or the Fixed
Account and change of the allocation of future Premium Payments. All Owners
intending to conduct telephone transfers through the VRU will be asked to
complete a Telephone Authorization Form.
NYLIAC will undertake reasonable procedures to confirm that instructions
communicated by telephone are genuine. Before a service representative accepts
any request, the caller will be asked for his or her social security number and
address. All calls will be recorded. A Personal Identification Number (PIN) will
be assigned to all Owners who request VRU access. The PIN is selected by and
known only to the Owner. Proper entry of the PIN is required before any
transactions will be allowed through the VRU. Furthermore, all transactions
performed over the VRU, as well as with a service representative, will be
confirmed by NYLIAC through a written letter. NYLIAC is not liable for any loss,
cost or expense for action on telephone instructions which are believed to be
genuine in accordance with these procedures. Telephone transfer requests must be
received no later than 4:00 p.m. Eastern Time in order to assure same-day
processing. Requests received after 4:00 p.m. will be processed at the end of
the next Valuation Period.
DOLLAR COST AVERAGING
This program permits systematic investing to be made in equal installments
over various market cycles to help reduce risk. The Owner may specify, prior to
the Annuity Commencement Date, a specific dollar amount to be transferred from
any Investment Divisions to any combination of Investment Divisions and/or the
Fixed Account. The Owner will specify the Investment Divisions to transfer money
from, the Investment Divisions and/or Fixed Account to transfer money to, the
amounts to be transferred, the date on which transfers will be made, subject to
our rules, and the frequency of the transfers, either monthly, quarterly,
semi-annually or annually. This process is called Dollar Cost Averaging. Dollar
Cost Averaging transfers are not available from the Fixed Account, but these
transfers may be made into the Fixed Account. A minimum of $100 must change
Investment Divisions (for each Investment Division and the Fixed Account) with
each transfer. The minimum Accumulation Value required to elect this option is
$5,000. The minimum transfer amount and minimum Accumulation Value may be
reduced at NYLIAC's discretion.
24
<PAGE> 28
The main objective of Dollar Cost Averaging is to achieve an average cost
per share that is lower than the average price per share in a fluctuating
market. Since the same dollar amount is transferred to an Investment Division
with each transfer, more units are purchased in an Investment Division if the
value per unit is low and fewer units are purchased if the value per unit is
high. Therefore, a lower than average cost per unit will be achieved if prices
fluctuate over the long term. Similarly, for each transfer out of an Investment
Division, more units are sold in an Investment Division if the value per unit is
low and fewer units are sold if the value per unit is high. Dollar Cost
Averaging does not assure a profit or protect against a loss in declining
markets.
NYLIAC will make all Dollar Cost Averaging transfers on the day of each
calendar month specified by the Owner, or on the next Business Day. The Owner
may specify any day of the month with the exception of the 29th, 30th or 31st of
a month. In order to process a Dollar Cost Averaging transfer, NYLIAC must have
received a request in writing no later than one week prior to the date Dollar
Cost Averaging transfers are to commence.
The Dollar Cost Averaging option may be canceled at any time by the Owner
in a written request or by NYLIAC if the Accumulation Value is less than $5,000,
or such lower amount as we may determine. The Dollar Cost Averaging option may
not be elected if you have selected the Automatic Asset Reallocation option.
AUTOMATIC ASSET REALLOCATION
Selection of this option allows an Owner to maintain the percentage of the
Owner's Variable Accumulation Value allocated to each Separate Account
Investment Division at a pre-set level. For example, an Owner might specify that
50% of the Variable Accumulation Value of a Policy be allocated to the MainStay
VP International Equity Investment Division and 50% of the Variable Accumulation
Value be allocated to the MainStay VP Convertible Investment Division. Over
time, the variations in each such Investment Division's investment results will
shift this balance. If you elect this reallocation option, NYLIAC will
automatically transfer your Variable Accumulation Value back to the percentages
you specify. You may choose to have reallocations made quarterly, semi-annually
or annually. NYLIAC will process Automatic Asset Reallocations of less than
$500. NYLIAC reserves the right to charge up to $30 for each transfer in excess
of twelve, subject to any applicable state insurance law requirements. The
minimum Variable Accumulation Value required to elect this option is $5,000.
There is no minimum amount which you must allocate among the Investment
Divisions pursuant to this option. However, the Variable Accumulation Value may
not be allocated to more than 18 Investment Divisions if the Automatic Asset
Reallocation option is selected.
The Automatic Asset Reallocation option may be canceled at any time by the
Owner in a written request or by NYLIAC if the Accumulation Value is less than
$5,000, or such a lower amount as we may determine. The Automatic Asset
Reallocation option may not be elected if you have selected the Dollar Cost
Averaging option.
INTEREST SWEEP
The Owner may request, prior to the Annuity Commencement Date, for the
interest earned on monies allocated to the Fixed Account to be transferred from
the Fixed Account to any combination of Investment Divisions. The Owner will
specify the Investment Divisions to transfer money to, the frequency of the
transfers (either monthly, quarterly, semi-annually or annually), and the day of
each calendar month to make the transfers (any day except the 29th, 30th or 31st
of a month). This process is called Interest Sweep. The minimum Fixed
Accumulation Value required to elect this option is $5,000, but may be reduced
at NYLIAC's discretion.
The Interest Sweep may be requested in addition to either the Dollar Cost
Averaging or Automatic Asset Reallocation options. If an Interest Sweep transfer
is scheduled for the same day as a Dollar Cost Averaging or Automatic Asset
Reallocation transfer, the Interest Sweep transfer will be processed first.
An amount NOT GREATER THAN 20% of the Fixed Accumulation Value at the
beginning of the Policy Year may be transferred from the Fixed Account to the
Investment Divisions during a Policy Year. (See "The Fixed Account--Transfers to
Investment Divisions" at page 34.) If an Interest Sweep would cause more than
20% of the Fixed Accumulation Value at the beginning of the Policy Year to be
transferred from the Fixed Account, the transfer will not be processed and the
Interest Sweep will be canceled. The Interest Sweep option may be canceled at
any time by the Owner in a written request, or by NYLIAC if the Fixed
Accumulation Value is less than $5,000, or such a lower amount as we may
determine.
25
<PAGE> 29
ACCUMULATION PERIOD
(a) Crediting of Premium Payments
The Owner may allocate a portion of each Premium Payment to one or more
Investment Divisions or the Fixed Account. The minimum amount that may be
allocated to any one Investment Division or the Fixed Account is $25 (or such
lower amount as we may permit). The initial Premium Payment will be placed in
the MainStay VP Cash Management Investment Division until 15 days after the
Policy Issue Date. Subsequently, the allocation percentages for the first and
any later premiums will be as requested in the application, unless subsequently
changed by the Owner.
That portion of each Premium Payment allocated to a designated Investment
Division of a Separate Account is credited to the Policy in the form of
Accumulation Units. The number of Accumulation Units credited to a Policy is
determined by dividing the amount allocated to each Investment Division by the
Accumulation Unit value for that Investment Division on the Business Day during
which the Premium Payment and documentation is received at NYLIAC. The value of
an Accumulation Unit will vary in accordance with the investment experience of
the Portfolio in which the Investment Division invests. The number of
Accumulation Units credited to a Policy will not, however, change as a result of
any fluctuations in the value of an Accumulation Unit. (See "The Fixed Account"
at page 33 for a description of interest credited thereto.)
(b) Valuation of Accumulation Units
The value of Accumulation Units is expected to increase or decrease from
Valuation Period to Valuation Period. The value of Accumulation Units in each
Investment Division will change daily to reflect the investment experience of
the corresponding Portfolio as well as the daily deduction of the Separate
Accounts' charges. The Statement of Additional Information contains a detailed
description of how the Accumulation Units are valued.
OWNER INQUIRIES
Owner inquiries should be addressed to NYLIAC. (See page 17.)
CHARGES AND DEDUCTIONS
SURRENDER CHARGES
Since no deduction for a sales charge is made from Premium Payments, a
Surrender Charge (sometimes referred to as a contingent deferred sales charge)
is imposed on certain partial withdrawals and surrenders of the Policies, to
cover certain expenses relating to the sale of the Policies, including
commissions to registered representatives and other promotional expenses. The
Surrender Charge is measured as a percentage of the amount withdrawn or
surrendered. The Surrender Charge may apply to amounts applied under certain
Income Payment options.
In the case of a surrender, the Surrender Charge is deducted from the
amount paid to the Owner. In the case of a Partial Withdrawal, the Owner directs
NYLIAC to take Surrender Charges either from the remaining value of the
Allocation Alternatives from which the Partial Withdrawals are made, or from the
amount paid to the Owner. If the remaining value in an Allocation Alternative is
less than the necessary Surrender Charge, the remainder of the charge will be
deducted from the amount withdrawn from that Allocation Alternative.
The Surrender Charge is 7% of the amounts withdrawn or surrendered during
the first three Policy Years. The amount of the charge declines 1% for each
additional Policy Year, until the ninth Policy Year, after which no charge is
made, as shown in the following chart:
26
<PAGE> 30
AMOUNT OF SURRENDER CHARGE
<TABLE>
<CAPTION>
POLICY YEAR CHARGE
----------- ------
<S> <C>
1-3......................................................... 7%
4......................................................... 6%
5......................................................... 5%
6......................................................... 4%
7......................................................... 3%
8......................................................... 2%
9......................................................... 1%
10 and later............................................... 0
</TABLE>
The duration of the Surrender Charge schedule is based solely on the Policy
Date. Additional Premium Payments do not begin their own unique Surrender Charge
schedules.
EXCEPTIONS TO SURRENDER CHARGES
There are a number of exceptions to the imposition of a Surrender Charge.
First, for all Policies, the Surrender Charge will only be applied to any
amounts withdrawn in any Policy Year which, when aggregated with any other
withdrawals during such Policy Year, exceed 10% of the Accumulation Value at the
time of surrender or withdrawal. Second, for Policies with accumulated Premium
Payments of $100,000 or more, no Surrender Charge will be applied if either (1)
the total amount withdrawn in any Policy Year is 10% or less of the Accumulation
Value at the time of surrender or (2) the amount withdrawn is less than or equal
to the gain in the Policy which is measured as the Accumulation Value of the
Policy less accumulated Premium Payments. Third, no Surrender Charge will be
applied if NYLIAC cancels the Policy. (See "Cancellations" at page 30.) Fourth,
no Surrender Charge will be applied when proceeds are paid on the death of the
Owner or the Annuitant. Fifth, no Surrender Charge will be applied when an
Income Payment Option is selected in any Policy Year after the first Policy
Year. Sixth, no Surrender Charge will be applied when the Policy's Required
Minimum Distribution Option is selected. However, amounts withdrawn under the
Required Minimum Distribution option will count against the first exception
described above. (See "Periodic Partial Withdrawals" at page 29.) Seventh, no
Surrender Charge will be applied for any withdrawals at age 59 1/2 or older if
the Policy is tax-qualified and if the Policy was acquired as the result of a
transfer or rollover of a NYLIAC tax-deferred annuity policy. Eighth, no
Surrender Charge will be imposed in connection with withdrawals made in
accordance with the terms of the Living Needs Benefit Rider or Unemployment
Benefit Rider (See "Riders" at page 33 of this Prospectus for additional
information). Finally, in no event may the aggregate Surrender Charges under a
Policy exceed 8.5% of the total Premium Payments. (See "The Fixed Account" at
page 33 for additional exceptions to the imposition of a Surrender Charge.)
OTHER CHARGES
During the Accumulation Period, NYLIAC imposes certain charges which have
been set at a level to recover the cost of providing Policy administration
services. All Policies are subject to an administrative fee charged daily as an
amount equal, on an annual basis, to .10% of the daily net asset value of the
applicable Separate Account. In addition, an annual Policy fee for Policy
administration expenses is deducted once each Policy Year on the Policy
Anniversary or upon Policy surrender if on that date the Accumulation Value does
not equal or exceed $10,000. This Policy administration expense charge will be
the lesser of $30 or 2% of the Accumulation Value or lower if required by state
law at the end of the Policy Year or on the date of surrender, whichever is
applicable. The annual Policy fee is deducted from each Allocation Alternative
in proportion to its percentage of the Accumulation Value on the Policy
Anniversary. These charges are intended to offset the administrative expenses
associated with the Policies, e.g., the costs of collecting, processing, and
confirming Premium Payments. They are also intended to offset the cost of
establishing and maintaining the available methods of payment.
NYLIAC also imposes risk charges to compensate it for bearing certain
mortality and expense risks under the Policies. The Policies contain guaranteed
minimum monthly fixed Income Payment amount tables. NYLIAC promises to continue
to make Income Payments to each Owner determined according to those tables and
other provisions contained in the Policy regardless of how long the Annuitant
lives and regardless of how long all Annuitants as a group live. Thus neither an
Annuitant's own longevity nor a greater improvement in life expectancy than that
anticipated in those tables will have an adverse effect on the Income Payments
received by the Owner under the Policy. Therefore the Annuitant is relieved of
the risk of outliving the fund accumulated for retirement. That risk is
NYLIAC's. A risk also arises from NYLIAC's guarantee that if the Annuitant or
the Policy
27
<PAGE> 31
Owner dies prior to the Annuity Commencement Date, an amount will be paid to the
Beneficiary which will be equal to the greater of (a) the Accumulation Value
less any outstanding loan balance under the Policy as of the date due proof of
death and all requirements necessary to make payments are received; or (b) the
sum of all Premium Payments made, less any outstanding loan balance, less any
Partial Withdrawals and Surrender Charges previously imposed. (See "Death Before
Annuity Commencement" at page 30). In addition, NYLIAC assumes the risk that the
charges for providing Policy administration services to Owners and Annuitants
may be insufficient to cover the actual costs incurred by NYLIAC. Moreover,
NYLIAC does not anticipate that the Surrender Charges on withdrawals and
surrenders will generate sufficient funds to pay the distribution expenses. If
these charges are insufficient to cover those expenses, the deficiency will be
met from NYLIAC's general funds, including amounts derived from the risk charges
that are not needed for expenses actually incurred. For assuming these risks
NYLIAC makes a daily charge equal to a percentage of the value of the net assets
in the Separate Accounts. This charge is equal, on an annual basis, to 1.20% (of
which .70% is attributable to mortality risks and .50% to expense risks) of the
daily net asset values. If these charges are insufficient to cover actual costs
and assumed risks the loss will fall on NYLIAC. Conversely, if the charges prove
more than sufficient any excess will be added to NYLIAC's general funds. NYLIAC
guarantees that these charges will not be increased.
The value of the assets in the Separate Accounts will reflect the value of
Fund shares and therefore the fees and expenses paid by the Funds, which are
described in the relevant Fund's prospectus. The fees and expenses paid by the
Funds are not fixed or specified under the terms of the Policy, and they may
vary from year to year.
GROUP AND SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce the Surrender
Charge and the administrative charges or change the minimum initial Premium
Payment, and the minimum additional Premium Payment requirements. Group
arrangements include those in which a trustee or an employer, for example,
purchases Policies covering a group of individuals on a group basis. Sponsored
arrangements include those in which an employer allows us to sell Policies to
its employees or retirees on an individual basis.
Our costs for sales, administration, and mortality generally vary with the
size and stability of the group among other factors. We take all these factors
into account when reducing charges. To qualify for reduced charges, a group or
sponsored arrangement must meet certain requirements, including our requirements
for size and number of years in existence. Group or sponsored arrangements that
have been set up solely to buy Policies or that have been in existence less than
six months will not qualify for reduced charges.
We will make any reductions according to our rules in effect when an
application or enrollment form for a Policy is approved. We may change these
rules from time to time. Any variation in the Surrender Charge or administrative
charge will reflect differences in costs or services and will not be unfairly
discriminatory.
TAXES
NYLIAC may, where such taxes are imposed by state law, deduct premium taxes
relative to the Policy either (i) when a surrender or cancellation occurs, or
(ii) at the Annuity Commencement Date. Applicable premium tax rates depend upon
such factors as the Owner's current state of residency, and the insurance laws
and the status of NYLIAC in states where premium taxes are incurred. Current
premium tax rates range from 0% to 3.5%. Applicable premium tax rates are
subject to change by legislation, administrative interpretations or judicial
acts.
Under present laws, NYLIAC will incur state and local taxes (in addition to
the premium taxes described above) in several states. At present, these taxes
are not significant. If they increase, however, NYLIAC may make charges for such
taxes.
NYLIAC does not expect to incur any federal income tax liability
attributable to investment income or capital gains retained as part of the
reserves under the Policies. (See "Federal Tax Matters" at page 34.) Based upon
these expectations, no charge is being made currently to the Separate Accounts
for corporate federal income taxes which may be attributable to the Separate
Accounts.
NYLIAC will review the question of a charge to the Separate Accounts for
corporate federal income taxes periodically. Such a charge may be made in future
years for any federal income taxes incurred by NYLIAC. This might become
necessary if the tax treatment of NYLIAC is ultimately determined to be other
than what NYLIAC currently believes it to be, if there are changes made in the
federal income tax treatment of annuities at the corporate level, or if there is
a change in NYLIAC's tax status. In the event that NYLIAC should incur federal
income taxes attributable to investment income or capital gains retained as part
of the reserves under the
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Policies, the Accumulation Value of the Policies would be correspondingly
adjusted by any provision or charge for such taxes.
DISTRIBUTIONS UNDER THE POLICY
SURRENDERS AND WITHDRAWALS
The Owner may make a Partial Withdrawal, Periodic Partial Withdrawal,
Hardship Withdrawal or surrender the Policy to receive part or all of the
Accumulation Value at any time before the Annuity Commencement Date and while
the Annuitant is living, by sending a written request to NYLIAC. The amount
available for withdrawal is the Accumulation Value on the Business Day during
which the surrender or withdrawal request is received at NYLIAC, less any
outstanding loan balance, any Surrender Charges and any premium taxes which we
may deduct, less the charge for Policy administration expenses, if applicable.
The Policy administration expense charge, if applicable, will be the lesser of
$30 or 2% of the Accumulation Value at the end of the Policy Year or on the date
of surrender, whichever is applicable. If at the time the Owner makes a
withdrawal or surrender request, he or she has not provided NYLIAC with a
written election not to have federal income taxes withheld, NYLIAC must by law
withhold such taxes from the taxable portion of any surrender or withdrawal, and
remit that amount to the federal government. In addition, some states have
enacted legislation requiring withholding. All surrenders or withdrawals will be
paid within seven days of receipt of all documents (including documents
necessary to comply with federal and state tax law), subject to postponement in
certain circumstances. (See "Delay of Payments" at page 32.)
Since the Owner assumes the investment risk with respect to amounts
allocated to the Separate Accounts and because certain surrenders or withdrawals
are subject to a Surrender Charge and premium tax deduction, the total amount
paid upon surrender of the Policy (taking into account any prior withdrawals)
may be more or less than the total Premium Payments made.
Surrenders and withdrawals may be taxable transactions, and the Internal
Revenue Code provides that a 10% penalty tax may be imposed on certain early
surrenders or withdrawals. (See "Federal Tax Matters--Taxation of Annuities in
General" at page 35.)
(a) Surrenders
A Surrender Charge and any premium tax, if applicable, less any outstanding
loan balance, and less the charge for Policy administration expenses, if
applicable, may be deducted from the amount paid. The Policy administration
expense charge will be the lesser of $30 or 2% of the Accumulation Value at the
end of the Policy Year or on the date of surrender, whichever is applicable. The
proceeds will be paid in a lump sum to the Owner unless the Owner elects a
different Income Payment method. (See "Income Payments" at page 31.) Surrenders
may be taxable transactions and the 10% penalty tax provisions may be
applicable. (See "Federal Tax Matters--Taxation of Annuities in General" at page
35.)
(b) Partial Withdrawals
The minimum amount that can be withdrawn is $500, unless we agree
otherwise. The amount will be withdrawn from the Allocation Alternatives in
accordance with the Owner's request. If the Owner does not specify how to
allocate a Partial Withdrawal among the Allocation Alternatives, NYLIAC will
allocate the Partial Withdrawal on a pro-rata basis. Partial Withdrawals may be
taxable transactions and the 10% penalty tax provisions may be applicable. (See
"Federal Tax Matters--Taxation of Annuities in General" at page 35.)
If the value in any of the Allocation Alternatives from which the Partial
Withdrawal is being made is less than or equal to the amount requested from that
Allocation Alternative, NYLIAC will pay the entire value of that Allocation
Alternative, less any Surrender Charge that may apply, to the Owner.
(c) Periodic Partial Withdrawals
The Owner may elect to receive regularly scheduled withdrawals from the
Policy. These withdrawals may be paid on a monthly, quarterly, semi-annual, or
annual basis. The Owner elects the frequency of the withdrawals, and the day of
the month for the withdrawals to be made (may not be the 29th, 30th, or 31st of
a month). The Owner specifies which Investment Divisions and/or Fixed Account to
make the withdrawals from. The minimum withdrawal under this program is $100, or
such lower amount as we may permit. Periodic Partial Withdrawals may be taxable
transactions and the 10% penalty tax provisions may be applicable. (See "Federal
Tax Matters--
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Taxation of Annuities in General" at page 35.) If the Owner does not specify
otherwise, NYLIAC will withdraw money on a pro rata basis from each Investment
Division and/or the Fixed Account.
The Owner may elect to receive "Interest Only" Periodic Partial Withdrawals
for the interest earned on monies allocated to the Fixed Account. If this option
is chosen, the $100 minimum for Periodic Partial Withdrawals will be waived.
However, there must be at least $5,000 in the Fixed Account at the time of each
Periodic Partial Withdrawal, unless we agree otherwise.
(d) Hardship Withdrawals
Under certain Qualified Policies, the Plan Administrator may allow, in its
sole discretion, certain withdrawals it determines to be "Hardship Withdrawals."
The Surrender Charge and 10% penalty tax, if applicable, and provisions
applicable to Partial Withdrawals apply to Hardship Withdrawals. For all
Policies, the Surrender Charge will only be applied to any amounts withdrawn in
any Policy Year which, when aggregated with any other withdrawals during such
Policy Year, exceed 10% of the Accumulation Value at the time of Surrender. For
Policies with accumulated Premium Payments of $100,000 or more, the Surrender
Charge will not apply if the amount of the Hardship Withdrawal is less than or
equal to the gain in the Policy which is measured as the Accumulation Value of
the Policy less accumulated Premium Payments.
REQUIRED MINIMUM DISTRIBUTION OPTION
For IRAs and IRA SEPs, the Owner is generally not required to elect the
Required Minimum Distribution Option until April 1st of the year following the
calendar year he or she attains age 70 1/2. For TSAs, the Owner is generally not
required to elect the Required Minimum Distribution Option until April 1st of
the year following the calendar year he or she attains age 70 1/2 or until April
1st of the year following the calendar year he or she retires, whichever occurs
last.
CANCELLATIONS
NYLIAC may, in its sole discretion, subject to any applicable state
insurance law or regulation, cancel a Policy if no Premium Payments are made for
two or more Policy Years in a row, and both (a) the total Premium Payments made,
less any Partial Withdrawals and any Surrender Charges, and (b) the Accumulation
Value, are less than $2,000. If such a cancellation occurs, NYLIAC will pay the
Owner the Accumulation Value. We will notify you of our intention to exercise
this right and give you 90 days to make a Premium Payment.
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is the date specified on the Policy Data
Page. The Annuity Commencement Date is the day that Income Payments are
scheduled to commence under the Policy unless the Policy has been surrendered or
an amount has been paid as proceeds to the designated Beneficiary prior to that
date. The Owner may change the Annuity Commencement Date to an earlier date by
providing written notice to NYLIAC. The Owner may defer the Annuity Commencement
Date to a later date agreed to by NYLIAC, provided that written notice of the
request is received by NYLIAC at least one month before the last selected
Annuity Commencement Date. The Annuity Commencement Date and Income Payment
method for Qualified Policies may also be controlled by endorsements, the plan,
or applicable law. The Surrender Charge will be waived if the Life Income
Payment Option is selected after the first policy anniversary.
DEATH BEFORE ANNUITY COMMENCEMENT
If an Owner or Annuitant dies prior to the Annuity Commencement Date, an
amount will be paid, as of the date proof of death and all requirements
necessary to make the payment are received, as proceeds to the designated
Beneficiary. That amount will be the greater of (a) the Accumulation Value, less
any outstanding loan balance, and (b) the sum of all Premium Payments made less
any outstanding loan balance, less any Partial Withdrawals and Surrender Charges
on those withdrawals. The formula guarantees that the amount paid will at least
equal the sum of all Premium Payments (less any outstanding loan balance,
Partial Withdrawals and Surrender Charges on such Partial Withdrawals),
independent of the investment experience of the Separate Accounts. The
Beneficiary may receive the amount payable in a lump sum or under any Life
Income Payment Option which is then available. If more than one Beneficiary is
named, each Beneficiary will be paid a pro rata portion from each Allocation
Alternative in which the Policy is invested as of the date proof of death and
all requirements necessary to make the payment to that Beneficiary is received.
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If an Owner or Annuitant dies before the Annuity Commencement Date, the
Policy will no longer be in force and we will pay as proceeds to the Beneficiary
an amount which is the greater of "(a)" or "(b)" as they are described in the
preceding paragraph. Payment will be made in a lump sum to the Beneficiary
unless the Owner has elected or the Beneficiary elects otherwise in a signed
written notice which gives us the facts that we need. If such an election is
properly made, all or part of these proceeds will be:
(i) applied under the Life Income Payment Option to provide an
immediate annuity for the Beneficiary who will be the Owner and Annuitant;
or
(ii) applied under another Income Payment option we may offer at the
time. Payments under the annuity or under any other method of payment we
make available must be for the life of the Beneficiary, or for a number of
years that is not more than the life expectancy of the Beneficiary at the
time of the Owner's death (as determined for federal tax purposes), and
must begin within one year after the Owner's death. (See "Income Payments"
below.)
If the Owner's spouse is the Beneficiary, the proceeds can be paid to the
surviving spouse if the Owner dies before the Annuity Commencement Date or the
Policy can continue with the Owner's surviving spouse as the new Owner, and, if
the Owner was the Annuitant, as the Annuitant. Generally, NYLIAC will not issue
a Policy to joint owners. However, if NYLIAC makes an exception and issues a
jointly owned policy, ownership rights and privileges under the Policy must be
exercised jointly and benefits under the Policy will be paid upon the death of
any joint owner. (See "Federal Tax Matters--Taxation of Annuities in General" at
page 35.)
If the Annuitant and, where applicable under another Income Payment option,
the Joint Annuitant, if any, die after the Annuity Commencement Date, NYLIAC
will pay the sum required by the Income Payment Option in effect.
Any distribution or application of Policy proceeds will be made within 7
days after NYLIAC receives all documents (including documents necessary to
comply with federal and state tax law) in connection with the event or election
that causes the distribution to take place, subject to postponement in certain
circumstances. (See "Delay of Payments" at page 32.)
INCOME PAYMENTS
(a) Election of Income Payment Options
Income Payments will be made under the Life Income Payment Option or under
such other option we may offer at that time where permitted by state laws. We
will require that a single sum payment be made if the Accumulation Value is less
than $2,000. At any time before the Annuity Commencement Date, the Owner may
change the Income Payment option or request any other method of payment
agreeable to NYLIAC. If the Life Income Payment Option is chosen, proof of birth
date may be required before Income Payments begin. For Income Payment options
involving life income, the actual age of the Annuitant will affect the amount of
each payment. Since payments based on older annuitants are expected to be fewer
in number, the amount of each annuity payment shall be greater. Payments under
the Life Income Payment Option will always be in the same specified amount and
will be paid over the life of the Annuitant with a guarantee of 10 years of
payments, even if the Annuitant dies sooner. NYLIAC does not currently offer
variable Income Payment Options.
Under Income Payment options involving life income, the Payee may not
receive Income Payments equal to the total Premium Payments if the Annuitant
dies before the actuarially predicted date of death. Income Payment options
involving life income are based on annuity tables that vary on the basis of
gender, unless the Policy was issued under an employer sponsored plan or in a
state which requires unisex rates.
(b) Other Methods of Payment
If NYLIAC agrees, the Owner (or the Beneficiary upon the death of the
Annuitant, or the Owner prior to the Annuity Commencement Date) may choose to
have Income Payments made under some other method of payment or in a single sum.
(c) Proof of Survivorship
Satisfactory proof of survival may also be required, from time to time,
before any Income Payments or other benefits will be paid. The proof will be
requested at least 30 days prior to the next scheduled benefit payment date.
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DELAY OF PAYMENTS
Payment of any amounts due from the Separate Accounts under the Policy will
occur within seven days of the date NYLIAC receives all documents (including
documents necessary to comply with federal and state tax law) in connection with
a request unless:
1. The New York Stock Exchange is closed for other than usual weekends
or holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the Securities and Exchange
Commission;
3. The Securities and Exchange Commission permits a delay for the
protection of security holders; or
4. The check used to pay the premium has not cleared through the
banking system. This may take up to 15 days.
For the same reasons, transfers from the Separate Accounts to the Fixed
Account may be delayed.
Payments of any amount due from the Fixed Account may also be delayed. When
permitted by law, we may defer payment of any partial or full surrender request
for up to six months from the date of surrender from the Fixed Account. Interest
of at least 3.5% per year will be paid on any partial or full surrender request
deferred for 30 days or more.
DESIGNATION OF BENEFICIARY
The Owner may select one or more Beneficiaries and name them in the
application. Thereafter, before the Annuity Commencement Date and while the
Annuitant is living, the Owner may change the Beneficiary by written notice to
NYLIAC. If before the Annuity Commencement Date, the Annuitant dies before the
Owner and no Beneficiary for the proceeds or for a stated share of the proceeds
survives, the right to the proceeds or shares of the proceeds passes to the
Owner. If the Owner is the Annuitant, the proceeds pass to the Owner's estate.
However, if the Owner who is not the Annuitant dies before the Annuity
Commencement Date, and no Beneficiary for the proceeds or for a stated share of
the proceeds survives, the right to the proceeds or shares of the proceeds
passes to the Owner's estate.
RESTRICTIONS UNDER INTERNAL REVENUE CODE SECTION 403(b)(11)
Distributions attributable to salary reduction contributions made in years
beginning after December 31, 1988 (including the earnings on these
contributions), as well as to earnings in such years on salary reduction
accumulations held as of the end of the last year beginning before January 1,
1989, may not begin before the employee attains age 59 1/2, separates from
service, dies or becomes disabled. The plan may also provide for distribution in
the case of hardship. However, hardship distributions are limited to amounts
contributed by salary reduction; the earnings on such amounts may not be
withdrawn. Even though a distribution may be permitted under these rules (e.g.
for hardship or after separation from service), it may nonetheless be subject to
a 10% additional income tax as a premature distribution. To the extent that
these limitations on distributions conflict with the redeemability provisions of
the Investment Company Act, NYLIAC relies upon a November 28, 1988 letter for
exemptive relief.
Under the terms of your plan you may have the option to invest in other
403(b) funding vehicles, including 403(b)(7) custodial accounts. You should
consult your plan document to make this determination.
LOANS
Under your 403(b) Policy, you may borrow against your Policy's Accumulation
Value after the first Policy Year and prior to the Annuity Commencement Date.
Unless we agree otherwise, only one loan may be outstanding at a time. A minimum
Accumulation Value of $5,000 must remain in the Policy. The minimum loan amount
is $500. The maximum loan that may be taken is the lesser of: (a) 50% of the
Policy's Accumulation Value on the date of the loan or (b) $50,000. A loan
processing fee of $25 will be withdrawn from the Accumulation Value on a pro
rata basis, unless prohibited by applicable state law or regulation. If on the
date of the loan you do not have a Fixed Accumulation Value equal to at least
125% (110% in New York) of the loan amount, sufficient Accumulation Value will
be transferred from the Investment Divisions on a pro rata basis so that the
Fixed Accumulation Value equals 125% (110% in New York) of the loan amount.
While a loan is outstanding no partial withdrawals or transfers may be made
which would reduce the Fixed Accumulation Value to an amount less than 125%
(110% in New York) of the outstanding loan balance.
For plans not subject to the Employee Retirement Income Security Act of
1974 ("ERISA"), the interest rate paid by the Owner of the loan will equal 5%.
The assets being held in the Fixed Account to secure the loan will be
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credited with the minimum guaranteed interest rate of 3%. For plans subject to
ERISA, the interest charged on the loan will be applied annually at the Prime
Rate at the beginning of the calendar year, plus 1%. The money being held in the
Fixed Account to secure the loan will be credited with a rate of interest that
is the Prime Rate less 1%, but will always be at least equal to the minimum
guaranteed interest rate of 3%. For all plans, interest will be assessed in
arrears as part of the periodic loan repayments.
The loan must be repaid on a periodic basis at a frequency not less
frequently than quarterly and over a period no greater than five years from the
date it is taken. Depending upon applicable state law, if a loan repayment is in
default we will withdraw the amount in default from the Fixed Accumulation Value
to the extent permitted by Federal Income Tax rules. Such a repayment will be
taken first from the Fixed Accumulation Value as of the most recent Policy
Anniversary and then on a first in, first out basis from amounts allocated to
the Fixed Account since the most recent Policy Anniversary.
Loans to acquire a principal residence are permitted under the same terms
described above, except that:
(a) the minimum loan amount is $5,000; and
(b) repayment of the loan amount may be extended to a maximum of
twenty-five years.
Any outstanding loan balance will be deducted from the Fixed Accumulation
Value prior to payment of a surrender or the commencement of the annuity
benefits. On death of the Owner or Annuitant, any outstanding loan balance will
be deducted from the Fixed Accumulation Value as a Partial Withdrawal as of the
date the notice of death is received.
Loans are subject to the terms of the Policy, your 403(b) Plan and the
Code, which may impose restrictions upon them. We reserve the right to suspend,
modify, or terminate the availability of loans under this Policy at any time.
However, any action taken by us will not affect already outstanding loans.
RIDERS
For no additional Premium Payment, two riders are included: an Unemployment
Benefit Rider and a Living Needs Benefit Rider, both of which provide for an
increase in the amount that can be withdrawn from your Policy which will not be
subject to the imposition of a surrender charge upon the occurrence of certain
qualifying events. The riders are only available in those states where they have
been approved.
(a) Living Needs Benefit Rider
If the Annuitant enters a nursing home, becomes terminally ill or disabled
you, as Owner, may be eligible to receive all or a portion of the Accumulation
Value without paying a Surrender Charge. There is no additional charge for this,
and as the Owner you are automatically entitled to this benefit if it is
approved by your state. The Policy must have been inforce for at least one year
and have a minimum cash value of $5,000. Withdrawals will be taxable to the
extent of gain and, prior to age 59 1/2, may be subject to a 10% IRS penalty.
This rider is in effect in all states where approved.
(b) Unemployment Benefit Rider
For all Non-Qualified Policies and IRAs, if you as Owner of the Policy
become unemployed, you may be eligible to increase the amount that can be
withdrawn from your Policy up to 50% without paying contract Surrender Charges.
There is no additional charge for this, and as Owner you are automatically
entitled to this benefit if it is approved by your state. This rider can only be
used once. The Policy must have been inforce for at least one year and have a
minimum cash value of $5,000. Withdrawals may be taxable transactions and, prior
to age 59 1/2, may be subject to a 10% IRS penalty. This rider is in effect in
all states where approved.
THE FIXED ACCOUNT
The Fixed Account is supported by the assets in NYLIAC's general account,
which includes all of NYLIAC's assets except those assets specifically allocated
to NYLIAC's separate accounts. NYLIAC has sole discretion to invest the assets
of the Fixed Account subject to applicable law. An interest in the Fixed Account
is not registered under the Securities Act of 1933, and the Fixed Account is not
registered as an investment company under the Investment Company Act of 1940.
Accordingly neither the Fixed Account nor any interests therein are generally
subject to the provisions of these statutes, and NYLIAC has been advised that
the staff of the Securities and Exchange Commission has not reviewed the
disclosures in this Prospectus relating to the Fixed Account. These
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disclosures regarding the Fixed Account may, however, be subject to certain
applicable provisions of the Federal securities laws relating to the accuracy
and completeness of statements made in prospectuses.
(a) Interest Crediting
NYLIAC guarantees that it will credit interest at an effective rate of at
least 3% to amounts allocated or transferred to the Fixed Account under the
Policies. NYLIAC may, AT ITS SOLE DISCRETION, credit a higher rate of interest
to amounts allocated or transferred to the Fixed Account. The interest rate will
be set quarterly on the first day of each new calendar quarter. All Premium
Payments and additional payments (including transfers from other Investment
Divisions) received during a calendar quarter receive the interest rate declared
for that quarter until the end of that Policy Year. All other amounts in the
Fixed Account are credited with the rate set for the quarter in which the last
Policy Anniversary occurred, guaranteed for the current Policy Year.
(b) Bail-Out
Surrender Charges may be applied to withdrawals from the Fixed Account.
(See "Surrender Charges" at page 26.) In addition to the "Exceptions to
Surrender Charges" described at page 27, subject to any applicable state
insurance law or regulation, a Surrender Charge will not be imposed on any
amount which is withdrawn from the Fixed Account if on any Policy Anniversary
the interest rate set for that amount falls more than 2.5 percentage points
below the rate which was set for the immediately preceding Policy Year, or below
the minimum rate specified on your Policy's Data Page, and the Owner, within 60
days after that Policy Anniversary, withdraws part or all of that amount
allocated to the Fixed Account. NYLIAC reserves the right to set a separate
yearly interest rate and period for which this rate is guaranteed for amounts
transferred to the Fixed Account.
(c) Transfers to Investment Divisions
Amounts may be transferred from the Fixed Account to the Investment
Divisions up to 30 days prior to the Annuity Commencement Date, subject to the
following conditions.
1. An amount may be transferred from the Fixed Account to the
Investment Divisions if, on any Policy Anniversary, the interest rate set
for that amount falls more than 2.5 percentage points below the rate which
was set for the immediately preceding Policy Year, or below the minimum
rate specified on your Policy Data Page, and the Owner, within 60 days
after that Policy Anniversary, makes a request for such transfer. There is
no minimum transfer requirement and no charges will be imposed under this
condition.
2. An amount NOT GREATER THAN 20% of the Fixed Accumulation Value at
the beginning of the Policy Year may be transferred during that Policy Year
from the Fixed Account to the Investment Divisions.
3. Transfers of at least the minimum amount are permitted. The minimum
amount that may be transferred from the Fixed Account to the Investment
Divisions is the lesser of (i) $500 or (ii) the Fixed Accumulation Value,
unless we agree otherwise. (Additionally, the remaining values in the Fixed
Account must be at least $500. If, after a contemplated transfer, the
remaining values in the Fixed Account would be less than $500, that amount
must be included in the transfer, unless NYLIAC in its discretion
determines otherwise.)
Transfer requests must be in writing on a form approved by NYLIAC or by
telephone in accordance with established procedures. For a more detailed
discussion of procedures that may be used for requesting transfers by telephone,
please see "Procedures for Telephone Transfers" at page 24 of this Prospectus.
Unlimited transfers are permitted each Policy Year, although we reserve the
right to impose a charge of $30 per transfer for each transfer in excess of
twelve transfers in any Policy Year. Partial Withdrawals will be deducted and
any Surrender Charges will be applied to the Fixed Account in the following
sequence: first, from any value in the Fixed Account as of the last Policy
Anniversary, then from any value in the Fixed Account attributed to additional
Premium Payments or transfers from Investment Divisions in the same order in
which they were allocated to the Fixed Account during the current Policy Year.
See the Policy itself for details and a description of the Fixed Account.
FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. The
Qualified Policies are designed for use by individuals in retirement plans which
are intended to qualify as plans qualified for
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special income tax treatment under Sections 219, 403, 408, 408A or 457 of the
Code. The ultimate effect of federal income taxes on the Accumulation Value, on
Income Payments and on the economic benefit to the Owner, the Annuitant or the
Beneficiary depends on the type of retirement plan for which the Qualified
Policy is purchased, on the tax and employment status of the individual
concerned and on NYLIAC's tax status. The following discussion assumes that
Qualified Policies are used in retirement plans that qualify for the special
federal income tax treatment described above. This discussion is not intended to
address the tax consequences resulting from all of the situations in which a
person may be entitled to or may receive a distribution under a Policy. Any
person concerned about these tax implications should consult a competent tax
adviser before making a Premium Payment. This discussion is based upon NYLIAC's
understanding of the present federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to the
likelihood of continuation of the present federal income tax laws or of the
current interpretations by the Internal Revenue Service, which may change from
time to time without notice. Any such change could have retroactive effects
regardless of the date of enactment. Moreover, no attempt has been made to
consider any applicable state or other tax laws except with respect to the
imposition of any state premium taxes. We suggest you consult with your tax
adviser.
TAXATION OF ANNUITIES IN GENERAL
The following discussion assumes that the Policies will qualify as annuity
contracts for federal income tax purposes. The Statement of Additional
Information discusses such qualifications.
Section 72 of the Code governs taxation of annuities in general. NYLIAC
believes that an annuity contract owner generally is not taxed on increases in
the value of a policy until distribution occurs either in the form of a lump sum
received by withdrawing all or part of the Accumulation Value (i.e., surrenders
or Partial Withdrawals) or as Income Payments under the Income Payment option
elected. The exception to this rule is that generally, an owner of any deferred
annuity Policy who is not a natural person must include in income any increase
in the excess of the Owner's Accumulation Value over the Owner's investment in
the contract during the taxable year. However, there are some exceptions to this
exception and you may wish to discuss these with your tax counsel. The taxable
portion of a distribution (in the form of an annuity or lump sum payment) is
generally taxed as ordinary income. For this purpose, the assignment, pledge, or
agreement to assign or pledge any portion of the Accumulation Value generally
will be treated as a distribution.
In the case of a withdrawal or surrender distributed to a participant or
Beneficiary under a Qualified Policy (other than a Qualified Policy used in a
retirement plan that qualifies for special federal income tax treatment under
Section 457 of the Code as to which there are special rules), a ratable portion
of the amount received is taxable, generally based on the ratio of the
investment in the contract to the total policy value. The "investment in the
contract" generally equals the portion, if any, of any Premium Payments paid by
or on behalf of an individual under a Policy which is not excluded from the
individual's gross income. For Policies issued in connection with qualified
plans, the "investment in the contract" can be zero. The law requires the use of
special simplified methods to determine the taxable amount of payments that are
based in whole or in part on the Annuitant's life and that are paid from
qualified retirement plans under Section 401(a) and from qualified annuities and
Tax Sheltered Annuities under Sections 403(a) and 403(b).
Generally, in the case of a withdrawal under a Non-Qualified Policy before
the Annuity Commencement Date, amounts received are first treated as taxable
income to the extent that the Accumulation Value immediately before the
withdrawal exceeds the "investment in the contract" at that time. Any additional
amount withdrawn is not taxable.
Although the tax consequences may vary depending on the Income Payment
option elected under the Policy, in general, only the portion of the Income
Payment that represents the amount by which the Accumulation Value exceeds the
"investment in the contract" will be taxed; after the investment in the Policy
is recovered, the full amount of any additional Income Payments is taxable. For
Fixed Income Payments, in general, there is no tax on the portion of each
payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the Income Payments for the term of the
payments; however, the remainder of each Income Payment is taxable until the
recovery of the investment in the contract, and thereafter the full amount of
each annuity payment is taxable. If death occurs before full recovery of the
investment in the contract, the unrecovered amount may be deducted on the
annuitant's final tax return.
In the case of a distribution pursuant to any Policy, there may be imposed
a penalty tax equal to 10% of the amount treated as taxable income. The penalty
tax is not imposed in certain circumstances, including, generally,
distributions: (1) made on or after the date on which the taxpayer is actual age
59 1/2, (2) made as a result of the
35
<PAGE> 39
Owner's or Annuitant's death or disability, or (3) received in substantially
equal installments paid at least annually as a life annuity. Other tax penalties
may apply to certain distributions pursuant to a Qualified Policy.
All non-qualified, deferred annuity contracts issued by NYLIAC (or its
affiliates) to the same Owner during any calendar year are to be treated as one
annuity contract for purposes of determining the amount includible in an
individual's gross income. In addition, there may be other situations in which
the Treasury Department may conclude (under its authority to issue regulations)
that it would be appropriate to aggregate two or more annuity contracts
purchased by the same Owner. Accordingly, an Owner should consult a competent
tax adviser before purchasing more than one Policy or other annuity contract.
A transfer of ownership of a Policy may result in certain income or gift
tax consequences to the Owner that are beyond the scope of this discussion. An
Owner contemplating any transfer or assignment of a Policy should contact a
competent tax adviser with respect to the potential tax effects of such a
transaction.
QUALIFIED PLANS
The Qualified Policy is designed for use with several types of qualified
plans. The tax rules applicable to participants and beneficiaries in such
qualified plans vary according to the type of plan and the terms and conditions
of the plan itself. Special favorable tax treatment may be available for certain
types of contributions and distributions (including special rules for certain
lump sum distributions to individuals who attained the age of 50 by January 1,
1986). Adverse tax consequences may result from contributions in excess of
specified limits, distributions prior to age 59 1/2 (subject to certain
exceptions), distributions that do not conform to specified minimum distribution
rules and in certain other circumstances. Therefore, NYLIAC makes no attempt to
provide more than general information about use of the Policies with the various
types of qualified plans. Owners and participants under qualified plans as well
as Annuitants and Beneficiaries are cautioned that the rights of any person to
any benefits under qualified plans may be subject to the terms and conditions of
the plans themselves, regardless of the terms and conditions of the Policy
issued in connection therewith. Purchasers of Policies for use with any
qualified plan should seek competent legal and tax advice regarding the
suitability of the Policy therefore.
(a) Section 403(b) Plans. Under Section 403(b) of the Code, payments
made by public school systems and certain tax exempt organizations to
purchase annuity policies for their employees are excludible from the gross
income of the employee, subject to certain limitations. However, such
payments may be subject to FICA (Social Security) taxes.
(b) Individual Retirement Annuities. Sections 219 and 408 of the Code
permit individuals or their employers to contribute to an individual
retirement program known as an "Individual Retirement Annuity" or "IRA",
including an employer-sponsored Simplified Employee Pension or "SEP".
Individual Retirement Annuities are subject to limitations on the amount
which may be contributed and deducted and the time when distributions may
commence. In addition, distributions from certain other types of qualified
plans may be placed into Individual Retirement Annuities on a tax-deferred
basis.
(c) Roth Individual Retirement Annuities. Section 408A of the Code
permits individuals with incomes below a certain level to contribute to an
individual retirement program known as a "Roth Individual Retirement
Annuity" or "Roth IRA." Roth IRAs are subject to limitations on the amount
that may be contributed. Contributions to Roth IRAs are not deductible, but
distributions from Roth IRAs that meet certain requirements are not
included in gross income. Certain individuals are eligible to convert their
existing non-Roth IRAs into Roth IRAs. They will be subject to income tax
at the time of conversion.
(d) Deferred Compensation Plans. Section 457 of the Code, while not
actually providing for a qualified plan as that term is normally used,
provides for certain deferred compensation plans with respect to service
for state governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities and tax exempt
organizations which enjoy special treatment. The Policies can be used with
such plans. Under such plans, a participant may specify the form of
investment in which his or her participation will be made. Such investments
are generally owned by, and are subject to, the claims of the general
creditors of the sponsoring employer, except that Section 457 plans of
state and local government must be held and used for the exclusive benefit
of participants and beneficiaries in a trust or annuity contract.
DISTRIBUTOR OF THE POLICIES
NYLIFE Distributors Inc. ("NYLIFE Distributors"), 51 Madison Avenue, New
York, New York 10010, is the principal underwriter and the distributor of the
Policies and is an indirect wholly-owned subsidiary of New York
36
<PAGE> 40
Life. The maximum commission typically paid to broker-dealers who have entered
into dealer agreements with NYLIFE Distributors is 6.5%. A portion of this
amount will be paid as commissions to registered representatives.
VOTING RIGHTS
The Funds are not required to hold routine annual stockholder meetings.
Each Fund's Board of Directors/Trustees has decided not to hold routine annual
stockholder meetings. Special stockholder meetings will be called when
necessary. Not holding routine annual meetings will result in Owners having a
lesser role in governing the business of the Funds.
To the extent required by law, the Eligible Portfolio shares held in the
Investment Divisions of the Separate Accounts will be voted by NYLIAC at special
shareholder meetings of the Funds in accordance with instructions received from
persons having voting interests in the corresponding Investment Division. If,
however, the Investment Company Act of 1940 or any regulation thereunder should
be amended, or if the present interpretation thereof should change, and as a
result, NYLIAC determines that it is allowed to vote the Eligible Portfolio
shares in its own right, NYLIAC may elect to do so.
The number of votes which are available to an Owner will be calculated
separately for each Investment Division of the Separate Accounts. That number
will be determined by applying his or her percentage interest, if any, in a
particular Investment Division to the total number of votes attributable to the
Investment Division. Prior to the Annuity Commencement Date, the Owner holds a
voting interest in each Investment Division to which Policy Value is allocated.
The number of votes which are available to an Owner will be determined by
dividing the Accumulation Value attributable to an Investment Division by the
net asset value per share of the applicable Eligible Portfolios.
The number of votes of the Eligible Portfolio which are available will be
determined as of the date coincident with the date established by that Portfolio
for determining shareholders eligible to vote at the meeting of the relevant
Fund. Voting instructions will be solicited by written communication prior to
such meeting in accordance with procedures established by the relevant Fund.
Fund shares as to which no timely instructions are received will be voted
in proportion to the voting instructions which are received with respect to all
Policies participating in that Investment Division. Voting instructions to
abstain on any item to be voted upon will be applied on a pro rata basis to
reduce the votes eligible to be cast. Each person having a voting interest in an
Investment Division will receive proxy material, reports and other materials
relating to the appropriate Eligible Portfolio.
37
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38
<PAGE> 42
TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more
details concerning the subjects discussed in this Prospectus. The following is
the Table of Contents for that Statement:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE POLICIES................................................ 2
INVESTMENT PERFORMANCE CALCULATIONS......................... 2
GENERAL MATTERS............................................. 5
FEDERAL TAX MATTERS......................................... 6
DISTRIBUTOR OF THE POLICIES................................. 7
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS...................... 7
STATE REGULATION............................................ 7
RECORDS AND REPORTS......................................... 8
LEGAL PROCEEDINGS........................................... 8
INDEPENDENT ACCOUNTANTS..................................... 8
OTHER INFORMATION........................................... 8
FINANCIAL STATEMENTS........................................ F-1
</TABLE>
How to obtain a New York Life LifeStages(SM) Flexible Premium Variable Annuity
Statement of Additional Information.
Call (800) 598-2019 or send this request form to:
NYLIAC Variable Product Services
Madison Square Station
P.O. Box 922
New York, NY 10159
- --------------------------------------------------------------------------------
Please send me a New York Life LifeStages(SM) Flexible Premium Variable Annuity
Statement of Additional Information dated May 1, 1998:
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip
39
<PAGE> 43
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<PAGE> 44
[NY LIFE LOGO]
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
INDIVIDUAL RETIREMENT ANNUITY
DISCLOSURE STATEMENT
The following information is being provided to you, the Policyowner, in
accordance with the requirements of the Internal Revenue Service. This
Disclosure Statement includes non-technical explanation of some of the changes
made by the Taxpayer Relief Act of 1997 applicable to Individual Retirement
Accounts or Annuities (IRAs). You should consult your tax adviser about the
specifics of these rules, and remember that the terms of your actual contract
and any endorsements will control your rights and obligations.
1. REVOCATION OF YOUR IRA
If you have not received this Disclosure Statement at least seven calendar
days before the establishment of your Individual Retirement Annuity, you have
the right to revoke your Individual Retirement Annuity during the seven calendar
day period following the establishment of it. In order to revoke your Individual
Retirement Annuity, you must notify us in writing and you must mail or deliver
your revocation to NYLIAC. If your revocation is mailed, the date of the
postmark (or the date of certification or registration if sent by certified or
registered mail) will be considered your revocation date. If you revoke your
Individual Retirement Annuity during the seven day period, the entire amount of
your account, without any adjustments (for items such as administrative
expenses, fees, or fluctuation in market value) will be returned to you.
2. CONTRIBUTIONS
(a) Regular IRA. The Policyowner may make periodic contributions to a
regular IRA in any amount up to the combined tax deductible and non-tax
deductible contribution limit described in Section 3 of this Disclosure
Statement. All such contributions shall be in cash and shall be invested in
accordance with this Disclosure Statement. This IRA cannot be issued as a SIMPLE
IRA.
(b) Spousal IRA. If the Policyowner and the spouse file a joint federal
income tax return for the taxable year and if the spouse's compensation, if any,
includable in gross income for the year is less than the compensation includable
in the gross income of the Policyowner for the year, the Policyowner and the
spouse may each establish his or her own individual IRA and may make periodic
contributions to their own IRA in accordance with the rules and limits for tax
deductible and non-tax deductible contributions contained in Sections 219(c) and
408(o) of the Code. Such contributions shall be in cash and shall be vested in
accordance with this Disclosure Statement.
(c) Rollover IRA. A rollover contribution by the Policyowner shall be a
nonperiodic deposit in cash to be invested in accordance with this Disclosure
Statement, with respect to which contribution the Policyowner warrants that (1)
the entire amount rolled over is attributable to a distribution from an
employee's trust, an employee's annuity, an annuity contract or another
individual retirement account or annuity, which meets the requirements of Code
section 402(c), 403(a)(4), 403(b)(8), or 408(d)(3); (2) within one (1) year of
receiving such distribution, the Policyowner did not receive another
distribution which constituted a "rollover" referred to in Code Section
408(d)(3)(B); and (3) the contribution as made satisfies all the requirements
for rollover contributions as set forth under the Internal Revenue Code. A
rollover contribution attributable to contributions made by an employer to an
individual's SIMPLE IRA cannot be made prior to the expiration of the 2-year
period beginning on the date the individual first participated in that
employer's SIMPLE plan.
Strict limitations apply to rollovers, and you should seek competent tax
advice in order to comply with all the rules governing rollovers.
(d) Transfers. The Policyowner may make an initial or subsequent
contribution hereunder by directing a Custodian or Trustee of an existing
individual retirement account or individual retirement annuity to transfer an
amount in cash to the Individual Retirement Annuity.
(e) Time to Make Contributions. You may make contributions to your IRA at
any time for a taxable year beginning on the first day of that year and ending
on the date that your income tax return for that year is due (without regard to
any extensions).
(f) Simplified Employee Pension. If an IRA is established that meets the
requirements of a Simplified Employee Pension Plan, your employer may contribute
an amount not to exceed the lesser of 15% of your
IRA-1
<PAGE> 45
includable compensation ($160,000 for 1997, adjusted for inflation thereafter)
or $30,000. The amount of such contribution is not includable in your income as
wages (for federal income tax purposes). Within that overall limit you may elect
to defer up to $10,000 in 1998 (as adjusted for inflation in accordance with the
Internal Revenue Code) of your includable compensation if your employer's SEP
plan permits salary reduction contributions and was established on or before
December 31, 1996. The amount of such elective deferral is excludable from your
income as wages (for federal income tax purposes). For further details, see your
employer.
(g) Responsibility of the Policyowner. If the Policyowner contemplates
future periodic contributions, rollovers, or transfers to the IRA, such
contributions, rollovers or transfers must be made in accordance with the
appropriate sections of the Code. It is the Policyowner's full and sole
responsibility to determine the tax deductibility of all contributions, and to
make such contributions in accordance with the Code. Neither the Custodian nor
New York Life Insurance and Annuity Corporation are permitted to provide tax
advice, and will assume no liability for the tax consequences of any
contribution to the IRA.
3. DEDUCTIBILITY OF CONTRIBUTIONS
(a) Eligibility. Under the new law, if neither you nor your spouse is an
active participant (see (b) below), you and your spouse may contribute up to
$4,000 together (but no more than $2,000 to each individual account) if your
combined compensation is at least equal to that amount and take a deduction for
the entire amount contributed. If you are an active participant, but have an
adjusted gross income (AGI) below a certain level (see (c) below), you may make
a deductible contribution. If you are an active participant and you have AGI
above that level (see (c) below), the amount of the deductible contribution you
may make is phased down and eventually eliminated. If you are not an active
participant, but your spouse is an active participant, you may make a $2,000
deductible contribution provided that if your combined AGI is above the
specified level (see (c) below), the amount of the deductible contribution you
may make to an IRA is phased down and eventually eliminated.
(b) Active Participant. You are an "active participant" for a year if you
are covered by a retirement plan. You are covered by a "retirement plan" for a
year if your employer or union has a retirement plan under which money is added
to your annuity or you are eligible to earn retirement credits. For example, if
you are covered under a profit-sharing plan, a 403(b) annuity, certain
government plans, a salary reduction arrangement (such as a Tax Sheltered
Annuity (403(b)) arrangement or a 401(k) plan), a Simplified Employee Pension
Plan (SEP), a SIMPLE retirement account or a plan which promises you a
retirement benefit which is based upon the number of years of service you have
with the employer, you are likely to be an active participant. Your Form W-2 for
the year should indicate your participation status.
(c) Adjusted Gross Income (AGI). If you or your spouse is an active
participant, you must look at your Adjusted Gross Income for the year (if you
and your spouse file a joint tax return, you use your combined AGI) to determine
whether you can make a deductible IRA contribution. Your tax return will show
you how to calculate your AGI for this purpose. If you are at or below a certain
AGI level, called the Threshold Level, you are treated as if you were not an
active participant and can make a deductible contribution under the same rules
as a person who is not an active participant.
If you are single, your threshold AGI level is $30,000 (for 1998). The
Threshold Level if you are married and file a joint tax return is $50,000 (for
1998), and if you are married, but file a separate tax return, the Threshold
Level is $0. However, if only your spouse is an active participant and you file
a joint tax return, the Threshold level is $150,000 phased out at $160,000
(beginning in 1998).
IRA-2
<PAGE> 46
The $30,000 and $50,000 Threshold Levels are to increase in future years as
shown below:
<TABLE>
<CAPTION>
JOINT RETURNS
-------------
FOR TAXABLE YEARS BEGINNING IN: THE THRESHOLD LEVEL IS:
- ------------------------------- -----------------------
<S> <C>
1998 $50,000
1999 $51,000
2000 $52,000
2001 $53,000
2002 $54,000
2003 $60,000
2004 $65,000
2005 $70,000
2006 $75,000
2007 and thereafter $80,000
</TABLE>
<TABLE>
<CAPTION>
SINGLE TAXPAYERS
----------------
FOR TAXABLE YEARS BEGINNING IN: THE THRESHOLD LEVEL IS:
- ------------------------------- -----------------------
<S> <C>
1998 $30,000
1999 $31,000
2000 $32,000
2001 $33,000
2002 $34,000
2003 $40,000
2004 $45,000
2005 and thereafter $50,000
</TABLE>
If your AGI is less than $10,000 above your Threshold Level, you will still
be able to make a deductible contribution, but it will be limited in amount. The
amount by which your AGI exceeds your Threshold Level (AGI-Threshold Level) is
called your Excess AGI. The Maximum Allowable Deduction is $2,000 (and an
additional $2,000 for a Spousal IRA). You can calculate your Deduction Limit as
follows:
10,000 - Excess AGI X Maximum Allowable Deduction = Deduction Limit
-------------------
10,000
You must round up the result to the next highest $10 level (the next
highest number which ends in zero). For example, if the result is $1,525, you
must round it up to $1,530. If the final result is below $200 but above zero,
your Deduction Limit is $200. Your Deduction Limit cannot, in any event, exceed
100% of your compensation.
(d) Restrictions. No deduction is allowed for (a) contributions other than
in cash; (b) contributions (other than those by an employer to a Simplified
Employee Pension Plan) made during your calendar year in which you attain age
70 1/2 or thereafter; or (c) for any amount you contribute which was a
distribution from another retirement plan ("rollover" contribution). However,
the limitations in paragraphs (a) and (b) do not apply to rollover
contributions.
(e) Compensation. For purposes of determining allowable contributions, the
term "Compensation" includes all earned income, including net earnings from self
employment and alimony or separate maintenance payments received and includable
in your gross income, but does not include deferred compensation or any amount
received as a pension or annuity.
4. NONDEDUCTIBLE CONTRIBUTIONS TO IRAS
Even if you are above the Threshold Level and, thus, may not make a
deductible contribution of $2,000 (and an additional $2,000 for a Spousal IRA),
you may still contribute up to the lesser of 100% of compensation or $2,000 to
an IRA (and an additional $2,000 for a Spousal IRA). The amount of your
contribution which is not deductible will be a nondeductible contribution to the
IRA. You may also choose to make a contribution nondeductible even if you could
have deducted part or all of the contribution. Interest or other earnings on
your IRA contribution, whether from deductible or nondeductible contributions,
will not be taxed until taken out of your IRA and distributed to you.
If you make a nondeductible contribution to an IRA you must report the
amount of the nondeductible contribution to the IRS as a part of your tax return
for the year.
IRA-3
<PAGE> 47
5. DISTRIBUTIONS
(a) Required Distributions. Distribution of your IRA must be made or begin
no later than April 1 of the calendar year following the calendar year in which
you attain age 70 1/2. A distribution may be made at once in a lump sum, or it
may be made in installments. Installment payments must be made over a period not
exceeding your life expectancy (as determined annually), or the joint life and
last survivor expectancy of you and the beneficiary you designate (as
redetermined annually, if that beneficiary is your spouse).
If you die before the entire interest is distributed to you, but after
distribution to you has begun, your entire annuity must be distributed to your
beneficiary at least as rapidly as your annuity was being distributed prior to
your death. If you die before you begin to receive distributions from your
annuity and if you have a designated beneficiary, distribution to your
beneficiary must be made over a period not exceeding the greater of the
beneficiary's life expectancy or five years after your death; if you have no
designated beneficiary, distribution must be completed within five years of your
death. Distributions upon your death must begin within one year following your
death or, if your beneficiary is your spouse, no later than the date on which
you would have attained age 70 1/2 (if later). If following your death before
distributions have begun, your spouse also dies, immediate distribution must
begin to be made to your spouse's beneficiary, if any, over a period no longer
than that person's life expectancy, or if your spouse has not designated a
beneficiary, full payment must be made to your spouse's estate within five
years.
(b) IRA Distributions. Because nondeductible IRA contributions are made
using income which has already been taxed (that is, they are not deductible
contributions), the portion of the IRA distributions consisting of nondeductible
contributions will not be taxed again when received by you. If you make any
nondeductible IRA contributions, each distribution from your IRAs will consist
of a nontaxable portion (return of nondeductible contributions) and a taxable
portion (return of deductible contributions, if any, and account earnings).
Thus, you may not take a distribution which is entirely tax-free. The
following formula is used to determine the nontaxable portion of your
distributions for a taxable year.
<TABLE>
<S> <C> <C> <C> <C>
Remaining Nondeductible contributions
- --------------------------------------------- Total distributions Nontaxable distributions
Year-end total IRA balances X (for the year) = (for the year)
</TABLE>
To figure the year-end total IRA balance, you must treat all of your IRAs
as a single IRA (other than Roth IRAs). This includes all regular IRAs, as well
as Simplified Employee Pension (SEP) IRAs, SIMPLE IRAs, and Rollover IRAs. You
also add back the distributions taken during the year.
Even if you withdrew all of the money in your IRA in a lump sum, you will
not be entitled to use any form of income averaging to reduce the federal income
tax on your distribution. Also, no portion of your distribution is taxable as a
capital gain.
(c) Withholding. Unless you elect not to have withholding apply, a 10%
federal income tax will be withheld from your IRA distributions. If payments are
delivered to foreign countries, however, tax will, generally, be withheld at a
10% rate unless you certify to the Custodian that you are not a U.S. citizen
residing abroad or a "tax avoidance expatriate" as defined in the Internal
Revenue Code (Section 877).
6. PENALTIES
(a) Excess Contributions. If at the end of any taxable year your IRA
contributions (other than rollovers or transfers) exceed the maximum allowable
(deductible and nondeductible) amount for that year, this excess contribution
amount will be subject to a nondeductible 6% excise (penalty) tax. However, if
you withdraw the excess contribution, plus any earnings on it, before the due
date for filing your federal income tax return for the year (including
extensions), the excess contribution will not be subject to the 6% penalty tax.
The amount of the excess contribution withdrawn will not be considered a
premature distribution, but the earnings withdrawn will be taxable income to you
and may be subject to an additional 10% tax on premature distributions.
Alternatively, excess contributions for one year may be carried forward as IRA
contributions in the next year to the extent that the excess, when aggregated
with your IRA contribution (if any) for the subsequent year, does not exceed the
maximum allowable (deductible and nondeductible) amount for that year. The 6%
excise tax will be imposed on excess contributions in each year they are neither
returned nor applied as contributions.
(b) Early Distributions. Since the purpose of an IRA is to accumulate
funds for retirement, your receipt or use of any portion of your IRA before you
attain age 59 1/2 constitutes an early distribution unless the distribution
occurs in the event of your death or disability or is part of a series of
substantially equal periodic payments made over your life expectancy (as
determined from tables in the income tax regulations) or the joint life
expectancies
IRA-4
<PAGE> 48
of you and your beneficiary or is used to pay certain medical expenses or is
used for certain qualified first-time homebuyer expenses (beginning in 1998) or
certain qualified higher education expenses (beginning in 1998). The amount of
an early distribution (excluding the nondeductible contribution included
therein) is includable in your gross income and is subject to a 10% penalty tax
on the amount of the early distribution unless you transfer it to another IRA as
a qualifying rollover contribution. If you transfer, rollover or convert a
regular IRA into a Roth IRA, the 10% penalty tax will not apply, but the
distribution is taxable income. (If you transfer, rollover or convert a regular
IRA into a Roth IRA in 1998, the additional tax liability will be spread over
four years (1998, 1999, 2000, and 2001).
(c) Minimum Distributions. If the minimum distribution rules described in
5a apply to a recipient of distributions and if the amount distributed during a
calendar year is less than the minimum amount required to be distributed, the
recipient will be subject to a penalty tax equal to 50% of the difference
between the amount required to be distributed and the amount actually
distributed.
(d) Excess Distributions. The 15% excise tax on excess distributions has
been repealed for excess distributions received after December 31, 1996. The 15%
excise tax on excess retirement accumulations has been repealed for estates of
decedents dying after December 31, 1996.
(e) Prohibited Transactions. If the Policyowner or the beneficiary engage
in any prohibited transaction (such as any sale, exchange or leasing of any
property between the Policyowner and the annuity, or any interference with the
independent status of the annuity), the annuity will lose its tax exemption and
be treated as having been distributed to the Policyowner. The value of the
entire annuity (excluding the non-deductible contribution included therein) will
be includable in your gross income; if at the time of the prohibited transaction
the Policyowner is under age 59 1/2, the Policyowner will also be subject to the
10% penalty tax on early distributions.
(f) Overstatement of Non-deductible Contributions. If you overstate your
non-deductible IRA contributions on your federal income tax return (without
reasonable cause) you may be subject to a $100 penalty and a $50 penalty for
failure to file any form required by the IRS to report non-deductible
contributions (in addition to any generally applicable tax, interest, and
penalties to which you may be liable if you understate income upon receiving a
distribution from your account. See paragraph 5(b) of this Disclosure Statement
and IRS Form 8606.)
7. FEDERAL ESTATE AND GIFT TAXES
Any amount distributed from your IRA upon your death may be subject to
federal estate and gift taxes.
8. OTHER INFORMATION
(a) Tax Reporting. You need not file Treasury Form 5329 with the Internal
Revenue Service unless during the taxable year there is an excess contribution
to, premature distribution from, or insufficient distribution from your IRA. You
must report contributions to, and distributions from your IRA (including the
year end aggregate account balance of all IRAs) on your federal income tax
return for the year. You must designate on the return how much of your annual
contribution is deductible and how much is nondeductible.
(b) IRS Approval. This Individual Retirement Annuity has been approved as
to form by the Internal Revenue Service. Such approval is a determination only
as to the form of the annuity and does not represent a determination of the
merits of such annuity.
(c) Custodian. The Trustee or Custodian of an IRA must be either a bank or
such other person who has been approved by the Secretary of the Treasury.
(d) Vesting. Your interest in your IRA must be nonforfeitable at all
times.
(e) State Tax Law. You should consult your tax adviser about any state tax
consequences of your IRA; you should be aware that some of these laws may differ
from Federal tax law governing IRAs.
IRA-5
<PAGE> 49
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<PAGE> 53
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-I
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-II
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
FOR THE
NEW YORK LIFE LIFESTAGES(SM) FLEXIBLE PREMIUM VARIABLE ANNUITY
(FORMERLY NAMED NYLIAC VARIABLE ANNUITY)
OFFERED BY
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
This Statement of Additional Information is not a prospectus. Much of the
information contained in this Statement of Additional Information expands upon
subjects discussed in the current New York Life LifeStages(SM) Flexible Premium
Variable Annuity Prospectus. Accordingly this Statement should be read in
conjunction with the current New York Life LifeStages(SM) Flexible Premium
Variable Annuity Prospectus dated May 1, 1998, which may be obtained by calling
New York Life Insurance and Annuity Corporation ("NYLIAC") at (800) 598-2019 or
writing to NYLIAC at 51 Madison Avenue, New York, New York 10010. Terms used in
the current New York Life LifeStages(SM) Flexible Premium Variable Annuity
Prospectus are incorporated in this Statement.
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE POLICIES (22)........................................... 2
Valuation of Accumulation Units (26)................... 2
INVESTMENT PERFORMANCE CALCULATIONS......................... 2
MainStay VP Cash Management Investment Division........ 2
MainStay VP Government, MainStay VP High Yield
Corporate Bond and MainStay VP Bond Investment
Division Yields...................................... 3
Total Return Calculations.............................. 3
GENERAL MATTERS............................................. 5
FEDERAL TAX MATTERS (34).................................... 6
Taxation of New York Life Insurance and Annuity
Corporation.......................................... 6
Tax Status of the Policies............................. 6
DISTRIBUTOR OF THE POLICIES (34)............................ 7
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS...................... 7
STATE REGULATION............................................ 7
RECORDS AND REPORTS......................................... 8
LEGAL PROCEEDINGS........................................... 8
INDEPENDENT ACCOUNTANTS..................................... 8
OTHER INFORMATION........................................... 8
FINANCIAL STATEMENTS........................................ F-1
</TABLE>
- ------------
* (Numbers in parentheses refer to page numbers of corresponding sections of the
current New York Life LifeStages(SM) Flexible Premium Variable Annuity
Prospectus.)
<PAGE> 54
THE POLICIES
The following provides additional information about the Policies, to
supplement the description in the Prospectus, which may be of interest to some
Owners.
VALUATION OF ACCUMULATION UNITS
Accumulation Units are valued separately for each Investment Division of
each Separate Account. The method used for valuing Accumulation Units in each
Investment Division is the same. The value of each Accumulation Unit was
arbitrarily set as of the date operations began for the Investment Division.
Thereafter, the value of an Accumulation Unit of an Investment Division for any
Valuation Period equals the value of an Accumulation Unit in that Investment
Division as of the immediately preceding Valuation Period multiplied by the "Net
Investment Factor" for that Investment Division for the current Valuation
Period.
The Net Investment Factor for each Investment Division for any Valuation
Period is determined by dividing (a) by (b) and subtracting (c) from the result,
where:
(a) is the result of:
(1) the net asset value per share of the Eligible Portfolio shares
held in the Investment Division determined at the end of the current
Valuation Period, plus
(2) the per share amount of any dividend or capital gain
distribution made by the Eligible Portfolio for shares held in the
Investment Division if the "ex-dividend" date occurs during the
current Valuation Period;
(b) is the net asset value per share of the Eligible Portfolio shares
held in the Investment Division determined as of the end of the immediately
preceding Valuation Period; and
(c) is a factor representing the charges deducted from the applicable
Investment Division on a daily basis. Such factor is equal, on an annual
basis, to 1.30% of the daily net asset value of Separate Accounts I and II,
respectively, and represents the 1.20% charge for mortality and expense
risks (of which .70% is attributable to mortality risks and .50% to expense
risks), and the .10% charge for Policy administration expenses. (See "Other
Charges" at page 27 of the Prospectus.)
The Net Investment Factor may be greater or less than one. Therefore, the
value of an Accumulation Unit in an Investment Division may increase or decrease
from Valuation Period to Valuation Period.
INVESTMENT PERFORMANCE CALCULATIONS
MAINSTAY VP CASH MANAGEMENT INVESTMENT DIVISION
NYLIAC calculates a MainStay VP Cash Management Investment Division's
current annualized yield for a seven-day period in a manner which does not take
into consideration any realized or unrealized gains or losses on shares of the
MainStay VP Cash Management Portfolio or 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
unit of a MainStay VP Cash Management Investment Division at the beginning of
such seven-day period, dividing such net change in account value by the value of
the account at the beginning of the period to determine the base period return
and annualizing this quotient on a 365-day basis. The net change in account
value reflects the deductions for the administration fees and the mortality and
expense risk charge and income and expenses accrued during the period. Because
of these deductions, the yield for a MainStay VP Cash Management Division of a
Separate Account will be lower than the yield for the MainStay VP Cash
Management Portfolio.
NYLIAC also calculates the effective yield of the MainStay VP Cash
Management Investment Division for the same seven-day period on a compounded
basis. The effective yield is calculated by compounding the unannualized base
period return by adding one to the base period return, raising the sum to a
power equal to 365 divided by 7, and subtracting one from the result.
The yield on amounts held in a MainStay VP Cash Management Investment
Division normally will fluctuate on a daily basis. Therefore, the disclosed
yield for any given past period is not an indication or representation of future
yields or rates of return. The MainStay VP Cash Management Investment Division's
actual yield is affected by changes in interest rates on money market
securities, average portfolio maturity of the MainStay VP Cash Management
Portfolio, the types and quality of portfolio securities held by the MainStay VP
Cash Management Portfolio, and its operating expenses.
2
<PAGE> 55
For the seven-day period ending December 31, 1997, the MainStay VP Cash
Management Portfolio yields for Separate Account-I and Separate Account-II were
both 4.36%, and the effective yields were both 4.45%.
MAINSTAY VP GOVERNMENT, MAINSTAY VP HIGH YIELD CORPORATE BOND AND MAINSTAY
VP BOND INVESTMENT DIVISION YIELDS
The current annualized yield of the MainStay VP Government, MainStay VP
High Yield Corporate Bond and MainStay VP Bond Investment Divisions refers to
the income generated by these Investment Divisions over a specified 30-day
period. Because the yield is annualized, the yield generated by an Investment
Division during the 30 day period is assumed to be generated each 30-day period.
The yield is computed by dividing the net investment income per accumulation
unit earned during the period by the price per unit on the last day of the
period, according to the following formula:
YIELD = 2[(a-b +1)(6)-1]
---
cd
Where: a = net investment income earned during the period by the Portfolio
attributable to shares owned by the MainStay VP Government, MainStay
VP High-Yield Corporate Bond or MainStay VP Bond Investment Division.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of accumulation units outstanding during
the period.
d = the maximum offering price per accumulation unit on the last day of
the period.
Net investment income will be determined in accordance with rules
established by the Securities and Exchange Commission. Accrued expenses will
include all recurring fees that are charged to all Owner accounts. The yield
calculations do not reflect the effect of any Surrender Charges that may be
applicable to a particular Policy. Surrender Charges range from 7% to 0% of the
amount of Accumulation Value withdrawn depending on the elapsed time since the
Policy was issued.
Because of the charges and deductions imposed by the Separate Account the
yield for the Investment Divisions will be lower than the yield for the
corresponding Portfolio of the Fund. The yield on amounts held in the Investment
Divisions normally will fluctuate over time. Therefore, the disclosed yield for
any given past period is not an indication or representation of future yields or
rates of return. The MainStay VP Government, MainStay VP High Yield Corporate
Bond or MainStay VP Bond Investment Division's actual yield will be affected by
the types and quality of portfolio securities held by such Portfolio and its
operating expenses.
For the 30-day period ended December 31, 1997, the annualized yields for
the MainStay VP Government, MainStay VP High Yield Corporate Bond and MainStay
VP Bond Investment Divisions were 4.08%, 6.25% and 4.60% for Separate Account-I,
respectively, and 4.08%, 6.25% and 4.60% for Separate Account-II, respectively.
TOTAL RETURN CALCULATIONS
The following tables present performance data for the MainStay VP Capital
Appreciation, MainStay VP Cash Management, MainStay VP Convertible, MainStay VP
Government, MainStay VP High Yield Corporate Bond, MainStay VP International
Equity, MainStay VP Total Return, MainStay VP Value, MainStay VP Bond, MainStay
VP Growth Equity, MainStay VP Indexed Equity, Alger American Small
Capitalization, Calvert Social Balanced, Fidelity VIP II Contrafund, Fidelity
VIP Equity-Income, Janus Aspen Series Balanced, Janus Aspen Series Worldwide
Growth and Morgan Stanley Emerging Markets Equity Investment Divisions for
periods ending December 31, 1997. The average annual total return (if
surrendered) data reflect all Separate Account and Fund annual expenses shown in
the Fee Table which appears on pages 6, 7 and 8 of the Prospectus. The average
annual total return (if surrendered) figures assume that the Policy is
surrendered at the end of the periods shown. Thus, they reflect the deduction of
any applicable surrender charges. The annual Policy fee, which is charged to
Policies with less than $20,000 of Accumulation Value, is not reflected. This
fee, if applicable, would effectively reduce the rates of return credited to a
particular Policy. The average annual total return (no surrenders) does not
reflect the deduction of any surrender charges. All rates of return presented
include the reinvestment of investment income, including interest and dividends.
Certain Portfolios existed prior to the date that they were added to an
Investment Division of the Separate Accounts. For periods prior to May 1, 1995,
when the MainStay VP Bond, MainStay VP Growth Equity, and Calvert Social
Balanced Investment Divisions commenced operations, and for periods prior to
October 1, 1996,
3
<PAGE> 56
when the Alger American Small Capitalization, Fidelity VIP II Contrafund,
Fidelity VIP Equity-Income, Janus Aspen Series Balanced and Janus Aspen Series
Worldwide Growth Investment Divisions commenced operations, the performance of
the Investment Divisions was derived from the performance of the corresponding
Portfolios, modified to reflect the Separate Account and Fund annual expenses as
if the Policy had been available during the periods shown. There is no
performance information for the American Century Income & Growth, Dreyfus Large
Company Value, Eagle Asset Management Growth Equity, Lord Abbett Developing
Growth, MFS Growth With Income Series, MFS Research Series, T. Rowe Price Equity
Income and Van Eck Worldwide Hard Assets Investment Divisions because they were
not available under the Policies as of the date of this Statement of Additional
Information. The results shown are not an estimate or guarantee of future
investment performance for the Investment Divisions in the tables below.
For periods commencing on or after the dates when the respective Investment
Divisions commenced operations, the average annual total return (if surrendered)
figures may be referred to as "standardized" performance, prepared under the
method prescribed by the Securities and Exchange Commission when advertising
performance information. It is noted that all average annual total return (if
surrendered) figures have been prepared on the basis of this method, but are
considered "non-standardized" for periods prior to the dates on which the
respective Investment Divisions commenced operations. The average annual total
return (no surrender) figures are all considered "non-standardized."
AVERAGE ANNUAL TOTAL RETURN. Average annual total return quotations under
both calculation methods are computed by finding the average annual compounded
rates of return over the periods shown that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P(1+T)(n) = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one, five, or ten-year period or the inception date,
at the end of the one, five or ten-year period (or fractional portion
thereof).
<TABLE>
<CAPTION>
SEPARATE ACCOUNT-I
AVERAGE ANNUAL TOTAL RETURN
(FOR PERIODS ENDED DECEMBER 31, 1997)
-------------------------------------
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD MAINSTAY VP
CAPITAL CASH MAINSTAY VP MAINSTAY VP CORPORATE INTERNATIONAL
INVESTMENT DIVISIONS: APPRECIATION MANAGEMENT CONVERTIBLE GOVERNMENT BOND EQUITY
- --------------------------------------------- ------------ ---------- ----------- ----------- ----------- -------------
PORTFOLIO INCEPTION DATE: 1/29/93 1/29/93 10/1/96 1/29/93 5/1/95 5/1/95
- ---------------------------------------------
INVESTMENT DIVISION INCEPTION DATE: 1/29/93 1/29/93 10/1/96 1/29/93 5/1/95 5/1/95
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN (IF SURRENDERED)
1 Year....................................... 14.21% -2.65% 6.76% 1.26% 4.54% -2.73%
3 Year....................................... 22.31% 1.70% -- 5.60% -- --
5 Year....................................... -- -- -- -- -- --
10 Year...................................... -- -- -- -- -- --
Since Portfolio Inception.................... 15.90% 2.19% 8.04% 4.02% 11.02% 4.23%
Since Investment Division Inception.......... 15.90% 2.19% 8.04% 4.02% 11.02% 4.23%
AVERAGE ANNUAL TOTAL RETURN (NO SURRENDERS)
1 Year....................................... 21.89% 3.89% 13.93% 8.06% 11.57% 3.81%
3 Year....................................... 24.18% 3.93% -- 7.92% -- --
5 Year....................................... -- -- -- -- -- --
10 Year...................................... -- -- -- -- -- --
Since Portfolio Inception.................... 16.85% 3.15% 13.80% 4.99% 13.64% 6.80%
Since Investment Division Inception.......... 16.85% 3.15% 13.80% 4.99% 13.64% 6.80%
</TABLE>
4
<PAGE> 57
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP CALVERT
TOTAL MAINSTAY VP MAINSTAY VP GROWTH INDEXED SOCIAL
INVESTMENT DIVISIONS: RETURN VALUE BOND EQUITY EQUITY BALANCED
--------------------- ----------- ----------- ----------- ----------- ----------- --------
PORTFOLIO INCEPTION DATE: 1/29/93 5/1/95 1/23/84 1/23/84 1/29/93 9/2/86
- ----------------------------------------------
INVESTMENT DIVISION INCEPTION DATE: 1/29/93 5/1/95 12/15/93 12/15/93 1/29/93 5/1/95
- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN (IF SURRENDERED)
1 Year........................................ 8.95% 13.66% 1.42% 17.24% 22.86% 11.07%
3 Year........................................ 15.59% -- 6.06% 23.32% 27.16% 17.03%
5 Year........................................ -- -- 4.98% 16.15% -- 10.42%
10 Year....................................... -- -- 7.46% 15.12% -- 10.96%
Since Portfolio Inception..................... 11.06% 19.53% 8.66% 12.43% 17.35% 9.77%
Since Investment Division Inception........... 11.06% 19.53% 3.64% 17.58% 17.35% 14.65%
AVERAGE ANNUAL TOTAL RETURN (NO SURRENDERS)
1 Year........................................ 16.27% 21.31% 8.24% 25.12% 31.12% 18.54%
3 Year........................................ 17.67% -- 8.38% 25.15% 28.89% 19.07%
5 Year........................................ -- -- 5.95% 17.07% -- 11.44%
10 Year....................................... -- -- 7.46% 15.12% -- 10.96%
Since Portfolio Inception..................... 12.11% 21.85% 8.66% 12.43% 18.26% 9.77%
Since Investment Division Inception........... 12.11% 21.85% 4.83% 18.85% 18.26% 17.14%
</TABLE>
<TABLE>
<CAPTION>
MORGAN
JANUS ASPEN STANLEY
ALGER AMERICAN JANUS ASPEN SERIES EMERGING
SMALL FIDELITY VIP II FIDELITY VIP SERIES WORLDWIDE MARKETS
INVESTMENT DIVISIONS: CAPITALIZATION CONTRAFUND EQUITY INCOME BALANCED GROWTH EQUITY
--------------------- -------------- --------------- ------------- ----------- ----------- --------
PORTFOLIO INCEPTION DATE: 9/20/88 1/3/95 10/9/86 9/13/93 9/13/93 10/1/96
- ---------------------------------------
INVESTMENT DIVISION INCEPTION DATE: 10/1/96 10/1/96 10/1/96 10/1/96 10/1/96 10/1/96
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN (IF SURRENDERED)
1 Year................................. 3.03% 14.83% 18.50% 12.94% 12.99% -7.23%
3 Year................................. 15.11% -- 22.03% 17.39% 22.67% --
5 Year................................. 10.17% -- 17.74% -- -- --
10 Year................................ -- -- 15.22% -- -- --
Since Portfolio Inception.............. 17.67% 24.72% 13.03% 13.57% 20.26% -6.37%
Since Investment Division Inception.... -1.18% 16.89% 19.59% 11.43% 13.45% -6.37%
AVERAGE ANNUAL TOTAL RETURN (NO SURRENDERS)
1 Year................................. 9.96% 22.55% 26.46% 20.53% 20.58% -0.99%
3 Year................................. 17.21% -- 23.90% 19.41% 24.53% --
5 Year................................. 11.19% -- 18.61% -- -- --
10 Year................................ -- -- 15.22% -- -- --
Since Portfolio Inception.............. 17.67% 26.52% 13.03% 14.79% 21.32% -1.37%
Since Investment Division Inception.... 4.10% 23.14% 25.98% 17.39% 19.52% -1.37%
</TABLE>
Performance data for the Investment Divisions may be compared, in
advertisements, sales literature and reports to shareholders, to: (i) the
investment returns on various mutual funds, stocks, bonds, certificates of
deposit, tax free bonds, or common stock and bond indexes; and (ii) other groups
of variable annuity separate accounts or other investment products tracked by
Lipper Analytical Services, a widely used independent research firm which ranks
mutual funds and other investment companies by overall performance, investment
objectives, and assets, or tracked by other services, companies, publications,
or persons who rank such investment companies on overall performance or other
criteria.
Reports and promotional literature may also contain the ratings New York
Life and NYLIAC have received from independent rating agencies. New York Life
and NYLIAC are among only a few companies that have consistently received among
the highest possible ratings from the four major independent rating companies:
A.M. Best and Moody's (for financial strength and stability) and Standard and
Poor's and Duff & Phelps (for claims paying ability). However, neither New York
Life nor NYLIAC guarantees the investment performance of the Investment
Divisions.
GENERAL MATTERS
NON-PARTICIPATING. The Policies are non-participating; no dividends are
payable.
5
<PAGE> 58
FINANCIAL STATEMENTS
F-1
<PAGE> 59
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1997
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value
(Identified Cost: $168,872,797; $30,016,769;
$7,520,352; $35,273,439; $134,958,445; $9,337,777;
$130,125,402; $62,161,818; $27,338,361,
respectively)....................................... $256,064,007 $ 30,016,823 $ 7,494,402
LIABILITIES:
Liability for mortality and
expense risk charges................................ 824,706 96,319 22,469
------------ ------------ ------------
Total equity...................................... $255,239,301 $ 29,920,504 $ 7,471,933
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding:
11,857,215; 25,688,688; 635,509; 2,748,627;
9,538,610; 750,958; 9,719,609; 4,277,068;
2,248,999, respectively........................... $255,239,301 $ 29,920,504 $ 7,471,933
============ ============ ============
Variable accumulation
unit value........................................ $ 21.53 $ 1.16 $ 11.76
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP MAINSTAY VP AMERICAN
GROWTH INDEXED SMALL
EQUITY EQUITY CAPITALIZATION
------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value
(Identified Cost: $80,720,219; $111,142,475;
$7,255,549; $2,276,607; $21,594,510; $14,067,992;
$9,179,146; $31,207,175; $5,255,533,
respectively)....................................... $ 86,897,287 $153,994,311 $ 7,613,494
LIABILITIES:
Liability for mortality and
expense risk charges................................ 275,867 482,230 22,359
------------ ------------ ------------
Total equity...................................... $ 86,621,420 $153,512,081 $ 7,591,135
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding:
4,307,208; 6,723,894; 721,914; 154,270; 1,843,744;
1,137,704; 802,381; 2,632,482; 451,979,
respectively...................................... $ 86,621,420 $153,512,081 $ 7,591,135
============ ============ ============
Variable accumulation
unit value........................................ $ 20.11 $ 22.83 $ 10.52
============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-2
<PAGE> 60
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE ANNUITY SEPARATE ACCOUNT I
NON-QUALIFIED POLICIES
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 35,054,735 $134,678,051 $ 8,982,399 $171,156,971 $ 72,783,401 $ 27,305,154
115,849 420,547 28,791 554,884 225,248 86,967
------------ ------------ ------------ ------------ ------------ ------------
$ 34,938,886 $134,257,504 $ 8,953,608 $170,602,087 $ 72,558,153 $ 27,218,187
============ ============ ============ ============ ============ ============
$ 34,938,886 $134,257,504 $ 8,953,608 $170,602,087 $ 72,558,153 $ 27,218,187
============ ============ ============ ============ ============ ============
$ 12.71 $ 14.08 $ 11.92 $ 17.55 $ 16.96 $ 12.10
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
JANUS MORGAN STANLEY
CALVERT FIDELITY FIDELITY JANUS ASPEN EMERGING
SOCIALLY VIP II: VIP: ASPEN WORLDWIDE MARKETS
RESPONSIBLE CONTRAFUND EQUITY-INCOME BALANCED GROWTH EQUITY
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,360,941 $ 23,981,487 $ 15,222,651 $ 9,831,227 $ 32,993,284 $ 4,455,794
6,885 69,426 40,198 28,336 99,725 13,421
------------ ------------ ------------ ------------ ------------ ------------
$ 2,354,056 $ 23,912,061 $ 15,182,453 $ 9,802,891 $ 32,893,559 $ 4,442,373
============ ============ ============ ============ ============ ============
$ 2,354,056 $ 23,912,061 $ 15,182,453 $ 9,802,891 $ 32,893,559 $ 4,442,373
============ ============ ============ ============ ============ ============
$ 15.26 $ 12.97 $ 13.34 $ 12.22 $ 12.50 $ 9.83
============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-3
<PAGE> 61
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income......................................... $ 358 $ 1,424,114 $ 273,318
Mortality and expense risk charges...................... (2,935,500) (361,085) (63,188)
------------ ------------ ------------
Net investment income (loss)........................ (2,935,142) 1,063,029 210,130
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments....................... 11,447,214 67,359,027 687,004
Cost of investments sold................................ (6,613,610) (67,358,815) (627,999)
------------ ------------ ------------
Net realized gain (loss) on investments............. 4,833,604 212 59,005
Realized gain distribution received..................... 3,437,276 -- 387,948
Change in unrealized appreciation (depreciation) on
investments........................................... 38,112,703 110 (25,065)
------------ ------------ ------------
Net gain (loss) on investments...................... 46,383,583 322 421,888
------------ ------------ ------------
Increase (decrease) attributable to funds of New York
Life Insurance and Annuity Corporation
retained by Separate Account.......................... (83,048) (1,863) (1,962)
------------ ------------ ------------
Net increase in total equity resulting
from operations................................... $ 43,365,393 $ 1,061,488 $ 630,056
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP MAINSTAY VP AMERICAN
GROWTH INDEXED SMALL
EQUITY EQUITY CAPITALIZATION
------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income......................................... $ 602,605 $ 1,910,979 $ --
Mortality and expense risk charges...................... (891,722) (1,544,251) (54,706)
------------ ------------ ------------
Net investment income (loss)........................ (289,117) 366,728 (54,706)
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments....................... 910,771 1,658,901 1,255,456
Cost of investments sold................................ (654,669) (914,161) (1,252,553)
------------ ------------ ------------
Net realized gain on investments.................... 256,102 744,740 2,903
Realized gain distribution received..................... 11,217,552 3,565,021 118,813
Change in unrealized appreciation (depreciation) on
investments........................................... 3,863,793 25,776,218 359,486
------------ ------------ ------------
Net gain (loss) on investments...................... 15,337,447 30,085,979 481,202
------------ ------------ ------------
Increase (decrease) attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account.......................... (33,051) (54,381) (1,129)
------------ ------------ ------------
Net increase (decrease) in total equity resulting
from operations................................... $ 15,015,279 $ 30,398,326 $ 425,367
============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-4
<PAGE> 62
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE ANNUITY SEPARATE ACCOUNT I
NON-QUALIFIED POLICIES
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,235,207 $ 8,570,871 $ 718,059 $ 3,608,904 $ 914,708 $ 1,700,876
(454,797) (1,322,206) (115,249) (2,026,697) (687,336) (320,303)
----------- ----------- ----------- ----------- ----------- -----------
1,780,410 7,248,665 602,810 1,582,207 227,372 1,380,573
----------- ----------- ----------- ----------- ----------- -----------
8,336,469 3,376,427 1,659,858 10,564,695 798,692 3,531,376
(8,878,032) (2,849,382) (1,551,576) (7,542,119) (535,791) (3,444,295)
----------- ----------- ----------- ----------- ----------- -----------
(541,563) 527,045 108,282 3,022,576 262,901 87,081
-- 5,363,338 -- 3,083,183 3,104,376 75,997
1,410,360 (2,322,236) (441,057) 15,736,284 6,547,148 449,976
----------- ----------- ----------- ----------- ----------- -----------
868,797 3,568,147 (332,775) 21,842,043 9,914,425 613,054
----------- ----------- ----------- ----------- ----------- -----------
(6,627) (31,582) 338 (48,358) (20,257) (5,093)
----------- ----------- ----------- ----------- ----------- -----------
$ 2,642,580 $10,785,230 $ 270,373 $23,375,892 $10,121,540 $ 1,988,534
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
JANUS MORGAN STANLEY
CALVERT FIDELITY FIDELITY JANUS ASPEN EMERGING
SOCIALLY VIP II: VIP: ASPEN WORLDWIDE MARKETS
RESPONSIBLE CONTRAFUND EQUITY-INCOME BALANCED GROWTH EQUITY
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 51,740 $ 32,149 $ 23,706 $ 173,454 $ 209,871 $ 29,964
(19,732) (162,903) (81,489) (60,966) (234,791) (42,259)
----------- ----------- ----------- ----------- ----------- -----------
32,008 (130,754) (57,783) 112,488 (24,920) (12,295)
----------- ----------- ----------- ----------- ----------- -----------
118,973 182,770 239,984 331,396 257,157 443,766
(108,105) (152,033) (228,742) (290,382) (210,715) (393,623)
----------- ----------- ----------- ----------- ----------- -----------
10,868 30,737 11,242 41,014 46,442 50,143
112,234 84,966 119,190 5,979 85,328 132,571
90,491 2,355,000 1,149,335 650,923 1,754,303 (805,601)
----------- ----------- ----------- ----------- ----------- -----------
213,593 2,470,703 1,279,767 697,916 1,886,073 (622,887)
----------- ----------- ----------- ----------- ----------- -----------
(526) (5,233) (2,151) (1,929) (4,941) 670
----------- ----------- ----------- ----------- ----------- -----------
$ 245,075 $ 2,334,716 $ 1,219,833 $ 808,475 $ 1,856,212 $ (634,512)
=========== =========== =========== =========== =========== ===========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-5
<PAGE> 63
STATEMENT OF CHANGES IN TOTAL EQUITY
For the years ended December 31, 1997
and December 31, 1996
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL APPRECIATION CASH MANAGEMENT
--------------------------------- ---------------------------------
1997 1996 1997 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment income (loss)........ $ (2,935,142) $ (1,920,018) $ 1,063,029 $ 778,847
Net realized gain (loss) on
investments....................... 4,833,604 2,055,551 212 (235)
Realized gain distribution
received.......................... 3,437,276 -- -- --
Change in unrealized appreciation
(depreciation) on investments..... 38,112,703 24,383,346 110 73
Decrease attributable to funds of
New York Life Insurance and
Annuity Corporation retained by
Separate Account.................. (83,048) (22,494) (1,863) (636)
------------ ------------ ------------ ------------
Net increase in total equity
resulting from operations....... 43,365,393 24,496,385 1,061,488 778,049
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments...... 14,108,843 11,223,373 241,494,473 209,046,761
Policyowners' surrenders............ (5,441,134) (3,554,017) (1,240,425) (1,051,462)
Policyowners' annuity and death
benefits.......................... (1,439,678) (1,048,434) (348,829) (58,589)
Net transfers from (to) Fixed
Account........................... (315,375) 240,896 (29,451,497) (17,698,298)
Transfers between Investment
Divisions......................... 12,641,649 42,660,785 (208,989,293) (184,767,230)
------------ ------------ ------------ ------------
Net contributions and
withdrawals..................... 19,554,305 49,522,603 1,464,429 5,471,182
------------ ------------ ------------ ------------
Increase (decrease) in total
equity........................ 62,919,698 74,018,988 2,525,917 6,249,231
TOTAL EQUITY:
Beginning of year................... 192,319,603 118,300,615 27,394,587 21,145,356
------------ ------------ ------------ ------------
End of year......................... $255,239,301 $192,319,603 $ 29,920,504 $ 27,394,587
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
INTERNATIONAL EQUITY TOTAL RETURN
--------------------------------- ---------------------------------
1997 1996 1997 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)........ $ 602,810 $ 322,495 $ 1,582,207 $ 1,249,533
Net realized gain on investments.... 108,282 39,714 3,022,576 1,030,984
Realized gain distribution
received.......................... -- 10,103 3,083,183 --
Change in unrealized appreciation
(depreciation) on investments..... (441,057) 68,930 15,736,284 10,463,926
Increase (decrease) attributable to
funds of New York Life Insurance
and Annuity Corporation retained
by Separate Account............... 338 (1,398) (48,358) (15,330)
------------ ------------ ------------ ------------
Net increase in total equity
resulting from operations....... 270,373 439,844 23,375,892 12,729,113
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments...... 798,731 1,082,586 7,050,067 7,728,846
Policyowners' surrenders............ (179,972) (54,539) (4,323,373) (3,911,629)
Policyowners' annuity and death
benefits.......................... (97,579) (27,254) (1,491,783) (1,176,265)
Net transfers from (to) Fixed
Account........................... 17,008 131,997 (1,817,519) (190,777)
Transfers between Investment
Divisions......................... 409,137 4,423,391 6,374,145 22,838,889
------------ ------------ ------------ ------------
Net contributions and
withdrawals..................... 947,325 5,556,181 5,791,537 25,289,064
------------ ------------ ------------ ------------
Increase in total equity........ 1,217,698 5,996,025 29,167,429 38,018,177
TOTAL EQUITY:
Beginning of year................... 7,735,910 1,739,885 141,434,658 103,416,481
------------ ------------ ------------ ------------
End of year......................... $ 8,953,608 $ 7,735,910 $170,602,087 $141,434,658
============ ============ ============ ============
</TABLE>
(a) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-6
<PAGE> 64
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE ANNUITY SEPARATE ACCOUNT I
NON-QUALIFIED POLICIES
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD
CONVERTIBLE GOVERNMENT CORPORATE BOND
--------------------------- --------------------------- ---------------------------
1997 1996(a) 1997 1996 1997 1996
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 210,130 $ 13,510 $ 1,780,410 $ 1,881,109 $ 7,248,665 $ 2,756,422
59,005 522 (541,563) (466,032) 527,045 127,325
387,948 2,681 -- -- 5,363,338 888,770
(25,065) (885) 1,410,360 (1,107,570) (2,322,236) 2,017,948
(1,962) (11) (6,627) (2,229) (31,582) (12,399)
------------ ------------ ------------ ------------ ------------ ------------
630,056 15,817 2,642,580 305,278 10,785,230 5,778,066
------------ ------------ ------------ ------------ ------------ ------------
1,000,635 169,046 1,300,452 2,254,998 12,524,157 5,917,987
(92,401) (3,468) (1,196,410) (1,440,538) (2,556,656) (837,749)
(34,724) -- (689,466) (938,740) (869,008) (178,205)
1,952 3,022 (612,836) (235,117) 228,545 986,909
4,375,014 1,406,984 (3,880,014) (798,404) 45,401,706 41,300,726
------------ ------------ ------------ ------------ ------------ ------------
5,250,476 1,575,584 (5,078,274) (1,157,801) 54,728,744 47,189,668
------------ ------------ ------------ ------------ ------------ ------------
5,880,532 1,591,401 (2,435,694) (852,523) 65,513,974 52,967,734
1,591,401 -- 37,374,580 38,227,103 68,743,530 15,775,796
------------ ------------ ------------ ------------ ------------ ------------
$ 7,471,933 $ 1,591,401 $ 34,938,886 $ 37,374,580 $134,257,504 $ 68,743,530
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
VALUE BOND GROWTH EQUITY
--------------------------- --------------------------- ---------------------------
1997 1996 1997 1996 1997 1996
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 227,372 $ 153,150 $ 1,380,573 $ 1,200,794 $ (289,117) $ (45,376)
262,901 48,430 87,081 78,888 256,102 151,536
3,104,376 476,456 75,997 -- 11,217,552 6,131,118
6,547,148 3,713,466 449,976 (1,019,234) 3,863,793 1,120,490
(20,257) (7,269) (5,093) (1,345) (33,051) (11,636)
------------ ------------ ------------ ------------ ------------ ------------
10,121,540 4,384,233 1,988,534 259,103 15,015,279 7,346,132
------------ ------------ ------------ ------------ ------------ ------------
5,621,886 2,686,173 1,281,523 1,840,303 5,888,507 3,561,882
(1,035,379) (314,427) (811,171) (468,736) (1,372,347) (712,387)
(377,102) (26,412) (345,774) (204,169) (198,025) (237,850)
147,179 55,019 (134,442) (63,064) (126,113) (25,716)
22,805,397 20,923,800 1,981,470 2,657,996 17,823,214 15,708,702
------------ ------------ ------------ ------------ ------------ ------------
27,161,981 23,324,153 1,971,606 3,762,330 22,015,236 18,294,631
------------ ------------ ------------ ------------ ------------ ------------
37,283,521 27,708,386 3,960,140 4,021,433 37,030,515 25,640,763
35,274,632 7,566,246 23,258,047 19,236,614 49,590,905 23,950,142
------------ ------------ ------------ ------------ ------------ ------------
$ 72,558,153 $ 35,274,632 $ 27,218,187 $ 23,258,047 $ 86,621,420 $ 49,590,905
============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-7
<PAGE> 65
STATEMENT OF CHANGES IN TOTAL EQUITY (CONTINUED)
For the years ended December 31, 1997
and December 31, 1996
<TABLE>
<CAPTION>
ALGER AMERICAN
MAINSTAY VP SMALL
INDEXED EQUITY CAPITALIZATION
--------------------------------- ---------------------------------
1997 1996 1997 1996(a)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)........ $ 366,728 $ 374,435 $ (54,706) $ (1,200)
Net realized gain (loss) on
investments....................... 744,740 3,373,859 2,903 (671)
Realized gain distribution
received.......................... 3,565,021 1,047,477 118,813 --
Change in unrealized appreciation
(depreciation) on investments..... 25,776,218 7,690,196 359,486 (1,540)
Decrease attributable to funds of
New York Life Insurance and
Annuity Corporation retained by
Separate Account.................. (54,381) (20,656) (1,129) (231)
------------ ------------ ------------ ------------
Net increase (decrease) in total
equity resulting from
operations...................... 30,398,326 12,465,311 425,367 (3,642)
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments...... 9,886,766 5,256,430 1,293,929 88,539
Policyowners' surrenders............ (2,667,000) (1,433,327) (39,761) (1,040)
Policyowners' annuity and death
benefits.......................... (872,882) (409,320) (12,225) --
Net transfers from (to) Fixed
Account........................... (229,219) (77,411) 26,191 (13,494)
Transfers between Investment
Divisions......................... 33,975,643 24,995,760 4,664,076 1,163,195
Return of equity contribution to New
York Life Insurance and Annuity
Corporation....................... -- (10,765,092) -- --
------------ ------------ ------------ ------------
Net contributions and
withdrawals..................... 40,093,308 17,567,040 5,932,210 1,237,200
------------ ------------ ------------ ------------
Increase in total equity........ 70,491,634 30,032,351 6,357,577 1,233,558
TOTAL EQUITY:
Beginning of year................... 83,020,447 52,988,096 1,233,558 --
------------ ------------ ------------ ------------
End of year......................... $153,512,081 $ 83,020,447 $ 7,591,135 $ 1,233,558
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
FIDELITY JANUS
VIP: ASPEN
EQUITY-INCOME BALANCED
--------------------------------- ---------------------------------
1997 1996(a) 1997 1996(a)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)........ $ (57,783) $ (844) $ 112,488 $ 8,081
Net realized gain (loss) on
investments....................... 11,242 63 41,014 --
Realized gain distribution
received.......................... 119,190 -- 5,979 --
Change in unrealized appreciation
(depreciation) on investments..... 1,149,335 5,323 650,923 1,158
Increase (decrease) attributable to
funds of New York Life Insurance
and Annuity Corporation retained
by Separate Account............... (2,151) 6 (1,929) (7)
------------ ------------ ------------ ------------
Net increase (decrease) in total
equity resulting from
operations...................... 1,219,833 4,548 808,475 9,232
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments...... 2,305,722 52,277 1,423,207 98,306
Policyowners' surrenders............ (84,983) -- (54,290) (482)
Policyowners' annuity and death
benefits.......................... (22,573) -- -- --
Net transfers from Fixed Account.... 74,509 1,901 53,541 5,999
Transfers between Investment
Divisions......................... 10,880,655 750,564 6,614,826 844,077
------------ ------------ ------------ ------------
Net contributions and
withdrawals..................... 13,153,330 804,742 8,037,284 947,900
------------ ------------ ------------ ------------
Increase in total equity........ 14,373,163 809,290 8,845,759 957,132
TOTAL EQUITY:
Beginning of year................... 809,290 -- 957,132 --
------------ ------------ ------------ ------------
End of year......................... $ 15,182,453 $ 809,290 $ 9,802,891 $ 957,132
============ ============ ============ ============
</TABLE>
(a) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-8
<PAGE> 66
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE ANNUITY SEPARATE ACCOUNT I
NON-QUALIFIED POLICIES
<TABLE>
<CAPTION>
CALVERT FIDELITY
SOCIALLY VIP II:
RESPONSIBLE CONTRAFUND
--------------------------------- ---------------------------------
1997 1996 1997 1996(a)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 32,008 $ 11,721 $ (130,754) $ (2,543)
10,868 1,807 30,737 --
112,234 47,239 84,966 --
90,491 5,463 2,355,000 31,977
(526) (105) (5,233) (40)
------------ ------------ ------------ ------------
245,075 66,125 2,334,716 29,394
------------ ------------ ------------ ------------
108,024 71,210 2,951,510 155,357
(29,649) (7,044) (103,333) (73)
(2,729) -- (31,006) --
(4,077) 9,915 151,968 14,838
1,146,500 473,217 16,067,377 2,341,313
-- -- -- --
------------ ------------ ------------ ------------
1,218,069 547,298 19,036,516 2,511,435
------------ ------------ ------------ ------------
1,463,144 613,423 21,371,232 2,540,829
890,912 277,489 2,540,829 --
------------ ------------ ------------ ------------
$ 2,354,056 $ 890,912 $ 23,912,061 $ 2,540,829
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
JANUS MORGAN STANLEY
ASPEN EMERGING
WORLDWIDE MARKETS
GROWTH EQUITY
--------------------------------- ---------------------------------
1997 1996(a) 1997 1996(a)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ (24,920) $ 9,432 $ (12,295) $ 274
46,442 -- 50,143 (14)
85,328 -- 132,571 --
1,754,303 31,806 (805,601) 5,862
(4,941) (39) 670 (111)
------------ ------------ ------------ ------------
1,856,212 41,199 (634,512) 6,011
------------ ------------ ------------ ------------
4,205,570 240,993 687,149 32,353
(207,344) (4,872) (35,384) (4,237)
(79,209) -- (5,001) --
303,760 33,213 8,356 6,633
24,161,558 2,342,479 3,646,978 734,027
------------ ------------ ------------ ------------
28,384,335 2,611,813 4,302,098 768,776
------------ ------------ ------------ ------------
30,240,547 2,653,012 3,667,586 774,787
2,653,012 -- 774,787 --
------------ ------------ ------------ ------------
$ 32,893,559 $ 2,653,012 $ 4,442,373 $ 774,787
============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-9
<PAGE> 67
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1997
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value (Identified Cost:
$151,064,610; $32,195,156; $5,328,711; $24,401,449;
$73,882,990; $6,892,566; $107,216,334; $46,775,710;
$20,131,634, respectively).......................... $222,686,276 $ 32,195,212 $ 5,316,168
LIABILITIES:
Liability for mortality and expense risk charges...... 712,189 96,290 16,610
------------ ------------ ------------
Total equity...................................... $221,974,087 $ 32,098,922 $ 5,299,558
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding: 10,311,858;
27,559,044; 451,954; 1,903,657; 5,214,982;
553,260; 7,910,664; 3,185,866; 1,654,689,
respectively...................................... $221,974,087 $ 32,098,922 $ 5,299,558
============ ============ ============
Variable accumulation unit value.................... $ 21.53 $ 1.16 $ 11.73
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP MAINSTAY VP AMERICAN
GROWTH INDEXED SMALL
EQUITY EQUITY CAPITALIZATION
------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value (Identified Cost:
$64,998,805; $94,607,783; $5,500,996; $2,047,811;
$17,868,641; $9,540,935; $6,906,891; $25,777,339;
$4,616,486, respectively)........................... $ 69,630,271 $128,627,046 $ 5,815,482
LIABILITIES:
Liability for mortality and expense risk charges...... 219,373 399,623 16,941
------------ ------------ ------------
Total equity...................................... $ 69,410,898 $128,227,423 $ 5,798,541
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding: 3,451,426;
5,616,413; 551,479; 137,819; 1,542,236; 788,332;
599,878; 2,159,402; 391,289, respectively......... $ 69,410,898 $128,227,423 $ 5,798,541
============ ============ ============
Variable accumulation unit value.................... $ 20.11 $ 22.83 $ 10.51
============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-10
<PAGE> 68
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE ANNUITY SEPARATE ACCOUNT II
TAX-QUALIFIED POLICIES
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 24,278,244 $ 73,545,810 $ 6,619,585 $139,300,543 $ 54,364,589 $ 20,090,664
80,078 225,405 20,288 449,641 166,167 65,031
------------ ------------ ------------ ------------ ------------ ------------
$ 24,198,166 $ 73,320,405 $ 6,599,297 $138,850,902 $ 54,198,422 $ 20,025,633
============ ============ ============ ============ ============ ============
$ 24,198,166 $ 73,320,405 $ 6,599,297 $138,850,902 $ 54,198,422 $ 20,025,633
============ ============ ============ ============ ============ ============
$ 12.71 $ 14.06 $ 11.93 $ 17.55 $ 17.01 $ 12.10
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
JANUS MORGAN STANLEY
CALVERT FIDELITY FIDELITY JANUS ASPEN EMERGING
SOCIALLY VIP II: VIP: ASPEN WORLDWIDE MARKETS
RESPONSIBLE CONTRAFUND EQUITY-INCOME BALANCED GROWTH EQUITY
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,111,815 $ 19,673,384 $ 10,469,988 $ 7,370,102 $ 27,114,475 $ 3,886,258
6,237 55,147 28,292 21,202 79,439 11,452
------------ ------------ ------------ ------------ ------------ ------------
$ 2,105,578 $ 19,618,237 $ 10,441,696 $ 7,348,900 $ 27,035,036 $ 3,874,806
============ ============ ============ ============ ============ ============
$ 2,105,578 $ 19,618,237 $ 10,441,696 $ 7,348,900 $ 27,035,036 $ 3,874,806
============ ============ ============ ============ ============ ============
$ 15.28 $ 12.72 $ 13.25 $ 12.25 $ 12.52 $ 9.90
============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-11
<PAGE> 69
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income.......................................... $ 300 $ 1,382,051 $ 199,553
Mortality and expense risk charges....................... (2,475,736) (350,404) (43,923)
------------ ------------ ------------
Net investment income (loss)......................... (2,475,436) 1,031,647 155,630
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments........................ 5,262,336 55,385,080 198,827
Cost of investments sold................................. (2,718,618) (55,384,897) (176,922)
------------ ------------ ------------
Net realized gain (loss) on investments.............. 2,543,718 183 21,905
Realized gain distribution received...................... 2,984,667 -- 283,232
Change in unrealized appreciation (depreciation) on
investments............................................ 33,808,820 125 (11,797)
------------ ------------ ------------
Net gain (loss) on investments....................... 39,337,205 308 293,340
------------ ------------ ------------
Increase (decrease) attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account........................... (69,865) (1,788) (1,344)
------------ ------------ ------------
Net increase in total equity resulting
from operations.................................... $ 36,791,904 $ 1,030,167 $ 447,626
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP MAINSTAY VP AMERICAN
GROWTH INDEXED SMALL
EQUITY EQUITY CAPITALIZATION
------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income.......................................... $ 481,476 $ 1,596,927 $ --
Mortality and expense risk charges....................... (700,526) (1,250,210) (42,024)
------------ ------------ ------------
Net investment income (loss)......................... (219,050) 346,717 (42,024)
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments........................ 640,992 807,367 365,891
Cost of investments sold................................. (462,390) (445,585) (353,124)
------------ ------------ ------------
Net realized gain on investments..................... 178,602 361,782 12,767
Realized gain distribution received...................... 8,962,456 2,960,475 107,111
Change in unrealized appreciation (depreciation)
on investments......................................... 2,829,774 20,854,191 313,020
------------ ------------ ------------
Net gain (loss) on investments....................... 11,970,832 24,176,448 432,898
------------ ------------ ------------
Increase (decrease) attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account........................... (25,859) (43,500) (1,063)
------------ ------------ ------------
Net increase (decrease) in total equity resulting
from operations.................................... $ 11,725,923 $ 24,479,665 $ 389,811
============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-12
<PAGE> 70
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE ANNUITY SEPARATE ACCOUNT II
TAX-QUALIFIED POLICIES
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,545,116 $ 4,674,959 $ 523,324 $ 2,935,313 $ 680,688 $ 1,257,256
(310,443) (706,975) (78,885) (1,612,221) (502,898) (239,936)
------------ ------------ ------------ ------------ ------------ ------------
1,234,673 3,967,984 444,439 1,323,092 177,790 1,017,320
------------ ------------ ------------ ------------ ------------ ------------
4,937,270 1,309,724 1,092,303 4,219,522 370,587 2,635,043
(5,138,805) (1,068,612) (1,006,509) (2,956,411) (246,090) (2,585,081)
------------ ------------ ------------ ------------ ------------ ------------
(201,535) 241,112 85,794 1,263,111 124,497 49,962
-- 2,921,075 -- 2,507,716 2,307,137 56,176
809,190 (1,246,855) (318,086) 13,467,450 4,894,124 357,210
------------ ------------ ------------ ------------ ------------ ------------
607,655 1,915,332 (232,292) 17,238,277 7,325,758 463,348
------------ ------------ ------------ ------------ ------------ ------------
(4,567) (16,924) 183 (38,300) (14,829) (3,789)
------------ ------------ ------------ ------------ ------------ ------------
$ 1,837,761 $ 5,866,392 $ 212,330 $ 18,523,069 $ 7,488,719 $ 1,476,879
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
JANUS MORGAN STANLEY
CALVERT FIDELITY FIDELITY JANUS ASPEN EMERGING
SOCIALLY VIP II: VIP: ASPEN WORLDWIDE MARKETS
RESPONSIBLE CONTRAFUND EQUITY-INCOME BALANCED GROWTH EQUITY
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 46,184 $ 16,931 $ 12,547 $ 131,738 $ 167,546 $ 26,126
(18,193) (120,851) (59,704) (43,915) (179,360) (32,989)
------------ ------------ ------------ ------------ ------------ ------------
27,991 (103,920) (47,157) 87,823 (11,814) (6,863)
------------ ------------ ------------ ------------ ------------ ------------
188,442 127,107 100,105 139,843 79,111 505,191
(162,143) (110,037) (92,292) (122,226) (62,679) (475,192)
------------ ------------ ------------ ------------ ------------ ------------
26,299 17,070 7,813 17,617 16,432 29,999
100,182 44,746 63,085 4,553 67,264 115,592
76,729 1,795,628 927,663 464,904 1,328,505 (732,744)
------------ ------------ ------------ ------------ ------------ ------------
203,210 1,857,444 998,561 487,074 1,412,201 (587,153)
------------ ------------ ------------ ------------ ------------ ------------
(494) (3,917) (1,663) (1,422) (3,757) 702
------------ ------------ ------------ ------------ ------------ ------------
$ 230,707 $ 1,749,607 $ 949,741 $ 573,475 $ 1,396,630 $ (593,314)
============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-13
<PAGE> 71
STATEMENT OF CHANGES IN TOTAL EQUITY
For the years ended December 31, 1997
and December 31, 1996
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL APPRECIATION CASH MANAGEMENT
--------------------------------- ---------------------------------
1997 1996 1997 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment income (loss)........ $ (2,475,436) $ (1,474,114) $ 1,031,647 $ 674,859
Net realized gain (loss) on
investments....................... 2,543,718 407,621 183 (170)
Realized gain distribution
received.......................... 2,984,667 -- -- --
Change in unrealized appreciation
(depreciation) on investments..... 33,808,820 19,749,356 125 30
Decrease attributable to funds of
New York Life Insurance and
Annuity Corporation retained by
Separate Account.................. (69,865) (16,885) (1,788) (579)
------------ ------------ ------------ ------------
Net increase in total equity
resulting from operations....... 36,791,904 18,665,978 1,030,167 674,140
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments...... 17,283,267 13,248,538 221,468,721 159,193,839
Policyowners' surrenders............ (7,420,904) (4,150,737) (2,149,399) (997,807)
Policyowners' annuity and death
benefits.......................... (496,971) (354,048) (12,026) --
Net transfers from (to) Fixed
Account........................... (634,517) 140,085 (21,745,282) (16,336,626)
Transfers between Investment
Divisions......................... 23,244,461 37,494,148 (189,074,178) (136,755,752)
------------ ------------ ------------ ------------
Net contributions and
withdrawals..................... 31,975,336 46,377,986 8,487,836 5,103,654
------------ ------------ ------------ ------------
Increase (decrease) in total
equity........................ 68,767,240 65,043,964 9,518,003 5,777,794
TOTAL EQUITY:
Beginning of year................... 153,206,847 88,162,883 22,580,919 16,803,125
------------ ------------ ------------ ------------
End of year......................... $221,974,087 $153,206,847 $ 32,098,922 $ 22,580,919
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
INTERNATIONAL EQUITY TOTAL RETURN
--------------------------------- ---------------------------------
1997 1996 1997 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)........ $ 444,439 $ 202,046 $ 1,323,092 $ 1,002,318
Net realized gain on investments.... 85,794 23,512 1,263,111 446,360
Realized gain distribution
received.......................... -- 6,289 2,507,716 --
Change in unrealized appreciation
(depreciation) on investments..... (318,086) 35,676 13,467,450 7,966,085
Increase (decrease) attributable to
funds of New York Life Insurance
and Annuity Corporation retained
by Separate Account............... 183 (781) (38,300) (11,256)
------------ ------------ ------------ ------------
Net increase in total equity
resulting from operations....... 212,330 266,742 18,523,069 9,403,507
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments...... 756,173 456,933 9,496,059 8,598,145
Policyowners' surrenders............ (235,473) (92,408) (4,771,168) (3,109,248)
Policyowners' annuity and death
benefits.......................... (15,263) (9,215) (536,283) (292,743)
Net transfers from (to) Fixed
Account........................... 6,221 37,407 (1,062,480) (169,531)
Transfers between Investment
Divisions......................... 977,443 3,062,319 8,742,557 19,659,858
------------ ------------ ------------ ------------
Net contributions and
withdrawals..................... 1,489,101 3,455,036 11,868,685 24,686,481
------------ ------------ ------------ ------------
Increase in total equity........ 1,701,431 3,721,778 30,391,754 34,089,988
TOTAL EQUITY:
Beginning of year................... 4,897,866 1,176,088 108,459,148 74,369,160
------------ ------------ ------------ ------------
End of year......................... $ 6,599,297 $ 4,897,866 $138,850,902 $108,459,148
============ ============ ============ ============
</TABLE>
(a) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-14
<PAGE> 72
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE ANNUITY SEPARATE ACCOUNT II
TAX-QUALIFIED POLICIES
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD
CONVERTIBLE GOVERNMENT CORPORATE BOND
--------------------------- --------------------------- ---------------------------
1997 1996(a) 1997 1996 1997 1996
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 155,630 $ 5,737 $ 1,234,673 $ 1,258,997 $ 3,967,984 $ 1,421,096
21,905 -- (201,535) (206,200) 241,112 73,731
283,232 1,118 -- -- 2,921,075 455,418
(11,797) (746) 809,190 (776,162) (1,246,855) 928,223
(1,344) (4) (4,567) (1,635) (16,924) (6,157)
------------ ------------ ------------ ------------ ------------ ------------
447,626 6,105 1,837,761 275,000 5,866,392 2,872,311
------------ ------------ ------------ ------------ ------------ ------------
542,669 46,322 1,341,036 1,956,083 5,458,336 2,698,422
(84,162) -- (1,368,958) (1,172,007) (2,267,246) (730,510)
-- -- (104,052) (166,939) (110,532) (39,751)
(13,754) -- (103,177) (138,140) 87,769 133,504
3,648,550 706,202 (2,364,157) 669,666 28,483,192 22,396,428
------------ ------------ ------------ ------------ ------------ ------------
4,093,303 752,524 (2,599,308) 1,148,663 31,651,519 24,458,093
------------ ------------ ------------ ------------ ------------ ------------
4,540,929 758,629 (761,547) 1,423,663 37,517,911 27,330,404
758,629 -- 24,959,713 23,536,050 35,802,494 8,472,090
------------ ------------ ------------ ------------ ------------ ------------
$ 5,299,558 $ 758,629 $ 24,198,166 $ 24,959,713 $ 73,320,405 $ 35,802,494
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
VALUE BOND GROWTH EQUITY
--------------------------- --------------------------- ---------------------------
1997 1996 1997 1996 1997 1996
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 177,790 $ 111,643 $ 1,017,320 $ 919,319 $ (219,050) $ (37,598)
124,497 56,211 49,962 67,613 178,602 114,907
2,307,137 331,458 56,176 -- 8,962,456 4,635,761
4,894,124 2,480,326 357,210 (785,904) 2,829,774 909,080
(14,829) (4,901) (3,789) (1,060) (25,859) (8,840)
------------ ------------ ------------ ------------ ------------ ------------
7,488,719 2,974,737 1,476,879 199,968 11,725,923 5,613,310
------------ ------------ ------------ ------------ ------------ ------------
4,232,629 2,144,693 1,000,361 1,356,317 5,776,378 2,973,597
(1,188,146) (340,909) (1,052,054) (1,016,681) (2,165,671) (857,970)
(135,096) (37,598) (99,443) (26,793) (167,673) (49,744)
260,817 179,498 (63,468) 14,027 46,978 186,645
18,941,073 14,663,548 975,709 2,674,350 16,644,547 11,331,332
------------ ------------ ------------ ------------ ------------ ------------
22,111,277 16,609,232 761,105 3,001,220 20,134,559 13,583,860
------------ ------------ ------------ ------------ ------------ ------------
29,599,996 19,583,969 2,237,984 3,201,188 31,860,482 19,197,170
24,598,426 5,014,457 17,787,649 14,586,461 37,550,416 18,353,246
------------ ------------ ------------ ------------ ------------ ------------
$ 54,198,422 $ 24,598,426 $ 20,025,633 $ 17,787,649 $ 69,410,898 $ 37,550,416
============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-15
<PAGE> 73
STATEMENT OF CHANGES IN TOTAL EQUITY (CONTINUED)
For the years ended December 31, 1997
and December 31, 1996
<TABLE>
<CAPTION>
ALGER AMERICAN
MAINSTAY VP SMALL
INDEXED EQUITY CAPITALIZATION
--------------------------------- ---------------------------------
1997 1996 1997 1996(a)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)........ $ 346,717 $ 301,328 $ (42,024) $ (499)
Net realized gain (loss) on
investments....................... 361,782 3,237,791 12,767 (193)
Realized gain distribution
received.......................... 2,960,475 826,965 107,111 --
Change in unrealized appreciation
(depreciation) on investments..... 20,854,191 5,372,322 313,020 1,465
Increase (decrease) attributable to
funds of New York Life Insurance
and Annuity Corporation retained
by Separate Account............... (43,500) (16,075) (1,063) 8
------------ ------------ ------------ ------------
Net increase in total equity
resulting from operations....... 24,479,665 9,722,331 389,811 781
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments...... 9,283,406 5,191,859 554,447 27,083
Policyowners' surrenders............ (3,655,368) (1,629,285) (85,204) (1,082)
Policyowners' annuity and death
benefits.......................... (210,205) (103,547) (107) --
Net transfers from (to) Fixed
Account........................... (22,594) 209,758 35,666 11,702
Transfers between Investment
Divisions......................... 32,489,812 20,247,586 4,377,981 487,463
Return of equity contribution to New
York Life Insurance
and Annuity Corporation........... -- (10,765,101) -- --
------------ ------------ ------------ ------------
Net contributions and
withdrawals..................... 37,885,051 13,151,270 4,882,783 525,166
------------ ------------ ------------ ------------
Increase in total equity........ 62,364,716 22,873,601 5,272,594 525,947
TOTAL EQUITY:
Beginning of year................... 65,862,707 42,989,106 525,947 --
------------ ------------ ------------ ------------
End of year......................... $128,227,423 $ 65,862,707 $ 5,798,541 $ 525,947
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
FIDELITY JANUS
VIP: ASPEN
EQUITY-INCOME BALANCED
--------------------------------- ---------------------------------
1997 1996(a) 1997 1996(a)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)........ $ (47,157) $ (505) $ 87,823 $ 3,529
Net realized gain on investments.... 7,813 308 17,617 558
Realized gain distribution
received.......................... 63,085 -- 4,553 --
Change in unrealized appreciation
(depreciation) on investments..... 927,663 1,391 464,904 (1,693)
Increase (decrease) attributable to
funds of New York Life Insurance
and Annuity Corporation retained
by Separate Account............... (1,663) (1) (1,422) (6)
------------ ------------ ------------ ------------
Net increase (decrease) in total
equity resulting from
operations...................... 949,741 1,193 573,475 2,388
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments...... 1,272,681 53,102 920,259 20,348
Policyowners' surrenders............ (132,003) -- (122,827) --
Policyowners' annuity and death
benefits.......................... (8,989) -- (48,121) --
Net transfers from (to) Fixed
Account........................... 49,560 (2,670) 41,510 5,196
Transfers between Investment
Divisions......................... 7,776,259 482,822 5,584,736 371,936
------------ ------------ ------------ ------------
Net contributions and
withdrawals..................... 8,957,508 533,254 6,375,557 397,480
------------ ------------ ------------ ------------
Increase in total equity........ 9,907,249 534,447 6,949,032 399,868
TOTAL EQUITY:
Beginning of year................... 534,447 -- 399,868 --
------------ ------------ ------------ ------------
End of year......................... $ 10,441,696 $ 534,447 $ 7,348,900 $ 399,868
============ ============ ============ ============
</TABLE>
(a) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-16
<PAGE> 74
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE ANNUITY SEPARATE ACCOUNT II
TAX-QUALIFIED POLICIES
<TABLE>
<CAPTION>
CALVERT FIDELITY
SOCIALLY VIP II:
RESPONSIBLE CONTRAFUND
--------------------------------- ---------------------------------
1997 1996 1997 1996(a)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 27,991 $ 12,238 $ (103,920) $ (881)
26,299 3,532 17,070 114
100,182 42,293 44,746 --
76,729 (8,190) 1,795,628 9,115
(494) (77) (3,917) (15)
------------ ------------ ------------ ------------
230,707 49,796 1,749,607 8,333
------------ ------------ ------------ ------------
307,316 112,398 2,529,779 41,751
(26,289) (19,134) (193,614) --
-- -- (3,255) --
(2,218) 11,968 68,020 6,319
805,582 494,939 14,518,700 892,597
-- -- -- --
------------ ------------ ------------ ------------
1,084,391 600,171 16,919,630 940,667
------------ ------------ ------------ ------------
1,315,098 649,967 18,669,237 949,000
790,480 140,513 949,000 --
------------ ------------ ------------ ------------
$ 2,105,578 $ 790,480 $ 19,618,237 $ 949,000
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN MORGAN STANLEY
WORLDWIDE EMERGING MARKETS
GROWTH EQUITY
--------------------------------- ---------------------------------
1997 1996(a) 1997 1996(a)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ (11,814) $ 3,984 $ (6,863) $ 194
16,432 -- 29,999 40
67,264 -- 115,592 --
1,328,505 8,631 (732,744) 2,517
(3,757) (17) 702 (2)
------------ ------------ ------------ ------------
1,396,630 12,598 (593,314) 2,749
------------ ------------ ------------ ------------
3,626,051 68,873 846,636 21,005
(306,921) (1,073) (44,611) (1,078)
(6,683) -- (2,380) --
195,389 5,954 48,827 15,204
21,087,779 956,439 3,360,106 221,662
------------ ------------ ------------ ------------
24,595,615 1,030,193 4,208,578 256,793
------------ ------------ ------------ ------------
25,992,245 1,042,791 3,615,264 259,542
1,042,791 -- 259,542 --
------------ ------------ ------------ ------------
$ 27,035,036 $ 1,042,791 $ 3,874,806 $ 259,542
============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-17
<PAGE> 75
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Organization and Accounting Policies:
- --------------------------------------------------------------------------------
New York Life Insurance and Annuity Corporation Variable Annuity Separate
Account I ("Separate Account I") and New York Life Insurance and Annuity
Corporation Variable Annuity Separate Account II ("Separate Account II")
were established on October 5, 1992, under Delaware law by New York Life
Insurance and Annuity Corporation, a wholly-owned subsidiary of New York Life
Insurance Company. These accounts were established to receive and invest premium
payments under Non-Qualified Flexible Premium Multi-Funded Variable Retirement
Annuity Policies (Separate Account I) and Qualified Flexible Premium
Multi-Funded Variable Retirement Annuity Policies (Separate Account II) issued
by New York Life Insurance and Annuity Corporation. Separate Account I policies
are designed to establish retirement benefits to provide individuals with
supplemental retirement income. Separate Account II policies are designed to
establish retirement benefits for individuals who participate in qualified
pension, profit sharing or annuity plans. The policies are distributed by NYLIFE
Distributors Inc. and sold by registered representatives of NYLIFE Securities
Inc., both of which are wholly-owned subsidiaries of NYLIFE Inc., which is a
wholly-owned subsidiary of New York Life Insurance Company. Separate Account I
and Separate Account II are registered under the Investment Company Act of 1940,
as amended, as unit investment trusts.
The assets of Separate Account I and Separate Account II are invested in the
shares of the MainStay VP Series Fund, Inc. (formerly, "New York Life MFA Series
Fund, Inc."), The Alger American Fund, the Acacia Capital Corporation, the
Fidelity Variable Insurance Products Fund, the Fidelity Variable Insurance
Products Fund II, the Janus Aspen Series and the Morgan Stanley Universal Funds,
Inc. (collectively, "Funds"). These assets are clearly identified and
distinguished from the other assets and liabilities of New York Life Insurance
and Annuity Corporation.
Separate Account I and Separate Account II offer the following eighteen
variable Investment Divisions, with their respective fund portfolios, for
Policyowners to invest premium payments: MainStay VP Capital Appreciation,
MainStay VP Cash Management, MainStay VP Convertible, MainStay VP Government,
MainStay VP High Yield Corporate Bond, MainStay VP International Equity,
MainStay VP Total Return, MainStay VP Value, MainStay VP Bond, MainStay VP
Growth Equity, MainStay VP Indexed Equity, Alger American Small Capitalization,
Calvert Socially Responsible, Fidelity VIP II: Contrafund, Fidelity VIP:
Equity-Income, Janus Aspen Balanced, Janus Aspen Worldwide Growth and Morgan
Stanley Emerging Markets Equity. Each Investment Division of the Separate
Accounts will invest exclusively in the corresponding Eligible Portfolio.
Initial premium payments received are allocated to the MainStay VP Cash
Management Investment Division until 15 days after the policy issue date.
Thereafter, premium payments will be allocated to the Investment Divisions of
Separate Account I or Separate Account II in accordance with the Policyowner's
instructions. In addition, the Policyowner has the option to transfer amounts
between the Investment Divisions of Separate Account I or Separate Account II
and the Fixed Account of New York Life Insurance and Annuity Corporation.
No Federal income tax is payable on investment income or capital gains of
Separate Account I or Separate Account II under current Federal income tax law.
Security Valuation--The investments are valued at the net asset value of
shares of the respective Fund portfolios.
Security Transactions--Realized gains and losses from security transactions
are reported on the identified cost basis. Security transactions are accounted
for as of the date the securities are purchased or sold (trade date).
Distributions Received--Dividend income and capital gain distributions are
recorded on the ex-dividend date and reinvested in the corresponding portfolio.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
F-18
<PAGE> 76
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE ANNUITY SEPARATE ACCOUNTS I AND II
NON-QUALIFIED AND TAX-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-19
<PAGE> 77
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--Investments (in 000's):
- --------------------------------------------------------------------------------
At December 31, 1997, the investments of Separate Account I and Separate
Account II are as follows:
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
<S> <C> <C> <C>
-------------------------------------------------------
SEPARATE ACCOUNT I (NON-QUALIFIED POLICIES)
Number of shares........................................ 11,437 30,017 696
Identified cost*........................................ $168,873 $ 30,017 $ 7,520
SEPARATE ACCOUNT II (TAX-QUALIFIED POLICIES)
Number of shares........................................ 9,946 32,196 494
Identified cost*........................................ $151,065 $ 32,195 $ 5,329
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP MAINSTAY VP AMERICAN
GROWTH INDEXED SMALL
EQUITY EQUITY CAPITALIZATION
<S> <C> <C> <C>
-------------------------------------------------------
SEPARATE ACCOUNT I (NON-QUALIFIED POLICIES)
Number of shares........................................ 4,278 7,484 174
Identified cost*........................................ $ 80,720 $111,142 $ 7,256
SEPARATE ACCOUNT II (TAX-QUALIFIED POLICIES)
Number of shares........................................ 3,428 6,251 133
Identified cost*........................................ $ 64,999 $ 94,608 $ 5,501
</TABLE>
* The cost stated also represents the aggregate cost for Federal income tax
purposes.
Investment activity for the year ended December 31, 1997, was as follows:
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
<S> <C> <C> <C>
-------------------------------------------------------
SEPARATE ACCOUNT I (NON-QUALIFIED POLICIES)
Purchases............................................... $ 31,623 $ 69,906 $ 6,554
Proceeds from sales..................................... 11,447 67,359 687
SEPARATE ACCOUNT II (TAX-QUALIFIED POLICIES)
Purchases............................................... $ 37,904 $ 64,929 $ 4,745
Proceeds from sales..................................... 5,262 55,385 199
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP MAINSTAY VP AMERICAN
GROWTH INDEXED SMALL
EQUITY EQUITY CAPITALIZATION
<S> <C> <C> <C>
-------------------------------------------------------
SEPARATE ACCOUNT I (NON-QUALIFIED POLICIES)
Purchases............................................... $ 33,940 $ 45,844 $ 7,272
Proceeds from sales..................................... 911 1,659 1,255
SEPARATE ACCOUNT II (TAX-QUALIFIED POLICIES)
Purchases............................................... $ 29,593 $ 42,147 $ 5,329
Proceeds from sales..................................... 641 807 366
</TABLE>
F-20
<PAGE> 78
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE ANNUITY SEPARATE ACCOUNTS I AND II
NON-QUALIFIED AND TAX-QUALIFIED POLICIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
3,566 11,479 871 10,393 4,523 2,077
$ 35,273 $134,958 $ 9,338 $130,125 $ 62,162 $ 27,338
2,470 6,269 642 8,459 3,378 1,529
$ 24,401 $ 73,883 $ 6,893 $107,216 $ 46,776 $ 20,132
</TABLE>
<TABLE>
<CAPTION>
JANUS MORGAN STANLEY
CALVERT FIDELITY FIDELITY JANUS ASPEN EMERGING
SOCIALLY VIP II: VIP: ASPEN WORLDWIDE MARKETS
RESPONSIBLE CONTRAFUND EQUITY-INCOME BALANCED GROWTH EQUITY
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
1,191 1,203 627 563 1,411 473
$ 2,277 $ 21,595 $ 14,068 $ 9,179 $ 31,207 $ 5,256
1,065 987 431 422 1,159 412
$ 2,048 $ 17,869 $ 9,541 $ 6,907 $ 25,777 $ 4,616
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
$ 5,023 $ 70,903 $ 3,214 $ 21,063 $ 31,389 $ 6,966
8,336 3,376 1,660 10,565 799 3,531
$ 3,564 $ 39,957 $ 3,031 $ 19,980 $ 25,044 $ 4,473
4,937 1,310 1,092 4,220 371 2,635
</TABLE>
<TABLE>
<CAPTION>
JANUS MORGAN STANLEY
CALVERT FIDELITY FIDELITY JANUS ASPEN EMERGING
SOCIALLY VIP II: VIP: ASPEN WORLDWIDE MARKETS
RESPONSIBLE CONTRAFUND EQUITY-INCOME BALANCED GROWTH EQUITY
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
$ 1,485 $ 19,235 $ 13,492 $ 8,513 $ 28,794 $ 4,879
119 183 240 331 257 444
$ 1,405 $ 17,038 $ 9,100 $ 6,627 $ 24,805 $ 4,834
188 127 100 140 79 505
</TABLE>
F-21
<PAGE> 79
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--Mortality and Expense Risk Charges:
- --------------------------------------------------------------------------------
Separate Account I and Separate Account II are charged for administrative
services provided and the mortality and expense risks assumed by New York
Life Insurance and Annuity Corporation. These charges are made daily at an
annual rate of 1.30% of the daily net asset value of each Investment
Division. The amounts of these charges retained in the Investment Divisions
represent funds of New York Life Insurance and Annuity Corporation. Accordingly,
New York Life Insurance and Annuity Corporation participates in the results of
each Investment Division ratably with the Policyowners.
- --------------------------------------------------------------------------------
NOTE 4--Distribution of Net Income:
- --------------------------------------------------------------------------------
Separate Account I and Separate Account II do not expect to declare dividends
to Policyowners from accumulated net investment income and realized gains.
The income and gains are distributed to Policyowners as part of withdrawals
of amounts (in the form of surrenders, death benefits, transfers, or annuity
payments) in excess of the net premium payments.
F-22
<PAGE> 80
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE ANNUITY SEPARATE ACCOUNTS I AND II
NON-QUALIFIED AND TAX-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-23
<PAGE> 81
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--Cost to Policyowners (in 000's):
- --------------------------------------------------------------------------------
At December 31, 1997, the cost to Policyowners for accumulation units
outstanding, with adjustments for net investment income, market appreciation
(depreciation) and deduction for expenses is as follows:
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
------------------------------------------------
<S> <C> <C> <C>
SEPARATE ACCOUNT I (NON-QUALIFIED POLICIES)
Cost to Policyowners (net of withdrawals)................ $162,440 $ 26,827 $ 6,826
Accumulated net investment income (loss)................. (5,929) 3,101 224
Accumulated net realized gain (loss) on investments and
realized gain distributions received................... 11,690 -- 450
Unrealized appreciation (depreciation) on investments.... 87,191 -- (26)
Decrease attributable to funds of New York Life Insurance
and Annuity Corporation retained by Separate Account... (153) (7) (2)
-------- -------- --------
Net amount applicable to Policyowners.................... $255,239 $ 29,921 $ 7,472
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP MAINSTAY VP AMERICAN
GROWTH INDEXED SMALL
EQUITY EQUITY CAPITALIZATION
------------------------------------------------
<S> <C> <C> <C>
SEPARATE ACCOUNT I (NON-QUALIFIED POLICIES)
Cost to Policyowners (net of withdrawals)................ $ 60,455 $ 97,146 $ 7,169
Accumulated net investment income (loss)................. (192) 1,816 (56)
Accumulated net realized gain on investments and
realized gain distributions received................... 20,234 11,805 121
Unrealized appreciation (depreciation) on investments.... 6,177 42,852 358
Increase (decrease) attributable to funds of New York
Life Insurance and Annuity Corporation retained
by Separate Account.................................... (53) (107) (1)
-------- -------- --------
Net amount applicable to Policyowners.................... $ 86,621 $153,512 $ 7,591
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
------------------------------------------------
<S> <C> <C> <C>
SEPARATE ACCOUNT II (TAX-QUALIFIED POLICIES)
Cost to Policyowners (net of withdrawals)................ $148,491 $ 29,425 $ 4,847
Accumulated net investment income (loss)................. (4,692) 2,680 161
Accumulated net realized gain (loss) on investments and
realized gain distributions received................... 6,675 -- 306
Unrealized appreciation (depreciation) on investments.... 71,622 -- (13)
Decrease attributable to funds of New York Life Insurance
and Annuity Corporation retained by Separate Account... (122) (6) (1)
-------- -------- --------
Net amount applicable to Policyowners.................... $221,974 $ 32,099 $ 5,300
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP MAINSTAY VP AMERICAN
GROWTH INDEXED SMALL
EQUITY EQUITY CAPITALIZATION
------------------------------------------------
<S> <C> <C> <C>
SEPARATE ACCOUNT II (TAX-QUALIFIED POLICIES)
Cost to Policyowners (net of withdrawals)................ $ 49,267 $ 82,925 $ 5,409
Accumulated net investment income (loss)................. (157) 1,495 (43)
Accumulated net realized gain on investments and
realized gain distributions received................... 15,711 9,874 120
Unrealized appreciation (depreciation) on investments.... 4,631 34,019 314
Increase (decrease) attributable to funds of New York
Life Insurance and Annuity Corporation retained by
Separate Account....................................... (41) (86) (1)
-------- -------- --------
Net amount applicable to Policyowners.................... $ 69,411 $128,227 $ 5,799
======== ======== ========
</TABLE>
F-24
<PAGE> 82
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE ANNUITY SEPARATE ACCOUNTS I AND II
NON-QUALIFIED AND TAX-QUALIFIED POLICIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 27,672 $117,091 $ 8,144 $115,807 $ 57,651 $ 22,916
9,169 10,489 998 5,622 416 4,137
(1,663) 7,003 168 8,242 3,897 209
(219) (280) (355) 41,032 10,622 (33)
(20) (45) (1) (101) (28) (11)
-------- -------- -------- -------- -------- --------
$ 34,939 $134,258 $ 8,954 $170,602 $ 72,558 $ 27,218
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
JANUS MORGAN STANLEY
CALVERT FIDELITY FIDELITY JANUS ASPEN EMERGING
SOCIALLY VIP II: VIP: ASPEN WORLDWIDE MARKETS
RESPONSIBLE CONTRAFUND EQUITY-INCOME BALANCED GROWTH EQUITY
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,031 $ 21,547 $ 13,958 $ 8,985 $ 30,996 $ 5,070
59 (133) (59) 121 (15) (12)
181 116 130 47 132 183
84 2,387 1,155 652 1,786 (800)
(1) (5) (2) (2) (5) 1
-------- -------- -------- -------- -------- --------
$ 2,354 $ 23,912 $ 15,182 $ 9,803 $ 32,894 $ 4,442
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 19,420 $ 64,277 $ 6,056 $ 97,610 $ 43,491 $ 16,847
5,891 5,659 696 4,253 315 3,073
(977) 3,745 121 4,981 2,823 155
(123) (337) (273) 32,084 7,589 (41)
(13) (24) (1) (77) (20) (8)
-------- -------- -------- -------- -------- --------
$ 24,198 $ 73,320 $ 6,599 $138,851 $ 54,198 $ 20,026
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
JANUS MORGAN STANLEY
CALVERT FIDELITY FIDELITY JANUS ASPEN EMERGING
SOCIALLY VIP II: VIP: ASPEN WORLDWIDE MARKETS
RESPONSIBLE CONTRAFUND EQUITY-INCOME BALANCED GROWTH EQUITY
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,818 $ 17,860 $ 9,492 $ 6,773 $ 25,626 $ 4,465
48 (105) (48) 91 (8) (7)
177 62 71 23 84 146
64 1,805 929 463 1,337 (730)
(1) (4) (2) (1) (4) 1
-------- -------- -------- -------- -------- --------
$ 2,106 $ 19,618 $ 10,442 $ 7,349 $ 27,035 $ 3,875
======== ======== ======== ======== ======== ========
</TABLE>
F-25
<PAGE> 83
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--Unit Transactions (in 000's):
- --------------------------------------------------------------------------------
Transactions in accumulation units for the years ended December 31, 1997 and
December 31, 1996, were as follows:
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL APPRECIATION CASH MANAGEMENT
------------------------- -------------------------
1997 1996 1997 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT I (NON-QUALIFIED POLICIES)
Units issued on premium payments....................... 712 682 211,219 189,700
Units redeemed on surrenders........................... (277) (216) (1,083) (955)
Units redeemed on annuity and death benefits........... (73) (62) (306) (53)
Units issued (redeemed) on net transfers from (to)
Fixed Account........................................ (16) 16 (25,765) (16,041)
Units issued (redeemed) on transfers between
Investment Divisions................................. 621 2,618 (182,812) (167,769)
-------- -------- -------- --------
Net increase (decrease).............................. 967 3,038 1,253 4,882
Units outstanding, beginning of year................... 10,890 7,852 24,436 19,554
-------- -------- -------- --------
Units outstanding, end of year......................... 11,857 10,890 25,689 24,436
======== ======== ======== ========
SEPARATE ACCOUNT II (TAX-QUALIFIED POLICIES)
Units issued on premium payments....................... 886 803 193,703 144,385
Units redeemed on surrenders........................... (373) (250) (1,883) (902)
Units redeemed on annuity and death benefits........... (25) (21) (10) --
Units issued (redeemed) on net transfers from (to)
Fixed Account........................................ (32) 9 (19,052) (14,788)
Units issued (redeemed) on transfers between
Investment Divisions................................. 1,181 2,282 (165,341) (124,092)
-------- -------- -------- --------
Net increase (decrease).............................. 1,637 2,823 7,417 4,603
Units outstanding, beginning of year................... 8,675 5,852 20,142 15,539
-------- -------- -------- --------
Units outstanding, end of year......................... 10,312 8,675 27,559 20,142
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
TOTAL RETURN VALUE
------------------------- -------------------------
1997 1996 1997 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT I (NON-QUALIFIED POLICIES)
Units redeemed on withdrawal by New York Life
Insurance and Annuity Corporation.................... -- -- -- --
Units issued on premium payments....................... 428 543 362 214
Units redeemed on surrenders........................... (265) (272) (66) (25)
Units redeemed on annuity and death benefits........... (92) (83) (24) (2)
Units issued (redeemed) on net transfers from (to)
Fixed Account........................................ (111) (13) 9 5
Units issued on transfers between
Investment Divisions................................. 391 1,615 1,474 1,672
-------- -------- -------- --------
Net increase......................................... 351 1,790 1,755 1,864
Units outstanding, beginning of year................... 9,369 7,579 2,522 658
-------- -------- -------- --------
Units outstanding, end of year......................... 9,720 9,369 4,277 2,522
======== ======== ======== ========
SEPARATE ACCOUNT II (TAX-QUALIFIED POLICIES)
Units redeemed on withdrawal by New York Life
Insurance and Annuity Corporation.................... -- -- -- --
Units issued on premium payments....................... 585 602 273 170
Units redeemed on surrenders........................... (290) (217) (76) (27)
Units redeemed on annuity and death benefits........... (34) (21) (8) (3)
Units issued (redeemed) on net transfers from (to)
Fixed Account........................................ (66) (11) 16 14
Units issued on transfers between Investment
Divisions............................................ 531 1,382 1,227 1,165
-------- -------- -------- --------
Net increase......................................... 726 1,735 1,432 1,319
Units outstanding, beginning of year................... 7,185 5,450 1,754 435
-------- -------- -------- --------
Units outstanding, end of year......................... 7,911 7,185 3,186 1,754
======== ======== ======== ========
</TABLE>
(a) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
F-26
<PAGE> 84
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE ANNUITY SEPARATE ACCOUNTS I AND II
NON-QUALIFIED AND TAX-QUALIFIED POLICIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD MAINSTAY VP
CONVERTIBLE GOVERNMENT CORPORATE BOND INTERNATIONAL EQUITY
------------------- ------------------- ------------------- ---------------------
1997 1996(a) 1997 1996 1997 1996 1997 1996
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
91 17 108 197 933 501 67 99
(8) -- (100) (126) (190) (71) (15) (5)
(3) -- (57) (83) (65) (14) (8) (2)
-- -- (52) (20) 17 85 1 12
402 137 (327) (72) 3,395 3,502 32 405
-------- -------- -------- -------- -------- -------- -------- --------
482 154 (428) (104) 4,090 4,003 77 509
154 -- 3,177 3,281 5,449 1,446 674 165
-------- -------- -------- -------- -------- -------- -------- --------
636 154 2,749 3,177 9,539 5,449 751 674
======== ======== ======== ======== ======== ======== ======== ========
49 5 112 171 408 227 64 41
(7) -- (113) (102) (169) (61) (20) (8)
-- -- (9) (15) (8) (3) (1) (1)
(1) -- (9) (12) 7 11 1 3
337 69 (199) 60 2,136 1,889 83 279
-------- -------- -------- -------- -------- -------- -------- --------
378 74 (218) 102 2,374 2,063 127 314
74 -- 2,122 2,020 2,841 778 426 112
-------- -------- -------- -------- -------- -------- -------- --------
452 74 1,904 2,122 5,215 2,841 553 426
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
ALGER
AMERICAN
MAINSTAY VP MAINSTAY VP MAINSTAY VP SMALL
BOND GROWTH EQUITY INDEXED EQUITY CAPITALIZATION
------------------- ------------------- ------------------- -------------------
1997 1996 1997 1996 1997 1996 1997 1996(a)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- -- -- -- (718) -- --
111 169 325 244 483 335 128 9
(70) (43) (74) (48) (130) (91) (4) --
(31) (19) (11) (16) (43) (26) (1) --
(12) (6) (7) (2) (14) (3) 3 (1)
171 246 989 1,076 1,660 1,594 467 121
-------- -------- -------- -------- -------- -------- -------- --------
169 347 1,222 1,254 1,956 1,091 593 129
2,080 1,733 3,085 1,831 4,768 3,677 129 --
-------- -------- -------- -------- -------- -------- -------- --------
2,249 2,080 4,307 3,085 6,724 4,768 722 129
======== ======== ======== ======== ======== ======== ======== ========
-- -- -- -- -- (718) -- --
87 125 318 205 453 330 56 3
(91) (93) (118) (58) (176) (102) (8) --
(9) (2) (9) (3) (10) (6) -- --
(6) 1 2 13 (1) 14 3 1
83 246 922 776 1,567 1,282 445 51
-------- -------- -------- -------- -------- -------- -------- --------
64 277 1,115 933 1,833 800 496 55
1,591 1,314 2,336 1,403 3,783 2,983 55 --
-------- -------- -------- -------- -------- -------- -------- --------
1,655 1,591 3,451 2,336 5,616 3,783 551 55
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
F-27
<PAGE> 85
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 -- Unit Transactions (in 000's) (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALVERT FIDELITY FIDELITY
SOCIALLY VIP II: VIP:
RESPONSIBLE CONTRAFUND EQUITY-INCOME
----------------- ----------------- -----------------
1997 1996 1997 1996(a) 1997 1996(a)
---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I (NON-QUALIFIED POLICIES)
Units issued on premium payments................... 7 6 245 15 186 5
Units redeemed on surrenders....................... (2) (1) (8) -- (7) --
Units redeemed on annuity and death benefits....... -- -- (2) -- (2) --
Units issued on net transfers from
Fixed Account.................................... -- 1 13 1 6 --
Units issued on transfers between
Investment Divisions............................. 80 39 1,356 224 878 72
------- ------- ------- ------- ------- -------
Net increase..................................... 85 45 1,604 240 1,061 77
Units outstanding, beginning of year............... 69 24 240 -- 77 --
------- ------- ------- ------- ------- -------
Units outstanding, end of year..................... 154 69 1,844 240 1,138 77
======= ======= ======= ======= ======= =======
SEPARATE ACCOUNT II (TAX-QUALIFIED POLICIES)
Units issued on premium payments................... 22 9 216 4 106 5
Units redeemed on surrenders....................... (2) (2) (16) -- (10) --
Units redeemed on annuity and death benefits....... -- -- -- -- (1) --
Units issued on net transfers from
Fixed Account.................................... -- 1 6 1 4 --
Units issued on transfers between
Investment Divisions............................. 57 41 1,245 86 638 46
------- ------- ------- ------- ------- -------
Net increase..................................... 77 49 1,451 91 737 51
Units outstanding, beginning of year............... 61 12 91 -- 51 --
------- ------- ------- ------- ------- -------
Units outstanding, end of year..................... 138 61 1,542 91 788 51
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
JANUS MORGAN STANLEY
JANUS ASPEN EMERGING
ASPEN WORLDWIDE MARKETS
BALANCED GROWTH EQUITY
----------------- ----------------- -----------------
1997 1996(a) 1997 1996(a) 1997 1996(a)
---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I (NON-QUALIFIED POLICIES)
Units issued on premium payments................... 124 9 351 24 61 3
Units redeemed on surrenders....................... (5) -- (17) -- (3) --
Units redeemed on annuity and death benefits....... -- -- (6) -- (1) --
Units issued on net transfers from
Fixed Account.................................... 5 1 25 3 1 1
Units issued on transfers between
Investment Divisions............................. 584 84 2,023 229 316 74
------- ------- ------- ------- ------- -------
Net increase..................................... 708 94 2,376 256 374 78
Units outstanding, beginning of year............... 94 -- 256 -- 78 --
------- ------- ------- ------- ------- -------
Units outstanding, end of year..................... 802 94 2,632 256 452 78
======= ======= ======= ======= ======= =======
SEPARATE ACCOUNT II (TAX-QUALIFIED POLICIES)
Units issued on premium payments................... 80 2 304 6 74 2
Units redeemed on surrenders....................... (10) -- (24) -- (4) --
Units redeemed on annuity and death benefits....... (4) -- (1) -- -- --
Units issued on net transfers from
Fixed Account.................................... 3 1 16 1 4 2
Units issued on transfers between
Investment Divisions............................. 492 36 1,764 93 291 22
------- ------- ------- ------- ------- -------
Net increase..................................... 561 39 2,059 100 365 26
Units outstanding, beginning of year............... 39 -- 100 -- 26 --
------- ------- ------- ------- ------- -------
Units outstanding, end of year..................... 600 39 2,159 100 391 26
======= ======= ======= ======= ======= =======
</TABLE>
(a) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
F-28
<PAGE> 86
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE ANNUITY SEPARATE ACCOUNTS I AND II
NON-QUALIFIED AND TAX-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-29
<PAGE> 87
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--Selected Per Unit Data+:
- --------------------------------------------------------------------------------
The following table presents selected per accumulation unit income and
capital changes (for an accumulation unit outstanding throughout each year)
with respect to each Investment Division of Separate Account I and Separate
Account II:
<TABLE>
<CAPTION>
MAINSTAY VP
CAPITAL APPRECIATION
-------------------------------------------------
1997 1996 1995 1994 1993(a)
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I (NON-QUALIFIED POLICIES)
Unit value, beginning of year........................... $17.66 $15.07 $11.24 $11.91 $10.00
Net investment income (loss)............................ (0.26) (0.20) (0.10) (0.08) (0.08)
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital
share transactions)................................... 4.13 2.79 3.93 (0.59) 1.99
------ ------ ------ ------ ------
Unit value, end of year................................. $21.53 $17.66 $15.07 $11.24 $11.91
====== ====== ====== ====== ======
SEPARATE ACCOUNT II (TAX-QUALIFIED POLICIES)
Unit value, beginning of year........................... $17.66 $15.07 $11.24 $11.91 $10.00
Net investment income (loss)............................ (0.26) (0.20) (0.10) (0.08) (0.09)
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)......................................... 4.13 2.79 3.93 (0.59) 2.00
------ ------ ------ ------ ------
Unit value, end of year................................. $21.53 $17.66 $15.07 $11.24 $11.91
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
HIGH YIELD INTERNATIONAL
CORPORATE BOND EQUITY
--------------------------- -----------------------------
1997 1996 1995(c) 1997 1996 1995(c)
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I (NON-QUALIFIED POLICIES)
Unit value, beginning of year........................... $12.62 $10.91 $10.00 $11.48 $10.53 $10.00
Net investment income................................... 0.96 0.81 0.76 0.82 0.71 0.91
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital
share transactions)................................... 0.50 0.90 0.15 (0.38) 0.24 (0.38)
------ ------ ------ ------ ------ ------
Unit value, end of year................................. $14.08 $12.62 $10.91 $11.92 $11.48 $10.53
====== ====== ====== ====== ====== ======
SEPARATE ACCOUNT II (TAX-QUALIFIED POLICIES)
Unit value, beginning of year........................... $12.60 $10.89 $10.00 $11.49 $10.53 $10.00
Net investment income................................... 0.98 0.84 0.84 0.88 0.75 1.11
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital
share transactions)................................... 0.48 0.87 0.05 (0.44) 0.21 (0.58)
------ ------ ------ ------ ------ ------
Unit value, end of year................................. $14.06 $12.60 $10.89 $11.93 $11.49 $10.53
====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP
GROWTH EQUITY
-------------------------------------------------
1997 1996 1995 1994 1993++(b)
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I (NON-QUALIFIED POLICIES)
Unit value, beginning of year........................... $16.07 $13.08 $10.26 $10.27 $10.00
Net investment income (loss)............................ (0.08) (0.02) 0.05 0.23 0.14
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital
share transactions)................................... 4.12 3.01 2.77 (0.24) 0.13
------ ------ ------ ------ ------
Unit value, end of year................................. $20.11 $16.07 $13.08 $10.26 $10.27
====== ====== ====== ====== ======
SEPARATE ACCOUNT II (TAX-QUALIFIED POLICIES)
Unit value, beginning of year........................... $16.07 $13.08 $10.26 $10.27 $10.00
Net investment income (loss)............................ (0.07) (0.02) 0.06 0.20 0.15
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital
share transactions)................................... 4.11 3.01 2.76 (0.21) 0.12
------ ------ ------ ------ ------
Unit value, end of year................................. $20.11 $16.07 $13.08 $10.26 $10.27
====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during the year.
++ Per unit data based on average daily units outstanding during the period.
(a) For the period January 29, 1993 (Commencement of Operations) through
December 31, 1993.
(b) For the period December 15, 1993 (Commencement of Operations) through
December 31, 1993.
(c) For the period May 1, 1995 (Commencement of Operations) through December 31,
1995.
(d) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
F-30
<PAGE> 88
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE ANNUITY SEPARATE ACCOUNTS I AND II
NON-QUALIFIED AND TAX-QUALIFIED POLICIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
CASH MANAGEMENT CONVERTIBLE GOVERNMENT
----------------------------------------------- ----------------- -------------------------------------------------
1997 1996 1995 1994 1993(a) 1997 1996(d) 1997 1996 1995 1994 1993(a)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.12 $ 1.08 $ 1.04 $ 1.01 $ 1.00 $10.32 $10.00 $11.76 $11.65 $10.11 $10.44 $10.00
0.04 0.04 0.04 0.03 0.01 0.49 0.15 0.61 0.57 0.68 0.68 0.70
-- -- -- -- -- 0.95 0.17 0.34 (0.46) 0.86 (1.01) (0.26)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$ 1.16 $ 1.12 $ 1.08 $ 1.04 $ 1.01 $11.76 $10.32 $12.71 $11.76 $11.65 $10.11 $10.44
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
$ 1.12 $ 1.08 $ 1.04 $ 1.01 $ 1.00 $10.29 $10.00 $11.76 $11.65 $10.11 $10.44 $10.00
0.04 0.04 0.04 0.03 0.01 0.52 0.15 0.62 0.58 0.68 0.70 0.60
-- -- -- -- -- 0.92 0.14 0.33 (0.47) 0.86 (1.03) (0.16)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$ 1.16 $ 1.12 $ 1.08 $ 1.04 $ 1.01 $11.73 $10.29 $12.71 $11.76 $11.65 $10.11 $10.44
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
TOTAL RETURN VALUE BOND
----------------------------------------------- --------------------------- ---------------------------
1997 1996 1995 1994 1993(a) 1997 1996 1995(c) 1997 1996 1995
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$15.10 $13.65 $10.77 $11.37 $10.00 $13.98 $11.50 $10.00 $11.18 $11.10 $ 9.51
0.17 0.14 0.20 0.22 0.24 0.07 0.10 0.13 0.64 0.63 0.71
2.28 1.31 2.68 (0.82) 1.13 2.91 2.38 1.37 0.28 (0.55) 0.88
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$17.55 $15.10 $13.65 $10.77 $11.37 $16.96 $13.98 $11.50 $12.10 $11.18 $11.10
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
$15.10 $13.65 $10.77 $11.37 $10.00 $14.02 $11.53 $10.00 $11.18 $11.10 $ 9.51
0.18 0.16 0.21 0.24 0.17 0.07 0.10 0.16 0.63 0.62 0.77
2.27 1.29 2.67 (0.84) 1.20 2.92 2.39 1.37 0.29 (0.54) 0.82
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$17.55 $15.10 $13.65 $10.77 $11.37 $17.01 $14.02 $11.53 $12.10 $11.18 $11.10
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
<CAPTION>
MAINSTAY VP
BOND
-------------------
1994 1993++(b)
-------------------
<S> <C> <C>
$ 9.97 $ --
1.18 --
(1.64) --
------ ------
$ 9.51 $ --
====== ======
$ 9.97 $10.00
1.17 0.56
(1.63) (0.59)
------ ------
$ 9.51 $ 9.97
====== ======
</TABLE>
<TABLE>
<CAPTION>
ALGER
AMERICAN CALVERT
MAINSTAY VP SMALL SOCIALLY
INDEXED EQUITY CAPITALIZATION RESPONSIBLE
----------------------------------------------- ----------------- -----------------------------
1997 1996 1995 1994 1993(a) 1997 1996(d) 1997 1996 1995(c)
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$17.41 $14.41 $10.66 $10.72 $10.00 $ 9.56 $10.00 $12.87 $11.58 $10.00
0.06 0.09 0.15 0.14 0.13 (0.13) (0.02) 0.30 0.25 1.54
5.36 2.91 3.60 (0.20) 0.59 1.09 (0.42) 2.09 1.04 .04
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$22.83 $17.41 $14.41 $10.66 $10.72 $10.52 $ 9.56 $15.26 $12.87 $11.58
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
$17.41 $14.41 $10.66 $10.72 $10.00 $ 9.56 $10.00 $12.89 $11.59 $10.00
0.07 0.10 0.15 0.13 0.10 (0.13) (0.02) 0.29 0.39 1.34
5.35 2.90 3.60 (0.19) 0.62 1.08 (0.42) 2.10 0.91 .25
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$22.83 $17.41 $14.41 $10.66 $10.72 $10.51 $ 9.56 $15.28 $12.89 $11.59
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
F-31
<PAGE> 89
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--Selected Per Unit Data+ (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY
VIP II: VIP:
CONTRAFUND EQUITY-INCOME
----------------- -----------------
1997 1996(d) 1997 1996(d)
-------------------------------------
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT I (NON-QUALIFIED POLICIES)
Unit value, beginning of year........................... $10.58 $10.00 $10.55 $10.00
Net investment loss..................................... (0.13) (0.02) (0.11) (0.02)
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital
share transactions)................................... 2.52 0.60 2.90 0.57
------ ------ ------ ------
Unit value, end of year................................. $12.97 $10.58 $13.34 $10.55
====== ====== ====== ======
SEPARATE ACCOUNT II (TAX-QUALIFIED POLICIES)
Unit value, beginning of year........................... $10.38 $10.00 $10.47 $10.00
Net investment loss..................................... (0.13) (0.02) (0.13) (0.02)
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)......................................... 2.47 0.40 2.91 0.49
------ ------ ------ ------
Unit value, end of year................................. $12.72 $10.38 $13.25 $10.47
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
JANUS MORGAN
JANUS ASPEN STANLEY
ASPEN WORLDWIDE EMERGING
BALANCED GROWTH MARKETS EQUITY
----------------- ----------------- -----------------
1997 1996(d) 1997 1996(d) 1997 1996(d)
---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I (NON-QUALIFIED POLICIES)
Unit value, beginning of year........................... $10.14 $10.00 $10.36 $10.00 $ 9.93 $10.00
Net investment income (loss)............................ 0.28 0.17 (0.02) 0.07 (0.04) 0.01
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital
share transactions)................................... 1.80 (0.03) 2.16 0.29 (0.06) (0.08)
------ ------ ------ ------ ------ ------
Unit value, end of year................................. $12.22 $10.14 $12.50 $10.36 $ 9.83 $ 9.93
====== ====== ====== ====== ====== ======
SEPARATE ACCOUNT II (TAX-QUALIFIED POLICIES)
Unit value, beginning of year........................... $10.16 $10.00 $10.38 $10.00 $10.00 $10.00
Net investment income (loss)............................ 0.30 0.21 (0.01) 0.09 (0.03) 0.02
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital
share transactions)................................... 1.79 (0.05) 2.15 0.29 (0.07) (0.02)
------ ------ ------ ------ ------ ------
Unit value, end of year................................. $12.25 $10.16 $12.52 $10.38 $ 9.90 $10.00
====== ====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during the year.
(d) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
F-32
<PAGE> 90
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE ANNUITY SEPARATE ACCOUNTS I AND II
NON-QUALIFIED AND TAX-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-33
<PAGE> 91
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of New York Life Insurance and
Annuity Corporation and the Variable Annuity Policyowners:
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations, of changes in total equity and the selected
per unit data present fairly, in all material respects, the financial position
of the New York Life Insurance and Annuity Corporation Variable Annuity Separate
Account I and the New York Life Insurance and Annuity Corporation Variable
Annuity Separate Account II comprised of the MainStay VP Capital Appreciation
Investment Division, MainStay VP Cash Management Investment Division, MainStay
VP Convertible Investment Division, MainStay VP Government Investment Division,
MainStay VP High Yield Corporate Bond Investment Division, MainStay VP
International Equity Investment Division, MainStay VP Total Return Investment
Division, MainStay VP Value Investment Division, MainStay VP Bond Investment
Division, MainStay VP Growth Equity Investment Division, MainStay VP Indexed
Equity Investment Division, Alger American Small Capitalization Investment
Division, Calvert Socially Responsible Investment Division, Fidelity VIP II:
Contrafund Investment Division, Fidelity VIP: Equity-Income Investment Division,
Janus Aspen Balanced Investment Division, Janus Aspen Worldwide Growth
Investment Division, and Morgan Stanley Emerging Markets Equity Investment
Division at December 31, 1997, and the results of each of their operations, the
changes in each of their total equity, and the selected per unit data for each
of the periods presented in conformity with generally accepted accounting
principles. These financial statements and the selected per unit data (herein
referred to as the "financial statements") are the responsibility of management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of investments at
December 31, 1997 with the MainStay VP Series Fund, Inc., The Alger American
Fund, the Acacia Capital Corporation, the Fidelity Variable Insurance Products
Fund, the Fidelity Variable Insurance Products Fund II, the Janus Aspen Series,
and the Morgan Stanley Universal Funds, Inc., provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 23, 1998
F-34
<PAGE> 92
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
New York Life Insurance and Annuity Corporation
In our opinion, the accompanying balance sheets and the related statements
of income, of changes in stockholder's equity and of cash flows present fairly,
in all material respects, the financial position of New York Life Insurance and
Annuity Corporation at December 31, 1997 and 1996, and the results of its
operations and its cash flows for the three years in the period ended December
31, 1997, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York
February 13, 1998
F-35
<PAGE> 93
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
------- -------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Fixed maturities
Available for sale, at fair value...................... $12,170 $11,854
Held to maturity, at amortized cost.................... 801 647
Equity securities........................................... 83 70
Mortgage loans.............................................. 1,305 1,113
Real estate................................................. 151 151
Policy loans................................................ 481 464
Other long-term investments................................. 20 17
------- -------
Total investments................................. 15,011 14,316
Cash and cash equivalents................................... 773 236
Deferred policy acquisition costs........................... 688 691
Other assets................................................ 345 252
Separate account assets..................................... 4,315 2,445
------- -------
Total assets...................................... $21,132 $17,940
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Policyholders' account balances............................. $13,716 $13,163
Future policy benefits...................................... 276 251
Policy claims............................................... 55 57
Deferred taxes.............................................. 93 47
Other liabilities........................................... 727 333
Separate account liabilities................................ 4,303 2,403
------- -------
Total liabilities................................. 19,170 16,254
STOCKHOLDER'S EQUITY
Capital stock -- par value $10,000
(20,000 shares authorized,
2,500 issued and outstanding)............................. 25 25
Additional paid in capital.................................. 480 480
Net unrealized gains on investments......................... 157 68
Retained earnings........................................... 1,300 1,113
------- -------
Total stockholder's equity........................ 1,962 1,686
------- -------
Total liabilities and stockholder's equity........ $21,132 $17,940
======= =======
</TABLE>
See accompanying notes to financial statements.
F-36
<PAGE> 94
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Universal life and annuity fees........................ $ 267 $ 234 $ 224
Net investment income.................................. 1,066 1,048 1,012
Investment gains, net.................................. 126 65 38
Other income........................................... 82 58 71
------ ------ ------
Total revenues.................................... 1,541 1,405 1,345
------ ------ ------
EXPENSES
Interest credited to policyholders' account balances... 748 723 742
Policyholder benefits.................................. 141 117 168
Operating expenses..................................... 352 299 239
------ ------ ------
Total expenses.................................... 1,241 1,139 1,149
------ ------ ------
Income before Federal income taxes.......................... 300 266 196
Federal income taxes:
Current................................................ 114 121 84
Deferred............................................... (1) (24) (8)
------ ------ ------
Total Federal income taxes........................ 113 97 76
------ ------ ------
Net income.................................................. $ 187 $ 169 $ 120
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-37
<PAGE> 95
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996 1995
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Stockholder's equity, beginning of year..................... $1,686 $1,676 $1,141
Net income.................................................. 187 169 120
Change in unrealized gains and losses on investments........ 89 (159) 415
------ ------ ------
Stockholder's equity, end of year........................... $1,962 $1,686 $1,676
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-38
<PAGE> 96
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income................................................ $ 187 $ 169 $ 120
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... (43) (18) (26)
Net capitalization of deferred policy acquisition
costs................................................ (85) (44) (40)
Universal life and annuity fees........................ (202) (188) (183)
Interest credited to policyholders' account balances... 748 723 742
Net realized investment gains.......................... (126) (65) (38)
Deferred income taxes.................................. (1) (24) (8)
Decrease in net separate account assets................ 30 6 17
Decrease (increase) in other assets and other
liabilities.......................................... 126 (127) 308
(Decrease) increase in policy claims................... (2) (24) 8
Increase (decrease) in future policy benefits.......... 25 18 (80)
-------- ------- -------
Net cash provided by operating activities......... 657 426 820
-------- ------- -------
Cash Flows from Investing Activities:
Proceeds from sale of available for sale fixed
maturities............................................. 13,378 5,787 2,370
Proceeds from maturity of available for sale fixed
maturities............................................. 1,137 1,505 930
Proceeds from sale of held to maturity fixed securities... 3 -- --
Proceeds from maturity of held to maturity fixed
maturities............................................. 112 141 103
Proceeds from sale of equity securities................... 140 47 40
Proceeds from repayment of mortgage loans................. 220 143 244
Proceeds from sale of real estate......................... 24 55 13
Proceeds from other invested assets....................... 16 4 31
Cost of available for sale fixed maturities acquired...... (14,391) (7,447) (4,320)
Cost of held to maturity fixed maturities acquired........ (281) (95) (162)
Cost of equity securities acquired........................ (163) (43) (12)
Cost of mortgage loans acquired........................... (413) (280) (320)
Cost of real estate acquired.............................. (4) (35) (14)
Cost of other invested assets acquired.................... (25) (8) (5)
Policy loans.............................................. (17) (29) (25)
Securities sold under agreements to repurchase (net)...... 134 (37) (168)
-------- ------- -------
Net cash used in investing activities............. (130) (292) (1,295)
-------- ------- -------
Cash Flows from Financing Activities:
Policyholders' account balances:
Deposits............................................... 1,228 1,069 1,252
Withdrawals............................................ (176) (562) (751)
Net transfers to the separate accounts.................... (1,040) (733) (238)
Other, net................................................ -- -- (52)
-------- ------- -------
Net cash provided (used) by financing
activities...................................... 12 (226) 211
-------- ------- -------
Effect of exchange rate changes on cash and cash
equivalents............................................... (2) 2 (1)
-------- ------- -------
Net increase (decrease) in cash and cash equivalents........ 537 (90) (265)
-------- ------- -------
Cash and cash equivalents, beginning of year................ 236 326 591
-------- ------- -------
Cash and cash equivalents, end of year...................... $ 773 $ 236 $ 326
======== ======= =======
</TABLE>
See accompanying notes to financial statements.
F-39
<PAGE> 97
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 -- NATURE OF OPERATIONS
New York Life Insurance and Annuity Corporation ("NYLIAC"), is a direct,
wholly owned subsidiary of New York Life Insurance Company ("New York Life")
domiciled in the State of Delaware. NYLIAC offers a wide variety of interest
sensitive insurance and annuity products to a large cross section of the
insurance market. NYLIAC markets its products in all 50 of the United States,
the District of Columbia and Taiwan, primarily through its agency force. In
addition, NYLIAC markets Corporate Owned Life Insurance through independent
brokers and brokerage general agents.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP"). The preparation of financial
statements of life insurance enterprises requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements. Actual results may differ from estimates.
INVESTMENTS
Fixed maturity investments, which NYLIAC has both the ability and the
intent to hold to maturity, are stated at amortized cost. Investments identified
as available for sale are reported at fair value. Unrealized gains and losses on
available for sale securities are reported in stockholder's equity, net of
deferred taxes and related adjustments. The cost basis of fixed maturities is
adjusted for impairments in value deemed to be other than temporary, with the
associated realized loss reported in net income. Equity securities are carried
at fair value with related unrealized gains and losses reflected in
stockholder's equity, net of deferred taxes and related adjustments. Realized
losses are recognized in net income for other than temporary declines in the
fair value of equity securities. Mortgage loans are carried at unpaid principal
balances, net of impairment reserves, and are generally secured. Investment real
estate, which NYLIAC has the intent to hold for the production of income, is
carried at depreciated cost net of write-downs for other than temporary declines
in fair value. Properties held for sale are carried at the lower of cost or fair
value less estimated selling costs. Policy loans are stated at the aggregate
balance due, which approximates fair value since loans on policies have no
defined maturity date and reduce amounts payable at death or surrender. Cash
equivalents include investments that have maturities of 90 days or less at date
of purchase and are carried at amortized cost, which approximates fair value.
Short-term investments include investments that have maturities of between
91-365 days at date of purchase. They are included in fixed maturities on the
balance sheet, and are carried at amortized cost, which approximates fair value.
F-40
<PAGE> 98
INVESTMENTS -- (CONTINUED)
Derivative financial instruments used by NYLIAC to hedge exposure to
interest rate and foreign currency fluctuations are accounted for on an accrual
basis. Realized gains and losses related to contracts that are effective hedges
on specific assets are deferred and recognized in net income in the same period
as gains and losses on the hedged assets. Amounts payable or receivable under
interest rate, currency and commodity swap agreements and interest rate floor
agreements are recognized as investment income or expense when earned. Premiums
paid for interest rate floor agreements are amortized into interest expense over
the life of the agreement. Unamortized premiums are included in other assets in
the balance sheet.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business and certain costs of issuing policies
that vary with and are primarily related to the production of new business have
been deferred and recorded as an asset in the balance sheet. These consist
primarily of commissions, certain expenses of underwriting and issuing
contracts, and certain agency expenses. Acquisition costs for universal life and
annuity contracts are amortized in proportion to estimated gross profits over
the effective life of the contracts, which is assumed to be 25 years for
universal life contracts and 15 years for annuities. Changes in assumptions are
reflected in the current year's amortization.
The carrying amount of the deferred policy acquisition cost asset is
adjusted at each balance sheet date as if the unrealized gains or losses on
investments associated with these insurance contracts had been realized and
included in the gross profits used to determine current period amortization. The
increase or decrease in the deferred policy acquisition cost asset due to
unrealized gains or losses is recorded in stockholder's equity.
RECOGNITION OF INCOME AND RELATED EXPENSES
Amounts received under universal life and annuity contracts are reported as
deposits to policyholders' account balances. Revenues from these contracts
consist of amounts assessed during the period for mortality and expense risk,
policy administration and surrender charges. Policy benefits and claims that are
charged to expense include benefit claims incurred in the period in excess of
related policyholders' account balances.
POLICYHOLDERS' ACCOUNT BALANCES
Policyholders' account balances on universal life and annuity contracts are
equal to cumulative deposits plus credited interest less withdrawals and
charges.
FEDERAL INCOME TAXES
NYLIAC is a member of a group which files a consolidated Federal income tax
return with New York Life. The consolidated income tax provision or benefit is
allocated among the members of the group in accordance with a tax allocation
agreement. The tax allocation agreement provides that each member of the group
is allocated its share of the consolidated tax provision or benefit determined
on a separate company basis. Current Federal income taxes are charged or
credited to operations based upon amounts estimated to be payable or recoverable
as a result of taxable operations for the current year and any adjustments to
such estimates from prior years. Deferred income tax assets and liabilities are
recognized for the future tax consequence of temporary differences between
financial statement carrying amounts and income tax bases of assets and
liabilities.
Current Federal income taxes include a provision for NYLIAC's share of the
equity base tax applicable to mutual life insurance companies and their
subsidiaries. The amount recorded is based on NYLIAC's estimate of the
differential earnings rate (the actual rate will be announced at a later date by
the Internal Revenue Service ("IRS")) used to compute the equity base tax.
F-41
<PAGE> 99
REINSURANCE
NYLIAC enters into reinsurance agreements in the normal course of its
insurance business to reduce overall risk. NYLIAC remains liable for reinsurance
ceded if the reinsurer fails to meet its obligation on the business it has
assumed. NYLIAC evaluates the financial condition of its reinsurers to minimize
its exposure to significant losses from reinsurer insolvencies.
SEPARATE ACCOUNTS
NYLIAC has established separate accounts with varying investment objectives
which are segregated from NYLIAC's general account and are maintained for the
benefit of separate account policyholders and NYLIAC. Separate account assets
are stated at market value. The liability for separate accounts represents
policyholders' interests in the separate account assets. For its registered
separate accounts, these liabilities include accumulated net investment income
and realized and unrealized gains and losses on those assets, and generally
reflect market value. For its guaranteed, non-registered separate accounts, the
liability represents amounts due policyholders pursuant to the terms of the
binder agreements.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of various assets and liabilities are included throughout the
notes to financial statements. Specifically, fair value disclosure of fixed
maturities, short-term investments, cash equivalents, equity securities and
mortgage loans is reported in Note 2 -- Significant Accounting Policies and Note
3 -- Investments. Fair values for policyholders' account balances are reported
in Note 5 -- Insurance Liabilities. Fair values for derivative financial
instruments are included in Note 10 -- Derivative Financial Instruments and Risk
Management. Fair values for repurchase agreements are included in Note
11 -- Commitments and Contingencies.
BUSINESS RISKS AND UNCERTAINTIES
The development of policy reserves and deferred policy acquisition costs
for NYLIAC's products requires management to make estimates and assumptions
regarding mortality, morbidity, lapse, expense and investment experience. Such
estimates are primarily based on historical experience and future expectations
of mortality, morbidity, expense, persistency and investment assumptions. Actual
results could differ from those estimates. Management monitors actual
experience, and where circumstances warrant, revises its assumptions and the
related estimates for policy reserves and deferred policy acquisition costs.
NYLIAC regularly invests in mortgage loans, mortgage-backed securities and
other securities subject to prepayment and call risk. Significant changes in
prevailing interest rates and/or geographic conditions may adversely affect the
timing and amount of cash flows on such securities, as well as their related
values. In addition, the amortization of market premium and accretion of market
discount for mortgage-backed securities is based on historical experience and
estimates of future payment experience on the underlying mortgage loans. Actual
prepayment speeds will differ from original estimates and may result in material
adjustments to amortization or accretion recorded in future periods.
As a subsidiary of a mutual life insurance company, NYLIAC is subject to a
tax on its equity base. The rates applied to NYLIAC's equity base are determined
annually by the IRS after comparison of mutual life insurance company earnings
for the year to the average earnings of the 50 largest stock life insurance
companies for the prior three years. Due to the timing of earnings information,
estimates of the current year's tax rate must be made by management. The
ultimate amounts of equity base tax incurred may vary considerably from the
original estimates.
F-42
<PAGE> 100
RECENT ACCOUNTING PRONOUNCEMENTS
During 1997 the FASB issued SFAS 130, "Reporting Comprehensive Income"
which establishes standards for the reporting and display of comprehensive
income and its components. Comprehensive income is composed of two items -- "net
income" and "other comprehensive income". Other comprehensive income includes
all changes in equity from nonowner sources (e.g., unrealized holding gains and
losses on available for sale securities).
This Statement requires that the Company classify items of other
comprehensive income according to their nature and present each item separately
in the financial statement in which other comprehensive income is reported. This
Statement also requires that the accumulated balance of other comprehensive
income be reported as a separate item in the equity section of the balance
sheet. This Statement is effective for the 1998 financial statements of the
Company. Reclassification of financial statements for earlier periods provided
for comparative purposes is required. Adoption of this Statement will have no
effect on reported net income or stockholder's equity.
NOTE 3 -- INVESTMENTS
FIXED MATURITIES
For publicly traded fixed maturities, estimated fair value is determined
using quoted market prices. For fixed maturities without a readily ascertainable
market value, NYLIAC has determined an estimated fair value using either a
discounted cash flow approach (including provisions for credit risk) or a
proprietary matrix pricing model.
At December 31, 1997 and 1996, the maturity distribution of fixed
maturities was as follows (in millions):
<TABLE>
<CAPTION>
1997 1996
------------------------ ------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
AVAILABLE FOR SALE COST FAIR VALUE COST FAIR VALUE
------------------ ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Due in one year or less.................. $ 480 $ 482 $ 489 $ 491
Due after one year through five years.... 3,053 3,099 3,019 3,039
Due after five years through ten years... 2,156 2,230 2,122 2,151
Due after ten years...................... 2,425 2,608 2,030 2,091
Asset-backed securities:
Government or government agency..... 2,271 2,324 2,866 2,916
Other............................... 1,411 1,427 1,168 1,166
------- ------- ------- -------
Total Available for Sale............ $11,796 $12,170 $11,694 $11,854
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
1997 1996
------------------------ ------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
HELD TO MATURITY COST FAIR VALUE COST FAIR VALUE
---------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Due in one year or less.................. $ 30 $ 30 $ 24 $ 24
Due after one year through five years.... 225 239 192 194
Due after five years through ten years... 226 240 235 241
Due after ten years...................... 224 238 100 105
Asset-backed securities.................. 96 97 96 96
------- ------- ------- -------
Total Held to Maturity.............. $ 801 $ 844 $ 647 $ 660
======= ======= ======= =======
</TABLE>
F-43
<PAGE> 101
FIXED MATURITIES -- (CONTINUED)
At December 31, 1997 and 1996, the distribution of gross unrealized gains
and losses on investments in fixed maturities was as follows (in millions):
<TABLE>
<CAPTION>
1997
-------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
AVAILABLE FOR SALE COST GAINS LOSSES FAIR VALUE
------------------ --------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government
corporations and agencies............... $ 1,066 $ 36 $ 1 $ 1,101
U.S. agencies, state and municipal........ 1,946 42 2 1,986
Foreign governments....................... 237 19 -- 256
Corporate................................. 7,136 276 12 7,400
Other..................................... 1,411 20 4 1,427
------- ---- --- -------
Total Available for Sale............. $11,796 $393 $19 $12,170
======= ==== === =======
HELD TO MATURITY
----------------
Corporate................................. $ 705 $ 42 $-- $ 747
Other..................................... 96 1 -- 97
------- ---- --- -------
Total Held to Maturity............... $ 801 $ 43 $-- $ 844
======= ==== === =======
</TABLE>
<TABLE>
<CAPTION>
1996
-------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
AVAILABLE FOR SALE COST GAINS LOSSES FAIR VALUE
------------------ --------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government
corporations and agencies............... $ 1,243 $ 24 $ 7 $ 1,260
U.S. agencies, state and municipal........ 2,561 64 15 2,610
Foreign governments....................... 191 13 1 203
Corporate................................. 6,531 131 47 6,615
Other..................................... 1,168 19 21 1,166
------- ---- --- -------
Total Available for Sale............. $11,694 $251 $91 $11,854
======= ==== === =======
</TABLE>
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
HELD TO MATURITY COST GAINS LOSSES FAIR VALUE
---------------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Corporate................................. $ 551 $ 15 $ 2 $ 564
Other..................................... 96 -- -- 96
------- ---- --- -------
Total Held to Maturity............... $ 647 $ 15 $ 2 $ 660
======= ==== === =======
</TABLE>
F-44
<PAGE> 102
EQUITY SECURITIES
Estimated fair value for equity securities has been determined using quoted
market prices. At December 31, 1997 and 1996, the distribution of gross
unrealized gains and losses on equity securities is as follows (in millions):
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1997...................... $66 $25 $8 $83
1996...................... $63 $ 8 $1 $70
</TABLE>
MORTGAGE LOANS
NYLIAC's mortgage loans are diversified by property type, location and
borrower, and are generally collateralized by the related property. The carrying
value of mortgage loans was $1,305 million and $1,113 million at December 31,
1997 and 1996, respectively.
The fair market value of the mortgage loan portfolio at December 31, 1997
and 1996 is estimated to be $1,408 million and $1,194 million, respectively.
Market values are determined by discounting the projected cash flow for each
individual loan to determine the current net present value. The discount rate
used approximates the current rate for new mortgages with comparable
characteristics and similar remaining maturities.
At December 31, 1997, contractual commitments to extend credit under
commercial and residential mortgage loan agreements amounted to approximately
$108 million, all at a fixed market rate of interest. These commitments are
diversified by property type and geographic region.
The provision for losses on mortgage loans was $14 million and $20 million
at December 31, 1997 and 1996, respectively. The activity in the specific and
general provision as of December 31, 1997 and 1996 is summarized below (in
millions):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Beginning balance.................................. $20 $20
Reductions credited to operations.................. (1) (1)
Direct writedowns.................................. -- 9
Recoveries of amounts previously charged off....... (5) (8)
--- ---
Ending balance..................................... $14 $20
=== ===
</TABLE>
Impaired mortgage loans along with specific provisions for losses as of
December 31, 1997 and 1996, were as follows (in millions):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Impaired mortgage loans with provisions for
losses.......................................... $19 $ 39
Provision for losses.............................. (8) (14)
--- ----
Net impaired mortgage loans....................... $11 $ 25
=== ====
</TABLE>
F-45
<PAGE> 103
MORTGAGE LOANS -- (CONTINUED)
NYLIAC accrues interest income on impaired loans to the extent it is deemed
collectible and the loan continues to perform under its original or restructured
contractual terms. Interest income on problem loans is generally recognized on a
cash basis. Cash payments on loans in the process of foreclosure are generally
treated as a return of principal.
At December 31, 1997 and 1996, the distribution of the mortgage loan
portfolio by property type and geographic region was as follows (in millions):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Property Type:
Office building.......................... $ 601 $ 643
Retail................................... 255 235
Apartments............................... 187 179
Residential.............................. 172 18
Other.................................... 90 38
------ ------
Total............................... $1,305 $1,113
====== ======
Geographic Region:
Central.................................. $ 250 $ 246
Pacific.................................. 145 133
Middle Atlantic.......................... 426 377
South Atlantic........................... 362 307
New England.............................. 73 33
Other.................................... 49 17
------ ------
Total............................... $1,305 $1,113
====== ======
</TABLE>
REAL ESTATE
At December 31, 1997 and 1996, NYLIAC's real estate portfolio consisted of
the following (in millions):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Investment....................................... $103 $105
Acquired through foreclosure..................... 19 39
Real estate joint ventures and limited partnerships 29 7
---- ----
Total real estate...................... $151 $151
==== ====
</TABLE>
Accumulated depreciation on real estate was $8 million and $5 million at
December 31, 1997 and 1996, respectively. Depreciation expense totaled $3
million for each of the years ended December 31, 1997, 1996 and 1995.
F-46
<PAGE> 104
NOTE 4 -- INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES
The components of net investment income for the years ended December 31,
1997, 1996 and 1995, were as follows (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Fixed maturities..................... $ 961 $ 920 $ 904
Equity securities.................... 6 3 3
Mortgage loans....................... 96 93 82
Real estate.......................... 18 21 19
Policy loans......................... 39 37 35
Other................................ 1 6 4
------ ------ ------
Gross investment income......... 1,121 1,080 1,047
Investment expenses.................. (55) (32) (35)
------ ------ ------
Net investment income...... $1,066 $1,048 $1,012
====== ====== ======
</TABLE>
For the years ended December 31, 1997, 1996 and 1995, realized investment
gains computed under the specific identification method are as follows (in
millions):
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- --------------
GAINS LOSSES GAINS LOSSES GAINS LOSSES
----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
Fixed maturities....................... $172 $ (83) $100 $ (64) $ 62 $ (32)
Equity securities...................... 9 (4) 22 (1) 16 (7)
Mortgage loans......................... 12 (8) 15 (19) 15 (19)
Real estate............................ 3 (2) 6 (3) 1 (1)
Derivative instruments................. 80 (71) 46 (41) 102 (102)
Other.................................. 19 (1) 7 (3) 9 (6)
---- ----- ---- ----- ---- -----
Subtotal.......................... $295 $(169) $196 $(131) $205 $(167)
---- ----- ---- ----- ---- -----
Investment gains, net.................. $126 $65 $38
===== ==== ====
</TABLE>
During 1997, one fixed maturity investment that had been classified as held
to maturity was sold due to credit deterioration. The investment had an
amortized cost of $2,791,000, and the sale resulted in a realized gain of
$14,000.
F-47
<PAGE> 105
NOTE 4 -- INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES -- (CONTINUED)
Stockholder's equity at December 31, 1997 and 1996 includes net unrealized
gains as follows (in millions):
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Net unrealized gains on investments before adjustments...... $ 382 $ 163
----- -----
Related adjustments:
Deferred policy acquisition costs...................... (148) (60)
Policyholder liabilities............................... 7 2
Deferred Federal income taxes.......................... (84) (37)
----- -----
(225) (95)
----- -----
Net unrealized gains on investments included in
stockholder's equity...................................... $ 157 $ 68
===== =====
</TABLE>
Changes in net unrealized gains and losses on investments were as follows
(in millions):
<TABLE>
<CAPTION>
1997 1996
---- -----
<S> <C> <C>
Unrealized gains (losses) on investments:
Beginning of year...................................... $163 $ 535
End of year............................................ 382 163
---- -----
Net change............................................. 219 (372)
Change in related adjustments of balance sheet accounts:
Deferred policy acquisition costs...................... (88) 136
Policyholder liabilities............................... 5 (7)
Deferred Federal income taxes.......................... (47) 84
---- -----
Change in unrealized gains on investments................... 89 (159)
Net unrealized gains on investments at beginning of year.... 68 227
---- -----
Net unrealized gains on investments at end of year.......... $157 $ 68
==== =====
</TABLE>
NOTE 5 -- INSURANCE LIABILITIES
POLICYHOLDERS' ACCOUNT BALANCES
NYLIAC's annuity contracts are primarily deferred annuities. The carrying
value, which approximates fair value, of NYLIAC's liabilities for deferred
annuities at December 31, 1997 and 1996, was $7,150 million and $7,345 million,
respectively.
NOTE 6 -- SEPARATE ACCOUNTS
NYLIAC maintains nine non-guaranteed, registered separate accounts for its
variable deferred annuity and variable life products. NYLIAC maintains
investments in the registered separate accounts of $12 million and $42 million
at December 31, 1997 and 1996, respectively. The assets of the separate
accounts, which are carried at market value, represent investments in shares of
the New York Life sponsored MainStay VP Series Fund and other nonproprietary
funds.
In addition, in 1997 two guaranteed, non-registered separate accounts were
established for universal life insurance policies. These accounts provide a
minimum guaranteed interest rate with a market value adjustment imposed upon
certain surrenders. The assets of these separate accounts are carried at market
value.
F-48
<PAGE> 106
NOTE 7 -- DEFERRED POLICY ACQUISITION COSTS
An analysis of deferred policy acquisition costs (DAC) for the years ended
December 31, 1997, 1996 and 1995 is as follows (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Balance at beginning of year before adjustment for
unrealized gains on investments........................... $751 $ 707 $ 667
Current year additions...................................... 200 151 126
Amortized during year....................................... (115) (107) (86)
Balance at end of year before adjustment for unrealized
gains on investments...................................... 836 751 707
Adjustment for unrealized gains on investments.............. (148) (60) (196)
---- ----- -----
Balance at end of year...................................... $688 $ 691 $ 511
==== ===== =====
</TABLE>
NOTE 8 -- FEDERAL INCOME TAXES
The components of the net deferred tax liability as of December 31, 1997
and 1996 are as follows (in millions):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Future policyholder benefits........... $153 $131
Employee and agents benefits........... 49 44
Other.................................. 6 16
---- ----
Gross deferred tax assets......... 208 191
==== ====
Deferred tax liabilities:
Deferred policy acquisition costs...... 147 161
Investments............................ 149 68
Other.................................. 5 9
---- ----
Gross deferred tax liabilities.... 301 238
---- ----
Net deferred tax liability........ $ 93 $ 47
==== ====
</TABLE>
The gross deferred tax asset relates to temporary differences that are
expected to reverse as net ordinary deductions. Management believes that
NYLIAC's taxable income in future years will be sufficient to realize the
deferred tax benefits and therefore, no valuation allowance has been recorded.
F-49
<PAGE> 107
NOTE 8 -- FEDERAL INCOME TAXES -- (CONTINUED)
Set forth below is a reconciliation of the Federal income tax rate to the
effective tax rate for 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate............. 35.0% 35.0% 35.0%
Equity base tax............................... 3.3 3.2 --
Tax-exempt income............................. (.5) (.7) (1.3)
Other......................................... (.1) (.9) 5.2
---- ---- ----
Effective tax rate............................ 37.7% 36.6% 38.9%
==== ==== ====
</TABLE>
NYLIAC's Federal income tax returns are routinely examined by the IRS and
provisions are made in the financial statements in anticipation of the results
of these audits. The IRS has completed audits through 1993. There were no
material effects on NYLIAC's results of operations as a result of these audits.
NYLIAC believes that its recorded income tax liabilities are adequate for all
open years.
NOTE 9 -- REINSURANCE
A group reinsurance agreement between NYLIAC and New York Life was approved
by the New York State Insurance Department in 1981 and was terminated effective
December 31, 1995. Under the terms of the agreement, NYLIAC assumed the
liabilities for group health long-term disability policies issued by New York
Life. Cash settlements were made between the companies through 1996 as follows
(in millions):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Premiums due..................................... $-- $(32)
Benefit reimbursement............................ 22 20
Experience refund................................ 4 8
--- ----
Net settlement paid (received) by NYLIAC......... $26 $ (4)
=== ====
</TABLE>
As a result of the termination of the group reinsurance agreement between
NYLIAC and New York Life, NYLIAC transferred $119 million in 1996 as payment for
the reserves held to support the claims of the disabled lives covered under the
group reinsurance contract. At December 31, 1995, NYLIAC had established a
liability of $119 million for this payment.
On April 1, 1997 NYLIAC, under the terms of an assumption reinsurance
agreement, acquired certain bank owned life insurance policies that had been
issued by Confederation Life Insurance Company. In conjunction with this
transaction, NYLIAC recorded a liability for policyholder account balances of
$278 million, and received cash of $245 million and a note receivable of $11
million. The difference of $22 million between the liability recorded and the
assets received has been recorded as DAC, which will be amortized over the
remaining life of the policies, assumed to be 25 years.
F-50
<PAGE> 108
NOTE 10 -- DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
NYLIAC uses derivative financial instruments to manage interest rate,
currency and market risk. These derivative financial instruments include foreign
currency forward exchange contracts, interest rate floors, and interest rate and
commodity swaps. NYLIAC has not engaged in derivative financial instrument
transactions for speculative purposes.
Notional or contractual amounts of derivative financial instruments provide
only a measure of involvement in these types of transactions and do not
represent the amounts exchanged between the parties engaged in the transaction.
The amounts exchanged are determined by reference to the notional amounts and
other terms of the derivative financial instruments which relate to interest
rates, exchange rates, or other financial indices.
NYLIAC is exposed to credit-related losses in the event that a counterparty
fails to perform its obligations under contractual terms. The credit exposure of
derivative financial instruments is represented by the sum of fair values of
contracts with each counterparty, if the net value is positive, at the reporting
date.
NYLIAC deals with highly rated counterparties and does not expect the
counterparties to fail to meet their obligations. NYLIAC has controls in place
to monitor credit exposures by limiting transactions with specific
counterparties within specified dollar limits and assessing the future
creditworthiness of counterparties. NYLIAC uses master netting agreements and
adjusts transaction levels, when appropriate, to minimize risk.
INTEREST RATE RISK MANAGEMENT
NYLIAC enters into various types of interest rate contracts primarily to
minimize exposure of specific assets held by NYLIAC to fluctuations in interest
rates.
The following table summarizes the notional amounts and credit exposures of
interest rate related derivative transactions (in thousands):
<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
NOTIONAL CREDIT NOTIONAL CREDIT
AMOUNT EXPOSURE AMOUNT EXPOSURE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest Rate Swaps........................ $125,000 $2,973 $ 57,000 $992
Interest Rate Floors....................... $150,000 $ 251 $150,000 $120
</TABLE>
Interest rate swaps are agreements with other parties to exchange, at
specified intervals, the difference between fixed-rate and floating-rate
interest amounts calculated by reference to an agreed upon notional amount. Swap
contracts outstanding at December 31, 1997 are between seven years, eight months
and twenty years in maturity. At December 31, 1996 such contracts were between
eight years, eight months and fourteen years, four months in maturity. NYLIAC
does not act as an intermediary or broker in interest rate swaps.
F-51
<PAGE> 109
INTEREST RATE RISK MANAGEMENT -- (CONTINUED)
The following table shows the type of swaps used by NYLIAC and the weighted
average interest rates. Average variable rates are based on the rates which
determine the last payment received or paid on each contract; those rates may
change significantly, affecting future cash flows:
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Receive -- fixed swaps -- Notional amount (in thousands).... $125,000 $57,000
Average receive rate................................... 6.64% 7.19%
Average pay rate....................................... 5.70% 5.92%
</TABLE>
During the term of the swap, net settlement amounts are recorded as
investment income or expense when earned. Fair values of interest rate swaps
were $2,973,000 and $569,000 at December 31, 1997 and 1996, respectively, based
on quoted market prices.
Interest rate floor agreements entitle NYLIAC to receive amounts from
counterparties based upon the difference between a strike price and current
interest rates. Such agreements serve as hedges against declining interest rates
on a portfolio of assets. Amounts received during the term of interest rate
floor agreements are recorded as investment income.
At December 31, 1997 and 1996, unamortized premiums on interest rate floors
amounted to $447,000 and $522,000, respectively. Fair values of such agreements
were $251,000 and $120,000 at December 31, 1997 and 1996, respectively, based on
quoted market prices.
COMMODITY RISK MANAGEMENT
NYLIAC has certain bond investments with interest payments linked to prices
of commodities such as gold and crude oil. NYLIAC has entered into commodity
swaps with a total notional amount of $18,000,000 as a hedge against commodity
risks. The credit exposure of these swaps is $3,021,000 at December 31, 1997.
NOTE 11 -- COMMITMENTS AND CONTINGENCIES
LITIGATION
In 1995, NYLIAC and New York Life settled a nationwide class action brought
in New York State court related to the sale of whole life and universal life
insurance policies from 1982 through 1994. In entering into the settlement,
NYLIAC specifically denied any wrongdoing. The settlement was approved by the
judge and has been upheld on appeal.
There are also actions in various jurisdictions by individual policyowners
who either did or did not exclude themselves from the settlement of the
nationwide class action and a purported class action claiming to include
numerous policyowners in one jurisdiction who did not exclude themselves from
the nationwide class action. The certification by a non-New York State court of
a purported class action claiming to include numerous policyowners in that state
who excluded themselves from the settlement of the nationwide class action was
recently reversed by an intermediate appellate court; plaintiffs have filed a
motion for rehearing in the intermediate appellate court. Most of these actions
seek substantial or unspecified compensatory and punitive damages.
F-52
<PAGE> 110
LITIGATION -- (CONTINUED)
NYLIAC is also a defendant in other individual suits arising from its
insurance (including variable contracts registered under the federal securities
law), investment and/or other operations, including actions involving retail
sales practices. Most of these actions also seek substantial or unspecified
compensatory and punitive damages. NYLIAC is also from time to time involved as
a party in various governmental, administrative, and investigative proceedings
and inquiries.
Given the uncertain nature of litigation and regulatory inquiries, the
outcome of the above cannot be predicted. NYLIAC nevertheless believes that,
after provisions made in the financial statements, the ultimate liability that
could result from such litigation and proceedings would not have a material
adverse effect on NYLIAC's financial position; however, it is possible that
settlements or adverse determinations in one or more actions or other
proceedings in the future could have a material adverse effect on NYLIAC's
operating results for a given year.
LOANED SECURITIES AND REPURCHASE AGREEMENTS
NYLIAC participates in a securities lending program for the purpose of
enhancing income on securities held. At December 31, 1997, $659 million ($826
million at December 31, 1996) of NYLIAC's bonds were on loan to others, but were
fully collateralized in an account held in trust for NYLIAC.
NYLIAC enters into agreements to sell and repurchase securities for the
purpose of enhancing income on securities held. Under these agreements, NYLIAC
obtains the use of funds from a broker for approximately one month. The
liability reported in the balance sheet (included in other liabilities) at
December 31, 1997 of $184 million ($50 million at December 31, 1996)
approximates fair value. The investments acquired with the funds received from
the securities sold are primarily included in cash and cash equivalents in the
balance sheet.
NOTE 12 -- RELATED PARTY TRANSACTIONS
New York Life provides NYLIAC with services and facilities for the sale of
insurance and other activities related to the business of insurance. NYLIAC
reimburses New York Life for the identified costs associated with these services
and facilities under the terms of a Service Agreement between New York Life and
NYLIAC. Such costs, amounting to $247 million for the year ended December 31,
1997 ($191 million for 1996 and $166 million for 1995) are reflected in
operating expenses and net investment income in the accompanying Statement of
Income.
NOTE 13 -- SUPPLEMENTAL CASH FLOW INFORMATION
As a result of the reinsurance agreement with New York Life discussed in
Note 9, NYLIAC transferred $119 million in fixed maturities to New York Life
during 1996.
Federal income taxes paid were $126 million, $146 million, and $57 million
during 1997, 1996 and 1995, respectively.
Interest paid was $5 million, $3 million and $2 million during 1997, 1996
and 1995, respectively.
F-53
<PAGE> 111
NOTE 14 -- RECONCILIATIONS BETWEEN STATUTORY ACCOUNTING AND GAAP
Accounting practices used to prepare statutory financial statements for
regulatory filings of life insurance companies differ in certain instances from
GAAP. The following chart reconciles NYLIAC's statutory surplus determined in
accordance with accounting practices prescribed by the Delaware State Insurance
Department with stockholder's equity on a GAAP basis (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Statutory Surplus......................................... $1,089 $ 998 $ 878
------ ------ ------
Adjustments:
Deferred policy acquisition costs.................... 688 691 511
Investment related................................... 377 151 511
Asset valuation reserve.............................. 165 164 137
Interest maintenance reserve......................... 105 35 26
Non-admitted assets.................................. 59 31 26
Policyholder liabilities............................. (330) (262) (187)
Deferred taxes....................................... (93) (47) (156)
Employee benefit liabilities......................... (66) (63) (61)
Other................................................ (32) (12) (9)
------ ------ ------
Total adjustments............................... 873 688 798
------ ------ ------
Total GAAP Stockholder's Equity........................... $1,962 $1,686 $1,676
====== ====== ======
</TABLE>
The following chart reconciles NYLIAC's statutory net income determined in
accordance with accounting practices prescribed by the Delaware State Insurance
Department with net income on a GAAP basis (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory Net Income.................................... $134 $148 $ 95
---- ---- ----
Adjustments:
Deferred policy acquisition costs.................. 63 44 40
Investment related................................. 92 1 (11)
Interest maintenance reserve....................... (14) 9 6
Policyholder liabilities........................... (84) (54) (4)
Deferred taxes..................................... (1) 24 8
Other.............................................. (3) (3) (14)
---- ---- ----
Total Adjustments............................. 53 21 25
---- ---- ----
GAAP Net Income......................................... $187 $169 $120
==== ==== ====
</TABLE>
F-54
<PAGE> 112
NOTE 14 -- RECONCILIATIONS BETWEEN STATUTORY ACCOUNTING AND GAAP -- (CONTINUED)
Financial statements prepared on the statutory basis of accounting vary
from those prepared under GAAP, primarily as follows: (1) the costs related to
acquiring business, principally commissions and certain policy issue expenses
are charged to income in the year incurred, whereas under GAAP they would be
deferred and amortized over the periods benefitted; (2) funds received under
deposit-type contracts are reported as premium income, whereas under GAAP, such
funds are recorded as a liability; (3) life insurance reserves are based on
different assumptions than they are under GAAP; (4) life insurance companies are
required to establish an Asset Valuation Reserve ("AVR") by a direct charge to
surplus to offset potential investment losses, whereas under GAAP, the AVR is
not recognized and any reserve for losses on investments would be deducted from
the assets to which they relate and would be charged to income; (5) investments
in fixed maturities are generally carried at amortized cost or values prescribed
by the National Association of Insurance Commissioners ("NAIC"); under GAAP,
investments in fixed maturities, which are available for sale or held for
trading, are generally carried at market value, with changes in market value
charged against equity or reflected in earnings; (6) realized gains and losses
resulting from changes in interest rates on fixed income investments are
deferred in the interest maintenance reserve ("IMR") and amortized into
investment income over the remaining life of the investment sold, whereas under
GAAP, the gains and losses are recognized in income at the time of sale; and (7)
deferred federal income taxes are not provided for as they are under GAAP; (8)
certain assets are considered non-admitted and excluded from assets in the
balance sheet, whereas they are included under GAAP.
The New York State Insurance Department recognizes only statutory
accounting practices for determining and reporting the financial condition and
results of operations of an insurance company, and for determining its solvency
under the New York Insurance Law. No consideration is given by the Department to
financial statements prepared in accordance with generally accepted accounting
principles in making such determinations.
At December 31, 1997 and 1996, on a statutory basis, admitted assets were
$20,059 million and $17,099 million, respectively, and total liabilities were
$18,970 million and $16,101 million, respectively, which included policy
reserves of $13,666 million and $13,099 million, respectively.
NYLIAC is restricted as to the amounts it may pay as dividends to New York
Life. The maximum amount of dividends which can be paid by a Delaware insurance
company to its stockholders may not exceed that part of its available and
accumulated surplus funds which is derived from net operating profits and
realized capital gains. Such available and accumulated funds at December 31,
1997 were $584 million.
F-55
<PAGE> 113
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements.
All required financial statements are included in Part B of this
Registration Statement.
b. Exhibits.
(1) Resolution of the Board of Directors of New York Life Insurance and
Annuity Corporation ("NYLIAC") authorizing establishment of the
Separate Account - Previously filed as Exhibit (1) to Registrant's
initial Registration Statement, re-filed in accordance with Regulation
S-T, 17 CFR 232.102(e) as Exhibit (1) to Registrant's Post-Effective
Amendment No. 6 on Form N-4, and incorporated herein by reference.
(2) Not applicable.
(3)(a) Distribution Agreement between NYLIFE Securities Inc. and NYLIAC -
Previously filed as Exhibit (3)(a) to Post-Effective Amendment No. 1 to
the registration statement on Form S-6 for NYLIAC MFA Separate
Account-I (File No. 2-86084), re-filed in accordance with Regulation
S-T, 17 CFR 232.102(e) as Exhibit (3)(a) to Post-Effective Amendment
No. 4 to the registration statement on Form S-6 for NYLIAC Variable
Universal Life Separate Account-I (File No. 33-64410), and incorporated
herein by reference.
(3)(b) Distribution Agreement between NYLIFE Distributors Inc. and NYLIAC -
Previously filed as Exhibit (3)(b) to Registrant's Post-Effective
Amendment No. 5 on Form N-4 , and incorporated herein by reference.
(4) Specimen Policy - Previously filed as Exhibit (4) to Registrant's
initial Registration Statement, re-filed in accordance with Regulation
S-T, 17 CFR 232.102(e) as Exhibit (4) to Registrant's Post-Effective
Amendment No. 6 on Form N-4, and incorporated herein by reference.
(5) Form of application for a Policy - Previously filed as Exhibit (5) to
Registrant's initial Registration Statement, re-filed in accordance
with Regulation S-T, 17 CFR 232.102(e) as Exhibit (5) to Registrant's
Post-Effective Amendment No. 6 on Form N-4, and incorporated herein by
reference.
(6)(a) Certificate of Incorporation of NYLIAC - Previously filed as Exhibit
(6)(a) to the registration statement on Form S-6 for NYLIAC MFA
Separate Account-I (File No. 2-86083), re-filed in accordance with
Regulation S-T, 17 CFR 232.102(e) as Exhibit (6)(a) to the initial
registration statement on Form S-6 for NYLIAC Corporate Sponsored
Variable Universal Life Separate Account-I (File No. 333-07617), and
incorporated herein by reference.
(6)(b)(1)By-Laws of NYLIAC - Previously filed as Exhibit (6)(b) to the
registration statement on Form S-6 for NYLIAC MFA Separate Account-I
(File No. 2-86083), re-filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (6)(b) to the initial registration statement on
Form S-6 for NYLIAC Corporate Sponsored Variable Universal Life
Separate Account-I (File No. 333-07617), and incorporated herein by
reference.
(6)(b)(2)Amendments to By-Laws of NYLIAC - Previously filed in accordance with
Regulation S-T, 17 CFR 232.102(e) as Exhibit (6)(b) to Pre-Effective
Amendment No. 1 to the registration statement on Form S-6 for NYLIAC
Variable Universal Life Separate Account-I (File No. 333-39157), and
incorporated herein by reference.
(7) Not applicable.
(8)(a) Stock Sale Agreement between NYLIAC and MainStay VP Series Fund, Inc.
(formerly New York Life MFA Series Fund, Inc.) - Previously filed as
Exhibit (8)(a) to Pre-Effective Amendment No. 1 to the registration
C-1
<PAGE> 114
statement on Form N-1A for New York Life MFA Series Fund, Inc. (File
No. 2-86082), re-filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (9)(a) to Pre-Effective Amendment No. 1 to the
registration statement on Form S-6 for NYLIAC Corporate Sponsored
Variable Universal Life Separate Account-I (File No. 333-07617), and
incorporated herein by reference.
(8)(b) Participation Agreement among Acacia Capital Corporation, Calvert Asset
Management Company, Inc. and NYLIAC, as amended - Previously filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(b)(1)
to Pre-Effective Amendment No. 1 to the registration statement on Form
S-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I (File No. 333-07617), and incorporated herein by reference.
(8)(c) Participation Agreement among The Alger American Fund, Fred Alger and
Company, Incorporated and NYLIAC - Previously filed in accordance with
Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(b)(2) to Pre-Effective
Amendment No. 1 to the registration statement on Form S-6 for NYLIAC
Corporate Sponsored Variable Universal Life Separate Account-I (File
No. 333-07617), and incorporated herein by reference.
(8)(d) Participation Agreement between Janus Aspen Series and NYLIAC -
Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e)
as Exhibit (9)(b)(3) to Pre-Effective Amendment No. 1 to the
registration statement on Form S-6 for NYLIAC Corporate Sponsored
Variable Universal Life Separate Account-I (File No. 333-07617), and
incorporated herein by reference.
(8)(e) Participation Agreement among Morgan Stanley Universal Funds, Inc.,
Morgan Stanley Asset Management Inc. and NYLIAC - Previously filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(b)(4)
to Pre-Effective Amendment No. 1 to the registration statement on Form
S-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I (File No. 333-07617), and incorporated herein by reference.
(8)(f) Participation Agreement among Variable Insurance Products Fund,
Fidelity Distributors Corporation and NYLIAC - Previously filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(b)(5)
to Pre-Effective Amendment No. 1 to the registration statement on Form
S-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I (File No. 333-07617), and incorporated herein by reference.
(8)(g) Participation Agreement among Variable Insurance Products Fund II,
Fidelity Distributors Corporation and NYLIAC - Previously filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(b)(6)
to Pre-Effective Amendment No. 1 to the registration statement on Form
S-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I (File No. 333-07617), and incorporated herein by reference.
(8)(h) Form of Participation Agreement among T. Rowe Price Equity Series,
Inc., T. Rowe Price Associates, Inc. and NYLIAC - filed herewith.
(8)(i) Form of Participation Agreement among Van Eck Worldwide Insurance
Trust, Van Eck Associates Corporation and NYLIAC - filed herewith.
(8)(j) Form of Participation Agreement among MFS Variable Insurance Trust,
Massachusetts Financial Services Company and NYLIAC - filed herewith.
(9) Opinion and Consent of Jonathan E. Gaines, Esq. - filed herewith.
(10)(a) Consent of Price Waterhouse LLP - filed herewith.
(10)(b) Powers of Attorney for the Directors and Officers of NYLIAC -
Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e)
as Exhibit (9)(c) to Pre-Effective Amendment No. 2 to the registration
statement on
C-2
<PAGE> 115
Form S-6 for NYLIAC Corporate Sponsored Variable Universal Life
Separate Account-I (File No. 333-07617) for the following, and
incorporated herein by reference:
Jay S. Calhoun, Vice President, Treasurer and Director (Principal
Financial Officer)
Richard M. Kernan, Jr., Director
Robert D. Rock, Senior Vice President and Director
Frederick J. Sievert, President and Director (Principal Executive
Officer)
Stephen N. Steinig, Senior Vice President, Chief Actuary and Director
Seymour Sternberg, Director
(10)(c) Power of Attorney for Maryann L. Ingenito, Vice President and
Controller (Principal Accounting Officer) Previously filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(d) to
Pre-Effective Amendment No. 1 to the registration statement on Form S-6
for NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I (File No. 333-07617), and incorporated herein by reference.
(10)(d) Power of Attorney for Howard I. Atkins, Executive Vice President
(Principal Financial Officer) - Previously filed as Exhibit 8(d) to
Pre-Effective Amendment No. 1 to the registration statement on Form S-6
for NYLIAC Variable Universal Life Separate Account-I (File No.
333-39157), and incorporated herein by reference.
(11) Not applicable.
(12) Not applicable.
(13) Schedule of Computations - Filed herewith.
(14) Not applicable.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The business address of each director and officer of NYLIAC is 51 Madison
Avenue, New York, NY 10010.
<TABLE>
<CAPTION>
Name: Title:
----- ------
<S> <C>
Seymour Sternberg Director
Richard M. Kernan, Jr. Director
Frederick J. Sievert Director and President
Robert D. Rock Director and Senior Vice President
Jay S. Calhoun Director, Senior Vice President and Treasurer
Stephen N. Steinig Director, Senior Vice President and Chief Actuary
Howard I. Atkins Executive Vice President and Chief Financial Officer
Michael L. Callahan Senior Vice President
Marc J. Chalfin Senior Vice President
John J. DiNiro Senior Vice President
Michael Gallo Senior Vice President
Solomon Goldfinger Senior Vice President
Phillip J. Hildebrand Senior Vice President
Jean E. Hoysradt Senior Vice President
Gerald Kaplan Senior Vice President and Tax Counsel
</TABLE>
C-3
<PAGE> 116
<TABLE>
<CAPTION>
Name: Title:
---- -----
<S> <C>
Richard D. Levy Senior Vice President
Paul Morris Senior Vice President
Michael J. Nocera Senior Vice President
Frank J. Ollari Senior Vice President
Anne F. Pollack Senior Vice President
Steven Ray Senior Vice President
Thomas J. Warga Senior Vice President and General Auditor
Edward C. Wilson Senior Vice President and Chief Sales Officer
William Cheng Vice President
Limin Chu General Manager and President of Taiwan Branch
Henry Ciapas Vice President
Patrick Colloton Vice President
John A. Cullen Vice President and Assistant Controller
Lisa O. Cullity Vice President
Sheila K. Davidson Vice President
Melvin J. Feinberg Vice President
Jane L. Hamrick Vice President and Actuary
Celia M. Holtzberg Vice President
Robert Hynes Vice President
Maryann L. Ingenito Vice President and Controller
Himi L. Kittner Vice President
David Krystel Vice President
Thomas S. McArdle Vice President
Daniel J. McKillop Vice President
John R. Meyer Vice President
William H. Mowat Vice President
Michael M. Oleske Vice President and Associate Tax Counsel
Andrew N. Reiss Vice President and National Sales Manager
Lawrence R. Stoehr Vice President
Richard W. Zuccaro Vice President
George J. Trapp Secretary
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR
REGISTRANT
The Depositor, NYLIAC, is a wholly-owned subsidiary of New York Life Insurance
Company ("New York Life"). The Registrant is a segregated asset account of
NYLIAC. The following chart indicates persons presumed to be controlled by New
York Life+, unless otherwise indicated. Subsidiaries of other subsidiaries are
indented accordingly, and ownership is 100% unless otherwise indicated.
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
- ---- ------------ ----------------
<S> <C> <C>
Aegis Technologies, Inc.(1) Delaware
</TABLE>
- --------
(1)A Certificate of Dissolution was filed for this Company on April 9,
1996. Pursuant to Delaware law, the Company's existence is "continued" for a
period of three years following dissolution for purposes of winding up.
Therefore, this Company is included here for informational purposes only.
C-4
<PAGE> 117
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
- ---- ------------ ----------------
<S> <C> <C>
MainStay Institutional Funds Inc.(2) Maryland
MainStay VP Series Fund, Inc.(3) Maryland
New York Life Fund, Inc.(3) New York
New York Life Insurance and Annuity Corporation Delaware
New York Life Irrevocable Trust of 1996(4) New York N/A
</TABLE>
- ------------------------------------
+ By including the indicated corporations in this list, New York Life is not
stating or admitting that said corporations are under its actual control;
rather, these corporations are listed here to ensure full compliance with
the requirements of this Form N-4.
<TABLE>
<S> <C> <C>
NYLIFE Inc. New York
Eagle Strategies Corp. Arizona
Greystone Realty Corporation Delaware
Greystone Realty Management, Inc. Delaware
MacKay-Shields Financial Corporation Delaware
MainStay Shareholder Services, Inc. Delaware
MSC Holding, Inc. Georgia 85.43%
Monitor Capital Advisors, Inc. Delaware
New York Life Benefit Services, Inc. Massachusetts
ADQ Insurance Agency, Inc. Massachusetts
New York Life Capital Corporation Delaware
New York Life International Investment Inc. Delaware
Monetary Research Ltd. Bermuda
NYL Management Limited United Kingdom
Japan Gamma Asset Management Limited(5) Japan 33.345%
New York Life Worldwide Holding, Inc. Delaware
New York Life Worldwide Capital, Inc. Delaware
New York Life Worldwide Development, Inc. Delaware
New York Life Worldwide (Bermuda) Ltd. Bermuda
</TABLE>
- --------
(2)This entity is an unaffiliated registered investment company as to
which New York Life and/or its subsidiaries perform investment management,
administrative, distribution and underwriting services. It is not a subsidiary
of New York Life but is included here for informational purposes only.
(3)New York Life serves as investment adviser to these entities, the
shares of which are held of record by separate accounts of New York Life (in the
case of New York Life Fund, Inc.) and New York Life Insurance and Annuity
Corporation ("NYLIAC") (for MainStay VP Series Fund, Inc.). New York Life
disclaims any beneficial ownership and control of these entities. New York Life
and NYLIAC as depositors of said separate accounts have agreed to vote their
shares as to matters covered in the proxy statements in accordance with voting
instructions received from holders of variable annuity and variable life
insurance policies at the shareholders meeting of these entities. They are not
subsidiaries of New York Life, but are included here for informational purposes
only.
(4)An unaffiliated trust formed solely for the purpose of holding
shares of New York Life Settlement Corporation. It is not a subsidiary of New
York Life, but is included here for informational purposes only.
(5)Based on the percentage of ownership as well as the lack of
"control" by New York Life over management or policies of this company, this
entity is not considered a subsidiary of New York Life but is included here for
informational purposes only.
C-5
<PAGE> 118
<TABLE>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
- ---- ------------ ----------------
<S> <C> <C>
(NYLIFE Inc. subsidiaries cont.)
New York Life Insurance Worldwide Ltd. Bermuda
New York Life (U.K.) Limited(6) United Kingdom 99.97%
Life Assurance Holding Corporation Limited United Kingdom 31.25%
Windsor Life Assurance Company Limited United Kingdom
Windsor Construction Company Limited United Kingdom
KOHAP New York Life Insurance Ltd. South Korea 51%
P.T. Asuransi Jiwa Sewu-New York Life Indonesia
GEO New York Life, S.A. Mexico 49%
NYLIFE Administration Corp. (doing business as NYLACOR) Texas
NYLIFE Depositary Corporation Delaware
NYLIFE Structured Asset Management Company Ltd. Texas 16.67%; NYLIFE
SFD Holding Inc.
owns the remaining
83.33%
NYLIFE Distributors Inc. Delaware
NYLIFE Equity Inc. Delaware
NYLIFE Funding Inc. Delaware
NYLIFE HealthCare Management, Inc. Delaware
Express Scripts, Inc. Delaware 46.3% of total
combined stock and
89.6% of the voting
rights
Express Scripts Vision Corporation Delaware
Great Plains Reinsurance Company Arizona
Practice Patterns Science, Inc. Delaware 80%
ESI Canada Holdings, Inc. Canada
ESI Canada, Inc. Canada
IVTx of Houston, Inc. Texas
IVTx of Dallas, Inc. Texas
PhyNet, Inc. Delaware
NYLCare Health Plans, Inc. Delaware
New York Life and Health Insurance Company Delaware
Avanti Corporate Health Systems, Inc. Delaware
Avanti Health Systems of Texas, Inc. Texas
Avanti of the District, Inc. Maryland
Avanti of Illinois, Inc. Illinois
Avanti of New York, Inc. New York
MBS IPA, Inc. New York
Avanti of New Jersey, Inc. New Jersey
NYLCare Health Plans of the Mid-Atlantic, Inc. Maryland 80%; Physicians
Health Services
Foundation, Inc.
owns 20%
Physicians Health Services Foundation, Inc. Maryland
Lonestar Holding Co. Delaware
</TABLE>
- --------
(6)One share is held by NYLIFE, Inc., a Nominee, as required by British
law.
C-6
<PAGE> 119
<TABLE>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
- ---- ------------ ----------------
<S> <C> <C>
(NYLIFE Inc. subsidiaries cont.)
Lone Star Health Plan, Inc. Texas 90%; NYLCare
Health Plans, Inc.
owns 10%
NYLCare Health Plans of the Gulf Coast, Inc. Texas
Prime Provider Corp. New York
Prime Provider Corp. of Texas Texas
NYLCare of Connecticut, Inc. Connecticut
Sanus Dental Plan of New Jersey, Inc. New Jersey
NYLCare Dental Plans of the Southwest, Inc. Texas
NYLCare Health Plans of New York, Inc. New York
NYLCare Health Plans of Connecticut, Inc. Connecticut
NYLCare Health Plans of the Midwest, Inc. Illinois
NYLCare Health Plans of New Jersey, Inc. New Jersey
NYLCare of Texas, Inc. Texas
NYLCare Passport PPO of the Southwest, Inc. Texas
NYLCare Preferred Services, Inc. Maryland
Sanus Preferred Providers West, Inc. California
Sanus Preferred Services of Illinois, Inc. Illinois
NYLCare Health Plans of the Southwest, Inc. Texas
NYLCare Health Plans of Louisiana, Inc. Louisiana 99.8%; Patrick D.
Seiter and
E. L. Henry each
own .1% of the
remaining stocks
NYLCare of New England, Inc. Delaware
Sanus - Northeast, Inc. Delaware
NYLCare Health Plans of Maine, Inc. Maine
NYLCare NC Holdings, Inc. Delaware
WellPath Community Health Plans, L.L.C. North Carolina Duke Medical
Strategies, Inc.
holds 50%;
50% LLC interest
WPCHP Holdings, Inc. Delaware
WellPath Preferred Services, L.L.C. North Carolina 99%; WPCHP
Holdings, Inc. owns
other 1%
WellPath Select Holdings, L.L.C. North Carolina WPCHP Holdings,
Inc. holds 1%;
99% LLC Interest
WellPath Select, Inc. North Carolina
WellPath of Carolina, Inc. Delaware
WellPath of Arizona Reinsurance Company Arizona
Sanus of New York and New Jersey, Inc. New York
NYLCare Health Plans of Pennsylvania, Inc. Pennsylvania
Docservco, Inc. New York
The ETHIX Corporation Delaware
ETHIX Great Lakes, Inc. Michigan
ETHIX Mid-Atlantic, Inc. Pennsylvania
ETHIX Midlands, Inc. Delaware
</TABLE>
C-7
<PAGE> 120
<TABLE>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
- ---- ------------ ----------------
<S> <C> <C>
(NYLIFE Inc. subsidiaries cont.)
ETHIX Mid-Rivers, Inc. Missouri
ETHIX Northwest Public Services, Inc. Washington
ETHIX Northwest, Inc. Washington
NYLCare Health Plans Northwest, Inc. Washington
ETHIX Pacific, Inc. Oregon
ETHIX Risk Management, Inc. Oregon
ETHIX Southeast, Inc. North Carolina
ETHIX Southwest, Inc. Texas
Benefit Panel Services, Inc. California 33 1/3% owned
by Mass Mutual
Holding Company
Two MSC, Inc. and
33 1/3% owned by
Anthem Companies,
Inc.
BPS Health Plan Administrators California
VivaHealth, Incorporated California
One Liberty Plaza Holdings, Inc. Delaware
NYLIFE Realty Inc. Delaware
CNP Realty Investments, Inc. Delaware
NYLIFE Refinery Inc. Delaware
NYLIFE Resources Inc. Delaware
NYLIFE Securities Inc. New York
NYLIFE SFD Holding Inc. Delaware
NYLIFE Structured Asset Management Company, Ltd. Texas 83.33%; NYLIFE
Depositary Corp.
owns the remaining
16.67%
NYLINK Insurance Agency Incorporated Delaware
NYLINK Insurance Agency of Alabama, Incorporated Alabama
NYLINK Insurance Agency of Hawaii, Incorporated Hawaii
NYLINK Insurance Agency of Massachusetts, Incorporated Massachusetts
NYLINK Insurance Agency of New Mexico, Incorporated New Mexico
NYLTEMPS Inc. Delaware
New York Life Trust Company New York
NYLIFE Insurance Company of Arizona Arizona
NYLINK Insurance Agency of Ohio, Incorporated(7) Ohio
NYLINK Insurance Agency of Oklahoma, Incorporated(8) Oklahoma
</TABLE>
- --------
(7)This affiliated corporation is organized to conduct the business of
NYLINK Insurance Agency Incorporated in the state of Ohio.
(8)This affiliated corporation is organized to conduct the business of
NYLINK Insurance Agency Incorporated in the state of Oklahoma.
C-8
<PAGE> 121
<TABLE>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
- ---- ------------ ----------------
<S> <C> <C>
NYLINK Insurance Agency of Texas, Incorporated(9) Texas
The MainStay Funds(10) Massachusetts
</TABLE>
ITEM 27. NUMBER OF CONTRACTOWNERS
As of January 31, 1998, there were approximately 43,860 owners of
Non-Qualified Policies offered under NYLIAC Variable Annuity Separate Account-I.
ITEM 28. INDEMNIFICATION
Reference is made to Article VIII of the Depositor's By-Laws.
New York Life maintains Directors and Officers Liability/Company
Reimbursement ("D&O") insurance which covers directors, officers and trustees of
New York Life, its subsidiaries, and its subsidiaries and certain affiliates
including the Depositor while acting in their capacity as such. The total annual
aggregate of D&O coverage is $100 million applicable to all insureds under the
D&O policies. There is no assurance that such coverage will be maintained by New
York Life or for the Depositor in the future as, in the past, there have been
large variances in the availability of D&O insurance for financial institutions.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Depositor pursuant to the foregoing provisions, or otherwise, the Depositor has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Depositor of expenses incurred
or paid by a director, officer or controlling person of the Depositor in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Depositor will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Investment companies (other than the Registrant) for which NYLIFE
Distributors Inc. is currently acting as underwriter:
NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I
NYLIAC MFA Separate Account-I
NYLIAC MFA Separate Account-II
NYLIAC Variable Annuity Separate Account-II
NYLIAC Variable Annuity Separate Account-III
- --------
(9)This affiliated corporation is organized to conduct the business of
NYLINK Insurance Agency Incorporated in the state of Texas.
(10)This entity is an unaffiliated registered investment company for
which New York Life subsidiaries perform investment management, administrative,
distribution and underwriting services. It is not a subsidiary of New York Life,
but is included here for informational purposes only.
C-9
<PAGE> 122
NYLIAC Variable Universal Life Separate Account-I
NYLIAC VLI Separate Account
(b) Directors and Officers.
The business address of each director and officer of NYLIFE Distributors
Inc. is 300 Interpace Parkway, Parsippany, New Jersey 07054.
<TABLE>
<CAPTION>
Names of Directors and Officers Positions and Offices with Underwriter
------------------------------- --------------------------------------
<S> <C>
Frank Mistero Director and President
Frank M. Boccio Director
Jefferson C. Boyce Director
Michael G. Gallo Director
Phillip J. Hildebrand Director
Alice T. Kane Director
Robert D. Rock Director
Stephen C. Roussin Director
Walter W. Ubl Director and Senior Vice President
Robert E. Brady Director and Vice President
Sheila K. Davidson Chief Compliance Officer
Thomas J. Warga Senior Vice President and General Auditor
Jay S. Calhoun Vice President and Treasurer
David J. Krystel Vice President
Linda M. Livornese Vice President
John H. O'Byrne Vice President
Anthony W. Polis Vice President and Chief Financial Officer
Richard W. Zuccaro Tax Vice President
Louis H. Adasse Corporate Vice President
Thomas J. Murray Corporate Vice President
Phyllis Zwarick Corporate Vice President
Arphiela Arizmendi Assistant Vice President
Antoinette B. Cirillo Assistant Vice President
George R. Daoust Assistant Vice President
Geraldine Lorito Assistant Vice President
Nancy Brenner Secretary
Mark A. Gomez Assistant Secretary
</TABLE>
(c) Commissions and Other Compensation
<TABLE>
<CAPTION>
Name of New Underwriting Compensation on
Principal Discounts and Redemption or Brokerage
Underwriter Commissions Annuitization Commission Compensation
----------- ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
NYLIFE Distributors
Inc. -0- -0- -0- -0-
</TABLE>
C-10
<PAGE> 123
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records required to be maintained by Section 31(a) of the
1940 Act and the rules under it are maintained by NYLIAC at its home office, 51
Madison Avenue, Room 0150, New York, New York 10010; New York Life - Records
Division, 110 Cokesbury Road, Lebanon, New Jersey 08833 and with Iron Mountain
Records Management, Inc. at both 8 Neptune Drive, Poughkeepsie, New York 12601
and Route 9W South, Port Ewen, New York 12466-0477.
ITEM 31. MANAGEMENT SERVICES - Not applicable.
ITEM 32. UNDERTAKINGS -
Registrant hereby undertakes:
(a) to a file post-effective amendment to this registration statement
as frequently as is necessary to ensure that the audited financial statements in
the registration statement are never more than 16 months old for so long as
payments under the variable annuity contracts may be accepted;
(b) to include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a post card or similar
written communication affixed to or included in the prospectus that the
applicant can remove to send for a Statement of Additional Information;
(c) to deliver any Statement of Additional Information and any
financial statements required to be made available under this Form promptly
upon written or oral request.
REPRESENTATION AS TO THE REASONABLENESS OF AGGREGATE FEES AND CHARGES
New York Life Insurance and Annuity Corporation ("NYLIAC"), the sponsoring
insurance company of the NYLIAC Variable Annuity Separate Account-I, hereby
represents that the fees and charges deducted under the NYLIAC Individual
Flexible Premium Multi-Funded Variable Retirement Annuity Policies are
reasonable in relation to the services rendered, the expenses expected to be
incurred and the risks assumed by NYLIAC.
SECTION 403(b) REPRESENTATIONS
Registrant represents that it is relying on a no-action letter dated
November 28, 1988, to the American Council of Life Insurance (Ref. No. IP-6-88)
regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment Company Act of
1940, in connection with redeemability restrictions on Section 403(b) Policies,
and that paragraphs numbered (1) through (4) of that letter will be complied
with.
C-11
<PAGE> 124
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Amendment to the Registration Statement
and has caused this Amendment to the Registration Statement to be signed on its
behalf, in the City and State of New York on this 16th day of April, 1998.
NYLIAC VARIABLE ANNUITY
SEPARATE ACCOUNT-I
(Registrant)
By /s/ David J. Krystel
-----------------------
David J. Krystel
Vice President
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
(Depositor)
By /s/ David J. Krystel
-----------------------
David J. Krystel
Vice President
As required by the Securities Act of 1933, this Amendment to the Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
<TABLE>
<S> <C>
Howard I. Atkins* Executive Vice President (Principal Financial Officer)
Jay S. Calhoun* Vice President, Treasurer and Director
Maryann L. Ingenito* Vice President and Controller (Principal Accounting Officer)
Richard M. Kernan, Jr.* Director
Robert D. Rock* Senior Vice President and Director
Frederick J. Sievert* President and Director (Principal Executive Officer)
Stephen N. Steinig* Senior Vice President, Chief Actuary and Director
Seymour Sternberg* Director
</TABLE>
*By /s/ David J. Krystel
------------------------
David J. Krystel
Attorney-in-Fact
April 16, 1998
<PAGE> 125
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
(8)(h) Form of Participation Agreement among T. Rowe Price
Equity Series, Inc., T. Rowe Price Associates, Inc. and
NYLIAC
(8)(i) Form of Participation Agreement among Van Eck Worldwide
Insurance Trust, Van Eck Associates Corporation and NYLIAC
(8)(j) Form of Participation Agreement among MFS Variable
Insurance Trust, Massachusetts Financial Services
Company and NYLIAC
(9) Opinion and Consent of Jonathan E. Gaines, Esq.
(10)(a) Consent of Price Waterhouse LLP
(13) Schedule of Computations
<PAGE> 1
EXHIBIT (8)(h)
PARTICIPATION AGREEMENT
AMONG
T. ROWE PRICE EQUITY SERIES, INC.;
T. ROWE PRICE INVESTMENT SERVICES, INC.;
AND
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
THIS AGREEMENT, made and entered into as of this __ day of April, 19__
by and among New York Life Insurance and Annuity Corporation (hereinafter, the
"Company"), a Delaware insurance company, on its own behalf and on behalf of
each segregated asset account of the Company set forth on Schedule A hereto as
may be amended from time to time (each account hereinafter referred to as the
"Account"), and the undersigned funds, each a corporation organized under the
laws of Maryland (each fund hereinafter referred to as the "Fund") and T. Rowe
Price Investment Services, Inc. (hereinafter the "Underwriter"), a Maryland
corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is or will be available to act as the investment vehicle
for separate accounts established for variable life insurance and variable
annuity contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter (hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission ("SEC") granting Participating Insurance Companies and
variable annuity and variable life insurance separate accounts exemptions from
the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment
Company Act of 1940, as amended, (hereinafter the "1940 Act") and Rules
6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, if and to the extent necessary to
permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
life insurance companies (hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, T. Rowe Price Associates, Inc. (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940, as amended, and any applicable state securities laws; and
WHEREAS, the Company has registered or will register certain variable
life insurance and variable annuity contracts supported wholly or partially by
the Account (the "Contracts") under the 1933 Act, and
<PAGE> 2
- 2 -
said Contracts are listed in Schedule A hereto, as it may be amended from time
to time by mutual written agreement; and
WHEREAS, the Account is duly established and maintained as a segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid Contracts; and
WHEREAS, the Company has registered or will register the Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Underwriter agrees to sell to the Company those full and
fractional shares of the Designated Portfolios which the Account orders,
executing such orders on a daily basis at the net asset value next computed
after receipt by the Fund or its designee of the order for the shares of the
Designated Portfolios.
1.2 The Fund agrees to make shares of the Designated Portfolios
available for purchase at the applicable net asset value per share by the
Company and the Account on those days on which the Fund calculates its net asset
value pursuant to rules of the Securities and Exchange Commission, and the Fund
shall use reasonable efforts to calculate such net asset value on each day which
the New York Stock Exchange is open for trading. Notwithstanding the foregoing,
the Board of Directors of the Fund (hereinafter the "Board") may refuse to sell
shares of any Designated Portfolio to any person, or suspend or terminate the
offering of shares of any Designated Portfolio if such action is required by law
or by regulatory authorities having jurisdiction, or is, in the sole discretion
of the Board acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws (including its fiduciary duty to Fund
shareholders, including the Company and the Account), necessary in the best
interests of the shareholders of such Designated Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Fund have
been and will be sold only to Participating Insurance Companies and their
separate accounts. No shares of any Designated Portfolios will be sold to the
general public. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, VI, and VII of this Agreement is in effect
to govern such sales.
1.4 The Fund agrees to redeem, on the Company's request, any full or
fractional shares of the Designated Portfolios held by the Company, executing
such requests on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of the request for redemption, except that
the Fund reserves the right to suspend the right of redemption or postpone the
date of payment or satisfaction upon
<PAGE> 3
- 3 -
redemption consistent with Section 22(e) of the 1940 Act and any rules
thereunder, and in accordance with the procedures and policies of the Fund as
described in the then current prospectus. Subject to the foregoing, the Fund
shall ordinarily wire any net redemption proceeds to the Company on the next
Business Day after an order to redeem Fund shares is made. Payment shall be in
federal funds transmitted by wire by 3:00 p.m. Baltimore time.
1.5 For purposes of Sections 1.1 and 1.4, the Company shall be the
designee of the Fund for receipt of purchase and redemption orders from the
Account, and receipt by such designee shall constitute receipt by the Fund;
provided that the Company receives the order by 4:00 p.m. Baltimore time and the
Fund receives notice of such order by 9:30 a.m. Baltimore time on the next
following Business Day by facsimile transmission or by such other means as the
Fund and the Company may agree to in writing. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading and on which the Fund
calculates its net asset value pursuant to the rules of the SEC.
1.6 The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus.
1.7 The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made. Payment shall be in federal
funds transmitted by wire by 3:00 p.m. Baltimore time. If payment in federal
funds for any purchase is not received or is received by the Fund after 3:00
p.m. Baltimore time on such Business Day, the Company shall promptly, upon the
Fund's request, reimburse the Fund for any charges, costs, fees, interest or
other reasonable expenses incurred by the Fund in connection with any advances
to, or borrowings or overdrafts by, the Fund, or any similar expenses incurred
by the Fund, as a result of portfolio transactions effected by the Fund based
upon such purchase request. For purposes of Section 2.8 and 2.9 hereof, upon
receipt by the Fund of the federal funds so wired, such funds shall cease to be
the responsibility of the Company and shall become the responsibility of the
Fund.
1.8 Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Designated Portfolios' shares. The
Company hereby elects to receive all such income, dividends, and capital gain
distributions as are payable on Designated Portfolio shares in additional shares
of that Portfolio. The Company reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Fund shall notify the Company of the number of shares so issued as payment of
such dividends and distributions.
1.10 The Fund shall make the net asset value per share for each
Designated Portfolio available to the Company on a daily basis as soon as
reasonably practical after the net asset value per share is calculated (normally
by 6:30 p.m. E.S.T.) and shall use its best efforts to make such net asset value
per share available by 7 p.m. E.S.T. If the net asset value is materially
incorrect through no fault of the Company, the Company, on behalf of each
Account, shall be entitled to an adjustment in the number of shares purchased or
redeemed to reflect the correct net asset value in accordance with Fund
procedures, and the Company shall not bear the cost of such correction.
1.11 The Parties hereto acknowledge that the arrangement contemplated
by this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies (subject to Section 1.3 and Article VI hereof) and the cash
value of the Contracts may be invested in other investment companies.
<PAGE> 4
- 4 -
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established the Account
prior to any issuance or sale thereof as a segregated asset account under the
New York insurance laws and has registered or, prior to any issuance or sale of
the Contracts, will register the Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts.
2.2 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Delaware and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed legally advisable by the
Fund or the Underwriter.
2.3 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it may
make such payments in the future. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund will undertake to have a
Board, a majority of whom are not interested persons of the Fund, formulate and
approve any plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses.
2.4 The Fund makes no representations as to whether any aspect of its
operations, including but not limited to, investment policies, fees and
expenses, complies with the insurance and other applicable laws of the various
states, except that the Fund represents that the Fund's investment policies,
fees and expenses are and shall at all times remain in compliance with the laws
of the State of Delaware to the extent required to perform this Agreement.
2.5 The Fund represents and warrants that it is lawfully organized and
validly existing under the laws of the State of Maryland and that it does and
will comply in all material respects with the 1940 Act.
2.6 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Delaware and any applicable state
and federal securities laws.
2.7 The Underwriter represents and warrants that the Adviser is and
shall remain duly registered under all applicable federal and state securities
laws and that the Adviser shall perform its obligations for the Fund and each
Designated Portfolio in compliance in all material respects with the laws of the
State of Delaware and any applicable state and federal securities laws.
2.8 The Fund and the Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other individuals
or entities dealing with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimum
coverage as required by Rule 17g-1 of the 1940 Act or related provisions as may
be promulgated from time to time. The aforesaid bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
<PAGE> 5
- 5 -
2.9 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities
employed or controlled by the Company dealing with the money and/or securities
of the Fund are covered by a blanket fidelity bond or similar coverage for the
benefit of the Fund, in an amount not less than $5 million. The aforesaid bond
includes coverage for larceny and embezzlement and is issued by a reputable
bonding company. The Company agrees to make all reasonable efforts to see that
this bond or another bond containing these provisions is always in effect, and
agrees to notify the Fund and the Underwriter in the event that such coverage no
longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1 The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Fund's current prospectus (describing only
the Designated Portfolios listed on Schedule A) as the Company may reasonably
request. If requested by the Company in lieu thereof, the Fund shall provide
such documentation (including an 8 1/2" x 11" camera ready copy of the new
prospectus at the Fund's expense) and other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
prospectus for the Fund is amended) to have the prospectus for the Contracts and
the Fund's prospectus printed together in one document (such printing to be at
the Company's expense). Each party agrees to cooperate with the others, as
applicable, in arranging to print and mail or otherwise deliver, in a timely
manner, combined or coordinated prospectuses and other materials of the Fund and
any Account.
3.2 The Fund's prospectus shall state that the current Statement of
Additional Information ("SAI") for the Fund is available from the Company, and
the Underwriter (or the Fund), at its expense, shall print and provide a copy of
such SAI free of charge to the Company for itself and for any owner of a
Contract who requests such SAI.
3.3 The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4 The Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of
such portfolio for which instructions have been
received,
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners or to the
extent otherwise required by law. The Company reserves the right to vote Fund
shares held in the Account in its own right, to the extent permitted by law.
3.5 Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by the Shared Funding Exemptive Order
and consistent with any reasonable standards that the Fund may adopt and provide
in writing, which are acceptable to the Company (such acceptance not be
unreasonably withheld) and not inconsistent with the Shared Funding Exemptive
Order.
3.6 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940
<PAGE> 6
- 6 -
Act (although the Fund is not one of the trusts described in Section 16(c) of
that Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the SEC's interpretation of the
requirements of Section 16(a) with respect to periodic elections of directors or
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. Sales Material and Information
4.1 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature and other promotional
material that the Company develops or uses and in which the Fund (or a
Designated Portfolio thereof) or the Adviser or the Underwriter is named, at
least ten Business Days prior to its use. No such material shall be used if the
Fund or its designee reasonably object to such use within ten Business Days
after receipt of such material. The Fund or its designee reserves the right to
reasonably object to the continued use of such material, and no such material
shall be used if the Fund or its designee so object.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus or SAI for
the Fund shares, as such registration statement and prospectus or SAI may be
amended or supplemented from time to time, or in reports or proxy statements for
the Fund, or in sales literature and other promotional material approved by the
Fund or its designee or by the Underwriter, except with the written permission
of the Fund or the Underwriter or the designee of either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company, each piece of sales literature and other
promotional material in which the Company, the Contracts, and/or an of its
Account, is named at least ten Business Days prior to its use. No such material
shall be used if the Company reasonably objects to such use within ten Business
Days after receipt of such material. The Company reserves the right to
reasonably object to the continued use of such material, and no such material
shall be used if the Company so objects.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for the Account which are in the public domain
and approved by the Company for distribution to Contract Owners, or in sales
literature and other promotional material approved by the Company or its
designee, except with the written permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, SAIs, reports, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Fund or its shares, contemporaneously with the filing of such
document(s) with the SEC or other regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, SAIs, reports, solicitations for
voting instructions, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Contracts or the Account,
contemporaneously with the filing of such document(s) with the SEC or other
regulatory authorities.
4.7 The Fund will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Designated Portfolio,
and of any material change in the Fund's registration
<PAGE> 7
- 7 -
statement, particularly any change resulting in change to the registration
statement or prospectus for the Account. The Fund will work with the Company so
as to enable the Company to solicit proxies from Contract Owners, or to make
changes to its prospectus or registration statement, in an orderly manner. The
Fund will make reasonable efforts to attempt to have changes affecting Contract
prospectuses become effective simultaneously with the annual updates for such
prospectuses.
4.8 For purposes of this Agreement, the phrase "sales literature and
other promotional materials" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
SAIs, shareholder reports, proxy materials, and any other communications
distributed or made generally available with regard to the Funds.
ARTICLE V. Fees and Expenses
5.1 The Fund and the Underwriter shall pay no fee or other compensation
to the Company under this Agreement, except that if the Fund or any Designated
Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance
distribution expenses, then the Underwriter may make payments to the Company or
to the underwriter for the Contracts if and in amounts agreed to by the
Underwriter in writing, and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter, or other
resources available to the Underwriter. No such payments shall be made directly
by the Fund. Currently, no such payments are contemplated.
5.2 The Fund shall see to it that all its shares are registered and
authorized for issuance in accordance with applicable federal law and, if and to
the extent deemed advisable by the Fund, in accordance with applicable state
laws prior to their sale. The Fund shall bear the expenses for the cost of
registration and qualification of the Fund's shares, preparation and filing of
the Fund's prospectus and registration statement, proxy materials and reports,
setting the prospectus in type (including camera ready), setting in type and
printing the proxy materials and reports to shareholders (including the costs of
printing a prospectus that constitutes an annual report), the preparation of all
statements and notices required by any federal or state law, and all taxes on
the issuance or transfer of the Fund's shares.
5.3 The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification and Qualification
6.1 The Fund and each Designated Portfolio has invested and will invest
its assets in such a manner as to ensure that the Contracts will be treated as
annuity or life insurance contracts, whichever is appropriate, under the Code
and the regulations issued thereunder (or any successor provisions); provided,
however, that the Fund and each Designated Portfolio make no representation or
undertaking regarding the Fund and each Designated Portfolio to the extent such
representation or undertaking is dependent on compliance by the Company with
Section 6.3 of this Agreement. Without limiting the scope of the foregoing, the
Fund and each Designated Portfolio has and will comply with Section 817(h) of
the Code and Treasury Regulation Section 1.817-5, and any Treasury
interpretations thereof, relating to the diversification requirements for
variable annuity, endowment, or life insurance contracts, and any amendments or
other modifications or successor provisions to such Section or Regulations. In
the event of a breach of this
<PAGE> 8
- 8 -
Section 6.1 by the Fund or a Designated Portfolio, the Fund will take all
reasonable steps (a) to notify the Company of such breach and (b) to adequately
diversify the Fund or the Designated Portfolio so as to achieve compliance
within the grace period afforded by Regulation Section 1.817-5.
6.2 The Fund represents that it is qualified as a Regulated Investment
Company under Subchapter M of the Code, and that it will make every effort to
maintain such qualification (under Subchapter M or any successor or similar
provisions) and that it will notify the Company immediately upon having a
reasonable basis for believing that it has ceased to so qualify or that it might
not so qualify in the future.
6.3 The Company represents that the Contracts are currently, and at the
time of issuance shall be, treated as life insurance or annuity insurance
contracts, under applicable provisions of the Code, and that it will make every
effort to maintain such treatment; provided, however, that the Company makes no
representation or undertaking regarding the Contracts to the extent such
representation or undertaking is dependent on compliance by the Fund and each
Designated Portfolio with Section 6.1 of this Agreement. The Company will notify
the Fund and the Underwriter immediately upon having a reasonable basis for
believing the Contracts have ceased to be treated as life insurance or annuity
insurance contracts under applicable provisions of the Code or that they might
not be so treated in the future. The Company agrees that any prospectus offering
a contract that is a "modified endowment contract" as that term is defined in
Section 7702A of the Code (or any successor or similar provision), shall
identify such contract as a modified endowment contract.
ARTICLE VII. Potential Conflicts
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3 If it is determined by a majority of the Board, or a majority of
its disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor
<PAGE> 9
- 9 -
of such segregation, or offering to the affected contract owners the option of
making such a change; and (2) establishing a new registered management
investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the Account's investment in
the Fund and terminate this Agreement with respect to each Account provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Board. Any such withdrawal and
termination must take place within six (6) months after the Fund gives written
notice that this provision is being implemented, and until the end of that six
month period the Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund.
7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Fund shall continue to
accept and implement orders by the Company for the purchase (and redemption) of
shares of the Fund.
7.6 For purposes of Section 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contract if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4, and
7.5 of this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1 Indemnification By the Company
8.1(a). The Company agrees to indemnify and hold harmless the
Fund, the Underwriter and each of their directors and officers and each person,
if any, who controls the Fund or Underwriter within the meaning of Section 15 of
the 1933 Act (collectively, the "Indemnified Parties" for purposes of
<PAGE> 10
- 10 -
this Section 8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Company)
or litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the Registration Statement, prospectus,
or SAI for the Contracts or contained in the
Contracts or sales literature for the Contracts (or
any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading, provided that
this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to the Company by or on behalf of the Fund
or Underwriter for use in the Registration Statement,
prospectus or SAI for the Contracts or in the
Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with
the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Registration
Statement, prospectus, SAI, or sales literature of
the Fund not supplied by the Company or persons under
its control) or wrongful conduct of the Company or
persons under its authorization or control, with
respect to the sale or distribution of the Contracts
or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
Registration Statement, prospectus, SAI, or sales
literature of the Fund, or any amendment thereof or
supplement thereto or the omission or alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading if such a statement or
omission was made in reliance upon information
furnished to the Fund or Underwriter by or on behalf
of the Company; or
(iv) arise as a result of any material failure by the
Company to provide the services and furnish the
materials under the terms of this Agreement
(including a failure, whether unintentional or in
good faith or otherwise, to comply with the
qualification requirements specified in Article VI of
this Agreement); or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Company in this Agreement or arise out of or result
from any other material breach of this Agreement by
the Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of its obligations or
duties under this Agreement.
<PAGE> 11
- 11 -
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the Contracts or the
operation of the Fund.
8.2 Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harmless
the Company and each of it directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts; and
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any
material fact contained in the Registration
Statement, prospectus, SAI or sales
literature of the Fund (or any amendment or
supplement to any of the foregoing), or
arise out of or are based upon the omission
or the alleged omission to state therein a
material fact required to be stated therein
or necessary to make the statements therein
not misleading, provided that this agreement
to indemnify shall not apply as to any
Indemnified Party if such statement or
omission or such alleged statement or
omission was made in reliance upon and in
conformity with information furnished to the
Underwriter or Fund by or on behalf of the
Company for use in the Registration
Statement, prospectus, or SAI for the Fund
or in sales literature (or any amendment or
supplement) or otherwise for use in
connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the
Registration Statement, prospectus, SAI or
sales literature for the Contracts not
supplied by the Underwriter or the Fund or
persons under their control) or wrongful
conduct of the Fund or Underwriter or
persons under their control, with respect to
the sale or distribution of the Contracts or
Fund shares; or
<PAGE> 12
- 12 -
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact
contained in a Registration Statement,
prospectus, SAI or sales literature covering
the Contracts, or any amendment thereof or
supplement thereto, or the omission or
alleged omission to state therein a material
fact required to be stated therein or
necessary to make the statement or
statements therein not misleading, if such
statement or omission was made in reliance
upon information furnished to the Company by
or on behalf of the Fund or Underwriter; or
(iv) arise as a result of any failure by the Fund
or Underwriter to provide the services and
furnish the materials under the terms of
this Agreement (including a failure, whether
unintentional or in good faith or otherwise,
to comply with the diversification and other
qualification requirements specified in
Article VI of this Agreement); or
(v) arise out of or result from any material
breach of any representation and/or warranty
made by the Underwriter in this Agreement or
arise out of or result from any other
material breach of this Agreement by the
Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Party, the Underwriter will be entitled to participate,
at its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Underwriter to such party of the
Underwriter's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Underwriter will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of the Account.
8.3 Indemnification By the Fund
<PAGE> 13
- 13 -
8.3(a). The Fund agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the Fund) or litigation
(including legal and other expenses) to which the Indemnified Parties may be
required to pay or may become subject under any statute or regulation, at common
law or otherwise, insofar as such losses, claims, expenses, damages, liabilities
or expenses (or actions in respect thereof) or settlements, are related to the
operations of the Fund and:
(i) arise as a result of any failure by the Fund
to provide the services and furnish the
materials under the terms of this Agreement
(including a failure, whether unintentional
or in good faith or otherwise, to comply
with the diversification and other
qualification requirements specified in
Article VI of this Agreement); or
(ii) arise out of or result from any material
breach of any representation and/or warranty
made by the Fund in this Agreement or arise
out of or result from any other material
breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company, the Fund, the Underwriter or the
Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the expense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to
notify the Fund of the commencement of any litigation or proceeding against it
or any of its respective officers or directors in connection with the Agreement,
the issuance or sale of the Contracts, the operation of the Account, or the sale
or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Maryland.
<PAGE> 14
- 14 -
9.2 This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, any Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1 This Agreement shall continue in full force and effect unless
terminated under any of the following circumstances:
(a) termination by any party, for any reason with respect
to some or all Designated Portfolios, by sixty days
advance written notice delivered to the other
parties; or
(b) termination by the Company by written notice to the
Fund and the Underwriter with respect to any
Designated Portfolio based upon the Company's
determination that shares of the Fund are not
reasonably available to meet the requirements of the
Contracts; or
(c) termination by the Company by written notice to the
Fund and the Underwriter in the event any of the
Designated Portfolio's shares are not registered,
issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of
such shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or
(d) termination by the Fund or Underwriter by written
notice to the Company in the event that formal
administrative proceedings are instituted against the
Company by the NASD, the SEC, the Insurance
Commissioner or like official of any state or any
other regulatory body regarding the Company's duties
under this Agreement or related to the sale of the
Contracts, the operation of any Account, or the
purchase of the Fund shares, provided, however, that
the Fund determines in its sole judgment exercised in
good faith, that any such administrative proceedings
will have a material adverse effect upon the ability
of the Company to perform its obligations under this
Agreement; or
(e) termination by the Company by written notice to the
Fund and Underwriter in the event that formal
administrative proceedings are instituted against the
Fund, Adviser, or Underwriter by the NASD, the SEC,
or any state securities or insurance department or
any other regulatory body, provided, however, that
the Company determines in its sole judgment exercised
in good faith, that any such administrative
proceedings will have a material adverse effect upon
the ability of the Fund, Adviser, or Underwriter to
perform its obligations under this Agreement; or
(f) termination by the Company by written notice to the
Fund and the Underwriter with respect to any
Designated Portfolio in the event that such Portfolio
ceases to qualify as a Regulated Investment Company
under Subchapter M or fails to comply with the
Section 817(h) diversification requirements specified
in Article VI hereof, or if the Company reasonably
believes that such Portfolio may fail to so qualify
or comply; or
(g) termination by the Fund or Underwriter by written
notice to the Company in the event that the Contracts
fail to meet the qualifications specified in Article
VI,
<PAGE> 15
- 15 -
section 6.3 hereof, or if the Fund or Underwriter
reasonably believes that such Contracts may fail to
so qualify; or
(h) termination by either the Fund or the Underwriter by
written notice to the Company, if either one or both
of the Fund or the Underwriter respectively, shall
determine, in their sole judgment exercised in good
faith, that the Company has suffered a material
adverse change in its business, operations, financial
condition, or prospects since the date of this
Agreement or is the subject of material adverse
publicity; or
(i) termination by the Company by written notice to the
Fund and the Underwriter, if the Company shall
determine, in its sole judgment exercised in good
faith, that the Fund, Adviser, or the Underwriter has
suffered a material adverse change in its business,
operations, financial condition or prospects since
the date of this Agreement or is the subject of
material adverse publicity.
10.2 Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, the owners of the Existing Contracts shall be
permitted to reallocate investments in the Fund, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 10.2 shall not apply
to any terminations under Article VII and the effect of such Article VII
termination shall be governed by Article VII of this Agreement. The parties
further agree that this Section 10.2 shall not apply to any terminations under
Section 10.1(g) of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Fund and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so.
10.4 Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify the other parties shall survive.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
T. Rowe Price Associates, Inc.
100 East Pratt Street
<PAGE> 16
- 16 -
Baltimore, Maryland 21202
Attention: Henry H. Hopkins, Esq.
If to the Company:
New York Life Insurance and Annuity Corporation
51 Madison Avenue
New York, New York 10010
Attention: Robert D. Rock, Senior Vice President
If to Underwriter:
T. Rowe Price Investment Services
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Henry H. Hopkins, Esq.
ARTICLE XII. Miscellaneous
12.1 All references herein to the "Fund" are to each of the undersigned
Funds individually, as if this Agreement were between such individual Fund and
the Underwriter and the Company. All references herein to the "Adviser" relate
solely to the Adviser of such individual Fund All persons dealing with the Fund
must look solely to the property of such Fund, and in the case of a series
company, the respective Designated Portfolios listed on Schedule A hereto as
though each such Designated Portfolio had separately contracted with the Company
and the Underwriter for the enforcement of any claims against the Fund. The
parties agree that neither the Board, officers, agents or shareholders assume
any personal liability or responsibility for obligations entered into by or on
behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information may come into the
public domain.
12.3 The captions in this 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.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Delaware Insurance Commissioner with
<PAGE> 17
- 17 -
any information or reports in connection with services provided under this
Agreement which such Commissioner may request in order to ascertain whether the
variable annuity operations of the Company are being conducted in a manner
consistent with the Delaware variable annuity laws and regulations and any other
applicable law or regulations.
12.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies, and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8 This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto.
<PAGE> 18
- 18 -
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
COMPANY: NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION
By its authorized officer
By:
--------------------------------
Title:
-----------------------------
Date:
------------------------------
FUND: T. ROWE PRICE EQUITY SERIES, INC.
By its authorized officer
By:
--------------------------------
Title: Vice President
-----------------------------
Date:
------------------------------
UNDERWRITER: T. ROWE PRICE INVESTMENT
SERVICES, INC.
By its authorized officer
By:
--------------------------------
Title: Vice President
-----------------------------
Date:
------------------------------
<PAGE> 19
SCHEDULE A
<TABLE>
<CAPTION>
Name of Separate Account and Contracts Funded by
Date Established by Board of Directors Separate Account Designated Portfolios
<S> <C> <C>
NYLIAC Variable Annuity New York LifeStages Flexible T. Rowe Price International Series,Inc.
Separate Account - I Premium Variable Annuity - T. Rowe Price International
(10-05-92) Stock Portfolio
New York LifeStages Flexible
NYLIAC Variable Annuity Premium Variable Annuity T. Rowe Price Equity Series, Inc.
Separate Account - II - T. Rowe Price Equity Income
(10-05-92) New York Life LifeStages Variable Portfolio
Annuity
NYLIAC Variable Annuity - T. Rowe Price New America
Separate Account - III MainStay Plus Variable Annuity Growth Portfolio
(11-30-94)
MainStay Variable Annuity
NYLIAC Variable Universal Variable Universal Life and
Life Separate Account - I Survivorship Variable Universal Life
(06-04-93)
NYLIAC Corporate Sponsored Corporate Sponsored Variable
Variable Universal Life Universal Life
Separate Account - I
(05-24-96)
</TABLE>
<PAGE> 1
Exhibit (8)(i)
PARTICIPATION AGREEMENT
Among
VAN ECK WORLDWIDE INSURANCE TRUST,
VAN ECK SECURITIES CORPORATION.
VAN ECK ASSOCIATES CORPORATION
and
THIS AGREEMENT, made and entered into to be effective on ________________,
by and among ____________________________________________, (hereinafter the
"Company"), a _______________________ corporation, on its own behalf and on
behalf of each segregated asset account of the Company set forth on Schedule A
hereto and incorporated herein by this reference, as such Schedule A may from
time to time be amended by mutual written agreement of the parties hereto (each
such account hereinafter referred to as the "Account"), and VAN ECK WORLDWIDE
INSURANCE TRUST, an unincorporated business trust organized under the laws of
the Commonwealth of Massachusetts (hereinafter the "Fund"), VAN ECK SECURITIES
CORPORATION (hereinafter the "Underwriter"), a Delaware corporation and VAN ECK
ASSOCIATES CORPORATION (hereinafter the "Adviser"), a Delaware corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(hereafter referred to collectively as the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets (each such series hereinafter referred
to as a "Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission (hereinafter the "SEC") (File No. 811-5083), granting Participating
Insurance Companies and variable annuity and variable life insurance separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Order");
and
Page 1
<PAGE> 2
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable life
insurance and variable annuity contracts under the 1933 Act, unless such
contracts are exempt from registration thereunder; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable life insurance and
variable annuity contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act, unless such Account is exempt from
registration thereunder; and
WHEREAS, the Underwriter is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter the "NASD"); and
WHEREAS, the Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940 and any applicable state securities law; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund, the Underwriter and the Adviser agree as follows:
ARTICLE I
Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of the
Portfolios (which are listed on Schedule B attached hereto and incorporated
herein by this reference, as such Schedule B may from time to time be amended by
mutual written agreement of the parties hereto) which each Account orders,
executing such orders on a daily basis at the net asset value per share next
computed after receipt by the Fund or its designee of the order for the shares
of the Portfolios subject to the terms and conditions of this Agreement. For
purposes of this Section 1.1, the Company shall be the designee of the Fund for
receipt of such orders from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
order by 9:00 a.m. Eastern time on the next following Business Day. "Business
Day" shall mean any day on which the
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New York Stock Exchange is open for business and on which the Fund calculates
the Portfolios' net asset values pursuant to the rules of the SEC.
1.2. The Fund agrees to make Portfolio shares available for purchase at
the applicable net asset value per share by the Company and its Accounts on
those days on which the Fund calculates net asset values pursuant to the rules
of the SEC and the Fund shall use reasonable efforts to calculate such net asset
values on each day on which the New York Stock Exchange is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Fund (hereinafter
the "Board") may refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of shares of any Portfolio, if such action is
required by law or by regulatory authorities having jurisdiction, or if it is,
in the sole discretion of the Board, desirable or advisable, and in the best
interests of the shareholders of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts or
other accounts (e.g., qualified retirement plans) as may be permitted so that
the Variable Insurance Products continue to qualify as a "life insurance,
annuity or variable contract" under Section 817(h) of the Internal Revenue Code
of 1986, as amended (hereinafter the "Code"). No shares of any Portfolio will be
sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company, separate account or other account unless an agreement
containing provisions substantially the same as Article I, Section 2.5 of
Article II, Sections 3.4 and 3.5 of Article III, Article V and Article VII of
this Agreement is in effect to govern such sales.
1.5. Subject to its rights under Section 18(f) of the 1940 Act, the Fund
agrees to redeem for cash, on the Company's request, any full or fractional
shares of a Portfolio held by the Company, executing such requests on a daily
basis at the net asset value per share next computed after receipt by the Fund
or its designee of the request for redemption. For purposes of this Section 1.5,
the Company shall be the designee of the Fund for receipt of requests for
redemption from each Account and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives notice of such request for
redemption by 9:00 a.m., Eastern Time, on the next following Business Day.
Payment of redemption proceeds for any whole or fractional shares shall be made
within seven days of actual receipt of the redemption request by the Fund, or
within such greater or lesser period as may be permitted by law or rule,
regulation, interpretive position or order of the SEC.
1.6. The Company agrees that purchases and redemptions of Portfolio shares
offered by the then-current prospectus of the Fund shall be made in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available in the Accounts which are listed in Schedule A attached hereto and
incorporated herein by this reference, as such Schedule A may from time to time
be amended by mutual written agreement of the parties hereto (the "Contracts"),
shall be invested in the Portfolios and in such other funds advised by the
Adviser as are listed in Schedule B, or in the Company's general account;
provided that such amounts may also be invested in an investment company other
than the Fund if (a) such other investment company, or series thereof, has
investment objectives or policies that are substantially different from the
investment objectives and
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policies of all the Portfolios of the Fund; or (b) the Company gives the Fund
and the Underwriter 45 days' written notice of its intention to make such other
investment company available as a funding vehicle for the Contracts; or (c) such
other investment company was available as a funding vehicle for the Contracts
prior to the date of this Agreement and the Company so informs the Fund and
Underwriter prior to their signing this Agreement (a list of such funds
appearing on Schedule C to this Agreement); or (d) the Fund or Underwriter
consents in writing to the use of such other investment company.
1.7. The Company shall pay for Portfolio shares on the next Business Day
after an order to purchase such shares is made in accordance with the provisions
of this Article I. Payment shall be in federal funds transmitted by wire. For
purposes of Sections 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income dividends or
capital gain distributions payable on the Portfolios' shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated (normally by 6:30 p.m., Eastern
Time) and shall use its best efforts to make such net asset value per share
available by 7:00 p.m., Eastern Time.
ARTICLE II
Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act or exempt therefrom; that the Contracts will be
issued and sold in compliance in all material respects with all applicable
federal and state laws and that the sale of the Contracts shall comply in all
material respects with state insurance suitability requirements. The Company
further represents and warrants that it is an insurance company duly organized
and in good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under the Insurance Code and Regulations of the State of
____________________, and has registered or, prior to any issuance or sale of
the Contracts, will, unless exempt from registration, register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act to serve
as a segregated investment account for the Contracts.
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2.2. The Company represents that the Contracts will be eligible for
treatment as life insurance or annuity contracts under applicable provisions of
the Code and that it will make every effort to maintain such treatment and that
it will notify the Fund and the Underwriter promptly upon having determined that
the Contracts may have ceased to be so treated or that they might not be so
treated in the future.
2.3. The Company represents and warrants that all of its
directors/trustees, employees, investment advisers and other
individuals/entities dealing with money and/or securities of the Fund are and
shall continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund, in an amount not less than $5 million. The
aforesaid bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company. The Company shall notify the Fund, the
Underwriter and the Adviser in the event that such coverage no longer applies.
2.4. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement are registered under the 1933 Act, duly authorized for issuance
and sale in compliance in all material respects with the terms of this Agreement
and all applicable federal and state securities laws, and that, while shares of
the Portfolios are being offered for sale, the Fund is and shall remain
registered under the 1940 Act. The Fund shall amend its Registration Statement
under the 1933 Act and the 1940 Act from time to time as required in order to
effect the continuous offering of Portfolio shares. The Fund shall register or
otherwise qualify the shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.5. The Fund represents that each Portfolio is qualified as a Regulated
Investment Company under Subchapter M of the Code and that it will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provision) and that it will notify the Company promptly upon having
determined that any Portfolio may have ceased to so qualify or that it might not
so qualify in the future.
2.6. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to
have a board of trustees, a majority of whom are not interested persons of the
Fund, formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.7. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees, expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund has disclosed or made available,
in writing, all information requested by Company and represents and warrants
that such written information is true and accurate in all material respects as
of the effective date of this Agreement. Without prior written notice to the
Company, the Fund will not make any changes in fundamental investment policies
or advisory fees, and shall at all times remain in compliance with federal
securities law as it applies to insurance products. The Company will use its
best efforts to
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provide the Fund with copies of amendments to provisions of state insurance laws
and regulations related to separate accounts and variable products, which may
affect Fund operations.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute Portfolio shares
to the Company in accordance with all applicable state and federal securities
laws, including, without limitation, the 1933 Act, the 1934 Act and the 1940
Act.
2.10. The Adviser represents and warrants that it is and shall remain duly
registered in all material respects under all applicable federal and state
securities laws and that it shall perform its obligations for the Fund in
compliance in all material respects with any applicable state and federal
securities laws.
2.11. The Fund, the Underwriter and the Adviser represent and warrant that
all of their directors/trustees, officers, employees, investment advisers and
other individuals/entities dealing with money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund, in an amount not less than the
minimum coverage as required by Rule 17g-1 of the 1940 Act or related provisions
as may from time to time be promulgated. The aforesaid bond shall include
coverage for larceny and embezzlement and shall be issued by a reputable bonding
company. The Fund shall notify the Company in the event such coverage no longer
applies.
ARTICLE III
Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company (at the Underwriter's
expense) with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus (or private offering memorandum,
if a Contract and its associated Account are exempt from registration) for the
Contracts and the Fund's prospectus printed together in one document (such
printing to be at the Company's expense).
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or in the Fund's
discretion, from the Fund), and the Underwriter (or the Fund), at its expense,
shall provide such Statement of Additional Information free of charge to the
Company and to any owner of a Contract or prospective owner who requests such
Statement.
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3.3. The Fund, at its expense, shall provide the Company with copies of
its proxy statements, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4. If and to the extent required by law, the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote Portfolio shares in accordance with instructions received
from Contract owners; and
(iii) vote Portfolio shares for which no instructions have been
received in the same proportion as shares of such Portfolio
for which instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners. The Company
reserves the right to vote Fund shares held in any segregated asset account in
its own right, to the extent permitted by law. The Company shall be responsible
for assuring that each of its separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
in the Shared Funding Order and rules and regulations of the SEC, which
standards will also be provided to other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular, the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of trustees and with whatever rules the SEC
may promulgate with respect thereto.
ARTICLE IV
Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund, the Underwriter or the Adviser is named, at least
fifteen Business Days prior to its use. No such material shall be used unless
approved in writing by the Fund or the Underwriter. The Fund and the Underwriter
will use reasonable best efforts to provide the Company with written response
within ten Business Days of receipt of such materials. Any piece which merely
names the Fund, the Underwriter or the Adviser as participating in the Variable
Insurance Products may be used after ten Business Days of receipt by the Fund
and the Underwriter if the Company has not received a written response from the
Fund or the Underwriter.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts
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other than the information or representations contained in the registration
statement or prospectus for the Fund, as such registration statement and
prospectus may from time to time be amended or supplemented, or in reports or
proxy statements for the Fund, or in sales literature or other promotional
material provided to the Company by the Fund or its designee or by the
Underwriter, except with the written permission of the Fund or the Underwriter,
pursuant to Section 4.1 hereof.
4.3. The Fund, the Underwriter or their designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used unless approved in writing by the Company or its
designee. The Company will use reasonable best efforts to provide the Fund with
written response within ten Business Days of receipt of such materials. Any
piece which merely states that the Fund, the Underwriter or the Adviser are
participating in the Variable Insurance Products may be used after ten Business
Days after receipt by the Company if the Fund or the Underwriter have not
received a written response from the Company.
4.4. The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may from time to time be amended or
supplemented, or in published reports which are in the public domain or approved
by the Company for distribution to Contract owners, or in sales literature or
other promotional material approved by the Company or its designee, except with
the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to any of the Portfolios or their shares,
promptly following the filing of such document with the SEC or other regulatory
authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Contracts or
each Account, promptly following the filing of such document with the SEC or
other regulatory authorities; and, if a Contract and its associated Account are
exempt from registration, the equivalents to the above.
4.7. For purposes of this Agreement, the phrase "sales literature or other
promotional material" includes, but is not limited to, any of the following that
refer to the Fund or any affiliate of the Fund: advertisements (such as material
published or designed for use in a newspaper, magazine, or other periodical,
radio, television, telephone or tape recording, videotape or electronic display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts
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of any other advertisement, sales literature or published article), educational
or training materials or other communications distributed or made generally
available to some or all agents or employees.
ARTICLE V
Fees and Expenses
5.1. The Fund and the Underwriter shall pay no fee or other compensation
to the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund. Currently,
no such payments are contemplated.
5.2. Except as otherwise expressly provided in the Agreement, all expenses
incident to performance by the Fund under this Agreement shall be paid by the
Fund. The Fund shall see to it that all Portfolio shares are registered and
authorized for issuance in accordance with applicable federal law and, if and to
the extent deemed advisable by the Fund, in accordance with applicable state
laws prior to their sale. The Fund shall bear the expenses for the cost of
registration and qualification of the Portfolios' shares, preparation and filing
of the Fund's prospectus and registration statement, proxy materials and
reports, setting the prospectus in type, setting in type and printing the proxy
materials and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of all statements
and notices required by any federal or state law and all taxes on the issuance
or transfer of the Portfolios' shares.
5.3. The Company shall bear the expenses of printing and distributing the
Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI
Diversification
6.1. The Fund will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Fund will at all times comply with Section 817(h) of the
Code and Treasury Regulation 1.817-5, relating to the diversification
requirements for variable annuity, endowment or life insurance contracts and any
amendments or other modifications to such Section or Regulation. In the event of
a breach of this Article VI by the Fund, it will take all reasonable steps (a)
to notify Company of such breach and (b) to adequately diversify the Fund so as
to achieve compliance with the grace period afforded by Regulation 1.817-5.
ARTICLE VII
Potential Conflicts
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7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. A material irreconcilable conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance, tax
or securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretive letter or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial decision in
any relevant proceeding; (d) the manner in which the investments of a Portfolio
are being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract owners; or (f) a decision
by a Participating Insurance Company to disregard the voting instructions of
contract owners. The Board shall promptly inform the Company if it determines
that a material irreconcilable conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts to the
Board. The Company will assist the Board in carrying out its responsibilities
under the Shared Funding Order, by providing the Board with all information
reasonably necessary for the Board to consider any issues raised. This includes,
but is not limited to, an obligation by the Company to inform the Board whenever
any of the events in Section 7.1, as they pertain to the Company, occur (e.g., a
decision to disregard contract owner voting instructions).
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the material irreconcilable conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change, and (2) establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such
Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested trustees of the Board. Any such
withdrawal and termination must take place within six months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Fund and the Underwriter shall continue to accept
and implement orders by the Company for the purchase (and redemption) of shares
of the Fund.
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7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
that of other state regulators, then the Company will withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account within six months after the Board informs the Company in writing
that it has determined that such decision has created a material irreconcilable
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested trustees of the Board. Until
the end of that six month period, the Fund and the Underwriter shall continue to
accept and implement orders by the Company for the purchase (and redemption) of
shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested trustees of the Board shall determine whether any
proposed action adequately remedies a material irreconcilable conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the material
irreconcilable conflict. In the event that the Board determines that any
proposed action does not adequately remedy a material irreconcilable conflict,
then the Company will withdraw the Account's investment in the Fund and
terminate this Agreement within six months after the Board informs the Company
in writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested trustees of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Order) on terms and conditions materially
different from those contained in the Shared Funding Order, then (a) the Fund
and/or the Participating Insurance Companies, as appropriate, shall take such
steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and
Rule 6e-3 as adopted, to the extent such rules are applicable; and (b) Sections
3.4, 3.5, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall continue in effect
only to the extent that terms and conditions substantially identical to such
Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII
Indemnification
8.1. Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund, the
Underwriter and the Adviser and each trustee/director and officer thereof and
each person, if any, who controls the Fund, the Underwriter, or the Adviser
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company), expenses or litigation (including legal and other
expenses) (hereinafter referred to
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collectively as a "Loss"), to which the Indemnified Parties may become subject
under any statute or regulation, at common law or otherwise, insofar as a Loss
is related to the sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or private offering
memorandum for the Contracts or contained in the Contracts or
sales literature or other promotional materials for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the
Indemnified Party for use in the registration statement or
prospectus for the Contracts or in the Contracts or in sales
literature or any other promotional materials (or any
amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature or
other promotional materials of the Fund not supplied by the
Company, or persons under its control) or wrongful conduct of
the Company or persons under its control, with respect to the
sale or distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus or sales literature or other promotional materials
of the Fund (or any amendment or supplement to any of the
foregoing) or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made
in reliance upon or in conformity with written information
furnished to the Fund, the Underwriter or the Adviser by or on
behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company, as limited by and in
accordance with the provisions of Sections 8.1 (b) and 8.1(c)
hereof.
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8.1(b). The Company shall not be liable under this indemnification
provision with respect to any Loss incurred or assessed against an Indemnified
Party as such may arise from such Indemnified Party's willful misfeasance, bad
faith or gross negligence in the performance of such Indemnified Party's duties
or by reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to the Fund, the Underwriter or the Adviser,
whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense thereof. The Company also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company to such Party of the Company's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Company will
not be liable to such Party under this Agreement for any legal or other expenses
subsequently incurred by such Party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
this Agreement, the issuance or sale of Portfolio shares or the Contracts or the
operation of the Fund.
8.2. Indemnification By The Fund
8.2(a). The Fund agrees to indemnify and hold harmless the Company, and
each of its directors/trustees and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any Loss to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as a Loss is related
to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the
diversification requirements specified in Article VI of this
Agreement);or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund, as limited by and in
accordance with the provisions of Sections 8.2(b) and 8.2(c)
hereof.
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8.2(b). The Fund shall not be liable under this indemnification provision
with respect to any Loss incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company, an Account, the Fund, the Underwriter or
the Adviser, whichever is applicable.
8.2(c). The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve the Fund from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Fund shall be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such Party
under this Agreement for any legal or other expenses subsequently incurred by
such Party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.2(d). The Company will promptly notify the Fund of the commencement of
any litigation or proceedings against the Indemnified Parties in connection with
this Agreement, the issuance or sale of Portfolio shares or the Contracts, the
operation of each Account or the acquisition of shares of the Fund.
8.3. Indemnification By The Underwriter
8.3(a) The Underwriter agrees to indemnify and hold harmless the Company
and each of its directors/trustees and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any Loss to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as a Loss is related
to the sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or sales literature or
other promotional materials of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as
to any
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<PAGE> 15
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with written information furnished to the Fund, the
Underwriter or the Adviser by or on behalf of the Indemnified
Party for use in the registration statement or prospectus of
the Fund or in sales literature or other promotional materials
(or any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature or
other promotional materials for the Contracts not supplied by
the Underwriter or persons under its control) or wrongful
conduct of the Fund or Underwriter or persons under their
control, with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus or private offering memorandum for the Contracts or
contained in the Contracts or sales literature or other
promotional materials for the Contracts (or any amendment or
supplement to any of the foregoing) or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon or in
conformity with written information furnished to the Company
by or on behalf of the Fund or the Underwriter; or
(iv) arise as a result of any failure by the Underwriter to provide
the services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter, as limited by and
in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Underwriter shall not be liable under this indemnification
provision with respect to any Loss incurred or assessed against an Indemnified
Party as such may arise from such Indemnified Party's willful misfeasance, bad
faith or gross negligence in the performance of such Indemnified Party's duties
or by reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company or an Account, whichever is
applicable.
8.3(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process
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<PAGE> 16
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter shall be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the Party named in the action. After notice from the Underwriter to such Party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such Party under this Agreement for
any legal or other expenses subsequently incurred by such Party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.3(d). The Company will promptly notify the Underwriter of the
commencement of any litigation or proceedings against the Indemnified Parties in
connection with this Agreement, the issuance or sale of Portfolio shares or the
Contracts or the operation of each Account.
8.4. Indemnification By The Adviser
8.4(a) The Adviser agrees to indemnify and hold harmless the Company and
each of its directors/trustees and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.4)
against any Loss to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as a Loss is related
to the sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature or
other promotional materials for the Contracts not supplied by
the Adviser, or persons under its control) or wrongful conduct
of the Adviser or persons under its control, with respect to
the sale or distribution of the Contracts or Fund shares; or
(ii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus or private offering memorandum for the Contracts or
contained in the Contracts or sales literature or other
promotional materials for the Contracts (or any amendment or
supplement to any of the foregoing) or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon or in conformity with
written information furnished to the Company by or on behalf
of the Adviser; or
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(iii) arise as a result of any failure by the Adviser to provide the
services and furnish the materials under the terms of this
Agreement (including a failure by the Fund, whether
unintentional or in good faith or otherwise, to comply with
the diversification requirements specified in Article VI of
this Agreement); or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Adviser, as limited by and in
accordance with the provisions of Sections 8.4(b) and 8.4(c)
hereof.
8.4(b). The Adviser shall not be liable under this indemnification
provision with respect to any Loss incurred or assessed against an Indemnified
Party as such may arise from such Indemnified Party's willful misfeasance, bad
faith or gross negligence in the performance of such Indemnified Party's duties
or by reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company or an Account, whichever is
applicable.
8.4(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Adviser shall be entitled to participate,
at its own expense, in the defense thereof. The Adviser also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Adviser to such party of the Adviser's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Adviser will
not be liable to such Party under this Agreement for any legal or other expenses
subsequently incurred by such Party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.4(d). The Company will promptly notify the Adviser of the commencement
of any litigation or proceedings against the Indemnified Parties in connection
with this Agreement, the issuance or sale of Portfolio shares or the Contracts
or the operation of each Account.
8.5. Except as otherwise expressly provided in the Agreement, no party
shall be liable to any other party for special, consequential, punitive or
exemplary damages, or damages of a like kind or nature; and, without limiting
the foregoing, with respect to Section 1.10 of Article I and Sections 8.2, 8.3
and 8.4 of Article VIII as such Sections relate to errors in calculation or
untimely reporting of net asset value per share or dividend or capital gain
rate, the liability of a party to any other party shall be limited to the amount
required to correct the value of the Account as if there had been no incorrect
calculation or reporting or untimely reporting of the net asset value per share
or dividend or capital gain rate.
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ARTICLE IX
Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
9.2. This Agreement shall be subject to the provisions of the 1933 Act,
the 1934 Act and the 1940 Act and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and regulations
as the SEC may grant (including, but not limited to, the Shared Funding Order)
and the terms of this Agreement shall be interpreted and construed in accordance
therewith.
ARTICLE X
Termination
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by sixty (60) days'
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the
Contracts; or
(c) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event any
of the Portfolio's shares are not registered, issued or sold
in accordance with applicable state and/or federal law or such
law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by
the Company; or
(d) termination by the Company by written notice to the Fund, the
Underwriter and the Adviser with respect to any Portfolio in
the event that such Portfolio ceases to qualify as a
"regulated investment company" under Subchapter M of the Code
or under any successor or similar provision, or if the Company
reasonably believes that the Fund will fail to so qualify; or
(e) termination by the Company by written notice to the Fund, the
Underwriter and the Adviser with respect to any Portfolio in
the event that such Portfolio fails to meet the
diversification requirements specified in Article VI hereof;
or
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(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or
the Underwriter shall determine, in their sole judgment
exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in
its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or
(g) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that either the Fund or the
Underwriter has suffered a material adverse change in its
business, operations, financial condition or prospects since
the date of this Agreement or is the subject of material
adverse publicity; or
(h) termination by the Fund or the Underwriter by written notice
to the Company, if the Company gives the Fund and the
Underwriter the written notice specified in Section 1.6(b)
hereof and at the time such notice was given there was no
notice of termination outstanding under any other provision of
this Agreement; provided, however, that any termination under
this Section 10.1(h) shall be effective forty-five days after
the notice specified in Section 1.6(b) was given.
10.2. Effect of Termination. Notwithstanding termination of this
Agreement, the Fund and the Underwriter shall, if the Company and the
Underwriter mutually agree, continue to make available additional shares of the
Fund pursuant to the terms and conditions of this Agreement, for all Contracts
in effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts shall be permitted to retain investments in the
Fund, reinvest dividends and redeem investments in the Fund. The parties agree
that this Section 10.2 shall not apply to any terminations under Section 1.2 of
Article I or under Article VII, and the effect of such Article VII terminations
shall be governed by Article VII of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions; or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"); or (iii) as a
result of action by the Fund's Board, acting in good faith, upon sixty (60)
days' advance written notice to the Company and Contract Owners. Upon request,
the Company will promptly furnish to the Fund and the Underwriter the opinion of
counsel for the Company (which counsel shall be reasonably satisfactory to the
Fund and the Underwriter) to the effect that any redemption pursuant to clause
(ii) above is a Legally Required Redemption, or is as permitted by an order of
the SEC pursuant to Section 26(b) of the 1940 Act. In the event that the Company
is to redeem shares pursuant to clause (iii) above, the Fund will promptly
furnish to the Company the opinion of counsel for the Fund (which counsel shall
be reasonably satisfactory to the Company) to the effect that any such
redemption is not in violation of the 1940 Act or any rule or regulation
thereunder, or is as permitted by an order of the SEC.
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Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract Owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Fund or the Underwriter 90 days' advance written notice of its intention to
do so.
ARTICLE XI
Notices
Any notice shall be sufficiently given when sent by registered or
certified mail or next-day delivery to the other parties at the address of such
parties set forth below or at such other address as any party may from time to
time specify in writing to the other parties.
If to the Company:
______________________________________
______________________________________
Attention:___________________________
If to the Fund:
99 Park Avenue
New York, New York 10016
Attention: President, with a copy to the General Counsel
If to the Underwriter:
99 Park Avenue
New York, New York 10016
Attention: President, with a copy to the General Counsel
If to the Adviser:
99 Park Avenue
New York, New York 10016
Attention: President, with a copy to the General Counsel
ARTICLE XII
Miscellaneous
12.1. All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
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12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party, until such time as it may come into the public domain.
12.3. The captions in this 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.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
12.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereunder; provided, however, that the Underwriter may assign this Agreement or
any rights or obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed and registered
to perform the obligations of the Underwriter under this Agreement.
12.9. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any), as
soon as practical and in any event within 120 days after the
end of each fiscal year;
(b) the Company's semi-annual statements (statutory) (and GAAP, if
any), as soon as practical and in any event within 60 days
after the end of each period:
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(c) any financial statement, proxy statement, notice or report of
the Company sent to stockholders and/or policyholders, as soon
as practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the SEC or any state
insurance regulator, as soon as practical after the filing
thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company, as soon as
practical after the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
_____________________________ Attest:
By:__________________________ By: ________________________
Name:________________________ Name: ______________________
Title:_______________________ Title: _______________________
VAN ECK WORLDWIDE INSURANCE TRUST Attest:
By:__________________________ By: _________________________
Name:________________________ Name: _______________________
Title:_______________________ Title: ________________________
VAN ECK SECURITIES CORPORATION Attest:
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By:__________________________ By: __________________________
Name:________________________ Name: ________________________
Title: ______________________ Title: _________________________
VAN ECK ASSOCIATES CORPORATION Attest:
By: _______________________ By: __________________________
Name: ____________________ Name: ________________________
Title: _____________________ Title: _________________________
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SCHEDULE A
ACCOUNTS
<TABLE>
<CAPTION>
Date Established by the Company's
Name of Account Board of Directors
--------------- ------------------
<S> <C>
</TABLE>
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<PAGE> 25
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<PAGE> 26
SCHEDULE B
PORTFOLIOS AND OTHER FUNDS
ADVISED BY ADVISER
I. Portfolios
II. Other Funds Advised by the Adviser
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<PAGE> 27
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<PAGE> 28
SCHEDULE C
OTHER INVESTMENT COMPANIES AVAILABLE
AS FUNDING VEHICLE FOR THE CONTRACTS
(If none, so state)
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<PAGE> 29
Page 29
<PAGE> 1
EXHIBIT (8)(j)
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this ____ day of ____ 1998, by
and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION, a Delaware
corporation (the "Company") on its own behalf and on behalf of each of the
segregated asset accounts of the Company set forth in Schedule A hereto, as may
be amended from time to time (each an "Account," and, collectively, the
"Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware
corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or
variable life insurance contracts (individually, the "Policy" and, collectively,
the "Policies") which, if required by applicable law, will be registered under
the 1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated
asset accounts, established by resolution of the Board of Directors of the
Company, to set aside and invest assets attributable to the aforesaid variable
annuity and/or variable life insurance contracts that are allocated to the
Accounts (the Policies and the Accounts covered by this Agreement, and each
corresponding Portfolio covered by this Agreement in which the Accounts invest,
is specified in Schedule A attached hereto as may be modified from time to
time);
WHEREAS, the Company has registered or will register the Accounts as
unit investment trusts under the 1940 Act (unless exempt therefrom);
<PAGE> 2
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered
as a broker-dealer with the Securities and Exchange Commission (the "SEC") under
the Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"),
and is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD");
WHEREAS, NY Life Distributors Inc. ("NY Life Distributors"), the
underwriter for the individual variable annuity and the variable life policies,
is registered as a broker-dealer with the SEC under the 1934 Act and is a member
in good standing of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust,
MFS, and the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those full and fractional
Shares which the Accounts order (based on orders placed by Policy
owners on that Business Day, as defined below) and which are available
for purchase by such Accounts, executing such orders on a daily basis
at the net asset value next computed after receipt by the Trust or its
designee of the order for the Shares. For purposes of this Section 1.1,
the Company shall be the designee of the Trust for receipt of such
orders from Policy owners and receipt by such designee shall constitute
receipt by the Trust; provided that the Trust receives notice of such
orders by 10:00 a.m. New York time on the next following Business Day
or such later time as permitted by Section 1.9 hereof. "Business Day"
shall mean any day on which the New York Stock Exchange, Inc. (the
"NYSE") is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and
the Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall calculate such
net asset value on each day which the NYSE is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Trust (the
"Board") may refuse to sell any Shares to the Company and the Accounts,
or suspend or terminate the offering of the Shares if such action is
required by law or by regulatory authorities having jurisdiction or is,
in the sole discretion of the Board acting in good faith and in light
of its fiduciary duties under federal and any applicable state laws,
necessary in the best interest of the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements
with the Trust and MFS (the "Participating Insurance Companies") and
their separate accounts, qualified pension and retirement plans and MFS
or its eligible affiliates. The Trust and MFS will not sell Trust
shares to any insurance company or separate account unless an agreement
containing provisions substantially the same as Articles III and VII of
this Agreement is in effect to govern such sales. The Company will not
resell the Shares except to the Trust or its agents.
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<PAGE> 3
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed
by Policy owners on that Business Day), executing such requests on a
daily basis at the net asset value next computed after receipt by the
Trust or its designee of the request for redemption. For purposes of
this Section 1.4, the Company shall be the designee of the Trust for
receipt of requests for redemption from Policy owners and receipt by
such designee shall constitute receipt by the Trust; provided that the
Trust receives notice of such request for redemption by 10:00 a.m. New
York time on the next following Business Day or such later time as
permitted by Section 1.9 hereof.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted
with respect to any Portfolio. However, with respect to payment of the
purchase price by the Company and of redemption proceeds by the Trust,
the Company and the Trust shall net purchase and redemption orders with
respect to each Portfolio and shall transmit one net payment for all of
the Portfolios in accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the
Shares by 2:00 p.m. New York time on the next Business Day after an
order to purchase the Shares is made in accordance with the provisions
of Section 1.1. hereof. In the event of net redemptions, the Trust
shall pay the redemption proceeds by 2:00 p.m. New York time on the
next Business Day after an order to redeem the shares is made in
accordance with the provisions of Section 1.4. hereof. All such
payments shall be in federal funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts.
The Shares ordered from the Trust will be recorded in an appropriate
title for the Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Shares. The Company hereby
elects to receive all such dividends and distributions as are payable
on a Portfolio's Shares in additional Shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all
such dividends and capital gain distributions in cash. The Trust shall
notify the Company of the number of Shares so issued as payment of such
dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per
share for each Portfolio available to the Company on each Business Day
as soon as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset value
per share available by 6:30 p.m. New York time. In the event that the
Trust is unable to meet the 6:30 p.m. time stated herein, it shall
provide additional time for the Company to place orders for the
purchase and redemption of Shares. Such additional time shall be equal
to the additional time which the Trust takes to make the net asset
value available to the Company. If the Trust provides materially
incorrect share net asset value information, the Trust shall make an
adjustment to the number of shares purchased or redeemed for the
Accounts to reflect the correct net asset value per share. Any material
error in the calculation or reporting of net asset value per share,
dividend or capital gains in formation shall be reported promptly upon
discovery to the Company.
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ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will
be registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold,
and distributed in compliance in all material respects with all
applicable state and federal laws, including without limitation the
1933 Act, the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the 1940 Act. The Company further represents and warrants
that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established
each Account as a segregated asset account under applicable law and has
registered or, prior to any issuance or sale of the Policies, will
register the Accounts as unit investment trusts in accordance with the
provisions of the 1940 Act (unless exempt therefrom) to serve as
segregated investment accounts for the Policies, and that it will
maintain such registration for so long as any Policies are outstanding.
The Company shall amend the registration statements under the 1933 Act
for the Policies and the registration statements under the 1940 Act for
the Accounts from time to time as required in order to effect the
continuous offering of the Policies or as may otherwise be required by
applicable law. The Company shall register and qualify the Policies for
sales in accordance with the securities laws of the various states only
if and to the extent deemed necessary by the Company.
2.2. The Company represents and warrants that the Policies are
currently and at the time of issuance will be treated as life
insurance, endowment or annuity contract under applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), that it
will maintain such treatment and that it will notify the Trust or MFS
immediately upon having a reasonable basis for believing that the
Policies have ceased to be so treated or that they might not be so
treated in the future; provided, however, that the Company makes no
representation or undertaking regarding any Policy to the extent such
representation or undertaking is dependent on compliance by an
investment vehicle in which the Company or an Account may invest with
the requirements of Subchapter M or Section 817(h) of the Code, the
regulations thereunder, or any successor provision
2.3. The Company represents and warrants that NY Life Distributors, the
underwriter for the individual variable annuity and the variable life
policies, is a member in good standing of the NASD and is a registered
broker-dealer with the SEC. The Company represents and warrants that
the Company and NY Life Distributors will sell and distribute such
policies in accordance in all material respects with all applicable
state and federal securities laws, including without limitation the
1933 Act, the 1934 Act, and the 1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of The
Commonwealth of Massachusetts and all applicable federal and state
securities laws and that the Trust is and shall remain registered under
the 1940 Act. The Trust shall amend the registration statement for its
Shares under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares. The
Trust shall register and qualify the Shares for sale in accordance with
the laws of the various states only if and to the extent deemed
necessary by the Trust.
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<PAGE> 5
2.5. MFS represents and warrants that the Underwriter is a member in
good standing of the NASD and is registered as a broker-dealer with the
SEC. The Trust and MFS represent that the Trust and the Underwriter
will sell and distribute the Shares in accordance in all material
respects with all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940
Act.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act and
any applicable regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it
shall perform its obligations for the Trust in compliance in all
material respects with any applicable federal securities laws and with
the securities laws of The Commonwealth of Massachusetts. MFS
represents and warrants that it is not subject to state securities laws
other than the securities laws of The Commonwealth of Massachusetts and
that it is exempt from registration as an investment adviser under the
securities laws of The Commonwealth of Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably
request so that it may carry out fully the obligations imposed upon it
by the conditions contained in the exemptive application pursuant to
which the SEC has granted exemptive relief to permit mixed and shared
funding (the "Mixed and Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the
Shares as the Company may reasonably request for distribution to
existing Policy owners whose Policies are funded by such Shares. The
Trust or its designee shall provide the Company, at the Company's
expense, with as many copies of the current prospectus for the Shares
as the Company may reasonably request for distribution to prospective
purchasers of Policies. If requested by the Company in lieu thereof,
the Trust or its designee shall provide such documentation (including a
"camera ready" copy of the new prospectus as set in type or, at the
request of the Company, as a diskette in the form sent to the financial
printer) and other assistance as is reasonably necessary in order for
the parties hereto once each year (or more frequently if the prospectus
for the Shares is supplemented or amended) to have the prospectus for
the Policies and the prospectus for the Shares printed together in one
document; the expenses of such printing to be apportioned between (a)
the Company and (b) the Trust or its designee in proportion to the
number of pages of the Policy and Shares' prospectuses, taking account
of other relevant factors affecting the expense of printing, such as
covers, columns, graphs and charts; the Trust or its designee to bear
the cost of printing the Shares' prospectus portion of such document
for distribution to owners of existing Policies funded by the Shares
and the Company to bear the expenses of printing the portion of such
document relating to the Accounts; provided, however, that the Company
shall bear all printing expenses of such combined documents where used
for distribution to prospective purchasers or to owners of existing
Policies not funded by the Shares. In the event that the Company
requests that the Trust or its designee provides the Trust's prospectus
in a "camera ready" or diskette format, the Trust shall be responsible
for providing the
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<PAGE> 6
prospectus in the format in which it or MFS is accustomed to formatting
prospectuses and shall bear the expense of providing the prospectus in
such format (e.g., typesetting expenses), and the Company shall bear
the expense of adjusting or changing the format to conform with any of
its prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or
its designee. The Trust or its designee, at its expense, shall print
and provide such statement of additional information to the Company (or
a master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust
or its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser
who requests such statement or to an owner of a Policy not funded by
the Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's
proxy materials, reports to Shareholders and other communications to
Shareholders in such quantity as the Company shall reasonably require
for distribution to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3
above, or of Article V below, the Company shall pay the expense of
printing or providing documents to the extent such cost is considered a
distribution expense. Distribution expenses would include by way of
illustration, but are not limited to, the printing of the Shares'
prospectus or prospectuses for distribution to prospective purchasers
or to owners of existing Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate
to include in the prospectus pursuant to which a Policy is offered
disclosure regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions
received from Policy owners; and
(c) vote the Shares for which no instructions have been
received in the same proportion as the Shares of such
Portfolio for which instructions have been received
from Policy owners;
so long as and to the extent that the SEC continues to interpret the
1940 Act to require pass through voting privileges for variable
contract owners. The Company will in no way recommend action in
connection with or oppose or interfere with the solicitation of proxies
for the Shares held for such Policy owners. The Company reserves the
right to vote shares held in any segregated asset account in its own
right, to the extent permitted by law. Participating Insurance
Companies shall be responsible for assuring that each of their separate
accounts holding Shares calculates voting privileges in the manner
required by the Mixed and Shared Funding Exemptive Order; provided,
however, that the Company shall be free to vote Portfolio shares
attributable to any Account in any manner permitted by applicable law,
to the extent the Mixed and Shared Funding Exemptive Order is
superseded by SEC
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<PAGE> 7
regulation or administrative practice. The Trust and MFS will notify
the Company of any changes of interpretations or amendments to the
Mixed and Shared Funding Exemptive Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, its prospectus relating to the Policies, each
piece of sales literature or other promotional material in which the
Trust, MFS, any other investment adviser to the Trust, or any affiliate
of MFS are named, at least ten (10) Business Days prior to its use or
such shorter period as the parties hereto may agree from time to time.
No such material shall be used if the Trust, MFS, or their respective
designees reasonably objects to such use within ten (10) Business Days
after receipt of such material or such shorter period as the parties
hereto may agree from time to time.
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning
the Trust or any other such entity in connection with the sale of the
Policies other than the information or representations contained in
the registration statement, prospectus or statement of additional
information for the Shares, as such registration statement, prospectus
and statement of additional information may be amended or supplemented
from time to time, or in reports or proxy materials for the Trust, or
in sales literature or other promotional material approved by the
Trust, MFS or their respective designees, except with the permission of
the Trust, MFS or their respective designees. The Trust, MFS or their
respective designees each agrees to respond to any request for approval
on a prompt and timely basis. The Company shall adopt and implement
procedures reasonably designed to ensure that information concerning
the Trust, MFS or any of their affiliates which is intended for use
only by brokers or agents selling the Policies (i.e., information that
is not intended for distribution to Policy owners or prospective
Policy owners) is so used, and neither the Trust, MFS nor any of their
affiliates shall be liable for any losses, damages or expenses relating
to the improper use of such broker only materials, except as otherwise
provided herein.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, its prospectus relating to
the Portfolios, each piece of sales literature or other promotional
material in which the Company and/or the Accounts is named, at least
ten (10) Business Days prior to its use or such shorter period as the
parties hereto may agree from time to time. No such material shall be
used if the Company or its designee reasonably objects to such use
within ten (10) Business Days after receipt of such material or such
shorter period as the parties hereto may agree from time to time.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf
of the Company or concerning the Company, the Accounts, or the Policies
in connection with the sale of the Policies other than the information
or representations contained in a registration statement, prospectus,
or statement of additional information for the Policies, as such
registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time, or in
reports for the Accounts, or in sales literature or other promotional
material approved by the Company or its designee, except with the
permission of the Company. The Company or its designee agrees to
respond to any request for approval on a prompt and timely basis. The
parties hereto agree that this Section 4.4. is neither intended to
designate nor otherwise imply that MFS is an underwriter or distributor
of the Policies.
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<PAGE> 8
4.5. The Company and the Trust (or their respective designees in lieu
of the Company or the Trust, as appropriate) will each provide to the
other at least one complete copy of all registration statements,
prospectuses, statements of additional information, reports, proxy
statements, sales literature or other promotional materials,
applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Policies, or to the
Trust or its Shares, prior to or contemporaneously with the filing of
such document with the SEC or other regulatory authorities. The Company
and the Trust shall also each promptly inform the other of the results
of any examination by the SEC (or other regulatory authorities) that
relates to the Policies, the Trust or its Shares, and the party that
was the subject of the examination shall provide the other party with a
copy of relevant portions of any "deficiency letter" or other
correspondence or written report regarding any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as
is reasonably practicable of any proxy solicitation for any Portfolio,
and of any material change in the Trust's registration statement,
particularly any change resulting in a change to the registration
statement or prospectus or statement of additional information for any
Account. The Trust and MFS will cooperate with the Company so as to
enable the Company to solicit proxies from Policy owners or to make
changes to its prospectus, statement of additional information or
registration statement, in an orderly manner. The Trust and MFS will
make reasonable efforts to attempt to have changes affecting Policy
prospectuses become effective simultaneously with the annual updates
for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited
to advertisements (such as material published, or designed for use in,
a newspaper, magazine, or other periodical, radio, television,
telephone or tape recording, videotape display, signs or billboards,
motion pictures, or other public media), and sales literature (such as
brochures, circulars, reprints or excerpts or any other advertisement,
sales literature, or published articles), distributed or made generally
available to customers or the public, educational or training materials
or communications distributed or made generally available to some or
all agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company
under this Agreement, and the Company shall pay no fee or other
compensation to the Trust, except that if the Trust or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act
to finance distribution and Shareholder servicing expenses, then,
subject to obtaining any required exemptive orders or regulatory
approvals, the Trust may make payments to the Company or to the
underwriter for the Policies if and in amounts agreed to by the Trust
in writing. Each party, however, shall, in accordance with the
allocation of expenses specified in Articles III and V hereof,
reimburse other parties for expenses initially paid by one party but
allocated to another party. In addition, nothing herein shall prevent
the parties hereto from otherwise agreeing to perform, and arranging
for appropriate compensation for, other services relating to the Trust
and/or to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable
federal and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration
fees; preparation and filing of the Trust's proxy materials and reports
to Shareholders; setting in type and printing its prospectus and
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<PAGE> 9
statement of additional information (to the extent provided by and as
determined in accordance with Article III above); setting in type and
printing the proxy materials and reports to Shareholders (to the extent
provided by and as determined in accordance with Article III above);
the preparation of all statements and notices required of the Trust by
any federal or state law with respect to its Shares; all taxes on the
issuance or transfer of the Shares; and the costs of distributing the
Trust's prospectuses and proxy materials to owners of Policies funded
by the Shares and any expenses permitted to be paid or assumed by the
Trust pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act.
The Trust shall not bear any expenses of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies
and of distributing the Trust's Shareholder reports to Policy owners.
The Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal
securities and state insurance laws; the cost of preparing, printing
and distributing the Policy prospectus and statement of additional
inform ation; and the cost of preparing, printing and distributing
annual individual account statements for Policy owners as required by
state insurance laws.
5.4 MFS will quarterly reimburse the Company certain of the
administrative costs and expenses incurred by the Company as a result
of operations necessitated by the beneficial ownership by Policy owners
of shares of the Portfolios of the Trust, equal to 0.20% per annum of
the aggregate net assets of the Trust attributable to such Policy
owners. In no event shall such fee be paid by the Trust, its
shareholders or by the Policy owners.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust does and will meet the diversification requirements of Section
817 (h)(1) of the Code and Treas. Reg. 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life
insurance contracts, as they may be amended from time to time (and any
revenue rulings, revenue procedures, notices, and other published
announcements of the Internal Revenue Service interpreting these
sections), as if those requirements applied directly to each such
Portfolio.
6.2. The Trust and MFS represent and warrant that each Portfolio has
elected to be qualified as a Regulated Investment Company under
Subchapter M of the Code and that it will maintain such qualification
(under Subchapter M or any successor or similar provision).
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ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for
the existence of any material irreconcilable conflict between the
interests of the variable annuity contract owners and the variable life
insurance policy owners of the Company and/or affiliated companies
("contract owners") investing in the Trust. The Board shall have the
sole authority to determine if a material irreconcilable conflict
exists, and such determination shall be binding on the Company only if
approved in the form of a resolution by a majority of the Board, or a
majority of the disinterested trustees of the Board. The Board will
give prompt notice of any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set
forth in the Trust's exemptive application pursuant to which the SEC
has granted the Mixed and Shared Funding Exemptive Order by providing
the Board, as it may reasonably request, with all information
reasonably necessary for the Board to consider any issues raised and
agrees that it will be responsible for promptly reporting any potential
or existing conflicts of which it is aware to the Board including, but
not limited to, an obligation by the Company to inform the Board
whenever contract owner voting instructions are disregarded. The
Company also agrees that, if a material irreconcilable conflict arises,
it will at its own cost remedy such conflict up to and including (a)
withdrawing the assets allocable to some or all of the Accounts from
the Trust or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of
the Trust, or submitting to a vote of all affected Policy owners
whether to withdraw assets from the Trust or any Portfolio and
reinvesting such assets in a different investment medium and, as
appropriate, segregating the assets attributable to any appropriate
group of Policy owners that votes in favor of such segregation, or
offering to any of the affected Policy owners the option of segregating
the assets attributable to their Policies, and (b) establishing a new
registered management investment company and segregating the assets
underlying the Policies, unless a majority of Policy owners materially
adversely affected by the conflict have voted to decline the offer to
establish a new registered management investment company.
7.3. A majority of the disinterested trustees of the Board shall
determine whether any proposed action by the Company adequately
remedies any material irreconcilable conflict. In the event that the
Board determines that any proposed action does not adequately remedy
any material irreconcilable conflict, the Company will withdraw from
investment in the Trust each of the Accounts designated by the
disinterested trustees and terminate this Agreement within six (6)
months after the Board in forms the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination
shall be limited to the extent required to remedy any such material
irreconcilable conflict as determined by a majority of the
disinterested trustees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the 1940 Act or the rules promulgated thereunder with respect to
mixed or shared funding (as defined in the Mixed and Shared Funding
Exemptive Order) on terms and conditions materially different from
those contained in the Mixed and Shared Funding Exemptive Order, then
(a) the Trust and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with
Rule 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2,
7.3 and 7.4 of this Agreement shall continue in effect only to the
extent that terms and conditions substantially identical to such
Sections are contained in such Rule(s) as so amended or adopted.
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ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
The Company agrees to indemnify and hold harmless the Trust,
MFS, any affiliates of MFS, and each of their respective
directors/trustees, officers and each person, if any, who controls the
Trust or MFS within the meaning of Section 15 of the 1933 Act, and any
agents or employees of the foregoing (each an "Indemnified Party," or
collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company) or expenses (including reasonable counsel fees) to which any
Indemnified Party may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Shares or the Policies
and:
(a) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement, prospectus
or statement of additional information for the
Policies or contained in the Policies or sales
literature or other promotional material for the
Policies (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reasonable reliance upon and in
conformity with information furnished to the Company
or its designee by or on behalf of the Trust or MFS
for use in the registration statement, prospectus or
statement of additional information for the Policies
or in the Policies or sales literature or other
promotional material (or any amendment or supplement)
or otherwise for use in connection with the sale of
the Policies or Shares; or
(b) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, statement of additional
information or sales literature or other promotional
material of the Trust not supplied by the Company or
its designee, or persons under its control and on
which the Company has reasonably relied) or wrongful
conduct of the Company or persons under its control,
with respect to the sale or distribution of the
Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the
registration statement, prospectus, statement of
additional information, or sales literature or other
promotional literature of the Trust, or any amendment
thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statement or statements therein not misleading,
if such statement or omission was made in reliance
upon and in conformity with information furnished to
the Trust by or on behalf of the Company; or
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(d) arise out of or result from any material breach of
any representation and/or warranty made by the
Company in this Agreement or arise out of or result
from any other material breach of this Agreement by
the Company; or
(e) arise as a result of any failure by the Company to
provide the services and furnish the materials under
the terms of this Agreement;
as limited by and in accordance with the provisions of this Article
VIII.
8.2. INDEMNIFICATION BY THE TRUST
The Trust agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act,
and any agents or employees of the foregoing (each an "Indemnified
Party," or collectively, the "Indemnified Parties" for purposes of this
Section 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Trust) or expenses (including reasonable counsel fees) to which any
Indemnified Party may become subject under any statute, at common law
or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to
the sale or acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement, prospectus,
statement of additional information or sales
literature or other promotional material of the Trust
(or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statement therein not
misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reasonable reliance upon and in
conformity with information furnished to the Trust,
MFS, the Underwriter or their respective designees by
or on behalf of the Company for use in the
registration statement, prospectus or statement of
additional information for the Trust or in sales
literature or other promotional material for the
Trust (or any amendment or supplement) or otherwise
for use in connection with the sale of the Policies
or Shares; or
(b) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, statement of additional
information or sales literature or other promotional
material for the Policies not supplied by the Trust,
MFS, the Underwriter or any of their respective
designees or persons under their respective control
and on which any such entity has reasonably relied)
or wrongful conduct of the Trust or persons under its
control, with respect to the sale or distribution of
the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the
registration statement, prospectus, statement of
additional information, or sales literature or other
promotional literature of the Accounts or
-12-
<PAGE> 13
relating to the Policies, or any amendment thereof or
supplement thereto, or the omission or alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statement
or statements therein not misleading, if such
statement or omission was made in reliance upon and
in conformity with information furnished to the
Company by or on behalf of the Trust, MFS or the
Underwriter; or
(d) arise out of or result from any material breach of
any representation and/or warranty made by the Trust
in this Agreement (including a failure by any
Portfolios, whether unintentional or in good faith or
otherwise, to comply with the diversification
requirements specified in Article VI of this
Agreement) or arise out of or result from any other
material breach of this Agreement by the Trust; or
(e) arise out of or result from the materially incorrect
or untimely calculation or reporting of the daily net
asset value per share or dividend or capital gain
distribution rate; or
(f) arise as a result of any failure by the Trust to
provide the services and furnish the materials under
the terms of the Agreement;
as limited by and in accordance with the provisions of this Article
VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating
Insurance Company or any Policy holder, with respect to any losses,
claims, damages, liabilities or expenses that arise out of or result
from (i) a breach of any representation, warranty, and/or covenant made
by the Company hereunder or by any Participating Insurance Company
under an agreement containing substantially similar representations,
warranties and covenants; (ii) the failure by the Company or any
Participating Insurance Company to maintain its segregated asset
account (which invests in any Portfolio) as a legally and validly
established segregated asset account under applicable state law and as
a duly registered unit investment trust under the provisions of the
1940 Act (unless exempt therefrom); or (iii) the failure by the Company
or any Participating Insurance Company to maintain its variable annuity
and/or variable life insurance contracts (with respect to which any
Portfolio serves as an underlying funding vehicle) as life insurance,
endowment or annuity contracts under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to
any losses, claims, damages, liabilities or expenses to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, willful misconduct, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations
and duties under this Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of notice of commencement of any action, such Indemnified Party
will, if a claim in respect thereof is to be made against the
indemnifying party under this section, notify the indemnifying party of
the commencement
-13-
<PAGE> 14
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any Indemnified
Party otherwise than under this section. In case any such action is
brought against any Indemnified Party, and it notified the indemnifying
party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish,
assume the defense thereof, with counsel satisfactory to such
Indemnified Party. After notice from the indemnifying party of its
intention to assume the defense of an action, the Indemnified Party
shall bear the expenses of any additional counsel obtained by it, and
the indemnifying party shall not be liable to such Indemnified Party
under this section for any legal or other expenses subsequently
incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation.
8.6. Each party agrees promptly to notify the other parties of the
commencement of any litigation or proceeding against it or any of its
respective officers, directors, trustees, employees or 1933 Act control
persons in connection with the Agreement, the issuance or sale of the
Policies, the operation of the Accounts, or the sale or acquisition of
Shares.
8.7. A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this
Article VIII. The indemnification provisions contained in this Article
VIII shall survive any termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth
of Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall
promptly notify the other parties to this Agreement, in writing, of the
institution of any formal proceedings brought against such party or its
designees by the NASD, the SEC, or any insurance department or any other
regulatory body regarding such party's duties under this Agreement or related to
the sale of the Policies, the operation of the Accounts, or the purchase of the
Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall continue in full force and effect until
terminated with respect to the Accounts, or one, some, or all
Portfolios:
(a) at the option of any party upon six (6) months'
advance written notice to the other parties; or
(b) at the option of the Company upon written notice to
the other parties to the extent that the Shares of
Portfolios are not reasonably available to meet the
requirements of the Policies or are not "appropriate
funding vehicles" for the Policies, as reasonably
-14-
<PAGE> 15
determined by the Company. Without limiting the
generality of the foregoing, the Shares of a
Portfolio would not be "appropriate funding vehicles"
if, for example, such Shares did not meet the
diversification or other requirements referred to in
Article VI hereof; or if the Company would be
permitted to disregard Policy owner voting
instructions pursuant to Rule 6e-2 or 6e-3(T) under
the 1940 Act. Prompt notice of the election to
terminate for such cause and an explanation of such
cause shall be furnished to the Trust by the Company;
or
(c) at the option of the Trust or MFS upon written notice
to the other parties upon institution of formal
proceedings against the Company or NY Life
Distributors by the NASD, the SEC, or any insurance
department or any other regulatory body regarding the
Company's or NY Life Distributors' duties under this
Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the
Shares; or
(d) at the option of the Company upon written notice to
the other parties upon institution of formal
proceedings against the Trust, the Underwriter or MFS
by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body
regarding the Trust's, the Underwriter's or MFS'
duties under this Agreement or related to the sale of
the Shares; or
(e) at the option of the Company, the Trust or MFS upon
receipt of any necessary regulatory approvals and/or
the vote of the Policy owners having an interest in
the Accounts (or any subaccounts) to substitute the
shares of another investment company for the
corresponding Portfolio Shares in accordance with the
terms of the Policies for which those Portfolio
Shares had been selected to serve as the underlying
investment media. The Company will give thirty (30)
days' prior written notice to the Trust of the Date
of any proposed vote or other action taken to replace
the Shares; or
(f) termination by either the Trust or MFS by written
notice to the Company, if either one or both of the
Trust or MFS respectively, shall determine, in their
sole judgment exercised in good faith, that the
Company has suffered a material adverse change in its
business, operations, financial condition, or
prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(g) termination by the Company by written notice to the
Trust and MFS, if the Company shall determine, in its
sole judgment exercised in good faith, that the Trust
or MFS has suffered a material adverse change in this
business, operations, financial condition or
prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(h) at the option of any party to this Agreement, upon
another party's material breach of any provision of
this Agreement; or
(i) upon assignment of this Agreement, unless made with
the written consent of the parties hereto.
-15-
<PAGE> 16
11.2. The notice shall specify the Portfolio or Portfolios, Policies
and, if applicable, the Accounts as to which the Agreement is to be
terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised
for cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations,
the Company shall not redeem the Shares attributable to the Policies
(as opposed to the Shares attributable to the Company's assets held in
the Accounts), and the Company shall not prevent Policy owners from
allocating payments to a Portfolio that was otherwise available under
the Policies, until thirty (30) days after the Company shall have
notified the Trust of its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and
MFS shall, at the option of the Company, continue to make available
additional shares of the Portfolios pursuant to the terms and
conditions of this Agreement, for all Policies in effect on the
effective date of termination of this Agreement (the "Existing
Policies"), except as otherwise provided under Article VII of this
Agreement. Specifically, without limitation, the owners of the Existing
Policies shall be permitted to transfer or reallocate investment under
the Policies, redeem investments in any Portfolio and/or invest in the
Trust upon the making of additional purchase payments under the
Existing Policies.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail, overnight courier or facsimile to the other party at the address
of such party set forth below or at such other address as such party may from
time to time specify in writing to the other party.
If to the Trust:
MFS VARIABLE INSURANCE TRUST
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, Secretary
If to the Company:
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
51 Madison Avenue
New York, New York 10010
Facsimile No.: (212) 576-6905
Attn: Robert D. Rock, Senior Vice President
If to MFS:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
-16-
<PAGE> 17
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-7765
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement or as otherwise required by
applicable law or regulation, shall not disclose, disseminate or
utilize such names and addresses and other confidential information
without the express written consent of the affected party until such
time as it may come into the public domain.
13.2. The captions in this 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.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument
are not binding upon any of the Trust's trustees, officers, employees
or shareholders individually, but are binding solely upon the assets
and property of the Trust in accordance with its proportionate interest
hereunder. The Company further acknowledges that the assets and
liabilities of each Portfolio are separate and distinct and that the
obligations of or arising out of this instrument are binding solely
upon the assets or property of the Portfolio on whose behalf the Trust
has executed this instrument. The Company also agrees that the
obligations of each Portfolio hereunder shall be several and not joint,
in accordance with its proportionate interest hereunder, and the
Company agrees not to proceed against any Portfolio for the obligations
of another Portfolio.
-17-
<PAGE> 18
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified above.
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION
By its authorized officer,
By:_________________________________________
Title:______________________________________
MFS VARIABLE INSURANCE TRUST,
ON BEHALF OF THE PORTFOLIOS
By its authorized officer and not individually,
____________________________________________
James R. Bordewick, Jr.
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
____________________________________________
Jeffrey L. Shames
Chairman and Chief Executive Officer
-18-
<PAGE> 19
As of ____________________
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
<CAPTION>
NAME OF SEPARATE ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS
ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
================================= =========================================== ================================
<S> <C> <C>
NYLIAC Variable Annuity New York Life LifeStages Flexible MFS Research Series
Separate Account - I Premium Variable Annuity MFS Growth with Income Series
(October 5, 1992)
NYLIAC Variable Annuity New York Life LifeStages Flexible
Separate Account - II Premium Variable Annuity
(October 5, 1992)
NYLIAC Variable Annuity New York Life LifeStages Variable
Separate Account - III Annuity
(November 30, 1994)
MainStay Plus Variable Annuity
NYLIAC Variable Universal Life MainStay Variable Annuity
Separate Account - I
(June 4, 1993) Variable Universal Life and
Survivorship Variable Universal Life
NYLIAC Corporate Sponsored
Variable Universal Life
Separate Account - I Corporate Sponsored Variable
(May 24, 1996) Universal Life
- --------------------------------- ------------------------------------------- --------------------------------
</TABLE>
-19-
<PAGE> 1
Exhibit (9)
[NEW YORK LIFE INSURANCE COMPANY LOGO]
NEW YORK LIFE INSURANCE COMPANY
51 Madison Avenue, New York, NY 10010
(212) 576-3763
JONATHAN E. GAINES
Vice President and
Associate General Counsel
April 16, 1998
Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, D. C. 20549
RE: NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE ANNUITY SEPARATE ACCOUNT-I
Ladies and Gentlemen:
This opinion is furnished in connection with the filing by New York Life
Insurance and Annuity Corporation ("NYLIAC") of Post-Effective Amendment No. 7
to the registration statement on Form N-4 ("Registration Statement") under the
Securities Act of 1933, as amended, of NYLIAC Variable Annuity Separate
Account-I ("Separate Account-I"). Separate Account-I receives and invests
premiums allocated to it under a flexible premium multi-funded variable
retirement annuity policy ("Annuity Contract"). The Annuity Contract is offered
in the manner described in the Registration Statement.
In connection with this opinion, I have made such examination of the law and
have examined such corporate records and such other documents as I consider
appropriate as a basis for the opinion hereinafter expressed. On the basis of
such examination, it is my opinion that:
1. NYLIAC is a corporation duly organized and validly existing under the laws
of the State of Delaware.
2. Separate Account-I is a separate account established and maintained by
NYLIAC pursuant to Section 2932 of the Delaware Insurance Code, under
which the income, gains and losses, realized or unrealized, from assets
allocated to Separate Account-I shall be credited to or charged against
Separate Account-I, without regard to other income, gains or losses of
NYLIAC.
<PAGE> 2
Securities and Exchange Commission
April 16, 1998
Page 2
3. The Annuity Contracts have been duly authorized by NYLIAC and, when sold
in jurisdictions authorizing such sales, in accordance with the
Registration Statement, will constitute validly issued and binding
obligations of NYLIAC in accordance with their terms.
4. Each owner of a Annuity Contract will not be subject to any deductions,
charges, or assessments imposed by NYLIAC other than those provided in the
Annuity Contract.
I consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ JONATHAN E. GAINES
Jonathan E. Gaines
Vice President and
Associate General Counsel
<PAGE> 1
Exhibit (10)(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in the Statement of Additional Information constituting
part of this Post-Effective Amendment No. 7 to the registration statement on
Form N-4 (the "Registration Statement") of our report dated February 13, 1998,
relating to the financial statements of New York Life Insurance and Annuity
Corporation, and of our report dated February 23, 1998, relating to the
financial statements and selected per unit data of New York Life Insurance and
Annuity Corporation Variable Annuity Separate Accounts I and II, which appear
in such Statement of Additional Information, and to the incorporation by
reference of our reports into the Prospectus which constitutes part of this
Registration Statement. We also consent to the reference to us under the
heading "Independent Accountants" in such Statement of Additional Information
and to the reference to us under the heading "Condensed Financial Information"
in such Prospectus.
PRICE WATERHOUSE, LLP
1177 Avenue of the Americas
New York, New York
April 16, 1998
<PAGE> 1
Exhibit (13)
Schedule of Computations
YIELD CALCULATIONS
The yield is computed by dividing the net investment income per accumulation
unit earned during the period by the price per unit on the last day of the
period, according to the following formula:
YIELD = 2[(a-b + 1)(6)-1]
---
cd
Where: a = net investment income earned during the period by the
Portfolio attributable to shares owned by the MainStay VP
Government, MainStay VP High Yield Corporate Bond or MainStay
VP Bond Investment Division.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of accumulation units outstanding
during the period.
d = the maximum offering price per accumulation unit on the last
day of the period.
AVERAGE ANNUAL TOTAL RETURN CALCULATIONS
Average annual total return is computed by finding the average annual compounded
rates of return over the periods shown that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P(1+T)(n) = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
(n) = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the one, five or ten-year period or
the inception date, at the end of the one, five or ten-year
period (or fractional portion thereof).
