<PAGE> 1
As filed with the Securities and Exchange Commission on April 23, 1999
Registration No. 33-53344
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. 8 [ X ]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 9 [ X ]
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-II
(Exact Name of Registrant)
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
(Name of Depositor)
51 Madison Avenue, New York, New York 10010
(Address of Depositor's Principal Executive Office)
Depositor's Telephone Number: (212) 576-7000
Carol Yee, Esq.
New York Life Insurance and Annuity Corporation
51 Madison Avenue
New York, New York 10010
(Name and Address of Agent for Service)
Copy to:
Peter E. Panarites, Esq. Michael J. McLaughlin, Esq.
Freedman, Levy, Kroll & Simonds Senior Vice President
1050 Connecticut Avenue and General Counsel
Suite 825 New York Life Insurance Company
Washington, D.C. 20036 51 Madison Avenue
New York, New York 10010
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485.
[X] on May 1, 1999 pursuant to paragraph (b) of Rule 485.
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
[ ] on ___________ pursuant to paragraph (a)(1) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered:
Units of interest in a separate account under variable annuity contracts.
<PAGE> 2
CROSS REFERENCE SHEET
INFORMATION REQUIRED IN A PROSPECTUS
<TABLE>
<CAPTION>
Item of Form N-4 Prospectus Caption
- ---------------- ------------------
<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>
<PAGE> 3
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Statement of Additional
Item of Form N-4 Information Caption
- ---------------- -------------------
<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>
<PAGE> 4
PROSPECTUS DATED MAY 1, 1999
FOR THE
NEW YORK LIFE LIFESTAGES(R) FLEXIBLE PREMIUM VARIABLE ANNUITY
(FORMERLY NAMED NYLIAC VARIABLE ANNUITY)
FROM
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A DELAWARE CORPORATION)
51 MADISON AVENUE, NEW YORK, NEW YORK 10010
INVESTING IN
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-I
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-II
This Prospectus describes the individual New York Life LifeStages(R) Flexible
Premium Variable Annuity policies. New York Life Insurance and Annuity
Corporation ("NYLIAC") issues these policies. We designed these policies to
assist individuals with their long-term retirement planning needs. You can use
these policies with retirement plans that do or do not qualify for special
federal income tax treatment. The policies offer flexible premium payments,
access to your money through partial withdrawals (some withdrawals may be
subject to a surrender charge and/or tax penalty), a choice of when income
payments will commence, and a guaranteed death benefit if the owner or annuitant
dies before income payments have commenced.
Your premium payments accumulate on a tax-deferred basis. This means your
earnings are not taxed until you take the money out of your policy which can be
done in several ways. You can split your premium payments among a guaranteed
interest option and twenty-six 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 Dean Witter Emerging
Markets Equity
- T. Rowe Price Equity Income
- Van Eck Worldwide Hard Assets
</TABLE>
*These investment divisions are part of the MainStay VP Series Fund, Inc.
We do not guarantee the investment performance of these variable investment
divisions. Depending on current market conditions, you can make or lose money in
any of the investment divisions.
You should read this Prospectus carefully before investing and keep 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
(VIP II), the Fidelity Variable Insurance Products Fund (VIP), the Janus Aspen
Series, the MFS Variable Insurance Trust, the Morgan Stanley Dean Witter
Universal Funds, Inc., the T. Rowe Price Equity Series, Inc. and the Van Eck
Worldwide Insurance Trust (the "Funds", each individually a "Fund").
To learn more about the policy you can obtain a copy of the Statement of
Additional Information ("SAI"), dated May 1, 1999. The SAI has been filed with
the Securities and Exchange Commission ("SEC") and is incorporated by reference
into this Prospectus. The table of contents for the SAI appears at the end of
this Prospectus. For a free copy of the SAI, call us at (800) 598-2019 or write
to us at the address above.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS............................ 3
FEE TABLE.............................. 4
QUESTIONS AND ANSWERS ABOUT NEW YORK
LIFE LIFESTAGES(R) FLEXIBLE PREMIUM
VARIABLE ANNUITY..................... 9
FINANCIAL STATEMENTS................... 16
CONDENSED FINANCIAL INFORMATION........ 17
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
Reinvestment......................... 22
THE POLICIES........................... 22
Qualified and Non-Qualified
Policies.......................... 22
Policy Application and Premium
Payments.......................... 23
Issue Ages........................... 24
Transfers............................ 24
Procedures for Telephone Transfers... 24
Dollar Cost Averaging................ 25
Automatic Asset Reallocation......... 26
Interest Sweep....................... 26
Accumulation Period.................. 26
(a) Crediting of Premium
Payments.................... 26
(b) Valuation of Accumulation
Units....................... 27
Policy Owner Inquiries............... 27
CHARGES AND DEDUCTIONS................. 27
Surrender Charges.................... 27
Amount of Surrender Charge........... 27
Exceptions to Surrender Charges...... 27
Other Charges........................ 28
(a) Mortality and Expense Risk
Charges..................... 28
(b) Administration Fee............ 28
(c) Policy Service Charge......... 28
(d) Fund Charges.................. 28
Group and Sponsored Arrangements..... 28
Taxes................................ 29
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DISTRIBUTIONS UNDER THE POLICY......... 29
Surrenders and Withdrawals........... 29
(a) Surrenders.................... 29
(b) Partial Withdrawals........... 30
(c) Periodic Partial
Withdrawals................. 30
(d) Hardship Withdrawals.......... 30
Required Minimum Distribution
Option............................ 30
Cancellations........................ 30
Annuity Commencement Date............ 30
Death Before Annuity Commencement.... 31
Income Payments...................... 32
(a) Election of Income Payment
Options..................... 32
(b) Other Methods of Payment.... 32
(c) Proof of Survivorship......... 32
Delay of Payments.................... 32
Designation of Beneficiary........... 32
Restrictions Under Internal Revenue
Code Section 403(b)(11)........... 33
Loans................................ 33
Riders............................... 33
(a) Living Needs Benefit
Rider....................... 34
(b) Unemployment Benefit Rider.. 34
THE FIXED ACCOUNT...................... 34
(a) Interest Crediting............ 34
(b) Bail-Out...................... 34
(c) Transfers to Investment
Divisions................... 35
FEDERAL TAX MATTERS.................... 35
Introduction......................... 35
Taxation of Annuities in General..... 35
Qualified Plans...................... 36
(a) Section 403(a) Plans.......... 37
(b) Section 403(b) Plans.......... 37
(c) Individual Retirement
Annuities................... 37
(d) Roth Individual Retirement
Annuities................... 37
(e) Deferred Compensation
Plans....................... 37
DISTRIBUTOR OF THE POLICIES............ 37
VOTING RIGHTS.......................... 37
TABLE OF CONTENTS FOR THE STATEMENT OF
ADDITIONAL INFORMATION............... 40
</TABLE>
THIS PROSPECTUS IS NOT CONSIDERED AN OFFERING IN ANY STATE WHERE THE SALE
OF THIS POLICY CANNOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATIONS REGARDING THE OFFERING OTHER THAN AS DESCRIBED IN THIS
PROSPECTUS OR IN ANY ATTACHED SUPPLEMENT TO THIS PROSPECTUS OR IN ANY
SUPPLEMENTAL SALES MATERIAL WE AUTHORIZE.
2
<PAGE> 6
DEFINITIONS
ACCUMULATION UNIT--An accounting unit we use to calculate the Variable
Accumulation Value prior to the Annuity Commencement Date. Each Investment
Division of each Separate Account has a distinct Accumulation Unit value.
ACCUMULATION VALUE--The sum of the Variable Accumulation Value and the Fixed
Accumulation Value of a policy.
ALLOCATION ALTERNATIVES--The Investment Divisions of the applicable Separate
Account and the Fixed Account.
ANNUITANT--The person whose life determines the Income Payments, and upon whose
death prior to the Annuity Commencement Date, benefits under the policy may be
paid.
ANNUITY COMMENCEMENT DATE--The date on which we are to make the first Income
Payment under the policy.
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
policy owner's death.
BUSINESS DAY--Generally, any day on which the New York Stock Exchange ("NYSE")
is open for trading. Our Business Day ends at 4:00 p.m. Eastern Time or the
closing of the NYSE, if earlier.
ELIGIBLE PORTFOLIOS ("PORTFOLIOS")--The mutual fund portfolios of the Funds that
are available for investment through the Investment Divisions of the Separate
Accounts.
FIXED ACCOUNT--An account that is credited with a fixed interest rate which
NYLIAC declares and is not part of the Separate Accounts. The Accumulation Value
of the Fixed Account is supported by assets in NYLIAC's general account, which
are subject to the claims of our general creditors.
FIXED ACCUMULATION VALUE--The sum of premium payments and transfers allocated to
the Fixed Account, plus interest credited on those premium payments and
transfers, less any transfers and partial withdrawals from the Fixed Account,
and less any surrender charges and policy service charges that may have already
been assessed from the Fixed Account.
INCOME PAYMENTS--Periodic payments NYLIAC makes after the Annuity Commencement
Date.
INVESTMENT DIVISION--The variable investment options available with the policy.
Each Investment Division invests exclusively in shares of a specified Eligible
Portfolio.
NON-QUALIFIED POLICIES--Policies that are not available for use in connection
with employee retirement plans that qualify for special federal income tax
treatment.
POLICY ANNIVERSARY--An anniversary of the Policy Date shown on the Policy Data
Page.
POLICY DATA PAGE--Page 2 of the policy, which contains the policy
specifications.
POLICY DATE--The date from which we measure Policy Years, quarters, months and
Policy Anniversaries. It is shown on the Policy Data Page.
POLICY YEAR--A year starting on the Policy Date. Subsequent Policy Years begin
on each Policy Anniversary, unless otherwise indicated.
QUALIFIED POLICIES--Policies issued under employee retirement plans that qualify
for special federal income tax treatment.
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 we established to receive and invest premium payments paid under
Non-Qualified Policies. This Separate Account's Investment Divisions, in turn,
purchase shares of Eligible Portfolios.
SEPARATE ACCOUNT II--NYLIAC Variable Annuity Separate Account-II, a segregated
asset account we established to receive and invest premium payments paid under
Qualified Policies. This Separate Account's Investment Divisions, in turn,
purchase shares of Eligible Portfolios.
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.
3
<PAGE> 7
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
Surrender Charge (as a % of amount
withdrawn)...................... 7% during Policy Years 1-3; 6% during Policy Year 4, 5% during Policy Year 5, 4%
during Policy Year 6, 3% during Policy Year 7, 2% during Policy Year 8, 1% during
Policy Year 9, and 0% thereafter.
Transfer Fee...................... There is no transfer fee on the first 12 transfers in any Policy Year. However,
NYLIAC reserves the right to charge up to $30 for each transfer in excess of 12
transfers per Policy Year.
Annual Policy Service Charge...... 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, 1998)(a)
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.................... 0.08% 0.09% 0.16% 0.13% 0.08% 0.17%
Total Fund Annual Expenses...... 0.64% 0.54% 0.72%(b) 0.63% 0.58% 0.97%(b)
<CAPTION>
MAINSTAY VP
TOTAL MAINSTAY VP MAINSTAY VP
RETURN VALUE BOND
----------- ----------- -----------
<S> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount
withdrawn)...................... 7% during Policy Years 1-3; 6% during Policy Year 4, 5% during Policy Year 5, 4%
during Policy Year 6, 3% during Policy Year 7, 2% during Policy Year 8, 1% during
Policy Year 9, and 0% thereafter.
Transfer Fee...................... There is no transfer fee on the first 12 transfers in any Policy Year. However,
NYLIAC reserves the right to charge up to $30 for each transfer in excess of 12
transfers per Policy Year.
Annual Policy Service Charge...... 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, 1998)(a)
Advisory Fees..................... 0.32% 0.36% 0.25%
Administration Fees............... 0.20% 0.20% 0.20%
Other Expenses.................... 0.08% 0.09% 0.07%
Total Fund Annual Expenses...... 0.60% 0.65% 0.52%
</TABLE>
- ------------
4
<PAGE> 8
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 VALUE EQUITY GROWTH CAPITALIZATION
-------- -------- -------- ------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount
withdrawn)......................... 7% during Policy Years 1-3; 6% during Policy Year 4, 5% during Policy Year 5, 4%
during Policy Year 6, 3% during Policy Year 7, 2% during Policy Year 8, 1% during
Policy Year 9, and 0% thereafter.
Transfer Fee......................... There is no transfer fee on the first 12 transfers in any Policy Year. However,
NYLIAC reserves the right to charge up to $30 for each transfer in excess of 12
transfers per Policy Year.
Annual Policy Service Charge......... 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
31,1998)(a)
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....................... 0.06% 0.08% 0.15%(c) 0.15%(c) 0.15%(c) 0.15%(c) 0.04%
Total Fund Annual Expenses........... 0.51% 0.38% 0.85% 0.95% 0.85% 0.95% 0.89%
<CAPTION>
CALVERT FIDELITY
SOCIAL VIP II
BALANCED CONTRAFUND
-------- ----------
<S> <C> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount
withdrawn)......................... 7% during Policy Years 1-3; 6% during Policy Year 4, 5% during Policy Year 5, 4%
during Policy Year 6, 3% during Policy Year 7, 2% during Policy Year 8, 1% during
Policy Year 9, and 0% thereafter.
Transfer Fee......................... There is no transfer fee on the first 12 transfers in any Policy Year. However,
NYLIAC reserves the right to charge up to $30 for each transfer in excess of 12
transfers per Policy Year.
Annual Policy Service Charge......... 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
31,1998)(a)
Advisory Fees........................ 0.70%(d) 0.59%
Administration Fees.................. -- --
Other Expenses....................... 0.18%(d) 0.11%
Total Fund Annual Expenses........... 0.88%(d) 0.70%(e)
</TABLE>
- ------------
5
<PAGE> 9
FEE TABLE--(CONTINUED)
<TABLE>
<CAPTION>
MORGAN
JANUS MFS STANLEY
FIDELITY JANUS ASPEN GROWTH DEAN WITTER
VIP ASPEN SERIES WITH MFS EMERGING
EQUITY- SERIES WORLDWIDE INCOME RESEARCH MARKETS
INCOME BALANCED GROWTH SERIES SERIES EQUITY
-------- -------- --------- ------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount withdrawn)............. 7% during Policy Years 1-3; 6% during Policy Year 4, 5% during
Policy Year 5, 4% during Policy Year 6, 3% during Policy Year 7, 2%
during Policy Year 8, 1% during Policy Year 9, and 0% thereafter.
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in any Policy
Year. However, NYLIAC reserves the right to charge up to $30 for
each transfer in excess of 12 transfers per Policy Year.
Annual Policy Service Charge.............................. 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 31,1998)(a)
Advisory Fees............................................. 0.49% 0.72% 0.65% 0.75% 0.75% 0.00%
Administration Fees....................................... -- -- -- -- -- 0.00%
Other Expenses............................................ 0.09% 0.02% 0.07% 0.13% 0.11% 1.95%
Total Fund Annual Expenses................................ 0.58%(e) 0.74% 0.72%(f) 0.88% 0.86% 1.95%(g)
<CAPTION>
T. ROWE VAN ECK
PRICE WORLDWIDE
EQUITY HARD
INCOME ASSETS
------- ---------
<S> <C> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount withdrawn)............. 7% during Policy Years 1-3; 6% during Policy Year 4, 5% during
Policy Year 5, 4% during Policy Year 6, 3% during Policy Year 7, 2%
during Policy Year 8, 1% during Policy Year 9, and 0% thereafter.
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in any Policy
Year. However, NYLIAC reserves the right to charge up to $30 for
each transfer in excess of 12 transfers per Policy Year.
Annual Policy Service Charge.............................. 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 31,1998)(a)
Advisory Fees............................................. 0.85%(h) 1.00%
Administration Fees....................................... -- --
Other Expenses............................................ -- 0.16%(i)
Total Fund Annual Expenses................................ 0.85% 1.16%
</TABLE>
- ------------
(a) The Fund or its agents provided the fees and charges, which are based on
1998 expenses and may reflect estimated changes. We have not verified the
accuracy of the information.
(b) "Other Expenses" and "Total Fund Annual Expenses" for the MainStay VP
Convertible and MainStay VP International Equity Portfolios reflect an
expense reimbursement agreement that ended December 31, 1998 limiting
"Other Expenses" to 0.17% annually. In the absence of the expense
reimbursement arrangement, the "Total Fund Annual Expenses" would have been
1.17% for the MainStay VP International Equity Portfolio.
(c) These numbers reflect an expense reimbursement agreement effective through
December 31, 1999 limiting "Other Expenses" to 0.15% annually.
(d) These fees are based on expenses for the fiscal year 1998, and have been
restated to reflect the complete assessment of transfer agency expenses of
0.01% expected to be incurred in 1999. "Other Expenses" reflect an indirect
fee. "Total Fund Annual Expenses" after reductions for fees paid
indirectly, which are restated, would have been 0.86%.
(e) A portion of the brokerage commissions that these Portfolios pay was used
to reduce the Portfolios' expenses. In addition, these Portfolios have
entered into arrangements with their custodian whereby credits realized as
a result of uninvested cash balances were used to reduce custodian
expenses. Including these reductions, the "Total Fund Annual Expenses"
would have been 0.66% for the Fidelity VIP II Contrafund Portfolio and
0.57% for the Fidelity VIP Equity-Income Portfolio.
(f) The "Total Fund Annual Expenses" include a fee reduction to reduce the
"Advisory Fees" to the level of the corresponding Janus retail fund. Other
waivers, if applicable, are first applied against the "Advisory Fees" and
then against "Other Expenses". Janus Capital Corporation has agreed to
continue the other waivers and fee reductions until at least the next
annual renewal of the advisory agreement. Absent such waivers or
reductions, the "Total Fund Annual Expenses" would have been 0.74%.
(g) Morgan Stanley Dean Witter Investment Management Inc. has voluntarily
waived receipt of its "Advisory Fees" and agreed to reimburse the
Portfolio, if necessary, to the extent that the "Total Fund Annual
Expenses" of the Portfolio exceed 1.75% of average daily net assets.
However, Morgan Stanley Dean Witter has reflected under "Other Expenses"
the Portfolio's interest and foreign tax expenses incurred in 1998 which
were equal to 0.20% of the Portfolio's average daily net assets. The fee
waivers and reimbursements described above may be terminated by Morgan
Stanley Dean Witter at any time without notice. Absent such reductions, it
is estimated that "Advisory Fees", "Administration Fees" and "Total Fund
Annual Expenses" would be 1.25%, 0.25% and 3.45%, respectively.
(h) The "Advisory Fees" include the ordinary operating expenses of the Fund.
(i) "Other Expenses" are net of soft dollar credit. Without such credit, "Other
Expenses" would have been 0.20% and "Total Fund Annual Expenses" would have
been 1.20%.
6
<PAGE> 10
This table will help you understand the various costs and expenses that you
will bear directly and indirectly. The table reflects charges and expenses of
the Separate Accounts and the Funds. However, the table does not reflect
optional charges under the policy. Charges and expenses may be higher or lower
in future years. For more information on the charges reflected in this table see
"Charges and Deductions" at page 27 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)
You 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 stated 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 $187.76 $291.42
Dreyfus Large Company Value............................. $ 91.61 $150.80 $192.57 $301.39
Eagle Asset Management Growth Equity.................... $ 90.65 $147.95 $187.76 $291.42
Lord Abbett Developing Growth........................... $ 91.61 $150.80 $192.57 $301.39
Alger American Small Capitalization..................... $ 91.04 $149.09 $189.69 $295.41
Calvert Social Balanced................................. $ 90.94 $148.81 $189.21 $294.42
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........................... $ 90.94 $148.81 $189.21 $294.42
MFS Research Series..................................... $ 90.75 $148.24 $188.25 $292.43
Morgan Stanley Dean Witter Emerging Markets Equity...... $101.17 $178.97 $239.59 $395.76
T. Rowe Price Equity Income............................. $ 90.65 $147.95 $187.76 $291.42
Van Eck Worldwide Hard Assets........................... $ 93.62 $156.77 $202.62 $322.00
</TABLE>
2. If you annuitize your Policy at the end of the stated time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
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, we have expressed the annual
policy service charge 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, 1998. This calculation method reasonably reflects the annual
policy service charges applicable to policies having an Accumulation Value
of less than $10,000, but does not reflect the annual policy service charges
on policies having an Accumulation Value of $10,000 or greater. This means
that the fees would be slightly lower if your policy's Accumulation Value is
$10,000 or greater on the Policy Anniversary or date of surrender.
7
<PAGE> 11
<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 $137.13 $291.42
Dreyfus Large Company Value............................. $ 91.61 $ 83.39 $142.20 $301.39
Eagle Asset Management Growth Equity.................... $ 90.65 $ 80.33 $137.13 $291.42
Lord Abbett Developing Growth........................... $ 91.61 $ 83.39 $142.20 $301.39
Alger American Small Capitalization..................... $ 91.04 $ 81.55 $139.16 $295.41
Calvert Social Balanced................................. $ 90.94 $ 81.25 $138.65 $294.42
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........................... $ 90.94 $ 81.25 $138.65 $294.42
MFS Research Series..................................... $ 90.75 $ 80.64 $137.65 $292.43
Morgan Stanley Dean Witter Emerging Markets Equity...... $101.17 $113.55 $191.67 $395.76
T. Rowe Price Equity Income............................. $ 90.65 $ 80.33 $137.13 $291.42
Van Eck Worldwide Hard Assets........................... $ 93.62 $ 89.78 $152.77 $322.00
</TABLE>
3. If you do not surrender your policy:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<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 $137.13 $291.42
Dreyfus Large Company Value.............................. $27.17 $ 83.39 $142.20 $301.39
Eagle Asset Management Growth Equity..................... $26.15 $ 80.33 $137.13 $291.42
Lord Abbett Developing Growth............................ $27.17 $ 83.39 $142.20 $301.39
Alger American Small Capitalization...................... $26.56 $ 81.55 $139.16 $295.41
Calvert Social Balanced.................................. $26.46 $ 81.25 $138.65 $294.42
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............................ $26.46 $ 81.25 $138.65 $294.42
MFS Research Series...................................... $26.25 $ 80.64 $137.65 $292.43
Morgan Stanley Dean Witter Emerging Markets Equity....... $37.38 $113.55 $191.67 $395.76
T. Rowe Price Equity Income.............................. $26.15 $ 80.33 $137.13 $291.42
Van Eck Worldwide Hard Assets............................ $29.32 $ 89.78 $152.77 $322.00
</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.
8
<PAGE> 12
QUESTIONS AND ANSWERS ABOUT NEW YORK LIFE
LIFESTAGES(R) FLEXIBLE PREMIUM VARIABLE ANNUITY
NOTE: THE FOLLOWING SECTION CONTAINS BRIEF QUESTIONS AND ANSWERS ABOUT NEW
YORK LIFE LIFESTAGES(R) FLEXIBLE PREMIUM VARIABLE ANNUITY. YOU SHOULD REFER TO
THE BODY OF THIS PROSPECTUS FOR MORE DETAILED INFORMATION.
1. WHAT IS NEW YORK LIFE LIFESTAGES(R) FLEXIBLE PREMIUM VARIABLE ANNUITY?
A New York Life LifeStages(R) Flexible Premium Variable Annuity is a
variable retirement annuity policy. NYLIAC issues the policy. You may allocate
premium payments to one or more of the Investment Divisions of each of the
Separate Accounts, or to the Fixed Account. The Accumulation Value will
fluctuate according to the performance of the Investment Divisions selected and
the interest credited to the amounts in the Fixed Account.
2. WHERE CAN I ALLOCATE MY PREMIUM PAYMENTS?
You can allocate your premium payments 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. They are listed on the
first page of this Prospectus. When you allocate a premium payment to
one of the Investment Divisions, the Separate Account will invest your
premium payment exclusively in shares of the corresponding Eligible
Portfolio of the relevant Fund.
(b) FIXED ACCOUNT
Each premium payment, or the portion of any premium payment, you
allocate to the Fixed Account will reflect a fixed interest rate. (See
"The Fixed Account" at page 34.)
3. CAN I MAKE TRANSFERS AMONG THE INVESTMENT DIVISIONS AND THE FIXED
ACCOUNT?
You can transfer all or part of the Accumulation Value of your policy
between the Investment Divisions within the applicable Separate Account or from
the Investment Divisions in the applicable Separate Account to the Fixed Account
at least 30 days before the Annuity Commencement date. Generally, you can
transfer a minimum amount of $500, unless we agree otherwise. You can make
unlimited transfers each Policy Year. We currently do not charge for transfers.
However, we reserve the right to charge up to $30 for each transfer after the
first twelve in a given Policy Year. (See "Transfers" at page 24.)
You can make transfers from the Fixed Account, although certain
restrictions may apply. (See "The Fixed Account" at page 34.) In addition, you
can request transfers through the Automatic Asset Reallocation, Dollar Cost
Averaging, or Interest Sweep options described at pages 25 and 26 of this
Prospectus.
4. WHAT CHARGES ARE ASSESSED AGAINST THE POLICY?
Before the date we start making Income Payments to you, we will deduct a
policy service charge on each Policy Anniversary or upon surrender of the policy
if on that date the Accumulation Value is below $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. In addition, we deduct on a daily basis a charge for
policy administration expenses. This charge is equal, on an annual basis, to
.10% of the net asset value of the applicable Separate Account. (See "Other
Charges" at page 28.)
The policies are also subject to a charge for certain mortality and expense
risks NYLIAC assumes. We also deduct this charge on a daily basis. This charge
is equal, on an annual basis, to 1.20% of the net asset value of the applicable
Separate Account. (See "Other Charges" at page 28.)
9
<PAGE> 13
We impose a surrender charge on certain partial withdrawals or surrenders
of the policies. This charge is assessed as a percentage of the amount withdrawn
during the first nine Policy Years. The percentage declines after the first
three Policy Years as follows:
<TABLE>
<CAPTION>
POLICY YEAR SURRENDER CHARGE
----------- ----------------
<S> <C>
1.......................................................... 7%
2.......................................................... 7%
3.......................................................... 7%
4.......................................................... 6%
5.......................................................... 5%
6.......................................................... 4%
7.......................................................... 3%
8.......................................................... 2%
9.......................................................... 1%
10+......................................................... 0%
</TABLE>
You can make withdrawals from the policy free of surrender charges based on
certain limitations. In any one Policy Year, you may withdraw free of a
surrender charge up to 10% of the Accumulation Value at the time of the
withdrawal ("10% Window"). In addition, for policies with total premium payments
of $100,000 or more, you may withdraw free of a surrender charge the greater of
(a) the 10% Window or (b) the Accumulation Value of the policy less the
accumulated premium payments. (See "Surrender Charges" 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) for tax-sheltered annuities, $50 per month or a $2,000 single premium;
(b) for IRAs and Roth IRAs, $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;
(c) for deferred compensation plans, $50 per month; and
(d) for SEP plans, $600 initial premium payment or $50 per month if part of
a pre-authorized billing arrangement.
For Qualified Policies you may not make premium payments in excess of the
amount permitted by law for the plan indicated.
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 a
pre-authorized monthly deduction or as part of a pre-authorized monthly billing
arrangement. You can make additional premium payments of at least $50 each or
such lower amount as we may permit at any time. You have a choice of sending
premium payments directly to NYLIAC or through pre-authorized monthly deductions
from banks, credit unions or similar accounts and public or private employee
payroll deductions. The maximum aggregate amount of premium payments we accept
is $1,000,000, without 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:
(a) 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.
(b) 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
10
<PAGE> 14
amount of scheduled premium payments may not exceed the applicable
annual plan limit as specified in the Internal Revenue Code.
(c) 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.
(d) 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 $100 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.
6. HOW ARE PREMIUM PAYMENTS ALLOCATED?
We will hold the initial premium payment in the MainStay VP Cash Management
Investment Division for 15 days after we issue the policy. At the end of this
period, we will allocate the premium payment to the Investment Divisions and/or
Fixed Account you have selected.
You may allocate each premium payment in up to 18 Investment Divisions plus
the Fixed Account (See "Automatic Asset Reallocation" at page 26). Moreover, you
may raise or lower the percentages of the premium payment (which must be in
whole number percentages) you place in 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 you may place in 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 you may place in
any one Allocation Alternative and the number of Investment Divisions to which
you allocate your Accumulation Value.
7. WHAT HAPPENS IF PREMIUM PAYMENTS ARE NOT MADE?
If we do not receive any premium payments for a period of two years, and
both the Accumulation Value of your policy and your total premium payments less
any withdrawals and surrender charges are less than $2,000, we reserve the right
to terminate your policy. We will notify you of our intention to exercise this
right and give you 90 days to make a premium payment. If we terminate your
policy, we will pay you the Accumulation Value of your policy in one lump sum.
8. CAN I WITHDRAW MONEY FROM THE POLICY BEFORE THE ANNUITY COMMENCEMENT
DATE?
You may make withdrawals from your policy before the Annuity Commencement
Date and while the Annuitant is still alive. Your withdrawal request must be in
a form that is acceptable to us. Under most circumstances, you may make a
minimum partial withdrawal of $500. Withdrawals may be subject to a surrender
charge. In addition, you may have to pay income tax and a 10% penalty tax may
apply if you are under age 59 1/2. (See "Distributions Under the Policy" at page
29 and "Federal Tax Matters" at page 35.)
9. HOW WILL NYLIAC MAKE INCOME PAYMENTS ON THE ANNUITY COMMENCEMENT DATE?
We will make Income Payments on a fixed basis. We do not currently offer a
variable income payment option. We will make payments under the Life Income
Payment Option 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 32.)
We may offer other options, at our discretion, where permitted by state law.
10. WHAT IS A LIFE INCOME PAYMENT OPTION?
On the Annuity Commencement Date, we will make periodic payments for the
life of the Annuitant (or to the Annuitant and another person, the "Joint
Annuitant") with a guarantee of at least 10 years of payments. Fixed Income
Payments will always be the same specified amount. (See "Income Payments" at
page 32.)
11
<PAGE> 15
11. WHAT HAPPENS IF I DIE OR THE ANNUITANT DIES BEFORE THE ANNUITY
COMMENCEMENT DATE?
If you or the Annuitant dies before the Annuity Commencement Date, we will
pay the Beneficiary under the policy an amount equal to the greater of:
(a) the Accumulation Value, less any outstanding loan balance, or
(b) the sum of all premium payments made less any outstanding loan balance,
partial withdrawals and surrender charges previously imposed.
If the Beneficiary is the spouse of the Annuitant or the owner, see
Question 12 below. (Also see "Death Before Annuity Commencement" at page 31 and
"Federal Tax Matters" at page 35.)
12. WHAT HAPPENS IF MY SPOUSE IS THE BENEFICIARY?
If you are the owner and Annuitant and you die before the Annuity
Commencement Date, your spouse may continue the policy as the new owner and
Annuitant if he/she is also the sole Beneficiary (for Non-Qualified, IRA, Roth
IRA, TSA or SEP policies only). If your spouse chooses to continue the policy,
we will not pay the death benefit proceeds as a consequence of your death, or
the Annuitant's death.
13. CAN I RETURN THE POLICY AFTER IT IS DELIVERED?
You can cancel the policy by returning it to us, or to the registered
representative through whom you purchased it, within 10 days of delivery of the
policy or such longer period as required under state law. You will then receive
from us the greater of (i) the initial premium payment less any prior partial
withdrawals or (ii) the Accumulation Value on the date we receive the policy,
without any deduction for premium taxes or a surrender charge.
14. WHAT ABOUT VOTING RIGHTS?
You can instruct NYLIAC how to vote shares of the Funds in which you have a
voting interest through the applicable Separate Account. (See "Voting Rights" at
page 37.)
15. HOW WILL NYLIAC CALCULATE INVESTMENT PERFORMANCE OF THE SEPARATE
ACCOUNTS?
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. In calculating the yield, we assume
that the income generated for that seven-day period is generated each seven-day
period over a 52-week period. The current yield is shown as a percentage of the
investment. The effective yield is calculated similarly but, when annualized,
the income earned in the Cash Management 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, 1998, the MainStay VP Cash Management Investment Division's
yield for Separate Account-I was 4.17% and for Separate Account-II was 4.16%,
and the effective yields for both were 4.25%.
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 in that Investment Division over a specified thirty-day period. In
calculating the yield we assume that the income generated by the investment
during that thirty-day period is generated each thirty-day period over a
12-month period. The current yield is shown as a percentage of the investment.
For the 30-day period ended December 31, 1998, the annualized yields for the
MainStay VP Government, MainStay VP High Yield Corporate Bond and MainStay VP
Bond Investment Divisions were 3.49%, 7.62% and 3.52% for Separate Account-I and
Separate Account-II.
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 present performance data
for each of the Investment Divisions of Separate Account-I for periods ending
December 31, 1998. The average annual total return (if surrendered) data reflect
all Separate Account and Fund annual expenses shown in the Fee Table on pages 4,
5 and 6. The average annual total return (if surrendered) figures assume that
the policy is surrendered at the end of the periods shown. The annual policy
service charge, which is charged to policies with an Accumulation Value of less
than $10,000, is not reflected. This fee, if applicable, would reduce the
12
<PAGE> 16
rates of return. The average annual total return (no surrenders) does not
reflect the deduction of any surrender charges. All rates of return 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 Account-I. For periods prior to an
Investment Division's inception date, the performance of the Investment Division
was derived from the performance of the corresponding Portfolios, as modified to
reflect the Separate Account and Fund annual expenses as if the policy had been
available during the periods shown. The results shown are not an estimate or
guarantee of future investment performance for the Investment Divisions:
13
<PAGE> 17
SEPARATE ACCOUNT-I
AVERAGE ANNUAL TOTAL RETURN
(FOR PERIODS ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP MAINSTAY VP
INVESTMENT DIVISIONS: APPRECIATION MANAGEMENT CONVERTIBLE GOVERNMENT
--------------------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
PORTFOLIO INCEPTION DATE: 1/29/93 1/29/93 10/1/96 1/29/93
- -----------------------------------------------------
<CAPTION>
INVESTMENT DIVISION INCEPTION DATE: 1/29/93 1/29/93 10/1/96 1/29/93
- -----------------------------------------------------
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN (IF SURRENDERED)
1 Year............................................... 27.85% -2.71% -3.36% 0.81%
3 Year............................................... 23.05% 1.57% -- 3.22%
5 Year............................................... 18.93% 2.67% -- 4.59%
10 Year.............................................. -- -- -- --
Since Portfolio Inception............................ 19.34% 2.62% 5.84% 4.78%
Since Investment Division Inception.................. 19.34% 2.62% 5.84% 4.78%
AVERAGE ANNUAL TOTAL RETURN (NO SURRENDERS)
1 Year............................................... 36.35% 3.84% 3.14% 7.59%
3 Year............................................... 24.89% 3.80% -- 5.49%
5 Year............................................... 19.77% 3.62% -- 5.55%
10 Year.............................................. -- -- -- --
Since Portfolio Inception............................ 19.94% 3.26% 8.94% 5.43%
Since Investment Division Inception.................. 19.94% 3.26% 8.94% 5.43%
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET
MANAGEMENT LORD ABBETT CALVERT ALGER AMERICAN
GROWTH DEVELOPING SOCIAL SMALL
INVESTMENT DIVISIONS: EQUITY GROWTH BALANCED CAPITALIZATION
--------------------- ------ ----------- -------- --------------
<S> <C> <C> <C> <C>
PORTFOLIO INCEPTION DATE: 5/1/98 5/1/98 9/2/86 9/20/88
- -----------------------------------------------------
<CAPTION>
INVESTMENT DIVISION INCEPTION DATE: 6/1/98 6/1/98 6/1/95 10/1/96
- -----------------------------------------------------
<S> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN (IF SURRENDERED)
1 Year............................................... -- -- 7.56% 6.87%
3 Year............................................... -- -- 12.60% 6.52%
5 Year............................................... -- -- 12.07% 10.61%
10 Year.............................................. -- -- 11.42% 18.30%
Since Portfolio Inception............................ 11.15% -5.83% 10.17% 17.31%
Since Investment Division Inception.................. 11.15% -5.83% 14.91% 5.31%
AVERAGE ANNUAL TOTAL RETURN (NO SURRENDERS)
1 Year............................................... -- -- 14.79% 14.06%
3 Year............................................... -- -- 14.79% 8.85%
5 Year............................................... -- -- 13.10% 11.63%
10 Year.............................................. -- -- 11.42% 18.30%
Since Portfolio Inception............................ 18.62% 0.50% 10.17% 17.31%
Since Investment Division Inception.................. 18.62% 0.50% 16.48% 8.40%
</TABLE>
14
<PAGE> 18
<TABLE>
<CAPTION>
MAINSTAY VP AMERICAN
HIGH YIELD MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP CENTURY
CORPORATE INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH INDEXED INCOME &
BOND EQUITY RETURN VALUE BOND EQUITY EQUITY GROWTH
----------- ------------- ----------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5/1/95 5/1/95 1/29/93 5/1/95 1/23/84 1/23/84 1/29/93 5/1/98
<CAPTION>
5/1/95 5/1/95 1/29/93 5/1/95 5/1/95 12/15/93 1/29/93 6/1/98
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-5.05% 13.87% 17.58% -11.34% 0.94% 17.11% 18.84% --
7.01% 8.90% 15.21% 9.45% 3.24% 22.47% 24.39% --
-- -- 13.13% -- 4.55% 18.76% 21.20% --
-- -- -- -- 7.55% 16.39% -- --
8.50% 8.96% 13.56% 12.08% 8.60% 13.23% 19.06% 4.02%
8.50% 8.96% 13.56% 12.08% 4.63% 19.22% 19.06% 4.02%
1.34% 21.53% 25.49% -5.38% 7.73% 24.98% 26.83% --
9.36% 11.24% 17.31% 11.76% 5.51% 24.33% 26.19% --
-- -- 14.15% -- 5.52% 19.60% 21.98% --
-- -- -- -- 7.55% 16.39% -- --
10.15% 10.62% 14.26% 13.75% 8.60% 13.23% 19.66% 11.01%
10.15% 10.62% 14.26% 13.75% 5.39% 20.03% 19.66% 11.01%
<CAPTION>
DREYFUS
LARGE
COMPANY
VALUE
-------
5/1/98
6/1/98
<S> <C>
--
--
--
--
-2.21%
-2.21%
--
--
--
--
4.36%
4.36%
</TABLE>
<TABLE>
<CAPTION>
MORGAN
STANLEY
DEAN
JANUS ASPEN MFS WITTER T. ROWE
FIDELITY VIP JANUS ASPEN SERIES GROWTH MFS EMERGING PRICE
FIDELITY VIP II EQUITY- SERIES WORLDWIDE WITH INCOME RESEARCH MARKETS EQUITY
CONTRAFUND INCOME BALANCED GROWTH SERIES SERIES EQUITY INCOME
--------------- ------------ ----------- ----------- ----------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1/3/95 10/9/86 9/13/93 9/13/93 10/9/95 7/26/95 10/1/96 3/31/94
<CAPTION>
10/1/96 10/1/96 10/1/96 10/1/96 6/1/98 6/1/98 10/1/96 6/1/98
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20.24% 3.26% 24.22% 19.26% 13.15% 11.60% -29.87% 0.19%
21.56% 14.14% 20.45% 23.20% 21.99% 17.50% -- 14.95%
-- 16.33% 16.67% 18.92% -- -- -- --
-- 14.13% -- -- -- -- -- --
25.91% 12.80% 17.15% 21.74% 22.69% 18.52% -15.23% 17.79%
22.49% 15.58% 20.94% 19.91% -2.20% 1.57% -15.23% -5.05%
28.32% 10.21% 32.58% 27.28% 20.76% 19.10% -25.16% 6.93%
23.45% 16.28% 22.37% 25.04% 23.86% 19.51% -- 17.05%
-- 17.25% 17.58% 19.76% -- -- -- --
-- 14.13% -- -- -- -- -- --
26.97% 12.80% 17.95% 22.42% 24.33% 20.13% -12.75% 18.74%
25.37% 18.67% 23.87% 22.87% 4.38% 8.40% -12.75% 1.34%
<CAPTION>
VAN ECK
WORLDWIDE
HARD ASSETS
-----------
9/1/89
6/1/98
<S> <C>
-36.11%
-10.27%
-5.38%
--
0.78%
-17.74%
-31.81%
-8.30%
-4.51%
--
0.78%
-22.88%
</TABLE>
15
<PAGE> 19
For additional information regarding the total return calculations
described above, you should 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 33.)
17. HOW DO I CONTACT NYLIAC?
<TABLE>
<CAPTION>
GENERAL INQUIRIES AND WRITTEN REQUESTS PREMIUM PAYMENTS AND LOAN PAYMENTS
-------------------------------------- ----------------------------------
<S> <C> <C>
REGULAR MAIL NYLIAC Variable Products Service NYLIAC Variable Products Service
Center Center
Madison Square Station P.O. Box 19289
P.O. Box 922 Newark, NJ 07195-0289
New York, NY 10159 (or the address indicated
on your quarterly statement)
EXPRESS MAIL NYLIAC Variable Products Service NYLIAC Variable Products Service
Center Center
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)
for the fiscal years ended December 31, 1998, 1997 and 1996, and of the Separate
Accounts (including the auditor's report) for the periods ended December 31,
1998 and 1997 are included in the Statement of Additional Information.
16
<PAGE> 20
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 PricewaterhouseCoopers 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
-------------------------------------------------------------- -------------------
1998 1997 1996 1995 1994 1993(a) 1998 1997
-------- -------- -------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period)............................. $21.53 $17.66 $15.07 $11.24 $11.91 $10.00 $ 1.16 $ 1.12
Accumulation Unit value (end of
period)............................. $29.35 $21.53 $17.66 $15.07 $11.24 $11.91 $ 1.21 $ 1.16
Number of units outstanding (in 000s)
(end of period)..................... 12,433 11,857 10,890 7,852 5,702 2,239 34,013 25,689
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period)............................. $21.53 $17.66 $15.07 $11.24 $11.91 $10.00 $ 1.16 $ 1.12
Accumulation Unit value (end of
period)............................. $29.35 $21.53 $17.66 $15.07 $11.24 $11.91 $ 1.21 $ 1.16
Number of units outstanding (in 000s)
(end of period)..................... 11,469 10,312 8,675 5,852 3,787 1,402 32,015 27,559
<CAPTION>
MAINSTAY VP
CASH MANAGEMENT
----------------------------------------
1996 1995 1994 1993(a)
-------- -------- -------- -------
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period)............................. $ 1.08 $ 1.04 $ 1.01 $ 1.00
Accumulation Unit value (end of
period)............................. $ 1.12 $ 1.08 $ 1.04 $ 1.01
Number of units outstanding (in 000s)
(end of period)..................... 24,436 19,554 19,630 15,549
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period)............................. $ 1.08 $ 1.04 $ 1.01 $ 1.00
Accumulation Unit value (end of
period)............................. $ 1.12 $ 1.08 $ 1.04 $ 1.01
Number of units outstanding (in 000s)
(end of period)..................... 20,142 15,539 15,647 10,677
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CONVERTIBLE GOVERNMENT
----------------------------- -----------------------------------------
1998 1997 1996(d) 1998 1997 1996 1995
-------- -------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period)............................. $11.76 $10.32 $10.00 $12.71 $11.76 $11.65 $10.11
Accumulation Unit value (end of
period)............................. $12.13 $11.76 $10.32 $13.68 $12.71 $11.76 $11.65
Number of units outstanding (in 000s)
(end of period)..................... 847 636 154 3,288 2,749 3,177 3,281
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period)............................. $11.73 $10.29 $10.00 $12.71 $11.76 $11.65 $10.11
Accumulation Unit value (end of
period)............................. $12.09 $11.73 $10.29 $13.68 $12.71 $11.76 $11.65
Number of units outstanding (in 000s)
(end of period)..................... 610 452 74 2,233 1,904 2,122 2,020
<CAPTION>
MAINSTAY VP
MAINSTAY VP HIGH YIELD
GOVERNMENT CORPORATE BOND
------------------ ----------------------------------------
1994 1993(a) 1998 1997 1996 1995(c)
-------- ------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period)............................. $10.44 $10.00 $14.08 $12.62 $10.91 $10.00
Accumulation Unit value (end of
period)............................. $10.11 $10.44 $14.26 $14.08 $12.62 $10.91
Number of units outstanding (in 000s)
(end of period)..................... 3,686 2,843 10,373 9,539 5,449 1,446
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period)............................. $10.44 $10.00 $14.06 $12.60 $10.89 $10.00
Accumulation Unit value (end of
period)............................. $10.11 $10.44 $14.25 $14.06 $12.60 $10.89
Number of units outstanding (in 000s)
(end of period)..................... 2,351 1,623 6,384 5,215 2,841 778
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP
INTERNATIONAL MAINSTAY VP
EQUITY TOTAL RETURN
---------------------------------------- -----------------------------------------
1998 1997 1996 1995(c) 1998 1997 1996 1995
-------- -------- -------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period)............................. $11.92 $11.48 $10.53 $10.00 $17.55 $15.10 $13.65 $10.77
Accumulation Unit value (end of
period)............................. $14.49 $11.92 $11.48 $10.53 $22.03 $17.55 $15.10 $13.65
Number of units outstanding (in 000s)
(end of period)..................... 716 751 674 165 9,895 9,720 9,369 7,579
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period)............................. $11.93 $11.49 $10.53 $10.00 $17.55 $15.10 $13.65 $10.77
Accumulation Unit value (end of
period)............................. $14.50 $11.93 $11.49 $10.53 $22.03 $17.55 $15.10 $13.65
Number of units outstanding (in 000s)
(end of period)..................... 532 553 426 112 8,406 7,911 7,185 5,450
<CAPTION>
MAINSTAY VP MAINSTAY VP
TOTAL RETURN VALUE
------------------ ----------------------------------------
1994 1993(a) 1998 1997 1996 1995(c)
-------- ------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period)............................. $11.37 $10.00 $16.96 $13.98 $11.50 $10.00
Accumulation Unit value (end of
period)............................. $10.77 $11.37 $16.05 $16.96 $13.98 $11.50
Number of units outstanding (in 000s)
(end of period)..................... 6,584 3,067 4,718 4,277 2,522 658
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period)............................. $11.37 $10.00 $17.01 $14.02 $11.53 $10.00
Accumulation Unit value (end of
period)............................. $10.77 $11.37 $16.10 $17.01 $14.02 $11.53
Number of units outstanding (in 000s)
(end of period)..................... 4,441 1,805 3,949 3,186 1,754 435
</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.
(e) For the period June 1, 1998 (commencement of operations) through December
31, 1998.
17
<PAGE> 21
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
BOND GROWTH EQUITY
--------------------------------------------------- ---------------------------------
1998 1997 1996 1995 1994 1993(B) 1998 1997 1996 1995
------ ------ ------ ------ ----- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period)............................. $12.10 $11.18 $11.10 $ 9.51 $9.97 -- $20.11 $16.07 $13.08 $10.26
Accumulation Unit value (end of
period)............................. $13.04 $12.10 $11.18 $11.10 $9.51 -- $25.13 $20.11 $16.07 $13.08
Number of units outstanding (in 000s)
(end of period)..................... 2,823 2,249 2,080 1,733 961 -- 4,996 4,307 3,085 1,831
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period)............................. $12.10 $11.18 $11.10 $ 9.51 $9.97 $10.00 $20.11 $16.07 $13.08 $10.26
Accumulation Unit value (end of
period)............................. $13.04 $12.10 $11.18 $11.10 $9.51 9.97 $25.13 $20.11 $16.07 $13.08
Number of units outstanding (in 000s)
(end of period)..................... 2,190 1,655 1,591 1,314 641 3 4,300 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>
DREYFUS LARGE
MAINSTAY VP AMERICAN CENTURY COMPANY
INDEXED EQUITY INCOME & GROWTH VALUE
---------------------------------------------------- ---------------- -------------
1998 1997 1996 1995 1994 1993(A) 1998(E) 1998(E)
------ ------ ------ ------ ------ ------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period)............................. $22.83 $17.41 $14.41 $10.66 $10.72 $10.00 $10.00 $10.00
Accumulation Unit value (end of
period)............................. $28.96 $22.83 $17.41 $14.41 $10.66 $10.72 $11.10 $10.44
Number of units outstanding (in 000s)
(end of period)..................... 8,414 6,724 4,768 3,677 3,236 2,187 302 125
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period)............................. $22.83 $17.41 $14.41 $10.66 $10.72 $10.00 $10.00 $10.00
Accumulation Unit value (end of
period)............................. $28.96 $22.83 $17.41 $14.41 $10.66 $10.72 $11.10 $10.58
Number of units outstanding (in 000s)
(end of period)..................... 7,539 5,616 3,783 2,983 2,567 1,819 194 91
<CAPTION>
EAGLE ASSET
MANAGEMENT LORD ABBETT
GROWTH DEVELOPING
EQUITY GROWTH
----------- -----------
1998(E) 1998(E)
----------- -----------
<S> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period)............................. $10.00 $10.00
Accumulation Unit value (end of
period)............................. $11.86 $10.05
Number of units outstanding (in 000s)
(end of period)..................... 64 87
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period)............................. $10.00 $10.00
Accumulation Unit value (end of
period)............................. $11.97 $10.07
Number of units outstanding (in 000s)
(end of period)..................... 101 59
</TABLE>
<TABLE>
<CAPTION>
ALGER AMERICAN CALVERT FIDELITY
SMALL SOCIAL VIP II
CAPITALIZATION BALANCED CONTRAFUND
------------------------- ---------------------------------- -------------------------
1998 1997 1996(D) 1998 1997 1996 1995(C) 1998 1997 1996(d)
------ ------ ------- ------ ------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period)............................. $10.52 $ 9.56 $10.00 $15.26 $12.87 $11.58 $10.00 $12.97 $10.58 $10.00
Accumulation Unit value (end of
period)............................. $11.99 $10.52 $ 9.56 $17.51 $15.26 $12.87 $11.58 $16.64 $12.97 $10.58
Number of units outstanding (in 000s)
(end of period)..................... 999 722 129 201 154 69 24 2,796 1,844 240
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period)............................. $10.51 $ 9.56 $10.00 $15.28 $12.89 $11.59 $10.00 $12.72 $10.38 $10.00
Accumulation Unit value (end of
period)............................. $11.99 $10.51 $ 9.56 $17.53 $15.28 $12.89 $11.59 $16.32 $12.72 $10.38
Number of units outstanding (in 000s)
(end of period)..................... 787 551 55 223 138 61 12 2,785 1,542 91
</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.
(e) For the period June 1, 1998 (commencement of operations) through December
31, 1998.
18
<PAGE> 22
<TABLE>
<CAPTION>
JANUS ASPEN
JANUS ASPEN SERIES
FIDELITY VIP SERIES WORLDWIDE
EQUITY-INCOME BALANCED GROWTH
------------------------- ------------------------ ------------------------
1998 1997 1996(D) 1998 1997 1996(D) 1998 1997 1996(D)
------ ------ ------- ------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period)............................. $13.34 $10.55 $10.00 $12.22 $10.14 $10.00 $12.50 $10.36 $10.00
Accumulation Unit value (end of
period)............................. $14.70 $13.34 $10.55 $16.19 $12.22 $10.14 $15.90 $12.50 $10.36
Number of units outstanding (in 000s)
(end of period)..................... 1,895 1,138 77 1,813 802 94 3,491 2,632 256
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period)............................. $13.25 $10.47 $10.00 $12.25 $10.16 $10.00 $12.52 $10.38 $10.00
Accumulation Unit value (end of
period)............................. $14.59 $13.25 $10.47 $16.24 $12.25 $10.16 $15.93 $12.52 $10.38
Number of units outstanding (in 000s)
(end of period)..................... 1,653 788 51 1,641 600 39 3,276 2,159 100
<CAPTION>
MFS
GROWTH MFS
WITH INCOME RESEARCH
SERIES SERIES
----------- --------
1998(E) 1998(e)
----------- --------
<S> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period)............................. $10.00 $10.00
Accumulation Unit value (end of
period)............................. $10.44 $10.84
Number of units outstanding (in 000s)
(end of period)..................... 107 82
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period)............................. $10.00 $10.00
Accumulation Unit value (end of
period)............................. $10.73 $10.70
Number of units outstanding (in 000s)
(end of period)..................... 74 70
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY
DEAN WITTER T. ROWE PRICE VAN ECK
EMERGING EQUITY WORLDWIDE
MARKETS EQUITY INCOME HARD ASSETS
------------------------ ------------- -----------
1998 1997 1996(D) 1998(E) 1998(e)
------ ------ ------- ------------- -----------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT I
Accumulation Unit value (beginning of
period)............................. $9.83 $ 9.93 $10.00 $10.00 $10.00
Accumulation Unit value (end of
period)............................. $7.36 $ 9.83 $ 9.93 $10.13 $ 7.71
Number of units outstanding (in 000s)
(end of period)..................... 515 452 78 192 32
SEPARATE ACCOUNT II
Accumulation Unit value (beginning of
period)............................. $9,90 $10.00 $10.00 $10.00 $10.00
Accumulation Unit value (end of
period)............................. $7.41 $ 9.90 $10.00 $10.21 $ 7.83
Number of units outstanding (in 000s)
(end of period)..................... 420 391 26 168 7
</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.
(e) For the period June 1, 1998 (commencement of operations) through December
31, 1998.
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 ("NYLIAC") is a stock life
insurance company incorporated in Delaware in 1980. NYLIAC is licensed to sell
life, accident and health insurance and annuities in the District of Columbia
and all states. In addition to the policies we describe in this Prospectus,
NYLIAC offers other life insurance policies and annuities.
NYLIAC is a wholly-owned subsidiary of New York Life Insurance Company
("New York Life"), a mutual life insurance company doing business in New York
since 1845. NYLIAC held assets of $25.117 billion at the end of 1998. New York
Life has invested in NYLIAC, and will occasionally make additional contributions
to NYLIAC in order to maintain capital and surplus in accordance with state
requirements.
Year 2000 Readiness -- We rely upon various computer systems to process all
policy transactions and valuations. These systems are being adjusted to enable
us to continue to administer the policies in Year 2000 and later. As is the case
with most systems projects, risks and uncertainties exist, in part due to our
reliance on systems that belong to service providers who are not affiliated with
NYLIAC.
We are devoting substantial resources to make all necessary systems
modifications, and have received assurances from our service providers that they
are taking all necessary steps to address Year 2000 modifications with respect
to the computer systems that they use. Although we cannot give you guarantees,
we expect that the necessary changes will be completed on time and in a way that
will result in no disruption to our policy servicing operations.
THE SEPARATE ACCOUNTS
Each of the Separate Accounts was established on 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. This registration does not signify
that the Securities and Exchange Commission supervises the management, or the
investment practices or policies, of the Separate Accounts.
Although the assets of each of the Separate Accounts belong to NYLIAC,
these assets are held separately from our other assets. The Separate Accounts'
assets are not chargeable with liabilities incurred in any of NYLIAC's other
business operations (except to the extent that assets in the Separate Accounts
exceed the reserves and other liabilities of that Separate Account). The income,
capital gains and capital losses incurred on the assets of the Separate Accounts
are credited to or charged against the assets of those Separate 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
the Fixed Account and any other separate account of NYLIAC.
Each of the Separate Accounts currently has 26 Investment Divisions.
Premium payments are invested solely in the corresponding Eligible Portfolios of
the relevant Fund.
THE PORTFOLIOS
The assets of each Eligible Portfolio are separate from the others and each
such Portfolio has different investment objectives and policies. As a result,
each Eligible Portfolio operates as a separate investment fund and the
investment performance of one Portfolio has no effect on the investment
performance of any other Portfolio.
WE OFFER NO ASSURANCE THAT ANY OF THE ELIGIBLE PORTFOLIOS WILL ATTAIN THEIR
RESPECTIVE STATED OBJECTIVES
The Funds also make their shares available to certain other separate
accounts funding variable life insurance policies offered by NYLIAC. This is
called "mixed funding." Except for MainStay VP Series Fund, all other Funds also
make their shares available to separate accounts of insurance companies
unaffiliated with NYLIAC. 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 a
certain Fund might at some time be in conflict. The Board of Directors/Trustees
of each Fund, each Fund's investment advisers, and NYLIAC
20
<PAGE> 24
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.
We provide certain services to you 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, we receive 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>
<S> <C> <C>
<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. Madison Square Advisors, Inc. MainStay VP Bond;
MainStay VP Growth Equity;
MainStay VP Series Fund, Inc. New York Life Insurance Company MainStay VP American Century Income & Growth;
MainStay VP Dreyfus Large Company Value;
MainStay VP Eagle Asset Management Growth
Equity;
MainStay VP Lord Abbett Developing Growth
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 MFS Investment Management MFS Growth with Income Series;
MFS Research Series
Morgan Stanley Dean Witter Morgan Stanley Dean Witter Morgan Stanley Dean Witter Emerging Markets
Universal Funds, Inc. Investment Management Inc. Equity
T. Rowe Price Equity Series, Inc. T. Rowe Price Associates, Inc. T. Rowe Price Equity Income
Van Eck Worldwide Insurance Trust Van Eck Associates Corporation Van Eck Worldwide Hard Assets
</TABLE>
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. We may
do this if the shares of the Eligible Portfolios are no longer available for
investment, or if we believe investment in any Eligible Portfolio would become
inappropriate in view of the purposes of the Separate Accounts. To the extent
required by law, we will not make substitutions of shares attributable to your
interest in an Investment Division until you have been notified of the change.
This does not prevent the Separate Accounts from purchasing other securities for
other series or classes of policies, or from processing a conversion between
series or classes of policies on the basis of requests made by policy owners.
We may establish new Investment Divisions when we determine in our sole
discretion that marketing, tax, investment or other conditions so warrant. We
will make new Investment Divisions available to existing policy owners on a
basis we determine. We may also eliminate one or more Investment Divisions, if
we determine, in our sole discretion, that marketing, tax, investment or other
conditions warrant.
In the event of any substitution or change, NYLIAC may, by appropriate
endorsement, change the policies to reflect such substitution or change. If
deemed to be in the best interests of persons having voting rights, we may (a)
operate the Separate Accounts as management companies under the Investment
Company Act of 1940, (b) deregister them under such Act in the event such
registration is no longer required, or (c) combine them with one or more other
separate accounts.
REINVESTMENT
We automatically reinvest all dividends and capital gain distributions from
Eligible Portfolios in shares of the distributing Portfolio at their net asset
values on the payable date.
THE POLICIES
We only offer the policies on the lives of individual Annuitants. We offer
flexible premium policies which means additional premium payments can be made.
The policies are variable. This means that the Accumulation Value will
fluctuate based on the investment experience of the Investment Divisions you
select and the interest credited on the Fixed Accumulation Value. NYLIAC does
not guarantee the investment performance of the Separate Accounts or of the
Funds. You bear the entire investment risk with respect to amounts allocated to
the Investment Divisions of the Separate Accounts. We offer no assurance that
the investment objectives of the Investment Divisions 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 in the Funds' investments.
As the owner of the policy, you have the right to (a) change the
Beneficiary, (b) name a new owner (on Non-Qualified Policies only), (c) receive
Income Payments and (d) name a payee to receive Income Payments. You cannot lose
these rights. However, all rights of ownership cease upon your death.
QUALIFIED AND NON-QUALIFIED POLICIES
We designed the policies primarily for the accumulation of retirement
savings, and to provide income at a future date. We issue both Qualified and
Non-Qualified Policies. Both types of policies offer tax-deferred accumulation.
You may purchase a Non-Qualified Policy with after-tax dollars to provide for
retirement income other than through a tax-qualified plan. You may purchase a
Qualified Policy with pre-tax dollars for use with any one of the tax-qualified
plans listed below.
(1) Section 403(b) Tax Sheltered Annuities purchased by employees of
certain tax-exempt organizations and certain state-supported
educational institutions;
(2) Section 408 or 408A Individual Retirement Annuities ("IRAs"), including
Roth IRAs;
(3) Section 457 Deferred Compensation Plans; and
(4) Section 403(a) annuities.
Please see "Federal Tax Matters" at page 35 for a detailed description of
these plans.
22
<PAGE> 26
If you are considering a Qualified Policy, you should be aware that there
are fees and charges in an annuity that may not be included in other types of
investments which may be more or less costly. However, the fees and charges
under the policies are designed to provide for certain payment guarantees and
features that may not be available in these other types of investments. They
include:
(1) a Fixed Account option, which features a guaranteed fixed interest
rate;
(2) a death benefit that is payable should you die while the policy is in
force and is guaranteed to be at least the amount of your premium
payments, less any outstanding loan balance, partial withdrawals and
surrender charges;
(3) the option for your Beneficiary to receive a guaranteed amount of
monthly income for his or her lifetime should you die prior to the
Annuity Commencement Date;
(4) the option to receive a guaranteed amount of monthly income for life
after the First Policy Year; and
(5) two riders (an Unemployment Benefit Rider and a Living Needs Benefit
Rider), which allow you to withdraw money from your policy without the
imposition of surrender charges, subject to the terms of each rider.
These features are explained in detail in this Prospectus. You should
consult with your tax or legal advisor to determine if the policy is suitable
for your tax qualified plan.
ISSUING THE POLICY AND PREMIUM PAYMENTS
You can purchase a policy by completing an application. The application
will be sent along with your initial premium payment to NYLIAC. For salary
reduction plans, the application is sent to NYLIAC and the policy becomes part
of the pre-authorized billing arrangement. If the application is accurate and
complete, we will credit the initial premium payment within two Business Days
after receipt. If we cannot credit the initial premium payment within five
Business Days after we receive it because the application is incomplete or
inaccurate, we will contact you and explain the reason for the delay. Unless you
consent to NYLIAC's retaining the initial premium payment and crediting it as
soon as the necessary requirements are fulfilled, we will offer to refund the
initial premium payment immediately. Acceptance of applications is subject to
NYLIAC's rules. We reserve the right to reject any application or initial
premium payment. Our rules generally require that only one policy 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.
We will allocate the initial premium payments to the MainStay VP Cash
Management Investment Division until 15 days after the policy issued. At the end
of this period, we will allocate premium payments in accordance with your
instructions. We credit subsequent premium payments to the policy at the close
of the Business Day on which they are received at NYLIAC.
You may allocate premium payments in up to 18 Investment Divisions plus the
Fixed Account. Moreover, you may increase or decrease the percentages of the
premium payments (which must be in whole number percentages) allocated to each
Allocation Alternative 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 permit otherwise, the minimum initial premium payment for
Qualified Policies is as follows:
(a) for tax-sheltered annuities, $50 per month or a $2,000 single
premium;
(b) for IRAs, $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;
(c) for deferred compensation plans, $50 per month; and
(d) for SEP plans, $600 initial premium payment or $50 per month if
part of a pre-authorized billing arrangement.
For Non-Qualified Policies, the minimum initial premium payment is $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. You may make additional premium payments of at least $50 each or
such lower amount as we may permit at any time and by any method NYLIAC makes
available. The currently
23
<PAGE> 27
available methods of payment are direct payments to NYLIAC, pre-authorized
monthly deductions from your bank, a credit union or similar accounts and public
and private employee payroll deductions. You may make premium payments at any
time before the Annuity Commencement Date and while you and the Annuitant are
living. The maximum aggregate amount of premium payments we accept is $1,000,000
without prior approval. NYLIAC reserves the right to limit the dollar amount of
any premium payment.
For Qualified Policies, you may not make premium payments in any Policy
Year that exceed the amount permitted by the plan or by law. NYLIAC also
reserves the right in its discretion to accept premium payments of less than
$50, provided such discretion is exercised in a non-discriminatory manner.
ISSUE AGES
We can issue Non-Qualified Policies if both you and the Annuitant are not
older than age 85 (age 78 in Pennsylvania and age 80 in New York). We will
accept additional premium payments until either you or the Annuitant reaches the
age of 85, unless we agree otherwise. For IRA, Roth IRA, TSA and SEP plans, you
must also be Annuitant. We can issue Qualified Policies if the Owner/Annuitant
is between the ages of 18 and 80. 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
You may transfer amounts between Investment Divisions of the same Separate
Account or to the Fixed Account at least 30 days before the Annuity Commencement
Date. Except in connection with transfers made pursuant to the Dollar Cost
Averaging, Automatic Asset Reallocation, and Interest Sweep options, the minimum
that you may transfer from one Investment Division to other Investment Divisions
within the same Separate Account or to the Fixed Account is $500. Except for the
Dollar Cost Averaging, Automatic Asset Reallocation and Interest Sweep options,
if the value of the remaining Accumulation Units in an Investment Division or
the Fixed Account would be less than $500 after you make a transfer, we will
transfer the entire value unless NYLIAC in its discretion determines otherwise.
The amount(s) transferred to other Investment Divisions must be a minimum of $25
for each Investment Division.
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. You can make transfers from the Fixed Account to the Investment
Divisions in connection with the Interest Sweep option and in certain other
situations. (See the "Fixed Account" at page 34.)
Your 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). We will make transfers from Investment Divisions
based on the Accumulation Unit values at the end of the Business Day on which we
receive the transfer request. (See "Delay of Payments" at page 32.)
PROCEDURES FOR TELEPHONE TRANSFERS
You may make telephone transfers in two ways: (1) you may directly contact
a service representative or (2) you may also request access to an electronic
service known as a Voice Response Unit (VRU). The VRU permits you to transfer
monies among the Investment Divisions and/or the Fixed Account and change the
allocation of future premium payments. You can elect this feature by completing
and signing a Telephone Authorization Form. However, we reserve the right to
temporarily discontinue the availability of the VRU.
We will use 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. We will assign a personal identification number (PIN) to
all policy owners who request VRU access. You must properly enter the PIN before
we allow any transactions through the VRU. Furthermore, we will confirm all
telephone transactions in writing.
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. We must receive telephone transfer requests no later than 4:00 p.m.
Eastern Time in order to assure same-day processing. We will process requests
received after 4:00 p.m. on the next Business Day.
24
<PAGE> 28
DOLLAR COST AVERAGING
The main objective of Dollar Cost Averaging is to achieve an average cost
per share that is lower than the average price per share during volatile market
conditions. Since you transfer the same dollar amount to an Investment Division
with each transfer, you purchase more units in an Investment Division if the
value per unit is low and fewer units if the value per unit is high. Therefore,
you achieve a lower than average cost per unit if prices fluctuate over the long
term. Similarly, for each transfer out of an Investment Division, you sell more
units in an Investment Division if the value per unit is low and fewer units if
the value per unit is high. Dollar Cost Averaging does not assure a profit or
protect against a loss in declining markets. Because it involves continuous
investing regardless of price levels, you should consider your financial ability
to continue to make purchases during periods of low price levels. We do not
count transfers under dollar cost averaging as part of your 12 free transfers
each Policy Year.
Under this option, you 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. You 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). You may not
make transfers from the Fixed Account, but you may make transfers into the Fixed
Account. Each transfer from an Investment Division must be at least $100. You
must have a minimum Accumulation Value of $5,000 to elect this option. NYLIAC
may reduce the minimum transfer amount and minimum Accumulation Value at its
discretion.
NYLIAC will make all dollar cost averaging transfers on the day of each
calendar month that you specify or on the next Business Day (if the day you have
specified is not a Business Day). You may specify any day of the month with the
exception of the 29th, 30th or 31st of a month. In order to process a transfer,
NYLIAC must have received a request in writing no later than one week prior to
the date the transfers are to begin.
You may cancel the Dollar Cost Averaging option at any time in a written
request. NYLIAC may also cancel this option if the Accumulation Value is less
than $5,000, or such lower amount as we may determine. You may not elect the
Dollar Cost Averaging option if you have selected the Automatic Asset
Reallocation option.
We have set forth below an example of how dollar cost averaging works. In
the example, we have assumed that you want to move $100 from the Cash Management
Investment Division to the MainStay VP Growth Equity Investment Division each
month. Assuming the Accumulation Unit values below, you would purchase the
following number of Accumulation Units:
<TABLE>
<CAPTION>
AMOUNT ACCUMULATION ACCUMULATION UNITS
MONTH TRANSFERRED UNIT VALUE PURCHASED
<S> <C> <C> <C>
1 $100 $10.00 10.00
2 $100 $ 8.00 12.50
3 $100 $12.50 8.00
4 $100 $ 7.50 13.33
Total $400 $38.00 43.83
</TABLE>
The average unit price is calculated as follows:
<TABLE>
<S> <C> <C> <C> <C>
Average share price $38.00
- -------------------- = ------ = $9.50
Number of months 4
</TABLE>
The average unit cost is calculated as follows:
<TABLE>
<S> <C> <C> <C> <C>
Total amount transferred $400.00
- ------------------------ = ------- = $9.13
Total units purchased 43.83
</TABLE>
In this example, you would have paid an average cost of $9.13 per unit
while the average price per unit is $9.50.
25
<PAGE> 29
AUTOMATIC ASSET REALLOCATION
This option allows you to maintain the percentage allocated to each
Investment Division at a pre-set level. For example, you might specify that 50%
of the Variable Accumulation Value of your policy be allocated to the MainStay
VP Convertible Investment Division and 50% of the Variable Accumulation Value be
allocated to the MainStay VP International Equity Investment Division. Over
time, the fluctuations in each of these Investment Divisions will shift the
percentages. If you elect the Automatic Asset 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. You must also specify the day of the month that reallocations are
to occur (with the exception of the 29th, 30th or 31st of a month). 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 under this
option. However, the Variable Accumulation Value may not be allocated to more
than 18 Investment Divisions if you selected the Automatic Asset Reallocation
option.
You may cancel the Automatic Asset Reallocation option at any time in a
written request. NYLIAC may also cancel this option if the Accumulation Value is
less than $5,000, or such a lower amount as we may determine. You may not elect
the Automatic Asset Reallocation option if you have selected the Dollar Cost
Averaging option.
INTEREST SWEEP
You can request, prior to the Annuity Commencement Date, that interest
earned on monies allocated to the Fixed Account be transferred from the Fixed
Account to any combination of Investment Divisions. You will specify the
Investment Divisions, the frequency of the transfers (either monthly, quarterly,
semi-annually or annually) and the day of each calendar month to make the
transfers (except the 29th, 30th or 31st of a month). The minimum Fixed
Accumulation Value required to elect this option is $5,000, but this amount may
be reduced at our discretion. NYLIAC will make all Interest Sweep transfers on
the day of each calendar month you specify or on the next Business Day (if the
day you have specified is not a Business Day).
You may request the Interest Sweep option 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, we will process the Interest Sweep transfer first.
YOU MAY NOT TRANSFER MORE THAN 20% of the Fixed Accumulation Value at the
beginning of the Policy Year from the Fixed Account to the Investment Divisions
during a Policy Year. (See "The Fixed Account -- Transfers to Investment
Divisions" at page 35.) If an Interest Sweep option transfer would cause more
than 20% of the Fixed Accumulation Value at the beginning of the Policy Year to
be transferred from the Fixed Account, we will not process the transfer and the
Interest Sweep option will be automatically suspended.
You can cancel the Interest Sweep option at any time in a written request.
We may also cancel this option if the Fixed Accumulation Value is less than
$5,000 or such a lower amount as we may determine.
ACCUMULATION PERIOD
(a) Crediting of Premium Payments
You can allocate a portion of each premium payment to one or more
Investment Divisions or the Fixed Account. The minimum amount that you may
allocate to any one Investment Division or the Fixed Account is $25 (or such
lower amount as we may permit). We will place the initial premium payment in the
MainStay VP Cash Management Investment Division until 15 days after we issue the
policy. At the end of this period, we will allocate the premium payments to the
Investment Divisions and/or the Fixed Account as requested. We will allocate all
additional premium payments to the Investment Divisions and/or Fixed Account as
requested.
We will credit that portion of each premium payment you allocate to an
Investment Division in the form of Accumulation Units. We determine the number
of Accumulation Units we credit to a policy by dividing the amount allocated to
each Investment Division by the Accumulation Unit value for that Investment
Division on the day we are making this calculation. The value of an Accumulation
Unit will vary with the investment experience of the Portfolio in which the
Investment Division invests. The number of Accumulation Units we credit to a
policy will not, however, change as a result of any fluctuations in the value of
an Accumulation Unit. (See "The Fixed Account" at page 34 for a description of
interest crediting.)
26
<PAGE> 30
(b) Valuation of Accumulation Units
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 we value the
Accumulation Units.
OWNER INQUIRIES
Your inquiries should be addressed to NYLIAC. (See page 16.)
CHARGES AND DEDUCTIONS
SURRENDER CHARGES
Since no deduction for a sales charge is made from premium payments, we
impose a surrender charge on certain partial withdrawals and surrenders of the
policies. The surrender charge covers certain expenses relating to the sale of
the policies, including commissions to registered representatives and other
promotional expenses. We measure the surrender charge as a percentage of the
amount withdrawn or surrendered. The surrender charge may apply to amounts
applied under certain Income Payment options.
If you surrender your policy, we deduct the surrender charge from the
amount paid to you. In the case of a partial withdrawal, you can direct 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 you. If the remaining value in an Allocation Alternative is less than
the necessary surrender charge, we will deduct the remainder of the charge 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 percentage of the charge declines 1% for each
additional Policy Year, until the ninth Policy Year, after which no surrender
charge is made, as shown in the following chart:
AMOUNT OF SURRENDER CHARGE
<TABLE>
<CAPTION>
POLICY YEAR CHARGE
----------- ------
<S> <C>
1.......................................................... 7%
2.......................................................... 7%
3.......................................................... 7%
4.......................................................... 6%
5.......................................................... 5%
6.......................................................... 4%
7.......................................................... 3%
8.......................................................... 2%
9.......................................................... 1%
10+......................................................... 0
</TABLE>
The duration of the surrender charge schedule is based solely on the Policy
Date. Additional premium payments do not begin their own surrender charge
schedules.
EXCEPTIONS TO SURRENDER CHARGES
We will not assess a surrender charge:
(a) on amounts you withdraw in any one Policy Year which do not exceed 10%
of the Accumulation Value at the time of surrender or withdrawal ("10%
Window");
(b) on amounts you withdraw in any Policy Year which are less than or equal
to the greater of (i) the 10% Window or (ii) the Accumulation Value
less accumulated premium payments, for policies with total premium
payments of $100,000 or more;
(c) if NYLIAC cancels the policy;
(d) when we pay proceeds upon the death of the policy owner or the
Annuitant;
27
<PAGE> 31
(e) when you select an Income Payment Option in any Policy Year after the
first Policy Year;
(f) when a required minimum distribution is made under a Qualified policy
(this amount will, however, count against the first exception
described above);
(g) on withdrawals at age 59 1/2 or older if the policy is tax-qualified
and if the money withdrawn from the policy was transferred or rolled
over from a NYLIAC annuity policy;
(h) on withdrawals you make under the Living Needs Benefit Rider or
Unemployment Benefit Rider; and
(i) when the aggregate surrender charges under a policy exceed 8.5% of the
total premium payments.
In addition, we will not assess a surrender charge on certain withdrawals
from the Fixed Account. (See "The Fixed Account" at page 34.)
OTHER CHARGES
(a) Mortality and Expense Risk Charges
Prior to the Annuity Commencement Date, NYLIAC imposes risk charges to
compensate it for bearing certain mortality and expense risks under the
policies. This charge is equal, on an annual basis, to 1.20% of the average
daily net asset value of the applicable Separate Account and is deducted daily.
We guarantee that these charges will not increase. If these charges are
insufficient to cover actual costs and assumed risks, the loss will fall on
NYLIAC. If the charges are more than sufficient, we will add any excess to our
general funds.
The mortality risk assumed is the risk that Annuitants as a group will live
for a longer time than our actuarial tables predict. As a result, we would be
paying more Income Payments than we planned. We also assume a risk that the
mortality assumptions reflected in our guaranteed annuity payment tables, shown
in each policy, will differ from actual mortality experience. Lastly, we assume
a mortality risk that, at the time of death, the guaranteed minimum death
benefit will exceed the policy's Accumulation Value. The expense risk assumed is
the risk that the cost of issuing and administering the policies will exceed the
amount we charge for these services.
(b) Administration Fee
Prior to the Annuity Commencement Date, we impose an administration fee
intended to cover the cost of providing policy administration services. This
charge is equal, on an annual basis, to .10% of the average daily net asset
value of the applicable Separate Account and is deducted daily.
(c) Policy Service Charge
We deduct an annual policy service charge each Policy Year on the Policy
Anniversary or upon surrender of the policy if on the Policy Anniversary or date
of surrender the Accumulation Value is less than $10,000. This charge is 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. We deduct the annual policy
service charge from each Allocation Alternative in proportion to its percentage
of the Accumulation Value on the Policy Anniversary or date of surrender. This
charge is designed to cover the costs for providing services under the policy
such as collecting, processing and confirming premium payments and establishing
and maintaining the available methods of payment.
(d) Fund Charges
The value of the assets in the Separate Accounts will indirectly reflect
the Funds' total fees and expenses. The Funds's total fees and expenses are not
part of the policy. They may vary in amount from year to year. These fees and
expenses are described in detail in the relevant Fund's prospectus.
GROUP AND SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce the surrender
charge and the policy service charge or change the minimum initial and
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
28
<PAGE> 32
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 policy service
charge will reflect differences in costs or services and will not be unfairly
discriminatory.
TAXES
NYLIAC may, where premium taxes are imposed by state law, deduct such taxes
from your 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 your current state of residency, and the insurance laws and NYLIAC's
status in states where premium taxes are incurred. Current premium tax rates
range from 0% to 3.5%. Applicable premium tax rates are subject to change by
legislation, administrative interpretations or judicial acts.
Under present laws, NYLIAC will also incur state and local taxes (in
addition to the premium taxes described above) in several states. At present,
these taxes are not significant. If they increase, however, NYLIAC may make
charges for such taxes.
NYLIAC does not expect to incur any federal income tax liability
attributable to investment income or capital gains retained as part of the
reserves under the Policies. (See "Federal Tax Matters" at page 35.) Based upon
these expectations, no charge is being made currently for corporate federal
income taxes which may be attributable to the Separate Accounts. Such a charge
may be made in future years for any federal income taxes NYLIAC incurs.
DISTRIBUTIONS UNDER THE POLICY
SURRENDERS AND WITHDRAWALS
You can 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 we receive
the request, less any outstanding loan balance, surrender charges, premium taxes
which we may deduct and policy service charge, if applicable. If you have not
provided us with a written election not to withhold federal income taxes at the
time you make a withdrawal or surrender request, NYLIAC must by law withhold
such taxes from the taxable portion of any surrender or withdrawal. We will
remit that amount to the federal government. In addition, some states have
enacted legislation requiring withholding. We will pay all surrenders or
withdrawals within seven days of receipt of all documents (including documents
necessary to comply with federal and state tax law), subject to postponement in
certain circumstances. (See "Delay of Payments" at page 32.)
Since you assume the investment risk with respect to amounts allocated to
the Separate Accounts and because certain surrenders or withdrawals are subject
to a surrender charge and premium tax deduction, the total amount paid upon
surrender of the Policy (taking into account any prior withdrawals) may be more
or less than the total 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
We may deduct a surrender charge and any state premium tax, if applicable,
less any outstanding loan balance, and less the annual policy service charge, if
applicable, from the amount paid. We will pay the proceeds in a lump sum to you
unless you elect a different Income Payment method. (See "Income Payments" at
page 32.) 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.)
29
<PAGE> 33
(b) Partial Withdrawals
The minimum amount that can be withdrawn is $500, unless we agree
otherwise. We will withdraw the amount from the Allocation Alternatives in
accordance with your request. If you do not specify how to allocate a partial
withdrawal among the Allocation Alternatives, we 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 requested partial withdrawal is greater than the value in any of the
Allocation Alternatives from which the partial withdrawal is being made, we will
pay the entire value of that Allocation Alternative, less any surrender charge
that may apply, to you.
(c) Periodic Partial Withdrawals
You may elect to receive regularly scheduled withdrawals from the policy.
These periodic partial withdrawals may be paid on a monthly, quarterly,
semi-annual, or annual basis. You will elect 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). We will make all withdrawals on the day of each
calendar month you specify, or on the next Business Day (if the day you have
specified is not a Business Day). You must specify which Investment Divisions
and/or Fixed Account from which the periodic withdrawals will be made. The
minimum amount under this feature 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--Taxation of
Annuities in General" at page 35.) If you do not specify otherwise, we will
withdraw money on a pro rata basis from each Investment Division and/or the
Fixed Account.
You can 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, you must have 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.
REQUIRED MINIMUM DISTRIBUTION OPTION
For IRAs and IRA SEPs, the policy 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 policy 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 later.
CANCELLATIONS
If we do not receive any premium payments for a period of two years, and
both the Accumulation Value of your policy and your total premium payments less
any withdrawals and surrender charges are less than $2,000, we reserve the right
to terminate your policy subject to any applicable state insurance law or
regulation. We will notify you of our intention to exercise this right and give
you 90 days to make a premium payment. If we terminate your policy, we will pay
you the Accumulation Value of your policy in one lump sum.
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. You may change the Annuity Commencement Date to an earlier date by
providing written notice to NYLIAC. You may defer the Annuity Commencement Date
to a later date if we agree to it, provided that we receive written notice of
the request 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.
30
<PAGE> 34
DEATH BEFORE ANNUITY COMMENCEMENT
If you or the Annuitant dies prior to the Annuity Commencement Date, we
will pay an amount as proceeds to the designated Beneficiary, as of the date we
receive proof of death and all requirements necessary to make the payment. That
amount will be the greater of:
(a) the Accumulation Value, less any outstanding loan balance; or
(b) the sum of all premium payments made less any outstanding loan balance,
partial withdrawals and surrender charges on those withdrawals.
We have set forth below an example of how the death benefit is calculated.
In this example, we have assumed the following:
(1) you purchase a policy with a $100,000 premium payment;
(2) the Accumulation Value is $110,000 in the second Policy Year;
(3) a $5,000 withdrawal is made in the second Policy Year;
(4) you die in the third Policy Year and the Accumulation Value of the
policy has decreased to $75,000.
<TABLE>
<S> <C> <C> <C>
The death benefit is the greater of:
(a) Accumulation Value; or = $75,000
(b) Premium payments less
any partial withdrawals = $95,000 ($100,000 - $5,000)
</TABLE>
In this example, your Beneficiary(ies) would receive $95,000.
The formula guarantees that the amount we pay 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 applicable Separate Account. 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 we receive proof of death and all requirements
necessary to make the payment to that Beneficiary. We will keep the remaining
balance in the policy to pay the other Beneficiaries. Due to market fluctuations
the remaining Accumulation Value may increase or decrease and we may pay
subsequent Beneficiaries a different amount.
We will make payments in a lump sum to the Beneficiary unless you have
elected or the Beneficiary elects otherwise in a signed written notice which
gives us the information that we need. If such an election is properly made, we
will apply all or part of these proceeds:
(i)under the Life Income Payment Option to provide an immediate annuity
for the Beneficiary who will be the policy owner and Annuitant; or
(ii)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 policy owner's death (as determined
for federal tax purposes), and must begin within one year after the
Owner's death. (See "Income Payments" at page 32.)
If your spouse is the Beneficiary, we can pay the proceeds to the surviving
spouse if you die before the Annuity Commencement Date or the policy can
continue with the surviving spouse as (a) the new policy owner, and, (b) if you
were 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.
We will make any distribution or application of policy proceeds within 7
days after NYLIAC receives all documents (including documents necessary to
comply with federal and state tax law) in connection with the
31
<PAGE> 35
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
We will make Income Payments 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 lump sum payment be made if the Accumulation Value is less
than $2,000. At any time before the Annuity Commencement Date, you may change
the Income Payment option or request any other method of payment we agree to. If
the Life Income Payment Option is chosen, we may require proof of birth date
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 should be greater. We will make payments under
the Life Income Payment Option in the same specified amount and 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. We base Income Payment
options involving life income are based on annuity tables that vary on the basis
of sex, 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, you (or the Beneficiary upon the death of you or the
Annuitant prior to the Annuity Commencement Date) may choose to have Income
Payments made under some other method of payment or in a lump sum.
(c) Proof of Survivorship
We may require satisfactory proof of survival, from time to time, before we
pay any Income Payments or other benefits. We will request the proof at least 30
days prior to the next scheduled payment date.
DELAY OF PAYMENTS
We will pay any amounts due from the Separate Accounts under the policy
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 ("NYSE") is closed for other than usual
weekends or holidays, or trading on the NYSE is otherwise
restricted;
2. An emergency exists as defined by the Securities and Exchange
Commission ("SEC");
3. The SEC 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 we will delay transfers from the Separate Accounts to
the Fixed Account.
We may also delay payments of any amount due from the Fixed Account. 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. We will
pay interest of at least 3.5% per year on any partial or full surrender request
deferred for 30 days or more.
DESIGNATION OF BENEFICIARY
You may select one or more Beneficiaries and name them in the application.
Thereafter, before the Annuity Commencement Date and while the Annuitant is
living, you may change the Beneficiary by written notice to NYLIAC. If before
the Annuity Commencement Date, the Annuitant dies before you 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 you. If you are the Annuitant,
the proceeds pass to your estate. However, if the policy 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 policy owner's estate.
32
<PAGE> 36
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 still 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 of 1940, NYLIAC relies upon a November 28, 1988 no-action
letter for exemptive relief.
Under the terms of your plan you may have the option to invest in other
403(b) funding vehicles, including 403(b)(7) custodial accounts. You should
consult your plan document to make this determination.
LOANS
Loans are available only if you have purchased your policy in connection
with a 403(b) plan and may not be available in all states for plans subject to
the Employment Retirement Income Security Act of 1974 ("ERISA"). 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 you may take is the lesser of: (a) 50% of the policy's
Accumulation Value on the date of the loan or (b) $50,000. We withdraw a loan
processing fee of $25 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, we will transfer sufficient Accumulation Value 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,
you may not make partial withdrawals or transfers 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 ERISA, the interest rate paid by the policy owner
of the loan will equal 5%. We will credit the assets being held in the Fixed
Account to secure the loan with the minimum guaranteed interest rate of 3%. For
plans subject to ERISA, we will apply the interest charged on the loan at the
then current prime rate, plus 1%. We will credit the money being held in the
Fixed Account to secure the loan 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, we will assess interest in arrears as part of the
periodic loan repayments.
You must repay the loan on a periodic basis at a frequency not less
frequently than quarterly and over a period not greater than five years from the
date it is taken. 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. We will take such a repayment on a first-in, first-out (FIFO)
basis from amounts allocated to the Fixed Account.
We permit loans to acquire a principal residence 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.
We deduct any outstanding loan balance including any accrued interest from
the Fixed Accumulation Value prior to payment of a surrender or the commencement
of the annuity benefits. On death of the policy owner or Annuitant, we deduct
any outstanding loan balance from the Fixed Accumulation Value as a partial
withdrawal as of the date we receive the notice of death.
Loans are subject to the terms of the policy, your 403(b) plan and the
Internal Revenue 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
At no additional charge, we include two riders under the policy: an
Unemployment Benefit Rider, for Non-Qualified, IRA and Roth IRA policies, and a
Living Needs Benefit Rider, for all types of policies. Both
33
<PAGE> 37
riders 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 happening 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 may be eligible to receive all or a portion of the Accumulation Value
without paying a surrender charge. The policy must have been inforce for at
least one year and have a minimum Accumulation Value of $5,000. You must also
provide us with proof that the Annuitant has spent 60 or more consecutive days
in a nursing home. 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, IRA and Roth IRA policies, if you become unemployed,
you may be eligible to increase the amount that can be withdrawn from your
policy up to 50% without paying surrender charges. This rider can only be used
once. The policy must have been inforce for at least one year and have a minimum
Accumulation Value of $5,000. You also must have been unemployed for at least 60
consecutive days. 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. The Fixed Account is not
registered under the federal securities laws and is not generally subject to
their provision. Furthermore, the staff of the Securities and Exchange
Commission has not reviewed the disclosures in this Prospectus relating to the
Fixed Account. These disclosures regarding the Fixed Account may 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. We credit interest on a daily basis. NYLIAC may, at its sole
discretion, credit a higher rate or rates of interest to amounts allocated or
transferred to the Fixed Account. Interest rates 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) allocated to the
Fixed Account during a calendar quarter will 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 27.) For policies applied for prior to April 1,
1999, 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: (1) 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 (2) within 60 days after that Policy Anniversary, you withdraw part or
all of that amount allocated to the Fixed Account. We reserve the right to set a
separate yearly interest rate and period for which this rate is guaranteed for
amounts transferred to the Fixed Account.
The exception described above does not apply to policies applied for on or
after April 1, 1999, in states where approved. You should check with your
registered representative to determine whether this provision is still available
in your state.
34
<PAGE> 38
(c) Transfers to Investment Divisions
You may transfer amounts from the Fixed Account to the Investment Divisions
up to 30 days prior to the Annuity Commencement Date, subject to the following
conditions.
1. The maximum amount you are allowed to transfer from the Fixed
Account to the Investment Divisions during any Policy Year is 20% of the
Fixed Accumulation Value at the beginning of the Policy Year.
2. You may transfer an amount from the Fixed Account to the Investment
Divisions if on any Policy Anniversary: (i) 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 (ii) within 60 days after that
Policy Anniversary, you make a request for such transfer. There is no
minimum transfer requirement and no charges will be imposed under this
condition.
3. The minimum amount that you may transfer 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. We determine amounts transferred from the
Fixed Account on a first-in, first-out ("FIFO") basis, for purposes of
determining the rate at which we credit interest on monies remaining in the
Fixed Account.
You must make transfer requests in writing on a form approved by NYLIAC or
by telephone in accordance with established procedures. (See "Procedures for
Telephone Transfers" at page 24).
We will deduct partial withdrawals and apply any surrender charges 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 you allocated such payments 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 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 you, 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. We
cannot predict 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, this
discussion does not take into consideration any applicable state or other tax
laws except with respect to the imposition of any state premium taxes. 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 policy owner generally is not taxed on increases in the
value of a policy until distribution occurs either in the form of a lump sum
received by withdrawing all or part of the Accumulation Value (i.e., surrenders
or partial withdrawals) or as Income Payments under the Income Payment option
elected. The exception to this rule is
35
<PAGE> 39
that generally, a policy owner of any deferred annuity policy who is not a
natural person must include in income any increase in the excess of the policy
owner's Accumulation Value over the policy owner's investment in the contract
during the taxable year. However, there are some exceptions to this exception.
You may wish to discuss these with your tax counsel. The taxable portion of a
distribution (in the form of an annuity or lump sum payment) is generally taxed
as ordinary income. For this purpose, the assignment, pledge, or agreement to
assign or pledge any portion of the 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, a penalty tax equal to 10% of the amount
treated as taxable income may be imposed. The penalty tax is not imposed in
certain circumstances, including, generally, distributions: (1) made on or after
the date on which the taxpayer is actual age 59 1/2, (2) made as a result of the
policy owner's 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 policy owner during any calendar year are to be treated
as one annuity contract for purposes of determining the amount includible in an
individual's gross income. In addition, there may be other situations in which
the Treasury Department may conclude (under its authority to issue regulations)
that it would be appropriate to aggregate two or more annuity contracts
purchased by the same policy owner. Accordingly, a policy owner should consult a
competent tax adviser before purchasing more than one policy or other annuity
contract.
A transfer of ownership of a policy, or designation of an Annuitant or
other Beneficiary who is not also the policy owner, may result in certain income
or gift tax consequences to the policy owner. A policy owner contemplating any
transfer or assignment of a policy should contact a competent tax adviser with
respect to the potential tax effects of such a transaction.
QUALIFIED PLANS
The Qualified Policy is designed for use with several types of qualified
plans. The tax rules applicable to participants and beneficiaries in such
qualified plans vary according to the type of plan and the terms and conditions
of the plan itself. Special favorable tax treatment may be available for certain
types of contributions and distributions (including special rules for certain
lump sum distributions 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
36
<PAGE> 40
specified minimum distribution rules and in certain other circumstances.
Therefore, this discussion only provides general information about use of the
policies with the various types of qualified plans. Policy owners 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 with the plan.
Purchasers of policies for use with any qualified plan should seek competent
legal and tax advice regarding the suitability of the policy.
(a) Section 403(a) Plans. Under Section 403(a) of the Code, payments
made by employers to purchase annuity contracts, which meet certain
requirements, for their employees are excludible from the gross income of
the employee. Any amounts distributed to the employees under such annuity
contracts are taxable to them in the years in which distributions are made.
(b) 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.
(c) 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.
(d) 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.
(e) 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. It is an indirect wholly-owned subsidiary of New York 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 and typically do not hold routine annual
stockholder meetings. Special stockholder meetings will be called when
necessary. To the extent required by law, NYLIAC will vote the Eligible
Portfolio shares held in the Investment Divisions at special stockholder
meetings of the Funds in accordance with instructions we receive from persons
having voting interests in the corresponding Investment Division. If, however,
the federal securities laws are amended, or if NYLIAC's present interpretation
should change, and as a result, NYLIAC determines that it is allowed to vote the
Eligible Portfolio shares in its own right, we may elect to do so.
37
<PAGE> 41
Prior to the Annuity Commencement Date, you hold a voting interest in each
Investment Division to which you have money allocated. We will determine the
number of votes which are available to you by dividing the Accumulation Value
attributable to an Investment Division by the net asset value per share of the
applicable Eligible Portfolios. We will calculate the number of votes which are
available to you separately for each Investment Division. We will determine that
number by applying your percentage interest, if any, in a particular Investment
Division to the total number of votes attributable to the Investment Division.
We will determine the number of votes of the Eligible Portfolio which are
available as of the date established by the Portfolio 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.
If we do not receive timely instructions, we will vote those shares in
proportion to the voting instructions which are received with respect to all
policies participating in that Investment Division. We will apply voting
instructions to abstain on any item to be voted upon 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.
38
<PAGE> 42
(THIS PAGE INTENTIONALLY LEFT BLANK)
39
<PAGE> 43
TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION
The SAI contains more details concerning the subjects discussed in this
Prospectus. The following is the Table of Contents for the SAI:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE POLICIES................................................ 2
INVESTMENT PERFORMANCE CALCULATIONS......................... 2
GENERAL MATTERS............................................. 4
FEDERAL TAX MATTERS......................................... 4
DISTRIBUTOR OF THE POLICIES................................. 5
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS...................... 6
STATE REGULATION............................................ 6
RECORDS AND REPORTS......................................... 6
LEGAL PROCEEDINGS........................................... 6
INDEPENDENT ACCOUNTANTS..................................... 6
OTHER INFORMATION........................................... 6
FINANCIAL STATEMENTS........................................ F-1
</TABLE>
How to obtain a New York Life LifeStages(R) Flexible Premium Variable Annuity
Statement
of Additional Information.
Call (800) 598-2019 or send this request form to:
NYLIAC Variable Products Service Center
Madison Square Station
P.O. Box 922
New York, NY 10159
- --------------------------------------------------------------------------------
Please send me a New York Life LifeStages(R) Flexible Premium Variable Annuity
Statement of
Additional Information dated May 1, 1999:
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip
40
<PAGE> 44
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 is not a part of the Prospectus. It 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 Internal Revenue Code. Such contributions shall be in cash and
shall be invested 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
Internal Revenue 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
Internal Revenue 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).
IRA-1
<PAGE> 45
(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 includable compensation
($160,000 for 1999, 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
1999 (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 Internal Revenue Code, 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 $31,000 (for 1999). The
threshold level if you are married and file a joint tax return is $51,000 (for
1999), 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 $31,000 and $51,000 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>
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>
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
IRA-4
<PAGE> 48
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 of you and your beneficiary or is used to pay certain medical
expenses or is used for certain qualified first-time homebuyer expenses or
certain qualified higher education expenses. 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 converted a regular IRA into a Roth IRA in 1998, the additional tax
liability will be spread over four years (1998, 1999, 2000, and 2001), unless
you elected to pay the entire amount when you filed your 1998 federal income tax
return.
(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
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 50
LOGO
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
ROTH 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 includes non-technical explanation of some of the requirements
applicable to Roth Individual Retirement Annuities (Roth IRAs). The information
provided applies to contributions made and distributions received on and after
January 1, 1998.
1. REVOCATION OF YOUR ROTH IRA
You may revoke your Roth IRA at anytime within seven days after it is
established by mailing or delivering a written notice of revocation to New York
Life Insurance and Annuity Corporation, 51 Madison Avenue, Room 452, New York,
NY 10010. Any notice of revocation will be deemed mailed on the date of postmark
(or if sent be certified or registered mail, the date of certification or
registration) if it is deposited in the U.S. Postal Service in an envelope, or
other appropriate wrapper, first-class postage prepaid, properly addressed. Upon
revocation, you will be entitled to a full refund of your entire Roth IRA
without any adjustments (for items such as administrative expenses, fees, or
fluctuation in market value).
2. CONTRIBUTIONS
(a) Regular Roth IRA. The policyowner may make periodic contributions to a
Roth IRA in any amount up to the contribution limit described in Section 3
(Deductibility of Contributions). All contributions to your Roth IRA must be
made in cash. Contributions for a taxable year must be made no later than April
15 of the following year.
(b) Rollover Roth IRA. A rollover contribution by the policyowner shall be
a nonperiodic deposit in cash, with respect to which contribution the
policyowner warrants that 1) the entire amount rolled over is attributable to a
distribution from a regular Individual Retirement Annuity (a "regular IRA") or
another Roth IRA which meets the requirements of Code Section 408(d)(3); 2)
within one (1) year of receiving such distribution, the policyowner did not
receive another distribution which constituted a "rollover" of a Roth IRA to
another Roth IRA; and 3) the contribution as made satisfies all the requirements
for Roth IRA rollover contributions as set forth under the Internal Revenue Code
"Code".
Strict limitations apply to rollovers, and you should seek competent tax
advice in order to comply with all the rules governing rollovers.
(c) Transfers and Conversions. The policyowner may make an initial or
subsequent contribution hereunder, provided that your Modified Adjusted Gross
Income (MAGI) does not exceed $100,000 during the year of such transfer and you
do not file your income tax return as married filing separately, by directing a
Trustee of an existing regular IRA to directly transfer an amount in cash from
or, if permitted by the Trustee, to convert, such regular IRA into this Roth
IRA. The policyowner may also direct a Trustee of an existing Roth IRA to
directly transfer an amount in cash from an existing Roth IRA to the Trustee of
this Roth IRA without regard to such income or return filing limitations.
(d) Tax Consequences of Rollovers and Transfers. A rollover, transfer, or
conversion of a regular IRA to a Roth IRA is permitted if your MAGI does not
exceed $100,000 and you do not file your income tax return as married filing
separately. Such a rollover, transfer, or conversion will be treated as a
taxable distribution of the regular IRA, but the 10% excise tax on early
distributions will not apply. For such rollovers, transfers, and conversions of
regular IRAs into Roth IRAs during 1998, a special rule applies and any amount
required to be so included in taxable income will be included ratably over 1998,
1999, 2000, and 2001.
(e) Responsibility of the policyowner. If the policyowner contemplates
future periodic contributions, rollovers, or transfers to the Roth 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. New York Life Insurance and
Annuity Corporation (NYLIAC) and its employees are not permitted to provide tax
advice, and assume no liability for the tax consequences of any contribution to,
or distribution from, the Roth IRA.
ROTH IRA-1
<PAGE> 51
3. DEDUCTIBILITY OF CONTRIBUTIONS
(a) Eligibility. Under the law, you may make a contribution of up to the
lesser of $2,000 or 100% of compensation, reduced by the amount of contributions
you make to any other regular IRA (except Education IRAs) or Roth IRA for the
taxable year, provided that if your MAGI is above the specified level, the
amount of the contribution you may make to a Roth IRA is phased down and
eventually eliminated. Contributions to a Roth IRA are not deductible for income
tax purposes.
(b) Modified Adjusted Gross Income (MAGI). You must look at your Modified
Adjusted Gross Income for the year (if you and your spouse file a joint tax
return, use your combined MAGI) to determine whether you can make a Roth IRA
contribution. Your tax return will show you how to calculate your MAGI for this
purpose, except that you should disregard any income resulting from a taxable
rollover, transfer, or conversion of a regular IRA to a Roth IRA. Only if you
are at or below a certain MAGI level, called the Threshold Level, can you make a
contribution to a Roth IRA.
If you are single, your MAGI Threshold Level is $95,000. The Threshold
Level if you are married and file a joint tax return is $150,000, and if you are
married but file a separate tax return, the Threshold Level is $0.
If your MAGI is less than $15,000 ($10,000 in the case of a joint return)
above your Threshold Level, you will still be able to make a Roth IRA
contribution, but it will be limited in amount. The amount by which your MAGI
exceeds your Threshold Level (MAGI minus the Threshold Level) is called your
Excess MAGI. The maximum allowable contribution is $2,000. You can calculate
your contribution limit as follows:
<TABLE>
<C> <C> <S> <C> <C>
$15,000 ($10,000 in the case) - Excess
(of a joint return) MAGI Maximum
- ----------------------------------------------- X Allowable = Contribution Limit
$15,000 ($10,000 in the case) Contribution
(of a joint return)
</TABLE>
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 contribution limit is $200. Your contribution limit cannot, in any event,
exceed 100% of your compensation.
The maximum contribution you and your spouse may make to all your IRAs in
the aggregate, including Roth IRAs, is the lesser of 100% of your combined
compensation or $4,000 annually ($2,000 individually).
(c) Deductions. No deduction is allowed for Roth IRA contributions.
(d) 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 includible
in your gross income, but does not include deferred compensation or any amount
received as a pension or annuity.
4. DISTRIBUTIONS
(a) Required Distributions After Death. If you die before the entire
interest is distributed to you, but after distribution to you from your Roth IRA
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) Roth IRA Distributions
(i) Qualifying nontaxable distributions.
ROTH IRA-2
<PAGE> 52
A distribution from your Roth IRA will not be includible in your gross
income if it is:
(a) made on or after the date you attain age 59 1/2
(b) made after you die or become disabled, or
(c) made as a qualified first time homebuyer distribution
and is made after the five taxable year period beginning with the first
taxable year in which you or your spouse made a contribution to a Roth IRA,
or, in the case of a rollover from a regular IRA to a Roth IRA, after the
five taxable year period beginning with the taxable year of the rollover.
Distributions meeting these requirements are known as "qualifying
distributions".
(ii) Other distributions partly taxable.
If a distribution from your Roth IRA does not meet the requirements of
a qualifying distribution as described in (i), then the distribution will
be treated first as a return of nontaxable Roth IRA contributions, and
second, after all such contributions have been returned, as distributions
of taxable earnings, which in addition to income tax may be subject to the
10% penalty tax on early distributions, as discussed below.
In addition, you will not be entitled to use any form of income
averaging to reduce the federal income tax on the taxable portion of your
distribution. Also, no portion of your distribution is taxable as a capital
gain.
(c) Withholding. Unless you elect not to have withholding apply, federal
income tax will be withheld from any taxable portion of your Roth IRA
distributions. If payments are delivered to foreign countries, however, tax
will, generally, be withheld at a 10% rate unless you certify to the Trustee
that you are not a U.S. citizen residing abroad or a "tax avoidance expatriate"
as defined in the Internal Revenue Code Section 877.
5. PENALTIES
(a) Excess Contributions. If at the end of any taxable year your Roth IRA
contributions (other than rollovers or transfers) exceed the maximum allowable
annuity 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. Alternatively, excess
contributions for one year may be carried forward as Roth IRA contributions in
the next year to the extent that the excess, when aggregated with your Roth IRA
contributions (if any) for the subsequent year, does not exceed the maximum
allowable 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 a Roth IRA is to accumulate
funds for retirement, your receipt or use of any portion of your Roth IRA
account (for example, as collateral for a loan) which is not a qualifying
distribution before you attain age 59 1/2, to the extent it is taxable to you as
described above, constitutes an early distribution unless the distribution is a
result of 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 of you and your
beneficiary, is used to pay certain medical expenses, or is used for certain
qualified first-time homebuyer expenses, or certain qualified higher education
expenses. The amount of an early distribution which is not a qualifying
distribution and is not a return of previous Roth IRA contributions is
includible 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 Roth IRA as a
qualifying rollover contribution.
(c) Minimum Distributions. If the minimum distribution rules described in
4(a) 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) Prohibited Transactions. If you or your beneficiary engage in any
prohibited transaction (such as any sale, exchange or leasing of any property
between you 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
ROTH IRA-3
<PAGE> 53
distributed to you. The value of the entire annuity (excluding the nondeductible
contributions included therein) will be includible in your gross income; if at
the time of the prohibited transaction you are under age 59 1/2 you will also be
subject to the 10% penalty tax on early distributions.
6. FEDERAL ESTATE GIFT TAXES
Any amount distributed from your Roth IRA upon your death may be subject to
federal estate and gift taxes.
7. 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, or premature distribution from, your Roth IRA. You must report distributions
from your Roth IRA on your federal income tax return for the year.
(b) IRS Approval. This Roth IRA plan has not been approved as to form by
the Internal Revenue Service. Approval by the IRS of the Roth IRA plan is a
determination only as to the form of the annuity and does not represent a
determination of the merits of such annuity.
(c) Vesting. Your interest in your Roth IRA must be nonforfeitable at all
times.
ROTH IRA-4
<PAGE> 54
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999
FOR
NEW YORK LIFE LIFESTAGES(R) FLEXIBLE PREMIUM VARIABLE ANNUITY
(FORMERLY NAMED NYLIAC VARIABLE ANNUITY)
FROM
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
INVESTING IN
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-I
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-II
This Statement of Additional Information ("SAI") is not a prospectus. The
SAI contains information that expands upon subjects discussed in the current New
York Life LifeStages(R) Flexible Premium Variable Annuity Prospectus. You should
read the SAI in conjunction with the current New York Life LifeStages(R)
Flexible Premium Variable Annuity Prospectus dated May 1, 1999. You may obtain a
copy of the Prospectus 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 but not defined in the SAI have the
same meaning as in the current New York Life LifeStages(R) Flexible Premium
Variable Annuity Prospectus.
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE POLICIES (22)........................................... 2
Valuation of Accumulation Units (27)................... 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............................................. 4
FEDERAL TAX MATTERS (35).................................... 4
Taxation of New York Life Insurance and Annuity
Corporation.......................................... 4
Tax Status of the Policies............................. 4
DISTRIBUTOR OF THE POLICIES (37)............................ 5
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS...................... 6
STATE REGULATION............................................ 6
RECORDS AND REPORTS......................................... 6
LEGAL PROCEEDINGS........................................... 6
INDEPENDENT ACCOUNTANTS..................................... 6
OTHER INFORMATION........................................... 6
FINANCIAL STATEMENTS........................................ F-1
</TABLE>
- ------------
* (Numbers in parentheses refer to page numbers of corresponding sections of the
current New York Life LifeStages(R) Flexible Premium Variable Annuity
Prospectus.)
<PAGE> 55
THE POLICIES
The following provides additional information about the policies and
supplements the description in the Prospectus.
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. We arbitrarily set the value of each
Accumulation Unit as of the date operations began for the Investment Division.
Thereafter, the value of an Accumulation Unit of an Investment Division for any
Business Day equals the value of an Accumulation Unit in that Investment
Division as of the immediately preceding Business Day multiplied by the "Net
Investment Factor" for that Investment Division for the current Business Day.
We determine the Net Investment Factor for each Investment Division for any
period from the close of the preceding Business Day to the close of the current
Business Day (the "Valuation Period") is determined by the following formula:
(a/b)-c
Where: a = the result of
(1) the net asset value per share of the Eligible Portfolio shares
held in the Investment Division determined at the end of the
current Valuation Period, plus
(2) the per share amount of any dividend or capital gain
distribution made by the Eligible Portfolio for shares held in
the Investment Division if the "ex-dividend" date occurs during
the current Valuation Period;
b = 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 = a factor representing the charges deducted from the applicable
Investment Division on a daily basis. Such factor equal, on an
annual basis, to 1.30% of the daily net asset value of Separate
Accounts I and II, respectively. (See "Other Charges" at page 28 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 the 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 the 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 the MainStay VP Cash Management Investment
Division 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 the 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
2
<PAGE> 56
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.
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.
We compute the yield by dividing the net investment income per accumulation unit
earned during the period by the price per unit on the last day of the period,
according to the following formula:
(6)
- ---- YIELD = 2[(a-b +1) -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.
Accrued expenses will include all recurring fees that are charged to all
policy owner accounts. The yield calculations do not reflect the effect of any
surrender charges that may be applicable to a particular policy. Surrender
charges range from 7% to 0% of the amount of 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.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return quotations for
the Investment Divisions 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:
(n)
P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one, five, or ten-year period or the inception date,
at the end of the one, five or ten-year period (or fractional portion
thereof).
All total return figures are prepared under methods the SEC requires when
advertising performance information. For periods beginning on or after the dates
when the Investment Divisions started operations, the average annual total
return (if surrendered) figures may be referred to as "standardized"
performance. For periods before the dates when the Investment Divisions started
operations, the figures are considered "non-standardized". The average annual
total return (no surrender) figures are all considered "non-standardized".
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,
3
<PAGE> 57
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. Dividends are not
paid.
MISSTATEMENT OF AGE OR SEX. If the Annuitant's stated age and/or sex in
the policy are incorrect, NYLIAC will change the benefits payable to those which
the premium payments would have purchased for the correct age and sex. Sex is
not a factor when annuity benefits are based on unisex annuity payment rate
tables. (See "Income Payments--Election of Income Payment Options" at page 32 of
the Prospectus.) If we made payments based on incorrect age or sex, we will
increase or reduce a later payment or payments to adjust for the error. Any
adjustment will include interest, at 3.5% per year, from the date of the wrong
payment to the date the adjustment is made.
ASSIGNMENTS. If permitted by the plan or by law for the plan indicated in
the application for the Policy, you may assign a Non-Qualified Policy or any
interest in it prior to the Annuity Commencement Date and during the Annuitant's
lifetime. NYLIAC will not be deemed to know of an assignment unless it receives
a copy of a duly executed instrument evidencing such assignment. Further, NYLIAC
assumes no responsibility for the validity of any assignment. (See "Federal Tax
Matters--Taxation of Annuities in General" at page of the Prospectus.)
MODIFICATION. NYLIAC may not modify the policy without your consent except
to make the Policy meet the requirements of the Investment Company Act of 1940,
or to make the policy comply with any changes in the Internal Revenue Code or as
required by the Code or by any other applicable law in order to continue
treatment of the policy as an annuity.
INCONTESTABILITY. We rely on statements made in the application. They are
representations, not warranties. We will not contest the policy after it has
been in force during the lifetime of the Annuitant for two years from the Policy
Date.
FEDERAL TAX MATTERS
TAXATION OF NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
NYLIAC is taxed as a life insurance company. Because the Separate Accounts
are not entities separate from NYLIAC, and their operations form a part of
NYLIAC, they will not be taxed separately as "regulated investment companies"
under Subchapter M of the Code. Investment income and realized net capital gains
on the assets of the Separate Accounts are reinvested and are taken into account
in determining the Accumulation Value. As a result, such investment income and
realized net capital gains are automatically retained as part of the reserves
under the policy. Under existing federal income tax law, NYLIAC believes that
Separate Account investment income and realized net capital gains should not be
taxed to the extent that such income and gains are retained as part of the
reserves under the policy.
TAX STATUS OF THE POLICIES
Section 817(h) of the Code requires that the investments of the Separate
Accounts must be "adequately diversified" in accordance with Treasury
regulations in order for the policies to qualify as annuity contracts under
Section 72 of the Code. The Separate Accounts intend to comply with the
diversification requirements prescribed by the Treasury under Treasury
Regulation Section 1.817-5.
To comply with regulations under Section 817(h) of the Code, the Separate
Account is required to diversify its investments, so that on the last day of
each quarter of a calendar year, no more than 55% of the value of its assets is
represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments, and no
more than 90% is
4
<PAGE> 58
represented by any four investments. For this purpose, securities of a single
issuer are treated as one investment and each U.S. Government agency or
instrumentality is treated as a separate issuer. Any security issued,
guaranteed, or insured (to the extent so guaranteed or insured) by the U.S.
Government or an agency or instrumentality of the U.S. Government is treated as
a security issued by the U.S. Government or its agency or instrumentality,
whichever is applicable.
Although the Treasury Department has issued regulations on the
diversification requirements, such regulations do not provide guidance
concerning the extent to which policy owners may direct their investments to
particular subaccounts of a separate account, or the permitted number of such
subaccounts. It is unclear whether additional guidance in this regard will be
issued in the future. It is possible that if such guidance is issued, the policy
may need to be modified to comply with such additional guidance. For these
reasons, NYLIAC reserves the right to modify the policy as necessary to attempt
to prevent the policy owner from being considered the owner of the assets of the
Separate Account or otherwise to qualify the policy for favorable tax treatment.
The Code also requires that non-qualified annuity contracts contain
specific provisions for distribution of the policy proceeds upon the death of
any policy owner. In order to be treated as an annuity contract for federal
income tax purposes, the Code requires that such policies provide that (a) if
any policy owner dies on or after the Annuity Commencement Date and before the
entire interest in the policy has been distributed, the remaining portion must
be distributed at least as rapidly as under the method in effect on the policy
owner's death; and (b) if any policy owner dies before the Annuity Commencement
Date, the entire interest in the policy must generally be distributed within 5
years after the policy owner's date of death. These requirements will be
considered satisfied if the entire interest of the policy is used to purchase an
immediate annuity under which payments will begin within one year of the policy
owner's death and will be made for the life of the Beneficiary or for a period
not extending beyond the life expectancy of the Beneficiary. The policy owner's
Beneficiary is the person to whom ownership of the Policy passes by reason of
death. If the Beneficiary is the policy owner's surviving spouse, the policy may
be continued with the surviving spouse as the new policy owner. If the policy
owner is not a natural person, these "death of Owner" rules apply when the
primary Annuitant is changed. Non-Qualified Policies contain provisions intended
to comply with these requirements of the Code. No regulations interpreting these
requirements of the Code have yet been issued and thus no assurance can be given
that the provisions contained in these policies satisfy all such Code
requirements. The provisions contained in these policies will be reviewed and
modified if necessary to assure that they comply with the Code requirements when
clarified by regulation or otherwise.
Withholding of federal income taxes on the taxable portion of all
distributions may be required unless the recipient elects not to have any such
amounts withheld and properly notifies NYLIAC of that election. Different rules
may apply to United States citizens or expatriates living abroad. In addition,
some states have enacted legislation requiring withholding.
Even if a recipient elects no withholding, special withholding rules may
require NYLIAC to disregard the recipient's election if the recipient fails to
supply NYLIAC with a "TIN" or taxpayer identification number (social security
number for individuals) or if the Internal Revenue Service notifies NYLIAC that
the TIN provided by the recipient is incorrect.
DISTRIBUTOR OF THE POLICIES
NYLIFE Distributors Inc. ("NYLIFE Distributors") is the distributor of the
policies. NYLIFE Distributors is registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 as a broker-dealer and is a
member of the National Association of Securities Dealers, Inc. NYLIFE
Distributors is an indirect wholly-owned subsidiary of New York 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.
For the years ended December 31, 1996, 1997 and 1998, the aggregate amount
of underwriting commissions paid to NYLIFE Distributors Inc. was $1,880,689,
$3,116,259 and $4,203,964, respectively, of which $940,345, $1,558,130 and
$2,101,982 was retained by them, respectively.
The policies are sold and premium payments are accepted on a continuous
basis.
5
<PAGE> 59
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
The Separate Accounts hold title to the assets of the Separate Accounts.
The assets are kept physically segregated and held separate and apart from
NYLIAC's general corporate assets. Records are maintained of all purchases and
redemptions of Eligible Portfolio shares held by each of the Investment
Divisions.
STATE REGULATION
NYLIAC is a stock life insurance company organized under the laws of
Delaware, and is subject to regulation by the Delaware State Insurance
Department. We file an annual statement with the Delaware Commissioner of
Insurance on or before March 1 of each year covering the operations and
reporting on the financial condition of NYLIAC as of December 31 of the
preceding calendar year. Periodically, the Delaware Commissioner of Insurance
examines the financial condition of NYLIAC, including the liabilities and
reserves of the Separate Accounts.
In addition, NYLIAC is subject to the insurance laws and regulations of all
the states where it is licensed to operate. The availability of certain policy
rights and provisions depends on state approval and/or filing and review
processes. Where required by state law or regulation, the policies will be
modified accordingly.
RECORDS AND REPORTS
NYLIAC maintains all records and accounts relating to the Separate
Accounts. As presently required by the federal securities laws, NYLIAC will mail
to you at your last known address of record, at least semi-annually after the
first Policy Year, reports containing information required under the federal
securities laws or by any other applicable law or regulation.
LEGAL PROCEEDINGS
NYLIAC is a defendant in individual and/or alleged class action suits
arising from its agency sales force, insurance (including variable contracts
registered under the federal securities law), investment, retail securities
and/or other operations, including actions involving retail sales practices.
Most of these actions also seek substantial or unspecified compensatory and
punitive damages. NYLIAC is also from time to time involved as a party in
various governmental, administrative, and investigative proceedings and
inquiries.
Given the uncertain nature of litigation and regulatory inquiries, the
outcome of which cannot be predicted. NYLIAC nevertheless believes that, after
provisions made in the financial statements, the ultimate liability that could
result from litigation and proceedings would not have a material adverse effect
on NYLIAC's financial position; however, it is possible that settlements or
adverse determinations in one or more actions or other proceedings in the future
could have a material adverse effect on NYLIAC's operating results for a given
year.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, independent accountants, 1177 Avenue of the
Americas, New York, New York audited the annual financial statements of the
Separate Accounts and NYLIAC. We have included the financial statements in this
Statement of Additional Information in reliance on the reports of
PricewaterhouseCoopers LLP, given on the authority of said firm as experts in
auditing and accounting.
OTHER INFORMATION
NYLIAC filed a registration statement with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
policies discussed in this Statement of Additional Information. We have not
included all of the information set forth in the registration statement,
amendments and exhibits to the registration statement in this Statement of
Additional Information. We intend the statements contained in this Statement of
Additional Information concerning the content of the policies and other legal
instruments to be summaries. For a complete statement of the terms of these
documents, you should refer to the instruments filed with the Securities and
Exchange Commission.
6
<PAGE> 60
FINANCIAL STATEMENTS
F-1
<PAGE> 61
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1998
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value............................. $366,120,538 $ 41,275,178 $ 10,298,175
LIABILITIES:
Liability to New York Life Insurance and Annuity
Corporation for mortality and expense risk charges...... 1,205,326 139,012 33,118
------------ ------------ ------------
Total equity.......................................... $364,915,212 $ 41,136,166 $ 10,265,057
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding:
12,432,615; 34,013,227; 846,509; 3,288,118;
10,372,543; 715,948; 9,894,702; 4,718,281;
2,823,065; 4,995,718, respectively.................... $364,915,212 $ 41,136,166 $ 10,265,057
============ ============ ============
Variable accumulation
unit value............................................ $ 29.35 $ 1.21 $ 12.13
============ ============ ============
Identified Cost of Investment............................... $192,652,544 $ 41,275,294 $ 10,905,809
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP CENTURY LARGE
INDEXED INCOME COMPANY
EQUITY & GROWTH VALUE
------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value............................. $244,478,881 $ 3,358,849 $ 1,303,245
LIABILITIES:
Liability to New York Life Insurance and Annuity
Corporation for mortality and expense risk charges...... 829,182 9,147 3,366
------------ ------------ ------------
Total equity.......................................... $243,649,699 $ 3,349,702 $ 1,299,879
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding:
8,414,479; 301,746; 124,552; 64,332; 86,885; 998,834;
200,833; 2,796,127; 1,895,259; 1,812,958,
respectively.......................................... $243,649,699 $ 3,349,702 $ 1,299,879
============ ============ ============
Variable accumulation
unit value............................................ $ 28.96 $ 11.10 $ 10.44
============ ============ ============
Identified Cost of Investment............................... $161,184,492 $ 3,014,142 $ 1,199,580
============ ============ ============
</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> 62
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-I
NON-QUALIFIED POLICIES
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 45,114,610 $148,424,990 $ 10,410,020 $218,655,951 $ 76,001,421 $ 36,916,898 $125,961,787
146,027 475,100 36,401 714,063 261,479 117,483 418,531
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 44,968,583 $147,949,890 $ 10,373,619 $217,941,888 $ 75,739,942 $ 36,799,415 $125,543,256
============ ============ ============ ============ ============ ============ ============
$ 44,968,583 $147,949,890 $ 10,373,619 $217,941,888 $ 75,739,942 $ 36,799,415 $125,543,256
============ ============ ============ ============ ============ ============ ============
$ 13.68 $ 14.26 $ 14.49 $ 22.03 $ 16.05 $ 13.04 $ 25.13
============ ============ ============ ============ ============ ============ ============
$ 44,326,135 $161,168,439 $ 9,146,568 $145,470,290 $ 78,937,732 $ 37,419,453 $106,952,565
============ ============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET LORD ALGER
MANAGEMENT ABBETT AMERICAN CALVERT FIDELITY FIDELITY JANUS ASPEN
GROWTH DEVELOPING SMALL SOCIAL VIP II VIP SERIES
EQUITY GROWTH CAPITALIZATION BALANCED CONTRAFUND EQUITY-INCOME BALANCED
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 765,079 $ 875,414 $ 12,016,314 $ 3,528,572 $ 46,675,642 $ 27,963,158 $ 29,447,896
1,946 2,185 38,834 11,327 148,623 95,048 88,490
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 763,133 $ 873,229 $ 11,977,480 $ 3,517,245 $ 46,527,019 $ 27,868,110 $ 29,359,406
============ ============ ============ ============ ============ ============ ============
$ 763,133 $ 873,229 $ 11,977,480 $ 3,517,245 $ 46,527,019 $ 27,868,110 $ 29,359,406
============ ============ ============ ============ ============ ============ ============
$ 11.86 $ 10.05 $ 11.99 $ 17.51 $ 16.64 $ 14.70 $ 16.19
============ ============ ============ ============ ============ ============ ============
$ 666,621 $ 753,541 $ 11,423,488 $ 3,400,797 $ 36,870,114 $ 26,480,359 $ 24,186,763
============ ============ ============ ============ ============ ============ ============
</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> 63
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
As of December 31, 1998
<TABLE>
<CAPTION>
JANUS ASPEN MFS
SERIES GROWTH
WORLDWIDE WITH MFS
GROWTH INCOME SERIES RESEARCH SERIES
------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value............................. $ 55,686,157 $ 1,124,931 $ 895,549
LIABILITIES:
Liability to New York Life Insurance and Annuity
Corporation for mortality and expense risk charges...... 182,012 2,886 2,411
------------ ------------ ------------
Total equity.......................................... $ 55,504,145 $ 1,122,045 $ 893,138
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding:
3,490,540; 107,498; 82,391, respectively.............. $ 55,504,145 $ 1,122,045 $ 893,138
============ ============ ============
Variable accumulation
unit value............................................ $ 15.90 $ 10.44 $ 10.84
============ ============ ============
Identified Cost of Investment............................... $ 46,287,068 $ 998,514 $ 804,388
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY T. ROWE VAN ECK
EMERGING PRICE WORLDWIDE
MARKETS EQUITY HARD
EQUITY INCOME ASSETS
------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value............................. $ 3,798,308 $ 1,948,747 $ 250,494
LIABILITIES:
Liability to New York Life Insurance and Annuity
Corporation for mortality and expense risk charges...... 12,476 4,913 738
------------ ------------ ------------
Total equity.......................................... $ 3,785,832 $ 1,943,834 $ 249,756
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding:
514,654; 191,821; 32,384, respectively................ $ 3,785,832 $ 1,943,834 $ 249,756
============ ============ ============
Variable accumulation
unit value............................................ $ 7.36 $ 10.13 $ 7.71
============ ============ ============
Identified Cost of Investment............................... $ 5,460,096 $ 1,905,962 $ 293,622
============ ============ ============
</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> 64
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-I
NON-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-5
<PAGE> 65
STATEMENT OF OPERATIONS
For the year ended December 31, 1998
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income........................................... $ 324,425 $ 1,714,230 $ 485,023
Mortality and expense risk charges........................ (3,869,464) (436,532) (123,591)
------------ ------------ ------------
Net investment income (loss).......................... (3,545,039) 1,277,698 361,432
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments......................... 16,541,716 57,548,163 961,296
Cost of investments sold.................................. (7,805,765) (57,547,838) (926,209)
------------ ------------ ------------
Net realized gain on investments...................... 8,735,951 325 35,087
Realized gain distribution received....................... 3,371,213 -- 356,275
Change in unrealized appreciation (depreciation) on
investments............................................. 86,276,784 (169) (581,684)
------------ ------------ ------------
Net gain (loss) on investments........................ 98,383,948 156 (190,322)
------------ ------------ ------------
Increase (decrease) attributable to funds of New York Life
Insurance and Annuity Corporation
retained by Separate Account............................ (237,887) (3,899) (201)
------------ ------------ ------------
Net increase (decrease) in total equity resulting
from operations..................................... $ 94,601,022 $ 1,273,955 $ 170,909
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP CENTURY LARGE
INDEXED INCOME COMPANY
EQUITY & GROWTH(a) VALUE(a)
------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income........................................... $ 2,403,839 $ 15,926 $ 6,226
Mortality and expense risk charges........................ (2,614,613) (12,365) (4,515)
------------ ------------ ------------
Net investment income (loss).......................... (210,774) 3,561 1,711
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments......................... 8,236,421 305,824 201,001
Cost of investments sold.................................. (3,950,580) (325,030) (227,635)
------------ ------------ ------------
Net realized gain (loss) on investments............... 4,285,841 (19,206) (26,634)
Realized gain on distribution received.................... 2,444,387 -- --
Change in unrealized appreciation (depreciation) on
investments............................................. 40,442,553 344,707 103,666
------------ ------------ ------------
Net gain on investments............................... 47,172,781 325,501 77,032
------------ ------------ ------------
Decrease attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account............................ (134,923) (789) (205)
------------ ------------ ------------
Net increase in total equity resulting
from operations..................................... $ 46,827,084 $ 328,273 $ 78,538
============ ============ ============
</TABLE>
(a) For the period June 1, 1998 (Commencement of Operations) through December
31, 1998.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-6
<PAGE> 66
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-I
NON-QUALIFIED POLICIES
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,881,586 $ 13,518,774 $ 245,495 $ 3,974,748 $ 1,197,269 $ 1,923,043 $ 915,809
(501,624) (1,930,678) (127,551) (2,464,494) (1,040,139) (410,080) (1,377,639)
------------ ------------ ------------ ------------ ------------ ------------ ------------
1,379,962 11,588,096 117,944 1,510,254 157,130 1,512,963 (461,830)
------------ ------------ ------------ ------------ ------------ ------------ ------------
8,952,387 16,450,348 1,680,488 12,107,510 7,021,629 3,457,022 6,342,706
(8,614,388) (15,039,621) (1,555,307) (7,726,165) (5,141,681) (3,154,962) (4,554,338)
------------ ------------ ------------ ------------ ------------ ------------ ------------
337,999 1,410,727 125,181 4,381,345 1,879,948 302,060 1,788,368
-- 468,150 -- 5,777,860 6,154,175 943,954 9,310,203
1,007,178 (12,463,054) 1,618,829 32,154,091 (13,557,894) (469,348) 12,832,153
------------ ------------ ------------ ------------ ------------ ------------ ------------
1,345,177 (10,584,177) 1,744,010 42,313,296 (5,523,771) 776,666 23,930,724
------------ ------------ ------------ ------------ ------------ ------------ ------------
(6,712) (2,277) (7,263) (109,686) 7,773 (5,778) (66,653)
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 2,718,427 $ 1,001,642 $ 1,854,691 $ 43,713,864 $ (5,358,868) $ 2,283,851 $ 23,402,241
============ ============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET LORD ALGER
MANAGEMENT ABBETT AMERICAN CALVERT FIDELITY FIDELITY JANUS ASPEN
GROWTH DEVELOPING SMALL SOCIAL VIP II VIP SERIES
EQUITY(a) GROWTH(a) CAPITALIZATION BALANCED CONTRAFUND EQUITY-INCOME BALANCED
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 473 $ -- $ -- $ 80,071 $ 175,584 $ 261,496 $ 747,034
(2,290) (2,667) (120,355) (39,031) (445,434) (324,548) (230,733)
------------ ------------ ------------ ------------ ------------ ------------ ------------
(1,817) (2,667) (120,355) 41,040 (269,850) (63,052) 516,301
------------ ------------ ------------ ------------ ------------ ------------ ------------
29,296 66,986 1,915,190 988,840 2,793,769 5,089,086 1,594,832
(36,091) (81,208) (1,768,591) (834,092) (2,220,988) (4,517,838) (1,270,410)
------------ ------------ ------------ ------------ ------------ ------------ ------------
(6,795) (14,222) 146,599 154,748 572,781 571,248 324,422
-- -- 1,155,283 179,572 1,291,799 930,617 114,992
98,457 121,873 234,881 43,442 7,418,551 328,140 4,609,053
------------ ------------ ------------ ------------ ------------ ------------ ------------
91,662 107,651 1,536,763 377,762 9,283,131 1,830,005 5,048,467
------------ ------------ ------------ ------------ ------------ ------------ ------------
(215) (247) (5,248) (1,065) (24,278) (7,470) (14,714)
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 89,630 $ 104,737 $ 1,411,160 $ 417,737 $ 8,989,003 $ 1,759,483 $ 5,550,054
============ ============ ============ ============ ============ ============ ============
</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> 67
STATEMENT OF OPERATIONS (CONTINUED)
For the year ended December 31, 1998
<TABLE>
<CAPTION>
JANUS ASPEN MFS
SERIES GROWTH
WORLDWIDE WITH MFS
GROWTH INCOME SERIES(a) RESEARCH SERIES(a)
----------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income.......................................... $ 1,231,637 $ -- $ --
Mortality and expense risk charges....................... (576,777) (3,421) (3,082)
----------- ----------- -----------
Net investment income (loss)......................... 654,860 (3,421) (3,082)
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments........................ 3,972,454 162,611 28,748
Cost of investments sold................................. (3,050,434) (175,203) (30,206)
----------- ----------- -----------
Net realized gain (loss) on investments.............. 922,020 (12,592) (1,458)
Realized gain distribution received...................... 493,932 -- --
Change in unrealized appreciation (depreciation) on
investments............................................ 7,612,980 126,417 91,161
----------- ----------- -----------
Net gain on investments.............................. 9,028,932 113,825 89,703
----------- ----------- -----------
Decrease attributable to funds of New York Life Insurance
and Annuity Corporation
retained by Separate Account........................... (31,204) (212) (213)
----------- ----------- -----------
Net increase in total equity resulting
from operations.................................... $ 9,652,588 $ 110,192 $ 86,408
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY T. ROWE VAN ECK
EMERGING PRICE WORLDWIDE
MARKETS EQUITY HARD
EQUITY INCOME(a) ASSETS(a)
----------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income.......................................... $ 20,393 $ 15,359 $ --
Mortality and expense risk charges....................... (54,059) (6,814) (1,419)
----------- ----------- -----------
Net investment income (loss)......................... (33,666) 8,545 (1,419)
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments........................ 1,326,871 302,399 23,426
Cost of investments sold................................. (1,725,059) (326,226) (26,968)
----------- ----------- -----------
Net realized loss on investments..................... (398,188) (23,827) (3,542)
Realized gain distribution received...................... -- 49,949 --
Change in unrealized appreciation (depreciation) on
investments............................................ (862,048) 42,785 (43,128)
----------- ----------- -----------
Net gain (loss) on investments....................... (1,260,236) 68,907 (46,670)
----------- ----------- -----------
Increase (decrease) attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account........................... 2,159 (188) 41
----------- ----------- -----------
Net increase (decrease) in total equity resulting
from operations.................................... $(1,291,743) $ 77,264 $ (48,048)
=========== =========== ===========
</TABLE>
(a) For the period June 1, 1998 (Commencement of Operations) through December
31, 1998.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-8
<PAGE> 68
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-I
NON-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-9
<PAGE> 69
STATEMENT OF CHANGES IN TOTAL EQUITY
For the years ended December 31, 1998
and December 31, 1997
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL APPRECIATION CASH MANAGEMENT
----------------------------- -----------------------------
1998 1997 1998 1997
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment income (loss)........ $ (3,545,039) $ (2,935,142) $ 1,277,698 $ 1,063,029
Net realized gain (loss) on
investments....................... 8,735,951 4,833,604 325 212
Realized gain distribution
received.......................... 3,371,213 3,437,276 -- --
Change in unrealized appreciation
(depreciation) on investments..... 86,276,784 38,112,703 (169) 110
Decrease attributable to funds of
New York Life Insurance and
Annuity Corporation retained by
Separate Account.................. (237,887) (83,048) (3,899) (1,863)
------------- ------------- ------------- -------------
Net increase in total equity
resulting
from operations................. 94,601,022 43,365,393 1,273,955 1,061,488
------------- ------------- ------------- -------------
Contributions and withdrawals:
Policyowners' premium payments...... 14,308,810 14,108,843 190,077,519 241,494,473
Policyowners' surrenders............ (10,101,026) (5,441,134) (1,465,659) (1,240,425)
Policyowners' annuity and death
benefits.......................... (1,934,728) (1,439,678) (197,294) (348,829)
Net transfers from (to) Fixed
Account........................... (2,416,250) (315,375) (21,324,871) (29,451,497)
Transfers between Investment
Divisions......................... 15,218,083 12,641,649 (157,147,988) (208,989,293)
------------- ------------- ------------- -------------
Net contributions and
withdrawals..................... 15,074,889 19,554,305 9,941,707 1,464,429
------------- ------------- ------------- -------------
Increase (decrease) in total
equity........................ 109,675,911 62,919,698 11,215,662 2,525,917
TOTAL EQUITY:
Beginning of year................... 255,239,301 192,319,603 29,920,504 27,394,587
------------- ------------- ------------- -------------
End of year......................... $ 364,915,212 $ 255,239,301 $ 41,136,166 $ 29,920,504
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
INTERNATIONAL EQUITY TOTAL RETURN
----------------------------- -----------------------------
1998 1997 1998 1997
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)........ $ 117,944 $ 602,810 $ 1,510,254 $ 1,582,207
Net realized gain on investments.... 125,181 108,282 4,381,345 3,022,576
Realized gain distribution
received.......................... -- -- 5,777,860 3,083,183
Change in unrealized appreciation
(depreciation) on investments..... 1,618,829 (441,057) 32,154,091 15,736,284
Increase (decrease) attributable to
funds of New York Life Insurance
and Annuity Corporation retained
by Separate Account............... (7,263) 338 (109,686) (48,358)
------------- ------------- ------------- -------------
Net increase (decrease) in total
equity
resulting from operations....... 1,854,691 270,373 43,713,864 23,375,892
------------- ------------- ------------- -------------
Contributions and withdrawals:
Policyowners' premium payments...... 429,917 798,731 7,326,298 7,050,067
Policyowners' surrenders............ (250,032) (179,972) (7,388,904) (4,323,373)
Policyowners' annuity and death
benefits.......................... (34,114) (97,579) (2,061,578) (1,491,783)
Net transfers from (to) Fixed
Account........................... (14,790) 17,008 (1,518,142) (1,817,519)
Transfers between Investment
Divisions......................... (565,661) 409,137 7,268,263 6,374,145
------------- ------------- ------------- -------------
Net contributions and
withdrawals..................... (434,680) 947,325 3,625,937 5,791,537
------------- ------------- ------------- -------------
Increase in total equity........ 1,420,011 1,217,698 47,339,801 29,167,429
TOTAL EQUITY:
Beginning of year................... 8,953,608 7,735,910 170,602,087 141,434,658
------------- ------------- ------------- -------------
End of year......................... $ 10,373,619 $ 8,953,608 $ 217,941,888 $ 170,602,087
============= ============= ============= =============
</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> 70
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-I
NON-QUALIFIED POLICIES
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD
CONVERTIBLE GOVERNMENT CORPORATE BOND
----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 361,432 $ 210,130 $ 1,379,962 $ 1,780,410 $ 11,588,096 $ 7,248,665
35,087 59,005 337,999 (541,563) 1,410,727 527,045
356,275 387,948 -- -- 468,150 5,363,338
(581,684) (25,065) 1,007,178 1,410,360 (12,463,054) (2,322,236)
(201) (1,962) (6,712) (6,627) (2,277) (31,582)
------------- ------------- ------------- ------------- ------------- -------------
170,909 630,056 2,718,427 2,642,580 1,001,642 10,785,230
------------- ------------- ------------- ------------- ------------- -------------
1,055,986 1,000,635 2,349,062 1,300,452 11,934,627 12,524,157
(225,525) (92,401) (1,917,641) (1,196,410) (6,086,326) (2,556,656)
(35,955) (34,724) (793,502) (689,466) (2,727,399) (869,008)
(135,017) 1,952 (180,147) (612,836) (1,696,578) 228,545
1,962,726 4,375,014 7,853,498 (3,880,014) 11,266,420 45,401,706
------------- ------------- ------------- ------------- ------------- -------------
2,622,215 5,250,476 7,311,270 (5,078,274) 12,690,744 54,728,744
------------- ------------- ------------- ------------- ------------- -------------
2,793,124 5,880,532 10,029,697 (2,435,694) 13,692,386 65,513,974
7,471,933 1,591,401 34,938,886 37,374,580 134,257,504 68,743,530
------------- ------------- ------------- ------------- ------------- -------------
$ 10,265,057 $ 7,471,933 $ 44,968,583 $ 34,938,886 $ 147,949,890 $ 134,257,504
============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
VALUE BOND GROWTH EQUITY
----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 157,130 $ 227,372 $ 1,512,963 $ 1,380,573 $ (461,830) $ (289,117)
1,879,948 262,901 302,060 87,081 1,788,368 256,102
6,154,175 3,104,376 943,954 75,997 9,310,203 11,217,552
(13,557,894) 6,547,148 (469,348) 449,976 12,832,153 3,863,793
7,773 (20,257) (5,778) (5,093) (66,653) (33,051)
------------- ------------- ------------- ------------- ------------- -------------
(5,358,868) 10,121,540 2,283,851 1,988,534 23,402,241 15,015,279
------------- ------------- ------------- ------------- ------------- -------------
5,662,445 5,621,886 2,402,069 1,281,523 6,845,359 5,888,507
(2,885,964) (1,035,379) (1,163,114) (811,171) (3,214,940) (1,372,347)
(612,942) (377,102) (285,108) (345,774) (521,389) (198,025)
(401,500) 147,179 (24,240) (134,442) (683,579) (126,113)
6,778,618 22,805,397 6,367,770 1,981,470 13,094,144 17,823,214
------------- ------------- ------------- ------------- ------------- -------------
8,540,657 27,161,981 7,297,377 1,971,606 15,519,595 22,015,236
------------- ------------- ------------- ------------- ------------- -------------
3,181,789 37,283,521 9,581,228 3,960,140 38,921,836 37,030,515
72,558,153 35,274,632 27,218,187 23,258,047 86,621,420 49,590,905
------------- ------------- ------------- ------------- ------------- -------------
$ 75,739,942 $ 72,558,153 $ 36,799,415 $ 27,218,187 $ 125,543,256 $ 86,621,420
============= ============= ============= ============= ============= =============
</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> 71
STATEMENT OF CHANGES IN TOTAL EQUITY (CONTINUED)
For the years ended December 31, 1998
and December 31, 1997
<TABLE>
<CAPTION>
AMERICAN
CENTURY
MAINSTAY VP INCOME
INDEXED EQUITY & GROWTH
------------------------------------------ -------------
1998 1997 1998(a)
-----------------------------------------------------------------
<S> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)....... $ (210,774) $ 366,728 $ 3,561
Net realized gain (loss) on
investments...................... 4,285,841 744,740 (19,206)
Realized gain distribution
received......................... 2,444,387 3,565,021 --
Change in unrealized appreciation
(depreciation) on investments.... 40,442,553 25,776,218 344,707
Decrease attributable to funds of
New York Life Insurance and
Annuity Corporation retained by
Separate Account................. (134,923) (54,381) (789)
------------- ------------- -------------
Net increase in total equity
resulting from operations...... 46,827,084 30,398,326 328,273
------------- ------------- -------------
Contributions and withdrawals:
Policyowners' premium payments..... 14,794,311 9,886,766 361,055
Policyowners' surrenders........... (6,254,335) (2,667,000) (7,148)
Policyowners' annuity and death
benefits......................... (1,202,034) (872,882) --
Net transfers from (to) Fixed
Account.......................... (1,499,025) (229,219) (1,476)
Transfers between Investment
Divisions........................ 37,471,617 33,975,643 2,668,998
------------- ------------- -------------
Net contributions and
withdrawals.................... 43,310,534 40,093,308 3,021,429
------------- ------------- -------------
Increase in total equity....... 90,137,618 70,491,634 3,349,702
TOTAL EQUITY:
Beginning of year.................. 153,512,081 83,020,447 --
------------- ------------- -------------
End of year........................ $ 243,649,699 $ 153,512,081 $ 3,349,702
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Calvert Fidelity
Social VIP II
Balanced Contrafund
----------------------------- -----------------------------
1998 1997 1998 1997
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)....... $ 41,040 $ 32,008 $ (269,850) $ (130,754)
Net realized gain on investments... 154,748 10,868 572,781 30,737
Realized gain distribution
received......................... 179,572 112,234 1,291,799 84,966
Change in unrealized appreciation
(depreciation) on investments.... 43,442 90,491 7,418,551 2,355,000
Decrease attributable to funds of
New York Life Insurance and
Annuity Corporation retained by
Separate Account................. (1,065) (526) (24,278) (5,233)
------------- ------------- ------------- -------------
Net increase in total equity
resulting from operations...... 417,737 245,075 8,989,003 2,334,716
------------- ------------- ------------- -------------
Contributions and withdrawals:
Policyowners' premium payments..... 278,946 108,024 3,937,290 2,951,510
Policyowners' surrenders........... (110,345) (29,649) (683,929) (103,333)
Policyowners' annuity and death
benefits......................... (38,404) (2,729) (114,419) (31,006)
Net transfers from (to) Fixed
Account.......................... (2,726) (4,077) 13,387 151,968
Transfers between Investment
Divisions........................ 617,981 1,146,500 10,473,626 16,067,377
------------- ------------- ------------- -------------
Net contributions and
withdrawals.................... 745,452 1,218,069 13,625,955 19,036,516
------------- ------------- ------------- -------------
Increase in total equity....... 1,163,189 1,463,144 22,614,958 21,371,232
TOTAL EQUITY:
Beginning of year.................. 2,354,056 890,912 23,912,061 2,540,829
------------- ------------- ------------- -------------
End of year........................ $ 3,517,245 $ 2,354,056 $ 46,527,019 $ 23,912,061
============= ============= ============= =============
</TABLE>
(a) For the period June 1, 1998 (Commencement of Operations) through December
31, 1998.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-12
<PAGE> 72
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-I
NON-QUALIFIED POLICIES
<TABLE>
<CAPTION>
Dreyfus Eagle Asset Lord
Large Management Abbett Alger American
Company Growth Developing Small
Value Equity Growth Capitalization
------------- ------------- ------------- -----------------------------
1998(a) 1998(a) 1998(a) 1998 1997
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1,711 $ (1,817) $ (2,667) $ (120,355) $ (54,706)
(26,634) (6,795) (14,222) 146,599 2,903
-- -- -- 1,155,283 118,813
103,666 98,457 121,873 234,881 359,486
(205) (215) (247) (5,248) (1,129)
------------- ------------- ------------- ------------- -------------
78,538 89,630 104,737 1,411,160 425,367
------------- ------------- ------------- ------------- -------------
160,256 148,460 108,082 915,479 1,293,929
(3,650) (2,962) (3,324) (225,737) (39,761)
-- -- (1,641) (202,214) (12,225)
14,898 (1,687) (676) 601 26,191
1,049,837 529,692 666,051 2,487,056 4,664,076
------------- ------------- ------------- ------------- -------------
1,221,341 673,503 768,492 2,975,185 5,932,210
------------- ------------- ------------- ------------- -------------
1,299,879 763,133 873,229 4,386,345 6,357,577
-- -- -- 7,591,135 1,233,558
------------- ------------- ------------- ------------- -------------
$ 1,299,879 $ 763,133 $ 873,229 $ 11,977,480 $ 7,591,135
============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
FIDELITY JANUS ASPEN SERIES
VIP SERIES WORLDWIDE
EQUITY-INCOME BALANCED GROWTH
----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ (63,052) $ (57,783) $ 516,301 $ 112,488 $ 654,860 $ (24,920)
571,248 11,242 324,422 41,014 922,020 46,442
930,617 119,190 114,992 5,979 493,932 85,328
328,140 1,149,335 4,609,053 650,923 7,612,980 1,754,303
(7,470) (2,151) (14,714) (1,929) (31,204) (4,941)
------------- ------------- ------------- ------------- ------------- -------------
1,759,483 1,219,833 5,550,054 808,475 9,652,588 1,856,212
------------- ------------- ------------- ------------- ------------- -------------
3,720,104 2,305,722 2,532,919 1,423,207 5,165,089 4,205,570
(647,986) (84,983) (397,791) (54,290) (936,300) (207,344)
(56,306) (22,573) (104,125) -- (207,652) (79,209)
(59,163) 74,509 (62,940) 53,541 (21,380) 303,760
7,969,525 10,880,655 12,038,398 6,614,826 8,958,241 24,161,558
------------- ------------- ------------- ------------- ------------- -------------
10,926,174 13,153,330 14,006,461 8,037,284 12,957,998 28,384,335
------------- ------------- ------------- ------------- ------------- -------------
12,685,657 14,373,163 19,556,515 8,845,759 22,610,586 30,240,547
15,182,453 809,290 9,802,891 957,132 32,893,559 2,653,012
------------- ------------- ------------- ------------- ------------- -------------
$ 27,868,110 $ 15,182,453 $ 29,359,406 $ 9,802,891 $ 55,504,145 $ 32,893,559
============= ============= ============= ============= ============= =============
</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> 73
STATEMENT OF CHANGES IN TOTAL EQUITY (CONTINUED)
For the years ended December 31, 1998
and December 31, 1997
<TABLE>
<CAPTION>
MFS
GROWTH
WITH MFS
INCOME SERIES RESEARCH SERIES
------------- ---------------
1998(a) 1998(a)
-------------------------------
<S> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment loss................ $ (3,421) $ (3,082)
Net realized loss on investments... (12,592) (1,458)
Change in unrealized appreciation
(depreciation) on investments.... 126,417 91,161
Decrease attributable to funds of
New York Life Insurance and
Annuity Corporation retained by
Separate Account................. (212) (213)
------------- -------------
Net increase in total equity
resulting from operations...... 110,192 86,408
------------- -------------
Contributions and withdrawals:
Policyowners' premium payments..... 190,252 187,441
Policyowners' surrenders........... (5,324) (2,323)
Net transfers from Fixed Account... 3,682 6,125
Transfers between Investment
Divisions........................ 823,243 615,487
------------- -------------
Net contributions and
withdrawals.................... 1,011,853 806,730
------------- -------------
Increase in total equity....... 1,122,045 893,138
TOTAL EQUITY:
Beginning of year.................. -- --
------------- -------------
End of year........................ $ 1,122,045 $ 893,138
============= =============
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY T. ROWE VAN ECK
EMERGING PRICE WORLDWIDE
MARKETS EQUITY HARD
EQUITY INCOME ASSETS
----------------------------- ------------- -------------
1998 1997 1998(a) 1998(a)
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
TOTAL EQUITY:
Operations:
Net investment income (loss)....... $ (33,666) $ (12,295) $ 8,545 $ (1,419)
Net realized gain (loss) on
investments...................... (398,188) 50,143 (23,827) (3,542)
Realized gain distribution
received......................... -- 132,571 49,949 --
Change in unrealized appreciation
(depreciation) on investments.... (862,048) (805,601) 42,785 (43,128)
Increase (decrease) attributable to
funds of New York Life Insurance
and Annuity Corporation retained
by
Separate Account................. 2,159 670 (188) 41
------------- ------------- ------------- -------------
Net increase (decrease) in total
equity resulting from
operations..................... (1,291,743) (634,512) 77,264 (48,048)
------------- ------------- ------------- -------------
Contributions and withdrawals:
Policyowners' premium payments..... 677,673 687,149 251,672 14,509
Policyowners' surrenders........... (116,629) (35,384) (6,487) (2,198)
Policyowners' annuity and death
benefits......................... (71,596) (5,001) -- --
Net transfers from Fixed Account... 3,032 8,356 102,785 --
Transfers between Investment
Divisions........................ 142,722 3,646,978 1,518,600 285,493
------------- ------------- ------------- -------------
Net contributions and
withdrawals.................... 635,202 4,302,098 1,866,570 297,804
------------- ------------- ------------- -------------
Increase (decrease) in total
equity....................... (656,541) 3,667,586 1,943,834 249,756
TOTAL EQUITY:
Beginning of year.................. 4,442,373 774,787 -- --
------------- ------------- ------------- -------------
End of year........................ $ 3,785,832 $ 4,442,373 $ 1,943,834 $ 249,756
============= ============= ============= =============
</TABLE>
(a) For the period June 1, 1998 (Commencement of Operations) through December
31, 1998.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-14
<PAGE> 74
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-I
NON-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-15
<PAGE> 75
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1998
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value............................. $337,729,392 $ 38,839,839 $ 7,401,193
LIABILITIES:
Liability to New York Life Insurance and Annuity
Corporation for mortality and expense risk charges...... 1,110,149 120,310 24,218
------------ ------------ ------------
Total equity.......................................... $336,619,243 $ 38,719,529 $ 7,376,975
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding:
11,468,561; 32,015,116; 609,978; 2,233,031; 6,384,170;
532,405; 8,406,049; 3,948,951;
2,189,519; 4,299,888, respectively.................... $336,619,243 $ 38,719,529 $ 7,376,975
============ ============ ============
Variable accumulation
unit value............................................ $ 29.35 $ 1.21 $ 12.09
============ ============ ============
Identified Cost of Investment............................... $183,325,677 $ 38,839,924 $ 7,832,650
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP CENTURY LARGE
INDEXED INCOME COMPANY
EQUITY & GROWTH VALUE
------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value............................. $219,028,070 $ 2,162,872 $ 961,500
LIABILITIES:
Liability to New York Life Insurance and Annuity
Corporation for mortality and expense risk charges...... 735,153 5,634 2,587
------------ ------------ ------------
Total equity.......................................... $218,292,917 $ 2,157,238 $ 958,913
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding:
7,538,776; 194,327; 90,651; 101,024; 59,018; 787,321;
222,986; 2,784,500; 1,653,175; 1,640,975,
respectively.......................................... $218,292,917 $ 2,157,238 $ 958,913
============ ============ ============
Variable accumulation
unit value............................................ $ 28.96 $ 11.10 $ 10.58
============ ============ ============
Identified Cost of Investment............................... $147,934,269 $ 1,938,492 $ 895,219
============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-16
<PAGE> 76
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-II
TAX-QUALIFIED POLICIES
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 30,639,150 $ 91,250,792 $ 7,744,524 $185,759,384 $ 63,786,755 $ 28,632,147 $108,412,232
99,987 290,380 27,031 606,640 218,264 91,187 355,370
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 30,539,163 $ 90,960,412 $ 7,717,493 $185,152,744 $ 63,568,491 $ 28,540,960 $108,056,862
============ ============ ============ ============ ============ ============ ============
$ 30,539,163 $ 90,960,412 $ 7,717,493 $185,152,744 $ 63,568,491 $ 28,540,960 $108,056,862
============ ============ ============ ============ ============ ============ ============
$ 13.68 $ 14.25 $ 14.50 $ 22.03 $ 16.10 $ 13.04 $ 25.13
============ ============ ============ ============ ============ ============ ============
$ 30,012,734 $ 99,032,738 $ 6,847,400 $125,272,248 $ 66,842,917 $ 29,038,062 $ 92,382,709
============ ============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET LORD ALGER
MANAGEMENT ABBETT AMERICAN CALVERT FIDELITY FIDELITY JANUS ASPEN
GROWTH DEVELOPING SMALL SOCIAL VIP II VIP SERIES
EQUITY GROWTH CAPITALIZATION BALANCED CONTRAFUND EQUITY-INCOME BALANCED
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,212,286 $ 596,057 $ 9,470,770 $ 3,922,203 $ 45,587,932 $ 24,207,379 $ 26,726,623
3,474 1,647 30,332 12,263 142,719 80,189 79,686
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 1,208,812 $ 594,410 $ 9,440,438 $ 3,909,940 $ 45,445,213 $ 24,127,190 $ 26,646,937
============ ============ ============ ============ ============ ============ ============
$ 1,208,812 $ 594,410 $ 9,440,438 $ 3,909,940 $ 45,445,213 $ 24,127,190 $ 26,646,937
============ ============ ============ ============ ============ ============ ============
$ 11.97 $ 10.07 $ 11.99 $ 17.53 $ 16.32 $ 14.59 $ 16.24
============ ============ ============ ============ ============ ============ ============
$ 1,043,240 $ 514,247 $ 9,045,645 $ 3,764,451 $ 36,366,641 $ 22,457,663 $ 22,042,492
============ ============ ============ ============ ============ ============ ============
</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> 77
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
As of December 31, 1998
<TABLE>
<CAPTION>
JANUS ASPEN MFS
SERIES GROWTH
WORLDWIDE WITH MFS
GROWTH INCOME SERIES RESEARCH SERIES
-------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value......................... $ 52,369,115 $ 800,195 $ 747,428
LIABILITIES:
Liability to New York Life Insurance and Annuity
Corporation for mortality and expense risk
charges............................................. 168,961 1,981 1,773
------------ ------------ ------------
Total equity...................................... $ 52,200,154 $ 798,214 $ 745,655
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding:
3,276,355; 74,422; 69,683, respectively........... $ 52,200,154 $ 798,214 $ 745,655
============ ============ ============
Variable accumulation
unit value........................................ $ 15.93 $ 10.73 $ 10.70
============ ============ ============
Identified Cost of Investment........................... $ 43,820,129 $ 718,679 $ 677,951
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY T. ROWE VAN ECK
EMERGING PRICE WORLDWIDE
MARKETS EQUITY HARD
EQUITY INCOME ASSETS
------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value......................... $ 3,123,310 $ 1,722,893 $ 53,007
LIABILITIES:
Liability to New York Life Insurance and Annuity
Corporation for mortality and expense risk
charges............................................. 10,387 4,915 149
------------ ------------ ------------
Total equity...................................... $ 3,112,923 $ 1,717,978 $ 52,858
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding:
420,018; 168,232; 6,748, respectively............. $ 3,112,923 $ 1,717,978 $ 52,858
============ ============ ============
Variable accumulation
unit value........................................ $ 7.41 $ 10.21 $ 7.83
============ ============ ============
Identified Cost of Investment........................... $ 4,461,319 $ 1,664,604 $ 53,328
============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-18
<PAGE> 78
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-II
TAX-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-19
<PAGE> 79
STATEMENT OF OPERATIONS
For the year ended December 31, 1998
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income........................................... $ 299,015 $ 1,692,569 $ 348,200
Mortality and expense risk charges........................ (3,482,639) (430,380) (89,056)
------------ ------------ ------------
Net investment income (loss).......................... (3,183,624) 1,262,189 259,144
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments......................... 7,050,113 56,470,594 790,111
Cost of investments sold.................................. (3,258,315) (56,470,276) (763,198)
------------ ------------ ------------
Net realized gain on investments...................... 3,791,798 318 26,913
Realized gain distribution received....................... 3,109,708 -- 251,585
Change in unrealized appreciation (depreciation) on
investments............................................. 82,782,048 (142) (418,915)
------------ ------------ ------------
Net gain (loss) on investments........................ 89,683,554 176 (140,417)
------------ ------------ ------------
Increase (decrease) attributable to funds of New York Life
Insurance and Annuity Corporation
retained by Separate Account............................ (215,731) (3,927) (165)
------------ ------------ ------------
Net increase (decrease) in total equity resulting
from operations..................................... $ 86,284,199 $ 1,258,438 $ 118,562
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP CENTURY LARGE
INDEXED INCOME COMPANY
EQUITY & GROWTH(a) VALUE(a)
------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income........................................... $ 2,154,472 $ 10,135 $ 4,604
Mortality and expense risk charges........................ (2,238,331) (7,082) (3,549)
----------- ----------- -----------
Net investment income (loss).......................... (83,859) 3,053 1,055
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments......................... 3,380,571 89,073 213,305
Cost of investments sold.................................. (1,615,459) (93,006) (217,489)
----------- ----------- -----------
Net realized gain (loss) on investments............... 1,765,112 (3,933) (4,184)
Realized gain distribution received....................... 2,091,944 -- --
Change in unrealized appreciation (depreciation) on
investments............................................. 37,074,539 224,380 66,281
----------- ----------- -----------
Net gain on investments............................... 40,931,595 220,447 62,097
----------- ----------- -----------
Decrease attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account............................ (116,185) (498) (169)
----------- ----------- -----------
Net increase in total equity resulting
from operations..................................... $40,731,551 $ 223,002 $ 62,983
=========== =========== ===========
</TABLE>
(a) For the period June 1, 1998 (Commencement of Operations) through December
31, 1998.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-20
<PAGE> 80
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-II
TAX-QUALIFIED POLICIES
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,280,788 $ 8,288,836 $ 183,370 $ 3,379,980 $ 1,004,418 $ 1,484,821 $ 786,889
(347,912) (1,129,986) (95,419) (2,060,737) (827,542) (315,550) (1,139,045)
------------ ------------ ------------ ------------ ------------ ------------ ------------
932,876 7,158,850 87,951 1,319,243 176,876 1,169,271 (352,156)
------------ ------------ ------------ ------------ ------------ ------------ ------------
5,463,577 6,119,355 1,725,296 6,267,554 3,472,164 2,518,425 2,428,037
(5,236,046) (5,589,152) (1,563,226) (3,927,210) (2,524,325) (2,276,105) (1,698,178)
------------ ------------ ------------ ------------ ------------ ------------ ------------
227,531 530,203 162,070 2,340,344 947,839 242,320 729,859
-- 272,310 -- 4,901,826 5,122,069 728,847 7,999,586
749,621 (7,444,766) 1,170,103 28,402,927 (10,645,041) (364,944) 11,398,057
------------ ------------ ------------ ------------ ------------ ------------ ------------
977,152 (6,642,253) 1,332,173 35,645,097 (4,575,133) 606,223 20,127,502
------------ ------------ ------------ ------------ ------------ ------------ ------------
(4,689) (806) (5,386) (92,193) 6,225 (4,431) (55,514)
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 1,905,339 $ 515,791 $ 1,414,738 $ 36,872,147 $ (4,392,032) $ 1,771,063 $ 19,719,832
============ ============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET LORD ALGER
MANAGEMENT ABBETT AMERICAN CALVERT FIDELITY FIDELITY JANUS ASPEN
GROWTH DEVELOPING SMALL SOCIAL VIP II VIP SERIES
EQUITY(a) GROWTH(a) CAPITALIZATION BALANCED CONTRAFUND EQUITY-INCOME BALANCED
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 775 $ -- $ -- $ 87,220 $ 149,720 $ 171,051 $ 662,112
(4,210) (2,015) (97,051) (41,994) (410,314) (244,093) (199,404)
------------ ------------ ------------ ------------ ------------ ------------ ------------
(3,435) (2,015) (97,051) 45,226 (260,594) (73,042) 462,708
------------ ------------ ------------ ------------ ------------ ------------ ------------
117,169 30,934 999,506 767,377 683,000 1,108,575 682,710
(117,456) (39,509) (1,031,550) (672,009) (557,617) (984,103) (548,080)
------------ ------------ ------------ ------------ ------------ ------------ ------------
(287) (8,575) (32,044) 95,368 125,383 124,472 134,630
-- -- 1,006,278 195,605 1,101,515 608,742 100,170
169,046 81,810 110,639 93,747 7,416,548 820,662 4,220,920
------------ ------------ ------------ ------------ ------------ ------------ ------------
168,759 73,235 1,084,873 384,720 8,643,446 1,553,876 4,455,720
------------ ------------ ------------ ------------ ------------ ------------ ------------
(381) (201) (3,922) (1,100) (22,413) (5,849) (12,712)
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 164,943 $ 71,019 $ 983,900 $ 428,846 $ 8,360,439 $ 1,474,985 $ 4,905,716
============ ============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-21
<PAGE> 81
STATEMENT OF OPERATIONS (CONTINUED)
For the year ended December 31, 1998
<TABLE>
<CAPTION>
JANUS ASPEN MFS
SERIES GROWTH
WORLDWIDE WITH MFS
GROWTH INCOME SERIES(a) RESEARCH SERIES(a)
----------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income.......................................... $ 1,113,054 $ -- $ --
Mortality and expense risk charges....................... (518,752) (2,313) (2,180)
----------- ---------- ----------
Net investment income (loss)......................... 594,302 (2,313) (2,180)
----------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments........................ 1,805,340 126,594 37,421
Cost of investments sold................................. (1,359,451) (138,052) (42,030)
----------- ---------- ----------
Net realized gain (loss) on investments.............. 445,889 (11,458) (4,609)
Realized gain distribution received...................... 445,238 -- --
Change in unrealized appreciation (depreciation) on
investments............................................ 7,211,850 81,516 69,477
----------- ---------- ----------
Net gain on investments.............................. 8,102,977 70,058 64,868
----------- ---------- ----------
Decrease attributable to funds of New York Life Insurance
and Annuity Corporation
retained by Separate Account........................... (27,437) (142) (146)
----------- ---------- ----------
Net increase in total equity resulting
from operations.................................... $ 8,669,842 $ 67,603 $ 62,542
=========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY T. ROWE VAN ECK
EMERGING PRICE WORLDWIDE
MARKETS EQUITY HARD
EQUITY INCOME(a) ASSETS(a)
---------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income........................................... $ 17,116 $ 14,841 $ --
Mortality and expense risk charges........................ (44,337) (6,423) (266)
----------- ---------- ----------
Net investment income (loss).......................... (27,221) 8,418 (266)
----------- ---------- ----------
REALIZED AND UNREALIZED LOSS:
Proceeds from sale of investments......................... 1,255,583 124,198 161,829
Cost of investments sold.................................. (1,678,569) (134,752) (164,763)
----------- ---------- ----------
Net realized loss on investments...................... (422,986) (10,554) (2,934)
Realized gain distribution received....................... -- 44,707 --
Change in unrealized appreciation (depreciation) on
investments............................................. (607,781) 58,289 (321)
----------- ---------- ----------
Net gain (loss) on investments........................ (1,030,767) 92,442 (3,255)
----------- ---------- ----------
Increase (decrease) attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account............................ 1,712 (214) (1)
----------- ---------- ----------
Net increase (decrease) in total equity resulting
from operations..................................... $(1,056,276) $ 100,646 $ (3,522)
=========== ========== ==========
</TABLE>
(a) For the period June 1, 1998 (Commencement of Operations) through December
31, 1998.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-22
<PAGE> 82
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-II
TAX-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-23
<PAGE> 83
STATEMENT OF CHANGES IN TOTAL EQUITY
For the years ended December 31, 1998
and December 31, 1997
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL APPRECIATION CASH MANAGEMENT
----------------------------------- -----------------------------------
1998 1997 1998 1997
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment income (loss)........ $ (3,183,624) $ (2,475,436) $ 1,262,189 $ 1,031,647
Net realized gain (loss) on
investments....................... 3,791,798 2,543,718 318 183
Realized gain distribution
received.......................... 3,109,708 2,984,667 -- --
Change in unrealized appreciation
(depreciation) on investments..... 82,782,048 33,808,820 (142) 125
Decrease attributable to funds of
New York Life Insurance and
Annuity Corporation retained by
Separate Account.................. (215,731) (69,865) (3,927) (1,788)
------------- ------------- ------------- -------------
Net increase in total equity
resulting from operations....... 86,284,199 36,791,904 1,258,438 1,030,167
------------- ------------- ------------- -------------
Contributions and withdrawals:
Policyowners' premium payments...... 18,241,304 17,283,267 211,670,331 221,468,721
Policyowners' surrenders............ (11,418,251) (7,420,904) (1,520,019) (2,149,399)
Policyowners' annuity and death
benefits.......................... (562,778) (496,971) (43,403) (12,026)
Net transfers from (to) Fixed
Account........................... (1,475,351) (634,517) (18,195,522) (21,745,282)
Transfers between Investment
Divisions......................... 23,576,033 23,244,461 (186,549,218) (189,074,178)
------------- ------------- ------------- -------------
Net contributions and
withdrawals..................... 28,360,957 31,975,336 5,362,169 8,487,836
------------- ------------- ------------- -------------
Increase (decrease) in total
equity........................ 114,645,156 68,767,240 6,620,607 9,518,003
TOTAL EQUITY:
Beginning of year................... 221,974,087 153,206,847 32,098,922 22,580,919
------------- ------------- ------------- -------------
End of year......................... $ 336,619,243 $ 221,974,087 $ 38,719,529 $ 32,098,922
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
INTERNATIONAL EQUITY TOTAL RETURN
----------------------------------- -----------------------------------
1998 1997 1998 1997
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)........ $ 87,951 $ 444,439 $ 1,319,243 $ 1,323,092
Net realized gain on investments.... 162,070 85,794 2,340,344 1,263,111
Realized gain distribution
received.......................... -- -- 4,901,826 2,507,716
Change in unrealized appreciation
(depreciation) on investments..... 1,170,103 (318,086) 28,402,927 13,467,450
Increase (decrease) attributable to
funds of New York Life Insurance
and Annuity Corporation retained
by Separate Account............... (5,386) 183 (92,193) (38,300)
------------- ------------- ------------- -------------
Net increase (decrease) in total
equity resulting from
operations...................... 1,414,738 212,330 36,872,147 18,523,069
------------- ------------- ------------- -------------
Contributions and withdrawals:
Policyowners' premium payments...... 537,865 756,173 9,571,382 9,496,059
Policyowners' surrenders............ (399,366) (235,473) (6,831,151) (4,771,168)
Policyowners' annuity and death
benefits.......................... (3,064) (15,263) (491,065) (536,283)
Net transfers from (to) Fixed
Account........................... (171,032) 6,221 (1,461,355) (1,062,480)
Transfers between Investment
Divisions......................... (260,945) 977,443 8,641,884 8,742,557
------------- ------------- ------------- -------------
Net contributions and
withdrawals..................... (296,542) 1,489,101 9,429,695 11,868,685
------------- ------------- ------------- -------------
Increase in total equity........ 1,118,196 1,701,431 46,301,842 30,391,754
TOTAL EQUITY:
Beginning of year................... 6,599,297 4,897,866 138,850,902 108,459,148
------------- ------------- ------------- -------------
End of year......................... $ 7,717,493 $ 6,599,297 $ 185,152,744 $ 138,850,902
============= ============= ============= =============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-24
<PAGE> 84
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-II
TAX-QUALIFIED POLICIES
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD
CONVERTIBLE GOVERNMENT CORPORATE BOND
----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 259,144 $ 155,630 $ 932,876 $ 1,234,673 $ 7,158,850 $ 3,967,984
26,913 21,905 227,531 (201,535) 530,203 241,112
251,585 283,232 -- -- 272,310 2,921,075
(418,915) (11,797) 749,621 809,190 (7,444,766) (1,246,855)
(165) (1,344) (4,689) (4,567) (806) (16,924)
------------- ------------- ------------- ------------- ------------- -------------
118,562 447,626 1,905,339 1,837,761 515,791 5,866,392
------------- ------------- ------------- ------------- ------------- -------------
900,805 542,669 1,336,911 1,341,036 7,934,149 5,458,336
(322,559) (84,162) (1,576,238) (1,368,958) (4,379,381) (2,267,246)
(11,958) -- (106,290) (104,052) (164,271) (110,532)
(43,985) (13,754) (206,309) (103,177) (919,406) 87,769
1,436,552 3,648,550 4,987,584 (2,364,157) 14,653,125 28,483,192
------------- ------------- ------------- ------------- ------------- -------------
1,958,855 4,093,303 4,435,658 (2,599,308) 17,124,216 31,651,519
------------- ------------- ------------- ------------- ------------- -------------
2,077,417 4,540,929 6,340,997 (761,547) 17,640,007 37,517,911
5,299,558 758,629 24,198,166 24,959,713 73,320,405 35,802,494
------------- ------------- ------------- ------------- ------------- -------------
$ 7,376,975 $ 5,299,558 $ 30,539,163 $ 24,198,166 $ 90,960,412 $ 73,320,405
============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
VALUE BOND GROWTH EQUITY
----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 176,876 $ 177,790 $ 1,169,271 $ 1,017,320 $ (352,156) $ (219,050)
947,839 124,497 242,320 49,962 729,859 178,602
5,122,069 2,307,137 728,847 56,176 7,999,586 8,962,456
(10,645,041) 4,894,124 (364,944) 357,210 11,398,057 2,829,774
6,225 (14,829) (4,431) (3,789) (55,514) (25,859)
------------- ------------- ------------- ------------- ------------- -------------
(4,392,032) 7,488,719 1,771,063 1,476,879 19,719,832 11,725,923
------------- ------------- ------------- ------------- ------------- -------------
6,012,994 4,232,629 1,983,500 1,000,361 7,050,774 5,776,378
(2,376,387) (1,188,146) (1,128,119) (1,052,054) (3,459,980) (2,165,671)
(84,382) (135,096) (25,208) (99,443) (172,898) (167,673)
(314,390) 260,817 (39,985) (63,468) (631,648) 46,978
10,524,266 18,941,073 5,954,076 975,709 16,139,884 16,644,547
------------- ------------- ------------- ------------- ------------- -------------
13,762,101 22,111,277 6,744,264 761,105 18,926,132 20,134,559
------------- ------------- ------------- ------------- ------------- -------------
9,370,069 29,599,996 8,515,327 2,237,984 38,645,964 31,860,482
54,198,422 24,598,426 20,025,633 17,787,649 69,410,898 37,550,416
------------- ------------- ------------- ------------- ------------- -------------
$ 63,568,491 $ 54,198,422 $ 28,540,960 $ 20,025,633 $ 108,056,862 $ 69,410,898
============= ============= ============= ============= ============= =============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-25
<PAGE> 85
STATEMENT OF CHANGES IN TOTAL EQUITY (CONTINUED)
For the years ended December 31, 1998
and December 31, 1997
<TABLE>
<CAPTION>
AMERICAN
CENTURY
MAINSTAY VP INCOME
INDEXED EQUITY & GROWTH
---------------------------------------- -------------
1998 1997 1998(a)
----------------------------------------------------------------
<S> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)....... $ (83,859) $ 346,717 $ 3,053
Net realized gain (loss) on
investments...................... 1,765,112 361,782 (3,933)
Realized gain distribution
received......................... 2,091,944 2,960,475 --
Change in unrealized appreciation
(depreciation) on investments.... 37,074,539 20,854,191 224,380
Decrease attributable to funds of
New York Life Insurance and
Annuity Corporation retained by
Separate Account................. (116,185) (43,500) (498)
------------- ------------- -------------
Net increase in total equity
resulting from operations...... 40,731,551 24,479,665 223,002
------------- ------------- -------------
Contributions and withdrawals:
Policyowners' premium payments..... 15,479,629 9,283,406 110,782
Policyowners' surrenders........... (6,529,166) (3,655,368) (14,460)
Policyowners' annuity and death
benefits......................... (751,119) (210,205) --
Net transfers from (to) Fixed
Account.......................... (647,595) (22,594) 21,802
Transfers between Investment
Divisions........................ 41,782,194 32,489,812 1,816,112
------------- ------------- -------------
Net contributions and
withdrawals.................... 49,333,943 37,885,051 1,934,236
------------- ------------- -------------
Increase in total equity....... 90,065,494 62,364,716 2,157,238
TOTAL EQUITY:
Beginning of year.................. 128,227,423 65,862,707 --
------------- ------------- -------------
End of year........................ $ 218,292,917 $ 128,227,423 $ 2,157,238
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
CALVERT FIDELITY
SOCIAL VIP II
BALANCED CONTRAFUND
----------------------------------- -----------------------------------
1998 1997 1998 1997
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)..... $ 45,226 $ 27,991 $ (260,594) $ (103,920)
Net realized gain on
investments.................... 95,368 26,299 125,383 17,070
Realized gain distribution
received....................... 195,605 100,182 1,101,515 44,746
Change in unrealized appreciation
(depreciation) on
investments.................... 93,747 76,729 7,416,548 1,795,628
Decrease attributable to funds of
New York Life Insurance and
Annuity Corporation retained by
Separate Account............... (1,100) (494) (22,413) (3,917)
------------- ------------- ------------- -------------
Net increase in total equity
resulting from operations.... 428,846 230,707 8,360,439 1,749,607
------------- ------------- ------------- -------------
Contributions and withdrawals:
Policyowners' premium payments... 549,904 307,316 4,588,559 2,529,779
Policyowners' surrenders......... (131,354) (26,289) (1,069,525) (193,614)
Policyowners' annuity and death
benefits....................... (405) -- (83,742) (3,255)
Net transfers from (to) Fixed
Account........................ (1,028) (2,218) 48,263 68,020
Transfers between Investment
Divisions...................... 958,399 805,582 13,982,982 14,518,700
------------- ------------- ------------- -------------
Net contributions and
withdrawals.................. 1,375,516 1,084,391 17,466,537 16,919,630
------------- ------------- ------------- -------------
Increase in total equity..... 1,804,362 1,315,098 25,826,976 18,669,237
TOTAL EQUITY:
Beginning of year................ 2,105,578 790,480 19,618,237 949,000
------------- ------------- ------------- -------------
End of year...................... $ 3,909,940 $ 2,105,578 $ 45,445,213 $ 19,618,237
============= ============= ============= =============
</TABLE>
(a) For the period June 1, 1998 (Commencement of Operations) through December
31, 1998.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-26
<PAGE> 86
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-II
TAX-QUALIFIED POLICIES
<TABLE>
<CAPTION>
DREYFUS EAGLE ASSET LORD
LARGE MANAGEMENT ABBETT ALGER AMERICAN
COMPANY GROWTH DEVELOPING SMALL
VALUE EQUITY GROWTH CAPITALIZATION
------------- ------------- ------------- -----------------------------
1998(a) 1998(a) 1998(a) 1998 1997
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1,055 $ (3,435) $ (2,015) $ (97,051) $ (42,024)
(4,184) (287) (8,575) (32,044) 12,767
-- -- -- 1,006,278 107,111
66,281 169,046 81,810 110,639 313,020
(169) (381) (201) (3,922) (1,063)
------------- ------------- ------------- ------------- -------------
62,983 164,943 71,019 983,900 389,811
------------- ------------- ------------- ------------- -------------
68,506 113,841 27,869 806,598 554,447
(7,599) (7,289) (1,772) (482,817) (85,204)
-- -- -- (976) (107)
78,028 (116) -- (29,157) 35,666
756,995 937,433 497,294 2,364,349 4,377,981
------------- ------------- ------------- ------------- -------------
895,930 1,043,869 523,391 2,657,997 4,882,783
------------- ------------- ------------- ------------- -------------
958,913 1,208,812 594,410 3,641,897 5,272,594
-- -- -- 5,798,541 525,947
------------- ------------- ------------- ------------- -------------
$ 958,913 $ 1,208,812 $ 594,410 $ 9,440,438 $ 5,798,541
============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
FIDELITY JANUS ASPEN SERIES
VIP SERIES WORLDWIDE
EQUITY-INCOME BALANCED GROWTH
----------------------------- ----------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ (73,042) $ (47,157) $ 462,708 $ 87,823 $ 594,302 $ (11,814)
124,472 7,813 134,630 17,617 445,889 16,432
608,742 63,085 100,170 4,553 445,238 67,264
820,662 927,663 4,220,920 464,904 7,211,850 1,328,505
(5,849) (1,663) (12,712) (1,422) (27,437) (3,757)
------------- ------------- ------------- ------------- ------------- -------------
1,474,985 949,741 4,905,716 573,475 8,669,842 1,396,630
------------- ------------- ------------- ------------- ------------- -------------
2,921,781 1,272,681 2,628,138 920,259 4,973,084 3,626,051
(772,229) (132,003) (485,681) (122,827) (1,463,664) (306,921)
(24,544) (8,989) (2,969) (48,121) (42,304) (6,683)
53,767 49,560 (123,106) 41,510 (39,724) 195,389
10,031,734 7,776,259 12,375,939 5,584,736 13,067,884 21,087,779
------------- ------------- ------------- ------------- ------------- -------------
12,210,509 8,957,508 14,392,321 6,375,557 16,495,276 24,595,615
------------- ------------- ------------- ------------- ------------- -------------
13,685,494 9,907,249 19,298,037 6,949,032 25,165,118 25,992,245
10,441,696 534,447 7,348,900 399,868 27,035,036 1,042,791
------------- ------------- ------------- ------------- ------------- -------------
$ 24,127,190 $ 10,441,696 $ 26,646,937 $ 7,348,900 $ 52,200,154 $ 27,035,036
============= ============= ============= ============= ============= =============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-27
<PAGE> 87
STATEMENT OF CHANGES IN TOTAL EQUITY (CONTINUED)
For the years ended December 31, 1998
and December 31, 1997
<TABLE>
<CAPTION>
MFS
GROWTH
WITH MFS
INCOME SERIES RESEARCH SERIES
--------------- ---------------
1998(a) 1998(a)
---------------------------------
<S> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment loss................ $ (2,313) $ (2,180)
Net realized loss on investments... (11,458) (4,609)
Change in unrealized appreciation
(depreciation) on investments.... 81,516 69,477
Decrease attributable to funds of
New York Life Insurance and
Annuity Corporation retained by
Separate Account................. (142) (146)
------------- -------------
Net increase in total equity
resulting from operations...... 67,603 62,542
------------- -------------
Contributions and withdrawals:
Policyowners' premium payments..... 54,203 14,358
Policyowners' surrenders........... (4,445) (1,036)
Net transfers from Fixed Account... 1,922 8,498
Transfers between Investment
Divisions........................ 678,931 661,293
------------- -------------
Net contributions and
withdrawals.................... 730,611 683,113
------------- -------------
Increase in total equity....... 798,214 745,655
TOTAL EQUITY:
Beginning of year.................. -- --
------------- -------------
End of year........................ $ 798,214 $ 745,655
============= =============
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY T. ROWE VAN ECK
EMERGING PRICE WORLDWIDE
MARKETS EQUITY HARD
EQUITY INCOME ASSETS
----------------------------- ------------- -------------
1998 1997 1998(a) 1998(a)
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment income (loss)....... $ (27,221) $ (6,863) $ 8,418 $ (266)
Net realized gain (loss) on
investments...................... (422,986) 29,999 (10,554) (2,934)
Realized gain distribution
received......................... -- 115,592 44,707 --
Change in unrealized appreciation
(depreciation) on investments.... (607,781) (732,744) 58,289 (321)
Increase (decrease) attributable to
funds of New York Life Insurance
and Annuity Corporation retained
by
Separate Account................. 1,712 702 (214) (1)
------------- ------------- ------------- -------------
Net increase (decrease) in total
equity resulting from
operations..................... (1,056,276) (593,314) 100,646 (3,522)
------------- ------------- ------------- -------------
Contributions and withdrawals:
Policyowners' premium payments..... 515,325 846,636 109,411 5,705
Policyowners' surrenders........... (204,824) (44,611) (10,936) --
Policyowners' annuity and death
benefits......................... -- (2,380) -- --
Net transfers from (to) Fixed
Account.......................... (15,899) 48,827 153,486 1,098
Transfers between Investment
Divisions........................ (209) 3,360,106 1,365,371 49,577
------------- ------------- ------------- -------------
Net contributions and
withdrawals.................... 294,393 4,208,578 1,617,332 56,380
------------- ------------- ------------- -------------
Increase (decrease) in total
equity....................... (761,883) 3,615,264 1,717,978 52,858
TOTAL EQUITY:
Beginning of year.................. 3,874,806 259,542 -- --
------------- ------------- ------------- -------------
End of year........................ $ 3,112,923 $ 3,874,806 $ 1,717,978 $ 52,858
============= ============= ============= =============
</TABLE>
(a) For the period June 1, 1998 (Commencement of Operations) through December
31, 1998.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-28
<PAGE> 88
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-II
TAX-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-29
<PAGE> 89
NOTES TO FINANCIAL STATEMENTS
NOTE 1-- Organization and Accounting Policies:
- --------------------------------------------------------------------------------
NYLIAC Variable Annuity Separate Account-I ("Separate Account-I") and NYLIAC
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., the Alger American Fund, the
Calvert Variable Series Inc. (formerly, "Acacia Capital Corporation"), 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 (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 twenty-six
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, American Century Income & Growth,
Dreyfus Large Company Value, Eagle Asset Management Growth Equity, Lord Abbett
Developing Growth, Alger American Small Capitalization, Calvert Social Balanced
(formerly, "Calvert Socially Responsible"), 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 and Van Eck Worldwide Hard
Assets. 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-30
<PAGE> 90
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNTS-I AND-II
NON-QUALIFIED AND TAX-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-31
<PAGE> 91
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--Investments (in 000's):
- --------------------------------------------------------------------------------
A
t December 31, 1998, 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............................................ 11,960 41,275 996
Identified cost*............................................ $192,653 $ 41,275 $ 10,906
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Number of shares............................................ 11,033 38,840 716
Identified cost*............................................ $183,326 $ 38,840 $ 7,833
</TABLE>
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP CENTURY LARGE
INDEXED INCOME COMPANY
EQUITY & GROWTH VALUE
<S> <C> <C> <C>
------------------------------------------------
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Number of shares............................................ 9,444 308 127
Identified cost*............................................ $161,184 $ 3,014 $ 1,200
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Number of shares............................................ 8,461 198 94
Identified cost*............................................ $147,934 $ 1,938 $ 895
</TABLE>
* The cost stated also represents the aggregate cost for Federal income tax
purposes.
Investment activity for the year ended December 31, 1998, 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................................................... $ 31,586 $ 68,806 $ 4,312
Proceeds from sales......................................... 16,542 57,548 961
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Purchases................................................... $ 35,519 $ 63,115 $ 3,267
Proceeds from sales......................................... 7,050 56,471 790
</TABLE>
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP CENTURY LARGE
INDEXED INCOME COMPANY
EQUITY & GROWTH(A) VALUE(A)
<S> <C> <C> <C>
------------------------------------------------
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Purchases................................................... $ 53,993 $ 3,339 $ 1,427
Proceeds from sales......................................... 8,236 306 201
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Purchases................................................... $ 54,942 $ 2,031 $ 1,113
Proceeds from sales......................................... 3,381 89 213
</TABLE>
(a) For the period June 1, 1998 (Commencement of Operations) through December
31, 1998.
F-32
<PAGE> 92
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNTS-I AND-II
NON-QUALIFIED AND TAX-QUALIFIED POLICIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
4,394 13,596 840 10,938 5,446 2,791 5,334
$ 44,326 $161,168 $ 9,147 $145,470 $ 78,938 $ 37,419 $106,953
2,984 8,359 625 9,293 4,571 2,164 4,591
$ 30,013 $ 99,033 $ 6,847 $125,272 $ 66,843 $ 29,038 $ 92,383
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET LORD ALGER
MANAGEMENT ABBETT AMERICAN CALVERT FIDELITY FIDELITY JANUS ASPEN
GROWTH DEVELOPING SMALL SOCIAL VIP II VIP SERIES
EQUITY GROWTH CAPITALIZATION BALANCED CONTRAFUND EQUITY-INCOME BALANCED
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
65 95 273 1,651 1,910 1,100 1,309
$ 667 $ 754 $ 11,423 $ 3,401 $ 36,870 $ 26,480 $ 24,187
103 65 215 1,835 1,865 952 1,188
$ 1,043 $ 514 $ 9,046 $ 3,764 $ 36,367 $ 22,458 $ 22,042
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
$ 17,667 $ 41,250 $ 1,364 $ 23,071 $ 21,918 $ 13,236 $ 30,787
8,952 16,450 1,680 12,108 7,022 3,457 6,343
$ 10,847 $ 30,739 $ 1,518 $ 21,983 $ 22,592 $ 11,183 $ 29,082
5,464 6,119 1,725 6,268 3,472 2,518 2,428
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET LORD ALGER
MANAGEMENT ABBETT AMERICAN CALVERT FIDELITY FIDELITY JANUS ASPEN
GROWTH DEVELOPING SMALL SOCIAL VIP II VIP SERIES
EQUITY(A) GROWTH(A) CAPITALIZATION BALANCED CONTRAFUND EQUITY-INCOME BALANCED
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
$ 703 $ 835 $ 5,937 $ 1,958 $ 17,497 $ 16,930 $ 16,278
29 67 1,915 989 2,794 5,089 1,595
$ 1,161 $ 554 $ 4,576 $ 2,389 $ 19,056 $ 13,901 $ 15,684
117 31 1,000 767 683 1,109 683
</TABLE>
F-33
<PAGE> 93
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2-- Investments (in 000's) (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUS ASPEN MFS
SERIES GROWTH
WORLDWIDE WITH MFS
GROWTH INCOME SERIES RESEARCH SERIES
<S> <C> <C> <C>
------------------------------------------------------
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Number of shares......................................... 1,914 56 47
Identified cost*......................................... $ 46,287 $ 999 $ 804
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Number of shares......................................... 1,800 40 39
Identified cost*......................................... $ 43,820 $ 719 $ 678
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY T. ROWE VAN ECK
EMERGING PRICE WORLDWIDE
MARKETS EQUITY HARD
EQUITY INCOME ASSETS
<S> <C> <C> <C>
------------------------------------------------------
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Number of shares......................................... 534 101 27
Identified cost*......................................... $ 5,460 $ 1,906 $ 294
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Number of shares......................................... 439 90 6
Identified cost*......................................... $ 4,461 $ 1,665 $ 53
</TABLE>
* The cost stated also represents the aggregate cost for Federal income tax
purposes.
<TABLE>
<CAPTION>
JANUS ASPEN MFS
SERIES GROWTH
WORLDWIDE WITH MFS
GROWTH INCOME SERIES(a) RESEARCH SERIES(a)
<S> <C> <C> <C>
------------------------------------------------------
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Purchases................................................ $ 18,130 $ 1,174 $ 835
Proceeds from sales...................................... 3,972 163 29
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Purchases................................................ $ 19,402 $ 857 $ 720
Proceeds from sales...................................... 1,805 127 37
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY T. ROWE VAN ECK
EMERGING PRICE WORLDWIDE
MARKETS EQUITY HARD
EQUITY INCOME(a) ASSETS(a)
<S> <C> <C> <C>
------------------------------------------------------
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Purchases................................................ $ 1,930 $ 2,232 $ 321
Proceeds from sales...................................... 1,327 302 23
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Purchases................................................ $ 1,523 $ 1,799 $ 218
Proceeds from sales...................................... 1,256 124 162
</TABLE>
(a) For the period June 1, 1998 (Commencement of Operations) through December
31, 1998.
F-34
<PAGE> 94
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNTS-I AND-II
NON-QUALIFIED AND TAX-QUALIFIED POLICIES
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-35
<PAGE> 95
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5-- Cost to Policyowners (in 000's):
- --------------------------------------------------------------------------------
At December 31, 1998, the cost to Policyowners for accumulation units
outstanding, with adjustments for net investment income, market appreciation
(depreciation) and deduction for expenses is as follows:
<TABLE>
<CAPTION>
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)................... $177,516 $ 36,768 $ 9,448
Accumulated net investment income (loss).................... (9,474) 4,378 585
Accumulated net realized gain (loss) on investments and
realized gain distributions received...................... 23,797 -- 841
Unrealized appreciation (depreciation) on investments....... 173,467 -- (607)
Decrease attributable to funds of New York Life Insurance
and Annuity Corporation retained by Separate Account...... (391) (10) (2)
-------- -------- --------
Net amount applicable to Policyowners....................... $364,915 $ 41,136 $ 10,265
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP CENTURY LARGE
INDEXED INCOME COMPANY
EQUITY & GROWTH VALUE
--------------------------------------------------
<S> <C> <C> <C>
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Cost to Policyowners (net of withdrawals)................... $140,458 $ 3,023 $ 1,222
Accumulated net investment income (loss).................... 1,605 3 1
Accumulated net realized gain (loss) on investments and
realized gain distributions received...................... 18,534 (19) (26)
Unrealized appreciation (depreciation) on investments....... 83,294 344 103
Decrease attributable to funds of New York Life Insurance
and Annuity Corporation retained by Separate Account...... (241) (1) --
-------- -------- --------
Net amount applicable to Policyowners....................... $243,650 $ 3,350 $ 1,300
======== ======== ========
</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)................... $176,852 $ 34,787 $ 6,805
Accumulated net investment income (loss).................... (7,875) 3,942 420
Accumulated net realized gain (loss) on investments and
realized gain distributions received...................... 13,576 -- 584
Unrealized appreciation (depreciation) on investments....... 154,403 -- (431)
Decrease attributable to funds of New York Life Insurance
and Annuity Corporation retained by Separate Account...... (337) (9) (1)
-------- -------- --------
Net amount applicable to Policyowners....................... $336,619 $ 38,720 $ 7,377
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP CENTURY LARGE
INDEXED INCOME COMPANY
EQUITY & GROWTH VALUE
--------------------------------------------------
<S> <C> <C> <C>
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Cost to Policyowners (net of withdrawals)................... $132,260 $ 1,933 $ 896
Accumulated net investment income (loss).................... 1,411 3 1
Accumulated net realized gain (loss) on investments and
realized gain distributions received...................... 13,730 (3) (4)
Unrealized appreciation (depreciation) on investments....... 71,093 224 66
Decrease attributable to funds of New York Life Insurance
and Annuity Corporation retained by Separate Account...... (201) -- --
-------- -------- --------
Net amount applicable to Policyowners....................... $218,293 $ 2,157 $ 959
======== ======== ========
</TABLE>
F-36
<PAGE> 96
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNTS-I AND-II
NON-QUALIFIED AND TAX-QUALIFIED POLICIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 34,984 $129,783 $ 7,712 $119,436 $ 66,192 $ 30,213 $ 75,974
10,548 22,076 1,115 7,131 573 5,650 (653)
(1,325) 8,881 292 18,400 11,931 1,454 31,332
788 (12,743) 1,263 73,185 (2,936) (502) 19,009
(26) (47) (8) (210) (20) (16) (119)
-------- -------- -------- -------- -------- -------- --------
$ 44,969 $147,950 $ 10,374 $217,942 $ 75,740 $ 36,799 $125,543
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET LORD ALGER
MANAGEMENT ABBETT AMERICAN CALVERT FIDELITY FIDELITY JANUS ASPEN
GROWTH DEVELOPING SMALL SOCIAL VIP II VIP SERIES
EQUITY GROWTH CAPITALIZATION BALANCED CONTRAFUND EQUITY-INCOME BALANCED
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 672 $ 768 $ 10,145 $ 2,777 $ 35,174 $ 24,884 $ 22,992
(1) (2) (176) 99 (403) (121) 636
(6) (14) 1,422 515 1,980 1,632 486
98 121 592 127 9,805 1,482 5,261
-- -- (6) (1) (29) (9) (16)
-------- -------- -------- -------- -------- -------- --------
$ 763 $ 873 $ 11,977 $ 3,517 $ 46,527 $ 27,868 $ 29,359
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 23,855 $ 81,401 $ 5,760 $107,041 $ 57,253 $ 23,592 $ 68,193
6,824 12,817 783 5,571 492 4,241 (509)
(749) 4,547 283 12,222 8,892 1,125 24,440
626 (7,781) 897 60,487 (3,056) (405) 16,029
(17) (24) (6) (168) (13) (12) (96)
-------- -------- -------- -------- -------- -------- --------
$ 30,539 $ 90,960 $ 7,717 $185,153 $ 63,568 $ 28,541 $108,057
======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET LORD ALGER
MANAGEMENT ABBETT AMERICAN CALVERT FIDELITY FIDELITY JANUS ASPEN
GROWTH DEVELOPING SMALL SOCIAL VIP II VIP SERIES
EQUITY GROWTH CAPITALIZATION BALANCED CONTRAFUND EQUITY-INCOME BALANCED
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,043 $ 523 $ 8,065 $ 3,194 $ 35,327 $ 21,701 $ 21,166
(3) (2) (139) 93 (365) (120) 554
-- (8) 1,093 467 1,288 804 257
169 81 425 157 9,221 1,749 4,684
-- -- (4) (1) (26) (7) (14)
-------- -------- -------- -------- -------- -------- --------
$ 1,209 $ 594 $ 9,440 $ 3,910 $ 45,445 $ 24,127 $ 26,647
======== ======== ======== ======== ======== ======== ========
</TABLE>
F-37
<PAGE> 97
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5-- Cost to Policyowners (in 000's) (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUS ASPEN MFS
SERIES GROWTH
WORLDWIDE WITH MFS
GROWTH INCOME SERIES RESEARCH SERIES
---------------------------------------------------
<S> <C> <C> <C>
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Cost to Policyowners (net of withdrawals)................... $ 43,955 $ 1,011 $ 806
Accumulated net investment income (loss).................... 639 (3) (3)
Accumulated net realized gain (loss) on investments and
realized gain distributions received...................... 1,547 (12) (1)
Unrealized appreciation (depreciation) on investments....... 9,399 126 91
Decrease attributable to funds of New York Life Insurance
and Annuity Corporation retained by Separate Account...... (36) -- --
-------- -------- --------
Net amount applicable to Policyowners....................... $ 55,504 $ 1,122 $ 893
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY T. ROWE VAN ECK
EMERGING PRICE WORLDWIDE
MARKETS EQUITY HARD
EQUITY INCOME ASSETS
--------------------------------------------------
<S> <C> <C> <C>
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Cost to Policyowners (net of withdrawals)................... $ 5,705 $ 1,868 $ 297
Accumulated net investment gain (loss)...................... (45) 8 (1)
Accumulated net realized gain (loss) on investments and
realized gain distributions received...................... (215) 26 (3)
Unrealized appreciation (depreciation) on investments....... (1,661) 42 (43)
Increase attributable to funds of New York Life Insurance
and Annuity Corporation retained by Separate Account...... 2 -- --
-------- -------- --------
Net amount applicable to Policyowners....................... $ 3,786 $ 1,944 $ 250
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN MFS
SERIES GROWTH
WORLDWIDE WITH MFS
GROWTH INCOME SERIES RESEARCH SERIES
---------------------------------------------------
<S> <C> <C> <C>
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Cost to Policyowners (net of withdrawals)................... $ 42,123 $ 730 $ 683
Accumulated net investment income (loss).................... 586 (2) (2)
Accumulated net realized gain (loss) on investments and
realized gain distributions received...................... 974 (11) (4)
Unrealized appreciation (depreciation) on investments....... 8,548 81 69
Decrease attributable to funds of New York Life Insurance
and Annuity Corporation retained by Separate Account...... (31) -- --
-------- -------- --------
Net amount applicable to Policyowners....................... $ 52,200 $ 798 $ 746
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY T. ROWE VAN ECK
EMERGING PRICE WORLDWIDE
MARKETS EQUITY HARD
EQUITY INCOME ASSETS
--------------------------------------------------
<S> <C> <C> <C>
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Cost to Policyowners (net of withdrawals)................... $ 4,759 $ 1,618 $ 55
Accumulated net investment gain (loss)...................... (33) 8 --
Accumulated net realized gain (loss) on investments and
realized gain distributions received...................... (277) 34 (2)
Unrealized appreciation (depreciation) on investments....... (1,338) 58 --
Increase attributable to funds of New York Life Insurance
and Annuity Corporation retained by Separate Account...... 2 -- --
-------- -------- --------
Net amount applicable to Policyowners....................... $ 3,113 $ 1,718 $ 53
======== ======== ========
</TABLE>
F-38
<PAGE> 98
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNTS-I AND-II
NON-QUALIFIED AND TAX-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-39
<PAGE> 99
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--Unit Transactions (in 000's):
- --------------------------------------------------------------------------------
Transactions in accumulation units for the years ended December 31, 1998 and
December 31, 1997, were as follows:
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL APPRECIATION CASH MANAGEMENT
------------------------- -------------------------
1998 1997 1998 1997
-----------------------------------------------------------
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Units issued on premium payments....................... 586 712 160,599 211,219
Units redeemed on surrenders........................... (414) (277) (1,232) (1,083)
Units redeemed on annuity and death benefits........... (80) (73) (166) (306)
Units issued (redeemed) on net transfers from (to)
Fixed Account........................................ (102) (16) (17,959) (25,765)
Units issued (redeemed) on transfers between
Investment Divisions................................. 586 621 (132,918) (182,812)
-------- -------- -------- --------
Net increase (decrease).............................. 576 967 8,324 1,253
Units outstanding, beginning of year................... 11,857 10,890 25,689 24,436
-------- -------- -------- --------
Units outstanding, end of year......................... 12,433 11,857 34,013 25,689
======== ======== ======== ========
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Units issued on premium payments....................... 751 886 178,668 193,703
Units redeemed on surrenders........................... (468) (373) (1,281) (1,883)
Units redeemed on annuity and death benefits........... (24) (25) (37) (10)
Units issued (redeemed) on net transfers from (to)
Fixed Account........................................ (61) (32) (15,327) (19,052)
Units issued (redeemed) on transfers between
Investment Divisions................................. 959 1,181 (157,567) (165,341)
-------- -------- -------- --------
Net increase (decrease).............................. 1,157 1,637 4,456 7,417
Units outstanding, beginning of year................... 10,312 8,675 27,559 20,142
-------- -------- -------- --------
Units outstanding, end of year......................... 11,469 10,312 32,015 27,559
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
INTERNATIONAL EQUITY TOTAL RETURN
------------------------- -------------------------
1998 1997 1998 1997
-----------------------------------------------------------
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Units issued on premium payments....................... 33 67 382 428
Units redeemed on surrenders........................... (19) (15) (385) (265)
Units redeemed on annuity and death benefits........... (3) (8) (108) (92)
Units issued (redeemed) on net transfers from (to)
Fixed Account........................................ (1) 1 (82) (111)
Units issued (redeemed) on transfers between
Investment Divisions................................. (45) 32 368 391
-------- -------- -------- --------
Net increase (decrease).............................. (35) 77 175 351
Units outstanding, beginning of year................... 751 674 9,720 9,369
-------- -------- -------- --------
Units outstanding, end of year......................... 716 751 9,895 9,720
======== ======== ======== ========
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Units issued on premium payments....................... 40 64 498 585
Units redeemed on surrenders........................... (30) (20) (353) (290)
Units redeemed on annuity and death benefits........... -- (1) (25) (34)
Units issued (redeemed) on net transfers from (to)
Fixed Account........................................ (12) 1 (77) (66)
Units issued (redeemed) on transfers between Investment
Divisions............................................ (19) 83 452 531
-------- -------- -------- --------
Net increase (decrease).............................. (21) 127 495 726
Units outstanding, beginning of year................... 553 426 7,911 7,185
-------- -------- -------- --------
Units outstanding, end of year......................... 532 553 8,406 7,911
======== ======== ======== ========
</TABLE>
F-40
<PAGE> 100
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNTS-I AND-II
NON-QUALIFIED AND TAX-QUALIFIED POLICIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD
CONVERTIBLE GOVERNMENT CORPORATE BOND
------------------- ------------------- -------------------
1998 1997 1998 1997 1998 1997
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
86 91 176 108 826 933
(18) (8) (146) (100) (426) (190)
(3) (3) (60) (57) (189) (65)
(12) -- (13) (52) (125) 17
158 402 582 (327) 748 3,395
-------- -------- -------- -------- -------- --------
211 482 539 (428) 834 4,090
636 154 2,749 3,177 9,539 5,449
-------- -------- -------- -------- -------- --------
847 636 3,288 2,749 10,373 9,539
======== ======== ======== ======== ======== ========
73 49 101 112 551 408
(27) (7) (119) (113) (306) (169)
(1) -- (8) (9) (12) (8)
(4) (1) (15) (9) (67) 7
117 337 370 (199) 1,003 2,136
-------- -------- -------- -------- -------- --------
158 378 329 (218) 1,169 2,374
452 74 1,904 2,122 5,215 2,841
-------- -------- -------- -------- -------- --------
610 452 2,233 1,904 6,384 5,215
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
VALUE BOND GROWTH EQUITY
------------------- ------------------- -------------------
1998 1997 1998 1997 1998 1997
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
327 362 191 111 310 325
(173) (66) (92) (70) (146) (74)
(36) (24) (23) (31) (23) (11)
(28) 9 (2) (12) (33) (7)
351 1,474 500 171 581 989
-------- -------- -------- -------- -------- --------
441 1,755 574 169 689 1,222
4,277 2,522 2,249 2,080 4,307 3,085
-------- -------- -------- -------- -------- --------
4,718 4,277 2,823 2,249 4,996 4,307
======== ======== ======== ======== ======== ========
349 273 159 87 319 318
(139) (76) (90) (91) (156) (118)
(5) (8) (2) (9) (8) (9)
(22) 16 (3) (6) (29) 2
580 1,227 471 83 723 922
-------- -------- -------- -------- -------- --------
763 1,432 535 64 849 1,115
3,186 1,754 1,655 1,591 3,451 2,336
-------- -------- -------- -------- -------- --------
3,949 3,186 2,190 1,655 4,300 3,451
======== ======== ======== ======== ======== ========
</TABLE>
F-41
<PAGE> 101
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--Unit Transactions (in 000's) (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN
CENTURY
MAINSTAY VP INCOME
INDEXED EQUITY & GROWTH
------------------- ----------
1998 1997 1998(a)
--------------------------------
<S> <C> <C> <C>
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Units issued on premium payments................... 577 483 37
Units redeemed on surrenders....................... (244) (130) (1)
Units redeemed on annuity and death benefits....... (47) (43) --
Units issued (redeemed) on net transfers from (to)
Fixed Account.................................... (62) (14) --
Units issued on transfers between
Investment Divisions............................. 1,466 1,660 266
-------- -------- --------
Net increase..................................... 1,690 1,956 302
Units outstanding, beginning of year............... 6,724 4,768 --
-------- -------- --------
Units outstanding, end of year..................... 8,414 6,724 302
======== ======== ========
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Units issued on premium payments................... 604 453 11
Units redeemed on surrenders....................... (254) (176) (1)
Units redeemed on annuity and death benefits....... (29) (10) --
Units issued (redeemed) on net transfers from (to)
Fixed Account.................................... (27) (1) 2
Units issued on transfers between
Investment Divisions............................. 1,629 1,567 182
-------- -------- --------
Net increase..................................... 1,923 1,833 194
Units outstanding, beginning of year............... 5,616 3,783 --
-------- -------- --------
Units outstanding, end of year..................... 7,539 5,616 194
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
CALVERT FIDELITY
SOCIAL VIP II
BALANCED CONTRAFUND
------------------- -------------------
1998 1997 1998 1997
-----------------------------------------
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Units issued on premium payments................... 17 7 275 245
Units redeemed on surrenders....................... (7) (2) (48) (8)
Units redeemed on annuity and death benefits....... (2) -- (8) (2)
Units issued (redeemed) on net transfers from (to)
Fixed Account.................................... -- -- -- 13
Units issued on transfers between
Investment Divisions............................. 39 80 733 1,356
-------- -------- -------- --------
Net increase..................................... 47 85 952 1,604
Units outstanding, beginning of year............... 154 69 1,844 240
-------- -------- -------- --------
Units outstanding, end of year..................... 201 154 2,796 1,844
======== ======== ======== ========
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Units issued on premium payments................... 33 22 328 216
Units redeemed on surrenders....................... (8) (2) (75) (16)
Units redeemed on annuity and death benefits....... -- -- (6) --
Units issued (redeemed) on net transfers from (to)
Fixed Account.................................... -- -- 3 6
Units issued on transfers between
Investment Divisions............................. 60 57 993 1,245
-------- -------- -------- --------
Net increase..................................... 85 77 1,243 1,451
Units outstanding, beginning of year............... 138 61 1,542 91
-------- -------- -------- --------
Units outstanding, end of year..................... 223 138 2,785 1,542
======== ======== ======== ========
</TABLE>
(a) For the period June 1, 1998 (Commencement of Operations) through December
31, 1998.
F-42
<PAGE> 102
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNTS-I AND-II
NON-QUALIFIED AND TAX-QUALIFIED POLICIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DREYFUS EAGLE ASSET LORD ALGER
LARGE MANAGEMENT ABBETT AMERICAN
COMPANY GROWTH DEVELOPING SMALL
VALUE EQUITY GROWTH CAPITALIZATION
-------- ----------- ---------- -------------------
1998(a) 1998(a) 1998(a) 1998 1997
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
16 13 11 84 128
-- -- -- (21) (4)
-- -- -- (18) (1)
1 -- -- -- 3
108 51 76 232 467
-------- -------- -------- -------- --------
125 64 87 277 593
-- -- -- 722 129
-------- -------- -------- -------- --------
125 64 87 999 722
======== ======== ======== ======== ========
7 12 3 73 56
(1) (1) -- (44) (8)
-- -- -- -- --
8 -- -- (3) 3
77 90 56 210 445
-------- -------- -------- -------- --------
91 101 59 236 496
-- -- -- 551 55
-------- -------- -------- -------- --------
91 101 59 787 551
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
FIDELITY JANUS ASPEN SERIES
VIP SERIES WORLDWIDE
EQUITY-INCOME BALANCED GROWTH
------------------- ------------------- -------------------
1998 1997 1998 1997 1998 1997
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
262 186 184 124 352 351
(46) (7) (29) (5) (65) (17)
(4) (2) (8) -- (14) (6)
(4) 6 (5) 5 (3) 25
549 878 869 584 589 2,023
-------- -------- -------- -------- -------- --------
757 1,061 1,011 708 859 2,376
1,138 77 802 94 2,632 256
-------- -------- -------- -------- -------- --------
1,895 1,138 1,813 802 3,491 2,632
======== ======== ======== ======== ======== ========
208 106 189 80 343 304
(55) (10) (35) (10) (101) (24)
(2) (1) -- (4) (3) (1)
3 4 (10) 3 (4) 16
711 638 897 492 882 1,764
-------- -------- -------- -------- -------- --------
865 737 1,041 561 1,117 2,059
788 51 600 39 2,159 100
-------- -------- -------- -------- -------- --------
1,653 788 1,641 600 3,276 2,159
======== ======== ======== ======== ======== ========
</TABLE>
F-43
<PAGE> 103
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 -- Unit Transactions (in 000's) (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MFS
Growth
With MFS
Income Series Research Series
------------- ---------------
1998(a) 1998(a)
-------------------------------
<S> <C> <C>
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Units issued on premium payments................... 21 17
Units redeemed on surrenders....................... (1) --
Units issued on net transfers from Fixed Account... -- 1
Units issued on transfers between
Investment Divisions............................. 87 64
-------- --------
Net increase..................................... 107 82
Units outstanding, beginning of year............... -- --
-------- --------
Units outstanding, end of year..................... 107 82
======== ========
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Units issued on premium payments................... 5 2
Units issued on net transfers from Fixed Account... -- 1
Units issued on transfers between
Investment Divisions............................. 69 67
-------- --------
Net increase..................................... 74 70
Units outstanding, beginning of year............... -- --
-------- --------
Units outstanding, end of year..................... 74 70
======== ========
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY T. ROWE VAN ECK
EMERGING PRICE WORLDWIDE
MARKETS EQUITY HARD
EQUITY INCOME ASSETS
------------------- -------- ---------
1998 1997 1998(a) 1998(a)
------------------------------------------
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Units issued on premium payments................... 72 61 26 1
Units redeemed on surrenders....................... (13) (3) (1) --
Units redeemed on annuity and death benefits....... (8) (1) -- --
Units issued on net transfers from
Fixed Account.................................... -- 1 11 --
Units issued on transfers between
Investment Divisions............................. 12 316 156 31
-------- -------- -------- --------
Net increase..................................... 63 374 192 32
Units outstanding, beginning of year............... 452 78 -- --
-------- -------- -------- --------
Units outstanding, end of year..................... 515 452 192 32
======== ======== ======== ========
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Units issued on premium payments................... 62 74 11 1
Units redeemed on surrenders....................... (25) (4) (1) --
Units issued (redeemed) on net transfers from (to)
Fixed Account.................................... (2) 4 16 --
Units issued (redeemed) on transfers between
Investment Divisions............................. (6) 291 142 6
-------- -------- -------- --------
Net increase..................................... 29 365 168 7
Units outstanding, beginning of year............... 391 26 -- --
-------- -------- -------- --------
Units outstanding, end of year..................... 420 391 168 7
======== ======== ======== ========
</TABLE>
(a) For the period June 1, 1998 (Commencement of Operations) through December
31, 1998.
F-44
<PAGE> 104
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNTS-I AND-II
NON-QUALIFIED AND TAX-QUALIFIED POLICIES
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-45
<PAGE> 105
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
-------------------------------------------
1998 1997 1996 1995 1994
-------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Unit value, beginning of year........................... $21.53 $17.66 $15.07 $11.24 $11.91
Net investment income (loss)............................ (0.29) (0.26) (0.20) (0.10) (0.08)
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received
(includes the
effect of capital share transactions)................. 8.11 4.13 2.79 3.93 (0.59)
------ ------ ------ ------ ------
Unit value, end of year................................. $29.35 $21.53 $17.66 $15.07 $11.24
====== ====== ====== ====== ======
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Unit value, beginning of year........................... $21.53 $17.66 $15.07 $11.24 $11.91
Net investment income (loss)............................ (0.29) (0.26) (0.20) (0.10) (0.08)
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)......................................... 8.11 4.13 2.79 3.93 (0.59)
------ ------ ------ ------ ------
Unit value, end of year................................. $29.35 $21.53 $17.66 $15.07 $11.24
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP
GOVERNMENT
-------------------------------------------
1998 1997 1996 1995 1994
-------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Unit value, beginning of year........................... $12.71 $11.76 $11.65 $10.11 $10.44
Net investment income................................... 0.47 0.61 0.57 0.68 0.68
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received
(includes the
effect of capital share transactions)................. 0.50 0.34 (0.46) 0.86 (1.01)
------ ------ ------ ------ ------
Unit value, end of year................................. $13.68 $12.71 $11.76 $11.65 $10.11
====== ====== ====== ====== ======
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Unit value, beginning of year........................... $12.71 $11.76 $11.65 $10.11 $10.44
Net investment income................................... 0.46 0.62 0.58 0.68 0.70
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received
(includes the
effect of capital share transactions)................. 0.51 0.33 (0.47) 0.86 (1.03)
------ ------ ------ ------ ------
Unit value, end of year................................. $13.68 $12.71 $11.76 $11.65 $10.11
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP
TOTAL RETURN
-------------------------------------------
1998 1997 1996 1995 1994
-------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Unit value, beginning of year........................... $17.55 $15.10 $13.65 $10.77 $11.37
Net investment income................................... 0.15 0.17 0.14 0.20 0.22
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received
(includes the
effect of capital share transactions)................. 4.33 2.28 1.31 2.68 (0.82)
------ ------ ------ ------ ------
Unit value, end of year................................. $22.03 $17.55 $15.10 $13.65 $10.77
====== ====== ====== ====== ======
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Unit value, beginning of year........................... $17.55 $15.10 $13.65 $10.77 $11.37
Net investment income................................... 0.16 0.18 0.16 0.21 0.24
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received
(includes the
effect of capital share transactions)................. 4.32 2.27 1.29 2.67 (0.84)
------ ------ ------ ------ ------
Unit value, end of year................................. $22.03 $17.55 $15.10 $13.65 $10.77
====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during the year.
(a) For the period May 1, 1995 (Commencement of Operations) through December 31,
1995.
(b) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
F-46
<PAGE> 106
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNTS-I AND-II
NON-QUALIFIED AND TAX-QUALIFIED POLICIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CASH MANAGEMENT CONVERTIBLE
----------------------------------------------- ---------------------------
1998 1997 1996 1995 1994 1998 1997 1996(b)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.16 $ 1.12 $ 1.08 $ 1.04 $ 1.01 $11.76 $10.32 $10.00
0.04 0.04 0.04 0.04 0.03 0.46 0.49 0.15
0.01 -- -- -- -- (0.09) 0.95 0.17
------ ------ ------ ------ ------ ------ ------ ------
$ 1.21 $ 1.16 $ 1.12 $ 1.08 $ 1.04 $12.13 $11.76 $10.32
====== ====== ====== ====== ====== ====== ====== ======
$ 1.16 $ 1.12 $ 1.08 $ 1.04 $ 1.01 $11.73 $10.29 $10.00
0.04 0.04 0.04 0.04 0.03 0.46 0.52 0.15
0.01 -- -- -- -- (0.10) 0.92 0.14
------ ------ ------ ------ ------ ------ ------ ------
$ 1.21 $ 1.16 $ 1.12 $ 1.08 $ 1.04 $12.09 $11.73 $10.29
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
HIGH YIELD INTERNATIONAL
CORPORATE BOND EQUITY
------------------------------------- -------------------------------------
1998 1997 1996 1995(a) 1998 1997 1996 1995(a)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$14.08 $12.62 $10.91 $10.00 $11.92 $11.48 $10.53 $10.00
1.12 0.96 0.81 0.76 0.16 0.82 0.71 0.91
(0.94) 0.50 0.90 0.15 2.41 (0.38) 0.24 (0.38)
------ ------ ------ ------ ------ ------ ------ ------
$14.26 $14.08 $12.62 $10.91 $14.49 $11.92 $11.48 $10.53
====== ====== ====== ====== ====== ====== ====== ======
$14.06 $12.60 $10.89 $10.00 $11.93 $11.49 $10.53 $10.00
1.18 0.98 0.84 0.84 0.16 0.88 0.75 1.11
(0.99) 0.48 0.87 0.05 2.41 (0.44) 0.21 (0.58)
------ ------ ------ ------ ------ ------ ------ ------
$14.25 $14.06 $12.60 $10.89 $14.50 $11.93 $11.49 $10.53
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
VALUE BOND
------------------------------------- -----------------------------------------------
1998 1997 1996 1995(a) 1998 1997 1996 1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$16.96 $13.98 $11.50 $10.00 $12.10 $11.18 $11.10 $ 9.51 $ 9.97
0.03 0.07 0.10 0.13 0.60 0.64 0.63 0.71 1.18
(0.94) 2.91 2.38 1.37 0.34 0.28 (0.55) 0.88 (1.64)
------ ------ ------ ------ ------ ------ ------ ------ ------
$16.05 $16.96 $13.98 $11.50 $13.04 $12.10 $11.18 $11.10 $ 9.51
====== ====== ====== ====== ====== ====== ====== ====== ======
$17.01 $14.02 $11.53 $10.00 $12.10 $11.18 $11.10 $ 9.51 $ 9.97
0.05 0.07 0.10 0.16 0.61 0.63 0.62 0.77 1.17
(0.96) 2.92 2.39 1.37 0.33 0.29 (0.54) 0.82 (1.63)
------ ------ ------ ------ ------ ------ ------ ------ ------
$16.10 $17.01 $14.02 $11.53 $13.04 $12.10 $11.18 $11.10 $ 9.51
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
F-47
<PAGE> 107
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--Selected Per Unit Data+ (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP
GROWTH
EQUITY
-----------------------------------------------
1998 1997 1996 1995 1994
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Unit value, beginning of year........................... $20.11 $16.07 $13.08 $10.26 $10.27
Net investment income (loss)............................ (0.10) (0.08) (0.02) 0.05 0.23
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received
(includes the
effect of capital share transactions)................. 5.12 4.12 3.01 2.77 (0.24)
------ ------ ------ ------ ------
Unit value, end of year................................. $25.13 $20.11 $16.07 $13.08 $10.26
====== ====== ====== ====== ======
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Unit value, beginning of year........................... $20.11 $16.07 $13.08 $10.26 $10.27
Net investment income (loss)............................ (0.09) (0.07) (0.02) 0.06 0.20
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)......................................... 5.11 4.11 3.01 2.76 (0.21)
------ ------ ------ ------ ------
Unit value, end of year................................. $25.13 $20.11 $16.07 $13.08 $10.26
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
LORD ALGER
ABBETT AMERICAN
DEVELOPING SMALL
GROWTH CAPITALIZATION
---------- ---------------------------
1998(c) 1998 1997 1996(b)
----------------------------------------
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Unit value, beginning of year........................... $10.00 $10.52 $ 9.56 $10.00
Net investment income (loss)............................ (0.07) (0.14) (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)................. 0.12 1.61 1.09 (0.42)
------ ------ ------ ------
Unit value, end of year................................. $10.05 $11.99 $10.52 $ 9.56
====== ====== ====== ======
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Unit value, beginning of year........................... $10.00 $10.51 $ 9.56 $10.00
Net investment income (loss)............................ (0.07) (0.14) (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)................. 0.14 1.62 1.08 (0.42)
------ ------ ------ ------
Unit value, end of year................................. $10.07 $11.99 $10.51 $ 9.56
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
JANUS ASPEN SERIES
SERIES WORLDWIDE
BALANCED GROWTH
--------------------------- ---------------------------
1998 1997 1996(b) 1998 1997 1996(b)
------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SEPARATE ACCOUNT-I (NON-QUALIFIED POLICIES)
Unit value, beginning of year........................... $12.22 $10.14 $10.00 $12.50 $10.36 $10.00
Net investment income (loss)............................ 0.40 0.28 0.17 0.21 (0.02) 0.07
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received
(includes the
effect of capital share transactions)................. 3.57 1.80 (0.03) 3.19 2.16 0.29
------ ------ ------ ------ ------ ------
Unit value, end of year................................. $16.19 $12.22 $10.14 $15.90 $12.50 $10.36
====== ====== ====== ====== ====== ======
SEPARATE ACCOUNT-II (TAX-QUALIFIED POLICIES)
Unit value, beginning of year........................... $12.25 $10.16 $10.00 $12.52 $10.38 $10.00
Net investment income (loss)............................ 0.42 0.30 0.21 0.22 (0.01) 0.09
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received
(includes the
effect of capital share transactions)................. 3.57 1.79 (0.05) 3.19 2.15 0.29
------ ------ ------ ------ ------ ------
Unit value, end of year................................. $16.24 $12.25 $10.16 $15.93 $12.52 $10.38
====== ====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during the year.
(a) For the period May 1, 1995 (Commencement of Operations) through December
31, 1995.
(b) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
(c) For the period June 1, 1998 (Commencement of Operations) through December
31, 1998.
F-48
<PAGE> 108
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNTS-I AND-II
NON-QUALIFIED AND TAX-QUALIFIED POLICIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN DREYFUS EAGLE ASSET
CENTURY LARGE MANAGEMENT
MAINSTAY VP INCOME COMPANY GROWTH
INDEXED EQUITY & GROWTH VALUE EQUITY
----------------------------------------------- ---------- ------- -----------
1998 1997 1996 1995 1994 1998(c) 1998(c) 1998(c)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$22.83 $17.41 $14.41 $10.66 $10.72 $10.00 $10.00 $10.00
(0.03) 0.06 0.09 0.15 0.14 0.02 0.03 (0.06)
6.16 5.36 2.91 3.60 (0.20) 1.08 0.41 1.92
------ ------ ------ ------ ------ ------ ------ ------
$28.96 $22.83 $17.41 $14.41 $10.66 $11.10 $10.44 $11.86
====== ====== ====== ====== ====== ====== ====== ======
$22.83 $17.41 $14.41 $10.66 $10.72 $10.00 $10.00 $10.00
(0.01) 0.07 0.10 0.15 0.13 0.02 0.02 (0.07)
6.14 5.35 2.90 3.60 (0.19) 1.08 0.56 2.04
------ ------ ------ ------ ------ ------ ------ ------
$28.96 $22.83 $17.41 $14.41 $10.66 $11.10 $10.58 $11.97
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CALVERT FIDELITY FIDELITY
SOCIAL VIP II VIP
BALANCED CONTRAFUND EQUITY-INCOME
------------------------------------- --------------------------- ---------------------------
1998 1997 1996 1995(a) 1998 1997 1996(b) 1998 1997 1996(b)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$15.26 $12.87 $11.58 $10.00 $12.97 $10.58 $10.00 $13.34 $10.55 $10.00
0.22 0.30 0.25 1.54 (0.11) (0.13) (0.02) (0.04) (0.11) (0.02)
2.03 2.09 1.04 0.04 3.78 2.52 0.60 1.40 2.90 0.57
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$17.51 $15.26 $12.87 $11.58 $16.64 $12.97 $10.58 $14.70 $13.34 $10.55
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
$15.28 $12.89 $11.59 $10.00 $12.72 $10.38 $10.00 $13.25 $10.47 $10.00
0.23 0.29 0.39 1.34 (0.12) (0.13) (0.02) (0.05) (0.13) (0.02)
2.02 2.10 0.91 0.25 3.72 2.47 0.40 1.39 2.91 0.49
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$17.53 $15.28 $12.89 $11.59 $16.32 $12.72 $10.38 $14.59 $13.25 $10.47
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MFS MORGAN STANLEY T. ROWE VAN ECK
GROWTH EMERGING PRICE WORLDWIDE
WITH MFS MARKETS EQUITY HARD
INCOME SERIES RESEARCH SERIES EQUITY INCOME ASSETS
------------- --------------- --------------------------- ------- ---------
1998(c) 1998(c) 1998 1997 1996(b) 1998(c) 1998(c)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$10.00 $10.00 $ 9.83 $ 9.93 $10.00 $10.00 $10.00
(0.07) (0.07) (0.07) (0.04) 0.01 0.09 (0.07)
0.51 0.91 (2.40) (0.06) (0.08) 0.04 (2.22)
------ ------ ------ ------ ------ ------ ------
$10.44 $10.84 $ 7.36 $ 9.83 $ 9.93 $10.13 $ 7.71
====== ====== ====== ====== ====== ====== ======
$10.00 $10.00 $ 9.90 $10.00 $10.00 $10.00 $10.00
(0.07) (0.07) (0.07) (0.03) 0.02 0.10 (0.06)
0.80 0.77 (2.42) (0.07) (0.02) 0.11 (2.11)
------ ------ ------ ------ ------ ------ ------
$10.73 $10.70 $ 7.41 $ 9.90 $10.00 $10.21 $ 7.83
====== ====== ====== ====== ====== ====== ======
</TABLE>
F-49
<PAGE> 109
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 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, formerly known as Calvert Socially
Responsible, 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, and Van Eck Worldwide Hard Assets Investment Divisions
(constituting the NYLIAC Variable Annuity Separate Account-I and the NYLIAC
Variable Annuity Separate Account-II) at December 31, 1998, and the results of
each of their operations, the changes in each of their total equity, and the
selected per unit data for each of the periods presented in conformity with
generally accepted accounting principles. These financial statements and the
selected per unit data (herein referred to as the "financial statements") are
the responsibility of management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of investments at December 31, 1998 with the MainStay VP Series
Fund, Inc., 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 provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 19, 1999
F-50
<PAGE> 110
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1997
------- -------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Fixed maturities
Available for sale, at fair value $13,081 $12,170
Held to maturity, at amortized cost 725 801
Equity securities 100 83
Mortgage loans 1,622 1,305
Real estate 116 151
Policy loans 491 481
Other long-term investments 26 20
------- -------
Total investments 16,161 15,011
Cash and cash equivalents 948 773
Deferred policy acquisition costs 859 688
Other assets 297 345
Separate account assets 6,852 4,315
------- -------
Total Assets $25,117 $21,132
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Policyholders' account balances $14,709 $13,716
Future policy benefits 315 276
Policy claims 60 55
Deferred taxes 101 93
Other liabilities 992 727
Separate account liabilities 6,792 4,303
------- -------
Total Liabilities 22,969 19,170
STOCKHOLDER'S EQUITY
Capital stock -- par value $10,000
(20,000 shares authorized, 2,500 issued and outstanding) 25 25
Additional paid in capital 480 480
Accumulated other comprehensive income 201 157
Retained earnings 1,442 1,300
------- -------
Total stockholder's equity 2,148 1,962
------- -------
Total liabilities and stockholder's equity $25,117 $21,132
======= =======
</TABLE>
See accompanying notes to financial statements.
F-51
<PAGE> 111
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1998 1997 1996
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Universal life and annuity fees $ 293 $ 271 $ 236
Net investment income 1,115 1,066 1,048
Investment gains, net 56 126 65
Other income 122 78 56
------ ------ ------
Total revenues 1,586 1,541 1,405
------ ------ ------
EXPENSES
Interest credited to policyholders' account balances 784 748 723
Policyholder benefits 175 141 117
Operating expenses 405 352 299
------ ------ ------
Total expenses 1,364 1,241 1,139
------ ------ ------
Income before Federal income taxes 222 300 266
Federal income taxes:
Current 97 114 121
Deferred (17) (1) (24)
------ ------ ------
Total Federal income taxes 80 113 97
------ ------ ------
Net income $ 142 $ 187 $ 169
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-52
<PAGE> 112
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997 1996
----- ----- ------
(IN MILLIONS)
<S> <C> <C> <C>
Net Income $142 $187 $ 169
Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized holding gains arising during period 79 -- --
Unrealized holding gains arising during period,
including reclassification adjustments -- 89 (159)
Less: reclassification adjustment for gains included
in net income 35 -- --
---- ---- -----
Other comprehensive income 44 89 (159)
---- ---- -----
Comprehensive income $186 $276 $ 10
==== ==== =====
</TABLE>
See accompanying notes to financial statements.
F-53
<PAGE> 113
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1998 1997 1996
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Stockholder's equity, beginning of year $1,962 $1,686 $1,676
Net Income 142 187 169
Other comprehensive income 44 89 (159)
------ ------ ------
Stockholder's equity, end of year $2,148 $1,962 $1,686
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-54
<PAGE> 114
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997 1996
------- -------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 142 $ 187 $ 169
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2 (43) (18)
Net capitalization of deferred policy acquisition costs (192) (85) (44)
Universal life and annuity fees (198) (202) (188)
Interest credited to policyholders' account balances 784 748 723
Net realized investment gains (56) (126) (65)
Deferred income taxes (17) (1) (24)
(Increase) decrease in net separate account assets (42) 30 6
Increase (decrease) in loaned securities 425 -- --
(Increase) decrease in other assets and other
liabilities (90) 126 (127)
Increase (decrease) in policy claims 4 (2) (24)
Increase (decrease) in future policy benefits 39 25 18
------- -------- -------
Net cash provided by operating activities 801 657 426
------- -------- -------
Cash Flows from Investing Activities:
Proceeds from sale of available for sale fixed maturities 5,325 13,378 5,787
Proceeds from maturity of available for sale fixed
maturities 1,610 1,137 1,505
Proceeds from sale of held to maturity fixed securities -- 3 --
Proceeds from maturity of held to maturity fixed
maturities 102 112 141
Proceeds from sale of equity securities 77 140 47
Proceeds from repayment of mortgage loans 238 220 143
Proceeds from sale of real estate and other invested
assets 47 40 59
Cost of available for sale fixed maturities acquired (7,670) (14,391) (7,447)
Cost of held to maturity fixed maturities acquired (49) (281) (95)
Cost of equity securities acquired (83) (163) (43)
Cost of mortgage loans acquired (558) (413) (280)
Cost of real estate and other invested assets acquired (20) (29) (43)
Policy loans (10) (17) (29)
Securities sold under agreements to repurchase (net) (45) 134 (37)
------- -------- -------
Net cash used in investing activities (1,036) (130) (292)
------- -------- -------
Cash Flows from Financing Activities:
Policyholders' account balances:
Deposits 1,493 1,189 929
Withdrawals (1,151) (1,235) (1,188)
Net transfers from the separate accounts 67 58 33
------- -------- -------
Net cash provided (used) by financing activities 409 12 (226)
------- -------- -------
Effect of exchange rate changes on cash and cash equivalents 1 (2) 2
------- -------- -------
Net increase (decrease) in cash and cash equivalents 175 537 (90)
------- -------- -------
Cash and cash equivalents, beginning of year 773 236 326
------- -------- -------
Cash and cash equivalents, end of year $ 948 $ 773 $ 236
======= ======== =======
</TABLE>
See accompanying notes to financial statements.
F-55
<PAGE> 115
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1 -- NATURE OF OPERATIONS
New York Life Insurance and Annuity Corporation ("NYLIAC") is a direct,
wholly owned subsidiary of New York Life Insurance Company ("New York Life")
domiciled in the State of Delaware. NYLIAC offers a wide variety of interest
sensitive insurance and annuity products to a large cross section of the
insurance market. NYLIAC markets its products in all 50 of the United States,
the District of Columbia and Taiwan, primarily through its agency force. In
addition, NYLIAC markets Corporate Owned Life Insurance through independent
brokers and brokerage general agents.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP"). The preparation of financial
statements of life insurance enterprises requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements. Actual results may differ from estimates.
Certain reclassifications have been made to the 1997 and 1996 financial
statements to conform to the current year presentation.
INVESTMENTS
Fixed maturity investments, which NYLIAC has both the ability and the
intent to hold to maturity, are stated at amortized cost. Investments identified
as available for sale are reported at fair value. Unrealized gains and losses on
available for sale securities are reported in stockholder's equity, net of
deferred taxes and related adjustments. The cost basis of fixed maturity and
equity securities are adjusted for impairments in value deemed to be other than
temporary, with the associated realized loss reported in net income. Equity
securities are carried at fair value with related unrealized gains and losses
reflected in stockholder's equity, net of deferred taxes and related
adjustments. Mortgage loans are carried at unpaid principal balances, net of
impairment reserves, and are generally secured. Investment real estate, which
NYLIAC has the intent to hold for the production of income, is carried at
depreciated cost net of write-downs for other than temporary declines in fair
value. Properties held for sale are carried at the lower of cost or fair value
less estimated selling costs. Policy loans are stated at the aggregate balance
due, which approximates fair value since loans on policies have no defined
maturity date and reduce amounts payable at death or surrender. Cash equivalents
include investments that have maturities of 90 days or less at date of purchase
and are carried at amortized cost, which approximates fair value. Short-term
investments that have maturities of between 91-365 days at date of purchase are
included in fixed maturities on the balance sheet and are carried at amortized
cost, which approximates fair value.
Derivative financial instruments hedging exposure to interest rate
fluctuation on available for sale securities are accounted for at fair market
value. Unrealized gains and losses are reported in stockholder's equity, net of
deferred taxes and related adjustments. Amounts payable or receivable under
interest rate and commodity swap agreements and interest rate floor agreements
are recognized as investment income or expense when earned. Premiums paid for
interest rate floor agreements are amortized into interest expense over the life
of the agreement. Unamortized premiums are included in other assets in the
balance sheet. Realized gains and losses are recognized in net income upon
termination or maturity of the contracts.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business and certain costs of issuing policies
that vary with and are primarily related to the production of new business have
been deferred and recorded as an asset in the balance sheet. These consist
primarily of commissions, certain expenses of underwriting and issuing
contracts, and certain agency expenses. Acquisition costs for universal life and
annuity contracts are amortized in proportion to
F-56
<PAGE> 116
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
DEFERRED POLICY ACQUISITION COSTS -- (CONTINUED)
estimated gross profits over the effective life of the contracts, which is
assumed to be 25 years for universal life contracts and 15 years for annuities.
Changes in assumptions are reflected in the current year's amortization.
The carrying amount of the deferred policy acquisition cost asset is
adjusted at each balance sheet date as if the unrealized gains or losses on
investments associated with these insurance contracts had been realized and
included in the gross profits used to determine current period amortization. The
increase or decrease in the deferred policy acquisition cost asset due to
unrealized gains or losses is recorded in comprehensive income.
RECOGNITION OF INCOME AND RELATED EXPENSES
Amounts received under universal life and annuity contracts are reported as
deposits to policyholders' account balances. Revenues from these contracts
consist of amounts assessed during the period for mortality and expense risk,
policy administration and surrender charges. Policy benefits and claims that are
charged to expenses include benefit claims incurred in the period in excess of
related policyholders' account balances.
POLICYHOLDERS' ACCOUNT BALANCES
Policyholders' account balances on universal life and annuity contracts are
equal to cumulative deposits plus credited interest less withdrawals and
charges.
FEDERAL INCOME TAXES
NYLIAC is a member of a group which files a consolidated Federal income tax
return with New York Life. The consolidated income tax provision or benefit is
allocated among the members of the group in accordance with a tax allocation
agreement. The tax allocation agreement provides that NYLIAC is allocated its
share of the consolidated tax provision or benefit determined generally on a
separate company basis. Current Federal income taxes are charged or credited to
operations based upon amounts estimated to be payable or recoverable as a result
of taxable operations for the current year and any adjustments to such estimates
from prior years. Deferred income tax assets and liabilities are recognized for
the future tax consequence of temporary differences between financial statement
carrying amounts and income tax bases of assets and liabilities.
Current Federal income taxes include a provision for NYLIAC's share of the
equity base tax applicable to mutual life insurance companies and their
insurance subsidiaries. The amount recorded is based on NYLIAC's estimate of the
differential earnings rate ("DER") (the actual rate will be announced at a later
date by the Internal Revenue Service ("IRS")) used to compute the equity base
tax.
REINSURANCE
NYLIAC enters into reinsurance agreements in the normal course of its
insurance business to reduce overall risk. NYLIAC remains liable for reinsurance
ceded if the reinsurer fails to meet its obligation on the business it has
assumed. NYLIAC evaluates the financial condition of its reinsurers to minimize
its exposure to significant losses from reinsurer insolvencies.
SEPARATE ACCOUNTS
NYLIAC has established separate accounts with varying investment objectives
which are segregated from NYLIAC's general account and are maintained for the
benefit of separate account policyholders and NYLIAC. Separate account assets
are stated at market value. The liability for separate accounts represents
policyholders' interests in the separate account assets. For its registered
separate accounts, these liabilities include accumulated net investment income
and realized and unrealized gains and losses on those assets, and generally
reflect market value. For its guaranteed, non-registered separate accounts, the
liability includes interest credited to the policies.
F-57
<PAGE> 117
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of various assets and liabilities are included throughout the
notes to financial statements. Specifically, fair value disclosure of fixed
maturities, short-term investments, cash equivalents, equity securities and
mortgage loans is reported in Note 2 -- Significant Accounting Policies and Note
3 -- Investments. Fair values for policyholders' account balances are reported
in Note 5 -- Insurance Liabilities. Fair values for derivative financial
instruments are included in Note 10 -- Derivative Financial Instruments and Risk
Management. Fair values for repurchase agreements are included in Note
11 -- Commitments and Contingencies.
BUSINESS RISKS AND UNCERTAINTIES
The development of policy reserves and deferred policy acquisition costs
for NYLIAC's products requires management to make estimates and assumptions
regarding mortality, morbidity, lapse, expense and investment experience. Such
estimates are primarily based on historical experience and future expectations
of mortality, morbidity, expense, persistency and investment assumptions. Actual
results could differ from those estimates. Management monitors actual
experience, and where circumstances warrant, revises its assumptions and the
related estimates for policy reserves and deferred policy acquisition costs.
NYLIAC regularly invests in mortgage loans, mortgage-backed securities and
other securities subject to prepayment and/or call risk. Significant changes in
prevailing interest rates and/or geographic conditions may adversely affect the
timing and amount of cash flows on such securities, as well as their related
values. In addition, the amortization of market premium and accretion of market
discount for mortgage-backed securities is based on historical experience and
estimates of future payment experience on the underlying mortgage loans. Actual
prepayment speeds will differ from original estimates and may result in material
adjustments to amortization or accretion recorded in future periods.
As a subsidiary of a mutual life insurance company, NYLIAC is subject to a
tax on its equity base. The rates applied to NYLIAC's equity base are determined
annually by the IRS after comparison of mutual life insurance company earnings
for the year to the average earnings of the 50 largest stock life insurance
companies for the prior three years. Due to the timing of earnings information,
estimates of the current year's tax rate must be made by management. The
ultimate amounts of equity base tax incurred may vary considerably from the
original estimates.
ACCOUNTING CHANGES
During 1997, the Financial Accounting Standard Board ("FASB") issued SFAS
130, "Reporting Comprehensive Income" which establishes standards for the
reporting and display of comprehensive income and its components. Comprehensive
income is defined as net income adjusted for changes in stockholder's equity
resulting from events other than net income.
This Statement was adopted for the 1998 NYLIAC financial statements. The
1997 and 1996 financial statements were not restated to report the
reclassification adjustments separately from unrealized gains (losses) which
arose during the period. Adoption of this Statement had no effect on reported
net income or stockholder's equity.
RECENT ACCOUNTING PRONOUNCEMENTS
The FASB recently issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (Statement). This Statement establishes new
GAAP accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, and for hedging activities.
This Statement is effective for the 2000 financial statements of the Company.
NYLIAC is currently evaluating what impact, if any, this Statement will have on
its financial results.
This Statement requires that derivatives be reported in the balance sheet
at their fair value, regardless of any hedging relationship that may exist.
Accounting for the gains or losses resulting from changes in the values of those
derivatives would depend on the use of the derivative and whether it qualifies
for hedge accounting. Changes in fair value of derivatives that are not
designated as hedges or that do not meet the hedge accounting criteria will be
reported in earnings.
F-58
<PAGE> 118
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 3 -- INVESTMENTS
FIXED MATURITIES
For publicly traded fixed maturities, estimated fair value is determined
using quoted market prices. For fixed maturities without a readily ascertainable
market value, NYLIAC has determined an estimated fair value using either a
discounted cash flow approach, including provisions for credit risk generally
based upon the assumption such securities will be held to maturity, or a
proprietary matrix pricing model.
At December 31, 1998 and 1997, the maturity distribution of fixed
maturities was as follows (in millions):
<TABLE>
<CAPTION>
1998 1997
----------------------- -----------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
AVAILABLE FOR SALE COST FAIR VALUE COST FAIR VALUE
- ------------------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Due in one year or less $ 518 $ 521 $ 480 $ 482
Due after one year through five years 3,473 3,533 3,053 3,099
Due after five years through ten years 1,804 1,885 2,156 2,230
Due after ten years 3,028 3,235 2,425 2,608
Asset-backed securities:
Government or government agency 2,080 2,121 2,271 2,324
Other 1,740 1,786 1,411 1,427
------- ------- ------- -------
Total Available for Sale $12,643 $13,081 $11,796 $12,170
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
HELD TO MATURITY
- ----------------
<S> <C> <C> <C> <C>
Due in one year or less $ 27 $ 28 $ 30 $ 30
Due after one year through five years 225 291 225 239
Due after five years through ten years 219 228 226 240
Due after ten years 193 207 224 238
Asset-backed securities 61 62 96 97
------- ------- ------- -------
Total Held to Maturity $ 725 $ 816 $ 801 $ 844
======= ======= ======= =======
</TABLE>
At December 31, 1998 and 1997, the distribution of gross unrealized gains
and losses on investments in fixed maturities was as follows (in millions):
<TABLE>
<CAPTION>
1998
---------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
AVAILABLE FOR SALE COST GAINS LOSSES FAIR VALUE
- ------------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government
corporations and agencies $ 1,006 $ 45 $ 1 $ 1,050
U.S. agencies, state and municipal 1,927 39 4 1,962
Foreign governments 234 22 -- 256
Corporate 7,736 338 47 8,027
Other 1,740 48 2 1,786
------- ---- --- -------
Total Available for Sale $12,643 $492 $54 $13,081
======= ==== === =======
HELD TO MATURITY
Corporate $ 664 $ 91 $ 1 $ 754
Other 61 1 -- 62
------- ---- --- -------
Total Held to Maturity $ 725 $ 92 $ 1 $ 816
======= ==== === =======
</TABLE>
F-59
<PAGE> 119
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
FIXED MATURITIES -- (CONTINUED)
<TABLE>
<CAPTION>
1997
---------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
AVAILABLE FOR SALE COST GAINS LOSSES FAIR VALUE
- ------------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government
corporations and agencies $ 1,066 $ 36 $ 1 $ 1,101
U.S. agencies, state and municipal 1,946 42 2 1,986
Foreign governments 237 19 -- 256
Corporate 7,136 276 12 7,400
Other 1,411 20 4 1,427
------- ---- --- -------
Total Available for Sale $11,796 $393 $19 $12,170
======= ==== === =======
HELD TO MATURITY
Corporate $ 705 $ 42 $-- $ 747
Other 96 1 -- 97
------- ---- --- -------
Total Held to Maturity $ 801 $ 43 $-- $ 844
======= ==== === =======
</TABLE>
EQUITY SECURITIES
Estimated fair value of equity securities has been determined using quoted
market prices for publicly traded securities and a matrix pricing model for
private placement securities. At December 31, 1998 and 1997, the distribution of
gross unrealized gains and losses on equity securities is as follows (in
millions):
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1998 $76 $27 $3 $100
1997 $66 $25 $8 $ 83
</TABLE>
MORTGAGE LOANS
NYLIAC's mortgage loans are diversified by property type, location and
borrower, and are generally collateralized by the related property.
The fair market value of the mortgage loan portfolio at December 31, 1998
and 1997 is estimated to be $1,728 million and $1,408 million, respectively.
Market values are determined by discounting the projected cash flows for each
loan to determine the current net present value. The discount rate used
approximates the current rate for new mortgages with comparable characteristics
and similar remaining maturities.
At December 31, 1998 and 1997, contractual commitments to extend credit
under commercial and residential mortgage loan agreements amounted to
approximately $76 million and $108 million, respectively, at a fixed market rate
of interest. These commitments are diversified by property type and geographic
region.
The provision for losses on mortgage loans was $1 million and $14 million
at December 31, 1998 and 1997, respectively. The activity in the specific and
general reserves as of December 31, 1998 and 1997 is summarized below (in
millions):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Beginning Balance $14 $20
Reductions credited to operations (5) (1)
Recoveries of amounts previously written-down (8) (5)
--- ---
Ending Balance $ 1 $14
=== ===
</TABLE>
F-60
<PAGE> 120
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
MORTGAGE LOANS -- (CONTINUED)
Impaired mortgage loans along with specific provisions for losses as of
December 31, 1998 and 1997, were as follows (in millions):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Impaired mortgage loans with provisions for losses $-- $19
Provision for losses -- (8)
-- ---
Net impaired mortgage loans $-- $11
== ===
</TABLE>
NYLIAC accrues interest income on impaired loans to the extent it is deemed
collectible and the loan continues to perform under its original or restructured
contractual terms. Interest income on problem loans is generally recognized on a
cash basis. Cash payments on loans in the process of foreclosure are generally
treated as a return of principal.
At December 31, 1998 and 1997, the distribution of the mortgage loan
portfolio by property type and geographic region was as follows (in millions):
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Property Type:
Office building $ 753 $ 601
Retail 330 255
Apartments 187 187
Residential 247 172
Other 105 90
------ ------
Total $1,622 $1,305
====== ======
Geographic Region:
Central $ 359 $ 250
Pacific 211 145
Middle Atlantic 451 426
South Atlantic 418 362
New England 121 73
Other 62 49
------ ------
Total $1,622 $1,305
====== ======
</TABLE>
REAL ESTATE
At December 31, 1998 and 1997, NYLIAC's real estate portfolio consisted of
the following (in millions):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Investment $105 $103
Acquired through foreclosures 11 19
Real estate joint ventures and limited partnerships -- 29
---- ----
Total real estate $116 $151
==== ====
</TABLE>
Accumulated depreciation on real estate at December 31, 1998 and 1997, was
$12 million and $8 million, respectively. Depreciation expense totaled $3
million in 1998, 1997 and 1996.
F-61
<PAGE> 121
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 4 -- INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES
The components of net investment income for the years ended December 31,
1998, 1997 and 1996, were as follows (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Fixed maturities $ 972 $ 961 $ 920
Equity securities 7 6 3
Mortgage loans 116 96 93
Real estate 15 18 21
Policy loans 40 39 37
Other 9 1 6
------ ------ ------
Gross investment income 1,159 1,121 1,080
Investment expenses (44) (55) (32)
------ ------ ------
Net investment income $1,115 $1,066 $1,048
====== ====== ======
</TABLE>
For the years ended December 31, 1998, 1997 and 1996, realized investment
gains computed under the specific identification method are as follows (in
millions):
<TABLE>
<CAPTION>
1998 1997 1996
-------------------- --------------------- --------------------
GAINS LOSSES GAINS LOSSES GAINS LOSSES
----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed maturities $ 87 $(29) $172 $ (83) $100 $ (64)
Equity securities 7 (7) 9 (4) 22 (1)
Mortgage loans 16 (8) 12 (8) 15 (19)
Real estate 6 (2) 3 (2) 6 (3)
Derivative instruments -- -- 80 (71) 46 (41)
Other 3 (17) 19 (1) 7 (3)
---- ---- ---- ----- ---- -----
Subtotal $119 $(63) $295 $(169) $196 $(131)
---- ---- ---- ----- ---- -----
Investment gains, net $56 $126 $65
=== ==== ===
</TABLE>
During 1997, one fixed maturity investment that had been classified as held
to maturity was sold due to credit deterioration. The investment had an
amortized cost of $2,791,000, and the sale resulted in a realized gain of
$14,000.
Stockholder's equity at December 31, 1998 and 1997 includes net unrealized
gains as follows (in millions):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net unrealized gains on investments before adjustments $472 $382
---- ----
Related adjustments
Deferred policy acquisition costs (169) (148)
Policyholder liabilities 6 7
Deferred Federal income taxes (108) (84)
---- ----
(271) (225)
---- ----
Net unrealized gains on investments included in
Stockholder's equity $201 $157
==== ====
</TABLE>
F-62
<PAGE> 122
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 4 -- INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES -- (CONTINUED)
Changes in net unrealized gains and losses on investments were as follows
(in millions):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Unrealized gains (losses) on investments:
Beginning of year $382 $163
End of year 472 382
---- ----
Net change 90 219
Change in related adjustments of balance sheet accounts:
Deferred policy acquisition costs (21) (88)
Policyholder liabilities (1) 5
Deferred Federal income taxes (24) (47)
---- ----
Change in unrealized gains on investments 44 89
Net unrealized gains on investments at beginning of year 157 68
---- ----
Net unrealized gains on investments at end of year $201 $157
==== ====
</TABLE>
NOTE 5 -- INSURANCE LIABILITIES
NYLIAC's annuity contracts are primarily deferred annuities. The carrying
value, which approximates fair value, of NYLIAC's liabilities for deferred
annuities at December 31, 1998 and 1997, was $6,905 million and $7,150 million,
respectively.
NOTE 6 -- SEPARATE ACCOUNTS
NYLIAC maintains eight non-guaranteed, registered separate accounts for its
variable deferred annuity and variable life products. NYLIAC maintains
investments in the registered separate accounts of $54 million and $12 million
at December 31, 1998 and 1997, respectively. The assets of the separate
accounts, which are carried at market value, represent investments in shares of
the New York Life sponsored MainStay VP Series Fund and other non-proprietary
funds.
In addition, in 1997 two guaranteed, non-registered separate accounts were
established for universal life insurance policies. These accounts provide a
minimum guaranteed interest rate with a market value adjustment imposed upon
certain surrenders. The assets of these separate accounts are carried at market
value. At December 31, 1998, no policies had yet been issued for one of these
separate accounts.
NOTE 7 -- DEFERRED POLICY ACQUISITION COSTS
An analysis of deferred policy acquisition costs (DAC) for the years ended
December 31, 1998, 1997 and 1996 is as follows (in millions):
<TABLE>
<CAPTION>
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Balance at beginning of year before adjustment for
unrealized gains on investments $ 836 $ 751 $ 707
Current year additions 286 200 151
Amortized during year (94) (115) (107)
Balance at end of year before adjustment for
unrealized gains on investments 1,028 836 751
Adjustment for unrealized gains on investments (169) (148) (60)
------ ----- -----
Balance at end of year $ 859 $ 688 $ 691
====== ===== =====
</TABLE>
F-63
<PAGE> 123
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 8 -- FEDERAL INCOME TAXES
The components of the net deferred tax liability as of December 31, 1998
and 1997 are as follows (in millions):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Future policyholder benefits $196 $153
Employee and agents' benefits 53 49
Other -- 6
---- ----
Gross deferred tax assets 249 208
==== ====
Deferred tax liabilities:
Deferred policy acquisition costs 168 147
Investments 174 149
Other 8 5
---- ----
Gross deferred tax liabilities 350 301
---- ----
Net deferred tax liability $101 $ 93
==== ====
</TABLE>
The gross deferred tax asset relates to temporary differences that are
expected to reverse as net ordinary deductions. Management believes that
NYLIAC's taxable income in future years will be sufficient to realize the
deferred tax benefits and therefore, no valuation allowance has been recorded.
Set forth below is a reconciliation of the Federal income tax rate to the
effective tax rate for 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Equity base tax 1.7 3.3 3.2
Tax exempt income (.5) (.5) (.7)
Other (.2) (.1) (.9)
---- ---- ----
Effective tax rate 36.0% 37.7% 36.6%
==== ==== ====
</TABLE>
NYLIAC's Federal income tax returns are routinely examined by the IRS and
provisions are made in the financial statements in anticipation of the results
of these audits. The IRS has completed audits through 1993. There were no
material effects on NYLIAC's results of operations as a result of these audits.
NYLIAC believes that its recorded income tax liabilities are adequate for all
open years.
NOTE 9 -- REINSURANCE
On April 1, 1997, NYLIAC, under the terms of an assumption reinsurance
agreement, acquired certain bank owned life insurance policies that had been
issued by Confederation Life Insurance Company. In conjunction with this
transaction, NYLIAC recorded a liability for policyholder account balances of
$278 million, and received cash of $245 million and a note receivable of $11
million. The difference of $22 million between the liability recorded and the
assets received has been recorded as DAC, which will be amortized over the
remaining life of the policies, assumed to be 25 years.
NOTE 10 -- DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
NYLIAC uses derivative financial instruments to manage interest rate,
commodity and market risk. These derivative financial instruments include
interest rate floors and interest rate and commodity swaps. NYLIAC has not
engaged in derivative financial instrument transactions for speculative
purposes.
F-64
<PAGE> 124
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 10 -- DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT -- (CONTINUED)
Notional or contractual amounts of derivative financial instruments provide
only a measure of involvement in these types of transactions and do not
represent the amounts exchanged between the parties engaged in the transaction.
The amounts exchanged are determined by reference to the notional amounts and
other terms of the derivative financial instruments which relate to interest
rates and other financial indices.
NYLIAC is exposed to credit-related losses in the event that a counterparty
fails to perform its obligations under contractual terms. The credit exposure of
derivative financial instruments is represented by the sum of fair values of
contracts with each counterparty, if the net value is positive, at the reporting
date.
NYLIAC deals with highly rated counterparties and does not expect the
counterparties to fail to meet their obligations. NYLIAC has controls in place
to monitor credit exposures by limiting transactions with specific
counterparties within specified dollar limits and assessing the future
creditworthiness of counterparties. NYLIAC uses master netting agreements and
adjusts transaction levels, when appropriate, to minimize risk.
INTEREST RATE RISK MANAGEMENT
NYLIAC enters into various types of interest rate contracts primarily to
minimize exposure of specific assets held by NYLIAC to fluctuations in interest
rates.
The following table summarizes the notional amounts and credit exposures of
interest rate related derivative transactions (in thousands):
<TABLE>
<CAPTION>
1998 1997
-------------------- --------------------
NOTIONAL CREDIT NOTIONAL CREDIT
AMOUNT EXPOSURE AMOUNT EXPOSURE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest Rate Swaps $125,000 $9,125 $125,000 $2,973
Floors $150,000 $ 748 $150,000 $ 251
</TABLE>
Interest rate swaps are agreements with other parties to exchange, at
specified intervals, the difference between fixed-rate and floating-rate
interest amounts calculated by reference to an agreed upon notional amount. Swap
contracts outstanding at December 31, 1998 are between six years, eight months
and nineteen years in maturity. At December 31, 1997 such contracts were between
seven years, eight months and twenty years in maturity. NYLIAC does not act as
an intermediary or broker in interest rate swaps.
The following table shows the type of swaps used by NYLIAC and the weighted
average interest rates. Average variable rates are based on the rates which
determine the last payment received or paid on each contract; those rates may
change significantly, affecting future cash flows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Receive - fixed swaps - Notional amount (in thousands) $125,000 $125,000
Average receive rate 6.64% 6.64%
Average pay rate 5.65% 5.70%
</TABLE>
During the term of the swap, net settlement amounts are recorded as
investment income or expense when earned. Fair values of interest rate swaps
were $9,125,000 and $2,973,000 at December 31, 1998 and 1997, respectively,
based on quoted market prices.
Interest rate floor agreements entitle NYLIAC to receive amounts from
counterparties based upon the difference between a strike price and current
interest rates. Such agreements serve as hedges against declining interest rates
on a portfolio of assets. Amounts received during the term of interest rate
floor agreements are recorded as investment income.
At December 31, 1998 and 1997, unamortized premiums on interest rate floors
amounted to $372,000 and $447,000, respectively. Fair values of such agreements
were $748,000 and $251,000 at December 31, 1998 and 1997, respectively, based on
quoted market prices.
F-65
<PAGE> 125
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
COMMODITY RISK MANAGEMENT
NYLIAC has certain bond investments with interest payments linked to prices
of commodities such as gold and crude oil. NYLIAC has entered into commodity
swaps with a total notional amount of $18,000,000 as a hedge against commodity
risks in both 1998 and 1997. The credit exposure of these swaps was $1,290,000
and $3,021,000 at December 31, 1998 and 1997, respectively.
NOTE 11 -- COMMITMENTS AND CONTINGENCIES
LITIGATION
NYLIAC is a defendant in individual and/or alleged class action suits
arising from its agency sales force, insurance (including variable contracts
registered under the federal securities law), investment, retail securities
and/or other operations, including actions involving retail sales practices.
Most of these actions also seek substantial or unspecified compensatory and
punitive damages. NYLIAC is also from time to time involved as a party in
various governmental, administrative, and investigative proceedings and
inquiries.
Given the uncertain nature of litigation and regulatory inquiries, the
outcome of which cannot be predicted, NYLIAC nevertheless believes that, after
provisions made in the financial statements, the ultimate liability that could
result from litigation and proceedings would not have a material adverse effect
on NYLIAC's financial position; however, it is possible that settlements or
adverse determinations in one or more actions or other proceedings in the future
could have a material adverse effect on NYLIAC's operating results for a given
year.
LOANED SECURITIES AND REPURCHASE AGREEMENTS
NYLIAC participates in a securities lending program for the purpose of
enhancing income on securities held. At December 31, 1998 and 1997, $571 million
and $659 million, respectively, of NYLIAC's fixed maturities and equity
securities were on loan to others, but were fully collateralized in an account
held in trust for NYLIAC. Such assets reflect the extent of NYLIAC's involvement
in securities lending, not NYLIAC's risk of loss.
NYLIAC enters into agreements to sell and repurchase securities for the
purpose of enhancing income on securities held. Under these agreements, NYLIAC
obtains the use of funds from a broker for approximately one month. The
liability reported in the balance sheet (included in other liabilities) at
December 31, 1998 of $139 million ($184 million at December 31, 1997)
approximates fair value. The investments acquired with the funds received from
the securities sold are primarily included in cash and cash equivalents in the
balance sheet.
NOTE 12 -- RELATED PARTY TRANSACTIONS
New York Life provides NYLIAC with services and facilities for the sale of
insurance and other activities related to the business of insurance. NYLIAC
reimburses New York Life for the identified costs associated with these services
and facilities under the terms of a Service Agreement between New York Life and
NYLIAC. Such costs, amounting to $342 million for the year ended December 31,
1998 ($247 million for 1997 and $191 million for 1996) are reflected in
operating expenses and net investment income in the accompanying Statement of
Income.
In 1998, NYLIAC sold a Corporate Owned Life (COLI) policy to its parent,
New York Life Insurance Company, for $250 million in premium. The policy was
sold on the same basis as policies sold to unrelated customers.
F-66
<PAGE> 126
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 13 -- ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated Other Comprehensive Income is as follows (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997 1996
----- ----- ------
<S> <C> <C> <C>
Unrealized gains on securities:
Beginning balance $157 $ 68 $ 227
Current period change 44 89 (159)
---- ---- -----
Ending balance $201 $157 $ 68
==== ==== =====
</TABLE>
The related tax effects allocated to Other Comprehensive Income are as
follows (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
--------------------------------------
TAX
BEFORE-TAX (EXPENSE) NET-OF-TAX
AMOUNT OR BENEFIT AMOUNT
---------- ---------- ----------
<S> <C> <C> <C>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during
period $123 $(44) $79
Less: reclassification adjustment for gains
(losses) in net income 54 (19) 35
---- ---- ---
Other Comprehensive Income $ 69 $(25) $44
==== ==== ===
</TABLE>
NOTE 14 -- SUPPLEMENTAL CASH FLOW INFORMATION
Federal income taxes paid were $67 million, $126 million, and $146 million
during 1998, 1997 and 1996, respectively.
Total interest paid was $27 million, $35 million and $10 million during
1998, 1997 and 1996, respectively.
NOTE 15 -- RECONCILIATIONS BETWEEN STATUTORY ACCOUNTING AND GAAP
Accounting practices used to prepare statutory financial statements for
regulatory filings of life insurance companies differ in certain instances from
GAAP. The following chart reconciles NYLIAC's statutory surplus determined in
accordance with accounting practices prescribed by the Delaware State Insurance
Department with stockholder's equity on a GAAP basis (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Statutory Surplus $1,095 $1,089 $ 998
------ ------ ------
Adjustments:
Deferred policy acquisition costs 859 688 691
Investment related 458 377 151
Asset valuation reserve 197 165 164
Interest maintenance reserve 120 105 35
Non-admitted assets 66 59 31
Policyholder liabilities (447) (330) (263)
Deferred taxes (101) (94) (47)
Employee benefit liabilities (79) (74) (72)
Other (20) (23) (2)
------ ------ ------
Total adjustments 1,053 873 688
------ ------ ------
Total GAAP Stockholder's Equity $2,148 $1,962 $1,686
====== ====== ======
</TABLE>
F-67
<PAGE> 127
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 15 -- RECONCILIATIONS BETWEEN STATUTORY ACCOUNTING AND GAAP -- (CONTINUED)
The following chart reconciles NYLIAC's statutory net income determined in
accordance with accounting practices prescribed by the Delaware State Insurance
Department with net income on a GAAP basis (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Statutory Net Income $ 10 $134 $148
----- ---- ----
Adjustments:
Deferred policy acquisition costs 192 63 44
Investment related 19 7 2
Interest maintenance reserve 15 70 9
Policyholder liabilities (110) (84) (62)
Deferred taxes 17 1 24
Other (1) (4) 4
----- ---- ----
Total Adjustments 132 53 21
----- ---- ----
GAAP Net Income $ 142 $187 $169
===== ==== ====
</TABLE>
Financial statements prepared on the statutory basis of accounting vary
from those prepared under GAAP, primarily as follows: (1) the costs related to
acquiring business, principally commissions and certain policy issue expenses
are charged to income in the year incurred, whereas under GAAP they would be
deferred and amortized over the periods benefitted; (2) funds received under
deposit-type contracts are reported as premium income, whereas under GAAP, such
funds are recorded as a liability; (3) life insurance reserves are based on
different assumptions than they are under GAAP; (4) life insurance companies are
required to establish an Asset Valuation Reserve ("AVR") by a direct charge to
surplus to offset potential investment losses, whereas under GAAP, the AVR is
not recognized and any reserve for losses on investments would be deducted from
the assets to which they relate and would be charged to income; (5) investments
in fixed maturities are generally carried at amortized cost or values prescribed
by the National Association of Insurance Commissioners ("NAIC"); under GAAP,
investments in fixed maturities, which are available for sale or held for
trading, are generally carried at market value, with changes in market value
charged against equity or reflected in earnings; (6) realized gains and losses
resulting from changes in interest rates on fixed income investments are
deferred in the interest maintenance reserve and amortized into investment
income over the remaining life of the investment sold, whereas under GAAP, the
gains and losses are recognized in income at the time of sale; (7) deferred
federal income taxes are not provided for as they are under GAAP; and (8)
certain assets are considered non-admitted and are excluded from assets in the
balance sheet, whereas they are included under GAAP.
The Delaware Insurance Department recognizes only statutory accounting
practices for determining and reporting the financial condition and results of
operations of an insurance company, and for determining its solvency under the
Delaware Insurance Law. No consideration is given by the Department to financial
statements prepared in accordance with generally accepted accounting principles
in making such determinations.
At December 31, 1998 and 1997 on a statutory basis, admitted assets were
$23,351 million and $20,059 million respectively, and total liabilities were
$22,256 million and $18,970 million, respectively, which included policy
reserves of $14,626 million and $13,666 million, respectively.
NYLIAC is restricted as to the amounts it may pay as dividends to New York
Life. The maximum amount of dividends which can be paid by a Delaware insurance
company to its stockholders may not exceed that part of its available and
accumulated statutory surplus funds which is derived from net operating profits
and realized capital gains. Such available and accumulated funds at December 31,
1998 were $590 million.
F-68
<PAGE> 128
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
New York Life Insurance and Annuity Corporation
In our opinion, the accompanying balance sheets and the related statements of
income and comprehensive income, of changes in stockholder's equity and of cash
flows present fairly, in all material respects, the financial position of New
York Life Insurance and Annuity Corporation at December 31, 1998 and 1997, and
the results of its operations and its cash flows for the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
1177 Avenue of the Americas
New York, New York 10036
March 9, 1999
F-69
<PAGE> 129
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 Post-Effective Amendment No. 6
to the registration statement on Form N-4 for NYLIAC Variable Annuity
Separate Account-I, 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 Post-Effective Amendment No.6
to the registration statement on Form N-4 for NYLIAC Variable Annuity
Separate Account-I, 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 Post-Effective
Amendment No. 6 to the registration statement on Form N-4 for NYLIAC
Variable Annuity Separate Account-I (File No. 33-53342), 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.
C-1
<PAGE> 130
(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
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 - Previously filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(h) to
Post-Effective Amendment No. 7 to the registration statement on Form
N-4 for NYLIAC Variable Annuity Separate Account-I (File No. 33-53342),
and incorporated herein by reference.
(8)(i) Form of Participation Agreement among Van Eck Worldwide Insurance
Trust, Van Eck Associates Corporation and NYLIAC - Previously filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(i) to
Post-Effective Amendment No. 7 to the registration statement on Form
N-4 for NYLIAC Variable Annuity Separate Account-I (File No. 33-53342),
and incorporated herein by reference.
(8)(j) Form of Participation Agreement among MFS Variable Insurance Trust,
Massachusetts Financial Services Company and NYLIAC - Previously filed
in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(j)
to Post-Effective Amendment No. 7 to the registration statement on
Form N-4 for NYLIAC Variable Annuity Separate Account-I (File No.
33-53342), and incorporated herein by reference.
C-2
<PAGE> 131
(9) Opinion and Consent of Jonathan E. Gaines, Esq. - filed herewith.
(10)(a) Consent of PricewaterhouseCoopers LLP - filed herewith.
(10)(b) Powers of Attorney for the Directors and Officers of NYLIAC -
Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e)
as Exhibit (9)(c) to Pre-Effective Amendment No. 2 to the registration
statement on Form S-6 for NYLIAC Corporate Sponsored Variable Universal
Life Separate Account-I (File No. 333-07617) for the following, and
incorporated herein by reference:
Jay S. Calhoun, Vice President, Treasurer and Director (Principal
Financial Officer)
Richard M. Kernan, Jr., Director
Robert D. Rock, Senior Vice President and Director
Frederick J. Sievert, President and Director (Principal Executive
Officer)
Stephen N. Steinig, Senior Vice President, Chief Actuary and Director
Seymour Sternberg, Director
(10)(c) Power of Attorney for Maryann L. Ingenito, Vice President and
Controller (Principal Accounting Officer) - Previously filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(d) to
Pre-Effective Amendment No. 1 to the registration statement on Form S-6
for NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I (File No. 333-07617), and incorporated herein by reference.
(10)(d) Power of Attorney for Howard I. Atkins, Executive Vice President
(Principal Financial Officer) - Previously filed as Exhibit 8(d) to
Pre-Effective Amendment No. 1 to the registration statement on Form S-6
for NYLIAC Variable Universal Life Separate Account-I (File No.
333-39157), and incorporated herein by reference.
(10)(e) Power of Attorney for Certain Directors of NYLIAC - Previously filed as
Exhibit 10(e) to Post-Effective Amendment No. 6 to the registration
statement on Form N-4 for NYLIAC Variable Annuity Separate Account-III
(File No. 33-87382), and incorporated herein by reference for the
following:
George J. Trapp, Director
Frank M. Boccio, Director
Phillip J. Hildebrand, Director
Michael G. Gallo, Director
Solomon Goldfinger, Director
Howard I. Atkins, Director
(11) Not applicable.
(12) Not applicable.
(13) Schedule of Computations - Previously filed as Exhibit 13 to
Post-Effective Amendment No. 7 to the registration statement on Form
N-4 for NYLIAC Variable Annuity Separate Account-I (File
No. 33-53342), and incorporated herein by reference.
(14) Not applicable.
C-3
<PAGE> 132
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The business address of each director and officer of NYLIAC is 51 Madison
Avenue, New York, NY 10010.
<TABLE>
<CAPTION>
Name: Title:
----- ------
<S> <C>
Seymour Sternberg Director
Richard M. Kernan, Jr. Director
Frederick J. Sievert Director and President
George J. Trapp Director
Frank M. Boccio Director
Robert D. Rock Director and Senior Vice President
Howard I. Atkins Director, Executive Vice President and Chief Financial Officer
Michael Gallo Director, Senior Vice President
Solomon Goldfinger Director, Senior Vice President
Phillip J. Hildebrand Director, Senior Vice President
Jean E. Hoysradt Senior Vice President
Gary G. Benanav Executive Vice President and Chairman of Taiwan Branch
Jay S. Calhoun Senior Vice President and Treasurer
Judith E. Campbell Senior Vice President and Chief Information Officer
Shiela K. Davidson Senior Vice President
Richard D. Levy Senior Vice President
Michael J. McLaughlin Senior Vice President and General Counsel
Michael J. Nocera Senior Vice President
Frank J. Ollari Senior Vice President
Anne F. Pollack Senior Vice President
Stephen N. Steinig Senior Vice President and Chief Actuary
Thomas J. Warga Senior Vice President and General Auditor
Edward C. Wilson Senior Vice President and Chief Sales Officer
William Cheng Vice President
Limim Chu General Manager and President of Taiwan Branch
Henry Ciapas Vice President
Patrick Colloton Vice President
John A. Cullen Vice President and Assistant Controller
Lisa O. Cullity Vice President
Melvin J. Feinberg Vice President
Jane L. Hamrick Vice President and Actuary
David A.K. Harland Vice President and Secretary
Robert E. Hebron Vice President
Celia J. Holtzberg Vice President
Robert Hynes Vice President
Maryann L. Ingenito Vice President and Controller
Himi L. Kittner Vice President
David Krystel Vice President
Thomas S. McArdle Vice President
Daniel J. McKillop Vice President
John R. Meyer Vice President
William H. Mowat Vice President
Michael M. Oleske Vice President and Tax Counsel
Danny Ramjit Vice President and CFO Taiwan Branch
Andrew N. Reiss Vice President and National Sales Manager
Joel Steinberg Vice President and Actuary
Lawrence R. Stoehr Vice President
Richard W. Zuccaro Vice President
</TABLE>
C-4
<PAGE> 133
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR
REGISTRANT
The Depositor, NYLIAC, is a wholly-owned subsidiary of New York Life Insurance
Company ("New York Life"). The Registrant is a segregated asset account of
NYLIAC. The following chart indicates persons presumed to be controlled by New
York Life(+), unless otherwise indicated. Subsidiaries of other subsidiaries are
indented accordingly, and ownership is 100% unless otherwise indicated.
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
Aegis Technologies, Inc.(1) Delaware
MainStay Institutional Funds Inc.(2) Maryland
MainStay VP Series Fund, Inc.(3) Maryland
New York Life Insurance and Annuity Corporation Delaware
New York Life Irrevocable Trust of 1996(4) New York N/A
NYLIFE Inc. New York
Avanti Corporate Health Systems, Inc. Delaware
Avanti of the District, Inc. Maryland
Avanti of New Jersey, Inc. New Jersey
Docservco, Inc. New York
Eagle Strategies Corp. Arizona
Greystone Realty Corporation Delaware
Greystone Realty Management, Inc. Delaware
MacKay-Shields Financial Corporation Delaware
Madison Square Advisers, Inc. Delaware
MainStay Management, Inc. Delaware
MainStay Shareholder Services Inc. Delaware
MSC Holding, Inc. Georgia 85.43%
Monitor Capital Advisors, Inc. Delaware
New York Life Benefit Services, Inc. Massachusetts
</TABLE>
- --------
(1) A Certificate of Dissolution was filed for this Company on April 9,
1996. Pursuant to Delaware law, the Company's existence is "continued" for a
period of three years following dissolution for purposes of winding up.
Therefore, this Company is included here for informational purposes only.
(2) This entity is an unaffiliated registered investment company as to
which New York Life and/or its subsidiaries perform investment management,
administrative, distribution and underwriting services. It is not a subsidiary
of New York Life but is included here for informational purposes only.
(3) New York Life serves as investment adviser to this entity, the
shares of which are held of record by separate accounts of NYLIAC. New York Life
disclaims any beneficial ownership and control of this entity. New York Life
and NYLIAC as depositors of said separate accounts have agreed to vote their
shares as to matters covered in the proxy statements in accordance with voting
instructions received from holders of variable annuity and variable life
insurance policies at the shareholders meeting of these entities. It is not
a subsidiary of New York Life, but is included here for informational purposes
only.
(4) An unaffiliated trust formed solely for the purpose of holding
shares of New York Life Settlement Corporation. It is not a subsidiary of New
York Life, but is included here for informational purposes only.
- ------------------------------------
(+) By including the indicated corporations in this list, New York Life is
not stating or admitting that said corporations are under its actual
control; rather, these corporations are listed here to ensure full
compliance with the requirements of this Form N-4.
C-5
<PAGE> 134
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
(NYLIFE Inc. subsidiaries cont.)
ADQ Insurance Agency, Inc. Massachusetts
New York Life Capital Corporation Delaware
New York Life International Investment Inc. Delaware
Monetary Research Ltd. Bermuda
NYL Management Limited United Kingdom
Taiyo Life Gamma Asset Management Ltd(5) Japan 16.7%
New York Life International Investment Asia Ltd. Mauritius
New York Life International, Inc. Delaware
New York Life Worldwide Capital, Inc. Delaware
New York Life Worldwide Development, Inc. Delaware
New York Life Worldwide (Bermuda) Ltd. Bermuda
New York Life Insurance Worldwide Ltd. Bermuda
New York Life (U.K.) Ltd.(6) United Kingdom 99.97%
Life Assurance Holding Corporation Limited United Kingdom 23%
Windsor Life Assurance Company Limited United Kingdom
Windsor Construction Company Limited United Kingdom
KOHAP New York Life Insurance Ltd. South Korea 51%
P.T. Asuransi Jiwa Sewu-New York Life Indonesia 50.2%
GEO New York Life, S.A. Mexico 49%
New York Life Trust Company New York
NYLIFE Administration Corp. Texas
NYLIFE Depositary Corporation Delaware
NYLIFE Structured Asset Management Company Ltd. Texas 16.67%; NYLIFE
SFD Holding Inc.
owns the remaining
83.33%
NYLIFE Distributors Inc. Delaware
NYLIFE HealthCare Management, Inc. Delaware
Express Scripts, Inc. Delaware 44.8% of total
combined stock and
89.1% of the voting
rights
Express Scripts Vision Corporation Delaware
Great Plains Reinsurance Company Arizona
Practice Patterns Science, Inc. Delaware 80%
ESI Canada Holdings, Inc. Canada
ESI Canada, Inc. Canada
IVTx of Houston, Inc. Texas
IVTx of Dallas, Inc. Texas
PhyNet, Inc. Delaware
</TABLE>
- --------
(5) Based on the percentage of ownership as well as the lack of
"control" by New York Life over management or policies of this company, this
entity is not considered a subsidiary of New York Life but is included here for
informational purposes only.
(6) One share is held by NYLIFE, Inc., a Nominee, as required by
British law.
C-6
<PAGE> 135
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
(NYLIFE Inc. subsidiaries cont.)
WellPath of Arizona Reinsurance Company Arizona
NYLCare NC Holdings, Inc.
WellPath Community Health Plans, L.L.C. North Carolina Duke Medical
Strategies, Inc. holds
50%; 50% LLC interest
WPCHP Holdings, Inc. Delaware
WellPath Preferred Services, L.L.C. North Carolina 99.9%; WPCHP
Holdings, Inc. owns
other 11%
WellPath Select Holdings, L.L.C. North Carolina WPCHP Holdings,
Inc. holds 11%;
99% LLC Interest
WellPath Select, Inc. North Carolina
WellPath of Carolina, Inc. Delaware
ETHIX Great Lakes, Inc. Michigan
ETHIX Mid-Atlantic, Inc. Pennsylvania
ETHIX Midlands, Inc. Delaware
ETHIX Mid-Rivers, Inc. Missouri
ETHIX Northwest Public Services, Inc. Washington
ETHIX Northwest, Inc. Washington
NYLCare Health Plans Northwest, Inc. Washington
ETHIX Pacific, Inc. Oregon
ETHIX Southeast, Inc. North Carolina
Benefit Panel Services, Inc. California 50%; 50%
owned by
Anthem Companies,
Inc.
BPS Health Plan Administrators California
VivaHealth, Incorporated California
One Liberty Plaza Holdings, Inc. Delaware
NYLIFE Refinery Inc. Delaware
NYLIFE Securities Inc. New York
NYLIFE SFD Holding Inc. Delaware
NYLIFE Structured Asset Management Company, Ltd. Texas 83.33%; NYLIFE
Depositary Corp.
owns the remaining
16.67%
NYLINK Insurance Agency Incorporated Delaware
NYLINK Insurance Agency of Alabama, Incorporated Alabama
NYLINK Insurance Agency of Hawaii, Incorporated Hawaii
NYLINK Insurance Agency of Massachusetts, Incorporated Massachusetts
</TABLE>
C-7
<PAGE> 136
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
(NYLIFE Inc. subsidiaries cont.)
NYLINK Insurance Agency of New Mexico, Incorporated New Mexico
NYLINK Insurance Agency of Ohio, Incorporated(7) Ohio
NYLINK Insurance Agency of Oklahoma, Incorporated(7) Oklahoma
NYLINK Insurance Agency of Texas, Incorporated(7) Texas
NYLTEMPS Inc. Delaware
NYLIFE Insurance Company of Arizona Arizona
The MainStay Funds(8) Massachusetts
</TABLE>
- -----------
(7) This entity is an unaffiliated insurance agency for which New York
Life and its subsidiaries perform administrative services. It is not a
subsidiary of New York Life but is included for informational purposes only.
(8) This entity is an unaffiliated registered investment company for
which New York Life subsidiaries perform investment management, administrative,
distribution and underwriting services. It is not a subsidiary of New York Life,
but is included here for informational purposes only.
C-8
<PAGE> 137
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
- ---- ------------ ----------------
<S> <C> <C>
NYLINK Insurance Agency of Oklahoma, Incorporated(8) Oklahoma
NYLINK Insurance Agency of Texas, Incorporated(9) Texas
The MainStay Funds(10) Massachusetts
</TABLE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of January 31, 1999, there were approximately 56,910 owners of
Qualified Policies offered under NYLIAC Variable Annuity Separate
Account-II.
ITEM 28. INDEMNIFICATION
Reference is made to Article VIII of the Depositor's By-Laws.
New York Life maintains Directors and Officers Liability/Company
Reimbursement ("D&O") insurance which covers directors, officers and trustees of
New York Life, its subsidiaries, and its subsidiaries and certain affiliates
including the Depositor while acting in their capacity as such. The total annual
aggregate of D&O coverage is $150 million applicable to all insureds under the
D&O policies. There is no assurance that such coverage will be maintained by New
York Life or for the Depositor in the future as, in the past, there have been
large variances in the availability of D&O insurance for financial institutions.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Depositor pursuant to the foregoing provisions, or otherwise, the Depositor has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Depositor of expenses incurred
or paid by a director, officer or controlling 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
.
C-9
<PAGE> 138
NYLIAC MFA Separate Account-I
NYLIAC MFA Separate Account-II
NYLIAC Variable Annuity Separate Account-I
NYLIAC Variable Annuity Separate Account-III
NYLIAC Variable Universal Life Separate Account-I
NYLIAC VLI Separate Account
(b) Directors and Officers.
The business address of each director and officer of NYLIFE Distributors
Inc. is 300 Interpace Parkway, Parsippany, New Jersey 07054.
<TABLE>
<CAPTION>
Names of Directors and Officers Positions and Offices with Underwriter
------------------------------- --------------------------------------
<S> <C>
Frank M. Boccio Director
Jefferson C. Boyce Director
Michael G. Gallo Director
Phillip J. Hildebrand Director
Robert D. Rock Director
Stephen C. Roussin Director and Senior Vice President
Robert E. Brady Director and Vice President
Mark Gordon President
Sheila K. Davidson Chief Compliance Officer
Thomas J. Warga Senior Vice President and General Auditor
Jay S. Calhoun Vice President and Treasurer
David J. Krystel Vice President
Linda M. Livornese Vice President
John H. O'Byrne Vice President
Anthony W. Polis Vice President and Chief Financial Officer
Richard W. Zuccaro Tax Vice President
Louis H. Adasse Corporate Vice President
Thomas J. Murray Corporate Vice President
Arphiela Arizmendi Assistant Vice President
Antoinette B. Cirillo Assistant Vice President
George R. Daoust Assistant Vice President
Geraldine Lorito Assistant Vice President
Mark A. Gomez Secretary
Ronald M. Jamison Assistant Secretary
Lori S. Whittaker Assistant Secretary
</TABLE>
(c) 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> 139
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-II, 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> 140
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it has caused this Amendment to the
Registration Statement to be signed on its behalf, in the City and State of New
York on this 19th day of April, 1999.
NYLIAC VARIABLE ANNUITY
SEPARATE ACCOUNT-II
(Registrant)
By /s/ David J. Krystel
-----------------------
David J. Krystel
Vice President
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
(Depositor)
By /s/ David J. Krystel
-----------------------
David J. Krystel
Vice President
As required by the Securities Act of 1933, this Amendment to the Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
<TABLE>
<S> <C>
Howard I. Atkins* Executive Vice President and Director
(Principal Financial Officer)
Frank M. Boccio* Director
Michael G. Gallo* Director
Solomon Goldfinger* Director
Phillip J. Hildebrand* Director
Maryann L. Ingenito* Vice President and Controller
(Principal Accounting Officer)
Richard M. Kernan, Jr.* Director
Robert D. Rock* Senior Vice President and Director
Frederick J. Sievert* President and Director (Principal
Executive Officer)
Seymour Sternberg* Director
George J. Trapp* Director
</TABLE>
*By /s/ David J. Krystel
------------------------
David J. Krystel
Attorney-in-Fact
April 19, 1999
<PAGE> 141
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
(9) Opinion and Consent of Jonathan E. Gaines, Esq.
(10)(a) Consent of PricewaterhouseCoopers LLP.
<PAGE> 1
[NEW YORK LIFE LOGO] The Company You Keep NEW YORK LIFE INSURANCE COMPANY
51 Madison Avenue, New York, NY 10010
(212) 576-3763
JONATHAN E. GAINES
Vice President and
Associate General Counsel
April 19, 1999
Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, D. C. 20549
RE: NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE ANNUITY SEPARATE ACCOUNT-II
INVESTMENT COMPANY ACT FILE NUMBER: 811-07282
SECURITIES ACT FILE NUMBER: 33-53344
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. 8
to the registration statement on Form N-4 ("Registration Statement") under the
Securities Act of 1933, as amended, of NYLIAC Variable Annuity Separate
Account-II ("Separate Account-II"). Separate Account-II receives and invests
premiums allocated to it under a flexible premium multi-funded variable
retirement annuity policy ("Annuity Contract"). The Annuity Contract is offered
in the manner described in the Registration Statement.
In connection with this opinion, I have made such examination of the law and
have examined such corporate records and such other documents as I consider
appropriate as a basis for the opinion hereinafter expressed. On the basis of
such examination, it is my opinion that:
1. NYLIAC is a corporation duly organized and validly existing under the laws
of the State of Delaware.
2. Separate Account-II is a separate account established and maintained by
NYLIAC pursuant to Section 2932 of the Delaware Insurance Code, under
which the income, gains and losses, realized or unrealized, from assets
allocated to Separate Account-II shall be credited to or charged against
Separate Account-II, without regard to other income, gains or losses of
NYLIAC.
<PAGE> 2
Securities and Exchange Commission
April 19, 1999
Page 2
3. The Annuity Contracts have been duly authorized by NYLIAC and, when sold
in jurisdictions authorizing such sales, in accordance with the
Registration Statement, will constitute validly issued and binding
obligations of NYLIAC in accordance with their terms.
4. Each owner of a Annuity Contract will not be subject to any deductions,
charges, or assessments imposed by NYLIAC other than those provided in the
Annuity Contract.
I consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ JONATHAN E. GAINES
Jonathan E. Gaines
Vice President and
Associate General Counsel
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 8 to registration
statement on Form N-4 (the "Registration Statement") of our report dated March
9, 1999, relating to the financial statements of New York Life Insurance and
Annuity Corporation, and of our report dated February 19, 1999, relating to the
financial statements and selected per unit data of New York Life Insurance and
Annuity Corporation 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" and the reference to us under the heading
"Condensed Financial Information" in such Prospectus.
PRICEWATERHOUSECOOPERS LLP
1177 Avenue of the Americas New York, New York
April 16, 1999
