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NYLIAC VARIABLE
UNIVERSAL
LIFE
Semi-Annual Report
Unaudited June 30, 1997
[NEW YORK LIFE LOGO] The Company You Keep (R)
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TABLE OF CONTENTS
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President's Letter...................... 2
NYLIAC Variable Universal Life
Performance Summary................... 4
MacKay-Shields Financial Corporation
Adviser's Report...................... 6
New York Life Insurance Company
Adviser's Report...................... 8
Portfolio Managers' Comments............ 9
NYLIAC Variable Universal Life Separate
Account I
Statement of Assets and Liabilities..... 40
Statement of Operations................. 42
Statement of Changes in Total Equity.... 44
Note 1 -- Organization and Accounting
Policies.............................. 49
Note 2 -- Investments................... 50
Note 3 -- Mortality and Expense Risk
Charges............................... 52
Note 4 -- Distribution of Net Income.... 52
Note 5 -- Cost to Policyowners.......... 54
Note 6 -- Unit Transactions............. 56
Note 7 -- Selected Per Unit Data........ 60
MainStay VP Series Fund, Inc.
Chairman's Letter....................... 64
Capital Appreciation Portfolio.......... 65
Cash Management Portfolio............... 69
Convertible Portfolio................... 73
Government Portfolio.................... 78
High Yield Corporate Bond Portfolio..... 82
International Equity Portfolio.......... 90
Total Return Portfolio.................. 98
Value Portfolio......................... 105
Bond Portfolio.......................... 109
Growth Equity Portfolio................. 113
Indexed Equity Portfolio................ 118
Note 1 -- Organization and Business..... 128
Note 2 -- Significant Accounting
Policies.............................. 128
Note 3 -- Fees and Related Party
Policies.............................. 134
Note 4 -- Federal Income Tax............ 136
Note 5 -- Financial Investments......... 136
Note 6 -- Portfolio Securities Loaned... 136
Note 7 -- Purchases and Sales of
Securities............................ 138
Note 8 -- Capital Share Transactions.... 138
Alger American Small Capitalization
Portfolio............................. A1
Calvert Socially Responsible
Portfolio............................. B1
Fidelity Variable Insurance Products
Fund II: Contrafund Portfolio......... C1
Fidelity Variable Insurance Products
Fund: Equity-Income Portfolio......... D1
Janus Aspen Balanced Portfolio and Janus
Aspen Worldwide Growth Portfolio...... E1
Morgan Stanley Emerging Markets Equity
Portfolio............................. F1
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PRESIDENT'S LETTER
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To the Owners of NYLIAC Variable Universal Life Policies:
I am pleased to present the unaudited NYLIAC Variable Universal Life Semi-Annual
Report package for the six month period ended June 30, 1997.
Included within this package are separate semi-annual reports for the MainStay
VP Series Fund, Inc., The Alger American Fund, Acacia Capital Corporation,
Fidelity Variable Insurance Products Fund, Fidelity Variable Insurance Products
Fund II, Janus Aspen Series and Morgan Stanley Universal Funds, Inc.. These
semi-annual reports contain performance data, financial statements and other
valuable financial information for each of the investment divisions available
under NYLIAC's Variable Universal Life.
NYLIAC'S VUL MEETS TODAY'S CHANGING NEEDS
Today, the insurance industry offers more than just whole life and term
insurance. Our VUL policy combines permanent insurance protection with
investment flexibility. You may choose from among 18 different investment
divisions and the fixed account -- one of these or a combination of several may
be right for you. These selections were designed to provide you with the
opportunity to invest your premium dollars with greater diversity. Please refer
to the Prospectus for complete descriptions of the investment divisions.
The following is a review of the current and anticipated economic conditions
that may affect the performance of the investment divisions.
ECONOMIC ENVIRONMENT
Real Gross Domestic Product grew faster than expected in the first half of 1997,
accelerating to a 5.9 percent annual rate in the first quarter, before
moderating to a more sustainable rate in the second quarter. Surprisingly,
inflation has shown no signs of worsening, despite the unemployment rate
hovering around 5 percent. The Federal Reserve Board (the Fed) raised its
Federal Funds rate by 25 basis points in March to head off persistently strong
demand, but refrained from further tightening of monetary policy in May as the
economy showed signs of slowing and inflation remained subdued.
The slowdown is most likely temporary, since an unusually mild winter boosted
both demand and output in the first quarter, while auto strikes and spring
floods adversely affected the second quarter. In addition, consumer confidence
has risen to a 28 year high, the soaring stock market has added to the United
States' strong economy, and the improving economies of our trading partners
should continue to increase demand for our exports. As such, growth is expected
to re-accelerate in the second half of the year and remain strong in 1998. With
the unemployment rate continuing to remain low, we believe that wages and prices
will gradually begin to accelerate, bond yields will begin to rise again, and
the Federal Reserve will resume tightening.
The stock market has continued to outperform even the most optimistic
expectations, with the Dow Jones Industrial Average(1) gaining another 20
percent in the first half of the year after rising 26 percent in 1996 and 33.5
percent in 1995. The bull market for equities continues to be driven by healthy
investment-led growth, strong earnings gains, low inflation, and low interest
rates. In the second half of the year, market conditions are likely to become
less ideal, but over the longer term, the fundamentals remain excellent, with
good prospects for continued disinflation and expanding global opportunities for
highly competitive U.S. companies.
NYLIAC VUL PERFORMANCE
Since NYLIAC Variable Universal Life was introduced in November of 1993 over $9
billion of face amount has been purchased. Our strong Variable Universal Life
sales momentum has continued into 1997. In the first half of the year over 9,250
new customers have purchased VUL policies representing over $2 billion of face
amount. We anticipate continued growth throughout the remainder of 1997.
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Our ongoing commitment to our policyowners remains stronger than ever. Look for
exciting new developments to our NYLIAC Variable Universal Life policy in the
second half of 1997. We look forward to serving you in the years to come.
/s/ FREDERICK J. SIEVERT
Frederick J. Sievert
President
New York Life Insurance and Annuity Corporation
(1) The Dow Jones Industrial Average is a trademark, and the property of, Dow
Jones and Co., Inc.
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NYLIAC VARIABLE UNIVERSAL LIFE
PERFORMANCE SUMMARY*:
AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDING JUNE 30, 1997
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INVESTMENT DIVISIONS INCEPTION DATE YEAR TO DATE 1 YR. 3 YRS. 5 YRS. 10 YRS.
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MAINSTAY VP SERIES FUNDS:
Capital Appreciation 01/29/93 12.54% 21.22% 24.07% -- --
Cash Management 01/29/93 2.21% 4.38% 4.43% -- --
Government 01/29/93 2.17% 6.29% 6.50% -- --
High Yield Corporate Bond 05/01/95 6.53% 14.89% -- -- --
International Equity 05/01/95 10.42% 13.64% -- -- --
Total Return 01/29/93 8.65% 15.31% 16.96% -- --
Value 05/01/95 11.09% 25.20% -- -- --
Bond 01/23/84 2.33% 6.61% 6.98% 6.18% 8.00%
Growth Equity 01/23/84 13.76% 25.03% 23.45% 17.81% 12.63%
Indexed Equity 01/29/93 20.04% 33.27% 27.42% -- --
Alger American Small Capitalization 09/20/88 0.30% -3.41% 18.54% 15.25% --
Calvert Socially Responsible 09/02/86 10.10% 19.84% 17.12% 12.13% 9.66%
Fidelity VIP II: Contrafund 01/03/95 11.24% 24.19% -- -- --
Fidelity VIP: Equity-Income 10/09/86 15.99% 24.77% 23.04% 19.25% 12.71%
Janus Aspen Balanced 09/13/93 11.93% 21.65% 16.72% -- --
Janus Aspen Worldwide Growth 09/13/93 18.51% 26.65% 25.60% -- --
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INVESTMENT DIVISIONS SINCE INCEPTION
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MAINSTAY VP SERIES FUNDS:
Capital Appreciation 17.44%
Cash Management 3.68%
Government 4.80%
High Yield Corporate Bond 15.14%
International Equity 12.46%
Total Return 12.43%
Value 23.45%
Bond 9.08%
Growth Equity 12.78%
Indexed Equity 18.78%
Alger American Small Capitalization 18.21%
Calvert Socially Responsible 10.13%
Fidelity VIP II: Contrafund 28.24%
Fidelity VIP: Equity-Income 13.42%
Janus Aspen Balanced 15.25%
Janus Aspen Worldwide Growth 24.55%
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* The values shown are unaudited.
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Past performance is no guarantee of future results. The investment return and
the accumulation value of your policy will fluctuate so that your contract, when
surrendered, may be worth more or less than the original cost. Performance
reflects the percentage change for the period shown with capital gains and
dividends reinvested.
For the period from the inception dates of the MainStay VP Capital Appreciation,
MainStay VP Government, MainStay VP Total Return, MainStay VP Bond, MainStay VP
Growth Equity and MainStay VP Indexed Equity portfolios to the date those
portfolios were offered under the Variable Universal Life policies on 11/15/93,
performance assumes that Variable Universal Life was available, which it was
not. For the period from the inception dates of the Calvert Socially
Responsible, Alger American Small Capitalization, Fidelity VIP II: Contrafund,
Fidelity VIP: Equity-Income, Janus Aspen Balanced and Janus Aspen Worldwide
Growth portfolios to the date those portfolios were offered under the Variable
Universal Life policies on 10/1/96, performance assumes that Variable Universal
Life was available and that these portfolios were offered under Variable
Universal Life, which they were not.
Performance reflects the deduction of the policy's current mortality and expense
risk charge (.60%), the administration fee (.10%) and total fund operating
expenses. However, it does not reflect the policy fees or charges. These include
the cost of insurance, surrender charges, monthly contract charges, sales
expense charges, and premium and federal tax charges. Had these expenses been
deducted, total returns would have been lower.
NYLIAC has agreed to assume a portion of the expenses of the MainStay VP
Investment Divisions. This expense limitation was effective for all MainStay VP
Investment Divisions until 12/31/96, and has been extended until 12/31/97 for
the MainStay VP High Yield Corporate Bond, MainStay VP International Equity and
MainStay VP Value Investment Divisions. In addition, Janus Capital Corporation
has agreed to reduce the advisory fee for the Janus Aspen Balanced and the Janus
Aspen Worldwide Growth Investment Divisions. Had these expenses not been assumed
or reduced, the total returns for these Investment Divisions would have been
lower.
There is no performance information for the MainStay VP Convertible and Morgan
Stanley Emerging Markets Equity Investment Division because they are new
investment divisions as of 10/1/96.
For additional information, including illustrations which reflect guaranteed
maximum cost of insurance rates, please consult the prospectus.
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MAINSTAY VP SERIES FUND, INC. PORTFOLIOS
MACKAY-SHIELDS FINANCIAL CORPORATION
ADVISER'S REPORT
Market Overview
The first half of 1997 was a tale of two markets: interest rate fears in the
first quarter and corporate earnings in the second. In February, Alan Greenspan,
Chairman of the Federal Reserve Board, "the Fed," began to suggest strongly and
repeatedly that the equity market was experiencing "irrational exuberance", with
resulting conditions that were not sustainable. Nevertheless, the stock market
continued its upward ascent to record levels. Finally, the Federal Funds' rate
was raised 25 basis points at the end of March, which contributed to the S&P
500's(1) subsequent nine percent dip that lasted until April 11.
Shortly after the Fed tightening, however, economic growth began to
substantially moderate. The rise in personal income slowed, resulting in softer
retail sales. The deceleration in growth was also evident in the industrial
sector as construction expenditures and orders for durable goods declined.
Currently, the general consensus on second quarter GDP growth is between
1 1/2% - 2 1/2%. This moderation has caused a strong rebound in bond prices as
the odds of another tightening by the Fed have been greatly reduced. The
benchmark 30-year Treasury yield decreased from just over 7.00% in the early
part of June to 6.78% by the end of June.
In the first weeks of the second quarter as companies reported their first
quarter earnings, investors realized earnings trends remained strong.
Approximately 70% of the S&P 500 companies reported better than expected
earnings. The earnings picture in combination with a slowly growing economy,
relatively low interest rates, benign inflationary pressures, high employment
and greater productivity enabled investors to bury their economic fears and ride
the market up to record highs through the end of the second quarter of 1997. The
average Lipper(2) U.S. stock fund returned in excess of 15% during the second
quarter, more than stocks have historically returned annually since 1929. The
S&P 500 returned 17.47%, the Dow Jones Industrial Average(3) 17.05% and the
NASDAQ(4) returned 18.04%.
However, not all stocks and sectors participated equally in this stellar
performance. The largest 10 stocks in the S&P 500 which constitute 19% of the
Index's market capitalization, contributed more than half of the entire market's
return during the second quarter. And when analyzing returns since the beginning
of 1995, the "nifty fifty" (fifty of the largest S&P 500 stocks measured by
market capitalization) have returned twice what their smaller capitalization
siblings have returned. This phenomena has not occurred in the past to the same
degree as today. Almost all industries were affected; the largest companies
posted the highest returns, with large gaps between the best performers and all
others. Most managers were encouraged by the behavior of the economy-- growth
without inflationary pressures--and diversified their holdings to include
smaller capitalization issues and cyclical issues. As a result, most stock
mutual funds did not outpace the S&P 500 Index for the first half of 1997.
This market euphoria extended to international funds as well, with the average
Lipper international equity fund returning 10.55% in the latest quarter.
International equity markets rebounded as they refocused on the positives of
world growth. For the most part, foreign economies, particularly in Europe, have
begun to show an increase in activity and consequently, equity markets have
begun to adjust prices to reflect better future earnings. During the second
quarter, there was an initial negative knee-jerk reaction to the uncertain
politics in the formation of the European Union and the surprise victory of a
Socialist coalition government in France. European equity markets then realized
the positive impact of the French electorate's vote for growth and lower
unemployment. In Asia, both Hong Kong and Japan performed well. In the case of
Hong Kong, the celebration of the return to a unified country, helped spur the
market to return 20.3%. Growing evidence of Japan's economic recovery coupled
with low inflation and low interest rates is starting to benefit the stock
market.
While the specter of rising interest rates in the U.S. and Japan made for stormy
international fixed income markets in the first quarter, clear skies and calm
seas dominated the second quarter. A slowing U.S. economy and continued low
inflation put the Fed on hold while in parts of Europe, official interest rates
continued to decline and inflation reached post-war lows. In the dollar block,
Australia and New Zealand bonds rallied strongly due to lower rates engineered
by their respective central banks.
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While investors continued to pour money into the stock market through mutual
funds (in excess of $50 billion in the second quarter alone), bond funds are now
gaining some attention from investors who seek diversification and some
potential protection in the midst of the stock market rise. Bond funds saw
approximately $4 billion added to their coffers during the second quarter. The
soaring gains of the stock market during the second quarter overshadowed the
average Lipper taxable bond fund return of 3.55%. If a stock market correction
were to take place, traditional bond funds could make a comeback. As was proven
in 1994, bonds can be volatile, and investors should not count on consistent
returns. Moreover, currently investors' largest inflows are towards the high
yield and emerging market debt--the riskiest sectors of the bond market. If the
economy continues its slowing pace, a longer term bond rally could result as
inflation and interest rate fears dwindle.
Several factors have influenced and will continue to influence the market for
the foreseeable future. Companies are globalizing, and competition makes it
nearly impossible to raise prices. As a result, inflation remains muted. Rather
than raising prices, companies are increasing productivity through technology
and improved utilization of resources. Lastly, baby boomers are pouring money
into the market for their retirement. The average investor has more information
now than many professional investors had twenty years ago.
There are, however, a number of risks over the coming months. A major risk would
be if unemployment falls much further, wage pressure will inevitably build, and
since wages comprise two thirds of the CPI(5), inflation could become more
pronounced, derailing the progress of the markets. Another risk is whether
mutual fund inflows will continue at their torrid pace. It is at this point
undetermined if the baby boomers who are responsible for most mutual fund
inflows, would continue their contributions in the wake of a market correction.
Ravi Akhoury
Chairman and Chief Executive Officer
MacKay-Shields Financial Corporation
(1) "Standard and Poor's 500 Composite Stock Price Index" and "S&P 500" are
registered trademarks of the Standard & Poor's Corporation. The MainStay VP
Series Fund, Inc. is neither sponsored by nor affiliated with Standard &
Poor's Corporation. The S&P 500 is an unmanaged index considered generally
representative of the U.S. stock market. Results assume the reinvestment of
all income and capital gains distributions.
(2) Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Its rankings are based on total returns with capital gains and
dividends reinvested. Results do not reflect any deduction of sales charges.
The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies.
(3) The Dow Jones Industrial Average is a trademark, and the property of, Dow
Jones and Co., Inc.
(4) "NASDAQ Composite Index" is an unmanaged index and is considered to be
generally representative of the U.S. small capitalization stock market.
(5) The Consumer Price Index (CPI) is a commonly used measure of the rate of
inflation.
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NEW YORK LIFE INSURANCE COMPANY
ADVISER'S REPORT
Market Overview
The first half of 1997 produced another period of attractive investment returns
for the U.S. financial markets, with particularly strong performance from the
stock market with the S&P 500(1) up 20.62%.
The year began on a positive note, but with some weakness in the debt markets as
continued economic growth led to investor fears of accelerating inflationary
pressures. During the second quarter these fears abated and interest rates
returned to levels close to where they began the year. By June 30, inflation was
running at 1.4%, down from 3.2% at year end. Corporate earnings have continued
to grow and the dollar remains strong.
The stock market has reached historically high price levels in both absolute and
relative terms. By the end of the second quarter, the valuation multiple for the
S&P 500 had increased to over 22 times earnings and the dividend yield declined
to 1.87%. The market was led by large capitalization stocks which benefited from
significant inflows into index funds.
The bond market produced returns close to the underlying interest income rate,
with little price movement from year-end to mid-year. In general, spreads have
continued to narrow on corporate and mortgage-backed securities as the credit
quality of corporate America improves and interest rate volatility stays
subdued.
Looking forward, we see continued economic growth in the U.S. and a pick-up in
growth overseas. Ultimately, we believe some modest increase in inflation is
inevitable, which, combined with growing demand for financing from overseas, can
be expected to lead to modestly higher rates.
We continue to see value in both markets. In the bond market, we see value in
corporate debt relative to mortgage-backed securities. We continue to emphasize
quality. In the stock market, we will be looking for opportunities in
mid-capitalization stocks selling at acceptable multiples and non-cyclical
sectors such as multinationals, consumer staples and healthcare.
Jean Hoysradt
Senior Vice President
in Charge of the Investment Department
New York Life Insurance Company
(1) "Standard and Poor's 500 Composite Stock Price Index" and "S&P 500" are
registered trademarks of the Standard & Poor's Corporation.
The MainStay VP Series Fund, Inc. is neither sponsored by nor affiliated
with Standard & Poor's Corporation.
The S&P 500 is an unmanaged index considered generally representative of the
U.S. stock market. Results assume the reinvestment of all income and
capital gains distributions.
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MAINSTAY VP
CAPITAL APPRECIATION PORTFOLIO
MARKET HIGHLIGHTS FOR THE SIX MONTHS ENDED 6/30/97
- - The biggest influences on the stock market were interest rates in the first
quarter and earnings in the second quarter of 1997.
- - Strong inflows into equities, particularly from foreign institutional
investors, boosted performance.
- - Low inflation, low interest rates, and moderate economic growth provided a
solid backdrop for growth investors.
- - The market gave disproportional rewards to larger-capitalization issues
throughout the reporting period.
PORTFOLIO HIGHLIGHTS FOR THE SIX MONTHS ENDED 6/30/97
- - For the six month period ended June 30, 1997, the Portfolio had a return of
12.93%.
- - Despite major setbacks in the first quarter, financial stocks rebounded
strongly in the second quarter and contributed significantly to the
Portfolio's performance.
- - We increased our pharmaceutical and health care related holdings, which also
positively impacted the Portfolio.
- - While various company-specific setbacks detracted from performance, the
Portfolio managed to outperform the average Lipper(1) capital appreciation
fund for the reporting period.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
The first six months of 1997 were like a tale of two cities, with each quarter
having a distinctive story. Following a substantial rally early in the first
quarter, concern over inflation, interest rates, and rapid economic growth led
to an equally substantial correction or downward adjustment. While the S&P 500
Index(2) advanced in the first quarter, the average stock fund declined.
In the second quarter, key indicators pointed to more moderate growth and
continued low inflation, both of which were positive for the stock market. While
past performance is no guarantee of future results, with investors focusing more
on earnings than interest rates, the stock market not only recovered lost
ground, but advanced far more in the second quarter than it typically has in an
entire year since 1926(3).
Throughout the first half of 1997, certain themes emerged. Large capitalization
issues were very strong and accounted for a major portion of the stock market's
gains. Tremendous volatility, in both directions, made news on a regular basis
and accounted for much of the opportunity investors experienced. In June, the
market reached record levels several times. And while performance varied widely
by sector and issuer, overall returns were exceedingly strong.
HOW DID THE MAINSTAY VP CAPITAL APPRECIATION PORTFOLIO DO IN THIS MARKET
ENVIRONMENT?
For the six months ended 6/30/97, the MainStay VP Capital Appreciation Portfolio
had a total return of 12.93%. That placed us ahead of the average Lipper capital
appreciation fund, which returned 9.68% for the six months ended 6/30/97--and
behind the average Lipper growth fund, which returned 13.57% for the same
period. During the first half of 1997, the S&P 500 advanced 20.62%.
WHAT WOULD YOU SAY MADE THE BIGGEST CONTRIBUTION TO THE PORTFOLIO'S PERFORMANCE?
Sticking to our management disciplines. Most of the Portfolio's underperformance
in the first quarter was due to five or six issues that subsequently did very
well in the second quarter and contributed positively to performance over the
first half of the year. As just one example, through our bottom-up approach to
individual security selection, we began the year heavily overweighted in the
financial sector. When the Federal Reserve Board moved to raise interest rates
in late March, financial stocks experienced a sudden and severe setback.
At various points along the way, we were tempted to sell financials and
reposition the Portfolio's investments. But when we looked at the fundamentals
and considered the likely impact--even if interest rates continued to
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rise--we still felt these stocks were undervalued and offered tremendous growth
potential. Our decision to continue to hold them proved highly beneficial for
the Portfolio when financial stocks rallied in the second quarter. One financial
stock that did particularly well was First USA, which received a takeover bid
from Banc One in the first quarter. We sold some First USA on the merger
announcement and more throughout the second quarter--all at a handsome profit.
WHAT ELSE WORKED WELL?
Technology stocks also declined substantially in the fourth quarter of 1996--and
in the first quarter correction this year. Our decision to continue to hold
Computer Associates International despite the market's negative view, proved to
be a good decision. The stock was the Portfolio's best performer in the second
quarter. Once again, it was a matter of maintaining the Portfolio's position
through difficult times. One stock that performed well in 1996 but had a
negative impact in the first half of 1997 was 3Com. However, we believed the
fundamentals were still in place and it rebounded significantly in the second
quarter. The stock suffered when Intel entered the adapter card market. But we
believe investors have overestimated the Intel threat and that 3Com is still a
strong contender.
WHAT TYPES OF SECURITIES DID YOU BUY DURING THE REPORTING PERIOD?
A wide variety. We don't select securities based on how the economy is doing or
what industries are hot. In keeping with the Portfolio's management style, we
concentrate on reviewing individual issues and try to identify those that may
offer rapid sales growth, earnings acceleration, and a catalyst or stimulus for
further growth potential.
During the first half of 1997 we added a number of securities to the Portfolio
which contributed positively to performance. Eli Lilly introduced a new product
to combat osteoporosis and did very well. We also purchased Monsanto, which
makes agricultural products and is planning to spin off its less profitable
businesses. Compuware is a midsized software company we bought in the middle of
the first quarter. Aetna (a managed health care company) and Washington Mutual
(a financial company) were securities that we also bought. All of these
purchases were positive contributors, though not necessarily large holdings.
DID YOU BUY ANYTHING THAT DIDN'T DO WELL?
Adaptec and Cardinal Health were two stocks we purchased that had slightly
negative results, but the overall impact on the Portfolio was negligible.
WHICH STOCKS HAD THE BIGGEST IMPACT ON PERFORMANCE?
On the positive side, Guidant, Schering-Plough, Travelers Group, Lucent
Technologies, and Microsoft were all major holdings that had outstanding
results. Guidant makes an apparatus used in cardiovascular surgery that has had
a tremendous reception in the surgical world. Medtronic is another holding in a
similar business that also did well. Schering-Plough had a big success with
Claritin, particularly when Seldane was taken off the market. Travelers Group
benefited from positive valuations resulting from acquisitions in the financial
sector, and Lucent Technologies profited from its reputation and diversified
offerings in telephone infrastructure. Microsoft continued to set the pace in
the technology sector and had a strong, positive impact on the Portfolio.
WHICH STOCKS DID POORLY?
We've already mentioned 3Com, which was the Portfolio's worst performer. We also
had some problems with Abacan Resource, a Canada-based Nigerian oil drilling
company the Portfolio held for some time. The stock declined substantially when
new drilling was unproductive and the company found itself short of capital.
Although the capital problem has been resolved, we've sold some of the
Portfolio's position and are keeping a close watch on the stock.
Nine West Group had been a successful holding, but came under investigation by
the SEC for accounting practices relating to an acquisition in 1995. The
unfavorable press caused the stock to decline which negatively impacted the
Portfolio. Other acquisition-related problems plagued IKON Office Solutions,
which was formerly known as Alco Standard, and Seagate Technology, a major hard
disk manufacturer, saw its stock drop substantially when tighter competition and
weakening demand led the company to preannounce lower earnings.
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DID YOU FACE ANY MAJOR SURPRISES DURING THE PERIOD?
Green Tree Financial, one of the Portfolio's largest holdings, lost 7% over the
first half of the year. This was not due to any wrong-doing by the company, but
rather because of rumors about competition from Fannie Mae, as well as media
attention regarding the chief executive's compensation.
Another surprise was HFS. The stock declined 3%--largely due to the market's
inability to understand what we believe to be very positive merger talks with
CUC International, which we also owned. HFS is a provider of real estate and
travel services and controls major franchise brands such as Howard Johnson,
Ramada, Days Inn, Avis, Century 21, and Coldwell Banker. CUC International helps
people benefit from buying clubs for shopping, travel, and auto services. While
the combined company is strong, the market has yet to grasp its potential.
The biggest surprise was that two of the Portfolio's largest holdings lost money
in a period when the market was up substantially. Since the fundamentals of both
companies remain strong, we're continuing to hold them and have a positive
outlook for the future.
HOW IS THE PORTFOLIO CURRENTLY WEIGHTED?
The Portfolio is heavily overweighted in the health care sector, with about
twice the weighting of the S&P 500. The Portfolio also owns a lot of technology
issues, as most growth portfolios do, but unlike most growth managers, the
Portfolio is also heavily concentrated in financials.
WITH THE INCREASED VOLATILITY IN THE MARKETPLACE, HOW ARE YOU MANAGING RISK?
We've seen two important risk factors in the first half of the year--interest
rates and corporate earnings. On both counts, we seek to manage risk by adhering
to our fundamental investment disciplines. Regardless of where interest rates
may move, we want to include companies in the Portfolio that we believe have
significant earnings acceleration and growth potential. Of course, there may
always be earnings surprises, but by carefully researching our stocks and
assessing the relationship between price, earnings, and performance potential,
we believe we're able to make prudent decisions for investors. When we believe
that fundamentals are strong, we tend to hold. When we see fundamentals
deteriorating, we're likely to sell.
CAN YOU GIVE AN EXAMPLE?
Sure. We sold AutoZone in the first quarter because of increased competition and
our belief that the do-it-yourself auto repair market was slowing. Since we
wouldn't have bought the stock with those fundamentals, we decided to sell it.
Another example was Lone Star, a chain of steakhouse restaurants, which we sold
in the second quarter when their sales momentum slowed and the restaurant group
went out of favor. We sold both stocks at a loss to the Portfolio, but used the
proceeds to buy stocks that we felt had better fundamentals and offered greater
growth opportunities.
WHAT IS YOUR OUTLOOK FOR THE FUTURE?
We're basically optimistic. As long as interest rates are stable, economic
growth is modest, and inflation remains in check, corporate earnings are likely
to remain strong. In the meantime, we'll continue to evaluate companies
individually to help investors seeking long-term growth of capital, with
dividend income as an incidental consideration.
Edmund Spelman
Rudy Carryl
Portfolio Managers
MacKay-Shields Financial Corporation
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INFLATION An increase in the cost of goods and services over time. As prices
rise, the purchasing power of the dollar declines.
CORRECTION A shift in security prices which brings them more in line with
historically appropriate levels.
CAPITALIZATION The amount of outstanding equity a company has issued. Companies
may vary greatly in the amount of equity capital they have raised, and their
capitalization may change with new issues or stock repurchases.
VOLATILITY Fluctuations in the price of securities or markets, up or down, over
a short period of time.
BOTTOM-UP INVESTING Security selection based on the specific fundamental merits
of individual issues. The opposite of "top-down" investing, which starts with
general economic trends, compares market sectors, and uses relative security
values to narrow the range of issues to examine.
WEIGHTING The proportion of a portfolio allocated to a specific security or
sector, i.e., a portfolio is said to be overweighted in a sector when that
portion of the portfolio is greater than the sector's general relationship to
the market as a whole.
(1) Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Its rankings are based on total returns with capital gains and
dividends reinvested. Results do not reflect any deduction of sales charges.
The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies.
(2) "Standard and Poor's 500 Composite Stock Price Index" and "S&P 500" are
registered trademarks of the Standard & Poor's Corporation. The MainStay VP
Series Fund, Inc. is neither sponsored by nor affiliated with Standard &
Poor's Corporation. The S&P 500 is an unmanaged index considered generally
representative of the U.S. stock market. Results assume the reinvestment of
all income and capital gains distributions.
(3) Source: Ibbotson Associates, Chicago. Average annual total return for
1926-1996 was 10.7%. Past performance is not a guarantee of future results.
Included is the reinvestment of all distributions at net asset value and the
change in share price for the stated period. Total returns shown indicate past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that shares, upon redemption, may be worth
more or less than their original cost. These results do not reflect any
deduction of sales charges, mortality and expense charges, contract charges, or
administrative charges. Please refer to page 4 for returns reflective of these
charges.
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MAINSTAY VP
CASH MANAGEMENT PORTFOLIO
MARKET HIGHLIGHTS FOR THE SIX MONTHS ENDED 6/30/97
- - Strong economic growth in the first quarter led to a Federal Reserve Board
move to raise interest rates 25 basis points at the end of March.
- - Slower economic growth in the second quarter led to uncertainty over whether
the Federal Reserve Board would continue to raise interest rates.
- - In this environment, longer maturity money market securities offered higher
yields and we extended maturities to add yield.
- - As interest rates became more uniform across the maturity spectrum in the
second quarter, the advantages of having longer securities decreased and we
shortened our average days to maturity.
PORTFOLIO HIGHLIGHTS FOR THE SIX MONTHS ENDED 6/30/97
- - For the 7-day period ended 6/30/97, the MainStay VP Cash Management Portfolio
provided an effective yield of 5.33% and a current yield of 5.19%.
- - The Portfolio outperformed the average Lipper(1) money market fund for the
six-month and one-year periods and since its inception through 6/30/97.
- - The Portfolio's outperformance resulted from the managers' adjustments in days
to maturity and careful selection of yield-enhancing securities.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
During the first half of 1997, the money market was strongly influenced by
perceptions of when and how the Federal Reserve Board (Fed) would move to adjust
interest rates. At the end of March, a preemptive 25 basis point increase in the
Federal Funds rate shifted the opportunity spectrum and raised concerns about
whether-- and if so, when--further Fed tightening might occur.
Investors with short average maturities in the first quarter and longer ones in
the second were able to pick up substantial improvements in yield. Domestic
money market securities tended to underperform U.S. dollar-denominated Yankee
issues. Other yield-enhancing securities offered attractive opportunities to
investors who could properly assess the risks and reward potential.
GIVEN THIS CONTEXT, HOW DID THE MAINSTAY VP CASH MANAGEMENT PORTFOLIO DO IN THE
FIRST HALF OF 1997?
For the 7-day period ended 6/30/97, the MainStay VP Cash Management Portfolio
provided an effective yield of 5.33% and a current yield of 5.19%. For the
six-month, one-year, and since-inception periods, the Portfolio outperformed the
average Lipper money market fund.
WHAT ACCOUNTED FOR THE PORTFOLIO'S PERFORMANCE?
In the first quarter, we kept the average maturity short because there was no
yield advantage to lengthening. When the Federal Reserve raised rates, the
Portfolio was well positioned. In the second quarter, we lengthened the
Portfolio's average maturity, which also proved to be beneficial for investors
when the Fed failed to make another move.
WHAT GAVE YOU THE CONFIDENCE TO LENGTHEN?
Amid all the speculation and conflicting reports, we looked at the overall
probability of the Fed taking further action. We saw stable unemployment, stable
inflation, and declining commodity prices. We looked at auto sales and housing
starts, which are general indicators of the rate of economic growth. On balance,
these factors gave us the confidence to extend the Portfolio's days to maturity
in the second quarter, and it proved to be the right decision.
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WHICH SECURITIES HELPED PERFORMANCE THE MOST?
In the first quarter, the Portfolio's floating-rate notes contributed
significantly to performance. In the second quarter, short fixed-coupon notes
helped us extend the Portfolio's days to maturity and enhance yield.
HOW FAR DID YOU EXTEND THE PORTFOLIO'S DAYS TO MATURITY?
Over the first six months, the Portfolio's days to maturity averaged in the low
to mid-50s. In the second quarter, we went out as far as 65 days, but we didn't
make any huge bets. We tried to stay within 10 days of what we took to be the
average in the Portfolio's universe. An important point to keep in mind is that
when we extended the days to maturity, the yield curve was relatively steep, so
we were well paid for the extensions. As the second quarter came to a close, the
yield curve flattened considerably, so we moved the Portfolio to a more neutral
position. If rates are relatively similar across the maturity spectrum, we don't
think it is worthwhile to tie up the Portfolio's money for longer periods.
HOW ELSE DID YOU SEEK TO INCREASE YIELD?
We didn't put all of the Portfolio's money in plain vanilla domestic securities.
We do a considerable amount of research to find opportunities in asset-backed
securities, callable certificates of deposit, and Yankee issues. We have a
sufficient understanding of these securities to take greater advantage of
opportunities than newcomers to these markets.
WHAT'S A CALLABLE CERTIFICATE OF DEPOSIT?
It's generally a 6- to 12-month CD that can be called every one or three months,
depending on what looks attractive to the issuer. We put these CDs into the
Portfolio at times when we think interest rates are going to be stable. But
sometimes, when you think rates are going up, they'll give you a higher rate,
and if they're called before they mature, they can become a very attractive
three-month piece of paper. We've invested in callable CDs, but have recently
decreased the Portfolio's holdings as they matured.
WHY HAVE YOU DONE THAT?
We've taken them about as far as we can. Approximately 10% of the Portfolio's
holdings were in callable CDs, but we have since reduced the Portfolio's
position to around 4%. As volatility has decreased over the reporting period,
the attractiveness--and issuance--of callable paper has also declined.
ARE THERE AREAS WHERE YOUR RESEARCH IS BENEFITING THE PORTFOLIO?
Definitely. We've added several Yankee issues to the Portfolio, which required a
good deal of research and analysis. During the first half of the year, the
Portfolio held paper from Japan and Europe. Of course, all of this paper is
denominated in U.S. dollars and rated in the top-tier of quality, so there's no
currency risk.
Given the problems Japan has had in the past, investors were skeptical, which
helped us buy at attractive prices. Europe has also offered better opportunities
than it has in the past, but it is important to research and analyze these
issues to know which names to buy.
WHAT TYPE OF RESEARCH SUPPORT DO YOU HAVE?
We have a quantitative credit research team, experts in asset-backed securities,
and our own background in managing these types of securities on a daily basis.
Together, we believe these resources help put us in a favorable position on the
education curve and help us analyze potential yield opportunities for the
Portfolio more effectively.
DOES THE SIZE OF THE PORTFOLIO OFFER ANY ADVANTAGES?
It may. The Portfolio is not like some large money market funds that need to own
huge amounts of Treasury paper just to meet prospectus requirements or daily
liquidity needs. We can pretty much invest where we believe yield opportunities
exist while maintaining quality. Additionally, we can ladder the Portfolio's
maturities across the spectrum, rather than having a lot of short paper to meet
daily liquidity concerns and a lot of longer paper to increase the Portfolio's
average days to maturity. That gives us a relatively balanced approach in
managing the Portfolio, as compared to other money markets, which we think is
good for investors.
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WHAT IS THE CREDIT QUALITY OF THE SECURITIES WITHIN THE PORTFOLIO?
A1-P1(2), which is the highest quality rating. Much of the paper the Portfolio
owns is backed by letters of credit. The Portfolio's asset-backed paper is high
quality, often overcollateralized or backed by guarantees. We're very attentive
to quality in our day-to-day management of the Portfolio.
WHAT DO YOU ANTICIPATE DURING THE REST OF THE YEAR?
We can't say exactly where interest rates will head or whether inflation will
heat up, but we're relatively optimistic. We think there will be enough earnings
improvement to keep companies growing at a modest pace, and we don't anticipate
the market trading much higher in terms of yield--at least not in the
foreseeable future. Whatever happens, we'll continue to seek as high a level of
current income as is consistent with the preservation of capital and liquidity.
Ravi Akhoury
Frank Salem
Jessica Terc
Portfolio Managers
MacKay-Shields Financial Corporation
EASING/TIGHTENING When the Federal Reserve lowers interest rates on benchmark
securities, it is said to be "easing" or making borrowing more affordable. When
it raises interest rates, it is said to be "tightening" or making borrowing more
expensive.
AVERAGE MATURITY Maturity is the termination date of an obligation or the length
of time an income security is required to pay interest. Average maturity
reflects the average of the maturities of all income securities in a portfolio.
YIELD The income per share (or current value of a security) paid to investors
over a specified period of time as a percentage of the cost of the security.
Mutual fund yields are expressed as a percentage of the fund's current price per
share.
YANKEE ISSUES Dollar-denominated income securities issued in the United States
by foreign banks and corporations, usually when conditions in the U.S. are more
favorable than in other markets, including the issuer's domestic market
overseas.
LIQUIDITY The ability of a security to be readily traded or exchanged for cash.
Generally speaking, the larger an issuer's capitalization, the more liquid its
securities are likely to be. For a money market fund, liquidity may refer to the
amount of cash that must be readily available to meet day-to-day redemptions.
CREDIT QUALITY A measure of an individual issuer's ability to repay principal
and interest on its income securities--or a measure of the general credit risk
of securities in an income portfolio.
(1) Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Its rankings are based on total returns with capital gains and
dividends reinvested. Results do not reflect any deduction of sales charges.
The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies.
(2) Rated by Moody's Investor Service and Standard & Poor's.
Total returns shown indicate past performance and are not indicative of future
results. Investment return and principal value will fluctuate so that shares,
upon redemption, may be worth more or less than their original cost. These
results do not reflect any deduction of sales charges, mortality and expense
charges, or administrative charges. Please refer to page 4 for returns
reflective of these charges.
An investment in the Portfolio is neither insured nor guaranteed by the U.S.
Government and there can be no assurance that the Portfolio will be able to
maintain a stable net asset value of $1.00 per share.
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MAINSTAY VP
CONVERTIBLE PORTFOLIO
The MainStay VP Convertible Portfolio had a total return of 6.06% for the six
month period ended June 30, 1997 versus 10.85% for the average fund in the
Lipper(1) universe. The S&P 500(2) rose a strong 20.62% and the Russell 2000(3)
index of smaller capitalization stocks rose 10.20%.
The performance of the Portfolio was helped by a varied group of companies. For
example, Vanstar Financing Trust, a personal computer distributor and
consultant, benefited from strong PC sales and was the Portfolio's best
performer. Apple South, a restaurant chain based in the Southeast, put together
two consecutive quarters of good sales and performed very well. Other good
performers were California Microwave, Fieldcrest Cannon, and NovaCare.
Hurting the Portfolio's performance was Loral Space & Communications, a
satellite manufacturer. Bernard Schwartz, Chairman and CEO, is believed to be a
moneymaker and we believe his bet on satellite-based communication services will
work out. Thus, we are retaining our position in the Loral Space &
Communications convertible preferred. The Portfolio's performance was also hurt
by our position in Boston Chicken. The company's problems were worse than we had
anticipated. As a result, we are reviewing our commitment.
The convertible market has an average premium of 27%, an average yield of 5.8%
and an average price of $122. These characteristics make the convertible market
very equity sensitive. If the stock market were to decline substantially,
convertibles would fall almost as much as stocks. We have described the
Portfolio as a vehicle for getting equity exposure with less risk. At the
present time, we believe convertibles, on average, are almost as risky as
stocks. However, we have stuck to our discipline of buying convertibles that
have an attractive risk/reward profile such that the convertible participates in
60% - 70% of the upside and 40% of the downside of the common stock. But, given
the expensive nature of the convertible market, we have not been able to find
many convertibles that meet these parameters. While this has caused the
Portfolio to lag the market, given the level of the stock market, we consider
this to be the prudent course of action.
Denis Laplaige
Neil Feinberg
Thomas Wynn
Portfolio Managers
MacKay-Shields Financial Corporation
(1) Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Its rankings are based on total returns with capital gains and
dividends reinvested. Results do not reflect any deduction of sales charges.
The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies.
(2) "Standard and Poor's 500 Composite Stock Price Index" and "S&P 500" are
registered trademarks of the Standard & Poor's Corporation. The MainStay VP
Series Fund, Inc. is neither sponsored by nor affiliated with Standard &
Poor's Corporation. The S&P 500 is an unmanaged index considered generally
representative of the U.S. stock market. Results assume the reinvestment of
all income and capital gains distributions.
(3) Russell 2000 Index consists of the smallest 2,000 securities in the Russell
3000 Index, representing approximately 11% of the Russell 3000 total market
capitalization. This index is widely regarded in the industry as the premier
measure of small cap stocks.
Included is the reinvestment of all distributions at net asset value and the
change in share price for the stated period. Total returns shown indicate past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that shares, upon redemption, may be worth
more or less than their original cost. These results do not reflect any
deduction of sales charges, mortality and expense charges, contract charges, or
administrative charges. Please refer to page 4 for returns reflective of these
charges.
Certain of the Portfolio's investments have speculative characteristics.
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MAINSTAY VP
GOVERNMENT PORTFOLIO
MARKET HIGHLIGHTS FOR THE SIX MONTHS ENDED 6/30/97
- - In general, the market for income securities was relatively quiet during the
first half of 1997.
- - Rapid economic growth in the first quarter led to a 25 basis point increase in
the Federal Funds rate in late March.
- - Economic activity, along with low unemployment and low inflation, kept bonds
trading in a relatively narrow range.
- - With lower volatility, the market's attention moved from Treasuries to other
ways of enhancing yield such as mortgage-backed and asset-backed securities.
PORTFOLIO HIGHLIGHTS FOR THE SIX MONTHS ENDED 6/30/97
- - The Portfolio had a return of 2.52% for the six months ended 6/30/97.
- - The Portfolio sold a portion of its Treasury holdings position and invested in
other securities, including mortgage-backed bonds, unleveraged collateralized
mortgage obligations (CMOs), whole loans, low balance loans, and other
instruments that we believed offered opportunities to enhance yield.
- - Given the market's lower volatility, the Portfolio maintained a relatively
neutral duration throughout the first six months of the year.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
The first six months of 1997 were relatively quiet in the U.S. government
securities markets. Although strong economic growth led to a tightening of the
Federal Funds rate in late March, the markets had largely discounted the move
before it happened, and whatever losses resulted from the rising rates were
regained by the end of the second quarter.
After a strong period of growth in the first quarter, the second quarter showed
modest growth, low inflation, and the lowest unemployment levels in over a
decade. The result was that the Treasury market traded in a narrow range.
Today, many of the securities in the fixed-income market give issuers or bond
holders some flexibility in how the security will perform, through puts, calls,
or prepayments. As volatility decreased, the market directed its attention to
agencies, mortgage-backed and asset-backed securities, and CMOs, that offer the
potential to earn higher yields. The result was a decreased demand for
Treasuries, yield spreads tightening to Treasuries, and increasing interest in
identifying market inefficiencies.
GIVEN THIS CONTEXT, HOW DID THE MAINSTAY VP GOVERNMENT PORTFOLIO DO IN THE FIRST
HALF OF 1997?
The Portfolio returned 2.52% for the six months ended 6/30/97. The Portfolio
underperformed the average Lipper(1) general U.S. government fund, which
returned 2.65% for the same period.
WHAT WAS YOUR PRIMARY STRATEGY DURING THE REPORTING PERIOD?
We sought to enhance yields, since there were few opportunities among Treasuries
and, given the flatness of the yield curve for this stage of the cycle, there
were not many opportunities to take advantage of trends in the yield curve. We
maintained a relatively neutral duration for the Portfolio and sought yield
among a variety of securities that offered yield spreads to Treasuries.
WHERE DID YOU FIND THE BEST OPPORTUNITIES?
We moved a portion of the Portfolio's holdings out of Treasuries and into
mortgage-backed securities because we felt that we could get enhanced yield for
the Portfolio given the state of the yield curve.
WHAT TYPES OF MORTGAGE-RELATED SECURITIES DID YOU BUY?
During the reporting period, we purchased seasoned mortgage pools at a discount,
which provided capital gain opportunities when prepayments came in higher than
expectations. We also invested the Portfolio in govern-
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ment guaranteed adjustable-rate mortgages both in the first and second quarter.
We feel these are the most undervalued securities in the short-end of the
market. And while they performed pretty much in line with Treasuries, we believe
that they may begin to outperform in the second half of the year. So we feel
that building the Portfolio's position in these securities can offer total
return potential.
We also increased the Portfolio's holdings in unleveraged collateralized
mortgage obligations (CMOs), from 5% to 9%. We pared back on those as well, when
we saw opportunities to take profits. CMOs accounted for about 9% of the
Portfolio at the end of June and both mortgage strategies helped increase yield
in a low volatility environment.
WHAT WAS YOUR DURATION STRATEGY FOR THE PORTFOLIO DURING THE FIRST SIX MONTHS?
We kept the Portfolio neutral. We correctly anticipated the Federal Reserve
Board's tightening move. Although prices dropped a bit afterward, there haven't
been any major trends in this low volatility market. Prices and yields have
ended the first half of 1997 near levels where they started the year.
COULDN'T YOU SEEK TO ENHANCE YIELD BY LOWERING THE PORTFOLIO'S QUALITY?
We could, but we won't. The Portfolio continues to be agency rated(2), which is
the highest rating the Portfolio can have--better than AAA. In a market with
spreads this tight, we don't believe there is any reason to compromise quality
to pick up a few basis points in yield here or there.
WERE THERE OTHER YIELD-ENHANCING SECURITIES THAT YOU BOUGHT FOR THE PORTFOLIO?
We purchased some low-balance mortgage loans. These are securities typically
backed by smaller non-conforming, limited documentation mortgages to top quality
self-employed individuals. These individuals carry the highest quality ratings.
The borrowers on average pay approximately 100 basis points over standard
mortgages. This is why they are attractive.
ARE THESE RELATIVELY NEW SECURITIES?
Yes, they are. And we believe we've been at the forefront of this market. Our
original research included modeling prepayments, projecting refinancing levels,
and developing a demographic and geographic profile. We've capitalized on our
in-house experience to establish ourselves as a prominent player in this market.
Since these are high coupon mortgages, they're issued at a premium. The biggest
risk they face is prepayment risk. But since the mortgage holders are paying a
premium to get the loans and don't have many financing alternatives, we believe
we'll see slower prepayments than the market expects. We're very comfortable
with these new securities and we believe they can provide attractive
opportunities for the Portfolio.
DID THE PORTFOLIO INVEST IN ASSET-BACKED SECURITIES?
Yes, we increased the Portfolio's exposure to asset-backed securities, which
also offer a spread over Treasuries. Basically, we concentrated on AAA-rated
manufactured housing mortgages and AAA-rated home equity loans. They provided
the Portfolio with increased yield in the short end of its investment Portfolio.
CAN YOU COMMENT ON THE PORTFOLIO'S TREASURY HOLDINGS?
The Treasury market was very efficient during the reporting period. Given the
reduced budget deficit, the need for new cash to finance the deficit has
decreased. As a result, the extra 10-year auctions that were announced last year
were canceled. During the first half of 1997, inflation-indexed Treasury
securities were introduced to the market. While these securities may be a good
idea, we think they came at a bad time. With inflation at such low levels, there
was little interest in them and they underperformed. Fortunately, we didn't
participate in these new offerings.
We did buy some high coupon callable paper that we think is pretty attractive
right now. The securities are yielding a little over the 10-year Treasuries and
we think that spreads will tighten over the course of the next six months.
WHAT'S YOUR OUTLOOK GOING FORWARD?
We expect more of the same. The Federal Reserve Board has been very strict on
inflation, and we expect that to continue. As long as productivity increases
faster than wages, we don't anticipate any major inflationary
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problems on the horizon. Whatever the future brings, we'll continue to apply our
disciplined approach to sector evaluation and individual security selection on
behalf of the Portfolio's shareholders.
Ravi Akhoury
Edward Munshower
Portfolio Managers
MacKay-Shields Financial Corporation
DURATION A measure of price sensitivity, which adjusts for the time value of the
payments investors will receive and which takes into account interest payments
as well as principal payments. Duration is a better gauge of interest-rate
sensitivity than average maturity alone.
EASING/TIGHTENING When the Federal Reserve Board lowers interest rates on
benchmark securities, it is said to be "easing" or making borrowing more
affordable. When it raises interest rates, it is said to be "tightening" or
making borrowing more expensive.
YIELD CURVE When interest rates available from various short-, intermediate-,
and long-term securities are plotted on a graph, the resulting line is known as
a yield curve.
YIELD SPREAD The difference in yield between securities in different market
sectors, such as government and mortgage-backed securities or between different
securities in a single sector, such as 5 and 10 year Treasuries.
SHORT-END OF THE MARKET The maturities of fixed-income securities may range from
as short as overnight to as long as 30 years or more. Securities with shorter
maturities represent the "short end" of the market or maturity spectrum.
BASIS POINT One hundredth of one percent in the yield of an investment, i.e.,
100 basis points equals 1%.
PREPAYMENT RISK The risk that mortgage or loan holders will repay their
obligations before they mature, shortening the stream of interest payments
investors receive.
AUCTION The competitive bidding process through which Treasury securities are
sold.
(1) Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Its rankings are based on total returns with capital gains and
dividends reinvested. Results do not reflect any deduction of sales charges.
The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies.
(2) Agency rating is above AAA. Currently debt rated AAA has the highest ratings
assigned by Standard & Poor's. These ratings are based solely on the
creditworthiness of the bonds in the portfolio and are not meant to
represent the stability or safety of the Portfolio. The MainStay VP Series
Fund, Inc. is neither sponsored by nor affiliated with Standard & Poor's
Corporation.
Included is the reinvestment of all distributions at net asset value and the
change in share price for the stated period. Total returns shown indicate past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that shares, upon redemption, may be worth
more or less than their original cost. These results do not reflect any
deduction of sales charges, mortality and expense charges, contract charges, or
administrative charges. Please refer to page 4 for returns reflective of these
charges.
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MAINSTAY VP
HIGH YIELD CORPORATE BOND PORTFOLIO
MARKET HIGHLIGHTS FOR THE SIX MONTHS ENDED 6/30/97
- - During the first half of 1997, the yield spreads of high-yield bonds relative
to U.S. Treasury securities were historically low.
- - After moving within a narrow range, interest rates ended the reporting period
relatively unchanged.
- - The high-yield bond market saw significant inflows of foreign capital,
significant amounts of new issuance, and historically low default levels.
PORTFOLIO HIGHLIGHTS FOR THE SIX MONTHS ENDED 6/30/97
- - The Portfolio had a return of 6.90% for the six month period ended 6/30/97.
- - The Portfolio outperformed the average Lipper(1) high current yield fund for
the six months ended 6/30/97.
- - The Portfolio emphasized high-quality, short-duration paper within prospectus
guidelines, but selectively sought opportunities among lower-quality bonds
with favorable risk/reward characteristics.
- - Despite high levels of new issuance, the Portfolio primarily focused in the
secondary market, where liquidity and information flow allow for better
assessment of relative values.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
During the first half of 1997, the high-yield bond market received significantly
higher capital inflows than a year before, much of it from foreign investors.
New issuance was up 38% over the first half of 1996. At the same time, only six
issues defaulted, for a 1.53% annualized default ratio, which is in an
historically low range.
From January through June, interest rates remained relatively flat, with a
slight upward movement in the first quarter and a slight downward trend in the
second. In this environment, high yield bonds offered historically low yield
spreads to Treasury securities. As a result, the lower quality segments of the
market significantly outperformed other high yield issues.
GIVEN THIS CONTEXT, HOW DID THE MAINSTAY VP HIGH YIELD CORPORATE BOND PORTFOLIO
DO IN THE FIRST HALF OF 1997?
The MainStay VP High Yield Corporate Bond Portfolio returned 6.90% for the six
months ended 6/30/97. The Portfolio outperformed the average Lipper high current
yield fund, which returned 6.10% over the same period.
WHAT FACTORS CONTRIBUTED THE MOST TO THE PORTFOLIO'S OUTPERFORMANCE?
The Portfolio's outperformance was largely due to an overweighting in the media,
telecommunications, and cable industries. These industries account for a large
percentage of the High Yield Portfolio, which contributed significantly to the
Portfolio's results.
STRATEGICALLY SPEAKING, WHAT DID YOU DO?
With historically tight yield spreads, we increased exposure to investments in
higher quality, shorter duration credits in keeping with the Portfolio's
management disciplines.
COULD YOU EXPLAIN THAT IN SIMPLER TERMS?
Sure. Generally, you purchase high yield bonds at a wide yield spread to
Treasuries, hoping that as spreads narrow you'll have an opportunity to profit.
In this environment, the chance of spreads narrowing was low--so there were
fewer reasons to assume greater risk, either in terms of quality or duration.
That made higher quality, shorter duration bonds more attractive on a
risk/reward basis.
DON'T YOU EARN MORE INCOME WITH LOWER QUALITY BONDS?
Generally you do. But you also assume additional risk. Since we carefully
evaluate the relationship of risk and reward in every security we purchase for
the Portfolio, we were very selective in the lower quality bonds we bought
during the reporting period. In particular, we tended to avoid the new issue
market, where we felt deals tended to be overpriced relative to the risks they
carried. At the same time, we did find selected opportunities in lower rated
bonds in the secondary market.
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CAN YOU GIVE US AN EXAMPLE?
One of our largest purchases and sales during the first half of 1997 was TCI
Satellite Entertainment. When their bonds first came to market, we felt the
company had to resolve some cash flow and corporate ownership issues before the
securities would be attractive. While the company resolved these issues with a
significant equity investment and substantially improved their cash flow, the
bonds that were issued at 100 cents on the dollar went down to 75 cents on the
dollar. In March and April, we bought as much of the issue as we possibly could
at 75 cents on the dollar and sold it in May when it returned to 100 cents.
That's a case where we thought the rewards would far outweigh any risks we took,
and our assessment benefited the Portfolio handsomely.
WHAT WERE SOME EXAMPLES OF THE HIGH QUALITY, SHORT DURATION PAPER?
Tenet Healthcare is an operator and consolidator of acute care hospitals. We
found their debt attractive and participated in two offerings, which have
performed pretty close to the market. Owens Illinois is a packaging company. We
believed that they were going to restructure their debt and would tender for
their senior debt. We purchased a significant amount of their senior debt, they
did tender, and we rolled into the new deal, still believing that the investment
would show a positive risk/reward ratio. So it was a solid performer, and for a
high quality credit, it was an outstanding performer.
WERE THERE ANY INDUSTRIES THAT WERE PARTICULARLY ACTIVE?
Yes, telecommunications represents about 10% of the high yield market, and we
identified a number of opportunities there. The second quarter was relatively
schizophrenic, as the market responded to the variety of telephone options, from
cellular to long-distance to local service alternatives. Cable companies also
got a shot in the arm through a series of deals.
We participated in Comcast's high yield debt, which benefited when Microsoft
made a billion dollar investment in the company. The bonds advanced to
investment grade, from a BB rating, which gave the Portfolio's performance a
substantial boost. The Portfolio owned Falcon Building Products debt, which made
substantial gains in just one month. And the Portfolio also owned Microcell
Telecommunications and Millicom International Cellular, which both performed
very strongly during the second quarter.
WERE THERE OTHER INDUSTRIES THAT SIGNIFICANTLY IMPACTED THE PORTFOLIO?
The paper industry was a strong performer, and we participated in that through
Stone Container and Gaylord Container, both of which contributed positively to
the Portfolio's performance in the second quarter. I should mention, however,
that we don't invest on an industry basis. We select securities on their
individual merits, based on their price and risk/reward characteristics.
WERE THERE OTHER THEMES IN YOUR INVESTMENT STRATEGY FOR THE PORTFOLIO?
We were consistent and conservative in our approach to investing for the
Portfolio. We weren't going to swing at every pitch. When something came along
that was going the right speed and was in our exact strike zone, we went for it.
AND WHAT EXACTLY IS YOUR "STRIKE ZONE"?
Well, the Portfolio's average credit rating is B. But we've pursued the higher
quality single-B securities with companies like Thermadyne Holdings and Fresh
Del Monte Produce. They were two positions we added to the Portfolio during the
first half of the year. We believe both are significantly underrated by both the
marketplace and the rating agencies. The Portfolio also holds names like Selmer
and Affinity Group that are B-rated bonds, but have many of the quality
characteristics of BB-rated bonds. And we think they're quickly approaching
that. So while the Portfolio's average credit rating is B, we believe the
Portfolio's bonds are at the higher end of the B category.
During the reporting period, we trimmed the Portfolio's CCC bonds and have added
BB securities. So overall, the Portfolio's credit quality has improved over the
first half of the year.
WHAT OTHER COMPANIES DID YOU BUY DURING THE FIRST HALF OF THE YEAR?
CMS Energy is an electric utility in Michigan that is another good example of a
high-quality, shorter-duration credit. They have a ten-year record of 6% annual
cash flow growth, which is very strong for a utility company. They have $3
billion in debt and $3 billion of equity value. CMS Energy had a BB piece of
paper we found
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attractive relative to the rest of the market and it has performed well since we
bought it early in the second quarter.
WHAT SECURITIES HAVE YOU SOLD?
We sold Spanish Broadcasting System preferred and equity because they reached
our price target in March and April. We also sold TeleWest which was the largest
cable company in the U.K., but is now the second largest, because of merger
activity. That sale was also at a profit. Argosy Gaming was a casino position in
the gaming industry that did well, but we sold it because we found better
relative value in other gaming issues.
WHICH SECURITIES WERE THE BEST OVERALL PERFORMERS FOR THE PORTFOLIO?
The Portfolio's holdings in National Tobacco provided more than a 100% return
over the past year and over 70% in the second quarter. The Portfolio had an
equity position that came attached with its bonds, and we sold the equity at a
very attractive price.
I already mentioned TCI Satellite Entertainment and Millicom International
Cellular, both of which were among the Portfolio's top performers. CD Radio was
another top contributor. During the holding period it received a license and the
market recognized it as a valuable strategic asset.
WERE THERE ANY SECURITIES THAT UNDERPERFORMED?
Alliance Entertainment was clearly a poor investment. We felt they were going to
get help from a strategic investor, but that never happened.
ARE THERE AREAS WHERE THE PORTFOLIO IS CURRENTLY OVER OR UNDERWEIGHTED?
Yes. The portfolio is currently overweighted in media broadcasting and
telecommunications, which has been a positive for performance. The Portfolio
remains underweighted in energy. That didn't contribute significantly to overall
performance, and we're in the process of reassessing that weighting.
HOW MUCH CASH DOES THE PORTFOLIO CURRENTLY HAVE ON HAND?
Given what we perceive to be the overpricing in the market, we currently hold a
cash position of about 14%, which is somewhat lower than at the end of 1996.
WHAT IS THE BIGGEST RISK INVESTORS FACED IN THE HIGH YIELD MARKET?
Basic market risk. As we noted before, spreads are at historically tight levels
and pricing isn't particularly attractive in most new issues. So careful
evaluation of price, risk, and reward is essential if we want to buy opportunity
instead of just buying bonds.
WHAT DO YOU FORESEE FOR THE FUTURE?
We continue to believe we're in the late stages of a bull market in credit and
we want to remain cautious. We don't want to guess the shape of the yield curve.
Instead, we try to buy quality and get a fair return, given where yields are
today. If spreads widen, and we think they will, we expect to take a more
aggressive stance, moving to lower-quality bonds that can offer appropriate
compensation for the risks they involve. As always, we'll seek to maximize
current income through diversified investments in high yield securities, with
capital appreciation as a secondary objective.
Denis Laplaige
Steven Tananbaum
Portfolio Managers
MacKay-Shields Financial Corporation
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DEFAULT Failure of a debtor to repay principal or interest on an obligation or
to meet some other provision of a debt instrument. If an issuer defaults,
bondholders may make claims against the assets of the issuer to recoup their
principal.
YIELD SPREAD The difference in yield between securities in different market
sectors, such as high-yield securities and Treasury issues--or between different
securities in a single sector, such as short-term and intermediate-term Treasury
issues.
CREDIT QUALITY A measure of an individual issuer's ability to repay principal
and interest on its income securities--or a measure of the general credit risk
of securities in an income portfolio.
WEIGHTING The proportion of a portfolio allocated to a specific security or
sector, i.e., a portfolio is said to be overweighted in a sector when that
portion of the portfolio is greater than the sector's share of the market as a
whole.
DURATION A measure of price sensitivity, which adjusts for the time value of the
payments investors will receive and which takes into account interest payments
as well as principal payments. Duration is a better gauge of interest-rate
sensitivity than average maturity alone.
CASH FLOW The amount of income or earnings available to cover outstanding
liabilities and other obligations, including debt service.
TENDER To offer money or goods in settlement of a prior debt or claim.
CASH POSITION The portion of a portfolio held in highly liquid securities (often
referred to as "cash"), either for defensive purposes or to take advantage of
investment opportunities as they may arise.
YIELD CURVE When interest rates available from various short-, intermediate-,
and long-term securities are plotted on a graph, the resulting line is known as
a yield curve.
(1) Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Its rankings are based on total returns with capital gains and
dividends reinvested. Results do not reflect any deduction of sales charges.
The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies.
Included is the reinvestment of all distributions at net asset value and the
change in share price for the stated period. Total returns shown indicate past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that shares, upon redemption, may be worth
more or less than their original cost. These results do not reflect any
deduction of sales charges, mortality and expense charges, contract charges, or
administrative charges. Please refer to page 4 for returns reflective of these
charges.
Certain of the Portfolio's investments have speculative characteristics.
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MAINSTAY VP
INTERNATIONAL EQUITY PORTFOLIO
MARKET HIGHLIGHTS FOR THE SIX MONTHS ENDED 6/30/97
- - After a weak first quarter, many international markets showed outstanding
results in the second quarter of 1997, helping boost returns for the six month
reporting period.
- - Restructuring and economic improvements led to excellent local returns in many
European markets, although a strong dollar moderated performance for U.S.
investors.
- - Economic recovery and favorable currency movements helped Japanese equities
regain some momentum, while property speculation in Malaysia presented
substantial investment risks.
- - Concerns over Chinese rule slowed performance in Hong Kong during the first
quarter of 1997, but returns were strong for the first half of the year.
PORTFOLIO HIGHLIGHTS FOR THE SIX MONTHS ENDED 6/30/97
- - The Portfolio had a return of 10.80% for the six month period ended June 30,
1997.
- - Over the reporting period, the Portfolio lagged its average Lipper(1) peer
fund and underperformed the Morgan Stanley Capital International EAFE
Index(2).
- - The Portfolio reduced its positions in Germany, France, and Spain and
increased exposure in Switzerland and Belgium to strengthen core European
holdings and broaden diversification.
- - Malaysian holdings were sold and invested primarily in Singapore, which the
Portfolio manager believes has a stable economy and strong fundamentals.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
In the first quarter of 1997, concerns about rising U.S. interest rates and a
decline in U.S. equities caused weakness in many international markets. During
the second quarter, however, investors returned to the fundamentals of their own
markets, which produced excellent returns in most markets and positive overall
results for the markets in the first half of the year.
Ongoing restructuring, low inflation, moderate growth, and progress toward
European Monetary Union boosted overall performance in Europe. Several core
European markets provided double-digit returns, with Spain up more than 36%,
Germany up 32% and France up 23% for the first half of 1997 in local currency
terms. As impressive as these returns may be, a strengthening dollar resulted in
more moderate returns for U.S. investors.
Asian markets were also generally strong. Japan began to climb out of its severe
recession and posted positive returns for the first half of the year. Hong Kong
suffered in the first quarter as investor concerns over rule by the People's
Republic of China caused a drop in equity values. Later, however, those fears
subsided and Hong Kong provided positive results for the first half of the year.
Singapore and Malaysia were underperformers. Emerging markets had variable
results and just after the first half of 1997 ended, Thailand devalued its
currency.
HOW DID THE MAINSTAY VP INTERNATIONAL EQUITY PORTFOLIO DO IN THIS ENVIRONMENT?
For the six months ended 6/30/97, the MainStay VP International Equity Portfolio
had a total return of 10.80%. These results lagged the average Lipper
international fund, which returned 12.13% for the same period and the Morgan
Stanley Capital International EAFE Index, which returned 11.21% for the first
half of 1997.
WHY DID THE PORTFOLIO UNDERPERFORM ITS BENCHMARK?
There are two principal reasons why the Portfolio underperformed the EAFE Index.
Most importantly, the Portfolio suffered due to an overweighted position in
France, which was negatively affected during, and shortly after the country's
elections. In addition, because the Portfolio was underweighted in Japan, it did
not benefit as much from the strengthening of the yen as did portfolios with
heavier weightings.
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WHAT DECISIONS MADE THE BIGGEST CONTRIBUTIONS TO THE PORTFOLIO'S PERFORMANCE?
As international investors, we believe that country selection is the most
important decision that we can make. Given the previous weakness in Japan, we
felt the Portfolio could benefit by strengthening the Portfolio's positions in
core European countries. During the first half of 1997, we reduced our Japanese
exposure and trimmed the Portfolio's positions in Germany, France, and Spain to
add holdings in Switzerland and Belgium. This strategic shift increased the
Portfolio's diversification within Europe and had a positive impact on the
Portfolio's overall performance.
HOW MUCH DID YOU REDUCE THE PORTFOLIO'S JAPANESE EXPOSURE?
Japan is still the largest international equity market and the Portfolio
continues to allocate more assets there than to any other country. At the end of
1996, Japan represented about 29.3% of our Portfolio. At the end of the first
half of 1997, it was about 25.6%. The Portfolio is currently underweighted in
Japan relative to the Morgan Stanley Capital International EAFE Index, which is
the benchmark against which we measure the Portfolio's performance.
The signs of recovery in Japan are positive and while the market's 7.5% return
may look meager next to the 20% to 30% returns in some European markets, Japan
was still a positive contributor to performance. In addition, the Japanese yen
strengthened relative to the dollar, so currency movements had a positive impact
for U.S. investors.
WHY DID YOU SELECT BELGIUM AND SWITZERLAND?
Diversification was an important consideration. Belgium's economy is tied to
other core European economies, which are generally getting stronger and
providing moderate growth. As a result, we believe the prospects there are very
positive. Switzerland has a number of companies that are export oriented and
benefited from low interest rates and favorable exchange rates. Novartis, a
Swiss pharmaceutical company that resulted from a merger between Ciba Geigy and
Sandoz, is an excellent example.
WITH THE HIGH RETURNS IN GERMANY, FRANCE, AND SPAIN, WAS IT WISE TO REDUCE THE
PORTFOLIO'S HOLDINGS IN THESE MARKETS?
With local returns over 20% or 30%, we felt it was a good time to take some
profits. We remain overweighted in many core European countries, including
France, Austria, and Italy. Decreasing the Portfolio's holdings in Spain brought
the Portfolio from an overweighted position to a fairly neutral position
relative to the EAFE Index. At the same time, the Portfolio's investments in
Switzerland and Belgium brought the Portfolio a more diversified exposure to
Europe.
WHICH COMPANIES PROVIDED THE BEST PERFORMANCE DURING THE REPORTING PERIOD?
There were several. For example, in Germany, we had positive results from
Volkswagen. In the Netherlands, Philips Electronics did very well. And in Italy,
which has benefited from low interest rates, low exchange rates, and the
privatization of industry, we've had positive results from Telecom Italia Mobile
and its sister companies in telecommunications and cellular equipment.
HAVE DEREGULATION AND PRIVATIZATION HAD AN IMPACT ON TELECOMMUNICATIONS IN OTHER
COUNTRIES?
Absolutely. As the industry moved from dependence on cables to fiber optics and
cellular technology, we've also seen a general shift from government-regulated
telephone monopolies to a more competitive private market. The move in that
direction is creating opportunities for businesses in Europe and the Far East,
just as it did in the United States. On the whole, we think this is a positive
trend and we have telecommunications holdings in several countries.
WHICH MARKETS DIDN'T DO WELL DURING THE REPORTING PERIOD?
By far the worst performer was Malaysia. We were concerned about the temporary
slowdown in technology, rising interest rates, and speculation on property
values. Although we had hoped that the situation could be contained, when
property speculation continued, we saw it as a signal to reduce the Portfolio's
holdings. We decided to sell Malaysian stocks in the second quarter, and since
Malaysia represented only about 2.3% of the Portfolio's investments at the
beginning of the year, the overall impact was minor.
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WHERE DID YOU INVEST THE MONEY THAT YOU RAISED SELLING MALAYSIAN STOCKS?
In Singapore and in Europe. Although the market in Singapore showed some
weakness during the reporting period, we believe it has a stable economy, strong
fundamentals, and has been a solid performer over time. Whereas in Europe, the
restructuring and economic improvements continued to look attractive, especially
on a relative basis.
WHAT HAPPENED IN THE UNITED KINGDOM DURING THE FIRST HALF OF THE YEAR?
The Portfolio started off the year underweighted in the U.K. and continues to
maintain that position. Interest rates have been rising in Britain and we
believe that to restrain their economy, further rate increases may be necessary.
The British have come out with a new budget that isn't as favorable for
corporations as it might be, so we're not taking any action at this time.
WHAT MAJOR RISKS DID INVESTORS FACE DURING THE REPORTING PERIOD?
As you know, investments in foreign securities may be subject to greater risks
than domestic investments. These risks include currency fluctuations, changes in
U.S. or foreign tax or currency laws, and changes in monetary policies and
economic and political conditions in foreign countries. During the period, many
investors were concerned about news reports of small Japanese banks facing
solvency problems. Seeking to avoid difficulties of this nature, the Portfolio
was invested primarily in large, well-established companies during the reporting
period. Managing risk is a major component in our approach to international
investing.
HOW DID SHIFTING CURRENCIES AFFECT THE PORTFOLIO?
The U.S. dollar generally strengthened relative to European currencies. While
that substantially reduced returns in U.S. dollar terms, our currency hedging
strategy helped reduce the negative impact currency movements had on the
Portfolio. As I mentioned, the Japanese yen strengthened against the dollar, and
while the Portfolio's yen exposure was limited, it had a positive impact on the
Portfolio's performance.
DID THE PORTFOLIO INVEST IN EMERGING MARKETS?
No. During the reporting period, we didn't believe that the reward potential in
emerging markets justifies the level of risk investors would have to take. While
many investors are attracted by stellar returns in emerging markets, we prefer
core established markets. Thailand's recent currency devaluation is just one
example of the kind of risk investors may face in emerging markets.
WHAT ABOUT MARKETS IN TRANSITION LIKE HONG KONG?
Investors were a little cautious about Hong Kong in the first quarter, but as
the transition to unified rule by the People's Republic of China approached,
many investors began to realize the market's long-range potential. Hong Kong is
the fifth largest banking center and the seventh largest trading center in the
world. It's the gateway for Chinese exports and its fundamentals remain strong.
We held the Portfolio's investments in Hong Kong throughout the first half of
the year, and our holdings contributed positively to the Portfolio's
performance.
WHAT IS YOUR OUTLOOK FOR THE PORTFOLIO?
We continue to believe that restructuring and monetary union will benefit
European markets and we are strongly committed to the Portfolio's
diversification strategy in Europe. As new developments unfold, we may continue
to shift assets among European markets to take advantage of opportunities as
they arise. We're pleased with the economic developments in Japan as well, and
if fundamentals continue to improve, we may begin looking for selected
opportunities to increase the Portfolio's exposure there. In any event, we will
continue to seek long-term growth of capital commensurate with an acceptable
level of risk.
Shigemi Takagi
Portfolio Manager
MacKay-Shields Financial Corporation
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FUNDAMENTALS Key economic factors such as interest rates, gross national
product, inflation, unemployment, and currency stability, which may affect the
direction of a country's economy--or issuer-specific factors such as assets,
earnings, sales, products, and management, which may affect the performance of a
company's securities.
RESTRUCTURING Any action designed to improve the overall financial structure,
labor relations, or productivity of a company. Restructuring may include such
steps as changing management, investing in new plant and equipment, engaging in
mergers and acquisitions, or taking other action to increase output or lower
costs.
EUROPEAN MONETARY UNION A proposed system that would allow participating
European countries to operate with a common currency or monetary unit. To
qualify for participation, each member country must meet strict monetary and
fiscal policy guidelines.
EMERGING MARKETS Countries with smaller or more recently established capital
markets, which seek to attract investors, but may lack the liquidity and
stability of larger, established markets.
WEIGHTING The proportion of a portfolio allocated to a specific market sector or
country, i.e., a portfolio is said to be overweighted in a country when that
portion of the portfolio is greater than the country's total equities relative
to the international equity markets as a whole.
PRIVATIZATION The process of converting state-run or publicly-operated companies
into privately owned and operated entities. In theory, enterprises may run more
efficiently and offer better service to customers when owned by shareholders
rather than the government.
HEDGING/CURRENCY MANAGEMENT An investment strategy that seeks to reduce the
effects of currency fluctuations on investor returns. There can be no assurance
that currency hedging will be beneficial to investors.
(1) Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Its rankings are based on total returns with capital gains and
dividends reinvested. Results do not reflect any deduction of sales charges.
The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies.
(2) Morgan Stanley Capital International EAFE Index is an unmanaged index of the
securities of over 1,000 companies traded on the markets of Europe,
Australia, New Zealand and the Far East.
Included is the reinvestment of all distributions at net asset value and the
change in share price for the stated period. Total returns shown indicate past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that shares, upon redemption, may be worth
more or less than their original cost. These results do not reflect any
deduction of sales charges, mortality and expense charges, contract charges, or
administrative charges. Please refer to page 4 for returns reflective of these
charges.
International investing involves special risks that are more volatile than those
found in the U.S. markets, including foreign currency fluctuations, lesser
liquidity of securities and exchanges, political and economic instability, and
different government regulatory concerns.
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MAINSTAY VP
TOTAL RETURN PORTFOLIO
MARKET HIGHLIGHTS FOR THE SIX MONTHS ENDED 6/30/97
- - After a sharp downturn in late March and early April, the stock market soared
to record highs.
- - Low inflation, low interest rates, and moderate economic growth in the second
quarter provided a solid backdrop for growth investors.
- - Although the Federal Reserve Board moved to raise interest rates in late
March, the bond markets were relatively quiet over the first half of 1997.
- - With low volatility, the market's attention moved from Treasuries to other
ways of enhancing yield, including corporate bonds, mortgage-backed
securities, and others.
PORTFOLIO HIGHLIGHTS FOR THE SIX MONTHS ENDED 6/30/97
- - The Portfolio had a return of 9.03% for the six months ended 6/30/97.
- - The Portfolio underperformed the average Lipper(1) balanced fund for the first
half of 1997.
- - Financial, pharmaceutical, and health care related stocks contributed
positively to equity performance.
- - Overweighting corporate bonds and finding opportunities among BBB-rated Yankee
bonds helped enhance yield in the income portion of the Portfolio's
investments.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
During the first half of 1997, the equity markets were highly volatile, with
daily gains or losses of 100 points or more becoming common fare. Over the same
period, however, the bond markets were relatively tame. The Federal Reserve
Board's move to raise interest rates in late March caused stocks to undergo a
sharp downturn, or correction, of nearly 10%.
In the second quarter, economic growth slowed to more moderate levels, inflation
fears calmed, and interest rates remained low. This environment provided an
ideal backdrop for growth investors, as stocks rose to record levels. Advances
were led by large capitalization issues, with the S&P 500(2) gaining much more
in six months than it normally would in an entire year since 1926(3). Of course,
investors should bear in mind that past performance is no guarantee of future
results.
While bond prices dropped slightly following the 25 basis point increase in the
Federal Funds rate, by the end of June, the markets had fully recovered. With
low volatility and relatively stable interest rates, opportunities among
Treasury securities and along the yield curve were scarce. As a result,
investors turned their attention to a variety of other income securities in an
effort to enhance yields. Corporate and utility bonds showed strong performance
and mortgage-related and asset-backed issues provided attractive opportunities.
GIVEN THIS CONTEXT, HOW DID THE MAINSTAY VP TOTAL RETURN PORTFOLIO DO IN THE
FIRST SIX MONTHS OF 1997?
For the six months ended 6/30/97, the MainStay VP Total Return Portfolio
returned 9.03%. The Portfolio underperformed the average Lipper balanced fund,
which returned 10.19% for the first half of 1997.
WHAT WAS THE PRINCIPAL REASON FOR THE PORTFOLIO'S UNDERPERFORMANCE OF ITS PEERS?
The Portfolio underperformed in the first quarter, when both stocks and bonds
suffered a major downturn. Although the Portfolio outperformed its peers in the
second quarter, the gains were not quite enough to make up for earlier losses.
IN THE EQUITY PORTION OF THE PORTFOLIO, WHAT MADE THE BIGGEST CONTRIBUTION TO
PERFORMANCE?
Sticking to our management disciplines. Most of the equity underperformance in
the first quarter was due to five or six issues that contributed positively to
performance in the second quarter. The Portfolio's overweighted position in
financial stocks took a substantial toll in the first quarter, but paid off in
the second when financial issues rallied. First USA was one security that did
particularly well. It received a takeover bid from Banc One in
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the first quarter, and we've sold some of the stock at a handsome profit. We
also bought Washington Mutual, a financial name that provided positive
performance over the first half of the year.
HOW DID TECHNOLOGY STOCKS DO OVER THE FIRST HALF?
Despite a major downturn in March and April, the Portfolio's technology names
have generally done well. Computer Associates International was the Portfolio's
best performer in the second quarter, and Microsoft also contributed positively
to performance over the first half of 1997. 3Com suffered a major setback when
Intel entered its market and was the Portfolio's worst performer over the
reporting period, but we believe investors have overestimated the competitive
threat. We purchased Compuware, a midsized software company in the middle of the
first quarter and it has contributed positively to the Portfolio.
WHAT OTHER COMPANIES MADE POSITIVE CONTRIBUTIONS OVER THE FIRST HALF OF THE
YEAR?
Many of the Portfolio's health care related issues performed well. The
Portfolio's holdings included Guidant, a manufacturer of devices for cardiac
surgery, and Schering-Plough, a major pharmaceutical company. Both returned over
40% for the Portfolio. Medtronic, whose business is similar to Guidant's, also
did well.
Travelers Group stock increased 39%, with its subsidiary, Smith Barney,
benefiting from rising values in the brokerage industry. Lucent Technologies, a
well diversified telecommunications company, gained 52% during the first half of
1997 and was a significant holding.
ASIDE FROM 3COM, WHICH STOCKS DIDN'T DO WELL?
Abacan Resource suffered when its new oil drilling operations proved
unproductive and the company found itself short on capital. We've sold some of
the Portfolio's position and placed the stock on our watch list. IKON Office
Solutions had trouble integrating new acquisitions, which affected performance
and Seagate Technology faced tighter competition and reduced demand for hard
disks, which led to negative returns.
One of the Portfolio's largest holdings, Green Tree Financial, suffered from
rumors about competition from Fannie Mae and news stories about the chief
executive's compensation. HFS, another major holding, performed poorly when
investors had difficulty evaluating its acquisition of CUC International. Both
HFS and CUC International are highly profitable and control vast streams of
income, so we're confident that the value will eventually be realized. Even so,
these difficulties had a negative impact on the Portfolio's overall performance.
WHAT HAPPENED IN THE BOND PORTION OF THE PORTFOLIO?
In this uneventful market, we maintained a relatively neutral duration for the
Portfolio but took a number of steps seeking to increase yield throughout the
reporting period. Recognizing that Treasury securities offered few
opportunities, we overweighted the Portfolio in corporate bonds, which added
value and capital gain potential as yield spreads narrowed. We also sold the
Portfolio's Treasury holdings to buy mortgage-backed and asset-backed
securities, including unleveraged collateralized mortgage obligations (CMOs).
All of these securities helped contribute positively to performance over the
first half of the year.
WHAT ABOUT YANKEE BONDS?
They're bonds issued in the United States by foreign banks and corporations,
usually when conditions in the U.S. are more favorable than in other markets,
including the issuer's domestic market overseas. Since the bonds are denominated
in U.S. dollars, they carry no currency risk. We believe one advantage we have
in the Yankee market is our strong research capability, which helps us sort good
names from the bad. We found some attractive opportunities among lower-rated
investment-grade Yankee bonds for the Portfolio, which have helped performance
in the first half of 1997.
WHAT'S THE OVERALL QUALITY OF THE INCOME PORTION OF THE PORTFOLIO?
The Portfolio has maintained AA quality, even with its investments in some
lower-quality bonds. While we can invest a portion of the Portfolio in BBB-rated
securities, we seek to minimize exposure to noninvestment-grade bonds.
DID YOU HAVE ANY BONDS THAT DIDN'T DO WELL?
The Portfolio's seasoned mortgage pools performed roughly in line with
Treasuries, which tended to underperform other segments of the market, but we
believe we may see values realized in seasoned mortgages in the
29
<PAGE> 31
- --------------------------------------------------------------------------------
months ahead. A significant decision during the first half of the year was
moving the Portfolio out of Treasuries and into higher performing sectors. One
area we didn't participate in was utility bonds, which had very positive
results. While we may have missed an opportunity there, we believe that with
deregulation, many of these bonds may be poised for downgrades.
WHAT'S YOUR OUTLOOK FOR THE FUTURE?
We believe that if economic growth continues at a moderate pace and inflation
stays near its current levels, it will be good for stocks and moderate for
bonds. The rising disparity between stock valuations and corporate earnings,
however, may pose a challenge for equity investors in the future. If wages rise
faster than corporate earnings, inflation could heat up, which could force rates
higher and bond prices lower. With these possibilities in mind, we remain
cautiously optimistic. Whatever the future brings, we'll continue to seek
current income consistent with reasonable opportunity for future growth of
capital and income.
Ravi Akhoury
Rudy Carryl
Edmund Spelman
Portfolio Managers
MacKay-Shields Financial Corporation
CORRECTION A shift in security prices that brings them more in line with
historic averages.
CAPITALIZATION Standard & Poor's defines capitalization as the market value of
outstanding common shares.
BASIS POINT One hundredth of one percent in the yield of an investment, i.e.,
100 basis points equal 1%.
YIELD CURVE When interest rates available from various short-, intermediate-,
and long-term securities are plotted on a graph, the resulting line is known as
a yield curve.
ASSET-BACKED SECURITIES Bonds or notes backed by loan paper or an anticipated
income stream from the sale of merchandise or services. The bonds are generally
originated by banks, credit card companies, or other providers of credit and
often "enhanced" by a bank letter of credit or by insurance by an institution
other than the issuer.
WEIGHTING The proportion of a portfolio allocated to a specific security or
sector, i.e., a portfolio is said to be overweighted in a sector when that
portion of the portfolio is greater than the sector's general relationship to
the market as a whole.
DURATION A measure of average maturity, which adjusts for the time value of the
payments investors will receive and which takes into account interest payments
as well as principal payments. Duration is a better gauge of interest rate
sensitivity than average maturity alone.
MORTGAGE-BACKED SECURITIES Securities representing interests in "pools" of
mortgages in which principal and interest payments by the holders of underlying
fixed- or adjustable-rate mortgages are, in effect, "passed through" to
investors (net of fees paid to the issuer or guarantor of the securities).
(1) Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Its rankings are based on total returns with capital gains and
dividends reinvested. Results do not reflect any deduction of sales charges.
The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies.
(2) "Standard and Poor's 500 Composite Stock Price Index" and "S&P 500" are
registered trademarks of the Standard & Poor's Corporation. The MainStay VP
Series Fund, Inc. is neither sponsored by nor affiliated with Standard &
Poor's Corporation. The S&P 500 is an unmanaged index considered generally
representative of the U.S. stock market. Results assume the reinvestment of
all income and capital gains distributions.
(3) Source: Ibbotson Associates, Chicago. Average annual total return for
1926-1996 was 10.7%.
Included is the reinvestment of all distributions at net asset value and the
change in share price for the stated period. Total returns shown indicate past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that shares, upon redemption, may be worth
more or less than their original cost. These results do not reflect any
deduction of sales charges, mortality and expense charges, contract charges, or
administrative charges. Please refer to page 4 for returns reflective of these
charges.
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MAINSTAY VP
VALUE PORTFOLIO
MARKET HIGHLIGHTS FOR THE SIX MONTHS ENDED 6/30/97
- - The stock market started the year on a strong note, then, dropped during a
five week period in March and early April, to finally recover to record highs.
- - The greatest gains were among a small number of large capitalization issues,
with large inflows from foreign institutional investors.
- - Interest rate sensitive issues reacted severely to rising interest rates but
outperformed the market in the second quarter.
PORTFOLIO HIGHLIGHTS FOR THE SIX MONTHS ENDED 6/30/97
- - The Portfolio had a return of 11.47% for the six month period ended 6/30/97.
- - The Portfolio underperformed the average Lipper(1) growth and income fund for
the six months ended 6/30/97.
- - Interest rate sensitive stocks, particularly insurance companies, were among
the Portfolio's strongest performers.
PORTFOLIO MANAGEMENT DISCUSSION AND ANALYSIS
The first half of 1997 was a dynamic and volatile period in the stock market.
Carrying momentum from the fourth quarter of 1996, equities rose early in the
year. Then in March and April, in anticipation and reaction to the Federal
Reserve Board's move to increase interest rates, the market declined 9.8% in a
sharp correction. As economic growth slowed, the ensuing recovery brought
unexpected stock price gains, led by a small number of large capitalization
issues. Foreign institutional investors contributed to the rally by pouring
money into large and liquid issues.
Although most investors anticipated a correction, the speed and magnitude of the
recovery appeared to dramatically shorten traditional investment cycles.
During the reporting period, the equity markets were highly volatile, with daily
gains or losses of 100 points or more being common, making this one of the most
volatile periods in recent history. Even so, there were some strong value
sectors--most notably interest rate sensitive issues--that performed well on an
absolute and relative basis over the first half of 1997.
GIVEN THIS CONTEXT, HOW DID THE MAINSTAY VP VALUE PORTFOLIO DO OVER THE FIRST
HALF OF 1997?
For the six months ended 6/30/97, the MainStay VP Value Portfolio returned
11.47%. While these returns are close to the historical averages for an entire
year, the Portfolio lagged the average Lipper growth and income fund, which
returned 15.81% for the same period.
WHAT WERE THE PRIMARY REASONS FOR THE PORTFOLIO'S UNDERPERFORMANCE?
During the first half of the year, much of the return in the S&P 500(2) came
from a small number of large capitalization stocks that did not fit the
Portfolio's investment profile, which is geared towards companies with low
price-to-earnings (P/E) and low price-to-cash flow ratios. More specifically,
the value stocks the Portfolio's management criteria caused us to emphasize
ranged from $7.5 billion to $15 billion in market capitalization, in sharp
contrast to the market's preference for stocks with market capitalizations in
excess of $20 billion. As a result, the Portfolio was automatically excluded
from participating in a large part of what made the market rise.
HOW DID YOUR DISCIPLINES HELP INVESTORS?
Using our strict, bottom-up stock selection process, we had identified interest
rate sensitive issues, particularly insurance companies, as an area that offered
potentially outstanding value. While this sector was hit hard during the
market's downturn, its recovery in the second quarter provided good returns for
investors and the Portfolio.
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<PAGE> 33
- --------------------------------------------------------------------------------
WHICH INSURANCE AND FINANCIAL ISSUES DID WELL?
There were several. Travelers Group was up 40%, American International Group
advanced 38%, and NationsBank rose 34%. Allstate and Chubb each provided returns
over 25%, and Transamerica gained 19%. We purchased Transamerica throughout much
of the first and second quarters of the year. The company was actively
restructuring, auctioning off subsidiaries that didn't fit their core business,
and providing direct incentives for managers to improve stock performance. We
look for these kinds of catalysts to identify value.
WHAT OTHER MAJOR DECISIONS DID YOU MAKE DURING THE REPORTING PERIOD?
We selectively increased the Portfolio's positions in the basic materials
companies. We believe auto-related and paper stocks are two of the most
undervalued sectors we have added to. In general, the economically sensitive
sectors underperformed the broad market averages so far in 1997.
WHAT HAPPENED IN THIS SECTOR?
Basic materials stocks such as paper and chemicals suffered from continued poor
pricing, coming off of 1996 with high inventories. Also, fertilizer stocks (i.e.
Agrium and IMC Global) were hurt from poor planting conditions related to poor
weather.
LATE LAST YEAR YOU BEGAN BUYING UTILITIES. WHAT HAPPENED IN THAT AREA?
We continued to purchase utilities as the Portfolio's proprietary valuation
criteria showed they had high potential. The Portfolio is currently slightly
overweighted and we may continue to strengthen the Portfolio's utility positions
in the future. We believe that there are many opportunities among aggressive
utilities that can restructure and take advantage of deregulation.
While the utility sector underperformed during the first half of 1997, we see
strong future potential in names like PECO Energy and Long Island Lighting. PECO
Energy, for example, is actively repurchasing shares. Another underperformer was
Niagara Mohawk Power. On the other hand, Brooklyn Union Gas saw the same
potential we did in Long Island Lighting and offered to merge with the company,
which contributed positively to the Portfolio's performance.
WHAT OTHER SIGNIFICANT PURCHASES DID YOU MAKE?
Columbia/HCA Healthcare was the Portfolio's largest purchase during the
reporting period. We began investing for the Portfolio after the stock corrected
sharply. The company owns hospitals and has consistent growth with high free
cash flow, and has other characteristics that we believe are attractive within
our investment framework. After we purchased the stock for the Portfolio, the
company announced a one billion dollar share repurchase.
We also bought Banc One when, after acquiring First USA, it became the lowest
P/E, lowest price-to-cash flow stock in the entire financial services sector.
WERE THERE OTHER SIGNIFICANT PURCHASES?
Toys "R" Us was an excellent value story. We bought the stock based on its low
P/E and substantial free cash flow. The company has dynamic product flow due to
the biggest lineup of blockbuster movies in recent years. The stock was up
around 20% through 6/30/97.
WHAT ABOUT SALES DURING THE FIRST HALF OF THE YEAR?
Conrail was sold when it was acquired by CSX and Norfolk Southern at a
substantial premium to the Portfolio's cost. Xerox appreciated 52% in the first
six months of 1997 and according to the Portfolio's management disciplines, we
started cutting back on the Portfolio's position.
Philip Morris was another position we cut back on. Given the rising multiples of
the stock and the uncertainties faced by the company, we trimmed our holdings
just before the March correction.
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WHICH OF THE PORTFOLIO'S SALES DIDN'T DO WELL?
We sold Stone Container and bought Georgia-Pacific where we saw a better
risk/reward tradeoff. Humana, a health care company, was the Portfolio's largest
sale. We had expected a faster turnaround and took advantage of a recovery in
the stock price.
WERE THERE OTHER STOCKS THAT UNDERPERFORMED IN THE PORTFOLIO?
Areas of weakness were the energy-related stocks due to lower oil and natural
gas prices (Unocal, Occidental Petroleum, MAPCO, and Seagull Energy). However,
this group appears significantly undervalued based upon discount to transaction
value and we expect a consolidation theme to unfold over the next 6-12 months.
Agriculture-related stocks experienced a continued setback due to weather
related conditions (IMC Global, Agrium).
HOW IS THE PORTFOLIO CURRENTLY POSITIONED?
Right now, the Portfolio is overweighted in consumer cyclicals and materials
processing and underweighted in health care and consumer staples.
WHAT RISKS DO YOU SEE ON THE HORIZON?
The biggest risk lies in valuation. With stock prices now selling at or near
historical valuation highs, investors are anticipating a continuation of the
current ideal investment environment. Any disappointment on the inflation front
and/or in corporate earnings could lead to further downside price volatility.
Denis Laplaige
Jeffrey Simon
Portfolio Managers
MacKay-Shields Financial Corporation
CORRECTION A shift in security prices that brings them more in line with
historically appropriate levels.
CAPITALIZATION Standard & Poor's defines capitalization as the market value of
outstanding shares.
INVESTMENT CYCLE The time it takes for a market to expand and contract, or move
from current levels to new highs and new lows.
PRICE-TO-EARNINGS The price of a stock divided by its earnings per share.
PRICE-TO-CASH FLOW The relationship between the price of a stock and the amount
of free cash flow the company is able to generate.
BOTTOM-UP INVESTING Security selection based on the specific fundamental merits
of individual issues. The opposite of "top-down" investing, which starts with
general economic trends, compares market sectors, and uses relative security
values to narrow the range of issues to examine.
RECOVERY A market recovery refers to a rise in security prices that were
formerly depressed. An economic recovery refers to a general improvement in
formerly weak fundamentals underlying a country's gross domestic product, which
may include factory output, sales, productivity, employment, and relative
currency values.
WEIGHTING The proportion of a portfolio allocated to a specific security or
sector, i.e., a portfolio is said to be overweighted in a sector when that
portion of the portfolio is greater than the sector's general relationship to
the market as a whole.
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<PAGE> 35
- --------------------------------------------------------------------------------
(1) Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Its rankings are based on total returns with capital gains and
dividends reinvested. Results do not reflect any deduction of sales charges.
The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies.
(2) "Standard and Poor's 500 Composite Stock Price Index" and "S&P 500" are
registered trademarks of the Standard & Poor's Corporation. The MainStay VP
Series Fund, Inc. is neither sponsored by nor affiliated with Standard &
Poor's Corporation. The S&P 500 is an unmanaged index considered generally
representative of the U.S. stock market. Results assume the reinvestment of
all income and capital gains distributions.
Included is the reinvestment of all distributions at net asset value and the
change in share price for the stated period. Total returns shown indicate past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that shares, upon redemption, may be worth
more or less than their original cost. These results do not reflect any
deduction of sales charges, mortality and expense charges, contract charges, or
administrative charges. Please refer to page 4 for returns reflective of these
charges.
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<PAGE> 36
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MAINSTAY VP
BOND PORTFOLIO
The MainStay VP Bond Portfolio registered a return of 2.69% for the six months
ended June 30, 1997. The Portfolio's performance was in line with the average A
rated corporate bond fund in the Lipper(1) universe, which returned 2.84% over
the same period.
During the first quarter, fixed income market participants were concerned about
an overheating economy and a restrictive Federal Reserve Bank. The ten year U.S.
Treasury note rose 49 basis points to 6.90%. In the second quarter, market
sentiment shifted. Weak retail sales numbers caused the market to ponder whether
the U.S. consumer was finally taking a break. The market also focused on an
improving budget deficit and benign inflation statistics. The price of a ten
year U.S. Treasury note rallied as its yield dropped 41 basis points to 6.49%.
Consistent with our constructive outlook for the economy, during the first six
months of 1997, we shifted assets from the government to the corporate and
mortgage-backed sectors, enhancing the Portfolio's income, and adding some
credit risk. We accomplished this while maintaining our long-term conservative
approach to managing the Portfolio.
Looking forward, we will watch for signs of economic growth picking up after a
second quarter lull. If this occurs, the Federal Reserve could resume
tightening. We will adjust the Portfolio accordingly, seeking to outperform the
market.
Albert R. Corapi, Jr.
Celia M. Holtzberg
Portfolio Managers
New York Life Insurance Company
(1) Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Its rankings are based on total returns with capital gains and
dividends reinvested. Results do not reflect any deduction of sales charges.
The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies.
Included is the reinvestment of all distributions at net asset value and the
change in share price for the stated period. Total returns shown indicate past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that shares, upon redemption, may be worth
more or less than their original cost. These results do not reflect any
deduction of sales charges, mortality and expense charges, contract charges, or
administrative charges. Please refer to page 4 for returns reflective of these
charges.
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MAINSTAY VP
GROWTH EQUITY PORTFOLIO
The MainStay VP Growth Equity Portfolio reported a strong return of 14.16% for
the six month period ended June 30, 1997. The Portfolio's results in the first
half of 1997 were favorable versus the Lipper(1) Growth Fund Average return of
13.57%; however, the Portfolio trailed the S&P 500(2) return of 20.62%. The
Portfolio's outperformance of its peer group was a result of the strong
performance of its health care holdings, particularly its pharmaceutical stocks.
The solid performance of technology stocks also contributed to the Portfolio's
positive first half results. The Portfolio's underperformance relative to the
S&P 500 was due to the superior performance of a narrow group of larger
capitalization issues within the index.
The equity market reported its fourth strongest first half gain in the past 50
years. Equity prices rose faster than most investors expected, largely owing to
positive surprises regarding inflation, which was lower than forecast, and
corporate profits, which exceeded consensus expectations. In fact, the equity
market shrugged off the Federal Reserve tightening in March as more of a
preventive action against future inflation. To add further fuel to the market,
liquidity remained positive throughout the first half of the year, given the
structural demand for stocks via strong equity mutual fund inflows and record
levels of mergers and acquisitions.
As we approach the second half of 1997, we remain positive on the equity market,
given our forecast for moderate economic growth and low price inflation, which
should continue to have a favorable impact on long-term interest rates. We
expect the equity market to extend its upward trend as inflation remains under
control and price/earnings ratios expand. Further, given the performance of the
equity market for the last few years and underlying favorable economic
conditions in place, we expect the supply/demand environment for stocks to
remain strong. Thus, we continue to focus the Portfolio toward more stable
larger capitalization multinational stocks which typically generate consistent
earnings growth. In particular, we are adding to positions in the less cyclical
consumer staple and health care sectors.
Our investment strategy continues to focus on identifying and investing in
quality growth companies which sell at reasonable valuations. We remain
disciplined in our stock selection process, weighing both the long-term and
short-term probabilities for price appreciation of each stock in the Portfolio.
James Agostisi
Patricia Rossi
Portfolio Managers
New York Life Insurance Company
(1) Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Its rankings are based on total returns with capital gains and
dividends reinvested. Results do not reflect any deduction of sales charges.
The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies.
(2) "Standard and Poor's 500 Composite Stock Price Index" and "S&P 500" are
registered trademarks of the Standard & Poor's Corporation. The MainStay VP
Series Fund, Inc. is neither sponsored by nor affiliated with Standard &
Poor's Corporation. The S&P 500 is an unmanaged index considered generally
representative of the U.S. stock market. Results assume the reinvestment of
all income and capital gains distributions.
Included is the reinvestment of all distributions at net asset value and the
change in share price for the stated period. Total returns shown indicate past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that shares, upon redemption, may be worth
more or less than their original cost. These results do not reflect any
deduction of sales charges, mortality and expense charges, contract charges, or
administrative charges. Please refer to page 4 for returns reflective of these
charges.
36
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MAINSTAY VP
INDEXED EQUITY PORTFOLIO
As 1997 began, it seemed that the long bull market might finally be drawing to a
close. Interest rates were edging up, and the Federal Reserve Board was
compelled to raise rates in an effort to moderate the pace of economic growth.
Equity funds, on average, posted slight losses in the first quarter, while the
blue-chip laden S&P 500(1) stock index managed a 3.15% gain. Economic growth
continued, but at a slower pace. Despite very low levels of unemployment,
general price levels had not risen significantly. Low interest rates, strong
earnings, and the absence of inflation gave the market a boost. Stock prices,
especially the large capitalization stocks that make up the bulk of the S&P 500
index, soared 17.47% in the second quarter.
The best performers were the largest stocks. These stocks enjoyed solid earnings
and substantial price gains. Microsoft, General Electric, Merck, Coca-Cola, and
Exxon posted total returns of 52.95%, 32.92%, 31.80%, 28.82% and 27.38%,
respectively. Collectively, these stocks make up roughly 12% of the S&P 500
index. These large stocks tend not to be as heavily represented in other equity
mutual funds, and this is a major reason that the index, and the MainStay VP
Indexed Equity Portfolio, outperformed the majority of stock funds. The
Portfolio's return of 20.46% for the first six months of the year is well above
the 12.67% gain for the Lipper(2) Average Diversified U.S. stock fund.
James A. Mehling
Portfolio Manager
Monitor Capital Advisors, Inc.
(1) "Standard and Poor's 500 Composite Stock Price Index" and "S&P 500" are
registered trademarks of the Standard & Poor's Corporation. The MainStay VP
Series Fund, Inc. is neither sponsored by nor affiliated with Standard &
Poor's Corporation. The S&P 500 is an unmanaged index considered generally
representative of the U.S. stock market. Results assume the reinvestment of
all income and capital gains distributions.
(2) Lipper Analytical Services, Inc. is an independent monitor of mutual fund
performance. Its rankings are based on total returns with capital gains and
dividends reinvested. Results do not reflect any deduction of sales charges.
The Lipper Variable Insurance Products Performance Analysis Service
(L-VIPPAS) ranks the portfolios that invest in the separate accounts of
insurance companies.
Included is the reinvestment of all distributions at net asset value and the
change in share price for the stated period. Total returns shown indicate past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that shares, upon redemption, may be worth
more or less than their original cost. These results do not reflect any
deduction of sales charges, mortality and expense charges, contract charges, or
administrative charges. Please refer to page 4 for returns reflective of these
charges.
Unlike other funds that generally seek to beat market averages, often with
unpredictable results, index funds seek to match the return of their respective
indexes.
37
<PAGE> 39
MAINSTAY VP SERIES FUND, INC.
OFFICERS AND DIRECTORS
Richard M. Kernan, Jr., Chairman,
Chief Executive Officer and Director
Anne F. Pollack, President,
Chief Administrative Officer and Director
Michael J. Drabb, Director
Jill Feinberg, Director
Daniel Herrick, Director
Robert D. Rock, Director and Vice President
Roman L. Weil, Director
Anthony W. Polis, Treasurer
A. Thomas Smith III, Secretary
Marc J. Chalfin, Controller
INVESTMENT ADVISERS
MacKay-Shields Financial Corporation
Monitor Capital Advisors, Inc.
New York Life Insurance Company
ADMINISTRATOR
New York Life Insurance and Annuity Corporation
CUSTODIANS
The Bank of New York
The Chase Manhattan Bank, N.A. (formerly Chemical Bank)
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
The financial information included herein is taken from the records of the Funds
without examination by the Funds' independent accountants, who do not express an
opinion thereon.
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(THIS PAGE INTENTIONALLY LEFT BLANK)
39
<PAGE> 41
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
------------------------------------------------------
ASSETS:
<S> <C> <C> <C>
Investment at
net asset
value
(Identified
Cost:
$59,519,722;
$6,257,404;
$502,409;
$1,647,720;
$8,351,747;
$2,598,289;
$17,371,430;
$9,393,048;
$3,779,763,
respectively)... $ 79,026,079 $ 6,257,413 $ 524,224
LIABILITIES:
Liability for
mortality and
expense risk
charges...... 133,419 9,117 752
------------ ------------ ------------
Total
equity... $ 78,892,660 $ 6,248,296 $ 523,472
============ ============ ============
TOTAL EQUITY
REPRESENTED BY:
Equity of
Policyowners:
Variable
accumulation
units
outstanding:
4,537,196;
5,413,404;
48,057;
138,794;
649,916;
217,059;
1,412,894;
691,079;
311,648,
respectively... $ 78,892,660 $ 6,248,296 $ 523,472
============ ============ ============
Variable
accumulation
unit
value...... $ 17.39 $ 1.15 $ 10.89
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP MAINSTAY VP AMERICAN
GROWTH INDEXED SMALL
EQUITY EQUITY CAPITALIZATION
------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at
net asset
value
(Identified
Cost:
$14,708,383;
$16,972,363;
$825,840;
$77,568;
$2,313,755;
$768,053;
$744,056;
$3,251,726;
$910,760,
respectively)... $ 16,923,758 $ 21,997,361 $ 843,487
LIABILITIES:
Liability for
mortality and
expense risk
charges...... 27,993 36,060 1,168
------------ ------------ ------------
Total
equity... $ 16,895,765 $ 21,961,301 $ 842,319
============ ============ ============
TOTAL EQUITY
REPRESENTED BY:
Equity of
Policyowners:
Variable
accumulation
units
outstanding:
923,243;
1,046,042;
86,937;
7,647;
214,626;
68,093;
68,409;
287,898;
82,239,
respectively... $ 16,895,765 $ 21,961,301 $ 842,319
============ ============ ============
Variable
accumulation
unit
value...... $ 18.30 $ 20.99 $ 9.69
============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
40
<PAGE> 42
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VL SEPARATE ACCOUNT I
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1,632,105 $ 8,846,932 $ 2,813,169 $ 21,163,569 $ 10,938,445 $ 3,786,903
2,816 22,709 12,478 36,109 21,981 6,377
------------ ------------ ------------ ------------ ------------ ------------
$ 1,629,289 $ 8,824,223 $ 2,800,691 $ 21,127,460 $ 10,916,464 $ 3,780,526
============ ============ ============ ============ ============ ============
$ 1,629,289 $ 8,824,223 $ 2,800,691 $ 21,127,460 $ 10,916,464 $ 3,780,526
============ ============ ============ ============ ============ ============
$ 11.74 $ 13.58 $ 12.90 $ 14.95 $ 15.80 $ 12.13
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
JANUS MORGAN STANLEY
CALVERT FIDELITY FIDELITY JANUS ASPEN EMERGING
SOCIALLY VIP II: VIP: ASPEN WORLDWIDE MARKETS
RESPONSIBLE CONTRAFUND EQUITY-INCOME BALANCED GROWTH EQUITY
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 83,970 $ 2,484,839 $ 820,976 $ 778,063 $ 3,513,273 $ 1,010,011
123 3,284 1,078 972 4,105 1,392
------------ ------------ ------------ ------------ ------------ ------------
$ 83,847 $ 2,481,555 $ 819,898 $ 777,091 $ 3,509,168 $ 1,008,619
============ ============ ============ ============ ============ ============
$ 83,847 $ 2,481,555 $ 819,898 $ 777,091 $ 3,509,168 $ 1,008,619
============ ============ ============ ============ ============ ============
$ 10.97 $ 11.56 $ 12.04 $ 11.36 $ 12.19 $ 12.26
============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
41
<PAGE> 43
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
----------------------------------------------------------
INVESTMENT INCOME (LOSS):
<S> <C> <C> <C>
Dividend income..................................... $ 123 $ 129,118 $ 48
Mortality and expense risk charges.................. (237,999) (17,836) (1,166)
------------ ------------ ------------
Net investment income (loss).................... (237,876) 111,282 (1,118)
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments................... 1,102,439 8,268,687 40,022
Cost of investments sold............................ (651,194) (8,268,668) (38,610)
------------ ------------ ------------
Net realized gain on investments................ 451,245 19 1,412
Realized gain distribution received................. -- -- 81
Change in unrealized appreciation (depreciation)
on investments.................................... 8,208,473 10 21,866
------------ ------------ ------------
Net gain on investments......................... 8,659,718 29 23,359
------------ ------------ ------------
Increase (decrease) attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account...................... (4,850) 30 (14)
------------ ------------ ------------
Net increase in total equity resulting
from operations............................... $ 8,416,992 $ 111,341 $ 22,227
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP MAINSTAY VP AMERICAN
GROWTH INDEXED SMALL
EQUITY EQUITY CAPITALIZATION
-----------------------------------------------------------
INVESTMENT INCOME (LOSS):
<S> <C> <C> <C>
Dividend income..................................... $ -- $ 62 $ --
Mortality and expense risk charges.................. (48,925) (60,327) (1,587)
------------ ------------ ------------
Net investment income (loss).................... (48,925) (60,265) (1,587)
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments................... 93,147 592,490 26,294
Cost of investments sold............................ (76,774) (369,549) (28,792)
------------ ------------ ------------
Net realized gain (loss) on investments......... 16,373 222,941 (2,498)
Realized gain distribution received................. 3,709 90,655 27,734
Change in unrealized appreciation (depreciation)
on investments.................................... 1,931,415 3,011,502 17,764
------------ ------------ ------------
Net gain on investments......................... 1,951,497 3,325,098 43,000
------------ ------------ ------------
Decrease attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account...................... (1,471) (2,842) (22)
------------ ------------ ------------
Net increase in total equity resulting
from operations............................... $ 1,901,101 $ 3,261,991 $ 41,391
============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
42
<PAGE> 44
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VL SEPARATE ACCOUNT I
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ -- $ 8,573 $ 49,183 $ -- $ 178 $ --
(5,356) (54,422) (34,972) (66,053) (46,793) (11,929)
------------ ------------ ------------ ------------ ------------ ------------
(5,356) (45,849) 14,211 (66,053) (46,615) (11,929)
------------ ------------ ------------ ------------ ------------ ------------
78,381 13,153,042 11,886,312 463,435 7,455,762 111,547
(77,861) (11,192,680) (11,117,393) (329,513) (5,195,723) (105,630)
------------ ------------ ------------ ------------ ------------ ------------
520 1,960,362 768,919 133,922 2,260,039 5,917
-- 46,617 -- -- 53,322 --
39,253 (1,236,908) (468,557) 1,570,045 (1,073,107) 89,277
------------ ------------ ------------ ------------ ------------ ------------
39,773 770,071 300,362 1,703,967 1,240,254 95,194
------------ ------------ ------------ ------------ ------------ ------------
(12) (1,212) (763) (973) (868) (38)
------------ ------------ ------------ ------------ ------------ ------------
$ 34,405 $ 723,010 $ 313,810 $ 1,636,941 $ 1,192,771 $ 83,227
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
JANUS MORGAN STANLEY
CALVERT FIDELITY FIDELITY JANUS ASPEN EMERGING
SOCIALLY VIP II: VIP: ASPEN WORLDWIDE MARKETS
RESPONSIBLE CONTRAFUND EQUITY-INCOME BALANCED GROWTH EQUITY
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ -- $ 5,634 $ 3,972 $ 16,487 $ 28,010 $ --
(177) (4,423) (1,437) (1,439) (5,331) (1,802)
------------ ------------ ------------ ------------ ------------ ------------
(177) 1,211 2,535 15,048 22,679 (1,802)
------------ ------------ ------------ ------------ ------------ ------------
4,645 57,182 72,454 24,406 61,770 52,885
(4,952) (55,242) (73,353) (23,276) (55,531) (47,475)
------------ ------------ ------------ ------------ ------------ ------------
(307) 1,940 (899) 1,130 6,239 5,410
-- 14,890 19,970 1,077 17,119 --
7,367 169,593 53,220 34,210 258,947 98,761
------------ ------------ ------------ ------------ ------------ ------------
7,060 186,423 72,291 36,417 282,305 104,171
------------ ------------ ------------ ------------ ------------ ------------
(4) (128) (48) (35) (223) (99)
------------ ------------ ------------ ------------ ------------ ------------
$ 6,879 $ 187,506 $ 74,778 $ 51,430 $ 304,761 $ 102,270
============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
43
<PAGE> 45
STATEMENT OF CHANGES IN TOTAL EQUITY
For the six months ended June 30, 1997 (Unaudited)
and the year ended December 31, 1996
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL APPRECIATION CASH MANAGEMENT
----------------------------- -----------------------------
1997 1996 1997 1996
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment income (loss)...................... $ (237,876) $ (259,950) $ 111,282 $ 125,170
Net realized gain (loss) on investments........... 451,245 117,486 19 (31)
Realized gain distribution received............... -- -- -- --
Change in unrealized appreciation (depreciation)
on investments.................................. 8,208,473 6,900,669 10 11
Increase (decrease) attributable to funds of New
York
Life Insurance and Annuity Corporation retained
by
Separate Account................................ (4,850) (3,153) 30 89
------------ ------------ ------------ ------------
Net increase in total equity resulting
from operations............................... 8,416,992 6,755,052 111,341 125,239
------------ ------------ ------------ ------------
Contributions and withdrawals:
Return of equity contribution to New York Life
Insurance and Annuity Corporation............... -- -- -- --
Policyowners' premium payments.................... 16,832,049 26,843,479 16,446,310 32,779,343
Cost of insurance................................. (6,255,490) (9,093,725) (654,153) (989,566)
Policyowners' surrenders.......................... (1,540,350) (1,271,171) (14,576) (56,535)
Net transfers to Fixed Account.................... (847,777) (1,045,732) (297,510) (557,133)
Transfers between Investment Divisions............ 2,464,610 11,653,145 (15,790,747) (27,966,704)
Policyowners' death benefits...................... (43,165) (29,669) (10,139) --
------------ ------------ ------------ ------------
Net contributions and withdrawals............... 10,609,877 27,056,327 (320,815) 3,209,405
------------ ------------ ------------ ------------
Increase (decrease) in total equity........... 19,026,869 33,811,379 (209,474) 3,334,644
TOTAL EQUITY:
Beginning of period............................... 59,865,791 26,054,412 6,457,770 3,123,126
------------ ------------ ------------ ------------
End of period..................................... $78,892,660 $59,865,791 $ 6,248,296 $ 6,457,770
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
INTERNATIONAL EQUITY TOTAL RETURN
----------------------------- -----------------------------
1997 1996 1997 1996
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment income (loss)...................... $ 14,211 $ 630,545 $ (66,053) $ 255,705
Net realized gain on investments.................. 768,919 10,856 133,922 69,613
Realized gain distribution received............... -- 17,725 -- --
Change in unrealized appreciation (depreciation)
on investments.................................. (468,557) 485,209 1,570,045 1,096,527
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation retained
by
Separate Account................................ (763) (1,988) (973) (891)
------------ ------------ ------------ ------------
Net increase in total equity resulting
from operations............................... 313,810 1,142,347 1,636,941 1,420,954
------------ ------------ ------------ ------------
Contributions and withdrawals:
Return of equity contribution to New York Life
Insurance and Annuity Corporation............... (11,738,746) -- -- --
Policyowners' premium payments.................... 760,389 958,640 4,186,380 7,504,745
Cost of insurance................................. (236,626) (257,367) (1,540,461) (2,550,631)
Policyowners' surrenders.......................... (17,507) (14,717) (434,539) (393,720)
Net transfers to Fixed Account.................... (15,801) (9,665) (208,488) (241,714)
Transfers between Investment Divisions............ 166,124 794,305 257,993 2,569,434
Policyowners' death benefits...................... (2,923) (2,096) (27,137) (12,043)
------------ ------------ ------------ ------------
Net contributions and withdrawals............... (11,085,090) 1,469,100 2,233,748 6,876,071
------------ ------------ ------------ ------------
Increase (decrease) in total equity........... (10,771,280) 2,611,447 3,870,689 8,297,025
TOTAL EQUITY:
Beginning of period............................... 13,571,971 10,960,524 17,256,771 8,959,746
------------ ------------ ------------ ------------
End of period..................................... $ 2,800,691 $13,571,971 $21,127,460 $17,256,771
============ ============ ============ ============
</TABLE>
(a) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
44
<PAGE> 46
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VL SEPARATE ACCOUNT I
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD
CONVERTIBLE GOVERNMENT CORPORATE BOND
--------------------------- --------------------------- ---------------------------
1997 1996(a) 1997 1996 1997 1996
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ (1,118) $ 1,209 $ (5,356) $ 82,707 $ (45,849) $ 757,498
1,412 8 520 12,558 1,960,362 48,439
81 225 -- -- 46,617 233,076
21,866 (52) 39,253 (60,509) (1,236,908) 1,191,289
(14) -- (12) (51) (1,212) (2,719)
------------ ------------ ------------ ------------ ------------ ------------
22,227 1,390 34,405 34,705 723,010 2,227,583
------------ ------------ ------------ ------------ ------------ ------------
-- -- -- -- (12,980,104) --
131,692 36,023 307,331 588,549 2,368,481 2,385,150
(34,554) (2,787) (115,521) (202,531) (680,650) (696,139)
(870) -- (24,663) (25,594) (101,281) (61,676)
(5,337) -- (5,220) (14,290) (17,249) (32,091)
275,632 100,056 (2,175) 90,391 1,467,628 2,269,082
-- -- -- (1,092) (204) (1,270)
------------ ------------ ------------ ------------ ------------ ------------
366,563 133,292 159,752 435,433 (9,943,379) 3,863,056
------------ ------------ ------------ ------------ ------------ ------------
388,790 134,682 194,157 470,138 (9,220,369) 6,090,639
134,682 -- 1,435,132 964,994 18,044,592 11,953,953
------------ ------------ ------------ ------------ ------------ ------------
$ 523,472 $ 134,682 $ 1,629,289 $ 1,435,132 $ 8,824,223 $18,044,592
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
VALUE BOND GROWTH EQUITY
--------------------------- --------------------------- ---------------------------
1997 1996 1997 1996 1997 1996
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ (46,615) $ 92,729 $ (11,929) $ 165,236 $ (48,925) $ 43,146
2,260,039 15,992 5,917 12,900 16,373 30,033
53,322 186,950 -- -- 3,709 1,437,459
(1,073,107) 1,787,101 89,277 (115,255) 1,931,415 161,667
(868) (1,752) (38) (91) (1,471) (1,387)
------------ ------------ ------------ ------------ ------------ ------------
1,192,771 2,081,020 83,227 62,790 1,901,101 1,670,918
------------ ------------ ------------ ------------ ------------ ------------
(7,345,155) -- -- -- -- --
2,627,109 2,967,711 1,030,122 1,242,545 3,537,386 4,982,537
(906,262) (906,758) (240,987) (402,055) (1,168,764) (1,651,492)
(70,974) (62,672) (59,960) (45,388) (221,885) (203,329)
(19,772) (31,930) (31,716) (31,204) (129,549) (178,949)
1,708,611 2,776,686 118,155 627,608 1,327,330 2,251,912
(1,398) (1,828) (2,266) (2,075) (30,238) (15,505)
------------ ------------ ------------ ------------ ------------ ------------
(4,007,841) 4,741,209 813,348 1,389,431 3,314,280 5,185,174
------------ ------------ ------------ ------------ ------------ ------------
(2,815,070) 6,822,229 896,575 1,452,221 5,215,381 6,856,092
13,731,534 6,909,305 2,883,951 1,431,730 11,680,384 4,824,292
------------ ------------ ------------ ------------ ------------ ------------
$10,916,464 $13,731,534 $ 3,780,526 $ 2,883,951 $16,895,765 $11,680,384
============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
45
<PAGE> 47
STATEMENT OF CHANGES IN TOTAL EQUITY (CONTINUED)
For the six months ended June 30, 1997 (Unaudited)
and the year ended December 31, 1996
<TABLE>
<CAPTION>
ALGER
AMERICAN
MAINSTAY VP SMALL
INDEXED EQUITY CAPITALIZATION
------------------------------- -------------------------------
1997 1996 1997 1996(a)
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)................... $ (60,265) $ 135,508 $ (1,587) $ (67)
Net realized gain (loss) on investments........ 222,941 64,602 (2,498) (30)
Realized gain distribution received............ 90,655 166,736 27,734 --
Change in unrealized appreciation
(depreciation)
on investments............................... 3,011,502 1,454,231 17,764 (117)
Increase (decrease) attributable to funds of
New York
Life Insurance and Annuity Corporation
retained by
Separate Account............................. (2,842) (1,534) (22) 3
------------ ------------ ------------ ------------
Net increase (decrease) in total equity
resulting
from operations............................ 3,261,991 1,819,543 41,391 (211)
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments................. 4,587,508 5,663,276 277,178 15,186
Cost of insurance.............................. (1,616,993) (1,832,018) (62,112) (3,169)
Policyowners' surrenders....................... (248,300) (189,215) (1,606) (29)
Net transfers from (to) Fixed Account.......... (207,977) (255,372) (6,564) 80
Transfers between Investment Divisions......... 2,279,384 3,981,697 477,290 109,530
Policyowners' death benefits................... (1,605) (2,523) (4,645) --
------------ ------------ ------------ ------------
Net contributions and withdrawals............ 4,792,017 7,365,845 679,541 121,598
------------ ------------ ------------ ------------
Increase in total equity................... 8,054,008 9,185,388 720,932 121,387
TOTAL EQUITY:
Beginning of period............................ 13,907,293 4,721,905 121,387 --
------------ ------------ ------------ ------------
End of period.................................. $ 21,961,301 $ 13,907,293 $ 842,319 $ 121,387
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
FIDELITY JANUS
VIP: ASPEN
EQUITY-INCOME BALANCED
------------------------------- -------------------------------
1997 1996(a) 1997 1996(a)
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)................... $ 2,535 $ (36) $ 15,048 $ 847
Net realized gain (loss) on investments........ (899) 121 1,130 1
Realized gain distribution received............ 19,970 -- 1,077 --
Change in unrealized appreciation
(depreciation)
on investments............................... 53,220 (298) 34,210 (203)
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation
retained by
Separate Account............................. (48) -- (35) --
------------ ------------ ------------ ------------
Net increase (decrease) in total equity
resulting
from operations............................ 74,778 (213) 51,430 645
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments................. 190,646 13,334 238,997 14,020
Cost of insurance.............................. (47,579) (1,305) (40,592) (1,851)
Policyowners' surrenders....................... (568) -- (251) --
Net transfers to Fixed Account................. (498) -- (3,582) --
Transfers between Investment Divisions......... 500,535 90,768 424,111 94,164
Policyowners' death benefits................... -- -- -- --
------------ ------------ ------------ ------------
Net contributions and withdrawals............ 642,536 102,797 618,683 106,333
------------ ------------ ------------ ------------
Increase in total equity................... 717,314 102,584 670,113 106,978
TOTAL EQUITY:
Beginning of period............................ 102,584 -- 106,978 --
------------ ------------ ------------ ------------
End of period.................................. $ 819,898 $ 102,584 $ 777,091 $ 106,978
============ ============ ============ ============
</TABLE>
(a) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
46
<PAGE> 48
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VL SEPARATE ACCOUNT I
<TABLE>
<CAPTION>
CALVERT FIDELITY
SOCIALLY VIP II:
RESPONSIBLE CONTRAFUND
------------------------------- -------------------------------
1997 1996(a) 1997 1996(a)
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ (177) $ 258 $ 1,211 $ (111)
(307) -- 1,940 376
-- 645 14,890 --
7,367 (965) 169,593 1,491
(4) -- (128) (1)
------------ ------------ ------------ ------------
6,879 (62) 187,506 1,755
------------ ------------ ------------ ------------
20,987 642 808,387 26,958
(4,941) (144) (141,041) (5,360)
(115) -- (3,849) (19)
(385) -- (11,820) (374)
37,423 23,563 1,385,824 233,588
-- -- -- --
------------ ------------ ------------ ------------
52,969 24,061 2,037,501 254,793
------------ ------------ ------------ ------------
59,848 23,999 2,225,007 256,548
23,999 -- 256,548 --
------------ ------------ ------------ ------------
$ 83,847 $ 23,999 $ 2,481,555 $ 256,548
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
JANUS MORGAN STANLEY
ASPEN EMERGING
WORLDWIDE MARKETS
GROWTH EQUITY
------------------------------- -------------------------------
1997 1996(a) 1997 1996(a)
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 22,679 $ 1,123 $ (1,802) $ 82
6,239 243 5,410 5
17,119 -- -- --
258,947 2,600 98,761 489
(223) (2) (99) --
------------ ------------ ------------ ------------
304,761 3,964 102,270 576
------------ ------------ ------------ ------------
820,819 51,071 355,789 11,833
(159,471) (6,122) (55,478) (2,147)
(4,860) (12) (628) (16)
(38,080) -- (1,671) --
2,327,218 209,880 535,345 65,490
-- -- (2,744) --
------------ ------------ ------------ ------------
2,945,626 254,817 830,613 75,160
------------ ------------ ------------ ------------
3,250,387 258,781 932,883 75,736
258,781 -- 75,736 --
------------ ------------ ------------ ------------
$ 3,509,168 $ 258,781 $ 1,008,619 $ 75,736
============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
47
<PAGE> 49
(THIS PAGE INTENTIONALLY LEFT BLANK)
48
<PAGE> 50
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VL SEPARATE ACCOUNT I
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-- Organization and Accounting Policies:
- --------------------------------------------------------------------------------
New York Life Insurance and Annuity Corporation Variable Universal Life
Separate Account I ("VL Separate Account I") was established on June 4, 1993,
under Delaware law by New York Life Insurance and Annuity Corporation, a
wholly-owned subsidiary of New York Life Insurance Company. The VL Separate
Account I policies are designed for individuals who seek lifetime insurance
protection and flexibility with respect to premium payments and death benefits.
The policies are distributed by NYLIFE Distributors Inc. and sold by registered
representatives of NYLIFE Securities Inc. and by registered representatives of
broker-dealers who have entered into dealer agreements with NYLIFE Distributors
Inc. NYLIFE Securities Inc. and NYLIFE Distributors Inc. are wholly-owned
subsidiaries of NYLIFE Inc., which is a wholly-owned subsidiary of New York
Life Insurance Company. VL Separate Account I is registered under the
Investment Company Act of 1940, as amended, as a unit investment trust.
The assets of VL Separate Account I are invested in the shares of the MainStay
VP Series Fund, Inc. (formerly, "New York Life MFA Series Fund, Inc."), The
Alger American Fund, the Acacia Capital Corporation, the Fidelity Variable
Insurance Products Fund, the Fidelity Variable Insurance Products Fund II, the
Janus Aspen Series and the Morgan Stanley Universal Funds, Inc. (collectively,
"Funds"). These assets are clearly identified and distinguished from the other
assets and liabilities of New York Life Insurance and Annuity Corporation.
VL Separate Account I offers the following eighteen variable Investment
Divisions, with their respective fund portfolios, for Policyowners to invest
premium payments: MainStay VP Capital Appreciation, MainStay VP Cash Management,
MainStay VP Convertible, MainStay VP Government, MainStay VP High Yield
Corporate Bond, MainStay VP International Equity, MainStay VP Total Return,
MainStay VP Value, MainStay VP Bond, MainStay VP Growth Equity, MainStay VP
Indexed Equity, Alger American Small Capitalization, Calvert Socially
Responsible, Fidelity VIP II: Contrafund, Fidelity VIP: Equity-Income, Janus
Aspen Balanced, Janus Aspen Worldwide Growth and Morgan Stanley Emerging Markets
Equity. Each Investment Division of VL Separate Account I will invest
exclusively in the corresponding Eligible Portfolio.
Initial premium payments received are allocated to the MainStay VP Cash
Management Investment Division until 20 days (10 days in New York) after the
policy issue date. Thereafter, premium payments will be allocated to the
Investment Divisions of VL Separate Account I in accordance with the
Policyowner's instructions. In addition, the Policyowner has the option to
transfer amounts between the Investment Divisions of VL Separate Account I 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 VL
Separate Account I 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.
49
<PAGE> 51
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 2--Investments (in 000's):
- --------------------------------------------------------------------------------
At June 30, 1997, the investments of VL Separate Account I are as follows:
<TABLE>
<CAPTION>
MAINSTAY
MAINSTAY VP VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
-------------------------------------------------------
<S> <C> <C> <C>
Number of shares........................................ 3,806 6,258 48
Identified cost*........................................ $ 59,520 $ 6,257 $ 502
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY ALGER
MAINSTAY VP VP AMERICAN
GROWTH INDEXED SMALL
EQUITY EQUITY CAPITALIZATION
-------------------------------------------------------
<S> <C> <C> <C>
Number of shares........................................ 796 1,140 21
Identified cost*........................................ $ 14,708 $ 16,972 $ 826
</TABLE>
* The cost stated also represents the aggregate cost for Federal income tax
purposes.
Investment activity for the six months ended June 30, 1997, was as follows:
<TABLE>
<CAPTION>
MAINSTAY
MAINSTAY VP VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
-------------------------------------------------------
<S> <C> <C> <C>
Purchases............................................... $ 11,504 $ 8,062 $ 406
Proceeds from sales..................................... 1,102 8,269 40
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY ALGER
MAINSTAY VP VP AMERICAN
GROWTH INDEXED SMALL
EQUITY EQUITY CAPITALIZATION
-------------------------------------------------------
<S> <C> <C> <C>
Purchases............................................... $ 3,369 $ 5,425 $ 733
Proceeds from sales..................................... 93 592 26
</TABLE>
50
<PAGE> 52
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VL SEPARATE ACCOUNT I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
166 718 243 1,333 710 288
$ 1,648 $ 8,352 $ 2,598 $17,371 $ 9,393 $ 3,780
</TABLE>
<TABLE>
<CAPTION>
JANUS MORGAN STANLEY
CALVERT FIDELITY FIDELITY JANUS ASPEN EMERGING
SOCIALLY VIP II: VIP: ASPEN WORLDWIDE MARKETS
RESPONSIBLE CONTRAFUND EQUITY-INCOME BALANCED GROWTH EQUITY
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
43 139 37 48 154 84
$ 78 $ 2,314 $ 768 $ 744 $ 3,252 $ 911
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 233 $ 3,201 $ 803 $ 2,637 $ 3,453 $ 915
78 13,153 11,886 463 7,456 112
</TABLE>
<TABLE>
<CAPTION>
JANUS MORGAN STANLEY
CALVERT FIDELITY FIDELITY JANUS ASPEN EMERGING
SOCIALLY VIP II: VIP: ASPEN WORLDWIDE MARKETS
RESPONSIBLE CONTRAFUND EQUITY-INCOME BALANCED GROWTH EQUITY
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 58 $ 2,114 $ 738 $ 660 $ 3,051 $ 883
5 57 72 24 62 53
</TABLE>
During the year New York Life Insurance and Annuity Corporation withdrew
$32,064,005 from Separate Account I. This amount represented the New York Life
Insurance and Annuity Corporation's May 1, 1995 initial investment in the
Separate Account. This amount included accumulated appreciation of $7,064,005.
51
<PAGE> 53
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 3--Mortality and Expense Risk Charges:
- --------------------------------------------------------------------------------
VL Separate Account I is 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 .70% of the
daily net asset value of each Investment Division. New York Life Insurance and
Annuity Corporation may increase these charges in the future up to a maximum
annual rate of 1.00%. 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:
- --------------------------------------------------------------------------------
VL Separate Account I does 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 or transfers) in excess of the net premium
payments.
52
<PAGE> 54
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VL SEPARATE ACCOUNT I
(THIS PAGE INTENTIONALLY LEFT BLANK)
53
<PAGE> 55
NOTE 5-- Cost to Policyowners (in 000's):
- --------------------------------------------------------------------------------
At June 30, 1997, the cost to Policyowners for accumulation units outstanding,
with adjustments for net investment income, market appreciation (depreciation)
and deduction for expenses is as follows:
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
------------------------------------------------------
<S> <C> <C> <C>
Cost to Policyowners..................................... $ 86,887 $ 16,393 $ 554
Sales charges............................................ (6,245) (7,901) (18)
Cost of insurance........................................ (21,311) (2,577) (37)
Accumulated net investment income (loss)................. (493) 333 --
Accumulated net realized gain (loss) on investments and
realized gain distributions received................... 561 -- 2
Unrealized appreciation (depreciation) on investments.... 19,506 -- 22
Decrease attributable to funds of New York Life Insurance
and Annuity Corporation retained by Separate Account... (12) -- --
-------- -------- --------
Net amount applicable to Policyowners.................... $ 78,893 $ 6,248 $ 523
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
ALGER
MAINSTAY VP MAINSTAY VP AMERICAN
GROWTH INDEXED SMALL
EQUITY EQUITY CAPITALIZATION
------------------------------------------------------
<S> <C> <C> <C>
Cost to Policyowners..................................... $ 17,560 $ 21,801 $ 897
Sales charges............................................ (1,149) (1,345) (31)
Cost of insurance........................................ (3,689) (4,377) (65)
Accumulated net investment income (loss)................. 39 167 (2)
Accumulated net realized gain (loss) on investments and
realized gain distributions received................... 1,924 695 25
Unrealized appreciation (depreciation) on investments.... 2,215 5,025 18
Decrease attributable to funds of New York Life Insurance
and Annuity Corporation retained by Separate Account... (4) (5) --
-------- -------- --------
Net amount applicable to Policyowners.................... $ 16,896 $ 21,961 $ 842
======== ======== ========
</TABLE>
54
<PAGE> 56
NEW YORK LIFE INSURANCE AND ANNUNITY CORPORATION
VL SEPERATE ACCOUNT I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 2,169 $ 6,852 $ 1,386 $ 24,769 $ 9,287 $ 4,754
(176) (523) (187) (1,835) (614) (324)
(533) (1,439) (518) (6,226) (1,894) (931)
168 1,129 1,111 429 75 256
17 2,315 798 201 2,521 19
(16) 495 215 3,792 1,545 7
-- (5) (4) (3) (4) --
--------- --------- --------- --------- --------- ---------
$ 1,629 $ 8,824 $ 2,801 $ 21,127 $ 10,916 $ 3,781
========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
JANUS MORGAN STANLEY
CALVERT FIDELITY FIDELITY JANUS ASPEN EMERGING
SOCIALLY VIP II: VIP: ASPEN WORLDWIDE MARKETS
RESPONSIBLE CONTRAFUND EQUITY-INCOME BALANCED GROWTH EQUITY
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 85 $ 2,528 $ 816 $ 794 $ 3,456 $ 1,003
(2) (89) (21) (27) (91) (38)
(5) (146) (49) (42) (166) (58)
-- 1 2 16 24 (2)
-- 17 19 2 24 5
6 171 53 34 262 99
-- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
$ 84 $ 2,482 $ 820 $ 777 $ 3,509 $ 1,009
========= ========= ========= ========= ========= =========
</TABLE>
55
<PAGE> 57
NOTE 6--Unit Transactions (in 000's):
- --------------------------------------------------------------------------------
Transactions in accumulation units for the six months ended June 30, 1997 and
for the year ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL APPRECIATION CASH MANAGEMENT
------------------------------ ------------------------------
1997 1996 1997 1996
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units redeemed on return of equity
contribution to New York Life Insurance
and Annuity Corporation................ -- -- -- --
Units issued on premium payments......... 1,045 1,859 14,393 29,552
Units redeemed on cost of insurance...... (389) (629) (572) (892)
Units redeemed on surrenders............. (96) (87) (13) (51)
Units redeemed on death benefits......... (3) (2) (9) --
Units redeemed on net transfers to
Fixed Account.......................... (59) (75) (261) (506)
Units issued (redeemed) on transfers
between
Investment Divisions................... 164 821 (13,842) (25,270)
------- ------- ------- -------
--- --- --- ---
Net increase (decrease)................ 662 1,887 (304) 2,833
Units outstanding, beginning of period... 3,875 1,988 5,717 2,884
------- ------- ------- -------
--- --- --- ---
Units outstanding, end of period......... 4,537 3,875 5,413 5,717
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
INTERNATIONAL EQUITY TOTAL RETURN
------------------------------ ------------------------------
1997 1996 1997 1996
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units redeemed on return of equity
contribution to New York Life Insurance
and Annuity Corporation................ (1,000) -- -- --
Units issued on premium payments......... 63 86 297 574
Units redeemed on cost of insurance...... (20) (24) (109) (195)
Units redeemed on surrenders............. (1) (1) (31) (30)
Units redeemed on death benefits......... -- -- (2) (1)
Units redeemed on net transfers to
Fixed Account.......................... -- (1) (17) (20)
Units issued on transfers between
Investment Divisions................... 14 71 21 201
------- ------- ------- -------
--- --- --- ---
Net increase (decrease)................ (944) 131 159 529
Units outstanding, beginning of period... 1,161 1,030 1,254 725
------- ------- ------- -------
--- --- --- ---
Units outstanding, end of period......... 217 1,161 1,413 1,254
======= ======= ======= =======
</TABLE>
(a) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
56
<PAGE> 58
NEW YORK LIFE INSURANCE AND ANNUNITY CORPORATION
VL SEPERATE ACCOUNT I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD
CONVERTIBLE GOVERNMENT CORPORATE BOND
------------------- ------------------- -------------------
1997 1996(a) 1997 1996 1997 1996
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
-- -- -- -- (1,000) --
13 3 26 53 182 199
(3) -- (10) (18) (52) (58)
-- -- (2) (2) (8) (5)
-- -- -- -- -- --
(1) -- -- (1) (1) (2)
26 10 -- 8 113 191
------- ------ ------- ------- ------- -------
35 13 14 40 (766) 325
13 -- 125 85 1,416 1,091
------- ------ ------- ------- ------- -------
48 13 139 125 650 1,416
======= ===== ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
VALUE BOND GROWTH EQUITY
------------------- ------------------- -------------------
1997 1996 1997 1996 1997 1996
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(500) -- -- -- -- --
177 230 87 108 209 341
(61) (70) (20) (35) (69) (113)
(5) (5) (5) (4) (13) (14)
-- -- -- -- (2) (1)
(2) (3) (2) (3) (8) (13)
116 219 9 55 80 155
------- ------ ------- ------- ------- -------
(275) 371 69 121 197 355
966 595 243 122 726 371
------- ------ ------- ------- ------- -------
691 966 312 243 923 726
======= ====== ======= ======= ======= =======
</TABLE>
57
<PAGE> 59
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 6--Unit Transactions (in 000's) (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALGER
AMERICAN
MAINSTAY VP SMALL
INDEXED EQUITY CAPITALIZATION
------------------------- -------------------------
1997 1996 1997 1996(a)
<S> <C> <C> <C> <C>
--------------------------------------------------------------
Units issued on premium payments...................... 241 357 31 2
Units redeemed on cost of insurance................... (85) (115) (7) --
Units redeemed on surrenders.......................... (13) (12) -- --
Units redeemed on death benefits...................... -- -- (1) --
Units redeemed on net transfers to
Fixed Account....................................... (11) (16) (1) --
Units issued on transfers between
Investment Divisions................................ 119 253 52 11
------ ------ ------ ------
Net increase........................................ 251 467 74 13
Units outstanding, beginning of period................ 795 328 13 --
------ ------ ------ ------
Units outstanding, end of period...................... 1,046 795 87 13
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY JANUS
VIP: ASPEN
EQUITY-INCOME BALANCED
------------------------- -------------------------
1997 1996(a) 1997 1996(a)
<S> <C> <C> <C> <C>
--------------------------------------------------------------
Units issued on premium payments...................... 17 1 23 2
Units redeemed on cost of insurance................... (4) -- (4) --
Units redeemed on net transfers to
Fixed Account....................................... -- -- -- --
Units issued on transfers between
Investment Divisions................................ 45 9 38 9
------ ------ ------ ------
Net increase........................................ 58 10 57 11
Units outstanding, beginning of period................ 10 -- 11 --
------ ------ ------ ------
Units outstanding, end of period...................... 68 10 68 11
====== ====== ====== ======
</TABLE>
(a) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
58
<PAGE> 60
NEW YORK LIFE INSURANCE AND ANNUNITY CORPORATION
VL SEPERATE ACCOUNT I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CALVERT FIDELITY
SOCIALLY VIP II:
RESPONSIBLE CONTRAFUND
------------------------- -------------------------
1997 1996(a) 1997 1996(a)
--------------------------------------------------------------
<S> <C> <C> <C> <C>
2 -- 76 3
-- -- (13) (1)
-- -- -- --
-- -- -- --
-- -- (1) --
4 2 128 23
------ ------ ------ ------
6 2 190 25
2 -- 25 --
------ ------ ------ ------
8 2 215 25
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
JANUS MORGAN STANLEY
ASPEN EMERGING
WORLDWIDE MARKETS
GROWTH EQUITY
------------------------- -------------------------
1997 1996(a) 1997 1996(a)
--------------------------------------------------------------
<S> <C> <C> <C> <C>
73 5 32 1
(14) (1) (5) --
(3) -- -- --
207 21 47 7
------ ------ ------ ------
263 25 74 8
25 -- 8 --
------ ------ ------ ------
288 25 82 8
====== ====== ====== ======
</TABLE>
59
<PAGE> 61
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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 period)
with respect to each Investment Division of VL Separate Account I:
<TABLE>
<CAPTION>
MAINSTAY VP
CAPITAL APPRECIATION
-----------------------------------------------------------------
1997(e) 1996 1995 1994 1993++(a)
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period........................... $ 15.45 $ 13.10 $ 9.72 $ 10.23 $ 10.00
Net investment income (loss).............................. (0.06) (0.09) -- 0.04 0.02
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received
(includes the
effect of capital share transactions)................... 2.00 2.44 3.38 (0.55) 0.21
------ ------ ------ ------ ------
Unit value, end of period................................. $ 17.39 $ 15.45 $ 13.10 $ 9.72 $ 10.23
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
HIGH YIELD INTERNATIONAL
CORPORATE BOND EQUITY
------------------------------- -------------------------------
1997(e) 1996 1995(c) 1997(e) 1996 1995(c)
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period........................... $12.75 $10.95 $10.00 $11.69 $10.65 $10.00
Net investment income (loss).............................. (0.04) 0.61 0.36 0.02 0.58 0.46
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received
(includes the
effect of capital share transactions)................... 0.87 1.19 0.59 1.19 0.46 0.19
------ ------ ------ ------ ----- -----
Unit value, end of period................................. $13.58 $12.75 $10.95 $12.90 $11.69 $10.65
====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP
GROWTH EQUITY
-------------------------------------------
1997(e) 1996 1995 1994(b)
-------------------------------------------
<S> <C> <C> <C> <C>
Unit value, beginning of period........................... $16.09 $13.01 $10.14 $10.00
Net investment income (loss).............................. (0.06) 0.08 0.17 0.30
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received
(includes the
effect of capital share transactions)................... 2.27 3.00 2.70 (0.16)
------ ------ ------ ------
Unit value, end of period................................. $18.30 $16.09 $13.01 $10.14
====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during the period.
++ Per unit data based on average daily units outstanding during the period.
(a) For the period November 15, 1993 (Commencement of Operations) through
December 31, 1993.
(b) For the period May 2, 1994 (Commencement of Operations) through December 31,
1994.
(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 six months ended June 30, 1997.
60
<PAGE> 62
NEW YORK LIFE INSURANCE AND ANNUNITY CORPORATION
VL SEPERATE ACCOUNT I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
CASH MANAGEMENT CONVERTIBLE GOVERNMENT
----------------------------------------------------------------- --------------------- -----------------------
1997(e) 1996 1995 1994 1993++(a) 1997(e) 1996(d) 1997(e) 1996
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.13 $ 1.08 $ 1.03 $ 1.00 $ 1.00 $ 10.31 $ 10.00 $ 11.49 $ 11.31
0.02 0.04 0.05 0.03 -- (0.04) 0.16 (0.04) 0.76
-- 0.01 -- -- -- 0.62 0.15 0.29 (0.58)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
$ 1.15 $ 1.13 $ 1.08 $ 1.03 $ 1.00 $ 10.89 $ 10.31 $ 11.74 $ 11.49
========= ========= ========= ========= ========= ========= ========= ========= =========
<CAPTION>
MAINSTAY VP
GOVERNMENT
-------------------------------------
1995 1994 1993++(a)
-------------------------------------
<S> <C> <C> <C>
$ 9.76 $ 10.01 $ 10.00
0.93 1.46 0.39
0.62 (1.71) (0.38)
--------- --------- ---------
$ 11.31 $ 9.76 $ 10.01
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY
MAINSTAY VP MAINSTAY VP VP
TOTAL RETURN VALUE BOND
----------------------------------------------------------------- ----------------------------------- ---------
1997(e) 1996 1995 1994 1993++(a) 1997(e) 1996 1995(c) 1997(e)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 13.76 $ 12.37 $ 9.70 $ 10.18 $ 10.00 $ 14.22 $ 11.62 $ 10.00 $ 11.85
(0.05) 0.26 0.32 0.52 0.18 (0.05) 0.12 0.05 (0.04)
1.24 1.13 2.35 (1.00) -- 1.63 2.48 1.57 0.32
--------- --------- --------- --------- --------- --------- --------- --------- ---------
$ 14.95 $ 13.76 $ 12.37 $ 9.70 $ 10.18 $ 15.80 $ 14.22 $ 11.62 $ 12.13
========= ========= ========= ========= ========= ========= ========= ========= =========
<CAPTION>
MAINSTAY VP
VALUE
------------------------------------
1996 1995 1994(b)
<S> <C> <C> <C>
------------------------------------
$ 11.70 $ 9.96 $ 10.00
0.92 1.03 1.70
(0.77) 0.71 (1.74)
--------- --------- ---------
$ 11.85 $ 11.70 $ 9.96
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
ALGER CALVERT
MAINSTAY VP AMERICAN SOCIALLY
INDEXED EQUITY SMALL CAPITALIZATION RESPONSIBLE
----------------------------------------------------------------- ----------------------- -----------------------
1997(e) 1996 1995 1994 1993++(a) 1997(e) 1996(d) 1997(e) 1996(d)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 17.49 $ 14.39 $ 10.58 $ 10.00 $ 10.00 $ 9.66 $ 10.00 $ 9.96 $ 10.00
(0.07) 0.24 0.34 0.49 -- (0.03) (0.01) (0.04) 0.21
3.57 2.86 3.47 0.09 -- 0.06 (0.33) 1.05 (0.25)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
$ 20.99 $ 17.49 $ 14.39 $ 10.58 $ 10.00 $ 9.69 $ 9.66 $ 10.97 $ 9.96
========= ========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
61
<PAGE> 63
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 7--Selected Per Unit Data+ (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY
VIP II: VIP:
CONTRAFUND EQUITY-INCOME
------------------- -------------------
1997(e) 1996(d) 1997(e) 1996(d)
-------------------------------------------
<S> <C> <C> <C> <C>
Unit value, beginning of period........................... $10.39 $10.00 $10.38 $10.00
Net investment income (loss).............................. 0.01 (0.01) 0.07 (0.01)
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)........................................... 1.16 0.40 1.59 0.39
------ ------ ------ ------
Unit value, end of period................................. $11.56 $10.39 $12.04 $10.38
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
JANUS
ASPEN
JANUS ASPEN WORLDWIDE
BALANCED GROWTH
------------------- -------------------
1997(e) 1996(d) 1997(e) 1996(d)
-------------------------------------------
<S> <C> <C> <C> <C>
Unit value, beginning of period........................... $10.15 $10.00 $10.29 $10.00
Net investment income..................................... 0.39 0.17 0.17 0.09
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)........................................... 0.82 (0.02) 1.73 0.20
------ ------ ------ ------
Unit value, end of period................................. $11.36 $10.15 $12.19 $10.29
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MORGAN
STANLEY
EMERGING
MARKETS
EQUITY
-------------------
1997(e) 1996(d)
-------------------
<S> <C> <C>
Unit value, beginning of period........................... $10.01 $10.00
Net investment income (loss).............................. (0.04) 0.02
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)........................................... 2.29 (0.01)
------ ------
Unit value, end of period................................. $12.26 $10.01
====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during the period.
(d) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
(e) For the six months ended June 30, 1997.
62
<PAGE> 64
(THIS PAGE INTENTIONALLY LEFT BLANK)
63
<PAGE> 65
MAINSTAY VP SERIES FUND, INC.
- --------------------------------------------------------------------------------
To Policyowners:
The assets of NYLIAC Variable Annuity Separate Account I, NYLIAC Variable
Annuity Separate Account II, NYLIAC Variable Annuity Separate Account III
(formerly NYLIAC LifeStages(SM) Separate Account), NYLIAC Variable Universal
Life Separate Account I, New York Life Insurance and Annuity Corporation MFA
Separate Account I, New York Life Insurance and Annuity Corporation MFA Separate
Account II and New York Life Insurance and Annuity Corporation VLI Separate
Account are invested in shares of MainStay VP Series Fund, Inc. (formerly New
York Life MFA Series Fund, Inc.). In addition, the assets of NYLIAC Variable
Annuity Separate Account I, NYLIAC Variable Annuity Separate Account II, NYLIAC
Variable Annuity Separate Account III and NYLIAC Variable Universal Life
Separate Account I may be invested in Acacia Capital Corporation, the Alger
American Fund, Fidelity Variable Insurance Products Fund, Fidelity Variable
Insurance Products Fund II, the Janus Aspen Series and the Morgan Stanley
Universal Funds Inc., which are not affiliated with MainStay VP Series Fund,
Inc. or NYLIAC and any of its subsidiaries.
At the Annual Meeting of the Board of Directors of the Fund held on February 18,
1997, executive officers of the Fund were elected. On May 14, 1997, a dividend
distribution was paid to NYLIAC Variable Annuity Separate Account I, NYLIAC
Variable Annuity Separate Account II, NYLIAC Variable Annuity Separate Account
III, NYLIAC Variable Universal Life Separate Account I, New York Life Insurance
and Annuity Corporation MFA Separate Account I, New York Life Insurance and
Annuity Corporation MFA Separate Account II and New York Life Insurance and
Annuity Corporation VLI Separate Account as the sole shareholders of record of
MainStay VP Series Fund, Inc.
The financial information included herein as of June 30, 1997, and for the
period then ended, is taken from the records of the Fund without examination by
independent accountants who do not express an opinion thereon.
/s/ RICHARD M. KERNAN JR.
Chairman of the Board
and Chief Executive Officer
MAINSTAY VP SERIES FUND, INC.
64
<PAGE> 66
MAINSTAY VP SERIES FUND, INC.
CAPITAL APPRECIATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (97.4%)+
SHARES VALUE
---------------------------
<S> <C> <C>
AUTO PARTS (1.0%)
Lear Corp. (a)................... 137,500 $ 6,101,562
------------
BANKS (1.9%)
NationsBank Corp. ............... 140,000 9,030,000
Wells Fargo & Co. ............... 10,566 2,847,537
------------
11,877,537
------------
BROKERAGE (0.2%)
Schwab (Charles) Corp. .......... 30,400 1,236,900
------------
BUILDINGS (0.6%)
Oakwood Homes Corp. ............. 158,000 3,792,000
------------
COMPUTER SERVICES (0.1%)
SABRE Group Holdings Inc. Class A
(a)............................. 25,000 678,125
------------
COMPUTERS & OFFICE EQUIPMENT
(6.9%)
Compuware Corp. (a).............. 181,000 8,642,750
Danka Business Systems PLC ADR
(b)............................. 159,500 6,519,562
Hewlett-Packard Co. ............. 129,000 7,224,000
IKON Office Solutions, Inc. ..... 171,400 4,274,288
Seagate Technology (a)........... 177,600 6,249,300
Sun Microsystems (a)............. 303,000 11,277,296
------------
44,187,196
------------
CONSUMER DURABLES (1.5%)
Harley-Davidson, Inc. ........... 199,500 9,563,531
------------
CONSUMER FINANCIAL
SERVICES (1.6%)
First Data Corp. ................ 235,000 10,325,313
------------
CONSUMER SERVICES (2.0%)
CUC International Inc. (a)....... 216,600 5,590,988
Service Corp. International...... 222,400 7,311,400
------------
12,902,388
------------
CREDIT & FINANCE (1.3%)
Equifax Inc. .................... 223,000 8,292,813
------------
DRUGS (9.8%)
Amgen Inc. (a)................... 186,600 10,846,125
Elan Corp. PLC ADR (a)(b)........ 186,000 8,416,500
Lilly (Eli) & Co. ............... 130,500 14,265,281
Merck & Co., Inc. ............... 107,000 11,074,500
Schering-Plough Corp. ........... 250,400 11,987,900
Teva Pharmaceutical Industries
Ltd. ADR (b).................... 93,000 6,021,750
------------
62,612,056
------------
<CAPTION>
SHARES VALUE
---------------------------
<S> <C> <C>
ELECTRONICS (0.7%)
Adaptec, Inc. (a)................ 124,500 $ 4,326,375
------------
ENERGY (1.0%)
Abacan Resource Corp. (a)........ 402,000 1,281,375
Triton Energy Ltd. (a)........... 115,400 5,286,762
------------
6,568,137
------------
FINANCIAL SERVICES (13.4%)
Associates First Capital Corp.
Class A......................... 116,000 6,438,000
Fannie Mae....................... 155,800 6,796,775
Green Tree Financial Corp. ...... 368,400 13,124,250
Household International, Inc. ... 114,300 13,423,106
MGIC Investment Corp. ........... 225,600 10,814,700
SunAmerica Inc. ................. 254,200 12,392,250
Travelers Group Inc. ............ 216,832 13,673,968
Washington Mutual Inc. .......... 142,000 8,484,500
------------
85,147,549
------------
HEALTH CARE (6.4%)
Cardinal Health, Inc. ........... 90,000 5,152,500
Columbia/HCA Healthcare Corp. ... 174,418 6,856,808
HEALTHSOUTH Corp. (a)............ 390,000 9,725,625
PacifiCare Health Systems, Inc.
Class B (a)..................... 51,900 3,315,112
Tenet Healthcare Corp. (a)....... 259,925 7,684,033
United Healthcare Corp. ......... 156,000 8,112,000
------------
40,846,078
------------
INDUSTRIAL (3.7%)
Illinois Tool Works Inc. ........ 126,000 6,292,125
Tyco International Ltd. ......... 243,700 16,952,381
------------
23,244,506
------------
INSURANCE (3.0%)
Aetna Inc. ...................... 70,000 7,166,250
American International Group,
Inc. ........................... 80,250 11,987,344
------------
19,153,594
------------
LEISURE (0.9%)
Mirage Resorts Inc. (a).......... 234,000 5,908,500
------------
MATERIALS/PROCESSING (1.3%)
Monsanto Co. .................... 193,000 8,311,063
------------
MEDICAL EQUIPMENT (6.8%)
Guidant Corp. ................... 148,000 12,580,000
Heartport, Inc. (a).............. 63,000 1,110,375
Johnson & Johnson................ 173,462 11,166,616
Medtronic, Inc. ................. 146,900 11,898,900
Waters Corp. (a)................. 176,000 6,314,000
------------
43,069,891
------------
</TABLE>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
65
<PAGE> 67
CAPITAL APPRECIATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
---------------------------
<S> <C> <C>
POLLUTION CONTROL (0.9%)
USA Waste Services Inc. (a)...... 149,000 $ 5,755,125
------------
RESTAURANTS &
LODGING (2.4%)
HFS Inc. (a)..................... 268,000 15,544,000
------------
RETAIL (9.9%)
Bed, Bath & Beyond, Inc. (a)..... 192,000 5,832,000
CompUSA Inc. (a)................. 88,000 1,892,000
Gymboree Corp. (The) (a)......... 100,000 2,400,000
Home Depot, Inc. (The)........... 122,000 8,410,375
Kohl's Corp. (a)................. 158,500 8,390,594
Kroger Co. (a)................... 250,000 7,250,000
Lowe's Cos., Inc. ............... 182,900 6,790,163
Mattel, Inc. .................... 153,000 5,182,875
Safeway Inc. (a)................. 235,500 10,862,437
Staples, Inc. (a)................ 261,200 6,072,900
------------
63,083,344
------------
SOFTWARE (7.2%)
Computer Associates
International, Inc. ............ 290,375 16,170,258
Microsoft Corp. (a).............. 96,400 12,182,550
Oracle Corp. (a)................. 262,000 13,198,250
Sterling Commerce, Inc. (a)...... 125,482 4,125,221
------------
45,676,279
------------
TECHNOLOGY (6.7%)
Cisco Systems, Inc. (a).......... 156,900 10,531,912
Intel Corp. ..................... 102,300 14,507,419
Linear Technology Corp. ......... 81,000 4,191,750
3Com Corp. (a)................... 300,150 13,506,750
------------
42,737,831
------------
TELECOMMUNICATIONS (1.9%)
Lucent Technologies Inc. ........ 165,000 11,890,312
------------
TELECOMMUNICATION SERVICES (1.8%)
WorldCom, Inc. (a)............... 355,388 11,372,416
------------
<CAPTION>
SHARES VALUE
-----------------------
<S> <C> <C>
TEXTILE & APPAREL (1.9%)
Nike, Inc. Class B............... 106,100 $ 6,193,587
Nine West Group Inc. (a)......... 146,100 5,579,194
------------
11,772,781
------------
TRANSPORTATION (0.6%)
Tidewater Inc. .................. 87,900 3,867,600
------------
Total Common Stocks
(Cost $437,891,311)............. 619,844,802
------------
<CAPTION>
SHORT-TERM
INVESTMENT (2.8%)
PRINCIPAL
AMOUNT
---------------------------
<S> <C> <C>
COMMERCIAL PAPER (2.8%)
American General Finance Corp.
6.08%, due 7/1/97............... $17,456,000 17,456,000
------------
Total Short-Term Investment
(Cost $17,456,000).............. 17,456,000
------------
Total Investments
(Cost $455,347,311) (c)......... 100.2% 637,300,802(d)
Liabilities in Excess of Cash and
Other Assets.................... (0.2) (1,021,218)
---------- ----------
Net Assets....................... 100.0% $636,279,584
========== ==========
</TABLE>
- ------------
(a) Non-income producing securities.
(b) ADR--American Depository Receipt.
(c) The cost stated also represents the aggregate cost for Federal income tax
purposes.
(d) At June 30, 1997 net unrealized appreciation was $181,953,491, based on cost
for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $187,974,674 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $6,021,183.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
66
<PAGE> 68
MAINSTAY VP SERIES FUND, INC.
CAPITAL APPRECIATION PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $455,347,311)....... $637,300,802
Cash................................... 216
Receivables:
Investment securities sold........... 17,222,434
Fund shares sold..................... 355,561
Dividends and interest............... 176,226
Total assets..................... 655,055,239
LIABILITIES:
Payables:
Investment securities purchased...... 18,097,806
Adviser.............................. 185,140
Fund shares redeemed................. 149,436
Administrator........................ 51,428
NYLIAC............................... 51,428
Custodian............................ 10,100
Directors............................ 240
Accrued expenses....................... 230,077
Total liabilities................ 18,775,655
Net assets applicable to
outstanding shares................... $636,279,584
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share)
50 million shares authorized......... $ 306,469
Additional paid-in capital............. 454,402,644
Accumulated undistributed net
investment income.................... 70,008
Accumulated net realized loss
on investments....................... (453,028)
Net unrealized appreciation
on investments....................... 181,953,491
Net assets applicable to
outstanding shares................... $636,279,584
Shares of capital stock outstanding.... 30,646,863
Net asset value per share
outstanding.......................... $ 20.76
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a)........................ $ 1,299,611
Interest............................. 518,260
------------
Total income..................... 1,817,871
------------
Expenses:
Advisory............................. 1,002,122
Administration....................... 556,735
Shareholder communication............ 123,558
Professional......................... 27,013
Custodian............................ 24,527
Directors............................ 9,690
Miscellaneous........................ 3,897
------------
Total expenses................... 1,747,542
------------
Net investment income.................. 70,329
------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments....... 6,698,773
Net change in unrealized appreciation
on investments....................... 63,700,693
------------
Net realized and unrealized gain
on investments....................... 70,399,466
------------
Net increase in net assets resulting
from operations...................... $ 70,469,795
===========
</TABLE>
- ------------
(a) Dividends recorded net of foreign withholding taxes in the amount of $5,553.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
67
<PAGE> 69
CAPITAL APPRECIATION PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited)
and the year ended December 31, 1996
<TABLE>
<CAPTION>
1997 1996
----------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................................................. $ 70,329 $ 323,264
Net realized gain on investments.................................................. 6,698,773 184,606
Net change in unrealized appreciation on investments.............................. 63,700,693 61,390,345
------------ ------------
Net increase in net assets resulting from operations.............................. 70,469,795 61,898,215
------------ ------------
Dividends to shareholders:
From net investment income........................................................ (1,000) (322,585)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.................................................. 74,527,438 204,401,461
Net asset value of shares issued to shareholders in reinvestment of dividends..... 1,000 322,585
------------ ------------
74,528,438 204,724,046
Cost of shares redeemed........................................................... (12,339,561) (7,213,582)
------------ ------------
Increase in net assets derived from capital share transactions.................... 62,188,877 197,510,464
------------ ------------
Net increase in net assets.......................................................... 132,657,672 259,086,094
NET ASSETS:
Beginning of period................................................................. 503,621,912 244,535,818
------------ ------------
End of period....................................................................... $636,279,584 $503,621,912
=========== ===========
Accumulated undistributed net investment income..................................... $ 70,008 $ 679
=========== ===========
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
JANUARY 29,
SIX MONTHS 1993 (a)
ENDED THROUGH
JUNE 30, YEAR ENDED DECEMBER 31 DECEMBER 31,
1997* 1996 1995 1994 1993
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period.... $ 18.39 $ 15.49 $ 11.45 $ 12.03 $ 10.00
-------- -------- -------- -------- --------
Net investment income..................... 0.00(b) 0.01 0.06 0.05 0.02
Net realized and unrealized gain (loss) on
investments............................. 2.37 2.90 4.04 (0.58) 2.03
-------- -------- -------- -------- --------
Total from investment operations.......... 2.37 2.91 4.10 (0.53) 2.05
-------- -------- -------- -------- --------
Less dividends:
From net investment income.............. (0.00)(b) (0.01) (0.06) (0.05) (0.02)
-------- -------- -------- -------- --------
Net asset value at end of period.......... $ 20.76 $ 18.39 $ 15.49 $ 11.45 $ 12.03
======== ======== ======== ======== ========
Total investment return (c)............... 12.93% 18.75% 35.78% (4.38%) 20.54%
Ratios (to average net
assets)/Supplemental Data:
Net investment income................... 0.03%+ 0.09% 0.57% 0.63% 0.46%+
Net expenses............................ 0.63%+ 0.73% 0.73% 0.73% 0.73%+
Expenses (before reimbursement)......... 0.63%+ 0.75% 0.90% 0.91% 1.15%+
Portfolio turnover rate................... 13% 16% 35% 39% 28%
Average commission rate paid.............. $ 0.0577 $ 0.0600 (d) (d) (d)
Net assets at end of period (in 000's).... $ 636,280 $ 503,622 $ 244,536 $ 113,999 $ 43,485
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Less than one cent per share.
(c) Total return is not annualized.
(d) Disclosure of amount required for fiscal years beginning on or after
September 1, 1995.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
68
<PAGE> 70
MAINSTAY VP SERIES FUND, INC.
CASH MANAGEMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENTS (100.1%)+
PRINCIPAL AMORTIZED
AMOUNT COST
--------------------------
<S> <C> <C>
BANK NOTES (2.9%)
American Express Centurion Bank
5.66%, due 9/12/97 (b)(c)........ $1,000,000 $ 999,979
Boatmens Credit Card Bank
5.67%, due 8/8/97 (b)(c)......... 3,000,000 2,999,941
------------
3,999,920
------------
CERTIFICATES OF DEPOSIT (2.9%)
Abbey National Treasury Services
PLC 5.64%, due 11/3/97 (c)....... 1,000,000 998,651
Sanwa Bank Ltd. 6.28%, due 7/10/97
(c).............................. 3,000,000 3,000,369
------------
3,999,020
------------
COMMERCIAL PAPER (85.6%)
Allianz of America Finance Corp.
5.60%, due 10/22/97 (a).......... 2,400,000 2,357,813
American General Corp.
5.58%, due 7/15/97............... 1,975,000 1,975,000
Banca CRT Financial Corp.
5.38%, due 9/2/97................ 1,000,000 990,585
5.72%, due 11/17/97.............. 5,000,000 4,889,572
Banco Real S.A., Grand Cayman
5.60%, due 10/2/97............... 4,400,000 4,336,347
BankAmerica Corp.
5.65%, due 9/19/97............... 3,000,000 2,962,333
BCI Funding Corp.
5.41%, due 7/7/97................ 5,100,000 5,095,402
BEAL Cayman Ltd. (Brazil) Series A
5.57%, due 8/26/97............... 2,400,000 2,379,205
BHF Finance (DE) Inc.
5.68%, due 12/1/97............... 2,000,000 1,951,720
BTR Dunlop Finance Inc.
5.67%, due 11/18/97 (a).......... 4,000,000 3,911,800
China International Marine
Containers (Group) Ltd.
5.66%, due 8/5/97................ 4,000,000 3,977,989
China Light & Power Co. Ltd.
5.65%, due 7/14/97............... 2,000,000 1,995,919
Compagnie Bancaire USA Finance
Corp.
5.40%, due 7/21/97............... 5,000,000 4,985,000
5.65%, due 7/10/97............... 1,000,000 998,588
Cregem North America Inc.
5.62%, due 8/18/97............... 3,000,000 2,977,520
Demir Funding Corp. II Series B
5.65%, due 7/16/97............... 3,000,000 2,992,937
Formosa Plastics Corp. U.S.A.
5.60%, due 9/2/97................ 3,000,000 2,970,600
Garanti Funding Corp. II Series B
5.63%, due 7/10/97............... 2,300,000 2,296,763
General Electric Capital Corp.
5.58%, due 7/8/97 (c)............ 3,500,000 3,500,000
<CAPTION>
PRINCIPAL AMORTIZED
AMOUNT COST
----------------------
<S> <C> <C>
COMMERCIAL PAPER (Continued)
Goldman, Sachs & Co.
5.55%, due 7/2/97................ $2,650,000 $ 2,649,591
Gotham Funding Corp.
5.72%, due 8/7/97 (a)............ 1,000,000 994,121
Great Lakes Chemical Corp.
5.53%, due 7/3/97 (a)............ 2,400,000 2,399,263
Hitachi Credit America Corp.
5.66%, due 7/25/97............... 2,300,000 2,291,321
Industrial Bank of Korea
5.70%, due 9/12/97............... 2,950,000 2,915,903
5.72%, due 8/26/97............... 3,500,000 3,468,858
Korea Development Bank
5.65%, due 9/3/97................ 5,900,000 5,840,738
Merrill Lynch International
(Australia) Ltd.
5.56%, due 7/7/97................ 1,650,000 1,648,471
Minmetals Capitals & Securities
Inc.
5.30%, due 8/12/97............... 2,000,000 1,987,633
5.67%, due 8/12/97............... 2,000,000 1,986,770
Mitsui & Co. (USA) Inc.
5.61%, due 8/15/97............... 400,000 397,195
Monsanto Co.
5.61%, due 9/23/97 (a)........... 2,000,000 1,973,820
Nacional Financiera S.N.C., Grand
Cayman Series A
5.60%, due 8/20/97............... 2,000,000 1,984,444
Pemex Capital Inc.
5.62%, due 9/26/97............... 2,000,000 1,972,837
Petroleo Brasileiro S.A.-Petrobras
5.61%, due 7/10/97............... 1,000,000 998,597
Philip Morris Cos. Inc.
6.10%, due 7/1/97................ 5,170,000 5,170,000
Rubbermaid Inc.
5.55%, due 7/1/97 (a)............ 2,309,000 2,309,000
San Paolo U.S. Financial Co.
5.60%, due 9/11/97............... 3,850,000 3,806,880
5.77%, due 9/10/97............... 2,500,000 2,471,551
Songs Fuel Co.
5.60%, due 8/4/97................ 3,092,000 3,075,647
Svenska Handelsbanken Inc.
5.62%, due 7/25/97............... 2,500,000 2,490,633
Twin Towers Inc.
5.64%, due 7/17/97 (a)........... 875,000 872,807
UNIfunding Inc.
5.39%, due 7/9/97................ 5,000,000 4,994,011
5.70%, due 11/12/97.............. 1,600,000 1,566,053
------------
117,811,237
------------
FEDERAL AGENCIES (5.4%)
Federal Home Loan Bank
5.67%, due 3/5/98
(call date 9/5/97) (c)........... 5,000,000 5,000,000
5.84%, due 11/24/97 (c).......... 2,500,000 2,500,000
------------
7,500,000
------------
</TABLE>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
69
<PAGE> 71
CASH MANAGEMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENTS (CONTINUED)
PRINCIPAL AMORTIZED
AMOUNT COST
--------------------------
<S> <C> <C>
MEDIUM-TERM NOTES (3.3%)
American General Finance Corp.
7.70%, due 11/15/97 (c).......... $2,500,000 $ 2,514,449
Sony Capital Corp. 5.78%, due
8/29/97 (a)(b)(c)................ 2,000,000 2,000,000
------------
4,514,449
------------
Total Short-Term Investments
(Amortized Cost $137,824,626)
(d).............................. 100.1% 137,824,626
Liabilities in Excess of
Cash and Other Assets............ (0.1) (206,115)
---------- ------------
Net Assets........................ 100.0% $137,618,511
========== ============
</TABLE>
- ------------
(a) May be sold to institutional investors only.
(b) Floating rate. Rate shown is the rate in effect at June 30, 1997.
(c) Coupon interest bearing security.
(d) The cost stated also represents the aggregate cost for Federal income tax
purposes.
The table below sets forth the diversification of Cash Management Portfolio
investments by industry.
INDUSTRY
DIVERSIFICATION
<TABLE>
<CAPTION>
AMORTIZED
COST PERCENT +
-------------------------
<S> <C> <C>
Banks #..................... $ 87,177,816 63.3%
Brokerage................... 4,298,063 3.1
Chemicals................... 4,373,083 3.2
Conglomerates............... 5,897,195 4.3
Federal Agencies............ 7,500,000 5.4
Finance..................... 11,695,090 8.5
Household Products.......... 2,309,000 1.7
Insurance................... 4,332,813 3.1
Tobacco..................... 5,170,000 3.8
Utilities................... 3,075,647 2.2
Utilities-Electric.......... 1,995,919 1.5
----------- --------
137,824,626 100.1
Liabilities in Excess of
Cash and Other Assets..... (206,115) (0.1)
----------- --------
Net Assets.................. $137,618,511 100.0%
=========== ========
</TABLE>
- ------------
+ Percentages indicated are based on Fund net assets.
# The Fund will invest more than 25% of the market value of its total assets in
the securities of banks and bank holding companies, including certificates of
deposit, bankers' acceptances and securities guaranteed by banks and bank
holding companies.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
70
<PAGE> 72
MAINSTAY VP SERIES FUND, INC.
CASH MANAGEMENT PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(amortized cost $137,824,626)........ $137,824,626
Cash................................... 1,250
Receivables:
Fund shares sold..................... 3,193,006
Investment securities sold........... 2,000,000
Interest............................. 466,372
------------
Total assets..................... 143,485,254
------------
LIABILITIES:
Payables:
Investment securities purchased...... 5,169,124
Adviser.............................. 26,044
Fund shares redeemed................. 22,876
Administrator........................ 10,418
NYLIAC............................... 10,418
Custodian............................ 3,642
Directors............................ 76
Accrued expenses....................... 62,069
Dividend payable....................... 562,076
------------
Total liabilities................ 5,866,743
------------
Net assets applicable to outstanding
shares............................... $137,618,511
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 600 million shares
authorized........................... $ 1,376,209
Additional paid-in capital............. 136,243,588
Accumulated net realized loss on
investments.......................... (1,286)
------------
Net assets applicable to outstanding
shares............................... $137,618,511
============
Shares of capital stock outstanding.... 137,620,936
============
Net asset value per share
outstanding.......................... $ 1.00
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest............................. $ 3,379,079
------------
Expenses:
Advisory............................. 150,271
Administration....................... 120,217
Shareholder communication............ 24,447
Professional......................... 15,731
Custodian............................ 8,732
Directors............................ 2,337
Miscellaneous........................ 1,536
------------
Total expenses................... 323,271
------------
Net investment income.................. 3,055,808
------------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments....... 780
------------
Net increase in net assets resulting
from operations...................... $ 3,056,588
============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
71
<PAGE> 73
CASH MANAGEMENT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited)
and the year ended December 31, 1996
<TABLE>
<CAPTION>
1997 1996
----------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................................................. $ 3,055,808 $ 4,723,279
Net realized gain (loss) on investments........................................... 780 (733)
------------ ------------
Net increase in net assets resulting from operations.............................. 3,056,588 4,722,546
------------ ------------
Dividends to shareholders:
From net investment income........................................................ (3,055,808) (4,723,279)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.................................................. 140,646,031 237,101,140
Net asset value of shares issued to shareholders in reinvestment of dividends..... 2,995,478 4,585,514
------------ ------------
143,641,509 241,686,654
Cost of shares redeemed........................................................... (124,370,700) (211,178,343)
------------ ------------
Increase in net assets derived from capital share transactions.................... 19,270,809 30,508,311
------------ ------------
Net increase in net assets.......................................................... 19,271,589 30,507,578
NET ASSETS:
Beginning of period................................................................. 118,346,922 87,839,344
------------ ------------
End of period....................................................................... $137,618,511 $118,346,922
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
JANUARY 29,
SIX MONTHS 1993 (a)
ENDED THROUGH
JUNE 30, YEAR ENDED DECEMBER 31 DECEMBER 31,
1997* 1996 1995 1994 1993
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Net investment income..................... 0.03 0.05 0.05 0.04 0.02
-------- -------- -------- -------- --------
Less dividends:
From net investment income.............. (0.03) (0.05) (0.05) (0.04) (0.02)
-------- -------- -------- -------- --------
Net asset value at end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total investment return (b)............... 2.54% 4.95% 5.59% 3.82% 2.40%
Ratios (to average net
assets)/Supplemental Data:
Net investment income................... 5.08%+ 4.92% 5.44% 3.97% 2.65%+
Net expenses............................ 0.54%+ 0.62% 0.62% 0.62% 0.62%+
Expenses (before reimbursement)......... 0.54%+ 0.64% 0.94% 0.89% 1.10%+
Net assets at end of period (in 000's).... $ 137,619 $ 118,347 $ 87,839 $ 71,116 $ 26,733
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Total return is not annualized.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
72
<PAGE> 74
MAINSTAY VP SERIES FUND, INC.
CONVERTIBLE PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
CONVERTIBLE SECURITIES (68.5%)+
BONDS (39.5%)
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
CABLE (2.1%)
Tele-Communications
International, Inc.
4.50%, due 2/15/06............... $ 800,000 $ 637,000
-----------
COMPUTERS & OFFICE EQUIPMENT
(2.1%)
Apple Computer, Inc.
6.00%, due 6/1/01................ 400,000 328,000
S3, Incorporated
5.75%, due 10/1/03............... 350,000 307,125
-----------
635,125
-----------
DRUGS (4.8%)
Alza Corp.
5.00%, due 5/1/06................ 775,000 784,688
Roche Holdings, Inc.
(zero coupon), due 5/6/12 (b).... 1,500,000 652,500
-----------
1,437,188
-----------
ELECTRICAL EQUIPMENT (4.1%)
California Microwave, Inc.
5.25%, due 12/15/03.............. 1,500,000 1,215,000
-----------
FINANCE (0.4%)
Berkshire Hathaway, Inc.
1.00%, due 12/2/01............... 100,000 104,500
-----------
GAS UTILITIES (1.8%)
Consolidated Natural Gas Co.
7.25%, due 12/15/15.............. 500,000 540,625
-----------
HEALTH CARE (4.7%)
NovaCare, Inc.
5.50%, due 1/15/00............... 1,500,000 1,415,625
-----------
MEDIA (8.5%)
Time Warner, Inc.
(zero coupon), due 12/17/12...... 3,000,000 1,155,000
(zero coupon), due 6/22/13....... 3,000,000 1,380,000
-----------
2,535,000
-----------
POLLUTION & RELATED (0.8%)
U.S. Filter Corp.
4.50%, due 12/15/01.............. 250,000 244,687
-----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
PUBLISHING (3.2%)
Hollinger, Inc., Series U.S.
(zero coupon), due 10/5/13 (c)... $ 1,500,000 $ 558,750
Times Mirror Co.
(zero coupon), due 4/15/17 (b)... 1,000,000 407,500
-----------
966,250
-----------
RESTAURANTS &
LODGING (1.8%)
Boston Chicken, Inc.
(zero coupon), due 6/1/15........ 2,500,000 550,000
-----------
RETAIL (0.6%)
Saks Holdings, Inc.
5.50%, due 9/15/06............... 200,000 180,000
-----------
SPECIALIZED SERVICES (1.4%)
CUC International, Inc.
3.00%, due 2/15/02 (b)........... 400,000 425,500
-----------
STEEL, ALUMINUM & OTHER METALS
(0.9%)
Inco Ltd.
7.75%, due 3/15/16 (c)........... 250,000 260,937
-----------
TELECOMMUNICATION EQUIPMENT (1.4%)
Premiere Technologies, Inc.
5.75%, due 7/1/04 (b)............ 400,000 416,000
-----------
TELECOMMUNICATION SERVICES (0.9%)
Gilat Satellite Networks Ltd.
6.50%, due 6/3/04 (b)............ 250,000 253,125
-----------
Total Bonds
(Cost $11,720,554)............... 11,816,562
-----------
PREFERRED STOCKS (29.0%)
<CAPTION>
SHARES
-----------
<S> <C> <C>
BANKS (2.3%)
Fuji International Finance Trust
0.25% (b)(e)..................... 25 682,338
-----------
CABLE (1.6%)
Merrill Lynch & Co., Inc.
6.00% (d1)....................... 20,000 477,500
-----------
</TABLE>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
73
<PAGE> 75
CONVERTIBLE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
PREFERRED STOCKS (CONTINUED)
SHARES VALUE
--------------------------
<S> <C> <C>
COMPUTERS & OFFICE EQUIPMENT
(3.3%)
Vanstar Financing Trust
6.75%............................ 25,000 $ 993,750
-----------
DOMESTIC OIL & GAS (1.0%)
Enron Corp.
6.25%............................ 15,000 286,875
-----------
DOMESTIC OILS (0.4%)
Atlantic Richfield Co.
9.00%............................ 5,000 107,500
-----------
ELECTRICAL EQUIPMENT (0.4%)
Elsag Bailey Process Automation
N.V.
5.50%............................ 2,500 104,062
-----------
INSURANCE (1.8%)
Merrill Lynch & Co., Inc.
7.25% (d2)....................... 8,000 548,000
-----------
LEISURE (1.2%)
Royal Caribbean Cruises Ltd.
7.25%, Series A.................. 6,000 370,500
-----------
NATURAL GAS PIPELINES (0.9%)
MCN Financing III
8.00%............................ 5,000 271,875
-----------
RESTAURANTS &
LODGING (2.8%)
Apple South, Inc.
$3.50 (b)........................ 7,000 434,875
Host Marriott Financial Trust
6.75% (b)........................ 7,000 405,125
-----------
840,000
-----------
STEEL, ALUMINUM & OTHER METALS
(3.4%)
Bethlehem Steel Corp.
$3.50 (b)........................ 25,000 1,015,625
-----------
TELECOMMUNICATION EQUIPMENT (3.1%)
Loral Space & Communications Ltd.
6.00%, Series C (b).............. 19,000 940,500
-----------
TELECOMMUNICATION SERVICES (3.7%)
AirTouch Communications, Inc.
$4.25, Series C.................. 11,200 537,600
US West, Inc.
4.50%, Series D.................. 11,000 553,438
-----------
1,091,038
-----------
<CAPTION>
SHARES VALUE
--------------------------
<S> <C> <C>
TEXTILE & APPAREL (2.3%)
Fieldcrest Cannon, Inc.
$3.00, Series A.................. 15,000 $ 690,000
-----------
TRANSPORTATION-- TRUCKING (0.8%)
CNF Trust I
5.00%, Series A.................. 4,000 224,000
-----------
Total Preferred Stocks
(Cost $7,950,878)................ 8,643,563
-----------
Total Convertible Securities
(Cost $19,671,432)............... 20,460,125
-----------
U.S. GOVERNMENT (13.5%)
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
UNITED STATES TREASURY NOTE
(13.5%)
8.875%, due 11/15/97............. $ 4,000,000 4,046,240
-----------
Total U.S. Government
(Cost $4,132,188)................ 4,046,240
-----------
COMMON STOCKS (2.1%)
<CAPTION>
SHARES
-----------
<S> <C> <C>
CHEMICALS (1.0%)
IMC Global, Inc................... 9,000 315,000
-----------
ELECTRIC UTILITIES (0.2%)
Potomac Electric Power Co......... 2,000 46,250
-----------
HEALTH CARE (0.9%)
Regency Health Services, Inc.
(a).............................. 17,200 264,450
-----------
Total Common Stocks
(Cost $542,468).................. 625,700
-----------
PREFERRED STOCK (0.9%)
MINING (0.9%)
Freeport-McMoRan Copper & Gold,
Inc. Series Silver (f)(g)........ 15,000 273,750
-----------
Total Preferred Stock
(Cost $255,750).................. 273,750
-----------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
74
<PAGE> 76
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENTS (13.3%)
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
COMMERCIAL PAPER (4.9%)
American Express Credit Corp.
5.57%, due 7/15/97............... $ 1,480,000 $ 1,480,000
-----------
U.S. GOVERNMENT (8.4%)
United States Treasury Notes
5.875%, due 7/31/97.............. 2,100,000 2,100,651
8.50%, due 7/15/97............... 400,000 400,500
-----------
2,501,151
-----------
Total Short-Term Investments
(Cost $3,984,593)................ 3,981,151
-----------
Total Investments
(Cost $28,586,431) (h)........... 98.3% 29,386,966(i)
Cash and Other Assets,
Less Liabilities................. 1.7 505,996
---------- -----------
Net Assets........................ 100.0% $29,892,962
========== ===========
</TABLE>
- ------------
(a) Non-income producing security.
(b) May be sold to institutional investors only.
(c) Yankee bonds.
(d1) STRYPES--Structured Yield Product Exchangeable for Cox Communications, Inc.
common stock.
(d2) STRYPES--Structured Yield Product Exchangeable for SunAmerica, Inc. common
stock.
(e) 25 Units--each unit reflects an interest in 1,000 Noncumulative Mandatory
Convertible preference shares of the Fuji Bank, Limited. The preference
shares are convertible into ordinary shares at an initial conversion price
of Y(Japanese Yen) 2,002 per ordinary share at a future date.
(f) Depository Shares--each share represents 0.025 shares of silver denominated
preferred stock.
(g) Dividend equals U.S. dollar equivalent of 0.04125 oz. of silver per share.
(h) The cost stated also represents the aggregate cost for Federal income tax
purposes.
(i) At June 30, 1997 net unrealized appreciation was $800,535, based on cost
for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $1,186,349 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $385,814.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
75
<PAGE> 77
CONVERTIBLE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $28,586,431)........ $ 29,386,966
Cash................................... 145
Receivables:
Investment securities sold........... 950,294
Dividends and interest............... 223,843
Fund shares sold..................... 64,562
Unamortized organization expense....... 39,123
------------
Total assets..................... 30,664,933
------------
LIABILITIES:
Payables:
Investment securities purchased...... 700,000
Organization......................... 40,031
Adviser.............................. 8,524
Administrator........................ 2,368
NYLIAC............................... 2,185
Custodian............................ 338
Directors............................ 102
Accrued expenses....................... 18,423
------------
Total liabilities................ 771,971
------------
Net assets applicable to outstanding
shares............................... $ 29,892,962
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 100 million shares
authorized........................... $ 27,463
Additional paid-in capital............. 28,133,150
Accumulated undistributed net
investment income.................... 636,651
Accumulated undistributed net realized
gain on investments.................. 295,163
Net unrealized appreciation on
investments.......................... 800,535
------------
Net assets applicable to outstanding
shares............................... $ 29,892,962
============
Shares of capital stock outstanding.... 2,746,290
============
Net asset value per share
outstanding.......................... $ 10.88
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends............................ $ 214,332
Interest............................. 504,268
------------
Total income..................... 718,600
------------
Expenses:
Advisory............................. 40,108
Administration....................... 22,282
Professional......................... 12,881
Amortization of organization
expense............................ 4,560
Shareholder communication............ 2,739
Custodian............................ 2,479
Directors............................ 269
Miscellaneous........................ 1,279
------------
Total expenses before
reimbursement.................. 86,597
Expense reimbursement from
Administrator........................ (5,270)
------------
Net expenses..................... 81,327
------------
Net investment income.................. 637,273
------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on investments....... 295,397
Net change in unrealized appreciation
on investments....................... 548,317
------------
Net realized and unrealized gain on
investments.......................... 843,714
------------
Net increase in net assets resulting
from operations...................... $ 1,480,987
============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
76
<PAGE> 78
MAINSTAY VP SERIES FUND, INC.
CONVERTIBLE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited)
and the period October 1, 1996 (Commencement of Operations)
through December 31, 1996
<TABLE>
<CAPTION>
1997 1996
---------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income........................................................... $ 637,273 $ 153,883
Net realized gain on investments................................................ 295,397 31,320
Net change in unrealized appreciation on investments............................ 548,317 252,218
------------ -----------
Net increase in net assets resulting from operations............................ 1,480,987 437,421
------------ -----------
Dividends and distributions to shareholders:
From net investment income...................................................... (3,000) (153,822)
From net realized gain on investments........................................... (5,000) (26,554)
------------ -----------
Total dividends and distributions to shareholders............................. (8,000) (180,376)
------------ -----------
Capital share transactions:
Net proceeds from sale of shares................................................ 13,449,688 5,079,116
Net asset value of shares issued to shareholders in reinvestment of dividends
and distributions.............................................................. 8,000 180,376
------------ -----------
13,457,688 5,259,492
Cost of shares redeemed......................................................... (502,073) (52,177)
------------ -----------
Increase in net assets derived from capital share transactions.................. 12,955,615 5,207,315
------------ -----------
Net increase in net assets........................................................ 14,428,602 5,464,360
NET ASSETS:
Beginning of period............................................................... 15,464,360 10,000,000
------------ -----------
End of period..................................................................... $ 29,892,962 $15,464,360
============ ===========
Accumulated undistributed net investment income................................... $ 636,651 $ 2,378
============ ===========
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
OCTOBER 1,
SIX MONTHS 1996 (a)
ENDED THROUGH
JUNE 30, DECEMBER 31,
1997* 1996
---------------------------
<S> <C> <C>
Net asset value at beginning of period.............................................. $ 10.27 $ 10.00
-------- --------
Net investment income............................................................... 0.23 0.10
Net realized and unrealized gain on investments..................................... 0.38 0.29
-------- --------
Total from investment operations.................................................... 0.61 0.39
-------- --------
Less dividends and distributions:
From net investment income........................................................ (0.00)(b) (0.10)
From net realized gain on investments............................................. (0.00)(b) (0.02)
-------- --------
Total dividends and distributions................................................... (0.00) (0.12)
-------- --------
Net asset value at end of period.................................................... $ 10.88 $ 10.27
======== ========
Total investment return (c)......................................................... 6.06% 3.89%
Ratios (to average net assets)/Supplemental Data:
Net investment income............................................................. 5.72%+ 5.14%+
Net expenses...................................................................... 0.73%+ 0.73%+
Expenses (before reimbursement)................................................... 0.78%+ 1.46%+
Portfolio turnover rate............................................................. 64% 15%
Average commission rate paid........................................................ $ 0.0587 $ 0.0537
Net assets at end of period (in 000's).............................................. $ 29,893 $ 15,464
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Less than one cent per share.
(c) Total return is not annualized.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
77
<PAGE> 79
GOVERNMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
LONG-TERM BONDS (107.1%)+
ASSET-BACKED SECURITIES (16.3%)
PRINCIPAL
AMOUNT VALUE
-------------------------
<S> <C> <C>
AIRCRAFT LEASES (2.8%)
Airplanes Pass-Through Trust
Series 1 Class C
8.15%, due 3/15/19................ $1,885,000 $ 1,962,323
-----------
AUTO LEASES (0.7%)
Advanta Automobile Receivables
Trust
Series 1997-1 Class A2
6.75%, due 12/15/03............... 495,000 497,322
-----------
CONSUMER LOANS (3.5%)
Green Tree Recreational, Equipment
& Consumer Trust
Series 1996-C Class A1
5.93%, due 10/15/17 (d)........... 313,811 314,106
Series 1997-B Class A1
6.55%, due 7/15/28................ 2,110,000 2,105,041
-----------
2,419,147
-----------
EQUIPMENT LOANS (3.8%)
Case Equipment Loan Trust
Series 1997-A Class A3
6.45%, due 3/15/04................ 1,680,000 1,683,343
Newcourt Receivables Asset Trust
Series 1996-2 Class A
6.87%, due 6/20/04................ 973,645 979,272
-----------
2,662,615
-----------
HOME EQUITY LOANS (3.4%)
Southern Pacific Secured Assets
Corp.
Series 1997-1 Class A1
5.89%, due 4/25/27 (d)............ 2,410,864 2,407,850
-----------
MANUFACTURED HOUSING LOANS (2.1%)
Green Tree Financial Corp.
Series 1997-3 Class A2
6.49%, due 7/15/28................ 800,000 803,592
Series 1997-4 Class A7
7.36%, due 2/15/29................ 645,000 638,550
-----------
1,442,142
-----------
Total Asset-Backed Securities
(Cost $11,384,562)................ 11,391,399
-----------
MORTGAGE-BACKED SECURITIES (9.0%)
COMMERCIAL MORTGAGE LOANS
(COLLATERALIZED MORTGAGE
OBLIGATIONS) (5.2%)
Asset Securitization Corp.
Series 1996-MD6 Class A1B
6.88%, due 11/13/26............... 1,445,000 1,446,474
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-------------------------
<S> <C> <C>
COMMERCIAL MORTGAGE LOANS
(COLLATERALIZED MORTGAGE
OBLIGATIONS) (Continued)
Asset Securitization Corp.
(Continued)
Series 1997-MD7 Class A1B
7.41%, due 1/13/30................ $ 665,000 $ 682,875
Series 1997-D4 Class A1D
7.49%, due 4/14/29................ 1,450,000 1,496,110
-----------
3,625,459
-----------
FIRST MORTGAGE LOANS
(COLLATERALIZED MORTGAGE
OBLIGATIONS) (3.8%)
Residential Accredit Loans, Inc.
Series 1997-QS4 Class A4
10.00%, due 5/25/27............... 476,888 505,014
Series 1997-QS5 Class A3
10.00%, due 6/25/27............... 760,000 802,628
Series 1997-QS1 Class A6
11.00%, due 2/25/27............... 781,854 852,862
Residential Asset Securitization
Trust
Series 1997-A5 Class A4
10.00%, due 7/25/27............... 455,866 479,799
-----------
2,640,303
-----------
Total Mortgage-Backed Securities
(Cost $6,186,500)................. 6,265,762
-----------
U.S. GOVERNMENT &
FEDERAL AGENCIES (81.8%)
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (MORTGAGE PASS-THROUGH
SECURITIES) (17.1%)
(zero coupon), due 7/11/97 (a).... 4,300,000 4,292,088
6.52%, due 12/1/03 (c)............ 522,614 515,387
6.595%, due 1/1/04 (c)............ 521,994 516,685
6.80%, due 1/1/04 (c)............. 772,232 772,232
7.50%, due 2/13/25 TBA (b)........ 5,850,000 5,866,848
-----------
11,963,240
-----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION I (MORTGAGE
PASS-THROUGH SECURITIES) (13.1%)
6.50%, due 12/15/23 (c)........... 2,039,401 1,966,757
7.00%, due 12/15/23 (c)........... 2,815,288 2,779,647
7.50%, due 7/25/27 TBA (b)........ 665,000 670,200
9.50%, due 12/15/17-5/15/22 (c)... 3,462,242 3,754,923
-----------
9,171,527
-----------
</TABLE>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
78
<PAGE> 80
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
U.S. GOVERNMENT &
FEDERAL AGENCIES (CONTINUED)
PRINCIPAL
AMOUNT VALUE
-------------------------
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION II (MORTGAGE
PASS-THROUGH SECURITIES) (12.2%)
7.125%, due 6/20/23-6/20/25 ARM
(c)(f)............................ $8,325,171 $ 8,553,974
-----------
UNITED STATES TREASURY BONDS
(28.1%)
6.25%, due 8/15/23 (e)............ 3,545,000 3,281,890
6.625%, due 2/15/27 (e)........... 6,850,000 6,702,314
8.875%, due 8/15/17............... 3,005,000 3,660,000
11.25%, due 2/15/15............... 710,000 1,031,055
12.00%, due 8/15/13............... 3,565,000 5,018,308
-----------
19,693,567
-----------
UNITED STATES TREASURY NOTES
(11.3%)
5.50%, due 11/15/98 (e)........... 1,440,000 1,431,446
5.625%, due 11/30/00.............. 440,000 430,993
6.25%, due 2/28/02 (e)............ 2,215,000 2,202,530
9.00%, due 5/15/98................ 3,725,000 3,825,687
-----------
7,890,656
-----------
Total U.S. Government &
Federal Agencies
(Cost $57,235,139)................ 57,272,964
-----------
Total Long-Term Bonds
(Cost $74,806,201)................ 74,930,125
-----------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENT (1.1%)
PRINCIPAL
AMOUNT VALUE
-------------------------
<S> <C> <C>
COMMERCIAL PAPER (1.1%)
Ford Motor Credit Corp.
6.11%, due 7/1/97................. $ 760,000 $ 760,000
-----------
Total Short-Term Investment
(Cost $760,000)................... 760,000
-----------
Total Investments
(Cost $75,566,201) (g)............ 108.2% 75,690,125(h)
Liabilities in Excess of
Cash and Other Assets............. (8.2) (5,718,674)
--------- ---------
Net Assets......................... 100.0% $69,971,451
========= ===========
</TABLE>
- ------------
(a) Long-term security maturing within the subsequent twelve month period.
(b) TBA: Securities purchased on a forward commitment basis with an approximate
principal amount and maturity date. The actual principal amount and maturity
date will be determined upon settlement.
(c) Segregated or partially segregated as collateral for TBA.
(d) Floating rate. Rate shown is the rate in effect at June 30, 1997.
(e) Represents securities out on loan or a portion which is out on loan.
(f) ARM--Adjustable Rate Mortgage. Resets annually.
(g) The cost for Federal income tax purposes is $75,609,414.
(h) At June 30, 1997 net unrealized appreciation was $80,711, based on cost for
Federal income tax purposes. This consisted of aggregate gross unrealized
appreciation for all investments on which there was an excess of market
value over cost of $451,098 and aggregate gross unrealized depreciation for
all investments on which there was an excess of cost over market value of
$370,387.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
79
<PAGE> 81
GOVERNMENT PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $75,566,201)........ $ 75,690,125
Cash................................... 3,788
Receivables:
Investment securities sold........... 2,201,009
Interest............................. 824,230
Fund shares sold..................... 28,299
------------
Total assets..................... 78,747,451
------------
LIABILITIES:
Payables:
Investment securities purchased...... 8,671,080
Fund shares redeemed................. 23,565
Adviser.............................. 17,258
Administrator........................ 5,753
NYLIAC............................... 5,753
Custodian............................ 4,314
Directors............................ 27
Accrued expenses....................... 48,250
------------
Total liabilities................ 8,776,000
------------
Net assets applicable to outstanding
shares............................... $ 69,971,451
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 50 million shares
authorized........................... $ 71,154
Additional paid-in capital............. 73,018,036
Accumulated undistributed net
investment income.................... 2,405,477
Accumulated net realized loss on
investments.......................... (5,647,140)
Net unrealized appreciation on
investments.......................... 123,924
------------
Net assets applicable to outstanding
shares............................... $ 69,971,451
============
Shares of capital stock outstanding.... 7,115,434
============
Net asset value per share
outstanding.......................... $ 9.83
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest............................. $ 2,622,857
------------
Expenses:
Advisory............................. 105,627
Administration....................... 70,418
Professional......................... 16,068
Shareholder communication............ 12,581
Custodian............................ 9,566
Directors............................ 1,350
Portfolio pricing.................... 1,310
Miscellaneous........................ 460
------------
Total expenses................... 217,380
------------
Net investment income.................. 2,405,477
------------
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS:
Net realized loss on investments....... (537,732)
Net change in unrealized appreciation
on investments....................... (149,235)
------------
Net realized and unrealized loss on
investments.......................... (686,967)
------------
Net increase in net assets resulting
from operations...................... $ 1,718,510
============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
80
<PAGE> 82
MAINSTAY VP SERIES FUND, INC.
GOVERNMENT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited)
and the year ended December 31, 1996
<TABLE>
<CAPTION>
1997 1996
----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income............................................................. $ 2,405,477 $ 4,644,150
Net realized loss on investments.................................................. (537,732) (1,685,892)
Net change in unrealized appreciation on investments.............................. (149,235) (1,228,232)
------------ ------------
Net increase in net assets resulting from operations.............................. 1,718,510 1,730,026
------------ ------------
Dividends to shareholders:
From net investment income........................................................ -- (4,616,401)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.................................................. 4,326,796 18,643,180
Net asset value of shares issued to shareholders in reinvestment of dividends..... -- 4,616,401
------------ ------------
4,326,796 23,259,581
Cost of shares redeemed........................................................... (9,196,395) (12,063,044)
------------ ------------
Increase (decrease) in net assets derived from capital share transactions......... (4,869,599) 11,196,537
------------ ------------
Net increase (decrease) in net assets............................................... (3,151,089) 8,310,162
NET ASSETS:
Beginning of period................................................................. 73,122,540 64,812,378
------------ ------------
End of period....................................................................... $ 69,971,451 $ 73,122,540
============ ============
Accumulated undistributed net investment income..................................... $ 2,405,477 $ --
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
JANUARY 29,
SIX MONTHS 1993 (a)
ENDED THROUGH
JUNE 30, YEAR ENDED DECEMBER 31 DECEMBER 31,
1997* 1996 1995 1994 1993
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period.... $ 9.59 $ 10.01 $ 9.21 $ 10.15 $ 10.00
-------- -------- -------- -------- --------
Net investment income..................... 0.34 0.65 0.75 0.75 0.82
Net realized and unrealized gain (loss) on
investments............................. (0.10) (0.42) 0.80 (0.94) (0.25)
-------- -------- -------- -------- --------
Total from investment operations.......... 0.24 0.23 1.55 (0.19) 0.57
-------- -------- -------- -------- --------
Less dividends:
From net investment income.............. -- (0.65) (0.75) (0.75) (0.42)
-------- -------- -------- -------- --------
Net asset value at end of period.......... $ 9.83 $ 9.59 $ 10.01 $ 9.21 $ 10.15
======== ======== ======== ======== ========
Total investment return (b)............... 2.52% 2.28% 16.72% (1.84%) 5.63%
Ratios (to average net
assets)/Supplemental Data:
Net investment income................... 6.83%+ 6.66% 7.80% 8.16% 8.46%+
Net expenses............................ 0.62%+ 0.67% 0.67% 0.67% 0.67%+
Expenses (before reimbursement)......... 0.62%+ 0.71% 0.82% 0.87% 1.02%+
Portfolio turnover rate................... 149% 304% 592% 483% 501%
Net assets at end of period (in 000's).... $ 69,971 $ 73,123 $ 64,812 $ 61,641 $ 46,766
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Total return is not annualized.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
81
<PAGE> 83
HIGH YIELD CORPORATE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
LONG-TERM BONDS (77.7%)+
CONVERTIBLE BONDS (1.0%)
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
TELECOMMUNICATION SERVICES (1.0%)
PLD Telekom, Inc.
9.00%, due 6/1/06 (c)........... $ 500,000 $ 475,000
Rogers Communications, Inc.
(zero coupon), due 5/20/13
(i)............................. 6,100,000 2,531,500
------------
Total Convertible Bonds
(Cost $2,867,830)............... 3,006,500
------------
CORPORATE BONDS (62.4%)
AEROSPACE (0.8%)
K&F Industries, Inc.
11.875%, due 12/1/03............ 60,000 63,525
Sequa Corp.
9.375%, due 12/15/03............ 2,000,000 2,040,000
9.625%, due 10/15/99............ 400,000 409,000
------------
2,512,525
------------
AUTO MANUFACTURING (1.9%)
Titan Tire Corp.
7.00%, due 2/11/00 (j).......... 6,000,000 5,745,000
------------
AUTO PARTS (0.9%)
CSK Auto, Inc.
Series A
11.00%, due 11/1/06............. 2,600,000 2,704,000
------------
BUILDING MATERIALS (1.1%)
American Standard, Inc.
(zero coupon), due 6/1/05
10.50%, beginning 6/1/98........ 3,000,000 2,947,500
Associated Materials, Inc.
11.50%, due 8/15/03............. 450,000 477,000
------------
3,424,500
------------
BUILDINGS (2.2%)
Greystone Homes, Inc.
10.75%, due 3/1/04.............. 1,600,000 1,752,000
NVR, Inc.
11.00%, due 4/15/03............. 2,200,000 2,354,000
Standard Pacific Corp.
8.50%, due 6/15/07.............. 2,500,000 2,487,500
------------
6,593,500
------------
CABLE (7.2%)
American Telecasting, Inc.
(zero coupon), due 6/15/04
14.50%, beginning 6/15/99....... 1,400,000 448,000
Continental Cablevision, Inc.
11.00%, due 6/1/07.............. 1,000,000 1,124,450
CS Wireless Systems, Inc.
Series B
(zero coupon), due 3/1/06
11.375%, beginning 3/1/01....... 4,500,000 1,057,500
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
CABLE (Continued)
Heartland Wireless
Communications, Inc.
Series B
14.00%, due 10/15/04............ $5,060,000 $ 2,175,800
Marcus Cable Operating Co.
(zero coupon), due 8/1/04
13.50%, beginning 8/1/99........ 6,700,000 5,829,000
UIH Australia/Pacific, Inc.
Series B
(zero coupon), due 5/15/06
14.00%, beginning 5/15/01....... 6,500,000 3,900,000
United International Holdings,
Inc.
(zero coupon), due 11/15/99..... 7,650,000 5,909,625
Series B
(zero coupon), due 11/15/99..... 1,600,000 1,236,000
------------
21,680,375
------------
CASINOS (3.7%)
Casino America, Inc.
12.50%, due 8/1/03.............. 1,300,000 1,342,250
Casino Magic Finance Corp.
11.50%, due 10/15/01............ 2,400,000 2,136,000
Casino Magic Louisiana Corp.
13.00%, due 8/15/03 (c)......... 1,400,000 1,246,000
El Comandante Capital Corp.
11.75%, due 12/15/03............ 2,900,000 2,929,000
Horseshoe Gaming LLC, Series B
12.75%, due 9/30/00............. 500,000 557,500
President Riverboat Casinos, Inc.
13.00%, due 9/15/01............. 3,500,000 2,870,000
------------
11,080,750
------------
CELLULAR TELEPHONE (1.9%)
CCPR Services, Inc.
10.00%, due 2/1/07 (c).......... 3,375,000 3,341,250
Centennial Cellular Corp.
8.875%, due 11/1/01............. 1,500,000 1,492,500
10.125%, due 5/15/05............ 500,000 520,000
PriCellular Wireless Corp.
Series B
(zero coupon), due 11/15/01
14.00%, beginning 11/15/97...... 50,000 53,000
10.75%, due 11/1/04............. 500,000 520,000
------------
5,926,750
------------
CHEMICALS (0.3%)
Uniroyal Chemical Co., Inc.
9.00%, due 9/1/00............... 800,000 814,000
------------
</TABLE>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
82
<PAGE> 84
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
CHILD CARE SERVICES (0.4%)
La Petite Holdings Corp.
9.625%, due 8/1/01.............. $1,100,000 $ 1,138,500
------------
COMPUTERS & OFFICE EQUIPMENT
(0.9%)
Unisys Corp.
10.625%, due 10/1/99............ 1,500,000 1,545,000
11.75%, due 10/15/04............ 1,003,000 1,095,777
------------
2,640,777
------------
CONSUMER DURABLES (2.2%)
IHF Holdings, Inc., Series B
(zero coupon), due 11/15/04
15.00%, beginning 11/15/99...... 2,200,000 1,815,000
Samsonite Corp.
11.125%, due 7/15/05............ 2,531,000 2,822,065
Selmer Co., Inc.
11.00%, due 5/15/05............. 1,770,000 1,947,000
------------
6,584,065
------------
CONTAINERS (1.8%)
Silgan Corp.
11.75%, due 6/15/02............. 5,000,000 5,325,000
------------
ELECTRIC UTILITIES (3.4%)
Cleveland Electric Illuminating
Company (The) and Toledo Edison
Company (The), Series A
7.19%, due 7/1/00 (c)........... 1,500,000 1,507,500
CMS Energy Corp.
8.125%, due 5/15/02............. 5,000,000 5,050,000
Midland Funding Corp. I
Series C-94
10.33%, due 7/23/02............. 2,797,061 2,992,855
Panda Funding Corp., Series A-1
11.625%, due 8/20/12............ 598,773 622,724
------------
10,173,079
------------
EQUIPMENT FINANCING (1.8%)
Atlas Air, Inc.
12.25%, due 12/1/02............. 650,000 721,500
GPA Delaware, Inc.
8.75%, due 12/15/98............. 2,400,000 2,454,000
World Airways, Inc.
10.25%, due 2/15/03 (j)......... 2,429,373 2,356,492
------------
5,531,992
------------
FOOD, BEVERAGES & TOBACCO (3.4%)
Colorado Prime Corp.
12.50%, due 5/1/04 (c)(n)....... 3,600 3,636,000
Foodbrands America, Inc.
10.75%, due 5/15/06............. 2,500,000 2,930,800
North Atlantic Trading, Inc.
11.00%, due 6/15/04 (c)......... 3,830,000 3,877,875
------------
10,444,675
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
HEALTH CARE (2.7%)
Abbey Healthcare Group, Inc.
9.50%, due 11/1/02.............. $1,000,000 $ 1,030,000
Magellan Health Services, Inc.
Series A
11.25%, due 4/15/04............. 3,500,000 3,902,500
Tenet Healthcare Corp.
10.125%, due 3/1/05............. 2,900,000 3,168,250
------------
8,100,750
------------
INDUSTRIAL (1.6%)
Newflo Corp., Series B
13.25%, due 11/15/02............ 350,000 378,875
Thermadyne Holdings Corp.
10.75%, due 11/1/03............. 4,290,000 4,493,775
------------
4,872,650
------------
LEISURE (1.3%)
Bally's Health & Tennis Corp.
13.00%, due 1/15/03............. 3,774,000 3,906,090
------------
MEDIA (8.2%)
Allbritton Communications Co.
Series B
9.75%, due 11/30/07............. 2,800,000 2,758,000
11.50%, due 8/15/04............. 2,975,000 3,123,750
Garden State Newspapers, Inc.
12.00%, due 7/1/04.............. 300,000 327,000
General Media, Inc.
10.625%, due 12/31/00........... 2,700,000 2,376,000
Heritage Media Corp.
11.00%, due 10/1/02............. 2,000,000 2,130,000
PanAmSat L.P.
(zero coupon), due 8/1/03
11.375%, beginning 8/1/98....... 4,000,000 3,896,560
SCI Television, Inc.
11.00%, due 6/30/05............. 2,000,000 2,127,500
Viacom, Inc.
6.75%, due 1/15/03.............. 8,600,000 8,269,760
------------
25,008,570
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
83
<PAGE> 85
HIGH YIELD CORPORATE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
PAPER & FOREST PRODUCTS (1.2%)
Gaylord Container Corp.
11.50%, due 5/15/01............. $2,000,000 $ 2,102,500
Stone Container Corp.
11.875%, due 12/1/98............ 1,522,000 1,605,710
------------
3,708,210
------------
PUBLISHING (1.6%)
Affiliated Newspaper Investments,
Inc.
(zero coupon), due 7/1/06
13.25%, beginning 7/1/99........ 2,900,000 2,599,125
Hollinger International
Publishing, Inc.
8.625%, due 3/15/05............. 2,200,000 2,227,500
------------
4,826,625
------------
RECREATION & ENTERTAINMENT (2.4%)
Affinity Group, Inc.
11.50%, due 10/15/03............ 2,000,000 2,145,000
Affinity Group Holding, Inc.
11.00%, due 4/1/07 (c).......... 2,600,000 2,730,000
Alliance Entertainment Corp.
Series B
11.25%, due 7/15/05 (m)......... 5,835,000 1,254,525
AMC Entertainment, Inc.
9.50%, due 3/15/09 (c).......... 1,200,000 1,227,000
------------
7,356,525
------------
RESTAURANTS & LODGING (1.8%)
AFC Enterprises, Inc.
10.25%, due 5/15/07 (c)......... 1,390,000 1,390,000
American Restaurant Group, Inc.
Series 93
13.00%, due 9/15/98............. 169,252 165,867
Family Restaurant, Inc.
9.75%, due 2/1/02............... 1,350,000 1,012,500
Flagstar Corp.
10.875%, due 12/1/02............ 2,800,000 2,842,000
------------
5,410,367
------------
RETAIL (2.7%)
Barnes & Noble, Inc.
Series B
11.875%, due 1/15/03............ 2,327,000 2,524,795
Brylane L.P., Series B
10.00%, due 9/1/03.............. 200,000 214,000
Eckerd Corp.
9.25%, due 2/15/04.............. 5,000,000 5,300,000
Guitar Center Management Co.
11.00%, due 7/1/06.............. 160,000 176,000
------------
8,214,795
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
STEEL, ALUMINUM & OTHER METALS
(1.8%)
Easco Corp.
Series B
10.00%, due 3/15/01............. $3,200,000 $ 3,248,000
UCAR Global Enterprises, Inc.
Series B
12.00%, due 1/15/05............. 2,000,000 2,250,000
------------
5,498,000
------------
SUPERMARKETS (0.4%)
Dominick's Finer Foods, Inc.
10.875%, due 5/1/05............. 1,200,000 1,326,000
------------
TELECOMMUNICATION SERVICES (2.0%)
Globalstar L.P. Capital Corp.
11.25%, due 6/15/04 (c)......... 3,000,000 2,820,000
Metrocall, Inc.
10.375%, due 10/1/07............ 2,000,000 1,840,000
Mobile Telecommunication
Technology Corp.
13.50%, due 12/15/02............ 1,000,000 1,070,000
ProNet, Inc.
11.875%, due 6/15/05............ 500,000 485,000
------------
6,215,000
------------
TEXTILE & APPAREL (0.8%)
Hosiery Corp. of America, Inc.
13.75%, due 8/1/02.............. 2,329,000 2,550,255
------------
Total Corporate Bonds
(Cost $188,398,650)............. 189,313,325
------------
FOREIGN BOND (0.1%)
CHEMICALS (0.1%)
Kronos International, Inc.
Bank debt
5.051%, due 12/31/50
(d)(j)(s)....................... DM 446,639 246,054
------------
Total Foreign Bond
(Cost $243,744)................. 246,054
------------
U.S. GOVERNMENT &
FEDERAL AGENCY (3.7%)
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (1.8%)
Series B
12.00%, due 6/26/98............. $5,000,000 5,282,050
------------
UNITED STATES TREASURY BOND
(1.9%)
11.75%, due 2/15/01............. 5,000,000 5,864,850
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
84
<PAGE> 86
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
U.S. GOVERNMENT & FEDERAL AGENCY (CONTINUED)
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
UNITED STATES TREASURY NOTE
(0.0%) (b)
9.125%, due 5/15/99............. $ 100,000 $ 105,297
------------
Total U.S. Government & Federal
Agency
(Cost $11,536,126).............. 11,252,197
------------
YANKEE BONDS (10.5%)
CABLE (1.5%)
Kabelmedia Holdings GmbH
(zero coupon), due 8/1/06
13.625%, beginning 8/1/01....... 3,300,000 2,013,000
TeleWest, PLC
(zero coupon), due 10/1/07
11.00%, beginning 10/1/00....... 3,300,000 2,376,000
------------
4,389,000
------------
CELLULAR TELEPHONE (3.2%)
Microcell Telecommunications,
Inc.
Series B
(zero coupon), due 6/1/06
14.00%, beginning 12/1/01....... 1,400,000 784,000
Millicom International Cellular,
S.A.
(zero coupon), due 6/1/06
13.50%, beginning 6/1/01........ 4,800,000 3,504,000
Occidente y Caribe Celular, S.A.
Series B
(zero coupon), due 3/15/04
14.00%, beginning 3/15/01....... 2,670,000 2,023,326
Rogers Cantel, Inc.
9.375%, due 6/1/08.............. 2,000,000 2,110,000
11.125%, due 7/15/02............ 1,350,000 1,397,250
------------
9,818,576
------------
CONSUMER DURABLES (1.0%)
International Semi-Technology
Microelectronics, Inc.
(zero coupon), due 8/15/03
11.50%, beginning 8/15/00....... 5,100,000 3,047,250
------------
FOOD, BEVERAGES & TOBACCO (0.9%)
Fresh Del Monte Produce NV
Series B
10.00%, due 5/1/03.............. 2,600,000 2,684,500
------------
MEDIA (1.6%)
Le Groupe Videotron Ltee
10.625%, due 2/15/05............ 3,900,000 4,348,500
Videotron Ltee
10.25%, due 10/15/02............ 500,000 530,000
------------
4,878,500
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------------------------
<S> <C> <C>
REAL ESTATE (0.2%)
Trizec Finance Ltd.
10.875%, due 10/15/05........... $ 550,000 $ 607,750
------------
TELECOMMUNICATION SERVICES (2.1%)
Call-Net Enterprises, Inc.
(zero coupon), due 12/1/04
13.25%, beginning 12/1/99....... 2,460,000 2,127,900
Ionica, PLC
(zero coupon), due 5/1/07
15.00%, beginning 5/1/02 (o).... 5,700 3,021,000
13.50%, due 8/15/06............. 1,100,000 1,171,500
------------
6,320,400
------------
Total Yankee Bonds
(Cost $29,363,185).............. 31,745,976
------------
Total Long-Term Bonds
(Cost $232,409,535)............. 235,564,052
------------
COMMON STOCKS (4.0%)
<CAPTION>
SHARES
----------
<S> <C> <C>
BUILDING MATERIALS (0.0%) (b)
Hanson, PLC ADR (g).............. 4,312 107,800
------------
BUILDINGS (0.1%)
NVR, Inc. (a).................... 15,200 231,800
------------
CABLE (1.0%)
United International Holdings,
Inc.
Class A (a)..................... 289,000 2,998,375
------------
CASINOS (0.0%) (b)
Casino America, Inc. (a)......... 7,053 15,428
Colorado Gaming & Entertainment
Co. (a)......................... 12,488 53,074
------------
68,502
------------
CELLULAR TELEPHONE (0.4%)
AirTouch Communications, Inc.
(a)............................. 33,000 907,500
Clearnet Communications, Inc.
Class A (a)..................... 20,000 242,500
------------
1,150,000
------------
CONGLOMERATES (0.1%)
General Motors Corp., Class H.... 6,000 345,750
------------
CONTAINERS (0.2%)
Gaylord Container Corp. (a)...... 95,340 732,926
------------
DRUGS (0.0%) (b)
ICN Pharmaceuticals, Inc......... 70 2,008
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
85
<PAGE> 87
HIGH YIELD CORPORATE BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
<S> <C> <C>
ELECTRIC UTILITIES (0.6%)
Energy Group, PLC ADR (g)........ 4,312 $ 182,721
PECO Energy Co................... 70,000 1,470,000
------------
1,652,721
------------
FOOD, BEVERAGES & TOBACCO (0.1%)
Imperial Tobacco Group, PLC ADR
(g)............................. 8,625 110,961
RJR Nabisco Holdings Corp........ 10,000 330,000
------------
440,961
------------
MEDIA (0.4%)
Comcast Corp., Class A........... 16,000 335,000
Le Groupe Videotron Ltee (r)..... 69,000 557,662
Matav-Cable Systems Media Ltd.
ADR (a)(g)...................... 12,250 214,375
------------
1,107,037
------------
PAPER & FOREST PRODUCTS (0.3%)
Millennium Chemicals, Inc........ 42,464 966,056
------------
RECREATION & ENTERTAINMENT (0.0%)
(b)
Steinway Musical Instruments,
Inc. (a)........................ 4,100 79,950
------------
RESTAURANTS & LODGING (0.1%)
Bob Evans Farms, Inc. ........... 10,000 169,375
------------
STEEL, ALUMINUM & OTHER METALS
(0.4%)
Newmont Mining Corp.............. 20,000 780,000
Ryerson Tull, Inc., Class A
(a)............................. 19,500 321,750
------------
1,101,750
------------
TELECOMMUNICATION SERVICES (0.3%)
Paging Network, Inc. (a)......... 38,100 334,566
Rogers Communications, Inc.
Class B (a)(r).................. 100,000 626,993
------------
961,559
------------
TEXTILE & APPAREL (0.0%) (b)
Hosiery Corp. of America, Inc.
(a)............................. 500 3,500
------------
Total Common Stocks
(Cost $11,996,637).............. 12,120,070
------------
PREFERRED STOCKS (4.2%)
CASINOS (0.1%)
Station Casinos, Inc.
7.00% (l)....................... 9,500 425,125
------------
<CAPTION>
SHARES VALUE
--------------------------
<S> <C> <C>
DRUGS (0.4%)
ICN Pharmaceuticals, Inc.
Series B (c)(h)(l)............... 1,194 $ 1,194,000
------------
EQUIPMENT FINANCING (0.2%)
GPA Group, PLC (a)(j)............. 1,000,000 515,000
------------
MEDIA (3.3%)
CD Radio, Inc.
5.00%
Delayed Preferred Stock
(a)(c)(l)........................ 50,000 1,550,000
Chancellor Radio Broadcasting Co.
12.00% (c)(f).................... 600 68,700
Granite Broadcasting Corp.
12.75% (c)(f).................... 1,000 970,000
Paxson Communications Corp.
12.50% (f)....................... 2,899 3,043,540
Spanish Broadcasting System, Inc.
14.25% (c)(f).................... 4,500 4,320,000
------------
9,952,240
------------
TELECOMMUNICATION SERVICES (0.2%)
ICG Holdings, Inc.
14.00% (c)(h).................... 569 587,493
------------
Total Preferred Stocks
(Cost $11,529,296)............... 12,673,858
------------
WARRANTS (0.3%)
CASINOS (0.0%) (b)
Casino America, Inc.
expire 5/3/01 (a)................ 1,249 1,249
------------
CELLULAR TELEPHONE (0.0%) (b)
Microcell Telecommunications, Inc.
expire 6/1/06 (a)(c)(k).......... 5,600 3,500
expire 6/1/06 (a)(c)............. 5,600 70,000
Occidente y Caribe Celular, S.A.
expire 3/15/04 (a)(c)............ 10,680 107
------------
73,607
------------
MEDIA (0.3%)
General Media, Inc.
expire 12/21/00 (a).............. 900 4,500
Spanish Broadcasting System, Inc.
expire 6/30/99 (a)(c)(p)......... 2,500 300,000
expire 6/30/99 (a)(q)............ 2,500 550,000
------------
854,500
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
86
<PAGE> 88
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
WARRANTS (CONTINUED)
SHARES VALUE
--------------------------
<S> <C> <C>
POLLUTION & RELATED (0.0%) (b)
ICF Kaiser International, Inc.
expire 12/31/98 (a)............. 960 $ 240
------------
Total Warrants
(Cost $825,045)................. 929,596
------------
PURCHASED PUT
OPTION (0.0%)(B)
<CAPTION>
NOTIONAL
PRINCIPAL
AMOUNT
----------
<S> <C> <C>
FOOD, BEVERAGES & TOBACCO
(0.0%)(b)
Underlying security
RJR Nabisco, Inc.
8.75%, due 8/15/05
expire 10/6/97 (e).............. $2,000,000 2,200
------------
Total Purchased Put Option
(Cost $40,000).................. 2,200
------------
SHORT-TERM
INVESTMENTS (12.3%)
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C>
COMMERCIAL PAPER (2.8%)
American Express Credit Corp.
5.57%, due 7/15/97.............. $8,579,000 8,579,000
------------
SHORT-TERM BOND (0.1%)
MEDIA (0.1%)
Time Warner, Inc.
7.45%, due 2/1/98............... 200,000 201,192
------------
U.S. GOVERNMENT (9.4%)
United States Treasury Notes
5.875%, due 7/31/97............. 21,350,000 21,356,619
8.50%, due 7/15/97.............. 7,150,000 7,158,937
------------
28,515,556
------------
Total Short-Term Investments
(Cost $37,354,875).............. 37,295,748
------------
Total Investments
(Cost $294,155,388) (t)......... 98.5% 298,585,524(u)
Cash and Other Assets,
Less Liabilities................ 1.5 4,520,266
---------- ------------
Net Assets....................... 100.0% $303,105,790
========== ============
</TABLE>
- ------------
(a) Non-income producing securities.
(b) Less than one tenth of a percent.
(c) May be sold to institutional investors only.
(d) Floating rate. Rate shown is the rate in effect at June 30, 1997.
(e) Purchased put option is based on spread between the risk/duration of RJR
Nabisco, Inc., 8.75% Note due 8/15/05, multiplied by the yield on the RJR
Nabisco Note less the yield on the U.S. Treasury Bond 6.50%, due 8/15/05,
less 3.50%, multiplied by the notional principal.
(f) PIK ("Payment in Kind") interest or dividend payment is made with
additional securities.
(g) ADR--American Depository Receipt.
(h) CIK ("Cash in Kind") interest or dividend payment is made with cash or
additional securities.
(i) Yankee bond.
(j) Restricted securities.
(k) Conditional warrants.
(l) Convertible preferred stocks.
(m) Issuer in bankruptcy.
(n) 3,600 Units--each unit reflects $1,000 principal amount of Senior Notes,
plus 0.19608 warrants to acquire 1 share of common stock at $100.00 per
share at a future date.
(o) 5,700 Units--each unit reflects $1,000 principal amount of Senior
Discounted Notes, plus 1 warrant to acquire 19.619 shares of common stock
at $0.10 per share at a future date.
(p) Each warrant entitles the holder thereof to purchase 0.428 shares of the
Company's Class A common stock, par value $0.01 per share.
(q) Each warrant entitles the holder thereof to purchase one share of the
Company's Class A common stock at $0.01 per share, subject to adjustment
under certain circumstances on or after the Exercisability Date and prior
to June 30, 1999.
(r) Canadian securities.
(s) Multiple tranche facility.
(t) The cost for Federal income tax purposes is $294,170,763.
(u) At June 30, 1997 net unrealized appreciation was $4,414,761, based on cost
for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $8,891,045 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $4,476,284.
(v) The following abbreviation is used in the above portfolio: DM--Deutsche
Mark
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
87
<PAGE> 89
HIGH YIELD CORPORATE BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $294,155,388)....... $298,585,524
Cash................................... 71
Deposit with broker.................... 115,951
Receivables:
Dividends and interest............... 5,745,852
Investment securities sold........... 5,411,255
Fund shares sold..................... 583,263
Unrealized appreciation on forward
foreign currency contracts........... 14,269
------------
Total assets..................... 310,456,185
------------
LIABILITIES:
Payables:
Investment securities purchased...... 7,124,477
Adviser.............................. 72,062
Administrator........................ 24,021
NYLIAC............................... 24,021
Custodian............................ 3,381
Directors............................ 26
Accrued expenses....................... 102,407
------------
Total liabilities................ 7,350,395
------------
Net assets applicable to outstanding
shares............................... $303,105,790
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 100 million shares
authorized........................... $ 245,931
Additional paid-in capital............. 281,148,309
Accumulated undistributed net
investment income.................... 10,378,246
Accumulated undistributed net realized
gain on investments.................. 6,881,557
Accumulated undistributed net realized
gain on foreign currency
transactions......................... 16,700
Net unrealized appreciation on
investments.......................... 4,430,136
Net unrealized appreciation on
translation of assets and liabilities
in foreign currencies and forward
foreign currency contracts........... 4,911
------------
Net assets applicable to outstanding
shares............................... $303,105,790
============
Shares of capital stock outstanding.... 24,593,147
============
Net asset value per share
outstanding.......................... $ 12.32
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a)........................ $ 372,244
Interest............................. 10,972,627
------------
Total income..................... 11,344,871
------------
Expenses:
Advisory............................. 373,632
Administration....................... 249,088
Shareholder communication............ 47,075
Professional......................... 29,967
Custodian............................ 10,760
Directors............................ 4,192
Portfolio pricing.................... 4,192
Miscellaneous........................ 3,292
------------
Total expenses................... 722,198
------------
Net investment income.................. 10,622,673
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain from:
Security transactions................ 7,105,293
Foreign currency transactions........ 16,700
------------
Net realized gain on investments and
foreign currency transactions........ 7,121,993
------------
Net change in unrealized appreciation
on investments:
Security transactions................ (34,142)
Translation of assets and liabilities
in foreign currencies and forward
foreign currency contracts......... 4,911
------------
Net unrealized loss on investments and
foreign currencies................... (29,231)
------------
Net realized and unrealized gain on
investments and foreign currency
transactions......................... 7,092,762
------------
Net increase in net assets resulting
from operations...................... $ 17,715,435
============
</TABLE>
- ------------
(a) Dividends recorded net of foreign withholding taxes in the amount of $824.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
88
<PAGE> 90
MAINSTAY VP SERIES FUND, INC.
HIGH YIELD CORPORATE BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited)
and the year ended December 31, 1996
<TABLE>
<CAPTION>
1997 1996
----------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income......................................................... $ 10,622,673 $ 9,736,281
Net realized gain on investments.............................................. 7,105,293 4,084,739
Net realized gain on foreign currency transactions............................ 16,700 --
Net change in unrealized appreciation on investments.......................... (34,142) 3,943,445
Net change in unrealized appreciation on translation of assets and liabilities
in foreign currencies and forward foreign currency contracts................. 4,911 --
------------ ------------
Net increase in net assets resulting from operations.......................... 17,715,435 17,764,465
------------ ------------
Dividends and distributions to shareholders:
From net investment income.................................................... (295,000) (9,685,708)
From net realized gain on investments......................................... (1,604,000) (2,622,325)
------------ ------------
Total dividends and distributions to shareholders........................... (1,899,000) (12,308,033)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.............................................. 96,922,879 146,492,029
Net asset value of shares issued to shareholders in reinvestment of dividends
and distributions............................................................ 1,899,000 12,308,033
------------ ------------
98,821,879 158,800,062
Cost of shares redeemed....................................................... (16,533,559) (2,569,930)
------------ ------------
Increase in net assets derived from capital share transactions................ 82,288,320 156,230,132
------------ ------------
Net increase in net assets...................................................... 98,104,755 161,686,564
NET ASSETS:
Beginning of period............................................................. 205,001,035 43,314,471
------------ ------------
End of period................................................................... $303,105,790 $205,001,035
============ ============
Accumulated undistributed net investment income................................. $ 10,378,246 $ 50,573
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
MAY 1,
SIX MONTHS YEAR 1995 (a)
ENDED ENDED THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31,
1997* 1996 1995
-------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.............................. $ 11.61 $ 10.55 $ 10.00
-------- -------- --------
Net investment income............................................... 0.43 0.59 0.37
Net realized and unrealized gain on investments..................... 0.36 1.22 0.61
Net realized and unrealized gain on foreign currency transactions... 0.00(b) -- --
-------- -------- --------
Total from investment operations.................................... 0.79 1.81 0.98
-------- -------- --------
Less dividends and distributions:
From net investment income........................................ (0.01) (0.59) (0.37)
From net realized gain on investments............................. (0.07) (0.16) (0.04)
In excess of net realized gain on investments..................... -- -- (0.02)
-------- -------- --------
Total dividends and distributions................................... (0.08) (0.75) (0.43)
-------- -------- --------
Net asset value at end of period.................................... $ 12.32 $ 11.61 $ 10.55
======== ======== ========
Total investment return (c)......................................... 6.90% 17.16% 10.06%
Ratios (to average net assets)/Supplemental Data:
Net investment income............................................. 8.53%+ 8.59% 10.02%+
Net expenses...................................................... 0.58%+ 0.67% 0.67%+
Expenses (before reimbursement)................................... 0.58%+ 0.71% 1.25%+
Portfolio turnover rate............................................. 72% 149% 95%
Average commission rate paid........................................ $ 0.0576 $ 0.0613 (d)
Net assets at end of period (in 000's).............................. $ 303,106 $ 205,001 $ 43,314
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Less than one cent per share.
(c) Total return is not annualized.
(d) Disclosure of amount required for fiscal years beginning on or after
September 1, 1995.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
89
<PAGE> 91
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (90.2%)+
SHARES VALUE
------------------------
<S> <C> <C>
AUSTRALIA (6.2%)
Amcor, Ltd. (forest products &
paper)............................ 9,200 $ 60,651
Boral, Ltd. (building materials &
components)....................... 33,900 105,901
Brambles Industries, Ltd. (business
& public services)................ 4,300 84,370
Broken Hill Proprietary Co., Ltd.
(energy sources).................. 20,900 305,048
Coles Myer, Ltd. (merchandising)... 24,470 126,305
CSR, Ltd. (multi-industry)......... 37,000 142,195
Foster's Brewing Group, Ltd.
(beverages & tobacco)............. 62,120 114,481
Mount Isa Mines Holdings, Ltd.
(metals-nonferrous)............... 44,461 65,283
National Australia Bank, Ltd.
(banking)......................... 17,620 250,403
News Corp., Ltd. (broadcasting &
publishing)....................... 27,839 132,432
Pacific Dunlop, Ltd.
(multi-industry).................. 27,400 80,464
Rio Tinto, Ltd.
(metals-nonferrous)............... 5,325 90,076
Santos, Ltd. (energy sources)...... 15,500 64,677
Westpac Banking Corp., Ltd.
(banking)......................... 29,000 173,150
WMC, Ltd. (metals-nonferrous)...... 12,200 76,315
----------
1,871,751
----------
AUSTRIA (3.5%)
Austrian Airlines Oesterreichische
Luftverkehrs AG
(transportation-airlines) (a)..... 150 24,223
Bank Austria AG (banking).......... 2,950 163,607
Creditanstalt-Bankverein Stamm AG
(banking)......................... 2,050 119,712
EA-Generali AG (insurance)......... 350 92,060
Flughafen Wien AG
(transportation-airlines)......... 1,200 50,697
Oesterreichische Brau-Beteiligungs
AG (beverages & tobacco).......... 750 44,348
OMV AG (energy sources)............ 1,650 211,400
Verbundgesellschaft-Oesterreichische
Elektrizitatswirtschafts AG Class
A (utilities-electrical & gas).... 1,350 95,103
Voest-Alpine Technologie AG
(machinery & engineering)......... 850 155,583
Wienerberger Baustoffindustrie AG
(building materials &
components)....................... 500 102,723
----------
1,059,456
----------
BELGIUM (1.3%)
Electrabel, S.A.
(utilities-electrical & gas)...... 260 55,760
Fortis AG (insurance).............. 350 72,335
Generale de Banque, S.A.
(banking)......................... 110 42,378
<CAPTION>
SHARES VALUE
------------------------
<S> <C> <C>
BELGIUM (Continued)
Kredietbank N.V. (banking)......... 110 $ 44,366
PetroFina, S.A. (energy sources)... 160 60,639
Reunies Electrobel & Tractebel,
S.A. (multi-industry)............. 120 50,069
Solvay, S.A. Class A (chemicals)... 80 47,176
----------
372,723
----------
FRANCE (8.2%)
Alcatel Alsthom, S.A. (electrical &
electronics)...................... 678 84,996
AXA-UAP, S.A. (insurance).......... 2,493 155,204
Carrefour, S.A. (merchandising).... 265 192,648
Compagnie de Saint Gobain, S.A.
(miscellaneous-materials &
commodities)...................... 311 45,398
Compagnie de Suez, S.A.
(banking)......................... 42,240 103,964
Compagnie Financiere de Paribas,
S.A. Class A (banking)............ 1,451 100,343
Compagnie Generale des Eaux, S.A.
(business & public services)...... 1,337 171,483
Elf Aquitaine, S.A. (energy
sources).......................... 1,312 141,683
Eridania Beghin-Say, S.A. (food &
household products)............... 550 82,440
Groupe Danone, S.A. (food &
household products)............... 316 52,264
Havas, S.A. (business & public
services)......................... 1,311 94,569
Lafarge, S.A. (building materials &
components)....................... 860 53,540
L'Air Liquide, S.A. (chemicals).... 863 137,147
L'Oreal, S.A. (health & personal
care)............................. 417 175,865
LVMH (Moet Hennessy Louis Vuitton),
S.A. (beverages & tobacco)........ 510 137,253
Michelin (CGDE), S.A. Class B
(tire & rubber)................... 1,253 75,318
Pernod-Ricard, S.A. (beverages &
tobacco).......................... 430 22,192
Pinault-Printemps-Redoute, S.A.
(building materials &
components)....................... 250 120,254
PSA Peugeot, S.A. (automobiles).... 150 14,512
Rhone-Poulenc, S.A. Class A
(chemicals)....................... 1,468 60,011
Schneider, S.A. (machinery &
engineering)...................... 1,567 83,489
Societe Generale, S.A. (banking)... 1,134 126,710
Thomson CSF, S.A. (aerospace &
military technology).............. 3,047 78,576
Total, S.A. Class B (energy
sources).......................... 1,494 151,158
----------
2,461,017
----------
GERMANY (9.5%)
Allianz AG Registered
(insurance)....................... 1,000 209,465
BASF AG (chemicals)................ 3,000 110,959
Bayer AG (chemicals)............... 3,450 132,691
Daimler-Benz AG (automobiles)...... 4,200 341,055
Deutsche Bank AG (banking)......... 3,000 175,434
</TABLE>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
90
<PAGE> 92
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
------------------------
<S> <C> <C>
GERMANY (Continued)
Deutsche Telekom AG
(telecommunications).............. 9,300 $ 224,157
Dresdner Bank AG (banking)......... 3,000 103,814
Karstadt AG (merchandising)........ 50 17,819
Linde AG (machinery &
engineering)...................... 50 38,306
Mannesmann AG (machinery &
engineering)...................... 500 222,951
Preussag AG (multi-industry)....... 50 14,648
RWE AG (utilities-electrical &
gas).............................. 8,850 380,911
Siemens AG (electrical &
electronics)...................... 4,050 240,671
Thyssen AG (metals-steel).......... 300 71,104
VEBA AG (utilities-electrical &
gas).............................. 2,600 146,224
Viag AG (multi-industry)........... 600 273,051
Volkswagen AG (automobiles)........ 200 153,455
----------
2,856,715
----------
HONG KONG (2.5%)
Cheung Kong (Holdings), Ltd.
(real estate)..................... 13,000 128,368
China Light & Power Co., Ltd.
(utilities-electrical & gas)...... 14,500 82,165
Hang Seng Bank, Ltd. (banking)..... 7,900 112,679
Hong Kong Telecommunications, Ltd.
(telecommunications).............. 48,400 115,577
Hutchison Whampoa, Ltd.
(multi-industry).................. 15,000 129,723
Sun Hung Kai Properties, Ltd.
(real estate)..................... 10,000 120,365
Swire Pacific, Ltd. Class A
(multi-industry).................. 7,000 63,022
----------
751,899
----------
ITALY (7.7%)
Assicurazioni Generali S.p.A.
(insurance)....................... 11,880 215,850
Banca Commerciale Italiana S.p.A.
(banking)......................... 28,000 57,953
Benetton Group S.p.A. (textile &
apparel).......................... 4,160 66,411
Credito Italiano S.p.A.
(banking)......................... 34,000 62,175
Edison S.p.A. (energy sources)..... 8,000 39,772
Ente Nazionale Idrocarburi S.p.A.
(energy sources).................. 98,000 554,631
Fiat S.p.A. (automobiles).......... 45,000 161,935
Fiat S.p.A. di Risp
(automobiles)..................... 15,000 28,180
Istituto Bancario San Paolo di
Torino S.p.A. (banking)........... 14,000 101,994
Istituto Nazionale delle
Assicurazioni S.p.A.
(insurance)....................... 55,000 83,761
Italgas S.p.A.
(utilities-electrical & gas)...... 10,000 32,340
Mediobanca S.p.A. (financial
services)......................... 11,000 66,750
Montedison S.p.A. (multi-industry)
(a)............................... 79,940 52,739
Olivetti Group S.p.A. (data
processing & reproduction) (a).... 30,000 8,494
Parmalat Finanziaria S.p.A. (food &
household products)............... 35,000 49,495
<CAPTION>
SHARES VALUE
------------------------
<S> <C> <C>
ITALY (Continued)
Pirelli S.p.A. (industrial
components)....................... 26,000 $ 64,362
Riunione Adriatica di Sicurta
S.p.A. (insurance)................ 5,200 41,125
Sirti S.p.A.
(telecommunications).............. 7,000 40,357
Telecom Italia S.p.A.
(telecommunications).............. 81,000 242,427
Telecom Italia S.p.A. di Risp
(telecommunications).............. 22,000 43,530
Telecom Italia Mobile S.p.A.
(telecommunications).............. 81,000 261,954
Telecom Italia Mobile S.p.A. di
Risp (telecommunications)......... 21,000 37,538
----------
2,313,773
----------
JAPAN (25.6%)
Ajinomoto Co., Inc. (food &
household products)............... 3,000 32,247
Asahi Chemical Industry Co., Ltd.
(chemicals) (c)................... 19,000 113,738
Asahi Glass Co., Ltd.
(miscellaneous-materials &
components) (c)................... 49,000 488,161
Bank of Tokyo-Mitsubishi, Ltd.
(banking) (c)..................... 25,000 502,493
Bridgestone Corp. (industrial
components) (c)................... 17,000 395,178
Chiba Bank, Ltd. (banking) (c)..... 6,000 35,760
Dai Nippon Printing Co., Ltd.
(business & public services)...... 5,000 113,170
Daiei, Inc. (merchandising) (c).... 10,000 64,232
Fanuc, Ltd. (electronic components
& instruments).................... 2,000 76,903
Fuji Bank, Ltd. (banking) (c)...... 20,000 300,622
Fuji Photo Film, Ltd. (recreation &
other consumer goods)............. 8,000 322,294
Fujitsu, Ltd. (data processing &
reproduction) (c)................. 11,000 152,845
Furukawa Electric Co. (industrial
components) (c)................... 15,000 95,561
Hankyu Corp. (transportation-road &
rail)............................. 3,000 16,595
Hitachi Corp., Ltd. (electrical &
electronics) (c).................. 20,000 223,718
Honda Motor Co., Ltd.
(automobiles)..................... 6,000 180,897
Industrial Bank of Japan, Ltd.
(banking) (c)..................... 19,000 295,553
Ito-Yokado Co., Ltd.
(merchandising)................... 1,000 58,114
Itochu Corp. (wholesale &
international trade) (c).......... 30,000 161,759
Japan Airlines Co. (transportation-
airlines) (a)(c).................. 9,000 40,977
Japan Energy Corp. (energy
sources).......................... 28,000 73,408
Joyo Bank (banking)................ 3,000 16,595
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
91
<PAGE> 93
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
------------------------
<S> <C> <C>
JAPAN (Continued)
Kajima Corp. (construction &
housing).......................... 2,000 $ 11,728
Kansai Electric Power Co., Inc.
(utilities-electrical & gas)...... 3,000 57,940
Kawasaki Steel Corp.
(metals-steel).................... 6,000 19,558
Kinki Nippon Railway Co., Ltd.
(transportation-road & rail)...... 7,000 42,821
Kirin Brewery Co., Ltd. (beverages
& tobacco)........................ 11,000 114,394
Komatsu, Ltd. (machinery &
engineering)...................... 10,000 81,273
Marubeni Corp. (wholesale &
international trade).............. 17,000 77,253
Marui Co., Ltd. (merchandising).... 2,000 37,228
Matsushita Electric Industrial Co.,
Ltd. (appliances & household
durables)......................... 17,000 343,181
Mitsubishi Chemical Corp.
(chemicals)....................... 10,000 32,684
Mitsubishi Corp.
(multi-industry).................. 5,000 62,484
Mitsubishi Estate Co., Ltd.
(construction & housing).......... 3,000 43,520
Mitsui Engineering & Shipbuilding
Co., Ltd. (machinery &
engineering) (a).................. 21,000 45,880
Mitsui Fudosan Co., Ltd.
(construction & housing).......... 6,000 82,846
Mitsui Marine & Fire Insurance Co.,
Ltd. (insurance).................. 15,000 108,538
Mitsui Trust & Banking Co., Ltd.
(financial services).............. 3,000 22,678
Mitsukoshi, Ltd. (merchandising)... 3,000 21,367
NEC Corp. (electrical &
electronics)...................... 8,000 111,859
Nippon Express Co., Ltd.
(transportation-road & rail)...... 13,000 103,950
Nippon Oil Co., Ltd. (energy
sources).......................... 8,000 43,835
Nippon Paper Industries Co. (forest
products & paper)................. 6,000 34,764
Nippon Yusen Kabushiki Kaisha
(transportation-shipping)......... 5,000 19,444
Nissan Motor Co., Ltd.
(automobiles)..................... 27,000 209,762
NKK Corp. (metals-steel)........... 58,000 124,688
Obayashi Corp. (construction &
housing).......................... 5,000 33,514
Oji Paper Co., Ltd. (forest
products & paper)................. 2,000 12,392
Osaka Gas Co., Ltd. (utilities-
electrical & gas)................. 6,000 17,251
Sankyo Co., Ltd. (health & personal
care)............................. 2,000 67,290
Sanyo Electric Co., Ltd.
(appliances & household
durables)......................... 45,000 202,133
Sekisui Chemical Co., Ltd.
(building materials &
components)....................... 2,000 20,274
Sekisui House, Ltd. (construction &
housing).......................... 2,000 20,274
Sharp Corp. (appliances & household
durables)......................... 5,000 69,038
Shimizu Corp. (construction &
housing).......................... 4,000 24,015
<CAPTION>
SHARES VALUE
------------------------
<S> <C> <C>
JAPAN (Continued)
Shiseido Co., Ltd. (health &
personal care).................... 8,000 $ 132,134
Sumitomo Bank, Ltd. (banking)...... 14,000 230,010
Sumitomo Chemical Co.
(chemicals)....................... 6,000 27,213
Sumitomo Corp. (wholesale &
international trade).............. 14,000 133,357
Sumitomo Metal Mining Co.
(metals-nonferrous)............... 4,000 28,314
Taisei Corp. (construction &
housing).......................... 19,000 88,168
Taisho Pharmaceutical Co. (health &
personal care).................... 1,000 27,004
Takeda Chemical Industries, Ltd.
(health & personal care).......... 6,000 168,837
Tobu Railway Co., Ltd.
(transportation-road & rail)...... 14,000 64,721
Tohoku Electric Power (utilities-
electrical & gas)................. 1,000 17,828
Tokai Bank (banking)............... 11,000 113,432
Tokyo Dome Corp. (leisure &
tourism).......................... 2,000 26,916
Tokyo Electric Power Co., Inc.
(utilities-electrical & gas)...... 6,000 126,366
Tokyo Gas Co., Ltd.
(utilities-electrical & gas)...... 15,000 41,685
Tokyu Corp. (transportation-road &
rail)............................. 5,000 31,067
Toppan Printing Co., Ltd. (business
& public services)................ 8,000 125,842
Tostem Corp. (building materials &
components)....................... 1,000 27,703
Toto, Ltd. (building materials &
components)....................... 1,000 12,322
Toyoda Automatic Loom Works, Ltd.
(machinery & engineering)......... 1,000 22,721
Yamanouchi Pharmaceutical Co., Ltd.
(health & personal care).......... 3,000 80,748
Yamazaki Baking Co., Ltd. (food &
household products)............... 1,000 17,653
Yasuda Trust & Banking (financial
services)......................... 15,000 57,415
----------
7,682,132
----------
MALAYSIA (0.0%) (b)
Telekom Malaysia Berhad
(telecommunications).............. 1,000 4,675
----------
NETHERLANDS (1.4%)
Elsevier N.V. (broadcasting &
publishing)....................... 1,500 25,111
ING Groep N.V. (insurance)......... 1,370 63,279
Koninklijke PTT Nederland N.V.
(forest products & paper)......... 826 32,461
Philips Electronics N.V.
(appliances & household
durables)......................... 600 43,056
Royal Dutch Petroleum Co. (energy
sources).......................... 3,200 166,752
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
92
<PAGE> 94
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
------------------------
<S> <C> <C>
NETHERLANDS (Continued)
Unilever CVA N.V. (food & household
products)......................... 300 $ 63,267
Wolters Kluwer CVA N.V.
(broadcasting & publishing)....... 101 12,320
----------
406,246
----------
NEW ZEALAND (3.0%)
Brierley Investments Ltd.
(multi-industry).................. 129,700 126,578
Carter Holt Harvey Ltd. (forest
products & paper)................. 79,100 204,248
Fletcher Challenge Building
(building materials &
components)....................... 16,500 49,539
Fletcher Challenge Energy (energy
sources).......................... 16,700 50,366
Fletcher Challenge Forest (forest
products & paper)................. 2,716 3,939
Fletcher Challenge Paper (forest
products & paper)................. 34,700 83,956
Telecom Corp. of New Zealand Ltd.
(telecommunications).............. 74,600 379,189
----------
897,815
----------
NORWAY (1.4%)
Bergesen d.y. ASA Class A
(transportation-shipping)......... 2,100 49,769
Bergesen d.y. ASA Class B
(transportation-shipping)......... 500 11,816
Dyno Industrier ASA (chemicals).... 500 12,908
Hafslund ASA Class A (energy
sources).......................... 1,000 6,010
Hafslund ASA Class B (energy
sources).......................... 600 3,262
Kvaerner ASA Class B (machinery &
engineering)...................... 400 22,402
Norsk Hydro ASA (energy sources)... 3,700 201,658
Norske Skogindustrier ASA Class A
(forest products & paper)......... 900 31,226
Nycomed ASA Class A (health &
personal care).................... 1,000 14,753
Nycomed ASA Class B (health &
personal care).................... 600 8,565
Orkla ASA Class A
(multi-industry).................. 900 66,386
----------
428,755
----------
SINGAPORE (2.0%)
City Developments, Ltd. (real
estate)........................... 6,000 58,747
DBS Land, Ltd. (real estate)....... 9,000 28,451
Development Bank of Singapore, Ltd.
Foreign Registered (banking)...... 4,000 50,355
Fraser & Neave, Ltd. (beverages &
tobacco).......................... 4,000 28,534
Keppel Corp., Ltd. (machinery &
engineering)...................... 6,250 27,626
Oversea-Chinese Banking Corp., Ltd.
Foreign Registered (banking)...... 6,000 62,104
Singapore Airlines, Ltd. Foreign
Registered
(transportation-airlines)......... 8,000 71,616
<CAPTION>
SHARES VALUE
------------------------
<S> <C> <C>
SINGAPORE (Continued)
Singapore Press Holdings, Ltd.
Foreign Registered (broadcasting &
publishing)....................... 2,400 $ 48,341
Singapore Telecommunications, Ltd.
(telecommunications).............. 85,000 156,940
United Overseas Bank, Ltd. Foreign
Registered (banking).............. 6,000 61,685
----------
594,399
----------
SPAIN (2.3%)
Acerinox, S.A. (metals-steel)...... 110 20,649
Autopistas Concesionares Espanola,
S.A. (business & public
services)......................... 7,126 96,899
Banco de Bilbao Vizcaya, S.A.
Registered (banking).............. 810 65,921
Banco de Central Hispanoamericano,
S.A. (banking).................... 680 24,920
Banco de Santander, S.A.
(banking)......................... 1,860 57,414
Corporacion Bancaria de Espana,
S.A. (banking).................... 410 22,998
Corporacion Mapfre, S.A.
(insurance)....................... 220 11,727
Empresa Nacional de Electricidad,
S.A. (utilities-electrical &
gas).............................. 820 68,965
Fomento de Construcciones y
Contratas, S.A. (construction &
housing).......................... 460 58,767
Gas Natural SDG, S.A.
(utilities-electrical & gas)...... 330 72,224
Iberdrola, S.A.
(utilities-electrical & gas)...... 2,430 30,730
Repsol, S.A. (energy sources)...... 1,080 45,746
Telefonica de Espana, S.A.
(telecommunications).............. 3,600 104,269
----------
681,229
----------
SWITZERLAND (6.5%)
Credit Suisse Group Registered
(banking)......................... 1,300 167,198
Nestle S.A. Registered (food &
household products)............... 400 528,450
Novartis S.A. Registered (health &
personal care).................... 300 480,297
Schweizerische Bankverein
Registered (banking) (a).......... 700 187,502
Schweizerische Rueckversicherungs
Gesellschaft Registered
(insurance)....................... 100 141,647
UBS-Union Bank of Switzerland
(banking)......................... 200 229,105
Zurich Versicherungs Gesellschaft
Registered (insurance)............ 500 199,266
----------
1,933,465
----------
UNITED KINGDOM (9.1%)
Abbey National PLC (banking)....... 7,790 106,312
Barclays PLC (banking)............. 6,765 134,207
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
93
<PAGE> 95
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
------------------------
<S> <C> <C>
UNITED KINGDOM (Continued)
Bass PLC (beverages & tobacco)..... 1,680 $ 20,495
B.A.T. Industries PLC (beverages &
tobacco).......................... 6,671 59,676
BG PLC (energy sources)............ 11,990 44,100
BOC Group PLC (chemicals).......... 1,223 21,270
Boots Co. PLC (merchandising)...... 1,760 20,607
British Airways PLC
(transportation-airlines)......... 1,498 17,065
British Petroleum Co. PLC (energy
sources).......................... 18,274 227,036
British Telecommunications PLC
(telecommunications).............. 11,110 82,467
BTR PLC (multi-industry)........... 16,831 57,564
Cable & Wireless PLC
(telecommunications).............. 9,093 83,613
Centrica PLC (energy sources)...... 11,990 14,617
Commercial Union PLC (insurance)... 1,803 18,950
EMI Group PLC (recreation & other
consumer goods)................... 990 17,754
Energy Group PLC (energy
sources).......................... 3,239 34,554
General Electric Co. PLC
(electrical & electronics)........ 8,700 51,981
GKN PLC (machinery &
engineering)...................... 657 11,312
Glaxo Wellcome PLC (health &
personal care).................... 11,369 234,626
Granada Group PLC (leisure &
tourism).......................... 5,010 65,871
Grand Metropolitan PLC
(multi-industry).................. 9,955 96,344
Great Universal Stores PLC (The)
(merchandising)................... 12,200 123,451
Guinness PLC (beverages &
tobacco).......................... 15,670 153,348
Hanson PLC (multi-industry)........ 4,049 20,115
HSBC Holdings PLC (financial
services)......................... 2,450 75,373
Imperial Chemical Industries PLC
(chemicals)....................... 830 11,541
Imperial Tobacco Group PLC
(beverages & tobacco)............. 3,239 20,835
Kingfisher PLC (merchandising)..... 1,111 12,611
Lloyds TSB Group PLC (banking)..... 12,654 129,730
Marks & Spencer PLC
(merchandising)................... 10,352 85,800
MEPC PLC (real estate)............. 1,050 8,615
National Power PLC
(utilities-electrical & gas)...... 8,580 74,540
Peninsular & Oriental Steam
Navigation Co. Deferred Stock
(The) (transportation-shipping)... 4,355 43,488
<CAPTION>
SHARES VALUE
------------------------
<S> <C> <C>
UNITED KINGDOM (Continued)
Prudential Corp. PLC (insurance)... 9,120 $ 88,263
Rank Group PLC (leisure &
tourism).......................... 5,210 32,993
Redland PLC (building materials &
components)....................... 1,616 9,158
Reed International PLC
(broadcasting & publishing)....... 10,820 104,805
Reuters Holdings PLC (broadcasting
& publishing)..................... 5,820 61,314
Rio Tinto PLC Registered (metals-
nonferrous)....................... 4,143 72,158
RMC Group PLC (building materials &
components)....................... 700 11,365
Sainsbury (J.) PLC
(merchandising)................... 4,930 29,907
Scottish Power PLC (utilities-
electrical & gas)................. 7,100 46,203
Thorn PLC (appliances & household
durables)......................... 990 2,834
Unilever PLC (food & household
products)......................... 2,820 80,796
Vodafone Group PLC
(multi-industry).................. 3,995 19,448
----------
2,739,112
----------
Total Common Stocks
(Cost $24,708,059)................ 27,055,162
----------
PREFERRED STOCK (0.1%)
AUSTRIA (0.1%)
Creditanstalt-Bankverein Vorzug AG
(banking)......................... 600 24,125
----------
Total Preferred Stock
(Cost $35,245).................... 24,125
----------
WARRANTS (0.0%) (B)
FRANCE (0.0%) (b)
Compagnie Generale des Eaux, S.A.
Call Warrants
Strike price FF 900
Expire 5/2/01
(business & public services)
(a)............................... 1,337 802
----------
Total Warrants..................... 802
----------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
94
<PAGE> 96
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
OPTIONS (0.3%)
PRINCIPAL
AMOUNT VALUE
------------------------
<S> <C> <C>
UNITED STATES (0.3%)
U.S. Dollar Call/Deutsche Mark Put
Strike price DM 1.695
Expire 8/25/97.................... $2,655,000 $ 76,939
Strike price DM 1.745
Expire 9/15/97.................... 715,000 9,747
-----------
Total Options
(Cost $48,405).................... 86,686
-----------
SHORT-TERM
INVESTMENT (0.9%)
COMMERCIAL PAPER (0.9%)
UNITED STATES (0.9%)
Merrill Lynch & Co. Inc.
6.22%, due 7/1/97................. 270,000 270,000
-----------
Total Short-Term Investment
(Cost $270,000)................... 270,000
-----------
Total Investments
(Cost $25,061,709) (d)............ 91.5% 27,436,775(e)
Cash and Other Assets,
Less Liabilities.................. 8.5 2,552,528
--------- -----------
Net Assets......................... 100.0% $29,989,303
========= ===========
</TABLE>
- ------------
(a) Non-income producing securities.
(b) Less than one tenth of a percent.
(c) Segregated as collateral for options and forward foreign
currency contracts.
(d) The cost for Federal income tax purposes is $25,073,145.
(e) At June 30, 1997 net unrealized appreciation for securities was $2,363,630,
based on cost for Federal income tax purposes. This consisted of aggregate
gross unrealized appreciation for all investments on which there was an
excess of market value over cost of $3,701,413 and aggregate gross
unrealized depreciation for all investments on which there was an excess
of cost over market value of $1,337,783.
(f) The following abbreviations are used in the above portfolio:
DM--Deutsche Mark
FF --French Franc
The table below sets forth the diversification of
International Equity Portfolio investments by industry.
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
VALUE PERCENT+
-----------------------
<S> <C> <C>
Aerospace & Military
Technology.................. $ 78,576 0.3%
Appliances & Household
Durables.................... 660,241 2.2
Automobiles................... 1,089,797 3.6
Banking....................... 4,556,725 15.2
Beverages & Tobacco........... 715,556 2.4
Broadcasting & Publishing..... 384,323 1.3
Building Materials &
Components.................. 512,779 1.7
Business & Public Services.... 687,134 2.3
Chemicals..................... 707,340 2.4
Construction & Housing........ 362,831 1.2
Data Processing &
Reproduction................ 161,339 0.5
Electrical & Electronics...... 713,226 2.4
Electronic Components &
Instruments................. 76,903 0.3
Energy Sources................ 2,440,352 8.1
Financial Services............ 492,216 1.6
Food & Household Products..... 906,611 3.0
Forest Products & Paper....... 463,637 1.5
Health & Personal Care........ 1,390,118 4.6
Industrial Components......... 555,101 1.9
Insurance..................... 1,501,470 5.0
Leisure & Tourism............. 125,781 0.4
Machinery & Engineering....... 711,543 2.4
Merchandising................. 790,087 2.6
Metals-Nonferrous............. 332,147 1.1
Metals-Steel.................. 235,999 0.8
Miscellaneous-Materials &
Commodities................. 45,398 0.2
Miscellaneous-Materials &
Components.................. 488,161 1.6
Multi-Industry................ 1,254,831 4.2
Real Estate................... 344,546 1.2
Recreation & Other Consumer
Goods....................... 340,048 1.1
Telecommunications............ 1,776,691 5.9
Textile & Apparel............. 66,411 0.2
Tire & Rubber................. 75,318 0.3
Transportation-Airlines....... 204,579 0.7
Transportation-Road & Rail.... 259,155 0.9
Transportation-Shipping....... 124,517 0.4
Utilities-Electrical & Gas.... 1,346,233 4.5
Wholesale & International
Trade....................... 372,369 1.2
----------- -----
27,350,089 91.2
Cash and Other Assets, Less
Liabilities................. 2,639,214 8.8
-----
-----------
Net Assets.................... $29,989,303 100.0%
=========== =====
</TABLE>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
96
<PAGE> 97
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $25,061,709)........ $ 27,436,775
Cash denominated in foreign currencies
(identified cost $1,423,788)......... 1,430,205
Cash................................... 101,177
Receivables:
Investment securities sold........... 2,846,014
Dividends and interest............... 132,666
Fund shares sold..................... 62,661
NYLIAC............................... 1,503
Unrealized net appreciation on forward
foreign currency contracts........... 131,933
------------
Total assets..................... 32,142,934
------------
LIABILITIES:
Payables:
Investment securities purchased...... 2,079,066
Adviser.............................. 14,147
Custodian............................ 10,797
Fund shares redeemed................. 3,388
Administrator........................ 2,433
Directors............................ 66
Accrued expenses....................... 43,734
------------
Total liabilities................ 2,153,631
------------
Net assets applicable to outstanding
shares............................... $ 29,989,303
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 100 million shares
authorized........................... $ 25,901
Additional paid-in capital............. 26,621,351
Accumulated distribution in excess of
net investment income................ (772,837)
Accumulated distribution in excess of
net
realized gain on investments......... (419,524)
Accumulated undistributed net realized
gain on foreign currency
transactions......................... 2,033,420
Net unrealized appreciation on
investments.......................... 2,375,066
Net unrealized appreciation on
translation of assets and liabilities
in foreign currencies and forward
foreign currency contracts........... 125,926
------------
Net assets applicable to outstanding
shares............................... $ 29,989,303
============
Shares of capital stock outstanding.... 2,590,127
============
Net asset value per share
outstanding.......................... $ 11.58
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a)........................ $ 356,150
Interest............................. 71,922
------------
Total income..................... 428,072
------------
Expenses:
Advisory............................. 98,621
Administration....................... 32,874
Professional......................... 19,368
Custodian............................ 17,379
Shareholder communication............ 12,747
Portfolio pricing.................... 9,923
Directors............................ 708
Miscellaneous........................ 833
------------
Total expenses before
reimbursement.................. 192,453
Expense reimbursement from
Administrator........................ (33,016)
------------
Net expenses..................... 159,437
------------
Net investment income.................. 268,635
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain (loss) from:
Security transactions................ (218,823)
Foreign currency transactions........ 2,033,420
------------
Net realized gain on investments and
foreign currency transactions........ 1,814,597
------------
Net change in unrealized appreciation
on investments:
Security transactions................ 1,911,608
Translation of assets and liabilities
in foreign currencies and forward
foreign currency contracts......... (1,069,665)
------------
Net unrealized gain on investments and
foreign currencies................... 841,943
------------
Net realized and unrealized gain on
investments and foreign currency
transactions......................... 2,656,540
------------
Net increase in net assets resulting
from operations...................... $ 2,925,175
============
</TABLE>
- ------------
(a) Dividends recorded net of foreign withholding taxes in the amount of
$52,973.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
96
<PAGE> 98
MAINSTAY VP SERIES FUND, INC.
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited)
and the year ended December 31, 1996
<TABLE>
<CAPTION>
1997 1996
----------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income......................................................... $ 268,635 $ 249,190
Net realized loss on investments.............................................. (218,823) (100,619)
Net realized gain on foreign currency transactions............................ 2,033,420 858,716
Net change in unrealized appreciation on investments.......................... 1,911,608 319,371
Net change in unrealized appreciation on translation of assets and liabilities
in foreign currencies and forward foreign currency contracts................. (1,069,665) 1,159,064
----------- -----------
Net increase in net assets resulting from operations.......................... 2,925,175 2,485,722
----------- -----------
Dividends and distributions to shareholders:
From net investment income.................................................... (523,000) (1,745,204)
From net realized gain on investments and foreign currency transactions....... -- (44,794)
----------- -----------
Total dividends and distributions to shareholders........................... (523,000) (1,789,998)
----------- -----------
Capital share transactions:
Net proceeds from sale of shares.............................................. 5,759,096 18,900,627
Net asset value of shares issued to shareholders in reinvestment of dividends
and distributions............................................................ 523,000 1,789,998
----------- -----------
6,282,096 20,690,625
Cost of shares redeemed....................................................... (13,204,188) (1,507,839)
----------- -----------
Increase (decrease) in net assets derived from capital share transactions..... (6,922,092) 19,182,786
----------- -----------
Net increase (decrease) in net assets........................................... (4,519,917) 19,878,510
NET ASSETS:
Beginning of period............................................................. 34,509,220 14,630,710
----------- -----------
End of period................................................................... $29,989,303 $34,509,220
=========== ===========
Accumulated distribution in excess of net investment income..................... $ (772,837) $ (518,472)
=========== ===========
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
MAY 1,
SIX MONTHS YEAR 1995 (a)
ENDED ENDED THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31,
1997* 1996 1995
-------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.............................. $ 10.65 $ 10.20 $ 10.00
------- ------- -------
Net investment income............................................... 0.08 0.44 0.64
Net realized and unrealized gain on investments..................... 0.68 0.06 0.01
Net realized and unrealized gain on foreign currency transactions... 0.39 0.56 0.05
------- ------- -------
Total from investment operations.................................... 1.15 1.06 0.70
------- ------- -------
Less dividends and distributions:
From net investment income........................................ (0.22) (0.60) (0.06)
From net realized gain on investments and foreign currency
transactions.................................................... -- (0.01) (0.44)
------- ------- -------
Total dividends and distributions................................... (0.22) (0.61) (0.50)
------- ------- -------
Net asset value at end of period.................................... $ 11.58 $ 10.65 $ 10.20
======= ======= =======
Total investment return (b)......................................... 10.80% 10.54% 6.96%
Ratios (to average net assets)/Supplemental Data:
Net investment income............................................. 1.63%+ 1.01% 1.07%+
Net expenses...................................................... 0.97%+ 0.97% 0.97%+
Expenses (before reimbursement)................................... 1.17%+ 1.51% 2.51%+
Portfolio turnover rate............................................. 32% 16% 14%
Average commission rate paid........................................ $ 0.0436 $ 0.0364 (c)
Net assets at end of period (in 000's).............................. $ 29,989 $ 34,509 $ 14,631
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Total return is not annualized.
(c) Disclosure of amount required for fiscal years beginning on or after
September 1, 1995.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
97
<PAGE> 99
TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
LONG-TERM BONDS (37.0%)+
ASSET-BACKED SECURITIES (5.2%)
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
AIRPLANE LEASES (0.6%)
Aircraft Lease Portfolio
Securitization Ltd.
Series 1996-1 Class CX
7.038%, due 6/15/06
(call date 7/15/02) (e)......... $ 1,196,703 $ 1,196,703
Airplanes Pass-Through Trust
Series 1 Class C
8.15%, due 3/15/19
(call date 3/15/01)............. 925,000 962,943
------------
2,159,646
------------
AUTO LOANS (0.3%)
Advanta Automobile Receivables
Trust
Series 1997-1 Class A2
6.75%, due 12/15/03............. 970,000 974,549
------------
CONSUMER LOANS (1.1%)
Green Tree Recreational,
Equipment &
Consumer Trust
Series 1997-B Class A1
6.55%, due 7/15/28.............. 4,470,000 4,459,496
------------
CREDIT CARD RECEIVABLES (1.7%)
Banc One Credit Card Master Trust
Series 1995-A Class A
6.15%, due 7/15/02.............. 1,500,000 1,487,280
Series 1994-C Class A
7.80%, due 12/15/00............. 4,500,000 4,603,185
Standard Credit Card Master Trust
Series 1995-4 Class A
5.913%, due 2/15/00 (e)......... 725,000 725,116
------------
6,815,581
------------
EQUIPMENT LOANS (0.6%)
Case Equipment Loan Trust
Series 1995-B Class A3
6.15%, due 9/15/02.............. 901,321 903,043
Newcourt Receivables Asset Trust
Series 1996-3 Class A
6.24%, due 12/20/04............. 790,068 787,658
Series 1996-2 Class A
6.87%, due 6/20/04.............. 838,409 843,255
------------
2,533,956
------------
MANUFACTURED HOUSING LOANS (0.9%)
Green Tree Financial Corp.
Series 1997-4 Class A7
7.36%, due 2/15/29.............. 1,375,000 1,361,250
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
MANUFACTURED HOUSING LOANS
(Continued)
Mid-State Trust VI
Class A-4
7.79%, due 7/1/35............... $ 2,060,000 $ 2,076,418
------------
3,437,668
------------
Total Asset-Backed Securities
(Cost $20,365,280).............. 20,380,896
------------
BRADY BOND (0.4%)
EURO BOND (0.4%)
Poland-Global Registered Series
RSTA
3.25%, due 10/27/24
(call date 10/27/97) (e)........ 2,400,000 1,524,000
------------
Total Brady Bond
(Cost $1,382,504)............... 1,524,000
------------
CORPORATE BONDS (4.1%)
AIRLINES (0.8%)
American Airlines Pass-Through
Trusts
Series 1994-A4
9.78%, due 11/26/11............. 860,000 980,555
Series 1991-A2
10.18%, due 1/2/13
(call date 7/2/07).............. 1,710,000 2,080,745
------------
3,061,300
------------
BANKS (1.2%)
Capital One Bank
Medium-Term Senior Bank Notes
7.15%, due 9/15/06
(put date 9/15/99).............. 1,750,000 1,769,162
Regions Financial Corp.
7.75%, due 9/15/24
(put date 7/15/04).............. 1,125,000 1,195,819
Sakura Capital Funding Cayman
Ltd. Guaranteed
Medium-Term Notes
6.763%, due 8/29/49
(call date 2/27/02) (b)(e)...... 650,000 650,000
Southtrust Bank
Birmingham, Alabama N A
Medium-Term Notes
7.69%, due 5/15/25
(put date 5/15/05).............. 1,000,000 1,056,320
------------
4,671,301
------------
BROKERAGE (0.1%)
Lehman Brothers Holdings Inc.
7.375%, due 5/15/07
(put date 5/15/00).............. 600,000 615,036
------------
</TABLE>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
98
<PAGE> 100
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
CORPORATE BONDS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
DRUGS (0.1%)
Merck & Co., Inc.
Medium-Term Notes Series B
5.76%, due 5/3/37
(put date 5/3/99)............... $ 450,000 $ 454,315
------------
FINANCE (1.0%)
Aetna Services Inc. Guaranteed
6.97%, due 8/15/36
(put date 8/15/04).............. 850,000 855,585
American General Institutional
Capital Guaranteed
Series B
8.125%, due 3/15/46 (b)......... 695,000 699,754
Travelers Property &
Casualty Corp.
6.75%, due 9/1/99............... 1,200,000 1,208,688
TTB Finance Cayman Ltd.
Guaranteed Series REGS
6.763%, due 3/18/07
(call date 3/18/02) (e)......... 1,000,000 1,000,000
------------
3,764,027
------------
FOOD (0.1%)
RJR Nabisco, Inc.
8.50%, due 7/1/07............... 350,000 348,513
------------
MEDIA (0.4%)
Tele Communications Inc.
9.25%, due 4/15/02.............. 1,400,000 1,505,966
------------
RETAIL (0.4%)
Dayton Hudson Co.
5.895%, due 6/15/37
(put date 6/15/99).............. 1,315,000 1,313,159
Sears Roebuck Acceptance Corp.
6.95%, due 5/15/02.............. 205,000 206,486
------------
1,519,645
------------
Total Corporate Bonds
(Cost $15,810,395).............. 15,940,103
------------
MORTGAGE-BACKED SECURITIES (5.1%)
COMMERCIAL MORTGAGE LOANS
(COLLATERALIZED MORTGAGE
OBLIGATIONS) (1.5%)
Asset Securitization Corp.
Series 1996-MD6 Class A1B
6.88%, due 11/13/26 (d)......... 2,125,000 2,127,167
Series 1997-MD7 Class A1B
7.41%, due 1/13/30 (d).......... 1,295,000 1,329,810
Series 1997-D4 Class A1D
7.49%, due 4/14/29 (d).......... 2,175,000 2,244,165
------------
5,701,142
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
RESIDENTIAL MORTGAGE LOANS (3.6%)
Bear Stearns Mortgage Securities
Inc.
Series 1996-5 Class A2
10.00%, due 9/25/27............. $ 896,060 $ 930,854
Series 1996-4 Class AI2
10.50%, due 9/25/27............. 824,054 863,163
Financial Asset Securitization
Inc.
Series 1997-NAM2 Class FA8
10.00%, due 7/25/27............. 2,294,250 2,433,970
Norwest Asset Securities Corp.
Series 1997-10 Class A2
6.50%, due 8/25/27.............. 1,490,000 1,481,805
Residential Accredit Loans, Inc.
Series 1997-QS4 Class A4
10.00%, due 5/25/27............. 928,937 983,726
Series 1997-QS5 Class A3
10.00%, due 6/25/27............. 1,560,000 1,647,500
Series 1996-QS4 Class AI2
11.00%, due 8/25/26............. 832,909 870,648
Series 1997-QS1 Class A6
11.00%, due 2/25/27............. 1,474,218 1,608,107
Residential Asset Securitization
Trust
Series 1997-A3 Class A7
10.00%, due 5/25/27 (d)......... 1,164,299 1,226,834
Series 1997-A5 Class A4
10.00%, due 7/25/27............. 931,551 980,458
Structured Asset Securities Corp.
Series 1996-2 Class A1
7.00%, due 8/25/26.............. 975,000 980,636
------------
14,007,701
------------
Total Mortgage-Backed Securities
(Cost $19,626,957).............. 19,708,843
------------
U.S. GOVERNMENT &
FEDERAL AGENCIES (19.3%)
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (MORTGAGE PASS-
THROUGH SECURITIES) (4.2%)
6.52%, due 12/1/03 (d).......... 945,682 932,603
6.525%, due 12/1/03 (d)......... 895,913 886,398
6.595%, due 1/1/04 (d).......... 969,418 959,559
7.50%, due 7/14/27 TBA (c)...... 13,620,000 13,659,226
------------
16,437,786
------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION I
(MORTGAGE PASS-THROUGH
SECURITIES) (3.6%)
6.50%, due 12/15/23 (d)......... 4,182,750 4,033,761
7.00%, due 12/15/23 (d)......... 5,772,813 5,699,729
7.50%, due 7/25/27 TBA (c)...... 2,000,000 2,015,640
9.50%, due 12/15/17-5/15/22 (d). 2,221,900 2,413,139
------------
14,162,269
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
99
<PAGE> 101
TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
U.S. GOVERNMENT &
FEDERAL AGENCIES (CONTINUED)
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION II
(MORTGAGE PASS-THROUGH
SECURITIES) (2.2%)
6.875%, due 10/20/22 ARM
(d)(h).......................... $ 2,315,176 $ 2,383,196
7.125%, due 9/20/23-8/20/25 ARM
(d)(h).......................... 5,931,671 6,094,050
------------
8,477,246
------------
UNITED STATES TREASURY
BONDS (4.0%)
6.625%, due 2/15/27 (f)......... 8,885,000 8,693,439
8.875%, due 8/15/17 (f)......... 3,415,000 4,159,368
12.00%, due 8/15/13 (f)......... 1,960,000 2,759,014
------------
15,611,821
------------
UNITED STATES TREASURY
NOTES (5.3%)
5.625%, due 11/30/00 (f)........ 5,195,000 5,088,658
6.25%, due 2/28/02 (f).......... 9,895,000 9,839,291
7.75%, due 11/30/99............. 4,586,000 4,745,776
7.875%, due 11/15/04............ 755,000 814,811
------------
20,488,536
------------
Total U.S. Government &
Federal Agencies
(Cost $74,464,898).............. 75,177,658
------------
YANKEE BONDS (2.9%)
BANKS (0.8%)
Dao Heng Bank Ltd.
7.75%, due 1/24/07 (b).......... 1,675,000 1,679,338
Export Import Bank Korea
6.50%, due 11/15/06
(put date 11/15/03)............. 1,460,000 1,413,411
------------
3,092,749
------------
FINANCE (0.7%)
Guangdong International Trust &
Investment Corp.
8.75%, due 10/24/16 (b)......... 1,700,000 1,769,802
Hero Asian BVI Ltd.
9.11%, due 10/15/01 (b)......... 551,298 572,958
Wharf Capital International 1994
Ltd.
Guaranteed
8.875%, due 11/1/04............. 575,000 618,183
------------
2,960,943
------------
FOREIGN GOVERNMENTS (0.5%)
Republic of Columbia
8.375%, due 2/15/27............. 945,000 915,592
Republic of South Africa
8.50%, due 6/23/17.............. 1,200,000 1,198,008
------------
2,113,600
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
INSURANCE (0.2%)
Zurich Capital Trust I Guaranteed
8.376%, due 6/1/37
(call date 6/1/07) (b).......... $ 660,000 $ 683,318
------------
TELEPHONE UTILITIES (0.3%)
SK Telecom Co. Ltd.
7.75%, due 4/29/04.............. 1,175,000 1,195,903
------------
UTILITIES (0.4%)
Hydro-Quebec
Series IO
8.05%, due 7/7/24
(put date 7/7/06)............... 1,300,000 1,414,530
------------
Total Yankee Bonds
(Cost $11,278,151).............. 11,461,043
------------
Total Long-Term Bonds
(Cost $142,928,185)............. 144,192,543
------------
COMMON STOCKS (60.7%)
<CAPTION>
SHARES
-----------
<S> <C> <C>
AUTO PARTS (0.6%)
Lear Corp. (a)................... 52,400 2,325,250
------------
BANKS (2.7%)
NationsBank Corp. ............... 53,200 3,431,400
Washington Mutual Inc. .......... 100,000 5,975,000
Wells Fargo & Co. ............... 4,000 1,078,000
------------
10,484,400
------------
BROKERAGE (0.1%)
Schwab (Charles) Corp. .......... 8,600 349,913
------------
BUILDINGS (0.4%)
Oakwood Homes Corp. ............. 68,400 1,641,600
------------
COMMERCIAL SERVICES (0.8%)
Peapod, Inc. .................... 5,000 56,250
Service Corp. International...... 89,000 2,925,875
------------
2,982,125
------------
COMPUTERS & OFFICE EQUIPMENT
(3.7%)
CompUSA, Inc. (a)................ 30,000 645,000
Danka Business Systems PLC ADR
(g)............................. 60,300 2,464,763
Hewlett-Packard Co. ............. 52,400 2,934,400
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
100
<PAGE> 102
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
---------------------------
<S> <C> <C>
COMPUTERS & OFFICE EQUIPMENT
(Continued)
IKON Office Solutions, Inc. ..... 62,700 $ 1,563,581
Seagate Technology (a)........... 69,600 2,449,050
Sun Microsystems (a)............. 119,000 4,429,037
------------
14,485,831
------------
CONSUMER DURABLES (0.9%)
Harley-Davidson, Inc............. 73,500 3,523,406
------------
CONSUMER FINANCIAL
SERVICES (1.0%)
First Data Corp.................. 89,000 3,910,438
------------
CONSUMER SERVICES (0.5%)
CUC International Inc. (a)....... 72,150 1,862,372
------------
DRUGS (6.0%)
Amgen Inc. (a)................... 73,100 4,248,938
Elan Corp. PLC ADR (a)(g)........ 72,400 3,276,100
Lilly (Eli) & Co. ............... 49,000 5,356,312
Merck & Co., Inc. ............... 39,000 4,036,500
Schering-Plough Corp. ........... 91,600 4,385,350
Teva Pharmaceutical Industries
Ltd. ADR (g).................... 31,500 2,039,625
------------
23,342,825
------------
ELECTRONICS (0.4%)
Adaptec, Inc. (a)................ 43,300 1,504,675
------------
FINANCE (6.2%)
Equifax, Inc. ................... 70,100 2,606,844
Fannie Mae....................... 59,800 2,608,775
Green Tree Financial Corp. ...... 136,000 4,845,000
Household International, Inc. ... 39,900 4,685,756
MGIC Investment Corp. ........... 87,400 4,189,738
Travelers Group Inc. ............ 82,400 5,196,350
------------
24,132,463
------------
FINANCIAL SERVICES (2.0%)
Associates First Capital Corp.
Class A ........................ 49,300 2,736,150
SunAmerica Inc. ................. 108,500 5,289,375
------------
8,025,525
------------
HEALTH CARE (3.3%)
Cardinal Health, Inc. ........... 36,000 2,061,000
Columbia/HCA Healthcare Corp. ... 71,803 2,822,755
PacifiCare Health Systems, Inc.
Class B (a)..................... 15,600 996,450
Sunrise Assisted Living, Inc.
(a) ............................ 30,200 1,057,000
Tenet Healthcare Corp. (a)....... 92,475 2,733,792
United Healthcare Corp. ......... 60,400 3,140,800
------------
12,811,797
------------
<CAPTION>
SHARES VALUE
---------------------------
<S> <C> <C>
HOSPITAL MANAGEMENT & SERVICES
(1.0%)
HEALTHSOUTH Corp. (a)............ 156,000 $ 3,890,250
------------
INDUSTRIAL (2.7%)
Illinois Tool Works Inc. ........ 48,000 2,397,000
Mattel, Inc. .................... 55,400 1,876,675
Tyco International Ltd. ......... 88,200 6,135,412
------------
10,409,087
------------
INSURANCE (1.8%)
Aetna Inc. ...................... 25,200 2,579,850
American International Group,
Inc. ........................... 33,750 5,041,406
------------
7,621,256
------------
LEISURE (0.6%)
Mirage Resorts Inc. (a).......... 86,400 2,181,600
------------
MATERIALS/PROCESSING (0.8%)
Monsanto Co. .................... 73,800 3,178,013
------------
MEDICAL EQUIPMENT (4.4%)
Guidant Corp. ................... 60,000 5,100,000
Heartport, Inc. (a).............. 27,000 475,875
Johnson & Johnson................ 66,552 4,284,285
Medtronic, Inc. ................. 58,700 4,754,700
Waters Corp. (a)................. 68,800 2,468,200
------------
17,083,060
------------
OIL & GAS EXPLORATION (0.6%)
Abacan Resource Corp. (a)........ 85,000 270,937
Triton Energy Ltd. (a)........... 44,300 2,029,494
------------
2,300,431
------------
OIL SERVICES (0.4%)
Tidewater Inc. .................. 32,800 1,443,200
------------
POLLUTION & RELATED (0.3%)
USA Waste Services Inc. (a)...... 34,000 1,313,250
------------
RESTAURANTS &
LODGING (1.5%)
HFS Inc. (a)..................... 101,100 5,863,800
------------
RETAIL (5.4%)
Bed, Bath & Beyond, Inc. (a)..... 42,000 1,275,750
Home Depot, Inc. (The)........... 42,000 2,895,375
Kohl's Corp. (a)................. 66,200 3,504,463
Kroger Co. (a)................... 93,600 2,714,400
Lowe's Cos., Inc. ............... 72,000 2,673,000
Nike, Inc. Class B............... 38,800 2,264,950
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
101
<PAGE> 103
TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
---------------------------
<S> <C> <C>
RETAIL (Continued)
Safeway Inc. (a)................. 84,300 $ 3,888,337
Staples, Inc. (a)................ 75,500 1,755,375
------------
20,971,650
------------
SOFTWARE (3.7%)
Computer Associates
International, Inc. ............ 113,350 6,312,178
Compuware Corp. (a).............. 68,400 3,266,100
Microsoft Corp. (a).............. 37,600 4,751,700
------------
14,329,978
------------
TECHNOLOGY (5.6%)
Cisco Systems, Inc. (a).......... 55,100 3,698,588
Intel Corp. ..................... 39,700 5,629,956
Linear Technology Corp. ......... 36,000 1,863,000
Oracle Corp. (a)................. 102,025 5,139,509
3Com Corp. (a)................... 119,700 5,386,500
------------
21,717,553
------------
TELECOMMUNICATION SERVICES (2.4%)
Lucent Technologies Inc. ........ 64,500 4,648,031
WorldCom, Inc. (a)............... 145,432 4,653,824
------------
9,301,855
------------
TEXTILE & APPAREL (0.5%)
Nine West Group Inc. (a)......... 52,900 2,020,119
------------
TURNKEY & SOFTWARE SYSTEMS (0.4%)
Sterling Commerce, Inc. (a)...... 48,574 1,596,870
------------
Total Common Stocks
(Cost $156,733,403)............. 236,604,592
------------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENTS (6.2%)
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
COMMERCIAL PAPER (3.4%)
Ford Motor Credit Co.
6.11%, due 7/1/97............... $ 4,675,000 $ 4,675,000
Prudential Funding Corp.
5.53%, due 7/2/97............... 8,625,000 8,625,000
------------
Total Commercial Paper
(Cost $13,300,000).............. 13,300,000
------------
FEDERAL AGENCY (2.8%)
Federal Mortgage Corp.
Discount Note
5.72%, due 7/7/97............... $11,000,000 $ 10,991,750
------------
Total Federal Agency
(Cost $10,993,449).............. 10,991,750
------------
Total Short-Term Investments
(Cost $24,293,449).............. 24,291,750
------------
Total Investments
(Cost $323,955,037)(i).......... 103.9% 405,088,885(j)
Liabilities in Excess of
Cash and Other Assets........... (3.9) (15,075,017)
---------- ------------
Net Assets....................... 100.0% $390,013,868
========== ============
</TABLE>
- ------------
(a) Non-income producing securities.
(b) May be sold to institutional investors only.
(c) TBA: Securities purchased on a forward commitment basis with an approximate
principal amount and maturity date. The actual principal amount and maturity
date will be determined upon settlement.
(d) Segregated as collateral for TBA.
(e) Floating rate. Rate shown is the rate in effect at June 30, 1997.
(f) Represents securities out on loan or a portion which is out on loan.
(g) ADR--American Depository Receipt.
(h) ARM--Adjustable Rate Mortgage. Resets annually.
(i) The cost for Federal income tax purposes is $324,016,289.
(j) At June 30, 1997 net unrealized appreciation was $81,072,596, based on cost
for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $83,485,564 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $2,412,968.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
102
<PAGE> 104
MAINSTAY VP SERIES FUND, INC.
TOTAL RETURN PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $323,955,037)....... $405,088,885
Receivables:
Investment securities sold........... 25,672,612
Dividends and interest............... 1,670,261
Fund shares sold..................... 161,761
------------
Total assets..................... 432,593,519
------------
LIABILITIES:
Payables:
Investment securities purchased...... 42,245,405
Adviser.............................. 101,381
Administrator........................ 31,681
NYLIAC............................... 31,681
Custodian............................ 11,104
Directors............................ 339
Accrued expenses....................... 158,060
------------
Total liabilities................ 42,579,651
------------
Net assets applicable to outstanding
shares............................... $390,013,868
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 50 million shares
authorized........................... $ 245,652
Additional paid-in capital............. 305,533,180
Accumulated undistributed net
investment income.................... 4,547,692
Accumulated net realized loss on
investments.......................... (1,446,504)
Net unrealized appreciation on
investments.......................... 81,133,848
------------
Net assets applicable to outstanding
shares............................... $390,013,868
============
Shares of capital stock outstanding.... 24,565,202
============
Net asset value per share
outstanding.......................... $ 15.88
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a)........................ $ 509,970
Interest............................. 5,084,998
------------
Total income..................... 5,594,968
------------
Expenses:
Advisory............................. 564,465
Administration....................... 352,791
Shareholder communication............ 72,376
Professional......................... 24,188
Custodian............................ 22,821
Directors............................ 6,651
Miscellaneous........................ 3,984
------------
Total expenses................... 1,047,276
------------
Net investment income.................. 4,547,692
------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on investments....... 1,827,413
Net change in unrealized appreciation
on investments....................... 25,352,236
------------
Net realized and unrealized gain on
investments.......................... 27,179,649
------------
Net increase in net assets resulting
from operations...................... $ 31,727,341
============
</TABLE>
- ------------
(a) Dividends recorded net of foreign withholding taxes in the amount of $1,901.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
103
<PAGE> 105
TOTAL RETURN PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited)
and the year ended December 31, 1996
<TABLE>
<CAPTION>
1997 1996
----------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income......................................................... $ 4,547,692 $ 6,700,275
Net realized gain on investments.............................................. 1,827,413 925,325
Net change in unrealized appreciation on investments.......................... 25,352,236 23,203,457
------------ ------------
Net increase in net assets resulting from operations.......................... 31,727,341 30,829,057
------------ ------------
Dividends to shareholders:
From net investment income.................................................... -- (6,719,788)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.............................................. 35,078,508 114,153,151
Net asset value of shares issued to shareholders in reinvestment of
dividends.................................................................... -- 6,719,788
------------ ------------
35,078,508 120,872,939
Cost of shares redeemed....................................................... (9,689,369) (6,978,226)
------------ ------------
Increase in net assets derived from capital share transactions................ 25,389,139 113,894,713
------------ ------------
Net increase in net assets...................................................... 57,116,480 138,003,982
NET ASSETS:
Beginning of period............................................................. 332,897,388 194,893,406
------------ ------------
End of period................................................................... $390,013,868 $332,897,388
============ ============
Accumulated undistributed net investment income................................. $ 4,547,692 $ --
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
JANUARY 29,
SIX MONTHS 1993 (a)
ENDED THROUGH
JUNE 30, YEAR ENDED DECEMBER 31 DECEMBER 31,
1997* 1996 1995 1994 1993
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period.... $ 14.56 $ 13.26 $ 10.58 $ 11.32 $ 10.00
-------- -------- -------- -------- --------
Net investment income..................... 0.19 0.30 0.31 0.27 0.16
Net realized and unrealized gain (loss) on
investments............................. 1.13 1.30 2.69 (0.72) 1.34
-------- -------- -------- -------- --------
Total from investment operations.......... 1.32 1.60 3.00 (0.45) 1.50
-------- -------- -------- -------- --------
Less dividends and distributions:
From net investment income.............. -- (0.30) (0.32) (0.29) (0.16)
In excess of net realized gain on
investments........................... -- -- -- -- (0.02)
-------- -------- -------- -------- --------
Total dividends and distributions......... -- (0.30) (0.32) (0.29) (0.18)
-------- -------- -------- -------- --------
Net asset value at end of period.......... $ 15.88 $ 14.56 $ 13.26 $ 10.58 $ 11.32
======== ======== ======== ======== ========
Total investment return (b)............... 9.03% 12.08% 28.33% (3.99%) 15.04%
Ratios (to average net
assets)/Supplemental Data:
Net investment income................... 2.58%+ 2.52% 3.06% 3.50% 3.48%+
Net expenses............................ 0.59%+ 0.69% 0.69% 0.69% 0.69%+
Expenses (before reimbursement)......... 0.59%+ 0.71% 0.81% 0.88% 1.07%+
Portfolio turnover rate................... 68% 175% 253% 297% 197%
Average commission rate paid.............. $ 0.0567 $ 0.0599 (c) (c) (c)
Net assets at end of period (in 000's).... $ 390,014 $ 332,897 $ 194,893 $ 122,333 $ 55,548
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Total return is not annualized.
(c) Disclosure of amount required for fiscal years beginning on or after
September 1, 1995.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
104
<PAGE> 106
MAINSTAY VP SERIES FUND, INC.
VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (91.6%)+
SHARES VALUE
--------------------------
<S> <C> <C>
AEROSPACE/DEFENSE ELECTRONICS
(0.6%)
Litton Industries, Inc. (a)....... 23,700 $ 1,145,006
------------
AIRLINES (1.3%)
AMR Corp. (a)..................... 25,300 2,340,250
------------
AUTO MANUFACTURING (2.1%)
Ford Motor Co..................... 64,900 2,449,975
General Motors Corp............... 26,000 1,447,875
------------
3,897,850
------------
AUTO PARTS (2.9%)
Echlin Inc........................ 89,100 3,207,600
Mark IV Industries, Inc........... 89,565 2,149,560
------------
5,357,160
------------
BANKS (6.8%)
Banc One Corp..................... 89,300 4,325,469
Bankers Trust New York Corp....... 13,500 1,174,500
Chase Manhattan Corp.............. 16,000 1,553,000
NationsBank Corp.................. 32,334 2,085,543
PNC Bank Corp..................... 38,000 1,581,750
Wells Fargo & Co.................. 6,400 1,724,800
------------
12,445,062
------------
CAPITAL GOODS (2.1%)
Case Corp......................... 7,000 482,125
Xerox Corp........................ 42,100 3,320,638
------------
3,802,763
------------
CHEMICALS (6.2%)
Agrium Inc........................ 124,500 1,431,750
Dow Chemical Co................... 20,200 1,759,925
Geon Co. (The).................... 49,600 1,004,400
Georgia Gulf Corp................. 66,800 1,941,375
IMC Global Inc.................... 64,600 2,261,000
Imperial Chemical Industries PLC
ADR (b).......................... 21,700 1,234,187
PPG Industries, Inc............... 28,500 1,656,563
------------
11,289,200
------------
COMPUTERS & OFFICE EQUIPMENT
(3.7%)
Ceridian Corp. (a)................ 48,000 2,028,000
Lexmark International Group, Inc.
Class A (a)...................... 99,000 3,007,125
Storage Technology Corp. (a)...... 40,700 1,811,150
------------
6,846,275
------------
<CAPTION>
SHARES VALUE
----------------------
<S> <C> <C>
CONGLOMERATES (3.2%)
American Standard Cos. Inc. (a)... 35,900 $ 1,606,525
Tenneco Inc....................... 95,300 4,306,369
------------
5,912,894
------------
CONTAINERS (1.4%)
Owens-Illinois Inc. (a)........... 84,900 2,631,900
------------
DOMESTIC OIL (4.5%)
Amerada Hess Corp................. 32,000 1,778,000
Louisiana Land & Exploration Co.
(The)............................ 32,900 1,879,413
Noble Affiliates, Inc............. 23,200 897,550
Parker & Parsley Petroleum Co..... 13,400 474,025
Unocal Corp....................... 84,400 3,275,775
------------
8,304,763
------------
ELECTRICAL EQUIPMENT (1.1%)
UCAR International Inc. (a)....... 45,000 2,058,750
------------
ENERGY (3.3%)
Coastal Corp. (The)............... 39,400 2,095,587
MAPCO Inc......................... 68,600 2,160,900
Seagull Energy Corp. (a).......... 98,600 1,725,500
------------
5,981,987
------------
FINANCE (2.8%)
Transamerica Corp................. 30,000 2,806,875
Travelers Group Inc............... 38,066 2,400,537
------------
5,207,412
------------
FOOD (1.0%)
IBP, Inc.......................... 77,800 1,808,850
------------
FOOD, BEVERAGES & TOBACCO (4.1%)
Philip Morris Cos................. 46,200 2,050,125
RJR Nabisco Holdings Corp......... 92,500 3,052,500
UST Inc........................... 84,000 2,331,000
------------
7,433,625
------------
HEALTH CARE (7.4%)
Aetna Inc......................... 30,700 3,142,912
Allegiance Corp................... 87,600 2,387,100
Columbia/HCA Healthcare Corp...... 117,000 4,599,563
Foundation Health Systems, Inc.
(a).............................. 109,500 3,319,219
------------
13,448,794
------------
HOSPITAL MANAGEMENT (1.5%)
Tenet Healthcare Corp. (a)........ 90,000 2,660,625
------------
</TABLE>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
105
<PAGE> 107
VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
--------------------------
<S> <C> <C>
HOUSEHOLD PRODUCTS (1.8%)
Premark International, Inc........ 62,300 $ 1,666,525
Tupperware Corp................... 46,000 1,679,000
------------
3,345,525
------------
INSURANCE (5.1%)
Allstate Corp. (The).............. 34,000 2,482,000
American International Group,
Inc.............................. 18,700 2,793,312
Chubb Corp........................ 33,600 2,247,000
Equitable Cos., Inc. (The)........ 54,300 1,805,475
------------
9,327,787
------------
INTERNATIONAL OIL (2.3%)
British Petroleum Co., PLC ADR
(b).............................. 30,000 2,246,250
Occidental Petroleum Corp......... 77,600 1,944,850
------------
4,191,100
------------
PAPER & FOREST PRODUCTS (3.6%)
Bowater Inc....................... 54,000 2,497,500
Chesapeake Corp................... 20,200 681,750
Georgia-Pacific Corp.............. 29,900 2,552,713
Rayonier Inc...................... 13,800 580,462
Temple-Inland Inc................. 3,900 210,600
------------
6,523,025
------------
RAILROADS (3.7%)
CSX Corp.......................... 52,200 2,897,100
Illinois Central Corp............. 45,150 1,577,428
Union Pacific Corp................ 33,100 2,333,550
------------
6,808,078
------------
RECREATION & ENTERTAINMENT (2.0%)
Time Warner Inc................... 74,000 3,570,500
------------
RETAIL (5.2%)
Dillard's Inc..................... 20,000 692,500
Federated Department Stores, Inc.
(a).............................. 68,500 2,380,375
Great Atlantic & Pacific
Tea Co., Inc. (The).............. 48,000 1,305,000
Penney (J.C.) Co., Inc............ 32,000 1,670,000
Toys "R" Us, Inc. (a)............. 98,300 3,440,500
------------
9,488,375
------------
TECHNOLOGY (1.9%)
International Business Machines
Corp............................. 37,400 3,373,012
------------
TEXTILE & APPAREL (3.1%)
Burlington Industries, Inc. (a)... 151,000 1,812,000
Fruit of the Loom, Inc. Class A
(a).............................. 17,300 536,300
Reebok International Ltd.......... 45,200 2,113,100
Springs Industries, Inc. Class
A................................ 21,900 1,155,225
------------
5,616,625
------------
<CAPTION>
SHARES VALUE
--------------------------
<S> <C> <C>
TIRE & RUBBER (1.2%)
Goodyear Tire & Rubber Co.
(The)............................ 33,900 $ 2,146,294
------------
UTILITIES--ELECTRIC (5.7%)
GPU, Inc.......................... 28,100 1,008,087
Long Island Lighting Co........... 98,000 2,254,000
Niagara Mohawk Power Corp. (a).... 130,100 1,113,981
PECO Energy Co.................... 103,000 2,163,000
PG&E Corp......................... 106,900 2,592,325
Pinnacle West Capital Corp........ 42,700 1,283,669
------------
10,415,062
------------
Total Common Stocks
(Cost $145,343,803).............. 167,378,549
------------
SHORT-TERM
INVESTMENTS (7.4%)
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C>
COMMERCIAL PAPER (7.4%)
American Express Credit Corp.
5.56%, due 7/1/97................ $6,240,000 6,240,000
American General Finance Corp.
6.08%, due 7/1/97................ 7,343,000 7,343,000
------------
Total Short-Term Investments
(Cost $13,583,000)............... 13,583,000
------------
Total Investments
(Cost $158,926,803) (c).......... 99.0% 180,961,549(d)
Cash and Other Assets,
Less Liabilities................. 1.0 1,853,830
--------- ------------
Net Assets........................ 100.0% $182,815,379
========= ============
</TABLE>
- ------------
(a) Non-income producing securities.
(b) ADR--American Depository Receipt.
(c) The cost stated also represents the aggregate cost for Federal income tax
purposes.
(d) At June 30, 1997 net unrealized appreciation was $22,034,746, based on cost
for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $23,720,661 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $1,685,915.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
106
<PAGE> 108
MAINSTAY VP SERIES FUND, INC.
VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $158,926,803)....... $180,961,549
Cash................................... 558
Receivables:
Investment securities sold........... 9,008,754
Dividends and interest............... 384,594
Fund shares sold..................... 250,429
------------
Total assets..................... 190,605,884
------------
LIABILITIES:
Payables:
Investment securities purchased...... 7,642,788
Adviser.............................. 52,243
Administrator........................ 14,512
NYLIAC............................... 14,512
Custodian............................ 3,731
Directors............................ 40
Accrued expenses....................... 62,679
------------
Total liabilities................ 7,790,505
------------
Net assets applicable to outstanding
shares............................... $182,815,379
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 100 million shares
authorized........................... $ 118,641
Additional paid-in capital............. 152,718,182
Accumulated undistributed net
investment income.................... 1,297,813
Accumulated undistributed net realized
gain on investments.................. 6,645,997
Net unrealized appreciation on
investments.......................... 22,034,746
------------
Net assets applicable to outstanding
shares............................... $182,815,379
============
Shares of capital stock outstanding.... 11,864,096
============
Net asset value per share
outstanding.......................... $ 15.41
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (a)........................ $ 1,414,290
Interest............................. 360,537
-----------
Total income..................... 1,774,827
-----------
Expenses:
Advisory............................. 264,818
Administration....................... 147,121
Shareholder communication............ 29,918
Professional......................... 18,894
Custodian............................ 11,099
Directors............................ 2,453
Miscellaneous........................ 2,347
-----------
Total expenses................... 476,650
-----------
Net investment income.................. 1,298,177
-----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on investments....... 6,646,714
Net change in unrealized appreciation
on investments....................... 8,939,066
-----------
Net realized and unrealized gain on
investments.......................... 15,585,780
-----------
Net increase in net assets resulting
from operations...................... $ 16,883,957
===========
</TABLE>
- ------------
(a) Dividends recorded net of foreign withholding taxes in the amount of $570.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
107
<PAGE> 109
VALUE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited)
and the year ended December 31, 1996
<TABLE>
<CAPTION>
1997 1996
----------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income......................................................... $ 1,298,177 $ 1,417,822
Net realized gain on investments.............................................. 6,646,714 2,468,445
Net change in unrealized appreciation on investments.......................... 8,939,066 11,576,673
------------ ------------
Net increase in net assets resulting from operations.......................... 16,883,957 15,462,940
------------ ------------
Dividends and distributions to shareholders:
From net investment income.................................................... (3,000) (1,415,317)
From net realized gain on investments......................................... (900,000) (1,616,124)
------------ ------------
Total dividends and distributions to shareholders......................... (903,000) (3,031,441)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.............................................. 53,337,928 81,567,373
Net asset value of shares issued to shareholders in reinvestment of dividends
and distributions............................................................ 903,000 3,031,441
------------ ------------
54,240,928 84,598,814
Cost of shares redeemed....................................................... (7,821,394) (1,044,875)
------------ ------------
Increase in net assets derived from capital share transactions................ 46,419,534 83,553,939
------------ ------------
Net increase in net assets...................................................... 62,400,491 95,985,438
NET ASSETS:
Beginning of period............................................................. 120,414,888 24,429,450
------------ ------------
End of period................................................................... $182,815,379 $120,414,888
============ ============
Accumulated undistributed net investment income................................. $ 1,297,813 $ 2,636
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
MAY 1,
SIX MONTHS YEAR 1995 (a)
ENDED ENDED THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31,
1997* 1996 1995
-------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period.............................. $ 13.90 $ 11.58 $ 10.00
-------- -------- --------
Net investment income............................................... 0.11 0.17 0.10
Net realized and unrealized gain on investments..................... 1.48 2.52 1.58
-------- -------- --------
Total from investment operations.................................... 1.59 2.69 1.68
-------- -------- --------
Less dividends and distributions:
From net investment income........................................ (0.00)(b) (0.17) (0.10)
From net realized gain on investments............................. (0.08) (0.20) --
-------- -------- --------
Total dividends and distributions................................... (0.08) (0.37) (0.10)
-------- -------- --------
Net asset value at end of period.................................... $ 15.41 $ 13.90 $ 11.58
======== ======== ========
Total investment return (c)......................................... 11.47% 23.22% 16.76%
Ratios (to average net assets)/Supplemental Data:
Net investment income............................................. 1.76%+ 2.10% 2.57%+
Net expenses...................................................... 0.65%+ 0.73% 0.73%+
Expenses (before reimbursement)................................... 0.65%+ 0.79% 1.45%+
Portfolio turnover rate............................................. 27% 41% 20%
Average commission rate paid........................................ $ 0.0595 $ 0.0593 (d)
Net assets at end of period (in 000's).............................. $ 182,815 $ 120,415 $ 24,429
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Less than one cent per share.
(c) Total return is not annualized.
(d) Disclosure of amount required for fiscal years beginning on or after
September 1, 1995.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
108
<PAGE> 110
MAINSTAY VP SERIES FUND, INC.
BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
LONG-TERM BONDS (96.0%)+
CORPORATE BONDS (47.2%)
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
AUTO PARTS/EQUIPMENT (2.2%)
Borg-Warner Automotive, Inc.
7.00%, due 11/1/06.............. $ 5,000,000 $ 4,950,000
------------
BANKS (7.0%)
BankAmerica Corp.
7.75%, due 7/15/02.............. 4,000,000 4,150,000
First Union Capital Corp.
7.935%, due 1/15/27............. 5,000,000 4,918,750
Golden West Financial Corp.
10.25%, due 12/1/00............. 1,000,000 1,106,250
Republic New York Corp.
7.75%, due 5/15/09.............. 5,000,000 5,225,000
------------
15,400,000
------------
CONGLOMERATES-- DIVERSIFIED
(1.0%)
Harcourt General, Inc.
9.50%, due 3/15/00.............. 2,000,000 2,135,000
------------
CONTAINERS (1.7%)
Federal Paper Board Co., Inc.
10.00%, due 4/15/11............. 3,100,000 3,801,375
------------
DATA PROCESSING (1.4%)
International Business Machines
Corp.
6.375%, due 6/15/00............. 3,000,000 2,992,500
------------
DIVERSIFIED UTILITIES (5.2%)
Consumers Energy Co.
7.375%, due 9/15/23............. 7,000,000 6,615,000
Niagara Mohawk Power Corp.
7.375%, due 8/1/03.............. 2,000,000 1,957,500
Public Service Co. of Colorado
6.00%, due 1/1/01............... 3,000,000 2,940,000
------------
11,512,500
------------
ELECTRIC UTILITIES (2.2%)
Texas Utilities
5.75%, due 7/1/98............... 5,000,000 4,981,250
------------
FINANCE (6.7%)
Chrysler Financial Corp.
5.875%, due 2/7/01.............. 5,000,000 4,875,000
General Motors Acceptance Corp.
5.625%, due 2/15/01............. 6,000,000 5,797,500
9.625%, due 12/15/01............ 1,000,000 1,108,750
Mellon Financial Co.
7.625%, due 11/15/99............ 3,000,000 3,090,000
------------
14,871,250
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
FOOD (0.5%)
ConAgra, Inc.
9.875%, due 11/15/05............ $ 1,000,000 $ 1,170,000
------------
OIL & GAS (2.0%)
Oryx Energy Co.
9.50%, due 11/1/99.............. 4,235,000 4,462,631
------------
PAPER PRODUCTS (2.2%)
Champion International Corp.
9.875%, due 6/1/00.............. 4,500,000 4,876,875
------------
RAILROADS (4.6%)
Norfolk Southern Corp.
6.95%, due 5/1/02............... 5,000,000 5,025,000
7.80%, due 5/15/27.............. 5,000,000 5,112,500
------------
10,137,500
------------
RETAIL STORES (7.8%)
Penney (J.C.) Co., Inc.
6.95%, due 4/1/00............... 5,000,000 5,050,000
Price/Costco, Inc.
7.125%, due 6/15/05............. 5,000,000 4,987,500
Sears Roebuck & Co.
8.45%, due 11/1/98.............. 7,000,000 7,212,940
------------
17,250,440
------------
TELECOMMUNICATION SERVICES (2.7%)
360 Communications Co.
7.60%, due 4/1/09............... 6,000,000 6,022,500
------------
Total Corporate Bonds
(Cost $102,615,931)............. 104,563,821
------------
U.S. GOVERNMENT & FEDERAL
AGENCIES (38.9%)
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (4.5%)
4.95%, due 9/30/98.............. 10,000,000 9,898,200
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (MORTGAGE PASS-
THROUGH SECURITIES) (14.2%)
7.00%, due 6/1/12-2/1/27........ 17,541,234 17,323,238
8.00%, due 5/1/25............... 13,861,711 14,203,929
------------
31,527,167
------------
</TABLE>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
109
<PAGE> 111
BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
U.S. GOVERNMENT &
FEDERAL AGENCIES (CONTINUED)
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION I (MORTGAGE
PASS-THROUGH SECURITY) (2.4%)
9.00%, due 4/15/26.............. $ 5,000,000 $ 5,303,125
------------
UNITED STATES TREASURY BONDS
(9.9%)
6.50%, due 11/15/26............. 13,000,000 12,449,710
6.75%, due 8/15/26.............. 5,500,000 5,440,655
7.125%, due 2/15/23............. 4,000,000 4,119,240
------------
22,009,605
------------
UNITED STATES TREASURY NOTES
(7.9%)
6.25%, due 2/28/02.............. 5,000,000 4,968,550
7.125%, due 2/29/00............. 5,000,000 5,107,400
7.25%, due 5/15/04.............. 7,000,000 7,297,640
------------
17,373,590
------------
Total U.S. Government &
Federal Agencies
(Cost $85,473,978).............. 86,111,687
------------
YANKEE BONDS (9.9%)
BANKS (1.0%)
National Westminster Bancorp,
Inc.
9.375%, due 11/15/03............ 2,000,000 2,250,000
------------
COMMERCIAL PRINTER (2.2%)
Quebecor Printing Capital Corp.
7.25%, due 1/15/07.............. 5,000,000 5,037,500
------------
CRUDE PETROLEUM NATURAL GAS
(2.4%)
Gulf Canada Resources Ltd.
9.00%, due 8/15/99.............. 5,000,000 5,237,500
------------
FINANCE (2.3%)
Ford Motor Credit Co.
7.20%, due 6/15/07.............. 5,000,000 5,043,750
------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
TELECOMMUNICATION SERVICES (2.0%)
British Telecommunications
Finance Inc.
9.375%, due 2/15/99............. $ 4,200,000 $ 4,404,750
------------
Total Yankee Bonds
(Cost $21,509,461).............. 21,973,500
------------
Total Long-Term Bonds
(Cost $209,599,370)............. 212,649,008
------------
SHORT-TERM
INVESTMENTS (2.6%)
COMMERCIAL PAPER (2.6%)
American Express Credit Corp.
6.00%, due 7/1/97............... 915,000 915,000
Associates Corp. of North America
5.50%, due on demand (a)........ 4,925,000 4,925,000
------------
Total Short-Term Investments
(Cost $5,840,000)............... 5,840,000
------------
Total Investments
(Cost $215,439,370) (b)......... 98.6% 218,489,008(c)
Cash and Other Assets,
Less Liabilities................ 1.4 3,065,654
---------- ------------
Net Assets....................... 100.0% $221,554,662
========== ============
</TABLE>
- ------------
(a) Adjustable rate. Rate shown is the rate in effect at June 30, 1997.
(b) The cost stated also represents the aggregate cost for Federal income tax
purposes.
(c) At June 30, 1997 net unrealized appreciation was $3,049,638, based on cost
for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $3,614,639 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $565,001.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
110
<PAGE> 112
MAINSTAY VP SERIES FUND, INC.
BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $215,439,370)....... $218,489,008
Cash................................... 731
Receivables:
Investment securities sold........... 10,399,969
Interest............................. 3,368,051
Fund shares sold..................... 56,385
------------
Total assets..................... 232,314,144
------------
LIABILITIES:
Payables:
Investment securities purchased...... 10,303,150
Fund shares redeemed................. 151,971
Adviser.............................. 137,254
Administrator........................ 18,204
NYLIAC............................... 18,204
Directors............................ 48
Accrued expenses....................... 130,651
------------
Total liabilities................ 10,759,482
------------
Net assets applicable to outstanding
shares............................... $221,554,662
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 100 million shares
authorized........................... $ 168,205
Additional paid-in capital............. 213,824,377
Accumulated undistributed net
investment income.................... 7,125,688
Accumulated net realized loss on
investments.......................... (2,613,246)
Net unrealized appreciation on
investments.......................... 3,049,638
------------
Net assets applicable to outstanding
shares............................... $221,554,662
============
Shares of capital stock outstanding.... 16,820,513
============
Net asset value per share
outstanding.......................... $ 13.17
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Interest............................. $ 7,689,659
------------
Expenses:
Advisory............................. 275,765
Administration....................... 220,612
Shareholder communication............ 39,551
Professional......................... 15,671
Directors............................ 4,213
Portfolio pricing.................... 3,384
Miscellaneous........................ 4,775
------------
Total expenses................... 563,971
------------
Net investment income.................. 7,125,688
------------
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS:
Net realized loss on investments....... (826,934)
Net change in unrealized appreciation
on investments....................... (474,654)
------------
Net realized and unrealized loss on
investments.......................... (1,301,588)
------------
Net increase in net assets resulting
from operations...................... $ 5,824,100
============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
111
<PAGE> 113
BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited)
and the year ended December 31, 1996
<TABLE>
<CAPTION>
1997 1996
-------------------------
<S> <C> <C>
DECREASE IN NET ASSETS:
Operations:
Net investment income............................................................. $ 7,125,688 $ 14,382,960
Net realized gain (loss) on investments........................................... (826,934) 961,896
Net change in unrealized appreciation on investments.............................. (474,654) (10,866,414)
------------ ------------
Net increase in net assets resulting from operations.............................. 5,824,100 4,478,442
------------ ------------
Dividends to shareholders:
From net investment income........................................................ -- (14,405,743)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.................................................. 10,108,172 25,643,335
Net asset value of shares issued to shareholders in reinvestment of dividends..... -- 14,405,743
------------ ------------
10,108,172 40,049,078
Cost of shares redeemed........................................................... (20,752,496) (38,777,335)
------------ ------------
Increase (decrease) in net assets derived from capital share transactions......... (10,644,324) 1,271,743
------------ ------------
Net decrease in net assets.......................................................... (4,820,224) (8,655,558)
NET ASSETS:
Beginning of period................................................................. 226,374,886 235,030,444
------------ ------------
End of period....................................................................... $221,554,662 $226,374,886
============ ============
Accumulated undistributed net investment income..................................... $ 7,125,688 $ --
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31
1997* 1996 1995 1994 1993 1992
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning
of period................... $ 12.83 $ 13.42 $ 12.09 $ 13.43 $ 12.91 $ 12.77
-------- -------- -------- -------- -------- --------
Net investment income......... 0.43 0.87 0.88 0.88 0.95 0.92
Net realized and unrealized
gain (loss) on
investments................. (0.09) (0.59) 1.33 (1.34) 0.53 0.13
-------- -------- -------- -------- -------- --------
Total from investment
operations.................. 0.34 0.28 2.21 (0.46) 1.48 1.05
-------- -------- -------- -------- -------- --------
Less dividends:
From net investment
income.................... -- (0.87) (0.88) (0.88) (0.96) (0.91)
-------- -------- -------- -------- -------- --------
Net asset value at end of
period...................... $ 13.17 $ 12.83 $ 13.42 $ 12.09 $ 13.43 $ 12.91
======== ======== ======== ======== ======== ========
Total investment return (a)... 2.69% 2.05% 18.31% (3.39%) 11.40% 8.26%
Ratios (to average net
assets)/Supplemental Data:
Net investment income....... 6.46%+ 6.31% 6.55% 6.53% 6.79% 7.54%
Net expenses................ 0.51%+ 0.58% 0.62% 0.62%# 0.27%# 0.25%
Expenses (before
reimbursement)............ 0.51%+ 0.58% 0.91% 0.67%# 0.27%# 0.25%
Portfolio turnover rate....... 141% 103% 81% 88% 41% 10%
Net assets at end of period
(in 000's).................. $ 221,555 $ 226,375 $ 235,030 $ 206,686 $ 228,683 $ 203,947
</TABLE>
- ------------
(a) Total return is not annualized.
# At the MainStay VP Series Fund, Inc.'s shareholders meeting on December 14,
1993, the shareholders voted to have the Bond Portfolio assume certain
administrative and operating expenses of the Fund previously borne by New
York Life.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
112
<PAGE> 114
MAINSTAY VP SERIES FUND, INC.
GROWTH EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (97.8%)+
SHARES VALUE
---------------------------
<S> <C> <C>
ADVERTISING SALES (0.7%)
Outdoor Systems, Inc. (a)........ 126,200 $ 4,827,150
------------
AEROSPACE/DEFENSE (2.3%)
Coltec Industries Inc. (a)....... 270,000 5,265,000
Lockheed Martin Corp. ........... 61,200 6,338,025
Loral Space & Communications Ltd.
(a)............................. 258,500 3,877,500
------------
15,480,525
------------
APPAREL MANUFACTURERS (0.7%)
Fruit of the Loom, Inc. Class A
(a)............................. 150,000 4,650,000
------------
AUTO & AUTO SERVICES (0.9%)
Tower Automotive, Inc. (a)....... 146,200 6,286,600
------------
BANKS (5.7%)
Bank of New York Co., Inc.
(The)........................... 150,000 6,525,000
Chase Manhattan Corp. ........... 90,000 8,735,625
NationsBank Corp. ............... 117,200 7,559,400
Norwest Corp. ................... 125,000 7,031,250
Republic New York Corp. ......... 75,000 8,062,500
------------
37,913,775
------------
BEVERAGES (2.0%)
Anheuser-Busch Cos., Inc. ....... 137,000 5,745,437
PepsiCo, Inc. ................... 200,000 7,512,500
------------
13,257,937
------------
BUILDING PRODUCTS (1.5%)
Masco Corp. ..................... 96,000 4,008,000
Sherwin-Williams Co. ............ 200,000 6,175,000
------------
10,183,000
------------
BUSINESS SERVICES (0.8%)
AccuStaff, Inc. (a).............. 215,700 5,109,394
------------
CAPITAL GOODS (0.5%)
Checkpoint Systems, Inc. (a)..... 214,400 3,443,800
------------
CHEMICALS (3.7%)
Du Pont (E.I.) De Nemours &
Co. ............................ 110,000 6,916,250
IMC Global Inc. ................. 150,000 5,250,000
Praxair, Inc. ................... 100,000 5,600,000
Sealed Air Corp. (a)............. 150,000 7,125,000
------------
24,891,250
------------
COMMERCIAL SERVICES (1.2%)
CUC International Inc. (a)....... 300,000 7,743,750
------------
COMMUNICATIONS (1.2%)
Northern Telecom Ltd. ........... 60,000 5,460,000
Qwest Communications
International Inc. (a).......... 103,000 2,806,750
------------
8,266,750
------------
<CAPTION>
SHARES VALUE
---------------------------
<S> <C> <C>
COMPUTERS & OFFICE EQUIPMENT
(8.5%)
Computer Associates
International, Inc. ............ 115,000 $ 6,404,062
Computer Sciences Corp. (a)...... 90,000 6,491,250
Compuware Corp. (a).............. 125,000 5,968,750
Danka Business Systems PLC ADR
(b)............................. 158,800 6,490,950
FIserv, Inc. (a)................. 155,000 6,916,875
FORE Systems Inc. (a)............ 200,000 2,725,000
Micron Electronics, Inc. ........ 184,000 3,277,500
Microsoft Corp. (a).............. 65,000 8,214,375
Sungard Data Systems Inc. (a).... 150,000 6,975,000
Zebra Technologies Corp. Class A
(a)............................. 110,000 3,066,250
------------
56,530,012
------------
DRUGS (8.0%)
American Home Products Corp. .... 70,000 5,355,000
Amgen Inc. (a)................... 50,000 2,906,250
Bristol-Meyers Squibb Co. ....... 87,000 7,047,000
Centocor Inc. (a)................ 100,000 3,106,250
Genzyme Corp. (a)................ 120,000 3,330,000
Johnson & Johnson................ 100,000 6,437,500
Lilly (Eli) & Co. ............... 80,000 8,745,000
NABI Inc. (a).................... 245,000 1,623,125
SmithKline Beecham PLC ADR (b)... 90,000 8,246,250
Warner-Lambert Co. .............. 50,000 6,212,500
------------
53,008,875
------------
ELECTRICAL (2.8%)
General Electric Co. ............ 200,000 13,075,000
Mark IV Industries, Inc. ........ 234,945 5,638,680
------------
18,713,680
------------
ELECTRONICS (3.8%)
LSI Logic Corp (a)............... 120,000 3,840,000
Philips Electronics N.V. ........ 150,000 10,781,250
Teradyne, Inc. (a)............... 180,000 7,065,000
Texas Instruments, Inc. ......... 45,300 3,808,031
------------
25,494,281
------------
FINANCE (3.5%)
Comdisco Inc. ................... 275,000 7,150,000
Fannie Mae....................... 160,000 6,980,000
Federal Home Loan Mortgage
Corp. .......................... 160,000 5,500,000
Student Loan Marketing
Association .................... 30,000 3,810,000
------------
23,440,000
------------
</TABLE>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
113
<PAGE> 115
GROWTH EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
---------------------------
<S> <C> <C>
FOOD (5.1%)
Archer-Daniels-Midland Co. ...... 295,000 $ 6,932,500
Chiquita Brands International,
Inc. ........................... 124,200 1,707,750
CPC International Inc. .......... 80,000 7,385,000
Dole Food Co., Inc. ............. 145,000 6,198,750
Sysco Corp. ..................... 180,000 6,570,000
Tyson Foods Inc. Class A......... 265,000 5,068,125
------------
33,862,125
------------
HEAVY INDUSTRIAL (0.6%)
U.S. Filter Corp. (a)............ 139,300 3,795,925
------------
HOSPITAL & MEDICAL SERVICES
(2.1%)
HEALTHSOUTH Corp. (a)............ 280,000 6,982,500
Orthodontic Centers of America
Inc. (a)........................ 200,000 3,637,500
Quorum Health Group, Inc. (a).... 100,000 3,575,000
------------
14,195,000
------------
HOUSEHOLD PRODUCTS (1.1%)
Colgate-Palmolive Co. ........... 110,000 7,177,500
------------
INSURANCE-PROPERTY & CASUALTY
(4.0%)
Allstate Corp. (The) ............ 90,000 6,570,000
American International Group,
Inc. ........................... 50,000 7,468,750
Chubb Corp. ..................... 60,400 4,039,250
Equitable Cos., Inc. (The)....... 100,000 3,325,000
Provident Cos., Inc. ............ 100,000 5,350,000
------------
26,753,000
------------
LODGING &
RESTAURANTS (3.0%)
Carnival Corp. Class A........... 110,000 4,537,500
Marriott International Inc. ..... 110,000 6,751,250
McDonald's Corp. ................ 103,200 4,985,850
Wendy's International, Inc. ..... 150,000 3,890,625
------------
20,165,225
------------
MACHINERY/CAPITAL GOODS (2.5%)
AGCO Corp. ...................... 200,000 7,187,500
Stewart & Stevenson Services,
Inc. ........................... 100,000 2,600,000
Tyco International Ltd. ......... 100,000 6,956,250
------------
16,743,750
------------
MANUFACTURING (1.4%)
AlliedSignal Inc. ............... 111,000 9,324,000
------------
MEDIA & INFORMATION
SERVICES (3.1%)
Cognizant Corp. ................. 175,000 7,087,500
Jacor Communications Inc. (a).... 125,500 4,800,375
Time Warner Inc. ................ 175,000 8,443,750
------------
20,331,625
------------
<CAPTION>
SHARES VALUE
---------------------------
<S> <C> <C>
MEDICAL EQUIPMENT (2.2%)
Becton, Dickinson & Co. ......... 125,000 $ 6,328,125
Cardinal Health, Inc. ........... 60,000 3,435,000
Medtronic, Inc. ................. 60,000 4,860,000
------------
14,623,125
------------
OIL & ENERGY SERVICES (6.5%)
Apache Corp. .................... 105,000 3,412,500
Halliburton Co. ................. 70,000 5,547,500
McDermott International, Inc. ... 175,000 5,107,813
Mobil Corp. ..................... 80,000 5,590,000
Quaker State Corp. .............. 333,000 5,078,250
Schlumberger Ltd. ............... 55,000 6,875,000
Smith International, Inc. (a).... 110,000 6,682,500
Triton Energy Ltd. (a)........... 100,000 4,581,250
XCL Ltd. (a)..................... 1,316,800 246,900
------------
43,121,713
------------
PACKAGING (0.9%)
Crown Cork & Seal Co., Inc. ..... 110,000 5,878,125
------------
PAPER & FOREST PRODUCTS (0.7%)
Boise Cascade Corp. ............. 138,600 4,894,312
------------
POLLUTION CONTROL (0.8%)
Philip Environmental, Inc. (a)... 350,000 5,556,250
------------
REAL ESTATE (2.5%)
Chelsea GCA Realty, Inc. ........ 96,300 3,659,400
First Industrial Realty Trust,
Inc. ........................... 175,000 5,118,750
Healthcare Realty Trust Inc. .... 125,000 3,484,375
Liberty Property Trust........... 166,500 4,141,688
------------
16,404,213
------------
RETAIL TRADE & MERCHANDISING
(5.9%)
American Stores Co. ............. 150,000 7,406,250
Costco Cos., Inc. (a)............ 200,000 6,575,000
CVS Corp. ....................... 120,000 6,150,000
Kroger Co. (a)................... 296,000 8,584,000
Smart & Final Inc. .............. 163,000 3,993,500
Wal-Mart Stores, Inc. ........... 200,000 6,762,500
------------
39,471,250
------------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
114
<PAGE> 116
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
---------------------------
<S> <C> <C>
TELECOMMUNICATIONS (1.6%)
DSC Communication Corp. (a)...... 250,000 $ 5,562,500
Lucent Technologies Inc. ........ 67,000 4,828,187
------------
10,390,687
------------
TRANSPORTATION (1.0%)
Wisconsin Central Transport Corp.
(a)............................. 175,000 6,518,750
------------
UTILITIES--ELECTRIC (1.4%)
Cinergy Corp. ................... 125,000 4,351,563
CMS Energy Corp. ................ 135,000 4,758,750
------------
9,110,313
------------
UTILITIES--GAS (0.8%)
Consolidated Natural Gas Co. .... 100,000 5,381,250
------------
UTILITIES--TELEPHONE (1.3%)
WorldCom, Inc. (a)............... 262,800 8,409,600
------------
WASTE DISPOSAL (1.5%)
Republic Industries Inc. (a)..... 150,000 3,637,500
USA Waste Services Inc. (a)...... 160,000 6,180,000
------------
9,817,500
------------
Total Common Stocks
(Cost $508,671,935)............. 651,166,017
------------
SHORT-TERM
INVESTMENTS (2.8%)
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
COMMERCIAL PAPER (2.8%)
American Express Credit Corp.
6.00%, due 7/1/97............... $ 2,692,000 $ 2,692,000
Associates Corp. of North America
5.50%, due on demand (c)........ 15,240,000 15,240,000
PG&E Corp.
5.56%, due 7/21/97.............. 452,000 450,604
------------
Total Short-Term Investments
(Cost $18,382,604).............. 18,382,604
------------
Total Investments
(Cost $527,054,539) (d)......... 100.6% 669,548,621(e)
Liabilities in Excess of
Cash and Other Assets........... (0.6) (3,637,204)
---------- ------------
Net Assets....................... 100.0% $665,911,417
========== ============
</TABLE>
- ------------
(a) Non-income producing securities.
(b) ADR--American Depository Receipt.
(c) Adjustable rate. Rate shown is the rate in effect at June 30, 1997.
(d) The cost stated also represents the aggregate cost for Federal income tax
purposes.
(e) At June 30, 1997 net unrealized appreciation was $142,494,082, based on cost
for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $151,340,560 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $8,846,478.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
115
<PAGE> 117
GROWTH EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $527,054,539)....... $669,548,621
Cash................................... 1,163,464
Receivables:
Investment securities sold........... 8,855,155
Dividends and interest............... 700,014
Fund shares sold..................... 327,265
------------
Total assets..................... 680,594,519
------------
LIABILITIES:
Payables:
Investment securities purchased...... 13,834,929
Adviser.............................. 386,551
Fund shares redeemed................. 96,966
Administrator........................ 54,090
NYLIAC............................... 54,090
Directors............................ 182
Accrued expenses....................... 256,294
------------
Total liabilities................ 14,683,102
------------
Net assets applicable to outstanding
shares............................... $665,911,417
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 100 million shares
authorized........................... $ 313,159
Additional paid-in capital............. 477,147,479
Accumulated undistributed net
investment income.................... 2,626,362
Accumulated undistributed net realized
gain on investments.................. 43,330,335
Net unrealized appreciation on
investments.......................... 142,494,082
------------
Net assets applicable to outstanding
shares............................... $665,911,417
============
Shares of capital stock outstanding.... 31,315,890
============
Net asset value per share
outstanding.......................... $ 21.26
============
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (Unaudited)
INVESTMENT INCOME:
Income:
Dividends (a)........................ $ 3,201,912
Interest............................. 957,543
------------
Total income..................... 4,159,455
------------
Expenses:
Advisory............................. 750,553
Administration....................... 600,443
Shareholder communication............ 140,155
Professional......................... 20,072
Directors............................ 10,796
Miscellaneous........................ 11,074
------------
Total expenses................... 1,533,093
------------
Net investment income.................. 2,626,362
------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on investments....... 43,331,368
Net change in unrealized appreciation
on investments....................... 35,721,033
------------
Net realized and unrealized gain on
investments.......................... 79,052,401
------------
Net increase in net assets resulting
from operations...................... $ 81,678,763
============
</TABLE>
- ------------
(a) Dividends recorded net of foreign withholding taxes
in the amount of $3,626.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
116
<PAGE> 118
MAINSTAY VP SERIES FUND, INC.
GROWTH EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited)
and the year ended December 31, 1996
<TABLE>
<CAPTION>
1997 1996
-------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................................................. $ 2,626,362 $ 4,810,773
Net realized gain on investments.................................................. 43,331,368 69,850,131
Net change in unrealized appreciation on investments.............................. 35,721,033 32,938,177
------------ ------------
Net increase in net assets resulting from operations.............................. 81,678,763 107,599,081
------------ ------------
Dividends and distributions to shareholders:
From net investment income........................................................ -- (4,810,773)
From net realized gain on investments............................................. (152,000) (69,699,164)
------------ ------------
Total dividends and distributions to shareholders............................. (152,000) (74,509,937)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.................................................. 48,905,156 74,877,524
Net asset value of shares issued to shareholders in reinvestment of dividends and
distributions.................................................................... 152,000 74,509,937
------------ ------------
49,057,156 149,387,461
Cost of shares redeemed........................................................... (29,357,913) (45,298,015)
------------ ------------
Increase in net assets derived from capital share transactions.................... 19,699,243 104,089,446
------------ ------------
Net increase in net assets.......................................................... 101,226,006 137,178,590
NET ASSETS:
Beginning of period................................................................. 564,685,411 427,506,821
------------ ------------
End of period....................................................................... $665,911,417 $564,685,411
============ ============
Accumulated undistributed net investment income..................................... $ 2,626,362 $ --
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31
1997* 1996 1995 1994 1993 1992
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning
of period................... $ 18.63 $ 17.22 $ 14.69 $ 15.64 $ 15.53 $ 15.57
-------- -------- -------- -------- -------- --------
Net investment income......... 0.08 0.18 0.22 0.22 0.24 0.22
Net realized and unrealized
gain (loss) on
investments................. 2.55 4.06 4.06 (0.03) 1.88 1.72
-------- -------- -------- -------- -------- --------
Total from investment
operations.................. 2.63 4.24 4.28 0.19 2.12 1.94
-------- -------- -------- -------- -------- --------
Less dividends and
distributions:
From net investment
income.................... -- (0.18) (0.22) (0.22) (0.25) (0.22)
From net realized gain on
investments............... (0.00)(a) (2.65) (1.53) (0.92) (1.76) (1.76)
-------- -------- -------- -------- -------- --------
Total dividends and
distributions............... (0.00) (2.83) (1.75) (1.14) (2.01) (1.98)
-------- -------- -------- -------- -------- --------
Net asset value at end of
period...................... $ 21.26 $ 18.63 $ 17.22 $ 14.69 $ 15.64 $ 15.53
======== ======== ======== ======== ======== ========
Total investment return (b)... 14.16% 24.50% 29.16% 1.20% 13.71% 12.42%
Ratios (to average net
assets)/Supplemental Data:
Net investment income....... 0.87%+ 0.98% 1.29% 1.41% 1.42% 1.50%
Net expenses................ 0.51%+ 0.58% 0.62% 0.62%# 0.27%# 0.27%
Expenses (before
reimbursement)............ 0.51%+ 0.58% 0.91% 0.65%# 0.27%# 0.27%
Portfolio turnover rate....... 53% 104% 104% 108% 121% 82%
Average commission rate
paid........................ $ 0.0595 $ 0.0595 (c) (c) (c) (c)
Net assets at end of period
(in 000's).................. $ 665,911 $ 564,685 $ 427,507 $ 330,161 $ 319,196 $ 272,834
</TABLE>
- ------------
(a) Less than one cent per share.
(b) Total return is not annualized.
(c) Disclosure of amount required for fiscal years beginning on or after
September 1, 1995.
# At the MainStay VP Series Fund, Inc.'s shareholders meeting on December 14,
1993, the shareholders voted to have the Growth Equity Portfolio assume
certain administrative and operating expenses of the Fund previously borne
by New York Life.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
117
<PAGE> 119
INDEXED EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (95.6%)+
SHARES VALUE
-------------------------
<S> <C> <C>
AEROSPACE/DEFENSE (1.8%)
Boeing Co. ..................... 35,532 $ 1,885,417
General Dynamics Corp. ......... 3,130 234,750
Lockheed Martin Corp. .......... 9,484 982,187
McDonnell Douglas Corp. ........ 10,592 725,552
Northrop Grumman Corp. ......... 2,842 249,563
Raytheon Co. ................... 11,745 598,995
Rockwell International Corp. ... 10,764 635,076
United Technologies Corp. ...... 11,725 973,175
-----------
6,284,715
-----------
AIRLINES (0.3%)
AMR Corp. (a)................... 4,484 414,770
Delta Air Lines, Inc. .......... 3,771 309,222
Southwest Airlines Co. ......... 7,143 184,825
US Airways Group, Inc. (a)...... 3,919 137,165
-----------
1,045,982
-----------
ALUMINUM (0.4%)
Alcan Aluminum Ltd. ............ 11,187 388,049
Aluminum Co. of America......... 8,675 653,878
Reynolds Metals Co. ............ 3,589 255,716
-----------
1,297,643
-----------
AUTOMOBILES (1.5%)
Chrysler Corp. ................. 34,103 1,119,005
Ford Motor Co. ................. 58,692 2,215,623
General Motors Corp. ........... 36,118 2,011,321
-----------
5,345,949
-----------
AUTO PARTS--AFTER MARKET (0.3%)
Cooper Tire & Rubber Co. ....... 4,092 90,024
Echlin Inc. .................... 3,087 111,132
Genuine Parts Co. .............. 9,044 306,366
Goodyear Tire & Rubber Co.
(The).......................... 7,696 487,253
-----------
994,775
-----------
BEVERAGES--ALCOHOLIC (0.6%)
Anheuser-Busch Cos., Inc. ...... 24,661 1,034,221
Brown-Forman Corp. Class B...... 3,437 167,768
Coors (Adolph) Co. Class B...... 1,897 50,508
Seagram Co. Ltd. ............... 18,440 742,210
-----------
1,994,707
-----------
BEVERAGES--SOFT DRINKS (3.2%)
Coca-Cola Co. (d)............... 122,591 8,550,722
PepsiCo, Inc. .................. 76,014 2,855,276
-----------
11,405,998
-----------
BROADCAST/MEDIA (0.4%)
Comcast Corp. Class A........... 16,137 344,928
Tele-Communications TCI Group
Series A (a)................... 32,864 488,852
U.S. West Media Group (a)....... 30,115 609,829
-----------
1,443,609
-----------
BUILDING MATERIALS (0.2%)
Masco Corp. .................... 7,943 331,621
Owens-Corning Corp. ............ 2,586 111,521
Sherwin-Williams Co. ........... 8,400 259,350
-----------
702,492
-----------
<CAPTION>
SHARES VALUE
-------------------------
<S> <C> <C>
CHEMICALS (2.3%)
Air Products & Chemicals,
Inc. .......................... 5,555 $ 451,344
Dow Chemical Co. ............... 11,565 1,007,601
Du Pont (E.I.) De Nemours &
Co. ........................... 59,194 3,721,823
Eastman Chemical Co. ........... 3,992 253,492
Goodrich (B.F.) Co. ............ 2,652 114,865
Hercules, Inc. ................. 5,240 250,865
Monsanto Co. ................... 29,113 1,253,678
Praxair, Inc. .................. 7,657 428,792
Rohm & Haas Co. ................ 3,193 287,569
Union Carbide Corp. ............ 6,531 307,365
-----------
8,077,394
-----------
CHEMICALS--DIVERSIFIED (0.3%)
Avery Dennison Corp. ........... 5,287 212,141
Engelhard Corp. ................ 7,121 149,096
FMC Corp. (a)................... 1,869 148,468
PPG Industries, Inc. ........... 9,206 535,099
-----------
1,044,804
-----------
CHEMICALS--SPECIALTY (0.3%)
Grace (W.R.) & Co. ............. 3,542 195,253
Great Lakes Chemical Corp. ..... 3,177 166,395
Morton International, Inc. ..... 7,012 211,675
Nalco Chemical Co. ............. 3,282 126,767
Sigma-Aldrich Corp. ............ 4,923 172,613
-----------
872,703
-----------
COMMUNICATION--EQUIPMENT
MANUFACTURERS (2.2%)
Andrew Corp. (a)................ 4,547 127,884
Bay Networks, Inc. (a).......... 9,544 253,513
Cabletron Systems, Inc. (a)..... 7,695 217,865
Cisco Systems, Inc. (a)......... 32,856 2,205,459
DSC Communications Corp. (a).... 5,732 127,537
General Instrument Corp. (a).... 6,752 168,800
Lucent Technologies Inc. ....... 31,622 2,278,760
Northern Telecom Ltd. .......... 12,792 1,164,072
Scientific-Atlanta, Inc. ....... 3,829 83,759
Tellabs, Inc. (a)............... 8,946 499,858
3Com Corp. (a).................. 16,426 739,170
-----------
7,866,677
-----------
COMPUTER--SOFTWARE & SERVICES
(3.7%)
Adobe Systems, Inc. ............ 3,511 123,104
Autodesk, Inc. ................. 2,255 86,395
Automatic Data Processing,
Inc. .......................... 14,356 674,732
Ceridian Corp. (a).............. 3,973 167,859
Computer Associates
International, Inc. ........... 18,036 1,004,380
Computer Sciences Corp. (a)..... 3,702 267,007
Equifax Inc. ................... 7,500 278,906
First Data Corp. ............... 22,111 971,502
Microsoft Corp. (a)............. 59,485 7,517,417
Novell Inc. (a)................. 17,064 118,381
Oracle Corp. (a)................ 32,397 1,631,999
</TABLE>
- ------------
+ Percentages indicated are based on Fund net assets.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
118
<PAGE> 120
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
<S> <C> <C>
COMPUTER--SOFTWARE & SERVICES
(Continued)
Parametric Technology Corp.
(a)............................ 6,332 $ 269,506
Shared Medical Systems Corp. ... 1,186 64,044
-----------
13,175,232
-----------
COMPUTER SYSTEMS (3.4%)
Amdahl Corp. (a)................ 5,899 51,616
Apple Computer, Inc. (a)........ 6,103 86,968
Compaq Computer Corp. (a)....... 13,294 1,319,430
Data General Corp. (a).......... 1,925 50,050
Dell Computer Corp. (a)......... 8,347 980,251
Digital Equipment Corp. (a)..... 7,659 271,416
EMC Corp. (a)................... 12,320 480,480
Hewlett-Packard Co. ............ 50,418 2,823,408
Intergraph Corp. (a)............ 2,285 19,422
International Business Machines
Corp. ......................... 49,283 4,444,711
Seagate Technology (a).......... 12,376 435,480
Silicon Graphics Inc. (a)....... 8,783 131,745
Sun Microsystems (a)............ 18,260 679,615
Tandem Computers Inc. (a)....... 5,721 115,850
Unisys Corp. (a)................ 8,545 65,156
-----------
11,955,598
-----------
CONGLOMERATES (0.3%)
Tenneco Inc. ................... 8,495 383,868
Textron Inc. ................... 8,067 535,447
-----------
919,315
-----------
CONTAINERS--METAL & GLASS (0.1%)
Ball Corp. ..................... 1,478 44,432
Crown Cork & Seal Co., Inc. .... 6,367 340,237
-----------
384,669
-----------
CONTAINERS--PAPER (0.1%)
Bemis Co., Inc. ................ 2,626 113,903
Stone Container Corp. .......... 4,828 69,101
Temple-Inland Inc. ............. 2,716 146,664
-----------
329,668
-----------
COSMETICS (1.0%)
Alberto-Culver Co. Class B...... 2,825 79,100
Avon Products, Inc. ............ 6,643 468,746
Gillette Co. ................... 27,501 2,605,720
International Flavors &
Fragrances Inc. ............... 5,516 278,558
-----------
3,432,124
-----------
DRUGS (4.4%)
Lilly (Eli) & Co. .............. 27,190 2,972,207
Merck & Co., Inc. .............. 59,673 6,176,155
Pfizer Inc. .................... 31,885 3,810,258
Pharmacia & Upjohn, Inc. ....... 25,172 874,727
Schering-Plough Corp. .......... 36,440 1,744,565
-----------
15,577,912
-----------
ELECTRIC POWER COMPANIES (2.3%)
American Electric Power Co.,
Inc. .......................... 9,250 388,500
Baltimore Gas & Electric Co. ... 7,292 194,605
Carolina Power & Light Co. ..... 7,555 271,036
<CAPTION>
SHARES VALUE
-------------------------
<S> <C> <C>
ELECTRIC POWER
COMPANIES (Continued)
Central & South West Corp. ..... 10,344 $ 219,810
Cinergy Corp. .................. 7,843 273,034
Consolidated Edison Co. of New
York, Inc. .................... 11,640 342,652
Dominion Resources, Inc. ....... 9,182 336,291
DTE Energy Co. ................. 7,138 197,187
Duke Energy Corp. .............. 17,921 859,088
Edison International............ 20,359 506,430
Entergy Corp. .................. 11,796 322,916
FPL Group, Inc. ................ 9,041 416,451
GPU, Inc. ...................... 5,964 213,959
Houston Industries Inc. ........ 11,635 249,425
Niagara Mohawk Power Corp.
(a)............................ 7,205 61,693
Northern States Power Co. ...... 3,395 175,691
Ohio Edison Co. ................ 7,542 164,510
PacifiCorp...................... 14,511 319,242
PECO Energy Co. ................ 10,984 230,664
PG&E Corp. ..................... 20,516 497,513
PP&L Resources, Inc. ........... 7,938 158,264
Public Service Enterprise Group
Inc. .......................... 11,510 287,750
Southern Co. (The).............. 33,779 738,916
Texas Utilities Co. ............ 11,152 384,047
Unicom Corp. ................... 10,672 237,452
Union Electric Co. ............. 5,082 191,528
-----------
8,238,654
-----------
ELECTRICAL EQUIPMENT (4.0%)
AMP Inc. ....................... 10,847 452,862
Emerson Electric Co. ........... 22,258 1,225,581
General Electric Co. (d)........ 162,669 10,634,486
General Signal Corp. ........... 2,443 106,576
Grainger (W.W.), Inc. .......... 2,528 197,658
Honeywell, Inc. ................ 6,320 479,530
Raychem Corp. .................. 2,189 162,807
Thomas & Betts Corp. ........... 2,616 137,503
Westinghouse Electric Corp. .... 31,495 728,322
-----------
14,125,325
-----------
ELECTRONIC--DEFENSE (0.0%) (b)
EG&G, Inc. ..................... 2,413 54,293
-----------
ELECTRONIC-- INSTRUMENTATION
(0.1%)
Perkin-Elmer Corp. ............. 2,174 172,969
Tektronix, Inc. ................ 1,645 98,700
-----------
271,669
-----------
ELECTRONIC-- SEMICONDUCTORS
(3.0%)
Advanced Micro Devices, Inc.
(a)............................ 6,986 251,496
Applied Materials, Inc. (a)..... 8,880 628,815
Intel Corp. .................... 40,765 5,780,986
LSI Logic Corp. (a)............. 6,985 223,520
Micron Technology, Inc. ........ 10,322 412,235
Motorola, Inc. ................. 29,337 2,229,612
National Semiconductor Corp.
(a)............................ 6,736 206,290
Texas Instruments, Inc. ........ 9,391 789,431
-----------
10,522,385
-----------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
119
<PAGE> 121
INDEXED EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
<S> <C> <C>
ENGINEERING & CONSTRUCTION
(0.1%)
Fluor Corp. .................... 4,133 $ 228,090
Foster Wheeler Corp. ........... 2,054 83,187
-----------
311,277
-----------
ENTERTAINMENT (1.3%)
King World Productions, Inc.
(a)............................ 1,881 65,835
Time Warner Inc. ............... 27,700 1,336,525
Viacom, Inc. Class B (a)........ 17,603 528,090
Walt Disney Co. (The)........... 33,537 2,691,344
-----------
4,621,794
-----------
FINANCIAL--
MISCELLANEOUS (2.4%)
American Express Co. ........... 23,527 1,752,761
American General Corp. ......... 12,086 577,106
Fannie Mae...................... 52,558 2,292,843
Federal Home Loan Mortgage
Corp. ......................... 34,440 1,183,875
Green Tree Financial Corp. ..... 6,833 243,426
MBIA Corp. ..................... 2,092 236,004
MBNA Corp. ..................... 16,548 606,071
Morgan Stanley, Dean Witter,
Discover & Co. ................ 28,515 1,227,927
Transamerica Corp. ............. 3,283 307,166
-----------
8,427,179
-----------
FOOD DISTRIBUTORS (0.2%)
Cardinal Health, Inc. .......... 5,325 304,856
Fleming Cos., Inc. ............. 1,888 33,984
Supervalu Inc. ................. 3,385 116,783
Sysco Corp. .................... 8,935 326,127
-----------
781,750
-----------
FOODS (2.8%)
Archer-Daniels-Midland Co. ..... 26,475 622,162
Campbell Soup Co. .............. 23,174 1,158,700
ConAgra, Inc. .................. 11,966 767,320
CPC International Inc. ......... 7,122 657,449
General Mills, Inc. ............ 8,057 524,712
Heinz (H.J.) Co. ............... 18,262 842,335
Hershey Foods Corp. ............ 7,564 418,384
Kellogg Co. .................... 10,446 894,439
Quaker Oats Co. ................ 6,677 299,630
Ralston-Ralston Purina Group.... 5,280 433,950
Sara Lee Corp. ................. 23,961 997,377
Unilever, N.V. ................. 7,967 1,705,436
Wrigley (Wm.) Jr. Co. .......... 5,780 387,260
-----------
9,709,154
-----------
GOLD (0.3%)
Barrick Gold Corp. ............. 18,500 407,000
Battle Mountain Gold Co. ....... 11,077 63,000
Echo Bay Mines Ltd. ............ 6,896 38,790
Homestake Mining Co. ........... 7,232 94,468
Newmont Mining Corp. ........... 7,708 300,612
Placer Dome Inc. ............... 11,858 194,175
-----------
1,098,045
-----------
<CAPTION>
SHARES VALUE
-------------------------
<S> <C> <C>
HARDWARE & TOOLS (0.1%)
Black & Decker Corp. ........... 4,659 $ 173,256
Snap-On, Inc. .................. 3,007 118,401
Stanley Works (The)............. 4,410 176,400
-----------
468,057
-----------
HEALTH CARE--
DIVERSIFIED (4.3%)
Abbott Laboratories............. 38,392 2,562,666
Allergan, Inc. ................. 3,188 101,418
American Home Products Corp. ... 31,874 2,438,361
Bristol-Myers Squibb Co. ....... 49,310 3,994,110
Johnson & Johnson............... 65,961 4,246,239
Mallinckrodt Group Inc. ........ 3,775 147,225
Warner-Lambert Co. ............. 13,395 1,664,329
-----------
15,154,348
-----------
HEALTH CARE--HMOs (0.2%)
Humana Inc. (a)................. 8,065 186,503
United Healthcare Corp. ........ 9,072 471,744
-----------
658,247
-----------
HEALTH CARE--
MISCELLANEOUS (0.4%)
ALZA Corp. (a).................. 4,140 119,801
Amgen Inc. (a).................. 13,136 763,530
Beverly Enterprises, Inc. (a)... 4,817 78,276
HEALTHSOUTH Corp. (a)........... 17,056 425,334
Manor Care, Inc. ............... 3,113 101,562
-----------
1,488,503
-----------
HEAVY TRUCKS & PARTS (0.3%)
Cummins Engine Co., Inc. ....... 1,966 138,726
Dana Corp. ..................... 5,052 191,976
Eaton Corp. .................... 3,830 334,407
ITT Industries, Inc. ........... 5,829 150,097
Navistar International Corp.
(a)............................ 3,776 65,136
PACCAR Inc. .................... 3,760 174,605
-----------
1,054,947
-----------
HOMEBUILDING (0.0%) (b)
Centex Corp. ................... 1,441 58,541
Kaufman & Broad Home Corp. ..... 1,904 33,439
Pulte Corp. .................... 1,206 41,682
-----------
133,662
-----------
HOSPITAL MANAGEMENT (0.5%)
Columbia/HCA Healthcare
Corp. ......................... 33,162 1,303,681
Tenet Healthcare Corp. (a)...... 14,875 439,742
-----------
1,743,423
-----------
HOTEL--MOTEL (0.3%)
Harrah's Entertainment, Inc.
(a)............................ 5,123 93,495
Hilton Hotels Corp. ............ 12,181 323,558
ITT Corp. (a)................... 5,792 353,674
Marriott International Inc. .... 6,376 391,327
-----------
1,162,054
-----------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
120
<PAGE> 122
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
<S> <C> <C>
HOUSEHOLD--FURNISHINGS &
APPLIANCES (0.1%)
Armstrong World Industries,
Inc. .......................... 1,948 $ 142,935
Maytag Corp. ................... 5,081 132,741
Whirlpool Corp. ................ 3,654 199,371
-----------
475,047
-----------
HOUSEHOLD PRODUCTS (2.1%)
Clorox Co. (The)................ 2,517 332,244
Colgate-Palmolive Co. .......... 14,622 954,085
Kimberly-Clark Corp. ........... 27,965 1,391,259
Proctor & Gamble Co. (The)...... 33,675 4,756,594
-----------
7,434,182
-----------
HOUSEWARES (0.3%)
Fortune Brands, Inc. ........... 8,425 314,358
Newell Co. ..................... 7,828 310,185
Rubbermaid Inc. ................ 7,426 220,923
Tupperware Corp. ............... 3,105 113,332
-----------
958,798
-----------
INSURANCE BROKERS (0.3%)
Aon Corp. ...................... 8,111 419,745
Marsh & McLennan Cos., Inc. .... 8,142 581,135
-----------
1,000,880
-----------
INVESTMENT BANK/ BROKERAGE
(0.5%)
Merrill Lynch & Co., Inc. ...... 16,189 965,269
Salomon Inc. ................... 5,242 291,586
Schwab (Charles) Corp. ......... 8,705 354,185
-----------
1,611,040
-----------
LEISURE TIME (0.0%) (b)
Brunswick Corp. ................ 4,852 151,625
-----------
LIFE INSURANCE (0.6%)
Aetna Inc. ..................... 7,464 764,127
Conseco Inc. ................... 9,388 347,356
Jefferson-Pilot Corp. .......... 3,541 247,428
Lincoln National Corp. ......... 5,209 335,329
Torchmark Corp. ................ 3,480 247,950
UNUM Corp. ..................... 7,190 301,980
-----------
2,244,170
-----------
MACHINE TOOLS (0.0%) (b)
Cincinnati Milacron Inc. ....... 1,928 50,007
Giddings & Lewis, Inc. ......... 1,674 34,945
-----------
84,952
-----------
MACHINERY--
DIVERSIFIED (0.9%)
Briggs & Stratton Corp. ........ 1,437 71,850
Case Corp. ..................... 3,629 249,947
Caterpillar Inc. ............... 9,551 1,025,539
Cooper Industries Inc. ......... 5,826 289,844
Deere & Co. .................... 12,877 706,625
Harnischfeger Industries,
Inc. .......................... 2,335 96,902
Ingersoll-Rand Co. ............. 5,372 331,721
NACCO Industries, Inc. Class
A.............................. 441 24,889
Thermo Electron Corp. (a)....... 7,386 251,124
Timken Co. (The)................ 3,013 107,150
-----------
3,155,591
-----------
<CAPTION>
SHARES VALUE
-------------------------
<S> <C> <C>
MAJOR REGIONAL BANKS (4.6%)
Banc One Corp. ................. 24,784 $ 1,200,475
Bank of New York Co., Inc.
(The).......................... 19,363 842,290
BankBoston Corp. ............... 7,522 542,054
Barnett Banks, Inc. ............ 9,834 516,285
Comerica Inc. .................. 5,350 363,800
CoreStates Financial Corp. ..... 10,216 549,110
Fifth Third Bancorp............. 5,123 420,246
First Bank System, Inc. ........ 6,607 564,073
First Union Corp. .............. 14,088 1,303,140
Fleet Financial Group, Inc. .... 13,000 822,250
KeyCorp......................... 11,313 632,114
Mellon Bank Corp. .............. 12,954 584,549
National City Corp. ............ 10,930 573,825
NationsBank Corp. .............. 35,954 2,319,033
Norwest Corp. .................. 18,395 1,034,719
PNC Bank Corp. ................. 15,923 662,795
Republic New York Corp. ........ 2,710 291,325
SunTrust Banks, Inc. ........... 11,198 616,590
U.S. Bancorp.................... 7,564 485,042
Wachovia Corp. ................. 8,339 486,268
Wells Fargo & Co. .............. 4,590 1,237,005
-----------
16,046,988
-----------
MANUFACTURED HOUSING (0.0%) (b)
Fleetwood Enterprises Inc. ..... 1,989 59,297
-----------
MANUFACTURING-- DIVERSIFIED
(1.0%)
Aeroquip-Vickers Inc. .......... 1,420 67,095
AlliedSignal Inc. .............. 14,043 1,179,612
Crane Co. ...................... 2,227 93,116
Dover Corp. .................... 5,589 343,723
Illinois Tool Works Inc. ....... 12,254 611,934
Johnson Controls, Inc. ......... 4,202 172,545
Millipore Corp. ................ 2,219 97,636
Pall Corp. ..................... 6,167 143,383
Parker-Hannifin Corp. .......... 3,766 228,549
Tyco International Ltd. ........ 8,293 576,882
-----------
3,514,475
-----------
MEDICAL PRODUCTS (1.0%)
Bard (C.R.), Inc. .............. 2,844 103,273
Bausch & Lomb Inc. ............. 2,836 133,646
Baxter International Inc. ...... 13,479 704,278
Becton, Dickinson & Co. ........ 6,147 311,192
Biomet, Inc. ................... 5,647 105,175
Boston Scientific Corp. (a)..... 9,616 590,783
Guidant Corp. .................. 3,619 307,615
Medtronic, Inc. ................ 11,912 964,872
St. Jude Medical, Inc. (a)...... 4,530 176,670
United States Surgical Corp. ... 3,436 127,991
-----------
3,525,495
-----------
METALS--MISCELLANEOUS (0.3%)
ASARCO Inc. .................... 2,138 65,476
Cyprus Amax Minerals Co. ....... 4,566 111,867
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
121
<PAGE> 123
INDEXED EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
<S> <C> <C>
METALS--MISCELLANEOUS
(Continued)
Freeport-McMoRan Copper & Gold
Inc. Class B................... 9,642 $ 300,107
Inco Ltd. ...................... 8,343 250,812
Phelps Dodge Corp. ............. 3,234 275,496
-----------
1,003,758
-----------
MISCELLANEOUS (1.4%)
AirTouch Communications, Inc.
(a)............................ 24,687 675,806
American Greetings Corp. Class
A.............................. 3,671 136,286
Corning Inc. ................... 11,411 634,737
Harcourt General, Inc. ......... 3,501 166,735
Harris Corp. ................... 1,940 162,960
Jostens, Inc. .................. 2,063 54,412
Minnesota Mining & Manufacturing
Co. ........................... 20,734 2,114,868
Pioneer Hi-Bred International,
Inc. .......................... 4,056 324,480
TRW, Inc. ...................... 6,339 360,134
Whitman Corp. .................. 5,148 130,309
-----------
4,760,727
-----------
MONEY CENTER BANKS (2.7%)
BankAmerica Corp. .............. 35,202 2,272,729
Bankers Trust New York Corp. ... 3,964 344,868
Chase Manhattan Corp. .......... 21,657 2,102,083
Citicorp........................ 23,152 2,791,263
First Chicago Corp. ............ 15,700 949,850
Morgan (J.P.) & Co., Inc. ...... 9,249 965,364
-----------
9,426,157
-----------
MULTI-LINE INSURANCE (1.9%)
American International Group,
Inc. .......................... 23,290 3,478,944
CIGNA Corp. .................... 3,797 673,967
Hartford Financial Services
Group, Inc. ................... 5,812 480,943
Travelers Group Inc. ........... 31,794 2,005,009
-----------
6,638,863
-----------
NATURAL GAS DISTRIBUTORS &
PIPELINES (0.7%)
Coastal Corp. (The)............. 5,168 274,873
Columbia Gas System, Inc. ...... 2,692 175,653
Consolidated Natural Gas Co. ... 4,647 250,067
Eastern Enterprises............. 1,003 34,791
Enron Corp. .................... 12,451 508,156
ENSERCH Corp. .................. 3,411 75,895
NICOR Inc. ..................... 2,472 88,683
NorAm Energy Corp. ............. 6,720 102,480
ONEOK Inc. ..................... 1,393 44,837
Pacific Enterprises............. 4,147 139,443
Peoples Energy Corp. ........... 1,711 64,056
Sonat, Inc. .................... 4,223 216,429
Williams Cos., Inc. (The)....... 7,725 337,969
-----------
2,313,332
-----------
OFFICE EQUIPMENT & SUPPLIES
(0.5%)
Moore Corp. Ltd. ............... 4,334 85,326
Pitney Bowes Inc. .............. 7,476 532,665
Xerox Corp. .................... 16,071 1,267,600
-----------
1,885,591
-----------
OIL & GAS DRILLING (0.1%)
Helmerich & Payne, Inc. ........ 1,227 70,706
Rowan Cos., Inc. (a)............ 4,179 117,796
-----------
188,502
-----------
<CAPTION>
SHARES VALUE
-------------------------
<S> <C> <C>
OIL--EXPLORATION & PRODUCTION
(0.2%)
Burlington Resources Inc. ...... 6,220 $ 274,458
Oryx Energy Co. (a)............. 5,218 110,230
Santa Fe Energy Resources, Inc.
(a)............................ 4,883 71,719
Union Pacific Resources Group,
Inc. .......................... 12,414 308,798
-----------
765,205
-----------
OIL--INTEGRATED
DOMESTIC (1.1%)
Amerada Hess Corp. ............. 4,614 256,365
Ashland Inc. ................... 3,709 172,005
Atlantic Richfield Co. ......... 16,874 1,189,617
Kerr-McGee Corp. ............... 2,434 154,255
Louisiana Land & Exploration Co.
(The).......................... 1,678 95,856
Occidental Petroleum Corp. ..... 16,235 406,890
Pennzoil Co. ................... 2,338 179,441
Phillips Petroleum Co. ......... 12,947 566,431
Sun Co., Inc. .................. 3,660 113,460
Unocal Corp. ................... 12,339 478,907
USX-Marathon Group.............. 14,178 409,390
-----------
4,022,617
-----------
OIL--INTEGRATED INTERNATIONAL
(6.3%)
Amoco Corp. .................... 24,683 2,145,878
Chevron Corp. .................. 32,314 2,389,216
Exxon Corp. (d)................. 123,068 7,568,682
Mobil Corp. .................... 38,984 2,724,007
Royal Dutch Petroleum Co. ...... 26,623 5,790,503
Texaco Inc. .................... 13,077 1,422,124
-----------
22,040,410
-----------
OIL--WELL EQUIPMENT & SERVICES
(0.8%)
Baker Hughes Inc. .............. 7,084 274,062
Dresser Industries, Inc. ....... 8,904 331,674
Halliburton Co. ................ 6,228 493,569
McDermott International,
Inc. .......................... 2,689 78,485
Schlumberger Ltd. .............. 12,141 1,517,625
Western Atlas Inc. (a).......... 2,632 192,794
-----------
2,888,209
-----------
PAPER & FOREST PRODUCTS (0.8%)
Boise Cascade Corp. ............ 2,368 83,620
Champion International Corp. ... 4,773 263,708
Georgia-Pacific Corp. .......... 4,559 389,225
International Paper Co. ........ 14,811 719,259
James River Corp. of Virginia... 4,182 154,734
Louisiana-Pacific Corp. ........ 5,367 113,378
Mead Corp. ..................... 2,648 164,838
Potlatch Corp. ................. 1,440 65,160
Union Camp Corp. ............... 3,424 171,200
Westvaco Corp. ................. 5,011 157,533
Weyerhaeuser Co. ............... 9,810 510,120
Willamette Industries, Inc. .... 2,707 189,490
-----------
2,982,265
-----------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
122
<PAGE> 124
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
<S> <C> <C>
PERSONAL LOANS (0.3%)
Beneficial Corp. ............... 2,662 $ 189,169
Countrywide Credit Industries,
Inc. .......................... 5,200 162,175
Household International,
Inc. .......................... 5,322 625,002
Providian Financial Corp. ...... 4,646 149,253
-----------
1,125,599
-----------
PHOTOGRAPHY/
IMAGING (0.4%)
Eastman Kodak Co. .............. 16,589 1,273,206
IKON Office Solutions, Inc. .... 6,720 167,580
Polaroid Corp. ................. 2,238 124,209
-----------
1,564,995
-----------
POLLUTION CONTROL (0.3%)
Browning-Ferris Industries
Inc. .......................... 10,485 348,626
Waste Management Inc. .......... 22,305 716,548
-----------
1,065,174
-----------
PROPERTY--CASUALTY INSURANCE
(1.3%)
Allstate Corp. (The)............ 22,060 1,610,380
Chubb Corp. .................... 8,674 580,074
General Re Corp. ............... 4,095 745,290
Loews Corp. .................... 5,744 575,118
MGIC Investment Corp. .......... 5,819 278,949
SAFECO Corp. ................... 6,255 292,030
St. Paul Cos., Inc. (The)....... 4,113 313,616
USF&G Corp. .................... 5,477 131,448
-----------
4,526,905
-----------
PUBLISHING (0.1%)
McGraw-Hill Cos., Inc. (The).... 5,011 294,709
Meredith Corp. ................. 2,613 75,777
-----------
370,486
-----------
PUBLISHING--NEWSPAPER (0.5%)
Dow Jones & Co., Inc. .......... 4,842 194,588
Gannett Co., Inc. .............. 7,018 693,027
Knight-Ridder Inc. ............. 4,821 236,530
New York Times Co. (The) Class
A.............................. 4,812 243,006
Times Mirror Co. (The) Class
A.............................. 4,605 261,622
Tribune Co. .................... 6,031 289,865
-----------
1,918,638
-----------
RAILROADS (0.8%)
Burlington Northern Santa Fe
Corp. ......................... 7,630 685,746
CSX Corp. ...................... 10,557 585,914
Norfolk Southern Corp. ......... 6,212 625,859
Union Pacific Corp. ............ 12,103 853,261
-----------
2,750,780
-----------
RESTAURANTS (0.5%)
Darden Restaurants, Inc. ....... 7,545 68,377
McDonald's Corp. ............... 34,211 1,652,819
Wendy's International, Inc. .... 6,337 164,366
-----------
1,885,562
-----------
RETAIL STORES--APPAREL (0.3%)
Charming Shoppes, Inc. (a)...... 5,153 26,892
Gap, Inc. (The)................. 13,874 539,352
Limited, Inc. (The)............. 13,368 270,702
TJX Cos., Inc. (The)............ 7,442 196,283
-----------
1,033,229
-----------
<CAPTION>
SHARES VALUE
-------------------------
<S> <C> <C>
RETAIL STORES--
DEPARTMENT (0.6%)
Dillard's Inc. Class A.......... 5,602 $ 193,969
Federated Department Stores,
Inc. (a)....................... 10,296 357,786
May Department Stores Co. ...... 11,726 554,053
Mercantile Stores Co., Inc. .... 1,864 117,316
Nordstrom, Inc. ................ 3,956 194,091
Penney (J.C.) Co., Inc. ........ 12,277 640,706
-----------
2,057,921
-----------
RETAIL STORES--DRUG (0.3%)
Longs Drug Stores Corp. ........ 1,967 51,511
Rite-Aid Corp. ................. 5,858 292,168
Walgreen Co. ................... 12,170 652,616
-----------
996,295
-----------
RETAIL STORES--FOOD
CHAIN (0.5%)
Albertson's, Inc. .............. 12,452 454,498
American Stores Co. ............ 7,379 364,338
Giant Food, Inc. Class A........ 2,936 95,053
Great Atlantic & Pacific Tea
Co., Inc. (The)................ 1,902 51,711
Kroger Co. (a).................. 12,372 358,788
Winn-Dixie Stores, Inc. ........ 7,505 279,561
-----------
1,603,949
-----------
RETAIL STORES--GENERAL
MERCHANDISE (1.6%)
Dayton-Hudson Corp. ............ 10,830 576,021
Kmart Corp. (a)................. 23,883 292,567
Sears Roebuck & Co. ............ 19,354 1,040,277
Wal-Mart Stores, Inc. .......... 112,366 3,799,375
-----------
5,708,240
-----------
RETAIL STORES--SPECIALTY (1.1%)
Autozone, Inc. (a).............. 7,398 174,315
Circuit City Stores--Circuit
City Group..................... 4,843 172,229
Costco Cos., Inc. .............. 10,388 341,506
CVS Corp. ...................... 8,227 421,634
Home Depot, Inc. (The).......... 24,088 1,660,566
Lowe's Cos., Inc. .............. 8,543 317,159
Pep Boys-Manny, Moe & Jack...... 3,084 105,049
Tandy Corp. .................... 2,940 164,640
Toys "R" Us, Inc. (a)........... 14,427 504,945
Woolworth Corp. (a)............. 6,588 158,112
-----------
4,020,155
-----------
SAVINGS & LOANS (0.2%)
Ahmanson (H.F.) & Co. .......... 5,195 223,385
Golden West Financial Corp. .... 2,893 202,510
Great Western Financial
Corp. ......................... 6,788 364,855
-----------
790,750
-----------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
123
<PAGE> 125
INDEXED EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (CONTINUED)
SHARES VALUE
-------------------------
<S> <C> <C>
SHOES (0.3%)
Nike Inc. Class B............... 14,261 $ 832,486
Reebok International Ltd. ...... 2,756 128,843
Stride Rite Corp. .............. 2,453 31,582
-----------
992,911
-----------
SPECIALIZED SERVICES (0.8%)
Block (H&R), Inc. .............. 5,139 165,733
Cognizant Corp. ................ 8,380 339,390
CUC International Inc. (a)...... 20,257 522,884
Dun & Bradstreet Corp. (The).... 8,374 219,818
Ecolab Inc. .................... 3,163 151,033
HFS Inc. (a).................... 7,801 452,458
Interpublic Group of Cos.,
Inc. .......................... 3,931 241,019
Laidlaw Inc. Class B............ 15,561 214,936
National Service Industries,
Inc. .......................... 2,379 115,828
Safety-Kleen Corp. ............. 2,888 48,735
Service Corp. International..... 11,601 381,383
-----------
2,853,217
-----------
SPECIALTY PRINTING (0.1%)
Deluxe Corp. ................... 4,102 139,981
Donnelley (R.R.) & Sons Co. .... 7,541 276,189
Harland (John H.) Co. .......... 1,498 34,173
-----------
450,343
-----------
STEEL (0.2%)
Allegheny Teledyne Inc. ........ 8,647 233,469
Armco Inc. (a).................. 5,301 20,541
Bethlehem Steel Corp. (a)....... 5,496 57,364
Inland Steel Industries Inc. ... 2,388 62,387
Nucor Corp. .................... 4,364 249,839
USX-U.S. Steel Group............ 4,203 147,368
Worthington Industries, Inc. ... 4,562 83,542
-----------
854,510
-----------
TELECOMMUNICATIONS-- LONG
DISTANCE (1.9%)
AT&T Corp. ..................... 80,591 2,825,722
MCI Communications Corp. ....... 33,825 1,294,865
Sprint Corp. ................... 21,316 1,121,754
WorldCom, Inc. (a).............. 44,246 1,415,872
-----------
6,658,213
-----------
TELEPHONE (3.8%)
ALLTEL Corp. ................... 9,401 314,346
Ameritech Corp. ................ 27,340 1,857,411
Bell Atlantic Corp. ............ 21,642 1,642,087
BellSouth Corp. ................ 49,122 2,278,033
Frontier Corp. ................. 8,149 162,471
GTE Corp. ...................... 47,569 2,087,090
NYNEX Corp. .................... 21,695 1,250,174
SBC Communications Inc. ........ 45,156 2,794,027
US West, Inc. .................. 23,551 887,578
-----------
13,273,217
-----------
<CAPTION>
SHARES VALUE
-------------------------
<S> <C> <C>
TEXTILES--APPAREL MANUFACTURERS
(0.2%)
Fruit of the Loom, Inc.
Class A (a).................... 3,755 $ 116,405
Liz Claiborne, Inc. ............ 3,634 169,435
Russell Corp. .................. 1,926 57,058
Springs Industries, Inc. Class
A.............................. 987 52,064
VF Corp. ....................... 3,149 268,059
-----------
663,021
-----------
TOBACCO (1.6%)
Philip Morris Cos. ............. 120,414 5,343,371
UST Inc. ....................... 9,312 258,408
-----------
5,601,779
-----------
TOYS (0.2%)
Hasbro Inc. .................... 6,476 183,757
Mattel, Inc. ................... 14,341 485,801
-----------
669,558
-----------
TRANSPORTATION-- MISCELLANEOUS
(0.1%)
Federal Express Corp. (a)....... 5,700 329,175
Ryder System, Inc. ............. 3,915 129,195
-----------
458,370
-----------
TRUCKERS (0.0%) (b)
Caliber System, Inc. ........... 1,943 72,377
-----------
Total Common Stocks
(Cost $246,459,778)............ 337,321,102(c)
-----------
SHORT-TERM
INVESTMENTS (4.4%)
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C>
COMMERCIAL PAPER (3.0%)
Dynamic Funding Corp.
5.82%, due 7/2/97 (d).......... $ 600,000 599,903
Shinhan Bank
5.90%, due 7/1/97 (d).......... 800,000 800,000
5.90%, due 7/7/97 (d).......... 2,600,000 2,597,443
5.92%, due 8/22/97 (d)......... 200,000 198,290
5.93%, due 8/18/97 (d)......... 1,100,000 1,091,302
5.93%, due 8/19/97 (d)......... 2,400,000 2,380,629
5.93%, due 8/22/97 (d)......... 1,800,000 1,784,582
5.93%, due 8/26/97 (d)......... 1,100,000 1,089,853
-----------
Total Commercial Paper
(Cost $10,542,002)............. 10,542,002
-----------
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
124
<PAGE> 126
MAINSTAY VP SERIES FUND, INC.
<TABLE>
<CAPTION>
SHORT-TERM
INVESTMENTS (CONTINUED)
PRINCIPAL
AMOUNT VALUE
---------------------------
<S> <C> <C>
U.S. GOVERNMENT (1.4%)
United States Treasury Bills
4.82%, due 9/11/97 (d)......... $1,500,000 $ 1,484,519
4.87%, due 9/18/97 (d)......... 3,700,000 3,658,149
------------
Total U.S. Government
(Cost $5,146,055).............. 5,142,668
------------
Total Short-Term Investments
(Cost $15,688,057)............. 15,684,670
------------
Total Investments
(Cost $262,147,835) (f)........ 100.0% 353,005,772(g)
Liabilities in Excess of
Cash and Other Assets.......... (0.0)(b) (35,042)
---------- ------------
Net Assets...................... 100.0% $352,970,730
========== ============
FUTURES CONTRACTS (0.0%) (B)
<CAPTION>
CONTRACTS UNREALIZED
LONG APPRECIATION
--------------------------
<S> <C> <C>
Standard & Poor's 500
September 1997................. 34 $ 102,286(e)
------------
Total Futures Contracts
(Settlement Value
$15,031,964)................... $ 102,286
============
</TABLE>
- ------------
(a) Non-income producing securities.
(b) Less than one tenth of a percent.
(c) The combined market value of common stocks and settlement value of Standard
& Poor's 500 Index futures contracts represents 99.8% of net assets.
(d) Segregated or partially segregated as collateral for futures contracts.
(e) Represents the difference between the value of the contracts at the time
they were opened and the value at June 30, 1997.
(f) The cost for Federal income tax purposes is $262,335,215.
(g) At June 30, 1997 net unrealized appreciation was $90,670,557, based on cost
for Federal income tax purposes. This consisted of aggregate gross
unrealized appreciation for all investments on which there was an excess of
market value over cost of $92,795,756 and aggregate gross unrealized
depreciation for all investments on which there was an excess of cost over
market value of $2,125,199.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
125
<PAGE> 127
INDEXED EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in securities, at value
(identified cost $262,147,835)....... $353,005,772
Cash................................... 61,502
Receivables:
Investment securities sold........... 1,029,788
Dividends and interest............... 440,255
Fund shares sold..................... 409,162
------------
Total assets..................... 354,946,479
------------
LIABILITIES:
Payables:
Investment securities purchased...... 1,707,860
Adviser.............................. 28,068
Administrator........................ 28,068
NYLIAC............................... 28,068
Custodian............................ 8,796
Directors............................ 109
Accrued expenses....................... 102,254
Variation margin payable on futures
contracts............................ 72,526
------------
Total liabilities................ 1,975,749
------------
Net assets applicable to outstanding
shares............................... $352,970,730
============
COMPOSITION OF NET ASSETS:
Capital stock (par value of $.01 per
share) 50 million shares
authorized........................... $ 182,913
Additional paid-in capital............. 254,973,192
Accumulated undistributed net
investment income.................... 2,418,675
Accumulated undistributed net realized
gain on investments.................. 4,435,727
Net unrealized appreciation on
investments.......................... 90,960,223
------------
Net assets applicable to outstanding
shares............................... $352,970,730
============
Shares of capital stock outstanding.... 18,291,292
============
Net asset value per share
outstanding.......................... $ 19.30
============
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (Unaudited)
INVESTMENT INCOME:
Income:
Dividends (a)........................ $ 2,392,993
Interest............................. 549,506
-----------
Total income..................... 2,942,499
-----------
Expenses:
Administration....................... 276,872
Advisory............................. 138,436
Shareholder communication............ 51,158
Custodian............................ 27,134
Professional......................... 21,713
Directors............................ 4,545
Portfolio pricing.................... 1,822
Miscellaneous........................ 1,534
-----------
Total expenses................... 523,214
-----------
Net investment income.................. 2,419,285
-----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain from:
Securities transactions.............. 1,062,054
Futures transactions................. 3,434,092
-----------
Net realized gain on investments....... 4,496,146
-----------
Net change in unrealized appreciation
on investments:
Securities transactions.............. 46,325,662
Futures transactions................. 231,231
-----------
Net unrealized gain on investments..... 46,556,893
-----------
Net realized and unrealized gain on
investments.......................... 51,053,039
-----------
Net increase in net assets resulting
from operations...................... $ 53,472,324
===========
</TABLE>
- ------------
(a) Dividends recorded net of foreign withholding taxes
in the amount of $18,515.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
126
<PAGE> 128
MAINSTAY VP SERIES FUND, INC.
INDEXED EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1997 (Unaudited)
and the year ended December 31, 1996
<TABLE>
<CAPTION>
1997 1996
-------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................................................. $ 2,419,285 $ 3,184,041
Net realized gain on investments.................................................. 4,496,146 3,967,042
Net change in unrealized appreciation on investments.............................. 46,556,893 24,620,177
------------ ------------
Net increase in net assets resulting from operations.............................. 53,472,324 31,771,260
------------ ------------
Dividends and distributions to shareholders:
From net investment income........................................................ (1,000) (3,183,651)
From net realized gain on investments............................................. (1,459,000) (2,701,672)
------------ ------------
Total dividends and distributions to shareholders............................. (1,460,000) (5,885,323)
------------ ------------
Capital share transactions:
Net proceeds from sale of shares.................................................. 77,619,830 110,486,675
Net asset value of shares issued to shareholders in reinvestment of dividends and
distributions.................................................................... 1,460,000 5,885,323
------------ ------------
79,079,830 116,371,998
Cost of shares redeemed........................................................... (2,065,971) (23,483,920)
------------ ------------
Increase in net assets derived from capital share transactions.................... 77,013,859 92,888,078
------------ ------------
Net increase in net assets.......................................................... 129,026,183 118,774,015
NET ASSETS:
Beginning of period................................................................. 223,944,547 105,170,532
------------ ------------
End of period....................................................................... $352,970,730 $223,944,547
============ ============
Accumulated undistributed net investment income..................................... $ 2,418,675 $ 390
============ ============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(Selected Per Share Data and Ratios)
<TABLE>
<CAPTION>
JANUARY 29,
SIX MONTHS 1993 (a)
ENDED THROUGH
JUNE 30, YEAR ENDED DECEMBER 31 DECEMBER 31,
1997* 1996 1995 1994 1993
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period.... $ 16.10 $ 13.53 $ 10.38 $ 10.58 $ 10.00
-------- -------- -------- -------- --------
Net investment income..................... 0.13 0.24 0.27 0.24 0.19
Net realized and unrealized gain (loss) on
investments............................. 3.16 2.79 3.55 (0.15) 0.67
-------- -------- -------- -------- --------
Total from investment operations.......... 3.29 3.03 3.82 0.09 0.86
-------- -------- -------- -------- --------
Less dividends and distributions:
From net investment income.............. (0.00)(b) (0.24) (0.28) (0.24) (0.19)
From net realized gain on investments... (0.09) (0.22) (0.39) (0.05) (0.08)
In excess of net realized gain on
investments........................... -- -- -- -- (0.01)
-------- -------- -------- -------- --------
Total dividends and distributions......... (0.09) (0.46) (0.67) (0.29) (0.28)
-------- -------- -------- -------- --------
Net asset value at end of period.......... $ 19.30 $ 16.10 $ 13.53 $ 10.38 $ 10.58
======== ======== ======== ======== ========
Total investment return (c)............... 20.46% 22.42% 36.89% 0.76% 8.53%
Ratios (to average net
assets)/Supplemental Data:
Net investment income................... 1.75%+ 2.14% 2.52% 2.61% 2.54%+
Net expenses............................ 0.38%+ 0.47% 0.47% 0.47% 0.47%+
Expenses (before reimbursement)......... 0.38%+ 0.50% 0.62% 0.68% 0.96%+
Portfolio turnover rate................... 1% 3% 5% 8% 7%
Average commission rate paid.............. $ 0.0497 $ 0.0498 (d) (d) (d)
Net assets at end of period (in 000's).... $ 352,971 $ 223,945 $ 105,171 $ 63,164 $ 43,081
</TABLE>
- ------------
(a) Commencement of Operations.
(b) Less than one cent per share.
(c) Total return is not annualized.
(d) Disclosure of amount required for fiscal years beginning on or after
September 1, 1995.
+ Annualized.
* Unaudited.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
127
<PAGE> 129
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-- Organization and Business:
- --------------------------------------------------------------------------------
MainStay VP Series Fund, Inc. (formerly New York Life MFA Series Fund, Inc.)
(the "Company") was incorporated under Maryland law on June 3, 1983. The
Company is registered under the Investment Company Act of 1940, as amended,
("Investment Company Act") as an open-end diversified management investment
company. Convertible Portfolio, which commenced operations on October 1, 1996,
High Yield Corporate Bond, International Equity and Value Portfolios, which
commenced operations on May 1, 1995, Capital Appreciation, Cash Management,
Government, Total Return and Indexed Equity Portfolios, which commenced
operations on January 29, 1993 and Bond and Growth Equity Portfolios, which
commenced operations on January 23, 1984, (the "Funds") are separate portfolios
of the Company. Shares of the Funds are currently offered only to New York Life
Insurance and Annuity Corporation ("NYLIAC"), a wholly owned subsidiary of New
York Life Insurance Company ("New York Life"). NYLIAC allocates shares of the
Funds to, among others, New York Life Insurance and Annuity Corporation's
Variable Universal Life Separate Account I and may allocate shares in the future
to Variable Universal Life Separate Account II ("Separate Accounts",
collectively). The Separate Accounts are used to fund flexible premium variable
life insurance policies.
The investment objectives for each of the Portfolios of the Company are as
follows:
Capital Appreciation: to seek long-term growth of capital.
Cash Management: to seek as high a level of current income as is considered
consistent with the preservation of capital and liquidity.
Convertible: to seek capital appreciation together with current income.
Government: to seek a high level of current income, consistent with safety of
principal.
High Yield Corporate Bond: to maximize current income through investment in a
diversified portfolio of high yield, high risk debt securities which are
ordinarily in the lower rating categories of recognized rating agencies.
International Equity: to seek long-term growth of capital by investing in a
portfolio consisting primarily of non-U.S. equity securities.
Total Return: to realize current income consistent with reasonable opportunity
for future growth of capital and income.
Value: to realize maximum long-term total return from a combination of capital
growth and income.
Bond: to seek the highest income over the long term consistent with
preservation of principal.
Growth Equity: to seek long-term growth of capital with income as a secondary
consideration.
Indexed Equity: to provide investment results that correspond to the total
return performance (reflecting reinvestment of dividends) of common stocks in
the aggregate, as represented by the S&P 500.
- --------------------------------------------------------------------------------
NOTE 2--Significant Accounting Policies:
- --------------------------------------------------------------------------------
The following is a summary of significant accounting policies followed by the
Company:
(A)
VALUATION OF FUND SHARES. The net asset value per share of each Portfolio is
calculated on each day the New York Stock Exchange (the "Exchange") is open for
trading as of the regular close of the Exchange (normally 4:00 P.M., Eastern
Time). Net asset value per share is calculated for each Portfolio by dividing
the current market value (amortized cost, in the case of Cash Management
Portfolio) of the Portfolio's total assets, less liabilities, by the total
number of outstanding shares of that Portfolio.
128
<PAGE> 130
MAINSTAY VP SERIES FUND, INC.
(B)
SECURITIES VALUATION. Portfolio securities of Cash Management Portfolio are
valued at amortized cost, which approximates market value. The amortized cost
method involves valuing a security at its cost on the date of purchase and
thereafter assuming a constant amortization to maturity of the difference
between such cost and the value on maturity date.
Securities of each of the other Portfolios are stated at value determined (a) by
appraising common and preferred stocks which are traded on the New York Stock
Exchange at the last sale price on that day or, if no sale occurs, at the mean
between the closing bid and asked prices, (b) by appraising common and preferred
stocks traded on other United States national securities exchanges or foreign
securities exchanges as nearly as possible in the manner described in (a) by
reference to their principal exchange, including the National Association of
Securities Dealers National Market System, (c) by appraising over-the-counter
securities quoted on the National Association of Securities Dealers NASDAQ
system (but not listed on the National Market System) at the bid price supplied
through such system, (d) by appraising over-the-counter securities not quoted on
the NASDAQ system and securities listed or traded on certain foreign exchanges
whose operations are similar to the U.S. over-the-counter market, at prices
supplied by the pricing agent or brokers selected by the Adviser if these prices
are deemed to be representative of market values at the regular close of
business of the New York Stock Exchange, (e) by appraising debt securities at
prices supplied by a pricing agent selected by the Adviser, whose prices reflect
broker/dealer supplied valuations and electronic data processing techniques if
those prices are deemed by the Adviser to be representative of market values at
the regular close of business of the New York Stock Exchange, (f) by appraising
options and futures contracts at the last sale price on the market where such
options or futures contracts are principally traded, and (g) by appraising all
other securities and other assets, including debt securities for which prices
are supplied by a pricing agent but are not deemed by the Adviser to be
representative of market values, but excluding money market instruments with a
remaining maturity of sixty days or less and including restricted securities and
securities for which no market quotations are available, at fair value in
accordance with procedures approved by the Directors. Short-term securities
which mature in more than 60 days are valued at current market quotations.
Short-term securities which mature in 60 days or less are valued at amortized
cost if their term to maturity at purchase was 60 days or less, or by amortizing
the difference between market value on the 61st day prior to maturity and value
on maturity date if their original term to maturity at purchase exceeded 60
days.
Events affecting the values of certain portfolio securities that occur between
the close of trading on the principal market for such securities (foreign
exchanges and over-the-counter markets) and the regular close of the New York
Stock Exchange will not be reflected in the Portfolios' calculations of net
asset values unless the Adviser believes that the particular event would
materially affect net asset value, in which case an adjustment would be made.
(C)
FORWARD FOREIGN CURRENCY CONTRACTS. A forward foreign currency contract is an
agreement to buy or sell currencies of different countries on a specified future
date at a specified rate. During the period the forward contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking to market" such contract on a daily basis to reflect the
market value of the contract at the end of each day's trading. When the forward
contract is closed, the Portfolio records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transaction and
the Portfolio's basis in the contract. The International Equity Portfolio enters
into forward foreign currency contracts in order to hedge its foreign currency
denominated investments and receivables and payables against adverse movements
in future foreign exchange rates.
The use of forward contracts involves, to varying degrees, elements of market
risk in excess of the amount recognized in the statement of assets and
liabilities. The contract amount reflects the extent of the Portfolio's
involvement in these financial instruments. Risks arise from the possible
movements in the foreign exchange rates underlying these instruments. The net
unrealized appreciation on forward contracts reflects the Portfolio's exposure
at period end to credit loss in the event of a counterparty's failure to perform
its obligations.
129
<PAGE> 131
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
HIGH YIELD CORPORATE BOND PORTFOLIO
Forward foreign currency contract open at June 30, 1997:
<TABLE>
<CAPTION>
VALUE ON
CONTRACT TRADE CURRENT UNREALIZED
AMOUNT DATE VALUE APPRECIATION
-------------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY SALE CONTRACT
- ---------------------------------------------------
Deutsche Mark, expiring 8/27/97.................... DM 521,798 $ 315,000 $ 300,731 $ 14,269
===========
</TABLE>
INTERNATIONAL EQUITY PORTFOLIO
Forward foreign currency contracts open at June 30, 1997:
<TABLE>
<CAPTION>
VALUE ON UNREALIZED
CONTRACT TRADE CURRENT APPRECIATION/
AMOUNT DATE VALUE (DEPRECIATION)
-------------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY SALE CONTRACTS
- ---------------------------------------------------
Australian Dollar, expiring 7/7/97 - 9/3/97........ A$ 1,815,000 $ 1,394,981 $ 1,360,293 $ 34,688
Deutsche Mark, expiring 7/7/97 - 10/20/97.......... DM 24,170,424 14,272,666 13,900,794 371,872
French Franc, expiring 8/18/97..................... FF 6,600,000 1,136,377 1,127,940 8,437
Italian Lira, expiring 8/1/97...................... IL 3,060,000,000 1,778,225 1,796,220 (17,995)
Japanese Yen, expiring 7/7/97 - 10/28/97........... Y 1,129,744,163 9,365,734 9,943,945 (578,211)
New Zealand Dollar, expiring 7/23/97............... N$ 1,265,000 869,561 856,820 12,741
Norwegian Krone, expiring 7/21/97.................. NK 4,250,000 599,887 580,992 18,895
Spanish Peseta, expiring 8/1/97.................... SP 142,000,000 968,360 965,884 2,476
Swiss Franc, expiring 9/29/97 - 10/10/97........... CF 6,862,000 4,812,769 4,763,097 49,672
-----------
(97,425)
-----------
FOREIGN CURRENCY BUY CONTRACTS
- ---------------------------------------------------
Australian Dollar, expiring 7/7/97................. A$ 500,000 390,465 374,621 (15,844)
Canadian Dollar, expiring 7/16/97.................. C$ 1,893,780 1,372,106 1,374,276 2,170
Deutsche Mark, expiring 7/7/97 - 9/29/97........... DM 20,379,196 11,919,605 11,723,080 (196,525)
French Franc, expiring 8/18/97..................... FF 2,885,000 506,460 493,046 (13,414)
Italian Lira, expiring 8/1/97...................... IL 1,340,000,000 782,692 786,580 3,888
Japanese Yen, expiring 7/7/97 - 10/28/97........... Y 905,886,673 7,479,629 7,980,980 501,351
Norwegian Krone, expiring 7/21/97.................. NK 2,878,000 406,514 393,434 (13,080)
Pound Sterling, expiring 7/7/97.................... L 705,000 1,150,028 1,173,084 23,056
Spanish Peseta, expiring 8/1/97.................... SP 134,000,000 920,077 911,468 (8,609)
Swiss Franc, expiring 7/10/97 - 10/10/97........... CF 6,185,000 4,315,978 4,262,343 (53,635)
-----------
229,358
-----------
Net Appreciation................................... $ 131,933
===========
</TABLE>
(D)
FUTURES CONTRACTS. A futures contract is an agreement to purchase or sell a
specified quantity of an underlying instrument at a specified future date, or to
make or receive a cash payment based on the value of a securities index. During
the period the futures contract is open, changes in the value of the contract
are recognized as unrealized gains or losses by "marking to market" such
contract on a daily basis to reflect the market value of the contract at the end
of each day's trading. The Portfolio agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in the value of the contract.
Such receipts or payments are known as "variation margin". When the futures
contract is closed, the Portfolio records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transaction and
the
130
<PAGE> 132
MAINSTAY VP SERIES FUND, INC.
Portfolio's basis in the contract. The Indexed Equity Portfolio invests in stock
index futures contracts to gain full exposure to changes in stock market prices
to fulfill its investment objective.
The use of futures contracts involves, to varying degrees, elements of market
risk in excess of the amount recognized in the statement of assets and
liabilities. The contract or notional amounts and variation margin reflect the
extent of the Portfolio's involvement in open futures positions. Risks arise
from the possible imperfect correlation in movements in the price of futures
contracts and the underlying hedged assets, and the possible inability of
counterparties to meet the terms of their contracts. However, the Portfolio's
activities in futures contracts are conducted through regulated exchanges which
minimize counterparty credit risks.
(E)
REPURCHASE AGREEMENTS. At the time the Funds enter into a repurchase agreement,
the value of the underlying security, including accrued interest, will be equal
to or exceed the value of the repurchase agreement and, in the case of
repurchase agreements exceeding one day, the value of the underlying security,
including accrued interest, is required during the term of the agreement to be
equal to or exceed the value of the repurchase agreement. The underlying
securities for all repurchase agreements are held in a segregated account of the
respective Portfolios' custodian. In the case of repurchase agreements exceeding
one day, the market value of the underlying securities are monitored by the
Adviser by pricing them daily. (Also see Note 5).
(F)
SECURITY TRANSACTIONS AND INVESTMENT INCOME. The Company records security
transactions on the trade date. Realized gains and losses on security
transactions are determined using the identified cost method and include gains
and losses from repayments of principal on mortgage related and other
asset-backed securities. Dividend income is recognized on the ex-dividend date
and interest income is accrued daily except when collection is not expected.
Discounts on securities purchased for all Portfolios are accreted on the
constant yield method over the life of the respective securities or, if
applicable, over the period to the first call date. Premiums on securities
purchased are not amortized for any Portfolio except Cash Management Portfolio
which amortizes the premium on the constant yield method over the life of the
respective securities.
(G)
FOREIGN CURRENCY INVESTING. The books and records of the Company are recorded in
U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the
mean between the buying and selling rates last quoted by any major U.S. bank at
the following dates:
(i) market value of investment securities, other assets and
liabilities--at the valuation date,
(ii) purchases and sales of investment securities, income and
expenses--at the date of such transactions.
The assets and liabilities of International Equity Portfolio are presented at
the exchange rates and market values at the close of the period. The changes in
net assets arising from fluctuations in exchange rates and the changes in net
assets resulting from changes in market prices are not separately presented.
However, gains and losses from certain foreign currency transactions are treated
as ordinary income for Federal income tax purposes.
Net realized gain (loss) on foreign currency transactions represents net gains
and losses on forward currency contracts, net currency gains or losses realized
as a result of differences between the amounts of securities sale proceeds or
purchase cost, dividends, interest and withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amount actually received or
paid. Net currency gains or losses from valuing foreign currency denominated
assets and liabilities, other than investments, at period-end exchange rates are
reflected in unrealized foreign exchange gains.
131
<PAGE> 133
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
There are certain risks involved in investing in foreign securities that are in
addition to the usual risks inherent in domestic instruments. These risks
include those resulting from future adverse political and economic developments
and possible imposition of currency exchange blockages or other foreign
governmental laws or restrictions.
INTERNATIONAL EQUITY PORTFOLIO
Foreign cash held at June 30, 1997:
<TABLE>
<CAPTION>
CURRENCY COST VALUE
--------------------------------------------- -------- --------
<S> <C> <C> <C> <C>
Australian Dollar A$ 10,385 $ 7,970 $ 7,781
Austrian Schilling AS 159,634 13,253 13,020
Deutsche Mark DM 31,184 18,268 17,895
French Franc FF 241,008 41,411 41,051
Hong Kong Dollar HK 44,160 5,703 5,700
Italian Lira IL 55,846,875 33,280 32,838
Japanese Yen Y 595,941 5,148 5,208
Malaysian Ringgit MK 2,400 954 951
Netherland Guilder NG 10,138 5,289 5,174
New Zealand Dollar N$ 7,833 5,402 5,309
Norwegian Krone NK 78,200 11,080 10,682
Pound Sterling L 265,767 425,240 442,319
Singapore Dollar S$ 1,493 1,043 1,044
Spanish Peseta SP 58,580,964 401,572 398,292
Swiss Franc CF 645,764 448,175 442,941
---------- ----------
$1,423,788 $1,430,205
========== ==========
</TABLE>
(H)
MORTGAGE DOLLAR ROLLS. The Funds enter into mortgage dollar roll transactions
("MDRs") in which they sell mortgage backed securities ("MBS") from their
portfolio to a counterparty from whom they simultaneously agree to buy a similar
security on a delayed delivery basis. The MDR transactions of the Funds are
classified as purchase and sale transactions. The securities sold in connection
with the MDRs are removed from the portfolio and a realized gain or loss is
recognized. The securities the Funds have agreed to acquire are included at
market value in the portfolio of investments and liability for such purchase
commitments is included as payables for investments purchased. The Funds
maintain a segregated account with the custodian containing securities from the
respective portfolios having a value not less than the repurchase price,
including accrued interest. MDR transactions involve certain risks, including
the risk that the MBS returned to the Funds at the end of the roll, while
substantially similar, could be inferior to what was initially sold to the
counterparty.
(I)
RESTRICTED SECURITIES. A restricted security is a security which has been
purchased through a private offering and cannot be resold to the general public
without prior registration under the Securities Act of 1933. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt sale
at an acceptable price may be difficult.
HIGH YIELD CORPORATE BOND PORTFOLIO
The issuers of the securities will bear the costs involved in registration under
the Securities Act of 1933 and in connection with the disposition of such
securities. The Portfolio does not have the right to demand that such securities
be registered. The Portfolio may not invest more than 10% of its net assets in
illiquid securities.
132
<PAGE> 134
MAINSTAY VP SERIES FUND, INC.
Restricted securities held at June 30, 1997:
<TABLE>
<CAPTION>
SHARES/ PERCENT
ACQUISITION PRINCIPAL 6/30/97 OF
SECURITY DATE AMOUNT COST VALUE NET ASSETS
- ------- --------- ----------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
GPA Group, PLC
Preferred Stock............................... 3/6/96 1,000,000 $ 328,750 $ 515,000 0.2%
Kronos International, Inc.
5.051%, due 12/31/50.......................... 2/25/97 DM 446,639 243,744 246,054 0.1
Titan Tire Corp.
7.00%, due 2/11/00............................ 6/24/97 $ 6,000,000 5,745,534 5,745,000 1.9
World Airways, Inc.
10.25%, due 2/15/03........................... 4/4/97 $ 2,429,373 2,334,478 2,356,492 0.8
---------- ---------- ---
$8,652,506 $8,862,546 3.0%
========== ========== ===
</TABLE>
- ------------
DM--Deutsche Mark
(J)
SECURITIES LENDING. The Funds may lend its securities to broker-dealers and
financial institutions. The loans are secured by collateral at least equal at
all times to the market value of the securities loaned. The Funds may bear the
risk of delay in recovery of, or loss of rights in, the securities loaned should
the borrower of the securities fail financially. The Funds receive compensation
for lending its securities in the form of fees or it retains a portion of
interest on the investment of any cash received as collateral. The Funds also
continue to receive interest and dividends on the securities loaned and any gain
or loss in the market price of the securities loaned that may occur during the
term of the loan will be for the account of the Funds.
(K)
FEDERAL INCOME TAXES. Each of the Portfolios is treated as a separate entity for
Federal income tax purposes. The Company's policy is to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of the taxable income to the shareholders of
each Portfolio within the allowable time limits. Therefore, no Federal income
tax provision is required.
Investment income received by a Portfolio from foreign sources may be subject to
foreign income taxes withheld at the source.
(L)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are
recorded on the ex-dividend date. For Cash Management Portfolio, dividends are
declared daily and paid monthly. Each of the other Portfolios intends to declare
and pay, as a dividend, substantially all of their net investment income and net
realized gains no less frequently than once a year.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
133
<PAGE> 135
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(M)
ORGANIZATION COSTS. Costs incurred in connection with the initial organization
and registration of a Portfolio of the Company are amortized over a maximum
period of 60 months beginning with the commencement of operations of the
respective Portfolio. Organization costs for Convertible Portfolio, paid by, and
reimbursable to, NYLIAC, totalled approximately $46,000. Such costs are being
amortized beginning with the commencement of operations on October 1, 1996. In
the event that any of the initial shares purchased by NYLIAC are redeemed,
proceeds of such redemption will be reduced by the proportionate amount of the
unamortized deferred organizational expenses which the number of shares redeemed
bears to the total number of initial shares purchased.
(N)
EXPENSES. Expenses with respect to the Company are allocated to the individual
Portfolios in proportion to the net assets of the respective Portfolios when the
expenses are incurred except where allocations of direct expenses can otherwise
fairly be made.
(O)
USE OF ESTIMATES. 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.
- --------------------------------------------------------------------------------
NOTE 3--Fees and Related Party Policies:
- --------------------------------------------------------------------------------
(A)
INVESTMENT ADVISORY AND ADMINISTRATION FEES. MacKay-Shields Financial
Corporation ("MacKay-Shields") acts as investment adviser to Capital
Appreciation, Cash Management, Convertible, Government, High Yield Corporate
Bond, International Equity, Total Return and Value Portfolios under an
Investment Advisory Agreement. MacKay-Shields is a registered investment
adviser, a wholly-owned subsidiary of NYLIFE Inc. and an indirect wholly-owned
subsidiary of New York Life Insurance Company ("New York Life"). New York Life
acts as investment adviser to Bond and Growth Equity Portfolios under an
Investment Advisory agreement. Monitor Capital Advisors Inc. ("Monitor") acts as
investment adviser to Indexed Equity Portfolio under an Investment Advisory
Agreement. Monitor is a registered investment adviser, a wholly-owned subsidiary
of NYLIFE Inc. and an indirect wholly-owned subsidiary of New York Life.
NYLIAC is Administrator for the Company.
The Company, on behalf of each Portfolio, pays the Advisers and Administrator a
monthly fee for the services performed and the facilities furnished at an
approximate annual rate of the average daily net assets of each Fund as follows:
<TABLE>
<CAPTION>
ADVISER ADMINISTRATOR
------ -----------
<S> <C> <C>
Capital Appreciation Portfolio........................................................ .36% .20%
Cash Management Portfolio............................................................. .25% .20%
Convertible Portfolio................................................................. .36% .20%
Government Portfolio.................................................................. .30% .20%
High Yield Corporate Bond Portfolio................................................... .30% .20%
International Equity Portfolio........................................................ .60% .20%
Total Return Portfolio................................................................ .32% .20%
Value Portfolio....................................................................... .36% .20%
Bond Portfolio........................................................................ .25% .20%
Growth Equity Portfolio............................................................... .25% .20%
Indexed Equity Portfolio.............................................................. .10% .20%
</TABLE>
134
<PAGE> 136
MAINSTAY VP SERIES FUND, INC.
The Administrator has voluntarily agreed to assume the operating expenses of
Convertible, High Yield Corporate Bond, International Equity and Value
Portfolios through December 31, 1997, which on an annualized basis exceed the
percentages indicated below.
<TABLE>
<S> <C>
Convertible Portfolio................................................................................... .73%
High Yield Corporate Bond Portfolio..................................................................... .67%
International Equity Portfolio.......................................................................... .97%
Value Portfolio......................................................................................... .73%
</TABLE>
In connection with such expense limitation, the Administrator assumed certain of
the expenses of these Portfolios for the period ended June 30, 1997 as shown on
the Statement of Operations.
The Capital Appreciation, Cash Management, Government, Total Return, Bond,
Growth Equity and Indexed Equity Portfolios will not have an expense limitation
in 1997.
(B)
DISTRIBUTOR. NYLIFE Distributors Inc. ("NYLIFE Distributors"), a wholly-owned
subsidiary of NYLIFE Inc. and an indirect wholly-owned subsidiary of New York
Life serves as the Company's distributor and principal underwriter (the
"Distributor") pursuant to a Distribution agreement. NYLIFE Distributors is not
obligated to sell any specific amount of the Company's shares, and receives no
compensation from the Company pursuant to the Distribution Agreement.
(C)
DIRECTORS FEES. Directors, other than those affiliated with New York Life,
MacKay-Shields, Monitor, NYLIFE Distributors or NYLIFE Securities, are paid an
annual fee of $16,000 and $750 for each Board meeting attended plus
reimbursement for travel and out-of-pocket expenses. The Company allocates this
expense in proportion to the net assets of the respective Portfolios.
(D)
CAPITAL. At June 30, 1997 NYLIAC held shares of the following Portfolio with a
net asset value as follows:
<TABLE>
<S> <C>
Convertible Portfolio.............................................................................. $10,884,854
</TABLE>
This value represents 36.4% of the net assets of the Convertible Portfolio at
period end.
(E)
OTHER. Fees for the cost of legal services provided to the Company by the Office
of General Counsel of New York Life are charged to the Portfolios. For the
period ended June 30, 1997 these fees were as follows:
<TABLE>
<S> <C>
Capital Appreciation Portfolio......................................................................... $11,279
Cash Management Portfolio.............................................................................. 2,727
Convertible Portfolio.................................................................................. 418
Government Portfolio................................................................................... 1,584
High Yield Corporate Bond Portfolio.................................................................... 5,039
International Equity Portfolio......................................................................... 781
Total Return Portfolio................................................................................. 7,375
Value Portfolio........................................................................................ 2,925
Bond Portfolio......................................................................................... 4,920
Growth Equity Portfolio................................................................................ 12,582
Indexed Equity Portfolio............................................................................... 5,352
</TABLE>
135
<PAGE> 137
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 4--Federal Income Tax:
- --------------------------------------------------------------------------------
At December 31, 1996, for Federal income tax purposes, capital loss
carryforwards, as shown in the table below, are available to the extent
provided by regulations to offset future realized gains of each respective
Portfolio through the years indicated. To the extent that these loss
carryforwards are used to offset future capital gains, it is probable that the
capital gains so offset will not be distributed to shareholders. Additionally,
as shown in the table below, certain Portfolios intend to elect, to the extent
provided by regulations, to treat certain qualifying capital losses that arose
during the year ended December 31, 1996 as if they arose on January 1, 1997.
<TABLE>
<CAPTION>
CAPITAL LOSS CAPITAL LOSS
AVAILABLE THROUGH AMOUNT (000'S) DEFERRED (000'S)
---------------- ------------- --------------
<S> <C> <C> <C>
Capital Appreciation Portfolio.................................. 2002 $2,010
2003 3,133
------
$5,143 $2,008
====== ======
Cash Management Portfolio....................................... 2003 $ 1
2004 1
------
$ 2 $ 0
====== ======
Government Portfolio............................................ 2002 $3,261
2004 1,523
------
$4,784 $ 53
====== ======
International Equity Portfolio.................................. $ 0 $ 186
====== ======
Total Return Portfolio.......................................... 2002 $3,048 $ 131
====== ======
Bond Portfolio.................................................. 2002 $1,786 $ 0
====== ======
</TABLE>
- --------------------------------------------------------------------------------
NOTE 5--Financial Investments:
- --------------------------------------------------------------------------------
High Yield Corporate Bond Portfolio invests primarily in high yield
bonds. These bonds may involve special risks in addition to the risks
associated with investment in higher rated debt securities. High yield bonds
may be more susceptible to real or perceived adverse economic and competitive
industry conditions than higher grade bonds. Also, the secondary market on
which high yield bonds are traded may be less liquid than the market for higher
grade bonds.
Each Portfolio may enter into repurchase agreements to earn income. In the event
of the bankruptcy of the seller or the failure of the seller to repurchase the
securities as agreed, a Portfolio could suffer losses, including loss of
interest on or principal of the security and costs associated with delay and
enforcement of the repurchase agreement.
- --------------------------------------------------------------------------------
NOTE 6--Portfolio Securities Loaned:
- --------------------------------------------------------------------------------
At June 30, 1997, the Government Portfolio and Total Return Portfolio
had portfolio securities with a fair market value of $12,462,454 and
$26,579,288, respectively, on loan to broker-dealers and government securities
dealers. With respect to these securities loaned, the Portfolios received
collateral with a fair market value of $12,856,794 and $27,700,606,
respectively.
136
<PAGE> 138
(THIS PAGE INTENTIONALLY LEFT BLANK)
137
<PAGE> 139
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 7--Purchases and Sales of Securities (in 000's):
- --------------------------------------------------------------------------------
During the six month period ended June 30, 1997, purchases and sales of
securities, other than securities subject to repurchase transactions and
short-term securities, were as follows:
<TABLE>
<CAPTION>
CAPITAL APPRECIATION CONVERTIBLE GOVERNMENT
PORTFOLIO PORTFOLIO PORTFOLIO
PURCHASES SALES PURCHASES SALES PURCHASES SALES
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government Securities.......................... $ -- $ -- $ -- $ -- $ 83,985 $ 100,892
All others.......................................... 141,785 72,762 22,122 12,573 21,386 3,483
-------------------------------------------------------------------------------
Total............................................... $141,785 $ 72,762 $ 22,122 $ 12,573 $105,371 $ 104,375
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
GROWTH EQUITY INDEXED EQUITY
PORTFOLIO PORTFOLIO
PURCHASES SALES PURCHASES SALES
---------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Securities.......................... $ -- $ -- $ -- $ --
All others.......................................... 339,534 300,749 77,588 3,180
---------------------------------------------------
Total............................................... $339,534 $ 300,749 $ 77,588 $ 3,180
===================================================
</TABLE>
- --------------------------------------------------------------------------------
NOTE 8--Capital Share Transactions (in 000's):
- --------------------------------------------------------------------------------
Transactions in capital shares for the six month period ended June 30, 1997
and the year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
CAPITAL
APPRECIATION CASH MANAGEMENT CONVERTIBLE
PORTFOLIO PORTFOLIO PORTFOLIO
1997 1996 1997 1996 1997 1996(a)
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold......................................... 3,903 12,007 140,649 237,105 1,287 494
Shares issued in reinvestment of dividends and
distributions..................................... 0(b) 18 2,995 4,586 1 17
---------------------------------------------------------------------
3,903 12,025 143,644 241,691 1,288 511
Shares redeemed..................................... (649) (416) (124,373) (211,181) (48) (5)
---------------------------------------------------------------------
Net increase (decrease)............................. 3,254 11,609 19,271 30,510 1,240 506
=====================================================================
</TABLE>
<TABLE>
<CAPTION>
GROWTH EQUITY INDEXED EQUITY
PORTFOLIO PORTFOLIO
1997 1996 1997 1996
---------------------------------------------
<S> <C> <C> <C> <C>
Shares sold......................................... 2,503 3,863 4,420 7,431
Shares issued in reinvestment of dividends and
distributions..................................... 8 3,968 80 363
---------------------------------------------
2,511 7,831 4,500 7,794
Shares redeemed..................................... (1,503) (2,346) (122) (1,657)
---------------------------------------------
Net increase (decrease)............................. 1,008 5,485 4,378 6,137
=============================================
</TABLE>
- ------------
(a) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
(b) Less than 1,000 shares.
138
<PAGE> 140
MAINSTAY VP SERIES FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH YIELD INTERNATIONAL
CORPORATE BOND EQUITY TOTAL RETURN VALUE BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
PURCHASES SALES PURCHASES SALES PURCHASES SALES PURCHASES SALES PURCHASES SALES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9,931 $ 3,999 $ -- $ -- $184,900 $ 178,657 $ -- $ -- $146,698 $ 181,020
236,413 136,709 9,067 14,808 98,248 57,554 84,687 36,152 150,806 117,258
- ------------------------------------------------------------------------------------------------------------------------------------
$246,344 $ 140,708 $ 9,067 $ 14,808 $283,148 $ 236,211 $ 84,687 $ 36,152 $297,504 $ 298,278
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD INTERNATIONAL
GOVERNMENT CORPORATE BOND EQUITY TOTAL RETURN VALUE BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
449 1,887 8,174 12,714 534 1,777 2,349 8,197 3,685 6,418 783 1,940
-- 479 160 1,061 47 168 -- 459 61 217 -- 1,117
- -----------------------------------------------------------------------------------------------------------------------------------
449 2,366 8,334 13,775 581 1,945 2,349 8,656 3,746 6,635 783 3,057
(957) (1,219) (1,396) (225) (1,231) (140) (645) (494) (544) (83) (1,611) (2,923)
- -----------------------------------------------------------------------------------------------------------------------------------
(508) 1,147 6,938 13,550 (650) 1,805 1,704 8,162 3,202 6,552 (828) 134
===================================================================================================================================
</TABLE>
139
<PAGE> 141
This is a report for the general information of NYLIAC
Variable Universal Life policyowners. It must accom-
panied or preceded by a current prospectus if it is given
to anyone who is not an owner of a NYLIAC Variable
Universal Life policy. This Report does not offer for sale
or solicit orders to purchase securities.
New York Life Insurance and Annuity Corporation
(A Delaware Corporation)
51 Madison Avenue
New York, NY 10010
Issued by:
New York Life Insurance and Annuity Corporation
Distributed by:
NYLIFE Distributors Inc., Member NASD
LOGO Printed on recycled paper
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