<PAGE> 1
As filed with the Securities and Exchange Commission on April 14, 2000
Registration No. 333-39157
811-07798
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
POST-EFFECTIVE AMENDMENT NO. 2
FORM S-6
---------------------------
FOR THE REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
---------------------------
A. Exact name of trust:
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE UNIVERSAL LIFE SEPARATE ACCOUNT-I
B. Name of depositor:
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
C. Complete address of depositor's principal executive office:
51 Madison Avenue
New York, New York 10010
D. Name and complete address of agent for service:
Judith C. Keilp, Esq.
New York Life Insurance and
Annuity Corporation
51 Madison Avenue
New York, New York 10010
Copy to:
Jeffrey S. Puretz Michael J. McLaughlin, Esq.
Dechert Price & Rhoads Senior Vice President
1500 K Street, N. W. and General Counsel
Washington, D. C. 20005 New York Life Insurance Company
51 Madison Avenue
New York, New York 10010
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485.
[X] on May 1, 2000 pursuant to paragraph (b) of Rule 485.
[ ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485.
[ ] on _______ pursuant to paragraph (a)(i) of 485.
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
E. Title of securities being registered:
Units of interest in a separate account under flexible premium
survivorship variable universal life policies
F. Approximate date of proposed public offering: Not applicable
G. Proposed maximum aggregate offering price to the public of the
securities being registered:
[ ] Check box if it is proposed that this filing will become effective
on (date) at (time) pursuant to Rule 487.
<PAGE> 2
CROSS REFERENCE SHEET
INFORMATION REQUIRED IN A PROSPECTUS
<TABLE>
<CAPTION>
Item of Form N-8B-2 Prospectus Caption
- ------------------- ------------------
<S> <C>
1 Definitions; The Separate Account
2 About NYLIAC
3 Not Applicable
4 Sales and Other Agreements
5 The Separate Account
6 The Separate Account
9 Legal Proceedings
10 Summary of Policy Features; General Description; Life Insurance Protection;
Cash Value and Cash Surrender Value; Loans; Partial Withdrawals; Surrenders;
Additional Benefits through Riders and Options; Policy Split Option;
Premiums; Investments; Deductions and Charges; Policy Proceeds; Additional
Policy Provisions; Free Look; Exchange Privilege; Additional Provisions
Regarding the Separate Account; About NYLIAC; Sales and Other Agreements
11 Cash Value and Cash Surrender Value; The Separate Account
12 Funds; Portfolios; About NYLIAC; Sales and Other Agreements
13 Summary of Policy Features; General Description; Loans; Partial Withdrawals;
Surrenders; Premiums; Investments; Deductions and Charges; Sales and Other
Agreements
14 Summary of Policy Features; General Description; Premiums; Investments; Sales
and Other Agreements
15 Summary of Policy Features; General Description; Cash Value and Cash
Surrender Value; Premiums; Investments
16 Summary of Policy Features; General Description; Cash Value and Cash
Surrender Value; Premiums; Investments
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Item of Form N-8B-2 Prospectus Caption
- ------------------- ------------------
<S> <C>
17 Summary of Policy Features; General
Description; Cash Value and Cash
Surrender Value; Loans; Partial
Withdrawals; Surrenders
18 Summary of Policy Features; General
Description; Cash Value and Cash
Surrender Value; Loans; Partial
Withdrawals; Surrenders; Premiums;
Investments
19 Records and Reports
20 Not Applicable
21 Loans
22 Not Applicable
23 Not Applicable
24 Additional Policy Provisions;
Additional Provisions Regarding the
Separate Account
25 About NYLIAC
26 Deductions and Charges; Loans;
Partial Withdrawals; Surrenders;
Reinstatement Option; Additional Policy
Provisions
27 About NYLIAC
28 Directors and Principal Officers of
NYLIAC
29 About NYLIAC
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Not Applicable
37 Not Applicable
38 Sales and Other Agreements
39 Sales and Other Agreements
40 Sales and Other Agreements
41 Sales and Other Agreements
42 Not Applicable
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Item of Form N-8B-2 Prospectus Caption
- ------------------- ------------------
<S> <C>
43 Not Applicable
44 Cash Value and Cash Surrender Value
45 Not Applicable
46 Cash Value and Cash Surrender Value; Loans; Partial Withdrawals; Surrenders;
Deductions and Charges; Investments
47 Cash Value and Cash Surrender Value; Loans; Partial Withdrawals; Surrenders;
Deductions and Charges; Investments
48 Not Applicable
49 Not Applicable
50 Investments; Additional Provisions Regarding the Separate Account
51 Cover Page; Summary of Policy Features; Life Insurance Protection; Additional
Benefits through Riders and Options; Policy Split Option; Surrenders;
Premiums; Policy Proceeds; Additional Policy Provisions
52 Investments; Additional Provisions Regarding the Separate Account
53 Federal Income Tax Considerations
54 Not Applicable
55 Not Applicable
</TABLE>
<PAGE> 5
SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
PROSPECTUS DATED MAY 1, 2000
VARIABLE PRODUCTS SERVICE CENTER ADDRESSES:
<TABLE>
<S> <C> <C>
Variable Products Service Center Variable Products Service Center
Madison Square Station or 51 Madison Avenue
P.O. Box 922 Room 452
New York, New York 10159 New York, New York 10010
</TABLE>
This prospectus describes a flexible premium survivorship variable universal
life insurance policy which New York Life Insurance and Annuity Corporation
("NYLIAC") issues.
POLICY FEATURES
LIFE INSURANCE PROTECTION--This policy offers life insurance protection on two
insureds, with a life insurance benefit payable when the last surviving insured
dies while the policy is in effect.
CHOICE OF LIFE INSURANCE BENEFIT OPTIONS--You may choose either a level life
insurance benefit equal to the face amount of your policy or a life insurance
benefit which varies and is equal to the sum of your policy's face amount and
cash value. If you choose a benefit which varies, the life insurance benefit
will increase or decrease depending on the performance of the investment options
you select. Your policy's life insurance benefit will never be less than the
face amount of your policy. Under both options, a higher life insurance benefit
may apply if necessary to qualify as life insurance under the Internal Revenue
Code. The policy proceeds we pay will be the sum of the life insurance benefit
plus any rider death benefits less any loans (including any accrued loan
interest).
FLEXIBLE PREMIUM PAYMENTS--You may decide the amount of premiums to pay and when
to pay them, within limits. Although premium payments are flexible, we may
require additional premium payments to keep the policy in effect. The policy may
terminate if its cash surrender value is insufficient to pay the policy's
monthly charges. The cash surrender value of your policy will fluctuate
depending on the performance of the investment options you have chosen.
LOANS, WITHDRAWALS AND SURRENDERS--You may borrow against or withdraw money from
your policy, within limits. Loans and withdrawals will reduce the policy's
proceeds and cash surrender value. You can also surrender your policy at any
time. The cash surrender value of your policy may increase or decrease depending
on the performance of the investment options you select. We do not guarantee the
cash surrender value for your policy. If you surrender your policy or take a
partial withdrawal during the first fifteen policy years or within fifteen years
after you increase the face amount, we may apply a surrender charge.
FACE AMOUNT INCREASES AND DECREASES--You may increase or decrease the face
amount of your policy, within limits. We will apply a new schedule of surrender
charges to any increase in your policy's face amount. We may also deduct a
surrender charge for any reduction in the face amount.
INVESTMENT OPTIONS--Your policy allows you to choose how you want to invest your
premium payments. You have the option to choose from twenty-two Investment
Divisions and a fixed account. Policyowners may invest in a total of 21
investment options at any one time. The Investment Divisions available under
your policy are:
<TABLE>
<S> <C>
- -- MainStay VP Capital Appreciation
- -- MainStay VP Cash Management
- -- MainStay VP Convertible
- -- MainStay VP Government
- -- MainStay VP High Yield Corporate Bond
- -- MainStay VP International Equity
- -- MainStay VP Total Return
- -- MainStay VP Value
- -- MainStay VP Bond
- -- MainStay VP Growth Equity
- -- MainStay VP Indexed Equity
- -- American Century Income & Growth(1)
- -- Dreyfus Large Company Value(1)
- -- Eagle Asset Management Growth Equity(1)
- -- Alger American Small Capitalization
- -- Calvert Social Balanced
- -- Fidelity VIP II Contrafund(R)
- -- Fidelity VIP Equity-Income
- -- Janus Aspen Series Balanced
- -- Janus Aspen Series Worldwide Growth
- -- Morgan Stanley UIF Emerging Markets Equity
- -- T. Rowe Price Equity Income(1)
</TABLE>
- ------------
(1)Available on and after May 19, 2000.
We do not guarantee the investment performance of the investment divisions,
which involve varying degrees of risk.
FREE LOOK PERIOD--You may examine the policy for a limited period and cancel it
for a refund of the greater of the cash value of your policy or the total
premium payments you have paid less any loans or withdrawals you have taken.
REPLACING EXISTING INSURANCE WITH THIS POLICY MAY NOT BE TO YOUR ADVANTAGE.
IMPORTANT NOTICES
THIS PROSPECTUS PROVIDES INFORMATION THAT A PROSPECTIVE INVESTOR SHOULD KNOW
BEFORE INVESTING. PLEASE READ IT CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
THIS PROSPECTUS IS NOT VALID UNLESS ATTACHED TO CURRENT PROSPECTUSES FOR THE
MAINSTAY VP SERIES FUND, INC., THE ALGER AMERICAN FUND, CALVERT VARIABLE
SERIES, INC., THE FIDELITY VARIABLE INSURANCE PRODUCTS FUND II, THE FIDELITY
VARIABLE INSURANCE PRODUCTS FUND, THE JANUS ASPEN SERIES, THE UNIVERSAL
INSTITUTIONAL FUNDS, INC. AND THE T. ROWE PRICE EQUITY SERIES, INC. (THE
"FUNDS", EACH INDIVIDUALLY A "FUND").
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE POLICIES INVOLVE RISKS, INCLUDING POTENTIAL LOSS OF PRINCIPAL INVESTED.
THE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FDIC, THE FEDERAL RESERVE
BOARD, OR ANY OTHER AGENCY.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY OF POLICY FEATURES............. 4
DEFINITIONS............................ 8
GENERAL DESCRIPTION.................... 9
When Life Insurance Coverage
Begins............................ 9
How the Policy is Available.......... 9
How the Policy Works................. 9
LIFE INSURANCE PROTECTION.............. 11
Your Policy Proceeds................. 11
Your Life Insurance Benefit....... 11
Changing Your Life Insurance
Benefit Option.................. 12
Changing the Face Amount of Your
Policy.......................... 14
CASH VALUE AND CASH SURRENDER VALUE.... 15
Cash Value........................... 15
Amount in the Separate Account.... 15
Amount in the Fixed Account....... 16
Investment Return................. 16
Cash Surrender Value................. 16
LOANS.................................. 17
Your Policy as Collateral for the
Loan.............................. 17
Loan Interest........................ 18
Interest on the Cash Value Held as
Collateral........................ 18
When Loan Interest is Due............ 18
Loan Repayment....................... 18
The Effects of a Policy Loan......... 19
PARTIAL WITHDRAWALS.................... 19
Amount Available to Withdraw......... 19
Requesting a Partial Withdrawal...... 19
When is the Partial Withdrawal
Effective......................... 19
Partial Withdrawal Fee and Surrender
Charge............................ 20
Allocation of Partial Withdrawal and
Fee............................... 20
The Effects of a Partial
Withdrawal........................ 20
SURRENDERS............................. 20
Requesting a Surrender............... 20
When is the Surrender Effective...... 20
Surrender Charges.................... 21
ADDITIONAL BENEFITS THROUGH RIDERS AND
OPTIONS.............................. 21
How the Riders are Available......... 21
Supplementary Term Rider............. 21
Guaranteed Minimum Death Benefit
Rider............................. 23
GMDB Premium Test.................... 23
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
First-to-Die Monthly Deduction Waiver
Rider............................. 24
Level First-to-Die Term Rider........ 24
Living Benefits Rider................ 24
POLICY SPLIT OPTION.................... 25
About Your New Policy................ 25
PREMIUMS............................... 26
Premium Allocation................... 27
Payments Returned for Insufficient
Funds............................. 27
Termination.......................... 27
Late Period.......................... 27
Reinstatement Option................. 28
Maturity Date........................ 28
INVESTMENTS............................ 30
The Separate Account................. 30
Funds............................. 31
Portfolios........................ 33
Additions, Deletions or
Substitutions of Investments.... 37
Reinvestment...................... 37
The Fixed Account.................... 37
Interest Credited on Amounts in
the Fixed Account............... 37
Assets in the Fixed Account....... 38
Transfers Between Investment
Divisions and/or the Fixed
Account........................... 38
Requesting a Transfer............. 39
Dollar Cost Averaging................ 39
Automatic Asset Reallocation......... 40
Interest Sweep....................... 40
Third Party Investment Advisory
Arrangements...................... 41
DEDUCTIONS AND CHARGES................. 42
Deductions from Premiums............. 43
Sales Expense Charge.............. 43
State Tax Charge.................. 43
Federal Tax Charge................ 44
Deductions from Cash Value........... 44
Expense Allocation................ 44
Monthly Contract Charge........... 44
Charge for Cost of Insurance
Protection...................... 45
Charge Per $1,000 of Initial Face
Amount.......................... 45
Rider Charges..................... 45
Separate Account Charges............. 46
Mortality and Expense Risk
Charge.......................... 46
Administrative Charge............. 46
</TABLE>
2
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Other Charges for Federal Income
Taxes........................... 46
Fund Charges......................... 47
Surrender Charges.................... 49
Charges in Policy Years 1-15...... 49
Additional Charge on a Surrender
in the First Policy Year........ 49
Surrender Charges after Face
Amount Increases................ 50
Surrender Charges on Face Amount
Decreases....................... 50
Exceptions to Surrender Charge.... 50
POLICY PROCEEDS........................ 51
Beneficiary.......................... 51
When We Pay Proceeds................. 51
Payment Options...................... 52
Payees............................... 53
ADDITIONAL POLICY PROVISIONS........... 53
Limits on Our Rights to Challenge
Your Policy....................... 53
Suicide.............................. 53
Misstatement of Age or Sex........... 54
Assignment........................... 54
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FREE LOOK.............................. 54
EXCHANGE PRIVILEGE..................... 55
ADDITIONAL PROVISIONS REGARDING THE
SEPARATE ACCOUNT..................... 55
Your Voting Rights................... 55
Our Rights........................... 56
FEDERAL INCOME TAX CONSIDERATIONS...... 56
ABOUT NYLIAC........................... 63
Performance Calculations............. 63
Directors and Principal Officers of
NYLIAC............................ 64
RECORDS AND REPORTS.................... 66
SALES AND OTHER AGREEMENTS............. 66
LEGAL PROCEEDINGS...................... 67
EXPERTS................................ 67
FINANCIAL STATEMENTS................... 67
FINANCIAL STATEMENTS................... F-1
APPENDIX A: Illustrations.............. A-1
APPENDIX B: Variations By
Jurisdiction......................... B-1
APPENDIX C: Maximum Surrender
Charges.............................. C-1
</TABLE>
IMPORTANT NOTICE
THIS PROSPECTUS IS NOT CONSIDERED AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH AN OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANY
INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS OR ANY ATTACHED
SUPPLEMENT TO THIS PROSPECTUS OR IN ANY SUPPLEMENTAL SALES MATERIAL WE
AUTHORIZE.
3
<PAGE> 8
SUMMARY OF POLICY FEATURES
THE TERMS OF YOUR POLICY AND RIDERS QUALIFY THE FOLLOWING SUMMARY. MORE
DETAILED INFORMATION IS CONTAINED LATER IN THIS PROSPECTUS, INCLUDING THE
APPENDIX OF VARIATIONS BY JURISDICTION CONTAINED IN APPENDIX B.
POLICY PROCEEDS -- When the last surviving insured dies, we will pay the
beneficiary of your policy an amount equal to your policy's Life Insurance
Benefit plus any rider death benefits less any outstanding loans (including any
accrued loan interest).
- -- LIFE INSURANCE BENEFITS
- Option 1--a level benefit equal to your policy's face amount.
- Option 2--a benefit which varies that equals the sum of your policy's face
amount and cash value.
- Under both options, a higher Life Insurance Benefit may apply if necessary
to qualify as life insurance under the Internal Revenue Code.
- Within limits, you may increase or decrease the face amount of your policy.
The minimum face amount for your policy is $100,000.
RIDER BENEFITS -- You may apply for the following additional rider benefits:
- -- SUPPLEMENTARY TERM RIDER
- -- GUARANTEED MINIMUM DEATH BENEFIT RIDER
- -- FIRST-TO-DIE MONTHLY DEDUCTION WAIVER RIDER
- -- LEVEL FIRST-TO-DIE TERM RIDER
- -- LIVING BENEFITS RIDER
Riders are subject to regulatory approval in each jurisdiction and may not
be available in all jurisdictions. In addition, the rider name and the
requirements for any rider may vary by jurisdiction. You should contact your
registered representative to determine whether the rider(s) is (are) available
in your jurisdiction.
LOANS -- You may borrow up to 90% of your policy's cash surrender value. Any
amount that secures a loan remains part of your policy's cash value but is
transferred to the Fixed Account. Amounts securing a loan may earn a different
interest rate than other amounts in the Fixed Account. For the first ten Policy
Years, the interest rate we currently expect to credit on the amounts set aside
to secure the loan is 1.0% lower than the rate we charge for loan interest.
Beginning in the eleventh Policy Year, the interest we currently expect to
credit on the loaned amounts is 0.5% lower than the interest rate we charge for
loan interest. We guarantee the interest rate we credit on the loaned amounts
will never be less than 2.0% lower than the interest rate we charge for loan
interest.
PARTIAL WITHDRAWALS -- You may request a partial withdrawal from your policy's
cash surrender value at any time, within limits. When you make a partial
withdrawal, we will deduct a fee for processing the withdrawal. We may apply a
surrender charge as a result of a partial withdrawal.
SURRENDERS -- You may surrender your policy for its cash surrender value at any
time while either insured is living. If you surrender your policy during the
first fifteen
4
<PAGE> 9
Policy Years or within fifteen years after you increase the face amount of your
policy, we may apply a surrender charge.
PREMIUMS -- You may make premium payments as often as you like and for any
amount you choose, within limits. Other than the initial premium, there are no
required premium payments. However, under certain conditions, you may be
required to make additional premium payments to keep your policy from
terminating.
DEDUCTIONS AND CHARGES --
DEDUCTIONS FROM PREMIUMS
- -- SALES EXPENSE CHARGE
- Target Premium--We assess a sales expense charge based on your policy's
Target Premium. Your initial Target Premium is set at the time your policy
is issued. You can find this initial Target Premium on the Policy Data Page
of your policy. We will change your Target Premium if you change the face
amount of your policy.
- Current--During each of the first ten Policy Years, we expect to deduct a
sales expense charge that is currently 8% of any premiums paid up to the
Target Premium. Once the Target Premium for that Policy Year has been
reached, we expect to deduct a sales expense charge that is currently 4%
from any additional premiums paid in that Policy Year. During each Policy
Year beginning with the eleventh Policy Year, we currently expect to deduct
a sales expense charge of 4% of any premiums paid up to the Target Premium,
with no charge for premiums paid in excess of the Target Premium.
- Guaranteed--During each of the first ten Policy Years, we guarantee that any
sales expense charge we deduct will never exceed 9% of any premiums paid up
to the Target Premium. Once the Target Premium for that Policy Year has been
reached, we will never deduct a sales expense charge more than 6.5% of any
additional premiums paid in that Policy Year. Beginning with the eleventh
Policy Year, we guarantee that any sales expense charge will never exceed
6.5% of any premiums paid.
- -- STATE TAX CHARGE
We deduct 2% of each premium payment you make as a state tax charge. We may
increase this charge to reflect changes in the law.
- -- FEDERAL TAX CHARGE
For Non-Qualified Policies, we deduct 1.25% of each premium payment you make
as a federal tax charge. We may increase this charge to reflect changes in
the law.
DEDUCTIONS FROM CASH VALUE
- -- MONTHLY CONTRACT CHARGE
- Current--We currently deduct a monthly contract charge that is currently $59
per month during the first Policy Year, and we currently expect to deduct $9
per month in later Policy Years.
- Guaranteed--We guarantee that we will never deduct a monthly contract charge
that exceeds $62 per month during the first Policy Year and $12 per month in
later Policy Years.
5
<PAGE> 10
- -- CHARGE FOR COST OF INSURANCE PROTECTION
We deduct a charge for cost of insurance protection each month. This charge
is equal to the net amount at risk multiplied by a monthly cost of insurance
rate plus any applicable flat extra charge (which might apply to certain
insureds based on our underwriting). We determine the monthly cost of
insurance rate based on the insureds' issue ages, sexes, and underwriting
classes and the Policy Year. The cost of insurance rates will never exceed
the guaranteed maximum cost of insurance rates for your policy.
- -- CHARGE PER $1,000 OF THE INITIAL FACE AMOUNT
On each Monthly Deduction Day, during the first three Policy Years, we will
deduct $0.04 per $1,000 of your policy's initial face amount (not including
riders). We guarantee we will never increase this charge. This charge will
always be at least $10 per month and will never be more than $100 per month.
- -- RIDER CHARGES
Each month, we will deduct any cost of insurance charges for the optional
riders you have chosen.
SEPARATE ACCOUNT CHARGES
- -- MORTALITY AND EXPENSE RISK CHARGE
- Current--We currently deduct on a daily basis, a mortality and expense risk
charge that is equal to an annual rate of 0.60% of the average daily net
asset value of each Investment Division.
- Guaranteed--We guarantee that the mortality and expense risk charge will
never exceed an annual rate of 0.90% of the average daily net asset value of
each Investment Division.
- -- ADMINISTRATIVE CHARGE
We deduct on a daily basis, an administrative charge that is equal to an
annual rate of 0.10% of the average daily net asset value of each Investment
Division. We guarantee we will never increase this charge.
- -- OTHER CHARGES FOR FEDERAL INCOME TAXES
We do not currently deduct a charge for federal income taxes from the
Investment Divisions, though we may do so in the future, to reflect changes
in the law.
FUND CHARGES-- Each Investment Division of the Separate Account purchases shares
of the corresponding Eligible Portfolio at net asset value. The net asset value
reflects the investment advisory fees and other expenses that are deducted from
the assets of the Portfolio. The advisory fees and other expenses are not fixed
or specified under the terms of the policy, and they may vary from year to year.
These fees and expenses are described in the Funds' prospectuses. (See page 48
for a list of these charges.)
SURRENDER CHARGES-- If you surrender your policy or if you decrease the face
amount of your policy (including a decrease in the face amount that results from
changing the Life Insurance Benefit Option or from a partial withdrawal) during
the first fifteen Policy Years or within fifteen years after you increase the
face amount, we may apply a surrender charge. (See page 49 for an explanation of
these charges.)
6
<PAGE> 11
INVESTMENTS -- The balance of your premium payment after we deduct the premium
charges is called your net premium. We allocate your net premium among the
twenty-two Investment Divisions available under the policy and the Fixed
Account, based on your instructions. The twenty-two Investment Divisions
available under your policy are:
<TABLE>
<S> <C>
- -- MainStay VP Capital Appreciation -- American Century Income & Growth(1)
- -- MainStay VP Cash Management -- Dreyfus Large Company Value(1)
- -- MainStay VP Convertible -- Eagle Asset Management Growth Equity(1)
- -- MainStay VP Government -- Alger American Small Capitalization
- -- MainStay VP High Yield Corporate -- Calvert Variable Series, Inc. Social Balanced
Bond Portfolio
- -- MainStay VP International Equity -- Fidelity VIP II Contrafund
- -- MainStay VP Total Return -- Fidelity VIP Equity-Income
- -- MainStay VP Value -- Janus Aspen Series Balanced
- -- MainStay VP Bond -- Janus Aspen Series Worldwide Growth
- -- MainStay VP Growth Equity -- Morgan Stanley Emerging Markets Equity
- -- MainStay VP Indexed Equity -- T. Rowe Price Equity Income(1)
</TABLE>
- ---------------
(1)Available on and after May 19, 2000.
You may adjust your allocation to various Investment Divisions and/or the
Fixed Account by changing your premium allocation percentages or making
transfers among these options, within limits.
ADDITIONAL INFORMATION
FREE LOOK PERIOD
- -- You have the right to examine your policy. If you are not satisfied with it,
you may cancel it within twenty days.
- -- If you cancel the policy, we will refund the greater of the cash value of
your policy or the total premiums you have paid, less any loans or partial
withdrawals you have taken.
INCOME TAX EFFECT
- -- Generally, life insurance benefits are not currently subject to federal
income tax. The earnings on the amounts you invest in the Investment
Divisions and the Fixed Account are also generally not subject to income tax
as long as they remain invested in the policy. If you take a partial
withdrawal, surrender or terminate your policy, or if your policy matures,
you may incur taxable income. You may also incur taxable income if your
policy becomes a modified endowment contract and you take a policy loan.
IMPORTANT NOTICE
THE POLICY IS A LEGAL CONTRACT BETWEEN YOU AND NYLIAC. THE CONTRACT
CONSISTS OF THE APPLICATION FOR THE POLICY, THE POLICY, AND ANY RIDERS AND
ENDORSEMENTS ATTACHED TO IT.
VARIATIONS
SURVIVORSHIP VARIABLE UNIVERSAL LIFE IS SUBJECT TO THE INSURANCE LAWS AND
REGULATIONS OF EACH JURISDICTION IN WHICH IT IS SOLD. AS A RESULT, CERTAIN TERMS
OF OUR SURVIVORSHIP VARIABLE UNIVERSAL LIFE POLICIES MAY VARY FROM JURISDICTION
TO JURISDICTION. APPENDIX B LISTS THE SIGNIFICANT VARIATIONS THAT APPLY TO
SURVIVORSHIP VARIABLE UNIVERSAL LIFE. YOU SHOULD REVIEW THIS LIST TO DETERMINE
WHETHER ANY OF THESE VARIATIONS APPLY TO YOUR POLICY.
7
<PAGE> 12
DEFINITIONS
ELIGIBLE PORTFOLIOS ("PORTFOLIOS"): The mutual fund Portfolios of the Funds
that are available for investment through the Investment Divisions of the
Separate Account. Portfolios described in this prospectus are different from
portfolios available directly to the general public. Investment results may
differ.
FIXED ACCOUNT: The Fixed Account is supported by assets in NYLIAC's general
account. The amount in the Fixed Account earns interest on a daily basis.
Interest is credited on each Monthly Deduction Day.
FUND: An open-end management investment company.
INVESTMENT DIVISION: A division of the Separate Account. Each Investment
Division invests exclusively in shares of a specified Eligible Portfolio.
ISSUE DATE: The date we issue the policy as specified in the Policy Data Page.
LIFE INSURANCE BENEFIT: The benefit calculated under the Life Insurance Benefit
Option you have chosen.
MONTHLY DEDUCTION DAY: The date as of which we deduct your monthly contract
charge; cost of insurance charge; the charge per $1,000 of initial face amount,
if any; and any rider charges from your policy's cash value. The first Monthly
Deduction Day will be the first monthly anniversary of the Policy Date on or
following the Issue Date.
NON-QUALIFIED POLICY: A policy that is issued to persons or entities other than
employee benefit plans that qualify for special federal income tax treatment.
POLICY DATA PAGE: Page 2 of your policy. The Policy Data Page contains your
policy's specifications.
POLICY DATE: It is the date we use as the starting point for determining Policy
Years and Monthly Deduction Days. Your Policy Date will be the same as your
Issue Date, unless you request otherwise. Generally, you may not choose a Policy
Date that is more than six months before your policy's Issue Date. You can find
your Policy Date on the Policy Data Page.
POLICY PROCEEDS: The benefit we will pay to your beneficiary when we receive
proof that the last surviving insured died. It is equal to the Life Insurance
Benefit plus any additional death benefits under any riders you have chosen
minus any outstanding loans (including any accrued loan interest).
POLICY YEAR: The twelve-month period starting on your Policy Date, and each
twelve-month period thereafter.
QUALIFIED POLICY: A policy owned by an employee benefit plan that qualifies for
special federal income tax treatment.
SEPARATE ACCOUNT: NYLIAC Variable Universal Life Separate Account-I, a
segregated asset account NYLIAC established to receive and invest net premiums
which are allocated to the Eligible Portfolios.
TARGET PREMIUM: An amount shown on the Policy Data Page that we use to
calculate the sales expense and surrender charges. Any changes to the face
amount of your base policy will affect your Target Premium.
8
<PAGE> 13
GENERAL DESCRIPTION
The policy provides life insurance protection on two lives (the insureds),
and pays Policy Proceeds when the last surviving insured dies while the policy
is in effect. The policy offers:
-- flexible premium payments, where you select the timing and amount of the
premium;
-- a choice of two Life Insurance Benefit Options;
-- loan and partial withdrawal privileges;
-- the ability to increase or decrease the policy's face amount of
insurance;
-- additional benefits through the use of optional riders; and
-- a selection of premium and expense allocation alternatives, including
twenty-two variable Investment Divisions and a Fixed Account with a
guaranteed interest rate.
WHEN LIFE INSURANCE COVERAGE BEGINS
If you have coverage under a conditional temporary coverage agreement and
if the policy is issued, the policy will replace the temporary coverage. Your
coverage under the policy will be deemed to have commenced on the Policy Date.
In all other cases, if the policy is issued, coverage under the policy will
take effect when we receive the premium payment that you are required to make
when the policy is delivered to you.
HOW THE POLICY IS AVAILABLE
Survivorship Variable Universal Life is available to our policyowners as
either a Non-Qualified or Qualified Policy. We issue Qualified Policies on a
unisex basis. Any reference in this prospectus which makes a distinction based
on the sex of the insureds should be disregarded as it relates to such policies.
HOW THE POLICY WORKS
We will pay your beneficiary the Policy Proceeds if your policy is still in
effect when the last surviving insured dies. Your policy will stay in effect so
long as the cash surrender value of your policy is sufficient to pay your
policy's monthly charges. The following example demonstrates how we determine
the cash surrender value of your policy.
9
<PAGE> 14
EXAMPLE
This example is based on the illustration shown in Appendix A. It assumes
current charges and a 6% hypothetical gross annual investment return, which
results in a 4.47% net annual investment return. It also assumes the policy is
in its first Policy Year.
<TABLE>
<S> <C> <C>
PREMIUM(1) You choose the amount of premium you intend to
Less sales expense charge(2) $15,000.00 pay and the frequency with which you intend to
Less state tax charge (2%) 1,106.48 make these payments. We call this your planned
Less Federal tax charge (1.25%) 300.00 premium. Any additional premium payments you
(if applicable) 187.50 make are called unplanned premiums.
- ------------------------------------------
NET PREMIUM $13,406.02
Plus net investment performance for one We allocate your net premium to the Investment
year (earned from the Investment Divisions and/or the Fixed Account based on your
Divisions and/or the Fixed Account) instructions.
(varies daily) 569.93
Less total annual monthly contract
charge for one year(3) 708.00
Less total annual monthly cost of
insurance charge for one year
(varies monthly and with age) 32.22
Less total annual charge per $1,000 of
the initial face amount of your
Policy for one year (not including
riders) 480.00
Less total annual monthly cost of
riders(4) 0.00
- ------------------------------------------
CASH VALUE $12,755.73
Less surrender charge(5) Cash Value is used to determine the amount of
(if applicable) 2,532.40 your Life Insurance Benefit as well as the cash
surrender value of your policy.
We may assess a surrender charge when you make a
partial withdrawal or full surrender in the
first fifteen Policy Years or within fifteen
years after you increase the face amount.
- ------------------------------------------
CASH SURRENDER VALUE $10,223.33 The amount of loans, withdrawals and surrenders
you can make is based on your policy's cash
surrender value. Your policy will terminate if
your cash surrender value is insufficient to pay
your policy's monthly charges.
</TABLE>
- ------------
(1) This example assumes you pay an annual planned premium of $15,000 at the
beginning of the Policy Year and that you do not make any unplanned premium
payments.
(2) For details about how we calculate the sales expense charge for your policy,
you should refer to page 43.
(3) We currently deduct a monthly contract charge of $59 per month from a policy
in its first Policy Year. For a policy in a later Policy Year, we currently
expect to deduct a monthly contract charge of $9 per month.
(4) This example assumes you have not chosen any riders.
(5) If you surrender your policy in the first Policy Year, we will include an
additional contract charge in the surrender charge we deduct from your
policy. For details, you should refer to page 49.
10
<PAGE> 15
LIFE INSURANCE PROTECTION
YOUR POLICY PROCEEDS
We will pay proceeds to your beneficiary when we receive satisfactory proof
that the last surviving insured died. These proceeds will equal:
<TABLE>
<S> <C> <C>
1) the Life Insurance Benefit calculated under the Life
Insurance Benefit Option you have chosen;
plus 2) any additional death benefits under the riders you have
chosen;
less 3) any outstanding loans (including any accrued loan interest)
on the policy.
</TABLE>
We will pay interest on these proceeds from the date the last surviving
insured died until the date we pay the proceeds or the date when the payment
option you have chosen becomes effective.
YOUR LIFE INSURANCE BENEFIT
Under your policy, the Life Insurance Benefit depends on the Life Insurance
Benefit Option you choose. Your policy offers two options:
OPTION 1--The Life Insurance Benefit under this option is equal to the
policy's face amount. Except as described below, your Life
Insurance Benefit under this option will be a level amount.
OPTION 2--The Life Insurance Benefit under this option is equal to the
policy's face amount plus the policy's cash value. The Life
Insurance Benefit under this option will vary with the policy's
cash value. Your Life Insurance Benefit will never be less than
your policy's face amount.
Under both options, your Life Insurance Benefit may be greater if the
minimum percentage of the policy's cash value necessary for the policy to
qualify as life insurance under Section 7702 of the Internal Revenue Code is
greater than the amount calculated under the option you have chosen. In general,
this higher Life Insurance Benefit will be the cash value of your policy
multiplied by the minimum percentage required by Section 7702 of the Internal
Revenue Code. (You can find this percentage on the Policy Data Page).
Assuming your Life Insurance Benefit does not increase as described in the
above paragraph, and assuming the same face amount and premium payments under
both options:
- If you choose Option 1, your Life Insurance Benefit will not vary in
amount and you will generally have lower total policy cost of
insurance charges and lower Policy Proceeds.
- If you choose Option 2, your Life Insurance Benefit will vary with
your policy's cash value and you will generally have higher total
policy cost of insurance charges and higher Policy Proceeds.
11
<PAGE> 16
EXAMPLES
(Effect of IRC Section 7702 on Life Insurance Benefit)
LIFE INSURANCE BENEFIT OPTION 1
LIFE INSURANCE BENEFIT OPTION 2
<TABLE>
<S> <C> <C>
EXAMPLE 1:
Life Insurance Benefit = Face Amount
Face Amount: $100,000
Cash Value: $ 25,000
IRC Section 7702
Percentage 379%
Greater of:
Face Amount: $100,000
% of Cash Value:
($25,000 X 379%) $ 94,750
-----------------------
--------
Life Insurance Benefit: $100,000
EXAMPLE 2:
Life Insurance Benefit = % of Cash Value
Face Amount: $100,000
Cash Value: $ 50,000
IRC Section 7702
Percentage 379%
Greater of:
Face Amount: $100,000
% of Cash Value:
($50,000 X 379%) $189,500
-----------------------
--------
Life Insurance Benefit: $189,500
EXAMPLE 1:
Life Insurance Benefit = Face Amount +
Cash Value
Face Amount: $100,000
Cash Value: $ 20,000
IRC Section 7702
Percentage 379%
Greater of:
Face Amount + Cash Value: $120,000
% of Cash Value:
($20,000 X 379%) $ 75,800
-----------------------
--------
Life Insurance Benefit: $120,000
EXAMPLE 2:
Life Insurance Benefit = % of Cash Value
Face Amount: $100,000
Cash Value: $ 40,000
IRC Section 7702
Percentage 379%
Greater of:
Face Amount + Cash Value: $140,000
% of Cash Value:
($40,000 X 379%) $151,600
-----------------------
--------
Life Insurance Benefit: $151,600
</TABLE>
CHANGING YOUR LIFE INSURANCE BENEFIT OPTION
You can change the Life Insurance Benefit Option for your policy while both
insureds are still living. However, we may prohibit you from changing the Life
Insurance Benefit Option if the change would (i) cause the face amount of the
policy to be less than $100,000, (ii) cause the policy to fail to qualify as
life insurance under Section 7702 of the Internal Revenue Code, or (iii) cause
the policy's face amount to exceed our retention limits. Additionally, if you
elect to have the Supplementary Term Rider included in your
12
<PAGE> 17
policy, you must select Option 1 and you can never change your Life Insurance
Benefit Option to Option 2, even if the Supplementary Term Rider ends.
CHANGES FROM OPTION 1 TO OPTION 2
If you change from Option 1 to Option 2, we will decrease the face amount
of your policy by the amount of the cash value, so that your Life Insurance
Benefit immediately before and after the change remains the same. If a
surrender charge applies to face amount decreases at the time you change your
Life Insurance Benefit Option, we will assess a surrender charge based on the
amount of the face amount decrease.
CHANGES FROM OPTION 2 TO OPTION 1
If you change from Option 2 to Option 1, we will increase the face amount
of your policy by the amount of the cash value, so that your Life Insurance
Benefit immediately before and after the change remains the same. We will
continue to apply the existing surrender charge schedule to your policy, but
we will not apply a new surrender charge schedule to the increased face amount
resulting from the change in this option.
In order to change your Life Insurance Benefit Option, you must submit a
signed request to Variable Products Service Center at the addresses shown on the
cover of this prospectus (or any other address we indicate to you in writing).
We will change your Life Insurance Benefit Option on the Monthly Deduction Day
on or after the date we receive your written request.
EXAMPLE
CHANGE FROM OPTION 1 TO OPTION 2
Cash Value $ 200,000
Face Amount
before option change $1,000,000
Face Amount
after option change $ 800,000
($1,000,000 - $200,000)
Life Insurance Benefit
immediately before and
after Option change $1,000,000
CHANGE FROM OPTION 2 TO OPTION 1
Cash Value $ 150,000
Face Amount
before option change $1,000,000
Face Amount
after option change $1,150,000
($1,000,000 + $150,000)
Life Insurance Benefit
immediately before and
after option change $1,150,000
13
<PAGE> 18
CHANGING THE FACE AMOUNT OF YOUR POLICY
The face amount of your policy affects the amount of the Life Insurance
Benefit of your policy.
INCREASING YOUR POLICY'S FACE AMOUNT
You may request an increase in the face amount of your policy if all of
the following conditions are met:
-- both insureds are still living;
-- the older insured is age 90 or younger;
-- the increase you are requesting is $5,000 or more;
-- the requested increase will not cause the policy's face amount to
exceed our maximum retention limit; and
-- you submit a written application signed by each insured along with
satisfactory evidence of insurability.
We may limit any increase in the face amount of your policy.
If we approve your request for a face amount increase, we will increase
your policy's face amount on the Monthly Deduction Day on or after the day we
approve the increase.
An increase in the face amount of your policy may have the following
consequences which you should consider:
-- additional cost of insurance charges;
-- a new fifteen year surrender charge period applicable only to the
amount of the increase;
-- a new suicide and contestability period applicable only to the amount
of the increase;
-- a change in the life insurance percentage applied to the entire policy
under Section 7702 of the Internal Revenue Code; and
-- a new seven year testing period for modified endowment contract status
may begin.
DECREASING YOUR POLICY'S FACE AMOUNT
You may request a decrease in the face amount of your policy if both of
the following conditions are met:
-- either insured is still living; and
-- the decrease you are requesting will not reduce the policy's face
amount below $100,000.
We may limit any decrease in the face amount of your policy.
If we approve your request for a face amount decrease, we will decrease
your policy's face amount on the Monthly Deduction Day on or after the day we
receive your written request for a decrease.
A decrease in the face amount of your policy may have the following
consequences which you should consider:
-- lower total policy cost of insurance charges;
-- a surrender charge may apply to the amount of the decreased face
amount based on a last increased, first canceled basis; and
-- possible adverse tax consequences.
14
<PAGE> 19
CASH VALUE AND CASH SURRENDER VALUE
CASH VALUE
The cash value of your policy is the sum of the amounts the policy has in
the Investment Divisions in the Separate Account and in the Fixed Account. These
amounts are allocated based on the instructions you give us. A number of factors
affect your policy's cash value including but not limited to:
-- the amount and frequency of the premiums you pay;
-- the investment experience of the Investment Divisions you choose;
-- the interest credited on the amount in the Fixed Account; and
-- the amount of any partial withdrawals you make (including any charges
you incur as a result of the withdrawal).
The cash value is not necessarily the amount you receive when you surrender
your policy. See CASH SURRENDER VALUE on page 16 and SURRENDERS on page 20 for
details about surrendering your policy.
AMOUNT IN THE SEPARATE ACCOUNT
We use amounts allocated to an Investment Division to purchase accumulation
units of an Investment Division. We redeem accumulation units from an Investment
Division when amounts are loaned, withdrawn, transferred, surrendered or
deducted for charges or loan interest. We calculate the number of accumulation
units purchased or redeemed in an Investment Division by dividing the dollar
amount of the transaction by the Investment Division's accumulation unit value.
On any given day, the amount you have in the Separate Account is the value of
the accumulation units you have in all of the Investment Divisions of the
Separate Account. The value of the accumulation units you have in a given
Investment Division equals the current accumulation unit value for the
Investment Division multiplied by the number of accumulation units held in that
Investment Division.
We determine accumulation unit values for the Investment Divisions as of
the end of each valuation day. A valuation day is any day on which we and the
New York Stock Exchange are open for trading.
The value of an accumulation unit on any valuation day equals the
accumulation unit on the preceding valuation day multiplied by the net
investment factor for the period from the time the New York Stock Exchange
closed on the immediately preceding valuation day to the time it closed on the
current valuation day.
The net investment factor for an Investment Division for this period equals
(a) divided by (b) less (c) [i.e., (a / b) - c]where:
(a) is the sum of:
(1) the net asset value of the Fund share held in the Separate
Account for that Investment Division determined at the end of
the period, plus
(2) the per share amount of any dividends or capital gain
distributions made by the Fund for shares held in the Separate
Account for that Investment Division if the ex-dividend date
occurs during the period,
15
<PAGE> 20
(b) is the net asset value of a Fund share held in the Separate Account
for that Investment Division determined as of the end of the
previous valuation day,
(c) is a factor representing the mortality and expense risk charge and
the administrative charge. This factor is deducted on a daily basis
and is currently equal to an annual rate of .70% (the sum of .60%
and .10%) of the daily average net asset value of the Investment
Division.
The net investment factor may be greater or less than one. Therefore, the
value of an accumulation unit may increase or decrease.
AMOUNT IN THE FIXED ACCOUNT
The amount you have in the Fixed Account equals:
1) the sum of the net premiums you have allocated to the Fixed
Account;
plus 2) any transfers you have made from the Separate Account to the
Fixed Account;
plus 3) any interest credited to the Fixed Account;
less 4) any amounts you have withdrawn from the Fixed Account;
less 5) any charges we have deducted from the Fixed Account;
less 6) any transfers you have made from the Fixed Account to the
Separate Account.
INVESTMENT RETURN
The investment return of your policy is based on the amount you have in
each Investment Division of the Separate Account, the amount you have in the
Fixed Account, the investment experience of each Investment Division as measured
by its actual net rate of return, and the interest rate we credit on the amount
you have in the Fixed Account.
The investment experience of an Investment Division of the Separate Account
reflects increases or decreases in the net asset value of the shares of the
underlying Fund, any dividend or capital gains distributions declared by the
Fund, and any charges against the assets of the Investment Division. We
determine this investment experience each valuation day, which is when the net
asset value of the underlying Fund is determined. The actual net rate of return
for an Investment Division measures the investment experience from the end of
one valuation day to the end of the next valuation day.
CASH SURRENDER VALUE
The cash surrender value of your policy is the amount we will pay you if
you surrender your policy. The cash surrender value of your policy is equal to
the cash value of the policy less any surrender charges and any outstanding
policy loans (including any accrued loan interest). If you surrender your policy
during the first Policy Year, an additional contract charge applies as described
on page 49. Since the cash value of the policy fluctuates with the performance
of the Investment Divisions and the interest credited to the Fixed Account, and
because a surrender charge may apply, the cash surrender value may be more or
less than the total premium payments you have made less any deductions from
premiums and deductions from cash value that were made.
16
<PAGE> 21
Cash surrender value is significant for two reasons:
-- Loans and Partial Withdrawals--You can take loans and partial
withdrawals from your policy based on the amount of the policy's cash
surrender value.
-- Keeping Your Policy in Effect--While premium payments are flexible,
you may need to make additional premium payments so that the cash
surrender value of your policy is sufficient to pay the charges
needed to keep your policy in effect.
LOANS
You can borrow up to 90% of your policy's cash surrender value, less any
additional contract charge in the first Policy Year. Your policy will be used as
collateral to secure this loan. Any amount that secures a loan remains part of
your policy's cash value but is transferred to the Fixed Account. We credit any
amount that secures a loan (the loaned amount) with an interest rate that we
expect to be different from the interest rate we credit on any unloaned amount.
YOUR POLICY AS COLLATERAL FOR THE LOAN
- --For Existing Loans Initiated Before May 19, 2000
When you request a loan, we will transfer funds from the Separate Account
to the Fixed Account so that the cash value of the amount in the Fixed Account
(less any outstanding loans, including any accrued loan interest) is at least
108% of the requested loan. We will transfer these funds from the Investment
Divisions of the Separate Account in proportion to the amounts you have in each
Investment Division. While any policy loan is outstanding, we will not allow you
to make any partial withdrawals or transfer any funds from the Fixed Account if
the partial withdrawal or transfer would cause the cash value of the Fixed
Account to fall below 108% of all outstanding loans. Additionally, if the
monthly deductions from cash value will cause the cash value of the Fixed
Account to fall below 108% of all outstanding policy loans, we may take these
deductions from the Investment Divisions of the Separate Account in proportion
to the amounts you have in each Investment Division.
- --For All New Policies Issued On and After May 19, 2000 and For All New and
Existing Loans On Their Policy Anniversary Following May 19, 2000
When you request a loan, a transfer of funds may be made from the Separate
Account to the Fixed Account so that the cash value of the amount in the Fixed
Account is at least 106% of the requested loan plus any outstanding loans,
including accrued loan interest. This percentage will change in accordance with
changes in the loan interest rate, but will never exceed 108%. We will transfer
these funds from the Investment Divisions of the Separate Account in accordance
with your instructions, or if you have not provided us with any instructions, in
proportion to the amounts you have in each Investment Division. While any policy
loan is outstanding, we will not allow you to make any partial withdrawals or
transfer any funds from the Fixed Account if the partial withdrawal or transfer
would cause the cash value of the Fixed Account to fall below 106% of all
outstanding loans (or a different percentage based on the loan interest rate).
Additionally, if the monthly deductions from cash value will cause the cash
value of the Fixed Account to fall below 106% of all outstanding policy loans,
we may take these deductions from the Investment Divisions
17
<PAGE> 22
of the Separate Account in proportion to the amounts you have in each Investment
Division.
LOAN INTEREST
We currently charge an effective annual loan interest rate of 8% (6% for
all new policies issued on and after May 19, 2000 and for existing policies, any
new or outstanding loan balance on their policy anniversary following May 19,
2000), which is payable in arrears. We may set a lower rate. If we set a lower
rate, we will determine this lower rate at least once every twelve months, but
not more frequently than once every three months. If we lower this rate, we may
increase it again in the future by no more than 1% per calendar year, within
certain limits.
INTEREST ON THE CASH VALUE HELD AS COLLATERAL
When you take a loan from your policy, the amount we hold in the Fixed
Account to secure the loan earns interest at a different rate from the rate we
charge you for loan interest. The rate we credit on loaned amounts will never be
less than 2.0% less than the rate we charge for policy loans. We guarantee that
the interest rate we credit on loaned amounts will always be at least 4.0%. For
the first ten Policy Years, the rate we currently expect to credit on loaned
amounts is 1.0% less than the rate we charge for loan interest. Beginning in the
eleventh Policy Year, the rate we currently expect to credit on loaned amounts
is 0.5% less than the rate we charge for loan interest.
WHEN LOAN INTEREST IS DUE
The interest we charge on a loan accrues daily and is payable on the
earliest of the following dates:
-- the policy anniversary;
-- the date you increase or repay a loan;
-- the date you surrender the policy;
-- the date the policy lapses; or
-- the date on which the last surviving insured dies.
Any loan interest due on a policy anniversary which you do not pay will be
charged against the policy as an additional loan.
LOAN REPAYMENT
You may repay all or part of a policy loan at any time while your policy is
in effect. We will allocate your loan repayments to the Investment Divisions
and/or Fixed Account according to your most recent instructions on how to
allocate your premium payments. If you would like us to allocate your loan
repayment differently, you must indicate this in writing at the time of the
repayment. We will consider any payment we receive from you while you have a
loan outstanding to be a premium payment unless you tell us in writing that it
is a loan repayment.
If the amount of any unpaid loans (including any accrued loan interest) is
greater than the cash value of your policy less any applicable surrender charges
and any additional contract charge we will mail a notice to you at your last
known address. We will also send a
18
<PAGE> 23
copy of the notice to the last known assignee, if any, on our records. If you do
not pay the necessary amount within 31 days after the day we mail you this
notice, we will terminate your policy.
THE EFFECTS OF A POLICY LOAN
As long as there is an outstanding loan, the amount held as collateral
remains in the Fixed Account which does not share in the Separate Account's
investment performance. As you repay your loan, we reduce the amount held as
collateral. You may choose whether to invest the amounts no longer required for
collateral in the Investment Divisions and/or to leave them invested in the
Fixed Account. If your policy is a modified endowment contract, a loan may
result in taxable income to you. See FEDERAL INCOME TAX CONSIDERATIONS on page
56 for more information.
A loan will affect the cash surrender value of your policy, and its Policy
Proceeds. If you surrender your policy, if your policy terminates, or if a Life
Insurance Benefit becomes payable under the policy, and there are any
outstanding loans at that time, we will deduct the amount of any outstanding
loans (including any accrued loan interest) from the cash value of your policy
or from the Life Insurance Benefit we pay.
If you do not pay off your loan and the policy lapses, your outstanding
loan amount may result in taxable income to you. See FEDERAL INCOME TAX
CONSIDERATIONS-- POLICY LOANS and INTEREST DEDUCTIONS on page 60.
PARTIAL WITHDRAWALS
You may request a partial withdrawal from your policy's cash surrender
value if the following conditions are met:
-- at least one insured is living;
-- the partial withdrawal being requested is at least $500; and
-- the partial withdrawal will not cause the policy to fail to qualify as
life insurance under Section 7702 of the Internal Revenue Code.
AMOUNT AVAILABLE TO WITHDRAW
You may withdraw an amount up to the cash surrender value of your policy.
We process partial withdrawals at the price next determined after we receive
your written request. If you request a partial withdrawal that would reduce the
face amount of your policy (not including riders) below $100,000, we may require
you to surrender your policy.
REQUESTING A PARTIAL WITHDRAWAL
You may request a partial withdrawal from your policy by sending a written
request to Variable Products Service Center at the addresses listed on the front
cover of this prospectus.
WHEN IS THE PARTIAL WITHDRAWAL EFFECTIVE
Your requested partial withdrawal will be effective on the date we receive
your written request. However, if the day we receive your request is not a day
on which the New York Stock Exchange ("NYSE") is open or if your request is
received after the close of the
19
<PAGE> 24
NYSE, then the requested partial withdrawal will be effective on the next day on
which the NYSE is open.
PARTIAL WITHDRAWAL FEE AND SURRENDER CHARGE
When you make a partial withdrawal, we will deduct a fee for processing the
partial withdrawal. This fee will not exceed the lesser of $25 or 2% of the
amount withdrawn. Additionally, a partial withdrawal may result in a decrease in
your policy's face amount which may cause a surrender charge to apply as
described in SURRENDER CHARGES on page 49.
ALLOCATION OF PARTIAL WITHDRAWAL AND FEE
You may specify how much of the partial withdrawal you want taken from the
amount you have in each of the Investment Divisions and in the Fixed Account. If
you do not specify how you would like your partial withdrawal allocated, we will
deduct the partial withdrawal and any withdrawal fee from the Investment
Divisions and/or the Fixed Account in proportion to the amounts you have in each
of these investment options. If you request a partial withdrawal that is greater
than the amount in the Investment Divisions and/or in the Fixed Account you have
chosen, we will reduce the amount of the partial withdrawal to the amount
available in those Investment Divisions and/or in the Fixed Account and pay you
that amount less any applicable withdrawal fee and surrender charge.
THE EFFECTS OF A PARTIAL WITHDRAWAL
When you make a partial withdrawal, we reduce your cash value and cash
surrender value by the amount of the partial withdrawal, and any applicable
withdrawal fee and surrender charge. Additionally, if you have elected Life
Insurance Benefit Option 1, we reduce your policy's face amount and your Policy
Proceeds by the amount of the withdrawal (not including the effects of any
withdrawal fee or surrender charge). If you have elected Life Insurance Benefit
Option 2, we will not reduce your policy's face amount but we will reduce your
Policy Proceeds by the amount of the partial withdrawal and any applicable
withdrawal fee and surrender charge. A partial withdrawal may result in taxable
income to you. See FEDERAL INCOME TAX CONSIDERATIONS on page 56 for more
information.
We may restrict the amount and frequency of partial withdrawals, within
certain limits.
SURRENDERS
You may surrender your policy for its cash surrender value at any time
while either insured is living.
REQUESTING A SURRENDER
You may surrender the policy by sending a written request and the policy to
Variable Products Service Center at the addresses listed on the front cover of
this prospectus.
WHEN IS THE SURRENDER EFFECTIVE
Your surrender will be effective on the date we receive your written
request and the policy. However, if the day we receive your request is not a day
on which the NYSE is open
20
<PAGE> 25
or if your request is received after the close of the NYSE, then the requested
surrender will be effective on the next day on which the NYSE is open.
SURRENDER CHARGES
If you surrender your policy during the first fifteen Policy Years or
within fifteen years after you increase the face amount of your policy, a
surrender charge may apply. We will deduct any applicable surrender charge from
the amounts you have in the Investment Divisions and the Fixed Account in
proportion to these amounts. See SURRENDER CHARGES on page 49 for details.
ADDITIONAL BENEFITS THROUGH RIDERS AND OPTIONS
You may apply for additional benefits by selecting any of the following
optional riders:
-- Supplementary Term Rider
-- Guaranteed Minimum Death Benefit Rider
-- First-to-Die Monthly Deduction Waiver Rider
-- Level First-to-Die Term Rider
-- Living Benefits Rider (also known as Accelerated Benefits Rider)
HOW THE RIDERS ARE AVAILABLE
Generally, you must select your riders when you apply for your policy.
However, you may only elect the Living Benefits Rider after one of the insureds
has died.
The Living Benefits Rider is only available on Non-Qualified Policies.
Generally, all other riders are available on both Non-Qualified and Qualified
Policies.
SUPPLEMENTARY TERM RIDER
This rider provides a term insurance death benefit that is payable when the
last surviving insured dies. It insures the same individuals covered by your
base policy. At the time you apply for this rider, you select a target face
amount for your policy. The initial term insurance death benefit under this
rider equals the target face amount less the initial face amount of your base
policy (not including riders). We recalculate the term insurance death benefit
on each Monthly Deduction Day, so that the amount of the term insurance death
benefit equals the target face amount less the current Life Insurance Benefit at
that time.
Because the Life Insurance Benefit of your base policy (not including
riders) may increase or decrease depending on investment performance, the
rider's term insurance death benefit will do the reverse in order to maintain a
level target face amount. However, in the event that the Life Insurance Benefit
is greater than the target face amount, the rider's term insurance death benefit
will not be reduced to an amount less than zero. For example, if your Life
Insurance Benefit increases, the rider's term insurance death benefit will
decrease by the same amount. If the base policy's Life Insurance Benefit changes
for
21
<PAGE> 26
any reason other than because of the requirements of Section 7702 of the
Internal Revenue Code, we will make a corresponding adjustment to the target
face amount.
<TABLE>
<S> <C> <C> <C> <C>
Target Base Policy's Supplementary
Face less Life Insurance equals Term Rider
Amount Benefit Death Benefit
</TABLE>
If you compare a policy with this rider to a policy that initially provides
the same Policy Proceeds but does not have this rider, the policy with this
rider will have lower surrender charges and a lower Target Premium. (See TARGET
PREMIUM on page 43 for additional information about Target Premium)
We will only allow you to elect this rider if:
-- the initial target face amount is at least $1,000,000;
-- the base policy Life Insurance Benefit is at least $200,000;
-- the initial term insurance death benefit is at least the minimum amount
we allow, which is currently $100,000.
-- the initial term insurance death benefit is no greater than four times
the policy's Life Insurance Benefit; and
-- you have chosen Life Insurance Benefit Option 1.
Within certain limits, you may:
-- increase or decrease this rider's term insurance death benefit or target
face amount; and/or
-- convert this rider to increase the face amount of your base policy. The
minimum amount of term insurance benefit you may convert is $5,000,
which is the same as the minimum base face amount increase. (Note: The
target face amount of your policy after this conversion will be the same
as the target face amount of your policy including riders before the
conversion. Your Target Premium will increase as a result of the
increase in the face amount of your base policy and a new surrender
charge period will apply to the increase. (See TARGET PREMIUM on page 43
for additional information about Target Premium.))
You may request changes to your Policy under this rider if:
(a) you do not decrease the target face amount below $1,000,000, unless the
decrease is due to a partial withdrawal;
(b) you do not decrease the base Policy's Life Insurance Benefit below
$200,000, unless the decrease is due to a partial withdrawal; and
(c) you do not make a change that causes the term insurance death benefit
to be greater than four times the Policy's Life Insurance Benefit. This
requirement prohibits you from increasing the term insurance death
benefit or decreasing the base Policy face amount to an amount that
would violate this maximum ratio.
Once you choose this rider, you may not change your Life Insurance Benefit
Option, even after this rider ends or is terminated.
22
<PAGE> 27
GUARANTEED MINIMUM DEATH BENEFIT RIDER
As long as this rider is in effect and the benefit period has not expired,
this rider guarantees that your policy will never lapse due to its cash
surrender value being insufficient to cover the current monthly deduction
charges. Under this rider, if your total monthly deduction charges are greater
than your policy's cash value, we will deduct as much of the monthly deduction
charges from the cash value as possible. We will then waive any excess amount of
these charges including the charge for this and any other rider. Generally, this
rider is available with a benefit period up to the younger insured's age 80 or
100. You may choose either expiry date as long as the benefit period is at least
ten years.
In exchange for the guarantee provided by this rider, you must make certain
premium payments into your policy. The premium you must pay under this rider is
called the "Monthly Guaranteed Minimum Death Benefit (GMDB) premium." You will
find it on the Policy Data Page. The monthly GMDB premium may change if you
modify your policy or any of the riders attached to your policy. Although this
premium is expressed as a monthly premium, you do not need to pay it on a
monthly basis. Rather, we will perform a GMDB premium test each month to
determine if you have made enough cumulative premium payments to keep the rider
in effect.
GMDB PREMIUM TEST (PERFORMED ON EACH MONTHLY DEDUCTION DAY)
<TABLE>
<S> <C> <C> <C> <C>
Cumulative Cumulative partial Cumulative monthly GMDB
premium payments less withdrawals must be at least premiums from the Policy Date to
to date to date equal to the date the test is performed
</TABLE>
If your policy does not satisfy the GMDB premium test and your policy fails
the test by an amount that is more than one monthly GMDB premium, we will notify
you that your policy has failed this test. The rider will terminate unless you
make a premium payment in an amount necessary to pass the GMDB premium test
before the next Monthly Deduction Day. If the rider terminates, we will
reinstate it if we receive the required premium payment before the Monthly
Deduction Day that follows the date the rider terminated. If the rider
terminates during a period when the rider benefit is in effect, your policy will
enter the late period and will lapse unless the required payment is made.
Having this rider affects your ability to take policy loans in the
following way:
(a) If you take a loan during the first two Policy Years, this rider will
end.
(b) After the first two Policy Years, you may take loans within certain
limits. On the day you take a loan (or when any unpaid loan interest is
charged as an additional loan), the resulting cash surrender value of
your policy after accounting for any new or additional loans must be
greater than the cumulative monthly GMDB premiums which were required
up to the time you take the loan, accumulated at an annual effective
interest rate of 6.0% as of that date.
This rider is not available on a policy with a Supplementary Term Rider.
23
<PAGE> 28
FIRST-TO-DIE MONTHLY DEDUCTION WAIVER RIDER
If either insured dies while this rider is in effect, we will waive your
policy's monthly deductions from cash value for the remainder of the policy. The
charges we will waive under this rider are:
(a) the monthly contract charge;
(b) the monthly cost of insurance charge for the base policy (not including
riders);
(c) the charge per $1,000 of the initial face amount (not including
riders), which only applies during the first three Policy Years;
(d) any monthly rider charges.
These deductions are described in more detail under DEDUCTIONS FROM CASH
VALUE on page 44 and on the Policy Data Page.
LEVEL FIRST-TO-DIE TERM RIDER
This rider provides a level term insurance death benefit which we will pay
when either insured dies while this rider is in effect. We will only pay the
benefit under this rider once, even if both insureds die at the same time.
You may decrease the face amount of this rider as long as you do not
decrease it below the minimum amount we require to issue the rider. You may not
increase the face amount of this rider.
LIVING BENEFITS RIDER (ALSO KNOWN AS ACCELERATED BENEFITS RIDER)
Under this rider, after either insured dies, if the last surviving insured
has a life expectancy of twelve months or less, you may request a portion or all
of the Policy Proceeds as an accelerated death benefit.
You may elect to receive an accelerated death benefit of 25%, 50%, 75%, or
100% of certain eligible proceeds from your Policy Proceeds. We will pay you an
amount equal to:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Elected X Eligible X Interest - Administrative fee - Elected percentage of an
percentage proceeds factor (up to $150) unpaid Policy loan
</TABLE>
Minimum accelerated benefit amount: $25,000.
Maximum accelerated benefit amount: $250,000 (total for all of your NYLIAC
policies).
If you accelerate less than 100% of the eligible proceeds, the remaining
face amount of your policy after we pay this benefit must be at least $100,000.
When we make a payment under this rider, we will reduce your policy's face
amount, rider death benefits, monthly deductions, cash value, and any unpaid
policy loan based on the percentage you elected.
24
<PAGE> 29
POLICY SPLIT OPTION
You may split your policy into two single adjustable life insurance
policies that each insure the life of one of the insureds under certain
circumstances. You are allowed to make this split within six months after either
of the following two dates:
(1) the date a final divorce decree which terminates the marriage of the
insureds has been in effect for six months; or
(2) the effective date of a change in the federal tax law which results in
(a) a reduction in the unlimited federal estate tax marital deduction
provision (Section 2056 of the Internal Revenue Code), or
(b) a reduction of at least 50% in the level of estate tax rate from
the 1986 Tax Act payable on death.
You must request a policy split in writing. At the time of the split:
-- both insureds must be living;
-- we will not ask for evidence of insurability;
-- each new policy will be an adjustable life insurance policy which we
offer for the purpose of this option and which was available on the
Policy Date of your original policy; and
-- an insurable interest must exist between the owner of each new policy
and the insured of that new policy under all applicable laws.
ABOUT YOUR NEW POLICY
-- The Policy Date and Issue Date of each new policy will be the date when
you split the policy.
-- The policyowner and beneficiary of each new policy will be the same as
under the original policy, unless you state otherwise.
-- We will not assess a fee or surrender charge on a policy that is
terminating as a result of a policy split. However, we will apply all
fees and charges that generally apply to the type of policy you are
splitting your policy into, including a new surrender charge schedule,
to each of the new policies that result from the policy split.
-- The cost of insurance rates for each new policy will be based on the
insured's age and sex on the date of the split and most recent
underwriting class on the original policy.
-- The initial premium for each new policy will be one half of the cash
value of the original policy less any unpaid loan (including any accrued
loan interest).
-- The face amount of each new policy will equal one half of the original
base policy face amount, plus one half of the face amount of any riders
on the original policy. The benefits from any Level First-to-Die Term
Rider in effect will be excluded from this calculation.
-- If the original policy has been assigned, each new policy will have the
same assignment.
Splitting your policy may have certain adverse tax consequences. Please
read the FEDERAL INCOME TAX CONSIDERATIONS on page 56 for more details.
25
<PAGE> 30
PREMIUMS
Although premium payments are flexible, you may need to make additional
premium payments so that the cash surrender value of your policy is sufficient
to pay the charges needed to keep your policy in effect. Policies that are
maintained at cash surrender values just sufficient to cover fees and charges or
that are otherwise minimally funded are more subject to not being able to
maintain such cash surrender values because of market fluctuation and other
performance related risks. When determining the amount of your planned premium
payments, you should consider funding your policy at a level which has the
potential to maximize the investment opportunities within your policy and to
minimize the risks associated with market fluctuations.
Premiums are the total dollar amount you pay into your policy. When we
receive a premium payment, we deduct the sales expense, state tax, and federal
tax charges that apply. The balance of the premium is called the net premium. We
apply your net premium to the Investment Divisions and/or the Fixed Account,
according to your instructions. For more details on when and how your premiums
are applied, see PREMIUM ALLOCATION below.
For purposes of determining whether we require additional underwriting when
accepting a premium payment, we divide your premium payments into planned and
unplanned premiums.
PLANNED PREMIUM
When you apply for your policy, you select a premium payment schedule,
which indicates the amount and frequency of premium payments you intend to make.
The premium amount you select for this schedule is called your "planned
premium." It is shown on the Policy Data Page.
- -- You may increase or decrease the amount of your planned premium and change
the frequency of your payments, within limits.
- -- Planned premium payments end on the policy anniversary on which the younger
insured is, or would have been, age 100.
- -- Your policy will not automatically terminate if you are unable to pay the
planned premium. However, payment of your planned premium does not guarantee
your policy will remain in effect. Your policy will terminate if the cash
surrender value is insufficient to pay the monthly deduction charges or if
you have an excess policy loan, and you reach the end of the late period and
you have not made the necessary payment. See LATE PERIOD and TERMINATION on
pages 26 and 27 for more details.
UNPLANNED PREMIUM
An unplanned premium is a payment you make that is not part of the premium
payment schedule you choose.
- -- While at least one insured is living, you may make unplanned premium payments
at any time before the policy anniversary on which the younger insured is, or
would have been, age 100. However, if payment of an unplanned premium will
cause the Life Insurance Benefit of your policy to increase more than the
cash value will increase, both insureds must be living, and we may require
proof of insurability before accepting that payment and applying it to your
policy.
- -- If you exchange another life insurance policy to acquire this policy under
Section 1035 of the Internal Revenue Code, we will treat the proceeds of that
exchange as an unplanned premium.
- -- The minimum unplanned premium amount we allow is $50.
- -- We may limit the number and amount of any unplanned premium payments.
26
<PAGE> 31
PREMIUM ALLOCATION
Except for premium payments you make during the free look period, we apply
your net premium, which equals the balance of any planned or unplanned premium
payment after we deduct sales expense, state tax, and any federal tax charges
that apply, to the Investment Divisions of the Separate Account and/or to the
Fixed Account according to the most recent premium allocation election you have
given to us. We allocate the net premiums from any premium payments you make
during the free look period plus any interest accrued (currently an annual rate
of 3%) on the gross premiums to the General Account until the end of the free
look period. For more details, see FREE LOOK PERIOD on page 54. When your free
look period is over, we will allocate your net premiums according to your
instructions. You can change your premium allocation any time you make a premium
payment by submitting a revised premium allocation form. The allocation
percentages must be in whole numbers.
PAYMENTS RETURNED FOR INSUFFICIENT FUNDS
If your premium payment is returned for insufficient funds, we reserve the
right to reverse the investment options chosen and charge you a $20.00 fee for
each returned payment. In addition, the Fund may also redeem shares to cover any
losses it incurs as a result of a returned payment. If payment is returned for
insufficient funds for two consecutive periods, the privilege to pay by check or
electronically will be suspended until you notify us to reinstate it, and we
agree.
TERMINATION
If your policy's cash surrender value on any Monthly Deduction Day is less
than the monthly deductions from cash value for the next policy month, your
policy will continue in the late period for 62 days after that date. If the late
period expires without sufficient payment, then we will terminate your policy
without any benefits. See LATE PERIOD below for more details.
LATE PERIOD
The late period is the 62 days following the Monthly Deduction Day on which
the cash surrender value of your policy is insufficient to pay for monthly
deductions from cash value for the next policy month. During this period, you
have the opportunity to pay any premium needed to cover any overdue charges. We
will mail a notice to your last known address stating this amount. We will also
send a copy to the last known assignee, if any, on our records. We will mail
these notices at least 31 days before the end of the late period. Your policy
remains in effect during the late period. However, if we do not receive the
required payment before the end of the late period, we will terminate your
policy without any benefits.
During the late period, we will pay your beneficiary any benefits the
beneficiary is entitled to as follows:
-- If the last surviving insured dies during the late period, we will pay
the Policy Proceeds, which we will reduce by the unpaid monthly
deductions from cash value for the full policy months from the beginning
of the late period through the policy month in which the last surviving
insured dies.
27
<PAGE> 32
-- If the policy has a First-to-Die Monthly Deduction Waiver Rider and
either insured dies while the policy is in the late period, we will
approve the waiver claim when you pay all overdue monthly deductions
from cash value.
-- If the policy has a Level First-to-Die Term Rider and either insured
dies while the policy is in the late period, we will pay the proceeds
due under this rider less any overdue charges for this rider.
REINSTATEMENT OPTION
You can request that we reinstate your policy if all of these conditions
are met:
-- you make your request within five years after your policy terminated;
-- both insureds are living (However, we will accept your reinstatement
request when only one insured is living, if the other insured died
before your policy terminated); and
-- you have not surrendered your policy for its cash surrender value.
It is important to realize that a termination and subsequent reinstatement
may cause your policy to become a modified endowment contract. Modified
endowment contracts are subject to less favorable tax treatment. For more
information about modified endowment contracts, please see page 58.
Before we will reinstate your policy, we must receive the following:
(1) a payment equal to the sum of (a) and (b) where:
(a) is an amount which is sufficient to keep the policy in effect for at
least three months; and
(b) is 115% of any additional contract charge for a policy that ended
during the first Policy Year and is later reinstated. (This
additional contract charge is equal to the difference between the
monthly contract charge for the first Policy Year and the monthly
contract charge for subsequent Policy Years multiplied by the number
of Monthly Deduction Days missed during the first Policy Year
because the policy was not in effect).
(2) satisfactory evidence of insurability, if your reinstatement request is
more than 31 days after termination.
The effective date of reinstatement will be the Monthly Deduction Day on or
following the date we approve your request. If we reinstate your policy, the
face amount for the reinstated policy will be the same as it would have been if
the policy had not terminated.
The cash value of the reinstated policy will be the cash value at the time
the policy lapsed less the difference between the surrender charge assessed at
the time of the lapse and the surrender charge that applies at the time the
policy is reinstated. We will deduct any unpaid loan from this cash value or any
unpaid loan can be repaid, together with loan interest up to 6% compounded once
each year from the end of the late period to the date of reinstatement.
MATURITY DATE
Your policy matures on the policy anniversary on which the younger insured
is, or would have been, age 100. Beginning on this maturity date, the face
amount of your policy, as shown on the Policy Data Page, will no longer apply.
Instead, your Life Insurance Benefit will equal the cash value of your policy.
28
<PAGE> 33
One year before your policy's maturity date, we will notify you that on
your maturity date you may elect either:
(1) to receive the cash surrender value of your policy; or
(2) to continue the policy, without having to pay any more monthly contract
or cost of insurance charges.
If you choose to continue the policy, we will continue to assess separate
account charges on the cash value left in the Investment Divisions.
If you choose to surrender your policy, you must submit a signed request to
Variable Products Service Center at the addresses listed on the front cover of
this prospectus (or any other address we indicate to you in writing).
Please consult your tax advisor regarding the tax implications of these
options.
If your policy is still in effect when the last surviving insured dies, we
will pay the Policy Proceeds to the beneficiary.
29
<PAGE> 34
INVESTMENTS
Your policy offers a choice of investment options in which you can invest
your net premium. You may allocate your net premium (1) to any of the Investment
Divisions of the Separate Account, and/or (2) to the Fixed Account. We refer to
the Investment Divisions and the Fixed Account as your investment options.
THE SEPARATE ACCOUNT
NYLIAC Variable Universal Life Separate Account-I is a segregated asset
account NYLIAC established to receive and invest your net premiums.
NYLIAC established the Separate Account on June 4, 1993 under the laws of
Delaware, in accordance with the resolutions set forth by the NYLIAC Board of
Directors. The Separate Account is registered as a unit investment trust with
the Securities and Exchange Commission (SEC) under the Investment Company Act of
1940. This registration does not mean that the SEC supervises the management or
the investment practices or policies of the Separate Account.
Although the assets of the Separate Account belong to NYLIAC, these assets
are held separately from the other assets of NYLIAC, and under applicable
insurance law, cannot be charged for liabilities incurred in any other business
operations of NYLIAC (except to the extent that assets in the Separate Account
exceed the reserves and other liabilities of the Separate Account). These assets
are not subject to the claims of our general creditors. The income, capital
gains and capital losses incurred on the assets of the Separate Account are
credited to or are charged against the assets of the Separate Account, without
regard to the income, capital gains or capital losses arising out of any other
business NYLIAC may conduct. Therefore, the investment performance of the
Separate Account is entirely independent of both the investment performance of
NYLIAC's Fixed Account and the performance of any other separate account.
The Separate Account currently consists of twenty-two Investment Divisions,
four of which will be available under your policy beginning May 19, 2000. The
Investment Divisions invest exclusively in the corresponding Eligible Portfolios
of the Funds. The income, capital gains, and capital losses incurred on the
assets of an Investment Division are credited to or are charged against the
assets of the Investment Division, without regard to the income, capital gains
or capital losses of any other Investment Division. The Investment Divisions of
the Separate Account are designed to provide money to pay benefits under your
policy, but they do not guarantee a minimum rate of return or protect against
asset depreciation. They will fluctuate up and down depending on performance of
the Eligible Portfolios. The Eligible Portfolios of the relevant Funds, along
with their portfolio managers, are listed in the following table:
30
<PAGE> 35
<TABLE>
<S> <C> <C>
FUND PORTFOLIO MANAGERS ELIGIBLE PORTFOLIOS
- ------------------------------------------------------------------------------------------------------
MainStay VP Series Fund, Inc. MacKay Shields LLC 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 Series Fund, Inc. Monitor Capital Advisors LLC MainStay VP Indexed Equity
- ------------------------------------------------------------------------------------------------------
MainStay VP Series Fund, Inc. Madison Square Advisors LLC MainStay VP Bond;
MainStay VP Growth Equity
- ------------------------------------------------------------------------------------------------------
MainStay VP Series Fund, Inc. Adviser: New York Life MainStay VP American Century
Insurance Company Income & Growth
Subadviser: American Century
Investment Management, Inc.
- ------------------------------------------------------------------------------------------------------
MainStay VP Series Fund, Inc. Adviser: New York Life MainStay VP Dreyfus Large
Insurance Company Company Value
Subadviser: The Dreyfus
Corporation
- ------------------------------------------------------------------------------------------------------
MainStay VP Series Fund, Inc. Adviser: New York Life MainStay VP Eagle Asset
Insurance Company Management Growth Equity
Subadviser: Eagle Asset
Management, Inc.
- ------------------------------------------------------------------------------------------------------
The Alger American Fund Fred Alger Management, Inc. Alger American Small
Capitalization
- ------------------------------------------------------------------------------------------------------
Calvert Variable Series, Inc. Calvert Asset Management Calvert Social Balanced
Company, Inc.
- ------------------------------------------------------------------------------------------------------
Fidelity Variable Insurance Fidelity Management and Fidelity VIP II Contrafund(R)
Products Fund II Research Company
- ------------------------------------------------------------------------------------------------------
Fidelity Variable Insurance Fidelity Management and Fidelity VIP Equity-Income
Products Fund Research Company
- ------------------------------------------------------------------------------------------------------
Janus Aspen Series Janus Capital Corporation Janus Aspen Series Balanced;
Janus Aspen Series Worldwide
Growth
- ------------------------------------------------------------------------------------------------------
The Universal Institutional Morgan Stanley Morgan Stanley UIF Emerging
Funds, Inc. Asset Management Markets Equity
- ------------------------------------------------------------------------------------------------------
T. Rowe Price Equity Series, T. Rowe Price Associates, Inc. T. Rowe Price Equity Income
Inc.
</TABLE>
FUNDS
MainStay VP Series Fund, Inc.--The Separate Account currently invests in
fourteen Eligible Portfolios of the MainStay VP Series Fund, a diversified
open-end management investment company. MacKay Shields LLC, Monitor Capital
Advisors LLC, Madison Square Advisors LLC and New York Life Insurance Company
provide investment advisory services to these Portfolios. American Century
Investment Management, Inc., The Dreyfus Corporation and Eagle Asset Management,
Inc. provide investment subadvisory services
31
<PAGE> 36
to certain Portfolios. See the prospectus for the MainStay VP Series Fund which
is attached to this prospectus.
The Alger American Fund--The Separate Account currently invests in the
Alger American Small Capitalization Portfolio of The Alger American Fund.
Currently, the Alger American Small Capitalization Portfolio is the only
Eligible Portfolio available through The Alger American Fund for investment by
the Separate Account. Fred Alger Management, Inc. provides investment advisory
services to the Alger American Small Capitalization Portfolio. See the
prospectus for The Alger American Fund which is attached to this prospectus.
Calvert Variable Series, Inc.--The Separate Account currently invests in
the Calvert Social Balanced Portfolio of the Calvert Variable Series, Inc.
Currently, the Calvert Social Balanced Portfolio is the only Eligible Portfolio
available through the Calvert Variable Series, Inc. for investment by the
Separate Account. Calvert Asset Management Company, Inc. provides investment
advisory services to the Calvert Social Balanced Portfolio. See the prospectus
for the Calvert Variable Series, Inc. which is attached to this prospectus.
Fidelity Variable Insurance Products Fund (VIP) and Fidelity Variable
Insurance Products Fund II (VIP II)--The Separate Account currently invests in
the Fidelity VIP II Contrafund Portfolio of the Variable Insurance Products Fund
II trust and the Fidelity VIP Equity-Income Portfolio of the Variable Insurance
Products Fund trust. Currently, the Fidelity VIP II Contrafund and Fidelity VIP
Equity-Income Portfolios are the only Eligible Portfolios available through the
Fidelity Funds for investment by the Separate Account. Fidelity Management and
Research Company ("FMR") provides investment advisory services to the Fidelity
VIP II Contrafund(R) Portfolio and Fidelity VIP Equity-Income Portfolio. See the
prospectuses for the Fidelity Variable Insurance Products Funds which are
attached to this prospectus.
Janus Aspen Series--The Separate Account currently invests in the Balanced
and Worldwide Growth Portfolios of the Janus Aspen Series. Currently, the
Balanced and Worldwide Growth Portfolios are the only Eligible Portfolios
available through the Janus Aspen Series for investment by the Separate Account.
Janus Capital Corporation provides investment advisory services to the Janus
Aspen Series Balanced and Janus Aspen Series Worldwide Growth Portfolios. See
the prospectus for the Janus Aspen Series which is attached to this prospectus.
The Universal Institutional Funds, Inc.--The Separate Account currently
invests in the Emerging Markets Equity Portfolio of The Universal Institutional
Funds, Inc. (the "Universal Funds"). Currently, the Emerging Markets Equity
Portfolio is the only Eligible Portfolio available through the Universal Funds
for investment by the Separate Account. Morgan Stanley Asset Management provides
investment advisory services to the Emerging Markets Equity Portfolio. See the
prospectus for the Universal Funds which is attached to this prospectus.
T. Rowe Price Equity Series, Inc.--The Separate Account currently invests
in the T. Rowe Price Equity Income Portfolio of the T. Rowe Price Equity Series,
Inc. Currently, the T. Rowe Price Equity Income Portfolio is the only Eligible
Portfolio available through the T. Rowe Price Equity Series, Inc. for investment
by the Separate Account. T. Rowe Price Associates, Inc. provides investment
advisory services to the T. Rowe Price Equity Income Portfolio. See the
prospectus for the T. Rowe Price Equity Series, Inc. which is attached to this
prospectus.
32
<PAGE> 37
PORTFOLIOS
The Eligible Portfolios, which the Funds offer, are the mutual fund
portfolios which you may invest in through the Investment Divisions of the
Separate Account. The assets of each Eligible Portfolio are separate from the
others and each Portfolio has different investment objectives and policies. As a
result, each Eligible Portfolio operates as a separate investment Fund and the
investment performance of one Portfolio has no effect on the investment
performance of any other Portfolio. Portfolios described in this prospectus are
different from portfolios available directly to the general public. Investment
results may differ. The following describes the investment characteristics of
each of the twenty-two Portfolios in greater detail:
The MainStay VP Capital Appreciation Portfolio--The MainStay VP Capital
Appreciation Portfolio seeks long-term growth of capital. It seeks to achieve
its primary investment objective by maintaining a flexible approach towards
investing in various types of companies as well as types of securities depending
upon the economic environment and the relative attractiveness of the various
securities markets. Generally, the Portfolio will seek to invest in securities
issued by companies with investment characteristics such as participation in
expanding markets, increasing unit sales volume, growth in revenues and earnings
per share superior to that of the average common stocks comprising indices such
as the Standard & Poor's 500 Composite Stock Price Index ("S&P 500") and
increasing return on investment. Dividend income, if any, is a consideration
incidental to the Portfolio's objective of growth of capital.
The MainStay VP Cash Management Portfolio--The MainStay VP Cash Management
Portfolio seeks as high a level of current income as is consistent with
preservation of capital and maintenance of liquidity. It invests primarily in
short-term U.S. Government securities, obligations of banks, commercial paper,
short-term corporate obligations and obligations of U.S. and non-U.S. issuers
denominated in U.S. dollars. An investment in the MainStay VP Cash Management
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.
The MainStay VP Convertible Portfolio--The MainStay VP Convertible
Portfolio seeks capital appreciation together with current income. The Portfolio
will invest primarily in convertible securities consisting of bonds, debentures,
corporate notes, preferred stocks or other securities which are convertible into
common stocks or the cash value of a stock or a basket or index of equity
securities. Certain of the Portfolio's investments have speculative
characteristics.
The MainStay VP Government Portfolio--The MainStay VP Government Portfolio
seeks a high level of current income, consistent with safety of principal. It
will invest primarily in U.S. Government securities which include U.S. Treasury
obligations and obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities. The U.S. Government securities purchased for this
Portfolio, but not the shares of the Portfolio themselves, are issued or
guaranteed by the U.S. Government or its agencies or instrumentalities.
The MainStay VP High Yield Corporate Bond Portfolio--The MainStay VP High
Yield Corporate Bond Portfolio seeks maximum current income through investment
in a diversified portfolio of high yield, high risk debt securities. This
Portfolio seeks to achieve its primary objective by investment in a diversified
portfolio of high yield debt securities which
33
<PAGE> 38
are ordinarily in the lower rating categories of recognized rating agencies that
is, rated Baa to B by Moody's Investors Services, Inc. ("Moody's") or BBB to B
by Standard & Poor's ("S&P"). Securities rated lower than Baa by Moody's or BBB
by S&P, or, if not rated, of equivalent quality, are sometimes referred to as
"high yield" securities or "junk bonds." The potential for high yield is
accompanied by higher risk. Certain of the Portfolio's investments have
speculative characteristics. Capital appreciation is a secondary objective which
will be sought only when consistent with this Portfolio's primary objective.
The MainStay VP International Equity Portfolio--The MainStay VP
International Equity Portfolio seeks long-term growth of capital by investing in
a portfolio consisting primarily of non-U.S. equity securities. Current income
is a secondary objective. In pursuing its investment objective, the Portfolio
will seek to invest in securities that provide the potential for strong return
but that do not, in MacKay Shields' judgment, present undue or imprudent risk.
The Portfolio pursues its objectives by investing its assets in a diversified
portfolio of common stocks, preferred stocks, warrants and comparable equity
securities.
The MainStay VP Total Return Portfolio--The MainStay VP Total Return
Portfolio seeks to realize current income consistent with reasonable opportunity
for future growth of capital and income. The Portfolio maintains a flexible
approach by investing in a broad range of securities, which may be diversified
by company, by industry and by type. The Portfolio may invest in common stocks,
convertible securities, warrants and fixed-income securities, such as bonds,
preferred stocks and other debt obligations, including money market instruments.
The MainStay VP Value Portfolio--The MainStay VP Value Portfolio seeks
maximum long-term total return from a combination of capital growth and income.
It seeks to achieve this objective by following flexible investment policies
emphasizing investment in common stocks which are, in the opinion of MacKay
Shields, undervalued at the time of purchase. This Portfolio will normally
invest in dividend-paying common stocks that are listed on a national securities
exchange or traded in the over-the-counter market, but may also invest in
non-dividend paying stocks in accordance with MacKay Shields' judgment.
The MainStay VP Bond Portfolio--The MainStay VP Bond Portfolio seeks the
highest income over the long-term consistent with preservation of principal. It
will invest primarily in fixed-income debt securities of an investment grade,
but may also invest in lower-rated securities, convertible debt, and preferred
and convertible preferred stock.
The MainStay VP Growth Equity Portfolio--The MainStay VP Growth Equity
Portfolio seeks long-term growth of capital, with income as a secondary
consideration. It will invest principally in common stock (and securities
convertible into, or with rights to purchase, common stock) of well-established,
well-managed companies that appear to have better than average potential for
capital appreciation.
The MainStay VP Indexed Equity Portfolio--The MainStay VP Indexed Equity
Portfolio seeks 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(R). Using a full replication
method, the Portfolio invests in all 500 stocks in the S&P 500(R) in the same
proportion as their representation in the S&P 500(R). The S&P 500(R) is an
unmanaged index considered representative of the U.S. stock market. The MainStay
VP Indexed Equity Portfolio is neither sponsored by or affiliated with the S&P
500(R). Standard & Poor's(R), S&P 500(R), "S&P(R)", "Standard & Poor's 500" and
"500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed
for use by
34
<PAGE> 39
Monitor Capital. S&P does not sponsor, endorse, sell or promote the Indexed
Equity Portfolio or represent the advisability of investing in the Portfolio.
The MainStay VP American Century Income & Growth Portfolio--The MainStay VP
American Century Income & Growth Portfolio seeks dividend growth, current income
and capital appreciation by primarily investing in equity securities of the
1,500 largest companies traded in the United States (ranked by market
capitalization).
The MainStay VP Dreyfus Large Company Value Portfolio--The MainStay VP
Dreyfus Large Company Value Portfolio seeks capital appreciation by investing
principally in a portfolio of publicly traded equity securities of domestic and
foreign issuers which are characterized as value companies.
The MainStay VP Eagle Asset Management Growth Equity Portfolio--The
MainStay VP Eagle Asset Management Growth Equity Portfolio seeks growth through
long-term capital appreciation by investing in common stocks that Eagle Asset
Management, Inc., the Portfolio's subadviser, believes have sufficient growth
potential to offer above average long-term capital appreciation.
The Alger American Small Capitalization Portfolio--The Alger American Small
Capitalization Portfolio seeks long-term capital appreciation. Except during
temporary defensive periods, the Portfolio focuses on small, fast-growing
companies that offer innovative products, services or technologies to a rapidly
expanding marketplace. Under normal circumstances, the Portfolio invests
primarily in the equity securities of small capitalization companies. A small
capitalization company is one that has a market capitalization within the range
of the Russell 2000 Growth Index or the S&P SmallCap 600 Index.
The Calvert Social Balanced Portfolio--The Calvert Social Balanced
Portfolio seeks to achieve a competitive total return through an actively
managed portfolio of stocks, bonds and money market instruments which offer
income and capital growth opportunity and which satisfy the investment and
social criteria.
The Fidelity VIP II Contrafund Portfolio--The Fidelity VIP II Contrafund
Portfolio seeks long-term capital appreciation by investing primarily in common
stock. FMR invests in securities of companies whose value it believes is not
fully recognized by the public.
The Fidelity VIP Equity-Income Portfolio--The Fidelity VIP Equity-Income
Portfolio seeks reasonable income by investing at least 65% of total assets in
income-producing equity securities. The Portfolio will also consider the
potential for capital appreciation. Secondarily, the Portfolio seeks a yield
that exceeds the composite yield on the securities comprising the S&P 500 Index.
The Janus Aspen Series Balanced Portfolio--The Janus Aspen Series Balanced
Portfolio seeks long-term capital growth, consistent with preservation of
capital and balanced by current income. It is a diversified Portfolio that,
under normal circumstances, pursues its objective by investing 40% to 60% of its
assets in securities selected primarily for their growth potential and 40% to
60% of its assets in securities selected primarily for their income potential.
The Portfolio normally invests at least 25% of its assets in fixed-income
securities.
The Janus Aspen Series Worldwide Growth Portfolio--The Janus Aspen Series
Worldwide Growth Portfolio seeks long-term growth of capital in a manner
consistent with the
35
<PAGE> 40
preservation of capital. It invests in a diversified portfolio of common stocks
of foreign and domestic issuers. The Portfolio has the flexibility to invest on
a worldwide basis in companies and organizations of any size, regardless of
country of organization or place of principal business activity. The Portfolio
normally invests in issuers from at least five different countries, including
the United States. The Portfolio may at times invest in fewer than five
countries or even in a single country.
The Morgan Stanley UIF Emerging Markets Equity Portfolio--The Emerging
Markets Equity Portfolio seeks long-term capital appreciation by investing
primarily in equity securities of issuers in emerging market countries. The
Adviser seeks to maximize returns by investing in growth-oriented equity
securities in emerging markets. The Adviser's investment approach combines
top-down country allocation with bottom-up stock selection. Investment selection
criteria include attractive growth characteristics, reasonable valuations and
managements with a strong shareholder value orientation.
The T. Rowe Price Equity Income Portfolio--The T. Rowe Price Equity Income
Portfolio seeks to provide substantial dividend income as well as long-term
growth of capital through investments in the common stocks of established
companies, paying above average dividends. The Portfolio's investment approach
typically employs a "value" approach and seeks companies that have good
prospects for capital appreciation and dividend growth.
THERE IS NO ASSURANCE THAT ANY OF THE ELIGIBLE PORTFOLIOS WILL ATTAIN THEIR
RESPECTIVE STATED OBJECTIVES.
You can find additional information concerning the investment objectives
and policies of the Eligible Portfolios and the investment advisory services and
charges and expenses in the current prospectus for the relevant Funds. These
prospectuses are attached at the end of this prospectus. It is important to read
the Funds' prospectuses carefully before you make any decision about your
allocation of premiums to an Investment Division. Portfolios described in this
prospectus are different from portfolios available directly to the general
public. Investment results may differ.
The Funds' shares may also be available to certain separate accounts we use
to fund our variable annuity policies. This is called "mixed funding." Except
for the MainStay VP Series Fund, shares of all other Funds may be available to
separate accounts of insurance companies that are not affiliated with NYLIAC
and, in certain instances, to qualified plans. This is called "shared funding."
Although we do not anticipate that any difficulties will result from mixed and
shared funding, it is possible that differences in tax treatment and other
considerations may cause the interests of owners of various contracts
participating in the Funds to be in conflict. The Board of Directors/Trustees of
each Fund, each Fund's investment advisers, and NYLIAC are required to monitor
events to identify any material conflicts that arise from the use of the Funds
for mixed and shared funding. In the event of a material conflict, we could be
required to withdraw from an Eligible Portfolio. For more information about the
risks of mixed and shared funding, please refer to the relevant Fund prospectus.
We provide certain services to you in connection with investment of
premiums and commitment of cash values to the Investment Divisions, which, in
turn, invest in the Eligible Portfolios. These services include, among others,
providing information about the Eligible Portfolios. We receive a service fee
from the investment advisers or other service providers of some of the Funds in
return for providing services of this type. Currently, we
36
<PAGE> 41
receive service fees at annual rates ranging from .10% to .21% of the aggregate
net asset value of the shares of some of the Eligible Portfolios held by the
Investment Divisions.
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
We may add, delete or substitute the Eligible Portfolio shares held by any
Investment Division, within certain limits. We may eliminate the shares of any
of the Eligible Portfolios and substitute shares of another portfolio of a Fund,
or of another registered open-end management investment company or other
investment vehicles. We may do this if the shares of the Eligible Portfolios are
no longer available for investment or, if we decide that investment in an
Eligible Portfolio is inappropriate given the purposes of the Separate Account.
We will not substitute shares attributable to your interest in an Investment
Division until you have been notified of the change, as required by the
Investment Company Act of 1940, and we obtain any necessary approvals.
The Separate Account may purchase other securities for other series or
classes of policies, or may convert between series or classes of policies based
on your request.
In the future, we may establish additional investment divisions for the
Separate Account. Each additional investment division will purchase shares in a
new portfolio of a Fund or in another mutual fund. We may establish new
investment divisions and/or eliminate one or more Investment Divisions when
marketing, tax, investment or other conditions make it appropriate. We may
decide whether or not the new investment divisions will be made available to
existing policyowners.
If we make a substitution or change to the Investment Divisions, we may
change your policy to reflect such substitution or change. We also reserve the
right to: (a) operate the Separate Account as a management company under the
Investment Company Act of 1940, (b) deregister it under such Act in the event
such registration is no longer required, (c) combine the Separate Account with
one or more other separate accounts, and (d) restrict or eliminate the voting
rights of persons having voting rights as to the Separate Accounts, as permitted
by law.
REINVESTMENT
We automatically reinvest all dividends and capital gain distributions from
Eligible Portfolios in shares of the distributing Portfolio at their net asset
value on the date they are paid.
THE FIXED ACCOUNT
You may choose to allocate all or part of your net premiums to the Fixed
Account.
INTEREST CREDITED ON AMOUNTS IN THE FIXED ACCOUNT
We will credit any amounts in the Fixed Account with a fixed interest rate
which we declare periodically in advance, at our sole discretion. This rate will
never be less than an annual rate of 4%. We may credit different interest rates
to loaned and unloaned amounts in the Fixed Account. All net premiums applied
to, and amounts transferred to, the Fixed Account receive the loaned amount rate
or the unloaned amount rate in effect at that time. Interest accrues daily and
is credited on each Monthly Deduction Day.
37
<PAGE> 42
ASSETS IN THE FIXED ACCOUNT
The Fixed Account is supported by the assets in our general account, which
includes all of our assets except those assets specifically allocated to
separate accounts. These assets are subject to the claims of our general
creditors. We may invest the assets of the Fixed Account however we choose,
within limits. Your interest in the Fixed Account is not registered under the
Securities Act of 1933, and the Fixed Account is not registered as an investment
company under the Investment Company Act of 1940. Therefore, the Fixed Account
and any interests earned in the Fixed Account are generally not subject to these
statutes. The staff of the SEC has not reviewed the disclosures in this
prospectus relating to the Fixed Account. These disclosures regarding the Fixed
Account may, however, be subject to certain applicable provisions of the federal
securities laws relating to the accuracy and completeness of statements made in
prospectuses.
TRANSFERS BETWEEN INVESTMENT DIVISIONS AND/OR THE FIXED ACCOUNT
You may transfer all or part of the cash value of your policy (1) from the
Fixed Account to the Investment Divisions of the Separate Account, (2) from the
Investment Divisions of the Separate Account to the Fixed Account, or (3)
between the Investment Divisions in the Separate Account.
You may request a transfer, under the following conditions:
-- Maximum Transfer--There is no limit on the amount you may transfer from
one Investment Division to another Investment Division or to the Fixed
Account. The maximum amount you may transfer from the Fixed Account to
the Investment Divisions during any Policy Year is 10% of the amount in
the Fixed Account at the beginning of the Policy Year.
-- Minimum Transfer--The minimum amount that you may transfer from the
Investment Divisions or the Fixed Account is the lesser of (i) $500 or
(ii) the total amount in the Investment Divisions or the Fixed Account.
-- Minimum Remaining Value--If a transfer will cause the amount you have in
the Investment Divisions or the Fixed Account to be less than $500, we
will transfer the entire amount in the Investment Divisions and/or the
Fixed Account you have chosen.
-- Number of Transfers--You may make an unlimited number of transfers from
the Investment Divisions of the Separate Account to the Fixed Account
within the first two Policy Years. We may limit this type of transfer
after the first two Policy Years. You may make an unlimited number of
transfers between Investment Divisions each Policy Year. You may make an
unlimited number of transfers from the Fixed Account to the Investment
Divisions each Policy Year.
-- Transfer Charge--We may impose a charge up to $30 per transfer for each
transfer after the first twelve in any Policy Year. We will not count
any transfer made in connection with the Dollar Cost Averaging,
Automatic Asset Reallocation and Interest Sweep Options as a transfer
toward the twelve transfer limit.
38
<PAGE> 43
REQUESTING A TRANSFER:
You can request a transfer in three ways:
-- submit your request in writing on a form we approve to Variable Products
Service Center at the addresses listed on the front of this prospectus;
-- telephone a service representative at 800-598-2019 on business days
between the hours of 8:00 a.m. and 4:00 p.m. (Eastern Time); or
-- request access to an electronic service known as a Voice Response Unit
(VRU).
We will use reasonable procedures to make sure that the instructions we
receive through the telephone are genuine. Before a service representative
accepts any request, he or she will ask the caller for the caller's Social
Security Number and address. We will also record all calls.
You may use the VRU to transfer monies among the Investment Divisions
and/or the Fixed Account and change the allocation of future premium payments.
You must complete a Telephone Authorization Form to conduct telephone transfers
through the VRU. We will assign a personal identification number (PIN) to you.
You must properly enter the PIN before we allow any transactions through the
VRU. We reserve the right to temporarily discontinue the availability of the
VRU.
We will confirm all telephone transactions in writing. We are not
responsible for any loss, cost or expense for any actions we take based on
telephone instructions we believe are genuine. Transfer requests received after
4:00 p.m. will be priced as of the next business day. Transfers will be effected
at the price next determined after receipt of the transfer request.
DOLLAR COST AVERAGING
Dollar Cost Averaging is a systematic method of investing which allows you
to purchase shares of the Investment Divisions at regular intervals in fixed
dollar amounts so that the cost of your shares is averaged over time and over
various market cycles. The main objective of Dollar Cost Averaging is to achieve
an average cost per share that is lower than the average price per share in a
fluctuating market. Since you transfer the same dollar amount to a given
Investment Division on each transfer, you purchase more units in an Investment
Division if the value per unit is low and fewer units if the value per unit is
high. Therefore, you may achieve a lower than average cost per unit if prices
fluctuate over the long term. Similarly, for each transfer out of an Investment
Division, you sell more units in an Investment Division if the value per unit is
low and fewer units if the value per unit is high. Dollar Cost Averaging does
not assure growth or protect against a loss in declining markets.
If you decide to use the Dollar Cost Averaging feature, we will ask you to
specify:
-- the dollar amount you want to have transferred (minimum transfer: $100);
-- the Investment Division you want to transfer money from;
-- the Investment Divisions and/or Fixed Account you want to transfer money
to;
-- the date on which you want the transfers to be made, within limits; and
-- how often you want us to make these transfers, either monthly,
quarterly, semi-annually or annually.
39
<PAGE> 44
You are not allowed to make Dollar Cost Averaging transfers from the Fixed
Account, but you can make Dollar Cost Averaging transfers into the Fixed
Account.
We will make all Dollar Cost Averaging transfers on the date you specify,
or on the next business day. You may specify any day of the month with the
exception of the 29th, 30th or 31st of a month. We will not process a Dollar
Cost Averaging transfer, unless we have received a written request at Variable
Products Service Center at the addresses listed on the cover page of this
prospectus. We must receive this request at least one week before the date
Dollar Cost Averaging transfers are scheduled to begin.
The minimum cash value you must have allocated to the Separate Account in
order to elect this option is $2,500. We will automatically suspend this feature
if the cash value is less than $2,000 on a transfer date. Once the cash value
equals or exceeds this amount, the Dollar Cost Averaging transfers will
automatically resume as scheduled.
You may cancel the Dollar Cost Averaging option at any time by written
request. You may not elect Dollar Cost Averaging if you have chosen Automatic
Asset Reallocation. However, you have the option of alternating between these
two policy features.
This option is available to you at no additional cost.
AUTOMATIC ASSET REALLOCATION
If you choose the Automatic Asset Reallocation feature, we will
automatically reallocate your assets among the Investment Divisions in order to
maintain a pre-determined percentage invested in the Investment Division(s) you
have selected. For example, you could specify that 50% of the amount you have in
the Separate Account be allocated to a particular Investment Division and the
other 50% be allocated to another Investment Division. Over time, the variations
in each of these Investment Division's investment results would cause this
balance to shift. If you elect the Automatic Asset Reallocation feature, we will
automatically reallocate the amounts you have in the Separate Account among the
various Investment Divisions so that they are invested in the percentages you
specify.
You may choose to schedule the investment reallocations quarterly,
semi-annually or annually, but not on a monthly basis. The minimum amount you
must have in the Separate Account in order to elect this option is $2,500. We
will automatically suspend this feature if the cash value is less than $2,000 on
a reallocation date. Once the cash value equals or exceeds this amount,
Automatic Asset Reallocation will automatically resume as scheduled. There is no
minimum amount which you must allocate among the Investment Divisions under this
feature.
You may cancel the Automatic Asset Reallocation feature at any time by
written request. You may not elect Automatic Asset Reallocation if you have
chosen Dollar Cost Averaging. However, you have the option of alternating
between these two policy features.
This option is available to you at no additional cost.
INTEREST SWEEP
You may instruct us to periodically transfer the interest credited to the
Fixed Account into the Investment Division(s) you specify. This automatic
process is called Interest Sweep. If you choose the Interest Sweep feature, we
will ask you to specify:
-- the date you want this feature to start;
-- the percentages you want to be transferred to each Investment Division;
and
40
<PAGE> 45
-- how often you want us to make these transfers, either monthly,
quarterly, semi-annually or annually.
We will begin to make Interest Sweep transfers if the amount in the Fixed
Account is at least $2,500. You may specify any date that you want us to make
these automatic transfers, with the exception of the 29th, 30th or 31st of a
month.
You may not choose the Interest Sweep feature if you have instructed us to
allocate any part of your policy expenses to the Fixed Account. If you want to
elect the Interest Sweep feature and you want to allocate your expenses, you
must allocate your expenses to the MainStay VP Cash Management Investment
Division.
You may request Interest Sweep in addition to either the Dollar Cost
Averaging or Automatic Asset Reallocation features. If an Interest Sweep
transfer is scheduled for the same day as a Dollar Cost Averaging or Automatic
Asset Reallocation transfer, we will process the Interest Sweep transfer first.
If an Interest Sweep transfer would cause more than 10% of the amount you
have in the Fixed Account at the beginning of the Policy Year to be transferred
from the Fixed Account, we will not process the transfer and we will suspend the
Interest Sweep feature. If the amount you have in the Fixed Account is less than
$2,000, we will automatically suspend this feature. Once the amount you have in
the Fixed Account equals or exceeds this amount, the Interest Sweep feature will
automatically resume as scheduled. You may cancel the Interest Sweep feature at
any time by written request.
This option is available to you at no additional cost.
THIRD PARTY INVESTMENT ADVISORY ARRANGEMENTS
In some cases, the policy may be sold to policyowners who independently
utilize the services of a third party advisor offering asset allocation and/or
market timing services. NYLIAC may honor transfer and withdrawal instructions
from such asset allocation and market timing services if it has received
authorization to do so from the policyowner participating in the service. We do
not endorse, approve or recommend such services in any way and you should be
aware that fees paid for such services are separate from and in addition to fees
paid under the policy.
Because the amounts associated with some of these transactions may be
unusually large, the investment advisers may have difficulty processing the
transactions. In addition, execution of such transactions may possibly adversely
affect the Variable Accumulation Values of policyowners who are not utilizing
asset allocation or market timing services. Accordingly, NYLIAC reserves the
right to not accept transfer instructions which are submitted by any person,
asset allocation and/or market timing services on behalf of policyowners.
We will exercise this right only in accordance with uniform procedures that
we may establish from time to time and that will not unfairly discriminate
against similarly situated policyowners.
41
<PAGE> 46
DEDUCTIONS AND CHARGES
We assess certain charges and deductions from your policy as compensation
for providing the Life Insurance Benefit under your policy, for providing the
benefits under any riders, for administering the policy, for assuming certain
risks and for incurring certain expenses in issuing the policy. We deduct four
types of charges from your policy:
-- deductions from premiums,
-- deductions from cash value,
-- Separate Account charges, and
-- Fund charges (deducted by the Funds).
Additionally, we may assess surrender charges under certain circumstances.
Surrender charges are explained on page 49. The Eligible Portfolios also pay
advisory fees and other expenses that are deducted from the Portfolio's assets.
As an indirect investor in an Eligible Portfolio, you also bear your portion of
those expenses. All other charges are described below.
SUMMARY OF DEDUCTIONS AND CHARGES
<TABLE>
<CAPTION>
CURRENT GUARANTEED
------- ----------
<S> <C> <C>
DEDUCTIONS FROM PREMIUMS
Sales Expense Charge
Policy Years 1-10 8% up to Target Premium 9% up to Target Premium
4% over Target Premium 6.5% over Target Premium
Policy Years 11+ 4% up to Target Premium 6.5% of all premiums
0% over Target Premium
State Tax Charge 2% may vary
Federal Tax Charge
Non-Qualified Policies 1.25% may vary
Qualified Policies N/A N/A
DEDUCTIONS FROM CASH VALUE
Monthly Contract Charge
Policy Year 1 $59 per month $62 per month
Policy Year 2+ $ 9 per month $12 per month
Charges for Cost of Insurance based on current rates based on guaranteed rates
Charge per $1,000 Initial Face Amount
Policy Years 1-3 $0.04/$1,000 per month $0.04/$1,000 per month
(min $10; max $100) (min $10; max $100)
Policy Years 4+ $0 $0
Rider Charges vary vary
SEPARATE ACCOUNT CHARGES
Mortality and Expense Risk Charge .60%* .90%*
Administrative Charge .10%* .10%*
FUND CHARGES
(see chart on page 48) vary vary
</TABLE>
* equal to an annual rate assessed on the average daily net asset value in
the Investment Divisions of the Separate Account.
42
<PAGE> 47
DEDUCTIONS FROM PREMIUMS
When we receive a premium payment from you, whether planned or unplanned,
we will deduct a sales expense charge and a state tax charge. If your policy is
a Non-Qualified Policy we will also deduct a federal tax charge.
SALES EXPENSE CHARGE
We deduct a sales expense charge from each premium you pay to partially
cover our expenses for selling the policy to you. The sales expense charge we
deduct is a percentage of the premium you pay. This percentage varies depending
on whether the total premium you have paid in any given Policy Year is above or
below the Target Premium for your policy. The amount of the sales expense charge
in a Policy Year is not necessarily related to our actual expenses for that
particular year. To the extent that sales expenses are not covered by the sales
expense charge and the surrender charge, they will be recovered from NYLIAC
surplus, including any amounts derived from the mortality and expense risk
charge, the charge for cost of insurance protection or the charge per $1,000 of
initial face amount.
TARGET PREMIUM
When your policy is issued, we determine the initial Target Premium for
your policy. Your Target Premium is based on the specific age, sex, and
underwriting class combination of the two insureds and the base policy face
amount. We use the Target Premium for the purpose of calculating the sales
expense charge and the surrender charge. An increase in your Target Premium will
generally increase these charges. You can find your initial Target Premium on
the Policy Data Page. If you increase or decrease the face amount of your base
policy, we will make a corresponding increase or decrease to your Target
Premium.
CURRENT SALES EXPENSE CHARGE
During each of the first ten Policy Years, we expect to deduct a sales
expense charge that is currently 8% of any premiums paid up to the Target
Premium. Once the Target Premium for that Policy Year has been reached, we
expect to deduct a sales expense charge that is currently 4% from any additional
premiums paid in that Policy Year. Beginning in the eleventh Policy Year, we
currently expect to deduct a sales expense charge of 4% of any premiums paid up
to the Target Premium for a given Policy Year, with no charge for any premiums
paid in excess of the Target Premium.
GUARANTEED SALES EXPENSE CHARGE
We may change the sales expense charge at any time. During each of the
first ten Policy Years, we guarantee that any sales expense charge we deduct
will never exceed 9% of any premiums paid up to the Target Premium. Once the
Target Premium for that Policy Year has been reached, we will never deduct a
sales expense charge of more than 6.5% of any additional premiums paid in that
Policy Year. Beginning in the eleventh Policy Year, we guarantee that any sales
expense charge will never exceed 6.5% of any premiums paid.
STATE TAX CHARGE
Some jurisdictions impose a tax on the premiums insurance companies receive
from their policyholders. We deduct 2% of each premium payment you make to cover
these state taxes. We may increase the amount we deduct as a state tax charge to
reflect changes in the law. Our right to increase this charge is limited in some
jurisdictions by law.
43
<PAGE> 48
FEDERAL TAX CHARGE
The federal government imposes limitations on our ability to deduct certain
expenses associated with Non-Qualified Policies. For Non-Qualified Policies, we
deduct 1.25% of each premium payment you make to cover the federal tax that
results. We do not deduct this charge from Qualified Policies. We may increase
the amount we deduct as a federal tax charge to reflect changes in the law.
DEDUCTIONS FROM CASH VALUE
Each month, we will deduct a monthly contract charge, a cost of insurance
charge, and a rider charge for the cost of any additional riders. During the
first three Policy Years, we will also deduct a charge per $1,000 of the initial
face amount of your policy (not including riders).
We will deduct these charges from the cash value of your policy on the
Monthly Deduction Day. The first Monthly Deduction Day will be the monthly
anniversary of your Policy Date on or following the Issue Date. If the Policy
Date is prior to the Issue Date, the deductions made on the first Monthly
Deduction Day will cover the period from the Policy Date until the first Monthly
Deduction Day.
EXPENSE ALLOCATION
If you do not provide us with any instructions on how you would like your
expenses allocated, we will deduct these charges from the amount in the
Investment Divisions and the amount not held as collateral for a loan in the
Fixed Account in proportion to these amounts. You may instruct us to deduct the
policy's monthly cash value charges first from the MainStay VP Cash Management
Investment Division and/or the Fixed Account. If the values in the MainStay VP
Cash Management Investment Division and/or the Fixed Account you have chosen are
insufficient to pay these charges, we will deduct as much of the charges as
possible from these investment options. We will deduct the remainder from the
amounts in all of the Investment Divisions and the amount not held as collateral
for a loan in the Fixed Account in proportion to the amounts in these investment
options.
MONTHLY CONTRACT CHARGE
On each Monthly Deduction Day, we will deduct a monthly contract charge to
cover our costs for providing certain administrative services including premium
collection, record keeping, processing claims and communicating to our
policyowners.
CURRENT MONTHLY CONTRACT CHARGE
Currently, we deduct a monthly contract charge of $59 per month from
policies in their first Policy Year and we currently expect to deduct $9 per
month from policies in later Policy Years.
GUARANTEED MONTHLY CONTRACT CHARGE
While we may change the monthly contract charge we deduct from your policy
at any time, we guarantee that we will never charge you a monthly contract
charge that is more than $62 per month during the first Policy Year and $12 per
month in later Policy Years.
44
<PAGE> 49
CHARGE FOR COST OF INSURANCE PROTECTION
On each Monthly Deduction Day, we will deduct a charge for cost of
insurance protection from the cash value of your policy. This charge covers the
cost of providing Life Insurance Benefits to you.
The cost of insurance charge is calculated by multiplying the net amount at
risk on the Monthly Deduction Day by the monthly cost of insurance rate which
applies to the insureds at that time and then adding any applicable flat extra
charge (which might apply to certain insureds based on our underwriting). The
net amount at risk is based on the difference between the current Life Insurance
Benefit of your policy and the policy's cash value.
Your cost of insurance charge will vary from month to month depending upon
changes in the net amount at risk.
We base the monthly cost of insurance rate we apply to your policy on our
current monthly cost of insurance rates. We may change these rates from time to
time. However, the current rates will never be more than the guaranteed maximum
rates shown on the Policy Data Page. We base the guaranteed rates on the 1980
Commissioner's Standard Ordinary Mortality Tables appropriate to each Insured's
underwriting class if the insureds are a standard underwriting class. We base
the guaranteed rates for policies that insure insureds in substandard
underwriting classes on different scales. We base the current monthly cost of
insurance rates on such factors as the sexes, underwriting classes and issue
ages of both insureds and the Policy Year. Changes to the current monthly cost
of insurance rates will be based on changes in future expectations of such
factors as mortality, investment income, expenses and persistency.
CHARGE PER $1,000 OF INITIAL FACE AMOUNT
On each Monthly Deduction Day during the first three Policy Years, we will
deduct a charge of $0.04 per $1,000 of your policy's initial face amount (not
including riders) from your policy's cash value. However, this charge will
always be at least $10 per month and will never be more than $100 per month.
RIDER CHARGES
On each Monthly Deduction Day, we will deduct charges for any optional
rider benefits you have chosen from the cash value of your policy.
SUPPLEMENTARY TERM RIDER CHARGE
If you choose this rider, we will deduct a charge equal to the cost of
insurance rate for your policy multiplied by the term insurance death benefit
for this rider.
GUARANTEED MINIMUM DEATH BENEFIT RIDER CHARGE
If you choose this rider, we will deduct a charge equal to $0.01 per $1000
multiplied by the sum of your policy's face amount and the face or benefit
amount of any riders. The face or benefit amount of a rider is the amount that
is multiplied by the cost of insurance rate for that rider.
45
<PAGE> 50
FIRST-TO-DIE MONTHLY DEDUCTION WAIVER RIDER CHARGE
If you choose this rider, we will deduct a charge based on the present
value of the future charges that we estimate may be waived under this rider and
the cost of insurance rate for this rider.
LEVEL FIRST-TO-DIE TERM RIDER CHARGE
If you choose this rider, we will deduct a charge equal to the face amount
of this rider multiplied by the cost of insurance rate for this rider.
LIVING BENEFITS RIDER CHARGE
We do not deduct a charge for this rider until it is exercised.
SEPARATE ACCOUNT CHARGES
In addition to the deductions from premiums and the deductions from cash
value, we will also deduct certain charges from the Separate Account's
Investment Divisions. We make these deductions on a daily basis.
MORTALITY AND EXPENSE RISK CHARGE
We deduct on a daily basis a mortality and expense risk charge from each
Investment Division to cover our mortality and expense risk. We assume a
mortality risk that the group of lives we have insured under our policies will
not live as long as we expected. In addition, we assume an expense risk that the
cost of issuing and administering the policies we have sold will be greater than
we estimated. We may use any profit derived from this charge for any corporate
purpose, including any distribution expenses not covered by the sales expense
charge.
CURRENT MORTALITY AND EXPENSE RISK CHARGE
We currently deduct on a daily basis, a mortality and expense risk charge
that is equal to an annual rate of .60% of the average daily net asset value of
the Separate Account.
GUARANTEED MORTALITY AND EXPENSE RISK CHARGE
While we may change the mortality and expense risk charge we deduct, we
guarantee that this charge will never be more than an annual rate of .90% of the
average daily net asset value of each Investment Division.
ADMINISTRATIVE CHARGE
We deduct on a daily basis an administrative charge from each Investment
Division to cover the cost of providing administrative policy services. We
deduct a daily administrative charge that is equal to an annual rate of .10% of
the average daily net asset value of the Separate Account to cover these costs.
This charge is designed not to produce a profit. We guarantee this charge will
not increase.
OTHER CHARGES FOR FEDERAL INCOME TAXES
We do not currently deduct any charges from the Investment Divisions for
federal income taxes attributable to them. We may choose to deduct such a charge
in the future in order to provide for any future income tax liability of the
Investment Divisions.
46
<PAGE> 51
FUND CHARGES
Each Investment Division of the Separate Account purchases shares of the
corresponding Portfolio at net asset value. The net asset value reflects the
investment advisory fees and other expenses that are deducted from the assets of
the Portfolio. The advisory fees and other expenses are not fixed or specified
under the terms of the policy, and they may vary from year to year. These fees
and expenses are described in the Funds' prospectuses. The following chart
reflects 1999 fees and charges that are provided by the Funds or their agents,
which are based on 1999 expenses and may reflect estimated charges:
47
<PAGE> 52
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD
CAPITAL CASH MAINSTAY VP MAINSTAY VP CORPORATE
APPRECIATION MANAGEMENT CONVERTIBLE GOVERNMENT BOND
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets)
Advisory Fees............................ 0.36% 0.25% 0.36% 0.30% 0.30%
Administration Fees...................... 0.20% 0.20% 0.20% 0.20% 0.20%
Other Expenses........................... 0.06% 0.06% 0.15% 0.09% 0.07%
Total Fund Annual Expenses............... 0.62% 0.51% 0.71% 0.59% 0.57%
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH
EQUITY RETURN VALUE BOND EQUITY
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets)
Advisory Fees............................ 0.60% 0.32% 0.36% 0.25% 0.25%
Administration Fees...................... 0.20% 0.20% 0.20% 0.20% 0.20%
Other Expenses........................... 0.27% 0.06% 0.07% 0.05% 0.04%
Total Fund Annual Expenses............... 1.07% 0.58% 0.63% 0.50% 0.49%
<CAPTION>
MAINSTAY VP
INDEXED
EQUITY
-----------
<S> <C>
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets)
Advisory Fees............................ 0.10%
Administration Fees...................... 0.20%
Other Expenses........................... 0.06%
Total Fund Annual Expenses............... 0.36%
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
AMERICAN DREYFUS MAINSTAY VP
CENTURY LARGE EAGLE ASSET ALGER AMERICAN CALVERT
INCOME & COMPANY MANAGEMENT SMALL SOCIAL
GROWTH VALUE GROWTH EQUITY CAPITALIZATION BALANCED
----------- ----------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C>
FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT
(as a % of average net assets)
Advisory Fees............................ 0.50% 0.60% 0.50% 0.85% 0.70%
Administration Fees...................... 0.20% 0.20% 0.20% 0.00% 0.00%
Other Expenses........................... 0.15%(e) 0.15%(e) 0.15%(e) 0.05% 0.19%(a)
Total Fund Annual Expenses............... 0.85% 0.95% 0.85% 0.90% 0.89%(a)
<CAPTION>
JANUS ASPEN MORGAN STANLEY
FIDELITY VIP JANUS ASPEN SERIES UIF
FIDELITY VIP II EQUITY- SERIES WORLDWIDE EMERGING
CONTRAFUND INCOME BALANCED GROWTH MARKETS EQUITY
--------------- ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT
(as a % of average net assets)
Advisory Fees............................ 0.58% 0.48% 0.65% 0.65% 0.42%
Administration Fees...................... 0.00% 0.00% 0.00% 0.00% 0.25%
Other Expenses........................... 0.07% 0.08% 0.02% 0.05% 1.12%
Total Fund Annual Expenses............... 0.65%(b) 0.56%(b) 0.67%(c) 0.70%(c) 1.79%(d)
<CAPTION>
T. ROWE
PRICE EQUITY
INCOME
------------
<S> <C>
FUND ANNUAL EXPENSES AFTER
REIMBURSEMENT
(as a % of average net assets)
Advisory Fees............................ 0.85%(f)
Administration Fees...................... 0.00%
Other Expenses........................... 0.00%
Total Fund Annual Expenses............... 0.85%(f)
</TABLE>
- ------------
<TABLE>
<S> <C>
(a) "Other Expenses" reflect an indirect fee. Net fund operating
expenses after reductions for fees paid indirectly, would be
0.86%.
(b) Through arrangements with certain funds or Fidelity
Management & Research Company on behalf of certain funds'
custodian, credits realized as a result of uninvested cash
balances were used to reduce a portion of each applicable
fund's expenses. Without these reductions, total operating
expenses presented in the table would have been 0.67% for
the Fidelity VIP II Contrafund Portfolio and 0.57% for the
Fidelity VIP Equity-Income Portfolio.
(c) Expenses are based upon expenses for the fiscal year ended
December 31, 1999, restated to reflect a reduction in the
management fee for Janus Aspen Series Worldwide Growth and
Balanced Portfolios. All expenses are shown without the
effect of any expense offset arrangements.
(d) Morgan Stanley Asset Management has voluntarily waived
receipt of its "Advisory Fees" and agreed to reimburse the
Portfolio, if necessary, to the extent that the "Total Fund
Annual Expenses" of the Portfolio exceed 1.75% of average
daily net assets. However, Morgan Stanley has reflected
under "Other Expenses" the Portfolio's interest and foreign
tax expenses incurred in 1999 which were equal to 0.04% of
the Portfolio's average daily net assets. The fee waivers
and reimbursements described above may be terminated by
Morgan Stanley at any time without notice. Absent such
reductions, it is estimated that "Advisory Fees",
"Administration Fees" and "Total Fund Annual Expenses" would
be 1.25%, 0.25% and 2.62%, respectively.
(e) "Other Expenses" and "Total Fund Annual Expenses" for the
MainStay VP American Century Income & Growth, MainStay VP
Dreyfus Large Company Value and MainStay VP Eagle Asset
Management Growth Equity Portfolios reflect an expense
reimbursement agreement that ended December 31, 1999
limiting "Other Expenses" to 0.15% annually. In the absence
of the expense reimbursement arrangement, the "Total Fund
Annual Expenses" would have been 0.92%, 1.00% and 0.87% for
the MainStay VP American Century Income & Growth, MainStay
VP Dreyfus Large Company Value and MainStay VP Eagle Asset
Management Growth Equity Portfolios, respectively.
(f) Management fees include operating expenses.
</TABLE>
48
<PAGE> 53
SURRENDER CHARGES
CHARGES IN POLICY YEARS 1-15
During the first fifteen Policy Years, we will deduct a surrender charge
from the cash value of your policy if you:
- surrender your policy; or
- decrease the face amount of your policy (including a decrease in the
face amount that results from changing the Life Insurance Benefit
Option or from a partial withdrawal).
This surrender charge is in addition to the sales expense charge. The
surrender charge we will deduct if you surrender your entire policy (assuming
you have not made any changes to your policy) is equal to the percentage shown
in the table below multiplied by 20% of your Target Premium for the Policy Year
in which you surrender your policy. See page 41 for an explanation of Target
Premium. The surrender charge we will deduct if you decrease your policy's face
amount is described on page 50. Appendix C contains a table of maximum surrender
charges that could be assessed under a policy.
<TABLE>
<CAPTION>
YOUNGER INSURED < ISSUE AGE 85 YOUNGER INSURED >/- ISSUE AGE 85
---------------------------------- ----------------------------------
POLICY YEAR SURRENDER CHARGE POLICY YEAR SURRENDER CHARGE
----------- ---------------- ----------- ----------------
<S> <C> <C> <C>
1-6 100% 1-4 100%
7 90% 5 80%
8 80% 6 60%
9 70% 7 40%
10 60% 8 20%
11 50% 9+ 0%
12 40%
13 30%
14 20%
15 10%
16+ 0%
</TABLE>
The above percentages apply regardless of the years in which you make
premium payments.
Example: Assume that a policy (a) has not had an increase in face amount, (b)
has a Target Premium of $12,662.14, (c) is issued when the younger
insured is under age 85 and (d) is surrendered in any Policy Year 1
through 6. The surrender charge for the policy would be $2,532.43
(i.e., (20% of $12,662.14) multiplied by 100%).
ADDITIONAL CHARGE ON A SURRENDER IN THE FIRST POLICY YEAR
If you surrender your policy during the first Policy Year, we will deduct
an additional contract charge when you surrender your policy. This additional
charge equals the difference between a and b multiplied by c [i.e.,
(a - b) x c], where:
a = the monthly contract charge for the first Policy Year;
b = the monthly contract charge for subsequent Policy Years; and
c = the number of Monthly Deduction Days between the day you surrender your
policy and the first anniversary of your Policy Date.
49
<PAGE> 54
SURRENDER CHARGES AFTER FACE AMOUNT INCREASES
If you increase your policy's face amount (other than an increase that
results from a change in your Life Insurance Benefit Option), we will apply a
new surrender charge schedule to the amount of the increase in the face amount.
This schedule will start on the day we process your request. The original
surrender charge schedule will continue to apply to the original face amount of
your policy.
If you have made multiple increases to the face amount of your policy, and
later decide to decrease the face amount of your policy or surrender it, we will
calculate the surrender charge in the following order:
1) based on the surrender charge associated with the last increase in face
amount;
2) based on each prior increase, in the reverse order in which the
increases occurred; and
3) based on the initial face amount.
SURRENDER CHARGES ON FACE AMOUNT DECREASES
If you decrease the face amount of your policy, we will deduct a surrender
charge, if applicable. This charge will equal the difference between the
surrender charge that we would have charged if you had surrendered your entire
policy before the decrease and the surrender charge that we would charge if you
surrendered your entire policy after the decrease.
<TABLE>
<CAPTION>
EXAMPLE:
--------------------------------------------
<S> <C>
Face Amount prior to Decrease: $500,000
Amount of Decrease: $100,000
------------------------ --------
Face Amount after Decrease: $400,000
Surrender Charge on Face Amount
prior to Decrease ($500,000) $ 1,280
Less Surrender Charge on Face
Amount after Decrease
($400,000) $ 1,030
--------------------------------- --------
Surrender Charge Deducted $ 250
</TABLE>
We will not impose a surrender charge on a decrease or termination of any
rider.
EXCEPTIONS TO SURRENDER CHARGE
We will not deduct a surrender charge if:
-- we cancel the policy;
-- we pay proceeds upon the death of the last surviving insured;
-- we pay a required Internal Revenue Service minimum distribution; or
-- you exercise the Policy Split Option.
50
<PAGE> 55
POLICY PROCEEDS
BENEFICIARY
The beneficiary is the person(s) or entity(ies) you have specified on our
records to receive insurance proceeds from your policy.
-- You name the beneficiary when you apply for the policy.
-- The beneficiary receives insurance proceeds after the last surviving
insured dies, or if there is a Level First-to-Die Term Rider, after
either insured dies.
-- You may elect to have different classes of beneficiaries, such as
primary and secondary, where these classes determine the order of
payment. You may have more than one beneficiary in a class.
-- You may name a different beneficiary to receive benefits under a Level
First-to-Die Term Rider from the beneficiary you name to receive
benefits under your base policy.
-- You may change the beneficiary while at least one insured is living, by
writing to Variable Products Service Center at the addresses listed on
the front cover of this prospectus (or another address we indicate to
you in writing). Generally, the change will take effect on the date you
sign the request.
-- If no beneficiary is living when the last surviving insured dies, we
will pay the Policy Proceeds to you or if you are deceased, to your
estate, unless you tell us to do otherwise.
WHEN WE PAY PROCEEDS
If your policy is still in effect, we will pay any cash surrender value,
partial withdrawals, loan proceeds, or the Policy Proceeds generally within
seven days after we receive all of the necessary requirements at Variable
Products Service Center at the addresses listed on the front cover of this
prospectus (or any other address we indicate to you in writing).
Situations where payment of proceeds may be delayed:
-- We may delay payment of any loan proceeds attributable to the Separate
Account, any partial withdrawal from the Separate Account, the cash
surrender value or the Policy Proceeds during any period that:
a) we are unable to determine the amount to be paid because the New York
Stock Exchange is closed (other than customary weekend and holiday
closings), trading is restricted by the Securities and Exchange
Commission ("SEC"), or the SEC declares that an emergency exists; or
b) the SEC, by order, permits us to delay payment in order to protect
our policyowners.
-- We may delay payment of any portion of any loan or surrender request,
including requests for partial withdrawals, from the Fixed Account for
up to six months from the date we receive your request.
51
<PAGE> 56
-- We may delay payment of the entire Policy Proceeds if we contest the
payment. We investigate all death claims that occur within the two year
contestable period. Upon receiving the information from a completed
investigation we will make a determination, generally within five days,
as to whether the claim should be authorized for payment. Payments are
made promptly after authorization.
We add interest at an annual rate of 3% (or at a higher rate if required by
law) if we delay payment of a partial withdrawal or cash surrender value for 30
days or more.
We add interest to Policy Proceeds from the date of death to the date of
payment at the same rate as we pay under the Interest Payment Option (or at a
higher rate if required by law).
PAYMENT OPTIONS
We will pay your Policy Proceeds in one sum unless you choose otherwise.
There are three payment options you may choose from: an Interest Accumulation
Option, an Interest Payment Option, and a Life Income Option. If any payment
under these options is less than $100, we may pay any unpaid amount or present
value in one sum.
Any Policy Proceeds paid in one sum will be paid in cash and bear interest
compounded each year from the last surviving insured's death to the date of
payment. We set the interest rate each year. This rate will be at least 3% per
year (or a higher rate if required by law).
-- Interest Accumulation Option (Option 1A)
Under this option, the portion of the Policy Proceeds you choose to keep
with us will bear interest each year. You may make withdrawals from this
amount at any time in sums of $100 or more. We will pay interest on the
sum withdrawn up to the date of the withdrawal.
-- Interest Payment Option (Option 1B)
Under this option, we will pay interest on all or part of the Policy
Proceeds you choose to keep with us. You elect the frequency of the
interest payments we make: once each month, every three months, every
six months or each year.
-- Life Income Option (Option 2)
Under this option, we make equal monthly payments during the lifetime of
the payee or payees. We determine the amount of the monthly payment by
applying the Policy Proceeds to the purchase of a corresponding single
premium life annuity policy, which is issued when the first payment is
due.
Payments remain the same and are guaranteed for ten years, even if the
specified payee dies sooner.
Payments are based on an adjusted annuity premium rate in effect at the
time the annuity policy is issued. This rate will not be less than the
corresponding minimum amount shown in the Option 2 table found in your
policy. These minimum amounts are based on the 1983 Table "a" with
Projection Scale G and with interest compounded each year at 3%.
52
<PAGE> 57
If you ask us, we will send you a statement of the minimum amount due
with respect to each monthly payment in writing. The minimum is based on
the sex and adjusted age of the payee(s). To find the adjusted age in
the year the first payment is due, we increase or decrease the payee's
age at that time, as follows:
<TABLE>
<CAPTION>
1997-2005 2006-2015 2016-2025 2026-2035 2036 AND LATER
- --------- --------- --------- --------- --------------
<S> <C> <C> <C> <C>
+1 0 -1 -2 -3
</TABLE>
Electing or changing a payment option:
While at least one of the insureds is living, you can elect or change your
payment option. You can also elect or change one or more of the beneficiaries
who will be the payee(s) under that option.
After the last surviving insured dies, any person who is entitled to
receive Policy Proceeds in one sum (other than an assignee) can elect a payment
option and name payees. The person who elects a payment option can also name one
or more successor payees to receive any amount remaining at the death of the
payees. Naming these payees cancels any prior choice of successor payees. A
payee who did not elect the payment option has the right to advance or assign
payments, take the payments in one sum, change the payment option, or make any
other change, only if the person who elects the payment option notifies us in
writing and we agree.
PAYEES
You can only name individuals who are able to receive payments on their own
behalf as payees or successor payees, unless we agree otherwise. We may require
proof of the age of the payee or proof that the payee is living. If we still
have an unpaid amount, or there are some payments which still need to be made
when the last surviving payee dies, we will pay the unpaid amount with interest
to the date of payment, or pay the present value of the remaining payments, to
that payee's estate. We will make this payment in one sum. The present value of
the remaining payments is based on the interest rate used to compute them, and
is always less than their sum.
ADDITIONAL POLICY PROVISIONS
LIMITS ON OUR RIGHTS TO CHALLENGE YOUR POLICY
Generally, we must bring any legal action contesting the validity of your
policy within two years of the Issue Date, including any action taken to contest
a face increase as a result of a change in the Life Insurance Benefit Option.
For any increase(s) in face amount other than one due to a change in the Life
Insurance Benefit Option, this two year period begins on the effective date of
the increase.
SUICIDE
While your policy is in effect:
-- If the death of the first insured who dies is a result of suicide within
two years of the Issue Date, your policy will continue to be in effect
on the last surviving insured.
53
<PAGE> 58
-- If the suicide of both insureds occurs at the same time, or if the
suicide of the last surviving insured occurs within two years of the
Issue Date, we will pay a limited life insurance benefit in one sum to
the beneficiary. The limited life insurance benefit is the total amount
of premiums, less any outstanding loans (including accrued loan
interest) and/or amounts withdrawn. If the suicide(s) occurs within two
years of the effective date of a face amount increase, we will also pay
the limited life insurance benefit, or, if the limited life insurance
benefit is not payable, the monthly deductions from cash value made for
that increase.
MISSTATEMENT OF AGE OR SEX
If the policy application misstates either or both of the insured's age or
sex, we will adjust the cash value, the cash surrender value, and the Life
Insurance Benefit to reflect the correct ages and sexes. We will adjust the
Policy Proceeds provided by your policy based on the most recent mortality
charge for the correct dates of birth or correct sexes.
ASSIGNMENT
You may assign a Non-Qualified Policy as collateral for a loan or other
obligation. In order for this assignment to be binding on us, we must receive a
signed copy of it at Variable Products Service Center at the addresses listed on
the front cover of this prospectus (or any other location we indicate to you in
writing). We are not responsible for the validity of any assignment. If your
policy is a modified endowment contract, assigning your policy may result in
taxable income to you. For more information, please read FEDERAL INCOME TAX
CONSIDERATIONS on page 56. You may not assign Qualified Policies.
FREE LOOK
You have a right to cancel your policy, within certain limits. Under the
free look provision of your policy, you generally have twenty days after you
receive your policy to return the policy to us and receive a refund. You may
cancel increases in the face amount of your policy under the same time limits.
If you cancel your policy, we will pay you the greater of your policy's
cash value on the date you return the policy or the total premium payments you
have made, less any loans and any partial withdrawals you have taken. We will
allocate net premium payments you make during the free look period plus any
interest accrued (currently an annual rate of 3%) on the gross premium to the
General Account until the end of the free look period, as stated in your policy.
If you cancel an increase in face amount of your policy, we will refund the
premium payments you have paid in excess of the planned premiums which are
allocated to the increase in accordance with the surrender charge provision,
less any part of the excess premium payments which we have already paid you.
You may return the policy to Variable Product Services at the addresses
listed on the front cover of this prospectus or you may return it to any of our
agency offices or to the registered representative who sold you the policy.
54
<PAGE> 59
EXCHANGE PRIVILEGE
Within the first twenty four months after the Issue Date of your policy, if
you decide you do not want to own a variable policy, you may either (1) transfer
all of the amounts you have invested in the Investment Divisions to the Fixed
Account of your policy or (2) exchange your policy for a new fixed premium
survivorship permanent plan of life insurance that we (or one of our affiliates)
offer for this purpose. The new policy will have the same policy date, issue
age, risk classification and initial face amount as your original policy, but
will not offer variable investment options such as the Investment Divisions.
In order to exchange your policy:
-- your policy must be in effect on the date of the exchange;
-- you must repay any unpaid loan (including any accrued loan interest);
and
-- you must submit a proper written request.
We will process your request for an exchange on the later of: (a) the date
you send in your written request along with your policy or (b) the date we
receive the necessary payment for your exchange at Variable Products Service
Center at the addresses listed on the front cover of this prospectus (or any
other location we indicate to you in writing). The exchange will be effective on
the later of these two dates. We will require you to make any adjustment to the
premiums and cash values of your policy and the new policy, if necessary.
When you exchange your policy, all riders and benefits on that policy will
end, unless required by law. The new policy will have the same Issue Date, issue
ages, and risk classifications as your original policy.
During the first two years after any increase in the face amount of your
policy you have the right to transfer amounts attributable to this increase from
the Investment Divisions to the Fixed Account. The maximum amount you may
request as a transfer from the Separate Account to the Fixed Account during this
two year period is the lesser of the premium payments you made after you
increased your policy's face amount which are attributable to the increase in
face amount and the amount in the Separate Account.
ADDITIONAL PROVISIONS REGARDING THE SEPARATE ACCOUNT
YOUR VOTING RIGHTS
We will vote the shares that the Investment Divisions of the Separate
Account hold in the Funds at any regular and special shareholder meetings of the
Funds. We will vote these shares according to the instructions we receive from
our policyholders who have invested their premiums in Investment Divisions that
invest in the Fund. However, if the law changes to allow us to vote the shares
in our own right, we may decide to do so.
While your policy is in effect, you hold a voting interest in each
Investment Division that you have amounts invested in. The number of votes you
are entitled to will be determined by dividing the cash value of your policy in
an Investment Division by the net asset value per share for the Eligible
Portfolio underlying that Investment Division.
We will determine the number of votes you are entitled to on the date
established by the underlying Fund for determining shareholders that are
eligible to vote at the meeting of
55
<PAGE> 60
the relevant Fund. We will send you written voting instructions prior to the
meeting according to the procedures established by the Fund. We will send proxy
material, reports and other materials relating to the Fund to each person having
a voting interest.
We will vote the Fund shares for which we do not receive timely
instructions in the same proportion as the shares for which we receive voting
instructions in a timely manner. We will use voting instructions to abstain from
voting on an item to reduce the number of votes eligible to be cast.
OUR RIGHTS
We may take certain actions relating to our operations and the operations
of the Separate Account. We will take these actions in accordance with
applicable laws (including obtaining any required approval of the SEC and any
other required regulatory approvals). If necessary, we will seek approval by our
policyowners.
Specifically, we reserve the right to:
-- add or remove any Investment Division;
-- create new separate accounts;
-- combine the Separate Account with one or more other separate accounts;
-- operate the Separate Account as a management investment company under
the Investment Company Act of 1940 or in any other form permitted by
law;
-- deregister the Separate Account under the Investment Company Act of
1940;
-- manage the Separate Account under the direction of a committee or
discharge such committee at any time;
-- transfer the assets of the Separate Account to one or more other
separate accounts; and
-- restrict or eliminate any of the voting rights of policyowners or other
persons who have voting rights as to the Separate Account.
We may also change the name of the Separate Account.
FEDERAL INCOME TAX CONSIDERATIONS
OUR INTENT
Our intent in the discussion in this section is to provide general
information about federal income tax considerations related to the policies.
This is not an exhaustive discussion of all tax questions that might arise under
the policies. This discussion is not intended to be tax advice for you. Tax
results may vary according to your particular circumstances, and you may need
tax advice in connection with the purchase or use of your policy.
The discussion in this section is based on our understanding of the present
Federal income tax laws as they are currently interpreted by the Internal
Revenue Service ("IRS"). We have not included any information about applicable
state or other tax laws. Further, you should note that tax law changes from time
to time. We do not know whether the treatment of life insurance policies under
federal income tax or estate or gift tax laws will continue. Future legislation,
regulations or interpretations could adversely affect the tax treatment of life
insurance policies. Lastly, there are many areas of the tax law where minimal
guidance exists in the form of Treasury Regulations or Revenue Rulings. You
should consult a tax advisor for information on the tax treatment of the
policies, for the tax
56
<PAGE> 61
treatment under the laws of your state, or for information on the impact of
proposed or future changes in tax legislation, regulations or interpretations.
The ultimate effect of federal income taxes on values under the policy and
on the economic benefit to you or the beneficiary depends upon NYLIAC's tax
status, upon the terms of the policy and upon your circumstances.
TAX STATUS OF NYLIAC AND THE SEPARATE ACCOUNT
NYLIAC is taxed as a life insurance company under Subchapter L of the
Internal Revenue Code. The Separate Account is not a separate taxable entity
from NYLIAC and we take its operations into account in determining NYLIAC's
income tax liability. All investment income and realized net capital gains on
the assets of the Separate Account are reinvested and taken into account in
determining policy cash values and are automatically applied to increase the
book reserves associated with the policies. Under existing Federal income tax
law, neither the investment income nor any net capital gains of the Separate
Account, are taxed to NYLIAC to the extent those items are applied to increase
reserves associated with the policies.
CHARGES FOR TAXES
We impose a federal tax charge on Non-Qualified Policies equal to 1.25% of
premiums received under the policy to compensate us for taxes we have to pay
under Section 848 of the Internal Revenue Code in connection with our receipt of
premiums under Non-Qualified Policies. No other charge is currently made to the
Separate Account for our federal income taxes that may be attributable to the
Separate Account. In the future, we may impose a charge for our Federal income
taxes that are attributable to the Separate Account. In addition, depending on
the method of calculating interest on amounts allocated to the Fixed Account, we
may impose a charge for the policy's share of NYLIAC's federal income taxes
attributable to the Fixed Account.
Under current laws, we may incur state or local taxes (in addition to
premium taxes) in several states. At present, these taxes are not significant.
If there is a material change in applicable state or local tax laws, we reserve
the right to charge the Separate Account for the portion of such taxes, if any,
attributable to the Separate Account or the policies. We may increase the
federal tax charge if the government increases this tax liability.
DIVERSIFICATION STANDARDS AND CONTROL ISSUES
In addition to other requirements imposed by the Internal Revenue Code, a
policy will qualify as life insurance under the Internal Revenue Code only if
the diversification requirements of Internal Revenue Code Section 817(h) are
satisfied by the Separate Account. We intend for the Separate Account to comply
with Internal Revenue Code Section 817(h) and related regulations. To satisfy
these diversification standards, the regulations generally require that on the
last day of each calendar quarter, no more than 55% of the value of a Separate
Account's assets can be represented by any one investment, no more than 70% can
be represented by any two investments, no more than 80% can be represented by
any three investments, and no more than 90% can be represented by any four
investments. For purposes of these rules, all securities of the same issuer
generally are treated as a single investment, but each U.S. Government agency or
instrumentality is treated as a separate issuer. Under a "look through" rule, we
are able to meet the diversification requirements by looking through the
Separate Account
57
<PAGE> 62
to the underlying Eligible Portfolio. Each of the Funds have committed to us
that the Eligible Portfolios will meet the diversification requirements.
The Internal Revenue Service has stated in published rulings that a
variable policyowner will be considered the owner of separate account assets if
he or she possesses incidents of ownership in those assets, such as the ability
to exercise investment control over the assets. In those circumstances, income
and gains from the separate account assets would be includable in the variable
policyowner's gross income. In connection with its issuance of temporary
regulations under Internal Revenue Code Section 817(h) in 1986, the Treasury
Department announced that such temporary regulations did not provide guidance
concerning the extent to which policyowners could be permitted to direct their
investments to particular investment divisions of a separate account and that
guidance on this issue would be forthcoming. Regulations addressing this issue
have not yet been issued or proposed. The ownership rights under your policy are
similar to, but different in certain respects from, those described by the
Internal Revenue Service in rulings in which it was determined that policyowners
were not owners of separate account assets. For example, you have additional
flexibility in allocating premium payments and policy cash values. These
differences could result in your being treated as the owner of your policy's pro
rata portion of the assets of the Separate Account. In addition, we do not know
what standards will be set forth, if any, in the regulations or ruling which the
Treasury Department has stated it expects to issue. We therefore reserve the
right to modify the policy, as deemed appropriate by us, to attempt to prevent
you from being considered the owner of your policy's pro rata share of the
assets of the Separate Account. Moreover, in the event that regulations are
adopted or rulings are issued, there can be no assurance that the Eligible
Portfolios will continue to be available, will be able to operate as currently
described in the Fund prospectuses, or that a Fund will not have to change an
Eligible Portfolio's investment objective or investment policies.
LIFE INSURANCE STATUS OF POLICY
We believe that the policy meets the statutory definition of life insurance
under Internal Revenue Code Section 7702 and that you and the beneficiary of
your policy will receive the same federal income tax treatment as that accorded
to owners and beneficiaries of fixed benefit life insurance policies.
Specifically, we believe that the Life Insurance Benefit under your policy will
be excludable from the gross income of the beneficiary subject to the terms and
conditions of Section 101(a)(1) of the Internal Revenue Code. Pursuant to
Section 101(g) of the Internal Revenue Code, amounts received by the policyowner
may also be excludable from the policyowner's gross income when either insured
has a terminal illness. (Life insurance benefits under a "modified endowment
contract" as discussed below are treated in the same manner as life insurance
benefits under life insurance policies that are not so classified.)
In addition, unless the policy is a "modified endowment contract," in which
case the receipt of any loan under the policy may result in recognition of
income to the policyowner, we believe that the policyowner will not be deemed to
be in constructive receipt of the cash values, including increments thereon,
under the policy until proceeds of the policy are received upon a surrender of
the policy or a partial withdrawal.
The area of the tax law relating to the definition of life insurance does
not explicitly address all of the facts that are relevant for the policies
(including, for example, the treatment of substandard risk policies, policies
with term insurance on the Insureds, and
58
<PAGE> 63
certain tax requirements relating to joint survivorship life insurance
policies). We reserve the right to make changes to the policy if we think it is
appropriate to attempt to assure qualification of the policy as a life insurance
contract. If a policy were determined not to qualify as life insurance, the
policy would not provide the tax advantages normally provided by life insurance.
MODIFIED ENDOWMENT CONTRACT STATUS
Internal Revenue Code Section 7702A defines a class of life insurance
policies referred to as modified endowment contracts. Under this provision, the
policies will be treated for tax purposes in one of two ways. Policies that are
not classified as modified endowment contracts will be taxed as conventional
life insurance policies, as described below. Taxation of pre-death distributions
from policies that are classified as modified endowment contracts and that are
entered into on or after June 21, 1988 is somewhat different, as described
below.
A life insurance policy becomes a "modified endowment contract" if, at any
time during the first seven years, the sum of actual premiums paid exceeds the
sum of the "seven-pay premium." Generally, the "seven-pay premium" is the level
annual premium, such that if paid for each of the first seven years, will fully
pay for all future life insurance and endowment benefits under a life insurance
policy. For example, if the "seven-pay premiums" were $1,000, the maximum
premiums that could be paid during the first seven years to avoid "modified
endowment" treatment would be $1,000 in the first year, $2,000 through the first
two years and $3,000 through the first three years, etc. Under this test, a
policy may or may not be a modified endowment contract, depending on the amount
of premiums paid during each of the policy's first seven years. A policy
received in exchange for a modified endowment contract will be taxed as a
modified endowment contract even if it would otherwise satisfy the 7-pay test.
Certain changes in the terms of a policy including a reduction in life
insurance benefits will require a policy to be retested to determine whether the
change has caused the policy to become a modified endowment contract. In
addition, if a "material change" occurs at any time while the policy is in
force, a new 7-pay test period will start and the policy will need to be
retested to determine whether it continues to meet the 7-pay test. A "material
change" generally includes increases in life insurance benefits, but does not
include an increase in life insurance benefits which is attributable to the
payment of premiums necessary to fund the lowest level of life insurance
benefits payable during the first seven policy years, or which is attributable
to the crediting of interest with respect to such premiums.
Because the policy provides for flexible premiums, NYLIAC has instituted
procedures to monitor whether, under our current interpretation of the law,
increases in Life Insurance Benefits or additional premiums cause either the
start of a new seven-year test period or the taxation of distributions and
loans. All additional premiums will be considered in these determinations.
If a policy fails the 7-pay test, all distributions (including loans)
occurring in the policy year of failure and thereafter will be subject to the
rules for modified endowment contracts. A recapture provision also applies to
loans and distributions that are received in anticipation of failing the 7-pay
test. Under the Internal Revenue Code, any distribution or loan made within two
Policy Years prior to the date that a policy fails the 7-pay test is considered
to have been made in anticipation of the failure.
59
<PAGE> 64
POLICY SURRENDERS AND PARTIAL WITHDRAWALS
Upon a full surrender of a policy for its cash surrender value, you will
recognize ordinary income for federal tax purposes to the extent that the cash
value less surrender charges and any uncollected additional contract charges,
exceeds the investment in your policy (the total of all premiums paid but not
previously recovered plus any other consideration paid for the policy). The tax
consequences of a partial withdrawal from your policy will depend upon whether
the partial withdrawal results in a reduction of future benefits under your
policy and whether your policy is a modified endowment contract.
If your policy is not a modified endowment contract, the general rule is
that a partial withdrawal from a policy is taxable only to the extent that it
exceeds the total investment in the policy. An exception to this general rule
applies, however, if a reduction of future benefits occurs during the first
fifteen years after a policy is issued and there is a cash distribution
associated with that reduction. In such a case, the Internal Revenue Code
prescribes a formula under which you may be taxed on all or a part of the amount
distributed. After fifteen years, cash distributions from a policy that is not a
modified endowment contract will not be subject to federal income tax, except to
the extent they exceed the total investment in the policy. We suggest that you
consult with a tax advisor in advance of a proposed decrease in face amount or a
partial withdrawal. In addition, any amounts distributed under a "modified
endowment contract" (including proceeds of any loan) are taxable to the extent
of any accumulated income in the policy. In general, the amount that may be
subject to tax is the excess of the cash value (both loaned and unloaned) over
the previously unrecovered premiums paid.
For purposes of determining the amount of income received upon a
distribution (or loan) from a modified endowment contract, the Internal Revenue
Code requires the aggregation of all modified endowment contracts issued to the
same policyowner by an insurer and its affiliates within the same calendar year.
Therefore, loans and distributions from any one such policy are taxable to the
extent of the income accumulated in all the modified endowment contracts
required to be so aggregated.
If any amount is taxable as a distribution of income under a modified
endowment contract (as a result of a policy surrender, a partial withdrawal or a
loan), it may also be subject to a 10% penalty tax under Internal Revenue Code
Section 72(v). Limited exceptions from the additional penalty tax are available
for certain distributions to individuals who own policies. The penalty tax will
not apply to distributions: (i) that are made on or after the date the taxpayer
attains age 59 1/2; or (ii) that are attributable to the taxpayer's becoming
disabled; or (iii) that are part of a series of substantially equal periodic
payments (made not less frequently than annually) made for the life or life
expectancy of the taxpayer.
POLICY LOANS AND INTEREST DEDUCTIONS
We believe that under current law any loan received under your policy will
be treated as policy debt to you and that, unless your policy is a modified
endowment contract, no part of any loan under your policy will constitute income
to you. If your policy is a modified endowment contract (see discussion above)
loans will be fully taxable to the extent of the income in the policy (and in
any other contracts with which it must be aggregated) and could be subject to
the additional 10% tax.
60
<PAGE> 65
Internal Revenue Code Section 264 provides that interest paid or accrued on
a loan in connection with a Policy is generally nondeductible. Certain
exceptions apply, however, with respect to policies covering key employees. In
addition, in the case of policies not held by individuals, special rules may
limit the deductibility of interest on loans that are not made in connection
with a policy. We suggest consultation with a tax advisor for further guidance.
In addition, if your policy lapses or you surrender it with an outstanding
loan, and the amount of the loan plus the cash surrender value is more than the
sum of premiums you paid, you will generally be liable for taxes on the excess.
Such amount will be taxed as ordinary income.
CORPORATE OWNERS
If you are a corporation, ownership of a policy may affect your exposure to
the corporate alternative minimum tax. If you intend to use the policies to fund
deferred compensation arrangements, you should consider the tax consequences of
these arrangements. You should consult your tax advisors on these matters.
EXCHANGES OR ASSIGNMENTS OF POLICIES
If you change the policyowner or exchange or assign your policy, it may
have significant tax consequences depending on the circumstances. For example,
an assignment or exchange of the policy may result in taxable income to you.
Further, Internal Revenue Code Section 101(a) provides, subject to certain
exceptions, that where a policy has been transferred for value, only the portion
of the life insurance benefit which is equal to the total consideration paid for
the policy may be excluded from gross income. For complete information with
respect to policy assignments and exchanges, a qualified tax advisor should be
consulted.
REASONABLENESS REQUIREMENT FOR CHARGES
Another provision of the tax law deals with allowable charges for mortality
costs and other expenses that are used in making calculations to determine
whether a policy qualifies as life insurance for federal income tax purposes.
For life insurance policies entered into on or after October 21, 1988, these
calculations must be based upon reasonable mortality charges and other charges
reasonably expected to be actually paid. The Treasury Department has issued
proposed regulations and is expected to promulgate temporary or final
regulations governing reasonableness standards for mortality charges. Under the
proposed regulations, the standards applicable to joint survivor life insurance
policies are not entirely clear. While we believe under Internal Revenue Service
pronouncements currently in effect that the mortality costs and other expenses
used in making calculations to determine whether your policy qualifies as life
insurance meet the current requirements, we cannot assure you that the Internal
Revenue Service would necessarily agree. It is possible that future regulations
will contain standards that would require us to modify the mortality charges
used for the purposes of the calculations in order to attempt to retain the
qualification of your policy as life insurance for federal income tax purposes,
and we reserve the right to make any such modifications.
LIVING BENEFITS RIDER (ALSO KNOWN AS ACCELERATED BENEFITS RIDER)
A Living Benefits Rider is available in connection with the policy. Amounts
received under this rider will generally be excludable from your gross income
under Section 101(g)
61
<PAGE> 66
of the Internal Revenue Code. The exclusion from gross income will not apply,
however, if you are not one of the insureds or if you do not have an insurable
interest in the life of the surviving insured either because the surviving
insured is your director, officer or employee or because the surviving insured
has a financial interest in a business of yours.
In some cases, there may be a question as to whether a life insurance
policy that has an accelerated living benefit rider can meet certain technical
aspects of the definition of "life insurance contract" under the Internal
Revenue Code. We reserve the right (but we are not obligated) to modify the
rider to conform with requirements the Internal Revenue Service may enact.
POLICY SPLIT OPTION
This option permits a policy to be split into two individual policies. A
policy split could have adverse tax consequences. The Internal Revenue Service
has ruled privately that where the insured or insureds of an insurance policy
that is exchanged for a new policy are not identical to the insured or insureds
of the new policy, the exchange is taxable.
OTHER TAX ISSUES
Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of Policy Proceeds depend on the
circumstances of each policyowner or beneficiary.
QUALIFIED PLANS
The policies are intended to be used with plans qualified under Section
401(a) of the Internal Revenue Code. While these plans include profit sharing
plans, 401(k) plans, money purchase pension plans and defined benefit plans,
purchasers of these Policies should seek competent legal and tax advice
regarding the suitability of these Policies for all types of plans qualified
under Section 401(a). Generally, employer contributions to plans qualified under
Section 401(a) and earnings thereon are not taxed to participants until
distributed in accordance with plan provisions.
WITHHOLDING
Under Section 3405 of the Internal Revenue Code, withholding is generally
required with respect to certain taxable distributions under insurance policies.
In the case of periodic payments (payments made as an annuity or on a similar
basis), the withholding is at graduated rates (as though the payments were
employee wages). With respect to non-periodic distributions, the withholding is
at a flat rate of 10%. You can elect to have either non-periodic or periodic
payments made without withholding except where your tax identification number
has not been furnished to us, or where the Internal Revenue Service has notified
us that a tax identification number is incorrect.
Different withholding rules apply to payments made to U.S. citizens living
outside the United States and to non-U.S. citizens living outside of the United
States. U.S. citizens who live outside of the United States generally are not
permitted to elect not to have federal income taxes withheld from payments.
Payments to non-U.S. citizens who are not residents of the United States
generally are subject to 30% withholding, unless an income tax treaty between
their country of residence and the United States provides for a lower rate of
withholding or an exemption from withholding.
62
<PAGE> 67
ABOUT NYLIAC
NYLIAC is a stock life insurance company incorporated in Delaware in 1980.
NYLIAC is licensed to sell life, accident and health insurance and annuities in
the District of Columbia and all states. In addition to the policies described
in this prospectus, NYLIAC offers other life insurance policies and annuities.
NYLIAC's financial statements are also included in this prospectus. NYLIAC's
principal business address is 51 Madison Avenue, New York, New York 10010.
NYLIAC is a wholly-owned subsidiary of New York Life Insurance Company
("New York Life"), a mutual life insurance company founded in New York in 1845.
NYLIAC had total assets amounting to $29.699 billion at the end of 1999. New
York Life has invested in NYLIAC, and will, occasionally make additional
contributions to NYLIAC in order to maintain capital and surplus in accordance
with state requirements.
PERFORMANCE CALCULATIONS
From time to time, we may advertise the performance of the Investment
Divisions. These performance figures do not include contract charges such as the
policy service fee, sales expense charge, tax charges, cost of insurance, rider
charges, and surrender charges.
Performance data for the Investment Divisions may be compared, in
advertisements, sales literature and reports to shareholders, to: (i) the
investment returns on various mutual funds, stocks, bonds, certificates of
deposit, tax free bonds, or common stock and bond indexes; and (ii) other groups
of variable annuity separate accounts or other investment products tracked by
Lipper Analytical Services, a widely used independent research firm which ranks
mutual funds and other investment companies by overall performance, investment
objectives, and assets, or tracked by other services, companies, publications,
or persons who rank such investment companies on overall performance or other
criteria.
Reports and promotional literature may also contain the ratings New York
Life and NYLIAC have received from independent rating agencies. New York Life
and NYLIAC are among only a few companies that have consistently received among
the highest possible ratings from the four major independent rating companies:
A.M. Best and Moody's (for financial stability and strength) and Standard and
Poor's and Duff & Phelps (for claims paying ability). However, neither New York
Life nor NYLIAC guarantees the investment performance of the Investment
Divisions.
We may also advertise a hypothetical illustration of policy values,
including all contract charges.
63
<PAGE> 68
DIRECTORS AND PRINCIPAL OFFICERS OF NYLIAC
<TABLE>
<S> <C>
DIRECTORS: POSITIONS DURING LAST FIVE YEARS:
Seymour Sternberg......................... Chairman of the Board, Chief Executive Officer and
President of New York Life from April 1997 to date;
President and Chief Operating Officer of New York
Life from October 1995 to April 1997; Vice Chairman
and President Elect from February 1995 to October
1995; Executive Vice President prior thereto.
President of NYLIAC from November 1995 to May 1997.
Richard M. Kernan, Jr..................... Executive Vice President and Chief Investment Officer
of New York Life from March 1991 to date.
Frederick J. Sievert...................... Vice Chairman of New York Life from January 1997 to
date; Executive Vice President from February 1995 to
January 1997; Senior Vice President and Chief
Financial Officer--Individual Operations prior
thereto. President of NYLIAC from May 1997 to date;
Executive Vice President from November 1995 to May
1997; Senior Vice President prior thereto.
George J. Trapp........................... Executive Vice President of New York Life from June
1995 to date and Corporate Secretary of New York Life
from November 1995 to date; Senior Vice President of
New York Life from 1991 until June 1995. Member of
the Executive Management Committee of New York Life
since 1994.
Phillip J. Hildebrand..................... Executive Vice President of New York Life from March
1999 to date; Senior Vice President in charge of the
Agency Department of New York Life from 1996 to March
1999. Managing Partner of Dallas General Office of
New York Life from 1994 to 1996.
Howard I. Atkins.......................... Executive Vice President and Chief Financial Officer
of New York Life and NYLIAC from April 1996 to date;
Chief Financial Officer of Midlantic Corporation
prior thereto.
</TABLE>
64
<PAGE> 69
<TABLE>
<S> <C>
Robert D. Rock............................ Senior Vice President in charge of the Individual
Annuity Department of New York Life from March 1992
to date; Vice President prior thereto. Senior Vice
President of NYLIAC from April 1992 to date.
Frank M. Boccio........................... Senior Vice President in charge of Individual Policy
Services Department of New York Life since July 1995;
Vice President of New York Life from 1994 to July
1995.
Michael G. Gallo.......................... Senior Vice President in charge of the Individual
Life Department of New York Life from July 1995 to
date; Senior Vice President--Northeastern Agencies
from February 1994 to July 1995; Vice President prior
thereto. Senior Vice President of NYLIAC from August
1995 to date.
Solomon Goldfinger........................ Senior Vice President and Chief Financial Officer in
charge of the Financial Management Department of New
York Life from July 1995 to date; Senior Vice
President in charge of the Individual Life Department
prior thereto. Senior Vice President of NYLIAC from
April 1992 to date.
OFFICERS:
Jay S. Calhoun, III....................... Senior Vice President and Treasurer of New York Life
from March 1997 to date; Vice President and Treasurer
from November 1992 to March 1997; Corporate Vice
President prior thereto. Senior Vice President and
Treasurer of NYLIAC from May 1997 to date; Vice
President and Treasurer of NYLIAC from January 1993
to May 1997.
Gary E. Wendlandt......................... Executive Vice President in charge of the Asset
Management Business of New York Life from May 1999 to
date. Executive Vice President of NYLIAC from March
2000 to date. Executive Vice President and Chief
Investment Officer of MassMutual Life Insurance
Company, June 1992 to April 1999.
Richard C. Schwartz....................... Senior Vice President of New York Life from March
1998 to date. Senior Vice President of NYLIAC from
March 2000 to date. Vice President of New York Life
from 1993.
</TABLE>
65
<PAGE> 70
<TABLE>
<S> <C>
John A. Cullen............................ Vice President and Deputy Controller of New York Life
from November 1999 to date; Vice President prior
thereto. Vice President and Controller of NYLIAC from
December 1999 to date; Vice President and Assistant
Controller prior thereto.
Frank J. Ollari........................... Senior Vice President in charge of the Mortgage
Finance Department of New York Life from October 1989
to date. Senior Vice President of NYLIAC from April
1992 to date.
Joel M. Steinberg......................... Vice President and Actuary of New York Life from
March 1998 to date; Corporate Vice President and
Actuary from March 1996 to March 1998. Actuary prior
to March 1996.
Stephen N. Steinig........................ Senior Vice President and Chief Actuary of New York
Life from February 1994 to date; Chief Actuary and
Controller prior thereto. Senior Vice President and
Chief Actuary of NYLIAC from May 1991 to date.
</TABLE>
RECORDS AND REPORTS
New York Life or NYLIAC maintains all records and accounts relating to the
Separate Account and the Fixed Account. Each year we will mail you a report
showing the cash value, cash surrender value and outstanding loans (including
accrued loan interest) as of the latest policy anniversary. This report contains
any additional information required by any applicable law or regulation. We will
also mail you a report each quarter showing this same information as of the end
of the previous quarter. In addition to these reports, you may request an
illustration of your policy at any time by contacting your registered
representative.
Reports and promotional literature may contain the ratings New York Life
and NYLIAC have received from independent rating agencies. Both companies are
among only a few companies that have consistently received among the highest
possible ratings from the four major independent rating companies: A.M. Best and
Moody's Investor's Services Inc. (for financial strength and stability) and
Standard and Poor's and Duff & Phelps (for claims paying ability). However,
neither New York Life nor NYLIAC guarantees the investment performance of the
Investment Divisions.
SALES AND OTHER AGREEMENTS
NYLIFE Distributors Inc., ("NYLIFE Distributors") 51 Madison Avenue, New
York, New York 10010, is the principal underwriter and the distributor of the
Policies and is an indirect wholly-owned subsidiary of New York Life. The
commissions paid to registered representatives of broker-dealers who have
entered into dealer agreements with NYLIFE Distributors during a policy's first
Policy Year will not exceed 50% of the premiums paid up to a policy's Target
Premium (8.0% in the second and subsequent Policy Years) plus 3.5% of premiums
paid in excess of such amount. Commissions in excess of the
66
<PAGE> 71
percentage payable on renewal premiums are available for premiums paid in
connection with most increases in a policy's face amount. Registered
representatives who meet certain productivity standards and/or participate in
certain programs may receive additional compensation. From time to time, NYLIFE
Distributors may have or enter into a special arrangement with a broker-dealer,
which provides for the payment of higher commissions to such broker-dealer in
connection with sales of the policies.
LEGAL PROCEEDINGS
NYLIAC is a defendant in individual and/or alleged class action suits
arising from its agency sales force, insurance (including variable contracts
registered under the federal securities law), investment, retail securities
and/or other operations, including actions involving retail sales practices.
Many of these actions also seek substantial or unspecified compensatory and
punitive damages. NYLIAC is also from time to time involved as a party in
various governmental, administrative, and investigative proceedings and
inquiries.
Given the uncertain nature of litigation and regulatory inquiries, the
outcome cannot be predicted. NYLIAC nevertheless believes that, after provisions
made in the financial statements, the ultimate liability that could result from
litigation and proceedings would not have a material adverse effect on NYLIAC's
financial position; however, it is possible that settlements or adverse
determinations in one or more actions or other proceedings in the future could
have a material adverse effect on NYLIAC's operating results for a given year.
EXPERTS
The financial statements of NYLIAC as of December 31, 1999 and 1998 and for
each of the three years in the period ended December 31, 1999 included in this
prospectus have been so included in reliance on the report (which includes an
explanatory paragraph relating to a change in its method of accounting for the
cost of computer software developed or obtained for internal use as described in
Note 2 to the financial statements) of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements of the Separate Account as of December 31, 1999
and for the year then ended included in this prospectus have been so included in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
Irwin Don, FSA, MAAA, Actuary, has examined actuarial matters in this
prospectus. We have filed an opinion on actuarial matters as an exhibit to the
registration statements we filed with the SEC.
FINANCIAL STATEMENTS
We have included in this prospectus the audited financial statements of
NYLIAC (including the auditor's report) for the fiscal years ended December 31,
1999, 1998 and 1997 and of the Separate Account (including the auditor's report)
for the year ended December 31, 1999. You should consider the financial
statements of NYLIAC as bearing only upon the ability of NYLIAC to meet its
obligations under the policy.
67
<PAGE> 72
FINANCIAL STATEMENTS
F-1
<PAGE> 73
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1999
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE GOVERNMENT
<S> <C> <C> <C> <C>
----------------------------------------------------------------
ASSETS:
Investment at net asset value.................. $248,250,589 $ 22,762,437 $ 3,378,694 $ 3,570,800
LIABILITIES:
Liability to New York Life Insurance and
Annuity Corporation for mortality and expense
risk charges................................. 419,994 44,442 5,486 6,133
------------ ------------ ------------ ------------
Total equity............................... $247,830,595 $ 22,717,995 $ 3,373,208 $ 3,564,667
============ ============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
VUL and SVUL variable accumulation units
outstanding: 7,630,484; 17,483,479;
190,417; 269,503; 1,581,024; 343,179;
2,039,979; 1,578,356; 519,766; 1,946,565;
3,369,197, respectively.................... $246,982,346 $ 22,447,825 $ 3,290,587 $ 3,555,262
VUL 2000 variable accumulation units
outstanding: 70,003; 267,906; 6,871; 936;
8,676; 1,200; 8,883; 8,457; 1,421; 26,277;
175,836, respectively...................... 848,249 270,170 82,621 9,405
------------ ------------ ------------ ------------
Total equity............................... $247,830,595 $ 22,717,995 $ 3,373,208 $ 3,564,667
============ ============ ============ ============
VUL and SVUL variable accumulation unit
value...................................... $ 32.37 $ 1.28 $ 17.28 $ 13.19
============ ============ ============ ============
VUL 2000 variable accumulation unit value.... $ 12.12 $ 1.01 $ 12.02 $ 10.05
============ ============ ============ ============
Identified Cost of Investment.................... $219,380,587 $ 22,762,438 $ 3,075,693 $ 3,834,138
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
AMERICAN ALGER
CENTURY DREYFUS LARGE EAGLE ASSET AMERICAN
INCOME & COMPANY MANAGEMENT SMALL
GROWTH VALUE GROWTH EQUITY CAPITALIZATION
<S> <C> <C> <C> <C>
----------------------------------------------------------------
ASSETS:
Investment at net asset value.................. $ 35,909 $ 21,032 $ 135,691 $ 16,749,579
LIABILITIES:
Liability to New York Life Insurance and
Annuity Corporation for mortality and expense
risk charges................................. 19 8 13 26,729
------------ ------------ ------------ ------------
Total equity............................... $ 35,890 $ 21,024 $ 135,678 $ 16,722,850
============ ============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
VUL and SVUL variable accumulation units
outstanding: --; --; --; 954,307; 64,356;
1,813,616; 832,595; 1,091,689; 2,010,023;
455,712; --, respectively.................. $ -- $ -- $ -- $ 16,660,846
VUL 2000 variable accumulation units
outstanding: 3,283; 2,034; 9,759; 4,746;
770; 39,810; 21,318; 76,690; 44,583; 3,912;
8,647, respectively........................ 35,890 21,024 135,678 62,004
------------ ------------ ------------ ------------
Total equity............................... $ 35,890 $ 21,024 $ 135,678 $ 16,722,850
============ ============ ============ ============
VUL and SVUL variable accumulation unit
value...................................... $ -- $ -- $ -- $ 17.46
============ ============ ============ ============
VUL 2000 variable accumulation unit value.... $ 10.93 $ 10.34 $ 13.90 $ 13.06
============ ============ ============ ============
Identified Cost of Investment.................... $ 34,889 $ 20,834 $ 133,193 $ 16,314,853
============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-2
<PAGE> 74
NYLIAC VUL SEPARATE ACCOUNT-I
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH INDEXED
CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
$ 25,980,616 $ 6,536,354 $ 48,361,258 $ 28,308,751 $ 7,134,827 $ 64,376,426 $121,088,697
44,501 11,290 83,460 48,083 12,248 112,912 203,551
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 25,936,115 $ 6,525,064 $ 48,277,798 $ 28,260,668 $ 7,122,579 $ 64,263,514 $120,885,146
============ ============ ============ ============ ============ ============ ============
$ 25,846,254 $ 6,511,184 $ 48,176,161 $ 28,171,272 $ 7,108,358 $ 63,941,612 $118,869,113
89,861 13,880 101,637 89,396 14,221 321,902 2,016,033
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 25,936,115 $ 6,525,064 $ 48,277,798 $ 28,260,668 $ 7,122,579 $ 64,263,514 $120,885,146
============ ============ ============ ============ ============ ============ ============
$ 16.35 $ 18.97 $ 23.62 $ 17.85 $ 13.68 $ 32.85 $ 35.28
============ ============ ============ ============ ============ ============ ============
$ 10.36 $ 11.56 $ 11.44 $ 10.57 $ 10.01 $ 12.25 $ 11.47
============ ============ ============ ============ ============ ============ ============
$ 28,535,513 $ 5,282,639 $ 35,502,480 $ 28,298,257 $ 7,727,533 $ 55,166,467 $113,970,586
============ ============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN MORGAN STANLEY
CALVERT FIDELITY FIDELITY JANUS ASPEN SERIES DEAN WITTER T. ROWE
SOCIAL VIP II VIP SERIES WORLDWIDE EMERGING MARKETS PRICE
BALANCED CONTRAFUND EQUITY-INCOME BALANCED GROWTH EQUITY EQUITY INCOME
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
$ 993,327 $ 37,541,549 $ 13,115,902 $ 23,473,542 $ 53,154,029 $ 6,719,728 $ 84,995
1,686 61,031 21,309 37,324 92,836 11,060 3
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 991,641 $ 37,480,518 $ 13,094,593 $ 23,436,218 $ 53,061,193 $ 6,708,668 $ 84,992
============ ============ ============ ============ ============ ============ ============
$ 983,387 $ 37,009,050 $ 12,869,070 $ 22,548,988 $ 52,432,340 $ 6,650,527 $ --
8,254 471,468 225,523 887,230 628,853 58,141 84,992
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 991,641 $ 37,480,518 $ 13,094,593 $ 23,436,218 $ 53,061,193 $ 6,708,668 $ 84,992
============ ============ ============ ============ ============ ============ ============
$ 15.28 $ 20.41 $ 15.46 $ 20.66 $ 26.09 $ 14.59 $ --
============ ============ ============ ============ ============ ============ ============
$ 10.72 $ 11.84 $ 10.58 $ 11.57 $ 14.11 $ 14.86 $ 9.83
============ ============ ============ ============ ============ ============ ============
$ 995,807 $ 29,118,554 $ 12,632,107 $ 19,504,034 $ 46,780,275 $ 4,251,628 $ 86,546
============ ============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-3
<PAGE> 75
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE GOVERNMENT
<S> <C> <C> <C> <C>
----------------------------------------------------------------
INVESTMENT INCOME (LOSS):
Dividend income................................ $ -- $ 1,033,284 $ 112,711 $ 186,993
Mortality and expense risk charges............. (1,325,374) (149,862) (16,793) (24,832)
------------- ------------- ------------- -------------
Net investment income (loss)............... (1,325,374) 883,422 95,918 162,161
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments.............. 152,344,807 420,117,735 190,880 2,190,273
Cost of investments sold....................... (105,222,446) (420,117,858) (165,136) (2,181,903)
------------- ------------- ------------- -------------
Net realized gain (loss) on investments.... 47,122,361 (123) 25,744 8,370
Realized gain distribution received............ 9,212,178 8 333,649 --
Change in unrealized appreciation
(depreciation) on investments................ (9,158,970) 107 406,847 (259,370)
------------- ------------- ------------- -------------
Net gain (loss) on investments............. 47,175,569 (8) 766,240 (251,000)
------------- ------------- ------------- -------------
Increase (decrease) attributable to funds of
New York Life Insurance and Annuity
Corporation retained by Separate Account..... (57,448) (1,253) (1,036) 47
------------- ------------- ------------- -------------
Net increase (decrease) in total equity
resulting from operations................ $ 45,792,747 $ 882,161 $ 861,122 $ (88,792)
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
AMERICAN EAGLE ASSET ALGER
CENTURY DREYFUS LARGE MANAGEMENT AMERICAN
INCOME & COMPANY GROWTH SMALL
GROWTH(a) VALUE(a) EQUITY(a) CAPITALIZATION
<S> <C> <C> <C> <C>
----------------------------------------------------------------
INVESTMENT INCOME (LOSS):
Dividend income................................ $ 221 $ 156 $ -- $ --
Mortality and expense risk charges............. (18) (8) (12) (64,998)
------------- ------------- ------------- -------------
Net investment income (loss)............... 203 148 (12) (64,998)
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments.............. 6,414 798 2,538 309,989,456
Cost of investments sold....................... (6,273) (771) (1,944) (306,259,435)
------------- ------------- ------------- -------------
Net realized gain (loss) on investments.... 141 27 594 3,730,021
Realized gain distribution received............ -- -- 1,080 735,842
Change in unrealized appreciation
(depreciation) on investments................ 1,020 198 2,499 212,328
------------- ------------- ------------- -------------
Net gain on investments.................... 1,161 225 4,173 4,678,191
------------- ------------- ------------- -------------
Decrease attributable to funds of New York Life
Insurance and Annuity Corporation retained by
Separate Account............................. (1) -- (1) (5,174)
------------- ------------- ------------- -------------
Net increase in total equity resulting from
operations............................... $ 1,363 $ 373 $ 4,160 $ 4,608,019
============= ============= ============= =============
</TABLE>
(a) For the period September 28, 1999 (Commencement of Operations) through
December 31, 1999.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-4
<PAGE> 76
NYLIAC VUL SEPARATE ACCOUNT-I
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH INDEXED
CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
$ 2,919,680 $ 19,396 $ 795,746 $ 349,161 $ 429,660 $ 340,542 $ 1,094,708
(160,799) (34,254) (278,453) (177,341) (46,120) (342,165) (625,794)
------------- ------------- ------------- ------------- ------------- ------------- -------------
2,758,881 (14,858) 517,293 171,820 383,540 (1,623) 468,914
------------- ------------- ------------- ------------- ------------- ------------- -------------
1,691,618 1,039,546 1,942,053 1,474,401 743,861 9,199,644 237,429,723
(1,669,515) (946,738) (1,004,465) (1,186,551) (736,993) (5,816,498) (223,788,302)
------------- ------------- ------------- ------------- ------------- ------------- -------------
22,103 92,808 937,588 287,850 6,868 3,383,146 13,641,421
499,619 133,262 1,305,271 -- 553 5,714,804 1,618,939
(818,497) 1,140,110 3,737,718 1,329,416 (531,346) 4,351,297 734,879
------------- ------------- ------------- ------------- ------------- ------------- -------------
(296,775) 1,366,180 5,980,577 1,617,266 (523,925) 13,449,247 15,995,239
------------- ------------- ------------- ------------- ------------- ------------- -------------
(3,665) (1,636) (8,421) (1,483) 71 (18,194) (21,057)
------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 2,458,441 $ 1,349,686 $ 6,489,449 $ 1,787,603 $ (140,314) $ 13,429,430 $ 16,443,096
============= ============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN MORGAN STANLEY T. ROWE
CALVERT FIDELITY FIDELITY JANUS ASPEN SERIES DEAN WITTER PRICE
SOCIAL VIP II VIP SERIES WORLDWIDE EMERGING MARKETS EQUITY
BALANCED CONTRAFUND EQUITY-INCOME BALANCED GROWTH EQUITY INCOME(a)
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
$ 21,450 $ 91,179 $ 130,390 $ 376,018 $ 53,187 $ 760 $ 249
(4,964) (176,020) (74,391) (91,838) (220,680) (24,825) (3)
------------- ------------- ------------- ------------- ------------- ------------- -------------
16,486 (84,841) 55,999 284,180 (167,493) (24,065) 246
------------- ------------- ------------- ------------- ------------- ------------- -------------
80,603 828,229 1,148,237 600,921 189,862,953 638,675 746
(76,785) (545,722) (1,035,736) (420,980) (174,195,638) (817,984) (735)
------------- ------------- ------------- ------------- ------------- ------------- -------------
3,818 282,507 112,501 179,941 15,667,315 (179,309) 11
73,487 668,643 288,230 -- -- -- 1,944
(346) 5,142,920 (219) 3,014,831 4,604,576 3,006,590 (1,551)
------------- ------------- ------------- ------------- ------------- ------------- -------------
76,959 6,094,070 400,512 3,194,772 20,271,891 2,827,281 404
------------- ------------- ------------- ------------- ------------- ------------- -------------
(106) (7,286) (603) (4,490) (22,883) (3,019) --
------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 93,339 $ 6,001,943 $ 455,908 $ 3,474,462 $ 20,081,515 $ 2,800,197 $ 650
============= ============= ============= ============= ============= ============= =============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-5
<PAGE> 77
STATEMENT OF CHANGES IN TOTAL EQUITY
For the years ended December 31, 1999
and December 31, 1998
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL APPRECIATION CASH MANAGEMENT
------------------------------ ------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
------------------------------------------------------------------
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss).................. $ (1,325,374) $ (719,267) $ 883,422 $ 416,851
Net realized gain (loss) on investments....... 47,122,361 28,598,175 (123) 174
Realized gain distribution received........... 9,212,178 1,508,712 8 --
Change in unrealized appreciation
(depreciation) on investments............... (9,158,970) 12,462,126 107 (115)
Increase (decrease) attributable to funds of
New York Life Insurance and Annuity
Corporation retained by Separate Account.... (57,448) (54,151) (1,253) (576)
------------ ------------ ------------ ------------
Net increase (decrease) in total equity
resulting
from operations........................... 45,792,747 41,795,595 882,161 416,334
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments................ 55,159,677 43,015,039 64,486,957 55,826,497
Cost of insurance............................. (18,814,467) (15,632,087) (2,584,763) (2,030,838)
Policyowners' surrenders...................... (8,083,942) (5,755,421) (491,187) (350,776)
Net transfers to Fixed Account................ (4,927,532) (3,314,522) (381,185) (637,496)
Transfers between Investment Divisions........ 15,795,045 6,185,530 (53,599,684) (46,950,717)
Policyowners' death benefits.................. (227,269) (257,174) (188) (18,009)
------------ ------------ ------------ ------------
Net contributions........................... 38,901,512 24,241,365 7,429,950 5,838,661
------------ ------------ ------------ ------------
Increase in total equity.................. 84,694,259 66,036,960 8,312,111 6,254,995
TOTAL EQUITY:
Beginning of year............................. 163,136,336 97,099,376 14,405,884 8,150,889
------------ ------------ ------------ ------------
End of year................................... $247,830,595 $163,136,336 $ 22,717,995 $ 14,405,884
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
INTERNATIONAL EQUITY TOTAL RETURN
------------------------------ ------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
------------------------------------------------------------------
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss).................. $ (14,858) $ 69,313 $ 517,293 $ 445,770
Net realized gain on investments.............. 92,808 399,556 937,588 830,540
Realized gain distribution received........... 133,262 -- 1,305,271 933,164
Change in unrealized appreciation
(depreciation) on investments............... 1,140,110 253,950 3,737,718 4,843,628
Increase (decrease) attributable to funds of
New York Life Insurance and Annuity
Corporation retained by Separate Account.... (1,636) (1,447) (8,421) (9,150)
------------ ------------ ------------ ------------
Net increase (decrease) in total equity
resulting from operations................. 1,349,686 721,372 6,489,449 7,043,952
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments................ 1,598,744 1,534,922 10,858,597 9,007,541
Cost of insurance............................. (503,092) (529,562) (3,741,166) (3,313,627)
Policyowners' surrenders...................... (162,868) (256,808) (1,584,812) (1,211,414)
Net transfers to Fixed Account................ (187,961) (141,464) (909,132) (772,143)
Transfers between Investment Divisions........ 328,106 (191,458) 1,510,064 524,899
Policyowners' death benefits.................. (86,667) (98,515) (29,909) (122,817)
------------ ------------ ------------ ------------
Net contributions........................... 986,262 317,115 6,103,642 4,112,439
------------ ------------ ------------ ------------
Increase in total equity.................. 2,335,948 1,038,487 12,593,091 11,156,391
TOTAL EQUITY:
Beginning of year............................. 4,189,116 3,150,629 35,684,707 24,528,316
------------ ------------ ------------ ------------
End of year................................... $ 6,525,064 $ 4,189,116 $ 48,277,798 $ 35,684,707
============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-6
<PAGE> 78
NYLIAC VUL SEPARATE ACCOUNT-I
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD
CONVERTIBLE GOVERNMENT CORPORATE BOND
------------------------------ ------------------------------ ------------------------------
1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
$ 95,918 $ 73,863 $ 162,161 $ 127,272 $ 2,758,881 $ 1,590,363
25,744 7,340 8,370 37,886 22,103 64,854
333,649 50,288 -- -- 499,619 47,406
406,847 (85,229) (259,370) 14,939 (818,497) (1,498,958)
(1,036) (23) 47 (204) (3,665) (61)
------------ ------------ ------------ ------------ ------------ ------------
861,122 46,239 (88,792) 179,893 2,458,441 203,604
------------ ------------ ------------ ------------ ------------ ------------
867,144 737,857 1,020,933 766,789 8,302,753 7,559,778
(271,355) (229,862) (338,961) (242,485) (2,619,979) (2,353,235)
(86,364) (23,416) (132,107) (50,424) (944,952) (463,485)
(11,682) (24,417) (38,557) (33,099) (456,296) (263,644)
250,099 377,042 (307,986) 1,168,469 412,072 1,875,550
(739) -- (367) (27,512) (18,566) (8,961)
------------ ------------ ------------ ------------ ------------ ------------
747,103 837,204 202,955 1,581,738 4,675,032 6,346,003
------------ ------------ ------------ ------------ ------------ ------------
1,608,225 883,443 114,163 1,761,631 7,133,473 6,549,607
1,764,983 881,540 3,450,504 1,688,873 18,802,642 12,253,035
------------ ------------ ------------ ------------ ------------ ------------
$ 3,373,208 $ 1,764,983 $ 3,564,667 $ 3,450,504 $ 25,936,115 $ 18,802,642
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
VALUE BOND GROWTH EQUITY
------------------------------ ------------------------------ ------------------------------
1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
$ 171,820 $ 203,854 $ 383,540 $ 270,882 $ (1,623) $ 79,088
287,850 166,506 6,868 2,914 3,383,146 227,341
-- 1,711,646 553 150,296 5,714,804 2,916,300
1,329,416 (3,245,087) (531,346) (24,456) 4,351,297 3,898,766
(1,483) 952 71 (496) (18,194) (10,255)
------------ ------------ ------------ ------------ ------------ ------------
1,787,603 (1,162,129) (140,314) 399,140 13,429,430 7,111,240
------------ ------------ ------------ ------------ ------------ ------------
9,785,258 9,730,766 2,187,714 1,746,262 15,546,512 12,186,740
(3,051,256) (3,192,216) (693,353) (615,607) (5,033,902) (3,822,721)
(1,034,284) (713,023) (278,012) (215,276) (1,962,772) (927,793)
(470,194) (421,071) (106,081) (91,675) (995,672) (618,303)
(339,100) 1,606,497 244,474 702,565 3,855,951 3,326,747
(111,844) (144,245) (7,364) (271,589) (49,043) (27,376)
------------ ------------ ------------ ------------ ------------ ------------
4,778,580 6,866,708 1,347,378 1,254,680 11,361,074 10,117,294
------------ ------------ ------------ ------------ ------------ ------------
6,566,183 5,704,579 1,207,064 1,653,820 24,790,504 17,228,534
21,694,485 15,989,906 5,915,515 4,261,695 39,473,010 22,244,476
------------ ------------ ------------ ------------ ------------ ------------
$ 28,260,668 $ 21,694,485 $ 7,122,579 $ 5,915,515 $ 64,263,514 $ 39,473,010
============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-7
<PAGE> 79
STATEMENT OF CHANGES IN TOTAL EQUITY (CONTINUED)
For the years ended December 31, 1999
and December 31, 1998
<TABLE>
<CAPTION>
MAINSTAY VP AMERICAN CENTURY
INDEXED EQUITY INCOME & GROWTH
------------------------------ ----------------
1999 1998 1999(a)
<S> <C> <C> <C>
---------------------------------------------------------------
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss).................. $ 468,914 $ 315,924 $ 203
Net realized gain on investments.............. 13,641,421 10,716,754 141
Realized gain distribution received........... 1,618,939 557,191 --
Change in unrealized appreciation
(depreciation) on investments............... 734,879 282,888 1,020
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation
retained by Separate Account................ (21,057) (16,684) (1)
------------ ------------ ------------
Net increase in total equity resulting from
operations................................ 16,443,096 11,856,073 1,363
------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments................ 38,307,020 23,448,394 9,386
Cost of insurance............................. (11,332,970) (7,501,864) (1,571)
Policyowners' surrenders...................... (3,449,613) (1,904,644) --
Net transfers from (to) Fixed Account......... (1,221,342) (1,125,551) 26,125
Transfers between Investment Divisions........ 8,893,653 17,788,953 587
Policyowners' death benefits.................. (69,949) (46,244) --
------------ ------------ ------------
Net contributions........................... 31,126,799 30,659,044 34,527
------------ ------------ ------------
Increase in total equity.................. 47,569,895 42,515,117 35,890
TOTAL EQUITY:
Beginning of year............................. 73,315,251 30,800,134 --
------------ ------------ ------------
End of year................................... $120,885,146 $ 73,315,251 $ 35,890
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
FIDELITY FIDELITY
VIP II VIP
CONTRAFUND EQUITY-INCOME
------------------------------ ------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
------------------------------------------------------------------
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss).................. $ (84,841) $ (27,964) $ 55,999 $ 5,692
Net realized gain (loss) on investments....... 282,507 54,036 112,501 85,885
Realized gain distribution received........... 668,643 329,061 288,230 150,693
Change in unrealized appreciation
(depreciation) on investments............... 5,142,920 2,790,206 (219) 306,596
Increase (decrease) attributable to funds of
New York Life Insurance and Annuity
Corporation retained by Separate Account.... (7,286) (4,175) (603) (991)
------------ ------------ ------------ ------------
Net increase (decrease) in total equity
resulting from operations................. 6,001,943 3,141,164 455,908 547,875
------------ ------------ ------------ ------------
Contributions and withdrawals:
Policyowners' premium payments................ 13,026,887 7,696,442 4,956,313 3,688,644
Cost of insurance............................. (3,705,244) (2,146,703) (1,482,147) (969,176)
Policyowners' surrenders...................... (667,893) (449,496) (286,960) (171,064)
Net transfers from (to) Fixed Account......... (343,741) (154,308) 53,981 (55,950)
Transfers between Investment Divisions........ 5,534,689 3,975,127 1,108,674 2,915,659
Policyowners' death benefits.................. (52,911) (114,379) (17,479) (328)
------------ ------------ ------------ ------------
Net contributions........................... 13,791,787 8,806,683 4,332,382 5,407,785
------------ ------------ ------------ ------------
Increase in total equity.................. 19,793,730 11,947,847 4,788,290 5,955,660
TOTAL EQUITY:
Beginning of year............................. 17,686,788 5,738,941 8,306,303 2,350,643
------------ ------------ ------------ ------------
End of year................................... $ 37,480,518 $ 17,686,788 $ 13,094,593 $ 8,306,303
============ ============ ============ ============
</TABLE>
(a) For the period September 28, 1999 (Commencement of Operations) through
December 31, 1999.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-8
<PAGE> 80
NYLIAC VUL SEPARATE ACCOUNT-I
<TABLE>
<CAPTION>
DREYFUS LARGE EAGLE ASSET
COMPANY MANAGEMENT ALGER AMERICAN CALVERT
VALUE GROWTH EQUITY SMALL CAPITALIZATION SOCIAL BALANCED
------------- ------------- --------------------------- ---------------------------
1999(a) 1999(a) 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
$ 148 $ (12) $ (64,998) $ (34,358) $ 16,486 $ 8,208
27 594 3,730,021 1,215,940 3,818 15,361
-- 1,080 735,842 374,506 73,487 22,970
198 2,499 212,328 128,347 (346) (1,990)
-- (1) (5,174) (1,817) (106) (57)
------------ ------------ ------------ ------------ ------------ ------------
373 4,160 4,608,019 1,682,618 93,339 44,492
------------ ------------ ------------ ------------ ------------ ------------
7,985 3,878 3,734,375 2,188,725 316,514 220,463
(1,534) (1,165) (1,014,165) (772,586) (111,360) (66,198)
(657) -- (171,665) (129,594) (35,089) (39,108)
14,857 128,805 (94,044) (35,391) (5,479) (4,614)
-- -- 4,697,824 131,223 283,964 121,446
-- -- (30,619) (213) -- (827)
------------ ------------ ------------ ------------ ------------ ------------
20,651 131,518 7,121,706 1,382,164 448,550 231,162
------------ ------------ ------------ ------------ ------------ ------------
21,024 135,678 11,729,725 3,064,782 541,889 275,654
-- -- 4,993,125 1,928,343 449,752 174,098
------------ ------------ ------------ ------------ ------------ ------------
$ 21,024 $ 135,678 $ 16,722,850 $ 4,993,125 $ 991,641 $ 449,752
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN MORGAN STANLEY
JANUS ASPEN SERIES DEAN WITTER T. ROWE
SERIES WORLDWIDE EMERGING MARKETS PRICE
BALANCED GROWTH EQUITY EQUITY INCOME
--------------------------- --------------------------- --------------------------- -------------
1999 1998 1999 1998 1999 1998 1999(a)
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
$ 284,180 $ 122,429 $ (167,493) $ 271,229 $ (24,065) $ (1,253) $ 246
179,941 147,872 15,667,315 1,387,577 (179,309) (268,494) 11
-- 20,409 -- 144,214 -- -- 1,944
3,014,831 851,673 4,604,576 1,447,292 3,006,590 (242,047) (1,551)
(4,490) (1,474) (22,883) (4,965) (3,019) 406 --
------------ ------------ ------------ ------------ ------------ ------------ ------------
3,474,462 1,140,909 20,081,515 3,245,347 2,800,197 (511,388) 650
------------ ------------ ------------ ------------ ------------ ------------ ------------
7,857,797 2,528,610 13,190,861 8,596,803 1,501,600 1,516,539 7,374
(1,990,257) (658,423) (3,974,595) (2,591,821) (407,571) (393,054) (1,890)
(263,420) (138,143) (850,986) (474,849) (108,494) (74,822) (654)
542,842 (52,710) (145,095) (198,761) (94,620) (25,939) 79,512
7,429,452 2,191,093 4,014,635 4,521,415 803,924 77,823 --
(11,226) (110,888) (46,785) (66,168) (18,592) (42,802) --
------------ ------------ ------------ ------------ ------------ ------------ ------------
13,565,188 3,759,539 12,188,035 9,786,619 1,676,247 1,057,745 84,342
------------ ------------ ------------ ------------ ------------ ------------ ------------
17,039,650 4,900,448 32,269,550 13,031,966 4,476,444 546,357 84,992
6,396,568 1,496,120 20,791,643 7,759,677 2,232,224 1,685,867 --
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 23,436,218 $ 6,396,568 $ 53,061,193 $ 20,791,643 $ 6,708,668 $ 2,232,224 $ 84,992
============ ============ ============ ============ ============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-9
<PAGE> 81
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-10
<PAGE> 82
NYLIAC VUL SEPARATE ACCOUNT-I
NOTES TO FINANCIAL STATEMENTS
NOTE 1-- Organization and Accounting Policies:
- --------------------------------------------------------------------------------
NYLIAC Variable Universal Life Separate Account-I ("VUL 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 VUL Separate Account-I funds Flexible Premium Variable Life
Insurance policies ("VUL policies"), Survivorship Variable Universal Life
policies ("SVUL policies"), and Flexible Premium Variable Universal Life
policies ("VUL 2000 policies"). VUL, SVUL, and VUL 2000 policies were first
offered on June 4, 1993, June 5, 1998, and September 28, 1999, respectively. All
three policies are designed for individuals who seek lifetime insurance
protection and flexibility with respect to premium payments and death benefits.
In addition, SVUL policies offer life insurance protection on two insureds.
These 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 LLC, which is a wholly-owned subsidiary of
New York Life Insurance Company. VUL Separate Account-I is registered under the
Investment Company Act of 1940, as amended, as a unit investment trust.
The assets of VUL Separate Account-I are invested in the shares of the
MainStay VP Series Fund, Inc., the Alger American Fund, the Calvert Variable
Series, Inc. (formerly, "Acacia Capital Corporation"), the Fidelity Variable
Insurance Products Fund II, the Fidelity Variable Insurance Products Fund, the
Janus Aspen Series, the Morgan Stanley Dean Witter Universal Funds, Inc.
(formerly, "Morgan Stanley Universal Funds, Inc."), and the T. Rowe Price Equity
Series, Inc. (collectively, "Funds"). These assets are clearly identified and
distinguished from the other assets and liabilities of New York Life Insurance
and Annuity Corporation.
New York Life Insurance Company, MacKay Shields LLC, Madison Square Advisors
LLC and Monitor Capital Advisors LLC provide investment advisory services to the
MainStay VP Series Funds for a fee. MacKay Shields LLC, Madison Square Advisors
LLC and Monitor Capital Advisors LLC are wholly-owned subsidiaries of NYLIFE
LLC.
VUL Separate Account-I offers twenty-two variable Investment Divisions, with
their respective fund portfolios, for Policyowners to invest premium payments.
The following Investment Divisions are available for VUL, SVUL and VUL 2000
policies: MainStay VP Capital Appreciation, MainStay VP Cash Management,
MainStay VP Convertible, MainStay VP Government, MainStay VP High Yield
Corporate Bond, MainStay VP International Equity, MainStay VP Total Return,
MainStay VP Value, MainStay VP Bond, MainStay VP Growth Equity, MainStay VP
Indexed Equity, Alger American Small Capitalization, Calvert Social Balanced
(formerly, "Calvert Socially Responsible"), Fidelity VIP II Contrafund, Fidelity
VIP Equity-Income, Janus Aspen Series Balanced, Janus Aspen Series Worldwide
Growth, and Morgan Stanley Dean Witter Emerging Markets Equity (formerly,
"Morgan Stanley Emerging Markets Equity"). Additionally, the following are
available to VUL 2000 Policyowners: American Century Income & Growth, Dreyfus
Large Company Value, Eagle Asset Management Growth Equity, and T. Rowe Price
Equity Income. Each Investment Division of VUL Separate Account-I will invest
exclusively in the corresponding eligible portfolio.
For VUL and SVUL policies, 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. For VUL 2000 policies, initial premium
payments received are allocated to the General Account of New York Life
Insurance and Annuity Corporation until 20 days (10 days in New York) after the
policy issue date. Thereafter, premium payments will be allocated to the
Investment Divisions of VUL 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 VUL 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 VUL
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.
F-11
<PAGE> 83
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--Investments (in 000's):
- --------------------------------------------------------------------------------
At December 31, 1999, the investments of VUL Separate Account-I are as follows:
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE GOVERNMENT
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------
Number of shares........................... 6,713 22,763 266 373
Identified cost*........................... $219,381 $ 22,762 $ 3,076 $ 3,834
</TABLE>
<TABLE>
<CAPTION>
AMERICAN ALGER
CENTURY DREYFUS LARGE EAGLE ASSET AMERICAN
INCOME & COMPANY MANAGEMENT SMALL
GROWTH VALUE GROWTH EQUITY CAPITALIZATION
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------
Number of shares........................... 3 2 7 304
Identified cost*........................... $ 35 $ 21 $ 133 $ 16,315
</TABLE>
* The cost stated also represents the aggregate cost for Federal income tax
purposes.
Investment activity for the year ended December 31, 1999, was as follows:
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE GOVERNMENT
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------
Purchases.................................. $199,209 $428,453 $ 1,369 $ 2,556
Proceeds from sales........................ 152,345 420,118 191 2,190
</TABLE>
<TABLE>
<CAPTION>
AMERICAN ALGER
CENTURY DREYFUS LARGE EAGLE ASSET AMERICAN
INCOME & COMPANY MANAGEMENT SMALL
GROWTH(a) VALUE(a) GROWTH EQUITY(a) CAPITALIZATION
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------
Purchases.................................. $ 41 $ 22 $ 135 $317,788
Proceeds from sales........................ 6 1 3 309,989
</TABLE>
(a) For the period September 28, 1999 (Commencement of Operations) through
December 31, 1999.
F-12
<PAGE> 84
NYLIAC VUL SEPARATE ACCOUNT-I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH INDEXED
CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------
2,429 422 2,163 1,888 583 2,318 3,971
$ 28,536 $ 5,283 $ 35,502 $ 28,298 $ 7,728 $ 55,166 $113,971
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN MORGAN STANLEY
CALVERT FIDELITY FIDELITY JANUS ASPEN SERIES DEAN WITTER T. ROWE
SOCIAL VIP II VIP SERIES WORLDWIDE EMERGING MARKETS PRICE
BALANCED CONTRAFUND EQUITY-INCOME BALANCED GROWTH EQUITY EQUITY INCOME
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------
458 1,288 510 841 1,113 483 5
$ 996 $ 29,119 $ 12,632 $ 19,504 $ 46,780 $ 4,252 $ 87
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH INDEXED
CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------
$ 9,635 $ 2,146 $ 9,881 $ 6,433 $ 2,478 $ 26,301 $270,712
1,692 1,040 1,942 1,474 744 9,200 237,430
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN MORGAN STANLEY
CALVERT FIDELITY FIDELITY JANUS ASPEN SERIES DEAN WITTER T. ROWE
SOCIAL VIP II VIP SERIES WORLDWIDE EMERGING MARKETS PRICE
BALANCED CONTRAFUND EQUITY-INCOME BALANCED GROWTH EQUITY EQUITY INCOME(a)
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------
$ 620 $ 15,229 $ 5,831 $ 14,473 $201,919 $ 2,295 $ 87
81 828 1,148 601 189,863 639 1
</TABLE>
F-13
<PAGE> 85
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--Mortality and Expense Risk Charges:
- --------------------------------------------------------------------------------
VUL Separate Account-I is charged for administrative services provided and the
mortality and expense risks assumed by New York Life Insurance and Annuity
Corporation. For VUL and SVUL policies, 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%. For VUL 2000 policies, the
mortality and expense risk charge is made daily at an annual rate of .50% of the
daily net asset value of each Investment Division. New York Life Insurance and
Annuity Corporation may increase this charge to a maximum annual rate of .80%.
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.
For VUL 2000 policies, an administrative charge is assessed at the policy
level based on the cash value in the Separate Account as follows: .20% if less
than $10,000; .15% if $10,000 to $19,999.99; .10% if $20,000 to $29,999.99; .05%
if $30,000 to $49,999.99; 0% if $50,000 or more. New York Life Insurance and
Annuity Corporation may increase the administrative charge in the future up to
an annual maximum rate of .20% of the Separate Account cash value.
- --------------------------------------------------------------------------------
NOTE 4--Distribution of Net Income:
- --------------------------------------------------------------------------------
VUL 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.
F-14
<PAGE> 86
NYLIAC VUL SEPARATE ACCOUNT-I
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-15
<PAGE> 87
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--Unit Transactions (in 000's):
- --------------------------------------------------------------------------------
Transactions in accumulation units for the years ended December 31, 1999 and
December 31, 1998, were as follows:
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL APPRECIATION CASH MANAGEMENT
--------------------- -----------------
1999(a) 1998 1999(a) 1998
<S> <C> <C> <C> <C>
-----------------------------------------
VUL AND SVUL POLICIES
Units issued on premium payments......... 1,998 2,003 51,235 46,217
Units redeemed on cost of insurance...... (687) (727) (2,039) (1,679)
Units redeemed on surrenders............. (293) (266) (390) (289)
Units redeemed on net transfers to
Fixed Account.......................... (242) (177) (646) (569)
Units issued (redeemed) on transfers
between Investment Divisions........... 585 331 (42,359) (38,887)
Units redeemed on death benefits......... (8) (12) -- (15)
------- ------- ------- -------
Net increase........................... 1,353 1,152 5,801 4,778
Units outstanding, beginning of year..... 6,277 5,125 11,682 6,904
------- ------- ------- -------
Units outstanding, end of year........... 7,630 6,277 17,483 11,682
======= ======= ======= =======
VUL 2000 POLICIES
Units issued on premium payments......... 13 -- 27 --
Units redeemed on cost of insurance...... (3) -- (22) --
Units issued on net transfers from
Fixed Account.......................... 56 -- 427 --
Units issued (redeemed) on transfers
between Investment Divisions............ 4 -- (164) --
------- ------- ------- -------
Net increase........................... 70 -- 268 --
Units outstanding, beginning of year..... -- -- -- --
------- ------- ------- -------
Units outstanding, end of year........... 70 -- 268 --
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
INTERNATIONAL EQUITY TOTAL RETURN
--------------------- -----------------
1999(a) 1998 1999(a) 1998
<S> <C> <C> <C> <C>
-----------------------------------------
VUL AND SVUL POLICIES
Units issued on premium payments......... 102 113 513 509
Units redeemed on cost of insurance...... (32) (39) (178) (187)
Units redeemed on surrenders............. (10) (19) (75) (68)
Units redeemed on net transfers to
Fixed Account.......................... (17) (11) (61) (50)
Units issued (redeemed) on transfers
between Investment Divisions............ 25 (14) 86 35
Units redeemed on death benefits......... (6) (7) (1) (7)
------- ------- ------- -------
Net increase........................... 62 23 284 232
Units outstanding, beginning of year..... 281 258 1,756 1,524
------- ------- ------- -------
Units outstanding, end of year........... 343 281 2,040 1,756
======= ======= ======= =======
VUL 2000 POLICIES
Units issued on premium payments......... -- -- 1 --
Units redeemed on cost of insurance...... -- -- -- --
Units issued on net transfers from
Fixed Account.......................... 1 -- 8 --
------- ------- ------- -------
Net increase........................... 1 -- 9 --
Units outstanding, beginning of year..... -- -- -- --
------- ------- ------- -------
Units outstanding, end of year........... 1 -- 9 --
======= ======= ======= =======
</TABLE>
(a) For VUL 2000 policies, represents the period September 28, 1999
(Commencement of Operations) through December 31, 1999.
F-16
<PAGE> 88
NYLIAC VUL SEPARATE ACCOUNT-I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD
CONVERTIBLE GOVERNMENT CORPORATE BOND
----------------- ----------------- -----------------
1999(a) 1998 1999(a) 1998 1999(a) 1998
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------
59 61 77 59 524 518
(19) (19) (25) (19) (166) (162)
(6) (2) (10) (4) (59) (32)
(3) (3) (5) (3) (37) (20)
15 32 (22) 89 31 129
-- -- -- (2) (1) (1)
------- ------- ------- ------- ------- -------
46 69 15 120 292 432
144 75 255 135 1,289 857
------- ------- ------- ------- ------- -------
190 144 270 255 1,581 1,289
======= ======= ======= ======= ======= =======
1 -- -- -- 1 --
-- -- -- -- -- --
3 -- 1 -- 8 --
3 -- -- -- -- --
------- ------- ------- ------- ------- -------
7 -- 1 -- 9 --
-- -- -- -- -- --
------- ------- ------- ------- ------- -------
7 -- 1 -- 9 --
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
VALUE BOND GROWTH EQUITY
----------------- ----------------- -----------------
1999(a) 1998 1999(a) 1998 1999(a) 1998
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------
556 563 157 131 558 545
(173) (184) (50) (46) (182) (171)
(58) (41) (20) (16) (70) (42)
(39) (26) (11) (8) (50) (30)
(14) 88 21 53 142 151
(7) (8) -- (21) (2) (1)
------- ------- ------- ------- ------- -------
265 392 97 93 396 452
1,313 921 423 330 1,551 1,099
------- ------- ------- ------- ------- -------
1,578 1,313 520 423 1,947 1,551
======= ======= ======= ======= ======= =======
2 -- -- -- 5 --
-- -- -- -- (1) --
6 -- 1 -- 22 --
------- ------- ------- ------- ------- -------
8 -- 1 -- 26 --
-- -- -- -- -- --
------- ------- ------- ------- ------- -------
8 -- 1 -- 26 --
======= ======= ======= ======= ======= =======
</TABLE>
F-17
<PAGE> 89
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--Unit Transactions (in 000's) (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP AMERICAN CENTURY
INDEXED EQUITY INCOME & GROWTH
----------------- ----------------
1999(a) 1998 1999(a)
<S> <C> <C> <C>
------------------------------------
VUL AND SVUL POLICIES
Units issued on premium payments....... 1,172 900 --
Units redeemed on cost of insurance.... (356) (289) --
Units redeemed on surrenders........... (108) (73) --
Units redeemed on net transfers to
Fixed Account........................ (101) (47) --
Units issued on transfers between
Investment Divisions................. 273 667 --
Units redeemed on death benefits....... (2) (2) --
------- ------- -------
Net increase......................... 878 1,156 --
Units outstanding, beginning of year... 2,491 1,335 --
------- ------- -------
Units outstanding, end of year......... 3,369 2,491 --
======= ======= =======
VUL 2000 POLICIES
Units issued on premium payments....... 80 -- 1
Units redeemed on cost of insurance.... (4) -- --
Units issued on net transfers from
Fixed Account........................ 97 -- 2
Units issued on transfers between
Investment Divisions................. 3 -- --
------- ------- -------
Net increase......................... 176 -- 3
Units outstanding, beginning of year... -- -- --
------- ------- -------
Units outstanding, end of year......... 176 -- 3
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY FIDELITY
VIP II VIP
CONTRAFUND EQUITY-INCOME
----------------- -----------------
1999(a) 1998 1999(a) 1998
<S> <C> <C> <C> <C>
-------------------------------------
VUL AND SVUL POLICIES
Units issued on premium payments......... 723 542 320 267
Units redeemed on cost of insurance...... (207) (151) (95) (70)
Units redeemed on surrenders............. (37) (31) (18) (13)
Units redeemed on net transfers to
Fixed Account.......................... (41) (14) (11) (5)
Units issued on transfers between
Investment Divisions................... 310 283 71 210
Units redeemed on death benefits......... (3) (8) (1) --
------- ------- ------- -------
Net increase........................... 745 621 266 389
Units outstanding, beginning of year..... 1,069 448 567 178
------- ------- ------- -------
Units outstanding, end of year........... 1,814 1,069 833 567
======= ======= ======= =======
VUL 2000 POLICIES
Units issued on premium payments......... 9 -- 2 --
Units redeemed on cost of insurance...... (2) -- (1) --
Units issued on net transfers from
Fixed Account.......................... 33 -- 20 --
Units issued on transfers between
Investment Divisions................... -- -- -- --
------- ------- ------- -------
Net increase........................... 40 -- 21 --
Units outstanding, beginning of year..... -- -- -- --
------- ------- ------- -------
Units outstanding, end of year........... 40 -- 21 --
======= ======= ======= =======
</TABLE>
(a) For VUL 2000 policies, represents the period September 28, 1999
(Commencement of Operations) through December 31, 1999.
F-18
<PAGE> 90
NYLIAC VUL SEPARATE ACCOUNT-I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALGER
DREYFUS LARGE EAGLE ASSET AMERICAN
COMPANY MANAGEMENT SMALL CALVERT
VALUE GROWTH EQUITY CAPITALIZATION SOCIAL BALANCED
------------- ------------- ----------------- -----------------
1999(a) 1999(a) 1999(a) 1998 1999(a) 1998
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------
-- -- 272 202 22 16
-- -- (77) (71) (8) (5)
-- -- (13) (12) (2) (3)
--
-- -- (11) (4) (1) --
-- -- 379 112 20 10
-- -- (3) -- -- --
------- ------- ------- ------- ------- -------
-- -- 547 227 31 18
-- -- 407 180 33 15
------- ------- ------- ------- ------- -------
-- -- 954 407 64 33
======= ======= ======= ======= ======= =======
1 -- 1 -- -- --
-- -- -- -- -- --
1 10 3 -- 1 --
-- -- 1 -- -- --
------- ------- ------- ------- ------- -------
2 10 5 -- 1 --
-- -- -- -- -- --
------- ------- ------- ------- ------- -------
2 10 5 -- 1 --
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN MORGAN STANLEY
JANUS ASPEN SERIES DEAN WITTER T. ROWE
SERIES WORLDWIDE EMERGING MARKETS PRICE
BALANCED GROWTH EQUITY EQUITY INCOME
----------------- ----------------- ----------------- -------------
1999(a) 1998 1999(a) 1998 1999(a) 1998 1999(a)
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------
425 180 710 596 156 181 --
(108) (47) (218) (179) (42) (46) --
(14) (10) (45) (33) (11) (9) --
(8) (4) (37) (17) (14) (4) --
407 157 300 317 72 10 --
-- (8) (2) (4) (2) (4) --
------- ------- ------- ------- ------- ------- -------
702 268 708 680 159 128 --
390 122 1,302 622 297 169 --
------- ------- ------- ------- ------- ------- -------
1,092 390 2,010 1,302 456 297 --
======= ======= ======= ======= ======= ======= =======
12 -- 7 -- 1 -- 1
(2) -- (1) -- -- -- --
64 -- 39 -- 3 -- 8
3 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
77 -- 45 -- 4 -- 9
-- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
77 -- 45 -- 4 -- 9
======= ======= ======= ======= ======= ======= =======
</TABLE>
F-19
<PAGE> 91
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--Selected Per Unit Data+:
- --------------------------------------------------------------------------------
The following table presents selected per accumulation unit income and capital
changes (for an accumulation unit outstanding throughout each year) with respect
to each Investment Division of VUL Separate Account-I:
<TABLE>
<CAPTION>
MAINSTAY VP
CAPITAL APPRECIATION
-----------------------------------------------
1999(c) 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
-----------------------------------------------
VUL AND SVUL POLICIES
Unit value, beginning of year............................... $25.99 $18.95 $15.45 $13.10 $ 9.72
Net investment income (loss)................................ (0.19) (0.12) (0.12) (0.09) --
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 6.57 7.16 3.62 2.44 3.38
------ ------ ------ ------ ------
Unit value, end of year..................................... $32.37 $25.99 $18.95 $15.45 $13.10
====== ====== ====== ====== ======
VUL 2000 POLICIES
Unit value, beginning of year............................... $10.00 $ -- $ -- $ -- $ --
Net investment income (loss)................................ (0.01) -- -- -- --
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 2.13 -- -- -- --
------ ------ ------ ------ ------
Unit value, end of year..................................... $12.12 $ -- $ -- $ -- $ --
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP
GOVERNMENT
-----------------------------------------------
1999(c) 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
-----------------------------------------------
VUL AND SVUL POLICIES
Unit value, beginning of year............................... $13.52 $12.49 $11.49 $11.31 $ 9.76
Net investment income (loss)................................ 0.60 0.71 0.71 0.76 0.93
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. (0.93) 0.32 0.29 (0.58) 0.62
------ ------ ------ ------ ------
Unit value, end of year..................................... $13.19 $13.52 $12.49 $11.49 $11.31
====== ====== ====== ====== ======
VUL 2000 POLICIES
Unit value, beginning of year............................... $10.00 $ -- $ -- $ -- $ --
Net investment income (loss)................................ 1.04 -- -- -- --
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. (0.99) -- -- -- --
------ ------ ------ ------ ------
Unit value, end of year..................................... $10.05 $ -- $ -- $ -- $ --
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP
TOTAL RETURN
-----------------------------------------------
1999(c) 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
-----------------------------------------------
VUL AND SVUL POLICIES
Unit value, beginning of year............................... $20.32 $16.10 $13.76 $12.37 $ 9.70
Net investment income....................................... 0.27 0.27 0.26 0.26 0.32
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 3.03 3.95 2.08 1.13 2.35
------ ------ ------ ------ ------
Unit value, end of year..................................... $23.62 $20.32 $16.10 $13.76 $12.37
====== ====== ====== ====== ======
VUL 2000 POLICIES
Unit value, beginning of year............................... $10.00 $ -- $ -- $ -- $ --
Net investment income....................................... 0.31 -- -- -- --
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 1.13 -- -- -- --
------ ------ ------ ------ ------
Unit value, end of year..................................... $11.44 $ -- $ -- $ -- $ --
====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during the year.
(a) For the period May 1, 1995 (Commencement of Operations) through December 31,
1995.
(b) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
(c) For VUL 2000 policies, represents the period September 28, 1999
(Commencement of Operations) through December 31, 1999.
F-20
<PAGE> 92
NYLIAC VUL SEPARATE ACCOUNT-I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CASH MANAGEMENT CONVERTIBLE
----------------------------------------------- -------------------------------------
1999(c) 1998 1997 1996 1995 1999(c) 1998 1997 1996(b)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
$ 1.23 $ 1.18 $ 1.13 $ 1.08 $ 1.03 $12.26 $11.81 $10.31 $10.00
0.06 0.05 0.05 0.04 0.05 0.56 0.68 0.64 0.16
(0.01) -- -- 0.01 -- 4.46 (0.23) 0.86 0.15
------ ------ ------ ------ ------ ------ ------ ------ ------
$ 1.28 $ 1.23 $ 1.18 $ 1.13 $ 1.08 $17.28 $12.26 $11.81 $10.31
====== ====== ====== ====== ====== ====== ====== ====== ======
$ 1.00 $ -- $ -- $ -- $ -- $10.00 $ -- $ -- $ --
0.01 -- -- -- -- 0.95 -- -- --
-- -- -- -- -- 1.07 -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
$ 1.01 $ -- $ -- $ -- $ -- $12.02 $ -- $ -- $ --
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
HIGH YIELD INTERNATIONAL
CORPORATE BOND EQUITY
----------------------------------------------- -----------------------------------------------
1999(c) 1998 1997 1996 1995(a) 1999(c) 1998 1997 1996 1995(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------
$14.58 $14.31 $12.75 $10.95 $10.00 $14.92 $12.20 $11.69 $10.65 $10.00
1.90 1.46 0.67 0.61 0.36 (0.05) 0.26 0.33 0.58 0.46
(0.13) (1.19) 0.89 1.19 0.59 4.10 2.46 0.18 0.46 0.19
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$16.35 $14.58 $14.31 $12.75 $10.95 $18.97 $14.92 $12.20 $11.69 $10.65
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
$10.00 $ -- $ -- $ -- $ -- $10.00 $ -- $ -- $ -- $ --
2.31 -- -- -- -- (0.01) -- -- -- --
(1.95) -- -- -- -- 1.57 -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$10.36 $ -- $ -- $ -- $ -- $11.56 $ -- $ -- $ -- $ --
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
VALUE BOND
----------------------------------------------- -----------------------------------------------
1999(C) 1998 1997 1996 1995(a) 1999(C) 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------
$16.52 $17.35 $14.22 $11.62 $10.00 $13.99 $12.91 $11.85 $11.70 $ 9.96
0.12 0.18 0.12 0.12 0.05 0.80 0.72 0.80 0.92 1.03
1.21 (1.01) 3.01 2.48 1.57 (1.11) 0.36 0.26 (0.77) 0.71
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$17.85 $16.52 $17.35 $14.22 $11.62 $13.68 $13.99 $12.91 $11.85 $11.70
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
$10.00 $ -- $ -- $ -- $ -- $10.00 $ -- $ -- $ -- $ --
0.22 -- -- -- -- 1.71 -- -- -- --
0.35 -- -- -- -- (1.70) -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$10.57 $ -- $ -- $ -- $ -- $10.01 $ -- $ -- $ -- $ --
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
F-21
<PAGE> 93
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--Selected Per Unit Data+ (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP
GROWTH EQUITY
-----------------------------------------------
1999(b) 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
-----------------------------------------------
VUL AND SVUL POLICIES
Unit value, beginning of year............................... $25.45 $20.25 $16.09 $13.01 $10.14
Net investment income....................................... -- 0.06 0.04 0.08 0.17
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 7.40 5.14 4.12 3.00 2.70
------ ------ ------ ------ ------
Unit value, end of year..................................... $32.85 $25.45 $20.25 $16.09 $13.01
====== ====== ====== ====== ======
VUL 2000 POLICIES
Unit value, beginning of year............................... $10.00 $ -- $ -- $ -- $ --
Net investment income....................................... 0.12 -- -- -- --
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 2.13 -- -- -- --
------ ------ ------ ------ ------
Unit value, end of year..................................... $12.25 $ -- $ -- $ -- $ --
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET
DREYFUS LARGE MANAGEMENT
COMPANY VALUE GROWTH EQUITY
------------- -------------
1999(b) 1999(b)
<S> <C> <C>
-----------------------------
VUL AND SVUL POLICIES
Unit value, beginning of year............................... $ -- $ --
Net investment income (loss)................................ -- --
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital shared
transactions)............................................. -- --
------ ------
Unit value, end of year..................................... $ -- $ --
====== ======
VUL 2000 POLICIES
Unit value, beginning of year............................... $10.00 $10.00
Net investment income (loss)................................ 0.16 --
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital shared
transactions)............................................. 0.18 3.90
------ ------
Unit value, end of year..................................... $10.34 $13.90
====== ======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY VIP II CONTRAFUND
-------------------------------------
1999(B) 1998 1997 1996(a)
<S> <C> <C> <C> <C>
-------------------------------------
VUL AND SVUL POLICIES
Unit value, beginning of year............................... $16.54 $12.81 $10.39 $10.00
Net investment income (loss)................................ (0.06) (0.04) (0.06) (0.01)
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital shared
transactions)............................................. 3.93 3.77 2.48 0.40
------ ------ ------ ------
Unit value, end of year..................................... $20.41 $16.54 $12.81 $10.39
====== ====== ====== ======
VUL 2000 POLICIES
Unit value, beginning of year............................... $10.00 $ -- $ -- $ --
Net investment income (loss)................................ (0.01) -- -- --
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 1.85 -- -- --
------ ------ ------ ------
Unit value, end of year..................................... $11.84 $ -- $ -- $ --
====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during the year.
(a) For the period October 1, 1996 (Commencement of Operations) through
December 31, 1996.
(b) For VUL 2000 policies, represents the period September 28, 1999
(Commencement of Operations) through December 31, 1999.
F-22
<PAGE> 94
NYLIAC VUL SEPARATE ACCOUNT-I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP AMERICAN CENTURY
INDEXED EQUITY INCOME & GROWTH
----------------------------------------------- ----------------
1999(b) 1998 1997 1996 1995 1999(b)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------
$29.44 $23.07 $17.49 $14.39 $10.58 $ --
0.16 0.17 0.22 0.24 0.34 --
5.68 6.20 5.36 2.86 3.47 --
------ ------ ------ ------ ------ ------
$35.28 $29.44 $23.07 $17.49 $14.39 $ --
====== ====== ====== ====== ====== ======
$10.00 $ -- $ -- $ -- $ -- $10.00
0.22 -- -- -- -- 0.11
1.25 -- -- -- -- 0.82
------ ------ ------ ------ ------ ------
$11.47 $ -- $ -- $ -- $ -- $10.93
====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
ALGER AMERICAN CALVERT
SMALL CAPITALIZATION SOCIAL BALANCED
------------------------------------- -------------------------------------
1999(b) 1998 1997 1996(a) 1999(b) 1998 1997 1996(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------
$12.26 $10.69 $ 9.66 $10.00 $13.71 $11.88 $ 9.96 $10.00
(0.10) (0.11) (0.07) (0.01) 0.33 0.36 0.40 0.21
5.30 1.68 1.10 (0.33) 1.24 1.47 1.52 (0.25)
------ ------ ------ ------ ------ ------ ------ ------
$17.46 $12.26 $10.69 $ 9.66 $15.28 $13.71 $11.88 $ 9.96
====== ====== ====== ====== ====== ====== ====== ======
$10.00 $ -- $ -- $ -- $10.00 $ -- $ -- $ --
(0.02) -- -- -- 0.61 -- -- --
3.08 -- -- -- 0.11 -- -- --
------ ------ ------ ------ ------ ------ ------ ------
$13.06 $ -- $ -- $ -- $10.72 $ -- $ -- $ --
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY VIP EQUITY-INCOME JANUS ASPEN SERIES BALANCED
------------------------------------- -------------------------------------
1999(b) 1998 1997 1996(a) 1999(b) 1998 1997 1996(a)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------
$14.64 $13.21 $10.38 $10.00 $16.41 $12.31 $10.15 $10.00
0.08 0.02 (0.04) (0.01) 0.39 0.52 0.35 0.17
0.74 1.41 2.87 0.39 3.86 3.58 1.81 (0.02)
------ ------ ------ ------ ------ ------ ------ ------
$15.46 $14.64 $13.21 $10.38 $20.66 $16.41 $12.31 $10.15
====== ====== ====== ====== ====== ====== ====== ======
$10.00 $ -- $ -- $ -- $10.00 $ -- $ -- $ --
(0.01) -- -- -- 0.21 -- -- --
0.59 -- -- -- 1.36 -- -- --
------ ------ ------ ------ ------ ------ ------ ------
$10.58 $ -- $ -- $ -- $11.57 $ -- $ -- $ --
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
F-23
<PAGE> 95
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--Selected Per Unit Data+ (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUS ASPEN
SERIES WORLDWIDE GROWTH
-------------------------------------
1999(b) 1998 1997 1996(a)
<S> <C> <C> <C> <C>
-------------------------------------
VUL AND SVUL POLICIES
Unit value, beginning of year............................... $15.97 $12.48 $10.29 $10.00
Net investment income (loss)................................ (0.10) 0.29 0.06 0.09
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 10.22 3.20 2.13 0.20
------ ------ ------ ------
Unit value, end of year..................................... $26.09 $15.97 $12.48 $10.29
====== ====== ====== ======
VUL 2000 POLICIES
Unit value, beginning of year............................... $10.00 $ -- $ -- $ --
Net investment loss......................................... (0.01) -- -- --
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital shared
transactions)............................................. 4.12 -- -- --
------ ------ ------ ------
Unit value, end of year..................................... $14.11 $ -- $ -- $ --
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY
DEAN WITTER
EMERGING MARKETS EQUITY
-------------------------------------
1999(b) 1998 1997 1996(a)
<S> <C> <C> <C> <C>
-------------------------------------
VUL AND SVUL POLICIES
Unit value, beginning of year............................... $ 7.51 $ 9.97 $10.01 $10.00
Net investment income (loss)................................ (0.07) (0.01) 0.06 0.02
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 7.15 (2.45) (0.10) (0.01)
------ ------ ------ ------
Unit value, end of year..................................... $14.59 $ 7.51 $ 9.97 $10.01
====== ====== ====== ======
VUL 2000 POLICIES
Unit value, beginning of year............................... $10.00 $ -- $ -- $ --
Net investment loss......................................... (0.01) -- -- --
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 4.87 -- -- --
------ ------ ------ ------
Unit value, end of year..................................... $14.86 $ -- $ -- $ --
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
T. ROWE PRICE
EQUITY INCOME
-------------
1999(b)
<S> <C>
-------------
VUL 2000 POLICIES
Unit value, beginning of year............................... $10.00
Net investment income....................................... 0.08
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital shared
transactions)............................................. (0.25)
------
Unit value, end of year..................................... $ 9.83
======
</TABLE>
+ Per unit data based on average monthly units outstanding during the year.
(a) For the period October 1, 1996 (Commencement of Operations) through
December 31, 1996.
(b) For VUL 2000 policies, represents the period September 28, 1999
(Commencement of Operations) through December 31, 1999.
F-24
<PAGE> 96
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of New York Life Insurance and
Annuity Corporation and the Variable Universal Life Separate Account-I
Policyowners:
In our opinion, the accompanying statement of assets and liabilities and the
related statement of operations, of changes in total equity and the selected per
unit data present fairly, in all material respects, the financial position of
the MainStay VP Capital Appreciation, MainStay VP Cash Management, MainStay VP
Convertible, Mainstay VP Government, MainStay VP High Yield Corporate Bond,
MainStay VP International Equity, MainStay VP Total Return, MainStay VP Value,
MainStay VP Bond, MainStay VP Growth Equity, MainStay VP Indexed Equity,
American Century Income & Growth, Dreyfus Large Company Value, Eagle Asset
Management Growth Equity, Alger American Small Capitalization, Calvert Social
Balanced, formerly known as Calvert Socially Responsible, Fidelity VIP II
Contrafund, Fidelity VIP Equity-Income, Janus Aspen Series Balanced, Janus Aspen
Series Worldwide Growth, Morgan Stanley Dean Witter Emerging Markets Equity,
formerly known as Morgan Stanley Emerging Markets Equity, and T. Rowe Price
Equity Income Investment Divisions (constituting the NYLIAC Variable Universal
Life Separate Account-I) at December 31, 1999, and the results of each of their
operations, the changes in each of their total equity, and the selected per unit
data for each of the periods presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and the
selected per unit data (herein referred to as the "financial statements") are
the responsibility of management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments at December 31, 1999 by
correspondence with the MainStay VP Series Fund, Inc., the Alger American Fund,
the Calvert Variable Series, Inc., the Fidelity Variable Insurance Products Fund
II, the Fidelity Variable Insurance Products Fund, the Janus Aspen Series, and
the Morgan Stanley Dean Witter Universal Funds, Inc., formerly known as Morgan
Stanley Universal Funds, Inc. and the T. Rowe Price Equity Series, Inc., provide
a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 17, 2000
F-25
<PAGE> 97
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Fixed maturities
Available for sale, at fair value $13,289 $13,081
Held to maturity, at amortized cost 681 725
Equity securities 89 100
Mortgage loans 1,850 1,622
Real estate 72 116
Policy loans 512 491
Other long-term investments 21 26
------- -------
Total investments 16,514 16,161
Cash and cash equivalents 1,087 948
Deferred policy acquisition costs 1,507 859
Deferred taxes 53 --
Other assets 316 282
Separate account assets 10,192 6,852
------- -------
Total assets $29,669 $25,102
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Policyholders' account balances $16,065 $14,743
Future policy benefits 356 315
Policy claims 69 60
Deferred taxes -- 101
Other liabilities 1,113 943
Separate account liabilities 10,134 6,792
------- -------
Total liabilities 27,737 22,954
------- -------
STOCKHOLDER'S EQUITY
Capital stock -- par value $10,000
(20,000 shares authorized, 2,500 issued and outstanding) 25 25
Additional paid in capital 480 480
Accumulated other comprehensive income (loss) (191) 201
Retained earnings 1,618 1,442
------- -------
Total stockholder's equity 1,932 2,148
------- -------
Total liabilities and stockholder's equity $29,669 $25,102
======= =======
</TABLE>
See accompanying notes to financial statements.
F-26
<PAGE> 98
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1999 1998 1997
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Universal life and annuity fees $ 442 $ 364 $ 314
Net investment income 1,179 1,108 1,084
Investment gains, net 12 63 108
Other income 97 51 35
------ ------ ------
Total revenues 1,730 1,586 1,541
------ ------ ------
EXPENSES
Interest credited to policyholders' account balances 858 784 748
Policyholder benefits 182 175 141
Operating expenses 405 405 352
------ ------ ------
Total expenses 1,445 1,364 1,241
------ ------ ------
Income before Federal income taxes 285 222 300
Federal income taxes:
Current 52 97 114
Deferred 57 (17) (1)
------ ------ ------
Total Federal income taxes 109 80 113
------ ------ ------
NET INCOME $ 176 $ 142 $ 187
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-27
<PAGE> 99
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF COMPREHENSIVE INCOME/(LOSS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1999 1998 1997
------ ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
NET INCOME $ 176 $142 $187
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during
period (393) 79 --
Unrealized holding gains (losses) arising during
period, including reclassification adjustments -- -- 89
Less: reclassification adjustment for gains (losses)
included in net income (1) 35 --
----- ---- ----
OTHER COMPREHENSIVE INCOME (LOSS) (392) 44 89
----- ---- ----
COMPREHENSIVE INCOME (LOSS) $(216) $186 $276
===== ==== ====
</TABLE>
See accompanying notes to financial statements.
F-28
<PAGE> 100
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER TOTAL
CAPITAL PAID IN COMPREHENSIVE RETAINED STOCKHOLDERS'
STOCK CAPITAL INCOME (LOSS) EARNINGS EQUITY
------- ---------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $25 $480 $ 68 $1,113 $1,686
Net income for 1997 -- -- -- 187 187
Net change in unrealized gains and losses of
available for sale securities -- -- 89 -- 89
--- ---- ----- ------ ------
BALANCE AT DECEMBER 31, 1997 25 480 157 1,300 1,962
Net income for 1998 -- -- -- 142 142
Net change in unrealized gains and losses of
available for sale securities -- -- 44 -- 44
--- ---- ----- ------ ------
BALANCE AT DECEMBER 31, 1998 25 480 201 1,442 2,148
Net income for 1999 -- -- -- 176 176
Net change in unrealized gains and losses of
available for sale securities -- -- (392) -- (392)
--- ---- ----- ------ ------
BALANCE AT DECEMBER 31, 1999 $25 $480 $(191) $1,618 $1,932
=== ==== ===== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-29
<PAGE> 101
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997
------- ------- --------
(IN MILLIONS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 176 $ 142 $ 187
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization (3) 2 (43)
Net capitalization of deferred policy acquisition costs (298) (192) (85)
Universal life and annuity fees (215) (198) (202)
Interest credited to policyholders' account balances 858 784 748
Net realized investment losses (13) (56) (126)
Deferred income taxes 57 (17) (1)
(Increase) decrease in:
Net separate account assets 1 (42) 30
Other assets and other liabilities (90) (98) 124
Increase (decrease) in:
Policy claims 9 4 (2)
Future policy benefits 41 39 25
------- ------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 523 368 655
------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from:
Sale of available for sale fixed maturities 3,981 5,325 13,378
Maturity of available for sale fixed maturities 1,505 1,610 1,137
Sale of held to maturity fixed maturities -- -- 3
Maturity of held to maturity fixed maturities 121 102 112
Sale of equity securities 170 77 140
Repayment of mortgage loans 227 238 220
Sale of real estate and other invested assets 62 47 40
Cost of:
Available for sale fixed maturities acquired (6,679) (7,670) (14,391)
Held to maturity fixed maturities acquired (75) (49) (281)
Equity securities acquired (152) (83) (163)
Mortgage loans acquired (451) (558) (413)
Real estate and other invested assets acquired (13) (20) (29)
Policy loans (net) (21) (10) (17)
Increase (decrease) in loaned securities (222) 425 --
Securities sold under agreements to repurchase (net) 480 (45) 134
------- ------- --------
NET CASH USED IN INVESTING ACTIVITIES (1,067) (611) (130)
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits 2,195 1,501 1,191
Withdrawals (1,335) (1,151) (1,235)
Net transfers from (to) the separate accounts (181) 67 58
------- ------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 679 417 14
------- ------- --------
Effect of exchange rate changes on cash and cash equivalents 4 1 (2)
------- ------- --------
Net increase in cash and cash equivalents 139 175 537
------- ------- --------
Cash and cash equivalents, beginning of year 948 773 236
------- ------- --------
Cash and cash equivalents, end of year $ 1,087 $ 948 $ 773
======= ======= ========
</TABLE>
See accompanying notes to financial statements.
F-30
<PAGE> 102
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
NOTE 1 -- NATURE OF OPERATIONS
New York Life Insurance and Annuity Corporation ("NYLIAC") is a direct,
wholly owned subsidiary of New York Life Insurance Company ("New York Life")
domiciled in the State of Delaware. NYLIAC offers a wide variety of interest
sensitive insurance and annuity products to a large cross section of the
insurance market. NYLIAC markets its products in all 50 of the United States,
the District of Columbia and Taiwan, primarily through its agency force. In
addition, NYLIAC markets Corporate Owned Life Insurance through independent
brokers and brokerage general agents.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP"). The preparation of financial
statements of life insurance enterprises requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements. Actual results may differ from estimates.
Certain reclassifications have been made to the 1998 and 1997 financial
statements to conform to the current presentation.
INVESTMENTS
Fixed maturity investments, which NYLIAC has both the ability and the
intent to hold to maturity, are stated at amortized cost. Investments identified
as available for sale are reported at fair value. Unrealized gains and losses on
available for sale securities are reported in stockholder's equity, net of
deferred taxes and related adjustments. The cost basis of fixed maturity and
equity securities are adjusted for impairments in value deemed to be other than
temporary, with the associated realized loss reported in net income. Equity
securities are carried at fair value with related unrealized gains and losses
reflected in comprehensive income, net of deferred taxes and related
adjustments. Mortgage loans are carried at unpaid principal balances, net of
impairment reserves, and are generally secured. Investment real estate, which
NYLIAC has the intent to hold for the production of income, is carried at
depreciated cost net of write-downs for other than temporary declines in fair
value. Properties held for sale are carried at the lower of cost or fair value
less estimated selling costs. Policy loans are stated at the aggregate balance
due, which approximates fair value since loans on policies have no defined
maturity date and reduce amounts payable at death or surrender. Cash equivalents
include investments that have maturities of 90 days or less at date of purchase
and are carried at amortized cost, which approximates fair value. Short-term
investments that have maturities of between 91-365 days at date of purchase are
included in fixed maturities on the balance sheet and are carried at amortized
cost, which approximates fair value.
Mortgage backed bonds are carried at amortized cost using the interest
method considering anticipated prepayments at the date of purchase. Significant
changes in future anticipated cash flows from the original purchase assumptions
are accounted for using the retrospective adjustment method.
Derivative financial instruments hedging exposure to interest rate
fluctuation on available for sale securities are accounted for at fair market
value. Unrealized gains and losses are reported in comprehensive income, net of
deferred taxes and related adjustments. Amounts payable or receivable under
interest rate and commodity swap agreements and interest rate floor agreements
are recognized as investment income or expense when earned. Premiums paid for
interest rate floor agreements are amortized into interest expense over the life
of the agreement. Realized gains and losses are recognized in net income upon
termination or maturity of the contracts.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new and maintaining renewal business and certain
costs of issuing policies that vary with and are primarily related to the
production of new and renewal business have been deferred and
F-31
<PAGE> 103
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
DEFERRED POLICY ACQUISITION COSTS -- (CONTINUED)
recorded as an asset in the balance sheet. These consist primarily of
commissions, certain expenses of underwriting and issuing contracts, and certain
agency expenses. Acquisition costs for universal life and annuity contracts are
amortized in proportion to estimated gross profits over the effective life of
the contracts, which is assumed to be 25 years for universal life contracts and
15 years for annuities. Changes in assumptions are reflected in the current
year's amortization.
The carrying amount of the deferred policy acquisition cost asset is
adjusted at each balance sheet date as if the unrealized gains or losses on
investments associated with these insurance contracts had been realized and
included in the gross profits used to determine current period amortization. The
increase or decrease in the deferred policy acquisition cost asset due to
unrealized gains or losses is recorded in comprehensive income.
RECOGNITION OF INCOME AND RELATED EXPENSES
Amounts received under universal life and annuity contracts are reported as
deposits to policyholders' account balances. Revenues from these contracts
consist of amounts assessed during the period for mortality and expense risk,
policy administration and surrender charges. Amounts previously assessed to
compensate the insurer for services to be performed over future periods are
deferred and recognized into income in the period benefited using the same
assumptions and factors used to amortize capitalized acquisition costs. Policy
benefits and claims that are charged to expenses include benefit claims incurred
in the period in excess of related policyholders' account balances.
POLICYHOLDERS' ACCOUNT BALANCES
Policyholders' account balances on universal life and annuity contracts are
equal to cumulative deposits plus credited interest less withdrawals and
charges. This liability also includes a liability for amounts that have been
assessed to compensate the insurer for services to be performed over future
periods.
FEDERAL INCOME TAXES
NYLIAC is a member of a group which files a consolidated Federal income tax
return with New York Life. The consolidated income tax provision or benefit is
allocated among the members of the group in accordance with a tax allocation
agreement. The tax allocation agreement provides that NYLIAC is allocated its
share of the consolidated tax provision or benefit determined generally on a
separate company basis. Current Federal income taxes are charged or credited to
operations based upon amounts estimated to be payable or recoverable as a result
of taxable operations for the current year and any adjustments to such estimates
from prior years. Deferred income tax assets and liabilities are recognized for
the future tax consequence of temporary differences between financial statement
carrying amounts and income tax bases of assets and liabilities.
Current Federal income taxes include a provision for NYLIAC's share of the
equity base tax applicable to mutual life insurance companies and their
insurance subsidiaries. The amount recorded is based on NYLIAC's estimate of the
differential earnings rate ("DER") (the actual rate will be announced at a later
date by the Internal Revenue Service ("IRS")) used to compute the equity base
tax.
REINSURANCE
NYLIAC enters into reinsurance agreements in the normal course of its
insurance business to reduce overall risk. NYLIAC remains liable for reinsurance
ceded if the reinsurer fails to meet its obligation on the business it has
assumed. NYLIAC evaluates the financial condition of its reinsurers to minimize
its exposure to significant losses from reinsurer insolvencies.
SEPARATE ACCOUNTS
NYLIAC has established separate accounts with varying investment objectives
which are segregated from NYLIAC's general account and are maintained for the
benefit of separate account policyholders' and NYLIAC. Separate account assets
are stated at market value. The liability for separate accounts represents
F-32
<PAGE> 104
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
SEPARATE ACCOUNTS -- (CONTINUED)
policyholders' interests in the separate account assets. For its registered
separate accounts, these liabilities include accumulated net investment income
and realized and unrealized gains and losses on those assets, and generally
reflect market value. For its guaranteed, non-registered separate account, the
liability includes interest credited to the policies.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of various assets and liabilities are included throughout the
notes to financial statements. Specifically, fair value disclosure of fixed
maturities, short-term investments, cash equivalents, equity securities and
mortgage loans is reported in Note 2 -- Significant Accounting Policies and Note
3 -- Investments. Fair values for policyholders' account balances are reported
in Note 5 -- Insurance Liabilities. Fair values for derivative financial
instruments are included in Note 10 -- Derivative Financial Instruments and Risk
Management. Fair values for repurchase agreements are included in Note
11 -- Commitments and Contingencies.
BUSINESS RISKS AND UNCERTAINTIES
The development of policy reserves and deferred policy acquisition costs
for NYLIAC's products requires management to make estimates and assumptions
regarding mortality, morbidity, lapse, expense and investment experience. Such
estimates are primarily based on historical experience and future expectations
of mortality, morbidity, expense, persistency and investment assumptions. Actual
results could differ from those estimates. Management monitors actual
experience, and where circumstances warrant, revises its assumptions and the
related estimates for policy reserves and deferred policy acquisition costs.
NYLIAC regularly invests in mortgage loans, mortgage-backed securities and
other securities subject to prepayment and/or call risk. Significant changes in
prevailing interest rates and/or geographic conditions may adversely affect the
timing and amount of cash flows on such securities, as well as their related
values. In addition, the amortization of market premium and accretion of market
discount for mortgage-backed and asset-backed securities is based on historical
experience and estimates of future payment experience on the underlying assets.
Actual prepayment speeds will differ from original estimates and may result in
material adjustments to asset values and amortization or accretion recorded in
future periods.
As a subsidiary of a mutual life insurance company, NYLIAC is subject to a
tax on its equity base. The rates applied to NYLIAC's equity base are determined
annually by the IRS after comparison of mutual life insurance company earnings
for the year to the average earnings of the 50 largest stock life insurance
companies for the prior three years. Due to the timing of earnings information,
estimates of the current year's tax rate must be made by management. The
ultimate amounts of equity base tax incurred may vary considerably from the
original estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
During 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use", which requires
capitalization of external and certain internal costs incurred to obtain or
develop internal-use computer software during the application development stage.
NYLIAC applied the provisions of SOP 98-1 prospectively effective January
1, 1999. The adoption of SOP 98-1 resulted in net capitalization of $37 million
at December 31, 1999, which is included in other assets in the accompanying
Balance Sheet. Capitalized internal-use software is amortized on a straight-line
basis over the estimated useful life of the software, not to exceed five years.
During 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This Statement establishes new GAAP
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, and for hedging activities.
In 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities -- Deferral of the Effective Date of FASB Statement No.
133", which postpones the implementation until the 2001 financial statements.
NYLIAC is currently evaluating what impact, if any, this Statement will have on
its financial results.
F-33
<PAGE> 105
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
RECENT ACCOUNTING PRONOUNCEMENTS -- (CONTINUED)
This Statement requires that derivatives be reported in the balance sheet
at their fair value, regardless of any hedging relationship that may exist.
Accounting for the gains or losses resulting from changes in the values of those
derivatives would depend on the use of the derivative and whether it qualifies
for hedge accounting. Changes in fair value of derivatives that are not
designated as hedges or that do not meet the hedge accounting criteria will be
reported in earnings.
NOTE 3 -- INVESTMENTS
FIXED MATURITIES
For publicly traded fixed maturities, estimated fair value is determined
using quoted market prices. For fixed maturities without a readily ascertainable
market value, NYLIAC has determined an estimated fair value using either a
discounted cash flow approach, including provisions for credit risk generally
based upon the assumption such securities will be held to maturity, broker
dealer quotations, or a proprietary matrix pricing model.
At December 31, 1999 and 1998, the maturity distribution of fixed
maturities was as follows (in millions):
<TABLE>
<CAPTION>
1999 1998
----------------------- -----------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
AVAILABLE FOR SALE COST FAIR VALUE COST FAIR VALUE
- ------------------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Due in one year or less $ 514 $ 514 $ 518 $ 521
Due after one year through five years 3,196 3,153 3,473 3,533
Due after five years through ten years 2,167 2,099 1,804 1,885
Due after ten years 3,138 2,938 3,028 3,235
Mortgage and asset-backed securities:
Government or government agency 3,114 2,996 2,080 2,121
Other 1,631 1,589 1,740 1,786
------- ------- ------- -------
Total Available for Sale $13,760 $13,289 $12,643 $13,081
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
HELD TO MATURITY
- ----------------
<S> <C> <C> <C> <C>
Due in one year or less $ 17 $ 17 $ 27 $ 28
Due after one year through five years 272 360 225 291
Due after five years through ten years 165 159 219 228
Due after ten years 206 194 193 207
Asset-backed securities 21 21 61 62
------- ------- ------- -------
Total Held to Maturity $ 681 $ 751 $ 725 $ 816
======= ======= ======= =======
</TABLE>
F-34
<PAGE> 106
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
FIXED MATURITIES -- (CONTINUED)
At December 31, 1999 and 1998, the distribution of gross unrealized gains
and losses on investments in fixed maturities was as follows (in millions):
<TABLE>
<CAPTION>
1999
---------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
AVAILABLE FOR SALE COST GAINS LOSSES FAIR VALUE
- ------------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government
Corporations and agencies $ 635 $ 7 $ 16 $ 626
U.S. agencies, state and municipal 3,046 7 129 2,924
Foreign Governments 20 -- -- 20
Corporate 8,428 61 359 8,130
Other 1,631 4 46 1,589
------- ---- ---- -------
Total Available for Sale $13,760 $ 79 $550 $13,289
======= ==== ==== =======
HELD TO MATURITY
- ----------------
Corporate $ 661 $ 91 $ 22 $ 730
Other 20 1 -- 21
------- ---- ---- -------
Total Held to Maturity $ 681 $ 92 $ 22 $ 751
======= ==== ==== =======
</TABLE>
<TABLE>
<CAPTION>
1998
---------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
AVAILABLE FOR SALE COST GAINS LOSSES FAIR VALUE
- ------------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government
Corporations and agencies $ 1,006 $ 45 $ 1 $ 1,050
U.S. agencies, state and municipal 1,927 39 4 1,962
Foreign Governments 234 22 -- 256
Corporate 7,736 338 47 8,027
Other 1,740 48 2 1,786
------- ---- ---- -------
Total Available for Sale $12,643 $492 $ 54 $13,081
======= ==== ==== =======
HELD TO MATURITY
- ----------------
Corporate $ 664 $ 91 $ 1 $ 754
Other 61 1 -- 62
------- ---- ---- -------
Total Held to Maturity $ 725 $ 92 $ 1 $ 816
======= ==== ==== =======
</TABLE>
EQUITY SECURITIES
Estimated fair value of equity securities has been determined using quoted
market prices for publicly traded securities and a matrix pricing model for
private placement securities. At December 31, 1999 and 1998, the distribution of
gross unrealized gains and losses on equity securities is as follows (in
millions):
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1999 $80 $13 $4 $ 89
1998 $76 $27 $3 $100
</TABLE>
MORTGAGE LOANS
NYLIAC's mortgage loans are diversified by property type, location and
borrower, and are generally collateralized by the related property.
The fair market value of the mortgage loan portfolio at December 31, 1999
and 1998 is estimated to be $1,858 million and $1,728 million, respectively.
Market values are determined by discounting the projected cash flows for each
loan to determine the current net present value. The discount rate used
approximates the current rate for new mortgages with comparable characteristics
and similar remaining maturities.
F-35
<PAGE> 107
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
MORTGAGE LOANS -- (CONTINUED)
At December 31, 1999 and 1998, contractual commitments to extend credit
under commercial and residential mortgage loan agreements amounted to
approximately $37 million and $76 million, respectively, at a fixed market rate
of interest. These commitments are diversified by property type and geographic
region.
The general reserve provision for losses on mortgage loans was $4 million
and $1 million at December 31, 1999 and 1998, respectively. There were no
specific provisions for losses as of December 31, 1999 and 1998. The activity in
the general reserves as of December 31, 1999 and 1998 is summarized below (in
millions):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Beginning Balance $ 1 $14
Additions/(reductions) charged/(credited) to operations 3 (5)
Recoveries of amounts previously written-down -- (8)
--- ---
Ending Balance $ 4 $ 1
=== ===
</TABLE>
NYLIAC accrues interest income on impaired loans to the extent it is deemed
collectible and the loan continues to perform under its original or restructured
contractual terms. Interest income on problem loans is generally recognized on a
cash basis. Cash payments on loans in the process of foreclosure are generally
treated as a return of principal.
At December 31, 1999 and 1998, the distribution of the mortgage loan
portfolio by property type and geographic region was as follows (in millions):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Property Type:
Office building $ 795 $ 753
Retail 385 330
Apartments 185 187
Residential 302 247
Other 183 105
------ ------
Total $1,850 $1,622
====== ======
Geographic Region:
Central $ 438 $ 359
Pacific 255 211
Middle Atlantic 444 451
South Atlantic 534 418
New England 121 121
Other 58 62
------ ------
Total $1,850 $1,622
====== ======
</TABLE>
REAL ESTATE
At December 31, 1999 and 1998, NYLIAC's real estate portfolio consisted of
the following (in millions):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Investment $63 $105
Acquired through foreclosures 9 11
--- ----
Total real estate $72 $116
=== ====
</TABLE>
Accumulated depreciation on real estate at December 31, 1999 and 1998, was
$11 million and $12 million, respectively. Depreciation expense totaled $3
million in 1999, 1998 and 1997.
F-36
<PAGE> 108
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 4 -- INVESTMENT INCOME AND CAPITAL GAINS AND LOSSES
The components of net investment income for the years ended December 31,
1999, 1998 and 1997, were as follows (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Fixed Maturities $1,013 $ 972 $ 961
Equity Securities 10 7 6
Mortgage Loans 134 116 96
Real Estate 15 15 18
Policy Loans 41 40 39
Derivative Instruments 1 1 1
Other 16 1 18
------ ------ ------
Gross investment income 1,230 1,152 1,139
Investment expenses (51) (44) (55)
------ ------ ------
Net investment income $1,179 $1,108 $1,084
====== ====== ======
</TABLE>
During 1999 a fixed maturity investment that had been classified as held to
maturity was transferred to available for sale and subsequently sold due to
credit deterioration. The investment had an amortized cost of $10,052,000, and
the sale resulted in a realized gain of $82,000. In addition, in 1997 a fixed
maturity investment that had been classified as held to maturity was sold due to
credit deterioration. The investment had an amortized cost of $2,791,000, and
the sale resulted in a realized gain of $14,000.
For the years ended December 31, 1999, 1998 and 1997, realized investment
gains (losses) computed under the specific identification method are as follows
(in millions):
<TABLE>
<CAPTION>
1999 1998 1997
------------------------- ------------------------- -------------------------
GAINS LOSSES GAINS LOSSES GAINS LOSSES
----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Maturities $ 64 $(87) $ 87 $(29) $172 $ (83)
Equity Securities 34 (8) 7 (7) 9 (4)
Mortgage Loans 4 -- 16 (8) 12 (8)
Real Estate 5 (2) 6 (2) 3 (2)
Derivative Instruments -- -- -- -- 80 (71)
Other 2 -- 3 (10) 1 (1)
---- ---- ---- ---- ---- -----
Subtotal $109 $(97) $119 $(56) $277 $(169)
---- ---- ---- ---- ---- -----
Investment gains, net $12 $63 $108
=== === ====
</TABLE>
NET UNREALIZED INVESTMENT GAINS
Net unrealized investment gains on fixed maturities available for sale are
included in the Balance Sheet as a component of "Accumulated other comprehensive
income". Changes in these amounts include reclassification adjustments to avoid
double counting in "Comprehensive income" items that are part of "Net income"
for
F-37
<PAGE> 109
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NET UNREALIZED INVESTMENT GAINS -- (CONTINUED)
a period that also had been part of "Other comprehensive income" in earlier
periods. The amounts for the years ended December 31, are as follows (in
millions):
<TABLE>
<CAPTION>
1999 1998 1997
----- ---- ----
<S> <C> <C> <C>
Net unrealized investments gains, beginning of the year $ 201 $157 $ 68
Changes in net unrealized investment gains attributable to:
Investments:
Net unrealized investment gains (losses) arising
during the period (612) 24 --
Reclassification adjustments for gains (losses)
included in net income (1) 35 --
Net unrealized investment gains (losses) arising
during the period, including reclassification
adjustments -- -- 142
----- ---- ----
Change in net unrealized investment gains (losses),
net of adjustments (613) 59 142
Impact of net unrealized investment gains (losses) on:
Policyholders' account balance (7) (1) 3
Deferred policy acquisition costs 228 (14) (56)
----- ---- ----
Change in net unrealized investment gains (losses) (392) 44 89
----- ---- ----
Net unrealized investment gains (losses), end of year $(191) $201 $157
===== ==== ====
</TABLE>
Net unrealized gains (losses) on investments arising during the periods
reported in the above table are net of income tax expense (benefit) of $(330)
million, $31 million and $76 million for the years ended December 31, 1999, 1998
and 1997, respectively.
Reclassification adjustments reported in the above table for the years
ended December 31, 1999, 1998 and 1997 are net of income tax expense of $0
million, $19 million and $0 million, respectively.
Policyholders' account balance reported in the above table are net of
income tax expense (benefit) of $(3) million, $0 million and $1 million for the
years ended December 31, 1999, 1998 and 1997, respectively.
Deferred policy acquisition costs in the above table for the years ended
December 31, 1999, 1998 and 1997 are net of income tax expense (benefit) of $122
million, $(8) million and $(31) million, respectively.
NOTE 5 -- INSURANCE LIABILITIES
NYLIAC's annuity contracts are primarily deferred annuities. The carrying
value, which approximates fair value, of NYLIAC's liabilities for deferred
annuities at December 31, 1999 and 1998, was $7,279 million and $6,905 million,
respectively.
NOTE 6 -- SEPARATE ACCOUNTS
NYLIAC maintains eight non-guaranteed, registered separate accounts for its
variable deferred annuity and variable life products. NYLIAC maintains
investments in the registered separate accounts of $71 million and $54 million
at December 31, 1999 and 1998, respectively. The assets of the separate
accounts, which are carried at market value, represent investments in shares of
the New York Life sponsored MainStay VP Series Fund and other non-proprietary
funds.
NYLIAC maintains one guaranteed separate account for universal life
insurance policies. This account provides a minimum guaranteed interest rate
with a market value adjustment imposed upon certain surrenders. The assets of
this separate account are carried at market value.
F-38
<PAGE> 110
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 7 -- DEFERRED POLICY ACQUISITION COSTS
An analysis of deferred policy acquisition costs (DAC) for the years ended
December 31, 1999, 1998 and 1997 is as follows (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ -----
<S> <C> <C> <C>
Balance at beginning of year before adjustment
for unrealized gains (losses) on investments $1,028 $ 836 $ 751
Current year additions 372 286 200
Amortized during year (74) (94) (115)
------ ------ -----
Balance at end of year before adjustment for
unrealized gains (losses) on investments 1,326 1,028 836
Adjustment for unrealized gains (losses) on investments 181 (169) (148)
------ ------ -----
Balance at end of year $1,507 $ 859 $ 688
====== ====== =====
</TABLE>
NOTE 8 -- FEDERAL INCOME TAXES
The components of the net deferred tax liability as of December 31, 1999
and 1998 are as follows (in millions):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Future policyholder benefits $258 $196
Employee and agents benefits 52 53
Investments 131 --
---- ----
Gross deferred tax assets 441 249
==== ====
Deferred tax liabilities
Deferred policy acquisition costs 374 168
Investments -- 174
Other 14 8
---- ----
Gross deferred tax liabilities 388 350
---- ----
Net deferred tax (asset) liability $(53) $101
==== ====
</TABLE>
The gross deferred tax asset relates to temporary differences that are
expected to reverse as net ordinary deductions. Management believes that
NYLIAC's taxable income in future years will be sufficient to realize the
deferred tax benefits and therefore, no valuation allowance has been recorded.
Set forth below is a reconciliation of the Federal income tax rate to the
effective tax rate for 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Equity base tax 5.9 1.7 3.3
Tax exempt income (1.1) (.5) (.5)
Other (1.5) (.2) (.1)
---- ---- ----
Effective tax rate 38.3% 36.0% 37.7%
==== ==== ====
</TABLE>
NYLIAC's Federal income tax returns are routinely examined by the IRS and
provisions are made in the financial statements in anticipation of the results
of these audits. The IRS has completed audits through 1995. There were no
material effects on NYLIAC's results of operations as a result of these audits.
NYLIAC believes that its recorded income tax liabilities are adequate for all
open years.
F-39
<PAGE> 111
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 9 -- REINSURANCE
NYLIAC has entered into cession reinsurance agreements on a coinsurance
basis with non-affiliated companies and on a yearly renewable term basis with
affiliated and non-affiliated companies.
NYLIAC has ceded yearly renewable term reinsurance with affiliated
companies. Under this agreement, included in the accompanying consolidated
statement of income are $1.5 million, $.9 million and $.4 million of ceded
premiums at December 31, 1999, 1998 and 1997, respectively.
On April 1, 1997, NYLIAC, under the terms of an assumption reinsurance
agreement, acquired certain bank owned life insurance policies that had been
issued by Confederation Life Insurance Company. In conjunction with this
transaction, NYLIAC recorded a liability for policyholder account balances of
$277 million, and received cash of $245 million and a note receivable of $11
million. The difference of $21 million between the liability recorded and the
assets received has been recorded as DAC, which is being amortized over the
remaining life of the policies, assumed to be 25 years.
NOTE 10 -- DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
NYLIAC uses derivative financial instruments to manage interest rate,
commodity and market risk. These derivative financial instruments include
interest rate floors and interest rate and commodity swaps. NYLIAC has not
engaged in derivative financial instrument transactions for speculative
purposes.
Notional or contractual amounts of derivative financial instruments provide
only a measure of involvement in these types of transactions and do not
represent the amounts exchanged between the parties engaged in the transaction.
The amounts exchanged are determined by reference to the notional amounts and
other terms of the derivative financial instruments which relate to interest
rates or other financial indices.
NYLIAC is exposed to credit-related losses in the event that a counterparty
fails to perform its obligations under contractual terms. The credit exposure of
derivative financial instruments is represented by the sum of fair values of
contracts with each counterparty, if the net value is positive, at the reporting
date.
NYLIAC deals with highly rated counterparties and does not expect the
counterparties to fail to meet their obligations. NYLIAC has controls in place
to monitor credit exposures by limiting transactions with specific
counterparties within specified dollar limits and assessing the future
creditworthiness of counterparties. NYLIAC uses master netting agreements and
adjusts transaction levels, when appropriate, to minimize risk.
INTEREST RATE RISK MANAGEMENT
NYLIAC enters into various types of interest rate contracts primarily to
minimize exposure of specific assets held by NYLIAC to fluctuations in interest
rates.
The following table summarizes the notional amounts and credit exposures of
interest rate related derivative transactions (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
NOTIONAL CREDIT NOTIONAL CREDIT
AMOUNT EXPOSURE AMOUNT EXPOSURE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest Rate Swaps $225,000 $-- $125,000 $9,125
Interest Rate Floors $150,000 $92 $150,000 $ 748
</TABLE>
Interest rate swaps are agreements with other parties to exchange, at
specified intervals, the difference between fixed-rate and floating-rate
interest amounts calculated by reference to an agreed upon notional amount. Swap
contracts outstanding at December 31, 1999 are between four years, seven months
and nineteen years in maturity. At December 31, 1998 such contracts were between
six years, eight months and nineteen years, four months in maturity. NYLIAC does
not act as an intermediary or broker in interest rate swaps.
F-40
<PAGE> 112
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
INTEREST RATE RISK MANAGEMENT -- (CONTINUED)
The following table shows the type of swaps used by NYLIAC and the weighted
average interest rates. Average variable rates are based on the rates which
determine the last payment received or paid on each contract; those rates may
change significantly, affecting future cash flows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Receive -- fixed swaps -- Notional amount (in thousands) $225,000 $125,000
Average receive rate 6.50% 6.64%
Average pay rate 5.17% 5.65%
</TABLE>
During the term of the swap, net settlement amounts are recorded as
investment income or expense when earned. Fair values of interest rate swaps
were ($8,420,000) and $9,125,000 at December 31, 1999 and 1998, respectively,
based on broker/dealer quotations.
Interest rate floor agreements entitle NYLIAC to receive amounts from
counterparties based upon the difference between a strike price and current
interest rates. Such agreements serve as hedges against declining interest rates
on a portfolio of assets. Amounts received during the term of interest rate
floor agreements are recorded as investment income.
At December 31, 1999 and 1998, unamortized premiums on interest rate floors
amounted to $315,000 and $372,000, respectively. Fair values of such agreements
were $92,000 and $748,000 at December 31, 1999 and 1998, respectively, based on
broker/dealer quotations.
COMMODITY RISK MANAGEMENT
NYLIAC has a bond investment with interest payments linked to the price of
crude oil. NYLIAC has entered into a commodity swap with a total notional amount
of $7,500,000 as a hedge against this commodity risk. The credit exposure of the
swap was $0 and $136,000 at December 31, 1999 and 1998, respectively.
NOTE 11 -- COMMITMENTS AND CONTINGENCIES
LITIGATION
NYLIAC is a defendant in individual suits arising from its agency sales
force, insurance (including variable contracts registered under the federal
securities law), investment, retail securities and/or other operations,
including actions involving retail sales practices. Most of these actions seek
substantial or unspecified compensatory and punitive damages. NYLIAC is also
from time to time involved as a party in various governmental, administrative,
and investigative proceedings and inquiries.
Notwithstanding the uncertain nature of litigation and regulatory
inquiries, the outcome of which cannot be predicted, NYLIAC nevertheless
believes that, after provisions made in the financial statements, the ultimate
liability that could result from litigation and proceedings would not have a
material adverse effect on NYLIAC's financial position; however, it is possible
that settlements or adverse determinations in one or more actions or other
proceedings in the future could have a material adverse effect on NYLIAC's
operating results for a given year.
LOANED SECURITIES AND REPURCHASE AGREEMENTS
NYLIAC participates in a securities lending program for the purpose of
enhancing income on securities held. At December 31, 1999 and 1998, $246 million
and $571 million, respectively, of NYLIAC's fixed maturities and equity
securities were on loan to others, but were fully collateralized in an account
held in trust for NYLIAC. Such assets reflect the extent of NYLIAC's involvement
in securities lending, not NYLIAC's risk of loss.
NYLIAC enters into agreements to sell and repurchase securities for the
purpose of enhancing income on securities held. Under these agreements, NYLIAC
obtains the use of funds from a broker for approximately one month. The
liability reported in the accompanying Balance Sheet (included in other
liabilities) at December 31, 1999 of $620 million ($139 million at December 31,
1998) approximates fair value. The
F-41
<PAGE> 113
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
LOANED SECURITIES AND REPURCHASE AGREEMENTS -- (CONTINUED)
investments acquired with the funds received from the securities sold are
primarily included in cash and cash equivalents in the accompanying Balance
Sheet.
NOTE 12 -- RELATED PARTY TRANSACTIONS
New York Life provides NYLIAC with services and facilities for the sale of
insurance and other activities related to the business of insurance. New York
Life charges NYLIAC for the identified costs associated with these services and
facilities under the terms of a Service Agreement between New York Life and
NYLIAC. Such costs, amounting to $393 million for the year ended December 31,
1999 ($335 million for 1998 and $239 million for 1997) are reflected in
operating expenses and net investment income in the accompanying Statement of
Income.
In addition, NYLIAC is allocated post-retirement and post-employment
benefits other than pensions, which are held by New York Life. NYLIAC was
allocated $12 million for its share of the net periodic post-retirement benefits
expense in 1999 ($8 million and $9 million in 1998 and 1997, respectively) and
$3 million for the post-employment benefits expense in 1999 ($2 million in 1998
and 1997) under the provisions of the Service Agreement. The expenses are
reflected in operating expenses and net investment income in the accompanying
Statement of Income.
In addition, in 1999 New York Life concluded a comprehensive expense
reduction program expected to streamline processes and improve profitability. As
a result of job eliminations and early retirement benefits as defined in
management's termination plan, NYLIAC was allocated $16 million for its share of
these restructuring costs in 1999, which are reflected in operating expenses and
net investment income in the accompanying Statement of Income.
At December 31, 1999 and 1998, NYLIAC has a net liability of $80 million
and $63 million, respectively for the above described services which are
included in other liabilities in the accompanying Balance Sheet.
In 1999 NYLIAC sold a $197 million Corporate Sponsored Variable Universal
Life (CSVUL) policy and a $82 million Corporate Sponsored Universal Life (CSUL)
policy to a Voluntary Employee Benefit Association (VEBA) trust. This trust was
established to fund New York Life's retired employees medical and dental
benefits. In addition, in 1999 and 1998, NYLIAC sold a Corporate Owned Life
(COLI) policy to New York Life for $180 million and $250 million in premiums,
respectively. These policies were sold on the same basis as policies sold to
unrelated customers.
NOTE 13 -- SUPPLEMENTAL CASH FLOW INFORMATION
Federal income taxes paid were $48 million, $67 million, and $126 million
during 1999, 1998 and 1997, respectively.
Total interest paid was $30 million, $27 million and $35 million during
1999, 1998 and 1997, respectively.
NOTE 14 -- STATUTORY FINANCIAL INFORMATION
Accounting practices used to prepare statutory financial statements for
regulatory filings of life insurance companies differ in certain instances from
GAAP. The Delaware Insurance Department recognizes only statutory accounting
practices for determining and reporting the financial condition and results of
operations of an insurance company, and for determining its solvency under the
Delaware Insurance Law. No consideration is given by the Department to financial
statements prepared in accordance with generally accepted accounting principles
in making such determinations.
In 1998, the NAIC adopted the Codification of Statutory Accounting
Principles guidance, which will replace the current Accounting Practices and
Procedures manual as the NAIC's primary guidance on statutory accounting. The
Delaware Insurance Department has adopted the Codification guidance, effective
January 1, 2001. NYLIAC has not estimated the potential effect of the
Codification guidance on its financial statements.
At December 31, 1999 and 1998, statutory stockholder's equity was $1,130
million and $1,095 million, respectively.
F-42
<PAGE> 114
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
NOTE 14 -- STATUTORY FINANCIAL INFORMATION -- (CONTINUED)
NYLIAC is restricted as to the amounts it may pay as dividends to New York
Life. Under Delaware Insurance Law, dividends on capital stock can be
distributed only out of earned surplus. Furthermore, without prior approval of
the Delaware Insurance Commissioner, dividends can not be declared or
distributed which exceed the greater of ten percent of the Company's surplus or
one hundred percent of net gain from operations.
No dividends were paid or declared for the years ended December 31, 1999,
1998 and 1997.
As of December 31, 1999, the amount of available and accumulated funds
derived from earned surplus from which NYLIAC can pay dividends is $625 million.
The maximum amount of dividend which may be paid in 2000 without prior approval
is $113 million.
F-43
<PAGE> 115
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
New York Life Insurance and Annuity Corporation
In our opinion, the accompanying balance sheet and the related statements of
income, of comprehensive income, of stockholder's equity and of cash flows
present fairly, in all material respects, the financial position of New York
Life Insurance and Annuity Corporation at December 31, 1999 and 1998, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 2 to the financial statements, the Company changed its
method of accounting in 1999 for the cost of computer software developed or
obtained for internal use.
PRICEWATERHOUSECOOPERS LLP
1177 Avenue of the Americas
New York, New York 10036
March 1, 2000
F-44
<PAGE> 116
APPENDIX A
ILLUSTRATIONS
The following tables demonstrate the way in which your policy works. The
tables are based on the ages, sexes, underwriting classes, initial Life
Insurance Benefit and premium as follows:
The tables are for a policy issued to a male with non-smoker underwriting
class and issue age 55, and a female with non-smoker underwriting class and
issue age 50 with a planned annual premium of $15,000, a Target Premium of
$12,662.14, an initial face amount of $1,000,000 and no riders. It assumes that
100% of the net premium is allocated to purchase accumulation units.
The tables show how the Life Insurance Benefit, cash value and cash
surrender value would vary over an extended period of time assuming hypothetical
gross rates of return equivalent to a constant annual rate of 0%, 6% or 12%. The
tables will assist in the comparison of the Life Insurance Benefit, cash value
and cash surrender value of the policy with other variable life insurance plans.
The Life Insurance Benefit, cash value and cash surrender value for a
Policy would be different from the amounts shown if the actual gross rates of
return averaged 0%, 6% or 12%, but varied above and below those averages for the
period. They would also be different depending on the allocation of the cash
value among the Investment Divisions of the Separate Account and the Fixed
Account, if the actual gross rate of return for all Investment Divisions
averaged 0%, 6% or 12%, but varied above or below that average for individual
Investment Divisions. They would also differ if any policy loans or partial
withdrawals were made or if premium payment were not paid on the policy
anniversary during the period of time illustrated.
The first table reflects all charges under the policy and assumes that the
cost of insurance charges are based on our current cost of insurance rates and
reflects the deduction of all charges from planned premium and the cash value at
their current levels. It also reflects a daily mortality and expense risk charge
assessed against the Separate Account equal to an annual rate of 0.60% (on a
current basis) of the assets in the Separate Account and a daily asset based
administrative charge assessed against the Separate Account equal to an annual
rate of 0.10% on the assets in each Investment Division attributable to the
Policies.
The second table reflects all charges under the policy and assumes that the
cost of insurance charges are based on our guaranteed maximum cost of insurance
rates and reflects the deduction of all charges from planned premium and the
cash value at their guaranteed maximum levels. It also reflects a daily
mortality and expense risk charge assessed against the Separate Account equal to
an annual rate of 0.90% (on a guaranteed basis) of the assets in the Separate
Account and a daily asset based administrative charge assessed against the
Separate Account equal to an annual rate of 0.10% on the assets in each
Investment Division attributable to the Policies.
The tables also reflect total assumed investment advisory fees together
with the expenses incurred by the Funds of 0.75% of the average daily net assets
of the Funds. This total is based upon (a) 0.46% of average daily net assets,
which is an average of the management fees of each Investment Division; (b)
0.14% of average daily net assets of the Funds which is an average of actual
administrative fees for each Investment Division; and (c) 0.15% of average daily
net assets of the Funds which is an average of the other expenses after expense
reimbursement for each Investment Division.
"Other Expenses" and "Total Fund Annual Expenses" for the MainStay VP
American Century Income & Growth, MainStay VP Dreyfus Large Company Value and
MainStay VP Eagle Asset Management Growth Equity Portfolios reflect an expense
reimbursement agreement that ended December 31, 1999 limiting "Other Expenses"
to 0.15% annually. In the absence of the expense reimbursement arrangement, the
"Total Fund Annual Expenses" would have been 0.92%, 1.00%
A-1
<PAGE> 117
and 0.87% for the MainStay VP American Century Income & Growth, MainStay VP
Dreyfus Large Company Value and MainStay VP Eagle Asset Management Growth Equity
Portfolios, respectively.
For the Calvert Social Balanced Portfolio, "Other Expenses" reflect an
indirect fee. Net fund operating expenses after reductions for fees paid
indirectly would be 0.86%.
A portion of the brokerage commissions that the Fidelity VIP II Contrafund
and Fidelity VIP Equity Income Portfolios pay was used to reduce the Portfolios'
expenses. In addition, these Portfolios have entered into arrangements with
their custodian whereby credits realized as a result of uninvested cash balances
were used to reduce custodian expenses. Including these reductions, the "Total
Fund Annual Expenses" would have been 0.66% for the Fidelity VIP II Contrafund
Portfolio and 0.57% for the Fidelity VIP Equity-Income Portfolio.
Expenses are based upon expenses for the fiscal year ended December 31,
1999, restated to reflect a reduction in the management fee for the Janus Aspen
Series Worldwide Growth and Janus Aspen Series Balanced Portfolios. All expenses
are shown without the effect of expense offset arrangements.
Morgan Stanley Asset Investment Management has voluntarily waived receipt
of its "Advisory Fees" and agreed to reimburse the Portfolio, if necessary, to
the extent that the "Total Fund Annual Expenses" of the Portfolio exceed 1.75%
of average daily net assets. However, Morgan Stanley has reflected under "Other
Expenses" the Portfolio's interest and foreign tax expenses incurred in 1999
which were equal to 0.04% of the Portfolio's average daily net assets. The fee
waivers and reimbursements described above may be terminated by Morgan Stanley
at any time without notice. Absent such reductions, it is estimated that
"Advisory Fees", "Administration Fees" and "Total Fund Annual Expenses" would be
1.25%, 0.25% and 2.62%, respectively.
Taking into account the assumed charges for mortality and expense risks and
administrative fees in the Separate Account and the average investment advisory
fees and expenses of the Funds, the gross rates of return of 0%, 6% and 12%
would correspond to illustrated net investment returns of -1.44%, 4.47% and
10.38%, respectively, based on the current charge for mortality and expense
risks, and -1.74%, 4.16% and 10.05%, respectively, based on the guaranteed
maximum charge for mortality and expense risks.
The actual investment advisory fees and expenses may be more or less than
the amounts illustrated and will depend on the allocations made by the
policyowner.
The second column of each table shows the amount which would accumulate if
an amount equal to the planned premiums were invested and earned interest, after
taxes, at 5% per year, compounded annually.
NYLIAC will furnish upon request a comparable illustration using the ages,
sexes and underwriting classifications of the insureds for any initial Life
Insurance Benefit and premium requested. In addition to an illustration assuming
Policy charges at their maximum, we will furnish an illustration assuming
current policy charges and current cost of insurance rates.
A-2
<PAGE> 118
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE: 55, NON-SMOKER
FEMALE ISSUE AGE: 50, NON-SMOKER
PLANNED ANNUAL PREMIUM: $15,000
TARGET PREMIUM: $12,662.00
INITIAL FACE AMOUNT: $1,000,000
LIFE INSURANCE BENEFIT OPTION 1
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
END OF YEAR DEATH BENEFIT(2) END OF YEAR CASH VALUE(2)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
TOTAL PREMIUMS PAID ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
VALUE(2) PLUS INTEREST AT 5% --------------------------------- -----------------------------
POLICY YEAR AS OF END OF YEAR(1) 0% 6% 12% 0% 6% 12%
- ----------- -------------------- --------- --------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 15,750 1,000,000 1,000,000 1,000,000 12,002 12,756 13,510
2 32,288 1,000,000 1,000,000 1,000,000 24,385 26,653 29,011
3 49,652 1,000,000 1,000,000 1,000,000 36,562 41,143 46,092
4 67,884 1,000,000 1,000,000 1,000,000 49,004 56,736 65,416
5 87,029 1,000,000 1,000,000 1,000,000 61,215 72,974 86,693
6 107,130 1,000,000 1,000,000 1,000,000 73,192 89,879 110,121
7 128,237 1,000,000 1,000,000 1,000,000 84,924 107,469 135,911
8 150,398 1,000,000 1,000,000 1,000,000 96,415 125,775 164,313
9 173,668 1,000,000 1,000,000 1,000,000 107,571 144,734 195,507
10 198,102 1,000,000 1,000,000 1,000,000 118,391 164,374 229,789
15 339,862 1,000,000 1,000,000 1,000,000 170,085 277,122 464,337
20 520,789 1,000,000 1,000,000 1,462,221 213,317 413,783 845,214
30 1,046,412 1,000,000 1,024,119 3,205,654 226,942 764,268 2,392,279
<CAPTION>
END OF YEAR
CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF
VALUE(2) -----------------------------
POLICY YEAR 0% 6% 12%
- ----------- ------- ------- ---------
<S> <C> <C> <C>
1 9,470 10,223 10,977
2 21,853 24,121 26,478
3 34,030 38,611 43,560
4 46,471 54,204 62,883
5 58,683 70,442 84,161
6 70,659 87,347 107,588
7 82,645 105,190 133,632
8 94,389 123,749 162,287
9 105,798 142,961 193,735
10 116,872 162,854 228,270
15 169,831 276,869 464,084
20 213,317 413,783 845,214
30 226,942 764,268 2,392,279
</TABLE>
- ------------
(1) All premiums are illustrated as if made at the beginning of the Policy Year.
(2) Assumes no Policy loan or partial withdrawal has been made.
WE EMPHASIZE THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND YOU SHOULD NOT DEEM THEM TO BE A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND THE INVESTMENT EXPERIENCE OF THE
PORTFOLIOS OF THE FUNDS. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOANS OR PARTIAL WITHDRAWALS WERE MADE. NEITHER
NEW YORK LIFE INSURANCE AND ANNUITY COMPANY, THE SEPARATE ACCOUNTS, NOR THE
FUNDS REPRESENT THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
A-3
<PAGE> 119
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE: 55, NON-SMOKER
FEMALE ISSUE AGE: 50, NON-SMOKER
PLANNED ANNUAL PREMIUM: $15,000
TARGET PREMIUM: $12,662.00
INITIAL FACE AMOUNT: $1,000,000
LIFE INSURANCE BENEFIT OPTION 1
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
END OF YEAR DEATH BENEFIT(2) END OF YEAR CASH VALUE(2)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
TOTAL PREMIUMS PAID ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
VALUE(2) PLUS INTEREST AT 5% --------------------------------- -----------------------------
POLICY YEAR AS OF END OF YEAR(1) 0% 6% 12% 0% 6% 12%
- ----------- -------------------- --------- --------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 15,750 1,000,000 1,000,000 1,000,000 11,746 12,487 13,226
2 32,288 1,000,000 1,000,000 1,000,000 23,810 26,030 28,336
3 49,652 1,000,000 1,000,000 1,000,000 35,573 40,046 44,870
4 67,884 1,000,000 1,000,000 1,000,000 47,499 55,024 63,458
5 87,029 1,000,000 1,000,000 1,000,000 59,086 70,492 83,781
6 107,130 1,000,000 1,000,000 1,000,000 70,314 86,446 105,989
7 128,237 1,000,000 1,000,000 1,000,000 81,160 102,879 130,248
8 150,398 1,000,000 1,000,000 1,000,000 91,598 119,781 156,740
9 173,668 1,000,000 1,000,000 1,000,000 101,599 137,139 185,667
10 198,102 1,000,000 1,000,000 1,000,000 111,126 154,935 217,247
15 339,862 1,000,000 1,000,000 1,000,000 151,090 250,976 426,450
20 520,789 1,000,000 1,000,000 1,297,578 165,820 349,530 750,045
30 1,046,412 * 1,000,000 2,541,912 * 476,027 1,896,949
<CAPTION>
END OF YEAR
CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF
VALUE(2) -----------------------------
POLICY YEAR 0% 6% 12%
- ----------- ------- ------- ---------
<S> <C> <C> <C>
1 9,214 9,954 10,694
2 21,277 23,498 25,803
3 33,041 37,513 42,337
4 44,966 52,491 60,926
5 56,553 67,960 81,248
6 67,781 83,914 103,456
7 78,881 100,600 127,969
8 89,573 117,755 154,715
9 99,827 135,366 183,894
10 109,607 153,416 215,727
15 150,836 250,723 426,196
20 165,820 349,530 750,045
30 * 476,027 1,896,949
</TABLE>
- ------------
(1) All premiums are illustrated as if made at the beginning of the Policy Year.
(2) Assumes no Policy loan or partial withdrawal has been made.
* Without additional Premiums above the annual planned premium, the Policy
would lapse in this scenario.
WE EMPHASIZE THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
ARE ILLUSTRATIVE ONLY AND YOU SHOULD NOT DEEM THEM TO BE A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND THE INVESTMENT EXPERIENCE OF THE
PORTFOLIOS OF THE FUNDS. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE
FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL
RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. THEY WOULD
ALSO BE DIFFERENT IF ANY POLICY LOANS OR PARTIAL WITHDRAWALS WERE MADE. NEITHER
NEW YORK LIFE INSURANCE AND ANNUITY COMPANY, THE SEPARATE ACCOUNTS, NOR THE
FUNDS REPRESENT THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY
ONE YEAR OR SUSTAINED OVER A PERIOD OF TIME.
A-4
<PAGE> 120
APPENDIX B
VARIATIONS BY JURISDICTION
The following lists by jurisdiction any variations to the statements made in
this prospectus.
CALIFORNIA
- -- Free Look--If you cancel your policy, we will pay you your policy's cash
value on the date you return the policy, plus the charges which were deducted
from the premium payments you have made, less any loans and partial
withdrawals you have taken.
COLORADO
- -- Transfers to the Fixed Account--If there is a change in the investment
strategy of the Separate Account, you may make an unrestricted transfer from
the Separate Account to the Fixed Account, even if such change occurs after
the first two Policy Years.
- -- The Suicide Exclusion period is one year from the Issue Date.
CONNECTICUT
- -- Loan Interest Rate--Due to state regulation, the loan interest rate is fixed
at 8.0% and may not be lowered.
DISTRICT OF COLUMBIA
- -- Free Look Period--You have until the later of 20 days from the date you
receive your policy, or 45 days from the date the application is signed, to
return the policy and receive a refund. We will allocate the initial premium
and any other premium payments you make during the first 20 days after you
receive your policy to the General Account. After this 20 day period, we will
allocate your net premiums according to your instructions.
FLORIDA
- -- Late Period--The late period is the 31 days following the Monthly Deduction
Day on which the cash surrender value is zero or less than zero. We will mail
a notice to the policyowner (and any known assignee) at least 30 days before
the end of the late period.
INDIANA
- -- Free Look--You may return the policy to any of our registered
representatives.
MARYLAND
- -- Partial Withdrawals--We have the right to deny any partial withdrawal which
would cause the face amount of the policy to drop below $100,000.
- -- Additional Benefits through Riders--The GMDB rider is called the Guaranteed
No Lapse Benefit Rider.
B-1
<PAGE> 121
MASSACHUSETTS
- -- Transfers to the Fixed Account--If there is a change in the investment
strategy of the Separate Account, you may make an unrestricted transfer from
the Separate Account to the Fixed Account, even if such change occurs after
the first two Policy Years.
- -- Guaranteed Minimum Death Benefit--This rider is not available.
MICHIGAN
- -- Living Benefits Rider--You may exercise the benefit under this rider if the
surviving insured has a life expectancy of six months or less.
NEW JERSEY
- -- Policy Date--You may not choose a Policy Date that is before your policy's
Issue Date.
- -- Face Amount Increases--You are allowed to increase your policy's face amount
only once each Policy Year.
- -- Face Amount Decreases--You are allowed to decrease your policy's face amount
only once each Policy Year.
- -- Unplanned Premium--You are allowed a maximum of twelve unplanned premium
payments each Policy Year.
- -- State Tax Charge--We will not increase the charge above 2.0%.
- -- Transfers--After the first two Policy Years, you are allowed a maximum of
twelve transfers into the Fixed Account each Policy Year.
- -- Changing Your Life Insurance Benefit Option--You may make only one change to
your Life Insurance Benefit Option each Policy Year. If your policy is issued
with the Supplementary Term Rider, you may change your Life Insurance Benefit
to Option 2 if the rider ends or is terminated. However, you must meet the
requirements described on page 12 for selecting this option.
- -- Partial Withdrawals--You may take only one partial withdrawal in the first
Policy Year, if Life Insurance Benefit Option 1 is in effect.
- -- Guaranteed Minimum Death Benefit--This rider is not available.
NEW YORK
- -- Face Amount Increases--You are allowed to increase your policy's face amount
only once each Policy Year.
- -- Face Amount Decreases--You are allowed to decrease your policy's face amount
only once each Policy Year.
- -- Unplanned Premium--You are allowed a maximum of twelve unplanned premium
payments each Policy Year.
- -- Transfers--After the first two Policy Years, you are allowed a maximum of
twelve transfers into the Fixed Account each Policy Year.
- -- Changing Your Life Insurance Benefit Option--You may make only one change to
your Life Insurance Benefit Option each Policy Year.
B-2
<PAGE> 122
- -- Policy Termination--Your policy will end on the policy anniversary the
younger insured is, or would have been, age 100. The cash surrender value
will be paid at that time.
- -- Free Look Period--You have ten days from the date you receive your policy. We
will allocate the initial premium and any other premium payments you make
during the first ten days after you receive your policy to the General
Account. After this ten day period, we will allocate your net premiums
according to your instructions.
- -- Change in Objective of an Investment Division--If there is a change in the
investment strategy of any Investment Division, you have the option of
converting, without evidence of insurability, your policy within 60 days
after the effective date of such change or the date you receive notification
of such change, whichever is later. You may elect to convert your policy to a
new fixed benefit survivorship life insurance policy, for an amount of
insurance not greater than the Life Insurance Benefit of the original policy,
on the date of conversion. The new policy will be based on the same issue
ages, sexes and underwriting classes as your original Policy, but will not
offer variable investment options such as the Investment Divisions. All
riders attached to your original policy will end on the date of any such
conversion.
- -- Maximum Transfer from the Fixed Account--The maximum amount you may transfer
from the Fixed Account to the Investment Divisions during any Policy Year is
25% of the amount in the Fixed Account at the beginning of the Policy Year.
- -- Policy Split Option--You must provide evidence of insurability for any
exercise of this option. Also, in addition to divorce and certain tax law
changes, the policy may be split in the event of the annulment of the
insureds.
- -- Extended Term Insurance--On each policy anniversary, you have the right to
transfer all of your money in the Separate Account to the Fixed Account and
obtain an extended term insurance benefit. See your policy for details
regarding this option.
- -- Guaranteed Minimum Death Benefit--This rider is not available.
- -- Spouse's Paid-up Insurance Purchase Option--This rider is not available.
NORTH CAROLINA
- -- Free Look Period--You have until the later of 20 days from the date you
receive your Policy, or 45 days from the date the application is signed, to
return the policy and receive a refund. We will allocate the initial premium
and any other premium payments you make during the first 20 days after you
receive your policy to the General Account. After this 20 day period, we will
allocate your net premiums according to your instructions.
OREGON
- -- State Tax Charge--In Oregon, this tax is referred to as a "tax charge back"
and only applies to policies issued after May 19, 2000. The rate may not be
changed for the life of the policy.
- -- Transfers--After the first two Policy Years, you are allowed a maximum of
twelve transfers into the Fixed Account each Policy Year.
B-3
<PAGE> 123
PENNSYLVANIA
- -- Policy Split Option--Due to state regulations, the policy cannot be split in
the event of the divorce of the insureds.
- -- Misstatement of Age or Sex--In the event of such misstatement, we will adjust
the Life Insurance Benefit provided by your policy, but we will not adjust
the cash value.
- -- Transfers--After the first two Policy Years, you are allowed a maximum of
twelve transfers to the Fixed Account each Policy Year.
- -- Loan Repayment--Where we have sent a notice that your policy is in danger of
terminating because the amount of your unpaid loan plus accrued loan interest
exceeds the cash surrender value of your policy, we will only terminate your
policy if you do not make the necessary payments within 61 days from the date
we mail the notice.
- -- Late Period--We will not terminate your policy until 61 days after the date
we mail a notice to you informing you that the cash surrender value of your
policy is insufficient to cover the required monthly deductions.
TEXAS
- -- Face Amount Increases--You are allowed to increase your policy's face amount
only once each Policy Year.
- -- Face Amount Decreases--You are allowed to decrease your policy's face amount
only once each Policy Year.
- -- Changing Your Life Insurance Benefit Option--You may make only one change in
your Life Insurance Benefit Option each Policy Year.
- -- Transfers--After the first two Policy Years, you are allowed a maximum of
twelve transfers to the Fixed Account each Policy Year.
- -- Unplanned Premium--You are allowed a maximum of twelve unplanned premium
payments each Policy Year.
- -- Partial Withdrawals--You may take only one partial withdrawal in the first
Policy Year, if Life Insurance Benefit Option 1 is in effect.
- -- Guaranteed Minimum Death Benefit--This rider is not available.
B-4
<PAGE> 124
APPENDIX C
MAXIMUM SURRENDER CHARGES
The following table shows the maximum surrender charges per $1,000 of initial
face amount which could be assessed under a policy depending on issue ages and
assuming no changes have been made to the face amount. Columns 1 through 3 show
the calculation of surrender charges in all Policy Years for a policy ("Policy
A") which insures 2 males, ages 90 and 84, in the standard underwriting
classification. Columns 4 through 6 show the calculation of surrender charges in
all Policy Years for a policy ("Policy B") which insures 2 males, both of whom
are age 90, in the standard underwriting classification. Because the length of
the surrender charge schedule varies based on the issue age of the younger
insured, the absolute maximum (as shown in Column 7) that can be charged under a
policy would, for Policy Years 5 through 15, be assessed under Policy A and
would, for Policy Years 1 through 4, be assessed under Policy B.
The surrender charges shown in the table apply only to policies issued to male
insureds of the ages and underwriting classifications specified and are not
representative of the surrender charges which would be assessed under other
policies. For surrender charges which would be applicable under your policy,
please contact your registered representative.
TABLE OF MAXIMUM SURRENDER CHARGES
PER $1,000 OF INITIAL FACE AMOUNT
<TABLE>
<CAPTION>
POLICY A POLICY B
MALE AGE 90/MALE AGE 84 MALE AGE 90/MALE AGE 90
---------------------------------- ----------------------------------
<S> <C> <C>
$107.70 Target Premium/$1,000 of initial face amount $123.20
$ 21.54 20% of Target Premium/$1,000 of initial face amount $ 24.64
</TABLE>
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7)
20% OF SURRENDER SURRENDER 20% OF SURRENDER SURRENDER MAXIMUM
POLICY TARGET CHARGE CHARGE TARGET CHARGE CHARGE SURRENDER
YEAR PREMIUM PERCENTAGE (3)=(1)X(2) PREMIUM PERCENTAGE (6)=(4)X(5) CHARGE*
------ ------- ---------- ----------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21.54 100% 27.54** 24.64 100% 30.64** 30.64
2 21.54 100% 21.54 24.64 100% 24.64 24.64
3 21.54 100% 21.54 24.64 100% 24.64 24.64
4 21.54 100% 21.54 24.64 100% 24.64 24.64
5 21.54 100% 21.54 24.64 80% 19.71 21.54
6 21.54 100% 21.54 24.64 60% 14.78 21.54
7 21.54 90% 19.39 24.64 40% 9.86 19.39
8 21.54 80% 17.23 24.64 20% 4.93 17.23
9 21.54 70% 15.08 24.64 0% 0.00 15.08
10 21.54 60% 12.92 24.64 0% 0.00 12.92
11 21.54 50% 10.77 24.64 0% 0.00 10.77
12 21.54 40% 8.62 24.64 0% 0.00 8.62
13 21.54 30% 6.46 24.64 0% 0.00 6.46
14 21.54 20% 4.31 24.64 0% 0.00 4.31
15 21.54 10% 2.15 24.64 0% 0.00 2.15
16+ 21.54 0% 0.00
</TABLE>
- ---------------
* The greater of Columns 3 or 6.
** The surrender charge reflects an additional contract charge of $50 per month
the first year. Based on the initial face amount of $100,000, this would be
$6/$1,000 annually. See "Additional Charge on a Surrender in the First Policy
Year" on page 36.
C-1
<PAGE> 125
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file
with the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Reference is made to Article VIII of the Depositor's By-Laws.
New York Life maintains Directors and Officers Liability/Company
Reimbursement ("D&O") insurance which covers directors, officers and trustees
of New York Life, its subsidiaries, and its subsidiaries and certain affiliates
including the Depositor while acting in their capacity as such. The total
annual aggregate of D&O coverage is $150 million applicable to all insureds
under the D&O policies. There is no assurance that such coverage will be
maintained by New York Life or for the Depositor in the future as, in the past,
there have been large variances in the availability of D&O insurance for
financial institutions.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Depositor pursuant to the foregoing provisions, or otherwise, the
Depositor has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Depositor of expenses incurred or paid by a director, officer or controlling
person of the Depositor in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Depositor will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
REPRESENTATION AS TO THE REASONABLENESS OF AGGREGATE FEES AND CHARGES
New York Life Insurance and Annuity Corporation ("NYLIAC"), the
sponsoring insurance company of the NYLIAC Variable Universal Life Separate
Account-I, hereby represents that the fees and charges deducted under the
Flexible Premium Survivorship Variable Universal Life Insurance Policies are
reasonable in relation to the services rendered, the expenses expected to be
incurred and the risks assumed by NYLIAC.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The prospectus consisting of 119 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484.
The representation as to the reasonableness of aggregate fees and charges.
II-1
<PAGE> 126
The signatures.
Written consents of the following persons:
(a) Thomas F. English, Esq.
(b) Irwin Don, Actuary
(c) PricewaterhouseCoopers LLP
The following exhibits:
1. The following exhibits correspond to those required by paragraph A of the
instructions as to exhibits in Form N-8B-2:
(1) (a) Resolution of the Board of Directors of NYLIAC establishing
the Separate Account - Previously filed as Exhibit 1.(1) to
the initial Registration Statement on Form S-6 for NYLIAC
Variable Universal Life Separate Account-I (File No.
33-64410), re-filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit 1.(1) to Post-Effective Amendment No. 4
on Form S-6, and incorporated herein by reference.
(1) (b) Resolution of the Board of Directors of NYLIAC authorizing
filings relating to the Policy with the Securities and
Exchange Commission - Previously filed as Exhibit 1. (1)(b) to
Registrant's Pre-Effective Amendment No. 1 on Form S-6 and
incorporated herein by reference.
(2) Not applicable.
(3)(a)(1) Distribution Agreement between NYLIFE Securities Inc. and
NYLIAC - Previously filed as Exhibit 1.(3)(a) to
Post-Effective Amendment No. 1 to the registration statement
on Form S-6 for NYLIAC MFA Separate Account-I (File No.
2-86084), re-filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit 1.(3)(a)(1) to Post-Effective Amendment
No. 4 on Form S-6 for NYLIAC Variable Universal Life Separate
Account-I (File No. 33-64410), and incorporated herein by
reference.
(3)(a)(2) Distribution Agreement between NYLIFE Distributors Inc. and
NYLIAC - Previously filed as Exhibit 1.(3)(a)(2) to
Post-Effective Amendment No. 3 to the registration statement
on Form S-6 for NYLIAC Variable Universal Life Separate
Account-I (File No. 33-64410), and incorporated herein by
reference.
(3)(b) Not applicable.
(3)(c) Not applicable.
(4) Not applicable.
(5)(a) Policy - Previously filed as Exhibit 1.(5)(a) to Registrant's
initial Registration Statement on Form S-6, and incorporated
herein by reference.
(5)(b) Guaranteed Minimum Death Benefit Rider for Survivorship
Variable Adjustable Life Insurance - Previously filed as
Exhibit 1.(5)(b) to Registrant's initial Registration
Statement on Form S-6, and incorporated herein by reference.
(5)(c)(1) Form of Level First-To-Die Term Rider for Survivorship
Variable Adjustable Life Insurance - Previously filed as
Exhibit 1.(5)(c) to Registrant's initial Registration
Statement on Form S-6, and incorporated herein by reference.
(5)(c)(2) Amended Form of Level First-to-Die Term Rider for Survivorship
Variable Adjustable Life Insurance - Previously filed as
Exhibit 1. (5)(c)(2) to Registrant's Pre-Effective Amendment
No. 1 on Form S-6 and incorporated herein by reference.
II-2
<PAGE> 127
(5)(d)(1) Form of First-To-Die Monthly Deduction Waiver Rider for
Survivorship Variable Adjustable Life Insurance - Previously
filed as Exhibit 1.(5)(d) to Registrant's initial registration
statement on Form S-6, and incorporated herein by reference.
(5)(d)(2) Amended Form of First-to-Die Monthly Deduction Waiver Rider
for Survivorship Variable Adjustable Life Insurance -
previously filed as Exhibit 1. (5)(d)(2) to Registrant's
Pre-Effective Amendment No. 1 on Form S-6 and incorporated
herein by reference.
(5)(e) Supplementary Term Rider for Survivorship Variable Adjustable
Life Insurance - Previously filed as Exhibit 1.(5)(a) to
Registrant's initial registration statement on Form S-6, and
incorporated herein by reference.
(5)(f) Accelerated Benefits Rider for Survivorship Variable
Adjustable Life Insurance - Previously filed as Exhibit
1.(5)(a) to Registrant's initial registration statement on
Form S-6, and incorporated herein by reference.
(6)(a) Certificate of Incorporation of NYLIAC - Previously filed as
Exhibit 1.(6)(a) to the registration statement on Form S-6 for
NYLIAC MFA Separate Account-I (File No. 2-86083), re-filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit
1.(6)(a) to the initial Registration Statement on Form S-6 for
NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I (File No. 333-07617), and incorporated herein by
reference.
(6)(b)(1) By-Laws of NYLIAC - Previously filed as Exhibit 1.(6)(b) to
the registration statement on Form S-6 for NYLIAC MFA Separate
Account-I (File No. 2-86083), re-filed in accordance with
Regulation S-T, 17 CFR 232.102(e) as Exhibit 1.(6)(b) to the
initial registration statement on Form S-6 for NYLIAC
Corporate Sponsored Variable Universal Life Separate Account-I
(File No. 333-07617), and incorporated herein by reference.
6(b)(2) Amended By-Laws of NYLIAC - Previously filed as Exhibit 1.
(6)(b)(2) to Registrant's Pre-Effective Amendment No. 1 on
Form S-6 and incorporated herein by reference.
(7) Not applicable.
(8) Not applicable.
(9)(a) Stock Sale Agreement between NYLIAC and New York Life MFA
Series Fund, Inc. - Previously filed as Exhibit 1. (9) to
Pre-Effective Amendment No. 1 to the registration statement on
Form S-6 (File No. 33-64410) and as Exhibit 1.(9)(a) to
Pre-Effective Amendment No. 1 to the registration statement on
Form S-6 for NYLIAC Corporate Sponsored Variable Universal
Life Separate Account-I (File No. 333-07617), and incorporated
herein by reference.
(9)(b) Participation Agreement among Acacia Capital Corporation,
Calvert Asset Management Company, Inc. and NYLIAC, as amended
- Previously filed as Exhibit 1.(9)(b)(1) to Pre-Effective
Amendment No. 1 to the registration statement on Form S-6 for
NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I (File No. 333-07617), and incorporated herein by
reference.
(9)(c) Participation Agreement among The Alger American Fund, Fred
Alger and Company, Incorporated and NYLIAC - Previously filed
as Exhibit 1.(9)(b)(2) to Pre-Effective Amendment No. 1 to the
registration statement on Form S-6 for NYLIAC Corporate
Sponsored Variable Universal Life Separate Account-I (File No.
333-07617), and incorporated herein by reference.
(9)(d) Participation Agreement between Janus Aspen Series and NYLIAC
- Previously filed as Exhibit 1.(9)(b)(3) to Pre-Effective
Amendment No. 1 to the registration statement on Form S-6 for
NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I (File No. 333-07617), and incorporated herein by
reference.
II-3
<PAGE> 128
(9)(e) Participation Agreement among Morgan Stanley Universal Funds,
Inc., Morgan Stanley Asset Management Inc. and NYLIAC -
Previously filed as Exhibit 1.(9)(b)(4) to Pre-Effective
Amendment No. 1 to the registration statement on Form S-6 for
NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I (File No. 333-07617), and incorporated herein by
reference.
(9)(f) Participation Agreement among Variable Insurance Products
Fund, Fidelity Distributors Corporation and NYLIAC -
Previously filed as Exhibit 1.(9)(b)(5) to Pre-Effective
Amendment No. 1 to the registration statement on Form S-6 for
NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I (File No. 333-07617), and incorporated herein by
reference.
(9)(g) Participation Agreement among Variable Insurance Products Fund
II, Fidelity Distributors Corporation and NYLIAC - Previously
filed as Exhibit 1.(9)(b)(6) to Pre-Effective Amendment No. 1
to the registration statement on Form S-6 for NYLIAC Corporate
Sponsored Variable Universal Life Separate Account-I (File No.
333-07617), and incorporated herein by reference.
(10) Form of Application - Previously filed as Exhibit 1.(10) to
the initial registration statement on Form S-6 for NYLIAC
Variable Universal Life Separate Account-I (File No.
33-64410), re-filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit 1.(10) to Post-Effective Amendment No. 4
to Registrant's registration statement on Form S-6 , and
incorporated herein by reference.
2. Opinion and Consent of Thomas F. English, Esq. - Filed
herewith.
3. Not applicable.
4. Not applicable.
5. Not applicable.
6. Opinion and Consent of Irwin Don, Actuary - Filed
herewith.
7. Consent of PricewaterhouseCoopers LLP - Filed herewith.
8 (a) Powers of Attorney for the Directors and Officers of NYLIAC -
Previously filed as Exhibit 1.(9)(c) to Pre-Effective
Amendment No. 2 to the registration statement on Form S-6 for
NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I (File No. 333-07617), and incorporated herein by
reference for the following:
Jay S. Calhoun, Vice President, Treasurer and Director
(Principal Financial Officer)
Richard M. Kernan, Jr., Director
Robert D. Rock, Senior Vice President and Director
Frederick J. Sievert, President and Director (Principal
Executive Officer)
Stephen N. Steinig, Senior Vice President, Chief Actuary and
Director
Seymour Sternberg, Director
8 (b) Power of Attorney for Maryann L. Ingenito, Vice President and
Controller (Principal Accounting Officer) - Previously filed
as Exhibit 1.(9)(d) to Pre-Effective Amendment No. 1 to the
registration statement on Form S-6 for NYLIAC Corporate
Sponsored Variable Universal Life Separate Account-I (File No.
333-07617), and incorporated herein by reference.
8 (c) Power of Attorney for Howard I. Atkins, Executive Vice
President (Principal Financial Officer) - previously filed as
Exhibit 8(c) to Registrant's Pre-Effective Amendment No. 1 on
Form S-6 and incorporated herein by reference.
8 (d) Memorandum describing NYLIAC's issuance, transfer and
redemption procedures for the survivorship variable adjustable
life insurance policies - previously filed as Exhibit 8 (d)
to Registrant's Pre-Effective Amendment No. 1 on Form S-6 and
incorporated herein by reference.
II-4
<PAGE> 129
8 (e) Power of Attorney for Certain Directors of NYLIAC -
Previously filed as Exhibit 10 (e) to Post-Effective
Amendment No. 6 to the registration statement on Form N-4 for
NYLIAC Variable Annuity Separate Account - III (File No.
33-87382), and incorporated herein by reference for the
following:
George J. Trapp, Director
Frank M. Boccio, Director
Phillip J. Hildebrand, Director
Michael G. Gallo, Director
Solomon Goldfinger, Director
Howard I. Atkins, Director
8 (f) Power of Attorney for John A. Cullen, Vice President and
Controller (Principal Accounting Officer) - Previously filed in
accordance with Regulation S-T, 17 CFR 232.102 (e) as Exhibit
(10)(f) to Post-Effective Amendment No. 21 to the registration
statement on Form N-4 for NYLIAC MFA Separate Account - I (File
No. 2-86083), and incorporated herein by reference.
II-5
<PAGE> 130
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
NYLIAC Variable Universal Life Separate Account-I, certifies that it has duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned thereunto duly authorized, in the City and State of New York
on the 14th day of April, 2000.
NYLIAC VARIABLE UNIVERSAL LIFE
SEPARATE ACCOUNT-I
(Registrant)
By /s/ Melvin J. Feinberg
-----------------------------------
Melvin J. Feinberg
Vice President and Actuary
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
(Depositor)
By /s/ Melvin J. Feinberg
-----------------------------------
Melvin J. Feinberg
Vice President and Actuary
As required by the Securities Act of 1933, this Amendment to the Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
<TABLE>
<S> <C>
Howard I. Atkins* Executive Vice President and Director (Principal Financial Officer)
Frank M. Boccio* Director
John A. Cullen* Vice President and Controller (Principal
Accounting Officer)
Michael G. Gallo* Director
Solomon Goldfinger* Director
Phillip J. Hildebrand* Director
Richard M. Kernan, Jr.* Director
Robert D. Rock* Senior Vice President and Director
Frederick J. Sievert* President and Director (Principal Executive Officer)
Seymour Sternberg* Director
George J. Trapp* Director
</TABLE>
*By /s/ Melvin J. Feinberg
------------------------------
Melvin J. Feinberg
Attorney-in-Fact
April 14, 2000
II-6
<PAGE> 131
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
2. Opinion and Consent of Thomas F. English, Esq.
6. Opinion and Consent of Irwin Don, Actuary
7. Consent of PricewaterhouseCoopers LLP
</TABLE>
<PAGE> 1
[NEW YORK LIFE LOGO] The Company You Keep NEW YORK LIFE INSURANCE COMPANY
51 Madison Avenue,
New York, NY 10010
(212) 576-6973
THOMAS F. ENGLISH
Vice President and
Deputy General Counsel
April 10, 2000
Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, D. C. 20549
RE: NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
VARIABLE UNIVERSAL LIFE SEPARATE ACCOUNT-I
INVESTMENT COMPANY ACT FILE NUMBER: 811-07798
SECURITIES ACT FILE NUMBER: 333-39157
Ladies and Gentlemen:
This opinion is furnished in connection with the filing by New York
Life Insurance and Annuity Corporation ("NYLIAC") of Post-Effective Amendment
No. 1 to the registration statement on Form S-6 ("Registration Statement") under
the Securities Act of 1933, as amended, of NYLIAC Variable Universal Life
Separate Account-I ("Separate Account-I"). Separate Account-I receives and
invests premiums allocated to it under a survivorship variable universal life
policy ("Policy"). The Policy is offered in the manner described in the
Registration Statement.
In connection with this opinion, I have made such examination of the
law and have examined such corporate records and such other documents as I
consider appropriate as a basis for the opinion hereinafter expressed. On the
basis of such examination, it is my opinion that:
1. NYLIAC is a corporation duly organized and validly existing
under the laws of the State of Delaware.
2. Separate Account-I is a separate account established and
maintained by NYLIAC pursuant to Section 2932 of the Delaware
Insurance Code, under which the income, gains and losses,
realized or unrealized, from assets allocated to Separate
Account-I shall be credited to or charged against Separate
Account-I, without regard to other income, gains or losses of
NYLIAC.
<PAGE> 2
Securities and Exchange Commission
April 10, 2000
Page 2
3. The Policies have been duly authorized by NYLIAC and, when
sold in jurisdictions authorizing such sales, in accordance
with the Registration Statement, will constitute validly
issued and binding obligations of NYLIAC in accordance with
their terms.
4. Each owner of a Policy will not be subject to any deductions,
charges, or assessments imposed by NYLIAC other than those
provided in the Policy.
I consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ THOMAS F. ENGLISH
Thomas F. English
Vice President and
Deputy General Counsel
<PAGE> 1
NEW YORK LIFE INSURANCE COMPANY
11400 Tomahawk Creek Parkway, Suite 200
Leawood, Kansas 66211
(913) 906-4059 FAX (913) 906-4129
IRWIN L. DON, FSA, MAAA
Actuary
April 6, 2000
Re: New York Life Insurance and Annuity Corporation
NYLIAC Variable Universal Life Separate Account - I
Investment Company Act File Number: 811-07798
Securities Act File Number: 333-39157
Ladies and Gentlemen:
This opinion is furnished in connection with the referenced registration
statement filed by New York Life Insurance and Annuity Corporation ("NYLIAC")
under the Securities Act of 1933 (the "Registration Statement"). The prospectus
included in the Registration Statement on Form S-6 describes survivorship
variable universal life insurance policies (the "Policies"). I am familiar with
the Registration Statement and Exhibits thereto.
In my opinion, the illustrations of benefits under the Policies included in the
section of the prospectus entitled "Appendix A: Illustrations", based on the
assumptions stated in the illustrations, are consistent with the provisions of
the respective forms of the Policies. The age combination selected in the
illustrations is representative of the manner in which the Policies operate.
In addition, I have reviewed the discount rate used in calculating the present
value of NYLIAC's future tax deductions resulting from the amortization of its
deduction for certain acquisition costs. In my opinion, the DAC tax charge is
reasonable in relation to NYLIAC's increased federal tax burden under Section
848 resulting from the receipt of premium; and the factors taken into account by
NYLIAC in determining the targeted rate of return are appropriate.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
prospectus.
Very truly yours,
/S/ IRWIN S. DON
Irwin L. Don
Actuary
<PAGE> 1
[PRICEWATERHOUSECOOPERS LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 2 to registration statement on Form S-6 (the
"Registration Statement") of our report dated March 1, 2000, relating to the
financial statements of New York Life Insurance and Annuity Corporation, and of
our report dated February 17, 2000, relating to the financial statements and
selected per unit data of New York Life Insurance and Annuity Corporation
Variable Universal Life Separate Account-I. We also consent to the reference to
us under the heading "Experts" which appears in such Prospectus.
[PricewaterhouseCoopers LLP]
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
April 10, 2000
