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MAINSTAY VARIABLE ANNUITY
INVESTING IN
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT--III
SUPPLEMENT DATED MAY 1, 1998 TO PROSPECTUS DATED MAY 1, 1998
This Supplement describes the minimum initial premium requirement and the
four additional Investment Divisions to which Policyowners may allocate Premium
under their MainStay Variable Annuity Policies ("Policies"). These Investment
Divisions are listed below.
- M Edinburgh Overseas Equity
- M Enhanced U.S. Equity
- M Frontier Capital Appreciation
- M Turner Core Growth
These Investment Divisions invest in shares of four corresponding
Portfolios of M Fund, Inc. ("M Fund"), an open-end management investment
company. This Supplement provides information that a prospective investor should
know before investing. Please read it carefully and retain it for future
reference. This Supplement is not valid unless accompanied by the current
prospectuses for both the Policies ("Policy Prospectus") and the M Fund. Defined
terms used but not defined in this Supplement have the same meanings as in the
Policy Prospectus. The Policy Prospectus should be read in light of the addition
of the four Investment Divisions and the following changes:
1. The following sentence should be added to the definition of "Eligible
Portfolios ('Portfolios')" on page 3 of the Policy Prospectus.
The M Fund has four Portfolios available to the Separate Account: the M
Edinburgh Overseas Equity, M Enhanced U.S. Equity, M Frontier Capital
Appreciation and M Turner Core Growth Portfolios.
2. The definition of "Funds (each, individually, a 'Fund')" on page 3 of the
Policy Prospectus should be modified to include the M Fund, Inc. ("M Fund").
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A DELAWARE CORPORATION)
51 MADISON AVENUE
NEW YORK, NEW YORK 10010
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3. The following information should be added to the Fee Table on pages 5 and 6.
FEE TABLE
<TABLE>
<CAPTION>
M EDINBURGH M ENHANCED M FRONTIER
OVERSEAS U.S. CAPITAL M TURNER
EQUITY EQUITY APPRECIATION CORE GROWTH
------ ------ ------------ -----------
<S> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Load(a)
(as a % of amount withdrawn)............................... 7% 7% 7% 7%
Transfer Fee................................................. Nyliac reserves the right to charge up to $30 for each transfer in
excess of 12 transfers per Policy Year.
Annual Policy Fee............................................ Lesser of $30 per Policy or 2% of the Accumulation Value, for
Policies with less than $20,000 of Accumulation Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value)
Mortality and Expense Risk Fees.............................. 1.25% 1.25% 1.25% 1.25%
Administration Fees.......................................... 0.15% 0.15% 0.15% 0.15%
Total Separate Account Annual Expenses..................... 1.40% 1.40% 1.40% 1.40%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1997)(g)
Advisory Fees................................................ 1.05% 0.55% 0.90% 0.45%
Administration Fees.......................................... -- -- -- --
Other Expenses............................................... 0.25% 0.25% 0.25% 0.25%
Total Fund Annual Expenses................................... 1.30%(h) 0.80%(h) 1.15%(h) 0.70%(h)
</TABLE>
- ----------
(a) The contingent deferred sales load percentage applicable to any amount
withdrawn declines by 1% each Payment Year from 7% during the first three
Payment Years to 4% in the sixth Payment Year, with no charge thereafter.
Certain exceptions may apply. See "Surrender Charges" on page 22 of the
Prospectus for the Policies.
(g) The fees and charges were provided by the Fund or its agents, which are
based on 1997 expenses and may reflect estimated changes.
(h) M Financial Investment Advisers, Inc. has agreed to limit the operating
expenses of each Portfolio (except brokerage or other Portfolio transaction
expenses or expenses for litigation, indemnification, taxes or other
extraordinary expenses) to the extent that such expenses, as accrued for
each Portfolio, through December 31, 1998 exceed .25% of that Portfolio's
estimated daily net assets on an annualized basis. Absent such limits,
"Total Fund Annual Expenses" for the fiscal year ended December 31, 1997
would have been 4.94%, 5.42%, 2.86% and 6.20% for the M Edinburgh Overseas
Equity, M Enhanced U.S. Equity, M Frontier Capital Appreciation and M
Turner Core Growth Portfolios, respectively.
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4. The following information should be added to the Examples on pages 7 and 8.
EXAMPLES (1)
An Owner would pay the following expenses on a $1,000 investment in one of
the Investment Divisions listed, assuming a 5% annual return on assets:
1. If you surrender your Policy at the end of the applicable time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
M Edinburgh Overseas Equity $94.96 $160.73 $209.25 $335.48
M Enhanced U.S. Equity $90.17 $146.50 $185.32 $286.33
M Frontier Capital Appreciation $93.52 $156.48 $202.13 $320.99
M Turner Core Growth $89.21 $143.64 $180.48 $276.22
</TABLE>
2. If you annuitize your Policy at the end of the applicable time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
M Edinburgh Overseas Equity $94.96 $94.02 $159.75 $335.48
M Enhanced U.S. Equity $90.17 $78.78 $134.56 $286.33
M Frontier Capital Appreciation $93.52 $89.47 $152.25 $320.99
M Turner Core Growth $89.21 $75.72 $129.47 $276.22
</TABLE>
3. If you do NOT surrender your Policy:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
M Edinburgh Overseas Equity $30.75 $94.02 $159.75 $335.48
M Enhanced U.S. Equity $25.63 $78.78 $134.56 $286.33
M Frontier Capital Appreciation $29.21 $89.47 $152.25 $320.99
M Turner Core Growth $24.62 $75.72 $129.47 $276.22
</TABLE>
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(1) For purposes of calculating these Examples, the annual policy
administration fee has been expressed as an annual percentage of assets
based on the average size of Policies having an Accumulation Value of less
than $20,000 on December 31, 1997. This calculation method reasonably
estimates annual policy fees applicable to Policies having an Accumulation
Value of less than $20,000 but does not reflect that no annual policy fees
are applicable to Policies having an Accumulation Value of $20,000 or
greater. This means that the fees would be slightly less if your Policy has
an Accumulation Value of $20,000 or greater on the Policy Anniversary or
date of surrender.
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
PERFORMANCE OR EXPENSES. THE ACTUAL EXPENSES PAID OR PERFORMANCE ACHIEVED MAY BE
GREATER OR LESS THAN THOSE SHOWN.
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5. The following performance information should be added to the Total Return
Calculations on page 13 of the Policy Prospectus.
The performance data under average annual total return (if surrendered)
reflect all Separate Account and Fund annual expenses shown in the Fee
Table which appears on pages 5 and 6 of the Prospectus. The average annual
total return (if surrendered) figures assume that the Policy is surrendered
at the end of the period shown. Thus, they reflect the deduction of any
applicable surrender charges. The annual Policy fee, which is charged to
Policies with less than $20,000 of Accumulation Value, is not reflected.
This fee, if applicable, would effectively reduce the rates of return
credited to a particular Policy. The average annual total return (no
surrenders) does not reflect the deduction of any surrender charges. All
rates of return presented include the reinvestment of investment income.
The M Enhanced U.S. Equity and M Frontier Capital Appreciation Portfolios
existed prior to the date they were added to an Investment Division of the
Separate Account. For periods starting prior to October 1, 1997, when the M
Frontier Capital Appreciation Investment Division commenced operations and
for periods starting prior to December 30, 1997, when the M Enhanced U.S.
Equity Investment Division commenced operations, the performance of the
Investment Divisions was derived from the performance of the corresponding
Portfolios, modified to reflect the Separate Account and Fund annual
expenses as if the Policy had been available during the periods shown. The
results shown are not an estimate or guarantee of future investment
performance for the Investment Divisions in the following tables.
As of December 31, 1997, there were no Premium Payments allocated to the M
Edinburgh Overseas Equity and M Turner Core Growth Investment Divisions.
Therefore, no performance or financial information is shown for these
Investment Divisions.
AVERAGE ANNUAL TOTAL RETURN
(FOR PERIODS ENDED DECEMBER 31, 1997)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
M FRONTIER
M ENHANCED CAPITAL
INVESTMENT DIVISION: U.S. EQUITY APPRECIATION
PORTFOLIO INCEPTION DATE: 1/4/96 1/4/96
INVESTMENT DIVISION INCEPTION DATE: 12/30/97 10/1/97
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Average Total Return (if surrendered)
1 Year 28.01% 18.27%
3 Year N/A N/A
5 Year N/A N/A
10 Year N/A N/A
Since Portfolio Inception 22.82% 21.55%
Since Investment Division Inception -5.87% -15.25%
- ----------------------------------------------------------------------------------------------
Average Annual Total Return (no surrenders)
1 Year 35.01% 25.27%
3 Year N/A N/A
5 Year N/A N/A
10 Year N/A N/A
Since Portfolio Inception 25.65% 24.40%
Since Investment Division Inception 0.46% -9.56%
- ----------------------------------------------------------------------------------------------
</TABLE>
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6. The following information should be added to the "Condensed Financial
Information" section on page 15 of the Policy Prospectus.
As of December 31, 1997, there were no Premium Payments allocated to the M
Edinburgh Overseas Equity and M Turner Core Growth Investment Divisions.
Therefore, no condensed financial information is shown for those Investment
Divisions.
For the period May 1, 1997 (commencement of operations) through December
31, 1997:
<TABLE>
<CAPTION>
M FRONTIER
M ENHANCED CAPITAL
U.S. EQUITY APPRECIATION
----------- ------------
<S> <C> <C>
Accumulation Unit Value (beginning of period) $10.00 $10.00
Accumulation Unit Value (end of period) $10.05 $ 9.04
Number of units outstanding (in 000s, end of period) 2 4
</TABLE>
7. The following information should be added to the table of Funds, Investment
Advisers and Eligible Portfolios on page 17 of the Policy Prospectus.
<TABLE>
<CAPTION>
FUND INVESTMENT ADVISERS SUB-ADVISERS PORTFOLIOS
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
M Fund, Inc. M Financial Investment Edinburgh Fund Managers plc M Edinburgh
Advisers Overseas Equity
- -------------------------------------------------------------------------------------------------------------
M Fund, Inc. M Financial Investment Franklin Portfolio Associates LLC M Enhanced U.S.
Advisers Equity
- -------------------------------------------------------------------------------------------------------------
M Fund, Inc. M Financial Investment Frontier Capital Management M Frontier Capital
Advisers Company, Inc. Appreciation
- -------------------------------------------------------------------------------------------------------------
M Fund, Inc. M Financial Investment Turner Investment Partners, Inc. M Turner Core
Advisers Growth
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the accompanying prospectus of the M Fund, Inc. for a complete
description of the M Fund, the investment advisers and the Portfolios.
ISSUED BY: NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
DISTRIBUTED BY: NYLIFE DISTRIBUTORS INC. (MEMBER NASD)
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