<PAGE> 1
As filed with the Securities and Exchange Commission on April 14, 2000
Registration No. 33-87382
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Form N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ( )
---
Post-Effective Amendment No. 9 ( X )
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and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 10 ( X )
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
(Exact Name of Registrant)
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
(Name of Depositor)
51 Madison Avenue, New York, New York 10010
(Address of Depositor's Principal Executive Office)
Depositor's Telephone Number: (212) 576-7000
Judith C. Keilp, Esq.
New York Life Insurance and Annuity Corporation
51 Madison Avenue
New York, New York 10010
(Name and Address of Agent for Service)
Copy to:
Peter Panarites, Esq. Michael J. McLaughlin, Esq.
Freedman, Levy, Kroll & Simond Senior Vice President
1050 Connecticut Avenue and General Counsel
Suite 825 New York Life Insurance Company
Washington, D.C. 20036 51 Madison Avenue
New York, New York 10010
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b) of Rule 485.
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X on May 1, 2000 pursuant to paragraph (b) of Rule 485.
- ---
60 days after filing pursuant to paragraph (a)(1) of Rule 485.
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on pursuant to paragraph (a)(1) of Rule 485.
- --- -----------------
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered
Units of interest in a separate account under variable annuity contracts.
<PAGE> 2
CROSS REFERENCE SHEET
INFORMATION REQUIRED IN A PROSPECTUS
<TABLE>
<CAPTION>
Item of Form N-4 Prospectus Caption
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<S> <C>
1. Cover Page Cover Page
2. Definitions Definitions
3. Synopsis Fee Table
4. Condensed Financial Information Condensed Financial Information
5. General Description of Registrant, New York Life Insurance and Annuity
Depositor and Portfolio Companies Corporation and the Separate
Account; Voting Rights
6. Deductions and Expenses Charges and Deductions; Fee Table; Distributions
Under the Policy; Distributor of the Policies
7. General Description of Variable The Policies; Distributions Under the Policy;
Annuity Contracts Voting Rights; Charges and Deductions; The
Fixed Account; Federal Tax Matters
8. Annuity Period Distributions Under the Policy - Income Payments
9. Death Benefit Distributions Under the Policy
10. Purchases and Contract Value The Policies - Issuing the Policy and Premium
Payments
11. Redemptions Distributions Under the Policy - Surrenders and
Withdrawals; Distributions Under the Policy -
Income Payments; Distributions Under the Policy -
Cancellations
12. Taxes Federal Tax Matters
13. Legal Proceedings Statement of Additional Information - Legal
Proceedings
14. Table of Contents of the Statement of Table of Contents for the Statement of
Additional Information Additional Information
</TABLE>
<PAGE> 3
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Statement of Additional
Item of Form N-4 Information Caption
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<S> <C>
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information & History Not Applicable
18. Services Safekeeping of Separate Account Assets
19. Purchase of Securities Being Offered Distributor of the Policies
20. Underwriters Distributor of the Policies
21. Calculation of Performance Data Investment Performance Calculations
22. Annuity Payments The Policies - Valuation of Accumulation Units
23. Financial Statements Financial Statements
</TABLE>
<PAGE> 4
PROSPECTUS DATED MAY 1, 2000
FOR
MAINSTAY PLUS VARIABLE ANNUITY
FROM
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A DELAWARE CORPORATION)
51 MADISON AVENUE, NEW YORK, NEW YORK 10010
INVESTING IN
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
This Prospectus describes the individual flexible premium MainStay Plus
Variable Annuity policies. New York Life Insurance and Annuity Corporation
("NYLIAC") issues these policies. We designed these policies to assist
individuals with their long-term retirement planning needs. You can use these
policies with retirement plans that do or do not qualify for special federal
income tax treatment. The policies offer flexible premium payments, access to
your money through partial withdrawals (some withdrawals may be subject to a
surrender charge and/or tax penalty), a choice of when income payments commence,
and a guaranteed death benefit if the owner or annuitant dies before income
payments have commenced.
Your premium payments accumulate on a tax-deferred basis. This means your
earnings are not taxed until you take the money out of your policy which can be
done in several ways. You can split your premium payments among a guaranteed
interest option, three general account options specifically for the dollar cost
averaging program (in states where approved) and the twenty-six variable
investment divisions listed below.*
<TABLE>
<S> <C>
- MainStay VP Capital Appreciation
- MainStay VP Cash Management
- MainStay VP Convertible
- MainStay VP Government
- MainStay VP High Yield Corporate Bond
- MainStay VP International Equity
- MainStay VP Total Return
- MainStay VP Value
- MainStay VP Bond
- MainStay VP Growth Equity
- MainStay VP Indexed Equity
- American Century Income & Growth
- Dreyfus Large Company Value
- Eagle Asset Management Growth Equity
- Lord Abbett Developing Growth
- Alger American Small Capitalization
- Calvert Social Balanced
- Fidelity VIP II Contrafund(R)
- Fidelity VIP Equity-Income
- Janus Aspen Series Balanced
- Janus Aspen Series Worldwide Growth
- MFS(R) Growth With Income Series
- MFS(R) Research Series
- Morgan Stanley UIF Emerging Markets Equity
- T. Rowe Price Equity Income
- Van Eck Worldwide Hard Assets
</TABLE>
We do not guarantee the investment performance of these variable investment
divisions. Depending on current market conditions, you can make or lose money in
any of the investment divisions.
You should read this Prospectus carefully before investing and keep it for
future reference. This Prospectus is not valid unless attached to current
prospectuses for the MainStay VP Series Fund, Inc., the Alger American Fund, the
Calvert Variable Series, Inc., the Fidelity Variable Insurance Products Fund II
(VIP II), the Fidelity Variable Insurance Products Fund (VIP), the Janus Aspen
Series, the MFS(R) Variable Insurance Trust(SM), The Universal Institutional
Funds, Inc., the T. Rowe Price Equity Series, Inc. and the Van Eck Worldwide
Insurance Trust (the "Funds", each individually a "Fund"). Each Investment
Division invests in shares of a corresponding Fund portfolio.
To learn more about the policy, you can obtain a copy of the Statement of
Additional Information ("SAI") dated May 1, 2000. The SAI has been filed with
the Securities and Exchange Commission ("SEC") and is incorporated by reference
into this Prospectus. The table of contents for the SAI appears at the end of
this Prospectus. For a free copy of the SAI, call us at (888) 695-6246 or write
to us at the address above.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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.
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* Currently, you may allocate initial premiums to 10, and thereafter may
maintain the Accumulation Value in up to 18, Allocation Alternatives and the
DCA Advantage Plan Accounts inclusively.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
DEFINITIONS............................ 3
FEE TABLE.............................. 5
QUESTIONS AND ANSWERS ABOUT MAINSTAY
PLUS VARIABLE ANNUITY................ 10
FINANCIAL STATEMENTS................... 16
CONDENSED FINANCIAL INFORMATION........ 17
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION AND THE SEPARATE
ACCOUNT.............................. 19
New York Life Insurance and Annuity
Corporation....................... 19
The Separate Account................. 19
The Portfolios....................... 19
Additions, Deletions or Substitutions
of Investments.................... 20
Reinvestment......................... 21
THE POLICIES........................... 21
Selecting the Variable Annuity That's
Right for You..................... 21
Qualified and Non-Qualified
Policies.......................... 22
Policy Application and Premium
Payments.......................... 22
Payments Returned for Insufficient
Funds............................. 23
Your Right to Cancel ("Free Look")... 24
Issue Ages........................... 24
Transfers............................ 24
Procedures for Telephone
Transactions...................... 24
Dollar Cost Averaging Programs....... 25
(a) Traditional Dollar Cost
Averaging.................... 25
(b) The DCA Advantage Plan........ 26
Automatic Asset Reallocation......... 26
Interest Sweep....................... 27
Accumulation Period.................. 27
(a) Crediting of Premium
Payments..................... 27
(b) Valuation of Accumulation
Units........................ 27
Third Party Investment Advisory
Arrangements...................... 28
Policy Owner Inquiries............... 28
CHARGES AND DEDUCTIONS................. 28
Surrender Charges.................... 28
Amount of Surrender Charge........... 29
Exceptions to Surrender Charges...... 29
Other Charges........................ 29
(a) Mortality and Expense Risk
Charges...................... 29
(b) Administration Fee............ 29
(c) Policy Service Charge......... 29
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
(d) Investment Protection Plan
Rider Charge................. 30
(e) Rider Risk Charge
Adjustment...................... 30
(f) Fund Charges................. 30
Group and Sponsored Arrangements..... 30
Taxes................................ 31
DISTRIBUTIONS UNDER THE POLICY......... 31
Surrenders and Withdrawals........... 31
(a) Surrenders.................... 31
(b) Partial Withdrawals........... 31
(c) Periodic Partial
Withdrawals................... 32
(d) Hardship Withdrawals.......... 32
Required Minimum Distribution........ 32
Our Right to Cancel.................. 32
Annuity Commencement Date............ 32
Death Before Annuity Commencement.... 33
Income Payments...................... 34
(a) Election of Income Payment
Options...................... 34
(b) Other Methods of Payment...... 34
(c) Proof of Survivorship......... 34
Delay of Payments.................... 34
Designation of Beneficiary........... 35
Restrictions Under Internal Revenue
Code Section 403(b)(11)........... 35
Loans................................ 35
Riders............................... 36
(a) Living Needs Benefit Rider.... 36
(b) Unemployment Benefit Rider... 36
(c) Investment Protection Plan
Rider........................ 36
THE FIXED ACCOUNT...................... 38
(a) Interest Crediting............ 38
(b) Transfers to Investment
Divisions.................... 38
(c) Fixed Account Initial Premium
Guarantee..................... 38
THE DCA ADVANTAGE PLAN ACCOUNTS........ 38
FEDERAL TAX MATTERS.................... 39
Introduction......................... 39
Taxation of Annuities in General..... 39
Qualified Plans...................... 40
(a) Section 403(a) Plans.......... 40
(b) Section 403(b) Plans.......... 40
(c) Individual Retirement
Annuities.................... 40
(d) Roth Individual Retirement
Annuities.................... 41
(e) Deferred Compensation Plans... 41
DISTRIBUTOR OF THE POLICIES............ 41
VOTING RIGHTS.......................... 41
TABLE OF CONTENTS FOR THE STATEMENT OF
ADDITIONAL INFORMATION............... 42
</TABLE>
THIS PROSPECTUS IS NOT CONSIDERED AN OFFERING IN ANY STATE WHERE THE SALE
OF THIS POLICY CANNOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATIONS REGARDING THE OFFERING OTHER THAN AS DESCRIBED IN THIS
PROSPECTUS OR IN ANY ATTACHED SUPPLEMENT TO THIS PROSPECTUS OR IN ANY
SUPPLEMENTAL SALES MATERIAL WE AUTHORIZE.
2
<PAGE> 6
DEFINITIONS
ACCUMULATION UNIT--An accounting unit we use to calculate the Variable
Accumulation Value prior to the Annuity Commencement Date. Each Investment
Division of the Separate Account has a distinct variable Accumulation Unit
value.
ACCUMULATION VALUE--The sum of the Variable Accumulation Value, the Fixed
Accumulation Value, and the DCA Accumulation Value of a policy.
ALLOCATION ALTERNATIVES--The Investment Divisions of the Separate Account and
the Fixed Account.
ANNUITANT--The person whose life determines the Income Payments, and upon whose
death prior to the Annuity Commencement Date, benefits under the policy may be
paid.
ANNUITY COMMENCEMENT DATE--The date on which we are to make the first Income
Payment under the policy.
BENEFICIARY--The person or entity having the right to receive the death benefit
set forth in the policy and who is the "designated beneficiary" for purposes of
Section 72 of the Internal Revenue Code in the event of the Annuitant's or the
policy owner's death.
BUSINESS DAY--Generally, any day on which the New York Stock Exchange ("NYSE")
is open for trading. Our Business Day ends at 4:00 p.m. Eastern Time or the
closing of regular trading on the NYSE, if earlier.
DOLLAR COST AVERAGING ("DCA") ADVANTAGE PLAN ACCOUNTS--The 6-month, 12-month and
18-month DCA accounts used specifically for the DCA Advantage Plan.
DOLLAR COST AVERAGING ("DCA") ADVANTAGE PLAN--A feature which permits automatic
dollar cost averaging using the DCA Advantage Plan Accounts.
DOLLAR COST AVERAGING ("DCA") ACCUMULATION VALUE--The sum of premium payments
allocated to the DCA Advantage Plan Accounts, plus interest credited on those
premium payments, less any transfers and partial withdrawals from the DCA
Advantage Plan, and less any surrender charges and any policy service charges
that may already have been assessed from the DCA Advantage Plan. The DCA
Accumulation Value is supported by assets in NYLIAC's general account. These
assets are subject to the claims of our general creditors.
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 to the general public. Investment results will differ.
FIXED ACCOUNT--An account that is credited with a fixed interest rate which
NYLIAC declares and is not part of the Separate Account. The Accumulation Value
of the Fixed Account is supported by assets in NYLIAC's general account, which
are subject to the claims of our general creditors.
FIXED ACCUMULATION VALUE--The sum of premium payments and transfers allocated to
the Fixed Account, plus interest credited on those premium payments and
transfers, less any transfers and partial withdrawals from the Fixed Account,
and less any surrender charges and policy service charges that may have already
been assessed from the Fixed Account.
FUND--A diversified, open-end management investment company.
INCOME PAYMENTS--Periodic payments NYLIAC makes after the Annuity Commencement
Date.
INVESTMENT DIVISION--The variable investment options available with the policy.
Each Investment Division invests exclusively in shares of a specified Eligible
Portfolio.
NON-QUALIFIED POLICIES--Policies that are not available for use in connection
with employee retirement plans that qualify for special federal income tax
treatment.
PAYMENT YEAR(S)--With respect to any premium payment, the year(s) beginning on
the date such premium payment is made to the policy.
POLICY ANNIVERSARY--An anniversary of the Policy Date shown on the Policy Data
Page.
POLICY DATA PAGE--Page 2 of the policy which contains the policy specifications.
3
<PAGE> 7
POLICY DATE--The date from which we measure Policy Years, quarters, months and
Policy Anniversaries. It is shown on the Policy Data Page.
POLICY YEAR--A year starting on the Policy Date. Subsequent Policy Years begin
on each Policy Anniversary, unless otherwise indicated.
QUALIFIED POLICIES--Policies issued under employee retirement plans that qualify
for special federal income tax treatment.
SEPARATE ACCOUNT--NYLIAC Variable Annuity Separate Account-III, a segregated
asset account we established to receive and invest premium payments paid under
the policies. The Separate Account's Investment Divisions, in turn, purchase
shares of Eligible Portfolios.
VARIABLE ACCUMULATION VALUE--The sum of the products of the current Accumulation
Unit value(s) for each of the Investment Divisions multiplied by the number of
Accumulation Units held in the respective Investment Division.
4
<PAGE> 8
FEE TABLE
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE GOVERNMENT
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount withdrawn)............. 7% during Payment Years 1-3; 6% during Payment Year 4;
5% during Payment Year 5; 4% during Payment Year 6;
and 0% thereafter.
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in
any Policy Year. However, NYLIAC reserves the right to
charge up to $30 for each transfer in excess of 12
transfers per Policy Year.
Annual Policy Service Charge.............................. Lesser of $30 per policy or 2% of the Accumulation
Value, for policies with less than $20,000 of
Accumulation Value.
Investment Protection Plan Rider Charge (optional)........ Maximum annual charge of 1% of the amount that is
guaranteed.
Rider Risk Charge Adjustment (optional)................... Maximum charge of 2% of the amount that is guaranteed
for cancellation of the Investment Protection Plan.
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, 1999)(a)
Advisory Fees............................................. 0.36% 0.25% 0.36% 0.30%
Administration Fees....................................... 0.20% 0.20% 0.20% 0.20%
Other Expenses............................................ 0.06% 0.06% 0.15% 0.09%
Total Fund Annual Expenses................................ 0.62% 0.51% 0.71% 0.59%
<CAPTION>
MAINSTAY VP
HIGH YIELD MAINSTAY VP
CORPORATE INTERNATIONAL
BOND EQUITY
----------- -------------
<S> <C> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount withdrawn)............. 7% during Payment Years 1-3; 6% during Payment Year 4;
5% during Payment Year 5; 4% during Payment Year 6;
and 0% thereafter.
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in
any Policy Year. However, NYLIAC reserves the right to
charge up to $30 for each transfer in excess of 12
transfers per Policy Year.
Annual Policy Service Charge.............................. Lesser of $30 per policy or 2% of the Accumulation
Value, for policies with less than $20,000 of
Accumulation Value.
Investment Protection Plan Rider Charge (optional)........ Maximum annual charge of 1% of the amount that is
guaranteed.
Rider Risk Charge Adjustment (optional)................... Maximum charge of 2% of the amount that is guaranteed
for cancellation of the Investment Protection Plan.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value)
Mortality and Expense Risk Fees........................... 1.25% 1.25%
Administration Fees....................................... 0.15% 0.15%
Total Separate Account Annual Expenses.................... 1.40% 1.40%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 0.30% 0.60%
Administration Fees....................................... 0.20% 0.20%
Other Expenses............................................ 0.07% 0.27%
Total Fund Annual Expenses................................ 0.57% 1.07%
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
TOTAL MAINSTAY VP MAINSTAY VP GROWTH INDEXED
RETURN VALUE BOND EQUITY EQUITY
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount withdrawn)............. 7% during Payment Years 1-3; 6% during Payment Year 4; 5% during
Payment Year 5; 4% during Payment Year 6; and 0% thereafter.
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in any Policy
Year. However, NYLIAC reserves the right to charge up to $30 for
each transfer in excess of 12 transfers per Policy Year.
Annual Policy Service Charge.............................. Lesser of $30 per policy or 2% of the Accumulation Value, for
policies with less than $20,000 of Accumulation Value.
Investment Protection Plan Rider Charge (optional)........ Maximum annual charge of 1% of the amount that is guaranteed.
Rider Risk Charge Adjustment (optional)................... Maximum charge of 2% of the amount that is guaranteed for
cancellation of the Investment Protection Plan.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value)
Mortality and Expense Risk Fees........................... 1.25% 1.25% 1.25% 1.25% 1.25%
Administration Fees....................................... 0.15% 0.15% 0.15% 0.15% 0.15%
Total Separate Account Annual Expenses.................... 1.40% 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, 1999)(a)
Advisory Fees............................................. 0.32% 0.36% 0.25% 0.25% 0.10%
Administration Fees....................................... 0.20% 0.20% 0.20% 0.20% 0.20%
Other Expenses............................................ 0.06% 0.07% 0.05% 0.04% 0.06%
Total Fund Annual Expenses................................ 0.58% 0.63% 0.50% 0.49% 0.36%
<CAPTION>
AMERICAN DREYFUS
CENTURY LARGE
INCOME & COMPANY
GROWTH VALUE
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<S> <C> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount withdrawn)............. 7% during Payment Years 1-3; 6% during Payment Year 4; 5% during
Payment Year 5; 4% during Payment Year 6; and 0% thereafter.
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in any Policy
Year. However, NYLIAC reserves the right to charge up to $30 for
each transfer in excess of 12 transfers per Policy Year.
Annual Policy Service Charge.............................. Lesser of $30 per policy or 2% of the Accumulation Value, for
policies with less than $20,000 of Accumulation Value.
Investment Protection Plan Rider Charge (optional)........ Maximum annual charge of 1% of the amount that is guaranteed.
Rider Risk Charge Adjustment (optional)................... Maximum charge of 2% of the amount that is guaranteed for
cancellation of the Investment Protection Plan.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value)
Mortality and Expense Risk Fees........................... 1.25% 1.25%
Administration Fees....................................... 0.15% 0.15%
Total Separate Account Annual Expenses.................... 1.40% 1.40%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 0.50% 0.60%
Administration Fees....................................... 0.20% 0.20%
Other Expenses............................................ 0.15%(b) 0.15%(b)
Total Fund Annual Expenses................................ 0.85% 0.95%
</TABLE>
5
<PAGE> 9
FEE TABLE--(CONTINUED)
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
<TABLE>
<CAPTION>
EAGLE
ASSET ALGER
MANAGEMENT LORD ABBETT AMERICAN CALVERT FIDELITY
GROWTH DEVELOPING SMALL SOCIAL VIP II
EQUITY GROWTH CAPITALIZATION BALANCED CONTRAFUND
---------- ----------- -------------- -------- ----------
<S> <C> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount withdrawn)............. 7% during Payment Years 1-3; 6% during Payment Year 4; 5% during
Payment Year 5; 4% during Payment Year 6; and 0% thereafter.
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in any Policy
Year. However, NYLIAC reserves the right to charge up to $30 for
each transfer in excess of 12 transfers per Policy Year.
Annual Policy Service Charge.............................. Lesser of $30 per policy or 2% of the Accumulation Value, for
policies with less than $20,000 of Accumulation Value.
Investment Protection Plan Rider Charge (optional)........ Maximum annual charge of 1% of the amount that is guaranteed.
Rider Risk Charge Adjustment (optional)................... Maximum charge of 2% of the amount that is guaranteed for
cancellation of the Investment Protection Plan.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value)
Mortality and Expense Risk Fees........................... 1.25% 1.25% 1.25% 1.25% 1.25%
Administration Fees....................................... 0.15% 0.15% 0.15% 0.15% 0.15%
Total Separate Account Annual Expenses.................... 1.40% 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, 1999)(a)
Advisory Fees............................................. 0.50% 0.60% 0.85% 0.70%(c) 0.59%
Administration Fees....................................... 0.20% 0.20% -- -- --
Other Expenses............................................ 0.15%(b) 0.15%(b) 0.04% 0.18%(c) 0.11%
Total Fund Annual Expenses................................ 0.85% 0.95% 0.89% 0.88%(c) 0.70%(d)
<CAPTION>
JANUS
FIDELITY VIP ASPEN
EQUITY- SERIES
INCOME BALANCED
------------ --------
<S> <C> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount withdrawn)............. 7% during Payment Years 1-3; 6% during Payment Year 4; 5% during
Payment Year 5; 4% during Payment Year 6; and 0% thereafter.
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in any Policy
Year. However, NYLIAC reserves the right to charge up to $30 for
each transfer in excess of 12 transfers per Policy Year.
Annual Policy Service Charge.............................. Lesser of $30 per policy or 2% of the Accumulation Value, for
policies with less than $20,000 of Accumulation Value.
Investment Protection Plan Rider Charge (optional)........ Maximum annual charge of 1% of the amount that is guaranteed.
Rider Risk Charge Adjustment (optional)................... Maximum charge of 2% of the amount that is guaranteed for
cancellation of the Investment Protection Plan.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value)
Mortality and Expense Risk Fees........................... 1.25% 1.25%
Administration Fees....................................... 0.15% 0.15%
Total Separate Account Annual Expenses.................... 1.40% 1.40%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 0.49% 0.72%
Administration Fees....................................... -- --
Other Expenses............................................ 0.09% 0.02%
Total Fund Annual Expenses................................ 0.58%(d) 0.74%
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN MORGAN STANLEY
SERIES MFS GROWTH MFS DEAN WITTER
WORLDWIDE WITH INCOME RESEARCH EMERGING
GROWTH SERIES SERIES MARKETS EQUITY
----------- ----------- -------- --------------
<S> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount withdrawn)............. 7% during Payment Years 1-3; 6% during Payment Year 4; 5%
during Payment Year 5; 4% during Payment Year 6; and 0%
thereafter.
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in any
Policy Year. However, NYLIAC reserves the right to charge
up to $30 for each transfer in excess of 12 transfers per
Policy Year.
Annual Policy Service Charge.............................. Lesser of $30 per policy or 2% of the Accumulation Value,
for policies with less than $20,000 of Accumulation Value.
Investment Protection Plan Rider Charge (optional)........ Maximum annual charge of 1% of the amount that is
guaranteed.
Rider Risk Charge Adjustment (optional)................... Maximum charge of 2% of the amount that is guaranteed for
cancellation of the Investment Protection Plan.
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, 1999)(a)
Advisory Fees............................................. 0.65% 0.75% 0.75% 0.00%
Administration Fees....................................... -- -- -- 0.00%
Other Expenses............................................ 0.07% 0.13% 0.11% 1.95%
Total Fund Annual Expenses................................ 0.72%(e) 0.88% 0.86% 1.95%(f)
<CAPTION>
T. ROWE PRICE VAN ECK
EQUITY WORLDWIDE
INCOME HARD ASSETS
------------- -----------
<S> <C> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount withdrawn)............. 7% during Payment Years 1-3; 6% during Payment Year 4; 5%
during Payment Year 5; 4% during Payment Year 6; and 0%
thereafter.
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in any
Policy Year. However, NYLIAC reserves the right to charge
up to $30 for each transfer in excess of 12 transfers per
Policy Year.
Annual Policy Service Charge.............................. Lesser of $30 per policy or 2% of the Accumulation Value,
for policies with less than $20,000 of Accumulation Value.
Investment Protection Plan Rider Charge (optional)........ Maximum annual charge of 1% of the amount that is
guaranteed.
Rider Risk Charge Adjustment (optional)................... Maximum charge of 2% of the amount that is guaranteed for
cancellation of the Investment Protection Plan.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value)
Mortality and Expense Risk Fees........................... 1.25% 1.25%
Administration Fees....................................... 0.15% 0.15%
Total Separate Account Annual Expenses.................... 1.40% 1.40%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 0.85%(g) 1.00%
Administration Fees....................................... -- --
Other Expenses............................................ -- 0.16%(h)
Total Fund Annual Expenses................................ 0.85% 1.16%
</TABLE>
- ------------
(a) The Fund or its agents provided the fees and charges which are based on
1999 expenses and may reflect estimated charges, except for Janus. We have
not verified the accuracy of the information provided by the agents.
(b) "Other Expenses" and "Total Fund Annual Expenses" for the American Century
Income & Growth, Dreyfus Large Company Value, Eagle Asset Management
Growth Equity and Lord Abbett Developing Growth 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%, 0.87% and 1.04% for the American Century Income &
Growth, Dreyfus Large Company Value, Eagle Asset Management Growth Equity
and Lord Abbett Developing Growth Portfolios, respectively.
6
<PAGE> 10
(c) "Other Expenses" reflect an indirect fee. Net fund operating expenses
after reductions for fees paid indirectly would be 0.86% for Social
Balanced Portfolio. Total expenses have been restated to reflect expenses
expected to be incurred in 2000.
(d) Through arrangements with certain funds or FMR 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(R) Portfolio and 0.57% for the
Fidelity VIP Equity-Income Portfolio.
(e) Expenses are based upon expenses for the fiscal year ended December 31,
1999, restated to reflect a reduction in the management fee for Worldwide
Growth and Balanced portfolios. Expenses are stated both with and without
contractual waivers by Janus Capital. Waivers, if applicable, are first
applied against the management fee and then against other expenses, and
will continue until at least the next annual renewal of the advisory
agreement. All expenses are shown without the effect of any expense offset
arrangements.
(f) Morgan Stanley Asset Management has voluntarily agreed to waive its
"Advisory Fees" and/or reimburse the Portfolio, if necessary, to the
extent that the "Total Fund Annual Expenses" of the Portfolio exceeds
1.75% of average daily net assets. For purposes of determining the amount
of the voluntary advisory fee waiver and/or reimbursement, if any, the
portfolio's annual operating expenses include certain investment related
expenses such as foreign country tax expense and interest expense on
amounts borrowed which were 0.04% of the average daily net assets for
1999. The fee waivers and reimbursements described above may be terminated
by Morgan Stanley Asset Management at any time without notice. Absent such
reductions, "Advisory Fees," "Administration Fees" and "Total Fund Annual
Expenses" would have been 1.25%, 0.25% and 2.62% respectively.
(g) The "Advisory Fees" include the ordinary operating expenses of the Fund.
7
<PAGE> 11
EXAMPLES(1)
This table below will help you understand the various costs and expenses
that you will bear directly and indirectly. The table reflects charges and
expenses of the Separate Account and the Funds. However, the table does not
reflect any optional charges under the policy. Charges and expenses may be
higher or lower in future years. For more information on the charges reflected
in this table, see "Charges and Deductions" at page 28 and the Fund prospectuses
which accompany this Prospectus. NYLIAC may, where premium taxes are imposed by
state law, deduct premium taxes on surrender of the policy or on the Annuity
Commencement Date.
You 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 stated time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
MainStay VP Capital Appreciation........................ $88.45 $141.35 $176.58 $268.05
MainStay VP Cash Management............................. $87.39 $138.19 $171.21 $256.70
MainStay VP Convertible................................. $89.31 $143.93 $180.96 $277.23
MainStay VP Government.................................. $88.16 $140.49 $175.12 $264.97
MainStay VP High Yield Corporate Bond................... $87.96 $139.91 $174.14 $262.90
MainStay VP International Equity........................ $92.76 $154.20 $198.30 $313.16
MainStay VP Total Return................................ $88.07 $140.21 $174.64 $263.94
MainStay VP Value....................................... $88.54 $141.64 $177.07 $269.08
MainStay VP Bond........................................ $87.30 $137.91 $170.72 $255.68
MainStay VP Growth Equity............................... $87.20 $137.61 $170.23 $254.63
MainStay VP Indexed Equity.............................. $85.95 $133.87 $163.84 $241.05
American Century Income & Growth........................ $90.64 $147.93 $187.73 $291.36
Dreyfus Large Company Value............................. $91.61 $150.79 $192.56 $301.34
Eagle Asset Management Growth Equity.................... $90.64 $147.93 $187.73 $291.36
Lord Abbett Developing Growth........................... $91.61 $150.79 $192.56 $301.34
Alger American Small Capitalization..................... $91.13 $149.37 $190.15 $296.37
Calvert Social Balanced................................. $91.03 $149.07 $189.66 $295.36
Fidelity VIP Contrafund(R).............................. $88.73 $142.22 $178.05 $271.13
Fidelity VIP Equity-Income.............................. $87.87 $139.63 $173.65 $261.87
Janus Aspen Series Balanced............................. $88.93 $142.78 $179.01 $273.16
Janus Aspen Series Worldwide Growth..................... $89.21 $143.64 $180.48 $276.22
MFS(R) Growth With Income Series........................ $90.93 $148.79 $189.18 $294.36
MFS(R) Research Series.................................. $90.75 $148.23 $188.24 $292.37
Morgan Stanley UIF Emerging Markets Equity.............. $99.65 $174.52 $232.22 $381.31
T. Rowe Price Equity Income............................. $90.64 $147.93 $187.73 $291.36
Van Eck Worldwide Hard Assets........................... $94.58 $159.60 $207.36 $331.63
</TABLE>
2. If you annuitize your policy at the end of the stated time period:
<TABLE>
<S> <C> <C> <C> <C>
MainStay VP Capital Appreciation........................ $88.45 $ 73.27 $125.37 $268.05
MainStay VP Cash Management............................. $87.39 $ 69.88 $119.71 $256.70
MainStay VP Convertible................................. $89.31 $ 76.03 $129.98 $277.23
MainStay VP Government.................................. $88.16 $ 72.34 $123.82 $264.97
MainStay VP High Yield Corporate Bond................... $87.96 $ 71.73 $122.79 $262.90
MainStay VP International Equity........................ $92.76 $ 87.02 $148.22 $313.16
</TABLE>
- ------------
(1) For purposes of calculating these examples, we have expressed the annual
policy service charge as an annual percentage of assets based on the average
size of policies having an Accumulation Value of less than $20,000 on
December 31, 1999. This calculation method reasonably reflects the annual
policy service charges applicable to policies having an Accumulation Value
of less than $20,000. The annual policy service charge does not apply to
policies having an Accumulation Value of $20,000 or greater. The expenses
shown, therefore, would be slightly lower if your policy's Accumulation
Value is $20,000 or greater.
8
<PAGE> 12
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
MainStay VP Total Return................................ $88.07 $ 72.05 $123.32 $263.94
MainStay VP Value....................................... $88.54 $ 73.58 $125.89 $269.08
MainStay VP Bond........................................ $87.30 $ 69.58 $119.20 $255.68
MainStay VP Growth Equity............................... $87.20 $ 69.26 $118.68 $254.63
MainStay VP Indexed Equity.............................. $85.95 $ 65.26 $111.96 $241.05
American Century Income & Growth........................ $90.64 $ 80.31 $137.10 $291.36
Dreyfus Large Company Value............................. $91.61 $ 83.38 $142.18 $301.34
Eagle Asset Management Growth Equity.................... $90.64 $ 80.31 $137.10 $291.36
Lord Abbett Developing Growth........................... $91.61 $ 83.38 $142.18 $301.34
Alger American Small Capitalization..................... $91.13 $ 81.86 $139.64 $296.37
Calvert Social Balanced................................. $91.03 $ 81.54 $139.13 $295.36
Fidelity VIP Contrafund(R).............................. $88.73 $ 74.19 $126.92 $271.13
Fidelity VIP Equity-Income.............................. $87.87 $ 71.42 $122.28 $261.87
Janus Aspen Series Balanced............................. $88.93 $ 74.80 $127.93 $273.16
Janus Aspen Series Worldwide Growth..................... $89.21 $ 75.72 $129.47 $276.22
MFS(R) Growth With Income Series........................ $90.93 $ 81.23 $138.62 $294.36
MFS(R) Research Series.................................. $90.75 $ 80.63 $137.63 $292.37
Morgan Stanley UIF Emerging Markets Equity.............. $99.65 $108.79 $183.92 $381.31
T. Rowe Price Equity Income............................. $90.64 $ 80.31 $137.10 $291.36
Van Eck Worldwide Hard Assets........................... $94.58 $ 92.81 $157.76 $331.63
</TABLE>
3. If you do not surrender your policy:
<TABLE>
<S> <C> <C> <C> <C>
MainStay VP Capital Appreciation........................ $23.80 $ 73.27 $125.37 $268.05
MainStay VP Cash Management............................. $22.67 $ 69.88 $119.71 $256.70
MainStay VP Convertible................................. $24.72 $ 76.03 $129.98 $277.23
MainStay VP Government.................................. $23.49 $ 72.34 $123.82 $264.97
MainStay VP High Yield Corporate Bond................... $23.28 $ 71.73 $122.79 $262.90
MainStay VP International Equity........................ $28.39 $ 87.02 $148.22 $313.16
MainStay VP Total Return................................ $23.39 $ 72.05 $123.32 $263.94
MainStay VP Value....................................... $23.90 $ 73.58 $125.89 $269.08
MainStay VP Bond........................................ $22.57 $ 69.58 $119.20 $255.68
MainStay VP Growth Equity............................... $22.46 $ 69.26 $118.68 $254.63
MainStay VP Indexed Equity.............................. $21.14 $ 65.26 $111.96 $241.05
American Century Income & Growth........................ $26.14 $ 80.31 $137.10 $291.36
Dreyfus Large Company Value............................. $27.17 $ 83.38 $142.18 $301.34
Eagle Asset Management Growth Equity.................... $26.14 $ 80.31 $137.10 $291.36
Lord Abbett Developing Growth........................... $27.17 $ 83.38 $142.18 $301.34
Alger American Small Capitalization..................... $26.66 $ 81.86 $139.64 $296.37
Calvert Social Balanced................................. $26.55 $ 81.54 $139.13 $295.36
Fidelity VIP Contrafund(R).............................. $24.10 $ 74.19 $128.92 $271.13
Fidelity VIP Equity-Income.............................. $23.18 $ 71.42 $122.28 $261.87
Janus Aspen Series Balanced............................. $24.31 $ 74.80 $127.93 $273.16
Janus Aspen Series Worldwide Growth..................... $24.62 $ 75.72 $129.47 $276.22
MFS(R) Growth With Income Series........................ $26.45 $ 81.23 $138.62 $294.36
MFS(R) Research Series.................................. $26.25 $ 80.63 $137.63 $292.37
Morgan Stanley UIF Emerging Markets Equity.............. $35.75 $108.79 $183.92 $381.31
T. Rowe Price Equity Income............................. $26.14 $ 80.31 $137.10 $291.36
Van Eck Worldwide Hard Assets........................... $30.34 $ 92.81 $157.76 $331.63
</TABLE>
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.
9
<PAGE> 13
QUESTIONS AND ANSWERS ABOUT MAINSTAY PLUS VARIABLE ANNUITY
NOTE: THE FOLLOWING SECTION CONTAINS BRIEF QUESTIONS AND ANSWERS ABOUT
MAINSTAY PLUS VARIABLE ANNUITY. YOU SHOULD REFER TO THE BODY OF THIS PROSPECTUS
FOR MORE DETAILED INFORMATION.
1. WHAT IS MAINSTAY PLUS VARIABLE ANNUITY?
MainStay Plus Variable Annuity is a flexible premium deferred variable
retirement annuity policy. NYLIAC issues the policy. You may allocate premium
payments to one or more of the Investment Divisions of the Separate Account, or
to the Fixed Account. In addition, in states where approved, you may also
allocate premium payments to one or more DCA Advantage Plan Accounts. The
Accumulation Value will fluctuate according to the performance of the Investment
Divisions selected and the interest credited on amounts in the Fixed Account and
the DCA Accounts.
2. WHERE CAN I ALLOCATE MY PREMIUM PAYMENT?
(a) You can allocate your premium payments to one or more of the following
Allocation Alternatives:
(i) SEPARATE ACCOUNT
The Separate Account currently consists of twenty-six Investment
Divisions. They are listed on the first page of this Prospectus. When
you allocate a premium payment to one of the Investment Divisions, the
Separate Account will invest your premium payment exclusively in shares
of the corresponding Eligible Portfolio of the relevant Fund.
(ii) FIXED ACCOUNT
Each premium payment, or the portion of any premium payment, you
allocate to the Fixed Account will reflect a guaranteed interest rate.
(See "The Fixed Account" at page 38.)
(b) In states where approved, you can also allocate your premium payments
to the DCA Advantage Plan. The DCA Advantage Plan consists of three DCA
Advantage Plan Accounts: a 6-month, 12-month and an 18-month account. NYLIAC
will credit interest to amounts held in the DCA Advantage Plan Accounts at rates
we have set in advance. The DCA Advantage Plan allows you to set up automatic
dollar cost averaging from the DCA Advantage Plan Accounts into the Investment
Divisions and/or the Fixed Account. (See "DCA Advantage Plan Accounts" at page
38.) You should check with your registered representative to determine if the
DCA Advantage Plan has been approved in your state.
3. CAN I MAKE TRANSFERS AMONG THE INVESTMENT DIVISIONS AND THE FIXED ACCOUNT?
You can transfer all or part of the Accumulation Value of your policy
between the Investment Divisions or from the Investment Divisions to the Fixed
Account at least 30 days before the Annuity Commencement Date, although certain
restrictions may apply. Generally, you can transfer a minimum amount of $500,
unless we agree otherwise. You can make unlimited transfers each Policy Year. We
currently do not charge for transfers. However, we reserve the right to charge
up to $30 for each transfer after the first twelve in a given Policy Year. (See
"Transfers" at page 38.) You may not transfer money into the Fixed Account if
you transferred money out of the Fixed Account during the previous six-month
period.
You can make transfers from the Fixed Account and the DCA Advantage Plan
Accounts, although certain restrictions may apply. (See "The Fixed Account" at
page 38 and "The DCA Advantage Plan Accounts" at page 38). In addition, you can
request transfers through the traditional Dollar Cost Averaging, Automatic Asset
Reallocation, or Interest Sweep options described at pages 25, 26 and 27 of this
Prospectus.
4. WHAT CHARGES ARE ASSESSED AGAINST THE POLICY?
Before the date we start making Income Payments to you, we will deduct a
policy service charge on each Policy Anniversary or upon surrender of the policy
if on that date the Accumulation Value is below $20,000. This charge will be the
lesser of $30 or 2% of the Accumulation Value at the end of the Policy Year or
on the date of surrender. In addition, we deduct on a daily basis a charge for
policy administration expenses. This charge is equal, on an annual basis, to
.15% of the net asset value of the Separate Account. (See "Other Charges" at
page 29.)
The policies are also subject to a charge for certain mortality and expense
risks NYLIAC assumes. We also deduct this charge on a daily basis. This charge
is equal, on an annual basis, to 1.25% of the net asset value of the Separate
Account. (See "Other Charges" at page 29.)
10
<PAGE> 14
We impose a surrender charge on certain partial withdrawals or surrenders
of the policies based on the amount of premium payments made. This charge is
assessed as a percentage of the amount withdrawn during the first six Payment
Years following each premium payment. We keep track of each premium payment and
assess a charge based on the length of time a premium payment is in your policy
before it is withdrawn. The percentage declines after the first three Payment
Years as follows:
<TABLE>
<CAPTION>
SURRENDER
PAYMENT YEAR CHARGE
------------ ---------
<S> <C>
1........................................................... 7%
2........................................................... 7%
3........................................................... 7%
4........................................................... 6%
5........................................................... 5%
6........................................................... 4%
7+.......................................................... 0%
</TABLE>
For purposes of calculating the surrender charge, we treat withdrawals as
coming from the oldest premium payment first (on a first-in, first-out basis).
You can make withdrawals from the policy free of surrender charges based on
certain limitations. In any one Policy Year, you may withdraw free of a
surrender charge the greater of (a) up to 10% of the Accumulation Value at the
time of withdrawal or (b) the Accumulation Value of the policy less the
accumulated premium payments. (See "Surrender Charges" at page 28 and
"Exceptions to Surrender Charges" at page 29.)
If you selected the Investment Protection Plan (in states where available),
we will deduct a charge on each policy quarter, based on the amount that is
guaranteed. (See "Other Charges--Investment Protection Plan Rider Charge" at
page 30). The maximum annual charge for this feature is 1% of the amount that is
guaranteed. We may deduct a charge from your Accumulation Value if you cancel
the Investment Protection Plan. We call this charge a Rider Risk Charge
Adjustment. (See "Other Charges--Rider Risk Charge Adjustment" at page 30). The
maximum Rider Risk Charge Adjustment is 2% of the amount that is guaranteed. We
set both of these charges at our sole discretion, subject to the stated
maximums. You should consult with your registered representative to determine
the percentages we are currently charging before you select the Investment
Protection Plan. We will not increase either of these charges after the date the
rider becomes effective for the Investment Protection Plan.
Finally, the value of the shares of each Fund reflects advisory fees,
administration fees and other expenses deducted from the assets of each Fund.
(See the Fund prospectuses which are attached to this Prospectus.)
5. WHAT ARE THE MINIMUM INITIAL AND MAXIMUM ADDITIONAL PREMIUM PAYMENTS?
Unless we permit otherwise, the minimum initial premium payment is $2,000
for Qualified Policies and $5,000 for Non-Qualified Policies. You can make
additional premium payments of at least $100 or such lower amount as we may
permit at any time. You have a choice of sending premium payments directly to
NYLIAC or through pre-authorized monthly deductions from banks, credit unions or
similar accounts. We may agree to other methods of payment. The maximum
aggregate amount of premium payments we accept is $1,000,000 without prior
approval. For Qualified Policies, you may not make premium payments in excess of
the amount permitted by law for the plan.
6. HOW ARE PREMIUM PAYMENTS ALLOCATED?
We will allocate the initial premium payment to the Investment Divisions,
Fixed Account and/or DCA Advantage Plan Accounts which you selected within two
Business Days after receipt, subject to our receipt of all information necessary
to issue a policy. Subsequent premium payments will be allocated at the close of
the Business Day on which they are received.
Currently, you may allocate the initial premium payment in a maximum of 10
Allocation Alternatives and the DCA Advantage Plan Accounts inclusively, and
thereafter may maintain the Accumulation Value in up to 18 Investment Divisions
and the DCA Advantage Plan Accounts inclusively plus the Fixed Account at any
one time. (See "Automatic Asset Reallocation" at page 26.) Moreover, you may
raise or lower the percentages (which must be in whole numbers) of the premium
payment you place in each Allocation Alternative at the time you make a premium
payment. The minimum amount which you may place in any one Allocation
Alternative is $25,
11
<PAGE> 15
or such lower amount as we may permit. The minimum amount which you may place in
any DCA Advantage Plan Account is $5,000. We reserve the right to limit the
amount of a premium payment that may be placed in any one Allocation Alternative
and/or any DCA Advantage Plan Account and the number of Allocation Alternatives
and DCA Advantage Plan Accounts to which you allocate your Accumulation Value.
7. WHAT HAPPENS IF PREMIUM PAYMENTS ARE NOT MADE?
If we do not receive any premium payments for a period of two years, and
both the Accumulation Value of your policy and your total premium payments less
any withdrawals and surrender charges are less than $2,000, we reserve the right
to terminate your policy. We will notify you of our intention to exercise this
right and give you 90 days to make a premium payment. If we terminate your
policy, we will pay you the Accumulation Value of your policy in one lump sum.
8. CAN I WITHDRAW MONEY FROM THE POLICY BEFORE THE ANNUITY COMMENCEMENT DATE?
You may make withdrawals from your policy before the Annuity Commencement
Date and while the Annuitant is alive. Your withdrawal request must be in a form
that is acceptable to us. Under most circumstances, you may make a minimum
partial withdrawal of $500. Withdrawals may be subject to a surrender charge. In
addition, you may have to pay income tax and a 10% penalty tax may apply if you
are under age 59 1/2. (See "Distributions Under the Policy" at page 31 and
"Federal Tax Matters" at page 39.)
9. HOW WILL NYLIAC MAKE INCOME PAYMENTS ON THE ANNUITY COMMENCEMENT DATE?
We will make Income Payments on a fixed basis. We do not currently offer a
variable income payment option. We will make payments under the Life Income
Payment Option over the life of the Annuitant with a guarantee of 10 years of
payments, even if the Annuitant dies sooner. Income Payments will always be the
same specified amount. (See "Income Payments" at page 34.) We may offer other
options, at our discretion, where permitted by state law.
10. WHAT HAPPENS IF I DIE OR THE ANNUITANT DIES BEFORE THE ANNUITY COMMENCEMENT
DATE?
If you or the Annuitant dies before the Annuity Commencement Date, we will
pay the Beneficiary under the policy an amount equal to the greater of:
(a) the Accumulation Value, less any outstanding loan balance,
(b) the sum of all premium payments made, less any outstanding loan
balance, partial withdrawals and surrender charges previously
imposed, or
(c) the "reset value" (as described on page 33 of this Prospectus) plus
any additional premium payments made since the most recent "reset
date," less any outstanding loan balance, proportional withdrawals
and applicable surrender charges since the most recent "reset date."
If the Beneficiary is the spouse of the Annuitant or the owner, see
Question 11. (Also see "Death Before Annuity Commencement" at page 33 and
"Federal Tax Matters" at page 39.)
11. WHAT HAPPENS IF MY SPOUSE IS THE BENEFICIARY?
If you are the owner and Annuitant and you die before the Annuity
Commencement Date, your spouse may continue the policy as the new owner and
Annuitant if he/she is also the sole Beneficiary (for Non-Qualified, IRA, Roth
IRA, TSA or SEP policies only). If your spouse chooses to continue the policy,
we will not pay the death benefit proceeds as a consequence of your death, or
the Annuitant's death.
12. MAY I RETURN THE POLICY AFTER IT IS DELIVERED?
You may cancel the policy by returning it to us, or to the registered
representative through whom you purchased it, within 10 days of delivery of the
policy or such longer period as required under state law. In states where
approved, you will receive the policy's Accumulation Value on the date we
receive the policy without any deduction for premium taxes or a surrender
charge. This amount may be more or less than your premium payments. Otherwise,
you will receive from us the greater of (i) the initial premium payment less any
prior partial withdrawals or (ii) the Accumulation Value on the date we receive
the policy, without any deduction for premium taxes or a surrender charge. We
will set forth the provision in your policy.
12
<PAGE> 16
13. WHAT ABOUT VOTING RIGHTS?
You can instruct NYLIAC how to vote shares of the Funds in which you have a
voting interest through the Separate Account. (See "Voting Rights" at page 38.)
14. HOW WILL NYLIAC CALCULATE INVESTMENT PERFORMANCE OF THE SEPARATE ACCOUNT?
YIELDS. The yield of the MainStay VP Cash Management Investment Division
refers to the annualized income generated by an investment in that Investment
Division over a specified seven-day period. In calculating the yield, we assume
that the income generated for that seven-day period is generated each seven-day
period over a 52-week period. The current yield is shown as a percentage of the
investment. The effective yield is calculated similarly but, when annualized,
the income earned in the Cash Management Investment Division is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment. For the seven-day period
ended December 31, 1999, the MainStay VP Cash Management Investment Division's
yield and effective yield were 4.05% and 4.13%, respectively.
The yield of the MainStay VP Government, MainStay VP High Yield Corporate
Bond or MainStay VP Bond Investment Divisions refers to the annualized income
generated in that Investment Division over a specified thirty-day period. In
calculating the yield, we assume that the income generated by the investment
during that thirty-day period is generated each thirty-day period over a
12-month period. The current yield is shown as a percentage of the investment.
For the 30-day period ended December 31, 1999, the annualized yields for the
MainStay VP Government, MainStay VP High Yield Corporate Bond and MainStay VP
Bond Investment Divisions were 3.38%, 7.52% and 3.86%, respectively.
The yield calculations do not reflect the effect of any surrender charge
that may be applicable to a particular policy. To the extent that the surrender
charge is applicable to a particular policy, the yield of that policy will be
reduced. Past performance is no indication of future performance. For additional
information regarding the yields described above, please refer to the Statement
of Additional Information.
TOTAL RETURN CALCULATIONS. The following tables present performance data
for each of the Investment Divisions for periods ending December 31, 1998. The
average annual total return (if surrendered) data reflect all Separate Account
and Fund annual expenses shown in the Fee Table on pages 5 through 7. The
average annual total return (if surrendered) figures assume that the policy is
surrendered at the end of the periods shown. The annual policy service charge,
which is charged to policies with an Accumulation Value of less than $20,000, is
not reflected. This fee, if applicable, would reduce the rates of return. The
average annual total return (no surrenders) does not reflect the deduction of
any surrender charges. All rates of return include the reinvestment of
investment income, including interest and dividends.
Certain Portfolios existed prior to the date that they were added to an
Investment Division of the Separate Account. For periods prior to an Investment
Division's inception date, the performance of the Investment Division was
derived from the performance of the corresponding Portfolios, as modified to
reflect the Separate Account and Fund annual expenses as if the policy had been
available during the periods shown. The results shown are not an estimate or
guarantee of future investment performance for the Investment Divisions.
13
<PAGE> 17
AVERAGE ANNUAL TOTAL RETURN
(FOR PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD
CAPITAL CASH MAINSTAY VP MAINSTAY VP CORPORATE
INVESTMENT DIVISIONS: APPRECIATION MANAGEMENT CONVERTIBLE GOVERNMENT BOND
--------------------- ------------ ----------- ----------- ----------- -----------
PORTFOLIO INCEPTION DATE: 1/29/93 1/29/93 10/1/96 1/29/93 5/1/95
- -------------------------------------------
INVESTMENT DIVISION INCEPTION DATE:
----------------------------------- 5/1/95 5/1/95 10/1/96 5/1/95 5/1/95
<S> <C> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN (IF SURRENDERED)
1 Year..................................... 16.72% -3.09% 33.01% -9.17% 4.31%
3 Year..................................... 25.63 1.44 16.27 1.80 5.85
5 Year..................................... 25.94 2.86 -- 4.66 --
10 Year.................................... -- -- -- -- --
Since Portfolio Inception.................. 20.38 3.20 16.43 4.07 9.40
Since Investment Division Inception........ 24.69 2.70 16.43 3.00 9.40
AVERAGE ANNUAL TOTAL RETURN (NO SURRENDERS)
1 Year..................................... 23.72 3.43 40.01 -3.07 11.31
3 Year..................................... 27.09 3.66 17.97 4.01 7.89
5 Year..................................... 26.34 3.74 -- 5.48 --
10 Year.................................... -- -- -- -- --
Since Portfolio Inception.................. 20.38 3.20 17.72 4.07 10.16
Since Investment Division Inception........ 25.16 3.66 17.72 3.94 10.16
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET
MANAGEMENT LORD ABBETT CALVERT ALGER AMERICAN
GROWTH DEVELOPING SOCIAL SMALL FIDELITY VIP II
INVESTMENT DIVISIONS: EQUITY GROWTH BALANCED CAPITALIZATION CONTRAFUND(R)
--------------------- ------ ----------- -------- -------------- ---------------
PORTFOLIO INCEPTION DATE: 5/1/98 5/1/98 9/2/86 9/20/88 1/3/95
- -------------------------------------------
INVESTMENT DIVISION INCEPTION DATE:
----------------------------------- 5/1/98 5/1/98 5/1/95 10/1/96 10/1/96
<S> <C> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN (IF SURRENDERED)
1 Year..................................... 56.22% 23.36% 3.74% 34.48% 15.57%
3 Year..................................... -- -- 12.75 19.37 22.84
5 Year..................................... -- -- 15.85 20.47 --
10 Year.................................... -- -- 10.50 16.57 --
Since Portfolio Inception.................. 43.82 6.98 10.11 19.17 25.57
Since Investment Division Inception........ 43.82 6.98 13.70 16.28 23.44
AVERAGE ANNUAL TOTAL RETURN (NO SURRENDERS)
1 Year..................................... 63.22 30.36 10.71 41.48 22.57
3 Year..................................... -- -- 14.56 20.99 24.37
5 Year..................................... -- -- 16.40 20.95 --
10 Year.................................... -- -- 10.50 16.57 --
Since Portfolio Inception.................. 47.08 10.94 10.11 19.17 25.97
Since Investment Division Inception........ 47.08 10.94 14.36 17.58 24.58
</TABLE>
14
<PAGE> 18
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP CENTURY LARGE
INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH INDEXED INCOME & COMPANY
EQUITY RETURN VALUE BOND EQUITY EQUITY GROWTH VALUE
------------- ----------- ----------- ----------- ----------- ----------- -------- -------
5/1/95 1/29/93 5/1/95 1/23/84 1/23/84 1/29/93 5/1/98 5/1/98
5/1/95 5/1/95 5/1/95 5/1/95 5/1/95 5/1/95 5/1/98 5/1/98
<S> <C> <C> <C> <C> <C> <C> <C>
19.28% 8.44% 0.53% -8.98% 21.21% 12.07% 8.96% -1.39%
14.98 17.24 5.04 1.98 24.52 24.00 -- --
-- 18.14 -- 5.01 25.22 25.96 -- --
-- -- -- 6.11 16.64 -- -- --
13.91 14.33 11.18 7.74 14.01 19.48 10.92 0.27
13.91 16.71 11.18 3.07 24.19 23.78 10.92 0.27
26.28 15.44 7.29 -2.86 28.21 19.07 15.96 5.24
16.71 18.91 7.12 4.17 26.01 25.50 -- --
-- 18.65 -- 5.82 25.62 26.36 -- --
-- -- -- 6.11 16.64 -- -- --
14.57 14.33 11.89 7.74 14.01 19.48 14.78 4.26
14.57 17.31 11.89 4.01 24.67 24.26 14.78 4.26
</TABLE>
<TABLE>
<CAPTION>
MORGAN
JANUS ASPEN MFS STANLEY T. ROWE
FIDELITY VIP JANUS ASPEN SERIES GROWTH MFS EMERGING PRICE VAN ECK
EQUITY- SERIES WORLDWIDE WITH INCOME RESEARCH MARKETS EQUITY WORLDWIDE
INCOME BALANCED GROWTH SERIES SERIES EQUITY INCOME HARD ASSETS
------------ ----------- ----------- ----------- -------- -------- ------- -----------
10/9/86 9/13/93 9/13/93 10/9/95 7/26/95 10/1/96 3/31/94 9/1/89
10/1/96 10/1/96 10/1/96 5/1/98 5/1/98 10/1/96 5/1/98 5/1/98
<S> <C> <C> <C> <C> <C> <C> <C>
-1.72% 18.04% 55.23% -1.38% 15.37% 85.97% -4.13% 12.37%
11.57 24.38 34.16 15.85 18.33 10.71 9.66 -9.60
16.44 22.53 31.43 -- -- -- 16.26 -0.83
12.90 -- -- -- -- -- -- 1.63
12.08 18.95 27.91 18.77 19.94 10.09 15.26 2.35
12.42 23.37 32.75 2.48 14.58 10.09 -1.77 -6.33
4.89 25.04 62.23 5.25 22.37 92.97 2.32 19.37
13.42 25.87 35.45 17.57 19.97 12.59 11.57 -7.62
16.98 22.97 31.76 -- -- -- 16.80 0.09
12.90 -- -- -- -- -- -- 1.63
12.08 18.95 27.91 19.44 20.54 11.55 15.61 2.35
13.82 24.51 33.72 6.54 18.36 11.55 2.13 -2.61
</TABLE>
15
<PAGE> 19
For additional information regarding the total return calculations
described above, you should refer to the Statement of Additional Information.
15. ARE POLICY LOANS AVAILABLE?
If you have purchased your policy in connection with a tax-sheltered
annuity "TSA" (Section 403(b)) plan, you may be able to borrow some of your
Accumulation Value subject to certain conditions. (See "Loans" at page 32.)
16. HOW DO I CONTACT MAINSTAY ANNUITIES OR NYLIAC?
<TABLE>
<S> <C> <C>
GENERAL INQUIRIES AND WRITTEN PREMIUM PAYMENTS AND LOAN
REQUESTS PAYMENTS
------------------------------ ------------------------------
REGULAR MAIL MainStay Annuities MainStay Annuities
300 Berwyn Park, P.O. Box 3031 P.O. Box 8500-50880
Berwyn, PA 19312-0031 Philadelphia, PA 19178-8500
EXPRESS MAIL First Union National Bank First Union National Bank
Mail Code PA 4223 Mail Code PA 4223
MainStay Annuities MainStay Annuities
Box 50880 Box 50880
401 Market Street 401 Market Street
Philadelphia, PA 19106 Philadelphia, PA 19106
CUSTOMER SERVICE (888) 695-6246
AND UNIT VALUES
</TABLE>
FINANCIAL STATEMENTS
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 period ended December 31, 1999
are included in the Statement of Additional Information.
16
<PAGE> 20
CONDENSED FINANCIAL INFORMATION
The following Accumulation Unit values and the number of Accumulation Units
outstanding for each Investment Division for each fiscal year ended December 31
presented below have been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report on the related financial statements appears in the
Statement of Additional Information. Values and units shown are for full year
periods, except where indicated. This information should be read in conjunction
with the Separate Account financial statements and notes thereto which appear in
the Statement of Additional Information.
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL APPRECIATION CASH MANAGEMENT
------------------------------------------- ---------------------------------------------
1999 1998 1997 1996 1995(a) 1999 1998 1997 1996 1995(a)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $23.09 $16.95 $13.92 $11.89 $10.00 $ 1.14 $ 1.10 $ 1.06 $ 1.03 $ 1.00
Accumulation Unit value
(end of period)........ $28.55 $23.09 $16.95 $13.92 $11.89 $ 1.18 $ 1.14 $ 1.10 $ 1.06 $ 1.03
Number of units
outstanding
(in 000s) (end of
period)................ 23,024 15,940 11,001 6,949 951 248,786 105,842 43,157 32,709 13,190
<CAPTION>
MAINSTAY VP MAINSTAY VP
CONVERTIBLE GOVERNMENT
---------------------------------- -------------------------------------------
1999 1998 1997 1996(b) 1999 1998 1997 1996 1995(a)
----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $12.14 $11.78 $10.35 $10.00 $12.37 $11.51 $10.66 $10.57 $10.00
Accumulation Unit value
(end of period)........ $17.00 $12.14 $11.78 $10.35 $11.98 $12.37 $11.51 $10.66 $10.57
Number of units
outstanding
(in 000s) (end of
period)................ 3,826 3,139 2,205 1,250 5,008 3,208 1,103 855 178
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP
HIGH YIELD MAINSTAY VP
CORPORATE BOND INTERNATIONAL EQUITY
------------------------------------------- -------------------------------------------
1999 1998 1997 1996 1995(a) 1999 1998 1997 1996 1995(a)
----- ----- ----- ----- ------ ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $14.12 $13.95 $12.52 $10.83 $10.00 $14.95 $12.32 $11.88 $10.90 $10.00
Accumulation Unit value
(end of period)........ $15.72 $14.12 $13.95 $12.52 $10.83 $18.88 $14.95 $12.32 $11.88 $10.90
Number of units
outstanding
(in 000s) (end of
period)................ 25,509 21,960 14,577 6,539 648 1,204 1,012 932 692 67
<CAPTION>
MAINSTAY VP MAINSTAY VP
TOTAL RETURN VALUE
------------------------------------------- -------------------------------------------
1999 1998 1997 1996 1995(a) 1999 1998 1997 1996 1995(a)
----- ----- ----- ----- ------ ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $18.28 $14.58 $12.55 $11.36 $10.00 $15.76 $16.67 $13.76 $11.32 $10.00
Accumulation Unit value
(end of period)........ $21.09 $18.28 $14.58 $12.55 $11.36 $16.91 $15.76 $16.67 $13.76 $11.32
Number of units
outstanding
(in 000s) (end of
period)................ 14,509 11,136 7,629 5,154 665 9,782 10,004 7,236 3,377 432
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
BOND GROWTH EQUITY INDEXED EQUITY
------------------------------------------- ------------------------------------------- ------
1999 1998 1997 1996 1995(a) 1999 1998 1997 1996 1995(a) 1999
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $12.37 $11.50 $10.64 $10.57 $10.00 $21.87 $17.52 $14.01 $11.42 $10.00 $23.19
Accumulation Unit value
(end of period)........ $12.02 $12.37 $11.50 $10.64 $10.57 $28.02 $21.87 $17.52 $14.01 $11.42 $27.60
Number of units
outstanding
(in 000s) (end of
period)................ 6,871 4,993 1,981 1,193 173 11,321 8,239 4,979 2,276 241 24,805
<CAPTION>
AMERICAN
CENTURY DREYFUS EAGLE ASSET
MAINSTAY VP
INDEXED EQUITY
---------------------------------- ---------------- ---------------- ----------------
1998 1997 1996 1995(a) 1999 1998(c) 1999 1998(c) 1999 1998(c)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $18.30 $13.97 $11.58 $10.00 $10.86 $10.00 $10.19 $10.00 $11.68 $10.00
Accumulation Unit value
(end of period)........ $23.19 $18.30 $13.97 $11.58 $12.59 $10.86 $10.72 $10.19 $19.06 $11.68
Number of units
outstanding
(in 000s) (end of
period)................ 17,575 9,982 4,327 358 3,997 2,263 2,397 1,629 2,730 1,408
<CAPTION>
LORD ABBETT
DEVELOPING
GROWTH
----------------
1999 1998(c)
----- -----
<S> <C> <C>
Accumulation Unit value
(beginning of
period)................ $ 9.12 $10.00
Accumulation Unit value
(end of period)........ $11.89 $ 9.12
Number of units
outstanding
(in 000s) (end of
period)................ 2,276 1,573
</TABLE>
- ------------
(a) For the period May 1, 1995 (commencement of operations) through December 31,
1995.
(b) For the period October 1, 1996 (commencement of operations) through December
31, 1996.
(c) For the period May 1, 1998 (commencement of operations) through December 31,
1998.
17
<PAGE> 21
CONDENSED FINANCIAL INFORMATION--(CONTINUED)
<TABLE>
<CAPTION>
ALGER AMERICAN
SMALL CALVERT FIDELITY VIP II
CAPITALIZATION SOCIAL BALANCED CONTRAFUND(R)
---------------------------------- ------------------------------------------- ---------------
1999 1998 1997 1996(b) 1999 1998 1997 1996 1995(a) 1999 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $11.97 $10.51 $ 9.57 $10.00 $16.92 $14.76 $12.46 $11.22 $10.00 $16.68 $13.01
Accumulation Unit value
(end of period)........ $16.93 $11.97 $10.51 $ 9.57 $18.72 $16.92 $14.76 $12.46 $11.22 $20.44 $16.68
Number of units
outstanding
(in 000s) (end of
period)................ 3,063 1,904 1,060 125 987 594 282 123 17 12,004 7,022
<CAPTION>
FIDELITY VIP II
CONTRAFUND(R) EQUITY-INCOME
---------------- ----------------------------------
1997 1996(b) 1999 1998 1997 1996(b)
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $10.63 $10.00 $14.53 $13.20 $10.45 $10.00
Accumulation Unit value
(end of period)........ $13.01 $10.63 $15.23 $14.53 $13.20 $10.45
Number of units
outstanding
(in 000s) (end of
period)................ 3,079 241 8,139 5,850 2,267 149
</TABLE>
<TABLE>
<CAPTION>
JANUS MFS
JANUS ASPEN SERIES GROWTH
ASPEN SERIES WORLDWIDE WITH INCOME
BALANCED GROWTH SERIES
---------------------------------- ---------------------------------- ----------------
1999 1998 1997 1996(b) 1999 1998 1997 1996(b) 1999 1998(c)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $16.32 $12.32 $10.24 $10.00 $15.86 $12.48 $10.36 $10.00 $10.57 $10.00
Accumulation Unit value
(end of period)........ $20.40 $16.32 $12.32 $10.24 $25.73 $15.86 $12.48 $10.36 $11.12 $10.57
Number of units
outstanding
(in 000s) (end of
period)................ 16,575 6,418 2,043 125 12,816 7,855 4,392 269 1,685 435
<CAPTION>
MFS MORGAN STANLEY T. ROWE PRICE VAN ECK
RESEARCH EMERGING EQUITY WORLDWIDE HARD
SERIES MARKETS EQUITY INCOME ASSETS
---------------- --------------------------------- ---------------- ---------------
1999 1998(c) 1999 1998 1997 1996(b) 1999 1998(c) 1999 1998(c)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $10.83 $10.00 $ 7.40 $9.89 $10.00 $10.00 $10.13 $10.00 $8.02 $10.00
Accumulation Unit value
(end of period)........ $13.25 $10.83 $14.27 $7.40 $ 9.89 $10.00 $10.36 $10.13 $9.57 $ 8.02
Number of units
outstanding
(in 000s) (end of
period)................ 999 252 1,659 841 827 80 2,387 995 216 53
</TABLE>
- ------------
(a) For the period May 1, 1995 (commencement of operations) through December 31,
1995.
(b) For the period October 1, 1996 (commencement of operations) through December
31, 1996.
(c) For the period May 1, 1998 (commencement of operations) through December 31,
1998.
18
<PAGE> 22
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
AND THE SEPARATE ACCOUNT
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
New York Life Insurance and Annuity Corporation ("NYLIAC") is a stock life
insurance company incorporated in Delaware in 1980. NYLIAC is licensed to sell
life, accident and health insurance and annuities in the District of Columbia
and all states. In addition to the policies we describe in this Prospectus,
NYLIAC offers other life insurance policies and annuities.
NYLIAC is a wholly-owned subsidiary of New York Life Insurance Company
("New York Life"), a mutual life insurance company doing business in New York
since 1845. NYLIAC held assets of $29.669 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.
THE SEPARATE ACCOUNT
The Separate Account was established on November 30, 1994, pursuant to
resolutions of the NYLIAC Board of Directors. The Separate Account is registered
as a unit investment trust with the Securities and Exchange Commission under the
Investment Company Act of 1940. The Securities and Exchange Commission, however,
does not supervise 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 our other assets. The Separate Account assets are not
chargeable with liabilities incurred in any of NYLIAC's other business
operations (except to the extent that assets in the Separate Account exceed the
reserves and other liabilities of that Separate Account). The income, capital
gains and capital losses incurred on the assets of the Separate Account are
credited to or 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 the investment performance of the
Fixed Account, the DCA Accounts and any other separate account of NYLIAC.
The Separate Account currently has 26 Investment Divisions. Premium
payments allocated to the Investment Divisions are invested solely in the
corresponding Eligible Portfolios of the relevant Fund.
THE PORTFOLIOS
The assets of each Eligible Portfolio are separate from the others and each
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.
WE OFFER NO ASSURANCE THAT ANY OF THE ELIGIBLE PORTFOLIOS WILL ATTAIN THEIR
RESPECTIVE STATED OBJECTIVES.
The Funds also make their shares available to certain other separate
accounts funding variable life insurance policies offered by NYLIAC. This is
called "mixed funding." Except for the MainStay VP Series Fund, all other Funds
also make their shares available to separate accounts of insurance companies
unaffiliated with NYLIAC. This is called "shared funding." Although we do not
anticipate any inherent difficulties arising from mixed and shared funding, it
is theoretically possible that, due to differences in tax treatment or other
considerations, the interests of owners of various contracts participating in a
certain Fund might at some time be in conflict. The Board of Directors/Trustees
of each Fund, each Fund's investment advisers, and NYLIAC are required to
monitor events to identify any material conflicts that arise from the use of the
Funds for mixed and shared funding. For more information about the risks of
mixed and shared funding, please refer to the relevant Fund prospectus.
We provide certain services to you in connection with the investment of
premium payments in the Investment Divisions, which, in turn, invest in the
Eligible Portfolios. These services include, among others, providing information
about the Eligible Portfolios. We receive a service fee from the investment
advisers or other service providers of some of the Funds in return for providing
services of this type. Currently, we receive service fees at annual rates
ranging from .10% to .21% of the aggregate net asset value of the shares of some
of the Eligible Portfolios held by the Investment Divisions.
19
<PAGE> 23
The Eligible Portfolios of the relevant Funds, along with their investment
advisers, are listed in the following table:
<TABLE>
<CAPTION>
FUND INVESTMENT ADVISERS ELIGIBLE PORTFOLIOS
<S> <C> <C>
MainStay VP Series Fund, Inc. MacKay Shields 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. New York Life Insurance Company MainStay VP American Century Income & Growth;
MainStay VP Dreyfus Large Company Value;
MainStay VP Eagle Asset Management Growth
Equity;
MainStay VP Lord Abbett Developing Growth
The Alger American Fund Fred Alger Management, Inc. Alger American Small Capitalization
Calvert Variable Series, Inc. Calvert Asset Management Company Calvert Variable Series, Inc. Social Balanced
Portfolio
Fidelity Variable Insurance Fidelity Management and Research Fidelity VIP II Contrafund(R)
Products Fund II Company
Fidelity Variable Insurance Fidelity Management and Research Fidelity VIP Equity-Income
Products Fund Company
Janus Aspen Series Janus Capital Corporation Janus Aspen Series Balanced;
Janus Aspen Series Worldwide Growth
MFS(R) Variable Insurance MFS Investment Management(R) MFS(R) Growth With Income Series;
Trust(SM) MFS(R) Research Series
The Universal Institutional Funds, Morgan Stanley Asset Management Morgan Stanley--UIF Emerging Markets Equity
Inc.
T. Rowe Price Equity Series, Inc. T. Rowe Price Associates, Inc. T. Rowe Price Equity Income
Van Eck Worldwide Insurance Trust Van Eck Associates Corporation Van Eck Worldwide Hard Assets
</TABLE>
Please refer to the attached prospectuses of the respective Funds for a complete
description of the Funds, the investment advisers and the Portfolios. The Funds'
prospectuses should be read carefully before any decision is made concerning the
allocation of premium payments to an Investment Division corresponding to a
particular Eligible Portfolio.
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
NYLIAC retains the right, subject to any applicable law, to make additions
to, deletions from, or substitutions for, the Eligible Portfolio shares held by
any Investment Division. NYLIAC reserves the right to eliminate the shares of
any of the Eligible Portfolios and to substitute shares of another portfolio of
a Fund, or of another registered open-end management investment company. We may
do this if the shares of the Eligible Portfolios are no longer available for
investment or if we believe investment in any Eligible Portfolio would become
inappropriate in view of the purposes of the Separate Account. To the extent
required by law, we will not make substitutions of shares attributable to your
interest in an Investment Division until you have been notified of the change.
This does not prevent the Separate Account from purchasing other securities for
other series or classes of policies, or from processing a conversion between
series or classes of policies on the basis of requests made by policy owners.
20
<PAGE> 24
We may establish new Investment Divisions when we determine, in our sole
discretion, that marketing, tax, investment or other conditions so warrant. We
will make any new Investment Divisions available to existing policy owners on a
basis we determine. We may also eliminate one or more Investment Divisions, if
we determine, in our sole discretion, that marketing, tax, investment or other
conditions warrant.
In the event of any substitution or change, NYLIAC may, by appropriate
endorsement, change the policies to reflect such substitution or change. 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 payable date.
THE POLICIES
This is a flexible premium policy which means additional premium payments
can be made. It is issued on the lives of individual Annuitants.
The policies are variable. This means that the Accumulation Value will
fluctuate based on the investment experience of the Investment Divisions you
select. The interest credited on the Fixed Accumulation Value and, in states
where approved, the DCA Accumulation Value will also vary. NYLIAC does not
guarantee the investment performance of the Separate Account or of the Funds.
You bear the entire investment risk with respect to amounts allocated to the
Investment Divisions of the Separate Account. We offer no assurance that the
investment objectives of the Investment Divisions will be achieved. Accordingly,
amounts allocated to the Investment Divisions of the Separate Account are
subject to the risks inherent in the securities markets and, specifically, to
price fluctuations in the Funds' investments.
As the owner of the policy, you have the right to (a) change the
Beneficiary, (b) name a new owner (on Non-Qualified Policies only), (c) receive
Income Payments, and (d) name a payee to receive Income Payments. You cannot
lose these rights. However, all rights of ownership cease upon your death.
SELECTING THE VARIABLE ANNUITY THAT'S RIGHT FOR YOU
In addition to the policy described in this prospectus, we offer other
variable annuities, with different features, fees and charges. Your registered
representative can help you decide which is best for you based on your
individual circumstances, time horizon and liquidity preferences. The MainStay
Plus Variable Annuity is designed generally for purchasers with an intermediate
time horizon. The MainStay Access Variable Annuity is designed generally for
purchasers with a shorter time horizon. Although there is no surrender charge
under a MainStay Access Variable Annuity, other charges are somewhat higher than
those in other policies.
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<PAGE> 25
The chart below outlines some of the different features for each variable
annuity we offer. Your registered representative can provide you with a
prospectus for one or more of these annuities, which contains more complete
information.
<TABLE>
<CAPTION>
MAINSTAY PLUS MAINSTAY ACCESS
VARIABLE ANNUITY VARIABLE ANNUITY
<S> <C> <C>
DCA Advantage Plan Yes (6, 12, 18 month accounts are No
available)
Surrender Charge Period 6 years (7%, 7%, 7%, 6%, 5%, 4%) (Based N/A
on each premium payment date)
Death Benefit Guarantee Annual Reset to age 85* Annual Reset to age 80
Total Separate Account Charges 1.40% 1.55%
(mortality and expense risk charge and
administration fee)
Annual Policy Fee $30 $40
Minimum Cash Value Required to Waive $20,000 $50,000
Policy Fee
</TABLE>
All policies and features may not be available in all states.
* Every 3 years in some states.
QUALIFIED AND NON-QUALIFIED POLICIES
We designed the policies primarily for the accumulation of retirement
savings, and to provide income at a future date. We issue both Qualified and
Non-Qualified Policies. Both types of policies offer tax-deferred accumulation.
You may purchase a Non-Qualified Policy with after-tax dollars to provide for
retirement income other than through a tax-qualified plan. You may purchase a
Qualified Policy with pre-tax dollars for use with any one of the tax-qualified
plans listed below.
(1) Section 403(b) Tax Sheltered Annuities purchased by employees of
certain tax-exempt organizations and certain state-supported
educational institutions;
(2) Section 408 or 408A Individual Retirement Annuities ("IRAs"), including
Roth IRAs;
(3) Section 457 Deferred Compensation Plans; and
(4) Section 403(a) annuities.
Please see "Federal Tax Matters" at page 36 for a detailed description of
these plans.
If you are considering a Qualified Policy, you should be aware that this
annuity will fund a retirement plan that already provides tax deferral under the
Internal Revenue Code. In such situations, the tax deferral of the annuity does
not provide additional benefits. In addition, you should be aware that there are
fees and charges in an annuity that may not be included in other types of
investments which may be more or less costly. However, the fees and charges
under the policies are designed to provide for certain payment guarantees and
features other than tax deferral that may not be available in other investments.
They include:
(1) a Fixed Account option, which features a guaranteed fixed interest
rate;
(2) a death benefit that is payable should you die while the policy is in
force, which is reset every three years (or every year in states where
approved) and is guaranteed to be at least the amount of your premium
payments, less any outstanding loan balance, partial withdrawals and
surrender charges;
(3) the option for your Beneficiary to receive a guaranteed amount of
monthly income for his or her lifetime should you die prior to the
Annuity Commencement Date;
(4) the option to receive a guaranteed amount of monthly income for life
after the first Policy Year; and
(5) two riders (an Unemployment Benefit Rider and a Living Needs Benefit
Rider), which allow you to withdraw money from your policy without the
imposition of surrender charges, subject to the terms of each rider.
These features are explained in detail in this Prospectus. You should consult
with your tax or legal advisor to determine if the policy is suitable for your
tax qualified plan.
POLICY APPLICATION AND PREMIUM PAYMENTS
You can purchase a policy by completing an application with a registered
representative. The application is sent to us with your initial premium payment.
In addition, in states where permitted, you can also instruct a
22
<PAGE> 26
broker-dealer with whom NYLIAC has entered into an agreement to forward the
initial premium payment along with our "Policy Request" form to us. If the
application or Policy Request supplied by a broker-dealer is complete and
accurate, and we have received all other information necessary to process the
application, we will credit the initial premium payment within two Business Days
after receipt. If we cannot credit the initial premium payment within five
Business Days after we receive it because the application or Policy Request is
incomplete or inaccurate, we will contact you or the broker-dealer providing the
application or Policy Request and explain the reason for the delay. Unless you
consent to NYLIAC's retaining the initial premium payment and crediting it as
soon as the necessary requirements are fulfilled, we will offer to refund the
initial premium payment immediately. Acceptance of applications is subject to
NYLIAC's rules. We reserve the right to reject any application or initial
premium payment. YOU ARE ENCOURAGED TO SEND SUBSEQUENT PREMIUM PAYMENTS DIRECTLY
AS INDICATED IN PAGE 16.
If we issue your policy based on a Policy Request, we will require you to
provide to us either a signed acknowledgement of the information contained in
the Policy Request in a form acceptable to us, or, where required by applicable
state law or regulation, a signed application form. From the time we issue the
policy until we receive the signed acknowledgement or application, the
Beneficiary under the policy will be the policy owner (or the estate). Also
policy transactions may not be made unless the Beneficiary designation or
transaction request is signature guaranteed. Upon receipt of the signed
acknowledgement or application form, the Beneficiary will be specified under the
policy and we will process transactions requested with respect to the policy
without requiring a signature guarantee.
We will allocate the initial premium payments to the Fixed Account or the
DCA Advantage Plan Accounts immediately. In states where approved, we will also
allocate the initial premium payments designated to the Investment Divisions
immediately. Otherwise, we will allocate the initial premium payments designated
to the Investment Divisions to the MainStay VP Cash Management Investment
Division until 15 days after the policy is issued. At the end of this period, we
will allocate the premium payments in accordance with your instructions. Please
check with your registered representative to determine how the initial premium
payment will be allocated under your policy.
You may allocate the initial premium payments in up to ten Allocation
Alternatives and the DCA Advantage Plan Accounts inclusively. Thereafter, you
may maintain the Accumulation Value in up to 18 Investment Divisions and the DCA
Advantage Plan Accounts inclusively plus the Fixed Account at any one time. We
will credit subsequent premium payments to the policy at the close of the
Business Day on which they are received at MainStay Annuities. (See page 16.)
Moreover, you may increase or decrease the percentages of the premium payments
(which must be in whole number percentages) allocated to each Allocation
Alternative at the time a premium payment is made. However, any change to the
policy's allocations may not result in the Accumulation Value being allocated to
more than 18 Investment Divisions and the DCA Advantage Plan Accounts
inclusively plus the Fixed Account.
Unless we permit otherwise, the minimum initial premium payment is $2,000
for Qualified Policies and $5,000 for Non-Qualified Policies. You may make
additional premium payments of at least $100 or such lower amount as we may
permit at any time or by any method NYLIAC makes available. For residents of the
states of Massachusetts, Maryland, New Jersey and Washington, however,
additional premium payments may only be made until either the Annuitant reaches
age 64 or the fourth Policy Year, whichever is later. The currently available
methods of payment are direct payments to NYLIAC, pre-authorized monthly
deductions from your bank, a credit union or similar accounts and any other
method agreed to by us. You may make additional premium payments at any time
before the Annuity Commencement Date and while you and the Annuitant are living.
The maximum aggregate amount of premium payments we accept is $1,000,000 without
prior approval. NYLIAC reserves the right to limit the dollar amount of any
premium payment.
For Qualified Policies, you may not make premium payments in any Policy
Year that exceed the amount permitted by the plan or by law.
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 a payment is returned for
insufficient funds for two consecutive periods, the privileges to pay by check
or electronically will be suspended until you notify us to reinstate it, and we
agree.
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<PAGE> 27
YOUR RIGHT TO CANCEL ("FREE LOOK")
You may cancel the policy by returning it to us, or to the registered
representative through whom you purchased it, within 10 days of delivery of the
policy or such longer period as required under state law. In states where
approved, you will receive the policy's Accumulation Value on the date we
receive the policy, without any deduction for premium taxes. This amount may be
more or less than your premium payments. Otherwise, you will receive from us the
greater of (i) the initial premium payment less any prior partial withdrawals or
(ii) the Accumulation Value on the date we receive the policy, without any
deduction for premium taxes or a surrender charge. We will set forth the
provision in your policy.
ISSUE AGES
We can issue Non-Qualified Policies if both you and the Annuitant are not
older than age 85 (age 78 in Pennsylvania and age 80 in New York). We will
accept additional premium payments until either you or the Annuitant reaches the
age of 85, unless we agree otherwise. For IRA, Roth IRA, TSA and SEP plans, you
must also be the Annuitant. We can issue Qualified Policies if the
Owner/Annuitant is between the ages of 18 and 80. We will accept additional
premium payments until the Owner/Annuitant reaches the age of 80, unless
otherwise limited by the terms of a particular plan or unless we agree
otherwise.
TRANSFERS
You may transfer amounts between Investment Divisions of the Separate
Account or to the Fixed Account at least 30 days before the Annuity Commencement
Date. You may not make transfers into the DCA Advantage Plan Accounts. Transfers
made from the DCA Advantage Plan Accounts (where available) to the Investment
Divisions are subject to different limitations (See "The DCA Advantage Plan" at
page 38.) Except in connection with transfers made pursuant to traditional
Dollar Cost Averaging, Automatic Asset Reallocation, Interest Sweep, and the DCA
Advantage Plan, the minimum amount that you may transfer from one Investment
Division to other Investment Divisions or to the Fixed Account, is $500. Except
for the traditional Dollar Cost Averaging, Automatic Asset Reallocation and
Interest Sweep options, and the DCA Advantage Plan (where available), if the
value of the remaining Accumulation Units in an Investment Division or Fixed
Account would be less than $500 after you make a transfer, we will transfer the
entire value unless NYLIAC in its discretion determines otherwise. The amount(s)
transferred to other Investment Divisions must be a minimum of $25 for each
Investment Division. Transfers into the Fixed Account may be subject to
restrictions. (See "The Fixed Account" at page 38.)
Money may not be transferred into the Fixed Account if a transfer was made
out of the Fixed Account during the previous six-month period.
There is no charge for the first twelve transfers in any one Policy Year.
NYLIAC reserves the right to charge up to $30 for each transfer in excess of
twelve, subject to any applicable state insurance law requirements. Any transfer
made in connection with traditional Dollar Cost Averaging, Automatic Asset
Reallocation, Interest Sweep and the DCA Advantage Plan (where available) will
not count as a transfer toward the twelve transfer limit. You may make transfers
from the Fixed Account to the Investment Divisions in connection with the
Interest Sweep option and in certain other situations. (See "The Fixed Account"
at page 38.)
Your transfer requests must be in writing on a form approved by NYLIAC or
by telephone in accordance with established procedures. (See "Procedures for
Telephone Transactions" below.) We will make transfers from Investment Divisions
based on the Accumulation Unit values at the end of the Business Day on which we
receive the transfer request. (See "Delay of Payments" at page 34.) Transfers
may be limited in connection with Third Party Investment Advisory Arrangements.
(See page 28.)
PROCEDURES FOR TELEPHONE TRANSACTIONS
You may authorize us to accept telephone instructions from you or other
persons you designate for the following types of transactions: premium
allocations, transfers among Allocation Alternatives and/or the DCA Advantage
Plan, partial withdrawals, periodic partial withdrawals, traditional Dollar Cost
Averaging, Automatic Asset Reallocation, Interest Sweep, or to reset or cancel
the Investment Protection Plan. You can elect this feature by completing and
signing a Telephone Authorization form. Telephone Authorization may be elected,
changed or canceled at any time. You, or other persons you designate, may effect
telephone transactions by speaking with a service representative at (888)
695-6246. Furthermore, we will confirm all telephone transactions in writing.
NYLIAC is not liable for any loss, cost or expense for action on telephone
instructions which are believed to be genuine in accordance with these
procedures. We must receive telephone transfer requests no later than 4:00 p.m.
Eastern Time in order to assure same day processing. We will process requests
received after 4:00 p.m. Eastern Time on the next Business Day.
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<PAGE> 28
DOLLAR COST AVERAGING PROGRAMS
The main objective of dollar cost averaging is to achieve an average cost
per share that is lower than the average price per share during volatile market
conditions. Since you transfer the same dollar amount to an Investment Division
with each transfer, you purchase more units in an Investment Division if the
value per unit is low and fewer units if the value per unit is high. Therefore,
you achieve a lower than average cost per unit if prices fluctuate over the long
term. Similarly, for each transfer out of an Investment Division, you sell more
units in an Investment Division if the value per unit is low and fewer units if
the value per unit is high. Dollar cost averaging does not assure a profit or
protect against a loss in declining markets. Because it involves continuous
investing regardless of price levels, you should consider your financial ability
to continue to make purchases during periods of low price levels. In states
where approved, NYLIAC will also offer the DCA Advantage Plan under which you
may utilize the 6-month, 12-month or 18-month DCA Advantage Plan Accounts. (See
"The DCA Advantage Plan Accounts" at page 36.) We do not count transfers under
dollar cost averaging as part of your 12 free transfers each Policy Year.
We have set forth below an example of how dollar cost averaging works. In
the example, we have assumed that you want to move $100 from the Cash Management
Investment Division to the MainStay VP Growth Equity Investment Division each
month. Assuming the Accumulation Unit values below, you would purchase the
following number of Accumulation Units:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<CAPTION>
AMOUNT ACCUMULATION ACCUMULATION UNITS
MONTH TRANSFERRED UNIT VALUE PURCHASED
<S> <C> <C> <C>
1 $100 $10.00 10.00
2 $100 $ 8.00 12.50
3 $100 $12.50 8.00
4 $100 $ 7.50 13.33
Total $400 $38.00 43.83
</TABLE>
The average unit price is calculated as follows:
<TABLE>
<S> <C> <C> <C> <C>
Total share price $38.00
- ----------------------- = ------ = $9.50
Number of months 4
</TABLE>
The average unit cost is calculated as follows:
<TABLE>
<S> <C> <C> <C> <C>
Total amount transferred $400.00
- ---------------------------- = ------- = $9.13
Total units purchased 43.83
</TABLE>
In this example, you would have paid an average cost of $9.13 per unit
while the average price per unit is $9.50.
(a) Traditional Dollar Cost Averaging
This option permits systematic investing to be made in equal installments
over various market cycles to help reduce risk. You may specify, prior to the
Annuity Commencement Date, a specific dollar amount to be transferred from any
Investment Divisions to any combination of Investment Divisions and/or the Fixed
Account. You specify the Investment Divisions to transfer money from, the
Investment Divisions and/or Fixed Account to transfer money to, the amounts to
be transferred, the date on which transfers will be made, subject to our rules,
and the frequency of the transfers (either monthly, quarterly, semi-annually or
annually). You may not make transfers from the Fixed Account, but you may make
transfers into the Fixed Account. Each transfer from an Investment Division must
be at least $100. You must have a minimum Accumulation Value of $5,000 to elect
this option. NYLIAC may reduce the minimum transfer amount and minimum
Accumulation Value at its discretion.
NYLIAC will make all dollar cost averaging transfers on the day of each
calendar month that you specify or on the next Business Day (if the day you have
specified is not a Business Day or does not exist in that month). You may
specify any day of the month. In order to process a transfer under our
traditional Dollar Cost Averaging option, NYLIAC must have received a request in
writing on a form acceptable by us, or by telephone (see "Procedures for
Telephone Transactions" at page 24) no later than one week prior to the date the
transfers are to begin.
You may cancel the traditional Dollar Cost Averaging option at any time in
a written request or by telephone (see "Procedures for Telephone Transactions"
at page 24). NYLIAC may also cancel this option if the
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<PAGE> 29
Accumulation Value is less than $5,000, or such lower amount as we may
determine. You may not elect the traditional Dollar Cost Averaging option if you
have selected the Automatic Asset Reallocation option.
(b) The DCA Advantage Plan
THE DCA ADVANTAGE PLAN IS AVAILABLE ONLY IN STATES WHERE APPROVED. This
feature permits you to set up automatic dollar cost averaging using the 6-month,
12-month and/or 18-month DCA Advantage Plan Accounts when an initial premium
payment or a subsequent premium payment is made. You can request the DCA
Advantage Plan in addition to the traditional Dollar Cost Averaging, Automatic
Asset Reallocation, or Interest Sweep options.
You can enroll in any one, two or all three DCA Advantage Plan Accounts.
You must allocate a minimum of $5,000 in each DCA Advantage Plan Account that is
selected. You must specify the Investment Divisions into which transfers from
the DCA Advantage Plan Accounts are to be made. However, you may not select a
DCA Advantage Plan Account with a duration which would extend beyond the Annuity
Commencement Date. Amounts in the DCA Advantage Plan Accounts will be
transferred to the Investment Divisions in 6 monthly transfers if the 6-month
DCA Advantage Plan Account is selected, in 12-monthly or 4-quarterly transfers
if the 12-month DCA Advantage Plan Account is selected or in 18-monthly or
6-quarterly transfers if the 18-month DCA Advantage Plan Account is selected.
For monthly transfers, dollar cost averaging will begin one month from the date
NYLIAC receives the premium payment and transfers will be made on the same day
or on the next Business Day (if the day is not a Business Day or does not exist
in that month) each subsequent month for the duration of the DCA Advantage Plan
Account. For quarterly transfers, dollar cost averaging will begin three months
from the date NYLIAC receives the premium payment and transfers will be made on
the same day or on the next Business Day (if the day is not a Business Day or
does not exist in that month) every subsequent three month period for the
duration of the DCA Advantage Plan Account. The amount of each transfer will be
calculated at the time of the transfer based on the number of remaining monthly
or quarterly transfers and the remaining value in a DCA Advantage Plan Account.
For example, the amount of the first monthly transfer out of a 6-month DCA
Advantage Plan Account will equal 1/6 of the value of the DCA Advantage Plan
Account on the date of the transfer. The amount of each of the five remaining
transfers will equal 1/5, 1/4, 1/3, 1/2 and the balance, respectively, of the
value of the DCA Advantage Plan Account on the date of each transfer.
You may have a 6-month, a 12-month and an 18-month DCA Advantage Plan
Account open simultaneously in accordance with established procedures. However,
you may not have more than one DCA Advantage Plan Account with the same duration
open at the same time. Accordingly, any subsequent premium payment we receive
for a duration that is already open will be allocated to that same DCA Advantage
Plan Account already opened. The entire value of the DCA Advantage Plan Account
will be completely transferred to the Investment Divisions within the duration
specified. For example, if you allocate an initial premium payment to the
12-month DCA Advantage Plan Account under which the 12-month term will end on
December 31, 1999 and you make a subsequent premium payment to the 12-month DCA
Advantage Plan Account before December 31, 1999, we will allocate the subsequent
premium payment to the same 12-month DCA Advantage Plan Account already opened
and transfer the entire value of the 12-month DCA Advantage Plan Account to the
Investment Divisions by December 31, 1999 even though a portion of the money was
not in that DCA Advantage Plan Account for the entire 12-month period.
You can make partial withdrawals and transfers (in addition to the
automatic transfers described above) from the DCA Advantage Plan Accounts. We
will make partial withdrawals and transfers first from the DCA Accumulation
Value attributed to the initial premium payment and then from the DCA
Accumulation Value attributed to subsequent allocations in the order received.
You cannot make transfers into the DCA Advantage Plan Accounts from any
Allocation Alternative.
AUTOMATIC ASSET REALLOCATION
This option allows you to maintain the percentage allocated to each
Investment Division at a pre-set level. For example, you might specify that 50%
of the Variable Accumulation Value of your policy be allocated to the MainStay
VP Convertible Investment Division and 50% of the Variable Accumulation Value be
allocated to the MainStay VP International Equity Investment Division. Over
time, the fluctuations in each of these Investment Division's investment results
will shift the percentages. If you elect this Automatic Asset Reallocation
option, NYLIAC will automatically transfer your Variable Accumulation Value back
to the percentages you specify. You may choose to have reallocations made
quarterly, semi-annually or annually. You must also specify the day of the month
that reallocations are to occur. The minimum Variable Accumulation Value
required to elect this option is $5,000. There is no minimum amount which you
must allocate among the Investment Divisions under this option. You may elect
Automatic Asset Reallocation by submitting the request in writing on a form
acceptable to
26
<PAGE> 30
us. You may not elect the Automatic Asset Reallocation option if you have
selected the Dollar Cost Averaging option.
You can cancel the Automatic Asset Reallocation option at any time in a
written request or by telephone (see "Procedures for Telephone Transactions" at
page 24). NYLIAC may also cancel this option if the Accumulation Value is less
than $5,000, or such a lower amount as we may determine. You may not elect the
Automatic Asset Reallocation option if you have selected the traditional Dollar
Cost Averaging option.
INTEREST SWEEP
You can request, prior to the Annuity Commencement Date, that the interest
earned on monies allocated to the Fixed Account be transferred from the Fixed
Account to any combination of Investment Divisions. You will specify the
Investment Divisions, the frequency of the transfers (either monthly, quarterly,
semi-annually or annually), and the day of each calendar month to make the
transfers. The minimum Fixed Accumulation Value required to elect this option is
$5,000, but this amount may be reduced at our discretion. NYLIAC will make all
Interest Sweep transfers on the day of each calendar month you have specified or
on the next Business Day (if the day you have specified is not a Business Day or
does not exist in that month).
You may request the Interest Sweep option in addition to either traditional
Dollar Cost Averaging, Automatic Asset Reallocation or the DCA Advantage Plan.
If an Interest Sweep transfer is scheduled for the same day as a transfer
related to the traditional Dollar Cost Averaging option, the Automatic Asset
Reallocation option or the DCA Advantage Plan, we will process the Interest
Sweep transfer first.
YOU MAY NOT TRANSFER MORE THAN 20% of the Fixed Accumulation Value at the
beginning of the Policy Year from the Fixed Account to the Investment Divisions
during a Policy Year. (See "The Fixed Account--Transfers to Investment
Divisions" at page 38.) If an Interest Sweep option transfer would cause more
than 20% of the Fixed Accumulation Value at the beginning of the Policy Year to
be transferred from the Fixed Account, we will not process the transfer and the
Interest Sweep option will be automatically suspended. Participation in the
Interest Sweep option will not affect the applicability of the Fixed Account
Initial Premium Guarantee described on page 38.
You can cancel the Interest Sweep option at any time in a written request
on a form acceptable to us or by telephone (see "Procedures for Telephone
Transactions" at page 24). We may also cancel this option if the Fixed
Accumulation Value is less than $5,000, or such a lower amount as we may
determine.
ACCUMULATION PERIOD
(a) Crediting of Premium Payments
You can allocate a portion of each premium payment to one or more
Investment Divisions or the Fixed Account. The minimum amount that you may
allocate to any one Investment Division or the Fixed Account is $25 (or such
lower amount as we may permit). In states where approved, you may also allocate
all or a portion of each premium payment to one or more DCA Advantage Plan
Accounts. The minimum amount that you may allocate to a DCA Account is $5,000.
(See "The DCA Advantage Plan" at page 38.) In states where approved, we will
allocate the initial premium payment to the Investment Divisions you have
specified immediately. Otherwise, we will place the initial premium payment,
except any initial premium payment allocated to the Fixed Account or the DCA
Advantage Plan Accounts, in the MainStay VP Cash Management Investment Division
until 15 days after we issue the policy. Please check with your registered
representative to determine how the initial premium payment will be allocated
under your policy. We will allocate all additional premium payments to the
Investment Divisions and/or the Fixed Account as requested. We will allocate all
additional premium payments to the DCA Advantage Plan based on instructions from
you at the time the additional premium payment is made.
We will credit that portion of each premium payment you allocate to an
Investment Division in the form of Accumulation Units. We determine the number
of Accumulation Units we credit to a policy by dividing the amount allocated to
each Investment Division by the Accumulation Unit value for that Investment
Division on the day we are making this calculation. The value of an Accumulation
Unit will vary depending on the investment experience of the Portfolio in which
the Investment Division invests. The number of Accumulation Units we credit to a
policy will not, however, change as a result of any fluctuations in the value of
an Accumulation Unit. (See "The Fixed Account" at page 38 for a description of
interest crediting.)
(b) Valuation of Accumulation Units
The value of Accumulation Units in each Investment Division will change
daily to reflect the investment experience of the corresponding Portfolio as
well as the daily deduction of the Separate Account charges. The Statement of
Additional Information contains a detailed description of how we value the
Accumulation Units.
27
<PAGE> 31
THIRD PARTY INVESTMENT ADVISORY ARRANGEMENTS
In some cases, the policy may be sold to policy owners 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 policy owner 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 policy owners 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 policy owners. 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 policy owners.
POLICY OWNER INQUIRIES
Your inquiries should be addressed to MainStay Annuities. (See page 16).
CHARGES AND DEDUCTIONS
SURRENDER CHARGES
Since no deduction for a sales charge is made from premium payments, we
impose a surrender charge on certain partial withdrawals and surrenders of the
policies. The surrender charge is based on your premium payments and is not
assessed on any earnings. The surrender charge covers certain expenses relating
to the sale of the policies, including commissions to registered representatives
and other promotional expenses. We measure the surrender charge as a percentage
of the amount withdrawn or surrendered. The surrender charge may apply to
amounts applied under certain Income Payment options.
If you surrender your policy, we deduct the surrender charge from the
amount paid to you. In the case of a partial withdrawal, you can direct NYLIAC
to take surrender charges either from the remaining value of the Allocation
Alternatives and/or the DCA Advantage Plan Accounts from which the partial
withdrawals are made, or from the amount paid to you. If the remaining value in
an Allocation Alternative and/or the DCA Advantage Plan Accounts is less than
the necessary surrender charge, we will deduct the remainder of the charge from
the amount withdrawn from that Allocation Alternative and/or the DCA Advantage
Plan Accounts.
The maximum surrender charge will be 7% of the amount withdrawn. The
percentage of the surrender charge varies, depending upon the length of time a
premium payment is in your policy before it is withdrawn. For purposes of
calculating the applicable surrender charge, we deem premium payments to be
withdrawn on a first-in, first-out basis. Unless required otherwise by state
law, the surrender charge for amounts withdrawn or surrendered during the first
three Payment Years following the premium payment to which such withdrawal or
surrender is attributable is 7% of the amount withdrawn or surrendered. This
charge then declines by 1% per
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<PAGE> 32
year for each additional Payment Year, until the sixth Payment Year, after which
no charge is made, as shown in the following chart:
AMOUNT OF SURRENDER CHARGE
<TABLE>
<CAPTION>
SURRENDER CHARGE
----------------
<S> <C>
1........................................................... 7%
2........................................................... 7%
3........................................................... 7%
4........................................................... 6%
5........................................................... 5%
6........................................................... 4%
7+.......................................................... 0%
</TABLE>
EXCEPTIONS TO SURRENDER CHARGES
We will not assess a surrender charge:
(a) on amounts you withdraw in any Policy Year which are less than or
equal to the greater of (i) 10% of the Accumulation Value at the
time of surrender or withdrawal or (ii) the Accumulation Value
less accumulated premium payments
(b) if NYLIAC cancels the policy;
(c) when we pay proceeds upon the death of the policy owner or the
Annuitant;
(d) when you select an Income Payment Option in any Policy Year after
the first Policy Year;
(e) when a required minimum distribution is made under a Qualified
Policy (this amount will, however, count against the first
exception described above); and
(f) on withdrawals you make under the Living Needs Benefit Rider or
Unemployment Benefit Rider.
OTHER CHARGES
(a) Mortality and Expense Risk Charges
Prior to the Annuity Commencement Date, NYLIAC imposes risk charges to
compensate it for bearing certain mortality and expense risks under the
policies. This charge is equal, on an annual basis, to 1.25% of the average net
asset value of the Separate Account and is deducted daily. We guarantee that
these charges will not increase. If these charges are insufficient to cover
actual costs and assumed risks, the loss will fall on NYLIAC. If the charges are
more than sufficient, we will add any excess to our general funds. We may use
these funds for any corporate purpose, including expenses relating to the sale
of the policies, to the extent that surrender charges do not adequately cover
sales expenses.
The mortality risk assumed is the risk that Annuitants as a group will live
for a longer time than our actuarial tables predict. As a result, we would be
paying more Income Payments than we planned. We also assume a risk that the
mortality assumptions reflected in our guaranteed annuity payment tables, shown
in each policy, will differ from actual mortality experience. Lastly, we assume
a mortality risk that, at the time of death, the guaranteed minimum death
benefit will exceed the policy's Accumulation Value. The expense risk assumed is
the risk that the cost of issuing and administering the policies will exceed the
amount we charge for these services.
(b) Administration Fee
Prior to the Annuity Commencement Date, we also impose an administration
fee intended to cover the cost of providing policy administration services. This
charge is equal, on an annual basis, to .15% of the average daily net asset
value of the Separate Account and is deducted daily.
(c) Policy Service Charge
We deduct an annual policy service charge each Policy Year on the Policy
Anniversary or upon surrender of the policy if on the Policy Anniversary or date
of surrender the Accumulation Value is less than $20,000. This charge is the
lesser of $30 or 2% of the Accumulation Value at the end of the Policy Year or
on the date of
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<PAGE> 33
surrender, whichever is applicable. We deduct the annual policy service charge
from each Allocation Alternative and each DCA Account, if applicable, in
proportion to its percentage of the Accumulation Value on the Policy Anniversary
or date of surrender. This charge is designed to cover the costs for providing
services under the policy such as collecting, processing and confirming premium
payments and establishing and maintaining the available methods of payment.
(d) Investment Protection Plan Rider Charge (optional)
If you selected the Investment Protection Plan (in states where available),
we will deduct a charge on the first Business Day on each policy quarter that
the rider is in effect based on the amount that is guaranteed. We will deduct
this charge beginning with the first policy quarter after the effective date of
the rider. (See "Riders--Investment Protection Plan Rider" at page 36). We will
deduct the charge from each Allocation Alternative and each DCA Advantage Plan
Account in proportion to its percentage of the Accumulation Value on the first
Business Day of the applicable policy quarter.
The maximum annual charge is 1% of the amount that is guaranteed. We may
set a lower charge at our sole discretion. You should check with your registered
representative to determine the percentage we are currently charging before you
select this feature.
If you reset the amount that is guaranteed, a new charge for the rider will
apply. This charge may be more or less than the charge currently in effect on
your policy, but will never exceed the stated maximum. The charge in effect on
the effective date of the rider or on the effective date of any reset will not
change after the date the rider becomes effective. We will continue to deduct
the current charge until the first policy quarter following the effective date
of the reset.
(e) Rider Risk Charge Adjustment (optional)
If you cancel the Investment Protection Plan, we will deduct a Rider Risk
Charge Adjustment from your Accumulation Value. The cancellation will be
effective on the date we receive your request. (See "Riders--Investment
Protection Plan Rider" at page 36). We will deduct the Rider Risk Charge
Adjustment from each Allocation Alternative and each DCA Advantage Plan Account
in proportion to its percentage of the Accumulation Value on that day. We will
not deduct this charge if you surrender your policy. However, surrender charges
may apply.
We will not change the adjustment for a particular policy once it is set on
the date the rider takes effect. The maximum Rider Risk Charge Adjustment is 2%
of the amount that is guaranteed. We may set a lower charge at our sole
discretion. You should check with your registered representative to determine
the percentage we are currently charging before you select this feature.
If you reset the amount that is guaranteed, a new Rider Risk Charge
Adjustment may apply. This charge may be more or less than the charge currently
in effect on your policy, but will never exceed the stated maximum. The
adjustment charge in effect on the effective date of the rider or on the
effective date of any reset will not increase after the rider is issued.
(f) Fund Charges
The value of the assets of the Separate Account will indirectly reflect the
Funds' total fees and expenses. The Funds' total fees and expenses are not part
of the policy. They may vary in amount from year to year. These fees and
expenses are described in detail in the relevant Fund's prospectus and/or
Statement of Additional Information.
GROUP AND SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce the surrender
charge and the policy service charge or change the minimum initial and
additional premium payment requirements. Group arrangements include those in
which a trustee or an employer, for example, purchases policies covering a group
of individuals on a group basis. Sponsored arrangements include those in which
an employer allows us to sell policies to its employees or retirees on an
individual basis.
Our costs for sales, administration, and mortality generally vary with the
size and stability of the group among other factors. We take all these factors
into account when reducing charges. To qualify for reduced charges, a group or
sponsored arrangement must meet certain requirements, including our requirements
for size and number of years in existence. Group or sponsored arrangements that
have been set up solely to buy policies or that have been in existence less than
six months will not qualify for reduced charges.
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<PAGE> 34
We will make any reductions according to our rules in effect when a request
for a policy is approved. We may change these rules from time to time. Any
variation in the surrender charge or policy service charge will reflect
differences in costs or services and will not be unfairly discriminatory.
TAXES
NYLIAC may, where premium taxes are imposed by state law, deduct such taxes
from your policy either (i) when a surrender or cancellation occurs, or (ii) at
the Annuity Commencement Date. Applicable premium tax rates depend upon such
factors as your current state of residency, and the insurance laws and NYLIAC's
status in states where premium taxes are incurred. Current premium tax rates
range from 0% to 3.5%. Applicable premium tax rates are subject to change by
legislation, administrative interpretations or judicial acts.
Under present laws, NYLIAC will also incur state and local taxes (in
addition to the premium taxes described above) in several states. At present,
these taxes are not significant. If they increase, however, NYLIAC may make
charges for such taxes.
NYLIAC does not expect to incur any federal income tax liability
attributable to investment income or capital gains retained as part of the
reserves under the policies. (See "Federal Tax Matters" at page 39.) Based upon
these expectations, no charge is being made currently for corporate federal
income taxes which may be attributable to the Separate Account. Such a charge
may be made in future years for any federal income taxes NYLIAC incurs.
DISTRIBUTIONS UNDER THE POLICY
SURRENDERS AND WITHDRAWALS
You can make partial withdrawals, periodic partial withdrawals, hardship
withdrawals or surrender the policy to receive part or all of the Accumulation
Value at any time before the Annuity Commencement Date and while the Annuitant
is living, by sending a written request on a form acceptable to MainStay
Annuities. In addition, you may request partial withdrawals and periodic partial
withdrawals by telephone. (See "Procedures for Telephone Transactions" at page
24.) The amount available for withdrawal is the Accumulation Value at the end of
the Business Day during which we receive the written or telephonic surrender or
withdrawal request, less any outstanding loan balance, surrender charges,
premium taxes which we may deduct, and policy service charge, if applicable. If
you have not provided us with a written election not to withhold federal income
taxes at the time you make a withdrawal or surrender request, NYLIAC must by law
withhold such taxes from the taxable portion of any surrender or withdrawal. We
will remit that amount to the federal government. In addition, some states have
enacted legislation requiring withholding. We will pay all surrenders or
withdrawals within seven days of receipt of all documents (including documents
necessary to comply with federal and state tax law), subject to postponement in
certain circumstances. (See "Delay of Payments" at page 34.)
Since you assume the investment risk with respect to amounts allocated to
the Separate Account and because certain surrenders or withdrawals are subject
to a surrender charge and premium tax deduction, the total amount paid upon
surrender of the policy (taking into account any prior withdrawals) may be more
or less than the total premium payments made.
Surrenders and withdrawals may be taxable transactions, and the Internal
Revenue Code provides that a 10% penalty tax may be imposed on certain early
surrenders or withdrawals. (See "Federal Tax Matters--Taxation of Annuities in
General" at page 39.)
(a) Surrenders
We may deduct a surrender charge and any state premium tax, if applicable,
less any outstanding loan balance, and less the annual policy service charge, if
applicable, from the amount paid. We will pay the proceeds in a lump sum to you
unless you elect a different Income Payment method. (See "Income Payments" at
page 34.) Surrenders may be taxable transactions and the 10% penalty tax
provisions may be applicable. (See "Federal Tax Matters--Taxation of Annuities
in General" at page 39.)
(b) Partial Withdrawals
The minimum amount that can be withdrawn is $500, unless we agree
otherwise. We will withdraw the amount from the Allocation Alternatives and/or
the DCA Advantage Plan Accounts (where available) in accordance with your
request. If you do not specify how to allocate a partial withdrawal among the
Allocation
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<PAGE> 35
Alternatives and/or the DCA Advantage Plan Accounts (where available), we will
allocate the partial withdrawal on a pro-rata basis. Partial withdrawals may be
taxable transactions and the 10% penalty tax provisions may be applicable. (See
"Federal Tax Matters--Taxation of Annuities in General" at page 39.)
If the requested partial withdrawal is greater than the value in any of the
Allocation Alternatives and/or the DCA Advantage Plan Accounts from which the
partial withdrawal is being made, we will pay the entire value of that
Allocation Alternative and/or the DCA Advantage Plan Accounts, less any
surrender charge that may apply, to you. We will not process partial withdrawal
requests if honoring such requests would result in an Accumulation Value of less
than $2,000.
(c) Periodic Partial Withdrawals
You may elect to receive regularly scheduled partial withdrawals from the
policy. These periodic partial withdrawals may be paid on a monthly, quarterly,
semi-annual, or annual basis. You will elect the frequency of the withdrawals
and the day of the month for the withdrawals to be made. We will make all
withdrawals on the day of each calendar month you specify, or on the next
Business Day (if the day you have specified is not a Business Day or does not
exist in that month). You must specify the Investment Divisions and/or the Fixed
Account from which the periodic partial withdrawals will be made. The minimum
amount under this feature is $100, or such lower amount as we may permit.
Periodic partial withdrawals may be taxable transactions and the 10% penalty tax
provisions may be applicable. (See "Federal Tax Matters--Taxation of Annuities
in General" at page 39.) If you do not specify otherwise, we will withdraw money
on a pro-rata basis from each Investment Division and/or the Fixed Account. You
may make periodic partial withdrawals from the DCA Advantage Plan Accounts.
You can elect to receive "Interest Only" periodic partial withdrawals for
the interest earned on monies allocated to the Fixed Account. If this option is
chosen, the $100 minimum for periodic partial withdrawals will be waived.
However, you must have at least $5,000 in the Fixed Account at the time of each
periodic partial withdrawal, unless we agree otherwise. This option will void
the Fixed Account Initial Premium Guarantee, described at page 38.
(d) Hardship Withdrawals
Under certain Qualified Policies, the Plan Administrator may allow, in its
sole discretion, certain withdrawals it determines to be "Hardship Withdrawals."
The surrender charge and 10% penalty tax, if applicable, and provisions
applicable to partial withdrawals apply to Hardship Withdrawals.
REQUIRED MINIMUM DISTRIBUTION
For IRAs and IRA SEPs, the policy owner is generally not required to elect
the required minimum distribution option until April 1st of the year following
the calendar year he or she attains age 70 1/2. For TSAs, the policy owner is
generally not required to elect the required minimum distribution option until
April 1st of the year following the calendar year he or she attains age 70 1/2
or until April 1st of the year following the calendar year he or she retires,
whichever occurs later.
OUR RIGHT TO CANCEL
If we do not receive any premium payments for a period of two years, and
both the Accumulation Value of your policy and your total premium payments less
any withdrawals and surrender charges are less than $2,000, we reserve the right
to terminate your policy subject to any applicable state insurance law or
regulation. We will notify you of our intention to exercise this right and give
you 90 days to make a premium payment. If we terminate your policy, we will pay
you the Accumulation Value of your policy in one lump sum.
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is the date specified on the Policy Data
Page. The Annuity Commencement Date is the day that Income Payments are
scheduled to commence unless the policy has been surrendered or an amount has
been paid as proceeds to the designated Beneficiary prior to that date. You may
change the Annuity Commencement Date to an earlier date by providing written
notice to NYLIAC. You may defer the Annuity Commencement Date to a later date if
we agree to it, provided that we receive a written notice of the request at
least one month before the last selected Annuity Commencement Date. The Annuity
Commencement Date and Income Payment method for Qualified Policies may also be
controlled by endorsements, the plan, or applicable law.
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<PAGE> 36
DEATH BEFORE ANNUITY COMMENCEMENT
If you or the Annuitant dies prior to the Annuity Commencement Date, we
will pay an amount as proceeds to the designated Beneficiary, as of the date we
receive proof of death and all requirements necessary to make the payment. That
amount will be the greater of:
(a) the Accumulation Value, less any outstanding loan balance;
(b) the sum of all premium payments made, less any outstanding loan
balance, partial withdrawals and surrender charges on those partial
withdrawals; or
(c) the "reset value" plus any additional premium payments made since the
most recent "Reset Anniversary," less any outstanding loan balance,
proportional withdrawals made since the most recent Reset Anniversary
and any surrender charges applicable to such partial withdrawals.
In states where approved, we recalculate the reset value, with respect to
any policy, every year from the date of the initial premium payment ("Reset
Anniversary") until you or the Annuitant reaches age 85. For all other policies,
we calculate the reset value every three years from the date of the initial
premium payment until you or the Annuitant reaches age 85. We calculate the
reset value on the Reset Anniversary based on a comparison between (a) the
current Reset Anniversary's Accumulation Value, and (b) the prior Reset
Anniversary's value, plus any premiums since the prior Reset Anniversary date,
less any proportional withdrawals and surrender charges on those proportional
withdrawals since the last Reset Anniversary date. The greater of the compared
values will be the new reset value. Please consult with your registered
representative regarding the reset value that is available under your particular
policy.
We have set forth below an example of how the death benefit is calculated
in a state where we calculate the reset value every three years. In this
example, we have assumed the following:
(1) you purchase a policy with a $200,000 premium payment;
(2) the Accumulation Value is $250,000 in the second Policy Year;
(3) $20,000 withdrawal is made prior to the policy's third Policy
Anniversary;
(4) the Accumulation Value is $220,000 on the third Policy Anniversary
(Reset Anniversary); and
(5) you die in the fourth Policy Year and the Accumulation Value of the
policy has decreased to $175,000.
The death benefit is the greater of:
<TABLE>
<S> <C> <C>
(a) Accumulation Value = $175,000
(b) Premium payments less any partial = $180,000 ($200,000 - $20,000)
withdrawals; or
(c) Reset value (Accumulation Value on third = $220,000
Policy Anniversary)
</TABLE>
In this example, your Beneficiary(ies) would receive $220,000.
The formula guarantees that the amount we pay will at least equal the sum
of all premium payments (less any outstanding loan balance, partial withdrawals
and surrender charges on such partial withdrawals), independent of the
investment experience of the Separate Account. The Beneficiary may receive the
amount payable in a lump sum or under any life income payment option which is
then available. If more than one Beneficiary is named, each Beneficiary will be
paid a pro rata portion from each Allocation Alternative and the DCA Advantage
Plan Account in which the policy is invested as of the date we receive proof of
death and all requirements necessary to make the payment to that Beneficiary. We
will keep the remaining balance in the policy to pay the other Beneficiaries.
Due to market fluctuations, the remaining Accumulation Value may increase or
decrease and we may pay subsequent Beneficiaries a different amount.
We will make payments in a lump sum to the Beneficiary unless you have
elected or the Beneficiary elects otherwise in a signed written notice which
gives us the information that we need. If such an election is properly made, we
will apply all or part of these proceeds:
(i) under the Life Income Payment Option to provide an immediate
annuity for the Beneficiary who will be the policy owner and
Annuitant; or
(ii) under another Income Payment option we may offer at the time.
Payments under the annuity or under any other method of payment
we make available must be for the life of the Beneficiary, or for
a number of years that is not more than the life expectancy of
the Beneficiary at the time of the
33
<PAGE> 37
policy owner's death (as determined for federal tax purposes), and must begin
within one year after the policy owner's death. (See "Income Payments" at page
34.)
If your spouse is the Beneficiary, we can pay the proceeds to the surviving
spouse if you die before the Annuity Commencement Date or the policy can
continue with the surviving spouse as (a) the new policy owner and, (b) if you
were the Annuitant, as the Annuitant. If a policy is jointly owned, ownership
rights and privileges under the policy must be exercised jointly and benefits
under the policy will be paid upon the death of any joint owner. (See "Federal
Tax Matters--Taxation of Annuities in General" at page 39.)
If the Annuitant and, where applicable under another Income Payment option,
the Joint Annuitant, if any, die after the Annuity Commencement Date, NYLIAC
will pay the sum required by the Income Payment option in effect.
We will make any distribution or application of policy proceeds within 7
days after NYLIAC receives all documents (including documents necessary to
comply with federal and state tax law) in connection with the event or election
that causes the distribution to take place, subject to postponement in certain
circumstances. (See "Delay of Payments" at page 34.)
INCOME PAYMENTS
(a) Election of Income Payment Options
We will make Income Payments under the Life Income Payment Option or under
such other option we may offer at that time where permitted by state laws. We
will require that a lump sum payment be made if the Accumulation Value is less
than $2,000. At any time before the Annuity Commencement Date, you may change
the Income Payment option or request any other method of payment we agree to. If
the Life Income Payment Option is chosen, we may require proof of birth date
before Income Payments begin. For Income Payment options involving life income,
the actual age of the Annuitant will affect the amount of each payment. Since
payments based on older Annuitants are expected to be fewer in number, the
amount of each annuity payment should be greater. We will make payments under
the Life Income Payment Option in the same specified amount and over the life of
the Annuitant with a guarantee of 10 years of payments, even if the Annuitant
dies sooner. NYLIAC does not currently offer variable Income Payment options.
Under Income Payment Options involving life income, the payee may not
receive Income Payments equal to the total premium payments if the Annuitant
dies before the actuarially predicted date of death. We base Income Payment
Options involving life income on annuity tables that vary on the basis of sex,
unless the policy was issued under an employer sponsored plan or in a state
which requires unisex rates.
(b) Other Methods of Payment
If NYLIAC agrees, you (or the Beneficiary upon the death of you or the
Annuitant prior to the Annuity Commencement Date) may choose to have Income
Payments made under some other method of payment or in a lump sum.
(c) Proof of Survivorship
We may require satisfactory proof of survival from time to time before we
pay any Income Payments or other benefits. We will request the proof at least 30
days prior to the next scheduled payment date.
DELAY OF PAYMENTS
We will pay any amounts due from the Separate Account under the policy
within seven days of the date NYLIAC receives all documents (including documents
necessary to comply with federal and state tax law) in connection with a request
unless:
1. The New York Stock Exchange ("NYSE") is closed for other than usual
weekends or holidays, or trading on the NYSE is otherwise
restricted;
2. An emergency exists as defined by the Securities and Exchange
Commission ("SEC");
3. The SEC permits a delay for the protection of security holders; or
4. The check used to pay the premium has not cleared through the
banking system. This may take up to 15 days.
For the same reasons, we will delay transfers from the Separate Account to
the Fixed Account.
We may also delay payments of any amount due from the Fixed Account and/or
the DCA Program. When permitted by law, we may defer payment of any partial
withdrawal or full surrender request for up to six months from the date of
surrender from the Fixed Account and/or the DCA Program. We will pay interest of
at least 3.5% per year on any partial withdrawal or full surrender request
deferred for 30 days or more.
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<PAGE> 38
DESIGNATION OF BENEFICIARY
You may name, in a written form acceptable to us, one or more
Beneficiaries. Thereafter, before the Annuity Commencement Date and while the
Annuitant is living, you may change the Beneficiary by written notice in a form
acceptable to NYLIAC. If before the Annuity Commencement Date, the Annuitant
dies before you and no Beneficiary for the proceeds or for a stated share of the
proceeds survives, the right to the proceeds or shares of the proceeds passes to
you. If you are the Annuitant, the proceeds pass to your estate. However, if the
policy owner who is not the Annuitant dies before the Annuity Commencement Date,
and no Beneficiary for the proceeds or for a stated share of the proceeds
survives, the right to the proceeds or shares of the proceeds passes to the
policy owner's estate.
For policies issued through a Policy Request, the Beneficiary will be the
policy owner or his/her estate until the Beneficiary is designated as described
under "Policy Application and Premium Payments" at page 22.
RESTRICTIONS UNDER INTERNAL REVENUE CODE SECTION 403(B)(11)
Distributions attributable to salary reduction contributions made in years
beginning after December 31, 1988 (including the earnings on these
contributions), as well as to earnings in such years on salary reduction
accumulations held as of the end of the last year beginning before January 1,
1989, may not begin before the employee attains age 59 1/2, separates from
service, dies or becomes disabled. The plan may also provide for distribution in
the case of hardship. However, hardship distributions are limited to amounts
contributed by salary reduction. The earnings on such amounts may not be
withdrawn. Even though a distribution may be permitted under these rules (e.g.
for hardship or after separation from service), it may still be subject to a 10%
additional income tax as a premature distribution. To the extent that these
limitations on distributions conflict with the redeemability provisions of the
Investment Company Act of 1940, NYLIAC relies upon a November 28, 1988 no-
action letter for exemptive relief.
Under the terms of your plan, you may have the option to invest in other
403(b) funding vehicles, including 403(b)(7) custodial accounts. You should
consult your plan document to make this determination.
LOANS
Loans are available only if you have purchased your policy in connection
with a 403(b) plan and may not be available in all states for plans subject to
the Employment Retirement Income Security Act of 1974 ("ERISA"). Under your
403(b) policy, you may borrow against your policy's Accumulation Value after the
first Policy Year and prior to the Annuity Commencement Date. Unless we agree
otherwise, only one loan may be outstanding at a time. A minimum Accumulation
Value of $5,000 must remain in the policy. The minimum loan amount is $500. The
maximum loan that you may take is the lesser of: (a) 50% of the policy's
Accumulation Value on the date of the loan or (b) $50,000. We withdraw a loan
processing fee of $25 from the Accumulation Value on a pro rata basis, unless
prohibited by applicable state law or regulation. If on the date of the loan you
do not have a Fixed Accumulation Value equal to at least 125% (110% in New York)
of the loan amount, we will transfer sufficient Accumulation Value from the
Investment Divisions and/or DCA Advantage Plan Accounts on a pro rata basis so
that the Fixed Accumulation Value equals 125% (110% in New York) of the loan
amount. While a loan is outstanding, you may not make partial withdrawals or
transfers which would reduce the Fixed Accumulation Value to an amount less than
125% (110% in New York) of the outstanding loan balance.
For plans not subject to ERISA, the interest rate paid by the policy owner
of the loan will equal 5%. We will credit the assets being held in the Fixed
Account to secure the loan with the minimum guaranteed interest rate of 3%. For
plans subject to ERISA, we will apply the interest charged on the loan at the
then current prime rate plus 1%. We will credit the money being held in the
Fixed Account to secure the loan with a rate of interest that is the prime rate
less 1%, but it will always be at least equal to the minimum guaranteed interest
rate of 3%. For all plans, we will assess interest in arrears as part of the
periodic loan repayments.
You must repay the loan on a periodic basis at a frequency not less
frequently than quarterly and over a period no greater than five years from the
date it is taken. If a loan repayment is in default we will withdraw the amount
in default from the Fixed Accumulation Value to the extent permitted by federal
income tax rules. We will take such a repayment on a first-in, first-out (FIFO)
basis from amounts allocated to the Fixed Account.
We permit loans to acquire a principal residence under the same terms
described above, except that:
(a) the minimum loan amount is $5,000; and
(b) repayment of the loan amount may be extended to a maximum of
twenty-five years.
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<PAGE> 39
We deduct any outstanding loan balance including any accrued interest from
the Fixed Accumulation Value prior to payment of a surrender or the commencement
of the annuity benefits. On death of the policy owner or Annuitant, we deduct
any outstanding loan balance from the Fixed Accumulation Value as a partial
withdrawal as of the date we receive the notice of death.
Loans are subject to the terms of the policy, your 403(b) plan and the
Internal Revenue Code, which may impose restrictions upon them. We reserve the
right to suspend, modify, or terminate the availability of loans under this
policy at any time. However, any action taken by us will not affect already
outstanding loans.
RIDERS
At no additional charge, we include two riders under the policy: an
Unemployment Benefit Rider, for Non-Qualified, IRA and Roth IRA policies, and a
Living Needs Benefit Rider, for all types of policies. The first two riders
described below provide for an increase in the amount that can be withdrawn from
your policy which will not be subject to a surrender charge upon the happening
of certain qualifying events. The Investment Protection Plan rider is available
at an additional cost. The riders are only available in those states where they
have been approved. Please consult with your registered representative regarding
the availability of these riders in your state.
(a) Living Needs Benefit Rider
If the Annuitant enters a nursing home, becomes terminally ill or disabled,
you may be eligible to receive all or a portion of the Accumulation Value
without paying a surrender charge. The policy must have been inforce for at
least one year and have a minimum Accumulation Value of $5,000. You must also
provide us with proof that the Annuitant has spent 60 or more consecutive days
in a nursing home. Withdrawals will be taxable to the extent of gain and, prior
to age 59 1/2, may be subject to a 10% IRS penalty. This rider is in effect in
all states where approved.
(b) Unemployment Benefit Rider
For all Non-Qualified, IRA and Roth IRA policies, if you become unemployed,
you may be eligible to increase the amount that can be withdrawn from your
policy up to 50% without paying surrender charges. This rider can only be used
once. The policy must have been inforce for at least one year and have a minimum
Accumulation Value of $5,000. You also must have been unemployed for at least 60
consecutive days. Withdrawals may be taxable transactions and, prior to age
59 1/2, may be subject to a 10% IRS penalty. This rider is in effect in all
states where approved.
(c) Investment Protection Plan Rider (optional)
THE INVESTMENT PROTECTION PLAN RIDER IS AVAILABLE ONLY IN STATES WHERE
APPROVED. If you select this rider, you will be able to surrender the policy and
receive the greater of the policy Accumulation Value or the amount that is
guaranteed under the rider. While this rider is in effect, we will deduct a
charge from your Accumulation Value on each policy quarter. (See "Other
Charges--Investment Protection Plan Rider Charge" at page 30). When you make a
partial withdrawal, we will reduce the amount that is guaranteed under the rider
by the amount of the proportional withdrawal. The proportional withdrawal is
equal to the amount withdrawn from the policy (including any amount withdrawn
for the surrender charge) divided by the Accumulation Value immediately
preceding the withdrawal, multiplied by the amount that is guaranteed
immediately preceding the withdrawal.
The amount that is guaranteed under the rider will depend on when you
select or reset it:
(i) At the time of application: The amount that is guaranteed will
equal the initial premium payment plus any additional premium
payments we receive in the first Policy Year, less all
proportional withdrawals. Premium payments made on or after the
first Policy Year will not be included in the amount that is
guaranteed. The rider will take effect on the Policy Date.
(ii) While the policy is in force: The amount that is guaranteed will
equal the Accumulation Value on the date the rider takes effect,
less all proportional withdrawals. The rider will take effect on
the next Policy Anniversary following the date we receive your
application for the rider.
(iii) Resetting the guaranteed amount: You may request to reset the
amount that is guaranteed at any time while the rider is in
effect. The new rider will take effect on the Policy Anniversary
immediately following the date we receive your request to reset.
The amount that is guaranteed will equal the
36
<PAGE> 40
Accumulation Value on the next Policy Anniversary, less all
proportional withdrawals. We will also reset a new charge for the
rider and the Rider Risk Charge Adjustment on that Policy Anniversary.
(See "Other Charges--Investment Protection Plan Rider Charge" and
"Other Charges--Rider Risk Charge Adjustment" at page 30).
You will be eligible to receive the benefit under this rider beginning on
the tenth Policy Anniversary after the later of (1) the effective date of the
rider or (2) the effective date of any reset. You may also exercise this benefit
on any Policy Anniversary subsequent to the tenth. To exercise this benefit, you
must send us a written request to surrender the policy no later than ten
Business Days after the applicable Policy Anniversary. Amounts paid to you under
the terms of this rider may be taxable and you may be subject to a 10% tax
penalty if paid before you reach age 59 1/2.
You may cancel this rider within 30 days after delivery of the rider or, if
you selected this feature at the time of application, within 30 days after
delivery of the policy. You must return the rider to us or to the registered
representative through whom it was purchased, with a written request for
cancellation. Upon receipt of this request, we will promptly cancel the rider
and refund any Investment Protection Plan Rider charge which may have been
deducted. After this 30-day period, you still have the right to discontinue the
rider. However, we will deduct a Rider Risk Charge Adjustment from your
Accumulation Value and we will not refund any Investment Protection Plan Rider
charge which may have been deducted. (See "Other Charges--Rider Risk Charge
Adjustment" at page 30). The cancellation will be effective on the date we
receive your request.
This rider is available on all Non-Qualified and Roth IRA policies so long
as the first date that you can exercise and receive benefits under the rider is
before the Annuity Commencement Date. The rider is also available on IRA and
SEP-IRA policies if the policy owner is younger than age 66 on the date the
rider takes effect.
Because this rider generally provides protection against decreases in the
policy's Accumulation Value due to negative investment performance, this rider
may not be a benefit to you if all or most of your Accumulation Value is
allocated to the Fixed Account. You should select this rider only if you have or
intend to have most or all of your Accumulation Value allocated to the
Investment Divisions.
This rider will provide no benefit if you surrender the policy before the
Policy Anniversary on which you are eligible to exercise the rider. Therefore,
you should select this rider only if you intend to keep the policy for at least
ten years.
We have set forth below an example of how the benefit of this rider may be
realized and how partial withdrawals will impact the guaranteed amount. In this
example, we have assumed the following:
(1) the rider is selected at the time of application;
(2) an initial premium payment of $100,000 is made;
(3) no additional premium payments are made;
(4) a withdrawal of $20,000 is made in the eighth Policy Year;
(5) the Accumulation Value immediately preceding the withdrawal has
decreased to $80,000; and
(6) the Accumulation Value on the tenth Policy Year has decreased to
$50,000.
The guaranteed amount at time of application was $100,000. When the partial
withdrawal was made in the eighth Policy Year, we reduced the guaranteed amount
by the amount of the proportional withdrawal. We calculated the amount of the
proportional withdrawal by taking the requested withdrawal amount, dividing it
by the Accumulation Value immediately preceding the withdrawal, and then
multiplying that number by the guaranteed amount immediately preceding the
withdrawal.
Proportional withdrawal = ($20,000/$80,000) x $100,000 = $25,000
To determine the new guaranteed amount after the withdrawal, we subtracted
the amount of the proportional withdrawal from the initial guaranteed amount:
($100,000 - $25,000) = $75,000. If this policy is surrendered in the tenth
Policy Year, the policy owner receives $75,000 even though the Accumulation
Value has decreased to $50,000.
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<PAGE> 41
THE FIXED ACCOUNT
The Fixed Account is supported by the assets in NYLIAC's general account,
which includes all of NYLIAC's assets except those assets specifically allocated
to NYLIAC's separate accounts. NYLIAC has sole discretion to invest the assets
of the Fixed Account subject to applicable law. The Fixed Account is not
registered under the federal securities laws and is generally not subject to
their provisions. Furthermore, the staff of the Securities and Exchange
Commission has not reviewed the disclosures in this Prospectus relating to the
Fixed Account. These disclosures regarding the Fixed Account may be subject to
certain applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
(a) Interest Crediting
NYLIAC guarantees that it will credit interest at an annual effective rate
of at least 3% to amounts allocated or transferred to the Fixed Account under
the policies. We credit interest on a daily basis. NYLIAC may, at its sole
discretion, credit a higher rate or rates of interest to amounts allocated or
transferred to the Fixed Account. Interest rates will be set on the anniversary
of each premium payment or transfer. All premium payments and additional amounts
(including transfers from other Investment Divisions) allocated to the Fixed
Account, plus prior interest earned on such amounts, will receive their
applicable interest rate for one-year periods from the anniversary on which the
allocation or transfer was made.
(b) Transfers to Investment Divisions
You may transfer amounts from the Fixed Account to the Investment Divisions
up to 30 days prior to the Annuity Commencement Date, subject to the following
conditions.
1. The maximum amount you are allowed to transfer from the Fixed
Account to the Investment Divisions during any Policy Year is 20% of the
Fixed Accumulation Value at the beginning of the Policy Year.
2. The minimum amount that you may transfer from the Fixed Account to
the Investment Divisions is the lesser of (i) $500 or (ii) the Fixed
Accumulation Value, unless we agree otherwise. Additionally, the remaining
value in the Fixed Account must be at least $500. If, after a contemplated
transfer, the remaining values in the Fixed Account would be less than
$500, that amount must be included in the transfer, unless NYLIAC in its
discretion permits otherwise. We determine amounts transferred from the
Fixed Account on a first-in, first-out ("FIFO") basis, for purposes of
determining the rate at which we credit interest on monies remaining in the
Fixed Account.
Except as part of an existing request relating to the traditional Dollar
Cost Averaging option, the Interest Sweep option or the DCA Advantage Plan
(where available), you may not transfer money into the Fixed Account if you made
a transfer out of the Fixed Account during the previous six-month period.
You must make transfer requests in writing on a form approved by NYLIAC or
by telephone in accordance with established procedures. (See "Procedures for
Telephone Transactions" at page 24.)
We will deduct partial withdrawals and apply any surrender charges to the
Fixed Account on a FIFO basis (i.e., from any value in the Fixed Account
attributable to premium payments or transfers from Investment Divisions in the
same order in which you allocated such payments or transfers to the Fixed
Account during the life of the policy).
(c) Fixed Account Initial Premium Guarantee
NYLIAC guarantees that upon any surrender of a policy, you will receive an
amount equal to at least that portion of the initial premium payment which was
initially allocated to the Fixed Account. However, this guarantee will not apply
if you transfer any amount out of the Fixed Account (except transfers made under
the Interest Sweep option) or make any partial withdrawals from the Fixed
Account, a DCA Account or the Separate Account.
THE DCA ADVANTAGE PLAN ACCOUNTS
Like the Fixed Account, the DCA Advantage Plan Accounts are also supported
by the assets in NYLIAC's general account. The DCA Advantage Plan Accounts are
not registered under the federal securities laws. The information contained in
the first paragraph under "The Fixed Account" above, equally applies to the DCA
Advantage Plan Accounts.
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<PAGE> 42
NYLIAC will set interest rates in advance for each date on which we may
receive a premium payment to a DCA Advantage Plan Account. We will never declare
less than a 3% annual effective rate. Premium payments into a DCA Advantage Plan
Account will receive the applicable interest rate in effect on the Business Day
we receive the premium payment. Interest rates for subsequent premium payments
made into the same DCA Advantage Plan Account may be different from the rate
applied to prior premium payments made into the DCA Advantage Plan Account.
The annual effective rate that we declare is credited only to amounts
remaining in a DCA Advantage Plan Account. We credit the interest on a daily
basis. Because money is periodically transferred out of the DCA Advantage Plan
Account, amounts in the DCA Advantage Plan Account will not achieve the declared
annual effective rate.
FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. The
Qualified Policies are designed for use by individuals in retirement plans which
are intended to qualify as plans qualified for special income tax treatment
under Sections 219, 403, 408, 408A or 457 of the Code. The ultimate effect of
federal income taxes on the Accumulation Value, on Income Payments and on the
economic benefit to you, the Annuitant or the Beneficiary depends on the type of
retirement plan for which the Qualified Policy is purchased, on the tax and
employment status of the individual concerned and on NYLIAC's tax status. The
following discussion assumes that Qualified Policies are used in retirement
plans that qualify for the special federal income tax treatment described above.
This discussion is not intended to address the tax consequences resulting from
all of the situations in which a person may be entitled to or may receive a
distribution under a policy. Any person concerned about these tax implications
should consult a competent tax adviser before making a premium payment. This
discussion is based upon NYLIAC's understanding of the present federal income
tax laws as they are currently interpreted by the Internal Revenue Service. We
cannot predict the likelihood of continuation of the present federal income tax
laws or of the current interpretations by the Internal Revenue Service, which
may change from time to time without notice. Any such change could have
retroactive effects regardless of the date of enactment. Moreover, this
discussion does not take into consideration any applicable state or other tax
laws except with respect to the imposition of any state premium taxes. We
suggest you consult with your tax adviser.
TAXATION OF ANNUITIES IN GENERAL
The following discussion assumes that the policies will qualify as annuity
contracts for federal income tax purposes. The Statement of Additional
Information discusses such qualifications.
Section 72 of the Code governs taxation of annuities in general. NYLIAC
believes that an annuity policy owner generally is not taxed on increases in the
value of a policy until distribution occurs either in the form of a lump sum
received by withdrawing all or part of the Accumulation Value (i.e., surrenders
or partial withdrawals) or as Income Payments under the Income Payment option
elected. The exception to this rule is that generally, a policy owner of any
deferred annuity policy who is not a natural person must include in income any
increase in the excess of the policy owner's Accumulation Value over the policy
owner's investment in the contract during the taxable year. However, there are
some exceptions to this exception. You may wish to discuss these with your tax
counsel. The taxable portion of a distribution (in the form of an annuity or
lump sum payment) is generally taxed as ordinary income. For this purpose, the
assignment, pledge, or agreement to assign or pledge any portion of the
Accumulation Value generally will be treated as a distribution.
In the case of a withdrawal or surrender distributed to a participant or
Beneficiary under a Qualified Policy (other than a Qualified Policy used in a
retirement plan that qualifies for special federal income tax treatment under
Section 457 of the Code as to which there are special rules), a ratable portion
of the amount received is taxable, generally based on the ratio of the
investment in the contract to the total policy value. The "investment in the
contract" generally equals the portion, if any, of any premium payments paid by
or on behalf of an individual under a policy which is not excluded from the
individual's gross income. For policies issued in connection with qualified
plans, the "investment in the contract" can be zero. The law requires the use of
special simplified methods to determine the taxable amount of payments that are
based in whole or in part on the Annuitant's life and that are paid from
qualified retirement plans under Section 401(a) and from qualified annuities and
Tax Sheltered Annuities under Sections 403(a) and 403(b).
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<PAGE> 43
Generally, in the case of a withdrawal under a Non-Qualified Policy before
the Annuity Commencement Date, amounts received are first treated as taxable
income to the extent that the Accumulation Value immediately before the
withdrawal exceeds the "investment in the contract" at that time. Any additional
amount withdrawn is not taxable.
Although the tax consequences may vary depending on the Income Payment
option elected under the policy, in general, only the portion of the Income
Payment that represents the amount by which the Accumulation Value exceeds the
"investment in the contract" will be taxed. After the investment in the policy
is recovered, the full amount of any additional Income Payments is taxable. For
fixed Income Payments, in general, there is no tax on the portion of each
payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the Income Payments for the term of the
payments. However, the remainder of each Income Payment is taxable until the
recovery of the investment in the contract, and thereafter the full amount of
each annuity payment is taxable. If death occurs before full recovery of the
investment in the contract, the unrecovered amount may be deducted on the
annuitant's final tax return.
In the case of a distribution, a penalty tax equal to 10% of the amount
treated as taxable income may be imposed. The penalty tax is not imposed in
certain circumstances, including, generally, distributions: (1) made on or after
the date on which the taxpayer is actual age 59 1/2, (2) made as a result of the
policy owner's or Annuitant's death or disability, or (3) received in
substantially equal installments paid at least annually as a life annuity. Other
tax penalties may apply to certain distributions pursuant to a Qualified Policy.
All non-qualified, deferred annuity contracts issued by NYLIAC (or its
affiliates) to the same policy owner during any calendar year are to be treated
as one annuity contract for purposes of determining the amount includable in an
individual's gross income. In addition, there may be other situations in which
the Treasury Department may conclude (under its authority to issue regulations)
that it would be appropriate to aggregate two or more annuity contracts
purchased by the same policy owner. Accordingly, a policy owner should consult a
competent tax adviser before purchasing more than one policy or other annuity
contract.
A transfer of ownership of a policy, or designation of an Annuitant or
other Beneficiary who is not also the policy owner, may result in certain income
or gift tax consequences to the policy owner. A policy owner contemplating any
transfer or assignment of a policy should contact a competent tax adviser with
respect to the potential tax effects of such a transaction.
QUALIFIED PLANS
The Qualified Policies are designed for use with several types of tax
qualified plans. The tax rules applicable to participants and beneficiaries in
such qualified plans vary according to the type of plan and the terms and
conditions of the plan itself. Special favorable tax treatment may be available
for certain types of contributions and distributions (including special rules
for certain lump sum distributions to individuals who attained the age of 50 by
January 1, 1986). Adverse tax consequences may result from contributions in
excess of specified limits, distributions prior to age 59 1/2 (subject to
certain exceptions), distributions that do not conform to specified minimum
distribution rules and in certain other circumstances. Therefore, this
discussion only provides general information about use of the policies with the
various types of qualified plans. Policy owners and participants under qualified
plans as well as Annuitants and Beneficiaries are cautioned that the rights of
any person to any benefits under qualified plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the policy issued in connection with the plan. Purchasers of policies for use
with any qualified plan should seek competent legal and tax advice regarding the
suitability of the policy.
(a) Section 403(a) Plans. Under Section 403(a) of the Code, payments
made by employers to purchase annuity contracts, which meet certain
requirements, for their employees are excludible from the gross income of
the employee. Any amounts distributed to the employees under such annuity
contracts are taxable to them in the years in which distributions are made.
(b) Section 403(b) Plans. Under Section 403(b) of the Code, payments
made by public school systems and certain tax exempt organizations to
purchase annuity policies for their employees are excludable from the gross
income of the employee, subject to certain limitations. However, such
payments may be subject to FICA (Social Security) taxes.
(c) Individual Retirement Annuities. Sections 219 and 408 of the Code
permit individuals or their employers to contribute to an individual
retirement program known as an "Individual Retirement Annuity" or "IRA",
including an employer-sponsored Simplified Employee Pension or "SEP".
Individual Retirement Annuities are subject to limitations on the amount
which may be contributed and deducted and the time when distributions
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<PAGE> 44
may commence. In addition, distributions from certain other types of
qualified plans may be placed into Individual Retirement Annuities on a
tax-deferred basis.
(d) Roth Individual Retirement Annuities. Section 408A of the Code
permits individuals with incomes below a certain level to contribute to an
individual retirement program known as a "Roth Individual Retirement
Annuity" or "Roth IRA." Roth IRAs are subject to limitations on the amount
that may be contributed. Contributions to Roth IRAs are not deductible, but
distributions from Roth IRAs that meet certain requirements are not
included in gross income. Certain individuals are eligible to convert their
existing non-Roth IRAs into Roth IRAs. They will be subject to income tax
at the time of conversion.
(e) Deferred Compensation Plans. Section 457 of the Code, while not
actually providing for a qualified plan as that term is normally used,
provides for certain deferred compensation plans with respect to service
for state governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities and tax exempt
organizations which enjoy special treatment. The policies can be used with
such plans. Under such plans, a participant may specify the form of
investment in which his or her participation will be made. Such investments
are generally owned by, and are subject to, the claims of the general
creditors of the sponsoring employer, except that Section 457 plans of
state and local government must be held and used for the exclusive benefit
of participants and beneficiaries in a trust or annuity contract.
DISTRIBUTOR OF THE POLICIES
NYLIFE Distributors Inc. ("NYLIFE Distributors"), 51 Madison Avenue, New
York, New York 10010, is the principal underwriter and the distributor of the
policies. It is an indirect wholly-owned subsidiary of New York Life. The
maximum commission paid to broker-dealers who have entered into dealer
agreements with NYLIFE Distributors is not expected to exceed 7%. A portion of
this amount is paid as commissions to registered representatives.
VOTING RIGHTS
The Funds are not required to and typically do not hold routine annual
stockholder meetings. Special stockholder meetings will be called when
necessary. To the extent required by law, NYLIAC will vote the Eligible
Portfolio shares held in the Investment Divisions at special shareholder
meetings of the Funds in accordance with instructions we receive from persons
having voting interests in the corresponding Investment Division. If, however,
the federal securities laws are amended, or if NYLIAC's present interpretation
should change, and as a result, NYLIAC determines that it is allowed to vote the
Eligible Portfolio shares in its own right, we may elect to do so.
Prior to the Annuity Commencement Date, you hold a voting interest in each
Investment Division to which you have money allocated. We will determine the
number of votes which are available to you by dividing the Accumulation Value
attributable to an Investment Division by the net asset value per share of the
applicable Eligible Portfolios. We will calculate the number of votes which are
available to you separately for each Investment Division. We will determine that
number by applying your percentage interest, if any, in a particular Investment
Division to the total number of votes attributable to the Investment Division.
We will determine the number of votes of the Eligible Portfolio which are
available as of the date established by the Portfolio of the relevant Fund.
Voting instructions will be solicited by written communication prior to such
meeting in accordance with procedures established by the relevant Fund.
If we do not receive timely instructions, we will vote those shares in
proportion to the voting instructions which are received with respect to all
policies participating in that Investment Division. We will apply voting
instructions to abstain on any item to be voted upon on a pro rata basis to
reduce the votes eligible to be cast. Each person having a voting interest in an
Investment Division will receive proxy material, reports and other materials
relating to the appropriate Eligible Portfolio.
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STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
FOR
MAINSTAY PLUS VARIABLE ANNUITY
FROM
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
INVESTING IN
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
This Statement of Additional Information ("SAI") is not a prospectus. This
SAI contains information that expands upon subjects discussed in the current
MainStay Plus Variable Annuity Prospectus. You should read the SAI in
conjunction with the current MainStay Plus Variable Annuity Prospectus dated May
1, 2000. You may obtain a copy of the Prospectus by calling MainStay Annuities
at (888) 695-6246 or writing to MainStay Annuities, 300 Berwyn Park, P.O. Box
3031, Berwyn, PA 19312-0031. Terms used but not defined in this SAI have the
same meaning as in the current MainStay Plus Variable Annuity(SM) Prospectus.
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE POLICIES (20)........................................... 2
Valuation of Accumulation Units (25)................... 2
INVESTMENT PERFORMANCE CALCULATIONS......................... 2
MainStay VP Cash Management Investment Division........ 2
MainStay VP Government, MainStay VP High Yield
Corporate Bond and MainStay VP Bond Investment
Division Yields...................................... 3
Average Annual Total Return............................ 3
ANNUITY PAYMENTS............................................ 4
GENERAL MATTERS............................................. 4
FEDERAL TAX MATTERS (36).................................... 5
Taxation of New York Life Insurance and Annuity
Corporation.......................................... 5
Tax Status of the Policies............................. 5
DISTRIBUTOR OF THE POLICIES (38)............................ 6
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS...................... 6
STATE REGULATION............................................ 6
RECORDS AND REPORTS......................................... 6
LEGAL PROCEEDINGS........................................... 6
EXPERTS..................................................... 7
OTHER INFORMATION........................................... 7
FINANCIAL STATEMENTS........................................ F-1
</TABLE>
- ------------
* (Numbers in parentheses refer to page numbers of corresponding sections of the
current MainStay Plus Variable Annuity Prospectus.)
<PAGE> 46
THE POLICIES
The following provides additional information about the policies and
supplements the description in the Prospectus.
VALUATION OF ACCUMULATION UNITS
Accumulation Units are valued separately for each Investment Division of
the Separate Account. The method used for valuing Accumulation Units in each
Investment Division is the same. We arbitrarily set the value of each
Accumulation Unit as of the date operations began for the Investment Division.
Thereafter, the value of an Accumulation Unit of an Investment Division for any
Business Day equals the value of an Accumulation Unit in that Investment
Division as of the immediately preceding Business Day multiplied by the "Net
Investment Factor" for that Investment Division for the current Business Day.
We determine the Net Investment Factor for each Investment Division for any
period from the close of the preceding Business Day to the close of the current
Business Day (the "Valuation Period") by the following formula:
(a/b) - c
Where: a = the result of:
(1) the net asset value per share of the Eligible Portfolio shares
held in the Investment Division determined at the end of the current
Valuation Period, plus
(2) the per share amount of any dividend or capital gain distribution
made by the Eligible Portfolio for shares held in the Investment
Division if the "ex-dividend" date occurs during the current Valuation
Period;
b = the net asset value per share of the Eligible Portfolio shares held
in the Investment Division determined as of the end of the
immediately preceding Valuation Period; and
c = a factor representing the charges deducted from the applicable
Investment Division on a daily basis. Such factor is equal, on an
annual basis, to 1.40% of the daily net asset value of the Separate
Account. (See "Other Charges" at page 27 of the Prospectus.)
The Net Investment Factor may be greater or less than one. Therefore, the
value of an Accumulation Unit in an Investment Division may increase or decrease
from Valuation Period to Valuation Period.
INVESTMENT PERFORMANCE CALCULATIONS
MAINSTAY VP CASH MANAGEMENT INVESTMENT DIVISION
NYLIAC calculates the MainStay VP Cash Management Investment Division's
current annualized yield for a seven-day period in a manner which does not take
into consideration any realized or unrealized gains or losses on shares of the
MainStay VP Cash Management Portfolio or on its portfolio securities. This
current annualized yield is computed by determining the net change (exclusive of
realized gains and losses on the sale of securities and unrealized appreciation
and depreciation) in the value of a hypothetical account having a balance of one
unit of the MainStay VP Cash Management Investment Division at the beginning of
such seven-day period, dividing such net change in account value by the value of
the account at the beginning of the period to determine the base period return
and annualizing this quotient on a 365-day basis. The net change in account
value reflects the deductions for the administration fee and the mortality and
expense risk charge, and income and expenses accrued during the period. Because
of these deductions, the yield for the MainStay VP Cash Management Division will
be lower than the yield for the MainStay VP Cash Management Portfolio.
NYLIAC also calculates the effective yield of the MainStay VP Cash
Management Investment Division for the same seven-day period on a compounded
basis. The effective yield is calculated by compounding the unannualized base
period return by adding one to the base period return, raising the sum to a
power equal to 365 divided by 7, and subtracting one from the result.
The yield on amounts held in the MainStay VP Cash Management Investment
Division normally will fluctuate on a daily basis. Therefore, the disclosed
yield for any given past period is not an indication or representation of future
yields or rates of return. The MainStay VP Cash Management Investment Division's
actual yield is affected by changes in interest rates on money market
securities, average portfolio maturity of the MainStay VP Cash
2
<PAGE> 47
Management Portfolio, the types and quality of portfolio securities held by the
MainStay VP Cash Management Portfolio, and its operating expenses.
MAINSTAY VP GOVERNMENT, MAINSTAY VP HIGH YIELD CORPORATE BOND AND MAINSTAY
VP BOND INVESTMENT DIVISION YIELDS
The current annualized yield of the MainStay VP Government, MainStay VP
High Yield Corporate Bond and MainStay VP Bond Investment Divisions refers to
the income generated by these Investment Divisions over a specified 30-day
period. Because the yield is annualized, the yield generated by an Investment
Division during the 30-day period is assumed to be generated each 30-day period.
We compute the yield by dividing the net investment income per accumulation unit
earned during the period by the price per unit on the last day of the period,
according to the following formula:
YIELD = 2[(a-b+1)(6)-1]
-----
cd
Where: a = net investment income earned during the period by the Portfolio
attributable to shares owned by the MainStay VP Government, MainStay
VP High Yield Corporate Bond or MainStay VP Bond Investment Division.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of accumulation units outstanding during
the period.
d = the maximum offering price per accumulation unit on the last day of
the period.
Accrued expenses will include all recurring fees that are charged to all
policy owner accounts. The yield calculations do not reflect the effect of any
surrender charges that may be applicable to a particular policy. Surrender
charges range from 7% to 0% of the premium payments withdrawn depending on the
elapsed time since the relevant premium payment was made.
Because of the charges and deductions imposed by the Separate Account the
yield for the Investment Divisions will be lower than the yield for the
corresponding Portfolio of the Fund. The yield on amounts held in the Investment
Divisions normally will fluctuate over time. Therefore, the disclosed yield for
any given past period is not an indication or representation of future yields or
rates of return. The MainStay VP Government, MainStay VP High Yield Corporate
Bond or MainStay VP Bond Investment Division's actual yield will be affected by
the types and quality of portfolio securities held by the MainStay VP
Government, MainStay VP High Yield Corporate Bond and MainStay VP Bond
Portfolios of the Fund and their operating expenses.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return quotations for
the Investment Divisions are computed by finding the average annual compounded
rates of return over the periods shown that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P(1+T)(n) = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one, five, or ten-year period or the inception date,
at the end of the one, five or ten-year period (or fractional portion
thereof).
All total return figures are prepared under methods the SEC requires when
advertising performance information. For periods beginning on or after the dates
when the Investment Divisions started operations, the average annual total
return (if surrendered) figures may be referred to as "standardized"
performance. For periods before the dates when the Investment Divisions started
operations, the figures are considered "non-standardized". The average annual
total return (no surrender) figures are all considered "non-standardized".
Performance data for the Investment Divisions may be compared, in
advertisements, sales literature and reports to shareholders, to: (i) the
investment returns on various mutual funds, stocks, bonds, certificates of
deposit, tax free bonds, or common stock and bond indexes; and (ii) other groups
of variable annuity separate accounts or other investment products tracked by
Lipper Analytical Services, a widely used independent research firm which ranks
mutual funds and other investment companies by overall performance, investment
3
<PAGE> 48
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.
ANNUITY PAYMENTS
We will make equal annuity payments each month under the Life Income
Payment Option during the lifetime of the Annuitant. Once payments begin, they
do not change and are guaranteed for 10 years even if the Annuitant dies sooner.
If the Annuitant dies before all guaranteed payments have been made, the rest
will be made to the Beneficiary. We may require that the payee submit proof of
the Annuitant's survivorship as a condition for future payments beyond the
10-year guaranteed payment period.
On the Annuity Commencement Date, we will determine the Accumulation Value
of your policy and use that value to calculate the amount of each annuity
payment. We determine each annuity payment by applying the Accumulation Value,
less any premium taxes, to the annuity factors specified in the annuity table
set forth in the policy. Those factors are based on a set amount per $1,000 of
proceeds applied. The appropriate rate must be determined by the sex (except
where, as in the case of certain Qualified Policies and other employer-sponsored
retirement plans, such classification is not permitted), date of application and
age of the Annuitant. The dollars applied are then divided by 1,000 and the
result multiplied by the appropriate annuity factor from the table to compute
the amount of the each monthly annuity payment.
GENERAL MATTERS
NON-PARTICIPATING. The policies are non-participating. Dividends are not
paid.
MISSTATEMENT OF AGE OR SEX. If the Annuitant's stated age and/or sex in
the policy are incorrect, NYLIAC will change the benefits payable to those which
the premium payments would have purchased for the correct age and sex. Sex is
not a factor when annuity benefits are based on unisex annuity payment rate
tables. (See "Income Payments--Election of Income Payment Options" at page 31 of
the Prospectus.) If we made payments based on incorrect age or sex, we will
increase or reduce a later payment or payments to adjust for the error. Any
adjustment will include interest, at 3.5% per year, from the date of the wrong
payment to the date the adjustment is made.
ASSIGNMENTS. If permitted by the plan or by law for the plan indicated in
the application for the policy, you may assign a Non-Qualified Policy or any
interest in it prior to the Annuity Commencement Date and during the Annuitant's
lifetime. NYLIAC will not be deemed to know of an assignment unless it receives
a copy of a duly executed instrument evidencing such assignment. Further, NYLIAC
assumes no responsibility for the validity of any assignment. (See "Federal Tax
Matters--Taxation of Annuities in General" at pages 36 and 37 of the
Prospectus.)
MODIFICATION. NYLIAC may not modify the policy without your consent except
to make the policy meet the requirements of the Investment Company Act of 1940,
or to make the policy comply with any changes in the Internal Revenue Code or as
required by the Code in order to continue treatment of the policy as an annuity,
or by any other applicable law.
INCONTESTABILITY. We rely on statements made in the application or a
Policy Request. They are representations, not warranties. We will not contest
the policy after it has been in force during the lifetime of the Annuitant for
two years from the Policy Date.
4
<PAGE> 49
FEDERAL TAX MATTERS
TAXATION OF NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
NYLIAC is taxed as a life insurance company. Because the Separate Account
is not an entity separate from NYLIAC, and its operations form a part of NYLIAC,
it will not be taxed separately as a "regulated investment company" under
Subchapter M of the Code. Investment income and realized net capital gains on
the assets of the Separate Account are reinvested and are taken into account in
determining the Accumulation Value. As a result, such investment income and
realized net capital gains are automatically retained as part of the reserves
under the policy. Under existing federal income tax law, NYLIAC believes that
Separate Account investment income and realized net capital gains should not be
taxed to the extent that such income and gains are retained as part of the
reserves under the policy.
TAX STATUS OF THE POLICIES
Section 817(h) of the Code requires that the investments of the Separate
Account must be "adequately diversified" in accordance with Treasury regulations
in order for the policies to qualify as annuity contracts under Section 72 of
the Code. The Separate Account intends to comply with the diversification
requirements prescribed by the Treasury under Treasury Regulation Section
1.817-5.
To comply with regulations under Section 817(h) of the Code, the Separate
Account is required to diversify its investments, so that on the last day of
each quarter of a calendar year, no more than 55% of the value of its assets is
represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments, and no
more than 90% is represented by any four investments. For this purpose,
securities of a single issuer are treated as one investment and each U.S.
Government agency or instrumentality is treated as a separate issuer. Any
security issued, guaranteed, or insured (to the extent so guaranteed or insured)
by the U.S. Government or an agency or instrumentality of the U.S. Government is
treated as a security issued by the U.S. Government or its agency or
instrumentality, whichever is applicable.
Although the Treasury Department has issued regulations on the
diversification requirements, such regulations do not provide guidance
concerning the extent to which policy owners may direct their investments to
particular subaccounts of a separate account, or the permitted number of such
subaccounts. It is unclear whether additional guidance in this regard will be
issued in the future. It is possible that if such guidance is issued, the policy
may need to be modified to comply with such additional guidance. For these
reasons, NYLIAC reserves the right to modify the policy as necessary to attempt
to prevent the policy owner from being considered the owner of the assets of the
Separate Account or otherwise to qualify the policy for favorable tax treatment.
The Code also requires that non-qualified annuity contracts contain
specific provisions for distribution of the policy proceeds upon the death of
any policy owner. In order to be treated as an annuity contract for federal
income tax purposes, the Code requires that such policies provide that (a) if
any policy owner dies on or after the Annuity Commencement Date and before the
entire interest in the policy has been distributed, the remaining portion must
be distributed at least as rapidly as under the method in effect on the policy
owner's death; and (b) if any policy owner dies before the Annuity Commencement
Date, the entire interest in the policy must generally be distributed within 5
years after the policy owner's date of death. These requirements will be
considered satisfied if the entire interest of the policy is used to purchase an
immediate annuity under which payments will begin within one year of the policy
owner's death and will be made for the life of the Beneficiary or for a period
not extending beyond the life expectancy of the Beneficiary. If the Beneficiary
is the policy owner's surviving spouse, the Policy may be continued with the
surviving spouse as the new policy owner. If the policy owner is not a natural
person, these "death of Owner" rules apply when the primary Annuitant is
changed. Non-Qualified Policies contain provisions intended to comply with these
requirements of the Code. No regulations interpreting these requirements of the
Code have yet been issued and thus no assurance can be given that the provisions
contained in these policies satisfy all such Code requirements. The provisions
contained in these policies will be reviewed and modified if necessary to assure
that they comply with the Code requirements when clarified by regulation or
otherwise.
Withholding of federal income taxes on the taxable portion of all
distributions may be required unless the recipient elects not to have any such
amounts withheld and properly notifies NYLIAC of that election. Different rules
may apply to United States citizens or expatriates living abroad. In addition,
some states have enacted legislation requiring withholding.
5
<PAGE> 50
Even if a recipient elects no withholding, special rules may require NYLIAC
to disregard the recipient's election if the recipient fails to supply NYLIAC
with a "TIN" or taxpayer identification number (social security number for
individuals) or if the Internal Revenue Service notifies NYLIAC that the TIN
provided by the recipient is incorrect.
DISTRIBUTOR OF THE POLICIES
NYLIFE Distributors Inc. ("NYLIFE Distributors") is the distributor of the
policies. NYLIFE Distributors is registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 as a broker-dealer and is a
member of the National Association of Securities Dealers, Inc. NYLIFE
Distributors is an indirect wholly-owned subsidiary of New York Life. The
maximum commission paid to broker-dealers who have entered into dealer
agreements with NYLIFE Distributors is not expected to exceed 7%. A portion of
this amount is paid as commissions to registered representatives.
For the years ended December 31, 1997, 1998 and 1999, NYLIAC paid
commissions of $12,000, $1,255,000 and $13,515,000, respectively, none of which
was retained by NYLIFE Distributors.
The policies are sold and premium payments are accepted on a continuous
basis.
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
NYLIAC holds title to assets of the Separate Account. The assets are kept
physically segregated and held separate and apart from NYLIAC's general
corporate assets. Records are maintained of all purchases and redemptions of
Eligible Portfolio shares held by each of the Investment Divisions.
STATE REGULATION
NYLIAC is a stock life insurance company organized under the laws of
Delaware, and is subject to regulation by the Delaware State Insurance
Department. We file an annual statement with the Delaware Commissioner of
Insurance on or before March 1 of each year covering the operations and
reporting on the financial condition of NYLIAC as of December 31 of the
preceding calendar year. Periodically, the Delaware Commissioner of Insurance
examines the financial condition of NYLIAC, including the liabilities and
reserves of the Separate Account.
In addition, NYLIAC is subject to the insurance laws and regulations of all
the states where it is licensed to operate. The availability of certain policy
rights and provisions depends on state approval and/or filing and review
processes. Where required by state law or regulation, the policies will be
modified accordingly.
RECORDS AND REPORTS
NYLIAC maintains all records and accounts relating to the Separate Account.
As presently required by the federal securities laws, NYLIAC will mail to you at
your last known address of record, at least semi-annually after the first Policy
Year, reports containing information required under the federal securities laws
or by any other applicable law or regulation.
LEGAL PROCEEDINGS
NYLIAC is a defendant in individual and/or alleged class action suits
arising from its agency sales force, insurance (including variable contracts
registered under the federal securities law), investment, retail securities
and/or other operations, including actions involving retail sales practices.
Most of these actions also seek substantial or unspecified compensatory and
punitive damages. NYLIAC is also from time to time involved in various
governmental, administrative, and investigative proceedings and inquiries.
Given the uncertain nature of litigation and regulatory inquiries, the
outcome of which cannot be predicted, NYLIAC nevertheless believes that, after
provisions made in the financial statements, the ultimate liability that could
result from litigation and proceedings would not have a material adverse effect
on NYLIAC's financial position; however, it is possible that settlements or
adverse determinations in one or more actions or other proceedings in the future
could have a material adverse effect on NYLIAC's operating results for a given
year.
6
<PAGE> 51
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
Statement of Additional Information 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 Statement of Additional Information
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.
OTHER INFORMATION
NYLIAC filed a registration statement with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
policies discussed in the Prospectus and this Statement of Additional
Information. We have not included all of the information set forth in the
registration statement, amendments and exhibits to the registration statement in
the Prospectus and this Statement of Additional Information. We intend the
statements contained in the Prospectus and this Statement of Additional
Information concerning the content of the policies and other legal instruments
to be summaries. For a complete statement of the terms of these documents, you
should refer to the instruments filed with the Securities and Exchange
Commission. For a complete statement of the terms of these documents, you should
refer to the instruments filed with the Securities and Exchange Commission. The
omitted information may be obtained at the principal offices of the Securities
and Exchange Commission in Washington, D.C., upon payment of prescribed fees, or
thorough the Commission's website at www.sec.gov.
7
<PAGE> 52
FINANCIAL STATEMENTS
F-1
<PAGE> 53
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1999
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value............................. $659,604,204 $295,142,129 $ 65,249,198
LIABILITIES:
Liability to New York Life Insurance and Annuity
Corporation
for mortality and expense risk charges.................. 2,275,294 899,530 214,918
------------ ------------ ------------
Total equity.......................................... $657,328,910 $294,242,599 $ 65,034,280
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding:
23,023,869; 248,785,945; 2,826,029; 5,007,661;
25,509,312; 1,203,583; 14,508,830; 9,782,274;
6,870,999; 11,321,413, respectively................... $657,328,910 $294,242,599 $ 48,036,427
Equity of New York Life Insurance and
Annuity Corporation:
Variable accumulation units outstanding for the MainStay
VP Convertible: 1,000,000............................. -- -- 16,997,853
------------ ------------ ------------
Total equity.......................................... $657,328,910 $294,242,599 $ 65,034,280
============ ============ ============
Variable accumulation unit value........................ $ 28.55 $ 1.18 $ 17.00
============ ============ ============
Identified Cost of Investment............................... $477,432,142 $295,142,140 $ 58,492,827
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP CENTURY LARGE
INDEXED INCOME COMPANY
EQUITY & GROWTH VALUE
------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value............................. $687,059,280 $ 50,497,127 $ 25,789,848
LIABILITIES:
Liability to New York Life Insurance and Annuity
Corporation
for mortality and expense risk charges.................. 2,358,604 169,624 88,522
------------ ------------ ------------
Total equity.......................................... $684,700,676 $ 50,327,503 $ 25,701,326
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding:
24,805,405; 2,997,332; 1,397,190; 1,729,666;
1,276,043; 3,062,522; 987,374; 12,003,879; 8,139,096;
16,575,418, respectively.............................. $684,700,676 $ 37,737,230 $ 14,979,886
Equity of New York Life Insurance and
Annuity Corporation:
Variable accumulation units outstanding: American
Century Income & Growth: 1,000,000 Dreyfus Large
Company Value: 1,000,000 Eagle Asset Management Growth
Equity: 1,000,000 Lord Abbett Developing Growth:
1,000,000............................................. -- 12,590,273 10,721,440
------------ ------------ ------------
Total equity.......................................... $684,700,676 $ 50,327,503 $ 25,701,326
============ ============ ============
Variable accumulation unit value........................ $ 27.60 $ 12.59 $ 10.72
============ ============ ============
Identified Cost of Investment............................... $537,046,015 $ 42,439,498 $ 23,936,634
============ ============ ============
</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> 54
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 60,210,085 $402,380,635 $ 22,808,781 $307,054,973 $165,988,177 $ 82,850,113 $318,375,620
208,976 1,387,893 80,142 1,077,034 590,846 289,554 1,102,923
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 60,001,109 $400,992,742 $ 22,728,639 $305,977,939 $165,397,331 $ 82,560,559 $317,272,697
============ ============ ============ ============ ============ ============ ============
$ 60,001,109 $400,992,742 $ 22,728,639 $305,977,939 $165,397,331 $ 82,560,559 $317,272,697
-- -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 60,001,109 $400,992,742 $ 22,728,639 $305,977,939 $165,397,331 $ 82,560,559 $317,272,697
============ ============ ============ ============ ============ ============ ============
$ 11.98 $ 15.72 $ 18.88 $ 21.09 $ 16.91 $ 12.02 $ 28.02
============ ============ ============ ============ ============ ============ ============
$ 64,502,570 $443,954,806 $ 17,493,121 $238,750,328 $169,781,959 $ 90,499,641 $267,336,524
============ ============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET LORD ALGER
MANAGEMENT ABBETT AMERICAN CALVERT FIDELITY FIDELITY JANUS ASPEN
GROWTH DEVELOPING SMALL SOCIAL VIP II VIP SERIES
EQUITY GROWTH CAPITALIZATION BALANCED CONTRAFUND EQUITY-INCOME BALANCED
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 52,176,639 $ 27,154,627 $ 52,028,059 $ 18,548,706 $246,138,035 $124,400,115 $339,221,648
161,605 82,882 168,075 61,465 832,676 418,173 1,097,068
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 52,015,034 $ 27,071,745 $ 51,859,984 $ 18,487,241 $245,305,359 $123,981,942 $338,124,580
============ ============ ============ ============ ============ ============ ============
$ 32,959,578 $ 15,177,532 $ 51,859,984 $ 18,487,241 $245,305,359 $123,981,942 $338,124,580
19,055,456 11,894,213 -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 52,015,034 $ 27,071,745 $ 51,859,984 $ 18,487,241 $245,305,359 $123,981,942 $338,124,580
============ ============ ============ ============ ============ ============ ============
$ 19.06 $ 11.89 $ 16.93 $ 18.72 $ 20.44 $ 15.23 $ 20.40
============ ============ ============ ============ ============ ============ ============
$ 35,930,655 $ 22,141,387 $ 41,557,991 $ 18,463,558 $190,279,581 $118,105,879 $274,354,819
============ ============ ============ ============ ============ ============ ============
</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> 55
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
As of December 31, 1999
<TABLE>
<CAPTION>
JANUS ASPEN MFS
SERIES GROWTH
WORLDWIDE WITH MFS
GROWTH INCOME SERIES RESEARCH SERIES
---------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value....................... $330,783,735 $ 18,792,928 $ 13,277,157
LIABILITIES:
Liability to New York Life Insurance and Annuity
Corporation for mortality and expense risk
charges........................................... 1,089,841 60,559 41,291
------------ ------------ ------------
Total equity.................................... $329,693,894 $ 18,732,369 $ 13,235,866
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding:
12,815,868; 1,685,002; 998,691, respectively.... $329,693,894 $ 18,732,369 $ 13,235,866
============ ============ ============
Variable accumulation unit value.................. $ 25.73 $ 11.12 $ 13.25
============ ============ ============
Identified Cost of Investment......................... $210,527,867 $ 17,561,025 $ 11,170,307
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY T. ROWE VAN ECK
DEAN WITTER PRICE WORLDWIDE
EMERGING MARKETS EQUITY HARD
EQUITY INCOME ASSETS
--------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value....................... $ 23,751,914 $ 24,805,125 $ 2,072,003
LIABILITIES:
Liability to New York Life Insurance and Annuity
Corporation for mortality and expense risk
charges........................................... 75,043 81,114 6,480
------------ ------------ ------------
Total equity.................................... $ 23,676,871 $ 24,724,011 $ 2,065,523
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding:
1,659,145; 2,386,891; 215,885, respectively..... $ 23,676,871 $ 24,724,011 $ 2,065,523
============ ============ ============
Variable accumulation unit value.................. $ 14.27 $ 10.36 $ 9.57
============ ============ ============
Identified Cost of Investment......................... $ 17,252,185 $ 25,930,813 $ 1,979,493
============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-4
<PAGE> 56
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-5
<PAGE> 57
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
---------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income........................................... $ -- $ 8,890,624 $ 2,166,858
Mortality and expense risk charges........................ (6,801,527) (2,572,847) (657,313)
------------ ------------- -----------
Net investment income (loss).......................... (6,801,527) 6,317,777 1,509,545
------------ ------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments......................... 64,560,091 240,289,042 3,373,641
Cost of investments sold.................................. (32,897,132) (240,289,652) (2,893,293)
------------ ------------- -----------
Net realized gain (loss) on investments............... 31,662,959 (610) 480,348
Realized gain distribution received....................... 24,098,794 77 6,416,144
Change in unrealized appreciation (depreciation) on
investments............................................. 68,925,559 453 8,269,879
------------ ------------- -----------
Net gain (loss) on investments........................ 124,687,312 (80) 15,166,371
------------ ------------- -----------
Increase (decrease) attributable to funds of New York Life
Insurance and Annuity Corporation retained by Separate
Account................................................. (300,890) (20,754) (41,855)
------------ ------------- -----------
Net increase (decrease) in total equity resulting from
operations.......................................... $117,584,895 $ 6,296,943 $16,634,061
============ ============= ===========
</TABLE>
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP CENTURY LARGE
INDEXED INCOME COMPANY
EQUITY & GROWTH VALUE
---------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income........................................... $ 6,174,824 $ 324,035 $ 192,979
Mortality and expense risk charges........................ (7,436,743) (504,445) (295,831)
------------ ----------- -----------
Net investment income (loss).......................... (1,261,919) (180,410) (102,852)
------------ ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments......................... 55,189,811 2,015,470 1,480,342
Cost of investments sold.................................. (28,455,026) (1,764,854) (1,403,056)
------------ ----------- -----------
Net realized gain (loss) on investments............... 26,734,785 250,616 77,286
Realized gain distribution received....................... 9,223,306 -- --
Change in unrealized appreciation (depreciation) on
investments............................................. 61,187,782 5,818,304 1,098,415
------------ ----------- -----------
Net gain on investments............................... 97,145,873 6,068,920 1,175,701
------------ ----------- -----------
Decrease attributable to funds of New York Life Insurance
and Annuity Corporation retained by Separate Account.... (248,381) (16,085) (3,398)
------------ ----------- -----------
Net increase in total equity resulting from
operations.......................................... $ 95,635,573 $ 5,872,425 $ 1,069,451
============ =========== ===========
</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> 58
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,137,161 $ 45,156,765 $ 67,312 $ 5,045,214 $ 2,051,953 $ 4,992,662 $ 1,664,412
(760,892) (5,063,816) (242,414) (3,516,954) (2,319,136) (1,065,422) (3,267,018)
------------- ------------- ------------- ------------- ------------- ------------- -------------
2,376,269 40,092,949 (175,102) 1,528,260 (267,183) 3,927,240 (1,602,606)
------------- ------------- ------------- ------------- ------------- ------------- -------------
6,459,367 12,998,207 4,049,865 7,413,453 20,311,707 4,993,682 8,623,250
(6,289,253) (12,296,439) (3,245,640) (4,729,675) (17,213,440) (4,992,421) (6,055,529)
------------- ------------- ------------- ------------- ------------- ------------- -------------
170,114 701,768 804,225 2,683,778 3,098,267 1,261 2,567,721
-- 7,725,965 462,134 8,277,954 -- 6,418 27,931,332
(4,154,780) (12,128,579) 3,535,130 26,859,289 7,362,393 (6,083,539) 34,621,533
------------- ------------- ------------- ------------- ------------- ------------- -------------
(3,984,666) (3,700,846) 4,801,489 37,821,021 10,460,660 (6,075,860) 65,120,586
------------- ------------- ------------- ------------- ------------- ------------- -------------
1,610 (117,590) (11,646) (106,692) (20,443) 1,926 (173,616)
------------- ------------- ------------- ------------- ------------- ------------- -------------
$ (1,606,787) $ 36,274,513 $ 4,614,741 $ 39,242,589 $ 10,173,034 $ (2,146,694) $ 63,344,364
============= ============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET LORD ALGER
MANAGEMENT ABBETT AMERICAN CALVERT FIDELITY FIDELITY JANUS ASPEN
GROWTH DEVELOPING SMALL SOCIAL VIP II VIP SERIES
EQUITY GROWTH CAPITALIZATION BALANCED CONTRAFUND EQUITY-INCOME BALANCED
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 690 $ 461,296 $ -- $ 400,072 $ 595,905 $ 1,296,727 $ 5,681,774
(352,509) (262,524) (431,695) (189,405) (2,424,368) (1,472,298) (2,849,564)
------------ ------------ ------------ ------------ ------------ ------------ ------------
(351,819) 198,772 (431,695) 210,667 (1,828,463) (175,571) 2,832,210
------------ ------------ ------------ ------------ ------------ ------------ ------------
1,514,103 4,142,313 74,122,277 1,098,925 7,016,138 3,174,267 1,957,201
(1,189,392) (4,175,653) (71,788,115) (894,501) (4,522,785) (2,593,745) (1,151,749)
------------ ------------ ------------ ------------ ------------ ------------ ------------
324,711 (33,340) 2,334,162 204,424 2,493,353 580,522 805,452
2,447,031 -- 3,276,996 1,370,648 4,369,968 2,866,449 --
13,826,296 5,050,045 8,718,638 (239,125) 33,698,949 473,073 46,892,559
------------ ------------ ------------ ------------ ------------ ------------ ------------
16,598,038 5,016,705 14,329,796 1,335,947 40,562,270 3,920,044 47,698,011
------------ ------------ ------------ ------------ ------------ ------------ ------------
(39,596) (16,473) (35,455) (3,911) (98,601) (11,677) (137,780)
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 16,206,623 $ 5,199,004 $ 13,862,646 $ 1,542,703 $ 38,635,206 $ 3,732,796 $ 50,392,441
============ ============ ============ ============ ============ ============ ============
</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> 59
STATEMENT OF OPERATIONS (CONTINUED)
For the year ended December 31, 1999
<TABLE>
<CAPTION>
JANUS ASPEN MFS
SERIES GROWTH MFS
WORLDWIDE WITH RESEARCH
GROWTH INCOME SERIES SERIES
-------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT LOSS:
Dividend income................................. $ 321,362 $ 27,455 $ 8,960
Mortality and expense risk charges.............. (2,577,762) (157,628) (92,410)
------------ ----------- -----------
Net investment loss......................... (2,256,400) (130,173) (83,450)
------------ ----------- -----------
REALIZED AND UNREALIZED GAIN:
Proceeds from sale of investments............... 37,513,165 497,017 1,515,664
Cost of investments sold........................ (25,909,006) (481,756) (1,335,780)
------------ ----------- -----------
Net realized gain on investments............ 11,604,159 15,261 179,884
Realized gain distribution received............. -- 32,955 47,348
Change in unrealized appreciation (depreciation)
on investments................................ 102,746,265 812,574 1,849,509
------------ ----------- -----------
Net gain on investments..................... 114,350,424 860,790 2,076,741
------------ ----------- -----------
Decrease attributable to funds of New York Life
Insurance and Annuity Corporation
retained by Separate Account.................. (268,363) (1,900) (4,115)
------------ ----------- -----------
Net increase in total equity resulting
from operations........................... $111,825,661 $ 728,717 $ 1,989,176
============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY T. ROWE VAN ECK
DEAN WITTER PRICE WORLDWIDE
EMERGING MARKETS EQUITY HARD
EQUITY INCOME ASSETS
-------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income................................. $ 2,386 $ 385,881 $ 7,966
Mortality and expense risk charges.............. (157,441) (261,283) (17,455)
------------ ----------- -----------
Net investment income (loss)................ (155,055) 124,598 (9,489)
------------ ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments............... 1,751,972 4,062,616 936,432
Cost of investments sold........................ (2,063,978) (3,806,002) (831,553)
------------ ----------- -----------
Net realized gain (loss) on investments..... (312,006) 256,614 104,879
Realized gain distribution received............. -- 998,267 --
Change in unrealized appreciation (depreciation)
on investments................................ 9,467,305 (1,375,827) 90,024
------------ ----------- -----------
Net gain (loss) on investments.............. 9,155,299 (120,946) 194,903
------------ ----------- -----------
Decrease attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account.................. (19,162) (251) (472)
------------ ----------- -----------
Net increase in total equity resulting
from operations........................... $ 8,981,082 $ 3,401 $ 184,942
============ =========== ===========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-8
<PAGE> 60
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-9
<PAGE> 61
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)..................... $ (6,801,527) $ (3,263,970) $ 6,317,777 $ 2,975,494
Net realized gain (loss) on investments.......... 31,662,959 4,832,178 (610) 709
Realized gain distribution received.............. 24,098,794 3,372,386 77 --
Change in unrealized appreciation (depreciation)
on investments................................. 68,925,559 80,264,752 453 (526)
Increase (decrease) attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account................... (300,890) (227,414) (20,754) (9,626)
-------------- -------------- -------------- --------------
Net increase (decrease) in total equity
resulting from operations.................... 117,584,895 84,977,932 6,296,943 2,966,051
-------------- -------------- -------------- --------------
Contributions and withdrawals:
Policyowners' premium payments................... 34,382,497 13,162,525 1,155,909,385 913,610,826
Policyowners' surrenders......................... (18,700,983) (9,195,564) (11,574,989) (2,866,672)
Policyowners' annuity and death benefits......... (2,652,375) (1,384,891) (1,882,423) (110,206)
Net transfers from (to) Fixed Account............ 1,385,445 (1,075,455) (7,387,762) (4,500,370)
Transfers between Investment Divisions........... 157,351,663 95,055,794 (968,197,144) (835,614,042)
-------------- -------------- -------------- --------------
Net contributions.............................. 171,766,247 96,562,409 166,867,067 70,519,536
-------------- -------------- -------------- --------------
Increase in total equity..................... 289,351,142 181,540,341 173,164,010 73,485,587
TOTAL EQUITY:
Beginning of year................................ 367,977,768 186,437,427 121,078,589 47,593,002
-------------- -------------- -------------- --------------
End of year...................................... $ 657,328,910 $ 367,977,768 $ 294,242,599 $ 121,078,589
============== ============== ============== ==============
</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)..................... $ (175,102) $ 157,931 $ 1,528,260 $ 1,584,276
Net realized gain on investments................. 804,225 67,333 2,683,778 383,756
Realized gain distribution received.............. 462,134 -- 8,277,954 5,245,257
Change in unrealized appreciation (depreciation)
on investments................................. 3,535,130 2,291,030 26,859,289 28,857,896
Increase (decrease) attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account................... (11,646) (10,483) (106,692) (95,981)
-------------- -------------- -------------- --------------
Net increase (decrease) in total equity
resulting from operations.................... 4,614,741 2,505,811 39,242,589 35,975,204
-------------- -------------- -------------- --------------
Contributions and withdrawals:
Policyowners' premium payments................... 1,111,621 442,310 14,574,035 8,659,295
Policyowners' surrenders......................... (487,657) (301,242) (9,356,112) (5,204,970)
Policyowners' annuity and death benefits......... (112,067) (91,591) (1,640,052) (766,712)
Net transfers from (to) Fixed Account............ 179,080 (63,428) (207,261) (707,925)
Transfers between Investment Divisions........... 2,287,180 1,168,012 59,847,100 54,347,173
-------------- -------------- -------------- --------------
Net contributions and withdrawals.............. 2,978,157 1,154,061 63,217,710 56,326,861
-------------- -------------- -------------- --------------
Increase in total equity..................... 7,592,898 3,659,872 102,460,299 92,302,065
TOTAL EQUITY:
Beginning of year................................ 15,135,741 11,475,869 203,517,640 111,215,575
-------------- -------------- -------------- --------------
End of year...................................... $ 22,728,639 $ 15,135,741 $ 305,977,939 $ 203,517,640
============== ============== ============== ==============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-10
<PAGE> 62
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
<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>
$ 1,509,545 $ 1,333,082 $ 2,376,269 $ 1,350,093 $ 40,092,949 $ 24,455,427
480,348 350,619 170,114 299,747 701,768 775,100
6,416,144 1,219,130 -- -- 7,725,965 779,456
8,269,879 (2,295,772) (4,154,780) (88,614) (12,128,579) (25,710,885)
(41,855) (1,174) 1,610 (3,824) (117,590) (422)
-------------- -------------- -------------- -------------- -------------- --------------
16,634,061 605,885 (1,606,787) 1,557,402 36,274,513 298,676
-------------- -------------- -------------- -------------- -------------- --------------
2,620,934 1,768,847 3,472,181 893,428 20,962,012 19,432,879
(1,292,532) (619,313) (2,236,959) (1,102,640) (17,095,230) (11,532,193)
(166,083) (129,950) (239,141) (186,772) (3,256,960) (1,549,873)
366,068 (114,198) (223,529) (152,490) (606,163) (2,618,743)
8,760,834 10,614,613 21,161,456 25,977,645 54,594,175 102,753,150
-------------- -------------- -------------- -------------- -------------- --------------
10,289,221 11,519,999 21,934,008 25,429,171 54,597,834 106,485,220
-------------- -------------- -------------- -------------- -------------- --------------
26,923,282 12,125,884 20,327,221 26,986,573 90,872,347 106,783,896
38,110,998 25,985,114 39,673,888 12,687,315 310,120,395 203,336,499
-------------- -------------- -------------- -------------- -------------- --------------
$ 65,034,280 $ 38,110,998 $ 60,001,109 $ 39,673,888 $ 400,992,742 $ 310,120,395
============== ============== ============== ============== ============== ==============
</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>
$ (267,183) $ 395,691 $ 3,927,240 $ 2,633,892 $ (1,602,606) $ (493,888)
3,098,267 1,279,135 1,261 32,492 2,567,721 356,925
-- 12,582,107 6,418 1,562,448 27,931,332 13,289,553
7,362,393 (25,490,442) (6,083,539) (1,391,302) 34,621,533 16,134,563
(20,443) 15,885 1,926 (7,219) (173,616) (88,398)
-------------- -------------- -------------- -------------- -------------- --------------
10,173,034 (11,217,624) (2,146,694) 2,830,311 63,344,364 29,198,755
-------------- -------------- -------------- -------------- -------------- --------------
6,471,643 8,504,850 5,568,019 2,962,500 16,960,756 7,854,006
(6,675,519) (4,951,446) (3,545,674) (1,415,205) (7,639,866) (3,939,312)
(912,254) (1,204,738) (681,286) (172,811) (1,074,648) (665,675)
(65,568) (1,354,692) 325,965 (56,985) 1,537,864 (259,908)
(1,237,019) 47,245,084 21,251,994 34,854,154 63,978,954 60,766,288
-------------- -------------- -------------- -------------- -------------- --------------
(2,418,717) 48,239,058 22,919,018 36,171,653 73,763,060 63,755,399
-------------- -------------- -------------- -------------- -------------- --------------
7,754,317 37,021,434 20,772,324 39,001,964 137,107,424 92,954,154
157,643,014 120,621,580 61,788,235 22,786,271 180,165,273 87,211,119
-------------- -------------- -------------- -------------- -------------- --------------
$ 165,397,331 $ 157,643,014 $ 82,560,559 $ 61,788,235 $ 317,272,697 $ 180,165,273
============== ============== ============== ============== ============== ==============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-11
<PAGE> 63
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 1998(a)
-------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)..................... $ (1,261,919) $ (20,441) $ (180,410) $ (27,268)
Net realized gain (loss) on investments.......... 26,734,785 3,737,791 250,616 (35,373)
Realized gain distribution received.............. 9,223,306 3,479,147 -- --
Change in unrealized appreciation (depreciation)
on investments................................. 61,187,782 61,206,441 5,818,304 2,239,326
Decrease attributable to funds of New York Life
Insurance and Annuity Corporation retained by
Separate Account............................... (248,381) (209,334) (16,085) (6,952)
------------- ------------- ------------- -------------
Net increase (decrease) in total equity
resulting from operations.................... 95,635,573 68,193,604 5,872,425 2,169,733
------------- ------------- ------------- -------------
Contributions and withdrawals:
Equity contribution by New York Life Insurance
and Annuity Corporation........................ -- -- -- 10,000,000
Policyowners' premium payments................... 39,131,214 20,576,362 4,260,261 634,838
Policyowners' surrenders......................... (19,102,715) (9,009,769) (868,297) (79,172)
Policyowners' annuity and death benefits......... (2,992,825) (1,003,566) (152,200) --
Net transfers from (to) Fixed Account............ 4,837,916 (82,202) 1,482,006 46,387
Transfers between Investment Divisions........... 159,603,918 146,203,904 15,165,095 11,796,427
------------- ------------- ------------- -------------
Net contributions.............................. 181,477,508 156,684,729 19,886,865 22,398,480
------------- ------------- ------------- -------------
Increase in total equity..................... 277,113,081 224,878,333 25,759,290 24,568,213
TOTAL EQUITY:
Beginning of year................................ 407,587,595 182,709,262 24,568,213 --
------------- ------------- ------------- -------------
End of year...................................... $ 684,700,676 $ 407,587,595 $ 50,327,503 $ 24,568,213
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
CALVERT FIDELITY
SOCIAL VIP II
BALANCED CONTRAFUND
----------------------------- -----------------------------
1999 1998 1999 1998
-------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)..................... $ 210,667 $ 127,321 $ (1,828,463) $ (698,763)
Net realized gain (loss) on investments.......... 204,424 77,911 2,493,353 99,321
Realized gain distribution received.............. 1,370,648 503,162 4,369,968 2,252,334
Change in unrealized appreciation (depreciation)
on investments................................. (239,125) 300,085 33,698,949 18,490,256
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation retained
by
Separate Account............................... (3,911) (2,809) (98,601) (56,749)
------------- ------------- ------------- -------------
Net increase in total equity resulting from
operations................................... 1,542,703 1,005,670 38,635,206 20,086,399
------------- ------------- ------------- -------------
Contributions and withdrawals:
Policyowners' premium payments................... 1,218,283 448,798 21,562,788 6,539,351
Policyowners' surrenders......................... (389,555) (178,847) (5,721,665) (2,091,645)
Policyowners' annuity and death benefits......... (44,732) (74,437) (603,445) (193,257)
Net transfers from (to) Fixed Account............ 383,374 (105,315) 4,530,876 54,147
Transfers between Investment Divisions........... 5,730,352 4,790,643 69,788,898 52,658,032
------------- ------------- ------------- -------------
Net contributions.............................. 6,897,722 4,880,842 89,557,452 56,966,628
------------- ------------- ------------- -------------
Increase in total equity..................... 8,440,425 5,886,512 128,192,658 77,053,027
TOTAL EQUITY:
Beginning of year................................ 10,046,816 4,160,304 117,112,701 40,059,674
------------- ------------- ------------- -------------
End of year...................................... $ 18,487,241 $ 10,046,816 $ 245,305,359 $ 117,112,701
============= ============= ============= =============
</TABLE>
(a) For the period May 1, 1998 (Commencement of Operations) through December 31,
1998.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-12
<PAGE> 64
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
<TABLE>
<CAPTION>
DREYFUS EAGLE ASSET LORD ALGER
LARGE MANAGEMENT ABBETT AMERICAN
COMPANY GROWTH DEVELOPING SMALL
VALUE EQUITY GROWTH CAPITALIZATION
----------------------------- ----------------------------- ----------------------------- -----------------------------
1999 1998(a) 1999 1998(a) 1999 1998(a) 1999 1998
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ (102,852) $ (32,350) $ (351,819) $ (103,061) $ 198,772 $ (94,657) $ (431,695) $ (221,783)
77,286 (21,758) 324,711 (5,237) (33,340) (130,955) 2,334,162 (255,859)
-- -- 2,447,031 -- -- -- 3,276,996 1,965,062
1,098,415 754,799 13,826,296 2,419,687 5,050,045 (36,805) 8,718,638 1,178,171
(3,398) (3,408) (39,596) (6,423) (16,473) (3,676) (35,455) (9,820)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1,069,451 697,283 16,206,623 2,304,966 5,199,004 (266,093) 13,862,646 2,655,771
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
-- 10,000,000 -- 10,000,000 -- 10,000,000 -- --
1,282,654 641,398 3,625,755 278,603 1,634,924 354,560 3,509,225 1,298,003
(439,054) (95,950) (382,671) (13,083) (385,998) (50,429) (977,668) (667,185)
(36,081) -- (28,061) -- (50) -- (159,596) (123,482)
835,237 10,210 1,113,574 37,328 566,892 42,726 1,235,110 83,274
6,389,989 5,346,189 15,046,226 3,825,774 5,707,840 4,268,369 11,588,412 8,414,198
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
8,032,745 15,901,847 19,374,823 14,128,622 7,523,608 14,615,226 15,195,483 9,004,808
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
9,102,196 16,599,130 35,581,446 16,433,588 12,722,612 14,349,133 29,058,129 11,660,579
16,599,130 -- 16,433,588 -- 14,349,133 -- 22,801,855 11,141,276
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 25,701,326 $ 16,599,130 $ 52,015,034 $ 16,433,588 $ 27,071,745 $ 14,349,133 $ 51,859,984 $ 22,801,855
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN MFS
FIDELITY JANUS ASPEN SERIES GROWTH
VIP SERIES WORLDWIDE WITH
EQUITY-INCOME BALANCED GROWTH INCOME SERIES
----------------------------- ----------------------------- ----------------------------- -----------------------------
1999 1998 1999 1998 1999 1998 1999 1998(a)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ (175,571) $ (345,272) $ 2,832,210 $ 1,654,759 $ (2,256,400) $ 1,194,667 $ (130,173) $ (15,005)
580,522 86,155 805,452 72,010 11,604,159 1,856,800 15,261 (18,494)
2,866,449 1,682,987 -- 347,759 -- 961,481 32,955 --
473,073 3,410,204 46,892,559 16,353,009 102,746,265 14,600,486 812,574 419,329
(11,677) (20,934) (137,780) (50,484) (268,363) (63,694) (1,900) (829)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
3,732,796 4,813,140 50,392,441 18,377,053 111,825,661 18,549,740 728,717 385,001
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
8,723,485 5,720,100 30,725,045 5,898,289 18,445,442 7,060,394 2,753,891 245,609
(3,848,099) (1,598,980) (7,304,738) (1,550,539) (6,629,373) (2,524,290) (336,762) (23,721)
(702,180) (309,345) (1,244,078) (253,681) (866,431) (281,189) (33,617) --
2,023,538 15,447 9,244,304 177,556 4,588,132 (39,738) 1,403,061 42,863
29,068,136 46,428,934 151,576,991 56,910,948 77,716,412 47,042,242 9,619,218 3,948,109
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
35,264,880 50,256,156 182,997,524 61,182,573 93,254,182 51,257,419 13,405,791 4,212,860
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
38,997,676 55,069,296 233,389,965 79,559,626 205,079,843 69,807,159 14,134,508 4,597,861
84,984,266 29,914,970 104,734,615 25,174,989 124,614,051 54,806,892 4,597,861 --
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 123,981,942 $ 84,984,266 $ 338,124,580 $ 104,734,615 $ 329,693,894 $ 124,614,051 $ 18,732,369 $ 4,597,861
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-13
<PAGE> 65
STATEMENT OF CHANGES IN TOTAL EQUITY (CONTINUED)
For the years ended December 31, 1999
and December 31, 1998
<TABLE>
<CAPTION>
MORGAN STANLEY
DEAN WITTER
MFS EMERGING MARKETS
RESEARCH SERIES EQUITY
----------------------------- -----------------------------
1999 1998(a) 1999 1998
-------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment loss.............................. $ (83,450) $ (9,472) $ (155,055) $ (67,041)
Net realized gain (loss) on investments.......... 179,884 (17,978) (312,006) (665,302)
Realized gain distribution received.............. 47,348 -- -- --
Change in unrealized appreciation (depreciation)
on investments................................. 1,849,509 257,341 9,467,305 (1,402,784)
Increase (decrease) attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account................... (4,115) (595) (19,162) 3,898
------------- ------------- ------------- -------------
Net increase (decrease) in total equity
resulting from operations.................... 1,989,176 229,296 8,981,082 (2,131,229)
------------- ------------- ------------- -------------
Contributions and withdrawals:
Policyowners' premium payments................... 2,836,575 193,769 1,600,831 544,180
Policyowners' surrenders......................... (170,420) (5,144) (638,716) (303,684)
Policyowners' annuity and death benefits......... (1,713) -- (42,089) (28,128)
Net transfers from (to) Fixed Account............ 1,448,410 5,543 537,872 (222,426)
Transfers between Investment Divisions........... 4,404,982 2,305,392 7,021,890 177,768
------------- ------------- ------------- -------------
Net contributions.............................. 8,517,834 2,499,560 8,479,788 167,710
------------- ------------- ------------- -------------
Increase (decrease) in total equity.......... 10,507,010 2,728,856 17,460,870 (1,963,519)
TOTAL EQUITY:
Beginning of year................................ 2,728,856 -- 6,216,001 8,179,520
------------- ------------- ------------- -------------
End of year...................................... $ 13,235,866 $ 2,728,856 $ 23,676,871 $ 6,216,001
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
T. ROWE VAN ECK
PRICE WORLDWIDE
EQUITY HARD
INCOME ASSETS
----------------------------- -----------------------------
1999 1998(a) 1999 1998(a)
-------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)..................... $ 124,598 $ 45,612 $ (9,489) $ (2,516)
Net realized gain (loss) on investments.......... 256,614 (36,653) 104,879 (52,557)
Realized gain distribution received.............. 998,267 258,411 -- --
Change in unrealized appreciation (depreciation)
on investments................................. (1,375,827) 250,139 90,024 2,487
Increase (decrease) attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account................... (251) (1,005) (472) 34
------------- ------------- ------------- -------------
Net increase (decrease) in total equity
resulting from operations.................... 3,401 516,504 184,942 (52,552)
------------- ------------- ------------- -------------
Contributions and withdrawals:
Policyowners' premium payments................... 2,744,823 737,336 320,055 23,746
Policyowners' surrenders......................... (751,362) (86,228) (25,725) (3,416)
Policyowners' annuity and death benefits......... (66,820) -- -- --
Net transfers from (to) Fixed Account............ 1,185,381 218,947 (76,098) (44,240)
Transfers between Investment Divisions........... 11,526,859 8,695,170 1,238,541 500,270
------------- ------------- ------------- -------------
Net contributions.............................. 14,638,881 9,565,225 1,456,773 476,360
------------- ------------- ------------- -------------
Increase in total equity..................... 14,642,282 10,081,729 1,641,715 423,808
TOTAL EQUITY:
Beginning of year................................ 10,081,729 -- 423,808 --
------------- ------------- ------------- -------------
End of year...................................... $ 24,724,011 $ 10,081,729 $ 2,065,523 $ 423,808
============= ============= ============= =============
</TABLE>
(a) For the period May 1, 1998 (Commencement of Operations) through December 31,
1998.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-14
<PAGE> 66
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-15
<PAGE> 67
NOTES TO FINANCIAL STATEMENTS
NOTE 1-- Organization and Accounting Policies:
- --------------------------------------------------------------------------------
NYLIAC Variable Annuity Separate Account-III ("Separate Account" formerly,
"LifeStages(R) Annuity Separate Account") was established on November 30, 1994,
under Delaware law by New York Life Insurance and Annuity Corporation, a
wholly-owned subsidiary of New York Life Insurance Company. The Separate
Account funds LifeStages(R) Variable Annuity, LifeStages(R) Flexible Premium
Variable Annuity, LifeStages(R) and MainStay Plus Variable Annuity policies.
This account was established to receive and invest premium payments under
Non-Qualified and Qualified Flexible Premium Variable Retirement Annuity
Policies issued by New York Life Insurance and Annuity Corporation. The non-
qualified policies are designed to establish retirement benefits to provide
individuals with supplemental retirement income. The qualified policies are
designed to establish retirement benefits for individuals who participate in
qualified pension, profit sharing or annuity plans. The policies are
distributed by NYLIFE Distributors Inc. and sold by registered representatives
of NYLIFE Securities Inc., certain banking and financial institutions which
have entered into selling agreements with New York Life Insurance and Annuity
Corporation and registered representatives of unaffiliated broker-dealers.
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. The Separate Account is registered under the Investment
Company Act of 1940, as amended, as a unit investment trust.
The assets of the Separate Account are invested in the shares of the MainStay
VP Series Fund, Inc., the Alger American Fund, the Calvert Variable Series, Inc.
(formerly, "Acacia Capital Corporation"), the Fidelity Variable Insurance
Products Fund II, the Fidelity Variable Insurance Products Fund, the Janus Aspen
Series, the MFS Variable Insurance Trust, the Morgan Stanley Dean Witter
Universal Funds, Inc. (formerly, "Morgan Stanley Universal Funds, Inc."), the T.
Rowe Price Equity Series, Inc., the Van Eck Worldwide Insurance Trust and
certain other funds (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.
The Separate Account offers twenty-six variable Investment Divisions, with
their respective fund portfolios, for Policyowners to invest premium payments.
The following Investment Divisions are available for LifeStages(R) Variable
Annuity, LifeStages(R) Flexible Premium Variable Annuity, LifeStages(R) and
MainStay Plus Variable Annuity 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 LifeStages(R) Variable Annuity, LifeStages(R)
Flexible Premium Variable Annuity and MainStay Plus Variable Annuity
Policyowners: American Century Income & Growth, Dreyfus Large Company Value,
Eagle Asset Management Growth Equity, Lord Abbett Developing Growth, MFS Growth
With Income Series, MFS Research Series, T. Rowe Price Equity Income, and Van
Eck Worldwide Hard Assets. Each Investment Division of the Separate Account will
invest exclusively in the corresponding eligible portfolio.
For LifeStages(R) Variable Annuity and LifeStages(R) policies, initial premium
payments, except those received for the Fixed Account, are allocated to the
MainStay VP Cash Management Investment Division until 15 days after the policy
issue date. Thereafter, premium payments are allocated to the Investment
Divisions of the Separate Account in accordance with the Policyowner's
instructions. For MainStay Plus Variable Annuity policies, in states where
approved, and LifeStages(R) Flexible Premium Variable Annuity policies, premium
payments received are allocated to the Investment Divisions in accordance with
the Policyowner's instructions. In addition, for all policies, the Policyowner
has the option to transfer amounts between the Investment Divisions of the
Separate Account 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 the
Separate Account 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).
F-16
<PAGE> 68
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
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-17
<PAGE> 69
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--Investments (in 000's):
- --------------------------------------------------------------------------------
At December 31, 1999, the investments of the Separate Account are as
follows:
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
----------------------------------------------------
<S> <C> <C> <C>
Number of shares......................................... 17,838 295,144 5,145
Identified cost*......................................... $477,432 $295,142 $ 58,493
</TABLE>
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP CENTURY LARGE
INDEXED INCOME COMPANY
EQUITY & GROWTH VALUE
--------------------------------------------------
<S> <C> <C> <C>
Number of shares......................................... 22,530 3,963 2,379
Identified cost*......................................... $537,046 $ 42,439 $ 23,937
</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
APPRECIATION MANAGEMENT CONVERTIBLE
----------------------------------------------------
<S> <C> <C> <C>
Purchases................................................ $254,335 $413,969 $ 21,629
Proceeds from sales...................................... 64,560 240,289 3,374
</TABLE>
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP CENTURY LARGE
INDEXED INCOME COMPANY
EQUITY & GROWTH VALUE
--------------------------------------------------
<S> <C> <C> <C>
Purchases................................................ $245,292 $ 21,798 $ 9,440
Proceeds from sales...................................... 55,190 2,015 1,480
</TABLE>
F-18
<PAGE> 70
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6,298 37,619 1,473 13,732 11,069 6,767 11,463
$ 64,503 $443,955 $ 17,493 $238,750 $169,782 $ 90,500 $267,337
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET LORD ALGER
MANAGEMENT ABBETT AMERICAN CALVERT FIDELITY FIDELITY JANUS ASPEN
GROWTH DEVELOPING SMALL SOCIAL VIP II VIP SERIES
EQUITY GROWTH CAPITALIZATION BALANCED CONTRAFUND EQUITY-INCOME BALANCED
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2,812 2,274 943 8,552 8,444 4,839 12,150
$ 35,931 $ 22,141 $ 41,558 $ 18,464 $190,280 $118,106 $274,355
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 30,853 $115,642 $ 7,328 $ 80,711 $ 17,618 $ 31,942 $109,026
6,459 12,998 4,050 7,413 20,312 4,994 8,623
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET LORD ALGER
MANAGEMENT ABBETT AMERICAN CALVERT FIDELITY FIDELITY JANUS ASPEN
GROWTH DEVELOPING SMALL SOCIAL VIP II VIP SERIES
EQUITY GROWTH CAPITALIZATION BALANCED CONTRAFUND EQUITY-INCOME BALANCED
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 23,050 $ 11,884 $ 92,218 $ 9,601 $ 99,462 $ 41,237 $188,414
1,514 4,142 74,122 1,099 7,016 3,174 1,957
</TABLE>
F-19
<PAGE> 71
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--Investments (in 000's) (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUS ASPEN MFS
SERIES GROWTH
WORLDWIDE WITH MFS
GROWTH INCOME SERIES RESEARCH SERIES
---------------------------------------------------------------
<S> <C> <C> <C>
Number of shares................................ 6,927 882 569
Identified cost*................................ $210,528 $ 17,561 $ 11,170
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY
DEAN WITTER T. ROWE VAN ECK
EMERGING PRICE WORLDWIDE
MARKETS EQUITY HARD
EQUITY INCOME ASSETS
---------------------------------------------------------------
<S> <C> <C> <C>
Number of shares................................ 1,708 1,324 189
Identified cost*................................ $ 17,252 $ 25,931 $ 1,979
</TABLE>
* The cost stated also represents the aggregate cost for Federal income tax
purposes.
<TABLE>
<CAPTION>
JANUS ASPEN MFS
SERIES GROWTH
WORLDWIDE WITH MFS
GROWTH INCOME SERIES RESEARCH SERIES
---------------------------------------------------------------
<S> <C> <C> <C>
Purchases....................................... $128,905 $ 13,852 $ 10,027
Proceeds from sales............................. 37,513 497 1,516
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY
DEAN WITTER T. ROWE VAN ECK
EMERGING PRICE WORLDWIDE
MARKETS EQUITY HARD
EQUITY INCOME ASSETS
---------------------------------------------------------------
<S> <C> <C> <C>
Purchases....................................... $ 10,109 $ 19,878 $ 2,388
Proceeds from sales............................. 1,752 4,063 936
</TABLE>
F-20
<PAGE> 72
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
NOTE 3--Mortality and Expense Risk Charges:
- --------------------------------------------------------------------------------
The Separate Account is charged for administrative services provided and the
mortality and expense risks assumed by New York Life Insurance and Annuity
Corporation. These charges are made daily at an annual rate of 1.40% of the
daily net asset value of each Investment Division. The amounts of these charges
retained in the Investment Divisions represent funds of New York Life Insurance
and Annuity Corporation. Accordingly, New York Life Insurance and Annuity
Corporation participates in the results of each Investment Division ratably
with the Policyowners.
- --------------------------------------------------------------------------------
NOTE 4 --Distribution of Net Income:
- --------------------------------------------------------------------------------
The Separate Account 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, transfers, or annuity payments) in excess of the
net premium payments.
F-21
<PAGE> 73
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 1998 1999 1998
--------------------------------------------------------
<S> <C> <C> <C> <C>
Units issued on premium payments....................... 1,403 686 994,277 812,628
Units redeemed on surrenders........................... (761) (476) (9,939) (2,547)
Units redeemed on annuity and death benefits........... (109) (72) (1,624) (97)
Units issued (redeemed) on net transfers from (to)
Fixed Account........................................ 51 (54) (6,353) (3,989)
Units issued (redeemed) on transfers between Investment
Divisions............................................ 6,500 4,855 (833,417) (743,310)
-------- -------- -------- --------
Net increase......................................... 7,084 4,939 142,944 62,685
Units outstanding, beginning of year................... 15,940 11,001 105,842 43,157
-------- -------- -------- --------
Units outstanding, end of year......................... 23,024 15,940 248,786 105,842
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
INTERNATIONAL EQUITY TOTAL RETURN
--------------------------- ---------------------------
1999 1998 1999 1998
--------------------------------------------------------
<S> <C> <C> <C> <C>
Units issued on premium payments....................... 71 33 771 542
Units redeemed on surrenders........................... (31) (22) (492) (324)
Units redeemed on annuity and death benefits........... (7) (7) (86) (48)
Units issued (redeemed) on net transfers from (to)
Fixed Account........................................ 11 (5) (15) (48)
Units issued (redeemed) on transfers between Investment
Divisions............................................ 148 81 3,195 3,385
-------- -------- -------- --------
Net increase (decrease).............................. 192 80 3,373 3,507
Units outstanding, beginning of year................... 1,012 932 11,136 7,629
-------- -------- -------- --------
Units outstanding, end of year......................... 1,204 1,012 14,509 11,136
======== ======== ======== ========
</TABLE>
F-22
<PAGE> 74
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
- --------------------------------------------------------------------------------
<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>
178 144 287 76 1,369 1,361
(92) (51) (184) (91) (1,120) (817)
(11) (10) (20) (16) (213) (110)
22 (11) (19) (12) (40) (199)
590 862 1,736 2,148 3,553 7,148
-------- -------- -------- -------- -------- --------
687 934 1,800 2,105 3,549 7,383
3,139 2,205 3,208 1,103 21,960 14,577
-------- -------- -------- -------- -------- --------
3,826 3,139 5,008 3,208 25,509 21,960
======== ======== ======== ======== ======== ========
</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>
385 504 458 246 711 404
(400) (302) (292) (118) (319) (204)
(54) (70) (56) (14) (45) (35)
(5) (91) 28 (4) 63 (17)
(148) 2,727 1,740 2,902 2,672 3,112
-------- -------- -------- -------- -------- --------
(222) 2,768 1,878 3,012 3,082 3,260
10,004 7,236 4,993 1,981 8,239 4,979
-------- -------- -------- -------- -------- --------
9,782 10,004 6,871 4,993 11,321 8,239
======== ======== ======== ======== ======== ========
</TABLE>
F-23
<PAGE> 75
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--Unit Transactions (in 000's) (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP AMERICAN CENTURY
INDEXED EQUITY INCOME & GROWTH
------------------- -------------------
1999 1998 1999 1998(a)
-----------------------------------------
<S> <C> <C> <C> <C>
Units issued on equity contribution by New York
Life Insurance and Annuity Corporation........... -- -- -- 1,000
Units issued on premium payments................... 1,556 1,003 370 66
Units redeemed on surrenders....................... (763) (438) (75) (8)
Units redeemed on annuity and death benefits....... (120) (50) (14) --
Units issued (redeemed) on net transfers from (to)
Fixed Account.................................... 188 (8) 127 5
Units issued on transfers between Investment
Divisions........................................ 6,369 7,086 1,326 1,200
-------- -------- -------- --------
Net increase..................................... 7,230 7,593 1,734 2,263
Units outstanding, beginning of year............... 17,575 9,982 2,263 --
-------- -------- -------- --------
Units outstanding, end of year..................... 24,805 17,575 3,997 2,263
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
CALVERT FIDELITY
SOCIAL VIP II
BALANCED CONTRAFUND
------------------- -------------------
1999 1998 1999 1998
-----------------------------------------
<S> <C> <C> <C> <C>
Units issued on premium payments................... 69 29 1,197 457
Units redeemed on surrenders....................... (22) (11) (318) (145)
Units redeemed on annuity and death benefits....... (3) (5) (34) (13)
Units issued (redeemed) on net transfers from (to)
Fixed Account.................................... 22 (7) 248 1
Units issued on transfers between Investment
Divisions........................................ 327 306 3,889 3,643
-------- -------- -------- --------
Net increase..................................... 393 312 4,982 3,943
Units outstanding, beginning of year............... 594 282 7,022 3,079
-------- -------- -------- --------
Units outstanding, end of year..................... 987 594 12,004 7,022
======== ======== ======== ========
</TABLE>
(a) For the period May 1, 1998 (Commencement of Operations) through December 31,
1998.
F-24
<PAGE> 76
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EAGLE ASSET
DREYFUS LARGE MANAGEMENT LORD ABBETT ALGER AMERICAN
COMPANY VALUE GROWTH EQUITY DEVELOPING GROWTH SMALL CAPITALIZATION
------------------- ------------------- ------------------- ---------------------
1999 1998(a) 1999 1998(a) 1999 1998(a) 1999 1998
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- 1,000 -- 1,000 -- 1,000 -- --
123 68 247 27 164 44 263 121
(43) (10) (27) (1) (39) (6) (74) (61)
(3) -- (2) -- -- -- (13) (11)
80 1 76 4 55 5 90 6
611 570 1,028 378 523 530 893 789
-------- -------- -------- -------- -------- -------- -------- --------
768 1,629 1,322 1,408 703 1,573 1,159 844
1,629 -- 1,408 -- 1,573 -- 1,904 1,060
-------- -------- -------- -------- -------- -------- -------- --------
2,397 1,629 2,730 1,408 2,276 1,573 3,063 1,904
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
FIDELITY JANUS ASPEN SERIES
VIP SERIES WORLDWIDE MFS GROWTH WITH
EQUITY-INCOME BALANCED GROWTH INCOME SERIES
------------------- ------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998 1999 1998(a)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
571 409 1,688 424 986 487 255 24
(252) (116) (403) (109) (353) (174) (31) (2)
(46) (22) (69) (19) (49) (20) (3) --
131 (4) 504 11 233 (6) 132 5
1,885 3,316 8,437 4,068 4,144 3,176 897 408
-------- -------- -------- -------- -------- -------- -------- --------
2,289 3,583 10,157 4,375 4,961 3,463 1,250 435
5,850 2,267 6,418 2,043 7,855 4,392 435 --
-------- -------- -------- -------- -------- -------- -------- --------
8,139 5,850 16,575 6,418 12,816 7,855 1,685 435
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
F-25
<PAGE> 77
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--Unit Transactions (in 000's) (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MORGAN STANLEY
DEAN WITTER
MFS RESEARCH EMERGING
SERIES MARKETS EQUITY
------------------- -------------------
1999 1998(a) 1999 1998
-----------------------------------------
<S> <C> <C> <C> <C>
Units issued on premium payments................... 252 18 156 62
Units redeemed on surrenders....................... (14) (1) (61) (36)
Units redeemed on annuity and death benefits....... -- -- (4) (3)
Units issued (redeemed) on net transfers from (to)
Fixed Account.................................... 125 1 51 (21)
Units issued on transfers between Investment
Divisions........................................ 384 234 676 12
-------- -------- -------- --------
Net increase..................................... 747 252 818 14
Units outstanding, beginning of year............... 252 -- 841 827
-------- -------- -------- --------
Units outstanding, end of year..................... 999 252 1,659 841
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
T. ROWE PRICE VAN ECK WORLDWIDE
EQUITY INCOME HARD ASSETS
------------------- -------------------
1999 1998(a) 1999 1998(a)
-----------------------------------------
<S> <C> <C> <C> <C>
Units issued on premium payments................... 262 76 36 2
Units redeemed on surrenders....................... (71) (9) (3) --
Units redeemed on annuity and death benefits....... (6) -- -- --
Units issued (redeemed) on net transfers from (to)
Fixed Account.................................... 112 22 (8) (5)
Units issued on transfers between Investment
Divisions........................................ 1,095 906 138 56
-------- -------- -------- --------
Net increase..................................... 1,392 995 163 53
Units outstanding, beginning of year............... 995 -- 53 --
-------- -------- -------- --------
Units outstanding, end of year..................... 2,387 995 216 53
======== ======== ======== ========
</TABLE>
(a) For the period May 1, 1998 (Commencement of Operations) through December 31,
1998.
F-26
<PAGE> 78
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-27
<PAGE> 79
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 the Separate Account:
<TABLE>
<CAPTION>
MAINSTAY VP
CAPITAL APPRECIATION
-----------------------------------------------
1999 1998 1997 1996 1995(a)
---------------------------------------------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $23.09 $16.95 $13.92 $11.89 $10.00
Net investment income (loss)................................ (0.34) (0.25) (0.22) (0.17) 0.06
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 5.80 6.39 3.25 2.20 1.83
------ ------ ------ ------ ------
Unit value, end of year..................................... $28.55 $23.09 $16.95 $13.92 $11.89
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP
GOVERNMENT
-----------------------------------------------
1999 1998 1997 1996 1995(a)
---------------------------------------------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $12.37 $11.51 $10.66 $10.57 $10.00
Net investment income (loss)................................ 0.53 0.70 0.69 0.86 2.49
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. (0.92) 0.16 0.16 (0.77) (1.92)
------ ------ ------ ------ ------
Unit value, end of year..................................... $11.98 $12.37 $11.51 $10.66 $10.57
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP
TOTAL RETURN
-----------------------------------------------
1999 1998 1997 1996 1995(a)
---------------------------------------------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $18.28 $14.58 $12.55 $11.36 $10.00
Net investment income (loss)................................ 0.11 0.17 0.17 0.27 0.79
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 2.70 3.53 1.86 0.92 0.57
------ ------ ------ ------ ------
Unit value, end of year..................................... $21.09 $18.28 $14.58 $12.55 $11.36
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP
GROWTH EQUITY
-----------------------------------------------
1999 1998 1997 1996 1995(a)
---------------------------------------------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $21.87 $17.52 $14.01 $11.42 $10.00
Net investment income (loss)................................ (0.16) (0.07) (0.06) 0.05 0.35
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 6.31 4.42 3.57 2.54 1.07
------ ------ ------ ------ ------
Unit value, end of year..................................... $28.02 $21.87 $17.52 $14.01 $11.42
====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during the year.
(a) For the period May 1, 1995 (Commencement of Operations) through December 31,
1995.
(b) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
(c) For the period May 1, 1998 (Commencement of Operations) through December 31,
1998.
F-28
<PAGE> 80
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CASH MANAGEMENT CONVERTIBLE
----------------------------------------------- -------------------------------------
1999 1998 1997 1996 1995(a) 1999 1998 1997 1996(b)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.14 $ 1.10 $ 1.06 $ 1.03 $ 1.00 $12.14 $11.78 $10.35 $10.00
0.04 0.04 0.04 0.04 0.02 0.45 0.49 0.38 0.08
-- -- -- (0.01) 0.01 4.41 (0.13) 1.05 0.27
------ ------ ------ ------ ------ ------ ------ ------ ------
$ 1.18 $ 1.14 $ 1.10 $ 1.06 $ 1.03 $17.00 $12.14 $11.78 $10.35
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP
HIGH YIELD MAINSTAY VP
CORPORATE BOND INTERNATIONAL EQUITY
----------------------------------------------- -----------------------------------------------
1999 1998 1997 1996 1995(a) 1999 1998 1997 1996 1995(a)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$14.12 $13.95 $12.52 $10.83 $10.00 $14.95 $12.32 $11.88 $10.90 $10.00
1.69 1.31 1.05 1.02 1.15 (0.16) 0.16 0.90 0.87 1.36
(0.09) (1.14) 0.38 0.67 (0.32) 4.09 2.47 (0.46) 0.11 (0.46)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$15.72 $14.12 $13.95 $12.52 $10.83 $18.88 $14.95 $12.32 $11.88 $10.90
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
VALUE BOND
----------------------------------------------- -----------------------------------------------
1999 1998 1997 1996 1995(a) 1999 1998 1997 1996 1995(a)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$15.76 $16.67 $13.76 $11.32 $10.00 $12.37 $11.50 $10.64 $10.57 $10.00
(0.03) 0.04 0.07 0.11 0.20 0.63 0.80 0.76 0.99 2.16
1.18 (0.95) 2.84 2.33 1.12 (0.98) 0.07 0.10 (0.92) (1.59)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$16.91 $15.76 $16.67 $13.76 $11.32 $12.02 $12.37 $11.50 $10.64 $10.57
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
AMERICAN CENTURY
MAINSTAY VP INCOME DREYFUS LARGE
INDEXED EQUITY & GROWTH COMPANY VALUE
------------------------------------------- ---------------- ----------------
1999 1998 1997 1996 1995(a) 1999 1998(c) 1999 1998(c)
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$23.19 $18.30 $13.97 $11.58 $10.00 $10.86 $10.00 $10.19 $10.00
(0.06) -- 0.09 0.21 0.62 (0.06) (0.02) (0.05) (0.03)
4.47 4.89 4.24 2.18 0.96 1.79 0.88 0.58 0.22
------ ------ ------ ------ ------ ------ ------ ------ ------
$27.60 $23.19 $18.30 $13.97 $11.58 $12.59 $10.86 $10.72 $10.19
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
F-29
<PAGE> 81
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--Selected Per Unit Data+ (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EAGLE ASSET LORD
MANAGEMENT ABBETT
GROWTH DEVELOPING
EQUITY GROWTH
----------------- ----------------
1999 1998(c) 1999 1998(c)
------------------------------------
<S> <C> <C> <C> <C>
Unit value, beginning of year............................... $11.68 $10.00 $ 9.12 $10.00
Net investment income (loss)................................ (0.19) (0.09) 0.10 (0.08)
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received (includes
the
effect of capital share transactions)..................... 7.57 1.77 2.67 (0.80)
------ ------ ------ ------
Unit value, end of year..................................... $19.06 $11.68 $11.89 $ 9.12
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
VIP II
CONTRAFUND
-------------------------------------
1999 1998 1997 1996(b)
-------------------------------------
<S> <C> <C> <C> <C>
Unit value, beginning of year............................... $16.68 $13.01 $10.63 $10.00
Net investment income (loss)................................ (0.19) (0.14) (0.14) (0.03)
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received (includes
the
effect of capital share transactions)..................... 3.95 3.81 2.52 0.66
------ ------ ------ ------
Unit value, end of year..................................... $20.44 $16.68 $13.01 $10.63
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
SERIES
WORLDWIDE
GROWTH
-------------------------------------
1999 1998 1997 1996(b)
-------------------------------------
<S> <C> <C> <C> <C>
Unit value, beginning of year............................... $15.86 $12.48 $10.36 $10.00
Net investment income (loss)................................ (0.23) 0.20 (0.03) 0.08
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received (includes
the
effect of capital share transactions)..................... 10.10 3.18 2.15 0.28
------ ------ ------ ------
Unit value, end of year..................................... $25.73 $15.86 $12.48 $10.36
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
T. ROWE VAN ECK
PRICE WORLDWIDE
EQUITY HARD
INCOME ASSETS
----------------- -----------------
1999 1998(c) 1999 1998(c)
-------------------------------------
<S> <C> <C> <C> <C>
Unit value, beginning of year............................... $10.13 $10.00 $ 8.02 $10.00
Net investment income (loss)................................ 0.07 0.08 (0.07) (0.06)
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received (includes
the
effect of capital share transactions)..................... 0.16 0.05 1.62 (1.92)
------ ------ ------ ------
Unit value, end of year..................................... $10.36 $10.13 $ 9.57 $ 8.02
====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during the year.
(a) For the period May 1, 1995 (Commencement of Operations) through December 31,
1995.
(b) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
(c) For the period May 1, 1998 (Commencement of Operations) through December 31,
1998.
F-30
<PAGE> 82
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALGER
AMERICAN CALVERT
SMALL SOCIAL
CAPITALIZATION BALANCED
------------------------------------- -----------------------------------------------
1999 1998 1997 1996(b) 1999 1998 1997 1996 1995(a)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$11.97 $10.51 $ 9.57 $10.00 $16.92 $14.76 $12.46 $11.22 $10.00
(0.18) (0.15) (0.14) (0.02) 0.27 0.29 0.31 0.35 1.60
5.14 1.61 1.08 (0.41) 1.53 1.87 1.99 0.89 (0.38)
------ ------ ------ ------ ------ ------ ------ ------ ------
$16.93 $11.97 $10.51 $ 9.57 $18.72 $16.92 $14.76 $12.46 $11.22
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY JANUS ASPEN
VIP SERIES
EQUITY-INCOME BALANCED
------------------------------------- -------------------------------------
1999 1998 1997 1996(b) 1999 1998 1997 1996(b)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$14.53 $13.20 $10.45 $10.00 $16.32 $12.32 $10.24 $10.00
(0.03) (0.08) (0.13) (0.02) 0.25 0.42 0.28 0.17
0.73 1.41 2.88 0.47 3.83 3.58 1.80 0.07
------ ------ ------ ------ ------ ------ ------ ------
$15.23 $14.53 $13.20 $10.45 $20.40 $16.32 $12.32 $10.24
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MFS MORGAN STANLEY
GROWTH DEAN WITTER
WITH MFS EMERGING MARKETS
INCOME SERIES RESEARCH SERIES EQUITY
----------------- ----------------- -------------------------------------
1999 1998(c) 1999 1998(c) 1999 1998 1997 1996(b)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$10.57 $10.00 $10.83 $10.00 $ 7.40 $ 9.89 $10.00 $10.00
(0.12) (0.07) (0.15) (0.07) (0.13) (0.08) (0.05) 0.02
0.67 0.64 2.57 0.90 7.00 (2.41) (0.06) (0.02)
------ ------ ------ ------ ------ ------ ------ ------
$11.12 $10.57 $13.25 $10.83 $14.27 $ 7.40 $ 9.89 $10.00
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
F-31
<PAGE> 83
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of New York Life Insurance and
Annuity Corporation and the Variable Annuity Separate Account-III 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, Lord Abbett Developing Growth, Alger American Small
Capitalization, Calvert Social Balanced, formerly known as Calvert Socially
Responsible, Fidelity VIP II Contrafund, Fidelity VIP Equity-Income, Janus Aspen
Series Balanced, Janus Aspen Series Worldwide Growth, MFS Growth With Income
Series, MFS Research Series, Morgan Stanley Dean Witter Emerging Markets Equity,
formerly known as Morgan Stanley Emerging Markets Equity, T. Rowe Price Equity
Income, and Van Eck Worldwide Hard Assets Investment Divisions (constituting the
NYLIAC Variable Annuity Separate Account-III, formerly known as LifeStages(R)
Annuity Separate Account) 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, the
MFS Variable Insurance Trust, the Morgan Stanley Dean Witter Universal Funds,
Inc., formerly known as Morgan Stanley Universal Funds, Inc., the T. Rowe Price
Equity Series, Inc., and the Van Eck Worldwide Insurance Trust, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 17, 2000
F-32
<PAGE> 84
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-33
<PAGE> 85
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-34
<PAGE> 86
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-35
<PAGE> 87
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-36
<PAGE> 88
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-37
<PAGE> 89
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-38
<PAGE> 90
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-39
<PAGE> 91
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-40
<PAGE> 92
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-41
<PAGE> 93
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-42
<PAGE> 94
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-43
<PAGE> 95
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-44
<PAGE> 96
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-45
<PAGE> 97
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-46
<PAGE> 98
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-47
<PAGE> 99
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-48
<PAGE> 100
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-49
<PAGE> 101
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-50
<PAGE> 102
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-51
<PAGE> 103
PROSPECTUS DATED MAY 1, 2000
FOR
NEW YORK LIFE LIFESTAGES(R) VARIABLE ANNUITY
FROM
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A DELAWARE CORPORATION)
51 MADISON AVENUE, ROOM 452, NEW YORK, NEW YORK 10010
INVESTING IN
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
This Prospectus describes the individual flexible premium New York Life
LifeStages(R) Variable Annuity policies issued by New York Life Insurance and
Annuity Corporation ("NYLIAC"). We designed these policies to assist individuals
with their long-term retirement planning needs. You can use these policies with
retirement plans that do or do not qualify for special federal income tax
treatment. The policies offer flexible premium payments, access to your money
through partial withdrawals (some withdrawals may be subject to a surrender
charge and/or tax penalty), a choice of when income payments will commence, and
a guaranteed death benefit if the owner or annuitant dies before income payments
have commenced.
Your premium payments accumulate on a tax-deferred basis. This means your
earnings are not taxed until you take the money out of your policy which can be
done in several ways. You can split your premium payments among a guaranteed
interest option and the twenty-six variable investment divisions listed below.
<TABLE>
<S> <C>
- MainStay VP Capital Appreciation
- MainStay VP Cash Management
- MainStay VP Convertible
- MainStay VP Government
- MainStay VP High Yield Corporate Bond
- MainStay VP International Equity
- MainStay VP Total Return
- MainStay VP Value
- MainStay VP Bond
- MainStay VP Growth Equity
- MainStay VP Indexed Equity
- American Century Income & Growth
- Dreyfus Large Company Value
- Eagle Asset Management Growth Equity
- Lord Abbett Developing Growth
- Alger American Small Capitalization
- Calvert Social Balanced
- Fidelity VIP II Contrafund(R)
- Fidelity VIP Equity-Income
- Janus Aspen Series Balanced
- Janus Aspen Series Worldwide Growth
- MFS(R) Growth With Income Series
- MFS(R) Research Series
- Morgan Stanley UIF Emerging Markets
Equity
- T. Rowe Price Equity Income
- Van Eck Worldwide Hard Assets
</TABLE>
We do not guarantee the investment performance of these variable investment
divisions. Depending on current market conditions, you can make or lose money in
any of the investment divisions.
You should read this Prospectus carefully before investing and keep it for
future reference. This Prospectus is not valid unless attached to current
prospectuses for the MainStay VP Series Fund, Inc., the Alger American Fund, the
Calvert Variable Series, Inc., the Fidelity Variable Insurance Products Fund II
(VIP II), the Fidelity Variable Insurance Products Fund (VIP), the Janus Aspen
Series, the MFS(R) Variable Insurance Trust(SM), The Universal Institutional
Funds, Inc., the T. Rowe Price Equity Series, Inc. and the Van Eck Worldwide
Insurance Trust (the "Funds", each individually a "Fund"). Each Investment
Division invests in shares of a corresponding Fund portfolio.
To learn more about the policy, you can obtain a copy of the Statement of
Additional Information ("SAI"), dated May 1, 2000. The SAI has been filed with
the Securities and Exchange Commission ("SEC") and is incorporated by reference
into this Prospectus. The table of contents for the SAI appears at the end of
this Prospectus. For a free copy of the SAI, call us at (800) 598-2019 or write
to us at the address above.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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> 104
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS............................ 3
FEE TABLE.............................. 4
QUESTIONS AND ANSWERS ABOUT
LIFESTAGES(R)........................ 8
FINANCIAL STATEMENTS................... 14
CONDENSED FINANCIAL INFORMATION........ 15
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION AND THE SEPARATE
ACCOUNT.............................. 17
New York Life Insurance and Annuity
Corporation....................... 17
The Separate Account................. 17
The Portfolios....................... 17
Additions, Deletions or Substitutions
of Investments.................... 18
Reinvestment......................... 19
THE POLICIES........................... 19
Selecting the Variable Annuity That's
Right for You..................... 19
Qualified and Non-Qualified
Policies.......................... 20
Policy Application and Premium
Payments.......................... 21
Payments Returned for Insufficient
Funds............................. 21
Your Right to Cancel ("Free Look")... 21
Issue Ages........................... 22
Transfers............................ 22
Procedures for Telephone Transfers... 22
Dollar Cost Averaging (DCA)
Program........................... 23
(a) Traditional Dollar Cost
Averaging..................... 23
(b) The DCA Advantage Plan....... 24
Automatic Asset Reallocation......... 24
Interest Sweep....................... 25
Accumulation Period.................. 25
(a) Crediting of Premium
Payments..................... 25
(b) Valuation of Accumulation
Units........................ 25
Third Party Investment Advisory
Arrangements...................... 26
Policy Owner Inquiries............... 26
CHARGES AND DEDUCTIONS................. 26
Surrender Charges.................... 26
Amount of Surrender Charge........... 26
Exceptions to Surrender Charges...... 27
Other Charges........................ 27
(a) Mortality and Expense Risk
Charges...................... 27
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(b) Administration Fee............ 27
(c) Policy Service Charge......... 27
(d) Fund Charges.................. 27
Group and Sponsored Arrangements..... 28
Taxes................................ 28
DISTRIBUTIONS UNDER THE POLICY......... 28
Surrenders and Withdrawals........... 28
(a) Surrenders.................... 28
(b) Partial Withdrawals........... 29
(c) Periodic Partial
Withdrawals.................. 29
(d) Hardship Withdrawals.......... 29
Required Minimum Distribution
Option........................... 29
Cancellations........................ 29
Annuity Commencement Date............ 29
Death Before Annuity Commencement.... 30
Income Payments...................... 31
(a) Election of Income Payment
Options...................... 31
(b) Other Methods of Payment...... 31
(c) Proof of Survivorship......... 31
Delay of Payments.................... 31
Designation of Beneficiary........... 32
Restrictions Under Internal Revenue
Code Section 403(b)(11)........... 32
Loans................................ 32
Riders............................... 33
(a) Living Needs Benefit Rider.... 33
(b) Unemployment Benefit Rider... 33
THE FIXED ACCOUNT...................... 33
(a) Interest Crediting............ 33
(b) Transfers to Investment
Divisions.................... 34
(c) Fixed Account Initial Premium
Guarantee..................... 34
THE DCA ADVANTAGE PLAN ACCOUNTS........ 34
FEDERAL TAX MATTERS.................... 34
Introduction......................... 34
Taxation of Annuities in General..... 35
Qualified Plans...................... 36
(a) Section 403(b) Plans.......... 36
(b) Individual Retirement
Annuities.................... 36
(c) Roth Individual Retirement
Annuities.................... 36
(d) Deferred Compensation Plans.. 36
DISTRIBUTOR OF THE POLICIES............ 36
VOTING RIGHTS.......................... 37
TABLE OF CONTENTS FOR THE STATEMENT OF
ADDITIONAL INFORMATION............... 38
</TABLE>
THIS PROSPECTUS IS NOT CONSIDERED AN OFFERING IN ANY STATE WHERE THE SALE
OF THIS POLICY CANNOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATIONS REGARDING THE OFFERING OTHER THAN AS DESCRIBED IN THIS
PROSPECTUS OR IN ANY ATTACHED SUPPLEMENT TO THIS PROSPECTUS OR IN ANY
SUPPLEMENTAL SALES MATERIAL WE AUTHORIZE.
2
<PAGE> 105
DEFINITIONS
ACCUMULATION UNIT--An accounting unit we use to calculate the variable
Accumulation Value prior to the Annuity Commencement Date. Each Investment
Division of the Separate Account has a distinct variable Accumulation Unit
value.
ACCUMULATION VALUE--The sum of the Variable Accumulation Value, Fixed
Accumulation Value and the DCA Accumulation Value of a policy.
ALLOCATION ALTERNATIVES--The Investment Divisions of the Separate Account and
the Fixed Account.
ANNUITANT--The person whose life determines the Income Payments, and upon whose
death prior to the Annuity Commencement Date, benefits under the policy may be
paid.
ANNUITY COMMENCEMENT DATE--The date on which we are to make the first Income
Payment under the policy.
BENEFICIARY--The person or entity having the right to receive the death benefit
set forth in the policy and who is the "designated beneficiary" for purposes of
Section 72 of the Internal Revenue Code in the event of the Annuitant's or the
policy owner's death.
BUSINESS DAY--Generally, any day on which the New York Stock Exchange ("NYSE")
is open for trading. Our Business Day ends at 4:00 p.m. Eastern Time or the
closing of regular trading on the NYSE, if earlier.
DOLLAR COST AVERAGING ("DCA") ADVANTAGE PLAN ACCOUNTS--The 6-month, 12-month and
18-month DCA accounts used specifically for the DCA Advantage Plan.
DOLLAR COST AVERAGING ("DCA") ADVANTAGE PLAN--A feature which permits automatic
dollar cost averaging using the DCA Advantage Plan Accounts.
DOLLAR COST AVERAGING ("DCA") ACCUMULATION VALUE--The sum of premium payments
allocated to the DCA Advantage Plan Accounts, plus interest credited on those
premium payments, less any transfers and partial withdrawals from the DCA
Advantage Plan, and less any surrender charges and any policy service charges
that may already have been assessed from the DCA Advantage Plan. The DCA
Accumulation Value is supported by assets in NYLIAC's general account. These
assets are subject to the claims of our general creditors.
ELIGIBLE PORTFOLIOS ("PORTFOLIOS")--The mutual fund portfolios of the Funds that
are available for investment through the Investment Divisions of the Separate
Account.
FIXED ACCOUNT--An account that is credited with a fixed interest rate which
NYLIAC declares and is not part of the Separate Account. The Accumulation Value
of the Fixed Account is supported by assets in NYLIAC's general account, which
are subject to the claims of our general creditors.
FIXED ACCUMULATION VALUE--The sum of premium payments and transfers allocated to
the Fixed Account, plus interest credited on those premium payments and
transfers, less any transfers and partial withdrawals from the Fixed Account,
and less any surrender charges and policy service charges that may have already
been assessed from the Fixed Account.
INCOME PAYMENTS--Periodic payments NYLIAC makes after the Annuity Commencement
Date.
INVESTMENT DIVISION--The variable investment options available with the policy.
Each Investment Division invests exclusively in shares of a specified Eligible
Portfolio.
NON-QUALIFIED POLICIES--Policies that are not available for use in connection
with employee retirement plans that qualify for special federal income tax
treatment.
PAYMENT YEAR(S)--With respect to any premium payment, the year(s) beginning on
the date such premium payment is made to the policy.
POLICY ANNIVERSARY--An anniversary of the Policy Date shown on the Policy Data
Page.
POLICY DATA PAGE--Page 2 of the policy which contains the policy specifications.
POLICY DATE--The date from which we measure Policy Years, quarters, months and
Policy Anniversaries. It is shown on the Policy Data Page.
POLICY YEAR--A year starting on the Policy Date. Subsequent Policy Years begin
on each Policy Anniversary, unless otherwise indicated.
QUALIFIED POLICIES--Policies issued under employee retirement plans that qualify
for special federal income tax treatment.
SEPARATE ACCOUNT--NYLIAC Variable Annuity Separate Account-III, a segregated
asset account we established to receive and invest premium payments paid under
the policies. The Separate Account's Investment Divisions, in turn, purchase
shares of Eligible Portfolios.
VARIABLE ACCUMULATION VALUE--The sum of the products of the current Accumulation
Unit value(s) for each of the Investment Divisions multiplied by the number of
Accumulation Units held in the respective Investment Division.
3
<PAGE> 106
FEE TABLE
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
<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>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount withdrawn).............. 7% during Payment Years 1-3; 6% during Payment Year 4; 5% during
Payment Year 5; 4% during Payment Year 6; and 0% thereafter.
Transfer Fee............................................... There is no transfer fee on the first 12 transfers in any Policy
Year. However, NYLIAC reserves the right to charge up to $30 for
each transfer in excess of 12 transfers per Policy Year.
Annual Policy Service Charge............................... Lesser of $30 per policy or 2% of the Accumulation Value, for
policies with less than $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% 1.25%
Administration Fees........................................ 0.15% 0.15% 0.15% 0.15% 0.15%
Total Separate Account Annual Expenses..................... 1.40% 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, 1999)(a)
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
INTERNATIONAL TOTAL
EQUITY RETURN
------------- -----------
<S> <C> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount withdrawn).............. 7% during Payment Years 1-3; 6% during Payment Year 4; 5% during
Payment Year 5; 4% during Payment Year 6; and 0% thereafter.
There is no transfer fee on the first 12 transfers in any Policy
Transfer Fee............................................... Year. However, NYLIAC reserves the right to charge up to $30 for
Annual Policy Service Charge............................... each transfer in excess of 12 transfers per Policy Year.
SEPARATE ACCOUNT ANNUAL EXPENSES Lesser of $30 per policy or 2% of the Accumulation Value, for
(as a % of average account value) policies with less than $20,000 of Accumulation Value.
Mortality and Expense Risk Fees............................
Administration Fees........................................ 0.15% 0.15%
Total Separate Account Annual Expenses..................... 1.40% 1.40%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees.............................................. 0.60% 0.32%
Administration Fees........................................ 0.20% 0.20%
Other Expenses............................................. 0.27% 0.06%
Total Fund Annual Expenses................................. 1.07% 0.58%
</TABLE>
<TABLE>
<CAPTION>
AMERICAN
MAINSTAY VP MAINSTAY VP CENTURY
MAINSTAY VP MAINSTAY VP GROWTH INDEXED INCOME &
VALUE BOND EQUITY EQUITY GROWTH
----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount withdrawn).............. 7% during Payment Years 1-3; 6% during Payment Year 4; 5% during
Payment Year 5; 4% during Payment Year 6; and 0% thereafter.
Transfer Fee............................................... There is no transfer fee on the first 12 transfers in any Policy
Year. However, NYLIAC reserves the right to charge up to $30 for
each transfer in excess of 12 transfers per Policy Year.
Annual Policy Service Charge............................... Lesser of $30 per policy or 2% of the Accumulation Value, for
policies with less than $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% 1.25%
Administration Fees........................................ 0.15% 0.15% 0.15% 0.15% 0.15%
Total Separate Account Annual Expenses..................... 1.40% 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, 1999)(a)
Advisory Fees.............................................. 0.36% 0.25% 0.25% 0.10% 0.50%
Administration Fees........................................ 0.20% 0.20% 0.20% 0.20% 0.20%
Other Expenses............................................. 0.07% 0.05% 0.04% 0.06% 0.15%(b)
Total Fund Annual Expenses................................. 0.63% 0.50% 0.49% 0.36% 0.85%
<CAPTION>
DREYFUS LARGE
COMPANY VALUE
-------------
<S> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount withdrawn).............. 7% during Payment Years 1-3; 6% during Payment Year 4; 5% during
Payment Year 5; 4% during Payment Year 6; and 0% thereafter.
There is no transfer fee on the first 12 transfers in any Policy
Year. However, NYLIAC reserves the right to charge up to $30 for
Transfer Fee............................................... each transfer in excess of 12 transfers per Policy Year.
Annual Policy Service Charge............................... Lesser of $30 per policy or 2% of the Accumulation Value, for
SEPARATE ACCOUNT ANNUAL EXPENSES policies with less than $20,000 of Accumulation Value.
(as a % of average account value)
Mortality and Expense Risk Fees............................ 1.25%
Administration Fees........................................ 0.15%
Total Separate Account Annual Expenses..................... 1.40%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees.............................................. 0.60%
Administration Fees........................................ 0.20%
Other Expenses............................................. 0.15%(b)
Total Fund Annual Expenses................................. 0.95%
</TABLE>
- ------------
(a) The Fund or its agents provided the fees and charges which are based on
1999 expenses and may reflect estimated charges, except for Janus. We have
not verified the accuracy of the information provided by the agents.
(b) "Other Expenses" and "Total Fund Annual Expenses" for the American Century
Income & Growth, Dreyfus Large Company Value, Eagle Asset Management Growth
Equity and Lord Abbett Developing Growth Portfolios reflect an expense
reimbursement arrangement 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%,
0.87% and 1.04% for the American Century Income & Growth, Dreyfus Large
Company Value, Eagle Asset Management Growth Equity and Lord Abbett
Developing Growth Portfolios, respectively.
4
<PAGE> 107
FEE TABLE--(CONTINUED)
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
<TABLE>
<CAPTION>
EAGLE
ASSET ALGER
MANAGEMENT LORD ABBETT AMERICAN CALVERT FIDELITY
GROWTH DEVELOPING SMALL SOCIAL VIP II
EQUITY GROWTH CAPITALIZATION BALANCED CONTRAFUND(R)
---------- ----------- -------------- -------- -------------
<S> <C> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount withdrawn).............. 7% during Payment Years 1-3; 6% during Payment Year 4; 5% during
Payment Year 5; 4% during Payment Year 6; and 0% thereafter.
Transfer Fee............................................... There is no transfer fee on the first 12 transfers in any Policy
Year. However, NYLIAC reserves the right to charge up to $30 for
each transfer in excess of 12 transfers per Policy Year.
Annual Policy Service Charge............................... Lesser of $30 per policy or 2% of the Accumulation Value, for
policies with less than $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% 1.25%
Administration Fees........................................ 0.15% 0.15% 0.15% 0.15% 0.15%
Total Separate Account Annual Expenses..................... 1.40% 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, 1999)(a)
Advisory Fees.............................................. 0.50% 0.60% 0.85% 0.70%(c) 0.58%
Administration Fees........................................ 0.20% 0.20% -- -- --
Other Expenses............................................. 0.15%(b) 0.15%(b) 0.05% 0.19%(c) 0.07%
Total Fund Annual Expenses................................. 0.85% 0.95% 0.90% 0.89%(c) 0.65%(d)
<CAPTION>
FIDELITY VIP JANUS
EQUITY ASPEN SERIES
INCOME BALANCED
------------ ------------
<S> <C> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount withdrawn).............. 7% during Payment Years 1-3; 6% during Payment Year 4; 5% during
Payment Year 5; 4% during Payment Year 6; and 0% thereafter.
There is no transfer fee on the first 12 transfers in any Policy
Transfer Fee............................................... Year. However, NYLIAC reserves the right to charge up to $30 for
Annual Policy Service Charge............................... each transfer in excess of 12 transfers per Policy Year.
SEPARATE ACCOUNT ANNUAL EXPENSES Lesser of $30 per policy or 2% of the Accumulation Value, for
(as a % of average account value) policies with less than $20,000 of Accumulation Value.
Mortality and Expense Risk Fees............................ 1.25% 1.25%
Administration Fees........................................ 0.15% 0.15%
Total Separate Account Annual Expenses..................... 1.40% 1.40%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees.............................................. 0.48% 0.65%
Administration Fees........................................ -- --
Other Expenses............................................. 0.08% 0.02%
Total Fund Annual Expenses................................. 0.56%(d) 0.67%(e)
</TABLE>
<TABLE>
<CAPTION>
JANUS MFS(R)
ASPEN SERIES GROWTH MFS(R) MORGAN STANLEY
WORLDWIDE WITH INCOME RESEARCH UIF EMERGING
GROWTH SERIES SERIES MARKETS EQUITY
------------ ----------- -------- --------------
<S> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Surrender Charge (as a % of amount withdrawn).............. 7% during Payment Years 1-3; 6% during Payment Year 4;
5% during Payment Year 5; 4% during Payment Year 6;
and 0% thereafter.
Transfer Fee............................................... There is no transfer fee on the first 12 transfers in
any Policy Year. However, NYLIAC reserves the right to
charge up to $30 for each transfer in excess of 12
transfers per Policy Year.
Annual Policy Service Charge............................... Lesser of $30 per policy or 2% of the Accumulation
Value, for policies with less than $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, 1999)(a)
Advisory Fees.............................................. 0.65% 0.75% 0.75% 0.42%
Administration Fees........................................ -- -- -- 0.25%
Other Expenses............................................. 0.05% 0.13% 0.11% 1.12%
Total Fund Annual Expenses................................. 0.70%(e) 0.88% 0.86% 1.79%(f)
<CAPTION>
VAN ECK
T. ROWE PRICE WORLDWIDE
EQUITY INCOME HARD ASSETS
------------- -----------
<S> <C> <C>
OWNER TRANSACTION EXPENSES
7% during Payment Years 1-3; 6% during Payment Year 4;
Surrender Charge (as a % of amount withdrawn).............. 5% during Payment Year 5; 4% during Payment Year 6;
and 0% thereafter.
There is no transfer fee on the first 12 transfers in
any Policy Year. However, NYLIAC reserves the right to
Transfer Fee............................................... charge up to $30 for each transfer in excess of 12
Annual Policy Service Charge............................... transfers per Policy Year.
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%
Administration Fees........................................ 0.15% 0.15%
Total Separate Account Annual Expenses..................... 1.40% 1.40%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees.............................................. 0.85%(g) 1.00%
Administration Fees........................................ -- --
Other Expenses............................................. -- 0.26%
Total Fund Annual Expenses................................. 0.85% 1.26%
</TABLE>
- ------------
(c) "Other Expenses" reflect an indirect fee. Net fund operating expenses after
reductions for fees paid indirectly would be 0.86% for Social Balanced
Portfolio. Total expenses have been restated to reflect expenses expected
to be incurred in 2000.
(d) Through arrangements with certain funds or FMR 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(R) Portfolio and 0.57% for the
Fidelity VIP Equity-Income Portfolio.
(e) Expenses are based upon expenses for the fiscal year ended December 31,
1999, restated to reflect a reduction in the management fee for Worldwide
Growth and Balanced portfolios. Expenses are stated both with and without
contractual waivers by Janus Capital. Waivers, if applicable, are first
applied against the management fee and then against other expenses, and
will continue until at least the next annual renewal of the advisory
agreement. All expenses are shown without the effect of any expense offset
arrangements.
(f) Morgan Stanley Asset Management has voluntarily agreed to waive its
"Advisory Fees" and/or reimburse the Portfolio, if necessary, to the extent
that the "Total Fund Annual Expenses" of the Portfolio exceeds 1.75% of
average daily net assets. For purposes of determining the amount of the
voluntary advisory fee waiver and/or reimbursement, if any, the portfolio's
annual operating expenses include certain investment related expenses such
as foreign country tax expense and interest expense on amounts borrowed
which were 0.04% of the average daily net assets for 1999. The fee waivers
and reimbursements described above may be terminated by Morgan Stanley
Asset Management at any time without notice. Absent such reductions,
"Advisory Fees," "Administration Fees" and "Total Fund Annual Expenses"
would have been 1.25%, 0.25% and 2.62% respectively.
(g) The "Advisory Fees" include the ordinary operating expenses of the Fund.
5
<PAGE> 108
EXAMPLES(1)
The table below will help you to understand the various costs and expenses
that you will bear directly and indirectly. The table reflects charges and
expenses of the Separate Account and the Funds. However, the table does not
reflect optional charges under the policy. Charges and expenses may be higher or
lower in future years. For more information on the charges reflected in this
table, see "Charges and Deductions" at page 26 and the Fund prospectuses which
accompany this Prospectus. NYLIAC may, where premium taxes are imposed by state
law, deduct premium taxes on surrender of the policy or on the Annuity
Commencement Date.
You 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 stated time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
MainStay VP Capital Appreciation..................... $ 88.45 $141.35 $176.58 $268.05
MainStay VP Cash Management.......................... $ 87.39 $138.19 $171.21 $256.70
MainStay VP Convertible.............................. $ 89.31 $143.93 $180.96 $277.23
MainStay VP Government............................... $ 88.16 $140.49 $175.12 $264.97
MainStay VP High Yield Corporate Bond................ $ 87.96 $139.91 $174.14 $262.90
MainStay VP International Equity..................... $ 92.76 $154.20 $198.30 $313.16
MainStay VP Total Return............................. $ 88.07 $140.21 $174.64 $263.94
MainStay VP Value.................................... $ 88.54 $141.64 $177.07 $269.08
MainStay VP Bond..................................... $ 87.30 $137.91 $170.72 $255.68
MainStay VP Growth Equity............................ $ 87.20 $137.61 $170.23 $254.63
MainStay VP Indexed Equity........................... $ 85.95 $133.87 $163.84 $241.05
American Century Income & Growth..................... $ 90.64 $147.93 $187.73 $291.36
Dreyfus Large Company Value.......................... $ 91.61 $150.79 $192.56 $301.34
Eagle Asset Management Growth Equity................. $ 90.64 $147.93 $187.73 $291.36
Lord Abbett Developing Growth........................ $ 91.61 $150.79 $192.56 $301.34
Alger American Small Capitalization.................. $ 91.13 $149.37 $190.15 $296.37
Calvert Social Balanced.............................. $ 91.03 $149.07 $189.66 $295.36
Fidelity VIP II Contrafund(R)........................ $ 88.73 $142.22 $178.05 $271.13
Fidelity VIP Equity-Income........................... $ 87.87 $139.63 $173.65 $261.87
Janus Aspen Series Balanced.......................... $ 88.93 $142.78 $179.01 $273.16
Janus Aspen Series Worldwide Growth.................. $ 89.21 $143.64 $180.48 $276.22
MFS(R) Growth With Income Series..................... $ 90.93 $148.79 $189.18 $294.36
MFS(R) Research Series............................... $ 90.75 $148.23 $188.24 $292.37
Morgan Stanley UIF Emerging Markets Equity........... $ 99.65 $174.52 $232.22 $381.31
T. Rowe Price Equity Income.......................... $ 90.64 $147.93 $187.73 $291.36
Van Eck Worldwide Hard Assets........................ $ 94.58 $159.60 $207.36 $331.63
</TABLE>
2. If you annuitize your policy at the end of the stated time period:
<TABLE>
<S> <C> <C> <C> <C>
MainStay VP Capital Appreciation..................... $ 88.45 $ 73.27 $125.37 $268.05
MainStay VP Cash Management.......................... $ 87.39 $ 69.88 $119.71 $256.70
MainStay VP Convertible.............................. $ 89.31 $ 76.03 $129.98 $277.23
MainStay VP Government............................... $ 88.16 $ 72.34 $123.82 $264.97
MainStay VP High Yield Corporate Bond................ $ 87.96 $ 71.73 $122.79 $262.90
MainStay VP International Equity..................... $ 92.76 $ 87.02 $148.22 $313.16
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
MainStay VP Total Return............................. $ 88.07 $ 72.05 $123.32 $263.94
MainStay VP Value.................................... $ 88.54 $ 73.58 $125.89 $269.08
MainStay VP Bond..................................... $ 87.30 $ 69.58 $119.20 $255.68
MainStay VP Growth Equity............................ $ 87.20 $ 69.26 $118.68 $254.63
MainStay VP Indexed Equity........................... $ 85.95 $ 65.26 $111.96 $241.05
American Century Income & Growth..................... $ 90.64 $ 80.31 $137.10 $291.36
</TABLE>
- ---------------
(1) For purposes of calculating these examples, we have expressed the annual
policy service charge as an annual percentage of assets based on the average
size of policies having an Accumulation Value of less than $20,000 on
December 31, 1999. This calculation method reasonably reflects the annual
policy service charges applicable to policies having an Accumulation Value
of less than $20,000. The annual policy service charge does not apply to
policies having an Accumulation Value of $20,000 or greater. The expenses
shown, therefore, would be slightly lower if your policy's Accumulation
Value is $20,000 or greater.
6
<PAGE> 109
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Dreyfus Large Company Value.......................... $ 91.61 $ 83.38 $142.18 $301.34
Eagle Asset Management Growth Equity................. $ 90.64 $ 80.31 $137.10 $291.36
Lord Abbett Developing Growth........................ $ 91.61 $ 83.38 $142.18 $301.34
Alger American Small Capitalization.................. $ 91.13 $ 81.86 $139.64 $296.37
Calvert Social Balanced.............................. $ 91.03 $ 81.54 $139.13 $295.36
Fidelity VIP II Contrafund(R)........................ $ 88.73 $ 74.19 $126.92 $271.13
Fidelity VIP Equity-Income........................... $ 87.87 $ 71.42 $122.28 $261.87
Janus Aspen Series Balanced.......................... $ 88.93 $ 74.80 $127.93 $273.16
Janus Aspen Series Worldwide Growth.................. $ 89.21 $ 75.72 $129.47 $276.22
MFS(R) Growth With Income Series..................... $ 90.93 $ 81.23 $138.62 $294.36
MFS(R) Research Series............................... $ 90.75 $ 80.63 $137.63 $292.37
Morgan Stanley UIF Emerging Markets Equity........... $ 99.65 $108.79 $183.92 $381.31
T. Rowe Price Equity Income.......................... $ 90.64 $ 80.31 $137.10 $291.36
Van Eck Worldwide Hard Assets........................ $ 94.58 $ 92.81 $157.76 $331.63
</TABLE>
3. If you do not surrender your policy:
<TABLE>
<S> <C> <C> <C> <C>
MainStay VP Capital Appreciation..................... $ 23.80 $ 73.27 $125.37 $268.05
MainStay VP Cash Management.......................... $ 22.67 $ 69.88 $119.71 $256.70
MainStay VP Convertible.............................. $ 24.72 $ 76.03 $129.98 $277.23
MainStay VP Government............................... $ 23.49 $ 72.34 $123.82 $264.97
MainStay VP High Yield Corporate Bond................ $ 23.28 $ 71.73 $122.79 $262.90
MainStay VP International Equity..................... $ 28.39 $ 87.02 $148.22 $313.16
MainStay VP Total Return............................. $ 23.39 $ 72.05 $123.32 $263.94
MainStay VP Value.................................... $ 23.90 $ 73.58 $125.89 $269.08
MainStay VP Bond..................................... $ 22.57 $ 69.58 $119.20 $255.68
MainStay VP Growth Equity............................ $ 22.46 $ 69.26 $118.68 $254.63
MainStay VP Indexed Equity........................... $ 21.14 $ 65.26 $111.96 $241.05
American Century Income & Growth..................... $ 26.14 $ 80.31 $137.10 $291.36
Dreyfus Large Company Value.......................... $ 27.17 $ 83.38 $142.18 $301.34
Eagle Asset Management Growth Equity................. $ 26.14 $ 80.31 $137.10 $291.36
Lord Abbett Developing Growth........................ $ 27.17 $ 83.38 $142.18 $301.34
Alger American Small Capitalization.................. $ 26.66 $ 81.86 $139.64 $296.37
Calvert Social Balanced.............................. $ 26.55 $ 81.54 $139.13 $295.36
Fidelity VIP II Contrafund(R)........................ $ 24.10 $ 74.19 $126.92 $271.13
Fidelity VIP Equity-Income........................... $ 23.18 $ 71.42 $122.28 $261.87
Janus Aspen Series Balanced.......................... $ 24.31 $ 74.80 $127.93 $273.16
Janus Aspen Series Worldwide Growth.................. $ 24.62 $ 75.72 $129.47 $276.22
MFS(R) Growth With Income Series..................... $ 26.45 $ 81.23 $138.62 $294.36
MFS(R) Research Series............................... $ 26.25 $ 80.63 $137.63 $292.37
Morgan Stanley UIF Emerging Markets Equity........... $ 35.75 $108.79 $183.92 $381.31
T. Rowe Price Equity Income.......................... $ 26.14 $ 80.31 $137.10 $291.36
Van Eck Worldwide Hard Assets........................ $ 30.34 $ 92.81 $157.76 $331.63
</TABLE>
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.
7
<PAGE> 110
QUESTIONS AND ANSWERS ABOUT LIFESTAGES(R) VARIABLE ANNUITY
NOTE: THE FOLLOWING SECTION CONTAINS BRIEF QUESTIONS AND ANSWERS ABOUT NEW
YORK LIFE LIFESTAGES(R) VARIABLE ANNUITY. YOU SHOULD REFER TO THE BODY OF THIS
PROSPECTUS FOR MORE DETAILED INFORMATION.
1. WHAT IS NEW YORK LIFE LIFESTAGES(R) VARIABLE ANNUITY?
A New York Life LifeStages(R) Variable Annuity is a Flexible Premium
Deferred Variable Retirement Annuity policy. NYLIAC issues the policy. You may
allocate premium payments to one or more of the Investment Divisions of the
Separate Account, or to the Fixed Account. In addition, in states where
approved, for applications signed on or after May 19, 2000, you may also
allocate premium payments to one or more DCA Advantage Plan Accounts. The
Accumulation Value will fluctuate according to the performance of the Investment
Divisions selected and the interest credited to the amounts in the Fixed Account
and the DCA Advantage Plan Accounts.
2. WHERE CAN I ALLOCATE MY PREMIUM PAYMENTS?
(a) You can allocate your premium payments to one or more of the following
Allocation Alternatives:
(i) SEPARATE ACCOUNT
The Separate Account currently consists of twenty-six Investment
Divisions. They are listed on the first page of this Prospectus. When
you allocate a premium payment to one of the Investment Divisions, the
Separate Account will invest your premium payment exclusively in shares
of the corresponding Eligible Portfolio of the relevant Fund.
(ii) FIXED ACCOUNT
Each premium payment, or the portion of any premium payment, you
allocate to the Fixed Account will reflect a fixed interest rate. (See
"The Fixed Account" at page 33.)
(b) In states where approved, for applications signed on or after May 19,
2000, you can also allocate your premium payments to the DCA Advantage Plan. The
DCA Advantage Plan consists of three DCA Advantage Plan Accounts: a 6-month,
12-month and an 18-month account. NYLIAC will credit interest to amounts held in
the DCA Advantage Plan Accounts at rates we have set in advance. The DCA
Advantage Plan allows you to set up automatic dollar cost averaging from the DCA
Advantage Plan Accounts into the Investment Divisions and/or the Fixed Account.
(See "The DCA Advantage Plan" at page 23.) You should check with your registered
representative to determine if the DCA Advantage Plan has been approved in your
state.
3. CAN I MAKE TRANSFERS AMONG THE INVESTMENT DIVISIONS AND THE FIXED ACCOUNT?
You can transfer all or part of the Accumulation Value of your policy
between the Investment Divisions or from the Investment Divisions to the Fixed
Account at least 30 days before the Annuity Commencement Date. The maximum
amount you are allowed to transfer from the Fixed Account during any Policy Year
is 20%. (See "The Fixed Account" at page 33). Generally, you can transfer a
minimum amount of $500, unless we agree otherwise. You can make unlimited
transfers each Policy Year. (See "Transfers" at page 22.)
You can make transfers to the investment divisions, from the Fixed Account
and the DCA Advantage Plan Accounts (for applications signed on or after May 19,
2000), although certain restrictions may apply. (See "The Fixed Account" at page
33 and "The DCA Advantage Plan Accounts" at page 24). In addition, you can
request transfers through the traditional Dollar Cost Averaging, Automatic Asset
Reallocation or Interest Sweep options described at pages 23, 24, and 25 of this
Prospectus. You may not transfer money into the Fixed Account if you transferred
money out of the Fixed Account during the previous six-month period.
4. WHAT CHARGES ARE ASSESSED AGAINST THE POLICY?
Before the date we start making Income Payments to you, we will deduct a
policy service charge on each Policy Anniversary or upon surrender of the policy
if on that date the Accumulation Value is below $20,000. This charge will be the
lesser of $30 or 2% of the Accumulation Value at the end of the Policy Year or
on the date of surrender. In addition, we deduct on a daily basis a charge for
policy administration expenses. This charge is equal, on an annual basis, to
.15% of the net asset value of the Separate Account. (See "Other Charges" at
page 27.)
The policies are also subject to a charge for certain mortality and expense
risks NYLIAC assumes. We also deduct this charge on a daily basis. This charge
is equal, on an annual basis, to 1.25% of the net asset value of the Separate
Account. (See "Other Charges" at page 27.)
8
<PAGE> 111
We impose a surrender charge on certain partial withdrawals or surrenders
of the policies. This charge is assessed as a percentage of the amount of
premium payment withdrawn during the first six Payment Years following each
premium payment. We keep track of each premium payment and assess a charge based
on the length of time a premium payment is in your policy before it is
withdrawn. The percentage declines after the first three Payment Years as
follows:
<TABLE>
<CAPTION>
PAYMENT YEAR SURRENDER CHARGE
------------ ----------------
<S> <C>
1........................................................... 7%
2........................................................... 7%
3........................................................... 7%
4........................................................... 6%
5........................................................... 5%
6........................................................... 4%
7+.......................................................... 0%
</TABLE>
For purposes of calculating the surrender charge, we treat withdrawals as
coming from the oldest premium payment first (on a first-in, first-out basis).
FOR APPLICATIONS SIGNED BEFORE MAY 19, 2000, you can make withdrawals from
the policy free of surrender charges based on certain limitations. In any one
Policy Year, you may withdraw free of a surrender charge up to 10% of the
Accumulation Value at the time of the withdrawal ("10% Window"). In addition,
for policies with total premium payments of $100,000 or more, you may withdraw
free of a surrender charge the greater of (a) the 10% Window or (b) the
Accumulation Value of the policy less the accumulated premium payments. (See
"Surrender Charges" at page 26 and "Exceptions to Surrender Charges" at page
27.)
FOR APPLICATIONS SIGNED ON OR AFTER MAY 19, 2000, you can make withdrawals
from the policy free of surrender charges based on certain limitations. In any
one Policy Year, you may withdraw free of a surrender charge the greater of (a)
up to 10% of the Accumulation Value at the time of the withdrawal or (b) the
Accumulation Value of the policy less the accumulated premium payments. (See
"Surrender Charges" at page 26 and "Exceptions to Surrender Charges" at page
27.)
Finally, the value of the shares of each Fund reflects advisory fees,
administration fees and other expenses deducted from the assets of each Fund.
(See the Fund prospectuses which are attached to this Prospectus.)
5. WHAT ARE THE MINIMUM INITIAL AND MAXIMUM ADDITIONAL PREMIUM PAYMENTS?
Unless we permit otherwise, the minimum initial premium payment is $2,000
for Qualified Policies and $5,000 for Non-Qualified Policies. You can make
additional premium payments of at least $500 or such lower amount as we may
permit at any time. You have a choice of sending premium payments directly to
NYLIAC or through pre-authorized monthly deductions from banks, credit unions or
similar accounts. We may agree to other methods of payment. The maximum
aggregate amount of premium payments we accept is $1,000,000, without prior
approval. For Qualified Policies, you may not make premium payments in excess of
the amount permitted by law for the plan.
6. HOW ARE PREMIUM PAYMENTS ALLOCATED?
In states where approved, for applications signed on or after May 19, 2000,
we will allocate the initial premium payment immediately to the Investment
Divisions, Fixed Account and DCA Advantage Plan Accounts you have selected.
Otherwise except for premium payments or portions of premium payments applied to
the Fixed Account, and for applications signed on or after May 19, 2000, the DCA
Advantage Plan Accounts, we will hold the initial premium payment in the
MainStay VP Cash Management Investment Division for 15 days after we issue the
policy. At the end of this period, we will allocate the premium payment to the
Investment Divisions you have selected. We will apply initial premium payments
allocated to the Fixed Account or for applications signed on or after May 19,
2000, the DCA Advantage Plan Accounts immediately. Please check with your
registered representative to determine how we will allocate the initial premium
payment under your policy. Subsequent premium payments will be allocated at the
close of the Business Day on which they are received.
You may allocate each premium payment in up to 18 Investment Divisions, and
DCA Advantage Plan Accounts (for applications signed on or after May 19, 2000 in
states where approved), plus the Fixed Account (See "Automatic Asset
Reallocation" at page 24). Moreover, you may raise or lower the percentages of
the premium payment (which must be in whole number percentages) you place in
each
9
<PAGE> 112
Allocation Alternative at the time you make a premium payment. However, any
change to your allocations may not result in the Accumulation Value being
allocated to more than 18 Investment Divisions plus the Fixed Account. The
minimum amount which you may place in any one Allocation Alternative is $25, or
such lower amount as we may permit. We reserve the right to limit the amount of
a premium payment that you may place in any one Allocation Alternative and the
number of Investment Divisions to which you allocate your Accumulation Value.
7. WHAT HAPPENS IF PREMIUM PAYMENTS ARE NOT MADE?
If we do not receive any premium payments for a period of two years, and
both the Accumulation Value of your policy and your total premium payments less
any withdrawals and surrender charges are less than $2,000, we reserve the right
to terminate your policy. We will notify you of our intention to exercise this
right and give you 90 days to make a premium payment. If we terminate your
policy, we will pay you the Accumulation Value of your policy in one lump sum.
8. CAN I WITHDRAW MONEY FROM THE POLICY BEFORE THE ANNUITY COMMENCEMENT DATE?
You may make withdrawals from your policy before the Annuity Commencement
Date and while the Annuitant is still alive. Your withdrawal request must be in
a form that is acceptable to us. Under most circumstances, you may make a
minimum partial withdrawal of $500. Withdrawals may be subject to a surrender
charge. In addition, you may have to pay income tax and a 10% penalty tax may
apply if you are under age 59 1/2. (See "Distributions Under the Policy" at page
28 and "Federal Tax Matters" at page 34.)
9. HOW WILL NYLIAC MAKE INCOME PAYMENTS ON THE ANNUITY COMMENCEMENT DATE?
We will make Income Payments on a fixed basis. We do not currently offer a
variable income payment option. We will make payments under the Life Income
Payment Option over the life of the Annuitant with a guarantee of 10 years of
payments, even if the Annuitant dies sooner. Income Payments will always be the
same specified amount. (See "Income Payments" at page 31.) We may offer other
options, at our discretion, where permitted by state law.
10. WHAT HAPPENS IF I DIE OR THE ANNUITANT DIES BEFORE THE ANNUITY COMMENCEMENT
DATE?
If you or the Annuitant dies before the Annuity Commencement Date, we will
pay the Beneficiary under the policy an amount equal to the greater of:
(a) the Accumulation Value, less any outstanding loan balance,
(b) the sum of all premium payments made, less any outstanding loan
balance, partial withdrawals and surrender charges previously
imposed, or
(c) the "reset value" (as described on page 30 of this Prospectus)
plus any additional premium payments made since the most recent
"reset date," less any outstanding loan balance, partial
withdrawals and applicable surrender charges since the most recent
"reset date."
If the Beneficiary is the spouse of the Annuitant or the owner, see
Question 11. (Also see "Death Before Annuity Commencement" at page 30 and
"Federal Tax Matters" at page 34.)
11. WHAT HAPPENS IF MY SPOUSE IS THE BENEFICIARY?
If you are the owner and Annuitant and you die before the Annuity
Commencement Date, your spouse may continue the policy as the new owner and
Annuitant if he/she is also the sole Beneficiary (for Non-Qualified, IRA, Roth
IRA, TSA or SEP policies only). If your spouse chooses to continue the policy,
we will not pay the death benefit proceeds as a consequence of your death, or
the Annuitant's death.
12. CAN I RETURN THE POLICY AFTER IT IS DELIVERED?
You can cancel the policy by returning it to us, or to the registered
representative through whom you purchased it, within 10 days of delivery of the
policy or such longer period as required under state law. For applications
signed on or after 5/19/2000, we will return the account value (in states where
approved), otherwise you will then receive from us the greater of (i) the
initial premium payment less any prior partial withdrawals or (ii) the
Accumulation Value on the date we receive the policy, without any deduction for
premium taxes or a surrender charge.
13. WHAT ABOUT VOTING RIGHTS?
You can instruct NYLIAC how to vote shares of the Funds in which you have a
voting interest through the Separate Account. (See "Voting Rights" at page 37.)
10
<PAGE> 113
14. HOW WILL NYLIAC CALCULATE INVESTMENT PERFORMANCE OF THE SEPARATE ACCOUNT?
YIELDS. The yield of the MainStay VP Cash Management Investment Division
refers to the annualized income generated by an investment in that Investment
Division over a specified seven-day period. In calculating the yield, we assume
that the income generated for that seven-day period is generated each seven-day
period over a 52-week period. The current yield is shown as a percentage of the
investment. The effective yield is calculated similarly but, when annualized,
the income earned in the Cash Management Investment Division is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment. For the seven-day period
ended December 31, 1999, the MainStay VP Cash Management Investment Division's
yield and effective yield were 4.09% and 4.59%, respectively.
The yield of the MainStay VP Government, MainStay VP High Yield Corporate
Bond or MainStay VP Bond Investment Divisions refers to the annualized income
generated in that Investment Division over a specified thirty-day period. In
calculating the yield, we assume that the income generated by the investment
during that thirty-day period is generated each thirty-day period over a
12-month period. The current yield is shown as a percentage of the investment.
For the 30-day period ended December 31, 1999, the annualized yields for the
MainStay VP Government, MainStay VP High Yield Corporate Bond and MainStay VP
Bond Investment Divisions were 4.34%, 7.32% and 5.19%, respectively.
The yield calculations do not reflect the effect of any surrender charge
that may be applicable to a particular policy. To the extent that the surrender
charge is applicable to a particular policy, the yield of that policy will be
reduced. Past performance is no indication of future performance. For additional
information regarding the yields described above, please refer to the Statement
of Additional Information.
TOTAL RETURN CALCULATIONS. The following tables present performance data
for each of the Investment Divisions for periods ending December 31, 1999. The
average annual total return (if surrendered) data reflect all Separate Account
and Fund annual expenses shown in the Fee Table on pages 4 and 5. The average
annual total return (if surrendered) figures assume that the policy is
surrendered at the end of the periods shown. The annual policy service charge,
which is charged to policies with an Accumulation Value of less than $20,000, is
not reflected. This fee, if applicable, would reduce the rates of return. The
average annual total return (no surrenders) does not reflect the deduction of
any surrender charges. All rates of return include the reinvestment of
investment income, including interest and dividends.
Certain Portfolios existed prior to the date that they were added to an
Investment Division of the Separate Account. For periods prior to an Investment
Division's inception date, the performance of the Investment Division was
derived from the performance of the corresponding Portfolios, as modified to
reflect the Separate Account and Fund annual expenses as if the policy had been
available during the periods shown. The results shown are not an estimate or
guarantee of future investment performance for the Investment Divisions.
11
<PAGE> 114
AVERAGE ANNUAL TOTAL RETURN
(FOR PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
MAINSTAY VP
MAINSTAY VP MAINSTAY VP HIGH YIELD
CAPITAL CASH MAINSTAY VP MAINSTAY VP CORPORATE
INVESTMENT DIVISIONS: APPRECIATION MANAGEMENT CONVERTIBLE GOVERNMENT BOND
--------------------- ------------ ----------- ----------- ----------- -----------
PORTFOLIO INCEPTION DATE: 1/29/93 1/29/93 10/1/96 1/29/93 5/1/95
- -----------------------------------------
INVESTMENT DIVISION INCEPTION DATE:
----------------------------------- 5/1/95 5/1/95 10/1/96 5/1/95 5/1/95
<S> <C> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN (IF SURRENDERED)
1 Year................................... 16.72% -3.09% 33.01% -9.17% 4.31%
3 Year................................... 25.63 1.44 16.27 1.80 5.85
5 Year................................... 25.94 2.86 -- 4.66 --
10 Year.................................. -- -- -- -- --
Since Portfolio Inception................ 20.38 3.20 16.43 4.07 9.40
Since Investment Division Inception...... 24.69 2.70 16.43 3.00 9.40
AVERAGE ANNUAL TOTAL RETURN (NO SURRENDERS)
1 Year................................... 23.72 3.43 40.01 -3.07 11.31
3 Year................................... 27.09 3.66 17.97 4.01 7.89
5 Year................................... 26.34 3.74 -- 5.48 --
10 Year.................................. -- -- -- -- --
Since Portfolio Inception................ 20.38 3.20 17.72 4.07 10.16
Since Investment Division Inception...... 25.16 3.66 17.72 3.94 10.16
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET
MANAGEMENT LORD ABBETT CALVERT ALGER AMERICAN
GROWTH DEVELOPING SOCIAL SMALL FIDELITY VIP II
INVESTMENT DIVISIONS: EQUITY GROWTH BALANCED CAPITALIZATION CONTRAFUND(R)
--------------------- ------ ----------- -------- -------------- ---------------
PORTFOLIO INCEPTION DATE: 5/1/98 5/1/98 9/2/86 9/20/88 1/3/95
- -----------------------------------------
INVESTMENT DIVISION INCEPTION DATE:
----------------------------------- 5/1/98 5/1/98 5/1/95 10/1/96 10/1/96
<S> <C> <C> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN (IF SURRENDERED)
1 Year................................... 56.22% 23.36% 3.74% 34.48% 15.57%
3 Year................................... -- -- 12.75 19.37 22.84
5 Year................................... -- -- 15.85 20.47 --
10 Year.................................. -- -- 10.50 16.57 --
Since Portfolio Inception................ 43.82 6.98 10.11 19.17 25.57
Since Investment Division Inception...... 43.82 6.98 13.70 16.28 23.44
AVERAGE ANNUAL TOTAL RETURN (NO SURRENDERS)
1 Year................................... 63.22 30.36 10.71 41.48 22.57
3 Year................................... -- -- 14.56 20.99 24.37
5 Year................................... -- -- 16.40 20.95 --
10 Year.................................. -- -- 10.50 16.57 --
Since Portfolio Inception................ 47.08 10.94 10.11 19.17 25.97
Since Investment Division Inception...... 47.08 10.94 14.36 17.58 24.58
</TABLE>
12
<PAGE> 115
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP CENTURY LARGE
INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH INDEXED INCOME & COMPANY
EQUITY RETURN VALUE BOND EQUITY EQUITY GROWTH VALUE
------------- ----------- ----------- ----------- ----------- ----------- -------- -------
5/1/95 1/29/93 5/1/95 1/23/84 1/23/84 1/29/93 5/1/98 5/1/98
5/1/95 5/1/95 5/1/95 5/1/95 5/1/95 5/1/95 5/1/98 5/1/98
<S> <C> <C> <C> <C> <C> <C> <C> <C>
19.28% 8.44% 0.53% -8.98% 21.21% 12.07% 8.96% -1.39%
14.98 17.24 5.04 1.98 24.52 24.00 -- --
-- 18.14 -- 5.01 25.22 25.96 -- --
-- -- -- 6.11 16.64 -- -- --
13.91 14.33 11.18 7.74 14.01 19.48 10.92 0.27
13.91 16.71 11.18 3.07 24.19 23.78 10.92 0.27
26.28 15.44 7.29 -2.86 28.21 19.07 15.96 5.24
16.71 18.91 7.12 4.17 26.01 25.50 -- --
-- 18.65 -- 5.82 25.62 26.36 -- --
-- -- -- 6.11 16.64 -- -- --
14.57 14.33 11.89 7.74 14.01 19.48 14.78 4.26
14.57 17.31 11.89 4.01 24.67 24.26 14.78 4.26
</TABLE>
<TABLE>
<CAPTION>
MORGAN
JANUS ASPEN MFS(R) STANLEY UIF T. ROWE
FIDELITY VIP JANUS ASPEN SERIES GROWTH MFS(R) EMERGING PRICE VAN ECK
EQUITY- SERIES WORLDWIDE WITH INCOME RESEARCH MARKETS EQUITY WORLDWIDE
INCOME BALANCED GROWTH SERIES SERIES EQUITY INCOME HARD ASSETS
------------ ----------- ----------- ----------- -------- ----------- ------- -----------
10/9/86 9/13/93 9/13/93 10/9/95 7/26/95 10/1/96 3/31/94 9/1/89
10/1/96 10/1/96 10/1/96 5/1/98 5/1/98 10/1/96 5/1/98 5/1/98
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-1.72% 18.04% 55.23% -1.38% 15.37% 85.97% -4.13% 12.37%
11.57 24.38 34.16 15.85 18.33 10.71 9.66 -9.60
16.44 22.53 31.43 -- -- -- 16.26 -0.83
12.90 -- -- -- -- -- -- 1.63
12.08 18.95 27.91 18.77 19.94 10.09 15.26 2.35
12.42 23.37 32.75 2.48 14.58 10.09 -1.77 -6.33
4.89 25.04 62.23 5.25 22.37 92.97 2.32 19.37
13.42 25.87 35.45 17.57 19.97 12.59 11.57 -7.62
16.98 22.97 31.76 -- -- -- 16.80 0.09
12.90 -- -- -- -- -- -- 1.63
12.08 18.95 27.91 19.44 20.54 11.55 15.61 2.35
13.82 24.51 33.72 6.54 18.36 11.55 2.13 -2.61
</TABLE>
For additional information regarding the total return calculations
described above, you should refer to the Statement of Additional Information.
16. ARE POLICY LOANS AVAILABLE?
If you have purchased your policy in connection with a tax-sheltered
annuity "TSA" (Section 403(b)) plan, you may be able to borrow some of your
Accumulation Value subject to certain conditions. (See "Loans" at page 32.)
13
<PAGE> 116
17. HOW DO I CONTACT NYLIAC?
<TABLE>
<S> <C> <C>
GENERAL INQUIRIES AND WRITTEN REQUESTS PREMIUM PAYMENTS AND LOAN PAYMENTS
-------------------------------------- ----------------------------------
REGULAR MAIL NYLIAC Variable Products Service NYLIAC Variable Products Service
Center Center
Madison Square Station P.O. Box 19289
P.O. Box 922 Newark, NJ 07195-0289
New York, NY 10159 (or the address indicated
on your quarterly statement)
EXPRESS MAIL NYLIAC Variable Products Service NYLIAC Variable Products Service
Center Center
51 Madison Avenue 51 Madison Avenue
Room 452 Room 452
New York, NY 10010 New York, NY 10010
CUSTOMER SERVICE (800) 598-2019
AND UNIT VALUES
</TABLE>
FINANCIAL STATEMENTS
The audited financial statements of NYLIAC (including the auditor's report)
for the fiscal years ended December 31, 1999, 1998 and 1997, and of the Separate
Account (including the auditor's report) for the period ended December 31, 1999
are included in the Statement of Additional Information.
14
<PAGE> 117
CONDENSED FINANCIAL INFORMATION
The following Accumulation Unit values and the number of Accumulation Units
outstanding for each Investment Division for each fiscal year ended December 31
presented below have been audited by PricewaterhouseCoopers LLP, independent
accountants, whose report on the related financial statements appears in the
Statement of Additional Information. Values and units shown are for full year
periods, except where indicated. This information should be read in conjunction
with the Separate Account financial statements and notes thereto which appear in
the Statement of Additional Information.
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL APPRECIATION CASH MANAGEMENT
------------------------------------------- ---------------------------------------------
1999 1998 1997 1996 1995(A) 1999 1998 1997 1996 1995(A)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $23.09 $16.95 $13.92 $11.89 $10.00 $ 1.14 $ 1.10 $ 1.06 $ 1.03 $ 1.00
Accumulation Unit value
(end of period)........ $28.55 $23.09 $16.95 $13.92 $11.89 $ 1.18 $ 1.14 $ 1.10 $ 1.06 $ 1.03
Number of units
outstanding
(in 000s) (end of
period)................ 23,024 15,940 11,001 6,949 951 248,786 105,842 43,157 32,709 13,190
<CAPTION>
MAINSTAY VP MAINSTAY VP
CONVERTIBLE GOVERNMENT
---------------------------------- -------------------------------------------
1999 1998 1997 1996(B) 1999 1998 1997 1996 1995(A)
----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $12.14 $11.78 $10.35 $10.00 $12.37 $11.51 $10.66 $10.57 $10.00
Accumulation Unit value
(end of period)........ $17.00 $12.14 $11.78 $10.35 $11.98 $12.37 $11.51 $10.66 $10.57
Number of units
outstanding
(in 000s) (end of
period)................ 3,826 3,139 2,205 1,250 5,008 3,208 1,103 855 178
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP
HIGH YIELD MAINSTAY VP
CORPORATE BOND INTERNATIONAL EQUITY
------------------------------------------- -------------------------------------------
1999 1998 1997 1996 1995(A) 1999 1998 1997 1996 1995(A)
----- ----- ----- ----- ------ ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $14.12 $13.95 $12.52 $10.83 $10.00 $14.95 $12.32 $11.88 $10.90 $10.00
Accumulation Unit value
(end of period)........ $15.72 $14.12 $13.95 $12.52 $10.83 $18.88 $14.95 $12.32 $11.88 $10.90
Number of units
outstanding
(in 000s) (end of
period)................ 25,509 21,960 14,577 6,539 648 1,204 1,012 932 692 67
<CAPTION>
MAINSTAY VP MAINSTAY VP
TOTAL RETURN VALUE
------------------------------------------- -------------------------------------------
1999 1998 1997 1996 1995(A) 1999 1998 1997 1996 1995(A)
----- ----- ----- ----- ------ ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $18.28 $14.58 $12.55 $11.36 $10.00 $15.76 $16.67 $13.76 $11.32 $10.00
Accumulation Unit value
(end of period)........ $21.09 $18.28 $14.58 $12.55 $11.36 $16.91 $15.76 $16.67 $13.76 $11.32
Number of units
outstanding
(in 000s) (end of
period)................ 14,509 11,136 7,629 5,154 665 9,782 10,004 7,236 3,377 432
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
BOND GROWTH EQUITY INDEXED EQUITY
------------------------------------------- ------------------------------------------- ------
1999 1998 1997 1996 1995(A) 1999 1998 1997 1996 1995(A) 1999
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $12.37 $11.50 $10.64 $10.57 $10.00 $21.87 $17.52 $14.01 $11.42 $10.00 $23.19
Accumulation Unit value
(end of period)........ $12.02 $12.37 $11.50 $10.64 $10.57 $28.02 $21.87 $17.52 $14.01 $11.42 $27.60
Number of units
outstanding
(in 000s) (end of
period)................ 6,871 4,993 1,981 1,193 173 11,321 8,239 4,979 2,276 241 24,805
<CAPTION>
AMERICAN
CENTURY DREYFUS EAGLE ASSET
MAINSTAY VP
INDEXED EQUITY
---------------------------------- ---------------- ---------------- ----------------
1998 1997 1996 1995(A) 1999 1998(C) 1999 1998(C) 1999 1998(C)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $18.30 $13.97 $11.58 $10.00 $10.86 $10.00 $10.19 $10.00 $11.68 $10.00
Accumulation Unit value
(end of period)........ $23.19 $18.30 $13.97 $11.58 $12.59 $10.86 $10.72 $10.19 $19.06 $11.68
Number of units
outstanding
(in 000s) (end of
period)................ 17,575 9,982 4,327 358 3,997 2,263 2,397 1,629 2,730 1,408
<CAPTION>
LORD ABBETT
DEVELOPING
GROWTH
----------------
1999 1998(C)
----- -----
<S> <C> <C>
Accumulation Unit value
(beginning of
period)................ $ 9.12 $10.00
Accumulation Unit value
(end of period)........ $11.89 $ 9.12
Number of units
outstanding
(in 000s) (end of
period)................ 2,276 1,573
</TABLE>
- ------------
(a) For the period May 1, 1995 (commencement of operations) through December 31,
1995.
(b) For the period October 1, 1996 (commencement of operations) through December
31, 1996.
(c) For the period May 1, 1998 (commencement of operations) through December 31,
1998.
15
<PAGE> 118
CONDENSED FINANCIAL INFORMATION--(CONTINUED)
<TABLE>
<CAPTION>
ALGER AMERICAN
SMALL CALVERT FIDELITY VIP II
CAPITALIZATION SOCIAL BALANCED CONTRAFUND(R)
---------------------------------- ------------------------------------------- ---------------
1999 1998 1997 1996(b) 1999 1998 1997 1996 1995(a) 1999 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $11.97 $10.51 $ 9.57 $10.00 $16.92 $14.76 $12.46 $11.22 $10.00 $16.68 $13.01
Accumulation Unit value
(end of period)........ $16.93 $11.97 $10.51 $ 9.57 $18.72 $16.92 $14.76 $12.46 $11.22 $20.44 $16.68
Number of units
outstanding
(in 000s) (end of
period)................ 3,063 1,904 1,060 125 987 594 282 123 17 12,004 7,022
<CAPTION>
FIDELITY VIP II
CONTRAFUND(R) EQUITY-INCOME
---------------- ----------------------------------
1997 1996(b) 1999 1998 1997 1996(b)
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $10.63 $10.00 $14.53 $13.20 $10.45 $10.00
Accumulation Unit value
(end of period)........ $13.01 $10.63 $15.23 $14.53 $13.20 $10.45
Number of units
outstanding
(in 000s) (end of
period)................ 3,079 241 8,139 5,850 2,267 149
</TABLE>
<TABLE>
<CAPTION>
JANUS MFS(R)
JANUS ASPEN SERIES GROWTH
ASPEN SERIES WORLDWIDE WITH INCOME
BALANCED GROWTH SERIES
---------------------------------- ---------------------------------- ----------------
1999 1998 1997 1996(b) 1999 1998 1997 1996(b) 1999 1998(c)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $16.32 $12.32 $10.24 $10.00 $15.86 $12.48 $10.36 $10.00 $10.57 $10.00
Accumulation Unit value
(end of period)........ $20.40 $16.32 $12.32 $10.24 $25.73 $15.86 $12.48 $10.36 $11.12 $10.57
Number of units
outstanding
(in 000s) (end of
period)................ 16,575 6,418 2,043 125 12,816 7,855 4,392 269 1,685 435
<CAPTION>
MFS(R) MORGAN STANLEY UIF T. ROWE PRICE VAN ECK
RESEARCH EMERGING EQUITY WORLDWIDE HARD
SERIES MARKETS EQUITY INCOME ASSETS
---------------- --------------------------------- ---------------- ---------------
1999 1998(c) 1999 1998 1997 1996(b) 1999 1998(c) 1999 1998(c)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation Unit value
(beginning of
period)................ $10.83 $10.00 $ 7.40 $9.89 $10.00 $10.00 $10.13 $10.00 $8.02 $10.00
Accumulation Unit value
(end of period)........ $13.25 $10.83 $14.27 $7.40 $ 9.89 $10.00 $10.36 $10.13 $9.57 $ 8.02
Number of units
outstanding
(in 000s) (end of
period)................ 999 252 1,659 841 827 80 2,387 995 216 53
</TABLE>
- ------------
(a) For the period May 1, 1995 (commencement of operations) through December 31,
1995.
(b) For the period October 1, 1996 (commencement of operations) through December
31, 1996.
(c) For the period May 1, 1998 (commencement of operations) through December 31,
1998.
16
<PAGE> 119
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
AND THE SEPARATE ACCOUNT
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
New York Life Insurance and Annuity Corporation ("NYLIAC") is a stock life
insurance company incorporated in Delaware in 1980. NYLIAC is licensed to sell
life, accident and health insurance and annuities in the District of Columbia
and all states. In addition to the policies we describe in this Prospectus,
NYLIAC offers other life insurance policies and annuities.
NYLIAC is a wholly-owned subsidiary of New York Life Insurance Company
("New York Life"), a mutual life insurance company doing business in New York
since 1845. NYLIAC held assets of $29.669 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.
THE SEPARATE ACCOUNT
The Separate Account was established on November 30, 1994, pursuant to
resolutions of the NYLIAC Board of Directors. The Separate Account is registered
as a unit investment trust with the Securities and Exchange Commission under the
Investment Company Act of 1940. The Securities and Exchange Commission, however,
does not supervise 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 our other assets. The Separate Account assets are not
chargeable with liabilities incurred in any of NYLIAC's other business
operations (except to the extent that assets in the Separate Account exceed the
reserves and other liabilities of that Separate Account). The income, capital
gains and capital losses incurred on the assets of the Separate Account are
credited to or 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 the investment performance of the
Fixed Account, the DCA Accounts and any other separate account of NYLIAC.
The Separate Account currently has 26 Investment Divisions. Premium
payments allocated to the Investment Divisions are invested solely in the
corresponding Eligible Portfolios of the relevant Fund.
THE PORTFOLIOS
The assets of each Eligible Portfolio are separate from the others and each
such Portfolio has different investment objectives and policies. As a result,
each Eligible Portfolio operates as a separate investment fund and the
investment performance of one Portfolio has no effect on the investment
performance of any other Portfolio. Portfolios described in this prospectus are
different from portfolios available directly to the general public. Investment
results may differ.
WE OFFER NO ASSURANCE THAT ANY OF THE ELIGIBLE PORTFOLIOS WILL ATTAIN THEIR
RESPECTIVE STATED OBJECTIVES.
The Funds also make their shares available to certain other separate
accounts funding variable life insurance policies offered by NYLIAC. This is
called "mixed funding." Except for MainStay VP Series Fund, all other Funds also
make their shares available to separate accounts of insurance companies
unaffiliated with NYLIAC. This is called "shared funding." Although we do not
anticipate any inherent difficulties arising from mixed and shared funding, it
is theoretically possible that, due to differences in tax treatment or other
considerations, the interests of owners of various contracts participating in a
certain Fund might at some time be in conflict. The Board of Directors/Trustees
of each Fund, each Fund's investment advisers, and NYLIAC are required to
monitor events to identify any material conflicts that arise from the use of the
Funds for mixed and shared funding. For more information about the risks of
mixed and shared funding, please refer to the relevant Fund prospectus.
We provide certain services to you in connection with the investment of
premium payments in the Investment Divisions, which, in turn, invest in the
Eligible Portfolios. These services include, among others, providing information
about the Eligible Portfolios. We receive a service fee from the investment
advisers or other service providers of some of the Funds in return for providing
services of this type. Currently, we receive service fees at annual rates
ranging from .10% to .21% of the aggregate net asset value of the shares of some
of the Eligible Portfolios held by the Investment Divisions.
17
<PAGE> 120
The Eligible Portfolios of the relevant Funds, along with their investment
advisers, are listed in the following table:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FUND INVESTMENT ADVISERS ELIGIBLE PORTFOLIOS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MainStay VP Series Fund, Inc. MacKay Shields 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. New York Life MainStay VP American Century
Insurance Company Income & Growth;
MainStay VP Dreyfus Large Company Value;
MainStay VP Eagle Asset Management Growth
Equity;
MainStay VP Lord Abbett Developing Growth
The Alger American Fund Fred Alger Management, Inc. Alger American Small Capitalization
Calvert Variable Series, Inc. Calvert Asset Management Company, Calvert Social Balanced
Inc.
Fidelity Variable Insurance Fidelity Management and Research Fidelity VIP II Contrafund(R)
Products Fund II Company
Fidelity Variable Insurance Fidelity Management and Research Fidelity VIP Equity-Income
Products Fund Company
Janus Aspen Series Janus Capital Corporation Janus Aspen Series Balanced;
Janus Aspen Series Worldwide Growth
MFS(R) Variable Insurance MFS Investment Management(R) MFS(R) Growth With Income Series; MFS(R)
Trust(SM) Research Series
The Universal Institutional Funds, Morgan Stanley Asset Management Morgan Stanley UIF Emerging Markets Equity
Inc.
T. Rowe Price Equity Series, Inc. T. Rowe Price Associates, Inc. T. Rowe Price Equity Income
Van Eck Worldwide Insurance Trust Van Eck Associates Corporation Van Eck Worldwide Hard Assets
</TABLE>
Please refer to the attached prospectuses of the respective Funds for a complete
description of the Funds, the investment advisers and the Portfolios. The Funds'
prospectuses should be read carefully before any decision is made concerning the
allocation of premium payments to an Investment Division corresponding to a
particular Eligible Portfolio.
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
NYLIAC retains the right, subject to any applicable law, to make additions
to, deletions from, or substitutions for, the Eligible Portfolio shares held by
any Investment Division. NYLIAC reserves the right to eliminate the shares of
any of the Eligible Portfolios and to substitute shares of another portfolio of
a Fund, or of another registered open-end management investment company. We may
do this if the shares of the Eligible Portfolios are no longer available for
investment or if we believe investment in any Eligible Portfolio would become
inappropriate in view of the purposes of the Separate Account. To the extent
required by law, we will not make substitutions of shares attributable to your
interest in an Investment Division until you have been notified of the change.
This does not prevent the Separate Account from purchasing other securities for
other series or classes of policies, or from processing a conversion between
series or classes of policies on the basis of requests made by policy owners.
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<PAGE> 121
We may establish new Investment Divisions when we determine, in our sole
discretion, that marketing, tax, investment or other conditions so warrant. We
will make any new Investment Divisions available to existing policy owners on a
basis we determine. We may also eliminate one or more Investment Divisions, if
we determine, in our sole discretion, that marketing, tax, investment or other
conditions warrant.
In the event of any substitution or change, NYLIAC may, by appropriate
endorsement, change the policies to reflect such substitution or change. 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 payable date.
THE POLICIES
This is a flexible premium policy which means additional premium payments
can be made. It is issued on the lives of individual Annuitants.
The policies are variable. This means that the Accumulation Value will
fluctuate based on the investment experience of the Investment Divisions you
select. The interest credited on the Fixed Accumulation Value will also vary.
NYLIAC does not guarantee the investment performance of the Separate Account or
of the Funds. You bear the entire investment risk with respect to amounts
allocated to the Investment Divisions of the Separate Account. We offer no
assurance that the investment objectives of the Investment Divisions will be
achieved. Accordingly, amounts allocated to the Investment Divisions of the
Separate Account are subject to the risks inherent in the securities markets
and, specifically, to price fluctuations in the Funds' investments.
As the owner of the policy, you have the right to (a) change the
Beneficiary, (b) name a new owner (on Non-Qualified Policies only) (c) receive
Income Payments and (d) name a payee to receive Income Payments. You cannot lose
these rights. However, all rights of ownership cease upon your death.
SELECTING THE VARIABLE ANNUITY THAT'S RIGHT FOR YOU
In addition to the policies described in this prospectus, we offer other
variable annuities, each having different features, fees and charges. Your
registered representative can help you decide which is best for you based on
your individual circumstances, time horizon and liquidity preferences. The
LifeStages(R) Flexible Premium Variable Annuity is designed generally for
purchasers with a long time horizon who intend to make multiple contributions to
the policy over time. The LifeStages(R) Variable Annuity is designed generally
for purchasers with an intermediate time horizon who intend to make a single
contribution or a limited number of contributions to the policy. The
LifeStages(R) Access Variable Annuity* is designed generally for purchasers with
a shorter time horizon. Although there is no surrender charge under a
LifeStages(R) Access Variable Annuity, other charges are somewhat higher than
those in other policies.
- ---------------
* For applications signed on or after May 19, 2000, in states where approved.
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<PAGE> 122
The chart below outlines some of the different features for each
LifeStages(R) variable annuity we offer. Your registered representative can
provide you with a prospectus for one or more of these annuities, which contains
more complete information.
<TABLE>
<CAPTION>
LIFESTAGES(R) FLEXIBLE LIFESTAGES(R) LIFESTAGES(R) ACCESS
PREMIUM VARIABLE ANNUITY VARIABLE ANNUITY VARIABLE ANNUITY(1)
<S> <C> <C> <C>
Fixed Account Yes Yes (1% additional rate Yes
credited to monies deposited
directly into Fixed Account)
DCA Advantage Plan No Yes (6, 12, 18 month accounts No
are available)(1)
Surrender Charge 9 Years (7%, 7%, 7%, 6%, 5%, 6 Years (7%, 7%, 7%, 6%, 5%, N/A
Period 4%, 3%, 2%, 1%) (Based on 4%) (Based on each premium
policy date) payment date)
Death Benefit 3 Year Reset to Age 85 Annual Reset to Age 85(1) Annual Reset to Age
Guarantee 80
Total Separate 1.40%* 1.40% 1.55%
Account Charges
(mortality and
expense risk charge
and administration
fee)
Annual Policy Fee $30 $30 $40
Minimum Cash Value $20,000* $20,000 $50,000
Required to Waive
Policy Fee
</TABLE>
All policies and features may not be available in all states.
* May be lower in some states.
(1) For applications signed on or after May 19, 2000, in states where approved.
QUALIFIED AND NON-QUALIFIED POLICIES
We designed the policies primarily for the accumulation of retirement
savings, and to provide income at a future date. We issue both Qualified and
Non-Qualified Policies. Both types of policies offer tax-deferred accumulation.
You may purchase a Non-Qualified Policy with after-tax dollars to provide for
retirement income other than through a tax-qualified plan. You may purchase a
Qualified Policy with pre-tax dollars for use with any one of the tax-qualified
plans listed below.
(1) Section 403(b) Tax Sheltered Annuities purchased by employees of
certain tax-exempt organizations and certain state-supported
educational institutions;
(2) Section 408 or 408A Individual Retirement Annuities ("IRAs"), including
Roth IRAs;
(3) Section 457 Deferred Compensation Plans.
Please see "Federal Tax Matters" at page 34 for a detailed description of
these plans.
If you are considering a Qualified Policy, you should be aware that there
are fees and charges in an annuity that may not be included in other types of
investments which may be more or less costly. However, the fees and charges
under the policies are designed to provide for certain payment guarantees and
features that may not be available in these other types of investments. They
include:
(1) a Fixed Account option, which features a guaranteed fixed interest
rate;
(2) a death benefit that is payable should you die while the policy is in
force, which is reset every three years (every year for applications
signed on or after 5/19/2000 in states where approved) and is
guaranteed to be at least the amount of your premium payments, less any
outstanding loan balance, partial withdrawals and surrender charges;
(3) the option for your Beneficiary to receive a guaranteed amount of
monthly income for his or her lifetime should you die prior to the
Annuity Commencement Date;
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<PAGE> 123
(4) the option to receive a guaranteed amount of monthly income for life
after the first Policy Year; and
(5) two riders (an Unemployment Benefit Rider and a Living Needs Benefit
Rider), which allow you to withdraw money from your policy without the
imposition of surrender charges, subject to the terms of each rider.
These features are explained in detail in this Prospectus. You should
consult with your tax or legal advisor to determine if the policy is suitable
for your tax qualified plan.
POLICY APPLICATION AND PREMIUM PAYMENTS
You can purchase a policy by completing an application. The application is
sent to us with your initial premium payment. If the application is complete and
accurate and we have received all other information necessary to process the
application, we will credit the initial premium payment within two Business Days
after receipt. If we cannot credit the initial premium payment within five
Business Days after we receive it because the application is incomplete or
inaccurate, we will contact you and explain the reason for the delay. Unless you
consent to NYLIAC's retaining the initial premium payment and crediting it as
soon as the necessary requirements are fulfilled, we will offer to refund the
initial premium payment immediately. Acceptance of applications is subject to
NYLIAC's rules. We reserve the right to reject any application or initial
premium payment. Our rules generally require that only one policy owner be
named. However, there are exceptions to these rules, such as when the
application is related to certain exchanges of in-force annuities in accordance
with Section 1035 of the Internal Revenue Code.
We will allocate the initial premium payments to the Fixed Account or the
DCA Advantage Plan Accounts immediately. For applications signed on or after May
19, 2000 in states where approved, we will allocate the initial premium
designated to the Investments Divisions you have chosen immediately. For all
other policies, we will allocate the initial premium payments designated to
Investment Divisions to the MainStay VP Cash Management Investment Division
until 15 days after the policy is issued. At the end of this period, we will
allocate the premium payments in accordance with your instructions. We credit
subsequent premium payments to the policy at the close of the Business Day on
which they are deposited by NYLIAC. You are encouraged to send subsequent
premium payments directly as indicated on page 14.
You may allocate premium payments in up to 18 Investment Divisions, and DCA
Advantage Plan Accounts (for applications signed on or after May 19, 2000 in
states where approved), plus the Fixed Account. Moreover, you may increase or
decrease the percentages of premium payments (which must be in whole number
percentages) allocated to each Allocation Alternative at the time a premium
payment is made. However, any change to the policy's allocations may not result
in the Accumulation Value being allocated to more than 18 Investment Divisions
plus the Fixed Account.
Unless we permit otherwise, the minimum initial premium payment is $2,000
for Qualified Policies and $5,000 for Non-Qualified Policies. You may make
additional premium payments of at least $500 each or such lower amount as we may
permit at any time or by any other method NYLIAC makes available. For residents
of the states of Maryland, New Jersey and Washington, however, additional
premium payments may only be made until either the Annuitant reaches age 64 or
the fourth Policy Year, whichever is later. The currently available methods of
payment are direct payments to NYLIAC, pre-authorized monthly deductions from
your bank, a credit union or similar accounts and by any other method agreed to
by us. You may make premium payments at any time before the Annuity Commencement
Date and while you and the Annuitant are living. The maximum aggregate amount of
premium payments we accept is $1,000,000 without prior approval. NYLIAC reserves
the right to limit the dollar amount of any premium payment.
For Qualified Policies, you may not make premium payments in any Policy
Year that exceed the amount permitted by the plan or by law.
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 a 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.
YOUR RIGHT TO CANCEL ("FREE LOOK")
You may cancel the policy by returning it to us, or to the registered
representative through whom you purchased it, within 10 days of delivery of the
policy or such longer period as required under state law. In
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<PAGE> 124
states where approved for applications signed on or after May 19, 2000, you will
receive the policy's Accumulation Value on the date we receive the policy, but
without any deduction for premium taxes or a surrender charge. This amount may
be more or less than your premium payments. Otherwise, you will receive from us
the greater of (i) the initial premium payment less any prior partial
withdrawals or (ii) the Accumulation Value on the date we receive the policy,
but without any deduction for premium taxes or a surrender charge. We will set
forth the provision in your policy.
ISSUE AGES
We can issue Non-Qualified Policies if both you and the Annuitant are not
older than age 85 (age 80 in New York and Pennsylvania). We will accept
additional premium payments until either you or the Annuitant reaches the age of
85, unless we agree otherwise. For IRA, Roth IRA, TSA and SEP plans, you must
also be the Annuitant. We can issue Qualified Policies if the Owner/Annuitant is
between the ages of 18 and 80. We will accept additional premium payments until
the Owner/Annuitant reaches the age of 80, unless otherwise limited by the terms
of a particular plan or unless we agree otherwise.
TRANSFERS
You may transfer amounts between Investment Divisions of the Separate
Account or to the Fixed Account at least 30 days before the Annuity Commencement
Date. In addition, for applications signed on or after May 19, 2000, in states
where approved, you can also transfer from the DCA Advantage Plan Accounts. You
may not make transfers into the DCA Advantage Plan Accounts. Except in
connection with transfers made pursuant to the Dollar Cost Averaging, Automatic
Asset Reallocation, and Interest Sweep options, the minimum that you may
transfer from one Investment Division to other Investment Divisions or to the
Fixed Account is $500. Except for the Dollar Cost Averaging, Automatic Asset
Reallocation and Interest Sweep options, if the value of the remaining
Accumulation Units in an Investment Division or the Fixed Account would be less
than $500 after you make a transfer, we will transfer the entire value unless
NYLIAC in its discretion determines otherwise. The amount(s) transferred to
other Investment Divisions must be a minimum of $25 for each Investment
Division.
There is no charge for the first twelve transfers in any one Policy Year.
NYLIAC reserves the right to charge up to $30 for each transfer in excess of
twelve, subject to any applicable state insurance law requirements. Any transfer
made in connection with the Dollar Cost Averaging, Automatic Asset Reallocation
Interest Sweep, and the DCA Advantage Plan options will not count as a transfer
toward the twelve transfer limit. You can make transfers from the Fixed Account
to the Investment Divisions in connection with the Interest Sweep option and in
certain other situations. Transfers into the Fixed Account may be subject to
restrictions. (See "Fixed Account" at page 33).
Your transfer requests must be in writing on a form approved by NYLIAC or
by telephone in accordance with established procedures. (See "Procedures for
Telephone Transfers" below). We will make transfers from Investment Divisions
based on the Accumulation Unit values at the end of the Business Day on which we
receive the transfer request. (See "Delay of Payments" at page 31.) Transfers
may be limited in connection with Third Party Investment Advisory Arrangements
(see page 26).
PROCEDURES FOR TELEPHONE TRANSFERS
You may make telephone transfers in two ways: (1) you may directly contact
a service representative or (2) you may also request access to an electronic
service known as a Voice Response Unit (VRU). The VRU permits you to transfer
monies among the Investment Divisions and/or the Fixed Account and change the
allocation of future premium payments. You can elect this feature by completing
and signing a Telephone Authorization Form. However, we reserve the right to
temporarily discontinue the availability of the VRU.
We will use reasonable procedures to confirm that instructions communicated
by telephone are genuine. Before a service representative accepts any request,
the caller will be asked for his or her social security number and address. All
calls will be recorded. We will assign a personal identification number (PIN) to
all policy owners who request VRU access. You must properly enter the PIN before
we allow any transactions through the VRU. Furthermore, we will confirm all
telephone transactions in writing.
NYLIAC is not liable for any loss, cost or expense for action on telephone
instructions which are believed to be genuine in accordance with these
procedures. We must receive telephone transfer requests no later than 4:00 p.m.
Eastern Time in order to assure same-day processing. We will process requests
received after 4:00 p.m. on the next Business Day.
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<PAGE> 125
DOLLAR COST AVERAGING PROGRAMS
The main objective of dollar cost averaging is to achieve an average cost
per share that is lower than the average price per share during volatile market
conditions. Since you transfer the same dollar amount to an Investment Division
with each transfer, you purchase more units in an Investment Division if the
value per unit is low and fewer units if the value per unit is high. Therefore,
you achieve a lower than average cost per unit if prices fluctuate over the long
term. Similarly, for each transfer out of an Investment Division, you sell more
units in an Investment Division if the value per unit is low and fewer units if
the value per unit is high. Dollar cost averaging does not assure a profit or
protect against a loss in declining markets. Because it involves continuous
investing regardless of price levels, you should consider your financial ability
to continue to make purchases during periods of low price levels. In states
where approved, for policies issued on or after May 19, 2000, NYLIAC will also
offer the DCA Advantage Plan under which you may utilize the 6-month, 12-month
or 18-month DCA Accounts. (See "The DCA Advantage Plan" at page 24.) We do not
count transfers under dollar cost averaging as part of your 12 free transfers
each Policy Year.
We have set forth below an example of how dollar cost averaging works. In
the example, we have assumed that you want to move $100 from the Cash Management
Investment Division to the MainStay VP Growth Equity Investment Division each
month. Assuming the Accumulation Unit values below, you would purchase the
following number of Accumulation Units:
<TABLE>
<CAPTION>
AMOUNT ACCUMULATION ACCUMULATION UNITS
MONTH TRANSFERRED UNIT VALUE PURCHASED
<S> <C> <C> <C>
1 $100 $10.00 10.00
2 $100 $ 8.00 12.50
3 $100 $12.50 8.00
4 $100 $ 7.50 13.33
Total $400 $38.00 43.83
</TABLE>
The average unit price is calculated as follows:
<TABLE>
<S> <C> <C> <C> <C>
Total share price $38.00
- -------------------- = ------ = $9.50
Number of months 4
</TABLE>
The average unit cost is calculated as follows:
<TABLE>
<S> <C> <C> <C> <C>
Total amount transferred $400.00
- ------------------------ = ------- = $9.13
Total units purchased 43.83
</TABLE>
In this example, you would have paid an average cost of $9.13 per unit
while the average price per unit is $9.50.
(a) Traditional Dollar Cost Averaging
This option permits systematic investing to be made in equal installments
over various market cycles to help reduce risk. You may specify, prior to the
Annuity Commencement Date, a specific dollar amount to be transferred from any
Investment Divisions to any combination of Investment Divisions and/or the Fixed
Account. You specify the Investment Divisions to transfer money from, the
Investment Divisions and/or Fixed Account to transfer money to, the amounts to
be transferred, the date on which transfers will be made, subject to our rules,
and the frequency of the transfers (either monthly, quarterly, semi-annually or
annually). You may not make transfers from the Fixed Account, but you may make
transfers into the Fixed Account. Each transfer from an Investment Division must
be at least $100. You must have a minimum Accumulation Value of $5,000 ($2,500
for applications signed on or after May 19, 2000) to elect this option. NYLIAC
may reduce the minimum transfer amount and minimum Accumulation Value at its
discretion.
NYLIAC will make all dollar cost averaging transfers on the day of each
calendar month that you specify or on the next Business Day (if the day you have
specified is not a Business Day or does not exist in that month). You may
specify any day of the month except the 29th, 30th or 31st. In order to process
a transfer under our traditional Dollar Cost Averaging option, NYLIAC must have
received a request in writing no later than one week prior to the date the
transfers are to begin.
You may cancel the traditional Dollar Cost Averaging option at any time in
a written request. NYLIAC may also cancel this option if the Accumulation Value
is less than $5,000, or such lower amount as we may
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<PAGE> 126
determine. You may not elect the traditional Dollar Cost Averaging option if you
have selected the Automatic Asset Reallocation option.
(b) The DCA Advantage Plan
THE DCA ADVANTAGE PLAN IS AVAILABLE, FOR APPLICATIONS SIGNED ON OR AFTER
MAY 19, 2000, AND ONLY IN STATES WHERE APPROVED. This feature permits you to set
up automatic dollar cost averaging using the 6-month, 12-month and/or 18-month
DCA Advantage Plan Accounts when an initial premium payment or a subsequent
premium payment is made. You can request the DCA Advantage Plan in addition to
the traditional Dollar Cost Averaging, Automatic Asset Reallocation, or Interest
Sweep options.
You can enroll in any one, two or all three DCA Advantage Plan Accounts.
You must allocate a minimum of $5,000 in each DCA Advantage Plan Account that is
selected. You must specify the Investment Divisions into which transfers from
the DCA Advantage Plan Accounts are to be made. However, you may not select a
DCA Advantage Plan Account with a duration which would extend beyond the Annuity
Commencement Date. Amounts in the DCA Advantage Plan Accounts will be
transferred to the Investment Divisions in 6 monthly transfers if the 6-month
DCA Advantage Plan Account is selected, in 12-monthly or 4-quarterly transfers
if the 12-month DCA Advantage Plan Account is selected or in 18-monthly or
6-quarterly transfers if the 18-month DCA Advantage Plan Account is selected.
For monthly transfers, dollar cost averaging will begin one month from the date
NYLIAC receives the premium payment and transfers will be made on the same day
or on the next Business Day (if the day is not a Business Day or does not exist
in that month) each subsequent month for the duration of the DCA Advantage Plan
Account. For quarterly transfers, dollar cost averaging will begin three months
from the date NYLIAC receives the premium payment and transfers will be made on
the same day or on the next Business Day (if the day is not a Business Day or
does not exist in that month) every subsequent three month period for the
duration of the DCA Advantage Plan Account. The amount of each transfer will be
calculated at the time of the transfer based on the number of remaining monthly
or quarterly transfers and the remaining value in a DCA Advantage Plan Account.
For example, the amount of the first monthly transfer out of a 6-month DCA
Advantage Plan Account will equal 1/6 of the value of the DCA Advantage Plan
Account on the date of the transfer. The amount of each of the five remaining
transfers will equal 1/5, 1/4, 1/3, 1/2 and the balance, respectively, of the
value of the DCA Advantage Plan Account on the date of each transfer.
You may have a 6-month, a 12-month and an 18-month DCA Advantage Plan
Account open simultaneously in accordance with established procedures. However,
you may not have more than one DCA Advantage Plan Account with the same duration
open at the same time. Accordingly, any subsequent premium payment we receive
for a duration that is already open will be allocated to that same DCA Advantage
Plan Account already opened. The entire value of the DCA Advantage Plan Account
will be completely transferred to the Investment Divisions within the duration
specified. For example, if you allocate an initial premium payment to the
12-month DCA Advantage Plan Account under which the 12-month term will end on
December 31, 2000 and you make a subsequent premium payment to the 12-month DCA
Advantage Plan Account before December 31, 2000, we will allocate the subsequent
premium payment to the same 12-month DCA Advantage Plan Account already opened
and transfer the entire value of the 12-month DCA Advantage Plan Account to the
Investment Divisions by December 31, 2000 even though a portion of the money was
not in that DCA Advantage Plan Account for the entire 12-month period.
You can make partial withdrawals and transfers (in addition to the
automatic transfers described above) from the DCA Advantage Plan Accounts. We
will make partial withdrawals and transfers first from the DCA Accumulation
Value attributed to the initial premium payment and then from the DCA
Accumulation Value attributed to subsequent allocations in the order received.
You cannot make transfers into the DCA Advantage Plan Accounts from any
Allocation Alternative.
AUTOMATIC ASSET REALLOCATION
This option allows you to maintain the percentage allocated to each
Investment Division at a pre-set level. For example, you might specify that 50%
of the Variable Accumulation Value of your policy be allocated to the MainStay
VP Convertible Investment Division and 50% of the Variable Accumulation Value be
allocated to the MainStay VP International Equity Investment Division. Over
time, the fluctuations in each of these Investment Division's investment results
will shift the percentages. If you elect this Automatic Asset Reallocation
option, NYLIAC will automatically transfer your Variable Accumulation Value back
to the percentages you specify. You may choose to have reallocations made
quarterly, semi-annually or annually. You must also specify the day of the month
that reallocations are to occur (with the exception of the 29th, 30th or 31st of
a month). The minimum Variable Accumulation Value required to elect this option
is $5,000 ($2,500 for applications signed
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<PAGE> 127
on or after May 19, 2000). There is no minimum amount which you must allocate
among the Investment Divisions under to this option. However, the Variable
Accumulation Value may not be allocated to more than 18 Investment Divisions if
you selected the Automatic Asset Reallocation option.
You can cancel the Automatic Asset Reallocation option at any time in a
written request. NYLIAC may also cancel this option if the Accumulation Value is
less than $5,000, or such a lower amount as we may determine. You may not elect
the Automatic Asset Reallocation option if you have selected the traditional
Dollar Cost Averaging option.
INTEREST SWEEP
You can request, prior to the Annuity Commencement Date, that interest
earned on monies allocated to the Fixed Account be transferred from the Fixed
Account to any combination of Investment Divisions. You will specify the
Investment Divisions, the frequency of the transfers (either monthly, quarterly,
semi-annually or annually), and the day of each calendar month to make the
transfers (except the 29th, 30th or 31st of a month). The minimum Fixed
Accumulation Value required to elect this option is $5,000 ($2,500 for
applications signed on or after May 19, 2000), but this amount may be reduced at
our discretion. NYLIAC will make all Interest Sweep transfers on the day that
you specify or on the next Business Day (if the day you have specified is not a
Business Day).
You may request the Interest Sweep option in addition to either the
traditional Dollar Cost Averaging, Automatic Asset Reallocation or for
applications signed on or after May 19, 2000, the DCA Advantage Plan. If an
Interest Sweep transfer is scheduled for the same day as a transfer related to
the traditional Dollar Cost Averaging option, the Automatic Asset Reallocation
option or the DCA Advantage Plan, we will process the Interest Sweep transfer
first.
YOU MAY NOT TRANSFER MORE THAN 20% of the Fixed Accumulation Value at the
beginning of the Policy Year from the Fixed Account to the Investment Divisions
during a Policy Year. (See "The Fixed Account--Transfers to Investment
Divisions" at page 34.) If an Interest Sweep option transfer would cause more
than 20% of the Fixed Accumulation Value at the beginning of the Policy Year to
be transferred from the Fixed Account, we will not process the transfer and the
Interest Sweep option will be automatically suspended. Participation in the
Interest Sweep option will not affect the applicability of the Fixed Account
Initial Premium Guarantee described on page 34.
You can cancel the Interest Sweep option at any time in a written request.
We may also cancel this option if the Fixed Accumulation Value is less than
$5,000, or such a lower amount as we may determine.
ACCUMULATION PERIOD
(a) Crediting of Premium Payments
You can allocate a portion of each premium payment to one or more
Investment Divisions, DCA Advantage Plan Accounts for applications signed on or
after May 19, 2000 in states where approved, or the Fixed Account. The minimum
amount that you may allocate to any one Investment Division or the Fixed Account
is $25 (or such lower amount as we may permit). We will place the initial
premium payment, except any initial premium payment you allocate to the Fixed
Account, in the MainStay VP Cash Management Investment Division until 15 days
after we issue the policy. At the end of this period, we will allocate the
premium payment to the Investment Divisions and/or the Fixed Account as
requested. We will allocate all additional premium payments to the Investment
Divisions and/or Fixed Account as requested.
We will credit that portion of each premium payment you allocate to an
Investment Division in the form of Accumulation Units. We determine the number
of Accumulation Units we credit to a policy by dividing the amount allocated to
each Investment Division by the Accumulation Unit value for that Investment
Division on the day we are making this calculation. The value of an Accumulation
Unit will vary with the investment experience of the Portfolio in which the
Investment Division invests. The number of Accumulation Units we credit to a
policy will not, however, change as a result of any fluctuations in the value of
an Accumulation Unit. (See "The Fixed Account" at page 33 for a description of
interest crediting.)
(b) Valuation of Accumulation Units
The value of Accumulation Units in each Investment Division will change
daily to reflect the investment experience of the corresponding Portfolio as
well as the daily deduction of the Separate Account charges. The Statement of
Additional Information contains a detailed description of how we value the
Accumulation Units.
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<PAGE> 128
THIRD PARTY INVESTMENT ADVISORY ARRANGEMENTS
In some cases, the policy may be sold to policy owners 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 policy owner 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 policy owners 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 policy owners.
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.
POLICY OWNER INQUIRIES
Your inquiries should be addressed to NYLIAC. (See page 14.)
CHARGES AND DEDUCTIONS
SURRENDER CHARGES
Since no deduction for a sales charge is made from premium payments, we
impose a surrender charge on certain partial withdrawals and surrenders of the
policies. The surrender charge is based on your premium payments and is not
assessed on any earnings. The surrender charge covers certain expenses relating
to the sale of the policies, including commissions to registered representatives
and other promotional expenses. We measure the surrender charge as a percentage
of the amount withdrawn or surrendered. The surrender charge may apply to
amounts applied under certain Income Payment options.
If you surrender your policy, we deduct the surrender charge from the
amount paid to you. In the case of a partial withdrawal, you can direct NYLIAC
to take surrender charges either from the remaining value of the Allocation
Alternatives and/or the DCA Advantage Plan Accounts from which the partial
withdrawals are made, or from the amount paid to you. If the remaining value in
an Allocation Alternative and/or the DCA Advantage Plan Accounts is less than
the necessary surrender charge, we will deduct the remainder of the charge from
the amount withdrawn from that Allocation Alternative and/or the DCA Advantage
Plan Accounts.
The maximum surrender charge will be 7% of the amount withdrawn. The
percentage of the surrender charge varies, depending upon the length of time a
premium payment is in your policy before it is withdrawn. For purposes of
calculating the applicable surrender charge, we deem premium payments to be
withdrawn on a first-in, first-out basis. Unless required otherwise by state
law, the surrender charge for amounts withdrawn or surrendered during the first
three Payment Years following the premium payment to which such withdrawal or
surrender is attributable is 7% of the amount withdrawn or surrendered. This
charge then declines by 1% per year for each additional Payment Year, until the
sixth Payment Year, after which no charge is made, as shown in the following
chart:
AMOUNT OF SURRENDER CHARGE
<TABLE>
<CAPTION>
PAYMENT YEAR CHARGE
------------ ------
<S> <C>
1........................................................... 7%
2........................................................... 7%
3........................................................... 7%
4........................................................... 6%
5........................................................... 5%
6........................................................... 4%
7+.......................................................... 0%
</TABLE>
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EXCEPTIONS TO SURRENDER CHARGES
We will not assess a surrender charge:
(a) on amounts you withdraw in any one Policy Year which are less than or
equal to the greater of (i) 10% of the Accumulation Value at the time
of surrender or withdrawal, or (ii) a) for policies issued on or after
May 19, 2000, the Accumulation Value less accumulated premium payments,
b) for policies issued prior to May 19, 2000, the Accumulation Value
less accumulated premium payments for policies with total premium
payments of $100,000 or more.
(b) if NYLIAC cancels the policy;
(c) when we pay proceeds upon the death of the policy owner or the
Annuitant;
(d) when you select an Income Payment Option in any Policy Year after the
first Policy Year;
(e) when a required minimum distribution is made under a Qualified Policy
(this amount will, however, count against the first exception
described above);
(f) on withdrawals at age 59 1/2 or older if the policy is tax-qualified
and if the money withdrawn from the policy was transferred or rolled
over from a NYLIAC fixed deferred annuity policy; and
(g) on withdrawals you make under the Living Needs Benefit Rider or
Unemployment Benefit Rider.
OTHER CHARGES
(a) Mortality and Expense Risk Charges
Prior to the Annuity Commencement Date, NYLIAC imposes risk charges to
compensate it for bearing certain mortality and expense risks under the
policies. This charge is equal, on an annual basis, to 1.25% of the average
daily net asset value of the Separate Account and is deducted daily. We
guarantee that these charges will not increase. If these charges are
insufficient to cover actual costs and assumed risks, the loss will fall on
NYLIAC. If the charges are more than sufficient, we will add any excess to our
general funds. We may use these funds for any corporate purpose, including
expenses relating to the sale of the policies, to the extent that surrender
charges do not adequately cover sales expenses.
The mortality risk assumed is the risk that Annuitants as a group will live
for a longer time than our actuarial tables predict. As a result, we would be
paying more Income Payments than we planned. We also assume a risk that the
mortality assumptions reflected in our guaranteed annuity payment tables, shown
in each policy, will differ from actual mortality experience. Lastly, we assume
a mortality risk that, at the time of death, the guaranteed minimum death
benefit will exceed the policy's Accumulation Value. The expense risk assumed is
the risk that the cost of issuing and administering the policies will exceed the
amount we charge for these services.
(b) Administration Fee
Prior to the Annuity Commencement Date, we impose an administration fee
intended to cover the cost of providing policy administration services. This
charge is equal, on an annual basis, to .15% of the net asset value of the
Separate Account and is deducted daily.
(c) Policy Service Charge
We deduct an annual policy service charge each Policy Year on the Policy
Anniversary or upon surrender of the policy if on the Policy Anniversary or date
of surrender the Accumulation Value is less than $20,000. This charge is the
lesser of $30 or 2% of the Accumulation Value at the end of the Policy Year or
on the date of surrender, whichever is applicable. We deduct the annual policy
service charge from each Allocation Alternative and each DCA Account, if
applicable, in proportion to its percentage of the Accumulation Value on the
Policy Anniversary or date of surrender. This charge is designed to cover the
costs for providing services under the policy such as collecting, processing and
confirming premium payments and establishing and maintaining the available
methods of payment.
(d) Fund Charges
The value of the assets in the Separate Account will indirectly reflect the
Funds' total fees and expenses. The Funds's total fees and expenses are not part
of the policy. They may vary in amount from year to year. These fees and
expenses are described in detail in the relevant Fund's prospectus and/or
statement of additional information.
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<PAGE> 130
GROUP AND SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce the surrender
charge and the policy service charge or change the minimum initial and
additional premium payment requirements. Group arrangements include those in
which a trustee or an employer, for example, purchases policies covering a group
of individuals on a group basis. Sponsored arrangements include those in which
an employer allows us to sell policies to its employees or retirees on an
individual basis.
Our costs for sales, administration, and mortality generally vary with the
size and stability of the group among other factors. We take all these factors
into account when reducing charges. To qualify for reduced charges, a group or
sponsored arrangement must meet certain requirements, including our requirements
for size and number of years in existence. Group or sponsored arrangements that
have been set up solely to buy policies or that have been in existence less than
six months will not qualify for reduced charges.
We will make any reductions according to our rules in effect when an
application or enrollment form for a policy is approved. We may change these
rules from time to time. Any variation in the surrender charge or policy service
charge will reflect differences in costs or services and will not be unfairly
discriminatory.
TAXES
NYLIAC may, where premium taxes are imposed by state law, deduct such taxes
from your policy either (i) when a surrender or cancellation occurs, or (ii) at
the Annuity Commencement Date. Applicable premium tax rates depend upon such
factors as your current state of residency, and the insurance laws and NYLIAC's
status in states where premium taxes are incurred. Current premium tax rates
range from 0% to 3.5%. Applicable premium tax rates are subject to change by
legislation, administrative interpretations or judicial acts.
Under present laws, NYLIAC will also incur state and local taxes (in
addition to the premium taxes described above) in several states. At present,
these taxes are not significant. If they increase, however, NYLIAC may make
charges for such taxes.
NYLIAC does not expect to incur any federal income tax liability
attributable to investment income or capital gains retained as part of the
reserves under the policies. (See "Federal Tax Matters" at page 34.) Based upon
these expectations, no charge is being made currently for corporate federal
income taxes which may be attributable to the Separate Account. Such a charge
may be made in future years for any federal income taxes NYLIAC incurs.
DISTRIBUTIONS UNDER THE POLICY
SURRENDERS AND WITHDRAWALS
You can make a partial withdrawal, periodic partial withdrawal, hardship
withdrawal or surrender the policy to receive part or all of the Accumulation
Value at any time before the Annuity Commencement Date and while the Annuitant
is living, by sending a written request to NYLIAC. The amount available for
withdrawal is the Accumulation Value on the Business Day during which we receive
the request, less any outstanding loan balance, surrender charges, premium taxes
which we may deduct and policy service charge, if applicable. If you have not
provided us with a written election not to withhold federal income taxes at the
time you make a withdrawal or surrender request, NYLIAC must by law withhold
such taxes from the taxable portion of any surrender or withdrawal. We will
remit that amount to the federal government. In addition, some states have
enacted legislation requiring withholding. We will pay all surrenders or
withdrawals within seven days of receipt of all documents (including documents
necessary to comply with federal and state tax law), subject to postponement in
certain circumstances. (See "Delay of Payments" at page 31.)
Since you assume the investment risk with respect to amounts allocated to
the Separate Account and because certain surrenders or withdrawals are subject
to a surrender charge and premium tax deduction, the total amount paid upon
surrender of the policy (taking into account any prior withdrawals) may be more
or less than the total premium payments made.
Surrenders and withdrawals may be taxable transactions, and the Internal
Revenue Code provides that a 10% penalty tax may be imposed on certain early
surrenders or withdrawals. (See "Federal Tax Matters--Taxation of Annuities in
General" at page 35.)
(a) Surrenders
We may deduct a surrender charge and any state premium tax, if applicable,
less any outstanding loan balance, and less the annual policy service charge, if
applicable, from the amount paid. We will pay the
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proceeds in a lump sum to you unless you elect a different Income Payment
method. (See "Income Payments" at page 31.) Surrenders may be taxable
transactions and the 10% penalty tax provisions may be applicable. (See "Federal
Tax Matters--Taxation of Annuities in General" at page 35.)
(b) Partial Withdrawals
The minimum amount that can be withdrawn is $500, unless we agree
otherwise. We will withdraw the amount from the Allocation Alternatives and/or
the DCA Advantage Plan Accounts (where available) in accordance with your
request. If you do not specify how to allocate a partial withdrawal among the
Allocation Alternatives and/or the DCA Advantage Plan Accounts (where
available), we will allocate the partial withdrawal on a pro-rata basis. Partial
withdrawals may be taxable transactions and the 10% penalty tax provisions may
be applicable. (See "Federal Tax Matters--Taxation of Annuities in General" at
page 35.)
If the requested partial withdrawal is greater than the value in any of the
Allocation Alternatives and/or the DCA Advantage Plan Accounts from which the
partial withdrawal is being made, we will pay the entire value of that
Allocation Alternative and/or the DCA Advantage Plan Accounts, less any
surrender charge that may apply, to you. We will not process partial withdrawal
requests if honoring such requests would result in an Accumulation Value of less
than $2,000.
(c) Periodic Partial Withdrawals
You may elect to receive regularly scheduled withdrawals from the policy.
These periodic partial withdrawals may be paid on a monthly, quarterly,
semi-annual, or annual basis. You will elect the frequency of the withdrawals
and the day of the month for the withdrawals to be made (may not be the 29th,
30th, or 31st of a month). We will make all withdrawals on the day of each
calendar month you specify, or on the next Business Day (if the day you have
specified is not a Business Day). You must specify the Investment Divisions
and/or Fixed Account from which the periodic withdrawals will be made. You may
make periodic partial withdrawals from the DCA Advantage Plan Accounts. The
minimum amount under this feature is $100, or such lower amount as we may
permit. Periodic partial withdrawals may be taxable transactions and the 10%
penalty tax provisions may be applicable. (See "Federal Tax Matters--Taxation of
Annuities in General" at page 35.) If you do not specify otherwise, we will
withdraw money on a pro-rata basis from each Investment Division and/or the
Fixed Account.
You can elect to receive "Interest Only" periodic partial withdrawals for
the interest earned on monies allocated to the Fixed Account. If this option is
chosen, the $100 minimum for periodic partial withdrawals will be waived.
However, you must have at least $5,000 in the Fixed Account at the time of each
periodic partial withdrawal, unless we agree otherwise. This option will void
the Fixed Account Initial Premium Guarantee, described at page 34.
(d) Hardship Withdrawals
Under certain Qualified Policies, the Plan Administrator may allow, in its
sole discretion, certain withdrawals it determines to be "Hardship Withdrawals."
The surrender charge and 10% penalty tax, if applicable, and provisions
applicable to partial withdrawals apply to Hardship Withdrawals.
REQUIRED MINIMUM DISTRIBUTION OPTION
For IRAs and IRA SEPs, the policy owner is generally not required to elect
the required minimum distribution option until April 1st of the year following
the calendar year he or she attains age 70 1/2. For TSAs, the policy owner is
generally not required to elect the required minimum distribution option until
April 1st of the year following the calendar year he or she attains age 70 1/2
or until April 1st of the year following the calendar year he or she retires,
whichever occurs later.
OUR RIGHT TO CANCEL
If we do not receive any premium payments for a period of two years, and
both the Accumulation Value of your policy and your total premium payments less
any withdrawals and surrender charges are less than $2,000, we reserve the right
to terminate your policy subject to any applicable state insurance law or
regulation. We will notify you of our intention to exercise this right and give
you 90 days to make a premium payment. If we terminate your policy, we will pay
you the Accumulation Value of your policy in one lump sum.
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is the date specified on the Policy Data
Page. The Annuity Commencement Date is the day that Income Payments are
scheduled to commence under the policy unless the policy has been surrendered or
an amount has been paid as proceeds to the designated Beneficiary prior
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<PAGE> 132
to that date. You may change the Annuity Commencement Date to an earlier date by
providing written notice to NYLIAC. You may defer the Annuity Commencement Date
to a later date if we agree to it, provided that we receive a written notice of
the request at least one month before the last selected Annuity Commencement
Date. The Annuity Commencement Date and Income Payment method for Qualified
Policies may also be controlled by endorsements, the plan, or applicable law.
DEATH BEFORE ANNUITY COMMENCEMENT
If you or the Annuitant dies prior to the Annuity Commencement Date, we
will pay an amount as proceeds to the designated Beneficiary, as of the date we
receive proof of death and all requirements necessary to make the payment. That
amount will be the greater of:
(a) the Accumulation Value, less any outstanding loan balance;
(b) the sum of all premium payments made, less any outstanding loan
balance, partial withdrawals and surrender charges on those withdrawals; or
(c) the most recently calculated "reset value" plus any additional premium
payments made, less any outstanding loan balance, less any withdrawals made
since the most recent Reset Anniversary and any surrender charges applicable to
such withdrawals.
We calculate the reset value, with respect to policies issued prior to May
19, 2000, every three years from the date of the initial premium payment ("Reset
Anniversary") until you or the Annuitant reaches age 85, unless otherwise
required by applicable state laws. For applications signed on or after May 19,
2000 (in states where approved), we calculate the reset value each year on the
Policy Anniversary. Please consult with your registered representative regarding
the reset value that is available under your particular policy. We calculate the
reset value on the Reset Anniversary based on a comparison between (a) the
current Reset Anniversary's Accumulation Value, and (b) the prior Reset
Anniversary's value, plus any premiums since the prior Reset Anniversary date,
less any partial withdrawals and surrender charges on those withdrawals since
the last Reset Anniversary date. The greater of the compared values will be the
new reset value.
We have set forth below an example of how the death benefit is calculated
in a state where we calculate the reset value every three years. In this
example, we have assumed the following:
(1) you purchase a policy with a $200,000 premium payment;
(2) the Accumulation Value is $250,000 in the second Policy Year;
(3) a $20,000 withdrawal is made prior to the policy's third Policy
Anniversary;
(4) the Accumulation Value is $220,000 on the third Policy Anniversary; and
(5) you die in the fourth Policy Year and the Accumulation Value of the
policy has decreased to $175,000.
The death benefit is the greater of:
<TABLE>
<S> <C> <C> <C>
(a) Accumulation Value = $175,000
(b) Premium payments less = $180,000 ($200,000 - $20,000)
any partial withdrawals; or
(c) Reset value (Accumulation Value = $220,000
on third Policy Anniversary)
</TABLE>
In this example, your Beneficiary(ies) would receive $220,000.
The formula guarantees that the amount we pay will at least equal the sum
of all premium payments (less any outstanding loan balance, partial withdrawals
and surrender charges on such partial withdrawals), independent of the
investment experience of the Separate Account. The Beneficiary may receive the
amount payable in a lump sum or under any life income payment option which is
then available. If more than one Beneficiary is named, each Beneficiary will be
paid a pro rata portion from each Allocation Alternative and any DCA Advantage
Plan Account in which the policy is invested as of the date we receive proof of
death and all requirements necessary to make the payment to that Beneficiary. We
will keep the remaining balance in the policy to pay the other Beneficiaries.
Due to market fluctuations, the remaining Accumulation Value may increase or
decrease and we may pay subsequent Beneficiaries a different amount.
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<PAGE> 133
We will make payments in a lump sum to the Beneficiary unless you have
elected or the Beneficiary elects otherwise in a signed written notice which
gives us the information that we need. If such an election is properly made, we
will apply all or part of these proceeds:
(i) under the Life Income Payment Option to provide an immediate
annuity for the Beneficiary who will be the policy owner and
Annuitant; or
(ii) under another Income Payment option we may offer at the time.
Payments under the annuity or under any other method of payment
we make available must be for the life of the Beneficiary, or for
a number of years that is not more than the life expectancy of
the Beneficiary at the time of the policy owner's death (as
determined for federal tax purposes), and must begin within one
year after the policy owner's death. (See "Income Payments"
below.)
If your spouse is the Beneficiary, we can pay the proceeds to the surviving
spouse if you die before the Annuity Commencement Date or the policy can
continue with the surviving spouse as (a) the new policy owner, and, (b) if you
were the Annuitant, as the Annuitant. Generally, NYLIAC will not issue a policy
to joint owners. However, if NYLIAC makes an exception and issues a jointly
owned policy, ownership rights and privileges under the policy must be exercised
jointly and benefits under the policy will be paid upon the death of any joint
owner. (See "Federal Tax Matters--Taxation of Annuities in General" at page 35.)
If the Annuitant and, where applicable under another Income Payment option,
the Joint Annuitant, if any, die after the Annuity Commencement Date, NYLIAC
will pay the sum required by the Income Payment option in effect.
We will make any distribution or application of policy proceeds within 7
days after NYLIAC receives all documents (including documents necessary to
comply with federal and state tax law) in connection with the event or election
that causes the distribution to take place, subject to postponement in certain
circumstances. (See "Delay of Payments" below.)
INCOME PAYMENTS
(a) Election of Income Payment Options
We will make Income Payments under the Life Income Payment Option or under
such other option we may offer at that time where permitted by state laws. We
will require that a lump sum payment be made if the Accumulation Value is less
than $2,000. At any time before the Annuity Commencement Date, you may change
the Income Payment option or request any other method of payment we agree to. If
the Life Income Payment Option is chosen, we may require proof of birth date
before Income Payments begin. For Income Payment options involving life income,
the actual age of the Annuitant will affect the amount of each payment. Since
payments based on older Annuitants are expected to be fewer in number, the
amount of each annuity payment should be greater. We will make payments under
the Life Income Payment Option in the same specified amount and over the life of
the Annuitant with a guarantee of 10 years of payments, even if the Annuitant
dies sooner. NYLIAC does not currently offer variable Income Payment options.
Under Income Payment options involving life income, the payee may not
receive Income Payments equal to the total premium payments if the Annuitant
dies before the actuarially predicted date of death. We base Income Payment
Options involving life income on annuity tables that vary on the basis of sex,
unless the policy was issued under an employer sponsored plan or in a state
which requires unisex rates.
(b) Other Methods of Payment
If NYLIAC agrees, you (or the Beneficiary upon the death of you or the
Annuitant prior to the Annuity Commencement Date) may choose to have Income
Payments made under some other method of payment or in a lump sum.
(c) Proof of Survivorship
We may require satisfactory proof of survival, from time to time before we
pay any Income Payments or other benefits. We will request the proof at least 30
days prior to the next scheduled payment date.
DELAY OF PAYMENTS
We will pay any amounts due from the Separate Account under the policy
within seven days of the date NYLIAC receives all documents (including documents
necessary to comply with federal and state tax law) in connection with a request
unless:
1. The New York Stock Exchange ("NYSE") is closed for other than usual
weekends or holidays, or trading on the NYSE is otherwise
restricted;
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<PAGE> 134
2. An emergency exists as defined by the Securities and Exchange
Commission ("SEC");
3. The SEC permits a delay for the protection of security holders; or
4. The check used to pay the premium has not cleared through the
banking system. This may take up to 15 days.
For the same reasons, we will delay transfers from the Separate Account to
the Fixed Account.
We may also delay payments of any amount due from the Fixed Account and/or
any DCA program. When permitted by law, we may defer payment of any partial or
full surrender request for up to six months from the date of surrender from the
Fixed Account and/or any DCA Program. We will pay interest of at least 3.5% per
year on any partial or full surrender request deferred for 30 days or more.
DESIGNATION OF BENEFICIARY
You may select one or more Beneficiaries and name them in the application.
Thereafter, before the Annuity Commencement Date and while the Annuitant is
living, you may change the Beneficiary by written notice to NYLIAC. If before
the Annuity Commencement Date, the Annuitant dies before you and no Beneficiary
for the proceeds or for a stated share of the proceeds survives, the right to
the proceeds or shares of the proceeds passes to you. If you are the Annuitant,
the proceeds pass to your estate. However, if the policy owner who is not the
Annuitant dies before the Annuity Commencement Date, and no Beneficiary for the
proceeds or for a stated share of the proceeds survives, the right to the
proceeds or shares of the proceeds passes to the policy owner's estate.
RESTRICTIONS UNDER INTERNAL REVENUE CODE SECTION 403(B)(11)
Distributions attributable to salary reduction contributions made in years
beginning after December 31, 1988 (including the earnings on these
contributions), as well as to earnings in such years on salary reduction
accumulations held as of the end of the last year beginning before January 1,
1989, may not begin before the employee attains age 59 1/2, separates from
service, dies or becomes disabled. The plan may also provide for distribution in
the case of hardship. However, hardship distributions are limited to amounts
contributed by salary reduction. The earnings on such amounts may not be
withdrawn. Even though a distribution may be permitted under these rules (e.g.
for hardship or after separation from service), it may still be subject to a 10%
additional income tax as a premature distribution.
Under the terms of your plan, you may have the option to invest in other
403(b) funding vehicles, including 403(b)(7) custodial accounts. You should
consult your plan document to make this determination.
LOANS
Loans are available only if you have purchased your policy in connection
with a 403(b) plan and may not be available in all states for plans subject to
the Employee Retirement Income Security Act of 1974 ("ERISA"). Under your 403(b)
policy, you may borrow against your policy's Accumulation Value after the first
Policy Year and prior to the Annuity Commencement Date. Unless we agree
otherwise, only one loan may be outstanding at a time. There must be a minimum
accumulation value of $5,000 in the contract at the time of the loan. The
minimum loan amount is $500. The maximum loan that you may take is the lesser
of: (a) 50% of the policy's Accumulation Value on the date of the loan or (b)
$50,000. We withdraw a loan processing fee of $25 from the Accumulation Value on
a pro rata basis, unless prohibited by applicable state law or regulation. If on
the date of the loan you do not have a Fixed Accumulation Value equal to at
least 125% (110% in New York) of the loan amount, we will transfer sufficient
Accumulation Value from the Investment Divisions and/or any DCA Advantage Plan
Accounts on a pro rata basis so that the Fixed Accumulation Value equals 125%
(110% in New York) of the loan amount. While a loan is outstanding, you may not
make partial withdrawals or transfers which would reduce the Fixed Accumulation
Value to an amount less than 125% (110% in New York) of the outstanding loan
balance.
For plans not subject to ERISA, the interest rate paid by the policy owner
of the loan will equal 5%. We will credit the assets being held in the Fixed
Account to secure the loan with the minimum guaranteed interest rate of 3%. For
plans subject to ERISA, we will apply the interest charged on the loan at the
then current prime rate at the beginning of the calendar year, plus 1%. We will
credit the money being held in the Fixed Account to secure the loan with a rate
of interest that is the prime rate less 1%, but will always be at least equal to
the minimum guaranteed interest rate of 3%. For all plans, we will assess
interest in arrears as part of the periodic loan repayments.
You must repay the loan on a periodic basis at a frequency not less
frequently than quarterly and over a period not greater than five years from the
date it is taken. If a loan repayment is in default, we will withdraw
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<PAGE> 135
the amount in default from the Fixed Accumulation value to the extent permitted
by federal income tax rules. We will take such a repayment on a first-in,
first-out (FIFO) basis from amounts allocated to the Fixed Account.
We permit loans to acquire a principal residence under the same terms
described above, except that:
(a) the minimum loan amount is $5,000; and
(b) repayment of the loan amount may be extended to a maximum of
twenty-five years.
We deduct any outstanding loan balance including any accrued interest from
the Fixed Accumulation Value prior to payment of a surrender or the commencement
of the annuity benefits. On death of the policy owner or Annuitant, we deduct
any outstanding loan balance from the Fixed Accumulation Value as a partial
withdrawal as of the date we receive the notice of death.
Loans are subject to the terms of the policy, your 403(b) plan and the
Internal Revenue Code, which may impose restrictions upon them. We reserve the
right to suspend, modify, or terminate the availability of loans under this
policy at any time. However, any action taken by us will not affect already
outstanding loans.
RIDERS
At no additional charge, we include two riders under the policy: an
Unemployment Benefit Rider, for Non-Qualified, IRA and Roth IRA policies, and a
Living Needs Benefit Rider, for all types of policies. Both riders provide for
an increase in the amount that can be withdrawn from your policy which will not
be subject to a surrender charge upon the happening of certain qualifying
events. The riders are only available in those states where they have been
approved.
(a) Living Needs Benefit Rider
If the Annuitant enters a nursing home, becomes terminally ill or disabled,
you may be eligible to receive all or a portion of the Accumulation Value
without paying a surrender charge. The policy must have been inforce for at
least one year and have a minimum Accumulation Value of $5,000. You must also
provide us with proof that the Annuitant has spent 60 or more consecutive days
in a nursing home. Withdrawals will be taxable to the extent of gain and, prior
to age 59 1/2, may be subject to a 10% IRS penalty. This rider is in effect in
all states where approved.
(b) Unemployment Benefit Rider
For all Non-Qualified, IRA and Roth IRA policies, if you become unemployed,
you may be eligible to increase the amount that can be withdrawn from your
policy up to 50% without paying surrender charges. This rider can only be used
once. The policy must have been inforce for at least one year and have a minimum
Accumulation Value of $5,000. You also must have been unemployed for at least 60
consecutive days. Withdrawals may be taxable transactions and, prior to age
59 1/2, may be subject to a 10% IRS penalty. This rider is in effect in all
states where approved. To apply for this benefit, you must submit a
determination letter from the applicable state's Department of Labor indicating
that you qualify for and are receiving unemployment benefits.
THE FIXED ACCOUNT
The Fixed Account is supported by the assets in NYLIAC's general account,
which includes all of NYLIAC's assets except those assets specifically allocated
to NYLIAC's separate accounts. NYLIAC has sole discretion to invest the assets
of the Fixed Account subject to applicable law. The Fixed Account is not
registered under the federal securities laws and is not generally subject to
their provisions. Furthermore, the staff of the Securities and Exchange
Commission has not reviewed the disclosures in this Prospectus relating to the
Fixed Account. These disclosures regarding the Fixed Account may be subject to
certain applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
(a) Interest Crediting
NYLIAC guarantees that it will credit interest at an effective rate of at
least 3% to amounts allocated or transferred to the Fixed Account under the
policies We credit interest on a daily basis. We will set an interest rate in
advance periodically. All premium payments allocated to, or amounts transferred
to, the Fixed Account will receive the rate in effect for the period during
which the allocation or transfer is made, until the end of the Policy Year.
Thereafter, the rate applicable to those amounts will change on each Policy
Anniversary. The new rate will be the rate in effect on the date on which the
Policy Anniversary occurs.
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(b) Transfers to Investment Divisions
You may transfer amounts from the Fixed Account to the Investment Divisions
up to 30 days prior to the Annuity Commencement Date, subject to the following
conditions.
1. The maximum amount you are allowed to transfer from the Fixed
Account to the Investment Divisions during any Policy Year is 20% of the
Fixed Accumulation Value at the beginning of the Policy Year.
2. The minimum amount that you may transfer from the Fixed Account to
the Investment Divisions is the lesser of (i) $500 or (ii) the Fixed
Accumulation Value, unless we agree otherwise. Additionally, the remaining
values in the Fixed Account must be at least $500. If, after a contemplated
transfer, the remaining values in the Fixed Account would be less than
$500, that amount must be included in the transfer, unless NYLIAC in its
discretion determines otherwise. We determine amounts transferred from the
Fixed Account on a first-in, first-out ("FIFO") basis, for purposes of
determining the rate at which we credit interest on monies remaining in the
Fixed Account.
Except as part of an existing request relating to the traditional Dollar
Cost Averaging option, the Interest Sweep option or any DCA Advantage Plan, you
may not transfer money into the Fixed Account if you made a transfer out of the
Fixed Account during the previous six-month period.
You must make transfer requests in writing on a form approved by NYLIAC or
by telephone in accordance with established procedures. See "Procedures for
Telephone Transfers" at page 22.
We will deduct partial withdrawals and apply any surrender charges to the
Fixed Account on a FIFO basis (i.e., from any value in the Fixed Account
attributable to premium payments or transfers from Investment Divisions in the
same order in which you allocated such payments or transfers to the Fixed
Account during the life of the policy). NYLIAC will also determine such partial
withdrawals on a FIFO basis, for purposes of determining the rate at which
interest will be credited on any monies remaining in the Fixed Account.
(c) Fixed Account Initial Premium Guarantee
NYLIAC guarantees that upon any surrender of a policy which occurs within
the first three Policy Years, or (the lifetime of the policy for applications
signed on or after May 19, 2000 in states where approved) you will receive an
amount equal to at least that portion of the initial premium payment which was
initially allocated to the Fixed Account. However, this guarantee will not apply
if you transfer any amount out of the Fixed Account (except transfers made under
the Interest Sweep option) or make any partial withdrawals from the Fixed
Account or a DCA Account.
See the policy itself for details and a description of the Fixed Account.
THE DCA ADVANTAGE PLAN ACCOUNTS
Like the Fixed Account, the DCA Advantage Plan Accounts are also supported
by the assets in NYLIAC's general account. The DCA Advantage Plan Accounts are
not registered under the federal securities laws. The information contained in
the first paragraph under "The Fixed Account" on page 35, equally applies to the
DCA Advantage Plan Accounts.
NYLIAC will set interest rates in advance for each date on which we may
receive a premium payment to a DCA Advantage Plan Account. We will never declare
less than a 3% annual effective rate. Premium payments into a DCA Advantage Plan
Account will receive the applicable interest rate in effect on the Business Day
we receive the premium payment. Interest rates for subsequent premium payments
made into the same DCA Advantage Plan Account may be different from the rate
applied to prior premium payments made into the DCA Advantage Plan Account.
The annual effective rate that we declare is credited only to amounts
remaining in a DCA Advantage Plan Account. We credit the interest on a daily
basis. Because money is periodically transferred out of the DCA Advantage Plan
Account, amounts in the DCA Advantage Plan Account will not achieve the declared
annual effective rate.
FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. The
Qualified Policies are designed for use by individuals in retirement plans which
are intended to qualify as plans qualified for special income tax treatment
under Sections 219, 403, 408, 408A or 457 of the Code. The ultimate effect of
federal
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<PAGE> 137
income taxes on the Accumulation Value, on Income Payments and on the economic
benefit to you, the Annuitant or the Beneficiary depends on the type of
retirement plan for which the Qualified Policy is purchased, on the tax and
employment status of the individual concerned and on NYLIAC's tax status. The
following discussion assumes that Qualified Policies are used in retirement
plans that qualify for the special federal income tax treatment described above.
This discussion is not intended to address the tax consequences resulting from
all of the situations in which a person may be entitled to or may receive a
distribution under a policy. Any person concerned about these tax implications
should consult a competent tax adviser before making a premium payment. This
discussion is based upon NYLIAC's understanding of the present federal income
tax laws as they are currently interpreted by the Internal Revenue Service. We
cannot predict the likelihood of continuation of the present federal income tax
laws or of the current interpretations by the Internal Revenue Service, which
may change from time to time without notice. Any such change could have
retroactive effects regardless of the date of enactment. Moreover, this
discussion does not take into consideration any applicable state or other tax
laws except with respect to the imposition of any state premium taxes. We
suggest you consult with your tax adviser.
TAXATION OF ANNUITIES IN GENERAL
The following discussion assumes that the policies will qualify as annuity
contracts for federal income tax purposes. The Statement of Additional
Information discusses such qualifications.
Section 72 of the Code governs taxation of annuities in general. NYLIAC
believes that an annuity policy owner generally is not taxed on increases in the
value of a policy until distribution occurs either in the form of a lump sum
received by withdrawing all or part of the Accumulation Value (i.e., surrenders
or partial withdrawals) or as Income Payments under the Income Payment option
elected. The exception to this rule is that generally, a policy owner of any
deferred annuity policy who is not a natural person must include in income any
increase in the excess of the policy owner's Accumulation Value over the policy
owner's investment in the contract during the taxable year. However, there are
some exceptions to this exception. You may wish to discuss these with your tax
counsel. The taxable portion of a distribution (in the form of an annuity or
lump sum payment) is generally taxed as ordinary income. For this purpose, the
assignment, pledge, or agreement to assign or pledge any portion of the
Accumulation Value generally will be treated as a distribution.
In the case of a withdrawal or surrender distributed to a participant or
Beneficiary under a Qualified Policy (other than a Qualified Policy used in a
retirement plan that qualifies for special federal income tax treatment under
Section 457 of the Code as to which there are special rules), a ratable portion
of the amount received is taxable, generally based on the ratio of the
investment in the contract to the total policy value. The "investment in the
contract" generally equals the portion, if any, of any premium payments paid by
or on behalf of an individual under a policy which is not excluded from the
individual's gross income. For policies issued in connection with qualified
plans, the "investment in the contract" can be zero. The law requires the use of
special simplified methods to determine the taxable amount of payments that are
based in whole or in part on the Annuitant's life and that are paid from
qualified retirement plans under Section 401(a) and from qualified annuities and
Tax Sheltered Annuities under Sections 403(a) and 403(b).
Generally, in the case of a withdrawal under a Non-Qualified Policy before
the Annuity Commencement Date, amounts received are first treated as taxable
income to the extent that the Accumulation Value immediately before the
withdrawal exceeds the "investment in the contract" at that time. Any additional
amount withdrawn is not taxable.
Although the tax consequences may vary depending on the Income Payment
option elected under the policy, in general, only the portion of the Income
Payment that represents the amount by which the Accumulation Value exceeds the
"investment in the contract" will be taxed. After the investment in the policy
is recovered, the full amount of any additional Income Payments is taxable. For
fixed Income Payments, in general, there is no tax on the portion of each
payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the Income Payments for the term of the
payments. However, the remainder of each Income Payment is taxable until the
recovery of the investment in the contract, and thereafter the full amount of
each annuity payment is taxable. If death occurs before full recovery of the
investment in the contract, the unrecovered amount may be deducted on the
annuitant's final tax return.
In the case of a distribution, a penalty tax equal to 10% of the amount
treated as taxable income may be imposed. The penalty tax is not imposed in
certain circumstances, including, generally, distributions: (1) made on or after
the date on which the taxpayer is actual age 59 1/2, (2) made as a result of the
policy owner's or
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Annuitant's death or disability, or (3) received in substantially equal
installments paid at least annually as a life annuity. Other tax penalties may
apply to certain distributions pursuant to a Qualified Policy.
All non-qualified, deferred annuity contracts issued by NYLIAC (or its
affiliates) to the same policy owner during any calendar year are to be treated
as one annuity contract for purposes of determining the amount includable in an
individual's gross income. In addition, there may be other situations in which
the Treasury Department may conclude (under its authority to issue regulations)
that it would be appropriate to aggregate two or more annuity contracts
purchased by the same policy owner. Accordingly, a policy owner should consult a
competent tax adviser before purchasing more than one policy or other annuity
contract.
A transfer of ownership of a policy, or designation of an Annuitant or
other Beneficiary who is not also the policy owner, may result in certain income
or gift tax consequences to the policy owner. A policy owner contemplating any
transfer or assignment of a policy should contact a competent tax adviser with
respect to the potential tax effects of such a transaction.
QUALIFIED PLANS
The Qualified Policy is designed for use with several types of qualified
plans. The tax rules applicable to participants and beneficiaries in such
qualified plans vary according to the type of plan and the terms and conditions
of the plan itself. Special favorable tax treatment may be available for certain
types of contributions and distributions (including special rules for certain
lump sum distributions to individuals who attained the age of 50 by January 1,
1986). Adverse tax consequences may result from contributions in excess of
specified limits, distributions prior to age 59 1/2 (subject to certain
exceptions), distributions that do not conform to specified minimum distribution
rules and in certain other circumstances. Therefore, this discussion only
provides general information about use of the policies with the various types of
qualified plans. Policy owners and participants under qualified plans as well as
Annuitants and Beneficiaries are cautioned that the rights of any person to any
benefits under qualified plans may be subject to the terms and conditions of the
plans themselves, regardless of the terms and conditions of the policy issued in
connection with the plan. Purchasers of policies for use with any qualified plan
should seek competent legal and tax advice regarding the suitability of the
policy.
(a) Section 403(b) Plans. Under Section 403(b) of the Code, payments
made by public school systems and certain tax exempt organizations to
purchase annuity policies for their employees are excludable from the gross
income of the employee, subject to certain limitations. However, such
payments may be subject to FICA (Social Security) taxes.
(b) Individual Retirement Annuities. Sections 219 and 408 of the Code
permit individuals or their employers to contribute to an individual
retirement program known as an "Individual Retirement Annuity" or "IRA",
including an employer-sponsored Simplified Employee Pension or "SEP".
Individual Retirement Annuities are subject to limitations on the amount
which may be contributed and deducted and the time when distributions may
commence. In addition, distributions from certain other types of qualified
plans may be placed into Individual Retirement Annuities on a tax-deferred
basis.
(c) Roth Individual Retirement Annuities. Section 408A of the Code
permits individuals with incomes below a certain level to contribute to an
individual retirement program known as a "Roth Individual Retirement
Annuity" or "Roth IRA." Roth IRAs are subject to limitations on the amount
that may be contributed. Contributions to Roth IRAs are not deductible, but
distributions from Roth IRAs that meet certain requirements are not
included in gross income. Certain individuals are eligible to convert their
existing non-Roth IRAs into Roth IRAs. They will be subject to income tax
at the time of conversion.
(d) Deferred Compensation Plans. Section 457 of the Code, while not
actually providing for a qualified plan as that term is normally used,
provides for certain deferred compensation plans with respect to service
for state governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities and tax exempt
organizations which enjoy special treatment. The policies can be used with
such plans. Under such plans, a participant may specify the form of
investment in which his or her participation will be made. Such investments
are generally owned by, and are subject to, the claims of the general
creditors of the sponsoring employer, except that Section 457 plans of
state and local government must be held and used for the exclusive benefit
of participants and beneficiaries in a trust or annuity contract.
DISTRIBUTOR OF THE POLICIES
NYLIFE Distributors Inc. ("NYLIFE Distributors"), 51 Madison Avenue, New
York, New York 10010, is the principal underwriter and the distributor of the
policies. It is an indirect wholly-owned subsidiary of New York Life. The
maximum commission typically paid to broker-dealers who have entered into dealer
agreements with
36
<PAGE> 139
NYLIFE Distributors is 6.5%. A portion of this amount will be paid as
commissions to registered representatives.
VOTING RIGHTS
The Funds are not required to and typically do not hold routine annual
stockholder meetings. Special stockholder meetings will be called when
necessary. To the extent required by law, NYLIAC will vote the Eligible
Portfolio shares held in the Investment Divisions at special stockholder
meetings of the Funds in accordance with instructions we receive from persons
having voting interests in the corresponding Investment Divisions. If, however,
the federal securities laws are amended, or if NYLIAC's present interpretation
should change, and as a result, NYLIAC determines that it is allowed to vote the
Eligible Portfolio shares in its own right, we may elect to do so.
Prior to the Annuity Commencement Date, you hold a voting interest in each
Investment Division to which you have money allocated. We will determine the
number of votes which are available to you by dividing the Accumulation Value
attributable to an Investment Division by the net asset value per share of the
applicable Eligible Portfolios. We will calculate the number of votes which are
available to you separately for each Investment Division. We will determine that
number by applying your percentage interest, if any, in a particular Investment
Division to the total number of votes attributable to the Investment Division.
We will determine the number of votes of the Eligible Portfolio which are
available as of the date established by the Portfolio of the relevant Fund.
Voting instructions will be solicited by written communication prior to such
meeting in accordance with procedures established by the relevant Fund.
If we do not receive timely instructions, we will vote those shares in
proportion to the voting instructions which are received with respect to all
policies participating in that Investment Division. We will apply voting
instructions to abstain on any item to be voted upon on a pro rata basis to
reduce the votes eligible to be cast. Each person having a voting interest in an
Investment Division will receive proxy material, reports and other materials
relating to the appropriate Eligible Portfolio.
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<PAGE> 140
TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
The SAI contains more details concerning the subjects discussed in this
Prospectus. The following is the Table of Contents for the SAI:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE POLICIES................................................ 2
INVESTMENT PERFORMANCE CALCULATIONS......................... 2
ANNUITY PAYMENTS............................................ 4
GENERAL MATTERS............................................. 4
FEDERAL TAX MATTERS......................................... 4
DISTRIBUTOR OF THE POLICIES................................. 5
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS...................... 6
STATE REGULATION............................................ 6
RECORDS AND REPORTS......................................... 6
LEGAL PROCEEDINGS........................................... 6
EXPERTS..................................................... 6
OTHER INFORMATION........................................... 6
FINANCIAL STATEMENTS........................................ F-1
</TABLE>
How to obtain a New York Life LifeStages(R) Variable Annuity Statement of
Additional Information.
Call (800) 598-2019 or send this request form to:
NYLIAC Variable Products Service Center
Madison Square Station
P.O. Box 922
New York, NY 10159
- -------------------------------------------------------------------------------
Please send me a New York Life LifeStages(R) Variable Annuity Statement
of Additional Information dated May 1, 2000:
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip
38
<PAGE> 141
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
FOR
NEW YORK LIFE LIFESTAGES(R) VARIABLE ANNUITY
FROM
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
INVESTING IN
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
This Statement of Additional Information ("SAI") is not a prospectus. The
SAI contains information that expands upon subjects discussed in the current New
York Life LifeStages(R) Variable Annuity Prospectus. You should read the SAI in
conjunction with the current New York Life LifeStages(R) Variable Annuity
Prospectus dated May 1, 2000. You may obtain a copy of the Prospectus by calling
New York Life Insurance and Annuity Corporation ("NYLIAC") at (800) 598-2019 or
writing to NYLIAC at 51 Madison Avenue, Room 452, New York, New York 10010.
Terms used but not defined in this SAI have the same meaning as in the current
New York Life LifeStages(R) Variable Annuity Prospectus.
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE POLICIES (19)........................................... 2
Valuation of Accumulation Units (23)................... 2
INVESTMENT PERFORMANCE CALCULATIONS......................... 2
MainStay VP Cash Management Investment Division........ 2
MainStay VP Government, MainStay VP High Yield
Corporate Bond and MainStay VP Bond Investment
Division Yields...................................... 3
ANNUITY PAYMENTS............................................ 4
GENERAL MATTERS............................................. 4
FEDERAL TAX MATTERS (31).................................... 4
Taxation of New York Life Insurance and Annuity
Corporation.......................................... 4
Tax Status of the Policies............................. 5
DISTRIBUTOR OF THE POLICIES................................. 5
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS...................... 6
STATE REGULATION............................................ 6
RECORDS AND REPORTS......................................... 6
LEGAL PROCEEDINGS........................................... 6
EXPERTS..................................................... 6
OTHER INFORMATION........................................... 6
FINANCIAL STATEMENTS........................................ F-1
</TABLE>
- ------------
* (Numbers in parentheses refer to page numbers of corresponding sections of the
current New York Life LifeStages(R) Variable Annuity Prospectus.)
<PAGE> 142
THE POLICIES
The following provides additional information about the policies and
supplements the description in the Prospectus.
VALUATION OF ACCUMULATION UNITS
Accumulation Units are valued separately for each Investment Division of
the Separate Account. The method used for valuing Accumulation Units in each
Investment Division is the same. We arbitrarily set the value of each
Accumulation Unit as of the date operations began for the Investment Division.
Thereafter, the value of an Accumulation Unit of an Investment Division for any
Business Day equals the value of an Accumulation Unit in that Investment
Division as of the immediately preceding Business Day multiplied by the "Net
Investment Factor" for that Investment Division for the current Business Day.
We determine the Net Investment Factor for each Investment Division for any
period from the close of the preceding Business Day to the close of the current
Business Day (the "Valuation Period") is determined by the following formula:
(a/b)-c
Where: a= the result of:
(1) the net asset value per share of the Eligible Portfolio shares
held in the Investment Division determined at the end of the
current Valuation Period, plus
(2) the per share amount of any dividend or capital gain
distribution made by the Eligible Portfolio for shares held in
the Investment Division if the "ex-dividend" date occurs during
the current Valuation Period;
b= is the net asset value per share of the Eligible Portfolio shares
held in the Investment Division determined as of the end of the immediately
preceding Valuation Period; and
c= is a factor representing the charges deducted from the applicable
Investment Division on a daily basis. Such factor is equal, on an annual
basis, to 1.40% of the daily net asset value of the Separate Account. (See
"Other Charges" at page 27 of the Prospectus.)
The Net Investment Factor may be greater or less than one. Therefore, the
value of an Accumulation Unit in an Investment Division may increase or decrease
from Valuation Period to Valuation Period.
INVESTMENT PERFORMANCE CALCULATIONS
MAINSTAY VP CASH MANAGEMENT INVESTMENT DIVISION
NYLIAC calculates the MainStay VP Cash Management Investment Division's
current annualized yield for a seven-day period in a manner which does not take
into consideration any realized or unrealized gains or losses on shares of the
MainStay VP Cash Management Portfolio or on its portfolio securities. This
current annualized yield is computed by determining the net change (exclusive of
realized gains and losses on the sale of securities and unrealized appreciation
and depreciation) in the value of a hypothetical account having a balance of one
unit of the MainStay VP Cash Management Investment Division at the beginning of
such seven-day period, dividing such net change in account value by the value of
the account at the beginning of the period to determine the base period return
and annualizing this quotient on a 365-day basis. The net change in account
value reflects the deductions for the administration fee and the mortality and
expense risk charge and income and expenses accrued during the period. Because
of these deductions, the yield for the MainStay VP Cash Management Division will
be lower than the yield for the MainStay VP Cash Management Portfolio.
NYLIAC also calculates the effective yield of the MainStay VP Cash
Management Investment Division for the same seven-day period on a compounded
basis. The effective yield is calculated by compounding the unannualized base
period return by adding one to the base period return, raising the sum to a
power equal to 365 divided by 7, and subtracting one from the result.
The yield on amounts held in the MainStay VP Cash Management Investment
Division normally will fluctuate on a daily basis. Therefore, the disclosed
yield for any given past period is not an indication or representation of future
yields or rates of return. The MainStay VP Cash Management Investment Division's
actual yield is affected by changes in interest rates on money market
securities, average portfolio maturity of the MainStay VP Cash Management
Portfolio, the types and quality of portfolio securities held by the MainStay VP
Cash Management Portfolio, and its operating expenses.
2
<PAGE> 143
MAINSTAY VP GOVERNMENT, MAINSTAY VP HIGH YIELD CORPORATE BOND AND MAINSTAY
VP BOND INVESTMENT DIVISION YIELDS
The current annualized yield of the MainStay VP Government, MainStay VP
High Yield Corporate Bond and MainStay VP Bond Investment Divisions refers to
the income generated by these Investment Divisions over a specified 30-day
period. Because the yield is annualized, the yield generated by an Investment
Division during the 30-day period is assumed to be generated each 30-day period.
We compute the yield by dividing the net investment income per accumulation unit
earned during the period by the price per unit on the last day of the period,
according to the following formula:
YIELD = 2[(a-b+1)(6)-1]
---
cd
Where: a = net investment income earned during the period by the Portfolio
attributable to shares owned by the MainStay VP Government, MainStay
VP High Yield Corporate Bond or MainStay VP Bond Investment Division.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of accumulation units outstanding during
the period.
d = the maximum offering price per accumulation unit on the last day of
the period.
Accrued expenses will include all recurring fees that are charged to all
policy owner accounts. The yield calculations do not reflect the effect of any
surrender charges that may be applicable to a particular policy. Surrender
charges range from 7% to 0% of the premium payments withdrawn depending on the
elapsed time since the relevant premium payment was made.
Because of the charges and deductions imposed by the Separate Account the
yield for the Investment Divisions will be lower than the yield for the
corresponding Portfolio of the Fund. The yield on amounts held in the Investment
Divisions normally will fluctuate over time. Therefore, the disclosed yield for
any given past period is not an indication or representation of future yields or
rates of return. The MainStay VP Government, MainStay VP High Yield Corporate
Bond or MainStay VP Bond Investment Division's actual yield will be affected by
the types and quality of portfolio securities held by the MainStay VP
Government, MainStay VP High Yield Corporate Bond and MainStay VP Bond
Portfolios of the Fund and their operating expenses.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return quotations for
the Investment Divisions are computed by finding the average annual compounded
rates of return over the periods shown that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P(1+T)(n) = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one, five, or ten-year period or the inception date,
at the end of the one, five or ten-year period (or fractional portion
thereof).
All total return figures are prepared under methods the SEC requires when
advertising performance information. For periods beginning on or after the dates
when the Investment Divisions started operations, the average annual total
return (if surrendered) figures may be referred to as "standardized"
performance. For periods before the dates when the Investment Divisions started
operations, the figures are considered "non-standardized". The average annual
total return (no surrender) figures are all considered "non-standardized".
Performance data for the Investment Divisions may be compared, in
advertisements, sales literature and reports to shareholders, to: (i) the
investment returns on various mutual funds, stocks, bonds, certificates of
deposit, tax free bonds, or common stock and bond indexes; and (ii) other groups
of variable annuity separate accounts or other investment products tracked by
Lipper Analytical Services, a widely used independent research firm which ranks
mutual funds and other investment companies by overall performance, 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:
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<PAGE> 144
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.
ANNUITY PAYMENTS
We will make equal annuity payments each month under the Life Income
Payment Option during the lifetime of the Annuitant. Once payments begin, they
do not change and are guaranteed for 10 years even if the Annuitant dies sooner.
If the Annuitant dies before all guaranteed payments have been made, the rest
will be made to the Beneficiary. We may require that the payee submit proof of
the Annuitant's survivorship as a condition for future payments beyond the
10-year guaranteed payment period.
On the Annuity Commencement Date, we will determine the Accumulation Value
of your policy and use that value to calculate the amount of each annuity
payment. We determine each annuity payment by applying the Accumulation Value,
less any premium taxes, to the annuity factors specified in the annuity table
set forth in the policy. Those factors are based on a set amount per $1,000 of
proceeds applied. The appropriate rate must be determined by the sex (except
where, as in the case of certain Qualified Policies and other employer-sponsored
retirement plans, such classification is not permitted), date of application and
age of the Annuitant. The dollars applied are then divided by 1,000 and the
result multiplied by the appropriate annuity factor from the table to compute
the amount of each monthly annuity payment.
GENERAL MATTERS
NON-PARTICIPATING. The policies are non-participating. Dividends are not
paid.
MISSTATEMENT OF AGE OR SEX. If the Annuitant's stated age and/or sex in
the policy are incorrect, NYLIAC will change the benefits payable to those which
the premium payments would have purchased for the correct age and sex. Sex is
not a factor when annuity benefits are based on unisex annuity payment rate
tables. (See "Income Payments--Election of Income Payment Options" at page 31 of
the Prospectus.) If we made payments based on incorrect age or sex, we will
increase or reduce a later payment or payments to adjust for the error. Any
adjustment will include interest, at 3.5% per year, from the date of the wrong
payment to the date the adjustment is made.
ASSIGNMENTS. If permitted by the plan or by law for the plan indicated in
the application for the policy, you may assign a Non-Qualified Policy or any
interest in it prior to the Annuity Commencement Date and during the Annuitant's
lifetime. NYLIAC will not be deemed to know of an assignment unless it receives
a copy of a duly executed instrument evidencing such assignment. Further, NYLIAC
assumes no responsibility for the validity of any assignment. (See "Federal Tax
Matters--Taxation of Annuities in General" at page 35 of the Prospectus.)
MODIFICATION. NYLIAC may not modify the policy without your consent except
to make the policy meet the requirements of the Investment Company Act of 1940,
or to make the policy comply with any changes in the Internal Revenue Code or as
required by the Code in order to continue treatment of the policy as an annuity,
or by any other applicable law.
INCONTESTABILITY. We rely on statements made in the application. They are
representations, not warranties. We will not contest the policy after it has
been in force during the lifetime of the Annuitant for two years from the Policy
Date.
FEDERAL TAX MATTERS
TAXATION OF NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
NYLIAC is taxed as a life insurance company. Because the Separate Account
is not an entity separate from NYLIAC, and its operations form a part of NYLIAC,
it will not be taxed separately as a "regulated investment company" under
Subchapter M of the Code. Investment income and realized net capital gains on
the assets of the Separate Account are reinvested and are taken into account in
determining the Accumulation Value. As a result, such investment income and
realized net capital gains are automatically retained as part of the reserves
under the policy. Under existing federal income tax law, NYLIAC believes that
Separate Account investment income and realized net capital gains should not be
taxed to the extent that such income and gains are retained as part of the
reserves under the policy.
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<PAGE> 145
TAX STATUS OF THE POLICIES
Section 817(h) of the Code requires that the investments of the Separate
Account must be "adequately diversified" in accordance with Treasury regulations
in order for the policies to qualify as annuity contracts under Section 72 of
the Code. The Separate Account intends to comply with the diversification
requirements prescribed by the Treasury under Treasury Regulation Section
1.817-5.
To comply with regulations under Section 817(h) of the Code, the Separate
Account is required to diversify its investments, so that on the last day of
each quarter of a calendar year, no more than 55% of the value of its assets is
represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments, and no
more than 90% is represented by any four investments. For this purpose,
securities of a single issuer are treated as one investment and each U.S.
Government agency or instrumentality is treated as a separate issuer. Any
security issued, guaranteed, or insured (to the extent so guaranteed or insured)
by the U.S. Government or an agency or instrumentality of the U.S. Government is
treated as a security issued by the U.S. Government or its agency or
instrumentality, whichever is applicable.
Although the Treasury Department has issued regulations on the
diversification requirements, such regulations do not provide guidance
concerning the extent to which policy owners may direct their investments to
particular subaccounts of a separate account, or the permitted number of such
subaccounts. It is unclear whether additional guidance in this regard will be
issued in the future. It is possible that if such guidance is issued, the policy
may need to be modified to comply with such additional guidance. For these
reasons, NYLIAC reserves the right to modify the Policy as necessary to attempt
to prevent the policy owner from being considered the owner of the assets of the
Separate Account or otherwise to qualify the policy for favorable tax treatment.
The Code also requires that non-qualified annuity contracts contain
specific provisions for distribution of the policy proceeds upon the death of
any policy owner. In order to be treated as an annuity contract for federal
income tax purposes, the Code requires that such policies provide that (a) if
any policy owner dies on or after the Annuity Commencement Date and before the
entire interest in the policy has been distributed, the remaining portion must
be distributed at least as rapidly as under the method in effect on the policy
owner's death; and (b) if any policy owner dies before the Annuity Commencement
Date, the entire interest in the policy must generally be distributed within 5
years after the policy owner's date of death. These requirements will be
considered satisfied if the entire interest of the policy is used to purchase an
immediate annuity under which payments will begin within one year of the policy
owner's death and will be made for the life of the Beneficiary or for a period
not extending beyond the life expectancy of the Beneficiary. If the Beneficiary
is the policy owner's surviving spouse, the policy may be continued with the
surviving spouse as the new policy owner. If the policy owner is not a natural
person, these "death of Owner" rules apply when the primary Annuitant is
changed. Non-Qualified Policies contain provisions intended to comply with these
requirements of the Code. No regulations interpreting these requirements of the
Code have yet been issued and thus no assurance can be given that the provisions
contained in these policies satisfy all such Code requirements. The provisions
contained in these policies will be reviewed and modified if necessary to assure
that they comply with the Code requirements when clarified by regulation or
otherwise.
Withholding of federal income taxes on the taxable portion of all
distributions may be required unless the recipient elects not to have any such
amounts withheld and properly notifies NYLIAC of that election. Different rules
may apply to United States citizens or expatriates living abroad. In addition,
some states have enacted legislation requiring withholding.
Even if a recipient elects no withholding, special rules may require NYLIAC
to disregard the recipient's election if the recipient fails to supply NYLIAC
with a "TIN" or taxpayer identification number (social security number for
individuals) or if the Internal Revenue Service notifies NYLIAC that the TIN
provided by the recipient is incorrect.
DISTRIBUTOR OF THE POLICIES
NYLIFE Distributors Inc. ("NYLIFE Distributors"), the distributor of the
policies, is registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the National Association of Securities Dealers,
Inc. NYLIFE Distributors is an indirect wholly-owned subsidiary of New York
Life. The maximum commission typically paid to broker-dealers who have entered
into dealer agreements with NYLIFE Distributors is 6.5%. A portion of this
amount will be paid as commissions to registered representatives.
For the years ended December 31, 1997, 1998 and 1999, NYLIAC paid
commissions of $29,748,000, $49,432,000 and $64,466,000, respectively, none of
which was retained by NYLIFE Distributors.
5
<PAGE> 146
The policies are sold and premium payments are accepted on a continuous
basis.
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
NYLIAC holds title to assets of the Separate Account. The assets are kept
physically segregated and held separate and apart from NYLIAC's general
corporate assets. Records are maintained of all purchases and redemptions of
Eligible Portfolio shares held by each of the Investment Divisions.
STATE REGULATION
NYLIAC is a stock life insurance company organized under the laws of
Delaware, and is subject to regulation by the Delaware State Insurance
Department. We file an annual statement with the Delaware Commissioner of
Insurance on or before March 1 of each year covering the operations and
reporting on the financial condition of NYLIAC as of December 31 of the
preceding calendar year. Periodically, the Delaware Commissioner of Insurance
examines the financial condition of NYLIAC, including the liabilities and
reserves of the Separate Account.
In addition, NYLIAC is subject to the insurance laws and regulations of all
the states where it is licensed to operate. The availability of certain policy
rights and provisions depends on state approval and/or filing and review
processes. Where required by state law or regulation, the policies will be
modified accordingly.
RECORDS AND REPORTS
NYLIAC maintains all records and accounts relating to the Separate Account.
As presently required by the federal securities laws, NYLIAC will mail to you at
your last known address of record, at least semi-annually after the first Policy
Year, reports containing information required under the federal securities laws
or by any other applicable law or regulation.
LEGAL PROCEEDINGS
NYLIAC is a defendant in individual and/or alleged class action suits
arising from its agency sales force, insurance (including variable contracts
registered under the federal securities law), investment, retail securities
and/or other operations, including actions involving retail sales practices.
Most of these actions also seek substantial or unspecified compensatory and
punitive damages. NYLIAC is also from time to time involved as a party in
various governmental, administrative, and investigative proceedings and
inquiries.
Given the uncertain nature of litigation and regulatory inquiries, the
outcome of which cannot be predicted, NYLIAC nevertheless believes that, after
provisions made in the financial statements, the ultimate liability that could
result from litigation and proceedings would not have a material adverse effect
on NYLIAC's financial position; however, it is possible that settlements or
adverse determinations in one or more actions or other proceedings in the future
could have a material adverse effect on NYLIAC's operating results for a given
year.
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
Statement of Additional Information 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 Statement of Additional Information
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.
OTHER INFORMATION
NYLIAC filed a registration statement with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
policies discussed in the Prospectus and this Statement of Additional
Information. We have not included all of the information set forth in the
registration statement, amendments and exhibits to the registration statement in
the Prospectus and this Statement of Additional Information. We intend the
statements contained in the Prospectus and this Statement of Additional
Information concerning the content of the policies and other legal instruments
to be summaries. For a
6
<PAGE> 147
complete statement of the terms of these documents, you should refer to the
instruments filed with the Securities and Exchange Commission. The omitted
information may be obtained at the principal offices of the Securities and
Exchange Commission in Washington, D.C., upon payment of prescribed fees, or
through the Commission's website at www.sec.gov.
7
<PAGE> 148
FINANCIAL STATEMENTS
F-1
<PAGE> 149
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1999
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value............................. $659,604,204 $295,142,129 $ 65,249,198
LIABILITIES:
Liability to New York Life Insurance and Annuity
Corporation
for mortality and expense risk charges.................. 2,275,294 899,530 214,918
------------ ------------ ------------
Total equity.......................................... $657,328,910 $294,242,599 $ 65,034,280
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding:
23,023,869; 248,785,945; 2,826,029; 5,007,661;
25,509,312; 1,203,583; 14,508,830; 9,782,274;
6,870,999; 11,321,413, respectively................... $657,328,910 $294,242,599 $ 48,036,427
Equity of New York Life Insurance and
Annuity Corporation:
Variable accumulation units outstanding for the MainStay
VP Convertible: 1,000,000............................. -- -- 16,997,853
------------ ------------ ------------
Total equity.......................................... $657,328,910 $294,242,599 $ 65,034,280
============ ============ ============
Variable accumulation unit value........................ $ 28.55 $ 1.18 $ 17.00
============ ============ ============
Identified Cost of Investment............................... $477,432,142 $295,142,140 $ 58,492,827
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP CENTURY LARGE
INDEXED INCOME COMPANY
EQUITY & GROWTH VALUE
------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value............................. $687,059,280 $ 50,497,127 $ 25,789,848
LIABILITIES:
Liability to New York Life Insurance and Annuity
Corporation
for mortality and expense risk charges.................. 2,358,604 169,624 88,522
------------ ------------ ------------
Total equity.......................................... $684,700,676 $ 50,327,503 $ 25,701,326
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding:
24,805,405; 2,997,332; 1,397,190; 1,729,666;
1,276,043; 3,062,522; 987,374; 12,003,879; 8,139,096;
16,575,418, respectively.............................. $684,700,676 $ 37,737,230 $ 14,979,886
Equity of New York Life Insurance and
Annuity Corporation:
Variable accumulation units outstanding: American
Century Income & Growth: 1,000,000 Dreyfus Large
Company Value: 1,000,000 Eagle Asset Management Growth
Equity: 1,000,000 Lord Abbett Developing Growth:
1,000,000............................................. -- 12,590,273 10,721,440
------------ ------------ ------------
Total equity.......................................... $684,700,676 $ 50,327,503 $ 25,701,326
============ ============ ============
Variable accumulation unit value........................ $ 27.60 $ 12.59 $ 10.72
============ ============ ============
Identified Cost of Investment............................... $537,046,015 $ 42,439,498 $ 23,936,634
============ ============ ============
</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> 150
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 60,210,085 $402,380,635 $ 22,808,781 $307,054,973 $165,988,177 $ 82,850,113 $318,375,620
208,976 1,387,893 80,142 1,077,034 590,846 289,554 1,102,923
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 60,001,109 $400,992,742 $ 22,728,639 $305,977,939 $165,397,331 $ 82,560,559 $317,272,697
============ ============ ============ ============ ============ ============ ============
$ 60,001,109 $400,992,742 $ 22,728,639 $305,977,939 $165,397,331 $ 82,560,559 $317,272,697
-- -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 60,001,109 $400,992,742 $ 22,728,639 $305,977,939 $165,397,331 $ 82,560,559 $317,272,697
============ ============ ============ ============ ============ ============ ============
$ 11.98 $ 15.72 $ 18.88 $ 21.09 $ 16.91 $ 12.02 $ 28.02
============ ============ ============ ============ ============ ============ ============
$ 64,502,570 $443,954,806 $ 17,493,121 $238,750,328 $169,781,959 $ 90,499,641 $267,336,524
============ ============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET LORD ALGER
MANAGEMENT ABBETT AMERICAN CALVERT FIDELITY FIDELITY JANUS ASPEN
GROWTH DEVELOPING SMALL SOCIAL VIP II VIP SERIES
EQUITY GROWTH CAPITALIZATION BALANCED CONTRAFUND EQUITY-INCOME BALANCED
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 52,176,639 $ 27,154,627 $ 52,028,059 $ 18,548,706 $246,138,035 $124,400,115 $339,221,648
161,605 82,882 168,075 61,465 832,676 418,173 1,097,068
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 52,015,034 $ 27,071,745 $ 51,859,984 $ 18,487,241 $245,305,359 $123,981,942 $338,124,580
============ ============ ============ ============ ============ ============ ============
$ 32,959,578 $ 15,177,532 $ 51,859,984 $ 18,487,241 $245,305,359 $123,981,942 $338,124,580
19,055,456 11,894,213 -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 52,015,034 $ 27,071,745 $ 51,859,984 $ 18,487,241 $245,305,359 $123,981,942 $338,124,580
============ ============ ============ ============ ============ ============ ============
$ 19.06 $ 11.89 $ 16.93 $ 18.72 $ 20.44 $ 15.23 $ 20.40
============ ============ ============ ============ ============ ============ ============
$ 35,930,655 $ 22,141,387 $ 41,557,991 $ 18,463,558 $190,279,581 $118,105,879 $274,354,819
============ ============ ============ ============ ============ ============ ============
</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> 151
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
As of December 31, 1999
<TABLE>
<CAPTION>
JANUS ASPEN MFS
SERIES GROWTH
WORLDWIDE WITH MFS
GROWTH INCOME SERIES RESEARCH SERIES
---------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value....................... $330,783,735 $ 18,792,928 $ 13,277,157
LIABILITIES:
Liability to New York Life Insurance and Annuity
Corporation for mortality and expense risk
charges........................................... 1,089,841 60,559 41,291
------------ ------------ ------------
Total equity.................................... $329,693,894 $ 18,732,369 $ 13,235,866
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding:
12,815,868; 1,685,002; 998,691, respectively.... $329,693,894 $ 18,732,369 $ 13,235,866
============ ============ ============
Variable accumulation unit value.................. $ 25.73 $ 11.12 $ 13.25
============ ============ ============
Identified Cost of Investment......................... $210,527,867 $ 17,561,025 $ 11,170,307
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY T. ROWE VAN ECK
DEAN WITTER PRICE WORLDWIDE
EMERGING MARKETS EQUITY HARD
EQUITY INCOME ASSETS
--------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investment at net asset value....................... $ 23,751,914 $ 24,805,125 $ 2,072,003
LIABILITIES:
Liability to New York Life Insurance and Annuity
Corporation for mortality and expense risk
charges........................................... 75,043 81,114 6,480
------------ ------------ ------------
Total equity.................................... $23,676,871 $ 24,724,011 $ 2,065,523
============ ============ ============
TOTAL EQUITY REPRESENTED BY:
Equity of Policyowners:
Variable accumulation units outstanding:
1,659,145; 2,386,891; 215,885, respectively..... $ 23,676,871 $ 24,724,011 $ 2,065,523
============ ============ ============
Variable accumulation unit value.................. $ 14.27 $ 10.36 $ 9.57
============ ============ ============
Identified Cost of Investment......................... $ 17,252,185 $ 25,930,813 $ 1,979,493
============ ============ ============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-4
<PAGE> 152
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-5
<PAGE> 153
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
---------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income........................................... $ -- $ 8,890,624 $ 2,166,858
Mortality and expense risk charges........................ (6,801,527) (2,572,847) (657,313)
------------ ------------- -----------
Net investment income (loss).......................... (6,801,527) 6,317,777 1,509,545
------------ ------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments......................... 64,560,091 240,289,042 3,373,641
Cost of investments sold.................................. (32,897,132) (240,289,652) (2,893,293)
------------ ------------- -----------
Net realized gain (loss) on investments............... 31,662,959 (610) 480,348
Realized gain distribution received....................... 24,098,794 77 6,416,144
Change in unrealized appreciation (depreciation) on
investments............................................. 68,925,559 453 8,269,879
------------ ------------- -----------
Net gain (loss) on investments........................ 124,687,312 (80) 15,166,371
------------ ------------- -----------
Increase (decrease) attributable to funds of New York Life
Insurance and Annuity Corporation retained by Separate
Account................................................. (300,890) (20,754) (41,855)
------------ ------------- -----------
Net increase (decrease) in total equity resulting from
operations.......................................... $117,584,895 $ 6,296,943 $16,634,061
============ ============= ===========
</TABLE>
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP CENTURY LARGE
INDEXED INCOME COMPANY
EQUITY & GROWTH VALUE
---------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income........................................... $ 6,174,824 $ 324,035 $ 192,979
Mortality and expense risk charges........................ (7,436,743) (504,445) (295,831)
------------ ----------- -----------
Net investment income (loss).......................... (1,261,919) (180,410) (102,852)
------------ ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments......................... 55,189,811 2,015,470 1,480,342
Cost of investments sold.................................. (28,455,026) (1,764,854) (1,403,056)
------------ ----------- -----------
Net realized gain (loss) on investments............... 26,734,785 250,616 77,286
Realized gain distribution received....................... 9,223,306 -- --
Change in unrealized appreciation (depreciation) on
investments............................................. 61,187,782 5,818,304 1,098,415
------------ ----------- -----------
Net gain on investments............................... 97,145,873 6,068,920 1,175,701
------------ ----------- -----------
Decrease attributable to funds of New York Life Insurance
and Annuity Corporation retained by Separate Account.... (248,381) (16,085) (3,398)
------------ ----------- -----------
Net increase in total equity resulting from
operations.......................................... $ 95,635,573 $ 5,872,425 $ 1,069,451
============ =========== ===========
</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> 154
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,137,161 $ 45,156,765 $ 67,312 $ 5,045,214 $ 2,051,953 $ 4,992,662 $ 1,664,412
(760,892) (5,063,816) (242,414) (3,516,954) (2,319,136) (1,065,422) (3,267,018)
------------- ------------- ------------- ------------- ------------- ------------- -------------
2,376,269 40,092,949 (175,102) 1,528,260 (267,183) 3,927,240 (1,602,606)
------------- ------------- ------------- ------------- ------------- ------------- -------------
6,459,367 12,998,207 4,049,865 7,413,453 20,311,707 4,993,682 8,623,250
(6,289,253) (12,296,439) (3,245,640) (4,729,675) (17,213,440) (4,992,421) (6,055,529)
------------- ------------- ------------- ------------- ------------- ------------- -------------
170,114 701,768 804,225 2,683,778 3,098,267 1,261 2,567,721
-- 7,725,965 462,134 8,277,954 -- 6,418 27,931,332
(4,154,780) (12,128,579) 3,535,130 26,859,289 7,362,393 (6,083,539) 34,621,533
------------- ------------- ------------- ------------- ------------- ------------- -------------
(3,984,666) (3,700,846) 4,801,489 37,821,021 10,460,660 (6,075,860) 65,120,586
------------- ------------- ------------- ------------- ------------- ------------- -------------
1,610 (117,590) (11,646) (106,692) (20,443) 1,926 (173,616)
------------- ------------- ------------- ------------- ------------- ------------- -------------
$ (1,606,787) $ 36,274,513 $ 4,614,741 $ 39,242,589 $ 10,173,034 $ (2,146,694) $ 63,344,364
============= ============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET LORD ALGER
MANAGEMENT ABBETT AMERICAN CALVERT FIDELITY FIDELITY JANUS ASPEN
GROWTH DEVELOPING SMALL SOCIAL VIP II VIP SERIES
EQUITY GROWTH CAPITALIZATION BALANCED CONTRAFUND EQUITY-INCOME BALANCED
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 690 $ 461,296 $ -- $ 400,072 $ 595,905 $ 1,296,727 $ 5,681,774
(352,509) (262,524) (431,695) (189,405) (2,424,368) (1,472,298) (2,849,564)
------------ ------------ ------------ ------------ ------------ ------------ ------------
(351,819) 198,772 (431,695) 210,667 (1,828,463) (175,571) 2,832,210
------------ ------------ ------------ ------------ ------------ ------------ ------------
1,514,103 4,142,313 74,122,277 1,098,925 7,016,138 3,174,267 1,957,201
(1,189,392) (4,175,653) (71,788,115) (894,501) (4,522,785) (2,593,745) (1,151,749)
------------ ------------ ------------ ------------ ------------ ------------ ------------
324,711 (33,340) 2,334,162 204,424 2,493,353 580,522 805,452
2,447,031 -- 3,276,996 1,370,648 4,369,968 2,866,449 --
13,826,296 5,050,045 8,718,638 (239,125) 33,698,949 473,073 46,892,559
------------ ------------ ------------ ------------ ------------ ------------ ------------
16,598,038 5,016,705 14,329,796 1,335,947 40,562,270 3,920,044 47,698,011
------------ ------------ ------------ ------------ ------------ ------------ ------------
(39,596) (16,473) (35,455) (3,911) (98,601) (11,677) (137,780)
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 16,206,623 $ 5,199,004 $ 13,862,646 $ 1,542,703 $ 38,635,206 $ 3,732,796 $ 50,392,441
============ ============ ============ ============ ============ ============ ============
</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> 155
STATEMENT OF OPERATIONS (CONTINUED)
For the year ended December 31, 1999
<TABLE>
<CAPTION>
JANUS ASPEN MFS
SERIES GROWTH MFS
WORLDWIDE WITH RESEARCH
GROWTH INCOME SERIES SERIES
-------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT LOSS:
Dividend income................................. $ 321,362 $ 27,455 $ 8,960
Mortality and expense risk charges.............. (2,577,762) (157,628) (92,410)
------------ ----------- -----------
Net investment loss......................... (2,256,400) (130,173) (83,450)
------------ ----------- -----------
REALIZED AND UNREALIZED GAIN:
Proceeds from sale of investments............... 37,513,165 497,017 1,515,664
Cost of investments sold........................ (25,909,006) (481,756) (1,335,780)
------------ ----------- -----------
Net realized gain on investments............ 11,604,159 15,261 179,884
Realized gain distribution received............. -- 32,955 47,348
Change in unrealized appreciation (depreciation)
on investments................................ 102,746,265 812,574 1,849,509
------------ ----------- -----------
Net gain on investments..................... 114,350,424 860,790 2,076,741
------------ ----------- -----------
Decrease attributable to funds of New York Life
Insurance and Annuity Corporation
retained by Separate Account.................. (268,363) (1,900) (4,115)
------------ ----------- -----------
Net increase in total equity resulting
from operations........................... $111,825,661 $ 728,717 $ 1,989,176
============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY T. ROWE VAN ECK
DEAN WITTER PRICE WORLDWIDE
EMERGING MARKETS EQUITY HARD
EQUITY INCOME ASSETS
-------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS):
Dividend income................................. $ 2,386 $ 385,881 $ 7,966
Mortality and expense risk charges.............. (157,441) (261,283) (17,455)
------------ ----------- -----------
Net investment income (loss)................ (155,055) 124,598 (9,489)
------------ ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Proceeds from sale of investments............... 1,751,972 4,062,616 936,432
Cost of investments sold........................ (2,063,978) (3,806,002) (831,553)
------------ ----------- -----------
Net realized gain (loss) on investments..... (312,006) 256,614 104,879
Realized gain distribution received............. -- 998,267 --
Change in unrealized appreciation (depreciation)
on investments................................ 9,467,305 (1,375,827) 90,024
------------ ----------- -----------
Net gain (loss) on investments.............. 9,155,299 (120,946) 194,903
------------ ----------- -----------
Decrease attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account.................. (19,162) (251) (472)
------------ ----------- -----------
Net increase in total equity resulting
from operations........................... $ 8,981,082 $ 3,401 $ 184,942
============ =========== ===========
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-8
<PAGE> 156
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-9
<PAGE> 157
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)..................... $ (6,801,527) $ (3,263,970) $ 6,317,777 $ 2,975,494
Net realized gain (loss) on investments.......... 31,662,959 4,832,178 (610) 709
Realized gain distribution received.............. 24,098,794 3,372,386 77 --
Change in unrealized appreciation (depreciation)
on investments................................. 68,925,559 80,264,752 453 (526)
Increase (decrease) attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account................... (300,890) (227,414) (20,754) (9,626)
-------------- -------------- -------------- --------------
Net increase (decrease) in total equity
resulting from operations.................... 117,584,895 84,977,932 6,296,943 2,966,051
-------------- -------------- -------------- --------------
Contributions and withdrawals:
Policyowners' premium payments................... 34,382,497 13,162,525 1,155,909,385 913,610,826
Policyowners' surrenders......................... (18,700,983) (9,195,564) (11,574,989) (2,866,672)
Policyowners' annuity and death benefits......... (2,652,375) (1,384,891) (1,882,423) (110,206)
Net transfers from (to) Fixed Account............ 1,385,445 (1,075,455) (7,387,762) (4,500,370)
Transfers between Investment Divisions........... 157,351,663 95,055,794 (968,197,144) (835,614,042)
-------------- -------------- -------------- --------------
Net contributions.............................. 171,766,247 96,562,409 166,867,067 70,519,536
-------------- -------------- -------------- --------------
Increase in total equity..................... 289,351,142 181,540,341 173,164,010 73,485,587
TOTAL EQUITY:
Beginning of year................................ 367,977,768 186,437,427 121,078,589 47,593,002
-------------- -------------- -------------- --------------
End of year...................................... $ 657,328,910 $ 367,977,768 $ 294,242,599 $ 121,078,589
============== ============== ============== ==============
</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)..................... $ (175,102) $ 157,931 $ 1,528,260 $ 1,584,276
Net realized gain on investments................. 804,225 67,333 2,683,778 383,756
Realized gain distribution received.............. 462,134 -- 8,277,954 5,245,257
Change in unrealized appreciation (depreciation)
on investments................................. 3,535,130 2,291,030 26,859,289 28,857,896
Increase (decrease) attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account................... (11,646) (10,483) (106,692) (95,981)
-------------- -------------- -------------- --------------
Net increase (decrease) in total equity
resulting from operations.................... 4,614,741 2,505,811 39,242,589 35,975,204
-------------- -------------- -------------- --------------
Contributions and withdrawals:
Policyowners' premium payments................... 1,111,621 442,310 14,574,035 8,659,295
Policyowners' surrenders......................... (487,657) (301,242) (9,356,112) (5,204,970)
Policyowners' annuity and death benefits......... (112,067) (91,591) (1,640,052) (766,712)
Net transfers from (to) Fixed Account............ 179,080 (63,428) (207,261) (707,925)
Transfers between Investment Divisions........... 2,287,180 1,168,012 59,847,100 54,347,173
-------------- -------------- -------------- --------------
Net contributions and withdrawals.............. 2,978,157 1,154,061 63,217,710 56,326,861
-------------- -------------- -------------- --------------
Increase in total equity..................... 7,592,898 3,659,872 102,460,299 92,302,065
TOTAL EQUITY:
Beginning of year................................ 15,135,741 11,475,869 203,517,640 111,215,575
-------------- -------------- -------------- --------------
End of year...................................... $ 22,728,639 $ 15,135,741 $ 305,977,939 $ 203,517,640
============== ============== ============== ==============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-10
<PAGE> 158
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
<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>
$ 1,509,545 $ 1,333,082 $ 2,376,269 $ 1,350,093 $ 40,092,949 $ 24,455,427
480,348 350,619 170,114 299,747 701,768 775,100
6,416,144 1,219,130 -- -- 7,725,965 779,456
8,269,879 (2,295,772) (4,154,780) (88,614) (12,128,579) (25,710,885)
(41,855) (1,174) 1,610 (3,824) (117,590) (422)
-------------- -------------- -------------- -------------- -------------- --------------
16,634,061 605,885 (1,606,787) 1,557,402 36,274,513 298,676
-------------- -------------- -------------- -------------- -------------- --------------
2,620,934 1,768,847 3,472,181 893,428 20,962,012 19,432,879
(1,292,532) (619,313) (2,236,959) (1,102,640) (17,095,230) (11,532,193)
(166,083) (129,950) (239,141) (186,772) (3,256,960) (1,549,873)
366,068 (114,198) (223,529) (152,490) (606,163) (2,618,743)
8,760,834 10,614,613 21,161,456 25,977,645 54,594,175 102,753,150
-------------- -------------- -------------- -------------- -------------- --------------
10,289,221 11,519,999 21,934,008 25,429,171 54,597,834 106,485,220
-------------- -------------- -------------- -------------- -------------- --------------
26,923,282 12,125,884 20,327,221 26,986,573 90,872,347 106,783,896
38,110,998 25,985,114 39,673,888 12,687,315 310,120,395 203,336,499
-------------- -------------- -------------- -------------- -------------- --------------
$ 65,034,280 $ 38,110,998 $ 60,001,109 $ 39,673,888 $ 400,992,742 $ 310,120,395
============== ============== ============== ============== ============== ==============
</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>
$ (267,183) $ 395,691 $ 3,927,240 $ 2,633,892 $ (1,602,606) $ (493,888)
3,098,267 1,279,135 1,261 32,492 2,567,721 356,925
-- 12,582,107 6,418 1,562,448 27,931,332 13,289,553
7,362,393 (25,490,442) (6,083,539) (1,391,302) 34,621,533 16,134,563
(20,443) 15,885 1,926 (7,219) (173,616) (88,398)
-------------- -------------- -------------- -------------- -------------- --------------
10,173,034 (11,217,624) (2,146,694) 2,830,311 63,344,364 29,198,755
-------------- -------------- -------------- -------------- -------------- --------------
6,471,643 8,504,850 5,568,019 2,962,500 16,960,756 7,854,006
(6,675,519) (4,951,446) (3,545,674) (1,415,205) (7,639,866) (3,939,312)
(912,254) (1,204,738) (681,286) (172,811) (1,074,648) (665,675)
(65,568) (1,354,692) 325,965 (56,985) 1,537,864 (259,908)
(1,237,019) 47,245,084 21,251,994 34,854,154 63,978,954 60,766,288
-------------- -------------- -------------- -------------- -------------- --------------
(2,418,717) 48,239,058 22,919,018 36,171,653 73,763,060 63,755,399
-------------- -------------- -------------- -------------- -------------- --------------
7,754,317 37,021,434 20,772,324 39,001,964 137,107,424 92,954,154
157,643,014 120,621,580 61,788,235 22,786,271 180,165,273 87,211,119
-------------- -------------- -------------- -------------- -------------- --------------
$ 165,397,331 $ 157,643,014 $ 82,560,559 $ 61,788,235 $ 317,272,697 $ 180,165,273
============== ============== ============== ============== ============== ==============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-11
<PAGE> 159
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 1998(a)
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)..................... $ (1,261,919) $ (20,441) $ (180,410) $ (27,268)
Net realized gain (loss) on investments.......... 26,734,785 3,737,791 250,616 (35,373)
Realized gain distribution received.............. 9,223,306 3,479,147 -- --
Change in unrealized appreciation (depreciation)
on investments................................. 61,187,782 61,206,441 5,818,304 2,239,326
Decrease attributable to funds of New York Life
Insurance and Annuity Corporation retained by
Separate Account............................... (248,381) (209,334) (16,085) (6,952)
------------- ------------- ------------- -------------
Net increase (decrease) in total equity
resulting from operations.................... 95,635,573 68,193,604 5,872,425 2,169,733
------------- ------------- ------------- -------------
Contributions and withdrawals:
Equity contribution by New York Life Insurance
and Annuity Corporation........................ -- -- -- 10,000,000
Policyowners' premium payments................... 39,131,214 20,576,362 4,260,261 634,838
Policyowners' surrenders......................... (19,102,715) (9,009,769) (868,297) (79,172)
Policyowners' annuity and death benefits......... (2,992,825) (1,003,566) (152,200) --
Net transfers from (to) Fixed Account............ 4,837,916 (82,202) 1,482,006 46,387
Transfers between Investment Divisions........... 159,603,918 146,203,904 15,165,095 11,796,427
------------- ------------- ------------- -------------
Net contributions.............................. 181,477,508 156,684,729 19,886,865 22,398,480
------------- ------------- ------------- -------------
Increase in total equity..................... 277,113,081 224,878,333 25,759,290 24,568,213
TOTAL EQUITY:
Beginning of year................................ 407,587,595 182,709,262 24,568,213 --
------------- ------------- ------------- -------------
End of year...................................... $ 684,700,676 $ 407,587,595 $ 50,327,503 $ 24,568,213
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
CALVERT FIDELITY
SOCIAL VIP II
BALANCED CONTRAFUND
----------------------------- -----------------------------
1999 1998 1999 1998
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)..................... $ 210,667 $ 127,321 $ (1,828,463) $ (698,763)
Net realized gain (loss) on investments.......... 204,424 77,911 2,493,353 99,321
Realized gain distribution received.............. 1,370,648 503,162 4,369,968 2,252,334
Change in unrealized appreciation (depreciation)
on investments................................. (239,125) 300,085 33,698,949 18,490,256
Decrease attributable to funds of New York
Life Insurance and Annuity Corporation retained
by
Separate Account............................... (3,911) (2,809) (98,601) (56,749)
------------- ------------- ------------- -------------
Net increase in total equity resulting from
operations................................... 1,542,703 1,005,670 38,635,206 20,086,399
------------- ------------- ------------- -------------
Contributions and withdrawals:
Policyowners' premium payments................... 1,218,283 448,798 21,562,788 6,539,351
Policyowners' surrenders......................... (389,555) (178,847) (5,721,665) (2,091,645)
Policyowners' annuity and death benefits......... (44,732) (74,437) (603,445) (193,257)
Net transfers from (to) Fixed Account............ 383,374 (105,315) 4,530,876 54,147
Transfers between Investment Divisions........... 5,730,352 4,790,643 69,788,898 52,658,032
------------- ------------- ------------- -------------
Net contributions.............................. 6,897,722 4,880,842 89,557,452 56,966,628
------------- ------------- ------------- -------------
Increase in total equity..................... 8,440,425 5,886,512 128,192,658 77,053,027
TOTAL EQUITY:
Beginning of year................................ 10,046,816 4,160,304 117,112,701 40,059,674
------------- ------------- ------------- -------------
End of year...................................... $ 18,487,241 $ 10,046,816 $ 245,305,359 $ 117,112,701
============= ============= ============= =============
</TABLE>
(a) For the period May 1, 1998 (Commencement of Operations) through December 31,
1998.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-12
<PAGE> 160
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
<TABLE>
<CAPTION>
DREYFUS EAGLE ASSET LORD ALGER
LARGE MANAGEMENT ABBETT AMERICAN
COMPANY GROWTH DEVELOPING SMALL
VALUE EQUITY GROWTH CAPITALIZATION
----------------------------- ----------------------------- ----------------------------- -----------------------------
1999 1998(a) 1999 1998(a) 1999 1998(a) 1999 1998
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ (102,852) $ (32,350) $ (351,819) $ (103,061) $ 198,772 $ (94,657) $ (431,695) $ (221,783)
77,286 (21,758) 324,711 (5,237) (33,340) (130,955) 2,334,162 (255,859)
-- -- 2,447,031 -- -- -- 3,276,996 1,965,062
1,098,415 754,799 13,826,296 2,419,687 5,050,045 (36,805) 8,718,638 1,178,171
(3,398) (3,408) (39,596) (6,423) (16,473) (3,676) (35,455) (9,820)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1,069,451 697,283 16,206,623 2,304,966 5,199,004 (266,093) 13,862,646 2,655,771
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
-- 10,000,000 -- 10,000,000 -- 10,000,000 -- --
1,282,654 641,398 3,625,755 278,603 1,634,924 354,560 3,509,225 1,298,003
(439,054) (95,950) (382,671) (13,083) (385,998) (50,429) (977,668) (667,185)
(36,081) -- (28,061) -- (50) -- (159,596) (123,482)
835,237 10,210 1,113,574 37,328 566,892 42,726 1,235,110 83,274
6,389,989 5,346,189 15,046,226 3,825,774 5,707,840 4,268,369 11,588,412 8,414,198
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
8,032,745 15,901,847 19,374,823 14,128,622 7,523,608 14,615,226 15,195,483 9,004,808
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
9,102,196 16,599,130 35,581,446 16,433,588 12,722,612 14,349,133 29,058,129 11,660,579
16,599,130 -- 16,433,588 -- 14,349,133 -- 22,801,855 11,141,276
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 25,701,326 $ 16,599,130 $ 52,015,034 $ 16,433,588 $ 27,071,745 $ 14,349,133 $ 51,859,984 $ 22,801,855
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN MFS
FIDELITY JANUS ASPEN SERIES GROWTH
VIP SERIES WORLDWIDE WITH
EQUITY-INCOME BALANCED GROWTH INCOME SERIES
----------------------------- ----------------------------- ----------------------------- -----------------------------
1999 1998 1999 1998 1999 1998 1999 1998(a)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ (175,571) $ (345,272) $ 2,832,210 $ 1,654,759 $ (2,256,400) $ 1,194,667 $ (130,173) $ (15,005)
580,522 86,155 805,452 72,010 11,604,159 1,856,800 15,261 (18,494)
2,866,449 1,682,987 -- 347,759 -- 961,481 32,955 --
473,073 3,410,204 46,892,559 16,353,009 102,746,265 14,600,486 812,574 419,329
(11,677) (20,934) (137,780) (50,484) (268,363) (63,694) (1,900) (829)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
3,732,796 4,813,140 50,392,441 18,377,053 111,825,661 18,549,740 728,717 385,001
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
8,723,485 5,720,100 30,725,045 5,898,289 18,445,442 7,060,394 2,753,891 245,609
(3,848,099) (1,598,980) (7,304,738) (1,550,539) (6,629,373) (2,524,290) (336,762) (23,721)
(702,180) (309,345) (1,244,078) (253,681) (866,431) (281,189) (33,617) --
2,023,538 15,447 9,244,304 177,556 4,588,132 (39,738) 1,403,061 42,863
29,068,136 46,428,934 151,576,991 56,910,948 77,716,412 47,042,242 9,619,218 3,948,109
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
35,264,880 50,256,156 182,997,524 61,182,573 93,254,182 51,257,419 13,405,791 4,212,860
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
38,997,676 55,069,296 233,389,965 79,559,626 205,079,843 69,807,159 14,134,508 4,597,861
84,984,266 29,914,970 104,734,615 25,174,989 124,614,051 54,806,892 4,597,861 --
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 123,981,942 $ 84,984,266 $ 338,124,580 $ 104,734,615 $ 329,693,894 $ 124,614,051 $ 18,732,369 $ 4,597,861
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-13
<PAGE> 161
STATEMENT OF CHANGES IN TOTAL EQUITY (CONTINUED)
For the years ended December 31, 1999
and December 31, 1998
<TABLE>
<CAPTION>
MORGAN STANLEY
DEAN WITTER
MFS EMERGING MARKETS
RESEARCH SERIES EQUITY
----------------------------- -----------------------------
1999 1998(A) 1999 1998
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN TOTAL EQUITY:
Operations:
Net investment loss.............................. $ (83,450) $ (9,472) $ (155,055) $ (67,041)
Net realized gain (loss) on investments.......... 179,884 (17,978) (312,006) (665,302)
Realized gain distribution received.............. 47,348 -- -- --
Change in unrealized appreciation (depreciation)
on investments................................. 1,849,509 257,341 9,467,305 (1,402,784)
Increase (decrease) attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account................... (4,115) (595) (19,162) 3,898
------------- ------------- ------------- -------------
Net increase (decrease) in total equity
resulting from operations.................... 1,989,176 229,296 8,981,082 (2,131,229)
------------- ------------- ------------- -------------
Contributions and withdrawals:
Policyowners' premium payments................... 2,836,575 193,769 1,600,831 544,180
Policyowners' surrenders......................... (170,420) (5,144) (638,716) (303,684)
Policyowners' annuity and death benefits......... (1,713) -- (42,089) (28,128)
Net transfers from (to) Fixed Account............ 1,448,410 5,543 537,872 (222,426)
Transfers between Investment Divisions........... 4,404,982 2,305,392 7,021,890 177,768
------------- ------------- ------------- -------------
Net contributions.............................. 8,517,834 2,499,560 8,479,788 167,710
------------- ------------- ------------- -------------
Increase (decrease) in total equity.......... 10,507,010 2,728,856 17,460,870 (1,963,519)
TOTAL EQUITY:
Beginning of year................................ 2,728,856 -- 6,216,001 8,179,520
------------- ------------- ------------- -------------
End of year...................................... $ 13,235,866 $ 2,728,856 $ 23,676,871 $ 6,216,001
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
T. ROWE VAN ECK
PRICE WORLDWIDE
EQUITY HARD
INCOME ASSETS
----------------------------- -----------------------------
1999 1998(A) 1999 1998(a)
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN TOTAL EQUITY:
Operations:
Net investment income (loss)..................... $ 124,598 $ 45,612 $ (9,489) $ (2,516)
Net realized gain (loss) on investments.......... 256,614 (36,653) 104,879 (52,557)
Realized gain distribution received.............. 998,267 258,411 -- --
Change in unrealized appreciation (depreciation)
on investments................................. (1,375,827) 250,139 90,024 2,487
Increase (decrease) attributable to funds of New
York Life Insurance and Annuity Corporation
retained by Separate Account................... (251) (1,005) (472) 34
------------- ------------- ------------- -------------
Net increase (decrease) in total equity
resulting from operations.................... 3,401 516,504 184,942 (52,552)
------------- ------------- ------------- -------------
Contributions and withdrawals:
Policyowners' premium payments................... 2,744,823 737,336 320,055 23,746
Policyowners' surrenders......................... (751,362) (86,228) (25,725) (3,416)
Policyowners' annuity and death benefits......... (66,820) -- -- --
Net transfers from (to) Fixed Account............ 1,185,381 218,947 (76,098) (44,240)
Transfers between Investment Divisions........... 11,526,859 8,695,170 1,238,541 500,270
------------- ------------- ------------- -------------
Net contributions.............................. 14,638,881 9,565,225 1,456,773 476,360
------------- ------------- ------------- -------------
Increase in total equity..................... 14,642,282 10,081,729 1,641,715 423,808
TOTAL EQUITY:
Beginning of year................................ 10,081,729 -- 423,808 --
------------- ------------- ------------- -------------
End of year...................................... $ 24,724,011 $ 10,081,729 $ 2,065,523 $ 423,808
============= ============= ============= =============
</TABLE>
(a) For the period May 1, 1998 (Commencement of Operations) through December 31,
1998.
The notes to the financial statements are an integral part of, and should be
read in conjunction with, the financial statements.
F-14
<PAGE> 162
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-15
<PAGE> 163
NOTES TO FINANCIAL STATEMENTS
NOTE 1-- Organization and Accounting Policies:
- --------------------------------------------------------------------------------
NYLIAC Variable Annuity Separate Account-III ("Separate Account" formerly,
"LifeStages(R) Annuity Separate Account") was established on November 30, 1994,
under Delaware law by New York Life Insurance and Annuity Corporation, a
wholly-owned subsidiary of New York Life Insurance Company. The Separate Account
funds LifeStages(R) Variable Annuity, LifeStages(R) Flexible Premium Variable
Annuity, LifeStages(R) and MainStay Plus Variable Annuity policies. This account
was established to receive and invest premium payments under Non-Qualified and
Qualified Flexible Premium Variable Retirement Annuity Policies issued by New
York Life Insurance and Annuity Corporation. The non- qualified policies are
designed to establish retirement benefits to provide individuals with
supplemental retirement income. The qualified policies are designed to establish
retirement benefits for individuals who participate in qualified pension, profit
sharing or annuity plans. The policies are distributed by NYLIFE Distributors
Inc. and sold by registered representatives of NYLIFE Securities Inc., certain
banking and financial institutions which have entered into selling agreements
with New York Life Insurance and Annuity Corporation and registered
representatives of unaffiliated broker-dealers. 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. The Separate Account
is registered under the Investment Company Act of 1940, as amended, as a unit
investment trust.
The assets of the Separate Account are invested in the shares of the MainStay
VP Series Fund, Inc., the Alger American Fund, the Calvert Variable Series, Inc.
(formerly, "Acacia Capital Corporation"), the Fidelity Variable Insurance
Products Fund II, the Fidelity Variable Insurance Products Fund, the Janus Aspen
Series, the MFS Variable Insurance Trust, the Morgan Stanley Dean Witter
Universal Funds, Inc. (formerly, "Morgan Stanley Universal Funds, Inc."), the T.
Rowe Price Equity Series, Inc., the Van Eck Worldwide Insurance Trust and
certain other funds (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.
The Separate Account offers twenty-six variable Investment Divisions, with
their respective fund portfolios, for Policyowners to invest premium payments.
The following Investment Divisions are available for LifeStages(R) Variable
Annuity, LifeStages(R) Flexible Premium Variable Annuity, LifeStages(R) and
MainStay Plus Variable Annuity 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 LifeStages(R) Variable Annuity, LifeStages(R)
Flexible Premium Variable Annuity and MainStay Plus Variable Annuity
Policyowners: American Century Income & Growth, Dreyfus Large Company Value,
Eagle Asset Management Growth Equity, Lord Abbett Developing Growth, MFS Growth
With Income Series, MFS Research Series, T. Rowe Price Equity Income, and Van
Eck Worldwide Hard Assets. Each Investment Division of the Separate Account will
invest exclusively in the corresponding eligible portfolio.
For LifeStages(R) Variable Annuity and LifeStages(R) policies, initial premium
payments, except those received for the Fixed Account, are allocated to the
MainStay VP Cash Management Investment Division until 15 days after the policy
issue date. Thereafter, premium payments are allocated to the Investment
Divisions of the Separate Account in accordance with the Policyowner's
instructions. For MainStay Plus Variable Annuity policies, in states where
approved, and LifeStages(R) Flexible Premium Variable Annuity policies, premium
payments received are allocated to the Investment Divisions in accordance with
the Policyowner's instructions. In addition, for all policies, the Policyowner
has the option to transfer amounts between the Investment Divisions of the
Separate Account 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 the
Separate Account 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).
F-16
<PAGE> 164
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
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-17
<PAGE> 165
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--Investments (in 000's):
- --------------------------------------------------------------------------------
At December 31, 1999, the investments of the Separate Account are as follows:
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE
----------------------------------------------------
<S> <C> <C> <C>
Number of shares......................................... 17,838 295,144 5,145
Identified cost*......................................... $477,432 $295,142 $ 58,493
</TABLE>
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP CENTURY LARGE
INDEXED INCOME COMPANY
EQUITY & GROWTH VALUE
--------------------------------------------------
<S> <C> <C> <C>
Number of shares......................................... 22,530 3,963 2,379
Identified cost*......................................... $537,046 $ 42,439 $ 23,937
</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
APPRECIATION MANAGEMENT CONVERTIBLE
----------------------------------------------------
<S> <C> <C> <C>
Purchases................................................ $254,335 $413,969 $ 21,629
Proceeds from sales...................................... 64,560 240,289 3,374
</TABLE>
<TABLE>
<CAPTION>
AMERICAN DREYFUS
MAINSTAY VP CENTURY LARGE
INDEXED INCOME COMPANY
EQUITY & GROWTH VALUE
--------------------------------------------------
<S> <C> <C> <C>
Purchases................................................ $245,292 $ 21,798 $ 9,440
Proceeds from sales...................................... 55,190 2,015 1,480
</TABLE>
F-18
<PAGE> 166
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6,298 37,619 1,473 13,732 11,069 6,767 11,463
$ 64,503 $443,955 $ 17,493 $238,750 $169,782 $ 90,500 $267,337
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET LORD ALGER
MANAGEMENT ABBETT AMERICAN CALVERT FIDELITY FIDELITY JANUS ASPEN
GROWTH DEVELOPING SMALL SOCIAL VIP II VIP SERIES
EQUITY GROWTH CAPITALIZATION BALANCED CONTRAFUND EQUITY-INCOME BALANCED
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2,812 2,274 943 8,552 8,444 4,839 12,150
$ 35,931 $ 22,141 $ 41,558 $ 18,464 $190,280 $118,106 $274,355
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP
MAINSTAY VP HIGH YIELD INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP GROWTH
GOVERNMENT CORPORATE BOND EQUITY RETURN VALUE BOND EQUITY
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 30,853 $115,642 $ 7,328 $ 80,711 $ 17,618 $ 31,942 $109,026
6,459 12,998 4,050 7,413 20,312 4,994 8,623
</TABLE>
<TABLE>
<CAPTION>
EAGLE ASSET LORD ALGER
MANAGEMENT ABBETT AMERICAN CALVERT FIDELITY FIDELITY JANUS ASPEN
GROWTH DEVELOPING SMALL SOCIAL VIP II VIP SERIES
EQUITY GROWTH CAPITALIZATION BALANCED CONTRAFUND EQUITY-INCOME BALANCED
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 23,050 $ 11,884 $ 92,218 $ 9,601 $ 99,462 $ 41,237 $188,414
1,514 4,142 74,122 1,099 7,016 3,174 1,957
</TABLE>
F-19
<PAGE> 167
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--Investments (in 000's) (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUS ASPEN MFS
SERIES GROWTH
WORLDWIDE WITH MFS
GROWTH INCOME SERIES RESEARCH SERIES
---------------------------------------------------------------
<S> <C> <C> <C>
Number of shares................................ 6,927 882 569
Identified cost*................................ $210,528 $ 17,561 $ 11,170
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY
DEAN WITTER T. ROWE VAN ECK
EMERGING PRICE WORLDWIDE
MARKETS EQUITY HARD
EQUITY INCOME ASSETS
---------------------------------------------------------------
<S> <C> <C> <C>
Number of shares................................ 1,708 1,324 189
Identified cost*................................ $ 17,252 $ 25,931 $ 1,979
</TABLE>
* The cost stated also represents the aggregate cost for Federal income tax
purposes.
<TABLE>
<CAPTION>
JANUS ASPEN MFS
SERIES GROWTH
WORLDWIDE WITH MFS
GROWTH INCOME SERIES RESEARCH SERIES
---------------------------------------------------------------
<S> <C> <C> <C>
Purchases....................................... $128,905 $ 13,852 $ 10,027
Proceeds from sales............................. 37,513 497 1,516
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY
DEAN WITTER T. ROWE VAN ECK
EMERGING PRICE WORLDWIDE
MARKETS EQUITY HARD
EQUITY INCOME ASSETS
---------------------------------------------------------------
<S> <C> <C> <C>
Purchases....................................... $ 10,109 $ 19,878 $ 2,388
Proceeds from sales............................. 1,752 4,063 936
</TABLE>
F-20
<PAGE> 168
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
NOTE 3--Mortality and Expense Risk Charges:
- --------------------------------------------------------------------------------
The Separate Account is charged for administrative services provided and the
mortality and expense risks assumed by New York Life Insurance and Annuity
Corporation. These charges are made daily at an annual rate of 1.40% of the
daily net asset value of each Investment Division. The amounts of these charges
retained in the Investment Divisions represent funds of New York Life Insurance
and Annuity Corporation. Accordingly, New York Life Insurance and Annuity
Corporation participates in the results of each Investment Division ratably with
the Policyowners.
- --------------------------------------------------------------------------------
NOTE 4 --Distribution of Net Income:
- --------------------------------------------------------------------------------
The Separate Account 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, transfers, or annuity payments) in excess of the net
premium payments.
F-21
<PAGE> 169
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 1998 1999 1998
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Units issued on premium payments....................... 1,403 686 994,277 812,628
Units redeemed on surrenders........................... (761) (476) (9,939) (2,547)
Units redeemed on annuity and death benefits........... (109) (72) (1,624) (97)
Units issued (redeemed) on net transfers from (to)
Fixed Account........................................ 51 (54) (6,353) (3,989)
Units issued (redeemed) on transfers between Investment
Divisions............................................ 6,500 4,855 (833,417) (743,310)
-------- -------- -------- --------
Net increase......................................... 7,084 4,939 142,944 62,685
Units outstanding, beginning of year................... 15,940 11,001 105,842 43,157
-------- -------- -------- --------
Units outstanding, end of year......................... 23,024 15,940 248,786 105,842
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
INTERNATIONAL EQUITY TOTAL RETURN
--------------------------- ---------------------------
1999 1998 1999 1998
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Units issued on premium payments....................... 71 33 771 542
Units redeemed on surrenders........................... (31) (22) (492) (324)
Units redeemed on annuity and death benefits........... (7) (7) (86) (48)
Units issued (redeemed) on net transfers from (to)
Fixed Account........................................ 11 (5) (15) (48)
Units issued (redeemed) on transfers between Investment
Divisions............................................ 148 81 3,195 3,385
-------- -------- -------- --------
Net increase (decrease).............................. 192 80 3,373 3,507
Units outstanding, beginning of year................... 1,012 932 11,136 7,629
-------- -------- -------- --------
Units outstanding, end of year......................... 1,204 1,012 14,509 11,136
======== ======== ======== ========
</TABLE>
F-22
<PAGE> 170
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
- --------------------------------------------------------------------------------
<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>
178 144 287 76 1,369 1,361
(92) (51) (184) (91) (1,120) (817)
(11) (10) (20) (16) (213) (110)
22 (11) (19) (12) (40) (199)
590 862 1,736 2,148 3,553 7,148
-------- -------- -------- -------- -------- --------
687 934 1,800 2,105 3,549 7,383
3,139 2,205 3,208 1,103 21,960 14,577
-------- -------- -------- -------- -------- --------
3,826 3,139 5,008 3,208 25,509 21,960
======== ======== ======== ======== ======== ========
</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>
385 504 458 246 711 404
(400) (302) (292) (118) (319) (204)
(54) (70) (56) (14) (45) (35)
(5) (91) 28 (4) 63 (17)
(148) 2,727 1,740 2,902 2,672 3,112
-------- -------- -------- -------- -------- --------
(222) 2,768 1,878 3,012 3,082 3,260
10,004 7,236 4,993 1,981 8,239 4,979
-------- -------- -------- -------- -------- --------
9,782 10,004 6,871 4,993 11,321 8,239
======== ======== ======== ======== ======== ========
</TABLE>
F-23
<PAGE> 171
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--Unit Transactions (in 000's) (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP AMERICAN CENTURY
INDEXED EQUITY INCOME & GROWTH
------------------- -------------------
1999 1998 1999 1998(a)
-----------------------------------------
<S> <C> <C> <C> <C>
Units issued on equity contribution by New York
Life Insurance and Annuity Corporation........... -- -- -- 1,000
Units issued on premium payments................... 1,556 1,003 370 66
Units redeemed on surrenders....................... (763) (438) (75) (8)
Units redeemed on annuity and death benefits....... (120) (50) (14) --
Units issued (redeemed) on net transfers from (to)
Fixed Account.................................... 188 (8) 127 5
Units issued on transfers between Investment
Divisions........................................ 6,369 7,086 1,326 1,200
-------- -------- -------- --------
Net increase..................................... 7,230 7,593 1,734 2,263
Units outstanding, beginning of year............... 17,575 9,982 2,263 --
-------- -------- -------- --------
Units outstanding, end of year..................... 24,805 17,575 3,997 2,263
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
CALVERT FIDELITY
SOCIAL VIP II
BALANCED CONTRAFUND
------------------- -------------------
1999 1998 1999 1998
-----------------------------------------
<S> <C> <C> <C> <C>
Units issued on premium payments................... 69 29 1,197 457
Units redeemed on surrenders....................... (22) (11) (318) (145)
Units redeemed on annuity and death benefits....... (3) (5) (34) (13)
Units issued (redeemed) on net transfers from (to)
Fixed Account.................................... 22 (7) 248 1
Units issued on transfers between Investment
Divisions........................................ 327 306 3,889 3,643
-------- -------- -------- --------
Net increase..................................... 393 312 4,982 3,943
Units outstanding, beginning of year............... 594 282 7,022 3,079
-------- -------- -------- --------
Units outstanding, end of year..................... 987 594 12,004 7,022
======== ======== ======== ========
</TABLE>
(a) For the period May 1, 1998 (Commencement of Operations) through December 31,
1998.
F-24
<PAGE> 172
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EAGLE ASSET
DREYFUS LARGE MANAGEMENT LORD ABBETT ALGER AMERICAN
COMPANY VALUE GROWTH EQUITY DEVELOPING GROWTH SMALL CAPITALIZATION
------------------- ------------------- ------------------- ---------------------
1999 1998(a) 1999 1998(a) 1999 1998(a) 1999 1998
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- 1,000 -- 1,000 -- 1,000 -- --
123 68 247 27 164 44 263 121
(43) (10) (27) (1) (39) (6) (74) (61)
(3) -- (2) -- -- -- (13) (11)
80 1 76 4 55 5 90 6
611 570 1,028 378 523 530 893 789
-------- -------- -------- -------- -------- -------- -------- --------
768 1,629 1,322 1,408 703 1,573 1,159 844
1,629 -- 1,408 -- 1,573 -- 1,904 1,060
-------- -------- -------- -------- -------- -------- -------- --------
2,397 1,629 2,730 1,408 2,276 1,573 3,063 1,904
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
FIDELITY JANUS ASPEN SERIES
VIP SERIES WORLDWIDE MFS GROWTH WITH
EQUITY-INCOME BALANCED GROWTH INCOME SERIES
------------------- ------------------- ------------------- -------------------
1999 1998 1999 1998 1999 1998 1999 1998(a)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
571 409 1,688 424 986 487 255 24
(252) (116) (403) (109) (353) (174) (31) (2)
(46) (22) (69) (19) (49) (20) (3) --
131 (4) 504 11 233 (6) 132 5
1,885 3,316 8,437 4,068 4,144 3,176 897 408
-------- -------- -------- -------- -------- -------- -------- --------
2,289 3,583 10,157 4,375 4,961 3,463 1,250 435
5,850 2,267 6,418 2,043 7,855 4,392 435 --
-------- -------- -------- -------- -------- -------- -------- --------
8,139 5,850 16,575 6,418 12,816 7,855 1,685 435
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
F-25
<PAGE> 173
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--Unit Transactions (in 000's) (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MORGAN STANLEY
DEAN WITTER
MFS RESEARCH EMERGING
SERIES MARKETS EQUITY
------------------- -------------------
1999 1998(a) 1999 1998
-----------------------------------------
<S> <C> <C> <C> <C>
Units issued on premium payments................... 252 18 156 62
Units redeemed on surrenders....................... (14) (1) (61) (36)
Units redeemed on annuity and death benefits....... -- -- (4) (3)
Units issued (redeemed) on net transfers from (to)
Fixed Account.................................... 125 1 51 (21)
Units issued on transfers between Investment
Divisions........................................ 384 234 676 12
-------- -------- -------- --------
Net increase..................................... 747 252 818 14
Units outstanding, beginning of year............... 252 -- 841 827
-------- -------- -------- --------
Units outstanding, end of year..................... 999 252 1,659 841
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
T. ROWE PRICE VAN ECK WORLDWIDE
EQUITY INCOME HARD ASSETS
------------------- -------------------
1999 1998(a) 1999 1998(a)
-----------------------------------------
<S> <C> <C> <C> <C>
Units issued on premium payments................... 262 76 36 2
Units redeemed on surrenders....................... (71) (9) (3) --
Units redeemed on annuity and death benefits....... (6) -- -- --
Units issued (redeemed) on net transfers from (to)
Fixed Account.................................... 112 22 (8) (5)
Units issued on transfers between Investment
Divisions........................................ 1,095 906 138 56
-------- -------- -------- --------
Net increase..................................... 1,392 995 163 53
Units outstanding, beginning of year............... 995 -- 53 --
-------- -------- -------- --------
Units outstanding, end of year..................... 2,387 995 216 53
======== ======== ======== ========
</TABLE>
(a) For the period May 1, 1998 (Commencement of Operations) through December 31,
1998.
F-26
<PAGE> 174
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-27
<PAGE> 175
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 the Separate Account:
<TABLE>
<CAPTION>
MAINSTAY VP
CAPITAL APPRECIATION
-----------------------------------------------
1999 1998 1997 1996 1995(a)
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $23.09 $16.95 $13.92 $11.89 $10.00
Net investment income (loss)................................ (0.34) (0.25) (0.22) (0.17) 0.06
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 5.80 6.39 3.25 2.20 1.83
------ ------ ------ ------ ------
Unit value, end of year..................................... $28.55 $23.09 $16.95 $13.92 $11.89
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP
GOVERNMENT
-----------------------------------------------
1999 1998 1997 1996 1995(a)
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $12.37 $11.51 $10.66 $10.57 $10.00
Net investment income (loss)................................ 0.53 0.70 0.69 0.86 2.49
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. (0.92) 0.16 0.16 (0.77) (1.92)
------ ------ ------ ------ ------
Unit value, end of year..................................... $11.98 $12.37 $11.51 $10.66 $10.57
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP
TOTAL RETURN
-----------------------------------------------
1999 1998 1997 1996 1995(a)
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $18.28 $14.58 $12.55 $11.36 $10.00
Net investment income (loss)................................ 0.11 0.17 0.17 0.27 0.79
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 2.70 3.53 1.86 0.92 0.57
------ ------ ------ ------ ------
Unit value, end of year..................................... $21.09 $18.28 $14.58 $12.55 $11.36
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP
GROWTH EQUITY
-----------------------------------------------
1999 1998 1997 1996 1995(a)
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............................... $21.87 $17.52 $14.01 $11.42 $10.00
Net investment income (loss)................................ (0.16) (0.07) (0.06) 0.05 0.35
Net realized and unrealized gains (losses) on security
transactions and realized capital gain distributions
received (includes the effect of capital share
transactions)............................................. 6.31 4.42 3.57 2.54 1.07
------ ------ ------ ------ ------
Unit value, end of year..................................... $28.02 $21.87 $17.52 $14.01 $11.42
====== ====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during the year.
(a) For the period May 1, 1995 (Commencement of Operations) through December 31,
1995.
(b) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
(c) For the period May 1, 1998 (Commencement of Operations) through December 31,
1998.
F-28
<PAGE> 176
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CASH MANAGEMENT CONVERTIBLE
----------------------------------------------- -------------------------------------
1999 1998 1997 1996 1995(a) 1999 1998 1997 1996(b)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1.14 $ 1.10 $ 1.06 $ 1.03 $ 1.00 $12.14 $11.78 $10.35 $10.00
0.04 0.04 0.04 0.04 0.02 0.45 0.49 0.38 0.08
-- -- -- (0.01) 0.01 4.41 (0.13) 1.05 0.27
------ ------ ------ ------ ------ ------ ------ ------ ------
$ 1.18 $ 1.14 $ 1.10 $ 1.06 $ 1.03 $17.00 $12.14 $11.78 $10.35
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP
HIGH YIELD MAINSTAY VP
CORPORATE BOND INTERNATIONAL EQUITY
----------------------------------------------- -----------------------------------------------
1999 1998 1997 1996 1995(a) 1999 1998 1997 1996 1995(a)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$14.12 $13.95 $12.52 $10.83 $10.00 $14.95 $12.32 $11.88 $10.90 $10.00
1.69 1.31 1.05 1.02 1.15 (0.16) 0.16 0.90 0.87 1.36
(0.09) (1.14) 0.38 0.67 (0.32) 4.09 2.47 (0.46) 0.11 (0.46)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$15.72 $14.12 $13.95 $12.52 $10.83 $18.88 $14.95 $12.32 $11.88 $10.90
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
VALUE BOND
----------------------------------------------- -----------------------------------------------
1999 1998 1997 1996 1995(a) 1999 1998 1997 1996 1995(a)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$15.76 $16.67 $13.76 $11.32 $10.00 $12.37 $11.50 $10.64 $10.57 $10.00
(0.03) 0.04 0.07 0.11 0.20 0.63 0.80 0.76 0.99 2.16
1.18 (0.95) 2.84 2.33 1.12 (0.98) 0.07 0.10 (0.92) (1.59)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$16.91 $15.76 $16.67 $13.76 $11.32 $12.02 $12.37 $11.50 $10.64 $10.57
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
AMERICAN CENTURY
MAINSTAY VP INCOME DREYFUS LARGE
INDEXED EQUITY & GROWTH COMPANY VALUE
------------------------------------------- ---------------- ----------------
1999 1998 1997 1996 1995(a) 1999 1998(c) 1999 1998(c)
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$23.19 $18.30 $13.97 $11.58 $10.00 $10.86 $10.00 $10.19 $10.00
(0.06) -- 0.09 0.21 0.62 (0.06) (0.02) (0.05) (0.03)
4.47 4.89 4.24 2.18 0.96 1.79 0.88 0.58 0.22
------ ------ ------ ------ ------ ------ ------ ------ ------
$27.60 $23.19 $18.30 $13.97 $11.58 $12.59 $10.86 $10.72 $10.19
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
F-29
<PAGE> 177
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--Selected Per Unit Data+ (Continued):
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EAGLE ASSET LORD
MANAGEMENT ABBETT
GROWTH DEVELOPING
EQUITY GROWTH
----------------- ----------------
1999 1998(c) 1999 1998(c)
------------------------------------
<S> <C> <C> <C> <C>
Unit value, beginning of year............................... $11.68 $10.00 $ 9.12 $10.00
Net investment income (loss)................................ (0.19) (0.09) 0.10 (0.08)
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received (includes
the
effect of capital share transactions)..................... 7.57 1.77 2.67 (0.80)
------ ------ ------ ------
Unit value, end of year..................................... $19.06 $11.68 $11.89 $ 9.12
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
VIP II
CONTRAFUND
-------------------------------------
1999 1998 1997 1996(b)
-------------------------------------
<S> <C> <C> <C> <C>
Unit value, beginning of year............................... $16.68 $13.01 $10.63 $10.00
Net investment income (loss)................................ (0.19) (0.14) (0.14) (0.03)
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received (includes
the
effect of capital share transactions)..................... 3.95 3.81 2.52 0.66
------ ------ ------ ------
Unit value, end of year..................................... $20.44 $16.68 $13.01 $10.63
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
SERIES
WORLDWIDE
GROWTH
-------------------------------------
1999 1998 1997 1996(b)
-------------------------------------
<S> <C> <C> <C> <C>
Unit value, beginning of year............................... $15.86 $12.48 $10.36 $10.00
Net investment income (loss)................................ (0.23) 0.20 (0.03) 0.08
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received (includes
the
effect of capital share transactions)..................... 10.10 3.18 2.15 0.28
------ ------ ------ ------
Unit value, end of year..................................... $25.73 $15.86 $12.48 $10.36
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
T. ROWE VAN ECK
PRICE WORLDWIDE
EQUITY HARD
INCOME ASSETS
----------------- -----------------
1999 1998(c) 1999 1998(c)
-------------------------------------
<S> <C> <C> <C> <C>
Unit value, beginning of year............................... $10.13 $10.00 $ 8.02 $10.00
Net investment income (loss)................................ 0.07 0.08 (0.07) (0.06)
Net realized and unrealized gains (losses) on security
transactions
and realized capital gain distributions received (includes
the
effect of capital share transactions)..................... 0.16 0.05 1.62 (1.92)
------ ------ ------ ------
Unit value, end of year..................................... $10.36 $10.13 $ 9.57 $ 8.02
====== ====== ====== ======
</TABLE>
+ Per unit data based on average monthly units outstanding during the year.
(a) For the period May 1, 1995 (Commencement of Operations) through December 31,
1995.
(b) For the period October 1, 1996 (Commencement of Operations) through December
31, 1996.
(c) For the period May 1, 1998 (Commencement of Operations) through December 31,
1998.
F-30
<PAGE> 178
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALGER
AMERICAN CALVERT
SMALL SOCIAL
CAPITALIZATION BALANCED
------------------------------------- -----------------------------------------------
1999 1998 1997 1996(b) 1999 1998 1997 1996 1995(a)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$11.97 $10.51 $ 9.57 $10.00 $16.92 $14.76 $12.46 $11.22 $10.00
(0.18) (0.15) (0.14) (0.02) 0.27 0.29 0.31 0.35 1.60
5.14 1.61 1.08 (0.41) 1.53 1.87 1.99 0.89 (0.38)
------ ------ ------ ------ ------ ------ ------ ------ ------
$16.93 $11.97 $10.51 $ 9.57 $18.72 $16.92 $14.76 $12.46 $11.22
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY JANUS ASPEN
VIP SERIES
EQUITY-INCOME BALANCED
------------------------------------- -------------------------------------
1999 1998 1997 1996(b) 1999 1998 1997 1996(b)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$14.53 $13.20 $10.45 $10.00 $16.32 $12.32 $10.24 $10.00
(0.03) (0.08) (0.13) (0.02) 0.25 0.42 0.28 0.17
0.73 1.41 2.88 0.47 3.83 3.58 1.80 0.07
------ ------ ------ ------ ------ ------ ------ ------
$15.23 $14.53 $13.20 $10.45 $20.40 $16.32 $12.32 $10.24
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
MFS MORGAN STANLEY
GROWTH DEAN WITTER
WITH MFS EMERGING MARKETS
INCOME SERIES RESEARCH SERIES EQUITY
----------------- ----------------- -------------------------------------
1999 1998(c) 1999 1998(c) 1999 1998 1997 1996(b)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$10.57 $10.00 $10.83 $10.00 $ 7.40 $ 9.89 $10.00 $10.00
(0.12) (0.07) (0.15) (0.07) (0.13) (0.08) (0.05) 0.02
0.67 0.64 2.57 0.90 7.00 (2.41) (0.06) (0.02)
------ ------ ------ ------ ------ ------ ------ ------
$11.12 $10.57 $13.25 $10.83 $14.27 $ 7.40 $ 9.89 $10.00
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
F-31
<PAGE> 179
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of New York Life Insurance and
Annuity Corporation and the Variable Annuity Separate Account-III 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, Lord Abbett Developing Growth, Alger American Small
Capitalization, Calvert Social Balanced, formerly known as Calvert Socially
Responsible, Fidelity VIP II Contrafund, Fidelity VIP Equity-Income, Janus Aspen
Series Balanced, Janus Aspen Series Worldwide Growth, MFS Growth With Income
Series, MFS Research Series, Morgan Stanley Dean Witter Emerging Markets Equity,
formerly known as Morgan Stanley Emerging Markets Equity, T. Rowe Price Equity
Income, and Van Eck Worldwide Hard Assets Investment Divisions (constituting the
NYLIAC Variable Annuity Separate Account-III, formerly known as LifeStages(R)
Annuity Separate Account) 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, the
MFS Variable Insurance Trust, the Morgan Stanley Dean Witter Universal Funds,
Inc., formerly known as Morgan Stanley Universal Funds, Inc., the T. Rowe Price
Equity Series, Inc., and the Van Eck Worldwide Insurance Trust, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 17, 2000
F-32
<PAGE> 180
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-33
<PAGE> 181
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-34
<PAGE> 182
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-35
<PAGE> 183
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-36
<PAGE> 184
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-37
<PAGE> 185
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-38
<PAGE> 186
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-39
<PAGE> 187
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-40
<PAGE> 188
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-41
<PAGE> 189
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
F-42
<PAGE> 190
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
MORTGAGE LOANS -- (CONTINUED)
cash flows for each loan to determine the current net present value. The
discount rate used approximates the current rate for new mortgages with
comparable characteristics and similar remaining maturities.
At December 31, 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>
F-43
<PAGE> 191
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY)
REAL ESTATE -- (CONTINUED)
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.
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-44
<PAGE> 192
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-45
<PAGE> 193
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-46
<PAGE> 194
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-47
<PAGE> 195
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-48
<PAGE> 196
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-49
<PAGE> 197
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-50
<PAGE> 198
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-51
<PAGE> 199
PROSPECTUS DATED MAY 1, 2000
FOR
MAINSTAY ACCESS VARIABLE ANNUITY
FROM
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A DELAWARE CORPORATION)
51 MADISON AVENUE, NEW YORK, NEW YORK 10010
INVESTING IN
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
This Prospectus describes the individual flexible premium MainStay Access
Variable Annuity policies issued by New York Life Insurance and Annuity
Corporation ("NYLIAC"). We designed these policies to assist individuals with
their long-term retirement planning needs. You can use the policies with
retirement plans that do or do not qualify for special federal income tax
treatment. The policies offer flexible premium payments, access to your money
through partial withdrawals (some withdrawals may be subject to a tax penalty),
a choice of when income payments commence, and a guaranteed death benefit if the
owner or annuitant dies before income payments have commenced.
Your premium payments accumulate on a tax-deferred basis. This means your
earnings are not taxed until you take money out of your policy, which can be
done in several ways. You can split your premium payments among a guaranteed
interest option and the twenty-six variable investment divisions listed below.
<TABLE>
<S> <C>
- MainStay VP Capital Appreciation
- MainStay VP Cash Management
- MainStay VP Convertible
- MainStay VP Government
- MainStay VP High Yield Corporate Bond
- MainStay VP International Equity
- MainStay VP Total Return
- MainStay VP Value
- MainStay VP Bond
- MainStay VP Growth Equity
- MainStay VP Indexed Equity
- American Century Income & Growth
- Dreyfus Large Company Value
- Eagle Asset Management Growth Equity
- Lord Abbett Developing Growth
- Alger American Small Capitalization
- Calvert Social Balanced
- Fidelity VIP II Contrafund(R)
- Fidelity VIP Equity-Income
- Janus Aspen Series Balanced
- Janus Aspen Series Worldwide Growth
- MFS(R) Growth With Income Series
- MFS(R) Research Series
- Morgan Stanley UIF Emerging Markets Equity
- T. Rowe Price Equity Income
- Van Eck Worldwide Hard Assets
</TABLE>
We do not guarantee the investment performance of these variable investment
divisions. Depending on market conditions, you can make or lose money in any of
the investment divisions.
You should read this Prospectus carefully before investing and keep it for
future reference. This Prospectus is not valid unless attached to current
prospectuses for the MainStay VP Series Fund, Inc., the Alger American Fund, the
Calvert Variable Series, Inc., the Fidelity Variable Insurance Products Fund II
(VIP II), the Fidelity Variable Insurance Products Fund (VIP), the Janus Aspen
Series, the MFS(R) Variable Insurance Trust(SM), The Universal Institutional
Funds, Inc., the T. Rowe Price Equity Series, Inc. and the Van Eck Worldwide
Insurance Trust (the "Funds", each individually a "Fund"). Each Investment
Division invests in shares of a corresponding Fund portfolio.
To learn more about the policy, you can obtain a copy of the Statement of
Additional Information ("SAI") dated May 1, 2000. The SAI has been filed with
the Securities and Exchange Commission ("SEC") and is incorporated by reference
into this Prospectus. The table of contents for the SAI appears at the end of
this Prospectus. For a free copy of the SAI, call us at (800) 762-6212 or write
to us at the address above.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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> 200
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS............................ 3
FEE TABLE.............................. 4
QUESTIONS AND ANSWERS ABOUT MAINSTAY
ACCESS VARIABLE ANNUITY.............. 7
FINANCIAL STATEMENTS................... 9
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION AND THE SEPARATE
ACCOUNT.............................. 10
New York Life Insurance and Annuity
Corporation....................... 10
The Separate Account................. 10
The Portfolios....................... 10
Additions, Deletions or Substitutions
of Investments.................... 11
Reinvestment......................... 12
THE POLICIES........................... 12
Selecting the Variable Annuity That's
Right for You..................... 12
Qualified and Non-Qualified
Policies.......................... 13
Policy Application and Premium
Payments.......................... 13
Payments Returned for Insufficient
Funds............................. 14
Your Right to Cancel ("Free Look")... 14
Issue Ages........................... 14
Transfers............................ 14
Procedures for Telephone
Transactions...................... 15
Dollar Cost Averaging Program........ 15
Automatic Asset Reallocation......... 16
Accumulation Period.................. 16
(a) Crediting of Premium
Payments..................... 16
(b) Valuation of Accumulation
Units........................ 16
Third Party Investment Advisory
Arrangements...................... 16
Policy Owner Inquiries............... 17
CHARGES AND DEDUCTIONS................. 17
Separate Account Charge.............. 17
Policy Service Charge................ 17
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Transfer Fees........................ 17
Group and Sponsored Arrangements..... 17
Taxes................................ 18
Fund Charges......................... 18
DISTRIBUTIONS UNDER THE POLICY......... 18
Surrenders and Withdrawals........... 18
(a) Surrenders.................... 19
(b) Partial Withdrawals........... 19
(c) Periodic Partial
Withdrawals.................. 19
(d) Hardship Withdrawals.......... 19
Required Minimum Distribution........ 19
Our Right to Cancel.................. 19
Annuity Commencement Date............ 19
Death Before Annuity Commencement.... 20
Income Payments...................... 21
(a) Election of Income Payment
Options...................... 21
(b) Other Methods of Payment...... 21
(c) Proof of Survivorship......... 21
Delay of Payments.................... 21
Designation of Beneficiary........... 22
Restrictions Under Internal Revenue
Code Section 403(b)(11)........... 22
THE FIXED ACCOUNT...................... 22
(a) Interest Crediting............ 22
(b) Transfers to Investment
Divisions.................... 22
FEDERAL TAX MATTERS.................... 23
Introduction......................... 23
Taxation of Annuities in General..... 23
Qualified Plans...................... 24
(a) Section 403(a) Plans.......... 24
(b) Section 403(b) Plans.......... 24
(c) Individual Retirement
Annuities.................... 24
(d) Roth Individual Retirement
Annuities.................... 25
(e) Deferred Compensation Plans... 25
DISTRIBUTOR OF THE POLICIES............ 25
VOTING RIGHTS.......................... 25
TABLE OF CONTENTS FOR THE STATEMENT OF
ADDITIONAL INFORMATION............... 26
</TABLE>
THIS PROSPECTUS IS NOT CONSIDERED AN OFFERING IN ANY STATE WHERE THE SALE
OF THIS POLICY CANNOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATIONS REGARDING THE OFFERING OTHER THAN AS DESCRIBED IN THIS
PROSPECTUS OR IN ANY ATTACHED SUPPLEMENT TO THIS PROSPECTUS OR IN ANY
SUPPLEMENTAL SALES MATERIAL WE AUTHORIZE.
2
<PAGE> 201
DEFINITIONS
ACCUMULATION UNIT--An accounting unit we use to calculate the Variable
Accumulation Value prior to the Annuity Commencement Date. Each Investment
Division of the Separate Account has a distinct variable Accumulation Unit
value.
ACCUMULATION VALUE--The sum of the Variable Accumulation Value and the Fixed
Accumulation Value of a policy.
ALLOCATION ALTERNATIVES--The Investment Divisions of the Separate Account and
the Fixed Account.
ANNUITANT--The person whose life determines the Income Payments, and upon whose
death prior to the Annuity Commencement Date, benefits under the policy may be
paid.
ANNUITY COMMENCEMENT DATE--The date on which we are to make the first Income
Payment under the policy.
BENEFICIARY--The person or entity having the right to receive the death benefit
set forth in the policy and who is the "designated beneficiary" for purposes of
Section 72 of the Internal Revenue Code in the event of the Annuitant's or the
policy owner's death.
BUSINESS DAY--Generally, any day on which the New York Stock Exchange ("NYSE")
is open for trading. Our Business Day ends at 4:00 p.m. Eastern Time or the
closing of regular trading on the NYSE, if earlier.
ELIGIBLE PORTFOLIOS ("PORTFOLIOS")--The mutual fund portfolios of the Funds that
are available for investment through the Investment Divisions of the Separate
Account.
FIXED ACCOUNT--An account that is credited with a fixed interest rate which
NYLIAC declares and is not part of the Separate Account. The Accumulation Value
of the Fixed Account is supported by assets in NYLIAC's general account, which
are subject to the claims of our general creditors.
FIXED ACCUMULATION VALUE--The sum of premium payments and transfers allocated to
the Fixed Account, plus interest credited on those premium payments and
transfers, less any transfers and partial withdrawals from the Fixed Account,
and policy service charges that may have already been assessed from the Fixed
Account.
FUND--An open-end management investment company.
INCOME PAYMENTS--Periodic payments NYLIAC makes after the Annuity Commencement
Date.
INVESTMENT DIVISION--The variable investment options available with the policy.
Each Investment Division invests exclusively in shares of a specified Eligible
Portfolio.
NON-QUALIFIED POLICIES--Policies that are not available for use in connection
with employee retirement plans that qualify for special federal income tax
treatment.
PAYMENT YEAR(S)--With respect to any premium payment, the year(s) beginning on
the date such premium payment is made to the policy.
POLICY ANNIVERSARY--An anniversary of the Policy Date shown on the Policy Data
Page.
POLICY DATA PAGE--Page 2 of the policy which contains the policy specifications.
POLICY DATE--The date from which we measure Policy Years, quarters, months and
Policy Anniversaries. It is shown on the Policy Data Page.
POLICY YEAR--A year starting on the Policy Date. Subsequent Policy Years begin
on each Policy Anniversary, unless otherwise indicated.
QUALIFIED POLICIES--Policies issued under employee retirement plans that qualify
for special federal income tax treatment.
SEPARATE ACCOUNT--NYLIAC Variable Annuity Separate Account-III, a segregated
asset account we established to receive and invest premium payments paid under
the policies. The Separate Account's Investment Divisions, in turn, purchase
shares of Eligible Portfolios.
VARIABLE ACCUMULATION VALUE--The sum of the products of the current Accumulation
Unit value(s) for each of the Investment Divisions multiplied by the number of
Accumulation Units held in the respective Investment Division.
3
<PAGE> 202
FEE TABLE
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE GOVERNMENT
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in
any Policy Year. NYLIAC reserves the right to charge
up to $30 for each transfer in excess of 12 transfers
per Policy Year.
Annual Policy Service Charge.............................. $40 per policy for policies with less than $50,000 of
Accumulation Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value) (including mortality and
expense risk and administrative fees)................... 1.55% 1.55% 1.55% 1.55%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 0.36% 0.25% 0.36% 0.30%
Administration Fees....................................... 0.20% 0.20% 0.20% 0.20%
Other Expenses............................................ 0.06% 0.06% 0.15% 0.09%
Total Fund Annual Expenses................................ 0.62% 0.51% 0.71% 0.59%
<CAPTION>
MAINSTAY VP
HIGH YIELD MAINSTAY VP
CORPORATE INTERNATIONAL
BOND EQUITY
----------- -------------
<S> <C> <C>
OWNER TRANSACTION EXPENSES
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in any
Policy Year. NYLIAC reserves the right to charge up to $30
for each transfer in excess of 12 transfers per Policy Year.
Annual Policy Service Charge.............................. $40 per policy for policies with less than $50,000 of
Accumulation Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value) (including mortality and
expense risk and administrative fees)................... 1.55% 1.55%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 0.30% 0.60%
Administration Fees....................................... 0.20% 0.20%
Other Expenses............................................ 0.07% 0.27%
Total Fund Annual Expenses................................ 0.57% 1.07%
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
TOTAL MAINSTAY VP MAINSTAY VP GROWTH INDEXED
RETURN VALUE BOND EQUITY EQUITY
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in any Policy
Year. NYLIAC reserves the right to charge up to $30 for each
transfer in excess of 12 transfers per Policy Year.
Annual Policy Service Charge.............................. $40 per policy for policies with less than $50,000 of Accumulation
Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value) (including mortality and
expense risk and administrative fees)................... 1.55% 1.55% 1.55% 1.55% 1.55%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 0.32% 0.36% 0.25% 0.25% 0.10%
Administration Fees....................................... 0.20% 0.20% 0.20% 0.20% 0.20%
Other Expenses............................................ 0.06% 0.07% 0.05% 0.04% 0.06%
Total Fund Annual Expenses................................ 0.58% 0.63% 0.50% 0.49% 0.36%
<CAPTION>
AMERICAN DREYFUS
CENTURY LARGE
INCOME & COMPANY
GROWTH VALUE
-------- -------
<S> <C> <C>
OWNER TRANSACTION EXPENSES
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in any
Policy Year. NYLIAC reserves the right to charge up to $30
for each transfer in excess of 12 transfers per Policy Year.
Annual Policy Service Charge.............................. $40 per policy for policies with less than $50,000 of
Accumulation Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value) (including mortality and
expense risk and administrative fees)................... 1.55% 1.55%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 0.50% 0.60%
Administration Fees....................................... 0.20% 0.20%
Other Expenses............................................ 0.15%(b) 0.15%(b)
Total Fund Annual Expenses................................ 0.85% 0.95%
</TABLE>
4
<PAGE> 203
FEE TABLE--(CONTINUED)
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
<TABLE>
<CAPTION>
EAGLE
ASSET ALGER
MANAGEMENT LORD ABBETT AMERICAN CALVERT
GROWTH DEVELOPING SMALL SOCIAL
EQUITY GROWTH CAPITALIZATION BALANCED
---------- ----------- -------------- --------
<S> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers
in any Policy Year. NYLIAC reserves the right to
charge up to $30 for each transfer in excess of 12
transfers per Policy Year.
Annual Policy Service Charge.............................. $40 per policy for policies with less than $50,000
of Accumulation Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value) (including mortality and
expense risk and administrative fees)................... 1.55% 1.55% 1.55% 1.55%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 0.50% 0.60% 0.85% 0.70%(c)
Administration Fees....................................... 0.20% 0.20% -- --
Other Expenses............................................ 0.15%(b) 0.15%(b) 0.05% 0.19%(c)
Total Fund Annual Expenses................................ 0.85% 0.95% 0.90% 0.89%(c)
<CAPTION>
JANUS
FIDELITY FIDELITY VIP ASPEN
VIP II EQUITY- SERIES
CONTRAFUND(R) INCOME BALANCED
------------- ------------ --------
<S> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers
in any Policy Year. NYLIAC reserves the right to
charge up to $30 for each transfer in excess of 12
transfers per Policy Year.
Annual Policy Service Charge.............................. $40 per policy for policies with less than $50,000
of Accumulation Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value) (including mortality and
expense risk and administrative fees)................... 1.55% 1.55% 1.55%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 0.58% 0.48% 0.65%
Administration Fees....................................... -- -- --
Other Expenses............................................ 0.07% 0.08% 0.02%
Total Fund Annual Expenses................................ 0.65%(d) 0.56%(d) 0.67%(e)
</TABLE>
<TABLE>
<CAPTION>
MORGAN
STANLEY
JANUS ASPEN UIF
SERIES MFS(R) GROWTH MFS(R) EMERGING
WORLDWIDE WITH INCOME RESEARCH MARKETS
GROWTH SERIES SERIES EQUITY
----------- ------------- -------- --------
<S> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in
any Policy Year. NYLIAC reserves the right to charge
up to $30 for each transfer in excess of 12 transfers
per Policy Year.
Annual Policy Service Charge.............................. $40 per policy for policies with less than $50,000 of
Accumulation Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value) (including mortality and
expense risk and administrative fees)................... 1.55% 1.55% 1.55% 1.55%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 0.65% 0.75% 0.75% 0.42%
Administration Fees....................................... -- -- -- 0.25%
Other Expenses............................................ 0.05% 0.13% 0.11% 1.12%
Total Fund Annual Expenses................................ 0.70%(e) 0.88% 0.86% 1.79%(f)
<CAPTION>
T. ROWE PRICE VAN ECK
EQUITY WORLDWIDE
INCOME HARD ASSETS
------------- -----------
<S> <C> <C>
OWNER TRANSACTION EXPENSES
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in
any Policy Year. NYLIAC reserves the right to charge
up to $30 for each transfer in excess of 12 transfers
per Policy Year.
Annual Policy Service Charge.............................. $40 per policy for policies with less than $50,000 of
Accumulation Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value) (including mortality and
expense risk and administrative fees)................... 1.55% 1.55%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 0.85%(g) 1.00%
Administration Fees....................................... -- --
Other Expenses............................................ -- 0.26%
Total Fund Annual Expenses................................ 0.85% 1.26%
</TABLE>
- ------------
(a) The Fund or its agents provided the fees and charges, which are based on
1999 expenses and may reflect estimated charges, except for Janus. We have
not verified the accuracy of the information provided by the agents.
(b) "Other Expenses" and "Total Fund Annual Expenses" for the American Century
Income & Growth, Dreyfus Large Company Value, Eagle Asset Management Growth
Equity and Lord Abbett Developing Growth 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%,
0.87% and 1.04% for the American Century Income & Growth, Dreyfus Large
Company Value, Eagle Asset Management Growth Equity and Lord Abbett
Developing Growth Portfolios, respectively.
(c) "Other Expenses" reflect an indirect fee. Net fund operating expenses after
reductions for fees paid indirectly would be 0.86% for Social Balanced
Portfolio. Total expenses have been restated to reflect expenses expected to
be incurred in 2000.
(d) Through arrangements with certain funds or FMR 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(R) Portfolio and 0.57% for the
Fidelity VIP Equity-Income Portfolio.
(e) Expenses are based upon expenses for the fiscal year ended December 31,
1999, restated to reflect a reduction in the management fee for Worldwide
Growth and Balanced portfolios. Expenses are stated both with and without
contractual waivers by Janus Capital. Waivers, if applicable, are first
applied against the management fee and then against other expenses, and will
continue until at least the next annual renewal of the advisory agreement.
All expenses are shown without the effect of any expense offset
arrangements.
(f) Morgan Stanley Asset Management has voluntarily agreed to waive its
"Advisory Fees" and/or reimburse the Portfolio, if necessary, to the extent
that the "Total Fund Annual Expenses" of the Portfolio exceeds 1.75% of
average daily net assets. For purposes of determining the amount of the
voluntary advisory fee waiver and/or reimbursement, if any, the portfolio's
annual operating expenses include certain investment related expenses such
as foreign country tax expense and interest expense on amounts borrowed
which were 0.04% of the average daily net assets for 1999. The fee waivers
and reimbursements described above may be terminated by Morgan Stanley
Asset Management at any time without notice. Absent such reductions,
"Advisory Fees," "Administration Fees" and "Total Fund Annual Expenses"
would have been 1.25%, 0.25% and 2.62% respectively.
(g) The "Advisory Fees" include the ordinary operating expenses of the Fund.
5
<PAGE> 204
EXAMPLES(1)
The table below will help you understand the various costs and expenses
that you will bear directly and indirectly. The table reflects charges and
expenses of the Separate Account and the Funds. Charges and expenses may be
higher or lower in future years. For more information on the charges reflected
in this table, see "Charges and Deductions" at page 17 and the Fund prospectuses
which accompany this Prospectus. NYLIAC may, where premium taxes are imposed by
state law, deduct premium taxes on surrender of the policy or on the Annuity
Commencement Date.
You would pay the following expenses on a $1,000 investment in one of the
Investment Divisions listed, assuming a 5% annual return on assets, whether you
surrender, annuitize or do not surrender your policy at the end of the stated
time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
MainStay VP Capital Appreciation........................ $25.32 $ 77.86 $133.03 $283.31
MainStay VP Cash Management............................. $24.21 $ 74.50 $127.42 $272.14
MainStay VP Convertible................................. $26.25 $ 80.63 $137.63 $292.37
MainStay VP Government.................................. $25.02 $ 76.95 $131.50 $280.27
MainStay VP High Yield Corporate Bond................... $24.81 $ 76.34 $130.48 $278.24
MainStay VP International Equity........................ $29.93 $ 91.58 $155.76 $327.78
MainStay VP Total Return................................ $24.91 $ 76.64 $131.00 $279.27
MainStay VP Value....................................... $25.43 $ 78.18 $133.54 $284.31
MainStay VP Bond........................................ $24.10 $ 74.19 $126.92 $271.13
MainStay VP Growth Equity............................... $24.00 $ 73.87 $126.38 $270.08
MainStay VP Indexed Equity.............................. $22.67 $ 69.88 $119.71 $256.70
Morgan Stanley UIF Emerging Markets Equity.............. $37.29 $113.28 $191.22 $394.91
American Century Growth & Income........................ $27.68 $ 84.90 $144.69 $306.27
Dreyfus Large Company Value............................. $28.70 $ 87.95 $149.74 $316.12
Eagle Asset Management Growth Equity.................... $27.68 $ 84.90 $144.69 $306.27
Lord Abbett Developing Growth........................... $28.70 $ 87.95 $149.74 $316.12
Alger American Small Capitalization..................... $28.18 $ 86.42 $147.22 $311.21
Calvert Social Balanced................................. $28.08 $ 86.12 $146.72 $310.24
Fidelity VIP II Contrafund(R)........................... $25.63 $ 78.78 $134.56 $286.33
Fidelity VIP Equity-Income.............................. $24.72 $ 76.03 $129.98 $277.23
Janus Aspen Series Balanced............................. $25.84 $ 79.40 $135.58 $288.34
Janus Aspen Series Worldwide Growth..................... $26.14 $ 80.31 $137.10 $291.36
MFS(R) Growth With Income Series........................ $27.99 $ 85.82 $146.22 $309.25
MFS(R) Research Series.................................. $27.78 $ 85.19 $145.20 $307.26
T. Rowe Price Equity Income............................. $27.68 $ 84.90 $144.69 $306.27
Van Eck Worldwide Hard Assets........................... $31.86 $ 97.34 $165.21 $345.96
</TABLE>
- ------------
(1) For purposes of calculating these examples, we have expressed the annual
policy service charge as an annual percentage of assets based on an
estimated average size of policies having an Accumulation Value of less than
$50,000. This calculation method reasonably reflects the annual policy
service charge applicable to policies having an Accumulation Value of less
than $50,000. The annual policy service charge does not apply to policies
having an Accumulation Value of $50,000 or greater. The expenses shown,
therefore, would be slightly lower if your policy's Accumulation Value is
$50,000 or greater.
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.
6
<PAGE> 205
QUESTIONS AND ANSWERS ABOUT MAINSTAY ACCESS VARIABLE ANNUITY
NOTE: THE FOLLOWING SECTION CONTAINS BRIEF QUESTIONS AND ANSWERS ABOUT
MAINSTAY ACCESS VARIABLE ANNUITY. YOU SHOULD REFER TO THE BODY OF THIS
PROSPECTUS FOR MORE DETAILED INFORMATION.
1. WHAT IS MAINSTAY ACCESS VARIABLE ANNUITY?
MainStay Access Variable Annuity is a flexible premium deferred variable
retirement annuity policy. NYLIAC issues the policy. You may allocate premium
payments to one or more of the Investment Divisions of the Separate Account, or
to the Fixed Account. The Accumulation Value will fluctuate according to the
performance of the Investment Divisions selected and the interest credited on
amounts in the Fixed Account.
2. WHERE CAN I ALLOCATE MY PREMIUM PAYMENT?
You can allocate your premium payments to one or more of the following
Allocation Alternatives:
SEPARATE ACCOUNT
The Separate Account currently consists of twenty-six Investment
Divisions. They are listed on the first page of this Prospectus. When
you allocate a premium payment to one of the Investment Divisions, the
Separate Account will invest your premium payment exclusively in shares
of the corresponding Eligible Portfolio of the relevant Fund.
FIXED ACCOUNT
Each premium payment, or the portion of any premium payment, you
allocate to the Fixed Account will reflect a guaranteed interest rate.
(See "The Fixed Account" at page 23.)
3. CAN I MAKE TRANSFERS AMONG THE INVESTMENT DIVISIONS AND THE FIXED ACCOUNT?
You can transfer all or part of the Accumulation Value of your policy
between the Investment Divisions or from the Investment Divisions to the Fixed
Account at least 30 days before the Annuity Commencement Date. Generally, you
can transfer a minimum amount of $500, unless we agree otherwise. You can make
unlimited transfers each Policy Year. We reserve the right to charge up to $30
for each transfer after the first twelve in a given Policy Year. (See
"Transfers" at page 15.) You may not transfer money into the Fixed Account if
you transferred money out of the Fixed Account during the previous 6-month
period.
You can make transfers from the Fixed Account, but certain restrictions may
apply. (See "The Fixed Account" at page 23). In addition, you can request
transfers through the Dollar Cost Averaging or Automatic Asset Reallocation
options described at pages 15 and 16 of this Prospectus.
4. WHAT CHARGES ARE ASSESSED AGAINST THE POLICY?
Before the date we start making Income Payments to you, we will deduct a
$40 policy service charge on each Policy Anniversary or upon surrender of the
policy if on that date the Accumulation Value is below $50,000. In addition, we
deduct a daily charge for certain mortality and expense risks NYLIAC assumes and
for policy administration expenses. This charge, on an annual basis, is 1.55% of
the average net asset value of the Separate Account. (See "Separate Account
Charge" at page 17.)
We do not impose any surrender charge on withdrawals or surrenders of the
policies.
The value of the shares of each Fund reflects advisory fees, administration
fees and other expenses deducted from the assets of each Fund. (See the Fund
prospectuses which are attached to this Prospectus.)
5. WHAT ARE THE MINIMUM INITIAL AND MAXIMUM ADDITIONAL PREMIUM PAYMENTS?
Unless we permit otherwise, the minimum initial premium payment is $2,000
for Qualified Policies and $15,000 for Non-Qualified Policies. You can make
additional premium payments of at least $1,000 or such lower amount as we may
permit at any time. You have a choice of sending premium payments directly to
NYLIAC or through pre-authorized monthly deductions from banks, credit unions or
similar accounts. We may agree to other methods of payment. The maximum
aggregate amount of premium payments we accept is $1,000,000 without prior
approval. For Qualified Policies, you may not make premium payments in excess of
the amount permitted by law for the plan.
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<PAGE> 206
6. HOW ARE PREMIUM PAYMENTS ALLOCATED?
We will allocate the initial premium payment to the Investment Divisions
and Fixed Account you have selected within two Business Days after receipt,
subject to our receipt of all information necessary to issue a policy.
Subsequent premium payments will be allocated at the close of the Business Day
on which they are received.
You may allocate the initial premium payment in a maximum of 18 Allocation
Alternatives, and thereafter, may maintain the Accumulation Value in up to 26
Investment Divisions plus the Fixed Account at any one time. (See "Automatic
Asset Reallocation" at page 16.) Moreover, you may raise or lower the
percentages (which must be in whole numbers) of the premium payment you place in
each Allocation Alternative at the time you make a premium payment. The minimum
amount which you may place in any one Allocation Alternative is $100, or such
lower amount as we may permit. We reserve the right to limit the amount of a
premium payment that may be placed in any one Allocation Alternative and the
number of Allocation Alternatives to which you allocate your Accumulation Value.
7. WHAT HAPPENS IF PREMIUM PAYMENTS ARE NOT MADE?
If we do not receive any premium payments for a period of two years, and
both the Accumulation Value of your policy and your total premium payments less
any withdrawals are less than $2,000, we reserve the right to terminate your
policy. We will notify you of our intention to exercise this right and give you
90 days to make a premium payment. If we terminate your policy, we will pay you
the Accumulation Value of your policy in one lump sum.
8. CAN I WITHDRAW MONEY FROM THE POLICY BEFORE THE ANNUITY COMMENCEMENT DATE?
You may make withdrawals from your policy before the Annuity Commencement
Date and while the Annuitant is alive. Your withdrawal request must be in a form
that is acceptable to us. Under most circumstances, you may make a minimum
partial withdrawal of $500. You may have to pay income tax and a 10% penalty tax
may apply if you are under age 59 1/2. (See "Distributions Under the Policy" at
page 19 and "Federal Tax Matters" at page 23.)
9. HOW WILL NYLIAC MAKE INCOME PAYMENTS ON THE ANNUITY COMMENCEMENT DATE?
We will make Income Payments on a fixed basis. We do not currently offer a
variable income payment option. We will make payments under the Life Income
Payment Option over the life of the Annuitant with a guarantee of 10 years of
payments, even if the Annuitant dies sooner. Income Payments will always be the
same specified amount. (See "Income Payments" at page 21.) We may offer other
options, at our discretion, where permitted by state law.
10. WHAT HAPPENS IF I DIE OR THE ANNUITANT DIES BEFORE THE ANNUITY COMMENCEMENT
DATE?
If you or the Annuitant dies before the Annuity Commencement Date, we will
pay the Beneficiary under the policy an amount equal to the greater of:
(a) the Accumulation Value,
(b) the sum of all premium payments made, less any partial withdrawals,
or
(c) the "reset value" (as described on page 20 of this Prospectus) plus
any additional premium payments made since the most recent "reset
date," less any proportional withdrawals since the most recent
"reset date."
If the Beneficiary is the spouse of the Annuitant or the owner, see
Question 11. (Also see "Death Before Annuity Commencement" at page 20 and
"Federal Tax Matters" at page 23.)
11. WHAT HAPPENS IF MY SPOUSE IS THE BENEFICIARY?
If you are the owner and Annuitant and you die before the Annuity
Commencement Date, your spouse may continue the policy as the new owner and
Annuitant if he/she is also the sole Beneficiary (for Non-Qualified, IRA, Roth
IRA, TSA or SEP policies only). If your spouse chooses to continue the policy,
we will not pay the death benefit proceeds as a consequence of your death, or
the Annuitant's death.
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<PAGE> 207
12. MAY I RETURN THE POLICY AFTER IT IS DELIVERED?
You may cancel the policy by returning it to us, or to the registered
representative through whom you purchased it, within 10 days of delivery of the
policy or such longer period as required under state law. In states where
approved, you will receive the policy's Accumulation Value on the date we
receive the policy without any deduction for premium taxes. This amount may be
more or less than your premium payments. Otherwise, you will receive from us the
greater of (i) the initial premium payment less any prior partial withdrawals or
(ii) the Accumulation Value on the date we receive the policy, without any
deduction for premium taxes. We will set forth the provision in your policy.
13. WHAT ABOUT VOTING RIGHTS?
You can instruct NYLIAC how to vote shares of the Funds in which you have a
voting interest through the Separate Account. (See "Voting Rights" at page 25.)
14. ARE POLICY LOANS AVAILABLE?
Policy loans are not available.
15. HOW DO I CONTACT MAINSTAY ANNUITIES OR NYLIAC?
<TABLE>
<S> <C> <C>
GENERAL INQUIRIES AND WRITTEN PREMIUM PAYMENTS
REQUESTS ------------------------------
----------------------------------
REGULAR MAIL MainStay Annuities--Client MainStay Annuities
Services P.O. Box 13886
51 Madison Avenue Newark, NJ 07188-0886
Room 3300
New York, NY 10010
EXPRESS MAIL MainStay Annuities--Client MainStay Annuities
Services (Box 13886) 3rd Floor
51 Madison Avenue 300 Harmon Meadow Boulevard
Room 3300 Secaucus, NJ 07094
New York, NY 10010
CUSTOMER SERVICE (800) 762-6212
AND UNIT VALUES
</TABLE>
FINANCIAL STATEMENTS
The audited financial statements of NYLIAC (including the auditor's report)
for the fiscal years ended December 31, 1999, 1998 and 1997 are included in the
Statement of Additional Information. As of December 31, 1999, the sale of
MainStay Access Variable Annuity policies had not begun. Therefore, no financial
statements for the Separate Account are presented.
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NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
AND THE SEPARATE ACCOUNT
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
New York Life Insurance and Annuity Corporation ("NYLIAC") is a stock life
insurance company incorporated in Delaware in 1980. NYLIAC is licensed to sell
life, accident and health insurance and annuities in the District of Columbia
and all states. In addition to the policies we describe in this Prospectus,
NYLIAC offers other life insurance policies and annuities.
NYLIAC is a wholly-owned subsidiary of New York Life Insurance Company
("New York Life"), a mutual life insurance company doing business in New York
since 1845. NYLIAC held assets of $29.669 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.
THE SEPARATE ACCOUNT
The Separate Account was established on November 30, 1994, pursuant to
resolutions of the NYLIAC Board of Directors. The Separate Account is registered
as a unit investment trust with the Securities and Exchange Commission under the
Investment Company Act of 1940. The Securities and Exchange Commission, however,
does not supervise 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 our other assets. The Separate Account assets are not
chargeable with liabilities incurred in any of NYLIAC's other business
operations (except to the extent that assets in the Separate Account exceed the
reserves and other liabilities of that Separate Account). The income, capital
gains and capital losses incurred on the assets of the Separate Account are
credited to or 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 the investment performance of the
Fixed Account and any other separate account of NYLIAC.
The Separate Account currently has 26 Investment Divisions. Premium
payments allocated to the Investment Divisions are invested solely in the
corresponding Eligible Portfolios of the relevant Fund.
THE PORTFOLIOS
The assets of each Eligible Portfolio are separate from the others and each
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.
WE OFFER NO ASSURANCE THAT ANY OF THE ELIGIBLE PORTFOLIOS WILL ATTAIN THEIR
RESPECTIVE STATED OBJECTIVES.
The Funds also make their shares available to certain other separate
accounts funding variable life insurance policies offered by NYLIAC. This is
called "mixed funding." Except for the MainStay VP Series Fund, all other Funds
also make their shares available to separate accounts of insurance companies
unaffiliated with NYLIAC. This is called "shared funding." Although we do not
anticipate any inherent difficulties arising from mixed and shared funding, it
is theoretically possible that, due to differences in tax treatment or other
considerations, the interests of owners of various contracts participating in a
certain Fund might at some time be in conflict. The Board of Directors/Trustees
of each Fund, each Fund's investment advisers, and NYLIAC are required to
monitor events to identify any material conflicts that arise from the use of the
Funds for mixed and shared funding. For more information about the risks of
mixed and shared funding, please refer to the relevant Fund prospectus.
We provide certain services to you in connection with the investment of
premium payments in the Investment Divisions, which, in turn, invest in the
Eligible Portfolios. These services include, among others, providing information
about the Eligible Portfolios. We receive a service fee from the investment
advisers or other service providers of some of the Funds in return for providing
services of this type. Currently, we receive service fees at annual rates
ranging from .10% to .21% of the aggregate net asset value of the shares of some
of the Eligible Portfolios held by the Investment Divisions.
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<PAGE> 209
The Eligible Portfolios of the relevant Funds, along with their investment
advisers, are listed in the following table:
<TABLE>
<CAPTION>
FUND INVESTMENT ADVISERS ELIGIBLE PORTFOLIOS
<S> <C> <C>
MainStay VP Series Fund, Inc. MacKay Shields 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. New York Life Insurance Company MainStay VP American Century Income & Growth;
MainStay VP Dreyfus Large Company Value;
MainStay VP Eagle Asset Management Growth
Equity;
MainStay VP Lord Abbett Developing Growth
The Alger American Fund Fred Alger Management, Inc. Alger American Small Capitalization
Calvert Variable Series, Inc. Calvert Asset Management Company, Calvert Social Balanced
Inc.
Fidelity Variable Insurance Fidelity Management and Research Fidelity VIP II Contrafund(R)
Products Fund II Company
Fidelity Variable Insurance Fidelity Management and Research Fidelity VIP Equity-Income
Products Fund Company
Janus Aspen Series Janus Capital Corporation Janus Aspen Series Balanced;
Janus Aspen Series Worldwide Growth
MFS(R) Variable Insurance MFS(R) Investment Management MFS(R) Growth With Income Series;
Trust(SM) MFS(R) Research Series
The Universal Institutional Funds, Morgan Stanley Asset Management Morgan Stanley UIF Emerging Markets Equity
Inc.
T. Rowe Price Equity Series, Inc. T. Rowe Price Associates, Inc. T. Rowe Price Equity Income
Van Eck Worldwide Insurance Trust Van Eck Associates Corporation Van Eck Worldwide Hard Assets
</TABLE>
Please refer to the attached prospectuses of the respective Funds for a complete
description of the Funds, the investment advisers and the Portfolios. The Funds'
prospectuses should be read carefully before any decision is made concerning the
allocation of premium payments to an Investment Division corresponding to a
particular Eligible Portfolio.
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
NYLIAC retains the right, subject to any applicable law, to make additions
to, deletions from, or substitutions for, the Eligible Portfolio shares held by
any Investment Division. NYLIAC reserves the right to eliminate the shares of
any of the Eligible Portfolios and to substitute shares of another portfolio of
a Fund, or of another registered open-end management investment company. We may
do this if the shares of the Eligible Portfolios are no longer available for
investment or if we believe investment in any Eligible Portfolio would become
inappropriate in view of the purposes of the Separate Account. To the extent
required by law, we will not make substitutions of shares attributable to your
interest in an Investment Division until you have been notified of the change.
This does not prevent the Separate Account from purchasing other securities for
other series or classes of policies, or from processing a conversion between
series or classes of policies on the basis of requests made by policy owners.
We may establish new Investment Divisions when we determine, in our sole
discretion, that marketing, tax, investment or other conditions so warrant. We
will make any new Investment Divisions available to existing
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<PAGE> 210
policy owners on a basis we determine. We may also eliminate one or more
Investment Divisions, if we determine, in our sole discretion, that marketing,
tax, investment or other conditions warrant.
In the event of any substitution or change, NYLIAC may, by appropriate
endorsement, change the policies to reflect such substitution or change. 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 payable date.
THE POLICIES
This is a flexible premium deferred policy which means additional premium
payments can be made. It is issued on the lives of individual Annuitants.
The policies are variable. This means that the Accumulation Value will
fluctuate based on the investment experience of the Investment Divisions you
select. The interest credited on the Fixed Accumulation Value also will vary.
NYLIAC does not guarantee the investment performance of the Separate Account or
of the Funds. You bear the entire investment risk with respect to amounts
allocated to the Investment Divisions of the Separate Account. We offer no
assurance that the investment objectives of the Investment Divisions will be
achieved. Accordingly, amounts allocated to the Investment Divisions of the
Separate Account are subject to the risks inherent in the securities markets
and, specifically, to price fluctuations in the Funds' investments.
As the owner of the policy, you have the right to (a) change the
Beneficiary, (b) name a new owner (on Non-Qualified Policies only), (c) receive
Income Payments, and (d) name a payee to receive Income Payments. You cannot
lose these rights. However, all rights of ownership cease upon your death.
SELECTING THE VARIABLE ANNUITY THAT'S RIGHT FOR YOU
In addition to the policy described in this prospectus, we offer other
variable annuities, with different features, fees and charges. Your registered
representative can help you decide which is best for you based on your
individual circumstances, time horizon and liquidity preferences. The MainStay
Plus Variable Annuity is designed generally for purchasers with an intermediate
time horizon. The MainStay Access Variable Annuity is designed generally for
purchasers with a shorter time horizon. Although there is no surrender charge
under a MainStay Access Variable Annuity, other charges are somewhat higher than
those in other policies.
The chart below outlines some of the different features for each variable
annuity we offer. Your registered representative can provide you with a
prospectus for one or more of these annuities, which contains more complete
information.
<TABLE>
<CAPTION>
MAINSTAY PLUS MAINSTAY ACCESS
VARIABLE ANNUITY VARIABLE ANNUITY
<S> <C> <C>
DCA Advantage Plan Yes (6, 12, 18 month No
accounts are available)
Surrender Charge Period 6 years (7%, 7%, 7%, 6%, 5%, 4%) (Based N/A
on each premium payment date)
Death Benefit Guarantee Annual Reset to age 85* Annual Reset to age 80
Total Separate Account Charges 1.40% 1.55%
(mortality and expense risk charge and
administration fee)
Annual Policy Fee $30 $40
Minimum Cash Value Required to Waive $20,000 $50,000
Policy Fee
</TABLE>
All policies and features may not be available in all states.
* Every 3 years in some states.
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<PAGE> 211
QUALIFIED AND NON-QUALIFIED POLICIES
We designed the policies primarily for the accumulation of retirement
savings, and to provide income at a future date. We issue both Qualified and
Non-Qualified Policies. Both types of policies offer tax-deferred accumulation.
You may purchase a Non-Qualified Policy with after-tax dollars to provide for
retirement income other than through a tax-qualified plan. You may purchase a
Qualified Policy with pre-tax dollars for use with any one of the tax-qualified
plans listed below.
(1) Section 403(b) Tax Sheltered Annuities purchased by employees of
certain tax-exempt organizations and certain state-supported
educational institutions;
(2) Section 408 or 408A Individual Retirement Annuities ("IRAs"), including
Roth IRAs;
(3) Section 457 Deferred Compensation Plans; and
(4) Section 403(a) annuities.
Please see "Federal Tax Matters" at page 23 for a detailed description of
these plans.
If you are considering a Qualified Policy, you should be aware that this
annuity will fund a retirement plan that already provides tax deferral under the
Internal Revenue Code. In such situations, the tax deferral of the annuity does
not provide additional benefits. In addition, you should be aware that there are
fees and charges in an annuity that may not be included in other types of
investments which may be more or less costly. However, the fees and charges
under the policies are designed to provide for certain payment guarantees and
features other than tax deferral that may not be available in these other types
of investments. They include:
(1) a Fixed Account option, which features a guaranteed fixed interest
rate;
(2) a death benefit that is payable should you die while the policy is in
force, which is reset every year (or longer if required by state law)
and is guaranteed to be at least the amount of your premium payments,
less any partial withdrawals;
(3) the option for your Beneficiary to receive a guaranteed amount of
monthly income for his or her lifetime should you die prior to the
Annuity Commencement Date; and
(4) the option to receive a guaranteed amount of monthly income for life
after the first Policy Year.
These features are explained in detail in this Prospectus. You should consult
with your tax or legal advisor to determine if the policy is suitable for your
tax qualified plan.
POLICY APPLICATION AND PREMIUM PAYMENTS
You can purchase a policy by completing an application. The application is
sent to us with your initial premium payment. In addition, in states where
permitted, you can also instruct a broker-dealer with whom NYLIAC has entered
into an agreement to forward the initial premium payment along with our "Policy
Request" form to us. If the application or Policy Request supplied by a
broker-dealer is complete and accurate, and we have received all other
information necessary to process the application, we will credit the initial
premium payment to the Allocation Alternatives you have selected within two
Business Days after receipt. If we cannot credit the initial premium payment
within five Business Days after we receive it because the application or Policy
Request is incomplete or inaccurate, we will contact you or the broker-dealer
providing the application or Policy Request and explain the reason for the
delay. Unless you consent to NYLIAC's retaining the initial premium payment and
crediting it as soon as the necessary requirements are fulfilled, we will offer
to refund the initial premium payment immediately. Acceptance of applications is
subject to NYLIAC's rules. We reserve the right to reject any application or
initial premium payment.
If we issue your policy based on a Policy Request, we will require you to
provide to us either a signed acknowledgement of the information contained in
the Policy Request in a form acceptable to us, or, where required by applicable
state law or regulation, a signed application form. From the time we issue the
policy until we receive the signed acknowledgement or application, the
Beneficiary under the policy will be the policy owner (or the estate). Also
policy transactions may not be made unless the Beneficiary designation or
transaction request is signature guaranteed. Upon receipt of the signed
acknowledgement or application form, the Beneficiary will be specified under the
policy and we will process transactions requested with respect to the policy
without requiring a signature guarantee.
You may allocate the initial premium payments in up to 18 Allocation
Alternatives, and thereafter, may maintain the Accumulation Value in up to 18
Investment Divisions plus the Fixed Account at any one time. We will credit
subsequent premium payments to the policy at the close of the Business Day on
which they are received at MainStay Annuities--Client Services. Moreover, you
may increase or decrease the percentages of the premium payments (which must be
in whole number percentages) allocated to each Allocation Alternative at
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<PAGE> 212
the time a premium payment is made. However, any change to the policy's
allocations may not result in the Accumulation Value being allocated to more
than 18 Investment Divisions plus the Fixed Account.
Unless we permit otherwise, the minimum initial premium payment is $2,000
for Qualified Policies and $15,000 for Non-Qualified Policies. You may make
additional premium payments of at least $1,000 or such lower amount as we may
permit at any time or by any method NYLIAC makes available. The currently
available methods of payment are direct payments to NYLIAC, pre-authorized
monthly deductions from your bank, a credit union or similar accounts and any
other method agreed to by us. You may make additional premium payments at any
time before the Annuity Commencement Date and while you and the Annuitant are
living. The maximum aggregate amount of premium payments we accept is $1,000,000
without prior approval. NYLIAC reserves the right to limit the dollar amount of
any premium payment.
For Qualified Policies, you may not make premium payments in any Policy
Year that exceed the amount permitted by the plan or by law.
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 a 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.
YOUR RIGHT TO CANCEL ("FREE LOOK")
You may cancel the policy by returning it to us, or to the registered
representative through whom you purchased it, within 10 days of delivery of the
policy or such longer period as required under state law. In states where
approved, you will receive the policy's Accumulation Value on the date we
receive the policy, without any deduction for premium taxes. This amount may be
more or less than your premium payments. Otherwise, you will receive from us the
greater of (i) the initial premium payment less any prior partial withdrawals or
(ii) the Accumulation Value on the date we receive the policy, without any
deduction for premium taxes or a surrender charge. We will set forth the
provision in your policy.
ISSUE AGES
We can issue Non-Qualified Policies if both you and the Annuitant are not
older than age 90 (some states may have lower age limits). We will accept
additional premium payments until either you or the Annuitant reaches the age of
90, unless we agree otherwise. For IRA, Roth IRA, TSA and SEP plans, you must
also be the Annuitant. We can issue Qualified Policies if the Owner/Annuitant is
between the ages of 18 and 80. We will accept additional premium payments until
the Owner/Annuitant reaches the age of 80, unless otherwise limited by the terms
of a particular plan or unless we agree otherwise.
TRANSFERS
You may transfer amounts between Investment Divisions of the Separate
Account or to the Fixed Account at least 30 days before the Annuity Commencement
Date. Except in connection with transfers made pursuant to Dollar Cost Averaging
and Automatic Asset Reallocation, the minimum amount that you may transfer from
one Investment Division to other Investment Divisions or to the Fixed Account,
is $500. Except for the Dollar Cost Averaging and Automatic Asset Reallocation
options, if the value of the remaining Accumulation Units in an Investment
Division or Fixed Account would be less than $500 after you make a transfer, we
will transfer the entire value unless NYLIAC in its discretion determines
otherwise. The amount(s) transferred to other Investment Divisions must be a
minimum of $500 for each Investment Division. Transfers into the Fixed Account
may be subject to restrictions. (See "The Fixed Accounts" at page 23.)
There is no charge for the first twelve transfers in any one Policy Year.
NYLIAC reserves the right to charge up to $30 for each transfer in excess of
twelve, subject to any applicable state insurance law requirements. Any transfer
made in connection with Dollar Cost Averaging or Automatic Asset Reallocation
will not count as a transfer toward the twelve transfer limit. You may make
transfers from the Fixed Account to the Investment Divisions in certain
situations. (See "The Fixed Account" at page 23.)
Your transfer requests must be in writing on a form approved by NYLIAC or
by telephone in accordance with established procedures. (See "Procedures for
Telephone Transactions" below.) We will make transfers from Investment Divisions
based on the Accumulation Unit values at the end of the Business Day on which we
receive the transfer request. (See "Delay of Payments" at page 22.) Transfers
may be limited in connection with Third Party Investment Advisory Arrangements.
(See page 17.)
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<PAGE> 213
PROCEDURES FOR TELEPHONE TRANSACTIONS
You may authorize us to accept telephone instructions from you or other
persons you designate for the following types of transactions: premium
allocations, transfers among Allocation Alternatives, partial withdrawals,
periodic partial withdrawals, Dollar Cost Averaging, or Automatic Asset
Reallocation. You can elect this feature by completing and signing a Telephone
Authorization form. Telephone Authorization may be elected, changed or canceled
at any time. You, or other persons you designate, may effect telephone
transactions by speaking with a service representative at (800) 762-6212.
Furthermore, we will confirm all telephone transactions in writing.
NYLIAC is not liable for any loss, cost or expense for action on telephone
instructions which are believed to be genuine in accordance with these
procedures. We must receive telephone transfer requests no later than 4:00 p.m.
Eastern Time in order to assure same day processing. We will process requests
received after 4:00 p.m. Eastern Time on the next Business Day.
DOLLAR COST AVERAGING PROGRAM
The main objective of dollar cost averaging is to achieve an average cost
per share that is lower than the average price per share during volatile market
conditions. Since you transfer the same dollar amount to an Investment Division
with each transfer, you purchase more units in an Investment Division if the
value per unit is low and fewer units if the value per unit is high. Therefore,
you achieve a lower than average cost per unit if prices fluctuate over the long
term. Similarly, for each transfer out of an Investment Division, you sell more
units in an Investment Division if the value per unit is low and fewer units if
the value per unit is high. Dollar cost averaging does not assure a profit or
protect against a loss in declining markets. Because it involves continuous
investing regardless of price levels, you should consider your financial ability
to continue to make purchases during periods of low price levels. We do not
count transfers under dollar cost averaging as part of your 12 free transfers
each Policy Year.
We have set forth below an example of how dollar cost averaging works. In
the example, we have assumed that you want to move $100 from the Cash Management
Investment Division to the MainStay VP Growth Equity Investment Division each
month. Assuming the Accumulation Unit values below, you would purchase the
following number of Accumulation Units:
<TABLE>
<CAPTION>
AMOUNT ACCUMULATION ACCUMULATION UNITS
MONTH TRANSFERRED MUNIT VALUE PURCHASED
<S> <C> <C> <C>
1 $100 $10.00 10.00
2 $100 $ 8.00 12.50
3 $100 $12.50 8.00
4 $100 $ 7.50 13.33
Total $400 $38.00 43.83
</TABLE>
The average unit price is calculated as follows:
<TABLE>
<S> <C> <C> <C> <C>
Total share price $38.00
- ----------------------- = ------ = $9.50
Number of months 4
</TABLE>
The average unit cost is calculated as follows:
<TABLE>
<S> <C> <C> <C> <C>
Total amount transferred $400.00
- ---------------------------- = ------- = $9.13
Total units purchased 43.83
</TABLE>
In this example, you would have paid an average cost of $9.13 per unit
while the average price per unit is $9.50.
The Dollar Cost Averaging option permits systematic investing to be made in
equal installments over various market cycles to help reduce risk. You may
specify, prior to the Annuity Commencement Date, a specific dollar amount to be
transferred from any Investment Divisions to any combination of Investment
Divisions and/or the Fixed Account. You will specify the Investment Divisions to
transfer money from, the Investment Divisions and/ or Fixed Account to transfer
money to, the amounts to be transferred, the date on which transfers will be
made, subject to our rules, and the frequency of the transfers (either monthly,
quarterly, semi-annually or annually). You may not make transfers from the Fixed
Account, but you may make transfers into the Fixed Account. Each transfer from
an Investment Division must be at least $100. You must have a minimum
Accumulation Value of $5,000 to elect this option. NYLIAC may reduce the minimum
transfer amount and minimum Accumulation Value at its discretion.
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<PAGE> 214
NYLIAC will make all dollar cost averaging transfers on the day of each
calendar month that you specify or on the next Business Day (if the day you have
specified is not a Business Day or does not exist in that month). You may
specify any day of the month. In order to process a transfer under our Dollar
Cost Averaging option, NYLIAC must have received a request in writing on a form
acceptable by us or by telephone (see "Procedures for Telephone Transactions" at
page 15) no later than one week prior to the date the transfers are to begin.
You may cancel the Dollar Cost Averaging option at any time in a written
request or by telephone (see "Procedures for Telephone Transactions" at page
15). NYLIAC may also cancel this option if the Accumulation Value is less than
$5,000, or such lower amount as we may determine. You may not elect the Dollar
Cost Averaging option if you have selected the Automatic Asset Reallocation
option.
AUTOMATIC ASSET REALLOCATION
This option allows you to maintain the percentage allocated to each
Investment Division at a pre-set level. For example, you might specify that 50%
of the Variable Accumulation Value of your policy be allocated to the MainStay
VP Convertible Investment Division and 50% of the Variable Accumulation Value be
allocated to the MainStay VP International Equity Investment Division. Over
time, the fluctuations in each of these Investment Division's investment results
will shift the percentages. If you elect this Automatic Asset Reallocation
option, NYLIAC will automatically transfer your Variable Accumulation Value back
to the percentages you specify. You may choose to have reallocations made
quarterly, semi-annually or annually. You must also specify the day of the month
that reallocations are to occur. The minimum Variable Accumulation Value
required to elect this option is $5,000. There is no minimum amount which you
must allocate among the Investment Divisions under this option. You may elect
Automatic Asset Reallocation by submitting the request in writing on a form
acceptable to us. You may not elect the Automatic Asset Reallocation option if
you have selected the Dollar Cost Averaging option.
You can cancel the Automatic Asset Reallocation option at any time in a
written request or by telephone (see "Procedures for Telephone Transactions" at
page 15). NYLIAC may also cancel this option if the Accumulation Value is less
than $5,000, or such a lower amount as we may determine.
ACCUMULATION PERIOD
(a) Crediting of Premium Payments
You can allocate a portion of each premium payment to one or more
Investment Divisions or the Fixed Account. The minimum amount that you may
allocate to any one Investment Division or the Fixed Account is $100 (or such
lower amount as we may permit). We will allocate the initial premium payment to
the Allocation Alternative you have specified within two Business Days after
receipt. We will allocate additional premium payments to the Allocation
Alternatives at the close of the Business Day on which they are received at
MainStay Annuities -- Client Services.
We will credit that portion of each premium payment you allocate to an
Investment Division in the form of Accumulation Units. We determine the number
of Accumulation Units we credit to a policy by dividing the amount allocated to
each Investment Division by the Accumulation Unit value for that Investment
Division on the day we are making this calculation. The value of an Accumulation
Unit will vary depending on the investment experience of the Portfolio in which
the Investment Division invests. The number of Accumulation Units we credit to a
policy will not, however, change as a result of any fluctuations in the value of
an Accumulation Unit. (See "The Fixed Account" at page 23 for a description of
interest crediting.)
(b) Valuation of Accumulation Units
The value of Accumulation Units in each Investment Division will change
daily to reflect the investment experience of the corresponding Portfolio as
well as the daily deduction of the Separate Account charges. The Statement of
Additional Information contains a detailed description of how we value the
Accumulation Units.
THIRD PARTY INVESTMENT ADVISORY ARRANGEMENTS
In some cases, the policy may be sold to policy owners 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 policy owner 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.
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<PAGE> 215
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 policy owners 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 policy owners. 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 policy owners.
POLICY OWNER INQUIRIES
Your inquiries should be addressed to MainStay Annuities. (See page 10).
CHARGES AND DEDUCTIONS
THERE ARE NO SURRENDER OR WITHDRAWAL CHARGES UNDER THE POLICIES.
SEPARATE ACCOUNT CHARGE
Prior to the Annuity Commencement Date, we deduct a daily charge from the
assets of the Separate Account to compensate us for certain mortality and
expense risks we assume under the policies and for providing policy
administration services. On an annual basis, the charge equals 1.55% of the
average net asset value of the Separate Account. We guarantee that this charge
will not increase. If the charge is insufficient to cover actual costs and
assumed risks, the loss will fall on NYLIAC. If the charge is more than
sufficient, we will add any excess to our general funds. We may use these funds
for any corporate purpose, including expenses relating to the sale of the
policies, to the extent that surrender charges do not adequately cover sales
expenses.
The mortality risk assumed is the risk that Annuitants as a group will live
for a longer time than our actuarial tables predict. As a result, we would be
paying more Income Payments than we planned. We also assume a risk that the
mortality assumptions reflected in our guaranteed annuity payment tables, shown
in each policy, will differ from actual mortality experience. Lastly, we assume
a mortality risk that, at the time of death, the guaranteed minimum death
benefit will exceed the policy's Accumulation Value. The expense risk assumed is
the risk that the cost of issuing and administering the policies will exceed the
amount we charge for these services.
POLICY SERVICE CHARGE
We deduct an annual $40 policy service charge each Policy Year on the
Policy Anniversary or upon surrender of the policy if on the Policy Anniversary
or date of surrender the Accumulation Value is less than $50,000. We deduct the
annual policy service charge from each Allocation Alternative in proportion to
its percentage of the Accumulation Value on the Policy Anniversary or date of
surrender. This charge is designed to cover the costs for providing services
under the policy such as collecting, processing and confirming premium payments
and establishing and maintaining the available methods of payment.
TRANSFER FEES
We do not impose any fee on the first 12 transfers in any Policy Year.
However, NYLIAC reserves the right to charge $30 for each transfer in excess of
12 transfers per Policy Year.
GROUP AND SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce the policy
service charge or change the minimum initial and additional premium payment
requirements. Group arrangements include those in which a trustee or an
employer, for example, purchases policies covering a group of individuals on a
group basis. Sponsored arrangements include those in which an employer allows us
to sell policies to its employees or retirees on an individual basis.
Our costs for sales, administration, and mortality generally vary with the
size and stability of the group among other factors. We take all these factors
into account when reducing charges. To qualify for reduced charges, a group or
sponsored arrangement must meet certain requirements, including our requirements
for size and number of years in existence. Group or sponsored arrangements that
have been set up solely to buy policies or that have been in existence less than
six months will not qualify for reduced charges.
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<PAGE> 216
We will make any reductions according to our rules in effect when a request
for a policy is approved. We may change these rules from time to time. Any
variation in the policy service charge will reflect differences in costs or
services and will not be unfairly discriminatory.
TAXES
NYLIAC may, where premium taxes are imposed by state law, deduct such taxes
from your policy either (i) when a surrender or cancellation occurs, or (ii) at
the Annuity Commencement Date. Applicable premium tax rates depend upon such
factors as your current state of residency, and the insurance laws and NYLIAC's
status in states where premium taxes are incurred. Current premium tax rates
range from 0% to 3.5%. Applicable premium tax rates are subject to change by
legislation, administrative interpretations or judicial acts.
Under present laws, NYLIAC will also incur state and local taxes (in
addition to the premium taxes described above) in several states. At present,
these taxes are not significant. If they increase, however, NYLIAC may make
charges for such taxes.
NYLIAC does not expect to incur any federal income tax liability
attributable to investment income or capital gains retained as part of the
reserves under the policies. (See "Federal Tax Matters" at page 23.) Based upon
these expectations, no charge is being made currently for corporate federal
income taxes which may be attributable to the Separate Account. Such a charge
may be made in future years for any federal income taxes NYLIAC incurs.
FUND CHARGES
The value of the assets of the Separate Account will indirectly reflect the
Funds' total fees and expenses. The Funds' total fees and expenses are not part
of the policy. They may vary in amount from year to year. These fees and
expenses are described in detail in the relevant Fund's prospectus and/or
statement of additional information.
DISTRIBUTIONS UNDER THE POLICY
SURRENDERS AND WITHDRAWALS
You can make partial withdrawals, periodic partial withdrawals, hardship
withdrawals or surrender the policy to receive part or all of the Accumulation
Value at any time before the Annuity Commencement Date and while the Annuitant
is living, by sending a written request on a form acceptable to MainStay
Annuities. In addition, you may request partial withdrawals and periodic partial
withdrawals by telephone. (See "Procedures for Telephone Transactions" at page
15.) The amount available for withdrawal is the Accumulation Value at the end of
the Business Day during which we receive the written or telephonic surrender or
withdrawal request, less any outstanding premium taxes which we may deduct, and
policy service charge, if applicable. If you have not provided us with a written
election not to withhold federal income taxes at the time you make a withdrawal
or surrender request, NYLIAC must by law withhold such taxes from the taxable
portion of any surrender or withdrawal. We will remit that amount to the federal
government. In addition, some states have enacted legislation requiring
withholding. We will pay all surrenders or withdrawals within seven days of
receipt of all documents (including documents necessary to comply with federal
and state tax law), subject to postponement in certain circumstances. (See
"Delay of Payments" at page 22.)
Since you assume the investment risk with respect to amounts allocated to
the Separate Account and because certain surrenders or withdrawals are subject
to premium tax deduction, the total amount paid upon surrender of the policy
(taking into account any prior withdrawals) may be more or less than the total
premium payments made.
Surrenders and withdrawals may be taxable transactions, and the Internal
Revenue Code provides that a 10% penalty tax may be imposed on certain early
surrenders or withdrawals. (See "Federal Tax Matters--Taxation of Annuities in
General" at page 24.)
(a) Surrenders
We may deduct any state premium tax, if applicable, and the annual policy
service charge, if applicable, from the amount paid. We will pay the proceeds in
a lump sum to you unless you elect a different Income Payment method. (See
"Income Payments" at page 21.) Surrenders may be taxable transactions and the
10% penalty tax provisions may be applicable. (See "Federal Tax
Matters--Taxation of Annuities in General" at page 24.)
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<PAGE> 217
(b) Partial Withdrawals
The minimum amount that can be withdrawn is $500, unless we agree
otherwise. We will withdraw the amount from the Allocation Alternatives in
accordance with your request. If you do not specify how to allocate a partial
withdrawal among the Allocation Alternatives, we will allocate the partial
withdrawal on a pro-rata basis. Partial withdrawals may be taxable transactions
and the 10% penalty tax provisions may be applicable. (See "Federal Tax
Matters--Taxation of Annuities in General" at page 24.)
If the requested partial withdrawal is greater than the value in any of the
Allocation Alternatives from which the partial withdrawal is being made, we will
pay the entire value of that Allocation Alternative to you. We will not process
partial withdrawal requests if honoring such requests would result in an
Accumulation Value of less than $2,000.
(c) Periodic Partial Withdrawals
You may elect to receive regularly scheduled partial withdrawals from the
policy. These periodic partial withdrawals may be paid on a monthly, quarterly,
semi-annual, or annual basis. You will elect the frequency of the withdrawals
and the day of the month for the withdrawals to be made. We will make all
withdrawals on the day of each calendar month you specify, or on the next
Business Day (if the day you have specified is not a Business Day or does not
exist in that month). You must specify the Investment Divisions and/or the Fixed
Account from which the periodic partial withdrawals will be made. The minimum
amount under this feature is $100, or such lower amount as we may permit.
Periodic partial withdrawals may be taxable transactions and the 10% penalty tax
provisions may be applicable. (See "Federal Tax Matters--Taxation of Annuities
in General" at page 24.) If you do not specify otherwise, we will withdraw money
on a pro-rata basis from each Investment Division and/or the Fixed Account.
(d) Hardship Withdrawals
Under certain Qualified Policies, the Plan Administrator may allow, in its
sole discretion, certain withdrawals it determines to be "Hardship Withdrawals."
The 10% penalty tax, if applicable, and provisions applicable to partial
withdrawals apply to Hardship Withdrawals.
REQUIRED MINIMUM DISTRIBUTION
For IRAs and IRA SEPs, the policy owner is generally not required to elect
the required minimum distribution option until April 1st of the year following
the calendar year he or she attains age 70 1/2. For TSAs, the policy owner is
generally not required to elect the required minimum distribution option until
April 1st of the year following the calendar year he or she attains age 70 1/2
or until April 1st of the year following the calendar year he or she retires,
whichever occurs later.
OUR RIGHT TO CANCEL
If we do not receive any premium payments for a period of two years, and
both the Accumulation Value of your policy and your total premium payments less
any withdrawals are less than $2,000, we reserve the right to terminate your
policy subject to any applicable state insurance law or regulation. We will
notify you of our intention to exercise this right and give you 90 days to make
a premium payment. If we terminate your policy, we will pay you the Accumulation
Value of your policy in one lump sum.
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is the date specified on the Policy Data
Page. The Annuity Commencement Date is the day that Income Payments are
scheduled to commence unless the policy has been surrendered or an amount has
been paid as proceeds to the designated Beneficiary prior to that date. You may
change the Annuity Commencement Date to an earlier date by providing written
notice to NYLIAC. You may defer the Annuity Commencement Date to a later date if
we agree to it, provided that we receive a written notice of the request at
least one month before the last selected Annuity Commencement Date. The Annuity
Commencement Date and Income Payment method for Qualified Policies may also be
controlled by endorsements, the plan, or applicable law.
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<PAGE> 218
DEATH BEFORE ANNUITY COMMENCEMENT
If you or the Annuitant dies prior to the Annuity Commencement Date, we
will pay an amount as proceeds to the designated Beneficiary, as of the date we
receive proof of death and all requirements necessary to make the payment. That
amount will be the greater of:
(a) the Accumulation Value;
(b) the sum of all premium payments made, less any partial withdrawals; or
(c) the "reset value" as calculated on the most recent Policy Anniversary,
plus any additional premium payments made, less any "proportional
withdrawals" made, since that Policy Anniversary.
The reset value is the greater of (a) the current Policy Anniversary's
Accumulation Value, and (b) the prior Policy Anniversary's value, plus any
premium payments since the prior Policy Anniversary, less any proportional
withdrawals since the prior Policy Anniversary.
A proportional withdrawal is an amount equal to the amount withdrawn from
the policy divided by the policy's Accumulation Value immediately preceding the
withdrawal, multiplied by the reset value immediately preceding the withdrawal.
We recalculate the reset value every Policy Anniversary until you or the
Annuitant reaches age 80. Please consult with your registered representative
regarding the reset value that is available under your particular policy.
We have set forth below an example of how the death benefit is calculated.
In this example, we have assumed the following:
(1) you purchase a policy with a $210,000 Premium Payment;
(2) the reset value on the second Policy Anniversary is $220,000;
(3) the Accumulation Value is $250,000 immediately before a $20,000 partial
withdrawal is taken during the third Policy Year;
(4) the proportional withdrawal is ($20,000/$250,000) X $220,000 = $17,600;
(5) the Accumulation Value is $195,000 on the third Policy Anniversary;
(6) The reset value is the greater of:
<TABLE>
<S> <C> <C>
(a) The current Policy Anniversary's Accumulation Value of $195,000; and
(b) The prior Policy Anniversary's value, plus any premium payments since the prior Policy
Anniversary date, less any proportional withdrawals since the last Policy Anniversary is:
$220,000 - $17,600 = $202,400.
</TABLE>
The greater is $202,400 (new reset value).
(7) If you die during the fourth Policy Year and the Accumulation Value of
the policy on the date of death has decreased to $175,000.
The death benefit is the greater of:
<TABLE>
<S> <C> <C>
(a) Accumulation Value = $175,000
(b) Premium Payments less any partial = $190,000 ($210,000 - $20,000)
withdrawals; or
(c) reset value on last Policy Anniversary) = $202,400
</TABLE>
The formula guarantees that the amount we pay will at least equal the sum
of all premium payments (less any partial withdrawals), independent of the
investment experience of the Separate Account. The Beneficiary may receive the
amount payable in a lump sum or under any life income payment option which is
then available. If more than one Beneficiary is named, each Beneficiary will be
paid a pro rata portion from each Allocation Alternative in which the policy is
invested as of the date we receive proof of death and all requirements necessary
to make the payment to that Beneficiary. We will keep the remaining balance in
the policy to pay the other Beneficiaries. Due to market fluctuations, the
remaining Accumulation Value may increase or decrease and we may pay subsequent
Beneficiaries a different amount.
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<PAGE> 219
We will make payments in a lump sum to the Beneficiary unless you have
elected or the Beneficiary elects otherwise in a signed written notice which
gives us the information that we need. If such an election is properly made, we
will apply all or part of these proceeds:
(i) under the Life Income Payment Option to provide an immediate
annuity for the Beneficiary who will be the policy owner and
Annuitant; or
(ii) under another Income Payment option we may offer at the time.
Payments under the annuity or under any other method of payment
we make available must be for the life of the Beneficiary, or for
a number of years that is not more than the life expectancy of
the Beneficiary at the time of the policy owner's death (as
determined for federal tax purposes), and must begin within one
year after the policy owner's death. (See "Income Payments"
below.)
If your spouse is the Beneficiary, we can pay the proceeds to the surviving
spouse if you die before the Annuity Commencement Date or the policy can
continue with the surviving spouse as (a) the new policy owner and, (b) if you
were the Annuitant, as the Annuitant. If a policy is jointly owned, ownership
rights and privileges under the policy must be exercised jointly and benefits
under the policy will be paid upon the death of any joint owner. (See "Federal
Tax Matters--Taxation of Annuities in General" at page 24.)
If the Annuitant and, where applicable under another Income Payment option,
the Joint Annuitant, if any, die after the Annuity Commencement Date, NYLIAC
will pay the sum required by the Income Payment option in effect.
We will make any distribution or application of policy proceeds within 7
days after NYLIAC receives all documents (including documents necessary to
comply with federal and state tax law) in connection with the event or election
that causes the distribution to take place, subject to postponement in certain
circumstances. (See "Delay of Payments" below.)
INCOME PAYMENTS
(a) Election of Income Payment Options
We will make Income Payments under the Life Income Payment Option or under
such other option we may offer at that time where permitted by state laws. We
will require that a lump sum payment be made if the Accumulation Value is less
than $2,000. At any time before the Annuity Commencement Date, you may change
the Income Payment option or request any other method of payment we agree to. If
the Life Income Payment Option is chosen, we may require proof of birth date
before Income Payments begin. For Income Payment options involving life income,
the actual age of the Annuitant will affect the amount of each payment. Since
payments based on older Annuitants are expected to be fewer in number, the
amount of each annuity payment should be greater. We will make payments under
the Life Income Payment Option in the same specified amount and over the life of
the Annuitant with a guarantee of 10 years of payments, even if the Annuitant
dies sooner. NYLIAC does not currently offer variable Income Payment options.
Under Income Payment Options involving life income, the payee may not
receive Income Payments equal to the total premium payments if the Annuitant
dies before the actuarially predicted date of death. We base Income Payment
Options involving life income on annuity tables that vary on the basis of sex,
unless the policy was issued under an employer sponsored plan or in a state
which requires unisex rates.
(b) Other Methods of Payment
If NYLIAC agrees, you (or the Beneficiary upon the death of you or the
Annuitant prior to the Annuity Commencement Date) may choose to have Income
Payments made under some other method of payment or in a lump sum.
(c) Proof of Survivorship
We may require satisfactory proof of survival from time to time before we
pay any Income Payments or other benefits. We will request the proof at least 30
days prior to the next scheduled payment date.
DELAY OF PAYMENTS
We will pay any amounts due from the Separate Account under the policy
within seven days of the date NYLIAC receives all documents (including documents
necessary to comply with federal and state tax law) in connection with a request
unless:
1. The New York Stock Exchange ("NYSE") is closed for other than usual
weekends or holidays, or trading on the NYSE is otherwise
restricted;
2. An emergency exists as defined by the Securities and Exchange
Commission ("SEC");
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<PAGE> 220
3. The SEC permits a delay for the protection of security holders; or
4. The check used to pay the premium has not cleared through the
banking system. This may take up to 15 days.
For the same reasons, we will delay transfers from the Separate Account to
the Fixed Account.
We may also delay payments of any amount due from the Fixed Account. When
permitted by law, we may defer payment of any partial withdrawal or full
surrender request for up to six months from the date of surrender from the Fixed
Account. We will pay interest of at least 3.5% per year on any partial
withdrawal or full surrender request deferred for 30 days or more.
DESIGNATION OF BENEFICIARY
You may name, in a written form acceptable to us, one or more
Beneficiaries. Thereafter, before the Annuity Commencement Date and while the
Annuitant is living, you may change the Beneficiary by written notice in a form
acceptable to NYLIAC. If before the Annuity Commencement Date, the Annuitant
dies before you and no Beneficiary for the proceeds or for a stated share of the
proceeds survives, the right to the proceeds or shares of the proceeds passes to
you. If you are the Annuitant, the proceeds pass to your estate. However, if the
policy owner who is not the Annuitant dies before the Annuity Commencement Date,
and no Beneficiary for the proceeds or for a stated share of the proceeds
survives, the right to the proceeds or shares of the proceeds passes to the
policy owner's estate.
For policies issued through a Policy Request, the Beneficiary will be the
policy owner or his/her estate until the Beneficiary is designated as described
under "Policy Application and Premium Payments" at page 14.
RESTRICTIONS UNDER INTERNAL REVENUE CODE SECTION 403(b)(11)
Distributions attributable to salary reduction contributions made in years
beginning after December 31, 1988 (including the earnings on these
contributions), as well as to earnings in such years on salary reduction
accumulations held as of the end of the last year beginning before January 1,
1989, may not begin before the employee attains age 59 1/2, separates from
service, dies or becomes disabled. The plan may also provide for distribution in
the case of hardship. However, hardship distributions are limited to amounts
contributed by salary reduction. The earnings on such amounts may not be
withdrawn. Even though a distribution may be permitted under these rules (e.g.
for hardship or after separation from service), it may still be subject to a 10%
additional income tax as a premature distribution.
Under the terms of your plan, you may have the option to invest in other
403(b) funding vehicles, including 403(b)(7) custodial accounts. You should
consult your plan document to make this determination.
THE FIXED ACCOUNT
The Fixed Account is supported by the assets in NYLIAC's general account,
which includes all of NYLIAC's assets except those assets specifically allocated
to NYLIAC's separate accounts. NYLIAC has sole discretion to invest the assets
of the Fixed Account subject to applicable law. The Fixed Account is not
registered under the federal securities laws and is generally not subject to
their provisions. Furthermore, the staff of the Securities and Exchange
Commission has not reviewed the disclosures in this Prospectus relating to the
Fixed Account. These disclosures regarding the Fixed Account may be subject to
certain applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
(a) Interest Crediting
NYLIAC guarantees that it will credit interest at an annual effective rate
of at least 3% to amounts allocated or transferred to the Fixed Account under
the policies. We credit interest on a daily basis. We will set an interest rate
in advance periodically. All premium payments allocated to, or amounts
transferred to, the Fixed Account will receive the rate in effect for the period
during which the allocation or transfer is made, until the end of the Policy
Year. Thereafter, the rate applicable to those amounts will change on each
Policy Anniversary. The new rate will be the rate in effect on the date on which
the Policy Anniversary occurs.
(b) Transfers to Investment Divisions
You may transfer amounts from the Fixed Account to the Investment Divisions
up to 30 days prior to the Annuity Commencement Date. The minimum amount that
you may transfer from the Fixed Account to the Investment Divisions is the
lesser of (i) $500 or (ii) the Fixed Accumulation Value, unless we agree
otherwise. Additionally, the remaining value in the Fixed Account must be at
least $500. If, after a contemplated transfer,
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<PAGE> 221
the remaining values in the Fixed Account would be less than $500, that amount
must be included in the transfer, unless NYLIAC in its discretion permits
otherwise. We determine amounts transferred from the Fixed Account on a
first-in, first-out ("FIFO") basis, for purposes of determining the rate at
which we credit interest on monies remaining in the Fixed Account.
You may not transfer money into the Fixed Account if you made a transfer
out of the Fixed Account during the previous six-month period.
You must make transfer requests in writing on a form approved by NYLIAC or
by telephone in accordance with established procedures. (See "Procedures for
Telephone Transactions" at page 15.)
We will deduct partial withdrawals from the Fixed Account on a FIFO basis
(i.e., from any value in the Fixed Account attributable to premium payments or
transfers from Investment Divisions in the same order in which you allocated
such payments or transfers to the Fixed Account during the life of the policy).
FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. The
Qualified Policies are designed for use by individuals in retirement plans which
are intended to qualify as plans qualified for special income tax treatment
under Sections 219, 403, 408, 408A or 457 of the Code. The ultimate effect of
federal income taxes on the Accumulation Value, on Income Payments and on the
economic benefit to you, the Annuitant or the Beneficiary depends on the type of
retirement plan for which the Qualified Policy is purchased, on the tax and
employment status of the individual concerned and on NYLIAC's tax status. The
following discussion assumes that Qualified Policies are used in retirement
plans that qualify for the special federal income tax treatment described above.
This discussion is not intended to address the tax consequences resulting from
all of the situations in which a person may be entitled to or may receive a
distribution under a policy. Any person concerned about these tax implications
should consult a competent tax adviser before making a premium payment. This
discussion is based upon NYLIAC's understanding of the present federal income
tax laws as they are currently interpreted by the Internal Revenue Service. We
cannot predict the likelihood of continuation of the present federal income tax
laws or of the current interpretations by the Internal Revenue Service, which
may change from time to time without notice. Any such change could have
retroactive effects regardless of the date of enactment. Moreover, this
discussion does not take into consideration any applicable state or other tax
laws except with respect to the imposition of any state premium taxes. We
suggest you consult with your tax adviser.
TAXATION OF ANNUITIES IN GENERAL
The following discussion assumes that the policies will qualify as annuity
contracts for federal income tax purposes. The Statement of Additional
Information discusses such qualifications.
Section 72 of the Code governs taxation of annuities in general. NYLIAC
believes that an annuity policy owner generally is not taxed on increases in the
value of a policy until distribution occurs either in the form of a lump sum
received by withdrawing all or part of the Accumulation Value (i.e., surrenders
or partial withdrawals) or as Income Payments under the Income Payment option
elected. The exception to this rule is that generally, a policy owner of any
deferred annuity policy who is not a natural person must include in income any
increase in the excess of the policy owner's Accumulation Value over the policy
owner's investment in the contract during the taxable year. However, there are
some exceptions to this exception. You may wish to discuss these with your tax
counsel. The taxable portion of a distribution (in the form of an annuity or
lump sum payment) is generally taxed as ordinary income. For this purpose, the
assignment, pledge, or agreement to assign or pledge any portion of the
Accumulation Value generally will be treated as a distribution.
In the case of a withdrawal or surrender distributed to a participant or
Beneficiary under a Qualified Policy (other than a Qualified Policy used in a
retirement plan that qualifies for special federal income tax treatment under
Section 457 of the Code as to which there are special rules), a ratable portion
of the amount received is taxable, generally based on the ratio of the
investment in the contract to the total policy value. The "investment in the
contract" generally equals the portion, if any, of any premium payments paid by
or on behalf of an individual under a policy which is not excluded from the
individual's gross income. For policies issued in connection with qualified
plans, the "investment in the contract" can be zero. The law requires the use of
special simplified methods to determine the taxable amount of payments that are
based in whole or in part on
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the Annuitant's life and that are paid from qualified retirement plans under
Section 401(a) and from qualified annuities and Tax Sheltered Annuities under
Sections 403(a) and 403(b).
Generally, in the case of a withdrawal under a Non-Qualified Policy before
the Annuity Commencement Date, amounts received are first treated as taxable
income to the extent that the Accumulation Value immediately before the
withdrawal exceeds the "investment in the contract" at that time. Any additional
amount withdrawn is not taxable.
Although the tax consequences may vary depending on the Income Payment
option elected under the policy, in general, only the portion of the Income
Payment that represents the amount by which the Accumulation Value exceeds the
"investment in the contract" will be taxed. After the investment in the policy
is recovered, the full amount of any additional Income Payments is taxable. For
fixed Income Payments, in general, there is no tax on the portion of each
payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the Income Payments for the term of the
payments. However, the remainder of each Income Payment is taxable until the
recovery of the investment in the contract, and thereafter the full amount of
each annuity payment is taxable. If death occurs before full recovery of the
investment in the contract, the unrecovered amount may be deducted on the
annuitant's final tax return.
In the case of a distribution, a penalty tax equal to 10% of the amount
treated as taxable income may be imposed. The penalty tax is not imposed in
certain circumstances, including, generally, distributions: (1) made on or after
the date on which the taxpayer is actual age 59 1/2, (2) made as a result of the
policy owner's or Annuitant's death or disability, or (3) received in
substantially equal installments paid at least annually as a life annuity. Other
tax penalties may apply to certain distributions pursuant to a Qualified Policy.
All non-qualified, deferred annuity contracts issued by NYLIAC (or its
affiliates) to the same policy owner during any calendar year are to be treated
as one annuity contract for purposes of determining the amount includable in an
individual's gross income. In addition, there may be other situations in which
the Treasury Department may conclude (under its authority to issue regulations)
that it would be appropriate to aggregate two or more annuity contracts
purchased by the same policy owner. Accordingly, a policy owner should consult a
competent tax adviser before purchasing more than one policy or other annuity
contract.
A transfer of ownership of a policy, or designation of an Annuitant or
other Beneficiary who is not also the policy owner, may result in certain income
or gift tax consequences to the policy owner. A policy owner contemplating any
transfer or assignment of a policy should contact a competent tax adviser with
respect to the potential tax effects of such a transaction.
QUALIFIED PLANS
The Qualified Policies are designed for use with several types of tax
qualified plans. The tax rules applicable to participants and beneficiaries in
such qualified plans vary according to the type of plan and the terms and
conditions of the plan itself. Special favorable tax treatment may be available
for certain types of contributions and distributions (including special rules
for certain lump sum distributions to individuals who attained the age of 50 by
January 1, 1986). Adverse tax consequences may result from contributions in
excess of specified limits, distributions prior to age 59 1/2 (subject to
certain exceptions), distributions that do not conform to specified minimum
distribution rules and in certain other circumstances. Therefore, this
discussion only provides general information about use of the policies with the
various types of qualified plans. Policy owners and participants under qualified
plans as well as Annuitants and Beneficiaries are cautioned that the rights of
any person to any benefits under qualified plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the policy issued in connection with the plan. Purchasers of policies for use
with any qualified plan should seek competent legal and tax advice regarding the
suitability of the policy.
(a) Section 403(a) Plans. Under Section 403(a) of the Code, payments
made by employers to purchase annuity contracts, which meet certain
requirements, for their employees are excludible from the gross income of
the employee. Any amounts distributed to the employees under such annuity
contracts are taxable to them in the years in which distributions are made.
(b) Section 403(b) Plans. Under Section 403(b) of the Code, payments
made by public school systems and certain tax exempt organizations to
purchase annuity policies for their employees are excludable from the gross
income of the employee, subject to certain limitations. However, such
payments may be subject to FICA (Social Security) taxes.
(c) Individual Retirement Annuities. Sections 219 and 408 of the Code
permit individuals or their employers to contribute to an individual
retirement program known as an "Individual Retirement Annuity" or "IRA",
including an employer-sponsored Simplified Employee Pension or "SEP".
Individual Retirement Annuities
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are subject to limitations on the amount which may be contributed and
deducted and the time when distributions may commence. In addition,
distributions from certain other types of qualified plans may be placed
into Individual Retirement Annuities on a tax-deferred basis.
(d) Roth Individual Retirement Annuities. Section 408A of the Code
permits individuals with incomes below a certain level to contribute to an
individual retirement program known as a "Roth Individual Retirement
Annuity" or "Roth IRA." Roth IRAs are subject to limitations on the amount
that may be contributed. Contributions to Roth IRAs are not deductible, but
distributions from Roth IRAs that meet certain requirements are not
included in gross income. Certain individuals are eligible to convert their
existing non-Roth IRAs into Roth IRAs. They will be subject to income tax
at the time of conversion.
(e) Deferred Compensation Plans. Section 457 of the Code, while not
actually providing for a qualified plan as that term is normally used,
provides for certain deferred compensation plans with respect to service
for state governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities and tax exempt
organizations which enjoy special treatment. The policies can be used with
such plans. Under such plans, a participant may specify the form of
investment in which his or her participation will be made. Such investments
are generally owned by, and are subject to, the claims of the general
creditors of the sponsoring employer, except that Section 457 plans of
state and local government must be held and used for the exclusive benefit
of participants and beneficiaries in a trust or annuity contract.
DISTRIBUTOR OF THE POLICIES
NYLIFE Distributors Inc. ("NYLIFE Distributors"), 51 Madison Avenue, New
York, New York 10010, is the principal underwriter and the distributor of the
policies. It is an indirect wholly-owned subsidiary of New York Life. The
maximum commission paid to broker-dealers who have entered into dealer
agreements with NYLIFE Distributors is not expected to exceed 7%. A portion of
this amount is paid as commissions to registered representatives.
VOTING RIGHTS
The Funds are not required to and typically do not hold routine annual
stockholder meetings. Special stockholder meetings will be called when
necessary. To the extent required by law, NYLIAC will vote the Eligible
Portfolio shares held in the Investment Divisions at special shareholder
meetings of the Funds in accordance with instructions we receive from persons
having voting interests in the corresponding Investment Division. If, however,
the federal securities laws are amended, or if NYLIAC's present interpretation
should change, and as a result, NYLIAC determines that it is allowed to vote the
Eligible Portfolio shares in its own right, we may elect to do so.
Prior to the Annuity Commencement Date, you hold a voting interest in each
Investment Division to which you have money allocated. We will determine the
number of votes which are available to you by dividing the Accumulation Value
attributable to an Investment Division by the net asset value per share of the
applicable Eligible Portfolios. We will calculate the number of votes which are
available to you separately for each Investment Division. We will determine that
number by applying your percentage interest, if any, in a particular Investment
Division to the total number of votes attributable to the Investment Division.
We will determine the number of votes of the Eligible Portfolio which are
available as of the date established by the Portfolio of the relevant Fund.
Voting instructions will be solicited by written communication prior to such
meeting in accordance with procedures established by the relevant Fund.
If we do not receive timely instructions, we will vote those shares in
proportion to the voting instructions which are received with respect to all
policies participating in that Investment Division. We will apply voting
instructions to abstain on any item to be voted upon on a pro rata basis to
reduce the votes eligible to be cast. Each person having a voting interest in an
Investment Division will receive proxy material, reports and other materials
relating to the appropriate Eligible Portfolio.
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STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
FOR
MAINSTAY ACCESS VARIABLE ANNUITY
FROM
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
INVESTING IN
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
This Statement of Additional Information ("SAI") is not a prospectus. This
SAI contains information that expands upon subjects discussed in the current
MainStay Access Variable Annuity Prospectus. You should read the SAI in
conjunction with the current MainStay Access Variable Annuity Prospectus dated
February 4, 2000. You may obtain a copy of the Prospectus by calling MainStay
Annuities at 800-762-6212 or writing to MainStay Annuities, 51 Madison Avenue,
Room 3300, New York, NY 10010, ATTN: CLIENT SERVICES. Terms used but not defined
in this SAI have the same meaning as in the current MainStay Access Variable
Annuity Prospectus.
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE POLICIES (13)........................................... 2
Valuation of Accumulation Units (16)................... 2
INVESTMENT PERFORMANCE CALCULATIONS......................... 2
MainStay VP Cash Management Investment Division........ 2
MainStay VP Government, MainStay VP High Yield
Corporate Bond and MainStay VP Bond Investment
Division Yields...................................... 3
Average Annual Total Return............................ 3
ANNUITY PAYMENTS............................................ 4
GENERAL MATTERS............................................. 4
FEDERAL TAX MATTERS (23).................................... 5
Taxation of New York Life Insurance and Annuity
Corporation.......................................... 5
Tax Status of the Policies............................. 5
DISTRIBUTOR OF THE POLICIES (25)............................ 6
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS...................... 6
STATE REGULATION............................................ 6
RECORDS AND REPORTS......................................... 6
LEGAL PROCEEDINGS........................................... 6
EXPERTS..................................................... 7
OTHER INFORMATION........................................... 7
FINANCIAL STATEMENTS........................................ F-1
</TABLE>
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* (Numbers in parentheses refer to page numbers of corresponding sections of the
current MainStay Access Variable Annuity Prospectus.)
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THE POLICIES
The following provides additional information about the policies and
supplements the description in the Prospectus.
VALUATION OF ACCUMULATION UNITS
Accumulation Units are valued separately for each Investment Division of
the Separate Account. The method used for valuing Accumulation Units in each
Investment Division is the same. We arbitrarily set the value of each
Accumulation Unit as of the date operations began for the Investment Division.
Thereafter, the value of an Accumulation Unit of an Investment Division for any
Business Day equals the value of an Accumulation Unit in that Investment
Division as of the immediately preceding Business Day multiplied by the "Net
Investment Factor" for that Investment Division for the current Business Day.
We determine the Net Investment Factor for each Investment Division for any
period from the close of the preceding Business Day to the close of the current
Business Day (the "Valuation Period") by the following formula:
(a/b) - c
Where: a = the result of:
(1) the net asset value per share of the Eligible Portfolio shares
held in the Investment Division determined at the end of the current
Valuation Period, plus
(2) the per share amount of any dividend or capital gain distribution
made by the Eligible Portfolio for shares held in the Investment
Division if the "ex-dividend" date occurs during the current Valuation
Period;
b = the net asset value per share of the Eligible Portfolio shares held
in the Investment Division determined as of the end of the
immediately preceding Valuation Period; and
c = a factor representing the charge deducted from the applicable
Investment Division on a daily basis. Such factor is equal, on an
annual basis, to 1.55% of the daily net asset value of the Separate
Account. (See "Separate Account Charges" at page 17 of the
Prospectus.)
The Net Investment Factor may be greater or less than one. Therefore, the
value of an Accumulation Unit in an Investment Division may increase or decrease
from Valuation Period to Valuation Period.
INVESTMENT PERFORMANCE CALCULATIONS
MAINSTAY VP CASH MANAGEMENT INVESTMENT DIVISION
NYLIAC calculates the MainStay VP Cash Management Investment Division's
current annualized yield for a seven-day period in a manner which does not take
into consideration any realized or unrealized gains or losses on shares of the
MainStay VP Cash Management Portfolio or on its portfolio securities. This
current annualized yield is computed by determining the net change (exclusive of
realized gains and losses on the sale of securities and unrealized appreciation
and depreciation) in the value of a hypothetical account having a balance of one
unit of the MainStay VP Cash Management Investment Division at the beginning of
such seven-day period, dividing such net change in account value by the value of
the account at the beginning of the period to determine the base period return
and annualizing this quotient on a 365-day basis. The net change in account
value reflects the deductions for the administration fee and the mortality and
expense risk charge, and income and expenses accrued during the period. Because
of these deductions, the yield for the MainStay VP Cash Management Division will
be lower than the yield for the MainStay VP Cash Management Portfolio.
NYLIAC also calculates the effective yield of the MainStay VP Cash
Management Investment Division for the same seven-day period on a compounded
basis. The effective yield is calculated by compounding the unannualized base
period return by adding one to the base period return, raising the sum to a
power equal to 365 divided by 7, and subtracting one from the result.
The yield on amounts held in the MainStay VP Cash Management Investment
Division normally will fluctuate on a daily basis. Therefore, the disclosed
yield for any given past period is not an indication or representation of future
yields or rates of return. The MainStay VP Cash Management Investment Division's
actual yield is affected by changes in interest rates on money market
securities, average portfolio maturity of the MainStay VP Cash
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Management Portfolio, the types and quality of portfolio securities held by the
MainStay VP Cash Management Portfolio, and its operating expenses.
MAINSTAY VP GOVERNMENT, MAINSTAY VP HIGH YIELD CORPORATE BOND AND MAINSTAY
VP BOND INVESTMENT DIVISION YIELDS
The current annualized yield of the MainStay VP Government, MainStay VP
High Yield Corporate Bond and MainStay VP Bond Investment Divisions refers to
the income generated by these Investment Divisions over a specified 30-day
period. Because the yield is annualized, the yield generated by an Investment
Division during the 30-day period is assumed to be generated each 30-day period.
We compute the yield by dividing the net investment income per accumulation unit
earned during the period by the price per unit on the last day of the period,
according to the following formula:
YIELD = 2[(a-b+1)(6)-1]
----
cd
Where: a = net investment income earned during the period by the Portfolio
attributable to shares owned by the MainStay VP Government, MainStay
VP High Yield Corporate Bond or MainStay VP Bond Investment Division.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of accumulation units outstanding during
the period.
d = the maximum offering price per accumulation unit on the last day of
the period.
Accrued expenses will include all recurring fees that are charged to all
policy owner accounts. The yield calculations do not reflect the effect of any
surrender charges that may be applicable to a particular policy. Surrender
charges range from 7% to 0% of the premium payments withdrawn depending on the
elapsed time since the relevant premium payment was made.
Because of the charges and deductions imposed by the Separate Account the
yield for the Investment Divisions will be lower than the yield for the
corresponding Portfolio of the Fund. The yield on amounts held in the Investment
Divisions normally will fluctuate over time. Therefore, the disclosed yield for
any given past period is not an indication or representation of future yields or
rates of return. The MainStay VP Government, MainStay VP High Yield Corporate
Bond or MainStay VP Bond Investment Division's actual yield will be affected by
the types and quality of portfolio securities held by the MainStay VP
Government, MainStay VP High Yield Corporate Bond and MainStay VP Bond
Portfolios of the Fund and their operating expenses.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return quotations for
the Investment Divisions are computed by finding the average annual compounded
rates of return over the periods shown that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P(1+T)(n) = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one, five, or ten-year period or the inception date,
at the end of the one, five or ten-year period (or fractional portion
thereof).
All total return figures are prepared under methods the SEC requires when
advertising performance information. For periods beginning on or after the dates
when the Investment Divisions started operations, the average annual total
return (if surrendered) figures may be referred to as "standardized"
performance. For periods before the dates when the Investment Divisions started
operations, the figures are considered "non-standardized". The average annual
total return (no surrender) figures are all considered "non-standardized".
Performance data for the Investment Divisions may be compared, in
advertisements, sales literature and reports to shareholders, to: (i) the
investment returns on various mutual funds, stocks, bonds, certificates of
deposit, tax free bonds, or common stock and bond indexes; and (ii) other groups
of variable annuity separate accounts or other investment products tracked by
Lipper Analytical Services, a widely used independent research firm which ranks
mutual funds and other investment companies by overall performance, investment
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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.
ANNUITY PAYMENTS
We will make equal annuity payments each month under the Life Income
Payment Option during the lifetime of the Annuitant. Once payments begin, they
do not change and are guaranteed for 10 years even if the Annuitant dies sooner.
If the Annuitant dies before all guaranteed payments have been made, the rest
will be made to the Beneficiary. We may require that the payee submit proof of
the Annuitant's survivorship as a condition for future payments beyond the
10-year guaranteed payment period.
On the Annuity Commencement Date, we will determine the Accumulation Value
of your policy and use that value to calculate the amount of each annuity
payment. We determine each annuity payment by applying the Accumulation Value,
less any premium taxes, to the annuity factors specified in the annuity table
set forth in the policy. Those factors are based on a set amount per $1,000 of
proceeds applied. The appropriate rate must be determined by the sex (except
where, as in the case of certain Qualified Policies and other employer-sponsored
retirement plans, such classification is not permitted), date of application and
age of the Annuitant. The dollars applied are then divided by 1,000 and the
result multiplied by the appropriate annuity factor from the table to compute
the amount of the each monthly annuity payment.
GENERAL MATTERS
NON-PARTICIPATING. The policies are non-participating. Dividends are not
paid.
MISSTATEMENT OF AGE OR SEX. If the Annuitant's stated age and/or sex in
the policy are incorrect, NYLIAC will change the benefits payable to those which
the premium payments would have purchased for the correct age and sex. Sex is
not a factor when annuity benefits are based on unisex annuity payment rate
tables. (See "Income Payments--Election of Income Payment Options" at page 21 of
the Prospectus.) If we made payments based on incorrect age or sex, we will
increase or reduce a later payment or payments to adjust for the error. Any
adjustment will include interest, at 3.5% per year, from the date of the wrong
payment to the date the adjustment is made, unless required otherwise by state
law.
ASSIGNMENTS. If permitted by the plan or by law for the plan indicated in
the application for the policy, you may assign a Non-Qualified Policy or any
interest in it prior to the Annuity Commencement Date and during the Annuitant's
lifetime. NYLIAC will not be deemed to know of an assignment unless it receives
a copy of a duly executed instrument evidencing such assignment. Further, NYLIAC
assumes no responsibility for the validity of any assignment. (See "Federal Tax
Matters--Taxation of Annuities in General" at pages 24 of the Prospectus.)
MODIFICATION. NYLIAC may not modify the policy without your consent except
to make the policy meet the requirements of the Investment Company Act of 1940,
or to make the policy comply with any changes in the Internal Revenue Code or as
required by the Code in order to continue treatment of the policy as an annuity,
or by any other applicable law.
INCONTESTABILITY. We rely on statements made in the application or a
Policy Request. They are representations, not warranties. We will not contest
the policy after it has been in force during the lifetime of the Annuitant for
two years from the Policy Date.
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FEDERAL TAX MATTERS
TAXATION OF NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
NYLIAC is taxed as a life insurance company. Because the Separate Account
is not an entity separate from NYLIAC, and its operations form a part of NYLIAC,
it will not be taxed separately as a "regulated investment company" under
Subchapter M of the Code. Investment income and realized net capital gains on
the assets of the Separate Account are reinvested and are taken into account in
determining the Accumulation Value. As a result, such investment income and
realized net capital gains are automatically retained as part of the reserves
under the policy. Under existing federal income tax law, NYLIAC believes that
Separate Account investment income and realized net capital gains should not be
taxed to the extent that such income and gains are retained as part of the
reserves under the policy.
TAX STATUS OF THE POLICIES
Section 817(h) of the Code requires that the investments of the Separate
Account must be "adequately diversified" in accordance with Treasury regulations
in order for the policies to qualify as annuity contracts under Section 72 of
the Code. The Separate Account intends to comply with the diversification
requirements prescribed by the Treasury under Treasury Regulation Section
1.817-5.
To comply with regulations under Section 817(h) of the Code, the Separate
Account is required to diversify its investments, so that on the last day of
each quarter of a calendar year, no more than 55% of the value of its assets is
represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments, and no
more than 90% is represented by any four investments. For this purpose,
securities of a single issuer are treated as one investment and each U.S.
Government agency or instrumentality is treated as a separate issuer. Any
security issued, guaranteed, or insured (to the extent so guaranteed or insured)
by the U.S. Government or an agency or instrumentality of the U.S. Government is
treated as a security issued by the U.S. Government or its agency or
instrumentality, whichever is applicable.
Although the Treasury Department has issued regulations on the
diversification requirements, such regulations do not provide guidance
concerning the extent to which policy owners may direct their investments to
particular subaccounts of a separate account, or the permitted number of such
subaccounts. It is unclear whether additional guidance in this regard will be
issued in the future. It is possible that if such guidance is issued, the policy
may need to be modified to comply with such additional guidance. For these
reasons, NYLIAC reserves the right to modify the policy as necessary to attempt
to prevent the policy owner from being considered the owner of the assets of the
Separate Account or otherwise to qualify the policy for favorable tax treatment.
The Code also requires that non-qualified annuity contracts contain
specific provisions for distribution of the policy proceeds upon the death of
any policy owner. In order to be treated as an annuity contract for federal
income tax purposes, the Code requires that such policies provide that (a) if
any policy owner dies on or after the Annuity Commencement Date and before the
entire interest in the policy has been distributed, the remaining portion must
be distributed at least as rapidly as under the method in effect on the policy
owner's death; and (b) if any policy owner dies before the Annuity Commencement
Date, the entire interest in the policy must generally be distributed within 5
years after the policy owner's date of death. These requirements will be
considered satisfied if the entire interest of the policy is used to purchase an
immediate annuity under which payments will begin within one year of the policy
owner's death and will be made for the life of the Beneficiary or for a period
not extending beyond the life expectancy of the Beneficiary. If the Beneficiary
is the policy owner's surviving spouse, the Policy may be continued with the
surviving spouse as the new policy owner. If the policy owner is not a natural
person, these "death of Owner" rules apply when the primary Annuitant is
changed. Non-Qualified Policies contain provisions intended to comply with these
requirements of the Code. No regulations interpreting these requirements of the
Code have yet been issued and thus no assurance can be given that the provisions
contained in these policies satisfy all such Code requirements. The provisions
contained in these policies will be reviewed and modified if necessary to assure
that they comply with the Code requirements when clarified by regulation or
otherwise.
Withholding of federal income taxes on the taxable portion of all
distributions may be required unless the recipient elects not to have any such
amounts withheld and properly notifies NYLIAC of that election. Different rules
may apply to United States citizens or expatriates living abroad. In addition,
some states have enacted legislation requiring withholding.
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Even if a recipient elects no withholding, special rules may require NYLIAC
to disregard the recipient's election if the recipient fails to supply NYLIAC
with a "TIN" or taxpayer identification number (social security number for
individuals) or if the Internal Revenue Service notifies NYLIAC that the TIN
provided by the recipient is incorrect.
DISTRIBUTOR OF THE POLICIES
NYLIFE Distributors Inc. ("NYLIFE Distributors"), the distributor of the
policies, is registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the National Association of Securities Dealers,
Inc. NYLIFE Distributors is an indirect wholly-owned subsidiary of New York
Life. The maximum commission paid to broker-dealers who have entered into dealer
agreements with NYLIFE Distributors is not expected to exceed 7%. A portion of
this amount is paid as commissions to registered representatives.
As these policies were offered for the first time commencing in early 2000,
no commissions were paid prior to this year.
The policies are sold and premium payments are accepted on a continuous
basis.
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
NYLIAC holds title to the assets of the Separate Account. The assets are
kept physically segregated and held separate and apart from NYLIAC's general
corporate assets. Records are maintained of all purchases and redemptions of
Eligible Portfolio shares held by each of the Investment Divisions.
STATE REGULATION
NYLIAC is a stock life insurance company organized under the laws of
Delaware, and is subject to regulation by the Delaware State Insurance
Department. We file an annual statement with the Delaware Commissioner of
Insurance on or before March 1 of each year covering the operations and
reporting on the financial condition of NYLIAC as of December 31 of the
preceding calendar year. Periodically, the Delaware Commissioner of Insurance
examines the financial condition of NYLIAC, including the liabilities and
reserves of the Separate Account.
In addition, NYLIAC is subject to the insurance laws and regulations of all
the states where it is licensed to operate. The availability of certain policy
rights and provisions depends on state approval and/or filing and review
processes. Where required by state law or regulation, the policies will be
modified accordingly.
RECORDS AND REPORTS
NYLIAC maintains all records and accounts relating to the Separate Account.
As presently required by the federal securities laws, NYLIAC will mail to you at
your last known address of record, at least semi-annually after the first Policy
Year, reports containing information required under the federal securities laws
or by any other applicable law or regulation.
LEGAL PROCEEDINGS
NYLIAC is a defendant in individual and/or alleged class action suits
arising from its agency sales force, insurance (including variable contracts
registered under the federal securities law), investment, retail securities
and/or other operations, including actions involving retail sales practices.
Most of these actions seek substantial or unspecified compensatory and punitive
damages. NYLIAC is also from time to time involved 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.
6
<PAGE> 230
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
Statement of Additional Information 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.
OTHER INFORMATION
NYLIAC filed a registration statement with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
policies discussed in the Prospectus and this Statement of Additional
Information. We have not included all of the information set forth in the
registration statement, amendments and exhibits to the registration statement in
the Prospectus and this Statement of Additional Information. We intend the
statements contained in the Prospectus and this Statement of Additional
Information concerning the content of the policies and other legal instruments
to be summaries. For a complete statement of the terms of these documents, you
should refer to the instruments filed with the Securities and Exchange
Commission. The omitted information may be obtained at the principal offices of
the Securities and Exchange Commission in Washington, D.C., upon payment of
prescribed fees, or through the Commission's website at www.sec.gov.
7
<PAGE> 231
FINANCIAL STATEMENTS
F-1
<PAGE> 232
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-2
<PAGE> 233
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-3
<PAGE> 234
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-4
<PAGE> 235
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-5
<PAGE> 236
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-6
<PAGE> 237
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-7
<PAGE> 238
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-8
<PAGE> 239
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-9
<PAGE> 240
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-10
<PAGE> 241
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-11
<PAGE> 242
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-12
<PAGE> 243
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-13
<PAGE> 244
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-14
<PAGE> 245
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-15
<PAGE> 246
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-16
<PAGE> 247
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-17
<PAGE> 248
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-18
<PAGE> 249
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-19
<PAGE> 250
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-20
<PAGE> 251
PROSPECTUS DATED MAY 1, 2000
FOR
LIFESTAGES(R) ACCESS VARIABLE ANNUITY
FROM
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A DELAWARE CORPORATION)
51 MADISON AVENUE, NEW YORK, NEW YORK 10010
INVESTING IN
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
This Prospectus describes the individual flexible premium LifeStages(R)
Access Variable Annuity policies issued by New York Life Insurance and Annuity
Corporation ("NYLIAC"). We designed these policies to assist individuals with
their long-term retirement planning needs. You can use the policies with
retirement plans that do or do not qualify for special federal income tax
treatment. The policies offer flexible premium payments, access to your money
through partial withdrawals (some withdrawals may be subject to a tax penalty),
a choice of when income payments commence, and a guaranteed death benefit if the
owner or annuitant dies before income payments have commenced.
Your premium payments accumulate on a tax-deferred basis. This means your
earnings are not taxed until you take money out of your policy, which can be
done in several ways. You can split your premium payments among a guaranteed
interest option and the twenty-six variable investment divisions listed below.
<TABLE>
<S> <C>
- MainStay VP Capital Appreciation
- MainStay VP Cash Management
- MainStay VP Convertible
- MainStay VP Government
- MainStay VP High Yield Corporate Bond
- MainStay VP International Equity
- MainStay VP Total Return
- MainStay VP Value
- MainStay VP Bond
- MainStay VP Growth Equity
- MainStay VP Indexed Equity
- American Century Income & Growth
- Dreyfus Large Company Value
- Eagle Asset Management Growth Equity
- Lord Abbett Developing Growth
- Alger American Small Capitalization
- Calvert Social Balanced
- Fidelity VIP II Contrafund(R)
- Fidelity VIP Equity-Income
- Janus Aspen Series Balanced
- Janus Aspen Series Worldwide Growth
- MFS(R) Growth With Income Series
- MFS(R) Research Series
- Morgan Stanley UIF Emerging Markets Equity
- T. Rowe Price Equity Income
- Van Eck Worldwide Hard Assets
</TABLE>
We do not guarantee the investment performance of these variable investment
divisions. Depending on market conditions, you can make or lose money in any of
the investment divisions.
You should read this Prospectus carefully before investing and keep it for
future reference. This Prospectus is not valid unless attached to current
prospectuses for the MainStay VP Series Fund, Inc., the Alger American Fund, the
Calvert Variable Series, Inc., the Fidelity Variable Insurance Products Fund II
(VIP II), the Fidelity Variable Insurance Products Fund (VIP), the Janus Aspen
Series, the MFS(R) Variable Insurance Trust(SM), The Universal Institutional
Funds, Inc., the T. Rowe Price Equity Series, Inc. and the Van Eck Worldwide
Insurance Trust (the "Funds", each individually a "Fund"). Each Investment
Division invests in shares of a corresponding fund portfolio.
To learn more about the policy, you can obtain a copy of the Statement of
Additional Information ("SAI") dated May 1, 2000. The SAI has been filed with
the Securities and Exchange Commission ("SEC") and is incorporated by reference
into this Prospectus. The table of contents for the SAI appears at the end of
this Prospectus. For a free copy of the SAI, call us at (800) 598-2019 or write
to us at the address above.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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> 252
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS............................ 3
FEE TABLE.............................. 4
QUESTIONS AND ANSWERS ABOUT
LIFESTAGES(R) ACCESS VARIABLE
ANNUITY.............................. 7
FINANCIAL STATEMENTS................... 9
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION AND THE SEPARATE
ACCOUNT.............................. 10
New York Life Insurance and Annuity
Corporation....................... 10
The Separate Account................. 10
The Portfolios....................... 10
Additions, Deletions or Substitutions
of Investments.................... 11
Reinvestment......................... 12
THE POLICIES........................... 12
Selecting the Variable Annuity That's
Right for You..................... 12
Qualified and Non-Qualified
Policies.......................... 13
Policy Application and Premium
Payments.......................... 14
Payments Returned for Insufficient
Funds............................. 14
Your Right to Cancel ("Free Look")... 14
Issue Ages........................... 14
Transfers............................ 15
Procedures for Telephone
Transactions...................... 15
Dollar Cost Averaging (DCA)
Program........................... 15
Automatic Asset Reallocation......... 16
Accumulation Period.................. 17
(a) Crediting of Premium
Payments..................... 17
(b) Valuation of Accumulation
Units........................ 17
Third Party Investment Advisory
Arrangements...................... 17
Policy Owner Inquiries............... 17
CHARGES AND DEDUCTIONS................. 17
Separate Account Charge.............. 17
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Policy Service Charge................ 18
Transfer Fees........................ 18
Group and Sponsored Arrangements..... 18
Taxes................................ 18
Fund Charges......................... 18
DISTRIBUTIONS UNDER THE POLICY......... 19
Surrenders and Withdrawals........... 19
(a) Surrenders.................... 19
(b) Partial Withdrawals........... 19
(c) Periodic Partial
Withdrawals.................. 19
(d) Hardship Withdrawals.......... 20
Required Minimum Distribution........ 20
Our Right to Cancel.................. 20
Annuity Commencement Date............ 20
Death Before Annuity Commencement.... 20
Income Payments...................... 21
(a) Election of Income Payment
Options...................... 21
(b) Other Methods of Payment...... 22
(c) Proof of Survivorship......... 22
Delay of Payments.................... 22
Designation of Beneficiary........... 22
Restrictions Under Internal Revenue
Code Section 403(b)(11)........... 22
THE FIXED ACCOUNT...................... 23
(a) Interest Crediting............ 23
(b) Transfers to Investment
Divisions.................... 23
FEDERAL TAX MATTERS.................... 23
Introduction......................... 23
Taxation of Annuities in General..... 24
Qualified Plans...................... 25
(a) Section 403(b) Plans.......... 25
(b) Individual Retirement
Annuities.................... 25
(c) Roth Individual Retirement
Annuities.................... 25
(d) Deferred Compensation Plans... 25
DISTRIBUTOR OF THE POLICIES............ 25
VOTING RIGHTS.......................... 25
TABLE OF CONTENTS FOR THE STATEMENT OF
ADDITIONAL INFORMATION............... 27
</TABLE>
THIS PROSPECTUS IS NOT CONSIDERED AN OFFERING IN ANY STATE WHERE THE SALE
OF THIS POLICY CANNOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATIONS REGARDING THE OFFERING OTHER THAN AS DESCRIBED IN THIS
PROSPECTUS OR IN ANY ATTACHED SUPPLEMENT TO THIS PROSPECTUS OR IN ANY
SUPPLEMENTAL SALES MATERIAL WE AUTHORIZE.
2
<PAGE> 253
DEFINITIONS
ACCUMULATION UNIT--An accounting unit we use to calculate the Variable
Accumulation Value prior to the Annuity Commencement Date. Each Investment
Division of the Separate Account has a distinct variable Accumulation Unit
value.
ACCUMULATION VALUE--The sum of the Variable Accumulation Value and the Fixed
Accumulation Value of a policy.
ALLOCATION ALTERNATIVES--The Investment Divisions of the Separate Account and
the Fixed Account.
ANNUITANT--The person whose life determines the Income Payments, and upon whose
death prior to the Annuity Commencement Date, benefits under the policy may be
paid.
ANNUITY COMMENCEMENT DATE--The date on which we are to make the first Income
Payment under the policy.
BENEFICIARY--The person or entity having the right to receive the death benefit
set forth in the policy and who is the "designated beneficiary" for purposes of
Section 72 of the Internal Revenue Code in the event of the Annuitant's or the
policy owner's death.
BUSINESS DAY--Generally, any day on which the New York Stock Exchange ("NYSE")
is open for trading. Our Business Day ends at 4:00 p.m. Eastern Time or the
closing of regular trading on the NYSE, if earlier.
ELIGIBLE PORTFOLIOS ("PORTFOLIOS")--The mutual fund portfolios of the Funds that
are available for investment through the Investment Divisions of the Separate
Account.
FIXED ACCOUNT--An account that is credited with a fixed interest rate which
NYLIAC declares and is not part of the Separate Account. The Accumulation Value
of the Fixed Account is supported by assets in NYLIAC's general account, which
are subject to the claims of our general creditors.
FIXED ACCUMULATION VALUE--The sum of premium payments and transfers allocated to
the Fixed Account, plus interest credited on those premium payments and
transfers, less any transfers and partial withdrawals from the Fixed Account,
and policy service charges that may have already been assessed from the Fixed
Account.
FUND--An open-end management investment company.
INCOME PAYMENTS--Periodic payments NYLIAC makes after the Annuity Commencement
Date.
INVESTMENT DIVISION--The variable investment options available with the policy.
Each Investment Division invests exclusively in shares of a specified Eligible
Portfolio.
NON-QUALIFIED POLICIES--Policies that are not available for use in connection
with employee retirement plans that qualify for special federal income tax
treatment.
PAYMENT YEAR(S)--With respect to any premium payment, the year(s) beginning on
the date such premium payment is made to the policy.
POLICY ANNIVERSARY--An anniversary of the Policy Date shown on the Policy Data
Page.
POLICY DATA PAGE--Page 2 of the policy which contains the policy specifications.
POLICY DATE--The date from which we measure Policy Years, quarters, months and
Policy Anniversaries. It is shown on the Policy Data Page.
POLICY YEAR--A year starting on the Policy Date. Subsequent Policy Years begin
on each Policy Anniversary, unless otherwise indicated.
QUALIFIED POLICIES--Policies issued under employee retirement plans that qualify
for special federal income tax treatment.
SEPARATE ACCOUNT--NYLIAC Variable Annuity Separate Account-III, a segregated
asset account we established to receive and invest premium payments paid under
the policies. The Separate Account's Investment Divisions, in turn, purchase
shares of Eligible Portfolios.
VARIABLE ACCUMULATION VALUE--The sum of the products of the current Accumulation
Unit value(s) for each of the Investment Divisions multiplied by the number of
Accumulation Units held in the respective Investment Division.
3
<PAGE> 254
FEE TABLE
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
<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>
OWNER TRANSACTION EXPENSES
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in any Policy
Year. NYLIAC reserves the right to charge up to $30 for each
transfer in excess of 12 transfers per Policy Year.
Annual Policy Service Charge.............................. $40 per policy for policies with less than $50,000 of Accumulation
Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value) (including mortality and
expense risk and administrative fees)................... 1.55% 1.55% 1.55% 1.55% 1.55%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
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
INTERNATIONAL
EQUITY
-------------
<S> <C>
OWNER TRANSACTION EXPENSES
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in any Policy
Year. NYLIAC reserves the right to charge up to $30 for each
transfer in excess of 12 transfers per Policy Year.
Annual Policy Service Charge.............................. $40 per policy for policies with less than $50,000 of Accumulation
Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value) (including mortality and
expense risk and administrative fees)................... 1.55%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 0.60%
Administration Fees....................................... 0.20%
Other Expenses............................................ 0.27%
Total Fund Annual Expenses................................ 1.07%
</TABLE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP MAINSTAY VP
TOTAL MAINSTAY VP MAINSTAY VP GROWTH INDEXED
RETURN VALUE BOND EQUITY EQUITY
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in any Policy
Year. NYLIAC reserves the right to charge up to $30 for each
transfer in excess of 12 transfers per Policy Year.
Annual Policy Service Charge.............................. $40 per policy for policies with less than $50,000 of Accumulation
Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value) (including mortality and
expense risk and administrative fees)................... 1.55% 1.55% 1.55% 1.55% 1.55%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 0.32% 0.36% 0.25% 0.25% 0.10%
Administration Fees....................................... 0.20% 0.20% 0.20% 0.20% 0.20%
Other Expenses............................................ 0.06% 0.07% 0.05% 0.04% 0.06%
Total Fund Annual Expenses................................ 0.58% 0.63% 0.50% 0.49% 0.36%
<CAPTION>
AMERICAN DREYFUS
CENTURY LARGE
INCOME & COMPANY
GROWTH VALUE
-------- -------
<S> <C> <C>
OWNER TRANSACTION EXPENSES
OWNER TRANSACTION EXPENSES
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in any Policy
Year. NYLIAC reserves the right to charge up to $30 for each
transfer in excess of 12 transfers per Policy Year.
Annual Policy Service Charge.............................. $40 per policy for policies with less than $50,000 of Accumulation
Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value) (including mortality and
expense risk and administrative fees)................... 1.55% 1.55%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 0.50% 0.60%
Administration Fees....................................... 0.20% 0.20%
Other Expenses............................................ 0.15%(b) 0.15%(b)
Total Fund Annual Expenses................................ 0.85% 0.95%
</TABLE>
4
<PAGE> 255
FEE TABLE--(CONTINUED)
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
<TABLE>
<CAPTION>
EAGLE
ASSET ALGER
MANAGEMENT LORD ABBETT AMERICAN CALVERT
GROWTH DEVELOPING SMALL SOCIAL
EQUITY GROWTH CAPITALIZATION BALANCED
---------- ----------- -------------- --------
<S> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers
in any Policy Year. NYLIAC reserves the right to
charge up to $30 for each transfer in excess of 12
transfers per Policy Year.
Annual Policy Service Charge.............................. $40 per policy for policies with less than $50,000
of Accumulation Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value) (including mortality and
expense risk and administrative fees)................... 1.55% 1.55% 1.55% 1.55%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 0.50% 0.60% 0.85% 0.70%(c)
Administration Fees....................................... 0.20% 0.20% -- --
Other Expenses............................................ 0.15%(b) 0.15%(b) 0.05% 0.19%(c)
Total Fund Annual Expenses................................ 0.85% 0.95% 0.90% 0.89%(c)
<CAPTION>
JANUS
FIDELITY VIP ASPEN
FIDELITY VIP II EQUITY- SERIES
CONTRAFUND(R) INCOME BALANCED
--------------- ------------ --------
<S> <C> <C> <C>
OWNER TRANSACTION EXPENSES
charge up to $30 for each transfer in
Transfer Fee.............................................. excess of 12 transfers per Policy Year.
Annual Policy Service Charge..............................
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value) (including mortality and
expense risk and administrative fees)................... 1.55% 1.55% 1.55%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 0.58% 0.48% 0.65%
Administration Fees....................................... -- -- --
Other Expenses............................................ 0.07% 0.08% 0.02%
Total Fund Annual Expenses................................ 0.65%(d) 0.56%(d) 0.67%(e)
</TABLE>
<TABLE>
<CAPTION>
MORGAN
STANLEY
JANUS ASPEN UIF
SERIES MFS(R) GROWTH MFS(R) EMERGING T. ROWE PRICE
WORLDWIDE WITH INCOME RESEARCH MARKETS EQUITY
GROWTH SERIES SERIES EQUITY INCOME
----------- ------------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
OWNER TRANSACTION EXPENSES
Transfer Fee.............................................. There is no transfer fee on the first 12 transfers in any Policy
Year. NYLIAC reserves the right to charge up to $30 for each transfer
in excess of 12 transfers per Policy Year.
Annual Policy Service Charge.............................. $40 per policy for policies with less than $50,000 of Accumulation
Value.
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value) (including mortality and
expense risk and administrative fees)................... 1.55% 1.55% 1.55% 1.55% 1.55%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 0.65% 0.75% 0.75% 0.42% 0.85%(g)
Administration Fees....................................... -- -- -- 0.25% --
Other Expenses............................................ 0.05% 0.13% 0.11% 1.12% --
Total Fund Annual Expenses................................ 0.70%(e) 0.88% 0.86% 1.79%(f) 0.85%
<CAPTION>
VAN ECK
WORLDWIDE
HARD ASSETS
-----------
<S> <C>
OWNER TRANSACTION EXPENSES
charge up
to $30 for
each
transfer in
excess of
12
transfers
per Policy
Transfer Fee.............................................. Year.
Annual Policy Service Charge..............................
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a % of average account value) (including mortality and
expense risk and administrative fees)................... 1.55%
FUND ANNUAL EXPENSES AFTER REIMBURSEMENT
(as a % of average net assets for the fiscal year ended
December 31, 1999)(a)
Advisory Fees............................................. 1.00%
Administration Fees....................................... --
Other Expenses............................................ 0.26%
Total Fund Annual Expenses................................ 1.26%
</TABLE>
- ------------
(a) The Fund or its agents provided the fees and charges which are based on
1999 expenses and may reflect estimated charges, except for Janus. We have
not verified the accuracy of the information provided by the agents.
(b) "Other Expenses" and "Total Fund Annual Expenses" for the American Century
Income & Growth, Dreyfus Large Company Value, Eagle Asset Management Growth
Equity and Lord Abbett Developing Growth 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%,
0.87% and 1.04% for the American Century Income & Growth, Dreyfus Large
Company Value, Eagle Asset Management Growth Equity and Lord Abbett
Developing Growth Portfolios, respectively.
(c) "Other Expenses" reflect an indirect fee. Net fund operating expenses after
reductions for fees paid indirectly would be 0.86% for Social Balanced
Portfolio. Total expenses have been restated to reflect expenses expected
to be incurred in 2000.
(d) Through arrangements with certain funds or FMR 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(R) Portfolio and 0.57% for the
Fidelity VIP Equity-Income Portfolio.
(e) Expenses are based upon expenses for the fiscal year ended December 31,
1999, restated to reflect a reduction in the management fee for Worldwide
Growth and Balanced portfolios. Expenses are stated both with and without
contractual waivers by Janus Capital. Waivers, if applicable, are first
applied against the management fee and then against other expenses, and
will continue until at least the next annual renewal of the advisory
agreement. All expenses are shown without the effect of any expense offset
arrangements.
(f) Morgan Stanley Asset Management has voluntarily agreed to waive its
"Advisory Fees" and/or reimburse the Portfolio, if necessary, to the extent
that the "Total Fund Annual Expenses" of the Portfolio exceeds 1.75% of
average daily net assets. For purposes of determining the amount of the
voluntary advisory fee waiver and/or reimbursement, if any, the portfolio's
annual operating expenses include certain investment related expenses such
as foreign country tax expense and interest expense on amounts borrowed
which were 0.04% of the average daily net assets for 1999. The fee waivers
and reimbursements described above may be terminated by Morgan Stanley
Asset Management at any time without notice. Absent such reductions,
"Advisory Fees," "Administration Fees" and "Total Fund Annual Expenses"
would have been 1.25%, 0.25% and 2.62% respectively.
(g) The "Advisory Fees" include the ordinary operating expenses of the Fund.
5
<PAGE> 256
EXAMPLES(1)
The table below will help you understand the various costs and expenses
that you will bear directly and indirectly. The table reflects charges and
expenses of the Separate Account and the Funds. Charges and expenses may be
higher or lower in future years. For more information on the charges reflected
in this table, see "Charges and Deductions" at page 17 and the Fund prospectuses
which accompany this Prospectus. NYLIAC may, where premium taxes are imposed by
state law, deduct premium taxes on surrender of the policy or on the Annuity
Commencement Date.
You would pay the following expenses on a $1,000 investment in one of the
Investment Divisions listed, assuming a 5% annual return on assets, whether you
surrender, annuitize or do not surrender your policy at the end of the stated
time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
MainStay VP Capital Appreciation........................ $25.32 $ 77.86 $133.03 $283.31
MainStay VP Cash Management............................. $24.21 $ 74.50 $127.42 $272.14
MainStay VP Convertible................................. $26.25 $ 80.63 $137.63 $292.37
MainStay VP Government.................................. $25.02 $ 76.95 $131.50 $280.27
MainStay VP High Yield Corporate Bond................... $24.81 $ 76.34 $130.48 $278.24
MainStay VP International Equity........................ $29.93 $ 91.58 $155.76 $327.78
MainStay VP Total Return................................ $24.91 $ 76.64 $131.00 $279.27
MainStay VP Value....................................... $25.43 $ 78.18 $133.54 $284.31
MainStay VP Bond........................................ $24.10 $ 74.19 $126.92 $271.13
MainStay VP Growth Equity............................... $24.00 $ 73.87 $126.38 $270.08
MainStay VP Indexed Equity.............................. $22.67 $ 69.88 $119.71 $256.70
American Century Income & Growth........................ $27.68 $ 84.90 $144.69 $306.27
Dreyfus Large Company Value............................. $28.70 $ 87.95 $149.74 $316.12
Eagle Asset Management Growth Equity.................... $27.68 $ 84.90 $144.69 $306.27
Lord Abbett Developing Growth........................... $28.70 $ 87.95 $149.74 $316.12
Alger American Small Capitalization..................... $28.18 $ 86.42 $147.22 $311.21
Calvert Social Balanced................................. $28.08 $ 86.12 $146.72 $310.24
Fidelity VIP II Contrafund(R)........................... $25.63 $ 78.78 $134.56 $286.33
Fidelity VIP Equity-Income.............................. $24.72 $ 76.03 $129.98 $277.23
Janus Aspen Series Balanced............................. $25.84 $ 79.40 $135.58 $288.34
Janus Aspen Series Worldwide Growth..................... $26.14 $ 80.31 $137.10 $291.36
Morgan Stanley UIF Emerging Markets Equity.............. $37.29 $113.28 $191.22 $394.91
MFS(R) Growth With Income Series........................ $27.99 $ 85.82 $146.22 $309.25
MFS(R) Research Series.................................. $27.78 $ 85.19 $145.20 $307.26
T. Rowe Price Equity Income............................. $27.68 $ 84.90 $144.69 $306.27
Van Eck Worldwide Hard Assets........................... $31.86 $ 97.34 $165.21 $345.96
</TABLE>
- ------------
(1) For purposes of calculating these examples, we have expressed the annual
policy service charge as an annual percentage of assets based on an
estimated average size of policies having an Accumulation Value of less than
$50,000. This calculation method reasonably reflects the annual policy
service charge applicable to policies having an Accumulation Value of less
than $50,000. The annual policy service charge does not apply to policies
having an Accumulation Value of $50,000 or greater. The expenses shown,
therefore, would be slightly lower if your policy's Accumulation Value is
$50,000 or greater.
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.
6
<PAGE> 257
QUESTIONS AND ANSWERS ABOUT LIFESTAGES(R) ACCESS VARIABLE ANNUITY
NOTE: THE FOLLOWING SECTION CONTAINS BRIEF QUESTIONS AND ANSWERS ABOUT
LIFESTAGES(R) ACCESS VARIABLE ANNUITY. YOU SHOULD REFER TO THE BODY OF THIS
PROSPECTUS FOR MORE DETAILED INFORMATION.
1. WHAT IS LIFESTAGES(R) ACCESS VARIABLE ANNUITY?
A LifeStages(R) Access Variable Annuity is a flexible premium deferred
variable retirement annuity policy. NYLIAC issues the policy. You may allocate
premium payments to one or more of the Investment Divisions of the Separate
Account, or to the Fixed Account. The Accumulation Value will fluctuate
according to the performance of the Investment Divisions selected and the
interest credited on amounts in the Fixed Account.
2. WHERE CAN I ALLOCATE MY PREMIUM PAYMENT?
You can allocate your premium payments to one or more of the following
Allocation Alternatives:
SEPARATE ACCOUNT
The Separate Account currently consists of twenty-six Investment
Divisions. They are listed on the first page of this Prospectus. When
you allocate a premium payment to one of the Investment Divisions, the
Separate Account will invest your premium payment exclusively in shares
of the corresponding Eligible Portfolio of the relevant Fund.
FIXED ACCOUNT
Each premium payment, or the portion of any premium payment, you
allocate to the Fixed Account will reflect a guaranteed interest rate.
(See "The Fixed Account" at page 23.)
3. CAN I MAKE TRANSFERS AMONG THE INVESTMENT DIVISIONS AND THE FIXED ACCOUNT?
You can transfer all or part of the Accumulation Value of your policy
between the Investment Divisions or from the Investment Divisions to the Fixed
Account at least 30 days before the Annuity Commencement Date but certain
restrictions apply. Generally, you can transfer a minimum amount of $500, unless
we agree otherwise. You can make transfers from the Fixed Account, to the
Investment Divisions but certain restrictions apply. (See "The Fixed Account" at
page 23.) You may not transfer money into the Fixed Account if you transferred
money out of the Fixed Account during the previous six-month period.
You can make unlimited transfers each Policy Year. In addition, you can
request transfers through the Dollar Cost Averaging or the Automatic Asset
Reallocation options described at pages 15 and 16 of this Prospectus.
4. WHAT CHARGES ARE ASSESSED AGAINST THE POLICY?
Before the date we start making Income Payments to you, we will deduct a
$40 policy service charge on each Policy Anniversary or upon surrender of the
policy if on that date the Accumulation Value is below $50,000. In addition, we
deduct a daily charge for certain mortality and expense risks NYLIAC assumes and
for policy administration expenses. This charge, on an annual basis, is 1.55% of
the average net asset value of the Separate Account. (See "Separate Account
Charge" at page 17.)
We do not impose any surrender charge on withdrawals or surrenders of the
policies.
The value of the shares of each Fund reflects advisory fees, administration
fees and other expenses deducted from the assets of each Fund. (See the Fund
prospectuses which are attached to this Prospectus.)
5. WHAT ARE THE MINIMUM INITIAL AND MAXIMUM ADDITIONAL PREMIUM PAYMENTS?
Unless we permit otherwise, the minimum initial premium payment is $2,000
for Qualified Policies and $10,000 for Non-Qualified Policies. You can make
additional premium payments of at least $1,000 or such lower amount as we may
permit at any time. You have a choice of sending premium payments directly to
NYLIAC or through pre-authorized monthly deductions from banks, credit unions or
similar accounts. We may agree to other methods of payment. The maximum
aggregate amount of premium payments we accept is $1,000,000 without prior
approval. For Qualified Policies, you may not make premium payments in excess of
the amount permitted by law for the plan.
7
<PAGE> 258
6. HOW ARE PREMIUM PAYMENTS ALLOCATED?
We will allocate the initial premium payment to the Investment Divisions
and/or Fixed Account which you selected within two Business Days after receipt,
subject to our receipt of all information necessary to issue a policy.
Subsequent premium payments will be allocated at the close of the Business Day
on which they are received.
You may allocate the initial premium payment in a maximum of 18 Allocation
Alternatives, and thereafter, may maintain the Accumulation Value in up to 18
Investment Divisions plus the Fixed Account at any one time. (See "Automatic
Asset Reallocation" at page 16.) Moreover, you may raise or lower the
percentages (which must be in whole numbers) of the premium payment you place in
each Allocation Alternative at the time you make a premium payment. The minimum
amount which you may place in any one Allocation Alternative is $100, or such
lower amount as we may permit. We reserve the right to limit the amount of a
premium payment that may be placed in any one Allocation Alternative and the
number of Allocation Alternatives to which you allocate your Accumulation Value.
7. WHAT HAPPENS IF PREMIUM PAYMENTS ARE NOT MADE?
If we do not receive any premium payments for a period of two years, and
both the Accumulation Value of your policy and your total premium payments less
any withdrawals are less than $2,000, we reserve the right to terminate your
policy. We will notify you of our intention to exercise this right and give you
90 days to make a premium payment. If we terminate your policy, we will pay you
the Accumulation Value of your policy in one lump sum.
8. CAN I WITHDRAW MONEY FROM THE POLICY BEFORE THE ANNUITY COMMENCEMENT DATE?
You may make withdrawals from your policy before the Annuity Commencement
Date and while the Annuitant is alive. Your withdrawal request must be in a form
that is acceptable to us. Under most circumstances, you may make a minimum
partial withdrawal of $500. You may have to pay income tax and a 10% penalty tax
may apply if you are under age 59 1/2. (See "Distributions Under the Policy" at
page 19 and "Federal Tax Matters" at page 23.)
9. HOW WILL NYLIAC MAKE INCOME PAYMENTS ON THE ANNUITY COMMENCEMENT DATE?
We will make Income Payments on a fixed basis. We do not currently offer a
variable income payment option. We will make payments under the Life Income
Payment Option over the life of the Annuitant with a guarantee of 10 years of
payments, even if the Annuitant dies sooner. Income Payments will always be the
same specified amount. (See "Income Payments" at page 21.) We may offer other
options, at our discretion, where permitted by state law.
10. WHAT HAPPENS IF I DIE OR THE ANNUITANT DIES BEFORE THE ANNUITY COMMENCEMENT
DATE?
If you or the Annuitant dies before the Annuity Commencement Date, we will
pay the Beneficiary under the policy an amount equal to the greater of:
(a) the Accumulation Value,
(b) the sum of all premium payments made, less any partial withdrawals,
or
(c) the "reset value" (as described on page 20 of this Prospectus) plus
any additional premium payments made since the most recent "reset
date," less any partial withdrawals since the most recent "reset
date."
If the Beneficiary is the spouse of the Annuitant or the owner, see
Question 11. (Also see "Death Before Annuity Commencement" at page 20 and
"Federal Tax Matters" at page 23.)
11. WHAT HAPPENS IF MY SPOUSE IS THE BENEFICIARY?
If you are the owner and Annuitant and you die before the Annuity
Commencement Date, your spouse may continue the policy as the new owner and
Annuitant if he/she is also the sole Beneficiary (for Non-Qualified, IRA, Roth
IRA, TSA or SEP policies only). If your spouse chooses to continue the policy,
we will not pay the death benefit proceeds as a consequence of your death, or
the Annuitant's death.
8
<PAGE> 259
12. MAY I RETURN THE POLICY AFTER IT IS DELIVERED?
You may cancel the policy by returning it to us, or to the registered
representative through whom you purchased it, within 10 days of delivery of the
policy or such longer period as required under state law. In states where
approved, you will receive the policy's Accumulation Value on the date we
receive the policy without any deduction for premium taxes. This amount may be
more or less than your premium payments. Otherwise, you will receive from us the
greater of (i) the initial premium payment less any prior partial withdrawals or
(ii) the Accumulation Value on the date we receive the policy, without any
deduction for premium taxes. We will set forth the provision in your policy.
13. WHAT ABOUT VOTING RIGHTS?
You can instruct NYLIAC how to vote shares of the Funds in which you have a
voting interest through the Separate Account. (See "Voting Rights" at page 25.)
14. ARE POLICY LOANS AVAILABLE?
Policy loans are not available.
15. HOW DO I CONTACT NYLIAC?
<TABLE>
<S> <C> <C>
GENERAL INQUIRIES AND WRITTEN REQUESTS PREMIUM PAYMENTS
--------------------------------------- ---------------------------------------
REGULAR MAIL NYLIAC Variable Products Service Center NYLIAC
Madison Square Station P.O. Box 19272
P.O. Box 922 Newark, NJ 07195-0272
New York, NY 10159 (or the address indicated
on your quarterly statement)
EXPRESS MAIL NYLIAC Variable Products Service Center NYLIAC - 19272
51 Madison Avenue Lock Box - 3W
Room 452 Bank of New York
New York, NY 10010 101 Barclay St.
New York, NY 10007
CUSTOMER SERVICE (800) 598-2019
AND UNIT VALUES
</TABLE>
FINANCIAL STATEMENTS
The audited financial statements of NYLIAC (including the auditor's report)
for the fiscal years ended December 31, 1999, 1998 and 1997 are included in the
Statement of Additional Information. As of the date of this prospectus, the sale
of LifeStages(R) Access policies had not begun. Therefore, no financial
statements for the Separate Account are presented.
9
<PAGE> 260
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
AND THE SEPARATE ACCOUNT
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
New York Life Insurance and Annuity Corporation ("NYLIAC") is a stock life
insurance company incorporated in Delaware in 1980. NYLIAC is licensed to sell
life, accident and health insurance and annuities in the District of Columbia
and all states. In addition to the policies we describe in this Prospectus,
NYLIAC offers other life insurance policies and annuities.
NYLIAC is a wholly-owned subsidiary of New York Life Insurance Company
("New York Life"), a mutual life insurance company doing business in New York
since 1845. NYLIAC held assets of $29.669 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.
THE SEPARATE ACCOUNT
The Separate Account was established on November 30, 1994, pursuant to
resolutions of the NYLIAC Board of Directors. The Separate Account is registered
as a unit investment trust with the Securities and Exchange Commission under the
Investment Company Act of 1940. The Securities and Exchange Commission, however,
does not supervise 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 our other assets. The Separate Account assets are not
chargeable with liabilities incurred in any of NYLIAC's other business
operations (except to the extent that assets in the Separate Account exceed the
reserves and other liabilities of that Separate Account). The income, capital
gains and capital losses incurred on the assets of the Separate Account are
credited to or 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 the investment performance of the
Fixed Account and any other separate account of NYLIAC.
The Separate Account currently has 26 Investment Divisions. Premium
payments allocated to the Investment Divisions are invested solely in the
corresponding Eligible Portfolios of the relevant Fund.
THE PORTFOLIOS
The assets of each Eligible Portfolio are separate from the others and each
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 to the general public. Investment results may differ.
WE OFFER NO ASSURANCE THAT ANY OF THE ELIGIBLE PORTFOLIOS WILL ATTAIN THEIR
RESPECTIVE STATED OBJECTIVES.
The Funds also make their shares available to certain other separate
accounts funding variable life insurance policies offered by NYLIAC. This is
called "mixed funding." Except for the MainStay VP Series Fund, all other Funds
also make their shares available to separate accounts of insurance companies
unaffiliated with NYLIAC. This is called "shared funding." Although we do not
anticipate any inherent difficulties arising from mixed and shared funding, it
is theoretically possible that, due to differences in tax treatment or other
considerations, the interests of owners of various contracts participating in a
certain Fund might at some time be in conflict. The Board of Directors/Trustees
of each Fund, each Fund's investment advisers, and NYLIAC are required to
monitor events to identify any material conflicts that arise from the use of the
Funds for mixed and shared funding. For more information about the risks of
mixed and shared funding, please refer to the relevant Fund prospectus.
We provide certain services to you in connection with the investment of
premium payments in the Investment Divisions, which, in turn, invest in the
Eligible Portfolios. These services include, among others, providing information
about the Eligible Portfolios. We receive a service fee from the investment
advisers or other service providers of some of the Funds in return for providing
services of this type. Currently, we receive service fees at annual rates
ranging from .10% to .21% of the aggregate net asset value of the shares of some
of the Eligible Portfolios held by the Investment Divisions.
10
<PAGE> 261
The Eligible Portfolios of the relevant Funds, along with their investment
advisers, are listed in the following table:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND INVESTMENT ADVISERS ELIGIBLE PORTFOLIOS
- -
<S> <C> <C>
MainStay VP Series Fund, Inc. MacKay Shields 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. New York Life Insurance Company MainStay VP American Century Income &
Growth;
MainStay VP Dreyfus Large Company Value;
MainStay VP Eagle Asset Management Growth
Equity;
MainStay VP Lord Abbett Developing Growth
The Alger American Fund Fred Alger Management, Inc. Alger American Small Capitalization
Calvert Variable Series, Inc. Calvert Asset Management Company, Calvert Social Balanced
Inc.
Fidelity Variable Insurance Products Fidelity Management and Research Fidelity VIP II Contrafund(R)
Fund II Company
Fidelity Variable Insurance Products Fidelity Management and Research Fidelity VIP Equity-Income
Fund Company
Janus Aspen Series Janus Capital Corporation Janus Aspen Series Balanced;
Janus Aspen Series Worldwide Growth
MFS(R) Variable Insurance Trust(SM) MFS Investment Management(R) MFS(R) Growth With Income Series;
MFS(R) Research Series
The Universal Institutional Funds, Morgan Stanley Asset Management Morgan Stanley UIF Emerging Markets Equity
Inc.
T. Rowe Price Equity Series, Inc. T. Rowe Price Associates, Inc. T. Rowe Price Equity Income
Van Eck Worldwide Insurance Trust Van Eck Associates Corporation Van Eck Worldwide Hard Assets
</TABLE>
Please refer to the attached prospectuses of the respective Funds for a complete
description of the Funds, the investment advisers and the Portfolios. The Funds'
prospectuses should be read carefully before any decision is made concerning the
allocation of premium payments to an Investment Division corresponding to a
particular Eligible Portfolio.
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
NYLIAC retains the right, subject to any applicable law, to make additions
to, deletions from, or substitutions for, the Eligible Portfolio shares held by
any Investment Division. NYLIAC reserves the right to eliminate the shares of
any of the Eligible Portfolios and to substitute shares of another portfolio of
a Fund, or of another registered open-end management investment company. We may
do this if the shares of the Eligible Portfolios are no longer available for
investment or if we believe investment in any Eligible Portfolio would become
inappropriate in view of the purposes of the Separate Account. To the extent
required by law, we will not make substitutions of shares attributable to your
interest in an Investment Division until you have been notified of the change.
This does not prevent the Separate Account from purchasing other securities for
other series or classes of policies, or from processing a conversion between
series or classes of policies on the basis of requests made by policy owners.
We may establish new Investment Divisions when we determine, in our sole
discretion, that marketing, tax, investment or other conditions so warrant. We
will make any new Investment Divisions available to existing
11
<PAGE> 262
policy owners on a basis we determine. We may also eliminate one or more
Investment Divisions, if we determine, in our sole discretion, that marketing,
tax, investment or other conditions warrant.
In the event of any substitution or change, NYLIAC may, by appropriate
endorsement, change the policies to reflect such substitution or change. 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 payable date.
THE POLICIES
This is a flexible premium policy which means additional premium payments
can be made. It is issued on the lives of individual Annuitants.
The policies are variable. This means that the Accumulation Value will
fluctuate based on the investment experience of the Investment Divisions you
select. The interest credited on the Fixed Accumulation Value will also vary.
NYLIAC does not guarantee the investment performance of the Separate Account or
of the Funds. You bear the entire investment risk with respect to amounts
allocated to the Investment Divisions of the Separate Account. We offer no
assurance that the investment objectives of the Investment Divisions will be
achieved. Accordingly, amounts allocated to the Investment Divisions of the
Separate Account are subject to the risks inherent in the securities markets
and, specifically, to price fluctuations in the Funds' investments.
As the owner of the policy, you have the right to (a) change the
Beneficiary, (b) name a new owner (on Non-Qualified Policies only), (c) receive
Income Payments, and (d) name a payee to receive Income Payments. You cannot
lose these rights. However, all rights of ownership cease upon your death.
SELECTING THE VARIABLE ANNUITY THAT'S RIGHT FOR YOU
In addition to the policies described in this prospectus, we offer other
variable annuities, each having different features, fees and charges. Your
registered representative can help you decide which is best for you based on
your individual circumstances, time horizon and liquidity preferences. The
LifeStages(R) Flexible Premium Variable Annuity is designed generally for
purchasers with a long time horizon who intend to make multiple contributions to
the policy over time. The LifeStages(R) Variable Annuity is designed generally
for purchasers with an intermediate time horizon who intend to make a single
contribution or a limited number of contributions to the policy. The
LifeStages(R) Access Variable Annuity* is designed generally for purchasers with
a shorter time horizon. Although there is no surrender charge under a
LifeStages(R) Access Variable Annuity, other charges are somewhat higher than
those in other policies.
* For applications signed on or after May 19, 2000, in states where approved.
12
<PAGE> 263
The chart below outlines some of the different features for each variable
annuity we offer. Your registered representative can provide you with a
prospectus for one or more of these annuities, which contains more complete
information.
<TABLE>
<CAPTION>
LIFESTAGES(R) LIFESTAGES(R)
FLEXIBLE PREMIUM LIFESTAGES(R) ACCESS
VARIABLE ANNUITY VARIABLE ANNUITY VARIABLE ANNUITY(1)
<S> <C> <C> <C>
Fixed Amount Yes Yes (1% additional rate Yes
credited to monies deposited
directly into Fixed Account)
DCA Advantage Plan No Yes (6, 12, 18 month accounts No
are available)(1)
Surrender Charge Period 9 Years (7%, 7%, 7%, 6%, 6 Years (7%, 7%, 7%, 6%, 5%, N/A
5%, 4%, 3%, 2%, 1%) 4%)
(Based on policy date) (Based on each premium
payment date)
Death Benefit Guarantee 3 Year Reset to Age 85 Annual Reset to Age 85(1) Annual Reset to Age 80
Total Separate Account Charges 1.40%* 1.40% 1.55%
(mortality and expense risk charge
and administration fee)
Annual Policy Fee $30 $30 $40
Minimum Cash Value Required to $20,000* $20,000 $50,000
Waive Policy Fee
</TABLE>
- ------------
* May be lower in some states.
(1) For applications signed on or after May 19, 2000, in states where approved.
All policies and features may not be available in all states.
QUALIFIED AND NON-QUALIFIED POLICIES
We designed the policies primarily for the accumulation of retirement
savings, and to provide income at a future date. We issue both Qualified and
Non-Qualified Policies. Both types of policies offer tax-deferred accumulation.
You may purchase a Non-Qualified Policy with after-tax dollars to provide for
retirement income other than through a tax-qualified plan. You may purchase a
Qualified Policy with pre-tax dollars for use with any one of the tax-qualified
plans listed below.
(1) Section 403(b) Tax Sheltered Annuities purchased by employees of
certain tax-exempt organizations and certain state-supported
educational institutions;
(2) Section 408 or 408A Individual Retirement Annuities ("IRAs"), including
Roth IRAs; and
(3) Section 457 Deferred Compensation Plans
Please see "Federal Tax Matters" at page 23 for a detailed description of
these plans.
If you are considering a Qualified Policy, you should be aware that this
annuity will fund a retirement plan that already provides tax deferral under the
Internal Revenue Code. In such situations, the tax deferral of the annuity does
not provide additional benefits. In addition, you should be aware that there are
fees and charges in an annuity that may not be included in other types of
investments which may be more or less costly. However, the fees and charges
under the policies are designed to provide for certain payment guarantees and
features other than tax deferral that may not be available in other investments.
They include:
(1) a Fixed Account option, which features a guaranteed fixed interest
rate;
(2) a death benefit that is payable should you die while the policy is in
force, which is reset every year (or longer if required by state law)
and is guaranteed to be at least the amount of your premium payments,
less any partial withdrawals;
(3) the option for your Beneficiary to receive a guaranteed amount of
monthly income for his or her lifetime should you die prior to the
Annuity Commencement Date; and
(4) the option to receive a guaranteed amount of monthly income for life
after the first Policy Year.
These features are explained in detail in this Prospectus. You should consult
with your tax or legal advisor to determine if the policy is suitable for your
tax qualified plan.
13
<PAGE> 264
POLICY APPLICATION AND PREMIUM PAYMENTS
You can purchase a policy by completing an application. The application is
sent to us with your initial premium payment. If the application is complete and
accurate, and we have received all other information necessary to process the
application, we will credit the initial premium payment to the Allocation
Alternatives you have selected within two Business Days after receipt. If we
cannot credit the initial premium payment within five Business Days after we
receive it because the application is incomplete or inaccurate, we will contact
you and explain the reason for the delay. Unless you consent to NYLIAC's
retaining the initial premium payment and crediting it as soon as the necessary
requirements are fulfilled, we will offer to refund the initial premium payment
immediately. Acceptance of applications is subject to NYLIAC's rules. We reserve
the right to reject any application or initial premium payment.
We will allocate the initial premium payments to the Allocation
Alternatives immediately in accordance with your instructions. We credit
subsequent premium payments to the policy at the close of the Business Day on
which they are deposited by NYLIAC. You are encouraged to send subsequent
premium payments directly as indicated on page 9.
You may allocate the initial premium payments in up to 18 Allocation
Alternatives, and thereafter, may maintain the Accumulation Value in up to 18
Investment Divisions plus the Fixed Account at any one time. We will credit
subsequent premium payments to the policy at the close of the Business Day on
which they are received. Moreover, you may increase or decrease the percentages
of the premium payments (which must be in whole number percentages) allocated to
each Allocation Alternative at the time a premium payment is made. However, any
change to the policy's allocations may not result in the Accumulation Value
being allocated to more than 18 Investment Divisions plus the Fixed Account.
Unless we permit otherwise, the minimum initial premium payment is $2,000
for Qualified Policies and $10,000 for Non-Qualified Policies. You may make
additional premium payments of at least $1,000 or such lower amount as we may
permit at any time or by any method NYLIAC makes available. The currently
available methods of payment are direct payments to NYLIAC, pre-authorized
monthly deductions from your bank, a credit union or similar accounts and any
other method agreed to by us. You may make additional premium payments at any
time before the Annuity Commencement Date and while you and the Annuitant are
living. The maximum aggregate amount of premium payments we accept is $1,000,000
without prior approval. NYLIAC reserves the right to limit the dollar amount of
any premium payment.
For Qualified Policies, you may not make premium payments in any Policy
Year that exceed the amount permitted by the plan or by law.
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 a 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.
YOUR RIGHT TO CANCEL ("FREE LOOK")
You may cancel the policy by returning it to us, or to the registered
representative through whom you purchased it, within 10 days of delivery of the
policy or such longer period as required under state law. In states where
approved, you will receive the policy's Accumulation Value on the date we
receive the policy, without any deduction for premium taxes. This amount may be
more or less than your premium payments. Otherwise, you will receive from us the
greater of (i) the initial premium payment less any prior partial withdrawals or
(ii) the Accumulation Value on the date we receive the policy, without any
deduction for premium taxes or a surrender charge. We will set forth the
provision in your policy.
ISSUE AGES
We can issue Non-Qualified Policies if both you and the Annuitant are not
older than age 90 (some states may have lower age limits). We will accept
additional premium payments until either you or the Annuitant reaches the age of
90, unless we agree otherwise. For IRA, Roth IRA, TSA and SEP plans, you must
also be the Annuitant. We can issue Qualified Policies if the Owner/Annuitant is
between the ages of 18 and 80. We will accept additional premium payments until
the Owner/Annuitant reaches the age of 80, unless otherwise limited by the terms
of a particular plan or unless we agree otherwise.
14
<PAGE> 265
TRANSFERS
You may transfer amounts between Investment Divisions of the Separate
Account or to the Fixed Account at least 30 days before the Annuity Commencement
Date. Except in connection with transfers made pursuant to Dollar Cost Averaging
and Automatic Asset Reallocation, the minimum amount that you may transfer from
one Investment Division to other Investment Divisions or to the Fixed Account,
is $500. Except for the Dollar Cost Averaging and Automatic Asset Reallocation
options, if the value of the remaining Accumulation Units in an Investment
Division or Fixed Account would be less than $500 after you make a transfer, we
will transfer the entire value unless NYLIAC in its discretion determines
otherwise. The amount(s) transferred to other Investment Divisions must be a
minimum of $500 for each Investment Division. Transfers into the Fixed Account
may be subject to restrictions. (See "Fixed Account" at page 23.)
There is no charge for the first twelve transfers in any one Policy Year.
NYLIAC reserves the right to charge up to $30 for each transfer in excess of
twelve, subject to any applicable state insurance law requirements. Any transfer
made in connection with Dollar Cost Averaging or Automatic Asset Reallocation
will not count as a transfer toward the twelve transfer limit. You may make
transfers from the Fixed Account to the Investment Divisions in certain
situations. (See "The Fixed Account" at page 23.)
Your transfer requests must be in writing on a form approved by NYLIAC or
by telephone in accordance with established procedures. (See "Procedures for
Telephone Transactions" below.) We will make transfers from Investment Divisions
based on the Accumulation Unit values at the end of the Business Day on which we
receive the transfer request. (See "Delay of Payments" at page 22.) Transfers
may be limited in connection with Third Party Investment Advisory Arrangements.
(See page 17.)
PROCEDURES FOR TELEPHONE TRANSACTIONS
You may authorize us to accept telephone instructions from you or other
persons you designate for the following types of transactions: premium
allocations and transfers among Allocation Alternatives. You can elect this
feature by completing and signing a Telephone Authorization form. Telephone
Authorization may be elected, changed or canceled at any time. You, or other
persons you designate, may effect telephone transactions by speaking with a
service representative at (800) 598-2019. Furthermore, we will confirm all
telephone transactions in writing.
NYLIAC is not liable for any loss, cost or expense for action on telephone
instructions which are believed to be genuine in accordance with these
procedures. We must receive telephone transfer requests no later than 4:00 p.m.
Eastern Time in order to assure same day processing. We will process requests
received after 4:00 p.m. Eastern Time on the next Business Day.
DOLLAR COST AVERAGING PROGRAM
The main objective of dollar cost averaging is to achieve an average cost
per share that is lower than the average price per share during volatile market
conditions. Since you transfer the same dollar amount to an Investment Division
with each transfer, you purchase more units in an Investment Division if the
value per unit is low and fewer units if the value per unit is high. Therefore,
you achieve a lower than average cost per unit if prices fluctuate over the long
term. Similarly, for each transfer out of an Investment Division, you sell more
units in an Investment Division if the value per unit is low and fewer units if
the value per unit is high. Dollar cost averaging does not assure a profit or
protect against a loss in declining markets. Because it involves continuous
investing regardless of price levels, you should consider your financial ability
to continue to make purchases during periods of low price levels. We do not
count transfers under dollar cost averaging as part of your 12 free transfers
each Policy Year.
We have set forth below an example of how dollar cost averaging works. In
the example, we have assumed that you want to move $100 from the Cash Management
Investment Division to the MainStay VP Growth Equity
15
<PAGE> 266
Investment Division each month. Assuming the Accumulation Unit Values below, you
would purchase the following number of Accumulation Units:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<CAPTION>
AMOUNT ACCUMULATION ACCUMULATION UNITS
TRANSFERRED MUNIT VALUE PURCHASED
<S> <C> <C> <C>
1 $100 $10.00 10.00
2 $100 $ 8.00 12.50
3 $100 $12.50 8.00
4 $100 $ 7.50 13.33
Total $400 $38.00 43.83
</TABLE>
The average unit price is calculated as follows:
<TABLE>
<S> <C> <C> <C> <C>
Total share price $38.00
- ----------------------- = ------ = $9.50
Number of months 4
</TABLE>
The average unit cost is calculated as follows:
<TABLE>
<S> <C> <C> <C> <C>
Total amount transferred $400.00
- ---------------------------- = ------- = $9.13
Total units purchased 43.83
</TABLE>
In this example, you would have paid an average cost of $9.13 per unit
while the average price per unit is $9.50.
The Dollar Cost Averaging option permits systematic investing to be made in
equal installments over various market cycles to help reduce risk. You may
specify, prior to the Annuity Commencement Date, a specific dollar amount to be
transferred from any Investment Divisions to any combination of Investment
Divisions and/or the Fixed Account. You specify the Investment Divisions to
transfer money from, the Investment Divisions and/or Fixed Account to transfer
money to, the amounts to be transferred, the date on which transfers will be
made, subject to our rules, and the frequency of the transfers (either monthly,
quarterly, semi-annually or annually). You may not make transfers from the Fixed
Account, but you may make transfers into the Fixed Account. Each transfer from
an Investment Division must be at least $100. You must have a minimum
Accumulation Value of $2,500 to elect this option. NYLIAC may reduce the minimum
transfer amount and minimum Accumulation Value at its discretion.
NYLIAC will make all dollar cost averaging transfers on the day of each
calendar month that you specify or on the next Business Day (if the day you have
specified is not a Business Day or does not exist in that month). You may
specify any day of the month with the exception of the 29th, 30th or 31st of a
month. In order to process a transfer under our Dollar Cost Averaging option,
NYLIAC must have received a request in writing, on a form acceptable by us, no
later than one week prior to the date the transfers are to begin.
You may cancel the Dollar Cost Averaging option at any time in a written
request. NYLIAC may also cancel this option if the Accumulation Value is less
than $2,500, or such lower amount as we may determine. You may not elect the
Dollar Cost Averaging option if you have selected the Automatic Asset
Reallocation option.
AUTOMATIC ASSET REALLOCATION
This option allows you to maintain the percentage allocated to each
Investment Division at a pre-set level. For example, you might specify that 50%
of the Variable Accumulation Value of your policy be allocated to the MainStay
VP Convertible Investment Division and 50% of the Variable Accumulation Value be
allocated to the MainStay VP International Equity Investment Division. Over
time, the fluctuations in each of these Investment Division's investment results
will shift the percentages. If you elect this Automatic Asset Reallocation
option, NYLIAC will automatically transfer your Variable Accumulation Value back
to the percentages you specify. You may choose to have reallocations made
quarterly, semi-annually or annually. You must also specify the day of the month
that reallocations are to occur (with the exception of the 29th, 30th or 31st of
a month). The minimum Variable Accumulation Value required to elect this option
is $2,500. There is no minimum amount which you must allocate among the
Investment Divisions under this option. You may elect Automatic Asset
Reallocation by submitting the request in writing on a form acceptable to us.
You may not elect the Automatic Asset Reallocation option if you have selected
the Dollar Cost Averaging option.
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<PAGE> 267
You can cancel the Automatic Asset Reallocation option at any time in a
written request. NYLIAC may also cancel this option if the Accumulation Value is
less than $2,500, or such a lower amount as we may determine.
ACCUMULATION PERIOD
(a) Crediting of Premium Payments
You can allocate a portion of each premium payment to one or more
Investment Divisions or the Fixed Account. The minimum amount that you may
allocate to any one Investment Division or the Fixed Account is $100 (or such
lower amount as we may permit). We will allocate the initial premium payment to
the Allocation Alternative you have specified within two Business Days after
receipt. We will allocate additional premium payments to the Allocation
Alternatives at the close of the Business Day on which they are deposited by
NYLIAC.
We will credit that portion of each premium payment you allocate to an
Investment Division in the form of Accumulation Units. We determine the number
of Accumulation Units we credit to a policy by dividing the amount allocated to
each Investment Division by the Accumulation Unit value for that Investment
Division on the day we are making this calculation. The value of an Accumulation
Unit will vary depending on the investment experience of the Portfolio in which
the Investment Division invests. The number of Accumulation Units we credit to a
policy will not, however, change as a result of any fluctuations in the value of
an Accumulation Unit. (See "The Fixed Account" at page 23 for a description of
interest crediting.)
(b) Valuation of Accumulation Units
The value of Accumulation Units in each Investment Division will change
daily to reflect the investment experience of the corresponding Portfolio as
well as the daily deduction of the Separate Account charges. The Statement of
Additional Information contains a detailed description of how we value the
Accumulation Units.
THIRD PARTY INVESTMENT ADVISORY ARRANGEMENTS
In some cases, the policy may be sold to policy owners 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 policy owner 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 policy owners 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 policy owners. 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.
POLICY OWNER INQUIRIES
Your inquiries should be addressed to NYLIAC. (See page 9).
CHARGES AND DEDUCTIONS
THERE ARE NO SURRENDER OR WITHDRAWAL CHARGES UNDER THE POLICIES.
SEPARATE ACCOUNT CHARGE
Prior to the Annuity Commencement Date, we deduct a daily charge from the
assets of the Separate Account to compensate us for certain mortality and
expense risks we assume under the policies and for providing policy
administration services. On an annual basis, the charge equals 1.55% of the
average net asset value of the Separate Account. We guarantee that this charge
will not increase. If the charge is insufficient to cover actual costs and
assumed risks, the loss will fall on NYLIAC. If the charge is more than
sufficient, we will add any excess to our general funds. We may use these funds
for any corporate purpose, including expenses relating to the sale of the
policies, to the extent that surrender charges do not adequately cover sales
expenses.
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The mortality risk assumed is the risk that Annuitants as a group will live
for a longer time than our actuarial tables predict. As a result, we would be
paying more Income Payments than we planned. We also assume a risk that the
mortality assumptions reflected in our guaranteed annuity payment tables, shown
in each policy, will differ from actual mortality experience. Lastly, we assume
a mortality risk that, at the time of death, the guaranteed minimum death
benefit will exceed the policy's Accumulation Value. The expense risk assumed is
the risk that the cost of issuing and administering the policies will exceed the
amount we charge for these services.
POLICY SERVICE CHARGE
We deduct an annual $40 policy service charge each Policy Year on the
Policy Anniversary or upon surrender of the policy if on the Policy Anniversary
or date of surrender the Accumulation Value is less than $50,000. We deduct the
annual policy service charge from each Allocation Alternative in proportion to
its percentage of the Accumulation Value on the Policy Anniversary or date of
surrender. This charge is designed to cover the costs for providing services
under the policy such as collecting, processing and confirming premium payments
and establishing and maintaining the available methods of payment.
TRANSFER FEES
We do not impose any fee on the first 12 transfers in any Policy Year.
However, NYLIAC reserves the right to charge $30 for each transfer in excess of
12 transfers per Policy Year.
GROUP AND SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce the policy
service charge or change the minimum initial and additional premium payment
requirements. Group arrangements include those in which a trustee or an
employer, for example, purchases policies covering a group of individuals on a
group basis. Sponsored arrangements include those in which an employer allows us
to sell policies to its employees or retirees on an individual basis.
Our costs for sales, administration, and mortality generally vary with the
size and stability of the group among other factors. We take all these factors
into account when reducing charges. To qualify for reduced charges, a group or
sponsored arrangement must meet certain requirements, including our requirements
for size and number of years in existence. Group or sponsored arrangements that
have been set up solely to buy policies or that have been in existence less than
six months will not qualify for reduced charges.
We will make any reductions according to our rules in effect when a request
for a policy is approved. We may change these rules from time to time. Any
variation in the policy service charge will reflect differences in costs or
services and will not be unfairly discriminatory.
TAXES
NYLIAC may, where premium taxes are imposed by state law, deduct such taxes
from your policy either (i) when a surrender or cancellation occurs, or (ii) at
the Annuity Commencement Date. Applicable premium tax rates depend upon such
factors as your current state of residency, and the insurance laws and NYLIAC's
status in states where premium taxes are incurred. Current premium tax rates
range from 0% to 3.5%. Applicable premium tax rates are subject to change by
legislation, administrative interpretations or judicial acts.
Under present laws, NYLIAC will also incur state and local taxes (in
addition to the premium taxes described above) in several states. At present,
these taxes are not significant. If they increase, however, NYLIAC may make
charges for such taxes.
NYLIAC does not expect to incur any federal income tax liability
attributable to investment income or capital gains retained as part of the
reserves under the policies. (See "Federal Tax Matters" at page 23.) Based upon
these expectations, no charge is being made currently for corporate federal
income taxes which may be attributable to the Separate Account. Such a charge
may be made in future years for any federal income taxes NYLIAC incurs.
FUND CHARGES
The value of the assets of the Separate Account will indirectly reflect the
Funds' total fees and expenses. The Funds' total fees and expenses are not part
of the policy. They may vary in amount from year to year.
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These fees and expenses are described in detail in the relevant Fund's
prospectus and/or statement of additional information.
DISTRIBUTIONS UNDER THE POLICY
SURRENDERS AND WITHDRAWALS
You can make partial withdrawals, periodic partial withdrawals, hardship
withdrawals or surrender the policy to receive part or all of the Accumulation
Value at any time before the Annuity Commencement Date and while the Annuitant
is living, by sending a written request to NYLIAC. The amount available for
withdrawal is the Accumulation Value at the end of the Business Day during which
we receive the written or telephonic surrender or withdrawal request, less any
outstanding premium taxes which we may deduct, and policy service charge, if
applicable. If you have not provided us with a written election not to withhold
federal income taxes at the time you make a withdrawal or surrender request,
NYLIAC must by law withhold such taxes from the taxable portion of any surrender
or withdrawal. We will remit that amount to the federal government. In addition,
some states have enacted legislation requiring withholding. We will pay all
surrenders or withdrawals within seven days of receipt of all documents
(including documents necessary to comply with federal and state tax law),
subject to postponement in certain circumstances. (See "Delay of Payments" at
page 22.)
Since you assume the investment risk with respect to amounts allocated to
the Separate Account and because certain surrenders or withdrawals are subject
to premium tax deduction, the total amount paid upon surrender of the policy
(taking into account any prior withdrawals) may be more or less than the total
premium payments made.
Surrenders and withdrawals may be taxable transactions, and the Internal
Revenue Code provides that a 10% penalty tax may be imposed on certain early
surrenders or withdrawals. (See "Federal Tax Matters--Taxation of Annuities in
General" at page 24.)
(a) Surrenders
We may deduct any state premium tax, if applicable, and the annual policy
service charge, if applicable, from the amount paid. We will pay the proceeds in
a lump sum to you unless you elect a different Income Payment method. (See
"Income Payments" at page 21.) Surrenders may be taxable transactions and the
10% penalty tax provisions may be applicable. (See "Federal Tax
Matters--Taxation of Annuities in General" at page 24.)
(b) Partial Withdrawals
The minimum amount that can be withdrawn is $500, unless we agree
otherwise. We will withdraw the amount from the Allocation Alternatives in
accordance with your request. If you do not specify how to allocate a partial
withdrawal among the Allocation Alternatives, we will allocate the partial
withdrawal on a pro-rata basis. Partial withdrawals may be taxable transactions
and the 10% penalty tax provisions may be applicable. (See "Federal Tax
Matters--Taxation of Annuities in General" at page 24.)
If the requested partial withdrawal is greater than the value in any of the
Allocation Alternatives from which the partial withdrawal is being made, we will
pay the entire value of that Allocation Alternative to you. We will not process
partial withdrawal requests if honoring such requests would result in an
Accumulation Value of less than $2,000.
(c) Periodic Partial Withdrawals
You may elect to receive regularly scheduled partial withdrawals from the
policy. These periodic partial withdrawals may be paid on a monthly, quarterly,
semi-annual, or annual basis. You will elect the frequency of the withdrawals
and the day of the month for the withdrawals to be made (except on the 29th,
30th or 31st of a month). We will make all withdrawals on the day of each
calendar month you specify, or on the next Business Day (if the day you have
specified is not a Business Day or does not exist in that month). You must
specify the Investment Divisions and/or the Fixed Account from which the
periodic partial withdrawals will be made. The minimum amount under this feature
is $100, or such lower amount as we may permit. Periodic partial withdrawals may
be taxable transactions and the 10% penalty tax provisions may be applicable.
(See "Federal Tax Matters--Taxation of Annuities in General" at page 24.) If you
do not specify otherwise, we will withdraw money on a pro-rata basis from each
Investment Division and/or the Fixed Account.
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(d) Hardship Withdrawals
Under certain Qualified Policies, the Plan Administrator may allow, in its
sole discretion, certain withdrawals it determines to be "Hardship Withdrawals."
The 10% penalty tax, if applicable, and provisions applicable to partial
withdrawals apply to Hardship Withdrawals.
REQUIRED MINIMUM DISTRIBUTION
For IRAs and IRA SEPs, the policy owner is generally not required to elect
the required minimum distribution option until April 1st of the year following
the calendar year he or she attains age 70 1/2. For TSAs, the policy owner is
generally not required to elect the required minimum distribution option until
April 1st of the year following the calendar year he or she attains age 70 1/2
or until April 1st of the year following the calendar year he or she retires,
whichever occurs later.
OUR RIGHT TO CANCEL
If we do not receive any premium payments for a period of two years, and
both the Accumulation Value of your policy and your total premium payments less
any withdrawals are less than $2,000, we reserve the right to terminate your
policy subject to any applicable state insurance law or regulation. We will
notify you of our intention to exercise this right and give you 90 days to make
a premium payment. If we terminate your policy, we will pay you the Accumulation
Value of your policy in one lump sum.
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is the date specified on the Policy Data
Page. The Annuity Commencement Date is the day that Income Payments are
scheduled to commence unless the policy has been surrendered or an amount has
been paid as proceeds to the designated Beneficiary prior to that date. You may
change the Annuity Commencement Date to an earlier date by providing written
notice to NYLIAC. You may defer the Annuity Commencement Date to a later date if
we agree to it, provided that we receive a written notice of the request at
least one month before the last selected Annuity Commencement Date. The Annuity
Commencement Date and Income Payment method for Qualified Policies may also be
controlled by endorsements, the plan, or applicable law.
DEATH BEFORE ANNUITY COMMENCEMENT
If you or the Annuitant dies prior to the Annuity Commencement Date, we
will pay an amount as proceeds to the designated Beneficiary, as of the date we
receive proof of death and all requirements necessary to make the payment. That
amount will be the greater of:
(a) the Accumulation Value;
(b) the sum of all premium payments made, less any partial withdrawals; or
(c) the "reset value" as calculated on the most recent Policy Anniversary,
plus any additional premium payments made, less any "proportional
withdrawals" made, since that Policy Anniversary.
The reset value is the greater of (a) the current Policy Anniversary's
Accumulation Value, and (b) the prior Policy Anniversary's value, plus any
premium payments since the prior Policy Anniversary, less any proportional
withdrawals since the prior Policy Anniversary.
A proportional withdrawal is an amount equal to the amount withdrawn from
the policy divided by the policy's Accumulation Value immediately preceding the
withdrawal, multiplied by the reset value immediately preceding the withdrawal.
We recalculate the reset value every Policy Anniversary until you or the
Annuitant reaches age 80. Please consult with your registered representative
regarding the reset value that is available under your particular policy.
We have set forth below an example of how the death benefit is calculated.
In this example, we have assumed the following:
(1) you purchase a policy with a $210,000 Premium Payment;
(2) the reset value on the second Policy Anniversary is $220,000;
(3) the Accumulation Value is $250,000 immediately before a $20,000 partial
withdrawal is taken during the third Policy Year;
(4) the proportional withdrawal is ($20,000/$250,000) X $220,000 = $17,600;
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(5) the Accumulation Value is $195,000 on the third Policy Anniversary;
(6) The reset value is the greater of:
<TABLE>
<S> <C> <C>
(a) The current Policy Anniversary's Accumulation Value of $195,000; and
(b) The prior Policy Anniversary's value, plus any premium payments since the prior Policy
Anniversary date, less any proportional withdrawals since the last Policy Anniversary is:
$220,000 - $17,600 = $202,400.
</TABLE>
The greater is $202,400 (new reset value).
(7) If you die during the fourth Policy Year and the Accumulation Value of
the policy on the date of death has decreased to $175,000.
The death benefit is the greater of:
<TABLE>
<S> <C> <C>
(a) Accumulation Value = $175,000
(b) Premium Payments less any partial = $190,000 ($210,000 - $20,000)
withdrawals; or
(c) reset value on last Policy Anniversary) = $202,400
</TABLE>
The formula guarantees that the amount we pay will at least equal the sum
of all premium payments (less any partial withdrawals), independent of the
investment experience of the Separate Account. The Beneficiary may receive the
amount payable in a lump sum or under any life income payment option which is
then available. If more than one Beneficiary is named, each Beneficiary will be
paid a pro rata portion from each Allocation Alternative in which the policy is
invested as of the date we receive proof of death and all requirements necessary
to make the payment to that Beneficiary. We will keep the remaining balance in
the policy to pay the other Beneficiaries. Due to market fluctuations, the
remaining Accumulation Value may increase or decrease and we may pay subsequent
Beneficiaries a different amount.
We will make payments in a lump sum to the Beneficiary unless you have
elected or the Beneficiary elects otherwise in a signed written notice which
gives us the information that we need. If such an election is properly made, we
will apply all or part of these proceeds:
(i) under the Life Income Payment Option to provide an immediate
annuity for the Beneficiary who will be the policy owner and
Annuitant; or
(ii) under another Income Payment option we may offer at the time.
Payments under the annuity or under any other method of payment
we make available must be for the life of the Beneficiary, or for
a number of years that is not more than the life expectancy of
the Beneficiary at the time of the policy owner's death (as
determined for federal tax purposes), and must begin within one
year after the policy owner's death. (See "Income Payments"
below.)
If your spouse is the Beneficiary, we can pay the proceeds to the surviving
spouse if you die before the Annuity Commencement Date or the policy can
continue with the surviving spouse as (a) the new policy owner and, (b) if you
were the Annuitant, as the Annuitant. If a policy is jointly owned, ownership
rights and privileges under the policy must be exercised jointly and benefits
under the policy will be paid upon the death of any joint owner. (See "Federal
Tax Matters--Taxation of Annuities in General" at page 24.)
If the Annuitant and, where applicable under another Income Payment option,
the Joint Annuitant, if any, die after the Annuity Commencement Date, NYLIAC
will pay the sum required by the Income Payment option in effect.
We will make any distribution or application of policy proceeds within 7
days after NYLIAC receives all documents (including documents necessary to
comply with federal and state tax law) in connection with the event or election
that causes the distribution to take place, subject to postponement in certain
circumstances. (See "Delay of Payments" at page 22.)
INCOME PAYMENTS
(a) Election of Income Payment Options
We will make Income Payments under the Life Income Payment Option or under
such other option we may offer at that time where permitted by state laws. We
will require that a lump sum payment be made if the Accumulation Value is less
than $2,000. At any time before the Annuity Commencement Date, you may change
the Income Payment option or request any other method of payment we agree to. If
the Life Income Payment Option is chosen, we may require proof of birth date
before Income Payments begin. For Income Payment
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options involving life income, the actual age of the Annuitant will affect the
amount of each payment. Since payments based on older Annuitants are expected to
be fewer in number, the amount of each annuity payment should be greater. We
will make payments under the Life Income Payment Option in the same specified
amount and over the life of the Annuitant with a guarantee of 10 years of
payments, even if the Annuitant dies sooner. NYLIAC does not currently offer
variable Income Payment options.
Under Income Payment Options involving life income, the payee may not
receive Income Payments equal to the total premium payments if the Annuitant
dies before the actuarially predicted date of death. We base Income Payment
Options involving life income on annuity tables that vary on the basis of sex,
unless the policy was issued under an employer sponsored plan or in a state
which requires unisex rates.
(b) Other Methods of Payment
If NYLIAC agrees, you (or the Beneficiary upon the death of you or the
Annuitant prior to the Annuity Commencement Date) may choose to have Income
Payments made under some other method of payment or in a lump sum.
(c) Proof of Survivorship
We may require satisfactory proof of survival from time to time before we
pay any Income Payments or other benefits. We will request the proof at least 30
days prior to the next scheduled payment date.
DELAY OF PAYMENTS
We will pay any amounts due from the Separate Account under the policy
within seven days of the date NYLIAC receives all documents (including documents
necessary to comply with federal and state tax law) in connection with a request
unless:
1. The New York Stock Exchange ("NYSE") is closed for other than usual
weekends or holidays, or trading on the NYSE is otherwise
restricted;
2. An emergency exists as defined by the Securities and Exchange
Commission ("SEC");
3. The SEC permits a delay for the protection of security holders; or
4. The check used to pay the premium has not cleared through the
banking system. This may take up to 15 days.
For the same reasons, we will delay transfers from the Separate Account to
the Fixed Account.
We may also delay payments of any amount due from the Fixed Account. When
permitted by law, we may defer payment of any partial withdrawal or full
surrender request for up to six months from the date of surrender from the Fixed
Account. We will pay interest of at least 3.5% per year on any partial
withdrawal or full surrender request deferred for 30 days or more.
DESIGNATION OF BENEFICIARY
You may name, in a written form acceptable to us, one or more
Beneficiaries. Thereafter, before the Annuity Commencement Date and while the
Annuitant is living, you may change the Beneficiary by written notice in a form
acceptable to NYLIAC. If before the Annuity Commencement Date, the Annuitant
dies before you and no Beneficiary for the proceeds or for a stated share of the
proceeds survives, the right to the proceeds or shares of the proceeds passes to
you. If you are the Annuitant, the proceeds pass to your estate. However, if the
policy owner who is not the Annuitant dies before the Annuity Commencement Date,
and no Beneficiary for the proceeds or for a stated share of the proceeds
survives, the right to the proceeds or shares of the proceeds passes to the
policy owner's estate.
RESTRICTIONS UNDER INTERNAL REVENUE CODE SECTION 403(B)(11)
Distributions attributable to salary reduction contributions made in years
beginning after December 31, 1988 (including the earnings on these
contributions), as well as to earnings in such years on salary reduction
accumulations held as of the end of the last year beginning before January 1,
1989, may not begin before the employee attains age 59 1/2, separates from
service, dies or becomes disabled. The plan may also provide for distribution in
the case of hardship. However, hardship distributions are limited to amounts
contributed by salary reduction. The earnings on such amounts may not be
withdrawn. Even though a distribution may be permitted under these rules (e.g.
for hardship or after separation from service), it may still be subject to a 10%
additional income tax as a premature distribution.
Under the terms of your plan, you may have the option to invest in other
403(b) funding vehicles, including 403(b)(7) custodial accounts. You should
consult your plan document to make this determination.
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THE FIXED ACCOUNT
The Fixed Account is supported by the assets in NYLIAC's general account,
which includes all of NYLIAC's assets except those assets specifically allocated
to NYLIAC's separate accounts. NYLIAC has sole discretion to invest the assets
of the Fixed Account subject to applicable law. The Fixed Account is not
registered under the federal securities laws and is generally not subject to
their provisions. Furthermore, the staff of the Securities and Exchange
Commission has not reviewed the disclosures in this Prospectus relating to the
Fixed Account. These disclosures regarding the Fixed Account may be subject to
certain applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
(a) Interest Crediting
NYLIAC guarantees that it will credit interest at an annual effective rate
of at least 3% to amounts allocated or transferred to the Fixed Account under
the policies. We credit interest on a daily basis. We will set an interest rate
in advance periodically. All premium payments allocated to, or amounts
transferred to, the Fixed Account will receive the rate in effect for the period
during which the allocation or transfer is made, until the end of the Policy
Year. Thereafter, the rate applicable to those amounts will change on each
Policy Anniversary. The new rate will be the rate in effect on the date on which
the Policy Anniversary occurs.
(b) Transfers to Investment Divisions
You may transfer amounts from the Fixed Account to the Investment Divisions
up to 30 days prior to the Annuity Commencement Date. The minimum amount that
you may transfer from the Fixed Account to the Investment Divisions is the
lesser of (i) $500 or (ii) the Fixed Accumulation Value, unless we agree
otherwise. Additionally, the remaining value in the Fixed Account must be at
least $500. If, after a contemplated transfer, the remaining values in the Fixed
Account would be less than $500, that amount must be included in the transfer,
unless NYLIAC in its discretion permits otherwise. We determine amounts
transferred from the Fixed Account on a first-in, first-out ("FIFO") basis, for
purposes of determining the rate at which we credit interest on monies remaining
in the Fixed Account.
You may not transfer money into the Fixed Account if you made a transfer
out of the Fixed Account during the previous six-month period.
You must make transfer requests in writing on a form approved by NYLIAC or
by telephone in accordance with established procedures. (See "Procedures for
Telephone Transactions" at page 15.)
We will deduct partial withdrawals from the Fixed Account on a FIFO basis
(i.e., from any value in the Fixed Account attributable to premium payments or
transfers from Investment Divisions in the same order in which you allocated
such payments or transfers to the Fixed Account during the life of the policy).
FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. The
Qualified Policies are designed for use by individuals in retirement plans which
are intended to qualify as plans qualified for special income tax treatment
under Sections 219, 403, 408, 408A or 457 of the Code. The ultimate effect of
federal income taxes on the Accumulation Value, on Income Payments and on the
economic benefit to you, the Annuitant or the Beneficiary depends on the type of
retirement plan for which the Qualified Policy is purchased, on the tax and
employment status of the individual concerned and on NYLIAC's tax status. The
following discussion assumes that Qualified Policies are used in retirement
plans that qualify for the special federal income tax treatment described above.
This discussion is not intended to address the tax consequences resulting from
all of the situations in which a person may be entitled to or may receive a
distribution under a policy. Any person concerned about these tax implications
should consult a competent tax adviser before making a premium payment. This
discussion is based upon NYLIAC's understanding of the present federal income
tax laws as they are currently interpreted by the Internal Revenue Service. We
cannot predict the likelihood of continuation of the present federal income tax
laws or of the current interpretations by the Internal Revenue Service, which
may change from time to time without notice. Any such change could have
retroactive effects regardless of the date of enactment. Moreover, this
discussion does not take into consideration any applicable state or other tax
laws except with respect to the imposition of any state premium taxes. We
suggest you consult with your tax adviser.
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TAXATION OF ANNUITIES IN GENERAL
The following discussion assumes that the policies will qualify as annuity
contracts for federal income tax purposes. The Statement of Additional
Information discusses such qualifications.
Section 72 of the Code governs taxation of annuities in general. NYLIAC
believes that an annuity policy owner generally is not taxed on increases in the
value of a policy until distribution occurs either in the form of a lump sum
received by withdrawing all or part of the Accumulation Value (i.e., surrenders
or partial withdrawals) or as Income Payments under the Income Payment option
elected. The exception to this rule is that generally, a policy owner of any
deferred annuity policy who is not a natural person must include in income any
increase in the excess of the policy owner's Accumulation Value over the policy
owner's investment in the contract during the taxable year. However, there are
some exceptions to this exception. You may wish to discuss these with your tax
counsel. The taxable portion of a distribution (in the form of an annuity or
lump sum payment) is generally taxed as ordinary income. For this purpose, the
assignment, pledge, or agreement to assign or pledge any portion of the
Accumulation Value generally will be treated as a distribution.
In the case of a withdrawal or surrender distributed to a participant or
Beneficiary under a Qualified Policy (other than a Qualified Policy used in a
retirement plan that qualifies for special federal income tax treatment under
Section 457 of the Code as to which there are special rules), a ratable portion
of the amount received is taxable, generally based on the ratio of the
investment in the contract to the total policy value. The "investment in the
contract" generally equals the portion, if any, of any premium payments paid by
or on behalf of an individual under a policy which is not excluded from the
individual's gross income. For policies issued in connection with qualified
plans, the "investment in the contract" can be zero. The law requires the use of
special simplified methods to determine the taxable amount of payments that are
based in whole or in part on the Annuitant's life and that are paid from
qualified retirement plans under Section 401(a) and from qualified annuities and
Tax Sheltered Annuities under Section 403(b).
Generally, in the case of a withdrawal under a Non-Qualified Policy before
the Annuity Commencement Date, amounts received are first treated as taxable
income to the extent that the Accumulation Value immediately before the
withdrawal exceeds the "investment in the contract" at that time. Any additional
amount withdrawn is not taxable.
Although the tax consequences may vary depending on the Income Payment
option elected under the policy, in general, only the portion of the Income
Payment that represents the amount by which the Accumulation Value exceeds the
"investment in the contract" will be taxed. After the investment in the policy
is recovered, the full amount of any additional Income Payments is taxable. For
fixed Income Payments, in general, there is no tax on the portion of each
payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the Income Payments for the term of the
payments. However, the remainder of each Income Payment is taxable until the
recovery of the investment in the contract, and thereafter the full amount of
each annuity payment is taxable. If death occurs before full recovery of the
investment in the contract, the unrecovered amount may be deducted on the
annuitant's final tax return.
In the case of a distribution, a penalty tax equal to 10% of the amount
treated as taxable income may be imposed. The penalty tax is not imposed in
certain circumstances, including, generally, distributions: (1) made on or after
the date on which the taxpayer is actual age 59 1/2, (2) made as a result of the
policy owner's or Annuitant's death or disability, or (3) received in
substantially equal installments paid at least annually as a life annuity. Other
tax penalties may apply to certain distributions pursuant to a Qualified Policy.
All non-qualified, deferred annuity contracts issued by NYLIAC (or its
affiliates) to the same policy owner during any calendar year are to be treated
as one annuity contract for purposes of determining the amount includable in an
individual's gross income. In addition, there may be other situations in which
the Treasury Department may conclude (under its authority to issue regulations)
that it would be appropriate to aggregate two or more annuity contracts
purchased by the same policy owner. Accordingly, a policy owner should consult a
competent tax adviser before purchasing more than one policy or other annuity
contract.
A transfer of ownership of a policy, or designation of an Annuitant or
other Beneficiary who is not also the policy owner, may result in certain income
or gift tax consequences to the policy owner. A policy owner contemplating any
transfer or assignment of a policy should contact a competent tax adviser with
respect to the potential tax effects of such a transaction.
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QUALIFIED PLANS
The Qualified Policies are designed for use with several types of tax
qualified plans. The tax rules applicable to participants and beneficiaries in
such qualified plans vary according to the type of plan and the terms and
conditions of the plan itself. Special favorable tax treatment may be available
for certain types of contributions and distributions (including special rules
for certain lump sum distributions to individuals who attained the age of 50 by
January 1, 1986). Adverse tax consequences may result from contributions in
excess of specified limits, distributions prior to age 59 1/2 (subject to
certain exceptions), distributions that do not conform to specified minimum
distribution rules and in certain other circumstances. Therefore, this
discussion only provides general information about use of the policies with the
various types of qualified plans. Policy owners and participants under qualified
plans as well as Annuitants and Beneficiaries are cautioned that the rights of
any person to any benefits under qualified plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the policy issued in connection with the plan. Purchasers of policies for use
with any qualified plan should seek competent legal and tax advice regarding the
suitability of the policy.
(a) Section 403(b) Plans. Under Section 403(b) of the Code, payments
made by public school systems and certain tax exempt organizations to
purchase annuity policies for their employees are excludable from the gross
income of the employee, subject to certain limitations. However, such
payments may be subject to FICA (Social Security) taxes.
(b) Individual Retirement Annuities. Sections 219 and 408 of the Code
permit individuals or their employers to contribute to an individual
retirement program known as an "Individual Retirement Annuity" or "IRA",
including an employer-sponsored Simplified Employee Pension or "SEP".
Individual Retirement Annuities are subject to limitations on the amount
which may be contributed and deducted and the time when distributions may
commence. In addition, distributions from certain other types of qualified
plans may be placed into Individual Retirement Annuities on a tax-deferred
basis.
(c) Roth Individual Retirement Annuities. Section 408A of the Code
permits individuals with incomes below a certain level to contribute to an
individual retirement program known as a "Roth Individual Retirement
Annuity" or "Roth IRA." Roth IRAs are subject to limitations on the amount
that may be contributed. Contributions to Roth IRAs are not deductible, but
distributions from Roth IRAs that meet certain requirements are not
included in gross income. Certain individuals are eligible to convert their
existing non-Roth IRAs into Roth IRAs. They will be subject to income tax
at the time of conversion.
(d) Deferred Compensation Plans. Section 457 of the Code, while not
actually providing for a qualified plan as that term is normally used,
provides for certain deferred compensation plans with respect to service
for state governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities and tax exempt
organizations which enjoy special treatment. The policies can be used with
such plans. Under such plans, a participant may specify the form of
investment in which his or her participation will be made. Such investments
are generally owned by, and are subject to, the claims of the general
creditors of the sponsoring employer, except that Section 457 plans of
state and local government must be held and used for the exclusive benefit
of participants and beneficiaries in a trust or annuity contract.
DISTRIBUTOR OF THE POLICIES
NYLIFE Distributors Inc. ("NYLIFE Distributors"), 51 Madison Avenue, New
York, New York 10010, is the principal underwriter and the distributor of the
policies. It is an indirect wholly-owned subsidiary of New York Life. The
maximum commission paid to broker-dealers who have entered into dealer
agreements with NYLIFE Distributors is not expected to exceed 6.5%. A portion of
this amount is paid as commissions to registered representatives.
VOTING RIGHTS
The Funds are not required to and typically do not hold routine annual
stockholder meetings. Special stockholder meetings will be called when
necessary. To the extent required by law, NYLIAC will vote the Eligible
Portfolio shares held in the Investment Divisions at special shareholder
meetings of the Funds in accordance with instructions we receive from persons
having voting interests in the corresponding Investment Division. If, however,
the federal securities laws are amended, or if NYLIAC's present interpretation
should change, and as a result, NYLIAC determines that it is allowed to vote the
Eligible Portfolio shares in its own right, we may elect to do so.
25
<PAGE> 276
Prior to the Annuity Commencement Date, you hold a voting interest in each
Investment Division to which you have money allocated. We will determine the
number of votes which are available to you by dividing the Accumulation Value
attributable to an Investment Division by the net asset value per share of the
applicable Eligible Portfolios. We will calculate the number of votes which are
available to you separately for each Investment Division. We will determine that
number by applying your percentage interest, if any, in a particular Investment
Division to the total number of votes attributable to the Investment Division.
We will determine the number of votes of the Eligible Portfolio which are
available as of the date established by the Portfolio of the relevant Fund.
Voting instructions will be solicited by written communication prior to such
meeting in accordance with procedures established by the relevant Fund.
If we do not receive timely instructions, we will vote those shares in
proportion to the voting instructions which are received with respect to all
policies participating in that Investment Division. We will apply voting
instructions to abstain on any item to be voted upon on a pro rata basis to
reduce the votes eligible to be cast. Each person having a voting interest in an
Investment Division will receive proxy material, reports and other materials
relating to the appropriate Eligible Portfolio.
26
<PAGE> 277
TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
The SAI contains more details concerning the subjects discussed in this
Prospectus. The following is the Table of Contents for that SAI:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE POLICIES................................................ 2
INVESTMENT PERFORMANCE CALCULATIONS......................... 2
ANNUITY PAYMENTS............................................ 4
GENERAL MATTERS............................................. 4
FEDERAL TAX MATTERS......................................... 5
DISTRIBUTOR OF THE POLICIES................................. 6
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS...................... 6
STATE REGULATION............................................ 6
RECORDS AND REPORTS......................................... 6
LEGAL PROCEEDINGS........................................... 6
EXPERTS..................................................... 7
OTHER INFORMATION........................................... 7
FINANCIAL STATEMENTS........................................ F-1
</TABLE>
How to obtain a LifeStages(R) Access Variable Annuity Statement of Additional
Information.
Call (800) 598-2019 or send this request form to:
NYLIAC Variable Products Service Center
Madison Square Station
P.O. Box 922
New York, NY 10159
- --------------------------------------------------------------------------------
Please send me a LifeStages(R)Access Variable Annuity Statement of Additional
Information dated May 1, 2000:
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip
27
<PAGE> 278
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
FOR
LIFESTAGES(R) ACCESS VARIABLE ANNUITY
FROM
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
INVESTING IN
NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III
This Statement of Additional Information ("SAI") is not a prospectus. This
SAI contains information that expands upon subjects discussed in the current
LifeStages(R) Access Variable Annuity Prospectus. You should read the SAI in
conjunction with the current LifeStages(R) Access Variable Annuity Prospectus
dated May 1, 2000. You may obtain a copy of the Prospectus by calling
800-598-2019 or writing to NYLIAC Variable Products Service Center, Madison
Square Station, P.O. Box 922, New York, NY 10159. Terms used but not defined in
this SAI have the same meaning as in the current LifeStages(R) Access Variable
Annuity Prospectus.
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE POLICIES (13)........................................... 2
Valuation of Accumulation Units (17)................... 2
INVESTMENT PERFORMANCE CALCULATIONS......................... 2
MainStay VP Cash Management Investment Division........ 2
MainStay VP Government, MainStay VP High Yield
Corporate Bond and MainStay VP Bond Investment
Division Yields...................................... 3
Average Annual Total Return............................ 3
ANNUITY PAYMENTS............................................ 4
GENERAL MATTERS............................................. 4
FEDERAL TAX MATTERS (23).................................... 5
Taxation of New York Life Insurance and Annuity
Corporation.......................................... 5
Tax Status of the Policies............................. 5
DISTRIBUTOR OF THE POLICIES................................. 6
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS...................... 6
STATE REGULATION............................................ 6
RECORDS AND REPORTS......................................... 6
LEGAL PROCEEDINGS........................................... 6
EXPERTS..................................................... 7
OTHER INFORMATION........................................... 7
FINANCIAL STATEMENTS........................................ F-1
</TABLE>
- ------------
* (Numbers in parentheses refer to page numbers of corresponding sections of the
current LifeStages(R) Access Variable Annuity Prospectus.)
<PAGE> 279
THE POLICIES
The following provides additional information about the policies and
supplements the description in the Prospectus.
VALUATION OF ACCUMULATION UNITS
Accumulation Units are valued separately for each Investment Division of
the Separate Account. The method used for valuing Accumulation Units in each
Investment Division is the same. We arbitrarily set the value of each
Accumulation Unit as of the date operations began for the Investment Division.
Thereafter, the value of an Accumulation Unit of an Investment Division for any
Business Day equals the value of an Accumulation Unit in that Investment
Division as of the immediately preceding Business Day multiplied by the "Net
Investment Factor" for that Investment Division for the current Business Day.
We determine the Net Investment Factor for each Investment Division for any
period from the close of the preceding Business Day to the close of the current
Business Day (the "Valuation Period") by the following formula:
(a/b) - c
Where: a = the result of:
(1) the net asset value per share of the Eligible Portfolio shares
held in the Investment Division determined at the end of the current
Valuation Period, plus
(2) the per share amount of any dividend or capital gain distribution
made by the Eligible Portfolio for shares held in the Investment
Division if the "ex-dividend" date occurs during the current Valuation
Period;
b = the net asset value per share of the Eligible Portfolio shares held
in the Investment Division determined as of the end of the
immediately preceding Valuation Period; and
c = a factor representing the charge deducted from the applicable
Investment Division on a daily basis. Such factor is equal, on an
annual basis, to 1.55% of the daily net asset value of the Separate
Account. (See "Separate Account Charges" at page 17 of the
Prospectus.)
The Net Investment Factor may be greater or less than one. Therefore, the
value of an Accumulation Unit in an Investment Division may increase or decrease
from Valuation Period to Valuation Period.
INVESTMENT PERFORMANCE CALCULATIONS
MAINSTAY VP CASH MANAGEMENT INVESTMENT DIVISION
NYLIAC calculates the MainStay VP Cash Management Investment Division's
current annualized yield for a seven-day period in a manner which does not take
into consideration any realized or unrealized gains or losses on shares of the
MainStay VP Cash Management Portfolio or on its portfolio securities. This
current annualized yield is computed by determining the net change (exclusive of
realized gains and losses on the sale of securities and unrealized appreciation
and depreciation) in the value of a hypothetical account having a balance of one
unit of the MainStay VP Cash Management Investment Division at the beginning of
such seven-day period, dividing such net change in account value by the value of
the account at the beginning of the period to determine the base period return
and annualizing this quotient on a 365-day basis. The net change in account
value reflects the deductions for the administration fee and the mortality and
expense risk charge, and income and expenses accrued during the period. Because
of these deductions, the yield for the MainStay VP Cash Management Division will
be lower than the yield for the MainStay VP Cash Management Portfolio.
NYLIAC also calculates the effective yield of the MainStay VP Cash
Management Investment Division for the same seven-day period on a compounded
basis. The effective yield is calculated by compounding the unannualized base
period return by adding one to the base period return, raising the sum to a
power equal to 365 divided by 7, and subtracting one from the result.
The yield on amounts held in the MainStay VP Cash Management Investment
Division normally will fluctuate on a daily basis. Therefore, the disclosed
yield for any given past period is not an indication or representation of future
yields or rates of return. The MainStay VP Cash Management Investment Division's
actual yield is affected by changes in interest rates on money market
securities, average portfolio maturity of the MainStay VP Cash
2
<PAGE> 280
Management Portfolio, the types and quality of portfolio securities held by the
MainStay VP Cash Management Portfolio, and its operating expenses.
MAINSTAY VP GOVERNMENT, MAINSTAY VP HIGH YIELD CORPORATE BOND AND MAINSTAY
VP BOND INVESTMENT DIVISION YIELDS
The current annualized yield of the MainStay VP Government, MainStay VP
High Yield Corporate Bond and MainStay VP Bond Investment Divisions refers to
the income generated by these Investment Divisions over a specified 30-day
period. Because the yield is annualized, the yield generated by an Investment
Division during the 30-day period is assumed to be generated each 30-day period.
We compute the yield by dividing the net investment income per accumulation unit
earned during the period by the price per unit on the last day of the period,
according to the following formula:
- ---- YIELD = 2[(a-b+1)(6)-1]
cd
Where: a = net investment income earned during the period by the Portfolio
attributable to shares owned by the MainStay VP Government, MainStay
VP High Yield Corporate Bond or MainStay VP Bond Investment Division.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of accumulation units outstanding during
the period.
d = the maximum offering price per accumulation unit on the last day of
the period.
Accrued expenses will include all recurring fees that are charged to all
policy owner accounts. The yield calculations do not reflect the effect of any
surrender charges that may be applicable to a particular policy. Surrender
charges range from 7% to 0% of the premium payments withdrawn depending on the
elapsed time since the relevant premium payment was made.
Because of the charges and deductions imposed by the Separate Account the
yield for the Investment Divisions will be lower than the yield for the
corresponding Portfolio of the Fund. The yield on amounts held in the Investment
Divisions normally will fluctuate over time. Therefore, the disclosed yield for
any given past period is not an indication or representation of future yields or
rates of return. The MainStay VP Government, MainStay VP High Yield Corporate
Bond or MainStay VP Bond Investment Division's actual yield will be affected by
the types and quality of portfolio securities held by the MainStay VP
Government, MainStay VP High Yield Corporate Bond and MainStay VP Bond
Portfolios of the Fund and their operating expenses.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return quotations for
the Investment Divisions are computed by finding the average annual compounded
rates of return over the periods shown that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P(1+T)(n) = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one, five, or ten-year period or the inception date,
at the end of the one, five or ten-year period (or fractional portion
thereof).
All total return figures are prepared under methods the SEC requires when
advertising performance information. For periods beginning on or after the dates
when the Investment Divisions started operations, the average annual total
return (if surrendered) figures may be referred to as "standardized"
performance. For periods before the dates when the Investment Divisions started
operations, the figures are considered "non-standardized". The average annual
total return (no surrender) figures are all considered "non-standardized".
Performance data for the Investment Divisions may be compared, in
advertisements, sales literature and reports to shareholders, to: (i) the
investment returns on various mutual funds, stocks, bonds, certificates of
deposit, tax free bonds, or common stock and bond indexes; and (ii) other groups
of variable annuity separate accounts or other investment products tracked by
Lipper Analytical Services, a widely used independent research firm which ranks
mutual funds and other investment companies by overall performance, investment
3
<PAGE> 281
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.
ANNUITY PAYMENTS
We will make equal annuity payments each month under the Life Income
Payment Option during the lifetime of the Annuitant. Once payments begin, they
do not change and are guaranteed for 10 years even if the Annuitant dies sooner.
If the Annuitant dies before all guaranteed payments have been made, the rest
will be made to the Beneficiary. We may require that the payee submit proof of
the Annuitant's survivorship as a condition for future payments beyond the
10-year guaranteed payment period.
On the Annuity Commencement Date, we will determine the Accumulation Value
of your policy and use that value to calculate the amount of each annuity
payment. We determine each annuity payment by applying the Accumulation Value,
less any premium taxes, to the annuity factors specified in the annuity table
set forth in the policy. Those factors are based on a set amount per $1,000 of
proceeds applied. The appropriate rate must be determined by the sex (except
where, as in the case of certain Qualified Policies and other employer-sponsored
retirement plans, such classification is not permitted), date of application and
age of the Annuitant. The dollars applied are then divided by 1,000 and the
result multiplied by the appropriate annuity factor from the table to compute
the amount of the each monthly annuity payment.
GENERAL MATTERS
NON-PARTICIPATING. The policies are non-participating. Dividends are not
paid.
MISSTATEMENT OF AGE OR SEX. If the Annuitant's stated age and/or sex in
the policy are incorrect, NYLIAC will change the benefits payable to those which
the premium payments would have purchased for the correct age and sex. Sex is
not a factor when annuity benefits are based on unisex annuity payment rate
tables. (See "Income Payments--Election of Income Payment Options" at page 21 of
the Prospectus.) If we made payments based on incorrect age or sex, we will
increase or reduce a later payment or payments to adjust for the error. Any
adjustment will include interest, at 3.5% per year, from the date of the wrong
payment to the date the adjustment is made, unless required otherwise by state
law.
ASSIGNMENTS. If permitted by the plan or by law for the plan indicated in
the application for the policy, you may assign a Non-Qualified Policy or any
interest in it prior to the Annuity Commencement Date and during the Annuitant's
lifetime. NYLIAC will not be deemed to know of an assignment unless it receives
a copy of a duly executed instrument evidencing such assignment. Further, NYLIAC
assumes no responsibility for the validity of any assignment. (See "Federal Tax
Matters--Taxation of Annuities in General" at pages 24 of the Prospectus.)
MODIFICATION. NYLIAC may not modify the policy without your consent except
to make the policy meet the requirements of the Investment Company Act of 1940,
or to make the policy comply with any changes in the Internal Revenue Code or as
required by the Code in order to continue treatment of the policy as an annuity,
or by any other applicable law.
INCONTESTABILITY. We rely on statements made in the application or a
Policy Request. They are representations, not warranties. We will not contest
the policy after it has been in force during the lifetime of the Annuitant for
two years from the Policy Date.
4
<PAGE> 282
FEDERAL TAX MATTERS
TAXATION OF NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
NYLIAC is taxed as a life insurance company. Because the Separate Account
is not an entity separate from NYLIAC, and its operations form a part of NYLIAC,
it will not be taxed separately as a "regulated investment company" under
Subchapter M of the Code. Investment income and realized net capital gains on
the assets of the Separate Account are reinvested and are taken into account in
determining the Accumulation Value. As a result, such investment income and
realized net capital gains are automatically retained as part of the reserves
under the policy. Under existing federal income tax law, NYLIAC believes that
Separate Account investment income and realized net capital gains should not be
taxed to the extent that such income and gains are retained as part of the
reserves under the policy.
TAX STATUS OF THE POLICIES
Section 817(h) of the Code requires that the investments of the Separate
Account must be "adequately diversified" in accordance with Treasury regulations
in order for the policies to qualify as annuity contracts under Section 72 of
the Code. The Separate Account intends to comply with the diversification
requirements prescribed by the Treasury under Treasury Regulation Section
1.817-5.
To comply with regulations under Section 817(h) of the Code, the Separate
Account is required to diversify its investments, so that on the last day of
each quarter of a calendar year, no more than 55% of the value of its assets is
represented by any one investment, no more than 70% is represented by any two
investments, no more than 80% is represented by any three investments, and no
more than 90% is represented by any four investments. For this purpose,
securities of a single issuer are treated as one investment and each U.S.
Government agency or instrumentality is treated as a separate issuer. Any
security issued, guaranteed, or insured (to the extent so guaranteed or insured)
by the U.S. Government or an agency or instrumentality of the U.S. Government is
treated as a security issued by the U.S. Government or its agency or
instrumentality, whichever is applicable.
Although the Treasury Department has issued regulations on the
diversification requirements, such regulations do not provide guidance
concerning the extent to which policy owners may direct their investments to
particular subaccounts of a separate account, or the permitted number of such
subaccounts. It is unclear whether additional guidance in this regard will be
issued in the future. It is possible that if such guidance is issued, the policy
may need to be modified to comply with such additional guidance. For these
reasons, NYLIAC reserves the right to modify the policy as necessary to attempt
to prevent the policy owner from being considered the owner of the assets of the
Separate Account or otherwise to qualify the policy for favorable tax treatment.
The Code also requires that non-qualified annuity contracts contain
specific provisions for distribution of the policy proceeds upon the death of
any policy owner. In order to be treated as an annuity contract for federal
income tax purposes, the Code requires that such policies provide that (a) if
any policy owner dies on or after the Annuity Commencement Date and before the
entire interest in the policy has been distributed, the remaining portion must
be distributed at least as rapidly as under the method in effect on the policy
owner's death; and (b) if any policy owner dies before the Annuity Commencement
Date, the entire interest in the policy must generally be distributed within 5
years after the policy owner's date of death. These requirements will be
considered satisfied if the entire interest of the policy is used to purchase an
immediate annuity under which payments will begin within one year of the policy
owner's death and will be made for the life of the Beneficiary or for a period
not extending beyond the life expectancy of the Beneficiary. If the Beneficiary
is the policy owner's surviving spouse, the Policy may be continued with the
surviving spouse as the new policy owner. If the policy owner is not a natural
person, these "death of Owner" rules apply when the primary Annuitant is
changed. Non-Qualified Policies contain provisions intended to comply with these
requirements of the Code. No regulations interpreting these requirements of the
Code have yet been issued and thus no assurance can be given that the provisions
contained in these policies satisfy all such Code requirements. The provisions
contained in these policies will be reviewed and modified if necessary to assure
that they comply with the Code requirements when clarified by regulation or
otherwise.
Withholding of federal income taxes on the taxable portion of all
distributions may be required unless the recipient elects not to have any such
amounts withheld and properly notifies NYLIAC of that election. Different rules
may apply to United States citizens or expatriates living abroad. In addition,
some states have enacted legislation requiring withholding.
5
<PAGE> 283
Even if a recipient elects no withholding, special rules may require NYLIAC
to disregard the recipient's election if the recipient fails to supply NYLIAC
with a "TIN" or taxpayer identification number (social security number for
individuals) or if the Internal Revenue Service notifies NYLIAC that the TIN
provided by the recipient is incorrect.
DISTRIBUTOR OF THE POLICIES
NYLIFE Distributors Inc. ("NYLIFE Distributors"), the distributor of the
policies, is registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the National Association of Securities Dealers,
Inc. NYLIFE Distributors is an indirect wholly-owned subsidiary of New York
Life. The maximum commission paid to broker-dealers who have entered into dealer
agreements with NYLIFE Distributors is not expected to exceed 6.5%. A portion of
this amount is paid as commissions to registered representatives.
As these policies are being offered for the first time, no commissions have
been paid.
The policies are sold and premium payments are accepted on a continuous
basis.
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
NYLIAC holds title to the assets of the Separate Account. The assets are
kept physically segregated and held separate and apart from NYLIAC's general
corporate assets. Records are maintained of all purchases and redemptions of
Eligible Portfolio shares held by each of the Investment Divisions.
STATE REGULATION
NYLIAC is a stock life insurance company organized under the laws of
Delaware, and is subject to regulation by the Delaware State Insurance
Department. We file an annual statement with the Delaware Commissioner of
Insurance on or before March 1 of each year covering the operations and
reporting on the financial condition of NYLIAC as of December 31 of the
preceding calendar year. Periodically, the Delaware Commissioner of Insurance
examines the financial condition of NYLIAC, including the liabilities and
reserves of the Separate Account.
In addition, NYLIAC is subject to the insurance laws and regulations of all
the states where it is licensed to operate. The availability of certain policy
rights and provisions depends on state approval and/or filing and review
processes. Where required by state law or regulation, the policies will be
modified accordingly.
RECORDS AND REPORTS
NYLIAC maintains all records and accounts relating to the Separate Account.
As presently required by the federal securities laws, NYLIAC will mail to you at
your last known address of record, at least semi-annually after the first Policy
Year, reports containing information required under the federal securities laws
or by any other applicable law or regulation.
LEGAL PROCEEDINGS
NYLIAC is a defendant in individual and/or alleged class action suits
arising from its agency sales force, insurance (including variable contracts
registered under the federal securities law), investment, retail securities
and/or other operations, including actions involving retail sales practices.
Most of these actions seek substantial or unspecified compensatory and punitive
damages. NYLIAC is also from time to time involved 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.
6
<PAGE> 284
FINANCIAL STATEMENTS
F-1
<PAGE> 285
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-2
<PAGE> 286
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-3
<PAGE> 287
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-4
<PAGE> 288
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-5
<PAGE> 289
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-6
<PAGE> 290
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-7
<PAGE> 291
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-8
<PAGE> 292
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-9
<PAGE> 293
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-10
<PAGE> 294
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-11
<PAGE> 295
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-12
<PAGE> 296
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-13
<PAGE> 297
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-14
<PAGE> 298
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-15
<PAGE> 299
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-16
<PAGE> 300
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-17
<PAGE> 301
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-18
<PAGE> 302
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-19
<PAGE> 303
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-20
<PAGE> 304
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements.
All required financial statements are included in Part B of this
Registration Statement.
b. Exhibits.
(1) Resolution of the Board of Directors of New York Life Insurance
and Annuity Corporation ("NYLIAC") authorizing establishment of
the Separate Account - Previously filed as Exhibit (1) to
Registrant's initial Registration Statement, re-filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit
(1) to Registrant's Post-Effective Amendment No. 2 on Form N-4,
and incorporated herein by reference.
(2) Not applicable.
(3)(a) Distribution Agreement between NYLIFE Securities Inc. and
NYLIAC - Previously filed as Exhibit (3)(a) to Post-Effective
Amendment No. 1 to the registration statement on Form S-6 for
NYLIAC MFA Separate Account-I (File No. 2-86084), re-filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit
(3)(a) to Post-Effective Amendment No. 4 to the registration
statement on Form S-6 for NYLIAC Variable Universal Life
Separate Account-I (File No. 33-64410), and incorporated herein
by reference.
(3)(b) Distribution Agreement between NYLIFE Distributors Inc. and
NYLIAC - Previously filed as Exhibit (3)(b) to Registrant's
Post-Effective Amendment No. 1 on Form N-4, and incorporated
herein by reference.
(4) Specimen Policy - Previously filed as Exhibit (4) to
Registrant's initial Registration Statement, re-filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit
(4) to Registrant's Post-Effective Amendment No. 2 on Form N-4,
and incorporated herein by reference. Specimen policy for the
MainStay Plus Variable Annuity - Previously filed in accordance
with Regulation S-T, 17 CFR 232.102(3) as Exhibit (4) to
Registrant's Post-Effective Amendment No. 4 on Form N-4 and
incorporated herein by reference.
(4)(a) Endorsements to Specimen Policy for the MainStay Plus Variable
Annuity - Previously filed in accordance with Regulation S-T,
17 CFR 232.102(e) as Exhibit (4)(a) to Registrant's
Post-Effective Amendment No. 4, and incorporated herein by
reference.
(4)(b) Rider to Specimen Policy for the MainStay Plus Variable Annuity
- Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (4)(b) to Registrant's Post-Effective
Amendment No. 6 on Form N-4 and incorporated herein by
reference.
(4)(c) Specimen Policy for the LifeStages Access Variable Annuity and
MainStay Access Variable Annuity - Filed herewith.
(5) Form of application for a Policy - Previously filed as Exhibit
(5) to the initial registration statement on Form N-4 for
NYLIAC Variable Annuity Separate Account-I (File No. 33-53342),
re-filed in accordance with Regulation S-T, 17 CFR 232.102(e)
as Exhibit (5) to Registrant's Post-Effective Amendment No. 2
on Form N-4, and incorporated herein by reference. Form of
application for the MainStay Plus Variable Annuity - Previously
filed in accordance with Regulation S-T, 17 CFR 232.102(e) as
Exhibit (5) to Registrant's Post-Effective Amendment No. 3 on
Form N-4, and incorporated herein by reference.
(5)(a) Form of application for the LifeStages Access Variable
Annuity - Filed herewith.
(5)(b) Form of application for the MainStay Access Variable
Annuity - Filed herewith.
(6)(a) Certificate of Incorporation of NYLIAC - Previously filed as
Exhibit (6)(a) to the registration statement on Form S-6 for
NYLIAC MFA Separate Account-I (File No. 2-86083), re-filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit
(6)(a) to the initial registration statement on Form S-6 for
NYLIAC Corporate Sponsored Variable Universal Life Separate
Account-I (File No. 333-07617), and incorporated herein by
reference.
(6)(b)(1) By-Laws of NYLIAC - Previously filed as Exhibit (6)(b) to the
registration statement on Form S-6 for NYLIAC MFA Separate
Account-I (File No. 2-86083), re-filed in accordance with
C-1
<PAGE> 305
Regulation S-T, 17 CFR 232.102(e) as Exhibit (6)(b) to the
initial registration statement on Form S-6 for NYLIAC Corporate
C-2
<PAGE> 306
Sponsored Variable Universal Life Separate Account-I (File No.
333-07617), and incorporated herein by reference.
(6)(b)(2) Amendments to By-Laws of NYLIAC - Previously filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit
(6)(b) to Pre-Effective Amendment No. 1 to the registration
statement on Form S-6 for NYLIAC Variable Universal Life
Separate Account-I (File No. 333-39157), and incorporated
herein by reference.
(7) Contract of Reinsurance between Connecticut General Life
Insurance Company/Cigna Reinsurance and NYLIAC - Previously
filed as Exhibit (7) to Registrant's Post-Effective Amendment
No. 1 on Form N-4, and incorporated herein by reference.
(8)(a) Stock Sale Agreement between NYLIAC and MainStay VP Series
Fund, Inc. (formerly New York Life MFA Series Fund, Inc.) -
Previously filed as Exhibit (8)(a) to Pre-Effective Amendment
No. 1 to the registration statement on Form N-1 for New York
Life MFA Series Fund, Inc. (File No. 2-86082), re-filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit
(9)(a) to Pre-Effective Amendment No. 1 to the registration
statement on Form S-6 for NYLIAC Corporate Sponsored Variable
Universal Life Separate Account-I (File No. 333-07617), and
incorporated herein by reference.
(8)(b) Participation Agreement among Acacia Capital Corporation,
Calvert Asset Management Company, Inc. and NYLIAC, as amended -
Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (9)(b)(1) to Pre-Effective Amendment No.
1 to the registration statement on Form S-6 for NYLIAC
Corporate Sponsored Variable Universal Life Separate Account-I
(File No. 333-07617), and incorporated herein by reference.
(8)(c) Participation Agreement among The Alger American Fund, Fred
Alger and Company, Incorporated and NYLIAC - Previously filed
in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit
(9)(b)(2) to Pre-Effective Amendment No. 1 to the registration
statement on Form S-6 for NYLIAC Corporate Sponsored Variable
Universal Life Separate Account-I (File No. 333-07617), and
incorporated herein by reference.
(8)(d) Participation Agreement between Janus Aspen Series and NYLIAC -
Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (9)(b)(3) to Pre-Effective Amendment No.
1 to the registration statement on Form S-6 for NYLIAC
Corporate Sponsored Variable Universal Life Separate Account-I
(File No. 333-07617), and incorporated herein by reference.
(8)(e) Participation Agreement among Morgan Stanley Universal Funds,
Inc., Morgan Stanley Asset Management Inc. and NYLIAC -
Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (9)(b)(4) to Pre-Effective Amendment No.
1 to the registration statement on Form S-6 for NYLIAC
Corporate Sponsored Variable Universal Life Separate Account-I
(File No. 333-07617), and incorporated herein by reference.
(8)(f) Participation Agreement among Variable Insurance Products Fund,
Fidelity Distributors Corporation and NYLIAC - Previously filed
in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit
(9)(b)(5) to Pre-Effective Amendment No. 1 to the registration
statement on Form S-6 for NYLIAC Corporate Sponsored Variable
Universal Life Separate Account-I (File No. 333-07617), and
incorporated herein by reference.
(8)(g) Participation Agreement among Variable Insurance Products Fund
II, Fidelity Distributors Corporation and NYLIAC - Previously
filed in accordance with Regulation S-T, 17 CFR 232.102(e) as
Exhibit (9)(b)(6) to Pre-Effective Amendment No. 1 to the
registration statement on Form S-6 for NYLIAC Corporate
C-3
<PAGE> 307
Sponsored Variable Universal Life Separate Account-I (File No.
333-07617), and incorporated herein by reference.
(8)(h) Form of Participation Agreement among T. Rowe Price Equity
Series, Inc., T. Rowe Price Associates, Inc. and NYLIAC -
Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (8)(h) to Post-Effective Amendment
No. 7 to the registration statement on Form N-4 for NYLIAC
Variable Annuity Separate Account-I (File No. 33-53342), and
incorporated herein by reference.
(8)(i) Form of Participation Agreement among Van Eck Worldwide
Insurance Trust, Van Eck Associates Corporation and NYLIAC -
Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (8)(i) to Post-Effective Amendment No.
7 to the registration statement on Form N-4 for NYLIAC Variable
Annuity Separate Account-I (File No. 33-53342), and
incorporated herein by reference.
(8)(j) Form of Participation Agreement among MFS Variable Insurance
Trust, Massachusetts Financial Services Company and NYLIAC -
Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (8)(j) to Post-Effective Amendment No.
7 to the registration statement on Form N-4 for NYLIAC Variable
Annuity Separate Account-I (File No. 33-53342), and
incorporated herein by reference.
(9) Opinion and Consent of Thomas F. English, Esq. - Filed
herewith.
(10)(a) Consent of PricewaterhouseCoopers LLP - Filed herewith.
(10)(b) Powers of Attorney for the Directors and Officers of NYLIAC -
Previously filed in accordance with Regulation S-T, 17 CFR
232.102(e) as Exhibit (9)(c) to Pre-Effective Amendment No. 2
to the registration statement on Form S-6 for NYLIAC Corporate
Sponsored Variable Universal Life Separate Account-I (File No.
333-07617) for the following, and incorporated herein by
reference:
Jay S. Calhoun, Vice President, Treasurer and Director
(Principal Financial Officer)
Richard M. Kernan, Jr., Director
Robert D. Rock, Senior Vice President and Director
Frederick J. Sievert, President and Director (Principal
Executive Officer)
Stephen N. Steinig, Senior Vice President, Chief Actuary and
Director
Seymour Sternberg, Director
(10)(c) Power of Attorney for Maryann L. Ingenito, Vice President and
Controller (Principal Accounting Officer) - Previously filed in
accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit
(9)(d) to Pre-Effective Amendment No. 1 to the registration
statement on Form S-6 for NYLIAC Corporate Sponsored Variable
Universal Life Separate Account-I (File No. 333-07617), and
incorporated herein by reference.
(10)(d) Power of Attorney for Howard I. Atkins, Executive Vice
President (Principal Financial Officer) - Previously filed as
Exhibit 8 (d) to Pre-Effective Amendment No. 1 to the
registration statement on Form S-6 for NYLIAC Variable
Universal Life Separate Account-I (File No. 333-39157), and
incorporated herein by reference.
(10)(e) Power of Attorney for Certain Directors of NYLIAC - Previously
filed as Exhibit (10)(e) to Registrant's Post-Effective
Amendment No. 6 on Form N-4 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
(10)(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.
C-4
<PAGE> 308
(11) Not applicable.
(12) Not applicable.
(13) Schedule of Computations - Previously filed as Exhibit (13) to
Post-Effective Amendment No. 7 to the Registration Statement on
Form N-4 for NYLIAC Variable Annuity Separate Account-I (File
No. 33- 53342), and incorporated herein by reference.
(14) Not applicable.
C-5
<PAGE> 309
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The business address of each director and officer of NYLIAC is 51 Madison
Avenue, New York, NY 10010.
<TABLE>
<CAPTION>
Name: Title:
----- ------
<S> <C>
Seymour Sternberg Director
Richard M. Kernan, Jr. Director
Frederick J. Sievert Director and President
George J. Trapp Director
Frank M. Boccio Director
Robert D. Rock Director and Senior Vice President
Howard I. Atkins Director, Executive Vice President and Chief Financial Officer
Michael Gallo Director, Senior Vice President
Solomon Goldfinger Director, Senior Vice President
Phillip J. Hildebrand Director, Executive Vice President
Gary G. Benanav Executive Vice President and Chairman of Taiwan Branch
Gary E. Wendlandt Executive Vice President
Jay S. Calhoun Senior Vice President and Treasurer
Judith E. Campbell Senior Vice President and Chief Information Officer
Patrick Colloton Senior Vice President
Shiela K. Davidson Senior Vice President
Richard D. Levy Senior Vice President
Michael J. McLaughlin Senior Vice President and General Counsel
John R. Meyer Senior Vice President
Michael J. Nocera Senior Vice President
Frank J. Ollari Senior Vice President
Anne F. Pollack Senior Vice President
Richard C. Schwartz Senior Vice President
Stephen N. Steinig Senior Vice President and Chief Actuary
Thomas J. Warga Senior Vice President and General Auditor
Edward C. Wilson Senior Vice President and Chief Sales Officer
David Boyle Vice President
William Cheng Vice President
Limim Chu General Manager and President of Taiwan Branch
Henry Ciapas Vice President
Adam Clemens Vice President
John A. Cullen Vice President and Controller
Lisa O. Cullity Vice President
Melvin J. Feinberg Vice President
Jane L. Hamrick Vice President
Robert E. Hebron Vice President
Matthew M. Huss Vice President
Robert Hynes Vice President
Himi L. Kittner Vice President
David Krystel Vice President
Thomas S. McArdle Vice President
Daniel J. McKillop Vice President
William H. Mowat Vice President
Michael M. Oleske Vice President and Tax Counsel
Danny Ramjit Vice President and CFO Taiwan Branch
Andrew N. Reiss Vice President and National Sales Manager
John E. Schumacher Vice President
Joel Steinberg Vice President and Actuary
Richard W. Zuccaro Vice President
Catherine A. Marrion Secretary
</TABLE>
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<PAGE> 310
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR
REGISTRANT
The Depositor, NYLIAC, is a wholly-owned subsidiary of New York Life Insurance
Company ("New York Life"). The Registrant is a segregated asset account of
NYLIAC. The following chart indicates persons presumed to be controlled by New
York Life(+), unless otherwise indicated. Subsidiaries of other subsidiaries
are indented accordingly, and ownership is 100% unless otherwise indicated.
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
MainStay Institutional Funds Inc.(1) Maryland
MainStay VP Series Fund, Inc.(2) Maryland
New York Life Insurance and Annuity Corporation Delaware
New York Life Irrevocable Trust of 1996(3) New York N/A
NYLIFE LLC New York
Avanti Corporate Health Systems, Inc. Delaware
Avanti of the District, Inc. Maryland
Eagle Strategies Corp. Arizona
</TABLE>
- --------
(1) This entity is an unaffiliated registered investment company as to
which New York Life and/or its subsidiaries perform investment management,
administrative, distribution and underwriting services. It is not a subsidiary
of New York Life but is included here for informational purposes only.
(2) New York Life serves as investment adviser to this entity, the
shares of which are held of record by separate accounts of NYLIAC. New York Life
disclaims any beneficial ownership and control of this entity. New York Life
and NYLIAC as depositors of said separate accounts have agreed to vote their
shares as to matters covered in the proxy statements in accordance with voting
instructions received from holders of variable annuity and variable life
insurance policies at the shareholders meeting of these entities. It is not
a subsidiary of New York Life, but is included here for informational purposes
only.
(3) An unaffiliated trust formed solely for the purpose of holding
shares of New York Life Settlement Corporation. It is not a subsidiary of New
York Life, but is included here for informational purposes only.
- --------
(+) By including the indicated corporations in this list, New York Life is
not stating or admitting that said corporations are under its actual
control; rather, these corporations are listed here to ensure full
compliance with the requirements of this Form N-4.
C-7
<PAGE> 311
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
(NYLIFE LLC subsidiaries cont.)
New York Life Capital Corporation Delaware
New York Life International Investment Inc. Delaware
Monetary Research Ltd. Bermuda
NYL Management Limited United Kingdom
Taiyo Life Gamma Asset Management Ltd(4) Japan 16.7%
New York Life (U.K.) Ltd.(5) United Kingdom 99.97%
Life Assurance Holding Corporation Limited United Kingdom 23%
Windsor Life Assurance Company Limited United Kingdom
Windsor Construction Company Limited United Kingdom
New York Life Trust Company New York
New York Life Administration Corp. Texas
NYLIFE Structured Asset Management Company Ltd. Texas
NYLIFE HealthCare Management, Inc. Delaware
Express Scripts, Inc. Delaware 39.4% of total
combined stock and
89.6% of the voting
rights
Express Scripts Vision Corporation Delaware
Great Plains Reinsurance Company Arizona
Practice Patterns Science, Inc. Delaware 80%
ESI Canada Holdings, Inc. Canada
ESI Canada, Inc. Canada
Diversified Pharmaceutical Services (P.R.), Inc. Puerto Rico
Diversified Pharmaceutical Services, Inc. Minnesota
Diversified NY IPA, Inc. New York
ESI/VRX Sales Development Co. Delaware
Express Scripts Specialty Distribution Services, Inc. Delaware
ESI Utilization Management Co. Delaware
ESI Claims, Inc. Delaware
ESI Mail Pharmacy Service, Inc. Delaware
IVTx, Inc. Delaware
Value Health, Inc. Delaware
Value Rx of Michigan, Inc. Michigan
Your Pharmacy.com, Inc. Delaware
</TABLE>
- --------
(4) Based on the percentage of ownership as well as the lack of
"control" by New York Life over management or policies of this company, this
entity is not considered a subsidiary of New York Life but is included here for
informational purposes only.
(5) One share is held by NYLIFE LLC, a Nominee, as required by
British law.
C-8
<PAGE> 312
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
(NYLIFE LLC subsidiaries cont.)
WellPath of Arizona Reinsurance Company Arizona
NYLCare NC Holdings, Inc. Delaware
WellPath Community Health Plans LLC North Carolina Duke Medical
Strategies, Inc. holds
75%; 25% LLC interest
Wellpath of Carolina, Inc. Delaware
ETHIX Southeast, Inc. North Carolina
WPCHP Holdings, Inc. Delaware
WellPath Preferred Services, LLC North Carolina 99.9%; WPCHP
Holdings, Inc. owns
other 0.1%
WellPath Select Holdings, LLC North Carolina WPCHP Holdings,
Inc. holds 0.1%;
99.9% LLC Interest
WellPath Select, Inc. North Carolina
NYLIFE Refinery Inc. New York
NYLIFE Securities Inc. New York
NYLIFE Structured Asset Management Company, Ltd. Texas 83.33%; NYLIFE
Depositary Corp.
owns the remaining
16.67%
Prime Provider Corp. New York
Prime Provider Corp. of Texas Texas
NYLINK Insurance Agency Incorporated Delaware
NYLINK Insurance Agency of Alabama, Incorporated Alabama
NYLINK Insurance Agency of Hawaii, Incorporated Hawaii
NYLINK Insurance Agency of Idaho, Incorporated Idaho
NYLINK Insurance Agency of Massachusetts, Incorporated Massachusetts
NYLINK Insurance Agency of Montana, Incorporated Montana
NYLINK Insurance Agency of Nevada, Incorporated Nevada
</TABLE>
C-9
<PAGE> 313
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Organization Securities Owned
<S> <C> <C>
(NYLIFE LLC, subsidiaries cont.)
NYLINK Insurance Agency of New Mexico, Incorporated New Mexico
NYLINK Insurance Agency of Ohio, Incorporated(6) Ohio
NYLINK Insurance Agency of Oklahoma, Incorporated(6) Oklahoma
NYLINK Insurance Agency of Texas, Incorporated(6) Texas
NYLINK Insurance Agency of Washington, Incorporated Washington
NYLINK Insurance Agency of Wyoming, Incorporated Wyoming
NYLTEMPS Inc. Delaware
New York Life Asset Management LLC Delaware
MainStay Management LLC Delaware
New York Life Benefit Services LLC Delaware
Monitor Capital Advisors LLC Delaware
New York Life International Investment Asia Ltd. Mauritius
Madison Square Advisors LLC Delaware
NYLCAP Manager LLC Delaware
New York Life Capital Partners LLC Delaware
MainStay Shareholder Services, Inc. Delaware
MacKay Shields LLC Delaware
MacKay Shields Domestic General Partner LLC
NYLIFE Distributors, Inc. Delaware
New York Life Asset Management Operating Company LLC Delaware
NYLIFE Insurance Company of Arizona Arizona
The MainStay Funds(7) Massachusetts
New York Life International, Inc. Delaware
New York Life Worldwide Capital, Inc. Delaware
New York Life Insurance Worldwide Ltd. Bermuda
New York Life Insurance Ltd. South Korea 51%
P.T. Asuransi Jiwa Sewu-New York Life Indonesia 50.2%
GEO New York Life, S.A. Mexico 49%
New York Life International India Fund LLC Mauritius 90%
NYLI-VB Asset Management Co. LLC Mauritius 90%
La Buenos Aires New York Life Seguros de Vida S.A. Argentina 40%
La Buenos Aires New York Life Seguros de Retiro Argentina 40%
Maxima S.A. AFJP Argentina 40%
New York Life Insurance (Philippines), Inc. Philippines
</TABLE>
- ------------------
(6) This entity is an unaffiliated insurance agency for which New York
Life and its subsidiaries perform administrative services. It is not a
subsidiary of New York Life but is included for informational purposes only.
(7) This entity is an unaffiliated registered investment company for
which New York Life susidiaries perform invetment management, administrative,
distribution and underwriting services. It is not a subsidiary of New York
Life, but is included here for informational purposes only.
C-10
<PAGE> 314
ITEM 27. NUMBER OF CONTRACT OWNERS
As of January 31, 2000, there were approximately 48,250 owners of
Qualified Policies and 51,285 owners of Non-Qualified Policies offered under
NYLIAC Variable Annuity Separate Account - III.
ITEM 28. INDEMNIFICATION
Reference is made to Article VIII of the Depositor's By-Laws.
New York Life maintains Directors and Officers Liability/Company
Reimbursement ("D&O") insurance which covers directors, officers and trustees of
New York Life, its subsidiaries, and its subsidiaries and certain affiliates
including the Depositor while acting in their capacity as such. The total annual
aggregate of D&O coverage is $150 million applicable to all insureds under the
D&O policies. There is no assurance that such coverage will be maintained by New
York Life or for the Depositor in the future as, in the past, there have been
large variances in the availability of D&O insurance for financial institutions.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Depositor pursuant to the foregoing provisions, or otherwise, the Depositor has
C-11
<PAGE> 315
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Depositor of expenses incurred
or paid by a director, officer or controlling person of the Depositor in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Depositor will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Investment companies (other than the Registrant) for which NYLIFE
Distributors Inc. is currently acting as underwriter:
NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I
NYLIAC MFA Separate Account-I
NYLIAC MFA Separate Account-II
NYLIAC Variable Annuity Separate Account-I
NYLIAC Variable Annuity Separate Account-II
NYLIAC Variable Universal Life Separate Account-I
NYLIAC VLI Separate Account
(b) Directors and Officers.
The business address of each director and officer of NYLIFE Distributors
Inc. is 300 Interpace Parkway, Parsippany, New Jersey 07054.
<TABLE>
<CAPTION>
Names of Directors and Officers Positions and Offices with Underwriter
------------------------------- --------------------------------------
<S> <C>
Frank M. Boccio Director
Jefferson C. Boyce Director
Michael G. Gallo Director
Phillip J. Hildebrand Director
Richard D. Levy Director
Robert D. Rock Director
Stephen C. Roussin Director and Senior Vice President
Robert E. Brady Director and Vice President
Sheila K. Davidson Chief Compliance Officer
Jay S. Calhoun Senior Vice President and Treasurer
John A. Flanagan Senior Vice President and Chief Financial Officer
Thomas J. Warga Senior Vice President and General Auditor
David J. Krystel Vice President
Linda M. Livornese Vice President
Barbara McInerney Vice President
Louis H. Adasse Corporate Vice President
Scott T. Harrington Corporate Vice President
Albert W. Leier Corporate Vice President
Thomas J. Murray Corporate Vice President
Arphiela Arizmendi Assistant Vice President
Antoinette B. Cirillo Assistant Vice President
Geraldine Lorito Assistant Vice President
Mark A. Gomez Secretary
Lori S. Whittaker Assistant Secretary
</TABLE>
C-12
<PAGE> 316
(c) Commissions and Other Compensation
<TABLE>
<CAPTION>
Name of New Underwriting Compensation on
Principal Discounts and Redemption or Brokerage
Underwriter Commissions Annuitization Commission Compensation
----------- ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
NYLIFE Distributors
Inc. -0- -0- -0- -0-
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records required to be maintained by Section 31(a) of the
1940 Act and the rules under it are maintained by NYLIAC at its home office, 51
Madison Avenue, Room 0150, New York, New York 10010; New York Life - Records
Division, 110 Cokesbury Road, Lebanon, New Jersey 08833 and with Iron Mountain
Records Management, Inc. at both 8 Neptune Drive, Poughkeepsie, New York 12601
and Route 9W South, Port Ewen, New York 12466-0477.
ITEM 31. MANAGEMENT SERVICES - Not applicable.
ITEM 32. UNDERTAKINGS - Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial statements in
the registration statement are never more than 16 months old for so long as
payments under the variable annuity contracts may be accepted;
(b) to include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a post card or similar
written communication affixed to or included in the prospectus that the
applicant can remove to send for a Statement of Additional Information;
(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form promptly upon written
or oral request.
REPRESENTATION AS TO THE REASONABLENESS OF AGGREGATE FEES AND CHARGES
New York Life Insurance and Annuity Corporation ("NYLIAC"), the sponsoring
insurance company of the NYLIAC Variable Annuity Separate Account-III, hereby
represents that the fees and charges deducted under the NYLIAC Individual
Flexible Premium Variable Annuity Policies are reasonable in relation to the
services rendered, the expenses expected to be incurred and the risks assumed by
NYLIAC.
C-13
<PAGE> 317
SECTION 403(b) REPRESENTATIONS
Registrant represents that it is relying on a no-action letter dated
November 28, 1988, to the American Council of Life Insurance (Ref. No. IP-6-88)
regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment Company Act of
1940, in connection with redeemability restrictions on Section 403(b) Policies,
and that paragraphs numbered (1) through (4) of that letter will be complied
with.
C-14
<PAGE> 318
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant certifies that it has caused this Amendment to the
Registration Statement to be signed on its behalf, in the City and State of New
York on this 13th day of April, 2000.
NYLIAC VARIABLE ANNUITY
SEPARATE ACCOUNT-III
(Registrant)
By: /s/ DAVID J. KRYSTEL
-----------------------------
David J. Krystel
Vice President
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
(Depositor)
By: /s/ DAVID J. KRYSTEL
-----------------------------
David J. Krystel
Vice President
As required by the Securities Act of 1933, this Amendment to the Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
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
*By: /s/ DAVID J. KRYSTEL
----------------------------------
David J. Krystel
Attorney-in-Fact
April 13, 2000
<PAGE> 319
EXHIBIT INDEX
Exhibit
Number Description
(4)(c) Specimen Policy for the LifeStages Access Variable Annuity and
MainStay Access Variable Annuity
(5)(a) Form of application for the LifeStages Access Variable Annuity
(5)(b) Form of application for the MainStay Access Variable Annuity
(9) Opinion and Consent of Thomas F. English, Esq.
(10)(a) Consent of PricewaterhouseCoopers LLP
<PAGE> 1
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A Delaware Corporation)
Executive Office - 51 Madison Avenue
New York, NY 10010
THE CORPORATION New York Life Insurance and Annuity Corporation (NYLIAC) will
pay the benefits of this policy in accordance with its provisions. The pages
which follow are also a part of this policy.
ANNUITY BENEFIT ON THE ANNUITY COMMENCEMENT DATE, THE ACCUMULATION VALUE WILL BE
APPLIED TO PROVIDE A MONTHLY INCOME PAYMENT, AS STATED IN THE ANNUITY BENEFIT
SECTION.
RIGHT TO RETURN POLICY PLEASE EXAMINE YOUR POLICY. WITHIN 10 DAYS (OR LONGER IF
REQUIRED BY STATE LAW) AFTER DELIVERY, YOU MAY RETURN IT TO THE CORPORATION OR
TO THE REGISTERED REPRESENTATIVE THROUGH WHOM IT WAS PURCHASED, WITH A WRITTEN
REQUEST FOR A CANCELLATION. UPON RECEIPT OF THIS REQUEST, WE WILL PROMPTLY
CANCEL THE POLICY AND REFUND THE POLICY'S ACCUMULATION VALUE. THIS AMOUNT MAY BE
MORE OR LESS THAN THE PREMIUM PAYMENT(s).
PAYMENT OF PREMIUMS At any time before the Annuity Commencement Date and during
the lifetime of the Annuitant and Owner, premiums may be paid at any interval or
by any method we make available. Premium Payments are subject to the limitations
defined in the policy. The initial Premium Payment is shown on the Policy Data
Page.
REPORT TO OWNER At least once each Policy Year, New York Life Insurance and
Annuity Corporation will provide a report in connection with this policy. The
report will tell the Owner how much Accumulation Value there is as of the end of
the reporting period. It will also give the Owner any other facts required by
state law or regulations.
This policy is issued as of the Issue Date shown on the Policy Data Page.
/s/ Frederick L. Sievert
President
/s/ George J. Trapp
Secretary
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
Monthly Income Payments Begin On The Annuity Commencement Date.
Premiums May Be Paid During The Annuitant's Lifetime, As Defined Herein.
THE AMOUNT OF ANY ACCUMULATION VALUE MAY INCREASE OR DECREASE BASED ON THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT.
ACCUMULATION VALUES BASED ON THE PERFORMANCE OF THE SEPARATE ACCOUNT ARE
VARIABLE AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT.
A Stock Company Incorporated in Delaware.
Policy Is Non-Participating.
200-090
<PAGE> 2
POLICY DATA
200-090 PAGE 2
<PAGE> 3
READ THIS POLICY CAREFULLY
200-090 PAGE 3
<PAGE> 4
WE & YOU
In this policy, the words "we," "our," "us," "Corporation" and "NYLIAC" refer to
New York Life Insurance and Annuity Corporation, and the words "you" and "your"
refer to the Owner of this policy.
When you write to us, please include the policy number, your full name and your
current address.
CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
POLICY DATA...............................................................................................................2
DEFINITIONS...............................................................................................................6
SECTION ONE - ANNUITY BENEFIT.............................................................................................8
1.1 WHEN WILL INCOME PAYMENTS BEGIN?......................................................................................8
1.2 MAY THE ANNUITY COMMENCEMENT DATE BE CHANGED?.........................................................................8
SECTION TWO - INCOME PAYMENTS OF POLICY PROCEEDS..........................................................................8
2.1 HOW ARE INCOME PAYMENTS MADE?.........................................................................................8
2.2 HOW ARE PAYMENTS MADE UNDER THE LIFE INCOME PAYMENT OPTION?...........................................................8
2.3 HOW ARE LIFE INCOME PAYMENT AMOUNTS DETERMINED?.......................................................................8
2.4 ARE THERE ANY OTHER METHODS OF INCOME PAYMENT?........................................................................9
SECTION THREE - ANNUITANT, OWNER, BENEFICIARY.............................................................................9
3.1 WHAT ARE THE RIGHTS OF OWNERSHIP OF THIS POLICY?......................................................................9
3.2 MAY THE OWNER BE DIFFERENT FROM THE ANNUITANT?........................................................................9
3.3 HOW DO YOU CHANGE THE OWNER OF THIS POLICY?...........................................................................9
3.4 MAY MORE THAN ONE BENEFICIARY BE NAMED?...............................................................................9
3.5 MAY YOU CHANGE A BENEFICIARY?.........................................................................................9
3.6 WHAT HAPPENS IF THE ANNUITANT DIES BEFORE THE ANNUITY COMMENCEMENT DATE?..............................................9
3.7 WHAT HAPPENS IF THE ANNUITANT DIES AFTER THE ANNUITY COMMENCEMENT DATE?...............................................9
3.8 WHAT HAPPENS IF YOU DIE BEFORE THE ANNUITY COMMENCEMENT DATE?........................................................10
3.9 WHAT HAPPENS IF YOU DIE AFTER THE ANNUITY COMMENCEMENT DATE?.........................................................10
3.10 DOES A BENEFICIARY HAVE TO ACCEPT THE ACCUMULATION VALUE OF THE POLICY AT YOUR DEATH?...............................10
3.11 WHAT HAPPENS IF YOUR SPOUSE IS THE BENEFICIARY?.....................................................................10
3.12 WHAT HAPPENS IF A BENEFICIARY WHO IS RECEIVING INCOME PAYMENTS DIES?................................................10
3.13 WHAT HAPPENS IF NO BENEFICIARY SURVIVES THE ANNUITANT?..............................................................10
SECTION FOUR - PREMIUM PAYMENTS..........................................................................................11
4.1 HOW ARE PREMIUM PAYMENTS CREDITED?...................................................................................11
4.2 ARE THERE ANY LIMITATIONS REGARDING THE AMOUNTS AND FREQUENCY OF PREMIUM PAYMENTS?...................................11
4.3 HOW ARE PREMIUM PAYMENTS ALLOCATED?..................................................................................11
4.4 MAY THE ALLOCATION ALTERNATIVES FOR PREMIUM PAYMENTS BE CHANGED?.....................................................11
</TABLE>
200-090 PAGE 4
<PAGE> 5
<TABLE>
<S> <C>
4.5 MAY THE CORPORATION TERMINATE THIS POLICY?...........................................................................11
SECTION FIVE - ACCUMULATION VALUE........................................................................................11
5.1 HOW IS YOUR POLICY'S ACCUMULATION VALUE CALCULATED?..................................................................11
SECTION SIX - CHARGES AND DISTRIBUTIONS..................................................................................12
6.1 WHEN CAN YOU SURRENDER THIS POLICY?..................................................................................12
6.2 WHEN CAN YOU MAKE A PARTIAL WITHDRAWAL FROM THIS POLICY?.............................................................12
6.3 WHEN WILL A PARTIAL WITHDRAWAL OR SURRENDER BE PROCESSED?............................................................12
6.4 ARE SERVICE CHARGES DEDUCTED FROM YOUR POLICY?.......................................................................12
6.5 WHEN ARE STATE PREMIUM TAXES DEDUCTED FROM YOUR POLICY?..............................................................12
SECTION SEVEN - SEPARATE ACCOUNT.........................................................................................12
7.1 HOW IS THE SEPARATE ACCOUNT ESTABLISHED AND MAINTAINED?..............................................................12
7.2 HOW ARE THE SEPARATE ACCOUNT ASSETS INVESTED?........................................................................12
7.3 TO WHOM DO THE ASSETS IN THE SEPARATE ACCOUNT BELONG?................................................................13
7.4 HOW WILL THE ASSETS OF THE SEPARATE ACCOUNT BE VALUED?...............................................................13
7.5 CAN WE TRANSFER ASSETS OF THE SEPARATE ACCOUNT TO ANOTHER SEPARATE ACCOUNT?..........................................13
7.6 WHAT OTHER RIGHTS DO WE HAVE?........................................................................................13
7.7 CAN A CHANGE IN THE OBJECTIVE OF THE FUND BE MADE?...................................................................13
7.8 IF THE ASSETS IN THE SEPARATE ACCOUNT BELONG TO US, WHAT DO YOUR PREMIUM PAYMENTS PURCHASE?..........................13
7.9 HOW IS THE NUMBER OF ACCUMULATION UNITS DETERMINED?..................................................................13
7.10 HOW IS THE VALUE OF AN ACCUMULATION UNIT DETERMINED?................................................................14
7.11 CAN YOU TRANSFER BETWEEN INVESTMENT DIVISIONS AND TO THE FIXED ACCOUNT?.............................................14
7.12 HOW DO YOU TRANSFER THE ACCUMULATION VALUE BETWEEN INVESTMENT DIVISIONS AND TO THE FIXED ACCOUNT?...................14
7.13 ARE THERE LIMITS ON WHAT YOU MAY TRANSFER BETWEEN INVESTMENT DIVISIONS AND TO THE FIXED ACCOUNT?....................15
SECTION EIGHT - FIXED ACCOUNT............................................................................................15
8.1 HOW ARE THE FIXED ACCOUNT ASSETS INVESTED?...........................................................................15
8.2 HOW IS THE FIXED ACCOUNT VALUED?.....................................................................................15
8.3 CAN TRANSFERS BE MADE FROM THE FIXED ACCOUNT TO THE INVESTMENT DIVISIONS?............................................15
8.4 HOW DO YOU TRANSFER THE FIXED ACCUMULATION VALUE TO THE INVESTMENT DIVISIONS?........................................15
8.5 HOW WILL PARTIAL WITHDRAWALS AND TRANSFERS BE DEDUCTED FROM THE FIXED ACCOUNT?.......................................15
SECTION NINE - GENERAL PROVISIONS........................................................................................16
9.1 WHAT CONSTITUTES THE ENTIRE CONTRACT?................................................................................16
9.2 HOW IMPORTANT IS THE INFORMATION YOU PROVIDE FOR THIS POLICY?........................................................16
9.3 WILL WE BE ABLE TO CONTEST THIS POLICY?..............................................................................16
9.4 HOW ARE THE DATES REFERRED TO IN THIS POLICY MEASURED?...............................................................16
9.5 HOW IS A PERSON'S AGE CALCULATED FOR THE PURPOSE OF THIS POLICY?.....................................................16
9.6 WHAT HAPPENS IF IN THIS POLICY WE REFER TO A PERSON'S AGE OR SEX INCORRECTLY?........................................16
9.7 MAY YOU ASSIGN OR TRANSFER YOUR POLICY?..............................................................................16
9.8 HOW DO YOU ASSIGN THIS POLICY?.......................................................................................16
9.9 MAY THE ASSIGNEE CHANGE THE OWNER, ANNUITANT, OR BENEFICIARY?........................................................16
9.10 ARE THE PAYMENTS MADE UNDER THE TERMS OF THIS POLICY PROTECTED AGAINST CREDITORS?...................................16
9.11 HOW SHOULD PAYMENTS FOR THIS POLICY BE MADE?........................................................................17
9.12 HOW IS GUARANTEED INTEREST CALCULATED FOR THIS POLICY?..............................................................17
9.13 IS THIS POLICY SUBJECT TO ANY LAW?..................................................................................17
9.14 ARE THERE ANY DIVIDENDS PAYABLE UNDER THIS POLICY?..................................................................17
</TABLE>
Note: This is a legal contract between the Owner and the Corporation.
200-090 PAGE 5
<PAGE> 6
200-090 PAGE 6
<PAGE> 7
DEFINITIONS
ACCUMULATION UNIT: An accounting unit used to calculate the Variable
Accumulation Value prior to the Annuity Commencement Date. Each Investment
Division of the Separate Account has a distinct Accumulation Unit value.
ACCUMULATION VALUE: The sum of the Variable Accumulation Value, if any, plus the
Fixed Accumulation Value, if any, of a policy for any Valuation Period.
AGE: The attained age on your last birthday.
ALLOCATION ALTERNATIVES: The Investment Divisions of the Separate Account and
the Fixed Account constitute the Allocation Alternatives.
ANNUITANT: The person named on the Policy Data Page and whose life determines
the Income Payments, and upon whose death prior to the Annuity Commencement Date
benefits under this policy may be paid.
ANNUITY COMMENCEMENT DATE: The date on which the first Income Payment under this
policy is to be made.
BENEFICIARY: The person or an entity having the right to receive the death
benefit set forth in this policy and who is the "designated Beneficiary" for
purposes of Section 72 of the Internal Revenue Code in the event of the
Annuitant's or Owner's death.
BUSINESS DAY: Generally, any day on which the New York Stock Exchange is open
for trading. Our Business Day ends at 4:00 p.m. Eastern Time or the closing of
the New York Stock Exchange, if earlier.
CORPORATION ("NYLIAC, WE, US, OUR"): New York Life Insurance and Annuity
Corporation, which is a wholly-owned Delaware subsidiary of New York Life
Insurance Company.
ELIGIBLE PORTFOLIOS ("PORTFOLIOS"): The mutual fund portfolios of the Fund which
are available for investment by the Investment Divisions of the Separate
Account, as shown on the Policy Data Page.
FIXED ACCOUNT: Assets in the Fixed Account are not part of the Separate Account
of New York Life Insurance and Annuity Corporation. The Fixed Accumulation Value
is supported by assets in the General Account of the Corporation, which are
subject to the claims of its general creditors.
FIXED ACCUMULATION VALUE: The sum of Premium Payments and transfers allocated to
the Fixed Account, plus interest credited on those Premium Payments and
transfers, less transfers and any Partial Withdrawals from the Fixed Account,
and less any Service Charges that may have already been assessed from the Fixed
Account.
FUND: MainStay VP Series Fund, Inc., a diversified open-end management
investment company registered under the Investment Company Act of 1940, and any
other registered open-end management investment company which offers Eligible
Portfolios.
GENERAL ACCOUNT: Includes all of NYLIAC's assets except those assets
specifically allocated to the Separate Account.
INCOME PAYMENTS: Payments made by NYLIAC to the named Payee, generally after the
Annuity Commencement Date.
INVESTMENT DIVISION ("DIVISION"): A division of the Separate Account. Each
Investment Division invests exclusively in shares of a specified Eligible
Portfolio.
ISSUE DATE: The date the policy is executed.
OWNER ("YOU, YOUR"): The person(s) or an entity designated as the Owner in this
policy, or as subsequently changed, and upon whose death prior to the Annuity
Commencement Date benefits under this policy may be paid. If NYLIAC issues a
jointly owned policy, ownership rights and privileges under this policy must be
exercised jointly and benefits under this policy will be paid upon the death of
any joint owner.
PARTIAL WITHDRAWAL: Any part of the Accumulation Value paid to you, at your
request, in accordance with the terms of this policy.
PAYEE: A recipient of payments under this policy, generally the owner.
POLICY ANNIVERSARY: An anniversary of the
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Policy Date displayed on the Policy Data Page.
POLICY DATA PAGE: Page (2) of this policy, containing the policy specifications.
POLICY DATE: The date from which Policy Years, quarters, months, and
anniversaries are measured. It is shown on the Policy Data Page.
POLICY YEAR: A year commencing on the Policy Date. Subsequent Policy Years begin
on each Policy Anniversary unless otherwise indicated.
PROPORTIONAL WITHDRAWAL: An amount equal to the amount withdrawn from the policy
divided by the policy's Accumulation Value immediately preceding the withdrawal,
multiplied by the Reset Value immediately preceding the withdrawal.
PREMIUM PAYMENT: An amount paid to the Corporation as consideration for the
benefits provided by this policy.
PURCHASE DATE: The Business Day on which a Premium Payment is received by us and
credited under this policy.
PURCHASE YEAR: A year as measured from the Purchase Date of the initial Premium
Payment or from the Purchase Date of any additional Premium Payments made.
QUALIFIED PLANS: A retirement plan under Section 219, 401(a), 403(b), or 408 of
the Internal Revenue Code.
RESET ANNIVERSARY: Every Policy Anniversary until either the Owner or the
Annuitant is age 80.
RESET VALUE: The value calculated on the Reset Anniversary is based on a
comparison between (a) the current Reset Anniversary's Accumulation Value, and
(b) the prior Reset Anniversary's value, plus any Premium Payments since the
prior Reset Anniversary date, less any Proportional Withdrawals, and any rider
premiums since the last Reset Anniversary date. The greater of the compared
values will be the new Reset Value.
RMD AUTOMATED OPTION: The calculation and automatic processing of the Required
Minimum Distribution (RMD) under certain Qualified Plans on a scheduled interval
(monthly, quarterly, semi-annually, or annually) or on an interval made
available by us to meet the Internal Revenue Service (IRS) requirements. RMD is
an amount that the IRS requires the owners of certain Qualified Plans to
withdraw each year generally commencing with the year the owner attains age 70
1/2.
SEPARATE ACCOUNT: A Separate Account established by the Corporation into which
assets are placed for the purchasers of this class of policies.
VALUATION PERIOD: The period from the close of the immediately preceding
Business Day to the close of the current Business Day.
VARIABLE ACCUMULATION VALUE: The sum of the products of the current Accumulation
Unit's value for each of the Investment Divisions multiplied by the number of
Accumulation Units held in the respective Investment Divisions.
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SECTION ONE - ANNUITY BENEFIT
1.1 WHEN WILL INCOME PAYMENTS BEGIN?
We will apply the Accumulation Value of this policy to the Life Income Payment
Option and make Income Payments to you each month beginning on the Annuity
Commencement Date shown on the Policy Data Page. These payments will be made in
accordance with the 'Income Payments Of Policy Proceeds' section of this policy.
Income Payments will begin if you and the Annuitant, if you are not the
Annuitant, are alive and if this policy is in force on that date.
1.2 MAY THE ANNUITY COMMENCEMENT DATE BE CHANGED?
Yes. If we agree, you may have the Annuity Commencement Date shown on the Policy
Data Page changed to an earlier date or deferred to a later date. You must
notify us in writing of your wish to change the date at least one month before
the Annuity Commencement Date.
SECTION TWO - INCOME PAYMENTS OF POLICY PROCEEDS
2.1 HOW ARE INCOME PAYMENTS MADE?
If you and the Annuitant, if you are not the Annuitant, are alive, and this
policy is in force on the Annuity Commencement Date, we will make Income
Payments under the Life Income Payment Option. If the Accumulation Value of this
policy is less than $2,000 on the Annuity Commencement Date, payment will be
made in a single sum.
2.2 HOW ARE PAYMENTS MADE UNDER THE LIFE INCOME PAYMENT OPTION?
We will make equal payments each month during the lifetime of the Annuitant.
Once Life Income Payments start, they do not change and are guaranteed for 10
years even if the Annuitant dies sooner. We may require that the Payee submit
proof of the Annuitant's survivorship as a condition for future Income Payments.
2.3 HOW ARE LIFE INCOME PAYMENT AMOUNTS DETERMINED?
Life Income Payments are based on the annuity premium rate in effect when the
first Income Payment is due, but will not be less than the corresponding minimum
amount shown in the Life Income Payment Option Table. These minimum amounts are
based on the 1983 Table a with Projection Scale G and with interest compounded
annually at 3%.
When asked, we will state in writing what the minimum amount of each monthly
Income Payment would be under this provision. It is based on the sex and
adjusted Age of the Annuitant. To find the adjusted Age in the year the first
Income Payment is due, we increase or decrease the Annuitant's Age at that time,
according to the following table:
2000-2005 2006-2015 2016-2025 2026-2035 2036 & later
- --------------------------------------------------------------------------------
+1 0 -1 -2 -3
LIFE INCOME PAYMENT OPTION TABLE
(Minimum Monthly Payment Guaranteed for 10 years for $1,000 of Proceeds)
- ------------------------------------------------------------------------
Adjusted Age Male Female
60 4.46 4.03
61 4.55 4.11
62 4.66 4.19
63 4.76 4.27
64 4.87 4.37
65 4.99 4.46
66 5.11 4.57
67 5.24 4.67
68 5.38 4.79
69 5.52 4.91
70 5.66 5.04
71 5.81 5.18
72 5.96 5.32
73 6.12 5.47
74 6.28 5.63
75 6.45 5.79
76 6.61 5.96
77 6.78 6.14
78 6.96 6.32
79 7.13 6.51
80 7.30 6.70
81 7.46 6.89
82 7.63 7.07
83 7.78 7.26
84 7.93 7.44
85+ 8.07 7.62
2.4 ARE THERE ANY OTHER METHODS OF INCOME PAYMENT?
Yes. You may elect to have the Accumulation Value paid to you in a single sum,
or if we agree, the
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proceeds may be placed under some other Income Payment option.
SECTION THREE - ANNUITANT, OWNER, BENEFICIARY
3.1 WHAT ARE THE RIGHTS OF OWNERSHIP OF THIS POLICY?
As the Owner, you have the right to change the Beneficiary or the Owner of this
policy. These rights are nonforfeitable and also include the right to receive
Income Payments or to name a Payee to receive these Income Payments.
3.2 MAY THE OWNER BE DIFFERENT FROM THE ANNUITANT?
Yes, but unless it is indicated on the Policy Data Page, or unless ownership is
subsequently changed, you are both the Annuitant and Owner of this policy.
3.3 HOW DO YOU CHANGE THE OWNER OF THIS POLICY?
You may change the Owner of this policy, from yourself to a new Owner, in a
notice you sign which gives us the facts that we need. This change will take
effect as of the date we receive your signed notice, subject to any payment we
made or action we took before recording the change. When this change takes
effect, all rights of ownership in this policy will pass to the new Owner.
Changing the Owner does not change the Beneficiary or the Annuitant.
3.4 MAY MORE THAN ONE BENEFICIARY BE NAMED?
Yes. You may name more than one Beneficiary. Multiple Beneficiaries may be
classified as first, second, and so on. If two or more beneficiaries are named
in a class, their shares in any amount payable may be stated. Any amount payable
to a Beneficiary will be applied to any first Beneficiaries who survive you. If
no first Beneficiaries survive, payment will be made to any surviving in the
second class, and so on. Those who survive in the same class have an equal share
to the extent possible in any amount payable, unless the shares are stated
otherwise. No amount will be payable to a Beneficiary if you die after the end
of an Income Payment period under any payment option.
3.5 MAY YOU CHANGE A BENEFICIARY?
Yes. You may change a Beneficiary during the lifetime of the Annuitant or Owner,
if you are not the Annuitant, in a signed notice that is satisfactory to us.
When we record a change, it will take effect as of the date we receive your
signed notice, subject to any payment we made or action we took before recording
the change.
3.6 WHAT HAPPENS IF THE ANNUITANT DIES BEFORE THE ANNUITY COMMENCEMENT DATE?
When we have proof that the Annuitant has died before the Annuity Commencement
Date, upon receipt of all necessary information, we will pay to the
Beneficiary(s) an amount equal to the greater of:
a) the Accumulation Value of this policy, or
b) the sum of all Premium Payments paid for this policy, less the amount of any
Partial Withdrawals and, less any rider premiums, or
c) the Reset Value on the last Reset Anniversary of the policy, plus, since the
last Reset Anniversary, any Premium Payments less any Proportional Withdrawals
and less any rider premiums since the last Reset Anniversary.
Payment will be made in a single sum, or in accordance with the Beneficiary's
election as provided for in Section 3.10. The Accumulation Value will be
calculated as of the date we receive due proof of death and all requirements
necessary to make the payment. This policy will end on such date. However, if
you are not the Annuitant and the Annuitant was your spouse and you are the sole
primary Beneficiary, you may elect in writing to continue the policy with you as
the new Annuitant.
3.7 WHAT HAPPENS IF THE ANNUITANT DIES AFTER THE ANNUITY COMMENCEMENT DATE?
If the Annuitant dies after the Annuity Commencement Date, but before the end of
the guaranteed period of the Income Payments, we will continue to make these
payments to the Beneficiary for the remainder of the Income Payment period. No
amount will be payable to a Beneficiary if the Annuitant dies after the end of
an Income Payment period under any payment option.
3.8 WHAT HAPPENS IF YOU DIE BEFORE THE ANNUITY COMMENCEMENT DATE?
If you are not the Annuitant, and if you die before the Annuity Commencement
Date, when we have proof of your death, upon receipt of all necessary
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information, we will pay to the Beneficiary an amount equal to the greater of:
a) the Accumulation Value of this policy, or
b) the sum of all Premium Payments paid for this policy, less the amount of any
Partial Withdrawals and less any rider premiums, or
c) the Reset Value on the last Reset Anniversary of the policy, plus, since the
last Reset Anniversary, any Premium Payments less any Proportional Withdrawals
and less any rider premiums since the last Reset Anniversary.
Payment will be made in a single sum or in accordance with the Beneficiary's
election as provided for in Section 3.10. The Accumulation Value will be
calculated as of the date we receive due proof of death and all requirements
necessary to make payment. This policy will end on such date. However, if you
are not the Annuitant and your surviving spouse is the sole primary Beneficiary,
your spouse may elect in writing to become the new Owner of this policy.
3.9 WHAT HAPPENS IF YOU DIE AFTER THE ANNUITY COMMENCEMENT DATE?
If you die before the Annuitant, we will make payment to the Beneficiary in an
amount equal to the present value of remaining Income Payments under a fixed
option or the current value of any amount remaining with us under a variable
option if then available. That amount will be determined based on the method,
interest rate and mortality table used to determine the monthly Income Payment.
3.10 DOES A BENEFICIARY HAVE TO ACCEPT THE ACCUMULATION VALUE OF THE POLICY AT
YOUR DEATH?
Upon receiving proof of your death, full payment will be made within five (5)
years after the date of your death to the Beneficiary. Your Beneficiary is not
required to accept the Accumulation Value of the policy if, while the Annuitant
is alive, you or the Beneficiary (after your death), choose in a signed notice
which gives us the facts that we need, to have all or part of this payment
placed under the Life Income Payment Option or any other payment option for the
Beneficiary. Payment under the option must be for the life of the Beneficiary or
for a number of years that is not more than the life expectancy of the
Beneficiary, at the time of your death (as determined for federal tax purposes),
and must begin within one year after your death.
3.11 WHAT HAPPENS IF YOUR SPOUSE IS THE BENEFICIARY?
If your spouse is the sole primary Beneficiary and you die before the Annuity
Commencement Date, this policy may be continued with your spouse as the new
Owner. If you are also the Annuitant, your spouse will become the new Annuitant.
If your spouse chooses to continue this policy, no death benefit proceeds will
be paid as a consequence of your death.
3.12 WHAT HAPPENS IF A BENEFICIARY WHO IS RECEIVING INCOME PAYMENTS DIES?
Each remaining Income Payment will be made to those Beneficiaries in the same
class who are alive when that payment becomes due. If no Beneficiary for any
amount payable, or for a stated share, survives you, the right to this amount or
this share will pass to your estate.
3.13 WHAT HAPPENS IF NO BENEFICIARY SURVIVES THE ANNUITANT?
If no Beneficiary for any amount payable is alive at the death of the Annuitant,
the right to this amount or this share will pass to you or, in the case of your
death, to your estate. Payment of the proceeds will be made in a single sum to
your estate. If any Beneficiary dies at the same time as you, or within 15 days
after your death, but before we receive proof of your death, we will pay any
amount payable as though the Beneficiary died first.
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SECTION FOUR - PREMIUM PAYMENTS
4.1 HOW ARE PREMIUM PAYMENTS CREDITED?
If we have received all of the information we require to issue this policy, the
initial Premium Payment will be credited within two Business Days after receipt.
Additional Premium Payments will be credited to the policy as of the Purchase
Date.
4.2 ARE THERE ANY LIMITATIONS REGARDING THE AMOUNTS AND FREQUENCY OF PREMIUM
PAYMENTS?
At any time before the maximum age shown on the Policy Data Page, during the
lifetime of the Annuitant or Owner, if you are not the Annuitant, and before
settlement of this policy under the 'Income Payments Of Policy Proceeds'
section, payments may be made at any interval and by any method we make
available. The initial Premium Payment is the amount shown on the Policy Data
Page. The minimum payment you can make, as well as the frequency of the
premiums, are shown on the Policy Data Page. We reserve the right to limit the
dollar amount of any additional Premium Payment.
4.3 HOW ARE PREMIUM PAYMENTS ALLOCATED?
The initial Premium Payment may be applied to one or more of the Allocation
Alternatives shown on the Policy Data Page or to any other Investment
Division(s) which may be made available by us for this policy, in accordance
with established procedures. All additional Premium Payments to the Allocation
Alternatives will be allocated as requested unless subsequently changed by you.
4.4 MAY THE ALLOCATION ALTERNATIVES FOR PREMIUM PAYMENTS BE CHANGED?
Yes. The allocation for Premium Payments may be changed among the Allocation
Alternatives after the Issue Date shown on the Policy Data Page in accordance
with established procedures. Premium Payments received after the date on which
we receive your notice will be applied on the basis of the new instructions. You
must indicate what percentage of each Premium Payment to allocate to the
Allocation Alternatives. The minimum amount of a Premium Payment that can be
allocated to an Allocation Alternative is shown on the Policy Data Page. We
reserve the right to limit the maximum amount of a Premium Payment that may be
allocated to any one Allocation Alternative.
4.5 MAY THE CORPORATION TERMINATE THIS POLICY?
It may happen that no Premium Payment has been received for two or more
consecutive years and both (a) the sum of all Premium Payments for this policy,
less any Partial Withdrawals and (b) the Accumulation Value, are less than
$2,000. If so, we have the right, subject to any applicable state law or
regulation, to terminate this policy by paying you the Accumulation Value in a
single sum. We will notify you of our intention to exercise this right and allow
you 90 days to make a Premium Payment.
SECTION FIVE - ACCUMULATION VALUE
5.1 HOW IS YOUR POLICY'S ACCUMULATION VALUE CALCULATED?
On any day on or before the Annuity Commencement Date, the Accumulation Value of
this policy is equal to:
a) the Fixed Accumulation Value, which is: the sum of Premium Payments and
transfers allocated to the Fixed Account, plus interest credited on those
Premium Payments and transfers, less transfers and any Partial Withdrawals from
the Fixed Account, and less Service Charges that may have already been assessed
from the Fixed Account, plus
b) the Variable Accumulation Value, which is: the sum of the products of the
current Accumulation Unit's value(s) for each of the Investment Divisions of the
Separate Account multiplied by the number of Accumulation Units held in the
respective Investment Divisions.
When you ask us, we will tell you how much Accumulation Value there is.
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SECTION SIX - CHARGES AND DISTRIBUTIONS
6.1 WHEN CAN YOU SURRENDER THIS POLICY?
At any time, on or before the Annuity Commencement Date, after this policy has
an Accumulation Value, you may surrender it for the Accumulation Value, less any
Service Charge that may apply. Service Charges are explained in Section 6.4.
6.2 WHEN CAN YOU MAKE A PARTIAL WITHDRAWAL FROM THIS POLICY?
After this policy has an Accumulation Value, you may request a Partial
Withdrawal by sending us a written request at least 30 days before the Annuity
Commencement Date and while the Annuitant and Owner, if you are not the
Annuitant, are alive. The Partial Withdrawal may be for a selected amount or a
percentage of the Accumulation Value. The minimum amount you may withdraw is
shown on the Policy Data Page. You must indicate how it is to be withdrawn from
the Allocation Alternatives. However, if you do not specify which Allocation
Alternatives, NYLIAC will withdraw the money on a pro-rata basis from each
Allocation Alternative. If your request for a Partial Withdrawal is greater than
the amount in the Allocation Alternative(s), we will pay you the entire value of
that Allocation Alternative(s).
6.3 WHEN WILL A PARTIAL WITHDRAWAL OR SURRENDER BE PROCESSED?
We will pay any Partial Withdrawal within seven (7) days after we receive all
the necessary requirements. The Partial Withdrawal value to be paid will be
determined on the date we receive all requirements. However, it may happen that
the New York Stock Exchange is closed for trading (other than the usual Business
Day) or the Securities and Exchange Commission restricts trading or determines
that an emergency exists. If so, it may not be practical for us to determine the
investment experience of the Separate Account. In that case, we may defer
payment of Partial Withdrawals. When permitted by law, we may defer payment of
any Partial Withdrawal or full surrender request from the Fixed Account for up
to six (6) months from the Partial Withdrawal or surrender request date.
Interest will be paid on any amount deferred for 30 days or more. This rate will
be at least three and one half percent (3.5%).
It may also happen that a request for a Partial Withdrawal would cause the total
Accumulation Value of the policy to fall below $2,000. If so, we may not process
the Partial Withdrawal request.
6.4 ARE SERVICE CHARGES DEDUCTED FROM YOUR POLICY?
An annual Service Charge may be applicable as shown on the Policy Data Page.
That charge, if any, will be deducted on each Policy Anniversary or the date of
surrender.
6.5 WHEN ARE STATE PREMIUM TAXES DEDUCTED FROM YOUR POLICY?
When any amount is placed under an Income Payment option on the Annuity
Commencement Date, we may deduct from that amount any state premium tax that we
are, or were, required to pay. We may also deduct any state premium tax that we
are, or were, required to pay when the policy is surrendered for its
Accumulation Value.
SECTION SEVEN - SEPARATE ACCOUNT
7.1 HOW IS THE SEPARATE ACCOUNT ESTABLISHED AND MAINTAINED?
We have established and maintained the Separate Account under the laws of the
state of Delaware. Any realized or unrealized income, net gains, and losses from
the assets of the Separate Account are credited to it without regard to our
other income.
7.2 HOW ARE THE SEPARATE ACCOUNT ASSETS INVESTED?
The Separate Account invests its assets in shares of the Eligible Portfolios of
the Fund. Fund shares are
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purchased, redeemed, and valued on behalf of the Separate Account. The Separate
Account is divided into Investment Divisions. We reserve the right to add or
remove any Investment Division of the Separate Account.
7.3 TO WHOM DO THE ASSETS IN THE SEPARATE ACCOUNT BELONG?
The assets in the Separate Account are our property. The Separate Account assets
equal the reserves and other policy liabilities of the Separate Account. Those
assets will not be chargeable with liabilities arising out of any other business
we conduct. We reserve the right to transfer assets of an Investment Division,
in excess of the reserves and other policy liabilities with respect to that
Investment Division, to another Investment Division or to our General Account.
7.4 HOW WILL THE ASSETS OF THE SEPARATE ACCOUNT BE VALUED?
We will determine the value of the assets for the Separate Account on each
Business Day. The assets of the Separate Account will be valued at fair market
value, as determined in accordance with a method of valuation which we establish
in good faith. However, it may happen that the New York Stock Exchange is closed
for trading (other than the usual Business Day), or the Securities and Exchange
Commission restricts trading or determines that an emergency exists. If so, it
may not be practical for us to determine the investment experience of the
Separate Account. In that case, we may defer transfers among the Investment
Divisions and to the Fixed Account.
7.5 CAN WE TRANSFER ASSETS OF THE SEPARATE ACCOUNT TO ANOTHER SEPARATE ACCOUNT?
Yes. We reserve the right to transfer assets of the Separate Account, which we
determine to be associated with the class of policies to which this policy
belongs, to another Separate Account. If this type of transfer is made, the term
"Separate Account" as used in this policy, will then mean the Separate Account
to which the assets were transferred.
7.6 WHAT OTHER RIGHTS DO WE HAVE?
We also reserve the right, when permitted by law, to:
a) de-register the Separate Account under the Investment Company Act of 1940,
b) manage the Separate Account under the direction of a committee at any time,
c) restrict or eliminate any of the voting rights of Owners or other persons who
have voting rights as to the Separate Account, and
d) combine the Separate Account with one or more other Separate Accounts.
7.7 CAN A CHANGE IN THE OBJECTIVE OF THE FUND BE MADE?
Yes. When required by law or regulation, an objective of the Fund can be
changed. The objective of the Fund will not be changed unless approved by the
appropriate insurance official of the State of Delaware or deemed approved in
accordance with such law or regulation. If so required, the request to obtain
such approval will be filed with the insurance official of the state or the
district in which this policy is delivered.
7.8 IF THE ASSETS IN THE SEPARATE ACCOUNT BELONG TO US, WHAT DO YOUR PREMIUM
PAYMENTS PURCHASE?
The Variable Accumulation Value of this policy in the Investment Divisions of
the Separate Account prior to the Annuity Commencement Date is represented by
Accumulation Units. Premium Payments allocated or transferred to the Investment
Divisions will be applied to provide Accumulation Units in those Investment
Divisions.
7.9 HOW IS THE NUMBER OF ACCUMULATION UNITS DETERMINED?
That portion of each Premium Payment allocated or transferred to a designated
Investment Division of the Separate Account is credited to this policy in the
form of Accumulation Units. The number of Accumulation Units credited to this
policy is determined by dividing the amount allocated or transferred to each
Investment Division by the Accumulation Unit value for that Investment Division
for the Valuation Period during which the Premium Payment or transfer request
and all required documentation is received.
That portion of each Partial Withdrawal, Policy Service Charge or transfer from
a designated Investment Division of the Separate Account is deducted from this
Policy in the form of Accumulation Units. The number of Accumulation Units
deducted from the Policy is determined by dividing the amount withdrawn or
transferred from
200-090 PAGE 14
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each Investment Division by the Accumulation Units' value for that Investment
Division for the Valuation Period.
The value of an Accumulation Unit will vary in accordance with the investment
experience of the Eligible Portfolios in which the Investment Divisions invest.
The number of Accumulation Units in a policy will not, however, change as a
result of any fluctuations in the value of an Accumulation Unit.
7.10 HOW IS THE VALUE OF AN ACCUMULATION UNIT DETERMINED?
The value of an Accumulation Unit on any Business Day is determined by
multiplying the value of that unit on the immediately preceding Business Day by
the net investment factor for the Valuation Period. The net investment factor
for this policy used to calculate the value of an Accumulation Unit in any
Investment Division of the Separate Account for the Valuation Period is
determined by dividing (a) by (b) and subtracting (c) from the result, where:
a) is the sum of:
1) the net asset value of a Fund share held in the Separate Account for
that Investment Division determined at the end of the current Valuation
Period, plus
2) the per share amount of any dividend 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 Valuation Period.
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 immediately preceding
Valuation Period.
c) is a factor representing the mortality and expense risk fee, and
administrative charges. This factor is equal, on an annual basis, to one point
fifty five percent (1.55%) of the daily net asset value of a Fund share held in
the Separate Account for that Investment Division.
Mortality and expense results will not adversely affect the dollar amount of the
Variable Accumulation Value.
The net investment factor may be greater or less than one. Therefore, the
Accumulation Unit value may increase or decrease.
The net asset value of a Fund share held in the Separate Account reflects a fee
paid to an investment advisor for investment advisory services provided.
7.11 CAN YOU TRANSFER BETWEEN INVESTMENT DIVISIONS AND TO THE FIXED ACCOUNT?
Yes. Transfers of the Accumulation Value may be made between Investment
Divisions of the Separate Account and to the Fixed Account. For transfers made
from the Fixed Account to the Investment Divisions, see Section Eight.
7.12 HOW DO YOU TRANSFER THE ACCUMULATION VALUE BETWEEN INVESTMENT DIVISIONS AND
TO THE FIXED ACCOUNT?
Prior to 30 days before the Annuity Commencement Date, amounts may be
transferred between Investment Divisions of the Separate Account and to the
Fixed Account, in accordance with established procedures.
In addition to a request for a one-time transfer, transfers may be made on an
automatic basis based on established procedures.
Dollar Cost Averaging
You may specify a specific dollar amount to be transferred from any Investment
Division to any combination of Investment Divisions and/or to the Fixed Account.
We will automatically transfer the specific dollar amount into the Investment
Divisions and/or to the Fixed Account in accordance with established procedures.
This option is called Dollar Cost Averaging.
In order to elect this option the Variable Accumulation Value must equal the
minimum value shown on the Policy Data Page. The minimum amount that must be
transferred from or to an Investment Division or to the Fixed Account is shown
on the Policy Data Page.
Transfers under the Dollar Cost Averaging option are not available from the
Fixed Account.
Automatic Asset Reallocation
You may specify a specific percentage of the Variable Accumulation Value
allocated to each Investment Division at a pre-set level. If you elect
200-090 PAGE 15
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this reallocation option, we will automatically transfer your Variable
Accumulation Value back to the percentages you specify in accordance with
established procedures. This option is called Automatic Asset Reallocation.
In order to elect this option, the Variable Accumulation Value must equal the
minimum value shown on the Policy Data Page. The minimum amount which must be
allocated among the Investment Divisions under this option is also shown on the
Policy Data Page.
You may not elect the Dollar Cost Averaging and Automatic Asset Reallocation
options at the same time.
7.13 ARE THERE LIMITS ON WHAT YOU MAY TRANSFER BETWEEN INVESTMENT DIVISIONS AND
TO THE FIXED ACCOUNT?
Except in connection with transfers made under the Dollar Cost Averaging or
Automatic Asset Reallocation options, the minimum amount that can be transferred
is the lesser of the amount shown on the Policy Data Page or the value of all
remaining Accumulation Units in the Investment Division. The Investment Division
from which the transfer is being made must maintain the minimum balance as shown
on the Policy Data Page after the transfer is completed. If, after a transfer,
the value of the remaining Accumulation Units in an Investment Division would be
less than the minimum, we have the right to include that amount as part of the
transfer.
There is no limit to the number of transfers that can be made. However, we
reserve the right to apply a charge, as shown on the Policy Data Page. Transfers
may not be made into the Fixed Account if there were transfers made out of the
Fixed Account within the six month period prior to the transfer request. We
reserve the right to limit the amount which may be transferred from the
Investment Divisions to the Fixed Account.
SECTION EIGHT - FIXED ACCOUNT
8.1 HOW ARE THE FIXED ACCOUNT ASSETS INVESTED?
Premium Payments allocated to, or amounts transferred to, the Fixed Account are
held in NYLIAC's General Account. NYLIAC invests the assets of the General
Account in accordance with applicable law governing the investments of insurance
company General Accounts. NYLIAC's General Account assets are all of its assets
other than those allocated to the Separate Account. NYLIAC's General Account
assets support all of its liabilities except Separate Account liabilities.
8.2 HOW IS THE FIXED ACCOUNT VALUED?
Premium Payments allocated to, or amounts transferred to the Fixed Account are
credited with interest at an interest rate we set from time to time. This rate
will never be less than the guaranteed rate shown on the Policy Data Page.
We will set an interest rate in advance periodically. All Premium Payments
allocated to, or amounts transferred to, the Fixed Account will receive the rate
in effect for that period until the end of the Policy Year. Thereafter, the rate
applicable to those amounts will change on each Policy Anniversary. The new rate
will be the rate in effect on the date on which the Policy Anniversary occurs.
8.3 CAN TRANSFERS BE MADE FROM THE FIXED ACCOUNT TO THE INVESTMENT DIVISIONS?
Yes. Each Policy Year you may transfer from the Fixed Account to the Investment
Divisions with certain limitations, see Section 8.4.
8.4 HOW DO YOU TRANSFER THE FIXED ACCUMULATION VALUE TO THE INVESTMENT
DIVISIONS?
Prior to 30 days before the Annuity Commencement Date, amounts may be
transferred from the Fixed Account to the Investment Divisions. Transfer
requests must be in writing on a form approved by us or by telephone in
accordance with established procedures. Each transfer must be for an amount not
less than that shown on the Policy Data Page.
A minimum amount, as shown on the Policy Data Page, must remain in the Fixed
Account after a transfer. If after a transfer, the Fixed Accumulation Value
would fall below the minimum, the remaining amount will be
200-090 PAGE 16
<PAGE> 17
allocated to the Investment Division(s) in the same proportion as the transfer
request.
8.5 HOW WILL PARTIAL WITHDRAWALS AND TRANSFERS BE DEDUCTED FROM THE FIXED
ACCOUNT?
Partial Withdrawals and transfers will be made from the Fixed Account in the
following sequence: first from the Fixed Accumulation Value of the contract
200-090 PAGE 17
<PAGE> 18
as of the last Policy Anniversary and then from the Fixed Accumulation Value
attributed to subsequent Premium Payments and transfers in the order received.
SECTION NINE - GENERAL PROVISIONS
9.1 WHAT CONSTITUTES THE ENTIRE CONTRACT?
This entire contract consists of this policy, any attached riders and
endorsements, and a copy of the application, if attached. Only our Chairman,
President, Secretary, or one of our Executive Officers may change the policy and
then only in writing. No change will be made in the contract unless you agree to
it in writing, or by telephone, in accordance with established procedures. No
Registered Representative is authorized to change this contract or waive any
provisions of this contract.
9.2 HOW IMPORTANT IS THE INFORMATION YOU PROVIDE FOR THIS POLICY?
In issuing this policy, we have relied on the information you provided. If you
signed an application for this policy, we have relied on the statements made on
the application in issuing this policy. All such statements are deemed to be
representations and not warranties. We assume these statements are true and
complete to the best of the knowledge and belief of those who made them. No
statement made in connection with the application will be used by us to void the
policy unless that statement is a material misrepresentation and is part of the
policy.
9.3 WILL WE BE ABLE TO CONTEST THIS POLICY?
We will not contest this policy after it has been in force during the lifetime
of the Annuitant for two years from the Issue Date.
9.4 HOW ARE THE DATES REFERRED TO IN THIS POLICY MEASURED?
Policy Years, months, and anniversaries are measured from the Policy Date,
except where otherwise specified.
9.5 HOW IS A PERSON'S AGE CALCULATED FOR THE PURPOSE OF THIS POLICY?
In this policy when we refer to a person's Age on any date, we mean his or her
Age attained at his or her last birthday.
9.6 WHAT HAPPENS IF IN THIS POLICY WE REFER TO A PERSON'S AGE OR SEX
INCORRECTLY?
If a date on the Policy Data Page is based on an Age that is not correct, we
may change the date to reflect the correct Age. If the Age or sex of the
Annuitant shown on the Policy Data Page is not correct as stated, any amount
payable under this policy will be what would have been purchased at the correct
Age and sex. If payments were made based on incorrect Age or sex, we will
increase or reduce a later payment or payments to adjust for the error. Any
adjustment will include interest, at three and one-half percent (3.5%) per
year, from the date of the wrong payment to the date the adjustment is made.
9.7 MAY YOU ASSIGN OR TRANSFER YOUR POLICY?
While the Annuitant is alive, you may assign this policy or any interest in it.
If you do this, your interest, and anyone else's, is subject to that of the
assignee. As Owner, you still have the rights of Ownership that have not been
assigned.
9.8 HOW DO YOU ASSIGN THIS POLICY?
You must provide us with a copy of the assignment. We are not responsible for
the validity of any assignment. Any assignment will be subject to any payment
previously made by us or any other action we may take before we record the
assignment.
9.9 MAY THE ASSIGNEE CHANGE THE OWNER, ANNUITANT, OR BENEFICIARY?
No. The assignee cannot change the Owner, Annuitant, or Beneficiary. The
assignee also may not elect an alternative payment option. Any amount payable to
the assignee will be made in a single sum.
9.10 ARE THE PAYMENTS MADE UNDER THE TERMS OF THIS POLICY PROTECTED AGAINST
CREDITORS?
Payments we make under this policy are to the extent the law permits, exempt
from the claims, attachments, or levies of any creditors.
9.11 HOW SHOULD PAYMENTS FOR THIS POLICY BE MADE?
Any payments made to us by check or money order must be payable to New York Life
Insurance and
200-090 PAGE 18
<PAGE> 19
Annuity Corporation or NYLIAC. When asked, we will give a countersigned receipt,
also signed by our President or Secretary, for any Premium Payment made to us.
9.12 HOW IS GUARANTEED INTEREST CALCULATED FOR THIS POLICY?
All guaranteed Accumulation Values referred to in this policy are based on
interest compounded annually at the guaranteed rate shown on the Policy Data
Page. Each value is at least as much as the value the law requires.
9.13 IS THIS POLICY SUBJECT TO ANY LAW?
Yes. This policy is subject to all laws which apply.
9.14 ARE THERE ANY DIVIDENDS PAYABLE UNDER THIS POLICY?
No. This is a non-participating policy. Therefore, no dividends are payable.
200-090 PAGE 19
<PAGE> 20
NEW YORK LIFE INSURANCE
AND ANNUITY CORPORATION
Executive Office - 51 Madison Avenue
New York, NY 10010
A Stock Company Incorporated in Delaware
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
Monthly Income Payments Begin On The Annuity Commencement Date. Premiums May Be
Paid During The Annuitant's Lifetime, As Defined Herein. The Amount Of Any
Accumulation Value May Increase Or Decrease Based On The Investment Experience
Of The Separate Account. Accumulation Values Based On The Performance Of The
Separate Account Are Variable And Are Not Guaranteed As To Dollar Amount.
A Stock Company Incorporated in Delaware.
This Policy Is Non-Participating.
200-090 PAGE 20
<PAGE> 21
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
51 MADISON AVENUE - NEW YORK, NY 10010
POLICY DATA
Page 2
ANNUITANT -- JOHN DOE AGE: 55 MALE
POLICY NUMBER -- 00 000 000
POLICY DATE -- MARCH 1, 2000
OWNER -- THE ANNUITANT
ALLOCATION ALTERNATIVES:
ALGER AMERICAN SMALL CAPITALIZATION
AMERICAN CENTURY INCOME & GROWTH
CALVERT SOCIAL BALANCED
DREYFUS LARGE COMPANY VALUE
EAGLE ASSET MANAGEMENT GROWTH EQUITY
FIDELITY VIP II CONTRAFUND
FIDELITY VIP EQUITY-INCOME
JANUS ASPEN SERIES BALANCED
JANUS ASPEN SERIES WORLDWIDE GROWTH
LORD ABBETT DEVELOPING GROWTH
MAINSTAY VP BOND
MAINSTAY VP CAPITAL APPRECIATION
MAINSTAY VP CASH MANAGEMENT
MAINSTAY VP CONVERTIBLE
MAINSTAY VP GOVERNMENT
MAINSTAY VP GROWTH EQUITY
MAINSTAY VP HIGH YIELD BOND
MAINSTAY VP INDEXED EQUITY
MAINSTAY VP INTERNATIONAL EQUITY
MAINSTAY VP TOTAL RETURN
MAINSTAY VP VALUE
MFS GROWTH WITH INCOME SERIES
MFS RESEARCH SERIES
MORGAN STANLEY DEAN WITTER EMERGING
MARKETS EQUITY
T. ROWE PRICE EQUITY INCOME
VAN ECK WORLDWIDE HARD ASSETS
FIXED ACCOUNT
INITIAL PREMIUM PAYMENT: $15,000
INITIAL PREMIUM PAYMENT DATE: MARCH 1, 2000
PLANNED ADDITIONAL PREMIUMS:
PREMIUM AMOUNT: $1,000 - Monthly
ANNUITY COMMENCEMENT DATE: MARCH 1, 2035
MINIMUM GUARANTEED INTEREST RATE: 3%
DATE OF ISSUE: MARCH 5, 2000
<PAGE> 22
200-090 PAGE 2
POLICY DATA
Page 2A
MINIMUMS:
MINIMUM ADDITIONAL PREMIUM PAYMENT: $1,000
MINIMUM WITHDRAWAL AMOUNT: $500
MINIMUM AMOUNT OF A PREMIUM PAYMENT THAT
CAN BE ALLOCATED TO AN ALLOCATION ALTERNATIVE: $100
MINIMUM TRANSFER AMOUNT FROM FIXED ACCOUNT: $500
MINIMUM TRANSFER AMOUNT FROM INVESTMENT DIVISIONS: $500
MINIMUM DOLLAR COST AVERAGING OPTION TRANSFER IS: $100
MINIMUM AUTOMATIC ASSET REALLOCATION TRANSFER IS: NO MINIMUM
MINIMUM BALANCE THAT MUST BE MAINTAINED IN AN
INVESTMENT DIVISION AFTER A TRANSFER IS MADE: $500
MINIMUM BALANCE THAT MUST BE MAINTAINED IN THE
FIXED ACCOUNT AFTER A TRANSFER IS MADE: $500
MINIMUM ACCUMULATION VALUE REQUIRED TO ELECT DOLLAR COST
AVERAGING OR AUTOMATIC ASSET REALLOCATION OPTIONS IS: $5,000
MAXIMUM CHARGE FOR EACH TRANSFER MADE TO OR FROM AN
ALLOCATION ALTERNATIVE AFTER THE FIRST TWELVE (12) IN A POLICY YEAR: $30
MAXIMUM AGE FOR WHICH ADDITIONAL PREMIUM PAYMENTS MAY BE MADE: 90
POLICY SERVICE CHARGE: FORTY DOLLARS ($40), WHICH MAY BE DEDUCTED ON EACH POLICY
ANNIVERSARY AND ON THE DATE THE POLICY IS SURRENDERED. HOWEVER, THIS FEE IS
WAIVED IF THE ACCUMULATION VALUE ON THE POLICY ANNIVERSARY OR ON THE DATE OF
SURRENDER IS $50,000 OR GREATER. THE POLICY SERVICE CHARGE IS DEDUCTED FROM EACH
ALLOCATION ALTERNATIVE IN PROPORTION TO ITS PERCENTAGE OF THE ACCUMULATION VALUE
ON THE POLICY ANNIVERSARY.
DATE OF ISSUE: MARCH 5, 2000
<PAGE> 23
200-090 PAGE 2A
<PAGE> 1
<TABLE>
<S> <C>
APPLICATION FOR
[NEW YORK LIFE FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY [NEW YORK LIFE LOGO]
LIFESTAGES ANNUITY COMMENCEMENT AT AGE 90 OR 10 YEARS
ANNUITIES LOGO] TO NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (NYLIAC) (A DELAWARE CORPORATION)
51 Madison Avenue, New York, NY 10010 PLEASE PRINT OR TYPE
- ------------------------------------------------------------------------------------------------------------------------------------
1. WHO WILL BE THE OWNER OF THIS CONTRACT?
Name (First, M.I., Last) | Date of Birth | Male Female | SS # or Tax ID #
| | |
| Month | Day | Year | [ ] [ ] |
| | | | |
- ------------------------------------------------------------------------------------------------------------------------------------
Mailing Address-Street City State Zip Code
- ------------------------------------------------------------------------------------------------------------------------------------
Tel. No. (day) Tel. No. (eve) | Citizenship | Relationship to Annuitant
| |
( ) ( ) | [ ] U.S. Other |
| ---------------- |
- ------------------------------------------------------------------------------------------------------------------------------------
Joint Owner Name (First, M.I., Last) | Relationship to Owner: | Date of Birth | Male Female | SS # or Tax ID #
| | | |
| | Month | Day | Year |[ ] [ ] |
| | | | | |
- ------------------------------------------------------------------------------------------------------------------------------------
2. WHO WILL BE THE ANNUITANT? IF SAME AS OWNER, CHECK HERE [ ]. (IF OTHER THAN OWNER, COMPLETE THIS SECTION.)
Name (First, M.I., Last) | Date of Birth | Male Female | SS # or Tax ID #
| | |
| Month | Day | Year | [ ] [ ] |
| | | | |
- ------------------------------------------------------------------------------------------------------------------------------------
Mailing Address-Street City State Zip Code
- ------------------------------------------------------------------------------------------------------------------------------------
Tel. No. (day) Tel. No. (eve) | Citizenship
|
( ) ( ) | [ ] U.S. Other
| ----------------
- ------------------------------------------------------------------------------------------------------------------------------------
3. WHAT IS THE PREMIUM AMOUNT? (ATTACH CHECK PAYABLE TO NYLIAC, IF APPLICABLE.)
Premium Amount $
----------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
4. WHO WILL BE THE PRIMARY BENEFICIARY(IES) OF THIS CONTRACT? NOTE: COMPLETE QUESTION 7 TO NAME A CONTINGENT BENEFICIARY.
Name | Relationship to Owner | Percentage
| |
| |
- ------------------------------------------------------------------------------------------------------------------------------------
Name | Relationship to Owner | Percentage
| |
| |
- ------------------------------------------------------------------------------------------------------------------------------------
5. WHAT IS THE PLAN TYPE? (COMPLETE ONE PLAN.)
[ ] NON- | Is this a 1035 Exchange? [ ] Yes [ ] No | If yes, what is the Cost Basis?
QUALIFIED | |
| (If yes, submit Form 18263) | $
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] IRA | Current Year Contribution Prior Year Contribution | Transfer Amount | Rollover Amount
| | |
[ ] SEP | $ Year $ Year | $ | $
| ------ ----- | |
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] 403(b) | Transfer Amount $ | [ ] 467 DEFERRED COMPENSATION PLAN
| |
- ------------------------------------------------------------------------------------------------------------------------------------
Is this an Employer Sponsored Plan? [ ] Yes [ ] No | NOTE: If this is an IRA/SEP transfer/rollover or 403(b) TSA transfer,
| submit Form 18500.
- ------------------------------------------------------------------------------------------------------------------------------------
6. IS THIS A REPLACEMENT OF A LIFE INSURANCE OR ANNUITY POLICY? (IF YES, COMPLETE THIS SECTION.)
Company Name | Policy Number(s) | Estimated Contract Value
| |
| | $
- ------------------------------------------------------------------------------------------------------------------------------------
7. ARE THERE ADDITIONAL DETAILS?
- ------------------------------------------------------------------------------------------------------------------------------------
8. SIGNATURES
I/We agree that: (1) All of the statements in this application are true to the best of the knowledge and belief of those who made
and recorded them. (2) This contract will not become effective unless it is delivered to the Owner while the Annuitant is living.
(3) Unless otherwise indicated below, the Owner of this contract is the Applicant. (4) Under penalties of perjury, the Taxpayer
Identification Number(s) provided on this application are certified to be correct. (5) No Registered Representative is authorized
to accept risks, make or change this application or any contract issued by the Company, or give up any of the Owner's rights or
requirements. BENEFITS BASED ON THE PERFORMANCE OF THE SEPARATE ACCOUNTS ARE VARIABLE AND ARE NOT GUARANTEED AS TO THE DOLLAR
AMOUNT.
Signed at (City/State) Dated On
------------------------------------------- ---------------------------------------------------
Owner > Joint Owner >
---------------------------------------------------------- ----------------------------------------------
Annuitant (if other than Owner) > Applicant (if other than Owner) >
-------------------------------- --------------------------
Registered Rep's Signature > Registered Rep's Printed Name
------------------------------------- ------------------------------
Registered Rep's Registered Rep's
Tel. No. ( ) Code No. Agent's State/License No.
------------------- ----------------------------- --------------------------
General Office Name/No. Lic. Resident Agent Countersignature >
------------------ ---------------------------------------------
[RECYCLE LOGO]
200-593 (3/2000)
</TABLE>
<PAGE> 1
<TABLE>
<S> <C>
APPLICATION FOR
[MAINSTAY FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY [NEW YORK LIFE LOGO]
ANNUITIES AT AGE 90 OR 10 YEARS
LOGO] TO NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (NYLIAC) (A DELAWARE CORPORATION) PLEASE PRINT OR TYPE
- ------------------------------------------------------------------------------------------------------------------------------------
1. WHO WILL BE THE OWNER OF THIS CONTRACT?
Name (First, M.I., Last) | Date of Birth | Male Female | SS # or Tax ID #
| | |
| Month | Day | Year | [ ] [ ] |
| | | | |
- ------------------------------------------------------------------------------------------------------------------------------------
Mailing Address-Street City State | Zip Code
|
|
- ------------------------------------------------------------------------------------------------------------------------------------
Tel. No. (day) Tel. No. (eve) | Relationship to Annuitant
|
( ) ( ) |
- ------------------------------------------------------------------------------------------------------------------------------------
Joint Owner Name (First, M.I., Last) | Relationship to Owner: | Date of Birth | Male Female | SS # or Tax ID #
| | | |
| | Month | Day | Year | [ ] [ ] |
| | | | | |
- ------------------------------------------------------------------------------------------------------------------------------------
2. WHO WILL BE THE ANNUITANT? IF SAME AS OWNER, CHECK HERE [ ]. (IF OTHER THAN OWNER, COMPLETE THIS SECTION.)
Name (First, M.I., Last) | Date of Birth | Male Female | SS # or Tax ID #
| | |
| Month | Day | Year | [ ] [ ] |
| | | | |
- ------------------------------------------------------------------------------------------------------------------------------------
Mailing Address-Street City State | Zip Code | Tel. No.
| |
| | ( )
- ------------------------------------------------------------------------------------------------------------------------------------
3. WHAT IS YOUR PREMIUM AMOUNT? (ATTACH CHECK PAYABLE TO NYLIAC, UNLESS INSTRUCTED OTHERWISE.)
Premium Amount $
---------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
4. WHO WILL BE THE PRIMARY BENEFICIARY(IES) OF THIS CONTRACT? NOTE: USE QUESTION 7 TO NAME A CONTINGENT BENEFICIARY.
Name: | Relationship to Owner: | Percentage:
| |
| |
- ------------------------------------------------------------------------------------------------------------------------------------
Name: | Relationship to Owner: | Percentage:
| |
| |
- ------------------------------------------------------------------------------------------------------------------------------------
5. WHAT IS THE PLAN TYPE? (COMPLETE ONE PLAN.)
[ ] NON- | Is this a 1035 Exchange? [ ] Yes [ ] No | If yes, what is the Cost Basis?
QUALIFIED | |
| (If yes, submit Agreement for Exchange Form.) | $
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] IRA | Current Year Contribution Prior Year Contribution | Transfer Amount | Rollover Amount
| | |
[ ] SEP | $ Year $ Year | $ | $
| ------ ----- | |
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] 403(b) | Transfer Amount | NOTE: If this is an IRA/SEP transfer/rollover or 403(b) transfer,
(TSA) | $ | submit Request for IRA Transfer/Direct Rollover or 403(b) Transfer
Form.
- ------------------------------------------------------------------------------------------------------------------------------------
6. IS THIS A REPLACEMENT OF A LIFE INSURANCE OR ANNUITY POLICY? (IF YES, COMPLETE THIS SECTION.)
Company Name | Policy Number(s) | Estimated Contract Value
| |
| | $
- ------------------------------------------------------------------------------------------------------------------------------------
7. ARE THERE ADDITIONAL DETAILS?
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
8. SIGNATURES
I/We acknowledge receipt of a current prospectus and agree that: (1) All of the statements in this application are true to the
best of the knowledge and belief of those who made and recorded them. (2) This contract will not become effective unless it is
delivered to the Owner while the Annuitant is living. (3) Unless otherwise indicated below, the Owner of this contract is the
Applicant. (4) Under penalties of perjury, the Taxpayer Identification Numbers provided on this application are certified to be
correct. (5) I/We understand that the annuity is not backed or guaranteed by any bank or insured by the FDIC.
Signed at
------------------------------- -------------------------------------------- ----------------- -------------
City State Date
----------------------------------------- --------------------------------------------- --------------------------------------
Applicant (Owner) Annuitant (if other than Owner) Joint Owner (if applicable)
----------------------------------------- --------------------------------------------- --------------------------------------
Registered Representative's Signature Registered Representative (print name) Registered Representative's Tel. No.
----------------------------------------------------------------------------------------- --------------------------------------
Registered Representative's State and License No. Reg. Representative's NYLIAC Code No.
----------------------------------------------------------------------------------------- --------------------------------------
Broker/Dealer Name and Address Broker/Dealer Tel. No.
[RECYCLE LOGO]
200-592 (2/2000)
</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 ANNUITY SEPARATE ACCOUNT-III
INVESTMENT COMPANY ACT FILE NUMBER: 811-08904
SECURITIES ACT FILE NUMBER: 33-87382
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. 9
to the registration statement on Form N-4 ("Registration Statement") under the
Securities Act of 1933, as amended, of NYLIAC Variable Annuity Separate
Account-III ("Separate Account-III"). Separate Account-III receives and invests
premiums allocated to it under a flexible premium multi-funded variable
retirement annuity policy ("Annuity Contract"). The Annuity Contract is offered
in the manner described in the Registration Statement.
In connection with this opinion, I have made such examination of the law
and have examined such corporate records and such other documents as I consider
appropriate as a basis for the opinion hereinafter expressed. On the basis of
such examination, it is my opinion that:
1. NYLIAC is a corporation duly organized and validly existing under the
laws of the State of Delaware.
2. Separate Account-III 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-III shall be credited to or charged
against Separate Account-III, without regard to other income, gains or
losses of NYLIAC.
<PAGE> 2
Securities and Exchange Commission
April 10, 2000
Page 2
3. The Annuity Contracts have been duly authorized by NYLIAC and, when sold
in jurisdictions authorizing such sales, in accordance with the
Registration Statement, will constitute validly issued and binding
obligations of NYLIAC in accordance with their terms.
4. Each owner of a Annuity Contract will not be subject to any deductions,
charges, or assessments imposed by NYLIAC other than those provided in
the Annuity Contract.
I consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ THOMAS F. ENGLISH
Thomas F. English
Vice President and
Deputy General Counsel
<PAGE> 1
[PRICEWATERHOUSECOOPERS LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 9 to registration
statement on Form N-4 (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 Annuity Separate Account III, which appear in such
Statement of Additional Information. We also consent to the reference to us
under the heading "Experts" and the reference to us under the heading "Condensed
Financial Information" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
April 10, 2000
