<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 17, 2000
REGISTRATION NOS. 333-
AND 811-6466
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. / /
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 16 /X/
------------------
ML OF NEW YORK VARIABLE ANNUITY
SEPARATE ACCOUNT A
(EXACT NAME OF REGISTRANT)
ML LIFE INSURANCE
COMPANY OF NEW YORK
(NAME OF DEPOSITOR)
100 CHURCH STREET, 11TH FLOOR, NEW YORK, NY 10080-6511
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(212) 602-8250
------------------------
<TABLE>
<S> <C>
NAME AND ADDRESS OF AGENT FOR SERVICE: COPY TO:
BARRY G. SKOLNICK, ESQ. STEPHEN E. ROTH, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL KIMBERLY J. SMITH, ESQ.
ML LIFE INSURANCE COMPANY OF NEW YORK SUTHERLAND ASBILL & BRENNAN LLP
800 SCUDDERS MILL ROAD 1275 PENNSYLVANIA AVENUE, N.W.
PLAINSBORO, NEW JERSEY 08536 WASHINGTON, D.C. 20004-2415
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER EFFECTIVENESS OF THE REGISTRATION STATEMENT.
------------------------
TITLE OF SECURITIES BEING REGISTERED:
UNITS OF INTEREST IN A SEPARATE ACCOUNT UNDER FLEXIBLE PREMIUM INDIVIDUAL
DEFERRED VARIABLE ANNUITY CONTRACTS.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
SHALL DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
MAY 15, 2000
ML of New York Variable Annuity Separate Account A (the "Account")
FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
issued by
ML LIFE INSURANCE COMPANY OF NEW YORK
HOME OFFICE: 100 Church Street, 11th Floor
New York, New York 10080-6511
SERVICE CENTER: P.O. Box 44222
Jacksonville, Florida 32231-4222
4804 Deer Lake Drive East
Jacksonville, Florida 32246
PHONE: (800) 333-6524
offered through
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
This prospectus gives you information you need to know before you invest. Keep
it for future reference. Address all communications concerning the Contract to
our Service Center at the address above.
The variable annuity contract described here provides a variety of investment
features. It also provides options for income protection later in life. It is
important that you understand how the contract works, and its benefits, costs,
and risks. First, some basics.
WHAT IS AN ANNUITY?
An annuity provides for the systematic liquidation of a sum of money at the
annuity date through a variety of annuity options. Each annuity option has
different protection features intended to cover different kinds of income needs.
Many of these annuity options provide income streams that can't be outlived.
WHAT IS A VARIABLE ANNUITY?
A variable annuity bases its benefits on the performance of underlying
investments. These investments may typically include stocks, bonds, and money
market instruments. The annuity described here is a variable annuity.
WHAT ARE THE RISKS IN OWNING A VARIABLE ANNUITY?
A variable annuity does not guarantee the performance of the underlying
investments. The performance can go up or down. It can even decrease the value
of money you've put in. You bear all of this risk. You could lose all or part of
the money you've put in.
<PAGE>
HOW DOES THIS ANNUITY WORK?
We put your premium payments as you direct into one or more subaccounts of the
Account. In turn, we invest each subaccount's assets in corresponding portfolios
("Funds") of the following:
<TABLE>
<C> <C> <S>
- MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
- Basic Value Focus Fund
- Domestic Money Market Fund
- Fundamental Growth Focus Fund
- Government Bond Fund
- Index 500 Fund
- AIM VARIABLE INSURANCE FUNDS
- AIM V.I. International Equity Fund
- AIM V.I. Value Fund
- ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
- Growth and Income Portfolio
- Premier Growth Portfolio
- MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-
- MFS Emerging Growth Series
- MFS Growth With Income Series
- HOTCHKIS AND WILEY VARIABLE TRUST
- International VIP Portfolio
- DAVIS VARIABLE ACCOUNT FUND, INC.
- Davis Value Portfolio
- DELAWARE GROUP PREMIUM FUND
- Trend Series
- PIMCO VARIABLE INSURANCE TRUST
- Total Return Bond Portfolio
- SELIGMAN PORTFOLIOS, INC.
- Seligman Small-Cap Value Portfolio
- VAN KAMPEN LIFE INVESTMENT TRUST
- Emerging Growth Portfolio
</TABLE>
The value of your Contract at any point in time up to the annuity date is called
your contract value. Before the annuity date, you are generally free to direct
your contract value among the subaccounts as you wish. You may also withdraw all
or part of your contract value. If you die before the annuity date, we pay a
death benefit to your beneficiary.
We've designed this annuity as a long-term investment. Any money you take out of
the Contract is subject to tax, and if taken before age 59 1/2 may also be
subject to a 10% federal penalty tax. FOR THESE REASONS, YOU NEED TO CONSIDER
YOUR CURRENT AND SHORT-TERM INCOME NEEDS CAREFULLY BEFORE YOU DECIDE TO BUY THE
CONTRACT.
WHAT DOES THIS ANNUITY COST?
THIS ANNUITY DOES NOT IMPOSE ANY SALES CHARGES -- ON EITHER PURCHASES OR
WITHDRAWALS. However, we impose a number of other charges, including an
asset-based insurance charge. We provide more details on this charge, as well as
a description of all other charges, later in the prospectus.
************************************************************************
This prospectus contains information about the Contract and the Account that you
should know before you invest. A Statement of Additional Information contains
more information about the Contract and the Account. We have filed the Statement
of Additional Information, dated May 15, 2000, with the Securities and Exchange
Commission. We incorporate this Statement of Additional Information by
reference. If you want to obtain this Statement of Additional Information,
simply call or write us at the phone number or address noted above. There is no
charge to obtain it. The Table of Contents for this Statement of Additional
Information is found on page 42 of this prospectus.
The Securities and Exchange Commission ("SEC") maintains a web site that
contains the Statement of Additional Information, material incorporated by
reference, and other information regarding registrants that file electronically
with the SEC. The address of the site is http://www.sec.gov.
2
<PAGE>
CURRENT PROSPECTUSES FOR THE MERRILL LYNCH VARIABLE SERIES FUNDS, INC., AIM
VARIABLE INSURANCE FUNDS, ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.,
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-, HOTCHKIS AND WILEY
VARIABLE TRUST, DAVIS VARIABLE ACCOUNT FUND, INC., DELAWARE GROUP PREMIUM FUND,
PIMCO VARIABLE INSURANCE TRUST, SELIGMAN PORTFOLIOS, INC., AND VAN KAMPEN LIFE
INVESTMENT TRUST MUST ACCOMPANY THIS PROSPECTUS. PLEASE READ THESE DOCUMENTS
CAREFULLY AND RETAIN THEM FOR FUTURE REFERENCE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE CONTRACTS OR
DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
--------
<S> <C>
DEFINITIONS................................................. 7
CAPSULE SUMMARY OF THE CONTRACT............................. 8
Premiums................................................ 8
The Account............................................. 8
The Funds Available For Investment...................... 8
Fees and Charges........................................ 9
Asset-Based Insurance Charge....................... 9
Contract Fee....................................... 9
Premium Taxes...................................... 9
Fund Expenses...................................... 9
Transfers Among Subaccounts............................. 9
Withdrawals............................................. 10
Death Benefit........................................... 10
Annuity Payments........................................ 10
Ten Day Review.......................................... 10
FEE TABLE................................................... 11
YIELDS AND TOTAL RETURNS.................................... 13
ML LIFE INSURANCE COMPANY OF NEW YORK....................... 14
THE ACCOUNT................................................. 14
Segregation of Account Assets........................... 14
Number of Subaccounts; Subaccount Investments........... 15
INVESTMENTS OF THE ACCOUNT.................................. 15
General Information and Investment Risks................ 15
Merrill Lynch Variable Series Funds, Inc................ 15
Basic Value Focus Fund............................. 16
Domestic Money Market Fund......................... 16
Fundamental Growth Focus Fund...................... 16
Government Bond Fund............................... 16
Index 500 Fund..................................... 16
AIM Variable Insurance Funds............................ 16
AIM V.I. International Equity Fund................. 16
AIM V.I. Value Fund................................ 17
Alliance Variable Products Series Fund, Inc............. 17
Growth and Income Portfolio........................ 17
Premier Growth Portfolio........................... 17
MFS-Registered Trademark- Variable Insurance
Trust-SM-............................................... 17
MFS Emerging Growth Series......................... 17
MFS Growth With Income Series...................... 18
Hotchkis and Wiley Variable Trust....................... 18
International VIP Portfolio........................ 18
Davis Variable Account Fund, Inc........................ 18
Davis Value Portfolio.............................. 18
Delaware Group Premium Fund............................. 18
Trend Series....................................... 19
PIMCO Variable Insurance Trust.......................... 19
Total Return Bond Portfolio........................ 19
Seligman Portfolios, Inc................................ 19
Seligman Small-Cap Value Portfolio................. 19
Van Kampen Life Investment Trust........................ 19
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Emerging Growth Portfolio.......................... 20
Purchases and Redemptions of Fund Shares;
Reinvestment............................................ 20
Material Conflicts, Substitution of Investments and
Changes to the Account.................................. 20
CHARGES AND DEDUCTIONS...................................... 21
Asset-Based Insurance Charge............................ 21
Contract Fee............................................ 21
Other Charges........................................... 22
Transfer Charges................................... 22
Tax Charges........................................ 22
Fund Expenses...................................... 22
Premium Taxes...................................... 22
FEATURES AND BENEFITS OF THE CONTRACT....................... 22
Ownership of The Contract............................... 22
Issuing the Contract.................................... 23
Issue Age.......................................... 23
Information We Need To Issue The Contract.......... 23
Ten Day Right to Review............................ 23
Premiums................................................ 23
Minimum and Maximum Premiums....................... 23
How to Make Payments............................... 24
Automatic Investment Feature....................... 24
Premium Investments................................ 24
Accumulation Units...................................... 24
How Are My Contract Transactions Priced?................ 24
How Do We Determine The Number of Units?................ 25
ADDITIONAL PROVISIONS APPLICABLE TO ALL CONTRACTS........... 25
Death of Annuitant Prior to Annuity Date................ 25
Transfers Among Subaccounts............................. 25
Dollar Cost Averaging Program........................... 26
What Is It?........................................ 26
Participating in the DCA Program................... 26
Minimum Amounts.................................... 26
When Do We Make DCA Transfers?..................... 27
Asset Allocation Program................................ 27
Rebalancing Program..................................... 28
Withdrawals and Surrenders.............................. 28
When and How Withdrawals are Made.................. 28
Minimum Amounts.................................... 29
Systematic Withdrawal Program...................... 29
Surrenders......................................... 29
Payments to Contract Owners............................. 29
Contract Changes........................................ 29
Death Benefit........................................... 30
General............................................ 30
Spousal Continuation............................... 30
Calculation of Death Benefit....................... 30
Maximum Anniversary Value.......................... 31
Annuity Payments........................................ 31
Annuity Options......................................... 32
How We Determine Present Value of Future Guaranteed
Annuity Payments..................................... 32
Payments of a Fixed Amount......................... 32
Payments for a Fixed Period........................ 33
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Life Annuity....................................... 33
Life Annuity With Payments Guaranteed for 5, 10,
15, or 20 Years...................................... 33
Life Annuity With Guaranteed Return of Contract
Value................................................ 33
Joint and Survivor Life Annuity.................... 33
Joint and Survivor Life Annuity with Payments
Guaranteed for 5, 10, 15, or 20 Years................ 33
Individual Retirement Account Annuity.............. 33
Gender-Based Annuity Purchase Rates..................... 34
FEDERAL INCOME TAXES........................................ 34
Federal Income Taxes.................................... 34
Tax Status of the Contract.............................. 34
Diversification Requirements....................... 34
Owner Control...................................... 34
Required Distributions............................. 35
Taxation of Annuities................................... 35
In General......................................... 35
Withdrawals and Surrenders......................... 35
Annuity Payments................................... 36
Taxation of Death Benefit Proceeds................. 36
Penalty Tax on Some Withdrawals......................... 36
Transfers, Assignments, or Exchanges of a Contract...... 36
Withholding............................................. 36
Multiple Contracts...................................... 36
Possible Changes In Taxation............................ 37
Possible Charge For Our Taxes........................... 37
Individual Retirement Annuities......................... 37
Traditional IRAs................................... 37
Roth IRAs.......................................... 37
Other Tax Issues For IRAs and Roth IRAs............ 37
Tax Sheltered Annuities................................. 38
OTHER INFORMATION........................................... 38
Notices and Elections................................... 38
Voting Rights........................................... 38
Reports to Contract Owners.............................. 39
Selling the Contract.................................... 39
State Regulation........................................ 39
Controlling Documents................................... 40
Legal Proceedings....................................... 40
Experts................................................. 40
Legal Matters........................................... 40
Registration Statements................................. 40
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL
INFORMATION............................................... 41
APPENDIX A.................................................. 42
</TABLE>
6
<PAGE>
DEFINITIONS
ACCUMULATION UNIT: A unit of measure used to compute the value of your interest
in a subaccount prior to the annuity date.
ANNUITANT: Annuity payments may depend upon the continuation of a person's life.
That person is called the annuitant.
ANNUITY DATE: The date on which annuity payments are scheduled to begin.
ATTAINED AGE: The age of a person on the contract date plus the number of full
contract years since the contract date.
BENEFICIARY(S): The person(s) designated by you to receive payment upon the
death of an owner prior to the annuity date.
CONTRACT ANNIVERSARY: The yearly anniversary of the contract date.
CONTRACT DATE: The effective date of the Contract. This is usually the business
day we receive your initial premium at our Service Center.
CONTRACT VALUE: The value of your interest in the Account.
CONTRACT YEAR: The period from the contract date to the first contract
anniversary, and thereafter, the period from one contract anniversary to the
next contract anniversary.
INDIVIDUAL RETIREMENT ACCOUNT OR ANNUITY ("IRA"): A retirement arrangement
meeting the requirements of Section 408 of the Internal Revenue Code ("IRC").
NET INVESTMENT FACTOR: An index used to measure the investment performance of a
subaccount from one valuation period to the next.
NONQUALIFIED CONTRACT: A Contract issued in connection with a retirement
arrangement other than a qualified plan described under Section 401, 403, 408,
408A, 457 or any similar provisions of the IRC.
QUALIFIED CONTRACT: A Contract issued in connection with a retirement
arrangement described under Section 403(b), 408, or 408A of the Internal Revenue
Code ("IRC").
TAX SHELTERED ANNUITY: A Contract issued in connection with a retirement
arrangement that receives favorable tax status under Section 403(b) of the IRC.
VALUATION PERIOD: The interval from one determination of the net asset value of
a subaccount to the next. Net asset values are determined as of the close of
business on each day the New York Stock Exchange is open.
7
<PAGE>
CAPSULE SUMMARY OF THE CONTRACT
This capsule summary provides a brief overview of the Contract. More detailed
information about the Contract can be found in the sections of this Prospectus
that follow, all of which should be read in their entirety.
PREMIUMS
Generally, before the annuity date you can pay premiums as often as you like.
The minimum initial premium is $25,000. Subsequent premiums generally must be
$100 or more. The maximum premium that will be accepted without Company approval
is $1,000,000. Under an automatic investment feature, you can make subsequent
premium payments systematically from your Merrill Lynch brokerage account. For
more information, see "Automatic Investment Feature".
The Contract is available as a non-qualified contract or may be issued as an IRA
or purchased through an established IRA or Roth IRA custodial account with
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"). Federal law
limits maximum annual contributions to IRAs and Roth IRAs. Transfer amounts from
tax sheltered annuity plans that are not subject to the Employee Retirement
Income Security Act of 1974, as amended, will be accepted as premium payments,
as permitted by law. Other premium payments will not be accepted under a
Contract used as a tax sheltered annuity.
The tax advantages typically provided by a variable annuity are already
available with tax-qualified plans, including IRAs and Roth IRAs. You should
carefully consider the advantages and disadvantages of owning a variable annuity
in a tax-qualified plan, including the costs and benefits of the Contract
(including the annuity income benefits), before you purchase the Contract in a
tax-qualified plan.
We offer another variable annuity contract that has a different death benefit,
contract features, fund selections, and optional programs. However, this other
contract also has different charges that would affect your subaccount
performance and contract values. To obtain more information about this other
contract, contact our Service Center or your Financial Consultant.
THE ACCOUNT
As you direct, we will put premiums into the subaccounts corresponding to the
Funds in which we invest your contract value. For the first 14 days following
the contract date, we put all premiums into the Domestic Money Market
Subaccount. After the 14 days, we'll put the money into the subaccounts you've
selected. Currently, you may allocate premiums or contract value among 10 of the
available subaccounts. Generally, within certain limits you may transfer
contract value periodically among subaccounts.
THE FUNDS AVAILABLE FOR INVESTMENT
<TABLE>
<S> <C>
- --ARROW-- FUNDS OF MERRILL LYNCH VARIABLE SERIES --ARROW-- FUNDS OF HOTCHKIS AND WILEY VARIABLE TRUST
FUNDS, INC.
--ARROW-- Basic Value Focus Fund --ARROW-- International VIP Portfolio
--ARROW-- Domestic Money Market Fund --ARROW-- FUNDS OF DAVIS VARIABLE ACCOUNT FUND, INC.
--ARROW-- Fundamental Growth Focus Fund --ARROW-- Davis Value Portfolio
--ARROW-- Government Bond Fund --ARROW-- FUNDS OF DELAWARE GROUP PREMIUM FUND
--ARROW-- Index 500 Fund --ARROW-- Trend Series
- --ARROW-- FUNDS OF AIM VARIABLE INSURANCE FUNDS --ARROW-- FUNDS OF PIMCO VARIABLE INSURANCE TRUST
--ARROW-- AIM V.I. International Equity Fund --ARROW-- Total Return Bond Portfolio
--ARROW-- AIM V.I. Value Fund --ARROW-- FUNDS OF SELIGMAN PORTFOLIOS, INC.
- --ARROW-- FUNDS OF ALLIANCE VARIABLE PRODUCTS SERIES --ARROW-- Seligman Small-Cap Value Portfolio
FUND, INC.
--ARROW-- Growth and Income Portfolio --ARROW-- FUNDS OF VAN KAMPEN LIFE INVESTMENT TRUST
--ARROW-- Premier Growth Portfolio --ARROW-- Emerging Growth Portfolio
- --ARROW-- FUNDS OF MFS-REGISTERED TRADEMARK- VARIABLE
INSURANCE TRUST-SM-
--ARROW-- MFS Emerging Growth Series
--ARROW-- MFS Growth With Income Series
</TABLE>
8
<PAGE>
If you want detailed information about the investment objectives of the Funds,
see "Investments of the Account" and the prospectuses for the Funds.
FEES AND CHARGES
ASSET-BASED INSURANCE CHARGE
We currently impose an asset-based insurance charge of 1.59% annually to cover
certain risks. It will never exceed 1.59% annually.
The asset-based insurance charge compensates us for:
- costs associated with the establishment and administration of the
Contract;
- mortality risks we assume for the annuity payment and death benefit
guarantees made under the Contract; and
- expense risks we assume to cover Contract maintenance expenses.
We deduct the asset-based insurance charge daily from the net asset value of
the subaccounts. This charge ends on the annuity date.
CONTRACT FEE
We impose a $40 contract fee each year and upon a full withdrawal to reimburse
us for expenses related to maintenance of the Contract only if the greater of
contract value, or premiums less withdrawals, is less than $25,000.
Accordingly, if your withdrawals have not decreased your investment in the
Contract below $25,000, we will not impose this annual fee. We may also waive
this fee in certain circumstances where you own at least three Contracts. This
fee ends after the annuity date.
PREMIUM TAXES
On the annuity date, we deduct a charge for any premium taxes imposed by a
state or local government. Premium tax rates vary from jurisdiction to
jurisdiction. They currently range from 0% to 5%.
FUND EXPENSES
You will bear the costs of advisory fees and operating expenses deducted from
Fund assets.
You can find detailed information about all fees and charges imposed on the
Contract under "Charges and Deductions".
TRANSFERS AMONG SUBACCOUNTS
Before the annuity date, you may transfer all or part of your contract value
among the subaccounts up to twelve times per contract year without charge. You
may make more than twelve transfers among available subaccounts, but we may
charge $25 per extra transfer. (See "Transfers".)
Several specialized transfer programs are available under the Contract. You
cannot use more than one such program at a time.
9
<PAGE>
- First, we offer a Dollar Cost Averaging Program where money you've put in
a designated subaccount is systematically transferred monthly into other
subaccounts you select without charge. The program may allow you to take
advantage of fluctuations in fund share prices over time. (See "Dollar
Cost Averaging Program".) (There is no guarantee that Dollar Cost
Averaging will result in lower average prices or protect against market
loss.)
- Second, through participation in the Asset Allocation Program, you may
select one of five asset allocation models. Your contract value is
rebalanced quarterly based on the asset allocation model selected. (See
"Asset Allocation Program".)
- Third, you may choose to participate in a Rebalancing Program where we
automatically reallocate your contract value quarterly in order to
maintain a particular percentage allocation among the subaccounts that you
select. (See "Rebalancing Program".)
WITHDRAWALS
You can withdraw money from the Contract six times each contract year.
Additionally, under a Systematic Withdrawal Program, you may have automatic
withdrawals of a specified dollar amount made monthly, quarterly, semi-annually,
or annually. These systematic withdrawals are in addition to the annual six
withdrawals permitted under the Contract. For more information, see "Systematic
Withdrawal Program".
A withdrawal may have adverse tax consequences, including the imposition of a
penalty tax on withdrawals prior to age 59 1/2 (see "Federal Income Taxes").
DEATH BENEFIT
Regardless of investment experience, the Contract provides a guaranteed minimum
death benefit if you die before the annuity date.
If you are age 80 or over when the Contract is issued, the death benefit equals
the greater of premiums less adjusted withdrawals or the contract value. If you
are under age 80 when the Contract is issued, the death benefit equals the
greatest of premiums less adjusted withdrawals, the contract value, or the
Maximum Anniversary Value. The Maximum Anniversary Value equals the greatest
anniversary value for the Contract.
You can find more detailed information about the death benefit and how it is
calculated, including age limitations that apply, under "Death Benefit".
ANNUITY PAYMENTS
Annuity payments begin on the annuity date and are made under the annuity option
you select. You may select an annuity date that cannot be later than the
annuitant's 90th birthday. If you do not select an annuity date, the annuity
date for nonqualified Contracts is the annuitant's 90th birthday. The annuity
date for IRA or tax sheltered annuity Contracts is when the owner/annuitant
reaches age 70 1/2.
Details about the annuity options available under the Contract can be found
under "Annuity Options".
TEN DAY REVIEW
When you receive the Contract, read it carefully to make sure it's what you
want. Generally, within 10 days after you receive the Contract, you may return
it for a refund. To get a refund, return the Contract to the Service Center or
to the Financial Consultant who sold it. We will then refund the greater of all
premiums paid into the Contract or the contract value as of the date you return
the Contract.
10
<PAGE>
FEE TABLE
A. Contract Owner Transaction Expenses
1.Sales Load Imposed on Premium ................................... None
2.Contingent Deferred Sales Charge ................................ None
3.Transfer Fee ..................................................... $25
The first 12 transfers among subaccounts in a contract year are
free. We currently do not, but may in the future, charge a $25 fee
on all subsequent transfers.
The Fee Table and Examples do not include charges to contract owners
for premium taxes. Premium taxes may be applicable. Refer to the
"Premium Taxes" section in this Prospectus for further details.
B. Annual Contract Fee ................................................ $40
The Contract Fee will be assessed annually on each contract
anniversary and upon a full withdrawal only if the greater of contract
value, or premiums less withdrawals, is less than $25,000.
C. Separate Account Annual Expenses (as a percentage of contract value)
Current and Maximum Asset-Based Insurance Charge ................. 1.59%
D. Fund Expenses for the Year Ended December 31, 1999 (see "Notes to Fee
Table") (as a percentage of each Fund's average net assets)
<TABLE>
<CAPTION>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. (CLASS A SHARES)
--------------------------------------------------------------
DOMESTIC FUNDAMENTAL
BASIC VALUE MONEY GROWTH GOVERNMENT
ANNUAL EXPENSES FOCUS MARKET FOCUS (A) BOND INDEX 500
- --------------- ----------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees............. .60% .50% .65% .50% .30%
Other Expenses....................... .06% .05% .15% .05% .05%
Total Annual Operating Expenses...... .66% .55% .80% .55% .35%
Expense Reimbursements............... -- -- -- -- --
Net Expenses......................... .66% .55% .80% .55% .35%
</TABLE>
<TABLE>
<CAPTION>
AIM ALLIANCE VARIABLE MFS-REGISTERED TRADEMARK- HOTCHKIS
VARIABLE PRODUCTS SERIES VARIABLE AND WILEY
INSURANCE FUND, INC. INSURANCE VARIABLE
FUNDS (CLASS A SHARES) TRUST-SM- TRUST
------------------------ ------------------- ------------------------- -------------
MFS
AIM V.I. GROWTH MFS GROWTH
INTERNATIONAL AIM V.I. AND PREMIER EMERGING WITH INTERNATIONAL
ANNUAL EXPENSES EQUITY VALUE INCOME GROWTH GROWTH(B) INCOME(B) VIP
- --------------- ------------- -------- -------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees............. .75% .61% .63% 1.00% .75% .75% .75%
Other Expenses....................... .22% .15% .08% .05% .09% .13% .26%
Total Annual Operating Expenses...... .97% .76% .71% 1.05% .84% .88% 1.01%
Expense Reimbursements............... -- -- -- -- -- -- --
Net Expenses......................... .97% .76% .71% 1.05% .84% .88% 1.01%
</TABLE>
<TABLE>
<CAPTION>
DAVIS DELAWARE PIMCO
VARIABLE GROUP VARIABLE VAN KAMPEN
ACCOUNT PREMIUM INSURANCE SELIGMAN LIFE INVESTMENT
FUND, INC. FUND TRUST PORTFOLIOS, INC. TRUST
---------- -------- --------- ---------------- ---------------
TOTAL SELIGMAN
DAVIS TREND RETURN SMALL-CAP EMERGING
ANNUAL EXPENSES VALUE SERIES BOND (C) VALUE (D) GROWTH (E)
- --------------- ---------- -------- --------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees............. .75% .75% .40% 1.00% .70%
Other Expenses....................... .25% .07% .35% .41% .18%
Total Annual Operating Expenses...... 1.00% .82% .75% 1.41% .88%
Expense Reimbursements............... -- -- .10% -- --
Net Expenses......................... 1.00% .82% .65% 1.41% .88%
</TABLE>
11
<PAGE>
EXAMPLES OF CHARGES
If you surrender or annuitize your Contract at the end of the applicable time
period, you would pay the following cumulative expenses on each $1,000 invested,
assuming 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SUBACCOUNT INVESTING IN:
ML Basic Value Focus Fund+.............................. $23 $72 $123 $264
ML Domestic Money Market Fund+.......................... 22 69 117 252
ML Fundamental Growth Focus Fund+....................... 25 76 130 278
ML Government Bond Fund+................................ 22 69 117 252
ML Index 500 Fund+...................................... 20 62 107 231
AIM V.I. International Equity Fund...................... 27 81 139 295
AIM V.I. Value Fund..................................... 24 75 128 274
Alliance Growth and Income Portfolio+................... 24 74 126 269
Alliance Premier Growth Portfolio+...................... 27 84 143 303
MFS Emerging Growth Series.............................. 25 78 132 282
MFS Growth With Income Series........................... 26 79 134 286
Hotchkis and Wiley International VIP Portfolio.......... 27 83 141 299
Davis Value Portfolio................................... 27 82 141 298
Delaware Trend Series................................... 25 77 131 280
PIMCO Total Return Bond Portfolio....................... 23 72 123 263
Seligman Small-Cap Value Portfolio...................... 31 95 161 338
Van Kampen Emerging Growth Portfolio.................... 26 79 134 286
</TABLE>
- ---------
<TABLE>
<S> <C>
+ Class A Shares.
</TABLE>
Because there is no contingent deferred sales charge, you would pay the same
expenses whether you surrender your Contract at the end of the applicable time
period or not, based on the same assumptions.
--------------------------
The preceding Fee Table and Examples help you understand the costs and expenses
you will bear, directly or indirectly. The Fee Table and Examples include
expenses and charges of the Account as well as the Funds. The Examples do not
reflect the $40 contract fee because, based on our estimates of average contract
size and withdrawals, its effect on the examples shown would be negligible.
Premium taxes may also be applicable. See the Charges and Deductions section in
this Prospectus and the Fund prospectuses for a further discussion of fees and
charges.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR ANNUAL RATES OF RETURN OF ANY FUND. ACTUAL EXPENSES AND ANNUAL RATES
OF RETURN MAY BE MORE OR LESS THAN THOSE ASSUMED FOR THE PURPOSE OF THE
EXAMPLES.
THE SUBACCOUNTS AVAILABLE UNDER THE CONTRACT HAVE NOT YET COMMENCED OPERATIONS.
THEREFORE, THERE IS NO HISTORY OF ACCUMULATION UNIT VALUES FOR THESE
SUBACCOUNTS.
NOTES TO FEE TABLE
(a) "Other Expenses" and "Net Expenses" shown for the Fundamental Growth Focus
Fund are based on expenses estimated for the current fiscal year.
(b) The MFS Emerging Growth Series and the MFS Growth With Income Series have
an expense offset arrangement which reduces each Fund's custodian fee based
upon the amount of cash maintained by the Fund with its custodian and
dividend disbursing agent. Each Fund may enter into such arrangements and
directed brokerage arrangements, which would also have the effect of
reducing the Fund's expenses. "Other Expenses" do not take into account
these expense reductions, and are therefore higher than the actual expenses
of the Funds. Had these fee reductions been taken into account, "Net
Expenses" would have been 0.83% for the Emerging Growth Series and 0.87%
for the Growth With Income Series.
(c) Pacific Investment Management Company ("PIMCO") has agreed to reduce its
0.25% administrative fee (which is included in "Other Expenses" in the Fee
Table) to the extent that total Fund operating expenses would exceed 0.65%
of average daily net assets, due to organizational expenses and the payment
by the Fund of its pro rata portion of the Trust's Trustees' fees. Any such
waiver is subject to potential future reimbusement within three years from
the date the fee was waived.
(d) The Fee Table does not reflect fees waived or expenses assumed by J. & W.
Seligman & Co. Incorporated ("Seligman") for the Seligman Small-Cap Value
Portfolio during the year ended December 31, 1999. Such waivers and
assumption of expenses were made on a voluntary basis, and may be
discontinued or reduced at any time without notice. During the fiscal year
ended December 31, 1999, Seligman waived fees and expense totaling 0.41%
for the Seligman Small-Cap Value Portfolio. Considering such
reimbursements, "Net Expenses" would have been 1.00%.
(e) The Fee Table does not reflect fees waived or expenses assumed by Van
Kampen Asset Management Inc. ("Van Kampen Management") for the Emerging
Growth Portfolio during the year ended December 31, 1999. Such waivers and
assumption of expenses were made on a voluntary basis, and may be
discontinued or reduced at any time without notice. During the fiscal year
ended December 31, 1999, Van Kampen Management waived fees and expense
totaling 0.03% for the Emerging Growth Portfolio. Considering such
reimbursements, "Net Expenses" would have been 0.85%.
12
<PAGE>
YIELDS AND TOTAL RETURNS
From time to time, we may advertise yields, effective yields, and total returns
for the subaccounts. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND DO NOT
INDICATE OR PROJECT FUTURE PERFORMANCE. We may also advertise performance of the
subaccounts in comparison to certain performance rankings and indices. More
detailed information on the calculation of performance information, as well as
comparisons with unmanaged market indices, appears in the Statement of
Additional Information.
Effective yields and total returns for a subaccount are based on the investment
performance of the corresponding Fund. Fund expenses influence Fund performance.
The yield of the Domestic Money Market Subaccount refers to the annualized
income generated by an investment in the subaccount over a specified 7-day
period. The yield is calculated by assuming that the income generated for that
7-day period is generated each 7-day period over a 52-week period and is shown
as a percentage of the investment. The effective yield is calculated similarly
but, when annualized, the income earned by an investment is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment.
The yield of a subaccount (besides the Domestic Money Market Subaccount) refers
to the annualized income generated by an investment in the subaccount over a
specified 30-day or one month period. The yield is calculated by assuming the
income generated by the investment during that 30-day or one-month period is
generated each period over 12 months and is shown as a percentage of the
investment.
The average annual total return of a subaccount refers to return quotations
assuming an investment has been held in each subaccount for 1, 5 and 10 years,
or for a shorter period, if applicable. The average annual total returns
represent the average compounded rates of return that would cause an initial
investment of $1,000 to equal the value of that investment at the end of each
period. These percentages exclude any deductions for premium taxes.
We may also advertise or present yield or total return performance information
computed on different bases, but this information will always be accompanied by
average annual total returns for the corresponding subaccounts. We may also
advertise total return performance information for the Funds. We may also
present total return performance information for a subaccount for periods before
the date the subaccount commenced operations. If we do, we'll base performance
of the corresponding Fund as if the subaccount existed for the same periods as
those indicated for the corresponding Fund, with a level of fees and charges
equal to those currently imposed under the Contracts. We may also present total
performance information for a hypothetical Contract assuming allocation of the
initial premium to more than one subaccount or assuming monthly transfers from
one subaccount to designated other subaccounts under a Dollar Cost Averaging
Program. We may also present total performance information for a hypothetical
Contract assuming participation in the Asset Allocation Program or the
Rebalancing Program. This information will reflect the performance of the
affected subaccounts for the duration of the allocation under the hypothetical
Contract. It will also reflect the deduction of charges described above. This
information may also be compared to various indices.
Advertising and sales literature for the Contracts may also compare the
performance of the subaccounts and Funds to the performance of other variable
annuity issuers in general or to the performance of particular types of variable
annuities investing in mutual funds, with investment objectives similar to each
of the Funds corresponding to the subaccounts.
Performance information may also be based on rankings by services which monitor
and rank the performance of variable annuity issuers in each of the major
categories of investment objectives on an industry-wide basis.
13
<PAGE>
Ranking services we may use as sources of performance comparison are Lipper,
VARDS, CDA/Weisenberger, Morningstar, MICROPAL, and Investment Company Data,
Inc.
Advertising and sales literature for the Contracts may also compare the
performance of the subaccounts to the Standard & Poor's Index of 500 Common
Stocks, the Morgan Stanley EAFE Index, the Russell 2000 Index and the Dow Jones
Indices, all widely used measures of stock market performance. These unmanaged
indices assume the reinvestment of dividends, but do not reflect any deduction
for the expense of operating or managing an investment portfolio. Other sources
of performance comparison that we may use are Chase Investment Performance
Digest, Money, Forbes, Fortune, Business Week, Financial Services Weekly,
Kiplinger Personal Finance, Wall Street Journal, USA Today, Barrons, U.S. News &
World Report, Strategic Insight, Donaghues, Investors Business Daily, and
Ibbotson Associates.
Advertising and sales literature for the Contracts may also contain information
on the effect of tax deferred compounding on subaccount investment returns, or
returns in general. The tax deferral may be illustrated by graphs and charts and
may include a comparison at various points in time of the return from an
investment in a Contract (or returns in general) on a tax-deferred basis
(assuming one or more tax rates) with the return on a currently taxable basis.
ML LIFE INSURANCE COMPANY OF NEW YORK
We are a stock life insurance company organized under the laws of the State of
New York on November 28, 1973. We are an indirect wholly owned subsidiary of
Merrill Lynch & Co., Inc., a corporation whose common stock is traded on the New
York Stock Exchange.
Our financial statements can be found in the Statement of Additional
Information. You should consider them only in the context of our ability to meet
any Contract obligation.
THE ACCOUNT
The ML of New York Variable Annuity Separate Account A (the "Account") offers
through its subaccounts a variety of investment options. Each option has a
different investment objective.
We established the Account on August 14, 1991. It is governed by New York law,
our state of domicile. The Account is registered with the Securities and
Exchange Commission as a unit investment trust under the Investment Company Act
of 1940. The Account meets the definition of a separate account under the
federal securities laws. The Account's assets are SEGREGATED from all of our
other assets.
SEGREGATION OF ACCOUNT ASSETS
Obligations to contract owners and beneficiaries that arise under the Contract
are our obligations. We own all of the assets in the Account. The Account's
income, gains, and losses, whether or not realized, derived from Account assets
are credited to or charged against the Account without regard to our other
income, gains or losses. The assets in each Account will always be at least
equal to the reserves and other liabilities of the Account. If the Account's
assets exceed the required reserves and other Contract liabilities, we may
transfer the excess to our general account. Under New York insurance law the
assets in the Account, to the extent of its reserves and liabilities, may not be
charged with liabilities arising out of any other business we conduct nor may
the assets of the Account be charged with any liabilities of other separate
accounts.
14
<PAGE>
NUMBER OF SUBACCOUNTS; SUBACCOUNT INVESTMENTS
There are 17 subaccounts currently available through the Account. All
subaccounts invest in a corresponding portfolio of the Merrill Lynch Variable
Series Funds, Inc. (the "Variable Series Funds"); the AIM Variable Insurance
Funds (the "AIM V.I. Funds"); the Alliance Variable Products Series Fund, Inc.
(the "Alliance Fund"); the MFS-Registered Trademark- Variable Insurance
Trust-SM- (the "MFS Trust"); the Hotchkis and Wiley Variable Trust (the
"Hotchkis and Wiley Trust"); the Davis Variable Account Fund, Inc. (the "Davis
Fund"); the Delaware Group Premium Fund (the "Delaware Fund"); the PIMCO
Variable Insurance Trust (the "PIMCO Trust"); the Seligman Portfolios, Inc. (the
"Seligman Portfolios"); or the Van Kampen Life Investment Trust (the "Van Kampen
Trust"). Additional subaccounts may be added or closed in the future.
Although the investment objectives and policies of certain Funds are similar to
the investment objectives and policies of other portfolios that may be managed
or sponsored by the same investment adviser, manager, or sponsor, nevertheless,
we do not represent or assure that the investment results will be comparable to
any other portfolio, even where the investment advisor or manager is the same.
Differences in portfolio size, actual investments held, fund expenses, and other
factors all contribute to differences in fund performance. For all of these
reasons, you should expect investment results to differ. In particular, certain
funds available only through the Contract have names similar to funds not
available through the Contract. The performance of a fund not available through
the Contract does not indicate performance of the similarly named fund available
through the Contract.
INVESTMENTS OF THE ACCOUNT
GENERAL INFORMATION AND INVESTMENT RISKS
Information about investment objectives, management, policies, restrictions,
expenses, risks, and all other aspects of fund operations can be found in the
Funds' prospectuses and Statements of Additional Information. Read these
carefully before investing. Fund shares are currently sold to our separate
accounts as well as separate accounts of Merrill Lynch Life Insurance Company
(an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc.), and
insurance companies not affiliated with us, to fund benefits under certain
variable annuity and variable life insurance contracts. Shares of these funds
may be offered in the future to certain pension or retirement plans.
Generally, you should consider the funds as long-term investments and vehicles
for diversification, but not as a balanced investment program. Many of these
funds may not be appropriate as the exclusive investment to fund a Contract for
all contract owners. The Fund prospectuses also describe certain additional
risks, including investing on an international basis or in foreign securities
and investing in lower rated or unrated fixed income securities. There is no
guarantee that any fund will be able to meet its investment objectives. Meeting
these objectives depends upon future economic conditions and upon how well Fund
management anticipates changes in economic conditions.
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
The Merrill Lynch Variable Series Funds, Inc. ("Variable Series Funds") is
registered with the Securities and Exchange Commission as an open-end management
investment company. It currently offers the Account Class A shares of 5 of its
separate investment mutual fund portfolios.
Merrill Lynch Asset Management, L.P. ("MLAM") is the investment adviser to the
Variable Series Funds. MLAM, together with its affiliates, Fund Asset
Management, L.P., Mercury Asset Management International Ltd., and Hotchkis and
Wiley, is a worldwide mutual fund leader, and had a total of $550.07 billion in
investment company and other portfolio assets under management as of the end of
January 31, 2000. It is
15
<PAGE>
registered as an investment adviser under the Investment Advisers Act of 1940.
MLAM is an indirect subsidiary of Merrill Lynch & Co., Inc. MLAM's principal
business address is 800 Scudders Mill Road, Plainsboro, New Jersey 08536. As the
investment adviser, it is paid fees by these Funds for its services. The fees
charged to each of these Funds are set forth in the summary below.
MLAM and Merrill Lynch Life Agency, Inc. have entered into a Reimbursement
Agreement that limits the operating expenses paid by each Fund of the Variable
Series Funds in a given year to 1.25% of its average net assets (see "Selling
the Contract").
BASIC VALUE FOCUS FUND. This Fund seeks capital appreciation and, secondarily,
income by investing in securities, primarily equities, that management of the
Fund believes are undervalued and therefore represent basic investment value.
MLAM receives an advisory fee from the Fund at the annual rate of 0.60% of the
average daily net assets of the Fund.
DOMESTIC MONEY MARKET FUND. This Fund seeks to preserve capital, maintain
liquidity, and achieve the highest possible current income consistent with the
foregoing objectives by investing in short-term domestic money market
securities. MLAM receives an advisory fee from the Fund at the annual rate of
0.50% of the average daily net assets of the Fund.
FUNDAMENTAL GROWTH FOCUS FUND. This Fund seeks long-term growth of capital. The
Fund purchases primarily common stocks of U.S. companies that Fund management
believes have shown above-average rates of growth earnings over the long-term.
The Fund will invest at least 65% of its total assets in equity securities. MLAM
receives an advisory fee from the Fund at an annual rate of 0.65% of the average
daily net assets of the Fund.
GOVERNMENT BOND FUND. This Fund seeks the highest possible current income
consistent with the protection of capital afforded by investing in debt
securities issued or guaranteed by the United States Government, its agencies or
instrumentalities. MLAM receives an advisory fee from the Fund at an annual rate
of 0.50% of the average daily net assets of the Fund.
INDEX 500 FUND. This Fund seeks investment results that, before expenses,
correspond to the aggregate price and yield performance of the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500 Index"). MLAM receives an advisory
fee from the Fund at an annual rate of 0.30% of the Fund's average daily net
assets.
AIM VARIABLE INSURANCE FUNDS
AIM Variable Insurance Funds ("AIM V.I. Funds") is registered with the
Securities and Exchange Commission as an open-end, series, management investment
company. It currently offers the Account two of its separate investment
portfolios.
A I M Advisors, Inc. ("AIM"), 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173, serves as the investment adviser to each of the AIM V.I. Funds. AIM
has acted as an investment adviser since its organization in 1976. Today AIM,
together with its subsidiaries, advises or manages over 120 investment
portfolios, including the Funds, encompassing a broad range of investment
objectives. As the investment adviser, AIM receives compensation from the Funds
for its services. The fees charged to each of these Funds are set forth in the
summary of investment objectives below.
AIM V.I. INTERNATIONAL EQUITY FUND. This Fund seeks to provide long-term growth
of capital by investing in a diversified portfolio of international equity
securities whose issuers are considered to have strong earnings
16
<PAGE>
momentum. AIM receives an advisory fee from the Fund at an annual rate of 0.75%
of the average daily net assets of the Fund.
AIM V.I. VALUE FUND. This Fund seeks to achieve long-term growth of capital by
investing primarily in equity securities judged by AIM to be undervalued
relative to AIM's appraisal of the current or projected earnings of the
companies issuing the securities, or relative to current market values of assets
owned by the companies issuing the securities or relative to the equity market
generally. Income is a secondary objective. AIM receives an advisory fee from
the Fund at an annual rate of 0.65% of the first $250 million of the Fund's
average daily net assets and 0.60% of the Fund's average daily net assets in
excess of $250 million.
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Alliance Variable Products Series Fund, Inc. ("Alliance Fund") is registered
with the Securities and Exchange Commission as an open-end management investment
company. It currently offers the Account Class A shares of two of its separate
investment portfolios. Alliance Capital Management L.P. ("Alliance"), a Delaware
limited partnership with principal offices at 1345 Avenue of the Americas, New
York, New York 10105 serves as the investment adviser to each Fund of the
Alliance Fund. Alliance Capital Management Corporation ("ACMC"), the sole
general partner of Alliance, is an indirect wholly owned subsidiary of The
Equitable Life Assurance Society of the United States, which is in turn a wholly
owned subsidiary of AXA Financial, Inc., a holding company which is controlled
by AXA, a French insurance holding company for an international group of
insurance and related financial services companies. As the investment adviser,
Alliance is paid fees by the Fund for its services. The fees charged to the Fund
are set forth in the summary of investment objective below.
GROWTH AND INCOME PORTFOLIO. This Fund seeks reasonable current income and
reasonable opportunity for appreciation through investing primarily in
dividend-paying stocks of good quality. Alliance receives an advisory fee from
the Fund at an annual rate of 0.63% of the average daily net assets of the Fund.
PREMIER GROWTH PORTFOLIO. This Fund seeks growth of capital by pursuing
aggressive investment policies. Since investments will be made based upon their
potential for capital appreciation, current income is incidental to the
objective of capital growth. Alliance receives an advisory fee from the Fund at
an annual rate of 1.00% of the Fund's average daily net assets.
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-
MFS-Registered Trademark- Variable Insurance Trust-SM- ("MFS Trust") is
registered with the Securities and Exchange Commission as an open-end management
investment company. It currently offers the Account two of its separate
investment portfolios.
Massachusetts Financial Services Company ("MFS"), a Delaware corporation, 500
Boylston Street, Boston, Massachusetts 02116, serves as the investment adviser
to each Fund of MFS Trust. MFS is a subsidiary of Sun Life of Canada (U.S.)
Financial Services Holdings, Inc., which, in turn, is a indirect wholly owned
subsidiary of Sun Life Assurance Company of Canada. As the investment adviser,
MFS is paid fees by the Fund for its services. The fees charged to the Fund are
set forth in the summary of investment objective below.
MFS EMERGING GROWTH SERIES. This Fund seeks long-term growth of capital. The
Fund invests, under normal market conditions, at least 65% of its total assets
in common stocks and related securities of emerging growth companies. These
companies are companies that the Fund's adviser believes are either early in
their life cycle but have the potential to become major enterprises or are major
enterprises whose rates of earnings growth are expected to accelerate. MFS
receives an advisory fee from the Fund at an annual rate of 0.75% of the average
daily net assets of the Fund.
17
<PAGE>
MFS GROWTH WITH INCOME SERIES. This Fund seeks to provide reasonable current
income and long-term growth of capital and income. Under normal conditions, the
Fund invests at least 65% of its total assets in common stock and related
securities. Although the Fund may invest in companies of any size, it primarily
invests in companies with larger market capitalizations and attractive
valuations based on current and expected earnings or cash flow. MFS receives an
advisory fee from the Fund at an annual rate of 0.75% of the average daily net
assets of the Fund.
HOTCHKIS AND WILEY VARIABLE TRUST
Hotchkis and Wiley Variable Trust ("Hotchkis and Wiley Trust"), a Massachusetts
business trust, is registered with the Securities and Exchange Commission as an
open-end management investment company. The Hotchkis and Wiley Trust is intended
to serve as the investment medium for variable annuity contracts and variable
life insurance policies to be offered by the separate accounts of certain
insurance companies.
Hotchkis and Wiley, 725 S. Figueroa Street, Suite 4000, Los Angeles, California
90017-5400, serves as the investment adviser to the International VIP Portfolio
and generally administers the affairs of the Hotchkis and Wiley Trust. Hotchkis
and Wiley is a division of MLAM. As the investment adviser, Hotchkis and Wiley
is paid fees by the Fund for its services. The fees charged to the Fund for
advisory services are set forth in the summary of investment objective below.
INTERNATIONAL VIP PORTFOLIO. The Fund's investment objective is to provide
current income and long-term growth of income, accompanied by growth of capital.
The Fund invests at least 65% of its total assets in stocks in at least ten
foreign markets. In investing the Fund, Hotchkis and Wiley follows a VALUE
style. This means that it buys stocks that it believes are currently undervalued
by the market and thus have a lower price than their true worth. Hotchkis and
Wiley receives from the Fund an advisory fee at an annual rate of 0.75% of the
Fund's average daily net assets.
DAVIS VARIABLE ACCOUNT FUND, INC.
Davis Variable Account Fund, Inc. ("Davis Fund") is registered with the
Securities and Exchange Commission as an open-end management investment company.
It currently offers the Account one of its portfolios, the Davis Value
Portfolio. Davis Selected Advisers, LP ("Davis Advisers"), located at 2949 East
Elvira Road, Tucson, Arizona 85706, is the investment adviser to the Davis Value
Portfolio. Davis Selected Advisers-NY, Inc. ("Davis Advisers-NY"), located at
609 Fifth Avenue, New York, New York 10017 serves as the sub-adviser to the
Davis Value Portfolio. Davis Advisers-NY is a wholly owned subsidiary of Davis
Advisers. Davis Advisers pays the sub-advisory fee, not the Davis Value
Portfolio. The fees charged to the Fund for advisory services are set forth in
the summary of investment objective below.
DAVIS VALUE PORTFOLIO. This Fund seeks to provide growth of capital. The Fund
invests primarily in common stock of U.S. companies with market capitalizations
of at least $5 billion. These companies are selected based on their potential
for long-term growth, long-term return, and minimum risk. Davis Advisers
receives an advisory fee at an annual rate of 0.75% of the average daily net
assets of the Fund.
DELAWARE GROUP PREMIUM FUND
Delaware Group Premium Fund ("Delaware Fund") is registered with the Securities
and Exchange Commission as an open-end management investment company. It
currently offers the Account one of its investment portfolios, the Trend Series.
Delaware Management Company, located at One Commerce Square, Philadelphia,
Pennsylvania 19103, serves as the investment adviser to the Trend Series.
Delaware Management Company is a series of Delaware Management Business Trust,
which is an indirect, wholly owned subsidiary of Delaware
18
<PAGE>
Management Holdings, Inc. The fees charged to the Fund for advisory services are
set forth in the summary of investment objective below.
TREND SERIES. This Fund seeks long-term capital appreciation. The Fund invests
primarily in stocks of small, growth-oriented companies that Fund management
believes are responsive to changes within the marketplace and which management
believes have fundamental characteristics to support continued growth. Delaware
Management Company receives an advisory fee from the Fund at an annual rate of
0.75% on the first $500 million, 0.70% on the next $500 million, 0.65% on the
next $1.5 million, and 0.60% on assets over $2.5 million of the average daily
net assets of the Fund.
PIMCO VARIABLE INSURANCE TRUST
PIMCO Variable Insurance Trust ("PIMCO Trust") is registered with the Securities
and Exchange Commission as an open-end management investment company. It
currently offers one of its portfolios, the Total Return Bond Portfolio, to the
Account. Pacific Investment Management Company ("PIMCO"), located at 840 Newport
Center Drive, Suite 300 Newport Beach, California 92660, serves as the
investment adviser to the Total Return Bond Portfolio. PIMCO is a wholly owned
subsidiary partnership of PIMCO Advisors, L.P. The fees charged to the Fund for
advisory services are set forth in the summary of investment objective below.
TOTAL RETURN BOND PORTFOLIO. This Fund seeks to maximize total return,
consistent with preservation of capital and prudent investment management. Under
normal circumstances, the Fund invests at least 65% of its assets in a
diversified portfolio of fixed income instruments of varying maturities. The
average portfolio duration normally varies within a three- to six-year time
frame based on PIMCO's forecast for interest rates. PIMCO receives an advisory
fee at an annual rate of 0.40% of the average daily net assets of the Fund.
SELIGMAN PORTFOLIOS, INC.
Seligman Portfolios, Inc. ("Seligman Portfolios") is registered with the
Securities and Exchange Commission as an open-end management investment company.
It currently offers the Account one of its portfolios, the Small-Cap Value
Portfolio. J. & W. Seligman & Co. Incorporated ("Seligman"), located at 100 Park
Avenue, New York, New York 10017 serves as the investment manager to the
Seligman Small-Cap Value Portfolio. The fees charged to the Fund for advisory
services are set forth in the summary of investment objective below.
SELIGMAN SMALL-CAP VALUE PORTFOLIO. This Fund seeks long-term capital
appreciation. Generally, the Fund invests at least 65% of its total assets in
the common stocks of "value" companies with small market capitalization that the
Fund manager believes have been undervalued, either historically, by the market,
or by their peers. Seligman receives an advisory fee at an annual rate of 1.00%
on the first $500 million, .90% on the next $500 million, and .80% thereafter of
the average daily net assets of the Fund.
VAN KAMPEN LIFE INVESTMENT TRUST
Van Kampen Life Investment Trust ("Van Kampen Trust") is registered with the
Securities and Exchange Commission as a diversified open-end management company.
It currently offers the Account one of its separate investment portfolios, the
Emerging Growth Portfolio. Van Kampen Asset Management Inc. ("Van Kampen
Management") is the portfolio's investment adviser. Van Kampen Management is
located at 1 Parkview Plaza, Oakbrook Terrace, Illinois 60181-5555, and is a
wholly owned subsidiary of Van Kampen Investment Inc. Van Kampen Investments
Inc. is a diversified asset management company with more than two million retail
investor accounts, extensive capabilities for managing institutional portfolios,
and more than $90 billion under management or supervision as of December 31,
1999. Van Kampen Funds Inc., the distributor of the Fund, is also a wholly owned
subsidiary of Van Kampen Investments Inc. Van Kampen Investments Inc. is an
indirect wholly owned subsidiary of Morgan Stanley Dean Witter & Co. As the
investment adviser, Van Kampen
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<PAGE>
Management is paid fees by the Fund for its services. The fees to the Fund are
set forth in the summary of investment objective below.
EMERGING GROWTH PORTFOLIO. The investment objective of the Fund is to seek
capital appreciation. Under normal market conditions, the Fund's investment
adviser seeks to achieve the Fund's investment objective by investing at least
65% of the Fund's total assets in common stocks of emerging growth companies.
Emerging growth companies are those companies in the early stages of their life
cycles that the Fund's investment adviser believes have the potential to become
major enterprises. Van Kampen Management receives an advisory fee from the Fund
at an annual rate of 0.70% of the average daily net assets of the Fund.
PURCHASES AND REDEMPTIONS OF FUND SHARES; REINVESTMENT
The Account will purchase and redeem shares of the Funds at net asset value to
provide benefits under the Contract. Fund distributions to the Account are
automatically reinvested at net asset value in additional shares of the Funds.
The investment adviser of a Fund (or its affiliates) may pay compensation to us
or our affiliates, which may be significant, in connection with administration,
distribution, or other services provided with respect to the Funds and their
availability through the Contracts. The amount of this compensation is based
upon a percentage of the assets of the Fund attributable to the Contracts and
other contracts that we or our affiliates issue. These percentages differ, and
some advisers (or affiliates) may pay more than others.
MATERIAL CONFLICTS, SUBSTITUTION OF INVESTMENTS AND CHANGES TO THE ACCOUNT
It is conceivable that material conflicts could arise as a result of both
variable annuity and variable life insurance separate accounts investing in the
Funds. Although no material conflicts are foreseen, the participating insurance
companies will monitor events in order to identify any material conflicts
between variable annuity and variable life insurance contract owners to
determine what action, if any, should be taken. Material conflicts could result
from such things as (1) changes in state insurance law, (2) changes in federal
income tax law or (3) differences between voting instructions given by variable
annuity and variable life insurance contract owners. If a conflict occurs, we
may be required to eliminate one or more subaccounts of the Account or
substitute a new subaccount. In responding to any conflict, we will take the
action we believe necessary to protect our contract owners.
We may substitute a different investment option for any of the current Funds. We
can do this for both existing investments and the investment of future premiums.
However, before any such substitution, we would need the approval of the
Securities and Exchange Commission and applicable state insurance departments.
We will notify you of any substitutions.
We may also add new subaccounts to the Account, eliminate subaccounts in the
Account, deregister the Account under the Investment Company Act of 1940 (the
"1940 Act"), make any changes required by the 1940 Act, operate the Account as a
managed investment company under the 1940 Act or any other form permitted by
law, transfer all or a portion of the assets of a subaccount or separate account
to another subaccount or separate account pursuant to a combination or
otherwise, and create new separate accounts. Before we make certain changes we
need approval of the Securities and Exchange Commission and applicable state
insurance departments. We will notify you of any changes.
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<PAGE>
CHARGES AND DEDUCTIONS
We deduct the charges described below to cover costs and expenses, services
provided, and risks assumed under the Contracts. The amount of a charge may not
necessarily correspond to the costs associated with providing the services or
benefits.
ASSET-BASED INSURANCE CHARGE
We currently impose an asset-based insurance charge on the Account that equals
1.59% annually. It will never exceed 1.59%.
We deduct this charge daily from the net asset value of the subaccounts. This
amount compensates us for mortality risks we assume for the annuity payment and
death benefit guarantees made under the Contract. These guarantees include
making annuity payments which won't change based on our actual mortality
experience, and providing a guaranteed minimum death benefit under the Contract.
The charge also compensates us for expense risks we assume to cover Contract
maintenance expenses. These expenses may include issuing Contracts, maintaining
records, and performing accounting, regulatory compliance, and reporting
functions. Finally, this charge compensates us for costs associated with the
establishment and administration of the Contract, including programs like
transfers and Dollar Cost Averaging.
If the asset-based insurance charge is inadequate to cover the actual expenses
of mortality, maintenance, and administration, we will bear the loss. If the
charge exceeds the actual expenses, we will add the excess to our profit and it
may be used to finance distribution expenses.
CONTRACT FEE
We may charge a $40 contract fee each year. We will only impose this fee if the
greater of contract value, or premiums less withdrawals, is less than $25,000.
Accordingly, if you have not made any withdrawals from your Contract (or your
withdrawals have not decreased your investment in the Contract below $25,000),
we will not impose this annual fee.
The contract fee reimburses us for additional expenses related to maintenance of
certain Contracts with lower contract values. We do not deduct the contract fee
after the annuity date. The contract fee will never increase.
If the contract fee applies, we will deduct it as follows:
- We deduct this fee from your contract value on each contract anniversary
that occurs on or before the annuity date.
- We deduct this fee from your contract value if you surrender the contract
on any date other than a contract anniversary.
- We deduct this fee on a pro rata basis from all subaccounts in which your
contract value is invested.
Currently, a contract owner of three or more Contracts will be assessed no more
than $120 in contract fees annually. We reserve the right to change this limit
on contract fees at any time.
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<PAGE>
OTHER CHARGES
TRANSFER CHARGES
You may make up to twelve transfers among subaccounts per contract year without
charge. If you make more than twelve, we may, but currently do not, charge you
$25 for each extra transfer. We deduct this charge pro rata from the subaccounts
from which you are transferring contract value. Currently, transfers made by us
under the Dollar Cost Averaging Program, the Asset Allocation Program, and the
Rebalancing Program will not count toward the twelve transfers permitted among
subaccounts per contract year without charge. (See "Dollar Cost Averaging
Program", "Asset Allocation Program", "Rebalancing Program", and "Transfers".)
TAX CHARGES
We reserve the right, subject to any necessary regulatory approval, to charge
for assessments or federal premium taxes or federal, state or local excise,
profits or income taxes measured by or attributable to the receipt of premiums.
We also reserve the right to deduct from the Account any taxes imposed on the
Account's investment earnings. (See "Tax Status of the Contract".)
FUND EXPENSES
In calculating net asset value, the Funds deduct advisory fees and operating
expenses from assets. Information about those fees and expenses can be found in
the prospectuses for the Funds, and in the Statement of Additional Information
for each Fund.
PREMIUM TAXES
Various states impose a premium tax on annuity premiums when they are received
by an insurance company. In other jurisdictions, a premium tax is paid on the
contract value on the annuity date.
Premium tax rates vary from jurisdiction to jurisdiction and currently range
from 0% to 5%. Although we pay these taxes when due, we won't deduct them from
your contract value until the annuity date. In those jurisdictions that do not
allow an insurance company to reduce its current taxable premium income by the
amount of any withdrawal, surrender or death benefit paid, we will also deduct a
charge for these taxes on any withdrawal, surrender or death benefit paid under
the Contract.
Premium tax rates are subject to change by law, administrative interpretations,
or court decisions. Premium tax amounts will depend on, among other things, the
contract owner's state of residence, our status within that state, and the
premium tax laws of that state.
FEATURES AND BENEFITS OF THE CONTRACT
As we describe the contract, we will often use the word "you". In this context
"you" means "contract owner".
OWNERSHIP OF THE CONTRACT
The contract owner is entitled to exercise all rights under the Contract. Unless
otherwise specified, the purchaser of the Contract will be the contract owner.
The Contract can be owned by a trust or a corporation. However, special tax
rules apply to Contracts owned by "non-natural persons" such as corporations or
trusts. If you are a human being, you are considered a "natural person." You may
designate a beneficiary. If you die, the beneficiary will receive a death
benefit. You may also designate an annuitant. You may change the annuitant at
any time prior to the annuity date. If you don't select an annuitant, you are
the annuitant.
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<PAGE>
If a non-natural person owns the Contract and changes the annuitant, the
Internal Revenue Code (IRC) requires us to treat the change as the death of a
contract owner. We will then pay the beneficiary the death benefit.
When co-owners are established, they exercise all rights under the Contract
jointly unless they elect otherwise. Co-owners may designate a beneficiary to
receive benefits on the surviving co-owner's death. Qualified contracts may not
have co-owners.
You may assign the Contract to someone else by giving notice to our Service
Center. Only complete ownership of the Contract may be assigned to someone else.
You can't do it in part. An assignment to a new owner cancels all prior
beneficiary designations except a prior irrevocable beneficiary designation.
Assignment of the Contract may have tax consequences or may be prohibited on
certain qualified contracts, so you should consult with a qualified tax adviser
before assigning the Contract. (See "Federal Income Taxes".)
ISSUING THE CONTRACT
ISSUE AGE
You can buy a nonqualified Contract if you (and any co-owner) are less than 90
years old. Annuitants on nonqualified Contracts must also be less than 90 years
old when we issue the Contract. For qualified Contracts owned by natural
persons, the contract owner and annuitant must be the same person. Contract
owners and annuitants on qualified Contracts must be less than 70 1/2 years old
when we issue the Contract.
INFORMATION WE NEED TO ISSUE THE CONTRACT
Before we issue the Contract, you must complete and return a written
application. Once we review and approve the application, and you pay the initial
premium, we'll issue a Contract. Generally, we'll issue the Contract and invest
the premium within two business days of our receiving your premium. If we
haven't received necessary information within five business days, however, we
will offer to return the premium and no Contract will be issued. You can consent
to our holding the premium until we get all necessary information, and then we
will invest the premium within two business days after we get the information.
TEN DAY RIGHT TO REVIEW
When you get the Contract, review it carefully to make sure it is what you
intended to purchase. Generally, within ten days after you receive the Contract,
you may return it for a refund. The Contract will then be deemed void. You may
have a longer period to return the Contract if the Contract is replacing another
contract. To get a refund, return the Contract to our Service Center or to the
Financial Consultant who sold it. We will then refund the greater of all
premiums paid into the Contract or the contract value as of the date the
Contract is returned.
PREMIUMS
MINIMUM AND MAXIMUM PREMIUMS
Initial premium payments must be $25,000 or more. Subsequent premium payments
generally must be $100 or more. You can make subsequent premium payments at any
time before the annuity date. The maximum premium that will be accepted without
Company approval is $1,000,000. We also reserve the right to reject subsequent
premium payments.
The Contract is available as a non-qualified contract or may be issued as an IRA
or purchased through an established IRA or Roth IRA custodial account with
MLPF&S. Federal law limits maximum annual contributions to qualified contracts.
Transfer amounts from tax-sheltered annuity plans that are not subject to
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<PAGE>
the Employee Retirement Income Security Act of 1974, as amended, will be
accepted as premium payments, as permitted by law. Other premium payments will
not be accepted under a Contract used as a tax sheltered annuity. We may waive
the $100 minimum for premiums paid under IRA Contracts held in custodial
accounts with MLPF&S where you're transferring the complete cash balance of such
account into a Contract.
HOW TO MAKE PAYMENTS
You can pay premiums directly to our Service Center at the address printed on
the first page of this Prospectus or have money debited from your MLPF&S
brokerage account.
AUTOMATIC INVESTMENT FEATURE
You may make systematic premium payments on a monthly, quarterly, semi-annual or
annual basis. Each payment must be for at least $100. Premiums paid under this
feature must be deducted from an MLPF&S brokerage account specified by you and
acceptable to us. You must specify how premiums paid under this feature will be
allocated among the subaccounts. If you select the Asset Allocation Program or
the Rebalancing Program, premiums will be allocated based on the model or the
specified subaccounts and percentages you have selected. You may change the
specified premium amount, the premium allocation, or cancel the Automatic
Investment Feature at any time upon notice to us. We reserve the right to make
changes to this program at any time.
PREMIUM INVESTMENTS
For the first 14 days following the contract date, we'll hold all premiums in
the Domestic Money Market Subaccount. After the 14 days, we'll reallocate the
contract value to the subaccounts you selected.
Currently, you may allocate your premium among 10 of the subaccounts.
Allocations must be made in whole numbers. For example, 12% of a premium
received may be allocated to the Basic Value Focus Subaccount, 58% allocated to
the Government Bond Subaccount, and 30% allocated to the Index 500 Subaccount.
However, you may not allocate 33 1/3% to the Basic Value Focus Subaccount and
66 2/3% to the Government Bond Subaccount. If we don't get allocation
instructions when we receive subsequent premiums, we will allocate those
premiums according to the allocation instructions you last gave us. We reserve
the right to modify the limit on the number of subaccounts to which future
allocations may be made.
ACCUMULATION UNITS
Each subaccount has a distinct value, called the accumulation unit value. The
accumulation unit value for a subaccount varies daily with the performance and
expenses of the corresponding fund. We use this value to determine the number of
subaccount accumulation units represented by your investment in a subaccount.
HOW ARE MY CONTRACT TRANSACTIONS PRICED?
We calculate an accumulation unit value for each
subaccount at the close of business on each day that
the New York Stock Exchange is open. Transactions are
priced, which means that accumulation units in your
Contract are purchased (added to your Contract) or
redeemed (taken out of your contract), at the unit
value next calculated after our Service Center
receives notice of the transaction. For premium
payments and transfers into a subaccount, units are
purchased. For payment of Contract proceeds (i.e.,
withdrawals, surrenders, annuitization, and death
benefits), transfers out of a subaccount, and
deductions for any contract fee, any transfer charge,
and any premium taxes due, units are redeemed.
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<PAGE>
HOW DO WE DETERMINE THE NUMBER OF UNITS?
We determine the number of units by dividing the
dollar value of the amount of the purchase or transfer
allocated to the subaccount by the value of one
accumulation unit for that subaccount for the
valuation period in which the purchase or transfer is
made. The number of accumulation units in each
subaccount credited to a Contract will therefore
increase or decrease as these transactions are made.
The number of subaccount accumulation units credited
to a Contract will not change as a result of
investment experience or the deduction of asset-based
insurance charges. Instead, this charge and investment
experience are reflected in the accumulation unit
value.
When we establish a subaccount, we set an initial value for an accumulation unit
(usually, $10). Accumulation unit values increase, decrease, or stay the same
from one valuation period to the next. An accumulation unit value for any
valuation period is determined by multiplying the accumulation unit value for
the prior valuation period by the net investment factor for the subaccount for
the current valuation period.
The net investment factor is an index used to measure the investment performance
of a subaccount from one valuation period to the next. For any subaccount, we
determine the net investment factor by dividing the value of the assets of the
subaccount for that valuation period by the value of the assets of the
subaccount for the preceding valuation period. We subtract from that result the
daily equivalent of the asset-based insurance charge for the valuation period.
We also take reinvestment of dividends and capital gains into account when we
determine the net investment factor.
We may adjust the net investment factor to make provisions for any change in tax
law that requires us to pay tax on earnings in the Account or any charge that
may be assessed against the Account for assessments or premium taxes or federal,
state or local excise, profits or income taxes measured by or attributable to
the receipt of premiums. (See "Other Charges".)
ADDITIONAL PROVISIONS APPLICABLE TO ALL CONTRACTS
DEATH OF ANNUITANT PRIOR TO ANNUITY DATE
If the annuitant dies before the annuity date, and the annuitant is not a
contract owner, the owner may designate a new annuitant. If a new annuitant is
not designated, the contract owner will become the annuitant unless any owner is
not a natural person. If any contract owner is not a natural person, no new
annuitant may be named and the death benefit will be paid to the beneficiary.
TRANSFERS AMONG SUBACCOUNTS
Before the annuity date, you may transfer all or part of your contract value
among the subaccounts up to twelve times per contract year without charge. You
can make additional transfers among subaccounts, but we may charge you $25 for
each extra transfer. We will deduct the transfer charge pro rata from among the
subaccounts you're transferring from. Currently, transfers made by us under the
Dollar Cost Averaging Program, the Asset Allocation Program, and the Rebalancing
Program will not count toward the twelve transfers permitted among subaccounts
per contract year without charge. (See "Dollar Cost Averaging
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<PAGE>
Program", "Asset Allocation Program", and "Rebalancing Program".) We reserve the
right to change the number of additional transfers permitted each contract year.
Transfers among subaccounts may be made in specific dollar amounts or as a
percentage of contract value. You must transfer at least $100 or the total value
of a subaccount, if less.
You may request transfers in writing or by telephone, once we get proper
telephone transfer authorization. Transfer requests may also be made through
your Merrill Lynch Financial Consultant, or another person you designate, once
we receive proper authorization. Transfers will take effect as of the end of the
valuation period on the date the Service Center receives the request. We will
consider telephone transfer requests received after 4:00 p.m. (ET) to be
received the following business day.
An excessive number of transfers, including short-term "market timing"
transfers, may adversely affect the performance of the underlying fund in which
a subaccount invests. If, in our sole opinion, a pattern of excessive transfers
develops, we reserve the right not to process a transfer request. We also
reserve the right not to process a transfer request when the sale or purchase of
shares of a Fund is not reasonably practicable due to actions taken or
limitations imposed by the Fund.
DOLLAR COST AVERAGING PROGRAM
WHAT IS IT?
The Contract offers an optional transfer program called Dollar Cost Averaging
("DCA"). This program allows you to reallocate money at monthly intervals from a
designated subaccount to one or more other subaccounts. The DCA Program is
intended to reduce the effect of short term price fluctuations on investment
cost. Since we transfer the same dollar amount to selected subaccounts monthly,
the DCA Program allows you to purchase more accumulation units when prices are
low and fewer accumulation units when prices are high. Therefore, you may
achieve a lower average cost per accumulation unit over the long-term. However,
it is important to understand that a DCA Program does not assure a profit or
protect against loss in a declining market. If you choose to participate in the
DCA Program you should have the financial ability to continue making investments
through periods of fluctuating markets.
If you choose to participate in the DCA Program, each month we will transfer
amounts from the subaccount that you designate and allocate them, in accordance
with your allocation instructions, to the subaccounts that you select.
If you choose the Asset Allocation Program or the Rebalancing Program, you
cannot use the DCA Program. We reserve the right to make changes to this program
at any time.
PARTICIPATING IN THE DCA PROGRAM
You can choose the DCA Program any time before the annuity date. To choose the
DCA Program, we must receive a written request from you. Once you start using
the DCA Program, you must continue it for at least three months. After three
months, you may cancel the DCA Program at any time by notifying us in writing.
Once you reach the annuity date, you may no longer use this program.
MINIMUM AMOUNTS
To elect the DCA Program, you need to have a minimum amount of money in the
designated subaccount. We determine the amount required by multiplying the
specified length of your DCA Program in months by your specified monthly
transfer amount. Amounts of $100 or more must be allotted for transfer each
month in the DCA Program. We reserve the right to change these minimums.
Allocations must be designated in whole
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<PAGE>
percentage increments. No specific dollar amount designations may be made.
Should the amount in your selected subaccount drop below the selected monthly
transfer amount, we'll notify you that you need to put more money in to continue
the program.
WHEN DO WE MAKE DCA TRANSFERS?
You select the date for DCA transfers. We will make the first DCA transfer on
the selected date following the later of 14 days after the contract date or the
date we receive notice of your DCA election at our Service Center. We'll make
subsequent DCA transfers on the same day of each succeeding month. Currently, we
don't charge for DCA transfers; they are in addition to the twelve annual
transfers permitted without charge under the Contract.
ASSET ALLOCATION PROGRAM
Under the Asset Allocation Program, we will allocate your premiums and rebalance
your contract value quarterly according to an asset allocation model you select
based on your investment goals and risk tolerance. There are currently five
asset allocation models to choose from:
- Capital Preservation
- Current Income
- Income and Growth
- Long-Term Growth
- Aggressive Growth
Each model identifies specific subaccounts and the percentage of premium or
contract value which should be allocated to each of those subaccounts. We may
periodically adjust the composition of each model. Any adjustments become
effective at the end of the calendar quarter.
The asset allocation models are not recommendations, have not been designed with
your specific financial circumstances in mind, and may not be appropriate for
any particular individual. There may be other allocations that would be more
appropriate to satisfy your needs and goals.
After you elect the Asset Allocation Program, we allocate your premium in
accordance with your selected model. On the last business day of each calendar
quarter, we automatically reallocate your contract value to maintain the
subaccounts and percentages for your selected model.
We perform this periodic rebalancing to take account of:
- increases and decreases in contract value in each subaccount due to
subaccount performance,
- increases and decreases in contract value in each subaccount due to
withdrawals, transfers, and premiums, and
- any adjustments we make to your selected model.
Asset allocation can be elected at issue or at any time subsequent. To elect the
Asset Allocation Program, we must receive a written request from you. If you
elect the Asset Allocation Program, you must include all contract value in the
program. We allocate all systematic investment premiums and, unless you instruct
us otherwise, all other premiums in accordance with your selected model. The
asset allocation model that you select under the program will override any prior
percentage allocations that you have chosen and we will allocate all future
premiums accordingly. You may change your selected model at any time. Once
elected, you may instruct us, in a written form satisfactory to us, at any time
to terminate the program. Currently, we don't
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<PAGE>
charge for transfers under this program; they are in addition to the twelve
annual transfers permitted without charge under the Contract.
We reserve the right to make changes to this program at any time. If you choose
the Rebalancing Program or the DCA Program, you cannot use the Asset Allocation
Program.
REBALANCING PROGRAM
Under the Rebalancing Program, we will allocate your premiums and rebalance your
contract value quarterly according to the subaccounts and percentages you select
based on your investment goals and risk tolerance.
After you elect the Rebalancing Program, we allocate your premiums in accordance
with the subaccounts and percentages you have selected. On the last business day
of each calendar quarter, we automatically reallocate your contract value to
maintain the particular percentage allocation among the subaccounts that you
have selected.
We perform this periodic rebalancing to take account of:
- increases and decreases in contract value in each subaccount due to
subaccount performance, and
- increases and decreases in contract value in each subaccount due to
withdrawals, transfers, and premiums.
The Rebalancing Program can be elected at issue or at any time subsequent. To
elect the Rebalancing Program, we must receive a written request from you. If
you elect the Rebalancing Program, you must include all contract value in the
program. We allocate all systematic investment premiums and, unless you instruct
us otherwise, all other premiums in accordance with the particular percentage
allocation among the subaccounts that you have selected. The percentages that
you select under the Rebalancing Program will override any prior percentage
allocations that you have chosen and we will allocate all future premiums
accordingly. You may change your allocations at any time. Once elected, you may
instruct us, in a written form satisfactory to us, at any time to terminate the
program. Currently, we don't charge for transfers under this program; they are
in addition to the twelve annual transfers permitted without charge under the
Contract.
We reserve the right to make changes to this program at any time. If you choose
the Asset Allocation Program or the DCA Program, you cannot use the Rebalancing
Program.
WITHDRAWALS AND SURRENDERS
WHEN AND HOW WITHDRAWALS ARE MADE
Before the annuity date, you may make lump-sum withdrawals from the Contract up
to six times per contract year. In addition, you may make systematic
withdrawals, discussed below. Withdrawals are subject to tax and prior to age
59 1/2 may also be subject to a 10% federal penalty tax. (See "Federal Income
Taxes".)
Unless you direct us otherwise, we will make lump-sum withdrawals from
subaccounts in the same proportion as the subaccounts bear to your contract
value. You may make a withdrawal request in writing to our Service Center. You
may withdraw money by telephone, once you've submitted a proper telephone
authorization form to our Service Center, but only if the amount withdrawn is to
be paid into a Merrill Lynch brokerage account. We will consider telephone
withdrawal requests received after 4:00 p.m. (ET) to be received the following
business day.
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MINIMUM AMOUNTS
The minimum amount that may be withdrawn is $100. At least $5,000 must remain in
the Contract after you make a withdrawal. We reserve the right to change these
minimums.
SYSTEMATIC WITHDRAWAL PROGRAM
You may have automatic withdrawals of a specified dollar amount made monthly,
quarterly, semi-annually or annually. Each withdrawal must be for at least $100
and the remaining contract value must be at least $5,000. You may change the
specified dollar amount or frequency of withdrawals or stop the Systematic
Withdrawal Program at any time upon notice to us. We will make systematic
withdrawals from subaccounts in the same proportion as the subaccounts bear to
your contract value. These systematic withdrawals are in addition to the six
lump-sum withdrawals permitted each year under the Contract. We reserve the
right to restrict the maximum amount that may be withdrawn each year under the
Systematic Withdrawal Program and to make any other changes to this program at
any time.
SURRENDERS
At any time before the annuity date you may surrender the Contract through a
full withdrawal. The Contract must be delivered to our Service Center. We will
pay you an amount equal to the contract value as of the end of the valuation
period when we process the surrender, minus the contract fee, if applicable, and
minus any applicable charge for premium taxes. (See "Charges and Deductions".)
PAYMENTS TO CONTRACT OWNERS
We'll make any payments to you usually within seven days of our Service Center
receiving your proper request. However, we may delay any payment, or delay
processing any annuity payment or transfer request if:
(a) the New York Stock Exchange is closed;
(b) trading on the New York Stock Exchange is restricted by the Securities
and Exchange Commission;
(c) the Securities and Exchange Commission declares that an emergency exists
making it not reasonably practicable to dispose of securities held in the
Account or to determine the value of the Account's assets;
(d) the Securities and Exchange Commission by order so permits for the
protection of security holders; or
(e) payment is derived from a check used to make a premium payment which has
not cleared through the banking system.
CONTRACT CHANGES
Requests to change the owner, beneficiary, annuitant, or annuity date of a
Contract will take effect as of the date you sign such a request, unless we have
already acted in reliance on the prior status. We are not responsible for the
validity of such a request.
If you change the owner or annuitant on a nonqualified Contract, the new owner
or annuitant must be less than 90 years old. For qualified Contracts, if you
change the owner or annuitant, the new owner or annuitant must be less than
70 1/2 years old.
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DEATH BENEFIT
GENERAL
Regardless of investment experience, the Contract provides a guaranteed minimum
death benefit to the beneficiary if you die before the annuity date. (If an
owner is a non-natural person, then the death of the annuitant will be treated
as the death of the owner.)
We will pay the death benefit in a lump sum unless the beneficiary chooses an
annuity payment option available under the Contract. (See "Annuity Options".)
However, if you die before the annuity date, federal tax law generally requires
us to distribute the entire contract value within five years of the date of
death. Special rules may apply to a surviving spouse. (See "Federal Income
Taxes".)
We determine the death benefit as of the date we receive certain information at
our Service Center. We call this information due proof of death. It consists of
the Beneficiary Statement, a certified copy of the death certificate, and any
additional documentation we may need to process the death claim. If we haven't
received the other documents within 60 days following our receipt of a certified
death certificate, we will consider due proof of death to have been received and
we will pay the death benefit in a lump sum.
Unless you irrevocably designated a beneficiary, you may change the beneficiary
at any time before the annuity date.
Death benefit proceeds are taxable. (See "Federal Income Taxes -- Taxation of
Death Benefit Proceeds".)
SPOUSAL CONTINUATION
If your beneficiary is your surviving spouse, your spouse may elect to continue
the Contract if you die before the annuity date. Your spouse becomes the
contract owner and the beneficiary until your spouse names a new beneficiary. If
the death benefit which would have been paid to the surviving spouse is greater
than the contract value as of the date we determine the death benefit, we will
increase the contract value of the continued Contract to equal the death benefit
we would have paid to the surviving spouse. Your interest in each subaccount
will be increased by the ratio of your contract value in each subaccount to your
contract value.
CALCULATION OF DEATH BENEFIT
If you (or the older owner, if the Contract has co-owners, or the annuitant, if
the owner is a non-natural person) are age 80 or over on the contract date, the
death benefit is the greater of:
<TABLE>
<S> <C> <C>
(i) the premiums paid For this formula, each "adjusted"
into the Contract withdrawal equals the amount
less "adjusted" withdrawn multiplied by (a)
withdrawals from DIVIDED BY (b) where:
the Contract; or a = premiums paid into the Contract
less previous
"adjusted" withdrawals; and
(ii) the contract value. b = the contract value. Both (a) and (b) are
calculated immediately prior to the
withdrawal.
</TABLE>
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If you (or the older owner, if the Contract has co-owners, or the annuitant, if
the owner is a non-natural person) are under age 80 on the contract date, the
death benefit is the greatest of:
<TABLE>
<S> <C> <C>
(i) the premiums paid into For this formula, each "adjusted"
the Contract less withdrawal equals the amount
"adjusted" withdrawals withdrawn multiplied by the greater
from the Contract; of (a) or (b) DIVIDED BY (c) where:
(ii) the contract value; or a = premiums paid into the Contract
less previous "adjusted"
withdrawals;
(iii) the Maximum Anniversary Value. b = the Maximum Anniversary Value; and
c = the contract value.
Values for (a), (b), and (c) are
calculated immediately prior to the
withdrawal.
</TABLE>
MAXIMUM ANNIVERSARY VALUE
The Maximum Anniversary Value is equal to the greatest anniversary value for the
Contract. An anniversary value is equal to the contract value on a contract
anniversary increased by premium payments and decreased by "adjusted"
withdrawals since that anniversary. "Adjusted" withdrawals are calculated
according to the formula that appears immediately above this section.
To determine the Maximum Anniversary Value, we will calculate an anniversary
value for each contract anniversary through the earlier of your attained age 80
or the anniversary on or prior to your date of death. If the contract has
co-owners, we will calculate the anniversary value through the earlier of the
older owner's attained age 80 or the anniversary on or prior to any owner's date
of death if a death benefit is payable. If an owner is a non-natural person,
then the annuitant's age, rather than the owner's, will be used.
We will calculate the Maximum Anniversary Value based on your age (or the age of
the older owner, if the Contract has co-owners, or the annuitant, if the owner
is a non-natural person) on the contract date. Subsequent changes in owner will
not increase the period of time used to determine the Maximum Anniversary Value.
If a new owner has not reached attained age 80 and is older than the owner whose
age is being used to determine the Maximum Anniversary Value at the time of the
ownership change, the period of time used in the calculation of the Maximum
Anniversary Value will be based on the age of the new owner at the time of the
ownership change. If at the time of an ownership change the new owner is
attained age 80 or over, we will use the Maximum Anniversary Value as of the
anniversary on or prior to the ownership change, increased by premium payments
and decreased by "adjusted" withdrawals since that anniversary.
FOR AN EXAMPLE OF THE CALCULATION OF DEATH BENEFIT, SEE APPENDIX A.
ANNUITY PAYMENTS
We'll make the first annuity payment on the annuity date, and payments will
continue according to the annuity option selected. When you first buy the
Contract, the annuity date for non-qualified Contracts is the annuitant's 90th
birthday. The annuity date for IRA or tax sheltered annuity Contracts is when
the owner/annuitant reaches age 70 1/2. However, you may specify an earlier
annuity date. You may change the annuity date at any time before the annuity
date.
Contract owners may select from a variety of fixed annuity payment options, as
outlined below in "Annuity Options." If you don't choose an annuity option,
we'll use the Life Annuity with Payments Guaranteed for 10
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Years annuity option when the contract owner reaches age 90 (age 70 1/2 for an
IRA Contract or tax-sheltered annuity). You may change the annuity option before
the annuity date. We reserve the right to limit annuity options available to IRA
contract owners to comply with the Internal Revenue Code or regulations under
it.
We determine the dollar amount of annuity payments by applying your contract
value on the annuity date to our then current annuity purchase rates less any
applicable premium tax. Purchase rates show the amount of periodic payment that
a $1000 value buys. These rates are based on the annuitant's age and sex (where
permitted) at the time payments begin, and will assume interest of not less than
3% per year. The rates will never be less than those shown in the Contract.
If the age and/or sex of the annuitant was misstated to us, resulting in an
incorrect calculation of annuity payments, we will adjust future annuity
payments to reflect the correct age and/or sex. We will deduct any amount we
overpaid as the result of a misstatement from future payments with 6% annual
interest charges. Likewise, if we underpaid any amount as the result of a
misstatement, we correct it with the next payment made with 6% annual interest
credited.
If the contract value on the annuity date after the deduction of any applicable
premium taxes is less than $2,000, we may cash out your Contract in a lump sum.
If any annuity payment would be less than $20, we may change the frequency of
payments so that all payments will be at least $20. Unless you tell us
differently, we'll make annuity payments directly to your Merrill Lynch
brokerage account.
ANNUITY OPTIONS
We currently provide the following fixed annuity payment options. After the
annuity date, your contract value does not vary with the performance of the
Account. We may in the future offer more options. Once you begin to receive
annuity payments, you cannot change the annuity option, payment amount, or the
payment period. If you or the annuitant dies while guaranteed payments remain
unpaid, several options provide the ability to take the present value of future
guaranteed payments in a lump sum.
HOW WE DETERMINE PRESENT VALUE OF FUTURE
GUARANTEED ANNUITY PAYMENTS
Present value refers to the amount of money needed
today to fund the remaining guaranteed payments under
the annuity payment option you select. The primary
factor in determining present value is the interest
rate assumption we use. If you are receiving annuity
payments under an option that gives you the ability to
take the present value of future payments in a lump
sum and you elect to take the lump sum, we will use
the same interest rate assumption in calculating the
present value that we used to determine your payment
stream at the time your annuity payments commenced.
PAYMENTS OF A FIXED AMOUNT
We will make equal payments in an amount you choose until the sum of all
payments equals the contract value applied, increased for interest credited of
at least 3%. The amount you choose must provide at least five years of payments.
These payments don't depend on the annuitant's life. If the annuitant dies
before the guaranteed amount has been paid, you may elect to have payments
continued for the amount guaranteed or to receive the present value of the
remaining guaranteed payments in a lump sum. If the contract owner dies while
guaranteed amounts remain unpaid, the beneficiary may elect to receive the
present value of the remaining guaranteed payments in a lump sum.
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PAYMENTS FOR A FIXED PERIOD
We will make equal payments for a period you select of at least five years.
These payments don't depend on the annuitant's life. If the annuitant dies
before the end of the period, you may elect to have payments continued for the
period guaranteed or to receive the present value of the remaining guaranteed
payments in a lump sum. If the contract owner dies while guaranteed amounts
remain unpaid, the beneficiary may elect to receive the present value of the
remaining guaranteed payments in a lump sum.
*LIFE ANNUITY
We make payments for as long as the annuitant lives. Payments will cease with
the last payment made before the annuitant's death.
LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 5, 10, 15, OR 20 YEARS
We make payments for as long as the annuitant lives. In addition, even if the
annuitant dies before the period ends, we guarantee payments for either 5, 10,
15, or 20 years as you selected. If the annuitant dies before the guaranteed
period ends, you may elect to have payments continued for the period guaranteed
or to receive the present value of the remaining guaranteed payments in a lump
sum. If the contract owner dies while guaranteed amounts remain unpaid, the
beneficiary may elect to receive the present value of the remaining guaranteed
payments in a lump sum.
LIFE ANNUITY WITH GUARANTEED RETURN OF CONTRACT VALUE
We make payments for as long as the annuitant lives. In addition, even if the
annuitant dies, we guarantee payments until the sum of all annuity payments
equals the contract value applied. If the annuitant dies while guaranteed
amounts remain unpaid, you may elect to have payments continued for the amount
guaranteed or to receive the present value of the remaining guaranteed amount in
a lump sum. If the contract owner dies while guaranteed amounts remain unpaid,
the beneficiary may elect to receive the present value of the remaining
guaranteed amount in a lump sum.
*JOINT AND SURVIVOR LIFE ANNUITY
We make payments for the lives of the annuitant and a designated second person.
Payments will continue as long as either one is living.
JOINT AND SURVIVOR LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 5, 10, 15, OR
20 YEARS
We make payments during the lives of the annuitant and a designated second
person. Payments will continue as long as either one is living. In addition,
even if the annuitant and the designated second person die before the guaranteed
period ends, we guarantee payments for either 5, 10, 15, or 20 years as you
selected. If the annuitant and the designated second person die before the end
of the period, you may elect to have payments continued for the period
guaranteed or to receive the present value of the remaining guaranteed payments
in a lump sum. If the contract owner dies while guaranteed amounts remain
unpaid, the beneficiary may elect to receive the present value of the remaining
guaranteed payments in a lump sum.
INDIVIDUAL RETIREMENT ACCOUNT ANNUITY
This annuity option is available only to IRA contract owners. Payments will be
made annually based on either (a) the life expectancy of the annuitant; (b) the
joint life expectancy of the annuitant and his or her spouse; (c) the life
expectancy of the surviving spouse if the annuitant dies before the annuity
date. Each annual
- -------------
* These options are "pure" life annuities. Therefore, it is possible for the
payee to receive only one annuity payment if the person (or persons) on
whose life (lives) payment is based dies after only one payment or to
receive only two annuity payments if that person (those persons) dies after
only two payments, etc.
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payment will be equal to the remaining contract value on January 1, divided by
the applicable current life expectancy, as defined by Internal Revenue Service
regulations. Each subsequent payment will be made on the anniversary of the
annuity date. Interest will be credited at our current rate for this option, but
will not be less than 3%. On the death of the measuring life or lives prior to
full distribution of the remaining value, we will pay that value to the
beneficiary in a lump sum.
GENDER-BASED ANNUITY PURCHASE RATES
Generally, the Contract provides for gender-based annuity purchase rates when
life annuity options are chosen. However, in states that have adopted
regulations prohibiting gender-based rates, blended unisex annuity purchase
rates will be applied to both male and female annuitants. Unisex annuity
purchase rates will provide the same annuity payments for male or female
annuitants that are the same age on their annuity dates.
Employers and employee organizations considering purchase of the Contract should
consult with their legal advisor to determine whether purchasing a Contract
containing gender-based annuity purchase rates is consistent with Title VII of
the Civil Rights Act of 1964 or other applicable law. We may offer such contract
owners Contracts containing unisex annuity purchase rates.
FEDERAL INCOME TAXES
FEDERAL INCOME TAXES
The following summary discussion is based on our understanding of current
federal income tax law as the Internal Revenue Service (IRS) now interprets it.
We can't guarantee that the law or the IRS's interpretation won't change. It
does not purport to be complete or to cover all tax situations. This discussion
is not intended as tax advice. Counsel or other tax advisors should be consulted
for further information.
We haven't considered any applicable federal gift, estate or any state or other
tax laws. Of course, your own tax status or that of your beneficiary can affect
the tax consequences of ownership or receipt of distributions.
When you invest in an annuity contract, you usually do not pay taxes on your
investment gains until you withdraw the money -- generally for retirement
purposes. If your annuity is independent of any formal retirement or pension
plan, it is termed a NONQUALIFIED contract. If you invest in a variable annuity
as part of an individual retirement annuity or tax sheltered annuity, your
contract is called a QUALIFIED contract. The tax rules applicable to qualified
contracts vary according to the type of retirement plan and the terms and
conditions of the plan.
TAX STATUS OF THE CONTRACT
DIVERSIFICATION REQUIREMENTS
Section 817(h) of the Internal Revenue Code (IRC) and the regulations under it
provide that separate account investments underlying a contract must be
"adequately diversified" for it to qualify as an annuity contract under IRC
section 72. The Account, through the subaccounts, intends to comply with the
diversification requirements of the regulations under Section 817(h). This will
affect how we make investments.
OWNER CONTROL
In certain circumstances, owners of variable annuity contracts have been
considered for Federal income tax purposes to be the owners of the assets of the
separate account supporting their Contracts due to their ability to exercise
investment control over those assets. When this is the case, the contract owners
have been currently taxed on income and gains attributable to the separate
account assets. There is little guidance in this area, and
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some features such as the flexibility of an owner to allocate premium payments
and transfer contract accumulation values, have not been explicitly addressed in
IRS published rulings. While we believe that the Contracts do not give owners
investment control over Account assets, we reserve the right to modify the
Contracts as necessary to prevent an owner from being treated as the owner of
the Account assets supporting the Contract.
REQUIRED DISTRIBUTIONS
To qualify as an annuity contract under Section 72(s) of the IRC, a
non-qualified annuity contract must provide that: (a) if any owner dies on or
after the annuity starting date but before all amounts under the Contract have
been distributed, the remaining amounts will be distributed at least as quickly
as under the method being used when the owner died; and (b) if any owner dies
before the annuity starting date, all amounts under the Contract will be
distributed within five years of the date of death. So long as the distributions
begin within a year of the owner's death, the IRS will consider these
requirements satisfied for any part of the owner's interest payable to or for
the benefit of a "designated beneficiary" and distributed over the beneficiary's
life or over a period that cannot exceed the beneficiary's life expectancy. A
designated beneficiary is the person the owner names as beneficiary and who
assumes ownership when the owner dies. A designated beneficiary must be a
natural person. If the deceased owner's spouse is the designated beneficiary, he
or she can continue the Contract when such contract owner dies.
The Contract is designed to comply with Section 72(s). We will review the
Contract and amend it if necessary to make sure that it continues to comply with
the section's requirements.
Other rules regarding required distributions apply to Individual Retirement
Annuities.
TAXATION OF ANNUITIES
IN GENERAL
IRC Section 72 governs annuity taxation generally. We believe an owner who is a
natural person usually won't be taxed on increases in the value of a contract
until there is a distribution (i.e., the owner withdraws all or part of the
accumulation or takes annuity payments). Assigning, pledging, or agreeing to
assign or pledge any part of the accumulation usually will be considered a
distribution. Distributions of accumulated investment earnings are taxable as
ordinary income.
The owner of any annuity contract who is not a natural person (e.g., a
corporation or a trust) generally must include in income any increase in the
excess of the accumulation over the "investment in the contract" during the
taxable year. There are some exceptions to this rule and a prospective owner
that is not a natural person may wish to discuss them with a competent tax
advisor.
The following discussion applies generally to Contracts owned by a natural
person:
WITHDRAWALS AND SURRENDERS
When you take a withdrawal from a Contract, the amount received generally will
be treated as ordinary income subject to tax up to an amount equal to the excess
(if any) of the contract value immediately before the distribution over the
investment in the Contract (generally, the premiums or other consideration paid
for the Contract, reduced by any amount previously distributed from the Contract
that was not subject to tax) at that time. Other rules apply to Individual
Retirement Annuities.
If you withdraw your entire contract value, you will be taxed only on the part
that exceeds your investment in the Contract.
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ANNUITY PAYMENTS
Although tax consequences may vary depending on the annuity option selected
under an annuity contract, a portion of each annuity payment is generally not
taxed and the remainder is taxed as ordinary income. The non-taxable portion of
an annuity payment is generally determined in a manner that is designed to allow
you to recover your investment in the Contract ratably on a tax-free basis over
the expected stream of annuity payments, as determined when annuity payments
start. Once your investment in the Contract has been fully recovered, however,
the full amount of each annuity payment is subject to tax as ordinary income.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be paid from a Contract because an owner or annuitant (if an owner
is not a natural person) has died. If the payments are made in a single sum,
they're taxed the same way a full withdrawal from the Contract is taxed. If they
are distributed as annuity payments, they're taxed as annuity payments.
PENALTY TAX ON SOME WITHDRAWALS
You may have to pay a penalty tax (10 percent of the amount treated as taxable
income) on some withdrawals. However, there is usually no penalty on
distributions:
(1) on or after you reach age 59 1/2;
(2) after you die (or after the annuitant dies, if an owner isn't an
individual);
(3) after you become disabled; or
(4) that are part of a series of substantially equal periodic (at least
annual) payments for your life (or life expectancy) or the joint lives (or
life expectancies) of you and your beneficiary.
Other exceptions may be applicable under certain circumstances and special rules
may apply in connection with the exceptions listed above. Also, additional
exceptions apply to distributions from an Individual Retirement Annuity or tax
sheltered annuity. You should consult a tax adviser with regard to exceptions
from the penalty tax.
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF A CONTRACT
Transferring or assigning ownership of the Contract, designating a payee or
beneficiary who is not also the owner, or exchanging a Contract can have other
tax consequences that we don't discuss here. If you're thinking about any of
those transactions, contact a tax advisor.
WITHHOLDING
Annuity distributions usually are subject to withholding for the recipient's
federal income tax liability at rates that vary according to the type of
distribution and the recipient's tax status. However, except for certain
distributions from tax sheltered annuities, recipients can usually choose not to
have tax withheld from distributions.
MULTIPLE CONTRACTS
All non-qualified deferred annuity Contracts that we (or our affiliates) issue
to the same owner during any calendar year are generally treated as one annuity
Contract for purposes of determining the amount includible in such owner's
income when a taxable distribution occurs. This could affect when income is
taxable and how much is subject to the ten percent penalty tax discussed above.
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POSSIBLE CHANGES IN TAXATION
Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the Contracts could change by legislation
or other means. It is also possible that any change could be retroactive (that
is, effective prior to the date of the change). A tax adviser should be
consulted with respect to legislative developments and their effect on the
Contract.
POSSIBLE CHARGE FOR OUR TAXES
Currently we don't charge the Account for any federal, state, or local taxes on
them or the Contracts (other than premium taxes), but we reserve the right to
charge the Account or the Contracts for any tax or other cost resulting from the
tax laws that we believe should be attributed to them.
INDIVIDUAL RETIREMENT ANNUITIES
TRADITIONAL IRAS
Section 408 of the IRC permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity" or
"IRA." This Contract is available for purchase either as an IRA or through an
established IRA custodial account with MLPF&S. An individual may make annual
contributions of up to the lesser of $2,000 or 100% of adjusted gross income to
an IRA. The contributions may be deductible in whole or in part, depending on
the individual's income. Distributions from certain pension plans may be "rolled
over" into an IRA on a tax-deferred basis without regard to these limits.
Amounts in the IRA (other than nondeductible contributions) are taxed when
distributed from the IRA. A 10% penalty tax generally applies to distributions
made before age 59 1/2, unless certain exceptions apply. IRAs have minimum
distribution rules that govern the timing and amount of distributions. You
should refer to your adoption agreement or consult a tax advisor for more
information about these distribution rules. Adverse tax consequences may result
if you do not ensure that contributions, distributions and other transactions
with respect to the Contract comply with the law. The IRS has not reviewed the
Contract for qualification as an IRA, and has not addressed in a ruling of
general applicability whether a death benefit provision such as the enhanced
death benefit provision in the Contract comports with IRA qualification
requirements.
ROTH IRAS
A Contract is available for purchase by an individual who has separately
established a Roth IRA custodial account with MLPF&S. Roth IRAs, as described in
section 408A of the IRC, permit certain eligible individuals to contribute to
make non-deductible contributions to a Roth IRA in cash or as a rollover or
transfer from another Roth IRA or other IRA. An individual may make annual
contributions to a Roth IRA of up to the lesser of $2,000 or 100% of adjusted
gross income. A rollover from or conversion of an IRA to a Roth IRA is generally
subject to tax and other special rules apply. You may wish to consult a tax
adviser before combining any converted amounts with any other Roth IRA
contributions, including any other conversion amounts from other tax years.
Distributions from a Roth IRA generally are not taxed, except that, once
aggregate distributions exceed contributions to the Roth IRA, income tax and a
10% penalty tax may apply to distributions made (1) before age 59 1/2 (subject
to certain exceptions) or (2) during the five taxable years starting with the
year in which the first contribution is made to any Roth IRA. A 10% penalty tax
may apply to amounts attributable to a conversion from an IRA if they are
distributed during the five taxable years beginning with the year in which the
conversion was made.
OTHER TAX ISSUES FOR IRAS AND ROTH IRAS
Total annual contributions to all of an individual's IRAs and Roth IRAs may not
exceed $2,000 or 100% of the individual's adjusted gross income. Distributions
from an IRA or Roth IRA generally are subject to withholding for the
participant's federal income tax liability. The withholding rate varies
according to the type of
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distribution and the owner's tax status. The owner will be provided the
opportunity to elect not have tax withheld from distributions.
TAX SHELTERED ANNUITIES
Section 403(b) of the IRC allow employees of certain Section 501(c)(3)
organizations and public schools to exclude from their gross income the premium
payments made, within certain limits, on a contract that will provide an annuity
for the employee's retirement. Transfer amounts from tax sheltered annuity plans
that are not subject to the Employee Retirement Income Security Act of 1974, as
amended, are accepted as premium payments, as permitted by law, under a
Contract. Other premium payments, including premium payments subject to IRC
Section 402(g), will not be accepted. Distributions of (1) salary reduction
contributions made in years beginning after December 31, 1988; (2) earnings on
those contributions; and (3) earnings on amounts held as of the last year
beginning before January 1, 1989, are not allowed prior to age 59 1/2,
separation from service, death or disability. Salary reduction contributions may
also be distributed upon hardship, but would generally be subject to penalties.
OTHER INFORMATION
NOTICES AND ELECTIONS
You must send any changes, notices, and/or choices for your Contract to our
Service Center. These requests must be in writing and signed unless you have
submitted a telephone authorization form. If you have submitted an authorization
form, you may make the following choices via telephone:
1. Transfers
2. Premium allocation
3. Withdrawals, other than full surrenders
4. Requests to change the annuity date
5. Requests to change the annuity option
6. Requests to change the owner, beneficiary, or annuitant
We will use reasonable procedures to confirm that a telephone request is proper.
These procedures may include possible tape recording of telephone calls and
obtaining appropriate identification before effecting any telephone
transactions. We do not have any liability if we act on a request that we
reasonably believe is proper.
VOTING RIGHTS
We own all Fund shares held in the Account. As the owner, we have the right to
vote on any matter put to vote at any Funds' shareholder meetings. However, we
will vote all Fund shares attributable to Contracts by following instructions we
receive from you. If we don't receive voting instructions, we'll vote those
shares in the same proportion as shares for which we receive instructions. We
determine the number of shares you may give voting instructions on by dividing
your interest in a subaccount by the net asset value per share of the
corresponding Fund. We'll determine the number of shares you may give voting
instructions on as of a record date we choose. We may vote Fund shares in our
own right if laws change to permit us to do so.
You have voting rights until the annuity date. You may give voting instructions
concerning:
(1) the election of a Fund's Board of Directors;
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(2) ratification of a Fund's independent accountant;
(3) approval of the investment advisory agreement for a Fund corresponding to
your selected subaccounts;
(4) any change in a fundamental investment policy of a Fund corresponding to
your selected subaccounts; and
(5) any other matter requiring a vote of the Fund's shareholders.
REPORTS TO CONTRACT OWNERS
At least once each contract year before the annuity date, we will send you
information about your Contract. It will outline all your Contract transactions
during the year, your Contract's current number of accumulation units in each
subaccount, the value of each accumulation unit of each subaccount, and the
contract value.
You will also receive an annual and a semi-annual report containing financial
statements and a list of portfolio securities of the Funds.
SELLING THE CONTRACT
MLPF&S is the principal underwriter of the Contract. Its principal business
address is World Financial Center, 250 Vesey Street, New York, New York 10281.
It was organized in 1958 under the laws of the state of Delaware and is
registered as a broker-dealer under the Securities Exchange Act of 1934. It is a
member of the National Association of Securities Dealers, Inc. MLPF&S is an
indirect wholly owned subsidiary of Merrill Lynch & Co., Inc.
Registered representatives (Financial Consultants) of MLPF&S sell the Contract.
These Financial Consultants are also licensed through Merrill Lynch Life Agency,
Inc. as our insurance agents. Through a distribution agreement we have with
MLPF&S and companion sales agreements we have with Merrill Lynch Life Agency,
Inc., MLPF&S and/or Merrill Lynch Life Agency, Inc. compensate the Financial
Consultants. The maximum commission paid to a Financial Consultant is 0.51% of
each premium. In addition, on the annuity date, the Financial Consultant will
receive compensation of up to 1.5% of contract value. Financial Consultants may
also be paid additional annual compensation of up to 0.51% of contract value.
Reduced compensation may be paid on Contracts purchased by our employees or
their spouses or dependents. Compensation may be paid in the form of non-cash
compensation, subject to applicable regulatory requirements.
The maximum commission we will pay to Merrill Lynch Life Agency, Inc. to be used
to pay commissions to Financial Consultants is 3.5% of each premium. In
addition, the maximum commission we will pay to the applicable insurance agency
on the annuity date is 2.40% of contract value.
MLPF&S may arrange for sales of the Contract by other broker-dealers. Registered
representatives of these other broker-dealers may be compensated on a different
basis than MLPF&S Financial Consultants.
STATE REGULATION
We are subject to the laws of the State of New York and to the regulations of
the New York Insurance Department. We are also subject to the insurance laws and
regulations of all jurisdictions in which we're licensed to do business.
We file an annual statement with the insurance departments of jurisdictions
where we do business. The statement discloses our operations for the preceding
year and our financial condition as of the end of that year. Our books and
accounts are subject to insurance department review at all times. The New York
Insurance
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Department, in conjunction with the National Association of Insurance
Commissions, conducts a full examination of our operations periodically.
CONTROLLING DOCUMENTS
This prospectus provides a general description of the Contract. Your actual
policy, application, and any endorsements are the controlling documents. If you
would like to review a copy of the policy, application, and endorsements,
contact our Service Center.
LEGAL PROCEEDINGS
There are no legal proceedings involving the Account. We and MLPF&S are engaged
in various kinds of routine litigation that, in our judgment, are not material
to our total assets.
EXPERTS
Deloitte & Touche LLP, independent auditors, have audited our financial
statements as of December 31, 1999 and 1998 and for each of the three years in
the period ended December 31, 1999. They've also audited the financial
statements of the Account as of December 31, 1999 and for the periods presented
in the Statement of Additional Information. We include these financial
statements in reliance upon the reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing. Their principal business
address is Two World Financial Center, New York, New York 10281-1420.
LEGAL MATTERS
Our organization, our authority to issue the Contract, and the validity of the
form of the Contract have been passed upon by Barry G. Skolnick, our Senior Vice
President and General Counsel. Sutherland Asbill & Brennan LLP of Washington,
D.C. has provided advice on certain matters relating to federal securities laws.
REGISTRATION STATEMENTS
Registration Statements that relate to the Contract and its investment options
have been filed with the Securities and Exchange Commission under the Securities
Act of 1933 and the Investment Company Act of 1940. This Prospectus does not
contain all of the information in the registration statements. You can obtain
the omitted information from the Securities and Exchange Commission's principal
office in Washington, D.C., upon payment of a prescribed fee.
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TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
The contents of the Statement of Additional Information for the Contract include
the following:
OTHER INFORMATION
Principal Underwriter
Financial Statements
Administrative Services Arrangements
CALCULATION OF YIELDS AND TOTAL RETURNS
FINANCIAL STATEMENTS OF ML OF NEW YORK VARIABLE ANNUITY
SEPARATE ACCOUNT A
FINANCIAL STATEMENTS OF ML LIFE INSURANCE COMPANY OF NEW YORK
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APPENDIX A
Example: Assume that you are under age 80 at issue. You pay an initial premium
of $100,000 on June 1, 2000 and a subsequent premium of $10,000 on December 1,
2001. You also make a withdrawal of $50,000 on January 1, 2002. Your death
benefit, based on HYPOTHETICAL Contract values and transactions, and resulting
hypothetical maximum anniversary values ("MAV"), are illustrated below. This
example assumes hypothetical positive and negative investment performance of the
Account, as indicated, to demonstrate the calculation of the death benefit
value. There is, of course, no assurance that the Account will experience
positive investment performance. The example does not reflect the deduction of
fees and charges. FOR A DETAILED EXPLANATION OF HOW WE CALCULATE THE DEATH
BENEFIT, SEE "DEATH BENEFIT."
<TABLE>
<CAPTION>
(A) (B) (C)
---------------- --------- ----------- -------- --------------------------------
TRANSACTIONS PREMS
---------------- LESS ADJ. MAX ANNIV. CONTRACT
DATE PREM. WITHDR. WITHDRS. VALUE (MAV) VALUE DEATH BENEFIT
- --------------------------------------------- ------- ------- --------- ----------- -------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
06/01/00 THE CONTRACT IS ISSUED 100,000 100,000 0 100,000 100,000 maximum of (A), (B), (C)
MAV is $0 until first contract
anniversary
06/01/01 FIRST CONTRACT ANNIVERSARY 100,000 110,000 110,000 110,000 maximum of (A), (B), (C)
Assume contract value increased by
$10,000 due to positive investment
performance
Anniversary value for 6/1/2001 =
Contract value on 6/1/2001 =
$110,000
MAV = greatest of anniversary
values = $110,000
OWNER PUTS IN $10,000 ADDITIONAL
12/01/01 PREMIUM 10,000 110,000 120,000 114,000 120,000 maximum of (A), (B), (C)
Assume contract value decreased by
$6,000 due to negative investment
performance
Anniversary value for 6/1/2001 =
Contract value on 6/1/2001 +
premiums added since that
anniversary = $110,000 + $10,000 =
$120,000
MAV = greatest of anniversary
values = $120,000
01/01/02 OWNER TAKES A $50,000 WITHDRAWAL 50,000 50,000 60,000 50,000 60,000 maximum of (A), (B), (C)
Assume contract value decreased by
$14,000 due to negative investment
performance
Anniversary value for 6/1/2001 =
contract value on 6/1/2001 +
premiums added - adjusted
withdrawals since that anniversary
= $110,000 + $10,000 - $60,000 =
$60,000
Adjusted withdrawal = withdrawal X
maximum (MAV, prems - adj.
withdrs.)
-
contract value
= $50,000 x maximum (120,000,
110,000)/100,000
= $50,000 x 120,000/100,000 =
$60,000
(Note: all values are determined
immediately prior to the
withdrawal)
MAV = greatest of anniversary
values = $60,000
06/01/02 SECOND CONTRACT ANNIVERSARY 50,000 60,000 55,000 60,000 maximum of (A), (B), (C)
Assume contract value increased by
$5,000 due to positive investment
performance
Anniversary value for 6/1/2001 =
$60,000
Anniversary value for 6/1/2002 =
contract value on 6/1/2002 =
$55,000
MAV = greatest of anniversary
values = maximum ($60,000, $55,000)
= $60,000
06/01/03 THIRD CONTRACT ANNIVERSARY 50,000 65,000 65,000 65,000 maximum of (A), (B), (C)
Assume contract value increased by
$10,000 due to positive investment
performance
Anniversary value for 6/1/2001 =
$60,000
Anniversary value for 6/1/2002 =
contract value on 6/1/2002 =
$55,000
Anniversary value for 6/1/2003 =
contract value on 6/1/2003 =
$65,000
MAV = greatest of anniversary
values = maximum ($60,000, $55,000,
$65,000) = $65,000
</TABLE>
42
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MAY 15, 2000
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY
ML LIFE INSURANCE COMPANY OF NEW YORK
HOME OFFICE: 100 CHURCH STREET, 11TH FLOOR
NEW YORK, NEW YORK 10080-6511
SERVICE CENTER: P.O. BOX 44222,
JACKSONVILLE, FLORIDA 32231-4222
4804 DEER LAKE DRIVE EAST,
JACKSONVILLE, FLORIDA 32246
PHONE: (800) 333-6524
OFFERED THROUGH
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
This individual deferred variable annuity contract (the "Contract") is designed
to provide comprehensive and flexible ways to invest and to create a source of
income protection for later in life through the payment of annuity benefits. An
annuity is intended to be a long term investment. Contract owners should
consider their need for deferred income before purchasing the Contract. The
Contract is issued by ML Life Insurance Company of New York ("ML of New York")
both on a nonqualified basis, and as an Individual Retirement Annuity ("IRA")
that is given qualified tax status. The Contract may also be purchased through
an established IRA or Roth IRA custodial account with Merrill Lynch, Pierce,
Fenner & Smith Incorporated. Transfer amounts from tax sheltered annuity plans
that are not subject to the Employee Retirement Income Security Act of 1974, as
amended, will be accepted as premium payments, as permitted by law. Other
premium payments will not be accepted under a Contract used as a tax sheltered
annuity.
This Statement of Additional Information is not a Prospectus and should be read
together with the Contract's Prospectus dated May 15, 2000, which is available
on request and without charge by writing to or calling ML of New York at the
Service Center address or phone number set forth above.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
OTHER INFORMATION........................................... 3
Principal Underwriter....................................... 3
Financial Statements........................................ 3
Administrative Services Arrangements........................ 3
CALCULATION OF YIELDS AND TOTAL RETURNS..................... 3
Money Market Yields......................................... 3
Other Subaccount Yields..................................... 4
Total Returns............................................... 5
FINANCIAL STATEMENTS OF ML OF NEW YORK VARIABLE ANNUITY
SEPARATE ACCOUNT A........................................ S-1
FINANCIAL STATEMENTS OF ML LIFE INSURANCE COMPANY OF NEW
YORK...................................................... G-1
</TABLE>
2
<PAGE>
OTHER INFORMATION
PRINCIPAL UNDERWRITER
Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of ML of New
York, performs all sales and distribution functions regarding the Contracts and
may be deemed the principal underwriter of ML of New York Variable Annuity
Separate Account A (the "Account") under the Investment Company Act of 1940. The
offering is continuous. MLPF&S has not received any payments or commissions in
connection with the sale of the Contracts in the past three years.
FINANCIAL STATEMENTS
The financial statements of ML of New York included in this Statement of
Additional Information should be distinguished from the financial statements of
the Account and should be considered only as bearing upon the ability of ML of
New York to meet any obligations it may have under the Contract.
ADMINISTRATIVE SERVICES ARRANGEMENTS
ML of New York has entered into a Service Agreement with its parent, Merrill
Lynch Insurance Group, Inc. ("MLIG") pursuant to which ML of New York can
arrange for MLIG to provide directly or through affiliates certain services.
Pursuant to this agreement, ML of New York has arranged for MLIG to provide
administrative services for the Account and the Contracts, and MLIG, in turn,
has arranged for a subsidiary, Merrill Lynch Insurance Group Services, Inc.
("MLIG Services"), to provide these services. Compensation for these services,
which will be paid by ML of New York, will be based on the charges and expenses
incurred by MLIG Services, and will reflect MLIG Services' actual costs. No
amounts paid pursuant to this agreement in the past three years were
attributable to the Contracts.
CALCULATION OF YIELDS AND TOTAL RETURNS
MONEY MARKET YIELD
From time to time, ML of New York may quote in advertisements and sales
literature the current annualized yield for the Domestic Money Market Subaccount
for a 7-day period in a manner that does not take into consideration any
realized or unrealized gains or losses on shares of the underlying Funds or on
their respective portfolio securities. The current annualized yield is computed
by: (a) determining the net change (exclusive of realized gains and losses on
the sales of securities and unrealized appreciation and depreciation) at the end
of the 7-day period in the value of a hypothetical account under a Contract
having a balance of 1 unit at the beginning of the period, (b) 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 (c) annualizing this quotient on
a 365-day basis. The net change in account value reflects: (1) net income from
the Fund attributable to the hypothetical account; and (2) charges and
deductions imposed under the Contract which are attributable to the hypothetical
account. The charges and deductions include the per unit charges for the
hypothetical account for: (1) the asset-based insurance charge; and (2) the
annual contract fee. For purposes of calculating current yield for a Contract,
an average per unit contract fee is used. Based on our current estimates of
average contract
3
<PAGE>
size and withdrawals, we have assumed the average per unit contract fee to be
0.00%. Current yield will be calculated according to the following formula:
Current Yield = ((NCF - ES)/UV) x (365/7)
Where:
<TABLE>
<S> <C> <C>
NCF = the net change in the value of the Fund (exclusive of
realized gains and losses on the sale of securities and
unrealized appreciation and depreciation) for the 7-day
period attributable to a hypothetical account having a
balance of 1 unit.
ES = per unit expenses for the hypothetical account for the 7-day
period.
UV = the unit value on the first day of the 7-day period.
</TABLE>
The current yield for the Domestic Money Market Subaccount for the 7-day period
ended December 31, 1999 was 3.83%.
ML of New York also may quote the effective yield of the Domestic Money Market
Subaccount for the same 7-day period, determined on a compounded basis. The
effective yield is calculated by compounding the unannualized base period return
according to the following formula:
Effective Yield = (1 + ((NCF - ES)/UV))TO THE POWER OF 365/7 - 1
Where:
<TABLE>
<S> <C> <C>
NCF = the net change in the value of the Fund (exclusive of
realized gains and losses on the sale of securities and
unrealized appreciation and depreciation) for the 7-day
period attributable to a hypothetical account having a
balance of 1 unit.
ES = per unit expenses of the hypothetical account for the 7-day
period.
UV = the unit value for the first day of the 7-day period.
</TABLE>
The effective yield for the Domestic Money Market Subaccount for the 7-day
period ended December 31, 1999 was 3.91%.
Because of the charges and deductions imposed under the Contract, the yield for
the Domestic Money Market Subaccount will be lower than the yield for the
corresponding underlying Fund.
The yields on amounts held in the Domestic Money Market Subaccount 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 actual yield for the subaccount is affected by changes in interest
rates on money market securities, average portfolio maturity of the underlying
Fund, the types and qualities of portfolio securities held by the Fund and the
Fund's operating expenses. Yields on amounts held in the Domestic Money Market
Subaccount may also be presented for periods other than a 7-day period.
OTHER SUBACCOUNT YIELDS
From time to time, ML of New York may quote in sales literature or
advertisements the current annualized yield of one or more of the subaccounts
(other than the Domestic Money Market Subaccount) for a Contract for a 30-day or
one-month period. The annualized yield of a subaccount refers to income
generated by the subaccount over a specified 30-day or one-month period. Because
the yield is annualized, the yield generated by the subaccount during the 30-day
or one-month period is assumed to be generated each period over a 12-month
period. The yield is computed by: (1) dividing the net investment income of the
Fund attributable to the subaccount units less subaccount expenses for the
period; by (2) the maximum offering price per unit on the last day of the period
times the daily average
4
<PAGE>
number of units outstanding for the period; then (3) compounding that yield for
a 6-month period; and then (4) multiplying that result by 2. Expenses
attributable to the subaccount include the asset-based insurance charge and the
annual contract fee. For purposes of calculating the 30-day or one-month yield,
an average contract fee per dollar of contract value in the subaccount is used
to determine the amount of the charge attributable to the subaccount for the
30-day or one-month period. Based on our current estimates of average contract
size and withdrawals, we have assumed the average contract fee to be 0.00%. The
30-day or one-month yield is calculated according to the following formula:
Yield = 2 x ((((NI - ES)/(U x UV)) + 1)TO THE POWER OF 6 - 1)
Where:
<TABLE>
<S> <C> <C>
NI = net investment income of the Fund for the 30-day or
one-month period attributable to the subaccount's units.
ES = expenses of the subaccount for the 30-day or one-month
period.
U = the average number of units outstanding.
UV = the unit value at the close of the last day in the 30-day or
one-month
</TABLE>
Currently, ML of New York may quote yields on bond subaccounts. The yield for
the Government Bond Subaccount for the 30-day period ended December 31, 1999 was
4.44%. Because of the charges and deductions imposed under the Contracts, the
yield for a subaccount will be lower than the yield for the corresponding Fund.
The yield on the amounts held in the subaccounts 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. A subaccount's
actual yield is affected by the types and quality of portfolio securities held
by the corresponding Fund, and its operating expenses.
TOTAL RETURNS
From time to time, ML of New York also may quote in sales literature or
advertisements, total returns, including average annual total returns for one or
more of the subaccounts for various periods of time. Average annual total
returns will be provided for a subaccount for 1, 5 and 10 years, or for a
shorter period, if applicable.
5
<PAGE>
For the year ended December 31, 1999, average annual total returns were:
<TABLE>
<CAPTION>
SINCE
NAME OF SUBACCOUNT (INCEPTION DATE) 1 YEAR 5 YEAR INCEPTION
- ----------------------------------- --------------- -------- ---------------
<S> <C> <C> <C>
ML Basic Value Focus Fund(7/1/93) 19.21% 17.47% 14.76%
ML Domestic Money Market Fund (2/21/92) 3.19% 3.55% 2.96%
ML Fundamental Growth Focus Fund (5/15/00) n/a n/a n/a
ML Government Bond Fund (5/16/94) -3.35% 4.87% 4.42%
ML Index 500 Fund (12/18/96) 18.60% n/a 25.22
AIM V.I. International Equity Fund (5/15/00) n/a n/a n/a
AIM V.I. Value Fund (12/18/96) 27.85% n/a 27.26%
Alliance Growth and Income Portfolio (5/15/00) n/a n/a n/a
Alliance Premier Growth Portfolio (12/18/96) 30.22% n/a 35.17%
MFS Emerging Growth Series (12/18/96) 73.92% n/a 38.84%
MFS Growth With Income Series (5/15/00) n/a n/a n/a
Hotchkis and Wiley International VIP Portfolio
(6/10/98) 19.78% n/a 8.36%
Davis Value Portfolio (5/15/00) n/a n/a n/a
Delaware Trend Series (5/15/00) n/a n/a n/a
PIMCO Total Return Bond Portfolio (5/15/00) n/a n/a n/a
Seligman Small-Cap Value Portfolio (5/15/00) n/a n/a n/a
Van Kampen Emerging Growth Portfolio (5/15/00) n/a n/a n/a
</TABLE>
Total returns assume the Contract was surrendered at the end of the period
shown, and are not indicative of performance if the Contract was continued for a
longer period. The Contract does not impose any surrender charge.
Average annual total returns for other periods of time may also be disclosed
from time to time. For example, average annual total returns may be provided
based on the assumption that a subaccount had been in existence and had invested
in the corresponding underlying Fund for the same period as the corresponding
Fund had been in operation. The Funds commenced operations as indicated below:
<TABLE>
<CAPTION>
FUND COMMENCED OPERATIONS
- ---- --------------------
<S> <C>
ML Basic Value Focus Fund July 1, 1993
ML Domestic Money Market Fund February 21, 1992
ML Fundamental Growth Focus Fund March 28, 2000
ML Government Bond Fund May 16, 1994
ML Index 500 Fund December 13, 1996
AIM V.I. International Equity Fund May 5, 1993
AIM V.I. Value Fund May 5, 1993
Alliance Growth and Income Portfolio January 14, 1991
Alliance Premier Growth Portfolio June 26, 1992
MFS Emerging Growth Series July 24, 1995
MFS Growth With Income Series October 9, 1995
Hotchkis and Wiley International VIP Portfolio June 10, 1998
Davis Value Portfolio July 1, 1999
Delaware Trend Series December 27, 1993
PIMCO Total Return Bond Portfolio December 31, 1997
Seligman Small-Cap Value Portfolio May 1, 1998
Van Kampen Emerging Growth Portfolio July 3, 1995
</TABLE>
Average annual total returns represent the average annual compounded rates of
return that would equate an initial investment of $1,000 under a Contract to the
redemption value or that investment as
6
<PAGE>
of the last day of each of the periods. The ending date for each period for
which total return quotations are provided will generally be as of the most
recent calendar quarter-end.
Average annual total returns are calculated using subaccount unit values
calculated on each valuation day based on the performance of the corresponding
underlying Fund, the deductions for the asset-based insurance charge and the
contract fee, and assume a surrender of the Contract at the end of the period
for the return quotation (although the Contract does not impose a surrender
charge). For purposes of calculating total return, an average per dollar
contract fee attributable to the hypothetical account for the period is used.
Based on our current estimates of average contract size and withdrawals, we have
assumed the average contract fee to be 0.00%. The average annual total return is
then calculated according to the following formula:
TR = ((ERV/P)TO THE POWER OF 1/N) - 1
Where:
<TABLE>
<S> <C> <C>
TR = the average annual total return net of subaccount recurring
charges (such as the asset- based insurance charge and
contract fee).
ERV = the ending redeemable value at the end of the period of the
hypothetical account with an initial payment of $1,000.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
</TABLE>
From time to time, ML of New York also may quote in sales literature or
advertisements total returns for other periods.
From time to time, ML of New York also may quote in sales literature or
advertisements total returns or other performance information for a hypothetical
Contract assuming the initial premium is allocated to more than one subaccount
or assuming monthly transfers from a specified subaccount to one or more
designated subaccounts under a dollar cost averaging program. ML of New York
also may quote in sales literature or advertisements total returns or other
performance information for a hypothetical Contract assuming participation in an
asset allocation or rebalancing program. These returns will reflect the
performance of the affected subaccount(s) for the amount and duration of the
allocation to each subaccount for the hypothetical Contract. They also will
reflect the deduction of the charges described above. For example, total return
information for a Contract with a dollar cost averaging program for a 12-month
period will assume commencement of the program at the beginning of the most
recent 12-month period for which average annual total return information is
available. This information will assume an initial lump-sum investment in a
specified subaccount (the "DCA subaccount") at the beginning of that period and
monthly transfers of a portion of the contract value from the DCA subaccount to
designated other subaccount(s) during the 12-month period. The total return for
the Contract for this 12-month period therefore will reflect the return on the
portion of the contract value that remains invested in the DCA subaccount for
the period it is assumed to be so invested, as affected by monthly transfers,
and the return on amounts transferred to the designated other subaccounts for
the period during which those amounts are assumed to be invested in those
subaccounts. The return for an amount invested in a subaccount will be based on
the performance of that subaccount for the duration of the investment, and will
reflect the charges described above. Performance information for a dollar
cost-averaging program also may show the returns for various periods for a
designated subaccount assuming monthly transfers to the subaccount, and may
compare those returns to returns assuming an initial lump-sum investment in that
subaccount. This information also may be compared to various indices, such as
the Merrill Lynch 91-day Treasury Bills index or the U.S. Treasury Bills index
and may be illustrated by graphs, charts, or otherwise.
7
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
ML Life Insurance Company of New York:
We have audited the accompanying statement of assets and
liabilities of each of the divisions of ML of New York
Variable Annuity Separate Account A, comprised of divisions
investing in the Domestic Money Market Fund, Prime Bond
Fund, High Current Income Fund, Quality Equity Fund, Special
Value Focus Fund, American Balanced Fund, Natural Resources
Focus Fund, Global Strategy Focus Fund, Global Utility Focus
Fund, International Equity Focus Fund, Global Bond Focus
Fund, Basic Value Focus Fund, Government Bond Fund,
Developing Capital Markets Focus Fund, Index 500 Fund,
Global Growth Focus Fund, Capital Focus Fund, International
VIP Portfolio, Mercury V.I. U.S. Large Cap Fund
(commencement of operations June 18, 1999), 1999 ML Select
Ten V.I. Trust (commencement of operations April 29, 1999),
1998 ML Select Ten V.I. Trust (commencement of operations
May 1, 1998 through April 30, 1999), Quasar Portfolio,
Premier Growth Portfolio, MFS Emerging Growth Series, MFS
Research Series, AIM V.I. Value Fund and AIM Capital
Appreciation Fund (collectively, the "Divisions"), as of
December 31, 1999 and the related statements of operations
and changes in net assets for each of the two years in the
period then ended. These financial statements are the
responsibility of the management of ML Life Insurance
Company of New York. Our responsibility is to express an
opinion of these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards 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. Our procedures included confirmation
of mutual fund securities owned at December 31, 1999. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial positions of the
Divisions as of December 31, 1999, the results of their
operations and the changes in their net assets for each of
the two years in the period then ended, in conformity with
generally accepted accounting principles.
February 14, 2000
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Domestic High
Money Prime Current
Market Bond Income
Fund Fund Fund
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Domestic Money Market Fund, 33,635 shares
(Cost $33,635) $ 33,635 $ $
Prime Bond Fund, 3,805 shares
(Cost $44,888) 42,385
High Current Income Fund, 3,315 shares
(Cost $36,292) 31,793
-------------------- -------------------- --------------------
Total Assets 33,635 42,385 31,793
Liabilities
Due to ML Life Insurance Company of New York 10 12 8
-------------------- -------------------- --------------------
Net Assets $ 33,625 $ 42,373 $ 31,785
==================== ==================== ====================
Net Assets
Accumulation Units $ 33,625 $ 42,373 $ 31,785
==================== ==================== ====================
Units Outstanding (Note 6) 2,623 2,879 1,879
==================== ==================== ====================
Unit Value $ 12.82 $ 14.72 $ 16.92
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Special
Quality Value American
Equity Focus Balanced
Fund Fund Fund
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Quality Equity Fund, 1,586 shares
(Cost $51,544) $ 63,328 $ $
Special Value Focus Fund, 1,470 shares
(Cost $32,908) 34,314
American Balanced Fund, 955 shares
(Cost $13,621) 14,133
-------------------- -------------------- --------------------
Total Assets 63,328 34,314 14,133
Liabilities
Due to ML Life Insurance Company of New York 19 11 4
-------------------- -------------------- --------------------
Net Assets $ 63,309 $ 34,303 $ 14,129
==================== ==================== ====================
Net Assets
Accumulation Units $ 63,309 $ 34,303 $ 14,129
==================== ==================== ====================
Units Outstanding (Note 6) 2,191 1,677 703
==================== ==================== ====================
Unit Value $ 28.89 $ 20.45 $ 20.09
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Natural Global Global
Resources Strategy Utility
Focus Focus Focus
Fund Fund Fund
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Natural Resources Focus Fund, 71 shares
(Cost $793) $ 676 $ $
Global Strategy Focus Fund, 3,381 shares
(Cost $43,551) 47,767
Global Utility Focus Fund, 467 shares
(Cost $5,561) 7,866
-------------------- -------------------- --------------------
Total Assets 676 47,767 7,866
Liabilities
Due to ML Life Insurance Company of New York 0 15 2
-------------------- -------------------- --------------------
Net Assets $ 676 $ 47,752 $ 7,864
==================== ==================== ====================
Net Assets
Accumulation Units $ 676 $ 47,752 $ 7,864
==================== ==================== ====================
Units Outstanding (Note 6) 53 2,343 356
==================== ==================== ====================
Unit Value $ 12.68 $ 20.38 $ 22.12
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
International Global Basic
Equity Bond Value
Focus Focus Focus
Fund Fund Fund
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
International Equity Focus Fund, 885 shares
(Cost $9,634) $ 12,378 $ $
Global Bond Focus Fund, 384 shares
(Cost $3,628) 3,298
Basic Value Focus Fund, 4,582 shares
(Cost $64,057) 62,315
-------------------- -------------------- --------------------
Total Assets 12,378 3,298 62,315
Liabilities
Due to ML Life Insurance Company of New York 4 1 18
-------------------- -------------------- --------------------
Net Assets $ 12,374 $ 3,297 $ 62,297
==================== ==================== ====================
Net Assets
Accumulation Units $ 12,374 $ 3,297 $ 62,297
==================== ==================== ====================
Units Outstanding (Note 6) 765 267 2,506
==================== ==================== ====================
Unit Value $ 16.18 $ 12.35 $ 24.86
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Developing
Government Capital Markets Index
Bond Focus 500
Fund Fund Fund
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Government Bond Fund, 2,380 shares
(Cost $25,097) $ 23,868 $ $
Developing Capital Markets Focus Fund, 564 shares
(Cost $4,757) 5,828
Index 500 Fund, 2,324 shares
(Cost $35,080) 43,528
-------------------- -------------------- --------------------
Total Assets 23,868 5,828 43,528
Liabilities
Due to ML Life Insurance Company of New York 7 1 13
-------------------- -------------------- --------------------
Net Assets $ 23,861 $ 5,827 $ 43,515
==================== ==================== ====================
Net Assets
Accumulation Units $ 23,861 $ 5,827 $ 43,515
==================== ==================== ====================
Units Outstanding (Note 6) 1,843 556 2,180
==================== ==================== ====================
Unit Value $ 12.95 $ 10.48 $ 19.96
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Global
Growth Capital International
Focus Focus VIP
Fund Fund Portfolio
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Global Growth Focus Fund, 792 shares
(Cost $8,839) $ 11,701 $ $
Capital Focus Fund, 168 shares
(Cost $1,616) 1,705
Investments in Hotchkis & Wiley Variable Trust (Note 1):
International VIP Portfolio, 1,785 shares
(Cost $17,716) 20,564
-------------------- -------------------- --------------------
Total Assets 11,701 1,705 20,564
Liabilities
Due to ML Life Insurance Company of New York 3 1 6
-------------------- -------------------- --------------------
Net Assets $ 11,698 $ 1,704 $ 20,558
==================== ==================== ====================
Net Assets
Accumulation Units $ 11,698 $ 1,704 $ 20,558
==================== ==================== ====================
Units Outstanding (Note 6) 796 165 1,805
==================== ==================== ====================
Unit Value $ 14.69 $ 10.30 $ 11.39
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Mercury
V.I. U.S. 1999 ML
Large Cap Select Ten Quasar
Fund V.I. Trust Portfolio
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Mercury Asset Management V.I. Funds, Inc. (Note 1):
Mercury V.I. U.S. Large Cap Fund, 75 shares
(Cost $813) $ 906 $ $
Investments in Defined Asset Funds, Equity Investor Fund (Note 1):
1999 ML Select Ten V.I. Trust, 5,744 shares
(Cost $6,252) 5,388
Investments in Alliance Variable Products Series Fund, Inc (Note 1):
Quasar Portfolio, 395 shares
(Cost $4,484) 5,137
-------------------- -------------------- --------------------
Total Assets 906 5,388 5,137
Liabilities
Due to ML Life Insurance Company of New York 0 2 1
-------------------- -------------------- --------------------
Net Assets $ 906 $ 5,386 $ 5,136
==================== ==================== ====================
Net Assets
Accumulation Units $ 906 $ 5,386 $ 5,136
==================== ==================== ====================
Units Outstanding (Note 6) 76 574 519
==================== ==================== ====================
Unit Value $ 11.98 $ 9.39 $ 9.90
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
MFS
Premier Emerging MFS
Growth Growth Research
Portfolio Series Series
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Alliance Variable Products Series Fund, Inc (Note 1):
Premier Growth Portfolio, 2,229 shares
(Cost $60,797) $ 90,170 $ $
Investments in MFS Variable Insurance Trust (Note 1):
MFS Emerging Growth Series, 1,098 shares
(Cost $20,740) 41,643
MFS Research Series, 976 shares
(Cost $16,765) 22,783
-------------------- -------------------- --------------------
Total Assets 90,170 41,643 22,783
Liabilities
Due to ML Life Insurance Company of New York 27 12 7
-------------------- -------------------- --------------------
Net Assets $ 90,143 $ 41,631 $ 22,776
==================== ==================== ====================
Net Assets
Accumulation Units $ 90,143 $ 41,631 $ 22,776
==================== ==================== ====================
Units Outstanding (Note 6) 3,581 1,525 1,278
==================== ==================== ====================
Unit Value $ 25.17 $ 27.30 $ 17.82
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
=========================================
AIM
AIM V.I. Capital
V.I. Value Appreciation
Fund Fund
(In thousands, except unit values) ==================== ====================
<S> <C> <C>
Assets
Investments in AIM Variable Insurance Funds, Inc. (Note 1):
AIM V.I. Value Fund, 1,376 shares
(Cost $34,374) $ 46,090 $
AIM V.I. Capital Appreciation Fund, 393 shares
(Cost $9,434) 13,994
-------------------- --------------------
Total Assets 46,090 13,994
Liabilities
Due to ML Life Insurance Company of New York 14 4
-------------------- --------------------
Net Assets $ 46,076 $ 13,990
==================== ====================
Net Assets
Accumulation Units $ 46,076 $ 13,990
==================== ====================
Units Outstanding (Note 6) 2,198 742
==================== ====================
Unit Value $ 20.96 $ 18.86
==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Domestic High
Money Prime Current
Market Bond Income
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 1,606 $ 3,073 $ 3,500
Mortality and Expense Charges (Note 3) (425) (543) (396)
Administrative Charges (Note 3) (34) (43) (32)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 1,147 2,487 3,072
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 0 (382) (581)
Net Change In Unrealized Appreciation
(Depreciation) During the Year 0 (3,746) (1,084)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 0 (4,128) (1,665)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,147 (1,641) 1,407
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 70,604 326 168
Contract Owner Withdrawals (3,198) (2,699) (1,587)
Net Transfers In (Out) (Note 4) (68,556) 1,423 496
Contract Maintenance Charges (Note 3) (7) (11) (9)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (1,157) (961) (932)
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (10) (2,602) 475
Net Assets Beginning of Period 33,635 44,975 31,310
-------------------- -------------------- --------------------
Net Assets End of Period $ 33,625 $ 42,373 $ 31,785
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Special
Quality Value American
Equity Focus Balanced
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 12,358 $ 3,932 $ 2,865
Mortality and Expense Charges (Note 3) (679) (358) (177)
Administrative Charges (Note 3) (54) (29) (14)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 11,625 3,545 2,674
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 1,566 (1,725) 274
Net Change In Unrealized Appreciation
(Depreciation) During the Year 1,532 6,630 (1,964)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 3,098 4,905 (1,690)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 14,723 8,450 984
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 313 196 0
Contract Owner Withdrawals (3,084) (1,986) (958)
Net Transfers In (Out) (Note 4) (1,528) (1,885) (976)
Contract Maintenance Charges (Note 3) (14) (8) (4)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (4,313) (3,683) (1,938)
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 10,410 4,767 (954)
Net Assets Beginning of Period 52,899 29,536 15,083
-------------------- -------------------- --------------------
Net Assets End of Period $ 63,309 $ 34,303 $ 14,129
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Natural Global Global
Resources Strategy Utility
Focus Focus Focus
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 16 $ 6,218 $ 1,020
Mortality and Expense Charges (Note 3) (9) (554) (94)
Administrative Charges (Note 3) (1) (44) (8)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 6 5,620 918
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (84) 825 533
Net Change In Unrealized Appreciation
(Depreciation) During the Year 231 1,646 (685)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 147 2,471 (152)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 153 8,091 766
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 0 268 0
Contract Owner Withdrawals (126) (2,484) (478)
Net Transfers In (Out) (Note 4) (70) (4,209) (559)
Contract Maintenance Charges (Note 3) 0 (16) (2)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (196) (6,441) (1,039)
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (43) 1,650 (273)
Net Assets Beginning of Period 718 46,102 8,137
-------------------- -------------------- --------------------
Net Assets End of Period $ 675 $ 47,752 $ 7,864
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
International Global Basic
Equity Bond Value
Focus Focus Focus
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 540 $ 217 $ 12,519
Mortality and Expense Charges (Note 3) (135) (47) (657)
Administrative Charges (Note 3) (11) (4) (53)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 394 166 11,809
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (271) (15) 360
Net Change In Unrealized Appreciation
(Depreciation) During the Year 3,263 (537) (3,815)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 2,992 (552) (3,455)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 3,386 (386) 8,354
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 0 0 679
Contract Owner Withdrawals (702) (339) (2,590)
Net Transfers In (Out) (Note 4) (945) (404) 11,455
Contract Maintenance Charges (Note 3) (4) (1) (16)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (1,651) (744) 9,528
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 1,735 (1,130) 17,882
Net Assets Beginning of Period 10,639 4,427 44,415
-------------------- -------------------- --------------------
Net Assets End of Period $ 12,374 $ 3,297 $ 62,297
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Developing
Government Capital Markets Index
Bond Focus 500
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 1,455 $ 116 $ 1,575
Mortality and Expense Charges (Note 3) (288) (54) (487)
Administrative Charges (Note 3) (23) (4) (39)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 1,144 58 1,049
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 42 (458) 3,330
Net Change In Unrealized Appreciation
(Depreciation) During the Year (1,892) 2,621 2,379
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments (1,850) 2,163 5,709
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (706) 2,221 6,758
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 226 43 741
Contract Owner Withdrawals (1,251) (226) (1,301)
Net Transfers In (Out) (Note 4) 3,281 170 5,278
Contract Maintenance Charges (Note 3) (5) (1) (8)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 2,251 (14) 4,710
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 1,545 2,207 11,468
Net Assets Beginning of Period 22,316 3,620 32,047
-------------------- -------------------- --------------------
Net Assets End of Period $ 23,861 $ 5,827 $ 43,515
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Global
Growth Capital International
Focus Focus VIP
Fund Fund Portfolio
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 148 $ 52 $ 111
Mortality and Expense Charges (Note 3) (117) (19) (206)
Administrative Charges (Note 3) (9) (1) (16)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 22 32 (111)
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 341 16 (617)
Net Change In Unrealized Appreciation
(Depreciation) During the Year 2,730 39 3,201
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 3,071 55 2,584
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 3,093 87 2,473
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 164 40 147
Contract Owner Withdrawals (453) (31) (802)
Net Transfers In (Out) (Note 4) 7,530 502 (3,114)
Contract Maintenance Charges (Note 3) (2) 0 (3)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 7,239 511 (3,772)
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 10,332 598 (1,299)
Net Assets Beginning of Period 1,366 1,106 21,857
-------------------- -------------------- --------------------
Net Assets End of Period $ 11,698 $ 1,704 $ 20,558
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Mercury
V.I. U.S. 1999 ML 1998 ML
Large Cap Select Ten Select Ten
Fund V.I. Trust V.I. Trust
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 4 $ 65 $ 10
Mortality and Expense Charges (Note 3) (3) (46) (9)
Administrative Charges (Note 3) (1) (4) (1)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 0 15 0
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 2 (106) 253
Net Change In Unrealized Appreciation
(Depreciation) During the Year 94 (864) (46)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 96 (970) 207
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 96 (955) 207
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 32 199 23
Contract Owner Withdrawals (17) (79) (17)
Net Transfers In (Out) (Note 4) 795 6,222 (2,143)
Contract Maintenance Charges (Note 3) 0 (1) 0
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 810 6,341 (2,137)
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 906 5,386 (1,930)
Net Assets Beginning of Period 0 0 1,930
-------------------- -------------------- --------------------
Net Assets End of Period $ 906 $ 5,386 $ 0
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
MFS
Premier Emerging
Quasar Growth Growth
Portfolio Portfolio Series
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 4 $ 916 $ 0
Mortality and Expense Charges (Note 3) (37) (840) (325)
Administrative Charges (Note 3) (3) (67) (26)
-------------------- -------------------- --------------------
Net Investment Income (Loss) (36) 9 (351)
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (45) 3,360 1,734
Net Change In Unrealized Appreciation
(Depreciation) During the Year 671 15,739 16,238
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 626 19,099 17,972
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 590 19,108 17,621
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 23 1,701 454
Contract Owner Withdrawals (171) (2,308) (996)
Net Transfers In (Out) (Note 4) 3,888 22,307 3,775
Contract Maintenance Charges (Note 3) (1) (14) (6)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 3,739 21,686 3,227
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 4,329 40,794 20,848
Net Assets Beginning of Period 807 49,349 20,783
-------------------- -------------------- --------------------
Net Assets End of Period $ 5,136 $ 90,143 $ 41,631
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
AIM V.I.
MFS AIM V.I. Capital
Research Value Appreciation
Series Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 224 $ 760 $ 295
Mortality and Expense Charges (Note 3) (231) (444) (123)
Administrative Charges (Note 3) (19) (36) (10)
-------------------- -------------------- --------------------
Net Investment Income (Loss) (26) 280 162
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 571 1,051 157
Net Change In Unrealized Appreciation
(Depreciation) During the Year 3,547 7,912 3,790
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 4,118 8,963 3,947
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 4,092 9,243 4,109
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 407 1,005 232
Contract Owner Withdrawals (569) (1,119) (337)
Net Transfers In (Out) (Note 4) 1,937 10,407 1,556
Contract Maintenance Charges (Note 3) (5) (7) (2)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 1,770 10,286 1,449
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 5,862 19,529 5,558
Net Assets Beginning of Period 16,914 26,547 8,432
-------------------- -------------------- --------------------
Net Assets End of Period $ 22,776 $ 46,076 $ 13,990
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Domestic High
Money Prime Current
Market Bond Income
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 1,497 $ 2,711 $ 3,221
Mortality and Expense Charges (Note 3) (369) (532) (408)
Administrative Charges (Note 3) (30) (43) (33)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 1,098 2,136 2,780
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 0 (214) (637)
Net Change In Unrealized Appreciation
(Depreciation) During the Year 0 717 (3,768)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 0 503 (4,405)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,098 2,639 (1,625)
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 90,173 328 511
Contract Owner Withdrawals (1,129) (2,718) (1,369)
Net Transfers In (Out) (Note 4) (85,073) 4,871 3,425
Contract Maintenance Charges (Note 3) (5) (11) (8)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 3,966 2,470 2,559
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 5,064 5,109 934
Net Assets Beginning of Period 28,571 39,866 30,376
-------------------- -------------------- --------------------
Net Assets End of Period $ 33,635 $ 44,975 $ 31,310
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Special
Quality Value American
Equity Focus Balanced
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 7,272 $ 6,953 $ 1,740
Mortality and Expense Charges (Note 3) (644) (388) (187)
Administrative Charges (Note 3) (51) (31) (15)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 6,577 6,534 1,538
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 1,810 159 290
Net Change In Unrealized Appreciation
(Depreciation) During the Year (1,468) (8,979) (96)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 342 (8,820) 194
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 6,919 (2,286) 1,732
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 415 398 0
Contract Owner Withdrawals (2,575) (1,160) (700)
Net Transfers In (Out) (Note 4) (2,989) 2,625 (1,579)
Contract Maintenance Charges (Note 3) (16) (11) (5)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (5,165) 1,852 (2,284)
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 1,754 (434) (552)
Net Assets Beginning of Period 51,145 29,970 15,635
-------------------- -------------------- --------------------
Net Assets End of Period $ 52,899 $ 29,536 $ 15,083
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Natural Global Global
Resources Strategy Utility
Focus Focus Focus
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 213 $ 8,291 $ 569
Mortality and Expense Charges (Note 3) (12) (605) (96)
Administrative Charges (Note 3) (1) (48) (8)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 200 7,638 465
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (147) 105 414
Net Change In Unrealized Appreciation
(Depreciation) During the Year (217) (4,324) 684
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments (364) (4,219) 1,098
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (164) 3,419 1,563
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 0 220 0
Contract Owner Withdrawals (71) (2,852) (526)
Net Transfers In (Out) (Note 4) (449) (5,336) (635)
Contract Maintenance Charges (Note 3) 0 (19) (2)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (520) (7,987) (1,163)
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (684) (4,568) 400
Net Assets Beginning of Period 1,402 50,670 7,737
-------------------- -------------------- --------------------
Net Assets End of Period $ 718 $ 46,102 $ 8,137
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
International Global Basic
Equity Bond Value
Focus Focus Focus
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 2,179 $ 267 $ 5,990
Mortality and Expense Charges (Note 3) (235) (56) (548)
Administrative Charges (Note 3) (19) (5) (44)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 1,925 206 5,398
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (912) (30) 1,307
Net Change In Unrealized Appreciation
(Depreciation) During the Year 994 300 (3,899)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 82 270 (2,592)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 2,007 476 2,806
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 219 36 976
Contract Owner Withdrawals (941) (303) (1,698)
Net Transfers In (Out) (Note 4) (16,705) (744) 4,907
Contract Maintenance Charges (Note 3) (7) (2) (14)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (17,434) (1,013) 4,171
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (15,427) (537) 6,977
Net Assets Beginning of Period 26,066 4,964 37,438
-------------------- -------------------- --------------------
Net Assets End of Period $ 10,639 $ 4,427 $ 44,415
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Developing
Government Capital Markets Index
Bond Focus 500
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 886 $ 102 $ 1,045
Mortality and Expense Charges (Note 3) (195) (83) (325)
Administrative Charges (Note 3) (16) (7) (26)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 675 12 694
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 22 (1,985) 1,108
Net Change In Unrealized Appreciation
(Depreciation) During the Year 377 (748) 3,963
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 399 (2,733) 5,071
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,074 (2,721) 5,765
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 134 50 762
Contract Owner Withdrawals (444) (257) (695)
Net Transfers In (Out) (Note 4) 10,338 (1,668) 9,695
Contract Maintenance Charges (Note 3) (3) (2) (5)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 10,025 (1,877) 9,757
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 11,099 (4,598) 15,522
Net Assets Beginning of Period 11,217 8,218 16,525
-------------------- -------------------- --------------------
Net Assets End of Period $ 22,316 $ 3,620 $ 32,047
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Global
Growth Capital International
Focus Focus VIP
Fund Fund Portfolio
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 89
Mortality and Expense Charges (Note 3) (5) (4) (131)
Administrative Charges (Note 3) 0 0 (11)
-------------------- -------------------- --------------------
Net Investment Income (Loss) (5) (4) (53)
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (2) (3) (70)
Net Change In Unrealized Appreciation
(Depreciation) During the Year 133 51 (353)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 131 48 (423)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 126 44 (476)
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 18 16 22
Contract Owner Withdrawals 0 (19) (297)
Net Transfers In (Out) (Note 4) 1,222 1,065 22,611
Contract Maintenance Charges (Note 3) 0 0 (3)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 1,240 1,062 22,333
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 1,366 1,106 21,857
Net Assets Beginning of Period 0 0 0
-------------------- -------------------- --------------------
Net Assets End of Period $ 1,366 $ 1,106 $ 21,857
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
1998 ML Premier
Select Ten Quasar Growth
V.I. Trust Portfolio Portfolio
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 11 $ 5 $ 30
Mortality and Expense Charges (Note 3) (7) (3) (396)
Administrative Charges (Note 3) (1) 0 (32)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 3 2 (398)
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 0 (12) 399
Net Change In Unrealized Appreciation
(Depreciation) During the Year 45 (18) 12,278
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 45 (30) 12,677
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 48 (28) 12,279
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 111 14 737
Contract Owner Withdrawals (1) (7) (784)
Net Transfers In (Out) (Note 4) 1,772 828 20,305
Contract Maintenance Charges (Note 3) 0 0 (7)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 1,882 835 20,251
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 1,930 807 32,530
Net Assets Beginning of Period 0 0 16,819
-------------------- -------------------- --------------------
Net Assets End of Period $ 1,930 $ 807 $ 49,349
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
MFS
Emerging MFS AIM V.I.
Growth Research Value
Series Series Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 115 $ 256 $ 1,212
Mortality and Expense Charges (Note 3) (181) (159) (208)
Administrative Charges (Note 3) (14) (13) (17)
-------------------- -------------------- --------------------
Net Investment Income (Loss) (80) 84 987
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 155 479 183
Net Change In Unrealized Appreciation
(Depreciation) During the Year 4,193 2,011 3,635
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 4,348 2,490 3,818
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 4,268 2,574 4,805
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 488 490 697
Contract Owner Withdrawals (348) (265) (568)
Net Transfers In (Out) (Note 4) 9,280 7,071 12,917
Contract Maintenance Charges (Note 3) (4) (3) (3)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 9,416 7,293 13,043
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 13,684 9,867 17,848
Net Assets Beginning of Period 7,099 7,047 8,699
-------------------- -------------------- --------------------
Net Assets End of Period $ 20,783 $ 16,914 $ 26,547
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
=====================
AIM V.I.
Capital
Appreciation
Fund
(In thousands) ====================
<S> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 225
Mortality and Expense Charges (Note 3) (79)
Administrative Charges (Note 3) (6)
--------------------
Net Investment Income (Loss) 140
--------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 268
Net Change In Unrealized Appreciation
(Depreciation) During the Year 516
--------------------
Net Gain (Loss) on Investments 784
--------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 924
--------------------
Contract Transactions:
Premiums Received from Contract Owners 260
Contract Owner Withdrawals (177)
Net Transfers In (Out) (Note 4) (496)
Contract Maintenance Charges (Note 3) (1)
--------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (414)
--------------------
Total Increase (Decrease) in Net Assets 510
Net Assets Beginning of Period 7,922
--------------------
Net Assets End of Period $ 8,432
====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
ML of New York Variable Annuity Separate Account A
("Separate Account A"), a separate account of ML Life
Insurance Company of New York ("ML of New York"), was
established to support ML of New York's operations with
respect to certain variable annuity contracts
("Contracts"). Separate Account A is governed by New York
State Insurance Law. ML of New York is an indirect wholly
owned subsidiary of Merrill Lynch & Co., Inc. ("Merrill
Lynch & Co."). Separate Account A is registered as a
unit investment trust under the Investment Company Act of
1940 and consists of twenty-six investment divisions.
The investment divisions are as follows:
- Merrill Lynch Variable Series Funds, Inc.: Seventeen
of the investment divisions each invest in the
securities of a single mutual fund portfolio of the
Merrill Lynch Variable Series Funds, Inc. ("Merrill
Variable Funds"). The investment advisor to the funds
of the Merrill Variable Funds is Merrill Lynch Asset
Management, L.P. ("MLAM"), an indirect subsidiary of
Merrill Lynch & Co. Effective following the close of
business on June 5, 1998, the International Equity
Focus Fund and Global Bond Focus Fund were closed to
allocations of premiums and contract value. Three
other investment divisions; Natural Resources Focus
Fund, American Balanced Fund and Global Utility Focus
Fund have been closed to allocations of premiums and
contract value since 1996.
- Hotchkis & Wiley Variable Trust: One of the investment
divisions invests in the securities of a single mutual
fund portfolio of the Hotchkis & Wiley Variable Trust
("H&W Trust"). The investment advisor to the fund of
the H&W Trust is Hotchkis & Wiley, a division of MLAM.
- Mercury Asset Management V.I. Funds, Inc.: One of the
investment divisions invests in the securities of a
single mutual fund portfolio of the Mercury Asset
Management V.I. Funds, Inc. ("Mercury Funds"). The
investment advisor to the fund of the Mercury Funds is
Mercury Asset Management International, Ltd., a
division of Merrill Lynch & Co. This investment
division commenced operations on June 18, 1999.
- Defined Asset Funds, Equity Investor Fund: One of the
investment divisions invests in the securities of a
single unit investment trust of the Equity Investor
Fund. Equity Investor Fund is sponsored by Merrill
Lynch, Pierce, Fenner & Smith, Incorporated, a wholly
owned subsidiary of Merrill Lynch & Co. The unit
investment trust of the Equity Investor Fund has
annual rollovers that occur on or about May 1 of each
year.
- Alliance Variable Products Series Fund, Inc.: Two
investment divisions each invest in the securities of
a single mutual fund portfolio of the Alliance
Variable Products Series Fund, Inc. ("Alliance
Variable Fund"). The investment advisor to the funds
of the Alliance Variable Fund is Alliance Capital
Management, L.P.
- MFS Variable Insurance Trust: Two of the investment
divisions each invest in the securities of a single
mutual fund portfolio of the MFS Variable Insurance
Trust ("MFS Variable Trust"). The investment advisor
to the funds of the MFS Variable Trust is
Massachusetts Financial Services Company.
- AIM Variable Insurance Funds, Inc.: Two of the
investment divisions each invest in the securities of
a single mutual fund portfolio of the AIM Variable
Insurance Funds, Inc. ("AIM Variable Funds"). The
investment advisor to the funds of the AIM Variable
Funds is AIM Advisors, Inc.
The assets of Separate Account A are registered in the
name of ML of New York. The portion of Separate Account
A's assets applicable to the Contracts are not chargeable
with liabilities arising out of any other business ML of
New York may conduct.
The change in net assets accumulated in Separate Account
A provides the basis for the periodic determination of
the amount of increased or decreased benefits under the
Contracts.
The net assets may not be less than the amount required
under New York State Insurance Law to provide for death
benefits (without regard to the minimum death benefit
guarantee) and other Contract benefits.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements included herein have been
prepared in accordance with generally accepted accounting
principles for variable annuity separate accounts
registered as unit investment trusts. The preparation of
financial statements in conformity with generally
accepted accounting principles requires management to
make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Investments of the investment divisions are included in
the statement of assets and liabilities at the net asset
value of the shares held in the underlying funds, which
value their investments at market value.
Dividend income is recognized on the ex-dividend date.
All dividends are automatically reinvested.
Realized gains and losses on the sales of investments are
computed on the first in first out method.
Investment transactions are recorded on the trade date.
The operations of Separate Account A are included in the
Federal income tax return of ML of New York. Under the
provisions of the Contracts, ML of New York has the right
to charge Separate Account A for any Federal income tax
attributable to Separate Account A. No charge is
currently being made against Separate Account A for such
tax since, under current tax law, ML of New York pays no
tax on investment income and capital gains reflected in
variable annuity contract reserves. However, ML of New
York retains the right to charge for any Federal income
tax incurred that is attributable to Separate Account A
if the law is changed. Charges for state and local taxes,
if any, attributable to Separate Account A may also be
made.
3. CHARGES AND FEES
ML of New York assumes mortality and expense risks
related to Contracts investing in Separate Account A and
deducts daily charges at a rate of 1.25% (on an annual
basis) of the net assets of Separate Account A to cover
these risks.
An administration charge of .10% (on an annual basis) is
deducted daily from the net asset value of Separate
Account A. This charge is made to reimburse ML of New
York for costs associated with the establishment and
administration of Separate Account A.
ML of New York deducts a contract maintenance charge of
$40 for each Contract on each Contract's anniversary that
occurs on or prior to the annuity date. It is also
deducted when the Contract is surrendered if it is
surrendered on any date other than a contract anniversary
date. The contract maintenance charge is borne by
Contract owners by redeeming accumulation units with a
value equal to the charge. This charge is waived on all
Contracts with a Contract value equal to or greater than
$50,000 on the date the charge would otherwise be
deducted, and in certain circumstances where multiple
contracts are owned.
Contract owners may make up to six transfers among the
Separate Account A divisions per contract year without
charge. Certain transfers from the Equity Investor Fund
do not count towards the six transfers. Additional
transfers may be permitted at a charge of $25 per
transfer.
4. NET TRANSFERS
Net transfers include transfers between Separate Account
A investment divisions, as well as transfers from
Separate Account A investment divisions to the Reserve
Assets Fund investment division of ML of New York
Variable Annuity Separate Account B.
5. UNIT VALUES
The following is a summary of unit values and units
outstanding for variable annuity contracts and the
expenses as a percentage of average net assets, excluding
expenses of the underlying funds for each of the five
years in the period ended December 31, 1999 or lesser
time period, if applicable. For all funds excluding the
Domestic Money Market Fund the total return calculations
represent the one year total return (or from inception to
December 31 if less than one year) and do not reflect the
contingent deferred sales charge. Total return
calculations for the Domestic Money Market Fund represent
the effective yield for the seven day period ended
December 31.
Domestic Money Market Fund
-------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 2,623 $12.82 $33,625 1.35% 4.02%
1998 2,715 12.39 33,635 1.35 3.41
1997 2,393 11.94 28,571 1.35 4.05
1996 1,678 11.50 19,294 1.35 3.76
1995 2,104 11.09 23,337 1.35 3.89
Prime Bond Fund
--------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 2,879 $14.72 $42,373 1.35% -3.76%
1998 2,943 15.28 44,975 1.35 6.30
1997 2,776 14.36 39,866 1.35 7.07
1996 2,934 13.40 39,314 1.35 .80
1995 2,867 13.29 38,099 1.35 18.34
High Current Income Fund
------------------------ Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 1,879 $16.92 $31,785 1.35% 4.43%
1998 1,935 16.18 31,310 1.35 -4.48
1997 1,794 16.93 30,376 1.35 9.40
1996 1,341 15.46 20,733 1.35 9.57
1995 1,274 14.08 17,943 1.35 15.62
Quality Equity Fund
------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 2,191 $28.89 $63,309 1.35% 29.54%
1998 2,374 22.28 52,899 1.35 13.92
1997 2,617 19.54 51,145 1.35 21.92
1996 2,799 16.01 44,805 1.35 15.77
1995 2,588 13.77 35,637 1.35 21.29
Special Value Focus Fund
------------------------ Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 1,677 $20.45 $34,303 1.35% 32.22%
1998 1,912 15.45 29,536 1.35 -7.85
1997 1,789 16.75 29,970 1.35 10.11
1996 1,684 15.20 25,599 1.35 6.56
1995 1,333 14.25 18,991 1.35 43.80
American Balanced Fund
---------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 703 $20.09 $14,129 1.35% 7.16%
1998 805 18.73 15,083 1.35 11.93
1997 935 16.72 15,635 1.35 15.42
1996 1,196 14.47 17,308 1.35 7.95
1995 1,295 13.37 17,312 1.35 19.29
Natural Resources Focus Fund
---------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 53 $12.68 $ 676 1.35% 24.94%
1998 71 10.14 718 1.35 -16.52
1997 116 12.14 1,402 1.35 -13.78
1996 145 14.06 2,035 1.35 10.70
1995 168 12.56 2,104 1.35 12.22
Global Strategy Focus Fund
-------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 2,343 $20.38 $47,752 1.35% 19.63%
1998 2,709 17.02 46,102 1.35 7.31
1997 3,197 15.85 50,670 1.35 10.33
1996 3,436 14.35 49,309 1.35 11.33
1995 2,679 12.85 34,423 1.35 9.21
Global Utility Focus Fund
------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 356 $22.12 $ 7,864 1.35% 11.01%
1998 409 19.91 8,137 1.35 22.27
1997 476 16.27 7,737 1.35 24.09
1996 647 13.10 8,473 1.35 10.50
1995 724 11.75 8,510 1.35 23.45
International Equity Focus Fund
------------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 765 $16.18 $12,374 1.35% 35.65%
1998 893 11.91 10,639 1.35 6.25
1997 2,327 11.20 26,066 1.35 -5.93
1996 1,536 11.90 18,275 1.35 4.49
1995 1,276 11.31 14,426 1.35 4.54
Global Bond Focus Fund
---------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 267 $12.35 $ 3,297 1.35% -9.50%
1998 325 13.63 4,427 1.35 11.00
1997 405 12.27 4,964 1.35 0.48
1996 459 12.20 5,605 1.35 6.21
1995 504 11.45 5,775 1.35 15.28
Basic Value Focus Fund
---------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 2,506 $24.86 $62,297 1.35% 19.37%
1998 2,134 20.81 44,415 1.35 7.87
1997 1,943 19.27 37,438 1.35 18.89
1996 1,767 16.19 28,601 1.35 18.05
1995 1,242 13.60 16,888 1.35 24.62
Government Bond Fund
-------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 1,843 $12.95 $23,861 1.35% -3.21%
1998 1,670 13.36 22,316 1.35 7.20
1997 901 12.45 11,217 1.35 7.32
1996 402 11.59 4,658 1.35 1.40
1995 154 11.42 1,753 1.35 13.15
Developing Capital Markets Focus Fund
------------------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 556 $10.48 $ 5,827 1.35% 63.14%
1998 564 6.42 3,620 1.35 -30.40
1997 892 9.21 8,218 1.35 -7.88
1996 412 9.99 4,113 1.35 8.14
1995 240 9.16 2,200 1.35 -1.74
Index 500 Fund
-------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 2,180 $19.96 $43,515 1.35% 18.77%
1998 1,909 16.79 32,047 1.35 26.43
1997 1,245 13.27 16,525 1.35 30.91
1996 10 10.12 106 1.35 1.14
Global Growth Focus Fund
------------------------ Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 796 $14.69 $11,698 1.35% 36.70%
1998 127 10.74 1,366 1.35 13.02
Capital Focus Fund
------------------ Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 165 $10.30 $ 1,704 1.35% 6.30%
1998 114 9.68 1,106 1.35 -5.60
International VIP Portfolio
--------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 1,805 $11.39 $20,558 1.35% 19.93%
1998 2,303 9.49 21,857 1.35 -8.92
Mercury V.I. U.S. Large Cap Fund
-------------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 76 $11.98 $ 906 1.35% 39.80%
1999 ML Select 10 V.I. Trust
---------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 574 $9.39 $ 5,386 1.35% -7.34%
1998 ML Select 10 V.I. Trust
---------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1998 191 $10.12 $ 1,930 1.35% 1.90%
Quasar Portfolio
---------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 519 $9.90 $ 5,136 1.35% 15.39%
1998 94 8.57 807 1.35 -23.80
Premier Growth Portfolio
------------------------ Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 3,581 $25.17 $90,143 1.35% 30.41%
1998 2,560 19.28 49,349 1.35 45.84
1997 1,273 13.21 16,819 1.35 31.95
MFS Emerging Growth Series
-------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 1,525 $27.30 $41,631 1.35% 74.17%
1998 1,327 15.66 20,783 1.35 32.23
1997 600 11.83 7,099 1.35 20.15
1996 15 9.83 147 1.35 -1.75
MFS Research Series
-------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 1,278 $17.82 $22,776 1.35% 22.26%
1998 1,162 14.56 16,914 1.35 21.61
1997 589 11.96 7,047 1.35 18.53
AIM V.I. Value Fund
------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 2,198 $20.96 $46,076 1.35% 28.03%
1998 1,624 16.35 26,547 1.35 30.50
1997 695 12.52 8,699 1.35 21.91
AIM V.I. Capital Appreciation Fund
---------------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 742 $18.86 $13,990 1.35% 42.53%
1998 638 13.22 8,432 1.35 17.59
1997 705 11.23 7,922 1.35 11.87
6. UNITS ISSUED AND REDEEMED
Units issued and redeemed by Separate Account A during 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
Domestic High Special
Money Prime Current Quality Value
Market Bond Income Equity Focus
Fund Fund Fund Fund Fund
(In thousands) =============== =============== =============== =============== ===============
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1998 2,393 2,776 1,794 2,617 1,789
Activity during 1998:
Issued 7,756 572 553 251 427
Redeemed (7,434) (405) (412) (494) (304)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1998 2,715 2,943 1,935 2,374 1,912
Activity during 1999:
Issued 5,996 369 304 95 154
Redeemed (6,088) (433) (360) (278) (389)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1999 2,623 2,879 1,879 2,191 1,677
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Natural Global Global International
American Resources Strategy Utility Equity
Balanced Focus Focus Focus Focus
Fund Fund Fund Fund Fund
(In thousands) =============== =============== =============== =============== ===============
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1998 935 116 3,197 476 2,327
Activity during 1998:
Issued 8 1 133 7 267
Redeemed (138) (46) (621) (74) (1,701)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1998 805 71 2,709 409 893
Activity during 1999:
Issued 3 0 53 15 5
Redeemed (105) (18) (419) (68) (133)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1999 703 53 2,343 356 765
=============== =============== =============== =============== ===============
</TABLE>
6. UNITS ISSUED AND REDEEMED (continued)
<TABLE>
<CAPTION>
Global Basic Developing
Bond Value Government Capital Markets Index
Focus Focus Bond Focus 500
Fund Fund Fund Fund Fund
(In thousands) =============== =============== =============== =============== ===============
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1998 405 1,943 901 892 1,245
Activity during 1998:
Issued 20 567 869 241 1,074
Redeemed (100) (376) (100) (569) (410)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1998 325 2,134 1,670 564 1,909
Activity during 1999:
Issued 0 636 390 121 882
Redeemed (58) (264) (217) (129) (611)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1999 267 2,506 1,843 556 2,180
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Global Mercury
Growth Capital International V.I. U.S. 1999 ML
Focus Focus VIP Large Cap Select Ten
Fund Fund Portfolio Fund V.I. Trust
(In thousands) =============== =============== =============== =============== ===============
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1998 0 0 0 0 0
Activity during 1998:
Issued 132 120 2,407 0 0
Redeemed (5) (6) (104) 0 0
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1998 127 114 2,303 0 0
Activity during 1999:
Issued 1,099 84 693 84 774
Redeemed (430) (33) (1,191) (8) (200)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1999 796 165 1,805 76 574
=============== =============== =============== =============== ===============
</TABLE>
6. UNITS ISSUED AND REDEEMED (continued)
<TABLE>
<CAPTION> MFS
1998 ML Premier Emerging MFS
Select Ten Quasar Growth Growth Research
V.I. Trust Portfolio Portfolio Series Series
(In thousands) =============== =============== =============== =============== ===============
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1998 0 0 1,273 600 589
Activity during 1998:
Issued 194 100 1,414 815 756
Redeemed (3) (6) (127) (88) (183)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1998 191 94 2,560 1,327 1,162
Activity during 1999:
Issued 85 485 1,447 426 303
Redeemed (276) (60) (426) (228) (187)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1999 0 519 3,581 1,525 1,278
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
AIM V.I.
AIM V.I. Capital
Value Appreciation
Fund Fund
(In thousands) =============== ===============
<S> <C> <C>
Outstanding at January 1, 1998 695 705
Activity during 1998:
Issued 1,028 315
Redeemed (99) (382)
--------------- ---------------
Outstanding at December 31, 1998 1,624 638
Activity during 1999:
Issued 795 183
Redeemed (221) (79)
--------------- ---------------
Outstanding at December 31, 1999 2,198 742
=============== ===============
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
ML Life Insurance Company of New York:
We have audited the accompanying balance sheets of ML
Life Insurance Company of New York (the "Company"), a
wholly owned subsidiary of Merrill Lynch Insurance
Group, Inc., as of December 31, 1999 and 1998, and
the related statements of earnings, comprehensive
income, stockholder's equity, and cash flows for each
of the three years in the period ended December 31,
1999. 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 in accordance with generally
accepted auditing standards. Those standards 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. An audit also includes
assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement
presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present
fairly, in all material respects, the financial
position of the Company 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 generally
accepted accounting principles.
February 28, 2000
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
(Dollars in thousands, except common stock par value and shares)
<TABLE>
<CAPTION>
ASSETS 1999 1998
- ------ ------------ ------------
<S> <C> <C>
INVESTMENTS:
Fixed maturity securities, at estimated fair value
(amortized cost: 1999 - $166,016; 1998 - $197,588) $ 160,437 $ 200,681
Equity securities, at estimated fair value
(cost: 1999 - $19,782; 1998 - $14,684) 16,992 13,718
Policy loans on insurance contracts 88,165 88,083
------------ ------------
Total Investments 265,594 302,482
CASH AND CASH EQUIVALENTS 34,195 18,707
ACCRUED INVESTMENT INCOME 4,990 4,968
DEFERRED POLICY ACQUISITION COSTS 29,703 29,742
FEDERAL INCOME TAXES - DEFERRED 3,892 -
REINSURANCE RECEIVABLES 153 652
OTHER ASSETS 3,292 4,261
SEPARATE ACCOUNTS ASSETS 1,086,875 887,170
------------ ------------
TOTAL ASSETS $ 1,428,694 $ 1,247,982
============ ============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY 1999 1998
- ------------------------------------ ------------ ------------
<S> <C> <C>
LIABILITIES:
POLICYHOLDER LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 248,016 $ 269,246
Claims and claims settlement expenses 3,762 2,986
------------ ------------
Total policyholder liabilities and accruals 251,778 272,232
OTHER POLICYHOLDER FUNDS 1,195 1,783
FEDERAL INCOME TAXES - DEFERRED - 119
FEDERAL INCOME TAXES - CURRENT 1,420 1,347
AFFILIATED PAYABLES - NET 1,030 1,253
OTHER LIABILITIES 2,414 2,124
SEPARATE ACCOUNTS LIABILITIES 1,086,875 887,170
------------ ------------
Total Liabilities 1,344,712 1,166,028
------------ ------------
STOCKHOLDER'S EQUITY:
Common stock, $10 par value - 220,000 shares
authorized, issued and outstanding 2,200 2,200
Additional paid-in capital 66,259 66,259
Retained earnings 21,051 14,462
Accumulated other comprehensive loss (5,528) (967)
------------ ------------
Total Stockholder's Equity 83,982 81,954
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,428,694 $ 1,247,982
============ ============
</TABLE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 19,400 $ 21,549 $ 25,465
Net realized investment gains (losses) (3,100) (1,998) 1,947
Policy charge revenue 17,307 15,484 13,064
------------ ------------ ------------
Total Revenues 33,607 35,035 40,476
------------ ------------ ------------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 12,013 13,832 14,532
Market value adjustment expense 261 567 232
Policy benefits (net of reinsurance recoveries: 1999 - $542
1998 - $1,191; 1997 - $690) 632 1,630 781
Reinsurance premium ceded 1,822 1,705 1,584
Amortization of deferred policy acquisition costs 4,845 5,759 4,119
Insurance expenses and taxes 4,195 4,900 4,563
------------ ------------ ------------
Total Benefits and Expenses 23,768 28,393 25,811
------------ ------------ ------------
Earnings Before Federal Income Tax Provision 9,839 6,642 14,665
------------ ------------ ------------
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 4,805 3,337 2,905
Deferred (1,555) (1,465) 2,068
------------ ------------ ------------
Total Federal Income Tax Provision 3,250 1,872 4,973
------------ ------------ ------------
NET EARNINGS $ 6,589 $ 4,770 $ 9,692
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
NET EARNINGS $ 6,589 $ 4,770 $ 9,692
------------ ------------ ------------
OTHER COMPREHENSIVE LOSS
Net unrealized losses on available-for-sale securities:
Net unrealized holding losses arising during the period (14,221) (4,329) (413)
Reclassification adjustment for (gains) losses included
in net earnings 3,708 1,994 (1,771)
------------ ------------ ------------
Net unrealized losses on investment securities (10,513) (2,335) (2,184)
Adjustments for:
Policyholder liabilities 3,496 1,417 (70)
Deferred federal income taxes 2,456 321 789
------------ ------------ ------------
Total other comprehensive loss, net of tax (4,561) (597) (1,465)
------------ ------------ ------------
COMPREHENSIVE INCOME $ 2,028 $ 4,173 $ 8,227
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Retained comprehensive stockholder's
stock capital earnings income (loss) equity
----------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $ 2,200 $ 72,040 $ 9,219 $ 1,095 $ 84,554
Dividend to Parent (5,781) (9,219) (15,000)
Net earnings 9,692 9,692
Other comprehensive loss, net of tax (1,465) (1,465)
------------ ----------- ----------- ------------- ------------
BALANCE, DECEMBER 31, 1997 2,200 66,259 9,692 (370) 77,781
Net earnings 4,770 4,770
Other comprehensive loss, net of tax (597) (597)
------------ ----------- ----------- ------------- ------------
BALANCE, DECEMBER 31, 1998 2,200 66,259 14,462 (967) 81,954
Net earnings 6,589 6,589
Other comprehensive loss, net of tax (4,561) (4,561)
------------ ----------- ----------- ------------- ------------
BALANCE, DECEMBER 31, 1999 $ 2,200 $ 66,259 $ 21,051 $ (5,528) $ 83,982
============ =========== =========== ============= ============
</TABLE>
See accompanying notes to financial statements.
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 6,589 $ 4,770 $ 9,692
Noncash items included in earnings:
Amortization of deferred policy acquisition costs 4,845 5,759 4,119
Capitalization of policy acquisition costs (4,806) (5,095) (5,253)
Amortization (accretion) of investments 429 (262) (239)
Interest credited to policyholders' account balances 12,013 13,832 14,532
Benefit for deferred Federal income tax (1,555) (1,465) 2,068
(Increase) decrease in operating assets:
Accrued investment income (22) 448 536
Other 1,451 (1,079) 1,800
Increase (decrease) in operating liabilities:
Claims and claims settlement expenses 776 979 (565)
Other policyholder funds (588) (158) 781
Federal income taxes - current 73 (908) 156
Affiliated payables (223) (2,239) (1,534)
Other 290 (31) 506
Other operating activities:
Net realized investment (gains) losses 3,100 1,998 (1,947)
------------ ------------ ------------
Net cash and cash equivalents provided by operating activities 22,372 16,549 24,652
------------ ------------ ------------
Cash Flow From Investing Activities:
Proceeds from (payments for):
Sales of available-for-sale securities 171,785 102,967 88,882
Maturities of available-for-sale securities 40,227 59,161 51,060
Purchases of available-for-sale securities (189,067) (119,611) (120,965)
Mortgage loans principal payments received - - 2,057
Policy loans on insurance contracts (82) 80 (2,615)
------------ ------------ ------------
Net cash and cash equivalents provided by investing activities 22,863 42,597 18,419
------------ ------------ ------------
See accompanying notes to financial statements. (Continued)
</TABLE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Continued) (Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Financing Activities:
Proceeds from (payments for):
Dividends paid to parent $ - $ - $ (15,000)
Policyholder deposits 79,889 94,226 106,983
Policyholder withdrawals (including transfers to/from
separate accounts) (109,636) (144,728) (132,819)
------------ ------------ ------------
Net cash and cash equivalents used by financing activites (29,747) (50,502) (40,836)
------------ ------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 15,488 8,644 2,235
CASH AND CASH EQUIVALENTS:
Beginning of year 18,707 10,063 7,828
------------ ------------ ------------
End of year $ 34,195 $ 18,707 $ 10,063
============ ============ ============
Supplementary Disclosure of Cash Flow Information:
Cash paid to affiliates for:
Federal income taxes $ 4,732 $ 4,245 $ 2,749
Interest 85 148 494
</TABLE>
See accompanying notes to financial statements.
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Merrill Lynch Insurance Group,Inc.)
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business: ML Life Insurance Company
of New York (the "Company") is a wholly owned subsidiary of
Merrill Lynch Insurance Group, Inc. ("MLIG"). The Company is an
indirect wholly owned subsidiary of Merrill Lynch & Co.,Inc.
("Merrill Lynch & Co.").
The Company sells non-participating life insurance and annuity
products including variable life insurance, variable annuities,
market value adjusted annuities and immediate annuities. The
Company is licensed to sell insurance in nine states; however,
it currently limits its marketing activities to the State of
New York. The Company markets its products solely through the
retail network of Merrill Lynch, Pierce, Fenner & Smith,
Incorporated ("MLPF&S"), a wholly owned broker-dealer
subsidiary of Merrill Lynch & Co.
Basis of Reporting: The accompanying financial statements have
been prepared in conformity with generally accepted accounting
principles and prevailing industry practices, both of which
require management to make estimates that affect the reported
amounts and disclosure of contingencies in the financial
statements. Actual results could differ from those estimates.
For the purpose of reporting cashflows, cash and cash
equivalents include cash on hand and on deposit and short-term
investments with original maturities of three months or less.
To facilitate comparisons with the current year, certain amounts
in the prior years have been reclassified.
Revenue Recognition: Revenues for the Company's interest
sensitive life, interest-sensitive annuity, variable life and
variable annuity products consist of policy charges for
mortality risks and the cost of insurance, deferred sales
charges, policy administration charges and/or withdrawal charges
assessed against policyholders' account balances during the
period.
Investments: The Company's investments in fixed maturity and
equity securities are classified as available-for-sale and are
carried at estimated fair value with unrealized gains and losses
included in stockholder's equity as a component of accumulated
other comprehensive loss, net of tax. If management determines
that a decline in the value of a security is other-than-
temporary, the carrying value is adjusted to estimated fair
value and the decline in value is recorded as a net realized
investment loss.
For fixed maturity securities, premiums are amortized to the
earlier of the call or maturity date, discounts are accreted to
the maturity date, and interest income is accrued daily. For
equity securities, dividends are recognized on the ex-dividend
date. Realized gains and losses on the sale or maturity of the
investments are determined on the basis of specific
identification. Investment transactions are recorded on the
trade date.
Certain fixed maturity securities are considered non-investment
grade. The Company defines non-investment grade fixed maturity
securities as unsecured debt obligations that do not have a
rating equivalent to Standard and Poor's (or similar rating
agency) BBB- or higher.
All outstanding mortgage loans were repaid during 1997. The
Company recognized income from mortgage loans based on the cash
payment interest rate of the loan, which may have been different
from the accrual interest rate of the loan for certain mortgage
loans. The Company recognized a realized gain at the date of the
satisfaction of the loan at contractual terms for loans where
there was a difference between the cash payment interest rate
and the accrual interest rate. For all loans, the Company
stopped accruing income when an interest payment default either
occurred or was probable. Impairments of mortgage loans were
established as valuation allowances and recorded as a net
realized investment loss.
Policy loans on insurance contracts are stated at unpaid
principal balances.
Deferred Policy Acquisition Costs: Policy acquisition costs for
life and annuity contracts are deferred and amortized based on
the estimated future gross profits for each group of contracts.
These future gross profit estimates are subject to periodic
evaluation by the Company, with necessary revisions applied
against amortization to date. The impact of these revisions on
cumulative amortization is recorded as a charge or credit to
current operations. It is reasonably possible that estimates of
future gross profits could be reduced in the future,
resulting in a material reduction in the carrying amount of
deferred policy acquisition costs.
Policy acquisition costs are principally commissions and a
portion of certain other expenses relating to policy
acquisition, underwriting and issuance that are primarily
related to and vary with the production of new business.
Insurance expenses and taxes reported in the statements of
earnings are net of amounts deferred. Policy acquisition costs
can also arise from the acquisition or reinsurance of existing
inforce policies from other insurers. These costs include
ceding commissions and professional fees related to the
reinsurance assumed. The deferred costs are amortized in
proportion to the estimated future gross profits over the
anticipated life of the acquired insurance contracts utilizing
an interest methodology.
During 1990, the Company entered into an assumption reinsurance
agreement with an unaffiliated insurer. The acquisition costs
relating to this agreement are being amortized over a twenty-
five year period using an effective interest rate of 7.5%. This
reinsurance agreement provides for payment of contingent ceding
commissions based upon the persistency and mortality experience
of the insurance contracts assumed. Any payments made for the
contingent ceding commissions will be capitalized and amortized
using an identical methodology as that used for the initial
acquisition costs. The following is a reconciliation of the
acquisition costs related to the reinsurance agreement for the
years ended December 31:
1999 1998 1997
---------- ---------- ----------
Beginning balance $ 12,784 $ 16,550 $ 17,151
Capitalized amounts 1,336 691 577
Interest accrued 959 1,241 1,651
Amortization (2,683) (5,698) (2,829)
---------- ---------- ----------
Ending balance $ 12,396 $ 12,784 $ 16,550
========== ========== ==========
The following table presents the expected amortization, net of
interest accrued, of these deferred acquisition costs over the
next five years. The amortization may be adjusted based on
periodic evaluation of the expected gross profits on the
reinsured policies.
2000 $ 785
2001 $ 747
2002 $ 712
2003 $ 700
2004 $ 715
Separate Accounts: Separate Accounts are established in
conformity with New York State Insurance Law, the Company's
domiciliary state, and are generally not chargeable with
liabilities that arise from any other business of the Company.
Separate Accounts assets may be subject to general claims of
the Company only to the extent the value of such assets exceeds
Separate Accounts liabilities.
Net investment income and net realized and unrealized gains
(losses) attributable to Separate Accounts assets accrue
directly to the policyholder and are not reported as revenue in
the Company's Statement of Earnings.
Assets and liabilities of Separate Accounts, representing net
deposits and accumulated net investment earnings less fees,
held primarily for the benefit of policyholders, are shown as
separate captions in the balance sheets.
Policyholders' Account Balances: Liabilities for the Company's
universal life type contracts, including its life insurance and
annuity products, are equal to the full accumulation value of
such contracts as of the valuation date plus deficiency
reserves for certain products. Interest-crediting rates for the
Company's fixed-rate products are as follows:
Interest-sensitive life products 4.00%
Interest-sensitive deferred annuities 3.60% - 8.23%
Immediate annuities 3.00% - 10.00%
These rates may be changed at the option of the Company,
subject to minimum guarantees, after initial guaranteed rates
expire.
Claims and Claims Settlement Expenses: Liabilities for claims
and claims settlement expenses equal the death benefit for
claims that have been reported to the Company and an estimate
based upon prior experience for unreported claims.
Income Taxes: The results of operations of the Company are
included in the consolidated Federal income tax return of
Merrill Lynch & Co. The Company has entered into a tax-sharing
agreement with Merrill Lynch & Co. whereby the Company will
calculate its current tax provision based on its operations.
Under the agreement, the Company periodically remits to Merrill
Lynch & Co. its current federal tax liability.
The Company uses the asset and liability method in providing
income taxes on all transactions that have been recognized in
the financial statements. The asset and liability method
requires that deferred taxes be adjusted to reflect the tax
rates at which future taxable amounts will be settled or
realized. The effects of tax rate changes on future deferred
tax liabilities and deferred tax assets, as well as other
changes in income tax laws, are recognized in net earnings in
the period such changes are enacted. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amounts expected to be realized.
Insurance companies are generally subject to taxes on premiums
and in substantially all states are exempt from state income
taxes.
Accounting Pronouncements: In June 1999, the Financial
Accounting Standards Board deferred for one year the effective
date of the accounting and reporting requirements of SFAS No.
133, Accounting for Derivative Instruments and Hedging
Activities. The Company will adopt the provisions of SFAS No.
133 on January 1, 2001. The adoption of the standard is not
expected to have a material impact on the Company's financial
position or results of operations.
NOTE 2. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments are carried at fair value or amounts that
approximate fair value. The carrying value of financial
instruments as of December 31 were:
1999 1998
----------- -----------
Assets:
Fixed maturity securities (1) $ 160,437 $ 200,681
Equity securities (1) 16,992 13,718
Policy loans on insurance contracts (2) 88,165 88,083
Cash and cash equivalents (3) 34,195 18,707
Separate Accounts assets (4) 1,086,875 887,170
----------- -----------
Total financial instruments $1,386,664 $1,208,359
=========== ===========
(1) For publicly traded securities, the estimated fair value
is determined using quoted market prices. For securities
without a readily ascertainable market value, the Company
utilizes pricing services and broker quotes. Such estimated
fair values do not necessarily represent the values for
which these securities could have been sold at the dates of
the balance sheets. At December 31, 1999 and 1998,
securities without a readily ascertainable market value,
having an amortized cost of $19,734 and $33,427, had an
estimated fair value of $18,876 and $33,879, respectively.
(2) The Company estimates the fair value of policy loans as
equal to the book value of the loans. Policy loans are
fully collateralized by the account value of the associated
insurance contracts, and the spread between the policy loan
interest rate and the interest rate credited to the account
value held as collateral is fixed.
(3) The estimated fair value of cash and cash equivalents
approximates the carrying value.
(4) Assets held in Separate Accounts are carried at the net
asset value provided by the fund managers.
NOTE 3: INVESTMENTS
The amortized cost and estimated fair value of investments in
fixed maturity and equity securities as of December 31 were:
<TABLE>
<CAPTION>
1999
-----------------------------------------------------------------
Cost/ Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Fixed maturity securities:
Corporate debt securities $ 128,239 $ 600 $ 4,558 $ 124,281
Mortgage-backed securities 8,488 210 68 8,630
U.S. government and agencies 27,291 160 1,681 25,770
Foreign governments 1,998 - 242 1,756
----------- ----------- ----------- -----------
Total fixed maturity securities $ 166,016 $ 970 $ 6,549 $ 160,437
=========== =========== =========== ===========
Equity securities:
Non-redeemable preferred stocks $ 19,610 $ 25 $ 2,788 $ 16,847
Common stocks 172 - 27 145
----------- ----------- ----------- -----------
Total equity securities $ 19,782 $ 25 $ 2,815 $ 16,992
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
1998
-----------------------------------------------------------------
Cost/ Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Fixed maturity securities:
Corporate debt securities $ 159,421 $ 3,404 $ 1,224 $ 161,601
Mortgage-backed securities 13,258 443 54 13,646
U.S. government and agencies 22,912 869 48 23,734
Foreign governments 1,997 - 297 1,700
----------- ----------- ----------- -----------
Total fixed maturity securities $ 197,588 $ 4,716 $ 1,623 $ 200,681
=========== =========== =========== ===========
Equity securities:
Non-redeemable preferred stocks $ 13,361 $ 58 $ 257 $ 13,162
Common stocks 1,323 - 767 556
----------- ----------- ----------- -----------
Total equity securities $ 14,684 $ 58 $ 1,024 $ 13,718
=========== =========== =========== ===========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities at December 31, 1999 by contractual maturity were:
Estimated
Amortized Fair
Cost Value
----------- -----------
Fixed maturity securities:
Due in one year or less $ 25,889 $ 25,604
Due after one year through five years 84,457 81,926
Due after five years through ten years 23,956 22,216
Due after ten years 23,226 22,061
----------- -----------
157,528 151,807
Mortgage-backed securities 8,488 8,630
----------- -----------
Total fixed maturity securities $ 166,016 $ 160,437
=========== ===========
Fixed maturity securities not due at a single maturity date
have been included in the preceding table in the year of final
maturity. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment
penalties.
The amortized cost and estimated fair value of fixed maturity
securities at December 31, 1999 by rating agency equivalent
were:
Estimated
Amortized Fair
Cost Value
----------- -----------
AAA $ 51,304 $ 49,205
AA 9,173 8,982
A 53,218 51,402
BBB 46,788 45,403
Non-investment grade 5,533 5,445
----------- -----------
Total fixed maturity securities $ 166,016 $ 160,437
=========== ===========
The Company has recorded certain adjustments to policyholders'
account balances in conjunction with unrealized holding gains
or losses on investments classified as available-for-sale. The
Company adjusts those liabilities as if the unrealized holding
gains or losses had actually been realized, with corresponding
credits or charges reported in accumulated other comprehensive
loss, net of taxes. The components of net unrealized gains
(losses) included in accumulated other comprehensive loss as of
December 31 were as follows:
1999 1998
----------- -----------
Assets:
Fixed maturity securities $ (5,579) $ 3,093
Equity securities (2,790) (966)
Other assets (17) -
Federal income taxes - deferred 2,977 -
----------- -----------
(5,409) 2,127
----------- -----------
Liabilities:
Policyholders' account balances 119 3,615
Federal income taxes - deferred - (521)
----------- -----------
119 3,094
----------- -----------
Stockholder's equity:
Accumulated other comprehensive loss $ (5,528) $ (967)
=========== ===========
Proceeds and gross realized investment gains and losses from the
sale of available-for-sale securities for the years ended
December 31 were:
1999 1998 1997
-------- -------- --------
Proceeds $171,785 $102,967 $ 88,882
Gross realized investment gains 1,357 2,096 4,077
Gross realized investment lossess 4,457 4,094 2,130
The company owned investment securities of $989 and $1,104 that
were deposited with insurance regulatory authorities at December
31, 1999 and 1998, respectively.
Excluding investments in U.S. Government and Agencies, the
Company is not exposed to any significant concentration of
credit risk in its fixed maturity securities portfolio.
Net investment income arose from the following sources for the
years ended December 31:
1999 1998 1997
----------- ----------- -----------
Fixed maturity securities $ 12,921 $ 16,244 $ 19,815
Equity securities 1,637 734 761
Mortgage loans - - 81
Policy loans on insurance contracts 4,362 4,316 4,333
Cash and cash equivalents 932 761 1,293
Other 29 29 65
----------- ----------- -----------
Gross investment income 19,881 22,084 26,348
Less investment expenses (481) (535) (883)
----------- ----------- -----------
Net investment income $ 19,400 $ 21,549 $ 25,465
=========== =========== ===========
Net realized investment gains (losses), including changes in
valuation allowances, for the years ended December 31:
1999 1998 1997
---------- ---------- ----------
Fixed maturity securities $ (1,938) $ (1,944) $ (1,268)
Equity securities (1,162) (54) 3,215
---------- ---------- ----------
Net realized investment gains (losses) $ (3,100) $ (1,998) $ (1,947)
========== ========== ==========
NOTE 4: FEDERAL INCOME TAXES
The following is a reconciliation of the provision for income
taxes based on earnings before federal income taxes, computed
using the Federal statutory tax rate, with the provision for
income taxes for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Provision for income taxes computed at Federal
statutory rate $ 3,444 $ 2,325 $ 5,133
Decrease in income taxes resulting from:
Dividend received deduction (129) (300) (160)
Foreign tax credit (65) (153) -
----------- ----------- -----------
Federal income tax provision $ 3,250 $ 1,872 $ 4,973
=========== =========== ===========
</TABLE>
The Federal statutory rate for each of the three years in the
period ended December 31, 1999 was 35%.
The Company provides for deferred income taxes resulting from
temporary differences that arise from recording certain
transactions in different years for income tax reporting
purposes than for financial reporting purposes. The sources of
these differences and the tax effect of each are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Deferred policy acquisition costs $ 332 $ (158) $ 315
Policyholders' account balances (793) (659) (140)
Liability for guaranty fund assessments - - (50)
Investment adjustments (1,113) (629) 1,943
Other 19 (19) -
----------- ----------- -----------
Deferred Federal income tax provision (benefit) $ (1,555) $ (1,465) $ 2,068
=========== =========== ===========
</TABLE>
Deferred tax assets and liabilities as of December 31 are
determined as follows:
1999 1998
----------- -----------
Deferred tax assets:
Policyholders' account balances $ 5,816 $ 5,023
Investment adjustments 1,738 625
Net unrealized investment loss 2,977 521
Other - 19
----------- -----------
Total deferred tax assets 10,531 6,188
----------- -----------
Deferred tax liabilities:
Deferred policy acquisition costs 6,639 6,307
----------- -----------
Net deferred tax asset (liability) $ 3,892 $ (119)
=========== ===========
The Company anticipates that all deferred tax assets will be
realized, therefore no valuation allowance has been provided.
NOTE 5: REINSURANCE
In the normal course of business, the Company seeks to limit
its exposure to loss on any single insured life and to recover
a portion of benefits paid by ceding reinsurance to other
insurance enterprises or reinsurers under indemnity reinsurance
agreements, primarily excess coverage and coinsurance
agreements. The maximum amount of mortality risk retained by
the Company is approximately $300 on single life policies and
$500 on joint life policies.
Indemnity reinsurance agreements do not relieve the Company
from its obligations to policyholders. Failure of reinsurers to
honor their obligations could result in losses to the Company.
The Company regularly evaluates the financial condition of its
reinsurers so as to minimize its exposure to significant losses
from reinsurer insolvencies. The Company holds collateral under
reinsurance agreements in the form of letters of credit, trust
agreements and funds withheld totaling $131 that can be drawn
upon for delinquent reinsurance recoverables.
As of December 31, 1999, the Company had the following life
insurance inforce:
<TABLE>
<CAPTION>
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed to
amount companies companies amount net
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Life insurance in force $ 956,359 $ 157,279 $ 938,882 $1,737,962 54%
</TABLE>
NOTE 6: RELATED PARTY TRANSACTIONS
The Company and MLIG are parties to a service agreement
whereby MLIG has agreed to provide certain accounting, data
processing, legal, actuarial, management, advertising and other
services to the Company. Expenses incurred by MLIG, in relation
to this service agreement, are reimbursed by the Company on an
allocated cost basis. Charges billed to the Company by MLIG
pursuant to the agreement were $4,199, $4,767 and $4,305 for
1999, 1998 and 1997 respectively. Charges attributable to this
agreement are included in insurance expenses and taxes, except
for investment related expenses, which are included in net
investment income. The Company is allocated interest expense on
its accounts payable to MLIG that approximates the daily
Federal funds rate. Total intercompany interest incurred was
$54, $69 and $64 for 1999, 1998 and 1997, respectively.
Intercompany interest is included in net investment income.
The Company and Merrill Lynch Asset Management, LP ("MLAM") are
parties to a service agreement whereby MLAM has agreed to
provide certain invested asset management services to the
Company. The Company pays a fee to MLAM for these services
through the MLIG service agreement. Charges attributable to
this agreement and allocated to the Company by MLIG were $149,
$157 and $159 for 1999, 1998 and 1997, respectively.
The Company has a general agency agreement with Merrill Lynch
Life Agency Inc. ("MLLA") whereby registered representatives of
MLPF&S, who are the Company's licensed insurance agents,
solicit applications for contracts to be issued by the Company.
MLLA is paid commissions for the contracts sold by such agents.
Commissions paid to MLLA were $3,069, $3,798 and $4,130 for
1999, 1998 and 1997, respectively. Substantially all of these
commissions were capitalized as deferred policy acquisitions
costs and are being amortized in accordance with the policy
discussed in Note 1.
In connection with the acquisition of a block of variable life
insurance business from Monarch Life Insurance Company
("Monarch Life"), the Company borrowed funds from Merrill Lynch
& Co. to partially finance the transaction. As of December 31,
1999 and 1998, the outstanding loan balance was $290 and $434,
respectively. Repayments made on this loan during 1999, 1998
and 1997 were $144, $722 and $1,919, respectively. Loan
interest was calculated at LIBOR plus 150 basis points.
Intercompany interest paid during 1999, 1998 and 1997 was $31,
$79 and $359, respectively.
Affiliated agreements generally contain reciprocal indemnity
provisions pertaining to each party's representations and
contractual obligations thereunder.
NOTE 7: STOCKHOLDER'S EQUITY AND STATUTORY REGULATIONS
Notice of intention to declare a dividend must be filed with
the New York Superintendent of Insurance who may disallow the
payment. During 1999 and 1998, no dividend request was filed.
During 1997, the Company paid a dividend of $15,000 to MLIG.
Statutory capital and surplus at December 31, 1999 and 1998,
was $61,717 and $55,851, respectively.
Applicable insurance department regulations require that the
Company report its accounts in accordance with statutory
accounting practices. Statutory accounting practices differ
from principles utilized in these financial statements as
follows: policy acquisition costs are expensed as incurred,
future policy benefit reserves are established using different
actuarial assumptions, there is no provision for deferred
income taxes, and securities are valued on a different basis.
The Company's statutory net income for 1999, 1998 and 1997 was
$9,030, $5,405 and $9,888, respectively.
The National Association of Insurance Commissioners ("NAIC")
utilizes the Risk Based Capital ("RBC") adequacy monitoring
system. The RBC calculates the amount of adjusted capital that
a life insurance company should have based upon that company's
risk profile. As of December 31, 1999, and 1998, based on the
RBC formula, the Company's total adjusted capital level was
in excess of the minimum amount of capital required to avoid
regulatory action.
In March 1998, the NAIC adopted the Codification of Statutory
Accounting Principles ("Codification"). The Codification,
which is intended to standardize regulatory accounting and
reporting for the insurance industry, is proposed to be
effective January 1, 2001. However, statutory accounting
principles will continue to be established by individual state
laws and permitted practices and it is uncertain when, or if,
the state of New York will require adoption of Codification for
the preparation of statutory financial statements.
Codification is not expected to have a material impact on the
Company's capital requirements or statutory financial
statements.
The New York Insurance Department has recently concluded the
fieldwork for the Company's normal triennial examination for
the period ended December 31, 1998. At this time, the Company
is awaiting the results of the examination. Management
believes that the results of the examination will not have a
material impact on the Company's statutory financial
statements.
NOTE 8: COMMITMENTS AND CONTINGENCIES
State insurance laws generally require that all life insurers
who are licensed to transact business within a state become
members of the state's life insurance guaranty association.
These associations have been established for the protection of
policyholders from loss (within specified limits) as a result
of the insolvency of an insurer. At the time an insolvency
occurs, the guaranty association assesses the remaining members
of the association an amount sufficient to satisfy the
insolvent insurer's policyholder obligations (within specified
limits). Based upon the public information available at this
time, management believes the Company has no material financial
obligations to state guaranty associations.
In the normal course of business, the Company is subject to
various claims and assessments. Management believes the
settlement of these matters would not have a material effect on
the financial position or results of operations of the Company.
NOTE 9. SEGMENT INFORMATION
In reporting to management, the Company's operating results are
categorized into two business segments: Life Insurance and
Annuities. The Company's Life Insurance segment consists of
variable life insurance products and interest-sensitive life
insurance products. The Company's Annuity segment consists of
variable annuities and interest-sensitive annuities.
The Company's organization is structured in accordance with its
two business segments. Each segment has its own administrative
service center that provides product support to the Company and
customer service support to the Company's policyholders.
Additionally, the marketing and sales management functions,
within MLIG, are organized according to these two business
segments.
The accounting policies of the business segments are the same
as those described in the summary of significant accounting
policies. All revenue and expense transactions are recorded at
the product level and accumulated at the business segment level
for review by management.
The "Other" category, presented in the following segment
financial information, represents assets and the earnings on
those assets that do not support policyholder liabilities.
The following table summarizes each business segment's
contribution to the consolidated amounts:
<TABLE>
<CAPTION>
Life
1999 Insurance Annuities Other Total
------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest spread (a) $ 1,640 $ 3,108 $ 2,639 $ 7,387
Other revenues 8,453 5,873 (119) 14,207
----------- ----------- ----------- -----------
Net revenues 10,093 8,981 2,520 21,594
----------- ----------- ----------- -----------
Policy benefits 618 14 - 632
Reinsurance premium ceded 1,822 - - 1,822
Amortization of deferred policy
acquisition costs 2,100 2,745 - 4,845
Other non-interest expenses 1,662 2,794 - 4,456
----------- ----------- ----------- -----------
Total non-interest expenses 6,202 5,553 - 11,755
----------- ----------- ----------- -----------
Net earnings before Federal income
tax provision 3,891 3,428 2,520 9,839
Income tax expense 1,332 1,036 882 3,250
----------- ----------- ----------- -----------
Net earnings $ 2,559 $ 2,392 $ 1,638 $ 6,589
=========== =========== =========== ===========
Balance Sheet Information:
Total assets $ 519,774 $ 862,187 $ 46,733 $1,428,694
Deferred policy acquisition costs 15,082 14,621 - 29,703
Policyholder liabilities and accruals 103,146 148,632 - 251,778
Other policyholder funds 633 562 - 1,195
</TABLE>
<TABLE>
<CAPTION>
Life
1998 Insurance Annuities Other Total
------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest spread (a) $ 789 $ 3,876 $ 3,052 $ 7,717
Other revenues 8,472 5,377 (363) 13,486
----------- ----------- ----------- -----------
Net revenues 9,261 9,253 2,689 21,203
----------- ----------- ----------- -----------
Policy benefits 1,570 60 - 1,630
Reinsurance premium ceded 1,705 - - 1,705
Amortization of deferred policy
acquisition costs 3,571 2,188 - 5,759
Other non-interest expenses 1,973 3,494 - 5,467
----------- ----------- ----------- -----------
Total non-interest expenses 8,819 5,742 - 14,561
----------- ----------- ----------- -----------
Net earnings before Federal income
tax provision (benefit) 442 3,511 2,689 6,642
Income tax expense (benefit) (7) 938 941 1,872
----------- ----------- ----------- -----------
Net earnings $ 449 $ 2,573 $ 1,748 $ 4,770
=========== =========== =========== ===========
Balance Sheet Information:
Total assets $ 484,322 $ 720,478 $ 43,182 $1,247,982
Deferred policy acquisition costs 15,325 14,417 - 29,742
Policyholder liabilities and accruals 103,926 168,306 - 272,232
Other policyholder funds 1,319 464 - 1,783
</TABLE>
<TABLE>
<CAPTION>
Life
1997 Insurance Annuities Other Total
------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest spread (a) $ 1,399 $ 6,060 $ 3,474 $ 10,933
Other revenues 7,759 7,172 80 15,011
----------- ----------- ----------- -----------
Net revenues 9,158 13,232 3,554 25,944
----------- ----------- ----------- -----------
Policy benefits 781 - - 781
Reinsurance premium ceded 1,584 - - 1,584
Amortization of deferred policy
acquisition costs 1,992 2,127 - 4,119
Other non-interest expenses 1,747 3,048 - 4,795
----------- ----------- ----------- -----------
Total non-interest expenses 6,104 5,175 - 11,279
----------- ----------- ----------- -----------
Net earnings before Federal income
tax provision 3,054 8,057 3,554 14,665
Income tax expense 987 2,742 1,244 4,973
----------- ----------- ----------- -----------
Net earnings $ 2,067 $ 5,315 $ 2,310 $ 9,692
=========== =========== =========== ===========
Balance Sheet Information:
Total assets $ 456,240 $ 635,673 $ 46,668 $1,138,581
Deferred policy acquisition costs 17,506 12,900 - 30,406
Policyholder liabilities and accruals 103,677 205,663 - 309,340
Other policyholder funds 974 967 - 1,941
</TABLE>
(a) Management considers investment income net of interest
credited to policyholders' account balances in evaluating
results.
The table below summarizes the Company's net revenues by
product for 1999, 1998 and 1997:
1999 1998 1997
---------- ---------- ----------
Life Insurance
Variable life $ 9,656 $ 9,045 $ 8,828
Interest-sensitive whole life 437 216 330
---------- ---------- ----------
Total Life Insurance 10,093 9,261 9,158
---------- ---------- ----------
Annuities
Variable annuities 8,291 6,240 4,673
Interest-sensitive annuities 690 3,013 8,559
---------- ---------- ----------
Total Annuities 8,981 9,253 13,232
---------- ---------- ----------
Other 2,520 2,689 3,554
---------- ---------- ----------
Total $ 21,594 $ 21,203 $ 25,944
========== ========== ==========
* * * * * *
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<S> <C> <C> <C>
(a) Financial Statements
(1) Financial Statements of ML of New York Variable Annuity
Separate Account A as of December 31, 1999 and for the two
years ended December 31, 1999 and the Notes relating
thereto appear in the Statement of Additional Information.
(2) Financial Statements of ML Life Insurance Company of New
York for the three years ended December 31, 1999 and the
Notes relating thereto appear in the Statement of
Additional Information.
(b) Exhibits
(1) Resolution of the Board of Directors of ML Life Insurance
Company of New York establishing the ML of New York
Variable Annuity Separate Account A. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 10
to Form N-4, Registration No. 33-43654 Filed December 9,
1996.)
(2) Not Applicable.
(3) Underwriting Agreement Between ML Life Insurance Company of
New York and Merrill Lynch, Pierce, Fenner & Smith
Incorporated. (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 10 to Form N-4, Registration
No. 33-43654 Filed December 9, 1996.)
(4) (a) Form of Contract for the Flexible Premium Individual
Deferred Variable Annuity.
(b) Individual Retirement Annuity Endorsement.
(c) Tax-Sheltered Annuity Endorsement.
(d) Qualified Plan Endorsement.
(5) Form of Application for the Flexible Premium Individual
Deferred Variable Annuity.
(6) (a)(i) Certificate of Amendment and Restatement of Charter of Royal
Tandem Life Insurance Company. (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 10 to Form
N-4, Registration No. 33-43654 Filed December 9, 1996.)
(a)(ii) Certificate of Amendment of the Charter of ML Life Insurance
Company of New York. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43654 Filed December 9, 1996.)
(b) By-Laws of ML Life Insurance Company of New York.
(Incorporated by Reference to Registrant's Post-Effective
Amendment No. 10 to Form N-4, Registration No. 33-43654
filed December 9, 1996.)
(7) Not Applicable.
(8) (a) Amended General Agency Agreement. (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 5 to Form N-4,
Registration No. 33-43654 Filed April 28, 1994.)
(b) Indemnity Agreement Between ML Life Insurance Company of New
York and Merrill Lynch Life Agency, Inc. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 10
to Form N-4, Registration No. 33-43654 Filed December 9,
1996.)
(c) Management Agreement Between ML Life Insurance Company of
New York and Merrill Lynch Asset Management, Inc.
(Incorporated by Reference to Registrant's Post-Effective
Amendment No. 10 to Form N-4, Registration No. 33-43654
Filed December 9, 1996.)
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C> <C> <C>
(d) Agreement Between ML Life Insurance Company of New York and
Merrill Lynch Variable Series Funds, Inc. Relating to
Maintaining Constant Net Asset Value for the Domestic Money
Market Fund. (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 10 to Form N-4, Registration
No. 33-43654 Filed December 9, 1996.)
(e) Agreement Between ML Life Insurance Company of New York and
Merrill Lynch Variable Series Funds, Inc. Relating to
Valuation and Purchase Procedures. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 10
to Form N-4, Registration No. 33-43654 Filed December 9,
1996.)
(f) Service Agreement Between Tandem Financial Group, Inc. and
Royal Tandem Life Insurance Company. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 10
to Form N-4, Registration No. 33-43654 Filed December 9,
1996.)
(g) Reimbursement Agreement Between Merrill Lynch Asset
Management, Inc. and Merrill Lynch Life Agency, Inc.
(Incorporated by Reference to Registrant's Post-Effective
Amendment No. 10 to Form N-4, Registration No. 33-43654
Filed December 9, 1996.)
(h) Amendment to the Reimbursement Agreement Between Merrill
Lynch Asset Management, L.P. and Merrill Lynch Life
Agency, Inc.
(i) Form of Participation Agreement Between Merrill Lynch
Variable Series Funds, Inc. and ML Life Insurance Company
of New York. (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 10 to Form N-4, Registration
No. 33-43654 Filed December 9, 1996.)
(j) Form of Amendment to Participation Agreement Between Merrill
Lynch Variable Series Funds, Inc. and ML Life Insurance
Company of New York. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 12 to Form N-4,
Registration No. 33-43654 Filed May 1, 1998.)
(k) Form of Amendment to Participation Agreement Between Merrill
Lynch Variable Series Funds, Inc. and ML Life Insurance
Company of New York.
(l) Participation Agreement By And Among AIM Variable Insurance
Funds, Inc., AIM Distributors, Inc., and ML Life Insurance
Company of New York. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 11 to Form N-4,
Registration No. 33-43654 Filed April 23, 1997.)
(m) Amendment to the Participation Agreement By And Among AIM
Variable Insurance Funds, Inc., AIM Distributors, Inc., and
ML Life Insurance Company of New York.
(n) Form of Participation Agreement Among ML Life Insurance
Company of New York, Alliance Capital Management L.P., and
Alliance Fund Distributors, Inc. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 10
to Form N-4, Registration No. 33-43654 Filed December 9,
1996.)
(o) Form of Amendment to Participation Agreement Among ML Life
Insurance Company of New York, Alliance Capital Management
L.P., and Alliance Fund Distributors, Inc. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 12
to Form N-4, Registration No. 33-43654 Filed May 1, 1998.)
(p) Form of Participation Agreement Among MFS-Registered
Trademark- Variable Insurance Trust-SM-, ML Life Insurance
Company of New York, and Massachusetts Financial Services
Company. (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 10 to Form N-4, Registration
No. 33-43654 Filed December 9, 1996.)
</TABLE>
C-2
<PAGE>
<TABLE>
<S> <C> <C> <C>
(q) Amendment to Participation Agreement Among MFS-Registered
Trademark- Variable Insurance Trust-SM-, ML Life Insurance
Company of New York, and Massachusetts Financial Services
Company dated May 1, 1997.
(r) Form of Participation Agreement Between ML Life Insurance
Company of New York and Hotchkis and Wiley Variable Trust.
(Incorporated by Reference to Registrant's Post-Effective
Amendment No. 12 to Form N-4, Registration No. 33-43654
Filed May 1, 1998.)
(s) Form of Participation Agreement Between ML Life Insurance
Company of New York and Davis Variable Account Fund, Inc.
(t) Form of Participation Agreement Between ML Life Insurance
Company of New York and Delaware Group Premium Fund, Inc.
(u) Form of Participation Agreement Between ML Life Insurance
Company of New York and PIMCO Variable Insurance Trust.
(v) Form of Participation Agreement Between ML Life Insurance
Company of New York and Seligman Portfolios, Inc.
(w) Form of Participation Agreement Between ML Life Insurance
Company of New York and Van Kampen Life Investment Trust.
(9) Opinion of Barry G. Skolnick, Esq. and Consent to its use as
to the legality of the securities being registered.
(10) (a) Written Consent of Sutherland Asbill & Brennan LLP.
(b) Written Consent of Deloitte & Touche LLP, independent
auditors.
(c) Written Consent of Barry G. Skolnick, Esq. (SEE Exhibit 9.)
(11) Not Applicable.
(12) Not Applicable.
(13) Schedule of Computation of Performance Quotations.
(14) (a) Power of Attorney from Frederick J.C. Butler. (Incorporated
by Reference to Registrant's Post-Effective Amendment
No. 4 to Form N-4, Registration No. 33-43654 Filed
March 2, 1994.)
(b) Power of Attorney from Michael P. Cogswell. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 4 to
Form N-4, Registration No. 33-43654 Filed March 2, 1994.)
(c) Power of Attorney from Joseph E. Crowne, Jr. (Incorporated
by Reference to Registrant's Post-Effective Amendment
No. 4 to Form N-4, Registration No. 33-43654 Filed
March 2, 1994.)
(d) Power of Attorney from David M. Dunford. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 4 to
Form N-4, Registration No. 33-43654 Filed March 2, 1994.)
(e) Power of Attorney from Gail R. Farkas. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 8 to
Form N-4, Registration No. 33-43654 Filed April 25, 1996.)
(f) Power of Attorney from Robert L. Israeloff. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 4 to
Form N-4, Registration No. 33-43654 Filed March 2, 1994.)
(g) Power of Attorney from Allen N. Jones. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 11
to Form N-4, Registration No. 33-43654 Filed April 23,
1997.)
(h) Power of Attorney from Cynthia L. Kahn. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 4 to
Form N-4, Registration No. 33-43654 Filed March 2, 1994.)
</TABLE>
C-3
<PAGE>
<TABLE>
<S> <C> <C> <C>
(i) Power of Attorney from Robert A. King. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 4 to
Form N-4, Registration No. 33-43654 Filed March 2, 1994.)
(j) Power of Attorney from Stanley C. Peterson. (Incorporated by
Reference to ML Life Insurance Company of New York's
Registration Statement on Form S-1, Registration
No. 333-48983 Filed March 31, 1998.)
(k) Power of Attorney from Irving M. Pollack. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 4 to
Form N-4, Registration No. 33-43654 Filed March 2, 1994.)
(l) Power of Attorney from Barry G. Skolnick. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 4 to
Form N-4, Registration No. 33-43654 Filed March 2, 1994.)
(m) Power of Attorney from Anthony J. Vespa. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 4 to
Form N-4, Registration No. 33-43654 Filed March 2, 1994.)
(n) Power of Attorney from Richard M. Drew.
</TABLE>
ITEM 25. DIRECTORS AND OFFICERS OF ML LIFE INSURANCE COMPANY OF NEW YORK
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS ADDRESS POSITION WITH DEPOSITOR*
- -------------------- ------------------------------------- ------------------------------------
<S> <C> <C>
Frederick J.C. Butler, Chapman & Co., LLC Director
Butler 609 Fifth Avenue
New York, NY 10017
Michael P. Cogswell 800 Scudders Mill Road Director, Vice President and Senior
Plainsboro, NJ 08536 Counsel
Joseph E. Crowne, 800 Scudders Mill Road Director, Senior Vice President,
Jr. Plainsboro, NJ 08536 Chief Financial Officer, Chief
Actuary and Treasurer
Richard M. Drew 3430 81st Street Director
Jackson Heights, NY 11373
David M. Dunford 800 Scudders Mill Road Director, Senior Vice President
Plainsboro, NJ 08536 and Chief Investment Officer
Gail R. Farkas 800 Scudders Mill Road Director and Senior Vice President
Plainsboro, NJ 08536
Robert L. Israeloff Israeloff, Trattner & Co. Director
11 Sunrise Plaza
Valley Stream, NY 11580-6169
Allen N. Jones 800 Scudders Mill Road Director
Plainsboro, NJ 08536
Cynthia Kahn Sherman Rogers & Wells Director
200 Park Avenue
New York, NY 10166
Robert A. King 119 Formby Director
Williamsburg, VA 23188
Stanley C. Peterson 800 Scudders Mill Road Director
Plainsboro, NJ 08536
Irving M. Pollack 11400 Strand Drive Director
Suite 310
Rockville, MD 20852-2970
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS ADDRESS POSITION WITH DEPOSITOR*
- -------------------- ------------------------------------- ------------------------------------
<S> <C> <C>
Barry G. Skolnick 800 Scudders Mill Road Director, Senior Vice President,
Plainsboro, NJ 08536 General Counsel and Secretary
Anthony J. Vespa 800 Scudders Mill Road Director, Chairman of the Board,
Plainsboro, NJ 08536 Chief Executive Officer and
President
Deborah J. Adler 800 Scudders Mill Road Vice President and Actuary
Plainsboro, NJ 08536
Tracy A. Bartoy 4804 Deer Lake Drive East Vice President and Assistant
Jacksonville, FL 32246 Secretary
Robert J. Boucher 1414 Main Street Senior Vice President, Variable
Springfield, MA 01102 Life Administration
Edward W. Diffin, 800 Scudders Mill Road Vice President and Senior
Jr. Plainsboro, NJ 08536 Counsel
Linda Gillis 4804 Deer Lake Drive East Vice President and Assistant
Jacksonville, FL 32246 Secretary
Diana Joyner 1414 Main Street Vice President
Springfield, MA 01102
Peter P. Massa 4804 Deer Lake Drive East Vice President
Jacksonville, FL 32246
Kelly A. O'Dea 800 Scudders Mill Road Vice President and Senior
Plainsboro, NJ 08536 Compliance Officer
Robert Ostrander 1414 Main Street Vice President and Controller
Springfield, MA 01102
Shelley K. Parker 1414 Main Street Vice President and Assistant
Springfield, MA 01102 Secretary
Julia Raven 800 Scudders Mill Road Vice President
Plainsboro, NJ 08536
Matthew J. Rider 800 Scudders Mill Road Vice President and Actuary
Plainsboro, NJ 08536
Lori M. Salvo 800 Scudders Mill Road Vice President and Senior
Plainsboro, NJ 08536 Counsel
Thomas Samalis 4804 Deer Lake Drive East Vice President
Jacksonville, FL 32246
John A. Shea 800 Scudders Mill Road Vice President
Plainsboro, NJ 08536
Frederick H. Steele 800 Scudders Mill Road Vice President
Plainsboro, NJ 08536
Donald C. Stevens, 800 Scudders Mill Road Vice President and Controller
III Plainsboro, NJ 08536
Robert J. Viamari 1414 Main Street Vice President and Assistant
Springfield, MA 01102 Secretary
Amy S. Winston 800 Scudders Mill Road Vice President and Director of
Plainsboro, NJ 08536 Compliance
Denis G. Wuestman 800 Scudders Mill Road Vice President
Plainsboro, NJ 08536
</TABLE>
- ------------------------
* Each director is elected to serve until the next annual shareholder meeting
or until his or her successor is elected and shall have qualified.
C-5
<PAGE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
ML Life Insurance Company of New York is an indirect wholly-owned subsidiary
of Merrill Lynch & Co., Inc. ("ML & Co."). A list of subsidiaries of ML & Co.
appears below.
SUBSIDIARIES OF THE REGISTRANT
The following are subsidiaries of ML & Co. as of February 25, 2000 and the
states or jurisdictions in which they are organized. Indentation indicates the
principal parent of each subsidiary. Except as otherwise specified, in each case
ML & Co. owns, directly or indirectly, at least 99% of the voting securities of
each subsidiary. The names of particular subsidiaries have been omitted because,
considered in the aggregate as a single subsidiary, they would not constitute,
as of the end of the year covered by this report, a "significant subsidiary" as
that term is defined in Rule 1.02(w) of Regulation S-X under the Securities
Exchange Act of 1934.
<TABLE>
<CAPTION>
STATE OF
JURISDICTION OF
NAME ENTITY
- ---- -------------------
<S> <C>
Merrill Lynch & Co., Inc.................................... Delaware
Merrill Lynch, Pierce, Fenner & Smith Incorporated(1)..... Delaware
Broadcort Capital Corp.................................. Delaware
Merrill Lynch Life Agency Inc.(2)....................... Washington
Merrill Lynch Professional Clearing Corp.(3)............ Delaware
Merrill Lynch Bank & Trust Co............................... New Jersey
Merrill Lynch Capital Services, Inc......................... Delaware
Merrill Lynch Government Securities Inc..................... Delaware
Merrill Lynch Money Markets Inc........................... Delaware
Merrill Lynch Group, Inc.................................... Delaware
Merrill Lynch & Co., Canada Ltd........................... Ontario
Merrill Lynch Canada Inc................................ Canada
Mercury Asset Management Group Ltd.(4).................... England
Mercury Asset Management Holdings Ltd................... England
Merrill Lynch Asset Management L.P.(5).................... Delaware
Merrill Lynch Capital Partners, Inc....................... Delaware
Merrill Lynch Futures Inc................................. Delaware
Merrill Lynch Insurance Group, Inc...................... Delaware
Merrill Lynch Life Insurance Company.................... Arkansas
ML Life Insurance Company of New York................... New York
Merrill Lynch International Finance Corporation........... New York
Merrill Lynch International Bank Limited................ England
Merrill Lynch Bank (Suisse) S.A....................... Switzerland
Merrill Lynch Group Holdings Limited...................... Ireland
Merrill Lynch Capital Markets Bank Limited.............. Ireland
Merrill Lynch Mortgage Capital Inc........................ Delaware
Merrill Lynch Bank USA.................................... Utah
Merrill Lynch Trust Company(6)............................ New Jersey
Merrill Lynch Business Financial Services Inc........... Delaware
Merrill Lynch Credit Corporation........................ Delaware
Merrill Lynch Investment Partners Inc..................... Delaware
MLDP Holdings, Inc.(7).................................... Delaware
Merrill Lynch Derivative Products AG.................... Switzerland
ML IBK Positions, Inc..................................... Delaware
Merrill Lynch Capital Corporation....................... Delaware
ML Leasing Equipment Corp.(8)............................. Delaware
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
STATE OF
JURISDICTION OF
NAME ENTITY
- ---- -------------------
<S> <C>
Merrill Lynch International Incorporated.................... Delaware
Merrill Lynch (Australasia) Pty Limited................... New South Wales
Merrill Lynch International (Australia) Limited(9)...... New South Wales
Merrill Lynch International Bank.......................... United States
Merrill Lynch International Holdings Inc.................. Delaware
Merrill Lynch Bank and Trust Company (Cayman) Limited... Cayman Islands,
British West Indies
Merrill Lynch Capital Markets A.G....................... Switzerland
Merrill Lynch Europe PLC................................ England
Merrill Lynch Europe Holdings Limited................. England
Merrill Lynch International(10)..................... England
Merrill Lynch, Pierce, Fenner & Smith (Brokers &
Dealers)
Limited............................................. England
Merrill Lynch Europe Ltd................................ Cayman Islands,
British West Indies
Merrill Lynch France.................................... France
Merrill Lynch Capital Markets (France) S.A............ France
Merrill Lynch (Asia Pacific) Limited.................... Hong Kong
Merrill Lynch Far East Limited........................ Hong Kong
Merrill Lynch Japan Incorporated.......................... Cayman Islands,
British West Indies
</TABLE>
- ------------------------
(1) MLPF&S also conducts business as "Merrill Lynch & Co."
(2) Similarly named affiliates and subsidiaries that engage in the sale of life
insurance and annuity products are incorporated in various other
jurisdictions.
(3) The preferred stock of the corporation is owned by an unaffiliated group of
investors.
(4) Held through several intermediate holding companies.
(5) Merrill Lynch Asset Management L.P. is a limited partnership whose general
partner is Princeton Services, Inc. and whose limited partner is ML & Co.
(6) Similarly named affiliates and subsidiaries that provide trust and custodial
services are incorporated in various other jurisdictions.
(7) Merrill Lynch Group, Inc. owns 100% of this corporation's outstanding common
voting stock. 100% of the outstanding preferred voting stock is held by
outside parties.
(8) This corporation has more than 45 direct or indirect subsidiaries operating
in the United States and serving as either general partners or associate
general partners of limited partnerships.
(9) Held through an intermediate subsidiary
(10) Partially owned by another indirect subsidiary of ML & Co.
ITEM 27. NUMBER OF CONTRACTOWNERS
As of the date hereof, there are no owners of the Contracts.
ITEM 28. INDEMNIFICATION
There is no indemnification of the principal underwriter, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, with respect to the Contract.
The indemnity agreement between ML Life Insurance Company of New York ("ML
of New York") and its affiliate Merrill Lynch Life Agency, Inc. ("MLLA"), with
respect to MLLA's general agency responsibilities on behalf of ML of New York
and the Contract, provides:
C-7
<PAGE>
ML of New York will indemnify and hold harmless MLLA and all
persons associated with MLLA as such term is defined in Section
3(a) (21) of the Securities Exchange Act of 1934 against all
claims, losses, liabilities and expenses, to include reasonable
attorneys' fees, arising out of the sale by MLLA of insurance
products under the above-referenced Agreement, provided that ML of
New York shall not be bound to indemnify or hold harmless MLLA or
its associated persons for claims, losses, liabilities and
expenses arising directly out of the willful misconduct or
negligence of MLLA or its associated persons.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registration pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant 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 Registrant 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 UNDERWRITER
(a) Merrill Lynch, Pierce, Fenner & Smith Incorporated also acts as
principal underwriter for the following additional funds: CBA Money Fund; CMA
Government Securities Fund; CMA Money Fund; CMA Tax-Exempt Fund; The Corporate
Fund Accumulation Program, Inc.; CMA Treasury Fund; CMA Multi-State Municipal
Series Trust; Corporate Income Fund; Defined Asset Funds--Municipal Insured
Series; Equity Investor Fund; The Fund of Stripped ("Zero") U.S. Treasury
Securities; The GNMA Investment Accumulation Program; Government Securities
Income Fund; International Bond Fund; The Merrill Lynch Fund of Stripped
("Zero") U.S. Treasury Securities; Merrill Lynch Trust for Government
Securities; Municipal Income Fund; Municipal Investment Trust Fund; and The
Municipal Fund Accumulation Program, Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated also acts as principal
underwriter for the following additional accounts: ML of New York Variable
Annuity Separate Account B; Merrill Lynch Life Variable Life Separate Account;
Merrill Lynch Life Variable Life Separate Account II; Merrill Lynch Life
Variable Annuity Separate Account; Merrill Lynch Life Variable Annuity Separate
Account A; Merrill Lynch Life Variable Annuity Separate Account B; ML of New
York Variable Life Separate Account; ML of New York Variable Life Separate
Account II and ML of New York Variable Annuity Separate Account.
C-8
<PAGE>
(b) The directors, president, treasurer and executive vice presidents of
Merrill Lynch, Pierce, Fenner & Smith Incorporated are as follows:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES WITH UNDERWRITER
- ------------------------------- -------------------------------------------------
<S> <C>
John L. Steffens* Director, Chairman of the Board and Chief
Executive Officer
Thomas W. Davis Executive Vice President
Barry S. Friedberg* Executive Vice President
Edward L. Goldberg* Executive Vice President
Jerome P. Kenney* Executive Vice President
E. Stanley O'Neal Executive Vice President and Director
Thomas H. Patrick* Executive Vice President
George A. Schieren Director, General Counsel and Senior Vice
President
Winthrop H. Smith, Jr.* Executive Vice President
Roger M. Vasey* Executive Vice President
John C. Stomber* Senior Vice President and Treasurer
</TABLE>
- ------------------------
* World Financial Center, 250 Vesey Street, New York, NY 10281
(c) Not Applicable
ITEM 30. LOCATION OF BOOKS AND RECORDS
All accounts, books, and records required to be maintained by Section
31(a) of the 1940 Act and the rules promulgated thereunder are maintained by the
depositor at the principal executive offices at l00 Church Street, 11th Floor,
New York, NY 10080-6511, at Merrill Lynch Insurance Group Services, Inc., at
4804 Deer Lake Drive East, Jacksonville, Florida 32246, and at the office of the
General Counsel at 800 Scudders Mill Road, Plainsboro, New Jersey 08536.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS AND REPRESENTATIONS.
(a) Registrant undertakes to file a post-effective amendment to the
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) Registrant undertakes 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 postcard or
similar written communications affixed to or included in the prospectus that the
applicant can remove to send for a statement of additional information.
(c) Registrant undertakes 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.
(d) ML Life Insurance Company of New York hereby represents that the fees
and charges deducted under the Contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by ML Life Insurance Company of New York.
(e) Registrant hereby represents that it is relying on the American Council
of Life Insurance (avail. Nov. 28, 1988) no-action letter with respect to
Contracts used in connection with retirement plans meeting the requirements of
Section 403(b) of the Internal Revenue Code, and represents further that it will
comply with the provisions of paragraphs (1) through (4) set forth in that
no-action letter.
C-9
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, ML of New York Variable Annuity Separate Account A, has
caused this registration statement to be signed on its behalf, in the City of
Plainsboro, and the State of New Jersey, on this 14 day of April, 2000.
<TABLE>
<S> <C> <C> <C>
ML of New York Variable Annuity
Separate Account A
(Registrant)
Attest: /s/ EDWARD W. DIFFIN, JR. By: /s/ BARRY G. SKOLNICK
------------------------------------ ------------------------------------
Edward W. Diffin, Jr. Barry G. Skolnick
Vice President and Senior Counsel Senior Vice President of
ML Life Insurance Company
of New York
ML Life Insurance Company of New York
(Depositor)
Attest: /s/ EDWARD W. DIFFIN, JR. By: /s/ BARRY G. SKOLNICK
------------------------------------ ------------------------------------
Edward W. Diffin, Jr. Barry G. Skolnick
Vice President and Senior Counsel Senior Vice President
</TABLE>
As required by the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities indicated on April 14,
2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Chairman of the Board, President and Chief
- ------------------------------------------- Executive Officer
Anthony J. Vespa
* Director, Senior Vice President, Chief
- ------------------------------------------- Financial Officer, Chief Actuary and
Joseph E. Crowne, Jr. Treasurer
* Director, Senior Vice President, and Chief
- ------------------------------------------- Investment Officer
David M. Dunford
* Director and Senior Vice President
- -------------------------------------------
Gail R. Farkas
* Director, Vice President and Senior Counsel
- -------------------------------------------
Michael P. Cogswell
</TABLE>
C-10
<PAGE>
<TABLE>
<C> <S>
* Director
- -------------------------------------------
Frederick J.C. Butler
* Director
- -------------------------------------------
Robert L. Israeloff
* Director
- -------------------------------------------
Allen N. Jones
* Director
- -------------------------------------------
Cynthia Kahn Sherman
* Director
- -------------------------------------------
Robert A. King
* Director
- -------------------------------------------
Stanley C. Peterson
* Director
- -------------------------------------------
Irving M. Pollack
* Director
- -------------------------------------------
Richard M. Drew
*By: /s/ BARRY G. SKOLNICK
- -------------------------------------------
Barry G. Skolnick In his own capacity as Director, Senior Vice
President, General Counsel, and Secretary
and as Attorney-in-Fact
</TABLE>
C-11
<PAGE>
EXHIBIT LIST
<TABLE>
<S> <C> <C>
Exhibit 4(a) Form of Contract for the Flexible Premium Individual
Deferred Variable Annuity
Exhibit 4(b) Individual Retirement Annuity Endorsement
Exhibit 4(c) Tax-Sheltered Annuity Endorsement
Exhibit 4(d) Qualified Plan Endorsement
Exhibit 5 Form of Application for the Flexible Premium Individual
Deferred Variable Annuity
Exhibit 8(h) Amendment to the Reimbursement Agreement Between Merrill
Lynch Asset Management, L.P. and Merrill Lynch Life
Agency, Inc.
Exhibit 8(k) Form of Amendment to Participation Agreement Between Merrill
Lynch Variable Series Funds, Inc. and ML Life Insurance
Company of New York
Exhibit 8(m) Amendment to the Participation Agreement By And Among AIM
Variable Insurance Funds, Inc., AIM Distributors, Inc.,
and ML Life Insurance Company of New York
Exhibit 8(q) Amendment to Participation Agreement Among MFS-Registered
Trademark- Variable Insurance Trust-SM-, ML Life Insurance
Company of New York, and Massachusetts Financial Services
Company dated May 1, 1997
Exhibit 8(s) Form of Participation Agreement Between ML Life Insurance
Company of New York and Davis Variable Account Fund, Inc.
Exhibit 8(t) Form of Participation Agreement Between ML Life Insurance
Company of New York and Delaware Group Premium Fund, Inc.
Exhibit 8(u) Form of Participation Agreement Between ML Life Insurance
Company of New York and PIMCO Variable Insurance Trust
Exhibit 8(v) Form of Participation Agreement Between ML Life Insurance
Company of New York and Seligman Portfolios, Inc.
Exhibit 8(w) Form of Participation Agreement Between ML Life Insurance
Company of New York and Van Kampen Life Investment Trust
Exhibit 9 Opinion of Barry G. Skolnick, Esq. and Consent to its use as
to the legality of the securities being registered
Exhibit 10(a) Written Consent of Sutherland Asbill & Brennan LLP
Exhibit 10(b) Written Consent of Deloitte & Touche LLP, independent
auditors
Exhibit 13 Schedule of Computation of Performance Quotations
Exhibit 14(n) Power of Attorney From Richard M. Drew
</TABLE>
C-12
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
A Subsidiary of Merrill Lynch & Co., Inc.
Home Office: 100 Church Street, 11th Floor, New York, NY 10080-6511
Annuity Service Center: P.O. Box 44222
Jacksonville, Florida 32231-4222
ML LIFE INSURANCE COMPANY OF NEW YORK will make periodic annuity payments for
the life of the Annuitant or as otherwise provided in this Contract. Payments
will be made to the Owner starting on the Annuity Date.
This is a legal Contract between you and us. PLEASE READ THE CONTRACT CAREFULLY.
EXCEPT FOR FIXED ANNUITY PAYMENTS, VALUES PROVIDED BY THIS CONTRACT ARE BASED
ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO FIXED-DOLLAR AMOUNT.
TEN DAY RIGHT TO REVIEW CONTRACT: You may cancel this Contract within ten days
after you receive it. Simply return or mail it to us or your Financial
Consultant. We will refund the greater of the Contract Value or all of your
Premiums.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
SECTION PAGE
Definitions ................................................................ 2
Contract Schedule .......................................................... 3
1. General Provisions ..................................................... 4
2. Premiums ............................................................... 6
3. The Separate Account ................................................... 6
4. Charges and Deductions ................................................. 7
5. Transfers .............................................................. 8
6. Withdrawals ............................................................ 8
7. Payment at Death ....................................................... 9
8. Annuity Provisions ..................................................... 11
9. Annuity Options ........................................................ 11
10. Annuity Option Tables .................................................. 13
- --------------------------------------------------------------------------------
ML Life Insurance Company of New York is a stock life insurance company.
/s/ Anthony J. Vespa /s/ Barry G. Skolnick
President Secretary
Flexible Premium Deferred
Variable Annuity Contract
Nonparticipating
<PAGE>
DEFINITIONS
1. ACCUMULATION UNIT: A unit of measure used to compute the value of your
interest in a subaccount of the Separate Account prior to the Annuity Date.
2. ANNUITANT: Annuity payments may depend upon the continuation of a person's
life. That person is called the Annuitant.
3. ANNUITY DATE: The date on which annuity payments are scheduled to begin.
4. ATTAINED AGE: The age of a person on the Contract Date plus the number of
full contract years since the Contract Date.
5. BENEFICIARY: The person(s) designated by you to receive payment upon the
death of an Owner prior to the Annuity Date.
6. COMPANY: ML Life Insurance Company of New York. Also referred to as "we"
or "us".
7. CONTRACT ANNIVERSARY: The yearly anniversary of the Contract Date.
8. CONTRACT DATE: The effective date of the Contract as shown on the Contract
Schedule. This is usually the business day we receive your initial premium
at our Service Center.
9. CONTRACT VALUE: The value of your interest in the Separate Account.
10. CONTRACT YEAR: The period from the Contract Date to the first Contract
Anniversary, and thereafter, the period from one Contract Anniversary to
the next Contract Anniversary.
11. DUE PROOF OF DEATH: A certified copy of the death certificate, Beneficiary
Statement and any additional paperwork necessary to process a death claim.
12. FUND: An investment portfolio of an open-end management investment company
or unit investment trust in which a subaccount invests.
13. INDIVIDUAL RETIREMENT ACCOUNT OR ANNUITY ("IRA"): A retirement arrangement
meeting the requirements of Section 408 of the Internal Revenue Code.
14. NONQUALIFIED CONTRACT. A retirement arrangement plan other than a
qualified plan described under Section 401, 403, 408, 457 or any similar
provisions of the Internal Revenue Code.
15. OWNER: The person or persons entitled to exercise all rights under the
Contract. In this Contract, "you" means Owner.
16. PREMIUMS: The money you pay into this Contract.
17. SEPARATE ACCOUNT: This Contract is funded by a separate account of the
Company. The separate account has multiple subaccounts which invest in
shares or units of an underlying Fund. The separate account and the
subaccounts currently available with this Contract are identified in the
Contract Schedule.
-2-
<PAGE>
CONTRACT SCHEDULE
ML LIFE INSURANCE COMPANY OF NEW YORK Contract Number: [J001234567]
Home Office: New York, NY Contract Date: [April 1, 2000]
Annuity Service Center: Issue Date: [April 5, 2000]
P.O. Box 44222 Financial Consultant:
Jacksonville, FL 32231-4222 [ROBERT W. AGENT]
1-800-333-6524
- --------------------------------------------------------------------------------
OWNER INFORMATION ANNUITANT INFORMATION
- --------------------------------------------------------------------------------
Name: [JOHN T. DOE] Name: [JOHN T. DOE]
Age: [55] Age: [55] Sex: [M]
Co-Owner: [JANE A. DOE] Co-Annuitant: [JANE A. DOE]
Age: [55] Age: [55] Sex: [F]
Address: [123 ANY STREET] Annuity Date: [APRIL 1, 2035]
[ANYTOWN, US 01234-0033]
Maximum Owner Age: [90] Maximum Annuitant Age: [90]
Beneficiary: [WILLIAM M. DOE]
- --------------------------------------------------------------------------------
CONTRACT INFORMATION
- --------------------------------------------------------------------------------
CONTRACT TYPE: FLEXIBLE PREMIUM INDIVIDUAL VARIABLE ANNUITY
ASSET-BASED INSURANCE CHARGE: [1.59% maximum]
CONTRACT FEE: [$40 at the end of each Contract Year (and on full
withdrawal) if the greater of premiums less withdrawls or
Contract Value is less than $25,000.]
TRANSFER CHARGE: We reserve the right to charge [$25] for each transfer
during a Contract Year in excess of [12.]
INITIAL PREMIUM: [$70,000.] For the first 14 days following the Contract Date
all premiums will be allocated to the [Domestic Money Market
Subaccount.]
MINIMUM ADDITIONAL PREMIUM: [$100]
SEPARATE ACCOUNT: [ML of New York Variable Annuity Separate Account A] (The
"Separate Account")
SUBACCOUNTS AND ALLOCATION AFTER 14 DAYS FOLLOWING THE CONTRACT DATE:
[50% ML Basic Value Focus] [ % Davis Value]
[25% ML Domestic Money Mkt] [ % Delaware Trend]
[ % ML Fundmtl Grwth Focus] [ % H&W International VIP]
[ % ML Government Bond] [ % MFS Emerging Growth]
[25% ML Index 500] [ % MFS Growth With Income]
[ % AIM VI Int'l Equity] [ % PIMCO Total Return Bond]
[ % AIM VI Value] [ % Seligman Small Cap Value]
[ % Alliance Growth & Income] [ % Van Kampen Emerging Growth]
[ % Alliance Premier Growth] 100% TOTAL
MAXIMUM NUMBER OF SUBACCOUNTS: [10]
MINIMUM TRANSFER AMOUNT: [$100]
MAXIMUM NUMBER OF WITHDRAWLS DURING CONTRACT YEAR: [6]
MINIMUM WITHDRAWAL AMOUNT: [$100]
MINIMUM REMAINING CONTRACT VALUE AFTER WITHDRAWAL: [$5,000]
- --------------------------------------------------------------------------------
-3-
<PAGE>
1. GENERAL PROVISIONS
1.1 BENEFICIARY: The beneficiary is shown in the Contract Schedule. You may
change the beneficiary while you are alive.
You may name a beneficiary irrevocably. If you do so, you can later
change the beneficiary only with the beneficiary's written consent.
If a beneficiary does not survive you, the estate or heirs of such
beneficiary have no rights under this Contract. However, if a beneficiary
survives you but dies before the Contract Value is distributed, the
estate or heirs of such beneficiary are entitled to the death benefit
that would otherwise have been paid to such beneficiary. If no
beneficiary survives you, payment of the death benefit will be made to
your estate.
1.2 OWNERSHIP OF CONTRACT: Unless another Owner is named by the purchaser,
the purchaser is the Owner. Upon notice to us you may assign the
Contract to a new Owner. The assignment terminates all prior beneficiary
designations. When the Contract is issued or the Owner is changed, the
maximum age of the Owner (or older co-owner, if applicable) must be less
than the Maximum Owner Age shown in the Contract Schedule.
Ownership rights must be exercised by the co-owners jointly. Co-owners
are deemed to be joint tenants with right of survivorship unless they
indicate otherwise.
1.3 ANNUITANT: When an annuity option is elected, the amount payable as of
the Annuity Date is based on the age (and sex, where permissible) of the
Annuitant, the annuity option selected, and the Contract Value.
The Annuitant may be changed at any time prior to the Annuity Date. A
change of Annuitant by a non-natural owner will be treated as the death
of an Owner (see Section 7.1). When the Contract is issued or a new
Annuitant is named, the maximum age of the Annuitant (or the older
co-annuitant, if applicable) must be less than the Maximum Annuitant Age
shown in the Contract Schedule.
1.4 NOTICES, CHANGES AND CHOICES: To be effective, all notices, changes and
choices you may make under this Contract must be in writing, signed and
received by us at our Service Center, except that transfers and premium
allocations may be made by telephone by you or your representative if
authorized by you in writing. If acceptable to us, notices, changes, and
choices relating to beneficiaries, ownership, Annuitants, and Annuity
Date will take effect as of the date signed unless we have already acted
in reliance on the prior status. We are not responsible for their
validity.
1.5 RESTRICTIONS ON IRAS: If this Contract is issued as or as part of an IRA,
it may not be assigned, pledged, or transferred unless permitted by law.
1.6 MISSTATEMENT OF AGE OR SEX: If the age of the Owner (or co-owner, if
applicable) is misstated, any death benefit payable under this Contract
will be adjusted to reflect the correct age.
If the age or sex of the Annuitant (or co-annuitant, if applicable)
is misstated, annuity payments will be adjusted to reflect the
correct age and sex. Any amount we have overpaid as the result of
such misstatement will be deducted from the next payments made by us
under this Contract. Interest on the overpayment will be charged at
the rate of 6% per year. Any amount we have underpaid will be paid in
full with the next payment made by us under this Contract. We will
pay interest on the underpayment at the rate of 6% per year.
1.7 PROOF OF AGE, SEX, OR SURVIVAL: We may require satisfactory proof of age,
sex, or survival of any person on whose continued life any payment under
this Contract depends.
1.8 INCONTESTABILITY: We will not contest this Contract.
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1.9 THE CONTRACT: This Contract, any applications, and any endorsements or
riders are the entire Contract. It is issued in consideration of the
payment of the Initial Premium.
Only our President, a Vice President, Secretary, or Assistant
Secretary may change the Contract. Any change must be in writing.
At any time we may make such changes in this Contract as are required
to make it conform with any law, regulation, or ruling issued by a
government agency,
1.10 NONPARTICIPATING: This Contract is nonparticipating. It does not share in
our surplus.
1.11 DATES: Contract Years and anniversaries are measured from the Contract
Date.
1.12 CONTRACT PAYMENTS: All sums payable to or by us are payable at our
Service Center. We may require return of this Contract prior to making
payment. Paid-up annuity benefits, Contract withdrawal values and death
benefits will not be less than the minimum required by the laws of the
state in which the Contract is delivered.
1.13 PROTECTION OF PROCEEDS: Payments under this Contract may not be assigned
by the payee prior to their due dates. To the extent allowed by law,
payments are not subject to legal process for debts of a payee.
1.14 PERIODIC REPORTS: At least once a year prior to the Annuity Date we will
furnish you with a report for your Contract. It will show the current
number of Accumulation Units, the value per Accumulation Unit and the
Contract Value.
1.15 PAYMENTS UNDER THE CONTRACT: Payment generally will be made within seven
days of our receipt of a completed request, but we may defer payment if:
(a) The New York Stock Exchange is closed;
(b) Trading on the New York Stock Exchange is restricted;
(c) An emergency exists such that it is not reasonably practical to
dispose of securities in the Separate Account or to determine the
value of its assets;
(d) The Securities and Exchange Commission by order so permits for the
protection of security holders; or
(e) Payment is derived from a check used to pay a Premium which has not
cleared through the banking system.
Conditions (b), (c) and (d) will be decided by or in accordance with
rules of the Securities and Exchange Commission. Transfers also may be
deferred upon the occurrence of any of the events described above.
1.16 TAX QUALIFICATION: This Contract is intended to qualify as an annuity
contract for federal income tax purposes. To that end, the provisions of
this Contract are to be interpreted to ensure or maintain such tax
qualification, notwithstanding any other provision to the contrary.
Distributions under this Contract shall be made in a time and manner
necessary to maintain such qualification under the applicable provisions
of the Internal Revenue Code including, in the case of an owner who is a
non-natural person, the requirement to distribute the entire interest
in the Contract upon any change of the Annuitant. For this purpose, the
entire interest in the Contract is the Contract Value less any Contract
Fee under Section 4.1. We reserve the right to amend this Contract to
reflect any clarifications that may be needed or are appropriate to
maintain such qualification or to conform this Contract to any applicable
changes in the tax qualification requirements.
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2. PREMIUMS
2.1 ADDITIONAL PREMIUMS: The Minimum Additional Premium is shown on the
Contract Schedule. Premiums may be paid at any time prior to the Annuity
Date without prior notice to us. We will restrict your right to make
additional premium payments as required by law.
2.2 PREMIUM ALLOCATION: Your Premiums will be allocated to the subaccounts of
the Separate Account as you direct, as shown in the Contract Schedule.
However, for the first 14 days following the Contract Date, all Premiums
will be allocated to the subaccount shown under Initial Premium in the
Contract Schedule. If you do not give us allocation instructions with
subsequent Premiums, we will allocate those Premiums according to the
allocation instructions last received from you.
3. THE SEPARATE ACCOUNT
3.1 THE SEPARATE ACCOUNT: The Separate Account is identified in the Contract
Schedule. It is a separate investment account of ML Life Insurance
Company of New York. With respect to the Separate Account, income, gains,
and losses, whether or not realized, from assets allocated to the
Separate Account are credited to or charged against the Separate Account
without regard to other income, gains, or losses of the Company. Assets
allocated to the Separate Account remain our property but are separate
from our general account and any other separate accounts we may have.
Separate Account assets, to the extent equal to the Separate Account's
reserves and other liabilities, may not be charged with liabilities from
any other business we conduct. We reserve the right to transfer any
excess to our general account.
3.2 SUBACCOUNTS: Current subaccounts are shown in the Contract Schedule. We
reserve the right to limit the number of subaccounts in which you may
invest to the number shown in the Contract Schedule.
3.3 CHANGES TO THE SEPARATE ACCOUNT: We may make additional subaccounts
available. We reserve the right, subject to obtaining any necessary
regulatory approvals, to eliminate subaccounts; to substitute a new
portfolio for the portfolio in which a subaccount invests; to deregister
the Separate Account under the Investment Company Act of 1940 (the "1940
Act"); to make any changes required by the 1940 Act; to operate the
Separate Account as a managed investment company under the 1940 Act or
any other form permitted by law; to transfer all or a portion of the
assets of a subaccount or Separate Account to another subaccount or
Separate Account pursuant to a combination or otherwise; and to create a
new Separate Account.
3.4 NUMBER OF ACCUMULATION UNITS: For each subaccount the number of your
Accumulation Units is the sum of:
Each Premium or transfer allocated to the subaccount
Divided by
The value of an Accumulation Unit for that subaccount for the
valuation period in which we received the Premium or transfer.
The number will be adjusted for transfers from each subaccount,
withdrawals and charges. Adjustments will be made as of the valuation
period in which the transaction is effective.
3.5 VALUE OF EACH ACCUMULATION UNIT: For each subaccount, the value of an
Accumulation Unit was arbitrarily set at $10 when the subaccount was
established. The value may increase or decrease from one valuation period
to the next. For any valuation period the value is:
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The value of an Accumulation Unit for the last prior
valuation period
Multiplied by
The Net Investment Factor for that subaccount for the current
valuation period.
3.6 NET INVESTMENT FACTOR: This is an index used to measure the investment
performance of a subaccount from one valuation period to the next. For
any subaccount, we determine the Net Investment Factor by dividing the
value of the assets of the subaccount for that valuation period by the
value of the assets of the subaccount for the preceding valuation period.
We subtract from that result the daily equivalent of the asset-based
insurance charge for the valuation period. We also take reinvestment of
dividends and capital gains into account when we determine the Net
Investment Factor.
We may adjust the Net Investment Factor to make provision for any
change in tax law that requires us to pay tax on earnings in the
Separate Account and any charge that may be assessed against the
Separate Account for assessments or federal premium taxes or federal,
state or local excise, profits or income taxes measured by or
attributable to the receipt of Premiums.
3.7 VALUATION PERIOD: This is the interval from one determination of the net
asset value of a subaccount to the next. Net asset values are determined
as of the close of business on each day the New York Stock Exchange is
open.
4. CHARGES AND DEDUCTIONS
4.1 CONTRACT FEE: A Contract Fee may be deducted from the Contract Value on
each Contract Anniversary that occurs on or prior to the Annuity Date. It
may also be deducted upon a full withdrawal of the Contract Value if it
is not withdrawn on a Contract Anniversary. The amount of the Contract
Fee and circumstances under which it will be imposed are shown in the
Contract Schedule. This charge will never increase.
4.2 ASSET-BASED INSURANCE CHARGE: This charge is made to compensate us for
our expenses for administration of the Separate Account, for issue and
administration of the Contract, for providing a guaranteed minimum death
benefit, and our risks. The maximum charge equals, on an annual basis,
the percentage shown in the Contract Schedule. The asset-based insurance
charge is deducted daily from the net asset value of the subaccounts.
4.3 TAXES, FEES AND ASSESSMENTS: Any charges made by us attributable to
premium taxes imposed by a state or other government will be deducted at
the Annuity Date, except in those jurisdictions that do not allow us to
reduce our current taxable premium income by the amount of any
withdrawal or death benefit. In those jurisdictions, we will also deduct
a charge for those taxes on any withdrawal or death benefit paid
under the Contract. We may also deduct a charge for assessments or
federal premium taxes or federal, state, or local excise, profits, or
income taxes measured by or attributable to the receipt of Premiums.
We also reserve the right to deduct from the Separate Account any
taxes imposed on the Separate Account.
4.4 PAYMENT OF DEDUCTIONS: The asset-based insurance charge will be computed
and deducted from each subaccount for each day the Contract is in force.
The transfer charge described in Section 5.1 will be deducted pro rata
from the subaccounts from which Contract Value is being transferred.
Other applicable charges will be deducted from each subaccount of the
Separate Account in the ratio of your interest in each subaccount to your
Contract Value.
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5. TRANSFERS
5.1 TRANSFERS AMONG SUBACCOUNTS: You may transfer all or part of your
Contract Value among the subaccounts. The number of transfers allowed
each contract year without charge is shown in the Contract Schedule.
We reserve the right to charge for each additional transfer as shown
in the Contract Schedule. The minimum amount which may be transferred
from any subaccount in any transaction is shown in the Contract
Schedule.
An excessive number of transfers, including short-term "market timing"
transfers, may adversely affect the performance of the underlying
portfolio in which a subaccount invests. If, in our sole opinion, a
pattern of an excessive number of transfers develops for a Contract, we
reserve the right not to process a transfer request. We also reserve the
right not to process a transfer request when the sale or purchase of
shares or units of an underlying portfolio is not reasonably practicable
due to actions taken or limitations imposed by the underlying fund
5.2 DOLLAR COST AVERAGING PROGRAM: You may transfer all or part of your
Contract Value in a designated subaccount to one or more other
subaccounts pursuant to the Dollar Cost Averaging Program (DCA Program).
We will transfer a specified amount each month from the subaccount that
you designate and allocate it in accordance with your instructions to the
subaccount(s) that you select. To elect the DCA Program you need to have
a minimum amount in the designated subaccount equal to the amount to be
transferred each month multiplied by the number of monthly transfers.
5.3 ASSET ALLOCATION PROGRAM: You may choose to have your premiums and
Contract Value allocated among the subaccounts in accordance with the
Asset Allocation Model you select based on your investment goals and risk
tolerance. Each Model identifies specific subaccounts and the percentage
of premium or Contract Value which should be allocated to each of these
subaccounts. At the end of each calendar quarter we will automatically
reallocate your Contract Value to maintain the subaccounts and
percentages then in effect for your selected Model.
5.4 REBALANCING PROGRAM: You may choose the Rebalancing Program where you
select the percentage of premium and Contract Value to be allocated to
subaccounts you select based on your investment goals and risk tolerance.
We will allocate your premiums or Contract Value to these subaccounts in
accordance with the percentages you select. At the end of each calendar
quarter we will automatically reallocate your Contract Value to maintain
the particular percentage allocation among the subaccounts you have
selected.
6. WITHDRAWALS
6.1 WITHDRAWALS: You may withdraw all or part of your Contract Value. Notice
must be received by us prior to the Annuity Date. The maximum number of
withdrawals permitted each contract year is shown in the Contract
Schedule. The minimum amount of each withdrawal, and the Contract Value
that must be remaining after a withdrawal, are shown in the Contract
Schedule. For a full withdrawal this contract must be surrendered to our
Service Center.
6.2 SYSTEMATIC WITHDRAWAL PROGRAM: You may have automatic withdrawals of a
specified dollar amount made periodically. We will make these
withdrawals from the subaccounts in the same proportion as the value of
each subbaccount bears to the Contract Value. These systematic
withdrawals are in addition to the withdrawals permitted annually under
the Contract. The minimum amount of each withdrawal and the remaining
Contract Value after a withdrawal is shown in the Contract Schedule. The
Systematic Withdrawal Program cannot extend beyond the Annuity Date.
6.3 PAYMENT OF WITHDRAWALS: Unless you notify us otherwise, partial
withdrawals will be deducted from each subaccount in the ratio of your
Contract Value in each subaccount to the
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Contract Value. Withdrawals will be based on Values for the valuation
period in which the notice (and Contract if required) is received at our
Service Center.
6.4 EFFECT OF WITHDRAWALS ON DEATH BENEFIT: Withdrawals will reduce on a
proportional basis the amount payable to a beneficiary if the owner dies
prior to the Annuity Date. See Section 7.1.1.
7. PAYMENT AT DEATH
7.1 DEATH OF OWNER
(including an Annuitant who is also an Owner)
7.1.1 DEATH PRIOR TO ANNUITY DATE: If an Owner dies prior to the Annuity
Date, we will pay the beneficiary the death benefit specified below, in a
lump sum, or if requested, under an annuity option under Section 7.1.4.
If the Owner is a non-natural person, then the Annuitant, rather than the
Owner will be used to determine the death benefit. The death benefit is
determined as of the date we receive due proof of the Owner's death at
our Service Center.
(a) If the Owner is age 80 or over on the Contract Date, the death
benefit is the greater of:
(i) the premiums paid into the Contract less "adjusted"
withdrawals from the Contract; or
(ii) the Contract Value.
Each "adjusted" withdrawal equals the amount withdrawn multiplied by
(i) divided by (ii) (both determined immediately prior to the
withdrawal).
(b) If the Owner is under age 80 on the Contract Date, the death benefit
is the greatest of:
(i) the premiums paid into the Contract less "adjusted" withdrawals
from the Contract;
(ii) the Contract Value; or
(iii) the Maximum Anniversary Value.
Each "adjusted" withdrawal equals the amount withdrawn multiplied by
the greater of (i) and (iii) divided by (ii) (all of which are
determined immediately prior to the withdrawal).
The following is an explantion and example of the effect of a withdrawal
on the death benefit. For purposes of this example, (a)(i) of this
section and the greater of (b)(i) and (b)(iii) of this section are
referred to as the Guaranteed Minimum Death Benefit (GMDB).
The adjustment to a withdrawal causes the GMDB to be reduced in the same
proportion that the withdrawal reduces the Contract Value. For example:
Assume that the GMDB and Contract Value immediately prior to a withdrawal
are $50,000 and $100,000, respectively. If a $10,000 withdrawal is taken
from the Contract, the "adjusted" withdrawal would equal the amount
withdrawn, multiplied by the GMDB divided by the Contract Value ($10,000
x $50,000/$100,000 = $5,000). Since a $10,000 withdrawal reduces the
Contract Value by 10% ($10,000/$100,000) the GMDB is also reduced by
10% or $5,000 (10% x $50,000).
7.1.2 MAXIMUM ANNIVERSARY VALUE: The Maximum Anniversary Value is equal to the
greatest anniversary value for the Contract. An anniversary value is
equal to the Contract Value on a Contract Anniversary increased by
premium payments and decreased by "adjusted" withdrawals, as defined in
Section 7.1.1(b), since that anniversary.
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To determine the Maximum Anniversary Value, we will calculate an
anniversary value for each Contract Anniversary through the earlier of
your attained age 80 or the anniversary on or prior to your date of
death. If the Contract has co-owners, we will calculate the anniversary
value through the earlier of the older Owner's attained age 80 or the
anniversary on or prior to any Owner's date of death if a death
benefit is payable.
We will calculate the Maximum Anniversary Value based on your age (or
the age of the older Owner, if the Contract has co-owners) on the
Contract Date. Subsequent changes in Owner will not increase the period
of time used to determine the Maximum Anniversary Value. If a new Owner
has not reached attained age 80 and is older than the Owner whose age is
being used to determine the Maximum Anniversary Value at the time of the
ownership change, the period of time used in the calculation of the
Maximum Anniversary Value will be based on the age of the new Owner at
the time of the ownership change. If at the time of an ownership change
the new Owner is attained age 80 or over, we will use the Maximum
Anniversary Value as of the anniversary on or prior to the ownership
change, increased by premium payments and decreased by "adjusted"
withdrawals, as defined in Section 7.1.1(b), since that anniversary.
If we have not received the beneficiary's instructions for making payment
within 60 days following our receipt of the Owner's certified
death certificate, due proof of death will be deemed to have been
received by us on the 60th day, and payment will be made in a lump sum.
7.1.3 CONTRACT CONTINUATION OPTION: If the surviving spouse of the deceased
Owner is the beneficiary, such spouse may choose to continue this
Contract. The spouse shall become the "new" owner and the beneficiary
until a new beneficiary is named. If the death benefit which would
have been paid to the surviving spouse is greater than the Contract
Value as of the date we determine the death benefit, we will increase the
Contract Value of the continued Contract to equal the death benefit we
would have paid to the surviving spouse. Your interest in each subaccount
will be increased by the ratio of your Contract Value in each subaccount
to your Contract Value.
7.1.4 ANNUITY OPTION: If the beneficiary is the surviving spouse of the
deceased Owner, he or she may choose to receive payments under any of the
annuity options of this Contract. For any other beneficiary, only those
options are available that provide for full payment of such Owner's
interest in the Contract:
(a) Within five years of the date of such Owner's death;
(b) Over the lifetime of such beneficiary of this Contract; or
(c) Over a period that does not exceed the life expectancy, as defined by
Internal Revenue Service regulations, of such beneficiary of this
Contract.
Subparagraphs (b) and (c) apply only to individuals, and such payments
must start within one year of the date of such Owner's death. For IRAs,
any annuity option chosen must meet the requirements of the Internal
Revenue Code.
7.1.5 DEATH AFTER ANNUITY DATE: See Section 9.
7.2 DEATH OF ANNUITANT WHO IS NOT AN OWNER
7.2.1 If the Annuitant dies prior to the Annuity Date and the Annuitant is not
the Owner, the Owner, provided the Owner is a natural person, may
designate a new Annuitant. If one is not designated, the Owner will
become the Annuitant. If the Owner is a non-natural person, the death
of the Annuitant shall be treated as the death of the Owner.
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8. ANNUITY PROVISIONS
8.1 ANNUITY DATE: The Annuity Date may not be later than the date the
Annuitant would reach the Maximum Annuitant Age shown in the Contract
Schedule. If you have not chosen an Annuity Date, it will be the date
the Annuitant would reach the Maximum Annuitant Age shown in the Contract
Schedule. For an IRA, if you have not chosen an Annuity Date, it will be
the date the Annuitant reaches age 70 1/2. You may change the Annuity
Date prior to the Annuity Date.
8.2 AMOUNT OF ANNUITY PAYMENTS: Charges made by us for premium taxes will be
deducted from your Contract Value at the Annuity Date. The remaining
value will be transferred to our general account and applied to the
annuity option you selected, at our then current annuity purchase rates,
which will be furnished on request. The annuity purchase rates will
assume interest of not less than 3%. They will not be less favorable than
those shown in the annuity tables in this Contract. The tables show the
minimum guaranteed amount of each monthly payment for each $1,000 so
applied, according to the sex (where permissible) and age at the Annuity
Date of the Annuitant. The tables are based on the 1983 Table "a" for
Individual Annuity Valuation, projected forward to 2000 with interest at
3%.
8.3 ANNUITY OPTIONS: If you have not chosen an annuity option described in
Section 9, Option 4 will apply with a 10-year guarantee period. You may
change options prior to the Annuity Date. An option not set forth in the
Contract may be chosen if acceptable to us.
8.4 MINIMUM ANNUITY PAYMENT: If the Contract Value to be applied at the
Annuity Date is less than $2,000, we may pay such amount in a lump sum.
If any payment would be less than $20, we may change the frequency so
payments are at least $20 each.
9. ANNUITY OPTIONS
9.1 OPTION 1 - PAYMENTS OF A FIXED AMOUNT: Equal payments in the amount
chosen will be made until the amount of your Contract Value transferred
to our general account adjusted for interest credited of at least 3% is
exhausted. The term over which such payments are made must be at least
five years.
9.2 OPTION 2 - PAYMENTS FOR A FIXED PERIOD: Payments will be made for the
period chosen. The period must be at least 5 years.
9.3 OPTION 3 - LIFE ANNUITY: Payments will be made for the life of the
Annuitant. Payments will cease with the last payment due prior to the
Annuitant's death.
9.4 OPTION 4 - LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 5,10,15 OR 20 YEARS:
Payments will be made for the guaranteed period chosen (5, 10, 15 or 20
years) and as long thereafter as the Annuitant lives.
9.5 OPTION 5 - LIFE ANNUITY WITH GUARANTEED RETURN OF CONTRACT VALUE:
Payments will be made until the sum of the annuity payments equals the
amount of your Contract Value transferred to our general account at the
Annuity Date, and as long thereafter as the Annuitant lives.
9.6 OPTION 6 - JOINT AND SURVIVOR LIFE ANNUITY: Payments will be made during
the lifetimes of the Annuitant and a designated second person. The amount
of such payments will not change by reason of the death of the first
joint Annuitant to die.
9.7 OPTION 7 - JOINT AND SURVIVOR LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR
5, 10, 15 OR 20 YEARS: Payments will be made for the guaranteed period
chosen (5, 10, 15 or 20 years) and as long thereafter as either of the
Annuitants lives.
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9.8 OPTION 8 - IRA: This option is available only for IRAs. Annuity
payments may be based on (a) the life expectancy of the Annuitant, (b)
the joint life expectancy of the Annuitant and his or her spouse, or (c)
the life expectancy of the surviving spouse if the Annuitant dies before
the Annuity Date. Payments will be made annually. Each annual payment
will be equal to the remaining value on that January 1, divided by the
applicable current life expectancy, as defined by Internal Revenue
Service regulations. Each subsequent payment will be made on the
anniversary of the Annuity Date. Interest will be credited at our current
rate for this option. The rate will not be less than 3%. On the death of
the measuring life or lives prior to full distribution of the remaining
value, the remaining value will be paid to the beneficiary in a lump sum.
9.9 DEATH OF ANNUITANT: On the death of the Annuitant while guaranteed
amounts remain unpaid under Option 1, 2, 4, 5 or 7, the Owner may choose
either:
(a) To have payments continue for the amount or period guaranteed; or
(b) To receive the present value of the remaining guaranteed payments in
a lump sum.
If an Owner dies while guaranteed amounts remain unpaid, the present
value may be paid in a lump sum to the beneficiary, if the beneficiary so
elects.
Present values will be computed at the interest rate that was used to
compute the amount of the initial annuity payment.
9.10 PAYMENT: Except for Option 8, monthly payments will be made beginning on
the Annuity Date, but prior to the Annuity Date you may choose a less
frequent payment interval. The amount of each payment on an annual,
semiannual, or quarterly basis will be not less than the monthly payment
computed from the annuity tables in this Contract multiplied by the
appropriate factor.
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10. ANNUITY OPTION TABLES
MINIMUM GUARANTEED MONTHLY ANNUITY PAYMENT FOR EACH $1,000 APPLIED UNDER OPTION
OPTION 2 (PAYMENTS FOR A FIXED PERIOD)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Years Each Years Each Years Each Years Each
Payable Payment Payable Payment Payable Payment Payable Payment
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5 17.91 9 10.53 13 7.71 17 6.23
6 15.14 10 9.61 14 7.26 18 5.96
7 13.16 11 8.86 15 6.87 19 5.73
8 11.68 12 8.24 16 6.53 20 5.51
-------------------------------------------------------------------------
</TABLE>
OPTION 3 (LIFE ANNUITY), OPTION 4 (LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED)
AND OPTION 5 (RETURN OF CONTRACT VALUE GUARANTEED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
*Adjusted Life 10 Years 20 Years Return of *Adjusted Life 10 Years 20 Years Return of
Male Age Annuity Guaranteed Guaranteed Contract Value Female Age Annuity Guaranteed Guaranteed Contract Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56 4.42 4.37 4.20 4.21 56 4.12 4.10 4.01 4.00
57 4.51 4.45 4.27 4.28 57 4.20 4.17 4.07 4.06
58 4.60 4.54 4.33 4.35 58 4.28 4.25 4.13 4.13
59 4.70 4.63 4.39 4.43 59 4.36 4.33 4.19 4.20
60 4.80 4.73 4.46 4.51 60 4.45 4.41 4.26 4.27
61 4.92 4.83 4.52 4.60 61 4.55 4.50 4.33 4.35
62 5.04 4.93 4.59 4.68 62 4.65 4.59 4.40 4.43
63 5.17 5.05 4.65 4.78 63 4.76 4.69 4.47 4.52
64 5.30 5.16 4.72 4.88 64 4.87 4.80 4.54 4.61
65 5.45 5.29 4.78 4.98 65 5.00 4.91 4.61 4.70
66 5.61 5.42 4.85 5.09 66 5.13 5.03 4.68 4.80
67 5.77 5.55 4.91 5.20 67 5.27 5.15 4.76 4.91
68 5.95 5.69 4.97 5.32 68 5.42 5.29 4.83 5.02
69 6.14 5.84 5.03 5.45 69 5.58 5.42 4.90 5.14
70 6.34 5.99 5.08 5.58 70 5.75 5.57 4.97 5.27
71 6.55 6.14 5.13 5.72 71 5.94 5.73 5.03 5.40
72 6.78 6.30 5.18 5.86 72 6.14 5.89 5.09 5.54
73 7.02 6.46 5.23 6.02 73 6.36 6.06 5.15 5.69
74 7.28 6.63 5.27 6.18 74 6.60 6.23 5.21 5.85
75 7.55 6.80 5.31 6.34 75 6.86 6.42 5.25 6.02
76 7.84 6.97 5.34 6.52 76 7.13 6.61 5.30 6.20
77 8.16 7.15 5.37 6.71 77 7.43 6.80 5.34 6.39
78 8.49 7.32 5.40 6.90 78 7.75 7.00 5.37 6.59
79 8.85 7.50 5.42 7.11 79 8.10 7.20 5.40 6.80
80 9.24 7.76 5.44 7.32 80 8.47 7.40 5.43 7.02
81 9.65 7.84 5.46 7.55 81 8.87 7.60 5.45 7.26
82 10.09 8.01 5.47 7.79 82 9.31 7.79 5.47 7.51
83 10.55 8.17 5.49 8.04 83 9.79 7.99 5.48 7.77
84 11.05 8.32 5.49 8.31 84 10.31 8.17 5.49 8.05
85 11.58 8.47 5.50 8.59 85 10.87 8.53 5.50 8.36
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OPTION 6 (JOINT AND SURVIVOR LIFE ANNUITY)
- -------------------------------------------------------------------------------------------------------------------------------
*Adjusted *Adjusted Male Age *Adjusted
Female ---------------------------------------------------------------------------------------------------------- Female
Age 50 55 60 65 70 75 80 85 Age
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3.46 3.54 3.60 3.65 3.69 3.71 3.72 3.73 50
55 3.58 3.70 3.80 3.88 3.94 3.98 4.01 4.03 55
60 3.68 3.85 4.00 4.13 4.24 4.32 4.37 4.40 60
65 3.77 3.98 4.20 4.40 4.59 4.73 4.83 4.90 65
70 3.84 4.09 4.38 4.67 4.96 5.21 5.41 5.55 70
75 3.89 4.18 4.52 4.92 5.34 5.74 6.10 6.38 75
80 3.92 4.24 4.63 5.11 5.67 6.26 6.85 7.37 80
85 3.95 4.28 4.71 5.25 5.93 6.72 7.58 8.45 85
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Information for ages or Annuity Options not shown will be furnished on request.
*"Adjusted Age" is the actual age on the Annuity Dated reduced by one year for
each 10 full years between January 1, 2000 and the Annuity Date. For example:
<TABLE>
<CAPTION>
---------------------------------------------------------
ANNUITY DATE ADJUSTED AGE
---------------------------------------------------------
<S> <C>
Before 2010 Actual Age
2010 to 2019 Subtract 1 year from actual age
2020 to 2029 Subtract 2 years from actual age
2030 to 2039 Subtract 3 years from actual age
2040 to 2049 Subtract 4 years from actual age
---------------------------------------------------------
</TABLE>
-13-
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
This endorsement is part of the Contract. The Contract, as amended, is intended
to qualify as an individual retirement annuity under Section 408(b) of the
Internal Revenue Code of 1986 (the "Code"). The following provisions replace any
contrary provisions of the Contract:
1. The Owner shall be the Annuitant. Any provision of the Contract that would
allow joint ownership, or that would allow more than one person to share
distributions, is deleted.
2. The Contract is not transferable or assignable (other than pursuant to a
divorce or separation instrument in accordance with Code Section 408(d)(6))
and is established for the exclusive benefit of the Owner and his or her
Beneficiaries. It may not be sold, assigned, alienated or pledged as
security for a loan or other obligation.
3. The Owner's entire interest in the Contract shall be nonforfeitable.
4. Premium payments shall be in cash. The following purchase payments shall be
accepted under this Contract:
a. Rollover contributions described in Code Sections 402(c),
403(a)(4), 403(b)(8) and 408(d)(3),
b. Amounts transferred from another individual retirement account or
annuity, and
c. Contributions made pursuant to a Simplified Employee Pension as
provided in Code Section 408(k), up to the limits specified in
Code Section 408(j).
The Owner must determine whether any premium payment qualifies as a
permissible contribution subject to favorable tax treatment under the Code.
The Owner must also determine whether such amount qualifies as a
permissible rollover contribution for income tax purposes.
5. This Contract does not require fixed premium payments. Any refund of
premiums (other than excess contributions) will be applied before the
close of the calendar year following the year of the refund toward the
payment of additional premiums or the purchase of additional benefits.
6. If this Contract is used in conjunction with a SEP-IRA plan under section
408(k) of the Code, the annuity option tables attached to this endorsement
shall be substituted for the tables set forth in the Contract.
7. The Annuity Date is the date the Owner's entire Contract Value will be
distributed or commence to be distributed. The Annuity Date shall be no
later than April 1 of the calendar year following the calendar year in
which the Owner attains age 70 1/2.
8. Any amounts payable during the Owner's lifetime shall commence on or before
the Annuity Date and shall be payable in substantially equal amounts, at
least annually. Payment shall be made as follows:
a. in a lump sum, or
b. over the Owner's life, or
c. over the lives of the Owner and his or her designated Beneficiary,
or
d. over a period certain not exceeding the Owner's life expectancy, or
e. over a period certain not exceeding the joint and last survivor
life expectancy of the Owner and his or her designated Beneficiary.
-1-
<PAGE>
If the Owner's entire interest is to be distributed in other than a lump
sum, then the minimum amount to be distributed each year (commencing with
the calendar year following the calendar year in which the Owner attains
age 70 1/2 and each year thereafter) shall be determined in accordance with
Code Section 408(b)(3) and the regulations thereunder, including the
incidental death benefit requirement of Code Section 401(a)(9)(G), the
regulations thereunder, and the minimum distribution incidental death
benefit requirement of Proposed Income Tax Regulation Section
1.401(a)(9)-2. Payments must be either nonincreasing or may increase only
as provided in Proposed Income Tax Regulation Section 1.401(a)(9)-1, Q&A
F-3. It is the Owner's responsibility to make sure that the required
minimum distribution is taken in a timely manner and that the correct
amount is distributed.
9. If the Owner dies after distribution of his or her interest has commenced,
the remaining portion of such interest will continue to be distributed at
least as rapidly as under the method of distribution being used prior to
his or her death.
If the Owner dies before distribution has begun, the entire interest must
be distributed no later than December 31 of the calendar year in which the
fifth anniversary of the Owner's death occurs. However, proceeds which are
payable to a named Beneficiary who is a natural person may be distributed
in substantially equal installments over the lifetime of the Beneficiary or
a period certain not exceeding the life expectancy of the Beneficiary
provided such distribution begins not later than December 31 of the
calendar year immediately following the calendar year of the Owner's death.
If the Beneficiary is the Owner's surviving spouse, the Beneficiary may
elect not later than December 31 of the calendar year in which the fifth
anniversary of the Owner's death to receive equal payments over the life or
life expectancy of the surviving spouse commencing at any date prior to the
date on which the Owner would have attained age 70 1/2. Minimum payments
will be calculated in accordance with Code Section 408(b)(3).
Any amount paid to any of the Owner's children will be treated as if it had
been paid to the surviving spouse if the remainder of the interest becomes
payable to the surviving spouse when the child reaches the age of majority.
If the Owner dies before his or her entire interest has been distributed,
no additional premiums will be accepted under this policy after his or her
death unless the Beneficiary is the Owner's surviving spouse.
10. If the Owner's spouse is not the named Beneficiary, the method of
distribution selected will assure that at least 50% of the present value of
the amount available for distribution is paid within the Owner's life
expectancy and that such method of distribution complies with Code Section
408(b)(3).
11. Life expectancy and joint and last survivor expectancy shall be determined
by use of the expected return multiples in Tables V and VI of Treasury
Regulation Section 1.72-9 in accordance with Code Section 408(b)(3). In the
case of distributions under paragraph (8) of this endorsement, the life
expectancy of the Owner and his or her Beneficiary will be initially
determined on the basis of his or her attained age in the year the Owner
reaches 70 1/2. In the case of a distribution under paragraph (9) of this
endorsement, life expectancy will be initially determined on the basis of
the Beneficiary's attained age in the year distributions begin. If the
Owner (or his or her spouse) so elects prior to the time distributions
begin, the Owner's life expectancy and, if applicable, his or her spouse's
life expectancy will be recalculated annually based on the Owner's attained
age(s) in the year for which the required distribution is being determined.
The life expectancy of a nonspouse Beneficiary will not be recalculated.
-2-
<PAGE>
The annual distribution required to be made by the Annuity Date is for the
calendar year in which the Owner reaches 70 1/2. Annual payments for
subsequent years, including the year in which the Annuity Date occurs, must
be made by December 31 of that year. The amount distributed for each year
shall equal or exceed the Contract Value as of the close of business on
December 31 of the preceding year, divided by the applicable life
expectancy or joint and last survivor life expectancy.
12. This endorsement is intended to qualify the Contract under the provisions
of Code Section 408 for federal income tax purposes. The provisions of the
Contract in conjunction with the provisions of this endorsement are to be
interpreted to maintain such qualification, notwithstanding any other
provisions to the contrary. We reserve the right to amend or modify the
Contract or this endorsement to the extent necessary to comply with any
law, regulation, ruling or other requirement necessary to establish or
maintain the tax advantages available to an individual retirement annuity
under Code Section 408(b) and any other applicable law. We will send you a
copy of any such amendment to this endorsement. The Owner is responsible
for determining that premiums, distributions, and other transactions under
the Contract comply with applicable law.
13. This endorsement is effective as the Contract Date.
ML LIFE INSURANCE COMPANY OF NEW YORK
By: /s/ Barry G. Skolnick
----------------------------------
Secretary
-3-
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
TAX-SHELTERED ANNUITY ENDORSEMENT
This endorsement is part of the Contract. The Contract, as amended, is intended
to qualify as a tax-sheltered annuity under Section 403(b) of the Internal
Revenue Code of 1986 (the "Code"). The following provisions replace any contrary
provisions of the Contract:
1. The Annuitant is the sole Owner. The Contract is not transferable and may
not be sold, assigned, discounted or pledged as security for a loan or as a
security for any other obligation, other than to ML Life Insurance Company
of New York ("we," "us" or "our"). Annuity payments under the Contract
cannot be surrendered, commuted, assigned, encumbered or anticipated in any
way. Your interest in the Contract is nonforfeitable. Only your spouse may
be designated as a Contingent Owner.
2. Rollover and transfer amounts from plans that are not subject to the
Employee Retirement Income Security Act of 1974, as amended, will be
accepted as premium payments, as permitted by law. Other premium payments,
including premium payments subject to Code Section 402(g), will not be
accepted.
3. Distributions under the Contract must satisfy the minimum distribution
rules in Code Section 403(b)(10), and the regulations thereunder. The
Annuity Date may not be later than the Required Beginning Date.
Required Beginning Date means April 1 of the calendar year following the
later of (i) the calendar year you attain age 70 1/2, or (ii) the calendar
year you retire. Except in the case of a governmental plan or a church plan
(as defined in Code Section 401(a)(9)(C)), if you are a 5% owner (as
defined in Code Section 416), Required Beginning Date means April 1 of the
calendar year following the calendar year you attain age 70 1/2.
4. Any amount which becomes payable to you during your lifetime must begin on
or before the Annuity Date and will be payable to you in substantially
equal amounts, no less frequently than annually. Your entire interest in
the Contract must be distributed under an Option described in paragraphs 5
to 9 of this endorsement.
5. Under "OPTION 1 - PAYMENTS OF A FIXED AMOUNT," the period over which
annuity payments are made may not exceed your life expectancy, or the joint
life expectancy of you and your designated Beneficiary, at the Annuity
Date. If you die before the Annuity Date, the period may not exceed the
life expectancy of your designated Beneficiary.
6. Under "OPTION 2 - PAYMENTS FOR A FIXED PERIOD," the period may not exceed
your life expectancy, or the joint life expectancy of you and your
designated Beneficiary, at the Annuity Date. If you die before the Annuity
Date, the period may not exceed the life expectancy of your designated
Beneficiary.
7. Under "OPTION 4 - LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20
YEARS," the guaranteed period selected may not exceed your life expectancy,
or the joint life expectancy of you and your designated Beneficiary, at the
Annuity Date. If you die before the Annuity Date, the guaranteed period
selected may not exceed the life expectancy of your designated Beneficiary.
8. Under "OPTION 5 - LIFE ANNUITY WITH GUARANTEED RETURN OF CONTRACT VALUE,"
the period required for distribution of the Contract Value applied under
this option may not exceed your life expectancy, or the joint life
expectancy of you and your designated Beneficiary, at the Annuity Date. If
you die before the Annuity Date, the period required for distribution of
such Contract Value may not exceed the life expectancy of your designated
Beneficiary.
-1-
<PAGE>
9. If "OPTION 6 - JOINT AND SURVIVOR LIFE ANNUITY" is chosen, the second
person must be your spouse, if you have a spouse. If you die before the
Annuity Date, Option 6 is not available to your Beneficiary.
10. If you die after distribution of your interest has begun, the remaining
portion of such interest will continue to be distributed at least as
rapidly as under the method of distribution being used immediately
preceding your death.
If you die before distribution has begun, the entire interest will be
distributed no later than December 31 of the calendar year in which the
fifth anniversary of your death occurs. However, proceeds which are payable
to a named Beneficiary who is a natural person may be distributed in
substantially equal installments over the lifetime of the Beneficiary or
over a period certain not exceeding the life expectancy of the Beneficiary,
provided such distribution commences not later than December 31 of the
calendar year following the calendar year in which your death occurred.
If you die before distribution of your interest has begun and your
Beneficiary is your surviving spouse, your surviving spouse may elect not
later than December 31 of the calendar year in which the fifth anniversary
of your death occurs to receive equal or substantially equal payments over
his or her life or life expectancy commencing at any date prior to the date
on which you would have attained age 70 1/2. Payments will be calculated
in accordance with Code Section 403(b)(10) and the regulations thereunder.
For the purposes of this requirement, any amount paid to your child shall
be treated as if it had been paid to your surviving spouse if the remainder
of the interest becomes payable to your surviving spouse when the child
reaches the age of majority.
11. For purposes of the foregoing provisions, life expectancy and joint and
last survivor expectancy shall be determined by use of the expected return
multiples in Tables V and VI of Treasury Regulation Section 1.72-9 in
accordance with Code Section 403(b)(10) and the regulations thereunder. In
the case of distributions under paragraphs 5 to 9 of this endorsement, your
life expectancy or, if applicable, the joint and last survivor expectancy
of you and your Beneficiary, will be initially determined on the basis of
attained ages in the year you reach 70 1/2. In the case of distributions
under paragraph 10 of this endorsement, life expectancy shall be initially
determined on the basis of the Beneficiary's attained age in the year
distributions are required to commence. Unless you (or your spouse) elect
otherwise prior to the date distributions are required to commence, your
life expectancy and, if applicable, your spouse's life expectancy shall be
recalculated annually based on attained ages in the year for which the
required distribution is being determined. The life expectancy of a
nonspouse Beneficiary shall not be recalculated.
In the case of a distribution other than in the form of life income or
joint life income, the annual distribution required to be made by the
Required Beginning Date is for the calendar year in which the Owner reaches
age 70 1/2. Annual payments for subsequent years, including the year in
which the Required Beginning Date occurs, must be made by December 31 of
the year. The amount distributed for each year shall equal or exceed the
Contract Value as of the close of business on December 31 of the preceding
year, divided by the applicable life expectancy or joint and last survivor
expectancy.
12. Distributions from the Contract attributable to contributions made
pursuant to a salary reduction agreement may be made only (1) after
you attain age 59 1/2; (2) upon separation from service; (3) upon
death or disability; or, (4) for an amount not greater than the total
of such contributions in the case of hardship. Any withdrawal from
the Contract shall effect a surrender of the Contract to the extent
of such withdrawal. Any premium payments thereafter may be made only
with our consent.
-2-
<PAGE>
13. You, your spouse, or your former spouse who is the alternate payee under a
Qualified Domestic Relations Order ("Distributee"), may elect to have any
portion of an eligible rollover distribution paid directly to an eligible
retirement plan. This is called a direct rollover. An eligible rollover
distribution ("Distribution") is any distribution unless it is:
(a) One of a series of substantially equal periodic payments (made at
least annually) for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of
the Distributee and the Distributee's designated Beneficiary, or
for a specified period of ten years or more; or
(b) Any required distribution under Code Section 403(b)(10); or
(c) Any part of a distribution that is not includible in income.
An eligible retirement plan is a Code Section 403(b) annuity or an
individual retirement plan as defined in Code Section 7701(a)(37) ("IRA")
that accepts Distributions. However, in the case of a Distribution to the
surviving spouse, an eligible retirement plan is an IRA.
14. We reserve the right to amend or modify the Contract or this endorsement to
the extent necessary to comply with any law, regulations, ruling or other
requirement necessary to establish or maintain the tax advantages,
protections or benefits available to a tax-sheltered annuity under Code
Section 403(b) and any other applicable law. You are responsible for
determining that premiums, distributions and other transactions under the
Contract comply with applicable law.
This endorsement controls over any contrary provisions of the Contract.
ML LIFE INSURANCE COMPANY OF NEW YORK
By: /s/ Barry G. Skolnick
----------------------------------
Secretary
-3-
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
QUALIFIED PLAN ENDORSEMENT
The following tables are substituted for the tables set forth in the
contract to which this endorsement is attached:
ANNUITY OPTION TABLES
MINIMUM GUARANTEED MONTHLY ANNUITY PAYMENT FOR EACH $1,000 APPLIED UNDER OPTION
OPTION 2 (PAYMENTS FOR A FIXED PERIOD)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Years Each Years Each Years Each Years Each
Payable Payment Payable Payment Payable Payment Payable Payment
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5 17.91 9 10.53 13 7.71 17 6.23
6 15.14 10 9.61 14 7.26 18 5.96
7 13.16 11 8.86 15 6.87 19 5.73
8 11.68 12 8.24 16 6.53 20 5.51
-------------------------------------------------------------------------
</TABLE>
OPTION 3 (LIFE ANNUITY), OPTION 4 (LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED)
AND OPTION 5 (RETURN OF CONTRACT VALUE GUARANTEED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
*Adjusted Life 10 Years 20 Years Return of *Adjusted Life 10 Years 20 Years Return of
Age Annuity Guaranteed Guaranteed Contract Age Annuity Guaranteed Guaranteed Contract
Value Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56 4.27 4.23 4.11 4.10 71 6.24 5.94 5.09 5.56
57 4.35 4.31 4.17 4.17 72 6.46 6.10 5.14 5.70
58 4.44 4.39 4.23 4.24 73 6.69 6.26 5.19 5.85
59 4.53 4.48 4.30 4.31 74 6.93 6.44 5.24 6.01
60 4.63 4.57 4.36 4.39 75 7.20 6.61 5.28 6.18
61 4.73 4.66 4.43 4.47 76 7.48 6.79 5.32 6.36
62 4.84 4.77 4.50 4.56 77 7.79 6.98 5.36 6.54
63 4.96 4.87 4.56 4.65 78 8.12 7.16 5.39 6.74
64 5.09 4.98 4.63 4.74 79 8.47 7.35 5.41 6.95
65 5.22 5.10 4.70 4.84 80 8.85 7.54 5.44 7.17
66 5.37 5.23 4.77 4.95 81 9.26 7.72 5.45 7.40
67 5.52 5.35 4.84 5.06 82 9.69 7.90 5.47 7.65
68 5.68 5.49 4.90 5.17 83 10.17 8.08 5.48 7.91
69 5.86 5.63 4.97 5.29 84 10.68 8.25 5.49 8.18
70 6.04 5.78 5.03 5.42 85 11.23 8.41 5.50 8.48
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OPTION 6 (JOINT AND SURVIVOR LIFE ANNUITY)
- -----------------------------------------------------------------------------------------------------------------------------
*Adjusted *Adjusted Age of Joint Annuitant *Adjusted
Age of ---------------------------------------------------------------------------------------------------------- Age of
Annuitant 50 55 60 65 70 75 80 85 Annuitant
- -----------------------------------------------------------------------------------------------------------------------------
100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3 100% 2/3
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3.47 3.72 3.57 3.86 3.65 4.01 3.72 4.17 3.77 4.35 3.80 4.54 3.83 4.74 3.84 4.93 50
55 3.57 3.86 3.70 4.02 3.83 4.19 3.94 4.39 4.02 4.60 4.09 4.82 4.13 5.05 4.16 5.28 55
60 3.65 4.01 3.83 4.19 4.01 4.40 4.18 4.64 4.32 4.89 4.43 5.17 4.51 5.44 4.56 5.72 60
65 3.72 4.17 3.94 4.39 4.18 4.64 4.42 4.92 4.64 5.24 4.83 5.58 4.98 5.94 5.08 6.28 65
70 3.77 4.35 4.02 4.60 4.32 4.89 4.64 5.24 4.98 5.64 5.29 6.08 5.55 6.54 5.74 7.00 70
75 3.80 4.54 4.09 4.82 4.43 5.17 4.83 5.58 5.29 6.08 5.76 6.65 6.20 7.26 6.56 7.88 75
80 3.83 4.74 4.13 5.05 4.51 5.44 4.98 5.94 5.55 6.54 6.20 7.26 6.87 8.07 7.49 8.94 80
85 3.84 4.93 4.16 5.28 4.56 5.72 5.08 6.28 5.74 7.00 6.56 7.88 7.49 8.94 8.45 10.12 85
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Information for ages and Annuity Options not shown will be furnished on request.
*"Adjusted Age" is the actual age on the Annuity Date reduced by one year for
each 10 full years between January 1, 2000 and the Annuity Date. For example:
<TABLE>
<CAPTION>
---------------------------------------------------------
ANNUITY DATE ADJUSTED AGE
---------------------------------------------------------
<S> <C>
Before 2010 Actual Age
2010 to 2019 Subtract 1 year from actual age
2020 to 2029 Subtract 2 years from actual age
2030 to 2039 Subtract 3 years from actual age
2040 to 2049 Subtract 4 years from actual age
---------------------------------------------------------
</TABLE>
The above tables are based on the combined male/female
1983 Table "a" with interest at 3%.
ML LIFE INSURANCE COMPANY OF NEW YORK
By: /s/ Barry G. Skolnick
-----------------------------------------
Secretary
MLNY034
<PAGE>
<TABLE>
<S><C>
----------------------
MERRILL LYNCH
[ICON] ANNUITIES RETIREMENT POWER-SM- APPLICATION FOR A
VARIABLE ANNUITY
In this form, the terms YOU and YOUR refer to the owner and the co-owner if there is one. The terms WE, OUR and US refer to
ML Life Insurance Company of New York.
1 CONTRACT INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch account number | State of purchase | What type of contract [ ] Non-Qualified [ ] IRA [ ] 403(b) Transfer
Are you applying for? (Non-ERISA Assets)*
*Note: Please complete a 403(b)
transfer form.
- ------------------------------------------------------------------------------------------------------------------------------------
2 OWNER INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
Full name (first, middle initial, last) | [ ] Male | Birthdate (Must be under age 90)
| [ ] Female (m/d/y)
- ------------------------------------------------------------------------------------------------------------------------------------
Address | City |State | Zip code | Social Security or Tax ID Number
- ------------------------------------------------------------------------------------------------------------------------------------
3 CO-OWNER INFORMATION - Not available for IRA or 403(b) contracts.
- ------------------------------------------------------------------------------------------------------------------------------------
Full name (first, middle initial, last) | [ ] Male | Birthdate (Must be under age 90)
| [ ] Female (m/d/y)
- ------------------------------------------------------------------------------------------------------------------------------------
Address | City |State | Zip code | Social Security or Tax ID Number
- ------------------------------------------------------------------------------------------------------------------------------------
4 ANNUITANT INFORMATION - Complete only if annuitant is different from the owner named in Section 2.
- ------------------------------------------------------------------------------------------------------------------------------------
Full name (first, middle initial, last) | [ ] Male | Birthdate (Must be under age 90)
| [ ] Female (m/d/y)
- ------------------------------------------------------------------------------------------------------------------------------------
Address | City |State | Zip code | Social Security or Tax ID Number
- ------------------------------------------------------------------------------------------------------------------------------------
5 BENEFICIARY INFORMATION - Do not complete if the contract will be held in a Merrill Lynch Retirement Plan Account.
- ------------------------------------------------------------------------------------------------------------------------------------
Full name (first, middle initial, last) | Relationship | Birthdate (m/d/y) | Social Security or Tax ID Number
- ------------------------------------------------------------------------------------------------------------------------------------
Full name (first, middle initial, last) | Relationship | Birthdate (m/d/y) | Social Security or Tax ID Number
- ------------------------------------------------------------------------------------------------------------------------------------
Full name (first, middle initial, last) | Relationship | Birthdate (m/d/y) | Social Security or Tax ID Number
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIAL INSTRUCTIONS - Please list any additional primary beneficiaries or contingent beneficiaries and distribution of funds
between two or more beneficiaries.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
6 INITIAL PREMIUM
- -------------------------------------------------------
(Minimum $25,000)
$
- -------------------------------------------------------
7 CONTRIBUTIONS FOR IRAs - Complete this section ONLY if you are purchasing an IRA contract which will not be held in a
Merrill Lynch Retirement Plan Account. Please specify premium amount by the tax year and type of contribution.
- ------------------------------------------------------------------------------------------------------------------------------------
Current Tax Year | Prior Tax Year | Rollover Amount | Transfer Amount
$ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
ML LIFE INSURANCE COMPANY OF NEW YORK
A Subsidiary of Merrill Lynch & Co., Inc.
MLNY036 Page 1 of 3
(New 9/99)
<PAGE>
8 CONTRACT REPLACEMENT INFORMATION - Is any existing annuity or life insurance contract being (or has any such contract
been) surrendered, lapsed, converted, borrowed against or otherwise reduced in value or replaced in connection with the purchase
of this variable annuity? Is any such action likely to occur?
[ ] YES - Please provide details below. State replacement regulations apply. [ ] NO
- ------------------------------------------------------------------------------------------------------------------------------------
Company | Contract number | Issue date (m/d/yyyy) | Original premium
$
- ------------------------------------------------------------------------------------------------------------------------------------
9 ASSET ALLOCATION PROGRAM - Under the Asset Allocation Program, we allocate premiums and rebalance your contract value quarterly
based on the investment options and percentages for your selected Asset Allocation Model. Would you like to select the Asset
Allocation Program?
[ ] YES - Please select one of the following models. (Do not complete Section 12) [ ] NO
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] Capital Preservation [ ] Current Income [ ] Income and Growth [ ] Long-Term Growth [ ] Aggressive Growth
- ------------------------------------------------------------------------------------------------------------------------------------
10 REBALANCING PROGRAM - Under the Rebalancing Program, we allocate premiums and rebalance your contract value quarterly based on
the investment options and percentages you have selected. Would you like to select the Rebalancing Program?
[ ] YES - Please provide allocations in the Initial Premium column in Section 12. [ ] NO
- ------------------------------------------------------------------------------------------------------------------------------------
11 PREMIUM ALLOCATION - Choose up to 18 investment options.
DOLLAR COST AUTOMATIC
INITIAL AVERAGING INVESTMENT
INVESTMENT OPTIONS PREMIUM PROGRAM FEATURE
- --------------------------------------------------------------------------------
[ML Basic Value Focus] | %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
[ML Domestic Money Mkt] | %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
[ML Fundamental Growth Focus] | %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
[ML Government Bond] | %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
[ML Index 500] | %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
[AIM VI International Equity] | %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
[AIM VI Value] | %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
[Alliance Growth & Income] | %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
[Alliance Premier Growth] | %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
[Davis Value] | %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
[Delaware Trend] | %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
[H&W International VIP] | %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
[MFS Emerging Growth] | %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
[MFS Growth With Income] | %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
[PIMCO Total Return Bond] | %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
[Seligman Small Cap Value] | %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
[Van Kampen Emerging Growth] | %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
| %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
| %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
| %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
| %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
| %| [ ] From %| %|
[ ] To
- --------------------------------------------------------------------------------
================================================================================
TOTAL 100% 100% 100%
12 SYSTEMATIC WITHDRAWAL PROGRAM - The Systematic Withdrawal Program allows you to take withdrawals from the contract automatically
on a periodic basis. Would you like to make systematic withdrawals?
[ ] YES - Please provide details below. [ ] NO
- ------------------------------------------------------------------------------------------------------------------------------------
Withdrawal amount (minimum $100) | Frequency [ ] Monthly [ ] Semi-annually | Start date (m/d/yyyy)
$ [ ] Quarterly [ ] Annually
- ------------------------------------------------------------------------------------------------------------------------------------
Withdrawals may be taxable and if you are under age 59 1/2 may also be subject to a 10% federal penalty tax.
If the contract is a 403(b) annuity and you wish to take withdrawals, you must complete a 403(b) Withdrawal Request Form.
13 DOLLAR COST AVERAGING PROGRAM - Would you like to use this program to reallocate a fixed amount each month from a designated
investment option to other selected investment options? (Not available if the Asset Allocation or Rebalancing Program has been
selected.)
[ ] YES - Please provide details below and in the Dollar Cost Averaging Program column in Section 12. [ ] NO
- ------------------------------------------------------------------------------------------------------------------------------------
Amount to be transferred monthly (minimum $100) | Start date (m/d/yyyy) | Number of transfers (minimum 3 months)
$
- ------------------------------------------------------------------------------------------------------------------------------------
MLNY036 Page 2 of 3
(New 9/99)
<PAGE>
14 AUTOMATIC INVESTMENT FEATURE - The Automatic Investment Feature allows you to make additional premium payments to this
[ ] YES - Please provide details below and in the Automatic Investment Feature column in Section 12. (Do not include allocations
for this program in Section 12 if the Asset Allocation or Rebalancing Program has been selected.) [ ] NO
- ------------------------------------------------------------------------------------------------------------------------------------
Amount of periodic premium |Frequency [ ] Monthly [ ] Semi-annually |Start date (m/d/yyyy) |Optional end date (m/d/yyyy)
(minimum $100) [ ] Quarterly [ ] Annually
- ------------------------------------------------------------------------------------------------------------------------------------
15 TAX EQUITY AND FISCAL RESPONSIBILITY ACT NOTICE - Withdrawals are subject to federal income tax withholding unless you choose
not to have tax withheld. Withholding applies only to the taxable portion of your withdrawal. If you choose not to have tax
withheld, or you do not have enough tax withheld, you may have to pay estimated tax. You may incur penalties under the estimated
tax rules if your withholding and estimated tax payments are not sufficient. In addition, some states require state taxes to be
withheld when federal taxes are withheld. If you live in one of these states, we will withhold state taxes as required by your
state.
IF YOU DO NOT CHECK A BOX, WE WILL WITHHOLD TAX [ ] No income tax to be withheld
FROM YOUR WITHDRAWALS AT THE RATE OF 10%. [ ] Income tax to be withheld _________% (use whole percentages)
If the contract is a 403(b) annuity, we are required to apply federal tax withholding of 20% on payments which are not directly
transferred to an IRA or other 403(b) plan.
16 OWNER SIGNATURE(S) VERIFIES:
- YOU HAVE READ THE ABOVE STATEMENTS AND REPRESENT THAT THEY ARE COMPLETE AND TRUE TO THE BEST OF YOUR KNOWLEDGE.
- YOU AGREE THAT THIS APPLICATION SHALL BE PART OF THE VARIABLE ANNUITY CONTRACT.
- YOU HAVE RECEIVED A COPY OF THE CURRENT PROSPECTUS BEFORE YOU PURCHASED THIS CONTRACT AND DETERMINED THE VARIABLE ANNUITY
APPLIED FOR MEETS YOUR INVESTMENT OBJECTIVES, FINANCIAL SITUATION AND NEEDS. YOU UNDERSTAND THAT IT IS A LONG TERM
INVESTMENT TO HELP MEET YOUR RETIREMENT NEEDS AND FINANCIAL GOALS.
- YOU UNDERSTAND THAT THE CONTRACT VALUE AND DEATH BENEFIT MAY INCREASE OR DECREASE DEPENDING ON THE PERFORMANCE OF THE VARIOUS
INVESTMENT OPTIONS YOU SELECT. ACCORDINGLY, YOUR CONTRACT VALUE COULD BE WORTH LESS THAN THE PREMIUMS YOU PAID, EVEN IF YOU
MAKE NO WITHDRAWALS. THERE IS NO GUARANTEED MINIMUM CONTRACT VALUE.
- ------------------------------------------------------------------------------------------------------------------------------------
UNDER PENALTY OF PERJURY YOU CERTIFY THAT:
1. YOUR SOCIAL SECURITY OR TAX ID NUMBER OR NUMBERS INDICATED ON PAGE 1 ARE CORRECT.
2. YOU ARE NOT SUBJECT TO BACKUP WITHHOLDING. (YOU ARE REQUIRED TO CROSS OUT THIS STATEMENT IF YOU HAVE BEEN NOTIFIED BY THE IRS
THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING.)
THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.
- ------------------------------------------------------------------------------------------------------------------------------------
Owner's signature | Date (m/d/yyyy) | Co-owner's signature | Date (m/d/yyyy)
- ------------------------------------------------------------------------------------------------------------------------------------
17 FINANCIAL CONSULTANT'S VERIFICATION - The Financial Consultant selling this annuity must complete and sign.
1. Has a current prospectus been given to the client? [ ]YES [ ]NO
2. Is any existing annuity or life insurance contract being (or has any such contract been) surrendered, lapsed, converted,
borrowed against or otherwise reduced in value or replaced in connection with this application? Is any such action likely to
occur? [ ]YES [ ]NO
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Consultant's signature |Date (m/d/yyyy) | FC number or Pool authorizing | FC Telephone number
number
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
AT YOUR SERVICE ML LIFE INSURANCE COMPANY OF NEW YORK
ANNUITY SERVICE CENTER
Our business hours are
8:30 a.m. to 6:00 p.m. Eastern Our mailing address: Our address for overnight mail:
Time, Monday through Friday. P.O. Box 44222 4804 Deer Lake Drive East
Jacksonville, FL 32231-4222 Jacksonville, FL 32216
Our automated voice response
system is available 24 hours a
day, 7 days a week. Our telephone number: 1-800-333-6524 Our FAX number: 1-888-329-6544
</TABLE>
MLNY036 Page 3 of 3
(New 9/99)
<PAGE>
SECOND AMENDMENT TO REIMBURSEMENT AGREEMENT
THIS AMENDMENT is made as of the 9th day of October, 1997, pursuant to
Paragraph 2 of the Reimbursement Agreement, dated as of April 23, 1985 and
amended as of February 11, 1992 (as so amended, the "Existing Agreement"),
between MERRILL LYNCH ASSET MANAGEMENT, L.P. ("MLAM") and MERRILL LYNCH LIFE
AGENCY, INC. ("MLLA").
MLAM and MLLA hereby amend the Existing Agreement to any extent necessary
to clarify the parties' intent and agreement that the aggregate operating
expenses for which reimbursement is provided pursuant to Paragraph 1 of the
Existing Agreement do not include any distribution or other separate fees that
may be imposed solely on shares other than Class A shares of any Portfolio of
the Fund.
Capitalized terms used herein without definition and defined in the
Existing Agreement shall have the same meaning herein as therein.
MERRILL LYNCH LIFE AGENCY, INC.
By: /s/ Mary Beth Donovan
-------------------------------
Name: Mary Beth Donovan
Title: Vice President
MERRILL LYNCH ASSET MANAGEMENT, L.P.
By: /s/ Philip L. Kirstein
------------------------------
Name: Philip L. Kirstein
Title: Senior Vice President
<PAGE>
AMENDMENT TO FUND PARTICIPATION AGREEMENT
Reference is made to the Fund Participation Agreement dated as of October
3rd, 1995, and amended as of April 15, 1998 between MERRILL LYNCH VARIABLE
SERIES FUNDS, INC., an open-end management investment company organized as a
Maryland corporation ( the "Fund"), and ML LIFE INSURANCE COMPANY OF NEW YORK,
a life insurance company organized under the laws of the state of New York (the
"Company"), on its own behalf and on behalf of each segregated asset account of
the Company set forth on Schedule A as attached thereto (the "Existing
Agreement"). This amendment to the Existing Agreement is made as of April 3,
2000.
WHEREAS, the several series of shares of the Fund offered by the Fund to
the Company and the Accounts are set forth on Schedule B attached to the
Existing Agreement.
The Fund and the Company hereby amend and restate said Schedule B to the
Existing Agreement as attached hereto, and all references in the Existing
Agreement to the Portfolios shall be deemed to refer to the series of shares of
the Fund as set forth on Schedule B as attached hereto.
Capitalized terms used herein without definition and defined in the
Existing Agreement shall have the same meaning herein as therein.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Amendment to Fund Participation Agreement as of the date and
year first above written.
ML LIFE INSURANCE COMPANY OF NEW YORK
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
MERRILL LYNCH VARIABLE SERIES FUNDS,INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
<PAGE>
AMENDMENT NO. 2
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated December 18, 1996 as
amended May 1, 1997, by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation, A I M Distributors, Inc., a Delaware corporation, and ML Life
Insurance Company of New York, a New York life insurance company, is hereby
amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced
with the following:
SCHEDULE A
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
FUNDS AVAILABLE UNDER THE CONTRACTS SEPARATE ACCOUNTS UTILIZING THE FUNDS CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
- ------------------------------------------- ---------------------------------------- -------------------------------------------
<S> <C> <C>
AIM V.I. Capital Appreciation Fund Merrill Lynch Life Variable Annuity Merrill Lynch Retirement Plus
AIM V.I. International Equity Fund Separate Account A Merrill Lynch Investor Life
AIM V.I. Value Fund
Merrill Lynch Variable Life Separate Merrill Lynch Investor Life Plus
Account
Merrill Lynch Estate Investor I
Merrill Lynch Life Variable Life Merrill Lynch Estate Investor II
Separate Account II Prime Plan V, VI, 7
Prime Plan Investor
Merrill Lynch Retirement Power
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Effective Date: April 3, 2000
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: By:
--------------------------- ---------------------------
Assistant Secretary President
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: By:
--------------------------- ---------------------------
Assistant Secretary President
(SEAL)
ML LIFE INSURANCE COMPANY OF NEW YORK
Attest: By:
--------------------------- ---------------------------
Assistant Secretary President
(SEAL)
<PAGE>
EXHIBIT 8(q)
AMENDMENT NO. 2 TO PARTICIPATION AGREEMENT
Pursuant to the Participation Agreement made and entered into as of the
29th day of November 1996, and amended on May 1, 1997, by and among
MFS-Registered Trademark- Variable Insurance Trust-SM- ML Life Insurance
Company of New York, and Massachusetts Financial Services Company, the
parties hereby agree to an amended Schedule A as attached hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to the Participation Agreement to be executed in its name and on
its behalf by its duly authorized representative. The Amendment shall take
effect as of April 3, 2000.
ML LIFE INSURANCE COMPANY
OF NEW YORK
By its authorized officer,
By: /s/ Barry G. Skolnick
-------------------------------------
Title: Senior Vice President
----------------------------------
Date:
-----------------------------------
MFS-Registered Trademark- VARIABLE
INSURANCE TRUST-SM-
By its authorized officer,
By: /s/ James R. Bordewick, Jr.
-------------------------------------
James R. Bordewick, Jr.
Assistant Secretary
Date:
-----------------------------------
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
By its authorized officer,
By: /s/ Jeffrey L. Shames
-------------------------------------
Jeffrey L. Shames
Chairman and Chief Executive Officer
Date:
-----------------------------------
37287
<PAGE>
As of April 3, 2000
SCHEDULE A
ACCOUNT, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ML of New York Variable Merrill Lynch MFS Emerging Growth Series
Annuity Separate Retirement Plus MFS Research Series
Account A
(8/14/91) --------------------------------------------------------------
Merrill Lynch MFS Emerging Growth Series
Retirement Power MFS Growth with Income Series
--------------------------------------------------------------
ML of New York Variable Merrill Lynch MFS Emerging Growth Series
Life Separate Account II - Investor Life MFS Research Series
(12/4/91) - Investor Life Plus
- Estate Investor I
- Estate Investor II
--------------------------------------------------------------
ML of New York Prime Plan V, VI, 7 MFS Emerging Growth Series
Variable Life Separate Prime Plan Investor MFS Research Series
Account
(11/19/90)
- -----------------------------------------------------------------------------------------------
</TABLE>
37287
<PAGE>
PARTICIPATION AGREEMENT
Among
DAVIS VARIABLE ACCOUNT FUND, INC.
DAVIS DISTRIBUTORS, LLC.
and
ML LIFE INSURANCE COMPANY OF NEW YORK
THIS AGREEMENT, made and entered into this __ day of ________, 2000, by
and among ML LIFE INSURANCE COMPANY OF NEW YORK (hereinafter the "Insurance
Company"), a New York corporation, on its own behalf and on behalf of each
segregated asset account of the Insurance Company set forth on Schedule A hereto
as may be amended from time to time (each such account hereinafter referred to
as the "Account"), DAVIS VARIABLE ACCOUNT FUND, INC., a Maryland Corporation
(the "Company") and Davis Distributors, LLC., a Delaware Limited Liability
Company ("Davis Distributors").
WHEREAS, the Company engages in business as an open-end management
investment company and is available to act as the investment vehicle for
variable annuity and life insurance contracts to be offered by separate accounts
of insurance companies which have entered into participation agreements
substantially similar to this Agreement ("Participating Insurance Companies")
and for qualified retirement and pension plans ("Qualified Plans"); and
WHEREAS, the beneficial interest in the Company is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Company has obtained an order from the Securities and
Exchange Commission (the "SEC"), granting Participating Insurance Companies and
their separate accounts exemptions from the provisions of Sections 9(a), 13(a),
15(a), and 15(b) of the Investment Company Act of 1940, as amended, (the "1940
Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Company to be sold to and held by Qualified
Plans and by variable annuity and variable life insurance separate accounts of
Participating Insurance Companies that may or may not be affiliated with one
another (the "Mixed and Shared Funding Exemptive Order"); and
1
<PAGE>
WHEREAS, the Company has registered as an open-end management
investment company under the 1940 Act and the offering of its shares has been
registered under the Securities Act of 1933, as amended (hereinafter the "1933
Act"); and
WHEREAS, Davis Distributors is duly registered as a broker-dealer under
the Securities Exchange Act of 1934, as amended, (the "1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
(the "NASD"); and
WHEREAS, Davis Distributors is a wholly owned subsidiary of Davis
Selected Advisers, L.P. which is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities law; and
WHEREAS, the Insurance Company has registered under the 1933 Act, or
will register under the 1933 Act, certain variable annuity or variable life
insurance contracts identified on Schedule B to this Agreement, as amended from
time to time hereafter by mutual written agreement of all the parties hereto
(the "Contracts"); and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the board of directors of the
Insurance Company on the date shown for that Account on Schedule A hereto, to
set aside and invest assets attributable to the Contracts; and
WHEREAS, the Insurance Company has registered or will register each
Account as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurance Company intends to purchase shares in the Funds
listed on Schedule C to this Agreement as amended from time to time, at net
asset value on behalf of each Account to fund the Contracts;
NOW, THEREFORE, in consideration of their mutual promises, the
Insurance Company, the Company and Davis Distributors agree as follows:
ARTICLE I. SALE OF COMPANY SHARES
1.1. Davis Distributors agrees to sell to the Insurance Company those
shares of the Company which each Account orders, executing such orders on a
daily basis at the net asset value next computed after receipt by the Company or
its designee of the order for the shares of the Company. For purposes of this
Section 1.1, the Insurance Company, or its designee, shall be the designee of
the Company for receipt of such orders from the Accounts and receipt by such
designee shall constitute receipt by the Company; provided that the Company
receives notice of such order by 10:00 a.m., Eastern Time, on the next following
Business Day. In this Agreement, "Business Day" shall mean any day on which the
New York Stock Exchange is open for trading and on which the Company calculates
its net asset value pursuant to the rules of the SEC.
2
<PAGE>
1.2. The Company agrees to make its shares available for purchase at
the applicable net asset value per share by the Insurance Company and its
Accounts on those days on which the Company is required to calculate its Funds'
net asset values pursuant to rules of the SEC and the Company shall calculate
its Funds' net asset values on each day on which the New York Stock Exchange is
open for trading. Notwithstanding the foregoing, the directors of the Company
may refuse to sell shares of any Fund to any person, or suspend or terminate the
offering of shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of the
directors of the Company acting in good faith and in light of their fiduciary
duties under federal and any applicable state laws, necessary in the best
interests of the shareholders of that Fund.
1.3. The Company agrees that shares of the Company will be sold only to
Accounts of Participating Insurance Companies and to Qualified Plans. No shares
of any Fund will be sold to the general public.
1.4. The Company will not sell its shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Sections 2.4, 3.4, 3.5, and Article VII of this Agreement is in effect
to govern such sales.
1.5. The Company agrees to redeem, on the Insurance Company's request,
any full or fractional shares of the Company held by the Account, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Company or its designee of the request for redemption. For purposes of this
Section 1.5, the Insurance Company shall be the designee of the Company for
receipt of requests for redemption from each Account and receipt by that
designee shall constitute receipt by the Company; provided that the Company
receives notice of the request for redemption by 10:00 a.m., Eastern Time, on
the next following Business Day.
1.6. The Insurance Company agrees to purchase and redeem the shares of
each Fund listed on Schedule C to this Agreement, as amended from time to time,
and offered by the then-current prospectus of the Company in accordance with the
provisions of that prospectus.
1.7. Each purchase, redemption and exchange order placed by the
Insurance Company shall be placed separately for each Fund and shall not be
netted with respect to any Fund. However, with respect to payment of the
purchase price by the Insurance Company and of redemption proceeds by the
Company, the Insurance Company and the Company shall net purchase and redemption
orders with respect to each Fund and shall transmit one net payment for all of
the Funds. Payment shall be in federal funds transmitted by wire. In the event
of net purchase, the Insurance Company shall pay for the Funds' shares by 3:00
p.m. Eastern time on the next Business Day after an order to purchase shares is
made in accordance with the provisions of Section 1.1 hereof. For the purpose of
Section 2.9, upon receipt by the Company of the wired federal funds, such funds
shall cease to be the responsibility of the Insurance Company and shall become
the responsibility of the Company. In the event of net redemption, the Company
shall pay the redemption proceeds by 3:00 p.m. Eastern
3
<PAGE>
time on the next Business Day after an order to redeem the shares is made in
accordance with the provisions of Section 1.5 hereof. However, payment may be
postponed under unusual circumstances, such as when normal trading is not
taking place on the New York Stock Exchange, an emergency as defined by the SEC
exists, or as permitted by the SEC.
1.8. Issuance and transfer of the Company's shares will be by book
entry only. Stock certificates will not be issued to the Insurance Company or
any Account. Shares ordered from the Company will be recorded in an appropriate
title for each Account or the appropriate subaccount of each Account.
1.9. The Company shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Insurance Company of any income,
dividends or capital gain distributions payable on the Funds' shares. The
Insurance Company hereby elects to receive all income dividends and capital gain
distributions payable on a Fund's shares in additional shares of that Fund. The
Insurance Company reserves the right to revoke this election and to receive all
such income dividends and capital gain distributions in cash. The Company shall
notify the Insurance Company of the number of shares issued as payment of
dividends and distributions.
1.10. The Company shall make the closing net asset value per share for
each Fund available to the Insurance Company on a daily basis as soon as
reasonably practical after the closing net asset value per share is calculated
and shall use its best efforts to make those per-share net asset values
available by 6:30 p.m., Eastern Time. In the event that the Company is unable to
meet the 6:30 p.m. Eastern time stated herein, it shall provide additional time
for the Insurance Company to place orders for the purchase and redemption of
shares. Such additional time shall be equal to the additional time which the
Company takes to make the closing net asset value available to the Insurance
Company. In accordance with Section 8.3(a)(iii) hereof, if the Company provides
materially incorrect share net asset value information, the Company will make an
adjustment to the number of shares purchased or redeemed for the Account to
reflect the correct net asset value per share. Any material error in the
calculation or reporting of net asset value per share, dividend or capital gains
information shall be reported to the Insurance Company promptly upon discovery.
4
<PAGE>
ARTICLE II. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
2.1. The Insurance Company represents, warrants and agrees that the
offerings of the Contracts are, or will be, registered under the 1933 Act; that
the Contracts will be issued and sold in compliance in all material respects
with all applicable federal and state laws and that the sale of the Contracts
shall comply in all material respects with applicable state insurance
suitability requirements. The Insurance Company further represents that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established the Account prior to any issuance or
sale thereof as a segregated asset account under New York insurance law and has
registered, or warrants and agrees that prior to any issuance or sale of the
Contracts it will register, the Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts.
2.2. The Company warrants and agrees that Company shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sale in compliance with the laws of the State of Maryland and all
applicable federal securities laws and that the Company is and shall remain
registered under the 1940 Act. The Company warrants and agrees that it shall
amend the registration statement for its shares under the 1933 Act and the 1940
Act from time to time as required in order to effect the continuous offering of
its shares. The Company shall register and qualify the shares for sale in
accordance with the laws of the various states only if and to the extent deemed
advisable by the Company or Davis Distributors.
2.3. The Company represents that each Fund is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), and warrants and agrees that it will maintain
each Fund's qualification (under Subchapter M or any successor or similar
provision) and that it will notify the Insurance Company immediately upon having
a reasonable basis for believing that any Fund has ceased to so qualify or might
not so qualify in the future.
2.4. Subject to Section 2.3 and Article VI, the Insurance Company
represents that the Contracts are currently treated as annuity or life insurance
contracts under applicable provisions of the Code and warrants and agrees that
it will make all reasonable efforts to maintain such treatment and that it will
notify the Company and Davis Distributors immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. The Company may elect to make payments to finance distribution
expenses pursuant to Rule 12b-1 under the 1940 Act. To the extent that it
decides to finance distribution expenses pursuant to Rule 12b-1, the Company
undertakes to have a board of directors, a majority of whom are not interested
persons of the Company, formulate and approve any plan under Rule 12b-1 to
finance distribution expenses.
5
<PAGE>
2.6. The Company and Davis Distributors represent that the Company's
investment policies, fees, and expenses are and shall at all times remain in
compliance with applicable state securities laws, if any, and with the insurance
laws of the State of New York and the Company and Davis Distributors represent
that their respective operations are and shall at all times remain in material
compliance with applicable state securities laws and with the insurance laws of
the State of New York to the extent required to perform this Agreement. The
Company and Davis Distributors also represent that the Company will comply with
any additional state insurance law restrictions, as provided in writing by the
Insurance Company to the Company, including the furnishing of information not
otherwise available to the Insurance Company which is required by state
insurance law to enable the Insurance Company to obtain the authority needed to
issue the Contracts in any applicable state.
2.7. The Company represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and represents, warrants and
agrees that it does and will comply in all material respects with the 1940 Act
and the laws of the State of Maryland.
2.8. Davis Distributors represents that it is and warrants that it
shall remain duly registered as a broker-dealer under all applicable federal and
state securities laws and agrees that it shall perform its obligations for the
Company in compliance in all material respects with the laws of the State of New
Mexico and any applicable state and federal securities laws.
2.9. The Company and Davis Distributors represent and warrant that all
of their officers, employees, investment advisers, investment sub-advisers, and
other individuals or entities described in Rule 17g-1 under the 1940 Act dealing
with the money and/or securities of the Company are, and shall continue to be at
all times, covered by a blanket fidelity bond or similar coverage for the
benefit of the Company in an amount not less than the minimum coverage required
currently by Rule 17g-1 under the 1940 Act or related provisions as may be
promulgated from time to time. That fidelity bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
6
<PAGE>
ARTICLE III. DISCLOSURE DOCUMENTS AND VOTING
3.1. Davis Distributors shall provide the Insurance Company (at the
Insurance Company's expense) with as many copies of the current prospectus for
each Fund listed on Schedule C herein as the Insurance Company may reasonably
request for distribution to prospective purchasers of contracts. Davis
Distributors shall also provide the Insurance Company (free of charge) with as
many copies of the current prospectus for each Fund listed on Schedule C herein
as the Insurance Company may reasonably request for distribution to existing
Contract owners whose Contracts are funded by shares of such Fund(s). If
requested by the Insurance Company in lieu thereof, the Company shall provide
such documentation (including a final copy of the new prospectus as set in type
at the Company's expense, or, at the request of the Insurance Company, as a
diskette in the form sent to financial printers) and other assistance as is
reasonably necessary in order for the Insurance Company once each year (or more
frequently if the prospectus for the Company is amended) to have the prospectus
for the Contracts and the Company's prospectus printed together in one document.
With respect to any prospectuses of the Funds that are printed in
combination with any one or more Contract prospectuses .(the "Prospectus
Booklet"), the costs of printing Prospectus Booklets for distribution to
existing Contract owners shall be prorated to the Company based on (a) the ratio
of the number of pages of the prospectuses for the Funds included in the
Prospectus Booklet to the number of pages in the Prospectus Booklet as a whole;
and (b) the ratio of the number of Contract owners with Contract value allocated
to the Funds to the total number of Contract owners; provided however, that the
Insurance Company shall bear all printing expenses of such combined documents
where used for distribution to prospective purchasers or to owners of existing
Contracts not funded by the Funds.
3.2. The Company's prospectus shall state that the Statement of
Additional Information for the Company (the "SAI") is available from the
Company, and Davis Distributors (or the Company), at its expense, shall print
and provide the SAI free of charge to the Insurance Company and to any owner of
a Contract or prospective owner who requests the SAI.
3.3. The Company, at its expense, shall provide the Insurance Company
with copies of its proxy material, reports to shareholders and other
communications to shareholders in such quantity as the Insurance Company shall
reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law, the Insurance Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Company shares of each Fund in accordance with
instructions received from Contract owners; and
(iii) vote Company shares for which no instructions have been
received in the same proportion as Company shares of that
Fund for which instructions have been received;
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so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners. The
Insurance Company reserves the right to vote Company shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that each of
their separate accounts participating in the Company calculates voting
privileges in a manner consistent with the standards set forth on Schedule D
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies. The Insurance
Company shall fulfill its obligation under, and abide by the terms and
conditions of, the Mixed and Shared Funding Exemptive Order.
3.5. The Company will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Company will either
provide for annual meetings (except insofar as the SEC may interpret Section 16
of the 1940 Act not to require such meetings) or, as the Company currently
intends, comply with Section 16(c) of the 1940 Act as well as with Sections
16(a) and, if and when applicable, 16(b). Further, the Company will act in
accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors and with whatever rules the SEC
may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Insurance Company shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company, Davis Selected Advisers, L.P.,
or Davis Distributors is named, at least five Business Days prior to its use. No
such material shall be used if the Company or its designee reasonably objects to
such use within five Business Days after receipt of such material.
4.2. The Insurance Company shall not give any information or make any
representations or statements on behalf of the Company or concerning the Company
in connection with the sale of the Contracts other than the information or
representations contained in the Company's registration statement, prospectus or
SAI, as that registration statement, prospectus or SAI may be amended or
supplemented from time to time, or in reports or proxy statements for the
Company, or in sales literature or other promotional material approved by the
Company or its designee or by Davis Distributors, except with the permission of
the Company or Davis Distributors.
4.3. The Company, Davis Distributors, or its designee shall furnish, or
shall cause to be furnished, to the Insurance Company or its designee, each
piece of sales literature or other promotional material in which the Insurance
Company or the Account is named at least five Business Days prior to its use. No
such material shall be used if the Insurance Company or its designee reasonably
objects to such use within five Business Days after receipt of that material.
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4.4. The Company and Davis Distributors shall not give any information
or make any representations on behalf of the Insurance Company or concerning the
Insurance Company, any Account, or the Contracts other than the information or
representations contained in a registration statement, prospectus or statement
of additional information for the Contracts, as that registration statement,
prospectus or statement of additional information may be amended or supplemented
from time to time, or in published reports for any Account which are in the
public domain or approved by the Insurance Company for distribution to Contract
owners, or in sales literature or other promotional material approved by the
Insurance Company or its designee, except with the permission of the Insurance
Company.
4.5. The Company and Davis Distributors shall adopt and implement
procedures reasonably designed to ensure that information concerning the
Insurance Company, any of its affiliates, or the Contracts which is intended
only for use only by brokers or agents selling the shares (i.e., information
that is not intended for distribution to shareowners or prospective shareowners)
is so used, and neither the Insurance Company nor any of its affiliates shall be
liable for any losses, damages, or expenses relating to the improper use of such
broker only materials.
4.6. The Insurance Company shall adopt and implement procedures
reasonably designed to ensure that information concerning the Company which is
intended only for use by brokers or agents selling the Contracts (i.e.
information that is not intended for distribution to Contract owners or
prospective Contract owners) is so used, and neither the Company nor Davis
Distributors shall be liable for any losses, damages, or expenses relating to
the improper use of such broker only materials. The parties hereto agree that
this section is not intended to designate or otherwise imply that the Insurance
Company is an underwriter or distributor of the Company's shares.
4.7. The Company will provide to the Insurance Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, proxy statement, piece of sales literature or
other promotional material, application for exemption, request for no-action
letter, and any amendment to any of the above, that relate to the Company or its
shares, contemporaneously with the filing of the document with the SEC, the
NASD, or other regulatory authorities.
4.8. The Insurance Company will provide to the Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, solicitation for voting instructions, piece of
sales literature and other promotional material, application for exemption,
request for no-action letter, and any amendment to any of the above, that
relates to the Contracts or the Account, contemporaneously with the filing of
the document with the SEC, the NASD, or other regulatory authorities.
4.9. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements,
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media, sales literature (I.E., any written communication distributed or
made
9
<PAGE>
generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, shareholder
newsletters, seminar texts, reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials or
other communications distributed or made generally available to some or all
agents or employees, and registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy materials.
4.10. At the request of any party to this Agreement, each other party
will make available to the other party's independent auditors and/or
representative of the appropriate regulatory agencies, all records, data and
access to operating procedures that may be reasonably requested.
4.11. Davis Distributors agrees to provide the Insurance Company within
five (5) business days after the end of a calendar month, the following
information with respect to each Fund of the Company set forth on Schedule C,
each as of the last business day of such calendar month: the Fund's ten largest
portfolio holdings (based on the percentage of the Fund's net assets); the five
industry sectors in which the Fund's investments are most heavily weighted; the
relative proportion of the Fund's net assets invested in equity, bond, and cash
instruments, respectively; the five geographic regions (by country) in which the
Fund's investments are most heavily weighted; and year-to-date SEC standardized
performance data. In addition, Davis Distributors agrees to provide to the
Insurance Company, within fifteen (15) business days after the end of a calendar
quarter, the following information with respect to each Fund of the Company set
forth on Schedule C, each as of the last business day of such quarter: a market
commentary from the portfolio manager of such Fund; and a complete list of
portfolio holdings (which will not be audited or reconciled against the Fund's
books and records). Also, Davis Distributors agrees to provide to the Insurance
Company, with in fifteen (15) business days after a request is submitted to
Davis Distributors by the Insurance Company, the following information with
respect to each Fund of the Company set forth on Schedule A, each as of the date
or dates specified in such request; net asset value; net asset value per share;
and other Share information. Davis Distributors acknowledges that such
information may be furnished to the Insurance Company's internal or independent
auditors and to the insurance departments of the various jurisdictions in which
the Insurance Company does business.
ARTICLE V. FEES AND EXPENSES
5.1. The Company and Davis Distributors shall pay no fee or other
compensation to the Insurance Company under this agreement.
5.2. All expenses incident to performance by the Company under this
Agreement shall be paid by the Company. The Company shall see to it that any
offering of its shares is registered and that all of its shares are authorized
for issuance in accordance with applicable federal law and, if and to the extent
deemed advisable by the Company or Davis Distributors, in accordance with
applicable state laws prior to their sale. The Company shall bear the cost of
registration and
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<PAGE>
qualification of the Company's shares, preparation and filing of the Company's
prospectus and registration statement, proxy materials and reports, setting the
prospectus in type, setting in type and printing the proxy materials and reports
to shareholders, the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Company's
shares.
5.3. The Insurance Company shall bear the expenses of printing and
distributing to Contract owners the Contract prospectuses and of distributing to
Contract owners the Company's prospectus, proxy materials and reports.
ARTICLE VI. DIVERSIFICATION
6.1. The Company will comply with Section 817(h) of the Code and
Treasury Regulation 1.817-5 relating to the diversification requirements for
variable annuity, endowment, modified endowment or life insurance contracts and
any amendments or other modifications to that Section or Regulation at all times
necessary to satisfy those requirements. In the event of a breach of this
Article VI by the Company, it will take all reasonable steps (a) to notify the
Insurance Company of such breach and (b) to adequately diversify the Fund so as
to achieve compliance within the grace period afforded by Regulation 1.817-5.
6.2. The Company shall provide the Insurance Company or its designee
with reports certifying compliance with Section 817(h) diversification and
Subchapter M qualification requirements on a quarterly basis.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The directors of the Company will monitor each Fund for the
existence of any material irreconcilable conflict between the interests of the
variable Contract owners of all separate accounts investing in the Company and
the participants of all Qualified Plans investing in the Company. An
irreconcilable material conflict may arise for a variety of reasons, including:
(a) an action by any state insurance regulatory authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or regulations,
or a public ruling, private letter ruling, no-action or interpretive letter, or
any similar action by insurance, tax, or securities regulatory authorities; (c)
an administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Fund are being managed; (e) a difference
in voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by a Participating Insurance
Company to disregard the voting instructions of variable contract owners. The
directors of the Company shall promptly inform the Insurance Company if they
determine that an irreconcilable material conflict exists and the implications
thereof. The directors of the Company shall have sole authority to determine
whether an irreconcilable material conflict exists and their determination shall
be binding upon the Insurance Company.
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7.2. The Insurance Company and Davis Distributors each will report
promptly any potential or existing conflicts of which it is aware to the
directors of the Company. The Insurance Company and Davis Distributors each will
assist the directors of the Company in carrying out their responsibilities under
the Mixed and Shared Funding Exemptive Order, by providing the directors of the
Company with all information reasonably necessary for them to consider any
issues raised. This includes, but is not limited to, an obligation by the
Insurance Company to inform the directors of the Company whenever Contract owner
voting instructions are to be disregarded. These responsibilities shall be
carried out by the Insurance Company with a view only to the interests of the
Contract owners and by Davis Distributors with a view only to the interests of
Contract owners and Qualified Plan participants.
7.3. If it is determined by a majority of the directors of the Company,
or a majority of the directors who are not interested persons of the Company,
any of its Funds, or Davis Distributors (the "Independent Directors"), that a
material irreconcilable conflict exists, the Insurance Company and/or other
Participating Insurance Companies or Qualified Plans that have executed
participation agreements shall, at their expense and to the extent reasonably
practicable (as determined by a majority of the Independent Directors), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (1) withdrawing the assets attributable to some
or all of the separate accounts from the Company or any Fund and reinvesting
those assets in a different investment medium, including (but not limited to)
another Fund of the Company, or submitting the question whether such segregation
should be implemented to a vote of all affected variable contract owners and, as
appropriate, segregating the assets of any appropriate group (E.G., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected variable contract owners the option of
making such a change; and (2) establishing a new registered management
investment company or managed separate account and obtaining any necessary
approvals or orders of the SEC in connection therewith.
7.4. If a material irreconcilable conflict arises because of a decision
by the Insurance Company to disregard Contract owner voting instructions and
that decision represents a minority position or would preclude a majority vote,
the Insurance Company may be required, at the Company's election, to withdraw
the affected Account's investment in the Company and terminate this Agreement
with respect to that Account; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the Independent
Directors. Any such withdrawal and termination must take place within six (6)
months after the Company gives written notice that this provision is being
implemented, and, until the end of that six month period, the Company shall
continue to accept and implement orders by the Insurance Company for the
purchase (and redemption) of shares of the Company.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Insurance Company
conflicts with the majority of other state regulators, then the Insurance
Company will withdraw the affected Account's investment in the
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Company and terminate this Agreement with respect to that Account within
six months after the directors of the Company inform the Insurance
Company in writing that they have determined that the state insurance
regulator's decision has created an irreconcilable material conflict; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the Independent Directors. Until the end of the foregoing six month
period, the Company shall continue to accept and implement orders by the
Insurance Company for the purchase (and redemption) of shares of the Company.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the Independent Directors shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required to establish a new funding medium for the
Contracts. The Insurance Company shall not be required by Section 7.3 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict. In the event that the directors of the
Company determine that any proposed action does not adequately remedy any
irreconcilable material conflict, then the Insurance Company will withdraw the
Account's investment in the Company and terminate this Agreement within six (6)
months after the directors of the Company inform the Insurance Company in
writing of the foregoing determination, provided, however, that the withdrawal
and termination shall be limited to the extent required by the material
irreconcilable conflict, as determined by a majority of the Independent
Directors.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Mixed and Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Mixed and Shared
Funding Exemptive Order, then (a) the Company and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent those rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3,
7.4, and 7.5 of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to those Sections are contained in
the Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE INSURANCE COMPANY
8.1(a). The Insurance Company agrees to indemnify and hold harmless the
Company and each director, officer, employee or agent of the Company, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Insurance Company) or
litigation
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(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale, acquisition, or
redemption of the Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the registration statement, prospectus or statement of
additional information for the Contracts or contained in the
Contracts or sales literature for the Contracts (or any
amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Insurance Company
by or on behalf of the Company for use in the registration
statement, prospectus or statement of additional information
for the Contracts or in the Contracts or sales literature (or
any amendment or supplement to any of the foregoing) or
otherwise for use in connection with the sale of the Contracts
or shares of the Company;
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus, statement
of additional information or sales literature of the Company
not supplied by the Insurance Company, or persons under its
control) or wrongful conduct of the Insurance Company or
persons under its control, with respect to the sale or
distribution of the Contracts or Company Shares;
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, statement of additional information or
sales literature of the Company or any amendment thereof or
supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if
such a statement or omission was made in reliance upon and in
conformity with information furnished in writing to the
Company by or on behalf of the Insurance Company;
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(iv) arise as a result of any failure by the Insurance Company
to provide the services and furnish the materials under the
terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation, warranty or agreement made by the Insurance
Company in this Agreement or arise out of or result from any
other material breach of this Agreement by the Insurance
Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Insurance Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party that
may arise from that Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of that Indemnified Party's duties or by reason of
that Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Company, whichever is applicable.
8.1(c). The Insurance Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless that Indemnified Party shall have notified the Insurance Company in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon that
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Insurance Company of its obligations hereunder except to the extent
that the Insurance Company has been prejudiced by such failure to give notice.
In addition, any failure by the Indemnified Party to notify the Insurance
Company of any such claim shall not relieve the Insurance Company from any
liability which it may have to the Indemnified Party against whom the action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Insurance Company
shall be entitled to participate, at its own expense, in the defense of the
action. The Insurance Company also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action; PROVIDED,
HOWEVER, that if the Indemnified Party shall have reasonably concluded that
there may be defenses available to it which are different from or additional to
those available to the Insurance Company, the Insurance Company shall not have
the right to assume said defense, but shall pay the costs and expenses thereof
(except that in no event shall the Insurance Company be liable for the fees and
expenses of more than one counsel for Indemnified Parties in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances). After notice from
the Insurance Company to the Indemnified Party of the Insurance Company's
election to assume the defense thereof, and in the absence of such a reasonable
conclusion that there may be different or additional defenses available to the
Indemnified Party, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Insurance Company will not
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<PAGE>
be liable to that party under this Agreement for any legal or other expenses
subsequently incurred by the party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Insurance
Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Company's shares or the Contracts or
the operation of the Company.
8.2. INDEMNIFICATION BY DAVIS DISTRIBUTORS
8.2(a). Davis Distributors agrees to indemnify and hold harmless the
Insurance Company and each of its directors, officers, employees or agents, and
each person, if any, who controls the Insurance Company within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Section 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of Davis
Distributors) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale, acquisition
or redemption of the Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement, prospectus, statement of additional
information or sales literature of the Company (or any
amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as
to any Indemnified Party if the statement or omission or
alleged statement or omission was made in reliance upon and in
conformity with information furnished in writing to Davis
Distributors or the Company by or on behalf of the Insurance
Company for use in the registration statement, prospectus, or
statement of additional information for the Company or in
sales literature (or any amendment or supplement to any of the
foregoing) or otherwise for use in connection with the sale of
the Contracts or Company shares;
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus, statement
of additional information or sales literature for the
Contracts not supplied by Davis Distributors or persons under
its control) or wrongful conduct of the Company,
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Davis Distributors or persons under their control, with
respect to the sale or distribution of the Contracts or
shares of the Company;
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, statement of additional information or
sales literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon and in conformity with
information furnished to the Insurance Company by or on behalf
of the Company;
(iv) arise as a result of any failure by the Company or Davis
Distributors to provide the services and furnish the materials
under the terms of this Agreement (including a failure,
whether unintentional or in good faith or otherwise, to comply
with the diversification requirements specified in Article VI
of this Agreement); or
(v) arise out of or result from any material breach of any
representation, warranty or agreement made by Davis
Distributors or the Company in this Agreement or arise out of
or result from any other material breach of this Agreement by
Davis Distributors or the Company;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b) Davis Distributors shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party that
may arise from the Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of the Indemnified Party's duties or by reason of
the Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to the Insurance Company or the Account, whichever is applicable.
8.2(c) Davis Distributors shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless the Indemnified Party shall have notified Davis Distributors in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon the
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve Davis Distributors of its obligations hereunder except to the extent
that Davis Distributors has been prejudiced by such failure to give notice. In
addition, any failure
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<PAGE>
by the Indemnified Party to notify Davis Distributors of any such claim shall
not relieve Davis Distributors from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this indemnification provision. In case any such action is brought against
the Indemnified Parties, Davis Distributors will be entitled to participate, at
its own expense, in the defense thereof. Davis Distributors also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action; PROVIDED, HOWEVER, that if the Indemnified Party shall have
reasonably concluded that there may be defenses available to it which are
different from or additional to those available to Davis Distributors, Davis
Distributors shall not have the right to assume said defense, but shall pay the
costs and expenses thereof (except that in no event shall Davis Distributors be
liable for the fees and expenses of more than one counsel for Indemnified
Parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances). After notice from Davis Distributors to the Indemnified Party of
Davis Distributors' election to assume the defense thereof, and in the absence
of such a reasonable conclusion that there may be different or additional
defenses available to the Indemnified Party, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and Davis
Distributors will not be liable to that party under this Agreement for any legal
or other expenses subsequently incurred by that party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d) The Insurance Company agrees to notify Davis Distributors
promptly of the commencement of any litigation or proceedings against it or any
of its officers or directors in connection with the issuance or sale of the
Contracts or the operation of the Account.
8.3 INDEMNIFICATION BY THE COMPANY
8.3(a). The Company agrees to indemnify and hold harmless the Insurance
Company, and each of its directors, officers, employees and agents, and each
person, if any, who controls the Insurance Company within the meaning of Section
15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.3) against any and all losses, claims, damages, liabilities (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, at common law or otherwise, insofar as those losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
result from the gross negligence, bad faith or willful misconduct of any
director(s) of the Company, are related to the operations of the Company or:
(i) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement (including a failure to comply with the
diversification requirements specified in Article VI of this
Agreement);
(ii) arise out of or result from any material breach of any
representation, warranty or agreement made by the Company in
this
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Agreement or arise out of or result from any other
material breach of this Agreement by the Company; or
(iii) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net asset value
per share or dividend or capital gain distribution rate for
any Fund. With respect to net asset value information, the
Company will make a determination , in accordance with SEC
guidelines, as to whether an error has occurred. Any
correction of pricing errors shall be accomplished using the
least costly corrective action, as agreed to by the Company in
writing. In no event shall the Company be required to
reimburse for pricing errors caused by conditions beyond the
control of the Company or its agent, including, but not
limited to, Acts of God, fires, electrical or phone outages.
as limited by, and in accordance with the provisions of, Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party that may arise from the
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of the Indemnified Party's duties or by reason of the Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Insurance Company, the Company, Davis Distributors or the Account, whichever
is applicable.
8.3(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified the Company in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Company of its
obligations hereunder except to the extent that the Company has been prejudiced
by such failure to give notice. In addition, any failure by the Indemnified
Party to notify the Company of any such claim shall not relieve the Company from
any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, the Company
will be entitled to participate, at its own expense, in the defense thereof. The
Company also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action; PROVIDED, HOWEVER, that if the
Indemnified Party shall have reasonably concluded that there may be defenses
available to it which are different from or additional to those available to the
Company, the Company shall not have the right to assume said defense, but shall
pay the costs and expenses thereof (except that in no event shall the Company be
liable for the fees and expenses of more than one counsel for Indemnified
Parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of
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<PAGE>
the same general allegations or circumstances). After notice from the Company to
the Indemnified Party of the Company's election to assume the defense thereof,
and in the absence of such a reasonable conclusion that there may be different
or additional defenses available to the Indemnified Party, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Company will not be liable to that party under this Agreement for any legal
or other expenses subsequently incurred by that party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.3(d). The Insurance Company and Davis Distributors agree promptly to
notify the Company of the commencement of any litigation or proceedings against
it or any of its respective officers or directors in connection with this
Agreement, the issuance or sale of the Contracts, the operation of the Account,
or the sale or acquisition of shares of the Company.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and provisions hereof
interpreted under and in accordance with the laws of the State of Maryland.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934, and 1940 Acts, and the rules and regulations and rulings thereunder,
including any exemptions from those statutes, rules and regulations the SEC may
grant (including, but not limited to, the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon six months advance written notice
to the other parties; provided, however, such notice shall not be given
earlier than one year following the date of this Agreement; or
(b) at the option of the Insurance Company to the extent that shares of
Funds are not reasonably available to meet the requirements of the
Contracts as determined by the Insurance Company, provided, however,
that such a termination shall apply only to the Fund(s) not reasonably
available. Prompt written notice of the election to terminate for such
cause shall be furnished by the Insurance Company to the Company and
Davis Distributors; or
(c) at the option of the Company or Davis Distributors, in the event
that formal administrative proceedings are instituted against the
Insurance Company by the NASD, the
20
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SEC, an insurance commissioner or any other regulatory body regarding
the Insurance Company's duties under this Agreement or related to the
sale of the Contracts, the operation of any Account, or the purchase of
the Company's shares, provided, however, that the Company determines in
its sole judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of the
Insurance Company to perform its obligations under this Agreement; or
(d) at the option of the Insurance Company in the event that formal
administrative proceedings are instituted against the Company or Davis
Distributors by the NASD, the SEC, or any state securities or insurance
department or any other regulatory body, provided, however, that the
Insurance Company determines in its sole judgement exercised in good
faith, that any such administrative proceedings will have a material
adverse effect upon the ability of the Company or Davis Distributors to
perform its obligations under this Agreement; or
(e) with respect to any Account, upon requisite authority to substitute
the shares of another investment company for the corresponding Fund
shares in accordance with the terms of the Contracts for which those
Fund shares had been selected to serve as the underlying investment
media. The Insurance Company will give at least 30 days' prior written
notice to the Company of the date of any proposed action to replace the
Company's shares; or
(f) at the option of the Insurance Company, in the event any of the
Company's shares are not registered, issued or sold in accordance with
applicable state and/or federal law or exemptions therefrom, or such
law precludes the use of those shares as the underlying investment
media of the Contracts issued or to be issued by the Insurance Company;
or
(g) at the option of the Insurance Company, if the Company ceases to
qualify as a regulated investment company under Subchapter M of the
Code or under any successor or similar provision, or if the Insurance
Company reasonably believes that the Company may fail to so qualify; or
(h) at the option of the Insurance Company, if the Company fails to
meet the diversification requirements specified in Article VI hereof;
or
(i) at the option of either the Company or Davis Distributors, if (1)
the Company or Davis Distributors, respectively, shall determine, in
their sole judgment reasonably exercised in good faith, that the
Insurance Company has suffered a material adverse change in its
business or financial condition or is the subject of material adverse
publicity and that material adverse change or material adverse
publicity will have a material adverse impact upon the business and
operations of either the Company or Davis Distributors, (2) the Company
or Davis Distributors shall notify the Insurance Company in writing of
that determination and its intent to terminate this Agreement, and (3)
after considering the actions taken by the Insurance Company and any
other changes in circumstances since the
21
<PAGE>
giving of such a notice, the determination of the Company or Davis
Distributors shall continue to apply on the sixtieth (60th) day
following the giving of that notice, which sixtieth day shall be the
effective date of termination; or
(j) at the option of the Insurance Company, if (1) the Insurance
Company shall determine, in its sole judgment reasonably exercised in
good faith, that either the Company or Davis Distributors or Davis
Selected Advisers, L.P. has suffered a material adverse change in its
business or financial condition or is the subject of material adverse
publicity and that material adverse change or material adverse
publicity will have a material adverse impact upon the business and
operations of the Insurance Company, (2) the Insurance Company shall
notify the Company and Davis Distributors in writing of the
determination and its intent to terminate the Agreement, and (3) after
considering the actions taken by the Company and/or Davis Distributors
and any other changes in circumstances since the giving of such a
notice, the determination shall continue to apply on the sixtieth
(60th) day following the giving of the notice, which sixtieth day shall
be the effective date of termination; or
(j) At the option of any party upon another party's failure to cure a
material breach of any provision of this Agreement within 30 days after
written notice thereof.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3. No termination of this Agreement shall be effective unless and
until the party terminating this Agreement gives prior written notice to all
other parties to this Agreement of its intent to terminate, which notice shall
set forth the basis for the termination. Furthermore,
(a) In the event that any termination is based upon the provisions of
Article VII, or the provision of Section 10.1(a), 10.1(i) or 10.1(j) of
this Agreement, the prior written notice shall be given in advance of
the effective date of termination as required by those provisions; and
(b) in the event that any termination is based upon the provisions of
Section 10.1(c) or 10.1(d) of this Agreement, the prior written notice
shall be given at least ninety (90) days before the effective date of
termination; provided that any party may terminate this Agreement
immediately with respect to any Fund if such party reasonably
determines that continuing to perform under this Agreement would
violate any state or federal law.
10.4. Notwithstanding any termination of this Agreement, subject to
Section 1.2 of this Agreement and for so long as the Company continues to exist,
the Company and Davis Distributors shall at the option of the Insurance Company,
continue to make available additional shares of the Company pursuant to the
terms and conditions of this Agreement, for all Contracts in effect on the
22
<PAGE>
effective date of termination of this Agreement ("Existing Contracts").
Specifically, without limitation, the owners of the Existing Contracts shall be
permitted to reallocate investments from any other investment option to any
Fund, redeem investments in the Company and/or invest in the Company upon the
making of additional purchase payments under the Existing Contracts. The parties
agree that this Section 10.4 shall not apply to any terminations under Article
VII and the effect of Article VII terminations shall be governed by Article VII
of this Agreement.
10.5. The Insurance Company shall not redeem Company shares
attributable to the Contracts (as opposed to Company shares attributable to the
Insurance Company's assets held in the Account) except (i) as necessary to
implement Contract-owner-initiated transactions, (ii) as required by state
and/or federal laws or regulations or judicial or other legal precedent of
general application (a "Legally Required Redemption"), (iii) upon 30 days notice
to the Company, as permitted by an order of the SEC pursuant to Section 26(b) of
the 1940 Act, or (iv) as permitted under the terms of the Contract. Upon
request, the Insurance Company will promptly furnish to the Company and Davis
Distributors the opinion of counsel for the Insurance Company (which counsel
shall be reasonably satisfactory to the Company and Davis Distributors) to the
effect that any redemption pursuant to clause (ii) above is a Legally Required
Redemption.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of that other party set forth
below or at such other address as the other party may from time to time specify
in writing.
If to the Company:
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
Attention: Thomas Tays, Vice President
If to the Insurance Company:
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Attention: Edward W. Diffin, Jr., Vice President and Senior Counsel
If to Davis Distributors:
2949 East Elvira Road, Suite 101
Tucson, Arizona 85706
Attention: Thomas Tays, Vice President
23
<PAGE>
ARTICLE XII. MISCELLANEOUS
12.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party unless and until that information may come into the public
domain.
12.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit those authorities
reasonable access to its books and records in connection with any lawful
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.6. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.7. This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns; provided, that no party
may assign this Agreement without the prior written consent of the others.
12.8. Except as otherwise expressly provided in this Agreement, neither
the Company nor Davis Distributors, nor any affiliate thereof shall use any
trademark, trade name, service mark or logo of the Insurance Company or any of
its affiliates, or any variation of any such trademark, trade name, service mark
or logo, without the Insurance Company's prior written consent, the granting of
which shall be at the Insurance Company's sole option.
12.9. Except as otherwise expressly provided in this Agreement, neither
the Insurance Company nor any affiliate thereof shall use any trademark, trade
name, service mark or logo of the Company or Davis Distributors, or any
affiliates thereof, or any variation of any such trademark,
24
<PAGE>
trade name, service mark or logo, without the Company's or Davis Distributor's
prior written consent, the granting of which shall be at the Company's and
Davis Distributor's sole option.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative as of the date specified below.
ML Life Insurance Company of New York
("Insurance Company")
By its authorized officer,
By:_______________________________
Title: Senior Vice President, General Counsel & Secretary
Date:_____________________
DAVIS VARIABLE ACCOUNT FUND
("Company")
By its authorized officer,
By:________________________________
Title: Vice President
Date:_______________________
DAVIS DISTRIBUTORS, LLC
("Davis Distributors")
By its authorized officer,
By:_________________________________
Title: President
Date:_______________________
25
<PAGE>
SCHEDULE A
ACCOUNTS
NAME OF ACCOUNT DATE OF RESOLUTION OF INSURANCE COMPANY'S
BOARD WHICH ESTABLISHED THE ACCOUNT
ML of New York Variable Annuity Separate Account A 08/14/91
26
<PAGE>
SCHEDULE B
CONTRACTS
Merrill Lynch Retirement Power
27
<PAGE>
SCHEDULE C
TO
PARTICIPATION AGREEMENT
NAME OF FUND
Davis Value Portfolio
Dated: ___, 2000
28
<PAGE>
SCHEDULE D
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding
responsibilities for the handling of proxies relating to the Company by Davis
Distributors, the Company and the Insurance Company. The defined terms herein
shall have the meanings assigned in the Participation Agreement except that the
term "Insurance Company" shall also include the department or third party
assigned by the Insurance Company to perform the steps delineated below.
1. The number of proxy proposals is given to the Insurance Company by
Davis Distributors as early as possible before the date set by the
Company for the shareholder meeting to facilitate the establishment of
tabulation procedures. At this time Davis Distributors will inform the
Insurance Company of the Record, Mailing and Meeting dates. This will
be done verbally, with confirmation following promptly in writing,
approximately two months before meeting.
2. Promptly after the Record Date, the Insurance Company will perform a
"tape run", or other activity, which will generate the names, addresses
and number of units which are attributed to each
contract-owner/policyholder (the "Customer") as of the Record Date.
Allowance should be made for account adjustments made after this date
that could affect the status of the Customers' accounts of the Record
Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Insurance Company will use its best efforts to call in
the number of Customers to Davis Distributors, as soon as possible, but no later
than one week after the Record Date.
3. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Insurance Company by the Company. Davis
Distributors must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification
of votes (already on Cards as printed by the Company). (This and
related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
4. During this time, Davis Distributors will develop and produce the
Notice of Proxy and the Proxy Statement (one document). Printed and
folded notices and statements will be sent to Insurance Company for
insertion into envelopes. Contents of envelope sent to customers by
Insurance Company will include:
29
<PAGE>
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. Return envelope addressed to the Insurance Company or
its tabulation agent
d. "Urge buckslip" - optional, but recommended. (This is
a small, single sheet of paper that requests Contract
owners to vote as quickly as possible and that their
vote is important. One copy will be supplied by the
Company.)
e. Cover letter - optional, supplied by Insurance
Company and reviewed and approved in advance by Davis
Distributors.
5. The above contents should be received by the Insurance Company
approximately 3-5 business days before mail date, and in no event later
than 3 business days before mail date. Individual in charge at
Insurance Company reviews and approves the contents of the mailing
package to ensure correctness and completeness. Copy of this approval
sent to Davis Distributors.
6. Package mailed by the Insurance Company.
* The Company MUST allow at least a 15-day solicitation time
to the Insurance Company as the shareowner. (A 5-week period
is recommended.) Solicitation time is calculated as calendar
days from (but NOT including) the meeting, counting backwards.
7. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often-used procedure is to sort cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure.
8. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to the Customer with an explanatory
letter, a new Card and return envelope. The mutilated or illegible Card
is disregarded and considered to be NOT RECEIVED for purposes of vote
tabulation. Such mutilated or illegible Cards are "hand verified,"
I.E., examined as to why they did not complete the system. Any
questions on those Cards are usually remedied individually.
9. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to sort
the Cards as they first arrive into categories depending upon their
vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur.
This may entail a recount.
30
<PAGE>
10. The actual tabulation of votes is done in units and then converted to
shares. (It is very important that the Company receives the tabulations
stated in terms of a percentage and the number of SHARES.) Davis
Distributors must review and approve tabulation format.
11. Final tabulation in shares is verbally given by the Insurance Company
to Davis Distributors on the day of the meeting not later than 1:00
p.m. Eastern time. Davis Distributors may request an earlier deadline
if required to calculate the vote in time for the meeting.
12. A Certificate of Mailing and Authorization to Vote Shares will be
required from the Insurance Company as well as an original copy of the
final vote. Davis Distributors will provide a standard form for each
Certification.
13. The Insurance Company will be required to box and archive the Cards
received from the Customers. In the event that any vote is challenged
or if otherwise necessary for legal, regulatory, or accounting
purposes, Davis Distributors will be permitted reasonable access to
such Cards.
14. All approvals and "signing-off" may be done orally, but must always be
followed up in writing. For this purpose, signatures transmitted by
facsimile will be acceptable.
31
<PAGE>
PARTICIPATION AGREEMENT
AMONG
ML LIFE INSURANCE COMPANY OF NEW YORK
DELAWARE GROUP PREMIUM FUND
AND
DELAWARE DISTRIBUTORS, LP
THIS AGREEMENT, dated as of the _____ day of _________, 2000, by and
among ML Life Insurance Company of New York (the "Company"), a New York life
insurance company, on its own behalf and on behalf of each segregated asset
account of the Company set forth on Schedule A hereto as may be amended from
time to time (each account hereinafter referred to as the "Account"), Delaware
Group Premium Fund (the "Fund"), a Delaware business trust, and Delaware
Distributors, LP (the "Underwriter"), a Delaware limited partnership .
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance and variable annuity
contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter ("Participating Insurance Companies");
WHEREAS, the shares of beneficial interest of the Fund are divided into
several series of shares, each designated a "Portfolio" and representing the
interest in a particular managed portfolio of securities and other assets;
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (the "SEC") granting Participating Insurance Companies and
variable annuity and variable life insurance separate accounts exemptions from
the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment
Company Act of 1940, as amended, (the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, if and to the extent necessary to permit shares of
the Fund to be sold to and held by variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance companies
(the "Mixed and Shared Funding Exemptive Order");
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, Delaware Management Company (the "Adviser"), which serves as
investment adviser to the Fund, is duly registered as an investment adviser
under the federal Investment Advisers Act of 1940, as amended;
<PAGE>
WHEREAS, the Company has issued or will issue certain variable life
insurance and/or variable annuity contracts supported wholly or partially by the
Account (the "Contracts"), and said Contracts are listed in Schedule A hereto,
as it may be amended from time to time by mutual written agreement;
WHEREAS, the Account is duly established and maintained as a segregated
asset account, duly established by the Company, on the date shown for such
Account on Schedule A hereto, to set aside and invest assets attributable to the
aforesaid Contracts;
WHEREAS, the Underwriter, which serves as distributor to the Fund, is
registered as a broker dealer with the SEC under the Securities Exchange Act of
1934, as amended (the "1934 Act"), and is a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
the Account at net asset value.
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Fund has granted to the Underwriter exclusive authority to
distribute the Fund's shares, and has agreed to instruct, and has so instructed,
the Underwriter to make available to the Company for purchase on behalf of the
Account Fund shares of those Designated Portfolios selected by the Underwriter.
Pursuant to such authority and instructions, and subject to Article X hereof,
the Underwriter agrees to make available to the Company for purchase on behalf
of the Account, shares of those Designated Portfolios listed on Schedule A to
this Agreement, such purchases to be effected at net asset value in accordance
with Section 1.3 of this Agreement. Notwithstanding the foregoing, (i) Fund
series (other than those listed on Schedule A) in existence now or that may be
established in the future will be made available to the Company only as the
Underwriter may so provide, and (ii) the Board of Trustees of the Fund (the
"Board") may suspend or terminate the offering of Fund shares of any Designated
Portfolio or class thereof, if such action is required by law or by regulatory
authorities having jurisdiction or if, in the sole discretion of the Board
acting in good faith and in light of its fiduciary duties under federal and any
applicable state laws, suspension or termination is necessary in the best
interests of the Fund and its shareholders.
1.2. The Fund shall redeem, at the Company's request, any full or
fractional Designated Portfolio shares held by the Company on behalf of the
Account, such redemptions to
2
<PAGE>
be effected at net asset value in accordance with Section 1.3 of this Agreement.
Notwithstanding the foregoing, (i) the Company shall not redeem Fund shares
attributable to Contract owners except in the circumstances permitted in Section
10.3 of this Agreement, and (ii) the Fund may delay redemption of Fund shares of
any Designated Portfolio to the extent permitted by the 1940 Act, and any rules,
regulations or orders thereunder.
1.3. PURCHASE AND REDEMPTION PROCEDURES
(a) The Fund hereby appoints the Company as designee of the
Fund for the limited purpose of receiving purchase and redemption requests on
behalf of the Account (but not with respect to any Fund shares that may be held
in the general account of the Company) for shares of those Designated Portfolios
made available hereunder, based on allocations of amounts to the Account or
subaccounts thereof under the Contracts and other transactions relating to the
Contracts or the Account. Receipt of any such request (or relevant transactional
information therefor) on any day the New York Stock Exchange ("NYSE") is open
for trading and on which the Fund calculates its net asset value ("NAV")
pursuant to its prospectus and the rules of the SEC (a "Business Day") by the
Company as such designee of the Fund prior to the time that the Fund ordinarily
calculates its NAV as described from time to time in the Fund Prospectus (which
as of the date of execution of this Agreement is close of trading of the NYSE,
generally 4:00 p.m. Eastern Time) shall constitute receipt by the Fund on that
same Business Day, provided that the Fund receives notice of such request by 11
a.m. Eastern Time on the next following Business Day.
(b) The Company shall pay for shares of each Designated
Portfolio on the same day that it notifies the Fund of a purchase request for
such shares. Payment for Designated Portfolio shares shall be made in federal
funds transmitted to the Fund by wire to be received by the Fund by 4:00 p.m.
Eastern Time on the day the Fund is notified of the purchase request for
Designated Portfolio shares (unless the Fund determines and so advises the
Company that sufficient proceeds are available from redemption of shares of
other Designated Portfolios effected pursuant to redemption requests tendered by
the Company on behalf of the Account). Upon receipt of federal funds so wired,
such funds shall cease to be the responsibility of the Company and shall become
the responsibility of the Fund.
(c) Payment for Designated Portfolio shares redeemed by the
Account or the Company shall be made in federal funds transmitted by wire to the
Company or any other designated person to be received by the Company by 4:00
p.m. Eastern Time on the same day the Fund is properly notified of the
redemption order of such shares (unless redemption proceeds are to be applied to
the purchase of shares of other Designated Portfolios in accordance with Section
1.3(b) of this Agreement), except that the Fund reserves the right to delay
payment of redemption proceeds to the extent permitted under Section 22(e) of
the 1940 Act and any Rules thereunder, and in accordance with the procedures and
policies of the Fund as described in the then current prospectus. The Fund shall
not bear any responsibility whatsoever for the proper disbursement
3
<PAGE>
or crediting of redemption proceeds by the Company; the Company alone shall be
responsible for such action.
1.4. The Fund shall use its best efforts to make the closing net asset
value per share for each Designated Portfolio available to the Company by 6:30
p.m. Eastern Time each Business Day, and in any event, as soon as reasonably
practicable after the closing net asset value per share for such Designated
Portfolio is calculated, and shall calculate such closing net asset value in
accordance with the Fund's Prospectus. In the event the Fund is unable to make
the 6:30 p.m. deadline stated herein, it shall provide additional time for the
Company to provide notice on the next Business Day pursuant to section 1.3(a) of
orders received prior to the calculation of the Fund's NAV on the preceding
Business Day. Such additional time shall be equal to the additional time which
the Fund takes to make the closing net asset value available to the Company.
Neither the Fund, any Designated Portfolio, the Underwriter, nor any of their
affiliates shall be liable for any information provided to the Company pursuant
to this Agreement which information is based on incorrect information supplied
by the Company or any other Participating Insurance Company to the Fund or the
Underwriter. Any material error in the calculation or reporting of the closing
net asset value per share shall be reported immediately upon discovery to the
Company. In such event the Company shall be entitled to an adjustment to the
number of shares purchased or redeemed to reflect the correct closing net asset
value per share and the Fund shall bear the cost of correcting such errors. Any
error of a lesser amount shall be corrected in the next Business Day's net asset
value per share. In no event, however, shall the Fund be liable for material
errors in calculating or reporting NAV where such errors are the result of
information supplied or failed to be supplied by the Company or persons under
its control.
1.5. The Fund shall furnish notice (by wire or telephone followed by
written confirmation) to the Company as soon as reasonably practicable of any
income dividends or capital gain distributions payable on any Designated
Portfolio shares. The Company, on its behalf and on behalf of the Account,
hereby elects to receive all such dividends and distributions as are payable on
any Designated Portfolio shares in the form of additional shares of that
Designated Portfolio. The Company reserves the right, on its behalf and on
behalf of the Account, to revoke this election and to receive all such dividends
and capital gain distributions in cash. The Fund shall notify the Company
promptly of the number of Designated Portfolio shares so issued as payment of
such dividends and distributions.
1.6. Issuance and transfer of Fund shares shall be by book entry only.
Stock certificates will not be issued to the Company or the Account. Purchase
and redemption orders for Fund shares shall be recorded in an appropriate ledger
for the Account or the appropriate subaccount of the Account.
1.7. (a) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive; the Fund's shares may be sold
to other insurance companies (subject to Section 1.8 hereof) and the cash value
of the Contracts may be invested in other investment
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<PAGE>
companies. A funding vehicle other than those listed on Schedule A to this
Agreement may be made available for the investment of the cash value of the
Contracts, provided, however, that the Company gives the Fund and the
Underwriter 45 days written notice of its intention to make such other
investment vehicle available as a funding vehicle for the Contracts.
(b) The Company shall not, without prior notice to the
Underwriter (unless otherwise required by applicable law), take any action to
operate the Account as a management investment company under the 1940 Act.
(c) The Company shall not, without prior notice to the
Underwriter (unless otherwise required by applicable law), induce Contract
owners to change or modify the Fund or change the Fund's distributor or
investment adviser.
(d) The Company shall not, without prior notice to the Fund
(unless otherwise required by applicable law), induce Contract owners to vote on
any matter submitted for consideration by the shareholders of the Fund in a
manner other than as recommended by the Board of Trustees of the Fund.
1.8. The Underwriter and the Fund shall sell Fund shares only to
Participating Insurance Companies and their separate accounts and to persons or
plans ("Qualified Persons") that communicate to the Underwriter and the Fund
that they qualify to purchase shares of the Fund under Section 817(h) of the
Internal Revenue Code of 1986, as amended (the "Code") and the regulations
thereunder without impairing the ability of the Account to consider the
portfolio investments of the Fund as constituting investments of the Account for
the purpose of satisfying the diversification requirements of Section 817(h).
The Underwriter and the Fund shall not sell Fund shares to any insurance company
or separate account unless an agreement complying with Article VI of this
Agreement is in effect to govern such sales, to the extent required. The Company
hereby represents and warrants that it and the Account are Qualified Persons.
The Fund reserves the right to cease offering shares of any Designated Portfolio
in the discretion of the Fund.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts (a) are, or
prior to issuance will be, registered under the 1933 Act, or (b) are not
registered because they are properly exempt from registration under the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act. The Company further represents and warrants
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal securities and state securities and
insurance laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law, that it has legally and validly established
the Account prior to any issuance or sale thereof as a segregated asset account
under New York
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insurance laws, and that it (a) has registered or, prior to any issuance or sale
of the Contracts, will register the Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts, or alternatively (b) has not registered
the Account in proper reliance upon an exclusion from registration under the
1940 Act. The Company shall register and qualify the Contracts or interests
therein as securities in accordance with the laws of the various states only if
and to the extent deemed advisable by the Company.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with applicable state and federal securities
laws and that the Fund is and shall remain registered under the 1940 Act. The
Fund shall amend the registration statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
2.3. The Fund may make payments to finance distribution expenses
pursuant to Rule 12b-1 under the 1940 Act. Prior to financing distribution
expenses pursuant to Rule 12b-1, the Fund will have the Board, a majority of
whom are not interested persons of the Fund, formulate and approve a plan
pursuant to Rule 12b-1 under the 1940 Act to finance distribution expenses.
2.4. The Fund and Distributor represent that the Fund's investment
policies, fees, and expenses are and shall at all times remain in compliance
with applicable state securities laws, if any, and such insurance laws as the
Company may notify the Fund in writing from time to time, and the Fund and
Distributor represent that their respective operations are and shall at all
times remain in material compliance with applicable state securities laws and
with such insurance laws as the Company may notify the Fund in writing from time
to time to the extent required to perform this Agreement. The Fund and
Distributor agree that the Fund will comply with any state insurance law
restrictions, as provided in writing by the Company to the Fund, including the
furnishing of information not otherwise available to the Company which is
required by state insurance law to enable the Company to obtain the authority
needed to issue the Contracts in any applicable state.
2.5. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Delaware and that it does and will
comply in all material respects with the 1940 Act.
2.6. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with any applicable state and federal securities laws.
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<PAGE>
2.7. The Fund and the Underwriter represent and warrant that all of
their trustees/directors, officers, employees, investment advisers, and other
individuals or entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimum coverage as required currently by Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.8. The Fund represents and warrants that the investments of each
Portfolio will comply with the diversification requirements set forth in Section
817(h) of the Code and the rules and regulations thereunder.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company with as many copies of
the Fund's current prospectus describing only the Designated Portfolios listed
on Schedule A as the Company may reasonably request. The Fund or the Underwriter
shall bear the expense of printing copies of the current prospectus and profiles
for the Contracts that will be distributed to existing Contract owners, and the
Company shall bear the expense of printing copies of the Fund's prospectus and
profiles that are used in connection with offering the Contracts issued by the
Company. If requested by the Company in lieu thereof, the Fund shall provide
such documentation (including a final copy of the new prospectus on diskette at
the Fund's expense) and other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the prospectus for the Fund is
amended) to have the prospectus for the Contracts and the Fund's prospectus
printed together in one document (such printing for existing Contract owners to
be at the Fund's or Underwriter's expense). With respect to any prospectuses of
the funds that are printed in combination with any one or more Contract
prospectus (the "Prospectus Booklet"), the costs of printing Prospectus Booklets
for distribution to existing Contract owners shall be prorated to the Company
based on (a) the ratio of the number of pages of the prospectus for the Funds
included in the Prospectus Booklet to the number of pages in the Prospectus
Booklet as a whole; and (b) the ratio of the number of the Contract owners with
Contract value allocated to the Funds to the total number of Contract owners;
PROVIDED, however, that the Company shall bear all printing expenses of such
combined documents where used for distribution to prospective purchasers or to
owners of existing Contracts not funded by the Funds.
3.2. The Fund's prospectus shall state that the current Statement of
Additional Information ("SAI") for the Fund is available, and the Underwriter
(or the Fund), at its expense, shall provide a reasonable number of copies of
such SAI free of charge to the Company for itself and for any owner of a
Contract who requests such SAI.
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3.3. The Fund shall provide the Company with information regarding the
Fund's expenses, which information may include a table of fees and related
narrative disclosure for use in any prospectus or other descriptive document
relating to a Contract.
3.4. The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.5. The Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
portfolio for which instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners or to the
extent otherwise required by law. The Company will vote Fund shares held in any
segregated asset account in the same proportion as Fund shares of such portfolio
for which voting instructions have been received from Contract owners, to the
extent permitted by law.
3.6. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in a Designated
Portfolio calculates voting privileges as required by the Mixed and Shared
Funding Exemptive Order and consistent with any reasonable standards that the
Fund may adopt and provide in writing.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material that the Company develops and in which the Fund (or a Designated
Portfolio thereof) or the Adviser or the Underwriter is named. No such material
shall be used if the Fund or its designee objects to such sales literature or
promotional material within five Business Days after receipt of such material.
The Fund or its designee reserves the right to reasonably object to the
continued use of any such sales literature or other promotional material in
which the Fund (or a Designated Portfolio thereof) or the Adviser or the
Underwriter is named, and no such material shall be used if the Fund or its
designee so object.
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<PAGE>
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund or
the Adviser or the Underwriter in connection with the sale of the Contracts
other than the information or representations contained in the registration
statement or profiles or prospectus or SAI for the Fund shares, as such
registration statement and profiles and prospectus or SAI may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or by
the Underwriter, except with the permission of the Fund or the Underwriter.
4.3. The Fund and the Underwriter, or their designee, shall furnish, or
cause to be furnished, to the Company, each piece of sales literature or other
promotional material that it develops and in which the Company, and/or its
Account, is named. No such material shall be used if the Company objects to such
sales literature or promotional material within five Business Days after receipt
of such material. The Company reserves the right to reasonably object to the
continued use of any such sales literature or other promotional material in
which the Company and/or its Account is named, and no such material shall be
used if the Company so objects.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement and prospectus (which shall include an
offering memorandum, if any, if the Contracts issued by the Company or interests
therein are not registered under the 1933 Act), or SAI for the Contracts, as
such registration statement, prospectus, or SAI may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain or approved by the Company for distribution to Contract owners, or
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund and the Underwriter shall adopt and implement procedures
reasonably designed to ensure that information concerning the Company, any of
its affiliates, or the Contracts which is intended only for use by brokers or
agents selling the shares (I.E., information that is not intended for
distribution to shareowners or prospective shareowners) is so used, and neither
the Company nor any of its affiliates shall be liable for any losses, damages,
or expenses relating to the improper use of such broker only materials.
4.6. The Company shall adopt and implement procedures reasonably
designed to ensure that information concerning the Funds which is intended only
for use by brokers or agents selling the Contracts (I.E., information that is
not intended for distribution to Contract owners or prospective Contract owners)
is so used, and neither the Fund nor Underwriter shall be liable for any losses,
damages, or expenses relating to the improper use of such broker only materials.
The parties hereto agree that this section is not intended to designate or
otherwise imply that the Company is an underwriter or distributor of the Fund's
shares.
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<PAGE>
4.7. The Fund will provide to the Company at least one complete copy of
all registration statements, profiles, prospectuses, SAIs, reports, proxy
statements, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Fund or its shares, promptly after the filing of such
document(s) with the SEC or other regulatory authorities.
4.8. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses (which shall include an offering
memorandum, if any, if the Contracts issued by the Company or interests therein
are not registered under the 1933 Act), SAIs, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Contracts or the Account, promptly after the filing of
such document(s) with the SEC or other regulatory authorities. The Company shall
provide to the Fund and the Underwriter any complaints received from the
Contract owners pertaining to the Fund or the Designated Portfolio.
4.9. The Fund will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Designated Portfolio,
and of any material change in the Fund's registration statement, particularly
any change resulting in a change to the registration statement or prospectus for
any Account. The Fund will work with the Company so as to enable the Company to
solicit proxies from Contract owners, or to make changes to its prospectus or
registration statement, in an orderly manner. The Fund will make reasonable
efforts to attempt to have changes affecting Contract prospectuses become
effective simultaneously with the annual updates for such prospectuses.
4.10. For purposes of this Article IV, the phrase "sales literature and
other promotional materials" includes, but is not limited to, any of the
following that refer to the Fund or Company, as applicable or any affiliate of
the Fund or Company, as applicable: advertisements (such as material published,
or designed for use in, a newspaper, magazine, or other periodical, radio,
television, telephone or tape recording, videotape display, signs or billboards,
motion pictures, or other public media), sales literature (I.E., any written
communication distributed or made generally available to customers or the
public, including brochures, circulars, reports, market letters, form letters,
seminar texts, reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, and registration statements, prospectuses, SAIs, shareholder reports,
proxy materials, and any other communications distributed or made generally
available with regard to the Fund.
4.11. The Fund agrees to provide to the Company, within fifteen (15)
Business Days after the end of a calendar Quarter, the following information
with respect to each Portfolio of the Fund set forth on Schedule A, each as of
the last Business Day of such calendar Quarter: the Portfolio's ten largest
portfolio holdings (based on the percentage of the Portfolio's net assets); the
five industry sectors in which the Portfolio's investments are most heavily
weighted; the
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relative proportion of the Portfolio's net assets invested in equity, bond, and
cash instruments, respectively; and year-to-date NAV performance data. Also, the
Fund agrees to provide to the Company, within fifteen (15) Business Days after a
request is submitted to the Fund by the Company, the following information with
respect to each Portfolio of the Fund set forth on Schedule A, each as of the
date or dates specified in such request: net asset value; net asset value per
Share; and other reasonable Share information. The Fund acknowledges that such
information may be furnished to the Company's internal or independent auditors
and to the insurance departments of the various jurisdictions in which the
Company does business.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and the Underwriter shall pay no fee or other
compensation to the Company under this Agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance
distribution expenses, then the Fund or Underwriter may make payments to the
Company or to the underwriter for the Contracts if and in amounts agreed to by
the Underwriter in writing, and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter, or other
resources available to the Underwriter. Currently, no such payments are
contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus to owners of Contracts issued by the Company and of distributing the
Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. DIVERSIFICATION AND QUALIFICATION
6.1. The Fund will invest its assets in such a manner as to ensure that
the Contracts will be treated as annuity or life insurance contracts, whichever
is appropriate, under the Code and the regulations issued thereunder (or any
successor provisions). Without limiting the scope of the foregoing, each
Designated Portfolio has complied and will continue to comply with Section
817(h) of the Code and Treasury Regulation Section 1.817-5, and any Treasury
interpretations thereof, relating to the diversification requirements for
variable annuity, endowment, or life
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<PAGE>
insurance contracts, and any amendments or other modifications or successor
provisions to such Section or Regulations. In the event of a breach of this
Article VI by the Fund, it will (a) take all reasonable steps to notify the
Company of such breach and (b) immediately take all necessary steps to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
6.2. The Fund represents that it is qualified as a Regulated Investment
Company under Subchapter M of the Code, and that it will maintain such
qualification (under Subchapter M or any successor or similar provisions) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future. The Fund acknowledges that compliance with Subchapter M is an
essential element of compliance with Section 817(h).
6.3. The Fund shall provide the Company or its designee with reports
certifying compliance with the aforesaid Section 817(h) diversification and
Subchapter M qualification requirements on a quarterly basis.
6.4. Subject to Sections 6.1 and 6.2, the Company represents that the
Contracts are currently, and at the time of issuance shall be, treated as life
insurance or annuity insurance contracts, under applicable provisions of the
Code, and that it will make every effort to maintain such treatment, and that it
will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing the Contracts have ceased to be so treated or that they
might not be so treated in the future. The Company agrees that any prospectus
offering a contract that is a "modified endowment contract" as that term is
defined in Section 7702A of the Code (or any successor or similar provision),
shall identify such contract as a modified endowment contract.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the Contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the
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Mixed and Shared Funding Exemptive Order, by providing the Board with all
information reasonably necessary for the Board to consider any issues raised.
This includes, but is not limited to, an obligation by the Company to inform the
Board whenever Contract owner voting instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (I.E., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the Account's investment in
the Fund and terminate this Agreement with respect to each Account; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Board. Any such withdrawal and
termination must take place within six (6) months after the Fund gives written
notice that this provision is being implemented, and until the end of that six
month period the Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Fund shall continue to
accept and implement orders by the Company for the purchase (and redemption) of
shares of the Fund.
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7.6. For purposes of Section 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contract if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent the Mixed and Shared Funding Exemption Order
or any amendment thereto contains terms and conditions different from Sections
3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement, then the Fund
and/or the Participating Insurance Companies, as appropriate, shall take such
steps as may be necessary to comply with the Mixed and Shared Funding Exemptive
Order, and Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement
shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in the Mixed and Shared
Funding Exemptive Order or any amendment thereto. If and to the extent that Rule
6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive
relief from any provision of the 1940 Act or the rules promulgated thereunder
with respect to mixed or shared funding (as defined in the Mixed and Shared
Funding Exemptive Order) on terms and conditions materially different from those
contained in the Mixed and Shared Funding Exemptive Order, then (a) the Fund
and/or the Participating Insurance Companies, as appropriate, shall take such
steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and
Rule 6e-3, as adopted, to the extent such rules are applicable; and (b) Sections
3.5, 3.6, 7.1., 7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in
effect only to the extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
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8.1(a). The Company agrees to indemnify and hold harmless the
Fund and the Underwriter and each of their trustees/directors and officers, and
each person, if any, who controls the Fund or Underwriter within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Section 8.1 ) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Company)
or litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statement or
alleged untrue statements of any material fact contained in
the registration statement, prospectus (which shall include a
written description of a Contract that is not registered under
the 1933 Act), or SAI for the Contracts or contained in sales
literature for the Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the
Fund for use in the registration statement, prospectus or SAI
for the Contracts or in the Contracts or sales literature (or
any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus, SAI, or
sales literature of the Fund not supplied by the Company or
persons under its control) or wrongful conduct of the Company
or its agents or persons under the Company's authorization or
control, with respect to the sale or distribution of the
Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, SAI, or sales literature of the Fund or
any amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such a statement or omission was made in
reliance upon and in conformity with information furnished to
the Fund by or on behalf of the Company; or
(iv) arise as a result of any material failure by the Company
to provide the services and furnish the materials under the
terms of this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply with
the qualification requirements specified in Section 6.4 of
this Agreement and
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including the failure to provide timely and accurate purchase
and redemption information to the Fund); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
as limited by and in accordance with the provisions of Sections 8.1(b) and 8.1
(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of its obligations or
duties under this Agreement.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Contracts or the
operation of the Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold harmless
the Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other
16
<PAGE>
expenses) to which the Indemnified Parties may become subject under any statute
or regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or profile or prospectus or SAI or
sales literature of the Fund (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with
information furnished to the Underwriter or Fund by or on
behalf of the Company for use in the registration statement,
profile, prospectus or SAI for the Fund or in sales literature
(or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus, SAI or
sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful conduct
of the Fund or Underwriter or persons under their control,
with respect to the sale or distribution of the Contracts or
Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, SAI or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statement or statements therein not misleading, if such
statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on
behalf of the Fund or the Underwriter; or
(iv) arise as a result of any material failure by the Fund or
the Underwriter to provide the services and furnish the
materials under the terms of this Agreement (including a
failure of the Fund, whether unintentional or in good faith or
otherwise, to comply with the diversification and other
qualification requirements specified in Sections 6.1 and 6.2
of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund or the
Underwriter in this Agreement or arise out of or
17
<PAGE>
result from any other material breach of this Agreement by
the Fund or the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance or such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Party, the Underwriter will be entitled to participate,
at its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Underwriter to such party of the
Underwriter's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Underwriter will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3. INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the Fund) or litigation
(including legal and other expenses) to which the Indemnified Parties may be
required to pay or may become subject under any statute or regulation, at common
law or otherwise, insofar as such losses,
18
<PAGE>
claims, expenses, damages, liabilities or expenses (or actions in respect
thereof) or settlements, are related to the operations of the Fund and:
(i) arise as a result of any material failure by the Fund to
provide the services and furnish the materials under the terms
of this Agreement (including a failure, whether unintentional
or in good faith or otherwise, to comply with the
diversification and other qualification requirements specified
in Sections 6.1 and 6.2 of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund; or
(iii) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net asset value
per share or dividend or capital gain distribution rate,
unless such incorrect or untimely calculation or reporting is
a result of information which the Company or persons under its
control has provided or failed to provide to the Fund.
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company, the Fund, the Underwriter or the
Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
19
<PAGE>
8.3(d). The Company and the Underwriter agree promptly to
notify the Fund of the commencement of any litigation or proceeding against it
or any of its respective officers or directors in connection with the Agreement,
the issuance or sale of the Contracts, the operation of the Account, or the sale
or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, any Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith. If, in the future, the Mixed and Shared Funding Exemptive Order
should no longer be necessary under applicable law, then Article VII shall no
longer apply.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party, for any reason with respect to some
or all Designated Portfolios, by six (6) months advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and
the Underwriter based upon the Company's determination that
shares of the Fund are not reasonably available to meet the
requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and
the Underwriter in the event any of the Designated
Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or such
law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by
the Company; or
(d) termination by the Fund or Underwriter in the event that
formal administrative proceedings are instituted against the
Company by the NASD, the SEC, the Insurance Commissioner or
like official of any state or any other regulatory body
regarding the Company's duties under this Agreement or
related to the sale of the Contracts, the operation of any
20
<PAGE>
Account, or the purchase of the Fund's shares; provided,
however, that the Fund or Underwriter determines in its sole
judgment exercised in good faith, that any such
administrative proceedings will have a material adverse
effect upon the ability of the Company to perform its
obligations under this Agreement; or
(e) termination by the Company in the event that formal
administrative proceedings are instituted against the Fund or
Underwriter by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body; provided,
however, that the Company determines in its sole judgment
exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the
ability of the Fund or Underwriter to perform its obligations
under this Agreement; or
(f) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Designated Portfolio in
the event that such Portfolio ceases to qualify as a
Regulated Investment Company under Subchapter M or fails to
comply with the Section 817(h) diversification requirements
specified in Sections 6.1 and 6.2 hereof, or if the Company
reasonably believes that such Portfolio may fail to so
qualify or comply; or
(g) termination by the Fund or Underwriter by written notice to
the Company in the event that the Contracts fail to meet the
qualifications specified in Section 6.4 hereof; or
(h) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or
the Underwriter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company has
suffered a material adverse change in its business,
operations, financial condition, or prospects since the date
of this Agreement or is the subject of material adverse
publicity; or
(i) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that the Fund, Adviser, or
the Underwriter has suffered a material adverse change in its
business, operations, financial condition or prospects since
the date of this Agreement or is the subject of material
adverse publicity; or
(j) termination by the Fund or the Underwriter by written notice
to the Company, if the Company gives the Fund and the
Underwriter the written notice specified in Section 1.7(a)
hereof and at the time such notice was given there was no
notice of termination outstanding under any other
21
<PAGE>
provision of this Agreement; provided, however, any
termination under this Section 10.l(j) shall be effective
forty-five days after the notice specified in Section 1.7(a)
was given; or
(k) termination by the Company upon any substitution of the
shares of another investment company or series thereof for
shares of a Designated Portfolio of the Fund in accordance
with the terms of the Contracts, provided that the Company
has given at least 45 days prior written notice to the Fund
and Underwriter of the date of substitution; or
(l) termination by any party in the event that the Fund's Board
of Trustees determines that a material irreconcilable
conflict exists as provided in Article VII.
(m) at the option of any party upon another party's failure to
cure a material breach of any provision of this Agreement
within 30 days after written notice thereof.
10.2. Notwithstanding any termination of this Agreement, the Fund and
the Underwriter shall, at the option of the Company, continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"), unless the
Underwriter requests that the Company seek an order pursuant to Section 26(b) of
the 1940 Act to permit the substitution of other securities for the shares of
the Designated Portfolios. The Underwriter agrees to split the cost of seeking
such an order, and the Company agrees that it shall reasonably cooperate with
the Underwriter and seek such an order upon request. Specifically, the owners of
the Existing Contracts may be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the existing Contracts (subject to any such
election by the Underwriter). The parties agree that this Section 10.2 shall not
apply to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement. The parties
further agree that this Section 10.2 shall not apply to any terminations under
Section 10.1 (g) of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), (iii) upon 45 days
prior written notice to the Fund and Underwriter, as permitted by an order of
the SEC pursuant to Section 26(b) of the 1940 Act, but only if a substitution of
other securities for the shares of the Designated Portfolios is consistent with
the terms of the Contracts, or (iv) as permitted under the terms of the
Contract. Upon request, the Company will promptly furnish to the Fund and the
22
<PAGE>
Underwriter reasonable assurance that any redemption pursuant to clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contacts, the Company shall not prevent
Contract owners from allocating payments to a Portfolio that was otherwise
available under the Contracts without first giving the Fund or the Underwriter
45 days notice of its intention to do so.
10.4. Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify the other parties shall survive.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund: Delaware Group Premium Fund
Attention: Christopher H. Price
1818 Market Street
Philadelphia, PA 19103
If to the Company: Barry G. Skolnick, Esq.
Senior Vice President and General Counsel
Merrill Lynch Life Insurance Company
800 Scudders Mill Road
Plainsboro, NJ 08536
If to Underwriter: Delaware Distributors, L.P.
Attention: Christopher H. Price
1818 Market Street
Philadelphia, PA 19103
ARTICLE XII. MISCELLANEOUS
12.1. All persons dealing with the Fund must look solely to the
property of the Fund, and in the case of a series company, the respective
Designated Portfolios listed on Schedule A hereto as though each such Designated
Portfolio had separately contracted with the Company and the Underwriter for the
enforcement of any claims against the Fund. The parties agree that neither the
Board, officers, agents or shareholders of the Fund assume any personal
liability or responsibility for obligations entered into by or on behalf of the
Fund.
23
<PAGE>
12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information has come into the
public domain.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the New York Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable contract
operations of the Company are being conducted in a manner consistent with the
New York variable annuity laws and regulations and any other applicable law or
regulations.
12.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies, and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto, except where such assignments do not result in an actual change in
control of the party.
12.9. Except as otherwise expressly provided in this Agreement, neither
the Fund nor Underwriter, nor any affiliate thereof shall use any trademark,
trade name, service mark or logo of the Company or any of its affiliates, or any
variation of any such trademark, trade name, service mark or logo, without the
Company's prior written consent, the granting of which shall be at the Company's
sole option.
24
<PAGE>
12.10. Except as otherwise expressly provided in this Agreement,
neither the Company nor any of its affiliates shall use any trademark, trade
name, service mark or logo of the Fund or Underwriter, or any affiliates
thereof, or any variation of any such trademark, trade name, service mark or
logo, without the Fund's or Underwriter's prior written consent, the granting of
which shall be at the Fund's or Underwriter's sole option.
25
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
ML LIFE INSURANCE COMPANY OF NEW YORK
By its authorized officer
By:_______________________
Title:____________________
Date:_____________________
DELAWARE GROUP PREMIUM FUND
By its authorized officer
By:_______________________
Title:____________________
Date:_____________________
DELAWARE DISTRIBUTORS, INC.
(General Partner) on behalf
of Delaware Distributors, L.P.
By its authorized officer
By:_______________________
Title:____________________
Date:_____________________
26
<PAGE>
SCHEDULE A
DELAWARE GROUP PREMIUM FUND:
Trend Series
CONTRACTS:
Merrill Lynch Retirement Power
SEGREGATED ASSET ACCOUNT:
ML of New York Variable Annuity Separate Account A (established 08/14/91)
<PAGE>
PARTICIPATION AGREEMENT
AMONG
ML LIFE INSURANCE COMPANY OF NEW YORK
PIMCO VARIABLE INSURANCE TRUST,
AND
PIMCO FUNDS DISTRIBUTORS LLC
THIS AGREEMENT, dated as of the 3rd day of April, 2000 by and among
ML Life Insurance Company of New York, (the "Company"), a New York life
insurance company, on its own behalf and on behalf of each segregated asset
account of the Company set forth on Schedule A hereto as may be amended from
time to time (each account hereinafter referred to as the "Account"), PIMCO
Variable Insurance Trust (the "Fund"), a Delaware business trust, and PIMCO
Funds Distributors LLC (the "Underwriter"), a Delaware limited liability
company.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance and variable annuity
contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter ("Participating Insurance Companies");
WHEREAS, the shares of beneficial interest of the Fund are divided into
several series of shares, each designated a "Portfolio" and representing the
interest in a particular managed portfolio of securities and other assets;
WHEREAS, the Fund has obtained an order dated February 9, 1998, (File
No. 812-10822) from the Securities and Exchange Commission (the "SEC") granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended, (the
"1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, if and to the
extent necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (the "Mixed and Shared Funding Exemptive
Order");
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, Pacific Investment Management Company (the "Adviser"), which
serves as investment adviser to the Fund, is duly registered as an investment
adviser under the federal Investment Advisers Act of 1940, as amended;
<PAGE>
WHEREAS, the Company has issued or will issue certain variable life
insurance and/or variable annuity contracts supported wholly or partially by the
Account (the "Contracts"), and said Contracts are listed in Schedule A hereto,
as it may be amended from time to time by mutual written agreement;
WHEREAS, the Account is duly established and maintained as a segregated
asset account, duly established by the Company, on the date shown for such
Account on Schedule A hereto, to set aside and invest assets attributable to the
aforesaid Contracts;
WHEREAS, the Underwriter, which serves as distributor to the Fund, is
registered as a broker dealer with the SEC under the Securities Exchange Act of
1934, as amended (the "1934 Act"), and is a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1 The Fund has granted to the Underwriter exclusive
authority to distribute the Fund's shares, and has agreed to instruct, and has
so instructed, the Underwriter to make available to the Company for purchase on
behalf of the Account Fund shares of those Designated Portfolios selected by the
Underwriter. Pursuant to such authority and instructions, and subject to Article
X hereof, the Underwriter agrees to make available to the Company for purchase
on behalf of the Account, shares of those Designated Portfolios listed on
Schedule A to this Agreement, such purchases to be effected at net asset value
in accordance with Section 1.3 of this Agreement. Notwithstanding the foregoing,
(i) Fund series (other than those listed on Schedule A) in existence now or that
may be established in the future will be made available to the Company only as
the Underwriter may so provide, and (ii) the Board of Trustees of the Fund (the
"Board") may suspend or terminate the offering of Fund shares of any Designated
Portfolio or class thereof, if such action is required by law or by regulatory
authorities having jurisdiction or if, in the sole discretion of the Board
acting in good faith and in light of its fiduciary duties under federal and any
applicable state laws, suspension or termination is necessary in the best
interests of the shareholders of such Designated Portfolio.
1.2 The Fund shall redeem, at the Company's request, any full
or fractional Designated Portfolio shares held by the Company on behalf of the
Account, such redemptions to be effected at net asset value in accordance with
Section 1.3 of this Agreement. Notwithstanding the foregoing, (i) the Company
shall not redeem Fund shares attributable to Contract owners except in the
circumstances permitted in Section 10.3 of this Agreement, and (ii) the Fund may
delay redemption of Fund shares of any Designated Portfolio to the extent
permitted by the 1940 Act, and any rules, regulations or orders thereunder.
-2-
<PAGE>
1.3 PURCHASE AND REDEMPTION PROCEDURES
(a) The Fund hereby appoints the Company as designee
of the Fund for the limited purpose of receiving purchase and
redemption requests on behalf of the Account (but not with respect to
any Fund shares that may be held in the general account of the Company)
for shares of those Designated Portfolios made available hereunder,
based on allocations of amounts to the Account or subaccounts thereof
under the Contracts and other transactions relating to the Contracts or
the Account. Receipt of any such request (or relevant transactional
information therefor) on any day the New York Stock Exchange is open
for trading and on which the Fund calculates its net asset value
pursuant to the rules of the SEC (a "Business Day") by the Company as
such designee of the Fund prior to the time that the Fund ordinarily
calculates its net asset value as described from time to time in the
Fund Prospectus (which as of the date of execution of this Agreement is
4:00 p.m. Eastern Time) shall constitute receipt by the Fund on that
same Business Day, provided that the Fund receives notice of such
request by 9:30 a.m. Eastern Time on the next following Business Day.
(b) The Company shall pay for shares of each
Designated Portfolio on the same Business Day that it notifies the Fund
of a purchase request for such shares. Payment for Designated Portfolio
shares shall be made in federal funds transmitted to the Fund by wire
to be received by the Fund by 4:00 p.m. Eastern Time (unless the Fund
determines and so advises the Company that sufficient proceeds are
available from redemption of shares of other Designated Portfolios
effected pursuant to redemption requests tendered by the Company on
behalf of the Account). If federal funds are not received on time, such
funds will be invested, and Designated Portfolio shares purchased
thereby will be issued, as soon as practicable and the Company shall
promptly, upon the Fund's request, reimburse the Fund for any charges,
costs, fees, interest or other expenses incurred by the Fund in
connection with any advances to, or borrowing or overdrafts by, the
Fund, or any similar expenses incurred by the Fund, as a result of
portfolio transactions effected by the Fund based upon such purchase
request. Upon receipt of federal funds so wired, such funds shall cease
to be the responsibility of the Company and shall become the
responsibility of the Fund.
(c) Payment for Designated Portfolio shares redeemed
by the Account or the Company shall be made in federal funds
transmitted by wire to the Company or any other designated person to be
received by the Company by 4:00 p.m. Eastern Time on the same day the
Fund is properly notified of the redemption order of such shares
(unless redemption proceeds are to be applied to the purchase of shares
of other Designated Portfolios in accordance with Section 1.3(b) of
this Agreement), except that the Fund reserves the right to delay
payment of redemption proceeds to the extent permitted under Section
22(e) of the 1940 Act and any Rules thereunder, and in accordance with
the procedures and policies of the Fund as described in the then
current prospectus. The Fund shall not bear any responsibility
whatsoever for the proper disbursement or crediting of redemption
proceeds by the Company; the Company alone shall be responsible for
such action.
1.4 The Fund shall use its best efforts to make the closing
net asset value per share for each Designated Portfolio available to the Company
by 7:00 p.m. Eastern Time each Business Day , and in any event, as soon as
reasonably practicable after the net asset value per share for such Designated
Portfolio is calculated, and shall calculate such net asset value in accordance
with the Fund's Prospectus. In the event the Fund is unable to make the deadline
stated herein, it shall provide additional time for the Company to place orders
for the purchase and redemption of shares. Such additional time shall be equal
to the additional time which the Fund takes to make the closing net asset value
available to the Company. Neither the Fund, any Designated Portfolio, the
Underwriter, nor any of their affiliates shall be liable for
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any information provided to the Company pursuant to this Agreement which
information is based on incorrect information supplied by the Company or any
other Participating Insurance Company to the Fund or the Underwriter.
1.5 The Fund shall furnish notice (by wire or telephone
followed by written confirmation) to the Company as soon as reasonably
practicable of any income dividends or capital gain distributions payable on any
Designated Portfolio shares. The Company, on its behalf and on behalf of the
Account, hereby elects to receive all such dividends and distributions as are
payable on any Designated Portfolio shares in the form of additional shares of
that Designated Portfolio. The Company reserves the right, on its behalf and on
behalf of the Account, to revoke this election and to receive all such dividends
and capital gain distributions in cash. The Fund shall notify the Company
promptly of the number of Designated Portfolio shares so issued as payment of
such dividends and distributions.
1.6 Issuance and transfer of Fund shares shall be by book
entry only. Stock certificates will not be issued to the Company or the Account.
Purchase and redemption orders for Fund shares shall be recorded in an
appropriate ledger for the Account or the appropriate subaccount of the Account.
1.7 (a) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive; the Fund's shares may be sold
to other insurance companies (subject to Section 1.8 hereof) and the cash value
of the Contracts may be invested in other investment companies. Funding vehicles
other than those listed on Schedule A to this Agreement may be available for the
investment of the cash value of the Contracts, provided, however, the Company
gives the Fund and the Underwriter 45 days written notice of its intention to
make such other investment vehicle available as a funding vehicle for the
Contracts(b) The Company shall not, without prior notice to the Underwriter
(unless otherwise required by applicable law), take any action to operate the
Account as a management investment company under the 1940 Act.
(c) The Company shall not, without prior notice to the
Underwriter (unless otherwise required by applicable law), induce Contract
owners to change or modify the Fund or change the Fund's distributor or
investment adviser.
(d) The Company shall not, without prior notice to the
Fund (unless otherwise required by applicable law), induce Contract owners to
vote on any matter submitted for consideration by the shareholders of the Fund
in a manner other than as recommended by the Board of Trustees of the Fund.
1.8 The Underwriter and the Fund shall sell Fund shares only
to Participating Insurance Companies and their separate accounts and to persons
or plans ("Qualified Persons") that communicate to the Underwriter and the Fund
that they qualify to purchase shares of the Fund under Section 817(h) of the
Internal Revenue Code of 1986, as amended (the "Code") and the regulations
thereunder without impairing the ability of the Account to consider the
portfolio investments of the Fund as constituting investments of the Account for
the purpose of satisfying the diversification requirements of Section 817(h).
The Underwriter and the Fund shall not sell Fund shares to any insurance company
or separate account unless an agreement complying with Article VI of this
Agreement is in effect to govern such sales, to the extent required. The Company
hereby represents and warrants that it and the Account are Qualified Persons.
The Fund reserves the right to cease offering shares of any Designated Portfolio
in the discretion of the Fund.
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1.9 The Fund will provide notice of any material error in
calculation of net asset value per share, dividend or capital gain information
of a Designated Portfolio as soon as reasonably practical after discovery
thereof. Any such notice will state for each day for which an error occurred,
the incorrect price, the correct price, and the reason for the price change. The
Fund will make the Company and the Account whole for any payments or adjustments
to the number of shares in the Account that are reasonably demonstrated to be
required as a result of pricing errors.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that the Contracts (a)
are, or prior to issuance will be, registered under the 1933 Act, or (b) are not
registered because they are properly exempt from registration under the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act. The Company further represents and warrants
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal securities and state securities and
insurance laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law, that it has legally and validly established
the Account prior to any issuance or sale thereof as a segregated asset account
under New York insurance laws, and that it (a) has registered or, prior to any
issuance or sale of the Contracts, will register the Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts, or alternatively (b) has not
registered the Account in proper reliance upon an exclusion from registration
under the 1940 Act. The Company shall register and qualify the Contracts or
interests therein as securities in accordance with the laws of the various
states only if and to the extent deemed advisable by the Company.
2.2 The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with applicable state and federal
securities laws and that the Fund is and shall remain registered under the 1940
Act. The Fund shall amend the registration statement for its shares under the
1933 Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and to
the extent deemed advisable by the Fund or the Underwriter.
2.3 The Fund may make payments to finance distribution
expenses pursuant to Rule 12b-1 under the 1940 Act. Prior to financing
distribution expenses pursuant to Rule 12b-1, the Fund will have the Board, a
majority of whom are not interested persons of the Fund, formulate and approve a
plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution expenses.
2.4 The Fund and Underwriter represent that the Fund's
investment policies, fees, and expenses are and shall at all times remain in
compliance with applicable state securities laws, if any, and the Fund and
Underwriter represent that their respective operations are and shall at all
times remain in material compliance with applicable state securities laws to the
extent required to perform this Agreement. The Fund and Underwriter also
represent that the Fund will comply with any additional state insurance law
restrictions, as provided in writing by the Company to the Fund, including the
furnishing of information not otherwise available to the Company which is
required by state insurance law to enable the Company to obtain the authority
needed to issue the Contracts in any applicable state.
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<PAGE>
2.5 The Fund represents that it is lawfully organized and
validly existing under the laws of the State of Delaware and that it does and
will comply in all material respects with the 1940 Act.
2.6 The Underwriter represents and warrants that it is a
member in good standing of the NASD and is registered as a broker-dealer with
the SEC. The Underwriter further represents that it will sell and distribute the
Fund shares in accordance with any applicable state and federal securities laws.
2.7 The Fund and the Underwriter represent and warrant that
all of their trustees/directors, officers, employees, investment advisers, and
other individuals or entities dealing with the money and/or securities of the
Fund are and shall continue to be at all times covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund in an amount not less than
the minimum coverage as required currently by Rule 17g-1 of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.8 The Company represents and warrants that it will maintain
a blanket fidelity bond or similar coverage issued by a reputable insurance
company in an amount appropriate to the Company's obligations under this
Agreement.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING 3.1 The Underwriter shall
provide the Company with as many copies of the Fund's current prospectus
(describing only the Designated Portfolios listed on Schedule A) or, to the
extent permitted, the Fund's profiles as the Company may reasonably request. The
Fund shall bear the expense of printing copies of the current prospectus and
profiles for the Contracts that will be distributed to existing Contract owners,
and the Company shall bear the expense of printing copies of the Fund's
prospectus and profiles that are used in connection with offering the Contracts
issued by the Company. If requested by the Company in lieu thereof, the Fund
shall provide such documentation (including a final copy of the new prospectus
on diskette at the Fund's expense) and other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
prospectus for the Fund is amended) to have the prospectus for the Contracts and
the Fund's prospectus or profile printed together in one document (the payment
of such printing costs to be governed by the provisions of Section 5.3 of this
Agreement).
3.2 The Fund's prospectus shall state that the current
Statement of Additional Information ("SAI") for the Fund is available, and the
Underwriter (or the Fund), at its expense, shall provide a reasonable number of
copies of such SAI free of charge to the Company for itself and for any owner of
a Contract who requests such SAI.
3.3 The Fund shall provide the Company with information
regarding the Fund's expenses, which information may include a table of fees and
related narrative disclosure for use in any prospectus or other descriptive
document relating to a Contract. The Company shall provide prior written notice
of any proposed modification of such information, which notice will describe the
manner in which the Company proposes to modify the information, and agrees that
it may not modify the substance of such information without the prior consent of
the Fund.
3.4 The Fund, at its expense, shall provide the Company with
copies of its proxy material, reports to shareholders, and other communications
to shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.5 The Company shall:
(i) solicit voting instructions from Contract owners;
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(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
portfolio for which instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners or to the
extent otherwise required by law. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act, as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the SEC's interpretation of the requirements of Section
16(a) with respect to periodic elections of directors or trustees and with
whatever rules the SEC may promulgate with respect thereto.
3.6 Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in a Designated
Portfolio calculates voting privileges as required by the Mixed and Shared
Funding Exemptive Order and consistent with any reasonable standards that the
Fund may adopt and provide in writing.
ARTICLE IV. SALES MATERIAL AND INFORMATION 4.1 The Company shall furnish, or
shall cause to be furnished, to the Fund or its designee, each piece of sales
literature or other promotional material that the Company develops and in which
the Fund (or a Designated Portfolio thereof) or the Adviser or the Underwriter
is named. No such material shall be used if the Fund or its designee objects to
such sales literature or promotional material within five Business Days after
receipt of such material. The Fund or its designee reserves the right to
reasonably object to the continued use of any such sales literature or other
promotional material in which the Fund (or a Designated Portfolio thereof) or
the Adviser or the Underwriter is named, and no such material shall be used if
the Fund or its designee so object.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund or
the Adviser or the Underwriter in connection with the sale of the Contracts
other than the information or representations contained in the registration
statement or prospectus or SAI for the Fund shares, as such registration
statement and prospectus or SAI may be amended or supplemented from time to
time, or in reports or proxy statements for the Fund, or in sales literature or
other promotional material approved by the Fund or its designee or by the
Underwriter, except with the permission of the Fund or the Underwriter or the
designee of either.
4.3 The Fund and the Underwriter, or their designee, shall
furnish, or cause to be furnished, to the Company, each piece of sales
literature or other promotional material that it develops and in which the
Company, and/or its Account, is named. No such material shall be used until
approved by the Company, and the Company will use its best efforts to review
such sales literature or promotional material within ten Business Days after
receipt of such material. The Company reserves the right to reasonably object to
the continued use of any such sales literature or other promotional material in
which the Company and/or its Account is named, and no such material shall be
used if the Company so objects.
4.4 The Fund and the Underwriter shall not give any
information or make any representations on behalf of the Company or concerning
the Company, the Account, or the Contracts other than the information or
representations contained in a registration statement, prospectus (which shall
include an offering memorandum, if any, if the Contracts issued by the Company
or interests therein are
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<PAGE>
not registered under the 1933 Act), or SAI for the Contracts, as such
registration statement, prospectus, or SAI may be amended or supplemented from
time to time, or in published reports for the Account which are in the public
domain or approved by the Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 The Fund and the Underwriter shall adopt and implement
procedures reasonably designed to ensure that information concerning the
Company, any of its affiliates, or the Contracts which is intended only for use
by brokers or agents selling the shares (i.e., information that is not intended
for distribution to shareowners or prospective shareowners) is so used, and
neither the Company nor any of its affiliates shall be liable for any losses,
damages, or expenses relating to the improper use of such broker only materials.
4.6 The Company shall adopt and implement procedures
reasonably designed to ensure that information concerning the Fund which is
intended only for use by brokers or agents selling the Contracts (i.e.,
information that is not intended for distribution to contract owners or
prospective contract owners) is so used, and neither the Fund nor the
Underwriter shall be liable for any losses, damages, or expenses relating to the
improper use of such broker only materials. The parties hereto agree that this
section is not intended to designate or otherwise imply that the Company is an
underwriter or distributor of the Fund's shares.
4.7 The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, SAIs, reports, proxy
statements, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Fund or its shares, promptly after the filing of such
document(s) with the SEC or other regulatory authorities.
4.8 The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses (which shall include an
offering memorandum, if any, if the Contracts issued by the Company or interests
therein are not registered under the 1933 Act), SAIs, reports, solicitations for
voting instructions, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Contracts or the Account, promptly after
the filing of such document(s) with the SEC or other regulatory authorities. The
Company shall provide to the Fund and the Underwriter any complaints received
from the Contract owners pertaining to the Fund or the Designated Portfolio.
4.9 The Fund will provide the Company with as much notice as
is reasonably practicable of any proxy solicitation for any Designated
Portfolio, and of any material change in the Fund's registration statement,
particularly any change resulting in a change to the registration statement or
prospectus for any Account. The Fund will work with the Company so as to enable
the Company to solicit proxies from Contract owners, or to make changes to its
prospectus or registration statement, in an orderly manner. The Fund will make
reasonable efforts to attempt to have changes affecting Contract prospectuses
become effective simultaneously with the annual updates for such prospectuses.
4.10 For purposes of this Article IV, the phrase "sales
literature and other promotional materials" includes, but is not limited to, any
of the following that refer to the Fund or any affiliate of the Fund:
advertisements (such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public media),
sales literature (I.E., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published
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<PAGE>
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, and registration
statements, prospectuses, SAIs, shareholder reports, proxy materials, and any
other communications distributed or made generally available with regard to the
Fund.
ARTICLE V. FEES AND EXPENSES
5.1 The Fund and the Underwriter shall pay no fee or other
compensation to the Company under this Agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance
distribution expenses, then the Fund or Underwriter may make payments to the
Company or to the underwriter for the Contracts if and in amounts agreed to by
the Underwriter in writing, and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter, or other
resources available to the Underwriter. Currently, no such payments are
contemplated.
5.2 All expenses incident to performance by the Fund under
this Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3 With respect to any prospectuses of the Designated
Portfolios that are printed in combination with any one or more Contract
prospectus (the "Prospectus Booklet"), the costs of printing Prospectus Booklets
for distribution to existing Contract owners shall be prorated to the Fund based
on (a) the ratio of the number of pages of the prospectuses for the Designated
Portfolios included in the Prospectus Booklet to the number of pages in the
Prospectus Booklet as a whole; and (b) the ratio of the number of Contract
owners with Contract value allocated to the Designated Portfolios to the total
number of Contract owners; PROVIDED, however, that the Company shall bear all
printing expenses of such combined documents where used for distribution to
prospective purchasers or to owners of existing Contracts not funded by the
Fund. The Company shall bear the expenses of distributing the Fund's proxy
materials and periodic reports to Contract owners.
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ARTICLE VI. DIVERSIFICATION AND QUALIFICATION
6.1 The Fund will invest its assets in such a manner as to
ensure that the Contracts will be treated as annuity or life insurance
contracts, whichever is appropriate, under the Code and the regulations issued
there under (or any successor provisions). Without limiting the scope of the
foregoing, each Designated Portfolio has complied and will continue to comply
with Section 817(h) of the Code and Treasury Regulation ss.1.817-5, and any
Treasury interpretations thereof, relating to the diversification requirements
for variable annuity, endowment, or life insurance contracts, and any amendments
or other modifications or successor provisions to such Section or Regulations.
In the event of a breach of this Article VI by the Fund, it will take all
reasonable steps (a) to notify the Company of such breach and (b) to adequately
diversify the Fund so as to achieve compliance within the grace period afforded
by Regulation 1.817-5.
6.2 The Fund represents that it is qualified as a Regulated
Investment Company under Subchapter M of the Code, and that it will maintain
such qualification (under Subchapter M or any successor or similar provisions)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
The Fund acknowledges that compliance with Subchapter M is a essential element
of compliance with Section 817(h).
6.3 The Fund shall provide the Company or its designee with
reports certifying compliance with the aforesaid Section 817(h) diversification
and Subchapter M qualification requirements upon request.
6.4 Subject to Section 6.1 and Section 6.2, the Company
represents that the Contracts are currently, and at the time of issuance shall
be, treated as life insurance or annuity insurance contracts, under applicable
provisions of the Code, and that it will make every effort to maintain such
treatment, and that it will notify the Fund and the Underwriter immediately upon
having a reasonable basis for believing the Contracts have ceased to be so
treated or that they might not be so treated in the future. The Company agrees
that any prospectus offering a contract that is a "modified endowment contract"
as that term is defined in Section 7702A of the Code (or any successor or
similar provision), shall identify such contract as a modified endowment
contract.
ARTICLE VII. POTENTIAL CONFLICTS
The following provisions shall apply only upon issuance of the Mixed
and Shared Funding Order and the sale of shares of the Fund to variable life
insurance separate accounts, and then only to the extent required under the
1940 Act.
7.1 The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the Contract owners of
all separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
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7.2 The Company will report any potential or existing
conflicts of which it is aware to the Board. The Company will assist the Board
in carrying out its responsibilities under the Mixed and Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Company to inform the Board whenever Contract
owner voting instructions are disregarded.
7.3 If it is determined by a majority of the Board, or a
majority of its disinterested members, that a material irreconcilable conflict
exists, the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority of
the disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (I.E., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the Account's
investment in the Fund and terminate this Agreement with respect to each
Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund.
7.5 If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board informs
the Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. Until the end of the foregoing six month period, the Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6 For purposes of Section 7.3 through 7.6 of this Agreement,
a majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contract if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
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7.7 If and to the extent the Mixed and Shared Funding
Exemption Order or any amendment thereto contains terms and conditions different
from Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement, then
the Fund and/or the Participating Insurance Companies, as appropriate, shall
take such steps as may be necessary to comply with the Mixed and Shared Funding
Exemptive Order, and Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this
Agreement shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in the Mixed and Shared
Funding Exemptive Order or any amendment thereto. If and to the extent that Rule
6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive
relief from any provision of the 1940 Act or the rules promulgated thereunder
with respect to mixed or shared funding (as defined in the Mixed and Shared
Funding Exemptive Order) on terms and conditions materially different from those
contained in the Mixed and Shared Funding Exemptive Order, then (a) the Fund
and/or the Participating Insurance Companies, as appropriate, shall take such
steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and
Rule 6e-3, as adopted, to the extent such rules are applicable; and (b) Sections
3.5, 3.6, 7.1., 7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in
effect only to the extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold
harmless the Fund and the Underwriter and each of their trustees/directors and
officers, and each person, if any, who controls the Fund or Underwriter within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company) or litigation (including legal and other expenses), to
which the Indemnified Parties may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue
statement or alleged untrue statements of any
material fact contained in the registration
statement, prospectus (which shall include a written
description of a Contract that is not registered
under the 1933 Act), or SAI for the Contracts or
contained in the Contracts or sales literature for
the Contracts (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein
a material fact required to be stated therein or
necessary to make the statements therein not
misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity
with information furnished to the Company by or on
behalf of the Fund for use in the registration
statement, prospectus or SAI for the Contracts or in
the Contracts or sales literature (or any amendment
or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, SAI, or sales literature of
the Fund not supplied by the Company or persons
under its control) or wrongful conduct of the
Company or its agents or persons
-12-
<PAGE>
under the Company's authorization or control, with
respect to the sale or distribution of the
Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, SAI, or sales
literature of the Fund or any amendment thereof or
supplement thereto or the omission or alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading if such a statement or
omission was made in reliance upon and in conformity
with information furnished to the Fund by or on
behalf of the Company; or
(iv) arise as a result of any material failure by the
Company to provide the services and furnish the
materials under the terms of this Agreement
(including a failure, whether unintentional or in
good faith or otherwise, to comply with the
qualification requirements specified in Article VI of
this Agreement); or
(v) arise out of or result from any material breach
of any representation and/or warranty made by the
Company in this Agreement or arise out of or result
from any other material breach of this Agreement by
the Company;
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of its obligations or
duties under this Agreement.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
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<PAGE>
8.1(d). The Indemnified Parties will promptly notify
the Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Contracts or the
operation of the Fund.
8.2 INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold
harmless the Company and each of its directors and officers and each person, if
any, who controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any material
fact contained in the registration statement or
prospectus or SAI or sales literature of the Fund (or
any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading, provided that
this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to the Underwriter or Fund by or on behalf
of the Company for use in the registration statement,
prospectus or SAI for the Fund or in sales literature
(or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, SAI or sales literature for
the Contracts not supplied by the Underwriter or
persons under its control) or wrongful conduct of the
Fund or Underwriter or persons under their control,
with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, SAI or sales
literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statement or statements therein not misleading,
if such statement or omission was made in reliance
upon and in conformity with information furnished to
the Company by or on behalf of the Fund or the
Underwriter; or
(iv) arise as a result of any failure by the Fund or
the Underwriter to provide the services and furnish
the materials under the terms of this Agreement
(including a failure of the Fund, whether
unintentional or in good faith or otherwise, to
comply with the diversification and other
qualification requirements specified in Article VI of
this Agreement); or
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<PAGE>
(v) arise out of or result from any material breach
of any representation and/or warranty made by the
Underwriter in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Underwriter; as limited by and in
accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under
this indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance or such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under
this indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Underwriter in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to notify
the Underwriter of any such claim shall not relieve the Underwriter from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Party, the Underwriter will be
entitled to participate, at its own expense, in the defense thereof. The
Underwriter also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Underwriter
to such party of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
The Company agrees promptly to notify the Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of the Account.
8.3 INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold
harmless the Company and each of its directors and officers and each person, if
any, who controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the Fund) or litigation
(including legal and other expenses) to which the Indemnified Parties may be
required to pay or may become subject under any statute or regulation, at common
law or otherwise, insofar as such losses, claims, expenses, damages, liabilities
or expenses (or actions in respect thereof) or settlements, are related to the
operations of the Fund and:
(i) arise as a result of any failure by the Fund to
provide the services and furnish the materials under
the terms of this Agreement (including a failure,
whether unintentional or in good faith or otherwise,
to comply with the diversification and other
qualification requirements specified in Article VI of
this Agreement); or
-15-
<PAGE>
(ii) arise out of or result from any material breach
of any representation and/or warranty made by the
Fund in this Agreement or arise out of or result from
any other material breach of this Agreement by the
Fund; or
(iii) arise out of or result from the materially
incorrect or untimely calculation or reporting of the
daily net asset value per share or dividend or
capital gain distribution rate; as limited by and in
accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company, the Fund, the Underwriter or the
Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree
promptly to notify the Fund of the commencement of any litigation or proceeding
against it or any of its respective officers or directors in connection with the
Agreement, the issuance or sale of the Contracts, the operation of the Account,
or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW 9.1 This Agreement shall be construed
and the provisions hereof interpreted under and in accordance with the laws of
the State of Delaware.
9.2 This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, any Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith. If, in the future, the Mixed and Shared Funding Exemptive Order
should no longer be necessary under applicable law, then Article VII shall no
longer apply.
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<PAGE>
ARTICLE X. TERMINATION
10.1 This Agreement shall continue in full force and effect
until the first to occur of:
(a) termination by any party, for any reason with respect
to some or all Designated Portfolios, by six (6)
months advance written notice delivered to the other
parties; or
(b) termination by the Company by written notice to the
Fund and the Underwriter based upon the Company's
determination that shares of the Fund are not
reasonably available to meet the requirements of the
Contracts; or
(c) termination by the Company by written notice to the
Fund and the Underwriter in the event any of the
Designated Portfolio's shares are not registered,
issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of
such shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or
(d) termination by the Fund or Underwriter in the event
that formal administrative proceedings are instituted
against the Company by the NASD, the SEC, the
Insurance Commissioner or like official of any state
or any other regulatory body regarding the Company's
duties under this Agreement or related to the sale of
the Contracts, the operation of any Account, or the
purchase of the Fund's shares; provided, however,
that the Fund or Underwriter determines in its sole
judgment exercised in good faith, that any such
administrative proceedings will have a material
adverse effect upon the ability of the Company to
perform its obligations under this Agreement; or
(e) termination by the Company in the event that formal
administrative proceedings are instituted against the
Fund or Underwriter by the NASD, the SEC, or any
state securities or insurance department or any other
regulatory body; provided, however, that the Company
determines in its sole judgment exercised in good
faith, that any such administrative proceedings will
have a material adverse effect upon the ability of
the Fund or Underwriter to perform its obligations
under this Agreement; or
(f) termination by the Company by written notice to the
Fund and the Underwriter with respect to any
Designated Portfolio in the event that such Portfolio
ceases to qualify as a Regulated Investment Company
under Subchapter M or fails to comply with the
Section 817(h) diversification requirements specified
in Article VI hereof, or if the Company reasonably
believes that such Portfolio may fail to so qualify
or comply; or
(g) termination by the Fund or Underwriter by written
notice to the Company in the event that the Contracts
fail to meet the qualifications specified in Article
VI hereof; or
(h) termination by either the Fund or the Underwriter by
written notice to the Company, if either one or both
of the Fund or the Underwriter respectively, shall
determine, in their sole judgment exercised in good
faith, that the Company has suffered a material
adverse change in its business, operations, financial
condition,
-17-
<PAGE>
or prospects since the date of this Agreement or is
the subject of material adverse publicity; or
(i) termination by the Company by written notice to the
Fund and the Underwriter, if the Company shall
determine, in its sole judgment exercised in good
faith, that the Fund, Adviser, or the Underwriter has
suffered a material adverse change in its business,
operations, financial condition or prospects since
the date of this Agreement or is the subject of
material adverse publicity; or
(j) termination by the Fund or the Underwriter by written
notice to the Company, if the Company gives the Fund
and the Underwriter the written notice specified in
Section 1.7(a)(ii) hereof and at the time such notice
was given there was no notice of termination
outstanding under any other provision of this
Agreement; provided, however, any termination under
this Section 10.1(j) shall be effective forty-five
days after the notice specified in Section 1.7(a)(ii)
was given; or
(k) termination by the Company upon any substitution of
the shares of another investment company or series
thereof for shares of a Designated Portfolio of the
Fund in accordance with the terms of the Contracts,
provided that the Company has given at least 45 days
prior written notice to the Fund and Underwriter of
the date of substitution; or
(l) termination by any party in the event that the Fund's
Board of Trustees determines that a material
irreconcilable conflict exists as provided in Article
VII.
(m) at the option of any party upon another party's
failure to cure a material breach of any provision of
this Agreement within 30 days after written notice
thereof.
10.2 Notwithstanding any termination of this Agreement, the
Fund and the Underwriter shall, at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms and conditions of
this Agreement, for all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Contracts"), unless the
Underwriter requests that the Company seek an order pursuant to Section 26(b) of
the 1940 Act to permit the substitution of other securities for the shares of
the Designated Portfolios. The Underwriter agrees to split the cost of seeking
such an order, and the Company agrees that it shall reasonably cooperate with
the Underwriter and seek such an order upon request. Specifically, the owners of
the Existing Contracts may be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts (subject to any such
election by the Underwriter). The parties agree that this Section 10.2 shall not
apply to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement. The parties
further agree that this Section 10.2 shall not apply to any terminations under
Section 10.1(g) of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to
the Contracts (as opposed to Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract owner
initiated or approved transactions, (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), (iii) upon 45 days
prior written notice to the Fund and Underwriter, as permitted by an order of
the SEC pursuant to Section 26(b) of the 1940 Act, but only if a substitution of
other securities for the shares of the Designated Portfolios is consistent with
the terms of the Contracts, or
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<PAGE>
(iv) as permitted under the terms of the Contract. Upon request, the Company
will promptly furnish to the Fund and the Underwriter reasonable assurance that
any redemption pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Contacts,
the Company shall not prevent Contract owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Fund or the Underwriter 45 days notice of its intention to do so.
10.4 Notwithstanding any termination of this Agreement, each
party's obligation under Article VIII to indemnify the other parties shall
survive.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered
or certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to the Fund: PIMCO Variable Insurance Trust
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
If to the Company: Merrill Lynch Life Insurance Company of New York
800 Scudders Mill Road PCC2I
Plainsboro, NJ 08536
If to Underwriter: PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
ARTICLE XII. MISCELLANEOUS
12.1 All persons dealing with the Fund must look solely to the
property of the Fund, and in the case of a series company, the respective
Designated Portfolios listed on Schedule A hereto as though each such Designated
Portfolio had separately contracted with the Company and the Underwriter for the
enforcement of any claims against the Fund. The parties agree that neither the
Board, officers, agents or shareholders of the Fund assume any personal
liability or responsibility for obligations entered into by or on behalf of the
Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information has come into the
public domain.
12.3 The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
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<PAGE>
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without limitation the SEC,
the NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the New York Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with the
New York variable annuity laws and regulations and any other applicable law or
regulations.
12.7 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies,
and obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
12.8 This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto.
12.9 The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles) containing the
Designated Portfolios, filed with any state or federal
regulatory body or otherwise made available to the
public, as soon as practicable and in any event within
90 days after the end of each fiscal year; and
(b) any registration statement containing the Designated
Portfolios (without exhibits) and financial reports of
the Company containing the Designated Portfolios, filed
with the Securities and Exchange Commission or any state
insurance regulatory, as soon as practicable after the
filing thereof.
12.10 Except as otherwise expressly provided in this Agreement,
neither the Fund nor the Underwriter, nor any affiliate thereof shall use any
trademark, trade name, service mark or logo of the Company or its affiliates, or
any variation of any such trademark, trade name, service mark or logo, without
the Company's prior written consent, the granting of which shall be at the
Company's sole option.
Except as otherwise provided in this Agreement, neither the
Company nor any of its affiliates shall use any trademark, trade name, service
mark or logo of the Fund or the Underwriter, or any affiliates thereof, or any
variation of any such trademark, trade name, service mark or logo, without the
Fund's or Underwriter's prior written consent, the granting of which shall be at
the Fund's or the Underwriter's sole option.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
ML LIFE INSURANCE COMPANY OF NEW YORK:
By its authorized officer
By:______________________________
Name:____________________________
Title:___________________________
Date:____________________________
PIMCO VARIABLE INSURANCE TRUST
By its authorized officer
By:______________________________
Name: Brent R. Harris
Title: Chairman
Date:____________________________
PIMCO FUNDS DISTRIBUTORS LLC
By its authorized officer
By:______________________________
Name: Newton B. Schott, Jr.
Title: Executive Vice President
Date:____________________________
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<PAGE>
Schedule A
PIMCO VARIABLE INSURANCE TRUST PORTFOLIOS:
Total Return Bond Portfolio
CONTRACTS:
Merrill Lynch Retirement Power
SEGREGATED ASSET ACCOUNTS:
ML of New York Variable Annuity Separate Account A (established August 14,
1991).
<PAGE>
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 3rd day of April, 2000, between Seligman
Portfolios, Inc., an open-end management investment company organized as a
Maryland Corporation (the "Fund"), Seligman Advisors, Inc., a Delaware
corporation (the "Distributor") and ML Life Insurance Company of New York, a
life insurance company organized under the laws of the State of New York (the
"Company"), on its own behalf and on behalf of each segregated asset account of
the Company set forth on Schedule A, as may be amended from time to time (the
"Account").
W I T N E S S E T H :
WHEREAS, the Fund is a registered open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and has filed a currently effective registration statement to offer and sell its
shares under the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Fund desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Fund (the "Participating Insurance
Companies"); and
WHEREAS, the shares of the Fund are divided into several series of
shares, each series representing an interest in a particular managed portfolio
of securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has applied for an order from the Securities and
Exchange Commission ("SEC") granting Participating Insurance Companies (as
defined in the Fund's application for such order) and their separate accounts
exemptions from the provisions of sections 9(a), 13(a), 15(a) and 15(b) of the
1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies and certain qualified pension and
retirement plans (the "Exemptive Order"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
and is a member in good standing of The National Association of Securities
Dealers, Inc. (the "NASD"); and
WHEREAS, the Distributor currently serves as the distributor of the
Fund's shares; and
<PAGE>
WHEREAS, the Company has registered or will register certain variable
life insurance policies and/or variable annuity contracts under the 1933 Act
(the "Contracts"); and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Company desires to utilize shares of one or more
Portfolios as an investment vehicle of the Accounts;
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
ARTICLE I.
SALE OF FUND SHARES
1.1. The Fund shall make shares of its Portfolios available to the
Accounts at the net asset value next computed after receipt of such purchase
order by the Fund (or its designee), as established in accordance with the
provisions of the then current prospectus of the Portfolio or Portfolios.
Shares of a particular Portfolio of the Fund shall be ordered in such
quantities and at such times as determined by the Company to be necessary to
meet the requirements of the Contracts. The Directors of the Fund (the
"Directors") may refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of shares of any Portfolio if such action
is required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Directors acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary
in the best interests of the shareholders of such Portfolio.
1.2. The Fund will redeem any full or fractional shares of any
Portfolio when requested by the Company on behalf of an Account at the net
asset value next computed after receipt by the Fund (or its designee) of the
request for redemption, as established in accordance with the provisions of
the then current prospectus of the Fund.
1.3. For the purposes of Sections 1.1 and 1.2, the Fund hereby
appoints the Company as its designee for the limited purpose of receiving and
accepting purchase and redemption orders resulting from investment in and
payments under the Contracts. Receipt by the Company shall constitute receipt
by the Fund provided that (i) such orders are received by the Company in good
order prior to the time the net asset value of each Portfolio is priced in
accordance with its prospectus and (ii) the Fund receives notice of such
orders by 10:00 a.m. New York time on the next following Business Day.
"Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Fund calculates its net asset value
pursuant to the rules of the SEC.
2
<PAGE>
1.4. For purposes of determining payment for purchase orders and
redemption orders, all such orders will be netted. Net purchase orders that are
transmitted to the Fund in accordance with Section 1.3 shall be paid for by the
Company by 2:00 p.m. EST on the same Business Day that the Fund receives notice
of the order. Net redemption orders that are transmitted to the Fund in
accordance with Section 1.3 shall be paid for by the Fund by 2:00 p.m. EST on
the same Business Day that the Fund receives notice of the order, to the extent
practicable, and in any event the Fund shall make such payment within five
calendar days after the date the order is transmitted to the Fund in accordance
with Section 1.3 or such shorter period of time as may be required by law.
Payments shall be made in federal funds transmitted by wire.
1.5. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Fund will be recorded in the appropriate title for each
Account or the appropriate subaccount of each Account.
1.6. The Fund shall furnish prompt notice to the Company of any income
dividends or capital gain distributions payable on the Fund's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional shares of
that Portfolio. The Fund shall notify the Company of the number of shares so
issued as payment of such dividends and distributions.
1.7. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall us its
best efforts to make such net asset value per share available by 6 p.m. New York
time.
1.8. The Fund agrees that its shares will be sold only to Participating
Insurance Companies and their separate accounts and to certain qualified pension
and retirement plans to the extent permitted by the Exemptive Order. No shares
of any Portfolio will be sold directly to the general public. The Company agrees
that Fund shares will be used only for the purposes of funding the Contracts and
Accounts listed in Schedule A, as amended from time to time.
1.9. The Fund and the Company agree that they shall amend any provision
of this Agreement to the extent that it is inconsistent with any condition
imposed by the SEC in the Exemptive Order.
ARTICLE II.
OBLIGATIONS OF THE PARTIES
2.1. The Fund shall prepare and be responsible for filing with the SEC
and any state regulators requiring such filing all shareholder reports, notices,
proxy materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of the Fund.
The Fund shall bear the cost of registration and qualification of its shares,
preparation and filing of the documents listed in this section 2.1 and all taxes
to which an issuer is subject on the issuance and transfer of its shares.
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2.2. At the option of the Company, the Fund or the Distributor shall
either (i) provide the Company with as many copies of the Fund's or the relevant
Portfolio's current prospectus, statement of additional information, annual
reports, semi-annual reports and other shareholder communications, including any
amendments or supplements to any of the foregoing ("Fund Documents"), as the
Company shall reasonably request; or (ii) provide the Company with a camera
ready copy of such documents in a form suitable for printing. The Fund or the
Distributor shall provide the Company with a copy of the Fund's statement of
additional information in a form suitable for duplication by the Company. The
Fund shall provide the Company with copies of any Fund-sponsored proxy materials
in such quantity as the Company shall reasonably require for distribution to
Contract owners.
2.3. The Fund shall bear the costs of printing and distributing Fund
Documents and any Fund-sponsored proxy-materials to existing Contract owners
whose Contracts are funded by the Fund's shares. The Company shall bear the
costs of printing and distributing the Fund Documents to prospective purchasers
of Contracts for which the Fund is serving or is to serve as an investment
vehicle. With respect to any prospectuses of the Portfolios that are printed in
combination with any one or more Contract prospectus (the "Prospectus Booklet"),
the costs of printing Prospectus Booklets for distribution to existing Contract
owners shall be prorated to the Fund based on (a) the ratio of the number of
pages of the prospectuses for the Portfolios included in the Prospectus Booklet
to the number of pages in the Prospectus Booklet as a whole; and (b) the ratio
of the number of Contract owners with Contract value allocated to the Portfolios
to the total number of Contract owners; PROVIDED, however, that the Company
shall bear all printing expenses of such combined documents where used for
distribution to prospective purchasers or to owners of existing Contracts not
funded by the Portfolios. The Company shall bear the costs of distributing proxy
materials (or similar materials such as voting solicitation instructions) that
are not sponsored by the Fund to Contract owners. The Company assumes sole
responsibility for ensuring that all such materials are delivered to Contract
owners in accordance with applicable federal and state securities laws.
2.4 (a) The Company agrees and acknowledges that the Fund's manager, J.
& W. Seligman & Co. Incorporated ("Seligman"), is the sole owner of the name and
mark "Seligman" and that all use of any designation comprised in whole or part
of Seligman (a "Seligman Mark") under this Agreement shall inure to the benefit
of Seligman. Except as provided in section 2.5, the Company shall not use any
Seligman Mark on its own behalf or on behalf of the Accounts or Contracts in any
registration statement, advertisement, sales literature or other materials
relating to the Accounts or Contracts without the prior written consent of
Seligman. Upon termination of this Agreement for any reason, the Company shall
cease all use of any Seligman Mark(s) as soon as reasonably practicable.
(b) The Fund and the Distributor agree and acknowledge that
the Company and its affiliates are the sole owner or owners of the name and the
mark "Merrill Lynch" and that all use of any designation comprised in whole or
part of Merrill Lynch (a "Merrill Lynch Mark") under this Agreement shall inure
to the benefit of Merrill Lynch. Except as provided in section 2.5, neither the
Fund nor the Distributor shall use any Merrill Lynch Mark on its own behalf or
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on behalf of the Accounts or Contracts in any registration statement,
advertisement, sales literature or other materials relating to the Accounts or
Contracts without the prior written consent of Merrill Lynch, subject to the
last sentence of this Section 2.4(b). Upon termination of this Agreement for any
reason, the Fund and the Distributor shall cease all use of any Merrill Lynch
Mark(s) as soon as reasonably practicable, subject to the last sentence of this
Section 2.4(b). Nothing in this Section 2.4(b) shall prohibit the Distributor
from using any Merrill Lynch Mark in any documents or materials to the extent
that such use is permitted under any other agreement by and between the
Distributor and any affiliate of the Company or has been authorized by any such
affiliate of the Company.
2.5. (a) The Company shall furnish, or cause to be furnished, to the
Fund or the Distributor a copy of each Contract prospectus or statement of
additional information in which the Fund or Seligman is named prior to the
filing of such document with the SEC. The Company shall furnish, or shall cause
to be furnished, to the Fund or its designee, each piece of advertising, sales
literature or other promotional material in which the Fund, the Portfolios or
Seligman is named, at least ten Business Days prior to its use. No such material
shall be used if the Fund or the Distributor reasonably objects to such use
prior to such use.
(b) The Distributor will provide to the Company, within fifteen
(15) Business Days after the end of a calendar quarter, or as soon thereafter as
is reasonably practicable, the following information with respect to each
Portfolio as of the last day of such calendar quarter: the Portfolio's ten
largest portfolio holdings (based on the percentage of the Portfolio's net
assets); the five industry sectors in which the Portfolio's investments are most
heavily weighted; and year-to-date SEC standardized performance data. In
addition, the Distributor agrees to provide to the Company, within fifteen (15)
Business Days after a request is submitted to the Distributor by the Company,
the following information with respect to each Portfolio, each as of the date or
dates specified in such request: net asset value and net asset value per Share.
The Distributor acknowledges that such information may be furnished to the
Company's internal or independent auditors and to the insurance departments of
the various jurisdictions in which the Company does business. The information
referred to in this Section 2.5(b) will only be used in Company advertisements,
sales literature or other promotional material in accordance with Section
2.5(a).
(c) The Distributor shall furnish, or cause to be furnished, to
the Company a copy of each Fund or Portfolio prospectus or statement of
additional information in which the Company is named prior to the filing of such
document with the SEC. The Distributor shall furnish, or shall cause to be
furnished, to the Company each piece of advertising, sales literature or other
promotional material in which the Company is named, at least ten Business Days
prior to its use. No such material shall be used if the Company reasonably
objects to such use prior to such use.
2.6. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund or
Seligman in connection with the sale of the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Fund shares (as such registration statement
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<PAGE>
and prospectus may be amended or supplemented from time to time), reports of the
Fund, Fund-sponsored proxy statements, or in any advertisements, sales
literature or other promotional material approved by the Fund or the
Distributor, except as required by legal process or regulatory authorities or
with the written permission of the Fund or the Distributor.
2.7. Neither the Fund nor the Distributor shall give any information or
make any representations or statements on behalf of the Company, or concerning
the Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Contracts (as such registration statement and
prospectus may be amended or supplemented from time to time), or in materials
approved by the Company for distribution including advertisements, sales
literature or other promotional materials, except as required by legal process
or regulatory authorities or with the written permission of the Company.
2.8. The Fund will provide to the Company at least one complete copy of
all registration statements, profiles, prospectuses, SAIs, reports, proxy
statements, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Fund or its shares, promptly after the filing of such
document(s) with the SEC or other regulatory authorities.
2.9. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses (which shall include an offering
memorandum, if any, if the Contracts issued by the Company or interests therein
are not registered under the 1933 Act), SAIs, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Contracts or the Account, promptly after the filing of
such document(s) with the SEC or other regulatory authorities. The Company shall
provide to the Fund and the Distributor any complaints received from the
Contract owners pertaining to the Fund or the Portfolios.
2.10. The Fund will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Portfolio, and of any
material change in the Fund's registration statement, particularly any change
resulting in a change to the registration statement or prospectus for any
Account. The Fund will work with the Company so as to enable the Company to
solicit proxies from Contract owners, or to make changes to its prospectus or
registration statement, in an orderly manner.
2.11. For purposes of this Article II, the phrase "sales literature and
other promotional materials" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund, or to the
Company, as the case may be: advertisements (such as material published, or
designed for use in, a newspaper, magazine, or other periodical, radio,
television, telephone or tape recording, videotape display, signs or billboards,
motion pictures, or other public media), sales literature (I.E., any written
communication distributed or made generally available to customers or the
public, including brochures, circulars, reports, market letters, form letters,
seminar texts, reprints or excerpts of any other advertisement, sales
literature, or
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published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees of
the Company, and registration statements, prospectuses, SAIs, shareholder
reports, proxy materials, and any other communications distributed or made
generally available to customers or the public with regard to the Fund.
2.12. The Distributor shall adopt and implement procedures reasonably
designed to ensure that information concerning the Company, any of its
affiliates, or the Contracts which is intended only for use only by brokers or
agents selling the shares (I.E., information that is not intended for
distribution to shareowners or prospective shareowners) is so used, and neither
the Company nor any of its affiliates shall be liable for any losses, damages,
or expenses relating to the improper use of such broker only materials.
2.13. The Company shall adopt and implement procedures reasonably
designed to ensure that information concerning the Fund which is intended only
for use by brokers or agents selling the Contracts (I.E., information that is
not intended for distribution to Contract owners or prospective Contract owners)
is so used, and neither the Fund nor the Distributor shall be liable for any
losses, damages, or expenses relating to the improper use of such broker only
materials. The parties hereto agree that this section is not intended to
designate or otherwise imply that the Company is an underwriter or distributor
of the Fund's shares.
2.14. The Fund hereby notifies the Company that it may be appropriate
to include in the prospectus pursuant to which Contracts are offered disclosure
regarding the potential risks of mixed- and shared-funding.
2.15. So long as, and to the extent that the SEC interprets the 1940
Act to require pass-through voting privileges for variable policyowners, the
Company will provide pass-through voting privileges to owners of policies whose
cash values are invested, through the Accounts, in shares of the Fund. The Fund
shall require all Participating Insurance Companies to calculate voting
privileges in the same manner and the Company shall be responsible for assuring
that the Accounts calculate voting privileges in the manner established by the
Fund. With respect to each Account, the Company will vote shares of the Fund
held by the Account and for which no timely voting instructions for policyowners
are received as well as shares it owns that are held by that Account, in the
same proportion as those shares for which voting instructions are received.
Subject to applicable law, the Company and its agents will in no way recommend
or oppose or interfere with the solicitation of proxies for Fund shares held by
Contract owners without the prior written consent of the Fund, which consent may
be withheld in the Fund's sole discretion.
2.16 The Company shall establish and disclose to Contract owners a
reasonable policy designed to discourage frequent and disruptive purchases and
redemptions of Fund shares by Contract owners and shall cooperate with the Fund
to minimize the impact on the Fund of such transactions.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
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3.1. The Company represents and warrants that it is an insurance
company duly organized and in good standing under the laws of the State of New
York and that it has legally and validly established each Account as a
segregated asset account under such law on the date set forth in Schedule A.
3.2. The Company represents and warrants that it has registered or,
prior to any issuance or sale of the Contracts, will register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act to serve
as a segregated investment account for the Contracts.
3.3. The Company represents that it has full power and authority under
applicable law and has taken all actions necessary, to enter into this
Agreement. The Company represents and warrants that the Contracts will be
registered under the 1933 Act prior to any issuance or sale of the Contracts;
the Contracts will be issued and sold in compliance in all material respects
with all applicable federal and state laws; and the sale of the Contracts shall
comply in all material respects with state insurance suitability requirements.
3.4. The Fund represents and warrants that it is duly organized and
validly existing under the laws of the State of Maryland.
3.5. The Fund represents and warrants that the Fund shares offered and
sold pursuant to this Agreement will be registered under the 1933 Act and the
Fund shall be registered under the 1940 Act prior to any issuance or sale of
such shares. The Fund shall amend its registration statement under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall make notice or other filings in
accordance with the laws of the various states only if and to the extent deemed
necessary by the Fund.
3.6. The Fund represents that it has full power and authority under
applicable law and has taken all actions necessary, to enter into this
Agreement.
3.7. The Distributor represents and warrants that it is duly organized
and validly existing under the laws of the State of Delaware.
3.8. The Distributor represents that it has full power and authority
under applicable law and has taken all actions necessary, to enter into this
Agreement.
3.9. The Fund and the Distributor represent that the Fund's investment
policies, fees, and expenses are and shall at all times remain in compliance
with applicable state securities laws, if any. The Fund and the Distributor
represent that their respective operations are and shall at all times remain in
material compliance with applicable state securities laws, if any. The Fund and
Distributor also represent that the Fund or the Distributor, as the case may be,
will comply with any state insurance law restrictions, as provided in writing by
the Company to the Fund or the Distributor, as the case may be, including the
furnishing of information not otherwise available
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<PAGE>
to the Company which is required by state insurance law to enable the Company to
obtain the authority needed to issue the Contracts in any applicable state.
3.10. The Fund will invest its assets in such a manner as to ensure
that the Contracts will be treated as annuity or life insurance contracts,
whichever is appropriate, under the Code and the regulations issued thereunder
(or any successor provisions). Without limiting the scope of the foregoing, each
Portfolio has complied and will continue to comply with Section 817(h) of the
Code and Treasury Regulation Section 1.817-5, and any Treasury interpretations
thereof, relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts, and any amendments or other
modifications or successor provisions to such Section or Regulations. In the
event of a breach of this Section 3.7 by the Fund, it will (a) take all
reasonable steps to notify the Company of such breach and (b) immediately take
all necessary steps to adequately diversify the Fund so as to achieve compliance
within the grace period afforded by Regulation Section 1.817-5.
3.11. The Fund represents that it is or will be qualified as a
Regulated Investment Company under Subchapter M of the Code, and that it will
use its best efforts to maintain such qualification (under Subchapter M or any
successor or similar provisions) and that it will notify the Company immediately
upon having a reasonable basis for believing that it has ceased to so qualify or
that it might not so qualify in the future. The Fund acknowledges that
compliance with Subchapter M is an essential element of compliance with Section
817(h).
ARTICLE IV.
POTENTIAL CONFLICTS
4.1. The parties acknowledge that the Fund's shares may be made
available for investment to other Participating Insurance Companies and
qualified pension and retirement plans ("Qualified Plans"). In such event, the
Directors will monitor the Fund for the existence of any material irreconcilable
conflict between the interests of the contract owners of all Participating
Insurance Companies and of Qualified Plans. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Directors shall promptly inform the Company
if they determine that an irreconcilable material conflict exists and the
implications thereof.
4.2. The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Directors. The Company will assist the
Directors in carrying out their responsibilities under the Exemptive Order by
providing the Directors with all information
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reasonably necessary for the Directors to consider any issues raised including,
but not limited to, information as to a decision by the Company to disregard
Contact owner voting instructions.
4.3 If it is determined by a majority of the Directors, or a majority
of its disinterested Directors, that a material irreconcilable conflict exists
that affects the interests of Contract owners, the Company shall, in cooperation
with other Participating Insurance Companies whose contract owners are also
affected, at its expense and to the extent reasonably practicable (as determined
by the Directors) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (i) withdrawing the
assets allocable to some or all of the Accounts from the Fund or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Fund, or submitting the question of whether
or not such segregation should be implemented to a vote of all affected Contract
owners and, as appropriate, segregating the assets of any appropriate group
(i.e., variable annuity contract owners or variable life insurance contract
owners that votes in favor of such segregation, or offering to the affected
Contract owners the option of making such a change; and (ii) establishing a new
registered management investment company or managed separate account.
4.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account if
requested by the Fund's Directors, terminate this Agreement with respect to such
Account within six months after the Directors inform the Company in writing that
it has determined that such decision has created a material irreconcilable
conflict; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested Directors. Until the end of
such six month period, the Fund shall continue to accept and implement orders by
the Company for the purchase and redemption of shares of the Fund.
4.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and, if requested by the Fund's
Directors, terminate this Agreement with respect to such Account within six
months after the Directors inform the Company in writing that it has determined
that such decision has created an irreconcilable material conflict; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested Directors. Until the end of such six month period,
the Fund shall continue to accept and implement orders by the Company for the
purchase and redemption of shares of the Fund.
4.6. For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested Directors shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required to establish a new funding medium for the Contracts
if an offer to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In the
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event that the Directors determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Fund and terminate this Agreement within six (6)
months after the Directors inform the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested Directors.
4.7. The Company and Seligman shall at least annually submit to the
Directors such reports, materials or data as the Directors may reasonable
request so that the Directors may fully carry out the duties imposed upon them
by the Exemptive Order, and said reports, materials and data shall be submitted
more frequently if deemed appropriate by the Directors.
4.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Exemptive Order) on terms and conditions materially
different from those contained in the Exemptive Order, then the Fund and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3,
as adopted, to the extent such rules are applicable.
ARTICLE V.
INDEMNIFICATION
5.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless the Fund, the Distributor, and each of their Directors,
officers, employees and agents and each person, if any, who controls the Fund or
the Distributor within the meaning of Section 15 of the 1933 Act (collectively,
the "Seligman Indemnified Parties" for purposes of this Article V) against any
and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Company) or expenses (including the
reasonable costs of investigating or defending any alleged loss, claim, damage,
liability or expense and reasonable legal counsel fees incurred in connection
therewith) (collectively, "Losses"), to which the Seligman Indemnified Parties
may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in the
Contracts themselves or in any advertising, sales literature or other
promotional literature generated or approved by the Company on behalf
of the Contracts or Accounts (or any amendment or supplement to any of
the foregoing) (collectively, "Company Documents" for the purposes of
this Article V), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this indemnity shall not apply as to any Seligman
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately
derived from written information furnished to the Company by or on
behalf of
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the Fund or the Distributor for use in Company Documents or otherwise
for use in connection with the sale of the Contracts or Fund shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Fund Documents as defined in Section 5.2(a)) or wrongful
conduct of the Company or persons under its control, or subject to its
authorization or supervisions with respect to the sale or acquisition
of the Contracts or Fund shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Fund Documents
as defined in Section 5.2(a) or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately derived
from written information furnished to the Fund or the Distributor by or
on behalf of the Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the terms
of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company.
5.2 INDEMNIFICATION BY THE FUND. The Fund agrees to indemnify and hold
harmless the Company and each of its directors, officers, employees and agents
and each person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act (collectively, the "Company Indemnified Parties" for purposes
of this Article V) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Fund) or
expenses (including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal counsel
fees incurred in connection therewith) (collectively, "Losses"), to which the
Company Indemnified Parties may become subject under any statute or regulation,
or at common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus for the Fund (or any amendment or
supplement thereto), (collectively, "Fund Documents" for the purposes
of this Article V), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this indemnity shall not apply as to any
Company Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately
derived from written information furnished to the Fund or the
Distributor by or on behalf of the Company for use in Fund Documents or
otherwise for use in connection with the sale of the Contracts or Fund
shares; or
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(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Company Documents) or wrongful conduct of the Fund or
persons under its control, or subject to its authorization or
supervision with respect to the sale or acquisition of the Contracts or
Fund shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statement therein not misleading if such statement or omission was made
in reliance upon and accurately derived from written information
furnished to the Company by or on behalf of the Fund; or
(d) arise out of or result from any failure by the Fund to
provide the services or furnish the materials required under the terms
of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Fund.
5.3 INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor agrees to
indemnify and hold harmless each of the Company Indemnified Parties against any
and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Distributor) or expenses (including
the reasonable costs of investigating or defending any alleged loss, claim,
damage, liability or expense and reasonable legal counsel fees incurred in
connection therewith) (collectively, "Losses"), to which the Company Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in any
advertising, sales literature or other promotional literature generated
or approved by the Fund or the Distributor on behalf of the Fund or any
of the Portfolios (collectively, "Fund Sales Documents" for the
purposes of this Article V), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this indemnity shall not apply as
to any Company Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and was
accurately derived from written information furnished to the Fund or
the Distributor by or on behalf of the Company for use in Fund Sales
Documents or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Company Documents) or wrongful conduct of the Distributor
or persons under its control, or
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subject to its authorization or supervision with respect to the sale
or acquisition of the Contracts or Fund shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statement therein not misleading if such statement or omission was made
in reliance upon and accurately derived from written information
furnished to the Company by or on behalf of the Distributor; or
(d) arise out of or result from any failure by the Distributor
to provide the services or furnish the materials required under the
terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Distributor.
5.3. Neither the Company, the Fund nor the Distributor shall be liable
under the indemnification provisions of sections 5.1 or 5.2, as applicable, with
respect to any Losses incurred or assessed against a Seligman Indemnified Party
or a Company Indemnified Party (collectively, the "Indemnified Parties") that
arise from such Indemnified Party's willful misfeasance, bad faith or gross
negligence in the performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations or duties under this
Agreement.
5.4. Neither the Company, the Fund nor the Distributor shall be liable
under the indemnification provisions of sections 5.1 or 5.2, as applicable, with
respect to any claim made against any Indemnified Party unless such Indemnified
Party shall have notified the other party in writing within a reasonable time
after the summons, or other first written notification, giving information of
the nature of the claim shall have been served upon or otherwise received by
such Indemnified Party (or after such Indemnified Party shall have received
notice of service upon or other notification to any designated agent), but
failure to notify the party against whom indemnification is sought of any such
claim shall not relieve that party from any liability which it may have to the
Indemnified Party in the absence of sections 5.1 and 5.2.
5.5. In case any such action is brought against the Indemnified
Parties, the indemnifying party shall be entitled to participate, at its own
expense, in the defense of such action. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel reasonably satisfactory to
the party named in the action. After notice from the indemnifying party to the
Indemnified Party of an election to assume such defense, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the indemnifying party will not be liable to the Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
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5.6 The obligations imposed on the Fund and the Distributor pursuant to
sections 5.2 shall be several obligations of the Fund and the Distributor,
respectively.
ARTICLE VI.
TERMINATION
6.1 This Agreement may be terminated by either party:
(a) for any reason by six months' advance written notice delivered
to the other party; or
(b) by the Company by written notice to the Fund and the
Distributor based upon the Company's determination that shares of the
Fund are not reasonably available to meet the requirements of the
Contracts; or
(c) by the Company by written notice to the Fund and the
Distributor in the event shares of any of the Portfolios are not
registered, issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as the
underlying investment media of the Contracts issued or to be issued by
the Company; or
(d) by the Fund or the Distributor in the event that formal
administrative proceedings are instituted against the Company by the
NASD, the SEC, the Insurance Commissioner or like official of any state
or any other regulatory body regarding the Company's duties under this
Agreement or related to the sale of the Contracts, the operation of any
Account, or the purchase of the Fund's shares; provided, however, that
the Fund or the Distributor determines in its sole judgment exercised
in good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Company to perform its
obligations under this Agreement; or
(e) by the Company in the event that formal administrative
proceedings are instituted against the Fund or the Distributor by the
NASD, the SEC, or any state securities or insurance department or any
other regulatory body; provided, however, that the Company determines
in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the
ability of the Fund or the Distributor to perform its obligations under
this Agreement; or
(f) by the Company by written notice to the Fund and the
Distributor with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company under
Subchapter M or fails to comply with the Section 817(h) diversification
requirements specified in Sections 3.10 and 3.11 hereof, or if the
Company reasonably believes that such Portfolio may fail to so qualify
or comply; or
(g)by either the Fund or the Distributor by written notice to
the Company, if either one or both of the Fund or the Distributor
respectively, shall determine, in their sole judgment exercised in good
faith, that the Company has suffered a material adverse
15
<PAGE>
change in its business, operations, financial condition, or prospects
since the date of this Agreement or is the subject of material adverse
publicity; or
(h) by the Company by written notice to the Fund and the
Distributor, if the Company shall determine, in its sole judgment
exercised in good faith, that the Fund or the Distributor has suffered
a material adverse change in its business, operations, financial
condition or prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(i) by the Company upon any substitution of the shares of another
investment company or series thereof for shares of a Portfolio of the
Fund in accordance with the terms of the Contracts, provided that the
Company has given at least 45 days prior written notice to the Fund and
the Distributor of the date of substitution; or
(j) by any party in the event that the Fund's Board of Directors
determines that a material irreconcilable conflict exists as provided
in Article V; or
(k) at the option of any party upon another party's failure to
cure a material breach of any provision of this Agreement within 30
days after written notice thereof.
6.2. Notwithstanding any termination of this Agreement pursuant to
Section 6.2 (other than a termination pursuant to Section 6.2(j)), the Fund
shall, at the option of the Company, continue to make available additional
shares of the Fund (or any Portfolio) pursuant to the terms and conditions of
this Agreement for all Contracts in effect on the effective date of termination
of this Agreement (the "Initial Termination Date"), provided that the Company
continues to pay the costs set forth in section 2.3. This continuation shall
extend to the later of the date as of which an Account owns no shares of the
affected Portfolio or a date six months following the Initial Termination Date,
except that the Company may, by written notice, adjust said six month period in
the case of a termination made at its option.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.15 shall survive the
termination of this Agreement as long as shares of the Fund are held on behalf
of the Contract owners in accordance with section 6.2.
ARTICLE VII.
NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
16
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If to the Fund:
100 Park Avenue
New York, New York 10017
Attention: General Counsel, Law & Regulation
If to the Company:
800 Scudders Mill Road - PCC 2I
Plainsboro, New Jersey 08536
Attention: General Counsel
ARTICLE VIII.
MISCELLANEOUS
8.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of State of New York. Each
party hereto unconditionally submits to the jurisdiction of any New York state
court or federal court of the United States sitting in New York City, and any
appellate court thereof, in any action or proceeding arising out of or relating
to this Agreement.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Fund arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Fund and that no Director, officer, agent or holder of shares of
beneficial interest of the Fund shall be personally liable for any such
liabilities.
8.6. Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
National Association of Securities Dealers and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
17
<PAGE>
8.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
8.8. The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the prior written approval of the other
party.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
8.11 This Agreement constitutes the entire contract between the parties
relating to the subject matter hereof and supersedes any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof.
18
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
Seligman Portfolios, Inc.
By: ________________________
Name: ______________________
Title: _______________________
Seligman Advisors, Inc.
By: ________________________
Name: ______________________
Title: _______________________
ML Life Insurance Company of New York
By: ________________________
Name: ______________________
Title: _______________________
19
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Names of Separate Account and Contracts Funded
DATE ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT
ML of New York Variable Annuity Merrill Lynch Retirement Power
Separate Account A - 8/14/91
00256.001 #125136
A-1
<PAGE>
PARTICIPATION AGREEMENT
AMONG
VAN KAMPEN LIFE INVESTMENT TRUST,
VAN KAMPEN FUNDS INC.,
VAN KAMPEN ASSET MANAGEMENT INC.,
and
ML LIFE INSURANCE COMPANY OF NEW YORK
DATED AS OF
APRIL 3, 2000
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I. Fund Shares 4
ARTICLE II Representations and Warranties 6
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements; Voting 7
ARTICLE IV. Sales Material and Information 9
ARTICLE V Reserved 10
ARTICLE VI. Diversification 10
ARTICLE VII. Potential Conflicts 10
ARTICLE VIII. Indemnification 12
ARTICLE IX. Applicable Law 16
ARTICLE X. Termination 16
ARTICLE XI. Notices 18
ARTICLE XII. Foreign Tax Credits 19
ARTICLE XIII. Miscellaneous 19
SCHEDULE A Separate Accounts and Contracts 22
SCHEDULE B Participating Life Investment Trust Portfolios 23
SCHEDULE C Proxy Voting Procedures 24
2
<PAGE>
PARTICIPATION AGREEMENT
Among
VAN KAMPEN LIFE INVESTMENT TRUST,
VAN KAMPEN FUNDS INC.,
VAN KAMPEN ASSET MANAGEMENT INC.,
and
ML LIFE INSURANCE COMPANY OF NEW YORK
THIS AGREEMENT, made and entered into as of the [ ] day of [ ], 2000 by
and among ML LIFE INSURANCE COMPANY OF NEW YORK (hereinafter the "Company"), a
New York corporation, on its own behalf and on behalf of each separate account
of the Company set forth on Schedule A hereto as may be amended from time to
time (each such account hereinafter referred to as the "Account"), and VAN
KAMPEN LIFE INVESTMENT TRUST (hereinafter the "Fund"), a Delaware business
trust, VAN KAMPEN FUNDS INC. (hereinafter the "Underwriter"), a Delaware
corporation, and VAN KAMPEN ASSET MANAGEMENT INC. (hereinafter the "Adviser"), a
Delaware corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation and/or
pay-out provisions (hereinafter referred to individually and/or collectively as
"Variable Insurance Products"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Insurance Products are required to enter
into participation agreements with the Fund and the Underwriter (the
"Participating Insurance Companies"); and
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available for Variable
Insurance Products of Participating Insurance Companies; and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule B (each such series hereinafter referred to as a "Portfolio") as may be
amended from time to time by mutual agreement of the parties hereto, under this
Agreement to the Accounts of the Company; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 19, 1990 (File No. 812-7552), granting
Participating Insurance Companies and Variable Insurance Product separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended (hereinafter the "1940
Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance product separate accounts of both affiliated
and unaffiliated life insurance companies (hereinafter the "Shared Funding
Exemptive Order"); and
3
<PAGE>
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
WHEREAS, the Adviser is the investment adviser of the Portfolios of the
Fund; and
WHEREAS, the Underwriter is registered as a broker/dealer under the
Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), is a
member in good standing of the National Association of Securities Dealers, Inc.
(hereinafter "NASD") and serves as principal underwriter of the shares of the
Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule A
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Products; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Variable Insurance Products and
the Underwriter is authorized to sell such shares to each such Account at net
asset value.
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund, the Underwriter and the Adviser agree as follows:
ARTICLE I. FUND SHARES
1.1. The Fund and the Underwriter agree to make available for
purchase by the Company shares of the Portfolios and shall execute orders placed
for each Account on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of such order. For purposes of this Section
1.1, the Company shall be the designee of the Fund and Underwriter for receipt
of such orders from each Account and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives notice of such order by
11:00 a.m. Eastern Standard time on the next following Business Day.
Notwithstanding the foregoing, the Company shall use its best efforts to provide
the Fund with notice of such orders by 10:15 a.m. Eastern Standard Time on the
next following Business Day. "Business Day" shall mean any day on which the New
York Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission, as
set forth in the Fund's prospectus and statement of additional information.
Notwithstanding the foregoing, the Board of Trustees of the Fund (hereinafter
the "Board") may refuse to permit the Fund to sell shares of any Portfolio to
any person, or suspend or terminate the offering of shares of any Portfolio if
such action is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion of the Board acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
4
<PAGE>
1.2. The Fund and the Underwriter agree that shares of the Fund
will be sold only to Participating Insurance Companies for their Variable
Insurance Products. No shares of any Portfolio will be sold to the general
public.
1.3. The Fund will not make its shares available for purchase by
any insurance company or separate account unless an agreement containing
provisions which afford the Company substantially the same protections currently
provided by Sections 2.1, 2.4, 2.9, 3.4 and Article VII of this Agreement is in
effect to govern such sales.
1.4. The Fund and the Underwriter agree to redeem for cash, on the
Company's request, any full or fractional shares of the Fund held by the
Company, executing such requests on a daily basis at the net asset value next
computed after receipt by the Fund or its designee of the request for
redemption. For purposes of this Section 1.4, the Company shall be the designee
of the Fund for receipt of requests for redemption from each Account and receipt
by such designee shall constitute receipt by the Fund; provided that the
Underwriter receives notice of such request for redemption on the next following
Business Day in accordance with the timing rules described in Section 1.1.
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Accounts of the Company,
under which amounts may be invested in the Fund are listed on Schedule A
attached hereto and incorporated herein by reference, as such Schedule A may be
amended from time to time by mutual written agreement of all of the parties
hereto. The Company will give the Fund and the Underwriter sixty (60) days
written notice of its intention to make available in the future, as a funding
vehicle under the Contracts, any other investment company.
1.6. The Company will place separate orders to purchase or redeem
shares of each Portfolio. Each order shall describe the net amount of shares and
dollar amount of each Portfolio to be purchased or redeemed. In the event of net
purchases, the Company shall pay for Portfolio shares on the next Business Day
at 4:00 p.m. Eastern Standard time after an order to purchase Portfolio shares
is made in accordance with the provisions of Section 1.1 hereof. Payment shall
be in federal funds transmitted by wire. In the event of net redemptions, the
Portfolio shall pay the redemption proceeds in federal funds transmitted by wire
on the next Business Day at 4:00 p.m. Eastern Standard time after an order to
redeem Portfolio shares is made in accordance with the provisions of Section 1.4
hereof. Notwithstanding the foregoing, if the payment of redemption proceeds on
the next Business Day would require the Portfolio to dispose of Portfolio
securities or otherwise incur substantial additional costs, and if the Portfolio
has determined to settle redemption transactions for all shareholders on a
delayed basis, proceeds shall be wired to the Company within five (5) days and
the Portfolio shall notify in writing the person designated by the Company as
the recipient for such notice of such delay by 4:00 p.m. Eastern Standard time
on the same Business Day that the Company transmits the redemption order to the
Portfolio.
1.7. Issuance and transfer of the Fund's shares will be by book
entry only. Share certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8. The Underwriter shall use its best efforts to furnish same day
notice by 5:30 p.m. Eastern Standard time (by wire or telephone, followed by
written confirmation) to the Company of any dividends or capital gain
distributions payable on the Fund's shares. The Company hereby elects to receive
all such dividends and capital gain distributions as are payable on the
Portfolio shares in additional shares of that Portfolio. The Company reserves
the right to revoke this election and to receive all such dividends and capital
gain distributions in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
5
<PAGE>
1.9. The Underwriter shall make the closing net asset value per
share of each Portfolio available to the Company on a daily basis as soon as
reasonably practical after the closing net asset value per share is calculated
and shall use its best efforts to make such net asset value per share available
by 6:00 p.m. Eastern Standard time. In the event that Underwriter is unable to
meet the 6:00 p.m. time stated immediately above, then Underwriter shall provide
the Company with additional time to notify Underwriter of purchase or redemption
orders pursuant to Sections 1.1 and 1.4, respectively, above. Such additional
time shall be equal to the additional time that Underwriter takes to make the
closing net asset values available to the Company.
1.10. If Underwriter provides materially incorrect share net asset
value information through no fault of the Company, the Company shall be entitled
to an adjustment with respect to the Fund shares purchased or redeemed to
reflect the correct net asset value per share. The determination of the
materiality of any net asset value pricing error shall be based on the SEC's
recommended guidelines regarding such errors. The correction of any such errors
shall be made at the Company level pursuant to the SEC's recommended guidelines.
Any material error in the calculation or reporting of net asset value per share,
dividend or capital gain information shall be reported promptly upon discovery
to the Company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the interests of the
Accounts (the "Contracts") are or will be registered and will maintain the
registration under the 1933 Act and the regulations thereunder to the extent
required by the 1933 Act; that the Contracts will be issued and sold in
compliance with all applicable federal and state laws and regulations. The
Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established each Account prior to any issuance or sale thereof as a
segregated asset account under the New York Insurance Code and the regulations
thereunder and has registered or, prior to any issuance or sale of the
Contracts, will register and will maintain the registration of each Account as a
unit investment trust in accordance with and to the extent required by the
provisions of the 1940 Act and the regulations thereunder to serve as a
segregated investment account for the Contracts. The Company shall amend its
registration statement for its contracts under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of its
Contracts.
2.2. The Fund and the Underwriter represent and warrant that Fund
shares sold pursuant to this Agreement shall be registered under the 1933 Act
and the regulations thereunder to the extent required by the 1933 Act, duly
authorized for issuance in accordance with the laws of the State of Delaware and
sold in compliance with all applicable federal and state securities laws and
regulations and that the Fund is and shall remain registered under the 1940 Act
and the regulations thereunder to the extent required by the 1940 Act. The Fund
shall amend the registration statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund.
2.3. The Fund and the Adviser represent that the Fund is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code") and that the Fund will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provision) and that each will notify the Company immediately upon having
a reasonable basis for believing that the Fund has ceased to so qualify or that
the Fund might not so qualify in the future.
6
<PAGE>
2.4. Subject to Sections 2.3 and Article V!, the Company
represents that each Account is and will continue to be a "segregated
account" under applicable provisions of the Code and that each Contract is
and will be treated as a "variable contract" under applicable provisions of
the Code and that it will make every effort to maintain such treatment and
that it will notify the Fund immediately upon having a reasonable basis for
believing that the Account or Contract has ceased to be so treated or that
they might not be so treated in the future.
2.5. The Fund represents that to the extent that it decides to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the
Fund undertakes to have a board of directors, a majority of whom are not
interested persons of the Fund, formulate and approve any plan under Rule 12b-1
to finance distribution expenses.
2.6. The Fund and the Distributor represent that the Fund's
investment policies, fees, and expenses are and shall at all times remain in
compliance with such applicable state securities law, if any, and such insurance
laws as the Company may notify the Fund in writing from time to time, and the
Fund and Distributor represent that their respective operations are and shall at
all times remain in material compliance with such applicable state securities
laws and with such insurance laws as the Company may notify the Fund in writing
from time to time to the extent required to perform this Agreement. The Fund and
Distributor agree that the Fund will use its best efforts to comply with any
applicable state insurance law restrictions, as provided in writing by the
Company to the Fund, which is required by state insurance law to enable the
Company to obtain the authority needed to issue the Contracts in any applicable
state. The Fund and Distributor agree to furnish such information, which is not
otherwise available to the Company, that is necessary and required by applicable
state insurance law to enable the Company to obtain the authority needed to
issue the Contracts in any applicable state.
2.7. The Fund and the Adviser represent that the Fund is duly
organized and validly existing under the laws of the State of Delaware and
that the Fund does and will comply in all material respects with the 1940 Act.
2.8. The Underwriter represents and warrants that it is and shall
remain duly registered under all applicable federal and state laws and
regulations and that it will perform its obligations for the Fund and the
Company in compliance with the laws and regulations of its state of domicile and
any applicable state and federal laws and regulations.
2.9. The Company represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage, in an amount equal to the greater of $5 million or any
amount required by applicable federal or state law or regulation. The aforesaid
includes coverage for larceny and embezzlement is issued by a reputable bonding
company. The Company agrees to make all reasonable efforts to see that this bond
or another bond containing these provisions is always in effect, and agrees to
notify the Fund and the Underwriter in the event that such coverage no longer
applies.
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS; VOTING
3.1. The Fund shall provide the Company with as many printed copies
of the Portfolio's current prospectus and statement of additional information as
the Company may reasonably request. If requested by the Company in lieu of
providing printed copies the Fund shall provide camera-ready film or computer
diskettes containing the Portfolio's prospectus and statement of additional
information, and such other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the prospectus and/or
statement of additional information for the Fund is amended during the year) to
have the prospectus for the Contracts and the prospectus for the Portfolios
printed together in one document or separately. The Company may elect to print
the prospectus for the Portfolios and/or its statement of
7
<PAGE>
additional information in combination with other fund companies' prospectuses
and statements of additional information.
3.2(a). Except as otherwise provided in this Section 3.2., all
expenses of preparing, setting in type and printing and distributing Fund
prospectuses and statements of additional information shall be the expense of
the Company. For prospectuses and statements of additional information provided
by the Company to its existing owners of Contracts in order to update disclosure
as required by the 1933 Act and/or the 1940 Act, the cost of setting in type,
printing and distributing shall be borne by the Fund. If the Company chooses to
receive camera-ready film or computer diskettes in lieu of receiving printed
copies of the Portfolio's prospectus and/or statement of additional information,
the Fund shall bear the cost of typesetting to provide the Fund's prospectus
and/or statement of additional information to the Company in the format in which
the Fund is accustomed to formatting prospectuses and statements of additional
information, respectively, and the Company shall bear the expense of adjusting
or changing the format to conform with any of its prospectuses and/or statements
of additional information. In such event, the Fund will reimburse the Company in
an amount equal to the product of x and y where x is the number of such
prospectuses distributed to owners of the Contracts, and y is the Fund's per
unit cost of printing the Fund's prospectuses. The same procedures shall be
followed with respect to the Fund's statement of additional information. The
Fund shall not pay any costs of typesetting, printing and distributing the
Fund's prospectus and/or statement of additional information to prospective
Contract owners.
3.2(b). The Fund, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and other
communications (except for prospectuses and statements of additional
information, which are covered in Section 3.2(a) above) to shareholders in such
quantity as the Company shall reasonably require for distributing to Contract
owners. The Fund shall not pay any costs of distributing such proxy-related
material, reports to shareholders, and other communications to prospective
Contract owners.
3.2(c). The Company agrees to provide the Fund or its designee with
such information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of typesetting, printing or distributing
any of the foregoing documents other than those actually distributed to existing
Contract owners.
3.2(d) The Fund shall pay no fee or other compensation to the Company
under this Agreement, except that if the Fund or any Portfolio adopts and
implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then
the Underwriter may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Underwriter in writing.
3.2(e) All expenses, including expenses to be borne by the Fund
pursuant to Section 3.2 hereof, incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares.
3.3. The Fund's statement of additional information shall be
obtainable from the Fund, the Underwriter, the Company or such other person as
the Fund may designate.
3.4. If and to the extent required by law the Company shall
distribute all proxy material furnished by the Fund to Contract Owners to whom
voting privileges are required to be extended and shall:
(i) solicit voting instructions from Contract owners;
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(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of
such Portfolio for which instructions have been
received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. The Fund and the Company shall follow the procedures, and shall have the
corresponding responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be responsible for
ensuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule C, which standards will also be provided to the other Participating
Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings (except insofar as the Securities and Exchange Commission
may interpret Section 16 not to require such meetings) or comply with Section
16(c) of the 1940 Act (although the Fund is not one of the trusts described in
Section 16(c) of that Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further, the Fund will act in accordance with the Securities
and Exchange Commission's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors and with whatever rules the
Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund, the Underwriter or their designee, each piece of sales literature or
other promotional material prepared by the Company or any person contracting
with the Company in which the Fund, the Adviser or the Underwriter is named, at
least seven Business Days prior to its use. No such material shall be used if
the Fund, the Adviser, the Underwriter or their designee reasonably objects to
such use within seven Business Days after receipt of such material.
4.2. Neither the Company nor any person contracting with the
Company shall give any information or make any representations or statements on
behalf of the Fund or concerning the Fund in connection with the sale of the
Contracts other than the information or representations contained in the
registration statement or Fund prospectus, as such registration statement or
Fund prospectus may be amended or supplemented from time to time, or in reports
to shareholders or proxy statements for the Fund, or in sales literature or
other promotional material approved by the Fund or its designee, except with the
permission of the Fund or its designee.
4.3. The Fund shall furnish, or shall cause to be furnished, to the
Company or its designee, each piece of sales literature or other promotional
material prepared by the Fund in which the Company or its Accounts, are named at
least seven Business Days prior to its use. No such material shall be used if
the Company or its designee reasonably objects to such use within seven Business
Days after receipt of such material.
4.4. Neither the Fund nor the Underwriter shall give any
information or make any representations on behalf of the Company or concerning
the Company, each Account, or the Contracts, other than the information or
representations contained in a registration statement or prospectus for the
Contracts, as such registration statement or prospectus may be amended or
9
<PAGE>
supplemented from time to time, or in published reports or solicitations for
voting instruction for each Account which are in the public domain or approved
by the Company for distribution to Contract owners, or in sales literature or
other promotional material approved by the Company or its designee, except with
the permission of the Company.
4.5 The Company shall adopt and implement procedures reasonably
designed to ensure that information concerning the Fund which is intended only
for use by brokers or agents selling the Contracts (i.e. information that is not
intended for distribution to contract owners or prospective contract owners) is
so used, and neither the Fund nor the Underwriter shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials. The parties hereto agree that this section is not intended to
designate or otherwise imply that the Company is an underwriter or distributor
of the Fund's shares.
4.6 The Fund and Underwriter shall adopt and implement procedures
reasonably designed to ensure that information concerning the Company which is
intended only for use by brokers or agents selling the shares (i.e. information
that is not intended for distribution to shareowners or prospective shareowners)
is so used, and neither the Fund nor the Underwriter shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials. The parties hereto agree that this section is not intended to
designate or otherwise imply that the Company is an underwriter or distributor
of the Fund's shares.
4.7. The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.8. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
investment in an Account or Contract, contemporaneously with the filing of such
document with the Securities and Exchange Commission or other regulatory
authorities.
4.9. For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited to, any of the
following: advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media), sales literature (I.E., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, and registration
statements, prospectuses, statements of additional information, shareholder
reports, and proxy materials.
ARTICLE V. [RESERVED]
ARTICLE VI. DIVERSIFICATION
6.1 The Adviser will maintain the assets of the Fund in compliance
with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other
10
<PAGE>
modifications to such Section or Regulations. In the event the Fund ceases to so
qualify, the Adviser will take all reasonable steps (a) to notify Company of
such event and (b) to adequately diversify the Fund so as to achieve compliance
within the grace period afforded by Regulation 817-5.
6.2 The Fund shall provide the Company or its designee with
reports certifying compliance with Section 817(h) diversification and Subchapter
M qualification requirements on a quarterly basis.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners of
all separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract owners and variable life
insurance contract owners; or (f) a decision by a Participating Insurance
Company to disregard the voting instructions of contract owners. The Board shall
promptly inform the Company if it determines that an irreconcilable material
conflict exists and the implications thereof.
7.2. The Company will report any potential or existing material
irreconcilable conflict of which it is aware to the Board. The Company will
assist the Board in carrying out its responsibilities under the Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Company to inform the Board whenever contract
owner voting instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a majority
of its disinterested trustees, that a material irreconcilable conflict exists,
the Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance policy
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account. No charge
or penalty will be imposed as a result of such withdrawal. The Company agrees
that it bears the responsibility to take remedial action in the event of a Board
determination of an irreconcilable material conflict and the cost of such
remedial action, and these responsibilities will be carried out with a view only
to the interests of Contract owners.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account (at the Company's expense); provided, however that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as
11
<PAGE>
determined by a majority of the disinterested members of the Board. No charge or
penalty will be imposed as a result of such withdrawal. The Company agrees that
it bears the responsibility to take remedial action in the event of a Board
determination of an irreconcilable material conflict and the cost of such
remedial action, and these responsibilities will be carried out with a view only
to the interests of Contract owners.
7.5. For purposes of Sections 7.3 through 7.4 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 through 7.4 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict.
7.6. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the 1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then the Fund and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rules 6e-2
and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable.
7.7 Each of the Company and the Adviser shall at least annually
submit to the Board such reports, materials or data as the Board may reasonably
request so that the Board may fully carry out the obligations imposed upon them
by the provisions hereof and in the Shared Funding Exemptive Order, and said
reports, materials and data shall be submitted more frequently if deemed
appropriate by the Board. All reports received by the Board of potential or
existing conflicts, and all Board action with regard to determining the
existence of a conflict, notifying Participating Insurance Companies of a
conflict, and determining whether any proposed action adequately remedies a
conflict, shall be properly recorded in the minutes of the Board or other
appropriate records, and such minutes or other records shall be made available
to the Securities and Exchange Commission upon request.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Fund,
the Underwriter and each member of their respective Board and officers and each
person, if any, who controls the Fund within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the registration statement or prospectus
for the Contracts or contained in the Contracts or
sales literature for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading, provided that this agreement
to indemnify shall not apply as to any
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<PAGE>
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to the Company by or on behalf of the Fund
for use in the registration statement or prospectus
for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus or sales literature of the Fund
not supplied by the Company, or persons under its
control and other than statements or representations
authorized by the Fund or the Underwriter) or
unlawful conduct of the Company or persons under its
control, with respect to the sale or distribution of
the Contracts or Fund shares; or
(iii) arise out of or as a result of any untrue statement
or alleged untrue statement of a material fact
contained in a registration statement, prospectus, or
sales literature of the Fund or any amendment thereof
or supplement thereto, or the omission or alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statement
or statements therein not misleading, if such a
statement or omission was made in reliance upon and
in conformity with information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under
the terms of this Agreement; or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Company in this Agreement or arise out of or result
from any other material breach of this Agreement by
the Company.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense thereof. The Company also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company to such party of the Company's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Company will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
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<PAGE>
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with this Agreement, the issuance or sale of the Fund shares or the Contracts,
or the operation of the Fund.
8.2. INDEMNIFICATION BY UNDERWRITER
8.2(a). The Underwriter agrees, with respect to each Portfolio that it
distributes, to indemnify and hold harmless the Company and each of its
directors and officers and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Underwriter) or litigation (including legal and other expenses),
to which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Fund's shares that it distributes or
the Contracts and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement or prospectus
or sales literature of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading, provided that this agreement
to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to the Fund
or the Underwriter by or on behalf of the Company for
use in the registration statement or prospectus for
the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with
the sale of the Contracts or Portfolio shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus or sales literature for the
Contracts not supplied by the Fund, the Underwriter
or persons under their respective control and other
than statements or representations authorized by the
Company) or unlawful conduct of the Fund or
Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts
or Portfolio shares; or
(iii) arise out of or as a result of any untrue statement
or alleged untrue statement of a material fact
contained in a registration statement, prospectus, or
sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statement or statements therein
not misleading, if such statement or omission was
made in reliance upon and in conformity with
information furnished to the Company by or on behalf
of the Fund or the Underwriter; or
(iv) arise as a result of any failure by the Fund or the
Underwriter to provide the services and furnish the
materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Underwriter in this Agreement or arise out of or
result from any other material breach of this
Agreement by the
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<PAGE>
Underwriter; as limited by and in accordance with
the provisions of Section 8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with this Agreement, the issuance or sale of the
Contracts or the operation of each Account.
8.3. INDEMNIFICATION BY THE ADVISER
8.3(a). The Adviser agrees to indemnify and hold harmless the Company
and its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (hereinafter collectively, the
"Indemnified Parties" and individually, "Indemnified Party," for purposes of
this Section 8.3) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Adviser)
or litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the operations of the
Adviser or the Fund and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement or prospectus
or sales literature of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading, provided that this agreement
to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to the
Adviser, the Fund or the Underwriter by or on behalf
of the Company for use in the registration statement
or prospectus for the Fund or in sales literature (or
any
15
<PAGE>
amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or
Portfolio shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus or sales literature for the
Contracts not supplied by the Fund, the Adviser or
persons under its control and other than statements
or representations authorized by the Company) or
unlawful conduct of the Fund, the Adviser or persons
under their control, with respect to the sale or
distribution of the Contracts or Portfolio shares; or
(iii) arise out of or as a result of any untrue statement
or alleged untrue statement of a material fact
contained in a registration statement, prospectus, or
sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statement or statements therein
not misleading, if such statement or omission was
made in reliance upon and in conformity with
information furnished to the Company by or on behalf
of the Fund or the Adviser; or
(iv) arise as a result of any failure by the Adviser to
provide the services and furnish the materials under
the terms of this Agreement; or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the Fund
or the Adviser in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Fund or the Adviser, including
without limitation any failure by the Fund to comply
with the conditions of Article VI hereof.
8.3(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.3(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the Adviser's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Adviser will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company agrees to promptly notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with this Agreement, the issuance or sale of the
Contracts, with respect to the operation of each Account, or the sale or
acquisition of shares of the Adviser.
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ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Delaware.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason upon
six-months advance written notice delivered to the other
parties; or
(b) termination by the Company by written notice to the
Fund, the Adviser and the Underwriter with respect to any
Portfolio based upon the Company's determination that shares
of such Portfolio are not reasonably available to meet the
requirements of the Contracts. Reasonable advance notice of
election to terminate shall be furnished by the Company, said
termination to be effective ten (10) days after receipt of
notice; or
(c) termination by the Company by written notice to the
Fund, the Adviser and the Underwriter with respect to any
Portfolio in the event any of the Portfolio's shares are not
registered, issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such
shares as the underlying investment medium of the Contracts
issued or to be issued by the Company. The terminating party
shall give prompt notice to the other parties of its decision
to terminate; or
(d) termination by the Company by written notice to the
Fund, the Adviser and the Underwriter with respect to any
Portfolio in the event that such Portfolio ceases to qualify
as a Regulated Investment Company under Subchapter M of the
Code or under any successor or similar provision; or
(e) termination by the Company by written notice to the
Fund and the Underwriter with respect to any Portfolio in the
event that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof; or
(f) termination by either the Fund, the Adviser or the
Underwriter by written notice to the Company, if either one or
more of the Fund, the Adviser or the Underwriter, shall
determine, in its or their sole judgment exercised in good
faith, that the Company and/or their affiliated companies has
suffered a material adverse change in its business,
operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse
publicity, provided that the Fund, the Adviser or the
Underwriter will give the Company sixty (60) days' advance
written notice of such determination of its intent to
terminate this Agreement, and provided further that after
consideration of the actions taken by the Company and any
other changes in circumstances since the giving of such
notice, the determination of the Fund, the Adviser or the
17
<PAGE>
Underwriter shall continue to apply on the 60th day since
giving of such notice, then such 60th day shall be the
effective date of termination; or
(g) termination by the Company by written notice to the
Fund, the Adviser and the Underwriter, if the Company shall
determine, in its sole judgment exercised in good faith, that
either the Fund, the Adviser, the Underwriter, or their
affiliate companies has suffered a material adverse change in
its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity, provided that the Company will give the
Fund, the Adviser and the Underwriter sixty (60) days' advance
written notice of such determination of its intent to
terminate this Agreement, and provided further that after
consideration of the actions taken by the Fund, the Adviser or
the Underwriter and any other changes in circumstances since
the giving of such notice, the determination of the Company
shall continue to apply on the 60th day since giving of such
notice, then such 60th day shall be the effective date of
termination; or
(h) termination by the Fund, the Adviser or the
Underwriter by written notice to the Company, if the Company
gives the Fund, the Adviser and the Underwriter the written
notice specified in Section 1.5 hereof and at the time such
notice was given there was no notice of termination
outstanding under any other provision of this Agreement;
provided, however any termination under this Section 10.1(h)
shall be effective sixty (60) days after the notice specified
in Section 1.5 was given; or
(i) termination by any party upon the other party's
breach of any representation in Section 2 or any material
provision of this Agreement, which breach has not been cured
to the satisfaction of the terminating party within thirty
(30) days after written notice of such breach is delivered to
the Fund or the Company, as the case may be;
(j) termination by the Fund, Adviser or Underwriter by
written notice to the Company in the event an Account or
Contract is not registered or sold in accordance with
applicable federal or state law or regulation, or the Company
fails to provide pass-through voting privileges as specified
in Section 3.4;
(k) termination by the Fund, Underwriter or Adviser in
the event that formal administrative proceedings are
instituted against the Company by the NASD, the SEC, the
Insurance Commissioner or like official of any state or any
other regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Contracts, the
operation of any Account, or the operation of any Account, or
the purchase of the Fund's shares; provided, however, that the
Fund, Underwriter or Adviser determines in its sole judgment
exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the
ability of the Company to perform its obligations under this
Agreement;
(l) termination by the Company in the event that formal
administrative proceedings are instituted against the Fund,
Underwriter or Adviser by the NASD, the SEC, or any relevant
state securities or insurance department or any other relevant
regulatory body; provided, however, that the Company
determines in its sole judgment exercised in good faith, that
any such administrative proceedings will have a material
adverse effect upon the ability of the Fund, Underwriter or
Adviser to perform its obligations under this Agreement; or
18
<PAGE>
(m) termination by the Company upon any substitution of
the shares of another investment company or series thereof for
share of a Portfolio of the Fund in accordance with the terms
of the Contracts, provided that the Company has given at 30
days prior written notice to the Fund, Underwriter and Adviser
of the date of filing of a substitution application with the
SEC.
10.2. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund shall at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms and conditions of
this Agreement, for all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Contracts") unless such
further sale of Fund shares is proscribed by law, regulation or applicable
regulatory body, or unless the Fund determines that liquidation of the Fund
following termination of this Agreement is in the best interests of the Fund and
its shareholders. Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to direct reallocation of investments in the Fund,
redemption of investments in the Fund and/or investment in the Fund upon the
making of additional purchase payments under the Existing Contracts. The parties
agree that this Section 10.2 shall not apply to any terminations under Article
VII and the effect of such Article VII terminations shall be governed by Article
VII of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to the
Contracts (as distinct from Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Fund and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or the
Adviser 90 days notice of its intention to do so.
ARTICLE XI. NOTICES
11.1 Any notice shall be sufficiently given when sent by registered
or certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to the Fund:
Van Kampen Life Investment Trust
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: James J. Boyne
If to Underwriter:
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: James J. Boyne
19
<PAGE>
If to Adviser:
Van Kampen Asset Management Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: James J. Boyne
If to the Company:
ML Life Insurance Company of New York
800 Scudders Mill Road-PCC 2I
Plainsboro, NJ 08536
Attention: Edward W. Diffin, Jr.
ARTICLE XII. FOREIGN TAX CREDITS
12.1. The Fund and Adviser agree to consult in advance with the
Company concerning whether any series of the Fund qualifies to provide a foreign
tax credit pursuant to Section 853 of the Code.
ARTICLE XIII. MISCELLANEOUS
13.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund. Each of the
Company, Adviser and Underwriter acknowledges and agrees that, as provided by
Article 8, Section 8.1, of the Fund's Agreement and Declaration of Trust, the
shareholders, trustees, officers, employees and other agents of the Fund and its
Portfolios shall not personally be bound by or liable for matters set forth
hereunder, nor shall resort be had to their private property for the
satisfaction of any obligation or claim hereunder. A Certificate of Trust
referring to the Fund's Agreement and Declaration of Trust is on file with the
Secretary of State of Delaware.
13.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
13.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
13.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13.6. Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers and state insurance regulators) and shall permit
20
<PAGE>
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
13.7. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies and
obligations at law or in equity, which the parties hereto are entitled to under
state and federal laws.
13.8. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party (within the meaning of the Investment Advisers
Act of 1940, as amended) without the prior written consent of all parties hereto
13.9. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, upon the Fund's request, copies of the certain
reports, including but not limited to:
(a) the Company's annual statement (prepared
under statutory accounting principles) and annual
report (prepared under generally accepted accounting
principles ("GAAP"), if any), as soon as practical
after the request but in no event earlier than 90
days after the end of each fiscal year;
(b) the Company's June 30th quarterly
statements (statutory), as soon as practical after
the request, but in no earlier than 45 days following
such period;
(c) any financial statement, proxy
statement, notice or report of the Company that may
be relevant to parties' interest in this Agreement,
sent to stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
13.10 Except as otherwise expressly provided in this Agreement,
neither the Fund, Underwriter, Adviser, nor any affiliate thereof shall use any
trademark, trade name, service mark or logo of the Company or any of its
affiliates, or any variation of any such trademark, trade name, service mark or
logo, without the Company's prior written consent, the granting of which shall
be at the Company's sole option.
13.11 Except as otherwise expressly provided in this Agreement,
neither the Company nor any of its affiliate shall use any trademark, trade
name, service mark or logo of the Company or any of its affiliates, or any
variation of any such trademark, trade name, service mark or logo, without the
Fund's, Underwriter's or Adviser's prior written consent, the granting of which
shall be at the Fund's, Underwriter's or Adviser's sole option.
13.12 The Fund agrees to provide to the Company, within fifteen (15)
Business Days after the end of a calendar month, the following information with
respect to each Portfolio set forth on Schedule A, each as of the last Business
Day of such calendar month: the Portfolio's ten largest portfolio holdings
(based on the percentage of the Portfolio's net assets); the five industry
sectors in which the Portfolio's investments are most heavily weighted; the
relative proportion of the Portfolio's net assets invested in equity, bond, and
cash instruments, respectively; and year-to-date SEC standardized performance
data. In addition, the Fund agrees to provide within fifteen (15) Business Days
after the end of a calendar quarter, the following information with respect to
each Portfolio set forth on Schedule A, each of the last Business Day of such
quarter: a market commentary from the portfolio manager of such Portfolio. Also,
the Fund agrees to provide the Company, within fifteen (15) Business Days after
a request is submitted to the Fund by the Company, the following information
with respect to each Portfolio set forth on Schedule A, each as of the date or
dates specified in such request; net asset value and net asset value per Share.
21
<PAGE>
The Fund acknowledges that such information may be furnished to the Company's
internal or independent auditors and to the insurance departments of the various
jurisdictions in which the Company does business.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative as of the date specified above.
ML LIFE INSURANCE COMPANY of New York
on behalf of itself and each of its Accounts named in
Schedule A hereto, as amended from time to time
By:
-----------------------------------------------
Barry G. Skolnick
Senior Vice President
VAN KAMPEN LIFE INVESTMENT TRUST
By:
-----------------------------------------------
Stephen Boyd
Executive Vice President
VAN KAMPEN FUNDS INC.
By:
-----------------------------------------------
Patrick Woelfel
Senior Vice President
VAN KAMPEN ASSET MANAGEMENT INC.
By:
-----------------------------------------------
Stephen Boyd
President
22
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
<TABLE>
<S> <C>
Name of Separate Account and Form Numbers and Names of Contracts
Date Established by Board of Directors Funded by Separate Account
- --------------------------------------------------------------------------------
ML of New York Variable Annuity Merrill Lynch Retirement Power
Separate Account A [8/14/91] Form MLNY-VA-003
</TABLE>
23
<PAGE>
SCHEDULE B
PARTICIPATING LIFE INVESTMENT TRUST PORTFOLIOS
Emerging Growth Portfolio
24
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will
inform the Company of the Record, Mailing and Meeting dates. This will
be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run,"
or other activity, which will generate the names, address and number of
units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in
the number of Customers to the Fund, as soon as possible, but no later
than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting
instruction solicitation material. The Fund will provide the last
Annual Report to the Company pursuant to the terms of Section 3.3 of
the Agreement to which this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Fund or its affiliate must approve the Card before it is printed.
Allow approximately 2-4 business days for printing information on the
Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. fund or account number
d. coding to state number of units (or equivalent shares)
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
25
<PAGE>
5. During this time, the Fund will develop, produce, and the Fund will pay
for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Company for insertion
into envelopes (envelopes and return envelopes are provided and paid
for by the Company). Contents of envelope sent to Customers by the
Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to the Fund.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including,) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by the Fund in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card
and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be NOT RECEIVED for purposes of
vote tabulation. Any Cards that have been "kicked out" (e.g.,
mutilated, illegible) of the procedure are "hand verified," (i.e.,
examined as to why they did not complete the system). Any questions on
those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to sort
the Cards as they first arrive into categories depending upon their
vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur.
This may entail a recount.
26
<PAGE>
12. The actual tabulation of votes is done in units (or equivalent shares)
which is then converted to shares. (It is very important that the fund
receives the tabulations stated in terms of a percentage and the number
of shares.) The Fund must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to the Fund
on the morning of the meeting not later than 10:00 A.M. Houston time.
The Fund may request an earlier deadline if reasonable and if required
to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. The Fund will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
27
<PAGE>
EXHIBIT 9
OPINION OF BARRY G. SKOLNICK, ESQ.
AND CONSENT TO ITS USE AS TO THE LEGALITY OF THE SECURITIES BEING REGISTERED
<PAGE>
[ML LIFE INSURANCE COMPANY OF NEW YORK LETTERHEAD]
April 14, 2000
Board of Directors
ML Life Insurance Company of New York
800 Scudders Mill Road
Plainsboro, New Jersey 08536
To The Board Of Directors:
In my capacity as General Counsel of ML Life Insurance Company of New York
(the "Company"), I have supervised the preparation of the registration statement
on Form N-4 of the ML of New York Variable Annuity Separate Account A (the
"Account") to be filed by the Company with the Securities and Exchange
Commission under the Securities Act of 1933 and the Investment Company Act of
1940. Such registration statement describes certain flexible premium individual
deferred variable annuity contracts which will participate in the Account.
I am of the following opinion:
1. The Company has been duly organized under the laws of the State of
New York and is a validly existing corporation.
2. The flexible premium individual deferred variable annuity contracts,
when issued in accordance with the prospectus contained in the
aforesaid registration statement and upon compliance with applicable
local law, will be legal and binding obligations of the Company in
accordance with their terms.
3. The Account is duly created and validly existing as a separate
account of the Company pursuant to New York law.
4. The assets held in the Account equal to the reserves and other
contract liabilities with respect to the Account will not be
chargeable with liabilities arising out of any other business the
Company may conduct.
In arriving at the foregoing opinion, I have made such examination of law
and examined such records and other documents as in my judgment are necessary or
appropriate.
<PAGE>
I hereby consent to the filing of this opinion as an exhibit to the
aforesaid registration statement and to the reference to me under the caption
"Legal Matters" in the prospectus contained in said registration statement.
Very truly yours,
/s/ BARRY G. SKOLNICK
----------------------------
Barry G. Skolnick
Senior Vice President and
General Counsel
<PAGE>
EXHIBIT 10(a)
WRITTEN CONSENT OF SUTHERLAND ASBILL & BRENNAN LLP
<PAGE>
[SUTHERLAND ASBILL & BRENNAN LLP LETTERHEAD]
CONSENT OF SUTHERLAND ASBILL & BRENNAN LLP
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus filed as part of the Registration Statement filed on
Form N-4 for ML of New York Variable Annuity Separate Account A of ML Life
Insurance Company of New York. In giving this consent, we do not admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933.
SUTHERLAND ASBILL & BRENNAN LLP
/s/ KIMBERLY J. SMITH
-------------------------------
Kimberly J. Smith, Esq.
Washington, D.C.
April 14, 2000
<PAGE>
EXHIBIT 10(b)
WRITTEN CONSENT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS
<PAGE>
[LETTERHEAD OF DELOITTE & TOUCHE LLP]
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of ML of New York Variable
Annuity Separate Account A on Form N-4 of our reports on (i) ML Life Insurance
Company of New York dated February 28, 2000, and (ii) ML of New York Variable
Annuity Separate Account A dated February 14, 2000, appearing in the Statement
of Additional Information, which is a part of such Registration Statement, and
to the reference to us under the heading "Experts" in the Prospectus, which is a
part of such Registration Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
April 14, 2000
<PAGE>
EXHIBIT 13
SCHEDULE OF COMPUTATION OF PERFORMANCE QUOTATIONS
<PAGE>
There is a $40 Contract Fee applied to the contract only if the greater of
premiums less withdrawals and contract value is less than $25,000. It is
calculated and deducted proportionately from each subaccount on the contract
anniversary or at full surrender based on the contract value at that time.
DOMESTIC MONEY MARKET SUB-ACCOUNT
Note that the information presented below is hypothetical.
7-Day Current Yield
Current Yield = ((NCS-ES)/UV/7) x 365
where NCS = the net change in the value of the Series
(exclusive of realized gains and losses on the
sale of securities and unrealized appreciation
and depreciation) for the 7-day period
attributable to a hypothetical account
having a balance of 1 Sub-Account
unit.
ES = AIC + CMC
where ES = per unit expenses of the Sub-Account for the
7-day period
AIC = per unit Asset Based Insurance Charges Deducted
for the 7-day period
CMC = per unit Contract fee deducted for the 7-day
period
= 0
since AAV = Average Accumulated Value of Contracts on the
last day of the 7-day period
= $80,000
UV = the unit value on the first day of the 7-day
period
= 10.00000
Totals for 7-day period:
<PAGE>
NCS AIC CMC
----- ----- -----
0.012984 0.003049 0
= ((.012984 - .003049 - 0)/10.000000)/7 x 365
= 5.18% = 7-Day Current Yield
DOMESTIC MONEY MARKET SUB-ACCOUNT
7-Day Effective Yield
Effective Yield = ((1 + (NCS - ES)/UV) (CIRCUMFLEX) (365/7)) - 1
where NCS, ES, and UV are calculated as for the 7-Day Current Yield
7-Day Effective Yield = 5.31%
VARIABLE SUB-ACCOUNTS
Government Bond, PIMCO Total Return Bond
Note that the information presented below is hypothetical.
30-Day Yield
Yield = (2 x (((NI-ES)/(U x UV)) + 1) TO THE POWER OF ^ 6 - 1)
where NI = Net income of the portfolio for the 30-day period
attributable to the Sub-Account's units
ES = AIC + CMC
where ES = Expenses of the Sub-Account for the 30-day period
AIC = Asset Based Insurance charges deducted from the
Sub-Account for the 30-day period
CMC = Contract fee deducted from the Sub-Account for
the 30-day period
= $0
since AAV = Average Accumulated Value of Contracts on the
last day of the 30-day period
= $80,000
<PAGE>
U = the average number of units outstanding,
which equals the number of units on the
first day of the 30-day period plus the
number of units on the last day of the
30-day period, the sum of which is divided
by 2
UV = the unit value at the close of the last day in
the 30-day period
NI AIC CMC U UV
-- --- --- - --
$25,000.00 $5,136.99 $0 500,000 $10.0635
Based on the above hypothetical figures and the formulas presented, the 30-day
yield would be:
30-day Yield = 4.78%
VARIABLE SUB-ACCOUNTS
Basic Value Focus, Domestic Money Market, Fundamental Growth Focus, Government
Bond, Index 500, AIM V.I. International Equity, AIM V.I. Value, Alliance Growth
and Income, Alliance Premier Growth, MFS Emerging Growth, MFS Growth With
Income, Hotchkis and Wiley International VIP, Davis Value, Delaware Trend, PIMCO
Total Return Bond, Seligman Small-Cap Value, Van Kampen Emerging Growth.
Note that the information presented below is hypothetical.
Total Return
Total Return = ((ERV/P) - 1)
where ERV = the value, at the end of the applicable period,
of a hypothetical $1,000 investment made at the
beginning of the applicable period. It is assumed
that all dividends and capital gains distributions
are reinvested.
P = a hypothetical initial investment of $1,000
ERV = (1,000 x ((EUV-BUV) / BUV)) + 1,000 - CMC
where EUV = Unit Value at the end of the period
BUV = Unit Value at the beginning of the period
<PAGE>
CMC = Contract Fee attributable to the hypothetical
account for the period
= $0
since AAV = Average Accumulated Value of Contracts on the
last day of the period
= $80,000
BUV EUV CMC ERV
--- --- --- ---
10 11.25 0 1125.00
Thus the Total Return over the assumed two year period is:
Total Return = 12.5%
Average Annual Total Return
the Average Annual Total Return would be calculated as follow:
Average Annual Total Return = ((ERV/P) (circumflex) (1/N) - 1)
where ERV and P are defined as above
and N = Number of years
= 2
which, based on the above information would yield 6.07% as an Average Annual
Total Return.
<PAGE>
EXHIBIT 14(n)
POWER OF ATTORNEY FOR RICHARD M. DREW
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Richard M. Drew, a member of the Board
of Directors of ML Life Insurance Company of New York (the "Company"), whose
signature appears below, constitutes and appoints Barry G. Skolnick and Michael
P. Cogswell, respectively, and each of them, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all Registration Statements and Amendments thereto, and to file the same,
with all exhibits thereto, and other documents in connection therewith, under
the Investment Company Act of 1940, where applicable, and the Securities Act of
1933, respectively, with the Securities and Exchange Commission, for the purpose
of registering any and all variable life and variable annuity separate accounts
(collectively "Separate Accounts"), of the Company that may be established in
connection with the issuance of any and all variable life and variable annuity
contracts funded by such Separate Accounts, granting unto said attorney-in-fact
and agent, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done.
Date: March 29, 2000 /s/ RICHARD M. DREW
----------------------------
Richard M. Drew
<PAGE>
State of New York)
County of Queens)
On the 29 day of March, 2000, before me came Richard M. Drew,
Director of ML Life Insurance Company of New York, to me known to be said person
and he signed the above Power of Attorney on behalf of ML Life Insurance Company
of New York.
/s/ Peter A. Fermoselle
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[SEAL] Notary Public
Peter A. Fermoselle
Notary Public, State of New York
No. 01-4963227
Qualified in Queens County
Cert. filed in Nassau County
Commission Expires 6/10/2000
