<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
Supplement Dated January 19, 2001
To The
Prospectus Dated July 14, 2000, as revised January 19, 2001
The Merrill Lynch Retirement Power(SM) variable annuity contract (the
"Contract") issued by ML Life Insurance Company of New York is currently not
available to qualified plans, including IRAs.
* * *
This supplement should be retained with the prospectus for future reference. If
you have any questions, please contact your Financial Consultant or the Service
Center at (800) 333-6524.
<PAGE>
PROSPECTUS
JULY 14, 2000, AS REVISED JANUARY 19, 2001
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 July 14, 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 41 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...................................... 20
Asset-Based Insurance Charge............................ 21
Contract Fee............................................ 21
Other Charges........................................... 21
Transfer Charges................................... 21
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............................... 23
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...................................... 37
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........................................ 40
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 may deduct a charge for any premium taxes imposed by a
state. 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>
PIMCO
VARIABLE
DAVIS DELAWARE INSURANCE
VARIABLE GROUP TRUST VAN KAMPEN
ACCOUNT PREMIUM (ADMINISTRATIVE SELIGMAN LIFE INVESTMENT
FUND, INC. FUND CLASS SHARES) 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% .25% 1.00% .70%
Other Expenses....................... .25% .07% .44% .41% .18%
Total Annual Operating Expenses...... 1.00% .82% .69% 1.41% .88%
Expense Reimbursements............... -- -- .04% -- --
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.
++ Administrative Class Shares. Expenses shown for the PIMCO
Total Return Bond Portfolio assume that the contractual
reimbursement arrangement will continue for the duration of
the periods shown.
</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) Effective April 1, 2000, outstanding shares of the Fund were designated as
Administrative Class shares. 1999 fee and expense information has been
restated to reflect the fees and expenses applicable as of April 1, 2000 to
shares of the Administrative Class. "Other Expenses" shown in the fee table
reflect a 0.25% administrative fee, a 0.15% service fee, and 0.04%
representing the Fund's organizational expenses that are attributed to the
Administrative Class and pro rata Trustees' fees.
Pacific Investment Management Company ("PIMCO") has contractually agreed to
reduce total Fund operating expenses for the Administrative Class shares to
the extent that they would exceed, due to the payment of organizational
expenses and Trustees' fees, 0.65% of average daily net assets. Under this
agreement, PIMCO may recoup these waivers and reimbursements in future
periods, not exceeding three years, provided that total Fund operating
expenses, including such recoupment, do not exceed the annual expense limit
of 0.65% of average daily net assets. This agreement renews automatically
each year unless terminated by PIMCO.
(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%.
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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.
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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.
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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
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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
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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.
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<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 Management Holdings,
Inc. The fees charged to the Fund for advisory services are set forth in the
summary of investment objective below.
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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 Administrative Class shares of 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 0.25% 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 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.
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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.
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.
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<PAGE>
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.
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".)
21
<PAGE>
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, if applicable, 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 may 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. New York does not currently impose a premium tax
on annuity contracts.
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.
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.
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<PAGE>
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 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.
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<PAGE>
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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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.
(See "Charges and Deductions".) You may receive this amount in a lump sum or
apply it under an Annuity Option. (See "Annuity Options").
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.
We reserve the right, at our option, to defer any payments in accordance with
the Investment Company Act of 1940, as amended.
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 a contract owner dies prior to the annuity date and the beneficiary is the
surviving spouse of the deceased contract owner, such spouse may choose to
continue this contract. 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. If the surviving co-owner is not the surviving spouse of the
deceased owner, the contract may not be continued under this provision.
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. The amount
of your annuity payments will not be less than those that would be provided by
application of the contract value to purchase a single premium immediate annuity
contract offered by us for the same annuity plan. 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 per month, 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 choose to continue to receive the remaining payments or 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 choose to continue to receive the remaining payments or
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 choose to continue to receive the remaining payments
or 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;
-------------
* 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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(c) the life expectancy of the surviving spouse if the annuitant dies before the
annuity date. Each annual 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
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taxed on income and gains attributable to the separate account assets. There is
little guidance in this area, and 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.
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If you withdraw your entire contract value, you will be taxed only on the part
that exceeds your investment in the Contract.
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.
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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.
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 any applicable 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
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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 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
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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;
(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.
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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 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
-------------------------------------------------------------- -------- --------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
06/01/00 THE CONTRACT IS ISSUED 100,000 100,000 0 100,000
MAV is $0 until first contract anniversary
06/01/01 FIRST CONTRACT ANNIVERSARY 100,000 110,000 110,000
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
12/01/01 OWNER PUTS IN $10,000 ADDITIONAL PREMIUM 10,000 110,000 120,000 114,000
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
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
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
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
<CAPTION>
--------------------------------
DATE DEATH BENEFIT
-------- --------------------------------
<S> <C>
06/01/00 100,000 maximum of (A), (B), (C)
06/01/01 110,000 maximum of (A), (B), (C)
12/01/01 120,000 maximum of (A), (B), (C)
01/01/02 60,000 maximum of (A), (B), (C)
-----------------
06/01/02 60,000 maximum of (A), (B), (C)
06/01/03 65,000 maximum of (A), (B), (C)
</TABLE>
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