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AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON MAY 1, 1996 REGISTRATION NO. 33-45380
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 9 /X/
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 9 /X/
(Check appropriate box or boxes)
------------------------
ML OF NEW YORK VARIABLE ANNUITY
SEPARATE ACCOUNT B
(Exact Name of Registrant)
ML LIFE INSURANCE COMPANY OF NEW YORK
(Name of Depositor)
100 Church Street
11th Floor
New York, New York 10080-6511
(212) 415-8070
(Address and telephone number of principal executive offices)
------------------------
Barry G. Skolnick, Esq.
Senior Vice President and General Counsel
ML Life Insurance Company of New York
800 Scudders Mill Road
Plainsboro, New Jersey 08536
COPY TO:
Stephen E. Roth, Esq.
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, NW
Washington, D.C. 20004-2404
------------------------
The Registrant has registered an indefinite amount of securities pursuant to
Rule 24f-2 under the Investment Company Act of 1940. The Rule 24f-2 notice for
fiscal year 1995 was filed on February 28, 1996.
It is proposed that this filing will become effective (check appropriate
space):
/X/ immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on pursuant to paragraph (b) of Rule 485
------------
(date)
/ / 60 days after filing pursuant to paragraph (a) of Rule 485
/ / on pursuant to paragraph (a) of Rule 485
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(date)
EXHIBIT INDEX CAN BE FOUND ON PAGE C-9
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<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495(A) UNDER THE 1933 ACT)
<TABLE>
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N-4 ITEM NUMBER AND CAPTION LOCATION
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PART A
1. Cover Page.................... Cover Page
2. Definitions................... Definitions
3. Synopsis...................... Fee Table
4. Condensed Financial
Information.................. Accumulation Unit Value Table; Yields and
Total Returns
Part B: Calculation of Yields and Total
Returns
5. General Description of
Registrant, Depositor, and
Portfolio Companies.......... ML Life Insurance Company of New York; The
Accounts; Investments of the Accounts
6. Deductions and Expenses....... Capsule Summary of the Contract (Fees and
Charges; Transfers; Withdrawals); Charges
and Deductions; Description of the
Contract (Accumulation Units; Transfers;
Withdrawals and Surrenders; Payments to
Contract Owners)
7. General Description of
Variable Annuity Contracts... Capsule Summary of the Contract (The
Accounts; The Funds; Premiums; Annuity
Payments; Transfers; Withdrawals; Ten Day
Review); The Accounts; Description of the
Contract; Other Information (Voting
Rights; State Regulation)
8. Annuity Period................ Capsule Summary of the Contract (Annuity
Payments); Description of the Contract
(Annuity Date; Annuity Options)
9. Death Benefit................. Capsule Summary of the Contract (Death
Benefit); Description of the Contract
(Death Benefit; Death of Annuitant);
Federal Income Tax (Taxation of Annuities)
10. Purchases and Contract
Value........................ Capsule Summary of the Contract (The
Accounts; Premiums); Description of the
Contract (Premiums; Premium Investments;
Accumulation Units); Other Information
(Reports to Contract Owners)
Part B: Other Information (Principal
Underwriter)
11. Redemptions................... Capsule Summary of the Contract (Ten Day
Review); Charges and Deductions;
Description of the Contract (Issuing the
Contract; Ten Day Right to Review;
Withdrawals and Surrenders; Payments to
Contract Owners; Annuity Options)
12. Taxes......................... Capsule Summary of the Contract (Fees and
Charges; Withdrawals) Charges and
Deductions (Premium Taxes; Other Charges);
Description of the Contract (Accumulation
Units; Death Benefit; Withdrawals and
Surrenders; Annuity Options) Federal
Income Taxes
13. Legal Proceedings............. Other Information (Legal Proceedings)
14. Table of Contents of the
Statement of Additional
Information.................. Table of Contents of the Statement of
Additional Information
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PART B
<C> <S> <C>
15. Cover Page.................... Cover Page
16. Table of Contents............. Table of Contents
</TABLE>
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<TABLE>
<CAPTION>
N-4 ITEM NUMBER AND CAPTION LOCATION
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17. General Information and
History...................... Part A: ML Life Insurance Company of New
York; The Accounts; Investments of the
Accounts
Part B: Other Information (General
Information and History)
18. Services...................... Part A: Other Information (Experts)
Part B: Administrative Services
Arrangements
19. Purchase of Securities Being
Offered...................... Part A: Other Information (Selling the
Contract)
20. Underwriters.................. Part A: Other Information (Selling the
Contract)
Part B: Other Information (Principal
Underwriter)
21. Calculation of Performance
Data......................... Part A: Yields and Total Returns
Part B: Calculation of Yields and Total
Returns
22. Annuity Payments.............. Part A: Capsule Summary of the Contract
(Annuity Payments); Description of the
Contract (Annuity Date; Annuity Options)
23. Financial Statements.......... Other Information (Financial Statements);
Financial Statements of ML of New York
Variable Annuity Separate Account A;
Financial Statements of ML of New York
Variable Annuity Separate Account B;
Financial Statements of ML Life Insurance
Company of New York.
<CAPTION>
PART C
<C> <S> <C>
Information required to be included in Part C is set forth under the appropriate
item, so numbered in Part C to this Registration Statement.
</TABLE>
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE>
PROSPECTUS
MAY 1, 1996
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
AND
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT B
FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
ALSO KNOWN AS
MODIFIED SINGLE 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
Phone: (800) 333-6524
OFFERED THROUGH
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
The individual deferred variable annuity contract described in this Prospectus
(the "Contract") is designed to provide comprehensive and flexible ways to
invest and to create a source of income protection for later in life through the
payment of annuity benefits. The Contract is issued by ML Life Insurance Company
of New York ("ML of New York") both on a nonqualified basis, and as an
Individual Retirement Annuity ("IRA") that is given qualified tax status.
Premiums will be allocated as the contract owner directs into one or more
subaccounts of ML of New York Variable Annuity Separate Account A ("Account A")
and/or ML of New York Variable Annuity Separate Account B ("Account B"),
(together, the "Accounts"). The assets of each of the current subaccounts will
be invested in a corresponding mutual fund portfolio of the Merrill Lynch
Variable Series Funds, Inc. (the "Funds"). Currently, there are sixteen Funds
available to Account A and one Fund available to Account B. Other subaccounts
and corresponding investment options may be added in the future. The value of a
contract owner's investment in each subaccount will vary with investment
experience, and it is the contract owner who bears the full investment risk with
respect to his or her investments.
The Contract provides a choice of fixed annuity payment options. On the annuity
date, the entire contract value, after the deduction of a charge for any
applicable premium taxes, will be transferred to ML of New York's general
account, from which the annuity payments will be made. Prior to the annuity
date, the contract owner may make transfers among Account A subaccounts, limited
transfers from Account A into Account B, and full or partial withdrawals from
the Contract to suit investment and liquidity needs. Withdrawals may be taxable
and may be subject to a contingent deferred sales charge.
This Prospectus contains information about the Contract and the Accounts that a
prospective contract owner should know before investing. Additional information
about the Contract and the Accounts is contained in a Statement of Additional
Information, dated May 1, 1996, which has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The Statement of
Additional Information is available on request and without charge by writing to
or calling ML of New York at its Home Office address or phone number set forth
above. The table of contents for the Statement of Additional Information is
included on page 40 of this Prospectus.
THE PURCHASE OF THIS CONTRACT INVOLVES CERTAIN RISKS. BECAUSE IT IS A VARIABLE
ANNUITY, THE VALUE OF THE CONTRACT REFLECTS THE INVESTMENT PERFORMANCE OF THE
SELECTED INVESTMENT OPTIONS. INVESTMENT RESULTS CAN VARY BOTH UP AND DOWN AND
CAN EVEN DECREASE THE VALUE OF PREMIUM PAYMENTS. THEREFORE, CONTRACT OWNERS
COULD LOSE ALL OR PART OF THE MONEY THEY HAVE INVESTED. ML OF NEW YORK DOES NOT
GUARANTEE THE VALUE OF THE CONTRACT. RATHER, CONTRACT OWNERS BEAR ALL INVESTMENT
RISKS.
AN ANNUITY IS INTENDED TO BE A LONG TERM INVESTMENT. WITHDRAWALS OR SURRENDER OF
THE CONTRACT PREMATURELY MAY RESULT IN SUBSTANTIAL PENALTIES. CONTRACT OWNERS
SHOULD CONSIDER THEIR INCOME NEEDS BEFORE PURCHASING THE CONTRACT.
ALL WITHDRAWALS FROM AND SURRENDER OF THE CONTRACT ARE SUBJECT TO TAX, AND IF
TAKEN BEFORE AGE 59 1/2 MAY ALSO BE SUBJECT TO A 10% FEDERAL PENALTY TAX.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS ATTACHED TO
A CURRENT PROSPECTUS FOR MERRILL LYNCH VARIABLE SERIES FUNDS, INC., WHICH SHOULD
ALSO BE READ AND KEPT FOR REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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DEFINITIONS............................................................... 4
CAPSULE SUMMARY OF THE CONTRACT........................................... 5
FEE TABLE................................................................. 9
ACCUMULATION UNIT VALUE TABLE............................................. 12
YIELDS AND TOTAL RETURNS.................................................. 14
ML LIFE INSURANCE COMPANY OF NEW YORK..................................... 15
THE ACCOUNTS.............................................................. 15
INVESTMENTS OF THE ACCOUNTS............................................... 16
Merrill Lynch Variable Series Funds, Inc................................ 16
Domestic Money Market Fund............................................ 17
Prime Bond Fund....................................................... 17
High Current Income Fund.............................................. 17
Quality Equity Fund................................................... 18
Equity Growth Fund.................................................... 18
Flexible Strategy Fund................................................ 18
Natural Resources Focus Fund.......................................... 18
American Balanced Fund................................................ 18
Global Strategy Focus Fund............................................ 19
Basic Value Focus Fund................................................ 19
World Income Focus Fund............................................... 19
Global Utility Focus Fund............................................. 19
International Equity Focus Fund....................................... 19
International Bond Fund............................................... 19
Intermediate Government Bond Fund..................................... 20
Developing Capital Markets Focus Fund................................. 20
Reserve Assets Fund................................................... 20
Reinvestment............................................................ 20
Substitution of Investments and Changes to Accounts..................... 20
CHARGES AND DEDUCTIONS.................................................... 21
Contract Maintenance Charge............................................. 21
Mortality and Expense Risk Charge....................................... 21
Administration Charge................................................... 22
Contingent Deferred Sales Charge........................................ 22
Premium Taxes........................................................... 23
Other Charges........................................................... 23
DESCRIPTION OF THE CONTRACT............................................... 24
Ownership of the Contract............................................... 24
Issuing the Contract.................................................... 24
Ten Day Right to Review................................................. 24
Contract Changes........................................................ 25
Premiums................................................................ 25
Premium Investments..................................................... 25
Accumulation Units...................................................... 25
Death Benefit........................................................... 26
Death of Annuitant...................................................... 27
Transfers............................................................... 27
Dollar Cost Averaging................................................... 28
Merrill Lynch Retirement Plus Advisor-SM-............................... 29
</TABLE>
2
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<TABLE>
<CAPTION>
PAGE
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Withdrawals and Surrenders.............................................. 29
Payments to Contract Owners............................................. 31
Annuity Date............................................................ 31
Annuity Options......................................................... 31
Unisex.................................................................. 33
FEDERAL INCOME TAXES...................................................... 33
Introduction............................................................ 33
ML of New York's Tax Status............................................. 33
Taxation of Annuities................................................... 34
Internal Revenue Service Diversification Standards...................... 35
IRA Contracts........................................................... 36
Transfers, Assignments, or Exchanges of a Contract...................... 36
Withholding............................................................. 36
Possible Changes in Taxation............................................ 37
Other Tax Consequences.................................................. 37
OTHER INFORMATION......................................................... 37
Voting Rights........................................................... 37
Reports to Contract Owners.............................................. 38
Selling the Contract.................................................... 38
State Regulation........................................................ 39
Legal Proceedings....................................................... 39
Experts................................................................. 39
Legal Matters........................................................... 39
Registration Statements................................................. 39
Table of Contents of the Statement of Additional Information............ 40
</TABLE>
3
<PAGE>
DEFINITIONS
ACCOUNTS: Two segregated investment accounts of ML Life Insurance Company of New
York, named ML of New York Variable Annuity Separate Account A and ML of New
York Variable Annuity Separate Account B. (See page 15.)
ACCOUNT VALUE: The value of a contract owner's interest in a particular Account.
ACCUMULATION UNIT: An index used to compute the value of the contract owner's
interest in a subaccount prior to the annuity date. (See page 25.)
ANNUITANT: The person on whose continuation of life annuity payments may depend.
ANNUITY DATE: The date on which annuity payments begin. (See page 31.)
BENEFICIARY: The person to whom payment is to be made on the death of the
contract owner.
CONTRACT: The variable annuity offered by this Prospectus.
CONTRACT ANNIVERSARY: The same date each year as the date of issue of the
Contract.
CONTRACT OWNER: The person entitled to exercise all rights under the Contract.
(See page 24.)
CONTRACT VALUE: The value of a contract owner's interest in the Accounts.
CONTRACT YEAR: The period from one contract anniversary to the day preceding the
next contract anniversary.
DATE OF ISSUE: The date on which an initial premium is received and required
contract owner information is approved by ML of New York. (See page 24.)
DUE PROOF OF DEATH: A certified copy of the death certificate, Beneficiary
Statement, and any additional paperwork necessary to process the death claim.
FUNDS: The mutual funds, or separate investment portfolios within a series
mutual fund, designated as eligible investments for the Accounts. (See page 16.)
INDIVIDUAL RETIREMENT ACCOUNT OR ANNUITY ("IRA"): A Contract issued in
connection with a retirement arrangement that receives favorable tax status
under Section 408 of the Internal Revenue Code.
MONTHIVERSARY: The same date of each month as the date on which the Contract was
issued.
NET INVESTMENT FACTOR: An index used to measure the investment performance of a
subaccount from one valuation period to the next. (See page 26.)
NONQUALIFIED CONTRACT: A Contract issued in connection with a retirement
arrangement other than a qualified arrangement described under Section 401, 403,
408, 457 or any similar provisions of the Internal Revenue Code.
PREMIUMS: Money paid into the Contract. (See page 25.)
SUBACCOUNT: A division of each of the Accounts consisting of the shares of a
particular Fund held by that Account.
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. (See page 26.)
VARIABLE ANNUITY: A contract with a value that reflects investment experience
prior to the annuity date, and provides periodic payments of set amounts after
the annuity date.
4
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CAPSULE SUMMARY OF THE CONTRACT
The following capsule summary is intended to provide 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.
THE ACCOUNTS
Premiums will be allocated to ML of New York Variable Annuity Separate Account A
("Account A") and/or ML of New York Variable Annuity Separate Account B
("Account B") segregated investment accounts (together, the "Accounts"), as
directed by the contract owner. The Accounts are divided into subaccounts
corresponding to the Funds in which contract value may be invested. Premiums are
not invested directly in the underlying Funds. For the first 14 days following
the date of issue, all premiums directed into Account A will be allocated to the
Domestic Money Market Fund Subaccount. Thereafter, the account value will be
reallocated to the Account A subaccounts selected. Account A account value may
be periodically transferred among Account A subaccounts, subject to certain
limitations. The contract value and annuity payments will reflect the investment
performance of the Funds selected. (See THE ACCOUNTS on page 15 and TRANSFERS on
page 27.)
THE FUNDS
The Funds are separate investment mutual fund portfolios of the Merrill Lynch
Variable Series Funds, Inc. (the "Funds"). There are seventeen Funds available
for contract owner investment, each with a different investment objective:
Domestic Money Market Fund, Prime Bond Fund, High Current Income Fund, Quality
Equity Fund, Equity Growth Fund, Flexible Strategy Fund, Natural Resources Focus
Fund, American Balanced Fund, Global Strategy Focus Fund, Basic Value Focus
Fund, World Income Focus Fund, Global Utility Focus Fund, International Equity
Focus Fund, International Bond Fund, Intermediate Government Bond Fund,
Developing Capital Markets Focus Fund, and Reserve Assets Fund. Other investment
options may be added in the future. (See INVESTMENTS OF THE ACCOUNTS on page
16.)
Detailed information about the investment objectives of the Funds can be found
under INVESTMENTS OF THE ACCOUNTS on page 16 and in the attached prospectus for
the Funds.
PREMIUMS
The Contract generally allows contract owners the flexibility to make premium
payments as often as desired. The Contract is purchased by making an initial
premium payment of $5,000 or more on a nonqualified Contract and $2,000 or more
on an IRA Contract. Subsequent premium payments generally must be $300 or more
and can be made at any time prior to the annuity date. Maximum annual
contributions to IRA Contracts are limited by federal law. Under an automatic
investment feature, subsequent premium payments can be systematically made from
a Merrill Lynch Pierce, Fenner & Smith Incorporated account. A Financial
Consultant should be contacted for additional information. ML of New York
reserves the right to refuse to accept subsequent premium payments, if required
by law. (See PREMIUMS on page 25.)
FEES AND CHARGES
A charge is made to reimburse ML of New York for expenses related to maintenance
of the Contract. A $40 contract maintenance charge will be deducted from the
contract value on each contract anniversary that occurs on or prior to the
annuity date. It will also be deducted when the Contract is surrendered, if it
is surrendered on any date other than a contract anniversary. This charge will
be waived on all Contracts with a contract value equal to or greater than
$50,000 on the date the charge would otherwise be deducted, and in certain
circumstances where multiple contracts are owned. It is not deducted after the
annuity date.
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A mortality and expense risk charge is imposed on the Accounts. It equals 1.25%
annually for Account A and 0.65% annually for Account B and is deducted daily
from the net asset value of the Accounts. Of this amount, 0.75% annually for
Account A and 0.35% annually for Account B is attributable to mortality risks
assumed by ML of New York for the annuity payment and death benefit guarantees
made under the Contract. The remainder, 0.50% annually for Account A and 0.30%
annually for Account B, is attributable to expense risks assumed by ML of New
York should the contract maintenance and administration charges be insufficient
to cover all Contract maintenance and administration expenses.
An administration charge is made to reimburse ML of New York for costs
associated with the establishment and administration of the Contract. A charge
of 0.10% annually will be deducted daily only from the net asset value of
Account A. No administration charge is imposed on the assets of Account B.
A contingent deferred sales charge may be imposed on withdrawals and surrenders
from Account A. The maximum contingent deferred sales charge is 7% of premium
withdrawn during the first year after that premium is paid, decreasing by 1%
annually to 0% after year seven. No contingent deferred sales charge will be
imposed on withdrawals or surrenders from Account B. In addition, ML of New York
reserves the right not to impose a contingent deferred sales charge on
withdrawals or surrenders from Contracts purchased by employees of ML of New
York or from Contracts purchased by the employees' spouses or dependents, where
permitted by state regulation.
A charge for any premium taxes imposed by a state or local government will be
deducted from the contract value on the annuity date. State premium tax rates
vary from jurisdiction to jurisdiction and currently range from 0% to 5%. 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, ML of New York will also deduct a charge for these taxes on any
withdrawal, surrender or death benefit effected under the Contract.
ML of New York reserves 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. ML of New York also reserves the right to deduct from the Accounts any
taxes imposed on the Accounts' investment earnings. (See ML OF NEW YORK'S TAX
STATUS on page 33.)
Detailed information about fees and charges imposed on the Contract can be found
under CHARGES AND DEDUCTIONS on page 21.
ANNUITY PAYMENTS
The Contract provides a choice of fixed annuity payment options. On the annuity
date, the entire contract value will be transferred to ML of New York's general
account, from which the annuity payments will be made. The amount of each
payment is predetermined.
The contract owner selects an annuity date when annuity payments will begin.
Contract owners may change the annuity date up to 30 days prior to that date.
However, the annuity date for nonqualified Contracts may not be later than the
annuitant's 85th birthday. The annuity date for IRA Contracts will not be later
than when the owner/annuitant reaches the age of 70 1/2 unless the contract
owner selects a later annuity date.
If the contract value on the annuity date after the deduction of any applicable
premium taxes is less than $2,000 (or a different minimum amount, if required by
state law), ML of New York may pay the annuity benefits in a lump sum, rather
than as periodic payments. If any annuity payment would be less than $20 (or a
different minimum amount, if required by state law), ML of New York may change
the frequency of
6
<PAGE>
payments so that all payments will be at least $20 (or the minimum amount
required by state law). All annuity payments will be directly transferred to the
contract owner's designated Merrill Lynch, Pierce, Fenner & Smith Incorporated
brokerage account, unless otherwise specified.
Details about the annuity options available under the Contract can be found
under ANNUITY OPTIONS on page 31.
TRANSFERS
Once each contract year, contract owners may transfer from Account A to Account
B an amount equal to any gain in account value and/or any premium not subject to
a contingent deferred sales charge. Where permitted by state regulation, once
each contract year, contract owners may transfer all or a portion of the greater
of that amount or 10% of premiums subject to a contingent deferred sales charge
(minus any of that premium already withdrawn or transferred). Additionally,
where permitted by state regulation, periodic transfers of all or a portion of
the greater amount, determined at the time of each periodic transfer, are
permitted on a monthly, quarterly, semi-annual or annual basis.
This is the only amount which may be transferred from Account A to Account B
during that contract year. There is no charge imposed on the transfer of this
amount. No transfers are permitted from Account B to Account A.
Prior to their annuity date, contract owners may transfer all or part of their
Account A value among the subaccounts of Account A up to six times per contract
year without charge. Additional transfers among Account A subaccounts may be
made at a charge of $25 per transfer. Contract owners may elect a Dollar Cost
Averaging feature in which Account A value invested in the Domestic Money Market
Subaccount may be systematically transferred among the other Account A
subaccounts on a monthly basis without charge, subject to certain limitations.
In addition, through participation in the Merrill Lynch RPA-SM- program,
contract owners may have their Account A values allocated in accordance with an
investment program consistent with the contract owner's investment profile. (See
TRANSFERS on page 27; DOLLAR COST AVERAGING on page 28; and MERRILL LYNCH
RETIREMENT PLUS ADVISOR-SM- on page 29.)
WITHDRAWALS
Contract owners may make up to six withdrawals from the Contract per contract
year. Value withdrawn from Account A is generally subject to a contingent
deferred sales charge. (See CONTINGENT DEFERRED SALES CHARGE on page 22.)
However, a contingent deferred sales charge will not be applied to the first
withdrawal in any contract year out of Account A to the extent that the
withdrawal consists of gain and/or any premium not subject to such a charge.
Where permitted by state regulation, a contingent deferred sales charge will not
be applied to that portion of the first withdrawal from Account A in any
contract year that does not exceed the greater of any gain in account value
and/or any premium not subject to a contingent deferred sales charge and 10% of
premiums subject to a contingent deferred sales charge (minus any of that
premium already transferred out of Account A). Additionally, where permitted by
state regulation, the amount withdrawn may be elected to be paid on a monthly,
quarterly, semi-annual or annual basis.
The first withdrawal of the contract year out of Account A will be treated as
withdrawing gain in account value first, followed by premium not subject to a
contingent deferred sales charge, then followed by premium subject to such a
charge. If the amount withdrawn is paid on a monthly, quarterly, semi-annual or
annual basis, all such payments will be treated in the same way. All subsequent
withdrawals will be treated as withdrawing premium accumulated the longest
first. (See WITHDRAWALS AND SURRENDERS on page 29.)
7
<PAGE>
Value withdrawn from Account B is not subject to any contingent deferred sales
charge. In addition, ML of New York reserves the right not to impose a
contingent deferred sales charge on withdrawals from Contracts purchased by
employees of ML of New York or from Contracts purchased by the employees'
spouses or dependents, where permitted by state regulation.
In addition to the six withdrawals permitted each contract year, the value in
Account B may be automatically withdrawn on a monthly, quarterly, semi-annual,
or annual basis. These automatic withdrawals are not subject to any contingent
deferred sales charge. (See WITHDRAWALS AND SURRENDERS on page 29.)
Withdrawals will decrease the contract value. Withdrawals from either Account A
or Account B 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 on page 33.)
DEATH BENEFIT
The Contract provides a death benefit feature that guarantees a death benefit if
the contract owner dies prior to the annuity date, regardless of investment
experience. A Contract's death benefit is equal to the greater of (a) premiums
paid less any withdrawals or (b) the contract value. If the contract owner dies
prior to the annuity date, ML of New York will pay the Contract's death benefit
to the owner's beneficiary. (See DEATH BENEFIT on page 26.)
TEN DAY REVIEW
When the contract owner receives the Contract, it should be reviewed carefully
to make sure it is what the contract owner intended to purchase. Generally,
within 10 days after the contract owner receives the Contract, it may be
returned for a refund. Some states allow a longer period of time to return the
Contract. The Contract must be delivered to ML of New York's Home Office or to
the Financial Consultant who sold it for a refund to be made. ML of New York
will then refund to the contract owner the greater of all premiums paid into the
Contract or the contract value as of the date the Contract is returned. The
Contract will then be deemed void. (See TEN DAY RIGHT TO REVIEW on page 24.)
8
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FEE TABLE
<TABLE>
<S> <C> <C> <C>
A. Contract Owner Transaction Expenses
1. Sales Load Imposed on Premium................................... None
2. Contingent Deferred Sales Charge
</TABLE>
<TABLE>
<CAPTION>
COMPLETE YEARS ELAPSED CONTINGENT DEFERRED SALES CHARGE AS A
SINCE PAYMENT OF PREMIUM PERCENTAGE OF PREMIUM WITHDRAWN
- --------------------------- --------------------------------------
<S> <C>
0 years 7.00%
1 year 6.00%
2 years 5.00%
3 years 4.00%
4 years 3.00%
5 years 2.00%
6 years 1.00%
7 or more years 0.00%
</TABLE>
<TABLE>
<S> <C> <C> <C>
3. Transfer Fee.................................................... $25
The first 6 transfers among Separate Account A subaccounts in a contract
year are free. A $25 fee may be charged on all subsequent transfers. These
rules apply only to transfers among Separate Account A subaccounts. They do
not apply to transfers from Separate Account A to Separate Account B. No
transfers may be made from Separate Account B.
B. Annual Contract Maintenance Charge................................... $40
The Contract Maintenance Charge will be assessed annually on each contract
anniversary, only if the contract value is less than $50,000.
C. Separate Account Annual Expenses (as a percentage of account value)
</TABLE>
<TABLE>
<CAPTION>
SEPARATE ACCT A SEPARATE ACCT B
---------------- ----------------
<S> <C> <C>
Mortality and Expense Risk Charge....... 1.25% .65%
Administration Charge................... .10% .00%
--
---
Total Separate Account Annual
Expenses............................... 1.35% .65%
</TABLE>
<TABLE>
<S> <C> <C> <C>
D. Fund Expenses for the Year Ended December 31, 1995 (a)(b)(c)
(as a percentage of each Fund's net assets)
</TABLE>
<TABLE>
<CAPTION>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
--------------------------------------------------------------------------------------------------
HIGH NATURAL GLOBAL
RESERVE PRIME CURRENT QUALITY EQUITY FLEXIBLE RESOURCES STRATEGY
ANNUAL EXPENSES ASSETS BOND INCOME EQUITY GROWTH STRATEGY FOCUS FOCUS
- ------------------------------ --------- ------------- --------- --------- --------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees...... .50% .45% .50% .46% .75% .65% .65% .65%
Other Expenses................ .11% .05% .05% .05% .06% .06% .13% .07%
Total Annual Operating
Expenses..................... .61% .50% .55% .51% .81% .71% .78% .72%
</TABLE>
<TABLE>
<CAPTION>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. (CONT'D)
---------------------------------------------------------------------------------------
DOMESTIC BASIC WORLD GLOBAL INTERNATIONAL
AMERICAN MONEY VALUE INCOME UTILITY EQUITY INTERNATIONAL
ANNUAL EXPENSES BALANCED MARKET (A) FOCUS FOCUS FOCUS FOCUS BOND(A)(B)
- ------------------------------ --------- ------------- --------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees...... .55% .50% .60% .60% .60% .75% .60%
Other Expenses................ .06% .05% .06% .08% .06% .14% .35%
Total Annual Operating
Expenses..................... .61% .55% .66% .68% .66% .89% .95%
</TABLE>
<TABLE>
<CAPTION>
DEVELOPING
INTERMEDIATE CAPITAL
GOVERNMENT MARKETS
ANNUAL EXPENSES BOND (A)(B) FOCUS (C)
- ------------------------------------ ------------- -------------
<S> <C> <C>
Investment Advisory Fees............ .50% 1.00%
Other Expenses...................... .16% .25%
Total Annual Operating Expenses..... .66% 1.25%
</TABLE>
9
<PAGE>
EXAMPLES OF CHARGES
If the Contract is surrendered at the end of the applicable time period:
The following cumulative expenses would be paid 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>
Separate Account B subaccount investing in:
Reserve Assets Fund....................................... $ 84 $ 94 $ 106 $ 166
Prime Bond Fund........................................... $ 90 $ 112 $ 137 $ 231
High Current Income Fund.................................. $ 91 $ 114 $ 140 $ 236
Quality Equity Fund....................................... $ 90 $ 113 $ 138 $ 232
Equity Growth Fund........................................ $ 93 $ 122 $ 153 $ 264
Flexible Strategy Fund.................................... $ 92 $ 119 $ 148 $ 253
Natural Resources Focus Fund.............................. $ 93 $ 121 $ 152 $ 260
Global Strategy Focus Fund................................ $ 92 $ 119 $ 148 $ 254
American Balanced Fund.................................... $ 91 $ 116 $ 143 $ 243
Domestic Money Market Fund................................ $ 91 $ 114 $ 140 $ 236
Basic Value Focus Fund.................................... $ 92 $ 117 $ 145 $ 248
World Income Focus Fund................................... $ 92 $ 118 $ 146 $ 250
Global Utility Focus Fund................................. $ 92 $ 117 $ 145 $ 248
International Equity Focus Fund........................... $ 94 $ 124 $ 157 $ 272
International Bond Fund................................... $ 95 $ 126 $ 160 $ 278
Intermediate Government Bond Fund......................... $ 92 $ 117 $ 145 $ 248
Developing Capital Markets Focus Fund..................... $ 98 $ 135 $ 176 $ 308
</TABLE>
If the Contract is annuitized, or not surrendered, at the end of the applicable
time period:
The following cumulative expenses would be paid 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>
Separate Account B subaccount investing in:
Reserve Assets Fund....................................... $ 14 $ 44 $ 76 $ 166
Prime Bond Fund........................................... $ 20 $ 62 $ 107 $ 231
High Current Income Fund.................................. $ 21 $ 64 $ 110 $ 236
Quality Equity Fund....................................... $ 20 $ 63 $ 108 $ 232
Equity Growth Fund........................................ $ 23 $ 72 $ 123 $ 264
Flexible Strategy Fund.................................... $ 22 $ 69 $ 118 $ 253
Natural Resources Focus Fund.............................. $ 23 $ 71 $ 122 $ 260
Global Strategy Focus Fund................................ $ 22 $ 69 $ 118 $ 254
American Balanced Fund.................................... $ 21 $ 66 $ 113 $ 243
Domestic Money Market Fund................................ $ 21 $ 64 $ 110 $ 236
Basic Value Focus Fund.................................... $ 22 $ 67 $ 115 $ 248
World Income Focus Fund................................... $ 22 $ 68 $ 116 $ 250
Global Utility Focus Fund................................. $ 22 $ 67 $ 115 $ 248
International Equity Focus Fund........................... $ 24 $ 74 $ 127 $ 272
International Bond Fund................................... $ 25 $ 76 $ 130 $ 278
Intermediate Government Bond Fund......................... $ 22 $ 67 $ 115 $ 248
Developing Capital Markets Focus Fund..................... $ 28 $ 85 $ 146 $ 308
</TABLE>
10
<PAGE>
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 preceding Fee Table and Examples are intended to assist investors in
understanding the costs and expenses that a contract owner will bear, directly
or indirectly. The Fee Table and Examples include expenses and charges of the
Accounts as well as the Merrill Lynch Variable Series Funds, Inc. The Examples
also reflect the $40 contract maintenance charge as .089% of assets, determined
by dividing the total amount of such charges collected by the total average net
assets of the subaccounts. See the CHARGES AND DEDUCTIONS section in this
Prospectus and the INVESTMENT ADVISER section in the Fund prospectus for a
further discussion of fees and charges.
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.
NOTES TO FEE TABLE
(a) The Fee Table does not reflect any fees waived or expenses assumed by
Merrill Lynch Asset Management, L.P. ("MLAM") during the year ended December
31, 1995 with respect to any Fund because such waivers and assumptions of
expenses were made on a voluntary basis and MLAM may discontinue or reduce
any such waiver or assumption of expenses at any time without notice. During
the fiscal year ended December 31, 1995, MLAM waived management fees and
reimbursed expenses totaling 0.66% for the Intermediate Government Bond Fund
and 0.95% for the International Bond Fund after which each such Fund's total
expense ratio, net of reimbursement, was 0.00% for the Intermediate
Government Bond Fund, and 0.00% for the International Bond Fund. See also
notes (b) and (c).
(b) "Other Expenses" and "Total Annual Operating Expenses" shown for
International Bond and Intermediate Government Bond are based on expenses
estimated for the year ended December 31, 1996.
(c) MLAM and Merrill Lynch Life Agency, Inc. have entered into a Reimbursement
Agreement that limits the operating expenses paid by each Fund in a given
year to 1.25% of its average net assets. This Reimbursement Agreement is
expected to remain in effect for the current year. Pursuant to this
Reimbursement Agreement, the Developing Capital Market Focus Fund was
reimbursed for a portion of its operating expenses for 1995. Absent the
reimbursement, "Other Expenses" for this Fund would have been 0.36%.
Expenses shown for all other Funds do not reflect any reimbursement under
the Reimbursement Agreement.
11
<PAGE>
ACCUMULATION UNIT VALUES
(CONDENSED FINANCIAL INFORMATION)
<TABLE>
<CAPTION>
SUBACCOUNTS
---------------------------------------
DOMESTIC MONEY MARKET
---------------------------------------
1/1/95 1/1/94 1/1/93
TO TO TO
12/31/95 12/31/94 12/31/93
----------- ----------- -----------
<S> <C> <C> <C>
(1) Accumulation unit value at beginning of
period................................ $10.64 $10.37 $10.20
(2) Accumulation unit value at end of
period................................ $11.09 $10.64 $10.37
(3) Number of accumulation units outstanding
at end of period...................... 2,104,307.1 1,725,685.7 894,153.1
<CAPTION>
PRIME BOND
---------------------------------------
1/1/95 1/1/94 1/1/93
TO TO TO
12/31/95 12/31/94 12/31/93
----------- ----------- -----------
<S> <C> <C> <C>
(1) Accumulation unit value at beginning of
period................................ $11.21 $11.94 $10.80
(2) Accumulation unit value at end of
period................................ $13.29 $11.21 $11.94
(3) Number of accumulation units outstanding
at end of period...................... 2,866,758.2 2,939,785.1 2,187,536.2
<CAPTION>
HIGH CURRENT INCOME
---------------------------------------
1/1/95 1/1/94 1/1/93
TO TO TO
12/31/95 12/31/94 12/31/93
----------- ----------- -----------
(1) Accumulation unit value at beginning of
period................................ $12.18 $12.80 $11.01
(2) Accumulation unit value at end of
period................................ $14.08 $12.18 $12.80
(3) Number of accumulation units outstanding
at end of period...................... 1,274,375.1 1,116,584.4 693,594.6
</TABLE>
<TABLE>
<CAPTION>
QUALITY EQUITY
---------------------------------------
1/1/95 1/1/94 1/1/93
TO TO TO
12/31/95 12/31/94 12/31/93
----------- ----------- -----------
<S> <C> <C> <C>
(1) Accumulation unit value at beginning of
period................................ $11.38 $11.87 $10.33
(2) Accumulation unit value at end of
period................................ $13.77 $11.38 $11.67
(3) Number of accumulation units outstanding
at end of period...................... 2,587,997.3 2,368,801.5 1,359,217.6
<CAPTION>
EQUITY GROWTH
---------------------------------------
1/1/95 1/1/94 1/1/93
TO TO TO
12/31/95 12/31/94 12/31/93
----------- ----------- -----------
<S> <C> <C> <C>
(1) Accumulation unit value at beginning of
period................................ $9.90 $10.82 $9.31
(2) Accumulation unit value at end of
period................................ $14.25 $9.90 $10.82
(3) Number of accumulation units outstanding
at end of period...................... 1,332,688.3 1,048,612.8 511,403.7
<CAPTION>
FLEXIBLE STRATEGY
---------------------------------------
1/1/95 1/1/94 1/1/93
TO TO TO
12/31/95 12/31/94 12/31/93
----------- ----------- -----------
(1) Accumulation unit value at beginning of
period................................ $11.22 $11.87 $10.39
(2) Accumulation unit value at end of
period................................ $13.00 $11.22 $11.87
(3) Number of accumulation units outstanding
at end of period...................... 1,137,134.8 1,113,369.6 583,364.1
</TABLE>
<TABLE>
<CAPTION>
AMERICAN BALANCED
---------------------------------------
1/1/95 1/1/94 1/1/93
TO TO TO
12/31/95 12/31/94 12/31/93
----------- ----------- -----------
<S> <C> <C> <C>
(1) Accumulation unit value at beginning of
period................................ $11.21 $11.88 $10.60
(2) Accumulation unit value at end of
period................................ $13.37 $11.21 $11.86
(3) Number of accumulation units outstanding
at end of period...................... 1,294,854.9 1,205,254.3 820,318.5
<CAPTION>
NATURAL RESOURCES FOCUS
---------------------------------------
1/1/95 1/1/94 1/1/93
TO TO TO
12/31/95 12/31/94 12/31/93
----------- ----------- -----------
<S> <C> <C> <C>
(1) Accumulation unit value at beginning of
period................................ $11.30 $11.29 $10.36
(2) Accumulation unit value at end of
period................................ $12.56 $11.30 $11.29
(3) Number of accumulation units outstanding
at end of period...................... 167,533.9 190,785.7 79,452.1
<CAPTION>
GLOBAL STRATEGY FOCUS
---------------------------------------
1/1/95 1/1/94 1/1/93
TO TO TO
12/31/95 12/31/94 12/31/93
----------- ----------- -----------
(1) Accumulation unit value at beginning of
period................................ $11.78 $12.12 $10.15
(2) Accumulation unit value at end of
period................................ $12.85 $11.78 $12.12
(3) Number of accumulation units outstanding
at end of period...................... 2,678,814.8 2,924,265.0 1,425,420.6
</TABLE>
<TABLE>
<CAPTION>
BASIC VALUE FOCUS
---------------------------------------
1/1/95 1/1/94 7/1/93*
TO TO TO
12/31/95 12/31/94 12/31/93
----------- ----------- -----------
<S> <C> <C> <C>
(1) Accumulation unit value at beginning of
period................................ $10.98 $10.88 $10.00
(2) Accumulation unit value at end of
period................................ $13.60 $10.98 $10.88
(3) Number of accumulation units outstanding
at end of period...................... 1,241,769.4 850,329.6 231,857.5
<CAPTION>
WORLD INCOME FOCUS
---------------------------------------
1/1/95 1/1/94 7/1/93*
TO TO TO
12/31/95 12/31/94 12/31/93
----------- ----------- -----------
<S> <C> <C> <C>
(1) Accumulation unit value at beginning of
period................................ $9.94 $10.52 $10.00
(2) Accumulation unit value at end of
period................................ $11.45 $9.94 $10.52
(3) Number of accumulation units outstanding
at end of period...................... 504,390.5 556,854.0 320,253.5
<CAPTION>
GLOBAL UTILITY FOCUS
---------------------------------------
1/1/95 1/1/94 7/1/93*
TO TO TO
12/31/95 12/31/94 12/31/93
----------- ----------- -----------
(1) Accumulation unit value at beginning of
period................................ $9.58 $10.61 $10.00
(2) Accumulation unit value at end of
period................................ $11.75 $9.58 $10.61
(3) Number of accumulation units outstanding
at end of period...................... 724,247.5 785,888.0 576,579.5
</TABLE>
- ----------------------------------
* Commencement of business
12
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FOCUS
---------------------------------------
1/1/95 1/1/94 7/1/93*
TO TO TO
12/31/95 12/31/94 12/31/93
----------- ----------- -----------
<S> <C> <C> <C>
(1) Accumulation unit value at beginning of
period................................ $10.87 $10.96 $10.00
(2) Accumulation unit value at end of
period................................ $11.31 $10.87 $10.96
(3) Number of accumulation units outstanding
at end of period...................... 1,275,506.6 1,313,991.8 375,910.9
<CAPTION>
RESERVE ASSETS
---------------------------------------
1/1/95 1/1/94 1/1/93
TO TO TO
12/31/95 12/31/94 12/31/93
----------- ----------- -----------
<S> <C> <C> <C>
(1) Accumulation unit value at beginning of
period................................ $10.76 $10.43 $10.22
(2) Accumulation unit value at end of
period................................ $11.29 $10.76 $10.43
(3) Number of accumulation units outstanding
at end of period...................... 114,114.3 120,482.2 143,448.0
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL BOND
-------------------------
1/1/95 5/16/94*
TO TO
12/31/95 12/31/94
----------- -----------
<S> <C> <C>
(1) Accumulation unit value at beginning of
period................................ $9.93 $10.00
(2) Accumulation unit value at end of
period................................ $11.40 $9.93
(3) Number of accumulation units outstanding
at end of period...................... 40,678.5 18,139.0
<CAPTION>
INTERMEDIATE GOV'T BOND
-------------------------
1/1/95 5/16/94*
TO TO
12/31/95 12/31/94
----------- -----------
<S> <C> <C>
(1) Accumulation unit value at beginning of
period................................ $10.08 $10.00
(2) Accumulation unit value at end of
period................................ $11.42 $10.08
(3) Number of accumulation units outstanding
at end of period...................... 153,524.3 69,485.0
<CAPTION>
DEVELOPING CAPITAL
MARKETS FOCUS
-------------------------
1/1/95 5/16/94*
TO TO
12/31/95 12/31/94
----------- -----------
(1) Accumulation unit value at beginning of
period................................ $9.38 $10.00
(2) Accumulation unit value at end of
period................................ $9.16 $9.38
(3) Number of accumulation units outstanding
at end of period...................... 240,156.6 174,741.4
</TABLE>
- ----------------------------------
* Commencement of business
13
<PAGE>
YIELDS AND TOTAL RETURNS
From time to time, ML of New York may advertise yields, effective yields, and
total returns for the Account A subaccounts and the Account B subaccount. THESE
FIGURES ARE BASED ON HISTORICAL EARNINGS AND DO NOT INDICATE OR PROJECT FUTURE
PERFORMANCE. ML of New York also from time to time may advertise performance of
the subaccounts relative to certain performance rankings and indices. More
detailed information as to 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. A Fund's performance in part reflects
that Fund's expenses. The investment adviser and Merrill Lynch Life Agency, Inc.
(see SELLING THE CONTRACT on page 38) have entered into a Reimbursement
Agreement that limits the operating expenses paid by each Fund in a given year
to 1.25% of its average net assets.
The yields of the Domestic Money Market Subaccount and the Reserve Assets
Subaccount refer to the annualized income generated by an investment in each
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 in the subaccount or Account is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding affect of this assumed reinvestment.
The yield of an Account A subaccount (other than 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 that the income generated by the investment during that 30-day or
one-month period is generated each period over a 12-month period and is shown as
a percentage of the investment.
The average annual total return of a subaccount refers to return quotations
assuming an investment under a Contract has been held in each subaccount for 1,
5 and 10 years, or for a shorter period, if applicable. The average annual total
return quotations represent the average annual compounded rates of return that
would equate an initial investment of $1,000 under a Contract to the redemption
value of that investment as of the last day of each of the periods for which
return quotations are provided. Average annual total return information shows
the average percentage change in the value of an investment in a subaccount
(including any contingent deferred sales charge that would apply if an owner
terminated the Contract at the end of each period indicated, but excluding any
deductions for premium taxes).
ML of New York may, in addition, advertise or present yield or total return
performance information computed on different bases. ML of New York may present
total return information computed on the same basis as described above, except
the information will not reflect a deduction for the contingent deferred sales
charge. This presentation assumes that an investment in the Contract will
persist beyond the period when the contingent deferred sales charge applies,
consistent with the long-term investment and retirement objectives of the
Contract. ML of New York may also advertise total return performance information
for the Funds, but this information will always be accompanied by average annual
total returns for the corresponding subaccounts. ML of New York may also present
total return performance information for a hypothetical Contract assuming
allocation of the initial premium to more than one subaccount or assuming
monthly transfers from the Domestic Money Market Subaccount to designated
subaccounts under a dollar cost averaging program. This information will reflect
the performance of the affected subaccounts for the duration of the allocation
under the hypothetical Contract. It also will reflect the deduction of charges
described above except for the contingent deferred sales charge. This
information may also be compared to various indices.
14
<PAGE>
Advertising and sales literature for the Contracts may also compare the
performance of the subaccounts or 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, or series of 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. Some services'
rankings include variable life insurance issuers as well as variable annuity
issuers, while others' rankings compare only variable annuity issuers.
Performance analysis prepared by services may rank such issuers on the basis of
total return, assuming reinvestment of distributions, but do not take sales
charges, redemption fees or certain expense deductions at the separate account
level into consideration. In addition, some such services prepare risk-adjusted
rankings, which consider the effect of market risk on total return performance.
This type of ranking provides data as to which funds provide the highest total
return within various categories of funds defined by the degree of risk inherent
in their investment objectives. Ranking services ML of New York 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 ML of New York 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, which may be illustrated by graphs, charts or otherwise and
which 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
ML Life Insurance Company of New York ("ML of New York") is a stock life
insurance company organized under the laws of the State of New York in 1973. ML
of New York is an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc.,
a corporation whose common stock is traded on the New York Stock Exchange.
ML of New York's financial statements can be found in the Statement of
Additional Information and should only be considered in the context of its
ability to meet any obligations it may have under the Contract.
All communications concerning the Contract should be addressed to ML of New
York's Home Office at the address printed on the first page of this Prospectus.
THE ACCOUNTS
Contract owners may direct their premiums into one or both of two segregated
investment accounts available to the Contract (the "Accounts"). The ML of New
York Variable Annuity Separate Account A ("Account A") offers a variety of
investment options, each with a different investment objective, through its
subaccounts. The ML of New York Variable Annuity Separate Account B ("Account
B") offers a money market investment through its subaccount.
15
<PAGE>
The Accounts were established on August 14, 1991, as separate investment
accounts. They are registered with the Securities and Exchange Commission as
unit investment trusts pursuant to the Investment Company Act of 1940. Their
registration does not involve any supervision by the Securities and Exchange
Commission over the investment policies or practices of the Accounts. The
Accounts each meet the definition of a separate account under the federal
securities laws. The Accounts' assets are segregated from all of ML of New
York's other assets.
Obligations to contract owners and beneficiaries that arise under the Contract
are obligations of ML of New York. ML of New York owns all of the assets in the
Accounts. With respect to each Account, income, gains, and losses, whether or
not realized, from assets allocated to that Account are, in accordance with the
Contracts, credited to or charged against the Account without regard to other
income, gains or losses of ML of New York. As required, the assets in each
Account will always be at least equal to the reserves and other liabilities of
the Account. If the assets exceed the required reserves and other Contract
liabilities (which will always be at least equal to the aggregate contract value
allocated to the Account under the Contracts), ML of New York may transfer the
excess to its general account. New York insurance law provides that each
Account's assets, to the extent of its reserves and liabilities, may not be
charged with liabilities arising out of any other business ML of New York
conducts nor may the assets of either Account be charged with any liabilities of
the other Account.
There are sixteen subaccounts in Account A and one subaccount in Account B. All
subaccounts invest in a corresponding mutual fund portfolio of the Merrill Lynch
Variable Series Funds, Inc. Additional subaccounts may be added in the future.
The Accounts' financial statements can be found in the Statement of Additional
Information.
INVESTMENTS OF THE ACCOUNTS
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
The Merrill Lynch Variable Series Funds, Inc. (the "Funds") is registered with
the Securities and Exchange Commission as an open-end management investment
company. It currently offers the Accounts seventeen of its separate investment
mutual fund portfolios. The Reserve Assets Fund is available only to Account B.
The sixteen remaining Funds are available only to Account A. Other investment
options may be added in the future. The Funds' shares are currently sold only to
separate accounts of ML of New York, Merrill Lynch Life, and several insurance
companies not affiliated with ML of New York, to fund benefits under certain
variable annuity and variable life insurance contracts. Shares of each Portfolio
of the Funds may be made available to the separate accounts of additional
insurance companies in the future.
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, the
ML of New York may be required to eliminate one or more subaccounts of Separate
Account A or Separate Account B or substitute a new subaccount. In responding to
any conflict, ML of New York will take the action which it believes necessary to
protect its contract owners.
16
<PAGE>
The Accounts will purchase and redeem shares of the Funds to the extent
necessary to provide benefits under the Contract or for such other purposes as
may be consistent with the Contract. The Accounts will purchase and redeem
shares of the Funds at net asset value. Fund distributions to the Accounts are
automatically reinvested in additional shares of the Funds at net asset value.
Merrill Lynch Asset Management, L.P. ("MLAM") is the investment adviser to the
Funds. MLAM is a worldwide mutual fund leader with more than $145.7 billion in
assets under management. It is 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, MLAM is paid fees by
the Funds for its services. The fees charged to each of the Funds are set forth
in the summary of investment objectives below.
Details about the Funds, including their investment objectives, management,
policies, restrictions, their expenses and risks associated with investments
therein (including any risks associated with investment in the High Current
Income Fund), and all other aspects of the Funds' operation can be found in the
attached prospectus for the Funds and in their Statement of Additional
Information which should be read carefully before investing. There is no
guarantee that any Fund will meet its investment objective. Meeting the
objectives depends upon how well the Funds' management anticipates changing
economic conditions.
DOMESTIC MONEY MARKET FUND
This Fund seeks preservation of capital, liquidity, and the highest possible
current income consistent with the foregoing objectives by investing in
short-term money market securities. The Fund invests in short-term United States
government securities; government agency securities; bank certificates of
deposit and bankers' acceptances; short-term corporate debt securities such as
commercial paper and variable amount master demand notes; repurchase agreements
and other domestic money market instruments. MLAM receives from the Fund an
advisory fee at the annual rate of 0.50% of the average daily net assets of the
Fund.
PRIME BOND FUND
This Fund seeks to obtain as high a level of current income as is consistent
with the investment policies of the Fund and with prudent investment management,
and capital appreciation to the extent consistent with the foregoing objective.
The Fund invests primarily in long-term corporate bonds rated in the top three
ratings categories by established rating services. MLAM receives from the Fund
an advisory fee at the annual rate of 0.50% of the first $250 million of the
combined average daily nets assets of the Fund and High Current Income Fund;
0.45% of the next $250 million; 0.40% of the next $250 million; and 0.35% of the
combined average daily net assets in excess of $750 million. The reduction of
the advisory fee applicable to the Fund is determined on a uniform percentage
basis as described in the Statement of Additional Information for the Funds.
HIGH CURRENT INCOME FUND
This Fund seeks to obtain as high a level of current income as is consistent
with the investment policies of the Fund and with prudent investment management,
and capital appreciation to the extent consistent with the foregoing objective.
The Fund invests principally in fixed-income securities that are rated in the
lower rating categories of the established rating services or in unrated
securities of comparable quality (commonly known as "junk bonds"). Because
investment in such securities entails relatively greater risk of loss of income
or principal, an investment in the High Current Income Fund may not be
appropriate as the exclusive investment to fund a Contract. In an effort to
minimize risk, the Fund will diversify its holdings among many issuers. However,
there can be no assurance that diversification will protect the Fund from
widespread
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<PAGE>
defaults during periods of sustained economic downturn. MLAM receives from the
Fund an advisory fee at the annual rate of 0.55% of the first $250 million of
the combined average daily net assets of the Fund and Prime Bond Fund; 0.50% of
the next $250 million; 0.45% of the next $250 million; and 0.40% of the combined
average daily net assets in excess of $750 million. The reduction of the
advisory fee applicable to the Fund is determined on a uniform percentage basis
as described in the Statement of Additional Information for the Funds.
QUALITY EQUITY FUND
This Fund seeks to attain the highest total investment return consistent with
prudent risk. The Fund employs a fully managed investment policy utilizing
equity securities, primarily common stocks of large-capitalization companies, as
well as investment grade debt and convertible securities. Management of the Fund
will shift the emphasis among investment alternatives for capital growth,
capital stability, and income as market trends change. MLAM receives from the
Fund an advisory fee at the annual rate of 0.50% of the first $250 million of
average daily net assets; 0.45% of the next $50 million; 0.425% of the next $100
million; and 0.40% of the average daily net assets in excess of $400 million.
EQUITY GROWTH FUND
This Fund seeks to attain long-term growth of capital by investing in a
diversified portfolio of securities, primarily common stocks, of relatively
small companies that management of the Fund believes have special investment
value and emerging growth companies regardless of size. Such companies are
selected by management on the basis of their long-term potential for expanding
their size and profitability or for gaining increased market recognition for
their securities. Current income is not a factor in such selection. MLAM
receives from the Fund an advisory fee at the annual rate of 0.75% of the
average daily net assets of the Fund. This is a higher fee than that of many
other mutual funds, but management of the Fund believes it is justified by the
high degree of care that must be given to the initial selection and continuous
supervision of the types of portfolio securities in which the Fund invests.
FLEXIBLE STRATEGY FUND
This Fund's objective is to seek a high total investment return consistent with
prudent risk. The Fund seeks its objective through a flexible investment policy
using equity securities, intermediate and long-term debt obligations, and money
market securities. MLAM receives from the Fund an advisory fee at the annual
rate of 0.65% of the average daily net assets of the Fund.
NATURAL RESOURCES FOCUS FUND
This Fund seeks to attain long-term growth of capital and protection of the
purchasing power of capital by investing primarily in equity securities of
domestic and foreign companies with substantial natural resource assets. MLAM
receives from the Fund an advisory fee at the annual rate of 0.65% of the
average daily net assets of the Fund.
ML of New York and Account A reserve the right to suspend the sale of units of
the Natural Resources Focus Subaccount in response to conditions in the
securities markets or otherwise.
AMERICAN BALANCED FUND
This Fund seeks a level of current income and a degree of stability of principal
not normally available from an investment solely in equity securities and the
opportunity for capital appreciation greater than is normally available from an
investment solely in debt securities by investing in a balanced portfolio of
fixed income and
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<PAGE>
equity securities. MLAM receives from the Fund an advisory fee at the annual
rate of 0.55% of the average daily net assets of the Fund.
GLOBAL STRATEGY FOCUS FUND
This Fund seeks high total investment return by investing primarily in a
portfolio of equity and fixed income securities, including convertible
securities, of U.S. and foreign issuers. The Fund seeks to achieve its objective
by investing primarily in securities of issuers located in the United States,
Canada, Western Europe and the Far East. MLAM receives from the Fund an advisory
fee at the annual rate of 0.65% of the average daily net assets of the Fund.
BASIC VALUE FOCUS FUND
This Fund seeks to attain 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.
Particular emphasis is placed on securities which provide an above-average
dividend return and sell at a below-average price/earnings ratio. MLAM receives
from the Fund an advisory fee at the annual rate of 0.60% of the average daily
net assets of the Fund.
WORLD INCOME FOCUS FUND
This Fund seeks to provide shareholders with high current income by investing in
a global portfolio of fixed-income securities denominated in various currencies,
including multinational currency units. The Fund may invest in United States and
foreign government and corporate fixed income securities, including high yield,
high risk, lower rated and unrated securities. The World Income Focus Fund has
no established rating criteria for the securities in which it may invest. In an
effort to minimize risk, the Fund will diversify its holdings among many
issuers. However, there can be no assurance that diversification will protect
the Fund from widespread defaults during periods of sustained economic downturn.
Because investment in the World Income Focus Fund entails relatively greater
risk of loss of income or principal, an investment in the Fund may not be
appropriate as the exclusive investment to fund a Contract. MLAM receives from
the Fund an advisory fee at the annual rate of 0.60% of the average daily net
assets of the Fund.
GLOBAL UTILITY FOCUS FUND
This Fund seeks to obtain capital appreciation and current income through
investment of at least 65% of its total assets in equity and debt securities
issued by domestic and foreign companies which are, in the opinion of management
of the Fund, primarily engaged in the ownership or operation of facilities used
to generate, transmit or distribute electricity, telecommunications, gas or
water. MLAM receives from the Fund an advisory fee at the annual rate of 0.60%
of the average daily net assets of the Fund.
INTERNATIONAL EQUITY FOCUS FUND
This Fund seeks to obtain capital appreciation and, secondarily, income by
investing in a diversified portfolio of equity securities, of issuers located in
countries other than the United States. Under normal conditions, at least 65% of
the Fund's net assets will be invested in such equity securities. MLAM receives
from the Fund an advisory fee at the annual rate of 0.75% of the average daily
net assets of the Fund.
INTERNATIONAL BOND FUND
This Fund seeks a high total investment return by investing in an international
portfolio of non-U.S. debt instruments denominated in various currencies and
multinational currency units. MLAM receives from the Fund an advisory fee at an
annual rate of 0.60% of the average daily net assets of the Fund.
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<PAGE>
INTERMEDIATE GOVERNMENT BOND FUND
This Fund seeks to achieve the highest possible current income consistent with
the protection of capital. It invests in intermediate-term debt securities
issued or guaranteed by the United States Government, its agencies or
instrumentalities with a maximum maturity not to exceed fifteen years. Depending
on market conditions, an average maturity of six to eight years is anticipated.
MLAM receives from the Fund an advisory fee at an annual rate of 0.50% of the
average daily net assets of the Fund.
DEVELOPING CAPITAL MARKETS FOCUS FUND
This Fund seeks long-term capital appreciation by investing in securities,
principally equities, of issuers in countries having smaller capital markets.
For purposes of its investment objective, the Fund considers countries having
smaller capital markets to be all countries other than the four countries having
the largest equity market capitalizations. The Developing Capital Markets Focus
Fund has established no rating criteria for the debt securities in which it may
invest, and will rely on the investment adviser's judgment in evaluating the
creditworthiness of an issuer of such securities. In an effort to minimize the
risk, the Fund will diversify its holdings among many issuers. However, there
can be no assurance that diversification will protect the Fund from widespread
defaults during periods of sustained economic downturn. Because investment in
the Developing Capital Markets Focus Fund entails relatively greater risk of
loss of income or principal, an investment in the Fund may not be appropriate as
the exclusive investment to fund a Contract. MLAM receives from the Fund an
advisory fee at an annual rate of 1.00% of the average daily net assets of the
Fund.
RESERVE ASSETS FUND
This Fund seeks preservation of capital, liquidity, and the highest possible
current income consistent with the foregoing objectives by investing in
short-term money market securities. The Fund invests in short-term United States
government securities; government agency securities; bank certificates of
deposit and bankers' acceptances; short-term corporate debt securities such as
commercial paper and variable amount master demand notes; repurchase agreements
and other money market instruments. MLAM receives from the Fund an advisory fee
at the annual rate of 0.50% of the first $500 million of the Fund's average
daily net assets; 0.425% of the next $250 million; 0.375% of the next $250
million; 0.35% of the next $500 million; 0.325% of the next $500 million; 0.30%
of the next $500 million; and 0.275% of the average daily net assets in excess
of $2.5 billion.
REINVESTMENT
Fund distributions to the Accounts are automatically reinvested in additional
Fund shares at net asset value.
SUBSTITUTION OF INVESTMENTS AND CHANGES TO ACCOUNTS
ML of New York may substitute a different investment option for any of the
current Funds. Substitution may be made with respect to both existing
investments and the investment of future premiums. However, no such substitution
will be made without any necessary approval of the Securities and Exchange
Commission and applicable state insurance departments. Contract owners will be
notified of any substitutions. Additional investment options may be added in the
future as eligible investments through the Accounts.
In addition, ML of New York may make additional subaccounts available to either
Account, eliminate subaccounts in either Account, deregister either or both of
the Accounts under the Investment Company Act of 1940 (the "1940 Act"), make any
changes required by the 1940 Act, operate either or both Accounts as a managed
investment company under the 1940 Act or any other form permitted by law,
transfer all or a
20
<PAGE>
portion of the assets of a subaccount or Account to another subaccount or
account pursuant to a combination or otherwise, and create new accounts. No such
changes will be made without any necessary approval of the Securities and
Exchange Commission and applicable state insurance departments. Contract owners
will be notified of any changes.
CHARGES AND DEDUCTIONS
CONTRACT MAINTENANCE CHARGE
A charge is made to reimburse ML of New York for expenses related to maintenance
of the Contract. These expenses include issuing Contracts, maintaining records,
and performing accounting, regulatory compliance, and reporting functions. This
$40 maintenance charge will be deducted from the contract value on each contract
anniversary that occurs on or prior to the annuity date. It will also be
deducted when the Contract is surrendered if it is surrendered on any date other
than a contract anniversary. The contract maintenance charge will be deducted on
a pro rata basis from among all subaccounts in which contract value is invested.
(See ACCUMULATION UNITS on page 25 for a discussion of the effect the deduction
of this charge will have on the number of accumulation units credited to a
Contract.)
This charge will be waived on all Contracts with a contract value equal to or
greater than $50,000 on the date the charge would otherwise be deducted.
Currently, a contract owner of three or more Contracts will be assessed no more
than $120 in Contract Maintenance Charges annually, regardless of the number of
Contracts owned. Once Contract Maintenance Charges in an amount equal to $120
have been paid in a calendar year by a contract owner, remaining Contract
Maintenance Charges to which the contract owner would otherwise be subject in
the same calendar year will be waived. ML of New York reserves the right to
discontinue this waiver at any time.
It is not deducted after the annuity date. ML of New York does not expect to
profit from this charge. The contract maintenance charge will never increase.
MORTALITY AND EXPENSE RISK CHARGE
A mortality and expense risk charge is imposed on the Accounts. It equals 1.25%
annually for Account A and 0.65% annually for Account B deducted daily from the
net asset value of the Accounts. Of this amount, 0.75% annually for Account A
and 0.35% annually for Account B is attributable to mortality risks assumed by
ML of New York for the annuity payment and death benefit guarantees made under
the Contract. These guarantees include making annuity payments unaffected by
mortality experience and providing a minimum death benefit under the Contract.
Additionally, of the total mortality and expense risk charge, 0.50% annually for
Account A and 0.30% annually for Account B is attributable to expense risks
assumed by ML of New York should the contract maintenance and administration
charges be insufficient to cover all Contract maintenance and administration
expenses.
The mortality and expense risk charge is greater for Account A than for Account
B because a greater death benefit and higher administrative expenses are
attributable to Account A. If the mortality and expense risk charge is
inadequate to cover the actual expenses of mortality, maintenance, and
administration, ML of New York will bear the loss. If the charge exceeds the
actual expenses, the excess will be added to ML of New York's profit. The
mortality and expense risk charge will never increase.
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<PAGE>
ADMINISTRATION CHARGE
An administration charge is made to reimburse ML of New York for costs
associated with the establishment and administration of Account A. This charge
covers such expenses as optional contract transactions (for example, processing
transfers and Dollar Cost Averaging transactions). A charge of 0.10% annually
will be deducted daily only from the net asset value of Account A. ML of New
York does not expect to profit from this charge. The administration charge will
never increase.
CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge may be imposed on withdrawals and surrenders
from Account A. This charge reimburses ML of New York for expenses relating to
the sale of the Contract, such as commissions, preparation of sales literature,
and other promotional activity. The charge is imposed only on premium withdrawn
or surrendered from Account A that was held for less than seven years. However,
where permitted by state regulation, up to 10% of this premium will not be
subject to such a charge if withdrawn or surrendered from Account A during the
first withdrawal of the contract year, whether paid in a lump sum or elected to
be paid on a monthly, quarterly, semi-annual or annual basis. In addition, where
permitted by state regulation, ML of New York reserves the right not to impose a
contingent deferred sales charge on any premium withdrawn or surrendered from
Contracts purchased by employees of ML of New York or from Contracts purchased
by the employees' spouses or dependents.
The maximum contingent deferred sales charge is 7% of the premium withdrawn
during the first year after that premium is paid, decreasing by 1% annually to
0% after year seven, as shown below.
<TABLE>
<CAPTION>
NUMBER OF COMPLETE YEARS CONTINGENT DEFERRED SALES
ELAPSED SINCE PREMIUM WAS PAID CHARGE
- ------------------------------ -------------------------------
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
</TABLE>
Contingent deferred sales charges are calculated on total premiums withdrawn
from Account A, but not to exceed the account value. Gain in account value is
never subject to a contingent deferred sales charge. (See page 27 for a
discussion of the rules for determining whether a withdrawal is considered to
come from premiums or gain for contingent deferred sales charge purposes.) For
example, if a contract owner made a $5,000 premium payment to Account A and
withdrew the entire $5,000 three years later when there had been no gain or loss
on that premium, a 4% contingent deferred sales charge would be imposed on the
$5,000 withdrawal. If that contract owner had made a $5,000 premium payment to
Account A and due to negative investment experience only $4,500 remained in
Account A when the contract owner withdrew it three years later, a 4% contingent
deferred sales charge would be imposed only on $4,500 of the original premium.
If instead the $5,000 premium payment the contract owner made to Account A grew
to $5,500 due to positive investment experience, and the contract owner withdrew
$200 of gain in account value as the first withdrawal three years later, and
thereafter withdrew the remaining $5,300 in a subsequent withdrawal that same
year, no contingent deferred sales charge would be imposed on the $200 first
withdrawn (as it represents gain in account value and not premium) and a 4%
contingent deferred sales charge would be imposed only on $5,000 of the $5,300
subsequent withdrawal (as $300 of that amount represents gain in account value).
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<PAGE>
When imposed, the contingent deferred sales charge will be deducted on a pro
rata basis from among the subaccounts in which the contract owner has invested,
on the basis of the contract owner's interest in each subaccount to the Account
A account value. (See WITHDRAWALS AND SURRENDERS on page 29 and ACCUMULATION
UNITS on page 25 for a discussion of the effect the deduction of this charge
will have on the number of accumulation units credited to a Contract.)
To the extent that the contingent deferred sales charge is inadequate to recover
all sales expenses associated with the Contract, the deficiency will be met by
ML of New York's surplus, which may be partly derived from the mortality and
expense risk charge on the Contract.
No contingent deferred sales charge will be imposed on withdrawals or surrenders
from Account B.
PREMIUM TAXES
Various states and municipalities 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.
State premium tax rates vary from jurisdiction to jurisdiction and currently
range from 0% to 5%. ML of New York will pay these taxes when due, and a charge
for any premium taxes imposed by a state or local government will be deducted
from the contract value on the annuity date. (See ACCUMULATION UNITS on page 25
for a discussion of the effect the deduction of this charge will have on the
number of accumulation units credited to a Contract.) 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, ML of
New York will also deduct a charge for these taxes on any withdrawal, surrender
or death benefit effected 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, ML of New York's status within that state,
and the premium tax laws of that state.
OTHER CHARGES
Contract owners may make up to six transfers among Account A subaccounts per
contract year without charge. Additional transfers may be permitted at a charge
of $25 per transfer. (See TRANSFERS on page 27.)
ML of New York reserves 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. ML of New York also reserves the right to deduct from the Accounts any
taxes imposed on the Accounts' investment earnings. (See ML OF NEW YORK'S TAX
STATUS on page 33.)
Merrill Lynch Variable Series Funds, Inc., in calculating the net asset values
of the Funds, deducts advisory fees and operating expenses from the assets of
each Fund. Information about those fees and expenses can be found in the
attached prospectus for the Funds and in its Statement of Additional
Information.
Fees associated with participation in the Merrill Lynch RPA-SM- program are paid
by the participating contract owner and are not deducted from the contract value
or imposed on the Accounts. (See MERRILL LYNCH RETIREMENT PLUS ADVISOR-SM- on
page 29.)
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<PAGE>
DESCRIPTION OF THE CONTRACT
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 owner may designate a beneficiary. The beneficiary will receive all
outstanding Contract benefits if the owner dies. The contract owner may also
designate an annuitant. The annuitant may be changed at any time prior to the
annuity date. If no annuitant is selected, the contract owner will be the
annuitant. If the annuitant is changed on a contract owned by other than a
natural person, the change will be treated as the death of the contract owner
for purposes of the Internal Revenue Code. ML of New York will then pay to the
owner's beneficiary the contract value, less any applicable fees and charges.
The Contract may be assigned to another owner upon notice to ML of New York's
Home Office. The Contract may only be assigned to another owner in full, not in
part. An assignment to a new owner cancels all prior beneficiary designations
except for those prior beneficiary designations that have been made irrevocably.
Assignment of the Contract may have tax consequences or may be prohibited on
certain IRA Contracts, so the contract owner should consult with a qualified tax
adviser before assigning the Contract. (See FEDERAL INCOME TAXES on page 33.)
When co-owners are established, they exercise all rights under the Contract
jointly unless they elect otherwise. IRA Contracts may not have co-owners.
ISSUING THE CONTRACT
A nonqualified Contract may generally be issued to contract owners who are less
than 85 years of age. Annuitants on nonqualified Contracts must also be less
than age 85 at issue. For IRA Contracts owned by natural persons, the contract
owner and annuitant must be the same person. Therefore, contract owners and
annuitants on IRA Contracts must be less than age 70 1/2 at issue.
Before issuing the Contract, ML of New York requires certain information from
the prospective contract owner. Once that information is reviewed and approved,
and the prospective contract owner submits an initial premium, a Contract will
be issued. Generally, this review and approval process is completed and the
premium invested within two business days, but if any necessary information has
not been obtained within five business days, ML of New York will offer to return
the premium and no Contract will be processed. If the prospective contract owner
instead consents, ML of New York will hold the premium until all necessary
information is obtained, and will then invest the premium within two business
days after obtaining the information. The initial premium will be invested as
described under PREMIUM INVESTMENTS, on page 25.
The date of issue will be the date the required information and initial premium
are received at ML of New York's Home Office.
TEN DAY RIGHT TO REVIEW
When the contract owner receives the Contract, it should be reviewed carefully
to make sure it is what the contract owner intended to purchase. Generally,
within 10 days after the contract owner receives the Contract, he or she may
return it for a refund. Some states allow a longer period of time to return the
Contract. The Contract must be delivered to ML of New York's Home Office or to
the Financial Consultant who sold it for a refund to be made. ML of New York
will then refund to the contract owner the greater of all
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<PAGE>
premiums paid into the Contract or the contract value as of the date the
Contract is returned. The Contract will then be deemed void.
CONTRACT CHANGES
Requests to change the owner, beneficiary, annuitant, or annuity date of a
Contract will take effect as of the date such a request is signed by the
contract owner, unless ML of New York has already acted in reliance on the prior
status. Such changes may have tax consequences. See FEDERAL INCOME TAXES on page
33. See also OWNERSHIP OF THE CONTRACT on page 24.
PREMIUMS
Initial premium payments must be $5,000 or more on a nonqualified Contract and
$2,000 or more on an IRA Contract. Subsequent premium payments must be $300 or
more and can be made at any time prior to the annuity date. (The $300 minimum
may be waived in connection with premiums paid under IRA Contracts that are held
in Retirement Plan Operations (RPO) accounts of Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("MLPF&S"), in order to transfer any existing cash balance of
such account, in full, into a Contract.) ML of New York reserves the right to
refuse to accept subsequent premium payments, if required by law. Premium
payments can be made directly by the contract owner or debited from his or her
MLPF&S brokerage account and must be transmitted to ML of New York's Home Office
at the address printed on the cover of this Prospectus. Under an automatic
investment feature, premium payments can also be made systematically on a
monthly, quarterly, semi-annual or annual basis from a MLPF&S brokerage account.
A Financial Consultant should be contacted for additional information. The
automatic investment feature may be canceled by the contract owner at any time.
Once canceled, it cannot be activated again until the next contract year.
Maximum annual contributions to IRA Contracts are limited by federal law.
PREMIUM INVESTMENTS
For the first 14 days following the date of issue, all premiums directed into
Account A will be held in the Domestic Money Market Subaccount. Thereafter, the
account value will be reallocated to the Account A subaccounts selected.
Subsequent premiums allocated to Account A will be directly placed in the
subaccounts selected as of the end of the valuation period in which they are
received at ML of New York's Home Office. Premiums directed into Account B will
be directly placed in the Reserve Assets Subaccount on the issue date.
Subsequent premiums allocated to Account B will be directly placed in its
Reserve Assets Subaccount as of the end of the valuation period in which they
are received at ML of New York's Home Office. Currently, a contract owner may
allocate his or her premium among as many subaccounts as desired as long as
allocations are made in increments that are even multiples of 10%. For example,
10% of a premium received may be allocated to the Prime Bond Fund, 40% allocated
to the High Current Income Fund, and 50% allocated to the Quality Equity Fund.
However, a contract owner may not allocate 33 1/3% to the Prime Bond Fund and
66 2/3% to the High Current Income Fund. If allocation instructions are not
given with subsequent premiums received, ML of New York will allocate those
premiums according to the allocation instructions last received from the
contract owner. ML of New York reserves the right to limit 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 varies daily, as described below. This value is used to
determine the number of subaccount accumulation units represented by a contract
owner's investment in a subaccount. When a contract owner invests a premium or
transfers an amount to a subaccount, accumulation units in that subaccount are
purchased and credited to the Contract. Conversely, when a contract owner
withdraws contract value or transfers an amount from a
25
<PAGE>
subaccount, accumulation units credited to the Contract in that subaccount are
redeemed. Similarly, when a deduction is made under a Contract for the contract
maintenance charge, any contingent deferred sales charges, any transfer charge
and any premium taxes due, accumulation units credited to the Contract in the
subaccounts are redeemed. (See CHARGES AND DEDUCTIONS on page 21 for a
discussion concerning the allocation of charges to subaccounts.) The number of
accumulation units in a subaccount so purchased or redeemed for a Contract is
based on the subaccount's accumulation unit value as of the end of the valuation
period during which the purchase or redemption is made. It is determined by
dividing the dollar value of the amount of the purchase or redemption allocated
to the subaccount by the value of one accumulation unit for that subaccount for
the valuation period in which the transfer is effected. The number of
accumulation units in each subaccount credited to a Contract will therefore
increase or decrease as these transactions are effected.
The number of subaccount accumulation units credited to a Contract will not
change as a result of investment experience or the deduction of mortality and
expense risk and administration charges. Instead, these charges and investment
experience will be reflected in the accumulation unit value.
For each subaccount, the value of an accumulation unit was arbitrarily set at
$10 when it was established. Accumulation unit values may increase or decrease
from one valuation period to the next. A valuation period is the interval from
one determination of the net asset value of a subaccount to the next, measured
from the time each day the Funds are valued. The Funds are valued at the close
of business on each day the New York Stock Exchange is open. An accumulation
unit value for any valuation period is determined by multiplying the
accumulation unit value for the last prior valuation period by the net
investment factor for the subaccount for the current valuation period. The
Funds' investment performance, expenses, and the deduction of asset-based
charges affect the accumulation unit value.
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, the
net investment factor is determined 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, and subtracting from the result
the valuation period equivalent of the annual administration and mortality and
expense risk charges. ML of New York may adjust the net investment factor to
make provisions for any change in the law that requires it to pay tax on capital
gains in the Accounts or for any assessments or federal premium taxes or
federal, state or local excise, profits or income taxes measured by or
attributable to the receipt of premiums. (See OTHER CHARGES on page 23).
The net investment factor may be greater or less than one. Therefore, the value
of an accumulation unit may increase or decrease.
DEATH BENEFIT
Prior to the annuity date, the Contract provides a death benefit feature that
guarantees a death benefit if the contract owner dies, regardless of investment
experience. A Contract's death benefit is equal to the greater of (a) premiums
paid less any withdrawals or (b) the contract value. If the contract owner dies
prior to the annuity date, ML of New York will pay the Contract's death benefit
to the owner's beneficiary. Unless the beneficiary has been irrevocably
designated, the contract owner may change the beneficiary at any time prior to
the annuity date.
If the owner's beneficiary is his or her surviving spouse, the spouse may elect
to continue the Contract in force on the same terms as applicable before the
owner's death, and the spouse will then become the contract owner and the
beneficiary until a new beneficiary is named.
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The death benefit will be paid in a lump sum unless the beneficiary chooses an
annuity payment option available under the Contract. (See ANNUITY OPTIONS on
page 31.) However, if the contract owner dies before the annuity date, federal
tax law generally requires the entire contract value to be distributed within
five years of the date of death. Special rules may apply to the surviving
spouse. (See FEDERAL INCOME TAXES on page 33.)
The death benefit is determined as of the date ML of New York receives due proof
of death at its Service Center. Due proof of death is received as of the date ML
of New York receives a certified copy of the contract owner's death certificate,
the Beneficiary Statement, and any other paperwork necessary to process the
death claim. If other documents have not been received by the 60th day following
receipt of the certified death certificate, due proof of death will be deemed to
have been received and the death benefit will be paid in a lump sum.
DEATH OF ANNUITANT
If the annuitant dies prior to the annuity date, and the annuitant is not the
contract owner, the owner may designate a new annuitant. If a new annuitant is
not designated, the contract owner will become the annuitant unless the owner is
not a natural person. If the contract owner is not a natural person, no new
annuitant may be named and the death benefit will be paid.
If the annuitant dies after the annuity date, while guaranteed amounts remain
unpaid, the contract owner may either (a) have payments continue for the amount
or period guaranteed; or (b) receive the present value of the remaining
guaranteed payments in a lump sum. If the contract owner dies while guaranteed
amounts remain unpaid, his or her beneficiary may either (a) have payments
continue for the amount or period guaranteed; or (b) receive the present value
of the remaining guaranteed payments in a lump sum.
TRANSFERS
Once each contract year, contract owners may transfer from Account A to Account
B an amount equal to any gain in account value and/or any premium not subject to
a contingent deferred sales charge, determined as of the date the request is
received. Where permitted by state regulation, once each contract year, contract
owners may transfer from Account A to Account B all or a portion of the greater
of that amount or 10% of premiums subject to a contingent deferred sales charge
determined as of the date the request is received (minus any of that premium
already withdrawn or transferred). Additionally, where permitted by state
regulation, periodic transfers of all or a portion of the greater amount,
determined at the time of each periodic transfer, are permitted, on a monthly,
quarterly, semi-annual or annual basis. Periodic transfers may be canceled by
the contract owner at any time. Once canceled, they can not be activated again
until the next contract year.
Generally, the amount transferred will be deducted on a pro rata basis from
among the affected Account A subaccounts, on the basis of the contract owner's
interest in each subaccount to the Account A account value, unless the contract
owner requests otherwise. However, if the amount will be transferred on a
monthly, quarterly, semi-annual or annual basis, it must be deducted on a pro
rata basis.
This is the only amount which may be transferred from Account A to Account B
during that contract year. There is no charge imposed on the transfer of this
amount. No transfers are permitted from Account B to Account A.
Prior to the annuity date, contract owners may transfer all or part of their
Account A value among the subaccounts of Account A up to six times per contract
year without charge. Additional transfers among
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Account A subaccounts may be made at a charge of $25 per transfer. Currently,
there is no charge for additional transfers. The transfer charge will be
deducted on a pro rata basis from among the subaccounts from which account value
is being transferred. ML of New York reserves the right to change the number of
additional transfers permitted each contract year, as appropriate.
Transfers among subaccounts may be made in specific dollar amounts or as a
percentage of Account A value. Requests to transfer dollar amounts must be for
at least $300 or the total value of a subaccount, if less. Requests to transfer
a percentage of Account A value are also subject to a $300 minimum, with
allocations in increments that are even multiples of 10%. For example, 20% of
the $1,500 Account A value in the Prime Bond Fund may be transferred to the High
Current Income Fund, but 15 1/2% may not.
Contract owners may make transfer requests in writing or by telephone, once ML
of New York receives proper telephone transfer authorization. Transfer requests
may also be made through a Merrill Lynch Financial Consultant, once ML of New
York receives proper authorization. Transfers will take effect as of the end of
the valuation period on the date the request is received at ML of New York's
Home Office. Telephone transfer requests received after 4:00 p.m. (ET) will be
deemed to have been received the following business day.
DOLLAR COST AVERAGING
The Contract offers an additional optional transfer feature called Dollar Cost
Averaging. This feature allows contract owners to reallocate value from the
Account A Domestic Money Market Subaccount to any of the remaining Account A
investment options. Amounts will be transferred monthly to the subaccounts
specified by the contract owner. Amounts of $1,000 or more must be allotted for
transfer each month in the Dollar Cost Averaging feature. Allocations must be
designated in percentage increments that are even multiples of 10%. No specific
dollar amount designations may be made. ML of New York reserves the right to
change these minimums.
Contract owners may apply for the Dollar Cost Averaging feature at any time
prior to the annuity date. Dollar Cost Averaging transfers may continue for
anywhere from 12 to 36 months (or to the annuity date, if earlier), subject to
availability of Domestic Money Market Subaccount value for this purpose. When
the Dollar Cost Averaging feature is elected, an amount equal to the total to be
transferred during the term of the feature must have been deposited into the
Domestic Money Market Subaccount. Should the owner's interest in the Domestic
Money Market Subaccount drop below the selected monthly transfer amount, ML of
New York will notify the contract owner that an additional premium payment will
be necessary in that subaccount if he or she wants to continue in the Dollar
Cost Averaging feature.
The first Dollar Cost Averaging transfer will be effected on the first
monthiversary date after ML of New York receives the contract owner's election
at its Home Office. Subsequent Dollar Cost Averaging transfers will take effect
as of the end of the valuation period on each of the Contract's monthiversary
dates.
The main objective of the Dollar Cost Averaging feature is to shield investment
from short term price fluctuations. Since the same dollar amount is transferred
to selected subaccounts each month, more accumulation units are purchased in a
subaccount when their value is low and fewer accumulation units are purchased
when their value is high. Therefore, a lower than average cost of purchasing
accumulation units may be achieved over the long term. This plan of investing
allows contract owners to take advantage of investment fluctuations, but does
not assure a profit or protect against a loss in declining markets.
There is no charge imposed on Dollar Cost Averaging transfers. These transfers
are in addition to the annual transfers permitted under the Contract, as
described above.
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Dollar Cost Averaging is an investment strategy and does not guarantee an
investment gain, nor will it protect against an investment loss when markets
have declined.
MERRILL LYNCH RETIREMENT PLUS ADVISOR-SM-
Subject to certain eligibility requirements, a contract owner may elect to
participate in the Merrill Lynch Retirement Plus Advisor-SM- ("RPA") program.
Through RPA, premiums and Account A values are allocated and transferred
periodically among the subaccounts of Account A, in accordance with an
investment program developed by Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S") that is consistent with the contract owner's investment
profile. MLPF&S is registered as an investment adviser under the Investment
Advisers Act of 1940.
Prior to participating in this program, a contract owner must complete an RPA
profiling questionnaire and client agreement for each contract under which
Account A values will be allocated pursuant to the RPA program.
If premiums and Account A values under a contract are being invested pursuant to
the RPA program, then Dollar Cost Averaging is not available for the contract.
In addition, the contract owner's participation in the program may be terminated
in the discretion of MLPF&S if a contract owner requests a transfer while the
RPA program is in effect; such contract owner-initiated transfers may be
inconsistent with investment strategies being implemented through the program.
RPA program transfers of Account A values are not subject to any transfer
charge. Fees associated with participation in the RPA program, which are imposed
by MLPF&S, are paid by the participating contract owner directly through the
contract owner's Merrill Lynch brokerage account, and are not deducted from the
contract value or imposed on the Accounts.
A contract owner wishing to participate in the RPA program should consult with
his or her Financial Consultant for additional information regarding the
availability of the program and specific eligibility requirements.
Participation in the program does not guarantee that a contract owner will
attain his or her investment goals. In addition, the program does not guarantee
investment gains, or protect against investment losses.
WITHDRAWALS AND SURRENDERS
Withdrawals may be made from the Contract up to six times per contract year
prior to the annuity date. The first withdrawal from Account A in any contract
year will be effected as if gain in account value and premium not subject to a
contingent deferred sales charge is withdrawn first, followed by premium on a
"first-in, first-out" basis. A contingent deferred sales charge will not be
applied to the first withdrawal in any contract year out of Account A to the
extent that the withdrawal consists of gain and/or any premium not subject to
such a charge. Where permitted by state regulation, a contingent deferred sales
charge will not be applied to that portion of the first withdrawal from Account
A in any contract year that does not exceed the greater of (a) or (b) where (a)
is 10% of total premiums paid into Account A that are subject to a contingent
deferred sales charge determined as of the date the request is received, less
any prior amount withdrawn or transferred from Account A to Account B in the
contract year, and (b) is the gain in Account A plus premiums allocated to
Account A as of the date the request is received that are not subject to a
contingent deferred sales charge. Additionally, where permitted by state
regulation, the amount withdrawn may be paid on a monthly, quarterly,
semi-annual or annual basis, if the contract owner so elects. Withdrawals are
subject to tax and prior to age 59 1/2 may also be subject to a 10% federal
penalty tax. (See PENALTY TAXES on page 35.)
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All subsequent withdrawals from Account A in the same contract year will be
effected as if premium is withdrawn on a "first-in, first-out" basis before any
gain in account value is withdrawn. Therefore, premium accumulated the longest
will be withdrawn first. These withdrawals are subject to a contingent deferred
sales charge. (See CONTINGENT DEFERRED SALES CHARGE on page 22.)
There are no contingent deferred sales charges imposed on any withdrawals from
Account B. In addition, ML of New York reserves the right not to impose a
contingent deferred sales charge on withdrawals from Account A on a Contract
purchased by an employee of ML of New York or purchased by the employee's spouse
or dependents, where permitted by state regulation.
In addition, the contract owner may request monthly, quarterly, semiannual, or
annual automatic withdrawals from Account B. This optional automatic withdrawal
program can be activated or canceled by the contract owner once each contract
year. Once canceled, the program can not be activated again until the next
contract year. Withdrawal amounts may be increased or decreased at any time,
once ML of New York receives a proper request at its Home Office. There are no
contingent deferred sales charges imposed on automatic withdrawals from Account
B. These withdrawals are in addition to the annual withdrawals permitted under
the Contract, as described above. Automatic withdrawals may be included in the
contract owner's gross income in the year in which the withdrawal occurs. (See
DISTRIBUTIONS on page 34.) Withdrawals may be taxable and subject to a 10% tax
penalty. (See PENALTY TAXES on page 35.)
If the contract owner has elected both the automatic withdrawal program and a
withdrawal from Account A on a monthly, quarterly, semi-annual or annual basis,
both forms of withdrawal must be paid out on the same date(s).
The minimum amount that may be withdrawn is $300. At least $2,000 must remain in
the Contract after a withdrawal is made. ML of New York reserves the right to
change these minimums. Withdrawals will be effected as of the end of the
valuation period on the date the request is received at ML of New York's Home
Office. Unless otherwise directed by the contract owner, withdrawals will be
taken from subaccounts in the same proportion as the owner's contract value
bears to the subaccounts of the Accounts from which the withdrawal is made. A
withdrawal may be effected by telephone, once a proper authorization form is
submitted to ML of New York's Home Office, if the amount withdrawn is to be paid
into a Merrill Lynch, Pierce, Fenner & Smith Incorporated brokerage account.
Otherwise, a withdrawal request must be submitted by the contract owner in
writing to ML of New York's Home Office. Telephone withdrawal requests received
after 4:00 p.m. (ET) will be deemed to have been received the following business
day.
The Contract may be surrendered at any time prior to the annuity date. To
surrender the Contract through a full withdrawal, the Contract must be delivered
to ML of New York's Home Office. The surrender will be effected as of the end of
the valuation period on the date the Contract is received at ML of New York's
Home Office. The amount payable on surrender is the contract value as of the end
of the valuation period when the surrender is effected, less any applicable
contingent deferred sales charge, less the contract maintenance charge if the
contract value is less than $50,000 and that valuation period is not a contract
anniversary, less any applicable charge for premium taxes. (See CHARGES AND
DEDUCTIONS on page 21.)
Withdrawals will decrease the contract value. Withdrawals from either Account A
or Account B 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 on page 33.)
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PAYMENTS TO CONTRACT OWNERS
ML of New York will generally pay the amount of any withdrawal or surrender, any
annuity payment or death benefit, minus any applicable charges, premium taxes or
tax withholding, within seven days of receipt of a proper request at its Home
Office. However, ML of New York may delay the payment of any withdrawal,
surrender, or death benefit, or the processing of any annuity payment or
transfer request if (a) the New York Stock Exchange is closed, other than for a
customary weekend or holiday; (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 such that it is not
reasonably practical to dispose of securities held in the Accounts or to
determine the value of their 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.
ANNUITY DATE
The contract owner selects an annuity date when the Contract is applied for. The
annuity date may be changed by telephone or by written notice submitted to
Merrill Lynch Life's Service Center), up to 30 days prior to that date.
Generally, the annuity date for nonqualified Contracts may not be later than the
annuitant's 85th birthday. For IRA Contracts, the annuity date may not be later
than when the owner/ annuitant reaches the age of 70 1/2 unless the contract
owner selects a later annuity date. If no annuity date is chosen, the annuity
date will automatically be the date on which the annuitant reaches age 85 or
70 1/2, as outlined above.
The first annuity payment will be made on the annuity date, and payments will
continue thereafter according to the schedule of the annuity option selected.
Contract owners may select from a variety of fixed annuity payment options, as
outlined below in ANNUITY OPTIONS.
ANNUITY OPTIONS
The Contract provides a choice of fixed annuity payment options. If an annuity
option is not chosen by the contract owner, ML of New York will automatically
effect the Life Annuity with Payments Guaranteed for 10 Years annuity option
when the contract owner reaches age 85 (age 70 1/2 for an IRA Contract). The
annuity option may be changed up to 30 days prior to the annuity date. ML of New
York reserves the right to limit annuity options available to IRA contract
owners to comply with provisions of the Internal Revenue Code or regulations
thereunder. On the annuity date, the entire contract value, after a deduction
for the cost of any applicable premium taxes, will be transferred to ML of New
York's general account, from which the annuity payments will be made. The amount
of each payment is predetermined.
The dollar amount of annuity payments is determined by the contract value on the
annuity date, applied to ML of New York's then current annuity purchase rates.
These rates will be furnished on request. The rates will never be less favorable
than those shown in the Contract.
If the age and/or sex of the annuitant was misstated to ML of New York,
resulting in an incorrect calculation of annuity payments on a Contract, future
annuity payments on that Contract will be adjusted to reflect the correct age
and/or sex. Any amount ML of New York overpaid as the result of a misstatement
will be deducted from future payments with 6% annual interest charges. Any
amount ML of New York underpaid as the result of a misstatement will be paid in
full with the next payment made with 6% annual interest credited.
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If the contract value on the annuity date, after the deduction for the cost of
any applicable premium taxes, is less than $2,000 (or a different minimum
amount, if required by state law), ML of New York may pay the annuity benefits
in a lump sum, rather than as periodic payments. If any annuity payment would be
less than $20 (or a different minimum amount, if required by state law), the
frequency of payments may be changed so that all payments will be at least $20
(or the minimum amount required by state law). Otherwise, the contract owner has
the following annuity payment options. ML of New York reserves the right to
permit additional annuity payment options.
- - PAYMENTS OF A FIXED AMOUNT--Equal payments in an amount chosen by the
contract owner will be guaranteed until the sum of all annuity payments
equals the contract value transferred to ML of New York's general account
on the annuity date, adjusted for interest credited as shown in the
Contract. The amount chosen must provide for payments for at least five
years. Payments are guaranteed irrespective of the annuitant's life. If the
annuitant dies before the end of the guarantee period, the contract owner
may elect to receive the present value of the remaining guaranteed payments
in a lump sum. If the contract owner dies while guaranteed amounts remain
unpaid, his or her beneficiary may elect to receive the present value of
the remaining guaranteed payments in a lump sum.
- - PAYMENTS FOR A FIXED PERIOD--Payments will be made for five years or a
longer period if selected by the contract owner. Payments are guaranteed
irrespective of the annuitant's life. If the annuitant dies before the end
of the guarantee period, the contract owner may elect to receive the
present value of the remaining guaranteed payments in a lump sum. If the
contract owner dies while guaranteed amounts remain unpaid, his or her
beneficiary may elect to receive the present value of the remaining
guaranteed payments in a lump sum.
- - *LIFE ANNUITY--Payments will be made for the life of the annuitant.
Payments will cease with the last payment due before the annuitant's death.
- - LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20 YEARS--Payments will be
made for the life of the annuitant. In addition, even if the annuitant dies
before the guarantee period ends, payments will be guaranteed for either 10
or 20 years as selected by the contract owner. If the annuitant dies before
the end of the guarantee period, the contract owner may elect to receive
the present value of the remaining guaranteed payments in a lump sum. If
the contract owner dies while guaranteed amounts remain unpaid, his or her
beneficiary may elect to receive the present value of the remaining
guaranteed payments in a lump sum.
- - LIFE ANNUITY WITH GUARANTEED RETURN OF CONTRACT VALUE--Payments will be
made for the life of the annuitant. In addition, even if the annuitant dies
beforehand, payments will be guaranteed until the sum of all annuity
payments equals the contract value transferred to ML of New York's general
account on the annuity date, adjusted for interest credited as shown in the
Contract.
- - *JOINT AND SURVIVOR LIFE ANNUITY--Payments will be made for the lives of
the annuitant and a designated second person. Payments will continue as
long as either one is living.
- - 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 owner/ annuitant; (b) the joint life
expectancy of the owner/annuitant and his or her spouse; or (c) the life
expectancy of the surviving spouse if the owner/annuitant dies before the
annuity date. Each annual payment will be equal to the remaining contract
value transferred to ML of New York's general account, divided by the then
current life expectancy chosen, as defined by Internal Revenue Service
regulations. Payments will be made on each anniversary of the annuity date.
If the measuring life or lives dies before the remaining value has been
distributed, that value will be paid to the contract owner in a lump sum.
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*These options are 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.
UNISEX
Generally, the Contract provides for sex-distinct annuity purchase rates for
life annuities. However, in those states that have adopted regulations
prohibiting sex-distinct rates, blended unisex annuity purchase rates for life
annuities will be applied, whether the annuitant is male or female. 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 purchasing the Contract should
consult with their legal adviser to determine whether purchasing the Contract
based on sex-distinct annuity purchase rates is consistent with Title VII of the
Civil Rights Act of 1964 or other applicable law. ML of New York may offer such
contract owners Contracts based on unisex annuity purchase rates.
FEDERAL INCOME TAXES
INTRODUCTION
The Contracts are designed for use in connection with retirement plans that are
not qualified plans under the provisions of the Internal Revenue Code and also
Individual Retirement Annuities (IRAs). The ultimate effect of federal income
taxes on contract value, on annuity payments, and on the economic benefit to the
contract owner, depends on the type of retirement plan for which the Contract is
purchased, on whether the investments of the Accounts meet Internal Revenue
Service diversification standards (discussed below) and on the tax status of the
individual concerned. The following discussion is general in nature and is not
intended as tax advice. This discussion is not intended to address the tax
consequences resulting from all situations in which a person may by entitled to
or may receive a distribution under the Contract. Contract owners should consult
a competent tax adviser before initiating any transaction. This discussion is
based on the Company's understanding of current federal income tax laws as
currently interpreted by the Internal Revenue Service and generally does not
discuss or consider any applicable state or other tax laws. No representation is
made as to the likelihood of continuation of current federal income tax laws or
of the current interpretations by the Internal Revenue Service. ML OF NEW YORK
DOES NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY CONTRACT OR ANY
TRANSACTION INVOLVING THE CONTRACTS.
ML OF NEW YORK'S TAX STATUS
ML of New York is taxed as a life insurance company under the Internal Revenue
Code. The Accounts are not a separate entity and for tax purposes their
operations are part of the Company's. Therefore, the Company will be liable for
any taxes attributable to the Accounts. Under existing federal income tax law
the investment income of the Accounts is includable in the Company's gross
income. ML of New York currently incurs no income taxes on this income. ML of
New York reserves the right, however, to deduct from the Accounts any such taxes
which are imposed on the investment earnings or taxes measured by or
attributable to the receipt of premium.
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TAXATION OF ANNUITIES
IN GENERAL
Section 72 of the Internal Revenue Code governs taxation of annuities in
general. With respect to contracts held by natural persons, ML of New York
believes that the contract owner is not taxed on increases in the value of the
Contract until distribution occurs, either in the form of a withdrawal or as
annuity payments under the annuity option elected. The taxable portion of a
distribution (in the form of a single sum payment or an annuity) is taxable as
ordinary income. Additionally, certain transfers of a Contract for less than
full consideration, such as a gift, will trigger tax on the excess of the net
contract value over the contract owner's investment in the Contract.
REQUIRED DISTRIBUTIONS
In order to be treated as an annuity contract for federal income tax purposes,
section 72(s) of the Code requires any nonqualified Contract to provide that (a)
if any contract owner dies on or after the annuity commencement date but prior
to the time the entire interest in the Contract has been distributed, the
remaining portion of such interest will be distributed at least as rapidly as
under the method of distribution being used as of the date of that contract
owner's death; and (b) if any contract owner dies prior to the annuity
commencement date, the entire interest in the Contract will be distributed
within five years after the date of the contract owner's death. These
requirements will be considered satisfied as to any portion of the contract
owner's interest which is payable to or for the benefit of a "designated
beneficiary" and which is distributed over the life of such "designated
beneficiary" or over a period not extending beyond the life expectancy of that
beneficiary, provided that such distributions begin within one year of that
owner's death. The contract owner's "designated beneficiary" (referred to herein
as the "Owner's Beneficiary") is the person designated by such contract owner as
a beneficiary and to whom ownership of the Contract passes by reason of death
and must be a natural person. However, if the contract owner's "designated
beneficiary" is the surviving spouse of the contract owner, the Contract may be
continued with the surviving spouse as the new owner. Solely for purposes of
applying the provisions of Section 72(s) of the Code, when nonqualified
Contracts are held by other than a natural person, the death of, or change of,
the annuitant is treated as the death of the contract owner.
The nonqualified Contracts contain provisions which are intended to comply with
the requirements of section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. The Company intends to
review such provisions and modify them if necessary to assure that they comply
with the requirements of Code section 72(s) when clarified by regulation or
otherwise. Other rules may apply to IRAs.
NON-NATURAL OWNERS
Nonqualified contracts held by other than a natural person generally are not
treated as annuities, and the contract owner generally must include in income
any increase in the excess of the contract value over the contract owner's
investment in the Contract. This is not applicable to trusts or other entities
acting as an agent for a natural person, and there are certain other exceptions
to this rule. Prospective contract owners who are not natural persons should
consult a competent tax adviser.
DISTRIBUTIONS
The taxable portion of annuity payments is generally determined by a formula
that establishes the ratio that the cost basis of the contract bears to the
expected return under the contract. After such time as the sum of
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the nontaxable portion of annuity payments received equals the sum of premium
payments (adjusted for any withdrawals or outstanding loans), all subsequent
annuity payments are fully taxable as ordinary income. With respect to
nonqualified Contracts, partial withdrawals of contract value are treated as
taxable income to the extent that the contract value just before the withdrawal
exceeds the investment in the Contract. The assignment or pledge (or agreement
to assign or pledge) of any portion of the value of the Contract shall be
treated as a withdrawal subject to this rule. Full withdrawals are treated as
taxable income under section 72(e) of the Internal Revenue Code to the extent
that the net amount received exceeds the investment in the Contract. (For the
tax treatment of any premium paid prior to August 14, 1982, under another
annuity contract, which contract has been exchanged for this Contract, consult
your tax adviser.) Amounts may be distributed from a Contract because of the
death of the owner. Generally, such amounts are includable in the income of the
recipient as follows: (1) if distributed in a lump sum, the amount is taxed in
the same manner as a full withdrawal; or (2) if distributed under a payment
option, the amounts are taxed in the same manner as annuity payments. For both
withdrawals and annuity payments under IRAs, there may be no cost basis in the
contract within the meaning of Section 72 of the Internal Revenue Code, and the
total amount received may be taxable as ordinary income.
MULTIPLE ANNUITY CONTRACTS
All nonqualified annuity contracts entered into after October 21, 1988 that are
issued by ML of New York (or its affiliates) to the same owner during any
calendar year are treated as one annuity contract for purposes of determining
the amount includable in gross income under Section 72(e) of the Internal
Revenue Code. In addition, the Treasury Department has specific authority to
issue regulations that prevent the avoidance of Section 72(e) through the serial
purchase of annuity contracts or otherwise. Congress has also indicated that the
Treasury Department may have authority to treat the combination purchase of an
immediate annuity contract and a separate deferred annuity contract as a single
annuity contract under its general authority to prescribe rules as may be
necessary to enforce the income tax laws.
PENALTY TAXES
A penalty tax may be imposed equal to 10% of the taxable income portion of a
withdrawal. The penalty tax applies to both nonqualified Contracts and IRAs,
with different exceptions for each. The exceptions applicable to both
nonqualified Contracts and IRAs include (a) distributions made at or after the
contract owner attains age 59 1/2, (b) distributions made on or after the
contract owner's death, (c) distributions attributable to the contract owner's
disability, and (d) substantially equal periodic payments for the contract
owner's life or life expectancy (or joint life or joint life expectancy of the
contract owner and a second designated person). In certain circumstances, other
exceptions may apply. Other tax penalties may apply to certain distributions,
loans and other transactions under IRAs.
INTERNAL REVENUE SERVICE DIVERSIFICATION STANDARDS
The Internal Revenue Service has published regulations prescribing
diversification standards to be met by nonqualified variable annuity contracts
as a condition to being taxed as annuities under Section 72 of the Internal
Revenue Code. The standards provide that investments of a subaccount of the
Accounts are adequately diversified if no more than (a) 55% of the value of its
assets is represented by any one investment, (b) 70% is represented by any two
investments, (c) 80% is represented by any three investments, and (d) 90% is
represented by any four investments. It is ML of New York's opinion that each
subaccount of the Accounts will meet the diversification standards imposed by
the Internal Revenue Service.
The Treasury Department has announced that the diversification regulations do
not provide guidance concerning the extent to which contract owners may direct
their investments to particular subaccounts of a
35
<PAGE>
separate account. Such guidance will be included in regulations or Revenue
Rulings under Section 817(d) of the Internal Revenue Code relating to the
definition of a variable contract. It is unknown what standards will be adopted
in such regulations. ML of New York, however, believes that according to current
law the Contract will be treated as an annuity for federal income tax purposes
and that the Company, not the contract owner, will be treated as the owner of
the contract investments.
The ownership rights under the Contract are similar to, but different in certain
respects from, those described by the Internal Revenue Service in rulings in
which it determined that the owners were not owners of separate account assets.
For example, the owner of the Contract has additional flexibility in allocating
premium payments and account values. These differences could result in the owner
being treated as the owner of the assets of the Accounts. ML of New York
reserves the right to modify the Contract as necessary to prevent the contract
owner from being considered the owner of the assets of the Accounts for federal
tax purposes. Any such changes will apply uniformly to affected contract owners
and will be made with such notice to affected contract owners as is feasible
under the circumstances.
IRA CONTRACTS
Section 408 of the Internal Revenue Code permits eligible individuals to
contribute to an individual retirement program known as an Individual Retirement
Annuity ("IRA"). IRAs are subject to limits on the amount that may be
contributed, the contributions that may be deducted from taxable income, the
persons who may be eligible, and on the time when distributions may commence and
the duration of those distributions. Also, distributions from certain other
types of qualified plans may be "rolled over" on a tax-deferred basis into an
IRA. The ultimate effect of federal income taxes on the amounts contributed to
and held under a Contract, on annuity payments, and on the economic benefit to
the contract owner, the annuitant, or the beneficiary depends on the tax and
employment status of the individual concerned and on ML of New York's tax
status. In addition, certain requirements must be satisfied in purchasing an IRA
with proceeds from a tax qualified retirement plan and receiving distributions
from an IRA in order to continue receiving favorable tax treatment. Sales of the
Contract for use with IRAs may be subject to special disclosure requirements of
the Internal Revenue Service. Purchasers of the Contract for use with IRAs will
be provided with supplemental information required by the Internal Revenue
Service or other appropriate agency. Such purchasers will have the right to
revoke the Contract within seven days of the earlier of the establishment of the
IRA or the purchase of the Contract. Purchasers should seek competent tax advice
as to the suitability of the Contract for use with or as an IRA. The Internal
Revenue Service 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 provision in the Contract comports with IRA qualification
requirements.
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF A CONTRACT
A transfer of ownership of the Contract, the designation of an annuitant who is
not also the owner, or the exchange of the Contract may result in certain tax
consequences to the contract owner that are not discussed herein. A contract
owner contemplating any such transfer, assignment, or exchange should contact a
competent tax adviser with respect to the potential tax effects of such a
transaction.
WITHHOLDING
Unless the contract owner elects to the contrary, the taxable portion of any
amounts received under the Contract will be subject to withholding to meet
federal and state income tax obligations. The rate of withholding on annuity
payments will generally be determined on the basis of the withholding
certificate filed by the contract owner with ML of New York. If no such
certificate is filed, the contract owner will be treated, for purposes of
determining the withholding rate, as a married person with three exemptions.
36
<PAGE>
The rate of withholding on all other payments made under the Contract, such as
amounts received upon withdrawals, will generally be 10%. Thus, if the contract
owner fails to elect that there be no withholding, ML of New York will withhold
from every withdrawal or annuity payment the appropriate percentage of the
amount of the payment that is taxable. ML of New York will provide the contract
owner with forms and instructions concerning the right to elect that no amount
be withheld from payments. Generally, there will be no withholding for taxes
until payments are actually received under the Contract.
POSSIBLE CHANGES IN TAXATION
In past years, legislation has been proposed that would have adversely modified
the federal taxation of certain annuities. For example, one such proposal would
have changed the tax treatment of non-qualified annuities that did not have
"substantial life contingencies" by taxing income as it is credited to the
annuity. Although, as of the date of this prospectus, Congress is not actively
considering any legislation regarding the taxation of annuities, there is always
the possibility that the tax treatment of annuities could change by legislation
or other means (such as IRS regulations, revenue rulings, judicial decisions,
etc.). Moreover, it is also possible that any change could be retroactive (that
is, effective prior to the date of the change).
OTHER TAX CONSEQUENCES
ML of New York does not make any guarantee regarding the tax status of the
Contract or any transaction regarding the Contract. As noted above, the
foregoing discussion of the income tax consequences under the Contract is not
exhaustive and special rules are provided with respect to other tax situations
not discussed in the Prospectus. Further, the income tax consequences discussed
herein reflect the Company's understanding of current law and the law may
change. Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of distributions under the Contract depend
on the individual circumstances of each contract owner or recipient of the
distribution. A competent tax adviser should be consulted for further
information.
OTHER INFORMATION
VOTING RIGHTS
ML of New York is the legal owner of all Fund shares held in the Accounts. As
the owner, it has the right to vote on any matter put to vote at the Funds'
shareholder meetings. However, ML of New York will vote all Fund shares
attributable to Contracts according to instructions received from contract
owners. Shares attributable to Contracts for which no voting instructions are
received will be voted in the same proportion as shares in the respective
subaccounts for which instructions are received. Shares not attributable to
Contracts will also be voted in the same proportion as shares in the respective
subaccounts for which instructions are received. If any federal securities laws
or regulations, or their present interpretation, change to permit ML of New York
to vote Fund shares in its own right, it may elect to do so.
Contract owners have voting rights prior to their annuity date. They may give
voting instructions concerning (1) the election of the Funds' Board of
Directors; (2) ratification of the Funds' independent accountant; (3) approval
of the investment advisory agreement for a Fund corresponding to the contract
owner's selected subaccounts; (4) any change in the fundamental investment
policy of a Fund corresponding to the contract owner's selected subaccounts; and
(5) any other matter requiring a vote of the Funds' shareholders. The number of
shares for which a contract owner may give voting instructions prior to the
annuity date is determined by dividing the contract owner's interest in a
subaccount by the net asset value per share of the corresponding Fund. The
number of shares for which contract owners may give voting instructions will be
37
<PAGE>
determined as of a record date chosen by ML of New York. The record date will be
no earlier than 90 days prior to the shareholders meeting.
After the annuity date, contract owners no longer have voting rights, since
their contract value has then been moved out of the Funds.
Contract owners will receive periodic reports relating to the Funds in which
they have an interest including proxy material and voting instruction forms.
REPORTS TO CONTRACT OWNERS
At least once each contract year prior to the annuity date, contract owners will
be sent a statement that provides information pertinent to their own Contract.
The statement will outline all Contract transactions during the year, the
Contract's current number of accumulation units, the value of each accumulation
unit, and the total contract value.
Contract owners will also be sent an annual and a semiannual report containing
financial statements and a list of portfolio securities of the Funds, as
required by the Investment Company Act of 1940.
SELLING THE CONTRACT
Merrill Lynch, Pierce, Fenner & Smith Incorporated is the principal underwriter
of the Contract. 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.
("NASD"). Merrill Lynch, Pierce, Fenner & Smith Incorporated's principal
business address is World Financial Center, 250 Vesey Street, New York, New York
10281.
Contracts are sold by registered representatives (Financial Consultants) of
Merrill Lynch, Pierce, Fenner & Smith Incorporated who are also licensed through
Merrill Lynch Life Agency, Inc. as insurance agents for ML of New York. ML of
New York has entered into a distribution agreement with Merrill Lynch, Pierce,
Fenner & Smith Incorporated and a companion sales agreement with Merrill Lynch
Life Agency, Inc. through which agreements the Contracts are sold and the
Financial Consultants are compensated by Merrill Lynch Life Agency, Inc. and/or
Merrill Lynch, Pierce, Fenner & Smith Incorporated. The maximum commission paid
to the Financial Consultant is 2.0% of each premium allocated to Separate
Account A. In addition, on the annuity date, the Financial Consultant will
receive additional compensation of no more than 1.4% of contract value not
subject to a contingent deferred sales charge. Additional annual compensation of
no more than 0.50% of contract value may also be paid to the Financial
Consultant. Commission may be paid in the form of non-cash compensation. ML of
New York reserves the right not to pay commission or annuity date compensation
on Contracts purchased by employees of ML of New York or Contracts purchased by
the employees' spouses or dependents.
The maximum commission ML of New York will pay to Merrill Lynch Life Agency,
Inc. to be used to pay commissions to Financial Consultants is 3.5% of each
premium allocated to Separate Account A.
Merrill Lynch, Pierce, Fenner & Smith Incorporated may arrange for sales of the
Contract by other broker-dealers who are registered under the Securities
Exchange Act of 1934 and are members of the NASD. Registered representatives of
these other broker-dealers may be compensated on a different basis than Merrill
Lynch, Pierce, Fenner & Smith Incorporated registered representatives.
38
<PAGE>
STATE REGULATION
ML of New York is subject to the laws of the State of New York and to the
regulations of the New York Insurance Department. It is also subject to the
insurance laws and regulations of all jurisdictions in which it is licensed to
do business.
An annual statement in the prescribed form is filed with the insurance
departments of jurisdictions where ML of New York does business disclosing the
Company's operations for the preceding year and its financial condition as of
the end of that year. Insurance department regulation includes periodic
examination to verify Contract liabilities and reserves and to determine
solvency and compliance with all insurance laws and regulations. ML of New
York's books and accounts are subject to insurance department review at all
times. A full examination of ML of New York's operations is conducted
periodically by the New York Insurance Department and under the auspices of the
National Association of Insurance Commissioners.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Accounts are a party or to which the
assets of the Accounts are subject. ML of New York and Merrill Lynch, Pierce,
Fenner & Smith Incorporated are engaged in various kinds of routine litigation
that, in the Company's judgment, is not material to its total assets. No
litigation relates to the Accounts.
EXPERTS
The financial statements of ML of New York as of December 31, 1995 and 1994 and
for each of the three years in the period ended December 31, 1995 and of the
Accounts as of December 31, 1995 and for the periods presented in the Statement
of Additional Information have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing therein, and are
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing. Deloitte & Touche LLP's principal business
address is Two World Financial Center, New York, New York 10281-1420.
LEGAL MATTERS
The organization of the Company, its authority to issue the Contract, and the
validity of the form of the Contract have been passed upon by Barry G. Skolnick,
ML of New York's Senior Vice President and General Counsel. Sutherland, Asbill &
Brennan of Washington, D.C. has provided advice on certain matters relating to
federal securities laws.
REGISTRATION STATEMENTS
Registration statements have been filed with the Securities and Exchange
Commission under the Securities Act of 1933 and the Investment Company Act of
1940 that relate to the Contract and its investment options. This Prospectus
does not contain all of the information in the registration statements as
permitted by Securities and Exchange Commission regulations. The omitted
information can be obtained from the Securities and Exchange Commission's
principal office in Washington, D.C., upon payment of a prescribed fee.
39
<PAGE>
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
General Information and History
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 OF NEW YORK VARIABLE ANNUITY
SEPARATE ACCOUNT B
FINANCIAL STATEMENTS OF ML LIFE INSURANCE COMPANY OF NEW YORK
40
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT
OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1996
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
AND
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT B
FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
ALSO KNOWN AS
MODIFIED SINGLE 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
PHONE: (800) 333-6524
OFFERED THROUGH
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
This individual deferred variable annuity contract (the "Contract") is designed
to provide comprehensive and flexible ways to invest and to create a source of
income protection for later in life through the payment of annuity benefits. An
annuity is intended to be a long term investment. Contract owners should
consider their need for deferred income before purchasing the Contract. The
Contract is issued by ML Life Insurance Company of New York ("ML of New York")
both on a nonqualified basis, and as an Individual Retirement Annuity ("IRA")
that is given qualified tax status.
This Statement of Additional Information is not a Prospectus and should be read
together with the Contract's Prospectus dated May 1, 1996, which is available on
request and without charge by writing to or calling ML of New York at its Home
Office address or phone number set forth above.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
OTHER INFORMATION............................................... 3
General Information and History................................. 3
Principal Underwriter........................................... 3
Financial Statements............................................ 3
Administrative Services Arrangements............................ 3
CALCULATION OF YIELDS AND TOTAL RETURNS......................... 3
FINANCIAL STATEMENTS OF ML OF NEW YORK VARIABLE ANNUITY SEPARATE
ACCOUNT A....................................................... S-1
FINANCIAL STATEMENTS OF ML OF NEW YORK VARIABLE ANNUITY SEPARATE
ACCOUNT B....................................................... S-18
FINANCIAL STATEMENTS OF ML LIFE INSURANCE COMPANY OF NEW YORK... G-1
</TABLE>
2
<PAGE>
OTHER INFORMATION
GENERAL INFORMATION AND HISTORY
ML Life Insurance Company of New York ("ML of New York") is a stock life
insurance company organized under the laws of the State of New York in 1973.
Prior to September 11, 1991, ML of New York conducted its business under the
name Royal Tandem Life Insurance Company. The name change was effected under the
authority of the New York Insurance Department.
PRINCIPAL UNDERWRITER
Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of ML of New
York, performs all sales and distribution functions regarding the Contracts and
may be deemed the principal underwriter of ML of New York Variable Annuity
Separate Account A and ML of New York Variable Annuity Separate Account B (the
"Accounts") under the Investment Company Act of 1940. The offering is
continuous. For the years ended December 31, 1995, 1994, and 1993, Merrill
Lynch, Pierce, Fenner & Smith Incorporated received $0.8 million, $3.5 million
and $3.9 million, respectively, in commissions in connection with the sale of
the Contracts.
FINANCIAL STATEMENTS
The financial statements of ML of New York included in this Statement of
Additional Information should be distinguished from the financial statements of
the Accounts and should be considered only as bearing upon the ability of ML of
New York to meet any obligations it may have under the Contract.
ADMINISTRATIVE SERVICES ARRANGEMENTS
ML of New York has entered into a Service Agreement with its parent, Merrill
Lynch Insurance Group, Inc. ("MLIG") pursuant to which ML of New York can
arrange for MLIG to provide directly or through affiliates certain services.
Pursuant to this agreement, ML of New York has arranged for MLIG to provide
certain administrative services for the Accounts and the Contracts, and MLIG, in
turn, has arranged for a subsidiary, Merrill Lynch Insurance Group Services,
Inc. ("MLIG Services"), to provide these services. Compensation for these
services, which will be paid by ML of New York, will be based on the charges and
expenses incurred by MLIG Services, and will reflect MLIG Services' actual
costs. For the years ended December 31, 1995, 1994 and 1993, ML of New York paid
administrative services fees of $4.4 million, $4.0 million, and $5.7 million
respectively.
CALCULATION OF YIELDS AND TOTAL RETURNS
MONEY MARKET YIELDS
From time to time, ML of New York may quote in advertisements and sales
literature the current annualized yield for the Domestic Money Market Subaccount
of Account A and the Reserve Assets Subaccount of Account B for a 7-day period
in a manner that does not take into consideration any realized or unrealized
gains or losses on shares of the underlying Funds or on their respective
portfolio securities. The current annualized yield is computed by: (a)
determining the net change (exclusive of realized gains and losses on the sales
of securities and unrealized appreciation and depreciation) at the end of the
7-day period in the value of a hypothetical account under a Contract having a
balance of 1 unit at the beginning of the period, (b) dividing such net change
in account value by the value of the account at the beginning of the period to
determine the base period return, and (c) annualizing this quotient on a 365-day
basis. The net change in account value reflects: (1) net income from the Fund
attributable to the hypothetical account; and (2) charges and deductions imposed
under the Contract which are attributable to the hypothetical account. The
charges and deductions include the per unit charges for the hypothetical account
for: (1) the mortality and expense risk charge; (2) the administration charge in
the case of the Domestic Money Market Subaccount; and (3) the annual contract
maintenance charge. For purposes of calculating current yields for a Contract,
an average per unit contract maintenance charge is used, as described below.
Current yield will be calculated according to the following formula:
Current Yield = ((NCF-ES/UV) X (365/7)
3
<PAGE>
Where:
<TABLE>
<S> <C> <C>
NCF = the net change in the value of the Fund (exclusive of realized gains
and losses on the sale of securities and unrealized appreciation and
depreciation) for the 7-day period attributable to a hypothetical
account having a balance of 1 unit.
ES = per unit expenses for the hypothetical account for the 7-day period.
UV = the unit value of the first day of the 7-day period.
</TABLE>
ML of New York also may quote the effective yield of the Domestic Money Market
Subaccount or the Reserve Assets Subaccount for the same 7-day period,
determined on a compounded basis. The effective yield is calculated by
compounding the unannualized base period return according to the following
formula:
Effective Yield = (1 + ((NCF-ES)/UV)) 365/7 =1
Where:
<TABLE>
<S> <C> <C>
NCF = the net change in the value of the Fund (exclusive of realized gains
and losses on the sale of securities and unrealized appreciation and
depreciation) for the 7-day period attributable to a hypothetical
account having a balance of 1 unit.
ES = per unit expenses of the hypothetical account for the 7-day period.
UV = the unit value for the first day of the 7-day period.
</TABLE>
The effective yield for the Domestic Money Market subaccount for the 7-day
period ended December 31, 1995 was 3.89%. The effective yield for the Reserve
Assets subaccount for the 7-day period ended December 31, 1995 was 4.66%.
Because of the charges and deductions imposed under the Contract, the yield for
the Domestic Money Market Subaccount and the Reserve Assets Subaccount will be
lower than the yield for the corresponding underlying Fund.
The yields on amounts held in the Domestic Money Market Subaccount or the
Reserve Assets Subaccount normally will fluctuate on a daily basis. Therefore,
the disclosed yield for any given past period is not an indication or
representation of future yields or rates of return. The actual yield for those
subaccounts is affected by changes in interest rates on money market securities,
average portfolio maturity of the underlying Fund, the types and qualities of
portfolio securities held by the Fund and the Fund's operating expenses. Yields
on amounts held in the Domestic Money Market Subaccount and Reserve Assets
Subaccount may also be presented for periods other than a 7-day period.
OTHER SUBACCOUNT YIELDS
From time to time, ML of New York may quote in sales literature or
advertisements the current annualized yield of one or more of the Account A
subaccounts (other than the Domestic Money Market Subaccount) for a Contract for
30-day or one-month periods. The annualized yield of a subaccount refers to
income generated by the subaccount over a specified 30-day or one-month period.
Because the yield is annualized, the yield generated by the subaccount during
the 30-day or one-month period is assumed to be generated each period over a
12-month period. The yield is computed by: (1) dividing the net investment
income of the Fund attributable to the subaccount units less subaccount expenses
for the period; by (2) the maximum offering price per unit on the last day of
the period times the daily average number of units outstanding for the period;
then (3) compounding that yield for a 6-month period; and then (4) multiplying
that result by 2. Expenses attributable to the subaccount include the mortality
and expense risk charge, the administration charge and the annual contract
maintenance charge. For purposes of calculating the 30-day or one-month yield,
an average contract maintenance charge per dollar of contract value in the
subaccount is used to determine the amount of the charge attributable to the
subaccount for the 30-day or one-month period, as described below. The 30-day or
one-month yield is calculated according to the following formula:
Yield = 2 X ((((NY-ES)/(U X UV)) + 1)6 - 1)
4
<PAGE>
Where:
<TABLE>
<S> <C> <C>
NI = net investment income of the Fund for the 30-day or one-month period
attributable to the subaccount's units.
ES = expenses of the subaccount for the 30-day or one-month period.
U = the average number of units outstanding.
UV = the unit value at the close of the last day in the 30-day or one-month
period.
</TABLE>
Currently, ML of New York may quote yields on bond subaccounts within Account A.
The yield for those subaccounts for the 30-day period ended December 31, 1995
was:
<TABLE>
<CAPTION>
NAME OF SUBACCOUNT YIELD
- ---------------------------------------- ------
<S> <C>
Prime Bond 4.52%
High Current Income 8.62%
World Income Focus 7.36%
International Bond 4.66%
Intermediate Government Bond 4.16%
</TABLE>
Because of the charges and deductions imposed under the Contracts, the yield for
an Account A subaccount will be lower than the yield for the corresponding Fund.
The yield on the amounts held in the Account A subaccounts normally will
fluctuate over time. Therefore, the disclosed yield for any given past period is
not an indication or representation of future yields or rates of return. A
subaccount's actual yield is affected by the types and quality of portfolio
securities held by the corresponding Fund, and its operating expenses.
Yield calculations do not take into account the declining contingent deferred
sales charge under the Contract of amounts surrendered or withdrawn under the
Contract deemed to consist of premiums paid within the preceding seven years. A
contingent deferred sales charge will not be imposed on the first withdrawal in
any Contract year to the extent that it is deemed to consist of gain on premiums
paid during the preceding seven contract years and/or premiums not subject to
such a charge.
TOTAL RETURNS
From time to time, ML of New York also may quote in sales literature or
advertisements, total returns, including average annual total returns for one or
more of the subaccounts for various periods of time. ML of New York will always
include quotes of average annual total return for the period measured from the
date the subaccount commenced operations until it has been in operation for more
than 10 years. In addition, the average annual total returns will be provided
for an Account A subaccount or Account B for 1, 5 and 10 years, or for a shorter
period, if applicable. For the year ended December 31, 1995, returns were:
<TABLE>
<CAPTION>
NAME OF SUBACCOUNT RETURN
- ---------------------------------------- -------
<S> <C>
Prime Bond 11.34%
High Current Income 8.62%
Quality Equity 14.29%
Equity Growth 36.80%
Flexible Strategy 9.01%
Natural Resources Focus 5.22%
American Balanced 12.29%
Global Strategy Focus 2.27%
Basic Value Focus 17.62%
World Income Focus 8.28%
Global Utility Focus 16.45%
International Equity Focus -2.08%
International Bond 7.83%
Intermediate Government Bond 6.15%
Developing Capital Markets Focus -7.92%
</TABLE>
5
<PAGE>
Total returns assume the Contract was surrendered at the end of the period
shown, and are not indicative of performance if the Contract were continued for
a longer period.
Average annual total returns for other periods of time may also be disclosed
from time to time. For example, average annual total returns may be provided
based on the assumption that a subaccount had been in existence and had invested
in the corresponding underlying Fund for the same period as the corresponding
Fund had been in operation. The Funds commenced operations as indicated below:
<TABLE>
<CAPTION>
COMMENCED
FUND OPERATIONS
- ---------------------------------------- -------------------------
<S> <C>
Prime Bond April 20, 1982
High Current Income April 20, 1982
Quality Equity April 20, 1982
Equity Growth April 20, 1982
Flexible Strategy May 1, 1986
Natural Resources Focus June 1, 1988
American Balanced June 1, 1988
Global Strategy Focus February 14, 1992
Basic Value Focus July 1, 1993
World Income Focus July 1, 1993
Global Utility Focus July 1, 1993
International Equity Focus July 1, 1993
International Bond May 1, 1994
Intermediate Government Bond May 1, 1994
Developing Capital Markets Focus May 1, 1994
</TABLE>
Average annual total returns represent the average annual compounded rates of
return that would equate an initial investment of $1,000 under a Contract to the
redemption value of that investment as of the last day of each of the periods.
The ending date for each period for which total return quotations are provided
will generally be as of the most recent calendar quarter-end.
Average annual total returns are calculated using subaccount unit values
calculated on each valuation day based on the performance of the corresponding
underlying Fund, the deduction for the mortality and expense risk charge, the
administration charge (in the case of Account A subaccounts), and the contract
maintenance charge, and assume a surrender of the Contract at the end of the
period for the return quotation. Total returns therefore reflect a deduction of
the contingent deferred sales charge for any period of less than seven years.
For purposes of calculating total return, an average per dollar contract
maintenance charge attributable to the hypothetical account for the period is
used, as described below. The total return is then calculated according to the
following formula:
TR = ((ERV/P)1/N) - 1
Where:
<TABLE>
<S> <C> <C>
TR = the average annual total return net of subaccount recurring charges
(such as the mortality and expense risk charge, administration charge,
if applicable, and contract maintenance charge).
ERV = the ending redeemable value (net of any applicable contingent deferred
sales charge) at the end of the period of the hypothetical account
with an initial payment of $1,000.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
</TABLE>
From time to time, ML of New York also may quote in sales literature or
advertisements, total returns that do not reflect the contingent deferred sales
charge. These are calculated in exactly the same way as average annual total
returns described above, except that the ending redeemable value of the
hypothetical account for the period is replaced with an ending value for the
period that does not take into account any contingent deferred sales charge or
surrender of the Contract. In addition, such nonstandard returns may also be
quoted for other periods.
6
<PAGE>
From time to time, ML of New York also may quote in sales literature or
advertisements total returns or other performance information for a hypothetical
Contract assuming the initial premium is allocated to more than one subaccount
or assuming monthly transfers from the Domestic Money Market Subaccount to one
or more designated subaccounts under a dollar cost averaging program. These
returns will reflect the performance of the affected subaccount(s) for the
amount and duration of the allocation to each subaccount for the hypothetical
Contract. They also will reflect the deduction of charges described above except
for the contingent deferred sales charge. For example, total return information
for a Contract with a dollar cost averaging program for a 12-month period will
assume commencement of the program at the beginning of the most recent 12-month
period for which average annual total return information is available. This
information will assume an initial lump-sum investment in the Domestic Money
Market Subaccount at the beginning of that period and monthly transfers of a
portion of the contract value from that subaccount to designated subaccount(s)
during the 12-month period. The total return for the Contract for this 12-month
period therefore will reflect the return on the portion of the contract value
that remains invested in the Domestic Money Market Subaccount for the period it
is assumed to be so invested, as affected by monthly transfers, and the return
on amounts transferred to the designated subaccounts for the period during which
those amounts are assumed to be invested in those subaccounts. The return for an
amount invested in a subaccount will be based on the performance of that
subaccount for the duration of the investment, and will reflect the charges
described above other than the contingent deferred sales charge. Performance
information for a dollar cost-averaging program also may show the returns for
various periods for a designated subaccount assuming monthly transfers to the
subaccount, and may compare those returns to returns assuming an initial
lump-sum investment in that subaccount. This information also may be compared to
various indices, such as the Merrill Lynch 91-day Treasury Bills index or the
U.S. Treasury Bills index and may be illustrated by graphs, charts, or
otherwise.
7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
ML Life Insurance Company of New York:
We have audited the accompanying statement of net assets of
ML of New York Variable Annuity Separate Account A (the
"Account") as of December 31, 1995 and the related
statements of operations and changes in net assets for each
of the two years in the period then ended. These financial
statements are the responsibility of the management of ML
Life Insurance Company of New York. Our responsibility is to
express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation
of mutual fund securities owned at December 31, 1995, by
correspondence with the funds' custodian. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial position of the Account
at December 31, 1995 and the results of its operations and
the changes in its net assets for the above periods in
conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an
opinion on the basic financial statements taken as a whole.
The supplemental schedules included herein are for the
purpose of additional analysis and are not a required part
of the basic financial statements. These schedules are the
responsibility of the Company's management. Such
supplemental schedules have been subjected to the auditing
procedures applied in our audits of the basic financial
statements and, in our opinion, are fairly stated in all
material respects when considered in relation to the basic
financial statements taken as a whole.
/S/ Deloitte & Touche LLP
January 18, 1996
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF NET ASSETS AT DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Market
Cost Shares Value
======================= ======================= =======================
<S> <C> <C> <C>
ASSETS:
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Domestic Money Market Fund $ 23,342,691 23,342,691 $ 23,342,691
Prime Bond Fund 37,642,570 3,060,969 38,109,060
High Current Income Fund 18,303,918 1,595,364 17,947,843
Quality Equity Fund 30,460,080 1,088,093 35,645,933
Equity Growth Fund 14,328,488 678,903 18,995,705
Flexible Strategy Fund 13,636,737 897,788 14,786,574
American Balanced Fund 15,690,858 1,141,508 17,316,681
Natural Resources Focus Fund 1,953,679 176,131 2,104,770
Global Strategy Focus Fund 33,098,634 2,743,559 34,431,669
Global Utility Focus Fund 7,712,601 753,284 8,512,105
International Equity Focus Fund 14,444,008 1,304,676 14,429,712
World Income Focus Fund 5,858,215 590,068 5,776,764
Basic Value Focus Fund 14,630,399 1,289,498 16,892,428
International Bond Fund 455,915 44,093 463,854
Intermediate Government Bond Fund 1,652,736 162,530 1,753,701
Developing Capital Markets Focus Fund 2,316,651 236,095 2,200,405
----------------------- -----------------------
TOTAL ASSETS $ 235,528,180 252,709,895
======================= -----------------------
LIABILITIES:
Due to ML Life Insurance Company of New York 65,175
-----------------------
TOTAL LIABILITIES 65,175
-----------------------
NET ASSETS $ 252,644,720
=======================
</TABLE>
See Notes to Financial Statements
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
================================================================================
<TABLE>
<CAPTION>
1995 1994
======================= =======================
<S> <C> <C>
Investment Income:
Reinvested Dividends $ 10,648,984 $ 6,940,125
Mortality and Expense Charges (Note 3) (3,040,823) (2,415,219)
----------------------- -----------------------
Net Investment Income 7,608,161 4,524,906
----------------------- -----------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains 795,417 56,818
Net Unrealized Gains (Losses) 25,415,498 (12,340,022)
----------------------- -----------------------
Net Realized and Unrealized Gains (Losses) 26,210,915 (12,283,204)
----------------------- -----------------------
Increase (Decrease) in Net Assets
Resulting from Operations 33,819,076 (7,758,298)
----------------------- -----------------------
Changes from Principal Transactions:
Transfer of Net Premiums 24,211,078 100,871,436
Transfer of Contract Owner Withdrawals (8,215,726) (5,174,965)
Transfers Out - Net (1,121,733) (434,705)
Transfer of Contract Maintenance Charges (Note 3) (108,508) (59,295)
----------------------- -----------------------
Increase in Net Assets
Resulting from Principal Transactions 14,765,111 95,202,471
----------------------- -----------------------
Increase in Net Assets 48,584,187 87,444,173
Net Assets Beginning Balance 204,060,533 116,616,360
----------------------- -----------------------
Net Assets Ending Balance $ 252,644,720 $ 204,060,533
======================= =======================
</TABLE>
See Notes to Financial Statements
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
1. ML of New York Variable Annuity Separate Account A
("Separate Account A"), a separate account of ML Life
Insurance Company of New York ("ML of New York"), was
established to support the operations with respect to
certain variable annuity contracts ("Contracts").
Separate Account A is governed by New York State
Insurance Law. ML of New York is an indirect wholly-
owned subsidiary of Merrill Lynch & Co., Inc.
("Merrill"). Separate Account A is registered as a unit
investment trust under the Investment Company Act of 1940
and consists of sixteen investment divisions. The
investment divisions each invest in the securities of a
single mutual fund portfolio of the Merrill Lynch
Variable Series Funds, Inc. ("Series Funds"). The
portfolios of the Series Funds have varying investment
objectives relative to growth of capital and income. The
Series Funds receives investment advice from Merrill
Lynch Asset Management, L.P., an indirect subsidiary of
Merrill, for a fee calculated at various annual rates
ranging from .35% to 1.00% of the average daily net
assets of the investment divisions.
The assets of Separate Account A are registered in the
name of ML of New York. The portion of Separate Account
A's assets applicable to the Contracts are not chargeable
with liabilities arising out of any other business ML of
New York may conduct.
The change in net assets accumulated in Separate Account
A provides the basis for the periodic determination of
the amount of increased or decreased benefits under the
Contracts.
The net assets may not be less than the amount required
under New York State Insurance Law to provide for death
benefits (without regard to the minimum death benefit
guarantee) and other Contract benefits.
To facilitate comparisons with the current year, certain
amounts in the prior year have been reclassified.
2. The following is a summary of significant accounting
policies of Separate Account A:
Investments in the divisions are included in the
statement of net assets at the net asset value of the
Series Funds shares held.
Dividend income is recognized on the ex-dividend date.
All dividends are automatically reinvested.
Realized gains and losses on the sales of investments are
computed on the first in first out method.
The operations of Separate Account A are included in the
Federal income tax return of ML of New York. Under the
provisions of the Contracts, ML of New York has the right
to charge Separate Account A for any Federal income tax
attributable to Separate Account A. No charge is
currently being made against Separate Account A for such
tax since, under current tax law, ML of New York pays no
tax on investment income and capital gains reflected in
variable annuity contract reserves. However, ML of New
York retains the right to charge for any Federal income
tax incurred which is attributable to Separate Account A
if the law is changed. Charges for state and local
taxes, if any, attributable to Separate Account A may
also be made.
3. ML of New York assumes mortality and expense risks
related to Contracts investing in Separate Account A and
deducts daily charges at a rate of 1.25% (on an annual
basis) of the net assets of Separate Account A to cover
these risks.
An administration charge of .10% annually is deducted
from the net asset value of Separate Account A. This
charge is made to reimburse ML of New York for costs
associated with the establishment and administration of
Separate Account A.
ML of New York deducts a contract maintenance charge of
$40 for each Contract on each Contract's anniversary that
occurs on or prior to the annuity date. It is also
deducted when the Contract is surrendered if it is
surrendered on any date other than a contract anniversary
date. The contract maintenance charge is borne by
Contract owners by redeeming accumulation units with a
value equal to the charge. This charge is waived on all
Contracts with a Contract value equal to or greater than
$50,000 on the date the charge would otherwise be
deducted.
Contract owners may make up to six transfers among the
Separate Account A divisions per contract year without
charge. Additional transfers may be permitted at a
charge of $25 per transfer.
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Domestic High
Total Money Prime Current
Separate Market Bond Income
Account Fund Fund Fund
===================== ==================== ==================== ====================
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 10,648,984 $ 1,100,428 $ 2,478,146 $ 1,578,423
Mortality and Expense Charges (3,040,823) (270,684) (477,417) (216,105)
--------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 7,608,161 829,744 2,000,729 1,362,318
--------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 795,417 0 (259,212) (66,370)
Net Unrealized Gains 25,415,498 0 4,266,420 958,892
--------------------- -------------------- -------------------- --------------------
Net Realized and Unrealized Gains (Losses) 26,210,915 0 4,007,208 892,522
--------------------- -------------------- -------------------- --------------------
Increase (Decrease)in Net Assets
Resulting from Operations 33,819,076 829,744 6,007,937 2,254,840
--------------------- -------------------- -------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 24,211,078 22,372,316 156,609 171,824
Transfer of Contract Owner Withdrawals (8,215,726) (892,488) (1,437,521) (571,957)
Transfers In (Out) - Net (1,121,733) (17,320,263) 426,689 2,500,891
Transfer of Contract Maintenance Charges (108,508) (6,945) (14,830) (7,731)
--------------------- -------------------- -------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 14,765,111 4,152,620 (869,053) 2,093,027
--------------------- -------------------- -------------------- --------------------
Increase (Decrease) in Net Assets 48,584,187 4,982,364 5,138,884 4,347,867
Net Assets Beginning Balance 204,060,533 18,354,410 32,960,333 13,595,334
--------------------- -------------------- -------------------- --------------------
Net Assets Ending Balance $ 252,644,720 $ 23,336,774 $ 38,099,217 $ 17,943,201
===================== ==================== ==================== ====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
====================================================================================
Quality Equity Flexible American
Equity Growth Strategy Balanced
Fund Fund Fund Fund
===================== ==================== ==================== ====================
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 1,037,519 $ 52,571 $ 595,685 $ 608,454
Mortality and Expense Charges (420,966) (193,094) (183,197) (213,967)
--------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 616,553 (140,523) 412,488 394,487
--------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 329,434 466,538 45,556 117,896
Net Unrealized Gains 5,013,917 4,833,452 1,538,179 2,238,763
--------------------- -------------------- -------------------- --------------------
Net Realized and Unrealized Gains (Losses) 5,343,351 5,299,990 1,583,735 2,356,659
--------------------- -------------------- -------------------- --------------------
Increase (Decrease)in Net Assets
Resulting from Operations 5,959,904 5,159,467 1,996,223 2,751,146
--------------------- -------------------- -------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 285,553 221,245 104,769 57,776
Transfer of Contract Owner Withdrawals (971,173) (406,068) (517,208) (680,911)
Transfers In (Out) - Net 3,422,212 3,644,722 712,004 1,675,613
Transfer of Contract Maintenance Charges (15,607) (6,923) (6,880) (7,519)
--------------------- -------------------- -------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 2,720,985 3,452,976 292,685 1,044,959
--------------------- -------------------- -------------------- --------------------
Increase (Decrease) in Net Assets 8,680,889 8,612,443 2,288,908 3,796,105
Net Assets Beginning Balance 26,955,834 10,378,365 12,493,844 13,516,105
--------------------- -------------------- -------------------- --------------------
Net Assets Ending Balance $ 35,636,723 $ 18,990,808 $ 14,782,752 $ 17,312,210
===================== ==================== ==================== ====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
====================================================================================
Natural Global Global International
Resources Strategy Utility Equity
Focus Focus Focus Focus
Fund Fund Fund Fund
===================== ==================== ==================== ====================
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 43,052 $ 1,127,959 $ 299,769 $ 539,396
Mortality and Expense Charges (28,412) (453,534) (105,223) (183,716)
--------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 14,640 674,425 194,546 355,680
--------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 7,502 249,732 (67,434) (37,811)
Net Unrealized Gains 202,558 2,012,207 1,480,395 197,776
--------------------- -------------------- -------------------- --------------------
Net Realized and Unrealized Gains (Losses) 210,060 2,261,939 1,412,961 159,965
--------------------- -------------------- -------------------- --------------------
Increase (Decrease)in Net Assets
Resulting from Operations 224,700 2,936,364 1,607,507 515,645
--------------------- -------------------- -------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 25,450 204,373 77,973 187,196
Transfer of Contract Owner Withdrawals (133,808) (1,282,650) (284,361) (563,415)
Transfers In (Out) - Net (166,290) (1,860,983) (416,424) 13,089
Transfer of Contract Maintenance Charges (1,161) (19,210) (3,572) (7,539)
--------------------- -------------------- -------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (275,809) (2,958,470) (626,384) (370,669)
--------------------- -------------------- -------------------- --------------------
Increase (Decrease) in Net Assets (51,109) (22,106) 981,123 144,976
Net Assets Beginning Balance 2,155,335 34,444,876 7,528,785 14,281,004
--------------------- -------------------- -------------------- --------------------
Net Assets Ending Balance $ 2,104,226 $ 34,422,770 $ 8,509,908 $ 14,425,980
===================== ==================== ==================== ====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
====================================================================================
World Basic Intermediate
Income Value International Government
Focus Focus Bond Focus
Fund Fund Fund Fund
===================== ==================== ==================== ====================
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 491,150 $ 585,824 $ 21,076 $ 74,510
Mortality and Expense Charges (74,826) (174,082) (4,277) (17,397)
--------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 416,324 411,742 16,799 57,113
--------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (86,645) 141,435 7,275 5,484
Net Unrealized Gains 452,227 2,079,042 9,632 103,249
--------------------- -------------------- -------------------- --------------------
Net Realized and Unrealized Gains (Losses) 365,582 2,220,477 16,907 108,733
--------------------- -------------------- -------------------- --------------------
Increase (Decrease)in Net Assets
Resulting from Operations 781,906 2,632,219 33,706 165,846
--------------------- -------------------- -------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 14,159 209,592 6,750 7,500
Transfer of Contract Owner Withdrawals (156,235) (233,699) (27,624) (12,520)
Transfers In (Out) - Net (397,443) 4,946,139 270,850 892,104
Transfer of Contract Maintenance Charges (2,722) (6,429) (123) (340)
--------------------- -------------------- -------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (542,241) 4,915,603 249,853 886,744
--------------------- -------------------- -------------------- --------------------
Increase (Decrease) in Net Assets 239,665 7,547,822 283,559 1,052,590
Net Assets Beginning Balance 5,535,606 9,340,242 180,176 700,657
--------------------- -------------------- -------------------- --------------------
Net Assets Ending Balance $ 5,775,271 $ 16,888,064 $ 463,735 $ 1,753,247
===================== ==================== ==================== ====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
=====================
Developing
Capital Markets
Focus
Fund
=====================
<S> <C>
Investment Income (Loss):
Reinvested Dividends $ 15,022
Mortality and Expense Charges (23,926)
---------------------
Net Investment Income (Loss) (8,904)
---------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (57,963)
Net Unrealized Gains 28,789
---------------------
Net Realized and Unrealized Gains (Losses) (29,174)
---------------------
Increase (Decrease)in Net Assets
Resulting from Operations (38,078)
---------------------
Changes from Principal Transactions:
Transfer of Net Premiums 107,993
Transfer of Contract Owner Withdrawals (44,088)
Transfers In (Out) - Net 535,357
Transfer of Contract Maintenance Charges (977)
---------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 598,285
---------------------
Increase (Decrease) in Net Assets 560,207
Net Assets Beginning Balance 1,639,627
---------------------
Net Assets Ending Balance $ 2,199,834
=====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Domestic High
Money Prime Current
Market Bond Income
Fund Fund Fund
==================== ==================== ====================
<S> <C> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1995 2,104,307.8 2,866,758.2 1,274,375.1
-------------------- -------------------- --------------------
Total Units Outstanding at December 31, 1995 2,104,307.8 2,866,758.2 1,274,375.1
==================== ==================== ====================
Accumulation Unit Value at December 31, 1995 $ 11.09 $ 13.29 $ 14.08
==================== ==================== ====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Quality Equity Flexible
Equity Growth Strategy
Fund Fund Fund
==================== ==================== ====================
<S> <C> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1995 2,587,997.3 1,332,688.3 1,137,134.8
-------------------- -------------------- --------------------
Total Units Outstanding at December 31, 1995 2,587,997.3 1,332,688.3 1,137,134.8
==================== ==================== ====================
Accumulation Unit Value at December 31, 1995 $ 13.77 $ 14.25 $ 13.00
==================== ==================== ====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Natural Global
American Resources Strategy
Balanced Focus Focus
Fund Fund Fund
==================== ==================== ====================
<S> <C> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1995 1,294,854.9 167,533.9 2,678,814.8
-------------------- -------------------- --------------------
Total Units Outstanding at December 31, 1995 1,294,854.9 167,533.9 2,678,814.8
==================== ==================== ====================
Accumulation Unit Value at December 31, 1995 $ 13.37 $ 12.56 $ 12.85
==================== ==================== ====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Global International World
Utility Equity Income
Focus Focus Focus
Fund Fund Fund
==================== ==================== ====================
<S> <C> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1995 724,247.5 1,275,506.6 504,390.5
-------------------- -------------------- --------------------
Total Units Outstanding at December 31, 1995 724,247.5 1,275,506.6 504,390.5
==================== ==================== ====================
Accumulation Unit Value at December 31, 1995 $ 11.75 $ 11.31 $ 11.45
==================== ==================== ====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Basic Intermediate
Value International Government
Focus Bond Bond
Fund Fund Fund
==================== ==================== ====================
<S> <C> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1995 1,241,769.4 40,678.5 153,524.3
-------------------- -------------------- --------------------
Total Units Outstanding at December 31, 1995 1,241,769.4 40,678.5 153,524.3
==================== ==================== ====================
Accumulation Unit Value at December 31, 1995 $ 13.60 $ 11.40 $ 11.42
==================== ==================== ====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
====================
Developing
Capital Markets
Focus
Fund
====================
<S> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1995 240,156.6
--------------------
Total Units Outstanding at December 31, 1995 240,156.6
====================
Accumulation Unit Value at December 31, 1995 $ 9.16
====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Domestic High
Total Money Prime Current
Separate Market Bond Income
Account Fund Fund Fund
===================== ==================== ==================== ====================
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 6,940,125 $ 596,265 $ 2,418,437 $ 1,139,024
Mortality and Expense Charges (2,415,219) (201,008) (429,057) (169,270)
--------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 4,524,906 395,257 1,989,380 969,754
--------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 56,818 0 (232,750) (56,341)
Net Unrealized Gains (Losses) (12,340,022) 0 (3,729,246) (1,560,404)
--------------------- -------------------- -------------------- --------------------
Net Realized and Unrealized Gains (Losses) (12,283,204) 0 (3,961,996) (1,616,745)
--------------------- -------------------- -------------------- --------------------
Increase (Decrease)in Net Assets
Resulting from Operations (7,758,298) 395,257 (1,972,616) (646,991)
--------------------- -------------------- -------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 100,871,436 97,114,074 197,056 137,762
Transfer of Contract Owner Withdrawals (5,174,965) (311,975) (947,312) (292,414)
Transfers In (Out) - Net (434,705) (88,116,032) 9,582,971 5,523,286
Transfer of Contract Maintenance Charges (59,295) (1,350) (10,780) (4,946)
--------------------- -------------------- -------------------- --------------------
Increase in Net Assets
Resulting from Principal Transactions 95,202,471 8,684,717 8,821,935 5,363,688
--------------------- -------------------- -------------------- --------------------
Increase in Net Assets 87,444,173 9,079,974 6,849,319 4,716,697
Net Assets Beginning Balance 116,616,360 9,274,436 26,111,014 8,878,637
--------------------- -------------------- -------------------- --------------------
Net Assets Ending Balance $ 204,060,533 $ 18,354,410 $ 32,960,333 $ 13,595,334
===================== ==================== ==================== ====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
====================================================================================
Quality Equity Flexible American
Equity Growth Strategy Balanced
Fund Fund Fund Fund
===================== ==================== ==================== ====================
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 572,258 $ 51,338 $ 410,932 $ 356,013
Mortality and Expense Charges (317,752) (123,268) (144,890) (169,356)
--------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 254,506 (71,930) 266,042 186,657
--------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 47,019 40,177 20,466 37,550
Net Unrealized Gains (Losses) (979,862) (788,241) (879,444) (909,980)
--------------------- -------------------- -------------------- --------------------
Net Realized and Unrealized Gains (Losses) (932,843) (748,064) (858,978) (872,430)
--------------------- -------------------- -------------------- --------------------
Increase (Decrease)in Net Assets
Resulting from Operations (678,337) (819,994) (592,936) (685,773)
--------------------- -------------------- -------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 569,295 459,225 113,625 110,532
Transfer of Contract Owner Withdrawals (517,228) (480,744) (218,448) (424,425)
Transfers In (Out) - Net 11,723,439 5,691,021 6,269,135 4,788,801
Transfer of Contract Maintenance Charges (9,146) (3,319) (3,628) (4,879)
--------------------- -------------------- -------------------- --------------------
Increase in Net Assets
Resulting from Principal Transactions 11,766,360 5,666,183 6,160,684 4,470,029
--------------------- -------------------- -------------------- --------------------
Increase in Net Assets 11,088,023 4,846,189 5,567,748 3,784,256
Net Assets Beginning Balance 15,867,811 5,532,176 6,926,096 9,731,849
--------------------- -------------------- -------------------- --------------------
Net Assets Ending Balance $ 26,955,834 $ 10,378,365 $ 12,493,844 $ 13,516,105
===================== ==================== ==================== ====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
====================================================================================
Natural Global Global International
Resources Strategy Utility Equity
Focus Focus Focus Focus
Fund Fund Fund Fund
===================== ==================== ==================== ====================
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 20,384 $ 551,775 $ 239,766 $ 100,801
Mortality and Expense Charges (22,990) (410,106) (104,976) (146,336)
--------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) (2,606) 141,669 134,790 (45,535)
--------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 335 177,590 (50,332) 65,764
Net Unrealized Gains (Losses) (25,610) (1,531,836) (848,502) (435,551)
--------------------- -------------------- -------------------- --------------------
Net Realized and Unrealized Gains (Losses) (25,275) (1,354,246) (898,834) (369,787)
--------------------- -------------------- -------------------- --------------------
Increase (Decrease)in Net Assets
Resulting from Operations (27,881) (1,212,577) (764,044) (415,322)
--------------------- -------------------- -------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 98,047 627,754 359,318 675,002
Transfer of Contract Owner Withdrawals (14,891) (641,836) (192,688) (465,029)
Transfers In (Out) - Net 1,203,702 18,413,131 2,009,778 10,370,792
Transfer of Contract Maintenance Charges (445) (11,160) (2,899) (2,785)
--------------------- -------------------- -------------------- --------------------
Increase in Net Assets
Resulting from Principal Transactions 1,286,413 18,387,889 2,173,509 10,577,980
--------------------- -------------------- -------------------- --------------------
Increase in Net Assets 1,258,532 17,175,312 1,409,465 10,162,658
Net Assets Beginning Balance 896,803 17,269,564 6,119,320 4,118,346
--------------------- -------------------- -------------------- --------------------
Net Assets Ending Balance $ 2,155,335 $ 34,444,876 $ 7,528,785 $ 14,281,004
===================== ==================== ==================== ====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
====================================================================================
World Basic Intermediate
Income Value International Government
Focus Focus Bond Focus
Fund Fund Fund Fund
===================== ==================== ==================== ====================
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 410,484 $ 59,115 $ 3,928 $ 9,605
Mortality and Expense Charges (69,930) (93,409) (934) (3,510)
--------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 340,554 (34,294) 2,994 6,095
--------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (36,553) 44,649 (186) (8)
Net Unrealized Gains (Losses) (596,211) 93,878 (1,692) (2,285)
--------------------- -------------------- -------------------- --------------------
Net Realized and Unrealized Gains (Losses) (632,764) 138,527 (1,878) (2,293)
--------------------- -------------------- -------------------- --------------------
Increase (Decrease)in Net Assets
Resulting from Operations (292,210) 104,233 1,116 3,802
--------------------- -------------------- -------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 180,889 94,542 7,560 1,240
Transfer of Contract Owner Withdrawals (143,364) (511,706) (1,427) (7,440)
Transfers In (Out) - Net 2,423,501 7,133,453 172,931 703,075
Transfer of Contract Maintenance Charges (1,796) (2,002) (4) (20)
--------------------- -------------------- -------------------- --------------------
Increase in Net Assets
Resulting from Principal Transactions 2,459,230 6,714,287 179,060 696,855
--------------------- -------------------- -------------------- --------------------
Increase in Net Assets 2,167,020 6,818,520 180,176 700,657
Net Assets Beginning Balance 3,368,586 2,521,722 0 0
--------------------- -------------------- -------------------- --------------------
Net Assets Ending Balance $ 5,535,606 $ 9,340,242 $ 180,176 $ 700,657
===================== ==================== ==================== ====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
=====================
Developing
Capital Markets
Focus
Fund
=====================
<S> <C>
Investment Income (Loss):
Reinvested Dividends $ 0
Mortality and Expense Charges (8,427)
---------------------
Net Investment Income (Loss) (8,427)
---------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (562)
Net Unrealized Gains (Losses) (145,036)
---------------------
Net Realized and Unrealized Gains (Losses) (145,598)
---------------------
Increase (Decrease)in Net Assets
Resulting from Operations (154,025)
---------------------
Changes from Principal Transactions:
Transfer of Net Premiums 125,515
Transfer of Contract Owner Withdrawals (4,038)
Transfers In (Out) - Net 1,672,311
Transfer of Contract Maintenance Charges (136)
---------------------
Increase in Net Assets
Resulting from Principal Transactions 1,793,652
---------------------
Increase in Net Assets 1,639,627
Net Assets Beginning Balance 0
---------------------
Net Assets Ending Balance $ 1,639,627
=====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Domestic High
Money Prime Current
Market Bond Income
Fund Fund Fund
==================== ==================== ====================
<S> <C> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1994 1,725,685.7 2,939,785.1 1,116,584.4
-------------------- -------------------- --------------------
Total Units Outstanding at December 31, 1994 1,725,685.7 2,939,785.1 1,116,584.4
==================== ==================== ====================
Accumulation Unit Value at December 31, 1994 $ 10.64 $ 11.21 $ 12.18
==================== ==================== ====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Quality Equity Flexible
Equity Growth Strategy
Fund Fund Fund
==================== ==================== ====================
<S> <C> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1994 2,368,801.5 1,048,612.8 1,113,369.6
-------------------- -------------------- --------------------
Total Units Outstanding at December 31, 1994 2,368,801.5 1,048,612.8 1,113,369.6
==================== ==================== ====================
Accumulation Unit Value at December 31, 1994 $ 11.38 $ 9.90 $ 11.22
==================== ==================== ====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Natural Global
American Resources Strategy
Balanced Focus Focus
Fund Fund Fund
==================== ==================== ====================
<S> <C> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1994 1,205,254.3 190,785.7 2,924,265.0
-------------------- -------------------- --------------------
Total Units Outstanding at December 31, 1994 1,205,254.3 190,785.7 2,924,265.0
==================== ==================== ====================
Accumulation Unit Value at December 31, 1994 $ 11.21 $ 11.30 $ 11.78
==================== ==================== ====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Global International World
Utility Equity Income
Focus Focus Focus
Fund Fund Fund
==================== ==================== ====================
<S> <C> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1994 785,888.0 1,313,991.8 556,854.0
-------------------- -------------------- --------------------
Total Units Outstanding at December 31, 1994 785,888.0 1,313,991.8 556,854.0
==================== ==================== ====================
Accumulation Unit Value at December 31, 1994 $ 9.58 $ 10.87 $ 9.94
==================== ==================== ====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Basic Intermediate
Value International Government
Focus Bond Bond
Fund Fund Fund
==================== ==================== ====================
<S> <C> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1994 850,329.6 18,139.0 69,485.0
-------------------- -------------------- --------------------
Total Units Outstanding at December 31, 1994 850,329.6 18,139.0 69,485.0
==================== ==================== ====================
Accumulation Unit Value at December 31, 1994 $ 10.98 $ 9.93 $ 10.08
==================== ==================== ====================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
====================
Developing
Capital Markets
Focus
Fund
====================
<S> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1994 174,741.4
--------------------
Total Units Outstanding at December 31, 1994 174,741.4
====================
Accumulation Unit Value at December 31, 1994 $ 9.38
====================
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
ML Life Insurance Company of New York:
We have audited the accompanying statement of net assets of
ML of New York Variable Annuity Separate Account B (the
"Account") as of December 31, 1995 and the related
statements of operations and changes in net assets for each
of the two years in the period then ended. These financial
statements are the responsibility of the management of ML
Life Insurance Company of New York. Our responsibility is to
express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included
confirmation of mutual fund securities owned at December 31,
1995, by correspondence with the funds' custodian. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial position of the Account
at December 31, 1995 and the results of its operations and
the changes in its net assets for the above periods in
conformity with generally accepted accounting principles.
/S/ Deloitte & Touche LLP
January 18, 1996
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT B
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF NET ASSETS AT DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Market
Cost Shares Value
======================= ======================= =======================
<S> <C> <C> <C>
ASSETS:
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Reserve Assets Fund $ 1,288,508 1,288,508 $ 1,288,508
----------------------- -----------------------
TOTAL ASSETS $ 1,288,508 1,288,508
======================= -----------------------
LIABILITIES:
Due to ML Life Insurance Company 158
-----------------------
TOTAL LIABILITIES 158
-----------------------
NET ASSETS $ 1,288,350
=======================
</TABLE>
See Notes to Financial Statements
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT B
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
================================================================================
<TABLE>
<CAPTION>
1995 1994
======================= =======================
<S> <C> <C>
Investment Income:
Reinvested Dividends $ 72,245 $ 58,513
Mortality and Expense Charges (Note 3) (8,565) (10,367)
----------------------- -----------------------
Net Investment Income 63,680 48,146
----------------------- -----------------------
Increase in Net Assets
Resulting from Operations 63,680 48,146
----------------------- -----------------------
Changes from Principal Transactions:
Transfer of Net Premiums 350,271 919,914
Transfer of Contract Owner Withdrawals (1,577,588) (1,612,429)
Transfers In - Net 1,156,573 444,337
Transfer of Contract Maintenance Charges (Note 3) (412) (349)
----------------------- -----------------------
Decrease in Net Assets
Resulting from Principal Transactions (71,156) (248,527)
----------------------- -----------------------
Decrease in Net Assets (7,476) (200,381)
Net Assets Beginning Balance 1,295,826 1,496,207
----------------------- -----------------------
Net Assets Ending Balance $ 1,288,350 $ 1,295,826
======================= =======================
</TABLE>
<TABLE>
<CAPTION>
Division Investing In
===============================================
Reserve Reserve
Assets Assets
Fund Fund
1995 1995
======================= =======================
<S> <C> <C>
Accumulated Units Allocable to Contracts in
Accumulation Period at December 31, 114,114.3 120,482.2
----------------------- -----------------------
Total Units Outstanding at December 31, 114,114.3 120,482.2
======================= =======================
Accumulation Unit Value at December 31, $ 11.29 $ 10.76
======================= =======================
</TABLE>
See Notes to Financial Statements
<PAGE>
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT B
ML LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
1. ML of New York Variable Annuity Separate Account B
("Separate Account B"), a separate account of ML Life
Insurance Company of New York ("ML of New York"), was
established to support the operations with respect to
certain variable annuity contracts ("Contracts").
Separate Account B is governed by New York State
Insurance Law. ML of New York is an indirect wholly-
owned subsidiary of Merrill Lynch & Co., Inc.
("Merrill"). Separate Account B is registered as a unit
investment trust under the Investment Company Act of 1940
and consists of one investment division. The investment
division invests in the securities of the Reserve Assets
Fund of the Merrill Lynch Variable Series Funds, Inc.
("Series Funds"). This portfolio of the Series Funds
seeks preservation of capital, liquidity, and the highest
possible current income consistent with the foregoing
objectives by investing in short-term money market
securities. The Series Funds receives investment advice
from Merrill Lynch Asset Management, L.P., an indirect
subsidiary of Merrill, for a fee calculated at an
effective annual rate of .50% on the first $500 million
of net assets of the mutual fund portfolio with
decreasing rates on increments of net assets above that
amount.
The assets of Separate Account B are registered in the
name of ML of New York. The portion of Separate Account
B's assets applicable to the Contracts are not chargeable
with liabilities arising out of any other business ML of
New York may conduct.
The change in net assets accumulated in Separate Account
B provides the basis for the periodic determination of
the amount of increased or decreased benefits under the
Contracts.
The net assets may not be less than the amount required
under New York State Insurance Law to provide for death
benefits (without regard to the minimum death benefit
guarantee) and other Contract benefits.
To facilitate comparisons with the current year, certain
amounts in the prior year have been reclassified.
2. The following is a summary of significant accounting
policies of Separate Account B:
Investments in the divisions are included in the
statement of net assets at the net asset value of the
Series Funds shares held.
Dividend income is recognized on the ex-dividend date.
All dividends are automatically reinvested.
The operations of Separate Account B are included in the
Federal income tax return of ML of New York. Under the
provisions of the Contracts, ML of New York has the right
to charge Separate Account B for any Federal income tax
attributable to Separate Account B. No charge is
currently being made against Separate Account B for such
tax since, under current tax law, ML of New York pays no
tax on investment income and capital gains reflected in
variable annuity contract reserves. However, ML of New
York retains the right to charge for any Federal income
tax incurred which is attributable to Separate Account B
if the law is changed. Charges for state and local
taxes, if any, attributable to Separate Account B may
also be made.
3. ML of New York assumes mortality and expense risks
related to Contracts investing in Separate Account B and
deducts a daily charge at a rate of .65% (on an annual
basis) of the net assets of Separate Account B to cover
these risks.
ML of New York deducts a contract maintenance charge of
$40 for each Contract on each Contract's anniversary that
occurs on or prior to the annuity date. It is also
deducted when the Contract is surrendered if it is
surrendered on any date other than a contract anniversary
date. The contract maintenance charge is borne by
Contract owners by redeeming accumulation units with a
value equal to the charge. This charge is waived on all
Contracts with a Contract value equal to or greater than
$50,000 on the date the charge would otherwise be
deducted.
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
ML Life Insurance Company of New York:
We have audited the accompanying balance sheets of ML Life
Insurance Company of New York (the "Company"), a wholly-owned
subsidiary of Merrill Lynch Insurance Group, Inc., as of December
31, 1995 and 1994 and the related statements of earnings,
stockholder's equity and cash flows for each of the three years
in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Company at
December 31, 1995 and 1994 and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted
accounting principles.
/s/Deloitte & Touche LLP
February 26, 1996
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
(Dollars in Thousands)
=======================================================================
<TABLE>
<CAPTION>
ASSETS 1995 1994
------------ ------------
<S> <C> <C>
INVESTMENTS:
Fixed maturity securities available for sale, at estimated fair
value
(amortized cost: 1995 - $295,403; 1994 - $297,551) $ 307,596 $ 286,078
Equity securities available for sale, at estimated fair value
(cost: 1995 - $3,017; 1994 - $3,987) 3,534 4,301
Mortgage loans on real estate 4,032 7,941
Policy loans on insurance contracts 82,073 77,827
------------ ------------
Total Investments 397,235 376,147
CASH AND CASH EQUIVALENTS 17,387 20,915
ACCRUED INVESTMENT INCOME 6,603 7,354
DEFERRED POLICY ACQUISITION COSTS 30,922 31,031
FEDERAL INCOME TAXES - DEFERRED 3,622 9,749
REINSURANCE RECEIVABLES 493 605
OTHER ASSETS 2,653 3,265
SEPARATE ACCOUNTS ASSETS 544,432 471,656
------------ ------------
TOTAL ASSETS $ 1,003,347 $ 920,722
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
=======================================================================
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY 1995 1994
------------ ------------
<S> <C> <C>
LIABILITIES:
POLICY LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 337,137 $ 340,882
Claims and claims settlement expenses 2,901 4,314
------------ ------------
Total policy liabilities and accruals 340,038 345,196
OTHER POLICYHOLDER FUNDS 739 1,532
OTHER LIABILITIES 3,112 2,113
FEDERAL INCOME TAXES - CURRENT 185 170
PAYABLE TO AFFILIATES - NET 4,062 4,242
SEPARATE ACCOUNTS LIABILITIES 544,432 471,656
------------ ------------
Total Liabilities 892,568 824,909
------------ ------------
STOCKHOLDER'S EQUITY:
Common stock, $10 par value - 220,000 shares
authorized, issued and outstanding 2,200 2,200
Additional paid-in capital 83,006 83,006
Retained earnings 24,034 13,970
Net unrealized investment gain (loss) 1,539 (3,363)
------------ ------------
Total Stockholder's Equity 110,779 95,813
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,003,347 $ 920,722
============ ============
</TABLE>
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
=======================================================================
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 29,819 $ 32,679 $ 50,661
Net realized investment gains (losses) (265) (2,218) 6,131
Policy charge revenue 10,864 10,339 8,387
--------- --------- ---------
Total Revenues 40,418 40,800 65,179
--------- --------- ---------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account
balances 17,375 22,691 44,425
Market value adjustment expense 238 132 642
Policy benefits (net of reinsurance recoveries: 1995 - $917
1994 - $715; 1993 - $2,192) 528 1,620 1,729
Reinsurance premium ceded 1,227 1,240 1,182
Amortization of deferred policy acquisition costs 1,300 4,141 9,523
Insurance expenses and taxes 4,508 3,685 5,278
--------- --------- ---------
Total Benefits and Expenses 25,176 33,509 62,779
--------- --------- ---------
Earnings Before Federal Income
Tax Provision 15,242 7,291 2,400
--------- --------- ---------
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 1,692 (213) 2,842
Deferred 3,486 2,031 (2,250)
--------- --------- ---------
Total Federal Income Tax Provision 5,178 1,818 592
--------- --------- ---------
NET EARNINGS $ 10,064 $ 5,473 $ 1,808
========= ========= =========
</TABLE>
See notes to financial statements.
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
=======================================================================
<TABLE>
<CAPTION>
Net
Additional unrealized Total
Common paid-in Retained investment stockholder's
stock capital earnings gain (loss) equity
--------- ------------ ----------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 $ 2,200 $ 83,006 $ 6,689 $ 352 $ 92,247
Net earnings 1,808 1,808
Net unrealized investment loss (1,279) (1,279)
--------- ------------ ----------- --------------- -----------------
BALANCE, DECEMBER 31, 1993 2,200 83,006 8,497 (927) 92,776
Net earnings 5,473 5,473
Net unrealized investment loss (2,436) (2,436)
--------- ------------ ----------- --------------- -----------------
BALANCE, DECEMBER 31, 1994 2,200 83,006 13,970 (3,363) 95,813
Net earnings 10,064 10,064
Net unrealized investment gain 4,902 4,902
--------- ------------ ----------- --------------- -----------------
BALANCE, DECEMBER 31, 1995 $ 2,200 $ 83,006 $ 24,034 $ 1,539 $ 110,779
========= ============ =========== =============== =================
</TABLE>
See notes to financial statements.
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
=======================================================================
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 10,064 $ 5,473 $ 1,808
Adjustments to reconcile net earnings to net
cash and cash equivalents provided (used)
by operating activities:
Amortization of deferred policy acquisition
costs 1,300 4,142 9,523
Capitalization of policy acquisition costs (4,368) (7,142) (7,252)
Amortization and accretion of investments (434) (312) 918
Net realized investment (gains) losses 265 2,218 (6,131)
Interest credited to policyholders' account balances 17,375 22,691 44,425
Provision (benefit) for deferred Federal
income tax 3,486 2,031 (2,250)
Cash and cash equivalents provided (used) by
changes in operating assets and liabilities:
Accrued investment income 751 2,810 3,857
Claims and claims settlement expenses (1,413) (1,300) 2,273
Federal income taxes - current 15 (694) 173
Other policyholder funds (793) 332 1,129
Payable to affiliates - net (180) (981) (1,923)
Policy loans (4,246) (4,447) (7,343)
Other, net 1,723 (1,947) 2,644
------------ ------------ ------------
Net cash and cash equivalents provided
by operating activities 23,545 22,874 41,851
------------ ------------ ------------
INVESTING ACTIVITIES:
Fixed maturity securities sold 68,382 123,518 166,033
Fixed maturity securities matured 38,420 92,499 280,484
Fixed maturity securities purchased (103,268) (73,016) (251,522)
Equity securities available for sale purchased (300) (29) (109)
Equity securities available for sale sold 354 4,665 2,885
Mortgage loans on real estate principal payments received 0 8,998 4,425
Mortgage loans on real estate sold 3,608 0 0
------------ ------------ ------------
Net cash and cash equivalents provided by
investing activities 7,196 156,635 202,196
------------ ------------ ------------
</TABLE>
(Continued)
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Concluded) (Dollars In Thousands)
=======================================================================
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits $ 43,191 $ 56,297 $ 33,953
Withdrawals (net of transfers to/from Separate Accounts) (77,460) (242,355) (291,658)
------------ ------------ ------------
Net cash and cash equivalents used
by financing activities (34,269) (186,058) (257,705)
------------ ------------ ------------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (3,528) (6,549) (13,658)
CASH AND CASH EQUIVALENTS:
Beginning of year 20,915 27,464 41,122
------------ ------------ ------------
End of year $ 17,387 $ 20,915 $ 27,464
============ ============ ============
Supplementary Disclosure of Cash Flow Information:
Cash paid for:
Federal income taxes $ 1,677 $ 482 $ 2,668
Intercompany interest 447 352 397
</TABLE>
See notes to financial statements.
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
=======================================================================
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Reporting: ML Life Insurance Company of New York (the
"Company") is a wholly-owned subsidiary of Merrill Lynch
Insurance Group, Inc. ("MLIG"). The Company is an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("Merrill
Lynch & Co.").
The Company sells non-participating life insurance and annuity
products which comprise one business segment. The primary
products that the Company currently markets are immediate
annuities, market value adjusted annuities, variable life
insurance and variable annuities. The Company is licensed to
sell insurance in nine states, however, it currently limits its
marketing activities to the State of New York. The Company
markets its products solely through the retail network of
Merrill Lynch, Pierce, Fenner & Smith, Incorporated ("MLPF&S"),
a wholly-owned subsidiary of Merrill Lynch & Co.
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles for
stock life insurance companies. The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition: Revenues for the Company's interest
sensitive life, interest sensitive annuity, variable life and
variable annuity products consist of policy charges for the
cost of insurance, deferred sales charges, policy
administration charges and/or withdrawal charges assessed
against policyholders' account balances during the period.
Policyholders' Account Balances: Liabilities for the Company's
universal life type contracts, including its life insurance and
annuity products, are equal to the full accumulation value of
such contracts as of the valuation date plus deficiency
reserves for certain products. Interest crediting rates for
the Company's fixed rate products are as follows:
Interest sensitive life products 4.00% - 5.50%
Interest sensitive deferred annuities 3.80% - 8.23%
Immediate annuities 4.00% - 10.0%
These rates may be changed at the option of the Company,
subject to minimum guarantees, after initial guaranteed rates
expire.
Liabilities for unpaid claims equal the death benefit for those
claims which have been reported to the Company and an estimate
based upon prior experience for those claims which are
unreported as of the valuation date.
Reinsurance: In the normal course of business, the Company
seeks to limit its exposure to loss on any single insured life
and to recover a portion of benefits paid by ceding reinsurance
to other insurance enterprises or reinsurers under indemnity
reinsurance agreements, primarily excess coverage and
coinsurance agreements. The maximum amount of mortality risk
retained by the Company is approximately $500 on a single life.
<PAGE>
Indemnity reinsurance agreements do not relieve the Company
from its obligations to policyholders. Failure of reinsurers
to honor their obligations could result in losses to the
Company. The Company regularly evaluates the financial
condition of its reinsurers so as to minimize its exposure to
significant losses from reinsurer insolvencies. The Company
holds collateral under reinsurance agreements in the form of
letters of credit and funds withheld totaling $179 that can be
drawn upon for delinquent reinsurance recoverables.
As of December 31, 1995, the Company had life insurance in-
force which was ceded to other life insurance companies of
$151,317.
Deferred Policy Acquisition Costs: Policy acquisition costs
for life and annuity contracts are deferred and amortized based
on the estimated future gross profits for each group of
contracts. These future gross profit estimates are subject to
periodic evaluation by the Company, with necessary revisions
applied against amortization to date. It is reasonably possible
that estimates of future gross profits could be reduced in the
future, resulting in a material reduction in the carrying
amount of deferred policy acquisition costs.
Policy acquisition costs are principally commissions and a
portion of certain other expenses relating to policy
acquisition, underwriting and issuance, which are primarily
related to and vary with the production of new business.
Certain costs and expenses reported in the statements of
earnings are net of amounts deferred. Policy acquisition costs
can also arise from the acquisition or reinsurance of existing
in-force policies from other insurers. These costs include
ceding commissions and professional fees related to the
reinsurance assumed.
Included in deferred policy acquisition costs are those costs
related to the acquisition by assumption reinsurance of
insurance contracts from unaffiliated insurers. The deferred
costs are amortized in proportion to the estimated future gross
profits over the anticipated life of the acquired insurance
contracts utilizing an interest methodology.
<PAGE>
The Company has entered into an assumption reinsurance
agreement with an unaffiliated insurer. The acquisition costs
relating to this agreement are being amortized over a twenty-
year period using an effective interest rate of 9.01%. This
reinsurance agreement provides for payment of contingent ceding
commissions based upon the persistency and mortality experience
of the insurance contracts assumed. Any payments made for the
contingent ceding commissions will be capitalized and amortized
using an identical methodology as that used for the initial
acquisition costs. The following is a reconciliation of the
acquisition costs related to the reinsurance agreement for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
--------- ---------- ---------
<S> <C> <C> <C>
Beginning balance $ 14,923 $ 15,614 $ 16,925
Capitalized amounts 1,553 1,447 843
Interest accrued 2,138 1,407 1,478
Amortization (960) (3,545) (3,632)
--------- ---------- ---------
Ending balance $ 17,654 $ 14,923 $ 15,614
========= ========== =========
</TABLE>
The following table presents the expected amortization, net of
interest accrued, of these deferred acquisition costs over the
next five years. The amortization may be adjusted based on
periodic evaluation of the expected gross profits on the
reinsured policies.
1996 $2,110
1997 1,615
1998 1,080
1999 944
2000 852
<PAGE>
Investments: In accordance with Statement of Financial
Accounting Standards ("SFAS") No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS No. 115"), the
Company classifies its investments in fixed maturity securities
and equity securities as available for sale securities. These
securities may be sold for the Company's general liquidity
needs, asset/liability management strategy, credit dispositions
and investment opportunities. These securities are carried at
estimated fair value with unrealized gains and losses included
in stockholder's equity. If a decline in value of a security
is determined by management to be other than temporary, the
carrying value is adjusted to the estimated fair value at the
date of this determination and recorded in the net realized
investment gains (losses) caption of the statement of earnings.
For fixed maturity securities, premiums are amortized to the
earlier of the call or maturity date, discounts are accreted to
the maturity date and interest income is accrued daily. For
equity securities, dividends are recognized on the ex-dividend
date. Realized gains and losses on the sale or maturity of the
investments are determined on the basis of identified cost.
<PAGE>
Fixed maturity securities may contain securities which are
considered high yield. The Company defines high yield fixed
maturity securities as unsecured corporate debt obligations
which do not have a rating equivalent to Standard and Poor's
(or similar rating agency) BBB or higher, and are not
guaranteed by an agency of the federal government. Probable
losses are recognized in the period that a decline in value is
determined to be other than temporary.
Mortgage loans on real estate are stated at unpaid principal
balances net of valuation allowances. Such valuation
allowances are based on the decline in value expected to be
realized on those mortgage loans which may not be collectible
in full. In establishing valuation allowances management
considers, among other things, the estimated fair value of the
underlying collateral.
The Company recognizes income from mortgage loans on real
estate based on the cash payment interest rate of the loan,
which may be different from the accrual interest rate of the
loan for certain outstanding mortgage loans. The Company will
recognize a realized gain at the date of the satisfaction of
the loan at contractual terms for loans where there is a
difference between the cash payment interest rate and the
accrual interest rate. For all loans, the Company stops
accruing income when an interest payment default either occurs
or is probable.
During 1995 the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" ("SFAS No. 114") and SFAS
No. 118 "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures", which was an amendment to
SFAS No. 114. SFAS No. 114, as amended, requires that for
impaired loans, the impairment shall be measured based on the
present value of expected future cash flows discounted at the
loan's effective interest rate or the fair value of the
collateral. Impairments of mortgage loans on real estate are
established as valuation allowances and recorded to net
realized investment gains or losses. There was no impact on
either financial position or earnings as a result of adopting
SFAS No. 114.
The Company has previously made commercial mortgage loans
collateralized by real estate. The return on and the ultimate
recovery of these loans and investments are generally dependent
on the successful operation, sale or refinancing of the real
estate. The Company employs a system to monitor the effects of
current and expected real estate market conditions and other
factors when assessing the collectability of mortgage loans.
When, in management's judgment, these assets are impaired,
appropriate losses are recorded. Such estimates necessarily
include assumptions, which may include anticipated improvements
in selected market conditions for real estate, which may or may
not occur. The more significant assumptions management
considers involve estimates of the following: lease absorption
and sales rates; real estate values and rates of return;
operating expenses; required capital improvements; inflation;
and sufficiency of any collateral independent of the real
estate. Management believes that the carrying value
approximates the fair value of these investments.
<PAGE>
Policy loans on insurance contracts are stated at unpaid
principal balances.
Federal Income Taxes: The results of operations of the Company
are included in the consolidated Federal income tax return of
Merrill Lynch & Co. The Company has entered into a tax-sharing
agreement with Merrill Lynch & Co. whereby the Company will
calculate its current tax provision based on its operations.
Under the agreement, the Company periodically remits to Merrill
Lynch & Co. its current federal tax liability.
The Company accounts for Federal income taxes in compliance
with SFAS No. 109 "Accounting for Income Taxes" ("SFAS No.
109") which requires an asset and liability method in recording
income taxes on all transactions that have been recognized in
the financial statements. SFAS No. 109 provides that deferred
taxes be adjusted to reflect tax rates at which future tax
liabilities or assets are expected to be settled or realized.
Separate Accounts: The Separate Accounts are established in
conformity with New York State insurance law, the Company's
domiciliary state, and are generally not chargeable with
liabilities that arise from any other business of the Company.
Separate Accounts assets may be subject to General Account
claims only to the extent the value of such assets exceeds the
Separate Accounts liabilities.
Assets and liabilities of the Separate Accounts, representing
net deposits and accumulated net investment earnings less fees,
held primarily for the benefit of policyholders, are shown as
separate captions in the balance sheets.
Statements of Cash Flows: For the purpose of reporting cash
flows, cash and cash equivalents include cash on hand and on
deposit and short-term investments with original maturities of
three months or less.
Reclassifications: To facilitate comparisons with the current
year, certain amounts in the prior years have been
reclassified.
NOTE 2. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments which approximates
the estimated fair value of these financial instruments as of
December 31 were:
<TABLE>
<CAPTION>
1995 1994
<S> ---------- ----------
<C> <C>
Assets:
Fixed maturity securities available for sale (1) $ 307,596 $ 286,078
Equity securities available for sale (1) 3,534 4,301
Mortgage loans on real estate (2) 4,032 7,941
Policy loans on insurance contracts (3) 82,073 77,827
Cash and cash equivalents (4) 17,387 20,915
Separate Accounts assets (5) 544,432 471,656
---------- ----------
Total financial instruments recorded as assets $ 959,054 $ 868,718
========== ==========
</TABLE>
(1) For publicly traded securities, the estimated fair value
is determined using quoted market prices. For securities
without a readily ascertainable market value, the Company
has determined an estimated fair value using a discounted
cash flow approach, including provision for credit risk,
based upon the assumption that such securities will be
held to maturity. Such estimated fair values do not
necessarily represent the values for which these
securities could have been sold at the dates of the
balance sheets. At December 31, 1995 and 1994 securities
without a readily ascertainable market value, having an
amortized cost of $63,071 and $81,899, had an estimated
fair value of $66,367 and $82,470, respectively.
<PAGE>
(2) The estimated fair value of mortgage loans on real estate
approximates the carrying value. See Note 1 for a
discussion of the Company's valuation process.
(3) The Company estimates the fair value of policy loans as
equal to the book value of the loans. Policy loans are
fully collateralized by the account value of the
associated insurance contracts, and the spread between the
policy loan interest rate and the interest rate credited
to the account value held as collateral is fixed.
(4) The estimated fair value of cash and cash equivalents
approximates the carrying value.
(5) Assets held in the Separate Accounts are carried at quoted
market values.
NOTE 3: INVESTMENTS
The amortized cost (cost for equity securities) and estimated
fair value of investments in fixed maturity securities and
equity securities as of December 31 were:
<TABLE>
<CAPTION>
1995
----
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Fixed maturity securities available for sale:
Corporate debt $ 225,859 $ 10,251 $ 493 $ 235,617
Mortgage-backed securities 64,347 2,126 75 66,398
U.S. government and agencies 5,197 384 0 5,581
---------- ------------ ------------ ------------
Total fixed maturity securities
available for sale $ 295,403 $ 12,761 $ 568 $ 307,596
========== ============ ============ ============
Equity securities available for sale:
Common stocks $ 1,766 $ 135 $ 767 $ 1,134
Non-redeemable preferred stocks 1,251 1,149 0 2,400
---------- ------------ ------------ ------------
Total equity securities available for sale $ 3,017 $ 1,284 $ 767 $ 3,534
========== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
1994
----
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Fixed maturity securities available for sale:
Corporate debt $ 215,593 $ 1,766 $ 9,393 $ 207,966
Mortgage-backed securities 77,806 586 4,184 74,208
U.S. government and agencies 4,152 177 425 3,904
---------- ------------ ------------ -------------
Total fixed maturity securities
available for sale $ 297,551 $ 2,529 $ 14,002 $ 286,078
========== ============ ============ =============
Equity securities available for sale:
Common stocks $ 2,281 $ 72 $ 1,165 $ 1,188
Non-redeemable preferred stocks 1,706 1,782 375 3,113
---------- ------------ ------------ -------------
Total equity securities available for sale $ 3,987 $ 1,854 $ 1,540 $ 4,301
========== ============ ============ =============
</TABLE>
<PAGE>
The amortized cost and estimated fair value of fixed maturity
securities available for sale at December 31, 1995 by
contractual maturity were:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
---------- -----------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 23,816 $ 23,917
Due after one year through five years 117,787 122,853
Due after five years through ten years 76,228 80,204
Due after ten years 13,225 14,224
---------- -----------
231,056 241,198
Mortgage-backed securities 64,347 66,398
---------- -----------
Total fixed maturity securities
available for sale $ 295,403 $ 307,596
========= ===========
</TABLE>
Fixed maturity securities not due at a single maturity date
have been included in the preceding table in the year of final
maturity. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment
penalties.
The amortized cost and estimated fair value of fixed maturity
securities available for sale at December 31, 1995 by rating
agency equivalent were:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
---------- ------------
<S> <C> <C>
AAA $ 58,094 $ 60,123
AA 35,316 36,807
A 67,228 69,893
BBB 122,776 128,606
Non-investment grade 11,989 12,167
---------- -----------
Total fixed maturity securities
available for sale $ 295,403 $ 307,596
========== ===========
</TABLE>
The Company has recorded certain adjustments to deferred policy
acquisition costs and policyholders' account balances in
conjunction with adjustments required by SFAS No. 115. The
Company adjusts those assets and liabilities that would have
been adjusted had the unrealized investment gains or losses
from securities classified as available for sale actually been
realized with corresponding credits or charges reported
directly to shareholder's equity. The following reconciles the
net unrealized investment gain or (loss) as of December 31:
<PAGE>
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Assets:
Fixed maturity securities available for sale $ 12,193 $ (11,473)
Equity securities available for sale 517 314
Deferred policy acquisition costs 0 3,177
Federal income taxes - deferred (829) 1,812
---------- ----------
11,881 (6,170)
---------- ----------
Liabilities:
Policyholders' account balances 10,342 (2,807)
---------- ----------
Stockholder's equity:
Net unrealized investment gain (loss) $ 1,539 $ (3,363)
========== ==========
</TABLE>
Proceeds and gross realized investment gains and losses from
the sale of fixed maturity securities available for sale and
held to maturity for the years ended December 31 were:
<TABLE>
<CAPTION>
1995 1994 1993
--------- ---------- ----------
<S> <C> <C> <C>
Proceeds $ 68,352 $ 123,518 $ 166,033
Gross realized investment gains 1,605 6,793 4,546
Gross realized investment losses 620 8,560 438
</TABLE>
The Company had investment securities of $1,130 and $982 held
on deposit with insurance regulatory authorities at December
31, 1995 and 1994, respectively.
The Company's investment in mortgage loans on real estate are
principally collateralized by commercial real estate. The
Company's investment in commercial real estate mortgage loans
at December 31, 1995, as measured by the outstanding principal
balance, are for properties located in California ($2,032 or
50.4%) and Pennsylvania ($2,000 or 49.6%).
The carrying value and established valuation allowances of
impaired mortgage loans on real estate as of December 31, 1994
were $3,939 and $1,536, respectively. The Company had no
impaired mortgage loans on real estate as of December 31, 1995.
Additional information on impaired loans for the years ended
December 31 follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Average investment in impaired loans $ 3,650 $ 5,475 $ 5,475
Investment income recognized (cash basis) 233 275 333
</TABLE>
<PAGE>
Net investment income arose from the following sources for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
--------- ---------- ----------
<S> <C> <C> <C>
Fixed maturity securities $ 25,046 $ 28,255 $ 45,523
Equity securities available for sale 0 0 113
Mortgage loans on real estate 686 975 1,924
Policy loans 3,903 3,680 3,487
Cash equivalents 1,103 659 476
--------- ---------- ----------
Gross investment income 30,738 33,569 51,523
Less investment expenses (919) (890) (862)
--------- ---------- ----------
Net investment income $ 29,819 $ 32,679 $ 50,661
========= ========== ==========
</TABLE>
Net realized investment gains (losses), including changes in
valuation allowances for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------- --------- --------
<S> <C> <C> <C>
Fixed maturity securities $ 985 $ (1,767) $ 4,108
Equity securities available for sale (916) 237 2,081
Mortgage loans on real estate (334) (688) (58)
-------- --------- --------
Net realized investment gains (losses) $ (265) $ (2,218) $ 6,131
======== ========= ========
</TABLE>
The following is a reconciliation of the change in valuation
allowances which have been established to reflect other than
temporary declines in estimated fair value of the following
classifications of investments for the years ended December 31:
<TABLE>
<CAPTION>
Balance at Additions Balance at
Beginning Charged to Write - End
of Year Operations Downs of Year
---------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Mortgage loans on real estate
1995 $ 1,536 $ 0 $ 1,536 $ 0
1994 848 688 0 1,536
1993 790 58 0 848
</TABLE>
The Company held no investments at December 31, 1995 which have
been non-income producing for the preceding twelve months.
<PAGE>
NOTE 4: FEDERAL INCOME TAXES
The following is a reconciliation of the provision for income
taxes based on income before taxes, computed using the Federal
statutory tax rate, with the provision for income taxes for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Provision for income taxes computed at Federal
statutory rate $ 5,334 $ 2,552 $ 840
State corporate income taxes (91) 0 0
Decrease in income taxes resulting from:
Federal tax rate increase 0 0 (227)
Dividend received deduction (31) (670) 0
Other (34) (64) (21)
-------- -------- --------
Federal income tax provision $ 5,178 $ 1,818 $ 592
======== ======== ========
</TABLE>
The Federal statutory rate for each of the three years in the
period ended December 31, 1995 was 35%.
The Company provides for deferred income taxes resulting from
temporary differences which arise from recording certain
transactions in different years for income tax reporting
purposes than for financial reporting purposes. The sources of
these differences and the tax effect of each are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Deferred policy acquisition cost $ 1,239 $ 887 $ (1,184)
Policyholders' account balances 738 833 (969)
Investment adjustments 1,445 1,117 (100)
Other 64 (806) 3
--------- --------- ---------
Deferred Federal income tax
provision (benefit) $ 3,486 $ 2,031 $ (2,250)
========= ========= =========
</TABLE>
Deferred tax assets and liabilities as of December 31 are
determined as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Deferred tax assets:
Policyholders' account balances $ 8,277 $ 9,015
Net unrealized investment loss 0 1,812
Investment adjustments 2,581 4,026
Other 2 66
--------- ---------
Total deferred tax assets 10,860 14,919
--------- ---------
Deferred tax liabilities:
Deferred policy acquisition costs 6,409 5,170
Net unrealized investment gain 829 0
--------- ---------
Total deferred tax liabilities 7,238 5,170
--------- ---------
Net deferred tax asset $ 3,622 $ 9,749
========= =========
</TABLE>
The Company anticipates that all deferred tax assets will be
realized, therefore no valuation allowance has been provided.
<PAGE>
NOTE 5: RELATED PARTY TRANSACTIONS
The Company and MLIG are parties to a service agreement whereby
MLIG has agreed to provide certain data processing, legal,
actuarial, management, advertising and other services to the
Company. Expenses incurred by MLIG in relation to this service
agreement are reimbursed by the Company on an allocated cost
basis. Charges billed to the Company by MLIG pursuant to the
agreement were $4,415, $4,025 and $5,688 for 1995, 1994 and 1993
respectively. The Company is allocated interest expense on its
accounts payable to MLIG which approximates the daily Federal
funds rate. Total intercompany interest paid was $88, $50 and $69
for 1995, 1994 and 1993, respectively.
The Company and Merrill Lynch Asset Management, L.P. ("MLAM") are
parties to a service agreement whereby MLAM has agreed to provide
certain invested asset management services to the Company. The
Company pays a fee to MLAM for these services through the MLIG
service agreement. Charges attributable to this agreement and
allocated to the Company by MLIG were $206, $203 and $265 for
1995, 1994 and 1993, respectively.
The Company has a general agency agreement with Merrill Lynch
Life Agency Inc. ("MLLA") whereby registered representatives of
MLPF&S, who are the Company's licensed insurance agents, solicit
applications for contracts to be issued by the Company. MLLA is
paid commissions for the contracts sold by such agents.
Commissions paid to MLLA were $2,424, $5,329 and $4,927 for 1995,
1994 and 1993, respectively. Substantially all of these
commissions were capitalized as deferred policy acquisition costs
and are being amortized in accordance with the policy discussed
in Note 1.
In connection with the acquisition of a block of variable life
insurance business from Monarch Life Insurance Company ("Monarch
Life"), the Company borrowed funds from Merrill Lynch & Co. to
partially finance the transaction. As of December 31, 1995 and
1994, the outstanding balance of these loans was $3,075 and
$4,336, respectively. Repayments made on these loans during
1995, 1994, and 1993 were $1,261, $1,214 and $1,650,
respectively. Interest was calculated on these loans at LIBOR
plus 150 basis points. Intercompany interest paid on these loans
during 1995, 1994 and 1993 was $359, $302 and $328, respectively.
NOTE 6: STOCKHOLDER'S EQUITY AND STATUTORY REGULATIONS
At December 31, 1995 and 1994, $58,790 and $42,612, respectively,
of stockholder's equity was available for distribution to MLIG.
Notice of intention to declare a dividend must be filed with the
New York Superintendent of Insurance who may disallow the
payment. No dividends were declared or paid during 1995, 1994 and
1993. Statutory capital and surplus at December 31, 1995 and
1994, was $72,113 and $64,913, respectively.
Applicable insurance department regulations require that the
Company report its accounts in accordance with statutory
accounting practices. Statutory accounting practices primarily
differ from the principals utilized in theses financial
statements by charging policy acquisition costs to expense as
incurred, establishing future policy benefit reserves using
different actuarial assumptions, not providing for deferred
income taxes and valuing securities on a different basis. The
Company's statutory net income for 1995, 1994 and 1993 was
$3,080, $3,816 and $6,515, respectively.
The National Association of Insurance Commissioners ("NAIC")
utilized the Risk Based Capital ("RBC") adequacy monitoring
system. The RBC calculates the amount of adjusted capital which a
life insurance company should have based upon that company's risk
profile. As of December 31, 1995, and 1994, based on the RBC
formula, the Company's total adjusted capital level was 709% and
344%, respectively, of the minimum amount of capital required to
avoid regulatory action.
NOTE 7: COMMITMENTS AND CONTINGENCIES
State insurance laws generally require that all life insurers who
are licensed to transact business within a state become members
of the state's life insurance guaranty association. These
associations have been established for the protection of
policyholders from loss (within specified limits) as a result of
the insolvency of an insurer. At the time an insolvency occurs,
<PAGE>
the guaranty association assesses the remaining members of the
association an amount sufficient to satisfy the insolvent
insurer's policyholder obligations (within specified limits).
Based upon the public information available at this time,
management believes the Company has no material financial
obligations to state guaranty associations.
In the normal course of business, the Company is subject to
various claims and assessments. Management believes the
settlement of these matters would not have a material effect on
the financial position or results of operations of the Company.
* * * * * *
<PAGE>
PART C
OTHER INFORMATION
<PAGE>
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
<TABLE>
<C> <C> <S>
(1) Financial Statements of ML of New York Variable Annuity Separate
Account A as of December 31, 1995 and for the two years ended
December 31, 1995 and the Notes relating thereto appear in the
Statement of Additional Information (Part B of the Registration
Statement).
(2) Financial Statements of ML of New York Variable Annuity Separate
Account B as of December 31, 1995 and for the two years ended
December 31, 1995 and the Notes relating thereto appear in the
Statement of Additional Information (Part B of the Registration
Statement).
(3) Financial Statements of ML Life Insurance Company of New York for
the three years ended December 31, 1995 and the Notes relating
thereto appear in the Statement of Additional Information (Part B
of the Registration Statement).
</TABLE>
(b) Exhibits
<TABLE>
<C> <C> <S>
(1) Resolution of the Board of Directors of ML Life Insurance Company of
New York establishing the ML of New York Variable Annuity Separate
Account A and ML of New York Variable Annuity Separate Account B
(Incorporated by Reference to Registrant's Form N-4 Registration
No. 33-45380 Filed January 29, 1992)
(2) Not Applicable
(3) Underwriting Agreement Between ML Life Insurance Company of New York
and Merrill Lynch, Pierce, Fenner & Smith Incorporated
(Incorporated by Reference to Registrant's Form N-4 Registration
No. 33-45380 Filed April 28, 1993)
(4) (a) Individual Variable Annuity Contract issued by ML Life Insurance
Company of New York (Incorporated by Reference to Registrant's Form
N-4 Registration No. 33-45380 Filed January 29, 1992)
(b) ML Life Insurance Company of New York Contingent Deferred Sales
Charge Waiver Endorsement (Incorporated by Reference to
Registrant's Form N-4 Registration No. 33-45380 Filed January 29,
1992)
(c) ML Life Insurance Company of New York Individual Retirement Annuity
Endorsement (Incorporated by Reference to Registrant's Form N-4
Registration No. 33-45380 Filed January 29, 1992)
(d) ML Life Insurance Company of New York Endorsement. (MLNY008)
(Incorporated by Reference to Registrant's Form N-4 Registration
No. 33-45380 Filed April 26, 1995)
(e) ML Life Insurance Company of New York Endorsement. (MLNY011)
(Incorporated by Reference to Registrant's Form N-4 Registration
No. 33-45380 Filed April 26, 1995)
(f) ML Life Insurance Company of New York Individual Variable Annuity
Contract (MLNY-VA-001NY1) (Incorporated by Reference to
Registrant's Form N-4 Registration No. 33-45380 Filed April 26,
1995)
(5) (a) ML Life Insurance Company of New York Variable Annuity Application
(Incorporated by Reference to Registrant's Form N-4 Registration
No. 33-45380 Filed April 28, 1993)
(b) ML Life Insurance Company of New York Variable Annuity Application
(MLNY010) (Incorporated by Reference to Registrant's Form N-4
Registration No. 33-45380 Filed April 25, 1996)
(6) (a) Certificate of Amendment of the Charter of ML Life Insurance Company
of New York (Incorporated by Reference to Registrant's Form N-4
Registration No. 33-45380 Filed January 29, 1992)
(b) By-Laws of ML Life Insurance Company of New York (Incorporated by
Reference to Registrant's Form N-4 Registration No. 33-45380 Filed
January 29, 1992)
(7) Not Applicable
(8) (a) Amended General Agency Agreement (Incorporated by Reference to
Registrant's Form N-4 Registration No. 33-45380 Filed April 28,
1994)
(b) Management Agreement Between ML Life Insurance Company of New York
and Merrill Lynch Asset Management, Inc. (Incorporated by Reference
to Registrant's Form N-4 Registration No. 33-45380 Filed January
29, 1992)
</TABLE>
C-1
<PAGE>
<TABLE>
<C> <C> <S>
(c) Agreement Between ML Life Insurance Company of New York and Merrill
Lynch Variable Series Funds, Inc. Relating to Maintaining Constant
Net Asset Value for the Reserve Assets Fund (Incorporated by
Reference to Registrant's Form N-4 Registration No. 33-45380 Filed
April 28, 1993)
(d) Agreement Between ML Life Insurance Company of New York and Merrill
Lynch Variable Series Funds, Inc. Relating to Maintaining Constant
Net Asset Value for the Domestic Money Market Fund (Incorporated by
Reference to Registrant's Form N-4 Registration No. 33-45380 Filed
April 28, 1993)
(e) Agreement Between ML Life Insurance Company of New York and Merrill
Lynch Variable Series Funds, Inc. Relating to Valuation and
Purchase Procedures (Incorporated by Reference to Registrant's Form
N-4 Registration No. 33-45380 Filed April 28, 1993)
(f) Service Agreement Between ML Life Insurance Company of New York and
Merrill Lynch Insurance Group, Inc. (Incorporated by Reference to
Registrant's Form N-4 Registration No. 33-45380 Filed January 29,
1992)
(g) Reimbursement Agreement Between Merrill Lynch Asset Management, Inc.
and Merrill Lynch Life Agency (Incorporated by Reference to
Registrant's Form N-4 Registration No. 33-45380 Filed April 28,
1993)
(9) Opinion of Barry G. Skolnick, Esq. and Consent to its use as to the
legality of the securities being registered
(10) (a) Written Consent of Sutherland, Asbill & Brennan
(b) Written Consent of Deloitte & Touche LLP, independent auditors
(11) Not Applicable
(12) Not Applicable
(13) Schedule for Computation of Performance Quotations (Incorporated by
Reference to Registrant's Form N-4 Registration No. 33-45380 Filed
May 17, 1993)
(14) (a) Power of Attorney from Frederick J.C. Butler (Incorporated by
Reference to Registrant's Form N-4 Registration No. 33-45380 Filed
March 2, 1994)
(b) Power of Attorney from Michael P. Cogswell (Incorporated by
Reference to Registrant's Form N-4 Registration No. 33-45380 Filed
March 2, 1994)
(c) Power of Attorney from Sandra K. Cox (Incorporated by Reference to
Registrant's Form N-4 Registration No. 33-45380 Filed March 2,
1994)
(d) Power of Attorney from Joseph E. Crowne (Incorporated by Reference
to Registrant's Form N-4 Registration No. 33-45380 Filed March 2,
1994)
(e) Power of Attorney from David M. Dunford (Incorporated by Reference
to Registrant's Form N-4 Registration No. 33-45380 Filed March 2,
1994)
(f) Power of Attorney from John C.R. Hele (Incorporated by Reference to
Registrant's Form N-4 Registration No. 33-45380 Filed March 2,
1994)
(g) Power of Attorney from Robert L. Israeloff (Incorporated by
Reference to Registrant's Form N-4 Registration No. 33-45380 Filed
March 2, 1994)
(h) Power of Attorney from Allen N. Jones (Incorporated by Reference to
Registrant's Form N-4 Registration No. 33-45380 Filed March 2,
1994)
(i) Power of Attorney from Cynthia L. Kahn (Incorporated by Reference to
Registrant's Form N-4 Registration No. 33-45380 Filed March 2,
1994)
(j) Power of Attorney from Robert A. King (Incorporated by Reference to
Registrant's Form N-4 Registration No. 33-45380 Filed March 2,
1994)
(k) Power of Attorney from Irving M. Pollack (Incorporated by Reference
to Registrant's Form N-4 Registration No. 33-45380 Filed March 2,
1994)
(l) Power of Attorney from Barry G. Skolnick (Incorporated by Reference
to Registrant's Form N-4 Registration No. 33-45380 Filed March 2,
1994)
(m) Power of Attorney from William A. Wilde (Incorporated by Reference
to Registrant's Form N-4 Registration No. 33-45380 Filed March 2,
1994)
(n) Power of Attorney from Anthony J. Vespa (Incorporated by Reference
to Registrant's Form N-4 Registration No. 33-45380 Filed March 2,
1994)
(o) Power of Attorney from Francis X. Ervin, Jr. (Incorporated by
Reference to Registrant's Form N-4 Registration No. 33-45380 Filed
April 25, 1996)
(p) Power of Attorney from Gail R. Farkas (Incorporated by Reference to
Registrant's Form N-4 Registration No. 33-45380 Filed April 25,
1996)
</TABLE>
C-2
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR*
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS ADDRESS POSITION WITH DEPOSITOR*
- ----------------------------- ------------------------------------ ---------------------------------------
<S> <C> <C>
Frederick J.C. Butler 885 Third Avenue, Director.
Suite 3120
New York, NY 10022
Michael P. Cogswell 800 Scudders Mill Road Director, Vice President and Senior
Plainsboro, NJ 08536 Counsel.
Joseph E. Crowne, Jr. 800 Scudders Mill Road Director, Senior Vice President, Chief
Plainsboro, NJ 08536 Financial Officer, Chief Actuary and
Treasurer.
David M. Dunford 800 Scudders Mill Road Director, Senior Vice President and
Plainsboro, NJ 08536 Chief Investment Officer.
Francis X. Ervin, Jr. 800 Scudders Mill Road Director, Vice President and
Plainsboro, NJ 08536 Controller.
Gail R. Farkas 800 Scudders Mill Road Director and Senior Vice President.
Plainsboro, NJ 08536
Robert L. Israeloff Israeloff, Trattner & Co. Director.
11 Sunrise Plaza
Valley Stream, NY 11580-6169
Cynthia L. Kahn Rogers & Wells Director.
200 Park Avenue
New York, NY 10166
Robert A. King Marymount College Director.
Marymount Avenue
Tarrytown, NY 10591
Irving M. Pollack 11400 Strand Drive Director.
Apt. 310
Rockville, MD 20852-2970
Barry G. Skolnick 800 Scudders Mill Road Director, Senior Vice President,
Plainsboro, NJ 08536 General Counsel and Secretary.
Anthony J. Vespa 800 Scudders Mill Road Director, Chairman of the Board, Chief
Plainsboro, NJ 08536 Executive Officer and President.
William A. Wilde, III 800 Scudders Mill Road Director.
Plainsboro, NJ 08536
Deborah J. Adler 800 Scudders Mill Road Vice President and Actuary.
Plainsboro, NJ 08536
Robert J. Boucher 1414 Main Street Senior Vice President, Variable Life
Springfield, MA 01102 Administration.
Edward W. Diffin, Jr. 800 Scudders Mill Road Vice President and Senior Counsel
Plainsboro, NJ 08536
Eileen Dyson 4804 Deer Lake Drive East Vice President and Assistant Secretary.
Jacksonville, FL 32246
Peter P. Massa 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Kelly A. O'Dea 800 Scudders Mill Road Vice President and Senior Compliance
Plainsboro, NJ 08536 Officer
Shelley K. Parker 1414 Main Street Vice President and Assistant Secretary.
Springfield, MA 01102
Julia Raven 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Lori M. Salvo 800 Scudders Mill Road Vice President and Senior Counsel.
Plainsboro, NJ 08536
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS ADDRESS POSITION WITH DEPOSITOR*
- ----------------------------- ------------------------------------ ---------------------------------------
<S> <C> <C>
John A. Shea 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Frederick H. Steele 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Thomas J. Thatcher 4804 Deer Lake Drive East Vice President and Assistant Secretary.
Jacksonville, FL 32246
Margaret M. Toni 100 Church Street Vice President, Administrative Manager
11th Floor and Assistant Secretary.
New York, NY 10080-6511
Robert J. Viamari 1414 Main Street Vice President and Assistant Secretary.
Springfield, MA 01102
Denis G. Wuestman 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
</TABLE>
- ------------------------
*Each director is elected to serve until the next annual shareholder meeting or
until his or her successor is elected and shall have qualified.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
ML Life Insurance Company of New York is an indirect wholly-owned subsidiary
of Merrill Lynch & Co., Inc.
A list of subsidiaries of Merrill Lynch & Co., Inc. appears below.
C-4
<PAGE>
MLCOSUBO395
SUBSIDIARIES OF THE REGISTRANT
The following are subsidiaries of ML & Co. as of March 24, 1995 and the
states or jurisdictions in which they are organized. Indentation indicates the
principal parent of each subsidiary. Except as otherwise specified, in each case
ML & Co. owns, directly or indirectly, at least 99% of the voting securities of
each subsidiary. The names of particular subsidiaries have been omitted because,
considered in the aggregate as a single subsidiary, they would not constitute,
as of the end of the year covered by this report, a "significant subsidiary" as
that term is defined in Rule 1.02(v) of Regulation S-X under the Securities
Exchange Act of 1934.
<TABLE>
<CAPTION>
STATE OR
JURISDICTION
NAME OR ENTITY
- -------------------------------------------------------------------------------------- --------------------------
<S> <C>
Merrill Lynch & Co., Inc. ............................................................ Delaware
Merrill Lynch, Pierce, Fenner & Smith Incorporated(1)............................... Delaware
Broadcort Capital Corp. .......................................................... Delaware
Merrill Lynch & Co., Canada Ltd. ................................................. Ontario
Merrill Lynch Canada Incorporated/Incorporee.................................... Nova Scotia
Merrill Lynch Life Agency Inc.(2)................................................. Washington
Merrill Lynch Princeton Incorporated.............................................. Delaware
ROC Denver, Inc. ................................................................. Delaware
R.O.C. Florida, Inc. ............................................................. Florida
ROC Texas, Inc. .................................................................. Texas
Wagner Stott Clearing Corp.(3).................................................... Delaware
Green Equity, Inc. ................................................................. New Jersey
Merrill Lynch Bank & Trust Co. ..................................................... New Jersey
Merrill Lynch Capital Services, Inc. ............................................... Delaware
Merrill Lynch Derivative Products, Inc.(4).......................................... Delaware
Merrill Lynch Government Securities Inc. ........................................... Delaware
Merrill Lynch Government Securities of Puerto Rico S.A. .......................... Delaware
Merrill Lynch Money Markets Inc. ................................................. Delaware
Merrill Lynch Group, Inc. .......................................................... Delaware
HQ North Company, Inc. ........................................................... New York
Investor Protection Insurance Company............................................. Vermont
Merrill Lynch Capital Partners, Inc. ............................................. Delaware
Merrill Lynch Fiduciary Services, Inc. ........................................... New York
Merrill Lynch Futures Inc. ....................................................... Delaware
Merrill Lynch, Hubbard Inc.(5).................................................... Delaware
Merrill Lynch Insurance Group, Inc. .............................................. Delaware
Merrill Lynch Life Insurance Company............................................ Arkansas
ML Life Insurance Company of New York........................................... New York
Merrill Lynch International Finance Corporation................................... New York
Merrill Lynch International Bank Limited........................................ England
Merrill Lynch Bank (Suisse) S.A. ............................................. Switzerland
Merrill Lynch Trust Company (Jersey) Limited.................................. Jersey,
Channel Islands
Merrill Lynch L.P. Holdings, Inc. ................................................ Delaware
Merrill Lynch MBP Inc. ........................................................... Delaware
Merrill Lynch Mortgage Capital Inc. .............................................. Delaware
Merrill Lynch National Financial.................................................. Utah
Merrill Lynch Private Capital Inc.(6)............................................. Delaware
Merrill Lynch Trust Company....................................................... New Jersey
Merrill Lynch Business Financial Services Inc. ................................. Delaware
Merrill Lynch Credit Corporation................................................ Delaware
Merrill Lynch Home Equity Acceptance, Inc. ................................... Delaware
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE OR
JURISDICTION
NAME OR ENTITY
- -------------------------------------------------------------------------------------- --------------------------
<S> <C>
Merrill Lynch & Co., Inc.
Merrill Lynch International Incorporated (cont'd)
Merrill Lynch Trust Company....................................................... Florida
Merrill Lynch Trust Company of America............................................ Illinois
Merrill Lynch Trust Company of California......................................... California
Merrill Lynch Trust Company of Texas.............................................. Texas
Merrill Lynch/WFC/L, Inc. ........................................................ New York
ML Futures Investment Partners Inc. .............................................. Delaware
ML IBK Positions Inc. ............................................................ Delaware
Merrill Lynch Capital Corporation(7)............................................ Delaware
ML Leasing Equipment Corp.(8)..................................................... Delaware
Merlease Leasing Corp. ......................................................... Delaware
Merrill Lynch Venture Capital Inc. ............................................. Delaware
Princeton Services, Inc.(9)....................................................... Delaware
Merrill Lynch International Incorporated............................................ Delaware
Merrill Lynch GFX, Inc. .......................................................... Delaware
Merrill Lynch International (Australia) Limited................................... New South Wales
Merrill Lynch International Bank.................................................. United States
Merrill Lynch International Holdings Inc. ........................................ Delaware
Merrill Lynch Bank (Austria) Aktiengesellschaft A.G. ........................... Austria
Merrill Lynch Bank and Trust Company (Cayman) Limited........................... Cayman Islands,
British West Indies
Merrill Lynch International & Co.(10)......................................... Netherlands Antilles
Merrill Lynch Capital Markets A.G. ............................................. Switzerland
Merrill Lynch Europe Limited.................................................... England
Merrill Lynch International Limited........................................... England
Merrill Lynch Capital Markets PLC............................................. England
Merrill Lynch, Pierce, Fenner & Smith (Brokers & Dealers) Limited............. England
Merrill Lynch Europe Ltd. ...................................................... Cayman Islands,
British West Indies
Merrill Lynch Holding GmbH(11).................................................. Fed. Rep. of Germany
Merrill Lynch Bank A.G. ...................................................... Fed. Rep. of Germany
Merrill Lynch GmbH............................................................ Fed. Rep. of Germany
Merrill Lynch Holding S.A.F. ................................................... France
Merrill Lynch Capital Markets (France) S.A. .................................. France
Merrill Lynch Hong Kong Securities Limited...................................... Hong Kong
Merrill Lynch Japan Incorporated.................................................. Delaware
Merrill Lynch Specialists Inc. ..................................................... Delaware
<FN>
- ------------------------
(1) MLPF&S also conducts business as "Merrill Lynch & Co."
(2) Similarly named affiliates and subsidiaries that engage in the sale of life
insurance and annuity products are incorporated in various other
jurisdictions.
(3) The preferred stock of the corporation is owned by an unaffiliated group of
investors.
(4) ML & Co. owns 100% of this corporation's outstanding common voting stock.
100% of the outstanding preferred voting stock is held by outside parties.
The board of directors consist of 10 members, 9 of which are ML & Co.
employees and 1 of which represents outside parties.
(5) This corporation has more than 30 direct or indirect subsidiaries operating
in the United States and serving as either general partners or associate
general partners of real estate limited partnerships.
(6) This corporation has 12 subsidiaries which have engaged in direct principal
lending and investment management.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(7) This company has 10 subsidiaries holding or having a direct or indirect
interest in specific investments on its behalf.
(8) This corporation has more than 45 direct or indirect subsidiaries operating
in the United States and serving as either general partners or associate
general partners of limited partnerships.
(9) This corporation is the general partner of Merrill Lynch Asset Management,
L.P. (whose limited partner is ML & Co.).
(10) A partnership among subsidiaries of ML & Co.
(11) ML & Co. holds a 50% interest in this corporation, with the remaining 50%
interest held by an outside party.
</TABLE>
<PAGE>
ITEM 27. NUMBER OF CONTRACTS
The number of contracts in force as of March 22, 1996 was 4,646.
ITEM 28. INDEMNIFICATION
There is no indemnification of the principal underwriter, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, with respect to the Contract.
The indemnity agreement between ML Life Insurance Company of New York ("ML
of New York") and its affiliate Merrill Lynch Life Agency, Inc. ("MLLA"), with
respect to MLLA's general agency responsibilities on behalf of ML of New York
and the Contract, provides:
ML of New York will indemnify and hold harmless MLLA and all persons
associated with MLLA as such term is defined in Section 3(a)(21) of the
Securities Exchange Act of 1934 against all claims, losses, liabilities
and expenses, to include reasonable attorneys' fees, arising out of the
sale by MLLA of insurance products under the above-referenced Agreement,
provided that ML of New York shall not be bound to indemnify or hold
harmless MLLA or its associated persons for claims, losses, liabilities
and expenses arising directly out of the willful misconduct or
negligence of MLLA or its associated persons.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Merrill Lynch, Pierce, Fenner & Smith Incorporated also acts as
principal underwriter for the following additional funds: CBA Money Fund; CMA
Government Securities Fund; CMA Money Fund; CMA Tax-Exempt Fund; CMA Treasury
Fund; CMA Multi-State Municipal Series Trust; Corporate Income Fund; Equity
Income Fund; The Fund of Stripped ("Zero") U.S. Treasury Securities; The GNMA
Investment Accumulation Program; Government Security Income Fund; International
Bond Fund; The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities;
Merrill Lynch Trust for Government Securities; Municipal Income Fund; and
Municipal Investment Trust Fund.
Merrill Lynch, Pierce, Fenner & Smith Incorporated also acts as principal
underwriter for the following additional accounts: ML of New York Variable
Annuity Separate Account A; Merrill Lynch Life Variable Life Separate Account;
Merrill Lynch Life Variable Life Separate Account II; Merrill Lynch Life
Variable Annuity Separate Account; Merrill Lynch Life Variable Annuity Separate
Account A; Merrill Lynch Life Variable Annuity Separate Account B; ML of New
York Variable Life Separate Account; ML of New York Variable Life Separate
Account II and ML of New York Variable Annuity Separate Account.
C-5
<PAGE>
(b) The directors, president, treasurer and executive vice presidents of
Merrill Lynch, Pierce, Fenner & Smith Incorporated are as follows:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES WITH UNDERWRITER
- ------------------------------ ---------------------------------------------
<S> <C>
Herbert M. Allison, Jr.* Director and Executive Vice President
Barry S. Friedberg* Executive Vice President
Edward L. Goldberg* Executive Vice President
Stephen L. Hammerman* Director, Chairman and General Counsel
Jerome P. Kenney* Executive Vice President
David H. Komansky* Director, President and Chief Executive
Officer
Theresa Lang* Senior Vice President and Treasurer
Daniel T. Napoli* Senior Vice President
Thomas H. Patrick* Executive Vice President
Winthrop H. Smith, Jr.* Executive Vice President
John L. Steffens* Director and Executive Vice President
Daniel P. Tully* Director
Roger M. Vasey* Executive Vice President
</TABLE>
- ------------------------
*World Financial Center, 250 Vesey Street, New York, NY 10281
(c) Not Applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, and records required to be maintained by Section 31(a)
of the 1940 Act and the rules promulgated thereunder are maintained by the
depositor at the principal executive offices at 100 Church Street, 11th Floor,
New York, New York 10080-6511, at Merrill Lynch Insurance Group Services, Inc.
at 4804 Deer Lake Drive East, Jacksonville, Florida 32246, and at the office of
the General Counsel at 800 Scudders Mill Road, Plainsboro, New Jersey 08536.
ITEM 31. NOT APPLICABLE
ITEM 32. UNDERTAKINGS
(a) Registrant undertakes to file a post-effective amendment to the
Registrant Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted.
(b) Registrant undertakes to include either (1) as part of any application
to purchase a contract offered by the prospectus, a space that an applicant can
check to request a statement of additional information, or (2) a postcard or
similar written communications affixed to or included in the prospectus that the
applicant can remove to send for a statement of additional information.
(c) Registrant undertakes to deliver any statement of additional information
and any financial statements required to be made available under this Form
promptly upon written or oral request.
C-6
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, ML of New York Variable Annuity Separate Account B,
certifies that this Post-Effective Amendment meets all the requirements for
effectiveness under paragraph (b) of Rule 485, and accordingly, has caused this
Amendment to be signed on its behalf, in the City of Plainsboro, State of New
Jersey, on the 30th day of April, 1996.
ML of New York Variable Annuity
Separate Account B
----------------------------------------
(Registrant)
Attest: /s/ SANDRA K. DOMINGUES By: /s/ BARRY G. SKOLNICK
-------------------------- ----------------------------------------
Sandra K. Domingues Barry G. Skolnick
Assistant Vice President Senior Vice President of
ML Life Insurance Company of New York
ML Life Insurance Company of New York
----------------------------------------
(Depositor)
Attest: /s/ SANDRA K. DOMINGUES By: /s/ BARRY G. SKOLNICK
-------------------------- ----------------------------------------
Sandra K. Domingues Barry G. Skolnick
Assistant Vice President Senior Vice President
As required by the Securities Act of 1933, this Post-Effective Amendment No.
9 to the Registration Statement has been signed below by the following persons
in the capacities indicated on April 30, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------- --------------------------------
<S> <C> <C>
* Chairman of the Board, President
-------------------------------------------- and Chief Executive Officer
Anthony J. Vespa
* Director, Senior Vice President,
-------------------------------------------- Chief Financial Officer, Chief
Joseph E. Crowne, Jr. Actuary and Treasurer
* Director, Senior Vice President,
-------------------------------------------- and Chief Investment Officer
David M. Dunford
* Director, Vice President and
-------------------------------------------- Controller
Francis X. Ervin, Jr.
* Director and Senior Vice
-------------------------------------------- President
Gail R. Farkas
* Director, Vice President and
-------------------------------------------- Senior Counsel
Michael P. Cogswell
*
-------------------------------------------- Director
Frederick J.C. Butler
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------- --------------------------------
<S> <C> <C>
*
-------------------------------------------- Director
Robert L. Israeloff
*
-------------------------------------------- Director
Cynthia L. Kahn
*
-------------------------------------------- Director
Robert A. King
*
-------------------------------------------- Director
Irving M. Pollack
*
-------------------------------------------- Director
William A. Wilde, III
In his own capacity as Director,
*By: /s/ BARRY G. SKOLNICK Senior Vice President and
--------------------------------------- General Counsel and as
Barry G. Skolnick Attorney-In-Fact
</TABLE>
C-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- -------- -------------------------------------------------------------- ----
<C> <S> <C>
(9) Opinion of Barry G. Skolnick, Esq. and Consent to its use as
to the legality of the securities being registered........... C-
(10)(a) Written Consent of Sutherland, Asbill & Brennan............... C-
(10)(b) Written Consent of Deloitte & Touche LLP, independent
auditors..................................................... C-
</TABLE>
C-9
<PAGE>
EXHIBIT (9)
April 30, 1996
Board of Directors
ML Life Insurance Company of New York
100 Church Street, 11th Floor
New York, New York 10080-6511
To The Board Of Directors:
In my capacity as General Counsel of ML Life Insurance Company of New York
(the "Company"), I have supervised the preparation of Post-Effective Amendment
No. 9 to the registration statements on Form N-4 of the ML of New York Variable
Annuity Separate Account A (File No. 33-43654) and ML of New York Variable
Annuity Separate Account B (File No. 33-45380) (the "Accounts") to be filed by
the Company with the Securities and Exchange Commission under the Securities Act
of 1933 and the Investment Company Act of 1940. Such registration statements
describe certain individual variable annuity contracts which will participate in
the Accounts.
I am of the following opinion:
1. The Company has been duly organized under the laws of the State of New
York and is a validly existing corporation.
2. The individual variable annuity contracts, when issued in accordance with
the prospectus contained in the aforesaid registration statements and
upon compliance with applicable local law, will be legal and binding
obligations of the Company in accordance with their terms.
3. The Accounts are duly created and validly existing as separate accounts
of the Company pursuant to New York law.
4. The assets held in the Accounts equal to the reserves and other contract
liabilities with respect to the Accounts will not be chargeable with
liabilities arising out of any other business the Company may conduct.
In arriving at the foregoing opinion, I have made such examination of law
and examined such records and other documents as in my judgment are necessary or
appropriate.
I hereby consent to the filing of this opinion as an exhibit to the
aforesaid registration statements and to the reference to me under the caption
"Legal Matters" in the prospectus contained in said registration statements.
Very truly yours,
/s/ Barry G. Skolnick
Barry G. Skolnick
Senior Vice President and
General Counsel
<PAGE>
EXHIBIT (10)(A)
April 30, 1996
Board of Directors
ML Life Insurance Company of New York
717 Fifth Avenue, 16th Floor
New York, New York 10022
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus filed as part of Post-Effective Amendment No. 9 to
Form N-4 (File No. 33-45380) for ML of New York Variable Annuity Separate
Account B of ML Life Insurance Company of New York. In giving this consent, we
do not admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN
By /s/ Kimberly J. Smith
---------------------------------
Kimberly J. Smith
<PAGE>
EXHIBIT (10)(B)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 9 to Registration
Statement No. 33-45380 of ML of New York Variable Annuity Separate Account B on
Form N-4 of our reports on (i) ML Life Insurance Company of New York dated
February 26, 1996, and (ii) ML of New York Variable Annuity Separate Account B
dated January 18, 1996, appearing in the Statement of Additional Information,
which is a part of such Registration Statement, and to the reference to us under
the heading "Experts" in the Prospectus, which is a part of such Registration
Statement.
/s/ Deloitte & Touche LLP
New York, New York
April 30, 1996
