<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 2000
REGISTRATION NO. 33-45380
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 14 /X/
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 14 /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) 602-8250
(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.
KIMBERLY J. SMITH, ESQ.
SUTHERLAND ASBILL & BRENNAN LLP
1275 PENNSYLVANIA AVENUE, NW
WASHINGTON, D.C. 20004-2415
------------------------
It is proposed that this filing will become effective (check appropriate
space):
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on ___May 1, 2000___ pursuant to paragraph (b) of Rule 485
(date)
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ / on _______________pursuant to paragraph (a)(1) of Rule 485
(date)
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Units of Interest in Flexible Premium
Individual Deferred Variable Annuity Contracts.
EXHIBIT INDEX CAN BE FOUND ON PAGE C-12
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
May 1, 2000
ML of New York Variable Annuity Separate Account A (Account A)
and
ML of New York Variable Annuity Separate Account B (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 ("ML OF NEW YORK")
HOME OFFICE: 100 Church Street, 11th Floor
New York, New York 10080-6511
SERVICE CENTER: P.O. Box 44222
Jacksonville, Florida 32231-4222
4804 Deer Lake Drive East,
Jacksonville, Florida 32246
PHONE: (800) 333-6524
offered through
Merrill Lynch, Pierce, Fenner & Smith Incorporated
This prospectus gives you information you need to know before you invest. Keep
it for future reference. Address all communications concerning the Contract to
the Service Center at the address above.
The variable annuity contract described here provides a variety of investment
features. It also provides options for income protection later in life. We may
offer other variable annuity contracts that have different death benefits,
contract features, fund selections, and optional programs. However, these other
contracts also have different charges that would affect your subaccount
performance and contract values. To obtain more information, contact our Service
Center or your Financial Consultant.
It is important that you understand how the Contract works, and its benefits,
costs, and risks. First, some basics.
WHAT IS AN ANNUITY?
An annuity provides for the systematic liquidation of a sum of money at the
annuity date through a variety of annuity options. Each Annuity Option has
different protection features intended to cover different kinds of income needs.
Many of these Annuity Options provide income streams that can't be outlived.
WHAT IS A VARIABLE ANNUITY?
A variable annuity bases its benefits on the performance of underlying
investments. These investments may typically include stocks, bonds, and money
market instruments. The annuity described here is a variable annuity.
WHAT ARE THE RISKS IN OWNING A VARIABLE ANNUITY?
A variable annuity does not guarantee the performance of the underlying
investments. The performance can go up or down. It can even decrease the value
of money you've put in. You bear all of this risk. You could lose all or part of
the money you've put in.
<PAGE>
HOW DOES THIS ANNUITY WORK?
We put your premium payments as you direct into one or more subaccounts of
Account A and/or Account B. In turn, we invest each subaccount's assets in
corresponding portfolios of the following:
- - MERRILL LYNCH VARIABLE SERIES FUNDS
- Domestic Money Market Fund
- Prime Bond Fund
- High Current Income Fund
- Quality Equity Fund
- Small Cap Value Focus Fund
- Global Strategy Focus Fund
- Basic Value Focus Fund
- Balanced Capital Focus Fund
- Global Growth Focus Fund
- Government Bond Fund
- Developing Capital Markets Focus Fund
- Index 500 Fund
- Reserve Assets Fund
- - AIM VARIABLE INSURANCE FUNDS
- AIM V.I. Capital Appreciation Fund
- AIM V.I. Value Fund
- - ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
- Premier Growth Portfolio
- Quasar Portfolio
- - MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-
- Emerging Growth Series
- Research Series
- - HOTCHKIS AND WILEY VARIABLE TRUST
- International VIP Portfolio
- - DEFINED ASSET FUNDS
- 2000 ML Select Ten V.I. Trust
- - MERCURY ASSET MANAGEMENT V.I. FUNDS, INC.
- Mercury V.I. U.S. Large Cap Fund
The value of your contract at any point in time up to the annuity date is called
your contract value. Before the annuity date, you are generally free to direct
your contract value among the subaccounts as you wish. You may also withdraw all
or part of your contract value. If you die before the annuity date, we pay a
death benefit to your beneficiary.
We've designed this annuity as a long-term investment. If you withdraw money
from the annuity too soon, you may incur substantial charges. In addition, any
money you take out of the contract is subject to tax, and if taken before age
59 1/2 may also be subject to a 10% federal penalty tax or more. FOR THESE
REASONS, YOU NEED TO CONSIDER YOUR CURRENT AND SHORT-TERM INCOME NEEDS CAREFULLY
BEFORE YOU DECIDE TO BUY THE CONTRACT.
WHAT DOES THIS ANNUITY COST?
We impose a number of charges. The two most significant charges are a sales
charge and a mortality and expense risk charge.
We provide more details on these two charges as well as a description of all
other charges later in the prospectus.
************************************************************************
This prospectus contains information about the Contract and the Accounts that
you should know before you invest. A Statement of Additional Information
contains more information about the Contract and the Accounts. We have filed
this Statement of Additional Information, dated May 1, 2000, with the Securities
and Exchange Commission. We incorporate this Statement of Additional Information
by reference. If you want to obtain this Statement of Additional Information,
simply call or write the Service Center at the phone number or address noted
above. There is no charge to obtain it. The table of contents for this Statement
of Additional Information is found on page 53 of this prospectus.
The Securities and Exchange Commission ("SEC") maintains a web site that
contains the Statement of Additional Information, material incorporated by
reference, and other information regarding registrants that file electronically
with the SEC. The address of the site is http://www.sec.gov.
2
<PAGE>
CURRENT PROSPECTUSES FOR THE MERRILL LYNCH VARIABLE SERIES FUNDS, INC., THE AIM
VARIABLE INSURANCE FUNDS, THE ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC., THE
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-, THE HOTCHKIS AND WILEY
VARIABLE TRUST, THE MERCURY ASSET MANAGEMENT V.I. FUNDS, INC., AND THE DEFINED
ASSET FUNDS MUST ACCOMPANY THIS PROSPECTUS. PLEASE READ THESE DOCUMENTS
CAREFULLY AND RETAIN THEM FOR FUTURE REFERENCE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE CONTRACTS OR
DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
DEFINITIONS........................................................... 7
CAPSULE SUMMARY OF THE CONTRACT....................................... 8
Premiums.......................................................... 8
The Accounts...................................................... 8
The Funds Available For Investment................................ 9
Fees and Charges.................................................. 9
Mortality & Expense Risk Charge.............................. 9
Sales Charge................................................. 9
Administration Charge........................................ 9
Contract Maintenance Charge.................................. 10
Premium Taxes................................................ 10
Fund Expenses................................................ 10
Transfers......................................................... 10
Transfers Among Account A Subaccounts........................ 10
Transfers From Account A to Account B........................ 10
Withdrawals.................................................. 10
Death Benefit................................................ 11
Annuity Payments............................................. 11
Ten Day Review............................................... 11
FEE TABLE............................................................. 12
YIELDS AND TOTAL RETURNS.............................................. 17
ML LIFE INSURANCE COMPANY OF NEW YORK................................. 18
THE ACCOUNTS.......................................................... 18
Segregation of Account Assets..................................... 18
Number of Subaccounts; Subaccount Investments..................... 19
INVESTMENTS OF THE ACCOUNTS........................................... 19
General Information and Investment Risks.......................... 19
Merrill Lynch Variable Series Funds, Inc.......................... 19
Domestic Money Market Fund................................... 20
Prime Bond Fund.............................................. 20
High Current Income Fund..................................... 20
Quality Equity Fund.......................................... 21
Small Cap Value Focus Fund................................... 21
Natural Resources Focus Fund................................. 21
American Balanced Fund....................................... 21
Global Strategy Focus Fund................................... 21
Basic Value Focus Fund....................................... 21
Global Bond Focus Fund....................................... 22
Utilities and Telecommunications Focus Fund.................. 22
International Equity Focus Fund.............................. 22
Government Bond Fund......................................... 22
Developing Capital Markets Focus Fund........................ 22
Reserve Assets Fund.......................................... 23
Index 500 Fund............................................... 23
Balanced Capital Focus Fund.................................. 23
Global Growth Focus Fund..................................... 23
Defined Asset Funds -- Select Ten V.I. Trust...................... 23
AIM Variable Insurance Funds...................................... 24
AIM V.I. Capital Appreciation Fund........................... 25
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
AIM V.I. Value Fund.......................................... 25
Alliance Variable Products Series Fund, Inc....................... 25
Alliance Premier Growth Portfolio............................ 25
Alliance Quasar Portfolio.................................... 25
MFS-Registered Trademark- Variable Insurance Trust-SM-............ 25
MFS Emerging Growth Series................................... 26
MFS Research Series.......................................... 26
Hotchkis and Wiley Variable Trust................................. 26
Hotchkis and Wiley International VIP Portfolio............... 26
Mercury Asset Management V.I. Funds, Inc.......................... 26
Mercury V.I. U.S. Large Cap Fund............................. 27
Purchases and Redemptions of Fund Shares; Reinvestment............ 27
Material Conflicts, Substitution of Investments and Changes to
Accounts.......................................................... 27
CHARGES AND DEDUCTIONS................................................ 28
Mortality and Expense Risk Charge................................. 28
Sales Charge...................................................... 28
When Imposed................................................. 28
Amount of Charge............................................. 29
How Deducted................................................. 30
Administration Charge............................................. 30
Contract Maintenance Charge....................................... 30
Other Charges..................................................... 30
Transfer Charges............................................. 30
Tax Charges.................................................. 31
Fund Expenses................................................ 31
Retirement Plus Advisor Fees................................. 31
Premium Taxes..................................................... 31
FEATURES AND BENEFITS OF THE CONTRACT................................. 31
Ownership of The Contract......................................... 31
Issuing the Contract.............................................. 32
Issue Age.................................................... 32
Information We Need To Issue The Contract.................... 32
Ten Day Right to Review...................................... 32
Premiums.......................................................... 32
Minimum and Maximum Premiums................................. 32
How to Make Payments......................................... 33
Premium Investments.......................................... 33
Accumulation Units................................................ 33
ADDITIONAL PROVISIONS APPLICABLE TO ALL CONTRACTS..................... 34
Death of Annuitant Prior to Annuity Date.......................... 34
Transfers......................................................... 34
Transfers Within Account A................................... 34
Dollar Cost Averaging............................................. 35
What Is It?.................................................. 35
Minimum Amounts.............................................. 35
When Do We Make DCA Transfers?............................... 35
Merrill Lynch Retirement Plus Advisor-SM-......................... 36
Fees and Charges for RPA..................................... 36
Transfers From Account A to Account B............................. 36
Withdrawals and Surrenders........................................ 36
When and How Withdrawals are Made............................ 36
Automatic Withdrawals........................................ 37
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Minimum Amounts.............................................. 37
Surrenders................................................... 38
Payments to Contract Owners....................................... 38
Contract Changes.................................................. 38
Death Benefit..................................................... 38
Annuity Payments.................................................. 40
Annuity Options................................................... 40
Payments of a Fixed Amount................................... 41
Payments for a Fixed Period.................................. 41
Life Annuity................................................. 41
Life Annuity With Payments Guaranteed for 10 or 20 Years..... 41
Life Annuity With Guaranteed Return of Contract Value........ 41
Joint and Survivor Life Annuity.............................. 42
Individual Retirement Account Annuity........................ 42
Gender-based Annuity Purchase Rates............................... 42
FEDERAL INCOME TAXES.................................................. 42
Federal Income Taxes.............................................. 42
Tax Status of the Contract........................................ 43
Taxation of Annuities............................................. 43
Penalty Tax on Some Withdrawals................................... 44
Transfers, Assignments, or Exchanges of a Contract................ 44
Withholding....................................................... 44
Multiple Contracts................................................ 45
Possible Changes In Taxation...................................... 45
Possible Charge For Our Taxes..................................... 45
Individual Retirement Annuities................................... 45
Traditional IRAs............................................. 45
Roth IRAs.................................................... 45
Other Tax Issues For IRAs and Roth IRAs...................... 46
Tax Sheltered Annuities........................................... 46
OTHER INFORMATION..................................................... 46
Voting Rights..................................................... 46
Reports to Contract Owners........................................ 47
Selling the Contract.............................................. 47
State Regulation.................................................. 47
Controlling Documents............................................. 47
Legal Proceedings................................................. 48
Experts........................................................... 48
Legal Matters..................................................... 48
Registration Statements........................................... 48
ACCUMULATION UNIT VALUES.............................................. 49
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.......... 53
</TABLE>
6
<PAGE>
DEFINITIONS
ACCUMULATION UNIT: An index used to compute the value of the contract owner's
interest in a subaccount prior to the annuity date.
ANNUITANT: The person on whose continuation of life annuity payments may depend.
ANNUITY DATE: The date on which annuity payments begin.
BENEFICIARY: The person to whom payment is to be made on the death of the
contract owner.
CONTRACT ANNIVERSARY: The same date each year as the date of issue of the
Contract.
CONTRACT YEAR: The period from one contract anniversary to the day preceding the
next contract anniversary.
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 ("IRC").
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.
NONQUALIFIED CONTRACT: A Contract issued in connection with a retirement
arrangement other than a qualified arrangement described in the IRC.
QUALIFIED CONTRACT: A Contract issued in connection with a retirement
arrangement described under section 403(b), 408, or 408A of the IRC.
TAX SHELTERED ANNUITY: A Contract issued in connection with a retirement
arrangement that receives favorable tax status under Section 403(b) of the IRC.
VALUATION PERIOD: The interval from one determination of the net asset value of
a subaccount to the next.
7
<PAGE>
CAPSULE SUMMARY OF THE CONTRACT
This capsule summary provides a brief overview of the Contract. More detailed
information about the Contract can be found in the sections of this prospectus
that follow, all of which should be read in their entirety.
PREMIUMS
Generally, before the annuity date you can pay premiums as often as you like.
The minimum initial premium is $5,000 for a non-qualified Contract and $2,000
for an IRA Contract. Subsequent premiums generally must be $100 or more.
Transfer amounts from tax sheltered annuity plans that are not subject to the
Employee Retirement Income Security Act of 1974, as amended, will be accepted as
premium payments, as permitted by law. Other premium payments will not be
accepted under a Contract used as a tax sheltered annuity. Under an automatic
investment feature, you can make subsequent premium payments systematically from
your Merrill Lynch brokerage account. For more information, contact your
Financial Consultant.
The Contract is available as a non-qualified contract or may be issued as an IRA
in certain circumstances or purchased through an established IRA or Roth IRA
custodial account with Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S"). Federal law limits maximum annual contributions to IRAs and Roth
IRAs.
The tax advantages typically provided by a variable annuity are already
available with tax-qualified plans, including IRAs and Roth IRAs. You should
carefully consider the advantages and disadvantages of owning a variable annuity
in a tax-qualified plan, including the costs and benefits of the Contract
(including the annuity income benefits), before you purchase the Contract in a
tax-qualified plan.
THE ACCOUNTS
As you direct, we will put premiums into subaccounts of Account A and/or
Account B corresponding to the Funds in which we invest your contract value. For
the first 14 days following the date of issue, we put all premiums you've
directed into Account A into the Domestic Money Market Subaccount. After the 14
days, we'll put the money into the Account A subaccounts you've selected.
Currently, you may allocate premiums or contract value among 18 of 22 available
subaccounts. Generally, within certain limits you may transfer Account A value
periodically among Account A subaccounts.
8
<PAGE>
THE FUNDS AVAILABLE FOR INVESTMENT
- --ARROW-- FUNDS OF MERRILL LYNCH VARIABLE SERIES FUNDS
--ARROW-- Domestic Money Market Fund
--ARROW-- Prime Bond Fund
--ARROW-- High Current Income Fund
--ARROW-- Quality Equity Fund
--ARROW-- Small Cap Value Focus Fund
--ARROW-- Global Strategy Focus Fund
--ARROW-- Basic Value Focus Fund
--ARROW-- Balanced Capital Focus Fund
--ARROW-- Global Growth Focus Fund
--ARROW-- Government Bond Fund
--ARROW-- Developing Capital Markets Focus Fund
--ARROW-- Index 500 Fund
--ARROW-- Reserve Assets Fund
- --ARROW-- FUNDS OF ALLIANCE VARIABLE PRODUCTS SERIES FUND
--ARROW-- Premier Growth Portfolio
--ARROW-- Quasar Portfolio
- --ARROW-- FUNDS OF AIM VARIABLE INSURANCE FUNDS
--ARROW-- AIM V.I. Capital Appreciation Fund
--ARROW-- AIM V.I. Value Fund
- --ARROW-- FUNDS OF MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-
--ARROW-- Emerging Growth Series
--ARROW-- Research Series
- --ARROW-- FUNDS OF HOTCHKIS AND WILEY VARIABLE TRUST
--ARROW-- International VIP Portfolio
- --ARROW-- TRUSTS OF DEFINED ASSETS FUNDS
--ARROW-- 2000 ML Select Ten V.I. Trust
- --ARROW-- MERCURY ASSET MANAGEMENT & V.I. FUNDS, INC.
--ARROW-- Mercury V.I. U.S. Large Cap Fund
We have closed to new purchase payments and to transfers the subaccounts
investing in the Natural Resources Focus Fund, American Balanced Fund, Global
Bond Focus Fund, International Equity Focus Fund, and Utilities and
Telecommunications Focus Fund of the Merrill Lynch Variable Series Funds.
If you want detailed information about the investment objectives of the Funds,
see "Investments of the Accounts" and the attached prospectuses for the Funds.
FEES AND CHARGES
MORTALITY & EXPENSE RISK CHARGE
We impose a mortality and expense risk charge to cover certain risks. The
mortality portion compensates us for mortality risks we assume for the annuity
payment and death benefit guarantees made under the Contract. The expense
portion compensates us for expense risks we assume if the contract maintenance
and administration charges aren't enough to cover all Contract maintenance and
administration expenses. The charge equals 1.25% annually for Account A and
0.65% annually for Account B. We deduct it daily from the net asset value of the
Accounts. This charge ends on the annuity date.
SALES CHARGE
We may impose a deferred sales charge only if you withdraw money from
Account A. The maximum charge is 7% of premium withdrawn during the first year
after that premium is paid. The charges decrease by 1% each year. After year
seven, it's 0%. We don't impose a sales charge on withdrawals or surrenders from
Account B.
ADMINISTRATION CHARGE
We charge 0.10% annually to reimburse us for costs associated with the
establishment and administration of the Contract. We deduct this charge daily
only from the net asset value of Account A. We don't impose the charge on the
assets of Account B. This charge ends on the annuity date.
9
<PAGE>
CONTRACT MAINTENANCE CHARGE
We charge $40 a year to reimburse us for expenses related to maintenance of the
Contract. We waive this charge on all Contracts with a contract value of at
least $50,000 on the Contract anniversary and in certain circumstances where you
own at least three Contracts. The charge ends on the annuity date.
PREMIUM TAXES
On the annuity date we deduct a charge for any premium taxes imposed by a state
or local government. Premium tax rates vary from jurisdiction to jurisdiction.
They currently range from 0% to 5%.
FUND EXPENSES
You will bear the costs of advisory fees and operating expenses deducted from
Fund assets.
You can find detailed information about fees and charges imposed on the Contract
under "Charges and Deductions".
TRANSFERS
TRANSFERS AMONG ACCOUNT A SUBACCOUNTS
Before the annuity date, you may transfer all or part of your Account A value
among the subaccounts up to six times per contract year without charge. However,
the Natural Resources Focus Subaccount, American Balanced Subaccount, Global
Bond Focus Subaccount, International Equity Focus Subaccount, and Utilities and
Telecommunications Focus Subaccount are closed to transfers.
You may make more than six transfers among available subaccounts, but we may
charge $25 per extra transfer. You may elect a Dollar Cost Averaging feature so
that money you've put in the Domestic Money Market Subaccount is systematically
transferred monthly into other Account A subaccounts you select without charge.
In addition, through participation in the Merrill Lynch RPA-SM- program, you may
have your Account A values invested under an investment program based on your
investment profile (see "Transfers", "Dollar Cost Averaging", and "Merrill Lynch
Retirement Plus Advisor-SM-").
TRANSFERS FROM ACCOUNT A TO ACCOUNT B
Once each contract year, you may transfer from Account A to Account B an amount
equal to any gain in account value since the date of issue and/or any premium no
longer subject to a sales charge. Once each contract year, you may transfer from
Account A to Account B all or a portion of the greater of that amount or 10% of
premiums still subject to a sales charge (minus any premium already withdrawn or
transferred). Additionally, we allow periodic transfers of all or a portion of
the greater amount, determined at the time of each periodic transfer, on a
monthly, quarterly, semi-annual or annual basis.
This is the only amount you may transfer from Account A to Account B during a
contract year. We impose no charge on this transfer. We don't permit transfers
from Account B to Account A.
WITHDRAWALS
You can withdraw money from the Contract six times each contract year.
Withdrawals from Account A are generally subject to a sales charge (see "Sales
Charge"). However, we won't impose a sales charge to the first withdrawal in any
contract year of gain out of Account A and/or any premium no longer subject to a
sales
10
<PAGE>
charge. We won't impose a sales charge on that portion of the first withdrawal
from Account A in any contract year that does not exceed the greater of:
(1) any gain in account value and/or any premium not subject to a sales
charge; and
(2) 10% of premiums subject to a sales charge (minus any of that premium
already withdrawn or transferred out of Account A).
Additionally, you may elect that the amount withdrawn be paid on a monthly,
quarterly, semi-annual or annual basis.
We don't impose a sales charge on withdrawals from Account B.
In addition to the six withdrawals permitted each contract year, you may
withdraw the value in Account B automatically on a monthly, quarterly,
semi-annual, or annual basis. These automatic withdrawals are not subject to any
sales charge (see "Withdrawals and Surrenders").
A withdrawal may have adverse tax consequences (see "Federal Income Taxes").
DEATH BENEFIT
Regardless of investment experience, the Contract provides a guaranteed minimum
death benefit if you die before the annuity date.
Currently, if you are age 80 or under on the issue date, the death benefit
equals the greatest of:
(1) premiums paid less any withdrawals,
(2) the contract value, or
(3) the maximum death benefit value.
If you are over age 80 on the issue date, the death benefit equals the greater
of:
(1) premiums paid less any withdrawals, or
(2) the contract value.
The maximum death benefit value equals the greatest anniversary value of
Account A, plus the value of Account B.
ANNUITY PAYMENTS
Annuity payments begin on the annuity date and are made under the annuity option
you select. When you first buy the Contract, the annuity date for nonqualified
Contracts is the annuitant's 85th birthday. The annuity date for IRA Contracts
or Tax Sheltered Annuity Contracts is when the owner/annuitant reaches age
70 1/2.
Details about the annuity options available under the Contract can be found
under "Annuity Options".
TEN DAY REVIEW
When you receive the Contract, read it carefully to make sure it's what you
want. Generally, within 10 days after you receive the Contract, you may return
it for a refund. Some states allow a longer period of time to return the
Contract. To get a refund, return the Contract to the Service Center or to the
Financial Consultant who sold it. We will then refund the greater of all
premiums paid into the Contract or the contract value as of the date you return
the Contract.
11
<PAGE>
FEE TABLE
A. Contract Owner Transaction Expenses
1. Sales Load Imposed on Premium ................................. None
2. Contingent Deferred Sales Charge
<TABLE>
<CAPTION>
COMPLETE YEARS ELAPSED SINCE CONTINGENT DEFERRED SALES CHARGE AS A
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>
3. Transfer Fee ................................................... $25
The first 6 transfers among Separate Account A subaccounts in a
contract year are free. We currently do not, but may in the future,
charge a $25 fee 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.
The Fee Table and Examples do not include charges to contract owners
for premium taxes. Premium taxes may be applicable. Refer to the
PREMIUM TAXES section in this Prospectus for further details.
B. Annual Contract Maintenance Charge ................................ $40
The Contract Maintenance Charge will be assessed annually on each
contract anniversary if the contract value is less than $50,000.
C. Separate Account Annual Expenses (as a percentage of account value)
<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>
D. Fund Expenses for the Year Ended December 31, 1999 (see "Notes to Fee
Table") (as a percentage of each Fund's
average net assets)
<TABLE>
<CAPTION>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. (CLASS A SHARES)
-------------------------------------------------------------------------------------
HIGH SMALL CAP NATURAL GLOBAL DOMESTIC
RESERVE PRIME CURRENT QUALITY VALUE RESOURCES STRATEGY AMERICAN MONEY
ANNUAL EXPENSES ASSETS BOND INCOME EQUITY FOCUS(A) FOCUS* FOCUS BALANCED* MARKET
- --------------- ------- ----- ------- ------- --------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory
Fees................... .50% .42% .47% .43% .75% .65% .65% .55% .50%
Other Expenses........... .15% .05% .05% .06% .06% .26% .08% .06% .05%
----- ---- ----- ----- ------ ------ ------ ------ ------
Total Annual Operating
Expenses............... .65% .47% .52% .49% .81% .91% .73% .61% .55%
Expense Reimbursements... 0% 0% 0% 0% 0% 0% 0% 0% 0%
----- ---- ----- ----- ------ ------ ------ ------ ------
Net Expenses............. .65% .47% .52% .49% .81% .91% .73% .61% .55%
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. (CLASS A SHARES) (CONT'D)
-----------------------------------------------------------------------------
UTILITIES DEVELOPING
BASIC GLOBAL AND INTERNATIONAL CAPITAL
VALUE BOND TELECOMMUNCATIONS EQUITY GOVERNMENT MARKETS
ANNUAL EXPENSES FOCUS FOCUS** FOCUS(A) FOCUS** BOND FOCUS(B)
- --------------- ------ --------- ----------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees.......................... .60% .60% .60% .75% .50% 1.00%
Other Expenses.................................... .06% .17% .09% .17% .05% .67%
--- --- --- --- --- ----
Total Annual Operating Expenses................... .66% .77% .69% .92% .55% 1.67%
Expense Reimbursements............................ 0% 0% 0% 0% 0% .42%
--- --- --- --- --- ----
Net Expenses...................................... .66% .77% .69% .92% .55% 1.25%
<CAPTION>
MERRILL LYNCH VARIABLE SERIES
FUNDS, INC. (CLASS A SHARES)
(CONT'D)
-----------------------------------------------
GLOBAL BALANCED
GROWTH CAPITAL
ANNUAL EXPENSES INDEX 500 FOCUS FOCUS(A)
- --------------- --------- ------------- -------------
<S> <C> <C> <C>
Investment Advisory Fees.......................... .30% .75% .60%
Other Expenses.................................... .05% .12% .11%
--- ---- ---
Total Annual Operating Expenses................... .35% .87% .71%
Expense Reimbursements............................ 0% 0% 0%
--- ---- ---
Net Expenses...................................... .35% .87% .71%
</TABLE>
<TABLE>
<CAPTION>
ALLIANCE VARIABLE
PRODUCTS
AIM VARIABLE SERIES FUND, INC. MFS-REGISTERED TRADEMARK- VARIABLE HOTCHKIS AND WILEY
INSURANCE FUNDS (CLASS A SHARES) INSURANCE TRUST-SM- VARIABLE TRUST
--------------------- ----------------------- ----------------------------------- ------------------
AIM V.I. ALLIANCE MFS
CAPITAL AIM V.I. PREMIER ALLIANCE EMERGING MFS HOTCHKIS AND WILEY
ANNUAL EXPENSES APPRECIATION VALUE GROWTH(C) QUASAR(C) GROWTH(D) RESEARCH(D) INTERNATIONAL VIP
- --------------- ------------ -------- ----------- ----------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory
Fees.............. .62% .61% 1.00% 1.00% .75% .75% .75%
Other Expenses...... .11% .15% .05% .19% .09% .11% .26%
--- --- ---- ---- --- --- ----
Total Annual
Operating
Expenses.......... .73% .76% 1.05% 1.19% .84% .86% 1.01%
Expense
Reimbursements.... 0% 0% 0% 0% 0% 0% 0%
--- --- ---- ---- --- --- ----
Net Expenses........ .73% .76% 1.05% 1.19% .84% .86% 1.01%
<CAPTION>
MERCURY ASSET
MANAGEMENT
V.I. FUNDS, INC.
(CLASS A SHARES)
-----------------
MERCURY V.I.
U.S. LARGE
ANNUAL EXPENSES CAP(E)
- --------------- -----------------
<S> <C>
Investment Advisory
Fees.............. .65%
Other Expenses...... 2.18%
----
Total Annual
Operating
Expenses.......... 2.83%
Expense
Reimbursements.... 1.58%
----
Net Expenses........ 1.25%
</TABLE>
<TABLE>
<CAPTION>
DEFINED ASSET FUNDS
-------------------------------------
ANNUAL EXPENSES SELECT TEN V.I. TRUST(F)
- --------------- -------------------------------------
<S> <C>
Deferred Transaction Fee.......................... $4.29 per 1,000 Trust Units
Trustee's Fee..................................... .099%
Portfolio Supervision, Bookkeeping and
Administrative Fees............................. .077%
Organizational Expenses........................... .132%
Other Operating Expenses.......................... .030%
--------------------------------
Total Annual Operating Expenses................... .338%
</TABLE>
- ---------
* Closed to allocations of premiums or contract value following the close of
business on December 6, 1996.
** Closed to allocations of premiums or contract value following the close of
business on June 5, 1998.
13
<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:
ML Reserve Assets Fund+................................. $14 $43 $74 $163
SEPARATE ACCOUNT A SUBACCOUNT INVESTING IN:
ML Prime Bond Fund+..................................... $84 $109 $132 $221
ML High Current Income Fund+............................ $85 $111 $135 $226
ML Quality Equity Fund+................................. $85 $110 $133 $223
ML Small Cap Value Focus Fund+.......................... $88 $119 $150 $257
ML Natural Resources Focus Fund+*....................... $89 $122 $155 $267
ML Global Strategy Focus Fund+.......................... $87 $117 $146 $249
ML American Balanced Fund+*............................. $86 $113 $139 $236
ML Domestic Money Market Fund+.......................... $85 $111 $136 $229
ML Basic Value Focus Fund+.............................. $86 $115 $142 $241
ML Global Bond Focus Fund+**............................ $87 $118 $148 $253
ML Utilities and Telecommunications Focus Fund+*........ $86 $116 $144 $244
ML International Equity Focus Fund+**................... $89 $122 $155 $268
ML Government Bond Fund+................................ $85 $111 $136 $229
ML Developing Capital Markets Focus Fund+............... $92 $132 $172 $302
ML Index 500 Fund+...................................... $83 $106 $126 $208
ML Global Growth Focus Fund+............................ $88 $121 $153 $263
ML Balanced Capital Focus Fund+......................... $87 $116 $145 $246
Defined Asset Funds -- Select Ten V.I. Trust............ $87 $118 $147 $251
AIM V.I. Capital Appreciation Fund...................... $87 $117 $146 $249
AIM V.I. Value Fund..................................... $87 $118 $147 $252
Alliance Premier Growth Portfolio+...................... $90 $126 $162 $282
Alliance Quasar Portfolio+.............................. $91 $130 $169 $296
MFS Emerging Growth Series.............................. $88 $120 $151 $260
MFS Research Series..................................... $88 $121 $152 $262
Hotchkis and Wiley International VIP Portfolio.......... $90 $125 $160 $278
Mercury V.I. U.S. Large Cap Fund+....................... $92 $132 $172 $302
</TABLE>
- ---------
<TABLE>
<S> <C>
+ Class A Shares.
* Closed to allocations of premiums or contract value
following the close of business on December 6, 1996.
** Closed to allocations of premiums or contract value
following the close of business on June 5, 1998.
</TABLE>
14
<PAGE>
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:
ML Reserve Assets Fund+................................. $14 $43 $74 $163
SEPARATE ACCOUNT A SUBACCOUNT INVESTING IN:
ML Prime Bond Fund+..................................... $19 $59 $102 $221
ML High Current Income Fund+............................ $20 $61 $105 $226
ML Quality Equity Fund+................................. $19 $60 $103 $223
ML Small Cap Value Focus Fund+.......................... $23 $70 $120 $257
ML Natural Resources Focus Fund+*....................... $24 $73 $125 $267
ML Global Strategy Focus Fund+.......................... $22 $67 $116 $249
ML American Balanced Fund+*............................. $21 $64 $109 $236
ML Domestic Money Market Fund+.......................... $20 $62 $106 $229
ML Basic Value Focus Fund+.............................. $21 $65 $112 $241
ML Global Bond Focus Fund+**............................ $22 $69 $118 $253
ML Utilities and Telecommunications Focus Fund+*........ $21 $66 $114 $244
ML International Equity Focus Fund+**................... $24 $73 $125 $268
ML Government Bond Fund+................................ $20 $62 $106 $229
ML Developing Capital Markets Focus Fund+............... $27 $83 $142 $302
ML Index 500 Fund+...................................... $18 $56 $ 96 $208
ML Global Growth Focus Fund+............................ $23 $72 $123 $263
ML Balanced Capital Focus Fund+......................... $22 $68 $117 $251
Defined Asset Funds -- Select Ten V.I. Trust............ $22 $68 $117 $251
AIM V.I. Capital Appreciation Fund...................... $22 $67 $116 $249
AIM V.I. Value Fund..................................... $22 $68 $117 $252
Alliance Premier Growth Portfolio+...................... $25 $77 $132 $282
Alliance Quasar Portfolio+.............................. $27 $82 $139 $296
MFS Emerging Growth Series.............................. $23 $71 $121 $260
MFS Research Series..................................... $23 $71 $122 $262
Hotchkis and Wiley International VIP Portfolio.......... $25 $76 $130 $278
Mercury V.I. U.S. Large Cap Fund+....................... $27 $83 $142 $302
</TABLE>
- ---------
<TABLE>
<S> <C>
+ Class A Shares.
* Closed to allocations of premiums or contract value
following the close of business on December 6, 1996.
** Closed to allocations of premiums or contract value
following the close of business on June 5, 1998.
</TABLE>
15
<PAGE>
The preceding Fee Table and Examples help you understand the costs and expenses
you will bear, directly or indirectly. The Fee Table and Examples include
expenses and charges of the Accounts as well as the Funds. The Examples also
reflect the $40 contract maintenance charge as .025% of average assets. See the
CHARGES AND DEDUCTIONS section in this Prospectus and the Fund prospectuses for
a further discussion of fees and charges.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR ANNUAL RATES OF RETURN OF ANY FUND. ACTUAL EXPENSES AND ANNUAL RATES
OF RETURN MAY BE MORE OR LESS THAN THOSE ASSUMED FOR THE PURPOSE OF THE
EXAMPLES.
Condensed financial information containing the accumulation unit value history
appears at the end of this prospectus.
NOTES TO FEE TABLE
(a) Effective April 4, 2000, (i) the Special Value Focus Fund was renamed the
Small Cap Value Focus Fund; (ii) the Global Utility Focus Fund was renamed
the Utilities and Telecommunications Focus Fund; and (iii) the Capital Focus
Fund was renamed the Balanced Capital Focus Fund. See the accompanying
prospectus for Merrill Variable Funds for additional information regarding
these changes.
(b) Merrill Lynch Asset Management L.P. ("MLAM") and Merrill Lynch Life Agency,
Inc. have entered into a Reimbursement Agreement that limits the operating
expenses, exclusive of any distribution fees imposed on Class B shares, paid
by each Fund of the Merrill Variable Funds 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. Under this Reimbursement Agreement, the
Developing Capital Markets Focus Fund was reimbursed for a portion of its
operating expenses for 1999.
(c) The Fee Table does not reflect fees waived or expenses assumed by Alliance
Capital Management L.P. ("Alliance") for the Alliance Quasar Portfolio
during the year ended December 31, 1999. Such waivers and assumption of
expenses were made on a voluntary basis. Alliance may discontinue or reduce
any such waiver or assumption of expenses at any time without notice. During
the fiscal year ended December 31, 1999, Alliance waived management fees
totaling .24% for the Alliance Quasar Portfolio. Considering such
reimbursements, "Total Annual Operating Expenses" would have been .95%.
(d) The MFS Emerging Growth Series and MFS Research Series have expense offset
arrangements which reduce each Fund's custodian fee based upon the amount of
cash maintained by each Fund with its custodian and dividend disbursing
agent. The Funds may enter into such arrangements and directed brokerage
arrangements, which would also have the effect of reducing the Funds'
expenses. "Other Expenses" do not take into account these expense
reductions, and are therefore higher than the actual expenses of the Funds.
Had these fee reductions been taken into account, "Net Expenses" would have
been 0.83% for the Emerging Growth Series and 0.85% for the Research Series.
(e) Mercury Asset Management International Ltd. has agreed to limit for one
year the operating expenses paid by the Mercury V.I. U.S. Large Cap Fund to
1.25% of its average net assets.
(f) Merrill Lynch, Pierce, Fenner & Smith Incorporated, the sponsor of Defined
Asset Funds, receives a deferred transaction fee accrued daily at an annual
rate of $4.29 per 1,000 units of the Select Ten V.I. Trust ("Trust Units")
(about 0.47% per Trust Unit) for creating and maintaining the Select Ten
V.I. Trust. This deferred transaction fee also applies to income and
principal distributions on Trust Units, which are reinvested in Trust Units.
Other annual operating expenses are shown as a percentage of net assets of
the Select Ten V.I. Trust. The amount of each of these other expenses, on a
per 1,000 Trust Unit basis, are as follows: $0.99 (trustee's fee); $0.77
(portfolio supervision, bookkeeping and administrative fees); $1.32
(organizational expenses); and $0.30 (other operating expenses); for a total
of $3.38 per 1,000 Trust Units. These expenses do not include the costs of
purchasing and selling the underlying stocks held by the Select Ten V.I.
Trust.
16
<PAGE>
YIELDS AND TOTAL RETURNS
From time to time, we may advertise yields, effective yields, and total returns
for the subaccounts. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND DO NOT
INDICATE OR PROJECT FUTURE PERFORMANCE. We may also advertise performance of the
subaccounts in comparison to certain performance rankings and indices. More
detailed information on the calculation of performance information, as well as
comparisons with unmanaged market indices, appears in the Statement of
Additional Information.
Effective yields and total returns for a subaccount are based on the investment
performance of the corresponding Fund. Fund expenses influence Fund performance.
The 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 is assumed to be reinvested. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment.
The yield of an Account A subaccount (besides the Domestic Money Market
Subaccount) refers to the annualized income generated by an investment in the
subaccount over a specified 30-day or one month period. The yield is calculated
by assuming the income generated by the investment during that 30-day or
one-month period is generated each period over 12 months and is shown as a
percentage of the investment.
The average annual total return of a subaccount refers to return quotations
assuming an investment has been held in each subaccount for 1, 5 and 10 years,
or for a shorter period, if applicable. The average annual total returns
represent the average compounded rates of return that would cause an initial
investment of $1,000 to equal the value of that investment at the end of each
period. These percentages include any sales charge that would apply if you
terminated the Contract at the end of each period indicated, but exclude any
deductions for premium taxes.
We may also advertise or present yield or total return performance information
computed on different bases, but this information will always be accompanied by
average annual total returns for the corresponding subaccounts. For example, we
may present total return information that doesn't reflect a deduction for the
sales charge. This presentation assumes that an investment in the Contract will
extend beyond the period when the sales charge applies, consistent with the long
term investment and retirement objectives of the Contract. We may also advertise
total return performance information for the Funds. We may also present total
return performance information for a subaccount for periods before the date the
subaccount commenced operations. If we do, we'll base performance of the
corresponding Fund as if the subaccount existed for the same periods as those
indicated for the corresponding Fund, with a level of fees and charges equal to
those currently imposed under the Contracts. We may also present total
performance information for a hypothetical Contract assuming allocation of the
initial premium to more than one subaccount or assuming monthly transfers from
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 will also reflect the deduction of charges described above except
for the sales charge. This information may also be compared to various indices.
Advertising and sales literature for the Contracts may also compare the
performance of the subaccounts and Funds to the performance of other variable
annuity issuers in general or to the performance of particular types of variable
annuities investing in mutual funds, with investment objectives similar to each
of the Funds corresponding to the subaccounts.
17
<PAGE>
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. Ranking services
we may use as sources of performance comparison are Lipper, VARDS,
CDA/Weisenberger, Morningstar, MICROPAL, and Investment Company Data, Inc.
Advertising and sales literature for the Contracts may also compare the
performance of the subaccounts to the Standard & Poor's Index of 500 Common
Stocks, the Morgan Stanley EAFE Index, the Russell 2000 Index and the Dow Jones
Indices, all widely used measures of stock market performance. These unmanaged
indices assume the reinvestment of dividends, but do not reflect any "deduction"
for the expense of operating or managing an investment portfolio. Other sources
of performance comparison that we may use are Chase Investment Performance
Digest, Money, Forbes, Fortune, Business Week, Financial Services Weekly,
Kiplinger Personal Finance, Wall Street Journal, USA Today, Barrons, U.S.
News & World Report, Strategic Insight, Donaghues, Investors Business Daily, and
Ibbotson Associates.
Advertising and sales literature for the Contracts may also contain information
on the effect of tax deferred compounding on subaccount investment returns, or
returns in general. The tax deferral may be illustrated by graphs and charts and
may include a comparison at various points in time of the return from an
investment in a Contract (or returns in general) on a tax-deferred basis
(assuming one or more tax rates) with the return on a currently taxable basis.
ML LIFE INSURANCE COMPANY OF NEW YORK
We are a stock life insurance company organized under the laws of the State of
New York on November 28, 1973. We are an indirect wholly-owned subsidiary of
Merrill Lynch & Co., Inc., a corporation whose common stock is traded on the New
York Stock Exchange.
Our financial statements can be found in the Statement of Additional
Information. You should consider them only in the context of our ability to meet
any Contract obligation.
THE ACCOUNTS
You may direct 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 through its subaccounts a variety of
investment options. Each option has a different investment objective. The ML of
New York Variable Annuity Separate Account B ("Account B") offers a money market
investment through its subaccount.
We established the Accounts on August 14, 1991. They are governed by New York
law, our state of domicile. They are registered with the Securities and Exchange
Commission as unit investment trusts under the Investment Company Act of 1940.
Each account meets the definition of a separate account under the federal
securities laws. The Accounts' assets are SEGREGATED from all of our other
assets.
SEGREGATION OF ACCOUNT ASSETS
Obligations to contract owners and beneficiaries that arise under the Contract
are our obligations. We own all of the assets in the Accounts. Each Account's
income, gains, and losses, whether or not realized, derived from Account assets
are credited to or charged against the Account without regard to our other
income, gains or losses. The assets in each Account will always be at least
equal to the reserves and other liabilities of the Account. If an Account's
assets exceed the required reserves and other Contract liabilities, we may
transfer the excess to our general account. Under New York insurance law the
assets in each Account, to the extent of its
18
<PAGE>
reserves and liabilities, may not be charged with liabilities arising out of any
other business we conduct nor may the assets of either Account be charged with
any liabilities of the other Account.
NUMBER OF SUBACCOUNTS; SUBACCOUNT INVESTMENTS
There are 21 subaccounts currently available through Account A and one
subaccount currently available through Account B. Five subaccounts previously
available through Account A (the Natural Resources Focus Subaccount, the
American Balanced Subaccount, the Global Bond Focus Subaccount, the
International Equity Focus Subaccount and the Utilities and Telecommunications
Focus Subaccount) are closed to allocations of premiums and contract value. All
subaccounts invest in a corresponding portfolio of the Merrill Lynch Variable
Series Funds, Inc. (the "Merrill Variable Funds"); the AIM Variable Insurance
Funds (the "AIM V.I. Funds"); the Alliance Variable Products Series Fund, Inc.
(the "Alliance Fund"); the MFS-Registered Trademark- Variable Insurance
Trust-SM- (the "MFS Trust"); the Hotchkis and Wiley Variable Trust (the
"Hotchkis and Wiley Trust"); the Mercury Asset Management V.I. Funds, Inc. (the
"Mercury V.I. Funds"); or the Defined Asset Funds. Additional subaccounts may be
added or closed in the future.
Although the investment objectives and policies of certain Funds are similar to
the investment objectives and policies of other portfolios that may be managed
or sponsored by the same investment adviser, manager, or sponsor, nevertheless,
we do not represent or assure that the investment results will be comparable to
any other portfolio, even where the investment adviser or manager is the same.
Differences in portfolio size, actual investments held, fund expenses, and other
factors all contribute to differences in fund performance. For all of these
reasons, you should expect investment results to differ. In particular, certain
funds available only through the Contract have names similar to funds not
available through the Contract. The performance of a fund not available through
the Contract should not be indicative of performance of the similarly named fund
available through the Contract.
INVESTMENTS OF THE ACCOUNTS
GENERAL INFORMATION AND INVESTMENT RISKS
Information about investment objectives, management, policies, restrictions,
expenses and all other aspects of fund operations can be found in the Fund's
prospectus and Statement of Additional Information. Fund shares are currently
sold to our separate accounts as well as separate accounts of Merrill Lynch Life
Insurance Company (an indirect wholly owned subsidiary of Merrill Lynch &
Co., Inc.), and insurance companies not affiliated with us to fund benefits
under certain variable annuity and variable life insurance contracts. Shares of
these funds may be offered in the future to certain pension or retirement plans.
Generally, you should consider the funds as long-term investments and vehicles
for diversification, but not as a balanced investment program. Many of these
funds may not be appropriate as the exclusive investment to fund a Contract for
all contract owners. There is no guarantee that any fund will be able to meet
its investment objectives. Meeting these objectives depends upon future economic
conditions and upon how well fund management anticipates changes in economic
conditions.
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
The Merrill Lynch Variable Series Funds, Inc. ("Merrill Variable Funds") is
registered with the Securities and Exchange Commission as an open-end management
investment company. It currently offers the Accounts Class A shares of 18 of its
separate investment mutual fund portfolios. The Reserve Assets Fund is available
only to Account B.
19
<PAGE>
Merrill Lynch Asset Management, L.P. ("MLAM") is the investment adviser to the
Merrill Variable Funds. MLAM, together with its affiliates, Fund Asset
Management, L.P., Mercury Asset Management International Ltd., and Hotchkis and
Wiley, is a worldwide mutual fund leader, and had a total of $550.07 billion in
investment company and other portfolio assets under management as of the end of
January 31, 2000. It is registered as an investment adviser under the Investment
Advisers Act of 1940. MLAM is an indirect subsidiary of Merrill Lynch &
Co., Inc. MLAM's principal business address is 800 Scudders Mill Road,
Plainsboro, New Jersey 08536. As the investment adviser, it is paid fees by
these Funds for its services. The fees charged to each of these Funds are set
forth in the summary below.
Details about these Funds, including their investment objectives, management,
policies, restrictions, expenses and risks, and all other aspects of these
Funds' operation can be found in the attached prospectus for the Merrill
Variable Funds and in their Statement of Additional Information. Read these
carefully before investing. As described in the prospectus for Merrill Variable
Funds, many of these Funds should be considered a long-term investment and a
vehicle for diversification, and not as a balanced investment program. Such
Funds may not be appropriate as the exclusive investment to fund a Contract for
all contract owners. The Merrill Variable Funds prospectus also describes
certain additional risks, including investing on an international basis or in
foreign securities and investing in lower rated or unrated fixed income
securities.
DOMESTIC MONEY MARKET FUND. This Fund seeks to preserve capital, maintain
liquidity, and achieve the highest possible current income consistent with the
foregoing objectives by investing in short-term domestic money market
securities. MLAM receives an advisory fee from the Fund at the annual rate of
0.50% of the average daily net assets of the Fund.
PRIME BOND FUND. This Fund seeks to obtain a high level of current income.
Secondarily, the Fund seeks capital appreciation when consistent with the
foregoing objective. The Fund invests primarily in long-term corporate bonds
rated in the top three ratings categories by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Ratings Group ("Standard & Poor's"). MLAM
receives an advisory fee from the Fund 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 Merrill Variable Funds.
HIGH CURRENT INCOME FUND. This Fund seeks to obtain a high level of current
income. Secondarily, the Fund seeks 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
(including securities commonly known as "junk bonds"). Investment in such
securities entails relatively greater risk of loss of income or principal. 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.
MLAM receives an advisory fee from the Fund 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 Merrill Variable Funds.
20
<PAGE>
QUALITY EQUITY FUND. This Fund seeks to achieve high total investment return.
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 an advisory fee from the Fund
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.
SMALL CAP VALUE FOCUS FUND (FORMERLY, THE SPECIAL VALUE FOCUS FUND). This Fund
seeks long term growth of capital by investing in a diversified portfolio of
securities, primarily common stocks, of relatively small companies that
management of the Merrill Variable Funds believes have special investment value,
and of emerging growth companies regardless of size. 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 the selection of securities. MLAM
receives an advisory fee from the Fund at the annual rate of 0.75% of the
average daily net assets of the Fund.
NATURAL RESOURCES FOCUS FUND. This Fund seeks to achieve capital appreciation
and to protect the purchasing power of capital by investing primarily in equity
securities of domestic and foreign companies with substantial natural resource
assets. MLAM receives an advisory fee from the Fund at the annual rate of 0.65%
of the average daily net assets of the Fund.
We 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.
The subaccount corresponding to this Fund was closed to allocations of premiums
and contract value following the close of business on December 6, 1996.
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 equity securities. MLAM receives an
advisory fee from the Fund at the annual rate of 0.55% of the average daily net
assets of the Fund.
The subaccount corresponding to this Fund was closed to allocations of premiums
and contract value following the close of business on December 6, 1996.
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, the Far East and Latin America. MLAM
receives an advisory fee from the Fund at the annual rate of 0.65% of the
average daily net assets of the Fund.
Effective following the close of business on December 6, 1996, the Flexible
Strategy Fund was merged with and into the Global Strategy Focus Fund.
BASIC VALUE FOCUS FUND. This Fund seeks capital appreciation and, secondarily
income by investing in securities, primarily equities, that management of the
Fund believes are undervalued and therefore represent basic investment value.
The Fund seeks special opportunities in securities that are selling at a
discount, either from book value or historical price-earnings ratios, or seem
capable of recovering from temporarily out-of-favor considerations. Particular
emphasis is placed on securities which provide an above-average dividend return
and
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<PAGE>
sell at a below-average price/earnings ratio. MLAM receives an advisory fee from
the Fund at the annual rate of 0.60% of the average daily net assets of the
Fund.
GLOBAL BOND FOCUS FUND. This Fund seeks to provide high total investment return
by investing in a global portfolio of fixed-income securities denominated in
various currencies, including multinational currency units. The Fund may invest
in fixed-income securities that have a credit rating of A or better by
Standard & Poor's or by Moody's or commercial paper rated A-1 by Standard &
Poor's or Prime-1 by Moody's or obligations that MLAM has determined to be of
similar creditworthiness. MLAM receives an advisory fee from the Fund at the
annual rate of 0.60% of the average daily net assets of the Fund.
Effective following the close of business on December 6, 1996, the International
Bond Fund was merged with and into the Global Bond Focus Fund. The subaccount
corresponding to this Fund was closed to allocations of premiums and contract
value following the close of business on June 5, 1998.
UTILITIES AND TELECOMMUNICATIONS FOCUS FUND (FORMERLY, THE GLOBAL UTILITY FOCUS
FUND). This Fund seeks both 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 MLAM,
primarily engaged in the ownership or operation of facilities used to generate,
transmit or distribute electricity, telecommunications, gas or water. MLAM
receives an advisory fee from the Fund at the annual rate of 0.60% of the
average daily net assets of the Fund.
The subaccount corresponding to this Fund was closed to allocations of premiums
and contract value following the close of business on December 6, 1996.
INTERNATIONAL EQUITY FOCUS FUND. This Fund seeks 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 and at least 65% of the Fund's total assets will be invested
in the securities of issuers from at least three different foreign countries.
MLAM receives an advisory fee from the Fund at the annual rate of 0.75% of the
average daily net assets of the Fund.
The subaccount corresponding to this Fund was closed to allocations of premiums
and contract value following the close of business on June 5, 1998.
GOVERNMENT BOND FUND. This Fund seeks the highest possible current income
consistent with the protection of capital afforded by investing in debt
securities issued or guaranteed by the United States Government, its agencies or
instrumentalities. MLAM receives an advisory fee from the Fund at an annual rate
of 0.50% of the average daily net assets of the Fund.
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. Investment in the Developing Capital
Markets Focus Fund entails relatively greater risk of loss of income or
principal. MLAM receives an advisory fee from the Fund at an annual rate of
1.00% of the average daily net assets of the Fund.
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<PAGE>
RESERVE ASSETS FUND. This Fund seeks to preserve capital, maintain liquidity,
and achieve the highest possible current income consistent with the foregoing
objectives by investing in short-term money market securities. The Fund invests
in short-term United States government securities; U.S. government agency
securities; bank certificates of deposit and bankers' acceptances; short-term
debt securities such as commercial paper and variable amount master demand
notes; repurchase agreements and other money market instruments. MLAM receives
an advisory fee from the Fund 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.
INDEX 500 FUND. This Fund seeks investment results that, before expenses,
correspond to the aggregate price and yield performance of the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500 Index"). MLAM receives an advisory
fee from the Fund at an annual rate of 0.30% of the Fund's average daily net
assets.
BALANCED CAPITAL FOCUS FUND (FORMERLY, THE CAPITAL FOCUS FUND). This Fund seeks
to achieve high total investment return. To do this, management of the Fund uses
a flexible "fully managed" investment policy that shifts the emphasis among
equity, debt (including money market), and convertible securities. MLAM receives
an advisory fee from the Fund at the annual rate of 0.60% of the Fund's average
daily net assets.
GLOBAL GROWTH FOCUS FUND. This Fund seeks long-term growth of capital. The Fund
invests in a diversified portfolio of equity securities of issuers located in
various countries and the United States, placing particular emphasis on
companies that have exhibited above-average growth rates in earnings. Because a
substantial portion of the Fund's assets may be invested on an international
basis, contract owners should be aware of certain risks, such as fluctuations in
foreign exchange rates, future political and economic developments, different
legal systems, and the possible imposition of exchange controls or other foreign
government laws or restrictions. An investment in the Fund may be appropriate
only for long-term investors who can assume the risk of loss of principal, and
do not seek current income. MLAM receives an advisory fee from the Fund at an
annual rate of 0.75% of the Fund's average daily net assets.
DEFINED ASSET FUNDS--SELECT TEN V.I. TRUST
Defined Asset Funds is America's oldest and largest family of unit investment
trusts, with over $160 billion sponsored over the last 28 years. Each Defined
Asset Fund is a portfolio of preselected securities. The portfolio is divided
into "units" representing equal shares of the underlying assets ("Trust Units").
Each Trust Unit receives an equal share of income and principal distributions.
Units are redeemable securities.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") serves as sponsor
of Defined Asset Funds. MLPF&S receives a deferred transaction fee, accrued
daily at an annual rate of $4.29 per 1,000 Trust Units (about 0.47%) for
creating and maintaining the Select Ten V.I. Trust (the "Select Ten Trust").
Half of this fee is paid to MLIG to compensate it for its administrative
services in making Trust Units available for investment by Account A. The Select
Ten Trust is also subject to additional operating expenses, summarized in the
Fee Table and described more fully in the attached prospectus for the Select Ten
Trust.
The Select Ten Trust, one portfolio of Defined Asset Funds, Equity Investor
Fund, buys approximately equal amounts of the ten highest dividend-yielding
common stocks of the 30 stocks in the Dow Jones Industrial Average* ("DJIA")
(determined three business days prior to May 1, 2000) and holds them for about
one year.
- --------
* The name "Dow Jones Industrial Average" is the property of Dow Jones &
Company, Inc., which is not affiliated with MLPF&S, has not participated in any
way in the creation of the Select Ten Trust or in the selection of stocks
included in the Select Ten Trust, and has not reviewed or approved any
information included in this prospectus.
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<PAGE>
MLPF&S anticipates that the Select Ten Trust portfolio will remain unchanged
over its one year life despite any adverse developments concerning an issuer, an
industry, or the economy or stock market generally.
AT THE END OF THE YEAR (ON OR ABOUT MAY 1, 2001), THE SELECT TEN TRUST WILL BE
LIQUIDATED. WE CURRENTLY ANTICIPATE THAT THE SAME INVESTMENT STRATEGY WILL BE
REAPPLIED TO THE DJIA TO SELECT (AS OF TWO BUSINESS DAYS PRIOR TO MAY 1, 2001) A
NEW STOCK PORTFOLIO FOR A SUCCESSOR TRUST. You must give us instructions BY
APRIL 30, 2001 about how to invest any account value in the 2000 Select Ten
Trust when it terminates. You will receive a notice requesting instructions
prior to that time.
Your choices at that time will include:
- Giving us instructions to rollover your account value in the 2000 Select
Ten Trust when it terminates to the 2001 Select Ten Trust, if available.
- Giving us instructions to transfer any account value in the 2000 Select
Ten Trust to any of the other investment options available under the
Contract. This transfer will be made on the date you give us your transfer
instructions, unless you direct us to make the transfer on April 30, 2001.
If you do not pick either of these choices at that time, you will be deemed to
have instructed us to transfer any of your account value in the 2000 Select Ten
Trust to the Domestic Money Market Fund on April 30, 2001.
On or about May 1, 2001, it is contemplated that remaining Trust Units will be
redeemed, and the proceeds (for contract owners electing to rollover their
account value) will be immediately invested in the 2001 Select Ten Trust.
Brokerage commissions in selling and purchasing stocks for the rollover trust
will be borne indirectly by contract owners.
MLPF&S reserves the right to depart from the Select Ten investment strategy
described above in order to maintain the Select Ten Trust's compliance with the
diversification requirements of Section 817(h) of the Internal Revenue Code and
regulations thereunder. The Internal Revenue Service has not addressed the issue
of investment control with respect to a narrow investment policy such as that of
the Select Ten Trust. If you are deemed to have investment control of the assets
in a Select Ten Trust, then you could be treated as the owner of those assets.
If so, income and gains from the Select Ten Trust's assets would be includable
(pro rata) in your taxable income each year.
WE RESERVE THE RIGHT TO CEASE OFFERING THE SELECT TEN SUBACCOUNT AT ANY TIME.
THERE CAN BE NO ASSURANCE THAT DEFINED ASSET FUNDS OR MLPF&S WILL CONTINUE TO
MAKE TRUSTS AVAILABLE IN 2001, OR THEREAFTER.
AIM VARIABLE INSURANCE FUNDS
AIM Variable Insurance Funds ("AIM V.I. Funds") is registered with the
Securities and Exchange Commission as an open-end, series, management investment
company. It currently offers Account A two of its separate investment
portfolios.
A I M Advisors, Inc. ("AIM"), 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173, serves as the investment adviser to each of the Funds of AIM V.I.
Funds. AIM has acted as an investment adviser since its organization in 1976.
Today AIM, together with its subsidiaries, advises or manages over 120
investment portfolios, including the Funds, encompassing a broad range of
investment objectives. As the investment adviser, AIM receives compensation from
the Funds for its services. The fees charged to each of these Funds are set
forth in the summary of investment objectives below.
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<PAGE>
AIM V.I. CAPITAL APPRECIATION FUND. This Fund seeks growth of capital through
investment in common stocks, with emphasis on medium and small-sized growth
companies. AIM will be particularly interested in companies that are likely to
benefit from new or innovative products, services or processes as well as those
that have experienced above-average, long-term growth in earnings and have
excellent prospects for future growth. AIM receives an advisory fee from the
Fund at an annual rate of 0.65% of the first $250 million of the Fund's average
daily net assets and 0.60% of the Fund's average daily net assets in excess of
$250 million.
AIM V.I. VALUE FUND. This Fund seeks to achieve long-term growth of capital by
investing primarily in equity securities judged by AIM to be undervalued
relative to AIM's appraisal of the current or projected earnings of the
companies issuing the securities, or relative to current market values of assets
owned by the companies issuing the securities or relative to the equity market
generally. Income is a secondary objective. AIM receives an advisory fee from
the Fund at an annual rate of 0.65% of the first $250 million of the Fund's
average daily net assets and 0.60% of the Fund's average daily net assets in
excess of $250 million.
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Alliance Variable Products Series Fund, Inc. ("Alliance Fund") is registered
with the Securities and Exchange Commission as an open-end management investment
company. It currently offers Account A Class A shares of two of its separate
investment portfolios. Alliance Capital Management L.P. ("Alliance"), a Delaware
limited partnership with principal offices at 1345 Avenue of the Americas, New
York, New York 10105 serves as the investment adviser to each Fund of the
Alliance Fund. Alliance Capital Management Corporation ("ACMC"), the sole
general partner of Alliance, is an indirect wholly owned subsidiary of The
Equitable Life Assurance Society of the United States, which is in turn a wholly
owned subsidiary of AXA Financial, Inc., a holding company which is controlled
by AXA, a French insurance holding company for an international group of
insurance and related financial services companies. As the investment adviser,
Alliance is paid fees by the Funds for its services. The fees charged to the
Funds are set forth in the summary of investment objective below.
ALLIANCE PREMIER GROWTH PORTFOLIO. This Fund seeks growth of capital by pursuing
aggressive investment policies. Since investments will be made based upon their
potential for capital appreciation, current income is incidental to the
objective of capital growth. Alliance receives an advisory fee from the Fund at
an annual rate of 1.00% of the Fund's average daily net assets.
ALLIANCE QUASAR PORTFOLIO. This Fund seeks growth of capital by pursuing
aggressive investment policies. The Fund invests principally in a diversified
portfolio of equity securities of any company and industry and in any type of
security which is believed to offer possibilities for capital appreciation, and
invests only incidentally for current income. The selection of securities based
on the possibility of appreciation cannot prevent loss in value. Moreover,
because the Fund's investment policies are aggressive, an investment in the Fund
is risky and investors who want assured income or preservation of capital should
not invest in the Fund. Alliance receives an advisory fee from the Fund at an
annual rate of 1.00% of the Fund's average daily net assets. (See "Notes to Fee
Table" for a discussion of a reimbursement arrangement applicable to this Fund.)
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-
MFS-Registered Trademark- Variable Insurance Trust-SM- ("MFS Trust") is
registered with the Securities and Exchange Commission as an open-end management
investment company. It currently offers Account A two of its separate investment
portfolios.
Massachusetts Financial Services Company ("MFS"), a Delaware corporation, 500
Boylston Street, Boston, Massachusetts 02116, serves as the investment adviser
to each of the Funds of MFS Trust. MFS is a subsidiary of Sun Life of Canada
(U.S.), Financial Services Holdings, Inc. which, in turn, is a indirect wholly
owned
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<PAGE>
subsidiary of Sun Life Assurance Company of Canada. As the investment adviser,
MFS is paid fees by each of these Funds for its services. The fees charged to
these Funds are set forth in the summary of investment objectives below.
MFS EMERGING GROWTH SERIES. This Fund seeks long-term growth of capital. The
Fund invests, under normal market conditions, at least 65% of its total assets
in common stocks and related securities, such as preferred stocks, convertible
securities and depositary receipts for those securities, of emerging growth
companies. These companies are companies that the Fund's adviser believes are
either early in their life cycle but have the potential to become major
enterprises or are major enterprises whose rates of earnings growth are expected
to accelerate. MFS receives an advisory fee from the Fund at an annual rate of
0.75% of the average daily net assets of the Fund.
MFS RESEARCH SERIES. This Fund will seek to provide long-term growth of capital
and future income. The Fund invests, under normal market conditions, at least
80% of its total assets in common stocks and related securities, such as
preferred stocks, convertible securities and depositary receipts. The Fund
focuses on companies that the Fund's adviser believes have favorable prospects
for long-term growth, attractive valuations based on current and expected
earnings or cash flow, dominant or growing market share and superior management.
MFS receives an advisory fee from the Fund at an annual rate of 0.75% of the
average daily net assets of the Fund.
HOTCHKIS AND WILEY VARIABLE TRUST
Hotchkis and Wiley Variable Trust ("Hotchkis and Wiley Trust"), a Massachusetts
business trust, is registered with the Securities and Exchange Commission as an
open-end management investment company. The Hotchkis and Wiley Trust is intended
to serve as the investment medium for variable annuity contracts and variable
life insurance policies to be offered by the separate accounts of certain
insurance companies.
Hotchkis and Wiley, 725 S. Figueroa Street, Suite 4000, Los Angeles, California
90017-5400, serves as the investment adviser to the Hotchkis and Wiley
International VIP Portfolio and generally administers the affairs of the
Hotchkis and Wiley Trust. Hotchkis and Wiley is a division of MLAM. As the
investment adviser, Hotchkis and Wiley is paid fees by the Fund for its
services. The fees charged to the Fund for advisory services are set forth in
the summary of investment objectives below.
HOTCHKIS AND WILEY INTERNATIONAL VIP PORTFOLIO. The Fund's investment objective
is to provide current income and long-term growth of income, accompanied by
growth of capital. The Fund invests at least 65% of its total assets in stocks
in at least ten foreign markets. In investing the Fund, Hotchkis and Wiley
follows a VALUE style. This means that it buys stocks that it believes are
currently undervalued by the market and thus have a lower price than their true
worth. Hotchkis and Wiley receives an advisory fee from the Fund at an annual
rate of 0.75% of the Fund's average daily net assets.
MERCURY ASSET MANAGEMENT V.I. FUNDS, INC.
Mercury Asset Management V.I. Funds, Inc. ("Mercury V.I. Funds") is registered
with the Securities and Exchange Commission as an open-end management investment
company, and its adviser is Mercury Asset Management International Ltd. It
currently offers Account A Class A shares of one of its mutual fund portfolios,
the Mercury V.I. U.S. Large Cap Fund. The investment objective of the Mercury
V.I. U.S. Large Cap Fund is described below.
Mercury Asset Management International Ltd. is located at 33 King William
Street, London EC4R 9AS, England. Its intermediate parent is Mercury Asset
Management Group Ltd. a London-based holding company. The ultimate parent of
Mercury Asset Management Group Ltd. is Merrill Lynch & Co., Inc. The Mercury
V.I.
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<PAGE>
U.S. Large Cap Fund, as part of its operating expenses, pays an investment
advisory fee to Mercury Asset Management International Ltd. set forth in the
summary of investment objective below.
MERCURY V.I. U.S. LARGE CAP FUND. This Fund's main goal is long-term capital
growth. The Fund invests primarily in a diversified portfolio of equity
securities of large cap companies (which are companies whose market
capitalization is at least $5 billion) located in the U.S. that Fund Management
believes are undervalued or have good prospects for earnings growth. The Fund
may also invest up to 10% of its assets in stocks of companies located in
Canada. The Mercury V.I. Funds incurs operating expenses and pays a monthly
advisory fee to Mercury Asset Management International Ltd. at an annual rate of
..65% of the average daily net assets of the Mercury V.I. U.S. Large Cap Fund.
PURCHASES AND REDEMPTIONS OF FUND SHARES; REINVESTMENT
The Accounts will purchase and redeem shares or Trust Units of the Funds at net
asset value to provide benefits under the Contract. Fund distributions to the
Accounts are automatically reinvested at net asset value in additional shares or
Trust Units of the Funds.
The investment adviser of a Fund (or its affiliates) may pay compensation to us
or our affiliates, which may be significant, in connection with administration,
distribution, or other services provided with respect to the Funds and their
availability through the Contracts. The amount of this compensation is based
upon a percentage of the assets of the Fund attributable to the Contracts and
other contracts that we or our affiliates issue. These percentages differ, and
some advisers (or affiliates) may pay more than others.
MATERIAL CONFLICTS, SUBSTITUTION OF INVESTMENTS AND CHANGES TO ACCOUNTS
It is conceivable that material conflicts could arise as a result of both
variable annuity and variable life insurance separate accounts investing in the
Funds. Although no material conflicts are foreseen, the participating insurance
companies will monitor events in order to identify any material conflicts
between variable annuity and variable life insurance contract owners to
determine what action, if any, should be taken. Material conflicts could result
from such things as (1) changes in state insurance law, (2) changes in federal
income tax law or (3) differences between voting instructions given by variable
annuity and variable life insurance contract owners. If a conflict occurs, we
may be required to eliminate one or more subaccounts of Separate Account A or
Separate Account B or substitute a new subaccount. In responding to any
conflict, we will take the action we believe necessary to protect our contract
owners.
We may substitute a different investment option for any of the current Funds. We
can do this for both existing investments and the investment of future premiums.
However, before any such substitution, we would need the approval of the
Securities and Exchange Commission and applicable state insurance departments.
We will notify you of any substitutions.
We may also add new subaccounts to 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 portion of the assets
of a subaccount or account to another subaccount or account pursuant to a
combination or otherwise, and create new accounts. Before we make certain
changes we need approval of the Securities and Exchange Commission and
applicable state insurance departments. We will notify you of any changes.
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<PAGE>
CHARGES AND DEDUCTIONS
We deduct the charges described below to cover costs and expenses, services
provided, and risks assumed under the Contracts. The amount of a charge may not
necessarily correspond to the costs associated with providing the services or
benefits. For example, the sales charge may not fully cover all of the sales and
distribution expenses we actually incur, and we may use proceeds from other
charges, including the mortality and expense risk charge, in part to cover such
expenses.
MORTALITY AND EXPENSE RISK CHARGE
We impose a mortality and expense risk charge on the Accounts. It equals 1.25%
annually for Account A and 0.65% annually for Account B. We deduct it 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 we assume
for the annuity payment and death benefit guarantees made under the Contract.
These guarantees include making annuity payments which won't change based on our
actual mortality experience, and providing a guaranteed minimum death benefit
under the Contract.
The remaining portion of the charge, 0.50% annually for Account A and 0.30%
annually for Account B, is attributable to expense risks we assume 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 guaranteed death benefit and higher administrative expenses
are attributable to Account A. If this charge is inadequate to cover the actual
expenses of mortality, maintenance, and administration, we will bear the loss.
If the charge exceeds the actual expenses, we will add the excess to our profit
and it may be used to finance distribution expenses. The charge will never
increase.
SALES CHARGE
WHEN IMPOSED
We may impose a contingent deferred sales charge on withdrawals and surrenders
from Account A. We don't impose the charge on withdrawals or surrenders from
Account B. This charge is for expenses relating to the sale of the Contract,
such as commissions, preparation of sales literature, and other promotional
activity. We impose the charge only on premium withdrawn from Account A 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 from Account A
as part of the first withdrawal of the contract year, whether paid in a lump sum
or paid on a monthly, quarterly, semi-annual or annual basis. In addition, where
permitted by state regulation, we won't impose a contingent deferred sales
charge on any premium withdrawn from Contracts purchased by our employees or our
affiliates or from Contracts purchased by the employees' spouses or dependents.
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<PAGE>
AMOUNT OF CHARGE
The maximum charge is 7% of the premium withdrawn during the first year after
that premium is paid. The charge decreases by 1% annually to 0% after year
seven, as shown below.
<TABLE>
<CAPTION>
NUMBER OF COMPLETE
YEARS ELAPSED CONTINGENT
SINCE PREMIUM DEFERRED
WAS PAID SALES CHARGE
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
</TABLE>
The charge is calculated on total premiums withdrawn from Account A. If,
however, your account value at the time of withdrawal is less than your premiums
paid in, the charge is based on your account value. Gain in account value is
never subject to this sales charge. The example below explains this charge.
HOW THE SALES CHARGE WORKS
If you made a $5,000 premium payment to Account
A and withdrew the entire $5,000 three years
later, we would impose a 4% charge on the $5,000
withdrawal. If you had made a $5,000 premium
payment to Account A and due to negative
investment experience only $4,500 remained in
Account A when you withdrew it three years
later, we would impose a 4% charge only on
$4,500 of the original premium. If instead the
$5,000 premium payment you made to Account A
grew to $5,500 due to positive investment
experience, and you 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, we would impose no contingent
deferred sales charge on the $200 first
withdrawn (as it represents gain, and not
premium) and we would impose a 4% contingent
deferred sales charge only on $5,000 of the
$5,300 subsequent withdrawal (as $300 of that
amount represents gain).
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<PAGE>
HOW DEDUCTED
We deduct the charge on a pro rata basis from among the subaccounts you're
invested in, based on the ratio of your subaccount value to your Account A
value. The example below shows how this works.
PRO-RATA DEDUCTIONS
Kim Investor's Retirement Plus Contract has a
current account value of $100,000. $60,000 is in
the Basic Value Focus Subaccount, and $40,000 is
in the Balanced Capital Focus Subaccount. Kim
withdraws $20,000 from the Contract, and the
entire $20,000 is subject to a 7% sales charge
($1400). Accordingly, $840--60% of $1400--is
deducted from the Basic Value Focus Subaccount
and $560--40% of $1400--is deducted from the
Balanced Capital Focus Subaccount.
(See "Withdrawals and Surrenders" and "Accumulation Units" for a discussion of
the effect the deduction of this charge will have on the number of accumulation
units credited to a Contract.)
ADMINISTRATION CHARGE
We charge 0.10% annually to reimburse us for costs associated with the
establishment and administration of the Contract. We deduct the charge daily
only from the net asset value of Account A. We don't impose the charge on the
assets in Account B. This charge covers such expenses as optional contract
transactions (for example, processing transfers and Dollar Cost Averaging
transactions). This charge will never increase.
CONTRACT MAINTENANCE CHARGE
We charge $40 a year to reimburse us for expenses related to maintenance of the
Contract. These expenses include issuing Contracts, maintaining records, and
performing accounting, regulatory compliance, and reporting functions. We deduct
this charge from your contract value on each contract anniversary that occurs on
or before the annuity date. We won't deduct it after the annuity date. We also
deduct the charge if you surrender the Contract on any date besides a contract
anniversary. We deduct the charge on a pro rata basis from among all subaccounts
in which your contract value is invested. The contract maintenance charge will
never increase.
We'll waive this charge on all Contracts with a contract value equal to or
greater than $50,000 on the date the charge would normally be deducted.
Currently, a contract owner of three or more Contracts will be assessed no more
than $120 in Contract Maintenance Charges annually. We reserve the right to
change this limit at any time.
OTHER CHARGES
TRANSFER CHARGES
You may make up to six transfers among Account A subaccounts per contract year
without charge. If you make more than six, we may, but currently do not, charge
you $25 for each extra transfer. Certain transfers from the Select Ten
subaccount will not count toward the six transfers permitted among Account A
subaccounts per contract year without charge. (See "Defined Asset Funds--Select
Ten V.I. Trust" and "Transfers".)
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TAX CHARGES
We reserve the right, subject to any necessary regulatory approval, to charge
for assessments or federal premium taxes or federal, state or local excise,
profits or income taxes measured by or attributable to the receipt of premiums.
We also reserve the right to deduct from the Accounts any taxes imposed on the
Accounts' investment earnings. (See "Tax Status of the Contract".)
FUND EXPENSES
In calculating the net asset values of the Funds (except the Select Ten Trust),
advisory fees and operating expenses are deducted from the assets of each Fund.
Deferred transaction fees, trustee's fees, portfolio supervision, bookkeeping
and administrative fees, organizational expenses, and other operating expenses
are deducted from the assets of the Select Ten Trust. Information about those
fees and expenses can be found in the attached prospectuses for the Funds, and
in the Statement of Additional Information for each Fund, if applicable.
RETIREMENT PLUS ADVISOR FEES
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-".)
PREMIUM TAXES
Various states impose a premium tax on annuity premiums when they are received
by an insurance company. In other jurisdictions, a premium tax is paid on the
contract value on the annuity date.
Premium tax rates vary from jurisdiction to jurisdiction and currently range
from 0% to 5%. Although we pay these taxes when due, we won't deduct them from
your contract value until the annuity date. (See "Accumulation Units" 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, we will also deduct a
charge for these taxes on any withdrawal, surrender or death benefit paid under
the Contract.
Premium tax rates are subject to change by law, administrative interpretations,
or court decisions. Premium tax amounts will depend on, among other things, the
contract owner's state of residence, our status within that state, and the
premium tax laws of that state.
FEATURES AND BENEFITS OF THE CONTRACT
As we describe the contract, we will often use the word "you". In this context
"you" means "contract owner".
OWNERSHIP OF THE CONTRACT
The contract owner is entitled to exercise all rights under the Contract. Unless
otherwise specified, the purchaser of the Contract will be the contract owner.
The Contract can be owned by a trust or a corporation. However, special tax
rules apply to contracts owned by "non-natural persons" such as corporations or
trusts. If you are a human being, you are considered a "natural person." You may
designate a beneficiary. If you die, the beneficiary will receive a death
benefit. You may also designate an annuitant. You may change the annuitant at
any time prior to the annuity date. If you don't select an annuitant, you are
the annuitant.
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If a non-natural person owns the Contract and changes the annuitant, the
Internal Revenue Code ("IRC") requires us to treat the change as the death of a
contract owner. We will then pay the beneficiary the contract value, less any
applicable fees and charges.
When co-owners are established, they exercise all rights under the Contract
jointly unless they elect otherwise. Qualified Contracts may not have co-owners.
You may assign the Contract to someone else by giving notice to the Service
Center. Only complete ownership of the Contract may be assigned to someone else.
You can't do it in part. An assignment to a new owner cancels all prior
beneficiary designations except a prior irrevocable beneficiary designation.
Assignment of the Contract may have tax consequences or may be prohibited on
certain qualified Contracts, so you should consult with a qualified tax adviser
before assigning the Contract. (See "Federal Income Taxes".)
ISSUING THE CONTRACT
ISSUE AGE
You can buy a nonqualified Contract if you are less than 85 years old.
Annuitants on nonqualified Contracts must also be less than 85 years old when we
issue the Contract. For qualified Contracts owned by natural persons, the
contract owner and annuitant must be the same person. Contract owners and
annuitants on qualified Contracts must be less than 70 1/2 years old when we
issue the Contract.
INFORMATION WE NEED TO ISSUE THE CONTRACT
Before we issue the Contract, we need certain information from you. We require
you to complete and return a written application. Once we review and approve the
information provided or the application, and you pay the initial premium, we'll
issue a Contract. The date we do this is called the Date of Issue. Generally,
we'll do this and invest the premium within two business days of our receiving
your premium. If we haven't received necessary information within five business
days, however, we will offer to return the premium and no Contract will be
issued. You can consent to our holding the premium until we get all necessary
information, and then we will invest the premium within two business days after
we get the information.
TEN DAY RIGHT TO REVIEW
When you get the Contract, review it carefully to make sure it is what you
intended to purchase. Generally, within ten days after you receive the Contract,
you may return it for a refund. The Contract will then be deemed void. You may
have a longer period of time to return the Contract if the Contract is replacing
another contract. To get a refund, return the Contract to the Service Center or
to the Financial Consultant who sold it. We will then refund the greater of all
premiums paid into the Contract or the contract value as of the date the
Contract is returned.
PREMIUMS
MINIMUM AND MAXIMUM 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 generally must be
$100 or more. You can make them at any time before the annuity date. Transfer
amounts from tax sheltered annuity plans that are not subject to the Employee
Retirement Income Security Act of 1974, as amended, will be accepted as premium
payments, as permitted by law. Other premium payments will not be accepted under
a Contract used as a tax sheltered annuity. We may waive the $100 minimum for
premiums paid under IRA Contracts held in Retirement Plan Operations accounts of
MLPF&S where you're transferring the complete cash balance of such Account into
a
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Contract. Maximum annual contributions to qualified Contracts are limited by
federal law. We reserve the right to reject subsequent premium payments, if
required by law.
HOW TO MAKE PAYMENTS
You can pay premiums directly to the Service Center at the address printed on
the first page of this Prospectus or have money debited from your MLPF&S
brokerage account. Under an automatic investment feature, you can make
systematic premium payments on a monthly, quarterly, semi-annual or annual basis
from a MLPF&S brokerage account. Contact your Financial Consultant for
additional information. You may cancel the automatic investment feature at any
time.
PREMIUM INVESTMENTS
For the first 14 days following the date of issue, we'll hold all premiums
directed into Account A in the Domestic Money Market Subaccount. After the 14
days, we'll reallocate the Account value to the Account A subaccounts you
selected. We'll place premiums directed into Account B in the Reserve Assets
Subaccount on the Date of Issue. We'll place subsequent premiums allocated to
Account B in the Reserve Assets Subaccount as of the end of the valuation period
in which the Service Center receives them.
Currently, you may allocate your premium among 18 of 22 subaccounts (21
available through Account A and one available through Account B). Allocations
must be made in whole numbers. For example, 12% of a premium received may be
allocated to the Prime Bond Subaccount, 58% allocated to the High Current Income
Subaccount, and 30% allocated to the Quality Equity Subaccount. However, you may
not allocate 33 1/3% to the Prime Bond Subaccount and 66 2/3% to the High
Current Income Subaccount. If we don't get allocation instructions when we
receive subsequent premiums, we will allocate those premiums according to the
allocation instructions you last gave us. We reserve the right to modify the
limit on the number of subaccounts to which future allocations may be made.
ACCUMULATION UNITS
Each subaccount has a distinct value, called the accumulation unit value. The
accumulation unit value for a subaccount varies daily with the performance and
expenses of the corresponding fund. We use this value to determine the number of
subaccount accumulation units represented by your investment in a subaccount.
HOW ARE MY CONTRACT TRANSACTIONS PRICED?
We calculate an accumulation unit value for each subaccount at the
close of business on each day that the New York Stock Exchange is
open. Transactions are priced, which means that accumulation units
in your Contract are purchased (added to your contract) or redeemed
(taken out of your Contract), at the unit value next calculated
after the Service Center receives notice of the transaction. For
premium payments and transfers into a subaccount, units are
purchased. For payment of Contract proceeds (i.e., partial
withdrawals, surrenders, annuitization, and death benefits),
transfers out of a subaccount, and deduction for the contract
maintenance charge, any sales charge, any transfer charge, and any
premium taxes due, units are redeemed.
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HOW DO WE DETERMINE THE NUMBER OF UNITS?
We determine the number of units by dividing the dollar value of the
amount of the purchase or redemption allocated to the subaccount by
the value of one accumulation unit for that subaccount for the
valuation period in which the transfer is made. The number of
accumulation units in each subaccount credited to a Contract will
therefore increase or decrease as these transactions are made. The
number of subaccount accumulation units credited to a Contract will
not change as a result of investment experience or the deduction of
mortality and expense risk and administration charges. Instead,
these charges and investment experience are reflected in the
accumulation unit value.
When we first established each subaccount, we arbitrarily set the value of an
accumulation unit at $10. Accumulation unit values increase, decrease, or stay
the same from one valuation period to the next. A valuation period is the time
period 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 prior valuation period by the net investment
factor for the subaccount for the current valuation period.
The net investment factor is an index used to measure the investment performance
of a subaccount from one valuation period to the next. For any subaccount, we
determine the net investment factor by dividing the value of the assets of the
subaccount for that valuation period by the value of the assets of the
subaccount for the preceding valuation period. We subtract from that result the
valuation period equivalent of the annual administration and mortality and
expense risk charges. The net investment factor takes into account the
reinvestment of dividends and capital gains. We may adjust the net investment
factor to make provisions for any change in law that requires us 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").
ADDITIONAL PROVISIONS APPLICABLE TO ALL CONTRACTS
DEATH OF ANNUITANT PRIOR TO ANNUITY DATE
If the annuitant dies before the annuity date, and the annuitant is not a
contract owner, the owner may designate a new annuitant. If a new annuitant is
not designated, the contract owner will become the annuitant unless any owner is
not a natural person. If any contract owner is not a natural person, no new
annuitant may be named and the death benefit will be paid to the beneficiary.
TRANSFERS
TRANSFERS WITHIN ACCOUNT A
Before the annuity date, you may transfer all or part of your Account A value
among the Account A subaccounts up to six times per contract year without
charge. You can make additional transfers among Account A subaccounts, but we
may charge you $25 for each extra transfer. We will deduct the transfer charge
pro rata from among the subaccounts you're transferring from. Certain transfers
from the Select Ten subaccount will not count toward the six transfers permitted
among Account A subaccounts per contract year without charge. (See "Defined
Asset Funds -- Select Ten V.I. Trust".) We reserve the right to change the
number of additional transfers permitted each contract year.
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Transfers among subaccounts may be made in specific dollar amounts or as a
percentage of Account A value. You must transfer at least $100 or the total
value of a subaccount, if less. Transfers specified as percentages are also
subject to a $100 minimum with allocations in whole numbers. For example, 10% or
30% of $1,000 Account A value in the Prime Bond Subaccount may be transferred to
the High Current Income Subaccount, but 10.5% may not. Also, 20% of $600 ($120)
Account A value in the Prime Bond Subaccount may be transferred to the High
Current Income Subaccount, but 10% of $600 ($60) may not.
You may request transfers in writing or by telephone, once we get proper
telephone transfer authorization. Transfer requests may also be made through
your Merrill Lynch Financial Consultant, or another person you designate, once
we receive proper authorization. Transfers will take effect as of the end of the
valuation period on the date the Service Center receives the request. We will
consider telephone transfer requests received after 4:00 p.m. (ET) to be
received the following business day.
DOLLAR COST AVERAGING
WHAT IS IT?
The Contract offers an optional transfer feature called Dollar Cost Averaging
("DCA"). This feature allows you to reallocate money at monthly intervals from
the Account A Domestic Money Market Subaccount to any of the remaining Account A
subaccounts. The DCA feature is intended to reduce the effect of short term
price fluctuations on investment cost. 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, over the long haul a DCA
program may let you buy accumulation units at a lower average cost. However, a
DCA program does not assure a profit or protect against a loss in declining
markets.
You can choose the DCA feature any time before the annuity date. Once you start
using it, you must continue it for at least three months. Once you reach the
annuity date, you may no longer use Dollar Cost Averaging.
If you participate in the RPA program, you can't use DCA.
MINIMUM AMOUNTS
To elect DCA, you need to have a minimum amount of money in the Domestic Money
Market subaccount. We determine the amount required by multiplying the specified
length of your DCA program in months by your specified monthly transfer amount.
Amounts of $100 or more must be allotted for transfer each month in the DCA
feature. Allocations must be designated in whole percentage increments. No
specific dollar amount designations may be made. We reserve the right to change
these minimums. Should the amount in your Domestic Money Market Subaccount drop
below the selected monthly transfer amount, we'll notify you that you need to
put more money in to continue DCA.
WHEN DO WE MAKE DCA TRANSFERS?
You select the date for DCA transfers. After we receive your request at the
Service Center, we will make the first DCA transfer on the selected date of the
following month. We'll make subsequent DCA transfers on the same day of each
succeeding month. We don't charge for DCA transfers. These transfers are in
addition to the six transfers permitted each year under the Contract.
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MERRILL LYNCH RETIREMENT PLUS ADVISOR-SM-
If you qualify, you may participate in the Merrill Lynch Retirement Plus
Advisor-SM- ("RPA") program. Through RPA, an investment program developed by
MLPF&S, premiums and Account A money are allocated and transferred periodically
among the subaccounts of Account A based on your investment profile. MLPF&S is a
registered investment adviser under the Investment Advisers Act of 1940.
Before you can participate, you must complete a profiling questionnaire and
client agreement for each contract with which you're using the RPA program.
If you participate in the RPA program, you can't use DCA. In addition, MLPF&S
may ask you to give up the RPA program if you request a transfer while the RPA
program is in effect; such transfers may be inconsistent with investment
strategies being implemented through the RPA program.
FEES AND CHARGES FOR RPA
MLPF&S charges a fee for the RPA program. MLPF&S deducts this fee directly from
your brokerage account. The fee is not deducted from your contract value or
imposed on the Accounts. We don't charge for RPA program transfers of Account A
money.
If you wish to participate in the RPA program, consult with your Financial
Consultant for additional information regarding the availability of the program
and specific eligibility requirements.
Participation in the program does not guarantee that you will attain your
investment goals. In addition, the program does not guarantee investment gains,
or protect against investment losses.
TRANSFERS FROM ACCOUNT A TO ACCOUNT B
Once each contract year, you may transfer from Account A to Account B an amount
equal to any gain in account value and/or any premium not subject to sales
charge, determined as of the date we receive the request. Once each contract
year, you may transfer from Account A to Account B all or a portion of the
greater of that amount, or 10% of premiums still subject to a sales charge
determined as of the date we receive the request (minus any of that premium
already withdrawn or transferred). Additionally, 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. You may
cancel periodic transfers at any time. Once canceled, they cannot be activated
again until the next contract year.
Generally, we will deduct the amount transferred on a pro rata basis from among
the Account A subaccounts you specify, based on your proportional interest in
each of these subaccounts to the Account A value, unless you request otherwise.
However, if you want the amount transferred on a monthly, quarterly, semi-annual
or annual basis, it must be deducted on a pro rata basis. There is no charge
imposed on the transfer of this amount. No transfers are permitted from Account
B to Account A.
WITHDRAWALS AND SURRENDERS
WHEN AND HOW WITHDRAWALS ARE MADE
Before the annuity date, you may withdraw money from the Contract up to six
times per contract year. Withdrawals are subject to tax and prior to age 59 1/2
may also be subject to a 10% federal penalty tax. (See "Federal Income Taxes".)
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The Contract provides a specific order for
withdrawals. We treat the first withdrawal from
Account A in any contract year in the following order:
1. Gain in account value and premium no longer
subject to a sales charge; then
2. Premium on a "first-in, first-out" basis.
"Gain" means any positive difference between
account value and premiums paid, less withdrawals
and transfers from Account A.
By using this order, we don't impose a sales charge on the first withdrawal in
any contract year out of Account A to the extent that the withdrawal consists of
gain and/or any premium no longer subject to such a charge. We won't impose a
sales charge on that portion of the first withdrawal from Account A in any
contract year that does not exceed the greater of:
(1) 10% of premiums subject to a sales charge determined as of the date the
request is received, minus any prior amount withdrawn or transferred
from Account A to Account B, and
(2) any gain in Account A plus premiums allocated to Account A that are not
subject to a sales charge.
You may elect that the amount withdrawn be paid on a monthly, quarterly,
semi-annual or annual basis.
Unless you direct us otherwise, withdrawals will be taken from subaccounts in
the same proportion as the subaccounts of the Account from which the withdrawal
is made bear to your Account A value. You may withdraw money by telephone, once
you've submitted a proper telephone authorization form to the Service Center,
but only if the amount withdrawn is to be paid into a Merrill Lynch brokerage
account. You may make a withdrawal request in writing to the Service Center. We
will consider telephone withdrawal requests received after 4:00 p.m. (ET) to be
received the following business day.
We will treat all subsequent withdrawals from Account A in the same contract
year 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 sales charge. (See "Sales
Charge".)
We don't impose sales charges on any withdrawals from Account B. In addition,
where permitted by state regulation we don't impose a sales charge on
withdrawals from Account A on a Contract purchased by our employees or employees
of our affiliates or purchased by the employee's spouse or dependents.
AUTOMATIC WITHDRAWALS
You may request monthly, quarterly, semi-annual, or annual automatic withdrawals
from Account B. You may activate or cancel this optional automatic withdrawal
program once each contract year. Once canceled, you can't activate the program
again until the next contract year. You may increase or decrease withdrawals at
any time by contacting the Service Center. These automatic withdrawals are in
addition to the six withdrawals permitted each year under the Contract.
MINIMUM AMOUNTS
The minimum amount that may be withdrawn is $100. At least $2,000 must remain in
the Contract after you make a withdrawal. We reserve the right to change these
minimums.
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SURRENDERS
At any time before the annuity date you may surrender the Contract through a
full withdrawal. The Contract must be delivered to the Service Center. We will
pay you an amount equal to the contract value as of the end of the valuation
period when we process the surrender, minus any applicable sales charge, minus
any applicable contract maintenance charge, and minus any applicable charge for
premium taxes. (See "Charges and Deductions".)
PAYMENTS TO CONTRACT OWNERS
We'll make any payments to you usually within seven days of the Service Center
receiving your proper request. However, we may delay any payment, or delay
processing any annuity payment or transfer request if:
(a) the New York Stock Exchange is closed, 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
making it difficult to dispose of securities held in the Accounts or to
determine their value;
(d) the Securities and Exchange Commission by order so permits for the
protection of security holders; or
(e) payment is derived from a check used to make a premium payment which has
not cleared through the banking system.
CONTRACT CHANGES
Requests to change the owner, beneficiary, annuitant, or annuity date of a
Contract will take effect as of the date you sign such a request, unless we have
already acted in reliance on the prior status. Such changes may have tax
consequences. See "Federal Income Taxes". See also "Ownership of the Contract".
DEATH BENEFIT
Regardless of investment experience, the Contract provides a guaranteed minimum
death benefit if you die before the annuity date. Death benefit proceeds are
taxable. (See "Federal Income Taxes -- Taxation of Death Benefit Proceeds".)
Death Benefit proceeds are not payable on the death of an annuitant. (See "Death
of Annuitant Prior to Annuity Date".)
Unless you irrevocably designated a beneficiary, you may change the beneficiary
at any time before the annuity date. If your beneficiary is your surviving
spouse, your spouse may elect to continue the Contract. Your spouse becomes the
contract owner and the beneficiary until your spouse names a new beneficiary.
If you are age 80 or under on the Contract Date of Issue, the death benefit
equals the greatest of:
(a) premiums paid less any withdrawals,
(b) the contract value, or
(c) the maximum death benefit value.
If you are over age 80 on the Contract Date of Issue, the death benefit equals
the greater of:
(a) premiums paid less any withdrawals, or
(b) the contract value.
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The maximum death benefit value equals the greatest anniversary value of Account
A, plus the value of Account B. We calculate each anniversary value of Account A
as follows:
- the value of Account A on the Date of Issue and each contract anniversary
thereafter; plus
- premium payments you allocated to Account A since the Date of Issue or
that anniversary; less
- withdrawals and transfers from Account A since the Date of Issue or that
anniversary.
After age 80, the greatest anniversary value of Account A equals the greatest
anniversary value of Account A as of attained age 80, plus premium payments
allocated to Account A since such anniversary, less withdrawals and transfers
from Account A since such anniversary.
EXAMPLE: Assume you are below age 80 at issue, and you made no allocations to
Account B. Your maximum death benefit values, based on hypothetical values of
Account A* and the contract transactions shown, are illustrated below:
<TABLE>
<CAPTION>
MAXIMUM
TRANSACTIONS ANNIVERSARY VALUES DEATH PREMIUMS
--------------------- ---------------------------------- BENEFIT CONTRACT LESS DEATH
DATE PREMIUMS WITHDRAWALS 1/1/03 1/1/04 1/1/05 1/1/06 VALUE VALUE WITHDRAWALS BENEFITS
- ---- -------- ----------- ------- ------- ------- ------- ------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/1/01.. 100,000 100,000 100,000 100,000 100,000 100,000
1/1/04.. 100,000 105,000 105,000 105,000 100,000 105,000
6/1/04.. 10,000 110,000 115,000 115,000 114,000 110,000 115,000
7/1/04.. 5,000 105,000 110,000 110,000 112,000 105,000 112,000
1/1/05.. 105,000 110,000 109,000 110,000 109,000 105,000 110,000
1/1/06.. 105,000 110,000 109,000 112,000 112,000 112,000 105,000 112,000
</TABLE>
- --------
* Account Anniversary values reflect hypothetical positive and negative
investment performance to demonstrate the calculation of the maximum death
benefit value. There is, of course, no assurance that Account A will
experience positive investment performance.
For Contracts issued on a joint ownership basis, we calculate the greatest
anniversary value based on the period of time through the earlier of:
(a) the older co-owner attaining age 80; or
(b) the anniversary on or prior to either co-owner's date of death.
If the contract owner changes, we will not increase the period of time during
which we use anniversary values to determine the maximum death benefit value.
Subsequent changes could shorten the period if a subsequent owner is older than
the prior owner. Specifically, if a new contract owner has not attained age 80
and is older than the contract owner whose age is being used to determine the
maximum death benefit value at the time of the ownership change, we will base
the period of time used in the calculation of the maximum death benefit value on
the age of the new contract owner when the owner changes. If the new contract
owner is over attained age 80 when the owner changes, we will calculate the
maximum death benefit value based on the greatest anniversary value of Account A
as of the contract anniversary prior to the ownership change. If a contract
owner is a non-natural person, we use the annuitant's age, rather than the
contract owner's age, to determine the period of time used in the calculation of
the maximum death benefit value.
We will pay the death benefit in a lump sum unless the beneficiary chooses an
annuity payment option available under the Contract. (See "Annuity Options".)
However, if you die before the annuity date, federal tax law generally requires
us to distribute the entire contract value within five years of the date of
death. Special rules may apply to a surviving spouse. (See "Federal Income
Taxes".)
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We determine the death benefit as of the date we receive certain information at
the Service Center. We call this information due proof of death. It consists of
the Beneficiary Statement, a certified copy of the death certificate, and any
additional documentation we may need to process the death claim. If we haven't
received the other documents within 60 days following our receipt of a certified
death certificate, we will consider due proof of death to have been received and
we will pay the death benefit in a lump sum.
ANNUITY PAYMENTS
We'll make the first annuity payment on the annuity date, and payments will
continue according to the annuity option selected. When you first buy the
Contract, the annuity date for non-qualified Contracts is the annuitant's 85th
birthday. The annuity date for IRA Contracts is when the owner/annuitant reaches
age 70 1/2. However, you may specify an earlier annuity date. Contract owners
may select from a variety of fixed annuity payment options, as outlined below in
"Annuity Options." If you don't choose an annuity option, we'll use the Life
Annuity with Payments Guaranteed for 10 Years annuity option when the contract
owner reaches age 85 (age 70 1/2 for an IRA Contract). You may change the
annuity option before the annuity date. We reserve the right to limit annuity
options available to qualified contract owners to comply with the Internal
Revenue Code or regulations under it.
We determine the dollar amount of annuity payments by applying your contract
value on the annuity date to our then current annuity purchase rates. Purchase
rates show the amount of periodic payment that a $1000 value buys. These rates
are based on the annuitant's age and sex at the time payments begin. The rates
will never be less than those shown in the Contract.
If the age and/or sex of the annuitant was misstated to us, resulting in an
incorrect calculation of annuity payments, we will adjust future annuity
payments to reflect the correct age and/or sex. We will deduct any amount we
overpaid as the result of a misstatement from future payments with 6% annual
interest charges. Likewise, if we underpaid any amount as the result of a
misstatement, we correct it with the next payment made with 6% annual interest
credited.
If the contract value on the annuity date after the deduction of any applicable
premium taxes is less than $2,000 (or a different minimum amount, if required by
state law), we may cash out your Contract in a lump sum. If any annuity payment
would be less than $20 (or a different minimum amount, if required by state
law), we may change the frequency of payments so that all payments will be at
least $20 (or the minimum amount required by state law). Unless you tell us
differently, we'll make annuity payments directly to your Merrill Lynch
brokerage account.
ANNUITY OPTIONS
We currently provide the following fixed annuity payment options. After the
annuity date, your contract value does not vary with the performance of the
Accounts. We may in the future offer more options. Once you begin to receive
annuity payments, you cannot change the annuity option, payment amount, or the
payment period. Under certain circumstances, several options provide the ability
to take the present value of future guaranteed payments in a lump sum.
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HOW WE DETERMINE PRESENT VALUE OF
FUTURE GUARANTEED ANNUITY PAYMENTS
Present value refers to the amount of money needed
today to fund the remaining guaranteed payments under
the annuity payment option you select. The primary
factor in determining present value is the interest
rate assumption we use. If you are receiving annuity
payments under an option that gives you the ability to
take the present value of future payments in a lump
sum and you elect to take the lump sum, we will use
the same interest rate assumption in calculating the
present value that we used to determine your payment
stream at the time your annuity payments commenced.
PAYMENTS OF A FIXED AMOUNT
We will make equal payments in an amount you choose until the sum of all
payments equals the contract value applied, increased for interest credited. The
amount you choose must provide at least five years of payments. These payments
don't depend on the annuitant's life. If the annuitant dies before the end of
the period, you 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, the beneficiary may elect to receive the present value of
the remaining guaranteed payments in a lump sum.
PAYMENTS FOR A FIXED PERIOD
We will make equal payments for a period you select of at least five years.
These payments don't depend on the annuitant's life. If the annuitant dies
before the end of the period, you may elect to receive the present value of the
remaining guaranteed payments in a lump sum. If the contract owner dies while
guaranteed amounts remain unpaid, the beneficiary may elect to receive the
present value of the remaining guaranteed payments in a lump sum.
*LIFE ANNUITY
We make payments for as long as the annuitant lives. Payments will cease with
the last payment made before the annuitant's death.
LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20 YEARS
We make payments for as long as the annuitant lives. In addition, even if the
annuitant dies before the period ends, we guarantee payments for either 10 or 20
years as you selected. If the annuitant dies before the end of the period, you
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, the
beneficiary may elect to receive the present value of the remaining guaranteed
payments in a lump sum.
LIFE ANNUITY WITH GUARANTEED RETURN OF CONTRACT VALUE
We make payments for as long as the annuitant lives. In addition, even if the
annuitant dies, we guarantee payments until the sum of all annuity payments
equals the contract value applied. If the annuitant dies before the end of the
period, you 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, the beneficiary may elect to receive the present value of the
remaining guaranteed payments in a lump sum.
41
<PAGE>
*JOINT AND SURVIVOR LIFE ANNUITY
We make payments for the lives of the annuitant and a designated second person.
Payments will continue as long as either one is living.
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; (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 applied, divided by the then current life expectancy, as defined by
Internal Revenue Service regulations. If the measuring life or lives dies before
the remaining value has been distributed, we will pay that value to you in a
lump sum.
*These options are "pure" life annuities. Therefore, it is possible for the
payee to receive only one annuity payment if the person (or persons) on whose
life (lives) payment is based dies after only one payment or to receive only two
annuity payments if that person (those persons) dies after only two payments,
etc.
GENDER-BASED ANNUITY PURCHASE RATES
Generally, the Contract provides for gender-based annuity purchase rates when
life annuity options are chosen. However, in states that have adopted
regulations prohibiting gender-based rates, blended unisex annuity purchase
rates will be applied to both male and female annuitants. Unisex annuity
purchase rates will provide the same annuity payments for male or female
annuitants that are the same age on their annuity dates.
Employers and employee organizations considering purchase of the Contract should
consult with their legal advisor to determine whether purchasing a Contract
containing gender-based annuity purchase rates is consistent with Title VII of
the Civil Rights Act of 1964 or other applicable law. We may offer such contract
owners Contracts containing unisex annuity purchase rates.
FEDERAL INCOME TAXES
FEDERAL INCOME TAXES
The following summary discussion is based on our understanding of current
federal income tax law as the Internal Revenue Service (IRS) now interprets it.
We can't guarantee that the law or the IRS's interpretation won't change. It
does not purport to be complete or to cover all tax situations. This discussion
is not intended as tax advice. Counsel or other tax advisors should be consulted
for further information.
We haven't considered any applicable federal gift, estate or any state or other
tax laws. Of course, your own tax status or that of your beneficiary can affect
the tax consequences of ownership or receipt of distributions.
When you invest in an annuity contract, you usually do not pay taxes on your
investment gains until you withdraw the money -- generally for retirement
purposes. If your annuity is independent of any formal retirement or pension
plan, it is termed a NONQUALIFIED contract. If you invest in a variable annuity
as part of an individual retirement annuity or tax sheltered annuity, your
contract is called a QUALIFIED contract. The tax rules applicable to qualified
contracts vary according to the type of retirement plan and the terms and
conditions of the plan.
42
<PAGE>
TAX STATUS OF THE CONTRACT
DIVERSIFICATION REQUIREMENTS. Section 817(h) of the Internal Revenue Code (IRC)
and the regulations under it provide that separate account investments
underlying a Contract must be "adequately diversified" for it to qualify as an
annuity contract under IRC section 72. The separate account intends to comply
with the diversification requirements of the regulations under section 817(h).
This will affect how we make investments.
OWNER CONTROL. In certain circumstances, owners of variable annuity contracts
have been considered for Federal income tax purposes to be the owners of the
assets of the separate account supporting their Contracts due to their ability
to exercise investment control over those assets. When this is the case, the
contract owners have been currently taxed on income and gains attributable to
the separate account assets. There is little guidance in this area, and some
features such as the flexibility of an owner to allocate premium payments and
transfer contract accumulation values, have not been explicitly addressed in IRS
published rulings. While we believe that the Contracts do not give owners
investment control over Account assets, we reserve the right to modify the
Contracts as necessary to prevent an owner from being treated as the owner of
the Account assets supporting the Contract.
REQUIRED DISTRIBUTIONS. To qualify as an annuity contract under section 72(s) of
the IRC, a non-qualified annuity contract must provide that: (a) if any owner
dies on or after the annuity starting date but before all amounts under the
Contract have been distributed, the remaining amounts will be distributed at
least as quickly as under the method being used when the owner died; and (b) if
any owner dies before the annuity starting date, all amounts under the Contract
will be distributed within five years of the date of death. So long as the
distributions begin within a year of the owner's death, the IRS will consider
these requirements satisfied for any part of the owner's interest payable to or
for the benefit of a "designated beneficiary" and distributed over the
beneficiary's life or over a period that cannot exceed the beneficiary's life
expectancy. A designated beneficiary is the person the owner names as
beneficiary and who assumes ownership when the owner dies. A designated
beneficiary must be a natural person. If the deceased owner's spouse is the
designated beneficiary, he or she can continue the Contract when such contract
owner dies.
The Contract is designed to comply with section 72(s) of the IRC. We will review
the Contract and amend it if necessary to make sure that it continues to comply
with the section's requirements.
Other rules regarding required distributions apply to qualified Contracts.
TAXATION OF ANNUITIES
IN GENERAL. IRC section 72 governs annuity taxation generally. We believe an
owner who is a natural person usually won't be taxed on increases in the value
of a contract until there is a distribution (i.e., the owner withdraws all or
part of the accumulation or takes annuity payments). Assigning, pledging, or
agreeing to assign or pledge any part of the accumulation usually will be
considered a distribution. Distributions of accumulated investment earnings are
taxable as ordinary income.
The owner of any annuity contract who is not a natural person (e.g., a
corporation or a trust) generally must include in income any increase in the
excess of the accumulation over the "investment in the contract" during the
taxable year. There are some exceptions to this rule and a prospective owner
that is not a natural person may wish to discuss them with a competent tax
advisor.
The following discussion applies generally to Contracts owned by a natural
person:
43
<PAGE>
PARTIAL WITHDRAWALS AND SURRENDERS. When you take a withdrawal from a Contract,
the amount received generally will be treated as ordinary income subject to tax
up to an amount equal to the excess (if any) of the Contract value immediately
before the distribution over the investment in the Contract (generally, the
premiums or other consideration paid for the Contract, reduced by any amount
previously distributed from the Contract that was not subject to tax) at that
time. Other rules apply to Individual Retirement Annuities.
If you withdraw your entire contract value, you will be taxed only on the part
that exceeds your investment in the Contract.
ANNUITY PAYMENTS. Although tax consequences may vary depending on the annuity
option selected under an annuity contract, a portion of each annuity payment is
generally not taxed and the remainder is taxed as ordinary income. The
non-taxable portion of an annuity payment is generally determined in a manner
that is designed to allow you to recover your investment in the Contract ratably
on a tax-free basis over the expected stream of annuity payments, as determined
when annuity payments start. Once your investment in the Contract has been fully
recovered, however, the full amount of each annuity payment is subject to tax as
ordinary income.
TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be paid from a Contract because
an owner or annuitant (if the owner is not a natural person) has died. If the
payments are made in a single sum, they're taxed the same way a full withdrawal
from the Contract is taxed. If they are distributed as annuity payments, they're
taxed as annuity payments.
PENALTY TAX ON SOME WITHDRAWALS
You may have to pay a penalty tax (10 percent of the amount treated as taxable
income) on some withdrawals. However, there is usually no penalty on
distributions:
(1) on or after you reach age 59 1/2;
(2) after you die (or after the annuitant dies, if the owner isn't an
individual)
(3) after you become disabled; or
(4) that are part of a series of substantially equal periodic (at least annual)
payments for your life (or life expectancy) or the joint lives (or life
expectancies) of you and your beneficiary.
Other exceptions may be applicable under certain circumstances and special rules
may apply in connection with the exceptions listed above. Also, additional
exceptions apply to distributions from an Individual Retirement Annuity or Tax
Sheltered Annuity. You should consult a tax adviser with regard to exceptions
from the penalty tax.
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF A CONTRACT
Transferring or assigning ownership of the Contract, designating a payee or
beneficiary who is not also the owner, or exchanging a Contract can have other
tax consequences that we don't discuss here. If you're thinking about any of
those transactions, contact a tax advisor.
WITHHOLDING
Annuity distributions usually are subject to withholding for the recipient's
federal income tax liability at rates that vary according to the type of
distribution and the recipient's tax status. However, except for certain
distributions from Tax Sheltered Annuities, recipients can usually choose not to
have tax withheld from distributions.
44
<PAGE>
MULTIPLE CONTRACTS
All non-qualified deferred annuity Contracts that we (or our affiliates) issue
to the same owner during any calendar year are generally treated as one annuity
Contract for purposes of determining the amount includible in such owner's
income when a taxable distribution occurs. This could affect when income is
taxable and how much is subject to the ten percent penalty tax discussed above.
POSSIBLE CHANGES IN TAXATION
Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the Contracts could change by legislation
or other means. It is also possible that any change could be retroactive (that
is, effective prior to the date of the change). A tax adviser should be
consulted with respect to legislative developments and their effect on the
Contract.
POSSIBLE CHARGE FOR OUR TAXES
Currently we don't charge the Account for any federal, state, or local taxes on
them or the Contracts (other than premium taxes), but we reserve the right to
charge the Account or the Contracts for any tax or other cost resulting from the
tax laws that we believe should be attributed to them.
INDIVIDUAL RETIREMENT ANNUITIES
TRADITIONAL IRAS
Section 408 of the IRC permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity" or
"IRA." This Contract is available for purchase through an established IRA
custodial account with Merrill Lynch, Pierce, Fenner & Smith Incorporated. An
individual may make annual contributions of up to the lesser of $2,000 or 100%
of adjusted gross income to an IRA. The contributions may be deductible in whole
or in part, depending on the individual's income. Distributions from certain
pension plans may be "rolled over" into an IRA on a tax-deferred basis without
regard to these limits. Amounts in the IRA (other than nondeductible
contributions) are taxed when distributed from the IRA. A 10% penalty tax
generally applies to distributions made before age 59 1/2, unless certain
exceptions apply. IRAs have minimum distribution rules that govern the timing
and amount of distributions. You should refer to your adoption agreement or
consult a tax advisor for more information about these distribution rules.
Adverse tax consequences may result if you do not ensure that contributions,
distributions and other transactions with respect to the Contract comply with
the law. The IRS has not reviewed the Contract for qualification as an IRA, and
has not addressed in a ruling of general applicability whether a death benefit
provision such as the enhanced death benefit provision in the Contract comports
with IRA qualification requirements.
ROTH IRAS
A Contract is available for purchase by an individual who has separately
established a Roth IRA custodial account with Merrill Lynch, Pierce, Fenner &
Smith Incorporated. Roth IRAs, as described in section 408A of the IRC, permit
certain eligible individuals to contribute to make non-deductible contributions
to a Roth IRA in cash or as a rollover or transfer from another Roth IRA or
other IRA. A rollover from or conversion of an IRA to a Roth IRA is generally
subject to tax and other special rules apply. You may wish to consult a tax
adviser before combining any converted amounts with any other Roth IRA
contributions, including any other conversion amounts from other tax years.
Distributions from a Roth IRA generally are not taxed, except that, once
aggregate distributions exceed contributions to the Roth IRA, income tax and a
10% penalty tax may apply to distributions made (1) before age 59 1/2 (subject
to certain exceptions) or (2) during the five taxable years starting with the
year in which the first contribution is made to any Roth IRA. A 10% penalty tax
may
45
<PAGE>
apply to amounts attributable to a conversion from an IRA if they are
distributed during the five taxable years beginning with the year in which the
conversion was made.
OTHER TAX ISSUES FOR IRAS AND ROTH IRAS
Distributions from an IRA or Roth IRA generally are subject to withholding for
the participant's federal income tax liability. The withholding rate varies
according to the type of distribution and the owner's tax status. The owner will
be provided the opportunity to elect not have tax withheld from distributions.
TAX SHELTERED ANNUITIES
Section 403(b) of the IRC allow employees of certain Section
501(c)(3) organizations and public schools to exclude from their gross income
the premium payments made, within certain limits, on a contract that will
provide an annuity for the employee's retirement. Transfer amounts from tax
sheltered annuity plans that are not subject to the Employee Retirement Income
Security Act of 1974, as amended, will be accepted as premium payments, as
permitted by law, under a Contract. Other premium payments, including premium
payments subject to IRC Section 402(g), will not be accepted. Distributions of
(1) salary reduction contributions made in years beginning after December 31,
1988; (2) earnings on those contributions; and (3) earnings on amounts held as
of the last year beginning before January 1, 1989, are not allowed prior to age
59 1/2, separation from service, death or disability. Salary reduction
contributions may also be distributed upon hardship, but would generally be
subject to penalties.
OTHER INFORMATION
VOTING RIGHTS
We own all Fund shares and Trust Units held in the Accounts. As the owner, we
have the right to vote on any matter put to vote at any Funds' shareholder
meetings.(1) However, we will vote all Fund shares attributable to Contracts by
following instructions we receive from you. If we don't receive voting
instructions, we'll vote those shares in the same proportion as shares for which
we receive instructions. We determine the number of shares you may give voting
instructions on by dividing your interest in a subaccount by the net asset value
per share of the corresponding Fund. We'll determine the number of shares you
may give voting instructions on as of a record date we choose. We may vote Fund
shares in our own right if laws change to permit us to do so.
You have voting rights until the annuity date. You may give voting instructions
concerning
(1) the election of a Fund's Board of Directors;
(2) ratification of a Fund's independent accountant;
(3) approval of the investment advisory agreement for a Fund corresponding to
your selected subaccounts;
(4) any change in a fundamental investment policy of a Fund corresponding to
your selected subaccounts; and
(5) any other matter requiring a vote of the Fund's shareholders.
REPORTS TO CONTRACT OWNERS
At least once each contract year before the annuity date, we will send you
information about your Contract. It will outline all your Contract transactions
during the year, your Contract's current number of accumulation units in each
Fund, the value of each accumulation unit, and the contract value.
- ----------
(1) The Select 10 Trust is a unit investment trust. It has no board of
directors. No voting rights exist.
46
<PAGE>
You will also receive an annual and a semi-annual report containing financial
statements and a list of portfolio securities of the Funds.
SELLING THE CONTRACT
MLPF&S is the principal underwriter of the Contract. Its principal business
address is World Financial Center, 250 Vesey Street, New York, New York 10080.
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.
Registered representatives (Financial Consultants) of MLPF&S sell the Contract.
These Financial Consultants are also licensed through Merrill Lynch Life Agency,
Inc. as our insurance agents. Financial Consultants are compensated by MLPF&S
and/or Merrill Lynch Life Agency, Inc. through a distribution agreement we have
with MLPF&S and companion sales agreement we have with Merrill Lynch Life
Agency, Inc. The maximum commission paid to a Financial Consultant is 2.3% of
each premium allocated to Account A. Financial Consultants may also be paid
additional annual compensation of up to 0.13% of contract value. Reduced
compensation is paid on Contracts purchased by our employees or their spouses or
dependents. Compensation may be paid in the form of non-cash compensation
subject to applicable regulatory requirements.
The maximum commission we will pay to Merrill Lynch Life Agency, Inc. to be used
to pay commissions to Financial Consultants is 3.5% of each premium allocated to
Account A.
MLPF&S may arrange for sales of the Contract by other broker-dealers. Registered
representatives of these other broker-dealers may be compensated on a different
basis than MLPF&S Financial Consultants.
STATE REGULATION
We are subject to the laws of the State of New York and to the regulations of
the New York Insurance Department. We are also subject to the insurance laws and
regulations of all jurisdictions in which we're licensed to do business.
We file an annual statement with the insurance departments of jurisdictions
where we do business. The statement discloses our operations for the preceding
year and our financial condition as of the end of that year. Our books and
accounts are subject to insurance department review at all times. The New York
Insurance Department, in conjunction with the National Association of Insurance
Commissions, conducts a full examination of our operations periodically.
CONTROLLING DOCUMENTS
This prospectus provides a general description of the Contract. Your actual
policy and any endorsements are the controlling documents. If you would like to
review a copy of the policy and endorsements, contact our Service Center.
LEGAL PROCEEDINGS
There are no legal proceedings involving the Accounts. We and MLPF&S are engaged
in various kinds of routine litigation that, in our judgment, is not material to
our total assets.
47
<PAGE>
EXPERTS
Deloitte & Touche LLP, independent auditors, have audited our financial
statements as of December 31, 1999 and 1998 and for each of the three years in
the period ended December 31, 1999. They've also audited financial statements of
the Accounts as of December 31, 1999 and for the periods presented in the
Statement of Additional Information. We include these financial statements in
reliance upon the reports of Deloitte & Touche LLP given upon their authority as
experts in accounting and auditing. Their principal business address is Two
World Financial Center, New York, New York 10281-1420.
LEGAL MATTERS
Our organization, our authority to issue the Contract, and the validity of the
form of the Contract have been passed upon by Barry G. Skolnick, our Senior Vice
President and General Counsel. Sutherland Asbill & Brennan LLP of Washington,
D.C. has provided advice on certain matters relating to federal securities laws.
REGISTRATION STATEMENTS
Registration Statements that relate to the Contract and its investment options
have been filed with the Securities and Exchange Commission under the Securities
Act of 1933 and the Investment Company Act of 1940. This Prospectus does not
contain all of the information in the registration statements. You can obtain
the omitted information from the Securities and Exchange Commission's principal
office in Washington, D.C., upon payment of a prescribed fee.
48
<PAGE>
ACCUMULATION UNIT VALUES
(CONDENSED FINANCIAL INFORMATION)
<TABLE>
<CAPTION>
SUBACCOUNTS
---------------------------------------------------------------------------------------
DOMESTIC MONEY MARKET
---------------------------------------------------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/96 1/1/95 1/1/94
TO TO TO TO TO TO
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1) Accumulation unit value
at beginning of
period.................. $12.39 $11.94 $11.50 $11.09 $10.64 $10.37
(2) Accumulation unit value
at end of period........ $12.82 $12.39 $11.94 $11.50 $11.09 $10.64
(3) Number of accumulation
units outstanding at end
of period............... 2,622,855.7 2,714,662.2 2,392,904.0 1,677,743.10 2,104,307.1 1,725,685.7
<CAPTION>
SUBACCOUNTS
---------------------------------------------------------------------------------------
PRIME BOND
---------------------------------------------------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/96 1/1/95 1/1/94
TO TO TO TO TO TO
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1) Accumulation unit value
at beginning of
period.................. $15.28 $14.36 $13.40 $13.29 $11.21 $11.94
(2) Accumulation unit value
at end of period........ $14.72 $15.28 $14.36 $13.40 $13.29 $11.21
(3) Number of accumulation
units outstanding at end
of period............... 2,878,607.8 2,943,385.0 2,776,167.1 2,933,851.00 2,866,758.2 2,939,785.1
</TABLE>
<TABLE>
<CAPTION>
HIGH CURRENT INCOME
---------------------------------------------------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/96 1/1/95 1/1/94
TO TO TO TO TO TO
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1) Accumulation unit value
at beginning of
period.................. $16.18 $16.93 $15.46 $14.08 $12.18 $12.80
(2) Accumulation unit value
at end of period........ $16.92 $16.18 $16.93 $15.46 $14.08 $12.18
(3) Number of accumulation
units outstanding at end
of period............... 1,878,536.0 1,935,113.5 1,794,232.4 1,341,055.50 1,274,375.1 1,116,584.4
<CAPTION>
QUALITY EQUITY
---------------------------------------------------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/96 1/1/95 1/1/94
TO TO TO TO TO TO
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1) Accumulation unit value
at beginning of
period.................. $22.28 $19.54 $16.01 $13.77 $11.38 $11.87
(2) Accumulation unit value
at end of period........ $28.89 $22.28 $19.54 $16.01 $13.77 $11.38
(3) Number of accumulation
units outstanding at end
of period............... 2,191,387.8 2,374,281.3 2,617,428.2 2,798,594.00 2,587,997.3 2,368,801.5
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE FOCUS*
---------------------------------------------------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/96 1/1/95 1/1/94
TO TO TO TO TO TO
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1) Accumulation unit value at
beginning of period.......... $15.45 $16.75 $15.20 $14.25 $9.90 $10.82
(2) Accumulation unit value at end
of period.................... $20.45 $15.45 $16.75 $15.20 $14.25 $9.90
(3) Number of accumulation units
outstanding at end of
period....................... 1,677,430.3 1,911,721.5 1,789,233.1 1,684,158.80 1,332,688.3 1,048,612.8
<CAPTION>
FLEXIBLE STRATEGY*
---------------------------------------------------------
1/1/97 1/1/96 1/1/95 1/1/94
TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
(1) Accumulation unit value at
beginning of period.......... * $13.00 $11.22 $11.87
(2) Accumulation unit value at end
of period.................... * * $13.00 $11.22
(3) Number of accumulation units
outstanding at end of
period....................... 0.0 0.00 1,137,134.8 1,113,369.6
</TABLE>
- ----------
* Effective April 4, 2000, the Special Value Focus Fund changed its name to
the Small Cap Value Focus Fund, the Global Utility Focus Fund changed its
name to the Utilities and Telecommunications Focus Fund, and the Capital
Focus Fund changed its name to the Balanced Capital Focus Fund. Effective
following the close of business on December 6, 1996, the Flexible Strategy
Fund was merged with and into the Global Strategy Focus Fund and the
International Bond Fund was merged with and into the former World Income
Focus Fund, which was renamed the Global Bond Focus Fund and its investment
objective was changed.
49
<PAGE>
<TABLE>
<CAPTION>
AMERICAN BALANCED
---------------------------------------------------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/96 1/1/95 1/1/94
TO TO TO TO TO TO
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1) Accumulation unit value
at beginning of
period.................. $18.73 $16.72 $14.47 $13.37 $11.21 $11.88
(2) Accumulation unit value
at end of period........ $20.09 $18.73 $16.72 $14.47 $13.37 $11.21
(3) Number of accumulation
units outstanding at end
of period............... 703,298.5 805,270.1 935,102.6 1,196,131.90 1,294,854.9 1,205,254.3
<CAPTION>
NATURAL RESOURCES FOCUS
---------------------------------------------------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/96 1/1/95 1/1/94
TO TO TO TO TO TO
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1) Accumulation unit value
at beginning of
period.................. $10.14 $12.14 $14.06 $12.56 $11.30 $11.29
(2) Accumulation unit value
at end of period........ $12.68 $10.14 $12.14 $14.06 $12.56 $11.30
(3) Number of accumulation
units outstanding at end
of period............... 53,276.6 70,808.7 115,513.8 144,754.30 167,533.9 190,785.7
</TABLE>
<TABLE>
<CAPTION>
GLOBAL STRATEGY FOCUS*
---------------------------------------------------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/96 1/1/95 1/1/94
TO TO TO TO TO TO
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1) Accumulation unit value
at beginning of
period.................. $17.02 $15.85 $14.35 $12.85 $11.78 $12.12
(2) Accumulation unit value
at end of period........ $20.38 $17.02 $15.85 $14.35 $12.85 $11.78
(3) Number of accumulation
units outstanding at end
of period............... 2,343,104.2 2,708,721.4 3,196,842.1 3,436,164.50 2,678,814.8 2,924,265.0
<CAPTION>
BASIC VALUE FOCUS
---------------------------------------------------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/96 1/1/95 1/1/94
TO TO TO TO TO TO
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1) Accumulation unit value
at beginning of
period.................. $20.81 $19.27 $16.19 $13.60 $10.98 $10.88
(2) Accumulation unit value
at end of period........ $24.86 $20.81 $19.27 $16.19 $13.60 $10.98
(3) Number of accumulation
units outstanding at end
of period............... 2,505,912.5 2,134,295.9 1,942,837.1 1,766,570.40 1,241,769.4 850,329.6
</TABLE>
<TABLE>
<CAPTION>
GLOBAL BOND FOCUS*
---------------------------------------------------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/96 1/1/95 1/1/94
TO TO TO TO TO TO
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1) Accumulation unit value
at beginning of
period.................. $13.63 $12.27 $12.20 $11.45 $9.94 $10.52
(2) Accumulation unit value
at end of period........ $12.35 $13.63 $12.27 $12.20 $11.45 $9.94
(3) Number of accumulation
units outstanding at end
of period............... 266,934.6 324,790.1 404,574.9 459,402.30 504,390.5 556,854.0
<CAPTION>
UTILITIES AND TELECOMMUNICATIONS FOCUS*
---------------------------------------------------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/96 1/1/95 1/1/94
TO TO TO TO TO TO
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1) Accumulation unit value
at beginning of
period.................. $19.91 $16.27 $13.10 $11.75 $9.58 $10.61
(2) Accumulation unit value
at end of period........ $22.12 $19.91 $16.27 $13.10 $11.75 $9.58
(3) Number of accumulation
units outstanding at end
of period............... 355,501.8 408,706.9 475,558.5 646,792.9 724,247.5 786,888.0
</TABLE>
- ----------
* Effective April 4, 2000, the Special Value Focus Fund changed its name to
the Small Cap Value Focus Fund, the Global Utility Focus Fund changed its
name to the Utilities and Telecommunications Focus Fund, and the Capital
Focus Fund changed its name to the Balanced Capital Focus Fund. Effective
following the close of business on December 6, 1996, the Flexible Strategy
Fund was merged with and into the Global Strategy Focus Fund and the
International Bond Fund was merged with and into World Income Focus Fund,
which was renamed the Global Bond Focus Fund and its investment objective
was changed.
50
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FOCUS
---------------------------------------------------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/96 1/1/95 1/1/94
TO TO TO TO TO TO
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1) Accumulation unit value
at beginning of
period.................. $11.91 $11.20 $11.90 $11.31 $10.87 $10.96
(2) Accumulation unit value
at end of period........ $16.18 $11.91 $11.20 $11.90 $11.31 $10.87
(3) Number of accumulation
units outstanding at end
of period............... 764,791.1 893,307.1 2,327,316.1 1,535,723.1 1,275,506.6 1,313,991.8
<CAPTION>
RESERVE ASSETS
---------------------------------------------------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/96 1/1/95 1/1/94
TO TO TO TO TO TO
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1) Accumulation unit value
at beginning of
period.................. $12.87 $12.32 $11.79 $11.29 $10.76 $10.43
(2) Accumulation unit value
at end of period........ $13.39 $12.87 $12.32 $11.79 $11.29 $10.76
(3) Number of accumulation
units outstanding at end
of period............... 86,344.1 95,017.1 82,335.6 101,151.2 114,114.3 120,482.2
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL BOND* GOVERNMENT BOND
--------------------------------------------------------- ---------------------------
1/1/97 1/1/96 1/1/95 5/16/94** 1/1/99 1/1/98
TO TO TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94 12/31/99 12/31/98
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1) Accumulation unit value at
beginning of period.......... * $11.40 $9.93 $10.00 $13.36 $12.45
(2) Accumulation unit value at end
of period.................... * * $11.40 $9.93 $12.95 $13.36
(3) Number of accumulation units
outstanding at end of
period....................... 0.0 0.00 40,678.5 18,139.0 1,842,543.0 1,670,377.7
<CAPTION>
GOVERNMENT BOND
---------------------------------------------------------
1/1/97 1/1/96 1/1/95 5/16/94**
TO TO TO TO
12/31/97 12/31/96 12/31/95 12/31/94
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
(1) Accumulation unit value at
beginning of period.......... $11.59 $11.42 $10.08 $10.00
(2) Accumulation unit value at end
of period.................... $12.45 $11.59 $11.42 $10.08
(3) Number of accumulation units
outstanding at end of
period....................... 900,981.0 401,866.8 153,524.3 69,485.0
</TABLE>
<TABLE>
<CAPTION>
DEVELOPING CAPITAL MARKETS FOCUS
---------------------------------------------------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/96 1/1/95 5/16/94**
TO TO TO TO TO TO
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1) Accumulation unit value
at beginning of
period.................. $6.42 $9.21 $9.99 $9.16 $9.38 $10.00
(2) Accumulation unit value
at end of period........ $10.48 $6.42 $9.21 $9.99 $9.16 $9.38
(3) Number of accumulation
units outstanding at end
of period............... 555,965.5 563,805.5 892,320.3 411,686.3 240,156.6 174,741.4
<CAPTION>
GLOBAL
INDEX 500 GROWTH FOCUS
--------------------------------------------------------- ---------------------------
1/1/99 1/1/98 1/1/97 12/18/96** 1/1/99 1/1/98
TO TO TO TO TO TO
12/31/99 12/31/98 12/31/97 12/31/96 12/31/99 12/31/98
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1) Accumulation unit value
at beginning of
period.................. $16.79 $13.27 $10.12 $0.00 $10.74 ***
(2) Accumulation unit value
at end of period........ $19.96 $16.79 $13.27 $10.12 $14.69 $10.74
(3) Number of accumulation
units outstanding at end
of period............... 2,180,119.7 1,908,674.0 1,245,291.7 10,445.7 796,328.0 127,229.2
</TABLE>
- ----------
* Effective April 4, 2000, the Special Value Focus Fund changed its name to
the Small Cap Value Focus Fund, the Global Utility Focus Fund changed its
name to the Utilities and Telecommunications Focus Fund, and the Capital
Focus Fund changed its name to the Balanced Capital Focus Fund. Effective
following the close of business on December 6, 1996, the Flexible Strategy
Fund was merged with and into the Global Strategy Focus Fund and the
International Bond Fund was merged with and into the World Income Focus
Fund, which was renamed the Global Bond Focus Fund and its investment
objective was changed.
** Commencement of business
*** Available for allocations of premiums or contract value effective following
the close of business June 5, 1998.
51
<PAGE>
<TABLE>
<CAPTION>
BALANCED
CAPITAL FOCUS* SELECT TEN V.I. TRUST
--------------------------- ---------------------------
1/1/99 1/1/98 1/1/99 1/1/98
TO TO TO TO
12/31/99 12/31/98 12/31/99 12/31/98
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
(1) Accumulation unit value at
beginning of period........... $9.68 ** $10.12 **
(2) Accumulation unit value at end
of period..................... $10.30 $9.68 $9.39 $10.12
(3) Number of accumulation units
outstanding at end of
period........................ $165,442.8 114,280.3 573,604.7 190,745.2
<CAPTION>
AIM V.I. CAPITAL APPRECIATION
---------------------------------------------------------
1/1/99 1/1/98 1/1/97 1/1/96
TO TO TO TO
12/31/99 12/31/98 12/31/97 12/31/96
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
(1) Accumulation unit value at
beginning of period........... $13.22 $11.23 $10.03 $0.00
(2) Accumulation unit value at end
of period..................... $18.86 $13.22 $11.23 $10.03
(3) Number of accumulation units
outstanding at end of
period........................ 741,790.0 637,817.5 705,468.0 0.00
</TABLE>
<TABLE>
<CAPTION>
AIM V.I. VALUE PREMIER GROWTH
--------------------------------------------------------- ---------------------------
1/1/99 1/1/98 1/1/97 1/1/96 1/1/99 1/1/98
TO TO TO TO TO TO
12/31/99 12/31/98 12/31/97 12/31/96 12/31/99 12/31/98
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1) Accumulation unit value at
beginning of period.......... $16.35 $12.52 $10.26 $0.00 $19.28 $13.21
(2) Accumulation unit value at end
of period.................... $20.96 $16.35 $12.52 $10.26 $25.17 $19.28
(3) Number of accumulation units
outstanding at end of
period....................... 2,198,282.0 1,623,648.9 694,794.1 0.00 3,581,370.8 2,559,574.5
<CAPTION>
PREMIER GROWTH QUASAR
--------------------------- ---------------------------
1/1/97 1/1/96 1/1/99 1/1/98
TO TO TO TO
12/31/97 12/31/96 12/31/99 12/31/98
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
(1) Accumulation unit value at
beginning of period.......... $10.00 $0.00 $8.57 **
(2) Accumulation unit value at end
of period.................... $13.21 $10.00 $9.90 $8.57
(3) Number of accumulation units
outstanding at end of
period....................... 1,273,236.9 0.00 518,747.8 94,213.1
</TABLE>
<TABLE>
<CAPTION>
MFS EMERGING GROWTH MFS RESEARCH
--------------------------------------------------------- ---------------------------
1/1/99 1/1/98 1/1/97 1/1/96 1/1/99 1/1/98
TO TO TO TO TO TO
12/31/99 12/31/98 12/31/97 12/31/96 12/31/99 12/31/98
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1) Accumulation unit value at beginning
of period........................... $15.66 $11.83 $9.83 $0.00 $14.56 $11.96
(2) Accumulation unit value at end of
period.............................. $27.30 $15.66 $11.83 $9.83 $17.82 $14.56
(3) Number of accumulation units
outstanding at end of period........ 1,524,939.9 1,327,153.4 600,105.0 15,002.00 1,278,129.3 1,161,685.9
<CAPTION>
MERCURY V.I.
LARGE CAP
MFS RESEARCH INTERNATIONAL VIP FUND
--------------------------- --------------------------- ------------
1/1/97 1/1/96 1/1/99 1/1/98 1/1/99
TO TO TO TO TO
12/31/97 12/31/96 12/31/99 12/31/98 12/31/99
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(1) Accumulation unit value at beginning
of period........................... $10.08 $0.00 $9.49 ** ***
(2) Accumulation unit value at end of
period.............................. $11.96 $10.08 $11.39 $9.49 $11.98
(3) Number of accumulation units
outstanding at end of period........ 589,190.5 0.0 1,804,928.1 2,303,167.1 75,627.0
</TABLE>
- ----------
* Effective April 4, 2000, the Special Value Focus Fund changed its name to
the Small Cap Value Focus Fund, the Global Utility Focus Fund changed its
name to the Utilities and Telecommunications Focus Fund, and the Capital
Focus Fund changed its name to the Balanced Capital Focus Fund. Effective
following the close of business on December 6, 1996, the Flexible Strategy
Fund was merged with and into the Global Strategy Focus Fund and the
International Bond Fund was merged with and into the World Income Focus
Fund, which was renamed the Global Bond Focus Fund and its investment
objective was changed.
** Available for allocations of premiums or contract value effective following
the close of business June 5, 1998.
*** Available for allocations of premiums or contract value effective following
the close of business on June 18, 1999.
52
<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
53
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
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
SERVICE CENTER: P.O. BOX 44222
JACKSONVILLE, FLORIDA 32231-4222
4804 DEER LAKE DRIVE EAST,
JACKSONVILLE, FLORIDA 32246
PHONE: (800) 333-6524
OFFERED THROUGH
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
This individual deferred variable annuity contract (the "Contract") is designed
to provide comprehensive and flexible ways to invest and to create a source of
income protection for later in life through the payment of annuity benefits. An
annuity is intended to be a long term investment. Contract owners should
consider their need for deferred income before purchasing the Contract. The
Contract is issued by ML Life Insurance Company of New York ("ML of New York")
both on a nonqualified basis, and as an Individual Retirement Annuity ("IRA")
that is given qualified tax status.
This Statement of Additional Information is not a Prospectus and should be read
together with the Contract's Prospectus dated May 1, 2000, which is available on
request and without charge by writing to or calling ML of New York at its
Service Center 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-xx
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 on
November 28, 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, 1999, 1998, and 1997, Merrill
Lynch, Pierce, Fenner & Smith Incorporated received $2.7 million, $3.3 million,
and $3.5 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
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, 1999, 1998, and 1997, ML of New York paid
administrative services fees of $4.2 million, $4.8 million, and $4.3 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
3
<PAGE>
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)
Where:
<TABLE>
<S> <C> <C>
NCF = the net change in the value of the Fund (exclusive of
realized gains and losses on the sale of securities and
unrealized appreciation and depreciation) for the 7-day
period attributable to a hypothetical account having a
balance of 1 unit.
ES = per unit expenses for the hypothetical account for the 7-day
period.
UV = the unit value on the first day of the 7-day period.
</TABLE>
The current yield for the Domestic Money Market Subaccount for the 7-day period
ended December 31, 1999 was 3.94%. The current yield for the Reserve Assets
Subaccount for the 7-day period ended December 31, 1999 was 4.22%.
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)) TO THE POWER OF (365/7) = 1
Where:
<TABLE>
<S> <C> <C>
NCF = the net change in the value of the Fund (exclusive of
realized gains and losses on the sale of securities and
unrealized appreciation and depreciation) for the 7-day
period attributable to a hypothetical account having a
balance of 1 unit.
ES = per unit expenses of the hypothetical account for the 7-day
period.
UV = the unit value for the first day of the 7-day period.
</TABLE>
The effective yield for the Domestic Money Market Subaccount for the 7-day
period ended December 31, 1999 was 4.02%. The effective yield for the Reserve
Assets Subaccount for the 7-day period ended December 31, 1999 was 4.30%.
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
4
<PAGE>
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) TO THE POWER OF (6) - 1)
Where:
<TABLE>
<S> <C> <C>
NI = net investment income of the Fund for the 30-day or
one-month period attributable to the subaccount's units.
ES = expenses of the subaccount for the 30-day or one-month
period.
U = the average number of units outstanding.
UV = the unit value at the close of the last day in the 30-day or
one-month 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, 1999
was:
<TABLE>
<CAPTION>
NAME OF SUBACCOUNT YIELD
- ------------------ --------
<S> <C>
Prime Bond 5.50%
High Current Income 9.22%
Global Bond Focus 2.12%
Government Bond 4.58%
</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.
5
<PAGE>
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, 1999, returns were:
<TABLE>
<CAPTION>
SINCE
NAME OF SUBACCOUNT (INCEPTION DATE) 1 YR 5 YR 10 YR INCEPTION
- ----------------------------------- -------- -------- -------- ---------
<S> <C> <C> <C> <C>
ML Domestic Money Market (2/21/92)................ -3.20% 3.18% N/A 3.11%
ML Prime Bond (2/21/92)........................... -9.80% 5.00% N/A 4.94%
ML High Current Income (2/21/92).................. -2.19% 6.22% N/A 6.81%
ML Quality Equity (2/21/92)....................... 22.53% 20.07% N/A 14.33%
ML Small Cap Value Focus
(formerly, Special Value Focus) (2/21/92)....... 25.21% 15.16% N/A 9.41%
ML Natural Resources Focus* (2/21/92)............. 17.94% 1.68% N/A 2.97%
ML Global Strategy Focus (2/21/92)................ 12.62% 11.09% N/A 9.37%
ML American Balanced* (2/21/92)................... 0.35% 11.88% N/A 9.17%
ML Basic Value Focus (7/1/93)..................... 12.37% 17.31% N/A 14.83%
ML Global Bond Focus** (7/1/93)................... -15.15% 3.81% N/A 3.05%
ML Utilities and Telecommunications Focus*
(formerly, Global Utility Focus) (7/1/93)....... 4.00% 17.79% N/A 12.78%
ML International Equity Focus** (7/1/93).......... 28.64% 7.73% N/A 7.46%
ML Reserve Assets Fund (2/21/92).................. 3.97% 4.38% N/A 3.68%
ML Government Bond Fund (5/16/94)................. -9.29% 4.52% N/A 4.29%
ML Developing Capital Markets Focus (5/16/94)..... 56.13% 1.57% N/A 0.40%
ML Index 500 (12/18/96)........................... 11.76% N/A N/A 24.56%
ML Global Growth Focus (6/5/98)................... 29.69% N/A N/A 24.20%
ML Balanced Capital Focus
(formerly, Capital Focus) (6/5/98).............. -0.45% N/A N/A -1.75%
Defined Asset Funds--Select Ten V.I. Trust
(6/5/98)........................................ -13.13% N/A N/A -7.39%
AIM V.I. Capital Appreciation (12/18/96).......... 35.52% N/A N/A 22.20%
AIM V.I. Value (12/18/96)......................... 21.02% N/A N/A 26.62%
Alliance Premier Growth (12/18/96)................ 23.40% N/A N/A 34.64%
Alliance Quasar (6/5/98).......................... 8.39% N/A N/A -4.23%
MFS Emerging Growth (12/18/96).................... 67.16% N/A N/A 38.34%
MFS Research (12/18/96)........................... 15.26% N/A N/A 19.89%
Hotchkis and Wiley International VIP (6/10/98).... 12.93% N/A N/A 4.81%
Mercury V.I. U.S. Large Cap (6/18/99)............. N/A N/A N/A 24.94%
</TABLE>
Total returns assume the Contract was surrendered at the end of the period
shown, and are not indicative of performance if the Contract was continued for a
longer period.
- ------------------------
* This subaccount was closed to allocations of premiums or contract value
following the close of business on December 6, 1996.
** This subaccount was closed to allocations of premiums or contract value
following the close of business on June 5, 1998.
6
<PAGE>
Average annual total returns for other periods of time may also be disclosed
from time to time. For example, average annual total returns may be provided
based on the assumption that a subaccount had been in existence and had invested
in the corresponding underlying Fund for the same period as the corresponding
Fund had been in operation. The Funds commenced operations as indicated below:
<TABLE>
<CAPTION>
FUND COMMENCED OPERATIONS
- ---- --------------------
<S> <C>
ML Domestic Money Market Fund February 21, 1992
ML Prime Bond Fund April 29, 1982
ML High Current Income Fund April 29, 1982
ML Quality Equity Fund April 29, 1982
ML Small Cap Value Focus Fund (formerly, April 29, 1982
Special Value Focus)
ML Equity Growth Fund April 29, 1982
ML Natural Resources Focus Fund* June 1, 1988
ML American Balanced Fund* June 1, 1988
ML Global Strategy Focus Fund February 21, 1992
ML Basic Value Focus Fund July 1, 1993
ML Balanced Capital Focus Fund (formerly, June 5, 1998
Capital Focus)
ML Global Bond Focus Fund** July 1, 1993
(formerly, World Income Focus)
ML Utilities and Telecommunications Focus Fund July 1, 1993
(formerly, Global Utility Focus)*
ML International Equity Focus Fund** July 1, 1993
ML Government Bond Fund May 16, 1994
ML Developing Capital Markets Focus Fund May 16, 1994
ML Reserve Assets Fund November 23, 1981
ML Index 500 Fund December 13, 1996
Defined Asset Funds--Select Ten V.I. Trust June 5, 1998
AIM V.I. Capital Appreciation Fund May 5, 1993
AIM V.I. Value Fund May 5, 1993
Alliance Premier Growth Portfolio June 26, 1992
Alliance Quasar Portfolio September 17, 1990
MFS Emerging Growth Series July 24, 1995
MFS Research Series July 26, 1995
Hotchkis and Wiley International VIP Portfolio June 10, 1998
Mercury V.I. U.S. Large Cap Fund April 30, 1999
</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
7
<PAGE>
described below. The average annual total return is then calculated according to
the following formula:
TR = ((ERV/P) TO THE POWER OF (1/N)) - 1
Where:
<TABLE>
<S> <C> <C>
TR = the average annual total return net of subaccount recurring
charges (such as the 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>
- ------------------------
* The subaccount corresponding to this Fund was closed to allocations of
premiums or contract value following the close of business on December 6,
1996.
** The subaccount corresponding to this Fund was closed to allocations of
premiums or contract value following the close of business on June 5, 1998.
8
<PAGE>
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 on
surrender of the Contract. In addition, such nonstandard returns may also be
quoted for other periods.
For the year ended December 31, 1999, returns not reflecting any contingent
deferred sales charge were:
<TABLE>
<CAPTION>
SINCE
NAME OF SUBACCOUNT (INCEPTION DATE) 1 YR 5 YR 10 YR INCEPTION
- ----------------------------------- -------- -------- -------- ---------
<S> <C> <C> <C> <C>
ML Domestic Money Market Fund
(2/21/92)............................ 3.34% 3.70% N/A 3.11%
ML Prime Bond (2/21/92)................ -3.76% 5.49% N/A 4.94%
ML High Current Income (2/21/92)....... 4.43% 6.69% N/A 6.81%
ML Quality Equity (2/21/92)............ 29.54% 20.36% N/A 14.33%
ML Small Cap Value Focus (formerly,
Special Value Focus) (2/21/92)....... 32.22% 15.50% N/A 9.41%
ML Natural Resources Focus*
(2/21/92)............................ 24.94% 2.24% N/A 2.97%
ML Global Strategy Focus (2/21/92)..... 19.63% 11.48% N/A 9.37%
ML American Balanced* (2/21/92)........ 7.16% 12.26% N/A 9.17%
ML Basic Value Focus (7/1/93).......... 19.37% 17.63% N/A 14.91%
ML Global Bond Focus** (7/1/93)........ -9.50% 4.33% N/A 3.18%
ML Utilities and Telecommunications
Focus* (formerly, Global Utility
Focus) (7/1/93)...................... 11.01% 18.10% N/A 12.86%
ML International Equity Focus**
(7/1/93)............................. 35.65% 8.17% N/A 7.56%
ML Reserve Assets (2/21/92)............ 3.97% 4.38% N/A 3.68%
ML Government Bond Fund (5/16/94)...... -3.21% 5.02% N/A 4.58%
ML Developing Capital Markets Focus
(5/16/94)............................ 63.14% 2.13% N/A 0.73%
ML Index 500 (12/18/96)................ 18.77% N/A N/A 25.40%
ML Global Growth Focus (6/5/98)........ 36.70% N/A N/A 27.55%
ML Balanced Capital Focus (formerly,
Capital Focus)(6/5/98)............... 6.30% N/A N/A 1.80%
Defined Asset Funds--Select Ten V.I.
Trust (6/5/98)....................... -7.34% N/A N/A -4.08%
AIM V.I. Capital Appreciation
(12/18/96)........................... 42.53% N/A N/A 23.07%
AIM V.I. Value (12/18/96).............. 28.03% N/A N/A 27.44%
Alliance Premier Growth (12/18/96)..... 30.41% N/A N/A 35.36%
Alliance Quasar (6/5/98)............... 15.39% N/A N/A -0.79%
MFS Emerging Growth (12/18/96)......... 74.17% N/A N/A 39.03%
MFS Research (12/18/96)................ 22.26% N/A N/A 20.80%
Hotchkis and Wiley International VIP
(6/10/98)............................ 19.93% N/A N/A 8.50%
Mercury V.I. U.S. Large Cap
(6/18/99)............................ N/A N/A N/A 39.80%
</TABLE>
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
- --------------------------
* This subaccount was closed to allocations of premiums or contract value
following the close of business on December 6, 1996.
** This subaccount was closed to allocations of premiums or contract value
following the close of business on June 5, 1998.
9
<PAGE>
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 corrge. 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.
10
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
ML Life Insurance Company of New York:
We have audited the accompanying statement of assets and
liabilities of each of the divisions of ML of New York
Variable Annuity Separate Account A, comprised of divisions
investing in the Domestic Money Market Fund, Prime Bond
Fund, High Current Income Fund, Quality Equity Fund, Special
Value Focus Fund, American Balanced Fund, Natural Resources
Focus Fund, Global Strategy Focus Fund, Global Utility Focus
Fund, International Equity Focus Fund, Global Bond Focus
Fund, Basic Value Focus Fund, Government Bond Fund,
Developing Capital Markets Focus Fund, Index 500 Fund,
Global Growth Focus Fund, Capital Focus Fund, International
VIP Portfolio, Mercury V.I. U.S. Large Cap Fund
(commencement of operations June 18, 1999), 1999 ML Select
Ten V.I. Trust (commencement of operations April 29, 1999),
1998 ML Select Ten V.I. Trust (commencement of operations
May 1, 1998 through April 30, 1999), Quasar Portfolio,
Premier Growth Portfolio, MFS Emerging Growth Series, MFS
Research Series, AIM V.I. Value Fund and AIM Capital
Appreciation Fund (collectively, the "Divisions"), as of
December 31, 1999 and the related statements of operations
and changes in net assets for each of the two years in the
period then ended. These financial statements are the
responsibility of the management of ML Life Insurance
Company of New York. Our responsibility is to express an
opinion of these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation
of mutual fund securities owned at December 31, 1999. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial positions of the
Divisions as of December 31, 1999, the results of their
operations and the changes in their net assets for each of
the two years in the period then ended, in conformity with
generally accepted accounting principles.
February 14, 2000
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Domestic High
Money Prime Current
Market Bond Income
Fund Fund Fund
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Domestic Money Market Fund, 33,635 shares
(Cost $33,635) $ 33,635 $ $
Prime Bond Fund, 3,805 shares
(Cost $44,888) 42,385
High Current Income Fund, 3,315 shares
(Cost $36,292) 31,793
-------------------- -------------------- --------------------
Total Assets 33,635 42,385 31,793
Liabilities
Due to ML Life Insurance Company of New York 10 12 8
-------------------- -------------------- --------------------
Net Assets $ 33,625 $ 42,373 $ 31,785
==================== ==================== ====================
Net Assets
Accumulation Units $ 33,625 $ 42,373 $ 31,785
==================== ==================== ====================
Units Outstanding (Note 6) 2,623 2,879 1,879
==================== ==================== ====================
Unit Value $ 12.82 $ 14.72 $ 16.92
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Special
Quality Value American
Equity Focus Balanced
Fund Fund Fund
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Quality Equity Fund, 1,586 shares
(Cost $51,544) $ 63,328 $ $
Special Value Focus Fund, 1,470 shares
(Cost $32,908) 34,314
American Balanced Fund, 955 shares
(Cost $13,621) 14,133
-------------------- -------------------- --------------------
Total Assets 63,328 34,314 14,133
Liabilities
Due to ML Life Insurance Company of New York 19 11 4
-------------------- -------------------- --------------------
Net Assets $ 63,309 $ 34,303 $ 14,129
==================== ==================== ====================
Net Assets
Accumulation Units $ 63,309 $ 34,303 $ 14,129
==================== ==================== ====================
Units Outstanding (Note 6) 2,191 1,677 703
==================== ==================== ====================
Unit Value $ 28.89 $ 20.45 $ 20.09
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Natural Global Global
Resources Strategy Utility
Focus Focus Focus
Fund Fund Fund
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Natural Resources Focus Fund, 71 shares
(Cost $793) $ 676 $ $
Global Strategy Focus Fund, 3,381 shares
(Cost $43,551) 47,767
Global Utility Focus Fund, 467 shares
(Cost $5,561) 7,866
-------------------- -------------------- --------------------
Total Assets 676 47,767 7,866
Liabilities
Due to ML Life Insurance Company of New York 0 15 2
-------------------- -------------------- --------------------
Net Assets $ 676 $ 47,752 $ 7,864
==================== ==================== ====================
Net Assets
Accumulation Units $ 676 $ 47,752 $ 7,864
==================== ==================== ====================
Units Outstanding (Note 6) 53 2,343 356
==================== ==================== ====================
Unit Value $ 12.68 $ 20.38 $ 22.12
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
International Global Basic
Equity Bond Value
Focus Focus Focus
Fund Fund Fund
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
International Equity Focus Fund, 885 shares
(Cost $9,634) $ 12,378 $ $
Global Bond Focus Fund, 384 shares
(Cost $3,628) 3,298
Basic Value Focus Fund, 4,582 shares
(Cost $64,057) 62,315
-------------------- -------------------- --------------------
Total Assets 12,378 3,298 62,315
Liabilities
Due to ML Life Insurance Company of New York 4 1 18
-------------------- -------------------- --------------------
Net Assets $ 12,374 $ 3,297 $ 62,297
==================== ==================== ====================
Net Assets
Accumulation Units $ 12,374 $ 3,297 $ 62,297
==================== ==================== ====================
Units Outstanding (Note 6) 765 267 2,506
==================== ==================== ====================
Unit Value $ 16.18 $ 12.35 $ 24.86
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Developing
Government Capital Markets Index
Bond Focus 500
Fund Fund Fund
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Government Bond Fund, 2,380 shares
(Cost $25,097) $ 23,868 $ $
Developing Capital Markets Focus Fund, 564 shares
(Cost $4,757) 5,828
Index 500 Fund, 2,324 shares
(Cost $35,080) 43,528
-------------------- -------------------- --------------------
Total Assets 23,868 5,828 43,528
Liabilities
Due to ML Life Insurance Company of New York 7 1 13
-------------------- -------------------- --------------------
Net Assets $ 23,861 $ 5,827 $ 43,515
==================== ==================== ====================
Net Assets
Accumulation Units $ 23,861 $ 5,827 $ 43,515
==================== ==================== ====================
Units Outstanding (Note 6) 1,843 556 2,180
==================== ==================== ====================
Unit Value $ 12.95 $ 10.48 $ 19.96
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Global
Growth Capital International
Focus Focus VIP
Fund Fund Portfolio
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Global Growth Focus Fund, 792 shares
(Cost $8,839) $ 11,701 $ $
Capital Focus Fund, 168 shares
(Cost $1,616) 1,705
Investments in Hotchkis & Wiley Variable Trust (Note 1):
International VIP Portfolio, 1,785 shares
(Cost $17,716) 20,564
-------------------- -------------------- --------------------
Total Assets 11,701 1,705 20,564
Liabilities
Due to ML Life Insurance Company of New York 3 1 6
-------------------- -------------------- --------------------
Net Assets $ 11,698 $ 1,704 $ 20,558
==================== ==================== ====================
Net Assets
Accumulation Units $ 11,698 $ 1,704 $ 20,558
==================== ==================== ====================
Units Outstanding (Note 6) 796 165 1,805
==================== ==================== ====================
Unit Value $ 14.69 $ 10.30 $ 11.39
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Mercury
V.I. U.S. 1999 ML
Large Cap Select Ten Quasar
Fund V.I. Trust Portfolio
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Mercury Asset Management V.I. Funds, Inc. (Note 1):
Mercury V.I. U.S. Large Cap Fund, 75 shares
(Cost $813) $ 906 $ $
Investments in Defined Asset Funds, Equity Investor Fund (Note 1):
1999 ML Select Ten V.I. Trust, 5,744 shares
(Cost $6,252) 5,388
Investments in Alliance Variable Products Series Fund, Inc (Note 1):
Quasar Portfolio, 395 shares
(Cost $4,484) 5,137
-------------------- -------------------- --------------------
Total Assets 906 5,388 5,137
Liabilities
Due to ML Life Insurance Company of New York 0 2 1
-------------------- -------------------- --------------------
Net Assets $ 906 $ 5,386 $ 5,136
==================== ==================== ====================
Net Assets
Accumulation Units $ 906 $ 5,386 $ 5,136
==================== ==================== ====================
Units Outstanding (Note 6) 76 574 519
==================== ==================== ====================
Unit Value $ 11.98 $ 9.39 $ 9.90
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
MFS
Premier Emerging MFS
Growth Growth Research
Portfolio Series Series
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Alliance Variable Products Series Fund, Inc (Note 1):
Premier Growth Portfolio, 2,229 shares
(Cost $60,797) $ 90,170 $ $
Investments in MFS Variable Insurance Trust (Note 1):
MFS Emerging Growth Series, 1,098 shares
(Cost $20,740) 41,643
MFS Research Series, 976 shares
(Cost $16,765) 22,783
-------------------- -------------------- --------------------
Total Assets 90,170 41,643 22,783
Liabilities
Due to ML Life Insurance Company of New York 27 12 7
-------------------- -------------------- --------------------
Net Assets $ 90,143 $ 41,631 $ 22,776
==================== ==================== ====================
Net Assets
Accumulation Units $ 90,143 $ 41,631 $ 22,776
==================== ==================== ====================
Units Outstanding (Note 6) 3,581 1,525 1,278
==================== ==================== ====================
Unit Value $ 25.17 $ 27.30 $ 17.82
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
=========================================
AIM
AIM V.I. Capital
V.I. Value Appreciation
Fund Fund
(In thousands, except unit values) ==================== ====================
<S> <C> <C>
Assets
Investments in AIM Variable Insurance Funds, Inc. (Note 1):
AIM V.I. Value Fund, 1,376 shares
(Cost $34,374) $ 46,090 $
AIM V.I. Capital Appreciation Fund, 393 shares
(Cost $9,434) 13,994
-------------------- --------------------
Total Assets 46,090 13,994
Liabilities
Due to ML Life Insurance Company of New York 14 4
-------------------- --------------------
Net Assets $ 46,076 $ 13,990
==================== ====================
Net Assets
Accumulation Units $ 46,076 $ 13,990
==================== ====================
Units Outstanding (Note 6) 2,198 742
==================== ====================
Unit Value $ 20.96 $ 18.86
==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Domestic High
Money Prime Current
Market Bond Income
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 1,606 $ 3,073 $ 3,500
Mortality and Expense Charges (Note 3) (425) (543) (396)
Administrative Charges (Note 3) (34) (43) (32)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 1,147 2,487 3,072
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 0 (382) (581)
Net Change In Unrealized Appreciation
(Depreciation) During the Year 0 (3,746) (1,084)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 0 (4,128) (1,665)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,147 (1,641) 1,407
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 70,604 326 168
Contract Owner Withdrawals (3,198) (2,699) (1,587)
Net Transfers In (Out) (Note 4) (68,556) 1,423 496
Contract Maintenance Charges (Note 3) (7) (11) (9)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (1,157) (961) (932)
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (10) (2,602) 475
Net Assets Beginning of Period 33,635 44,975 31,310
-------------------- -------------------- --------------------
Net Assets End of Period $ 33,625 $ 42,373 $ 31,785
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Special
Quality Value American
Equity Focus Balanced
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 12,358 $ 3,932 $ 2,865
Mortality and Expense Charges (Note 3) (679) (358) (177)
Administrative Charges (Note 3) (54) (29) (14)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 11,625 3,545 2,674
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 1,566 (1,725) 274
Net Change In Unrealized Appreciation
(Depreciation) During the Year 1,532 6,630 (1,964)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 3,098 4,905 (1,690)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 14,723 8,450 984
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 313 196 0
Contract Owner Withdrawals (3,084) (1,986) (958)
Net Transfers In (Out) (Note 4) (1,528) (1,885) (976)
Contract Maintenance Charges (Note 3) (14) (8) (4)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (4,313) (3,683) (1,938)
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 10,410 4,767 (954)
Net Assets Beginning of Period 52,899 29,536 15,083
-------------------- -------------------- --------------------
Net Assets End of Period $ 63,309 $ 34,303 $ 14,129
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Natural Global Global
Resources Strategy Utility
Focus Focus Focus
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 16 $ 6,218 $ 1,020
Mortality and Expense Charges (Note 3) (9) (554) (94)
Administrative Charges (Note 3) (1) (44) (8)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 6 5,620 918
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (84) 825 533
Net Change In Unrealized Appreciation
(Depreciation) During the Year 231 1,646 (685)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 147 2,471 (152)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 153 8,091 766
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 0 268 0
Contract Owner Withdrawals (126) (2,484) (478)
Net Transfers In (Out) (Note 4) (70) (4,209) (559)
Contract Maintenance Charges (Note 3) 0 (16) (2)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (196) (6,441) (1,039)
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (43) 1,650 (273)
Net Assets Beginning of Period 718 46,102 8,137
-------------------- -------------------- --------------------
Net Assets End of Period $ 675 $ 47,752 $ 7,864
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
International Global Basic
Equity Bond Value
Focus Focus Focus
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 540 $ 217 $ 12,519
Mortality and Expense Charges (Note 3) (135) (47) (657)
Administrative Charges (Note 3) (11) (4) (53)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 394 166 11,809
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (271) (15) 360
Net Change In Unrealized Appreciation
(Depreciation) During the Year 3,263 (537) (3,815)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 2,992 (552) (3,455)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 3,386 (386) 8,354
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 0 0 679
Contract Owner Withdrawals (702) (339) (2,590)
Net Transfers In (Out) (Note 4) (945) (404) 11,455
Contract Maintenance Charges (Note 3) (4) (1) (16)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (1,651) (744) 9,528
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 1,735 (1,130) 17,882
Net Assets Beginning of Period 10,639 4,427 44,415
-------------------- -------------------- --------------------
Net Assets End of Period $ 12,374 $ 3,297 $ 62,297
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Developing
Government Capital Markets Index
Bond Focus 500
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 1,455 $ 116 $ 1,575
Mortality and Expense Charges (Note 3) (288) (54) (487)
Administrative Charges (Note 3) (23) (4) (39)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 1,144 58 1,049
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 42 (458) 3,330
Net Change In Unrealized Appreciation
(Depreciation) During the Year (1,892) 2,621 2,379
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments (1,850) 2,163 5,709
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (706) 2,221 6,758
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 226 43 741
Contract Owner Withdrawals (1,251) (226) (1,301)
Net Transfers In (Out) (Note 4) 3,281 170 5,278
Contract Maintenance Charges (Note 3) (5) (1) (8)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 2,251 (14) 4,710
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 1,545 2,207 11,468
Net Assets Beginning of Period 22,316 3,620 32,047
-------------------- -------------------- --------------------
Net Assets End of Period $ 23,861 $ 5,827 $ 43,515
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Global
Growth Capital International
Focus Focus VIP
Fund Fund Portfolio
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 148 $ 52 $ 111
Mortality and Expense Charges (Note 3) (117) (19) (206)
Administrative Charges (Note 3) (9) (1) (16)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 22 32 (111)
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 341 16 (617)
Net Change In Unrealized Appreciation
(Depreciation) During the Year 2,730 39 3,201
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 3,071 55 2,584
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 3,093 87 2,473
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 164 40 147
Contract Owner Withdrawals (453) (31) (802)
Net Transfers In (Out) (Note 4) 7,530 502 (3,114)
Contract Maintenance Charges (Note 3) (2) 0 (3)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 7,239 511 (3,772)
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 10,332 598 (1,299)
Net Assets Beginning of Period 1,366 1,106 21,857
-------------------- -------------------- --------------------
Net Assets End of Period $ 11,698 $ 1,704 $ 20,558
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Mercury
V.I. U.S. 1999 ML 1998 ML
Large Cap Select Ten Select Ten
Fund V.I. Trust V.I. Trust
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 4 $ 65 $ 10
Mortality and Expense Charges (Note 3) (3) (46) (9)
Administrative Charges (Note 3) (1) (4) (1)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 0 15 0
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 2 (106) 253
Net Change In Unrealized Appreciation
(Depreciation) During the Year 94 (864) (46)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 96 (970) 207
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 96 (955) 207
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 32 199 23
Contract Owner Withdrawals (17) (79) (17)
Net Transfers In (Out) (Note 4) 795 6,222 (2,143)
Contract Maintenance Charges (Note 3) 0 (1) 0
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 810 6,341 (2,137)
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 906 5,386 (1,930)
Net Assets Beginning of Period 0 0 1,930
-------------------- -------------------- --------------------
Net Assets End of Period $ 906 $ 5,386 $ 0
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
MFS
Premier Emerging
Quasar Growth Growth
Portfolio Portfolio Series
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 4 $ 916 $ 0
Mortality and Expense Charges (Note 3) (37) (840) (325)
Administrative Charges (Note 3) (3) (67) (26)
-------------------- -------------------- --------------------
Net Investment Income (Loss) (36) 9 (351)
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (45) 3,360 1,734
Net Change In Unrealized Appreciation
(Depreciation) During the Year 671 15,739 16,238
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 626 19,099 17,972
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 590 19,108 17,621
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 23 1,701 454
Contract Owner Withdrawals (171) (2,308) (996)
Net Transfers In (Out) (Note 4) 3,888 22,307 3,775
Contract Maintenance Charges (Note 3) (1) (14) (6)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 3,739 21,686 3,227
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 4,329 40,794 20,848
Net Assets Beginning of Period 807 49,349 20,783
-------------------- -------------------- --------------------
Net Assets End of Period $ 5,136 $ 90,143 $ 41,631
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
AIM V.I.
MFS AIM V.I. Capital
Research Value Appreciation
Series Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 224 $ 760 $ 295
Mortality and Expense Charges (Note 3) (231) (444) (123)
Administrative Charges (Note 3) (19) (36) (10)
-------------------- -------------------- --------------------
Net Investment Income (Loss) (26) 280 162
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 571 1,051 157
Net Change In Unrealized Appreciation
(Depreciation) During the Year 3,547 7,912 3,790
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 4,118 8,963 3,947
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 4,092 9,243 4,109
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 407 1,005 232
Contract Owner Withdrawals (569) (1,119) (337)
Net Transfers In (Out) (Note 4) 1,937 10,407 1,556
Contract Maintenance Charges (Note 3) (5) (7) (2)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 1,770 10,286 1,449
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 5,862 19,529 5,558
Net Assets Beginning of Period 16,914 26,547 8,432
-------------------- -------------------- --------------------
Net Assets End of Period $ 22,776 $ 46,076 $ 13,990
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Domestic High
Money Prime Current
Market Bond Income
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 1,497 $ 2,711 $ 3,221
Mortality and Expense Charges (Note 3) (369) (532) (408)
Administrative Charges (Note 3) (30) (43) (33)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 1,098 2,136 2,780
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 0 (214) (637)
Net Change In Unrealized Appreciation
(Depreciation) During the Year 0 717 (3,768)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 0 503 (4,405)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,098 2,639 (1,625)
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 90,173 328 511
Contract Owner Withdrawals (1,129) (2,718) (1,369)
Net Transfers In (Out) (Note 4) (85,073) 4,871 3,425
Contract Maintenance Charges (Note 3) (5) (11) (8)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 3,966 2,470 2,559
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 5,064 5,109 934
Net Assets Beginning of Period 28,571 39,866 30,376
-------------------- -------------------- --------------------
Net Assets End of Period $ 33,635 $ 44,975 $ 31,310
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Special
Quality Value American
Equity Focus Balanced
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 7,272 $ 6,953 $ 1,740
Mortality and Expense Charges (Note 3) (644) (388) (187)
Administrative Charges (Note 3) (51) (31) (15)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 6,577 6,534 1,538
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 1,810 159 290
Net Change In Unrealized Appreciation
(Depreciation) During the Year (1,468) (8,979) (96)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 342 (8,820) 194
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 6,919 (2,286) 1,732
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 415 398 0
Contract Owner Withdrawals (2,575) (1,160) (700)
Net Transfers In (Out) (Note 4) (2,989) 2,625 (1,579)
Contract Maintenance Charges (Note 3) (16) (11) (5)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (5,165) 1,852 (2,284)
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 1,754 (434) (552)
Net Assets Beginning of Period 51,145 29,970 15,635
-------------------- -------------------- --------------------
Net Assets End of Period $ 52,899 $ 29,536 $ 15,083
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Natural Global Global
Resources Strategy Utility
Focus Focus Focus
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 213 $ 8,291 $ 569
Mortality and Expense Charges (Note 3) (12) (605) (96)
Administrative Charges (Note 3) (1) (48) (8)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 200 7,638 465
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (147) 105 414
Net Change In Unrealized Appreciation
(Depreciation) During the Year (217) (4,324) 684
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments (364) (4,219) 1,098
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (164) 3,419 1,563
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 0 220 0
Contract Owner Withdrawals (71) (2,852) (526)
Net Transfers In (Out) (Note 4) (449) (5,336) (635)
Contract Maintenance Charges (Note 3) 0 (19) (2)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (520) (7,987) (1,163)
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (684) (4,568) 400
Net Assets Beginning of Period 1,402 50,670 7,737
-------------------- -------------------- --------------------
Net Assets End of Period $ 718 $ 46,102 $ 8,137
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
International Global Basic
Equity Bond Value
Focus Focus Focus
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 2,179 $ 267 $ 5,990
Mortality and Expense Charges (Note 3) (235) (56) (548)
Administrative Charges (Note 3) (19) (5) (44)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 1,925 206 5,398
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (912) (30) 1,307
Net Change In Unrealized Appreciation
(Depreciation) During the Year 994 300 (3,899)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 82 270 (2,592)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 2,007 476 2,806
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 219 36 976
Contract Owner Withdrawals (941) (303) (1,698)
Net Transfers In (Out) (Note 4) (16,705) (744) 4,907
Contract Maintenance Charges (Note 3) (7) (2) (14)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (17,434) (1,013) 4,171
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (15,427) (537) 6,977
Net Assets Beginning of Period 26,066 4,964 37,438
-------------------- -------------------- --------------------
Net Assets End of Period $ 10,639 $ 4,427 $ 44,415
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Developing
Government Capital Markets Index
Bond Focus 500
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 886 $ 102 $ 1,045
Mortality and Expense Charges (Note 3) (195) (83) (325)
Administrative Charges (Note 3) (16) (7) (26)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 675 12 694
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 22 (1,985) 1,108
Net Change In Unrealized Appreciation
(Depreciation) During the Year 377 (748) 3,963
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 399 (2,733) 5,071
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,074 (2,721) 5,765
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 134 50 762
Contract Owner Withdrawals (444) (257) (695)
Net Transfers In (Out) (Note 4) 10,338 (1,668) 9,695
Contract Maintenance Charges (Note 3) (3) (2) (5)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 10,025 (1,877) 9,757
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 11,099 (4,598) 15,522
Net Assets Beginning of Period 11,217 8,218 16,525
-------------------- -------------------- --------------------
Net Assets End of Period $ 22,316 $ 3,620 $ 32,047
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Global
Growth Capital International
Focus Focus VIP
Fund Fund Portfolio
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 89
Mortality and Expense Charges (Note 3) (5) (4) (131)
Administrative Charges (Note 3) 0 0 (11)
-------------------- -------------------- --------------------
Net Investment Income (Loss) (5) (4) (53)
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (2) (3) (70)
Net Change In Unrealized Appreciation
(Depreciation) During the Year 133 51 (353)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 131 48 (423)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 126 44 (476)
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 18 16 22
Contract Owner Withdrawals 0 (19) (297)
Net Transfers In (Out) (Note 4) 1,222 1,065 22,611
Contract Maintenance Charges (Note 3) 0 0 (3)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 1,240 1,062 22,333
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 1,366 1,106 21,857
Net Assets Beginning of Period 0 0 0
-------------------- -------------------- --------------------
Net Assets End of Period $ 1,366 $ 1,106 $ 21,857
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
1998 ML Premier
Select Ten Quasar Growth
V.I. Trust Portfolio Portfolio
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 11 $ 5 $ 30
Mortality and Expense Charges (Note 3) (7) (3) (396)
Administrative Charges (Note 3) (1) 0 (32)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 3 2 (398)
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 0 (12) 399
Net Change In Unrealized Appreciation
(Depreciation) During the Year 45 (18) 12,278
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 45 (30) 12,677
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 48 (28) 12,279
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 111 14 737
Contract Owner Withdrawals (1) (7) (784)
Net Transfers In (Out) (Note 4) 1,772 828 20,305
Contract Maintenance Charges (Note 3) 0 0 (7)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 1,882 835 20,251
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 1,930 807 32,530
Net Assets Beginning of Period 0 0 16,819
-------------------- -------------------- --------------------
Net Assets End of Period $ 1,930 $ 807 $ 49,349
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
MFS
Emerging MFS AIM V.I.
Growth Research Value
Series Series Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 115 $ 256 $ 1,212
Mortality and Expense Charges (Note 3) (181) (159) (208)
Administrative Charges (Note 3) (14) (13) (17)
-------------------- -------------------- --------------------
Net Investment Income (Loss) (80) 84 987
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 155 479 183
Net Change In Unrealized Appreciation
(Depreciation) During the Year 4,193 2,011 3,635
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 4,348 2,490 3,818
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 4,268 2,574 4,805
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 488 490 697
Contract Owner Withdrawals (348) (265) (568)
Net Transfers In (Out) (Note 4) 9,280 7,071 12,917
Contract Maintenance Charges (Note 3) (4) (3) (3)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 9,416 7,293 13,043
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 13,684 9,867 17,848
Net Assets Beginning of Period 7,099 7,047 8,699
-------------------- -------------------- --------------------
Net Assets End of Period $ 20,783 $ 16,914 $ 26,547
==================== ==================== ====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
=====================
AIM V.I.
Capital
Appreciation
Fund
(In thousands) ====================
<S> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 225
Mortality and Expense Charges (Note 3) (79)
Administrative Charges (Note 3) (6)
--------------------
Net Investment Income (Loss) 140
--------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 268
Net Change In Unrealized Appreciation
(Depreciation) During the Year 516
--------------------
Net Gain (Loss) on Investments 784
--------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 924
--------------------
Contract Transactions:
Premiums Received from Contract Owners 260
Contract Owner Withdrawals (177)
Net Transfers In (Out) (Note 4) (496)
Contract Maintenance Charges (Note 3) (1)
--------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (414)
--------------------
Total Increase (Decrease) in Net Assets 510
Net Assets Beginning of Period 7,922
--------------------
Net Assets End of Period $ 8,432
====================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT A
ML LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
ML of New York Variable Annuity Separate Account A
("Separate Account A"), a separate account of ML Life
Insurance Company of New York ("ML of New York"), was
established to support ML of New York's operations with
respect to certain variable annuity contracts
("Contracts"). Separate Account A is governed by New York
State Insurance Law. ML of New York is an indirect wholly
owned subsidiary of Merrill Lynch & Co., Inc. ("Merrill
Lynch & Co."). Separate Account A is registered as a
unit investment trust under the Investment Company Act of
1940 and consists of twenty-six investment divisions.
The investment divisions are as follows:
- Merrill Lynch Variable Series Funds, Inc.: Seventeen
of the investment divisions each invest in the
securities of a single mutual fund portfolio of the
Merrill Lynch Variable Series Funds, Inc. ("Merrill
Variable Funds"). The investment advisor to the funds
of the Merrill Variable Funds is Merrill Lynch Asset
Management, L.P. ("MLAM"), an indirect subsidiary of
Merrill Lynch & Co. Effective following the close of
business on June 5, 1998, the International Equity
Focus Fund and Global Bond Focus Fund were closed to
allocations of premiums and contract value. Three
other investment divisions; Natural Resources Focus
Fund, American Balanced Fund and Global Utility Focus
Fund have been closed to allocations of premiums and
contract value since 1996.
- Hotchkis & Wiley Variable Trust: One of the investment
divisions invests in the securities of a single mutual
fund portfolio of the Hotchkis & Wiley Variable Trust
("H&W Trust"). The investment advisor to the fund of
the H&W Trust is Hotchkis & Wiley, a division of MLAM.
- Mercury Asset Management V.I. Funds, Inc.: One of the
investment divisions invests in the securities of a
single mutual fund portfolio of the Mercury Asset
Management V.I. Funds, Inc. ("Mercury Funds"). The
investment advisor to the fund of the Mercury Funds is
Mercury Asset Management International, Ltd., a
division of Merrill Lynch & Co. This investment
division commenced operations on June 18, 1999.
- Defined Asset Funds, Equity Investor Fund: One of the
investment divisions invests in the securities of a
single unit investment trust of the Equity Investor
Fund. Equity Investor Fund is sponsored by Merrill
Lynch, Pierce, Fenner & Smith, Incorporated, a wholly
owned subsidiary of Merrill Lynch & Co. The unit
investment trust of the Equity Investor Fund has
annual rollovers that occur on or about May 1 of each
year.
- Alliance Variable Products Series Fund, Inc.: Two
investment divisions each invest in the securities of
a single mutual fund portfolio of the Alliance
Variable Products Series Fund, Inc. ("Alliance
Variable Fund"). The investment advisor to the funds
of the Alliance Variable Fund is Alliance Capital
Management, L.P.
- MFS Variable Insurance Trust: Two of the investment
divisions each invest in the securities of a single
mutual fund portfolio of the MFS Variable Insurance
Trust ("MFS Variable Trust"). The investment advisor
to the funds of the MFS Variable Trust is
Massachusetts Financial Services Company.
- AIM Variable Insurance Funds, Inc.: Two of the
investment divisions each invest in the securities of
a single mutual fund portfolio of the AIM Variable
Insurance Funds, Inc. ("AIM Variable Funds"). The
investment advisor to the funds of the AIM Variable
Funds is AIM Advisors, Inc.
The assets of Separate Account A are registered in the
name of ML of New York. The portion of Separate Account
A's assets applicable to the Contracts are not chargeable
with liabilities arising out of any other business ML of
New York may conduct.
The change in net assets accumulated in Separate Account
A provides the basis for the periodic determination of
the amount of increased or decreased benefits under the
Contracts.
The net assets may not be less than the amount required
under New York State Insurance Law to provide for death
benefits (without regard to the minimum death benefit
guarantee) and other Contract benefits.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements included herein have been
prepared in accordance with generally accepted accounting
principles for variable annuity separate accounts
registered as unit investment trusts. The preparation of
financial statements in conformity with generally
accepted accounting principles requires management to
make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Investments of the investment divisions are included in
the statement of assets and liabilities at the net asset
value of the shares held in the underlying funds, which
value their investments at market value.
Dividend income is recognized on the ex-dividend date.
All dividends are automatically reinvested.
Realized gains and losses on the sales of investments are
computed on the first in first out method.
Investment transactions are recorded on the trade date.
The operations of Separate Account A are included in the
Federal income tax return of ML of New York. Under the
provisions of the Contracts, ML of New York has the right
to charge Separate Account A for any Federal income tax
attributable to Separate Account A. No charge is
currently being made against Separate Account A for such
tax since, under current tax law, ML of New York pays no
tax on investment income and capital gains reflected in
variable annuity contract reserves. However, ML of New
York retains the right to charge for any Federal income
tax incurred that is attributable to Separate Account A
if the law is changed. Charges for state and local taxes,
if any, attributable to Separate Account A may also be
made.
3. CHARGES AND FEES
ML of New York assumes mortality and expense risks
related to Contracts investing in Separate Account A and
deducts daily charges at a rate of 1.25% (on an annual
basis) of the net assets of Separate Account A to cover
these risks.
An administration charge of .10% (on an annual basis) is
deducted daily from the net asset value of Separate
Account A. This charge is made to reimburse ML of New
York for costs associated with the establishment and
administration of Separate Account A.
ML of New York deducts a contract maintenance charge of
$40 for each Contract on each Contract's anniversary that
occurs on or prior to the annuity date. It is also
deducted when the Contract is surrendered if it is
surrendered on any date other than a contract anniversary
date. The contract maintenance charge is borne by
Contract owners by redeeming accumulation units with a
value equal to the charge. This charge is waived on all
Contracts with a Contract value equal to or greater than
$50,000 on the date the charge would otherwise be
deducted, and in certain circumstances where multiple
contracts are owned.
Contract owners may make up to six transfers among the
Separate Account A divisions per contract year without
charge. Certain transfers from the Equity Investor Fund
do not count towards the six transfers. Additional
transfers may be permitted at a charge of $25 per
transfer.
4. NET TRANSFERS
Net transfers include transfers between Separate Account
A investment divisions, as well as transfers from
Separate Account A investment divisions to the Reserve
Assets Fund investment division of ML of New York
Variable Annuity Separate Account B.
5. UNIT VALUES
The following is a summary of unit values and units
outstanding for variable annuity contracts and the
expenses as a percentage of average net assets, excluding
expenses of the underlying funds for each of the five
years in the period ended December 31, 1999 or lesser
time period, if applicable. For all funds excluding the
Domestic Money Market Fund the total return calculations
represent the one year total return (or from inception to
December 31 if less than one year) and do not reflect the
contingent deferred sales charge. Total return
calculations for the Domestic Money Market Fund represent
the effective yield for the seven day period ended
December 31.
Domestic Money Market Fund
-------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 2,623 $12.82 $33,625 1.35% 4.02%
1998 2,715 12.39 33,635 1.35 3.41
1997 2,393 11.94 28,571 1.35 4.05
1996 1,678 11.50 19,294 1.35 3.76
1995 2,104 11.09 23,337 1.35 3.89
Prime Bond Fund
--------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 2,879 $14.72 $42,373 1.35% -3.76%
1998 2,943 15.28 44,975 1.35 6.30
1997 2,776 14.36 39,866 1.35 7.07
1996 2,934 13.40 39,314 1.35 .80
1995 2,867 13.29 38,099 1.35 18.34
High Current Income Fund
------------------------ Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 1,879 $16.92 $31,785 1.35% 4.43%
1998 1,935 16.18 31,310 1.35 -4.48
1997 1,794 16.93 30,376 1.35 9.40
1996 1,341 15.46 20,733 1.35 9.57
1995 1,274 14.08 17,943 1.35 15.62
Quality Equity Fund
------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 2,191 $28.89 $63,309 1.35% 29.54%
1998 2,374 22.28 52,899 1.35 13.92
1997 2,617 19.54 51,145 1.35 21.92
1996 2,799 16.01 44,805 1.35 15.77
1995 2,588 13.77 35,637 1.35 21.29
Special Value Focus Fund
------------------------ Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 1,677 $20.45 $34,303 1.35% 32.22%
1998 1,912 15.45 29,536 1.35 -7.85
1997 1,789 16.75 29,970 1.35 10.11
1996 1,684 15.20 25,599 1.35 6.56
1995 1,333 14.25 18,991 1.35 43.80
American Balanced Fund
---------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 703 $20.09 $14,129 1.35% 7.16%
1998 805 18.73 15,083 1.35 11.93
1997 935 16.72 15,635 1.35 15.42
1996 1,196 14.47 17,308 1.35 7.95
1995 1,295 13.37 17,312 1.35 19.29
Natural Resources Focus Fund
---------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 53 $12.68 $ 676 1.35% 24.94%
1998 71 10.14 718 1.35 -16.52
1997 116 12.14 1,402 1.35 -13.78
1996 145 14.06 2,035 1.35 10.70
1995 168 12.56 2,104 1.35 12.22
Global Strategy Focus Fund
-------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 2,343 $20.38 $47,752 1.35% 19.63%
1998 2,709 17.02 46,102 1.35 7.31
1997 3,197 15.85 50,670 1.35 10.33
1996 3,436 14.35 49,309 1.35 11.33
1995 2,679 12.85 34,423 1.35 9.21
Global Utility Focus Fund
------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 356 $22.12 $ 7,864 1.35% 11.01%
1998 409 19.91 8,137 1.35 22.27
1997 476 16.27 7,737 1.35 24.09
1996 647 13.10 8,473 1.35 10.50
1995 724 11.75 8,510 1.35 23.45
International Equity Focus Fund
------------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 765 $16.18 $12,374 1.35% 35.65%
1998 893 11.91 10,639 1.35 6.25
1997 2,327 11.20 26,066 1.35 -5.93
1996 1,536 11.90 18,275 1.35 4.49
1995 1,276 11.31 14,426 1.35 4.54
Global Bond Focus Fund
---------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 267 $12.35 $ 3,297 1.35% -9.50%
1998 325 13.63 4,427 1.35 11.00
1997 405 12.27 4,964 1.35 0.48
1996 459 12.20 5,605 1.35 6.21
1995 504 11.45 5,775 1.35 15.28
Basic Value Focus Fund
---------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 2,506 $24.86 $62,297 1.35% 19.37%
1998 2,134 20.81 44,415 1.35 7.87
1997 1,943 19.27 37,438 1.35 18.89
1996 1,767 16.19 28,601 1.35 18.05
1995 1,242 13.60 16,888 1.35 24.62
Government Bond Fund
-------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 1,843 $12.95 $23,861 1.35% -3.21%
1998 1,670 13.36 22,316 1.35 7.20
1997 901 12.45 11,217 1.35 7.32
1996 402 11.59 4,658 1.35 1.40
1995 154 11.42 1,753 1.35 13.15
Developing Capital Markets Focus Fund
------------------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 556 $10.48 $ 5,827 1.35% 63.14%
1998 564 6.42 3,620 1.35 -30.40
1997 892 9.21 8,218 1.35 -7.88
1996 412 9.99 4,113 1.35 8.14
1995 240 9.16 2,200 1.35 -1.74
Index 500 Fund
-------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 2,180 $19.96 $43,515 1.35% 18.77%
1998 1,909 16.79 32,047 1.35 26.43
1997 1,245 13.27 16,525 1.35 30.91
1996 10 10.12 106 1.35 1.14
Global Growth Focus Fund
------------------------ Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 796 $14.69 $11,698 1.35% 36.70%
1998 127 10.74 1,366 1.35 13.02
Capital Focus Fund
------------------ Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 165 $10.30 $ 1,704 1.35% 6.30%
1998 114 9.68 1,106 1.35 -5.60
International VIP Portfolio
--------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 1,805 $11.39 $20,558 1.35% 19.93%
1998 2,303 9.49 21,857 1.35 -8.92
Mercury V.I. U.S. Large Cap Fund
-------------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 76 $11.98 $ 906 1.35% 39.80%
1999 ML Select 10 V.I. Trust
---------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 574 $9.39 $ 5,386 1.35% -7.34%
1998 ML Select 10 V.I. Trust
---------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1998 191 $10.12 $ 1,930 1.35% 1.90%
Quasar Portfolio
---------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 519 $9.90 $ 5,136 1.35% 15.39%
1998 94 8.57 807 1.35 -23.80
Premier Growth Portfolio
------------------------ Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 3,581 $25.17 $90,143 1.35% 30.41%
1998 2,560 19.28 49,349 1.35 45.84
1997 1,273 13.21 16,819 1.35 31.95
MFS Emerging Growth Series
-------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 1,525 $27.30 $41,631 1.35% 74.17%
1998 1,327 15.66 20,783 1.35 32.23
1997 600 11.83 7,099 1.35 20.15
1996 15 9.83 147 1.35 -1.75
MFS Research Series
-------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 1,278 $17.82 $22,776 1.35% 22.26%
1998 1,162 14.56 16,914 1.35 21.61
1997 589 11.96 7,047 1.35 18.53
AIM V.I. Value Fund
------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 2,198 $20.96 $46,076 1.35% 28.03%
1998 1,624 16.35 26,547 1.35 30.50
1997 695 12.52 8,699 1.35 21.91
AIM V.I. Capital Appreciation Fund
---------------------------------- Expenses
Net Assets as a % of
------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 742 $18.86 $13,990 1.35% 42.53%
1998 638 13.22 8,432 1.35 17.59
1997 705 11.23 7,922 1.35 11.87
6. UNITS ISSUED AND REDEEMED
Units issued and redeemed by Separate Account A during 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
Domestic High Special
Money Prime Current Quality Value
Market Bond Income Equity Focus
Fund Fund Fund Fund Fund
(In thousands) =============== =============== =============== =============== ===============
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1998 2,393 2,776 1,794 2,617 1,789
Activity during 1998:
Issued 7,756 572 553 251 427
Redeemed (7,434) (405) (412) (494) (304)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1998 2,715 2,943 1,935 2,374 1,912
Activity during 1999:
Issued 5,996 369 304 95 154
Redeemed (6,088) (433) (360) (278) (389)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1999 2,623 2,879 1,879 2,191 1,677
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Natural Global Global International
American Resources Strategy Utility Equity
Balanced Focus Focus Focus Focus
Fund Fund Fund Fund Fund
(In thousands) =============== =============== =============== =============== ===============
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1998 935 116 3,197 476 2,327
Activity during 1998:
Issued 8 1 133 7 267
Redeemed (138) (46) (621) (74) (1,701)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1998 805 71 2,709 409 893
Activity during 1999:
Issued 3 0 53 15 5
Redeemed (105) (18) (419) (68) (133)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1999 703 53 2,343 356 765
=============== =============== =============== =============== ===============
</TABLE>
6. UNITS ISSUED AND REDEEMED (continued)
<TABLE>
<CAPTION>
Global Basic Developing
Bond Value Government Capital Markets Index
Focus Focus Bond Focus 500
Fund Fund Fund Fund Fund
(In thousands) =============== =============== =============== =============== ===============
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1998 405 1,943 901 892 1,245
Activity during 1998:
Issued 20 567 869 241 1,074
Redeemed (100) (376) (100) (569) (410)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1998 325 2,134 1,670 564 1,909
Activity during 1999:
Issued 0 636 390 121 882
Redeemed (58) (264) (217) (129) (611)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1999 267 2,506 1,843 556 2,180
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Global Mercury
Growth Capital International V.I. U.S. 1999 ML
Focus Focus VIP Large Cap Select Ten
Fund Fund Portfolio Fund V.I. Trust
(In thousands) =============== =============== =============== =============== ===============
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1998 0 0 0 0 0
Activity during 1998:
Issued 132 120 2,407 0 0
Redeemed (5) (6) (104) 0 0
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1998 127 114 2,303 0 0
Activity during 1999:
Issued 1,099 84 693 84 774
Redeemed (430) (33) (1,191) (8) (200)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1999 796 165 1,805 76 574
=============== =============== =============== =============== ===============
</TABLE>
6. UNITS ISSUED AND REDEEMED (continued)
<TABLE>
<CAPTION> MFS
1998 ML Premier Emerging MFS
Select Ten Quasar Growth Growth Research
V.I. Trust Portfolio Portfolio Series Series
(In thousands) =============== =============== =============== =============== ===============
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1998 0 0 1,273 600 589
Activity during 1998:
Issued 194 100 1,414 815 756
Redeemed (3) (6) (127) (88) (183)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1998 191 94 2,560 1,327 1,162
Activity during 1999:
Issued 85 485 1,447 426 303
Redeemed (276) (60) (426) (228) (187)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1999 0 519 3,581 1,525 1,278
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
AIM V.I.
AIM V.I. Capital
Value Appreciation
Fund Fund
(In thousands) =============== ===============
<S> <C> <C>
Outstanding at January 1, 1998 695 705
Activity during 1998:
Issued 1,028 315
Redeemed (99) (382)
--------------- ---------------
Outstanding at December 31, 1998 1,624 638
Activity during 1999:
Issued 795 183
Redeemed (221) (79)
--------------- ---------------
Outstanding at December 31, 1999 2,198 742
=============== ===============
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
ML Life Insurance Company of New York:
We have audited the accompanying statement of assets and
liabilities of ML of New York Variable Annuity Separate
Account B, comprised of the Reserve Assets Fund, as of
December 31, 1999 and the related statements of operations
and changes in net assets for each of the two years in the
period then ended. These financial statements are the
responsibility of the management of ML Life Insurance
Company of New York. Our responsibility is to express an
opinion of these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation
of mutual fund securities owned at December 31, 1999. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial position of ML of New
York Variable Annuity Separate Account B Reserve Assets
Fund, as of December 31, 1999, the results of its operations
and the changes in its net assets for each of the two years
in the period then ended, in conformity with generally
accepted accounting principles.
February 14, 2000
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT B
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
===============================================================================
<TABLE>
<CAPTION>
Reserve
Assets
Fund
(In thousands, except unit values) ======================
<S> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Reserve Assets Fund, 1,156 shares
(Cost $1,156) $ 1,156
----------------------
Total Assets 1,156
Liabilities
Due to ML Life Insurance Company of New York 0
----------------------
Net Assets $ 1,156
======================
Net Assets
Accumulation Units $ 1,156
======================
Units Outstanding (Note 6) 86
======================
Unit Value $ 13.39
======================
</TABLE>
See notes to financial statements
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, 1999 AND 1998
===============================================================================
<TABLE>
<CAPTION>
Reserve Assets Fund
=============================================
1999 1998
(In thousands) ====================== ======================
<S> <C> <C>
Investment Income:
Reinvested Dividends (Note 2) $ 58 $ 62
Mortality and Expense Charges (Note 3) (8) (8)
---------------------- ----------------------
Net Investment Income 50 54
---------------------- ----------------------
Net Increase in Net Assets
Resulting from Operations 50 54
---------------------- ----------------------
Contract Transactions:
Premiums Received from Contract Owners 45 90
Contract Owner Withdrawals (3,623) (2,853)
Transfers In (Note 4) 3,461 2,918
---------------------- ----------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (117) 155
---------------------- ----------------------
Total Increase (Decrease) in Net Assets (67) 209
Net Assets Beginning of Period 1,223 1,014
---------------------- ----------------------
Net Assets End of Period $ 1,156 $ 1,223
====================== ======================
</TABLE>
See notes to financial statements
ML OF NEW YORK VARIABLE ANNUITY SEPARATE ACCOUNT B
ML LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
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 ML of New York's 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 Lynch & Co."). 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 portfolio of
the Merrill Lynch Variable Series Funds, Inc. ("Merrill
Variable Funds"). The investment advisor to the Reserve
Assets Fund portfolio is Merrill Lynch Asset Management,
L.P. ("MLAM"), an indirect subsidiary of Merrill Lynch &
Co.
The assets of Separate Account B are registered in the
name of ML of New York. Separate Account B's assets 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.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements included herein have been
prepared in accordance with generally accepted accounting
principles for variable annuity separate accounts
registered as unit investment trusts. The preparation of
financial statements in conformity with generally
accepted accounting principles requires management to
make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Investments of the investment division are included in
the statement of assets and liabilities at the net asset
value of the shares held in the underlying fund, which
values its investments at market value.
Dividend income is recognized on the ex-dividend date.
All dividends are automatically reinvested.
Investment transactions are recorded on the trade date.
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 that 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. CHARGES AND FEES
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, and in certain circumstances where multiple
contracts are owned.
4. TRANSFERS IN
Transfers in include transfers from the investment
divisions of ML of New York Variable Annuity Separate
Account A.
5. UNIT VALUES
The following is a summary of unit values and units
outstanding for variable annuity contracts and the
expenses as a percentage of average net assets, excluding
expenses of the underlying fund for each of the five
years in the period ended December 31, 1999. Total
return calculations represent the effective yield for the
seven day period ended December 31.
Reserve Assets Fund
------------------- Expenses
Net Assets as a % of
----------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
----------------------------------------------------------------
1999 86 $13.39 $1,156 0.65% 4.30%
1998 95 12.87 1,223 0.65 4.02
1997 82 12.32 1,014 0.65 4.67
1996 101 11.79 1,193 0.65 4.45
1995 114 11.29 1,288 0.65 4.66
6. UNITS ISSUED AND REDEEMED
Units issued and redeemed by Separate Account B during 1999 and 1998
were as follows:
Reserve
Assets
Fund
(In thousands) =================
Outstanding at January 1, 1998 82
Activity during 1998:
Issued 259
Redeemed (246)
-----------------
Outstanding at December 31, 1998 95
Activity during 1999:
Issued 273
Redeemed (282)
-----------------
Outstanding at December 31, 1999 86
=================
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
ML Life Insurance Company of New York:
We have audited the accompanying balance sheets of ML
Life Insurance Company of New York (the "Company"), a
wholly owned subsidiary of Merrill Lynch Insurance
Group, Inc., as of December 31, 1999 and 1998, and
the related statements of earnings, comprehensive
income, stockholder's equity, and cash flows for each
of the three years in the period ended December 31,
1999. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain
reasonable assurance about whether the financial
statements are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the
financial statements. An audit also includes
assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement
presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present
fairly, in all material respects, the financial
position of the Company at December 31, 1999 and
1998, and the results of its operations and its cash
flows for each of the three years in the period ended
December 31, 1999 in conformity with generally
accepted accounting principles.
February 28, 2000
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
(Dollars in thousands, except common stock par value and shares)
<TABLE>
<CAPTION>
ASSETS 1999 1998
- ------ ------------ ------------
<S> <C> <C>
INVESTMENTS:
Fixed maturity securities, at estimated fair value
(amortized cost: 1999 - $166,016; 1998 - $197,588) $ 160,437 $ 200,681
Equity securities, at estimated fair value
(cost: 1999 - $19,782; 1998 - $14,684) 16,992 13,718
Policy loans on insurance contracts 88,165 88,083
------------ ------------
Total Investments 265,594 302,482
CASH AND CASH EQUIVALENTS 34,195 18,707
ACCRUED INVESTMENT INCOME 4,990 4,968
DEFERRED POLICY ACQUISITION COSTS 29,703 29,742
FEDERAL INCOME TAXES - DEFERRED 3,892 -
REINSURANCE RECEIVABLES 153 652
OTHER ASSETS 3,292 4,261
SEPARATE ACCOUNTS ASSETS 1,086,875 887,170
------------ ------------
TOTAL ASSETS $ 1,428,694 $ 1,247,982
============ ============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY 1999 1998
- ------------------------------------ ------------ ------------
<S> <C> <C>
LIABILITIES:
POLICYHOLDER LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 248,016 $ 269,246
Claims and claims settlement expenses 3,762 2,986
------------ ------------
Total policyholder liabilities and accruals 251,778 272,232
OTHER POLICYHOLDER FUNDS 1,195 1,783
FEDERAL INCOME TAXES - DEFERRED - 119
FEDERAL INCOME TAXES - CURRENT 1,420 1,347
AFFILIATED PAYABLES - NET 1,030 1,253
OTHER LIABILITIES 2,414 2,124
SEPARATE ACCOUNTS LIABILITIES 1,086,875 887,170
------------ ------------
Total Liabilities 1,344,712 1,166,028
------------ ------------
STOCKHOLDER'S EQUITY:
Common stock, $10 par value - 220,000 shares
authorized, issued and outstanding 2,200 2,200
Additional paid-in capital 66,259 66,259
Retained earnings 21,051 14,462
Accumulated other comprehensive loss (5,528) (967)
------------ ------------
Total Stockholder's Equity 83,982 81,954
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,428,694 $ 1,247,982
============ ============
</TABLE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 19,400 $ 21,549 $ 25,465
Net realized investment gains (losses) (3,100) (1,998) 1,947
Policy charge revenue 17,307 15,484 13,064
------------ ------------ ------------
Total Revenues 33,607 35,035 40,476
------------ ------------ ------------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 12,013 13,832 14,532
Market value adjustment expense 261 567 232
Policy benefits (net of reinsurance recoveries: 1999 - $542
1998 - $1,191; 1997 - $690) 632 1,630 781
Reinsurance premium ceded 1,822 1,705 1,584
Amortization of deferred policy acquisition costs 4,845 5,759 4,119
Insurance expenses and taxes 4,195 4,900 4,563
------------ ------------ ------------
Total Benefits and Expenses 23,768 28,393 25,811
------------ ------------ ------------
Earnings Before Federal Income Tax Provision 9,839 6,642 14,665
------------ ------------ ------------
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 4,805 3,337 2,905
Deferred (1,555) (1,465) 2,068
------------ ------------ ------------
Total Federal Income Tax Provision 3,250 1,872 4,973
------------ ------------ ------------
NET EARNINGS $ 6,589 $ 4,770 $ 9,692
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
NET EARNINGS $ 6,589 $ 4,770 $ 9,692
------------ ------------ ------------
OTHER COMPREHENSIVE LOSS
Net unrealized losses on available-for-sale securities:
Net unrealized holding losses arising during the period (14,221) (4,329) (413)
Reclassification adjustment for (gains) losses included
in net earnings 3,708 1,994 (1,771)
------------ ------------ ------------
Net unrealized losses on investment securities (10,513) (2,335) (2,184)
Adjustments for:
Policyholder liabilities 3,496 1,417 (70)
Deferred federal income taxes 2,456 321 789
------------ ------------ ------------
Total other comprehensive loss, net of tax (4,561) (597) (1,465)
------------ ------------ ------------
COMPREHENSIVE INCOME $ 2,028 $ 4,173 $ 8,227
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Retained comprehensive stockholder's
stock capital earnings income (loss) equity
----------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $ 2,200 $ 72,040 $ 9,219 $ 1,095 $ 84,554
Dividend to Parent (5,781) (9,219) (15,000)
Net earnings 9,692 9,692
Other comprehensive loss, net of tax (1,465) (1,465)
------------ ----------- ----------- ------------- ------------
BALANCE, DECEMBER 31, 1997 2,200 66,259 9,692 (370) 77,781
Net earnings 4,770 4,770
Other comprehensive loss, net of tax (597) (597)
------------ ----------- ----------- ------------- ------------
BALANCE, DECEMBER 31, 1998 2,200 66,259 14,462 (967) 81,954
Net earnings 6,589 6,589
Other comprehensive loss, net of tax (4,561) (4,561)
------------ ----------- ----------- ------------- ------------
BALANCE, DECEMBER 31, 1999 $ 2,200 $ 66,259 $ 21,051 $ (5,528) $ 83,982
============ =========== =========== ============= ============
</TABLE>
See accompanying notes to financial statements.
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 6,589 $ 4,770 $ 9,692
Noncash items included in earnings:
Amortization of deferred policy acquisition costs 4,845 5,759 4,119
Capitalization of policy acquisition costs (4,806) (5,095) (5,253)
Amortization (accretion) of investments 429 (262) (239)
Interest credited to policyholders' account balances 12,013 13,832 14,532
Benefit for deferred Federal income tax (1,555) (1,465) 2,068
(Increase) decrease in operating assets:
Accrued investment income (22) 448 536
Other 1,451 (1,079) 1,800
Increase (decrease) in operating liabilities:
Claims and claims settlement expenses 776 979 (565)
Other policyholder funds (588) (158) 781
Federal income taxes - current 73 (908) 156
Affiliated payables (223) (2,239) (1,534)
Other 290 (31) 506
Other operating activities:
Net realized investment (gains) losses 3,100 1,998 (1,947)
------------ ------------ ------------
Net cash and cash equivalents provided by operating activities 22,372 16,549 24,652
------------ ------------ ------------
Cash Flow From Investing Activities:
Proceeds from (payments for):
Sales of available-for-sale securities 171,785 102,967 88,882
Maturities of available-for-sale securities 40,227 59,161 51,060
Purchases of available-for-sale securities (189,067) (119,611) (120,965)
Mortgage loans principal payments received - - 2,057
Policy loans on insurance contracts (82) 80 (2,615)
------------ ------------ ------------
Net cash and cash equivalents provided by investing activities 22,863 42,597 18,419
------------ ------------ ------------
See accompanying notes to financial statements. (Continued)
</TABLE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Continued) (Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Financing Activities:
Proceeds from (payments for):
Dividends paid to parent $ - $ - $ (15,000)
Policyholder deposits 79,889 94,226 106,983
Policyholder withdrawals (including transfers to/from
separate accounts) (109,636) (144,728) (132,819)
------------ ------------ ------------
Net cash and cash equivalents used by financing activites (29,747) (50,502) (40,836)
------------ ------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 15,488 8,644 2,235
CASH AND CASH EQUIVALENTS:
Beginning of year 18,707 10,063 7,828
------------ ------------ ------------
End of year $ 34,195 $ 18,707 $ 10,063
============ ============ ============
Supplementary Disclosure of Cash Flow Information:
Cash paid to affiliates for:
Federal income taxes $ 4,732 $ 4,245 $ 2,749
Interest 85 148 494
</TABLE>
See accompanying notes to financial statements.
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Merrill Lynch Insurance Group,Inc.)
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business: ML Life Insurance Company
of New York (the "Company") is a wholly owned subsidiary of
Merrill Lynch Insurance Group, Inc. ("MLIG"). The Company is an
indirect wholly owned subsidiary of Merrill Lynch & Co.,Inc.
("Merrill Lynch & Co.").
The Company sells non-participating life insurance and annuity
products including variable life insurance, variable annuities,
market value adjusted annuities and immediate annuities. The
Company is licensed to sell insurance in nine states; however,
it currently limits its marketing activities to the State of
New York. The Company markets its products solely through the
retail network of Merrill Lynch, Pierce, Fenner & Smith,
Incorporated ("MLPF&S"), a wholly owned broker-dealer
subsidiary of Merrill Lynch & Co.
Basis of Reporting: The accompanying financial statements have
been prepared in conformity with generally accepted accounting
principles and prevailing industry practices, both of which
require management to make estimates that affect the reported
amounts and disclosure of contingencies in the financial
statements. Actual results could differ from those estimates.
For the purpose of reporting cashflows, cash and cash
equivalents include cash on hand and on deposit and short-term
investments with original maturities of three months or less.
To facilitate comparisons with the current year, certain amounts
in the prior years have been reclassified.
Revenue Recognition: Revenues for the Company's interest
sensitive life, interest-sensitive annuity, variable life and
variable annuity products consist of policy charges for
mortality risks and the cost of insurance, deferred sales
charges, policy administration charges and/or withdrawal charges
assessed against policyholders' account balances during the
period.
Investments: The Company's investments in fixed maturity and
equity securities are classified as available-for-sale and are
carried at estimated fair value with unrealized gains and losses
included in stockholder's equity as a component of accumulated
other comprehensive loss, net of tax. If management determines
that a decline in the value of a security is other-than-
temporary, the carrying value is adjusted to estimated fair
value and the decline in value is recorded as a net realized
investment loss.
For fixed maturity securities, premiums are amortized to the
earlier of the call or maturity date, discounts are accreted to
the maturity date, and interest income is accrued daily. For
equity securities, dividends are recognized on the ex-dividend
date. Realized gains and losses on the sale or maturity of the
investments are determined on the basis of specific
identification. Investment transactions are recorded on the
trade date.
Certain fixed maturity securities are considered non-investment
grade. The Company defines non-investment grade fixed maturity
securities as unsecured debt obligations that do not have a
rating equivalent to Standard and Poor's (or similar rating
agency) BBB- or higher.
All outstanding mortgage loans were repaid during 1997. The
Company recognized income from mortgage loans based on the cash
payment interest rate of the loan, which may have been different
from the accrual interest rate of the loan for certain mortgage
loans. The Company recognized a realized gain at the date of the
satisfaction of the loan at contractual terms for loans where
there was a difference between the cash payment interest rate
and the accrual interest rate. For all loans, the Company
stopped accruing income when an interest payment default either
occurred or was probable. Impairments of mortgage loans were
established as valuation allowances and recorded as a net
realized investment loss.
Policy loans on insurance contracts are stated at unpaid
principal balances.
Deferred Policy Acquisition Costs: Policy acquisition costs for
life and annuity contracts are deferred and amortized based on
the estimated future gross profits for each group of contracts.
These future gross profit estimates are subject to periodic
evaluation by the Company, with necessary revisions applied
against amortization to date. The impact of these revisions on
cumulative amortization is recorded as a charge or credit to
current operations. It is reasonably possible that estimates of
future gross profits could be reduced in the future,
resulting in a material reduction in the carrying amount of
deferred policy acquisition costs.
Policy acquisition costs are principally commissions and a
portion of certain other expenses relating to policy
acquisition, underwriting and issuance that are primarily
related to and vary with the production of new business.
Insurance expenses and taxes reported in the statements of
earnings are net of amounts deferred. Policy acquisition costs
can also arise from the acquisition or reinsurance of existing
inforce policies from other insurers. These costs include
ceding commissions and professional fees related to the
reinsurance assumed. The deferred costs are amortized in
proportion to the estimated future gross profits over the
anticipated life of the acquired insurance contracts utilizing
an interest methodology.
During 1990, the Company entered into an assumption reinsurance
agreement with an unaffiliated insurer. The acquisition costs
relating to this agreement are being amortized over a twenty-
five year period using an effective interest rate of 7.5%. This
reinsurance agreement provides for payment of contingent ceding
commissions based upon the persistency and mortality experience
of the insurance contracts assumed. Any payments made for the
contingent ceding commissions will be capitalized and amortized
using an identical methodology as that used for the initial
acquisition costs. The following is a reconciliation of the
acquisition costs related to the reinsurance agreement for the
years ended December 31:
1999 1998 1997
---------- ---------- ----------
Beginning balance $ 12,784 $ 16,550 $ 17,151
Capitalized amounts 1,336 691 577
Interest accrued 959 1,241 1,651
Amortization (2,683) (5,698) (2,829)
---------- ---------- ----------
Ending balance $ 12,396 $ 12,784 $ 16,550
========== ========== ==========
The following table presents the expected amortization, net of
interest accrued, of these deferred acquisition costs over the
next five years. The amortization may be adjusted based on
periodic evaluation of the expected gross profits on the
reinsured policies.
2000 $ 785
2001 $ 747
2002 $ 712
2003 $ 700
2004 $ 715
Separate Accounts: Separate Accounts are established in
conformity with New York State Insurance Law, the Company's
domiciliary state, and are generally not chargeable with
liabilities that arise from any other business of the Company.
Separate Accounts assets may be subject to general claims of
the Company only to the extent the value of such assets exceeds
Separate Accounts liabilities.
Net investment income and net realized and unrealized gains
(losses) attributable to Separate Accounts assets accrue
directly to the policyholder and are not reported as revenue in
the Company's Statement of Earnings.
Assets and liabilities of Separate Accounts, representing net
deposits and accumulated net investment earnings less fees,
held primarily for the benefit of policyholders, are shown as
separate captions in the balance sheets.
Policyholders' Account Balances: Liabilities for the Company's
universal life type contracts, including its life insurance and
annuity products, are equal to the full accumulation value of
such contracts as of the valuation date plus deficiency
reserves for certain products. Interest-crediting rates for the
Company's fixed-rate products are as follows:
Interest-sensitive life products 4.00%
Interest-sensitive deferred annuities 3.60% - 8.23%
Immediate annuities 3.00% - 10.00%
These rates may be changed at the option of the Company,
subject to minimum guarantees, after initial guaranteed rates
expire.
Claims and Claims Settlement Expenses: Liabilities for claims
and claims settlement expenses equal the death benefit for
claims that have been reported to the Company and an estimate
based upon prior experience for unreported claims.
Income Taxes: The results of operations of the Company are
included in the consolidated Federal income tax return of
Merrill Lynch & Co. The Company has entered into a tax-sharing
agreement with Merrill Lynch & Co. whereby the Company will
calculate its current tax provision based on its operations.
Under the agreement, the Company periodically remits to Merrill
Lynch & Co. its current federal tax liability.
The Company uses the asset and liability method in providing
income taxes on all transactions that have been recognized in
the financial statements. The asset and liability method
requires that deferred taxes be adjusted to reflect the tax
rates at which future taxable amounts will be settled or
realized. The effects of tax rate changes on future deferred
tax liabilities and deferred tax assets, as well as other
changes in income tax laws, are recognized in net earnings in
the period such changes are enacted. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amounts expected to be realized.
Insurance companies are generally subject to taxes on premiums
and in substantially all states are exempt from state income
taxes.
Accounting Pronouncements: In June 1999, the Financial
Accounting Standards Board deferred for one year the effective
date of the accounting and reporting requirements of SFAS No.
133, Accounting for Derivative Instruments and Hedging
Activities. The Company will adopt the provisions of SFAS No.
133 on January 1, 2001. The adoption of the standard is not
expected to have a material impact on the Company's financial
position or results of operations.
NOTE 2. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments are carried at fair value or amounts that
approximate fair value. The carrying value of financial
instruments as of December 31 were:
1999 1998
----------- -----------
Assets:
Fixed maturity securities (1) $ 160,437 $ 200,681
Equity securities (1) 16,992 13,718
Policy loans on insurance contracts (2) 88,165 88,083
Cash and cash equivalents (3) 34,195 18,707
Separate Accounts assets (4) 1,086,875 887,170
----------- -----------
Total financial instruments $1,386,664 $1,208,359
=========== ===========
(1) For publicly traded securities, the estimated fair value
is determined using quoted market prices. For securities
without a readily ascertainable market value, the Company
utilizes pricing services and broker quotes. Such estimated
fair values do not necessarily represent the values for
which these securities could have been sold at the dates of
the balance sheets. At December 31, 1999 and 1998,
securities without a readily ascertainable market value,
having an amortized cost of $19,734 and $33,427, had an
estimated fair value of $18,876 and $33,879, respectively.
(2) The Company estimates the fair value of policy loans as
equal to the book value of the loans. Policy loans are
fully collateralized by the account value of the associated
insurance contracts, and the spread between the policy loan
interest rate and the interest rate credited to the account
value held as collateral is fixed.
(3) The estimated fair value of cash and cash equivalents
approximates the carrying value.
(4) Assets held in Separate Accounts are carried at the net
asset value provided by the fund managers.
NOTE 3: INVESTMENTS
The amortized cost and estimated fair value of investments in
fixed maturity and equity securities as of December 31 were:
<TABLE>
<CAPTION>
1999
-----------------------------------------------------------------
Cost/ Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Fixed maturity securities:
Corporate debt securities $ 128,239 $ 600 $ 4,558 $ 124,281
Mortgage-backed securities 8,488 210 68 8,630
U.S. government and agencies 27,291 160 1,681 25,770
Foreign governments 1,998 - 242 1,756
----------- ----------- ----------- -----------
Total fixed maturity securities $ 166,016 $ 970 $ 6,549 $ 160,437
=========== =========== =========== ===========
Equity securities:
Non-redeemable preferred stocks $ 19,610 $ 25 $ 2,788 $ 16,847
Common stocks 172 - 27 145
----------- ----------- ----------- -----------
Total equity securities $ 19,782 $ 25 $ 2,815 $ 16,992
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
1998
-----------------------------------------------------------------
Cost/ Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Fixed maturity securities:
Corporate debt securities $ 159,421 $ 3,404 $ 1,224 $ 161,601
Mortgage-backed securities 13,258 443 54 13,646
U.S. government and agencies 22,912 869 48 23,734
Foreign governments 1,997 - 297 1,700
----------- ----------- ----------- -----------
Total fixed maturity securities $ 197,588 $ 4,716 $ 1,623 $ 200,681
=========== =========== =========== ===========
Equity securities:
Non-redeemable preferred stocks $ 13,361 $ 58 $ 257 $ 13,162
Common stocks 1,323 - 767 556
----------- ----------- ----------- -----------
Total equity securities $ 14,684 $ 58 $ 1,024 $ 13,718
=========== =========== =========== ===========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities at December 31, 1999 by contractual maturity were:
Estimated
Amortized Fair
Cost Value
----------- -----------
Fixed maturity securities:
Due in one year or less $ 25,889 $ 25,604
Due after one year through five years 84,457 81,926
Due after five years through ten years 23,956 22,216
Due after ten years 23,226 22,061
----------- -----------
157,528 151,807
Mortgage-backed securities 8,488 8,630
----------- -----------
Total fixed maturity securities $ 166,016 $ 160,437
=========== ===========
Fixed maturity securities not due at a single maturity date
have been included in the preceding table in the year of final
maturity. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment
penalties.
The amortized cost and estimated fair value of fixed maturity
securities at December 31, 1999 by rating agency equivalent
were:
Estimated
Amortized Fair
Cost Value
----------- -----------
AAA $ 51,304 $ 49,205
AA 9,173 8,982
A 53,218 51,402
BBB 46,788 45,403
Non-investment grade 5,533 5,445
----------- -----------
Total fixed maturity securities $ 166,016 $ 160,437
=========== ===========
The Company has recorded certain adjustments to policyholders'
account balances in conjunction with unrealized holding gains
or losses on investments classified as available-for-sale. The
Company adjusts those liabilities as if the unrealized holding
gains or losses had actually been realized, with corresponding
credits or charges reported in accumulated other comprehensive
loss, net of taxes. The components of net unrealized gains
(losses) included in accumulated other comprehensive loss as of
December 31 were as follows:
1999 1998
----------- -----------
Assets:
Fixed maturity securities $ (5,579) $ 3,093
Equity securities (2,790) (966)
Other assets (17) -
Federal income taxes - deferred 2,977 -
----------- -----------
(5,409) 2,127
----------- -----------
Liabilities:
Policyholders' account balances 119 3,615
Federal income taxes - deferred - (521)
----------- -----------
119 3,094
----------- -----------
Stockholder's equity:
Accumulated other comprehensive loss $ (5,528) $ (967)
=========== ===========
Proceeds and gross realized investment gains and losses from the
sale of available-for-sale securities for the years ended
December 31 were:
1999 1998 1997
-------- -------- --------
Proceeds $171,785 $102,967 $ 88,882
Gross realized investment gains 1,357 2,096 4,077
Gross realized investment lossess 4,457 4,094 2,130
The company owned investment securities of $989 and $1,104 that
were deposited with insurance regulatory authorities at December
31, 1999 and 1998, respectively.
Excluding investments in U.S. Government and Agencies, the
Company is not exposed to any significant concentration of
credit risk in its fixed maturity securities portfolio.
Net investment income arose from the following sources for the
years ended December 31:
1999 1998 1997
----------- ----------- -----------
Fixed maturity securities $ 12,921 $ 16,244 $ 19,815
Equity securities 1,637 734 761
Mortgage loans - - 81
Policy loans on insurance contracts 4,362 4,316 4,333
Cash and cash equivalents 932 761 1,293
Other 29 29 65
----------- ----------- -----------
Gross investment income 19,881 22,084 26,348
Less investment expenses (481) (535) (883)
----------- ----------- -----------
Net investment income $ 19,400 $ 21,549 $ 25,465
=========== =========== ===========
Net realized investment gains (losses), including changes in
valuation allowances, for the years ended December 31:
1999 1998 1997
---------- ---------- ----------
Fixed maturity securities $ (1,938) $ (1,944) $ (1,268)
Equity securities (1,162) (54) 3,215
---------- ---------- ----------
Net realized investment gains (losses) $ (3,100) $ (1,998) $ (1,947)
========== ========== ==========
NOTE 4: FEDERAL INCOME TAXES
The following is a reconciliation of the provision for income
taxes based on earnings before federal income taxes, computed
using the Federal statutory tax rate, with the provision for
income taxes for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Provision for income taxes computed at Federal
statutory rate $ 3,444 $ 2,325 $ 5,133
Decrease in income taxes resulting from:
Dividend received deduction (129) (300) (160)
Foreign tax credit (65) (153) -
----------- ----------- -----------
Federal income tax provision $ 3,250 $ 1,872 $ 4,973
=========== =========== ===========
</TABLE>
The Federal statutory rate for each of the three years in the
period ended December 31, 1999 was 35%.
The Company provides for deferred income taxes resulting from
temporary differences that arise from recording certain
transactions in different years for income tax reporting
purposes than for financial reporting purposes. The sources of
these differences and the tax effect of each are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Deferred policy acquisition costs $ 332 $ (158) $ 315
Policyholders' account balances (793) (659) (140)
Liability for guaranty fund assessments - - (50)
Investment adjustments (1,113) (629) 1,943
Other 19 (19) -
----------- ----------- -----------
Deferred Federal income tax provision (benefit) $ (1,555) $ (1,465) $ 2,068
=========== =========== ===========
</TABLE>
Deferred tax assets and liabilities as of December 31 are
determined as follows:
1999 1998
----------- -----------
Deferred tax assets:
Policyholders' account balances $ 5,816 $ 5,023
Investment adjustments 1,738 625
Net unrealized investment loss 2,977 521
Other - 19
----------- -----------
Total deferred tax assets 10,531 6,188
----------- -----------
Deferred tax liabilities:
Deferred policy acquisition costs 6,639 6,307
----------- -----------
Net deferred tax asset (liability) $ 3,892 $ (119)
=========== ===========
The Company anticipates that all deferred tax assets will be
realized, therefore no valuation allowance has been provided.
NOTE 5: REINSURANCE
In the normal course of business, the Company seeks to limit
its exposure to loss on any single insured life and to recover
a portion of benefits paid by ceding reinsurance to other
insurance enterprises or reinsurers under indemnity reinsurance
agreements, primarily excess coverage and coinsurance
agreements. The maximum amount of mortality risk retained by
the Company is approximately $300 on single life policies and
$500 on joint life policies.
Indemnity reinsurance agreements do not relieve the Company
from its obligations to policyholders. Failure of reinsurers to
honor their obligations could result in losses to the Company.
The Company regularly evaluates the financial condition of its
reinsurers so as to minimize its exposure to significant losses
from reinsurer insolvencies. The Company holds collateral under
reinsurance agreements in the form of letters of credit, trust
agreements and funds withheld totaling $131 that can be drawn
upon for delinquent reinsurance recoverables.
As of December 31, 1999, the Company had the following life
insurance inforce:
<TABLE>
<CAPTION>
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed to
amount companies companies amount net
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Life insurance in force $ 956,359 $ 157,279 $ 938,882 $1,737,962 54%
</TABLE>
NOTE 6: RELATED PARTY TRANSACTIONS
The Company and MLIG are parties to a service agreement
whereby MLIG has agreed to provide certain accounting, data
processing, legal, actuarial, management, advertising and other
services to the Company. Expenses incurred by MLIG, in relation
to this service agreement, are reimbursed by the Company on an
allocated cost basis. Charges billed to the Company by MLIG
pursuant to the agreement were $4,199, $4,767 and $4,305 for
1999, 1998 and 1997 respectively. Charges attributable to this
agreement are included in insurance expenses and taxes, except
for investment related expenses, which are included in net
investment income. The Company is allocated interest expense on
its accounts payable to MLIG that approximates the daily
Federal funds rate. Total intercompany interest incurred was
$54, $69 and $64 for 1999, 1998 and 1997, respectively.
Intercompany interest is included in net investment income.
The Company and Merrill Lynch Asset Management, LP ("MLAM") are
parties to a service agreement whereby MLAM has agreed to
provide certain invested asset management services to the
Company. The Company pays a fee to MLAM for these services
through the MLIG service agreement. Charges attributable to
this agreement and allocated to the Company by MLIG were $149,
$157 and $159 for 1999, 1998 and 1997, respectively.
The Company has a general agency agreement with Merrill Lynch
Life Agency Inc. ("MLLA") whereby registered representatives of
MLPF&S, who are the Company's licensed insurance agents,
solicit applications for contracts to be issued by the Company.
MLLA is paid commissions for the contracts sold by such agents.
Commissions paid to MLLA were $3,069, $3,798 and $4,130 for
1999, 1998 and 1997, respectively. Substantially all of these
commissions were capitalized as deferred policy acquisitions
costs and are being amortized in accordance with the policy
discussed in Note 1.
In connection with the acquisition of a block of variable life
insurance business from Monarch Life Insurance Company
("Monarch Life"), the Company borrowed funds from Merrill Lynch
& Co. to partially finance the transaction. As of December 31,
1999 and 1998, the outstanding loan balance was $290 and $434,
respectively. Repayments made on this loan during 1999, 1998
and 1997 were $144, $722 and $1,919, respectively. Loan
interest was calculated at LIBOR plus 150 basis points.
Intercompany interest paid during 1999, 1998 and 1997 was $31,
$79 and $359, respectively.
Affiliated agreements generally contain reciprocal indemnity
provisions pertaining to each party's representations and
contractual obligations thereunder.
NOTE 7: STOCKHOLDER'S EQUITY AND STATUTORY REGULATIONS
Notice of intention to declare a dividend must be filed with
the New York Superintendent of Insurance who may disallow the
payment. During 1999 and 1998, no dividend request was filed.
During 1997, the Company paid a dividend of $15,000 to MLIG.
Statutory capital and surplus at December 31, 1999 and 1998,
was $61,717 and $55,851, respectively.
Applicable insurance department regulations require that the
Company report its accounts in accordance with statutory
accounting practices. Statutory accounting practices differ
from principles utilized in these financial statements as
follows: policy acquisition costs are expensed as incurred,
future policy benefit reserves are established using different
actuarial assumptions, there is no provision for deferred
income taxes, and securities are valued on a different basis.
The Company's statutory net income for 1999, 1998 and 1997 was
$9,030, $5,405 and $9,888, respectively.
The National Association of Insurance Commissioners ("NAIC")
utilizes the Risk Based Capital ("RBC") adequacy monitoring
system. The RBC calculates the amount of adjusted capital that
a life insurance company should have based upon that company's
risk profile. As of December 31, 1999, and 1998, based on the
RBC formula, the Company's total adjusted capital level was
in excess of the minimum amount of capital required to avoid
regulatory action.
In March 1998, the NAIC adopted the Codification of Statutory
Accounting Principles ("Codification"). The Codification,
which is intended to standardize regulatory accounting and
reporting for the insurance industry, is proposed to be
effective January 1, 2001. However, statutory accounting
principles will continue to be established by individual state
laws and permitted practices and it is uncertain when, or if,
the state of New York will require adoption of Codification for
the preparation of statutory financial statements.
Codification is not expected to have a material impact on the
Company's capital requirements or statutory financial
statements.
The New York Insurance Department has recently concluded the
fieldwork for the Company's normal triennial examination for
the period ended December 31, 1998. At this time, the Company
is awaiting the results of the examination. Management
believes that the results of the examination will not have a
material impact on the Company's statutory financial
statements.
NOTE 8: COMMITMENTS AND CONTINGENCIES
State insurance laws generally require that all life insurers
who are licensed to transact business within a state become
members of the state's life insurance guaranty association.
These associations have been established for the protection of
policyholders from loss (within specified limits) as a result
of the insolvency of an insurer. At the time an insolvency
occurs, the guaranty association assesses the remaining members
of the association an amount sufficient to satisfy the
insolvent insurer's policyholder obligations (within specified
limits). Based upon the public information available at this
time, management believes the Company has no material financial
obligations to state guaranty associations.
In the normal course of business, the Company is subject to
various claims and assessments. Management believes the
settlement of these matters would not have a material effect on
the financial position or results of operations of the Company.
NOTE 9. SEGMENT INFORMATION
In reporting to management, the Company's operating results are
categorized into two business segments: Life Insurance and
Annuities. The Company's Life Insurance segment consists of
variable life insurance products and interest-sensitive life
insurance products. The Company's Annuity segment consists of
variable annuities and interest-sensitive annuities.
The Company's organization is structured in accordance with its
two business segments. Each segment has its own administrative
service center that provides product support to the Company and
customer service support to the Company's policyholders.
Additionally, the marketing and sales management functions,
within MLIG, are organized according to these two business
segments.
The accounting policies of the business segments are the same
as those described in the summary of significant accounting
policies. All revenue and expense transactions are recorded at
the product level and accumulated at the business segment level
for review by management.
The "Other" category, presented in the following segment
financial information, represents assets and the earnings on
those assets that do not support policyholder liabilities.
The following table summarizes each business segment's
contribution to the consolidated amounts:
<TABLE>
<CAPTION>
Life
1999 Insurance Annuities Other Total
------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest spread (a) $ 1,640 $ 3,108 $ 2,639 $ 7,387
Other revenues 8,453 5,873 (119) 14,207
----------- ----------- ----------- -----------
Net revenues 10,093 8,981 2,520 21,594
----------- ----------- ----------- -----------
Policy benefits 618 14 - 632
Reinsurance premium ceded 1,822 - - 1,822
Amortization of deferred policy
acquisition costs 2,100 2,745 - 4,845
Other non-interest expenses 1,662 2,794 - 4,456
----------- ----------- ----------- -----------
Total non-interest expenses 6,202 5,553 - 11,755
----------- ----------- ----------- -----------
Net earnings before Federal income
tax provision 3,891 3,428 2,520 9,839
Income tax expense 1,332 1,036 882 3,250
----------- ----------- ----------- -----------
Net earnings $ 2,559 $ 2,392 $ 1,638 $ 6,589
=========== =========== =========== ===========
Balance Sheet Information:
Total assets $ 519,774 $ 862,187 $ 46,733 $1,428,694
Deferred policy acquisition costs 15,082 14,621 - 29,703
Policyholder liabilities and accruals 103,146 148,632 - 251,778
Other policyholder funds 633 562 - 1,195
</TABLE>
<TABLE>
<CAPTION>
Life
1998 Insurance Annuities Other Total
------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest spread (a) $ 789 $ 3,876 $ 3,052 $ 7,717
Other revenues 8,472 5,377 (363) 13,486
----------- ----------- ----------- -----------
Net revenues 9,261 9,253 2,689 21,203
----------- ----------- ----------- -----------
Policy benefits 1,570 60 - 1,630
Reinsurance premium ceded 1,705 - - 1,705
Amortization of deferred policy
acquisition costs 3,571 2,188 - 5,759
Other non-interest expenses 1,973 3,494 - 5,467
----------- ----------- ----------- -----------
Total non-interest expenses 8,819 5,742 - 14,561
----------- ----------- ----------- -----------
Net earnings before Federal income
tax provision (benefit) 442 3,511 2,689 6,642
Income tax expense (benefit) (7) 938 941 1,872
----------- ----------- ----------- -----------
Net earnings $ 449 $ 2,573 $ 1,748 $ 4,770
=========== =========== =========== ===========
Balance Sheet Information:
Total assets $ 484,322 $ 720,478 $ 43,182 $1,247,982
Deferred policy acquisition costs 15,325 14,417 - 29,742
Policyholder liabilities and accruals 103,926 168,306 - 272,232
Other policyholder funds 1,319 464 - 1,783
</TABLE>
<TABLE>
<CAPTION>
Life
1997 Insurance Annuities Other Total
------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest spread (a) $ 1,399 $ 6,060 $ 3,474 $ 10,933
Other revenues 7,759 7,172 80 15,011
----------- ----------- ----------- -----------
Net revenues 9,158 13,232 3,554 25,944
----------- ----------- ----------- -----------
Policy benefits 781 - - 781
Reinsurance premium ceded 1,584 - - 1,584
Amortization of deferred policy
acquisition costs 1,992 2,127 - 4,119
Other non-interest expenses 1,747 3,048 - 4,795
----------- ----------- ----------- -----------
Total non-interest expenses 6,104 5,175 - 11,279
----------- ----------- ----------- -----------
Net earnings before Federal income
tax provision 3,054 8,057 3,554 14,665
Income tax expense 987 2,742 1,244 4,973
----------- ----------- ----------- -----------
Net earnings $ 2,067 $ 5,315 $ 2,310 $ 9,692
=========== =========== =========== ===========
Balance Sheet Information:
Total assets $ 456,240 $ 635,673 $ 46,668 $1,138,581
Deferred policy acquisition costs 17,506 12,900 - 30,406
Policyholder liabilities and accruals 103,677 205,663 - 309,340
Other policyholder funds 974 967 - 1,941
</TABLE>
(a) Management considers investment income net of interest
credited to policyholders' account balances in evaluating
results.
The table below summarizes the Company's net revenues by
product for 1999, 1998 and 1997:
1999 1998 1997
---------- ---------- ----------
Life Insurance
Variable life $ 9,656 $ 9,045 $ 8,828
Interest-sensitive whole life 437 216 330
---------- ---------- ----------
Total Life Insurance 10,093 9,261 9,158
---------- ---------- ----------
Annuities
Variable annuities 8,291 6,240 4,673
Interest-sensitive annuities 690 3,013 8,559
---------- ---------- ----------
Total Annuities 8,981 9,253 13,232
---------- ---------- ----------
Other 2,520 2,689 3,554
---------- ---------- ----------
Total $ 21,594 $ 21,203 $ 25,944
========== ========== ==========
* * * * * *
<PAGE>
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<S> <C> <C> <C>
(a) Financial Statements
(1) Financial Statements of ML of New York Variable
Annuity Separate Account A as of December 31,
1999 and for the two years ended December 31,
1999 and the Notes relating thereto appear in the
Statement of Additional Information (Part B of
the Registration Statement).
(2) Financial Statements of ML of New York Variable
Annuity Separate Account B as of December 31,
1999 and for the two years ended December 31,
1999 and the Notes relating thereto appear in the
Statement of Additional Information (Part B of
the Registration Statement).
(3) Financial Statements of ML Life Insurance Company
of New York for the three years ended
December 31, 1999 and the Notes relating thereto
appear in the Statement of Additional Information
(Part B of the Registration Statement).
(b) Exhibits
(1) Resolution of the Board of Directors of ML Life
Insurance Company of New York establishing the ML
of New York Variable Annuity Separate Account A
and ML of New York Variable Annuity Separate
Account B (Incorporated by Reference to
Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43654 Filed December 9,
1996).
(2) Not Applicable
(3) Underwriting Agreement Between ML Life Insurance
Company of New York and Merrill Lynch, Pierce,
Fenner & Smith Incorporated (Incorporated by
Reference to Post-Effective Amendment No. 10 to
Form N-4, Registration No. 33-43654 Filed
December 9, 1996).
(4) (a) Individual Variable Annuity Contract issued by ML
Life Insurance Company of New York (Incorporated
by Reference to Post-Effective Amendment No. 10
to Form N-4, Registration No. 33-43654 Filed
December 9, 1996).
(b) ML Life Insurance Company of New York Contingent
Deferred Sales Charge Waiver Endorsement
(Incorporated by Reference to Post-Effective
Amendment No. 10 to Form N-4, Registration
No. 33-43654 Filed December 9, 1996).
(c) ML Life Insurance Company of New York Individual
Retirement Annuity Endorsement (Incorporated by
Reference to Post-Effective Amendment No. 10 to
Form N-4, Registration No. 33-43654 Filed
December 9, 1996).
(d) ML Life Insurance Company of New York Endorsement
(MLNY008) (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 7 to
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 Post-Effective Amendment No. 7 to
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
Post-Effective Amendment No. 7 to Form N-4,
Registration No. 33-45380 Filed April 26, 1995).
(g) ML Life Insurance Company of New York Endorsement
(MLNY013) (Incorporated by Reference to
Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43654 Filed December 9,
1996).
(h) ML Life Insurance Company of New York Endorsement
(MLNY014) (Incorporated by Reference to
Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43654 Filed December 9,
1996).
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C> <C> <C>
(i) Tax-Sheltered Annuity Endorsement (Incorporated by
Reference to Registrant's Post-Effective
Amendment No. 15 to Form N-4, Registration No.
33-43773 Filed April 13, 1999).
(5) (a) ML Life Insurance Company of New York Variable
Annuity Application (Incorporated by Reference to
Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43654 Filed December 9,
1996).
(b) ML Life Insurance Company of New York Variable
Annuity Application (MLNY010) (Incorporated by
Reference to Registrant's Post-Effective
Amendment No. 7 to Form N-4, Registration
No. 33-45380 Filed April 26, 1995).
(6) (a)(i) Certificate of Amendment and Restatement of
Charter of Royal Tandem Life Insurance Company
(Incorporated by Reference to Post-Effective
Amendment No. 10 to Form N-4, Registration
No. 33-43654 Filed December 9, 1996).
(6) (a)(ii) Certificate of Amendment of the Charter of ML Life
Insurance Company of New York (Incorporated by
Reference to Post-Effective Amendment No. 10 to
Form N-4, Registration No. 33-43654 Filed
December 9, 1996).
(b) By-Laws of ML Life Insurance Company of New York.
(Incorporated by Reference to Post-Effective
Amendment No. 10 to Form N-4, Registration
No. 33-43654 filed December 9, 1996).
(7) Not Applicable
(8) (a) Amended General Agency Agreement (Incorporated by
Reference to Registrant's Post-Effective
Amendment No. 4 to Form N-4, Registration
No. 33-45380 Filed April 28, 1994).
(b) Indemnity Agreement Between ML Life Insurance
Company of New York and Merrill Lynch Life
Agency, Inc. (Incorporated by Reference to
Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43654 Filed December 9,
1996).
(c) Management Agreement Between ML Life Insurance
Company of New York and Merrill Lynch Asset
Management, Inc. (Incorporated by Reference to
Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43654 Filed December 9,
1996).
(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 Reserve Assets Fund (Incorporated
by Reference to Post-Effective Amendment No. 10
to Form N-4, Registration No. 33-43654 Filed
December 9, 1996).
(e) Agreement Between ML Life Insurance Company of New
York and Merrill Lynch Variable Series Funds,
Inc. Relating to Maintaining Constant Net Asset
Value for the Domestic Money Market Fund
(Incorporated by Reference to Post-Effective
Amendment No. 10 to Form N-4, Registration
No. 33-43654 Filed December 9, 1996).
(f) 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
Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43654 Filed December 9,
1996).
(g) Service Agreement Between Tandem Financial Group,
Inc. and Royal Tandem Life Insurance Company
(Incorporated by Reference to Post-Effective
Amendment No. 10 to Form N-4, Registration
No. 33-43654 Filed December 9, 1996).
(h) Reimbursement Agreement Between Merrill Lynch
Asset Management, Inc. and Merrill Lynch Life
Agency, Inc. (Incorporated by Reference to
Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43654 Filed December 9,
1996).
</TABLE>
C-2
<PAGE>
<TABLE>
<S> <C> <C> <C>
(i) Amendment to the Reimbursement Agreement Between
Merrill Lynch Asset Management, L.P. and Merrill
Lynch Life Agency, Inc. (Incorporated by
Reference to Merrill Lynch Life Variable Annuity
Separate Account A's Registration Statement on
Form N-4, Registration No. 333-90243 Filed
November 3, 1999).
(j) Form of Participation Agreement Between Merrill
Lynch Variable Series Funds, Inc., Merrill Lynch
Life Insurance Company, ML Life Insurance Company
of New York, and Family Life Insurance Company
(Incorporated by Reference to Registrant's
Post-Effective Amendment No. 5 to Form N-4,
Registration No. 33-45380 Filed April 28, 1994).
(k) Form of Participation Agreement Between Merrill
Lynch Variable Series Funds, Inc. and ML Life
Insurance Company of New York. (Incorporated by
Reference to Post-Effective Amendment No. 10 to
Form N-4, Registration No. 33-43654 Filed Decem-
ber 9, 1996).
(l) Amendment to the Participation Agreement Between
Merrill Lynch Variable Series Funds, Inc. and ML
Life Insurance Company of New York. (Incorporated
by Reference to ML of New York Variable Annuity
Separate Account A's Registration Statement on
Form N-4, Registration No. 333-34894 Filed
April 17, 2000).
(m) Form of Amendment to Participation Agreement
Between Merrill Lynch Variable Series Funds, Inc.
and ML Life Insurance Company of New York
(Incorporated by Reference to Post-Effective
Amendment No. 12 to Form N-4, Registration
No. 33-43654 Filed May 1, 1998).
(9) Opinion of Barry G. Skolnick, Esq. and Consent to
its use as to the legality of the securities
being registered. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 10 to
Form N-4, Registration No. 33-43654 Filed
December 9, 1996.)
(10) (a) Written Consent of Sutherland Asbill & Brennan LLP
(b) Written Consent of Deloitte & Touche LLP,
independent auditors.
(c) Written Consent of Barry G. Skolnick, Esq.
(11) Not Applicable
(12) Not Applicable
(13) Schedule for Computation of Performance Quotations
(Incorporated by Reference to Post-Effective
Amendment No. 10 to Form N-4, Registration
No. 33-43654 Filed December 9, 1996).
(14) (a) Power of Attorney from Frederick J.C. Butler
(Incorporated by Reference to Registrant's
Post-Effective Amendment No. 4 to Form N-4,
Registration No. 33-45380 Filed March 2, 1994).
(b) Power of Attorney from Michael P. Cogswell
(Incorporated by Reference to Registrant's
Post-Effective Amendment No. 4 to Form N-4,
Registration No. 33-45380 Filed March 2, 1994).
(c) Power of Attorney from Sandra K. Cox (Incorporated
by Reference to Registrant's Post-Effective
Amendment No. 4 to Form N-4, Registration
No. 33-45380 Filed March 2, 1994).
(d) Power of Attorney from Joseph E. Crowne, Jr.
(Incorporated by Reference to Registrant's
Post-Effective Amendment No. 4 to Form N-4,
Registration No. 33-45380 Filed March 2, 1994).
(e) Power of Attorney from David M. Dunford
(Incorporated by Reference to Registrant's
Post-Effective Amendment No. 4 to Form N-4,
Registration No. 33-45380 Filed March 2, 1994).
</TABLE>
C-3
<PAGE>
<TABLE>
<S> <C> <C> <C>
(f) Power of Attorney from John C.R. Hele
(Incorporated by Reference to Registrant's
Post-Effective Amendment No. 4 to 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
Post-Effective Amendment No. 4 to Form N-4,
Registration No. 33-45380 Filed March 2, 1994).
(h) Power of Attorney from Allen N. Jones
(Incorporated by Reference to Post-Effective
Amendment No. 11 to Form N-4, Registration
No. 33-43654 Filed April 23, 1997).
(i) Power of Attorney from Cynthia L. Kahn
(Incorporated by Reference to Registrant's
Post-Effective Amendment No. 4 to Form N-4,
Registration No. 33-45380 Filed March 2, 1994).
(j) Power of Attorney from Robert A. King
(Incorporated by Reference to Registrant's
Post-Effective Amendment No. 4 to Form N-4,
Registration No. 33-45380 Filed March 2, 1994).
(k) Power of Attorney from Irving M. Pollack
(Incorporated by Reference to Registrant's
Post-Effective Amendment No. 4 to Form N-4,
Registration No. 33-45380 Filed March 2, 1994).
(l) Power of Attorney from Barry G. Skolnick
(Incorporated by Reference to Registrant's
Post-Effective Amendment No. 4 to Form N-4,
Registration No. 33-45380 Filed March 2, 1994).
(m) Power of Attorney from William A. Wilde
(Incorporated by Reference to Registrant's
Post-Effective Amendment No. 4 to 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
Post-Effective Amendment No. 4 to 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
Post-Effective Amendment No. 8 to 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
Post-Effective Amendment No. 8 to Form N-4,
Registration No. 33-45380 Filed April 25, 1996).
(q) Power of Attorney from Stanley C. Peterson
(Incorporated by Reference to ML Life Insurance
Company of New York's Registration Statement on
Form S-1, Registration No. 333-48983 Filed
March 31, 1998).
(r) Power of Attorney from Richard M. Drew
(Incorporated by Reference to ML Life Insurance
Company of New York's Registration Statement on
Form S-3, Registration No. 333-48983 Filed April
6, 2000).
</TABLE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR*
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS ADDRESS POSITION WITH DEPOSITOR*
- ---------------------------- ------------------------------------- ------------------------------------
<S> <C> <C>
Frederick J.C. Butler Butler, Chapman & Co. LLC Director.
609 Fifth Avenue
New York, NY 10017
Michael P. Cogswell 800 Scudders Mill Road Director, Vice President and Senior
Plainsboro, NJ 08536 Counsel.
Joseph E. Crowne, Jr. 800 Scudders Mill Road Director, Senior Vice President,
Plainsboro, NJ 08536 Chief Financial Officer, Chief
Actuary and Treasurer.
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS ADDRESS POSITION WITH DEPOSITOR*
- ---------------------------- ------------------------------------- ------------------------------------
<S> <C> <C>
David M. Dunford 800 Scudders Mill Road Director, Senior Vice President
Plainsboro, NJ 08536 and Chief Investment Officer.
Gail R. Farkas 800 Scudders Mill Road Director and Senior Vice President.
Plainsboro, NJ 08536
Richard M. Drew 3430 81st Street Director.
Jackson Heights, NY 11372
Robert L. Israeloff Israeloff, Trattner & Co. Director.
11 Sunrise Plaza
Valley Stream, NY 11580-6169
Allen N. Jones 800 Scudders Mill Road Director.
Plainsboro, NJ 08536
Cynthia Kahn Sherman Rogers & Wells Director.
200 Park Avenue
New York, NY 10166
Robert A. King 119 Formby Director.
Williamsburg, VA 23188
Stanley C. Peterson 800 Scudders Mill Road Director.
Plainsboro, NJ 08536
Irving M. Pollack 11400 Strand Drive Director.
Suite 310
Rockville, MD 20852-2970
Barry G. Skolnick 800 Scudders Mill Road Director, Senior Vice President,
Plainsboro, NJ 08536 General Counsel and Secretary.
Anthony J. Vespa 800 Scudders Mill Road Director, Chairman of the Board,
Plainsboro, NJ 08536 Chief Executive Officer and
President.
Deborah J. Adler 800 Scudders Mill Road Vice President and Actuary.
Plainsboro, NJ 08536
Robert J. Boucher 1414 Main Street Senior Vice President,
Springfield, MA 01102 Variable Life Administration.
Edward W. Diffin, Jr. 800 Scudders Mill Road Vice President and Senior Counsel.
Plainsboro, NJ 08536
Linda Gillis 4804 Deer Lake Drive East Vice President and Assistant
Jacksonville, FL 32246 Secretary.
Diana Joyner 1414 Main Street Vice President.
Springfield, MA 01102
Robin Maston 800 Scudders Mill Road Vice President and Senior Compliance
Plainsboro, NJ 08536 Officer.
Jeanne Markey 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.
Robert Ostrander 1414 Main Street Vice President and Controller.
Springfield, MA 01102
Shelley K. Parker 1414 Main Street Vice President and Assistant
Springfield, MA 01102 Secretary.
Julia Raven 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS ADDRESS POSITION WITH DEPOSITOR*
- ---------------------------- ------------------------------------- ------------------------------------
<S> <C> <C>
Lori M. Salvo 800 Scudders Mill Road Vice President and Senior Counsel.
Plainsboro, NJ 08536
John A. Shea 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Frederick H. Steele 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Tracy A. Bartoy 4804 Deer Lake Drive East Vice President and Assistant
Jacksonville, FL 32246 Secretary.
Robert J. Viamari 1414 Main Street Vice President and Assistant
Springfield, MA 01102 Secretary.
Denis G. Wuestman 800 Scudders Mill Road Plainsboro, NJ Vice President.
08536
Matthew J. Rider 800 Scudders Mill Road Vice President and Actuary.
Plainsboro, NJ 08536
Donald C. Stevens, III 800 Scudders Mill Road Vice President and Controller.
Plainsboro, NJ 08536
Amy S. Winston 800 Scudders Mill Road Vice President and Director of
Plainsboro, NJ 08536 Compliance.
</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. ("ML & Co.") appears
below.
SUBSIDIARIES OF THE REGISTRANT
The following are subsidiaries of ML & Co. as of February 25, 2000 and the
states or jurisdictions in which they are organized. Indentation indicates the
principal parent of each subsidiary. Except as otherwise specified, in each case
ML & Co. owns, directly or indirectly, at least 99% of the voting securities of
each subsidiary. The names of particular subsidiaries have been omitted because,
considered in the aggregate as a single subsidiary, they would not constitute,
as of the end of the year covered by this report, a "significant subsidiary" as
that term is defined in Rule 1.02(w) of Regulation S-X under the Securities
Exchange Act of 1934.
<TABLE>
<CAPTION>
STATE OR
NAME JURISDICTION OF ENTITY
- ---- ----------------------
<S> <C>
Merrill Lynch & Co., Inc.................................... Delaware
Merrill Lynch, Pierce, Fenner & Smith Incorporated(1)..... Delaware
Broadcort Capital Corp.................................. Delaware
Merrill Lynch Life Agency Inc.(2)....................... Washington
Merrill Lynch Professional Clearing Corp.(3)............ Delaware
Merrill Lynch Bank & Trust Co............................. New Jersey
Merrill Lynch Capital Services, Inc....................... Delaware
Merrill Lynch Government Securities, Inc.................. Delaware
Merrill Lynch Money Markets Inc......................... Delaware
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
STATE OR
NAME JURISDICTION OF ENTITY
- ---- ----------------------
<S> <C>
Merrill Lynch Group, Inc.................................. Delaware
Merrill Lynch & Co., Canada Ltd......................... Ontario
Merrill Lynch Canada Inc.............................. Canada
Mercury Asset Management Group Ltd(4)................... England
Mercury Asset Management Holdings Ltd................. England
Merrill Lynch Asset Management L.P.(5).................. Delaware
Merrill Lynch Capital Partners, Inc..................... Delaware
Merrill Lynch Futures Inc............................... Delaware
Merrill Lynch Insurance Group, Inc...................... Delaware
Merrill Lynch Life Insurance Company.................. Arkansas
ML Life Insurance Company of New York................. New York
Merrill Lynch International Finance Corporation......... New York
Merrill Lynch International Bank Limited.............. England
Merrill Lynch Bank (Suisse) S.A..................... Switzerland
Merrill Lynch Group Holdings Limited.................... Ireland
Merrill Lynch Capital Markets Bank Limited............ Ireland
Merrill Lynch Mortgage Capital Inc...................... Delaware
Merrill Lynch Bank USA.................................. Utah
Merrill Lynch Trust Company(6).......................... New Jersey
Merrill Lynch Business Financial Services Inc......... Delaware
Merrill Lynch Credit Corporation...................... Delaware
Merrill Lynch Investment Partners Inc................. Delaware
MLDP Holdings, Inc.(7).................................. Delaware
Merrill Lynch Derivative Products AG.................. Switzerland
ML IBK Positions, Inc................................... Delaware
Merrill Lynch Capital Corporation..................... Delaware
ML Leasing Equipment Corp.(8)........................... Delaware
Merrill Lynch International Incorporated.................. Delaware
Merrill Lynch (Australasia) Pty Limited................. New South Wales
Merrill Lynch International (Australia) Limited(9).... New South Wales
Merrill Lynch International Bank........................ United States
Merrill Lynch International Holdings Inc................ Delaware
Merrill Lynch Bank and Trust Company (Cayman) Cayman Islands,
Limited.............................................
British West Indies
Merrill Lynch Capital Markets A.G..................... Switzerland
Merrill Lynch Europe PLC.............................. England
Merrill Lynch Europe Holdings Limited............... England
Merrill Lynch International(10)................... England
Merrill Lynch, Pierce, Fenner & Smith (Brokers & England
Dealers) Limited..................................
Merrill Lynch Europe Ltd.............................. Cayman Islands,
British West Indies
Merrill Lynch France.................................. France
Merrill Lynch Capital Markets (France) S.A.......... France
Merrill Lynch (Asia Pacific) Limited.................. Hong Kong
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
STATE OR
NAME JURISDICTION OF ENTITY
- ---- ----------------------
<S> <C>
Merrill Lynch Far East Limited...................... Hong Kong
Merrill Lynch Japan Incorporated........................ Cayman Islands
British West Indies
</TABLE>
- ------------------------
(1) MLPF&S also conducts business as "Merrill Lynch & Co."
(2) Similarly named affiliates and subsidiaries that engage in the sale of life
insurance and annuity products are incorporated in various other
jurisdictions.
(3) The preferred stock of the corporation is owned by an unaffiliated group of
investors.
(4) Held through several intermediate holding companies.
(5) Merrill Lynch Asset Management L.P. is a limited partnership whose general
partner is Princeton Services, Inc. and whose limited partner is ML & Co.
(6) Similarly named affiliates and subsidiaries that provide trust and
custodial services are incorporated in various other jurisdictions.
(7) Merrill Lynch Group, Inc. owns 100% of this corporation's outstanding
common voting stock. 100% of the outstanding preferred voting stock is held
by outside parties.
(8) This corporation has more than 45 direct or indirect subsidiaries operating
in the United States and serving as either general partners or associate
general partners of limited partnerships.
(9) Held through an intermediate subsidiary.
(10) Partially owned by another indirect subsidiary of ML & Co.
ITEM 27. NUMBER OF CONTRACTS
The number of contracts in force as of March 24, 2000 was 7,934.
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,
C-8
<PAGE>
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; The Corporate Fund Accumulation
Program, Inc.; Defined Asset Funds--Municipal Insured Series; Equity Investor
Fund; The Fund of Stripped ("Zero") U.S. Treasury Securities; The GNMA
Investment Accumulation Program; Government Securities Income Fund;
International Bond Fund; The Merrill Lynch Fund of Stripped ("Zero") U.S.
Treasury Securities; Merrill Lynch Trust for Government Securities; Municipal
Income Fund; and Municipal Investment Trust Fund; and The Municipal Fund
Accumulation Program, Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated also acts as principal
underwriter for the following additional accounts: ML of New York Variable
Annuity Separate Account 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.
(b) The directors, president, treasurer and executive vice presidents of
Merrill Lynch, Pierce, Fenner & Smith Incorporated are as follows:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES WITH UNDERWRITER
- -------------------------------------- --------------------------------------
<S> <C>
John L. Steffens(1) Director, Chairman of the Board, and
Chief Executive Officer
Thomas W. Davis(1) Executive Vice President
Barry S. Friedberg(1) Executive Vice President
Edward L. Goldberg(1) Executive Vice President
Jerome P. Kenney(1) Executive Vice President
E. Stanley O'Neal(1) Director and Executive Vice President
Thomas H. Patrick(1) Executive Vice President
George A. Schieren(2) General Counsel and Senior Vice
President
Winthrop H. Smith, Jr.(1) Executive Vice President
John C. Stomber(3) Senior Vice President and Treasurer
Roger M. Vasey(1) Executive Vice President
</TABLE>
- ------------------------
(1) World Financial Center, 250 Vesey Street, New York, NY 10080
(2) 222 Broadway Street, 14th Floor, New York, NY 10038
(3) World Financial Center, 225 Liberty 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, NY 10080-6511, at Merrill Lynch Insurance Group Services, Inc. at
4804 Deer Lake Drive East, Jacksonville, Florida 32246, and at the office of the
General Counsel at 800 Scudders Mill Road, Plainsboro, New Jersey 08536.
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<PAGE>
ITEM 31. NOT APPLICABLE
ITEM 32. UNDERTAKINGS AND REPRESENTATIONS
(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.
(d) ML Life Insurance Company of New York hereby represents that the fees
and charges deducted under the Contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by ML Life Insurance Company of New York.
(e) Registrant hereby represents that it is relying on the American Council
of Life Insurance (avail. Nov. 38, 1998) no-action letter with respect to
Contracts used in connection with retirement plans meeting the requirements of
Section 403(b) of the Internal Revenue Code, and represents further that it will
comply with the provisions of paragraphs (1) through (4) set forth in that
no-action letter.
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<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 24th day of April, 2000.
<TABLE>
<S> <C> <C> <C>
ML of New York Variable Annuity
Separate Account B
(Registrant)
Attest: /s/ EDWARD W. DIFFIN, JR. By: /s/ BARRY G. SKOLNICK
------------------------------------ ------------------------------------
Edward W. Diffin, Jr. Barry G. Skolnick
Vice President and Senior Counsel Senior Vice President of
ML Life Insurance Company of
New York
ML Life Insurance Company of New York
(Depositor)
Attest: /s/ EDWARD W. DIFFIN, JR. By: /s/ BARRY G. SKOLNICK
------------------------------------ ------------------------------------
Edward W. Diffin, Jr. Barry G. Skolnick
Vice President and Senior Counsel Senior Vice President
</TABLE>
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 14 to the Registration Statement has been signed below by the following
persons in the capacities indicated on April 24, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Chairman of the Board, President and Chief
- ------------------------------------------- Executive Officer
Anthony J. Vespa
* Director, Senior Vice President, Chief
- ------------------------------------------- Financial Officer, Chief Actuary and
Joseph E. Crowne, Jr. Treasurer
* Director, Senior Vice President, and Chief
- ------------------------------------------- Investment Officer
David M. Dunford
* Director and Senior Vice President
- -------------------------------------------
Gail R. Farkas
* Director, Vice President and Senior Counsel
- -------------------------------------------
Michael P. Cogswell
</TABLE>
C-11
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Director
- -------------------------------------------
Frederick J.C. Butler
* Director
- -------------------------------------------
Richard M. Drew
* Director
- -------------------------------------------
Robert L. Israeloff
* Director
- -------------------------------------------
Allen N. Jones
* Director
- -------------------------------------------
Cynthia Kahn Sherman
* Director
- -------------------------------------------
Robert A. King
* Director
- -------------------------------------------
Stanley C. Peterson
* Director
- -------------------------------------------
Irving M. Pollack
*By: /s/ BARRY G. SKOLNICK In his own capacity as Director, Senior Vice
- ------------------------------------------- President, General Counsel, and Secretary
Barry G. Skolnick and as Attorney-In-Fact
</TABLE>
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- --------------------- ----------- --------
<S> <C> <C>
(10)(a) Written Consent of Sutherland Asbill & Brennan LLP.......... C-
(10)(b) Written Consent of Deloitte & Touche LLP, independent
auditors.................................................... C-
(10)(c) Written Consent of Barry G. Skolnick, Esq................... C-
</TABLE>
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<PAGE>
EXHIBIT (10)(a)
[SUTHERLAND ASBILL & BRENNAN LLP LETTERHEAD]
CONSENT OF SUTHERLAND ASBILL & BRENNAN LLP
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus filed as part of Post-Effective Amendment No. 14 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.
<TABLE>
<S> <C> <C>
SUTHERLAND ASBILL & BRENNAN LLP
/s/ KIMBERLY J. SMITH
-----------------------------------------
Kimberly J. Smith, Esq.
</TABLE>
Washington, D.C.
April 24, 2000
<PAGE>
EXHIBIT (10)(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 14 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 28, 2000, and (ii) ML of New York Variable Annuity Separate Account B
dated February 14, 2000, appearing in the Statement of Additional Information,
which is a part of such Registration Statement, and to the reference to us under
the heading "Experts" in the Prospectus, which is a part of such Registration
Statement.
/s/ DELOITTE & TOUCHE LLP
New York, New York
April 24, 2000
<PAGE>
EXHIBIT (10)(c)
CONSENT OF BARRY G. SKOLNICK, ESQ.
I hereby consent to the reference to my name under the caption "Legal
Matters" in the prospectus included in Post-Effective Amendment No. 15 to the
Registration Statement on Form N-4 for certain variable annuity insurance
contracts issued through ML of New York Variable Annuity Separate Account A and
included in the prospectus included in Post-Effective Amendment No. 14 to the
Registration Statement on Form N-4 for certain variable annuity insurance
contracts issued through ML of New York Variable Annuity Separate Account B of
Merrill Lynch Life Insurance Company, File Nos. 33-43654 and 33-45380.
<TABLE>
<S> <C> <C>
/s/ BARRY G. SKOLNICK
-----------------------------------------
Barry G. Skolnick
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
</TABLE>
April 24, 2000
