<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1994
REGISTRATION NO. 33-61670
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 3
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF THE SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
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ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
(EXACT NAME OF TRUST)
ML LIFE INSURANCE COMPANY OF NEW YORK
(NAME OF DEPOSITOR)
100 CHURCH STREET, 11TH FLOOR
NEW YORK, NEW YORK 10080-6511
(COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
BARRY G. SKOLNICK, ESQ.
SENIOR VICE PRESIDENT & GENERAL COUNSEL
ML LIFE INSURANCE COMPANY OF NEW YORK
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
------------------------
COPY TO:
STEPHEN E. ROTH, ESQ.
SUTHERLAND, ASBILL & BRENNAN
1275 PENNSYLVANIA AVENUE, NW
WASHINGTON, DC 20004-2404
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It is proposed that this filing will become effective (check appropriate
box)
/ / immediately upon filing pursuant to paragraph (b) of Rule 486
/X/ on May 1, 1994 pursuant to paragraph (b) of Rule 486
/ / 60 days after filing pursuant to paragraph (a) of Rule 486
/ / on (date) pursuant to paragraph (a) of Rule 486
Check box if it is proposed that the filing will become effective on (date)
at (time) pursuant to Rule 487 / /
Pursuant to Rule 24f-2 of the Investment Company Act of 1940, the Registrant
has registered an indefinite amount of securities under the Securities Act of
1933. The Registrant filed the 24f-2 Notice for the year ended December 31, 1993
on February 28, 1994.
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<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-8B-2
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N-8B-2 ITEM CAPTION IN PROSPECTUS
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1 Cover Page
2 Cover Page
3 Facts About the Separate Account, the Series Fund, the Variable Series
Funds, the Zero Trusts and ML of New York; More About the Separate Account
and its Divisions
4 Facts About the Separate Account, the Series Fund, the Variable Series
Funds, the Zero Trusts and ML of New York (ML of New York and MLPF&S); More
About the Contract (Selling the Contracts)
5 Facts About the Separate Account, the Series Fund, the Variable Series
Funds, the Zero Trusts and ML of New York (ML of New York and MLPF&S); More
About ML Life Insurance Company of New York (State Regulation)
6 Facts About the Separate Account, the Series Fund, the Variable Series
Funds, the Zero Trusts and ML of New York (The Separate Account)
7 Not Applicable
8 Experts
9 More About ML Life Insurance Company of New York (Legal Proceedings)
10 Summary of the Contract; Facts About the Contract; More About the Contract;
More About the Separate Account and its Divisions
11 Summary of the Contract (The Investment Divisions); Facts About the Separate
Account, the Series Fund, the Variable Series Funds, the Zero Trusts and ML
of New York; More About the Separate Account and its Divisions (About the
Separate Account; The Zero Trusts)
12 Summary of the Contract The Investment Divisions); Facts About the Separate
Account, the Series Fund, the Variable Series Funds, the Zero Trusts and ML
of New York; More About the Separate Account and its Divisions
13 Summary of the Contract (Loans; Fees and Charges); Facts About the Contract
(Charges Deducted from the Investment Base; Contract Loading; Charges to
the Separate Account; Guarantee Period; Cash Value; Loans; Partial
Withdrawals; Death Benefit Proceeds; Payment of Death Benefit Proceeds;
Rights to Cancel or Exchange); More About the Contract (Group or Sponsored
Arrangements; ML of New York's Income Taxes); More About the Separate
Account and its Divisions (Charges to Series Fund Assets; Charges to
Variable Series Funds Assets)
14 Facts About the Contract (Who May Be Covered; Purchasing a Contract;
Additional Payments); More About the Contract (Other Contract Provisions)
15 Summary of the Contract (Availability and Payments); Facts About the
Contract (Purchasing A Contract; Additional Payments); More About the
Contract (Income Plans)
16 Facts About the Separate Account, the Series Fund, the Variable Series
Funds, the Zero Trusts and ML of New York; More About the Separate Account
and its Divisions.
17 Summary of the Contract (Net Cash Surrender Value; Rights to Cancel ("Free
Look" Period) or Exchange; Partial Withdrawals); Facts About the Contract
(Cash Value; Partial Withdrawals; Rights to Cancel or Exchange); More About
the Contract (Using the Contract; Some Administrative Procedures)
</TABLE>
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<TABLE>
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N-8B-2 ITEM CAPTION IN PROSPECTUS
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18 Facts About the Separate Account, the Series Fund, the Variable Series
Funds, the Zero Trusts and ML of New York; More About the Separate Account
and its Divisions
19 More About ML Life Insurance Company of New York
20 Not Applicable
21 Summary of the Contract (Loans); Facts About the Contract (Loans)
22 Not Applicable
23 Not Applicable
24 Not Applicable
25 Facts About the Separate Account, the Series Fund, the Variable Series
Funds, the Zero Trusts and ML of New York (ML of New York and MLPF&S); More
About ML Life Insurance Company of New York
26 Not Applicable
27 Facts About the Separate Account, the Series Fund, the Variable Series
Funds, the Zero Trusts and ML of New York (ML of New York and MLPF&S); More
About ML Life Insurance Company of New York
28 More About ML Life Insurance Company of New York (Directors and Executive
Officers)
29 Facts About the Separate Account, the Series Fund, the Variable Series
Funds, the Zero Trusts and ML of New York (ML of New York and MLPF&S)
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Facts About the Separate Account, the Series Fund, the Variable Series
Funds, the Zero Trusts and ML of New York (ML of New York and MLPF&S)
36 Not Applicable
37 Not Applicable
38 Facts About the Separate Account, the Series Fund, the Variable Series
Funds, the Zero Trusts and ML of New York (ML of New York and MLPF&S); More
About the Contract (Selling the Contracts)
39 Facts About the Separate Account, the Series Fund, the Variable Series
Funds, the Zero Trusts and ML of New York (ML of New York and MLPF&S); More
About the Contract (Selling the Contracts)
40 More About Contract (Selling the Contracts)
41 Facts About the Separate Account, the Series Fund, the Variable Series
Funds, the Zero Trusts and ML of New York (ML of New York and MLPF&S); More
About the Contract (Selling the Contracts)
42 Not Applicable
43 Not Applicable
44 Facts About the Contract; More About the Contract
45 Not Applicable
46 Summary of the Contract; Facts About the Contract (Cash Value; Partial
Withdrawals)
47 Summary of the Contract (The Investment Divisions); Facts About the Separate
Account, the Series Fund, the Variable Series Funds, the Zero Trusts and ML
of New York; More About the Separate Account and its Divisions
</TABLE>
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N-8B-2 ITEM CAPTION IN PROSPECTUS
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48 Facts About the Separate Account, the Series Fund, the Variable Series
Funds, the Zero Trusts and ML of New York (ML of New York and MLPF&S); More
About ML Life Insurance Company of New York (State Regulation)
49 Facts About the Separate Account, the Series Fund, the Variable Series
Funds, the Zero Trusts and ML of New York; Facts About the Contract
(Charges Deducted from the Investment Base; Contract Loading; Charges to
the Separate Account); More About the Contract (Selling the Contracts)
50 Not Applicable
51 Facts About the Contract; More About the Contract
52 Facts About the Separate Account, the Series Fund, the Variable Series
Funds, the Zero Trusts and ML of New York (More About Separate Account and
its Divisions)
53 More About the Contract (Tax Considerations; ML of New York's Income Taxes)
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 More About ML Life Insurance Company of New York (Financial Statements)
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<PAGE>
PROSPECTUS
MAY 1, 1994
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR VARIABLE
UNIVERSAL LIFE INSURANCE 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 9025
SPRINGFIELD, MASSACHUSETTS 01102-9025
1414 MAIN STREET, THIRD FLOOR
SPRINGFIELD, MASSACHUSETTS 01104-1007
PHONE: (800) 831-8172
OFFERED THROUGH
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
This Prospectus is for a flexible premium joint and last survivor variable
universal life insurance contract (the "Contract") offered by ML Life Insurance
Company of New York ("ML of New York"), a subsidiary of Merrill Lynch & Co.,
Inc.
During the "free look" period, the initial payment less contract loading will be
invested only in the division investing in the Money Reserve Portfolio. After
the "free look" period, the contract owner may invest in up to any five of the
36 investment divisions of ML of New York Variable Life Separate Account II (the
"Separate Account"), the ML of New York separate investment account available
under the Contract. The investments available through the investment divisions
include 10 mutual fund portfolios of the Merrill Lynch Series Fund, Inc., six
mutual fund portfolios of the Merrill Lynch Variable Series Funds, Inc. and 20
unit investment trusts in The Merrill Lynch Fund of Stripped ("Zero") U.S.
Treasury Securities. Currently, the contract owner may change his or her
investment allocation as many times as desired.
The Contract provides an estate benefit through life insurance coverage on the
lives of two insureds with proceeds payable upon the death of the last surviving
insured. The Contract offers two death benefit options. At the election of the
contract owner, the death benefit may include the Contract's cash value. Subject
to certain conditions, contract owners may purchase additional insurance through
an additional insurance rider. ML of New York guarantees that the coverage will
remain in force for the guarantee period. Each payment will extend the guarantee
period until such time as the guarantee period is established for the whole of
life of the younger insured. During this guarantee period, ML of New York will
terminate the Contract only if the debt exceeds certain contract values. After
the guarantee period, the Contract will remain in force as long as there is not
excessive debt and as long as the cash value is sufficient to cover the charges
due. While the Contract is in force, the death benefit may vary to reflect the
investment results of the investment divisions chosen, but will never be less
than the current face amount.
The Contract allows for additional payments. Contract owners may also borrow up
to the loan value of the Contract, make partial withdrawals or turn in the
Contract for its net cash surrender value. The net cash surrender value will
vary with the investment results of the investment divisions chosen. ML of New
York doesn't guarantee any minimum net cash surrender value.
It may not be advantageous to replace existing insurance with the Contract. The
Contract may be exchanged for a contract with benefits that do not vary with the
investment results of a separate account.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT MUST BE
ACCOMPANIED BY CURRENT PROSPECTUSES FOR THE MERRILL LYNCH SERIES FUND, INC., THE
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. AND THE MERRILL LYNCH FUND OF STRIPPED
("ZERO") U.S. TREASURY SECURITIES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
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PAGE
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IMPORTANT TERMS.............................................................. 4
SUMMARY OF THE CONTRACT
Purpose of the Contract..................................................... 5
Availability and Payments.................................................. 5
CMA-R- Insurance Service................................................... 5
The Investment Divisions................................................... 5
How the Death Benefit Varies............................................... 6
How the Investment Base Varies............................................. 6
Net Cash Surrender Value................................................... 6
Illustrations.............................................................. 6
Replacement of Existing Coverage........................................... 6
Rights to Cancel ("Free Look" Period) or Exchange.......................... 6
How Death Benefit and Cash Value Increases are Taxed....................... 6
Loans...................................................................... 7
Partial Withdrawals........................................................ 7
Fees and Charges........................................................... 7
FACTS ABOUT THE SEPARATE ACCOUNT, THE SERIES FUND, THE VARIABLE SERIES FUNDS,
THE ZERO TRUSTS AND ML OF NEW YORK
The Separate Account....................................................... 8
The Series Fund............................................................ 8
The Variable Series Funds.................................................. 9
Equity Growth Fund -- Exemptive Relief..................................... 10
The Zero Trusts............................................................ 10
ML of New York and MLPF&S.................................................. 11
FACTS ABOUT THE CONTRACT
Who May be Covered......................................................... 11
Purchasing a Contract...................................................... 11
Additional Insurance Rider................................................. 12
Additional Payments........................................................ 13
Effect of Additional Payments.............................................. 13
Investment Base............................................................ 14
Charges Deducted from the Investment Base.................................. 14
Contract Loading........................................................... 15
Charges to the Separate Account............................................ 16
Guarantee Period........................................................... 16
Cash Value................................................................. 17
Loans...................................................................... 17
Partial Withdrawals........................................................ 18
Death Benefit Proceeds..................................................... 19
Payment of Death Benefit Proceeds.......................................... 20
Rights to Cancel or Exchange............................................... 21
Reports to Contract Owners................................................. 21
MORE ABOUT THE CONTRACT
Using the Contract......................................................... 22
Some Administrative Procedures............................................. 23
Other Contract Provisions.................................................. 24
Income Plans............................................................... 25
Group or Sponsored Arrangements............................................ 26
Unisex Legal Considerations for Employers.................................. 26
Selling the Contracts...................................................... 26
Tax Considerations......................................................... 27
</TABLE>
2
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PAGE
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ML of New York's Income Taxes.............................................. 30
Reinsurance................................................................ 30
MORE ABOUT THE SEPARATE ACCOUNT AND ITS DIVISIONS
About the Separate Account................................................. 30
Changes Within the Account................................................. 30
Net Rate of Return for an Investment Division.............................. 31
The Series Fund and the Variable Series Funds.............................. 31
Charges to Series Fund Assets.............................................. 32
Charges to Variable Series Funds Assets.................................... 33
The Zero Trusts............................................................ 34
ILLUSTRATIONS
Illustrations of Death Benefits, Investment Base, Net Cash Surrender Values
and Accumulated Payments.................................................. 34
EXAMPLES
Additional Payments........................................................ 40
Partial Withdrawals........................................................ 40
Changing the Death Benefit Option.......................................... 41
MORE ABOUT ML LIFE INSURANCE COMPANY OF NEW YORK
Directors and Executive Officers........................................... 42
Services Arrangement....................................................... 43
State Regulation........................................................... 43
Legal Proceedings.......................................................... 44
Experts.................................................................... 44
Legal Matters.............................................................. 44
Registration Statements.................................................... 44
Financial Statements....................................................... 44
Financial Statements of ML of New York Variable Life Separate Account II... 45
Financial Statements of ML Life Insurance Company of New York.............. 55
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
3
<PAGE>
IMPORTANT TERMS
ADDITIONAL PAYMENT: is a payment which may be made after the "free look"
period. Additional payments do not require evidence of insurability.
ATTAINED AGE: is, for each insured, the issue age of the insured plus the
number of full years since the contract date.
BASE PREMIUM: is the amount equal to the level annual premium necessary for the
face amount of the contract to endow at the younger insured's age 100. ML of New
York assumes death benefit option 1 is elected and further assumes a 5% annual
rate of return on the base premium less contract loading and a maximum cost of
insurance charge. Once determined, the base premium will not change.
CASH VALUE: is equal to the investment base plus any unearned charges for cost
of insurance and rider costs plus any debt less any accrued net loan cost since
the last contract anniversary (or since the contract date during the first
contract year).
CASH VALUE CORRIDOR FACTOR: is used to determine the amount of death benefit
purchased by $1.00 of cash value. ML of New York uses this factor in the
calculation of the variable insurance amount to make sure that the Contract
always meets the requirements of what constitutes a life insurance contract
under the Internal Revenue Code.
CONTRACT ANNIVERSARY: is the same date of each year as the contract date.
CONTRACT DATE: is used to determine processing dates, contract years and
anniversaries. It is usually the business day next following the receipt of the
initial payment at the Service Center. It is also referred to as the policy
date.
CONTRACT LOADING: is chargeable to all payments for sales load, federal tax and
premium tax charges.
DEATH BENEFIT: if option 1 is elected, it is the larger of the face amount and
the variable insurance amount; if option 2 is elected, it is the larger of the
face amount plus the cash value OR the variable insurance amount.
DEATH BENEFIT PROCEEDS: are equal to the death benefit plus any rider amounts
less any debt.
DEBT: is the sum of all outstanding loans on a Contract plus accrued interest.
FACE AMOUNT: is the minimum death benefit as long as the Contract remains in
force. The face amount will change if a change in death benefit option is made
or if a partial withdrawal is taken.
FIXED BASE: is calculated in the same manner as the cash value except that 5%
is substituted for the net rate of return, the guaranteed maximum cost of
insurance rates and guaranteed maximum rider costs are substituted for current
rates and loans and repayments are not taken into account.
GUARANTEE PERIOD: is the time guaranteed that the Contract will remain in force
regardless of investment experience, unless the debt exceeds certain values. It
is the period that a comparable fixed life insurance contract (same face amount,
payments made, guaranteed mortality table, contract loading and guaranteed
maximum rider costs) would remain in force if credited with 5% interest per
year.
IN FORCE DATE: is the date when the underwriting process is complete, the
initial payment is received and outstanding contract amendments (if any) are
received.
INITIAL PAYMENT: is the payment required to put the Contract into effect.
INVESTMENT BASE: is the amount available under a Contract for investment in the
Separate Account at any time. A contract owner's investment base is the sum of
the amounts invested in each of the selected investment divisions.
INVESTMENT DIVISION: is any division in the Separate Account.
ISSUE AGE: is, for each insured, the insured's age as of his or her birthday
nearest the contract date.
NET AMOUNT AT RISK: is the excess, as of a processing date, of the death
benefit (adjusted for interest at an annual rate of 5%) over the cash value, but
before the deduction for cost of insurance.
NET CASH SURRENDER VALUE: is equal to the cash value less debt.
PROCESSING DATES: are the contract date and the first day of each contract
quarter thereafter. Processing dates are the days when ML of New York deducts
certain charges from the investment base.
PROCESSING PERIOD: is the period between consecutive processing dates.
TARGET PREMIUM: is equal to 75% of the base premium.
VARIABLE INSURANCE AMOUNT: is computed daily by multiplying the cash value
(plus any excess sales load during the first 24 months after the Contract is
issued) by the cash value corridor factor for the younger insured at his or her
attained age.
4
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SUMMARY OF THE CONTRACT
PURPOSE OF THE CONTRACT
This flexible premium joint and last survivor variable universal life insurance
contract offers a choice of investments and an opportunity for the Contract's
investment base, cash value and death benefit to grow based on investment
results.
ML of New York doesn't guarantee that contract values will increase. Depending
on the investment results of selected investment divisions, the investment base,
cash value and death benefit may increase or decrease on any day. The contract
owner bears the investment risk. ML of New York guarantees to keep the Contract
in force during the guarantee period subject to the effect of any debt.
Life insurance is not a short term investment. The contract owner should
evaluate the need for insurance and the Contract's long term investment
potential before purchasing a contract.
AVAILABILITY AND PAYMENTS
The Contract is available in New York. A Contract may be issued for insureds
from age 20 to age 85. The minimum initial payment is 75% of the base premium.
ML of New York will not accept an initial payment that provides a guarantee
period of less than two years. The guarantee period is the period of time ML of
New York guarantees that the Contract will remain in force regardless of
investment experience unless the debt exceeds certain values.
ML of New York will issue a Contract only with a face amount (including any
additional insurance rider face amount) greater than $750,000.
Contract owners may make additional payments. Contract owners may specify an
additional payment amount on the application to be paid on either a quarterly or
annual basis. For additional payments not being withdrawn from a CMA account, ML
of New York will send reminder notices for such amounts beginning in the second
contract year.
CMA-R- INSURANCE SERVICE
Contract owners who subscribe to the Merrill Lynch Cash Management Account-R-
financial service ("CMA account") may elect to have their Contract linked to
their CMA account electronically. Certain transactions will be reflected in
monthly CMA account statements. Payments may be transferred to and from the
Contract through a CMA account.
THE INVESTMENT DIVISIONS
During the "free look" period, the initial payment less contract loading will be
invested in the investment division of the Separate Account investing in the
Money Reserve Portfolio. After the "free look" period, the contract owner may
select up to five of the 36 investment divisions in the Separate Account. (See
"Changing the Allocation" on page 14).
Payments are invested in investment divisions of the Separate Account. Ten
investment divisions of the Separate Account invest exclusively in shares of
designated mutual fund portfolios of the Merrill Lynch Series Fund, Inc. (the
"Series Fund"). Six investment divisions of the Separate Account invest
exclusively in shares of designated mutual fund portfolios of the Merrill Lynch
Variable Series Funds, Inc. (the "Variable Series Funds"). Each mutual fund
portfolio has a different investment objective. The other 20 investment
divisions invest in units of designated unit investment trusts in The Merrill
Lynch Fund of Stripped ("Zero") U.S. Treasury Securities (the "Zero Trusts").
The contract owner's payments are not invested directly in the Series Fund, the
Variable Series Funds or the Zero Trusts.
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Cash Management Account and CMA are registered trademarks of Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
5
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HOW THE DEATH BENEFIT VARIES
Contract owners elect a death benefit option on the application. Under option 1,
the death benefit equals the larger of the face amount or variable insurance
amount. Under option 2, the death benefit equals the larger of the sum of the
face amount plus the cash value or the variable insurance amount. Subject to
certain conditions, contract owners may change the death benefit option. The
death benefit may increase or decrease on any day depending on the investment
results of the investment divisions chosen by the contract owner. Death benefit
proceeds equal the death benefit reduced by any debt and increased by any rider
benefits payable. (See "Death Benefit Proceeds" on page 19.)
HOW THE INVESTMENT BASE VARIES
A Contract's investment base is the amount available for investment at any time.
On the contract date (usually the business day next following receipt of the
initial payment at the Service Center), the investment base is equal to the
initial payment less contract loading and charges for cost of insurance and
rider costs. Afterwards, it varies daily based on investment performance of the
investment divisions chosen. The contract owner bears the risk of poor
investment performance and receives the benefit of favorable investment
performance.
NET CASH SURRENDER VALUE
Contract owners may surrender their Contracts at any time and receive the net
cash surrender value. The net cash surrender value varies daily based on
investment performance of the investment divisions chosen. ML of New York
doesn't guarantee any minimum net cash surrender value. If the Contract is
surrendered within 24 months after issue, the contract owner will receive any
excess sales load previously deducted. (See "Contract Loading - Excess Sales
Load" on pages 15.)
ILLUSTRATIONS
Illustrations in this Prospectus or used in connection with the purchase of the
Contract are based on hypothetical investment rates of return. These rates are
not guaranteed. They are illustrative only and should not be deemed a
representation of past or future performance. Actual rates of return may be more
or less than those reflected in the illustrations and, therefore, actual values
will be different than those illustrated.
REPLACEMENT OF EXISTING COVERAGE
Before purchasing a Contract, the contract owner should ask his or her Merrill
Lynch registered representative if changing, or adding to, current insurance
coverage would be advantageous. Generally, it is not advisable to purchase
another contract as a replacement for existing coverage. In particular,
replacement should be carefully considered if the decision to replace existing
coverage is based solely on a comparison of contract illustrations.
RIGHTS TO CANCEL ("FREE LOOK" PERIOD) OR EXCHANGE
Once the contract owner receives the Contract, he or she should review it
carefully to make sure it is what he or she intended to purchase. A Contract may
be returned for a refund within the later of ten days after the contract owner
receives it, 45 days after the contract owner completes the application, or ten
days after ML of New York mails or personally delivers the Notice of Withdrawal
Right to the contract owner. If the Contract is returned during the "free look"
period, ML of New York will refund the initial payment without interest.
Once the Contract is issued, a contract owner may also exchange the Contract for
a contract with benefits that do not vary with the investment results of a
separate account. (See "Exchanging the Contract" on page 21.)
HOW DEATH BENEFIT AND CASH VALUE INCREASES ARE TAXED
Under current federal tax law, life insurance contracts receive tax-favored
treatment. The death benefit is generally excludable from the beneficiary's
gross income for federal income tax purposes, according to Section 101(a)(1) of
the Internal Revenue Code. An owner of a life insurance contract is not taxed on
any increase in the cash value while the contract remains in force.
6
<PAGE>
If the Contract is a modified endowment contract under federal tax law, certain
distributions made during either insured's lifetime, such as loans and partial
withdrawals from, and collateral assignments of, the Contract are includable in
gross income on an income-first basis. A 10% penalty tax may also be imposed on
distributions made before the contract owner attains age 59 1/2. Contracts that
are not modified endowment contracts under federal tax law receive preferential
tax treatment with respect to certain distributions.
For a discussion of the tax issues associated with this Contract, see "Tax
Considerations" on page 27.
LOANS
Contract owners may borrow up to the loan value of their Contracts, which is 90%
of the cash value. The maximum loan amount that may be borrowed at any time is
the difference between the loan value and debt. (See "Loans" on page 17.)
Loans are deducted from the amount payable on surrender of the Contract and are
also subtracted from any death benefit payable. Loan interest accrues daily and,
if it is not repaid each year, it is capitalized and added to the debt. If the
Contract is a modified endowment contract, the amount of capitalized interest
will be treated as a taxable withdrawal. Depending upon investment performance
of the divisions and the amounts borrowed, loans may cause a Contract to lapse.
If the Contract lapses with a loan outstanding, adverse tax consequences may
result. (See "Tax Considerations" on page 27.)
PARTIAL WITHDRAWALS
Contract owners may make partial withdrawals beginning in contract year sixteen,
subject to certain conditions. (See "Partial Withdrawals" on page 18.)
FEES AND CHARGES
CONTRACT LOADING. ML of New York deducts certain charges from all payments
before they are invested in the investment divisions. These charges are:
- Sales load equal to 46.25% of each payment through the second base premium
and 1.25% of each payment thereafter.
- State and local premium tax charge of 2% of each payment.
- A charge for federal taxes of 1.25% of each payment.
(See "Contract Loading" on page 15.)
INVESTMENT BASE CHARGES. ML of New York deducts certain charges from the
investment base. The charges deducted are:
- On the contract date and on all processing dates after the contract date,
ML of New York makes deductions for cost of insurance (see "Cost of
Insurance" on page 15) and any rider costs (see "Additional Insurance
Rider" on page 12).
- On each contract anniversary, ML of New York makes deductions for the net
loan cost if there has been any debt during the prior year. It equals a
maximum of 2% of the debt per year.
SEPARATE ACCOUNT CHARGES. There are certain charges deducted daily from the
investment results of the investment divisions in the Separate Account. These
charges are:
- an asset charge designed to cover mortality and expense risks deducted
from all investment divisions which is equivalent to .90% annually at the
beginning of the year; and
- a trust charge deducted from only those investment divisions investing in
the Zero Trusts, which is currently equivalent to .34% annually at the
beginning of the year and will never exceed .50% annually.
7
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ADVISORY FEES. The portfolios in the Series Fund and the Variable Series Funds
pay monthly advisory fees and other expenses. (See "Charges to Series Fund
Assets" on page 32 and "Charges to Variable Series Funds Assets" on page 33.)
THIS SUMMARY IS INTENDED TO PROVIDE ONLY A VERY BRIEF OVERVIEW OF THE MORE
SIGNIFICANT ASPECTS OF THE CONTRACT. FURTHER DETAIL IS PROVIDED IN THIS
PROSPECTUS AND IN THE CONTRACT. THE CONTRACT TOGETHER WITH ITS ATTACHED
APPLICATIONS, MEDICAL EXAM(S), AMENDMENTS, RIDERS AND ENDORSEMENTS CONSTITUTES
THE ENTIRE AGREEMENT BETWEEN THE CONTRACT OWNER AND ML OF NEW YORK AND SHOULD BE
RETAINED.
FOR THE DEFINITION OF CERTAIN TERMS USED IN THIS PROSPECTUS, SEE "IMPORTANT
TERMS" ON PAGE 4.
FACTS ABOUT THE SEPARATE ACCOUNT,
THE SERIES FUND, THE VARIABLE SERIES FUNDS, THE ZERO TRUSTS AND ML OF NEW YORK
THE SEPARATE ACCOUNT
The Separate Account is a separate investment account established by ML of New
York on December 4, 1991. It is registered with the Securities and Exchange
Commission as a unit investment trust pursuant to the Investment Company Act of
1940. This registration does not involve any supervision by the Securities and
Exchange Commission over the investment policies or practices of the Separate
Account. It meets the definition of a separate account under the federal
securities laws. The Separate Account is used to support the Contract as well as
to support other variable life insurance contracts issued by ML of New York.
ML of New York owns all of the assets in the Separate Account. The assets of the
Separate Account are kept separate from ML of New York's general account and any
other separate accounts it may have and, to the extent of its reserves and
liabilities, may not be charged with liabilities arising out of any other
business ML of New York conducts.
Obligations to contract owners and beneficiaries that arise under the Contract
are obligations of ML of New York. Income, gains, and losses, whether or not
realized, from assets allocated are, in accordance with the Contracts, credited
to or charged against the Separate Account without regard to other income, gains
or losses of ML of New York. As required, the assets in the Separate Account
will always be at least equal to the reserves and other liabilities of the
Separate Account. If the assets exceed the required reserves and other Contract
liabilities (which will always be at least equal to the aggregate contract value
allocated to the Separate Account under the Contracts), ML of New York may
transfer the excess to its general account.
There are currently 36 investment divisions in the Separate Account. Ten invest
in shares of a specific portfolio of the Series Fund. Six invest in shares of a
specific portfolio of the Variable Series Funds. Twenty invest in units of a
specific Zero Trust. Complete information about the Series Fund, the Variable
Series Funds and the Zero Trusts, including the risks associated with each
portfolio (including any risks associated with investment in the High Yield
Portfolio of the Series Fund) can be found in the accompanying prospectuses.
They should be read in conjunction with this Prospectus.
THE SERIES FUND
The Merrill Lynch Series Fund, Inc. is registered with the Securities and
Exchange Commission as an open-end management investment company. All of its ten
mutual fund portfolios are currently available through the Separate Account. The
investment objectives of the Series Fund portfolios are described below. There
is no guarantee that any portfolio will meet its investment objective. Meeting
the objectives depends on how well Series Fund management anticipates changing
economic conditions.
MONEY RESERVE PORTFOLIO seeks to preserve capital and liquidity. It also seeks
the highest possible current income consistent with those objectives. It invests
in short-term money market securities.
INTERMEDIATE GOVERNMENT BOND PORTFOLIO seeks the highest possible current income
consistent with the protection of capital. It invests in intermediate-term debt
securities issued or guaranteed by the U.S. Government or its agencies.
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LONG-TERM CORPORATE BOND PORTFOLIO seeks as high a level of current income as is
consistent with prudent investment risk. It invests primarily in fixed-income,
high quality corporate bonds.
HIGH YIELD PORTFOLIO seeks high current income, consistent with prudent
management, by investing principally in fixed-income securities rated in the
lower categories of the established rating services or in unrated securities of
comparable quality (commonly known as "junk bonds").
CAPITAL STOCK PORTFOLIO seeks long-term growth of capital and income, plus
moderate current income. It invests in common stocks considered to be of good or
improving quality or considered to be undervalued based on criteria such as
historical price/book value and price/earnings ratios.
GROWTH STOCK PORTFOLIO seeks above average long-term growth of capital. It
invests primarily in common stocks of aggressive growth companies considered to
have special growth potential.
MULTIPLE STRATEGY PORTFOLIO seeks the highest total investment return consistent
with prudent risk. It does this through a fully managed investment policy
utilizing equity securities, primarily common stocks of large-capitalization
companies, as well as investment grade intermediate- and long-term debt
securities and money market securities.
NATURAL RESOURCES PORTFOLIO seeks long-term growth of capital and protection of
the purchasing power of shareholders' capital by investing primarily in equity
securities of domestic and foreign companies with substantial natural resource
assets.
GLOBAL STRATEGY PORTFOLIO seeks high total investment return by investing
primarily in a portfolio of equity and fixed-income securities of U.S. and
foreign issuers.
BALANCED PORTFOLIO 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 that normally
available from an investment solely in debt securities by investing in a
balanced portfolio of fixed-income and equity securities.
The investment adviser for the Series Fund is Merrill Lynch Asset Management,
L.P. ("MLAM"), a subsidiary of Merrill Lynch & Co., Inc. and a registered
adviser under the Investment Advisers Act of 1940. The Series Fund, as part of
its operating expenses, pays an investment advisory fee to MLAM. (See "Charges
to Series Fund Assets" on page 32.)
THE VARIABLE SERIES FUNDS
The Merrill Lynch Variable Series Funds, Inc. is registered with the Securities
and Exchange Commission as an open-end management investment company. Six of its
18 mutual fund portfolios are currently available through the Separate Account.
The investment objectives of the six available Variable Series Funds portfolios
are described below. There is no guarantee that any portfolio will meet its
investment objective. Meeting the objectives depends on how well Variable Series
Funds management anticipates changing economic conditions.
BASIC VALUE FOCUS FUND seeks to attain capital appreciation, and secondarily,
income by investing in securities, primarily equities, that management of the
Fund believes are undervalued and therefore represent basic investment value.
Particular emphasis is placed on securities which provide an above-average
dividend return and sell at a below-average price/earnings ratio.
WORLD INCOME FOCUS FUND seeks to achieve high current income by investing in a
global portfolio of fixed-income securities denominated in various currencies,
including multinational currency units. The Fund may invest in United States and
foreign government and corporate fixed income securities, including high yield,
high risk, lower rated and unrated securities. The Fund will allocate its
investments among different types of fixed-income securities denominated in
various currencies.
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GLOBAL UTILITY FOCUS FUND seeks to obtain capital appreciation and current
income through investment of at least 65% of its total assets in equity and debt
securities issued by domestic and foreign companies which are, in the opinion of
management of the Fund, primarily engaged in the ownership or operation of
facilities used to generate, transmit or distribute electricity,
telecommunications, gas or water.
INTERNATIONAL EQUITY FOCUS FUND seeks to obtain capital appreciation through
investment in securities, principally equities, of issuers 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.
INTERNATIONAL BOND FUND seeks to achieve a high total investment return by
investing in a non-U.S. international portfolio of debt instruments denominated
in various currencies and multi-national currency units.
DEVELOPING CAPITAL MARKETS FOCUS FUND seeks to achieve 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. Currently, these four countries are Japan, the United Kingdom,
the United States, and Germany.
MLAM is the investment adviser for the Variable Series Funds. The Variable
Series Funds, as part of its operating expenses, pays an investment advisory fee
to MLAM. (See "Charges to Variable Series Funds Assets" on page 32.)
EQUITY GROWTH FUND -- EXEMPTIVE RELIEF
An application for exemptive relief has been filed with the Securities and
Exchange Commission on behalf of the Variable Series Funds, the Separate Account
and other affiliated parties. This relief is required under current rules of the
Securities and Exchange Commission in order for the Equity Growth Fund of the
Variable Series Funds to be made available through the Separate Account. (See
"Resolving Material Conflicts" on page 32.) Contract owners will be notified
when the necessary relief is obtained and the Equity Growth Fund is available.
EQUITY GROWTH FUND seeks to attain long-term growth of capital by investing
primarily in common stocks of relatively small companies that management of the
Fund believes have special investment value and emerging growth companies
regardless of size. Such companies are selected by management on the basis of
their long-term potential for expanding their size and profitability or for
gaining increased market recognition for their securities. Current income is not
a factor in such selection. MLAM receives from the Fund an advisory fee at the
annual rate of 0.75% of the average daily net assets of the Fund. This is a
higher fee than that of many other mutual funds, but management of the Fund
believes it is justified by the high degree of care that must be given to the
initial selection and continuous supervision of the types of portfolio
securities in which the Fund invests.
THE ZERO TRUSTS
The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities was formed
to provide safety of capital and a high yield to maturity. It seeks this through
U.S. Government-backed investments which make no periodic interest payments and,
therefore, are purchased at a deep discount. When held to maturity the
investments should receive approximately a fixed yield. The value of Zero Trust
units before maturity varies more than it would if the Zero Trusts contained
interest-bearing U.S. Treasury securities of comparable maturities.
The Zero Trust portfolios consist mainly of:
- bearer debt obligations issued by the U.S. Government stripped of their
unmatured interest coupons;
- coupons stripped from U.S. debt obligations; and
- receipts and certificates for such stripped debt obligations and coupons.
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The Zero Trusts currently available have maturity dates in years 1994 through
2011, 2013 and 2014.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of
Merrill Lynch & Co., Inc., is the sponsor for the Zero Trusts. The sponsor will
sell units of the Zero Trusts to the Separate Account and has agreed to
repurchase units when ML of New York needs to sell them to pay benefits and make
reallocations. ML of New York pays the sponsor a fee for these transactions and
is reimbursed through the trust charge assessed to the divisions investing in
the Zero Trusts. (See "Charges to Divisions Investing in the Zero Trusts" on
page 16.)
ML OF NEW YORK AND MLPF&S
ML of New York is a stock life insurance company organized under the laws of the
State of New York in 1973. It is an indirect wholly owned subsidiary of Merrill
Lynch & Co., Inc. ML of New York is authorized to sell life insurance and
annuities in 9 states. It is also authorized to sell variable life insurance and
variable annuities in certain of those jurisdictions.
MLPF&S is a wholly owned subsidiary of Merrill Lynch & Co., Inc. and provides a
broad range of securities brokerage and investment banking services in the
United States. It provides marketing services for ML of New York and is the
principal underwriter of the Contracts issued through the Separate Account. ML
of New York retains MLPF&S to provide services relating to the Contracts under a
distribution agreement. (See "Selling the Contracts" on page 26.)
FACTS ABOUT THE CONTRACT
WHO MAY BE COVERED
The Contract is available in New York. ML of New York will issue a Contract on
the lives of two insureds provided the relationship among the applicant and the
insureds meets ML of New York's insurable interest requirements and provided
neither insured is over age 85 or under age 20. The insureds' issue ages will be
determined using their ages as of their birthdays nearest the contract date. The
insureds must also meet ML of New York's medical and other underwriting
requirements, which will include undergoing a medical examination.
ML of New York assigns insureds to underwriting classes which determine the
current cost of insurance rates used in calculating cost of insurance
deductions. Contracts may be issued on insureds in standard, non-smoker or
preferred non-smoker underwriting classes. Contracts may also be issued on
insureds in a substandard underwriting class. For a discussion of the effect of
underwriting classification on deductions for cost of insurance, see "Cost of
Insurance" on page 15.
PURCHASING A CONTRACT
To purchase a Contract, the contract owner must complete an application and make
a payment. The payment is required to put the Contract into effect. In the
application, the contract owner selects the face amount of the Contract. The
amount of the minimum initial payment for a given Contract depends on the face
amount selected and the issue age, sex and underwriting class of each of the
insureds. The minimum initial payment for any Contract is 75% of the base
premium. ML of New York will not accept an initial payment for a specified face
amount that will provide a guarantee period of less than two years. (See
"Selecting the Initial Face Amount" and "Initial Guarantee Period" on page 12.)
ML of New York also will not accept an initial payment that would cause the
Contract to fail to qualify as life insurance under federal tax law as
interpreted by ML of New York.
Insurance coverage generally begins on the contract date, which is usually the
next business day following receipt of the initial payment at ML of New York's
Service Center. Temporary life insurance coverage may be provided under the
terms of a temporary insurance agreement. In accordance with ML of New York's
underwriting rules, temporary life insurance coverage may not exceed $300,000
and may not be in effect for more than 90 days. As provided for under state
insurance law, the contract owner, to
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preserve insurance age, may be permitted to backdate the Contract. In no case
may the contract date be more than six months prior to the date the application
was completed. Charges for cost of insurance and rider costs for the backdated
period are deducted on the contract date.
If ML of New York determines that, based on the contract owner's initial payment
and face amount, the Contract will be a modified endowment contract, ML of New
York will issue the Contract provided the contract owner signs a statement
acknowledging that the Contract is a modified endowment contract or agrees
either to reduce the initial payment or to increase the face amount to a level
at which the Contract will not be a modified endowment contract. For a
discussion of the tax consequences of purchasing a modified endowment contract,
see "Tax Considerations" on page 27.
SELECTING THE INITIAL FACE AMOUNT. The minimum initial face amount (excluding
any additional insurance rider face amount) is $250,000 or that face amount
which generates a $4,000 base premium, if larger. ML of New York will issue a
Contract only with a face amount (including any additional insurance rider face
amount) greater than $750,000. The maximum face amount that may be specified for
a given initial payment is the amount which will provide an initial guarantee
period of at least two years. For the same initial payment amount, the larger
the face amount requested, the shorter the guarantee period. The initial face
amount will change if the contract owner changes the death benefit option or
takes a partial withdrawal. Subject to certain conditions, the contract owner
may also purchase additional insurance coverage through an additional insurance
rider. (See "Additional Insurance Rider" on page 12.)
INITIAL GUARANTEE PERIOD. The initial guarantee period for a Contract will be
determined by the initial payment, face amount and any additional insurance
rider face amount. The guarantee period will be adjusted each time an additional
payment is made, when a partial withdrawal is taken, when the death benefit
option is changed and when the additional insurance rider face amount is
increased or decreased.
The guarantee period is the period of time ML of New York guarantees that the
Contract will remain in force regardless of investment experience unless the
debt exceeds certain values. The guarantee period is based on the guaranteed
maximum cost of insurance rates in the Contract, guaranteed maximum rider costs
(if an additional insurance rider is elected), the contract loading and a 5%
interest assumption. This means that for a given initial payment and face
amount, different joint insureds will have different guarantee periods depending
on the age, sex and underwriting class of each of the insureds. For example,
older joint insureds will have a shorter guarantee period than younger joint
insureds in the same underwriting classes.
The maximum guarantee period is for the whole of life of the younger insured.
ADDITIONAL INSURANCE RIDER
The contract owner may purchase additional insurance coverage payable to the
beneficiary on the death of the last surviving insured. Additional insurance
coverage can be purchased through an additional insurance rider when the
Contract is purchased. Under ML of New York's current procedures, the maximum
additional insurance rider face amount at the time the Contract is purchased is
three times the face amount of the Contract. The rider can also be added on any
contract anniversary thereafter, as long as an application is completed,
satisfactory evidence of insurability of both insureds is provided, and at least
one insured has not attained the age of 69. The minimum additional insurance
rider face amount at any time is $100,000. A cost of insurance charge for the
rider ("rider charge") will be deducted from the Contract's investment base on
each processing date. The rider charge will be based on the same cost of
insurance rates as the Contract. (See "Cost of Insurance" on page 15.) Because
insurance coverage through an additional insurance rider is purchased through
deductions from the Contract's investment base, there is no additional contract
loading associated with this coverage.
The additional insurance rider and all charges associated with the rider will
terminate upon the younger insured attaining age 70. At that time, all
additional insurance coverage will terminate.
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Once each year, the additional insurance rider face amount may be increased
(subject to evidence of insurability for both insureds) or decreased (after the
seventh contract anniversary); however, any change in the additional insurance
rider face amount must be at least $100,000. The effective date of the change
will be the contract anniversary next following underwriting approval of the
change. As of the effective date of the increase or decrease in the additional
insurance rider face amount, ML of New York uses the existing fixed base and the
face amount of the Contract plus the new additional insurance rider face amount
to calculate a new guarantee period. A decrease in the additional insurance
rider face amount will increase the guarantee period. An increase in the
additional insurance rider face amount will decrease the guarantee period. An
increase will not be allowed on the first contract anniversary if the face
amount of the Contract plus the new rider face amount provide a guarantee period
of less than one year from the effective date of the increase.
A decrease in the additional insurance rider face amount can cause a Contract
which is not a modified endowment contract to become a modified endowment
contract. In such a case, ML of New York will not process the decrease until the
contract owner confirms in writing his or her intent to convert the Contract to
a modified endowment contract. For a discussion of the tax consequences of
increasing or decreasing the additional insurance rider face amount, see "Tax
Considerations" on page 27.
ADDITIONAL PAYMENTS
After the "free look" period, contract owners may make additional payments.
Additional payments must be submitted with an additional payment form. The
minimum ML of New York will accept for these payments is $100. For Contracts
that are not modified endowment contracts, making an additional payment may
cause them to become modified endowment contracts. (See "Tax Considerations" on
page 27.) ML of New York will return that portion of any additional payment
beyond that necessary to extend the guarantee period to the whole of life of the
younger insured. ML of New York will also return that portion of any additional
payment that would cause the Contract to fail to qualify as life insurance under
federal tax law as interpreted by ML of New York.
Contract owners may specify an additional payment amount on the application to
be paid on either an annual or quarterly basis. For additional payments not
being withdrawn from a CMA account, ML of New York will send the contract owner
reminder notices. If a contract owner has the CMA Insurance Service, such
additional payments may be withdrawn automatically from his or her CMA account
and transferred to his or her Contract. The withdrawals will continue under the
selected plan until ML of New York is notified otherwise.
EFFECT OF ADDITIONAL PAYMENTS
Currently, any additional payments will be accepted the day they are received at
the Service Center. However, if acceptance of any portion of the payment would
cause a Contract which is not a modified endowment contract to become a modified
endowment contract, to the extent feasible, ML of New York will not accept that
portion of the payment unless the contract owner confirms in writing his or her
intent to convert the Contract to a modified endowment contract. ML of New York
may return that portion of the payment pending receipt of instructions from the
contract owner.
On the date ML of New York receives and accepts an additional payment, ML of New
York will:
- increase the Contract's investment base by the amount of the payment less
contract loading applicable to the payment;
- reflect the payment in the calculation of the variable insurance amount
(see "Variable Insurance Amount" on page 20); and
- increase the fixed base by the amount of the payment less contract loading
applicable to the payment (see "The Contract's Fixed Base" on page 17).
As of the processing date on or next following receipt and acceptance of an
additional payment, ML of New York will increase the guarantee period if the
guarantee period prior to receipt and acceptance of an additional payment is
less than for the whole of life of the younger insured.
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ML of New York will determine the increase in the guarantee period by taking the
immediate increase in the cash value resulting from the additional payment and
adding to that interest at the annual rate of 5% for the period from the date ML
of New York receives and accepts the payment to the contract processing date on
or next following such date. This is the guarantee adjustment amount. The
guarantee adjustment amount is added to the fixed base and the resulting new
fixed base is used to calculate a new guarantee period. For a discussion of the
effect of additional payments on a Contract's guarantee period, see "Additional
Payments" in the Examples on page 40.
Unless specified otherwise, if there is any debt, any payment made will be used
first as a loan repayment, with any excess applied as an additional payment.
(See "Loans" on page 17.)
INVESTMENT BASE
A Contract's investment base is the amount available for investment at any time.
It is the sum of the amounts invested in each of the investment divisions. On
the contract date, the investment base equals the initial payment less contract
loading and charges for cost of insurance and rider costs. ML of New York
adjusts the investment base daily to reflect the investment performance of the
investment divisions the contract owner has selected. (See "Net Rate of Return
for an Investment Division" on page 31.) The investment performance reflects the
deduction of Separate Account charges. (See "Charges to the Separate Account" on
page 16.)
Partial withdrawals, loans and deductions for cost of insurance, rider costs and
net loan cost decrease the investment base. (See "Charges Deducted from the
Investment Base" on page 14, "Partial Withdrawals" on page 18 and "Loans" on
page 17.) Loan repayments and additional payments increase it. Contract owners
may elect from which investment divisions loans and partial withdrawals are
taken and to which investment divisions repayments and additional payments are
added. If an election is not made, ML of New York will allocate increases and
decreases proportionately to the contract owner's investment base as then
allocated in the investment divisions.
INITIAL INVESTMENT ALLOCATION AND PREALLOCATION. The initial payment less
contract loading will be invested in the division investing in the Money Reserve
Portfolio. Through the first 14 days following the in force date, the initial
payment less contract loading will remain in that division. Thereafter, the
investment base will be reallocated to the investment divisions selected by the
contract owner on the application, if different. The contract owner may invest
in up to five of the 36 investment divisions in the Separate Account.
CHANGING THE ALLOCATION. After the "free look" period, a contract owner's
investment base may be invested in up to five investment divisions at any one
time. Currently, investment allocations may be changed as often as desired. ML
of New York reserves the right to charge up to $25 for each change in excess of
six each year. In order to change their investment base allocation, contract
owners must call or write to the Service Center. (See "Some Administrative
Procedures" on page 23.)
ZERO TRUST ALLOCATIONS. ML of New York will notify contract owners 30 days
before a Zero Trust in which they have invested matures. Contract owners must
notify ML of New York by calling or writing at least seven days before the
maturity date how to reinvest their funds in the division investing in that Zero
Trust. If ML of New York is not notified, it will move the contract owner's
investment base in that division to the investment division investing in the
Money Reserve Portfolio.
Units of a specific Zero Trust may no longer be available when a request for
allocation is received. Should this occur, ML of New York will attempt to notify
the contract owner immediately so that the request can be changed.
ALLOCATION TO THE DIVISION INVESTING IN THE NATURAL RESOURCES PORTFOLIO. ML of
New York and the Separate Account reserve the right to suspend the sale of units
of the investment division investing in the Natural Resources Portfolio in
response to conditions in the securities markets or otherwise.
CHARGES DEDUCTED FROM THE INVESTMENT BASE
The charges described below are deducted pro-rata from the investment base on
processing dates.
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COST OF INSURANCE. ML of New York deducts the cost of insurance from the
investment base on the contract date and on each processing date thereafter.
This charge compensates ML of New York for the cost of providing life insurance
coverage for the insureds. It is based on the underwriting class, sex and
attained age of each insured and the Contract's net amount at risk.
To determine the cost of insurance, ML of New York multiplies the current cost
of insurance rate by the Contract's net amount at risk. The net amount at risk
is the difference, as of a processing date, between the death benefit (adjusted
for interest at an annual rate of 5%) and the cash value, but before the
deduction for cost of insurance.
Current cost of insurance rates may be equal to or less than the guaranteed cost
of insurance rates depending on the underwriting class, sex and attained age of
each insured. Current cost of insurance rates are lower for insureds in a
preferred non-smoker underwriting class than for insureds of the same age in a
non-smoker underwriting class and are lower for insureds in a non-smoker
underwriting class than for insureds of the same age and sex in a standard
underwriting class.
ML of New York guarantees that the current cost of insurance rates will never
exceed the maximum guaranteed rates shown in the Contract. The maximum
guaranteed rates for Contracts (other than those issued on a substandard basis)
do not exceed the rates based on the 1980 Commissioners Standard Ordinary
Mortality Table (CSO Table). ML of New York may use rates that are equal to or
less than these rates, but never greater. The maximum rates for Contracts issued
on a substandard basis are based on a multiple of the 1980 CSO Table. Any change
in the cost of insurance rates will apply to all joint insureds of the same age,
sex and underwriting class whose Contracts have been in force for the same
length of time.
NET LOAN COST. The net loan cost is explained under "Loans" on page 17.
RIDER CHARGES. Rider charges are deducted on the contract date and on each
processing date thereafter. These charges are explained under "Additional
Insurance Rider" on page 12.
CONTRACT LOADING
Chargeable to each payment is an amount called the contract loading. The
contract loading equals 49.5% of each payment through the second base premium
and 4.5% of each payment thereafter. This charge consists of a sales load, a
charge for federal taxes and a state and local premium tax charge.
The sales load, equal to 46.25% of each payment through the second base premium
and 1.25% of each payment thereafter, compensates ML of New York for sales
expenses and the costs for underwriting and issuing the Contract. The sales load
may be reduced in certain group or sponsored arrangements as described on pages
26 and 27. ML of New York anticipates that the sales load may be insufficient to
cover its distribution expenses. Any shortfall will be made up from ML of New
York's general account which may include amounts derived from mortality gains
and asset charges. In no event will the sales load exceed the amount permitted
by the Investment Company Act of 1940.
The charge for federal taxes, equal to 1.25% of each payment, compensates ML of
New York for a significantly higher corporate income tax liability resulting
from Section 848 of the Internal Revenue Code as enacted by the Omnibus Budget
Reconciliation Act of 1990. (See "ML of New York's Income Taxes" on page 30.)
The charge for federal taxes is reasonable in relation to ML of New York's
increased federal tax burden under Section 848 resulting from the receipt of
premiums under the Contract.
The state and local premium tax charge, equal to 2% of each payment, compensates
ML of New York for state and local premium taxes ML of New York must pay when a
payment is accepted.
EXCESS SALES LOAD. Excess sales load is equal to any sales load deducted from
the first two base premiums in excess of 30% of the first base premium and 10%
of the second base premium. It is calculated and applied in the following
situations only during the first 24 months after the Contract is issued:
- It is refunded if the Contract is surrendered during the first 24 months
after issue.
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- It is added to the cash value so as to continue the Contract in effect if
debt exceeds the larger of cash value and the fixed base during the first
24 months after issue.
- It is added to the cash value in determining the variable insurance amount
during the first 24 months after issue.
CHARGES TO THE SEPARATE ACCOUNT
Each day ML of New York deducts an asset charge from each division of the
Separate Account. The total amount of this charge is computed at .90% annually
at the beginning of the year. Of this amount, .75% is for
- the risk assumed by ML of New York that insureds as a group will live for
a shorter time than actuarial tables predict. As a result, ML of New York
would be paying more in death benefits than planned; and
- the risk assumed by ML of New York that it will cost more to issue and
administer the Contracts than expected.
The remaining amount, .15%, is for
- the risk assumed by ML of New York with respect to potentially unfavorable
investment results. This risk is that the Contract's cash value cannot
cover the charges due during the guarantee period.
The total asset charge may not be increased. ML of New York will realize a gain
from this charge to the extent it is not needed to provide for benefits and
expenses under the Contracts.
CHARGES TO DIVISIONS INVESTING IN THE ZERO TRUSTS. ML of New York assesses a
daily trust charge against the assets of each division investing in the Zero
Trusts. This charge reimburses ML of New York for the transaction charge paid to
MLPF&S when units are sold to the Separate Account.
The trust charge is currently equivalent to .34% annually at the beginning of
the year. It may be increased, but will not exceed .50% annually at the
beginning of the year. The charge is based on cost (taking into account loss of
interest) with no expected profit.
TAX CHARGES. ML of New York has the right under the Contract to impose a charge
against Separate Account assets for any taxes imposed on the Separate Account's
investment earnings. (See "ML of New York's Income Taxes" on page 30.)
ADVISORY FEES. The portfolios in the Series Fund and the Variable Series Funds
pay monthly advisory fees and other expenses. (See "Charges to Series Fund
Assets" on page 32 and "Charges to Variable Series Funds Assets" on page 33.)
GUARANTEE PERIOD
ML of New York guarantees that the Contract will stay in force for the guarantee
period unless the debt exceeds certain contract values. (See "Loans" on page
17.) Additional payments will extend the guarantee period until such time as it
is guaranteed for the whole of life of the younger insured. The guarantee period
will be affected by partial withdrawals and by increases and decreases in the
face amount of the additional insurance rider. A reserve is held in ML of New
York's general account to support this guarantee.
WHEN THE GUARANTEE PERIOD IS LESS THAN FOR LIFE. After the end of the guarantee
period, ML of New York may cancel the Contract if the cash value on a processing
date is insufficient to cover charges due on that date. (See "Charges Deducted
from the Investment Base" on page 14.)
ML of New York will notify the contract owner before cancelling the Contract.
The contract owner will then have 61 days to pay an amount which, after
deducting contract loading, equals at least three times the charges that were
due (and not deducted) on the processing date when the cash value was determined
to be insufficient. If this amount is paid, ML of New York will deduct the
charges due on the
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processing date and apply the balance to investment base. ML of New York will
cancel the Contract at the end of this grace period if payment has not yet been
received. At that time, ML of New York will deduct any charges for cost of
insurance and rider costs that were applicable to the grace period and refund to
the contract owner any unearned charges for cost of insurance and rider costs.
If ML of New York cancels a Contract, it may be reinstated while both insureds
are still living if:
- the reinstatement is requested within three years after the end of the
grace period;
- ML of New York receives satisfactory evidence of the insureds'
insurability; and
- the reinstatement payment is made. The reinstatement payment is the
minimum payment for which ML of New York would then issue a Contract for
the minimum guarantee period with the same face amount as the original
Contract, based on the insureds' attained ages and underwriting classes as
of the effective date of the reinstated Contract.
A reinstated Contract will be effective on the processing date on or next
following the date the reinstatement application is approved.
THE CONTRACT'S FIXED BASE. On the contract date, the fixed base equals the cash
value. From then on, the fixed base is calculated in the same manner as the cash
value except that the calculation substitutes 5% for the net rate of return, the
guaranteed maximum cost of insurance rates and the guaranteed maximum rider
costs are substituted for the current rates and it is calculated as though there
had been no loans or repayments. The fixed base is equivalent to the cash value
for a comparable fixed benefit contract with the same face amount and guarantee
period. After the end of the guarantee period the fixed base is zero. The fixed
base is used to limit ML of New York's right to cancel the Contract during the
guarantee period.
AUTOMATIC ADJUSTMENT. On any contract anniversary, if the cash value is greater
than the fixed base necessary to cause the guarantee period to equal the whole
of life of the younger insured, the guarantee period will be extended to the
whole of life of the younger insured.
CASH VALUE
A Contract's cash value fluctuates daily with the investment results of the
investment divisions selected. ML of New York doesn't guarantee any minimum cash
value. The cash value on any date equals the total investment base plus debt
plus unearned charges for cost of insurance and rider costs less any accrued net
loan cost since the last contract anniversary (or since the contract date during
the first contract year).
CANCELLING THE CONTRACT. A contract owner may cancel the Contract at any time
while either insured is living. The request must be in writing in a form
satisfactory to ML of New York. All rights to death benefits will end on the
date the written request is sent to ML of New York.
The contract owner will then receive the net cash surrender value. The contract
owner may elect to receive this amount either in a single payment or under one
or more income plans described on page 25. The net cash surrender value will be
determined as of the date of receipt of the written request at the Service
Center.
If the Contract is cancelled during the first 24 months after the issue date of
the Contract, any sales load previously deducted from the first two base
premiums in excess of 30% of the first base premium and 10% of the second base
premium will be refunded. (See "Contract Loading - Excess Sales Load" on page
15.)
LOANS
Contract owners may use the Contract as collateral to borrow funds from ML of
New York. The minimum loan is $200. Contract owners may repay all or part of the
loan at any time during either insured's lifetime. Each repayment must be for at
least $200 or the amount of the debt, if less.
When a loan is taken, ML of New York transfers a portion of the contract owner's
investment base equal to the amount borrowed out of the investment divisions and
holds it as collateral in its general account. When a loan repayment is made, ML
of New York transfers an amount equal to the repayment from the
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general account to the investment divisions. The contract owner may select from
which divisions borrowed amounts should be taken and which divisions should
receive repayments (including interest payments). Otherwise, ML of New York will
take the borrowed amounts proportionately from and make repayments
proportionately to the contract owner's investment base as then allocated in the
investment divisions.
If a contract owner has the CMA Insurance Service, loans may be transferred to
and loan repayments transferred from his or her CMA account.
EFFECT ON DEATH BENEFIT AND CASH VALUE. Whether or not a loan is repaid, taking
a loan will have a permanent effect on a Contract's cash value and may have a
permanent effect on its death benefit. This is because the collateral for a loan
doesn't participate in the performance of the investment divisions while the
loan is outstanding. If the amount credited to the collateral is more than what
is earned in the investment divisions, the cash value may be higher as a result
of the loan, as may be the death benefit. Conversely, if the amount credited is
less, the cash value will be lower, as may be the death benefit. In that case,
the lower cash value may cause the Contract to lapse sooner than if no loan had
been taken.
LOAN VALUE. The loan value of a Contract equals 90% of its cash value. The sum
of all outstanding loan amounts plus accrued interest is called debt. The
maximum amount that can be borrowed at any time is the difference between the
loan value and the debt.
INTEREST. While a loan is outstanding, ML of New York charges interest at a
maximum rate of 6% annually. Currently ML of New York charges interest of 4.75%
annually. Interest accrues each day and payments are due at the end of each
contract year. If the interest isn't paid when due, it is added to the
outstanding loan amount. Interest paid on a loan may not be tax deductible.
The amount held in ML of New York's general account as collateral for a loan
earns interest at a minimum of 4% annually. Currently a loan amount earns
interest at 4%.
NET LOAN COST. On each contract anniversary, ML of New York reduces the
investment base by the net loan cost (the difference between the interest
charged and the earnings on the amount held as collateral in the general
account) and adds that amount to the amount held in the general account as
collateral for the loan. Since the interest charged is 4.75% and the collateral
earnings on such amounts are 4%, the current net loan cost on loaned amounts is
.75%. The net loan cost is taken into account in determining the net cash
surrender value of the Contract if the date of surrender is not a contract
anniversary.
CANCELLATION DUE TO EXCESS DEBT. If the debt exceeds the larger of the cash
value and the fixed base on a processing date, ML of New York will cancel the
Contract 61 days after a notice of intent to terminate the Contract is mailed to
the contract owner unless ML of New York has received at least the minimum
repayment amount specified in the notice. During the first 24 months after the
Contract is issued, ML of New York will add any excess sales load to the cash
value so as to continue the Contract in effect if debt exceeds the larger of the
cash value and the fixed base. (See "Contract Loading - Excess Sales Load" on
page 15.) If the Contract lapses with a loan outstanding, adverse tax
consequences may result. (See "Tax Considerations" on page 27.)
PARTIAL WITHDRAWALS
Beginning in contract year sixteen, a contract owner may make partial
withdrawals by submitting a request in a form satisfactory to ML of New York.
The effective date of the withdrawal is the date a withdrawal request is
received at the Service Center. Contract owners may elect to receive the
withdrawal amount either in a single payment or, subject to ML of New York's
rules, under one or more income plans.
Contract owners may make one partial withdrawal each contract year. The minimum
amount for each partial withdrawal is $1,000. The remaining cash value less any
debt following a partial withdrawal must equal or exceed $5,000. The amount of
any partial withdrawal may not exceed the loan value as of the effective date of
the partial withdrawal less any debt. A partial withdrawal may not be repaid.
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EFFECT ON INVESTMENT BASE, FIXED BASE, CASH VALUE AND DEATH BENEFIT. As of the
effective date of the withdrawal, the investment base, fixed base, cash value
and, if the contract owner has elected death benefit option 1, the face amount
of the Contract will each be reduced by the amount of the partial withdrawal. ML
of New York allocates this reduction proportionately to the investment base in
each of the contract owner's investment divisions unless notified otherwise. The
variable insurance amount will also reflect the partial withdrawal as of the
effective date.
EFFECT ON GUARANTEE PERIOD. As of the processing date on or next following the
effective date of a partial withdrawal, ML of New York calculates a new
guarantee period. This is done by taking the immediate decrease in cash value
resulting from the partial withdrawal and adding to that amount interest at an
annual rate of 5% for the period from the date of the withdrawal to the contract
processing date on or next following such date. This is the guarantee adjustment
amount. The guarantee adjustment amount is subtracted from the fixed base and
the resulting new fixed base is used to calculate a new guarantee period. For a
discussion of the effect of partial withdrawals on a Contract's guarantee
period, see "Partial Withdrawals" in the Examples on page 40.
A partial withdrawal may cause a Contract which is not a modified endowment
contract to become a modified endowment contract. In such a case, ML of New York
will not process the partial withdrawal until the contract owner confirms in
writing his or her intent to convert the Contract to a modified endowment
contract. For a discussion of the tax issues associated with a partial
withdrawal, see "Tax Considerations" on page 27.
DEATH BENEFIT PROCEEDS
ML of New York will pay the death benefit proceeds to the beneficiary upon
receipt of all information needed to process the payment, including due proof of
the death of the last surviving insured. Proof of death for both insureds must
be received. There is no death benefit payable at the first death.
If one of the insureds should die within two years from the Contract's issue
date, within two years from the effective date of any requested change in the
death benefit option requiring evidence of insurability, or within two years of
an increase in the additional insurance rider face amount requiring evidence of
insurability, due proof of the insured's death should be sent promptly to the
Service Center since ML of New York may pay only a limited benefit or contest
the Contract. (See "Incontestability" and "Payment in Case of Suicide" on page
24.)
DEATH BENEFIT PROCEEDS. The death benefit payable depends on the death benefit
option in effect on the date of death.
- Under option 1, the death benefit is equal to the larger of the face
amount or the variable insurance amount.
- Under option 2, the death benefit is equal to the larger of the face
amount plus the cash value or the variable insurance amount.
Contract owners who wish to have investment experience reflected in insurance
coverage should choose option 2. Contract owners who wish to have insurance
coverage that generally does not vary in amount should choose option 1.
The death benefit will never be less than the amount required to keep the
Contract qualified as life insurance under federal income tax laws.
To determine the death benefit proceeds, ML of New York will subtract from the
death benefit any debt and add to the death benefit any rider benefits payable.
The values used in calculating the death benefit proceeds are as of the date of
death. If the last surviving insured dies during the grace period, the death
benefit proceeds equal the death benefit proceeds in effect immediately prior to
the grace period reduced by any overdue charges. (See "When the Guarantee Period
is Less Than for Life" on page 16.)
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VARIABLE INSURANCE AMOUNT. ML of New York determines the variable insurance
amount daily by:
- calculating the cash value (plus any excess sales load during the first 24
months after the Contract is issued); and
- multiplying it by the cash value corridor factor (explained below) for the
younger insured at his or her attained age.
The variable insurance amount will never be less than required by federal tax
law.
CASH VALUE CORRIDOR FACTOR. The cash value corridor factor is used to determine
the amount of death benefit purchased by $1.00 of cash value. It is based on the
attained age of the younger insured on the date of calculation. It decreases
daily as the younger insured's age increases. As a result, the variable
insurance amount as a multiple of the cash value will decrease over time. A
table of cash value corridor factors as of each anniversary is included in the
Contract.
TABLE OF ILLUSTRATIVE CASH VALUE CORRIDOR FACTORS
ON ANNIVERSARIES
<TABLE>
<CAPTION>
ATTAINED AGE FACTOR
- ---------------- -----------
<S> <C>
40 and under 250%
45 215%
55 150%
65 120%
75-90 105%
95 and over 100%
</TABLE>
CHANGING THE DEATH BENEFIT OPTION. On each contract anniversary beginning with
the fifteenth, the contract owner may change the death benefit option. ML of New
York will change the face amount in order to keep the death benefit constant on
the effective date of the change. Therefore, if the change is from option 1 to
option 2, the face amount of the Contract will be decreased by the cash value on
the date of the change. A change in the death benefit option will not be
permitted if it would result in a face amount of less than $100,000. If the
change is from option 2 to option 1, the face amount of the Contract will be
increased by the cash value on the date of the change. For a discussion of the
effect of a change in the death benefit option on a Contract, see "Changing the
Death Benefit Option" in the Examples on page 41.
If the contract owner requests a change in the death benefit option from option
1 to option 2, evidence of insurability in a form satisfactory to ML of New York
that the insureds are insurable may be required. In no event will a change be
permitted if, after the change, the Contract would not qualify as life insurance
under federal tax laws as interpreted by ML of New York.
A change in the death benefit option may cause a Contract which is not a
modified endowment contract to become a modified endowment contract. In such a
case, ML of New York will not process the change until the contract owner
confirms in writing his or her intent to convert the Contract to a modified
endowment contract. For a discussion of the tax issues associated with a change
in the death benefit option, see "Tax Considerations" on page 27.
PAYMENT OF DEATH BENEFIT PROCEEDS
ML of New York will generally pay the death benefit proceeds to the beneficiary
within seven days after all the information needed to process the payment is
received at its Service Center. ML of New York will add interest from the date
of the last surviving insured's death to the date of payment at an annual rate
of at least 4%. The beneficiary may elect to receive the proceeds either in a
single payment or under one or more income plans described on page 25.
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Payment may be delayed if the Contract is being contested or under the
circumstances described in "Using the Contract" on page 22 and "Other Contract
Provisions" on page 24. If a delay is necessary and death of the last surviving
insured occurs prior to the end of the guarantee period, ML of New York may
delay payment of any excess of the death benefit over the face amount. After the
guarantee period has expired, ML of New York may delay payment of the entire
death benefit.
RIGHTS TO CANCEL OR EXCHANGE
"FREE LOOK" PERIOD. A contract owner may cancel his or her Contract during the
"free look" period by returning it for a refund. Generally, the "free look"
period ends the later of ten days after the Contract is received, 45 days after
the contract owner completes the application or ten days after ML of New York
mails or personally delivers to the contract owner the Notice of Withdrawal
Right. To cancel the Contract during the "free look" period, the contract owner
must mail or deliver the Contract to ML of New York's Service Center or to the
registered representative who sold it. ML of New York will refund the payment
made without interest. If cancelled, ML of New York may require the contract
owner to wait six months before applying again.
EXCHANGING THE CONTRACT. Contract owners may exchange their Contract at any
time for a joint and last survivor contract with benefits that do not vary with
the investment results of a separate account. A request to exchange must be made
in writing. To exchange, the original Contract must be returned to ML of New
York's Service Center. The exchange will not require evidence of insurability.
The new contract will have the same owner, insureds and beneficiary as those of
the original Contract on the date of the exchange. The new contract will also
have the same death benefit and the same net amount at risk as this Contract at
the time of exchange and will have payments which are based on the same issue
ages, sexes, and underwriting classes of the insureds. Any debt will be carried
over to the new contract. For a discussion of the tax consequences of exchanging
the Contract, see "Tax Considerations" on page 27.
REPORTS TO CONTRACT OWNERS
After the end of each processing period, contract owners will be sent a
statement of the allocation of their investment base, death benefit, cash value,
any debt and, if there has been a change, the guarantee period and any increase
or decrease in the additional insurance rider face amount. All figures will be
as of the end of the immediately preceding processing period. The statement will
show the amounts deducted from or added to the investment base during the
processing period. The statement will also include any other information that
may be currently required by New York.
Contract owners will receive confirmation of all financial transactions. Such
confirmations will show the price per unit of each of the contract owner's
investment divisions, the number of units a contract owner has in the investment
division and the value of the investment division computed by multiplying the
quantity of units by the price per unit. (See "Net Rate of Return for an
Investment Division" on page 31.) The sum of the values in each investment
division is a contract owner's investment base.
Contract owners will also be sent an annual and a semi-annual report containing
financial statements and a list of portfolio securities of the Series Fund and
the Variable Series Funds, as required by the Investment Company Act of 1940.
CMA ACCOUNT REPORTING. Contract owners who have the CMA Insurance Service will
have certain Contract information included as part of their regular monthly CMA
account statement. It will list the investment base allocation, death benefit,
cash value, debt and any CMA account activity affecting the Contract during the
month.
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MORE ABOUT THE CONTRACT
USING THE CONTRACT
OWNERSHIP. The contract owner is usually one of the insureds, unless another
owner has been named in the application. The contract owner has all rights and
options described in the Contract.
The contract owner may want to name a contingent owner. If the contract owner
dies before the last surviving insured, the contingent owner will own the
contract owner's interest in the Contract and have the contract owner's rights.
If the contract owner doesn't name a contingent owner, the contract owner's
estate will own the contract owner's interest in the Contract upon the owner's
death.
If there is more than one contract owner, ML of New York will treat the owners
as joint tenants with rights of survivorship unless the ownership designation
provides otherwise. The owners must exercise their rights and options jointly,
except that any one of the owners may reallocate the Contract's investment base
by phone if the owner provides the personal identification number as well as the
Contract number. One contract owner must be designated, in writing, to receive
all notices, correspondence and tax reporting to which contract owners are
entitled under the Contract.
CHANGING THE OWNER. During either insured's lifetime, the contract owner has
the right to transfer ownership of the Contract. The new owner will have all
rights and options described in the Contract. The change will be effective as of
the day the notice is signed, but will not affect any payment made or action
taken by ML of New York before receipt of the notice of the change at the
Service Center. Changing the owner may have tax consequences. (See "Tax
Considerations" on page 27.)
ASSIGNING THE CONTRACT AS COLLATERAL. Contract owners may assign the Contract
as collateral security for a loan or other obligation. This does not change the
ownership. However, the contract owner's rights and any beneficiary's rights are
subject to the terms of the assignment. Contract owners must give satisfactory
written notice at the Service Center in order to make or release an assignment.
ML of New York is not responsible for the validity of any assignment.
For a discussion of the tax issues associated with a collateral assignment, see
"Tax Considerations" on page 27.
NAMING BENEFICIARIES. ML of New York will pay the primary beneficiary the death
benefit proceeds of the Contract on the last surviving insured's death. If the
primary beneficiary has died, ML of New York will pay the contingent
beneficiary. If no contingent beneficiary is living, ML of New York will pay the
estate of the last surviving insured.
A contract owner may name more than one person as primary or contingent
beneficiaries. ML of New York will pay proceeds in equal shares to the surviving
beneficiaries unless the beneficiary designation provides otherwise.
A contract owner has the right to change beneficiaries during either insured's
lifetime, unless the primary beneficiary designation has been made irrevocable.
If the designation is irrevocable, the primary beneficiary must consent when
certain rights and options are exercised under this Contract. If the beneficiary
is changed, the change will take effect as of the day the notice is signed, but
will not affect any payment made or action taken by ML of New York before
receipt of the notice of the change at the Service Center.
MATURITY PROCEEDS. The maturity date is the contract anniversary nearest the
younger insured's 100th birthday. On the maturity date, ML of New York will pay
the net cash surrender value to the contract owner, provided either insured is
still living at that time.
HOW ML OF NEW YORK MAKES PAYMENTS. ML of New York generally pays death benefit
proceeds, partial withdrawals, loans and net cash surrender value on
cancellation from the Separate Account within seven days after the Service
Center receives all the information needed to process the payment.
However, it may delay payment from the Separate Account if it isn't practical
for ML of New York to value or dispose of Trust units, Series Fund shares or
Variable Series Funds shares because:
- the New York Stock Exchange is closed, other than for a customary weekend
or holiday; or
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- trading on the New York Stock Exchange is restricted by the Securities and
Exchange Commission; or
- the Securities and Exchange Commission declares that an emergency exists
such that it is not reasonably practical to dispose of securities held in
the Separate Account or to determine the value of their assets.
SOME ADMINISTRATIVE PROCEDURES
Described below are certain administrative procedures. ML of New York reserves
the right to modify them or to eliminate them. For administrative and tax
purposes, ML of New York may from time to time require that specific forms be
completed in order to accomplish certain transactions, including surrenders.
PERSONAL IDENTIFICATION NUMBER. ML of New York will send each contract owner a
four-digit personal identification number ("PIN") shortly after the Contract is
placed in force and before the end of the "free look" period. This number must
be given when the contract owner calls the Service Center to get information
about the Contract, to make a loan (if an authorization is on file), or to make
other requests. Each PIN will be accompanied by a notice reminding the contract
owner that all of the investment base is in the division investing in the Money
Reserve Portfolio, and that this allocation may be changed by calling or writing
to the Service Center. (See "Changing the Allocation" on page 14.)
REALLOCATING THE INVESTMENT BASE. Contract owners can reallocate their
investment base either in writing in a form satisfactory to ML of New York or by
phone. If the reallocation is requested by phone, contract owners must give
their personal identification number as well as their Contract number. ML of New
York will give a confirmation number over the phone and then follow up in
writing.
REQUESTING A LOAN. A loan may be requested in writing in a form satisfactory to
ML of New York or, if all required authorization forms are on file, by phone.
Once the authorization has been received at the Service Center, contract owners
can call the Service Center, give their Contract number, name and personal
identification number, and tell ML of New York the loan amount and from which
divisions the loan should be transferred.
Upon request, ML of New York will wire the funds to the contract owner's account
at the financial institution named on the contract owner's authorization. ML of
New York will generally wire the funds within two working days of receipt of the
request. If the contract owner has the CMA Insurance Service, funds may be
transferred directly to that CMA account.
REQUESTING PARTIAL WITHDRAWALS. Beginning in contract year 16, partial
withdrawals may be requested in writing in a form satisfactory to ML of New
York. A contract owner may request a partial withdrawal by phone if all required
phone authorization forms are on file. Once the authorization has been received
at the Service Center, contract owners can call the Service Center, give their
Contract number, name and personal identification number, and tell ML of New
York how much to withdraw and from which investment divisions.
Upon request, ML of New York will wire the funds to the contract owner's account
at the financial institution named on the contract owner's authorization. ML of
New York will generally wire the funds within two working days of receipt of the
request. If the contract owner has the CMA Insurance Service, funds may be
transferred directly to that CMA account.
TELEPHONE REQUESTS. A telephone request for a loan, partial withdrawal or a
reallocation received before 4 p.m. (ET) generally will be processed the same
day. A request received at or after 4 p.m. (ET) will be processed the following
business day. ML of New York reserves the right to change or discontinue
telephone transfer procedures.
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OTHER CONTRACT PROVISIONS
IN CASE OF ERRORS IN THE APPLICATION. If an age or sex given in the application
is wrong, it could mean that the face amount or any other Contract benefit is
wrong. ML of New York will pay what the payments made would have bought for the
guarantee period at the true age or sex.
INCONTESTABILITY ML of New York will rely on statements made in the
applications. Legally, they are considered representations, not warranties. ML
of New York can contest the validity of a Contract if any material misstatements
are made in the initial application or any application for reinstatement. ML of
New York can also contest the validity of any change in face amount due to a
change in death benefit option if any material misstatements are made in any
application required for the change. ML of New York can also contest any amount
of any death benefit which wouldn't be payable except for the fact that an
increase in the additional insurance rider face amount which requires evidence
of insurability was requested if any material misstatements are made in any
application required for the increase.
ML of New York won't contest the validity of a Contract after it has been in
effect during the lifetime of either insured for two years from the date of
issue or the date of any reinstatement. A change in face amount due to a change
in the death benefit option which requires evidence of insurability won't be
contested after the change has been in effect during the lifetime of either
insured for two years from the date of the change. Nor will ML of New York
contest any amount of death benefit attributable to an increase in the
additional insurance rider face amount which requires evidence of insurability
after the increase has been in effect during the lifetime of either insured for
two years from the date of the change.
At the end of the second contract year, ML of New York will mail the contract
owner a notice requesting that he or she tell ML of New York if either insured
has died. Failure to tell ML of New York of the death of either insured will not
avoid a contest if ML of New York has grounds to do so, even if the Contract is
still in force.
PAYMENT IN CASE OF SUICIDE. If either insured commits suicide within two years
from the Contract's issue date or the date of any reinstatement, ML of New York
will pay only a limited death benefit and then terminate the Contract. The
benefit will be equal to the amount of the payments made, reduced by any debt.
Within 90 days of the death of the first insured, the owner may elect to apply
the amount of the limited benefit to a single life contract on the life of the
surviving insured, subject to the following provisions:
- The new contract's issue date will be the date of death of the deceased
insured.
- The insurance age will be surviving insured's attained age on the new
contract's issue date.
- No medical examination or other evidence of insurability will be required
for the new contract.
- The face amount of the new contract will be determined by applying the
limited benefit amount as a single payment under the new contract. The
face amount of the new contract may not exceed the face amount of this
Contract.
- A written request for a new contract must be received at the Service
Center.
- The new contract cannot involve any other life.
- Additional benefits or riders available on this Contract will be available
with the new contract only with ML of New York's consent.
- The new contract will be issued at ML of New York's then current rates for
the surviving insured's attained age, based on the underwriting class
assigned to the surviving insured when this Contract was underwritten. The
underwriting class for the new contract may differ from that of this
Contract.
- If the amount of insurance that would be purchased under the new contract
falls below the minimum insurance amounts currently allowed, this option
will not be available.
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If either insured commits suicide within two years of the effective date of a
change in the death benefit option requiring evidence of insurability or of the
effective date of an increase in the additional insurance rider face amount
requiring evidence of insurability, any amount of death benefit which would not
be payable except for the fact that the face amount was increased will be
limited to the amount of cost of insurance deductions made for the increase.
ESTABLISHING SURVIVORSHIP. If ML of New York is unable to determine which of
the insureds was the last survivor on the basis of the proofs of death provided,
it will consider insured No. 1 as designated in the application to be the last
surviving insured.
CONTRACT CHANGES - APPLICABLE FEDERAL TAX LAW. To receive the tax treatment
accorded to life insurance under federal income tax law, the Contract must
qualify initially and continue to qualify as life insurance under the Internal
Revenue Code or successor law. Therefore, to maintain this qualification to the
maximum extent of the law, ML of New York reserves the right to return any
additional payments that would cause the Contract to fail to qualify as life
insurance under applicable tax law as interpreted by ML of New York. Further, ML
of New York reserves the right to make changes in the Contract or its riders or
to make distributions from the Contract to the extent it is necessary to
continue to qualify the Contract as life insurance. Any changes will apply
uniformly to all Contracts that are affected and contract owners will be given
advance written notice of such changes.
POLICY SPLIT RIDER. This rider allows the contract owner to split the Contract
into two new individual contracts upon divorce of the insureds or if certain
federal tax law changes occur. Certain conditions described in the rider,
including evidence of insurability of both insureds, must be met before the
rider's benefit can be exercised. For more information about this rider and the
conditions and rules relating to the exercise of any rights under the rider, the
contract owner should call the Service Center. The Service Center can also
provide the contract owner with a prospectus for the individual contract. For a
discussion of the possible tax consequences of splitting the Contract, see "Tax
Considerations" on page 27.
INCOME PLANS
ML of New York offers several income plans to provide for payment of the death
benefit proceeds to the beneficiary. The contract owner may choose one or more
income plans at any time during the lifetime of either insured. If no plan has
been chosen when the last surviving insured dies, the beneficiary has one year
to apply the death benefit proceeds either paid or payable to that beneficiary
to one or more of the plans. The contract owner may also choose one or more
income plans if the Contract is cancelled or a partial withdrawal is taken. ML
of New York's approval is needed for any plan where any income payment would be
less than $100. Payments under these plans do not depend on the investment
results of a separate account.
Income plans include:
ANNUITY PLAN. An amount can be used to purchase a single premium
immediate annuity.
INTEREST PAYMENT. Amounts can be left with ML of New York to earn
interest at an annual rate of at least 3%. Interest payments can be made
annually, semi-annually, quarterly or monthly.
INCOME FOR A FIXED PERIOD. Payments are made in equal installments for
a fixed number of years.
INCOME FOR LIFE. Payments are made in equal monthly installments until
death of a named person or end of a designated period, whichever is later.
The designated period may be for 10 or 20 years.
INCOME OF A FIXED AMOUNT. Payments are made in equal installments until
proceeds applied under the option and interest on unpaid balance at not less
than 3% per year are exhausted.
JOINT LIFE INCOME. Payments are made in monthly installments as long as
at least one of two named persons is living. While both are living, full
payments are made. If one dies, payments at two-thirds of the full amount
are made. Payments end completely when both named persons die.
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Once in effect, some of the plans may not provide any surrender rights.
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, ML of New York may reduce the sales
load, cost of insurance rates and the minimum payment and may modify
underwriting classifications and requirements.
Group arrangements include those in which a trustee or an employer, for example,
purchases Contracts covering a group of individuals on a group basis. Sponsored
arrangements include those in which an employer allows ML of New York to sell
Contracts to its employees on an individual basis. Costs for sales,
administration and mortality generally vary with the size and stability of the
group and the reasons the Contracts are purchased, among other factors. ML of
New York takes all these factors into account when reducing charges. To qualify
for reduced charges, a group or sponsored arrangement must meet certain
requirements, including requirements for size and number of years in existence.
Group or sponsored arrangements that have been set up solely to buy Contracts or
that have been in existence less than six months will not qualify for reduced
charges.
ML of New York makes any reductions according to rules in effect when an
application for a Contract or additional payment is approved. It may change
these rules from time to time. However, reductions in charges will not
discriminate unfairly against any person.
UNISEX LEGAL CONSIDERATIONS FOR EMPLOYERS
In 1983 the Supreme Court held in ARIZONA GOVERNING COMMITTEE V. NORRIS that
optional annuity benefits provided under an employee's deferred compensation
plan could not, under Title Vll of the Civil Rights Act of 1964, vary between
men and women. In addition, legislative, regulatory or decisional authority of
some states may prohibit use of sex-distinct mortality tables under certain
circumstances.
Generally, the Contracts offered by this Prospectus are based on mortality
tables that distinguish between men and women. As a result, the Contract pays
different benefits to men and women of the same age. Employers and employee
organizations should check with their legal advisers before purchasing these
Contracts.
SELLING THE CONTRACTS
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") is the principal
underwriter of the Contract. It was organized in 1958 under the laws of the
state of Delaware and is registered as a broker dealer under the Securities
Exchange Act of 1934. It is a member of the National Association of Securities
Dealers, Inc. ("NASD"). The principal business address of MLPF&S is World
Financial Center, 250 Vesey Street, New York, New York 10281. MLPF&S also acts
as principal underwriter of other variable life insurance and variable annuity
contracts issued by ML of New York, as well as variable life insurance and
variable annuity contracts issued by Merrill Lynch Life Insurance Company, an
affiliate of ML of New York. MLPF&S also acts as principal underwriter of
certain mutual funds managed by MLAM, the investment adviser for the Series Fund
and the Variable Series Funds.
Contracts are sold by registered representatives of MLPF&S who are also licensed
through Merrill Lynch Life Agency, Inc. as insurance agents for ML of New York.
ML of New York has entered into a distribution agreement with MLPF&S and a
companion sales agreement with Merrill Lynch Life Agency, Inc. through which
agreements the Contracts and other variable life insurance contracts issued
through the Separate Account are sold and the registered representatives are
compensated by Merrill Lynch Life Agency, Inc. and/or MLPF&S.
The maximum commissions ML of New York will pay to the applicable insurance
agency to be used to pay commissions to registered representatives are as
follows: 55% of the target premium under the Contract; plus 3% of payments in
excess of the target premium, up to an amount of payments equal to ten base
premiums; plus 1.5% of payments thereafter. Commissions may be paid in the form
of non-cash compensation.
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The amounts paid under the distribution and sales agreements for the Separate
Account for the years ended December 31, 1993 and December 31, 1992 were
$143,207 and $226, respectively.
MLPF&S may arrange for sales of the Contract by other broker-dealers who are
registered under the Securities Exchange Act of 1934 and are members of the
NASD. Registered representatives of these other broker-dealers may be
compensated on a different basis than MLPF&S registered representatives.
TAX CONSIDERATIONS
DEFINITION OF LIFE INSURANCE. In order to qualify as a life insurance contract
for federal tax purposes, the Contract must meet the definition of a life
insurance contract which is set forth in Section 7702 of the Internal Revenue
Code of 1986, as amended (the "Code"). The manner in which Section 7702 should
be applied to certain features of the Contract offered in this Prospectus is not
directly addressed by Section 7702. Nevertheless, ML of New York believes it is
reasonable to conclude that the Contract will meet the Section 7702 definition
of a life insurance contract, so that:
- the death benefit should be fully excludable from the gross income of the
beneficiary under Section 101(a)(1) of the Code; and
- the contract owner should not be considered in constructive receipt of the
cash value, including any increases, until actual cancellation of the
Contract (see "Tax Treatment of Loans and Other Distributions" on page
28).
In the absence of final regulations or other pertinent interpretations of
Section 7702, however, there is necessarily some uncertainty as to whether a
Contract will meet the statutory life insurance contract definition,
particularly if it insures substandard risks. If a Contract were determined not
to be a life insurance contract for purposes of Section 7702, such Contract
would not provide most of the tax advantages normally provided by a life
insurance contracts.
ML of New York thus reserves the right to make changes in the Contract if such
changes are deemed necessary to attempt to assure its qualification as a life
insurance contract for tax purposes. (See "Contract Changes - Applicable Federal
Tax Law" on page 25.)
DIVERSIFICATION. Section 817(h) of the Code provides that separate account
investments (or the investments of a mutual fund, the shares of which are owned
by separate accounts of insurance companies) underlying the Contract must be
"adequately diversified" in accordance with Treasury regulations in order for
the Contract to qualify as life insurance. The Treasury Department has issued
regulations prescribing the diversification requirements in connection with
variable contracts. The Separate Account, through the Series Fund and the
Variable Series Funds, intends to comply with these requirements. Although ML of
New York doesn't control the Series Fund or the Variable Series Funds, it
intends to monitor the investments of the Series Fund and the Variable Series
Funds to ensure compliance with the requirements prescribed by the Treasury
Department.
In connection with the issuance of the temporary diversification regulations,
the Treasury Department stated that it anticipates the issuance of regulations
or rulings prescribing the circumstances in which an owner's control of the
investments of a separate account may cause the owner, rather than the insurance
company, to be treated as the owner of the assets in the account. If the
contract owner is considered the owner of the assets of the Separate Account,
income and gains from the account would be included in the owner's gross income.
The ownership rights under the Contract offered in this Prospectus are similar
to, but different in certain respects from, those described by the Internal
Revenue Service in rulings in which it determined that the owners were not
owners of separate account assets. For example, the owner of the Contract has
additional flexibility in allocating payments and cash values. These differences
could result in the owner being treated as the owner of the assets of the
Separate Account. In addition, ML of New York does not know what standards will
be set forth in the regulations or rulings which the Treasury has stated it
expects to be issued. ML of New York therefore reserves the right to modify the
Contract as necessary to attempt to prevent the contract owner from being
considered the owner of the assets of the Separate Account.
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TAX TREATMENT OF LOANS AND OTHER DISTRIBUTIONS. Federal tax law establishes a
class of life insurance contracts referred to as modified endowment contracts. A
modified endowment contract is any contract which satisfies the definition of
life insurance set forth in Section 7702 of the Code but fails to meet the 7-pay
test. This test applies a cumulative limit on the amount of payments that can be
made into a contract each year in the first seven contract years in order to
avoid modified endowment treatment. In effect, compliance with the 7-pay test
requires that contracts be purchased with a higher face amount for a given
initial payment than would otherwise be required, at a minimum, to meet the
definition of life insurance. Contracts that do not satisfy the 7-pay test,
including contracts which initially satisfied the 7-pay test but later failed
the test, will be considered modified endowment contracts subject to the
following distribution rules. Loans and partial withdrawals from, as well as
collateral assignments of, modified endowment contracts will be treated as
distributions to the contract owner. Furthermore, if the loan interest is
capitalized by adding the amount due to the balance of the loan, the amount of
the capitalized interest will be treated as a distribution which may be subject
to income tax, to the extent of the income in the contract. All pre-death
distributions (including loans, partial withdrawals and collateral assignments)
from these contracts will be included in gross income on an income-first basis
to the extent of any income in the contract (the cash value less the contract
owner's investment in the contract) immediately before the distribution.
The law also imposes a 10% penalty tax on pre-death distributions (including
loans, capitalized interest, collateral assignments, partial withdrawals and
complete surrenders) from modified endowment contracts to the extent they are
included in income, unless such amounts are distributed on or after the taxpayer
attains age 59 1/2, because the taxpayer is disabled, or as substantially equal
periodic payments over the taxpayer's life (or life expectancy) or over the
joint lives (or joint life expectancies) of the taxpayer and his or her
beneficiary.
Contracts that comply with the 7-pay test will not be classified as modified
endowment contracts. Loans from contracts that are not modified endowment
contracts will be considered indebtedness of an owner and no part of a loan will
constitute income to the owner. In addition, pre-death distributions from these
contracts will generally not be included in gross income to the extent that the
amount received does not exceed the owner's investment in the contract. A lapse
of such a contract with an outstanding loan will result in the treatment of the
loan cancellation (including the accrued interest) as a distribution under the
contract and may be taxable.
Compliance with the 7-pay test does not imply or guarantee that only seven
payments will be required for the initial death benefit to be guaranteed for
life. Making additional payments or reducing the benefits (for example, through
a partial withdrawal, a change in death benefit option or terminating additional
benefits under a rider) may violate the 7-pay test or, at a minimum, reduce the
amount that may be paid in the future under the 7-pay test. Further, reducing
the death benefit at any time will require retroactive retesting and will
probably result in a failure of the 7-pay test regardless of any efforts by ML
of New York to provide a payment schedule that will not violate the 7-pay test.
Any contract received in an exchange for a modified endowment contract will be
considered a modified endowment contract and will be subject to the tax
treatment accorded to modified endowment contracts that is described in the
Prospectus. A contract that is not originally classified as a modified endowment
contract can become so classified if there is a reduction in benefits at any
time (including, for example, by a decrease in the additional insurance rider
face amount or a change in death benefit option) or if a material change is made
in the contract at any time. A material change includes, but is not limited to,
a change in the benefits that was not reflected in a prior 7-pay test
computation, such as a change in death benefit option. This could result from
additional payments made after 7-pay test calculations done at the time of the
contract exchange. Contract owners may choose not to exercise their right to
make additional payments, in order to preserve their contract's current tax
treatment.
If a contract becomes a modified endowment contract, distributions that occur
during the contract year it becomes a modified endowment contract and any
subsequent contract year will be taxed as distributions from a modified
endowment contract. In addition, distributions from a contract within two years
before
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it becomes a modified endowment contract will be taxed in this manner. This
means that a distribution made from a contract that is not a modified endowment
contract could later become taxable as a distribution from a modified endowment
contract.
SPECIAL TREATMENT OF LOANS ON THE CONTRACT. If there is any borrowing against
the Contract, whether a modified endowment contract or not, the interest paid on
loans may not be tax deductible.
AGGREGATION OF MODIFIED ENDOWMENT CONTRACTS. In the case of a pre-death
distribution (including a loan, partial withdrawal, collateral assignment or
complete surrender) from a contract that is treated as a modified endowment
contract under the rules described above, a special aggregation requirement may
apply for purposes of determining the amount of the income on the contract.
Specifically, if ML of New York or any of its affiliates issues to the same
contract owner more than one modified endowment contract within a calendar year,
then for purposes of measuring the income on the contract with respect to a
distribution from any of those contracts, the income on the contract for all
those contracts will be aggregated and attributed to that distribution.
TAX TREATMENT OF POLICY SPLIT. This rider permits a Contract to be split into
two other individual contracts upon the occurrence of a divorce of joint
insureds or certain changes in federal estate tax law. A policy split could have
adverse tax consequences; for example, it is not clear whether a policy split
will be treated as a nontaxable exchange under Sections 1031 through 1043 of the
Code. If a policy split is not treated as a nontaxable exchange, a split could
result in the recognition of taxable income in an amount up to any gain in the
Contract at the time of the split. In addition, it is not clear whether the
individual contracts that result from a policy split would in all circumstances
be treated as life insurance contracts for federal income tax purposes and, if
so treated, whether the individual contracts would be classified as modified
endowment contracts. (See "Tax Treatment of Loans and Other Distributions" on
page 28.) Before the contract owner exercises rights provided by the policy
split rider, it is important that he or she consult with a competent tax advisor
regarding the possible consequences of a policy split.
OTHER TAX CONSIDERATIONS. The transfer of the Contract or the designation of a
beneficiary may have federal, state, and/or local transfer and inheritance tax
consequences, including the imposition of gift, estate and generation skipping
transfer taxes. For example, the transfer of the Contract to, or the designation
as beneficiary of, or the payment of proceeds to, a person who is assigned to a
generation which is two or more generations below the generation assignment of
the contract owner, may have generation skipping transfer tax considerations
under Section 2601 of the Code.
The individual situation of each contract owner or beneficiary will determine
the extent, if any, to which federal, state and local transfer taxes may be
imposed. The contract owner should consult with a tax advisor for specific
information in connection with these taxes.
The particular situation of each contract owner or beneficiary will determine
how ownership or receipt of contract proceeds will be treated for purposes of
federal estate tax as well as state and local estate, inheritance, generation
skipping and other taxes.
OTHER TRANSACTIONS. Changing the contract owner may have tax consequences.
Exchanging this Contract for another involving the same insureds should have no
federal income consequences if there is no debt and no cash or other property is
received, according to Section 1035(a)(1) of the Code. The new contract would
have to satisfy the 7-pay test from the date of the exchange to avoid
characterization as a modified endowment contract. An exchange for a new
contract may, however, result in a loss of grandfathering status for statutory
changes made after the old contract was issued. A tax advisor should be
consulted before effecting an exchange.
OWNERSHIP OF THIS CONTRACT BY NON-NATURAL PERSONS. The above discussion of the
tax consequences arising from the purchase, ownership and transfer of the
Contract has assumed that the owner of the Contract consists of one or more
individuals. Organizations exempt from taxation under Section 501(a) of the Code
may be subject to additional or different tax consequences with respect to
transactions such as contract loans. Further, organizations purchasing Contracts
covering the life of an individual who is an officer or employee of, or is
financially interested in, the taxpayer's trade or business,
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may be unable to deduct all or a portion of the interest or payments made with
respect to the Contract. Such organizations should obtain tax advice prior to
the acquisition of this Contract and also before entering into any subsequent
changes to or transactions under this Contract.
ML OF NEW YORK DOES NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY
CONTRACT OR ANY TRANSACTION REGARDING THE CONTRACT.
THE ABOVE DISCUSSION IS NOT INTENDED AS TAX ADVICE. FOR TAX ADVICE CONTRACT
OWNERS SHOULD CONSULT A COMPETENT TAX ADVISOR. ALTHOUGH THIS TAX DISCUSSION IS
BASED ON ML OF NEW YORK'S UNDERSTANDING OF FEDERAL INCOME TAX LAWS AS THEY ARE
CURRENTLY INTERPRETED, IT CAN'T GUARANTEE THAT THOSE LAWS OR INTERPRETATIONS
WILL REMAIN UNCHANGED.
ML OF NEW YORK'S INCOME TAXES
As a result of the Omnibus Budget Reconciliation Act of 1990, insurance
companies are generally required to capitalize and amortize certain policy
acquisition expenses over a ten-year period rather than currently deducting such
expenses. This treatment applies to the deferred acquisition expenses of a
Contract and results in a significantly higher corporate income tax liability
for ML of New York in early contract years. ML of New York makes a charge to
compensate ML of New York for the anticipated higher corporate income taxes that
result from the receipt of payments under a Contract. (See "Contract Loading" on
page 15.)
Currently, ML of New York makes no charges to the Separate Account for any
federal, state or local taxes that it incurs that may be attributable to the
Separate Account or to the Contracts. ML of New York, however, reserves the
right to make a charge for assessments of federal premium taxes or federal,
state or local excise, profits or income taxes measured by or attributable to
the receipt of premiums.
REINSURANCE
ML of New York intends to reinsure some of the risks assumed under the
Contracts.
MORE ABOUT THE SEPARATE ACCOUNT AND ITS DIVISIONS
ABOUT THE SEPARATE ACCOUNT
The Separate Account is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940 as a unit investment trust. This
registration does not involve any supervision by the Securities and Exchange
Commission of ML of New York's management or the management of the Separate
Account. The Separate Account is also governed by the laws of the State of New
York, ML of New York's state of domicile.
ML of New York owns all of the assets of the Separate Account. These assets are
held separate and apart from all of ML of New York's other assets. ML of New
York maintains records of all purchases and redemptions of Series Fund, Variable
Series Funds and Zero Trust shares by each of the investment divisions.
CHANGES WITHIN THE ACCOUNT
ML of New York may from time to time make additional investment divisions
available to contract owners. These divisions will invest in investment
portfolios ML of New York finds suitable for the Contracts. ML of New York also
has the right to eliminate investment divisions from the Separate Account, to
combine two or more investment divisions, or to substitute a new portfolio for
the portfolio in which an investment division invests. A substitution may become
necessary if, in ML of New York's judgment, a portfolio no longer suits the
purposes of the Contracts. This may happen due to a change in laws or
regulations or in a portfolio's investment objectives or restrictions, or
because the portfolio is no longer available for investment, or for some other
reason. ML of New York would get any required prior approval from the New York
State Insurance Department and the Securities and Exchange Commission before
making such a substitution. It would also get any other required approvals
before making such a substitution.
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Subject to any required regulatory approvals, ML of New York reserves the right
to transfer assets of the Separate Account or of any of the investment divisions
to another separate account or investment division.
When permitted by law, ML of New York reserves the right to:
- deregister the Separate Account under the Investment Company Act of 1940;
- operate the Separate Account as a management company under the Investment
Company Act of 1940;
- restrict or eliminate any voting rights of contract owners, or other
persons who have voting rights as to the Separate Account; and
- combine the Separate Account with other separate accounts.
NET RATE OF RETURN FOR AN INVESTMENT DIVISION
Each investment division has a distinct unit value (also referred to as "price"
or "separate account index" in reports furnished to the contract owner by ML of
New York). When payments or other amounts are allocated to an investment
division, a number of units are purchased based on the value of a unit of the
investment division as of the end of the valuation period during which the
allocation is made. When amounts are transferred out of, or deducted from, an
investment division, units are redeemed in a similar manner. A valuation period
is each business day together with any non-business days before it. A business
day for an investment division is any day the New York Stock Exchange is open or
there's enough trading in portfolio securities to materially affect the net
asset value of an investment division.
For each investment division, the separate account index was initially set at
$10.00. The separate account index for each subsequent valuation period
fluctuates based upon the net rate of return for that period. ML of New York
determines the net rate of return of an investment division at the end of each
valuation period. The net rate of return reflects the investment performance of
the division for the valuation period and is net of the charges to the Separate
Account described above.
For divisions investing in the Series Fund or the Variable Series Funds, shares
are valued at net asset value and reflect reinvestment of any dividends or
capital gains distributions declared by the Series Fund or the Variable Series
Funds.
For divisions investing in the Zero Trusts, units of each Zero Trust are valued
at the sponsor's repurchase price, as explained in the prospectus for the Zero
Trusts.
THE SERIES FUND AND THE VARIABLE SERIES FUNDS
BUYING AND REDEEMING SHARES. The Series Fund and the Variable Series Funds sell
and redeem their shares at net asset value. Any dividend or capital gain
distribution will be reinvested at net asset value in shares of the same
portfolio.
VOTING RIGHTS. ML of New York is the legal owner of all Series Fund and
Variable Series Funds shares held in the Separate Account. As the owner, it has
the right to vote on any matter put to vote at the Series Fund's and the
Variable Series Funds' shareholder meetings. However, ML of New York will vote
all Series Fund and Variable Series Funds shares attributable to Contracts
according to instructions received from contract owners. Shares attributable to
Contracts for which no voting instructions are received will be voted in the
same proportion as shares in the respective investment divisions for which
instructions are received. Shares not attributable to Contracts will also be
voted in the same proportion as shares in the respective divisions for which
instructions are received. If any federal securities laws or regulations, or
their present interpretation, change to permit ML of New York to vote Series
Fund and Variable Series Funds shares in its own right, it may elect to do so.
ML of New York determines the number of shares that contract owners have in an
investment division by dividing their Contract's investment base in that
division by the net asset value of one share of the portfolio. Fractional votes
will be counted. ML of New York will determine the number of shares for
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which a contract owner may give voting instructions 90 days or less before each
Series Fund or Variable Series Funds meeting. ML of New York will request voting
instructions by mail at least 14 days before the meeting.
Under certain circumstances, ML of New York may be required by state regulatory
authorities to disregard voting instructions. This may happen if following the
instructions would mean voting to change the sub-classification or investment
objectives of the portfolios, or to approve or disapprove an investment advisory
contract.
ML of New York may also disregard instructions to vote for changes in the
investment policy or the investment adviser if it disapproves of the proposed
changes. ML of New York would disapprove a proposed change only if it was:
- contrary to state law;
- prohibited by state regulatory authorities; or
- decided by management that the change would result in overly speculative
or unsound investments.
If ML of New York disregards voting instructions, it will include a summary of
its actions in the next semi-annual report.
RESOLVING MATERIAL CONFLICTS. Shares of the Series Fund are available for
investment by ML of New York, Merrill Lynch Life Insurance Company (an indirect
wholly owned subsidiary of Merrill Lynch & Co., Inc.) and Monarch Life Insurance
Company (an insurance company not affiliated with ML of New York or Merrill
Lynch & Co., Inc.). Shares of the Variable Series Funds are currently sold only
to separate accounts of ML of New York, Merrill Lynch Life Insurance Company and
Family Life Insurance Company (an insurance company not affiliated with ML of
New York or Merrill Lynch & Co., Inc.) to fund benefits under certain variable
life insurance and variable annuity contracts. The Basic Value Focus Fund, World
Income Focus Fund, Global Utility Focus Fund, International Equity Focus Fund,
International Bond Fund and Developing Capital Markets Focus Fund are only
offered to separate accounts of ML of New York and Merrill Lynch Life Insurance
Company. The Equity Growth Fund is also offered to Family Life Insurance
Company.
It is possible that differences might arise between ML of New York's Separate
Account and one or more of the other separate accounts which invest in the
Series Fund or the Variable Series Funds. In some cases, it is possible that the
differences could be considered "material conflicts". Such a "material conflict"
could also arise due to changes in the law (such as state insurance law or
federal tax law) which affect these different variable life and variable annuity
insurance separate accounts. It could also arise by reason of difference in
voting instructions from ML of New York's contract owners and those of the other
insurance companies, or for other reasons. ML of New York will monitor events to
determine how to respond to such conflicts. If a conflict occurs, ML of New York
may be required to eliminate one or more investment divisions of the Separate
Account which invest in the Series Fund or the Variable Series Funds or
substitute a new portfolio for a portfolio in which a division invests. In
responding to any conflict, ML of New York will take the action which it
believes necessary to protect its contract owners.
CHARGES TO SERIES FUND ASSETS
The Series Fund incurs operating expenses and pays a monthly advisory fee to
MLAM. This fee equals an annual rate of:
- .50% of the first $250 million of the aggregate average daily net assets
of the Series Fund;
- .45% of the next $50 million of such assets;
- .40% of the next $100 million of such assets;
- .35% of the next $400 million of such assets; and
- .30% of such assets over $800 million.
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One or more of the insurance companies investing in the Series Fund has agreed
to reimburse the Series Fund so that the ordinary expenses of each portfolio
(which include the monthly advisory fee) do not exceed .50% of the portfolio's
average daily net assets. These companies have also agreed to reimburse MLAM for
any amounts it pays under the investment advisory agreement, as described below.
These reimbursement obligations will remain in effect so long as the advisory
agreement remains in effect and cannot be amended or terminated without Series
Fund approval.
Under its investment advisory agreement, MLAM has agreed that if any portfolio's
aggregate ordinary expenses (excluding interest, taxes, brokerage commissions
and extraordinary expenses) exceed the expense limitations for investment
companies in effect under any state securities law or regulation, it will reduce
its fee for that portfolio by the amount of the excess. If required, it will
reimburse the Series Fund for the excess. This reimbursement agreement will
remain in effect so long as the advisory agreement remains in effect and cannot
be amended without Series Fund approval.
CHARGES TO VARIABLE SERIES FUNDS ASSETS
The Variable Series Funds incurs operating expenses and pays a monthly advisory
fee to MLAM. This fee equals an annual rate of .60% of the average daily net
assets of the Basic Value Focus Fund, World Income Focus Fund and Global Utility
Focus Fund. This fee equals an annual rate of .75%, .60% and 1.00% of the
average daily net assets of the International Equity Focus Fund, the
International Bond Fund and the Developing Capital Markets Focus Fund,
respectively.
Under its investment advisory agreement, MLAM has agreed to reimburse the
Variable Series Funds if and to the extent that in any fiscal year the operating
expenses of any Fund exceeds the most restrictive expense limitations then in
effect under any state securities laws or published regulations thereunder.
Expenses for this purpose include MLAM's fee but exclude interest, taxes,
brokerage commissions and extraordinary expenses, such as litigation. No fee
payments will be made to MLAM with respect to any Fund during any fiscal year
which would cause the expenses of such Fund to exceed the pro rata expense
limitation applicable to such Fund at the time of such payment. This
reimbursement agreement will remain in effect so long as the advisory agreement
remains in effect and cannot be amended without Variable Series Funds approval.
MLAM and Merrill Lynch Life Agency, Inc. have entered into two agreements which
limit the operating expenses paid by each Fund in a given year to 1.25% of its
average daily net assets, which is less than the expense limitations imposed by
state securities laws or published regulations thereunder. These reimbursement
agreements provide that any expenses in excess of 1.25% of average daily net
assets will be reimbursed to the Fund by MLAM which, in turn, will be reimbursed
by Merrill Lynch Life Agency, Inc.
33
<PAGE>
THE ZERO TRUSTS
THE 20 ZERO TRUSTS:
<TABLE>
<CAPTION>
Targeted Rate of Return to
Maturity as
Zero Trust Maturity Date of April 25, 1994
- ---------- ------------------ -------------------------------
<C> <S> <C>
1994 August 15, 1994 2.65
1995 November 15, 1995 3.94
1996 February 15, 1996 4.26
1997 February 15, 1997 4.67
1998 February 15, 1998 4.99
1999 February 15, 1999 5.28
2000 February 15, 2000 5.38
2001 February 15, 2001 5.48
2002 February 15, 2002 5.64
2003 August 15, 2003 5.85
2004 February 15, 2004 5.88
2005 February 15, 2005 5.92
2006 February 15, 2006 5.84
2007 February 15, 2007 5.94
2008 February 15, 2008 6.15
2009 February 15, 2009 6.19
2010 February 15, 2010 6.26
2011 February 15, 2011 6.26
2013 February 15, 2013 6.32
2014 February 15, 2014 6.30
</TABLE>
TARGETED RATE OF RETURN TO MATURITY
Because the underlying securities in the Zero Trusts will grow to their face
value on the maturity date, it is possible to estimate a compound rate of growth
to maturity for the Zero Trust units.
But because the units are held in the Separate Account, the asset charge and the
trust charge (described in "Charges to the Separate Account" on page 16) must be
taken into account in estimating a targeted rate of return for the Separate
Account. The targeted rate of return to maturity for the Separate Account
depends on the compound rate of growth adjusted for these charges. It does not,
however, represent the actual return on a payment ML of New York might receive
under the Contract on that date, since it does not reflect the charges for
contract loading deducted from payments to a Contract, charges for cost of
insurance and rider charges and any net loan cost deducted from a Contract's
investment base.
Since the value of the Zero Trust units will vary daily to reflect the market
value of the underlying securities, the compound rate of growth to maturity for
the Zero Trust units and the targeted rate of return to maturity for the
Separate Account will vary correspondingly.
ILLUSTRATIONS
ILLUSTRATIONS OF DEATH BENEFITS, INVESTMENT BASE, NET CASH SURRENDER VALUES AND
ACCUMULATED PAYMENTS
The tables on pages 36 through 39 demonstrate the way in which the Contract
works. The tables are based on the following ages, face amounts, payments and
guarantee periods and shows values based upon both current and maximum mortality
charges.
1. The illustration on page 36 is for a Contract issued to a male age
65 and a female age 60 both in the standard non-smoker underwriting class
with annual payments of $39,890 through contract year 37, an initial face
amount of $1.5 million, an initial guarantee period of 7.5 years and
coverage under death benefit option 1. It assumes current mortality charges.
34
<PAGE>
2. The illustration on page 37 is for a Contract issued to a male age
65 and a female age 60 both in the standard non-smoker underwriting class
with annual payments of $39,890 through contract year 37, an initial face
amount of $1.5 million, an initial guarantee period of 7.5 years and
coverage under death benefit option 1. It assumes maximum mortality charges.
3. The illustration on page 38 is for a Contract issued to a male age
65 and a female age 60 both in the standard non-smoker underwriting class
with annual payments of $141,410 through contract year 32, an initial face
amount of $1.5 million, an initial guarantee period of 14 years and coverage
under death benefit option 2. It assumes current mortality charges.
4. The illustration on page 39 is for a Contract issued to a male age
65 and a female age 60 both in the standard non-smoker underwriting class
with annual payments of $141,410 through contract year 32, an initial face
amount of $1.5 million, an initial guarantee period of 14 years and coverage
under death benefit option 2. It assumes maximum mortality charges.
The tables show how the death benefit, investment base and net cash surrender
value may vary over an extended period of time assuming hypothetical rates of
return (i.e., investment income and capital gains and losses, realized or
unrealized) equivalent to constant gross annual rates of 0%, 6% and 12%.
The death benefit, investment base and net cash surrender value for a Contract
would be different from those shown if the actual rates of return averaged 0%,
6% and 12% over a period of years, but also fluctuated above or below those
averages for individual contract years.
The amounts shown for the death benefit, investment base and net cash surrender
value as of the end of each contract year take into account the daily asset
charge in the Separate Account equivalent to .90% (annually at the beginning of
the year) of assets attributable to the Contracts at the beginning of the year.
The amounts shown in the tables also assume an additional charge of .490%. This
charge assumes that investment base is allocated equally among all investment
divisions and is based on the 1993 expenses (including monthly advisory fees)
for the Series Fund and the Variable Series Funds, anticipated 1994 expenses for
the International Bond Fund and the Developing Capital Markets Focus Fund, and
the current trust charge. This charge does not reflect expenses incurred by the
Global Strategy Portfolio and the Natural Resources Portfolio of the Series Fund
in 1993, which were reimbursed to the Series Fund by MLAM. The reimbursements
amounted to .01% and .09%, respectively, of the average daily net assets of
these portfolios. (See "Charges to Series Fund Assets" on page 32.) The actual
charge under a Contract for Series Fund and Variable Series Funds expenses and
the trust charge will depend on the actual allocation of the investment base and
may be higher or lower depending on how the investment base is allocated.
Taking into account the .90% asset charge in the Separate Account and the .490%
charge described above, the gross annual rates of investment return of 0%, 6%
and 12% correspond to net annual rates of -1.39%, 4.56%, and 10.51%,
respectively. The gross returns are before any deductions and should not be
compared to rates which are after deduction of charges.
The hypothetical returns shown on the tables are without any income tax charges
that may be attributable to the Separate Account in the future, although they do
reflect the charge for federal taxes included in the contract loading. (See
"Contract Loading" on page 15.) In order to produce after tax returns of 0%, 6%
and 12%, the Series Fund and the Variable Series Funds would have to earn a
sufficient amount in excess of 0% or 6% or 12% to cover any tax charges
attributable to the Separate Account.
The second column of the tables shows the amount which would accumulate if an
amount equal to the payments were invested to earn interest (after taxes) at 5%
compounded annually.
ML of New York will furnish upon request a personalized illustration reflecting
the proposed insureds' ages, face amount and the payment amounts requested. The
illustration will also use current cost of insurance rates and will assume that
the proposed insureds are in a standard non-smoker underwriting class.
35
<PAGE>
JOINT INSUREDS: FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
STANDARD NON-SMOKER UNDERWRITING CLASS
ANNUAL PAYMENTS OF $39,890 FOR 37 YEARS
FACE AMOUNT(1): $1.5 MILLION INITIAL GUARANTEE PERIOD: 7.5 YEARS
DEATH BENEFIT OPTION 1
BASED ON CURRENT MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT (3)
PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL INVESTMENT RETURN OF
INTEREST AT 5% AS -----------------------------------
CONTRACT YEAR PAYMENTS (2)(6) OF END OF YEAR 0% 6% 12%
--------------------- --------------- ----------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
1................... $ 39,890 $ 41,885 $1,500,000 $1,500,000 $ 1,500,000
2................... 39,890 85,864 1,500,000 1,500,000 1,500,000
3................... 39,890 132,042 1,500,000 1,500,000 1,500,000
4................... 39,890 180,529 1,500,000 1,500,000 1,500,000
5................... 39,890 231,440 1,500,000 1,500,000 1,500,000
6................... 39,890 284,897 1,500,000 1,500,000 1,500,000
7................... 39,890 341,026 1,500,000 1,500,000 1,500,000
8................... 39,890 399,962 1,500,000 1,500,000 1,500,000
9................... 39,890 461,845 1,500,000 1,500,000 1,500,000
10................... 39,890 526,822 1,500,000 1,500,000 1,500,000
15................... 39,890 903,813 1,500,000 1,500,000 1,500,000
20................... 39,890 1,384,957 1,500,000 1,500,000 1,990,333
30................... 39,890 2,782,767 1,500,000 1,729,412 5,270,958
age 99............... 0 4,927,608 1,500,000 2,533,972 13,432,376
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR
INVESTMENT BASE AND END OF YEAR
NET CASH SURRENDER VALUE (3)(4) CASH VALUE (3)(5)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
--------------------------------- ---------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
--------------------- -------- ---------- ----------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
1................... $ 19,602 $ 20,791 $ 21,980 $ 19,602 $ 20,791 $ 21,980
2................... 38,521 42,105 45,831 38,521 42,105 45,831
3................... 74,827 83,109 91,975 74,827 83,109 91,975
4................... 110,560 125,915 142,903 110,560 125,915 142,903
5................... 145,687 170,567 199,082 145,687 170,567 199,082
6................... 180,200 217,136 261,054 180,200 217,136 261,054
7................... 214,055 265,660 329,389 214,055 265,660 329,389
8................... 247,223 316,199 404,739 247,223 316,199 404,739
9................... 279,649 368,795 487,813 279,649 368,795 487,813
10................... 311,322 423,537 579,448 311,322 423,537 579,448
15................... 450,657 726,909 1,157,073 450,657 726,909 1,157,073
20................... 534,032 1,081,474 1,895,555 534,032 1,081,474 1,895,555
30................... 251,288 1,647,059 5,019,960 251,288 1,647,059 5,019,960
age 99............... 0 2,533,972 13,432,376 0 2,533,972 13,432,376
<FN>
- --------------------------
(1) Assumes no additional insurance rider face amount.
(2) All payments are illustrated as if made at the beginning of the contract
year.
(3) Assumes annual payments are made and no loans or withdrawals have been
taken.
(4) Investment base will equal net cash surrender value on each contract
anniversary. If the Contract is surrendered within 24 months after issue,
the contract owner will also receive any excess sales load previously
deducted.
(5) Cash value will equal investment base and net cash surrender value on each
contract anniversary if no loans have been taken.
(6) The payments shown may extend beyond the year in which the automatic
adjustment is made. At annual rates of return of 6% and 12% and currently
mortality charges, the guarantee period reaches life of the younger
insured in contract years 21 and 14, respectively. Once a guarantee of
life is reached, no more payments would be accepted. Values shown at
annual rates of return of 0%, 6% and 12% do not reflect any payments shown
after a guarantee of life is reached.
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND
CASH VALUE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY ML OF NEW YORK OR THE SERIES FUND OR THE VARIABLE SERIES FUNDS OR THE
ZERO TRUSTS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
36
<PAGE>
JOINT INSUREDS: FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
STANDARD NON-SMOKER UNDERWRITING CLASS
ANNUAL PAYMENTS OF $39,890 FOR 37 YEARS
FACE AMOUNT(1): $1.5 MILLION INITIAL GUARANTEE PERIOD: 7.5 YEARS
DEATH BENEFIT OPTION 1
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT (3)
PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL RATE OF RETURN OF
INTEREST AT 5% AS -----------------------------------
CONTRACT YEAR PAYMENTS (2)(6) OF END OF YEAR 0% 6% 12%
--------------------- --------------- ----------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
1................... $ 39,890 $ 41,885 $1,500,000 $1,500,000 $ 1,500,000
2................... 39,890 85,864 1,500,000 1,500,000 1,500,000
3................... 39,890 132,042 1,500,000 1,500,000 1,500,000
4................... 39,890 180,529 1,500,000 1,500,000 1,500,000
5................... 39,890 231,440 1,500,000 1,500,000 1,500,000
6................... 39,890 284,897 1,500,000 1,500,000 1,500,000
7................... 39,890 341,026 1,500,000 1,500,000 1,500,000
8................... 39,890 399,962 1,500,000 1,500,000 1,500,000
9................... 39,890 461,845 1,500,000 1,500,000 1,500,000
10................... 39,890 526,822 1,500,000 1,500,000 1,500,000
15................... 39,890 903,813 1,500,000 1,500,000 1,500,000
20................... 39,890 1,384,957 1,500,000 1,500,000 1,778,775
30................... 39,890 2,782,767 1,500,000 1,500,000 4,566,460
age 99............... 0 4,927,608 1,500,000 1,500,000 11,446,437
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR
INVESTMENT BASE AND END OF YEAR
NET CASH SURRENDER VALUE (3)(4) CASH VALUE (3)(5)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
------------------------------- -------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
--------------------- -------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
1................... $ 19,602 $ 20,791 $ 21,980 $ 19,602 $ 20,791 $ 21,980
2................... 38,351 41,929 45,649 38,351 41,929 45,649
3................... 73,825 82,062 90,884 73,825 82,062 90,884
4................... 107,965 123,168 140,000 107,965 123,168 140,000
5................... 140,625 165,133 193,263 140,625 165,133 193,263
6................... 171,640 207,833 250,971 171,640 207,833 250,971
7................... 200,774 251,072 313,415 200,774 251,072 313,415
8................... 227,923 294,799 381,092 227,923 294,799 381,092
9................... 252,833 338,824 454,467 252,833 338,824 454,467
10................... 275,257 382,986 534,145 275,257 382,986 534,145
15................... 336,899 598,252 1,060,375 336,899 598,252 1,060,375
20 248,531 776,622 1,694,072 248,531 776,622 1,694,072
30................... 0 698,812 4,349,010 0 698,812 4,349,010
age 99............... 0 0 11,446,437 0 0 11,446,437
<FN>
- --------------------------
(1) Assumes no additional insurance rider face amount.
(2) All payments are illustrated as if made at the beginning of the contract
year.
(3) Assumes annual payments are made and no loans or withdrawals have been
taken.
(4) Investment base will equal net cash surrender value on each contract
anniversary. If the Contract is surrendered within 24 months after issue,
the contract owner will also receive any excess sales load previously
deducted.
(5) Cash value will equal investment base and net cash surrender value on each
contract anniversary if no loans have been taken.
(6) The payments shown may extend beyond the year in which the automatic
adjustment is made. At an annual rate of return of 12% and maximum
mortality charges, the guarantee period reaches life of the insured in
contract year 15. Once a guarantee of life is reached, no more payments
would be accepted. Values shown at annual rates of return of 0%, 6% and
12% do not reflect any payments shown after a guarantee of life is
reached.
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND
CASH VALUE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY ML OF NEW YORK OR THE SERIES FUND OR THE VARIABLE SERIES FUNDS OR THE
ZERO TRUSTS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
37
<PAGE>
JOINT INSUREDS: FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
STANDARD NON-SMOKER UNDERWRITING CLASS
ANNUAL PAYMENTS OF $141,410 FOR 32 YEARS
FACE AMOUNT(1): $1.5 MILLION INITIAL GUARANTEE PERIOD: 14 YEARS
DEATH BENEFIT OPTION 2
BASED ON CURRENT MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT (3)
PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL RATE OF RETURN OF
INTEREST AT 5% AS -----------------------------------
CONTRACT YEAR PAYMENTS (2)(6) OF END OF YEAR 0% 6% 12%
--------------------- --------------- ----------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
1................... $ 141,410 $ 148,481 $1,597,515 $1,603,405 $ 1,609,295
2................... 141,410 304,386 1,728,624 1,748,594 1,769,265
3................... 141,410 468,086 1,857,854 1,900,345 1,945,987
4................... 141,410 639,971 1,985,195 2,058,918 2,141,182
5................... 141,410 820,450 2,110,622 2,224,575 2,356,739
6................... 141,410 1,009,953 2,234,137 2,397,610 2,594,771
7................... 141,410 1,208,931 2,355,696 2,578,289 2,857,563
8................... 141,410 1,417,858 2,475,268 2,766,899 3,147,658
9................... 141,410 1,637,231 2,592,789 2,963,706 3,467,826
10................... 141,410 1,867,573 2,708,238 3,169,035 3,821,177
15................... 141,410 3,203,997 3,243,290 4,324,543 6,207,098
20................... 141,410 4,909,650 3,667,443 5,683,732 9,123,194
30................... 141,410 9,864,873 3,820,661 8,149,786 20,938,623
age 99............... 0 16,518,553 1,500,000 8,694,308 50,535,017
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR
INVESTMENT BASE AND END OF YEAR
NET CASH SURRENDER VALUE (3)(4) CASH VALUE (3)(5)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
----------------------------------- -----------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
--------------------- ---------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
1................... $ 97,515 $ 103,405 $ 109,295 $ 97,515 $ 103,405 $ 109,295
2................... 228,624 248,594 269,265 228,624 248,594 269,265
3................... 357,854 400,345 445,987 357,854 400,345 445,987
4................... 485,195 558,918 641,182 485,195 558,918 641,182
5................... 610,622 724,575 856,739 610,622 724,575 856,739
6................... 734,137 897,610 1,094,771 734,137 897,610 1,094,771
7................... 855,696 1,078,289 1,357,563 855,696 1,078,289 1,357,563
8................... 975,268 1,266,899 1,647,658 975,268 1,266,899 1,647,658
9................... 1,092,789 1,463,706 1,967,826 1,092,789 1,463,706 1,967,826
10................... 1,208,238 1,669,035 2,321,177 1,208,238 1,669,035 2,321,177
15................... 1,743,290 2,824,543 4,707,098 1,743,290 2,824,543 4,707,098
20................... 2,167,443 4,183,732 7,623,194 2,167,443 4,183,732 7,623,194
30................... 2,320,661 6,649,786 19,438,623 2,320,661 6,649,786 19,438,623
age 99............... 0 7,194,308 49,035,017 0 7,194,308 49,035,017
<FN>
- --------------------------
(1) Assumes no additional insurance rider face amount.
(2) All payments are illustrated as if made at the beginning of the contract
year.
(3) Assumes annual payments are made and no loans or withdrawals have been
taken.
(4) Investment base will equal net cash surrender value on each contract
anniversary. If the Contract is surrendered within 24 months after issue,
the contract owner will also receive any excess sales load previously
deducted.
(5) Cash value will equal investment base and net cash surrender value on each
contract anniversary if no loans have been taken.
(6) The payments shown may extend beyond the year in which the automatic
adjustment is made. At annual rates of return of 6% and 12% and current
mortality charges, the guarantee period reaches life of the younger
insured in contract years 26 and 15, respectively. Once a guarantee of
life is reached, no more payments would be accepted. Values shown at
annual rates of return of 0%, 6% and 12% do not reflect any payments shown
after a guarantee of life is reached.
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATE AND WILL DEPEND ON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND
CASH VALUE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY ML OF NEW YORK OR THE SERIES FUND OR THE VARIABLE SERIES FUNDS OR THE
ZERO TRUSTS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
38
<PAGE>
JOINT INSUREDS: FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
STANDARD NON-SMOKER UNDERWRITING CLASS
ANNUAL PAYMENTS OF $141,410 FOR 32 YEARS
FACE AMOUNT(1): $1.5 MILLION INITIAL GUARANTEE PERIOD: 14 YEARS
DEATH BENEFIT OPTION 2
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT (3)
PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL RATE OF RETURN OF
INTEREST AT 5% AS -----------------------------------
CONTRACT YEAR PAYMENTS (2)(6) OF END OF YEAR 0% 6% 12%
--------------------- --------------- ----------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
1................... $ 141,410 $ 148,481 $1,597,515 $1,603,405 $ 1,609,295
2................... 141,410 304,386 1,728,450 1,748,413 1,769,078
3................... 141,410 468,086 1,856,805 1,899,245 1,944,837
4................... 141,410 639,971 1,982,429 2,055,974 2,138,054
5................... 141,410 820,450 2,105,134 2,218,633 2,350,318
6................... 141,410 1,009,953 2,224,696 2,387,220 2,583,352
7................... 141,410 1,208,931 2,340,800 2,561,634 2,838,953
8................... 141,410 1,417,858 2,453,267 2,741,907 3,119,255
9................... 141,410 1,637,231 2,561,735 2,927,879 3,426,415
10................... 141,410 1,867,573 2,665,841 3,119,379 3,762,814
15................... 141,410 3,203,997 3,102,595 4,146,829 5,979,061
20................... 141,410 4,909,650 3,325,304 5,220,449 8,695,842
30................... 141,410 9,864,873 2,526,498 6,755,337 18,149,089
age 99............... 0 16,518,553 1,500,000 1,500,000 35,776,202
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR
INVESTMENT BASE AND END OF YEAR
NET CASH SURRENDER VALUE (3)(4) CASH VALUE (3)(5)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
----------------------------------- -----------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
--------------------- ---------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
1................... $ 97,515 $ 103,405 $ 109,295 $ 97,515 $ 103,405 $ 109,295
2................... 228,450 248,413 269,078 228,450 248,413 269,078
3................... 356,805 399,245 444,837 356,805 399,245 444,837
4................... 482,429 555,974 638,054 482,429 555,974 638,054
5................... 605,134 718,633 850,318 605,134 718,633 850,318
6................... 724,696 887,220 1,083,352 724,696 887,220 1,083,352
7................... 840,800 1,061,634 1,338,953 840,800 1,061,634 1,338,953
8................... 953,267 1,241,907 1,619,255 953,267 1,241,907 1,619,255
9................... 1,061,735 1,427,879 1,926,415 1,061,735 1,427,879 1,926,415
10................... 1,165,841 1,619,379 2,262,814 1,165,841 1,619,379 2,262,814
15................... 1,602,595 2,646,829 4,479,061 1,602,595 2,646,829 4,479,061
20................... 1,825,304 3,720,449 7,195,842 1,825,304 3,720,449 7,195,842
30................... 1,026,498 5,255,337 16,649,089 1,026,498 5,255,337 16,649,089
age 99............... 0 0 34,276,202 0 0 34,276,202
<FN>
- --------------------------
(1) Assumes no additional insurance rider face amount.
(2) All payments are illustrated as if made at the beginning of the contract
year.
(3) Assumes annual payments are made and no loans or withdrawals have been
taken.
(4) Investment base will equal net cash surrender value on each contract
anniversary. If the Contract is surrendered within 24 months after issue,
the contract owner will also receive any excess sales load previously
deducted.
(5) Cash value will equal investment base and net cash surrender value on each
contract anniversary if no loans have been taken.
(6) The payments shown may extend beyond the year in which the automatic
adjustment is made. At an annual rate of return of 12% and maximum
mortality charges, the guarantee period reaches life of the younger
insured in contract year 16. Once a guarantee of life is reached, no more
payments would be accepted. Values shown at annual rates of return of 0%,
6% and 12% do not reflect any payments shown after a guarantee of life is
reached.
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND
CASH VALUE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY ML OF NEW YORK OR THE SERIES FUND OR THE VARIABLE SERIES FUNDS OR THE
ZERO TRUSTS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
39
<PAGE>
EXAMPLES
ADDITIONAL PAYMENTS
As of the processing date on or next following receipt and acceptance of an
additional payment, ML of New York will increase the guarantee period if the
guarantee period prior to receipt and acceptance of an additional payment is
less than for the whole of life of the younger insured.
ML of New York will determine the increase in the guarantee period by taking the
immediate increase in the cash value resulting from the additional payment and
adding to that interest at the annual rate of 5% for the period from the date ML
of New York receives and accepts the payment to the contract processing date on
or next following such date. This is the guarantee adjustment amount. The
guarantee adjustment amount is added to the fixed base and the resulting new
fixed base is used to calculate a new guarantee period.
The amount of the increase in the guarantee period will depend on the amount of
the additional payment and the contract year in which it is received and
accepted. If additional payments of different amounts were made at the same time
to equivalent contracts, the contract to which the larger payment is applied
would have a larger increase in the guarantee period.
Example 1 shows the effect on the guarantee period of a $39,890 additional
payment received and accepted at the beginning of contract year ten. Example 2
shows the effect of a $79,780 additional payment received and accepted at the
beginning of contract year ten. Example 3 shows the effect of a $39,890
additional payment received and accepted at the beginning of contract year 11.
All three examples assume that death benefit option 1 has been elected, that
annual payments of $39,890 have been made through the contract year reflected in
the example and that no other contract transactions have been made.
FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
INITIAL PAYMENT PLUS ANNUAL PAYMENTS OF $39,890
FACE AMOUNT: $1.5 MILLION
INITIAL GUARANTEE PERIOD: 7.5 YEARS
DEATH BENEFIT OPTION: 1
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
EXAMPLE 1
- -----------------------------------------
CONTRACT ADDITIONAL INCREASE IN
YEAR PAYMENT GUARANTEE PERIOD
- --------- ----------- -----------------
<S> <C> <C>
10 $39,890 1 year
EXAMPLE 2
- -----------------------------------------
<CAPTION>
CONTRACT ADDITIONAL INCREASE IN
YEAR PAYMENT GUARANTEE PERIOD
- --------- ----------- -----------------
<S> <C> <C>
10 $79,780 2 years
EXAMPLE 3
- -----------------------------------------
<CAPTION>
CONTRACT ADDITIONAL INCREASE IN
YEAR PAYMENT GUARANTEE PERIOD
- --------- ----------- -----------------
<S> <C> <C>
11 $39,890 .75 years
</TABLE>
PARTIAL WITHDRAWALS
As of the processing date on or next following the effective date of a partial
withdrawal, ML of New York calculates a new guarantee period. This is done by
taking the immediate decrease in cash value resulting from the partial
withdrawal and adding to that amount interest at an annual rate of 5% for the
period from the date of the withdrawal to the contract processing date on or
next following such date. This is the guarantee adjustment amount. The guarantee
adjustment amount is subtracted from the fixed base and the resulting new fixed
base is used to calculate a new guarantee period.
The amount of the reduction in the guarantee period will depend on the amount of
the withdrawal, the face amount at the time of the withdrawal and the contract
year in which the withdrawal is made. If made at the same time to equivalent
contracts, a larger withdrawal would result in a greater reduction in the
guarantee period than a smaller withdrawal. The same partial withdrawal made at
the same time from contracts with the same guarantee periods but with different
face amounts would result in a greater reduction in the guarantee period for the
contract with the smaller face amount.
40
<PAGE>
Examples 1 and 2 show the effect on the guarantee period of partial withdrawals
for $30,000 and $60,000 taken at the beginning of contract year sixteen. Example
3 shows the effect on the guarantee period of a $60,000 partial withdrawal taken
at the beginning of contract year eighteen. All three examples assume that death
benefit option 1 has been elected, that annual payments of $39,890 have been
made through the contract year reflected in the example and that no other
contract transactions have been made.
FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
INITIAL PAYMENT PLUS ANNUAL PAYMENTS OF $39,890
FACE AMOUNT: $1.5 MILLION
INITIAL GUARANTEE PERIOD: 7.5 YEARS
DEATH BENEFIT OPTION: 1
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
EXAMPLE 1
- ------------------------------------------
CONTRACT PARTIAL DECREASE IN
YEAR WITHDRAWAL GUARANTEE PERIOD
- --------- ------------ -----------------
<S> <C> <C>
16 $30,000 .25 years
EXAMPLE 2
- ------------------------------------------
<CAPTION>
CONTRACT PARTIAL DECREASE IN
YEAR WITHDRAWAL GUARANTEE PERIOD
- --------- ------------ -----------------
<S> <C> <C>
16 $60,000 .75 years
EXAMPLE 3
- ------------------------------------------
<CAPTION>
CONTRACT PARTIAL DECREASE IN
YEAR WITHDRAWAL GUARANTEE PERIOD
- --------- ------------ -----------------
<S> <C> <C>
18 $60,000 .75 years
</TABLE>
CHANGING THE DEATH BENEFIT OPTION
On each contract anniversary beginning with the fifteenth, the contract owner
may change the death benefit option by switching from option 1 to option 2 or
from option 2 to option 1. ML of New York will change the face amount of the
Contract in order to keep the death benefit constant on the effective date of
the change. Therefore, if the change is from option 1 to option 2, the face
amount of the Contract will be decreased by the cash value on the date of the
change. If the change is from option 2 to option 1, the face amount of the
Contract will be increased by the cash value on the date of the change.
Example 1 shows the effect on the face amount of a change from option 1 to
option 2 and Example 2 shows the effect on the face amount of a change from
option 2 to option 1. The face amount before each change is $1 million.
EXAMPLE 1
--------------------------------------
BEFORE OPTION CHANGE
Death Benefit under Option 1: $1,000,000
Face Amount: $1,000,000
Cash Value: $80,000
AFTER OPTION CHANGE
Death Benefit under Option 2: $1,000,000
Face Amount: $920,000
Cash Value: $80,000
EXAMPLE 2
--------------------------------------
BEFORE OPTION CHANGE
Death Benefit under Option 2: $1,080,000
Face Amount: $1,000,000
Cash Value: $80,000
AFTER OPTION CHANGE
Death Benefit under Option 1: $1,080,000
Face Amount: $1,080,000
Cash Value: $80,000
41
<PAGE>
MORE ABOUT ML LIFE INSURANCE COMPANY OF NEW YORK
DIRECTORS AND EXECUTIVE OFFICERS
ML of New York's directors and executive officers and their positions with the
Company are as follows:
<TABLE>
<CAPTION>
NAME POSITION(S) WITH THE COMPANY
- ----------------------- ------------------------------------------
<S> <C>
Anthony J. Vespa Chairman of the Board, President, and
Chief Executive Officer
Joseph E. Crowne Director, Senior Vice President, Chief
Financial Officer, Chief Actuary, and
Treasurer
Barry G. Skolnick Director, Senior Vice President, and
General Counsel
David M. Dunford Director, Senior Vice President, and Chief
Investment Officer
John C.R. Hele Director and Senior Vice President
Frederick J.C. Butler Director
Michael P. Cogswell Director, Vice President, and Senior
Counsel
Sandra K. Cox Director
Robert L. Israeloff Director
Allen N. Jones Director
Cynthia L. Kahn Director
Robert A. King Director
Irving M. Pollack Director
William A. Wilde Director
Robert J. Boucher Senior Vice President, Variable Life
Administration
</TABLE>
Each director is elected to serve until the next annual meeting of shareholders
or until his or her successor is elected and shall have qualified. Some
directors have held various executive positions with insurance company
subsidiaries of the Company's indirect parent, Merrill Lynch & Co., Inc. The
principal positions of the Company's directors and executive officers for the
past five years are listed below:
Mr. Vespa joined ML of New York in February 1994. Since February 1994, he has
held the position of Senior Vice President of Merrill Lynch, Pierce, Fenner &
Smith Incorporated. From February 1991 to February 1994, he held the position of
District Director and First Vice President of Merrill Lynch, Pierce, Fenner &
Smith Incorporated. From September 1988 to February 1991, he held the position
of Senior Resident Vice President of Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
Mr. Crowne joined ML of New York in June 1991. From January 1989 to May 1991, he
was a Principal with Coopers & Lybrand.
Mr. Skolnick joined ML of New York in November 1989. He joined Merrill Lynch,
Pierce, Fenner & Smith Incorporated in July 1984. Since May 1992, he has held
the position of Assistant General Counsel of Merrill Lynch & Co., Inc. and First
Vice President of Merrill Lynch, Pierce, Fenner & Smith Incorporated. Prior to
May 1992, he held the position of Senior Counsel of Merrill Lynch & Co., Inc.
Mr. Dunford joined ML of New York in July 1990. He joined Merrill Lynch, Pierce,
Fenner & Smith Incorporated in September 1989. Prior to September 1989, he held
the position of President of Travelers Investment Management Co.
42
<PAGE>
Mr. Butler joined ML of New York in April 1991. Since November 1991, he has held
the position of Chairman of Butler, Chapman & Co., Inc. Prior to April 1991, he
served as Managing Director of the Investment Banking Division of Merrill Lynch
& Co., Inc.
Mr. Cogswell has been with ML of New York since November 1990. From April 1987
to November 1990, he was Assistant Counsel at UNUM Life Insurance Company.
Ms. Cox joined ML of New York in February 1991. Prior to February 1991, she
served as Annuity Product Manager with Merrill Lynch Life Agency, Inc.
Mr. Hele joined ML of New York in September 1990. He joined Merrill Lynch,
Pierce, Fenner & Smith Incorporated in August 1988.
Mr. Israeloff joined ML of New York in April 1991. Since 1964, he has been
Chairman and Executive Partner of Israeloff, Trattner & Co., CPAs, P.C., a
public accounting firm.
Mr. Jones joined ML of New York in June 1992. Since May 1992, he held the
position of Senior Vice President of Merrill Lynch, Pierce, Fenner & Smith
Incorporated. From June 1992 to February 1994, he held the position of Chairman
of the Board, President, and Chief Executive Officer of ML of New York. From
January 1992 to June 1992, he held the position of First Vice President of
Merrill Lynch, Pierce, Fenner & Smith Incorporated. From January 1991 to January
1992, he held the position of District Director of Merrill Lynch, Pierce, Fenner
& Smith Incorporated. Prior to January 1991, he held the position of Senior
Resident Vice President of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Ms. Kahn joined ML of New York in November 1993. She is a partner at the law
firm of Rogers & Wells. She has been associated with Rogers & Wells since 1984.
Mr. King joined ML of New York in April 1991. Since February 1991, he has been
Vice President for Finance at Marymount College, Tarrytown, New York. From March
1973 until February 1991, he served as Managing Director of Merrill Lynch
Capital Markets.
Mr. Pollack joined ML of New York in April 1991. In 1980, he retired from the
Securities and Exchange Commission after thirty years of service, and having
served as an SEC Commissioner from 1974 to 1980. Since 1980, he has practiced
law and been a private consultant in the securities and capital markets fields.
Mr. Wilde joined ML of New York in March 1991. He joined Merrill Lynch, Pierce,
Fenner & Smith Incorporated in 1976. Since 1985, he has been a Director and
Senior Vice President of Merrill Lynch Life Agency, Inc.
Mr. Boucher joined ML of New York in May 1992. Prior to May 1992, he held the
position of Vice President of Monarch Financial Services, Inc. (formerly Monarch
Resources, Inc.).
No shares of ML of New York are owned by any of its officers or directors, as it
is a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc. The officers
and directors of ML of New York, both individually and as a group, own less than
one percent of the outstanding shares of common stock of Merrill Lynch & Co.,
Inc.
SERVICES ARRANGEMENT
ML of New York and its parent, Merrill Lynch Insurance Group, Inc. ("MLIG") are
parties to a service agreement pursuant to which MLIG has agreed to provide
certain data processing, legal, actuarial, management, advertising and other
services to ML of New York including services related to the Separate Account
and the Contracts. Expenses incurred by MLIG in relation to this service
agreement are reimbursed by ML of New York on an allocated cost basis. Charges
billed to ML of New York by MLIG pursuant to the agreement were $5.7 million
during 1993.
STATE REGULATION
ML of New York is subject to the laws of the State of New York and to the
regulations of the New York Insurance Department (the "Department"). A detailed
financial statement in the prescribed form (the "Annual Statement") is filed
with the Department each year covering ML of New York's operations for the
43
<PAGE>
preceding year and its financial condition as of the end of that year.
Regulation by the Department includes periodic examination to determine contract
liabilities and reserves so that the Department may certify that these items are
correct. ML of New York's books and accounts are subject to review by the
Department at all times. A full examination of ML of New York's operations is
conducted periodically by the Department and under the auspices of the National
Association of Insurance Commissioners. ML of New York is also subject to the
insurance laws and regulations of all jurisdictions in which it is licensed to
do business.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. ML of New York and Merrill
Lynch, Pierce, Fenner & Smith Incorporated are engaged in various kinds of
routine litigation that, in the Company's judgment, is not material to ML of New
York's total assets or to Merrill Lynch, Pierce, Fenner & Smith Incorporated.
EXPERTS
The financial statements of ML of New York as of December 31, 1993 and 1992 and
for each of the three years in the period ended December 31, 1993 and of the
Separate Account as of December 31, 1993 and 1992 and for each of the periods
presented, included in this Prospectus have been audited by Deloitte & Touche,
independent auditors, as stated in their reports appearing herein, and have been
so included in reliance upon the reports of such firm given upon their authority
as experts in accounting and auditing. Deloitte & Touche's principal business
address is 1633 Broadway, New York, New York 10019-6754.
Actuarial matters included in this Prospectus have been examined by Joseph E.
Crowne, F.S.A., Chief Actuary and Chief Financial Officer of ML of New York, as
stated in his opinion filed as an exhibit to the registration statement.
LEGAL MATTERS
The organization of the Company, its authority to issue the Contract, and the
validity of the form of the Contract have been passed upon by Barry G. Skolnick,
ML of New York's Senior Vice President and General Counsel. Sutherland, Asbill &
Brennan of Washington, D.C. has provided advice on certain matters relating to
federal securities and tax laws.
REGISTRATION STATEMENTS
Registration statements have been filed with the Securities and Exchange
Commission under the Securities Act of 1933 and the Investment Company Act of
1940 that relate to the Contract and its investment options. This Prospectus
does not contain all of the information in the registration statements as
permitted by Securities and Exchange Commission regulations. The omitted
information can be obtained from the Securities and Exchange Commission's
principal office in Washington, D.C., upon payment of a prescribed fee.
FINANCIAL STATEMENTS
The financial statements of ML of New York, included herein, should be
distinguished from the financial statements of the Separate Account and should
be considered only as bearing upon the ability of ML of New York to meet its
obligations under the Contracts.
44
To the Board of Directors of
ML Life Insurance Company of New York
We have audited the accompanying statements of net assets of
ML of New York Variable Life Separate Account II (the
Account) as of December 31, 1993 and 1992 and the related
statements of earnings and changes in net assets for the
periods presented. These financial statements are the
responsibility of the management of ML Life Insurance
Company of New York. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation
of mutual fund securities owned at December 31, 1993, by
correspondence with the funds' transfer agent. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial position of the Account
at December 31, 1993 and December 31, 1992 and the results
of its operations and the changes in its net assets for the
periods presented in conformity with generally accepted
accounting principles.
Our audits were conducted for the purpose of forming an
opinion on the basic financial statements taken as a whole.
The supplemental schedules included herein are presented for
the purpose of additional analysis and are not a required
part of the basic financial statements. These schedules are
the responsibility of the Company's management. Such
schedules have been subjected to the auditing procedures
applied in our audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects
when considered in relation to the basic financial
statements taken as a whole.
/s/ Deloitte & Touche
February 16, 1994
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF NET ASSETS AT DECEMBER 31, 1993
==============================================
<TABLE>
<CAPTION>
Market
Cost Shares Value
=============== =============== ===============
<S> <C> <C> <C>
ASSETS
Investments in Merrill Lynch Series Fund, Inc. (Note B):
Money Reserve Portfolio $ 860,290 860,290 $ 860,290
Intermediate Government Bond Portfolio 18,207 1,509 18,134
Long-Term Corporate Bond Portfolio 45,431 3,638 45,797
Capital Stock Portfolio 179,053 7,574 194,888
Growth Stock Portfolio 259,334 10,944 269,761
Multiple Strategy Portfolio 567,971 31,010 615,234
High Yield Portfolio 69,733 7,390 71,537
Natural Resources Portfolio 39,995 5,158 38,836
Global Strategy Portfolio 689,299 47,894 738,525
Balanced Portfolio 159,042 10,965 160,308
--------------- ---------------
2,888,355 3,013,310
--------------- ---------------
Investment in Unit Investment Trusts (Note B):
Stripped ("Zero") U.S. Treasury Securities, Series A through J:
1995 Trust 1,750 1,895 1,759
1996 Trust 1,999 2,221 2,028
1997 Trust 2,027 2,344 2,032
1998 Trust 2,929 3,607 2,938
1999 Trust 1,029 1,350 1,034
2000 Trust 29,412 40,618 29,276
2005 Trust 1,467 2,945 1,498
2013 Trust 1,334 4,697 1,293
--------------- ---------------
41,947 41,858
--------------- ---------------
Total Assets $ 2,930,302 3,055,168
=============== ---------------
LIABILITIES
Payable to ML Series Fund, Inc. 30,353
Payable to ML Life Insurance Company of New York 75,638
---------------
Total Liabilities 105,991
---------------
Net Assets $ 2,949,177
===============
</TABLE>
See Notes to Financial Statements
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF NET ASSETS AT DECEMBER 31, 1992
=============================================
<TABLE>
<CAPTION> Market
Cost Shares Value
=============== =============== ===============
<S> <C> <C> <C>
ASSETS
Investments in Merrill Lynch Series Fund, Inc. (Note B):
Money Reserve Portfolio $ 53,675 53,675 $ 53,675
Multiple Strategy Portfolio 6,464 352 6,576
--------------- ---------------
Total Assets $ 60,139 60,251
=============== ---------------
LIABILITIES
Payable to ML Life Insurance Company of New York 53,610
---------------
Total Liabilities 53,610
---------------
Net Assets $ 6,641
===============
</TABLE>
See Notes to Financial Statements
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF EARNINGS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1993 AND THE PERIOD FROM JUNE 30, 1992
(Date of Inception) TO DECEMBER 31, 1992
=====================================================================
<TABLE>
<CAPTION>
1993 1992
=============== ===============
<S> <C> <C>
Reinvested Dividends $ 32,519 $ 104
Net Gain (Loss):
Realized 3,446 0
Unrealized 124,757 112
--------------- ---------------
Investment Earnings 160,722 216
Mortality and Expense Charges (Note C) (11,042) (3)
Transaction Charges ( Note D ) (45) 0
--------------- ---------------
Net Earnings 149,635 213
Capital Shares Transactions:
Transfers of Net Premiums 2,646,293 5,882
Transfers of Policy Loading, Net 203,968 582
Transfers Due to Other Terminations (470) 0
Transfers Due to Policy Loans (2,977) 0
Transfers of Cost of Insurance (53,905) (36)
Transfers of Loan Processing Charges (8) 0
--------------- ---------------
Increase in Net Assets 2,942,536 6,641
Net Assets Beginning Balance 6,641 0
--------------- ---------------
Net Assets Ending Balance $ 2,949,177 $ 6,641
=============== ===============
</TABLE>
See Notes to Financial Statements
<PAGE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
Notes to Financial Statements
December 31, 1993
Note - A ML of New York Variable Life Separate Account
II ("Account"), a separate account of ML Life Insurance
Company of New York ("ML of New York") was established by a
board of directors resolution on December 4, 1991 and is
governed by New York State Insurance Law. The Account is a
registered unit investment trust under the Investment
Company Act of 1940 and consists of twenty-eight investment
divisions (twenty-nine during the year). Ten of the
divisions each invest in the securities of a single mutual
fund portfolio of Merrill Lynch Series Fund, Inc. ("Series
Fund"). The portfolios of the Series Fund have varying
investment objectives relative to growth of capital and
income. The Series Fund receives investment advice from
Merrill Lynch Asset Management, L.P. for a fee calculated at
an effective annual rate of .50% on the first $250 million
of the aggregate average daily net assets of the investment
divisions investing in the Series Fund with declining rates
to .30% of such assets over $800 million. Eighteen of the
divisions (nineteen during the year) invest in the
securities of a single trust of the Merrill Lynch Fund of
Stripped ("Zero") U.S. Treasury Securities, Series A through
J. Each trust of the Series consists of Stripped Treasury
Securities with a fixed maturity date and a Treasury Note
deposited to provide income to pay expenses of the trust.
The Account was formed by ML of New York, an
indirect wholly-owned subsidiary of Merrill Lynch & Co.,
Inc. ("Merrill") to support ML of New York's operations
respecting certain variable life insurance contracts
("Contracts"). The assets of the Account are the property
of ML of New York. The portion of the Account'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 maintained in the Account
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 insurance law to provide for death
benefits (without regard to the minimum death benefit
guarantee) and other Contract benefits.
Note - B The significant accounting policies of the
Account are as follows:
* Investments are made in the divisions and are
valued at the net asset values of the respective
Portfolios.
* Transactions are recorded on the trade date.
* Income from dividends is recognized as of the ex-
dividend date. All dividends are automatically
reinvested.
* Realized gains and losses on the sales of
investments are computed on the first in first
out method.
* The operations of the Account are included in the
Federal income tax return of ML of New York. Un-
der the provisions of the Contracts, ML of New
York has the right to charge the Account for any
Federal income tax attributable to the Account.
No charge is currently being made against the
Account for income taxes since, under current
tax law, ML of New York pays no tax on investment
income and capital gains reflected in variable
life insurance contract reserves. However, ML of
New York retains the right to charge for any
Federal income tax incurred which is attribut-
able to the Account if the law is changed. Con-
tract loading, however, includes a charge for a
<PAGE>
significantly higher Federal income tax liability
of ML of New York (see Note C). Charges for state
and local taxes, if any, attributable to the
Account may also be made.
Note - C ML of New York assumes mortality and expense
risks related to the operations of the Account and deducts a
daily charge from the assets of the Account to cover these
risks. The daily charges are equal to a rate of .90% (on
an annual basis) of the net assets for Contract owners.
ML of New York makes certain deductions from each
premium. For certain Contracts, the deductions are made
before the premium is allocated to the Account. For other
Contracts, the deductions are taken in equal installments on
the first through tenth contract anniversaries. The
deductions are for (1) sales load, (2) Federal taxes, and
(3) state and local premium taxes.
In addition, for certain Contracts, the cost of
providing life insurance coverage for the insureds will be
deducted from the investment base on the contract date and
all subsequent processing dates. For other Contracts, the
cost of providing life insurance coverage will be deducted
only on processing dates. This cost will vary dependent
upon the insured's underwriting class, sex, attained age of
each insured and the Contract's net amount at risk.
Note - D ML of New York pays all transaction charges to
Merrill Lynch, Pierce, Fenner & Smith Inc., sponsor of the
unit investment trusts, on the sale of Series A through J
Unit Investment Trusts units to the Account and deducts a
daily asset charge against the assets of each trust for the
reimbursement of these transaction charges. The asset
charge is equivalent to an effective annual rate of .34%
(annually at the beginning of the year) of net assets for
Contract owners.
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF EARNINGS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1993
========================================================================
<TABLE>
<CAPTION>
Divisions Investing In
=====================================================================
Intermediate Long-Term
Money Government Corporate Capital
Reserve Bond Bond Stock
Portfolio Portfolio Portfolio Portfolio
=============== =============== =============== ===============
<S> <C> <C> <C> <C>
Reinvested Dividends $ 17,196 $ 504 $ 1,936 $ 387
Net Gain (Loss):
Realized 0 8 45 295
Unrealized 0 (73) 366 15,835
--------------- --------------- --------------- ---------------
Investment Earnings (Losses) 17,196 439 2,347 16,517
Mortality and Expense Charges (Note C) (3,568) (79) (275) (638)
Transaction Charges (Note D) 0 0 0 0
--------------- --------------- --------------- ---------------
Net Earnings (Losses) 13,628 360 2,072 15,879
Capital Shares Transactions:
Transfers of Net Premiums 2,584,685 0 0 1,537
Transfers of Policy Loading, Net 200,287 6 14 (58)
Transfers Due to Terminations (362) (6) (15) 185
Transfers Due to Policy Loans (2,977) 0 0 0
Transfers of Cost of Insurance (18,610) (362) (384) (3,323)
Transfers of Loan Processing Charges (8) 0 0 0
Transfers Among Investment Divisions (1,985,375) 18,033 41,553 179,631
--------------- --------------- --------------- ---------------
Increase in Net Assets 791,268 18,031 43,240 193,851
Net Assets Beginning Balance 68 0 0 0
--------------- --------------- --------------- ---------------
Net Assets Ending Balance $ 791,336 $ 18,031 $ 43,240 $ 193,851
=============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Growth Multiple High Natural
Stock Strategy Yield Resources
Portfolio Portfolio Portfolio Portfolio
=============== =============== =============== ===============
<S> <C> <C> <C> <C>
Reinvested Dividends $ 430 $ 4,342 $ 3,007 $ 167
Net Gain (Loss):
Realized 99 352 77 46
Unrealized 10,427 47,151 1,804 (1,158)
--------------- --------------- --------------- ---------------
Investment Earnings (Losses) 10,956 51,845 4,888 (945)
Mortality and Expense Charges (Note C) (527) (2,200) (311) (158)
Transaction Charges (Note D) 0 0 0 0
--------------- --------------- --------------- ---------------
Net Earnings (Losses) 10,429 49,645 4,577 (1,103)
Capital Shares Transactions:
Transfers of Net Premiums 0 5,882 0 0
Transfers of Policy Loading, Net 84 715 22 12
Transfers Due to Terminations 160 (150) (13) (12)
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (3,354) (10,483) (975) (527)
Transfers of Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions 258,708 557,504 65,233 40,260
--------------- --------------- --------------- ---------------
Increase in Net Assets 266,027 603,113 68,844 38,630
Net Assets Beginning Balance 0 6,573 0 0
--------------- --------------- --------------- ---------------
Net Assets Ending Balance $ 266,027 $ 609,686 $ 68,844 $ 38,630
=============== =============== =============== ===============
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF EARNINGS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1993
===============================================================================
<TABLE>
<CAPTION>
Divisions Investing In
=====================================================================
Global
Strategy Balanced 1993 1995
Portfolio Portfolio Trust Trust
=============== =============== =============== ===============
<S> <C> <C> <C> <C>
Reinvested Dividends $ 4,382 $ 168 $ 0 $ 0
Net Gain (Loss):
Realized 1,775 85 38 0
Unrealized 49,225 1,266 0 9
--------------- --------------- --------------- ---------------
Investment Earnings (Losses) 55,382 1,519 38 9
Mortality and Expense Charges (Note C) (2,690) (475) (9) (1)
Transaction Charges (Note D) 0 0 (4) 0
--------------- --------------- --------------- ---------------
Net Earnings (Losses) 52,692 1,044 25 8
Capital Shares Transactions:
Transfers of Net Premiums 1,643 0 4,775 1,671
Transfers of Policy Loading, Net 348 50 225 79
Transfers Due to Other Terminations (206) (50) 0 (1)
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (11,482) (3,140) (98) (30)
Transfers of Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions 685,473 161,550 (4,927) 1
--------------- --------------- --------------- ---------------
Increase in Net Assets 728,468 159,454 0 1,728
Net Assets Beginning Balance 0 0 0 0
--------------- --------------- --------------- ---------------
Net Assets Ending Balance $ 728,468 $ 159,454 $ 0 $ 1,728
=============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Divisions Investing In
=====================================================================
1996 1997 1998 1999
Trust Trust Trust Trust
=============== =============== =============== ===============
<S> <C> <C> <C> <C>
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Net Gain (Loss):
Realized 1 97 21 47
Unrealized 29 5 10 5
--------------- --------------- --------------- ---------------
Investment Earnings (Losses) 30 102 31 52
Mortality and Expense Charges (Note C) (6) (8) (8) (6)
Transaction Charges (Note D) (2) (3) (3) (2)
--------------- --------------- --------------- ---------------
Net Earnings (Losses) 22 91 20 44
Capital Shares Transactions: 0 0 0 0
Transfers of Net Premiums 1,433 5,348 3,820 2,388
Transfers of Policy Loading, Net 68 253 181 113
Transfers Due to Other Terminations 11 (1) (1) 0
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (55) (55) (97) (50)
Transfers of Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions 538 (3,615) (1,001) (1,466)
--------------- --------------- --------------- ---------------
Increase in Net Assets 2,017 2,021 2,922 1,029
Net Assets Beginning Balance 0 0 0 0
--------------- --------------- --------------- ---------------
Net Assets Ending Balance $ 2,017 $ 2,021 $ 2,922 $ 1,029
=============== =============== =============== ===============
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF EARNINGS AND
CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 1993
===============================================================
<TABLE>
<CAPTION>
Divisions Investing In
=====================================================================
2000 2005 2013
Trust Trust Trust Total
=============== =============== =============== ===============
<S> <C> <C> <C> <C>
Reinvested Dividends $ 0 $ 0 $ 0 $ 32,519
Net Gain (Loss):
Realized 458 2 0 3,446
Unrealized (135) 31 (40) 124,757
--------------- --------------- --------------- ---------------
Net Investment Earnings (Losses) 323 33 (40) 160,722
Mortality and Expense Charges (Note C) (74) (6) (3) (11,042)
Transaction Charges (Note D) (28) (2) (1) (45)
--------------- --------------- --------------- ---------------
Net Earnings (Losses) 221 25 (44) 149,635
Capital Shares Transactions:
Transfers of Net Premiums 33,111 0 0 2,646,293
Transfers of Policy Loading, Net 1,569 0 0 203,968
Transfers Due to Other Terminations (9) 0 0 (470)
Transfers Due to Policy Loans 0 0 0 (2,977)
Transfers of Cost of Insurance (814) (41) (25) (53,905)
Transfers of Loan Processing Charges 0 0 0 (8)
Transfers Among Investment Divisions (14,956) 1,502 1,354 0
--------------- --------------- --------------- ---------------
Increase in Net Assets 19,122 1,486 1,285 2,942,536
Net Assets Beginning Balance 0 0 0 6,641
--------------- --------------- --------------- ---------------
Net Assets Ending Balance $ 19,122 $ 1,486 $ 1,285 $ 2,949,177
=============== =============== =============== ===============
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF EARNINGS AND CHANGES IN NET ASSETS
FOR THE PERIOD FROM JUNE 30, 1992 (Date of Inception) TO DECEMBER 31, 1992
==========================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==================================================
Money Multiple
Reserve Strategy
Portfolio Portfolio Total
=============== =============== ===============
<S> <C> <C> <C>
Reinvested Dividends $ 104 $ 0 $ 104
Net Unrealized Gain 0 112 112
--------------- --------------- ---------------
Investment Earnings 104 112 216
Mortality and Expense Charges (Note C) (1) (2) (3)
--------------- --------------- ---------------
Net Earnings 103 110 213
Capital Shares Transactions:
Transfers of Net Premiums 5,882 0 5,882
Transfers of Policy Loading, Net 582 0 582
Transfers of Cost of Insurance (32) (4) (36)
Transfers Among Investment Divisions (6,467) 6,467 0
--------------- --------------- ---------------
Increase in Net Assets 68 6,573 6,641
Net Assets Beginning Balance 0 0 0
--------------- --------------- ---------------
Net Assets Ending Balance $ 68 $ 6,573 $ 6,641
=============== =============== ===============
</TABLE>
<PAGE>
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, 1993 and 1992 and the related statements of earnings,
stockholder's equity and cash flows for each of the three years
in the period ended December 31, 1993. 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, 1993 and 1992 and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1993 in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the financial statements, in 1993 the
Company changed its method of accounting for certain
investments in debt and equity securities to conform with
Statement of Financial Accounting Standards No. 115.
/s/Deloitte & Touche
February 28, 1994
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
- ------------------------------------------------------------------
BALANCE SHEETS
AS OF DECEMBER 31, 1993 AND 1992
(Dollars in Thousands)
==============================================================================
<TABLE>
<CAPTION>
ASSETS 1993 1992
---- ----
<S> <C> <C>
INVESTMENTS:
Fixed maturity securities available for sale, at estimated fair value
(amortized cost: 1993 - $442,008; 1992 - $63,568) $ 458,916 $ 63,980
Fixed maturity securities to be held to maturity, at amortized cost
(estimated fair value: 1992 - $587,970) 0 570,243
Equity securities available for sale, at estimated fair value
(cost: 1993 - $8,387; 1992 - $9,080) 7,195 9,202
Mortgage loans on real estate 17,627 22,110
Policy loans on insurance contracts 73,380 66,037
------------ ------------
Total Investments 557,118 731,572
CASH AND CASH EQUIVALENTS 27,464 41,122
ACCRUED INVESTMENT INCOME 10,164 14,021
DEFERRED POLICY ACQUISITION COSTS 24,036 27,127
FEDERAL INCOME TAXES - DEFERRED 10,468 7,537
REINSURANCE RECEIVABLES 1,685 187
OTHER ASSETS 3,765 3,397
SEPARATE ACCOUNTS ASSETS 410,613 277,725
------------ ------------
TOTAL ASSETS $ 1,045,313 $ 1,102,688
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY 1993 1992
---- ----
<S> <C> <C>
LIABILITIES:
POLICY LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 523,382 $ 720,335
Claims and claims settlement expenses 5,614 3,340
------------ ------------
Total policy liabilities and accruals 528,996 723,675
OTHER POLICYHOLDER FUNDS 1,200 71
OTHER LIABILITIES 5,641 1,153
FEDERAL INCOME TAXES - CURRENT 864 691
PAYABLE TO AFFILIATES - NET 5,223 7,146
SEPARATE ACCOUNTS LIABILITIES 410,613 277,705
------------ ------------
Total Liabilities 952,537 1,010,441
------------ ------------
STOCKHOLDER'S EQUITY:
Common stock, $10 par value - 220,000 shares
authorized, issued and outstanding 2,200 2,200
Additional paid-in capital 83,006 83,006
Retained earnings 8,497 6,689
Net unrealized investment gain (loss) (927) 352
------------ ------------
Total Stockholder's Equity 92,776 92,247
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,045,313 $ 1,102,688
============ ============
</TABLE>
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
- ------------------------------------------------------------------
STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Dollars in Thousands)
==============================================================================
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 50,661 $ 65,378 $ 69,965
Net realized investment gains (losses) 6,131 (434) (9,685)
Policy charge revenue 8,387 7,683 7,162
------------ ------------ ------------
Total Revenues 65,179 72,627 67,442
------------ ------------ ------------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account
balances 44,425 57,812 57,193
Market value adjustment expense 642 25 2
Policy benefits (reinsurance recoveries: 1993 - $2,192
1992 - $953; 1991 - $455) 1,729 594 839
Reinsurance premium ceded 1,182 1,070 1,179
Amortization of deferred policy acquisition costs 9,523 8,219 7,789
Insurance expenses and taxes 5,278 4,539 5,355
------------ ------------ ------------
Total Benefits and Expenses 62,779 72,259 72,357
------------ ------------ ------------
Earnings (Loss) Before Federal Income
Tax Provision (Benefit) 2,400 368 (4,915)
------------ ------------ ------------
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 2,842 2,373 6,475
Deferred (2,250) (2,196) (8,169)
------------ ------------ ------------
Total Federal Income Tax Provision (Benefit) 592 177 (1,694)
------------ ------------ ------------
NET EARNINGS (LOSS) $ 1,808 $ 191 $ (3,221)
============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
- ------------------------------------------------------------------
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Dollars in Thousands)
==============================================================================
<TABLE>
<CAPTION>
Net
Additional unrealized Total
Common paid-in Retained investment stockholder's
stock capital earnings gain (loss) equity
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1991 $ 2,200 $ 56,289 $ 9,719 $ (799) $ 67,409
Capital contribution 26,717 26,717
Net loss (3,221) (3,221)
Net unrealized investment loss (274) (274)
------------ ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1991 2,200 83,006 6,498 (1,073) 90,631
Net earnings 191 191
Net unrealized investment gain 1,425 1,425
------------ ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1992 2,200 83,006 6,689 352 92,247
Net earnings 1,808 1,808
Net unrealized investment loss (1) (1,279) (1,279)
------------ ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1993 $ 2,200 $ 83,006 $ 8,497 $ ( 927) $ 92,776
============ ============ ============ ============ ============
</TABLE>
(1) Asset gains less adjustment of policyholders' account balances and
deferred policy acquisition costs (See Note 1).
See notes to financial statements.
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
- ------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Dollars in Thousands)
==============================================================================
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings (loss) $ 1,808 $ 191 $ (3,221)
Adjustments to reconcile net earnings (loss) to net
cash and cash equivalents provided (used)
by operating activities:
Amortization of deferred policy acquisition
costs 9,523 8,219 7,789
Capitalization of policy acquisition costs (7,252) (2,539) (14,542)
Amortization of fixed maturity securities 918 366 (1,553)
Net realized investment (gains) losses (6,131) 434 9,685
Interest credited to policyholders' account balances 44,425 57,812 57,193
Provision (benefit) for deferred Federal
income tax (2,250) (2,196) (8,169)
Cash and cash equivalents provided (used) by
changes in operating assets and liabilities:
Accrued investment income 3,857 (27) (1,715)
Policy liabilities and accruals 2,273 448 7,825
Federal income taxes - current 173 873 5,381
Other policyholder funds 1,129 63 (744)
Payable/receivable from affiliates - net (1,923) 10,149 (3,844)
Policy loans (7,343) (12,342) (5,172)
Other, net 2,644 (2,501) 4,941
------------ ------------ ------------
Net cash and cash equivalents provided
by operating activities 41,851 58,950 53,854
------------ ------------ ------------
INVESTING ACTIVITIES:
Fixed maturity securities sold 166,033 177,835 312,618
Fixed maturity securities matured 280,484 195,691 54,073
Fixed maturity securities purchased (251,522) (323,172) (439,134)
Equity securities available for sale purchased (109) (665) (15,176)
Equity securities available for sale sold 2,885 11,886 0
Mortgage loans on real estate principal payments received 4,425 1,000 0
Mortgage loans on real estate acquired 0 (124) (123)
------------ ------------ ------------
Net cash and cash equivalents provided (used) by
investing activities 202,196 62,451 (87,742)
------------ ------------ ------------
</TABLE>
(Continued)
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
- ------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Concluded) (Dollars In Thousands)
==============================================================================
<TABLE>
<Caption
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Paid in capital from parent $ 0 $ 0 $ 26,717
Policyholders' account balances:
Deposits 33,953 5,985 23,374
Withdrawals (net of transfers to Separate Accounts) (291,658) (105,082) (24,503)
------------ ------------ ------------
Net cash and cash equivalents provided
(used) by financing activities (257,705) (99,097) 25,588
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (13,658) 22,304 (8,300)
CASH AND CASH EQUIVALENTS:
Beginning of year 41,122 18,818 27,118
------------ ------------ ------------
End of year $ 27,464 $ 41,122 $ 18,818
============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
- -----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
=======================================================================
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Reporting: ML Life Insurance Company of New York (the
"Company") is a wholly-owned subsidiary of Merrill Lynch
Insurance Group, Inc. ("MLIG"). The Company is an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("Merrill
Lynch & Co.").
The Company sells life insurance and annuity products which
comprise one business segment. The primary products that the
Company currently markets are immediate annuities, market value
adjusted annuities, variable life insurance and variable
annuities. The Company is licensed to sell insurance in nine
states, however, it currently limits its marketing activities
to the State of New York. The Company markets its products
solely through the Merrill Lynch & Co. retail network.
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles for
stock life insurance companies.
Revenue Recognition: Revenues for the Company's interest
sensitive life, interest sensitive annuity, variable life and
variable annuity products consist of policy charges for the
cost of insurance, deferred sales charges, policy
administration charges and/or withdrawal charges assessed
against policyholder account balances during the period.
Policyholders' Account Balances: Liabilities for the Company's
universal life type contracts, including its life insurance and
annuity products, are equal to the full accumulation value of
such contracts as of the valuation date plus deficiency
reserves for certain products. Interest crediting rates for
the Company's fixed rate products are as follows:
Interest sensitive life products 4.0% - 9.0%
Interest sensitive deferred annuities 4.0% - 9.0%
Immediate annuities 4.0% - 10.0%
These rates may be changed at the option of the Company,
subject to minimum guarantees, after initial guaranteed rates
expire.
Liabilities for unpaid claims equal the death benefit for those
claims which have been reported to the Company and an estimate
based upon prior experience for those claims which are
unreported as of the valuation date.
Reinsurance: Effective during 1992, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 113
"Accounting and Reporting for Reinsurance of Short Duration and
Long Duration Contracts" ("SFAS No. 113") which requires that
reinsurance receivables and prepaid reinsurance premium ceded
be reported as assets. SFAS No. 113 eliminates the practice by
insurance enterprises of reporting assets and liabilities
relating to reinsured contracts net of the effects of
reinsurance. The impact of adopting SFAS No. 113 was not
material.
<PAGE>
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. On life insurance contracts which the Company is
currently marketing, the maximum amount of mortality risk
retained by the Company is $500,000 on a single life.
Indemnity reinsurance agreements do not relieve the Company
from its obligations to policyholders. Failure of reinsurers
to honor their obligations could result in losses to the
Company. The Company regularly evaluates the financial
condition of its reinsurers so as to minimize its exposure to
significant losses from reinsurer insolvencies. The Company
holds collateral under reinsurance agreements in the form of
letters of credit and amounts withheld totaling $230,000 that
can be drawn upon for delinquent reinsurance recoverables.
As of December 31, 1993, the Company had life insurance in-
force which was ceded to other life insurance companies of
$168,098,000.
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.
Policy acquisition costs are principally commissions and a
portion of certain other expenses relating to policy
acquisition, underwriting and issuance, which are primarily
related to and vary with the production of new business.
Certain costs and expenses reported in the statements of
earnings are net of amounts deferred. Policy acquisition
costs can also arise from the acquisition or reinsurance of
existing in-force policies from other insurers. These costs
include ceding commissions and professional fees related to the
reinsurance assumed.
Included in deferred policy acquisition costs are those costs
related to the acquisition by assumption reinsurance of
insurance contracts from unaffiliated insurers. The deferred
costs will be amortized in proportion to the future gross
profits over the anticipated life of the acquired insurance
contracts utilizing an interest methodology.
In December 1990, the Company entered into an assumption
reinsurance agreement with a non-affiliated insurer (See Note
6). The acquisition costs relating to this agreement are being
amortized over a twenty-year period using an effective interest
rate of 9.01%. This reinsurance agreement provides for payment
of contingent ceding commissions based upon the persistency and
mortality experience of the insurance contracts assumed. Any
payments made for the contingent ceding commissions will be
capitalized and amortized using an identical methodology as
that used for the initial acquisition costs. The following is
a reconciliation of the acquisition costs for the reinsurance
transaction for the three years ended December 31,:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Beginning balance $ 16,925 $ 18,193 $ 3,593
Capitalized amounts 843 533 16,900
Interest accrued 1,478 1,865 1,704
Amortization (3,632) (3,666) (4,004)
------------ ------------ ------------
Ending balance $ 15,614 $ 16,925 $ 18,193
============ ============ ============
</TABLE>
<PAGE>
The following table presents the expected amortization 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.
1994 $2,268,000
1995 2,160,000
1996 1,944,000
1997 1,512,000
1998 1,075,000
Investments: Effective December 31, 1993, the Company has
adopted SFAS No. 115 "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS No. 115"). In compliance
with SFAS No. 115, the Company classifies its investments in
fixed maturity securities and equity securities in the
available for sale category. Available for sale securities
include both fixed maturity and equity securities. These
securities may be sold for the Company's general liquidity
needs, asset/liability management strategy, credit dispositions
and investment opportunities. These securities are carried at
estimated fair value with unrealized gains and losses included
in stockholder's equity (net of tax). If a decline in value of a
security is determined by management to be other than temporary,
the carrying value is adjusted to the estimated fair value at the
date of this determination and recorded in the net realized
investment gains (losses) caption of the statement of earnings.
SFAS No. 115 allows securities to be carried at amortized cost
if the Company has both the ability and intent to hold these
securities to maturity. The Company has determined that it can
not guarantee that it will not have the need or opportunity to
sell any particular security in its investment holdings. As
such, the Company did not utilize this classification as of
December 31, 1993. Additionally, SFAS No. 115 requires that
securities held for short-term sale are to be carried at fair
value with the change in fair value being recorded as a
component of the statement of earnings. The Company has no
securities at December 31, 1993 that are held for this purpose.
In compliance with a recent Securities and Exchange Commissions
("SEC") staff announcement, the Company has recorded certain
adjustments to deferred policy acquisition costs and
policyholders' account balances in conjunction with its
adoption of SFAS No. 115. The SEC requires that companies
adjust those assets and liabilities that would have been
adjusted had the unrealized investment gains or losses from
securities classified as available for sale actually been
realized with corresponding credits or charges reported
directly to shareholder's equity. Accordingly, deferred policy
acquisition costs have been decreased by $818,000 and
policyholders' account balances have been increased by
$16,327,000 as of December 31, 1993.
As of December 31, 1992, the Company classified its investments
in fixed maturity securities as either "to be held to maturity"
or "available for sale." Fixed maturity securities to be held
to maturity were stated in the balance sheets at amortized
cost. Fixed maturity securities available for sale were stated
at estimated fair value. The net unrealized gains and losses on
these securities are reflected as a component of stockholder's
equity.
For fixed maturity securities, premiums are amortized to the
earlier of the call or maturity date, discounts are accrued to
the maturity date and interest income is accrued daily.
Realized gains and losses on the sale or maturity of the
investment are determined on the basis of identified cost.
Fixed maturity securities may contain securities which are
considered high yield. The Company defines high yield fixed
maturity securities as unsecured corporate debt obligations
which do not have a rating equivalent to Standard and Poor's
(or similar rating agency) BBB or higher, and are not
guaranteed by an agency of the federal government. Probable
losses are recognized in the period that a decline in value is
determined to be other than temporary.
<PAGE>
Mortgage loans on real estate are stated at unpaid principal
balances net of valuation allowances. Such valuation
allowances are based on the decline in value expected by
management to be realized on in-substance foreclosures of
mortgage loans and on mortgage loans which management believes
may not be collectible in full. In establishing valuation
allowances management considers, among other things, the
estimated fair value of the underlying collateral.
The Company has previously made mortgage loans collateralized
by real estate. The return on and the ultimate recovery of
these loans and investments are generally dependent on the
successful operation, sale or refinancing of the real estate.
In many parts of the country, current real estate markets are
characterized by above-normal vacancy rates, a lack of ready
sources or credit for real estate financing, reduced or
declining real estate values, and similar factors.
The Company employs a system to monitor the effects of current
and expected market conditions and other factors when assessing
the collectability of mortgage loans. When, in management's
judgment, these assets are impaired, appropriate losses are
recorded. Such estimates necessarily include assumptions,
which may include anticipated improvements in selected market
conditions for real estate, which may or may not occur. The
more significant assumptions management considers involve
estimates of the following: lease, absorption and sales rates;
real estate values and rates of return; operating expenses;
inflation; and sufficiency of any collateral independent of the
real estate.
Resulting from the Company's management and valuation of its
mortgage loans on real estate, management believes that the
carrying value approximates the fair value of these
investments.
During 1993 the Financial Accounting Standards Board issued
SFAS No. 114 "Accounting by Creditors for Impairment of a Loan"
("SFAS No. 114"). SFAS No. 114 requires that for impaired
loans, the impairment shall be measured based on the present
value of expected future cash flows discounted at the loan's
effective interest rate or the fair value of the collateral.
Impairments of mortgage loans on real estate are established as
valuation allowances and recorded to net realized investment
gains (losses). SFAS No. 114 must be adopted for fiscal years
beginning after December 15, 1994. The Company has
decided not to early adopt this statement. The Company
estimates that the impact on both financial position and
earnings from adopting SFAS No. 114 would be immaterial.
Policy loans on insurance contracts are stated at unpaid
principal balances. The Company estimates the fair market
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.
Fair Value of Financial Instruments: Beginning in 1992, the
Company adopted SFAS No. 107 "Disclosures about Fair Value of
Financial Instruments", which requires companies to report the
fair value of financial instruments for certain assets and
liabilities both on and off-balance sheet.
Federal Income Taxes: Effective the first quarter 1992, the
Company adopted SFAS No. 109 "Accounting for Income Taxes"
("SFAS No. 109") which requires an asset and liability method
in recording income taxes on all transactions that have been
recognized in the financial statements. SFAS No. 109 provides that
deferred taxes be adjusted to reflect tax rates at which future
tax liabilities or assets are expected to be settled or
realized. Previously, the Company accounted for income taxes
in accordance with SFAS No. 96, "Accounting for Income Taxes."
The effect of adopting SFAS No. 109 was not material.
Separate Accounts: The Separate Accounts are established in
conformity with New York insurance law, the Company's
domiciliary state, and under such law, if and to the extent
provided under the applicable insurance contracts, assets held
in the Separate Accounts equal to the reserves and other
contract liabilities with respect to the Separate Accounts may
not be chargeable with liabilities that arise
<PAGE>
from any other
business of the Company. Separate Accounts assets may be
subject to General Account claims only to the extent the value
of such assets exceeds the Separate Accounts liabilities.
Assets and liabilities of the Separate Accounts, representing
net deposits and accumulated net investment earnings less fees,
held for the benefit of policyholders, are shown as separate
captions in the balance sheets. Assets held in the Separate
Accounts are carried at quoted market value.
The carrying value for Separate Accounts assets and liabilities
approximates the estimated fair value of the underlying assets.
Postretirement Benefits Other Than Pensions: During the fourth
quarter 1992, the Company adopted SFAS No. 106, "Employer's
Accounting for Postretirement Benefits Other Than Pensions "
("SFAS No. 106"). SFAS No. 106 requires the accrual of
postretirement benefits (such as health care benefits) during
the years an employee provides service. Prior to 1992, the
cost of these benefits were expensed on a pay-as-you-go basis
when such cost was allocated from MLIG as a component of the
Company's operating expenses. The effect of adopting SFAS No.
106 was minimal.
Statements of Cash Flows: For the purpose of reporting cash
flows, cash and cash equivalents includes cash on hand and on
deposit and short-term investments with original maturities of
three months or less.
The carrying amounts approximate the estimated fair value of
cash and cash-equivalents.
Reclassifications: To facilitate comparisons with the current
year, certain amounts in the prior years have been
reclassified.
<PAGE>
NOTE 2: INVESTMENTS
The amortized cost (original cost for equity securities) less
valuation allowances and estimated fair value of investments in
fixed maturity securities and equity securities as of December
31 are:
<TABLE>
<CAPTION>
1993
----
Amortized
Cost less Gross Gross Estimated
Valuation Unrealized Unrealized Fair
Allowances Gains Losses Value
------------ ------------ ------------ ------------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturity securities available for sale:
Corporate securities $ 284,710 $ 13,726 $ 3,204 $ 295,232
Mortgage-backed securities 149,834 6,209 216 155,827
U.S. Treasury securities and obligations of
U.S. government corporations and
agencies 3,964 349 24 4,289
Obligations of states and political
subdivisions 3,500 68 0 3,568
------------ ------------ ------------ ------------
Total fixed maturity securities
available for sale $ 442,008 $ 20,352 $ 3,444 $ 458,916
============ ============ ============ ============
Equity securities available for sale:
Common stocks $ 2,392 $ 106 $ 438 $ 2,060
Non-redeemable preferred stocks 5,995 1,002 1,862 5,135
------------ ------------ ------------ ------------
Total equity securities available for sale $ 8,387 $ 1,108 $ 2,300 $ 7,195
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
1992
----
Amortized
Cost less Gross Gross Estimated
Valuation Unrealized Unrealized Fair
Allowances Gains Losses Value
------------ ------------ ------------ ------------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturity securities to be held to
maturity:
Corporate securities $ 290,905 $ 12,328 $ 2,017 $ 301,216
Mortgage-backed securities 265,840 8,390 951 273,279
U.S. Treasury securities and obligations of
U.S. government corporations and
agencies 12,713 298 374 12,637
Obligations of states and political
subdivisions 785 53 0 838
------------ ------------ ------------ ------------
Total fixed maturity securities to be held
to maturity $ 570,243 $ 21,069 $ 3,342 $ 587,970
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1992
----
Amortized
Cost less Gross Gross Estimated
Valuation Unrealized Unrealized Fair
Allowances Gains Losses Value
------------ ------------ ------------ ------------
(In Thousands)
<S> <C> <C> <C> <C>
Fixed maturity securities available for sale:
Corporate securities $ 34,312 $ 745 $ 419 $ 34,638
Mortgage-backed securities 29,256 451 365 29,342
------------ ------------ ------------ ------------
Total fixed maturity securities
available for sale $ 63,568 $ 1,196 $ 784 $ 63,980
============ ============ ============ ============
Equity securities available for sale:
Common stocks $ 2,488 $ 40 $ 452 $ 2,076
Non-redeemable preferred stocks 6,592 1,131 597 7,126
------------ ------------ ------------ -----------
Total equity securities available for sale $ 9,080 $ 1,171 $ 1,049 $ 9,202
============ ============ ============ ============
</TABLE>
For publicly traded securities, the estimated fair value is
determined using quoted market prices. For securities without
a readily ascertainable market value, the Company has
determined an estimated fair value using a discounted cash flow
approach including provisions for credit risk, based upon the
assumption that such securities will be held to maturity. Such
estimated fair values do not necessarily represent the values
for which these securities could have been sold at the dates of
the balance sheets. At December 31, 1993 and 1992,
respectively, securities without a readily ascertainable market
value, having an amortized cost less valuation allowances of
approximately $125,783,000 and $163,829,000, had an estimated
fair value of approximately $131,917,000 and $173,057,000,
respectively.
The amortized cost less valuation allowance and estimated fair
value of fixed maturity securities available for sale at
December 31, 1993 by contractual maturity are shown below:
<TABLE>
<CAPTION>
Amortized
Cost Less Estimated
Valuation Fair
Allowances Value
----------- -----------
(In Thousands)
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 15,935 $ 16,257
Due after one year through five years 105,084 110,813
Due after five years through ten years 134,039 136,697
Due after ten years 37,116 39,322 292,174
Mortgage-backed securities 149,834 155,827
------------ ------------
Total fixed maturity securities available
for sale $ 442,008 $ 458,916
============ ============
</TABLE>
Fixed maturity securities not due at a single maturity date
have been included in the preceding table in the year of final
maturity. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment
penalties.
<PAGE>
The Company's investment in mortgage loans on real estate
consists principally of loans collateralized by commercial real
estate. The largest concentrations of commercial real estate
mortgage loans are for properties located in California
($7,474,000 or 40%) and Maryland ($7,000,000 or 38%).
Net investment income arose from the following sources for the
years ended December 31,:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Fixed maturity securities $ 45,667 $ 59,036 $ 62,924
Equity securities available for sale 113 499 372
Mortgage loans on real estate 1,924 2,309 2,478
Policy loans 3,487 3,029 2,491
Cash equivalents 476 1,034 1,907
Other (144) 1,310 246
------------ ------------ ------------
Gross investment income 51,523 67,217 70,418
Less expenses (862) (1,839) (453)
------------ ------------ ------------
Net investment income $ 50,661 $ 65,378 $ 69,965
============ ============ ============
</TABLE>
Net realized investment gains (losses), including changes in
valuation allowances, determined by specific identification for
the years ended December 31,:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Fixed maturity securities $ 4,108 $ 4,069 $ (7,789)
Equity securities available for sale 2,081 (2,710) (1,896)
Mortgage loans on real estate (58) (1,793) 0
------------ ------------ ------------
Net realized investment gains (losses) $ 6,131 $ ( 434) $ (9,685)
============ ============ ============
</TABLE>
Valuation allowances have been established to reflect other than
temporary declines in estimated fair value of the following
classifications of investments as of December 31,:
<TABLE>
<CAPTION>
1993 1992
---- ---
(In Thousands)
<S> <C> <C>
Fixed maturity securities to be held to maturity $ 0 $ 9,119
Fixed maturity securities available for sale 8,881 0
Equity securities available for sale 1,502 1,502
Mortgage loans on real estate 848 790
------------ ------------
$ 11,231 $ 11,411
============ ============
</TABLE>
Proceeds, gains and losses from the sale or maturity of fixed
maturity securities available for sale and held to maturity for
the years ended December 31,:
<PAGE>
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Proceeds $ 446,517 $ 373,526 $ 366,691
Realized investment gains 4,546 5,469 6,304
Realized investment losses 438 3,206 7,864
</TABLE>
The Company held investments at December 31, 1993 of $4,550,000
which have been non-income producing for the preceding twelve
months.
The Company had investment securities of $1,118,000 and
$645,000 held on deposit with insurance regulatory authorities
at December 31, 1993 and 1992, respectively.
The Company has restructured the terms of certain of its
investments in mortgage loans on real estate in 1993 and
certain of its fixed maturity securities during 1992. The
following table provides the amortized cost less valuation
allowances immediately prior to restructuring, gross interest
income that would have been earned had the loans been current
per their original terms ("Expected Income") and gross interest
income recorded during the year ("Actual Income") and equity
interests which are received in the restructuring:
<TABLE>
<CAPTION>
1993 1992
---- ----
(In Thousands)
<S> <C> <C>
Fixed maturity securities:
Amortized cost less valuation allowances $ 0 $ 3,073
Expected income 0 678
Actual income 0 117
Equity interest received 0 668
Mortgage loans on real estate:
Amortized cost less valuation allowance $ 5,475 $ 0
Expected income 442 0
Actual Income 411 0
</TABLE>
NOTE 3: FEDERAL INCOME TAXES
The Company is taxed as a life insurance company according to
the Federal Income Tax Reform Act of 1986, as amended. The
Company's tax return is not consolidated with any other entity.
The following is a reconciliation of the provision for income
taxes, computed using the Federal statutory tax rate, with the
provision for income taxes for the three years ended December
31,:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Provision for income taxes computed at Federal
statutory rate $ 840 $ 125 $ (1,671)
Increase (decrease) in income taxes resulting from:
Federal tax rate increase (227)
Other (21) 52 (23)
------------ ------------ ------------
Federal income tax provision (benefit) $ 592 $ 177 $ (1,694)
============ ============ ============
</TABLE>
<PAGE>
The Federal statutory rate for 1993, 1992 and 1991 was 35%, 34%
and 34%, respectively.
The Company provides for deferred income taxes resulting from
temporary differences which arise from recording certain
transactions in different years for income tax reporting
purposes than for financial reporting purposes. The sources of
these differences and the tax effect of each were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Deferred policy acquisition costs $ (1,184) $ (2,094) $ (1,604)
Policyholders' account balances (969) 1,700 (2,768)
Investment adjustments (100) (1,093) (2,055)
Other 3 (709) (1,742)
------------ ------------ ------------
Deferred Federal income tax
provision (benefit) $ (2,250) $ (2,196) $ (8,169)
============ ============ ============
</TABLE>
Deferred tax assets and liabilities as of December 31 are
determined as follows:
<TABLE>
<CAPTION>
1993 1992
---- ----
(In Thousands)
<S> <C> <C>
Deferred tax assets:
Policyholders' account balances $ 9,848 $ 8,879
Investment adjustments 5,143 5,043
------------ ------------
Total deferred tax asset 14,991 13,922
------------ ------------
Deferred tax liabilities:
Deferred policy acquisition costs 4,283 5,467
Net unrealized investment gain (loss) (500) 181
Other 740 737
------------ ------------
Total deferred tax liability 4,523 6,385
------------ ------------
Net deferred tax asset $ 10,468 $ 7,537
============ ============
</TABLE>
The Company anticipates that all deferred tax assets will be
realized, therefore no valuation allowance has been provided.
The Company paid Federal income taxes of $2,668,000, $1,500,000
and $1,095,000 in 1993, 1992 and 1991, respectively.
NOTE 4: RELATED PARTY TRANSACTIONS
The Company and MLIG are parties to a service agreement whereby
MLIG has agreed to provide certain data processing, legal,
actuarial, management, advertising and other services to the
Company. Expenses incurred by MLIG in relation to this service
agreement are reimbursed by the Company on an allocated cost
basis. Charges billed to the Company by MLIG pursuant to the
agreement were $5,688,000, $5,403,000 and $5,034,000 for the
years ended December 31, 1993, 1992 and 1991 respectively.
The Company and Merrill Lynch Asset Management, L.P. ("MLAM") are
parties to a service agreement whereby MLAM has agreed to provide
certain invested asset management services to the Company. The
<PAGE>
Company pays a fee to MLAM for these services through the MLIG
service agreement.
The Company and Merrill Lynch Trust Company ("ML Trust") are
parties to an agreement whereby the Company retains ML Trust to
hold certain invested assets upon the terms and conditions of the
agreement. ML Trust is paid a fee based on its current fee
schedule.
The Company has a general agency agreement with Merrill Lynch
Life Agency Inc. ("MLLA") whereby registered representatives of
Merrill Lynch, Pierce, Fenner and Smith, Inc. ("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 approximately $4,927,000, $1,469,000 and $864,000 for 1993,
1992 and 1991, respectively. Substantially all of these fees
were capitalized as deferred policy acquisition costs and are
being amortized in accordance with the policy discussed in Note
1.
In connection with the acquisition of a block of variable life
insurance business from Monarch Life Insurance Company ("Monarch
Life"), the Company borrowed funds from Merrill Lynch & Co. to
partially finance the transaction. As of December 31, 1993 and
1992, the outstanding balance of these loans was approximately
$5,550,000 and $7,200,000, respectively. Approximately
$1,650,000 and $4,600,000 was repaid on these loans during 1993
and 1992, respectively. Interest was calculated on these loans at
LIBOR plus 150 basis points. Intercompany interest paid on these
loans during 1993, 1992 and 1991 was approximately $328,000,
$679,000 and $942,000, respectively.
The Company has entered into certain other marketing and
administrative service agreements with affiliates in connection
with the variable life and annuity policies it sells.
During 1993, 1992 and 1991, the Company assumption reinsured
certain policies previously indemnity reinsured by the Company's
affiliate, Merrill Lynch Life Insurance Company ("MLLIC"), and
directly written by Family Life Insurance Company ("Family
Life"), a former affiliate. These transactions resulted in the
transfer of approximately $11,860,000, $2,000,000 and $19,200,000
of policy reserves during 1993, 1992 and 1991, respectively.
The fair value of the Company's payables to affiliates is
estimated at carrying value. These borrowings are payable on
demand and bear a variable interest rate based on LIBOR.
Total intercompany interest paid was $397,000, $801,000 and
$1,193,000 for 1993, 1992 and 1991, respectively.
NOTE 5: STOCKHOLDER'S EQUITY AND STATUTORY REGULATIONS
At December 31, 1993 and 1992, $30,125,000 and $56,862,000,
respectively, of retained earnings was available for distribution
to MLIG. Notice of intention to declare a dividend must be filed
with the New York Superintendent of Insurance who may disallow
the payment. No dividends were declared or paid during 1993, 1992
and 1991. Statutory capital and surplus at December 31, 1993 and
1992, was $57,333,000 and $59,062,000, respectively.
During 1991, MLIG contributed capital to the Company of
$26,717,000 to support the underwriting of additional insurance
premiums and deposits. No capital contributions were made during
1993 and 1992.
Applicable insurance department regulations require that the
Company report its accounts in accordance with statutory
accounting practices. Statutory accounting practices primarily
differ from the principles utilized in these financial statements
by charging policy acquisition costs to expense as incurred,
establishing future policy benefit reserves using different
actuarial assumptions, not providing for deferred taxes and
valuing
<PAGE>
securities on a different basis. The Company's statutory net
income for the years ended December 31, 1993, 1992 and 1991 was
$6,515,000, $10,167,000 and $5,809,000, respectively.
The National Association of Insurance Commissioners ("NAIC")
has developed and implemented, effective December 31,
1993, the Risk Based Capital ("RBC") adequacy monitoring system.
The RBC calculates the amount of adjusted capital which a life
insurance company should have based upon that company's risk
profile. The NAIC has established four different levels of
regulatory action with respect to the RBC adequacy monitoring
system. Each of these levels may be triggered if an insurer's
total adjusted capital is less than a corresponding level of RBC.
These levels are as follows:
For companies with capital levels which are below 100% of
the basic RBC level (company action level) calculated for
that company, the company must submit to the domiciliary
insurance commissioner, and implement, an approved plan to
increase adjusted capital to at least 100% of the basic
RBC.
For companies with capital levels which are below 75% of
the basic RBC level calculated for that company, an
examination of the company will be conducted by the
domiciliary insurance department and as a result of the
findings of the examination, corrective orders may be
issued.
For companies with capital levels which are below 50% of
the basic RBC level (authorized control level) calculated
for that company, the domiciliary insurance commissioner
will have the authority to place the company into
conservatorship or liquidation.
For companies with capital levels which are below 35% of
the basic RBC level calculated for that company, the
domiciliary insurance commissioner will be required to
place the company into conservatorship or liquidation.
As of December 31, 1993, based on the RBC formula, the Company's
total adjusted capital level was 245% of the basic RBC
level.
NOTE 6: REINSURANCE AGREEMENTS
On December 31, 1990, the Company and an affiliate entered into a
100% reinsurance agreement with respect to all variable life
policies issued by Monarch Life and sold through the Merrill
Lynch retail network. As a result of the indemnity provisions of
the agreement, the Company became obligated to reimburse Monarch
Life for its net amount at risk with regard to the reinsured
policies. At the date of acquisition, assets of approximately
$65,000,000 supporting general account reserves, on a statutory
accounting basis, were transferred from Monarch Life to the
Company. This agreement provides for contingent ceding
commission payments to Monarch Life dependent upon the lapse rate
during the five years ending in 1995 and mortality experience
during the ten years ending in 2000. To date, the Company has
paid approximately $24,700,000 to Monarch Life under the terms of
the agreement. As of December 31, 1993, the Company has accrued
$870,000 for such payments.
On various dates during 1992 and 1991, the Company and an
affiliate assumption reinsured substantially all such policies,
wherever permitted by appropriate regulatory authorities. Upon
assumption, the policy liabilities and the underlying assets of
approximately $261,000,000 were transferred to the ML of New York
Variable Life Separate Account ("Account"). As a result of the
assumptions, the Company became directly obligated to the
policyholders, rather than to Monarch Life. Certain contract
owners of the reinsured policies elected to remain with Monarch
Life as permitted under certain state insurance laws. Assets and
liabilities of those policies not assumption reinsured by the
Company or its affiliate have remained with Monarch Life. The
Company and its affiliate have indemnified Monarch Life against
its net amount at risk on such policies. As of December 31,
1993, approximately 23 life insurance policies with $2,820,000
life insurance in force remain under the indemnity reinsurance
agreement.
<PAGE>
During 1992, the Company, along with its affiliates, entered into
an agreement with Monarch Life for the purchase, transfer or
assignment of certain services and assets owned, licensed or
leased by Monarch Life. Additionally, the Company along with its
affiliates were allowed to actively solicit the employment of
individuals employed by Monarch Life, who are required to service
the Company's and its affiliates' variable life insurance
policies and Monarch Life's variable life insurance policies. In
consideration of this, the Company and its affiliate, MLLIC,
transferred title to Monarch Life of certain telecommunications
equipment owned by Merrill Lynch Insurance Group Services, Inc.,
an affiliate of the Company, with a net book value of $1,753,000.
The Company agreed to service Monarch Life's variable life
insurance policies for a period of five years at an annual rate
of $100 per policy. Monarch Life has an option to terminate the
service agreement upon proper notification.
NOTE 7: INTEREST RATE SWAP CONTRACTS
During 1992, the Company terminated all outstanding swap
contracts and recorded no net gains (losses) in connection with
interest rate swap activity.
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.
* * * * * *
<PAGE>
PART II. OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
ML Life Insurance Company of New York's By-Laws provide, in Article VII,
Section 7.1 as follows:
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND INCORPORATORS. To the
extent permitted by the law of the State of New York and subject to all
applicable requirements thereof:
a) any person made or threatened to be made a party to any action or
proceeding, whether civil or criminal, by reason of the fact that he,
his testator, or intestate, is or was a director, officer, employee or
incorporator of the Company shall be indemnified by the Company;
b) any person made or threatened to be made a party to any action or
proceeding, whether civil or criminal, by reason of the fact that he,
his testator or intestate serves or served any other organization in any
capacity at the request of the Company may be indemnified by the Company;
and
c) the related expenses of any such person in any other of said
categories may be advanced by the Company.
Any persons serving as an officer, director or trustee of a corporation,
trust, or other enterprise, including the Registrant, at the request of Merrill
Lynch are entitled to indemnification from Merrill Lynch, to the fullest extent
authorized or permitted by law, for liabilities with respect to actions taken or
omitted by such persons in any capacity in which such persons serve Merrill
Lynch or such other corporation, trust, or other enterprise. Any action
initiated by any such person for which indemnification is provided shall be
approved by the Board of Directors of Merrill Lynch prior to such initiation.
DIRECTORS' AND OFFICERS' INSURANCE
Merrill Lynch has purchased from Corporate Officers' and Directors'
Assurance Company directors' and officers' liability insurance policies which
cover, in addition to the Indemnification described above, liabilities for which
indemnification is not provided under the By-Laws. The Company will pay an
allocable portion of the insurance premium paid by Merrill Lynch with respect to
such insurance policies.
NEW YORK BUSINESS CORPORATION LAW
In addition, Sections 722, 723, and 724 of the New York Business Corporation
Law generally provide that a corporation has the power (and in some instances
the obligation) to indemnify a director or officer of the corporation, or a
person serving at the request of the corporation as a director or officer of
another corporation or other enterprise against any judgments, amounts paid in
settlement, and reasonably incurred expenses in a civil or criminal action or
proceeding if the director or officer acted in good faith in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation (or, in the case of a criminal action or proceeding, if he or she in
addition had no reasonable cause to believe that his or her conduct was
unlawful).
Insofar as indemnification for liability arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the
II-1
<PAGE>
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.
REPRESENTATIONS PURSUANT TO RULE 6E-3(T)
This filing is made pursuant to Rule 6e-3(T) under the Investment Company
Act of 1940.
Registrant elects to be governed by Rule 6e-3(T)(b)(13)(i)(A) under the
Investment Company Act of 1940 with respect to the policies described in the
Prospectus.
Registrant makes the following representations:
(1) Section 6e-3(T)(b)(13)(iii)(F) has been relied upon.
(2) The level of the mortality and expense risk and guaranteed benefits
risk charge is within the range of industry practice for comparable
flexible or scheduled contracts.
(3) Registrant has concluded that there is a reasonable likelihood that
the distribution financing arrangement of the Separate Account will
benefit the separate account and policyowners and will keep and make
available to the Commission on request a memorandum setting forth the basis
for this representation.
(4) The Separate Account will invest only in management investment
companies which have undertaken to have a board of directors, a
majority of whom are not interested persons of the company, formulate and
approve any plan under Rule 12b-1 to finance distribution expenses.
The methodology used to support the representation made in paragraph (2)
above is based on an analysis of the mortality and expense risk and guaranteed
benefits risk charge contained in other variable life insurance contracts.
Registrant undertakes to keep and make available to the Commission on request
the documents used to support the representation in paragraph (2) above.
II-2
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The Prospectus consisting of 74 pages.
Undertaking to file reports.
Rule 484 Undertaking.
Representations Pursuant to Rule 6e-3(T).
The signatures.
Written Consents of the Following Persons:
(a) Barry G. Skolnick, Esq.
(b) Joseph E. Crowne, F.S.A.
(c) Sutherland, Asbill & Brennan
(d) Deloitte & Touche, independent certified public accountants
The following exhibits:
<TABLE>
<S> <C> <C> <C>
1.A. (1) Resolution of the Board of Directors of ML Life Insurance Company of New York
establishing the Separate Account (Incorporated by Reference to Registrant's
Form S-6 Registration No. 33-51702 Filed September 4, 1992)
(2) Not applicable
(3) (a) Distribution Agreement between ML Life Insurance Company of New York and Merrill
Lynch, Pierce, Fenner & Smith Incorporated (Incorporated by Reference to
Registrant's Form S-6 Registration No. 33-61670 Filed April 26, 1993)
(b) Amended Sales Agreement between ML Life Insurance Company of New York and
Merrill Lynch Life Agency Inc. (Incorporated by Reference to Registrant's Form
S-6 Registration No. 33-61670 Filed April 26, 1993)
(c) Schedules of Sales Commissions (Incorporated by Reference to Registrant's Form
S-6 Registration No. 33-61670 Filed April 26, 1993)
(4) Undertaking of ML Life Insurance Company of New York pursuant to Rule 27d-2
(Incorporated by Reference to Registrant's Form S-6 Registration No. 33-61670
Filed April 26, 1993)
(5) (a) (1) Flexible Premium Joint and Last Survivor Variable Universal Life Insurance
Policy (Incorporated by Reference to Registrant's Form S-6 Registration No.
33-61670 Filed April 26, 1993)
(b) (1) Backdating Endorsement (Incorporated by Reference to Registrant's Form S-6
Registration No. 33-61670 Filed April 26, 1993)
(2) (a) Additional Insurance Rider for Flexible Premium Joint and Last Survivor Variable
Universal Life Insurance Policy (Incorporated by Reference to Registrant's Form
S-6 Registration No. 33-61670 Filed April 26, 1993)
(3) (a) Policy Split Rider for Flexible Premium Joint and Last Survivor Variable
Universal Life Insurance Policy (Incorporated by Reference to Registrant's Form
S-6 Registration No. 33-61670 Filed April 26, 1993)
(6) (a) Charter of ML Life Insurance Company of New York (Incorporated by Reference to
Registrant's Form S-6 Registration No. 33-51702 Filed September 4, 1992)
(b) By-Laws of ML Life Insurance Company of New York (Incorporated by Reference to
Registrant's Form S-6 Registration No. 33-51702 Filed September 4, 1992)
(7) Not applicable
(8) (a) Agreement between ML Life Insurance Company of New York and Merrill Lynch Funds
Distributor, Inc. (Incorporated by Reference to Registrant's Form S-6
Registration No. 33-61670 Filed April 26, 1993)
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C> <C> <C>
(b) Agreement between ML Life Insurance Company of New York and Merrill Lynch,
Pierce, Fenner & Smith Incorporated (Incorporated by Reference to Registrant's
Form S-6 Registration No. 33-61670 Filed April 26, 1993)
(c) Participation Agreement among Merrill Lynch Life Insurance Company, ML Life
Insurance Company of New York and Monarch Life Insurance Company (Incorporated
by Reference to Registrant's Post-Effective Amendment No. 3 to Form S-6
Registration No. 33-61670 Filed April 27, 1994)
(d) Management Agreement between Royal Tandem Life Insurance Company and Merrill
Lynch Asset Management, Inc. (Incorporated by Reference to Registrant's Form S-6
Registration No. 33-61670 Filed April 26, 1993)
(e) Form of Participation Agreement among 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. 3 to
Form S-6 Registration No. 33-55472 Filed April 27, 1994)
(9) (a) Service Agreement between Tandem Financial Group, Inc. and Royal Tandem Life
Insurance Company (Incorporated by Reference to Registrant's Form S-6
Registration No. 33-51702 Filed September 4, 1992)
(b) Service Agreement between ML Life Insurance Company of New York and Merrill
Lynch Life Insurance Company (Incorporated by Reference to Registrant's Form S-6
Registration No. 33-61670 Filed April 26, 1993)
(10) (a) Variable Life Insurance Application (Incorporated by Reference to Registrant's
Form S-6 Registration No. 33-61670 Filed April 26, 1993)
(b) Application for Reinstatement (Incorporated by Reference to Registrant's Form
S-6 Registration No. 33-61670 Filed April 26, 1993)
(11) Memorandum describing ML Life Insurance Company of New York's Issuance, Transfer
and Redemption Procedures (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 2 to Form S-6 Registration No. 33-61670 Filed March
1, 1994)
2. See Exhibit 1.A.(5)
3. Opinion and Consent of Barry G. Skolnick, Esq. as to the legality of the securities being
registered
4. Not applicable
5. Not applicable
6. Opinion and Consent of Joseph E. Crowne, F.S.A. as to actuarial matters pertaining to the
securities being registered
7. (a) Power of Attorney of Frederick J.C. Butler (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration No.
33-61670 Filed March 1, 1994)
(b) Power of Attorney of Michael P. Cogswell (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration No.
33-61670 Filed March 1, 1994)
(c) Power of Attorney of Sandra K. Cox (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 2 to Form S-6 Registration No. 33-61670 Filed March
1, 1994)
(d) Power of Attorney of Joseph E. Crowne (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 2 to Form S-6 Registration No. 33-61670 Filed March
1, 1994)
(e) Power of Attorney of David E. Dunford (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 2 to Form S-6 Registration No. 33-61670 Filed March
1, 1994)
(f) Power of Attorney of John C.R. Hele (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 2 to Form S-6 Registration No. 33-61670 Filed March
1, 1994)
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C> <C>
(g) Power of Attorney of Robert L. Israeloff (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration No.
33-61670 Filed March 1, 1994)
(h) Power of Attorney of Allen N. Jones (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 2 to Form S-6 Registration No. 33-61670 Filed March
1, 1994)
(i) Power of Attorney of Cynthia L. Kahn (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 2 to Form S-6 Registration No. 33-61670 Filed March
1, 1994)
(j) Power of Attorney of Robert A. King (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 2 to Form S-6 Registration No. 33-61670 Filed March
1, 1994)
(k) Power of Attorney of Irving M. Pollack (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration No.
33-61670 Filed March 1, 1994)
(l) Power of Attorney of Barry G. Skolnick (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration No.
33-61670 Filed March 1, 1994)
(m) Power of Attorney of Anthony J. Vespa (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 2 to Form S-6 Registration No. 33-61670 Filed March
1, 1994)
(n) Power of Attorney of William A. Wilde (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 2 to Form S-6 Registration No. 33-61670 Filed March
1, 1994)
8. (a) Written Consent of Barry G. Skolnick, Esq. (See Exhibit 3)
(b) Written Consent of Joseph E. Crowne, F.S.A. (See Exhibit 6)
(c) Written Consent of Sutherland, Asbill & Brennan
(d) Written Consent of Deloitte & Touche, independent certified public accountants
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
ML of New York Variable Life Separate Account II, hereby certifies that this
Post-Effective Amendment No. 3 meets all of the requirements for effectiveness
pursuant to paragraph (b) of Rule 486 under the Securities Act of 1933, and has
duly caused this Post-Effective Amendment No. 3 to the Registration Statement to
be signed on its behalf by the undersigned thereunto duly authorized, and its
seal to be hereunto affixed and attested, all in the City of Plainsboro and the
State of New Jersey, on the 27th day of April 1994.
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
(Registrant)
By: ML LIFE INSURANCE COMPANY OF NEW YORK
(Depositor)
<TABLE>
<S> <C>
Attest: /s/ SHELLEY K. PARKER By: /s/ BARRY G. SKOLNICK
-------------------------------- ----------------------------------------
Shelley K. Parker Barry G. Skolnick
Vice President Senior Vice President
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 3 to the Registration Statement has been signed
below by the following persons in the capacities indicated on April 27, 1994.
<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 Treasurer
Joseph E. Crowne
* Director, Senior Vice President, and Chief Investment
- ------------------------------------------- Officer
David M. Dunford
* Director and Senior Vice President
- -------------------------------------------
John C.R. Hele
* Director, Vice President and Senior Counsel
- -------------------------------------------
Michael P. Cogswell
* Director
- -------------------------------------------
Frederick J.C. Butler
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ------------------------------------------------------
<S> <C>
* Director
- -------------------------------------------
Sandra K. Cox
* Director
- -------------------------------------------
Robert L. Israeloff
* Director
- -------------------------------------------
Allen N. Jones
* Director
- -------------------------------------------
Cynthia L. Kahn
* Director
- -------------------------------------------
Robert A. King
* Director
- -------------------------------------------
Irving M. Pollack
* Director
- -------------------------------------------
William A. Wilde
*By: /s/ BARRY G. SKOLNICK In his own capacity as Director, Senior Vice
------------------------------------- President, and General Counsel and as Attorney-In-Fact
Barry G. Skolnick
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C> <C> <C>
1.A. (1) Resolution of the Board of Directors of ML Life Insurance Company of
New York establishing the Separate Account (Incorporated by Reference
to Registrant's Form S-6 Registration No. 33-51702 Filed September 4,
1992)
(2) Not Applicable
(3) (a) Distribution Agreement between ML Life Insurance Company of New York
and Merrill Lynch, Pierce, Fenner & Smith Incorporated (Incorporated
by Reference to Registrant's Form S-6 Registration No. 33-61672 Filed
April 26, 1993)
(b) Amended Sales Agreement between ML Life Insurance Company of New York
and Merrill Lynch Life Agency Inc. (Incorporated by Reference to
Registrant's Form S-6 Registration No. 33-61672 Filed April 26, 1993)
(c) Schedules of Sales Commissions (Incorporated by Reference to
Registrant's Form S-6 Registration No. 33-61672 Filed April 26, 1993)
(4) Undertaking of ML Life Insurance Company of New York pursuant to Rule
27d-2 (Incorporated by Reference to Registrant's Form S-6 Registration
No. 33-61672 Filed April 26, 1993)
(5) (a)(1) Flexible Premium Variable Universal Life Insurance Policy
(Incorporated by Reference to Registrant's Form S-6 Registration No.
33-61672 Filed April 26, 1993)
(b)(1) Backdating Endorsement (Incorporated by Reference to Registrant's Form
S-6 Registration No. 33-61672 Filed April 26, 1993)
(2)(a) Additional Insurance Rider for Flexible Premium Variable Universal
Life Insurance Policy (Incorporated by Reference to Registrant's Form
S-6 Registration No. 33-61672 Filed April 26, 1993)
(6) (a) Charter of ML Life Insurance Company of New York (Incorporated by
Reference to Registrant's Form S-6 Registration No. 33-51702 Filed
September 4, 1992)
(b) By-Laws of ML Life Insurance Company of New York (Incorporated by
Reference to Registrant's Form S-6 Registration No. 33-51702 Filed
September 4, 1992)
(7) Not Applicable
(8) (a) Agreement between ML Life Insurance Company of New York and Merrill
Lynch Funds Distributor, Inc. (Incorporated by Reference to
Registrant's Form S-6 Registration No. 33-61672 Filed April 26, 1993)
(b) Agreement between ML Life Insurance Company of New York and Merrill
Lynch, Pierce, Fenner & Smith Incorporated (Incorporated by Reference
to Registrant's Form S-6 Registration No. 33-61672 Filed April 26,
1993)
(c) Participation Agreement among Merrill Lynch Life Insurance Company, ML
Life Insurance Company of New York and Monarch Life Insurance Company
(Incorporated by Reference to Registrant's Post-Effective Amendment
No. 3 to Form S-6 Registration No. 33-61670 Filed April 27, 1994)
(d) Management Agreement between Royal Tandem Life Insurance Company and
Merrill Lynch Asset Management, Inc. (Incorporated by Reference to
Registrant's Form S-6 Registration No. 33-61672 Filed April 26, 1993)
(e) Form of Participation Agreement among 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. 3 to Form S-6 Registration No. 33-55472
Filed April 27, 1994)
(9) (a) Service Agreement between Tandem Financial Group, Inc. and Royal
Tandem Life Insurance Company (Incorporated by Reference to
Registrant's Form S-6 Registration No. 33-51702 Filed September 4,
1992)
</TABLE>
II-8
<PAGE>
<TABLE>
<S> <C> <C> <C>
(b) Service Agreement between ML Life Insurance Company of New York and
Merrill Lynch Life Insurance Company (Incorporated by Reference to
Registrant's Form S-6 Registration No. 33-61672 Filed April 26, 1993)
(10) (a) Variable Life Insurance Application (Incorporated by Reference to
Registrant's Form S-6 Registration No. 33-61672 Filed April 26, 1993)
(b) Application for Reinstatement (Incorporated by Reference to
Registrant's Form S-6 Registration No. 33-61672 Filed April 26, 1993)
(11) Memorandum describing ML Life Insurance Company of New York's
Issuance, Transfer and Redemption Procedures (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 2 to Form S-6
Registration No. 33-61670 Filed March 1, 1994)
(2) See Exhibit 1.A.(5)
3. Opinion and Consent of Barry G. Skolnick, Esq. as to the legality of the
securities being registered
6. Opinion and Consent of Joseph E. Crowne, F.S.A. as to actuarial matters
pertaining to the securities being registered
7. (a) Power of Attorney of Frederick J.C. Butler (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 2 to Form S-6
Registration No. 33-61670 Filed March 1, 1994)
(b) Power of Attorney of Michael P. Cogswell (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration
No. 33-61670 Filed March 1, 1994)
(c) Power of Attorney of Sandra K. Cox (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration
No. 33-61670 Filed March 1, 1994)
(d) Power of Attorney of Joseph E. Crowne (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration
No. 33-61670 Filed March 1, 1994)
(e) Power of Attorney of David E. Dunford (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration
No. 33-61670 Filed March 1, 1994)
(f) Power of Attorney of John C.R. Hele (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration
No. 33-61670 Filed March 1, 1994)
(g) Power of Attorney of Robert L. Israeloff (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration
No. 33-61670 Filed March 1, 1994)
(h) Power of Attorney of Allen N. Jones (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration
No. 33-61670 Filed March 1, 1994)
(i) Power of Attorney of Cynthia L. Kahn (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration
No. 33-61670 Filed March 1, 1994)
(j) Power of Attorney of Robert A. King (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration
No. 33-61670 Filed March 1, 1994)
(k) Power of Attorney of Irving M. Pollack (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration
No. 33-61670 Filed March 1, 1994)
(l) Power of Attorney of Barry G. Skolnick (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration
No. 33-61670 Filed March 1, 1994)
</TABLE>
II-9
<PAGE>
<TABLE>
<S> <C> <C> <C>
(m) Power of Attorney of Anthony J. Vespa (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration
No. 33-61670 Filed March 1, 1994)
(n) Power of Attorney of William A. Wilde (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration
No. 33-61670 Filed March 1, 1994)
8. (a) Written Consent of Barry G. Skolnick, Esq. (See Exhibit 3)
(b) Written Consent of Joseph E. Crowne, F.S.A. (See Exhibit 6)
(c) Written Consent of Sutherland, Asbill & Brennan
(d) Written Consent of Deloitte & Touche, independent certified public
accountants
</TABLE>
II-10
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
A SUBSIDIARY OF MERRILL LYNCH & CO., INC.
717 Fifth Avenue, 16th Floor
New York, NY 10022
April 4, 1994
Board of Directors
ML Life Insurance Company of New York
717 Fifth Avenue, 16th Floor
New York, NY 10022
To the Board of Directors:
In my capacity as General Counsel of ML Life Insurance Company of New York (the
"Company"), I have supervised the establishment of the ML of New York Variable
Life Separate Account II (the "Account"), by the Board of Directors of the
Company as a separate account for assets applicable to certain flexible premium
variable life insurance contracts (the "Contracts") issued by the Company
pursuant to the provisions of Section 4240 of the Insurance Laws of the State of
New York. Moreover, I have supervised the preparation of Post-Effective
Amendment No. 3 to the Registration Statement on Form S-6 (the "Registration
Statement") (File No. 33-61670) filed by the Company and the Account with the
Securities and Exchange Commission under the Securities Act of 1933, for the
registration of the Contracts to be issued with respect to the Account.
I have made such examination of the law and examined such corporate records and
such other documents as in my judgment are necessary and appropriate to enable
me to render the following opinion that:
1. The Company has been duly organized under the laws of the State of New York
and is a validly existing corporation.
2. The Account is duly created and validly existing as a separate account
pursuant to the aforesaid provisions of New York law.
3. The portion of the assets to be held in the Account equal to the reserves
and other liabilities under the Contracts is not chargeable with liabilities
arising out of any other business the Company may conduct.
4. The Contracts have been duly authorized by the Company and constitute legal,
validly issued and binding obligations of the Company in accordance with
their terms.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name under the caption "Legal Matters" in the
Prospectus contained in the Registration Statement.
Very truly yours,
/s/ Barry G. Skolnick
Barry G. Skolnick
Senior Vice President and General
Counsel
<PAGE>
April 4, 1994
Board of Directors
ML Life Insurance Company of New York
717 Fifth Avenue, 16th Floor
New York, NY 10022
Re: ML of New York Variable Life Separate Account II
To The Board of Directors:
This opinion is furnished in connection with the filing of Post Effective
Amendment No. 3 to the Registration Statement filed on Form S-6 (File No.
33-61670) which covers premiums received under certain flexible premium joint
and last survivor variable life insurance contracts ("Contracts" or "Contract")
issued by ML Life Insurance Company of New York (the "Company").
The Prospectus included in the Registration Statement describes Contracts which
are issued by the Company. The Contract forms were reviewed under my
direction, and I am familiar with the Registration Statement and exhibits
thereto. In my opinion:
1. The "sales load," as defined in paragraph (c)(4) of Rule 6(e)-3(T) under
the Investment Company Act of 1940, will not exceed 9 per centum of the sum of
the guideline annual premiums that would be paid during the period equal to the
lesser of 20 years or the anticipated joint life expectancy of the named
insureds, calculated on an exact age basis, based on the 1980 Commissioners
Standard Ordinary Smoker/Nonsmoker Mortality Table (or the 1980 Commissioners
Standard Ordinary Aggregate Mortality Table for ages 0-19). The sales load
payments made in excess of such sum will not exceed 9%. Sales load in excess of
(1) 30% of payments made which are less than or equal to one guideline annual
premium; plus (2) 10% of payments greater than one but no greater than two
guideline annual premiums; plus (3) 9% of payments in excess of two guideline
annual premiums, will be refunded if the Contract is surrendered during the
first 24 months after issue, added to the cash value so as to continue the
Contract in effect if debt exceeds the larger of the cash value and the fixed
base during the first 24 months after issue, and added to the cash value in
determining the variable insurance amount during the first 24 months after
issue.
2. The illustrations of death benefits, investment base, net cash surrender
values and cash values and accumulated premiums included in the Registration
Statement for the Contract and based on the assumptions stated in the
illustrations, are consistent with the provisions of the Contract. The rate
structure of the Contract has not been designed so as to make the relationship
between premiums and benefits, as shown in the illustrations, appear more
favorable to a prospective purchaser of a Contract for the ages and sexes shown,
than to prospective purchasers of a Contract for other ages and sex.
<PAGE>
3. The table of illustrative cash value corridor factors included in the
"Death Benefits Proceeds" section in consistent with the provisions of the
Contract.
4. The information with respect to the Contract contained in (i) the
illustrations of increase in guarantee period included in the "Additional
Payments" section of the Examples, (ii) the illustrations of a decrease in
guarantee period included in the "Partial Withdrawals" section of the Examples
and (iii) the illustrations of the changes in face amount included in the
"Changing the Death Benefit Option" section of the Examples, based on the
assumptions specified, are consistent with the provisions of the Contract.
5. The charge for federal taxes that is imposed under the under the Contracts
is reasonable in relation to the Company's increased tax burden under section
848 of the Internal Revenue Code of 1986, as amended, resulting from the
Company's receipt of such premiums. The cost to the Company of capital used to
satisfy its increased federal tax burden under Section 848 is, in essence, the
Company's targeted rate of return. The targeted rate of return that is used in
calculating the level of such charge is reasonable, and the factors taken into
account by the Company in determining such targeted rate of return are the
appropriate factors to consider in determining such targeted rate of return.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the use of my name relating to actuarial matters under the
heading "Experts" in the Prospectus.
Very truly yours,
/s/ Joseph E. Crowne
--------------------
Joseph E. Crowne, FSA
Senior Vice President and
Chief Financial Officer
<PAGE>
Exhibit 8(c)
CONSENT OF SUTHERLAND, ASBILL & BRENNAN
We consent to the reference to our firm under the heading "Legal
Matters" in the prospectus included in Post-Effective Amendment No. 3
to the Registration Statement on Form S-6 for certain variable life
insurance contracts issued through ML of New York Variable Life Separate
Account II of ML Life Insurance Company of New York (File No. 33-61670).
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.
/s/ Sutherland, Asbill & Brennan
SUTHERLAND, ASBILL & BRENNAN
Washington, D.C.
April 26, 1994
<PAGE>
Exhibit 8(d)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 3 to
Registration Statement No. 33-61670 of ML of New York Variable Life
Separate Account II on Form S-6 of our reports on (i) ML Life Insurance
Company of New York dated February 28, 1994, and (ii) ML of New York Variable
Life Separate Account II dated February 16, 1994, appearing in the Prospectus,
which is a part of such Registration Statement, and to the reference to us
under the heading "Experts" in such Prospectus.
New York, New York
April 25, 1994
