<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 1996
REGISTRATION NO. 33-51794
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
POST-EFFECTIVE AMENDMENT NO. 5
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
-------------------
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
-------------------
It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on May 1, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a) (1)
/ / on (date) pursuant to paragraph (a) (1) of Rule 485
/ / this post-effective amendment designates a new effective date
for a previously filed post-effective amendment
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, 1995
on February 28, 1996.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
----------- ----------------------------------------------------------------------------
<C> <S>
1 Cover Page
2 Cover Page
3 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
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 the ML Life Insurance Company of New York
6 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 Separate Account and its Divisions (Charges to Series Fund
Assets; Charges to Variable Series Funds Assets)
7 Not Applicable
8 Not Applicable
9 More About the Insurance Company (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 your Investment Base; Charges to the Separate
Account; Guarantee Period; Net Cash Surrender Value; Loans; Partial
Withdrawals; Death Benefit Proceeds; Payment of Death Benefit Proceeds;
Your Right to Cancel ("Free Look" Period) or Exchange]; More About the
Contract; More About the Separate Account and its Divisions (Charges to
Series Fund Assets; Charges to Variable Series Funds Assets)
14 Facts About the Contract (Purchasing a Contract; Planned Payments); More
About the Contract (Other Contract Provisions)
15 Summary of the Contract (Availability and Payments); Facts About the
Contract (Initial Payment; Making 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 and Cash Surrender Value;
Right to Cancel ("Free Look" Period) or Exchange; Partial Withdrawals];
Facts About the Contract [Net Cash Surrender Value; Partial Withdrawals;
Right to Cancel ("Free Look" Period) or Exchange]; More About the Contract
(Some Administrative Procedures)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
----------- ----------------------------------------------------------------------------
<C> <S>
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 More About the Separate Account and its Divisions (Charges Within the
Account; Charges to Series Fund Assets; Charges to Variable Series Funds
Assets)
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 the 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 the ML Life Insurance Company of New York
28 More About the ML Life Insurance Company of New York
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 Not Applicable
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 (Net Cash Surrender 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>
<PAGE>
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
----------- ----------------------------------------------------------------------------
<C> <S>
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 the Contract (Selling the Contracts)
49 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)
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 (ML of New York and MLPF&S); More
About the Contract (Selling the Contracts)
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)
</TABLE>
<PAGE>
PROSPECTUS
MAY 1, 1996
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
ALSO KNOWN AS
MODIFIED FLEXIBLE PREMIUM
VARIABLE 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 variable 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. It describes contracts which, at the
time of issue, are modified endowment contracts under federal tax law. A
prospective contract owner who wants to purchase a contract that is not a
modified endowment contract should consult a Merrill Lynch registered
representative. Because the Contract is a modified endowment contract, any loan,
partial withdrawal or surrender may result in adverse tax consequences and/or
penalties. However, a contract owner should not be considered in constructive
receipt of the cash surrender value of the Contract, including increases, unless
and until he or she is in actual receipt of distributions from the Contract.
Through the first 14 days following the in force date, the initial payment will
be invested only in the investment division of the Separate Account investing in
the Money Reserve Portfolio. Thereafter, the investment base will be reallocated
to any five of the 34 investment divisions of ML of New York Variable Life
Separate Account II (the "Separate Account"), a 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., seven mutual fund portfolios of the Merrill
Lynch Variable Series Funds, Inc. and 17 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
insured. ML of New York guarantees that coverage will remain in force for life,
or for a shorter time if the face amount chosen is above the minimum face amount
required for that payment. 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 surrender 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.
Contract owners may also purchase a Contract to provide insurance coverage on
the lives of two insureds with proceeds payable upon the death of the last
surviving insured.
Contract owners may make additional payments subject to certain conditions,
change the face amount of their Contract, turn in the Contract for its net cash
surrender value and make partial withdrawals. 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 cash surrender value.
It may not be advantageous to replace existing insurance with the Contract. The
Contract may be returned or exchanged for a contract with benefits that do not
vary with the investment results of a separate account.
THE PURCHASE OF THIS CONTRACT INVOLVES CERTAIN RISKS. BECAUSE IT IS A VARIABLE
LIFE INSURANCE CONTRACT, THE VALUE OF THE CONTRACT REFLECTS THE INVESTMENT
PERFORMANCE OF THE SELECTED INVESTMENT OPTIONS. INVESTMENT RESULTS CAN VARY BOTH
UP AND DOWN AND CAN EVEN DECREASE THE VALUE OF PREMIUM PAYMENTS. THEREFORE,
CONTRACT OWNERS COULD LOSE ALL OR PART OF THE MONEY THEY HAVE INVESTED. ML OF
NEW YORK DOES NOT GUARANTEE THE VALUE OF THE CONTRACT. RATHER, CONTRACT OWNERS
BEAR ALL INVESTMENT RISKS.
LIFE INSURANCE IS INTENDED TO BE A LONG-TERM INVESTMENT. CONTRACT OWNERS SHOULD
EVALUATE THEIR INSURANCE NEEDS AND THE CONTRACT'S LONG-TERM INVESTMENT POTENTIAL
AND RISKS BEFORE PURCHASING THE CONTRACT.
PARTIAL WITHDRAWALS AND SURRENDER OF THE CONTRACT ARE SUBJECT TO TAX, AND BEFORE
THE CONTRACT OWNER ATTAINS AGE 59 1/2 MAY ALSO BE SUBJECT TO A 10% FEDERAL
PENALTY TAX. LOANS UNDER THE CONTRACT ARE ALSO GENERALLY TAXABLE AND SUBJECT TO
THE 10% FEDERAL PENALTY TAX IF TAKEN BEFORE AGE 59 1/2.
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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
IMPORTANT TERMS........................................................... 4
SUMMARY OF THE CONTRACT
Purpose of the Contract................................................. 5
Availability and Payments............................................... 5
Joint Insureds.......................................................... 5
CMA-Registered Trademark- Insurance Service............................. 6
The Investment Divisions................................................ 6
How the Death Benefit Varies............................................ 6
How the Investment Base Varies.......................................... 6
Net Cash Surrender Value and Cash Surrender Value....................... 6
Illustrations........................................................... 6
Replacement of Existing Coverage........................................ 7
Right to Cancel ("Free Look" Period) or Exchange........................ 7
How Death Benefit and Cash Surrender Value Increases are Taxed.......... 7
Partial Withdrawals..................................................... 7
Loans................................................................... 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......................................................... 9
The Variable Series Funds............................................... 10
Certain Risks of the Series Fund and Variable Series Funds.............. 10
The Zero Trusts......................................................... 11
ML of New York and MLPF&S............................................... 11
FACTS ABOUT THE CONTRACT
Who May be Covered...................................................... 12
Initial Payment......................................................... 12
Making Additional Payments.............................................. 13
Changing the Face Amount................................................ 15
Investment Base......................................................... 15
Charges Deducted from the Investment Base............................... 16
Charges to the Separate Account......................................... 18
Guarantee Period........................................................ 18
Net Cash Surrender Value................................................ 19
Partial Withdrawals..................................................... 20
Loans................................................................... 20
Death Benefit Proceeds.................................................. 21
Payment of Death Benefit Proceeds....................................... 22
Right to Cancel ("Free Look" Period) or Exchange........................ 22
Reports to Contract Owners.............................................. 23
MORE ABOUT THE CONTRACT
Using the Contract...................................................... 23
Some Administrative Procedures.......................................... 25
Other Contract Provisions............................................... 26
Income Plans............................................................ 26
Group or Sponsored Arrangements......................................... 27
Unisex Legal Considerations for Employers............................... 27
Selling the Contracts................................................... 27
Tax Considerations...................................................... 28
ML of New York's Income Taxes........................................... 31
Reinsurance............................................................. 31
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MORE ABOUT THE SEPARATE ACCOUNT AND ITS DIVISIONS
About the Separate Account.............................................. 31
Changes Within the Account.............................................. 31
Net Rate of Return for an Investment Division........................... 32
The Series Fund and the Variable Series Funds........................... 32
Charges to Series Fund Assets........................................... 33
Charges to Variable Series Funds Assets................................. 34
The Zero Trusts......................................................... 34
ILLUSTRATIONS
Illustrations of Death Benefits, Investment Base, Cash Surrender Values
and Accumulated Payments............................................... 35
EXAMPLES
Additional Payments..................................................... 42
Changing the Face Amount................................................ 42
Partial Withdrawals..................................................... 43
JOINT INSUREDS............................................................ 44
MORE ABOUT ML LIFE INSURANCE COMPANY OF NEW YORK
Directors and Executive Officers........................................ 48
Services Arrangement.................................................... 49
State Regulation........................................................ 49
Legal Proceedings....................................................... 49
Experts................................................................. 49
Legal Matters........................................................... 50
Registration Statements................................................. 50
Financial Statements.................................................... 50
Financial Statements of ML of New York Variable Life Separate Account
II..................................................................... S-1
Financial Statements of ML Life Insurance Company of New York........... G-1
</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.
ATTAINED AGE: is the issue age of the insured plus the number of full years
since the contract date.
CASH SURRENDER VALUE: is equal to the net cash surrender value plus any debt.
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.
DEATH BENEFIT: is the larger of the face amount and the variable insurance
amount.
DEATH BENEFIT PROCEEDS: are equal to the death benefit less any debt and less
any overdue charges.
DEBT: is the sum of all outstanding loans on a Contract plus accrued interest.
DEFERRED CONTRACT LOADING: is chargeable to all payments for sales load,
federal tax and premium tax charges. ML of New York advances the amount of the
loading to the divisions as part of the investment base. This loading is
deducted in equal installments on the next ten contract anniversaries following
the date the initial payment is received and accepted. ML of New York deducts
the balance of the deferred contract loading not yet recouped in determining a
Contract's net cash surrender value.
FACE AMOUNT: is the minimum death benefit as long as the Contract remains in
force. The face amount will change if the change in face amount option is
chosen; it may increase as a result of an additional payment; or it may decrease
as a result of a partial withdrawal.
FIXED BASE: is calculated like the cash surrender value except that 4% is
substituted for the net rate of return, the guaranteed maximum cost of insurance
rates 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 and loading) would remain in force if
credited with 4% 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 the insured's age as of his or her birthday nearest the contract
date.
NET AMOUNT AT RISK: is the excess of the death benefit over the cash surrender
value.
NET CASH SURRENDER VALUE: is equal to the investment base less the balance of
any deferred contract loading and, depending on the date it is calculated, less
all or a portion of certain other charges not yet deducted.
NET SINGLE PREMIUM FACTOR: is used to determine the amount of death benefit
purchased by $1.00 of cash surrender 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 guidelines of what constitutes a life insurance contract under
the Internal Revenue Code.
PROCESSING DATES: are the contract date and the first day of each contract
quarter thereafter. Processing dates after the contract date are the days when
ML of New York deducts charges from the investment base.
PROCESSING PERIOD: is the period between consecutive processing dates.
VARIABLE INSURANCE AMOUNT: is computed daily by multiplying the cash surrender
value by the net single premium factor.
4
<PAGE>
SUMMARY OF THE CONTRACT
PURPOSE OF THE CONTRACT
This variable life insurance contract offers a choice of investments and an
opportunity for the Contract's investment base, net cash surrender 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,
net cash surrender 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 and risks before purchasing a Contract.
The Contract should be purchased as a long-term investment designed to provide a
death benefit. The Contract's net cash surrender value, as well as its death
benefit, may be used to provide proceeds for various individual and business
planning purposes. However, loans and partial withdrawals will affect the net
cash surrender value and death benefit proceeds, and may cause the Contract to
lapse; in addition, loans and partial withdrawals may be currently taxable. If
the performance of the investment divisions to which investment base is
allocated is not sufficient to provide funds for the specific planning purpose
contemplated, or if insufficient payments are made or Contract values
maintained, then the purchaser may not be able to utilize the Contract to
achieve the purposes for which it was purchased. Because the Contract is
designed to provide benefits on a long-term basis, before purchasing a Contract
in connection with a specialized purpose, a purchaser should consider whether
the long-term nature of the Contract, and the potential impact of any
contemplated loans and partial withdrawals, are consistent with the purposes for
which the Contract is being considered. Using a Contract for a specialized
purpose may have tax consequences. (See "Tax Considerations.")
AVAILABILITY AND PAYMENTS
The Contract is available in New York. A Contract may be issued for an insured
up to age 75 (or up to age 80 for joint insureds). ML of New York will consider
issuing Contracts for insureds above age 75 on an individual basis. A Contract
can be purchased with a single payment. The minimum single payment for a
Contract is the lesser of (a) $5,000 for an insured under age 20 and $10,000 for
an insured age 20 and over, or (b) the payment required to purchase a face
amount of at least $100,000 (but that payment may not be less than $2,000).
Contract owners may elect to pay planned periodic payments instead of a single
payment. If so, the minimum initial planned periodic payment is $2,000 provided
that the initial payment plus the planned payments elected in the application
will total $10,000 or more during the first five contract years.
ML of New York will not accept an initial payment that provides a guarantee
period of less than one year.
Subject to certain conditions, contract owners may make additional payments.
(See "Making Additional Payments" on page 13.)
For joint insureds, see modifications to this section on page 44.
JOINT INSUREDS
The Contract is also available to provide coverage on the lives of two insureds
with a death benefit payable on the death of the last surviving insured. Most of
the discussions in this Prospectus referencing a single insured may also be read
as though the single insured were the two insureds under a joint Contract. Those
discussions which are different for joint insureds are noted accordingly. (See
"Joint Insureds" on page 44.)
5
<PAGE>
CMA-REGISTERED TRADEMARK- INSURANCE SERVICE
Contract owners who subscribe to the Merrill Lynch Cash Management
Account-Registered Trademark- 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
Through the first 14 days following the in force date, the initial payment will
be invested only in the investment division of the Separate Account investing in
the Money Reserve Portfolio. Thereafter, the investment base will be reallocated
to up to five of the 34 investment divisions in the Separate Account. (See
"Changing the Allocation" on page 16.)
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"). Seven 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 17 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.
HOW THE DEATH BENEFIT VARIES
The death benefit equals the face amount or variable insurance amount, whichever
is larger. It may increase or decrease on any day depending on the investment
results of the investment divisions chosen by the contract owner. Death benefit
proceeds are reduced by any debt.
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. 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. Contract owners may wish to consider diversifying their investment
in the Contract by allocating investment base to two or more investment
divisions.
NET CASH SURRENDER VALUE AND CASH SURRENDER VALUE
Contract owners may cancel their Contracts at any time and receive the net cash
surrender value. On a contract anniversary, the net cash surrender value equals
the investment base minus the balance of any deferred contract loading not yet
deducted. The net cash surrender value varies daily based on investment
performance of the investment divisions chosen and accrual of contract charges.
ML of New York doesn't guarantee any minimum net cash surrender value.
For purposes of certain computations under the Contract, ML of New York uses the
cash surrender value. It is calculated by adding the amount of any debt to the
net cash surrender value.
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.
- ------------------------
Cash Management Account and CMA are registered trademarks of Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
6
<PAGE>
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.
RIGHT 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 ten days after the contract owner receives it.
If the Contract is returned during the "free look" period, ML of New York will
refund the payment without interest.
A contract owner may also exchange his or her Contract at any time for a
contract with benefits that do not vary with the investment results of a
separate account.
HOW DEATH BENEFIT AND CASH SURRENDER VALUE INCREASES ARE TAXED
Under current federal tax law, life insurance contracts receive tax-favored
treatment. The death benefit is fully excludable from the beneficiary's gross
income for federal income tax purposes, according to Section 101(a)(1) of the
Internal Revenue Code. A contract owner is not taxed on any increase in the cash
surrender value while a life insurance contract remains in force. In most cases,
the Contract will be a modified endowment contract. If a Contract is a modified
endowment contract, certain distributions made during an 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 be imposed on income distributed before the contract owner attains age
59 1/2. Contracts that are not modified endowment contracts receive preferential
tax treatment with respect to certain distributions. For a discussion of the tax
issues associated with this Contract, including distributions under the
Contract, see "Tax Considerations" on page 28.
PARTIAL WITHDRAWALS
After a Contract has been in force for one year, the contract owner may withdraw
up to 80% of the net cash surrender value. (See "Partial Withdrawals" on page
20.)
LOANS
A contract owner may borrow against his or her Contract. The maximum amount that
can be borrowed at any time is the difference between the loan value and the
debt. (See "Loans" on page 20.)
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 28.)
FEES AND CHARGES
INVESTMENT BASE CHARGES. ML of New York invests the entire amount of all
premium payments in the Separate Account. It then deducts certain charges from
the investment base on processing dates. The charges deducted are as follows:
- deferred contract loading equals 9% of each payment. It consists of a
sales load of 5%, a charge for federal taxes of 2% and a state and local
premium tax charge of 2%. For joint insureds the deferred contract loading
equals 11% of each payment and consists of a sales load of 7%, a charge
for federal taxes of 2% and a state and local premium tax charge of 2%.
Deferred contract loading is deducted in equal installments of .90% (1.1%
for joint insureds) of each payment. The deduction is taken on the ten
contract anniversaries following the date ML of New York receives and
accepts
7
<PAGE>
the payment. However, ML of New York subtracts the balance of the deferred
contract loading not yet deducted in determining a Contract's net cash
surrender value. Thus, this balance is deducted in determining the amount
payable on surrender of the Contract;
- on processing dates after the contract date, ML of New York makes
deductions for mortality cost (see "Mortality Cost" on page 17); and
- 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 2.0% of the debt per year (see "Charges Deducted From the
Investment Base" on page 16).
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.
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 33 and "Charges to Variable Series Funds Assets on page 34.)
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. New York insurance law provides that the
Separate Account's assets, to the extent of its reserves and liabilities, may
not be charged with liabilities arising out of any other business ML of New York
conducts.
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.
8
<PAGE>
There are currently 34 investment divisions in the Separate Account. Ten invest
in shares of a specific portfolio of the Series Fund. Seven invest in shares of
a specific portfolio of the Variable Series Funds. Seventeen 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 Series Fund 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.
MONEY RESERVE PORTFOLIO seeks to preserve capital, maintain liquidity and
achieve the highest possible current income consistent with those objectives by
investing in short-term money market securities.
INTERMEDIATE GOVERNMENT BOND PORTFOLIO seeks to obtain the highest level of
current income consistent with the protection of capital afforded by investing
in debt securities issued or guaranteed by the U.S. Government or its agencies
with a maximum maturity of 15 years.
LONG-TERM CORPORATE BOND PORTFOLIO primarily seeks to provide as high a level of
current income as is believed to be consistent with prudent investment risk, and
secondarily seeks the preservation of capital. In seeking to achieve these
objectives, the Portfolio invests at least 80% of the value of its assets in
debt securities which have a rating within the three highest grades of a major
rating agency.
HIGH YIELD PORTFOLIO primarily seeks as high a level of current income as is
believed to be consistent with prudent management, and secondarily capital
appreciation when consistent with its primary objective. The Portfolio seeks to
achieve its investment objective 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 principally 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 long-term growth of capital by investing in a
diversified portfolio of securities, primarily common stocks of aggressive
growth companies considered to have special investment value.
MULTIPLE STRATEGY PORTFOLIO seeks a high total investment return consistent with
prudent risk through a fully managed investment policy utilizing equity
securities, 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, including
convertible 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.
9
<PAGE>
The investment adviser for the Series Fund is Merrill Lynch Asset Management
L.P. ("MLAM") which is indirectly owned and controlled by Merrill Lynch & Co.,
Inc. and is 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 33.)
THE VARIABLE SERIES FUNDS
The Variable Series Funds is registered with the Securities and Exchange
Commission as an open-end management investment company. Seven of its 18 mutual
fund portfolios are currently available through the Separate Account. The
investment objectives of the seven available Variable Series Funds portfolios
are described below. There is no guarantee that any portfolio will meet its
investment objective.
BASIC VALUE FOCUS FUND seeks capital appreciation, and secondarily, income by
investing in securities, primarily equities, that management of the Fund
believes are undervalued and therefore represent basic investment value.
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 provide shareholders with high current income
by investing in a global portfolio of fixed-income securities denominated in
various currencies, including multinational currency units. The Fund may invest
in United States and foreign government and corporate fixed-income securities,
including high yield, high risk, lower rated and unrated securities.
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, and
secondarily, income by investing in a diversified portfolio of equity securities
of issuers located in countries other than the United States. Under normal
conditions, at least 65% of the Fund's net assets will be invested in such
equity securities.
INTERNATIONAL BOND FUND seeks a high total investment return by investing in an
international portfolio of non-U.S. debt instruments denominated in various
currencies and multi-national units.
DEVELOPING CAPITAL MARKETS FOCUS FUND seeks long-term capital appreciation by
investing in securities, principally equities, of issuers in countries having
smaller capital markets. For purposes of its investment objective, the Fund
considers countries having smaller capital markets to be all countries other
than the four countries having the largest equity market capitalizations.
EQUITY GROWTH FUND seeks to attain long-term growth of capital by investing in a
diversified portfolio of securities, primarily common stocks of relatively small
companies that management of the Fund believes have special investment value and
emerging growth companies regardless of size. Such companies are selected by
management on the basis of their long-term potential for expanding their size
and profitability or for gaining increased market recognition for their
securities. Current income is not a factor in such selection.
MLAM 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 34.)
CERTAIN RISKS OF THE SERIES FUND AND VARIABLE SERIES FUNDS
Investment in lower-rated debt securities, such as those in which the High Yield
Portfolio of the Series Fund invests, entails relatively greater risk of loss of
income or principal. In an effort to minimize risk, the High Yield Portfolio
will diversify holdings among many issuers. However, there can be no assurance
that diversification will protect the High Yield Portfolio from widespread
defaults during periods of sustained economic downturn.
10
<PAGE>
In seeking to protect the purchasing power of capital, the Natural Resources
Portfolio of the Series Fund reserves the right, when management anticipates
significant economic, political, or financial instability, such as high
inflationary pressures or upheaval in foreign currency exchange markets, to
invest a majority of its assets in companies that explore for, extract, process
or deal in gold or in asset-based securities indexed to the value of gold
bullion. The Natural Resources Portfolio will not concentrate its investments in
such securities until it has been advised that no adverse tax consequences will
result.
The World Income Focus Fund of the Variable Series Funds has no established
rating criteria for the securities in which it may invest. In an effort to
minimize risk, the Fund will diversify its holdings among many issuers. However,
there can be no assurance that diversification will protect the Fund from
widespread defaults during periods of sustained economic downturn.
The Developing Capital Markets Focus Fund of the Variable Series Funds has no
established rating criteria for the debt securities in which it may invest, and
will rely on the investment adviser's judgment in evaluating the
creditworthiness of an issuer of such securities. In an effort to minimize the
risk, the Fund will diversify its holdings among many issuers. However, there
can be no assurance that diversification will protect the Fund from widespread
defaults during periods of sustained economic downturn.
Because investment in these Portfolios and Funds entails relatively greater risk
of loss of income or principal, it may not be appropriate to allocate all
payments and investment base to an investment division that invests in one of
these Portfolios or Funds.
THE ZERO TRUSTS
The Zero Trusts 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.
The Zero Trusts currently available have maturity dates in years 1997 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 18.)
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 27.)
11
<PAGE>
FACTS ABOUT THE CONTRACT
WHO MAY BE COVERED
The Contract is available in New York. A Contract may be issued for an insured
up to issue age 75. ML of New York will consider issuing Contracts for insureds
above age 75 on an individual basis. The insured's issue age is his or her age
as of the birthday nearest the contract date. The insured must also meet ML of
New York's medical and other underwriting requirements.
ML of New York uses two methods of underwriting:
- simplified underwriting, with no physical exam; and
- para-medical or medical underwriting with a physical exam.
The initial payment plus any planned periodic payments elected and the age and
sex of the insured determine whether ML of New York will do underwriting on a
simplified or medical basis. The maximum initial payment plus any planned
payments that will be underwritten on a simplified basis is set out in the chart
below:
<TABLE>
<CAPTION>
AGE MAXIMUM
------------------------------------------ --------
<S> <C>
0-29..................................... $ 25,000
30-39..................................... 40,000
40-49..................................... 50,000
50-59..................................... 100,000
60-75..................................... 120,000
</TABLE>
However, if the face amount is above the minimum face amount required for an
initial payment (see "Selecting the Initial Face Amount" below), ML of New York
will also take the net amount at risk into account in determining the method of
underwriting.
ML of New York assigns insureds to underwriting classes which determine the
current cost of insurance rates used in calculating mortality cost deductions.
In assigning insureds to underwriting classes, ML of New York distinguishes
between those insureds underwritten on a simplified basis and those on a para-
medical or medical basis. Under both the simplified and medical underwriting
methods, Contracts may be issued on insureds either in the standard or
non-smoker underwriting class. Contracts may also be issued on insureds in a
substandard underwriting class. For a discussion of the effect of underwriting
classification on mortality cost deductions, see "Mortality Cost" on page 17.
For joint insureds, see modifications to this section on page 44.
INITIAL PAYMENT
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. This
Prospectus is for a Contract which is a modified endowment contract at the time
of issue. The minimum single payment for a Contract is the lesser of (a) $5,000
for an insured under age 20 and $10,000 for an insured age 20 and over, or (b)
the payment required to purchase a face amount of at least $100,000 (but that
payment may not be less than $2,000). Contract owners may make additional
payments which may, but need not be, under a periodic plan. (See "Making
Additional Payments" on page 13.)
ML of New York will not accept an initial payment for a specified face amount
that will provide a guarantee period of less than one year.
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 $250,000
and may not be in effect for more than 60 days. As provided for under state
insurance law, the contract owner, to
12
<PAGE>
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 for the backdated period are
deducted on the first processing date after the contract date.
For joint insureds, see modifications to this section on page 44.
SELECTING THE INITIAL FACE AMOUNT. Contract owners purchase a face amount of
insurance with the initial payment. The face amount is based on the initial
payment less the deferred contract loading. For a given initial payment contract
owners may choose their initial face amount, within limits. The minimum face
amount is the amount which will provide a guarantee period for the whole of
life. If the face amount chosen is in excess of the minimum, the guarantee
period will be shorter.
INITIAL GUARANTEE PERIOD. The initial guarantee period for a Contract will be
determined by the initial payment and face amount. 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, the deferred contract loading and a 4% interest assumption. This
means that for a given initial payment and face amount different insureds will
have different guarantee periods depending on their age, sex and underwriting
class. For example, an older insured will have a shorter guarantee period than a
younger insured of the same sex and in the same underwriting class.
MAKING ADDITIONAL PAYMENTS
After the end of the "free look" period, contract owners may make additional
payments. Payments may be made under a periodic plan. Payments may also be made
which are not under a periodic plan.
PAYMENTS WHICH ARE NOT UNDER A PERIODIC PLAN. Contract owners may make
additional payments which are not under a periodic payment plan provided the
attained age of the insured is not over 80. Additional payments may be made at
any time up to four times each contract year and must be submitted with an
Application for Additional Payment. The minimum ML of New York will accept for
these payments is $200. They may be made whether or not the contract owner is
making planned payments.
ML of New York may require satisfactory evidence of insurability before a
payment is accepted if the payment immediately increases the net amount at risk
under the Contract, if the contract owner is otherwise making planned payments
or if the guarantee period at the time of the payment is one year or less.
Currently, ML of New York will not accept an additional payment which is not
under a periodic plan where the evidence of insurability would put the insured
in a different underwriting class with different guaranteed or higher current
cost of insurance rates.
If an additional payment requires evidence of insurability, ML of New York will
invest that payment in the division investing in the Money Reserve Portfolio.
The additional payment will be invested in this division on the business day
next following receipt at the Service Center. Once the underwriting is completed
and the payment is accepted, the payment invested in the Money Reserve Portfolio
will automatically be allocated either according to instructions or, if no
instructions have been received, proportionately to the investment base in the
Contract's investment divisions.
PAYMENTS UNDER A PERIODIC PLAN. Contract owners may elect to make planned
periodic payments subject to the rules discussed below. They elect the amount,
duration and frequency of the payments but the minimum planned payment
(including the initial payment) is $2,000 per contract year and the amounts
elected must be level. In any one year the maximum amount of the planned
payments elected cannot exceed the initial payment. Currently, the duration of a
plan cannot exceed five years.
Under a periodic payment plan, as long as the initial payment plus the planned
payments elected will total $10,000 or more during the first five contract
years, the minimum initial payment is $2,000.
Contract owners may elect a periodic plan in the application. The amount and
duration of the payments elected, as well as other factors (such as the face
amount specified and the insured's age and sex), will
13
<PAGE>
affect whether ML of New York will do underwriting on a simplified or medical
basis. Once the elected plan is approved, the planned payments may be made at
any time without any additional evidence of insurability unless it increases the
face amount.
Contract owners may elect a periodic plan at a date later than in the
application. The amount and duration of the payments elected, as well as other
factors (such as the current death benefit and the insured's age and sex), will
affect whether ML of New York will require additional evidence of insurability.
Currently, ML of New York will not allow the later election of a plan where
additional evidence of insurability would put the insured in a different
underwriting class with different guaranteed or higher current cost of insurance
rates.
Contract owners may elect to make planned payments annually, semiannually or
quarterly. Payments may also be made on a monthly basis if the contract owner
authorizes ML of New York to deduct the payment from his or her checking account
(pre-authorized checking) or to withdraw the payment from his or her CMA
account. ML of New York reserves the right to change or discontinue payment
deduction procedures. If a contract owner has the CMA Insurance Service, planned
payments under any of the above frequencies may be withdrawn automatically from
his or her CMA account and transferred to his or her Contract. The withdrawals
will continue under the plan specified until ML of New York is notified
otherwise. For planned payments not being made under pre-authorized checking or
withdrawn from a CMA account, ML of New York will send the contract owner
reminder notices.
ML of New York may require satisfactory evidence of insurability before the
contract owner will be permitted to make any payments under a periodic payment
plan if the payment increases the face amount of the Contract.
Contract owners may change the frequency, duration and the amount of planned
payments by sending a written request to the Service Center. They may request
one change in the amount, one change in the duration and one change in the
frequency of payments each contract year. Satisfactory evidence of insurability
may be required before the duration or the amount of planned payments can be
increased. The evidence requirements will be based on the amount of the increase
in payment and the duration, as well as other factors such as the current death
benefit and the insured's age and sex.
EFFECT OF ADDITIONAL PAYMENTS. Currently, any additional payment not requiring
evidence of insurability will be accepted the day it is received. On the date ML
of New York receives and accepts an additional payment, whether under a periodic
plan or not, ML of New York will:
- increase the Contract's investment base by the amount of the payment;
- increase the deferred contract loading (see "Deferred Contract Loading" on
page 16);
- reflect the payment in the calculation of the variable insurance amount
(see "Variable Insurance Amount" on page 21); and
- increase the fixed base by the amount of the payment less the deferred
contract loading applicable to the payment (see "The Contract's Fixed
Base" on page 19).
If an additional payment requires evidence of insurability, once underwriting is
completed and the payment is accepted, acceptance will be effective, and the
additional payment will be reflected in contract values as described above, as
of the next business day after the payment is received at the Service Center.
As of the processing date on or next following receipt and acceptance of an
additional payment, ML of New York will increase either the guarantee period or
face amount or both. If the guarantee period prior to receipt and acceptance of
an additional payment is less than for life, payments will first be used to
extend the guarantee period. Any amount in excess of that required to extend the
guarantee period to the whole of life or any subsequent additional payment will
be used to increase the Contract's face amount.
ML of New York will determine the increase in face amount by taking any excess
amount or the additional payment, deducting the applicable deferred contract
loading, bringing the result up at an annual rate of
14
<PAGE>
4% interest from the date the additional payment is received and accepted to the
next processing date, and then multiplying by the applicable net single premium
factor. If the additional payment is received and accepted on a processing date,
the payment minus the deferred contract loading is multiplied by the applicable
net single premium factor. For a further discussion of the effect of additional
payments on a Contract's face amount, see "Additional Payments" in the Examples
on page 42.
Unless specified otherwise, if there is any debt, any payment made, other than
planned payments, will be used first as a loan repayment with any excess applied
as an additional payment. (See "Loans" on page 20.)
For joint insureds, see the modifications to this section on page 45.
CHANGING THE FACE AMOUNT
After the first contract year, if the insured is in a standard or non-smoker
underwriting class, a contract owner may request a change in the face amount of
his or her Contract without making an additional payment, subject to the rules
and conditions discussed below. A change in face amount is not permitted if the
attained age of the insured is over 80. The minimum change in face amount is
$10,000 and only one change may be made each contract year. A change in face
amount may affect the mortality cost deduction. (See "Mortality Cost" on page
17.)
The effective date of the change will be the next processing date following the
receipt and acceptance of a written request, provided it is received at the
Service Center at least seven days before the processing date.
INCREASING THE FACE AMOUNT. To increase the face amount of a Contract, ML of
New York may require satisfactory evidence of insurability. When the face amount
is increased, the guarantee period is decreased. The maximum increase in face
amount is the amount which will provide the minimum guarantee period for which
ML of New York would issue a Contract at the time of the request based on the
insured's attained age. Currently, ML of New York will not permit an increase in
face amount where evidence of insurability, if required, would put the insured
in a different underwriting class with different guaranteed or higher current
cost of insurance rates.
DECREASING THE FACE AMOUNT. When the face amount of a Contract is decreased,
the guarantee period is increased. The maximum decrease in face amount is that
decrease which would provide the minimum face amount for which ML of New York
would issue a Contract at the time of the request based on the insured's
attained age, sex and underwriting class. ML of New York won't permit a decrease
in face amount below the amount required to keep the Contract qualified as life
insurance under federal income tax laws.
DETERMINING THE NEW GUARANTEE PERIOD. As of the effective date of any change in
face amount, ML of New York takes the fixed base on that date and, based on the
attained age and sex of the insured and the new face amount of the Contract, it
redetermines the guarantee period. A 4% interest assumption and the guaranteed
maximum cost of insurance rates is used in these calculations. For a discussion
of the effect of changes in the face amount on a Contract's guarantee period,
see "Changing the Face Amount" in the Examples on page 42.
For joint insureds, see the modifications to this section on page 45.
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. 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 32.) The investment performance
reflects the deduction of Separate Account charges. (See "Charges to the
Separate Account" on page 18.)
15
<PAGE>
Deductions for deferred contract loading, mortality cost, and net loan cost, and
partial withdrawals and loans decrease the investment base. (See "Charges
Deducted from the Investment Base" below, "Partial Withdrawals" and "Loans" on
page 20.) 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 in the
investment divisions selected. (For special rules on allocation of additional
payments which require evidence of insurability, see "Payments Which are Not
Under a Periodic Plan" on page 13.)
INITIAL INVESTMENT ALLOCATION AND PREALLOCATION. The initial payment will be
invested only in the investment division of the Separate Account investing in
the Money Reserve Portfolio. Through the first 14 days following the in force
date, the initial payment will remain in that investment 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 34 investment divisions of 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.
However, ML of New York may limit the number of changes permitted but not to
less than five each contract year. Contract owners will be notified if
limitations are imposed.
In order to change their investment base allocation, contract owners must call
or write to the Service Center. (See "Some Administrative Procedures" on page
25.) If the "free look" period has expired, ML of New York will make the change
as soon as the request is received. Contract owners may give allocation requests
during the "free look" period and the allocation will be made immediately
following the end of the "free look" period.
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
tell ML of New York in writing at least seven days before the maturity date how
to reinvest their funds in the investment 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. ML of New York also deducts certain asset and trust charges
daily from the investment results of each investment division in the Separate
Account in determining its net rate of return. Currently the asset and trust
charges are equivalent to .90% and .34% annually at the beginning of the year.
(See "Charges to the Separate Account" on page 18.) The portfolios in the Series
Fund and Variable Series Funds also pay monthly advisory fees and other
expenses. (See "Charges to Series Fund Assets" on page 33 and "Charges to
Variable Series Funds Assets" on page 34.)
DEFERRED CONTRACT LOADING. 100% of all premium payments are invested in the
Separate Account. Chargeable to each payment is an amount called the deferred
contract loading. The deferred contract loading equals 9% of each payment. 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 5% of each payment, compensates ML of New York for
sales expenses. The sales load may be reduced if cumulative payments are
sufficiently high to reach certain breakpoints (2% of
16
<PAGE>
payments in excess of $1.5 million and 0% of payments in excess of $4 million)
and in certain group or sponsored arrangements as described on page 27. ML of
New York anticipates that the sales load charge may be insufficient to cover
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.
The charge for federal taxes equal to 2% of each payment, compensates ML of New
York for a significantly higher corporate income tax liability resulting from
changes made to the Internal Revenue Code by the Omnibus Reconciliation Act of
1990. (See "ML of New York's Income Taxes" on page 31.) This charge is treated
as a sales load for purposes of determining compliance with the limitations on
sales loads imposed by the Investment Company Act of 1940 and applicable
regulations thereunder.
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.
Although chargeable to each payment, ML of New York advances the amount of the
deferred contract loading to the investment divisions as part of a contract
owner's investment base. It then takes back these funds in equal installments on
the ten contract anniversaries following the date a payment is received and
accepted. This means that an amount equal to .90% of each payment is deducted
from the investment base on each of the ten contract anniversaries following the
payment. However, in determining a Contract's net cash surrender value, ML of
New York subtracts from the investment base the balance of the deferred contract
loading which is chargeable to any payment made but which has not yet been
deducted. Thus, this balance is deducted in determining the amount payable on
surrender of the Contract.
During the period that the deferred contract loading is included in the
investment base, a positive net rate of return will give greater increases in
net cash surrender value and a negative net rate of return will give greater
decreases in net cash surrender value than if the loading had not been included
in the investment base.
For joint insureds, see the modifications to this subsection on page 45.
MORTALITY COST. ML of New York deducts a mortality cost from the investment
base on each processing date after the contract date. This charge compensates ML
of New York for the cost of providing life insurance coverage for the insured.
It is based on the underwriting class assigned to the insured, the insured's sex
and attained age and the Contract's net amount at risk.
To determine the mortality cost, ML of New York multiplies the current cost of
insurance rate by the Contract's net amount at risk (adjusted for interest at an
annual rate of 4%). The net amount at risk is the difference, as of the previous
processing date, between the death benefit and the cash surrender value.
Current cost of insurance rates may be equal to or less than the guaranteed cost
of insurance rates depending on the insured's underwriting class, sex and
attained age. For all insureds, current cost of insurance rates distinguish
between insureds in the simplified underwriting class and medical underwriting
class. For insureds age 20 and over, current cost of insurance rates also
distinguish between insureds in a smoker (standard) underwriting class and
insureds in a non-smoker underwriting class. For Contracts issued on insureds
under the same underwriting method, current cost of insurance rates are lower
for an insured in a non-smoker underwriting class than for an insured of the
same age and sex in a smoker (standard) underwriting class. Also, current cost
of insurance rates are lower for an insured in a medical underwriting class than
for a similarly situated insured in a simplified underwriting class. The
simplified current cost of insurance rates are higher because less underwriting
is performed and therefore more risk is incurred.
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
17
<PAGE>
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 insureds of the same age, sex, and
underwriting class whose Contracts have been in force for the same length of
time.
During the period between processing dates, the net cash surrender value takes
the mortality cost into account on a pro-rated basis. Thus, a pro-rata portion
of the mortality cost is deducted in determining the amount payable on surrender
of the Contract if the date of surrender is not a processing date.
For joint insureds, see the modifications to this subsection on page 45.
MAXIMUM MORTALITY COST. During the guarantee period, ML of New York limits the
deduction for mortality cost if investment results are unfavorable. This is done
by substituting the fixed base for the cash surrender value in determining the
net amount at risk and by multiplying by the guaranteed cost of insurance rate.
ML of New York will deduct this alternate amount from the investment base when
it is less than the mortality cost that would have otherwise been deducted. In
effect, during the guarantee period, a contract owner will not be charged for
mortality costs that are greater than those for a comparable fixed contract,
based on 4% interest and the same guaranteed cost of insurance rates. (See "The
Contract's Fixed Base" on page 19.)
NET LOAN COST. The net loan cost is explained under "Loans" on page 21.
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 risks assumed by ML of New York with respect to potentially
unfavorable investment results. One risk is that the Contract's cash
surrender value cannot cover the charges due during the guarantee period.
The other risk is that ML of New York may have to limit the deduction for
mortality cost (see "Maximum Mortality Cost" above).
The total 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 its taxes, if any. Such a charge is not
currently imposed, but it may be in the future. However, see page 16 for a
discussion of tax charges included in deferred contract loading.
GUARANTEE PERIOD
ML of New York guarantees that the Contract will stay in force for the insured's
life, or for a shorter guarantee period depending on the face amount selected
and payments made to date. The guarantee period will be affected by a requested
change in the face amount and may also be affected by additional payments. A
partial withdrawal may affect the guarantee period in certain circumstances. ML
of New York
18
<PAGE>
won't cancel the Contract during the guarantee period unless the debt exceeds
certain contract values. (See "Interest" on page 21.) 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 will cancel the Contract if the cash surrender value on a
processing date is negative. This negative cash surrender value will be
considered an overdue charge. (See "Charges Deducted from the Investment Base"
on page 16.)
ML of New York will notify the contract owner before cancelling the Contract. He
or she will then have 61 days to pay the charges due on the processing date when
the cash surrender value became negative. ML of New York will cancel the
Contract at the end of this grace period if the payment has not yet been
received.
If ML of New York cancels a Contract, it may be reinstated while the insured is
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 insurability; and
- the reinstatement payment is paid. 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 insured's attained age and underwriting class 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.
For joint insureds, see the modifications to this subsection on page 45.
THE CONTRACT'S FIXED BASE. On the contract date, the fixed base equals the cash
surrender value. From then on, the fixed base is calculated like the cash
surrender value except that the calculation substitutes 4% for the net rate of
return, the guaranteed maximum cost of insurance rates 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 surrender value for a
comparable fixed benefit contract with the same face amount and guarantee
period. After the guarantee period, the fixed base is zero. The fixed base is
used to limit the mortality cost deduction and ML of New York's right to cancel
the Contract during the guarantee period.
NET CASH SURRENDER VALUE
A Contract's net cash surrender value fluctuates daily with the investment
results of the investment divisions selected. ML of New York doesn't guarantee
any minimum net cash surrender value. On a processing date which is also a
contract anniversary, the net cash surrender value equals:
- the Contract's investment base on that date;
- minus the balance of the deferred contract loading which has not yet been
deducted from the investment base (see "Deferred Contract Loading" on page
16).
If the date of calculation is not a processing date, the net cash surrender
value is calculated in a similar manner but ML of New York also subtracts a
pro-rata portion of the mortality cost which would otherwise be deducted on the
next processing date. And, if there is any existing debt, ML of New York will
also subtract a pro-rata net loan cost on dates other than the contract
anniversary.
CANCELLING TO RECEIVE NET CASH SURRENDER VALUE. A contract owner may cancel the
Contract at any time while the 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.
That 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 27. The net cash surrender value will be
determined upon receipt of the written request at the Service Center.
19
<PAGE>
For joint insureds, see the modifications to this subsection on page 45.
PARTIAL WITHDRAWALS
Currently, after a Contract is in force for one year, a contract owner may make
partial withdrawals of amounts up to the withdrawal value by submitting a
request in a form satisfactory to ML of New York. The withdrawal value is equal
to 80% X (a+b) - b where:
- a = the current net cash surrender value, and
- b = the sum of all prior withdrawals.
The effective date of the withdrawal is the date a withdrawal request is
received at the Service Center. Contract owners may make one partial withdrawal
each contract year and 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.
The minimum amount for each partial withdrawal is $500. The amount of any
partial withdrawal may not exceed the loan value less any debt. A partial
withdrawal may not be repaid.
EFFECT ON INVESTMENT BASE, FIXED BASE AND DEATH BENEFIT. As of the effective
date of the withdrawal, the investment base and fixed base will be reduced by
the amount of the partial withdrawal. ML of New York allocates this reduction
proportionately to the investment base in 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 GUARANTEED BENEFITS. As of the processing date on or next following a
partial withdrawal, ML of New York reduces the Contract's face amount. This is
done by taking the fixed base as of that processing date and determining what
face amount that fixed base would support for the Contract's guarantee period.
If this produces a face amount below the minimum face amount for the Contract,
ML of New York will reduce the face amount to that minimum, and reduce the
guarantee period, based on the reduced face amount, the fixed base and the
insured's sex, attained age, and underwriting class. The minimum face amount for
a Contract is the greater of the minimum face amount for which ML of New York
would then issue the Contract, based on the insured's sex, attained age and
underwriting class, and the minimum amount required to keep the Contract
qualified as life insurance under applicable tax law. For a discussion of the
effect of partial withdrawals on a Contract's guaranteed benefits, see "Partial
Withdrawals" in the Examples on page 43.
Partial withdrawals are treated as distributions under the Contract for federal
tax purposes and may be subject to a penalty tax. For a discussion of the tax
issues associated with a partial withdrawal, see "Tax Considerations" on page
28.
LOANS
Contract owners may use the Contract as collateral to borrow funds from ML of
New York. The minimum loan is $200 unless the contract owner is borrowing to
make a payment on another ML of New York variable life insurance contract. In
that case, the contract owner may borrow the exact amount required even if it is
less than $200. Contract owners may repay all or part of the loan any time
during the insured's lifetime. Each repayment must be for at least $200 or the
amount of the debt, if less.
Loans are treated as distributions under the Contract for federal tax purposes
and may be subject to a penalty tax. For a discussion of the tax issues
associated with a loan, see "Tax Considerations" on page 28.
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 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
20
<PAGE>
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 to 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 SURRENDER VALUE. Whether or not a loan is
repaid, taking a loan will have a permanent effect on a Contract's cash
surrender value and may have a permanent effect on its death benefit. This is
because the collateral for a loan does not 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
surrender value will be higher as a result of the loan, as may be the death
benefit. Conversely, if the amount credited is less, the cash surrender value
will be lower, as may be the death benefit. In that case, the lower cash
surrender 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 surrender
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. The cash surrender value is the net cash
surrender value plus any debt.
INTEREST. While a loan is outstanding, ML of New York charges interest of 5%
annually, subject to state regulation. 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. THIS AMOUNT ADDED TO THE LOAN IS
TAXABLE INCOME IF THE CONTRACT IS A MODIFIED ENDOWMENT CONTRACT. In addition,
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.
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 5% and the collateral
earnings on such amounts are 4%, the current net loan cost on loaned amounts is
1%. The net cash surrender value takes this charge into account on a pro-rated
basis. 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
surrender 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.
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 insured's death.
AMOUNT OF DEATH BENEFIT PROCEEDS. The death benefit proceeds are equal to the
death benefit, which is the larger of the current face amount and the variable
insurance amount, less any debt.
The values used in calculating the death benefit proceeds are as of the date of
death. The death benefit will never be less than the amount required to keep the
Contract qualified as life insurance under federal income tax laws. If the
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
19.)
VARIABLE INSURANCE AMOUNT. ML of New York determines the variable insurance
amount daily by:
- calculating the cash surrender value; and
21
<PAGE>
- multiplying by the net single premium factor (explained below).
The variable insurance amount will never be less than required by federal tax
law.
NET SINGLE PREMIUM FACTOR. The net single premium factor is used to determine
the amount of death benefit purchased by $1.00 of cash surrender value. It is
based on the insured's sex, underwriting class, and attained age on the date of
calculation. It decreases daily as the insured's age increases. As a result, the
variable insurance amount as a multiple of the cash surrender value will
decrease over time. Also, net single premium factors may be higher for a woman
than for a man of the same age. A table of net single premium factors as of each
anniversary is included in the Contract.
TABLE OF ILLUSTRATIVE NET SINGLE PREMIUM FACTORS
ON ANNIVERSARIES
STANDARD UNDERWRITING CLASS
<TABLE>
<CAPTION>
ATTAINED
AGE MALE FEMALE
--------- -------- --------
<S> <C> <C>
5 10.26609 12.37715
15 7.41160 8.96255
25 5.50386 6.47763
35 3.97199 4.64820
45 2.87751 3.36402
55 2.14059 2.48932
65 1.65787 1.87555
75 1.35396 1.45951
85 1.18028 1.21264
</TABLE>
For joint insureds, see the modifications to this section on page 45.
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 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 27. Payment may be delayed if the Contract is being
contested or under the circumstances described in "Using the Contract" on page
23 and "Other Contract Provisions" on page 26.
For joint insureds, see the modifications to this section on page 46.
RIGHT TO CANCEL ("FREE LOOK" PERIOD) OR EXCHANGE
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 ten days after
the Contract is received. 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 Contracts at any
time for a contract with benefits that do not vary with the investment results
of a separate account. A request to exchange must be in writing. Also, the
original Contract must be returned to ML of New York's Service Center.
The new contract will have the same owner, insured, and beneficiary as those of
the original Contract on the date of the exchange. It will have the same issue
age, issue date, face amount, cash surrender value, benefit riders and
underwriting class as the original Contract on the date of the exchange. Any
debt will be carried over to the new contract.
ML of New York will not require evidence of insurability to exchange for a new
contract.
22
<PAGE>
For joint insureds, see the modifications to this subsection on page 46.
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
surrender value, any debt and, if there has been a change, new face amount and
guarantee period. 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 a contract
owner's state.
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 32.) 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,
net cash surrender value, debt and any CMA account activity affecting the
Contract during the month.
MORE ABOUT THE CONTRACT
USING THE CONTRACT
OWNERSHIP. The contract owner is usually the insured, 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 insured, the contingent owner will own the contract owner's
interest in the contract and have all the contract owner's rights. If the
contract owner does not 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 the 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 28.)
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 28.
23
<PAGE>
NAMING BENEFICIARIES. ML of New York will pay the primary beneficiary the death
benefit proceeds of the Contract on the 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 insured's estate.
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
beneficiary unless the beneficiary designation provides otherwise.
A contract owner has the right to change beneficiaries during the 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.
CHANGING THE INSURED. Subject to certain requirements, contract owners may
request a change of insured once each contract year. ML of New York must receive
a written request from the contract owner and the proposed new insured. Neither
the original nor the new insured can have attained ages as of the effective date
of the change less than 21 or more than 75. ML of New York will also require
evidence of insurability for the proposed new insured. If the request for change
is approved, insurance coverage on the new insured will take effect on the
processing date on or next following the date of approval, provided the new
insured is still living at that time.
The Contract will be changed as follows on the effective date:
- the issue age will be the new insured's issue age (the new insured's age
as of the birthday nearest the contract date);
- the guaranteed maximum cost of insurance rates will be those in effect on
the contract date for the new insured's issue age, sex and underwriting
class;
- a charge for changing the insured will be deducted from the Contract's
investment base on the effective date. This charge will also be reflected
in the Contract's fixed base. The charge will equal $1.50 per $1,000 of
face amount with a minimum charge of $200 and a maximum of $1,500. This
charge may be reduced in certain group or sponsored arrangements as
described on page 27;
- the variable insurance amount will reflect the change of insured; and
- the Contract's issue date will be the effective date of the change.
The face amount or guarantee period may also change on the effective date
depending on the new insured's age, sex and underwriting class. The new
guarantee period cannot be less than the minimum guarantee period for which ML
of New York would then issue a Contract based on the new insured's attained age
as of the effective date of the change.
This option is not available for joint insureds.
For a discussion of the tax issues associated with changing the insured, see
"Tax Considerations" on page 28.
MATURITY PROCEEDS. The maturity date is the anniversary nearest the insured's
100th birthday. On the maturity date, ML of New York will pay the net cash
surrender value to the contract owner, provided the insured is still living and
the Contract is in effect 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
24
<PAGE>
- 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.
For joint insureds, see the modifications to this section on page 46.
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 a 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 will be reallocated to the investment divisions selected
at the time of application. The notice sent to contract owners who did not
choose to preallocate investment base will indicate 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 16.)
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 taken.
Upon request, ML of New York will wire the funds to the 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. 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 account at the financial
institution named on the contract owner's authorization. ML of New York will
usually wire the funds within two working days of receipt of the request. If the
contract owner has the CMA Insurance Service, funds can 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.
25
<PAGE>
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. ML of New York can also contest the
validity of any change in face amount requested if any material misstatements
are made in any application required for that change. In addition, ML of New
York can contest any amount of death benefit which wouldn't be payable except
for the fact that an additional payment which requires evidence of insurability
was made if any material misstatements are made in the application required with
the additional payment.
ML of New York will not contest the validity of a Contract after it has been in
effect during the insured's lifetime for two years from the date of issue. Any
change in face amount will not be contested after the change has been in effect
during the insured's lifetime for two years from the date of the change. Nor
will ML of New York contest any amount of death benefit attributable to an
additional payment which requires evidence of insurability after the death
benefit has been in effect during the insured's lifetime for two years from the
date the payment was received and accepted.
PAYMENT IN CASE OF SUICIDE. If the insured commits suicide within two years
from the Contract's issue date, ML of New York will pay only a limited death
benefit. The benefit will be equal to the amount of the payments made.
If the insured commits suicide within two years of the effective date of any
increase in face amount requested, 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 mortality cost deductions made for the increase.
If the insured commits suicide within two years of any date an additional
payment is received and accepted, any amount of death benefit which would not be
payable except for the fact that the additional payment was made will be limited
to the amount of the payment.
The death benefit will be reduced by any debt.
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 federal 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.
For joint insureds, see the modifications to this section on page 46.
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 insured's lifetime. If no plan has been
chosen when the 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 for its net cash surrender value 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.
For joint insureds, see the modifications to this section on page 47.
26
<PAGE>
Income plans include:
ANNUITY PLAN. An amount can be used to purchase a single premium
immediate annuity. (Annuity purchase rates will be 3% less than for new
annuitants.)
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
the death of a named person or the 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 this option and interest on the 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.
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 VII 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.
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
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
27
<PAGE>
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 Merrill Lynch Asset Management, 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 commission ML of New York will pay to Merrill Lynch Life Agency,
Inc. to be used to pay commissions to registered representatives is 3.5% of each
premium. Additional annual compensation of no more than 0.10% of the investment
base may also be paid to the registered representatives. Registered
representatives may elect to receive lower commission as a percent of each
premium in exchange for higher compensation as a percent of the investment base.
In such a case, the maximum additional annual compensation is 0.30% of the
investment base.
The amounts paid under the distribution and sales agreements for the Separate
Account for the years ended December 31, 1995, December 31, 1994 and December
31, 1993 were $162,482, $140,551, and $143,207, respectively. Commission may be
paid in the form of non-cash compensation.
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 Section 7702 definition can be met if
a life insurance contract satisfies either one of two tests set forth in that
section. The manner in which these tests should be applied to certain innovative
features of the Contract offered by this Prospectus is not directly addressed by
Section 7702 or the proposed regulations issued thereunder. The presence of
these innovative Contract features, and the absence of final regulations or any
other pertinent interpretations of the tests, thus creates some uncertainty
about the application of the tests to the Contract.
ML of New York believes that the Contract qualifies as a life insurance contract
for federal tax purposes. This means 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 surrender value, including any increases, unless and until actual
receipt of distributions from the Contract (see "Tax Treatment of Loans
and Other Distributions" on page 29).
Because of the absence of final regulations or any other pertinent
interpretations of the Section 7702 tests, it, however, is unclear whether
substandard risk Contracts or Contracts insuring more than one person will, in
all cases, meet the statutory life insurance contract definition. 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 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 26.)
28
<PAGE>
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 contract 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 this Contract has
additional flexibility in allocating payments and cash surrender 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.
TAX TREATMENT OF LOANS AND OTHER DISTRIBUTIONS. Federal tax law establishes a
class of life insurance contracts referred to as modified endowment contracts.
In most cases, this Contract will be a modified endowment contract. (See,
however, the discussion below on a Contract issued in exchange for another life
insurance contract. Loans and partial withdrawals from, as well as collateral
assignments of, modified endowment contracts will be treated as distributions to
the owner. 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
surrender value less the owner's investment in the Contract) immediately before
the distribution.
The law also imposes a 10% penalty tax on pre-death distributions (including
loans, 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. 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 an additional
distribution subject to income tax as well as the 10% penalty tax, if
applicable, to the extent of income in the Contract.
Any Contract issued in exchange for a modified endowment contract will be
subject to the tax treatment accorded to modified endowment contracts. However,
ML of New York believes that any Contract issued in exchange for a life
insurance contract that is not a modified endowment contract will generally not
be treated on a modified endowment contract if the face amount of the Contract
is greater than or equal to the death benefit of the policy being exchanged. The
payment of any premiums at the time of or after the exchange may, however, cause
the Contract to become a modified endowment contract. A contract owner may, of
course, choose not to exercise the right to make additional payments (whether
planned or unplanned) in order to prevent a Contract from being treated as a
modified endowment contract.
ML of New York also believes that a Contract received in an exchange for a life
insurance contract that is not a modified endowment contract should not be
treated as a modified endowment contract in
29
<PAGE>
situations where the face amount of the Contract received in less than the death
benefit of the contract being exchanged, provided no additional premium is paid
into the Contract. This matter is, however, not free from doubt because neither
Treasury regulations nor Internal Revenue Service rulings have been issued on
this situation. A prospective contract owner should therefore consult a tax
advisor before effecting such an exchange.
Unlike loans from modified endowment contracts, a loan from a Contract that is
not a modified endowment contract will be considered indebtedness of the owner
and no part of a loan will constitute income to the owner. However, a lapse of 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. Pre-death distributions from such a contract 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. Further, the 10% penalty
tax on pre-death distributions does not apply to Contracts that are not modified
endowment contracts.
Certain changes to Contracts that are not modified endowment contracts may cause
such Contracts to be treated as modified endowment contracts. A Contract that is
not originally classified as a modified endowment may become so classified if
there is a reduction in benefits during the first seven contract years after the
exchange (including, for example, by a decrease in face amount) or if a material
change (E.G., an increase in certain benefits) is made in the Contract at any
time. Further, in the case of a Contract with joint insureds, reducing the
Contract's death benefit at any time below the lowest death benefit provided
under the Contract may cause the Contract to become a modified endowment
contract. A contract owner should therefore consult a tax advisor before
effecting any change to a Contract that is not a modified endowment contract.
SPECIAL TREATMENT OF LOANS ON THE CONTRACT. If there is any borrowing against
the Contract, 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, 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.
OTHER TRANSACTIONS. Changing the contract owner or the insured may have tax
consequences. Exchanging this Contract for another involving the same insured(s)
will have no tax consequences if there is no debt and no cash or other property
is received, according to Section 1035(a)(1) of the Code. Changing the insured
under this Contract may not be treated as an exchange under Section 1035 but
rather as a taxable exchange.
In addition, the Contract may be used in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary depending on the particular
facts and circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a contract in any arrangement the value of which
depends in part on its tax consequences, you should be sure to consult a
qualified tax advisor regarding the tax attributes of the particular
arrangement.
OTHER TAXES. Federal estate and state and local estate, inheritance and other
taxes depend on the contract owner's or the beneficiary's specific situation.
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
30
<PAGE>
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, should consult a tax advisor regarding
possible tax consequences associated with a Contract 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 ADVISER. 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
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 will result in a significantly higher corporate
income tax liability for ML of New York in early contract years. ML of New York
makes a charge, which is included in the Contract's deferred contract loading,
to compensate ML of New York for the higher corporate income taxes that result
from the sale of a Contract. (See "Deferred Contract Loading" on page 16.)
ML of New York makes no other 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 any tax or other economic burden resulting from the application of
tax laws that it determines to be properly attributable to the Separate Account
or to the Contracts.
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 a change 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 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.
31
<PAGE>
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 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 Accounts. As the owner, ML of
New York has the right to vote on any matter put to vote at the Series Fund's
and 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 or 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
32
<PAGE>
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
several insurance companies not affiliated with ML of New York or Merrill Lynch
& Co., Inc. to fund benefits under certain variable life insurance and variable
annuity contracts. Shares of each Fund of the Variable Series Funds may be made
available to the separate accounts of additional insurance companies in the
future.
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 insurance and
variable annuity separate accounts. It could also arise by reason of differences
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 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
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 consistent with applicable
legal requirements.
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.
33
<PAGE>
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%, 1.00%, and .75% of the
average daily net assets of the International Equity Focus Fund, the
International Bond Fund, the Developing Capital Markets Focus Fund, and the
Equity Growth 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. Those 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.
THE ZERO TRUSTS
THE 17 ZERO TRUSTS:
<TABLE>
<CAPTION>
Targeted Rate of Return to
Maturity as
Zero Trust Maturity Date of April 17, 1996
- ---------- ------------------ ----------------------------
<C> <S> <C>
1997 February 15, 1997 3.74%
1998 February 15, 1998 4.58%
1999 February 15, 1999 4.84%
2000 February 15, 2000 4.91%
2001 February 15, 2001 4.97%
2002 February 15, 2002 5.11%
2003 August 15, 2003 5.27%
2004 February 15, 2004 5.35%
2005 February 15, 2005 5.34%
2006 February 15, 2006 5.25%
2007 February 15, 2007 5.36%
2008 February 15, 2008 5.62%
2009 February 15, 2009 5.66%
2010 February 15, 2010 5.77%
2011 February 15, 2011 5.74%
2013 February 15, 2013 5.86%
2014 February 15, 2014 5.95%
</TABLE>
34
<PAGE>
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 18) must be
taken into account in estimating a net rate of return for the Separate Account.
The net 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 that ML of New York might receive under
the Contract on that date, since it does not reflect the charges for deferred
contract loading, mortality costs and any net loan cost deducted from a
Contract's investment base (described in "Charges Deducted from the Investment
Base" on page 16).
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 net rate of return to maturity for the Separate
Account will vary correspondingly.
ILLUSTRATIONS
ILLUSTRATIONS OF DEATH BENEFITS, INVESTMENT BASE, CASH SURRENDER VALUES AND
ACCUMULATED PAYMENTS
The tables on pages 37 through 41 demonstrate the way in which the Contract
works. The tables are based on the following ages, face amounts, payments and
guarantee periods and assume maximum mortality charges.
1. The illustration on page 37 is for a Contract issued to a male age 5 in
the standard-simplified underwriting class with a single payment of $10,000, a
face amount of $93,422 and a guarantee period for life.
2. The illustration on page 38 is for a Contract issued to a female age 40
in the standard-simplified underwriting class with a single payment of $25,000,
a face amount of $89,686 and a guarantee period for life.
3. The illustration on page 39 is for a Contract issued to a male age 55 in
the standard-simplified underwriting class with a single payment of $30,000, a
face amount of $58,439 and a guarantee period for life.
4. The illustration on page 40 is for a Contract issued to a male age 65 in
the standard-simplified underwriting class with a single payment of $35,000, a
face amount of $52,804 and a guarantee period for life.
5. The illustration on page 41 is for a Contract issued to a male age 65
and a female age 65 in the standard-simplified underwriting class with a single
payment of $35,000, a face amount of $67,012 and a guarantee period for life.
The tables show how the death benefit, investment base and 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 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 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 1995 expenses (including monthly advisory fees)
for the Series Fund and the Variable Series Funds and the current trust charge.
This charge does not reflect expenses incurred by the Developing Capital Markets
Focus Fund of the Variable Series Funds in 1995, which were reimbursed to the
Variable Series Funds by MLAM. The reimbursements amounted to .20% of the
average daily net assets of this portfolio (see "Charges to
35
<PAGE>
Variable Series Funds Assets" on page 34). 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 income taxes included in the deferred contract
loading, see "Deferred Contract Loading" on page 16). 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 insured's age, face amount and the payment amounts requested. The
illustration will also use current cost of insurance rates and will assume that
the proposed insured is in a standard underwriting class.
36
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 5
$10,000 INITIAL PAYMENT FOR STANDARD-SIMPLIFIED UNDERWRITING CLASS
FACE AMOUNT: $93,422 GUARANTEE PERIOD: FOR LIFE
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT (2)
PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL INVESTMENT RETURN OF
INTEREST AT 5% AS -----------------------------
CONTRACT YEAR PAYMENTS (1) OF END OF YEAR 0% 6% 12%
--------------------- --------------- ----------------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
1................... $10,000 $ 10,500 $93,422 $ 94,333 $ 100,217
2................... 0 11,025 93,422 95,198 107,317
3................... 0 11,576 93,422 96,017 114,748
4................... 0 12,155 93,422 96,795 122,535
5................... 0 12,763 93,422 97,532 130,707
6................... 0 13,401 93,422 98,231 139,294
7................... 0 14,071 93,422 98,895 148,330
8................... 0 14,775 93,422 99,526 157,847
9................... 0 15,513 93,422 100,126 167,884
10................... 0 16,289 93,422 100,696 178,477
15................... 0 20,789 93,422 103,446 241,917
20 (age 25) ......... 0 26,533 93,422 106,270 327,901
30 (age 35) ......... 0 43,219 93,422 112,147 602,166
60 (age 65) ......... 0 186,791 93,422 131,820 3,735,274
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR END OF YEAR
INVESTMENT BASE (2) CASH SURRENDER VALUE (2)
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................... $9,694 $10,287 $ 10,878 $8,884 $ 9,477 $ 10,068
2................... 9,396 10,589 11,846 8,676 9,869 11,126
3................... 9,109 10,912 12,918 8,479 10,282 12,288
4................... 8,829 11,253 14,102 8,289 10,713 13,562
5................... 8,554 11,610 15,406 8,104 11,160 14,956
6................... 8,286 11,986 16,845 7,926 11,626 16,485
7................... 8,019 12,375 18,426 7,749 12,105 18,156
8................... 7,749 12,775 20,155 7,569 12,595 19,975
9................... 7,470 13,178 22,036 7,380 13,088 21,946
10................... 7,183 13,586 24,081 7,183 13,586 24,081
15................... 6,062 16,186 37,853 6,062 16,186 37,853
20 (age 25) ......... 4,941 19,308 59,577 4,941 19,308 59,577
30 (age 35) ......... 3,063 28,234 151,603 3,063 28,234 151,603
60 (age 65) ......... 0 79,512 2,253,056 0 79,512 2,253,056
<FN>
- --------------------------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
</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 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
SURRENDER 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>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
FEMALE ISSUE AGE 40
$25,000 INITIAL PAYMENT FOR STANDARD-SIMPLIFIED UNDERWRITING CLASS
FACE AMOUNT: $89,686 GUARANTEE PERIOD: FOR LIFE
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
DEATH BENEFIT (2)
TOTAL ASSUMING HYPOTHETICAL GROSS
PAYMENTS ANNUAL INVESTMENT RETURN OF
END OF MADE PLUS ---------------------------
CONTRACT YEAR PAYMENTS (1) INTEREST AT 5% 0% 6% 12%
--------------------- --------------- -------------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
1................... $25,000 $ 26,250 $89,686 $ 90,543 $ 96,188
2................... 0 27,562 89,686 91,372 103,001
3................... 0 28,941 89,686 92,158 110,133
4................... 0 30,388 89,686 92,904 117,609
5................... 0 31,907 89,686 93,612 125,458
6................... 0 33,502 89,686 94,285 133,708
7................... 0 35,178 89,686 94,923 142,388
8................... 0 36,936 89,686 95,530 151,533
9................... 0 38,783 89,686 96,107 161,175
10................... 0 40,722 89,686 96,656 171,350
15................... 0 51,973 89,686 99,294 232,256
20 (age 60) ......... 0 66,332 89,686 102,006 314,836
30 (age 70) ......... 0 108,049 89,686 107,656 578,666
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR END OF YEAR
INVESTMENT BASE (2) CASH SURRENDER VALUE (2)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
END OF ------------------------------ ------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
--------------------- ------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
1................... $24,266 $25,749 $ 27,228 $22,241 $23,724 $ 25,203
2................... 23,531 26,518 29,664 21,731 24,718 27,864
3................... 22,793 27,307 32,325 21,218 25,732 30,750
4................... 22,055 28,119 35,237 20,705 26,769 33,887
5................... 21,314 28,953 38,419 20,189 27,828 37,294
6................... 20,570 29,810 41,897 19,670 28,910 40,997
7................... 19,826 30,691 45,701 19,151 30,016 45,026
8................... 19,078 31,597 49,856 18,628 31,147 49,406
9................... 18,327 32,528 54,398 18,102 32,303 54,173
10................... 17,574 33,485 59,362 17,574 33,485 59,362
15................... 14,819 39,888 93,301 14,819 39,888 93,301
20 (age 60) ......... 11,828 47,290 145,960 11,828 47,290 145,960
30 (age 70) ......... 4,711 65,372 351,386 4,711 65,372 351,386
<FN>
- --------------------------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
</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 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
SURRENDER 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>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 55
$30,000 INITIAL PAYMENT FOR STANDARD-SIMPLIFIED UNDERWRITING CLASS
FACE AMOUNT: $58,439 GUARANTEE PERIOD: FOR LIFE
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT (2)
PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL INVESTMENT RETURN OF
INTEREST AT 5% AS ------------------------------
CONTRACT YEAR PAYMENTS (1) OF END OF YEAR 0% 6% 12%
--------------------- -------------- ----------------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
1................... $30,000 $ 31,500 $58,439 $59,009 $ 62,693
2................... 0 33,075 58,439 59,552 67,143
3................... 0 34,729 58,439 60,067 71,803
4................... 0 36,465 58,439 60,557 76,690
5................... 0 38,288 58,439 61,022 81,821
6................... 0 40,203 58,439 61,464 87,216
7................... 0 42,213 58,439 61,883 92,893
8................... 0 44,324 58,439 62,282 98,874
9................... 0 46,540 58,439 62,661 105,180
10 (age 65) ......... 0 48,867 58,439 63,020 111,833
15................... 0 62,368 58,439 64,744 151,676
20................... 0 79,599 58,439 66,516 205,758
30................... 0 129,658 58,439 70,213 378,938
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR END OF YEAR
INVESTMENT BASE (2) CASH SURRENDER VALUE (2)
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................... $28,991 $30,767 $ 32,536 $26,561 $28,337 $ 30,106
2................... 27,973 31,541 35,286 25,813 29,381 33,126
3................... 26,948 32,326 38,272 25,058 30,436 36,382
4................... 25,916 33,119 41,511 24,296 31,499 39,891
5................... 24,875 33,922 45,025 23,525 32,572 43,675
6................... 23,825 34,734 48,834 22,745 33,654 47,754
7................... 22,765 35,552 52,961 21,955 34,742 52,151
8................... 21,690 36,372 57,424 21,150 35,832 56,884
9................... 20,600 37,193 62,248 20,330 36,923 61,978
10 (age 65) ......... 19,492 38,012 67,456 19,492 38,012 67,456
15................... 14,995 43,526 101,969 14,995 43,526 101,969
20................... 9,879 49,127 151,967 9,879 49,127 151,967
30................... 0 59,488 321,057 0 59,488 321,057
<FN>
- --------------------------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
</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 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
SURRENDER 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>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 65
$35,000 INITIAL PAYMENT FOR STANDARD-SIMPLIFIED UNDERWRITING CLASS
FACE AMOUNT: $52,804 GUARANTEE PERIOD: FOR LIFE
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT (2)
PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL INVESTMENT RETURN OF
INTEREST AT 5% AS ------------------------------
CONTRACT YEAR PAYMENTS (1) OF END OF YEAR 0% 6% 12%
--------------------- ------------ ----------------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
1................... $35,000 $ 36,750 $52,804 $53,321 $ 56,654
2................... 0 38,588 52,804 53,813 60,683
3................... 0 40,517 52,804 54,281 64,904
4................... 0 42,543 52,804 54,727 69,333
5................... 0 44,670 52,804 55,150 73,985
6................... 0 46,903 52,804 55,553 78,875
7................... 0 49,249 52,804 55,935 84,023
8................... 0 51,711 52,804 56,298 89,444
9................... 0 54,296 52,804 56,642 95,161
10 (age 75) ......... 0 57,011 52,804 56,968 101,193
15................... 0 72,762 52,804 58,529 137,312
20................... 0 92,865 52,804 60,134 186,364
30................... 0 151,268 52,804 63,479 343,440
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR END OF YEAR
INVESTMENT BASE (2) CASH SURRENDER VALUE (2)
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................... $33,670 $35,737 $ 37,794 $30,835 $32,902 $ 34,959
2................... 32,327 36,471 40,805 29,807 33,951 38,285
3................... 30,973 37,201 44,050 28,768 34,996 41,845
4................... 29,608 37,928 47,547 27,718 36,038 45,657
5................... 28,233 38,651 51,314 26,658 37,076 49,739
6................... 26,843 39,368 55,367 25,583 38,108 54,107
7................... 25,438 40,074 59,722 24,493 39,129 58,777
8................... 24,013 40,764 64,394 23,383 40,134 63,764
9................... 22,564 41,433 69,394 22,249 41,118 69,079
10 (age 75) ......... 21,089 42,075 74,738 21,089 42,075 74,738
15................... 14,910 46,626 109,388 14,910 46,626 109,388
20................... 8,214 50,949 157,898 8,214 50,949 157,898
30................... 0 59,154 320,036 0 59,154 320,036
<FN>
- --------------------------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
</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 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
SURRENDER 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.
40
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
JOINT INSUREDS: FEMALE ISSUE AGE 65/MALE ISSUE AGE 65
$35,000 INITIAL PAYMENT FOR STANDARD-SIMPLIFIED UNDERWRITING CLASS
FACE AMOUNT: $67,012 GUARANTEE PERIOD: FOR LIFE
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT (2)
PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL INVESTMENT RETURN OF
INTEREST AT 5% AS ------------------------------
CONTRACT YEAR PAYMENTS (1) OF END OF YEAR 0% 6% 12%
--------------------- ------------ ----------------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
1................... $35,000 $ 36,750 $67,012 $67,736 $ 72,041
2................... 0 38,588 67,012 68,416 77,275
3................... 0 40,517 67,012 69,054 82,733
4................... 0 42,543 67,012 69,654 88,437
5................... 0 44,670 67,012 70,218 94,408
6................... 0 46,903 67,012 70,748 100,670
7................... 0 49,249 67,012 71,247 107,248
8................... 0 51,711 67,012 71,716 114,165
9................... 0 54,296 67,012 72,159 121,450
10 (age 75) ......... 0 57,011 67,012 72,575 129,127
15................... 0 72,762 67,012 74,558 175,080
20................... 0 92,865 67,012 76,599 237,500
30................... 0 151,268 67,012 80,857 437,481
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR END OF YEAR
INVESTMENT BASE (2) CASH SURRENDER VALUE (2)
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................... $34,117 $36,198 $38,278 $30,652 $32,733 $ 34,813
2................... 33,218 37,420 41,867 30,138 34,340 38,787
3................... 32,298 38,664 45,789 29,603 35,969 43,094
4................... 31,357 39,927 50,071 29,047 37,617 47,761
5................... 30,390 41,206 54,739 28,465 39,281 52,814
6................... 29,395 42,497 59,820 27,855 40,957 58,280
7................... 28,367 43,795 65,342 27,212 42,640 64,187
8................... 27,301 45,094 71,329 26,531 44,324 70,559
9................... 26,190 46,383 77,805 25,805 45,998 77,420
10 (age 75) ......... 25,027 47,656 84,790 25,027 47,656 84,790
15................... 20,196 55,640 130,656 20,196 55,640 130,656
20................... 13,695 62,930 195,119 13,695 62,930 195,119
30................... 0 75,232 407,046 0 75,232 407,046
<FN>
- --------------------------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
</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 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
SURRENDER 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.
41
<PAGE>
EXAMPLES
ADDITIONAL PAYMENTS
If the guarantee period is for the whole of life at the time an additional
payment is received and accepted, as of the processing date on or next following
the date of the additional payment, ML of New York will increase the face amount
to the amount that the Contract's fixed base, as of such processing date, would
support for the life of the insured.
Under these circumstances the amount of the increase in face amount 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 proportionately larger increase in face amount. And if
additional payments of the same amounts were made in earlier and later years,
those made in the later years would result in smaller increases to the face
amount.
Example 1 shows the effect on face amount of a $2,000 additional payment
received and accepted at the beginning of contract year two. Example 2 shows the
effect of a $4,000 additional payment received and accepted at the beginning of
contract year two. Example 3 shows the effect of a $2,000 additional payment
received and accepted at the beginning of contract year five. All three examples
assume that the guarantee period at the time of the additional payment is for
life and assume no other contract transactions have been made.
MALE ISSUE AGE: 55
INITIAL PAYMENT: $30,000 FACE AMOUNT: $58,439
<TABLE>
<CAPTION>
EXAMPLE 1
---------------------------------------------
CONTRACT ADDITIONAL CHANGE IN NEW FACE
YEAR PAYMENT FACE AMOUNT AMOUNT
-------- ---------- ----------- --------
<S> <C> <C> <C>
2 $2,000 $3,789 $62,228
<CAPTION>
EXAMPLE 2
---------------------------------------------
CONTRACT ADDITIONAL CHANGE IN NEW FACE
YEAR PAYMENT FACE AMOUNT AMOUNT
-------- ---------- ----------- --------
<S> <C> <C> <C>
2 $4,000 $7,579 $66,018
<CAPTION>
EXAMPLE 3
---------------------------------------------
CONTRACT ADDITIONAL CHANGE IN NEW FACE
YEAR PAYMENT FACE AMOUNT AMOUNT
-------- ---------- ----------- --------
<S> <C> <C> <C>
5 $2,000 $3,498 $61,937
</TABLE>
CHANGING THE FACE AMOUNT
As of the processing date on or next following receipt and acceptance of a
request for a change in face amount, ML of New York will make the requested
change and adjust the guarantee period. For an increase in face amount, ML of
New York will decrease the guarantee period and for a decrease in face amount,
ML of New York will increase the guarantee period. To decrease the face amount,
the guarantee period must be less than for the whole of life at the time of the
request. A new guarantee period is established by taking the Contract's fixed
base as of the processing date and determining how long that fixed base would
support the face amount.
The amount of the increase or decrease in the guarantee period will depend on
the amount of increase or decrease in the face amount and the contract year in
which the change is made. If made at the same time to equivalent Contracts, a
larger increase in face amount would result in a greater decrease in the
guarantee period than a smaller increase in face amount. The same increase made
in two different years would result in a smaller decrease in the guarantee
period for the increase in face amount made in the later year.
Examples 1 and 2 show the effect on the guarantee period of an increase in face
amount of $10,000 and $20,000 made at the beginning of contract year five.
Example 3 shows the effect on the guarantee period
42
<PAGE>
of an increase in face amount of $10,000 made in contract year eight. All three
examples assume that the guarantee period at the time of the requested increase
in face amount is for life and assume no other Contract transactions have been
made.
MALE ISSUE AGE: 55
INITIAL PAYMENT: $30,000 FACE AMOUNT: $58,439
<TABLE>
<CAPTION>
EXAMPLE 1
----------------------------------------
DECREASE IN
CONTRACT INCREASE IN GUARANTEE
YEAR FACE AMOUNT PERIOD
-------- ----------- ----------------
<S> <C> <C>
5 $10,000 16.00 years
<CAPTION>
EXAMPLE 2
----------------------------------------
DECREASE IN
CONTRACT INCREASE IN GUARANTEE
YEAR FACE AMOUNT PERIOD
-------- ----------- ----------------
<S> <C> <C>
5 $20,000 19.75 years
<CAPTION>
EXAMPLE 3
----------------------------------------
DECREASE IN
CONTRACT INCREASE IN GUARANTEE
YEAR FACE AMOUNT PERIOD
-------- ----------- ----------------
<S> <C> <C>
8 $10,000 15.50 years
</TABLE>
PARTIAL WITHDRAWALS
As of the processing date on or next following any partial withdrawal, ML of New
York will reduce the Contract's face amount. The new face amount is established
by taking the Contract's fixed base as of the processing date and determining
what face amount that fixed base would support for the Contract's guarantee
period.
The amount of the reduction in the face amount will depend on the amount of the
partial withdrawal, the guarantee period 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 face amount than a smaller withdrawal. The same partial withdrawal made at
the same time from Contracts with the same face amounts but with different
guarantee periods would result in a greater reduction in the face amount for the
Contract with the longer guarantee period. A partial withdrawal made in a later
contract year would result in a smaller decrease in the face amount than if the
same amount was withdrawn in an earlier year.
Examples 1 and 2 show the effect on the face amount of partial withdrawals for
$500 and $1,000 taken at the beginning of contract year three. Example 3 shows
the effect on the face amount of a $500 partial withdrawal taken at the
beginning of contract year eight. All three examples assume that the guarantee
period was for the lifetime of the insured before the partial withdrawal and
assume no other contract transactions have been made.
MALE ISSUE AGE: 55
INITIAL PAYMENT: $30,000 FACE AMOUNT: $58,439
<TABLE>
<CAPTION>
EXAMPLE 1
-----------------------------------
CONTRACT PARTIAL
YEAR WITHDRAWAL FACE AMOUNT
-------- ----------- -----------
<S> <C> <C>
3 $ 500 $57,425
<CAPTION>
EXAMPLE 2
-----------------------------------
CONTRACT PARTIAL
YEAR WITHDRAWAL FACE AMOUNT
-------- ----------- -----------
<S> <C> <C>
3 $1,000 $56,411
<CAPTION>
EXAMPLE 3
-----------------------------------
CONTRACT PARTIAL
YEAR WITHDRAWAL FACE AMOUNT
-------- ----------- -----------
<S> <C> <C>
8 $ 500 $57,547
</TABLE>
43
<PAGE>
If the reduction in face amount would be below the minimum face amount for a
Contract, ML of New York will reduce the face amount to the minimum face amount,
and then reduce the guarantee period by taking the Contract's fixed base as of
the processing date and determining how long that fixed base would support the
reduced face amount.
JOINT INSUREDS
Contract owners may purchase a Contract on the lives of two insureds. Some of
the discussions in this Prospectus applicable to the Contract apply only to a
Contract on a single insured. Set out below are the modifications to the
designated sections of this Prospectus for joint insureds. Except in the
sections noted below, the discussions in this Prospectus referencing a single
insured can be read as though the single insured were the two insureds under a
joint Contract.
AVAILABILITY AND PAYMENTS (REFERENCE PAGE 5)
A Contract may be issued for insureds up to age 80. The minimum initial payment
for a Contract is $5,000 if either insured is under age 20. If neither insured
is under age 20 the minimum initial payment is $10,000.
ML of New York will not accept an initial payment that will provide a guarantee
period of less than the minimum guarantee period for which it would then issue a
Contract based on the age of the younger insured. Such minimum will range from
10 to 40 years depending on the age of the younger insured.
WHO MAY BE COVERED (REFERENCE PAGE 12)
ML of New York will issue a Contract on the lives of two insureds provided the
relationship among the applicant and the insureds meets its insurable interest
requirements and provided neither insured is over age 80 and no more than one
insured is under age 20. The insureds' issue ages will be determined using their
ages as of their birthdays nearest the contract date.
The initial payment, or the planned periodic payments elected, and the average
age of the insureds determine whether underwriting will be done on a simplified
or medical basis. The maximum amount underwritten on a simplified basis for
joint insureds depends on ML of New York's administrative rules in effect at the
time of underwriting.
Under both simplified and medical underwriting methods, Contracts may be issued
on joint insureds in a standard underwriting class only.
INITIAL PAYMENT (REFERENCE PAGE 12)
The minimum initial payment for a Contract is $5,000 if either insured is under
age 20. If neither insured is under age 20 the minimum initial payment is
$10,000.
ML of New York will not accept an initial payment for a specified face amount
that will provide a guarantee period of less than the minimum guarantee period
for which ML of New York would then issue a Contract based on the age of the
younger insured. The minimum will range from 10 to 40 years depending on the age
of the younger insured.
MAKING ADDITIONAL PAYMENTS
PAYMENTS WHICH ARE NOT UNDER A PERIODIC PLAN (REFERENCE PAGE 13). Contract
owners may make additional payments which are not under a periodic payment plan
only if both insureds are living and the attained ages of both insureds are not
over 80.
PAYMENTS UNDER A PERIODIC PLAN (REFERENCE PAGE 13). Contract owners may change
the frequency and the amount of planned payments provided both insureds are
living.
Planned payments must be received while at least one insured is living and not
more than 30 days before or 30 days after the date specified for payment.
44
<PAGE>
EFFECT OF ADDITIONAL PAYMENTS (REFERENCE PAGE 14). If the guarantee period
prior to receipt and acceptance of an additional payment is less than for the
life of the last surviving insured, the payment will first be used to extend the
guarantee period to the whole of life of the younger insured.
CHANGING THE FACE AMOUNT
INCREASING THE FACE AMOUNT (REFERENCE PAGE 15). Contract owners may increase
the face amount of their Contracts only if both insureds are living. A change in
face amount is not permitted if the attained age of either insured is over 80.
DECREASING THE FACE AMOUNT (REFERENCE PAGE 15). Contract owners may decrease
the face amount of their Contracts if either insured is living.
CHARGES DEDUCTED FROM THE INVESTMENT BASE
DEFERRED CONTRACT LOADING (REFERENCE PAGE 16). The deferred contract loading
equals 11% of each payment. 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 7% of each payment, compensates ML of New York for
sales expenses. The sales load may be reduced if cumulative payments are
sufficiently high to reach certain breakpoints (4% of payments in excess of $1.5
million and 2% of payments in excess of $4 million). The charge for federal
taxes, equal to 2% of each payment, compensates ML of New York for a
significantly higher corporate income tax liability resulting from changes made
to the Internal Revenue Code by the Omnibus Budget Reconciliation Act of 1990.
(See "ML of New York's Income Taxes" on page 31.) The state and local premium
tax charge, equal to 2% of payments, compensates ML of New York for state and
local premium taxes that must be paid when a payment is accepted.
ML of New York deducts an amount equal to 1.1% of each payment from the
investment base on each of the ten contract anniversaries following payment.
MORTALITY COST (REFERENCE PAGE 17). For Contracts issued on joint insureds,
current cost of insurance rates are equal to the guaranteed maximum cost of
insurance rates set forth in the Contract. Those rates are based on the 1980
Commissioners Aggregate Mortality Table and do not distinguish between insureds
in a smoker underwriting class and insureds in a non-smoker underwriting class.
The cost of insurance rates are based on an aggregate class which is made up of
a blend of smokers and non-smokers.
GUARANTEE PERIOD
WHEN THE GUARANTEE PERIOD IS LESS THAN FOR LIFE (REFERENCE PAGE 19). If ML of
New York cancels a Contract, it may be reinstated only if neither insured has
died between the date the Contract was terminated and the effective date of the
reinstatement and the contract owner meets the other conditions listed on page
19.
NET CASH SURRENDER VALUE
CANCELLING TO RECEIVE NET CASH SURRENDER VALUE (REFERENCE PAGE 19). Contract
owners may cancel their Contracts at any time while either insured is living.
DEATH BENEFIT PROCEEDS (REFERENCE PAGE 21)
ML of New York will pay the death benefit proceeds to the beneficiary when all
information needed to process the payment, including due proof of the last
surviving insured's death, has been received at the Service Center. 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 increase in face amount
requested or within two years from the date an additional payment was received
and accepted, proof of the insured's death should be sent promptly to the
Service Center since ML of New York may only pay a limited benefit or contest
the Contract. (See "Incontestability" and "Payment in Case of Suicide" on page
26.)
45
<PAGE>
NET SINGLE PREMIUM FACTOR (REFERENCE PAGE 22). The net single premium factors
are based on the insureds' sexes and underwriting classes and the attained ages
on the date of calculation.
PAYMENT OF DEATH BENEFIT PROCEEDS (REFERENCE PAGE 22)
If payment is delayed, 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%.
RIGHT TO CANCEL ("FREE LOOK" PERIOD) OR EXCHANGE
EXCHANGING THE CONTRACT (REFERENCE PAGE 22). A contract owner may exchange his
or her Contract for a joint and last survivor contract with benefits that don't
vary with the investment results of a separate account.
USING THE CONTRACT
OWNERSHIP (REFERENCE PAGE 23). The contract owner is usually one of the
insureds, unless another owner has been named in the application.
The contract owner may want to name a contingent owner in the event the contract
owner dies before the last surviving insured. The contingent owner would then
own the contract owner's interest in the Contract and have all the contract
owner's rights.
NAMING BENEFICIARIES (REFERENCE PAGE 24). ML of New York pays the primary
beneficiary the proceeds of this Contract on the last surviving insured's death.
If no contingent beneficiary is living, ML of New York pays the last surviving
insured's estate.
CHANGING THE INSURED (REFERENCE PAGE 24). Not available for joint insureds.
MATURITY PROCEEDS (REFERENCE PAGE 24). 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 living.
OTHER CONTRACT PROVISIONS
INCONTESTABILITY (REFERENCE PAGE 26). ML of New York will not contest the
validity of a Contract after it has been in effect during the lifetimes of
either insured for two years from the issue date. It will not contest any change
in face amount requested 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 additional payment
which requires evidence of insurability after the death benefit has been in
effect during the lifetime of either insured for two years from the date the
payment has been received and accepted.
PAYMENT IN CASE OF SUICIDE (REFERENCE PAGE 26). If either insured commits
suicide within two years from the issue date, ML of New York will pay only a
limited benefit and terminate the Contract. The benefit will be equal to the
payments made reduced by any debt.
If either insured commits suicide within two years of the effective date of any
increase in face amount requested, the coverage attributable to the increase
will be terminated and a limited benefit will be paid. The benefit will be
limited to the amount of mortality cost deductions made for the increase.
If either insured commits suicide within two years of any date an additional
payment is received and accepted, the coverage attributable to the payment will
be terminated and only a limited benefit will be paid. The benefit will be equal
to the payment less any debt attributable to amounts borrowed during the two
years from the date the payment was received and accepted.
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;
46
<PAGE>
- 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 premium 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; and
- 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.
ESTABLISHING SURVIVORSHIP (ONLY APPLICABLE TO JOINT INSUREDS). 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.
INCOME PLANS (REFERENCE PAGE 26)
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 him
or her to one or more of the income plans.
47
<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 ML of
New York 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, Jr. Director, Senior Vice President, Chief
Financial Officer, Chief Actuary, and
Treasurer
Barry G. Skolnick Director, Senior Vice President, General
Counsel, and Secretary
David M. Dunford Director, Senior Vice President, and Chief
Investment Officer
Gail R. Farkas Director and Senior Vice President
Michael P. Cogswell Director, Vice President, and Senior Counsel
Francis X. Ervin, Jr. Director, Vice President, and Controller
Frederick J.C. Butler Director
Robert L. Israeloff Director
Cynthia L. Kahn Director
Robert A. King Director
Irving M. Pollack Director
William A. Wilde, III 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 ML of New York's indirect parent, Merrill Lynch & Co., Inc. The
principal positions of ML of New York'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 MLPF&S. From February 1991 to
February 1994, he held the position of District Director and First Vice
President of MLPF&S. Prior to February 1991, he held the position of Senior
Resident Vice President of MLPF&S.
Mr. Crowne joined ML of New York in June 1991. Prior to June 1991, he was a
Principal with Coopers & Lybrand.
Mr. Skolnick joined ML of New York in November 1989. Since May 1992, he has held
the position of Assistant General Counsel of Merrill Lynch & Co., Inc. and First
Vice President of MLPF&S. 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.
Ms. Farkas joined ML of New York in August 1995. Prior to August 1995, she held
the position of Director of Market Planning of MLPF&S.
Mr. Cogswell has been with ML of New York since November of 1990.
48
<PAGE>
Mr. Ervin joined ML of New York in June 1994. He joined Merrill Lynch & Co.,
Inc. in February 1992. Prior to February 1992, he held the position of Audit
Manager for Coopers & Lybrand.
Mr. Butler joined ML of New York in April 1991. Prior to April 1991, he served
as Managing Director of the Investment Banking Division of Merrill Lynch & Co.,
Inc.
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.
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. Prior to
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. 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 MLIG. 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 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 $4.4 million during 1995.
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
preceeding 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 MLPF&S
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 MLPF&S.
EXPERTS
The financial statements of ML of New York as of December 31, 1995 and 1994 and
for each of the three years in the period ended December 31, 1995 and of the
Separate Account as of December 31, 1995 and for the periods presented, included
in this Prospectus have been audited by Deloitte & Touche LLP, independent
auditors as stated in their reports appearing herein, and have been so included
in reliance
49
<PAGE>
upon the reports of such firm given upon their authority as experts in
accounting and auditing. Deloitte & Touche LLP's principal business address is
Two World Financial Center, New York, New York 10281-1433.
Actuarial matters included in this Prospectus have been examined by Joseph E.
Crowne, Jr., 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 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.
50
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
ML Life Insurance Company of New York
We have audited the accompanying statement of net assets of
ML of New York Variable Life Separate Account II (the
"Account") as of December 31, 1995 and the related
statements of operations and changes in net assets for each
of the three years in the period then ended. These financial
statements are the responsibility of the management of ML
Life Insurance Company of New York. Our responsibility is to
express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation
of mutual fund and unit investment trust securities owned at
December 31, 1995, by correspondence with their respective
custodians. An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial position of the Account
at December 31, 1995 and the results of its operations and
the changes in its net assets for the above periods in
conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an
opinion on the basic financial statements taken as a whole.
The supplemental schedules included herein are 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 LLP
February 8, 1996
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF NET ASSETS AT DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS Cost Shares Market Value
----------------- ----------------- -----------------
<S> <C> <C> <C>
Investment in Merrill Lynch Series Fund, Inc. (Note 1):
Money Reserve Portfolio $ 1,800,308 1,800,308 $ 1,800,308
Intermediate Government Bond Portfolio 167,738 15,254 174,044
Long-Term Corporate Bond Portfolio 87,176 7,753 93,191
Capital Stock Portfolio 664,863 30,089 718,514
Growth Stock Portfolio 929,684 44,136 1,061,920
Multiple Strategy Portfolio 1,739,149 103,805 1,789,604
High Yield Portfolio 178,144 19,733 177,396
Natural Resources Portfolio 122,109 15,710 128,351
Global Strategy Portfolio 2,644,772 177,959 2,713,875
Balanced Portfolio 313,980 22,684 337,083
----------------- -----------------
8,647,923 8,994,286
----------------- -----------------
Investment in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Global Utility Focus Fund 14,868 1,403 15,848
International Equity Focus Fund 325,523 30,551 337,890
World Income Focus Fund 5,436 565 5,536
Basic Value Focus Fund 695,074 57,095 747,946
International Bond Fund 7,294 733 7,706
Developing Capital Markets Focus Fund 324,849 35,258 328,604
----------------- -----------------
1,373,044 1,443,530
----------------- -----------------
Investment in Unit Investment Trusts (Note 1):
Stripped ("Zero") U.S. Treasury Securities, Series A through K:
1996 Trust 4,153 4,460 4,437
1997 Trust 4,166 4,730 4,485
1998 Trust 29,540 34,475 30,984
1999 Trust 4,100 5,334 4,541
2000 Trust 62,320 84,036 67,887
2003 Trust 32,059 58,324 38,546
2004 Trust 19,999 34,491 22,067
2005 Trust 19,310 39,305 23,881
2009 Trust 6,177 16,093 7,580
2010 Trust 18,638 57,022 24,955
2013 Trust 2,575 9,199 3,312
----------------- -----------------
203,037 232,675
----------------- -----------------
Total Assets $ 10,224,004 10,670,491
================= -----------------
LIABILITIES
Payable to Merrill Lynch Series Fund, Inc. 10,100
Payable to Merrill Lynch Variable Series Funds, Inc. 3,670
Payable to ML Life Insurance Company of New York 418,772
-----------------
Total Liabilities 432,542
-----------------
Net Assets $ 10,237,949
=================
</TABLE>
See Notes to Financial Statements
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ----------------- -----------------
<S> <C> <C> <C>
Investment Income:
Reinvested Dividends $ 423,802 $ 268,953 $ 32,519
Mortality and Expense Charges (Note 3) (69,677) (39,147) (11,042)
Transaction Charges (Note 4) (512) (139) (45)
----------------- ----------------- -----------------
Net Investment Income 353,613 229,667 21,432
----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (31,049) (14,386) 3,446
Net Unrealized Gains (Losses) 678,554 (356,936) 124,757
----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 647,505 (371,322) 128,203
----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 1,001,118 (141,655) 149,635
----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 3,597,850 2,992,673 2,646,293
Transfers of Policy Loading, Net (Note 3) 259,576 242,105 203,968
Transfers Due to Deaths (4,554) (4,709) 0
Transfers Due to Other Terminations (238,972) (42,335) (470)
Transfers Due to Policy Loans (38,631) (26,381) (2,977)
Transfers of Cost of Insurance (163,287) (142,930) (53,905)
Transfers of Loan Processing Charges (916) (180) (8)
----------------- ----------------- -----------------
Increase in Net Assets
Resulting from Principal Transactions 3,411,066 3,018,243 2,792,901
----------------- ----------------- -----------------
Increase in Net Assets 4,412,184 2,876,588 2,942,536
Net Assets Beginning Balance 5,825,765 2,949,177 6,641
----------------- ----------------- -----------------
Net Assets Ending Balance $ 10,237,949 $ 5,825,765 $ 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
Notes to Financial Statements
Note 1 - 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
to support the operations with respect to certain
variable life insurance contracts ("Contracts"). The
Account is governed by New York State Insurance Law. ML
of New York is an indirect wholly-owned subsidiary of
Merrill Lynch & Co., Inc. ("Merrill"). The Account is
registered as a unit investment trust under the
Investment Company Act of 1940 and consists of thirty-
four investment divisions (thirty-five 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"). Six of the
divisions each invest in the securities of a single
mutual fund portfolio of Merrill Lynch Variable Series
Funds, Inc. ("Variable Series Funds"). The portfolios
of the Series Fund and Variable Series Funds have
varying investment objectives relative to growth of
capital and income. The Series Fund receives investment
advice from Merrill Lynch Asset Management, L.P.
("MLAM"), an indirect subsidiary of Merrill, for a fee
calculated at an effective annual rate of .50% of 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. The Variable Series Funds receives
investment advise from MLAM for a fee at an effective
annual rate of .60% of the average daily net assets of
the Basic Value Focus, World Income Focus, Global
Utility Focus and International Bond Funds, .75% of
such assets of the International Equity Focus Fund and
1.00% of such assets of the Developing Capital Markets
Fund. Eighteen of the divisions (nineteen during the
year) each invest in the securities of a single trust
of the Merrill Lynch Fund of Stripped ("Zero") U.S.
Treasury Securities, Series A through K ("Zero
Trusts"). Each trust of the Zero Trusts 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 assets of the Account are registered in the name 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 accumulated 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 State insurance law to provide for death
benefits (without regard to the minimum death benefit
guarantee) and other Contract benefits.
To facilitate comparisons with the current year,
certain amounts in the prior years have been
reclassified.
Note 2 - The following is a summary of significant
accounting policies of the Account:
Investments in the divisions are included in the
statement of net assets at the net asset value of the
respective Series Fund, Variable Series Funds and Zero
Trusts shares held.
Dividend income 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. Under 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 such tax 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 attributable to the
Account if the law is changed. Contract loading,
however, includes a charge for a significantly higher
Federal income tax liability of ML of New York (see
Note 3). Charges for state and local taxes, if any,
attributable to the Account may also be made.
Note 3 - 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, the cost of providing life insurance
coverage for the insureds will be deducted on the dates
specified by the Contract. 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 4 - ML of New York pays all transaction charges to
Merrill Lynch, Pierce, Fenner & Smith Inc., a
subsidiary of Merrill and sponsor of the unit
investment trusts, on the sale of Series A through K
Unit Investment Trusts units to the Account. ML of New
York 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 OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------
Intermediate Long-Term
Total Money Government Corporate
Separate Reserve Bond Bond
Account Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 423,802 $ 75,573 $ 6,717 $ 5,678
Mortality and Expense Charges (69,677) (10,765) (882) (711)
Transaction Charges (512) 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 353,613 64,808 5,835 4,967
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains (Losses) (31,049) 0 (3,021) (1,867)
Net Unrealized Gains 678,554 0 12,060 11,165
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains 647,505 0 9,039 9,298
----------------- ----------------- ----------------- -----------------
Increase in Net Assets
Resulting from Operations 1,001,118 64,808 14,874 14,265
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 3,597,850 2,459,374 23,606 17,779
Transfers of Policy Loading, Net 259,576 232,646 727 264
Transfers Due to Deaths (4,554) 0 0 0
Transfers Due to Other Terminations (238,972) (34,843) (2,594) (2,669)
Transfers Due to Policy Loans (38,631) (3,399) 0 0
Transfers of Cost of Insurance (163,287) (21,503) (1,898) (2,082)
Transfers of Loan Processing Charges (916) (67) (6) (132)
Transfers Among Investment Divisions 0 (2,365,548) 50,888 5,396
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 3,411,066 266,660 70,723 18,556
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 4,412,184 331,468 85,597 32,821
Net Assets Beginning Balance 5,825,765 1,038,349 88,400 60,341
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 10,237,949 $ 1,369,817 $ 173,997 $ 93,162
================= ================= ================= =================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Capital Growth Multiple High
Stock Stock Strategy Yield
Portfolio Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 32,978 $ 31,715 $ 121,523 $ 15,804
Mortality and Expense Charges (4,909) (6,139) (13,244) (1,394)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 28,069 25,576 108,279 14,410
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains (Losses) (5,071) (5,479) (15,281) (1,905)
Net Unrealized Gains 74,124 175,202 126,014 8,743
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains 69,053 169,723 110,733 6,838
----------------- ----------------- ----------------- -----------------
Increase in Net Assets
Resulting from Operations 97,122 195,299 219,012 21,248
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 114,670 118,193 159,175 25,566
Transfers of Policy Loading, Net 3,765 3,650 (2,509) 501
Transfers Due to Deaths 0 0 (2,252) 0
Transfers Due to Other Terminations (10,645) (3,826) (68,092) (7,461)
Transfers Due to Policy Loans (3,841) (5,879) (15,000) 0
Transfers of Cost of Insurance (12,143) (12,609) (29,367) (2,333)
Transfers of Loan Processing Charges (52) (161) (119) (6)
Transfers Among Investment Divisions 162,101 344,527 299,844 24,577
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 253,855 443,895 341,680 40,844
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 350,977 639,194 560,692 62,092
Net Assets Beginning Balance 367,388 422,518 1,228,523 115,247
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 718,365 $ 1,061,712 $ 1,789,215 $ 177,339
================= ================= ================= =================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Global
Natural Global Utility
Resources Strategy Balanced Focus
Portfolio Portfolio Portfolio Fund
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 1,883 $ 105,576 $ 12,771 $ 819
Mortality and Expense Charges (967) (20,960) (2,089) (139)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 916 84,616 10,682 680
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains (Losses) 287 10,745 (1,046) 1,225
Net Unrealized Gains 9,187 116,873 29,915 1,119
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains 9,474 127,618 28,869 2,344
----------------- ----------------- ----------------- -----------------
Increase in Net Assets
Resulting from Operations 10,390 212,234 39,551 3,024
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 22,453 420,392 64,595 1,973
Transfers of Policy Loading, Net 545 9,765 2,652 23
Transfers Due to Deaths 0 (2,302) 0 0
Transfers Due to Other Terminations (23) (95,638) (6,177) 25
Transfers Due to Policy Loans (2,534) (7,978) 0 0
Transfers of Cost of Insurance (1,508) (52,742) (6,217) (255)
Transfers of Loan Processing Charges (19) (251) (13) (1)
Transfers Among Investment Divisions 12,859 315,736 109,076 7,691
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 31,773 586,982 163,916 9,456
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 42,163 799,216 203,467 12,480
Net Assets Beginning Balance 86,161 1,914,068 133,538 3,355
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 128,324 $ 2,713,284 $ 337,005 $ 15,835
================= ================= ================= =================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
International World Basic
Equity Income Value International
Focus Focus Focus Bond
Fund Fund Fund Fund
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 4,480 $ 250 $ 6,840 $ 290
Mortality and Expense Charges (1,684) (23) (2,668) (33)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 2,796 227 4,172 257
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains (Losses) (3,036) 0 997 16
Net Unrealized Gains 16,069 135 53,427 412
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains 13,033 135 54,424 428
----------------- ----------------- ----------------- -----------------
Increase in Net Assets
Resulting from Operations 15,829 362 58,596 685
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 49,049 4,080 44,182 0
Transfers of Policy Loading, Net 2,391 176 2,304 (18)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (4,854) (2) (379) (4)
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (5,887) (90) (5,950) (214)
Transfers of Loan Processing Charges (14) 0 (34) 0
Transfers Among Investment Divisions 165,264 14 554,331 7,252
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 205,949 4,178 594,454 7,016
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 221,778 4,540 653,050 7,701
Net Assets Beginning Balance 116,023 981 94,722 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 337,801 $ 5,521 $ 747,772 $ 7,701
================= ================= ================= =================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Developing
Capital
Markets Focus 1995 1996 1997
Fund Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 905 $ 0 $ 0 $ 0
Mortality and Expense Charges (1,720) 0 (32) (32)
Transaction Charges 0 0 (12) (12)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (815) 0 (44) (44)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains (Losses) (9,973) 0 9 5
Net Unrealized Gains 13,085 0 242 339
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains 3,112 0 251 344
----------------- ----------------- ----------------- -----------------
Increase in Net Assets
Resulting from Operations 2,297 0 207 300
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 38,689 0 1,432 1,432
Transfers of Policy Loading, Net 898 0 54 54
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (1,784) (2) (1) (1)
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (4,791) 0 (137) (137)
Transfers of Loan Processing Charges (32) 0 0 0
Transfers Among Investment Divisions 193,264 (21) 23 4
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 226,244 (23) 1,371 1,352
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 228,541 (23) 1,578 1,652
Net Assets Beginning Balance 99,982 23 2,870 2,824
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 328,523 $ 0 $ 4,448 $ 4,476
================= ================= ================= =================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
1998 1999 2000 2003
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (122) (32) (365) (255)
Transaction Charges (47) (12) (138) (97)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (169) (44) (503) (352)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains (Losses) 21 4 27 140
Net Unrealized Gains 1,559 507 6,514 6,488
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains 1,580 511 6,541 6,628
----------------- ----------------- ----------------- -----------------
Increase in Net Assets
Resulting from Operations 1,411 467 6,038 6,276
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 2,366 1,430 11,494 3,472
Transfers of Policy Loading, Net 76 54 402 40
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (13) (1) (21) (18)
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (338) (136) (1,032) (514)
Transfers of Loan Processing Charges (1) 0 (3) (2)
Transfers Among Investment Divisions 20,133 5 25,134 29,265
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 22,223 1,352 35,974 32,243
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 23,634 1,819 42,012 38,519
Net Assets Beginning Balance 7,334 2,713 25,841 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 30,968 $ 4,532 $ 67,853 $ 38,519
================= ================= ================= =================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2004 2005 2009 2010
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (84) (180) (61) (167)
Transaction Charges (32) (68) (23) (63)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (116) (248) (84) (230)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains (Losses) 8 959 1,105 82
Net Unrealized Gains 2,067 4,690 1,392 6,317
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains 2,075 5,649 2,497 6,399
----------------- ----------------- ----------------- -----------------
Increase in Net Assets
Resulting from Operations 1,959 5,401 2,413 6,169
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 6,368 5,039 0
Transfers of Policy Loading, Net 54 495 502 25
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (11) (7) (1) 71
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (161) (823) (159) (213)
Transfers of Loan Processing Charges (1) (1) 0 (1)
Transfers Among Investment Divisions 20,220 4,564 (5,499) 18,898
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 20,101 10,596 (118) 18,780
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 22,060 15,997 2,295 24,949
Net Assets Beginning Balance 0 7,865 5,304 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 22,060 $ 23,862 $ 7,599 $ 24,949
================= ================= ================= =================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
----------------------
2013
Trust
-----------------
<S> <C>
Investment Income (Loss):
Reinvested Dividends $ 0
Mortality and Expense Charges (20)
Transaction Charges (8)
-----------------
Net Investment Income (Loss) (28)
-----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains (Losses) 0
Net Unrealized Gains 909
-----------------
Net Realized and Unrealized Gains 909
-----------------
Increase in Net Assets
Resulting from Operations 881
-----------------
Changes from Principal Transactions:
Transfers of Net Premiums 1,041
Transfers of Policy Loading, Net 40
Transfers Due to Deaths 0
Transfers Due to Other Terminations (1)
Transfers Due to Policy Loans 0
Transfers of Cost of Insurance (48)
Transfers of Loan Processing Charges 0
Transfers Among Investment Divisions 2
-----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 1,034
-----------------
Increase (Decrease) in Net Assets 1,915
Net Assets Beginning Balance 1,395
-----------------
Net Assets Ending Balance $ 3,310
=================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------
Intermediate Long-Term
Total Money Government Corporate
Separate Reserve Bond Bond
Account Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 268,953 $ 41,342 $ 4,966 $ 5,571
Mortality and Expense Charges (39,147) (7,682) (579) (500)
Transaction Charges (139) 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 229,667 33,660 4,387 5,071
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains (Losses) (14,386) 0 (1,374) (2,463)
Net Unrealized Gains (Losses) (356,936) 0 (5,684) (5,516)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (371,322) 0 (7,058) (7,979)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (141,655) 33,660 (2,671) (2,908)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 2,992,673 2,182,917 16,259 14,303
Transfers of Policy Loading, Net 242,105 204,854 838 297
Transfers Due to Deaths (4,709) (4,709) 0 0
Transfers Due to Other Terminations (42,335) (19,061) (47) (34)
Transfers Due to Policy Loans (26,381) (3,291) 0 (8,090)
Transfers of Cost of Insurance (142,930) (11,687) (1,890) (1,766)
Transfers of Loan Processing Charges (180) (61) (2) (1)
Transfers Among Investment Divisions 0 (2,135,609) 57,882 15,300
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 3,018,243 213,353 73,040 20,009
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 2,876,588 247,013 70,369 17,101
Net Assets Beginning Balance 2,949,177 791,336 18,031 43,240
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 5,825,765 $ 1,038,349 $ 88,400 $ 60,341
================= ================= ================= =================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Capital Growth Multiple High
Stock Stock Strategy Yield
Portfolio Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 22,713 $ 44,060 $ 91,638 $ 10,086
Mortality and Expense Charges (2,624) (3,093) (8,738) (858)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 20,089 40,967 82,900 9,228
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains (Losses) (193) (4,489) (8,962) (113)
Net Unrealized Gains (Losses) (36,308) (53,393) (122,822) (11,295)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (36,501) (57,882) (131,784) (11,408)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (16,412) (16,915) (48,884) (2,180)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 87,258 72,918 141,921 19,063
Transfers of Policy Loading, Net 3,860 2,341 6,369 899
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (3,606) (5,552) (694) (62)
Transfers Due to Policy Loans 0 0 (7,343) 0
Transfers of Cost of Insurance (12,541) (11,943) (30,302) (2,517)
Transfers of Loan Processing Charges (9) (11) (30) (3)
Transfers Among Investment Divisions 114,987 115,653 557,800 31,203
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 189,949 173,406 667,721 48,583
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 173,537 156,491 618,837 46,403
Net Assets Beginning Balance 193,851 266,027 609,686 68,844
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 367,388 $ 422,518 $ 1,228,523 $ 115,247
================= ================= ================= =================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Global
Natural Global Utility
Resources Strategy Balanced Focus
Portfolio Portfolio Portfolio Fund
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 881 $ 40,661 $ 6,867 $ 48
Mortality and Expense Charges (515) (12,743) (945) (9)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 366 27,918 5,922 39
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains (Losses) (1,133) 6,797 (2,182) 1
Net Unrealized Gains (Losses) (1,787) (96,994) (8,078) (139)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (2,920) (90,197) (10,260) (138)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (2,554) (62,279) (4,338) (99)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 15,585 322,623 52,080 1,574
Transfers of Policy Loading, Net 459 16,489 2,418 63
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (76) (6,534) (5,452) (1)
Transfers Due to Policy Loans 0 (7,657) 0 0
Transfers of Cost of Insurance (1,820) (55,334) (6,317) (141)
Transfers of Loan Processing Charges (2) (47) (4) 0
Transfers Among Investment Divisions 35,939 978,339 (64,303) 1,959
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 50,085 1,247,879 (21,578) 3,454
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 47,531 1,185,600 (25,916) 3,355
Net Assets Beginning Balance 38,630 728,468 159,454 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 86,161 $ 1,914,068 $ 133,538 $ 3,355
================= ================= ================= =================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
International World Basic Developing
Equity Income Value Capital Markets
Focus Focus Focus Focus
Fund Fund Fund Fund
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 36 $ 37 $ 47 $ 0
Mortality and Expense Charges (178) (2) (144) (170)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (142) 35 (97) (170)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains (Losses) 25 0 (15) 15
Net Unrealized Gains (Losses) (3,703) (34) (555) (9,329)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (3,678) (34) (570) (9,314)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (3,820) 1 (667) (9,484)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 17,941 955 9,863 18,358
Transfers of Policy Loading, Net 954 43 584 891
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (452) 0 (47) (685)
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (1,772) (20) (679) (1,570)
Transfers of Loan Processing Charges (3) 0 (3) (3)
Transfers Among Investment Divisions 103,175 2 85,671 92,475
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 119,843 980 95,389 109,466
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 116,023 981 94,722 99,982
Net Assets Beginning Balance 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 116,023 $ 981 $ 94,722 $ 99,982
================= ================= ================= =================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
1995 1996 1997 1998
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (12) (19) (18) (45)
Transaction Charges (5) (7) (7) (17)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (17) (26) (25) (62)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains (Losses) 30 12 (6) (5)
Net Unrealized Gains (Losses) (11) 13 (24) (124)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 19 25 (30) (129)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 2 (1) (55) (191)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 1,466 1,448 3,740
Transfers of Policy Loading, Net (8) 62 61 158
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations 0 (1) (1) (4)
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (61) (182) (181) (328)
Transfers of Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions (1,638) (491) (469) 1,037
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (1,707) 854 858 4,603
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets (1,705) 853 803 4,412
Net Assets Beginning Balance 1,728 2,017 2,021 2,922
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 23 $ 2,870 $ 2,824 $ 7,334
================= ================= ================= =================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
1999 2000 2005 2009
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (18) (190) (36) (19)
Transaction Charges (7) (72) (13) (7)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (25) (262) (49) (26)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains (Losses) (2) (317) (18) (9)
Net Unrealized Gains (Losses) (71) (812) (150) 12
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (73) (1,129) (168) 3
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (98) (1,391) (217) (23)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 1,414 9,351 1,275 0
Transfers of Policy Loading, Net 60 347 54 0
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (1) (16) (4) (3)
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (178) (1,369) (193) (75)
Transfers of Loan Processing Charges 0 (1) 0 0
Transfers Among Investment Divisions 487 (202) 5,464 5,405
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 1,782 8,110 6,596 5,327
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 1,684 6,719 6,379 5,304
Net Assets Beginning Balance 1,029 19,122 1,486 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 2,713 $ 25,841 $ 7,865 $ 5,304
================= ================= ================= =================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------
2013
Trust
-----------------
<S> <C>
Investment Income (Loss):
Reinvested Dividends $ 0
Mortality and Expense Charges (10)
Transaction Charges (4)
-----------------
Net Investment Income (Loss) (14)
-----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains (Losses) 15
Net Unrealized Gains (Losses) (132)
-----------------
Net Realized and Unrealized Gains (Losses) (117)
-----------------
Increase (Decrease) in Net Assets
Resulting from Operations (131)
-----------------
Changes from Principal Transactions:
Transfers of Net Premiums 361
Transfers of Policy Loading, Net 12
Transfers Due to Deaths 0
Transfers Due to Other Terminations (2)
Transfers Due to Policy Loans 0
Transfers of Cost of Insurance (64)
Transfers of Loan Processing Charges 0
Transfers Among Investment Divisions (66)
-----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 241
-----------------
Increase (Decrease) in Net Assets 110
Net Assets Beginning Balance 1,285
-----------------
Net Assets Ending Balance $ 1,395
=================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------
Intermediate Long-Term
Total Money Government Corporate
Separate Reserve Bond Bond
Account Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 32,519 $ 17,196 $ 504 $ 1,936
Mortality and Expense Charges (11,042) (3,568) (79) (275)
Transaction Charges (45) 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 21,432 13,628 425 1,661
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains 3,446 0 8 45
Net Unrealized Gains (Losses) 124,757 0 (73) 366
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 128,203 0 (65) 411
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 149,635 13,628 360 2,072
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 2,646,293 2,584,685 0 0
Transfers of Policy Loading, Net 203,968 200,287 6 14
Transfers Due to Other Terminations (470) (362) (6) (15)
Transfers Due to Policy Loans (2,977) (2,977) 0 0
Transfers of Cost of Insurance (53,905) (18,610) (362) (384)
Transfers of Loan Processing Charges (8) (8) 0 0
Transfers Among Investment Divisions 0 (1,985,375) 18,033 41,553
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 2,792,901 777,640 17,671 41,168
----------------- ----------------- ----------------- -----------------
Increase in Net Assets 2,942,536 791,268 18,031 43,240
Net Assets Beginning Balance 6,641 68 0 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 2,949,177 $ 791,336 $ 18,031 $ 43,240
================= ================= ================= =================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Capital Growth Multiple High
Stock Stock Strategy Yield
Portfolio Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 387 $ 430 $ 4,342 $ 3,007
Mortality and Expense Charges (638) (527) (2,200) (311)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (251) (97) 2,142 2,696
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains 295 99 352 77
Net Unrealized Gains (Losses) 15,835 10,427 47,151 1,804
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 16,130 10,526 47,503 1,881
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 15,879 10,429 49,645 4,577
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 1,537 0 5,882 0
Transfers of Policy Loading, Net (58) 84 715 22
Transfers Due to Other Terminations 185 160 (150) (13)
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (3,323) (3,354) (10,483) (975)
Transfers of Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions 179,631 258,708 557,504 65,233
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 177,972 255,598 553,468 64,267
----------------- ----------------- ----------------- -----------------
Increase in Net Assets 193,851 266,027 603,113 68,844
Net Assets Beginning Balance 0 0 6,573 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 193,851 $ 266,027 $ 609,686 $ 68,844
================= ================= ================= =================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Natural Global
Resources Strategy Balanced 1993
Portfolio Portfolio Portfolio Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 167 $ 4,382 $ 168 $ 0
Mortality and Expense Charges (158) (2,690) (475) (9)
Transaction Charges 0 0 0 (4)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 9 1,692 (307) (13)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains 46 1,775 85 38
Net Unrealized Gains (Losses) (1,158) 49,225 1,266 0
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (1,112) 51,000 1,351 38
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (1,103) 52,692 1,044 25
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 1,643 0 4,775
Transfers of Policy Loading, Net 12 348 50 225
Transfers Due to Other Terminations (12) (206) (50) 0
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (527) (11,482) (3,140) (98)
Transfers of Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions 40,260 685,473 161,550 (4,927)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 39,733 675,776 158,410 (25)
----------------- ----------------- ----------------- -----------------
Increase in Net Assets 38,630 728,468 159,454 0
Net Assets Beginning Balance 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 38,630 $ 728,468 $ 159,454 $ 0
================= ================= ================= =================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
1995 1996 1997 1998
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (1) (6) (8) (8)
Transaction Charges 0 (2) (3) (3)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (1) (8) (11) (11)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains 0 1 97 21
Net Unrealized Gains (Losses) 9 29 5 10
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 9 30 102 31
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 8 22 91 20
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 1,671 1,433 5,348 3,820
Transfers of Policy Loading, Net 79 68 253 181
Transfers Due to Other Terminations (1) 11 (1) (1)
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (30) (55) (55) (97)
Transfers of Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions 1 538 (3,615) (1,001)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 1,720 1,995 1,930 2,902
----------------- ----------------- ----------------- -----------------
Increase in Net Assets 1,728 2,017 2,021 2,922
Net Assets Beginning Balance 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 1,728 $ 2,017 $ 2,021 $ 2,922
================= ================= ================= =================
</TABLE>
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
1999 2000 2005 2013
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (6) (74) (6) (3)
Transaction Charges (2) (28) (2) (1)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (8) (102) (8) (4)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gain (Losses):
Net Realized Gains 47 458 2 0
Net Unrealized Gains (Losses) 5 (135) 31 (40)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 52 323 33 (40)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 44 221 25 (44)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 2,388 33,111 0 0
Transfers of Policy Loading, Net 113 1,569 0 0
Transfers Due to Other Terminations 0 (9) 0 0
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (50) (814) (41) (25)
Transfers of Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions (1,466) (14,956) 1,502 1,354
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 985 18,901 1,461 1,329
----------------- ----------------- ----------------- -----------------
Increase in Net Assets 1,029 19,122 1,486 1,285
Net Assets Beginning Balance 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 1,029 $ 19,122 $ 1,486 $ 1,285
================= ================= ================= =================
</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, 1995 and 1994 and the related statements of earnings,
stockholder's equity and cash flows for each of the three years
in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Company at
December 31, 1995 and 1994 and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted
accounting principles.
/s/Deloitte & Touche LLP
February 26, 1996
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
(Dollars in Thousands)
=======================================================================
<TABLE>
<CAPTION>
ASSETS 1995 1994
------------ ------------
<S> <C> <C>
INVESTMENTS:
Fixed maturity securities available for sale, at estimated fair
value
(amortized cost: 1995 - $295,403; 1994 - $297,551) $ 307,596 $ 286,078
Equity securities available for sale, at estimated fair value
(cost: 1995 - $3,017; 1994 - $3,987) 3,534 4,301
Mortgage loans on real estate 4,032 7,941
Policy loans on insurance contracts 82,073 77,827
------------ ------------
Total Investments 397,235 376,147
CASH AND CASH EQUIVALENTS 17,387 20,915
ACCRUED INVESTMENT INCOME 6,603 7,354
DEFERRED POLICY ACQUISITION COSTS 30,922 31,031
FEDERAL INCOME TAXES - DEFERRED 3,622 9,749
REINSURANCE RECEIVABLES 493 605
OTHER ASSETS 2,653 3,265
SEPARATE ACCOUNTS ASSETS 544,432 471,656
------------ ------------
TOTAL ASSETS $ 1,003,347 $ 920,722
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
=======================================================================
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY 1995 1994
------------ ------------
<S> <C> <C>
LIABILITIES:
POLICY LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 337,137 $ 340,882
Claims and claims settlement expenses 2,901 4,314
------------ ------------
Total policy liabilities and accruals 340,038 345,196
OTHER POLICYHOLDER FUNDS 739 1,532
OTHER LIABILITIES 3,112 2,113
FEDERAL INCOME TAXES - CURRENT 185 170
PAYABLE TO AFFILIATES - NET 4,062 4,242
SEPARATE ACCOUNTS LIABILITIES 544,432 471,656
------------ ------------
Total Liabilities 892,568 824,909
------------ ------------
STOCKHOLDER'S EQUITY:
Common stock, $10 par value - 220,000 shares
authorized, issued and outstanding 2,200 2,200
Additional paid-in capital 83,006 83,006
Retained earnings 24,034 13,970
Net unrealized investment gain (loss) 1,539 (3,363)
------------ ------------
Total Stockholder's Equity 110,779 95,813
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,003,347 $ 920,722
============ ============
</TABLE>
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
=======================================================================
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 29,819 $ 32,679 $ 50,661
Net realized investment gains (losses) (265) (2,218) 6,131
Policy charge revenue 10,864 10,339 8,387
--------- --------- ---------
Total Revenues 40,418 40,800 65,179
--------- --------- ---------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account
balances 17,375 22,691 44,425
Market value adjustment expense 238 132 642
Policy benefits (net of reinsurance recoveries: 1995 - $917
1994 - $715; 1993 - $2,192) 528 1,620 1,729
Reinsurance premium ceded 1,227 1,240 1,182
Amortization of deferred policy acquisition costs 1,300 4,141 9,523
Insurance expenses and taxes 4,508 3,685 5,278
--------- --------- ---------
Total Benefits and Expenses 25,176 33,509 62,779
--------- --------- ---------
Earnings Before Federal Income
Tax Provision 15,242 7,291 2,400
--------- --------- ---------
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 1,692 (213) 2,842
Deferred 3,486 2,031 (2,250)
--------- --------- ---------
Total Federal Income Tax Provision 5,178 1,818 592
--------- --------- ---------
NET EARNINGS $ 10,064 $ 5,473 $ 1,808
========= ========= =========
</TABLE>
See notes to financial statements.
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
=======================================================================
<TABLE>
<CAPTION>
Net
Additional unrealized Total
Common paid-in Retained investment stockholder's
stock capital earnings gain (loss) equity
--------- ------------ ----------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 $ 2,200 $ 83,006 $ 6,689 $ 352 $ 92,247
Net earnings 1,808 1,808
Net unrealized investment loss (1,279) (1,279)
--------- ------------ ----------- --------------- -----------------
BALANCE, DECEMBER 31, 1993 2,200 83,006 8,497 (927) 92,776
Net earnings 5,473 5,473
Net unrealized investment loss (2,436) (2,436)
--------- ------------ ----------- --------------- -----------------
BALANCE, DECEMBER 31, 1994 2,200 83,006 13,970 (3,363) 95,813
Net earnings 10,064 10,064
Net unrealized investment gain 4,902 4,902
--------- ------------ ----------- --------------- -----------------
BALANCE, DECEMBER 31, 1995 $ 2,200 $ 83,006 $ 24,034 $ 1,539 $ 110,779
========= ============ =========== =============== =================
</TABLE>
See notes to financial statements.
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
=======================================================================
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 10,064 $ 5,473 $ 1,808
Adjustments to reconcile net earnings to net
cash and cash equivalents provided (used)
by operating activities:
Amortization of deferred policy acquisition
costs 1,300 4,142 9,523
Capitalization of policy acquisition costs (4,368) (7,142) (7,252)
Amortization and accretion of investments (434) (312) 918
Net realized investment (gains) losses 265 2,218 (6,131)
Interest credited to policyholders' account balances 17,375 22,691 44,425
Provision (benefit) for deferred Federal
income tax 3,486 2,031 (2,250)
Cash and cash equivalents provided (used) by
changes in operating assets and liabilities:
Accrued investment income 751 2,810 3,857
Claims and claims settlement expenses (1,413) (1,300) 2,273
Federal income taxes - current 15 (694) 173
Other policyholder funds (793) 332 1,129
Payable to affiliates - net (180) (981) (1,923)
Policy loans (4,246) (4,447) (7,343)
Other, net 1,723 (1,947) 2,644
------------ ------------ ------------
Net cash and cash equivalents provided
by operating activities 23,545 22,874 41,851
------------ ------------ ------------
INVESTING ACTIVITIES:
Fixed maturity securities sold 68,382 123,518 166,033
Fixed maturity securities matured 38,420 92,499 280,484
Fixed maturity securities purchased (103,268) (73,016) (251,522)
Equity securities available for sale purchased (300) (29) (109)
Equity securities available for sale sold 354 4,665 2,885
Mortgage loans on real estate principal payments received 0 8,998 4,425
Mortgage loans on real estate sold 3,608 0 0
------------ ------------ ------------
Net cash and cash equivalents provided by
investing activities 7,196 156,635 202,196
------------ ------------ ------------
</TABLE>
(Continued)
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Concluded) (Dollars In Thousands)
=======================================================================
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits $ 43,191 $ 56,297 $ 33,953
Withdrawals (net of transfers to/from Separate Accounts) (77,460) (242,355) (291,658)
------------ ------------ ------------
Net cash and cash equivalents used
by financing activities (34,269) (186,058) (257,705)
------------ ------------ ------------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (3,528) (6,549) (13,658)
CASH AND CASH EQUIVALENTS:
Beginning of year 20,915 27,464 41,122
------------ ------------ ------------
End of year $ 17,387 $ 20,915 $ 27,464
============ ============ ============
Supplementary Disclosure of Cash Flow Information:
Cash paid for:
Federal income taxes $ 1,677 $ 482 $ 2,668
Intercompany interest 447 352 397
</TABLE>
See notes to financial statements.
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
=======================================================================
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Reporting: ML Life Insurance Company of New York (the
"Company") is a wholly-owned subsidiary of Merrill Lynch
Insurance Group, Inc. ("MLIG"). The Company is an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("Merrill
Lynch & Co.").
The Company sells non-participating life insurance and annuity
products which comprise one business segment. The primary
products that the Company currently markets are immediate
annuities, market value adjusted annuities, variable life
insurance and variable annuities. The Company is licensed to
sell insurance in nine states, however, it currently limits its
marketing activities to the State of New York. The Company
markets its products solely through the retail network of
Merrill Lynch, Pierce, Fenner & Smith, Incorporated ("MLPF&S"),
a wholly-owned subsidiary of Merrill Lynch & Co.
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles for
stock life insurance companies. The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition: Revenues for the Company's interest
sensitive life, interest sensitive annuity, variable life and
variable annuity products consist of policy charges for the
cost of insurance, deferred sales charges, policy
administration charges and/or withdrawal charges assessed
against policyholders' account balances during the period.
Policyholders' Account Balances: Liabilities for the Company's
universal life type contracts, including its life insurance and
annuity products, are equal to the full accumulation value of
such contracts as of the valuation date plus deficiency
reserves for certain products. Interest crediting rates for
the Company's fixed rate products are as follows:
Interest sensitive life products 4.00% - 5.50%
Interest sensitive deferred annuities 3.80% - 8.23%
Immediate annuities 4.00% - 10.0%
These rates may be changed at the option of the Company,
subject to minimum guarantees, after initial guaranteed rates
expire.
Liabilities for unpaid claims equal the death benefit for those
claims which have been reported to the Company and an estimate
based upon prior experience for those claims which are
unreported as of the valuation date.
Reinsurance: In the normal course of business, the Company
seeks to limit its exposure to loss on any single insured life
and to recover a portion of benefits paid by ceding reinsurance
to other insurance enterprises or reinsurers under indemnity
reinsurance agreements, primarily excess coverage and
coinsurance agreements. The maximum amount of mortality risk
retained by the Company is approximately $500 on a single life.
<PAGE>
Indemnity reinsurance agreements do not relieve the Company
from its obligations to policyholders. Failure of reinsurers
to honor their obligations could result in losses to the
Company. The Company regularly evaluates the financial
condition of its reinsurers so as to minimize its exposure to
significant losses from reinsurer insolvencies. The Company
holds collateral under reinsurance agreements in the form of
letters of credit and funds withheld totaling $179 that can be
drawn upon for delinquent reinsurance recoverables.
As of December 31, 1995, the Company had life insurance in-
force which was ceded to other life insurance companies of
$151,317.
Deferred Policy Acquisition Costs: Policy acquisition costs
for life and annuity contracts are deferred and amortized based
on the estimated future gross profits for each group of
contracts. These future gross profit estimates are subject to
periodic evaluation by the Company, with necessary revisions
applied against amortization to date. It is reasonably possible
that estimates of future gross profits could be reduced in the
future, resulting in a material reduction in the carrying
amount of deferred policy acquisition costs.
Policy acquisition costs are principally commissions and a
portion of certain other expenses relating to policy
acquisition, underwriting and issuance, which are primarily
related to and vary with the production of new business.
Certain costs and expenses reported in the statements of
earnings are net of amounts deferred. Policy acquisition costs
can also arise from the acquisition or reinsurance of existing
in-force policies from other insurers. These costs include
ceding commissions and professional fees related to the
reinsurance assumed.
Included in deferred policy acquisition costs are those costs
related to the acquisition by assumption reinsurance of
insurance contracts from unaffiliated insurers. The deferred
costs are amortized in proportion to the estimated future gross
profits over the anticipated life of the acquired insurance
contracts utilizing an interest methodology.
<PAGE>
The Company has entered into an assumption reinsurance
agreement with an unaffiliated insurer. The acquisition costs
relating to this agreement are being amortized over a twenty-
year period using an effective interest rate of 9.01%. This
reinsurance agreement provides for payment of contingent ceding
commissions based upon the persistency and mortality experience
of the insurance contracts assumed. Any payments made for the
contingent ceding commissions will be capitalized and amortized
using an identical methodology as that used for the initial
acquisition costs. The following is a reconciliation of the
acquisition costs related to the reinsurance agreement for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
--------- ---------- ---------
<S> <C> <C> <C>
Beginning balance $ 14,923 $ 15,614 $ 16,925
Capitalized amounts 1,553 1,447 843
Interest accrued 2,138 1,407 1,478
Amortization (960) (3,545) (3,632)
--------- ---------- ---------
Ending balance $ 17,654 $ 14,923 $ 15,614
========= ========== =========
</TABLE>
The following table presents the expected amortization, net of
interest accrued, of these deferred acquisition costs over the
next five years. The amortization may be adjusted based on
periodic evaluation of the expected gross profits on the
reinsured policies.
1996 $2,110
1997 1,615
1998 1,080
1999 944
2000 852
<PAGE>
Investments: In accordance with Statement of Financial
Accounting Standards ("SFAS") No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS No. 115"), the
Company classifies its investments in fixed maturity securities
and equity securities as available for sale securities. These
securities may be sold for the Company's general liquidity
needs, asset/liability management strategy, credit dispositions
and investment opportunities. These securities are carried at
estimated fair value with unrealized gains and losses included
in stockholder's equity. If a decline in value of a security
is determined by management to be other than temporary, the
carrying value is adjusted to the estimated fair value at the
date of this determination and recorded in the net realized
investment gains (losses) caption of the statement of earnings.
For fixed maturity securities, premiums are amortized to the
earlier of the call or maturity date, discounts are accreted to
the maturity date and interest income is accrued daily. For
equity securities, dividends are recognized on the ex-dividend
date. Realized gains and losses on the sale or maturity of the
investments are determined on the basis of identified cost.
<PAGE>
Fixed maturity securities may contain securities which are
considered high yield. The Company defines high yield fixed
maturity securities as unsecured corporate debt obligations
which do not have a rating equivalent to Standard and Poor's
(or similar rating agency) BBB or higher, and are not
guaranteed by an agency of the federal government. Probable
losses are recognized in the period that a decline in value is
determined to be other than temporary.
Mortgage loans on real estate are stated at unpaid principal
balances net of valuation allowances. Such valuation
allowances are based on the decline in value expected to be
realized on those mortgage loans which may not be collectible
in full. In establishing valuation allowances management
considers, among other things, the estimated fair value of the
underlying collateral.
The Company recognizes income from mortgage loans on real
estate based on the cash payment interest rate of the loan,
which may be different from the accrual interest rate of the
loan for certain outstanding mortgage loans. The Company will
recognize a realized gain at the date of the satisfaction of
the loan at contractual terms for loans where there is a
difference between the cash payment interest rate and the
accrual interest rate. For all loans, the Company stops
accruing income when an interest payment default either occurs
or is probable.
During 1995 the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" ("SFAS No. 114") and SFAS
No. 118 "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures", which was an amendment to
SFAS No. 114. SFAS No. 114, as amended, requires that for
impaired loans, the impairment shall be measured based on the
present value of expected future cash flows discounted at the
loan's effective interest rate or the fair value of the
collateral. Impairments of mortgage loans on real estate are
established as valuation allowances and recorded to net
realized investment gains or losses. There was no impact on
either financial position or earnings as a result of adopting
SFAS No. 114.
The Company has previously made commercial mortgage loans
collateralized by real estate. The return on and the ultimate
recovery of these loans and investments are generally dependent
on the successful operation, sale or refinancing of the real
estate. The Company employs a system to monitor the effects of
current and expected real estate market conditions and other
factors when assessing the collectability of mortgage loans.
When, in management's judgment, these assets are impaired,
appropriate losses are recorded. Such estimates necessarily
include assumptions, which may include anticipated improvements
in selected market conditions for real estate, which may or may
not occur. The more significant assumptions management
considers involve estimates of the following: lease absorption
and sales rates; real estate values and rates of return;
operating expenses; required capital improvements; inflation;
and sufficiency of any collateral independent of the real
estate. Management believes that the carrying value
approximates the fair value of these investments.
<PAGE>
Policy loans on insurance contracts are stated at unpaid
principal balances.
Federal Income Taxes: The results of operations of the Company
are included in the consolidated Federal income tax return of
Merrill Lynch & Co. The Company has entered into a tax-sharing
agreement with Merrill Lynch & Co. whereby the Company will
calculate its current tax provision based on its operations.
Under the agreement, the Company periodically remits to Merrill
Lynch & Co. its current federal tax liability.
The Company accounts for Federal income taxes in compliance
with SFAS No. 109 "Accounting for Income Taxes" ("SFAS No.
109") which requires an asset and liability method in recording
income taxes on all transactions that have been recognized in
the financial statements. SFAS No. 109 provides that deferred
taxes be adjusted to reflect tax rates at which future tax
liabilities or assets are expected to be settled or realized.
Separate Accounts: The Separate Accounts are established in
conformity with New York State insurance law, the Company's
domiciliary state, and are generally not chargeable with
liabilities that arise from any other business of the Company.
Separate Accounts assets may be subject to General Account
claims only to the extent the value of such assets exceeds the
Separate Accounts liabilities.
Assets and liabilities of the Separate Accounts, representing
net deposits and accumulated net investment earnings less fees,
held primarily for the benefit of policyholders, are shown as
separate captions in the balance sheets.
Statements of Cash Flows: For the purpose of reporting cash
flows, cash and cash equivalents include cash on hand and on
deposit and short-term investments with original maturities of
three months or less.
Reclassifications: To facilitate comparisons with the current
year, certain amounts in the prior years have been
reclassified.
NOTE 2. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments which approximates
the estimated fair value of these financial instruments as of
December 31 were:
<TABLE>
<CAPTION>
1995 1994
<S> ---------- ----------
<C> <C>
Assets:
Fixed maturity securities available for sale (1) $ 307,596 $ 286,078
Equity securities available for sale (1) 3,534 4,301
Mortgage loans on real estate (2) 4,032 7,941
Policy loans on insurance contracts (3) 82,073 77,827
Cash and cash equivalents (4) 17,387 20,915
Separate Accounts assets (5) 544,432 471,656
---------- ----------
Total financial instruments recorded as assets $ 959,054 $ 868,718
========== ==========
</TABLE>
(1) For publicly traded securities, the estimated fair value
is determined using quoted market prices. For securities
without a readily ascertainable market value, the Company
has determined an estimated fair value using a discounted
cash flow approach, including provision for credit risk,
based upon the assumption that such securities will be
held to maturity. Such estimated fair values do not
necessarily represent the values for which these
securities could have been sold at the dates of the
balance sheets. At December 31, 1995 and 1994 securities
without a readily ascertainable market value, having an
amortized cost of $63,071 and $81,899, had an estimated
fair value of $66,367 and $82,470, respectively.
<PAGE>
(2) The estimated fair value of mortgage loans on real estate
approximates the carrying value. See Note 1 for a
discussion of the Company's valuation process.
(3) The Company estimates the fair value of policy loans as
equal to the book value of the loans. Policy loans are
fully collateralized by the account value of the
associated insurance contracts, and the spread between the
policy loan interest rate and the interest rate credited
to the account value held as collateral is fixed.
(4) The estimated fair value of cash and cash equivalents
approximates the carrying value.
(5) Assets held in the Separate Accounts are carried at quoted
market values.
NOTE 3: INVESTMENTS
The amortized cost (cost for equity securities) and estimated
fair value of investments in fixed maturity securities and
equity securities as of December 31 were:
<TABLE>
<CAPTION>
1995
----
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Fixed maturity securities available for sale:
Corporate debt $ 225,859 $ 10,251 $ 493 $ 235,617
Mortgage-backed securities 64,347 2,126 75 66,398
U.S. government and agencies 5,197 384 0 5,581
---------- ------------ ------------ ------------
Total fixed maturity securities
available for sale $ 295,403 $ 12,761 $ 568 $ 307,596
========== ============ ============ ============
Equity securities available for sale:
Common stocks $ 1,766 $ 135 $ 767 $ 1,134
Non-redeemable preferred stocks 1,251 1,149 0 2,400
---------- ------------ ------------ ------------
Total equity securities available for sale $ 3,017 $ 1,284 $ 767 $ 3,534
========== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
1994
----
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Fixed maturity securities available for sale:
Corporate debt $ 215,593 $ 1,766 $ 9,393 $ 207,966
Mortgage-backed securities 77,806 586 4,184 74,208
U.S. government and agencies 4,152 177 425 3,904
---------- ------------ ------------ -------------
Total fixed maturity securities
available for sale $ 297,551 $ 2,529 $ 14,002 $ 286,078
========== ============ ============ =============
Equity securities available for sale:
Common stocks $ 2,281 $ 72 $ 1,165 $ 1,188
Non-redeemable preferred stocks 1,706 1,782 375 3,113
---------- ------------ ------------ -------------
Total equity securities available for sale $ 3,987 $ 1,854 $ 1,540 $ 4,301
========== ============ ============ =============
</TABLE>
<PAGE>
The amortized cost and estimated fair value of fixed maturity
securities available for sale at December 31, 1995 by
contractual maturity were:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
---------- -----------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 23,816 $ 23,917
Due after one year through five years 117,787 122,853
Due after five years through ten years 76,228 80,204
Due after ten years 13,225 14,224
---------- -----------
231,056 241,198
Mortgage-backed securities 64,347 66,398
---------- -----------
Total fixed maturity securities
available for sale $ 295,403 $ 307,596
========= ===========
</TABLE>
Fixed maturity securities not due at a single maturity date
have been included in the preceding table in the year of final
maturity. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment
penalties.
The amortized cost and estimated fair value of fixed maturity
securities available for sale at December 31, 1995 by rating
agency equivalent were:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
---------- ------------
<S> <C> <C>
AAA $ 58,094 $ 60,123
AA 35,316 36,807
A 67,228 69,893
BBB 122,776 128,606
Non-investment grade 11,989 12,167
---------- -----------
Total fixed maturity securities
available for sale $ 295,403 $ 307,596
========== ===========
</TABLE>
The Company has recorded certain adjustments to deferred policy
acquisition costs and policyholders' account balances in
conjunction with adjustments required by SFAS No. 115. The
Company adjusts those assets and liabilities that would have
been adjusted had the unrealized investment gains or losses
from securities classified as available for sale actually been
realized with corresponding credits or charges reported
directly to shareholder's equity. The following reconciles the
net unrealized investment gain or (loss) as of December 31:
<PAGE>
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Assets:
Fixed maturity securities available for sale $ 12,193 $ (11,473)
Equity securities available for sale 517 314
Deferred policy acquisition costs 0 3,177
Federal income taxes - deferred (829) 1,812
---------- ----------
11,881 (6,170)
---------- ----------
Liabilities:
Policyholders' account balances 10,342 (2,807)
---------- ----------
Stockholder's equity:
Net unrealized investment gain (loss) $ 1,539 $ (3,363)
========== ==========
</TABLE>
Proceeds and gross realized investment gains and losses from
the sale of fixed maturity securities available for sale and
held to maturity for the years ended December 31 were:
<TABLE>
<CAPTION>
1995 1994 1993
--------- ---------- ----------
<S> <C> <C> <C>
Proceeds $ 68,352 $ 123,518 $ 166,033
Gross realized investment gains 1,605 6,793 4,546
Gross realized investment losses 620 8,560 438
</TABLE>
The Company had investment securities of $1,130 and $982 held
on deposit with insurance regulatory authorities at December
31, 1995 and 1994, respectively.
The Company's investment in mortgage loans on real estate are
principally collateralized by commercial real estate. The
Company's investment in commercial real estate mortgage loans
at December 31, 1995, as measured by the outstanding principal
balance, are for properties located in California ($2,032 or
50.4%) and Pennsylvania ($2,000 or 49.6%).
The carrying value and established valuation allowances of
impaired mortgage loans on real estate as of December 31, 1994
were $3,939 and $1,536, respectively. The Company had no
impaired mortgage loans on real estate as of December 31, 1995.
Additional information on impaired loans for the years ended
December 31 follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Average investment in impaired loans $ 3,650 $ 5,475 $ 5,475
Investment income recognized (cash basis) 233 275 333
</TABLE>
<PAGE>
Net investment income arose from the following sources for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
--------- ---------- ----------
<S> <C> <C> <C>
Fixed maturity securities $ 25,046 $ 28,255 $ 45,523
Equity securities available for sale 0 0 113
Mortgage loans on real estate 686 975 1,924
Policy loans 3,903 3,680 3,487
Cash equivalents 1,103 659 476
--------- ---------- ----------
Gross investment income 30,738 33,569 51,523
Less investment expenses (919) (890) (862)
--------- ---------- ----------
Net investment income $ 29,819 $ 32,679 $ 50,661
========= ========== ==========
</TABLE>
Net realized investment gains (losses), including changes in
valuation allowances for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------- --------- --------
<S> <C> <C> <C>
Fixed maturity securities $ 985 $ (1,767) $ 4,108
Equity securities available for sale (916) 237 2,081
Mortgage loans on real estate (334) (688) (58)
-------- --------- --------
Net realized investment gains (losses) $ (265) $ (2,218) $ 6,131
======== ========= ========
</TABLE>
The following is a reconciliation of the change in valuation
allowances which have been established to reflect other than
temporary declines in estimated fair value of the following
classifications of investments for the years ended December 31:
<TABLE>
<CAPTION>
Balance at Additions Balance at
Beginning Charged to Write - End
of Year Operations Downs of Year
---------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Mortgage loans on real estate
1995 $ 1,536 $ 0 $ 1,536 $ 0
1994 848 688 0 1,536
1993 790 58 0 848
</TABLE>
The Company held no investments at December 31, 1995 which have
been non-income producing for the preceding twelve months.
<PAGE>
NOTE 4: FEDERAL INCOME TAXES
The following is a reconciliation of the provision for income
taxes based on income before taxes, computed using the Federal
statutory tax rate, with the provision for income taxes for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Provision for income taxes computed at Federal
statutory rate $ 5,334 $ 2,552 $ 840
State corporate income taxes (91) 0 0
Decrease in income taxes resulting from:
Federal tax rate increase 0 0 (227)
Dividend received deduction (31) (670) 0
Other (34) (64) (21)
-------- -------- --------
Federal income tax provision $ 5,178 $ 1,818 $ 592
======== ======== ========
</TABLE>
The Federal statutory rate for each of the three years in the
period ended December 31, 1995 was 35%.
The Company provides for deferred income taxes resulting from
temporary differences which arise from recording certain
transactions in different years for income tax reporting
purposes than for financial reporting purposes. The sources of
these differences and the tax effect of each are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Deferred policy acquisition cost $ 1,239 $ 887 $ (1,184)
Policyholders' account balances 738 833 (969)
Investment adjustments 1,445 1,117 (100)
Other 64 (806) 3
--------- --------- ---------
Deferred Federal income tax
provision (benefit) $ 3,486 $ 2,031 $ (2,250)
========= ========= =========
</TABLE>
Deferred tax assets and liabilities as of December 31 are
determined as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Deferred tax assets:
Policyholders' account balances $ 8,277 $ 9,015
Net unrealized investment loss 0 1,812
Investment adjustments 2,581 4,026
Other 2 66
--------- ---------
Total deferred tax assets 10,860 14,919
--------- ---------
Deferred tax liabilities:
Deferred policy acquisition costs 6,409 5,170
Net unrealized investment gain 829 0
--------- ---------
Total deferred tax liabilities 7,238 5,170
--------- ---------
Net deferred tax asset $ 3,622 $ 9,749
========= =========
</TABLE>
The Company anticipates that all deferred tax assets will be
realized, therefore no valuation allowance has been provided.
<PAGE>
NOTE 5: RELATED PARTY TRANSACTIONS
The Company and MLIG are parties to a service agreement whereby
MLIG has agreed to provide certain data processing, legal,
actuarial, management, advertising and other services to the
Company. Expenses incurred by MLIG in relation to this service
agreement are reimbursed by the Company on an allocated cost
basis. Charges billed to the Company by MLIG pursuant to the
agreement were $4,415, $4,025 and $5,688 for 1995, 1994 and 1993
respectively. The Company is allocated interest expense on its
accounts payable to MLIG which approximates the daily Federal
funds rate. Total intercompany interest paid was $88, $50 and $69
for 1995, 1994 and 1993, respectively.
The Company and Merrill Lynch Asset Management, L.P. ("MLAM") are
parties to a service agreement whereby MLAM has agreed to provide
certain invested asset management services to the Company. The
Company pays a fee to MLAM for these services through the MLIG
service agreement. Charges attributable to this agreement and
allocated to the Company by MLIG were $206, $203 and $265 for
1995, 1994 and 1993, respectively.
The Company has a general agency agreement with Merrill Lynch
Life Agency Inc. ("MLLA") whereby registered representatives of
MLPF&S, who are the Company's licensed insurance agents, solicit
applications for contracts to be issued by the Company. MLLA is
paid commissions for the contracts sold by such agents.
Commissions paid to MLLA were $2,424, $5,329 and $4,927 for 1995,
1994 and 1993, respectively. Substantially all of these
commissions were capitalized as deferred policy acquisition costs
and are being amortized in accordance with the policy discussed
in Note 1.
In connection with the acquisition of a block of variable life
insurance business from Monarch Life Insurance Company ("Monarch
Life"), the Company borrowed funds from Merrill Lynch & Co. to
partially finance the transaction. As of December 31, 1995 and
1994, the outstanding balance of these loans was $3,075 and
$4,336, respectively. Repayments made on these loans during
1995, 1994, and 1993 were $1,261, $1,214 and $1,650,
respectively. Interest was calculated on these loans at LIBOR
plus 150 basis points. Intercompany interest paid on these loans
during 1995, 1994 and 1993 was $359, $302 and $328, respectively.
NOTE 6: STOCKHOLDER'S EQUITY AND STATUTORY REGULATIONS
At December 31, 1995 and 1994, $58,790 and $42,612, respectively,
of stockholder's equity was available for distribution to MLIG.
Notice of intention to declare a dividend must be filed with the
New York Superintendent of Insurance who may disallow the
payment. No dividends were declared or paid during 1995, 1994 and
1993. Statutory capital and surplus at December 31, 1995 and
1994, was $72,113 and $64,913, respectively.
Applicable insurance department regulations require that the
Company report its accounts in accordance with statutory
accounting practices. Statutory accounting practices primarily
differ from the principals utilized in theses financial
statements by charging policy acquisition costs to expense as
incurred, establishing future policy benefit reserves using
different actuarial assumptions, not providing for deferred
income taxes and valuing securities on a different basis. The
Company's statutory net income for 1995, 1994 and 1993 was
$3,080, $3,816 and $6,515, respectively.
The National Association of Insurance Commissioners ("NAIC")
utilized the Risk Based Capital ("RBC") adequacy monitoring
system. The RBC calculates the amount of adjusted capital which a
life insurance company should have based upon that company's risk
profile. As of December 31, 1995, and 1994, based on the RBC
formula, the Company's total adjusted capital level was 709% and
344%, respectively, of the minimum amount of capital required to
avoid regulatory action.
NOTE 7: COMMITMENTS AND CONTINGENCIES
State insurance laws generally require that all life insurers who
are licensed to transact business within a state become members
of the state's life insurance guaranty association. These
associations have been established for the protection of
policyholders from loss (within specified limits) as a result of
the insolvency of an insurer. At the time an insolvency occurs,
<PAGE>
the guaranty association assesses the remaining members of the
association an amount sufficient to satisfy the insolvent
insurer's policyholder obligations (within specified limits).
Based upon the public information available at this time,
management believes the Company has no material financial
obligations to state guaranty associations.
In the normal course of business, the Company is subject to
various claims and assessments. Management believes the
settlement of these matters would not have a material effect on
the financial position or results of operations of the Company.
* * * * * *
<PAGE>
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 Registrant will, unless in the opinion of its counsel the
II-1
<PAGE>
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)(B) 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 84 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, Jr., F.S.A.
(c) Sutherland, Asbill & Brennan
(d) Deloitte & Touche LLP, Independent Auditors
The following exhibits:
<TABLE>
<S> <C> <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. See Exhibit A(3)(b)
(4) Not applicable
(5) (a) (1) Modified Flexible Premium Variable Life Insurance Policy (Incorporated by
Reference to Registrant's Form S-6 Registration No. 33-51702 Filed September 4,
1992)
(2) Modified Flexible Premium Joint and Last Survivor Variable Life Insurance Policy
(Incorporated by Reference to Registrant's Form S-6 Registration No. 33-51702
Filed September 4, 1992)
(b) (1) Backdating Endorsement (Incorporated by Reference to Registrant's Form S-6
Registration No. 33-51702 Filed September 4, 1992)
(2) Guarantee of Insurability Rider (Incorporated by Reference to Registrant's Form
S-6 Registration No. 33-51702 Filed September 4, 1992)
(3) Single Premium Immediate Annuity Rider (Incorporated by Reference to
Registrant's Form S-6 Registration No. 33-51702 Filed September 4, 1992)
(4) Flexible Premium Joint and Last Survivor Partial Withdrawal Rider for use with
Modified Flexible Premium Joint and Last Survivor Variable Life Insurance Policy
(Incorporated by Reference to Registrant's Form S-6 Registration No. 33-51702
Filed September 4, 1992)
(5) Flexible Premium Partial Withdrawal Rider for use with Modified Flexible Premium
Variable Life Insurance Policy (Incorporated by Reference to Registrant's Form
S-6 Registration No. 33-51702 Filed September 4, 1992)
(6) Change of Insured Rider for use with Flexible Premium Variable Life Insurance
Policy (Incorporated by Reference to Registrant's Form S-6 Registration No.
33-51702 Filed September 4, 1992)
(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)
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
(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. 33-51702 Filed September 4, 1992)
(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. 33-51702 Filed September 4, 1992)
(b) Variable Life Insurance Supplemental Application 1 (Incorporated by Reference to
Registrant's Form S-6 Registration No. 33-51702 Filed September 4, 1992)
(c) Application for Additional Payment for Variable Life Insurance (Incorporated by
Reference to Registrant's Form S-6 Registration No. 33-51702 Filed September 4,
1992)
(d) Application for Reinstatement (Incorporated by Reference to Registrant's Form
S-6 Registration No. 33-51702 Filed September 4, 1992)
(e) Modified Flexible Premium Variable Life Insurance Policy (Form No. MFP87(NY)
(7/94))
(f) Modified Flexible Premium Joint and Last Survivor Variable Life Insurance Policy
(Form No. MFPLS87(NY) (7/94))
(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. 33-51794 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, Jr., F.S.A. as to actuarial matters pertaining
to the securities being registered
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
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, Jr. (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 Francis X. Ervin, Jr.
(g) Power of Attorney of Gail R. Farkas
(h) 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)
(i) Power of Attorney of Robert L. Israeloff (Incorporated by Reference to Post-
effective Amendment No. 2 to Registrant's Form S-6 Registration No. 33-61670
Filed March 1, 1994)
(j) 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)
(k) 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)
(l) 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)
(m) 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)
(n) 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)
(o) 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)
(p) Power of Attorney of William A. Wilde, III (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, Jr., F.S.A. (See Exhibit 6)
(c) Written Consent of Sutherland, Asbill & Brennan
(d) Written Consent of Deloitte & Touche LLP, Independent Auditors
</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. 5 meets all of the requirements for effectiveness
pursuant to paragraph (b) of Rule 485 under the Securities Act of 1933, and has
duly caused this Post-Effective Amendment No. 5 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 19th day of April 1996.
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
(Registrant)
By: ML LIFE INSURANCE COMPANY OF NEW YORK
(Depositor)
<TABLE>
<S> <C>
Attest: /s/ EDWARD W. DIFFIN, JR. By: /s/ BARRY G. SKOLNICK
-------------------------------- -----------------------------------
Edward W. Diffin, Jr. Barry G. Skolnick
Vice President Senior Vice President
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 5 to the Registration Statement has been signed
below by the following persons in the capacities indicated on April 19, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
-------------------------------------- --------------------------------------
<S> <C>
* Chairman of the Board, President, and
-------------------------------------- Chief
Anthony J. Vespa Executive Officer
* Director, Senior Vice President, Chief
-------------------------------------- Financial Officer, Chief Actuary, and
Joseph E. Crowne, Jr. Treasurer
* Director, Senior Vice President, and
-------------------------------------- Chief Investment Officer
David M. Dunford
* Director, and Senior Vice President
--------------------------------------
Gail R. Farkas
* Director, Vice President, and Senior
-------------------------------------- Counsel
Michael P. Cogswell
* Director, Vice President, and
-------------------------------------- Controller
Francis X. Ervin, Jr.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
-------------------------------------- --------------------------------------
<S> <C>
* Director
--------------------------------------
Frederick J.C. Butler
* Director
--------------------------------------
Robert L. Israeloff
* Director
--------------------------------------
Cynthia L. Kahn
* Director
--------------------------------------
Robert A. King
* Director
--------------------------------------
Irving M. Pollack
* Director
--------------------------------------
William A. Wilde, III
*By: /s/ BARRY G. SKOLNICK In his own capacity as Director,
--------------------------------- Senior Vice President, General
Barry G. Skolnick Counsel, Secretary and as
Attorney-In-Fact
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
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, Jr., F.S.A. as to actuarial matters
pertaining to the securities being registered
7. (f) Power of Attorney of Francis X. Ervin, Jr.
(g) Power of Attorney of Gail R. Farkas
8. (c) Written Consent of Sutherland, Asbill & Brennan
(d) Written Consent of Deloitte & Touche LLP, Independent Auditors
</TABLE>
II-8
<PAGE>
April 17, 1996
Board of Directors
ML Life Insurance Company of New York
100 Church Street, 11th Floor
New York, New York 10080-6511
To The Board of Directors:
In my capacity as General Counsel of ML Life Insurance Company of New York (the
"Company"), I have supervised the 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. 5 to the Registration Statement on Form S-6 (the "Registration
Statement") (File No. 33-51794) 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 Contracts, when issued in accordance with the prospectus contained
in the aforesaid registration statement and upon compliance with
applicable local law, will be legal and binding obligations of the
Company in accordance with their terms.
3. The Account is duly created and validly existing as a separate account
pursuant to the aforesaid provisions of New York law.
4. The assets held in the Account equal to the reserves and other
contract liabilities with respect to the Account will not be
chargeable with liabilities arising out of any other business
the Company may conduct.
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 17, 1996
Board of Directors
ML Insurance Company of New York
100 Church Street, 11th Floor
New York, New York 10080-6511
To The Board of Directors:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 5 to the Registration Statement on Form S-6 (the "Registration
Statement") (File No. 33-51794) which covers premiums received under certain
flexible premium 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. Using the interest rate and mortality tables guaranteed in the
Contract, current mortality rates cannot be established at levels such
that the "sales load," as defined in paragraph (c)(4) of Rule 6(e)-3T
under the Investment Company Act of 1940, would exceed 9 percent of
any payment.
2. The illustrations of death benefits, investment base, cash surrender
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.
3. The table of illustrative net single premium factors included in the
"Death Benefit Proceeds" section is consistent with the provision of
the Contract.
4. The information with respect to the Contract contained in (i) the
illustrations of the change in face amount included in the "Additional
Payments" sections of the Examples, (ii) the illustrations of a change
in Guarantee Period included in the "Changing the Face Amount" section
of the Examples and (iii) the illustrations of the changes in face
amount included in the "Partial Withdrawals" section of the Examples,
based in the assumptions specified, are consistent with the provisions
of the Contract.
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>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Francis X. Ervin, Jr., a member
of the Board of Directors of ML Life Insurance Company of New York (the
"Company"), whose signature appears below, constitutes and appoints Barry G.
Skolnick and Michael P. Cogswell, respectively, and each of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all Registration Statements and Amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, under the Investment Company Act of 1940, where
applicable, and the Securities Act of 1933, respectively, with the Securities
and Exchange Commission, for the purpose of registering any and all variable
life and variable annuity separate accounts (collectively "Separate Accounts"),
of the Company that may be established in connection with the issuance of any
and all variable life and variable annuity contracts funded by such Separate
Accounts, granting unto said attorney-in-fact and agent, and each of them, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done.
Date: September 19, 1995 /s/ Francis X. Ervin, Jr.
-----------------------------
State of New Jersey )
County of Middlesex )
On the 19th day of September, 1995, before me came Francis X. Ervin,
Jr., Director of ML Life Insurance Company of New York, to me known to be said
person and he signed the above Power of Attorney on behalf of ML Life Insurance
Company of New York.
/s/ Theresa M. Drummey
-----------------------------
Notary Public
[SEAL]
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Gail R. Farkas, a member of the
Board of Directors of ML Life Insurance Company of New York (the "Company"),
whose signature appears below, constitutes and appoints Barry G. Skolnick and
Michael P. Cogswell, respectively, and each of them, her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for her and in her name, place and stead, in any and all capacities, to sign any
and all Registration Statements and Amendments thereto, and to file the same,
with all exhibits thereto, and other documents in connection therewith, under
the Investment Company Act of 1940, where applicable, and the Securities Act of
1933, respectively, with the Securities and Exchange Commission, for the purpose
of registering any and all variable life and variable annuity separate accounts
(collectively "Separate Accounts"), of the Company that may be established in
connection with the issuance of any and all variable life and variable annuity
contracts funded by such Separate Accounts, granting unto said attorney-in-fact
and agent, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done.
Date:September 18, 1995 /s/ Gail R. Farkas
------------------------------
State of New Jersey )
County of Middlesex )
On the 18th day of September, 1995, before me came Gail R. Farkas,
Director of ML Life Insurance Company of New York, to me known to be said person
and she signed the above Power of Attorney on behalf of ML Life Insurance
Company of New York.
/s/ Colleen Mohan
------------------------------
[SEAL] Notary Public
<PAGE>
[SUTHERLAND, ASBILL & BRENNAN]
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. 5 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. 33-51794). 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 22, 1996
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 5 to Registration
Statement No. 33-51794 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 26, 1996, and (ii) ML of New York Variable Life Separate Account II
dated February 9, 1996, 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.
/s/ Deloitte & Touche LLP
New York, New York
April 22, 1996
