<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1997
REGISTRATION NO. 33-61670
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 6
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF THE SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
------------------------
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, L.L.P.
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, 1997 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, 1996 on February 26, 1997.
================================================================================
<PAGE> 2
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 Facts About the Separate Account, the Funds, the Zero Trusts and ML of New
York; More About the Separate Account and its Divisions
4 Facts About the Separate Account, the 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 Funds, the Zero Trusts and ML of New
York (ML of New York and MLPF&S); More About ML Life Insurance Company of
New York (State Regulation)
6 Facts About the Separate Account, the Funds, the Zero Trusts and ML of New
York (The Separate Account)
7 Not Applicable
8 Experts
9 More About ML Life Insurance Company of New York (Legal Proceedings)
10 Summary of the Contract; Facts About the Contract; More About the Contract;
More About the Separate Account and its Divisions
11 Summary of the Contract (The Investment Divisions); Facts About the Separate
Account, the 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 Funds, the Zero Trusts and ML of New York; More About the
Separate Account and its Divisions
13 Summary of the Contract (Loans; Fees and Charges); Facts About the Contract
(Charges Deducted from the Investment Base; Contract Loading; Charges to the
Separate Account; Guarantee Period; Cash Value; Loans; Partial Withdrawals;
Death Benefit Proceeds; Payment of Death Benefit Proceeds; Rights to Cancel
or Exchange); More About the Contract (Group or Sponsored Arrangements; ML
of New York's Income Taxes); More About the Separate Account and its
Divisions (Charges to Fund Assets)
14 Facts About the Contract (Who May Be Covered; Purchasing a Contract;
Additional Payments); More About the Contract (Other Contract Provisions)
15 Summary of the Contract (Availability and Payments); Facts About the Contract
(Purchasing A Contract; Additional Payments); More About the Contract
(Income Plans)
16 Facts About the Separate Account, the Funds, the Zero Trusts and ML of New
York; More About the Separate Account and its Divisions
17 Summary of the Contract (Net Cash Surrender Value; Rights to Cancel ("Free
Look" Period) or Exchange; Partial Withdrawals); Facts About the Contract
(Cash Value; Partial Withdrawals; Rights to Cancel or Exchange); More About
the Contract (Using the Contract; Some Administrative Procedures)
18 Facts About the Separate Account, the Funds, the Zero Trusts and ML of New
York; More About the Separate Account and its Divisions
19 More About ML Life Insurance Company of New York
20 Not Applicable
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ------------ ------------------------------------------------------------------------------
<C> <S>
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 Funds, the Zero Trusts and ML of New
York (ML of New York and MLPF&S); More About ML Life Insurance Company of
New York
26 Not Applicable
27 Facts About the Separate Account, the Funds, the Zero Trusts and ML of New
York (ML of New York and MLPF&S); More About ML Life Insurance Company of
New York
28 More About ML Life Insurance Company of New York (Directors and Executive
Officers)
29 Facts About the Separate Account, the 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 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 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 Funds, the Zero Trusts and ML of New
York (ML of New York and MLPF&S); More About the Contract (Selling the
Contracts)
40 More About Contract (Selling the Contracts)
41 Facts About the Separate Account, the Funds, the Zero Trusts and ML of New
York (ML of New York and MLPF&S); More About the Contract (Selling the
Contracts)
42 Not Applicable
43 Not Applicable
44 Facts About the Contract; More About the Contract
45 Not Applicable
46 Summary of the Contract; Facts About the Contract (Cash Value; Partial
Withdrawals)
47 Summary of the Contract (The Investment Divisions); Facts About the Separate
Account, the Funds, the Zero Trusts and ML of New York; More About the
Separate Account and its Divisions
48 Facts About the Separate Account, the Funds, the Zero Trusts and ML of New
York (ML of New York and MLPF&S); More About ML Life Insurance Company of
New York (State Regulation)
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ------------ ------------------------------------------------------------------------------
<C> <S>
49 Facts About the Separate Account, the Funds, the Zero Trusts and ML of New
York; Facts About the Contract (Charges Deducted from the Investment Base;
Contract Loading; Charges to the Separate Account); More About the Contract
(Selling the Contracts)
50 Not Applicable
51 Facts About the Contract; More About the Contract
52 Facts About the Separate Account, the Funds, the Zero Trusts and ML of New
York (More About Separate Account and its Divisions)
53 More About the Contract (Tax Considerations; ML of New York's Income Taxes)
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 More About ML Life Insurance Company of New York (Financial Statements)
</TABLE>
<PAGE> 5
PROSPECTUS
MAY 1, 1997
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR VARIABLE
UNIVERSAL LIFE INSURANCE CONTRACT
ISSUED BY
ML LIFE INSURANCE COMPANY OF NEW YORK
HOME OFFICE: 100 CHURCH STREET, 11TH FLOOR
NEW YORK, NEW YORK 10080-6511
SERVICE CENTER: P.O. BOX 9025
SPRINGFIELD, MASSACHUSETTS 01102-9025
1414 MAIN STREET, THIRD FLOOR
SPRINGFIELD, MASSACHUSETTS 01104-1007
PHONE: (800) 831-8172
OFFERED THROUGH
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
This Prospectus is for a flexible premium joint and last survivor variable
universal life insurance contract (the "Contract") offered by ML Life Insurance
Company of New York ("ML of New York"), a subsidiary of Merrill Lynch & Co.,
Inc.
During the "free look" period, the initial payment less contract loading will be
invested only in the division investing in the Money Reserve Portfolio. After
the "free look" period, the contract owner may invest in up to any five of the
38 investment divisions of ML of New York Variable Life Separate Account II (the
"Separate Account"), the ML of New York separate investment account available
under the Contract. The investments available through the investment divisions
include ten mutual fund portfolios of the Merrill Lynch Series Fund, Inc.; seven
mutual fund portfolios of the Merrill Lynch Variable Series Funds, Inc.; two
mutual fund portfolios of the AIM Variable Insurance Funds, Inc.; one mutual
fund portfolio of the Alliance Variable Products Series Fund, Inc.; two mutual
fund portfolios of the MFS Variable Insurance Trust; and sixteen unit investment
trusts in The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities.
Currently, the contract owner may change his or her investment allocation as
many times as desired.
The Contract provides an estate benefit through life insurance coverage on the
lives of two insureds with proceeds payable upon the death of the last surviving
insured. The Contract offers two death benefit options. At the election of the
contract owner, the death benefit may include the Contract's cash value. Subject
to certain conditions, contract owners may purchase additional insurance through
an additional insurance rider. ML of New York guarantees that the coverage will
remain in force for the guarantee period. Each payment will extend the guarantee
period until such time as the guarantee period is established for the whole of
life of the younger insured. During this guarantee period, ML of New York will
terminate the Contract only if the debt exceeds certain contract values. After
the guarantee period, the Contract will remain in force as long as there is not
excessive debt and as long as the cash value is sufficient to cover the charges
due. While the Contract is in force, the death benefit may vary to reflect the
investment results of the investment divisions chosen, but will generally never
be less than the current face amount.
The Contract allows for additional payments. Contract owners may also borrow up
to the loan value of the Contract, make partial withdrawals or turn in the
Contract for its net cash surrender value. The net cash surrender value will
vary with the investment results of the investment divisions chosen. ML of New
York does not guarantee any minimum net cash surrender value.
It may not be advantageous to replace existing insurance with the Contract. The
Contract may be exchanged for a contract with benefits that do not vary with the
investment results of a separate account.
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 IF
TAKEN BEFORE THE CONTRACT OWNER ATTAINS AGE 59 1/2 MAY ALSO BE SUBJECT TO A 10%
FEDERAL PENALTY TAX. LOANS MAY BE TAXABLE IF THE CONTRACT BECOMES A "MODIFIED
ENDOWMENT CONTRACT."
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.; THE AIM VARIABLE INSURANCE FUNDS,
INC.; THE ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.; THE MFS VARIABLE
INSURANCE TRUST; 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> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
IMPORTANT TERMS....................................................................... 4
SUMMARY OF THE CONTRACT
Purpose of the Contract............................................................. 5
Availability and Payments........................................................... 5
CMA(R) Insurance Service............................................................ 6
The Investment Divisions............................................................ 6
How the Death Benefit Varies........................................................ 6
How the Investment Base Varies...................................................... 6
Net Cash Surrender Value............................................................ 7
Illustrations....................................................................... 7
Replacement of Existing Coverage.................................................... 7
Rights to Cancel ("Free Look" Period) or Exchange................................... 7
How Death Benefit and Cash Value Increases are Taxed................................ 7
Loans............................................................................... 7
Partial Withdrawals................................................................. 8
Fees and Charges.................................................................... 8
FACTS ABOUT THE SEPARATE ACCOUNT, THE FUNDS, THE ZERO TRUSTS
AND ML OF NEW YORK
The Separate Account................................................................ 9
The Series Fund..................................................................... 9
The Variable Series Funds........................................................... 10
The AIM V.I. Funds.................................................................. 11
The Alliance Fund................................................................... 11
The MFS Trust....................................................................... 12
Certain Risks of the Funds.......................................................... 12
The Zero Trusts..................................................................... 13
ML of New York and MLPF&S........................................................... 14
FACTS ABOUT THE CONTRACT
Who May be Covered.................................................................. 14
Purchasing a Contract............................................................... 14
Additional Insurance Rider.......................................................... 15
Additional Payments................................................................. 16
Effect of Additional Payments....................................................... 16
Investment Base..................................................................... 17
Charges Deducted from the Investment Base........................................... 18
Contract Loading.................................................................... 18
Charges to the Separate Account..................................................... 19
Charges to Fund Assets.............................................................. 19
Guarantee Period.................................................................... 20
Cash Value.......................................................................... 21
Loans............................................................................... 21
Partial Withdrawals................................................................. 23
Death Benefit Proceeds.............................................................. 23
Payment of Death Benefit Proceeds................................................... 25
Rights to Cancel or Exchange........................................................ 25
Reports to Contract Owners.......................................................... 25
MORE ABOUT THE CONTRACT
Using the Contract.................................................................. 26
Some Administrative Procedures...................................................... 27
Other Contract Provisions........................................................... 28
</TABLE>
2
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Income Plans........................................................................ 29
Group or Sponsored Arrangements..................................................... 30
Unisex Legal Considerations for Employers........................................... 30
Selling the Contracts............................................................... 31
Tax Considerations.................................................................. 31
ML of New York's Income Taxes....................................................... 35
Reinsurance......................................................................... 35
MORE ABOUT THE SEPARATE ACCOUNT AND ITS DIVISIONS
About the Separate Account.......................................................... 35
Changes Within the Account.......................................................... 35
Net Rate of Return for an Investment Division....................................... 36
The Funds........................................................................... 36
The Zero Trusts..................................................................... 38
ILLUSTRATIONS
Illustrations of Death Benefits, Investment Base, Net Cash Surrender Values and
Accumulated Payments............................................................. 39
EXAMPLES
Additional Payments................................................................. 45
Partial Withdrawals................................................................. 45
Changing the Death Benefit Option................................................... 46
MORE ABOUT ML LIFE INSURANCE COMPANY OF NEW YORK
Directors and Executive Officers.................................................... 47
Services Arrangement................................................................ 48
State Regulation.................................................................... 49
Legal Proceedings................................................................... 49
Experts............................................................................. 49
Legal Matters....................................................................... 49
Registration Statements............................................................. 49
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> 8
IMPORTANT TERMS
additional payment: is a payment which may be made after the "free look"
period. Additional payments do not require evidence of insurability.
attained age: is, for each insured, the issue age of the insured plus the
number of full years since the contract date.
base premium: is the amount equal to the level annual premium necessary for the
face amount of the contract to endow at the younger insured's age 100. ML of New
York assumes death benefit option 1 is elected and further assumes a 5% annual
rate of return on the base premium less contract loading and a maximum cost of
insurance charge. Once determined, the base premium will not change.
cash value: is equal to the investment base plus any unearned charges for cost
of insurance and rider costs plus any debt less any accrued net loan cost since
the last contract anniversary (or since the contract date during the first
contract year).
cash value corridor factor: is used to determine the amount of death benefit
purchased by $1.00 of cash value. ML of New York uses this factor in the
calculation of the variable insurance amount to make sure that the Contract
always meets the requirements of what constitutes a life insurance contract
under the Internal Revenue Code.
contract anniversary: is the same date of each year as the contract date.
contract date: is used to determine processing dates, contract years and
anniversaries. It is usually the business day next following the receipt of the
initial payment at the Service Center. It is also referred to as the policy
date.
contract loading: is chargeable to all payments for sales load, federal tax and
premium tax charges.
death benefit: if option 1 is elected, it is the larger of the face amount and
the variable insurance amount; if option 2 is elected, it is the larger of the
face amount plus the cash value or the variable insurance amount.
death benefit proceeds: are equal to the death benefit plus the amount of any
insurance provided by a rider less any debt.
debt: is the sum of all outstanding loans on a Contract plus accrued interest.
excess sales load: a portion of the sales load calculated during the first two
policy years that may be refunded in the event of surrender during the first two
policy years. After policy year two, the excess sales load is zero.
face amount: is the minimum death benefit as long as the Contract remains in
force. The face amount will change if a change in death benefit option is made
or if a partial withdrawal is taken.
fixed base: is calculated in the same manner as the cash value except that 5%
is substituted for the net rate of return, the guaranteed maximum cost of
insurance rates and guaranteed maximum rider costs are substituted for current
rates and loans and repayments are not taken into account. After the end of the
guarantee period, the fixed base is zero.
issue date: is the date that the Contract is issued. The contestable and
suicide periods are measured from this date.
guarantee period: is the time guaranteed that the Contract will remain in force
regardless of investment experience, unless the debt exceeds certain values. It
is the period that a comparable fixed life insurance contract (same face amount,
payments made, guaranteed mortality table, contract loading and guaranteed
maximum rider costs) would remain in force if credited with 5% interest per
year.
4
<PAGE> 9
in force date: is the date when the underwriting process is complete, the
initial payment is received and outstanding contract amendments (if any) are
received.
initial payment: is the payment required to put the Contract into effect.
investment base: is the amount available under a Contract for investment in the
Separate Account at any time. A contract owner's investment base is the sum of
the amounts invested in each of the selected investment divisions.
investment division: is any division in the Separate Account.
issue age: is, for each insured, the insured's age as of his or her birthday
nearest the contract date.
net amount at risk: is the excess, as of a processing date, of the death
benefit (adjusted for interest at an annual rate of 5%) over the cash value, but
before the deduction for cost of insurance.
net cash surrender value: is equal to the cash value less debt.
processing dates: are the contract date and the first day of each contract
quarter thereafter. Processing dates are the days when ML of New York deducts
certain charges from the investment base.
processing period: is the period between consecutive processing dates.
target premium: is equal to 75% of the base premium.
variable insurance amount: is computed daily by multiplying the cash value
(plus certain excess sales load during the first 24 months after the Contract is
issued) by the cash value corridor factor for the younger insured at his or her
attained age.
SUMMARY OF THE CONTRACT
PURPOSE OF THE CONTRACT
This flexible premium joint and last survivor variable universal life insurance
contract offers a choice of investments and an opportunity for the Contract's
investment base, cash value and death benefit to grow based on investment
results.
ML of New York does not guarantee that contract values will increase. Depending
on the investment results of selected investment divisions, the investment base,
cash value and death benefit may increase or decrease on any day. The contract
owner bears the investment risk. ML of New York guarantees to keep the Contract
in force during the guarantee period subject to the effect of any debt.
Life insurance is not a short term investment. The contract owner should
evaluate the need for insurance and the Contract's long term investment
potential and risks before purchasing a contract.
AVAILABILITY AND PAYMENTS
The Contract is available in New York. A Contract may be issued for insureds
from age 20 through age 85. The minimum initial payment is 75% of the base
premium.
ML of New York will not accept an initial payment that provides a guarantee
period of less than two years. The guarantee period is the period of time ML of
New York guarantees that the Contract will remain in force regardless of
investment experience unless the debt exceeds certain values.
ML of New York will issue a Contract only with a face amount (including any
additional insurance rider face amount) greater than $750,000.
Contract owners may make additional payments. Contract owners may specify an
additional payment amount on the application to be paid on either a quarterly or
annual basis. For additional payments
5
<PAGE> 10
not being withdrawn from a CMA account, ML of New York will send reminder
notices for such amounts beginning in the second contract year.
CMA(R) INSURANCE SERVICE
Contract owners who subscribe to the Merrill Lynch Cash Management Account(R)
financial service ("CMA account") may elect to have their Contract linked to
their CMA account electronically. Certain transactions will be reflected in
monthly CMA account statements. Payments may be transferred to and from the
Contract through a CMA account.
THE INVESTMENT DIVISIONS
During the "free look" period, the initial payment less contract loading will be
invested in the investment division of the Separate Account investing in the
Money Reserve Portfolio. After the "free look" period, the contract owner may
select up to five of the 38 investment divisions in the Separate Account. (See
"Changing the Allocation" on page 17).
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 Class A shares of designated mutual fund portfolios of the
Merrill Lynch Variable Series Funds, Inc. (the "Variable Series Funds"). Two
investment divisions of the Separate Account invest exclusively in shares of
designated mutual fund portfolios of the AIM Variable Insurance Funds, Inc. (the
"AIM V.I. Funds"). One investment division of the Separate Account invests
exclusively in shares of a designated mutual fund portfolio of the Alliance
Variable Products Series Fund, Inc. (the "Alliance Fund"). Two investment
divisions of the Separate Account invest exclusively in shares of designated
mutual fund portfolios of the MFS Variable Insurance Trust (the "MFS Trust").
Each mutual fund portfolio has a different investment objective. The other
sixteen 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, the AIM V.I. Funds, the Alliance
Fund, or the MFS Trust (each, a "Fund"; collectively, the "Funds"); or in the
Zero Trusts.
HOW THE DEATH BENEFIT VARIES
Contract owners elect a death benefit option on the application. Under option 1,
the death benefit equals the larger of the face amount or variable insurance
amount. Under option 2, the death benefit equals the larger of the sum of the
face amount plus the cash value or the variable insurance amount. Subject to
certain conditions, contract owners may change the death benefit option. The
death benefit may increase or decrease on any day depending on the investment
results of the investment divisions chosen by the contract owner. Death benefit
proceeds equal the death benefit reduced by any debt and increased by any rider
benefits payable. (See "Death Benefit Proceeds" on page 23.)
HOW THE INVESTMENT BASE VARIES
A Contract's investment base is the amount available for investment at any time.
On the contract date (usually the business day next following receipt of the
initial payment at the Service Center), the investment base is equal to the
initial payment less contract loading and charges for cost of insurance and
rider costs. Afterwards, it varies daily based on investment performance of the
investment divisions chosen. The contract owner bears the risk of poor
investment performance and receives the benefit of favorable investment
performance. Contract owners may wish to consider diversifying their investment
in the Contract by allocating the investment base to two or more investment
divisions.
- ---------------
Cash Management Account and CMA are registered trademarks of Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
6
<PAGE> 11
NET CASH SURRENDER VALUE
Contract owners may surrender their Contracts at any time and receive the net
cash surrender value. The net cash surrender value varies daily based on
investment performance of the investment divisions chosen. ML of New York
doesn't guarantee any minimum net cash surrender value. If the Contract is
surrendered within 24 months after issue, the contract owner will receive
certain excess sales load. (See "Contract Loading -- Excess Sales Load" on page
18.)
ILLUSTRATIONS
Illustrations in this Prospectus or used in connection with the purchase of the
Contract are based on hypothetical investment rates of return. These rates are
not guaranteed. They are illustrative only and should not be deemed a
representation of past or future performance. Actual rates of return may be more
or less than those reflected in the illustrations and, therefore, actual values
will be different than those illustrated.
REPLACEMENT OF EXISTING COVERAGE
Before purchasing a Contract, the contract owner should ask his or her Merrill
Lynch registered representative if changing, or adding to, current insurance
coverage would be advantageous. Generally, it is not advisable to purchase
another contract as a replacement for existing coverage. In particular,
replacement should be carefully considered if the decision to replace existing
coverage is based solely on a comparison of contract illustrations.
RIGHTS TO CANCEL ("FREE LOOK" PERIOD) OR EXCHANGE
Once the contract owner receives the Contract, he or she should review it
carefully to make sure it is what he or she intended to purchase. A Contract may
be returned for a refund within the later of ten days after the contract owner
receives it, 45 days after the contract owner completes the application, or ten
days after ML of New York mails or personally delivers the Notice of Withdrawal
Right to the contract owner. If the Contract is returned during the "free look"
period, ML of New York will refund the initial payment without interest.
Once the Contract is issued, a contract owner may also exchange the Contract for
a contract with benefits that do not vary with the investment results of a
separate account. (See "Exchanging the Contract" on page 25.)
HOW DEATH BENEFIT AND CASH VALUE INCREASES ARE TAXED
Under current federal tax law, life insurance contracts receive tax-favored
treatment. The death benefit is generally excludable from the beneficiary's
gross income for federal income tax purposes, according to Section 101(a)(1) of
the Internal Revenue Code. An owner of a life insurance contract is not taxed on
any increase in the cash value while the contract remains in force.
If the Contract is a modified endowment contract under federal tax law, certain
distributions made during either insured's lifetime, such as loans, partial
withdrawals, collateral assignments, capitalized interest, and complete
surrenders, are includable in gross income on an income-first basis. A 10%
penalty tax may also be imposed on distributions made before the contract owner
attains age 59 1/2. Contracts that are not modified endowment contracts under
federal tax law receive preferential tax treatment with respect to certain
distributions.
For a discussion of the tax issues associated with this Contract, see "Tax
Considerations" on page 31.
LOANS
Contract owners may borrow up to the loan value of their Contracts, which is 90%
of the cash value. The maximum loan amount that may be borrowed at any time is
the difference between the loan value and debt. (See "Loans" on page 21.)
7
<PAGE> 12
Debt is deducted from the amount payable on surrender of the Contract and is
also subtracted from any death benefit payable. Loan interest accrues daily and,
IF IT IS NOT PAID EACH YEAR, IT IS CAPITALIZED AND ADDED TO THE OUTSTANDING LOAN
AMOUNT. If the Contract is a modified endowment contract, the amount of
capitalized interest will be treated as a taxable distribution. 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. Policy debt is considered part of total
cash value which is used to calculate gain. (See "Tax Considerations" on page
31.)
PARTIAL WITHDRAWALS
Contract owners may make partial withdrawals beginning in contract year sixteen,
subject to certain conditions. (See "Partial Withdrawals" on page 23.)
FEES AND CHARGES
Contract Loading. ML of New York deducts certain charges from all payments
before they are invested in the investment divisions. These charges are:
- Sales load equal to 46.25% of each payment through the second base
premium and 1.25% of each payment thereafter.
- State and local premium tax charge of 2% of each payment.
- A charge for federal taxes of 1.25% of each payment.
(See "Contract Loading" on page 18.)
Investment Base Charges. ML of New York deducts certain charges from the
investment base. The charges deducted are:
- On the contract date and on all processing dates after the contract date,
ML of New York makes deductions for cost of insurance (see "Cost of
Insurance" on page 18) and any rider costs (see "Additional Insurance
Rider" on page 15).
- On each contract anniversary, ML of New York makes deductions for the net
loan cost if there has been any debt during the prior year. It equals a
maximum of 2% of the debt per year.
Separate Account Charges. There are certain charges deducted daily from the
investment results of the investment divisions in the Separate Account. These
charges are:
- an asset charge designed to cover mortality and expense risks deducted
from all investment divisions which is equivalent to .90% annually at the
beginning of the year; and
- a trust charge deducted from only those investment divisions investing in
the Zero Trusts, which is currently equivalent to .34% annually at the
beginning of the year and will never exceed .50% annually.
Advisory Fees. The portfolios in the Funds pay monthly advisory fees and other
expenses. (See "Charges to Fund Assets" on page 19.)
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.
8
<PAGE> 13
FACTS ABOUT THE SEPARATE ACCOUNT, THE 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.
There are currently 38 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. Two invest in shares of a
specific portfolio of the AIM V.I. Funds. One invests in shares of a specific
portfolio of the Alliance Fund. Two invest in shares of a specific portfolio of
the MFS Trust. Sixteen invest in units of a specific Zero Trust. Complete
information about the Funds and the Zero Trusts, including the risks associated
with each portfolio (including specific 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 and its investment adviser is Merrill
Lynch Asset Management, L.P. ("MLAM"). 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 be able to 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 that have a rating within the three highest grades of Moody's or
Standard & Poor's.
9
<PAGE> 14
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 (including securities commonly known
as "junk bonds").
Capital Stock Portfolio seeks long-term growth of capital and income, plus
moderate current income. It generally invests in equity securities 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.
MLAM 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 19.)
THE VARIABLE SERIES FUNDS
The Variable Series Funds is registered with the Securities and Exchange
Commission as an open-end management investment company and its investment
adviser is MLAM. Seven of its 16 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 be able to 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 that provide an above-average
dividend return and sell at a below-average price/earnings ratio.
Global Bond Focus Fund (formerly the World Income Focus Fund) seeks to provide
high total investment return by investing in a global portfolio of fixed income
securities denominated in various currencies, including multinational currency
units. The Fund will invest in fixed income securities that have a credit rating
of A or better by Standard & Poor's or by Moody's or commercial paper rated A-1
by Standard & Poor's or Prime-1 by Moody's or obligations that MLAM has
determined to be of similar creditworthiness.
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
10
<PAGE> 15
United States. Under normal conditions, at least 65% of the Fund's net assets
will be invested in such equity securities.
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 of 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.
Index 500 Fund seeks to provide investment results that, before expenses,
correspond to the aggregate price and yield performance of the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500 Index").
The Variable Series Funds, as part of its operating expenses, pays an investment
advisory fee to MLAM. (See "Charges to Fund Assets" on page 19.)
THE AIM V.I. FUNDS
The AIM V.I. Funds is registered with the Securities and Exchange Commission as
an open-end, series, management investment company and its investment adviser is
A I M Advisors, Inc. ("AIM"). Two of its mutual fund portfolios are currently
available through the Separate Account. The investment objectives of the two
available AIM V.I. Funds portfolios are described below. There is no guarantee
that any portfolio will be able to meet its investment objective.
AIM V.I. Capital Appreciation Fund seeks to provide capital appreciation through
investments in common stocks, with emphasis on medium-sized and smaller emerging
growth companies. The portfolio is primarily comprised of securities of two
basic categories of companies: (1) "core" companies, which AIM considers to have
experienced above-average and consistent long-term growth in earnings and to
have excellent prospects for outstanding future growth, and (2) "earnings
acceleration" companies which AIM believes are currently enjoying a dramatic
increase in profits.
AIM V.I. Value Fund seeks to achieve long-term growth of capital by investing
primarily in equity securities judged by AIM to be undervalued relative to the
current or projected earnings of the companies issuing the securities, or
relative to current market values of assets owned by the companies issuing the
securities or relative to the equity markets generally. Income is a secondary
objective. The investment division investing in this Fund should not be selected
by contract owners who seek income as their primary investment objective.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, is a wholly owned
subsidiary of A I M Management Group Inc., an indirect subsidiary of AMVESCO plc
(formerly INVESCO plc). AIM is a registered adviser under the Investment
Advisers Act of 1940. AIM was organized in 1976, and, together with its domestic
subsidiaries, manages or advises 48 investment company portfolios (including the
AIM V.I. Funds). The AIM V.I. Funds, as part of its operating expenses, pays an
investment advisory fee to AIM. (See "Charges to Fund Assets" on page 19.)
THE ALLIANCE FUND
The Alliance Fund is registered with the Securities and Exchange Commission as
an open-end management investment company and its investment adviser is Alliance
Capital Management L.P. ("Alliance"). One of its mutual fund portfolios is
currently available through the Separate Account. The investment objective of
the available Alliance Fund portfolio is described below. There is no guarantee
that this portfolio will be able to meet its investment objective.
11
<PAGE> 16
Premier Growth Portfolio seeks growth of capital by pursuing aggressive
investment policies. Since investments will be made based upon their potential
for capital appreciation, current income will be incidental to the objective of
capital growth. Because of the market risks inherent in any investment, the
selection of securities on the basis of their appreciation possibilities cannot
ensure against possible loss in value.
Alliance, a Delaware limited partnership with principal offices at 1345 Avenue
of the Americas, New York, New York 10105, is a registered adviser under the
Investment Advisers Act of 1940. Alliance Capital Management Corporation
("ACMC"), the sole general partner of Alliance, is an indirect wholly-owned
subsidiary of The Equitable Life Assurance Society of the United States, which
is in turn a wholly-owned subsidiary of the Equitable Companies Incorporated, a
holding company which is controlled by AXA, a French insurance holding company.
The Alliance Fund, as part of its operating expenses, pays an investment
advisory fee to Alliance. (See "Charges to Fund Assets" on page 19.)
THE MFS TRUST
The MFS Trust is registered with the Securities and Exchange Commission as an
open-end management investment company and its investment adviser is
Massachusetts Financial Services Company ("MFS"). Two of its mutual fund
portfolios are currently available through the Separate Account. The investment
objectives of the available MFS Trust portfolios are described below. There is
no guarantee that any portfolio will be able to meet its investment objective.
MFS Emerging Growth Series seeks to provide long-term growth of capital by
investing primarily (i.e., at least 80% of its assets under normal
circumstances) in common stocks of emerging growth companies. Emerging growth
companies include companies that MFS believes are early in their life cycle but
which have the potential to become major enterprises. Dividend and interest
income from portfolio securities, if any, is incidental to the Fund's objective
of long-term growth of capital.
MFS Research Series seeks to provide long-term growth of capital and future
income. The portfolio securities of the MFS Research Series are selected by a
committee of investment research analysts. This committee includes investment
analysts employed not only by the Adviser but also by MFS International (U.K.)
Limited, a wholly-owned subsidiary of MFS. The Series' assets are allocated
among industries by the analysts acting together as a group. Individual analysts
are then responsible for selecting what they view as the securities best suited
to meet the Series' investment objective within their assigned industry
responsibility.
MFS, a Delaware corporation, 500 Boylston Street, Boston, Massachusetts 02116,
is a subsidiary of Sun Life of Canada (U.S.), which, in turn, is a wholly-owned
subsidiary of Sun Life Assurance Company of Canada, and is a registered adviser
under the Investment Advisers Act of 1940. MFS is America's oldest mutual fund
organization. MFS and its predecessor organizations have a history of money
management dating from 1924 and the founding of the first mutual fund in the
United States, Massachusetts Investors Trust. The MFS Trust, as part of its
operating expenses, pays an investment advisory fee to MFS. (See "Charges to
Fund Assets" on page 19.)
CERTAIN RISKS OF THE FUNDS
Investment in lower-rated debt securities, such as those in which the High Yield
Portfolio of the Series Fund, and the Developing Capital Markets Focus and
International Equity Focus Funds of the Variable Series Funds, expect to invest,
entails relatively greater risk of loss of income or principal. 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 risk, these portfolios will
diversify holdings among many issuers. However, there can be no assurance that
diversification will protect these portfolios from widespread defaults during
periods of sustained economic downturn.
12
<PAGE> 17
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 the Contracts' federal tax status
will not be adversely affected as a result.
In selecting investments for the AIM V.I. Capital Appreciation Fund, AIM is
particularly interested in companies that are likely to benefit from new or
innovative products, services or processes that should enhance such companies'
prospects for future growth in earnings. As a result of this policy, the market
prices of many of the securities purchased and held by this Fund may fluctuate
widely. Any income received from securities held by the Fund will be incidental,
and a contract owner should not consider a purchase of shares of the Fund as
equivalent to a complete investment program.
For the MFS Emerging Growth Series, the nature of investing in emerging growth
companies involves greater risk than is customarily associated with investments
in more established companies. Emerging growth companies often have limited
product lines, markets or financial resources, and they may be dependent on
one-person management. In addition, there may be less research available on many
promising small and medium sized emerging growth companies, making it more
difficult to find and analyze these companies. The securities of emerging growth
companies may have limited marketability and may be subject to abrupt or erratic
market movements than securities of larger, more established growth companies or
the market averages in general. Shares of the MFS Emerging Growth Series,
therefore, are subject to greater fluctuation in value than shares of a
conservative equity fund or of a growth fund which invests entirely in proven
growth stocks.
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 1998 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
13
<PAGE> 18
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 19.)
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 31.)
FACTS ABOUT THE CONTRACT
WHO MAY BE COVERED
The Contract is available in New York. ML of New York will issue a Contract on
the lives of two insureds provided the relationship among the applicant and the
insureds meets ML of New York's insurable interest requirements and provided
neither insured is over age 85 or under age 20. The insureds' issue ages will be
determined using their ages as of their birthdays nearest the contract date. The
insureds must also meet ML of New York's medical and other underwriting
requirements, which will include undergoing a medical examination.
ML of New York assigns insureds to underwriting classes which determine the
current cost of insurance rates used in calculating cost of insurance
deductions. Contracts may be issued on insureds in standard, non-smoker or
preferred non-smoker underwriting classes. Contracts may also be issued on
insureds in a substandard underwriting class. For a discussion of the effect of
underwriting classification on deductions for cost of insurance, see "Cost of
Insurance" on page 18.
PURCHASING A CONTRACT
To purchase a Contract, the contract owner must complete an application and make
a payment. The payment is required to put the Contract into effect. In the
application, the contract owner selects the face amount of the Contract. The
amount of the minimum initial payment for a given Contract depends on the face
amount selected and the issue age, sex and underwriting class of each of the
insureds. The minimum initial payment for any Contract is 75% of the base
premium. ML of New York will not accept an initial payment for a specified face
amount that will provide a guarantee period of less than two years. (See
"Selecting the Initial Face Amount" and "Initial Guarantee Period" on page 15.)
ML of New York also will not accept an initial payment that would cause the
Contract to fail to qualify as life insurance under federal tax law as
interpreted by ML of New York.
Insurance coverage generally begins as of 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 prior
to the contract date under the terms of a temporary insurance agreement. In
accordance with ML of New York's underwriting rules, temporary life insurance
coverage may not exceed $300,000 and may not be in effect for more than 90 days.
As provided for under state insurance law, the contract owner, to preserve
insurance age, may be permitted to backdate the Contract. In no case may the
contract date be more than six months prior to the date the application was
completed. Charges for cost of insurance and rider costs for the backdated
period are deducted on the contract date.
If ML of New York determines that, based on the contract owner's initial payment
and face amount, the Contract will be a modified endowment contract, ML of New
York will issue the Contract
14
<PAGE> 19
provided the contract owner signs a statement acknowledging that the Contract is
a modified endowment contract or agrees either to reduce the initial payment or
to increase the face amount to a level at which the Contract will not be a
modified endowment contract. For a discussion of the tax consequences of
purchasing a modified endowment contract, see "Tax Considerations" on page 31.
Selecting the Initial Face Amount. The minimum initial face amount (excluding
any additional insurance rider face amount) is $250,000 or that face amount
which generates a $4,000 base premium, if larger. ML of New York will issue a
Contract only with a face amount (including any additional insurance rider face
amount) greater than $750,000. The maximum face amount that may be specified for
a given initial payment is the amount which will provide an initial guarantee
period of at least two years. For the same initial payment amount, the larger
the face amount requested, the shorter the guarantee period. The initial face
amount will change if the contract owner changes the death benefit option or
takes a partial withdrawal. Subject to certain conditions, the contract owner
may purchase additional insurance coverage through an additional insurance
rider. (See "Additional Insurance Rider" below.)
Initial Guarantee Period. The initial guarantee period for a Contract will be
determined by the initial payment, face amount and any additional insurance
rider face amount. The guarantee period will be adjusted each time an additional
payment is made, when a partial withdrawal is taken, when a death benefit option
change results in a change in face amount, and when the additional insurance
rider face amount is increased or decreased.
The guarantee period is the period of time ML of New York guarantees that the
Contract will remain in force regardless of investment experience unless the
debt exceeds certain values. The guarantee period is based on the guaranteed
maximum cost of insurance rates in the Contract, guaranteed maximum rider costs
(if an additional insurance rider is elected), the contract loading and a 5%
interest assumption. This means that for a given initial payment and face
amount, different joint insureds will have different guarantee periods depending
on the age, sex and underwriting class of each of the insureds. For example,
older joint insureds will have a shorter guarantee period than younger joint
insureds in the same underwriting classes.
The maximum guarantee period is for the whole of life of the younger insured.
ADDITIONAL INSURANCE RIDER
The contract owner may purchase additional insurance coverage payable to the
beneficiary on the death of the last surviving insured. Additional insurance
coverage may be purchased through an additional insurance rider when the
Contract is purchased. Under ML of New York's current procedures, the maximum
additional insurance rider face amount at the time the Contract is purchased is
three times the face amount of the Contract. The rider can also be added on any
contract anniversary thereafter, as long as an application is completed,
satisfactory evidence of insurability of both insureds is provided, and at least
one insured has not attained the age of 69. The minimum additional insurance
rider face amount at any time is $100,000. A cost of insurance charge for the
rider ("rider charge") will be deducted from the Contract's investment base on
each processing date. The rider charge will be based on the same cost of
insurance rates as the Contract. (See "Cost of Insurance" on page 18.) Because
insurance coverage through an additional insurance rider is purchased through
deductions from the Contract's investment base that are not taken into account
in determining the base premium, there is no additional contract loading
associated with this coverage.
The additional insurance rider and all charges associated with the rider will
terminate upon the younger insured attaining age 70. At that time, all
additional insurance coverage will terminate.
Once each year, the additional insurance rider face amount may be increased
(subject to evidence of insurability for both insureds) or decreased (after the
seventh contract anniversary); however, any change in the additional insurance
rider face amount must be at least $100,000. The effective date of the change
will be the contract anniversary next following underwriting approval of the
change. As
15
<PAGE> 20
of the effective date of the increase or decrease in the additional insurance
rider face amount, ML of New York uses the existing fixed base and the face
amount of the Contract plus the new additional insurance rider face amount to
calculate a new guarantee period. A decrease in the additional insurance rider
face amount will increase the guarantee period. An increase in the additional
insurance rider face amount will decrease the guarantee period. An increase will
not be allowed on the first contract anniversary if the face amount of the
Contract plus the new rider face amount provide a guarantee period of less than
one year from the effective date of the increase.
A decrease in the additional insurance rider face amount can cause a Contract
which is not a modified endowment contract to become a modified endowment
contract. In such a case, ML of New York will not process the decrease until the
contract owner confirms in writing his or her intent to convert the Contract to
a modified endowment contract. For a discussion of the tax consequences of
increasing or decreasing the additional insurance rider face amount, see "Tax
Considerations" on page 31.
ADDITIONAL PAYMENTS
After the "free look" period, contract owners may make additional payments while
the insured is living. Additional payments must be submitted with an additional
payment form. The minimum ML of New York will accept for these payments is $100.
For Contracts that are not modified endowment contracts, making an additional
payment may cause them to become modified endowment contracts. (See "Tax
Considerations" on page 31.) ML of New York will return that portion of any
additional payment beyond that necessary to extend the guarantee period to the
whole of life of the younger insured. ML of New York will also return that
portion of any additional payment that would cause the Contract to fail to
qualify as life insurance under federal tax law as interpreted by ML of New
York.
Contract owners may specify an additional payment amount on the application to
be paid on either an annual or quarterly basis. For additional payments not
being withdrawn from a CMA account, ML of New York will send the contract owner
reminder notices. If a contract owner has the CMA Insurance Service, such
additional payments may be withdrawn automatically from his or her CMA account
and transferred to his or her Contract. The withdrawals will continue under the
selected plan until ML of New York is notified otherwise.
EFFECT OF ADDITIONAL PAYMENTS
Generally, any additional payments will be accepted the day they are received at
the Service Center. However, if acceptance of any portion of the payment would
cause a Contract which is not a modified endowment contract to become a modified
endowment contract, to the extent feasible, ML of New York will not accept that
portion of the payment unless the contract owner confirms in writing his or her
intent to convert the Contract to a modified endowment contract. ML of New York
may return that portion of the payment pending receipt of instructions from the
contract owner.
On the date ML of New York receives and accepts an additional payment, ML of New
York will:
- increase the Contract's investment base by the amount of the payment less
contract loading applicable to the payment;
- reflect the payment in the calculation of the variable insurance amount
(see "Variable Insurance Amount" on page 24); and
- increase the fixed base by the amount of the payment less contract
loading applicable to the payment (see "The Contract's Fixed Base" on
page 21).
As of the processing date on or next following receipt and acceptance of an
additional payment, ML of New York will increase the guarantee period if the
guarantee period prior to receipt and acceptance of an additional payment is
less than for the whole of life of the younger insured.
ML of New York will determine the increase in the guarantee period by taking the
immediate increase in the cash value resulting from the additional payment and
adding to that interest at the
16
<PAGE> 21
annual rate of 5% for the period from the date ML of New York receives and
accepts the payment to the contract processing date on or next following such
date. This is the guarantee adjustment amount. The guarantee adjustment amount
is added to the fixed base and the resulting new fixed base is used to calculate
a new guarantee period. For a discussion of the effect of additional payments on
a Contract's guarantee period, see "Additional Payments" in the Examples on page
45.
If any excess sales load has been applied to keep the Contract in force, any
additional payment, less contract loading, will first be applied to recover such
excess sales load (see "Excess Sales Load" on page 18). Next, unless specified
otherwise, if there is any debt, any payment made will be applied as a loan
repayment, with any excess applied as an additional payment. (See "Loans" on
page 21.)
INVESTMENT BASE
A Contract's investment base is the amount available for investment at any time.
It is the sum of the amounts invested in each of the investment divisions. On
the contract date, the investment base equals the initial payment less contract
loading and charges for cost of insurance and rider costs. ML of New York
adjusts the investment base daily to reflect the investment performance of the
investment divisions the contract owner has selected. (See "Net Rate of Return
for an Investment Division" on page 36.) The investment performance reflects the
deduction of Separate Account charges. (See "Charges to the Separate Account" on
page 19.)
Partial withdrawals, loans and deductions for cost of insurance, rider costs and
net loan cost decrease the investment base. (See "Charges Deducted from the
Investment Base" on page 18, "Partial Withdrawals" on page 23 and "Loans" on
page 21.) Loan repayments and additional payments increase it. Contract owners
may elect from which investment divisions loans and partial withdrawals are
taken and to which investment divisions repayments and additional payments are
added. If an election is not made, ML of New York will allocate increases and
decreases proportionately to the contract owner's investment base as then
allocated in the investment divisions.
Initial Investment Allocation and Preallocation. The initial payment less
contract loading will be invested in the division investing in the Money Reserve
Portfolio. Through the first 14 days following the in force date, the initial
payment less contract loading will remain in that division. Thereafter, the
investment base will be reallocated to the investment divisions selected by the
contract owner on the application, if different. The contract owner may invest
in up to five of the 38 investment divisions in the Separate Account.
Changing the Allocation. After the "free look" period, a contract owner's
investment base may be invested in up to five investment divisions at any one
time. Currently, investment allocations may be changed as often as desired. ML
of New York reserves the right to charge up to $25 for each change in excess of
six each year. In order to change their investment base allocation, contract
owners must call or write to the Service Center. (See "Some Administrative
Procedures" on page 27.)
Zero Trust Allocations. ML of New York will notify contract owners 30 days
before a Zero Trust in which they have invested matures. Contract owners must
notify ML of New York by calling or writing at least seven days before the
maturity date how to reinvest their funds in the division investing in that Zero
Trust. If ML of New York is not notified, it will move the contract owner's
investment base in that division to the investment division investing in the
Money Reserve Portfolio.
Units of a specific Zero Trust may no longer be available when a request for
allocation is received. Should this occur, ML of New York will attempt to notify
the contract owner immediately so that the request can be changed.
Allocation to the Division Investing in the Natural Resources Portfolio. ML of
New York and the Separate Account reserve the right to suspend the sale of units
of the investment division investing in the Natural Resources Portfolio in
response to conditions in the securities markets or otherwise.
17
<PAGE> 22
CHARGES DEDUCTED FROM THE INVESTMENT BASE
The charges described below are deducted pro-rata from the investment base on
processing dates.
Cost of Insurance. ML of New York deducts the cost of insurance from the
investment base on the contract date and on each processing date thereafter.
This charge compensates ML of New York for the cost of providing life insurance
coverage for the insureds. It is based on the underwriting class, sex and
attained age of each insured and the Contract's net amount at risk.
To determine the cost of insurance, ML of New York multiplies the current cost
of insurance rate by the Contract's net amount at risk. The net amount at risk
is the difference, as of a processing date, between the death benefit (adjusted
for interest at an annual rate of 5%) and the cash value, but before the
deduction for cost of insurance.
Current cost of insurance rates may be equal to or less than the guaranteed cost
of insurance rates depending on the underwriting class, sex and attained age of
each insured. Current cost of insurance rates are lower for insureds in a
preferred non-smoker underwriting class than for insureds of the same age in a
non-smoker underwriting class and are lower for insureds in a non-smoker
underwriting class than for insureds of the same age and sex in a standard
underwriting class.
ML of New York guarantees that the current cost of insurance rates will never
exceed the maximum guaranteed rates shown in the Contract. The maximum
guaranteed rates for Contracts (other than those issued on a substandard basis)
do not exceed the rates based on the 1980 Commissioners Standard Ordinary
Mortality Table (CSO Table). ML of New York may use rates that are equal to or
less than these rates, but never greater. The maximum rates for Contracts issued
on a substandard basis are based on a multiple of the 1980 CSO Table. Any change
in the cost of insurance rates will apply to all joint insureds of the same age,
sex and underwriting class whose Contracts have been in force for the same
length of time.
Net Loan Cost. The net loan cost is explained under "Loans" on page 21.
Rider Charges. Rider charges are deducted on the contract date and on each
processing date thereafter. These charges are explained under "Additional
Insurance Rider" on page 15.
CONTRACT LOADING
Chargeable to each payment is an amount called the contract loading. The
contract loading equals 49.5% of each payment made until cumulative payments
have been made in an amount equal to two base premiums, and 4.5% of each payment
thereafter. This charge consists of a sales load, a charge for federal taxes and
a state and local premium tax charge.
The sales load, equal to 46.25% of each payment through the second base premium
and 1.25% of each payment thereafter, compensates ML of New York for sales
expenses and the costs for underwriting and issuing the Contract. The sales load
may be reduced in certain group or sponsored arrangements as described on page
30.
The charge for federal taxes is equal to 1.25% of each payment.
The state and local premium tax charge is equal to 2% of each payment.
Excess Sales Load. Excess sales load is equal to any sales load deducted from
the first two base premiums in excess of 30% of premiums paid up to an amount
equal to the first base premium, and then 10% of the premiums paid up to an
amount equal to the second base premium. It is calculated and applied in the
following situations only during the first 24 months after the Contract is
issued:
- It is refunded if the Contract is surrendered during the first 24 months
after issue.
- It is added to the cash value so as to keep the Contract in force if debt
exceeds the larger of (i) cash value plus any excess sales load not
previously applied to keep the Contract in force and (ii) the fixed base
during the first 24 months after issue.
18
<PAGE> 23
- It is added to the cash value in determining the variable insurance
amount during the first 24 months after issue.
CHARGES TO THE SEPARATE ACCOUNT
Each day ML of New York deducts an asset charge from each division of the
Separate Account. The total amount of this charge is computed at .90% annually
at the beginning of the year. Of this amount, .75% is for
- the risk assumed by ML of New York that insureds as a group will live for
a shorter time than actuarial tables predict. As a result, ML of New York
would be paying more in death benefits than planned; and
- the risk assumed by ML of New York that it will cost more to issue and
administer the Contracts than expected.
The remaining amount, .15%, is for
- the risk assumed by ML of New York with respect to potentially
unfavorable investment results. This risk is that the Contract's cash
value cannot cover the charges due during the guarantee period.
The total asset charge may not be increased.
Charges to Divisions Investing in the Zero Trusts. ML of New York assesses a
daily trust charge against the assets of each division investing in the Zero
Trusts. This charge reimburses ML of New York for the transaction charge paid to
MLPF&S when units are sold to the Separate Account.
The trust charge is currently equivalent to .34% annually at the beginning of
the year. It may be increased, but will not exceed .50% annually at the
beginning of the year. The charge is based on cost (taking into account loss of
interest) with no expected profit.
Tax Charges. ML of New York has the right under the Contract to impose a charge
against Separate Account assets for any taxes imposed on the Separate Account's
investment earnings. (See "ML of New York's Income Taxes" on page 35.)
CHARGES TO FUND ASSETS
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.
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.
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, Global Bond Focus Fund and Global Utility Focus Fund. This fee equals an
annual rate of .30%, .75%, 1.00% and .75% of the average daily net assets of the
Index
19
<PAGE> 24
500 Fund, the International Equity Focus Fund, the Developing Capital Markets
Focus Fund, and the Equity Growth Fund, respectively.
MLAM and Merrill Lynch Life Agency, Inc. have entered into two agreements which
limit the operating expenses paid by each Fund in a given year to 1.25% of its
average daily net assets, which is less than the expense limitations imposed by
state securities laws or published regulations thereunder. These reimbursement
agreements provide that any expenses in excess of 1.25% of average daily net
assets will be reimbursed to the Fund by MLAM which, in turn, will be reimbursed
by Merrill Lynch Life Agency, Inc.
Charges to AIM V.I. Funds Assets. The AIM V.I. Funds incurs operating expenses
and pays a monthly advisory fee to AIM, which serves as the investment adviser
to each fund of the AIM V.I. Funds. As the investment adviser, AIM receives from
the AIM V.I. Capital Appreciation Fund and the AIM V.I. Value Fund an advisory
fee at an annual rate of .65% of each fund's average daily net assets.
Charges to Alliance Fund Assets. The Alliance Fund incurs operating expenses
and pays a monthly advisory fee to Alliance, which serves as the investment
adviser to each fund of the Alliance Fund. As the investment adviser, Alliance
receives from the Alliance Premier Growth Portfolio an advisory fee at an annual
rate of 1.00% of the fund's average daily net assets.
Alliance voluntarily waives fees and expenses that exceed .95% of the average
net assets of the Alliance Fund. Alliance may discontinue or reduce any waivers
or assumptions of expenses at any time without notice. Alliance, however,
intends to continue such reimbursements for the foreseeable future.
Charges to MFS Trust Assets. The MFS Trust incurs operating expenses and pays a
monthly advisory fee to MFS, which serves as the investment adviser to each of
the funds of MFS Trust. As the investment adviser, MFS receives from the MFS
Emerging Growth Series and MFS Research Series an advisory fee, computed and
paid monthly, at an annual rate of .75% of the average daily net assets of the
respective fund.
Subject to termination or revision at the sole discretion of MFS, MFS has agreed
to bear expenses of the MFS Emerging Growth Series and the MFS Research Series
(the "Series") such that each Series' expenses, except for management fees
("Other Expenses"), do not exceed .25% of the average daily net assets of the
Series. The obligation of MFS to bear Other Expenses for a Series terminates on
the last day of the Series' fiscal year in which Other Expenses are less than or
equal to .25%.
GUARANTEE PERIOD
ML of New York guarantees that the Contract will stay in force for the guarantee
period unless the debt exceeds certain contract values. (See "Loans" on page
21.) Additional payments will extend the guarantee period until such time as it
is guaranteed for the whole of life of the younger insured. The guarantee period
will be affected by partial withdrawals, by changes in death benefit options and
by increases and decreases in the face amount of the additional insurance rider.
A reserve is held in ML of New York's general account to support this guarantee.
When the Guarantee Period is Less Than for Life. After the end of the guarantee
period, ML of New York may cancel the Contract if the cash value plus certain
excess sales load on a processing date is insufficient to cover charges due on
that date. (See "Charges Deducted from the Investment Base" and "Contract
Loading -- Excess Sales Load" on page 18.)
ML of New York will notify the contract owner at the owner's last known address
before cancelling the Contract. The contract owner will then have 61 days to pay
an amount which, after deducting contract loading, equals at least three times
the charges that were due (and not deducted) on the processing date when the
cash value was determined to be insufficient, plus any excess sales load
previously applied to keep the Contract in force. If this amount is paid, ML of
New York will deduct the charges due on the processing date and apply the
balance to investment base. ML of New York
20
<PAGE> 25
will cancel the Contract at the end of this grace period if payment has not yet
been received. At that time, ML of New York will deduct any charges for cost of
insurance and rider costs that were applicable to the grace period and refund
any unearned charges for cost of insurance, rider costs and any excess sales
load not previously applied to keep the Contract in force.
If ML of New York cancels a Contract, it may be reinstated while both insureds
are still living if:
- the reinstatement is requested within three years after the end of the
grace period;
- ML of New York receives satisfactory evidence of the insureds'
insurability; and
- the reinstatement payment is made. The reinstatement payment is the
minimum payment for which ML of New York would then issue a Contract for
the minimum guarantee period with the same face amount as the original
Contract, based on the insureds' attained ages and underwriting classes
as of the effective date of the reinstated Contract.
A reinstated Contract will be effective on the processing date on or next
following the date the reinstatement application is approved.
The Contract's Fixed Base. On the contract date, the fixed base equals the cash
value. From then on, the fixed base is calculated in the same manner as the cash
value except that the calculation substitutes 5% for the net rate of return, the
guaranteed maximum cost of insurance rates and the guaranteed maximum rider
costs are substituted for the current rates and it is calculated as though there
had been no loans or repayments. The fixed base is equivalent to the cash value
for a comparable fixed benefit contract with the same face amount and guarantee
period. After the end of the guarantee period the fixed base is zero. The fixed
base is used to limit ML of New York's right to cancel the Contract during the
guarantee period.
Automatic Adjustment. On any contract anniversary, if the cash value is greater
than the fixed base necessary to cause the guarantee period to equal the whole
of life of the younger insured, the guarantee period will be extended to the
whole of life of the younger insured.
CASH VALUE
A Contract's cash value fluctuates daily with the investment results of the
investment divisions selected. ML of New York does not guarantee any minimum
cash value. The cash value on any date equals the total investment base plus
debt plus unearned charges for cost of insurance and rider costs less any
accrued net loan cost since the last contract anniversary (or since the contract
date during the first contract year).
Cancelling the Contract. A contract owner may cancel the Contract at any time
while either insured is living. The request must be in writing in a form
satisfactory to ML of New York. All rights to death benefits will end on the
date the written request is sent to ML of New York.
The contract owner will then receive the net cash surrender value. The contract
owner may elect to receive this amount either in a single payment or under one
or more income plans described on page 29. The net cash surrender value will be
determined as of the date of receipt of the written request at the Service
Center.
If the Contract is cancelled during the first 24 months after the issue date of
the Contract, excess sales load will be refunded except to the extent previously
applied to keep the Contract in force. (See "Contract Loading -- Excess Sales
Load" on page 18.)
LOANS
Contract owners may use the Contract as collateral to borrow funds from ML of
New York. The minimum loan is $200. Contract owners may repay all or part of the
loan at any time during either insured's lifetime. Each repayment must be for at
least $200 or the amount of the debt, if less. If any excess sales load was
previously applied to keep the Contract in force, any loan repayment will first
be applied to repay such excess sales load.
21
<PAGE> 26
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 payments). Otherwise, ML of New York will take the borrowed
amounts proportionately from and make repayments proportionately to the contract
owner's investment base as then allocated in the investment divisions.
If a contract owner has the CMA Insurance Service, loans may be transferred to
and loan repayments transferred from his or her CMA account.
Effect on Death Benefit and Cash Value. Whether or not a loan is repaid, taking
a loan will have a permanent effect on a Contract's cash value and may have a
permanent effect on its death benefit. This is because the collateral for a loan
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 value may be higher as a result
of the loan, as may be the death benefit. Conversely, if the amount credited is
less, the cash value will be lower, as may be the death benefit. In that case,
the lower cash value may cause the Contract to lapse sooner than if no loan had
been taken.
Loan Value. The loan value of a Contract equals 90% of its cash value. The sum
of all outstanding loan amounts plus accrued interest is called debt. The
maximum amount that can be borrowed at any time is the difference between the
loan value and the debt.
Interest. While a loan is outstanding, ML of New York may charge interest at a
maximum rate of 6% annually. Currently ML of New York charges interest of 5.25%
annually. Interest accrues each day and payments are due at the end of each
contract year. IF THE INTEREST ISN'T PAID WHEN DUE, IT IS ADDED TO THE
OUTSTANDING LOAN AMOUNT. Interest paid on a loan generally is not tax
deductible.
The amount held in ML of New York's general account as collateral for a loan
earns interest at a minimum of 4% annually. Currently a loan amount earns
interest at 4.5%.
ML of New York may change the interest rates currently charged on loans and the
rates of interest earned on the loan collateral amounts. Any such changes will
be effective on the contract anniversary following the date such rates are
declared.
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 5.75% and the collateral
earnings on such amounts are 5.0%, the current net loan cost on loaned amounts
is .75%. The net loan cost is taken into account in determining the net cash
surrender value of the Contract if the date of surrender is not a contract
anniversary.
Cancellation Due to Excess Debt. If on a processing date the debt exceeds the
larger of (i) cash value plus certain excess sales load, and less charges due on
that date, and (ii) the fixed base (if any), ML of New York will cancel the
Contract 61 days after a notice of intent to terminate the Contract is mailed to
the contract owner unless ML of New York has received at least the minimum
repayment amount specified in the notice. During the first 24 months after the
Contract is issued, ML of New York will add excess sales load to the cash value
as necessary to keep the Contract in force if debt exceeds the larger of the
cash value less charges due and the fixed base. (See "Contract Loading -- Excess
Sales Load" on page 18.) Upon termination, ML of New York will deduct any
charges for cost of insurance and rider costs that may be applicable to the
61-day period and refund any unearned charges for cost of insurance, rider costs
and any excess sales load not previously applied to keep the Contract in force.
If the Contract lapses with a loan outstanding, adverse tax consequences may
result. (See "Tax Considerations" on page 31.)
22
<PAGE> 27
PARTIAL WITHDRAWALS
Beginning in contract year sixteen, a contract owner may make partial
withdrawals by submitting a request in a form satisfactory to ML of New York.
The effective date of the withdrawal is the date a withdrawal request is
received at the Service Center. Contract owners may elect to receive the
withdrawal amount either in a single payment or, subject to ML of New York's
rules, under one or more income plans.
Contract owners may make one partial withdrawal each contract year. The minimum
amount for each partial withdrawal is $1,000. The remaining cash value less any
debt following a partial withdrawal must equal or exceed $5,000. The amount of
any partial withdrawal may not exceed the loan value as of the effective date of
the partial withdrawal less any debt. A partial withdrawal may not be repaid.
Effect on Investment Base, Fixed Base, Cash Value and Death Benefit. As of the
effective date of the withdrawal, the investment base, fixed base, cash value
and, if the contract owner has elected death benefit option 1, the face amount
of the Contract will each be reduced by the amount of the partial withdrawal. ML
of New York allocates this reduction proportionately to the investment base in
each of the contract owner's investment divisions unless notified otherwise. The
variable insurance amount will also reflect the partial withdrawal as of the
effective date.
Effect on Guarantee Period. As of the processing date on or next following the
effective date of a partial withdrawal, ML of New York calculates a new
guarantee period. This is done by taking the immediate decrease in cash value
resulting from the partial withdrawal and adding to that amount interest at an
annual rate of 5% for the period from the date of the withdrawal to the contract
processing date on or next following such date. This is the guarantee adjustment
amount. The guarantee adjustment amount is subtracted from the fixed base and
the resulting new fixed base is used to calculate a new guarantee period. For a
discussion of the effect of partial withdrawals on a Contract's guarantee
period, see "Partial Withdrawals" in the Examples on page 45.
A partial withdrawal may cause a Contract which is not a modified endowment
contract to become a modified endowment contract. In such a case, ML of New York
will not process the partial withdrawal until the contract owner confirms in
writing his or her intent to convert the Contract to a modified endowment
contract. For a discussion of the tax issues associated with a partial
withdrawal, see "Tax Considerations" on page 31.
DEATH BENEFIT PROCEEDS
ML of New York will pay the death benefit proceeds to the beneficiary upon
receipt of all information needed to process the payment, including due proof of
the death of the last surviving insured. Proof of death for both insureds must
be received. There is no death benefit payable at the first death. When ML of
New York is first provided reliable notification of the last surviving insured's
death by a representative of the owner or the insured, investment base may be
transferred to the division investing in the Money Reserve Portfolio, pending
payment of death benefit proceeds.
If one of the insureds should die within two years from the Contract's issue
date, within two years from the effective date of any requested change in the
death benefit option requiring evidence of insurability, or within two years of
an increase in the additional insurance rider face amount requiring evidence of
insurability, due proof of the insured's death should be sent promptly to the
Service Center since ML of New York may pay only a limited benefit or contest
the Contract. (See "Incontestability" and "Payment in Case of Suicide" on page
28.)
Death Benefit Proceeds. The death benefit payable depends on the death benefit
option in effect on the date of death.
- Under option 1, the death benefit is equal to the larger of the face
amount or the variable insurance amount.
- Under option 2, the death benefit is equal to the larger of the face
amount plus the cash value or the variable insurance amount.
23
<PAGE> 28
Contract owners who wish to have investment experience reflected in insurance
coverage should choose option 2. Contract owners who wish to have insurance
coverage that generally does not vary in amount should choose option 1.
The death benefit will never be less than the amount required to keep the
Contract qualified as life insurance under federal income tax laws.
To determine the death benefit proceeds, ML of New York will subtract from the
death benefit any debt and add to the death benefit any rider benefits payable.
The values used in calculating the death benefit proceeds are as of the date of
death. If the last surviving insured dies during the grace period, the death
benefit proceeds equal the death benefit proceeds in effect immediately prior to
the grace period reduced by any overdue charges. (See "When the Guarantee Period
is Less Than for Life" on page 20.)
Variable Insurance Amount. ML of New York determines the variable insurance
amount daily by:
- calculating the cash value (plus any excess sales load during the first
24 months after the Contract is issued); and
- multiplying it by the cash value corridor factor (explained below) for
the younger insured at his or her attained age.
The variable insurance amount will never be less than required by federal tax
law.
Cash Value Corridor Factor. The cash value corridor factor is used to determine
the amount of death benefit purchased by $1.00 of cash value. It is based on the
attained age of the younger insured on the date of calculation. It decreases
daily as the younger insured's age increases. As a result, the variable
insurance amount as a multiple of the cash value will decrease over time. A
table of cash value corridor factors as of each anniversary is included in the
Contract.
Table of Illustrative Cash Value Corridor Factors
on Anniversaries
<TABLE>
<CAPTION>
ATTAINED AGE FACTOR
- ------------- ------------
<S> <C>
40 and under %250
45 %215
55 %150
65 %120
75-90 %105
95 and over %100
</TABLE>
Changing the Death Benefit Option. On each contract anniversary beginning with
the fifteenth, the contract owner may change the death benefit option. ML of New
York will change the face amount in order to keep the death benefit constant on
the effective date of the change. Therefore, if the change is from option 1 to
option 2, the face amount of the Contract will be decreased by the cash value on
the date of the change. A change in the death benefit option will not be
permitted if it would result in a face amount of less than $100,000. If the
change is from option 2 to option 1, the face amount of the Contract will be
increased by the cash value on the date of the change. For a discussion of the
effect of a change in the death benefit option on a Contract, see "Changing the
Death Benefit Option" in the Examples on page 46.
If the contract owner requests a change in the death benefit option from option
1 to option 2, evidence of insurability in a form satisfactory to ML of New York
that the insureds are insurable may be required. In no event will a change be
permitted if, after the change, the Contract would not qualify as life insurance
under federal tax laws as interpreted by ML of New York.
24
<PAGE> 29
A change in the death benefit option may cause a Contract which is not a
modified endowment contract to become a modified endowment contract. In such a
case, ML of New York will not process the change until the contract owner
confirms in writing his or her intent to convert the Contract to a modified
endowment contract. For a discussion of the tax issues associated with a change
in the death benefit option, see "Tax Considerations" on page 31.
PAYMENT OF DEATH BENEFIT PROCEEDS
ML of New York will generally pay the death benefit proceeds to the beneficiary
within seven days after all the information needed to process the payment is
received at its Service Center. ML of New York will add interest from the date
of the last surviving insured's death to the date of payment at an annual rate
of at least 4%. The beneficiary may elect to receive the proceeds either in a
single payment or under one or more income plans described on page 29.
Payment may be delayed if the Contract is being contested or under the
circumstances described in "Using the Contract" on page 26 and "Other Contract
Provisions" on page 28. If a delay is necessary and death of the last surviving
insured occurs prior to the end of the guarantee period, ML of New York may
delay payment of any excess of the death benefit over the face amount. After the
guarantee period has expired, ML of New York may delay payment of the entire
death benefit.
RIGHTS TO CANCEL OR EXCHANGE
"Free Look" Period. A contract owner may cancel his or her Contract during the
"free look" period by returning it for a refund. Generally, the "free look"
period ends the later of ten days after the Contract is received, 45 days after
the contract owner completes the application or ten days after ML of New York
mails or personally delivers to the contract owner the Notice of Withdrawal
Right. To cancel the Contract during the "free look" period, the contract owner
must mail or deliver the Contract to ML of New York's Service Center or to the
registered representative who sold it. ML of New York will refund the payment
made without interest. If cancelled, ML of New York may require the contract
owner to wait six months before applying again.
Exchanging the Contract. Contract owners may exchange their Contract at any
time for a joint and last survivor contract with benefits that do not vary with
the investment results of a separate account. A request to exchange must be made
in writing. To exchange, the original Contract must be returned to ML of New
York's Service Center. The exchange will not require evidence of insurability.
The new contract will have the same owner, insureds and beneficiary as those of
the original Contract on the date of the exchange. The new contract will also
have the same death benefit and the same net amount at risk as this Contract at
the time of exchange and will have payments which are based on the same issue
ages, sexes, and underwriting classes of the insureds. Any debt will be carried
over to the new contract. For a discussion of the tax consequences of exchanging
the Contract, see "Tax Considerations" on page 31.
REPORTS TO CONTRACT OWNERS
After the end of each processing period, contract owners will be sent a
statement of the allocation of their investment base, death benefit, cash value,
any debt and, if there has been a change, the face amount, the guarantee period
and the additional insurance rider face amount. All figures will be as of the
end of the immediately preceding processing period. The statement will show the
amounts deducted from or added to the investment base during the processing
period. The statement will also include any other information that may be
currently required by New York.
Contract owners will receive confirmation of all financial transactions. Such
confirmations will show the price per unit of each of the contract owner's
investment divisions, the number of units a contract owner has in the investment
division and the value of the investment division computed by multiplying the
quantity of units by the price per unit. (See "Net Rate of Return for an
Investment
25
<PAGE> 30
Division" on page 36.) 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 Funds, as
required by the Investment Company Act of 1940.
CMA Account Reporting. Contract owners who have the CMA Insurance Service will
have certain Contract information included as part of their regular monthly CMA
account statement. It will list the investment base allocation, death benefit,
cash value, debt and any CMA account activity affecting the Contract during the
month.
MORE ABOUT THE CONTRACT
USING THE CONTRACT
Ownership. The contract owner is usually one of the insureds, unless another
owner has been named in the application. The contract owner has all rights and
options described in the Contract.
The contract owner may want to name a contingent owner. If the contract owner
dies before the last surviving insured, the contingent owner will own the
contract owner's interest in the Contract and have all of the contract owner's
rights. If the contract owner doesn't name a contingent owner, the contract
owner's estate will own the contract owner's interest in the Contract upon the
owner's death.
If there is more than one contract owner, ML of New York will treat the owners
as joint tenants with rights of survivorship unless the ownership designation
provides otherwise. The owners must exercise their rights and options jointly,
except that any one of the owners may reallocate the Contract's investment base
by phone if the owner provides the personal identification number as well as the
Contract number. One contract owner must be designated, in writing, to receive
all notices, correspondence and tax reporting to which contract owners are
entitled under the Contract.
Changing the Owner. During either insured's lifetime, with the consent of any
irrevocable beneficiary, 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 31.)
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 31.
Naming Beneficiaries. ML of New York will pay the primary beneficiary the death
benefit proceeds of the Contract on the last surviving insured's death. If the
primary beneficiary has died, ML of New York will pay the contingent
beneficiary. If no contingent beneficiary is living, ML of New York will pay the
estate of the last surviving insured.
A contract owner may name more than one person as primary or contingent
beneficiaries. ML of New York will pay proceeds in equal shares to the surviving
beneficiaries unless the beneficiary designation provides otherwise.
A contract owner has the right to change beneficiaries during either insured's
lifetime, unless the primary beneficiary designation has been made irrevocable.
If the designation is irrevocable, the primary beneficiary must consent when
certain rights and options are exercised under this Contract.
26
<PAGE> 31
If the beneficiary is changed, the change will take effect as of the day the
notice is signed, but will not affect any payment made or action taken by ML of
New York before receipt of the notice of the change at the Service Center.
Maturity Proceeds. The maturity date is the contract anniversary nearest the
younger insured's 100th birthday. On the maturity date, ML of New York will pay
the net cash surrender value to the contract owner, provided either insured is
still living at that time 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 or Fund shares because:
- the New York Stock Exchange is closed, other than for a customary weekend
or holiday; or
- trading on the New York Stock Exchange is restricted by the Securities
and Exchange Commission; or
- the Securities and Exchange Commission declares that an emergency exists
such that it is not reasonably practical to dispose of securities held in
the Separate Account or to determine the value of their assets.
SOME ADMINISTRATIVE PROCEDURES
Described below are certain administrative procedures. ML of New York reserves
the right to modify them or to eliminate them. For administrative and tax
purposes, ML of New York may from time to time require that specific forms be
completed in order to accomplish certain transactions, including surrenders.
Personal Identification Number. ML of New York will send each contract owner a
four-digit personal identification number ("PIN") shortly after the Contract is
placed in force and before the end of the "free look" period. This number must
be given when the contract owner calls the Service Center to get information
about the Contract, to make a loan (if an authorization is on file), or to make
other requests. Unless the contract owner has preallocated the Contract's
investment base, the personal identification number will be accompanied by a
notice reminding the contract owner that all of the investment base is in the
division investing in the Money Reserve Portfolio, and that this allocation may
be changed by calling or writing to the Service Center. (See "Changing the
Allocation" on page 17.)
Reallocating the Investment Base. Contract owners can reallocate their
investment base either in writing in a form satisfactory to ML of New York or by
phone. If the reallocation is requested by phone, contract owners must give
their personal identification number as well as their Contract number. ML of New
York will give a confirmation number over the phone and then follow up in
writing.
Requesting a Loan. A loan may be requested in writing in a form satisfactory to
ML of New York or, if all required authorization forms are on file, by phone.
Once the authorization has been received at the Service Center, contract owners
can call the Service Center, give their Contract number, name and personal
identification number, and tell ML of New York the loan amount and from which
divisions the loan should be transferred.
Upon request, ML of New York will wire the funds to the contract owner's account
at the financial institution named on the contract owner's authorization. ML of
New York will generally wire the funds within two working days of receipt of the
request. If the contract owner has the CMA Insurance Service, funds may be
transferred directly to that CMA account.
27
<PAGE> 32
Requesting Partial Withdrawals. Beginning in contract year 16, partial
withdrawals may be requested in writing in a form satisfactory to ML of New
York. A contract owner may request a partial withdrawal by phone if all required
phone authorization forms are on file. Once the authorization has been received
at the Service Center, contract owners can call the Service Center, give their
Contract number, name and personal identification number, and tell ML of New
York how much to withdraw and from which investment divisions.
Upon request, ML of New York will wire the funds to the contract owner's account
at the financial institution named on the contract owner's authorization. ML of
New York will generally wire the funds within two working days of receipt of the
request. If the contract owner has the CMA Insurance Service, funds may be
transferred directly to that CMA account.
Telephone Requests. A telephone request for a loan, partial withdrawal or a
reallocation received before 4 p.m. (ET) generally will be processed the same
day. A request received at or after 4 p.m. (ET) will be processed the following
business day. ML of New York reserves the right to change or discontinue
telephone transfer procedures.
ML of New York will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. These procedures may include, but are not
limited to, possible recording of telephone calls and obtaining appropriate
identification before effecting any telephone transactions. ML of New York will
not be liable for following telephone instructions that it reasonably believes
to be genuine.
OTHER CONTRACT PROVISIONS
In Case of Errors in the Application. If an age or sex given in the application
is wrong, it could mean that the face amount or any other Contract benefit is
wrong. ML of New York will pay what the payments made would have bought for the
guarantee period at the true age or sex.
Incontestability. ML of New York will rely on statements made in the
applications. Legally, they are considered representations, not warranties. ML
of New York can contest the validity of a Contract if any material misstatements
are made in the initial application or any application for reinstatement. ML of
New York can also contest the validity of any change in face amount due to a
change in death benefit option if any material misstatements are made in any
application required for the change. ML of New York can also contest any amount
of any death benefit which wouldn't be payable except for the fact that an
increase in the additional insurance rider face amount which requires evidence
of insurability was requested if any material misstatements are made in any
application required for the increase.
ML of New York will not contest the validity of a Contract after it has been in
effect during the lifetime of either insured for two years from the date of
issue or the date of any reinstatement. A change in face amount due to a change
in the death benefit option which requires evidence of insurability won't be
contested after the change has been in effect during the lifetime of either
insured for two years from the date of the change. Nor will ML of New York
contest any amount of death benefit attributable to an increase in the
additional insurance rider face amount which requires evidence of insurability
after the increase has been in effect during the lifetime of either insured for
two years from the date of the change.
At the end of the second contract year, ML of New York will mail the contract
owner a notice requesting that he or she tell ML of New York if either insured
has died. Failure to tell ML of New York of the death of either insured will not
avoid a contest if ML of New York has grounds to do so, even if the Contract is
still in force.
Payment in Case of Suicide. If either insured commits suicide within two years
from the Contract's issue date or the date of any reinstatement, ML of New York
will pay only a limited death benefit and then terminate the Contract. The
benefit will be equal to the amount of the payments made, reduced by any debt.
Within 90 days of the death of the first insured, the owner may elect to apply
the amount of the limited benefit to a single life contract on the life of the
surviving insured, subject to the following provisions:
- The new contract's issue date will be the date of death of the deceased
insured.
- The insurance age will be surviving insured's attained age on the new
contract's issue date.
28
<PAGE> 33
- No medical examination or other evidence of insurability will be required
for the new contract.
- The face amount of the new contract will be determined by applying the
limited benefit amount as a single payment under the new contract. The
face amount of the new contract may not exceed the face amount of this
Contract.
- A written request for a new contract must be received at the Service
Center.
- The new contract cannot involve any other life.
- Additional benefits or riders available on this Contract will be
available with the new contract only with ML of New York's consent.
- The new contract will be issued at ML of New York's then current rates
for the surviving insured's attained age, based on the underwriting class
assigned to the surviving insured when this Contract was underwritten. The
underwriting class for the new contract may differ from that of this
Contract.
- If the amount of insurance that would be purchased under the new contract
falls below the minimum insurance amounts currently allowed, this option
will not be available.
If either insured commits suicide within two years of the effective date of a
change in the death benefit option requiring evidence of insurability or of the
effective date of an increase in the additional insurance rider face amount
requiring evidence of insurability, any amount of death benefit which would not
be payable except for the fact that the face amount was increased will be
limited to the amount of cost of insurance deductions made for the increase.
Establishing Survivorship. If ML of New York is unable to determine which of
the insureds was the last survivor on the basis of the proofs of death provided,
it will consider insured No. 1 as designated in the application to be the last
surviving insured.
Contract Changes -- Applicable Federal Tax Law. To receive the tax treatment
accorded to life insurance under federal income tax law, the Contract must
qualify initially and continue to qualify as life insurance under the Internal
Revenue Code or successor law. Therefore, to maintain this qualification to the
maximum extent of the law, ML of New York reserves the right to return any
additional payments that would cause the Contract to fail to qualify as life
insurance under applicable tax law as interpreted by ML of New York. Further, ML
of New York reserves the right to make changes in the Contract or its riders or
to make distributions from the Contract to the extent it is necessary to
continue to qualify the Contract as life insurance. Any changes will apply
uniformly to all Contracts that are affected and contract owners will be given
advance written notice of such changes.
Policy Split Rider. This rider allows the contract owner to split the Contract
into two new individual contracts upon divorce of the insureds or if certain
federal tax law changes occur. Certain conditions described in the rider,
including evidence of insurability of both insureds, must be met before the
rider's benefit can be exercised. For more information about this rider and the
conditions and rules relating to the exercise of any rights under the rider, the
contract owner should call the Service Center. The Service Center can also
provide the contract owner with a prospectus for the individual contract. For a
discussion of the possible tax consequences of splitting the Contract, see "Tax
Considerations" on page 31.
INCOME PLANS
ML of New York offers several income plans to provide for payment of the death
benefit proceeds to the beneficiary. The contract owner may choose one or more
income plans at any time during the lifetime of either insured. If no plan has
been chosen when the last surviving insured dies, the beneficiary has one year
to apply the death benefit proceeds either paid or payable to that beneficiary
to one or more of the plans. The contract owner may also choose one or more
income plans if the
29
<PAGE> 34
Contract is cancelled or a partial withdrawal is taken. ML of New York's
approval is needed for any plan where any income payment would be less than
$100. Payments under these plans do not depend on the investment results of a
separate account.
Income plans include:
Annuity Plan. An amount can be used to purchase a single premium
immediate annuity.
Interest Payment. Amounts can be left with ML of New York to earn
interest at an annual rate of at least 3%. Interest payments can be made
annually, semi-annually, quarterly or monthly.
Income for a Fixed Period. Payments are made in equal installments
for a fixed number of years.
Income for Life. Payments are made in equal monthly installments
until death of a named person or end of a designated period, whichever is
later. The designated period may be for 10 or 20 years.
Income of a Fixed Amount. Payments are made in equal installments
until proceeds applied under the option and interest on unpaid balance at
not less than 3% per year are exhausted.
Joint Life Income. Payments are made in monthly installments as long
as at least one of two named persons is living. While both are living, full
payments are made. If one dies, payments at two-thirds of the full amount
are made. Payments end completely when both named persons die.
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.
Generally, the Contracts offered by this Prospectus are based on mortality
tables that distinguish between men and women. As a result, the Contract pays
different benefits to men and women of the
30
<PAGE> 35
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 principal underwriter of other variable life insurance and
variable annuity contracts issued by ML of New York, as well as variable life
insurance and variable annuity contracts issued by Merrill Lynch Life Insurance
Company, an affiliate of ML of New York. MLPF&S also acts as principal
underwriter of certain mutual funds managed by MLAM, the investment adviser for
the Series Fund and the Variable Series Funds.
Contracts are sold by registered representatives of MLPF&S who are also licensed
through Merrill Lynch Life Agency, Inc. as insurance agents for ML of New York.
ML of New York has entered into a distribution agreement with MLPF&S and a
companion sales agreement with Merrill Lynch Life Agency, Inc. through which
agreements the Contracts and other variable life insurance contracts issued
through the Separate Account are sold and the registered representatives are
compensated by Merrill Lynch Life Agency, Inc. and/or MLPF&S.
The maximum commissions ML of New York will pay to the applicable insurance
agency to be used to pay commissions to registered representatives are as
follows: 55% of the target premium under the Contract; plus 3% of payments in
excess of the target premium, up to an amount of payments equal to ten base
premiums; plus 1.5% of payments thereafter. Commissions may be paid in the form
of non-cash compensation.
The amounts paid under the distribution and sales agreements for the Separate
Account for the years ended December 31, 1996, December 31, 1995 and December
31, 1994 were $263,503, $162,482, and $140,551, respectively.
MLPF&S may arrange for sales of the Contract by other broker-dealers who are
registered under the Securities Exchange Act of 1934 and are members of the
NASD. Registered representatives of these other broker-dealers may be
compensated on a different basis than MLPF&S registered representatives.
TAX CONSIDERATIONS
Definition of Life Insurance. In order to qualify as a life insurance contract
for federal tax purposes, the Contract must meet the definition of a life
insurance contract which is set forth in Section 7702 of the Internal Revenue
Code of 1986, as amended (the "Code"). The manner in which Section 7702 should
be applied to certain features of the Contract offered in this Prospectus is not
directly addressed by Section 7702. Nevertheless, ML of New York believes it is
reasonable to conclude that the Contract will meet the Section 7702 definition
of a life insurance contract, so that:
- the death benefit should be fully excludable from the gross income of the
beneficiary under Section 101(a)(1) of the Code; and
- the contract owner should not be considered in constructive receipt of
the cash value, including any increases, until actual cancellation of the
Contract (see "Tax Treatment of Loans and Other Distributions" on page
32).
In the absence of final regulations or other pertinent interpretations of
Section 7702, however, there is necessarily some uncertainty as to whether a
Contract will meet the statutory life insurance contract definition,
particularly if it insures substandard risks. If a Contract were determined not
to be a life insurance contract for purposes of Section 7702, such Contract
would not provide most of the tax advantages normally provided by a life
insurance contract.
31
<PAGE> 36
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 29.)
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 Funds, intends to comply
with these requirements. Each Fund is obligated to comply with the
diversification requirements prescribed by the Treasury Department.
In connection with the issuance of the temporary diversification regulations,
the Treasury Department stated that it anticipates the issuance of regulations
or rulings prescribing the circumstances in which an owner's control of the
investments of a separate account may cause the owner, rather than the insurance
company, to be treated as the owner of the assets in the account. If the
contract owner is considered the owner of the assets of the Separate Account,
income and gains from the account would be included in the owner's gross income.
The ownership rights under the Contract offered in this Prospectus are similar
to, but different in certain respects from, those described by the Internal
Revenue Service in rulings in which it determined that the owners were not
owners of separate account assets. For example, the owner of the Contract has
additional flexibility in allocating payments and cash values. These differences
could result in the owner being treated as the owner of the assets of the
Separate Account. In addition, ML of New York does not know what standards will
be set forth in the regulations or rulings which the Treasury has stated it
expects to be issued. ML of New York therefore reserves the right to modify the
Contract as necessary to attempt to prevent the contract owner from being
considered an 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. A
modified endowment contract is any contract which satisfies the definition of
life insurance set forth in Section 7702 of the Code but fails to meet the 7-pay
test. This test applies a cumulative limit on the amount of payments that can be
made into a contract each year in the first seven contract years in order to
avoid modified endowment treatment. In effect, compliance with the 7-pay test
requires that contracts be purchased with a higher face amount for a given
initial payment than would otherwise be required, at a minimum, to meet the
definition of life insurance. Contracts that do not satisfy the 7-pay test,
including contracts which initially satisfied the 7-pay test but later failed
the test, will be considered modified endowment contracts subject to the
following distribution rules. Loans and partial withdrawals from, as well as
collateral assignments of, modified endowment contracts will be treated as
distributions to the contract owner. Furthermore, if the loan interest is
capitalized by adding the amount due to the balance of the loan, the amount of
the capitalized interest will be treated as a distribution which may be subject
to income tax, to the extent of the income in the contract. All pre-death
distributions (including loans, partial withdrawals, collateral assignments,
capitalized interest, and complete surrenders) from these contracts will be
included in gross income on an income-first basis to the extent of any income in
the contract (the cash value less the contract owner's investment in the
contract) immediately before the distribution.
The law also imposes a 10% penalty tax on pre-death distributions (including
loans, capitalized interest, collateral assignments, partial withdrawals and
complete surrenders) from modified endowment contracts to the extent they are
included in income, unless such amounts are distributed on or after the taxpayer
attains age 59 1/2, because the taxpayer is disabled, or as substantially equal
periodic payments over the taxpayer's life (or life expectancy) or over the
joint lives (or joint life expectancies) of the taxpayer and his or her
beneficiary.
Contracts that comply with the 7-pay test will not be classified as modified
endowment contracts. Loans from contracts that are not modified endowment
contracts will be considered indebtedness of
32
<PAGE> 37
an owner and no part of a loan will constitute income to the owner. In addition,
pre-death distributions from these contracts will generally not be included in
gross income to the extent that the amount received does not exceed the owner's
investment in the contract. A lapse of such a contract with an outstanding loan
will result in the treatment of the loan cancellation (including the accrued
interest) as a distribution under the contract and may be taxable.
Compliance with the 7-pay test does not imply or guarantee that only seven
payments will be required for the initial death benefit to be guaranteed for
life. Making additional payments or reducing the benefits (for example, through
a partial withdrawal, a change in death benefit option or terminating additional
benefits under a rider) may violate the 7-pay test or, at a minimum, reduce the
amount that may be paid in the future under the 7-pay test. Further, reducing
the death benefit at any time will require retroactive retesting and will
probably result in a failure of the 7-pay test regardless of any efforts by ML
of New York to provide a payment schedule that will not violate the 7-pay test.
Any contract received in an exchange for a modified endowment contract will be
considered a modified endowment contract and will be subject to the tax
treatment accorded to modified endowment contracts that is described in the
Prospectus. A contract that is not originally classified as a modified endowment
contract can become so classified if there is a reduction in benefits at any
time (including, for example, by a decrease in the additional insurance rider
face amount or a change in death benefit option) or if a material change is made
in the contract at any time. (A material change includes, but is not limited to,
a change in the benefits that was not reflected in a prior 7-pay test
computation, such as a change in death benefit option.) This could result from
additional payments made after 7-pay test calculations done at the time of the
contract exchange. Contract owners may choose not to exercise their right to
make additional payments, in order to preserve their contract's current tax
treatment.
If a contract becomes a modified endowment contract, distributions that occur
during the contract year it becomes a modified endowment contract and any
subsequent contract year will be taxed as distributions from a modified
endowment contract. In addition, distributions from a contract within two years
before it becomes a modified endowment contract will be taxed in this manner.
This means that a distribution made from a contract that is not a modified
endowment contract could later become taxable as a distribution from a modified
endowment contract.
Special Treatment of Loans on the Contract. If there is any borrowing against
the Contract, whether a modified endowment contract or not, the interest paid on
loans generally is not tax deductible.
Aggregation of Modified Endowment Contracts. In the case of a pre-death
distribution (including a loan, partial withdrawal, capitalized interest,
collateral assignment or complete surrender) from a contract that is treated as
a modified endowment contract under the rules described above, a special
aggregation requirement may apply for purposes of determining the amount of the
income on the contract. Specifically, if ML of New York or any of its affiliates
issues to the same contract owner more than one modified endowment contract
within a calendar year, then for purposes of measuring the income on the
contract with respect to a distribution from any of those contracts, the income
on the contract for all those contracts will be aggregated and attributed to
that distribution.
Tax Treatment of Policy Split. This rider permits a Contract to be split into
two other individual contracts upon the occurrence of a divorce of joint
insureds or certain changes in federal estate tax law. A policy split could have
adverse tax consequences; for example, it is not clear whether a policy split
will be treated as a nontaxable exchange under Sections 1031 through 1043 of the
Code. If a policy split is not treated as a nontaxable exchange, a split could
result in the recognition of taxable income in an amount up to any gain in the
Contract at the time of the split. In addition, it is not clear whether the
individual contracts that result from a policy split would in all circumstances
be treated as life insurance contracts for federal income tax purposes and, if
so treated, whether the individual contracts would be classified as modified
endowment contracts. (See "Tax Treatment of Loans and Other Distributions" on
page 32.) Before the contract owner exercises rights provided by the policy
33
<PAGE> 38
split rider, it is important that he or she consult with a competent tax advisor
regarding the possible consequences of a policy split.
Other Tax Considerations. The transfer of the Contract or the designation of a
beneficiary may have federal, state, and/or local transfer and inheritance tax
consequences, including the imposition of gift, estate and generation skipping
transfer taxes. For example, the transfer of the Contract to, or the designation
as beneficiary of, or the payment of proceeds to, a person who is assigned to a
generation which is two or more generations below the generation assignment of
the contract owner, may have generation skipping transfer tax considerations
under Section 2601 of the Code.
The individual situation of each contract owner or beneficiary will determine
the extent, if any, to which federal, state and local transfer taxes may be
imposed. The contract owner should consult with a tax advisor for specific
information in connection with these taxes.
The particular situation of each contract owner or beneficiary will determine
how ownership or receipt of contract proceeds will be treated for purposes of
federal estate tax as well as state and local estate, inheritance, generation
skipping and other taxes.
Other Transactions. Changing the contract owner or an additional insurance
rider's face amount may have tax consequences. Exchanging this Contract for
another involving the same insureds should have no federal income tax
consequences if there is no debt and no cash or other property is received,
according to Section 1035(a)(1) of the Code. In addition, exchanging this
Contract for more than one contract, or exchanging this Contract and one or more
other contracts for a single contract, in certain circumstances, may be treated
as an exchange under Section 1035, as long as all such contracts involve the
same insured(s). Any new contract would have to satisfy the 7-pay test from the
date of the exchange to avoid characterization as a modified endowment contract.
An exchange for a new contract or contracts may, however, result in a loss of
grandfathering status for statutory changes made after the old contract or
contracts were issued. Changing the insured under this Contract may not be
treated as an exchange under Section 1035, but rather as a taxable exchange. A
tax advisor should be consulted before effecting any exchange, since even if an
exchange is within Section 1035(a), the exchange may have tax consequences other
than immediate recognition of income.
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.
Ownership of This Contract by Non-Natural Persons. The above discussion of the
tax consequences arising from the purchase, ownership and transfer of the
Contract has assumed that the owner of the Contract consists of one or more
individuals. Organizations exempt from taxation under Section 501(a) of the Code
may be subject to additional or different tax consequences with respect to
transactions such as contract loans. Further, organizations purchasing Contracts
covering the life of an individual who is an officer or employee of, or is
financially interested in, the taxpayer's trade or business, 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 advisor. Although this tax discussion is
based on ML of New York's understanding of federal income tax laws as they are
currently interpreted, it can't guarantee that those laws or interpretations
will remain unchanged.
34
<PAGE> 39
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 results in a significantly higher corporate income
tax liability for ML of New York in early contract years. ML of New York makes a
charge to compensate ML of New York for the anticipated higher corporate income
taxes that result from the receipt of payments under a Contract. (See "Contract
Loading" on page 18.)
Currently, ML of New York makes no charges to the Separate Account for any
federal, state or local taxes that it incurs that may be attributable to the
Separate Account or to the Contracts. ML of New York, however, reserves the
right to make a charge for assessments of federal premium taxes or federal,
state or local excise, profits or income taxes measured by or attributable to
the receipt of premiums.
REINSURANCE
ML of New York intends to reinsure some of the risks assumed under the
Contracts.
MORE ABOUT THE SEPARATE ACCOUNT AND ITS DIVISIONS
ABOUT THE SEPARATE ACCOUNT
The Separate Account is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940 as a unit investment trust. This
registration does not involve any supervision by the Securities and Exchange
Commission of ML of New York's management or the management of the Separate
Account. The Separate Account is also governed by the laws of the State of New
York, ML of New York's state of domicile.
ML of New York owns all of the assets of the Separate Account. These assets are
held separate and apart from all of ML of New York's other assets. ML of New
York maintains records of all purchases and redemptions of shares of the Funds
and units of the Zero Trusts by each of the investment divisions.
CHANGES WITHIN THE ACCOUNT
ML of New York may from time to time make additional investment divisions
available to contract owners. These divisions will invest in investment
portfolios ML of New York finds suitable for the Contracts. ML of New York also
has the right to eliminate investment divisions from the Separate Account, to
combine two or more investment divisions, or to substitute a new portfolio for
the portfolio in which an investment division invests. A substitution may become
necessary if, in ML of New York's judgment, a portfolio no longer suits the
purposes of the Contracts. This may happen due to a change in laws or
regulations or in a portfolio's investment objectives or restrictions, or
because the portfolio is no longer available for investment, or for some other
reason. ML of New York would get any required prior approval from the New York
State Insurance Department and the Securities and Exchange Commission before
making such a substitution. It would also get any other required approvals
before making such a substitution.
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;
35
<PAGE> 40
- restrict or eliminate any voting rights of contract owners, or other
persons who have voting rights as to the Separate Account; and
- combine the Separate Account with other separate accounts.
NET RATE OF RETURN FOR AN INVESTMENT DIVISION
Each investment division has a distinct unit value (also referred to as "price"
or "separate account index" in reports furnished to the contract owner by ML of
New York). When payments or other amounts are allocated to an investment
division, a number of units are purchased based on the value of a unit of the
investment division as of the end of the valuation period during which the
allocation is made. When amounts are transferred out of, or deducted from, an
investment division, units are redeemed in a similar manner. A valuation period
is each business day together with any non-business days before it. A business
day for an investment division is any day the New York Stock Exchange is open or
the SEC requires that the net asset value of an investment division be
determined.
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 Funds, shares are valued at net asset value and
reflect reinvestment of any dividends or capital gains distributions declared by
the 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 FUNDS
Buying and Redeeming Shares. The 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 Fund shares held in the
Separate Account. As the owner, it has the right to vote on any matter put to
vote at the Funds' shareholder meetings. However, ML of New York will vote all
Fund shares attributable to Contracts according to instructions received from
contract owners. Shares attributable to Contracts for which no voting
instructions are received will be voted in the same proportion as shares in the
respective 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 Fund 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 which a
contract owner may give voting instructions 90 days or less before each Fund
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.
36
<PAGE> 41
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, the AIM V.I. Funds, the
Alliance Fund, and the MFS Trust are sold to separate accounts of ML of New
York, Merrill Lynch Life Insurance Company and insurance companies not
affiliated with ML of New York or Merrill Lynch & Co., Inc. to fund benefits
under variable life insurance and variable annuity contracts, and may be sold to
certain qualified plans.
It is possible that differences might arise between ML of New York's Separate
Account and one or more of the other separate accounts which invest in the
Series Fund or the Variable Series Funds. In some cases, it is possible that the
differences could be considered "material conflicts". Such a "material conflict"
could also arise due to changes in the law (such as state insurance law or
federal tax law) which affect these different variable life and variable annuity
insurance separate accounts. It could also arise by reason of difference in
voting instructions from ML of New York's contract owners and those of the other
insurance companies, or for other reasons. ML of New York will monitor events to
determine how to respond to such conflicts. If a conflict occurs, ML of New York
may be required to eliminate one or more investment divisions of the Separate
Account which invest in the Funds or substitute a new portfolio for a portfolio
in which a division invests. In responding to any conflict, ML of New York will
take the action which it believes necessary to protect its contract owners,
consistent with applicable legal requirements.
Administration Services Agreements. AIM V.I. Funds has entered into an
Administrative Services Agreement with AIM, pursuant to which AIM has agreed to
provide certain accounting and other administrative services to the AIM V.I.
Funds, including the services of a principal financial officer and related
staff. As compensation to AIM for its services under the Administrative Services
Agreement, the AIM V.I. Funds reimburse AIM for expenses incurred by AIM or its
affiliates in connection with such services. AIM has entered into an agreement
with ML of New York with respect to administrative services for the AIM V.I.
Funds in connection with the Contracts. Under this agreement, AIM pays
compensation to ML of New York in an amount equal to a percentage of the average
net assets of the AIM V.I. Funds attributable to the Contracts.
Alliance Fund Distributors, Inc. ("AFD"), an affiliate of Alliance, has entered
into an agreement with ML of New York with respect to administrative services
for the Alliance Fund in connection with the Contracts. Under this agreement,
AFD pays compensation to ML of New York in an amount equal to a percentage of
the average net assets of the Alliance Fund attributable to the Contracts.
MFS has entered into an agreement with MLIG with respect to administrative
services for the MFS Trust in connection with the Contracts and certain
contracts issued by Merrill Lynch Life Insurance Company. Under this agreement,
MFS pays compensation to MLIG in an amount equal to a percentage of the average
net assets of the MFS Trust attributable to such contracts.
37
<PAGE> 42
THE ZERO TRUSTS
The 16 Zero Trusts:
<TABLE>
<CAPTION>
Targeted Rate of Return to
Maturity as
Zero Trust Maturity Date of April 16, 1997
- ----------- ------------------ --------------------------
<C> <S> <C>
1998 February 15, 1998 4.35%
1999 February 15, 1999 5.11%
2000 February 15, 2000 5.28%
2001 February 15, 2001 5.33%
2002 February 15, 2002 5.46%
2003 August 15, 2003 5.57%
2004 February 15, 2004 5.64%
2005 February 15, 2005 5.59%
2006 February 15, 2006 5.45%
2007 February 15, 2007 5.56%
2008 February 15. 2008 5.83%
2009 February 15, 2009 5.86%
2010 February 15, 2010 5.94%
2011 February 15, 2011 5.92%
2013 February 15, 2013 6.00%
2014 February 15, 2014 6.09%
</TABLE>
Targeted Rate of Return to Maturity
Because the underlying securities in the Zero Trusts will grow to their face
value on the maturity date, it is possible to estimate a compound rate of growth
to maturity for the Zero Trust units.
But because the units are held in the Separate Account, the asset charge and the
trust charge (described in "Charges to the Separate Account" on page 19) must be
taken into account in estimating a targeted rate of return for the Separate
Account. The targeted rate of return to maturity for the Separate Account
depends on the compound rate of growth adjusted for these charges. It does not,
however, represent the actual return on a payment ML of New York might receive
under the Contract on that date, since it does not reflect the charges for
contract loading deducted from payments to a Contract, charges for cost of
insurance and rider charges and any net loan cost deducted from a Contract's
investment base.
Since the value of the Zero Trust units will vary daily to reflect the market
value of the underlying securities, the compound rate of growth to maturity for
the Zero Trust units and the targeted rate of return to maturity for the
Separate Account will vary correspondingly.
38
<PAGE> 43
ILLUSTRATIONS
ILLUSTRATIONS OF DEATH BENEFITS, INVESTMENT BASE, NET CASH SURRENDER VALUES AND
ACCUMULATED PAYMENTS
The tables on pages 41 through 44 demonstrate the way in which the Contract
works. The tables are based on the following ages, face amounts, payments and
guarantee periods and shows values based upon both current and maximum mortality
charges.
1. The illustration on page 41 is for a Contract issued to a male age
65 and a female age 60 both in the standard non-smoker underwriting class
with annual payments of $39,890 through contract year 37, an initial face
amount of $1.5 million, an initial guarantee period of 7.5 years and
coverage under death benefit option 1. It assumes current mortality
charges.
2. The illustration on page 42 is for a Contract issued to a male age
65 and a female age 60 both in the standard non-smoker underwriting class
with annual payments of $39,890 through contract year 37, an initial face
amount of $1.5 million, an initial guarantee period of 7.5 years and
coverage under death benefit option 1. It assumes maximum mortality
charges.
3. The illustration on page 43 is for a Contract issued to a male age
65 and a female age 60 both in the standard non-smoker underwriting class
with annual payments of $141,410 through contract year 32, an initial face
amount of $1.5 million, an initial guarantee period of 14 years and
coverage under death benefit option 2. It assumes current mortality
charges.
4. The illustration on page 44 is for a Contract issued to a male age
65 and a female age 60 both in the standard non-smoker underwriting class
with annual payments of $141,410 through contract year 32, an initial face
amount of $1.5 million, an initial guarantee period of 14 years and
coverage under death benefit option 2. It assumes maximum mortality
charges.
The tables show how the death benefit, investment base and net cash surrender
value may vary over an extended period of time assuming hypothetical rates of
return (i.e., investment income and capital gains and losses, realized or
unrealized) equivalent to constant gross annual rates of 0%, 6% and 12%.
The death benefit, investment base and net cash surrender value for a Contract
would be different from those shown if the actual rates of return averaged 0%,
6% and 12% over a period of years, but also fluctuated above or below those
averages for individual contract years.
The amounts shown for the death benefit, investment base and net cash surrender
value as of the end of each contract year take into account the daily asset
charge in the Separate Account equivalent to .90% (annually at the beginning of
the year) of assets attributable to the Contracts at the beginning of the year.
The amounts shown in the tables also assume an additional charge of .52%. This
charge assumes that investment base is allocated equally among all investment
divisions and is based on the 1996 expenses (including monthly advisory fees)
for the Funds and the current trust charge. This charge also reflects expense
reimbursements made in 1996 to certain portfolios by the investment adviser to
the respective portfolio. These reimbursements amounted to .06%, .07%, .16%,
.48%, and .28% of the average daily net assets of the Developing Capital Markets
Focus Fund, the Natural Resources Portfolio, the MFS Emerging Growth Series, the
MFS Research Series, and the Premier Growth Portfolio, respectively. (See
"Charges to Fund Assets" on page 19.) The actual charge under a Contract for
Fund 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 .52%
charge described above, the gross annual rates of investment return of 0%, 6%
and 12% correspond to net annual rates of -1.42%, 4.53%, and 10.48%,
respectively. The gross returns are before any deductions and should not be
compared to rates which are after deduction of charges.
39
<PAGE> 44
The hypothetical returns shown on the tables are without any income tax charges
that may be attributable to the Separate Account in the future, although they do
reflect the charge for federal taxes included in the contract loading. (See
"Contract Loading" on page 18.) In order to produce after tax returns of 0%, 6%
and 12%, the Funds would have to earn a sufficient amount in excess of 0% or 6%
or 12% to cover any tax charges attributable to the Separate Account.
The second column of the tables shows the amount which would accumulate if an
amount equal to the payments were invested to earn interest (after taxes) at 5%
compounded annually.
ML of New York will furnish upon request a personalized illustration reflecting
the proposed insureds' ages, face amount and the payment amounts requested. The
illustration will also use current cost of insurance rates and will assume that
the proposed insureds are in a standard non-smoker underwriting class.
40
<PAGE> 45
JOINT INSUREDS: FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
STANDARD NON-SMOKER UNDERWRITING CLASS
ANNUAL PAYMENTS OF $39,890 FOR 37 YEARS
FACE AMOUNT(1): $1.5 MILLION INITIAL GUARANTEE PERIOD: 7.5 YEARS
DEATH BENEFIT OPTION 1
BASED ON CURRENT MORTALITY CHARGES
<TABLE>
<CAPTION>
TOTAL
PAYMENTS END OF YEAR
MADE PLUS DEATH BENEFIT(3)(7)
INTEREST AT ASSUMING HYPOTHETICAL GROSS
5% AS ANNUAL INVESTMENT RETURN OF
OF END OF ------------------------------------------------
CONTRACT YEAR PAYMENTS(2)(6) YEAR 0% 6% 12%
- --------------------- -------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1................... $ 39,890 $ 41,885 $ 1,500,000 $ 1,500,000 $ 1,500,000
2................... 39,890 85,864 1,500,000 1,500,000 1,500,000
3................... 39,890 132,042 1,500,000 1,500,000 1,500,000
4................... 39,890 180,529 1,500,000 1,500,000 1,500,000
5................... 39,890 231,440 1,500,000 1,500,000 1,500,000
6................... 39,890 284,897 1,500,000 1,500,000 1,500,000
7................... 39,890 341,026 1,500,000 1,500,000 1,500,000
8................... 39,890 399,962 1,500,000 1,500,000 1,500,000
9................... 39,890 461,845 1,500,000 1,500,000 1,500,000
10................... 39,890 526,822 1,500,000 1,500,000 1,500,000
15................... 39,890 903,813 1,500,000 1,500,000 1,500,000
20................... 39,890 1,384,957 1,500,000 1,500,000 1,982,197
30................... 39,890 2,782,767 1,500,000 1,715,182 5,235,178
40................... 0 4,927,613 0 0 0
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR
INVESTMENT BASE AND END OF YEAR
NET CASH SURRENDER VALUE(3)(4) CASH VALUE(3)(5)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
-------------------------------------------- --------------------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
- --------------------- --------- ----------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
1................... $ 19,596 $ 20,785 $ 21,974 $ 19,596 $ 20,785 $ 21,974
2................... 38,503 42,086 45,811 38,503 42,086 45,811
3................... 74,786 83,065 91,928 74,786 83,065 91,928
4................... 110,486 125,834 142,813 110,486 125,834 142,813
5................... 145,570 170,433 198,928 145,570 170,433 198,928
6................... 180,030 216,932 260,813 180,030 216,932 260,813
7................... 213,821 265,370 329,032 213,821 265,370 329,032
8................... 246,916 315,806 404,235 246,916 315,806 404,235
9................... 279,261 368,277 487,112 279,261 368,277 487,122
10................... 310,845 422,873 578,526 310,845 422,873 578,526
15................... 449,604 725,112 1,154,006 449,604 725,112 1,154,006
20................... 532,188 1,077,538 1,887,807 532,188 1,077,538 1,887,807
30................... 246,439 1,633,507 4,985,884 246,439 1,633,507 4,985,884
40................... 0 2,505,920 13,305,023 0 2,505,920 13,305,023
</TABLE>
- ------------------------------
(1) Assumes no additional insurance rider face amount.
(2) All payments are illustrated as if made at the beginning of the contract
year.
(3) Assumes annual payments are made and no loans or withdrawals have been
taken.
(4) Investment base will equal net cash surrender value on each contract
anniversary. If the Contract is surrendered within 24 months after issue,
the contract owner will also receive any excess sales load previously
deducted.
(5) Cash value will equal investment base and net cash surrender value on each
contract anniversary if no loans have been taken.
(6) The payments shown may extend beyond the year in which the automatic
adjustment is made. At annual rates of return of 6% and 12% and currently
mortality charges, the guarantee period reaches life of the younger insured
in contract years 21 and 14, respectively. Once a guarantee of life is
reached, no more payments would be accepted. Values shown at annual rates of
return of 0%, 6% and 12% do not reflect any payments shown after a guarantee
period of life is reached.
(7) At contract year 40, on the contract anniversary nearest the younger
insured's 100th birthday, the Contract reaches its maturity date and a death
benefit is no longer provided. On the maturity date, the net cash surrender
value is paid to the contract owner, provided either insured is still
living.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND
CASH VALUE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY ML OF NEW YORK OR THE 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> 46
JOINT INSUREDS: FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
STANDARD NON-SMOKER UNDERWRITING CLASS
ANNUAL PAYMENTS OF $39,890 FOR 37 YEARS
FACE AMOUNT(1): $1.5 MILLION INITIAL GUARANTEE PERIOD: 7.5 YEARS
DEATH BENEFIT OPTION 1
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
TOTAL
PAYMENTS END OF YEAR
MADE PLUS DEATH BENEFIT(3)(7)
INTEREST AT ASSUMING HYPOTHETICAL GROSS
5% AS ANNUAL RATE OF RETURN OF
OF END OF ------------------------------------------------
CONTRACT YEAR PAYMENTS(2)(6) YEAR 0% 6% 12%
- --------------------- -------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1................... $ 39,890 $ 41,885 $ 1,500,000 $ 1,500,000 $ 1,500,000
2................... 39,890 85,864 1,500,000 1,500,000 1,500,000
3................... 39,890 132,042 1,500,000 1,500,000 1,500,000
4................... 39,890 180,529 1,500,000 1,500,000 1,500,000
5................... 39,890 231,440 1,500,000 1,500,000 1,500,000
6................... 39,890 284,897 1,500,000 1,500,000 1,500,000
7................... 39,890 341,026 1,500,000 1,500,000 1,500,000
8................... 39,890 399,962 1,500,000 1,500,000 1,500,000
9................... 39,890 461,845 1,500,000 1,500,000 1,500,000
10................... 39,890 526,822 1,500,000 1,500,000 1,500,000
15................... 39,890 903,813 1,500,000 1,500,000 1,500,000
20................... 39,890 1,384,957 1,500,000 1,500,000 1,770,207
30................... 39,890 2,782,767 1,500,000 1,500,000 4,532,143
40................... 0 4,927,613 0 0 0
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR
INVESTMENT BASE AND END OF YEAR
NET CASH SURRENDER VALUE(3)(4) CASH VALUE(3)(5)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
------------------------------------------ ------------------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
- --------------------- --------- --------- ------------ --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
1................... $ 19,596 $ 20,785 $ 21,974 $ 19,596 $ 20,785 $ 21,974
2................... 38,333 41,910 45,630 38,333 41,910 45,630
3................... 73,784 82,019 90,838 73,784 82,019 90,838
4................... 107,892 123,087 139,911 107,892 123,087 139,911
5................... 140,510 165,000 193,111 140,510 165,000 193,111
6................... 171,473 207,633 250,734 171,473 207,633 260,734
7................... 200,547 250,790 313,065 200,547 250,790 313,065
8................... 227,627 294,416 380,600 227,627 294,416 380,600
9................... 252,461 338,322 453,794 252,461 338,322 453,794
10................... 274,801 382,346 533,248 274,801 382,346 533,248
15................... 335,924 596,523 1,057,326 335,924 596,523 1,057,326
20................... 246,864 772,661 1,685,912 246,864 772,661 1,685,912
30................... 0 669,684 4,316,326 0 669,684 4,316,326
40................... 0 0 11,329,612 0 0 11,329,612
</TABLE>
- ------------------------------
(1) Assumes no additional insurance rider face amount.
(2) All payments are illustrated as if made at the beginning of the contract
year.
(3) Assumes annual payments are made and no loans or withdrawals have been
taken.
(4) Investment base will equal net cash surrender value on each contract
anniversary. If the Contract is surrendered within 24 months after issue,
the contract owner will also receive any excess sales load previously
deducted.
(5) Cash value will equal investment base and net cash surrender value on each
contract anniversary if no loans have been taken.
(6) The payments shown may extend beyond the year in which the automatic
adjustment is made. At an annual rate of return of 12% and maximum mortality
charges, the guarantee period reaches life of the younger insured in
contract year 15. Once a guarantee of life is reached, no more payments
would be accepted. Values shown at annual rates of return of 0%, 6% and 12%
do not reflect any payments shown after a guarantee period of life is
reached.
(7) At contract year 40, on the contract anniversary nearest the younger
insured's 100th birthday, the Contract reaches its maturity date and a death
benefit is no longer provided. On the maturity date, the net cash surrender
value is paid to the contract owner, provided either insured is still
living.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND
CASH VALUE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY ML OF NEW YORK OR THE 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.
42
<PAGE> 47
JOINT INSUREDS: FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
STANDARD NON-SMOKER UNDERWRITING CLASS
ANNUAL PAYMENTS OF $141,410 FOR 32 YEARS
FACE AMOUNT (1): $1.5 MILLION INITIAL GUARANTEE PERIOD: 14 YEARS
DEATH BENEFIT OPTION 2
BASED ON CURRENT MORTALITY CHARGES
<TABLE>
<CAPTION>
TOTAL
PAYMENTS END OF YEAR
MADE PLUS DEATH BENEFIT(3)(7)
INTEREST AT ASSUMING HYPOTHETICAL GROSS
5% AS ANNUAL RATE OF RETURN OF
OF END OF ------------------------------------------------
CONTRACT YEAR PAYMENTS(2)(6) YEAR 0% 6% 12%
- --------------------- --------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1................... $ 141,410 $ 148,481 $ 1,597,485 $ 1,603,375 $ 1,609,265
2................... 141,410 304,386 1,728,525 1,748,491 1,769,159
3................... 141,410 468,086 1,857,647 1,900,122 1,945,748
4................... 141,410 639,971 1,984,843 2,058,525 2,140,744
5................... 141,410 820,450 2,110,090 2,223,956 2,356,023
6................... 141,410 1,009,953 2,233,388 2,396,706 2,593,682
7................... 141,410 1,208,931 2,354,697 2,577,034 2,855,991
8................... 141,410 1,417,858 2,473,987 2,765,223 3,145,474
9................... 141,410 1,637,231 2,591,193 2,961,534 3,464,878
10................... 141,410 1,867,573 2,706,298 3,166,286 3,817,290
15................... 141,410 3,203,997 3,239,204 4,317,457 6,194,735
20................... 141,410 4,909,650 3,660,651 5,669,216 9,092,397
30................... 141,410 9,864,873 3,807,921 8,268,664 20,800,267
40................... 0 16,518,553 0 0 0
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR
INVESTMENT BASE AND END OF YEAR
NET CASH SURRENDER VALUE(3)(4) CASH VALUE(3)(5)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
---------------------------------------------- ----------------------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
- --------------------- ----------- ----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
1................... $ 97,485 $ 103,375 $ 109,265 $ 97,485 $ 103,375 $ 109,265
2................... 228,525 248,491 269,159 228,525 248,491 269,159
3................... 357,647 400,122 445,748 357,647 400,122 445,748
4................... 484,843 558,525 640,744 484,843 558,525 640,744
5................... 610,090 723,956 856,023 610,090 723,956 856,023
6................... 733,388 896,706 1,093,682 733,388 896,706 1,093,682
7................... 854,697 1,077,034 1,355,991 854,697 1,077,034 1,355,991
8................... 973,987 1,265,223 1,645,474 973,987 1,265,223 1,645,474
9................... 1,091,193 1,461,534 1,964,878 1,091,193 1,461,534 1,964,878
10................... 1,206,298 1,666,286 2,317,290 1,206,298 1,666,286 2,317,290
15................... 1,739,204 2,817,457 4,694,735 1,739,204 2,817,457 4,694,735
20................... 2,160,651 4,169,216 7,592,397 2,160,651 4,169,216 7,592,397
30................... 2,307,921 6,768,664 19,300,267 2,307,921 6,768,664 19,300,267
40................... 0 7,355,893 48,517,437 0 7,355,893 48,517,437
</TABLE>
- ------------------------------
(1) Assumes no additional insurance rider face amount.
(2) All payments are illustrated as if made at the beginning of the contract
year.
(3) Assumes annual payments are made and no loans or withdrawals have been
taken.
(4) Investment base will equal net cash surrender value on each contract
anniversary. If the Contract is surrendered within 24 months after issue,
the contract owner will also receive any excess sales load previously
deducted.
(5) Cash value will equal investment base and net cash surrender value on each
contract anniversary if no loans have been taken.
(6) The payments shown may extend beyond the year in which the automatic
adjustment is made. At annual rates of return of 6% and 12% and current
mortality charges, the guarantee period reaches life of the younger insured
in contract years 27 and 15, respectively. Once a guarantee of life is
reached, no more payments would be accepted. Values shown at annual rates of
return of 0%, 6% and 12% do not reflect any payments shown after a guarantee
period of life is reached.
(7) At contract year 40, on the contract anniversary nearest the younger
insured's 100th birthday, the Contract reaches its maturity date and a death
benefit is no longer provided. On the maturity date, the net cash surrender
value is paid to the contract owner, provided either insured is still
living.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATE AND WILL DEPEND ON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND
CASH VALUE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY ML OF NEW YORK OR THE 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.
43
<PAGE> 48
JOINT INSUREDS: FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
STANDARD NON-SMOKER UNDERWRITING CLASS
ANNUAL PAYMENTS OF $141,410 FOR 32 YEARS
FACE AMOUNT(1): $1.5 MILLION INITIAL GUARANTEE PERIOD: 14 YEARS
DEATH BENEFIT OPTION 2
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
TOTAL
PAYMENTS END OF YEAR
MADE PLUS DEATH BENEFIT(3)(7)
INTEREST AT ASSUMING HYPOTHETICAL GROSS
5% AS ANNUAL RATE OF RETURN OF
OF END OF ------------------------------------------------
CONTRACT YEAR PAYMENTS(2)(6) YEAR 0% 6% 12%
- --------------------- --------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1................... $ 141,410 $ 148,481 $ 1,597,485 $ 1,603,375 $ 1,609,265
2................... 141,410 304,386 1,728,351 1,748,310 1,768,472
3................... 141,410 468,086 1,856,598 1,899,023 1,944,599
4................... 141,410 639,971 1,982,078 2,055,582 2,137,617
5................... 141,410 820,450 2,104,603 2,218,016 2,349,604
6................... 141,410 1,009,953 2,223,952 2,386,321 2,582,269
7................... 141,410 1,208,931 2,336,810 2,560,388 2,837,392
8................... 141,410 1,417,858 2,452,000 2,740,247 3,117,090
9................... 141,410 1,637,231 2,560,162 2,925,733 3,423,498
10................... 141,410 1,867,573 2,663,933 3,116,670 3,758,976
15................... 141,410 3,203,997 3,098,669 4,139,959 5,966,993
20................... 141,410 4,909,650 3,319,005 5,206,681 8,665,907
30................... 141,410 9,864,873 2,516,327 6,717,029 18,018,025
40................... 0 16,518,553 0 0 0
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR
INVESTMENT BASE AND END OF YEAR
NET CASH SURRENDERED VALUE(3)(4) CASH VALUE(3)(5)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
---------------------------------------------- ----------------------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
- --------------------- ----------- ----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
1................... $ 97,485 $ 103,375 $ 109,265 $ 97,485 $ 103,375 $ 109,265
2................... 228,351 248,310 268,972 228,351 248,310 268,972
3................... 356,598 399,023 444,599 356,598 399,023 444,599
4................... 482,078 555,582 637,617 482,078 555,582 637,617
5................... 604,603 718,016 849,604 604,603 718,016 849,604
6................... 723,952 886,321 1,082,269 723,952 886,321 1,082,269
7................... 839,810 1,060,388 1,337,392 839,810 1,060,388 1,337,392
8................... 952,000 1,240,247 1,617,090 952,000 1,240,247 1,617,090
9................... 1,060,162 1,425,733 1,923,498 1,060,162 1,425,733 1,923,498
10................... 1,163,933 1,616,670 2,258,976 1,163,933 1,616,670 2,258,976
15................... 1,598,669 2,639,959 4,466,993 1,598,669 2,639,959 4,466,993
20................... 1,819,005 3,706,681 7,165,907 1,819,005 3,706,681 7,165,907
30................... 1,016,327 5,217,029 16,518,025 1,016,327 5,217,029 16,518,026
40................... 0 0 33,796,363 0 0 33,796,363
</TABLE>
- ------------------------------
(1) Assumes no additional insurance rider face amount.
(2) All payments are illustrated as if made at the beginning of the contract
year.
(3) Assumes annual payments are made and no loans or withdrawals have been
taken.
(4) Investment base will equal net cash surrender value on each contract
anniversary. If the Contract is surrendered within 24 months after issue,
the contract owner will also receive any excess sales load previously
deducted.
(5) Cash value will equal investment base and net cash surrender value on each
contract anniversary if no loans have been taken.
(6) The payments shown may extend beyond the year in which the automatic
adjustment is made. At an annual rate of return of 12% and maximum mortality
charges, the guarantee period reaches life of the younger insured in
contract year 16. Once a guarantee of life is reached, no more payments
would be accepted. Values shown at annual rates of return of 0%, 6% and 12%
do not reflect any payments shown after a guarantee period of life is
reached.
(7) At contract year 40, on the contract anniversary nearest the younger
insured's 100th birthday, the Contract reaches its maturity date and a death
benefit is no longer provided. On the maturity date, the net cash surrender
value is paid to the contract owner, provided either insured is still
living.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING
INTEREST RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND
CASH VALUE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY ML OF NEW YORK OR THE 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.
44
<PAGE> 49
EXAMPLES
ADDITIONAL PAYMENTS
As of the processing date on or next following receipt and acceptance of an
additional payment, ML of New York will increase the guarantee period if the
guarantee period prior to receipt and acceptance of an additional payment is
less than for the whole of life of the younger insured.
ML of New York will determine the increase in the guarantee period by taking the
immediate increase in the cash value resulting from the additional payment and
adding to that interest at the annual rate of 5% for the period from the date ML
of New York receives and accepts the payment to the contract processing date on
or next following such date. This is the guarantee adjustment amount. The
guarantee adjustment amount is added to the fixed base and the resulting new
fixed base is used to calculate a new guarantee period.
The amount of the increase in the guarantee period will depend on the amount of
the additional payment and the contract year in which it is received and
accepted. If additional payments of different amounts were made at the same time
to equivalent contracts, the contract to which the larger payment is applied
would have a larger increase in the guarantee period.
Example 1 shows the effect on the guarantee period of a $39,890 additional
payment received and accepted at the beginning of contract year ten. Example 2
shows the effect of a $79,780 additional payment received and accepted at the
beginning of contract year ten. Example 3 shows the effect of a $39,890
additional payment received and accepted at the beginning of contract year 11.
All three examples assume that death benefit option 1 has been elected, that
annual payments of $39,890 have been made up to the contract year reflected in
the example and that no other contract transactions have been made.
Female Issue Age 60/Male Issue Age 65
Initial payment plus annual payments of $39,890
Face Amount: $1.5 Million
Initial Guarantee Period: 7.5 years
Death Benefit Option: 1
Based on Maximum Mortality Charges
<TABLE>
<CAPTION>
EXAMPLE 1
- ---------------------------------
INCREASE
IN
CONTRACT ADDITIONAL GUARANTEE
YEAR PAYMENT PERIOD
- --- -------- ---------
<S> <C> <C>
10 $ 39,890 1 year
<CAPTION>
EXAMPLE 2
- ---------------------------------
INCREASE
IN
CONTRACT ADDITIONAL GUARANTEE
YEAR PAYMENT PERIOD
- --- -------- ---------
<S> <C> <C>
10 $ 79,780 2 years
<CAPTION>
EXAMPLE 3
- ---------------------------------
INCREASE
IN
CONTRACT ADDITIONAL GUARANTEE
YEAR PAYMENT PERIOD
- --- -------- ---------
<S> <C> <C>
11 $ 39,890 .75 years
</TABLE>
PARTIAL WITHDRAWALS
As of the processing date on or next following the effective date of a partial
withdrawal, ML of New York calculates a new guarantee period. This is done by
taking the immediate decrease in cash value resulting from the partial
withdrawal and adding to that amount interest at an annual rate of 5% for the
period from the date of the withdrawal to the contract processing date on or
next following such date. This is the guarantee adjustment amount. The guarantee
adjustment amount is subtracted from the fixed base and the resulting new fixed
base is used to calculate a new guarantee period.
45
<PAGE> 50
The amount of the reduction in the guarantee period will depend on the amount of
the withdrawal, the face amount at the time of the withdrawal and the contract
year in which the withdrawal is made. If made at the same time to equivalent
contracts, a larger withdrawal would result in a greater reduction in the
guarantee period than a smaller withdrawal. The same partial withdrawal made at
the same time from contracts with the same guarantee periods but with different
face amounts would result in a greater reduction in the guarantee period for the
contract with the smaller face amount.
Examples 1 and 2 show the effect on the guarantee period of partial withdrawals
for $30,000 and $60,000 taken at the beginning of contract year sixteen. Example
3 shows the effect on the guarantee period of a $60,000 partial withdrawal taken
at the beginning of contract year eighteen. All three examples assume that death
benefit option 1 has been elected, that annual payments of $39,890 have been
made up to the contract year reflected in the example and that no other contract
transactions have been made.
Female Issue Age 60/Male Issue Age 65
Initial payment plus annual payments of $39,890
Face Amount: $1.5 Million
Initial Guarantee Period: 7.5 years
Death Benefit Option: 1
Based on Maximum Mortality Charges
<TABLE>
<CAPTION>
EXAMPLE 1
------------------------------------
DECREASE
IN
CONTRACT PARTIAL GUARANTEE
YEAR WITHDRAWAL PERIOD
--- -------- ---------
<S> <C> <C>
16 $ 30,000 .25 years
<CAPTION>
EXAMPLE 2
------------------------------------
DECREASE
IN
CONTRACT PARTIAL GUARANTEE
YEAR WITHDRAWAL PERIOD
--- -------- ---------
<S> <C> <C>
16 $ 60,000 .75 years
<CAPTION>
EXAMPLE 3
------------------------------------
DECREASE
IN
CONTRACT PARTIAL GUARANTEE
YEAR WITHDRAWAL PERIOD
--- -------- ---------
<S> <C> <C>
18 $ 60,000 .5 years
</TABLE>
CHANGING THE DEATH BENEFIT OPTION
On each contract anniversary beginning with the fifteenth, the contract owner
may change the death benefit option by switching from option 1 to option 2 or
from option 2 to option 1. ML of New York will change the face amount of the
Contract in order to keep the death benefit constant on the effective date of
the change. Therefore, if the change is from option 1 to option 2, the face
amount of the Contract will be decreased by the cash value on the date of the
change. If the change is from option 2 to option 1, the face amount of the
Contract will be increased by the cash value on the date of the change.
Example 1 shows the effect on the face amount of a change from option 1 to
option 2 and Example 2 shows the effect on the face amount of a change from
option 2 to option 1. The face amount before each change is $1 million.
46
<PAGE> 51
EXAMPLE 1
------------------------------------------------
Before Option Change
Death Benefit under Option 1: $1,000,000
Face Amount: $1,000,000
Cash Value: $80,000
After Option Change
Death Benefit under Option 2: $1,000,000
Face Amount: $920,000
Cash Value: $80,000
EXAMPLE 2
------------------------------------------------
Before Option Change
Death Benefit under Option 2: $1,080,000
Face Amount: $1,000,000
Cash Value: $80,000
After Option Change
Death Benefit under Option 1: $1,080,000
Face Amount: $1,080,000
Cash Value: $80,000
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
Frederick J.C. Butler Director
Robert L. Israeloff Director
Allen N. Jones 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
Pearse McCormack Vice President, Administrative Manager, and
Assistant Secretary
</TABLE>
47
<PAGE> 52
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.
Mr. Crowne joined ML of New York in June 1991.
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.
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 1990.
Mr. Butler joined ML of New York in April 1991.
Mr. Israeloff joined ML of New York in April 1991. Since 1964, he has been
Chairman and Executive Partner of Israeloff, Trattner & Co., CPAs, P.C., a
public accounting firm.
Mr. Jones joined ML of New York in June 1996. Since May 1992, he has been Senior
Vice President of MLPF&S. From June 1992 to May 1995, he served as a director of
ML of New York. From June 1992 to February 1994, he held the position of
Chairman of the Board, President, and Chief Executive Officer of ML of New York.
Prior to June 1992, he held various positions with MLPF&S.
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. In May 1996, he retired from the
position of Vice President for Finance at Marymount College, Tarrytown, New
York, which he had held since February 1991.
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.
Mr. McCormack has been with ML of New York since August 1992. Since January
1997, he has been Vice President and Assistant Secretary. From January 1994 to
January 1997, he held the position of Assistant Administrative Officer. From
August 1992 to January 1994, he held the position of Product Specialist.
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
48
<PAGE> 53
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 $4.7 million during 1996.
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
preceding year and its financial condition as of the end of that year.
Regulation by the Department includes periodic examination to determine contract
liabilities and reserves so that the Department may certify that these items are
correct. ML of New York's books and accounts are subject to review by the
Department at all times. A full examination of ML of New York's operations is
conducted periodically by the Department and under the auspices of the National
Association of Insurance Commissioners. ML of New York is also subject to the
insurance laws and regulations of all jurisdictions in which it is licensed to
do business.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. ML of New York and 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, 1996 and 1995 and
for each of the three years in the period ended December 31, 1996 and of the
Separate Account as of December 31, 1996 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 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, L.L.P. of Washington, D.C. has provided advice on certain matters
relating to federal securities and tax laws.
REGISTRATION STATEMENTS
Registration statements have been filed with the Securities and Exchange
Commission under the Securities Act of 1933 and the Investment Company Act of
1940 that relate to the Contract and its investment options. This Prospectus
does not contain all of the information in the registration statements as
permitted by Securities and Exchange Commission regulations. The omitted
information can be obtained from the Securities and Exchange Commission's
principal office in Washington, D.C., upon payment of a prescribed fee.
49
<PAGE> 54
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> 55
<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, 1996 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, 1996. 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, 1996 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.
January 31, 1997
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF NET ASSETS AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS: Cost Shares Market Value
----------------- ----------------- -----------------
<S> <C> <C> <C>
Investments in Merrill Lynch Series Fund, Inc. (Note 1):
Money Reserve Portfolio $ 3,335,567 3,335,567 $ 3,335,567
Intermediate Government Bond Portfolio 243,615 21,938 239,786
Long-Term Corporate Bond Portfolio 135,417 11,924 137,489
Capital Stock Portfolio 1,549,174 71,076 1,652,521
Growth Stock Portfolio 1,568,684 68,690 1,908,902
Multiple Strategy Portfolio 2,186,793 134,898 2,310,801
High Yield Portfolio 406,512 45,177 413,368
Natural Resources Portfolio 155,325 19,290 177,271
Global Strategy Portfolio 3,484,342 231,600 3,890,886
Balanced Portfolio 585,200 40,772 626,260
----------------- -----------------
13,650,629 14,692,851
----------------- -----------------
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Global Utility Focus Fund 77,045 6,863 83,655
International Equity Focus Fund 594,110 54,018 628,227
Global Bond Focus Fund 60,396 6,262 61,121
Basic Value Focus Fund 1,786,791 136,431 2,010,990
Developing Capital Markets Focus Fund 465,787 49,706 499,549
Equity Growth Fund 56,894 2,209 57,931
----------------- -----------------
3,041,023 3,341,473
----------------- -----------------
Units
-----------------
Investments in the Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A through K (Note 1):
1997 Trust 5,475 6,059 6,040
1998 Trust 30,140 35,021 32,960
1999 Trust 5,400 6,840 6,057
2000 Trust 71,034 94,346 78,625
2003 Trust 33,563 59,980 39,820
2004 Trust 19,398 33,453 21,410
2005 Trust 30,205 56,310 33,982
2007 Trust 7,715 16,023 8,557
2009 Trust 6,346 15,830 7,220
2010 Trust 18,118 55,434 23,377
2013 Trust 3,604 12,390 4,250
2014 Trust 53,898 184,944 58,466
----------------- -----------------
284,896 320,764
----------------- -----------------
TOTAL ASSETS $ 16,976,548 18,355,088
================= -----------------
LIABILITIES:
Payable to ML Life Insurance Company of New York 264,882
-----------------
TOTAL LIABILITIES 264,882
-----------------
NET ASSETS $ 18,090,206
=================
</TABLE>
See Notes to Financial Statements
2
<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 YEAR ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
Investment Income:
Reinvested Dividends $ 772,097 $ 423,802 $ 268,953
Mortality and Expense Charges (Note 3) (121,660) (69,677) (39,147)
Transaction Charges (Note 4) (992) (512) (139)
----------------- ----------------- -----------------
Net Investment Income 649,445 353,613 229,667
----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 1,598 (31,049) (14,386)
Net Unrealized Gains (Losses) 932,056 678,554 (356,936)
----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 933,654 647,505 (371,322)
----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 1,583,099 1,001,118 (141,655)
----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 6,351,113 3,597,850 2,992,673
Transfers of Policy Loading, Net (Note 3) 495,055 259,576 242,105
Transfers Due to Deaths (25,307) (4,554) (4,709)
Transfers Due to Other Terminations (212,277) (238,972) (42,335)
Transfers Due to Policy Loans (118,069) (38,631) (26,381)
Transfers of Cost of Insurance (219,552) (163,287) (142,930)
Transfers of Loan Processing Charges (1,805) (916) (180)
----------------- ----------------- -----------------
Increase in Net Assets
Resulting from Principal Transactions 6,269,158 3,411,066 3,018,243
----------------- ----------------- -----------------
Increase in Net Assets 7,852,257 4,412,184 2,876,588
Net Assets Beginning Balance 10,237,949 5,825,765 2,949,177
----------------- ----------------- -----------------
Net Assets Ending Balance $ 18,090,206 $ 10,237,949 $ 5,825,765
================= ================= =================
</TABLE>
See Notes to Financial Statements
3
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
Notes to Financial Statements
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-three investment divisions
(thirty-five during the year). Ten of the investment
divisions each invest in the securities of a single
mutual fund portfolio of the Merrill Lynch Series Fund,
Inc. Six of the investment divisions each invest in the
securities of a single mutual fund portfolio of the
Merrill Lynch Variable Series Funds, Inc. (See Note 5).
Seventeen of the investment divisions (eighteen 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.
The financial statements included herein have been
prepared in accordance with generally accepted accounting
principles for variable life separate accounts registered
as unit investment trusts. The preparation of financial
statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
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
shares and units held.
Dividend income is recognized on the ex-dividend date.
All dividends are automatically reinvested.
Realized gains and losses on the sales of investments are
computed on the first in first out method.
The operations of 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.
3. ML of New York assumes mortality and expense risks
related to Contracts investing in the Account and deducts
a daily charges at a rate of .90% (on an annual basis) of
the net assets of the Account to cover these risks.
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 income
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.
4. ML of New York pays all transaction charges to Merrill
Lynch, Pierce, Fenner & Smith Inc., a subsidiary of
Merrill and sponsor of the Zero Trusts, on the sale of
Zero Trust 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.
5. Effective following the close of business on December 6,
1996, the International Bond Fund was merged with and
into the former World Income Focus Fund; the World Income
Focus Fund was renamed the Global Bond Focus Fund; and
the Fund's investment objective was modified.
<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, 1996
<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 $ 772,097 $ 103,078 $ 14,639 $ 8,048
Mortality and Expense Charges (121,660) (15,163) (1,968) (1,080)
Transaction Charges (992) 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 649,445 87,915 12,671 6,968
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 1,598 0 1,580 3
Net Unrealized Gains (Losses) 932,056 0 (10,136) (3,943)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 933,654 0 (8,556) (3,940)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 1,583,099 87,915 4,115 3,028
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 6,351,113 5,165,749 15,298 11,677
Transfers of Policy Loading, Net 495,055 490,996 (349) (248)
Transfers Due to Deaths (25,307) (19,967) 0 0
Transfers Due to Other Terminations (212,277) (25,965) 5 15
Transfers Due to Policy Loans (118,069) (699) 0 (8,026)
Transfers of Cost of Insurance (219,552) (31,592) (2,802) (1,898)
Transfers of Loan Processing Charges (1,805) (187) (8) (175)
Transfers Among Investment Divisions 0 (3,961,160) 52,514 39,904
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 6,269,158 1,617,175 64,658 41,249
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 7,852,257 1,705,090 68,773 44,277
Net Assets Beginning Balance 10,237,949 1,369,817 173,997 93,162
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 18,090,206 $ 3,074,907 $ 242,770 $ 137,439
================= ================= ================= =================
</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, 1996
<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 $ 143,386 $ 38,471 $ 245,513 $ 25,506
Mortality and Expense Charges (10,355) (12,913) (18,686) (2,495)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 133,031 25,558 226,827 23,011
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (5,485) 3,715 (35,912) (671)
Net Unrealized Gains (Losses) 49,697 207,982 73,553 7,603
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 44,212 211,697 37,641 6,932
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 177,243 237,255 264,468 29,943
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 124,131 150,718 152,418 25,998
Transfers of Policy Loading, Net 225 1,026 (3,197) 176
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (10,371) (11,821) (48,576) (1,649)
Transfers Due to Policy Loans (13,963) (15,882) (25,612) (5,809)
Transfers of Cost of Insurance (17,647) (19,858) (36,610) (4,025)
Transfers of Loan Processing Charges (153) (417) (311) (18)
Transfers Among Investment Divisions 674,243 501,049 218,373 191,296
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 756,465 604,815 256,485 205,969
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 933,708 842,070 520,953 235,912
Net Assets Beginning Balance 718,365 1,061,712 1,789,215 177,339
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 1,652,073 $ 1,903,782 $ 2,310,168 $ 413,251
================= ================= ================= =================
</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, 1996
<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 $ 2,772 $ 89,681 $ 20,809 $ 1,982
Mortality and Expense Charges (1,387) (29,889) (3,785) (440)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 1,385 59,792 17,024 1,542
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 1,875 15,132 366 87
Net Unrealized Gains (Losses) 15,704 337,443 17,957 5,630
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 17,579 352,575 18,323 5,717
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 18,964 412,367 35,347 7,259
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 18,865 400,696 50,509 2,090
Transfers of Policy Loading, Net 70 5,875 749 (2)
Transfers Due to Deaths 0 0 (5,340) 0
Transfers Due to Other Terminations (967) (81,661) (1,255) (29)
Transfers Due to Policy Loans 0 (27,472) (4,040) 0
Transfers of Cost of Insurance (1,908) (57,689) (7,096) (690)
Transfers of Loan Processing Charges (57) (252) (31) (4)
Transfers Among Investment Divisions 13,918 529,455 220,242 59,158
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 29,921 768,952 253,738 60,523
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 48,885 1,181,319 289,085 67,782
Net Assets Beginning Balance 128,324 2,713,284 337,005 15,835
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 177,209 $ 3,894,603 $ 626,090 $ 83,617
================= ================= ================= =================
</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, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
International Global Basic
Equity Bond Value International
Focus Focus Focus Bond
Fund Fund Fund Fund
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 4,697 $ 1,034 $ 62,330 $ 1,938
Mortality and Expense Charges (4,415) (152) (11,926) (240)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 282 882 50,404 1,698
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 85 5 14,743 417
Net Unrealized Gains (Losses) 21,751 624 171,327 (412)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 21,836 629 186,070 5
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 22,118 1,511 236,474 1,703
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 58,953 2,504 92,817 0
Transfers of Policy Loading, Net 981 63 (1,345) (203)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (11,361) (27) (6,645) 8
Transfers Due to Policy Loans (2,972) 0 (7,488) 0
Transfers of Cost of Insurance (7,163) (328) (19,752) (358)
Transfers of Loan Processing Charges (36) (4) (83) 0
Transfers Among Investment Divisions 229,734 10,123 968,722 32,873
Transfer of Merged Funds 0 41,724 0 (41,724)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 268,136 54,055 1,026,226 (9,404)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 290,254 55,566 1,262,700 (7,701)
Net Assets Beginning Balance 337,801 5,521 747,772 7,701
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 628,055 $ 61,087 $ 2,010,472 $ 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, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Developing
Capital Equity
Markets Focus Growth 1996 1997
Fund Fund Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 8,213 $ 0 $ 0 $ 0
Mortality and Expense Charges (4,047) (81) (5) (47)
Transaction Charges 0 0 (1) (18)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 4,166 (81) (6) (65)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (222) 1 308 16
Net Unrealized Gains (Losses) 30,006 1,037 (284) 246
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 29,784 1,038 24 262
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 33,950 957 18 197
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 42,742 0 0 1,438
Transfers of Policy Loading, Net (1,156) 1 0 47
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (11,879) (28) (45) 0
Transfers Due to Policy Loans (6,106) 0 0 0
Transfers of Cost of Insurance (5,962) (146) (20) (133)
Transfers of Loan Processing Charges (57) (4) 0 0
Transfers Among Investment Divisions 116,247 57,113 (4,401) 2
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 133,829 56,936 (4,466) 1,354
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 167,779 57,893 (4,448) 1,551
Net Assets Beginning Balance 328,523 0 4,448 4,476
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 496,302 $ 57,893 $ 0 $ 6,027
================= ================= ================= =================
</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, 1996
<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 (288) (47) (649) (337)
Transaction Charges (108) (18) (244) (127)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (396) (65) (893) (464)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 106 17 453 364
Net Unrealized Gains (Losses) 1,376 216 2,025 (231)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 1,482 233 2,478 133
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 1,086 168 1,585 (331)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 1,434 1,429 13,023 2,137
Transfers of Policy Loading, Net (153) 47 205 (42)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations 2 0 0 3
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (380) (133) (1,073) (479)
Transfers of Loan Processing Charges 0 0 (1) (1)
Transfers Among Investment Divisions (17) 1 (3,014) (16)
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 886 1,344 9,140 1,602
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 1,972 1,512 10,725 1,271
Net Assets Beginning Balance 30,968 4,532 67,853 38,519
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 32,940 $ 6,044 $ 78,578 $ 39,790
================= ================= ================= =================
</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, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2004 2005 2007 2009
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (191) (290) (42) (64)
Transaction Charges (72) (109) (16) (24)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (263) (399) (58) (88)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 35 694 18 315
Net Unrealized Gains (Losses) (55) (793) 843 (529)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (20) (99) 861 (214)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (283) (498) 803 (302)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 12,896 0 2,511
Transfers of Policy Loading, Net (156) 1,046 (73) 232
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations 2 (4) (4) 0
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (208) (708) (90) (64)
Transfers of Loan Processing Charges 0 (1) (1) 0
Transfers Among Investment Divisions (15) (2,625) 7,912 (2,763)
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (377) 10,604 7,744 (84)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets (660) 10,106 8,547 (386)
Net Assets Beginning Balance 22,060 23,862 0 7,599
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 21,400 $ 33,968 $ 8,547 $ 7,213
================= ================= ================= =================
</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, 1996
<TABLE>
<CAPTION>
Divisions Investing In
------------------------------------------------------
2010 2013 2014
Trust Trust Trust
----------------- ----------------- -----------------
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0
Mortality and Expense Charges (205) (32) (441)
Transaction Charges (77) (12) (166)
----------------- ----------------- -----------------
Net Investment Income (Loss) (282) (44) (607)
----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 135 0 3,418
Net Unrealized Gains (Losses) (1,059) (91) 4,569
----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (924) (91) 7,987
----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (1,206) (135) 7,380
----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 1,080 0
Transfers of Policy Loading, Net (180) 37 383
Transfers Due to Deaths 0 0 0
Transfers Due to Other Terminations 1 0 (26)
Transfers Due to Policy Loans 0 0 0
Transfers of Cost of Insurance (201) (46) (493)
Transfers of Loan Processing Charges 0 0 (4)
Transfers Among Investment Divisions (12) 1 51,143
Transfer of Merged Funds 0 0 0
----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (392) 1,072 51,003
----------------- ----------------- -----------------
Increase (Decrease) in Net Assets (1,598) 937 58,383
Net Assets Beginning Balance 24,949 3,310 0
----------------- ----------------- -----------------
Net Assets Ending Balance $ 23,351 $ 4,247 $ 58,383
================= ================= =================
</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
-----------------------------------------------------
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 Gains (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 Gains (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 Gains (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 Global Basic
Equity Bond 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 Gains (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 Gains (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 Gains (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 Gains (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>
Division 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 Gains (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 Gains (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 Gains (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 Gains (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 Global Basic Developing
Equity Bond 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 Gains (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 Gains (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 Gains (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>
Division 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 Gains (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>
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, 1996 and 1995, and the related statements of earnings,
stockholder's equity, and cash flows for each of the three years
in the period ended December 31, 1996. 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, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted
accounting principles.
February 24, 1997
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995
--------------- -------------
<S> <C> <C>
ASSETS
- ------
INVESTMENTS:
Fixed maturity securities, at estimated fair value
(amortized cost: 1996 - $264,341; 1995 - $295,403) $ 269,103 $ 307,596
Equity securities, at estimated fair value
(cost: 1996 - $8,975; 1995 - $3,017) 10,859 3,534
Mortgage loans 2,057 4,032
Policy loans on insurance contracts 85,548 82,073
--------------- -------------
Total Investments 367,567 397,235
=============== =============
CASH AND CASH EQUIVALENTS 7,828 17,387
ACCRUED INVESTMENT INCOME 5,952 6,603
DEFERRED POLICY ACQUISITION COSTS 29,272 30,922
FEDERAL INCOME TAXES - DEFERRED - 3,622
REINSURANCE RECEIVABLES 1,065 493
OTHER ASSETS 4,569 2,653
SEPARATE ACCOUNTS ASSETS 591,814 544,432
--------------- -------------
TOTAL ASSETS $ 1,008,067 $ 1,003,347
=============== =============
</TABLE>
See notes to financial statements.
<PAGE>
ML Life Insurance Company of New York
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
Balance Sheets
As of December 31, 1996 and 1995
(Continued) (Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995
--------------- --------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
LIABILITIES:
POLICY LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 318,567 $ 337,137
Claims and claims settlement expenses 2,572 2,901
--------------- --------------
Total policy liabilities and accruals 321,139 340,038
OTHER POLICYHOLDER FUNDS 1,160 739
FEDERAL INCOME TAXES - DEFERRED 626 -
FEDERAL INCOME TAXES - CURRENT 2,099 185
AFFILIATED PAYABLES - NET 5,026 4,062
OTHER LIABILITIES 1,649 3,112
SEPARATE ACCOUNTS LIABILITIES 591,814 544,432
--------------- --------------
Total Liabilities 923,513 892,568
--------------- --------------
STOCKHOLDER'S EQUITY:
Common stock, $10 par value - 220,000 shares
authorized, issued and outstanding 2,200 2,200
Additional paid-in capital 72,040 83,006
Retained earnings 9,219 24,034
Net unrealized gain on investment securities 1,095 1,539
-------------- --------------
Total Stockholder's Equity 84,554 110,779
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,008,067 $ 1,003,347
============== ==============
</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, 1996, 1995 AND 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 27,520 $ 29,819 $ 32,679
Net realized investment gains (losses) 2,169 (265) (2,218)
Policy charge revenue 11,959 10,864 10,339
------------ ------------ ------------
Total Revenues 41,648 40,418 40,800
------------ ------------ ------------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 16,586 17,375 22,691
Market value adjustment expense 301 238 132
Policy benefits (net of reinsurance recoveries: 1996 - $1,584
1995 - $917; 1994 - $715) 1,311 528 1,620
Reinsurance premium ceded 1,262 1,227 1,240
Amortization of deferred policy acquisition costs 3,784 1,300 4,141
Insurance expenses and taxes 4,595 4,508 3,685
------------ ------------ ------------
Total Benefits and Expenses 27,839 25,176 33,509
------------ ------------ ------------
Earnings Before Federal Income Tax Provision 13,809 15,242 7,291
------------ ------------ ------------
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 102 1,692 (213)
Deferred 4,488 3,486 2,031
------------ ------------ ------------
Total Federal Income Tax Provision 4,590 5,178 1,818
------------ ------------ ------------
NET EARNINGS $ 9,219 $ 10,064 $ 5,473
============ ============ ============
</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, 1996, 1995 AND 1994
(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, 1994 $ 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
Dividend to Parent (10,966) (24,034) (35,000)
Net earnings 9,219 9,219
Net unrealized investment loss (444) (444)
----------- ----------- ----------- ----------- -------------
BALANCE, DECEMBER 31, 1996 $ 2,200 $ 72,040 $ 9,219 $ 1,095 $ 84,554
=========== =========== =========== =========== =============
</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, 1996, 1995 AND 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 9,219 $ 10,064 $ 5,473
Adjustments to reconcile net earnings to net cash and
cash equivalents provided (used) by operating activities:
Amortization of deferred policy acquisition costs 3,784 1,300 4,142
Capitalization of policy acquisition costs (2,134) (4,368) (7,142)
Amortization, (accretion) and depreciation of investments 1 (434) (312)
Net realized investment (gains) losses (2,169) 265 2,218
Interest credited to policyholders' account balances 16,586 17,375 22,691
Provision for deferred Federal income tax 4,488 3,486 2,031
Changes in operating assets and liabilities:
Accrued investment income 651 751 2,810
Claims and claims settlement expenses (329) (1,413) (1,300)
Federal income taxes - current 1,914 15 (694)
Other policyholder funds 421 (793) 332
Affiliated payable - net 964 (180) (981)
Policy loans on insurance contracts (3,475) (4,246) (4,447)
Other, net (3,951) 1,723 (1,947)
----------- ----------- -----------
Net cash and cash equivalents provided
by operating activities 25,970 23,545 22,874
----------- ----------- -----------
INVESTING ACTIVITIES:
Sales of available-for-sale securities 155,645 68,736 128,183
Maturities of available-for-sale securities 34,455 38,420 92,499
Purchases of available-for-sale securities (162,828) (103,568) (73,045)
Mortgage loans principal payments received 1,975 - 8,998
Sales of mortgage loans - 3,608 -
----------- ----------- -----------
Net cash and cash equivalents provided by
investing activities 29,247 7,196 156,635
----------- ----------- -----------
</TABLE>
<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, 1996, 1995 AND 1994
(Continued) (Dollars In Thousands)
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- --------------
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Dividends paid to parent $ (35,000) $ - $ -
Policyholders' account balances:
Deposits 32,158 43,191 56,297
Withdrawals (net of transfers to/from Separate Accounts) (61,934) (77,460) (242,355)
------------- ------------- --------------
Net cash and cash equivalents used
by financing activities (64,776) (34,269) (186,058)
------------- ------------- --------------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (9,559) (3,528) (6,549)
CASH AND CASH EQUIVALENTS:
Beginning of year 17,387 20,915 27,464
------------- ------------- --------------
End of year $ 7,828 $ 17,387 $ 20,915
============= ============= ==============
Supplementary Disclosure of Cash Flow Information:
Cash paid (received) to (from) affiliates for:
Federal income taxes $ (1,812) $ 1,677 $ 482
Interest 440 447 352
</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 and
prevailing industry practices, both of which require management
to make estimates that affect the reported amounts and
disclosure of contingencies in the financial statements. Actual
results could differ from those estimates.
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% - 5.40%
Interest-sensitive deferred annuities 4.00% - 8.23%
Immediate annuities 3.00% - 10.00%
These rates may be changed at the option of the Company,
subject to minimum guarantees, after initial guaranteed rates
expire.
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 claims unreported.
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.
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 $183 that can be drawn upon for
delinquent reinsurance recoverables.
As of December 31, 1996, the Company had life insurance in-
force that was ceded to other life insurance companies of
$149,994.
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, that 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. 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.
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>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Beginning balance $ 17,654 $ 14,923 $ 15,614
Capitalized amounts 577 1,553 1,447
Interest accrued 1,566 2,138 1,407
Amortization (2,646) (960) (3,545)
----------- ----------- -----------
Ending balance $ 17,151 $ 17,654 $ 14,923
=========== =========== ===========
</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.
1997 $1,394
1998 995
1999 942
2000 905
2001 868
Investments: The Company's investments in fixed maturity and
equity securities are classified as available-for-sale
securities, which 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 as net realized investment gains (losses).
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.
Fixed maturity securities may contain securities which are
considered non-investment grade. The Company defines non-
investment grade fixed maturity securities as unsecured
corporate debt obligations that 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.
Mortgage loans 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 mortgage loans
that 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 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.
Impairments of mortgage loans are established as valuation
allowances and recorded to net realized investment gains or
losses.
The Company has previously made commercial mortgage loans
collateralized by real estate. The return on and the ultimate
recovery of these loans are generally dependent on the
successful operation, sale or refinancing of the real estate.
The Company monitors the effects of current and expected real
estate market conditions and other factors when assessing the
collectibility 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.
Policy loans on insurance contracts are stated at unpaid
principal balances.
Income Taxes: The results of operations of the Company are
included in the consolidated Federal income tax return of
Merrill Lynch & Co. The Company has entered into a tax-sharing
agreement with Merrill Lynch & Co. whereby the Company will
calculate its current tax provision based on its operations.
Under the agreement, the Company periodically remits to Merrill
Lynch & Co. its current federal tax liability.
The Company uses the asset and liability method in providing
income taxes on all transactions that have been recognized in
the financial statements. The asset and liability method
requires that deferred taxes be adjusted to reflect the tax
rates at which future taxable amounts will be settled or
realized. The effects of tax rate changes on future deferred
tax liabilities and deferred tax assets, as well as other
changes in income tax laws, are recognized in net earnings in
the period such changes are enacted. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amounts expected to be realized.
Insurance companies are generally subject to taxes on premiums
and in substantially all states are exempt from state income
taxes.
Separate Accounts: Separate Accounts are established in
conformity with New York State Insurance Law, the Company's
domiciliary state, and are generally not chargeable with
liabilities that arise from any other business of the Company.
Separate Accounts assets may be subject to general claims of
the Company only to the extent the value of such assets exceeds
Separate Accounts liabilities.
Assets and liabilities of Separate Accounts, representing net
deposits and accumulated net investment earnings less fees,
held primarily for the benefit of policyholders, are shown as
separate captions in the balance sheets.
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.
<PAGE>
NOTE 2. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments are carried at fair value or amounts that
approximate fair value. The carrying value of financial
instruments as of December 31 were:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Assets:
Fixed maturity securities (1) $ 269,103 $ 307,596
Equity securities (1) 10,859 3,534
Mortgage loans (2) 2,057 4,032
Policy loans on insurance contracts (3) 85,548 82,073
Cash and cash equivalents (4) 7,828 17,387
Separate Accounts assets (5) 591,814 544,432
------------ ------------
Total financial instruments recorded as assets $ 967,209 $ 959,054
============ ============
</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 model, 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, 1996 and 1995 securities
without a readily ascertainable market value, having an
amortized cost of $55,323 and $63,071, had an estimated
fair value of $57,018 and $66,367, respectively.
(2) The estimated fair value of mortgage loans 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 Separate Accounts are carried at quoted
market values.
<PAGE>
NOTE 3: INVESTMENTS
The amortized cost and estimated fair value of investments in
fixed maturity and equity securities as of December 31 were:
<TABLE>
<CAPTION>
1996
---------------------------------------------------------------------
Cost / Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Fixed maturity securities:
Corporate debt securities $ 212,290 $ 4,743 $ 556 $ 216,477
Mortgage-backed securities 46,204 827 383 46,648
U.S. government and agencies 830 230 - 1,060
Foreign governments 5,017 10 109 4,918
------------ ----------- ----------- -----------
Total fixed maturity securities $ 264,341 $ 5,810 $ 1,048 $ 269,103
============ =========== =========== ===========
Equity securities:
Non-redeemable preferred stocks $ 7,237 $ 2,429 $ 38 $ 9,628
Common stocks 1,738 260 767 1,231
------------ ----------- ----------- -----------
Total equity securities $ 8,975 $ 2,689 $ 805 $ 10,859
============ =========== =========== ===========
1995
---------------------------------------------------------------------
Cost / Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ----------- ----------- -----------
Fixed maturity securities:
Corporate debt securities $ 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 - 5,581
------------ ----------- ----------- -----------
Total fixed maturity securities $ 295,403 $ 12,761 $ 568 $ 307,596
============ =========== =========== ===========
Equity securities:
Non-redeemable preferred stocks $ 1,251 $ 1,149 $ - $ 2,400
Common stocks 1,766 135 767 1,134
------------ ----------- ----------- -----------
Total equity securities $ 3,017 $ 1,284 $ 767 $ 3,534
============ =========== =========== ===========
</TABLE>
<PAGE>
The amortized cost and estimated fair value of fixed maturity
securities at December 31, 1996 by contractual maturity were:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
----------- -----------
<S> <C> <C>
Fixed maturity securities:
Due in one year or less $ 36,508 $ 36,550
Due after one year through five years 125,060 128,214
Due after five years through ten years 45,087 46,196
Due after ten years 11,482 11,495
----------- -----------
218,137 222,455
Mortgage-backed securities 46,204 46,648
----------- -----------
Total fixed maturity securities $ 264,341 $ 269,103
=========== ===========
</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 at December 31, 1996 by rating agency equivalent
were:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
----------- -----------
<S> <C> <C>
AAA $ 61,677 $ 62,377
AA 19,178 19,791
A 64,297 65,091
BBB 107,256 109,782
Non-investment grade 11,933 12,062
----------- -----------
Total fixed maturity securities $ 264,341 $ 269,103
=========== ===========
</TABLE>
<PAGE>
The Company has recorded certain adjustments to deferred policy
acquisition costs and policyholders' account balances in
conjunction with investments classified as available-for-sale.
The Company adjusts those assets and liabilities as if the
unrealized investment gains or losses from securities
classified as available-for-sale had actually been realized,
with corresponding credits or charges reported directly to
shareholder's equity. The following reconciles the net
unrealized investment gain on investment securities classified
as available-for-sale as of December 31:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Assets:
Fixed maturity securities $ 4,762 $ 12,193
Equity securities 1,884 517
----------- -----------
6,646 12,710
----------- -----------
Liabilities:
Policyholders' account balances 4,962 10,342
Federal income taxes - deferred 589 829
----------- -----------
5,551 11,171
----------- -----------
Stockholder's equity:
Net unrealized investment gain on investment securities $ 1,095 $ 1,539
=========== ===========
</TABLE>
Proceeds and gross realized investment gains and losses from
the sale of available-for-sale securities for the years ended
December 31 were:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Proceeds $ 155,645 $ 68,736 $ 128,183
Gross realized investment gains 2,677 1,709 11,725
Gross realized investment losses 508 1,640 13,255
</TABLE>
The Company owned investment securities of $1,060 and $1,130
that were deposited with insurance regulatory authorities at
December 31, 1996 and 1995, respectively.
The Company's investment in mortgage loans are principally
collateralized by commercial real estate and are located in
California.
The Company had no impaired mortgage loans on real estate as of
December 31, 1996 and 1995.
<PAGE>
Additional information on impaired loans for the years ended
December 31 follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Average investment in impaired loans $ - $ 3,650 $ 5,475
Investment income recognized (cash basis) - 233 275
</TABLE>
Net investment income arose from the following sources for the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Fixed maturity securities $ 22,153 $ 25,046 $ 28,255
Equity securities 183 - -
Mortgage loans 388 686 975
Policy loans on insurance contracts 4,133 3,903 3,680
Cash and cash equivalents 1,559 1,103 659
----------- ----------- -----------
Gross investment income 28,416 30,738 33,569
Less investment expenses (896) (919) (890)
----------- ----------- -----------
Net investment income $ 27,520 $ 29,819 $ 32,679
=========== =========== ===========
</TABLE>
Net realized investment gains (losses), including changes in
valuation allowances, for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Fixed maturity securities $ 657 $ 985 $ (1,767)
Equity securities 1,512 (916) 237
Mortgage loans - (334) (688)
----------- ----------- -----------
Net realized investment gains (losses) $ 2,169 $ (265) $ (2,218)
=========== =========== ===========
</TABLE>
The following is a reconciliation of the change in valuation
allowances which have been recorded to reflect other-than-
temporary declines in estimated fair value of mortgage loans
for the years ended December 31, 1995 and 1994. During 1996,
there were no valuation allowances recorded:
<TABLE>
<CAPTION>
Balance at Additions Balance at
Beginning Charged to Write - End
of Year Operations Downs of Year
------------ ------------ ---------- -----------
<S> <C> <C> <C> <C>
1995 $ 1,536 $ - $ 1,536 $ -
1994 848 688 - 1,536
</TABLE>
<PAGE>
The Company held no investments at December 31, 1996 which have
been non-income producing for the preceding twelve months.
NOTE 4: FEDERAL INCOME TAXES
The following is a reconciliation of the provision for income
taxes based on earnings before federal income taxes, computed
using the Federal statutory tax rate, with the provision for
income taxes for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Provision for income taxes computed at Federal statutory rate $ 4,833 $ 5,334 $ 2,552
State corporate income taxes (10) (91) -
Decrease in income taxes resulting from:
Dividend received deduction (235) (31) (670)
Other 2 (34) (64)
----------- ----------- -----------
Federal income tax provision $ 4,590 $ 5,178 $ 1,818
=========== =========== ===========
</TABLE>
The Federal statutory rate for each of the three years in the
period ended December 31, 1996 was 35%.
The Company provides for deferred income taxes resulting from
temporary differences that arise from recording certain
transactions in different years for income tax reporting
purposes than for financial reporting purposes. The sources of
these differences and the tax effect of each are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Deferred policy acquisition costs $ (259) $ 1,239 $ 887
Policyholders' account balances 4,053 738 833
Liability for guaranty fund assessments 50 - -
Investment adjustments 642 1,445 1,117
Other 2 64 (806)
----------- ----------- -----------
Deferred Federal income tax provision $ 4,488 $ 3,486 $ 2,031
=========== =========== ===========
</TABLE>
<PAGE>
Deferred tax assets and liabilities as of December 31 are
determined as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Policyholders' account balances $ 4,224 $ 8,277
Investment adjustments 1,939 2,581
Other - 2
----------- -----------
Total deferred tax assets 6,163 10,860
----------- -----------
Deferred tax liabilities:
Deferred policy acquisition costs 6,150 6,409
Liability for guaranty fund assessments 50 -
Net unrealized investment gain 589 829
----------- -----------
Total deferred tax liabilities 6,789 7,238
----------- -----------
Net deferred tax asset (liability) $ (626) $ 3,622
=========== ===========
</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 accounting, data processing,
legal, actuarial, management, advertising and other services to
the Company. Expenses incurred by MLIG in relation to this
service agreement are reimbursed by the Company on an allocated
cost basis. Charges billed to the Company by MLIG pursuant to
the agreement were $4,258, $3,968 and $3,673 for 1996, 1995 and
1994 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 $74,
$88 and $50 for 1996, 1995 and 1994, 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 $186,
$206 and $203 for 1996, 1995 and 1994, 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 $1,334, $2,424 and $5,329 for
1996, 1995 and 1994, 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,
1996 and 1995, the outstanding balance of these loans was
$3,075. Repayments made on these loans during 1996, 1995, and
1994 were $0, $1,261 and $1,214, respectively. Interest was
calculated on these loans at LIBOR plus 150 basis points.
Intercompany interest paid on these loans during 1996, 1995 and
1994 was $366, $359 and $302, respectively.
NOTE 6: STOCKHOLDER'S EQUITY AND STATUTORY REGULATIONS
At December 31, 1996 and 1995, $41,214 and $58,790,
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. During 1996, the Company paid a
$35,000 dividend to MLIG. No dividends were declared or paid
during 1995 and 1994. Statutory capital and surplus at December
31, 1996 and 1995, was $52,895 and $72,113, 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 1996, 1995 and 1994 was
$12,884, $3,080 and $3,816, 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, 1996, and 1995, based on the
RBC formula, the Company's total adjusted capital level was
626% and 709%, 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, 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> 56
PART II. OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
ML Life Insurance Company of New York's By-Laws provide, in Article VII,
Section 7.1 as follows:
Indemnification of Directors, Officers, Employees and Incorporators. To the
extent permitted by the law of the State of New York and subject to all
applicable requirements thereof:
a) any person made or threatened to be made a party to any action or
proceeding, whether civil or criminal, by reason of the fact that he, his
testator, or intestate, is or was a director, officer, employee or
incorporator of the Company shall be indemnified by the Company;
b) any person made or threatened to be made a party to any action or
proceeding, whether civil or criminal, by reason of the fact that he, his
testator or intestate serves or served any other organization in any
capacity at the request of the Company may be indemnified by the Company;
and
c) the related expenses of any such person in any other of said
categories may be advanced by the Company.
Any persons serving as an officer, director or trustee of a corporation,
trust, or other enterprise, including the Registrant, at the request of Merrill
Lynch are entitled to indemnification from Merrill Lynch, to the fullest extent
authorized or permitted by law, for liabilities with respect to actions taken or
omitted by such persons in any capacity in which such persons serve Merrill
Lynch or such other corporation, trust, or other enterprise. Any action
initiated by any such person for which indemnification is provided shall be
approved by the Board of Directors of Merrill Lynch prior to such initiation.
DIRECTORS' AND OFFICERS' INSURANCE
Merrill Lynch has purchased from Corporate Officers' and Directors'
Assurance Company directors' and officers' liability insurance policies which
cover, in addition to the Indemnification described above, liabilities for which
indemnification is not provided under the By-Laws. The Company will pay an
allocable portion of the insurance premium paid by Merrill Lynch with respect to
such insurance policies.
NEW YORK BUSINESS CORPORATION LAW
In addition, Sections 722, 723, and 724 of the New York Business
Corporation Law generally provide that a corporation has the power (and in some
instances the obligation) to indemnify a director or officer of the corporation,
or a person serving at the request of the corporation as a director or officer
of another corporation or other enterprise against any judgments, amounts paid
in settlement, and reasonably incurred expenses in a civil or criminal action or
proceeding if the director or officer acted in good faith in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation (or, in the case of a criminal action or proceeding, if he or she in
addition had no reasonable cause to believe that his or her conduct was
unlawful).
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with
II-1
<PAGE> 57
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
REPRESENTATION PURSUANT TO SECTION 26(e)
ML Life Insurance Company of New York hereby represents that the fees and
charges deducted under the Contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by ML Life Insurance Company of New York.
II-2
<PAGE> 58
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The Prospectus consisting of 85 pages.
Undertaking to file reports.
Rule 484 Undertaking.
Representation Pursuant to Section 26(e).
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, L.L.P.
(d) Deloitte & Touche LLP, Independent Auditors
The following exhibits:
<TABLE>
<S> <C> <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 Post- Effective Amendment No. 8 to Form S-6 Registration
No. 33-61672 Filed April 29, 1997)
(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 Post-Effective Amendment No. 8 to Form S-6
Registration No. 33-61672 Filed April 29, 1997)
(b) Amended Sales Agreement between ML Life Insurance Company of New York
and Merrill Lynch Life Agency Inc. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 8 to Form S-6 Registration No.
33-61672 Filed April 29, 1997)
(c) Schedules of Sales Commissions (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 8 to Form S-6 Registration No.
33-61672 Filed April 29, 1997)
(4) Not applicable
(5) (a) (1) Flexible Premium Joint and Last Survivor Variable Universal Life
Insurance Policy
(b) (1) Backdating Endorsement (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 8 to Form S-6 Registration No. 33-61672
Filed April 29, 1997)
(2) (a) Additional Insurance Rider for Flexible Premium Joint and Last Survivor
Variable Universal Life Insurance Policy
(3) (a) Policy Split Rider for Flexible Premium Joint and Last Survivor Variable
Universal Life Insurance Policy
(6) (a) Charter of ML Life Insurance Company of New York (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 8 to Form S-6
Registration No. 33-61672 Filed April 29, 1997)
(b) By-Laws of ML Life Insurance Company of New York (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 8 to Form S-6
Registration No. 33-61672 Filed April 29, 1997)
(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
Post-Effective Amendment No. 8 to Form S-6 Registration No. 33-61672
Filed April 29, 1997)
(b) Agreement between ML Life Insurance Company of New York and Merrill
Lynch, Pierce, Fenner & Smith Incorporated (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 8 to Form S-6 Registration No.
33-61672 Filed April 29, 1997)
</TABLE>
II-3
<PAGE> 59
<TABLE>
<S> <C> <C> <C> <C> <C>
(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 Post-Effective Amendment No. 8 to Form S-6 Registration No.
33-61672 Filed April 29, 1997)
(e) Form of Participation Agreement Among ML Life Insurance Company of New
York, Alliance Capital Management L.P., and Alliance Fund Distributors,
Inc. (Incorporated by Reference to ML Life of New York Variable Annuity
Separate Account A's Post-Effective Amendment No. 10 to Form N-4
Registration No. 33-43654 Filed December 9, 1996)
(f) Form of Participation Agreement Among MFS Variable Insurance Trust, ML
Life Insurance Company of New York, and Massachusetts Financial Services
Company (Incorporated by Reference to ML Life of New York Variable
Annuity Separate Account A's Post-Effective Amendment No. 10 to Form N-4
Registration No. 33-43654 Filed December 9, 1996)
(g) Participation Agreement By and Among AIM Variable Insurance Funds, Inc.,
AIM Distributors, Inc., and ML Life Insurance Company of New York
(Incorporated by Reference to ML Life of New York Variable Annuity
Separate Account A's Post-Effective Amendment No. 11 to Form N-4
Registration No. 33-43654 Filed April 24, 1997)
(9) (a) Service Agreement between Tandem Financial Group, Inc. and Royal Tandem
Life Insurance Company (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 8 to Form S-6 Registration No. 33-61672
Filed April 29, 1997)
(b) Service Agreement between ML Life Insurance Company of New York and
Merrill Lynch Life Insurance Company (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 8 to Form S-6 Registration No.
33-61672 Filed April 29, 1997)
(10) (a) Variable Life Insurance Application (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 8 to Form S-6 Registration No.
33-61672 Filed April 29, 1997)
(b) Application for Reinstatement (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 8 to Form S-6 Registration No. 33-61672
Filed April 29, 1997)
(11) (a) Memorandum describing ML Life Insurance Company of New York's Issuance,
Transfer and Redemption Procedures (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration No.
33-61670 Filed March 1, 1994)
(11) (b) Supplement to 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. 8 to Form S-6
Registration No. 33-61672 Filed April 29, 1997)
2. See Exhibit 1.A.(5)
3. Opinion and Consent of Barry G. Skolnick, Esq. as to the legality of the securities
being registered (Incorporated by Reference to Registrant's Post-Effective Amendment
No. 5 to Form S-6 Registration No. 33-61670 Filed April 26, 1996)
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> 60
<TABLE>
<S> <C> <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)
</TABLE>
II-5
<PAGE> 61
<TABLE>
<S> <C> <C> <C> <C> <C>
(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. (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 2 to Form S-6
Registration No. 33-61670 Filed March 1, 1994)
(g) Power of Attorney of Gail R. Farkas (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration
No. 33-61670 Filed March 1, 1994)
(h) Power of Attorney of 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
Registrant's Post-Effective Amendment No. 2 to Form S-6 Registration
No. 33-61670 Filed March 1, 1994)
(j) Power of Attorney of Allen N. Jones (Incorporated by Reference to ML
Life of New York Variable Annuity Separate Account A's Post-Effective
Amendment No. 11 to Form N-4 Registration No. 33-43654 Filed April 24,
1997)
(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.
(b) Written Consent of Joseph E. Crowne, Jr., F.S.A. (See Exhibit 6)
(c) Written Consent of Sutherland, Asbill & Brennan, L.L.P.
(d) Written Consent of Deloitte & Touche LLP, Independent Auditors
27. Financial Data Schedule
</TABLE>
II-6
<PAGE> 62
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. 6 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. 6 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 21st day of April 1997.
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
(Registrant)
By: ML LIFE INSURANCE COMPANY OF NEW YORK
(Depositor)
<TABLE>
<S> <C> <C> <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. 6 to the Registration Statement has been signed
below by the following persons in the capacities indicated on April 21, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- ----------------------------------------
<S> <C>
* Chairman of the Board, President, and
- ---------------------------------------- Chief Executive Officer
Anthony J. Vespa
* Director, Senior Vice President, Chief
- ---------------------------------------- Financial Officer, Chief Actuary, and
Joseph E. Crowne, Jr. Treasurer
* Director, Senior Vice President, and
- ---------------------------------------- Chief Investment Officer
David M. Dunford
* Director and Senior Vice President
- ----------------------------------------
Gail R. Farkas
* Director, Vice President and Senior
- ---------------------------------------- Counsel
Michael P. Cogswell
</TABLE>
II-6
<PAGE> 63
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- ----------------------------------------
<S> <C>
* Director
- ----------------------------------------
Frederick J.C. Butler
* Director
- ----------------------------------------
Robert L. Israeloff
* Director
- ----------------------------------------
Allen N. Jones
* 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 Counsel,
Barry G. Skolnick Secretary and as Attorney-In-Fact
</TABLE>
II-7
<PAGE> 64
EXHIBIT INDEX
<TABLE>
<S> <C> <C> <C> <C>
1.A.5 (a) (1) Flexible Premium Joint and Last Survivor Variable Universal Life Insurance
Policy
1.A.5 (b) (2) (a) Additional Insurance Rider for Flexible Premium Joint and Last Survivor
Variable Universal Life Insurance Policy
1.A.5 (b) (3) (a) Policy Split Rider for Flexible Premium Joint and Last Survivor Variable
Universal Life Insurance Policy
6. Opinion and Consent of Joseph E. Crowne, F.S.A. as to actuarial matters
pertaining to the securities being registered
8.(a) Written Consent of Barry G. Skolnick, Esq.
8.(c) Written Consent of Sutherland, Asbill & Brennan, L.L.P.
8.(d) Written Consent of Deloitte & Touche LLP, Independent Auditors
27. Financial Data Schedule
</TABLE>
II-8
<PAGE> 1
EXHIBIT 1.A.(5)(a)(1)
<TABLE>
<S> <C>
ML LIFE INSURANCE COMPANY OF NEW YORK
Home Office: New York, New York
Variable Life Service Center: P.O. Box 9025, Springfield,
Massachusetts 01102-9025
Telephone: 1-800-354-5333
- --------------------------------------------------------------------------------------------------
INSURED NO. 1 RICHARD ROE
INSURED NO. 2 JANE ROE
POLICY NUMBER SPECIMEN
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR VARIABLE
UNIVERSAL LIFE INSURANCE POLICY
This policy is a legal contract between its owner and us.
PLEASE READ IT CAREFULLY. In this policy, the word YOU
refers to the owner shown on the policy schedule. WE, US,
and OUR refers to ML Life Insurance Company of New York.
- --------------------------------------------------------------------------------------------------
DEATH BENEFIT PROVIDED We will pay the death benefit proceeds to the beneficiary
BY THIS POLICY when we receive due proof of the death of the insured.
At issue, the death benefit equals this policy's initial
face amount plus any additional insurance rider face
amount. Afterwards, the death benefit may increase or
decrease on any day, depending on this policy's investment
results, but will never be less than this policy's face
amount. The duration for which the death benefit is in
effect may vary with the investment results, but will
never be less than this policy's guarantee period. For
details on death benefit proceeds and the guarantee
period, see INSURANCE BENEFITS.
- --------------------------------------------------------------------------------------------------
CASH VALUE BENEFITS During the lifetime of the last surviving insured while
PROVIDED BY this policy is in effect we provide cash value benefits
THIS POLICY and other important rights as described in this policy.
The cash value may increase or decrease on any day,
depending on the investment results for this policy. No
minimum amount is guaranteed. For information on cash
surrender values, see POLICY BENEFITS FOR THE OWNER.
- --------------------------------------------------------------------------------------------------
INVESTMENT RESULTS You may allocate this policy's total investment base among
FOR THIS POLICY the investment divisions. Each division invests in a
designated investment portfolio. Cash values and death
benefits may increase or decrease depending on the
investment experience of these investment divisions, the
allocation of the policy's investment base among the
divisions and the timing and amount of all premiums. For
details, see HOW VARIABLE LIFE INSURANCE WORKS.
- --------------------------------------------------------------------------------------------------
</TABLE>
- 1 -
VUL92NY SPECIMEN
<PAGE> 2
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
RIGHT TO EXAMINE This policy may be returned on or before the end of the
THIS POLICY FREE LOOK PERIOD. That period ends at the later of ten
days after you receive this policy, 45 days after you
execute the application, or ten days after we mail or
deliver to you the Notice of Withdrawal Rights. Mail or
deliver this policy to us or to the agent who sold it.
The returned policy will be treated as if we never issued
it. We will promptly return the premium paid.
/s/ BARRY G. SKOLNICK /s/ ALLEN JONES
--------------------- ---------------
BARRY G. SKOLNICK ALLEN JONES
Secretary President
- --------------------------------------------------------------------------------------------------
FLEXIBLE PREMIUM JOINT Variable universal life insurance payable upon death of
AND LAST SURVIVOR the last surviving insured. Death benefit subject to
VARIABLE UNIVERSAL guaranteed minimum during guarantee period. Guaranteed
LIFE INSURANCE POLICY minimum is policy's face amount. Flexible premiums. Non-
participating. Investment results reflected in policy
benefits.
- --------------------------------------------------------------------------------------------------
</TABLE>
- 2 -
VUL92NY SPECIMEN
<PAGE> 3
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
POLICY CONTENTS
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
POLICY SCHEDULE Page 3
DEFINITIONS 4
INTRODUCTION TO THIS POLICY 5
PREMIUM PAYMENTS 7
HOW VARIABLE LIFE INSURANCE WORKS 9
POLICY BENEFITS FOR THE OWNER 13
INSURANCE BENEFITS 16
CHOOSING AN INCOME PLAN 18
OTHER IMPORTANT INFORMATION 21
APPENDIX 1 24
APPENDIX 2 25
A copy of the application(s) and any additional benefit and endorsements are
at the back of this policy.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Policy Schedule The Policy Schedule comes right after this page. It gives
specific facts about this policy and its coverage. Please
refer to it while reading this policy.
</TABLE>
- 3 -
VUL92NY SPECIMEN
<PAGE> 4
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
POLICY SCHEDULE
- ------------------------------------------------------------------------------------------------
<S> <C>
INSURED NO. 1 Richard Roe
NO. 1 ISSUE AGE/SEX 35 Male
NO. 1 UNDERWRITING CLASS Standard Non-Smoker
INSURED NO. 2 Jane Roe
NO. 2 ISSUE AGE/SEX 35 Female
NO. 2 UNDERWRITING CLASS Standard Non-Smoker
INITIAL PREMIUM $25,000.00
INITIAL FACE AMOUNT $1,000,000.00
BASE PREMIUM $5,636.82
INITIAL ADDITIONAL INSURANCE
RIDER FACE AMOUNT $500,000.00
ISSUE DATE September 30, 1992
POLICY DATE September 30, 1992
POLICY NUMBER SPECIMEN
OWNER Jane Roe
INITIAL GUARANTEE PERIOD The Initial Guarantee Period is 33.50
years.
((SALES LOAD (only included if applicable regulations
under the Investment Company Act of 1940
require a reduced sales load) ))
RIDERS (( Additional Insurance Rider (only if
elected) ))
Policy Split Rider
((THIS IS A MODIFIED ENDOWMENT CONTRACT.))
</TABLE>
- 4 -
VUL92NY SPECIMEN
<PAGE> 5
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------
DEFINITIONS
- ------------------------------------------------------------------------------------------------
OWNER The owner has the rights and options as described in this
policy. The owner is shown on the Policy Schedule.
- ------------------------------------------------------------------------------------------------
BENEFICIARY The beneficiary is the person to whom we pay the proceeds
upon the death of the last surviving insured.
- ------------------------------------------------------------------------------------------------
BASE PREMIUM The base premium is the amount equal to the level annual
premium necessary for the face amount of the policy to
endow on the policy anniversary nearest the insured's
100th birthday. We assume a 5% annual rate of return on
the base premium less premium loading and guaranteed
maximum cost of insurance rates shown in Appendix 1.
Once determined, the base premium will not change. The
base premium is shown on the Policy Schedule.
- ------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT The ML of New York Variable Life Separate Account II is
governed by the laws of New York, our state of domicile.
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENT The total investment base is the amount that this
BASE policy provides for investment at any time. It is the
sum of the investment base in each of the investment
divisions.
- ------------------------------------------------------------------------------------------------
FIXED BASE The fixed base on the policy date of this policy equals
this policy's cash value. Thereafter, the fixed base is
calculated in the same manner as the cash value except
that all calculations are based on the guaranteed maximum
cost of insurance rates and a 5% annual rate of interest.
The fixed base calculation does not reflect policy loans
and repayments.
- ------------------------------------------------------------------------------------------------
CASH VALUE The cash value on any date equals the total investment
base, plus policy debt, less any accrued net loan cost
since the last policy anniversary (or since the policy
date during the first policy year), plus any unearned
charges for cost of insurance and rider costs.
- ------------------------------------------------------------------------------------------------
VARIABLE INSURANCE The variable insurance amount equals the cash value
AMOUNT corridor factor for the younger insured at his or her
attained age multiplied by the sum of cash value plus any
excess sales load as calculated under applicable
regulations in effect under the Investment Company Act of
1940. The variable insurance amount will vary daily
based on the investment results, any premium payments
made, any partial withdrawals taken and any loans taken.
In no event will the variable insurance amount be less
than that required to keep this policy qualified as life
</TABLE>
- 5 -
VUL92NY SPECIMEN
<PAGE> 6
<TABLE>
<S> <C>
insurance under the federal income tax laws. The table
of cash value corridor factors is shown in Appendix 2.
- ------------------------------------------------------------------------------------------------
GUARANTEE PERIOD The guarantee period is the period for which the policy
face amount and any additional insurance rider face
amount are guaranteed to remain in effect unless debt
exceeds certain values. It is calculated assuming the
cash value accrues interest at an annual rate of 5% and
guaranteed maximum cost of insurance rates and rider
costs are deducted.
</TABLE>
- 6 -
VUL92NY SPECIMEN
<PAGE> 7
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------
INTRODUCTION TO THIS POLICY
This policy insures the life of the insureds listed on the
Policy Schedule. Insured No. 1 is the owner of this
policy unless another owner has been named in the
application. If there is more than one owner, the owners
must exercise their rights and options jointly. We
reserve the right to limit the number of owners.
- -------------------------------------------------------------------------------------------------
THIS POLICY IS A This policy is a contract between you and us. We provide
CONTRACT insurance coverage and other benefits as stated in this
policy. We do this in return for a completed application
and payment of the initial premium.
Whenever we use the word policy, we mean the entire
contract. The entire contract consists of:
- the basic policy;
- the attached copy of the initial application and
medical exam(s);
- all attached subsequent applications and amendments to
change the basic policy; and
- any riders or endorsements.
Riders and endorsements add provisions or change the terms
of the basic policy.
- -------------------------------------------------------------------------------------------------
DATES AND AGES The following dates and ages are referred to in this
REFERRED TO IN THIS policy.
POLICY DATE OF ISSUE
This is the date this policy is issued at our Service
Center. The contestable and suicide periods are measured
from this date.
POLICY DATE
This date is used to determine policy processing dates,
policy years and anniversaries. It is generally one
business day after the premium is received by us. See the
Policy Schedule. The policy date may or may not be the
same as the date of issue. The policy processing dates
are the days when we deduct charges. They are the policy
date and the same day of the month as the policy date at
the end of each successive three month period. A policy
processing period is the period between successive policy
processing dates.
ISSUE AGE
For each insured, this is the insured's age on the
insured's birthday nearest to the policy date.
ATTAINED AGE
For each insured, this is the insured's age plus the
number of full years elapsed since the policy date.
MATURITY DATE
The maturity date of this policy is the policy anniversary
nearest the younger insured's 100th birthday.
- -------------------------------------------------------------------------------------------------
</TABLE>
- 7 -
VUL92NY SPECIMEN
<PAGE> 8
<TABLE>
<S> <C>
RIGHT TO NAME A You may name a contingent owner. If you die before a
CONTINGENT OWNER death benefit is payable under this policy, your interest
in this policy will then pass to the contingent owner. If
there's no contingent owner, your interest will pass to
your estate.
- -------------------------------------------------------------------------------------------------
THE BENEFICIARY Upon the death of the last surviving insured, we pay the
death benefit proceeds to the primary beneficiary. If the
primary beneficiary (whether or not irrevocable) has died,
the proceeds are paid to any contingent beneficiary. If
there is no surviving beneficiary, we pay the proceeds to
the estate of the last surviving insured. One or more
persons may be named as primary beneficiaries or
contingent beneficiaries. In that case we will assume the
proceeds are to be paid in equal shares to the surviving
beneficiaries. The owner can specify other than equal
shares. If an irrevocable beneficiary has been
designated, you and the irrevocable beneficiary must act
together to exercise certain rights and options under this
policy.
- -------------------------------------------------------------------------------------------------
CHANGE OF OWNER OR During either insured's lifetime, with the consent of any
BENEFICIARY irrevocable beneficiary, you can transfer ownership of
this policy and change the beneficiary. To do this, you
must send us written notice of the change in a form
satisfactory to us. The change will take effect as of the
day the notice is signed. However, the change will not
affect any payment made or action taken by us before
receipt of the notice of the change at our Service Center.
- -------------------------------------------------------------------------------------------------
SENDING NOTICE TO Any written notices or requests should be sent to our
US Service Center in a form satisfactory to us. The address
is shown on the front of this policy. Please include your
name, the name of the insured and the policy number.
- -------------------------------------------------------------------------------------------------
</TABLE>
- 8 -
VUL92NY SPECIMEN
<PAGE> 9
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------
PREMIUM PAYMENTS
- -------------------------------------------------------------------------------------------------
WHEN TO PAY Payment of the initial premium is required to put this
PREMIUMS policy in effect. The amount of the initial premium is
shown on the Policy Schedule.
- -------------------------------------------------------------------------------------------------
WHERE TO PAY Pay the premiums to our Service Center.
PREMIUMS
- -------------------------------------------------------------------------------------------------
ADDITIONS PREMIUMS After the end of the free look period, if an insured is
alive, the owner may pay additional premiums under this
policy. To make an additional premium payment, the owner
must provide us with notice at our Service Center. We
reserve the right to return any portion of the additional
premiums that would case this policy to become a modified
endowment contract, under applicable tax law as
interpreted by us, unless you consent. We may also return
any portion of the additional premium that would cause
this policy to fail to qualify as life insurance under
applicable tax laws as interpreted by us. Any amount of
additional premium beyond that necessary to extend the
guarantee period to the whole of life of the younger
insured will be returned to you.
The minimum additional premium is $100. Unless otherwise
specified by the owner, if there is any policy debt, any
additional premiums paid will be applied as a loan
repayment, with any excess used as an additional premium.
See POLICY LOANS.
As of the policy processing date on or next following the
date of receipt and acceptance of an additional premium
the guarantee period may increase. See THE GUARANTEE
PERIOD.
The variable insurance amount will also reflect this
premium.
- -------------------------------------------------------------------------------------------------
ALLOCATION OF As of the date we receive and accept an additional premium
ADDITIONAL PREMIUMS payment, the increase in the total investment base will be
allocated among the investment divisions in accordance
with instructions from the owner. If no such instructions
are received by us, allocation will be among the
investment divisions in the same proportion as the
investment base in each division bears to the total
investment base as of the date we receive and accept the
premium.
- -------------------------------------------------------------------------------------------------
</TABLE>
- 9 -
VUL92NY SPECIMEN
<PAGE> 10
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------
PREMIUM LOADING As of the date we receive and accept any premium:
- The investment base will increase by the amount of
the payment less: (1) a sales load of 46.25% of each
payment through the second base premium and 1.25% of
each base premium paid after the second; (2) a
premium tax charge of 2.00% of each premium paid;
(3) a charge for federal taxes of 1.25% of each
premium paid. These charges are deducted before
allocation to applicable investment divisions.
We may also deduct a charge for other assessments of
federal premium taxes or federal, state or local excise,
profits or income taxes measured by or attributable to the
receipt of premiums. We also reserve the right to deduct
from the separate account any taxes imposed on the
separate account earnings.
If your sales load will be less than the sales load
described above, it will be shown on the Policy Schedule.
In no event will the sales load exceed the amount
permitted by applicable regulations in effect under the
Investment Company Act of 1940.
- -------------------------------------------------------------------------------------------------
GRACE PERIOD After the end of the guarantee period, we will terminate
this policy at the end of the grace period if the
quarterly charges are greater than the cash value on a
policy processing date.
The grace period will end 61 days after we mail a notice
to the owner that we may terminate this policy because of
insufficient cash value. To avoid termination, you must
pay us an amount which after deducting premium loading
equals at least three (3) times the charges that were due
on the policy processing date on which we determined that
the cash value was insufficient. However, see Policy
Loans. This amount will be specified on the notice we
send. If we do not receive such amount at our Service
Center before the end of the grace period, this policy
will terminate. At that time, we deduct any charges for
cost of insurance and rider costs applicable to the grace
period and refund to you any unearned charges for cost of
insurance and rider costs. If the insured dies during the
grace period, we will pay the beneficiary the insurance
benefits as described in PROCEEDS PAYABLE TO THE
BENEFICIARY.
- -------------------------------------------------------------------------------------------------
</TABLE>
- 10 -
VUL92NY SPECIMEN
<PAGE> 11
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------
HOW TO REINSTATE If we have terminated this policy at the end of the grace
THIS POLICY period, you may reinstate it provided the insured had not
died between the date we terminated this policy and the
effective date of reinstatement if:
- You ask for reinstatement within three (3) years
after the end of the grace period;
- We receive satisfactory evidence of the insured's
insurability; and
- You pay us at least the minimum premium for which we
would then issue this policy based on the policy
year and underwriting class of the insured as of the
effective date of the reinstated policy.
The effective date of the reinstated policy will be the
policy processing date on or next following the date we
approve the reinstatement application.
- -------------------------------------------------------------------------------------------------
</TABLE>
- 11 -
VUL92NY SPECIMEN
<PAGE> 12
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------
HOW VARIABLE LIFE INSURANCE WORKS
- -------------------------------------------------------------------------------------------------
THE SEPARATE The variable life insurance benefits under this policy are
ACCOUNT provided through investments made in the separate account.
This account is kept separate from our general account and
any other separate accounts we may have. It is used to
support variable life insurance policies and may be used
for other purposes permitted by applicable laws and
regulations. We own the assets in the separate account.
Assets equal to the reserves and other liabilities of the
account will not be charged with liabilities that arise
from any other business we conduct. However, we may
transfer to our general account assets which exceed the
reserves and other liabilities of the separate account.
The separate account will invest in mutual funds, unit
investment trusts and other investment portfolios which we
determine to be suitable for this policy's purposes. The
separate account is a unit investment trust under federal
securities laws. It is registered with the Securities and
Exchange Commission (SEC) under the Investment Company Act
of 1940.
Income, realized and unrealized gains or losses from
assets in the separate account are credited to or charged
against the account without regard to other income, gains
or losses in our other separate accounts or general
account.
- -------------------------------------------------------------------------------------------------
INVESTMENT DIVISIONS The separate account is divided into investment divisions.
Each investment division invests in a designated
investment portfolio. The divisions and the investment
portfolios in which they invest are described in the
prospectus.
Each investment division will be valued at the end of each
valuation period. A valuation period is each business day
together with any non-business days before it. A business
day for a division is any day the New York Stock Exchange
(NYSE) is open for trading or any day in which the SEC
requires that the mutual funds, unit investment trusts or
other investment portfolios be valued.
- -------------------------------------------------------------------------------------------------
</TABLE>
- 12 -
VUL92NY SPECIMEN
<PAGE> 13
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------
CHANGES TO THE We may from time to time make additional investment
SEPARATE ACCOUNT divisions available. These divisions will invest in
investment portfolios we find suitable for this policy.
We also have 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 our judgment, a
portfolio no longer suits the purposes of this policy.
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. We
would get any required prior approval from the insurance
department of our state of domicile before making such a
substitution. We would also get any required prior
approval from the SEC and any other required approvals
before making such a substitution.
Subject to any required regulatory approvals, we reserve
the right to transfer assets of the separate account or of
an investment division, which we determine to be
associated with the class of policies to which this policy
belongs, to another separate account or investment
division.
When permitted by law, we reserve the right to:
- Deregister the separate account under the Investment
Company Act of 1940;
- Operate the separate account as a management
investment company under the Investment Company Act
of 1940;
- Restrict or eliminate any voting rights of
policyowners or other persons who have voting rights
as to the separate account; and
- Combine the separate account with other separate
accounts.
- -------------------------------------------------------------------------------------------------
ALLOCATION OF The owner selects the divisions to which to allocate the
TOTAL INVESTMENT total investment base. The maximum number of divisions to
BASE which the total investment base may be allocated at any
one time is five (5).
The owner can change the allocation of the total
investment base among the investment divisions. The
number of allocation changes per year is unlimited. We
reserve the right to charge up to $25 for each transfer in
excess of six (6) per year. No allocation changes are
allowed during the free look period. To make a change,
the owner must provide us with satisfactory notice at our
Service Center. The change will take effect when we
receive the notice. Our calculations will reflect the
change.
- -------------------------------------------------------------------------------------------------
</TABLE>
- 13 -
VUL92NY SPECIMEN
<PAGE> 14
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------
INVESTMENT BASE IN ON THE POLICY DATE
EACH INVESTMENT On the policy date, your initial premium is reduced by the
DIVISION premium loading. See PREMIUM LOADING. The balance is
your total investment base which allocated to the Money
Reserve investment division. Then we deduct quarterly
charges. The resulting amount remains in the Money
Reserve investment division at least until the end of the
free look period. After that, upon notice in a form
satisfactory to us, you may allocate any portion of your
total investment base to other investment divisions. See
ALLOCATION OF TOTAL INVESTMENT BASE. After the free look
period, the owner may pay additional premiums under this
policy. See ADDITIONAL PREMIUMS.
ON EACH SUBSEQUENT BUSINESS DAY
On each subsequent business day, the investment base in
each division is an amount calculated as follows:
(1) We take the investment base in the division at the
end of the preceding valuation period.
(2) We multiply (1) by the division's net rate of return
for the current valuation period.
(3) We add (1) and (2).
(4) We add to (3) any premiums allocated to the division
during the current valuation period less any premium
loading deducted before allocation.
(5) We add to (4) any loan repayments received and
subtract from (4) any borrowed amounts which are
allocated to the division during the current
valuation period.
(6) We add any amounts transferred to the investment
division and subtract any amounts transferred from
the investment division since the end of the
preceding valuation period.
(7) If the business day is a policy processing date, we
subtract from (6) the following amounts allocated to
that division for the next policy processing period
(sometimes referred to as quarterly charges):
(a) cost of insurance;
(b) any other fees we describe in this
policy; and
(c) any rider charges deducted from the
investment base.
If a policy processing date is on a policy
anniversary, we also subtract:
(d) any net loan cost.
All amounts in (7) will be allocated to each
division in the same proportion as (3) bears to the
total investment base.
(8) If the charges in (7) exceed the amount in (6), we
will notify you of the amount due.
- -------------------------------------------------------------------------------------------------
</TABLE>
- 14 -
VUL92NY SPECIMEN
<PAGE> 15
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------
CHARGES DEDUCTED COST OF INSURANCE
FROM INVESTMENT BASE We will determine the cost of insurance on each policy
processing date as follows:
(1) We determine the policy's net amount at risk as of
the policy processing date, which is equal to:
(a) the death benefit as of the policy processing
date adjusted for interest at the rate of 5%
per year, less
(b) the cash value as of the policy processing
date but before deduction for the cost of
insurance.
(2) We divide (1) by $1,000.
(3) We determine the current cost of insurance rate per
$1,000 based on the policy year, sex and
underwriting class of the both insureds.
(4) We multiply (2) by (3).
We may change the current cost of insurance rates per
$1,000 from time to time. Any change in the current rates
will be as described in CHANGES IN POLICY COST FACTORS.
They will never be more than the guaranteed maximum cost
of insurance rates per $1000 shown in Appendix 1.
OTHER DEDUCTIONS
The net loan cost is described in the POLICY LOANS
provision. The cost and frequency of deduction of any
benefits from riders are shown on the Policy Schedule
unless otherwise provided for in the rider. An asset
charge at a daily rate of .002477% (equivalent to .90%
annually in advance) and a trust charge at a daily rate
currently of .000933% (equivalent to .34% annually in
advance) are deducted from appropriate investment
divisions in the separate account.
We reserve the right to increase the trust charge but in
no event above a daily rate of .001373% (equivalent to
.50% annually in advance).
- ------------------------------------------------------------------------------------------------------
WHAT HAPPENS ON THE If part of the total investment base is allocated to an
MATURITY DATE OF AN investment division that has a maturity date, then, unless
INVESTMENT DIVISION otherwise specified by the owner, the amounts in that
division as of the maturity date will be allocated to the
Money Reserve investment division. We will notify the
owner 30 days in advance of the maturity date. To elect
an allocation to other than the Money Reserve investment
division, the owner must provide satisfactory notice to us
at least seven (7) days prior to the maturity date. The
allocation on a maturity date will not be considered a
change in the allocation of the investment base for
purposes of the number of changes permitted before a
charge may be applied.
- ------------------------------------------------------------------------------------------------------
</TABLE>
- 15 -
VUL92NY SPECIMEN
<PAGE> 16
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------
MEASUREMENT OF The investment experience of an investment division is
INVESTMENT determined at the end of each division's valuation period.
EXPERIENCE
INDEX OF INVESTMENT EXPERIENCE
We use an index to measure changes in each investment
division's experience during a valuation period. We set
the index at $10 when the first investments in that
division were made. The index for a current valuation
period equals the index for the preceding valuation period
multiplied by the experience factor for the current
period.
HOW WE DETERMINE THE EXPERIENCE FACTOR
The experience factor for an investment division's
valuation period reflects the investment experience of the
portfolio in which the division invests as well as the
charges assessed against the division. The factor is
calculated as follows:
(1) We take the net asset value as of the end of the
current valuation period of the portfolio in which
the division invests.
(2) We add to (1) the amount of any dividend or capital
gains distribution declared during the current
valuation period for the investment portfolio. We
subtract from that amount a charge for our taxes, if
any.
(3) We divide (2) by the net asset value of the
portfolio at the end of the preceding valuation
period.
(4) We subtract the daily asset charge for each day in
the valuation period. This charge is to cover
expense, mortality and minimum death benefit
guarantee risks that we are assuming.
(5) For any divisions investing in unit investment
trusts only, we subtract an additional charge equal
to the daily trust charge for each day in the
valuation period. This charge is to cover the
actual costs incurred in the purchase or sale of
units of the trusts.
The net asset value of an investment company's shares held
in each investment division shall be the value reported to
us by the investment company. Such net asset value will
be net of any investment advisory fees and other expenses
of such investment company.
Calculations for divisions investing in the mutual fund
portfolios are made on a per share basis. Calculations
for divisions investing in unit investment trusts are on a
per unit basis.
- ------------------------------------------------------------------------------------------------------
</TABLE>
- 16 -
VUL92NY SPECIMEN
<PAGE> 17
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------
NET RATE OF RETURN Here's how to determine an investment division's net rate
FOR AN INVESTMENT of return for a valuation period:
DIVISION (1) We determine the change in the division's index from
the preceding valuation period to the current
valuation period.
(2) We divide this by the index for the preceding
valuation period.
We follow a consistent method for longer periods of time.
- ------------------------------------------------------------------------------------------------------
</TABLE>
- 17 -
VUL92NY SPECIMEN
<PAGE> 18
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------
POLICY BENEFITS FOR THE OWNER
There are important rights and benefits that are available
to the owner of this policy during the lifetime of either
insured. Many of these rights and benefits are enumerated
in this section.
- ------------------------------------------------------------------------------------------------------
</TABLE>
- 18 -
VUL92NY SPECIMEN
<PAGE> 19
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------
PARTIAL WITHDRAWAL REQUIREMENTS FOR EACH PARTIAL WITHDRAWAL
Each partial withdrawal is subject to the following
requirements:
- The minimum partial withdrawal is $1,000. The
remaining cash value less any policy debt following
a partial withdrawal must equal or exceed $5,000.
Withdrawals are permitted once each policy year,
beginning in policy year 16.
- The amount of a partial withdrawal may not exceed
the loan value as of the effective date of a partial
withdrawal, less any existing policy debt as of such
date.
- A partial withdrawal may not be repaid.
REQUESTING A PARTIAL WITHDRAWAL
The request for a partial withdrawal must be in a form
satisfactory to us. The effective date of the withdrawal
will be the date the request is received at our Service
Center.
EFFECT OF A PARTIAL WITHDRAWAL ON TOTAL INVESTMENT BASE,
CASH VALUE AND DEATH BENEFIT
As of the effective date of a partial withdrawal:
- The total investment base, cash value, fixed base
and, if you have elected death benefit Option 1, the
face amount of this policy, each will be reduced by
the amount of the partial withdrawal.
- The reduction in the total investment base will be
allocated among the investment divisions in
accordance with your instructions. If no such
instructions are received by us, allocation will be
among the investment divisions in the same
proportion as the investment base in each division
bears to the total investment base as of the
effective date of the partial withdrawal.
- The variable insurance amount will reflect the
partial withdrawal.
As of the policy processing date on or next following the
effective date of a partial withdrawal, the guarantee
period will decrease.
EFFECT OF A PARTIAL WITHDRAWAL ON GUARANTEED PERIOD
As of the policy processing date on or next following the
effective date of a partial withdrawal, the guarantee
period will decrease as follows:
(1) We determine the immediate decrease in cash value
resulting from the partial withdrawal.
(2) We add to (1) interest at the annual rate of 5% for
the period from the date of the withdrawal to the
policy processing date on or next following such
date. This is the guarantee adjustment amount.
(3) We subtract the guarantee adjustment amount from the
fixed base and use the new fixed base to calculate a
new guarantee period.
- ---------------------------------------------------------------------------------------------------
</TABLE>
- 19 -
VUL92NY SPECIMEN
<PAGE> 20
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------
PARTIAL WITHDRAWAL WHEN WE WILL PAY THE PARTIAL WITHDRAWAL
(CONTINUED) We'll usually pay the amount of the partial withdrawal
within seven (7) days after we receive a request
satisfactory to us. But we may delay paying the amount of
the partial withdrawal when:
- The NYSE is closed for trading except for a normal
holiday closing; or
- The SEC determines that a state of emergency exists.
- ------------------------------------------------------------------------------------------------------
CASH VALUE BENEFITS SURRENDERING YOUR POLICY
You can surrender this policy at any time and receive its
cash value less any policy debt. This amount may be paid
in cash or under one or more income plans. See CHOOSING
AN INCOME PLAN. To surrender this policy, the owner must
return it to our Service Center with a signed request for
surrender in a form satisfactory to us. The right to a
death benefit will end on the date the request is sent to
us. The cash value will vary daily. We will determine
the cash value as of the date we receive this policy and
the signed request at our Service Center. We will usually
pay the cash value less any policy debt within seven (7)
days. But we may delay payment when we are not able to
determine the amount because:
- The NYSE is closed for trading except for a normal
holiday closing; or
- The SEC determines that a state of emergency exists.
If the policy is surrendered during the first two policy
years, we will refund a part of the sales load to the
extent required by regulations in effect under the
Investment Company Act of 1940.
- ------------------------------------------------------------------------------------------------------
</TABLE>
- 20 -
VUL92NY SPECIMEN
<PAGE> 21
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------
POLICY LOANS You may borrow money from us. The maximum amount you may
borrow is the loan value. This policy will be the only
security we require for the loan. A loan may be taken any
time this policy is in effect. You may repay all or part
of the loan at any time while either insured is living.
LOAN VALUE
The loan value is 90% of the cash value. The maximum loan
amount that may be borrowed at any time is the difference
between the loan value and the policy debt. The minimum
permissible amount of any loan and minimum repayment
amount are each $200.
INTEREST AND NET LOAN COST
Interest accrues (builds up) each day on your outstanding
loan. The sum of all outstanding loans plus accrued
interest is called policy debt. The amount held in the
general account for loans (see EFFECT OF A LOAN) earns
interest. On each policy anniversary, the investment base
is increased by the interest earned on the amount held in
the general account and decreased by the interest accrued
on the policy debt. The difference between the interest
accrued on the policy debt and the interest earned on the
amount held in the general account is called the net loan
cost.
The net loan cost will be calculated as follows:
(1) We determine the policy debt as of the previous
policy anniversary and take into account loans and
repayments made during the policy year.
(2) We multiply (1) by the loan interest rate less the
annual rate of interest earned on the amount held in
the general account for loans.
The maximum loan interest rate is 6% pr year. The amount
held in the general account for loans earns interest at a
minimum rate of 4% annually.
Interest payments are due at the end of each policy year.
If interest isn't paid when due, an amount equal to the
interest due will be added to your outstanding loan amount
and interest will accrue on this new loan amount.
- ------------------------------------------------------------------------------------------------------
</TABLE>
- 21 -
VUL92NY SPECIMEN
<PAGE> 22
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------
POLICY LOANS INTEREST AND NET LOAN COST (CONTINUED)
(CONTINUED)
The loan interest rate and the annual rate of interest
earned on the loan amount transferred to the general
account are set on each policy anniversary.
EFFECT OF A LOAN
An amount equal to the loan will be transferred out of the
separate account and into our general account. At the
time of a repayment, an amount equal to a repayment will
be transferred out of the general account and into the
separate account. A policy loan and the net loan cost
reduce the total investment base while repayment of a loan
will cause an increase in the total investment base.
Loans, repayments and the net loan cost will be allocated
among the investment divisions in accordance with your
instructions. You may change that allocation by sending
satisfactory notice to us. If no such instructions are on
record, the loan, repayment or net loan cost will be
allocated in the same proportion as the investment base in
each division bears to the total investment base as of the
date of the loan, repayment or deduction of net loan cost.
A loan, WHETHER OR NOT REPAID, will have a PERMANENT
EFFECT on the cash values and may have a permanent effect
on the death benefits. If not repaid, the policy debt
will reduce the amount of death benefit proceeds and cash
value benefits.
Loans and repayments during a policy year will affect our
calculations.
If on the policy processing date, the policy debt exceeds
the larger of:
(a) The cash value plus any excess sales load
calculated in accordance with applicable
regulations in effect under the Investment
Company Act of 1940 less quarterly charges and
(b) the fixed base,
we will terminate this policy. We will not do this,
however, until 61 days after we mail notice of our intent
to terminate. We will notify you at your last known
address. Upon termination, we deduct any charges for cost
of insurance and rider costs applicable to the 61 day
period and refund to you any unearned charges for cost of
insurance and rider costs.
WHEN WE WILL MAKE THE LOAN
We will usually loan the money within seven (7) days after
we receive a request in a form satisfactory to us. But we
may delay making the loan when we are not able to
determine the loan value because:
- The NYSE is closed for trading except for a normal
holiday closing; or
- The SEC determines that a state of emergency exists.
- ------------------------------------------------------------------------------------------------------
</TABLE>
- 22 -
VUL92NY SPECIMEN
<PAGE> 23
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------
ASSIGNMENT - USING You may assign this policy as collateral security for a
THIS POLICY AS loan or other obligation. This does not change the
COLLATERAL SECURITY ownership. But your rights and any beneficiary's rights
are subject to the terms of the assignment. To make or
release an assignment, we must receive written notice,
satisfactory to us, at our Service Center. We are not
responsible for the validity of any assignment.
- ------------------------------------------------------------------------------------------------------
RIGHT TO FIXED LIFE The owner may exchange this policy for a joint and last
BENEFITS survivor policy with benefits that do not vary with the
investment results of a separate account. No evidence of
insurability will be required.
We'll issue the new policy on your life after we receive:
- A proper written request; and
- This policy.
OTHER FACTS ABOUT THE NEW POLICY
The new policy's owner, insureds and beneficiary will be
the same as those of this policy as of the date of
exchange. The new policy will have the same death benefit
and the same net amount at risk as this policy at the time
of exchange. The new policy will also have the same issue
age, issue date, face amount, cash value, underwriting
class and benefit riders as this policy. Any policy debt
under this policy will be carried over to the new policy.
- ------------------------------------------------------------------------------------------------------
</TABLE>
- 23 -
VUL92NY SPECIMEN
<PAGE> 24
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------
INSURANCE BENEFITS
- ------------------------------------------------------------------------------------------------------
THE GUARANTEE PERIOD ON THE POLICY DATE
The initial guarantee period and initial face amount on
the policy date are shown on the Policy Schedule. The
guarantee period and face amount are not affected by
investment results nor the allocation of the total
investment base among the investment divisions. The
guarantee period will change as described below as a
result of any additional premiums.
WHEN AN ADDITIONAL PREMIUM IS PAID
The guarantee period will increase as follows:
(1) We determine the immediate increase in cash value
resulting from the additional premium less premium
loading. See PREMIUM LOADING.
(2) We add to (1) interest at the annual rate of 5% for
the period from the date we receive and accept the
additional premium to the policy processing date on
or next following such date. This is the guarantee
adjustment amount.
(3) If the guarantee period prior to payment is less
than for the lifetime of the younger insured, the
guarantee adjustment amount is added to the fixed
base and the new fixed base will be used to
calculate a new guarantee period. Any excess amount
of additional premium beyond that necessary to
extend the guarantee period to the whole of life of
the younger insured will be turned to you.
AUTOMATIC ADJUSTMENT
On any policy anniversary if the cash value is greater
than the fixed base necessary to cause the guarantee
period to equal the whole of life of the younger insured,
the guarantee period will be extended to the whole of life
of the younger insured.
- ------------------------------------------------------------------------------------------------------
</TABLE>
- 24 -
VUL92NY SPECIMEN
<PAGE> 25
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------
PROCEEDS PAYABLE TO We will pay the death benefit proceeds to the beneficiary
THE BENEFICIARY upon the last surviving insured's death. The proceeds may
be paid in cash or under one or more income plans. See
CHOOSING AN INCOME PLAN.
In the event of the death of either insured within two
years from the date of issue, proof of such death should
be promptly submitted to our Service Center since we will
pay only a limited benefit under certain circumstances.
See LIMITS ON OUR CONTESTING THIS POLICY AND SUICIDE.
DEATH BENEFIT PROCEEDS
Death benefit proceeds depend upon the death benefit
option in effect on the date of death.
OPTION 1. Under this option, death benefit proceeds are
determined as follows:
(1) We determine the policy's death benefit, which is
the larger of the face amount or the variable
insurance amount.
(2) We subtract from (1) any policy debt.
(3) We add to (2) any rider benefits payable
OPTION 2. Under this option, death benefit proceeds are
determined as follows:
(1) We determine the policy's death benefit, which is
the larger of the face amount plus cash value or the
variable insurance amount.
(2) We subtract from (1) any policy debt.
(3) We add to (2) any rider benefits payable.
- ------------------------------------------------------------------------------------------------------
PROCEEDS PAYABLE TO The value of the death benefit proceeds will be that as of
THE BENEFICIARY the last surviving insured's date of death. If that death
(continued) occurs during the grace period, we will pay the
beneficiary the death benefit proceeds in effect
immediately prior to the grace period reduced by any
overdue charges. The death benefit will never be less
than that required to keep this policy qualified as life
insurance under the federal income tax laws.
CHANGING THE DEATH BENEFIT OPTION
On each policy anniversary beginning with the fifteenth,
the owner may change the death benefit option. We will
change the policy face amount in order to keep your death
benefit constant as of the effective date of the change.
If the death benefit option is changed from Option 1 to
Option 2, satisfactory evidence of insurability will be
required. A change in the death benefit option will not
be permitted if it would result in a face amount of less
than $100,000. In no event will a change be permitted if
after the change, the policy would not qualify as life
insurance under federal income tax laws.
- ------------------------------------------------------------------------------------------------------
</TABLE>
- 25 -
VUL92NY SPECIMEN
<PAGE> 26
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------
PROCEEDS PAYABLE TO HOW TO CLAIM DEATH BENEFIT PROCEEDS
THE BENEFICIARY The beneficiary should contact our Service Center for
(CONTINUED) instructions. We will usually pay the proceeds within
seven (7) days after we receive satisfactory proof of the
last surviving insured's death and any other requirements,
including due proof of death of the first insured to die.
We may delay payment of all or part of the death benefit
if we have not been able to determine this policy's cash
value as of the date of death because:
- The NYSE is closed for trading except for normal
holiday closing; or
- The SEC determines that a state of emergency exists.
If a delay is necessary and death of the last surviving
insured occurs prior to the end of the guarantee period,
we may delay payment of any excess of the death benefit
over the face amount. After the guarantee period has
expired, we may delay payment of the entire death benefit.
We will add interest to the death benefit proceeds at an
annual rate of at least the minimum required by state law
from the date of death to the date of payment.
- ------------------------------------------------------------------------------------------------------
</TABLE>
- 26 -
VUL92NY SPECIMEN
<PAGE> 27
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------
CHOOSING AN INCOME PLAN
You may choose one or more income plans under the policy
for the payment of death benefit proceeds. If, at the
time of the death of the last surviving insured no plan
has been chosen for paying death benefit proceeds, the
beneficiary may choose a plan within one year. The owner
may also elect an income plan under the policy on
surrender of the policy.
Our approval s needed for any plan where:
- The person named to receive payment is other than
the owner or beneficiary;
- The person named is not a natural person, such as a
corporation; or
- Any income payment would be less than $100.
- ------------------------------------------------------------------------------------------------------
THE INCOME PLANS There are six (6) income plans to choose from. They are:
PLAN 1. INCOME FOR A FIXED PERIOD
Payment is made in equal installments for a fixed number
of years. We guarantee each monthly payment will be at
least the amount shown in the following table. Values for
annual, semi-annual or quarterly payments are available on
request.
- ------------------------------------------------------------------------------------------------------
<CAPTION>
Table for Income for a Fixed Period
(Payments for Each $1,000 Applied)
------------------------------------------------------------------------
Fixed
Period of Monthly Fixed Period Monthly
Years Income of Years Income
--------- ------- ------------ -------
<S> <C> <C> <C>
1 $84.47 16 $6.53
2 42.86 17 6.23
3 28.99 18 5.96
4 22.06 19 5.73
5 17.91 20 5.51
6 15.41 21 5.32
7 13.16 22 5.15
8 11.68 23 4.99
9 10.53 24 4.84
10 9.61 25 4.71
11 8.86 26 4.59
12 8.24 27 4.47
13 7.71 28 4.37
14 7.26 29 4.27
15 6.87 30 4.18
------------------------------------------------------------------------
</TABLE>
- 27 -
VUL92NY SPECIMEN
<PAGE> 28
<TABLE>
<S> <C>
------------------------------------------------------------------
PLAN 2. INCOME FOR LIFE
Payment is made to the person named in equal monthly
installments and guaranteed for at least a period certain.
The period certain can be 10 or 20 years. Other periods
certain are available on request. A refund certain may be
chosen instead. Under this arrangement, income is
guaranteed until payments equal the amount applied. If
the person named lives beyond the guaranteed payments,
payments continue until his or her death.
We guarantee each payment will be at least the amount
shown in the following table. By age we mean the named
person's age on his or her birthday nearest the plan's
effective date. Amounts for ages not shown are available
on request.
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THE INCOME PLANS Tables for Income for Life
(CONTINUED) (Monthly Payments for Each $1,000 Applied)
----------------------------------------------------------------------------------------------
Payments to a Male
Age 10 Years 20 Years Certain Refund Certain
----- -------- ---------------- --------------
Certain
-------
<S> <C> <C> <C>
0-10 $3.24 $3.23 $3.22
15 3.32 3.31 3.30
20 3.41 3.40 3.39
25 3.52 3.51 3.50
30 3.66 3.64 3.63
35 3.84 3.81 3.79
40 4.07 4.00 3.99
45 4.36 4.23 4.24
50 4.71 4.50 4.54
55 5.14 4.79 4.92
60 5.68 5.10 5.39
65 6.35 5.38 6.01
70 7.17 5.60 6.83
75 8.07 5.72 7.94
80 8.93 5.75 9.48
85 & over 9.54 5.75 ----
------------------------------------------------------------------------------------------
</TABLE>
- 28 -
VUL92NY SPECIMEN
<PAGE> 29
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
Payments to a Female
Age 10 Years 20 Years Certain Refund Certain
-------- -------- ---------------- --------------
Certain
---------
<S> <C> <C> <C>
0-10 $3.17 $3.16 $3.15
15 3.23 3.22 3.21
20 3.30 3.29 3.28
25 3.39 3.38 3.37
30 3.50 3.49 3.48
35 3.64 3.62 3.61
40 3.81 3.78 3.77
45 4.04 3.99 3.98
50 4.33 4.23 4.24
55 4.70 4.53 4.57
60 5.17 4.87 4.99
65 5.80 5.22 5.55
70 6.63 5.51 6.32
75 7.64 5.68 7.39
80 8.64 5.74 8.85
85 & over 9.33 5.75 ____
-------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
PLAN 3. INTEREST PAYMENT
Amounts can be left with us to earn interest at an annual
rate of at least 3%. Interest payments can be made
annually, semi-annually, quarterly or monthly.
PLAN 4. INCOME OF A FIXED AMOUNT
Payments of an agreed fixed amount are made annually,
semi-annually, quarterly or monthly. The fixed amount per
year must be at least $60 for each $1,000 of the amount
applied. The amount applied will earn interest at an
annual rate of at least 3%. Payments will continue until
the amount applied and interest are fully paid.
</TABLE>
- 29 -
VUL92NY SPECIMEN
<PAGE> 30
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------
THE INCOME PLANS PLAN 5. JOINT LIFE INCOME
(CONTINUED) This plan is available if there are two persons named to
receive payments. At least one of the persons named must
be either the owner or beneficiary of this policy.
Monthly payments are made as long as at least one of the
named persons is living. We guarantee the payments will
be at the amount shown in the following table while both
named persons are alive. When one dies, we guarantee to
continue paying the other at least two-thirds of the
amount shown. By age we mean the named person's age on
his or her birth day nearest the plan's effective date.
Amounts for two males, two females or for ages not shown
in the table below are available on request.
<CAPTION>
Table of Joint Life Income
(Monthly Payments for Each $1,000 Applied)
Female Age
55 60 65 70 75
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 $4.55 $4.76 $4.99 $5.26 $5.56
55 4.75 4.99 5.27 5.59 5.95
60 4.95 5.25 5.59 5.98 6.42
Male Age 65 5.18 5.53 5.94 6.43 6.99
70 5.43 5.84 6.33 6.94 7.66
75 5.69 6.16 6.73 7.49 8.41
</TABLE>
<TABLE>
<S> <C>
PLAN 6. ANNUITY PLAN
An amount can be used to buy any single premium annuity we
offer on the plan's effective date. Annuities combine
features of guaranteed income and payment similar to
plans 2 and 5.
- ----------------------------------------------------------------------------------------------------
PAYMENTS WHEN NAMED When the person named to receive payments dies, we will
PERSON DIES pay any amounts still due. The amounts still due are
determined as follows:
- For plans 1, 2 or 4, any remaining guaranteed
payments will be continued. Under plan 4, any
unpaid proceeds with any accrued interest may be
paid in a single sum. Under plans 1 and 2, the
discounted values of the remaining guaranteed
payments may be paid in a single sum. This means we
deduct the amount of the interest each remaining
guaranteed payment would have earned had it not been
paid out early. The discount interest rate is 3%
for plan 1 and 3.50% for plan 2. But we will use
the interest rate we used to calculate the payment
for plans 1 and 2, if they were not based on the
table in this policy.
- For plan 3, we'll pay the amount left with us and
any accrued interest.
- For plan 5, no amounts are payable after both named
persons have died.
- For plan 6, the annuity agreement will state the
amount due, if any.
- ----------------------------------------------------------------------------------------------------
</TABLE>
- 30 -
VUL92NY SPECIMEN
<PAGE> 31
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------
OTHER IMPORTANT INFORMATION
- -----------------------------------------------------------------------------------------------------
LIMITS ON OUR We rely on the statements made in the applications.
CONTESTING THIS Legally, they are considered representations, not
POLICY warranties. We can contest the validity of this policy if
any material misstatements are made in any applications.
A copy of any application will be attached to this policy.
With respect to each insured, we will not contest the
validity of this policy after this policy has been in
effect during either insured's lifetime for two years from
the date of issue. At the end of the second policy year,
we will mail you a notice requesting that you tell us if
either insured has died. Failure to tell us of the death
of an insured during the two years from the date of issue
will not avoid a contest, if we have basis to do so, even
if the policy is still in force. We will not contest any
policy change that requires evidence of insurability, or
any reinstatement of this policy, after the change or
reinstatement has been in effect for two years during the
lifetime of the insured, or insureds living at the time of
the change of reinstatement takes effect.
- -----------------------------------------------------------------------------------------------------
QUARTERLY REPORT We will send you a report four (4) times a policy year
within 31 days after the end of each policy quarter. The
report will show the death benefit, cash value, any change
in the additional insurance rider face amount and policy
debt as of the end of the policy quarter. The report will
also show the allocation of the total investment base as
of such date and the amounts deducted from or added to the
total investment base since the last quarterly report.
The report will also include any other information that
may be currently required by the insurance supervisory
official of the jurisdiction in which this policy is
delivered.
- -----------------------------------------------------------------------------------------------------
CHANGING THIS POLICY This policy with any benefit riders may be changed to
another plan of insurance according to our rules at the
time of the change.
- -----------------------------------------------------------------------------------------------------
POLICY CHANGES - For you to receive the tax treatment accorded to life
APPLICABLE TAX LAW insurance under federal law, this policy must qualify
initially and continue to qualify as life insurance under
the Internal Revenue Code of 1986, as amended, or
successor law. Therefore, to maintain this qualification
to the maximum extent permitted by law, we reserve in this
policy the right to return any premium payments that would
cause this policy to fail to qualify as life insurance
under applicable tax law as interpreted by us. Further,
we reserve the right to make changes in this policy or its
riders or to make distributions from this policy to the
extent we deem it necessary to continue to qualify this
policy as life insurance. Any such changes will apply
uniformly to all policies that are affected. You will be
given advance written notice of such changes.
- -----------------------------------------------------------------------------------------------------
</TABLE>
- 31 -
VUL92NY SPECIMEN
<PAGE> 32
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------
ERROR IN AGE OR SEX If the age or sex for either insured as stated in the
application is wrong, it could mean the face amount or any
other policy benefit is wrong. Therefore, amounts payable
under this policy or its riders will be what the premiums
paid would have bought for the guarantee period at the
true age or sex.
- -----------------------------------------------------------------------------------------------------
SUICIDE If the insured commits suicide within two years from the
date of issue or reinstatement, we will pay only a limited
benefit and then terminate this policy. The limited
benefit will be the amount of the premiums paid less any
policy debt.
Within 90 days of the death of the first insured, the
owner may be elect to apply the amount of the limited
benefit to a single life policy on the life of the
surviving insured, subject to the following provisions;
- The new policy's issue date will be the date
of death of the deceased insured.
- The insurance age will be the surviving
insured's attained age on the new policy's
issue date.
- No medical examination or other evidence of
insurability will be required for the new
policy.
- The face amount of the new policy will be
determined by applying the limited benefit
amount as a single premium payment under the
new policy. The face amount of the new policy
may not exceed the fact amount of this policy.
- Our Service Center must receive a written
request which is satisfactory to us.
- The new policy cannot involve any other life.
- Additional benefits or riders available on the
policy will be available with the new policy
only without consent.
- The new policy will be issued at our current
rates for the surviving insured's attained
age, based on the underwriting class assigned
to the surviving insured when this policy was
underwritten. The underwriting class for the
new policy may differ from that of this
policy.
- If the amount of insurance that would be
purchased under the new policy falls below the
minimum insurance amounts currently allowed,
this option will not be available.
- -----------------------------------------------------------------------------------------------------
ESTABLISHING If we are unable to determine which of the insureds was
SURVIVORSHIP the last survivor on the basis of the proofs of death
provided to us, we shall consider Insured No. 1 to be the
last surviving insured.
- -----------------------------------------------------------------------------------------------------
CLAIMS OF CREDITORS The proceeds of this policy will be free from creditors'
claims to the extent allowed by law.
- -----------------------------------------------------------------------------------------------------
</TABLE>
- 32 -
VUL92NY SPECIMEN
<PAGE> 33
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------
NON-PARTICIPATING This policy does not participate in the divisible surplus
of ML Life Insurance Company of New York ("ML of New
York").
- -----------------------------------------------------------------------------------------------------
AUTHORITY TO MAKE All agreements made by us must be signed by our president
AGREEMENTS or a vice president and by our secretary or an assistant
secretary. No other person, including an insurance agent
or broker, can:
- Change any of this policy's terms;
- Extend the time for paying premiums; or
- Make any agreement binding on us.
- -----------------------------------------------------------------------------------------------------
CHANGES IN POLICY Changes in policy cost factors (expense charges, current
COST FACTORS cost of insurance rates, loan charges) will be by class
and based upon changes in future expectations for such
elements as: mortality, persistency, expenses and taxes.
The policy cost factors are determined prospectively. We
will not recoup prior losses by means of policy cost
factor changes. Any change in policy cost factors will be
determined in accordance with procedures and standards on
file, if required, with the insurance supervisory official
of the jurisdiction in which this policy is delivered.
- -----------------------------------------------------------------------------------------------------
MATURITY DATE OF On the maturity date of this policy we will pay the owner
THIS POLICY the cash value less any policy debt if the insured is then
living and this policy is in effect. The cash value may
be paid in cash or under one or more income plans. See
CHOOSING AN INCOME PLAN.
- -----------------------------------------------------------------------------------------------------
REQUIRED NOTE ON OUR Our computations of reserves and fixed base are based on
COMPUTATIONS the Commissioners 1980 Standard Ordinary Mortality Tables
and interest at the rate of 5% per year. In calculating
the maximum joint and last survivor cost of insurance
rates in Appendix 1, we use the exact ages of both
insureds and their individual cost of insurance rates.
When making our computations, we assume that death claims
are paid immediately. Mortality and expense risks of ML
of New York shall not adversely affect the dollar amount
of insurance benefits or cash values.
We have filed a detailed statement of our computations
with the insurance supervisor of the state or jurisdiction
where this policy is delivered. All policy values equal
or exceed those required by the law of that state or
jurisdiction. Any benefit provided by an attached rider
will not increase these values unless stated in that
rider.
- -----------------------------------------------------------------------------------------------------
</TABLE>
- 33 -
VUL92NY SPECIMEN
<PAGE> 34
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
APPENDIX 1
- -------------------------------------------------------------------------------------------------------------
TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES
(Quarterly Rates per $1,000 of New Amount at Risk)
- -------------------------------------------------------------------------------------------------------------
Policy Policy Policy
Year Factor Year Factor Year Factor
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $0.00062 26 $0.50695 51 $29.50364
2 0.00200 27 0.59735 52 33.76133
3 0.00364 28 0.70806 53 38.38282
4 0.00559 29 0.84492 54 43.31380
5 0.00797 30 1.01203 55 48.61809
6 0.01080 31 1.20971 56 54.32188
7 0.01430 32 1.44039 57 60.54019
8 0.01839 33 1.70448 58 67.48249
9 0.02325 34 2.00341 59 75.52392
10 0.02885 35 2.34693 60 85.75032
11 0.03551 36 2.75356 61 100.49099
12 0.04330 37 3.26880 62 125.24872
13 0.05244 38 3.84120 63 174.86963
14 0.06314 39 4.57483 64 305.59174
15 0.07567 40 5.45962 65 333.33333
16 0.09044 41 6.49574
17 0.10808 42 7.68392
18 0.12936 43 9.03348
19 0.15507 44 10.53512
20 0.18560 45 12.22534
21 0.22169 46 14.16393
22 0.26390 47 16.41144
23 0.31218 48 19.04093
24 0.36695 49 22.11355
25 0.43101 50 25.60401
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
APPENDIX 2
- ----------------------------------------------------------------------------------------------------
CASH VALUE CORRIDOR FACTORS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Age of Percentage of Cash Age of Percentage of Cash
Insured Value Insured Value
- ----------------------------------------------------------------------------------------------------
</TABLE>
- 34 -
VUL92NY SPECIMEN
<PAGE> 35
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
40 and under 250% 61 128%
41 243% 62 126%
42 236% 63 124%
43 229% 64 122%
44 222% 65 120%
45 215% 66 119%
46 209% 67 118%
47 203% 68 117%
48 197% 69 116%
49 191% 70 115%
50 185% 71 113%
51 178% 72 111%
52 171% 73 109%
53 164% 74 107%
54 157% 75 - 90 105%
55 150% 91 104%
56 146% 92 103%
57 142% 93 102%
58 138% 94 101%
59 134% 95 and over 100%
60 130%
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------
FLEXIBLE PREMIUM Variable universal life insurance payable upon death of
JOINT AND LAST the last surviving insured. Death benefit subject to
SURVIVOR VARIABLE guaranteed minimum during guarantee period. Guaranteed
UNIVERSAL LIFE minimum is policy's face amount. Flexible premiums. Non-
INSURANCE POLICY participating. Investment results reflected in policy
benefits.
- -----------------------------------------------------------------------------------------------
</TABLE>
- 35 -
VUL92NY SPECIMEN
<PAGE> 36
<TABLE>
<S> <C>
-------------------------------------------------------------
[LOGO] Merrill Lynch Life Insurance Company LITTLE ROCK,
MERRILL LYNCH ARKANSAS
--------------------------------------------------------------
ADDITIONAL INSURANCE RIDER
- ------------------------------------------------------------------------------------------------
RIDER SCHEDULE Insured No. 1: Richard Roe
Insured No. 2: Jane Roe
Owner: Jane Roe
Issue Date: September 30, 1992
Policy Number: SPECIMEN
Rider Face Amount: $500,000.00
- ------------------------------------------------------------------------------------------------
INSURANCE BENEFITS This rider provides additional insurance coverage to the
insured. It is payable to the beneficiary at the death of
the last surviving insured. The rider face amount
provided by this rider is shown on the above rider
schedule.
- ------------------------------------------------------------------------------------------------
CHANGING THE RIDER The owner may elect to change the rider face amount prior
FACE AMOUNT to either insured's attained age 85. The minimum change
in the rider face amount is $100,000. Once (1) such
change is permitted each year. The minimum additional
insurance rider face amount is $100,000. To request a
change in rider face amount, you must provide satisfactory
notice to us. The effective date of change will be the
policy anniversary date next following underwriting
approval of the change. As of the effective date of
change, the guarantee period will change. See HOW WE
DETERMINE THE GUARANTEE PERIOD.
- ------------------------------------------------------------------------------------------------
INCREASING THE RIDER If both insureds are alive, you may increase the rider
FACE AMOUNT face amount. Satisfactory evidence of insurability will
be required before we will increase the rider face amount.
We will not allow an increase on the first policy
anniversary if the face amount of the policy plus the new
rider face amount provide a guarantee period of less than
one year from the effective date of the increase. An
increase in face amount will decrease the guarantee
period.
- ------------------------------------------------------------------------------------------------
DECREASING THE RIDER Beginning in policy year 8, you may decrease the rider
FACE AMOUNT face amount but not below the amount required to keep the
policy qualified as life insurance under federal income
tax laws. A decrease in the face amount will increase the
guarantee period.
- ------------------------------------------------------------------------------------------------
</TABLE>
- 36 -
VUL92NY SPECIMEN
<PAGE> 37
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------
HOW WE DETERMINE THE WHEN A CHANGE IN RIDER FACE AMOUNT IS REQUESTED
GUARANTEE PERIOD As of the effective date of change, we will redetermine
the guarantee period as follows:
(1) We take the fixed base described in the policy as of
such date.
(2) Based on the policy year, the face amount of the
policy, plus the rider face amount, and the amount
in (1), we will redetermine the guarantee period.
Our computations are based on an annual interest rate of
5% and the guaranteed maximum cost of insurance rates
shown in Appendix 1.
- -------------------------------------------------------------------------------------------------
COST OF RIDER The cost of the rider is determined by dividing the rider
face amount by $1000 and multiplying the result by the
current cost of insurance rate per $1000 based on the
policy year and sex and underwriting class of both
insureds. The cost of the rider is deducted from the
investment base as described in the policy. See
INVESTMENT BASE IN EACH INVESTMENT DIVISION IN THE POLICY.
- -------------------------------------------------------------------------------------------------
INCONTESTABILITY AND The incontestability and suicide provisions of the policy
SUICIDE also apply to this rider. We can contest the validity of
any change in the rider face amount requested by the owner
if any material misstatements are made in any application
required for that change. We will not contest any change
in the rider face amount requested by the owner after the
change has been in effect during the insured's lifetime
for two years from the effective date of such change. If
either insured commits suicide within two years of the
effective date of any increase in the rider face amount
requested by the owner, we will terminate the coverage
attributable to such increase in rider face amount and pay
only a limited benefit. The limited benefit will be the
amount of cost of insurance deductions made for such
increase.
- -------------------------------------------------------------------------------------------------
WHEN THIS RIDER WILL This rider will terminate on the date the policy
TERMINATE terminates or lapses.
- -------------------------------------------------------------------------------------------------
GENERAL This rider is a part of the policy. It has no cash or
loan value. Its benefit is subject to all the terms of
this rider and the policy.
ML LIFE INSURANCE COMPANY OF NEW YORK
/s/ BARRY G. SKOLNICK /s/ ALLEN JONES
--------------------- ---------------
Barry G. Skolnick Allen Jones
Secretary President
- -------------------------------------------------------------------------------------------------
</TABLE>
- 37 -
VUL92NY SPECIMEN
<PAGE> 38
<TABLE>
<S> <C>
-------------------------------------------------
ML LIFE INSURANCE COMPANY OF NEW YORK NEW YORK,
NEW YORK
-------------------------------------------------
POLICY SPLIT RIDER
- -------------------------------------------------------------------------------------------------------------------
RIDER BENEFIT This rider gives you the right to exchange this policy for an individual variable universal life insurance
policy on the life of each insured if the federal tax law is changed and results in (a) a reduction in or
elimination of the unlimited Federal Estate Tax marital deduction provision or (b) a reduction in the
maximum Federal Estate Tax bracket rate to a rate below 25%. It also gives you the right to exchange
this policy for an individual life insurance policy on the life of each insured upon divorce of the
insureds.
To exercise this option, a policy on the life of each insured must be applied for and issued.
If either insured does not qualify for an individual variable universal life insurance policy under our
rules then in effect, this option may not be exercised and the rider will terminate.
- -------------------------------------------------------------------------------------------------------------------
CONDITIONS FOR The following conditions must be met in order to make the exchange:
EXCHANGE (1) Both insureds must be living on the exchange date and be less than age 85.
(2) You must request the exchange in writing, complete an application for the new policies,
provide satisfactory evidence of insurability as to both insureds and surrender this policy. The
owner of each new policy must have an insurable interest in the insured. If this policy is
assigned, the assignee must consent to the exchange.
(3) This policy must be in effect on the exchange date.
(4) If the exchange is a result of divorce, a final divorce decree issued by a court of competent
jurisdiction in the United States on the insureds' marriage must be in effect for at least six
months, but not more than one year before an exchange takes effect. Evidence of such decree
must be received by us within one year after the decree but prior to the date of exchange. The
insureds must have been married when the policy was issued. If the exchange is as a result of
either federal tax law change described above, you must request the exchange within six months
of the date the change is signed into law.
</TABLE>
PSVUL92NY SPECIMEN
<PAGE> 39
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
THE NEW POLICY The face amount of each new policy will be equal to one-half of the face amount of this policy less any
outstanding policy debt on the date of exchange. One-half of the cash value of this policy less any
policy debt will be applied to each of the new policies.
The issue date of the new policy will be the date of exchange. On the issue date we will refund any
unearned charges for cost of insurance and rider costs previously deducted from this policy. Sales loads
for the new policy will take into account the sales load paid under this policy. If two base premiums
have not been paid, then the difference between (a) the sales load which would have been paid under
this policy had both base premiums been paid and (b) the sales load paid, shall be allocated to the new
policies. The allocation to each new policy shall be in the same proportion as the base premium for
each new policy bears to the base premium for this policy. This amount shall be deducted from
additional premiums paid at the sales load rate applicable to the first two base premiums under each new
policy. Thereafter, the sales load shall be paid at the rate applicable to each base premium paid after
the second under each new policy. The cost of insurance will be for each insured's then attained age
and for the same risk class that the insured was classified as under this policy.
We will not notify you of any tax law changes which may effect this policy. A policy split may have
tax consequences. You should consult a qualified tax adviser. This rider is part of the policy to which
it is attached.
ML LIFE INSURANCE COMPANY OF NEW YORK
/s/ BARRY G. SKOLNICK /s/ ALLEN JONES
--------------------- ---------------
Barry G. Skolnick Allen Jones
Secretary President
</TABLE>
PSVUL92NY SPECIMEN
<PAGE> 1
EXHIBIT 1.A.(5)(b)(2)(a)
- -------------------------------------------------------------------------------
ML LIFE INSURANCE COMPANY OF NEW YORK NEW YORK,
NEW YORK
- -------------------------------------------------------------------------------
ADDITIONAL INSURANCE RIDER
- -------------------------------------------------------------------------------
RIDER SCHEDULE Insured No. 1: Richard Roe
Owner: Jane Roe
Issue Date: September 30, 1992
Policy Number: SPECIMEN
Rider Face Amount: $500,000.00
- -------------------------------------------------------------------------------
INSURANCE BENEFITS This rider provides additional insurance coverage to
the insured. It is payable to the beneficiary at the
death of the insured. The rider face amount provided
by this rider is shown on the above rider schedule.
- -------------------------------------------------------------------------------
CHANGING THE The owner may elect to change the rider face amount
RIDER prior to insured's attained age 85. The minimum change
in the rider face amount is $100,000. One (1) such change
is permitted each year. The minimum additional insurance
rider face amount is $100,000. To request a change in rider
face amount, you must provide satisfactory notice to us.
The effective date of change will be the policy anniversary
date next following underwriting approval of the change. As
of the effective date of change, the guarantee period will
change. See HOW WE DETERMINE THE GUARANTEE PERIOD.
- -------------------------------------------------------------------------------
INCREASING THE If insured is alive, you may increase the rider
RIDER FACE face amount. Satisfactory evidence of insurability will
AMOUNT be required before we will increase the rider face amount.
We will not allow an increase on the first policy
anniversary if the face amount of the policy plus the new
rider face amount provide a guarantee period of less than
AIVUS92NY SPECIMEN
<PAGE> 2
<TABLE>
<S> <C>
one year from the effective date of the increase. An
increase in face amount will decrease the guarantee period.
- -------------------------------------------------------------------------------------------------
DECREASING THE Beginning in policy year 8, you may decrease the rider RIDER
FACE face amount but not below the amount required to keep
AMOUNT the policy qualified as life insurance under federal income
tax laws. A decrease in the face amount will increase the
guarantee period.
- -------------------------------------------------------------------------------------------------
HOW WE DETERMINE WHEN A CHANGE IN RIDER FACE AMOUNT IS REQUESTED
THE GUARANTEE As of the effective date of change, we will redetermine
PERIOD the guarantee period as follows:
(1) We take the fixed base described in the policy as of
such date.
(2) Based on the policy year, the face amount of the
policy, plus the rider face amount, and the amount in
(1), we will redetermine the guarantee period.
Our computations are based on an annual interest rate of 5%
and the guaranteed maximum cost of insurance rates shown in
Appendix 1.
- -------------------------------------------------------------------------------------------------
COST OF RIDER The cost of the rider is determined by dividing the rider
face amount by $1000 and multiplying the result by the
current cost of insurance rate per $1000 based on the policy
year and sex and underwriting class of the insured. The
cost of the rider is deducted from the investment base as
described in the policy. See INVESTMENT BASE IN EACH
INVESTMENT DIVISION in the policy.
- -------------------------------------------------------------------------------------------------
INCONTESTABILITY The incontestability and suicide provisions of the
AND SUICIDE policy also apply to this rider. We can contest the
validity of any change in the rider face amount requested by
the owner if any material misstatements are made in any
application required for that change. We will not contest
any change in the rider face amount requested by the owner
after the change has been in effect during the insureds'
lifetime for two years from the effective date of such
change. If the insured commits suicide within two years of
the effective date of any increase in the rider face amount
requested by the owner, we will terminate the coverage
attributable to such increase in rider face amount and pay
only a limited benefit. The limited benefit will be the
amount of cost of insurance deductions made for such
increase.
- -------------------------------------------------------------------------------------------------
WHEN THIS This rider will terminate on the date the policy
RIDER WILL terminates or lapses.
TERMINATE
- -------------------------------------------------------------------------------------------------
</TABLE>
AIVUS92NY SPECIMEN
<PAGE> 3
GENERAL This rider is a part of the policy. It has no cash or loan
value. Its benefit is subject to all the terms of this
rider and the policy.
ML LIFE INSURANCE COMPANY OF NEW YORK
/s/ BARRY G. SKOLNICK /s/ ALLEN JONES
--------------------- ----------------
Barry G. Skolnick Allen Jones
Secretary President
AIVUS92NY SPECIMEN
<PAGE> 1
EXHIBIT 1.A.(5)(b)(3)(a)
<TABLE>
<S> <C>
------------------------------------------------------
ML LIFE INSURANCE COMPANY OF NEW YORK NEW YORK,
NEW YORK
------------------------------------------------------
POLICY SPLIT RIDER
- ------------------------------------------------------------------------------
RIDER BENEFIT This rider gives you the right to exchange this policy for an individual variable universal
life insurance policy on the life of each insured if the federal tax law is changed and
results in (a) a reduction in or elimination of the unlimited Federal Estate Tax marital
deduction provision or (b) a reduction in the maximum Federal Estate Tax bracket rate to
a rate below 25%. It also gives you the right to exchange this policy for an individual
life insurance policy on the life of each insured upon divorce of the insureds.
To exercise this option, a policy on the life of each insured must be applied for and
issued.
If either insured does not qualify for an individual variable universal life insurance policy
under our rules then in effect, this option may not be exercised and the rider will
terminate.
- ------------------------------------------------------------------------------
CONDITIONS FOR The following conditions must be met in order to make the exchange:
EXCHANGE (1) Both insureds must be living on the exchange date and be less than age
85.
(2) You must request the exchange in writing, complete an application for
the new policies, provide satisfactory evidence of insurability as to
both insureds and surrender this policy. The owner of each new policy
must have an insurable interest in the insured. If this policy is
assigned, the assignee must consent to the exchange.
(3) This policy must be in effect on the exchange date.
(4) If the exchange is a result of divorce, a final divorce decree issued by a
court of competent jurisdiction in the United States on the insureds'
marriage must be in effect for at least six months, but not more than
one year before an exchange takes effect. Evidence of such decree
must be received by us within one year after the decree but prior to the
date of exchange. The insureds must have been married when the
policy was issued. If the exchange is as a result of either federal tax
law change described above, you must request the exchange within six
months of the date the change is signed into law.
</TABLE>
PSVUL92NY SPECIMEN
<PAGE> 2
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------
THE NEW POLICY The face amount of each new policy will be equal to one-half of the face amount of this
policy less any outstanding policy debt on the date of exchange. One-half of the cash
value of this policy less any policy debt will be applied to each of the new policies.
The issue date of the new policy will be the date of exchange. On the issue date we will
refund any unearned charges for cost of insurance and rider costs previously deducted
from this policy. Sales loads for the new policy will take into account the sales load paid
under this policy. If two base premiums have not been paid, then the difference between
(a) the sales load which would have been paid under this policy had both base premiums
been paid and (b) the sales load paid, shall be allocated to the new policies. The
allocation to each new policy shall be in the same proportion as the base premium for
each new policy bears to the base premium for this policy. This amount shall be
deducted from additional premiums paid at the sales load rate applicable to the first two
base premiums under each new policy. Thereafter, the sales load shall be paid at the rate
applicable to each base premium paid after the second under each new policy. The cost
of insurance will be for each insured's then attained age and for the same risk class that
the insured was classified as under this policy.
We will not notify you of any tax law changes which may effect this policy. A policy
split may have tax consequences. You should consult a qualified tax adviser. This rider
is part of the policy to which it is attached.
ML LIFE INSURANCE COMPANY OF NEW YORK
/s/ BARRY G. SKOLNICK /s/ ALLEN JONES
--------------------- ---------------
Barry G. Skolnick Allen Jones
Secretary President
</TABLE>
PSVUL92NY SPECIMEN
<PAGE> 1
EXHIBIT 6
[ML LIFE INSURANCE COMPANY OF NEW YORK]
April 23, 1997
Board of Directors
ML Life Insurance Company of New York
100 Church Street, 11th Floor
New York, NY 10080-6511
Re: ML of New York Variable Life Separate Account II
To the Board of Directors:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 6 to the Registration Statement filed on Form S-6 (File No.
33-61670) which covers premiums received under certain flexible premium joint
and last survivor variable life insurance contracts ("Contracts" or "Contract")
issued by ML Life Insurance Company of New York (the "Company").
The Prospectus included in the Registration Statement describes Contracts which
are issued by the Company. The Contract forms were reviewed under my direction,
and I am familiar with the Registration Statement and exhibits thereto. In my
opinion:
1. The illustrations of death benefits, investment base, net cash surrender
values, and cash values and accumulated premiums included in the
Registration Statement for the Contract and based on the assumptions stated
in the illustrations, are consistent with the provisions of the Contract.
The rate structure of the Contract has not been designed so as to make the
relationship between premiums and benefits, as shown in the illustrations,
appear more favorable to a prospective purchaser of a Contract for the ages
and sexes shown, than to prospective purchasers of a Contract for other
ages and sex.
2. The table of illustrative cash value corridor factors included in the
"Death Benefit Proceeds" section is consistent with the provisions of the
Contract.
3. The information with respect to the Contract contained in (i) the
illustrations of the increase in guarantee period included in the
"Additional Payments" section of the Examples, (ii) the illustrations of a
decrease in guarantee period included in the "Partial Withdrawals" section
of the Examples and (iii) the illustrations of the changes in face amount
included in the "Changing the Death Benefit Option" section of the
Examples, based on the assumptions specified, are consistent with the
provisions of the Contract.
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> 1
EXHIBIT 8(a)
[ML LIFE INSURANCE COMPANY OF NEW YORK]
CONSENT
I hereby consent to the reference to my name under the heading "Legal Matters"
in the prospectus included in Post-Effective Amendment No. 6 to the
Registration Statement on Form S-6 for certain variable life insurance
contracts issued through ML of New York Variable Life Separate Account II of ML
Life Insurance Company of New York (File No. 33-61670).
/s/ Barry G. Skolnick
----------------------------------------
Barry G. Skolnick, Esq.
Senior Vice President and General Counsel
April 23, 1997
<PAGE> 1
EXHIBIT 8(c)
[Letterhead]
CONSENT OF SUTHERLAND, ASBILL & BRENNAN, L.L.P.
We consent to the reference to our firm under the heading "Legal Matters" in the
prospectus included in Post-Effective Amendment No. 6 to the Registration
Statement on Form S-6 for certain variable universal life insurance contracts
issued through ML of New York Variable Life Separate Account II of ML Life
Insurance Company of New York (File No. 33-61670). In giving this consent, we do
not admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933.
/s/ Sutherland, Asbill & Brennan,
L.L.P.
SUTHERLAND, ASBILL & BRENNAN, L.L.P.
Washington, D.C.
April 23, 1997
<PAGE> 1
Exhibit 8(d)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 6 to Registration
Statement No. 33-61670 of ML of New York Variable Life Separate Account II on
Form S-6 of our reports on (i) ML Life Insurance Company of New York dated
February 24, 1997, and (ii) ML of New York Variable Life Separate Account II
dated January 31, 1997, 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 28, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 16,976,548
<INVESTMENTS-AT-VALUE> 18,355,088
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 18,355,088
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 264,882
<TOTAL-LIABILITIES> 264,882
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 18,090,206
<DIVIDEND-INCOME> 772,097
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (122,652)
<NET-INVESTMENT-INCOME> 649,445
<REALIZED-GAINS-CURRENT> 1,598
<APPREC-INCREASE-CURRENT> 932,056
<NET-CHANGE-FROM-OPS> 1,583,099
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,852,257
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
