<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 24, 1998
REGISTRATION NO. 33-51794
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 7
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
------------------------
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
(EXACT NAME OF TRUST)
ML LIFE INSURANCE COMPANY OF NEW YORK
(NAME OF DEPOSITOR)
100 CHURCH STREET
11TH FLOOR
NEW YORK, NEW YORK 10080-6511
(COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
BARRY G. SKOLNICK, ESQ.
Senior Vice President & General Counsel
ML LIFE INSURANCE COMPANY OF NEW YORK
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
------------------------
COPY TO:
STEPHEN E. ROTH, ESQ.
KIMBERLY J. SMITH, ESQ.
SUTHERLAND, ASBILL & BRENNAN LLP
1275 PENNSYLVANIA AVENUE, NW
WASHINGTON, DC 20004-2415
------------------------
It is proposed that this filing will become effective (check appropriate
box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 1998 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
Title of Securities Being Registered: Units of Interest in Flexible Premium
Variable Life Insurance Contracts.
Check box if it is proposed that the filing will become effective on (date)
at (time) pursuant to Rule 487 [ ]
- --------------------------------------------------------------------------------
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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>
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N-8B-2 ITEM CAPTION IN PROSPECTUS
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<C> <S>
1 Cover Page
2 Cover Page
3 Summary of the Contract (The Investment Divisions); Facts
About the Separate Account, the Funds, the Zero Trusts and
ML of New York
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
the ML Life Insurance Company of New York
6 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 Separate Account and its Divisions (Charges to Fund
Assets)
7 Not Applicable
8 Not Applicable
9 More About the Insurance Company (Legal Proceedings)
10 Summary of the Contract; Facts About the Contract; More
About the Contract; More About the Separate Account and its
Divisions
11 Summary of the Contract (The Investment Divisions); Facts
About the Separate Account, the 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 your Investment
Base; Charges to the Separate Account; Guarantee Period; Net
Cash Surrender Value; Loans; Partial Withdrawals; Death
Benefit Proceeds; Payment of Death Benefit Proceeds; Your
Right to Cancel ("Free Look" Period) or Exchange]; More
About the Contract; More About the Separate Account and its
Divisions (Charges to Fund Assets)
14 Facts About the Contract (Purchasing a Contract; Planned
Payments); More About the Contract (Other Contract
Provisions)
15 Summary of the Contract (Availability and Payments); Facts
About the Contract (Initial Payment; Making Additional
Payments); More About the Contract (Income Plans)
16 Facts About the Separate Account, the Funds, the Zero Trusts
and ML of New York; More About the Separate Account and its
Divisions
17 Summary of the Contract [Net Cash Surrender Value and Cash
Surrender Value; Right to Cancel ("Free Look" Period) or
Exchange; Partial Withdrawals]; Facts About the Contract
[Net Cash Surrender Value; Partial Withdrawals; Right to
Cancel ("Free Look" Period) or Exchange]; More About the
Contract (Some Administrative Procedures)
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 More About the Separate Account and its Divisions (Charges
Within the Account; Charges to Fund Assets)
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<TABLE>
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N-8B-2 ITEM CAPTION IN PROSPECTUS
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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
the 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
the ML Life Insurance Company of New York
28 More About the ML Life Insurance Company of New York
29 Facts About the Separate Account, the 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 Not Applicable
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 (Net Cash
Surrender 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
the Contract (Selling the Contracts)
49 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)
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 (ML of New York and MLPF&S); More About
the Contract (Selling the Contracts)
</TABLE>
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N-8B-2 ITEM CAPTION IN PROSPECTUS
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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, 1998
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
ALSO KNOWN AS
MODIFIED FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE CONTRACT
ISSUED BY
ML LIFE INSURANCE COMPANY OF NEW YORK
HOME OFFICE: 100 CHURCH STREET 11TH FLOOR, NEW YORK, NEW YORK 10080-6511
SERVICE CENTER: P.O. BOX 9025
SPRINGFIELD, MASSACHUSETTS 01102-9025
1414 MAIN STREET, THIRD FLOOR
SPRINGFIELD, MASSACHUSETTS 01104-1007
PHONE: (800) 831-8172
OFFERED THROUGH
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
This Prospectus is for a flexible premium variable life insurance contract (the
"Contract") offered by ML Life Insurance Company of New York ("ML of New York"),
a subsidiary of Merrill Lynch & Co., Inc. It describes contracts which, at the
time of issue, generally are modified endowment contracts under federal tax law.
A prospective contract owner who wants to purchase a contract that is not a
modified endowment contract should consult a Merrill Lynch registered
representative. Because the Contract generally is a modified endowment contract,
any loan, partial withdrawal, capitalized interest, collateral assignment, or
surrender may result in adverse tax consequences and/or penalties. However, a
contract owner should not be considered in constructive receipt of the cash
surrender value of the Contract, including increases, unless and until he or she
is in actual receipt of distributions from the Contract.
Through the first 14 days following the in force date, the initial payment will
be invested only in the investment division of the ML of New York Variable Life
Separate Account II (the "Separate Account") investing in the Money Reserve
Portfolio. Thereafter, the investment base will be reallocated to any five of
the 37 investment divisions of the Separate Account, a 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 fifteen unit investment trusts in The Merrill
Lynch Fund of Stripped ("Zero") U.S. Treasury Securities. Currently, the
contract owner may change his or her investment allocation as many times as
desired.
The Contract provides an estate benefit through life insurance coverage on the
insured. ML of New York guarantees that coverage will remain in force for life,
or for a shorter time if the face amount chosen is above the minimum face amount
required for the initial payment. During this guarantee period, ML of New York
will terminate the Contract only if the debt exceeds certain contract values.
After the guarantee period, the Contract will remain in force as long as there
is not excessive debt and as long as the cash surrender value is sufficient to
cover the charges due. While the Contract is in force, the death benefit may
vary to reflect the investment results of the investment divisions chosen, but
will never be less than the current face amount.
Contract owners may also purchase a Contract to provide insurance coverage on
the lives of two insureds with proceeds payable upon the death of the last
surviving insured.
Contract owners may make additional payments subject to certain conditions,
change the face amount of their Contract, turn in the Contract for its net cash
surrender value and make partial
<PAGE> 6
withdrawals. The net cash surrender value will vary with the investment results
of the investment divisions chosen. ML of New York doesn't guarantee any minimum
cash surrender value.
It may not be advantageous to replace existing insurance with the Contract. The
Contract may be returned or exchanged for a contract with benefits that do not
vary with the investment results of a separate account.
THE PURCHASE OF THIS CONTRACT INVOLVES CERTAIN RISKS. BECAUSE IT IS A VARIABLE
LIFE INSURANCE CONTRACT, THE VALUE OF THE CONTRACT REFLECTS THE INVESTMENT
PERFORMANCE OF THE SELECTED INVESTMENT OPTIONS. INVESTMENT RESULTS CAN VARY BOTH
UP AND DOWN AND CAN EVEN DECREASE THE VALUE OF PREMIUM PAYMENTS. THEREFORE,
CONTRACT OWNERS COULD LOSE ALL OR PART OF THE MONEY THEY HAVE INVESTED. ML OF
NEW YORK DOES NOT GUARANTEE THE VALUE OF THE CONTRACT. RATHER, CONTRACT OWNERS
BEAR ALL INVESTMENT RISKS.
LIFE INSURANCE IS INTENDED TO BE A LONG-TERM INVESTMENT. CONTRACT OWNERS SHOULD
EVALUATE THEIR INSURANCE NEEDS AND THE CONTRACT'S LONG-TERM INVESTMENT POTENTIAL
AND RISKS BEFORE PURCHASING THE CONTRACT.
PARTIAL WITHDRAWALS AND SURRENDER OF THE CONTRACT ARE SUBJECT TO TAX, AND IF
TAKEN BEFORE THE CONTRACT OWNER ATTAINS AGE 59 1/2 MAY ALSO BE SUBJECT TO A 10%
FEDERAL PENALTY TAX. LOANS UNDER THE CONTRACT ARE ALSO GENERALLY TAXABLE AND
SUBJECT TO THE 10% FEDERAL PENALTY TAX IF TAKEN BEFORE AGE 59 1/2.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT MUST BE
ACCOMPANIED BY CURRENT PROSPECTUSES FOR THE MERRILL LYNCH SERIES FUND, INC.; THE
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.; 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.
2
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
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PAGE
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IMPORTANT TERMS............................................. 5
SUMMARY OF THE CONTRACT
Purpose of the Contract................................... 6
Availability and Payments................................. 6
Joint Insureds............................................ 6
CMA(R) Insurance Service.................................. 7
The Investment Divisions.................................. 7
How the Death Benefit Varies.............................. 7
How the Investment Base Varies............................ 7
Net Cash Surrender Value and Cash Surrender Value......... 7
Illustrations............................................. 8
Replacement of Existing Coverage.......................... 8
Right to Cancel ("Free Look" Period) or Exchange.......... 8
How Death Benefit and Cash Surrender Value Increases are
Taxed.................................................. 8
Partial Withdrawals....................................... 8
Loans..................................................... 8
Fees and Charges.......................................... 9
FACTS ABOUT THE SEPARATE ACCOUNT, THE FUNDS, THE ZERO TRUSTS
AND ML OF NEW YORK
The Separate Account...................................... 10
The Series Fund........................................... 10
The Variable Series Funds................................. 11
The AIM V.I. Funds........................................ 12
The Alliance Fund......................................... 13
The MFS Trust............................................. 13
Certain Risks of the Funds................................ 14
The Zero Trusts........................................... 14
ML of New York and MLPF&S................................. 15
FACTS ABOUT THE CONTRACT
Who May be Covered........................................ 15
Initial Payment........................................... 16
Making Additional Payments................................ 17
Changing the Face Amount.................................. 19
Investment Base........................................... 19
Charges Deducted from the Investment Base................. 20
Charges to the Separate Account........................... 22
Charges to Fund Assets.................................... 22
Guarantee Period.......................................... 23
Net Cash Surrender Value.................................. 24
Partial Withdrawals....................................... 25
Loans..................................................... 25
Death Benefit Proceeds.................................... 26
Payment of Death Benefit Proceeds......................... 27
Right to Cancel ("Free Look" Period) or Exchange.......... 27
Reports to Contract Owners................................ 28
MORE ABOUT THE CONTRACT
Using the Contract........................................ 28
Some Administrative Procedures............................ 30
Other Contract Provisions................................. 31
Income Plans.............................................. 32
Group or Sponsored Arrangements........................... 33
Unisex Legal Considerations for Employers................. 33
</TABLE>
3
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<TABLE>
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PAGE
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Selling the Contracts..................................... 33
Tax Considerations........................................ 34
ML of New York's Income Taxes............................. 37
Reinsurance............................................... 37
MORE ABOUT THE SEPARATE ACCOUNT AND ITS DIVISIONS
About the Separate Account................................ 37
Changes Within the Account................................ 37
Net Rate of Return for an Investment Division............. 38
The Funds................................................. 38
The Zero Trusts........................................... 40
ILLUSTRATIONS
Illustrations of Death Benefits, Investment Base, Cash
Surrender Values and Accumulated Payments................ 41
EXAMPLES
Additional Payments....................................... 48
Changing the Face Amount.................................. 48
Partial Withdrawals....................................... 49
JOINT INSUREDS.............................................. 50
MORE ABOUT ML LIFE INSURANCE COMPANY OF NEW YORK
Directors and Executive Officers.......................... 54
Services Arrangement...................................... 55
State Regulation.......................................... 55
Year 2000................................................. 55
Legal Proceedings......................................... 56
Experts................................................... 56
Legal Matters............................................. 56
Registration Statements................................... 56
Financial Statements...................................... 56
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.
4
<PAGE> 9
IMPORTANT TERMS
additional payment: is a payment which may be made after the "free look"
period.
attained age: is the issue age of the insured plus the number of full years
since the contract date.
cash surrender value: is equal to the net cash surrender value plus any debt.
contract anniversary: is the same date of each year as the contract date.
contract date: is used to determine processing dates, contract years and
anniversaries. It is usually the business day next following the receipt of the
initial payment at the Service Center. It is also referred to as the policy
date.
death benefit: is the larger of the face amount and the variable insurance
amount.
death benefit proceeds: are equal to the death benefit less any debt and less
any overdue charges.
debt: is the sum of all outstanding loans on a Contract plus accrued interest.
deferred contract loading: is chargeable to all payments for sales load,
federal tax and premium tax charges. ML of New York advances the amount of the
loading to the divisions as part of the investment base. This loading is
deducted in equal installments on the next ten contract anniversaries following
the date the payment is received and accepted. ML of New York deducts the
balance of the deferred contract loading not yet recouped in determining a
Contract's net cash surrender value.
face amount: is the minimum death benefit as long as the Contract remains in
force. The face amount will change if the change in face amount option is
chosen; it may increase as a result of an additional payment; or it may decrease
as a result of a partial withdrawal.
fixed base: is calculated like the cash surrender value except that 4% is
substituted for the net rate of return, the guaranteed maximum cost of insurance
rates are substituted for current rates and loans and repayments are not taken
into account.
guarantee period: is the time guaranteed that the Contract will remain in force
regardless of investment experience, unless the debt exceeds certain values. It
is the period that a comparable fixed life insurance contract (same face amount,
payments made, guaranteed mortality table and loading) would remain in force if
credited with 4% interest per year.
in force date: is the date when the underwriting process is complete, the
initial payment is received and outstanding contract amendments (if any) are
received at the Service Center.
initial payment: is the payment required to put the Contract into effect.
investment base: is the amount available under a Contract for investment in the
Separate Account at any time. A contract owner's investment base is the sum of
the amounts invested in each of the selected investment divisions.
investment division: is any division in the Separate Account.
issue age: is the insured's age as of his or her birthday nearest the contract
date.
net amount at risk: is the excess of the death benefit over the cash surrender
value.
net cash surrender value: is equal to the investment base less the balance of
any deferred contract loading and, depending on the date it is calculated, less
all or a portion of certain other charges not yet deducted.
net single premium factor: is used to determine the amount of death benefit
purchased by $1.00 of cash surrender value. ML of New York uses this factor in
the calculation of the variable insurance amount to make sure that the Contract
always meets the guidelines of what constitutes a life insurance contract under
the Internal Revenue Code.
processing dates: are the contract date and the first day of each contract
quarter thereafter. Processing dates after the contract date are the days when
ML of New York deducts charges from the investment base.
processing period: is the period between consecutive processing dates.
variable insurance amount: is computed daily by multiplying the cash surrender
value by the net single premium factor.
5
<PAGE> 10
SUMMARY OF THE CONTRACT
PURPOSE OF THE CONTRACT
This variable life insurance contract offers a choice of investments and an
opportunity for the Contract's investment base, net cash surrender value and
death benefit to grow based on investment results.
ML of New York doesn't guarantee that contract values will increase. Depending
on the investment results of selected investment divisions, the investment base,
net cash surrender value and death benefit may increase or decrease on any day.
The contract owner bears the investment risk. ML of New York guarantees to keep
the Contract in force during the guarantee period, subject to the effect of any
debt.
Life insurance is not a short term investment. The contract owner should
evaluate the need for insurance and the Contract's long-term investment
potential and risks before purchasing a Contract.
The Contract should be purchased as a long-term investment designed to provide a
death benefit. The Contract's net cash surrender value, as well as its death
benefit, may be used to provide proceeds for various individual and business
planning purposes. However, loans and partial withdrawals will affect the net
cash surrender value and death benefit proceeds, and may cause the Contract to
lapse; in addition, loans and partial withdrawals may be currently taxable. If
the performance of the investment divisions to which the investment base is
allocated is not sufficient to provide funds for the specific planning purpose
contemplated, or if insufficient payments are made or Contract values
maintained, then the purchaser may not be able to utilize the Contract to
achieve the purposes for which it was purchased. Because the Contract is
designed to provide benefits on a long-term basis, before purchasing a Contract
in connection with a specialized purpose, a purchaser should consider whether
the long-term nature of the Contract, and the potential impact of any
contemplated loans and partial withdrawals, are consistent with the purposes for
which the Contract is being considered. Using a Contract for a specialized
purpose may have tax consequences. (See "Tax Considerations" on page 34.)
AVAILABILITY AND PAYMENTS
The Contract is available in New York. A Contract may be issued for an insured
up to age 75 (or up to age 80 for joint insureds). ML of New York will consider
issuing Contracts for insureds above age 75 on an individual basis. A Contract
can be purchased with a single payment. The minimum single payment for a
Contract is the lesser of (a) $5,000 for an insured under age 20 and $10,000 for
an insured age 20 and over, or (b) the payment required to purchase a face
amount of at least $100,000 (but that payment may not be less than $2,000).
Contract owners may elect to pay planned periodic payments instead of a single
payment. If so, the minimum initial planned periodic payment is $2,000 provided
that the initial payment plus the planned payments elected in the application
will total $10,000 or more during the first five contract years.
ML of New York will not accept an initial payment that provides a guarantee
period of less than one year.
Subject to certain conditions, contract owners may make additional payments.
(See "Making Additional Payments" on page 17.)
For joint insureds, see modifications to this section on page 50.
JOINT INSUREDS
The Contract is also available to provide coverage on the lives of two insureds
with a death benefit payable upon the death of the last surviving insured. Most
of the discussions in this Prospectus referencing a single insured may also be
read as though the single insured were the two insureds
6
<PAGE> 11
under a joint Contract. Those discussions which are different for joint insureds
are noted accordingly. (See "Joint Insureds" on page 50.)
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
Through the first 14 days following the in force date, the initial payment will
be invested only in the investment division of the Separate Account investing in
the Money Reserve Portfolio. Thereafter, the investment base will be reallocated
to up to five of the 37 investment divisions in the Separate Account. (See
"Changing the Allocation" on page 20.)
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
fifteen 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
The death benefit equals the face amount or variable insurance amount, whichever
is larger. It may increase or decrease on any day depending on the investment
results of the investment divisions chosen by the contract owner. Death benefit
proceeds are reduced by any debt.
HOW THE INVESTMENT BASE VARIES
A Contract's investment base is the amount available for investment at any time.
On the contract date (usually the business day next following receipt of the
initial payment at the Service Center), the investment base is equal to the
initial payment. Afterwards, it varies daily based on investment performance of
the investment divisions chosen. The contract owner bears the risk of poor
investment performance and receives the benefit of favorable investment
performance. Contract owners may wish to consider diversifying their investment
in the Contract by allocating the investment base to two or more investment
divisions.
NET CASH SURRENDER VALUE AND CASH SURRENDER VALUE
Contract owners may cancel their Contracts at any time and receive the net cash
surrender value. On a contract anniversary, the net cash surrender value equals
the investment base minus the balance of any deferred contract loading not yet
deducted. The net cash surrender value varies daily based on
- ------------------------------
Cash Management Account and CMA are registered trademarks of Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
7
<PAGE> 12
investment performance of the investment divisions chosen and accrual of
contract charges. ML of New York doesn't guarantee any minimum net cash
surrender value.
For purposes of certain computations under the Contract, ML of New York uses the
cash surrender value. It is calculated by adding the amount of any debt to the
net cash surrender value.
ILLUSTRATIONS
Illustrations in this Prospectus or used in connection with the purchase of the
Contract are based on hypothetical investment rates of return. These rates are
not guaranteed. They are illustrative only and should not be deemed a
representation of past or future performance. Actual rates of return may be more
or less than those reflected in the illustrations and, therefore, actual values
will be different than those illustrated.
REPLACEMENT OF EXISTING COVERAGE
Before purchasing a Contract, the contract owner should ask his or her Merrill
Lynch registered representative if changing, or adding to, current insurance
coverage would be advantageous. Generally, it is not advisable to purchase
another contract as a replacement for existing coverage. In particular,
replacement should be carefully considered if the decision to replace existing
coverage is based solely on a comparison of contract illustrations.
RIGHT TO CANCEL ("FREE LOOK" PERIOD) OR EXCHANGE
Once the contract owner receives the Contract, he or she should review it
carefully to make sure it is what he or she intended to purchase. A Contract may
be returned for a refund within ten days after the contract owner receives it.
If the Contract is returned during the "free look" period, ML of New York will
refund the payment without interest.
A contract owner may also exchange his or her Contract at any time for a
contract with benefits that do not vary with the investment results of a
separate account.
HOW DEATH BENEFIT AND CASH SURRENDER VALUE INCREASES ARE TAXED
Under current federal tax law, life insurance contracts receive tax-favored
treatment. The death benefit is fully excludable from the beneficiary's gross
income for federal income tax purposes, according to Section 101(a)(1) of the
Internal Revenue Code. A contract owner is not taxed on any increase in the cash
surrender value while a life insurance contract remains in force. In most cases,
the Contract will be a modified endowment contract. If a Contract is a modified
endowment contract, certain distributions made during an insured's lifetime,
such as loans and partial withdrawals from, and collateral assignments of, the
Contract are includable in gross income on an income-first basis. A 10% penalty
tax may be imposed on income distributed before the contract owner attains age
59 1/2. Contracts that are not modified endowment contracts receive preferential
tax treatment with respect to certain distributions. For a discussion of the tax
issues associated with this Contract, including distributions under the
Contract, see "Tax Considerations -- Tax Treatment of Loans and Other
Distributions" on page 35.
PARTIAL WITHDRAWALS
Beginning in Contract year two, the contract owner may withdraw up to 80% of the
net cash surrender value. (See "Partial Withdrawals" on page 25.)
LOANS
A contract owner may borrow against his or her Contract. The maximum amount that
can be borrowed at any time is the difference between the loan value and the
debt. (See "Loans" on page 25.)
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<PAGE> 13
Loans are deducted from the amount payable on surrender of the Contract and are
also subtracted from any death benefit payable. Loan interest accrues daily and,
IF IT IS NOT 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 -- Tax
Treatment of Loans and Other Distributions" on page 35.)
FEES AND CHARGES
Investment Base Charges. ML of New York invests the entire amount of all
premium payments in the Separate Account. It then deducts certain charges from
the investment base on processing dates. The charges deducted are as follows:
- deferred contract loading equals 9% of each payment. It consists of a
sales load of 5%, a charge for federal taxes of 2% and a state and local
premium tax charge of 2%. For joint insureds the deferred contract loading
equals 11% of each payment and consists of a sales load of 7%, a charge
for federal taxes of 2% and a state and local premium tax charge of 2%.
Deferred contract loading is deducted in equal installments of .90% (1.1%
for joint insureds) of each payment. The deduction is taken on the ten
contract anniversaries following the date ML of New York receives and
accepts the payment. However, ML of New York subtracts the balance of the
deferred contract loading not yet deducted in determining a Contract's net
cash surrender value. Thus, this balance is deducted in determining the
amount payable on surrender of the Contract;
- on processing dates after the contract date, ML of New York makes
deductions for mortality cost (see "Mortality Cost" on page 21); and
- on each contract anniversary, ML of New York makes deductions for the net
loan cost if there has been any debt during the prior year. It equals a
maximum of 2.0% of the debt per year (see "Charges Deducted From the
Investment Base" on page 20).
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 22.)
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 5.
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<PAGE> 14
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 37 investment divisions in the Separate Account. Ten invest
in shares of a specific portfolio of the Series Fund. Seven invest in Class A
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. Fifteen 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 investment objectives and policies of certain of these underlying portfolios
may be similar to the investment objectives and policies of other portfolios
that may be managed by the same investment adviser or manager. The investment
results of the underlying portfolios, however, may be higher or lower than the
results of such other portfolios. There can be no assurance, and no
representation is made, that the investment results of any of the underlying
portfolios will be comparable to the investment results of any other portfolio,
even if the other portfolio has the same investment adviser or manager.
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 and
certain investment policies 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.
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<PAGE> 15
Intermediate Government Bond Portfolio seeks to obtain the highest level of
current income consistent with the protection of capital afforded by investing
in intermediate-term debt securities issued or guaranteed by the U.S. Government
or its agencies. The Portfolio will invest in such securities 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. In
addition, the Portfolio seeks the preservation of capital. In seeking to achieve
these objectives, under normal circumstances the Portfolio invests at least 80%
of the value of its total assets in debt securities that have a rating within
the three highest grades of Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Ratings Group ("Standard & Poor's").
High Yield Portfolio primarily seeks as high a level of current income as is
believed to be consistent with prudent management. Secondarily, the Portfolio
seeks 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 Fund Assets" on page 22.)
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 18 mutual fund portfolios are currently available
through the Separate Account. The investment objectives and certain investment
policies 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. The
Fund seeks special opportunities in securities that are selling at a discount,
either from book value or historical price-earnings ratios, or seem capable of
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<PAGE> 16
recovering from temporarily out of favor considerations. 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 both capital appreciation and current income
through investment of at least 65% of its total assets in equity and debt
securities issued by domestic and foreign companies which are, in the opinion of
MLAM, primarily engaged in the ownership or operation of facilities used to
generate, transmit or distribute electricity, telecommunications, gas or water.
International Equity Focus Fund seeks capital appreciation and, secondarily,
income by investing in a diversified portfolio of equity securities of issuers
located in countries other than the United States. Under normal conditions, at
least 65% of the Fund's net assets will be invested in such equity securities
and at least 65% of the Fund's total assets will be invested in the securities
of issuers from at least three different foreign countries.
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.
Special Value Focus Fund (formerly the Equity Growth Fund) seeks long-term
growth of capital by investing in a diversified portfolio of securities,
primarily common stocks of relatively small companies that management of the
Variable Series Funds believes have special investment value, and of emerging
growth companies regardless of size. Companies are selected by management on the
basis of their long-term potential for expanding their size and profitability or
for gaining increased market recognition for their securities. Current income is
not a factor in the selection of securities.
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 22.)
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 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 with
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
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<PAGE> 17
companies issuing the securities or relative to the equity markets generally.
Income is a secondary objective. The investment division corresponding to 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., a holding company engaged in the
financial services business and an indirect wholly owned subsidiary of AMVESCAP
PLC. AIM is a registered adviser under the Investment Advisers Act of 1940. AIM
was organized in 1976, and, together with its subsidiaries, manages or advises
over 50 investment company portfolios (including the AIM V.I. Funds)
encompassing a broad range of investment objectives. 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 22.)
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.
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 22.)
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.
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<PAGE> 18
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 22.)
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.
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 portfolio may
fluctuate widely. Any income received from securities held by the portfolio will
be incidental, and a contract owner should not consider a purchase of shares of
the portfolio 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.
Investment in these portfolios entails relatively greater risk of loss of income
or principal. In addition, as described in the accompanying prospectus for the
portfolios, many portfolios should be considered a long-term investment and a
vehicle for diversification, and not as a balanced investment program. It may
not be appropriate to allocate all payments and investment base to a single
investment division.
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,
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<PAGE> 19
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 1999 through
2011, 2013 and 2014.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of
Merrill Lynch & Co., Inc., is the sponsor for the Zero Trusts. The sponsor will
sell units of the Zero Trusts to the Separate Account and has agreed to
repurchase units when ML of New York needs to sell them to pay benefits and make
reallocations. ML of New York pays the sponsor a fee for these transactions and
is reimbursed through the trust charge assessed to the divisions investing in
the Zero Trusts. (See "Charges to Divisions Investing in the Zero Trusts" on
page 22.)
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 33.)
FACTS ABOUT THE CONTRACT
WHO MAY BE COVERED
The Contract is available in New York. A Contract may be issued for an insured
up to issue age 75. ML of New York will consider issuing Contracts for insureds
above age 75 on an individual basis. The insured's issue age is his or her age
as of the birthday nearest the contract date. The insured must also meet ML of
New York's medical and other underwriting requirements.
ML of New York uses two methods of underwriting:
- simplified underwriting, with no physical exam; and
- para-medical or medical underwriting with a physical exam.
The initial payment plus any planned periodic payments elected and the age and
sex of the insured determine whether ML of New York will do underwriting on a
simplified or medical basis. The
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<PAGE> 20
maximum initial payment plus any planned payments that will be underwritten on a
simplified basis is set out in the chart below:
<TABLE>
<CAPTION>
AGE MAXIMUM
--- -------
<S> <C>
0-29............................ $ 25,000
30-39............................ 40,000
40-49............................ 50,000
50-59............................ 100,000
60-75............................ 120,000
</TABLE>
However, if the face amount is above the minimum face amount required for an
initial payment (see "Selecting the Initial Face Amount" below), ML of New York
will also take the net amount at risk into account in determining the method of
underwriting.
ML of New York assigns insureds to underwriting classes which determine the
current cost of insurance rates used in calculating mortality cost deductions.
In assigning insureds to underwriting classes, ML of New York distinguishes
between those insureds underwritten on a simplified basis and those on a
para-medical or medical basis. Under both the simplified and medical
underwriting methods, Contracts may be issued on insureds either in the standard
or non-smoker underwriting class. Contracts may also be issued on insureds in a
substandard underwriting class. For a discussion of the effect of underwriting
classification on mortality cost deductions, see "Mortality Cost" on page 21.
For joint insureds, see modifications to this section on page 50.
INITIAL PAYMENT
To purchase a Contract, the contract owner must complete an application and make
a payment. The payment is required to put the Contract into effect. This
Prospectus is for a Contract which generally is a modified endowment contract at
the time of issue. The minimum single payment for a Contract is the lesser of
(a) $5,000 for an insured under age 20 and $10,000 for an insured age 20 and
over, or (b) the payment required to purchase a face amount of at least $100,000
(but that payment may not be less than $2,000). Contract owners may make
additional payments which may, but need not be, under a periodic plan. (See
"Making Additional Payments" on page 17.)
ML of New York will not accept an initial payment for a specified face amount
that will provide a guarantee period of less than one year.
Insurance coverage generally begins on the contract date, which is usually the
next business day following receipt of the initial payment at ML of New York's
Service Center. Temporary life insurance coverage may be provided under the
terms of a temporary insurance agreement. In accordance with ML of New York's
underwriting rules, temporary life insurance coverage may not exceed $250,000
and may not be in effect for more than 60 days. As provided for under state
insurance law, the contract owner, to preserve insurance age, may be permitted
to backdate the Contract. In no case may the contract date be more than six
months prior to the date the application was completed. Charges for cost of
insurance for the backdated period are deducted on the first processing date
after the contract date.
For joint insureds, see modifications to this section on page 51.
Selecting the Initial Face Amount. Contract owners purchase a face amount of
insurance with the initial payment. The face amount is based on the initial
payment less the deferred contract loading. For a given initial payment contract
owners may choose their initial face amount, within limits. The minimum face
amount is the amount which will provide a guarantee period for the whole of
life. If the face amount chosen is in excess of the minimum, the guarantee
period will be shorter.
Initial Guarantee Period. The initial guarantee period for a Contract will be
determined by the initial payment and face amount. The guarantee period is the
period of time ML of New York guarantees that the Contract will remain in force
regardless of investment experience unless the
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<PAGE> 21
debt exceeds certain values. The guarantee period is based on the guaranteed
maximum cost of insurance rates in the Contract, the deferred contract loading
and a 4% interest assumption. This means that for a given initial payment and
face amount different insureds will have different guarantee periods depending
on their age, sex and underwriting class. For example, an older insured will
have a shorter guarantee period than a younger insured of the same sex and in
the same underwriting class.
MAKING ADDITIONAL PAYMENTS
After the end of the "free look" period, contract owners may make additional
payments. Payments may be made under a periodic plan. Payments may also be made
which are not under a periodic plan.
Payments Which are Not Under a Periodic Plan. Contract owners may make
additional payments which are not under a periodic payment plan provided the
attained age of the insured is not over 80. Additional payments may be made at
any time up to four times each contract year and must be submitted with an
Application for Additional Payment. The minimum ML of New York will accept for
these payments is $200. They may be made whether or not the contract owner is
making planned payments.
ML of New York may require satisfactory evidence of insurability before a
payment is accepted if the payment immediately increases the net amount at risk
under the Contract, if the contract owner is otherwise making planned payments
or if the guarantee period at the time of the payment is one year or less.
Currently, ML of New York will not accept an additional payment which is not
under a periodic plan where the evidence of insurability would put the insured
in a different underwriting class with different guaranteed or higher current
cost of insurance rates.
If an additional payment requires evidence of insurability, ML of New York will
invest that payment in the division investing in the Money Reserve Portfolio.
The additional payment will be invested in this division on the business day
next following receipt at the Service Center. Once the underwriting is completed
and the payment is accepted, the payment invested in the Money Reserve Portfolio
will automatically be allocated either according to instructions or, if no
instructions have been received, proportionately to the investment base in the
Contract's investment divisions.
Payments Under a Periodic Plan. Contract owners may elect to make planned
periodic payments subject to the rules discussed below. Failure to pay planned
payments will not necessarily cause a Contract to lapse. Conversely, unless the
guarantee period is in effect, PAYING ALL PLANNED PAYMENTS ON A TIMELY BASIS
DOES NOT GUARANTEE THAT A CONTRACT WILL NOT LAPSE. After the end of the
guarantee period, ML of New York may cancel a Contract if the cash surrender
value on a processing date is negative. (See "Guarantee Period" on page 23.)
Contract owners elect the amount, duration and frequency of the payments but the
minimum planned payment (including the initial payment) is $2,000 per contract
year and the amounts elected must be level. In any one year the maximum amount
of the planned payments elected cannot exceed the initial payment. Currently,
the duration of a plan cannot exceed five years.
Under a periodic payment plan, as long as the initial payment plus the planned
payments elected will total $10,000 or more during the first five contract
years, the minimum initial payment is $2,000.
Contract owners may elect a periodic plan in the application. The amount and
duration of the payments elected, as well as other factors (such as the face
amount specified and the insured's age and sex), will affect whether ML of New
York will do underwriting on a simplified or medical basis. Once the elected
plan is approved, the planned payments may be made at any time without any
additional evidence of insurability unless it increases the face amount.
Contract owners may elect a periodic plan at a date later than in the
application. The amount and duration of the payments elected, as well as other
factors (such as the current death benefit and the insured's age and sex), will
affect whether ML of New York will require additional evidence of insurability.
Currently, ML of New York will not allow the later election of a plan where
additional
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evidence of insurability would put the insured in a different underwriting class
with different guaranteed or higher current cost of insurance rates.
Contract owners may elect to make planned payments annually, semiannually or
quarterly. Payments may also be made on a monthly basis if the contract owner
authorizes ML of New York to deduct the payment from his or her checking account
(pre-authorized checking) or to withdraw the payment from his or her CMA
account. ML of New York reserves the right to change or discontinue payment
deduction procedures. If a contract owner has the CMA Insurance Service, planned
payments under any of the above frequencies may be withdrawn automatically from
his or her CMA account and transferred to his or her Contract. The withdrawals
will continue under the plan specified until ML of New York is notified
otherwise. For planned payments not being made under pre-authorized checking or
withdrawn from a CMA account, ML of New York will send the contract owner
reminder notices.
ML of New York may require satisfactory evidence of insurability before the
contract owner will be permitted to make any payments under a periodic payment
plan if the payment increases the face amount of the Contract.
Contract owners may change the frequency, duration and the amount of planned
payments by sending a written request to the Service Center. They may request
one change in the amount, one change in the duration and one change in the
frequency of payments each contract year. Satisfactory evidence of insurability
may be required before the duration or the amount of planned payments can be
increased. The evidence requirements will be based on the amount of the increase
in payment and the duration, as well as other factors such as the current death
benefit and the insured's age and sex.
Effect of Additional Payments. Currently, any additional payment not requiring
evidence of insurability generally will be accepted the day it is received. On
the date ML of New York receives and accepts an additional payment, whether
under a periodic plan or not, ML of New York will:
- increase the Contract's investment base by the amount of the payment;
- increase the deferred contract loading (see "Deferred Contract Loading"
on page 20);
- reflect the payment in the calculation of the variable insurance amount
(see "Variable Insurance Amount" on page 27); and
- increase the fixed base by the amount of the payment less the deferred
contract loading applicable to the payment (see "The Contract's Fixed
Base" on page 24).
If an additional payment requires evidence of insurability, once underwriting is
completed and the payment is accepted, acceptance will be effective, and the
additional payment will be reflected in contract values as described above, as
of the next business day after the payment is received at the Service Center. In
addition, planned payments received on the day prior to a due date will be
credited on the due date to facilitate compliance with the 7-pay test; planned
payments received more than one day prior to a due date will be returned to the
contract owner with instructions for timing planned payments to facilitate
compliance with the 7-pay test.
As of the processing date on or next following receipt and acceptance of an
additional payment, ML of New York will increase either the guarantee period or
face amount or both. If the guarantee period prior to receipt and acceptance of
an additional payment is less than for life, payments will first be used to
extend the guarantee period. Any amount in excess of that required to extend the
guarantee period to the whole of life or any subsequent additional payment will
be used to increase the Contract's face amount.
ML of New York will determine the increase in face amount by taking any excess
amount or the additional payment, deducting the applicable deferred contract
loading, bringing the result up at an annual rate of 4% interest from the date
the additional payment is received and accepted to the next processing date, and
then multiplying by the applicable net single premium factor. If the additional
payment is received and accepted on a processing date, the payment minus the
deferred contract
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<PAGE> 23
loading is multiplied by the applicable net single premium factor. For a further
discussion of the effect of additional payments on a Contract's face amount, see
"Additional Payments" in the Examples on page 48.
Unless specified otherwise, if there is any debt, any payment made, other than
planned payments, will be used first as a loan repayment with any excess applied
as an additional payment. (See "Loans" on page 25.)
For joint insureds, see the modifications to this section on page 51.
CHANGING THE FACE AMOUNT
After the first contract year, if the insured is in a standard or non-smoker
underwriting class, a contract owner may request a change in the face amount of
his or her Contract without making an additional payment, subject to the rules
and conditions discussed below. A change in face amount is not permitted if the
attained age of the insured is over 80. The minimum change in face amount is
$10,000 and only one change may be made each contract year. A change in face
amount may affect the mortality cost deduction. (See "Mortality Cost" on page
21.)
The effective date of the change will be the next processing date following the
receipt and acceptance of a written request, provided it is received at the
Service Center at least seven days before the processing date.
Increasing the Face Amount. To increase the face amount of a Contract, ML of
New York may require satisfactory evidence of insurability. When the face amount
is increased, the guarantee period is decreased. The maximum increase in face
amount is the amount which will provide the minimum guarantee period for which
ML of New York would issue a Contract at the time of the request based on the
insured's attained age. Currently, ML of New York will not permit an increase in
face amount where evidence of insurability, if required, would put the insured
in a different underwriting class with different guaranteed or higher current
cost of insurance rates.
Decreasing the Face Amount. When the face amount of a Contract is decreased,
the guarantee period is increased. The maximum decrease in face amount is that
decrease which would provide the minimum face amount for which ML of New York
would issue a Contract at the time of the request based on the insured's
attained age, sex and underwriting class. ML of New York won't permit a decrease
in face amount below the amount required to keep the Contract qualified as life
insurance under federal income tax laws.
Determining the New Guarantee Period. As of the effective date of any change in
face amount, ML of New York takes the fixed base on that date and, based on the
attained age and sex of the insured and the new face amount of the Contract, it
redetermines the guarantee period. A 4% interest assumption and the guaranteed
maximum cost of insurance rates is used in these calculations. For a discussion
of the effect of changes in the face amount on a Contract's guarantee period,
see "Changing the Face Amount" in the Examples on page 48.
For joint insureds, see the modifications to this section on page 51.
INVESTMENT BASE
A Contract's investment base is the amount available for investment at any time.
It is the sum of the amounts invested in each of the investment divisions. On
the contract date, the investment base equals the initial payment. ML of New
York adjusts the investment base daily to reflect the investment performance of
the investment divisions the contract owner has selected. (See "Net Rate of
Return for an Investment Division" on page 38.) The investment performance
reflects the deduction of Separate Account charges. (See "Charges to the
Separate Account" on page 22.)
Deductions for deferred contract loading, mortality cost, and net loan cost, and
partial withdrawals and loans decrease the investment base. (See "Charges
Deducted from the Investment Base" on page 20, "Partial Withdrawals" and "Loans"
on page 25.) Loan repayments and additional payments
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increase it. Contract owners may elect from which investment divisions loans and
partial withdrawals are taken and to which investment divisions repayments and
additional payments are added. If an election is not made, ML of New York will
allocate increases and decreases proportionately to the contract owner's
investment base in the investment divisions selected. (For special rules on
allocation of additional payments which require evidence of insurability, see
"Payments Which are Not Under a Periodic Plan" on page 17.)
Initial Investment Allocation and Preallocation. Through the first 14 days
following the in force date, the initial payment will remain in that investment
division. Thereafter, the investment base will be reallocated to the investment
divisions selected by the contract owner on the application, if different. The
contract owner may invest in up to five of the 37 investment divisions of the
Separate Account.
Changing the Allocation. After the first 14 days following the in force date, a
contract owner's investment base may be invested in up to five investment
divisions at any one time. Currently, investment allocations may be changed as
often as desired. However, ML of New York may limit the number of changes
permitted but not to less than five each contract year. Contract owners will be
notified if limitations are imposed. In order to change their investment base
allocation, contract owners must call or write to the Service Center. (See "Some
Administrative Procedures" on page 30.)
Zero Trust Allocations. ML of New York will notify contract owners 30 days
before a Zero Trust in which they have invested matures. Contract owners must
tell ML of New York in writing at least seven days before the maturity date how
to reinvest their funds in the investment division investing in that Zero Trust.
If ML of New York is not notified, it will move the contract owner's investment
base in that division to the investment division investing in the Money Reserve
Portfolio.
Units of a specific Zero Trust may no longer be available when a request for
allocation is received. Should this occur, ML of New York will attempt to notify
the contract owner immediately so that the request can be changed.
Allocation to the Division Investing in the Natural Resources Portfolio. ML of
New York and the Separate Account reserve the right to suspend the sale of units
of the investment division investing in the Natural Resources Portfolio in
response to conditions in the securities markets or otherwise.
CHARGES DEDUCTED FROM THE INVESTMENT BASE
ML of New York deducts the charges described below to cover costs and expenses,
services provided, and risks assumed under the Contracts. The amount of a charge
may not necessarily correspond to the costs associated with providing the
services or benefits indicated by the designation of the charge or associated
with the particular Contract. For example, the deferred contract loading may not
fully cover all of the sales and distribution expenses actually incurred by ML
of New York, and proceeds from other charges, including the mortality and
expense risk charge, may be used in part to cover such expenses.
The charges described below are deducted pro-rata from the investment base on
processing dates. ML of New York also deducts certain asset and trust charges
daily from the investment results of each investment division in the Separate
Account in determining its net rate of return. Currently the asset and trust
charges are equivalent to .90% and .34% annually at the beginning of the year.
(See "Charges to the Separate Account" on page 22.) The portfolios in the Funds
also pay monthly advisory fees and other expenses. (See "Charges to Fund Assets"
on page 22.)
Deferred Contract Loading. 100% of all premium payments are invested in the
Separate Account. Chargeable to each payment is an amount called the deferred
contract loading. The deferred contract loading equals 9% of each payment. This
charge consists of a sales load, a charge for federal taxes and a state and
local premium tax charge.
The sales load, equal to 5% of each payment, compensates ML of New York for
sales expenses. The sales load may be reduced if cumulative payments are
sufficiently high to reach certain breakpoints
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(2% of payments in excess of $1.5 million and 0% of payments in excess of $4
million) and in certain group or sponsored arrangements as described on page 33.
The charge for federal taxes is equal to 2% of each payment.
The state and local premium tax charge is equal to 2% of each payment.
Although chargeable to each payment, ML of New York advances the amount of the
deferred contract loading to the investment divisions as part of a contract
owner's investment base. It then takes back these funds in equal installments on
the ten contract anniversaries following the date a payment is received and
accepted. This means that an amount equal to .90% of each payment is deducted
from the investment base on each of the ten contract anniversaries following the
payment. However, in determining a Contract's net cash surrender value, ML of
New York subtracts from the investment base the balance of the deferred contract
loading which is chargeable to any payment made but which has not yet been
deducted. Thus, this balance is deducted in determining the amount payable on
surrender of the Contract.
During the period that the deferred contract loading is included in the
investment base, a positive net rate of return will give greater increases in
net cash surrender value and a negative net rate of return will give greater
decreases in net cash surrender value than if the loading had not been included
in the investment base.
For joint insureds, see the modifications to this subsection on page 51.
Mortality Cost. ML of New York deducts a mortality cost from the investment
base on each processing date after the contract date. This charge compensates ML
of New York for the cost of providing life insurance coverage for the insured.
It is based on the underwriting class assigned to the insured, the insured's sex
and attained age and the Contract's net amount at risk.
To determine the mortality cost, ML of New York multiplies the current cost of
insurance rate by the Contract's net amount at risk (adjusted for interest at an
annual rate of 4%). The net amount at risk is the difference, as of the previous
processing date, between the death benefit and the cash surrender value.
Current cost of insurance rates may be equal to or less than the guaranteed cost
of insurance rates depending on the insured's underwriting class, sex and
attained age. For all insureds, current cost of insurance rates distinguish
between insureds in the simplified underwriting class and medical underwriting
class. For insureds age 20 and over, current cost of insurance rates also
distinguish between insureds in a smoker (standard) underwriting class and
insureds in a non-smoker underwriting class. For Contracts issued on insureds
under the same underwriting method, current cost of insurance rates are lower
for an insured in a non-smoker underwriting class than for an insured of the
same age and sex in a smoker (standard) underwriting class. Also, current cost
of insurance rates are lower for an insured in a medical underwriting class than
for a similarly situated insured in a simplified underwriting class. The
simplified current cost of insurance rates are higher because less underwriting
is performed and therefore more risk is incurred.
ML of New York guarantees that the current cost of insurance rates will never
exceed the maximum guaranteed rates shown in the Contract. The maximum
guaranteed rates for Contracts (other than those issued on a substandard basis)
do not exceed the rates based on the 1980 Commissioners Standard Ordinary
Mortality Table (CSO Table). ML of New York may use rates that are equal to or
less than these rates, but never greater. The maximum rates for Contracts issued
on a substandard basis are based on a multiple of the 1980 CSO Table. Any change
in the cost of insurance rates will apply to all insureds of the same age, sex,
and underwriting class whose Contracts have been in force for the same length of
time.
During the period between processing dates, the net cash surrender value takes
the mortality cost into account on a pro-rated basis. Thus, a pro-rata portion
of the mortality cost is deducted in determining the amount payable on surrender
of the Contract if the date of surrender is not a processing date.
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For joint insureds, see the modifications to this subsection on page 51.
Maximum Mortality Cost. During the guarantee period, ML of New York limits the
deduction for mortality cost if investment results are unfavorable. This is done
by substituting the fixed base for the cash surrender value in determining the
net amount at risk and by multiplying by the guaranteed cost of insurance rate.
ML of New York will deduct this alternate amount from the investment base when
it is less than the mortality cost that would have otherwise been deducted. In
effect, during the guarantee period, a contract owner will not be charged for
mortality costs that are greater than those for a comparable fixed contract,
based on 4% interest and the same guaranteed cost of insurance rates. (See "The
Contract's Fixed Base" on page 24.)
Net Loan Cost. The net loan cost is explained under "Loans" on page 25.
CHARGES TO THE SEPARATE ACCOUNT
Each day ML of New York deducts an asset charge from each division of the
Separate Account. The total amount of this charge is computed at .90% annually
at the beginning of the year. Of this amount, .75% is for
- the risk assumed by ML of New York that insureds as a group will live for
a shorter time than actuarial tables predict. As a result, ML of New York
would be paying more in death benefits than planned; and
- the risk assumed by ML of New York that it will cost more to issue and
administer the Contracts than expected.
The remaining amount, .15%, is for
- the risks assumed by ML of New York with respect to potentially
unfavorable investment results. One risk is that the Contract's cash
surrender value cannot cover the charges due during the guarantee period.
The other risk is that ML of New York may have to limit the deduction for
mortality cost (see "Maximum Mortality Cost" above).
If the asset charge is inadequate to cover the actual expenses of mortality,
maintenance, and administration, ML of New York will bear the loss. If the
charge exceeds the actual expenses, the excess will be added to ML of New York's
profit and may be used to finance distribution expenses. The total 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 its taxes, if any. Such a charge is not
currently imposed, but it may be in the future. However, see page 20 for a
discussion of tax charges included in deferred contract loading.
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;
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- .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 500 Fund, the International Equity Focus Fund, the Developing Capital
Markets Focus Fund, and the Special Value Focus Fund, respectively.
MLAM and Merrill Lynch Life Agency, Inc. have entered into agreements which
limit the operating expenses, exclusive of any distribution fees imposed on
Class B shares, paid by each fund in a given year to 1.25% of its average daily
net assets. Those reimbursement agreements provide that any such 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 the first $250 million of each fund's average
daily net assets and .60% of each fund's average daily net assets in excess of
$250 million.
Effective May 1, 1998, the AIM V.I. Funds reimburse AIM in an amount up to 0.25%
of the average net asset value of each fund, for expenses incurred in providing,
or assuring that participating insurance companies provide, certain
administrative services. Currently the fee only applies to the average net asset
value of each fund in excess of the net asset value of each fund as calculated
on April 30, 1998.
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.
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.
GUARANTEE PERIOD
Subject to certain conditions, ML of New York guarantees that the Contract will
stay in force for the insured's life, or for a shorter guarantee period
depending on the face amount selected and payments made to date. The guarantee
period will be affected by a requested change in the face amount and may also be
affected by additional payments. A partial withdrawal may affect the guarantee
period in certain circumstances. ML of New York won't cancel the Contract during
the guarantee period unless the debt exceeds certain contract values. (See
"Interest" on page 26.) A reserve is held in ML of New York's general account to
support this guarantee.
When the Guarantee Period is Less Than for Life. After the end of the guarantee
period, ML of New York will cancel the Contract if the cash surrender value on a
processing date is negative. This
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negative cash surrender value will be considered an overdue charge. (See
"Charges Deducted from the Investment Base" on page 20.)
ML of New York will notify the contract owner before cancelling the Contract. He
or she will then have 61 days to pay the charges due on the processing date when
the cash surrender value became negative. ML of New York will cancel the
Contract at the end of this grace period if the payment has not yet been
received.
If ML of New York cancels a Contract, it may be reinstated while the insured is
still living if:
- the reinstatement is requested within three years after the end of the
grace period;
- ML of New York receives satisfactory evidence of insurability; and
- the reinstatement payment is paid. The reinstatement payment is the
minimum payment for which ML of New York would then issue a Contract for
the minimum guarantee period with the same face amount as the original
Contract, based on the insured's attained age and underwriting class as
of the effective date of the reinstated Contract.
A reinstated Contract will be effective on the processing date on or next
following the date the reinstatement application is approved.
For joint insureds, see the modifications to this subsection on page 52.
The Contract's Fixed Base. On the contract date, the fixed base equals the cash
surrender value. From then on, the fixed base is calculated like the cash
surrender value except that the calculation substitutes 4% for the net rate of
return, the guaranteed maximum cost of insurance rates are substituted for the
current rates and it is calculated as though there had been no loans or
repayments. The fixed base is equivalent to the cash surrender value for a
comparable fixed benefit contract with the same face amount and guarantee
period. After the guarantee period, the fixed base is zero. The fixed base is
used to limit the mortality cost deduction and ML of New York's right to cancel
the Contract during the guarantee period.
NET CASH SURRENDER VALUE
A Contract's net cash surrender value fluctuates daily with the investment
results of the investment divisions selected. ML of New York doesn't guarantee
any minimum net cash surrender value. On a processing date which is also a
contract anniversary, the net cash surrender value equals:
- the Contract's investment base on that date;
- minus the balance of the deferred contract loading which has not yet been
deducted from the investment base (see "Deferred Contract Loading" on
page 20).
If the date of calculation is not a processing date, the net cash surrender
value is calculated in a similar manner but ML of New York also subtracts a
pro-rata portion of the mortality cost which would otherwise be deducted on the
next processing date. And, if there is any existing debt, ML of New York will
also subtract a pro-rata net loan cost on dates other than the contract
anniversary.
Cancelling to Receive Net Cash Surrender Value. A contract owner may cancel the
Contract at any time while the insured is living. The request must be in writing
in a form satisfactory to ML of New York. All rights to death benefits will end
on the date the written request is sent to ML of New York.
That contract owner will then receive the net cash surrender value. The contract
owner may elect to receive this amount either in a single payment or under one
or more income plans described on page 31. The net cash surrender value will be
determined upon receipt of the written request at the Service Center.
For joint insureds, see the modifications to this subsection on page 52.
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PARTIAL WITHDRAWALS
Beginning in Contract year two, a contract owner may make partial withdrawals of
amounts up to the withdrawal value by submitting a request in a form
satisfactory to ML of New York. The withdrawal value is equal to 80% X (a+b) - b
where:
- a = the current net cash surrender value, and
- b = the sum of all prior withdrawals.
The effective date of the withdrawal is the date a withdrawal request is
received at the Service Center. Contract owners may make one partial withdrawal
each contract year and will receive the withdrawal amount in a single payment.
The minimum amount for each partial withdrawal is $500. The amount of any
partial withdrawal may not exceed the loan value less any debt. A partial
withdrawal may not be repaid.
Effect on Investment Base, Fixed Base and Death Benefit. As of the effective
date of the withdrawal, the investment base and fixed base will be reduced by
the amount of the partial withdrawal. ML of New York allocates this reduction
proportionately to the investment base in the contract owner's investment
divisions unless notified otherwise. The variable insurance amount will also
reflect the partial withdrawal as of the effective date.
Effect on Guaranteed Benefits. As of the processing date on or next following a
partial withdrawal, ML of New York reduces the Contract's face amount. This is
done by taking the fixed base as of that processing date and determining what
face amount that fixed base would support for the Contract's guarantee period.
If this produces a face amount below the minimum face amount for the Contract,
ML of New York will reduce the face amount to that minimum, and reduce the
guarantee period, based on the reduced face amount, the fixed base and the
insured's sex, attained age, and underwriting class. The minimum face amount for
a Contract is the greater of the minimum face amount for which ML of New York
would then issue the Contract, based on the insured's sex, attained age and
underwriting class, and the minimum amount required to keep the Contract
qualified as life insurance under applicable tax law. For a discussion of the
effect of partial withdrawals on a Contract's guaranteed benefits, see "Partial
Withdrawals" in the Examples on page 48.
Partial withdrawals are treated as distributions under the Contract for federal
tax purposes and may be subject to a 10% penalty tax. For a discussion of the
tax issues associated with a partial withdrawal, see "Tax Treatment of Loans and
Other Distributions" on page 35.
LOANS
Contract owners may use the Contract as collateral to borrow funds from ML of
New York. The minimum loan is $200 unless the contract owner is borrowing to
make a payment on another ML of New York variable life insurance contract. In
that case, the contract owner may borrow the exact amount required even if it is
less than $200. Contract owners may repay all or part of the loan any time
during the insured's lifetime. Each repayment must be for at least $200 or the
amount of the debt, if less.
Loans are treated as distributions under the Contract for federal tax purposes
and may be subject to a 10% penalty tax. For a discussion of the tax issues
associated with a loan, see "Tax Treatment of Loans and Other Distributions" on
page 35.
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
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proportionately from and make repayments proportionately to the contract owner's
investment base as then allocated to the investment divisions.
If a contract owner has the CMA Insurance Service, loans may be transferred to
and loan repayments transferred from his or her CMA account.
Effect on Death Benefit and Cash Surrender Value. Whether or not a loan is
repaid, taking a loan will have a permanent effect on a Contract's cash
surrender value and may have a permanent effect on its death benefit. This is
because the collateral for a loan does not participate in the performance of the
investment divisions while the loan is outstanding. If the amount credited to
the collateral is more than what is earned in the investment divisions, the cash
surrender value will be higher as a result of the loan, as may be the death
benefit. Conversely, if the amount credited is less, the cash surrender value
will be lower, as may be the death benefit. In that case, the lower cash
surrender value may cause the Contract to lapse sooner than if no loan had been
taken.
Loan Value. The loan value of a Contract equals 90% of its cash surrender
value. The sum of all outstanding loan amounts plus accrued interest is called
debt. The maximum amount that can be borrowed at any time is the difference
between the loan value and the debt. The cash surrender value is the net cash
surrender value plus any debt.
Interest. While a loan is outstanding, ML of New York charges interest of 5%
annually, subject to state regulation. Interest accrues each day and payments
are due at the end of each contract year. IF THE INTEREST ISN'T PAID WHEN DUE,
IT IS ADDED TO THE OUTSTANDING LOAN AMOUNT. Policy debt is considered part of
total cash value which is used to calculate gain. This amount added to the loan
is taxable income if the Contract is a modified endowment contract. In addition,
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.
Net Loan Cost. On each contract anniversary, ML of New York reduces the
investment base by the net loan cost (the difference between the interest
charged and the earnings on the amount held as collateral in the general
account) and adds that amount to the amount held in the general account as
collateral for the loan. Since the interest charged is 5% and the collateral
earnings on such amounts are 4%, the current net loan cost on loaned amounts is
1%. The net cash surrender value takes this charge into account on a pro-rated
basis. The net loan cost is taken into account in determining the net cash
surrender value of the Contract if the date of surrender is not a contract
anniversary.
Cancellation Due to Excess Debt. If the debt exceeds the larger of the cash
surrender value and the fixed base on a processing date, ML of New York will
cancel the Contract 61 days after a notice of intent to terminate the Contract
is mailed to the contract owner unless ML of New York has received at least the
minimum repayment amount specified in the notice.
DEATH BENEFIT PROCEEDS
ML of New York will pay the death benefit proceeds to the beneficiary upon
receipt of all information needed to process the payment, including due proof of
the insured's death. When ML of New York is first provided reliable notification
of the 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.
Amount of Death Benefit Proceeds. The death benefit proceeds are equal to the
death benefit, which is the larger of the current face amount and the variable
insurance amount, less any debt.
The values used in calculating the death benefit proceeds are as of the date of
death. The death benefit will never be less than the amount required to keep the
Contract qualified as life insurance under federal income tax laws. If the
insured dies during the grace period, the death benefit
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<PAGE> 31
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 24.)
Variable Insurance Amount. ML of New York determines the variable insurance
amount daily by:
- calculating the cash surrender value; and
- multiplying by the net single premium factor (explained below).
The variable insurance amount will never be less than required by federal tax
law.
Net Single Premium Factor. The net single premium factor is used to determine
the amount of death benefit purchased by $1.00 of cash surrender value. It is
based on the insured's sex, underwriting class, and attained age on the date of
calculation. It decreases daily as the insured's age increases. As a result, the
variable insurance amount as a multiple of the cash surrender value will
decrease over time. Also, net single premium factors may be higher for a woman
than for a man of the same age. A table of net single premium factors as of each
anniversary is included in the Contract.
Table of Illustrative Net Single Premium Factors
on Anniversaries
Standard Underwriting Class
<TABLE>
<CAPTION>
ATTAINED
AGE MALE FEMALE
- -------- -------- --------
<S> <C> <C>
5 10.26609 12.37715
15 7.41160 8.96255
25 5.50386 6.47763
35 3.97199 4.64820
45 2.87751 3.36402
55 2.14059 2.48932
65 1.65787 1.87555
75 1.35396 1.45951
85 1.18028 1.21264
</TABLE>
For joint insureds, see the modifications to this section on page 52.
PAYMENT OF DEATH BENEFIT PROCEEDS
ML of New York will generally pay the death benefit proceeds to the beneficiary
within seven days after all the information needed to process the payment is
received at its Service Center.
ML of New York will add interest from the date of the insured's death to the
date of payment at an annual rate of at least 4%. The beneficiary may elect to
receive the proceeds either in a single payment or under one or more income
plans described on page 32. Payment may be delayed if the Contract is being
contested or under the circumstances described in "Using the Contract" on page
28 and "Other Contract Provisions" on page 31.
For joint insureds, see the modifications to this section on page 52.
RIGHT TO CANCEL ("FREE LOOK" PERIOD) OR EXCHANGE
A contract owner may cancel his or her Contract during the "free look" period by
returning it for a refund. The "free look" period ends ten days after the
Contract is received. To cancel the Contract during the "free look" period, the
contract owner must mail or deliver the Contract to ML of New York's Service
Center or to the registered representative who sold it. ML of New York will
refund the payment made without interest. If cancelled, ML of New York may
require the contract owner to wait six months before applying again.
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<PAGE> 32
Exchanging the Contract. Contract owners may exchange their Contracts at any
time for a contract with benefits that do not vary with the investment results
of a separate account. A request to exchange must be in writing. Also, the
original Contract must be returned to ML of New York's Service Center.
The new contract will have the same owner, insured, and beneficiary as those of
the original Contract on the date of the exchange. It will have the same issue
age, issue date, face amount, cash surrender value, benefit riders and
underwriting class as the original Contract on the date of the exchange. Any
debt will be carried over to the new contract.
ML of New York will not require evidence of insurability to exchange for a new
contract.
For joint insureds, see the modifications to this subsection on page 52.
REPORTS TO CONTRACT OWNERS
After the end of each processing period, contract owners will be sent a
statement of the allocation of their investment base, death benefit, cash
surrender value, any debt and, if there has been a change, new face amount and
guarantee period. All figures will be as of the end of the immediately preceding
processing period. The statement will show the amounts deducted from or added to
the investment base during the processing period. The statement will also
include any other information that may be currently required by a contract
owner's state.
Contract owners will receive confirmation of all financial transactions. Such
confirmations will show the price per unit of each of the contract owner's
investment divisions, the number of units a contract owner has in the investment
division and the value of the investment division computed by multiplying the
quantity of units by the price per unit. (See "Net Rate of Return for an
Investment Division" on page 38.) 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,
net cash surrender value, debt and any CMA account activity affecting the
Contract during the month.
MORE ABOUT THE CONTRACT
USING THE CONTRACT
Ownership. The contract owner is usually the insured, unless another owner has
been named in the application. The contract owner has all rights and options
described in the Contract.
The contract owner may want to name a contingent owner. If the contract owner
dies before the insured, the contingent owner will own the contract owner's
interest in the contract and have all the contract owner's rights. If the
contract owner does not name a contingent owner, the contract owner's estate
will own the contract owner's interest in the Contract upon the owner's death.
If there is more than one contract owner, ML of New York will treat the owners
as joint tenants with rights of survivorship unless the ownership designation
provides otherwise. Completion of additional forms may be required. 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.
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<PAGE> 33
Changing the Owner. During the insured's lifetime, the contract owner has the
right to transfer ownership of the Contract with the consent of any irrevocable
beneficiary. 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 34.)
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 34.
Naming Beneficiaries. ML of New York will pay the primary beneficiary the death
benefit proceeds of the Contract upon the insured's death. If the primary
beneficiary has died, ML of New York will pay the contingent beneficiary. If no
contingent beneficiary is living, ML of New York will pay the insured's estate.
A contract owner may name more than one person as primary or contingent
beneficiaries. ML of New York will pay proceeds in equal shares to the surviving
beneficiary unless the beneficiary designation provides otherwise.
A contract owner has the right to change beneficiaries during the insured's
lifetime unless the primary beneficiary designation has been made irrevocable.
If the designation is irrevocable, the primary beneficiary must consent when
certain rights and options are exercised under this Contract. If the beneficiary
is changed, the change will take effect as of the day the notice is signed, but
will not affect any payment made or action taken by ML of New York before
receipt of the notice of the change at the Service Center.
Changing the Insured. Subject to certain requirements, contract owners may
request a change of insured once each contract year. ML of New York must receive
a written request signed by the contract owner and the proposed new insured.
Neither the original nor the new insured can have attained ages as of the
effective date of the change less than 21 or more than 75. The new insured must
have been alive at the time the Contract was issued. ML of New York will also
require evidence of insurability for the proposed new insured. The proposed new
insured must qualify for a standard or better underwriting classification.
Outstanding debt must be repaid and the Contract cannot be collaterally
assigned. If the request for change is approved, insurance coverage on the new
insured will take effect on the processing date on or next following the date of
approval, provided the new insured is still living at that time and the Contract
is still in force at that time.
The Contract will be changed as follows on the effective date:
- the issue age will be the new insured's issue age (the new insured's age
as of the birthday nearest the contract date);
- the guaranteed maximum cost of insurance rates will be those in effect on
the contract date for the new insured's issue age, sex and underwriting
class;
- a charge for changing the insured will be deducted from the Contract's
investment base on the effective date. This charge will also be reflected
in the Contract's fixed base. The charge will equal $1.50 per $1,000 of
face amount with a minimum charge of $200 and a maximum of $1,500. This
charge may be reduced in certain group or sponsored arrangements as
described on page 33;
- the variable insurance amount will reflect the change of insured; and
- the Contract's issue date will be the effective date of the change.
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<PAGE> 34
The face amount or guarantee period may also change on the effective date
depending on the new insured's age, sex and underwriting class. The new
guarantee period cannot be less than the minimum guarantee period for which ML
of New York would then issue a Contract based on the new insured's attained age
as of the effective date of the change.
This option is not generally available for joint insureds.
For a discussion of the tax issues associated with changing the insured, see
"Tax Considerations" on page 34.
Maturity Proceeds. The maturity date is the contract anniversary nearest the
insured's 100th birthday. On the maturity date, ML of New York will pay the net
cash surrender value to the contract owner, provided the insured is still living
and the Contract is in effect at that time.
How ML of New York Makes Payments. ML of New York generally pays death benefit
proceeds, partial withdrawals, loans and net cash surrender value on
cancellation from the Separate Account within seven days after the Service
Center receives all the information needed to process the payment.
However, it may delay payment from the Separate Account if it isn't practical
for ML of New York to value or dispose of Trust units 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.
For joint insureds, see the modifications to this section on page 52.
SOME ADMINISTRATIVE PROCEDURES
Described below are certain administrative procedures. ML of New York reserves
the right to modify them or to eliminate them. For administrative and tax
purposes, ML of New York may from time to time require that specific forms be
completed in order to accomplish certain transactions, including surrenders.
Personal Identification Number. ML of New York will send each contract owner a
four-digit personal identification number ("PIN") shortly after the Contract is
placed in force and before the end of the "free look" period. This number must
be given when a contract owner calls the Service Center to get information about
the Contract, to make a loan (if an authorization is on file), or to make other
requests. Each PIN will be accompanied by a notice reminding the contract owner
that all of the investment base is in the division investing in the Money
Reserve Portfolio and will be reallocated to the investment divisions selected
at the time of application. The notice sent to contract owners who did not
choose to preallocate the investment base will indicate that all of the
investment base is in the division investing in the Money Reserve Portfolio, and
that this allocation may be changed by calling or writing to the Service Center.
(See "Changing the Allocation" on page 20.)
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
telephone. If the reallocation is requested by telephone, 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 telephone 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
telephone. Once the authorization has been received at the Service Center,
contract owners can call the Service Center, give their Contract
30
<PAGE> 35
number, name and personal identification number, and tell ML of New York the
loan amount and from which divisions the loan should be taken.
Upon request, ML of New York will wire the funds to the account at the financial
institution named on the contract owner's authorization. ML of New York will
generally wire the funds within two working days of receipt of the request. If
the contract owner has the CMA Insurance Service, funds may be transferred
directly to that CMA account.
Requesting Partial Withdrawals. Beginning at the second contract year, 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 telephone if all
required telephone authorization forms are on file. Once the authorization has
been received at the Service Center, contract owners can call the Service
Center, give their Contract number, name and personal identification number, and
tell ML of New York how much to withdraw and from which investment divisions.
Upon request, ML of New York will wire the funds to the account at the financial
institution named on the contract owner's authorization. ML of New York will
usually wire the funds within two working days of receipt of the request. If the
contract owner has the CMA Insurance Service, funds can be transferred directly
to that CMA account.
Telephone Requests. A telephone request for a loan, partial withdrawal or a
reallocation received before 4 p.m. (ET) generally will be processed the same
day. A request received at or after 4 p.m. (ET) will be processed the following
business day. ML of New York reserves the right to change or discontinue
telephone transfer procedures.
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. ML of New York can also contest the
validity of any change in face amount requested if any material misstatements
are made in any application required for that change. In addition, ML of New
York can contest any amount of death benefit which wouldn't be payable except
for the fact that an additional payment which requires evidence of insurability
was made if any material misstatements are made in the application required with
the additional payment.
ML of New York will not contest the validity of a Contract after it has been in
effect during the insured's lifetime for two years from the date of issue. Any
change in face amount will not be contested after the change has been in effect
during the insured's lifetime for two years from the date of the change. Nor
will ML of New York contest any amount of death benefit attributable to an
additional payment which requires evidence of insurability after the death
benefit has been in effect during the insured's lifetime for two years from the
date the payment was received and accepted.
Payment in Case of Suicide. If the insured commits suicide within two years
from the Contract's issue date, ML of New York will pay only a limited death
benefit. The benefit will be equal to the amount of the payments made.
If the insured commits suicide within two years of the effective date of any
increase in face amount requested, any amount of death benefit which would not
be payable except for the fact that the face
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<PAGE> 36
amount was increased will be limited to the amount of mortality cost deductions
made for the increase.
If the insured commits suicide within two years of any date an additional
payment is received and accepted, any amount of death benefit which would not be
payable except for the fact that the additional payment was made will be limited
to the amount of the payment.
The death benefit will be reduced by any debt.
Contract Changes -- Applicable Federal Tax Law. To receive the tax treatment
accorded to life insurance under federal income tax law, the Contract must
qualify initially and continue to qualify as life insurance under the Internal
Revenue Code or successor law. Therefore, to maintain this qualification to the
maximum extent of the law, ML of New York reserves the right to return any
additional payments that would cause the Contract to fail to qualify as life
insurance under applicable federal tax law as interpreted by ML of New York.
Further, ML of New York reserves the right to make changes in the Contract or
its riders or to make distributions from the Contract to the extent it is
necessary to continue to qualify the Contract as life insurance. Any changes
will apply uniformly to all Contracts that are affected and contract owners will
be given advance written notice of such changes.
For joint insureds, see the modifications to this section on page 52.
INCOME PLANS
ML of New York offers several income plans to provide for payment of the death
benefit proceeds to the beneficiary. The contract owner may choose one or more
income plans at any time during the insured's lifetime. If no plan has been
chosen when the insured dies, the beneficiary has one year to apply the death
benefit proceeds either paid or payable to that beneficiary to one or more of
the plans. The contract owner may also choose one or more income plans if the
Contract is cancelled for its net cash surrender value. ML of New York's
approval is needed for any plan where any income payment would be less than
$100. Payments under these plans do not depend on the investment results of a
separate account.
For joint insureds, see the modifications to this section on page 53.
Income plans include:
Annuity Plan. An amount can be used to purchase a single premium
immediate annuity. (Annuity purchase rates will be 3% less than for new
annuitants.)
Interest Payment. Amounts can be left with ML of New York to earn
interest at an annual rate of at least 3%. Interest payments can be made
annually, semi-annually, quarterly or monthly.
Income for a Fixed Period. Payments are made in equal installments
for a fixed number of years.
Income for Life. Payments are made in equal monthly installments
until the death of a named person or the end of a designated period,
whichever is later. The designated period may be for 10 or 20 years. Other
designated periods and payment schedules may be available on request.
Income of a Fixed Amount. Payments are made in equal installments
until proceeds applied under this option and interest on the unpaid balance
at not less than 3% per year are exhausted.
Joint Life Income. Payments are made in monthly installments as long
as at least one of two named persons is living. Other payment schedules may
be available on request. While both are living, full payments are made. If
one dies, payments of at least two-thirds of the full amount are made.
Payments end completely when both named persons die.
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<PAGE> 37
Once in effect, some of the plans may not provide any surrender rights.
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, ML of New York may reduce the sales
load, cost of insurance rates and the minimum payment and may modify
underwriting classifications and requirements.
Group arrangements include those in which a trustee or an employer, for example,
purchases Contracts covering a group of individuals on a group basis. Sponsored
arrangements include those in which an employer allows ML of New York to sell
Contracts to its employees on an individual basis.
Costs for sales, administration, and mortality generally vary with the size and
stability of the group and the reasons the Contracts are purchased, among other
factors. ML of New York takes all these factors into account when reducing
charges. To qualify for reduced charges, a group or sponsored arrangement must
meet certain requirements, including requirements for size and number of years
in existence. Group or sponsored arrangements that have been set up solely to
buy Contracts or that have been in existence less than six months will not
qualify for reduced charges.
ML of New York makes any reductions according to rules in effect when an
application for a Contract or additional payment is approved. It may change
these rules from time to time. However, reductions in charges will not
discriminate unfairly against any person.
UNISEX LEGAL CONSIDERATIONS FOR EMPLOYERS
In 1983 the Supreme Court held in Arizona Governing Committee v. Norris that
optional annuity benefits provided under an employee's deferred compensation
plan could not, under Title VII of the Civil Rights Act of 1964, vary between
men and women. In addition, legislative, regulatory or decisional authority of
some states may prohibit use of sex-distinct mortality tables under certain
circumstances.
The Contracts offered by this Prospectus are based on mortality tables that
distinguish between men and women. As a result, the Contract pays different
benefits to men and women of the same age. Employers and employee organizations
should check with their legal advisers before purchasing these Contracts.
SELLING THE CONTRACTS
MLPF&S is the principal underwriter of the Contract. It was organized in 1958
under the laws of the state of Delaware and is registered as a broker-dealer
under the Securities Exchange Act of 1934. It is a member of the National
Association of Securities Dealers, Inc. ("NASD"). The principal business address
of MLPF&S is World Financial Center, 250 Vesey Street, New York, New York 10281.
MLPF&S also acts as principal underwriter of other variable life insurance and
variable annuity contracts issued by ML of New York, as well as variable life
insurance and variable annuity contracts issued by Merrill Lynch Life Insurance
Company, an affiliate of ML of New York. MLPF&S also acts as principal
underwriter of certain mutual funds managed by Merrill Lynch Asset Management,
the investment adviser for the Series Fund and the Variable Series Funds.
Contracts are sold by registered representatives of MLPF&S who are also licensed
through Merrill Lynch Life Agency, Inc. as insurance agents for ML of New York.
ML of New York has entered into a distribution agreement with MLPF&S and a
companion sales agreement with Merrill Lynch Life Agency, Inc. through which
agreements the Contracts and other variable life insurance contracts issued
through the Separate Account are sold and the registered representatives are
compensated by Merrill Lynch Life Agency, Inc. and/or MLPF&S.
The maximum commission ML of New York will pay to Merrill Lynch Life Agency,
Inc. to be used to pay commissions to registered representatives is 3.5% of each
premium. Additional annual compensation of no more than 0.10% of the investment
base may also be paid to the registered representa-
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<PAGE> 38
tives. Registered representatives may elect to receive lower commission as a
percent of each premium in exchange for higher compensation as a percent of the
investment base. In such a case, the maximum additional annual compensation is
0.30% of the investment base.
The amounts paid under the distribution and sales agreements for the Separate
Account for the years ended December 31, 1997, December 31, 1996, and December
31, 1995 were $400,483, $263,503 and $162,482, respectively. Commission may be
paid in the form of non-cash compensation.
MLPF&S may arrange for sales of the Contract by other broker-dealers who are
registered under the Securities Exchange Act of 1934 and are members of the
NASD. Registered representatives of these other broker-dealers may be
compensated on a different basis than MLPF&S registered representatives.
TAX CONSIDERATIONS
Definition of Life Insurance. In order to qualify as a life insurance contract
for federal tax purposes, the Contract must meet the definition of a life
insurance contract which is set forth in Section 7702 of the Internal Revenue
Code of 1986 as amended (the "Code"). The Section 7702 definition can be met if
a life insurance contract satisfies either one of two tests set forth in that
section. The manner in which these tests should be applied to certain innovative
features of the Contract offered by this Prospectus is not directly addressed by
Section 7702 or the proposed regulations issued thereunder. The presence of
these innovative Contract features, and the absence of final regulations or any
other pertinent interpretations of the tests, thus creates some uncertainty
about the application of the tests to the Contract.
ML of New York believes that the Contract qualifies as a life insurance contract
for federal tax purposes. This means that:
- the death benefit should be fully excludable from the gross income of the
beneficiary under Section 101(a)(1) of the Code; and
- the contract owner should not be considered in constructive receipt of
the cash surrender value, including any increases, unless and until
actual receipt of distributions from the Contract (see "Tax Treatment of
Loans and Other Distributions" on page 35).
Because of the absence of final regulations or any other pertinent
interpretations of the Section 7702 tests, it, however, is unclear whether
substandard risk Contracts or Contracts insuring more than one person will, in
all cases, meet the statutory life insurance contract definition. If a contract
were determined not to be a life insurance contract for purposes of Section
7702, such contract would not provide most of the tax advantages normally
provided by life insurance contracts.
ML of New York thus reserves the right to make changes in the Contract if such
changes are deemed necessary to attempt to assure its qualification as a life
insurance contract for tax purposes. (See "Contract Changes -- Applicable
Federal Tax Law" on page 32.)
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 diversification regulations, the Treasury
Department stated that it anticipates the issuance of regulations or rulings
prescribing the circumstances in which an owner's control of the investments of
a Separate Account may cause the contract owner, rather than the insurance
company, to be treated as the owner of the assets in the account. If the
contract owner is considered the owner of the assets of the separate account,
income and gains from the account would be included in the owner's gross income.
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<PAGE> 39
The ownership rights under the Contract offered in this Prospectus are similar
to, but different in certain respects from, those described by the Internal
Revenue Service in rulings in which it determined that the owners were not
owners of separate account assets. For example, the owner of this Contract has
additional flexibility in allocating payments and cash surrender values. These
differences could result in the owner being treated as the owner of the assets
of the Separate Account. In addition, ML of New York does not know what
standards will be set forth in the regulations or rulings which the Treasury has
stated it expects to be issued. ML of New York therefore reserves the right to
modify the Contract as necessary to attempt to prevent the contract owner from
being considered the owner of the assets of the Separate Account.
Tax Treatment of Loans and Other Distributions. Federal tax law establishes a
class of life insurance contracts referred to as modified endowment contracts.
In most cases, this Contract will be a modified endowment contract. (See,
however, the discussion below on a Contract issued in exchange for another life
insurance contract.) Loans and partial withdrawals from, as well as collateral
assignments of, modified endowment contracts will be treated as distributions to
the owner. All pre-death distributions (including loans, partial withdrawals,
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 surrender value less the owner's
investment in the Contract) immediately before the distribution.
The law also imposes a 10% penalty tax on pre-death distributions (including
loans, collateral assignments, partial withdrawals, capitalized interest and
complete surrenders) from modified endowment contracts to the extent they are
included in income, unless such amounts are distributed on or after the taxpayer
attains age 59 1/2, because the taxpayer is disabled, or as substantially equal
periodic payments over the taxpayer's life (or life expectancy) or over the
joint lives (or joint life expectancies) of the taxpayer and his or her
beneficiary. Furthermore, if the loan interest is capitalized by adding the
amount due to the balance of the loan, the amount of the capitalized interest
will be treated as an additional distribution subject to income tax as well as
the 10% penalty tax, if applicable, to the extent of income in the Contract.
Any Contract issued in exchange for a modified endowment contract will be
subject to the tax treatment accorded to modified endowment contracts. However,
ML of New York believes that any Contract issued in exchange for a life
insurance contract that is not a modified endowment contract will generally not
be treated as a modified endowment contract if the face amount of the Contract
is greater than or equal to the death benefit of the policy being exchanged. The
payment of any premiums at the time of or after the exchange may, however, cause
the Contract to become a modified endowment contract. A contract owner may, of
course, choose not to exercise the right to make additional payments (whether
planned or unplanned) in order to prevent a Contract from being treated as a
modified endowment contract.
ML of New York also believes that a Contract received in an exchange for a life
insurance contract that is not a modified endowment contract should not be
treated as a modified endowment contract in situations where the face amount of
the Contract received is less than the death benefit of the contract being
exchanged, provided no additional premium is paid into the Contract. This matter
is, however, not free from doubt because neither Treasury regulations nor
Internal Revenue Service rulings have been issued on this situation. A
prospective contract owner should therefore consult a tax advisor before
effecting such an exchange.
Unlike loans from modified endowment contracts, a loan from a Contract that is
not a modified endowment contract will be considered indebtedness of the owner
and no part of a loan will constitute income to the owner. However, a lapse of a
Contract with an outstanding loan will result in the treatment of the loan
cancellation (including the accrued interest) as a distribution under the
Contract and may be taxable. Pre-death distributions from such a contract will
generally not be included in gross income to the extent that the amount received
does not exceed the owner's investment in the Contract. An exception to this
general rule may occur in the case of a decrease in the death benefit provided
in respect of a Contract (possibly resulting from a partial withdrawal) or any
other change that reduces benefits under the Contract in the first 15 years
after the Contract is
35
<PAGE> 40
issued and that results in a cash distribution to the contract owner in order
for the Contract to continue complying with the Section 7702 definitional
limits. Such a cash distribution may be taxed in whole or in part as ordinary
income (to the extent of any gain in the Contract) under rules prescribed in
Section 7702. The 10% penalty tax on pre-death distributions does not apply to
Contracts that are not modified endowment contracts.
Certain changes to Contracts that are not modified endowment contracts may cause
such Contracts to be treated as modified endowment contracts. A Contract that is
not originally classified as a modified endowment may become so classified if
there is a reduction in benefits during the first seven contract years after the
exchange (including, for example, by a decrease in face amount) or if a material
change (e.g., an increase in certain benefits) is made in the Contract at any
time. Further, in the case of a Contract with joint insureds, reducing the
Contract's death benefit at any time below the lowest death benefit provided
under the Contract may cause the Contract to become a modified endowment
contract. A contract owner should therefore consult a tax advisor before
effecting any change to a Contract that is not a modified endowment contract.
Special Treatment of Loans on the Contract. If there is any borrowing against
the Contract, the interest paid on loans generally is not deductible.
Aggregation of Modified Endowment Contracts. In the case of a pre-death
distribution (including a loan, partial withdrawal, collateral assignment,
complete surrender, or capitalized interest) from a contract that is treated as
a modified endowment contract, a special aggregation requirement may apply for
purposes of determining the amount of the income on the contract. Specifically,
if ML of New York or any of its affiliates issues to the same contract owner
more than one modified endowment contract within a calendar year, then for
purposes of measuring the income on the contract with respect to a distribution
from any of those contracts, the income on the contract for all those contracts
will be aggregated and attributed to that distribution.
Other Transactions. Changing the contract owner or the insured may have tax
consequences. Exchanging this Contract for another involving the same insured(s)
will have no tax consequences if there is no debt and no cash or other property
is received, according to Section 1035(a)(1) of the Code. 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). An exchange for a new contract or contracts may
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.
Other Taxes. Federal estate and state and local estate, inheritance and other
taxes depend on the contract owner's or the beneficiary's specific situation.
Ownership of This Contract by Non-Natural Persons. The above discussion of the
tax consequences arising from the purchase, ownership, and transfer of the
Contract has assumed that the owner of the Contract consists of one or more
individuals. Organizations exempt from taxation under Section 501(a) of the Code
may be subject to additional or different tax consequences with respect to
transactions such as contract loans. In recent years, moreover, Congress has
adopted new rules relating to life insurance owned by businesses. Any business
should consult a tax advisor
36
<PAGE> 41
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.
Possible Changes in Taxation. Although the likelihood of legislative change is
uncertain, there is always the possibility that the tax treatment of the
Contracts could change by legislation or other means. For instance, the
President's 1999 Budget Proposal recommended legislation that, if enacted, would
adversely modify the federal taxation of the Contracts. It is also possible that
any change could be retroactive (that is, effective prior to the date of the
change). A tax advisor should be consulted with respect to legislative
developments and their effect on the Contract.
ML of New York does not make any guarantee regarding the tax status of any
Contract or any transaction regarding the Contract.
The above discussion is not intended as tax advice. For tax advice contract
owners should consult a competent tax adviser. Although this tax discussion is
based on ML of New York's understanding of federal income tax laws as they are
currently interpreted, it can't guarantee that those laws or interpretations
will remain unchanged.
ML OF NEW YORK'S INCOME TAXES
Insurance companies are generally required to capitalize and amortize certain
policy acquisition expenses over a ten year period rather than currently
deducting such expenses. This treatment applies to the deferred acquisition
expenses of a Contract and will result in a significantly higher corporate
income tax liability for ML of New York in early contract years. ML of New York
makes a charge, which is included in the Contract's deferred contract loading,
to compensate ML of New York for the higher corporate income taxes that result
from the sale of a Contract. (See "Deferred Contract Loading" on page 20.)
ML of New York makes no other charges to the Separate Account for any federal,
state or local taxes that it incurs that may be attributable to the Separate
Account or to the Contracts. ML of New York, however, reserves the right to make
a charge for any tax or other economic burden resulting from the application of
tax laws that it determines to be properly attributable to the Separate Account
or to the Contracts.
REINSURANCE
ML of New York intends to reinsure some of the risks assumed under the
Contracts.
MORE ABOUT THE SEPARATE ACCOUNT AND ITS DIVISIONS
ABOUT THE SEPARATE ACCOUNT
The Separate Account is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940 as a unit investment trust. This
registration does not involve any supervision by the Securities and Exchange
Commission of ML of New York's management or the management of the Separate
Account. The Separate Account is also governed by the laws of the State of New
York, ML of New York's state of domicile.
ML of New York owns all of the assets of the Separate Account. These assets are
held separate and apart from all of ML of New York's other assets. ML of New
York maintains records of all purchases and redemptions of 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
37
<PAGE> 42
Contracts. ML of New York also has the right to eliminate investment divisions
from the Separate Account, to combine two or more investment divisions, or to
substitute a new portfolio for the portfolio in which an investment division
invests. A substitution may become necessary if, in ML of New York's judgment, a
portfolio no longer suits the purposes of the Contracts. This may happen due to
a change in laws or regulations, or a change in a portfolio's investment
objectives or restrictions, or because the portfolio is no longer available for
investment, or for some other reason. ML of New York would get prior approval
from the New York State Insurance Department and the Securities and Exchange
Commission before making such a substitution. It would also get any other
required approvals before making such a substitution.
Subject to any required regulatory approvals, ML of New York reserves the right
to transfer assets of the Separate Account or of any of the investment divisions
to another separate account or investment division.
When permitted by law, ML of New York reserves the right to:
- deregister the Separate Account under the Investment Company Act of 1940;
- operate the Separate Account as a management company under the Investment
Company Act of 1940;
- restrict or eliminate any voting rights of contract owners, or other
persons who have voting rights as to the Separate Account; and
- combine the Separate Account with other separate accounts.
NET RATE OF RETURN FOR AN INVESTMENT DIVISION
Each investment division has a distinct unit value (also referred to as "price"
or "separate account index" in reports furnished to the contract owner by ML of
New York). When payments or other amounts are allocated to an investment
division, a number of units are purchased based on the value of a unit of the
investment division as of the end of the valuation period during which the
allocation is made. When amounts are transferred out of, or deducted from, an
investment division, units are redeemed in a similar manner. A valuation period
is each business day together with any non-business days before it. A business
day is any day the New York Stock Exchange is open or there's enough trading in
portfolio securities to materially affect the net asset value of an investment
division.
For each investment division, the separate account index was initially set at
$10.00. The separate account index for each subsequent valuation period
fluctuates based upon the net rate of return for that period. ML of New York
determines the net rate of return of an investment division at the end of each
valuation period. The net rate of return reflects the investment performance of
the division for the valuation period and is net of the charges to the Separate
Account described above.
For divisions investing in the 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 Accounts. As the owner, ML of New York 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
38
<PAGE> 43
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.
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
Funds. In some cases, it is possible that the differences could be considered
"material conflicts". Such a "material conflict" could also arise due to changes
in the law (such as state insurance law or federal tax law) which affect these
different variable life insurance and variable annuity separate accounts. It
could also arise by reason of differences in voting instructions from ML of New
York's contract owners and those of the other insurance companies, or for other
reasons. ML of New York will monitor events to determine how to respond to
conflicts. If a conflict occurs, ML of New York may be required to eliminate one
or more investment divisions of the Separate Account which invest in the Funds
substitute a new portfolio for a portfolio in which a division invests. In
responding to any conflict, ML of New York will take the action which it
believes necessary to protect its contract owners consistent with applicable
legal requirements.
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
39
<PAGE> 44
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.
THE ZERO TRUSTS
The 15 Zero Trusts:
<TABLE>
<CAPTION>
TARGETED RATE OF RETURN TO
MATURITY AS
ZERO TRUST MATURITY DATE OF APRIL 17, 1998
---------- ----------------- --------------------------
<C> <S> <C>
1999 February 15, 1999 4.06%
2000 February 15, 2000 4.12%
2001 February 15, 2001 4.10%
2002 February 15, 2002 4.25%
2003 August 15, 2003 4.30%
2004 February 15, 2004 4.38%
2005 February 15, 2005 4.26%
2006 February 15, 2006 4.08%
2007 February 15, 2007 4.19%
2008 February 15, 2008 4.47%
2009 February 15, 2009 4.51%
2010 February 15, 2010 4.63%
2011 February 15, 2011 4.57%
2013 February 15, 2013 4.66%
2014 February 15, 2014 4.75%
</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 22) must be
taken into account in estimating a net rate of return for the Separate Account.
The net rate of return to maturity for the Separate Account depends on the
compound rate of growth adjusted for these charges. It does not, however,
represent the actual return on a payment that ML of New York might receive under
the Contract on that date, since it does not reflect the charges for deferred
contract loading, mortality costs and any net loan cost deducted from a
Contract's investment base (described in "Charges Deducted from the Investment
Base" on page 20).
Since the value of the Zero Trust units will vary daily to reflect the market
value of the underlying securities, the compound rate of growth to maturity for
the Zero Trust units and the net rate of return to maturity for the Separate
Account will vary correspondingly.
40
<PAGE> 45
ILLUSTRATIONS
ILLUSTRATIONS OF DEATH BENEFITS, INVESTMENT BASE, CASH SURRENDER VALUES AND
ACCUMULATED PAYMENTS
The tables on pages 43 through 47 demonstrate the way in which the Contract
works. The tables are based on the following ages, face amounts, payments and
guarantee periods and assume maximum mortality charges.
1. The illustration on page 43 is for a Contract issued to a male age 5 in
the standard-simplified underwriting class with a single payment of $10,000, a
face amount of $93,421 and a guarantee period for life.
2. The illustration on page 44 is for a Contract issued to a female age 40
in the standard-simplified underwriting class with a single payment of $25,000,
a face amount of $89,668 and a guarantee period for life.
3. The illustration on page 45 is for a Contract issued to a male age 55
in the standard-simplified underwriting class with a single payment of $30,000,
a face amount of $58,438 and a guarantee period for life.
4. The illustration on page 46 is for a Contract issued to a male age 65
in the standard-simplified underwriting class with a single payment of $35,000,
a face amount of $52,803 and a guarantee period for life.
5. The illustration on page 47 is for a Contract issued to a male age 65
and a female age 65 in the standard-simplified underwriting class with a single
payment of $35,000, a face amount of $67,012 and a guarantee period for life.
The tables show how the death benefit, investment base and cash surrender value
may vary over an extended period of time assuming hypothetical rates of return
(i.e., investment income and capital gains and losses, realized or unrealized)
equivalent to constant gross annual rates of 0%, 6% and 12%.
The death benefit, investment base and cash surrender value for a Contract would
be different from those shown if the actual rates of return averaged 0%, 6% and
12% over a period of years, but also fluctuated above or below those averages
for individual contract years.
The amounts shown for the death benefit, investment base and cash surrender
value as of the end of each contract year take into account the daily asset
charge in the Separate Account equivalent to .90% (annually at the beginning of
the year) of assets attributable to the Contracts at the beginning of the year.
The amounts shown in the tables also assume an additional charge of .52%. This
charge assumes that investment base is allocated equally among all investment
divisions and is based on the 1997 expenses (including monthly advisory fees)
for the Funds and the current trust charge. This charge also reflects expense
reimbursements made in 1997 to certain portfolios by the investment adviser to
the respective portfolio. These reimbursements amounted to .17% and .09% of the
average daily net assets of the Developing Capital Markets Focus Fund and the
Natural Resources Portfolio, respectively. (See "Charges to Fund Assets" on page
22.) 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.
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
41
<PAGE> 46
income taxes included in the deferred contract loading, see "Deferred Contract
Loading" on page 20). 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 insured's age, face amount and the payment amounts requested. The
illustration will also use current cost of insurance rates and will assume that
the proposed insured is in a standard underwriting class.
42
<PAGE> 47
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 5
$10,000 INITIAL PAYMENT FOR STANDARD-SIMPLIFIED UNDERWRITING CLASS
FACE AMOUNT: $93,421 GUARANTEE PERIOD: FOR LIFE
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT (2)
PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL INVESTMENT RETURN OF
INTEREST AT 5% AS ----------------------------------
CONTRACT YEAR PAYMENTS (1) OF END OF YEAR 0% 6% 12%
------------- ------------ ----------------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
1.................... $10,000 $ 10,500 $93,421 $ 94,304 $ 100,187
2.................... 0 11,025 93,421 95,139 107,255
3.................... 0 11,576 93,421 95,929 114,649
4.................... 0 12,155 93,421 96,677 122,395
5.................... 0 12,763 93,421 97,384 130,522
6.................... 0 13,401 93,421 98,053 139,060
7.................... 0 14,071 93,421 98,687 148,039
8.................... 0 14,775 93,421 99,288 157,496
9.................... 0 15,513 93,421 99,858 167,465
10.................... 0 16,289 93,421 100,399 177,984
15.................... 0 20,789 93,421 102,993 240,923
20 (age 25)........... 0 26,533 93,421 105,654 326,114
30 (age 35)........... 0 43,219 93,421 111,180 597,272
60 (age 65)........... 0 186,792 93,422 129,570 3,675,056
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR END OF YEAR
INVESTMENT BASE (2) CASH SURRENDER VALUE (2)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
--------------------------------- ---------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
------------- -------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
1.................... $9,691 $10,284 $ 10,875 $8,881 $ 9,474 $ 10,065
2.................... 9,390 10,583 11,839 8,670 9,863 11,119
3.................... 9,100 10,903 12,908 8,470 10,273 12,278
4.................... 8,818 11,240 14,087 8,278 10,700 13,547
5.................... 8,541 11,593 15,384 8,091 11,143 14,934
6.................... 8,270 11,965 16,818 7,910 11,605 16,458
7.................... 8,001 12,349 18,390 7,731 12,079 18,120
8.................... 7,729 12,745 20,111 7,549 12,565 19,931
9.................... 7,448 13,143 21,981 7,358 13,053 21,891
10.................... 7,159 13,546 24,014 7,159 13,546 24,014
15.................... 6,030 16,115 37,698 6,030 16,115 37,698
20 (age 25)........... 4,903 19,196 59,252 4,903 19,196 59,252
30 (age 35)........... 3,019 27,991 150,371 3,019 27,991 150,371
60 (age 65)........... 0 78,155 2,216,734 0 78,155 2,216,734
</TABLE>
- ------------------------------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST
RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND CASH
SURRENDER VALUE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY ML OF NEW YORK OR THE 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
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
FEMALE ISSUE AGE 40
$25,000 INITIAL PAYMENT FOR STANDARD-SIMPLIFIED UNDERWRITING CLASS
FACE AMOUNT: $89,668 GUARANTEE PERIOD: FOR LIFE
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
DEATH BENEFIT (2)
TOTAL ASSUMING HYPOTHETICAL GROSS
PAYMENTS ANNUAL INVESTMENT RETURN OF
END OF MADE PLUS --------------------------------
CONTRACT YEAR PAYMENTS (1) INTEREST AT 5% 0% 6% 12%
------------- ------------ -------------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
1.................... $25,000 $ 26,250 $89,668 $ 90,515 $ 96,160
2.................... 0 27,563 89,668 91,315 102,941
3.................... 0 28,941 89,668 92,074 110,038
4.................... 0 30,388 89,668 92,791 117,475
5.................... 0 31,907 89,668 93,471 125,280
6.................... 0 33,502 89,668 94,115 133,482
7.................... 0 35,178 89,668 94,724 142,110
8.................... 0 36,936 89,668 95,302 151,196
9.................... 0 38,783 89,668 95,850 160,773
10.................... 0 40,722 89,668 96,370 170,876
15.................... 0 51,973 89,668 98,859 231,302
20 (age 60)........... 0 66,332 89,668 101,415 313,120
30 (age 70)........... 0 108,049 89,668 106,727 573,960
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR END OF YEAR
INVESTMENT BASE (2) CASH SURRENDER VALUE (2)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
END OF ------------------------------- -------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
------------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1.................... $24,259 $25,741 $ 27,220 $22,234 $23,716 $ 25,195
2.................... 23,517 26,503 29,648 21,717 24,703 27,848
3.................... 22,772 27,283 32,299 21,197 25,708 30,724
4.................... 22,027 28,086 35,198 20,677 26,736 33,848
5.................... 21,280 28,910 38,366 20,155 27,785 37,241
6.................... 20,531 29,757 41,828 19,631 28,857 40,928
7.................... 19,781 30,628 45,613 19,106 29,953 44,938
8.................... 19,028 31,523 49,746 18,578 31,073 49,296
9.................... 18,272 32,441 54,262 18,047 32,216 54,037
10.................... 17,515 33,386 59,198 17,515 33,386 59,198
15.................... 14,741 39,713 92,918 14,741 39,713 92,918
20 (age 60)........... 11,737 47,016 145,164 11,737 47,016 145,164
30 (age 70)........... 4,610 64,808 348,528 4,610 64,808 348,528
</TABLE>
- ------------------------------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST
RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND CASH
SURRENDER VALUE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY ML OF NEW YORK OR THE 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
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 55
$30,000 INITIAL PAYMENT FOR STANDARD-SIMPLIFIED UNDERWRITING CLASS
FACE AMOUNT: $58,438 GUARANTEE PERIOD: FOR LIFE
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT (2)
PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL INVESTMENT RETURN OF
INTEREST AT 5% AS -------------------------------
CONTRACT YEAR PAYMENTS (1) OF END OF YEAR 0% 6% 12%
------------- ------------ ----------------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1.................... $30,000 $ 31,500 $58,438 $58,991 $ 62,675
2.................... 0 33,075 58,438 59,515 67,104
3.................... 0 34,729 58,438 60,012 71,741
4.................... 0 36,465 58,438 60,483 76,602
5.................... 0 38,288 58,438 60,929 81,705
6.................... 0 40,203 58,438 61,353 87,069
7.................... 0 42,213 58,438 61,753 92,711
8.................... 0 44,324 58,438 62,133 98,653
9.................... 0 46,540 58,438 62,493 104,917
10 (age 65)........... 0 48,867 58,438 62,833 111,523
15.................... 0 62,368 58,438 64,460 151,051
20.................... 0 79,599 58,438 66,130 204,634
30.................... 0 129,658 58,438 69,605 375,849
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR END OF YEAR
INVESTMENT BASE (2) CASH SURRENDER VALUE (2)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
------------------------------- -------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
------------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1.................... $28,982 $30,758 $ 32,527 $26,552 $28,328 $ 30,097
2.................... 27,956 31,523 35,267 25,796 29,363 33,107
3.................... 26,923 32,297 38,240 25,033 30,407 36,350
4.................... 25,883 33,081 41,465 24,263 31,461 39,845
5.................... 24,835 33,873 44,963 23,485 32,523 43,613
6.................... 23,778 34,673 48,753 22,698 33,593 47,673
7.................... 22,712 35,479 52,858 21,902 34,669 52,048
8.................... 21,631 36,286 57,297 21,091 35,746 56,757
9.................... 20,535 37,094 62,093 20,265 36,824 61,823
10 (age 65)........... 19,422 37,900 67,269 19,422 37,900 67,269
15.................... 14,904 43,335 101,549 14,904 43,335 101,549
20.................... 9,777 48,842 151,137 9,777 48,842 151,137
30.................... 0 58,973 318,440 0 58,973 318,440
</TABLE>
- ------------------------------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST
RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND CASH
SURRENDER VALUE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY ML OF NEW YORK OR THE 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.
45
<PAGE> 50
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
MALE ISSUE AGE 65
$35,000 INITIAL PAYMENT FOR STANDARD-SIMPLIFIED UNDERWRITING CLASS
FACE AMOUNT: $52,803 GUARANTEE PERIOD: FOR LIFE
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT (2)
PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL INVESTMENT RETURN OF
INTEREST AT 5% AS -------------------------------
CONTRACT YEAR PAYMENTS (1) OF END OF YEAR 0% 6% 12%
------------- ------------ ----------------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1.................... $35,000 $ 36,750 $52,803 $53,304 $ 56,637
2.................... 0 38,588 52,803 53,779 60,647
3.................... 0 40,517 52,803 54,231 64,848
4.................... 0 42,543 52,803 54,660 69,254
5.................... 0 44,670 52,803 55,066 73,880
6.................... 0 46,903 52,803 55,452 78,742
7.................... 0 49,249 52,803 55,817 83,858
8.................... 0 51,711 52,803 56,163 89,245
9.................... 0 54,296 52,803 56,490 94,923
10 (age 75)........... 0 57,011 52,803 56,799 100,912
15.................... 0 72,762 52,803 58,272 136,746
20.................... 0 92,865 52,803 59,784 185,344
30.................... 0 151,268 52,803 62,929 340,637
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR END OF YEAR
INVESTMENT BASE (2) CASH SURRENDER VALUE (2)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
------------------------------- -------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
------------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1.................... $33,660 $35,727 $ 37,784 $30,825 $32,892 $ 34,949
2.................... 32,307 36,450 40,783 29,787 33,930 38,263
3.................... 30,944 37,169 44,014 28,739 34,964 41,809
4.................... 29,570 37,884 47,495 27,680 35,994 45,605
5.................... 28,186 38,595 51,243 26,611 37,020 49,668
6.................... 26,789 39,299 55,275 25,529 38,039 54,015
7.................... 25,377 39,991 59,606 24,432 39,046 58,661
8.................... 23,946 40,668 64,251 23,316 40,038 63,621
9.................... 22,491 41,322 69,221 22,176 41,007 68,906
10 (age 75)........... 21,010 41,950 74,531 21,010 41,950 74,531
15.................... 14,810 46,422 108,937 14,810 46,422 108,937
20.................... 8,106 50,653 157,034 8,106 50,653 157,034
30.................... 0 58,641 317,423 0 58,641 317,423
</TABLE>
- ------------------------------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST
RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND CASH
SURRENDER VALUE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY ML OF NEW YORK OR THE 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.
46
<PAGE> 51
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
JOINT INSUREDS: FEMALE ISSUE AGE 65/MALE ISSUE AGE 65
$35,000 INITIAL PAYMENT FOR STANDARD-SIMPLIFIED UNDERWRITING CLASS
FACE AMOUNT: $67,012 GUARANTEE PERIOD: FOR LIFE
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT (2)
PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL INVESTMENT RETURN OF
INTEREST AT 5% AS -------------------------------
CONTRACT YEAR PAYMENTS (1) OF END OF YEAR 0% 6% 12%
------------- ------------ ----------------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1.................... $35,000 $ 36,750 $67,012 $67,715 $ 72,020
2.................... 0 38,588 67,012 68,373 77,229
3.................... 0 40,517 67,012 68,990 82,661
4.................... 0 42,543 67,012 69,568 88,335
5.................... 0 44,670 67,012 70,110 94,273
6.................... 0 46,903 67,012 70,618 100,499
7.................... 0 49,249 67,012 71,096 107,037
8.................... 0 51,711 67,012 71,543 113,909
9.................... 0 54,296 67,012 71,964 121,145
10 (age 75)........... 0 57,011 67,012 72,358 128,769
15.................... 0 72,762 67,012 74,230 174,358
20.................... 0 92,865 67,012 76,153 236,201
30.................... 0 151,268 67,012 80,156 433,911
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR END OF YEAR
INVESTMENT BASE (2) CASH SURRENDER VALUE (2)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
------------------------------- -------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
------------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1.................... $34,107 $36,187 $ 38,268 $30,642 $32,722 $ 34,803
2.................... 33,197 37,399 41,844 30,117 34,319 38,764
3.................... 32,268 38,631 45,752 29,573 35,936 43,057
4.................... 31,318 39,881 50,016 29,008 37,571 47,706
5.................... 30,342 41,146 54,663 28,417 39,221 52,738
6.................... 29,339 42,422 59,721 27,799 40,882 58,181
7.................... 28,303 43,705 65,215 27,148 42,550 64,060
8.................... 27,229 44,987 71,171 26,459 44,217 70,401
9.................... 26,111 46,259 77,610 25,726 45,874 77,225
10 (age 75)........... 24,941 47,514 84,555 24,941 47,514 84,555
15.................... 20,083 55,395 130,117 20,083 55,395 130,117
20.................... 13,565 62,564 194,051 13,565 62,564 194,051
30.................... 0 74,580 403,724 0 74,580 403,724
</TABLE>
- ------------------------------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST
RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND CASH
SURRENDER VALUE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF
RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE
OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE
MADE BY ML OF NEW YORK OR THE 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.
47
<PAGE> 52
EXAMPLES
ADDITIONAL PAYMENTS
If the guarantee period is for the whole of life at the time an additional
payment is received and accepted, as of the processing date on or next following
the date of the additional payment, ML of New York will increase the face amount
to the amount that the Contract's fixed base, as of such processing date, would
support for the life of the insured.
Under these circumstances the amount of the increase in face amount will depend
on the amount of the additional payment and the contract year in which it is
received and accepted. If additional payments of different amounts were made at
the same time to equivalent Contracts, the Contract to which the larger payment
is applied would have a proportionately larger increase in face amount. And if
additional payments of the same amounts were made in earlier and later years,
those made in the later years would result in smaller increases to the face
amount.
Example 1 shows the effect on face amount of a $2,000 additional payment
received and accepted at the beginning of contract year two. Example 2 shows the
effect of a $4,000 additional payment received and accepted at the beginning of
contract year two. Example 3 shows the effect of a $2,000 additional payment
received and accepted at the beginning of contract year five. All three examples
assume that the guarantee period at the time of the additional payment is for
life and assume no other contract transactions have been made.
Male Issue Age: 55
Initial Payment: $30,000 Face Amount: $58,438
<TABLE>
<CAPTION>
EXAMPLE 1
- ----------------------------------------------
CONTRACT ADDITIONAL CHANGE IN NEW FACE
YEAR PAYMENT FACE AMOUNT AMOUNT
- -------- ---------- ----------- --------
<S> <C> <C> <C>
2 $2,000 $3,790 $62,228
<CAPTION>
EXAMPLE 2
- ----------------------------------------------
CONTRACT ADDITIONAL CHANGE IN NEW FACE
YEAR PAYMENT FACE AMOUNT AMOUNT
- -------- ---------- ----------- --------
<S> <C> <C> <C>
2 $4,000 $7,580 $66,018
<CAPTION>
EXAMPLE 3
- ----------------------------------------------
CONTRACT ADDITIONAL CHANGE IN NEW FACE
YEAR PAYMENT FACE AMOUNT AMOUNT
- -------- ---------- ----------- --------
<S> <C> <C> <C>
5 $2,000 $3,499 $61,937
</TABLE>
CHANGING THE FACE AMOUNT
As of the processing date on or next following receipt and acceptance of a
request for a change in face amount, ML of New York will make the requested
change and adjust the guarantee period. For an increase in face amount, ML of
New York will decrease the guarantee period and for a decrease in face amount,
ML of New York will increase the guarantee period. To decrease the face amount,
the guarantee period must be less than for the whole of life at the time of the
request. A new guarantee period is established by taking the Contract's fixed
base as of the processing date and determining how long that fixed base would
support the face amount.
The amount of the increase or decrease in the guarantee period will depend on
the amount of increase or decrease in the face amount and the contract year in
which the change is made. If made at the same time to equivalent Contracts, a
larger increase in face amount would result in a greater decrease in the
guarantee period than a smaller increase in face amount. The same increase made
in two different years would result in a smaller decrease in the guarantee
period for the increase in face amount made in the later year.
48
<PAGE> 53
Examples 1 and 2 show the effect on the guarantee period of an increase in face
amount of $10,000 and $20,000 made at the beginning of contract year five.
Example 3 shows the effect on the guarantee period of an increase in face amount
of $10,000 made in contract year eight. All three examples assume that the
guarantee period at the time of the requested increase in face amount is for
life and assume no other Contract transactions have been made.
Male Issue Age: 55
Initial Payment: $30,000 Face Amount: $58,438
<TABLE>
<CAPTION>
EXAMPLE 1
- ------------------------------------
DECREASE IN
CONTRACT INCREASE IN GUARANTEE
YEAR FACE AMOUNT PERIOD
- -------- ----------- -----------
<S> <C> <C>
5 $10,000 16.00 years
<CAPTION>
EXAMPLE 2
- ------------------------------------
DECREASE IN
CONTRACT INCREASE IN GUARANTEE
YEAR FACE AMOUNT PERIOD
- -------- ----------- -----------
<S> <C> <C>
5 $20,000 19.75 years
<CAPTION>
EXAMPLE 3
- ------------------------------------
DECREASE IN
CONTRACT INCREASE IN GUARANTEE
YEAR FACE AMOUNT PERIOD
- -------- ----------- -----------
<S> <C> <C>
8 $10,000 15.50 years
</TABLE>
PARTIAL WITHDRAWALS
As of the processing date on or next following any partial withdrawal, ML of New
York will reduce the Contract's face amount. The new face amount is established
by taking the Contract's fixed base as of the processing date and determining
what face amount that fixed base would support for the Contract's guarantee
period.
The amount of the reduction in the face amount will depend on the amount of the
partial withdrawal, the guarantee period at the time of the withdrawal and the
contract year in which the withdrawal is made. If made at the same time to
equivalent Contracts, a larger withdrawal would result in a greater reduction in
the face amount than a smaller withdrawal. The same partial withdrawal made at
the same time from Contracts with the same face amounts but with different
guarantee periods would result in a greater reduction in the face amount for the
Contract with the longer guarantee period. A partial withdrawal made in a later
contract year would result in a smaller decrease in the face amount than if the
same amount was withdrawn in an earlier year.
Examples 1 and 2 show the effect on the face amount of partial withdrawals for
$500 and $1,000 taken at the beginning of contract year three. Example 3 shows
the effect on the face amount of a $500 partial withdrawal taken at the
beginning of contract year eight. All three examples assume that
49
<PAGE> 54
the guarantee period was for the lifetime of the insured before the partial
withdrawal and assume no other contract transactions have been made.
Male Issue Age: 55
Initial Payment: $30,000 Face Amount: $58,438
<TABLE>
<CAPTION>
EXAMPLE 1
- -----------------------------------
CONTRACT PARTIAL
YEAR WITHDRAWAL FACE AMOUNT
- -------- ---------- -----------
<S> <C> <C>
3 $ 500 $57,425
<CAPTION>
EXAMPLE 2
- -----------------------------------
CONTRACT PARTIAL
YEAR WITHDRAWAL FACE AMOUNT
- -------- ---------- -----------
<S> <C> <C>
3 $1,000 $56,411
<CAPTION>
EXAMPLE 3
- -----------------------------------
CONTRACT PARTIAL
YEAR WITHDRAWAL FACE AMOUNT
- -------- ---------- -----------
<S> <C> <C>
8 $ 500 $57,547
</TABLE>
If the reduction in face amount would be below the minimum face amount for a
Contract, ML of New York will reduce the face amount to the minimum face amount,
and then reduce the guarantee period by taking the Contract's fixed base as of
the processing date and determining how long that fixed base would support the
reduced face amount.
JOINT INSUREDS
Contract owners may purchase a Contract on the lives of two insureds. Some of
the discussions in this Prospectus applicable to the Contract apply only to a
Contract on a single insured. Set out below are the modifications to the
designated sections of this Prospectus for joint insureds. Except in the
sections noted below, the discussions in this Prospectus referencing a single
insured can be read as though the single insured were the two insureds under a
joint Contract.
AVAILABILITY AND PAYMENTS (REFERENCE PAGE 6)
A Contract may be issued for insureds up to age 80. The minimum initial payment
for a Contract is $5,000 if either insured is under age 20. If neither insured
is under age 20 the minimum initial payment is $10,000.
ML of New York will not accept an initial payment that will provide a guarantee
period of less than the minimum guarantee period for which it would then issue a
Contract based on the age of the younger insured. Such minimum will range from
10 to 40 years depending on the age of the younger insured.
WHO MAY BE COVERED (REFERENCE PAGE 15)
ML of New York will issue a Contract on the lives of two insureds provided the
relationship among the applicant and the insureds meets its insurable interest
requirements and provided neither insured is over age 80 and no more than one
insured is under age 20. The insureds' issue ages will be determined using their
ages as of their birthdays nearest the contract date.
The initial payment, or the planned periodic payments elected, and the average
age of the insureds determine whether underwriting will be done on a simplified
or medical basis. The maximum amount underwritten on a simplified basis for
joint insureds depends on ML of New York's administrative rules in effect at the
time of underwriting.
50
<PAGE> 55
Under both simplified and medical underwriting methods, Contracts may be issued
on joint insureds in a standard underwriting class only.
INITIAL PAYMENT (REFERENCE PAGE 16)
The minimum initial payment for a Contract is $5,000 if either insured is under
age 20. If neither insured is under age 20 the minimum initial payment is
$10,000.
ML of New York will not accept an initial payment for a specified face amount
that will provide a guarantee period of less than the minimum guarantee period
for which ML of New York would then issue a Contract based on the age of the
younger insured. The minimum will range from 10 to 40 years depending on the age
of the younger insured.
MAKING ADDITIONAL PAYMENTS
Payments Which are not Under a Periodic Plan (reference page 17). Contract
owners may make additional payments which are not under a periodic payment plan
only if both insureds are living and the attained ages of both insureds are not
over 80.
Payments Under a Periodic Plan (reference page 17). Contract owners may change
the frequency and the amount of planned payments provided both insureds are
living.
Planned payments must be received while at least one insured is living and not
more than 30 days before or 30 days after the date specified for payment.
Effect of Additional Payments (reference page 18). If the guarantee period
prior to receipt and acceptance of an additional payment is less than for the
life of the last surviving insured, the payment will first be used to extend the
guarantee period to the whole of life of the younger insured.
CHANGING THE FACE AMOUNT
Increasing the Face Amount (reference page 19). Contract owners may increase
the face amount of their Contracts only if both insureds are living. A change in
face amount is not permitted if the attained age of either insured is over 80.
Decreasing the Face Amount (reference page 19). Contract owners may decrease
the face amount of their Contracts if either insured is living.
CHARGES DEDUCTED FROM THE INVESTMENT BASE
Deferred Contract Loading (reference page 20). The deferred contract loading
equals 11% of each payment. This charge consists of a sales load, a charge for
federal taxes and a state and local premium tax charge.
The sales load, equal to 7% of each payment, compensates ML of New York for
sales expenses. The sales load may be reduced if cumulative payments are
sufficiently high to reach certain breakpoints (4% of payments in excess of $1.5
million and 2% of payments in excess of $4 million). The charge for federal
taxes, equal to 2% of each payment, compensates ML of New York for a
significantly higher corporate income tax liability resulting from changes made
to the Internal Revenue Code by the Omnibus Budget Reconciliation Act of 1990.
(See "ML of New York's Income Taxes" on page 36.) The state and local premium
tax charge, equal to 2% of payments, compensates ML of New York for state and
local premium taxes that must be paid when a payment is accepted.
ML of New York deducts an amount equal to 1.1% of each payment from the
investment base on each of the ten contract anniversaries following payment.
Mortality Cost (reference page 21). For Contracts issued on joint insureds,
current cost of insurance rates are equal to the guaranteed maximum cost of
insurance rates set forth in the Contract. Those rates are based on the 1980
Commissioners Aggregate Mortality Table and do not distinguish between insureds
in a smoker underwriting class and insureds in a non-smoker underwriting class.
The cost of insurance rates are based on an aggregate class which is made up of
a blend of smokers and non-smokers.
51
<PAGE> 56
GUARANTEE PERIOD
When the Guarantee Period is Less Than for Life (reference page 24). If ML of
New York cancels a Contract, it may be reinstated only if neither insured has
died between the date the Contract was terminated and the effective date of the
reinstatement and the contract owner meets the other conditions listed on page
23.
NET CASH SURRENDER VALUE
Cancelling to Receive Net Cash Surrender Value (reference page 24). Contract
owners may cancel their Contracts at any time while either insured is living.
DEATH BENEFIT PROCEEDS (REFERENCE PAGE 26)
ML of New York will pay the death benefit proceeds to the beneficiary when all
information needed to process the payment, including due proof of the last
surviving insured's death, has been received at the Service Center. Proof of
death for both insureds must be received. There is no death benefit payable at
the first death. 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 increase in face amount
requested or within two years from the date an additional payment was received
and accepted, proof of the insured's death should be sent promptly to the
Service Center since ML of New York may only pay a limited benefit or contest
the Contract. (See "Incontestability" on page 31 and "Payment in Case of
Suicide" on page 32.)
Net Single Premium Factor (reference page 27). The net single premium factors
are based on the insureds' sexes and underwriting classes and the attained ages
on the date of calculation.
PAYMENT OF DEATH BENEFIT PROCEEDS (REFERENCE PAGE 27)
If payment is delayed, ML of New York will add interest from the date of the
last surviving insured's death to the date of payment at an annual rate of at
least 4%.
RIGHT TO CANCEL ("FREE LOOK" PERIOD) OR EXCHANGE
Exchanging the Contract (reference page 28). A contract owner may exchange his
or her Contract for a joint and last survivor contract with benefits that don't
vary with the investment results of a separate account.
USING THE CONTRACT
Ownership (reference page 28). The contract owner is usually one of the
insureds, unless another owner has been named in the application.
The contract owner may want to name a contingent owner in the event the contract
owner dies before the last surviving insured. The contingent owner would then
own the contract owner's interest in the Contract and have all the contract
owner's rights.
Naming Beneficiaries (reference page 29). ML of New York pays the primary
beneficiary the proceeds of this Contract upon the last surviving insured's
death. If no contingent beneficiary is living, ML of New York pays the last
surviving insured's estate.
Changing the Insured (reference page 29). Not available for joint insureds.
Maturity Proceeds (reference page 30). The maturity date is the contract
anniversary nearest the younger insured's 100th birthday. On the maturity date,
ML of New York will pay the net cash surrender value to the contract owner,
provided either insured is living.
OTHER CONTRACT PROVISIONS
Incontestability (reference page 31). ML of New York will not contest the
validity of a Contract after it has been in effect during the lifetimes of
either insured for two years from the issue date. It
52
<PAGE> 57
will not contest any change in face amount requested after the change has been
in effect during the lifetime of either insured for two years from the date of
the change. Nor will ML of New York contest any amount of death benefit
attributable to an additional payment which requires evidence of insurability
after the death benefit has been in effect during the lifetime of either insured
for two years from the date the payment has been received and accepted.
Payment in Case of Suicide (reference page 32). If either insured commits
suicide within two years from the issue date, ML of New York will pay only a
limited benefit and terminate the Contract. The benefit will be equal to the
payments made reduced by any debt.
If either insured commits suicide within two years of the effective date of any
increase in face amount requested, the coverage attributable to the increase
will be terminated and a limited benefit will be paid. The benefit will be
limited to the amount of mortality cost deductions made for the increase.
If either insured commits suicide within two years of any date an additional
payment is received and accepted, the coverage attributable to the payment will
be terminated and only a limited benefit will be paid. The benefit will be equal
to the payment less any debt attributable to amounts borrowed during the two
years from the date the payment was received and accepted.
Within 90 days of the death of the first insured, the owner may elect to apply
the amount of the limited benefit to a single life contract on the life of the
surviving insured, subject to the following provisions:
- the new contract's issue date will be the date of death of the deceased
insured;
- the insurance age will be surviving insured's attained age on the new
contract's issue date;
- no medical examination or other evidence of insurability will be required
for the new contract;
- the face amount of the new contract will be determined by applying the
limited benefit amount as a single premium payment under the new contract.
The face amount of the new contract may not exceed the face amount of this
Contract;
- a written request for a new contract must be received at the Service
Center;
- the new contract cannot involve any other life;
- additional benefits or riders available on this Contract will be
available with the new contract only with ML of New York's consent;
- the new contract will be issued at ML of New York's then current rates
for the surviving insured's attained age, based on the underwriting class
assigned to the surviving insured when this Contract was underwritten. The
underwriting class for the new contract may differ from that of this
Contract; and
- if the amount of insurance that would be purchased under the new contract
falls below the minimum insurance amounts currently allowed, this option
will not be available.
Establishing Survivorship (Only Applicable to Joint Insureds). If ML of New
York is unable to determine which of the insureds was the last survivor on the
basis of the proofs of death provided, it will consider insured No. 1 as
designated in the application to be the last surviving insured.
INCOME PLANS (REFERENCE PAGE 32)
If no plan has been chosen when the last surviving insured dies, the beneficiary
has one year to apply the death benefit proceeds either paid or payable to him
or her to one or more of the income plans.
53
<PAGE> 58
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
Stanley C. Peterson Director
Irving M. Pollack Director
Robert J. Boucher Senior Vice President, Variable Life
Administration
Chi N. Hum Vice President, Administrative Manager,
and Assistant Secretary
</TABLE>
Each director is elected to serve until the next annual meeting of shareholders
or until his or her successor is elected and shall have qualified. Some
directors have held various executive positions with insurance company
subsidiaries of ML of New York's indirect parent, Merrill Lynch & Co., Inc. The
principal positions of ML of New York's directors and executive officers for the
past five years are listed below:
Mr. Vespa joined ML of New York in February 1994. Since February 1994, he has
held the position of Senior Vice President of MLPF&S. From February 1991 to
February 1994, he held the position of District Director and First Vice
President of MLPF&S.
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 and Assistant General Counsel 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 of 1990.
54
<PAGE> 59
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.
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. Peterson joined ML of New York in December 1997. Since November 1997, he has
been National Sales Director for MLLA. Prior to November 1997, he held various
positions with MLLA.
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. Boucher joined ML of New York in May 1992.
Mr. Hum joined ML of New York in August 1997. Prior to August 1997, he was an
Assistant Vice President with Smith Barney Inc.
No shares of ML of New York are owned by any of its officers or directors, as it
is a wholly owned subsidiary of MLIG. The officers and directors of ML of New
York, both individually and as a group, own less than one percent of the
outstanding shares of common stock of Merrill Lynch & Co., Inc.
SERVICES ARRANGEMENT
ML of New York and MLIG, are parties to a service agreement pursuant to which
MLIG has agreed to provide certain data processing, legal, actuarial,
management, advertising and other services to ML of New York, including services
related to the Separate Account and the Contracts. Expenses incurred by MLIG in
relation to this service agreement are reimbursed by ML of New York on an
allocated cost basis. Charges billed to ML of New York by MLIG pursuant to the
agreement were $4.3 million during 1997.
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.
YEAR 2000
Many computer systems were designed using only two digits to designate years.
These systems may not be able to distinguish the Year 2000 from the Year 1900
(commonly known as the "Year 2000
55
<PAGE> 60
Problem"). Like other investment companies and financial and business
organizations, the Separate Account could be adversely affected if the computer
systems used by ML of New York or the other service providers do not properly
address this problem prior to January 1, 2000. Merrill Lynch & Co., Inc. has
established a dedicated group to analyze these issues and to implement any
systems modifications necessary to prepare for the Year 2000. The resources that
are being devoted to this effort are substantial. It is difficult to predict
with precision whether the amount of resources ultimately devoted, or the
outcome of these efforts, will have any negative impact on ML of New York.
Currently, ML of New York does not anticipate that the transition to the 21st
century will have any material impact on its ability to continue to service the
Contracts at current levels. In addition, ML of New York has sought assurances
from the other service providers that they are taking all necessary steps to
ensure that their computer systems will accurately reflect the Year 2000, and ML
of New York will continue to monitor the situation. At this time, however, no
assurance can be given that the other service providers have anticipated every
step necessary to avoid any adverse effect on the Separate Account attributable
to the Year 2000 Problem.
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, 1997 and 1996 and
for each of the three years in the period ended December 31, 1997 and of the
Separate Account as of December 31, 1997 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 LLP of Washington, D.C. has provided advice on certain matters relating
to federal securities laws.
REGISTRATION STATEMENTS
Registration statements have been filed with the Securities and Exchange
Commission under the Securities Act of 1933 and the Investment Company Act of
1940 that relate to the Contract and its investment options. This Prospectus
does not contain all of the information in the registration statements as
permitted by Securities and Exchange Commission regulations. The omitted
information can be obtained from the Securities and Exchange Commission's
principal office in Washington, D.C., upon payment of a prescribed fee.
FINANCIAL STATEMENTS
The financial statements of ML of New York, included herein, should be
distinguished from the financial statements of the Separate Account and should
be considered only as bearing upon the ability of ML of New York to meet its
obligations under the Contracts.
56
<PAGE> 61
<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, 1997 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, 1997. 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, 1997 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 30, 1998
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF NET ASSETS AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS: Cost Shares Market Value
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Investments in Merrill Lynch Series Fund, Inc. (Note 1):
Money Reserve Portfolio $ 6,118,095 6,118,095 $ 6,118,095
Intermediate Government Bond Portfolio 424,662 38,703 428,826
Long-Term Corporate Bond Portfolio 328,371 28,491 333,916
Capital Stock Portfolio 2,050,432 90,954 2,436,658
Growth Stock Portfolio 2,534,179 101,824 3,341,864
Multiple Strategy Portfolio 2,346,875 144,737 2,745,669
High Yield Portfolio 750,583 82,214 755,545
Natural Resources Portfolio 162,882 19,294 156,668
Global Strategy Portfolio 4,102,221 266,685 4,650,993
Balanced Portfolio 694,912 48,398 763,716
--------------------- ---------------------
19,513,212 21,731,950
--------------------- ---------------------
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Global Utility Focus Fund 117,060 9,983 148,144
International Equity Focus Fund 1,091,314 93,504 1,009,848
Global Bond Focus Fund 74,998 7,879 73,430
Basic Value Focus Fund 2,954,226 212,232 3,361,762
Developing Capital Markets Focus Fund 650,143 64,819 597,632
Special Value Focus Fund 164,307 6,284 174,378
Index 500 Fund 176,481 13,412 180,765
--------------------- ---------------------
5,228,529 5,545,959
--------------------- ---------------------
Investments in Alliance Variable Products Series Funds, Inc. (Note 1):
Premier Growth Portfolio 924,986 47,676 1,000,723
--------------------- ---------------------
924,986 1,000,723
--------------------- ---------------------
Investments in MFS Variable Insurance Trust (Note 1):
MFS Emerging Growth Series 395,370 25,932 418,538
MFS Research Series 621,927 40,175 634,359
--------------------- ---------------------
1,017,297 1,052,897
--------------------- ---------------------
Investments in AIM Variable Insurance Funds, Inc. (Note 1):
AIM V.I. Value Fund 880,708 43,271 901,335
AIM V.I. Capital Appreciation Fund 337,525 15,353 333,930
--------------------- ---------------------
1,218,233 1,235,265
--------------------- ---------------------
</TABLE>
(continued)
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF NET ASSETS AT DECEMBER 31, 1997 (continued)
<TABLE>
<CAPTION>
Units
-------------------
<S> <C> <C> <C>
Investments in the Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A through K (Note 1):
1998 Trust 30,794 35,538 35,350
1999 Trust 6,694 8,218 7,727
2000 Trust 76,411 99,779 88,830
2003 Trust 32,653 58,224 42,446
2004 Trust 18,816 32,451 22,934
2005 Trust 32,358 59,396 39,961
2007 Trust 7,432 15,435 9,344
2009 Trust 7,998 19,402 10,197
2010 Trust 17,595 53,831 26,352
2013 Trust 4,621 15,224 6,250
2014 Trust 135,524 416,129 159,369
--------------------- ---------------------
370,896 448,760
--------------------- ---------------------
TOTAL ASSETS $ 28,273,153 31,015,554
===================== ---------------------
LIABILITIES:
Payable to ML Life Insurance Company of New York 834,488
---------------------
TOTAL LIABILITIES 834,488
---------------------
NET ASSETS $ 30,181,066
=====================
</TABLE>
See Notes to Financial Statements
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Investment Income:
Reinvested Dividends $ 1,499,965 $ 772,097 $ 423,802
Mortality and Expense Charges (Note 3) (224,107) (121,660) (69,677)
Transaction Charges (Note 4) (1,249) (992) (512)
--------------------- --------------------- ---------------------
Net Investment Income 1,274,609 649,445 353,613
--------------------- --------------------- ---------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 268,415 1,598 (31,049)
Net Unrealized Gains 1,363,855 932,056 678,554
--------------------- --------------------- ---------------------
Net Realized and Unrealized Gains 1,632,270 933,654 647,505
--------------------- --------------------- ---------------------
Increase in Net Assets
Resulting from Operations 2,906,879 1,583,099 1,001,118
--------------------- --------------------- ---------------------
Changes from Principal Transactions:
Transfers of Net Premiums 9,507,778 6,351,113 3,597,850
Transfers of Policy Loading, Net (Note 3) 756,862 495,055 259,576
Transfers Due to Deaths (21,714) (25,307) (4,554)
Transfers Due to Other Terminations (524,168) (212,277) (238,972)
Transfers Due to Policy Loans (179,901) (118,069) (38,631)
Transfers of Cost of Insurance (350,569) (219,552) (163,287)
Transfers of Loan Processing Charges (4,307) (1,805) (916)
--------------------- --------------------- ---------------------
Increase in Net Assets
Resulting from Principal Transactions 9,183,981 6,269,158 3,411,066
--------------------- --------------------- ---------------------
Increase in Net Assets 12,090,860 7,852,257 4,412,184
Net Assets Beginning Balance 18,090,206 10,237,949 5,825,765
--------------------- --------------------- ---------------------
Net Assets Ending Balance $ 30,181,066 $ 18,090,206 $ 10,237,949
===================== ===================== =====================
</TABLE>
See Notes to Financial Statements
<PAGE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
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-eight investment divisions
(thirty-nine during the year). At any point in time, the
Account may or may not be invested in all available
divisions. Ten of the investment divisions each invest in
the securities of a single mutual fund portfolio of the
Merrill Lynch Series Fund, Inc. Seven of the investment
divisions each invest in the securities of a single
mutual fund portfolio of the Merrill Lynch Variable
Series Funds, Inc. One of the investment divisions
invests in the securities of a single mutual fund
portfolio of the Alliance Variable Products Series Fund,
Inc. Two of the investments divisions each invest in the
securities of a single mutual fund portfolio of the MFS
Variable Insurance Trust. Two of the investment divisions
each invest in the securities of a single mutual fund
portfolio of the AIM Variable Insurance Funds, Inc.
Sixteen of the investment divisions (seventeen 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
daily charges at a rate of .9% (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 August 15,
1997, the Equity Growth Fund was renamed the Special
Value Focus Fund. The Fund's investment objective was not
modified.
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, 1997
<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 $ 1,499,965 $ 279,359 $ 21,344 $ 14,264
Mortality and Expense Charges (224,107) (40,444) (2,978) (2,023)
Transaction Charges (1,249) 0 0 0
--------------------- --------------------- --------------------- ---------------------
Net Investment Income (Loss) 1,274,609 238,915 18,366 12,241
--------------------- --------------------- --------------------- ---------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 268,415 0 (651) 1,243
Net Unrealized Gains (Losses) 1,363,855 0 7,989 3,474
--------------------- --------------------- --------------------- ---------------------
Net Realized and Unrealized Gains (Losses) 1,632,270 0 7,338 4,717
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets
Resulting from Operations 2,906,879 238,915 25,704 16,958
--------------------- --------------------- --------------------- ---------------------
Changes from Principal Transactions:
Transfers of Net Premiums 9,507,778 8,133,534 10,516 12,995
Transfers of Policy Loading, Net 756,862 790,188 (1,836) (852)
Transfers Due to Deaths (21,714) 11,133 0 0
Transfers Due to Other Terminations (524,168) (49,609) (20,617) (13,253)
Transfers Due to Policy Loans (179,901) 0 (6,280) 0
Transfers of Cost of Insurance (350,569) (74,432) (3,883) (3,262)
Transfers of Loan Processing Charges (4,307) (362) (30) (337)
Transfers Among Investment Divisions 0 (6,833,504) 182,352 184,118
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 9,183,981 1,976,948 160,222 179,409
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets 12,090,860 2,215,863 185,926 196,367
Net Assets Beginning Balance 18,090,206 3,074,907 242,770 137,439
--------------------- --------------------- --------------------- ---------------------
Net Assets Ending Balance $ 30,181,066 $ 5,290,770 $ 428,696 $ 333,806
===================== ===================== ===================== =====================
</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, 1997
<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 $ 97,129 $ 224,008 $ 161,656 $ 55,464
Mortality and Expense Charges (19,265) (24,548) (23,414) (5,336)
Transaction Charges 0 0 0 0
--------------------- --------------------- --------------------- ---------------------
Net Investment Income (Loss) 77,864 199,460 138,242 50,128
--------------------- --------------------- --------------------- ---------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 25,490 46,789 6,871 1,894
Net Unrealized Gains (Losses) 282,878 467,467 274,786 (1,895)
--------------------- --------------------- --------------------- ---------------------
Net Realized and Unrealized Gains (Losses) 308,368 514,256 281,657 (1)
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets
Resulting from Operations 386,232 713,716 419,899 50,127
--------------------- --------------------- --------------------- ---------------------
Changes from Principal Transactions:
Transfers of Net Premiums 163,234 203,999 161,055 22,858
Transfers of Policy Loading, Net (4,081) (1,107) (8,208) (2,364)
Transfers Due to Deaths (18,929) 0 (7,104) 0
Transfers Due to Other Terminations (59,409) (16,098) (123,025) (13,962)
Transfers Due to Policy Loans 11,057 (33,989) (7,767) (35,726)
Transfers of Cost of Insurance (24,863) (33,709) (40,974) (7,676)
Transfers of Loan Processing Charges (225) (462) (626) (214)
Transfers Among Investment Divisions 330,931 604,944 41,522 329,017
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 397,715 723,578 14,873 291,933
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets 783,947 1,437,294 434,772 342,060
Net Assets Beginning Balance 1,652,073 1,903,782 2,310,168 413,251
--------------------- --------------------- --------------------- ---------------------
Net Assets Ending Balance $ 2,436,020 $ 3,341,076 $ 2,744,940 $ 755,311
===================== ===================== ===================== =====================
</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, 1997
<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 $ 1,344 $ 273,426 $ 75,660 $ 3,642
Mortality and Expense Charges (1,683) (40,923) (6,330) (1,010)
Transaction Charges 0 0 0 0
--------------------- --------------------- --------------------- ---------------------
Net Investment Income (Loss) (339) 232,503 69,330 2,632
--------------------- --------------------- --------------------- ---------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 8,173 41,397 7,222 398
Net Unrealized Gains (Losses) (28,160) 142,225 27,744 24,474
--------------------- --------------------- --------------------- ---------------------
Net Realized and Unrealized Gains (Losses) (19,987) 183,622 34,966 24,872
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets
Resulting from Operations (20,326) 416,125 104,296 27,504
--------------------- --------------------- --------------------- ---------------------
Changes from Principal Transactions:
Transfers of Net Premiums 15,476 368,829 41,998 2,213
Transfers of Policy Loading, Net (243) (4,111) (4,909) (560)
Transfers Due to Deaths 0 (6,814) 0 0
Transfers Due to Other Terminations (3,492) (138,667) (62,436) (17)
Transfers Due to Policy Loans (2,744) (76,360) 0 0
Transfers of Cost of Insurance (1,884) (66,388) (9,170) (1,195)
Transfers of Loan Processing Charges (70) (883) (55) (4)
Transfers Among Investment Divisions (7,320) 263,384 67,685 36,539
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (277) 338,990 33,113 36,976
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets (20,603) 755,115 137,409 64,480
Net Assets Beginning Balance 177,209 3,894,603 626,090 83,617
--------------------- --------------------- --------------------- ---------------------
Net Assets Ending Balance $ 156,606 $ 4,649,718 $ 763,499 $ 148,097
===================== ===================== ===================== =====================
</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, 1997
<TABLE>
<CAPTION>
Divisions Investing In
---------------------------------------------------------------------------------------
International Global Basic Developing
Equity Bond Value Capital
Focus Focus Focus Markets Focus
Fund Fund Fund Fund
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 16,894 $ 4,409 $ 222,076 $ 9,256
Mortality and Expense Charges (8,361) (620) (25,422) (5,823)
Transaction Charges 0 0 0 0
--------------------- --------------------- --------------------- ---------------------
Net Investment Income (Loss) 8,533 3,789 196,654 3,433
--------------------- --------------------- --------------------- ---------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 6,007 (336) 81,810 20,697
Net Unrealized Gains (Losses) (115,583) (2,293) 183,337 (86,273)
--------------------- --------------------- --------------------- ---------------------
Net Realized and Unrealized Gains (Losses) (109,576) (2,629) 265,147 (65,576)
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets
Resulting from Operations (101,043) 1,160 461,801 (62,143)
--------------------- --------------------- --------------------- ---------------------
Changes from Principal Transactions:
Transfers of Net Premiums 85,615 3,666 166,176 70,038
Transfers of Policy Loading, Net 2,014 (226) (1,877) 1,364
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (816) (50) (5,572) (3,261)
Transfers Due to Policy Loans 953 0 (11,113) (2,404)
Transfers of Cost of Insurance (12,743) (890) (34,875) (9,153)
Transfers of Loan Processing Charges (74) (2) (232) (106)
Transfers Among Investment Divisions 407,571 8,642 776,064 106,794
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 482,520 11,140 888,571 163,272
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets 381,477 12,300 1,350,372 101,129
Net Assets Beginning Balance 628,055 61,087 2,010,472 496,302
--------------------- --------------------- --------------------- ---------------------
Net Assets Ending Balance $ 1,009,532 $ 73,387 $ 3,360,844 $ 597,431
===================== ===================== ===================== =====================
</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, 1997
<TABLE>
<CAPTION>
Divisions Investing In
---------------------------------------------------------------------------------------
Special MFS
Value Index Premier Emerging
Focus 500 Growth Growth
Fund Fund Portfolio Series
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 3,010 $ 0 $ 385 $ 0
Mortality and Expense Charges (1,213) (497) (3,584) (1,196)
Transaction Charges 0 0 0 0
--------------------- --------------------- --------------------- ---------------------
Net Investment Income (Loss) 1,797 (497) (3,199) (1,196)
--------------------- --------------------- --------------------- ---------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 1,681 8,329 1,998 219
Net Unrealized Gains (Losses) 9,035 4,284 75,737 23,169
--------------------- --------------------- --------------------- ---------------------
Net Realized and Unrealized Gains (Losses) 10,716 12,613 77,735 23,388
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets
Resulting from Operations 12,513 12,116 74,536 22,192
--------------------- --------------------- --------------------- ---------------------
Changes from Principal Transactions:
Transfers of Net Premiums 3,481 4,104 4,739 3,068
Transfers of Policy Loading, Net (431) (168) (2,225) (281)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (48) (71) (5,847) (106)
Transfers Due to Policy Loans (10,805) (4,723) 0 0
Transfers of Cost of Insurance (2,095) (859) (5,667) (2,201)
Transfers of Loan Processing Charges (21) (192) (75) (91)
Transfers Among Investment Divisions 113,825 170,499 934,951 395,824
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 103,906 168,590 925,876 396,213
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets 116,419 180,706 1,000,412 418,405
Net Assets Beginning Balance 57,893 0 0 0
--------------------- --------------------- --------------------- ---------------------
Net Assets Ending Balance $ 174,312 $ 180,706 $ 1,000,412 $ 418,405
===================== ===================== ===================== =====================
</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, 1997
<TABLE>
<CAPTION>
Divisions Investing In
---------------------------------------------------------------------------------------
AIM V.I.
MFS AIM V.I. Capital
Research Value Appreciation 1997
Series Fund Fund Trust
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 32,286 $ 4,353 $ 0
Mortality and Expense Charges (1,943) (3,404) (787) (7)
Transaction Charges 0 0 0 (1)
--------------------- --------------------- --------------------- ---------------------
Net Investment Income (Loss) (1,943) 28,882 3,566 (8)
--------------------- --------------------- --------------------- ---------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 1,377 1,016 224 596
Net Unrealized Gains (Losses) 12,432 20,627 (3,594) (565)
--------------------- --------------------- --------------------- ---------------------
Net Realized and Unrealized Gains (Losses) 13,809 21,643 (3,370) 31
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets
Resulting from Operations 11,866 50,525 196 23
--------------------- --------------------- --------------------- ---------------------
Changes from Principal Transactions:
Transfers of Net Premiums 3,915 2,024 1,507 0
Transfers of Policy Loading, Net (1,895) (1,493) (233) 0
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (6,959) (775) (1) (42)
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (3,457) (5,768) (1,419) (20)
Transfers of Loan Processing Charges (135) (72) (28) 0
Transfers Among Investment Divisions 630,815 856,598 333,795 (5,988)
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 622,284 850,514 333,621 (6,050)
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets 634,150 901,039 333,817 (6,027)
Net Assets Beginning Balance 0 0 0 6,027
--------------------- --------------------- --------------------- ---------------------
Net Assets Ending Balance $ 634,150 $ 901,039 $ 333,817 $ 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, 1997
<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 (307) (61) (744) (366)
Transaction Charges (116) (24) (281) (138)
--------------------- --------------------- --------------------- ---------------------
Net Investment Income (Loss) (423) (85) (1,025) (504)
--------------------- --------------------- --------------------- ---------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 149 26 664 304
Net Unrealized Gains (Losses) 1,737 377 4,828 3,536
--------------------- --------------------- --------------------- ---------------------
Net Realized and Unrealized Gains (Losses) 1,886 403 5,492 3,840
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets
Resulting from Operations 1,463 318 4,467 3,336
--------------------- --------------------- --------------------- ---------------------
Changes from Principal Transactions:
Transfers of Net Premiums
Transfers of Policy Loading, Net 1,432 1,441 9,564 0
Transfers Due to Deaths (138) 41 34 (253)
Transfers Due to Other Terminations 0 0 0 0
Transfers Due to Policy Loans 0 0 (1) 1
Transfers of Cost of Insurance 0 0 0 0
Transfers of Loan Processing Charges (365) (135) (1,031) (460)
Transfers Among Investment Divisions (1) 0 (2) 0
0 2 (2,825) (3)
Increase (Decrease) in Net Assets --------------------- --------------------- --------------------- ---------------------
Resulting from Principal Transactions
928 1,349 5,739 (715)
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets
Net Assets Beginning Balance 2,391 1,667 10,206 2,621
32,940 6,044 78,578 39,790
Net Assets Ending Balance --------------------- --------------------- --------------------- ---------------------
$ 35,331 $ 7,711 $ 88,784 $ 42,411
===================== ===================== ===================== =====================
</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, 1997
<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 (197) (327) (78) (78)
Transaction Charges (74) (124) (30) (30)
--------------------- --------------------- --------------------- ---------------------
Net Investment Income (Loss) (271) (451) (108) (108)
--------------------- --------------------- --------------------- ---------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 78 240 49 33
Net Unrealized Gains (Losses) 2,105 3,826 1,069 1,324
--------------------- --------------------- --------------------- ---------------------
Net Realized and Unrealized Gains (Losses) 2,183 4,066 1,118 1,357
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets
Resulting from Operations 1,912 3,615 1,010 1,249
--------------------- --------------------- --------------------- ---------------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 2,785 0 1,657
Transfers of Policy Loading, Net (164) 20 (69) 121
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations 1 0 0 (1)
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (238) (459) (154) (54)
Transfers of Loan Processing Charges 0 (1) 0 0
Transfers Among Investment Divisions (1) 3 (2) 6
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (402) 2,348 (225) 1,729
--------------------- --------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets 1,510 5,963 785 2,978
Net Assets Beginning Balance 21,400 33,968 8,547
--------------------- --------------------- --------------------- ---------------------
Net Assets Ending Balance $ 22,910 $ 39,931 $ 9,332 $ 10,191
===================== ===================== ===================== =====================
</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, 1997
<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 (215) (45) (878)
Transaction Charges (81) (17) (333)
--------------------- --------------------- ---------------------
Net Investment Income (Loss) (296) (62) (1,211)
--------------------- --------------------- ---------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 168 0 4,260
Net Unrealized Gains (Losses) 3,498 984 19,276
--------------------- --------------------- ---------------------
Net Realized and Unrealized Gains (Losses) 3,666 984 23,536
--------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets
Resulting from Operations 3,370 922 22,325
--------------------- --------------------- ---------------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 1,084 4,775
Transfers of Policy Loading, Net (156) 35 925
Transfers Due to Deaths 0 0 0
Transfers Due to Other Terminations 1 0 (36)
Transfers Due to Policy Loans 0 0 0
Transfers of Cost of Insurance (221) (43) (826)
Transfers of Loan Processing Charges 0 0 (7)
Transfers Among Investment Divisions (3) 1 73,764
--------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (379) 1,077 78,595
--------------------- --------------------- ---------------------
Increase (Decrease) in Net Assets 2,991 1,999 100,920
Net Assets Beginning Balance 23,351 4,247 58,383
--------------------- --------------------- ---------------------
Net Assets Ending Balance $ 26,342 $ 6,246 $ 159,303
===================== ===================== =====================
</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
-----------------------------------------------------------------
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 Special
Capital Value
Markets Focus Focus 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>
Divisions Investing In
----------------------
2013
Trust
---------------------
<S> <C>
Investment Income (Loss):
Reinvested Dividends $ 0
Mortality and Expense Charges (20)
Transaction Charges (8)
---------------------
Net Investment Income (Loss) (28)
---------------------
Realized and Unrealized 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>
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, 1997 and 1996, and the related statements of
earnings, comprehensive income, stockholder's equity, and cash
flows for each of the three years in the period ended December
31, 1997. 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, 1997 and 1996, and the results of its operations
and its cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted
accounting principles.
February 23, 1998
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
ASSETS
- ------
INVESTMENTS:
Fixed maturity securities, at estimated fair value
(amortized cost: 1997 - $250,695; 1996 - $264,341) $ 255,958 $ 269,103
Equity securities, at estimated fair value
(cost: 1997 - $5,830; 1996 - $8,975) 5,029 10,859
Mortgage loans - 2,057
Policy loans on insurance contracts 88,163 85,548
-------------- --------------
Total Investments 349,150 367,567
-------------- --------------
CASH AND CASH EQUIVALENTS 10,063 7,828
ACCRUED INVESTMENT INCOME 5,416 5,952
DEFERRED POLICY ACQUISITION COSTS 30,406 29,272
REINSURANCE RECEIVABLES 429 1,065
OTHER ASSETS 3,405 4,569
SEPARATE ACCOUNTS ASSETS 739,712 591,814
-------------- --------------
TOTAL ASSETS $ 1,138,581 $ 1,008,067
============== ==============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
LIABILITIES:
POLICY LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 307,333 $ 318,567
Claims and claims settlement expenses 2,007 2,572
-------------- --------------
Total policy liabilities and accruals 309,340 321,139
OTHER POLICYHOLDER FUNDS 1,941 1,160
FEDERAL INCOME TAXES - DEFERRED 1,905 626
FEDERAL INCOME TAXES - CURRENT 2,255 2,099
AFFILIATED PAYABLES - NET 3,492 5,026
OTHER LIABILITIES 2,155 1,649
SEPARATE ACCOUNTS LIABILITIES 739,712 591,814
-------------- --------------
Total Liabilities 1,060,800 923,513
-------------- --------------
STOCKHOLDER'S EQUITY:
Common stock, $10 par value - 220,000 shares
authorized, issued and outstanding 2,200 2,200
Additional paid-in capital 66,259 72,040
Retained earnings 9,692 9,219
Accumulated other comprehensive income (370) 1,095
-------------- --------------
Total Stockholder's Equity 77,781 84,554
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,138,581 $ 1,008,067
============== ==============
</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, 1997, 1996 AND 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 25,465 $ 27,520 $ 29,819
Net realized investment gains (losses) 1,947 2,169 (265)
Policy charge revenue 13,064 11,959 10,864
-------------- -------------- --------------
Total Revenues 40,476 41,648 40,418
-------------- -------------- --------------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 14,532 16,586 17,375
Market value adjustment expense 232 301 238
Policy benefits (net of reinsurance recoveries: 1997 - $690
1996 - $1,584; 1995 - $917) 781 1,311 528
Reinsurance premium ceded 1,584 1,262 1,227
Amortization of deferred policy acquisition costs 4,119 3,784 1,300
Insurance expenses and taxes 4,563 4,595 4,508
-------------- -------------- --------------
Total Benefits and Expenses 25,811 27,839 25,176
-------------- -------------- --------------
Earnings Before Federal Income Tax Provision 14,665 13,809 15,242
-------------- -------------- --------------
FEDERAL INCOME TAX PROVISION:
Current 2,905 102 1,692
Deferred 2,068 4,488 3,486
-------------- -------------- --------------
Total Federal Income Tax Provision 4,973 4,590 5,178
-------------- -------------- --------------
NET EARNINGS $ 9,692 $ 9,219 $ 10,064
============== ============== ==============
</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 COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
NET EARNINGS $ 9,692 $ 9,219 $ 10,064
-------------- -------------- --------------
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Net unrealized gains (losses) on investment securities:
Net unrealized holding gains (losses) arising during the period (413) (4,206) 23,575
Reclassification adjustment for gains included in net earnings (1,771) (1,858) 294
-------------- -------------- --------------
Net unrealized gains (losses) on investment securities (2,184) (6,064) 23,869
Adjustments for:
Policyholder liabilities (70) 5,380 (13,149)
Deferred policy acquisition costs - - (3,177)
Income tax (expense) benefit related to items of
other comprehensive income 789 240 (2,641)
-------------- -------------- --------------
Other comprehensive income, net of tax (1,465) (444) 4,902
-------------- -------------- --------------
COMPREHENSIVE INCOME $ 8,227 $ 8,775 $ 14,966
============== ============== ==============
</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, 1997, 1996 AND 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Common paid-in Retained Comprehensive stockholder's
stock capital earnings Income equity
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 $ 2,200 $ 83,006 $ 13,970 $ (3,363) $ 95,813
Net earnings 10,064 10,064
Other comprehensive income, net of tax 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
Other comprehensive income, net of tax (444) (444)
------------- ------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1996 2,200 72,040 9,219 1,095 84,554
Dividend to Parent (5,781) (9,219) (15,000)
Net earnings 9,692 9,692
Other comprehensive income, net of tax (1,465) (1,465)
------------- ------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1997 $ 2,200 $ 66,259 $ 9,692 $ (370) $ 77,781
============= ============= ============= ============= =============
</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, 1997, 1996 AND 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 9,692 $ 9,219 $ 10,064
Adjustments to reconcile net earnings to net cash and
cash equivalents provided (used) by operating activities:
Amortization of deferred policy acquisition costs 4,119 3,784 1,300
Capitalization of policy acquisition costs (5,253) (2,134) (4,368)
Amortization, (accretion) and depreciation of investments (239) 1 (434)
Net realized investment (gains) losses (1,947) (2,169) 265
Interest credited to policyholders' account balances 14,532 16,586 17,375
Provision for deferred Federal income tax 2,068 4,488 3,486
Changes in operating assets and liabilities:
Accrued investment income 536 651 751
Claims and claims settlement expenses (565) (329) (1,413)
Federal income taxes - current 156 1,914 15
Other policyholder funds 781 421 (793)
Affiliated payable - net (1,534) 964 (180)
Policy loans on insurance contracts (2,615) (3,475) (4,246)
Other, net 2,306 (3,951) 1,723
-------------- -------------- --------------
Net cash and cash equivalents provided
by operating activities 22,037 25,970 23,545
-------------- -------------- --------------
INVESTING ACTIVITIES:
Sales of available-for-sale securities 88,882 155,645 68,736
Maturities of available-for-sale securities 51,060 34,455 38,420
Purchases of available-for-sale securities (120,965) (162,828) (103,568)
Mortgage loans principal payments received 2,057 1,975 -
Sales of mortgage loans - - 3,608
-------------- -------------- --------------
Net cash and cash equivalents provided
by investing activities 21,034 29,247 7,196
-------------- -------------- --------------
</TABLE>
See notes to financial statements. (Continued)
<PAGE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Continued) (Dollars In Thousands)
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Dividends paid to parent $ (15,000) $ (35,000) $ -
Policyholders' account balances:
Deposits 106,983 32,158 43,191
Withdrawals (including transfers to/from Separate Accounts) (132,819) (61,934) (77,460)
-------------- -------------- --------------
Net cash and cash equivalents used
by financing activities (40,836) (64,776) (34,269)
-------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,235 (9,559) (3,528)
CASH AND CASH EQUIVALENTS:
Beginning of year 7,828 17,387 20,915
-------------- -------------- --------------
End of year $ 10,063 $ 7,828 $ 17,387
============== ============== ==============
Supplementary Disclosure of Cash Flow Information:
Cash paid to (received from) affiliates for:
Federal income taxes $ 2,749 $ (1,812) $ 1,677
Interest 494 440 447
</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 variable life
insurance, variable annuities, market value adjusted annuities,
and immediate annuities. The Company is licensed to sell
insurance in nine states; however, it currently limits its
marketing activities to the State of New York. The Company
markets its products solely through the retail network of
Merrill Lynch, Pierce, Fenner & Smith, Incorporated ("MLPF&S"),
a wholly-owned broker-dealer subsidiary of Merrill Lynch & Co.
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% - 5.30%
Interest-sensitive deferred annuities 3.65% - 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 $202 that can be drawn upon for delinquent
reinsurance recoverables.
As of December 31, 1997, the Company had life insurance inforce
that was ceded to other life insurance companies of $154,754.
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:
<PAGE>
1997 1996 1995
----------- ----------- -----------
Beginning balance $ 17,151 $ 17,654 $ 14,923
Capitalized amounts 577 577 1,553
Interest accrued 1,651 1,566 2,138
Amortization (2,829) (2,646) (960)
----------- ----------- -----------
Ending balance $ 16,550 $ 17,151 $ 17,654
=========== =========== ===========
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.
1998 1,228
1999 1,105
2000 994
2001 895
2002 805
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, net of tax. If a decline in value
of a security is determined by management to be other-than-temporary,
the carrying value is adjusted to the estimated fair value at the date
of this determination and recorded 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
specific identification.
Certain fixed maturity securities are considered non-investment grade.
The Company defines non-investment grade fixed maturity securities as
unsecured debt obligations that do not have a rating equivalent to
Standard and Poor's (or similar rating agency) BBB- or higher.
As of December 31, 1997, the Company has no mortgage loans
outstanding. Mortgage loans were stated at unpaid principal
balances, net of valuation allowances. Such valuation allowances
were 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 considered, among other things, the
estimated fair value of the underlying collateral.
The Company recognized 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 recognized a realized gain at the date of the
satisfaction of the loan at contractual terms for loans where there
was a difference between the cash payment interest rate and the
accrual interest rate. For all loans, the Company stopped accruing
income when an interest payment default either occurred or was
probable. Impairments of mortgage loans were established as
valuation allowances and recorded to net realized investment gains
or losses.
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 Comprehensive Income: During 1997, the Company adopted
SFAS No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS
No. 130 defines comprehensive income as all non-owner changes in equity
during a period. Comprehensive income is reported in the Statements of
Comprehensive Income included in the financial statements for the years
ended December 31, 1997, 1996 and 1995.
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:
1997 1996
-------------- --------------
Assets:
Fixed maturity securities (1) $ 255,958 $ 269,103
Equity securities (1) 5,029 10,859
Mortgage loans (2) - 2,057
Policy loans on insurance contracts (3) 88,163 85,548
Cash and cash equivalents (4) 10,063 7,828
Separate Accounts assets (5) 739,712 591,814
-------------- --------------
Total financial instruments recorded as assets $ 1,098,925 $ 967,209
============== ==============
(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, 1997 and 1996, securities without a readily ascertainable
market value, having an amortized cost of $47,064 and $55,323,
had an estimated fair value of $48,188 and $57,018, respectively.
(2) The estimated fair value of mortgage loans approximates
the carrying value.
(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>
1997
-------------------------------------------------------------------
Cost / Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Fixed maturity securities:
Corporate debt securities $ 198,266 $ 4,595 $ 777 $ 202,084
Mortgage-backed securities 34,726 1,135 5 35,856
U.S. government and agencies 13,593 268 11 13,850
Municipals 2,090 90 - 2,180
Foreign governments 2,020 - 32 1,988
------------- ------------- ------------- -------------
Total fixed maturity securities $ 250,695 $ 6,088 $ 825 $ 255,958
============= ============= ============= =============
Equity securities:
Non-redeemable preferred stocks $ 4,507 $ - $ 34 $ 4,473
Common stocks 1,323 - 767 556
------------- ------------- ------------- -------------
Total equity securities $ 5,830 $ - $ 801 $ 5,029
============= ============= ============= =============
1996
-------------------------------------------------------------------
Cost / Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------- ------------- ------------- -------------
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
============= ============= ============= =============
</TABLE>
<PAGE>
The amortized cost and estimated fair value of fixed maturity
securities at December 31, 1997 by contractual maturity were:
Estimated
Amortized Fair
Cost Value
----------- -----------
Fixed maturity securities:
Due in one year or less $ 33,356 $ 33,722
Due after one year through five years 113,217 115,861
Due after five years through ten years 51,746 52,536
Due after ten years 17,650 17,983
----------- -----------
215,969 220,102
Mortgage-backed securities 34,726 35,856
----------- -----------
Total fixed maturity securities $ 250,695 $ 255,958
=========== ===========
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, 1997 by rating agency equivalent
were:
Estimated
Amortized Fair
Cost Value
----------- -----------
AAA $ 76,429 $ 78,021
AA 18,804 19,191
A 74,572 75,612
BBB 70,762 73,204
Non-investment grade 10,128 9,930
----------- -----------
Total fixed maturity securities $ 250,695 $ 255,958
=========== ===========
<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 (loss) on investment
securities classified as available-for-sale as of December 31:
1997 1996
----------- -----------
Assets:
Fixed maturity securities $ 5,263 $ 4,762
Equity securities (801) 1,884
----------- -----------
4,462 6,646
----------- -----------
Liabilities:
Policyholders' account balances 5,032 4,962
Federal income taxes - deferred (200) 589
----------- -----------
4,832 5,551
----------- -----------
Stockholder's equity:
Net unrealized investment gain (loss) on
investment securities $ (370) $ 1,095
=========== ==========
Proceeds and gross realized investment gains and losses from the sale of
available-for-sale securities for the years ended December 31 were:
1997 1996 1995
----------- ----------- -----------
Proceeds $ 88,882 $ 155,645 $ 68,736
Gross realized investment gains 4,077 2,677 1,709
Gross realized investment losses 2,130 508 1,640
The Company owned investment securities of $1,076 and $1,060 that were
deposited with insurance regulatory authorities at December 31, 1997 and
1996, respectively.
<PAGE>
Net investment income arose from the following sources for the
years ended December 31:
1997 1996 1995
----------- ----------- -----------
Fixed maturity securities $ 19,815 $ 22,153 $ 25,046
Equity securities 761 183 -
Mortgage loans 81 388 686
Policy loans on insurance contracts 4,333 4,133 3,903
Cash and cash equivalents 1,293 1,559 1,103
Other 65 - -
----------- ----------- ------------
Gross investment income 26,348 28,416 30,738
Less investment expenses (883) (896) (919)
----------- ----------- ------------
Net investment income $ 25,465 $ 27,520 $ 29,819
=========== =========== ============
Net realized investment gains (losses), including changes in valuation
allowances, for the years ended December 31:
1997 1996 1995
----------- ----------- ------------
Fixed maturity securities $ (1,268) $ 657 $ 985
Equity securities 3,215 1,512 (916)
Mortgage loans - - (334)
----------- ----------- ------------
Net realized investment gains
(losses) $ 1,947 $ 2,169 $ (265)
=========== =========== ============
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. During 1997 and 1996, there were no valuation
allowances recorded:
Balance at Additions Balance at
Beginning Charged to Write - End
of Year Operations Downs of Year
------------ ------------ ------------ ------------
1995 1,536 - 1,536 -
The Company held no investments at December 31, 1997 which have been
non-income producing for the preceding twelve months.
<PAGE>
NOTE 4: FEDERAL INCOME TAXES
The following is a reconciliation of the provision for income taxes
based on 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>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Provision for income taxes computed at Federal statutory rate $ 5,133 $ 4,833 $ 5,334
State corporate income taxes - (10) (91)
Decrease in income taxes resulting from:
Dividend received deduction (160) (235) (31)
Other - 2 (34)
--------- --------- ----------
Federal income tax provision $ 4,973 $ 4,590 $ 5,178
========= ========= ==========
</TABLE>
The Federal statutory rate for each of the three years in the period
ended December 31, 1997 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>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Deferred policy acquisition costs $ 315 $ (259) $ 1,239
Policyholders' account balances (140) 4,053 738
Liability for guaranty fund assessments (50) 50 -
Investment adjustments 1,943 642 1,445
Other - 2 64
--------- --------- ---------
Deferred Federal income tax provision $ 2,068 $ 4,488 $ 3,486
========= ========= =========
</TABLE>
<PAGE>
Deferred tax assets and liabilities as of December 31 are
determined as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Deferred tax assets:
Policyholders' account balances $ 4,364 $ 4,224
Investment adjustments (4) 1,939
Net unrealized investment loss 200 -
--------- ---------
Total deferred tax assets 4,560 6,163
--------- ---------
Deferred tax liabilities:
Deferred policy acquisition costs 6,465 6,150
Liability for guaranty fund assessments - 50
Net unrealized investment gain - 589
--------- ---------
Total deferred tax liabilities 6,465 6,789
--------- ---------
Net deferred tax liability $ 1,905 $ 626
========= =========
</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 $4,305, $4,258 and $3,968 for 1997, 1996 and
1995 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 $64,
$74 and $88 for 1997, 1996 and 1995, 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 $159,
$186 and $206 for 1997, 1996 and 1995, 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 $4,130, $1,334 and $2,424 for
1997, 1996 and 1995, 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,
1997 and 1996, the outstanding balance of these loans were
$1,156 and $3,075, respectively. Repayments made on these loans
during 1997, 1996, and 1995 were $1,919, $0 and $1,261,
respectively. Interest was calculated on these loans at LIBOR
plus 150 basis points. Intercompany interest paid on these
loans during 1997, 1996 and 1995 was $359, $366 and $359,
respectively.
Affiliated agreements generally contain reciprocal indemnity
provisions pertaining to each party's representations and
contractual obligations thereunder.
NOTE 6: STOCKHOLDER'S EQUITY AND STATUTORY REGULATIONS
Notice of intention to declare a dividend must be filed with
the New York Superintendent of Insurance who may disallow the
payment. During 1997 and 1996, the Company paid dividends of
$15,000 and $35,000, respectively, to MLIG. No dividends were
declared or paid during 1995. Statutory capital and surplus at
December 31, 1997 and 1996, was $51,080 and $52,895,
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 these financial
statements by charging policy acquisition costs to expense as
incurred, establishing future policy benefit reserves using
different actuarial assumptions, not providing for deferred
income taxes and valuing securities on a different basis. The
Company's statutory net income for 1997, 1996 and 1995 was
$9,888, $12,884 and $3,080, respectively.
The National Association of Insurance Commissioners ("NAIC")
utilizes the Risk Based Capital ("RBC") adequacy monitoring
system. The RBC calculates the amount of adjusted capital which
a life insurance company should have based upon that company's
risk profile. As of December 31, 1997, and 1996, based on the
RBC formula, the Company's total adjusted capital level was
649% and 626%, 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>
<PAGE> 62
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
ML Life Insurance Company of New York's By-Laws provide, in Article VII,
Section 7.1 as follows:
Indemnification of Directors, Officers, Employees and Incorporators. To
the extent permitted by the law of the State of New York and subject to all
applicable requirements thereof:
a) any person made or threatened to be made a party to any action or
proceeding, whether civil or criminal, by reason of the fact that he, his
testator, or intestate, is or was a director, officer, employee or
incorporator of the Company shall be indemnified by the Company;
b) any person made or threatened to be made a party to any action or
proceeding, whether civil or criminal, by reason of the fact that he, his
testator or intestate serves or served any other organization in any
capacity at the request of the Company may be indemnified by the Company;
and
c) the related expenses of any such person in any other of said
categories may be advanced by the Company.
Any persons serving as an officer, director or trustee of a corporation,
trust or other enterprise, including the Registrant, at the request of Merrill
Lynch are entitled to indemnification from Merrill Lynch, to the fullest extent
authorized or permitted by law, for liabilities with respect to actions taken or
omitted by such persons in any capacity in which such persons serve Merrill
Lynch or such other corporation, trust or other enterprise. Any action initiated
by any such person for which indemnification is provided shall be approved by
the Board of Directors of Merrill Lynch prior to such initiation.
DIRECTORS' AND OFFICERS' INSURANCE
Merrill Lynch has purchased from Corporate Officers' and Directors'
Assurance Company directors' and officers' liability insurance policies which
cover, in addition to the indemnification described above, liabilities for which
indemnification is not provided under the By-Laws. The Company will pay an
allocable portion of the insurance premium paid by Merrill Lynch with respect to
such insurance policies.
NEW YORK BUSINESS CORPORATION LAW
In addition, Sections 722, 723 and 724 of the New York Business Corporation
Law generally provide that a corporation has the power (and in some instances
the obligation) to indemnify a director or officer of the corporation, or a
person serving at the request of the corporation as a director or officer of
another corporation or other enterprise against any judgments, amounts paid in
settlement, and reasonably incurred expenses in a civil or criminal action or
proceeding if the director or officer acted in good faith in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation (or, in the case of a criminal action or proceeding, if he or she in
addition had no reasonable cause to believe that his or her conduct was
unlawful).
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
II-1
<PAGE> 63
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> 64
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The Prospectus consisting of 94 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 LLP
(d) Deloitte & Touche LLP, Independent Auditors
The following exhibits:
<TABLE>
<S> <C> <C> <C>
1.A. (1) Resolution of the Board of Directors of ML Life Insurance
Company of New York, establishing the Separate Account
(Incorporated by Reference to Registrant's 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. See Exhibit A(3)(b)
(4) Not applicable
(5) (a)(1) Modified Flexible Premium Variable Life Insurance Policy
(Incorporated by Reference to Registrant's Post-Effective
Amendment No. 6 to Form S-6 Registration No. 33-51702 Filed
April 29, 1997)
(2) Modified Flexible Premium Joint and Last Survivor Variable
Life Insurance Policy (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 6 to Form S-6
Registration No. 33-51702 Filed April 29, 1997)
(b)(1) Backdating Endorsement (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 6 to Form S-6
Registration No. 33-51702 Filed April 29, 1997)
(2) Guarantee of Insurability Rider (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 6 to Form S-6
Registration No. 33-51702 Filed April 29, 1997)
(3) Single Premium Immediate Annuity Rider (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 6 to
Form S-6 Registration No. 33-51702 Filed April 29, 1997)
(4) Flexible Premium Joint and Last Survivor Partial Withdrawal
Rider for use with Modified Flexible Premium Joint and Last
Survivor Variable Life Insurance Policy (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 6 to
Form S-6 Registration No. 33-51702 Filed April 29, 1997)
(5) Flexible Premium Partial Withdrawal Rider for use with
Modified Flexible Premium Variable Life Insurance Policy
(Incorporated by Reference to Registrant's Post-Effective
Amendment No. 6 to Form S-6 Registration No. 33-51702 Filed
April 29, 1997)
(6) Change of Insured Rider for use with Flexible Premium
Variable Life Insurance Policy (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 6 to Form S-6
Registration No. 33-51702 Filed April 29, 1997)
</TABLE>
II-3
<PAGE> 65
<TABLE>
<S> <C> <C> <C>
(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)
(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 Merrill Lynch Life
Insurance Company, ML Life Insurance Company of New York and
Family Life Insurance Company (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 3 to Form S-6
Registration No. 33-55472 Filed April 27, 1994)
(f) 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)
(g) 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)
(h) 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. 6 to
Form S-6 Registration No. 33-51702 Filed April 29, 1997)
(b) Variable Life Insurance Supplemental Application 1
(Incorporated by Reference to Registrant's Post-Effective
Amendment No. 6 to Form S-6 Registration No. 33-51702 Filed
April 29, 1997)
</TABLE>
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<PAGE> 66
<TABLE>
<S> <C> <C> <C>
(c) Application for Additional Payment for Variable Life
Insurance (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 6 to Form S-6 Registration No.
33-51702 Filed April 29, 1997)
(d) Application for Reinstatement (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 6 to Form S-6
Registration No. 33-51702 Filed April 29, 1997)
(e) Modified Flexible Premium Variable Life Insurance Policy
(Form No. MFP87(NY) (7/94)) (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 4 to Form S-6
Registration No. 33-51794 Filed April 28, 1995)
(f) Modified Flexible Premium Joint and Last Survivor Variable
Life Insurance Policy (Form No. MFPLS87(NY) (7/94))
(Incorporated by Reference to Registrant's Post-Effective
Amendment No. 4 to Form S-6 Registration No. 33-51794 Filed
April 28, 1995)
(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. 33-51794 Filed
March 1, 1994)
(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. 33-51794 Filed April 25, 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
7. (a) Power of Attorney of Frederick J.C. Butler (Incorporated by
Reference to Registrant's Post-effective Amendment No. 2 to
Form S-6 Registration No. 33-61670 Filed March 1, 1994)
(b) Power of Attorney of Michael P. Cogswell (Incorporated by
Reference to Registrant's Post-effective Amendment No. 2 to
Form S-6 Registration No. 33-61670 Filed March 1, 1994)
(c) Power of Attorney of Sandra K. Cox (Incorporated by
Reference to Registrant's Post-effective Amendment No. 2 to
Form S-6 Registration No. 33-61670 Filed March 1, 1994)
(d) Power of Attorney of Joseph E. Crowne, Jr. (Incorporated by
Reference to Registrant's Post-effective Amendment No. 2 to
Form S-6 Registration No. 33-61670 Filed March 1, 1994)
(e) Power of Attorney of David E. Dunford (Incorporated by
Reference to Registrant's Post-effective Amendment No. 2 to
Form S-6 Registration No. 33-61670 Filed March 1, 1994)
(f) Power of Attorney of Francis X. Ervin, Jr. (Incorporated by
Reference to Registrant's Post-effective Amendment No. 5 to
Form S-6 Registration No. 33-51794 Filed April 25, 1996)
(g) Power of Attorney of Gail R. Farkas (Incorporated by
Reference to Registrant's Post-effective Amendment No. 5 to
Form S-6 Registration No. 33-51794 Filed April 25, 1996)
(h) Power of Attorney of John C.R. Hele (Incorporated by
Reference to Registrant's Post-effective Amendment No. 2 to
Form S-6 Registration No. 33-61670 Filed March 1, 1994)
(i) Power of Attorney of Robert L. Israeloff (Incorporated by
Reference to Post-effective Amendment No. 2 to Registrant's
Form S-6 Registration No. 33-61670 Filed March 1, 1994)
</TABLE>
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<PAGE> 67
<TABLE>
<S> <C> <C> <C>
(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 Stanley C. Peterson (Incorporated by
Reference to ML Life Insurance Company of New York's
Registration Statement on Form S-1 Registration No.
333-48983 Filed March 31, 1998)
(n) 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)
(o) 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)
(p) 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)
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 LLP
(d) Written Consent of Deloitte & Touche LLP, Independent
Auditors
</TABLE>
II-6
<PAGE> 68
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. 7 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. 7 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 22nd day of April 1998.
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
(Registrant)
By: ML LIFE INSURANCE COMPANY OF NEW YORK
(Depositor)
<TABLE>
<S> <C>
Attest: /s/ EDWARD W. DIFFIN, JR. By: /s/ BARRY G. SKOLNICK
---------------------------------------------- -------------------------------------------------
Edward W. Diffin, Jr. Barry G. Skolnick
Vice President Senior Vice President
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 7 to the Registration Statement has been signed
below by the following persons in the capacities indicated on April 22, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* 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
* Director
- -----------------------------------------------------
Frederick J.C. Butler
* Director
- -----------------------------------------------------
Robert L. Israeloff
* Director
- -----------------------------------------------------
Allen N. Jones
* Director
- -----------------------------------------------------
Cynthia L. Kahn
</TABLE>
II-7
<PAGE> 69
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Director
- -----------------------------------------------------
Robert A. King
* Director
- -----------------------------------------------------
Stanley C. Peterson
* Director
- -----------------------------------------------------
Irving M. Pollack
*By: /s/ BARRY G. SKOLNICK In his own capacity as Director, Senior Vice
------------------------------------------------ President, General Counsel, Secretary and as
Barry G. Skolnick Attorney-In-Fact
</TABLE>
II-8
<PAGE> 70
EXHIBIT INDEX
<TABLE>
<S> <C>
6. Opinion and Consent of Joseph E. Crowne, Jr., 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 LLP
8.(d) Written Consent of Deloitte & Touche LLP, Independent
Auditors
</TABLE>
II-9
<PAGE> 1
EXHIBIT 6
[ML LIFE INSURANCE COMPANY OF NEW YORK]
April 22, 1998
Board of Directors
ML Life Insurance Company of New York
100 Church Street, 11th Floor
New York, NY 10080-6511
To The Board of Directors:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 7 to the Registration Statement on Form S-6 (the "Registration
Statement") (File No. 33-51794) which covers premiums received under certain
flexible premium variable life insurance contracts ("Contracts" or "Contract")
issued by ML Life Insurance Company of New York (the "Company").
The Prospectus included in the Registration Statement describes Contracts which
are issued by the Company. The Contract forms were reviewed under my direction,
and I am familiar with the Registration Statement and Exhibits thereto. In my
opinion:
1. The illustrations of death benefits, investment base, cash surrender values
and accumulated premiums included in the Registration Statement for the Contract
and based on the assumptions stated in the illustrations, are consistent with
the provision 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 net single premium factors included in the "Death
Benefit Proceeds" section is consistent with the provision of the Contract.
3. The information with respect to the Contract contained in (i) the
illustrations of the change in face amount included in the "Additional Payments"
sections of the Examples, (ii) the illustrations of a change in Guarantee Period
included in the "Changing the Face Amount" section of the Examples and (iii) the
illustrations of the changes in face amount included in the "Partial
Withdrawals" section of the Examples, based in the assumptions specified, are
consistent with the provisions of the Contract.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the use of my name relating to actuarial matters under the
heading "Experts" in the Prospectus.
Very truly yours,
/s/ JOSEPH E. CROWNE
--------------------------------------
Joseph E. Crowne, FSA
Senior Vice President &
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. 7 to the Registration
Statement on Form S-6 for certain variable life insurance contracts issued
through ML of New York Variable Life Separate Account II of ML Life Insurance
Company of New York (File No. 33-51794).
/s/ BARRY G. SKOLNICK
--------------------------------------
Barry G. Skolnick, Esq.
Senior Vice President and General
Counsel
April 22, 1998
<PAGE> 1
EXHIBIT 8(c)
[SUTHERLAND, ASBILL & BRENNAN LLP]
CONSENT OF SUTHERLAND, ASBILL & BRENNAN LLP
We consent to the reference to our firm under the heading "Legal Matters" in the
prospectus included in Post-Effective Amendment No. 7 to the Registration
Statement on Form S-6 for certain variable life insurance contracts issued
through ML of New York Variable Life Separate Account II of ML Life Insurance
Company of New York (File No. 33-51794). In giving this consent, we do not admit
that we are in the category of persons whose consent is required under Section 7
of the Securities Act of 1933.
/s/ SUTHERLAND, ASBILL & BRENNAN LLP
--------------------------------------
SUTHERLAND, ASBILL & BRENNAN LLP
Washington, D.C.
April 22, 1998
<PAGE> 1
EXHIBIT 8(d)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 7 to the Registration
Statement No. 33-51794 of ML of New York Variable Life Separate Account II on
Form S-6 of our reports on (i) ML Life Insurance Company of New York dated
February 23, 1998, and (ii) ML of New York Variable Life Separate Account II
dated January 30, 1998, appearing in the Prospectus, which is a part of such
Registration Statement, and to the reference to us under the heading "Experts"
in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
--------------------------------------
New York, New York
April 22, 1998
