<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 2000
REGISTRATION NO. 33-51794
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 9
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, 2000 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 / /
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
May 1, 2000
ML of New York Variable Life Separate Account II
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
Springfield, Massachusetts 01144-1007
Phone: (800) 354-5333
offered through
Merrill Lynch, Pierce, Fenner & Smith Incorporated
This Prospectus describes contracts which generally are modified endowment
contracts under federal tax law. Most distributions will have tax consequences
and/or penalties.
Generally, through the first 14 days following a Contract's in force date, we
will invest your initial payment in the investment division of the ML of New
York Variable Life Separate Account II (the "Separate Account") investing in the
Money Reserve Portfolio. Afterward, you may reallocate your investment base to
any five of the investment divisions of the Separate Account. We then invest
each investment division's assets in corresponding portfolios of the following:
- - MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
- Basic Value Focus Fund
- Balanced Capital Focus Fund
- Global Growth Focus Fund
- Utilities and Telecommunications Focus Fund
- Developing Capital Markets Focus Fund
- Small Cap Value Focus Fund
- Index 500 Fund
- - MERRILL LYNCH SERIES FUND, INC.
- Money Reserve Portfolio
- Intermediate Government Bond Portfolio
- Long-Term Corporate Bond Portfolio
- High Yield Portfolio
- Capital Stock Portfolio
- Growth Stock Portfolio
- Multiple Strategy Portfolio
- Natural Resources Portfolio
- Global Strategy Portfolio
- Balanced Portfolio
- - AIM VARIABLE INSURANCE FUNDS
- AIM V.I. Capital Appreciation Fund
- AIM V.I. Value Fund
- - ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
- Premier Growth Portfolio
- Quasar Portfolio
- - HOTCHKIS AND WILEY VARIABLE TRUST
- International VIP Portfolio
- - MFS VARIABLE INSURANCE TRUST
- MFS Emerging Growth Series
- MFS Research Series
- - MERCURY ASSET MANAGEMENT V.I. FUNDS, INC.
- Mercury V.I. U.S. Large Cap Fund
- - MERRILL LYNCH FUND OF STRIPPED ("ZERO") U.S. TREASURY SECURITIES
Fourteen maturity dates ranging from February 15, 2001 -- February 15, 2019
Currently, you may change your investment allocation as often as you like.
We guarantee that regardless of investment results, insurance coverage will
continue for the insured's life, or, as you may select, for a shorter time if
the face amount chosen is above the minimum face amount required for
<PAGE>
the initial payment. During this guarantee period, we will terminate the
Contract only if loan debt exceeds certain contract values. After the guarantee
period ends, the Contract will remain in effect as long as the net cash
surrender value is sufficient to cover all charges due. While the Contract is in
effect, the death benefit may vary to reflect the investment results of the
investment divisions chosen, but will never be less than the face amount.
You may:
- make additional payments subject to certain conditions
- change the face amount of your Contract subject to certain conditions
- redeem the Contract for its net cash surrender value
- make partial withdrawals
- borrow up to the loan value of your Contract
The net cash surrender value will vary with the investment results of the
investment divisions chosen. We don't guarantee any minimum cash surrender
value.
You may return the Contract or exchange it for a contract with benefits that
don't vary with the investment results of a separate account.
It may not be advantageous to replace existing insurance with the Contract.
PURCHASING THIS CONTRACT INVOLVES CERTAIN RISKS. INVESTMENT RESULTS CAN VARY
BOTH UP AND DOWN AND CAN EVEN DECREASE THE VALUE OF PREMIUM PAYMENTS. THEREFORE,
YOU COULD LOSE ALL OR PART OF THE MONEY YOU INVEST. EXCEPT FOR THE GUARANTEED
DEATH BENEFIT WE PROVIDE, YOU BEAR ALL INVESTMENT RISKS. WE DO NOT GUARANTEE HOW
ANY OF THE INVESTMENT DIVISIONS OR FUNDS WILL PERFORM.
LIFE INSURANCE IS INTENDED TO BE A LONG-TERM INVESTMENT. YOU SHOULD EVALUATE
YOUR INSURANCE NEEDS AND THE CONTRACT'S LONG-TERM INVESTMENT POTENTIAL AND RISKS
BEFORE PURCHASING THE CONTRACT.
CURRENT PROSPECTUSES FOR THE MERRILL LYNCH SERIES FUND, INC; THE MERRILL LYNCH
VARIABLE SERIES FUNDS, INC.; THE AIM VARIABLE INSURANCE FUNDS; THE ALLIANCE
VARIABLE PRODUCTS SERIES FUND, INC.; THE MFS-REGISTERED TRADEMARK- VARIABLE
INSURANCE TRUST-SM-; THE HOTCHKIS AND WILEY VARIABLE TRUST; THE MERCURY ASSET
MANAGEMENT V.I. FUNDS, INC.; AND THE MERRILL LYNCH FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES MUST ACCOMPANY THIS PROSPECTUS. PLEASE READ THESE
DOCUMENTS CAREFULLY AND RETAIN THEM FOR FUTURE REFERENCE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE CONTRACTS OR
DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
--------
<S> <C>
IMPORTANT TERMS............................................. 5
SUMMARY OF THE CONTRACT..................................... 6
What the Contract Provides.............................. 6
Availability and Payments............................... 7
The Investment Base..................................... 7
The Investment Divisions................................ 8
Illustrations........................................... 8
Replacement of Existing Coverage........................ 8
Right to Cancel ("Free Look" Period) or Exchange........ 8
Distributions From The Contract......................... 8
Fees and Charges........................................ 9
Joint Insureds.......................................... 11
FACTS ABOUT ML LIFE INSURANCE COMPANY OF NEW YORK, MERRILL
LYNCH, PIERCE, FENNER & SMITH INCORPORATED, THE SEPARATE
ACCOUNT, THE FUNDS, AND THE ZERO TRUSTS................... 12
ML Life Insurance Company of New York................... 12
Merrill Lynch, Pierce, Fenner & Smith Incorporated
(MLPF&S)................................................ 12
CMA Account Reporting................................... 12
The Separate Account.................................... 12
Net Rate of Return for an Investment.................... 13
Changes Within the Separate Account..................... 14
THE FUNDS................................................... 14
The Series Fund......................................... 14
The Variable Series Funds............................... 16
The AIM V.I. Funds...................................... 17
The Alliance Fund....................................... 17
The MFS Trust........................................... 18
The Hotchkis and Wiley Trust............................ 18
The Mercury V.I. Funds.................................. 19
Special Risks In Certain Funds.......................... 19
The Operation of the Funds.............................. 20
The Zero Trusts......................................... 21
FACTS ABOUT THE CONTRACT.................................... 22
Who May be Covered...................................... 22
Initial Payment......................................... 23
Right to Cancel ("Free Look" Period).................... 24
Making Additional Payments.............................. 24
Changing the Face Amount................................ 27
Investment Base......................................... 28
Charges................................................. 29
Charges Deducted from the Investment Base............... 29
Charges to the Separate Account......................... 30
Charges to Fund Assets.................................. 31
Guarantee Period........................................ 33
Net Cash Surrender Value................................ 33
Partial Withdrawals..................................... 34
Loans................................................... 35
Death Benefit Proceeds.................................. 36
Payment of Death Benefit Proceeds....................... 37
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Page
--------
<S> <C>
Dollar Cost Averaging................................... 38
Right to Exchange Contract.............................. 38
Income Plans............................................ 39
Reports to Contract Owners.............................. 39
MORE ABOUT THE CONTRACT..................................... 40
Using the Contract...................................... 40
Some Administrative Procedures.......................... 42
Other Contract Provisions............................... 43
Group or Sponsored Arrangements......................... 43
Unisex Legal Considerations............................. 44
Selling the Contracts................................... 44
Tax Considerations...................................... 45
ML Life Insurance Company of New York's Income Taxes.... 47
Reinsurance............................................. 48
ILLUSTRATIONS............................................... 48
JOINT INSUREDS.............................................. 55
Availability and Payments............................... 55
Who May be Covered...................................... 55
Initial Payment......................................... 55
Making Additional Payments.............................. 55
Changing the Face Amount................................ 56
Charges Deducted from the Investment Base............... 56
Guarantee Period........................................ 56
Net Cash Surrender Value................................ 56
Death Benefit Proceeds.................................. 56
Net Single Premium Factor............................... 57
Payment of Death Benefit Proceeds....................... 57
Right to Exchange Contract.............................. 57
Using the Contract...................................... 57
Other Contract Provisions............................... 57
Income Plans............................................ 59
MORE ABOUT ML LIFE INSURANCE COMPANY OF NEW YORK............ 59
Directors and Executive Officers........................ 59
Services Arrangement.................................... 60
State Regulation........................................ 60
Legal Proceedings....................................... 61
Experts................................................. 61
Legal Matters........................................... 61
Registration Statements................................. 61
Financial Statements.................................... 61
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. We have not authorized any person to
make any representations in connection with this offering other than those
contained in this prospectus.
4
<PAGE>
IMPORTANT TERMS
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 investment base less the balance of any
deferred contract load we have not yet deducted and, depending on the date it is
calculated, less all or a portion of certain other charges not yet deducted,
plus any loan 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
contract 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 contract date.
FACE AMOUNT: is the minimum death benefit as long as the Contract remains in
force. You can change the face amount; it may increase as a result of an
additional payment; or it may decrease as a result of a partial withdrawal.
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 reflects net premiums, uses 4% interest instead of
the net rate of return, and substitutes the guaranteed maximum cost of insurance
rates for the current rates. In addition, the fixed base is calculated without
taking into account 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.
We use the fixed base to limit the mortality cost deduction and our right to
cancel the Contract during the guarantee period.
GUARANTEE PERIOD: is the time we guarantee that the Contract will remain in
force regardless of investment experience, unless loan debt exceeds certain
contract values. It is the period that a comparable fixed life insurance
contract (with the same face amount, payments and withdrawals 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, we receive
the initial payment and any outstanding contract amendments at the Service
Center.
INVESTMENT BASE: is the amount available under a Contract for investment in the
Separate Account at any time.
ISSUE AGE: is the insured's age as of his or her birthday nearest the contract
date.
LOAN DEBT: is the sum of all outstanding loans on a Contract plus accrued
interest.
MONTHIVERSARY: is the same day each month as the contract date.
NET AMOUNT AT RISK: is the excess of the death benefit over the cash surrender
value, adjusted for interest at 4%.
NET CASH SURRENDER VALUE: is equal to cash surrender value less any loan debt.
NET SINGLE PREMIUM FACTOR: is used to determine the amount of death benefit
purchased by $1.00 of cash surrender value. We use this factor in the
calculation of the variable insurance amount to make sure that the
5
<PAGE>
Contract always meets the guidelines of what constitutes a life insurance
contract under the Internal Revenue Code (IRC).
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
we deduct 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.
SUMMARY OF THE CONTRACT
WHAT THE CONTRACT PROVIDES
The 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.
We don't guarantee that contract values will increase. Depending on the
investment results of the investment divisions you select, the investment base,
net cash surrender value and death benefit may go up or down on any day. You
bear the investment risk for any amount allocated to an investment division.
We offer other variable life insurance contracts that have different features
and charges. These different charges would affect your investment division
performance and investment base. To obtain more information about these other
contracts, contact our Service Center or your Financial Consultant.
DEATH BENEFIT. The death benefit equals the face amount or variable insurance
amount, whichever is larger. The variable insurance amount increases or
decreases depending on the investment results of the investment divisions you
select. The death benefit may go up or down, depending on investment
performance. However, it will never drop below the face amount. We will reduce
the death benefit by any loan debt.
TAX BENEFITS AND TAX CONSIDERATIONS. We believe the Contract generally provides
at least the minimum death benefit required under federal tax law (although
there is less guidance and therefore some uncertainty with respect to Contracts
issued on a substandard basis and Contracts insuring two lives). By satisfying
this requirement, the Contract provides two important tax benefits:
1) Its death benefit is generally not subject to income tax;
2) Any increases in the Contract's cash surrender value are not taxable until
distributed from the Contract. (Since the Contract generally is a modified
endowment contract, distributions are subject to tax, and, if taken before
you reach age 59 1/2, may also be subject to a 10% federal penalty tax.)
See "Tax Considerations".
GUARANTEE PERIOD. Generally, during the guarantee period, we guarantee the
Contract will remain in effect and provide the death benefit regardless of
investment performance unless loan debt exceeds certain contract values (See
"Loans" for an explanation of how any loan debt affects the Contract's value).
If your Contract's face amount is the minimum death benefit required under
federal tax laws, the guarantee period is for the insured's lifetime. If you
select a higher face amount, your guarantee period is shorter. The chart below
shows how the face amount of your contract affects the guarantee period
(assuming the same premium).
6
<PAGE>
INSURED MALE AGE 60
INITIAL PREMIUM 100,000
<TABLE>
<CAPTION>
LENGTH OF GUARANTEE PERIOD (YEARS) FACE AMOUNT
---------------------------------- ------------
<S> <C>
5 $1,079,637
10 501,909
20 235,437
30 177,763
Insured's lifetime 170,482
</TABLE>
A guarantee period for the insured's lifetime provides certainty. Your own
individual insurance needs and risk tolerance should determine the face amount
of your Contract and therefore your guarantee period.
You should purchase the Contract for its death benefit. You may use the
Contract's net cash surrender value, as well as its death benefit, 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 terminate. Because the Contract
is designed to provide benefits on a long-term basis, before purchasing a
Contract in connection with a specialized purpose, you should consider whether
the long-term nature of the Contract, its investment risks, and the potential
impact of any contemplated loans and partial withdrawals, are consistent with
the purposes you may be considering. Moreover, using a Contract for a
specialized purpose may have tax consequences. (See "Tax Considerations".)
AVAILABILITY AND PAYMENTS
We will issue a Contract for an insured up to age 75 (or up to age 80 for joint
insureds). We 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 pay planned periodic payments instead of a single payment.
If you elect planned periodic payments, the minimum initial planned periodic
payment is $2,000 provided that the initial payment plus the planned payments
will total $10,000 or more during the first five contract years.
We will not accept an initial payment that provides a guarantee period of less
than one year.
Subject to certain conditions, you may make additional unplanned payments. (See
"Making Additional Payments".)
THE INVESTMENT BASE
A Contract's investment base is the amount available for investment at any time.
On the contract date (usually the next business day after our Service Center
receives your initial payment), the investment base is equal to the initial
payment. Afterwards, it varies daily based on the investment performance of your
selected investment divisions. You bear the risk of poor investment performance
and receive the benefit of favorable investment performance. You may wish to
consider diversifying your investment in the Contract by allocating the
investment base to two or more investment divisions.
7
<PAGE>
THE INVESTMENT DIVISIONS
We invest your payments in investment divisions of the Separate Account.
Generally, through the first 14 days following the in force date, we will invest
the initial payment only in the investment division of the Separate Account
investing in the Money Reserve Portfolio. Afterwards, we will reallocate the
investment base to up to five of the investment divisions, according to your
instructions. (See "Changing the Allocation".)
ILLUSTRATIONS
Illustrations in this Prospectus or used in connection with the purchase of the
Contract are based on hypothetical investment rates of return. We don't
guarantee these rates. They are illustrative only, and not a representation of
past or future performance. Actual rates of return may be more or less than
those shown in the illustrations. Actual values will be different than those
illustrated.
REPLACEMENT OF EXISTING COVERAGE
Generally, it is not advisable to purchase an insurance contract as a
replacement for existing coverage. Before you buy a Contract, ask your Merrill
Lynch Financial Consultant if changing, or adding to, current insurance coverage
would be advantageous. Don't base your decision to replace existing coverage
solely on a comparison of contract illustrations.
RIGHT TO CANCEL ("FREE LOOK" PERIOD) OR EXCHANGE
Once you receive the Contract, review it carefully to make sure it is what you
want. You may return a Contract for a refund within ten days after you receive
it. If you return the Contract during the "free look" period, we will refund the
payment without interest.
You may also exchange your Contract at any time for a contract with benefits
that do not vary with the investment results of a separate account.
DISTRIBUTIONS FROM THE CONTRACT
PARTIAL WITHDRAWALS. Beginning in Contract year two, you may withdraw up to 80%
of the net cash surrender value. (See "Partial Withdrawals".) Partial
withdrawals may have tax consequences. (See "Tax Considerations".)
SURRENDERS. You may surrender your Contract at any time and receive the net cash
surrender value. The net cash surrender value equals the investment base minus:
- The balance of any deferred contract loading not yet deducted; and
- Other contract charges not yet deducted.
Surrendering your Contract may have tax consequences. (See "Tax
Considerations.")
LOANS. You may borrow money from us, using your Contract as collateral, subject
to limits. We deduct loan debt from the amount payable on surrender of the
Contract and from any death benefit payable. Loan interest accrues daily and, IF
IT IS NOT PAID EACH YEAR, IT IS TREATED AS A NEW LOAN (CAPITALIZED) AND ADDED TO
THE OUTSTANDING LOAN AMOUNT. With a modified endowment contract, both the loan
amount and the amount of
8
<PAGE>
capitalized interest are treated as taxable distributions. Depending upon
investment performance of the investment divisions and the amounts borrowed,
loans may cause a Contract to lapse. If the Contract lapses with loan debt
outstanding, adverse tax consequences may result. Loan debt is considered part
of the cash surrender value which is used to calculate taxable gain. Loans may
have other adverse tax consequences. (See "Loans" and "Tax Considerations--Tax
Treatment of Loans and Other Distributions".)
FEES AND CHARGES
INVESTMENT BASE CHARGES. We invest the entire amount of all premium payments in
the Separate Account. We then deduct certain charges from your investment base
on processing dates. These charges are:
- DEFERRED CONTRACT LOAD equal to 9% of each payment. It consists of a sales
load of 5%, a charge for federal taxes of 2% and a premium tax charge of
2%. For joint insureds the deferred contract load equals 11% of each
payment and consists of a sales load of 7%, a charge for federal taxes of
2% and a premium tax charge of 2%. We deduct the deferred contract load in
equal installments of .90% (1.1% for joint insureds) of each payment. We
make this deduction on the ten contract anniversaries following the date
we receive and accept the payment. However, in determining a Contract's
net cash surrender value, we subtract the balance of the deferred contract
load not yet deducted.
- MORTALITY COST -- on all quarterly processing dates after the contract
date, we deduct a cost for the life insurance coverage we provide (see
"Mortality Cost"); and
- NET LOAN COST -- on each contract anniversary, if there has been any loan
debt during the prior year, we deduct a net loan cost. It equals a maximum
of 2.0% of the loan debt per year (see "Charges Deducted From the
Investment Base" and "Net Loan Cost").
SEPARATE ACCOUNT CHARGES. We deduct certain charges daily from the investment
results of the investment divisions in the Separate Account. These charges are:
- A MORTALITY AND EXPENSE RISK CHARGE deducted from all investment
divisions. It 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. It is currently equivalent to .34% annually at the
beginning of the year. It will never exceed .50% annually.
9
<PAGE>
ADVISORY FEES AND FUND EXPENSES. The portfolios in the Funds pay monthly
advisory fees and other expenses. The following table helps you understand the
costs and expenses you will bear, directly or indirectly. The table shows Fund
expenses for the year ended December 31, 1999, as a percentage of each Fund's
average net assets. For more information on fees and charges, see "Charges to
Fund Assets".
<TABLE>
<CAPTION>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. (CLASS A SHARES)
----------------------------------------------------------------------------------------------------
DEVELOPING UTILITIES
BASIC GLOBAL CAPITAL AND INTERNATIONAL SMALL CAP BALANCED GLOBAL
VALUE BOND MARKETS TELECOMMUNICATIONS EQUITY VALUE CAPITAL GROWTH
ANNUAL EXPENSES FOCUS FOCUS* FOCUS(A) FOCUS(B) FOCUS* FOCUS(B) INDEX 500 FOCUS(B) FOCUS
- --------------- ----- ------ ---------- ------------------ ------------- --------- --------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory
Fees................... .60% .60% 1.00% .60% .75% .75% .30% .60% .75%
Other Expenses........... .06% .17% .67% .09% .17% .06% .05% .11% .12%
--- --- ---- --- --- --- --- --- ---
Total Annual Operating
Expenses............... .66% .77% 1.67% .69% .92% .81% .35% .71% .87%
Expense Reimbursements... 0% 0% .42% 0% 0% 0% 0% 0% 0%
--- --- ---- --- --- --- --- --- ---
Net Expenses............. .66% .77% 1.25% .69% .92% .81% .35% .71% .87%
</TABLE>
<TABLE>
<CAPTION>
MERRILL LYNCH SERIES FUND, INC.
----------------------------------------------------------------------------------------------------
INTERMEDIATE LONG-TERM
MONEY GOVERNMENT CORPORATE HIGH CAPITAL GROWTH MULTIPLE NATURAL GLOBAL
ANNUAL EXPENSES RESERVE BOND BOND YIELD STOCK STOCK STRATEGY RESOURCES(C) STRATEGY BALANCED
- --------------- ------- ------------ --------- ----- ------- ------ -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory
Fees................... .32% .32% .32% .32% .32% .32% .32% .32% .32% .32%
Other Expenses........... .05% .06% .07% .07% .05% .05% .07% .27% .10% .06%
--- --- --- --- --- --- --- --- --- ---
Total Annual Operating
Expenses............... .37% .38% .39% .39% .37% .37% .39% .59% .42% .38%
Expense Reimbursements... 0% 0% 0% 0% 0% 0% 0% .09% 0% 0%
--- --- --- --- --- --- --- --- --- ---
Net Expenses............. .37% .38% .39% .39% .37% .37% .39% .50% .42% .38%
</TABLE>
<TABLE>
<CAPTION>
ALLIANCE VARIABLE
PRODUCTS
AIM VARIABLE SERIES FUND, INC. MFS-REGISTERED TRADEMARK- VARIABLE HOTCHKIS AND WILEY
INSURANCE FUNDS (CLASS A SHARES) INSURANCE TRUST-SM- VARIABLE TRUST
---------------------- -------------------- ----------------------------------- ------------------
AIM V.I. ALLIANCE MFS
CAPITAL AIM V.I. PREMIER ALLIANCE EMERGING MFS HOTCHKIS AND WILEY
ANNUAL EXPENSES APPRECIATION VALUE GROWTH(D) QUASAR(D) GROWTH(E) RESEARCH(E) INTERNATIONAL VIP
- --------------- ------------ -------- --------- --------- ----------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory
Fees.............. .62% .61% 1.00% 1.00% .75% .75% .75%
Other Expenses...... .11% .15% .05% .19% .09% .11% .26%
--- --- ---- ---- --- --- ----
Total Annual
Operating
Expenses.......... .73% .76% 1.05% 1.19% .84% .86% 1.01%
Expense
Reimbursements.... 0% 0% 0% 0% 0% 0% 0%
--- --- ---- ---- --- --- ----
Net Expenses........ .73% .76% 1.05% 1.19% .84% .86% 1.01%
<CAPTION>
MERCURY ASSET
MANAGEMENT
V.I. FUNDS, INC.
(CLASS A SHARES)
-----------------
MERCURY V.I.
U.S. LARGE
ANNUAL EXPENSES CAP(F)
- --------------- -----------------
<S> <C>
Investment Advisory
Fees.............. .65%
Other Expenses...... 2.18%
----
Total Annual
Operating
Expenses.......... 2.83%
Expense
Reimbursements.... 1.58%
----
Net Expenses........ 1.25%
</TABLE>
- --------
* Closed to allocations of premiums or contract value following the close of
business on June 22, 1999.
(a) Merrill Lynch Asset Management L.P. ("MLAM") and Merrill Lynch Life Agency,
Inc. have entered into a Reimbursement Agreement that limits the operating
expenses, exclusive of any distribution fees imposed on Class B shares, paid
by each Fund of the Variable Series Funds in a given year to 1.25% of its
average net
10
<PAGE>
assets. This Reimbursement Agreement is expected to remain in effect for the
current year. Under this Reimbursement Agreement, the Developing Capital
Markets Focus Fund was reimbursed for a portion of its operating expenses
for 1999.
(b) Effective April 4, 2000, (i) the Special Value Focus Fund was renamed the
Small Cap Value Focus Fund; (ii) the Global Utility Focus Fund was renamed
the Utilities and Telecommunications Fund; and (iii) the Capital Focus Fund
was renamed the Balanced Capital Focus Fund. See the accompanying prospectus
for the Variable Series Funds for additional information regarding these
changes.
(c) We have agreed to limit operating expenses for each Fund of the Series Fund
in a given year to .50% of its average daily net assets. Under this
agreement, the Natural Resources Portfolio was reimbursed for a portion of
its operating expenses for 1999.
(d) The Fee Table does not reflect fees waived or expenses assumed by Alliance
Capital Management L.P. ("Alliance") for the Alliance Quasar Portfolio
during the year ended December 31, 1999. Such waivers and assumption of
expenses were made on a voluntary basis. Alliance may discontinue or reduce
any such waiver or assumption of expenses at any time without notice. During
the fiscal year ended December 31, 1999, Alliance waived management fees
totaling .24% for the Alliance Quasar Portfolio. Considering such
reimbursements, "Total Annual Operating Expenses" would have been .95%.
(e) The MFS Emerging Growth Series and the MFS Research Series have expense
offset arrangements which reduce each Fund's custodian fee based upon the
amount of cash maintained by each Fund with its custodian and dividend
disbursing agent. The Funds may enter into such arrangements and directed
brokerage arrangements, which would also have the effect of reducing the
Funds' expenses. "Other Expenses" do not take into account these expense
reductions, and are therefore higher than the actual expenses of the Funds.
Had these fee reductions been taken into account, "Net Expenses" would have
been 0.83% for the Emerging Growth Series and 0.85% for the Research Series.
(f) Mercury Asset Management International Ltd. has agreed to limit for one
year the operating expenses paid by the Mercury V.I. U.S. Large Cap Fund to
1.25% of its average net assets.
JOINT INSUREDS
The Contract can 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 under a joint Contract. We have
noted those discussions which are different for joint insureds. (See "Joint
Insureds.")
THIS SUMMARY PROVIDES ONLY A BRIEF OVERVIEW OF THE MORE SIGNIFICANT ASPECTS OF
THE CONTRACT. THIS PROSPECTUS AND THE CONTRACT PROVIDE FURTHER DETAIL. YOU
SHOULD RETAIN THE CONTRACT TOGETHER WITH ITS ATTACHED APPLICATIONS, MEDICAL
EXAM(S), AMENDMENTS, RIDERS, AND ENDORSEMENTS. THESE ARE THE ENTIRE AGREEMENT
BETWEEN YOU AND US.
FOR THE DEFINITIONS OF SOME IMPORTANT TERMS USED IN THIS PROSPECTUS, SEE
"IMPORTANT TERMS".
11
<PAGE>
FACTS ABOUT ML LIFE INSURANCE COMPANY OF NEW YORK,
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
THE SEPARATE ACCOUNT, THE FUNDS, AND THE ZERO TRUSTS
ML LIFE INSURANCE COMPANY OF NEW YORK ("ML OF NEW YORK")
ML of New York ("we" or "us") is a stock life insurance company organized under
the laws of the State of New York on November 28, 1973. We are an indirect
wholly owned subsidiary of Merrill Lynch & Co., Inc. We are authorized to sell
life insurance and annuities in 9 states. We are also authorized to sell
variable life insurance and variable annuities in most of those jurisdictions.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("MLPF&S")
MLPF&S provides a world-wide broad range of securities brokerage and investment
banking services. It provides marketing services for us and is the principal
underwriter of the Contracts issued through the Separate Account. We retain
MLPF&S to provide services relating to the Contracts under a distribution
agreement. (See "Selling the Contracts".)
CMA ACCOUNT REPORTING
If you have a Merrill Lynch Cash Management Account-Registered
Trademark-,* you may elect to have your Contract linked
electronically to that account. We call this the CMA Insurance
Service. With this service, certain Contract information is
included as part of your regular monthly CMA account statement.
However, the Contract is not an asset held in your CMA Account.
Your CMA Statement will list the investment base allocation, death
benefit, net cash surrender value, loan debt and any CMA account
activity affecting the Contract during the month.
THE SEPARATE ACCOUNT
We established the Separate Account, a separate investment account, on
December 4, 1991. It is registered with the Securities and Exchange Commission
as a unit investment trust under 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.
The Separate Account meets the definition of a separate account under the
federal securities laws. We use the Separate Account to support the Contract as
well as other variable life insurance contracts we issue. The Separate Account
is also governed by the laws of the State of New York, our state of domicile.
We own all of the assets in the Separate Account. We keep the Separate Account's
assets apart from our general account and any other separate accounts we 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 we conduct.
Obligations to contract owners and beneficiaries that arise under the Contract
are our obligations. Income, gains, and losses, whether or not realized, from
assets allocated to the Separate Account are, in accordance with the Contracts,
credited to or charged against the Separate Account without regard to our other
income, gains or losses. The assets in the Separate Account will always be at
least equal to the reserves and other
- --------------------------------
* Cash Management Account and CMA are registered trademarks of Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
12
<PAGE>
liabilities of the Separate Account. If the Separate Account's assets exceed the
required reserves and other Contract liabilities, we may transfer the excess to
our general account.
There are currently 39 investment divisions in the Separate Account that are
available for investment.
- Seven invest in Class A shares of a specific portfolio of the Merrill
Lynch Variable Series Funds, Inc. (the "Variable Series Funds").
- Ten invest in shares of a specific portfolio of the Merrill Lynch
Series Fund, Inc. (the "Series Fund").
- Two invest in shares of a specific portfolio of the AIM Variable Insurance
Funds (the "AIM V.I. Funds").
- Two invest in shares of a portfolio of the Alliance Variable Products
Series Fund, Inc. (the "Alliance Fund").
- Two invest in shares of a specific portfolio of the
MFS-Registered Trademark- Variable Insurance Trust-SM-(the "MFS Trust").
- One invests in shares of a portfolio of the Hotchkis and Wiley Variable
Trust (the "Hotchkis and Wiley Trust").
- One invests in Class A shares of a portfolio of the Mercury Asset
Management V.I. Funds, Inc (the "Mercury V.I. Funds").
- Fourteen invest in specific units of The Merrill Lynch Fund of Stripped
("Zero") U.S. Treasury Securities (the "Zero Trust").
On July 22, 1999, two investment divisions previously under the Separate Account
(the International Equity Focus Fund and the Global Bond Focus Fund of the
Variable Series Fund) closed to allocation of premiums and investment base.
For more information, see "The Funds" below. You'll find complete information
about the Funds and the Zero Trusts, including the risks associated with each
portfolio in the accompanying prospectuses. They should be read along with this
Prospectus.
Although the investment objectives and policies of certain Funds are similar to
the investment objectives and policies of other portfolios that may be managed
or sponsored by the same investment adviser, manager, or sponsor, we do not
represent or assure that the investment results will be comparable to any other
portfolio, even where the investment adviser or manager is the same. Differences
in portfolio size, actual investments held, fund expenses, and other factors all
contribute to differences in fund performance. For all of these reasons, you
should expect investment results to differ. In particular, certain Funds
available only through the Contract have names similar to funds not available
through the Contract. The performance of any fund not available through the
Contract is not indicative of performance of the similarly named fund available
through the Contract.
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 we furnish to you). When we allocate your
payments or investment base to an investment division, we purchase units based
on the value of a unit of the investment division as of the end of the valuation
period during which the allocation occurs. When we transfer or deduct amounts
out of an investment division, we
13
<PAGE>
redeem units 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 unit 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. We determine 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
investment division for the valuation period and the charges to the Separate
Account.
For investment 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 investment 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.
CHANGES WITHIN THE SEPARATE ACCOUNT
We may add new investment divisions. We can also eliminate investment divisions,
combine two or more investment divisions, or to substitute a new portfolio for
the portfolio in which an investment division invests. A substitution may become
necessary if, in our judgment, a portfolio no longer suits the purposes of 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. If necessary,
we would get prior approval from the New York Insurance Department and the
Securities and Exchange Commission and any other required approvals before
making such a substitution.
Subject to any required regulatory approvals, we can transfer assets of the
Separate Account or of any of the investment divisions to another separate
account or investment division.
When permitted by law, we also can:
- 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.
THE FUNDS
Below we list the funds into which the investment divisions may invest. There is
no guarantee that any fund or portfolio will be able to meet its investment
objective.
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
14
<PAGE>
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.
MONEY RESERVE PORTFOLIO seeks to preserve capital, maintain liquidity and
achieve the highest possible current income consistent with those objectives by
investing in short-term money market securities.
INTERMEDIATE GOVERNMENT BOND PORTFOLIO seeks to obtain the highest level of
current income consistent with the protection of capital afforded by investing
in 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 a high level of
current income. 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 a high level of current income.
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 companies with
the potential to achieve above-average earnings growth.
MULTIPLE STRATEGY PORTFOLIO seeks high total investment return through a fully
managed investment contract utilizing equity securities, intermediate and
long-term debt securities and money market securities.
NATURAL RESOURCES PORTFOLIO seeks capital appreciation and to protect 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".)
15
<PAGE>
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. Class A shares of seven of its portfolios are currently
available through the Separate Account. Two of its other portfolios are now
closed to further investment. The investment objectives and certain investment
policies of these Variable Series Funds portfolios are described below.
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
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 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.
The investment division corresponding to this Fund closed to allocation of
premiums and investment base on July 22, 1999.
UTILITIES AND TELECOMMUNICATIONS FOCUS FUND (FORMERLY THE 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.
The investment division corresponding to this Fund closed to allocation of
premiums and investment base on July 22, 1999.
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.
SMALL CAP VALUE FOCUS FUND (FORMERLY THE SPECIAL VALUE FOCUS 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.
16
<PAGE>
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").
BALANCED CAPITAL FOCUS FUND (FORMERLY THE CAPITAL FOCUS FUND) seeks to achieve
high total investment return. To do this, management of the Fund uses a flexible
"fully managed" investment policy that shifts the emphasis among equity, debt
(including money market), and convertible securities.
GLOBAL GROWTH FOCUS FUND seeks long-term growth of capital. The Fund invests in
a diversified portfolio of equity securities of issuers located in various
countries and the United States, placing particular emphasis on companies that
have exhibited above-average growth rates in earnings.
The Variable Series Funds, as part of its operating expenses, pays an investment
advisory fee to MLAM. (See "Charges to Fund Assets".)
THE AIM V.I. FUNDS
The AIM V.I. Funds is registered with the Securities and Exchange Commission as
an open-end 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.
AIM V.I. CAPITAL APPRECIATION FUND seeks growth of capital through investment in
common stocks, with emphasis on medium and small-sized growth companies. AIM
will be particularly interested in companies that are likely to benefit from new
or innovative products, services or processes, as well as those that have
experienced above-average, long-term growth in earnings and have excellent
prospects for future growth.
AIM 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 AIM's
appraisal of the current or projected earnings of the companies issuing the
securities, or relative to current market values of assets owned by the
companies issuing the securities or relative to the equity market generally.
Income is a secondary objective.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, has served as an
investment adviser since its organization in 1976. Today, AIM together with its
subsidiaries, advises or manages over 120 investment portfolios, including the
Funds, encompassing a broad range of investment objectives. The AIM V.I. Funds,
as part of its operating expenses, pays an investment advisory fee to AIM. (See
"Charges to Fund Assets".)
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"). Two of its mutual fund portfolios are
currently available through the Separate Account. The investment objectives of
these Alliance Fund portfolios are described below.
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 is 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. This Fund is therefore not intended for
contract owners whose principal objective is assured income and conservation of
capital.
17
<PAGE>
QUASAR PORTFOLIO seeks growth of capital by pursuing aggressive investment
policies. The Fund invests principally in a diversified portfolio of equity
securities of any company and industry and in any type of security which is
believed to offer possibilities for capital appreciation, and invests only
incidentally for current income. The selection of securities based on the
possibility of appreciation cannot prevent loss in value. Moreover, because the
Fund's investment policies are aggressive, an investment in the Fund is risky
and is not intended for contract owners who want assured income or preservation
of capital.
Alliance is a Delaware limited partnership with principal offices at 1345 Avenue
of the Americas, New York, New York 10105. Alliance Capital Management
Corporation ("ACMC"), the sole general partner of Alliance, is an indirect
wholly owned subsidiary of The Equitable Life Assurance Society of the United
States, which is in turn a wholly owned subsidiary of AXA Financial, Inc., a
holding company which is controlled by AXA, a French insurance holding company.
The Alliance Fund, as part of its operating expenses, pays an investment
advisory fee to Alliance. (See "Charges to Fund Assets".)
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.
MFS EMERGING GROWTH SERIES will seek long-term growth of capital. The series
invests, under normal market conditions, at least 65% of its total assets in
common stocks and related securities, such as preferred stocks, convertible
securities and depositary receipts for those securities, of emerging growth
companies. These companies are companies that the series' adviser believes are
either early in their life cycle but have the potential to become major
enterprises or are major enterprises whose rates of earnings growth are expected
to accelerate.
MFS RESEARCH SERIES will seek to provide long-term growth of capital and future
income. The series invests, under normal market conditions, at least 80% of its
total assets in common stocks and related securities, such as preferred stocks,
convertible securities and depositary receipts. The series focuses on companies
that the series' adviser believes have favorable prospects for long-term growth,
attractive valuations based on current and expected earnings or cash flow,
dominant or growing market share and superior management.
MFS, a Delaware corporation, 500 Boylston Street, Boston, Massachusetts 02116,
is a subsidiary of Sun Life of Canada (U.S.) Financial Services Holdings, Inc.,
which, in turn, is an indirect wholly owned subsidiary of Sun Life Assurance
Company of Canada. The MFS Trust, as part of its operating expenses, pays an
investment advisory fee to MFS. (See "Charges to Fund Assets".)
THE HOTCHKIS AND WILEY TRUST
The Hotchkis and Wiley Trust is registered with the Securities and Exchange
Commission as an open-end management investment company, and its adviser is
Hotchkis and Wiley. One if its mutual fund portfolios is available through the
Separate Account. The investment objective of this Hotchkis and Wiley Trust
portfolio is described below.
HOTCHKIS AND WILEY INTERNATIONAL VIP PORTFOLIO seeks to provide current income
and long-term growth of income, accompanied by growth of capital. The Fund
invests at least 65% of its total assets in stocks in at least ten foreign
markets. In investing the Fund, Hotchkis and Wiley follows a value style. This
means that it buys stocks that it believes are currently undervalued by the
market and thus have a lower price than their true worth.
18
<PAGE>
Hotchkis and Wiley, 725 S. Figueroa Street, Suite 4000, Los Angeles, California
90017-5400, is a division of MLAM. The Hotchkis and Wiley Trust, as part of its
operating expenses, pays an investment advisory fee to Hotchkis and Wiley. (See
"Charges to Fund Assets".)
THE MERCURY V.I. FUNDS
The Mercury V.I. Funds is registered with the Securities and Exchange Commission
as an open-end management investment company, and its adviser is Mercury Asset
Management International Ltd. Class A shares of one of its mutual fund
portfolios are available through the Separate Account. The investment objective
of the Mercury V.I. U.S. Large Cap Fund is described below.
MERCURY V.I. U.S. LARGE CAP FUND'S main goal is long-term capital growth. The
Fund invests primarily in a diversified portfolio of equity securities of large
cap companies (which are companies whose market capitalization is at least $5
billion) located in the U.S. that Fund management believes are undervalued or
have good prospects for earnings growth. The Fund may also invest up to 10% of
its assets in stocks of companies located in Canada.
Mercury Asset Management International Ltd. is located at 33 King William
Street, London EC4R 9AS, England. Its intermediate parent is Mercury Asset
Management Group Ltd. a London-based holding company. The ultimate parent of
Mercury Asset Management Group Ltd. is Merrill Lynch & Co., Inc. The Mercury
V.I. U.S. Large Cap Fund, as part of its operating expenses, pays an investment
advisory fee to Mercury Asset Management International Ltd. (See "Charges to
Fund Assets".)
SPECIAL RISKS IN CERTAIN 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
MLAM'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.
Because a substantial portion of the Global Growth Focus Fund's assets may be
invested on an international basis, you should be aware of certain risks of
international investments, such as fluctuations in foreign exchange rates,
future political and economic developments, different legal systems, and the
possible imposition of exchange controls or other foreign government laws or
restrictions. An investment in the Fund may be appropriate only for long-term
investors who can assume the risk of loss of principal, and do not seek current
income.
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.
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
19
<PAGE>
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 more than securities of larger, more established growth companies or
the market averages in general. Shares of the MFS Emerging Growth Series,
therefore may fluctuate more in value than shares of a conservative equity fund
or of a growth fund which invests entirely in proven growth stocks.
For the Hotchkis and Wiley International VIP Portfolio, investing in emerging
market and other foreign securities involves certain risk considerations not
typically associated with investing in securities of U.S. issuers, including
currency devaluations and other currency exchange rate fluctuations, political
uncertainty and instability, more substantial government involvement in the
economy, higher rates of inflation, less government supervision and regulation
of the securities markets and participants in those markets, controls on foreign
investment and limitations on repatriation of invested capital and on the Fund's
ability to exchange local currencies for U.S. dollars, greater price volatility,
substantially less liquidity and significantly smaller capitalization of
securities markets, absence of uniform accounting and auditing standards,
generally higher commission expenses, delay in settlement of securities
transactions, and greater difficulty in enforcing shareholder rights and
remedies.
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, you should consider many of these portfolios as 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 OPERATION OF 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. We are the legal owner of all Fund shares held in the Separate
Account. We have the right to vote on any matter put to vote at the Funds'
shareholder meetings. However, we will vote all Fund shares attributable to
Contracts according to instructions we receive from contract owners. We will
vote shares attributable to Contracts for which we receive no voting
instructions in the same proportion as shares in the respective investment
divisions for which we receive instructions. We will also vote shares not
attributable to Contracts in the same proportion as shares in the respective
divisions for which we received instructions. We may vote Fund shares in our own
right if any federal securities laws or regulations, or their present
interpretation, change to permit us to do so.
We determine the number of your shares in a division by dividing your Contract's
investment base in the division by the net asset value of one share of the
corresponding portfolio. We count fractional votes.
Under certain circumstances, state regulatory authorities may require us 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.
We may also disregard instructions to vote for changes in the investment policy
or the investment adviser if we disapprove of the proposed changes. We would
disapprove a proposed change only if it were:
- contrary to state law;
- prohibited by state regulatory authorities; or
20
<PAGE>
- decided by management that the change would result in overly speculative
or unsound investments.
If we disregard voting instructions, we will include a summary of our actions in
the next semi-annual report.
RESOLVING MATERIAL CONFLICTS. Shares of the Series Fund are available for
investment by us, 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 us or Merrill Lynch & Co., Inc.). Shares
of the Variable Series Funds, the AIM V.I. Funds, the Alliance Fund, the MFS
Trust and the Hotchkis and Wiley Trust are sold to separate accounts of ours,
Merrill Lynch Life Insurance Company, and insurance companies not affiliated
with us or Merrill Lynch & Co., Inc. to fund benefits under variable life
insurance and variable annuity contracts, and may be sold to certain qualified
plans. Shares of the Mercury Asset Management V.I. Funds are sold to separate
accounts of ours, Merrill Lynch Life Insurance Company, and may in the future be
sold to insurance companies not affiliated with us or Merrill Lynch & Co. 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 our 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 our contract owners and those
of the other insurance companies, or for other reasons. We will monitor events
to determine how to respond to conflicts. If a conflict occurs, we may need to
eliminate one or more investment divisions of the Separate Account which invest
in the Funds or substitute a new portfolio for a portfolio in which a division
invests. In responding to any conflict, we will take the action we believe
necessary to protect you consistent with applicable legal requirements.
ADMINISTRATIVE SERVICE ARRANGEMENTS. The investment adviser of a Fund (or its
affiliates) may pay compensation to us or our affiliates, which may be
significant, in connection with administration, distribution, or other services
provided with respect to the Funds and their availability through the Contracts.
The amount of this compensation is based upon a percentage of the assets of the
Fund attributable to the Contracts and other contracts that we or our affiliates
issue. These percentages differ, and some advisers (or affiliates) may pay more
than others.
THE ZERO TRUSTS
The Zero Trusts are intended to provide safety of capital and a competitive
yield to maturity. The Zero Trusts purchase at a deep discount U.S.
Government-backed investments which make no periodic interest payments. 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.
21
<PAGE>
The Zero Trusts currently available are shown below:
<TABLE>
<CAPTION>
TARGETED
RATE OF
RETURN TO
MATURITY AS OF
ZERO TRUST MATURITY DATE APRIL 19, 2000
- ---------- ----------------- ---------------
<C> <S> <C>
2001 February 15, 2001 4.00%
2002 February 15, 2002 4.60%
2003 August 15, 2003 4.95%
2004 February 15, 2004 5.01%
2005 February 15, 2005 4.80%
2006 February 15, 2006 4.53%
2007 February 15, 2007 4.67%
2008 February 15, 2008 5.00%
2009 February 15, 2009 4.97%
2010 February 15, 2010 5.08%
2011 February 15, 2011 4.96%
2013 February 15, 2013 4.96%
2014 February 15, 2014 5.04%
2019 February 15, 2019 4.91%
</TABLE>
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 that we need to sell to pay benefits and make reallocations. We
pay the sponsor a fee for these transactions and are reimbursed through the
trust charge assessed to the divisions investing in the Zero Trusts. (See
"Charges to Divisions Investing in the Zero Trusts".)
TARGETED RATE OF RETURN TO MATURITY. Because the underlying securities in the
Zero Trusts will grow to their face value on the maturity date, we can estimate
a compound rate of return to maturity for the Zero Trust units. But because the
Separate Account holds the units, we need to take into account the asset charge
and the trust charge (described in "Charges to the Separate Account") in
estimating the net rate of return. That rate depends on the compound rate of
return adjusted for these charges. It does not, however, represent the actual
return on a payment that we might receive under the Contract on that date, since
it does not reflect the charges for deferred contract load, mortality costs and
any net loan cost deducted from a Contract's investment base (described in
"Charges Deducted from the Investment Base").
Since the value of the Zero Trust units will vary daily to reflect the market
value of the underlying securities, the compound rate of return to maturity for
the Zero Trust units and the net rate of return to maturity for the Separate
Account will vary correspondingly.
FACTS ABOUT THE CONTRACT
WHO MAY BE COVERED
You may apply for a Contract for an insured up to issue age 75. We 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. Before we'll issue a Contract, the insured must meet our medical and other
underwriting and insurability requirements.
22
<PAGE>
We use two methods of underwriting:
- simplified underwriting, with no physical exam; and
- para-medical or medical underwriting with a physical exam.
The initial payment amount plus any planned periodic payments elected and the
age and sex of the insured determine whether we'll do underwriting on a
simplified or medical basis. The chart below shows the maximum initial payment
plus any planned payments that we'll underwrite on a simplified basis:
<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), we will also
take "the net amount at risk" into account in determining the method of
underwriting. The net amount at risk is the death benefit minus the cash
surrender value, adjusted for interest at 4%.
We assign insureds to underwriting classes in calculating mortality cost
deductions. In assigning insureds to underwriting classes, we distinguish
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 we may issue Contracts either in the standard or non-smoker
underwriting class. We may also issue Contracts on insureds in a "substandard"
underwriting class. Individuals in substandard classes have health or lifestyle
factors less favorable than the average person. For a discussion of the effect
of underwriting classification on mortality cost deductions, see "Mortality
Cost".
For joint insureds, see "Joint Insureds".
INITIAL PAYMENT
MINIMUM. To purchase a Contract, you must complete an application and make a
payment. We require the payment to put the Contract into effect. 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). We won't, however, accept an initial payment for a specified face
amount that will provide a guarantee period of less than one year. You may make
additional payments. (See "Making Additional Payments".)
COVERAGE. Insurance coverage generally begins on the contract date. This is
usually the next business day following receipt of the initial payment at our
Service Center. Prior to the contract date, we may provide temporary life
insurance coverage under a temporary insurance agreement. Under our underwriting
rules, in most states, temporary life insurance coverage may not exceed $250,000
and may not last more than 60 days.
BACKDATING. As provided for under state insurance law, you may backdate the
Contract to preserve the insured's age. However, you can't backdate more than
six months before the date the application was completed. We deduct cost of
insurance charges for the backdated period on the first processing date after
the contract date.
23
<PAGE>
For joint insureds, see "Joint Insureds".
SELECTING THE INITIAL FACE AMOUNT. Your initial payment determines the face
amount. For a given initial payment you may choose your initial face amount,
within limits. The minimum face amount is the amount which will provide a
guarantee period for the insured's entire life. If the face amount you choose
exceeds the minimum, the guarantee period will be shorter.
INITIAL GUARANTEE PERIOD. We determine the initial guarantee period for a
Contract based on the initial payment and face amount. The guarantee period is
the period of time we guarantee that the Contract will remain in force
regardless of investment experience unless loan debt exceeds certain contract
values. We base the guarantee period on the guaranteed maximum cost of insurance
rates in the Contract, the deferred contract load 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.
RIGHT TO CANCEL ("FREE LOOK" PERIOD)
You may cancel your Contract during the "free look" period by returning it for a
refund. The "free look" period ends 10 days after you receive the Contract. To
cancel the Contract during the "free look" period, you must mail or deliver the
Contract to our Service Center or to the Financial Consultant who sold it. We
will refund your payment without interest. We may require you to wait six months
before applying for another contract.
MAKING ADDITIONAL PAYMENTS
You may make additional payments under a periodic plan. You may also make
unplanned payments.
PAYMENTS UNDER A PERIODIC PLAN. Planned periodic payments are subject to our
rules. 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 WILL NOT NECESSARILY PREVENT A CONTRACT FROM LAPSING.
After the end of the guarantee period, we may cancel a Contract if the net cash
surrender value on a processing date is negative. (See "Guarantee Period".)
You may elect the amount, duration and frequency of the planned 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.
You 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 we will underwrite on a
simplified or medical basis. Once we approve the plan, any planned payment may
be made without any additional evidence of insurability unless it increases the
face amount.
You may elect a periodic plan later than the time of 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 we will
require additional evidence of insurability. Currently, we won't allow the later
election of a
24
<PAGE>
plan where additional evidence of insurability would put the insured in a
different underwriting class with different guaranteed or higher current cost of
insurance rates.
You may elect to make planned payments beginning on the first Contract
anniversary on an annual, semiannual or quarterly basis. You may also make
payments on a monthly basis if you authorize us to deduct the payment from your
checking account (pre-authorized checking) or to withdraw the payment from your
CMA account. We reserve the right to change the procedures or discontinue your
ability to make planned payments. If you have the CMA Insurance Service, planned
payments under any of the above frequencies may be withdrawn automatically from
your CMA account and transferred to your Contract. The withdrawals will continue
under the plan specified until we are notified otherwise. For planned payments
not made under pre-authorized checking or withdrawn from a CMA account, we will
send you reminder notices.
You may change the frequency, duration and the amount of planned payments by
sending a written request to our Service Center. You may request one change in
the amount, one change in the duration and one change in the frequency of
payments each contract year. We may require satisfactory evidence of
insurability before you increase the duration or the amount of planned payments.
PAYMENTS NOT UNDER A PERIODIC PLAN. After the end of the "free look" period, you
may make additional payments not under a periodic payment plan provided the
attained age of the insured is not over 80. You may make additional payments up
to four times each contract year. You need to use an Application for Additional
Payment. The minimum payment is $200. You may make these unplanned payments
whether or not you're making planned payments.
We may require satisfactory evidence of insurability before we accept a payment:
1. if the payment immediately increases the net amount at risk under the
Contract, or
2. if you are already making planned payments, or
3. if the guarantee period at the time of the payment is one year or less.
Currently, we won't 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, we will invest that
payment in the division investing in the Money Reserve Portfolio on the business
day after we receive it. Once we complete the underwriting and accept the
payment, we will credit the payment to your Contract and allocate the payment
either according to your instructions or, if you don't give us instructions,
proportionately to the investment base in the Contract's investment divisions.
EFFECT OF ADDITIONAL PAYMENTS. Currently, we will generally accept any
additional payment not requiring evidence of insurability the day we receive it.
On the date we accept an additional payment we will:
- increase the Contract's investment base by the amount of the payment;
- increase the deferred contract load (see "Deferred Contract Load");
- reflect the payment in the calculation of the variable insurance amount
(see "Variable Insurance Amount"); and
25
<PAGE>
- increase the fixed base by the amount of the payment less the deferred
contract load applicable to the payment.
If an additional payment requires evidence of insurability, once we complete
underwriting and accept the payment, we will reflect the additional payment in
contract values as described above.
As of the processing date on or next following the day we receive and accept an
additional payment, we will increase either the guarantee period or face amount
or both. If the guarantee period before acceptance of an additional payment is
less than for life, we will first use payments to extend the guarantee period.
Any amount greater than that required to extend the guarantee period to the
insured's lifetime or any subsequent additional payment will be used to increase
the Contract's face amount.
The Examples below show the effect of additional payments.
If the guarantee period is for the insured's entire life at the
time we receive and accept an additional payment, as of the
processing date on or next following the date of the additional
payment, we 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 we receive and accept it. If you make
additional payments of different amounts 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 you make additional payments of the same amounts
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>
26
<PAGE>
Unless you specify otherwise, if there is any loan debt, we will apply any
unplanned payment made first as a loan repayment with any excess applied as an
additional payment. (See "Loans".)
For joint insureds, see "Joint Insureds".
CHANGING THE FACE AMOUNT
After the first contract year, if the insured is in a standard or non-smoker
underwriting class, you may request a change in the face amount of your Contract
without making an additional payment or taking a partial withdrawal, subject to
the rules and conditions discussed below. We won't permit a change in face
amount if the insured's attained age 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".)
Changing your Contract's face amount may have tax consequences and you should
consult a tax adviser before doing so.
The effective date of the change will be the next processing date following the
receipt and acceptance of a written request, provided our Service Center
receives it at least seven days before the processing date.
INCREASING THE FACE AMOUNT. To increase the face amount of a Contract, we 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 that provides the minimum guarantee period for which we
would issue a Contract at the time of the request based on the insured's
attained age. Currently, we won't 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 you decrease the face amount of a Contract, we
increase the guarantee period. The maximum decrease in face amount is that
decrease which would provide the minimum face amount for which we would issue a
Contract at the time of the request based on the insured's attained age, sex and
underwriting class. We 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. (See "Tax Considerations".)
DETERMINING THE NEW GUARANTEE PERIOD. As of the effective date of any change in
face amount, we use the fixed base on that date and, based on the attained age
and sex of the insured and the new face amount, we redetermine the guarantee
period. We use a 4% interest assumption and the guaranteed maximum cost of
insurance rates in these calculations.
27
<PAGE>
The Examples below show the effect of changing the face amount.
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
-------- ----------- -----------
<C> <C> <S>
5 $10,000 16.00 years
<CAPTION>
EXAMPLE 2
- -------------------------------------------
DECREASE IN
CONTRACT INCREASE IN GUARANTEE
YEAR FACE AMOUNT PERIOD
- -------- ----------- -----------
<C> <C> <S>
5 $20,000 19.75 years
<CAPTION>
EXAMPLE 3
- -------------------------------------------
DECREASE IN
CONTRACT INCREASE IN GUARANTEE
YEAR FACE AMOUNT PERIOD
- -------- ----------- -----------
<C> <C> <S>
8 $10,000 15.50 years
</TABLE>
For joint insureds, see "Joint Insureds".
INVESTMENT BASE
A Contract's investment base is the sum of the amounts invested in each of the
investment divisions. On the contract date, the investment base equals the
initial payment. We adjust the investment base daily to reflect the investment
performance of the investment divisions you've selected. (See "Net Rate of
Return for an Investment Division".) The investment performance reflects the
deduction of Separate Account charges. (See "Charges to the Separate Account".)
Deductions for deferred contract load, mortality cost and net loan cost, and
partial withdrawals and loans, decrease the investment base. (See "Charges
Deducted from the Investment Base", "Partial Withdrawals", and "Loans".) Loan
repayments and additional payments increase it. You may elect from which
investment divisions loans and partial withdrawals are taken and to which
investment divisions repayments and additional payments are added. If you don't
make an election, we will allocate increases and decreases proportionately to
your investment base in the investment divisions selected. (For special
rules on allocation of additional payments which require evidence of
insurability, see "Payments Not Under a Periodic Plan".)
INITIAL INVESTMENT ALLOCATION AND PREALLOCATION. During the first 14 days
following the in force date, the initial payment will remain in the division
investing in the Money Reserve Portfolio. Afterward, we'll reallocate the
investment base to the investment divisions you've selected. You may invest in
up to five of the investment divisions.
28
<PAGE>
CHANGING THE ALLOCATION. Currently, you may change investment allocations as
often as you wish. However, we may limit the number of changes permitted but not
to less than five each contract year. We'll notify you if we impose any
limitations. To change your investment base allocation, call or write our
Service Center. (See "Some Administrative Procedures".) A dollar cost averaging
feature is also available. (See "Dollar Cost Averaging".)
ZERO TRUST ALLOCATIONS. If your investment base is in any of the Zero Trusts,
we'll notify you 30 days before that Trust matures. You need to tell us in
writing at least seven days before the maturity date how to reinvest the
proceeds. If you don't tell us, we'll move the proceeds to the investment
division investing in the Money Reserve Portfolio. When we receive a request for
allocation, units of a specific Zero Trust may no longer be available. Should
this occur, we'll attempt to notify you immediately so that you can change the
request.
ALLOCATION TO THE DIVISION INVESTING IN THE NATURAL RESOURCES PORTFOLIO. We
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
We deduct the charges described below to cover costs and expenses, services
provided, and risks assumed under the Contracts. The amount of a charge may not
necessarily correspond to the costs associated with providing the services or
benefits indicated by the designation of the charge or associated with the
particular Contract. For example, the deferred contract load may not fully cover
all of the sales and distribution expenses we actually incur. We may use
proceeds from other charges, including the mortality and expense risk charge and
cost of insurance, in part to cover such expenses.
We deduct certain charges pro-rata from the investment base on processing dates.
(See "Charges Deducted from the Investment Base".) We also deduct certain
charges daily from the investment results of each investment division in the
Separate Account in determining its net rate of return. (See "Charges to the
Separate Account".) The portfolios in the Funds also pay monthly advisory fees
and other expenses. (See "Charges to Fund Assets".)
CHARGES DEDUCTED FROM THE INVESTMENT BASE
DEFERRED CONTRACT LOAD. We assess a deferred contract load charge of 9% of each
payment. This charge consists of a sales load, a charge for federal taxes and a
premium tax charge.
The sales load is equal to 5% of each payment. We may reduce the sales load if
cumulative payments are sufficiently high to reach certain breakpoints (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.
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, we advance the amount of the deferred
contract load to the investment divisions as part of your investment base. We
then take back these funds in equal installments of .90% on the ten contract
anniversaries following the date we receive and accept a payment. However, in
determining the amount payable on surrender of the Contract, we subtract from
the investment base the balance of the deferred contract load chargeable to any
payment made that we have not yet deducted.
For joint insureds, see "Joint Insureds".
29
<PAGE>
MORTALITY COST (COST OF INSURANCE). We deduct a mortality cost from the
investment base on each processing date after the contract date. This charge
compensates us for the cost of providing life insurance coverage on the insured.
It is based on the insured's underwriting class, sex and attained age, and the
Contract's net amount at risk.
To determine the mortality cost, we multiply the current cost of insurance rate
by the Contract's net amount at risk. The net amount at risk is the difference,
as of the previous processing date, between the death benefit and the cash
surrender value adjusted for interest at 4%.
Current cost of insurance rates may be equal to or less than the guaranteed cost
of insurance rates. 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 non-smokers than for smokers. 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 we perform less underwriting and therefore
we incur more risk.
We guarantee that the current cost of insurance rates will never exceed the
maximum guaranteed rates shown in the Contract. The maximum guaranteed rates for
Contracts (except those issued on a substandard basis) do not exceed the rates
based on the 1980 Commissioners Standard Ordinary Mortality Table (1980 CSO
Table). We 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, we deduct a pro-rata
portion of the mortality cost in determining the amount payable on surrender of
the Contract if the date of surrender is not a processing date.
For joint insureds, see "Joint Insureds".
MAXIMUM MORTALITY COST. During the guarantee period, we limit the deduction for
mortality cost if investment results are unfavorable. We do this by substituting
the fixed base for the cash surrender value in determining the net amount at
risk and multiplying this amount by the guaranteed cost of insurance rate. We
will deduct this alternate amount from the investment base when it is less than
the mortality cost that would normally have been deducted.
NET LOAN COST. The net loan cost is explained under "Loans".
CHARGES TO THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE. Each day we deduct mortality and expense risk
charge from each division of the Separate Account. The total amount of this
charge is .90% annually at the beginning of the year. Of this amount, .75% is
for
- the risk we assume that insureds as a group will live for a shorter time
than actuarial tables predict. As a result, we would be paying more in
death benefits than planned; and
30
<PAGE>
- the risk we assume that it will cost us more to issue and administer the
Contracts than expected.
The remaining amount, .15%, is for
- the risks we assume for 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 we may have to
limit the deduction for mortality cost (see "Maximum Mortality Cost"
above).
If the mortality and expense risk charge is not enough to cover the actual
expenses of mortality, maintenance, and administration, we will bear the loss.
If the charge exceeds the actual expenses, we will add the excess to our profit
and we may use it to finance distribution expenses. We cannot increase the total
charge.
CHARGES TO DIVISIONS INVESTING IN THE ZERO TRUSTS. We assess a daily trust
charge against the assets of each division investing in the Zero Trusts. This
charge reimburses us 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. We may increase it, but it won't exceed
.50% annually at the beginning of the year. The charge is based on cost with no
expected profit.
TAX CHARGES. We have the right under the Contract to impose a charge against
Separate Account assets for its taxes, if any. We don't currently impose such a
charge, but we may in the future. Also, see above for a discussion of tax
charges included in deferred contract load.
CHARGES TO FUND ASSETS
CHARGES TO SERIES FUND ASSETS. The Series Fund incurs operating expenses and
pays a monthly advisory fee to MLAM. This fee equals an annual rate of:
- .50% of the first $250 million of the aggregate average daily net assets
of the Series Fund;
- .45% of the next $50 million of such assets;
- .40% of the next $100 million of such assets;
- .35% of the next $400 million of such assets; and
- .30% of such assets over $800 million.
We have 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. We 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.
31
<PAGE>
CHARGES TO VARIABLE SERIES FUNDS ASSETS. The Variable Series Funds incurs
operating expenses and pays a monthly advisory fee to MLAM at an annual rate of
the average daily net assets of each portfolio. The fee for each is shown as
follows:
<TABLE>
<CAPTION>
ADVISORY
PORTFOLIO NAME FEE
- -------------- --------
<S> <C>
Basic Value Focus Fund............................ .60%
Global Bond Focus Fund............................ .60%
Utilities and Telecommunications Focus Fund....... .60%
Index 500 Fund.................................... .30%
International Equity Focus Fund................... .75%
Developing Capital Markets Focus Fund............. 1.00%
Small Cap Value Focus Fund........................ .75%
Balanced Capital Focus Fund....................... .60%
Global Growth Focus Fund.......................... .75%
</TABLE>
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. These reimbursement agreements provide that any such expenses
greater than 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 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.
CHARGES TO ALLIANCE FUND ASSETS. The Alliance Fund incurs operating expenses and
pays a monthly advisory fee to Alliance at an annual rate of 1.00% of each of
the Alliance Premier Growth Portfolio's and the Alliance Quasar Portfolio's
average daily net assets.
CHARGES TO MFS TRUST ASSETS. The MFS Trust incurs operating expenses and pays a
monthly advisory fee to MFS at an annual rate of .75% of the average daily net
assets of each of the MFS Emerging Growth Series and MFS Research Series.
CHARGES TO HOTCHKIS AND WILEY TRUST ASSETS. The Hotchkis and Wiley Trust incurs
operating expenses and pays a monthly advisory fee to Hotchkis and Wiley at an
annual rate of .75% of the average daily net assets of the Hotchkis and Wiley
International VIP Portfolio.
Hotchkis and Wiley has agreed to make reimbursements so that the regular annual
operating expenses of the Fund do not exceed 1.35% of its average net assets.
This agreement will not be terminated without notice to investors.
CHARGES TO MERCURY V.I. FUNDS ASSETS. The Mercury V.I. Funds incurs operating
expenses and pays a monthly advisory fee to Mercury Asset Management
International Ltd. at an annual rate of .65% of the average daily net assets of
the Mercury V.I. U.S. Large Cap Fund.
Mercury Asset Management International Ltd. has agreed to limit the operating
expenses paid by the Mercury V.I. U.S. Large Cap Fund for one year to 1.25% of
its average daily net assets.
32
<PAGE>
GUARANTEE PERIOD
Subject to certain conditions, we guarantee that regardless of investment
performance the Contract will stay in effect for the guarantee period. 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. We won't cancel the Contract during
the guarantee period unless loan debt exceeds certain contract values. We hold a
reserve in our general account to support this guarantee.
WHEN THE GUARANTEE PERIOD IS LESS THAN FOR LIFE. After the end of the guarantee
period, we will cancel the Contract if the cash surrender value on a processing
date is negative. We will consider this negative cash surrender value an overdue
charge. (See "Charges Deducted from the Investment Base".)
We will notify you before canceling the Contract. You will then have 61 days to
pay these overdue charges. If we haven't received the required payment by the
end of this grace period, we'll cancel the Contract.
If we cancel a Contract, it may be reinstated while the insured is still living
if:
- You request the reinstatement within three years after the end of the
grace period;
- We receive satisfactory evidence of insurability; and
- You pay the reinstatement payment. The reinstatement payment is the
minimum payment for which we 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.
The effective date of a reinstated contract is the processing date on or next
following the date the reinstatement application is approved. Thus, if the
insured dies before the effective date of the reinstated Contract, we won't pay
a death benefit.
For joint insureds, see "Joint Insureds".
NET CASH SURRENDER VALUE
Because investment results vary daily, we don't guarantee any minimum net cash
surrender value. On a processing date the net cash surrender value equals:
- the Contract's investment base on that date;
- minus the balance of the 9% deferred contract load which has not yet been
deducted from the investment base (see "Deferred Contract Loading").
If the date of calculation is not a processing date, we also subtract a pro-rata
portion of the mortality cost which would otherwise be deducted on the next
processing date. If the date of calculation is not a contract anniversary and
there is loan debt, we also subtract a pro-rata portion of the net loan cost,
which would otherwise be deducted on the next contract anniversary.
CANCELING TO RECEIVE NET CASH SURRENDER VALUE. A contract owner may cancel the
Contract at any time while the insured is living and receive the net cash
surrender value in a lump sum or under an income plan. You must
33
<PAGE>
make the request in writing in a form satisfactory to us. All rights to death
benefits will end on the date you send the written request to us. Canceling the
Contract may have tax consequences. (See "Tax Considerations".)
For joint insureds, see "Joint Insureds".
PARTIAL WITHDRAWALS
Beginning in the second Contract year, you may make partial withdrawals up to
the withdrawal value by submitting a request in a form satisfactory to us. The
withdrawal value is determined by adding all prior withdrawals to the current
net cash surrender value, multiplying the result by 80%, and subtracting from
the result all prior withdrawals:
The amount of any partial withdrawal may not exceed the loan value less any loan
debt.
The effective date of the withdrawal is the valuation date our Service Center
receives a withdrawal request. You may make one partial withdrawal each contract
year.
The minimum amount for each partial withdrawal is $500. A partial withdrawal may
not be repaid.
EFFECT ON INVESTMENT BASE, FIXED BASE, AND VARIABLE INSURANCE AMOUNT. As of the
effective date of the withdrawal, we reduce the investment base and fixed base
by the amount of the partial withdrawal. Unless you tell us differently, we
allocate this reduction proportionately to the investment base in your
investment divisions. In addition, we reduce the variable insurance amount by
the amount of the withdrawal multiplied by the net single premium factor. This
means the reduction in the variable insurance amount will always be greater than
the amount of the withdrawal.
EFFECT ON GUARANTEED BENEFITS. As of the processing date on or next following a
partial withdrawal, we reduce the Contract's face amount. We do this 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, we will reduce the
face amount to that minimum, and then 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 we 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.
34
<PAGE>
The examples below show the effect of partial withdrawals. The
amount of the reduction in the face amount will depend on the
amount of the partial withdrawal, the guarantee period at the
time of the withdrawal and the contract year in which the
withdrawal is made. If made at the same time to equivalent
Contracts, a larger withdrawal would result in a greater
reduction in the face amount than a smaller withdrawal. The same
partial withdrawal made at the same time from Contracts with the
same face amounts but with different guarantee periods would
result in a greater reduction in the face amount for the
Contract with the longer guarantee period. A partial withdrawal
made in a later contract year would result in a smaller decrease
in the face amount than if the same amount was withdrawn in an
earlier year.
Examples 1 and 2 show the effect on the face amount of partial
withdrawals for $500 and $1,000 taken at the beginning of
contract year three. Example 3 shows the effect on the face
amount of a $500 partial withdrawal taken at the beginning of
contract year eight. All three examples assume that the
guarantee period was for the lifetime of the insured before the
partial withdrawal and assume no other contract transactions
have been made.
MALE ISSUE AGE: 55
INITIAL PAYMENT: $30,000 FACE AMOUNT: $58,438
<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>
Partial withdrawals are treated as distributions under the Contract for federal
tax purposes and may be subject to a 10% penalty tax. (See "Tax
Considerations".)
LOANS
You may use the Contract as collateral to borrow funds from us. The minimum loan
is $200 unless you are borrowing to make a payment on another of our variable
life insurance contracts. In that case, you may borrow the exact amount required
even if it's less than $200. You may repay all or part of the loan debt any time
during the insured's lifetime. Each repayment must be for at least $200 or the
amount of the loan debt, if less.
Loans taken from modified endowment contracts are generally treated as
distributions under the Contract for federal tax purposes and may be subject to
a 10% penalty tax. (See "Tax Considerations".)
When you take a loan, we transfer from your investment base the amount of the
loan and hold it as collateral in our general account. When a loan repayment is
made, we transfer the amount of the repayment from the general account to the
investment divisions. You may select the divisions you want to borrow from, and
the
35
<PAGE>
divisions you want to repay (including interest payments). If you don't specify,
we'll take the borrowed amounts proportionately from and make repayments
proportionately to your investment base as then allocated to the investment
divisions.
If you have the CMA Insurance Service, you can transfer loans and loan
repayments to and from your CMA account.
EFFECT ON DEATH BENEFIT AND CASH SURRENDER VALUE. Whether or not you repay a
loan, 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 loan
debt. The maximum amount that can be borrowed at any time is the difference
between the loan value and the loan debt. The cash surrender value is the net
cash surrender value plus any loan debt.
INTEREST. While loan debt remains unpaid, we charge interest of 5% annually,
subject to state regulation. Interest accrues each day and payments are due at
the end of each contract year. IF YOU DON'T PAY THE INTEREST WHEN DUE, IT IS
TREATED AS A NEW LOAN AND WE ADD IT TO THE UNPAID LOAN AMOUNT. Loan debt is
considered part of cash surrender value used to calculate gain. SINCE THIS IS
GENERALLY A MODIFIED ENDOWMENT CONTRACT, THE UNPAID INTEREST ADDED TO THE UNPAID
LOAN AMOUNT IS TREATED AS A DISTRIBUTION AND TAXED ACCORDINGLY.
The amount held in our general account as collateral for a loan earns interest
at a minimum rate of 4% annually.
NET LOAN COST. In addition to the loan interest we charge, on each contract
anniversary we reduce 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 add 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. We take the net loan cost 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 loan debt exceeds the larger of the cash
surrender value and the fixed base on a processing date, INCLUDING A PROCESSING
DATE DURING THE GUARANTEE PERIOD, we will cancel the Contract 61 days after we
mail a notice of intent to terminate the Contract to you unless we have received
at least the minimum repayment amount specified in the notice.
DEATH BENEFIT PROCEEDS
We will pay the death benefit proceeds to the beneficiary when we receive all
information needed to process the payment, including due proof of the insured's
death. When we first receive reliable notification of the insured's death by a
representative of the owner or the insured, we may transfer the investment base
to the division investing in the Money Reserve Portfolio, pending payment of
death benefit proceeds.
36
<PAGE>
AMOUNT OF DEATH BENEFIT PROCEEDS. The death benefit proceeds are the larger of
the face amount and the variable insurance amount, less any loan debt.
The values used in calculating the death benefit proceeds are as of the date of
death. If the insured dies during the grace period, the death benefit proceeds
equal the death benefit proceeds in effect immediately before the grace period
minus any overdue charges. (See "When the Guarantee Period is Less Than for
Life".)
VARIABLE INSURANCE AMOUNT. We determine the variable insurance amount daily by
multiplying the cash surrender value by the net single premium factor.
NET SINGLE PREMIUM FACTOR
We use the net single premium factor to determine the
amount of death benefit purchased by $1.00 of cash
surrender value. It is based on the insured's sex,
attained age, and underwriting class 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. Your contract contains a table of net single
premium factors as of each anniversary.
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 "Joint Insureds".
PAYMENT OF DEATH BENEFIT PROCEEDS
We will generally pay the death benefit proceeds to the beneficiary within seven
days after our Service Center receives all the information needed to process the
payment. We may delay payment, however, if we are contesting the Contract or
under the circumstances described in "Using the Contract" and "Other Contract
Provisions".
We 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
below.
37
<PAGE>
For joint insureds, see "Joint Insureds".
DOLLAR COST AVERAGING
WHAT IS IT? The Contract offers an optional transfer feature called Dollar Cost
Averaging ("DCA"). This feature allows you to make automatic monthly transfers
from the Money Reserve investment division to up to four other investment
divisions depending on your current allocation of investment base. The DCA
program will terminate and no transfers will be made if transfers under DCA
would cause you to be invested in more than 5 divisions.
The DCA feature is intended to reduce the effect of short-term price
fluctuations on investment cost. Since the same dollar amount is transferred to
selected divisions each month, more units of a division are purchased when their
value is low and fewer units are purchased when their value is high. Therefore,
over the long haul a DCA program may let you buy units at a lower average cost.
However, a DCA program does not assure a profit or protect against a loss in
declining markets.
Once available, you can choose the DCA feature any time. Once you start using
it, you must continue it for at least three months. You can select a duration in
months for the DCA program. If you do not choose a duration we will make
reallocations at monthly intervals until the balance in the Money Reserve
investment division is zero. While the DCA program is in place any amount in the
Money Reserve investment division is available for transfer.
MINIMUM AMOUNTS. To elect DCA, you need to have a minimum amount in the Money
Reserve investment division. We determine the amount required by multiplying the
specified length of your DCA program in months by your specified monthly
transfer amount. If you do not select a duration we determine the minimum amount
required by multiplying your monthly transfer amount by 3 months. You must
specify at least $100 for transfer each month. Allocations may be made in
specific whole dollar amounts or in percentage increments of 1%. We reserve the
right to change these minimums.
Should the amount in your Money Reserve investment division be less than the
selected monthly transfer amount, we'll notify you that you need to put more
money in the Money Reserve investment division to continue DCA. If you do not
specify a duration or the specified duration has not been reached and the amount
in the Money Reserve investment division is less than the monthly transfer
amount, the entire amount will be transferred. Transfers are made based on your
selected DCA percentage allocations or are made pro-rata based on your specified
DCA transfer amounts.
WHEN DO WE MAKE DCA TRANSFERS? We'll make the first DCA transfer on the first
monthiversary date after the later of the date our Service Center receives your
election or fourteen days after the in force date. We'll make additional DCA
transfers on each subsequent monthiversary. We don't charge for DCA transfers.
These transfers are in addition to reallocations permitted under the Contract.
RIGHT TO EXCHANGE CONTRACT
At any time you may exchange your Contract for a contract with benefits that do
not vary with the investment results of a separate account. Your request must be
in writing. Also, you must return the original Contract to our 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 also have the same
issue age, issue date, face amount, cash surrender value,
38
<PAGE>
benefit riders and underwriting class as the original Contract on the date of
the exchange. Any loan debt will be carried over to the new contract.
We won't require evidence of insurability to exchange for a new "fixed"
contract.
For joint insureds, see "Joint Insureds".
INCOME PLANS
We offer several income plans to provide for payment of the death benefit
proceeds to the beneficiary. Payments under these plans do not depend on the
investment results of a separate account. You may choose one or more income
plans at any time during the insured's lifetime. If you haven't selected a plan
when the insured dies, the beneficiary has one year to apply the death benefit
proceeds either paid or payable to one or more of the plans. In addition, if you
cancel the Contract for its net cash surrender value, you may also choose one or
more income plans for payment of the proceeds.
We need to approve any plan where any income payment would be less than $100.
For joint insureds, see "Joint Insureds".
Income plans include:
- ANNUITY PLAN. An amount can be used to purchase a single premium immediate
annuity.
- INTEREST PAYMENT. You can leave amounts with us 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. We make payments in equal installments for up
to a fixed number of years.
- INCOME FOR LIFE. We make payments 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. We make payments 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. We make payments 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.
UNDER THE INCOME FOR LIFE AND JOINT LIFE INCOME OPTIONS, OUR CONTRACTUAL
OBLIGATION MAY BE SATISFIED WITH ONLY ONE PAYMENT IF AFTERWARD THE NAMED PERSON
OR PERSONS DIES. IN ADDITION, ONCE IN EFFECT, SOME OF THE INCOME PLANS MAY NOT
PROVIDE ANY SURRENDER RIGHTS.
REPORTS TO CONTRACT OWNERS
After the end of each processing period, we will send you a statement showing
the allocation of your investment base, death benefit, cash surrender value, any
loan debt and, if there has been a change, new face amount
39
<PAGE>
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 your state.
You will receive confirmation of all financial transactions. These confirmations
will show the price per unit of each of your investment divisions, the number of
units you have 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".)
We will also send you 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.
MORE ABOUT THE CONTRACT
USING THE CONTRACT
OWNERSHIP. The contract owner is the insured, unless someone other than the
insured has been named as the owner in the application. The contract owner has
all rights and options described in the Contract.
If you are not the insured, you may want to name a contingent owner. If you die
before the insured, the contingent owner will own your interest in the contract
and have all your rights. If you don't name a contingent owner and you die
before the insured, your estate will then own your interest in the Contract.
If there is more than one contract owner, we will treat the owners as joint
tenants with rights of survivorship unless the ownership designation provides
otherwise. We may require completion of additional forms. The owners must
exercise their rights and options jointly, except that any one of the owners may
reallocate the Contract's investment base by phone if the owner provides the
personal identification number as well as the Contract number. One contract
owner must be designated, in writing, to receive all notices, correspondence and
tax reporting to which contract owners are entitled under the Contract.
CHANGING THE OWNER. During the insured's lifetime, you have the right to
transfer ownership of the Contract. However, if you've named an irrevocable
beneficiary, that person will need to consent. The new owner will have all
rights and options described in the Contract. The change will be effective as of
the date the notice is signed, but will not affect any payment we've made or
action we've taken before our Service Center receives the notice of the change.
Changing the owner may have tax consequences.
ASSIGNING THE CONTRACT AS COLLATERAL. You may assign the Contract as collateral
security for a loan or other obligation. This does not change the ownership.
However, your rights and any beneficiary's rights are subject to the terms of
the assignment. You must give satisfactory written notice at our Service Center
in order to make or release an assignment. We are not responsible for the
validity of any assignment.
A collateral assignment will generally be treated as a taxable distribution and
may be subject to a 10% penalty tax.
NAMING BENEFICIARIES. We will pay the primary beneficiary the death benefit
proceeds of the Contract on the insured's death. If the primary beneficiary has
died before the insured, we will pay the contingent beneficiary. If no
contingent beneficiary is living, we will pay the insured's estate.
You may name more than one person as primary or contingent beneficiaries. We
will pay proceeds in equal shares to the surviving beneficiaries unless the
beneficiary designation provides differently.
40
<PAGE>
You have the right to change beneficiaries during the insured's lifetime.
However, if your primary beneficiary designation is irrevocable, the primary
beneficiary must consent when certain contract rights and options are exercised.
If you change the beneficiary, the change will take effect as of the date the
notice is signed, but will not affect any payment we've made or action we've
taken before our Service Center receives the notice of the change.
CHANGING THE INSURED. Subject to certain requirements, you may request a change
of insured once each contract year. We must receive a written request signed by
you and the proposed new insured. Neither the original nor the new insured can
have attained ages as of the effective date of the change of less than 21 or
more than 75. The new insured must have been alive at the time the Contract was
issued. We 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 loan debt must first be repaid and the
Contract cannot be under a collateral assignment. If we approve the request for
change, 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.
We will change the Contract 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;
- we will deduct a charge for changing the insured from the Contract's
investment base on the effective date. This charge will also then 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;
- the variable insurance amount will reflect the change of insured; and
- the Contract's issue date will be the effective date of the change.
We may also change the face amount or guarantee period 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 we
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.
Changing the insured will generally be treated as a taxable transaction.
MATURITY PROCEEDS. The maturity date is the contract anniversary nearest the
insured's 100th birthday. On the maturity date, we will pay you the net cash
surrender value, provided the insured is still living at that time and the
Contract is in effect at that time.
WHEN WE MAKE PAYMENTS. We generally pay death benefit proceeds, partial
withdrawals, loans and net cash surrender value within seven days after our
Service Center receives all the information needed to process the
41
<PAGE>
payment. However, we may delay payment if it isn't practical for us 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 "Joint Insureds".
SOME ADMINISTRATIVE PROCEDURES
We reserve the right to modify or eliminate the procedures described below. For
administrative and tax purposes, we may from time to time require that specific
forms be completed for certain transactions. These include reallocations, loans
and partial withdrawals.
PERSONAL IDENTIFICATION NUMBER. We will send you a four-digit personal
identification number ("PIN") shortly after the Contract is placed in force and
before the end of the "free look" period. You must give this number when you
call the Service Center to get information about the Contract, to make a loan
(if an authorization is on file), or to make other requests.
REALLOCATING THE INVESTMENT BASE. Contract owners can reallocate their
investment base either in writing or by telephone. If you request the
reallocation by telephone, you must give your PIN as well as your Contract
number. We will give a confirmation number over the telephone and then follow up
in writing.
REQUESTING A LOAN. You may request a loan in writing or, if all required
authorization forms are on file, by telephone. Once our Service Center receives
the authorization, you can call the Service Center, give your Contract number,
name and PIN, and tell us the loan amount and the divisions from which the loan
should be taken.
Upon request, we will wire the funds to the account at the financial institution
named on your authorization. We will generally wire the funds within two working
days of receipt of the request. If you have the CMA Insurance Service, funds may
be transferred directly to that CMA account.
REQUESTING PARTIAL WITHDRAWALS. Beginning in the second contract year, you may
request partial withdrawals in writing or by telephone if all required telephone
authorization forms are on file. Once our Service Center receives the
authorization, you can call the Service Center, give your Contract number, name
and PIN, and tell us how much to withdraw and from which investment divisions.
Upon request, we will wire the funds to the account at the financial institution
named on your authorization. We will usually wire the funds within two working
days of receipt of the request. If you have 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) will generally be processed the same
day. A request received at or after 4 p.m. (ET) will be processed the following
business day. We reserve the right to change procedures or discontinue the
ability to make telephone transfers.
42
<PAGE>
We 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. We will not be liable for following
telephone instructions that we reasonably believe to be genuine.
OTHER CONTRACT PROVISIONS
IN CASE OF ERRORS IN THE APPLICATION. If an age or sex stated in the application
is wrong, it could mean that the face amount or any other Contract benefit is
wrong. We will pay the correct benefits for the true age or sex.
INCONTESTABILITY. We will rely on statements made in the applications. We can
contest the validity of a Contract if any material misstatements are made in the
application. We 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, we can contest any amount of death benefit
attributable to an additional payment if any material misstatements are made in
the application required with the additional payment.
We won't 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. We won't contest
any change in face amount after the change has been in effect during the
insured's lifetime for two years from the date of the change. Nor will we
contest any amount of death benefit attributable to an additional payment 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, we 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 attributable to
the increase in the face amount 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 attributable to
the additional payment will be limited to the amount of the payment.
The death benefit will be reduced by any loan 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. To maintain this qualification to the maximum
extent of the law, we reserve 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 we may interpret it. Further, we reserve the right to make
changes in the Contract or its riders or to make distributions from the Contract
to the extent necessary to continue to qualify the Contract as life insurance.
Any changes will apply uniformly to all Contracts that are affected and you will
be given advance written notice of such changes.
For joint insureds, see "Joint Insureds".
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce the deferred load,
cost of insurance rates and the minimum payment, and may modify underwriting
classifications and requirements.
43
<PAGE>
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 us 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. We take 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.
We make any reductions according to rules in effect when an application for a
Contract or additional payment is approved. We may change these rules from time
to time. However, reductions in charges will not discriminate unfairly against
any person.
UNISEX LEGAL CONSIDERATIONS
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
ROLE OF MERRILL LYNCH, PIERCE, FENNER & SMITH, INCORPORATED. MLPF&S is the
principal underwriter of the Contract. It was organized in 1958 under the laws
of the state of Delaware and is registered as a broker-dealer under the
Securities Exchange Act of 1934. It is a member of the National Association of
Securities Dealers, Inc. ("NASD"). The principal business address of MLPF&S is
World Financial Center, 250 Vesey Street, New York, New York 10080. MLPF&S also
acts as principal underwriter of other variable life insurance and variable
annuity contracts we issue, as well as variable life insurance and variable
annuity contracts issued by Merrill Lynch Life Insurance Company, an affiliate
of ours. 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.
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 Financial Consultants.
ROLE OF MERRILL LYNCH LIFE AGENCY, INC. Contracts are sold by registered
representatives of MLPF&S who are also licensed through Merrill Lynch Life
Agency, Inc. as insurance agents for us. We have entered into a distribution
agreement with MLPF&S and companion sales agreements with Merrill Lynch Life
Agency, Inc. through which 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 amounts paid under the distribution and sales agreements for the
Separate Account for the years ended December 31, 1999, December 31, 1998, and
December 31, 1997 were $283,222, $366,803, and $400,483, respectively.
44
<PAGE>
COMMISSIONS. The maximum commission we will pay to Financial Consultants ("FC")
is 3.1% of each premium. Additional annual compensation of no more than 0.13% of
the investment base may also be paid to your FC. FCs may elect to receive a
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 0.51% of the investment base. Commissions may
be paid in the form of non-cash compensation, subject to applicable regulatory
requirements.
The maximum commission we will pay to the applicable insurance agency to be used
to pay commissions to FCs is 3.5% of each premium.
For sales of Contracts to Merrill Lynch employees FCs receive reduced
commissions.
TAX CONSIDERATIONS
INTRODUCTION. The following summary discussion is based on our understanding of
current Federal income tax law as the Internal Revenue Service (IRS) now
interprets it. We can't guarantee that the law or the IRS's interpretation won't
change. It does not purport to be complete or to cover all tax situations. This
discussion is not intended as tax advice. Counsel or other tax advisors should
be consulted for further information.
We haven't considered any applicable federal gift, estate or any state or other
tax laws. Of course, your own tax status or that of your beneficiary can affect
the tax consequences of ownership or receipt of distributions.
TAX STATUS OF THE CONTRACT. In order to qualify as a life insurance contract for
Federal income tax purposes and to receive the tax treatment normally accorded
life insurance contracts under Federal tax law, a Contract must satisfy certain
requirements which are set forth in the IRC. Although guidance as to how these
requirements are to be applied is limited, we believe that a Contract should
satisfy the applicable requirements. However, there is less guidance with
respect to Policies issued on a substandard basis (I.E., a premium class
involving a higher than standard mortality risk) and Contracts insuring two
lives, and there is more uncertainty as to those Contracts. If it is
subsequently determined that Contract does not satisfy the applicable
requirements, we may take appropriate steps to bring the Contract into
compliance with such requirements and reserve the right to restrict Contract
transactions in order to do so.
DIVERSIFICATION REQUIREMENTS. IRC section 817(h) and the regulations under it
provide that separate account investments underlying a Contract must be
"adequately diversified" for it to qualify as a life insurance contract under
IRC section 7702. The Separate Account intends to comply with the
diversification requirements of the regulations under section 817(h). This will
affect how we make investments.
In certain circumstances, owners of variable life Contracts have been considered
for Federal income tax purposes to be the owners of the assets of the Separate
Account supporting their Contracts due to their ability to exercise investment
control over those assets. Where this is the case, the contract owners have been
currently taxed on income and gains attributable to the Separate Account assets.
There is little guidance in this area, and some features of the Contract such as
the flexibility of an owner to allocate premium payments and reallocate
investment base have not been explicitly addressed in published IRS rulings.
While we believe that the Contracts do not give owners investment control over
variable account assets, we reserve the right to modify the Contracts as
necessary to prevent an owner from being treated as the owner of the variable
account assets supporting the Contract.
The following discussion assumes that the Contract will qualify as a life
insurance contract for Federal income tax purposes.
45
<PAGE>
TAX TREATMENT OF CONTRACT BENEFITS IN GENERAL. We believe that the death benefit
under a Contract should be excludible from the gross income of the beneficiary.
Federal, state and local transfer, and other tax consequences of ownership or
receipt of Contract proceeds depend on the circumstances of each owner or
beneficiary. A tax advisor should be consulted on these consequences.
Generally, the Owner will not be deemed to be in constructive receipt of the
cash surrender value until there is a distribution. When distributions from a
Contract occur, or when loans are taken out from or secured by (e.g., by
assignment), a Contract, the tax consequences depend on whether the Contract is
classified as a "Modified Endowment Contract." If a loan is outstanding when a
Contract is cancelled or lapses or when benefits are paid under such a Contract
at maturity, the amount of the indebtedness will be added to any amount
distributed and taxed accordingly.
"MODIFIED ENDOWMENT CONTRACT". Under the IRC, certain life insurance contracts
are classified as "Modified Endowment Contracts," with less favorable tax
treatment than other life insurance contracts. In most cases the Contract will
be classified as a Modified Endowment Contract. Any Contract issued in exchange
for a Modified Endowment Contract will be a Modified Endowment Contract. A
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. The payment of additional premiums at the time of or after the
exchange to a Contract or certain changes to the Contract after it is issued
may, however, cause the Contract to become a Modified Endowment Contract. A
prospective owner should consult a tax advisor before effecting an exchange.
DISTRIBUTIONS FROM MODIFIED ENDOWMENT CONTRACTS. Policies classified as Modified
Endowment Contracts are subject to the following tax rules:
(1) All pre-death distributions, (including partial withdrawals, loans,
collateral assignments, capitalized interest or complete surrender) will be
treated as ordinary income on an income first basis up to the amount of any
income in the Contract (the cash surrender value less the owner's investment
in the Contract) immediately before the distribution.
(2) A 10 percent additional income tax is imposed on the amount included in
income except where the distribution (including loans, capitalized interest,
assignments, partial withdrawals or complete surrender) is made when the
owner has attained age 59 1/2 or becomes disabled, or where the distribution
is part of a series of substantially equal periodic payments for the life
(or 1ife expectancy) of the owner or the joint lives (or joint life
expectancies) of the owner and the owner's beneficiary.
DISTRIBUTIONS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT
CONTRACTS. Distributions from a Contract that is not a Modified Endowment
Contact are generally treated first as a recovery of an owner's investment in
the Contract and, only after the recovery of all investment in the Contract, as
taxable income. However, certain distributions which must be made in order to
enable the Contract to continue to qualify as a life insurance contract for
Federal income tax purposes, if Contract benefits are reduced during the first
15 Contract Years, may be treated in whole or in part as ordinary income subject
to tax.
Loans from or secured by a Contract that is not a Modified Endowment Contract
are generally not treated as distributions. Finally, neither distributions from
nor loans from or secured by a Contract that is not a Modified Endowment
Contract are subject to the 10 percent additional tax.
INVESTMENT IN THE CONTRACT. Your investment in the Contract is generally your
aggregate premiums. When a distribution is taken from the Contract, your
investment in the Contract is generally reduced by the amount of the
distribution that is tax-free.
46
<PAGE>
LOANS. In general, interest on a loan from a Contract will not be deductible.
Before taking out a Contract loan, an owner should consult a tax advisor as to
the tax consequences.
MULTIPLE POLICIES. All Modified Endowment Contracts that we (or our affiliates)
issue to the same owner during any calendar year are treated as one Modified
Endowment Contract for purposes of determining the amount includible in the
owner's income when a taxable distribution occurs.
TRANSFERS. The transfer of the Contract or designation of a beneficiary may have
federal, state, and/or local transfer and inheritance tax consequences,
including the imposition of gift, estate, and generation-skipping transfer
taxes. For example, the transfer of the Contract to, or the designation as a
beneficiary of, or the payment of proceeds to, a person who is assigned to a
generation which is two or more generations below the generation assignment of
the owner may have generation skipping transfer tax consequences under federal
tax law. The individual situation of each owner or beneficiary will determine
the extent, if any, to which federal, state, and local transfer and inheritance
taxes may be imposed and how ownership or receipt of Contract proceeds will be
treated for purposes of federal, state and local estate, inheritance, generation
skipping and other taxes.
CONTRACTS USED FOR BUSINESS PURPOSES. The Contract can be used in various
arrangements, including nonqualified deferred compensation or salary continuance
plans, split dollar insurance plans, executive bonus plans, tax exempt and
nonexempt welfare benefit plans, retiree medical benefit plans and others. The
tax consequences of such arrangements may vary depending on the particular facts
and circumstances. If you are purchasing the Contract for any arrangement the
value of which depends in part on its tax consequences, you should consult a
qualified tax adviser. In recent years, moreover, Congress has adopted new rules
relating to life insurance owned by businesses. Any business contemplating the
purchase of a new Contract or a change in an existing Contract should consult a
tax adviser.
POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax treatment of the
Contract could change by legislation or otherwise. It is possible that any
legislative change could be retroactive (that is, effective prior to the date of
the change). Consult a tax advisor with respect to legislative developments and
their effect on the Contract.
WE DON'T 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 YOU SHOULD
CONSULT A COMPETENT TAX ADVISER. ALTHOUGH THIS TAX DISCUSSION IS BASED ON OUR
UNDERSTANDING OF FEDERAL INCOME TAX LAWS AS THEY ARE CURRENTLY INTERPRETED, WE
CAN'T GUARANTEE THAT THOSE LAWS OR INTERPRETATIONS WILL REMAIN UNCHANGED.
ML LIFE INSURANCE COMPANY OF NEW YORK'S INCOME TAXES
Insurance companies are generally required to capitalize and amortize certain
contract 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 us in early contract years. We make a charge, included
in the Contract's deferred contract load, to compensate us for the anticipated
higher corporate income taxes that result from the sale of a Contract. (See
"Deferred Contract Load".)
We currently make no other charges to the Separate Account for any federal,
state or local taxes that we incur that may be attributable to the Separate
Account or to the Contracts. We reserve the right, however, to make a charge for
any tax or other economic burden resulting from the application of tax laws that
we determine to be properly attributable to the Separate Account or to the
Contracts.
47
<PAGE>
REINSURANCE
We intend to reinsure some of the risks assumed under the Contracts.
ILLUSTRATIONS
ILLUSTRATIONS OF DEATH BENEFITS, INVESTMENT BASE, CASH SURRENDER VALUES AND
ACCUMULATED PAYMENTS
The tables below 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 50 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 51 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 52 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 53 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 54 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 0.58%. This
charge assumes that the investment base is allocated equally among all the
investment divisions and is based on the 1999 expenses (including monthly
advisory fees and operating expenses) for the Funds and the current trust
charge. This charge also reflects expenses reimbursements made in 1999 to
certain portfolios by the investment adviser to the respective portfolio. These
reimbursements amounted to .09%, .42%, .24%, and 1.58% of the average daily net
assets of the Natural Resources Portfolio, the Developing Capital Markets Focus
Fund, the Alliance Quasar Portfolio, and the Mercury V.I. U.S. Large Cap Fund,
respectively (See "Charges to Fund Assets"). Values illustrated would be lower
if these reimbursements had not been taken into account. 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.
48
<PAGE>
Taking into account the .90% asset charge in the Separate Account and the .58%
charge described above, the gross annual rates of investment return of 0%, 6%
and 12% correspond to net annual rates of -1.47%, 4.47%, and 10.42%,
respectively. The gross returns are before any deductions and should not be
compared to rates which reflect deduction of charges.
The hypothetical returns shown on the tables are without any income tax charges
that may be attributable to the Separate Account in the future (although they do
reflect the charge for federal income taxes included in the deferred contract
loading, see "Deferred Contract Load"). 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.
We 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.
49
<PAGE>
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 $ 94,245 $ 100,129
2...................................... 0 11,025 93,421 95,021 107,131
3...................................... 0 11,576 93,421 95,752 114,451
4...................................... 0 12,155 93,421 96,441 122,116
5...................................... 0 12,763 93,421 97,089 130,153
6...................................... 0 13,401 93,421 97,699 138,591
7...................................... 0 14,071 93,421 98,274 147,460
8...................................... 0 14,775 93,421 98,815 156,795
9...................................... 0 15,513 93,421 99,325 166,629
10..................................... 0 16,289 93,421 99,805 177,000
15..................................... 0 20,789 93,421 102,092 238,947
20 (age 25)............................ 0 26,533 93,421 104,432 322,567
30 (age 35)............................ 0 43,219 93,421 109,269 587,599
60 (age 65)............................ 0 186,792 93,421 125,183 3,557,469
</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.............................................. $9,685 $10,278 $ 10,869 $8,875 $ 9,468 $ 10,059
2.............................................. 9,379 10,571 11,826 8,659 9,851 11,106
3.............................................. 9,083 10,884 12,886 8,453 10,254 12,256
4.............................................. 8,796 11,214 14,056 8,256 10,674 13,516
5.............................................. 8,514 11,559 15,342 8,064 11,109 14,892
6.............................................. 8,239 11,923 16,762 7,879 11,563 16,402
7.............................................. 7,965 12,299 18,319 7,695 12,029 18,049
8.............................................. 7,689 12,685 20,022 7,509 12,505 19,842
9.............................................. 7,404 13,074 21,872 7,314 12,984 21,782
10............................................. 7,111 13,466 23,882 7,111 13,466 23,882
15............................................. 5,966 15,975 37,388 5,966 15,975 37,388
20 (age 25).................................... 4,828 18,974 58,607 4,828 18,974 58,607
30 (age 35).................................... 2,932 27,510 147,936 2,932 27,510 147,936
60 (age 65).................................... 0 75,508 2,145,807 0 75,508 2,145,807
</TABLE>
- --------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST RATES AND RATES OF
INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND CASH 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 US 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.
50
<PAGE>
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 $ 90,458 $ 96,103
2.......................................... 0 27,563 89,668 91,202 102,822
3.......................................... 0 28,941 89,668 91,904 109,848
4.......................................... 0 30,388 89,668 92,565 117,208
5.......................................... 0 31,907 89,668 93,187 124,926
6.......................................... 0 33,502 89,668 93,774 133,032
7.......................................... 0 35,178 89,668 94,327 141,554
8.......................................... 0 36,936 89,668 94,847 150,523
9.......................................... 0 38,783 89,668 95,338 159,970
10......................................... 0 40,722 89,668 95,800 169,932
15......................................... 0 51,973 89,668 97,995 229,404
20 (age 60)................................ 0 66,332 89,668 100,241 309,714
30 (age 70)................................ 0 108,049 89,668 104,892 564,659
</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............................................... $24,244 $25,726 $ 27,206 $22,219 $23,701 $ 25,181
2............................................... 23,488 26,472 29,615 21,688 24,672 27,815
3............................................... 22,730 27,236 32,246 21,155 25,661 30,671
4............................................... 21,972 28,021 35,121 20,622 26,671 33,771
5............................................... 21,212 28,826 38,261 20,087 27,701 37,136
6............................................... 20,452 29,653 41,690 19,552 28,753 40,790
7............................................... 19,691 30,503 45,437 19,016 29,828 44,762
8............................................... 18,927 31,374 49,527 18,477 30,924 49,077
9............................................... 18,162 32,269 53,993 17,937 32,044 53,768
10.............................................. 17,395 33,189 58,871 17,395 33,189 58,871
15.............................................. 14,583 39,366 92,155 14,583 39,366 92,155
20 (age 60)..................................... 11,551 46,472 143,585 11,551 46,472 143,585
30 (age 70)..................................... 4,404 63,694 342,880 4,404 63,694 342,880
</TABLE>
- --------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST RATES AND RATES OF
INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND CASH 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 US 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.
51
<PAGE>
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 $58,954 $ 62,638
2......................................... 0 33,075 58,438 59,441 67,026
3......................................... 0 34,729 58,438 59,901 71,617
4......................................... 0 36,465 58,438 60,335 76,428
5......................................... 0 38,288 58,438 60,744 81,474
6......................................... 0 40,203 58,438 61,130 86,775
7......................................... 0 42,213 58,438 61,494 92,348
8......................................... 0 44,324 58,438 61,836 98,213
9......................................... 0 46,540 58,438 62,158 104,392
10 (age 65)............................... 0 48,867 58,438 62,461 110,906
15........................................ 0 62,368 58,438 63,895 149,810
20........................................ 0 79,599 58,438 65,363 202,404
30........................................ 0 129,658 58,438 68,406 369,744
</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............................................... $28,965 $30,740 $ 32,509 $26,535 $28,310 $ 30,079
2............................................... 27,921 31,487 35,229 25,761 29,327 33,069
3............................................... 26,872 32,241 38,178 24,982 30,351 36,288
4............................................... 25,817 33,004 41,374 24,197 31,384 39,754
5............................................... 24,755 33,774 44,839 23,405 32,424 43,489
6............................................... 23,685 34,551 48,592 22,605 33,471 47,512
7............................................... 22,605 35,333 52,654 21,795 34,523 51,844
8............................................... 21,513 36,116 57,044 20,973 35,576 56,504
9............................................... 20,406 36,897 61,784 20,136 36,627 61,514
10 (age 65)..................................... 19,283 37,675 66,897 19,283 37,675 66,897
15.............................................. 14,725 42,956 100,714 14,725 42,956 100,714
20.............................................. 9,575 48,276 149,490 9,575 48,276 149,490
30.............................................. 0 57,957 313,268 0 57,957 313,268
</TABLE>
- --------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST RATES AND RATES OF
INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND CASH 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 US 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.
52
<PAGE>
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 53,271 56,604
2......................................... 0 38,588 52,803 53,712 60,577
3......................................... 0 40,517 52,803 54,131 64,736
4......................................... 0 42,543 52,803 54,526 69,096
5......................................... 0 44,670 52,803 54,899 73,670
6......................................... 0 46,903 52,803 55,251 78,476
7......................................... 0 49,249 52,803 55,582 83,528
8......................................... 0 51,711 52,803 55,894 88,846
9......................................... 0 54,296 52,803 56,187 94,448
10 (age 75)............................... 0 57,011 52,803 56,462 100,353
15........................................ 0 72,762 52,803 57,761 135,620
20........................................ 0 92,865 52,803 59,090 183,321
30........................................ 0 151,268 52,803 61,843 335,096
</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............................................... $33,639 $35,706 $ 37,763 $30,804 $32,871 34,928
2............................................... 32,267 36,408 40,738 29,747 33,888 38,218
3............................................... 30,885 37,104 43,941 28,680 34,899 41,736
4............................................... 29,494 37,796 47,390 27,604 35,906 45,500
5............................................... 28,094 38,482 51,102 26,519 36,907 49,527
6............................................... 26,682 39,161 55,092 25,422 37,901 53,832
7............................................... 25,255 39,827 59,376 24,310 38,882 58,431
8............................................... 23,811 40,476 63,967 23,181 39,846 63,337
9............................................... 22,344 41,102 68,876 22,029 40,787 68,561
10 (age 75)..................................... 20,852 41,701 74,118 20,852 41,701 74,118
15.............................................. 14,611 46,014 108,040 14,611 46,014 108,040
20.............................................. 7,888 50,064 155,320 7,888 50,064 155,320
30.............................................. 0 57,629 312,260 0 57,629 312,260
</TABLE>
- --------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST RATES AND RATES OF
INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND CASH 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 US 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.
53
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE CONTRACT
JOINT INSUREDS: FEMALE ISSUE AGE 65/MALE ISSUE AGE 65
$35,000 INITIAL PAYMENT FOR STANDARD-SIMPLIFIED UNDERWRITING CLASS
FACE AMOUNT: $67,012 GUARANTEE PERIOD: FOR LIFE
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT (2)
PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL INVESTMENT RETURN OF
INTEREST AT 5% AS --------------------------------
CONTRACT YEAR PAYMENTS (1) OF END OF YEAR 0% 6% 12%
- ------------- ------------ ----------------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1......................................... $35,000 $ 36,750 $67,012 $67,672 $ 71,977
2......................................... 0 38,588 67,012 68,287 77,138
3......................................... 0 40,517 67,012 68,861 82,516
4......................................... 0 42,543 67,012 69,396 88,131
5......................................... 0 44,670 67,012 69,895 94,004
6......................................... 0 46,903 67,012 70,360 100,158
7......................................... 0 49,249 67,012 70,794 106,615
8......................................... 0 51,711 67,012 71,199 113,399
9......................................... 0 54,296 67,012 71,576 120,537
10 (age 75)............................... 0 57,011 67,012 71,927 128,053
15........................................ 0 72,762 67,012 73,577 172,922
20........................................ 0 92,865 67,012 75,268 233,623
30........................................ 0 151,268 67,012 78,772 426,855
</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............................................... $34,086 $36,167 $ 38,247 $30,621 $32,702 $ 34,782
2............................................... 33,156 37,355 41,798 30,076 34,275 38,718
3............................................... 32,209 38,563 45,677 29,514 35,868 42,982
4............................................... 31,239 39,788 49,906 28,929 37,478 47,596
5............................................... 30,247 41,025 54,513 28,322 39,100 52,588
6............................................... 29,226 42,273 59,523 27,686 40,733 57,983
7............................................... 28,175 43,525 64,963 27,020 42,370 63,808
8............................................... 27,087 44,774 70,856 26,317 44,004 70,086
9............................................... 25,954 46,012 77,223 25,569 45,627 76,838
10 (age 75)..................................... 24,771 47,230 84,085 24,771 47,230 84,085
15.............................................. 19,859 54,908 129,045 19,859 54,908 129,045
20.............................................. 13,308 61,837 191,933 13,308 61,837 191,933
30.............................................. 0 73,292 397,159 0 73,292 397,159
</TABLE>
- --------
(1) All payments are illustrated as if made at the beginning of the contract
year.
(2) Assumes no loan has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING
THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST RATES AND RATES OF
INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND CASH 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 US 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.
54
<PAGE>
JOINT INSUREDS
The Contract can insure two lives. 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 applying to two insureds.
AVAILABILITY AND PAYMENTS (REFERENCE PAGE CAPSULE SUMMARY)
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.
We will not accept an initial payment that will provide a guarantee period of
less than the minimum guarantee period for which we would then issue a Contract
based on the age of the younger insured. This minimum will range from 10 to 40
years depending on the age of the younger insured.
WHO MAY BE COVERED (REFERENCE PAGE 22)
We will issue a Contract on the lives of two insureds provided the relationship
among the applicant and the insureds meets our insurable interest requirements
and provided neither insured is over age 80 and no more than one insured is
under age 20. We will determine the insureds' issue ages 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 our administrative rules in effect at the time of
underwriting.
Under both simplified and medical underwriting methods, Contracts may be issued
on joint insureds in a standard underwriting class only.
INITIAL PAYMENT (REFERENCE PAGE 23)
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.
We 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
we 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 NOT UNDER A PERIODIC PLAN (REFERENCE PAGE 25). You 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 24). You 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.
55
<PAGE>
EFFECT OF ADDITIONAL PAYMENTS (REFERENCE PAGE 25). If the guarantee period prior
to receipt and acceptance of an additional payment is less than for the life of
the younger 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 27). You may increase the face amount
of your Contract 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 27). You may decrease the face amount
of your Contract if either insured is living.
CHARGES DEDUCTED FROM THE INVESTMENT BASE
DEFERRED CONTRACT LOAD (REFERENCE PAGE 29). The deferred contract load equals
11.0% of each payment. This charge consists of a sales load, a charge for
federal income taxes measured by premiums and a premium tax charge.
The sales load, equal to 7% of each payment, compensates us 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 is equal to 2%
of each payment. (See "ML of New York's Income Taxes".) The premium tax charge,
equal to 2% of payments, compensates us for premium taxes that must be paid when
a payment is accepted.
We deduct an amount equal to 1.1% of each payment from the investment base on
each of the ten contract anniversaries following payment.
MORTALITY COST (COST OF INSURANCE) (REFERENCE PAGE 30). For Contracts issued on
joint insureds, current cost of insurance rates are equal to the guaranteed
maximum cost of insurance rates set forth in the Contract. Those rates are based
on the 1980 Commissioners Aggregate Mortality Table and do not distinguish
between insureds in a smoker underwriting class and insureds in a non-smoker
underwriting class. The cost of insurance rates are based on an aggregate class
which is made up of a blend of smokers and non-smokers.
GUARANTEE PERIOD
WHEN THE GUARANTEE PERIOD IS LESS THAN FOR LIFE (REFERENCE PAGE 33). If we
cancel a Contract, you may reinstate it only if neither insured has died between
the date the Contract was terminated and the effective date of the reinstatement
and you meet the other conditions listed.
NET CASH SURRENDER VALUE
CANCELING TO RECEIVE NET CASH SURRENDER VALUE (REFERENCE PAGE 33). You may
cancel your Contracts at any time while either insured is living.
DEATH BENEFIT PROCEEDS (REFERENCE PAGE 36)
We will pay the death benefit proceeds to the beneficiary when our Service
Center receives all information needed to process the payment, including due
proof of the last surviving insured's death. We must receive proof of death for
both insureds. There is no death benefit payable at the first death. When we are
first provided
56
<PAGE>
reliable notification of the last surviving insured's death by a representative
of the owner or the insured, we may transfer the investment base 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 our
Service Center since we may only pay a limited benefit or contest the Contract.
(See "Incontestability" and "Payment in Case of Suicide" on pages 31 and 32.)
NET SINGLE PREMIUM FACTOR (REFERENCE PAGE 37)
The net single premium factors are based on the insureds' sexes, attained ages,
and underwriting classes on the date of calculation.
PAYMENT OF DEATH BENEFIT PROCEEDS (REFERENCE PAGE 37)
If payment is delayed, we 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 EXCHANGE CONTRACT (REFERENCE PAGE 38)
You may exchange your 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 40). 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 40). We pay the primary beneficiary the
proceeds of this Contract upon the last surviving insured's death. If no
contingent beneficiary is living, we pay the last surviving insured's estate.
CHANGING THE INSURED (REFERENCE PAGE 41). Not available for joint insureds.
MATURITY PROCEEDS (REFERENCE PAGE 41). The maturity date is the contract
anniversary nearest the younger insured's 100th birthday. On the maturity date,
we will pay the net cash surrender value to you, provided either insured is
living.
OTHER CONTRACT PROVISIONS
INCONTESTABILITY (REFERENCE PAGE 43). We won't contest the validity of a
Contract after it has been in effect during the lifetimes of both insureds for
two years from the issue date. We won't contest any change in face amount
requested after the change has been in effect during the lifetimes of both
insureds for two years from the date of the change. Nor will we contest any
amount of death benefit attributable to an additional payment after the
57
<PAGE>
death benefit has been in effect during the lifetimes of both insureds for two
years from the date the payment has been received and accepted.
PAYMENT IN CASE OF SUICIDE (REFERENCE PAGE 43). If either insured commits
suicide within two years from the issue date, we 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, we will terminate the coverage attributable
to the increase and pay a limited benefit. 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 our consent;
- The new contract will be issued at our 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 we are unable
to determine which of the insureds was the last survivor on the basis of the
proofs of death provided, we will consider insured No. 1 as designated in the
application to be the last surviving insured.
58
<PAGE>
INCOME PLANS (REFERENCE PAGE 39)
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.
MORE ABOUT ML LIFE INSURANCE COMPANY OF NEW YORK
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers and their positions with us 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
Richard M. Drew.............. Director
Robert L. Israeloff.......... Director
Allen N. Jones............... Director
Robert A. King............... Director
Stanley C. Peterson.......... Director
Irving M. Pollack............ Director
Cynthia Kahn Sherman......... Director
Robert J. Boucher............ Senior Vice President, Variable Life Administration
</TABLE>
Each director is elected to serve until the next annual meeting of shareholders
or until his or her successor is elected and shall have qualified. Some
directors have held various executive positions with insurance company
subsidiaries of our indirect parent, Merrill Lynch & Co., Inc. The principal
positions of our 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.
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.
59
<PAGE>
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.
Mr. Butler joined ML of New York in April 1991. Since 1991, he has been Chairman
of Butler, Chapman & Co. LLC, an investment banking firm.
Mr. Drew joined ML of New York in March 2000. From 1994 until February 2000, he
was Director of Compliance for MLPF&S.
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.
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 has 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
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.
Ms. Sherman joined ML of New York in November 1993. She was a partner at the law
firm of Rogers & Wells from 1984 until September 1999.
Mr. Boucher joined ML of New York in May 1992.
None of our shares are owned by any of our officers or directors, as we are a
wholly owned subsidiary of MLIG. Our officers and directors, 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
We and MLIG are parties to a service agreement pursuant to which MLIG has agreed
to provide certain accounting, data processing, legal, actuarial, management,
advertising and other services to us, including services related to the Separate
Account and the Contracts. We reimburse expenses incurred by MLIG under this
service agreement on an allocated cost basis. Charges billed to us by MLIG under
the agreement were $4.2 million for the year ended December 31, 1999.
60
<PAGE>
STATE REGULATION
We are subject to the laws of the State of New York and to the regulations of
the New York Insurance Department (the "Insurance Department"). We file a
detailed financial statement in the prescribed form (the "Annual Statement")
with the Insurance Department each year covering our operations for the
preceding year and our financial condition as of the end of that year.
Regulation by the Insurance Department includes periodic examination to
determine contract liabilities and reserves so that the Insurance Department may
certify that these items are correct. Our books and accounts are subject to
review by the Insurance Department at all times. A full examination of our
operations is conducted periodically by the Insurance Department and under the
auspices of the National Association of Insurance Commissioners. We are also
subject to the insurance laws and regulations of all jurisdictions in which we
are licensed to do business.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. We and MLPF&S are engaged
in various kinds of routine litigation that, in our judgment, is not material to
our total assets or to MLPF&S.
EXPERTS
Our financial statements as of December 31, 1999 and 1998 and for each of the
three years in the period ended December 31, 1999 and of the Separate Account as
of December 31, 1999 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., our Chief Actuary and Chief Financial Officer, 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,
our Senior Vice President and General Counsel. Sutherland Asbill & Brennan LLP
of Washington, D.C. has provided advice on certain matters relating to federal
securities laws.
REGISTRATION STATEMENTS
Registration statements 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
Our financial statements, included herein, should be distinguished from the
financial statements of the Separate Account and should be considered only as
bearing upon our ability to meet our obligations under the Contracts.
61
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
ML Life Insurance Company of New York:
We have audited the accompanying statements of assets and
liabilities of each of the divisions of ML of New York
Variable Life Separate Account II, comprised of divisions
investing in the Money Reserve Portfolio, Intermediate
Government Bond Portfolio, Long-Term Corporate Bond
Portfolio, Capital Stock Portfolio, Growth Stock Portfolio,
Multiple Strategy Portfolio, High Yield Portfolio, Natural
Resources Portfolio, Global Strategy Portfolio, Balanced
Portfolio, Global Utility Focus Fund, International Equity
Focus Fund, Global Bond Focus Fund, Basic Value Focus Fund,
Developing Capital Markets Focus Fund, Special Value Focus
Fund, Index 500 Fund, Capital Focus Fund (commencement of
operations July 21, 1999), Global Growth Focus Fund
(commencement of operations July 21, 1999), International
VIP Portfolio (commencement of operations July 21, 1999),
Mercury V. I. US Large Cap (commencement of operations July
21, 1999), Quasar Portfolio (commencement of operations
July 21, 1999), Premier Growth Portfolio, MFS Emerging
Growth Series, MFS Research Series, AIM V.I. Value Fund, AIM
V.I. Capital Appreciation Fund, 1997 Trust (matured on
February 18, 1997), 1998 Trust (matured on February 17,
1998), 1999 Trust (matured on February 16, 1999), 2000
Trust, 2001 Trust, 2002 Trust, 2003 Trust, 2004 Trust, 2005
Trust, 2006 Trust, 2007 Trust, 2008 Trust, 2009 Trust, 2010
Trust, 2011 Trust, 2013 Trust, 2014 Trust, 2019 Trust
(commencement of operations July 21, 1999) (collectively,
the "Divisions"), as of December 31, 1999 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, 1999. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial position of the
Divisions as of December 31, 1999, the results of their
operations and the changes in their net assets for each of
the three years in the period then ended, in conformity with
generally accepted accounting principles.
February 14, 2000
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------
Intermediate Long-Term
Money Government Corporate Capital
Reserve Bond Bond Stock
(In thousands, except unit values) Portfolio Portfolio Portfolio Portfolio
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in Merrill Lynch Series Fund, Inc. (Note 1):
Money Reserve Portfolio, 6,993 shares
(Cost $6,993) $ 6,993 $ 0 $ 0 $ 0
Intermediate Government Bond Portfolio, 111 shares
(Cost $1,224) 0 1,156 0 0
Long-Term Corporate Bond Portfolio, 40 shares
(Cost $466) 0 0 435 0
Capital Stock Portfolio, 136 shares
(Cost $3,289) 0 0 0 4,014
---------------- ---------------- ---------------- ----------------
Total Assets 6,993 1,156 435 4,014
Liabilities
Due to (from) ML Life Insurance Company of New York 544 0 0 1
---------------- ---------------- ---------------- ----------------
Net Assets $ 6,449 $ 1,156 $ 435 $ 4,013
================ ================ ================ ================
Units Outstanding 206 25 8 37
================ ================ ================ ================
Unit Value $ 31.29 $ 46.52 $ 53.11 $ 109.89
================ ================ ================ ================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------
Growth Multiple High Natural
Stock Strategy Yield Resources
(In thousands, except unit values) Portfolio Portfolio Portfolio Portfolio
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in Merrill Lynch Series Fund, Inc. (Note 1):
Growth Stock Portfolio, 188 shares
(Cost $5,648) $ 7,152 $ 0 $ 0 $ 0
Multiple Strategy Portfolio, 194 shares
(Cost $3,208) 0 3,531 0 0
High Yield Portfolio, 132 shares
(Cost $1,134) 0 0 983 0
Natural Resources Portfolio, 16 shares
(Cost $133) 0 0 0 130
---------------- ---------------- ---------------- ----------------
Total Assets 7,152 3,531 983 130
Liabilities
Due to (from) ML Life Insurance Company of New York 1 1 0 0
---------------- ---------------- ---------------- ----------------
Net Assets $ 7,151 $ 3,530 $ 983 $ 130
================ ================ ================ ================
Units Outstanding 65 67 32 13
================ ================ ================ ================
Unit Value $ 109.87 $ 52.87 $ 30.87 $ 9.92
================ ================ ================ ================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------
Global International
Global Utility Equity
Strategy Balanced Focus Focus
(In thousands, except unit values) Portfolio Portfolio Fund Fund
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in Merrill Lynch Series Fund, Inc. (Note 1):
Global Strategy Portfolio, 328 shares
(Cost $5,102) $ 5,619 $ 0 $ 0 $ 0
Balanced Portfolio, 72 shares
(Cost $1,063) 0 1,065 0 0
Investments in Merrill Lynch Variable
Series Funds, Inc. (Note 1):
Global Utility Focus Fund, 13 shares
(Cost $184) 0 0 216 0
International Equity Focus Fund, 80 shares
(Cost $900) 0 0 0 1,115
---------------- ---------------- ---------------- ----------------
Total Assets 5,619 1,065 216 1,115
Liabilities
Due to (from) ML Life Insurance Company of New York 1 0 0 0
---------------- ---------------- ---------------- ----------------
Net Assets $ 5,618 $ 1,065 $ 216 $ 1,115
================ ================ ================ ================
Units Outstanding 171 34 10 75
================ ================ ================ ================
Unit Value $ 32.90 $ 31.71 $ 22.60 $ 14.87
================ ================ ================ ================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------
Global Basic Developing Special
Bond Value Capital Value
Focus Focus Markets Focus Focus
(In thousands, except unit values) Fund Fund Fund Fund
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable
Series Funds, Inc. (Note 1):
Global Bond Focus Fund, 10 shares
(Cost $96) $ 87 $ 0 $ 0 $ 0
Basic Value Focus Fund, 391 shares
(Cost $5,424) 0 5,313 0 0
Developing Capital Markets Focus Fund, 57 shares
(Cost $548) 0 0 593 0
Special Value Focus Fund, 36 shares
(Cost $734) 0 0 0 833
---------------- ---------------- ---------------- ----------------
Total Assets 87 5,313 593 833
Liabilities
Due to (from) ML Life Insurance Company of New York 0 1 0 0
---------------- ---------------- ---------------- ----------------
Net Assets $ 87 $ 5,312 $ 593 $ 833
================ ================ ================ ================
Units Outstanding 7 220 55 41
================ ================ ================ ================
Unit Value $ 12.55 $ 24.11 $ 10.80 $ 20.43
================ ================ ================ ================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------
Global
Index Capital Growth International
500 Focus Focus VIP
(In thousands, except unit values) Fund Fund Fund Portfolio
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable
Series Funds, Inc. (Note 1):
Index 500 Fund, 94 shares
(Cost $1,485) $ 1,761 $ 0 $ 0 $ 0
Capital Focus Fund, 0.4 shares
(Cost $3) 0 4 0 0
Global Growth Focus Fund, 7 shares
(Cost $95) 0 0 108 0
Investments in Hotchkis & Wiley Variable Trust (Note 1):
International VIP Portfolio, 9 shares 0 0 0 106
(Cost $102)
---------------- ---------------- ---------------- ----------------
Total Assets 1,761 4 108 106
Liabilities
Due to (from) ML Life Insurance Company of New York 0 0 0 0
---------------- ---------------- ---------------- ----------------
Net Assets $ 1,761 $ 4 $ 108 $ 106
================ ================ ================ ================
Units Outstanding 87 0 7 9
================ ================ ================ ================
Unit Value $ 20.27 $ 10.38 $ 14.79 $ 11.47
================ ================ ================ ================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------
Mercury MFS
V.I. U.S. Premier Emerging
Large Cap Quasar Growth Growth
(In thousands, except unit values) Fund Portfolio Portfolio Series
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in Mercury Asset Management
V. I. Funds, Inc. (Note 1):
Mercury V. I. U. S. Large Cap, 18 shares
(Cost $202) $ 218 $ 0 $ 0 $ 0
Investments in Alliance Variable Products
Series Fund, Inc (Note 1):
Quasar Portfolio, 8 shares
(Cost $86) 0 102 0 0
Premier Growth Portfolio, 142 shares
(Cost $3,889) 0 0 5,738 0
Investments in MFS Variable Insurance Trust (Note 1):
MFS Emerging Growth Series, 76 shares 0 0 0 2,888
(Cost $1,475)
---------------- ---------------- ---------------- ----------------
Total Assets 218 102 5,738 2,888
Liabilities
Due to (from) ML Life Insurance Company of New York 0 0 1 0
---------------- ---------------- ---------------- ----------------
Net Assets $ 218 $ 102 $ 5,737 $ 2,888
================ ================ ================ ================
Units Outstanding 18 10 225 104
================ ================ ================ ================
Unit Value $ 12.04 $ 10.26 $ 25.51 $ 27.67
================ ================ ================ ================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------
AIM
MFS AIM V.I. Capital
Research V.I. Value Appreciation 2000
(In thousands, except unit values) Series Fund Fund Trust
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in MFS Variable Insurance Trust (Note 1):
MFS Research Series, 111 shares
(Cost $1,939) $ 2,600 $ 0 $ 0 $ 0
Investments in AIM Variable Insurance Funds, Inc. (Note 1):
AIM V.I. Value Fund, 119 shares
(Cost $2,887) 0 3,992 0 0
AIM V.I. Capital Appreciation Fund, 44 shares
(Cost $1,051) 0 0 1,576 0
Investments in the Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A through L (Note 1):
2000 Trust, 107 trust units
(Cost $85) 0 0 0 107
---------------- ---------------- ---------------- ----------------
Total Assets 2,600 3,992 1,576 107
Liabilities
Due to (from) ML Life Insurance Company of New York 0 1 0 0
---------------- ---------------- ---------------- ----------------
Net Assets $ 2,600 $ 3,991 $ 1,576 $ 107
================ ================ ================ ================
Units Outstanding 144 188 82 5
================ ================ ================ ================
Unit Value $ 18.06 $ 21.24 $ 19.11 $ 21.23
================ ================ ================ ================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------
2001 2003 2004 2005
(In thousands, except unit values) Trust Trust Trust Trust
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in the Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A through L (Note 1):
2001 Trust, 820 trust units
(Cost $708) $ 770 $ 0 $ 0 $ 0
2003 Trust, 0.2 trust units
(Cost $0.02) 0 0 0 0
2004 Trust, 30 trust units
(Cost $18) 0 0 23 0
2005 Trust, 63 trust units
(Cost $40) 0 0 0 46
---------------- ---------------- ---------------- ----------------
Total Assets 770 0 23 46
Liabilities
Due to (from) ML Life Insurance Company of New York 0 0 0 0
---------------- ---------------- ---------------- ----------------
Net Assets $ 770 $ 0 $ 23 $ 46
================ ================ ================ ================
Units Outstanding 16 0 2 1
================ ================ ================ ================
Unit Value $ 46.93 $ 73.71 $ 14.44 $ 54.75
================ ================ ================ ================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-------------------------------------------------------------------
2007 2009 2010 2013
(In thousands, except unit values) Trust Trust Trust Trust
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Investments in the Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A through L (Note 1):
2007 Trust, 14 trust units
(Cost $7) $ 9 $ 0 $ 0 $ 0
2009 Trust, 0.3 trust units
(Cost $0.03) 0 0 0 0
2010 Trust, 52 trust units
(Cost $28) 0 0 27 0
2013 Trust, 22 trust units
(Cost $7) 0 0 0 9
---------------- ---------------- ---------------- ----------------
Total Assets 9 0 27 9
Liabilities
Due to (from) ML Life Insurance Company of New York 0 0 0 0
---------------- ---------------- ---------------- ----------------
Net Assets $ 9 $ 0 $ 27 $ 9
================ ================ ================ ================
Units Outstanding 0 0 1 1
================ ================ ================ ================
Unit Value $ 32.46 $ 27.16 $ 26.11 $ 16.07
================ ================ ================ ================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Divisions Investing In
-------------------
2014
(In thousands, except unit values) Trust
----------------
<S> <C>
Assets
Investments in the Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A through L (Note 1):
2014 Trust, 402 trust units
(Cost $169) $ 154
----------------
Total Assets 154
Liabilities
Due to (from) ML Life Insurance Company of New York 0
----------------
Net Assets $ 154
================
Units Outstanding 10
================
Unit Value $ 15.79
================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Intermediate Long-Term
Money Government Corporate Capital
Reserve Bond Bond Stock
(In thousands) Portfolio Portfolio Portfolio Portfolio
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 339 $ 77 $ 33 $ 628
Mortality and Expense Charges (Note 3) (59) (10) (4) (30)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 280 67 29 598
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 0 (2) (1) 48
Net Change in Unrealized Appreciation
(Depreciation) During the Year 0 (90) (43) 293
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 0 (92) (44) 341
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 280 (25) (15) 939
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 4,725 9 4 107
Policy Loading, Net (Note 3) 410 (7) (4) (12)
Contract Owner Deaths (85) 0 0 (6)
Contract Owner Terminations 0 0 (2) 0
Policy Loans, Net 61 (8) 0 (41)
Cost of Insurance (77) (12) (4) (35)
Policy Loan Processing Charges 0 0 (1) 0
Transfers Among Investment Divisions (5,013) 66 33 100
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 21 48 26 113
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 301 23 11 1,052
Net Assets Beginning of Period 6,148 1,133 424 2,961
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 6,449 $ 1,156 $ 435 $ 4,013
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Growth Multiple High Natural
Stock Strategy Yield Resources
(In thousands) Portfolio Portfolio Portfolio Portfolio
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 1,664 $ 570 $ 118 $ 5
Mortality and Expense Charges (Note 3) (52) (28) (10) (1)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 1,612 542 108 4
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 195 11 (43) (5)
Net Change in Unrealized Appreciation
(Depreciation) During the Year 126 12 (18) 29
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 321 23 (61) 24
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,933 565 47 28
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 244 143 39 13
Policy Loading, Net (Note 3) (14) (8) (6) 0
Contract Owner Deaths (9) 0 0 0
Contract Owner Terminations (48) (38) (18) 0
Policy Loans, Net (38) (17) (9) 0
Cost of Insurance (63) (43) (12) (1)
Policy Loan Processing Charges (1) 0 0 0
Transfers Among Investment Divisions 112 (84) (118) (55)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 183 (47) (124) (43)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 2,116 518 (77) (15)
Net Assets Beginning of Period 5,035 3,012 1,060 145
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 7,151 $ 3,530 $ 983 $ 130
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Global International
Global Utility Equity
Strategy Balanced Focus Focus
(In thousands) Portfolio Portfolio Fund Fund
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 640 $ 172 $ 28 $ 50
Mortality and Expense Charges (Note 3) (45) (9) (2) (9)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 595 163 26 41
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 40 8 25 (3)
Net Change in Unrealized Appreciation
(Depreciation) During the Year 302 (95) (27) 276
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 342 (87) (2) 273
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 937 76 24 314
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 264 37 3 6
Policy Loading, Net (Note 3) (11) (6) (1) (7)
Contract Owner Deaths (2) (2) 0 (1)
Contract Owner Terminations (53) (39) 0 0
Policy Loans, Net (17) (1) 0 (12)
Cost of Insurance (58) (11) (2) (12)
Policy Loan Processing Charges (1) 0 0 0
Transfers Among Investment Divisions (380) (7) (26) (161)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (258) (29) (26) (187)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 679 47 (2) 127
Net Assets Beginning of Period 4,939 1,018 218 988
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 5,618 $ 1,065 $ 216 $ 1,115
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Global Basic Developing Special
Bond Value Capital Value
Focus Focus Markets Focus Focus
(In thousands) Fund Fund Fund Fund
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 6 $ 1,112 $ 12 $ 70
Mortality and Expense Charges (Note 3) (1) (44) (4) (5)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 5 1,068 8 65
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) (1) 28 (22) (17)
Net Change in Unrealized Appreciation
(Depreciation) During the Year (13) (271) 243 137
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments (14) (243) 221 120
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (9) 825 229 185
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 2 216 24 45
Policy Loading, Net (Note 3) (1) (16) (1) 0
Contract Owner Deaths 0 (3) (1) 0
Contract Owner Terminations 0 (125) (6) (4)
Policy Loans, Net 0 (15) (2) 0
Cost of Insurance (1) (56) (5) (7)
Policy Loan Processing Charges 0 (1) 0 0
Transfers Among Investment Divisions 25 443 (27) 147
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 25 443 (18) 181
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 16 1,268 211 366
Net Assets Beginning of Period 71 4,044 382 467
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 87 $ 5,312 $ 593 $ 833
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Global
Index Capital Growth International
500 Focus Focus VIP
(In thousands) Fund Fund Fund Portfolio
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 48 $ 0 $ 1 $ 0
Mortality and Expense Charges (Note 3) (11) 0 0 0
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 37 0 1 0
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 21 0 0 0
Net Change in Unrealized Appreciation
(Depreciation) During the Year 175 0 14 4
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 196 0 14 4
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 233 0 15 4
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 108 0 0 1
Policy Loading, Net (Note 3) 2 0 0 0
Contract Owner Deaths 0 0 0 0
Contract Owner Terminations 0 0 0 0
Policy Loans, Net 25 0 0 0
Cost of Insurance (19) 0 0 0
Policy Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions 741 4 93 101
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 857 4 93 102
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 1,090 4 108 106
Net Assets Beginning of Period 671 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 1,761 $ 4 $ 108 $ 106
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Mercury MFS
V.I. U.S. Premier Emerging
Large Cap Quasar Growth Growth
(In thousands) Fund Portfolio Portfolio Series
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 1 $ 0 $ 58 $ 0
Mortality and Expense Charges (Note 3) 0 0 (39) (15)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 1 0 19 (15)
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 0 0 53 39
Net Change in Unrealized Appreciation
(Depreciation) During the Year 16 16 1,157 1,170
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 16 16 1,210 1,209
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 17 16 1,229 1,194
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 0 0 173 83
Policy Loading, Net (Note 3) 0 0 (14) (3)
Contract Owner Deaths 0 0 0 0
Contract Owner Terminations 0 0 (39) 0
Policy Loans, Net 0 0 (11) (19)
Cost of Insurance 0 0 (71) (23)
Policy Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions 201 86 1,693 359
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 201 86 1,731 397
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 218 102 2,960 1,591
Net Assets Beginning of Period 0 0 2,777 1,297
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 218 $ 102 $ 5,737 $ 2,888
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
AIM
MFS AIM V.I. Capital
Research V.I. Value Appreciation 1999
(In thousands) Series Fund Fund Trust
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 23 $ 66 $ 33 $ 0
Mortality and Expense Charges (Note 3) (18) (27) (9) 0
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 5 39 24 0
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 17 27 8 2
Net Change in Unrealized Appreciation
(Depreciation) During the Year 449 747 418 (2)
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 466 774 426 0
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 471 813 450 0
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 77 90 62 0
Policy Loading, Net (Note 3) (5) (12) 0 0
Contract Owner Deaths 0 0 0 0
Contract Owner Terminations (3) (21) 0 0
Policy Loans, Net (26) (2) (10) 0
Cost of Insurance (25) (42) (14) 0
Policy Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions 600 892 307 (9)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 618 905 345 (9)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 1,089 1,718 795 (9)
Net Assets Beginning of Period 1,511 2,273 781 9
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 2,600 $ 3,991 $ 1,576 $ 0
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
2000 2001 2003 2004
(In thousands) Trust Trust Trust Trust
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (Note 3) (1) (7) 0 0
Transaction Charges (Note 3) 0 (3) 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) (1) (10) 0 0
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 0 3 10 0
Net Change in Unrealized Appreciation
(Depreciation) During the Year 4 21 (10) (1)
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 4 24 0 (1)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 3 14 0 (1)
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 6 0 0 0
Policy Loading, Net (Note 3) 0 (7) 0 0
Contract Owner Deaths 0 0 0 0
Contract Owner Terminations 0 (15) 0 0
Policy Loans, Net 0 0 0 0
Cost of Insurance (1) (7) 0 (1)
Policy Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions 0 0 (37) 0
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 5 (29) (37) (1)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 8 (15) (37) (2)
Net Assets Beginning of Period 99 785 37 25
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 107 $ 770 $ 0 $ 23
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
2005 2007 2009 2010
(In thousands) Trust Trust Trust Trust
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (Note 3) 0 0 0 (1)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 0 0 0 (1)
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 0 0 0 4
Net Change in Unrealized Appreciation
(Depreciation) During the Year (2) (1) 0 (14)
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments (2) (1) 0 (10)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (2) (1) 0 (11)
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 13 0 0 0
Policy Loading, Net (Note 3) 1 0 0 (3)
Contract Owner Deaths 0 0 0 0
Contract Owner Terminations 0 0 0 (26)
Policy Loans, Net 0 0 0 0
Cost of Insurance 0 0 0 (1)
Policy Loan Processing Charges (1) 0 0 0
Transfers Among Investment Divisions 0 0 0 (86)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 13 0 0 (116)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 11 (1) 0 (127)
Net Assets Beginning of Period 35 10 0 154
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 46 $ 9 $ 0 $ 27
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------
2013 2014
(In thousands) Trust Trust
-------------------- --------------------
<S> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0
Mortality and Expense Charges (Note 3) 0 (2)
Transaction Charges (Note 3) 0 (1)
-------------------- --------------------
Net Investment Income (Loss) 0 (3)
-------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 0 4
Net Change in Unrealized Appreciation
(Depreciation) During the Year (1) (29)
-------------------- --------------------
Net Gain (Loss) on Investments (1) (25)
-------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (1) (28)
-------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 1 7
Policy Loading, Net (Note 3) 0 (4)
Contract Owner Deaths 0 0
Contract Owner Terminations 0 (26)
Policy Loans, Net 0 0
Cost of Insurance 0 (1)
Policy Loan Processing Charges 0 0
Transfers Among Investment Divisions 0 0
-------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 1 (24)
-------------------- --------------------
Total Increase (Decrease) in Net Assets 0 (52)
Net Assets Beginning of Period 9 206
-------------------- --------------------
Net Assets End of Period $ 9 $ 154
==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Intermediate Long-Term
Money Government Corporate Capital
Reserve Bond Bond Stock
(In thousands) Portfolio Portfolio Portfolio Portfolio
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 313 $ 52 $ 24 $ 310
Mortality and Expense Charges (Note 3) (50) (8) (3) (25)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 263 44 21 285
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 0 0 1 47
Net Change in Unrealized Appreciation
(Depreciation) During the Year 0 18 6 50
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 0 18 7 97
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 263 62 28 382
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 6,546 10 10 138
Policy Loading, Net (Note 3) 600 (6) (3) (8)
Contract Owner Deaths (45) 0 0 0
Contract Owner Terminations (35) 0 (4) (51)
Policy Loans, Net (125) 0 (8) (21)
Cost of Insurance (74) (9) (4) (31)
Policy Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions (6,273) 647 71 116
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 594 642 62 143
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 857 704 90 525
Net Assets Beginning of Period 5,291 429 334 2,436
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 6,148 $ 1,133 $ 424 $ 2,961
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Growth Multiple High Natural
Stock Strategy Yield Resources
(In thousands) Portfolio Portfolio Portfolio Portfolio
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 643 $ 373 $ 84 $ 3
Mortality and Expense Charges (Note 3) (36) (26) (8) (1)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 607 347 76 2
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 119 14 (4) 0
Net Change in Unrealized Appreciation
(Depreciation) During the Year 579 (84) (137) (26)
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 698 (70) (141) (26)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,305 277 (65) (24)
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 224 170 22 14
Policy Loading, Net (Note 3) (8) (5) (5) 0
Contract Owner Deaths (2) 0 0 0
Contract Owner Terminations (38) (22) (2) 0
Policy Loans, Net 3 1 0 0
Cost of Insurance (51) (43) (12) (2)
Policy Loan Processing Charges (1) (1) 0 0
Transfers Among Investment Divisions 262 (110) 367 0
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 389 (10) 370 12
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 1,694 267 305 (12)
Net Assets Beginning of Period 3,341 2,745 755 157
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 5,035 $ 3,012 $ 1,060 $ 145
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Global International
Global Utility Equity
Strategy Balanced Focus Focus
(In thousands) Portfolio Portfolio Fund Fund
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 757 $ 74 $ 11 $ 85
Mortality and Expense Charges (Note 3) (45) (8) (2) (10)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 712 66 9 75
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 14 5 2 (9)
Net Change in Unrealized Appreciation
(Depreciation) During the Year (325) 30 28 20
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments (311) 35 30 11
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 401 101 39 86
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 363 42 3 64
Policy Loading, Net (Note 3) (3) (2) (1) (3)
Contract Owner Deaths 0 0 0 0
Contract Owner Terminations (41) (5) (2) (26)
Policy Loans, Net (14) 0 0 0
Cost of Insurance (66) (11) (2) (13)
Policy Loan Processing Charges (1) 0 0 0
Transfers Among Investment Divisions (350) 129 33 (130)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (112) 153 31 (108)
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 289 254 70 (22)
Net Assets Beginning of Period 4,650 764 148 1,010
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 4,939 $ 1,018 $ 218 $ 988
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Global Basic Developing Special
Bond Value Capital Value
Focus Focus Markets Focus Focus
(In thousands) Fund Fund Fund Fund
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 4 $ 523 $ 7 $ 40
Mortality and Expense Charges (Note 3) 0 (36) (4) (2)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 4 487 3 38
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 0 39 (25) (12)
Net Change in Unrealized Appreciation
(Depreciation) During the Year 5 (247) (146) (49)
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 5 (208) (171) (61)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 9 279 (168) (23)
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 6 192 30 15
Policy Loading, Net (Note 3) 0 (11) (1) (1)
Contract Owner Deaths 0 0 0 0
Contract Owner Terminations 0 (49) (16) (3)
Policy Loans, Net 0 (1) 0 0
Cost of Insurance (1) (50) (7) (5)
Policy Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions (16) 323 (54) 310
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (11) 404 (48) 316
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (2) 683 (216) 293
Net Assets Beginning of Period 73 3,361 598 174
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 71 $ 4,044 $ 382 $ 467
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
MFS
Index Premier Emerging MFS
500 Growth Growth Research
(In thousands) Fund Portfolio Series Series
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 11 $ 2 $ 6 $ 20
Mortality and Expense Charges (Note 3) (4) (17) (7) (10)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 7 (15) (1) 10
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 3 137 38 9
Net Change in Unrealized Appreciation
(Depreciation) During the Year 97 616 219 200
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 100 753 257 209
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 107 738 256 219
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 23 72 44 53
Policy Loading, Net (Note 3) 0 (5) (2) (2)
Contract Owner Deaths 0 (2) (2) (2)
Contract Owner Terminations (9) 0 0 (1)
Policy Loans, Net (26) 0 (10) 0
Cost of Insurance (6) (32) (13) (14)
Policy Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions 401 1,006 606 624
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 383 1,039 623 658
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 490 1,777 879 877
Net Assets Beginning of Period 181 1,000 418 634
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 671 $ 2,777 $ 1,297 $ 1,511
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
AIM
AIM V.I. Capital
V.I. Value Appreciation 1998 1999
(In thousands) Fund Fund Trust Trust
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 104 $ 21 $ 0 $ 0
Mortality and Expense Charges (Note 3) (13) (5) 0 0
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 91 16 0 0
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 9 2 5 0
Net Change in Unrealized Appreciation
(Depreciation) During the Year 338 109 (5) 0
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 347 111 0 0
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 438 127 0 0
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 43 26 0 1
Policy Loading, Net (Note 3) (5) (2) 0 0
Contract Owner Deaths 0 (2) 0 0
Contract Owner Terminations 0 0 0 0
Policy Loans, Net (1) 0 0 0
Cost of Insurance (20) (10) 0 0
Policy Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions 917 308 (35) 0
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 934 320 (35) 1
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 1,372 447 (35) 1
Net Assets Beginning of Period 901 334 35 8
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 2,273 $ 781 $ 0 $ 9
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
2000 2001 2003 2004
(In thousands) Trust Trust Trust Trust
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (Note 3) (1) (5) 0 0
Transaction Charges (Note 3) 0 (2) 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) (1) (7) 0 0
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 0 0 4 0
Net Change in Unrealized Appreciation
(Depreciation) During the Year 6 42 0 2
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 6 42 4 2
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 5 35 4 2
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 6 0 3 0
Policy Loading, Net (Note 3) 0 2 0 0
Contract Owner Deaths 0 0 0 0
Contract Owner Terminations 0 0 0 0
Policy Loans, Net 0 0 0 0
Cost of Insurance (1) (5) 0 0
Policy Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions 0 753 (12) 0
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 5 750 (9) 0
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 10 785 (5) 2
Net Assets Beginning of Period 89 0 42 23
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 99 $ 785 $ 37 $ 25
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
2005 2007 2009 2010
(In thousands) Trust Trust Trust Trust
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (Note 3) 0 0 0 0
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 4 0 3 0
Net Change in Unrealized Appreciation
(Depreciation) During the Year 0 1 (2) 4
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 4 1 1 4
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 4 1 1 4
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 3 0 1 0
Policy Loading, Net (Note 3) 0 0 0 0
Contract Owner Deaths 0 0 0 0
Contract Owner Terminations 0 0 0 0
Policy Loans, Net 0 0 0 0
Cost of Insurance (1) 0 0 (1)
Policy Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions (11) 0 (12) 125
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (9) 0 (11) 124
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (5) 1 (10) 128
Net Assets Beginning of Period 40 9 10 26
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 35 $ 10 $ 0 $ 154
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------
2013 2014
(In thousands) Trust Trust
-------------------- --------------------
<S> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0
Mortality and Expense Charges (Note 3) 0 (2)
Transaction Charges (Note 3) 0 0
-------------------- --------------------
Net Investment Income (Loss) 0 (2)
-------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 0 38
Net Change in Unrealized Appreciation
(Depreciation) During the Year 1 (10)
-------------------- --------------------
Net Gain (Loss) on Investments 1 28
-------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1 26
-------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 2 14
Policy Loading, Net (Note 3) 0 3
Contract Owner Deaths 0 0
Contract Owner Terminations 0 0
Policy Loans, Net 0 0
Cost of Insurance 0 (1)
Policy Loan Processing Charges 0 0
Transfers Among Investment Divisions 0 5
-------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 2 21
-------------------- --------------------
Total Increase (Decrease) in Net Assets 3 47
Net Assets Beginning of Period 6 159
-------------------- --------------------
Net Assets End of Period $ 9 $ 206
==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Intermediate Long-Term
Money Government Corporate Capital
Reserve Bond Bond Stock
(In thousands) Portfolio Portfolio Portfolio Portfolio
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 279 $ 22 $ 14 $ 97
Mortality and Expense Charges (Note 3) (40) (3) (2) (19)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 239 19 12 78
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 0 (1) 1 25
Net Change in Unrealized Appreciation
(Depreciation) During the Year 0 8 3 283
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 0 7 4 308
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 239 26 16 386
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 8,134 11 13 163
Policy Loading, Net (Note 3) 790 (2) (1) (4)
Contract Owner Deaths 11 0 0 (19)
Contract Owner Terminations (50) (21) (13) (59)
Policy Loans, Net 0 (6) 0 11
Cost of Insurance (74) (4) (3) (25)
Policy Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions (6,834) 182 185 331
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 1,977 160 181 398
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 2,216 186 197 784
Net Assets Beginning of Period 3,075 243 137 1,652
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 5,291 $ 429 $ 334 $ 2,436
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Growth Multiple High Natural
Stock Strategy Yield Resources
(In thousands) Portfolio Portfolio Portfolio Portfolio
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 224 $ 162 $ 55 $ 1
Mortality and Expense Charges (Note 3) (25) (23) (5) (2)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 199 139 50 (1)
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 47 7 2 8
Net Change in Unrealized Appreciation
(Depreciation) During the Year 467 275 (2) (28)
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 514 282 0 (20)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 713 421 50 (21)
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 204 161 23 16
Policy Loading, Net (Note 3) (1) (8) (2) 0
Contract Owner Deaths 0 (7) 0 0
Contract Owner Terminations (16) (123) (14) (3)
Policy Loans, Net (34) (8) (36) (3)
Cost of Insurance (34) (41) (8) (2)
Policy Loan Processing Charges 0 (1) 0 0
Transfers Among Investment Divisions 605 41 329 (7)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 724 14 292 1
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 1,437 435 342 (20)
Net Assets Beginning of Period 1,904 2,310 413 177
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 3,341 $ 2,745 $ 755 $ 157
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Global International
Global Utility Equity
Strategy Balanced Focus Focus
(In thousands) Portfolio Portfolio Fund Fund
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 273 $ 75 $ 4 $ 17
Mortality and Expense Charges (Note 3) (41) (6) (1) (8)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 232 69 3 9
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 41 7 0 6
Net Change in Unrealized Appreciation
(Depreciation) During the Year 143 28 24 (116)
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 184 35 24 (110)
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 416 104 27 (101)
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 369 42 2 86
Policy Loading, Net (Note 3) (4) (5) (1) 2
Contract Owner Deaths (7) 0 0 0
Contract Owner Terminations (139) (62) 0 (1)
Policy Loans, Net (76) 0 0 1
Cost of Insurance (66) (9) (1) (13)
Policy Loan Processing Charges (1) 0 0 0
Transfers Among Investment Divisions 263 68 37 408
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 339 34 37 483
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 755 138 64 382
Net Assets Beginning of Period 3,895 626 84 628
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 4,650 $ 764 $ 148 $ 1,010
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
Global Basic Developing Special
Bond Value Capital Value
Focus Focus Markets Focus Focus
(In thousands) Fund Fund Fund Fund
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 4 $ 222 $ 9 $ 3
Mortality and Expense Charges (Note 3) (1) (25) (6) (1)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 3 197 3 2
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 0 82 21 2
Net Change in Unrealized Appreciation
(Depreciation) During the Year (2) 184 (86) 9
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments (2) 266 (65) 11
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1 463 (62) 13
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 4 166 70 3
Policy Loading, Net (Note 3) 0 (2) 1 0
Contract Owner Deaths 0 0 0 0
Contract Owner Terminations 0 (6) (3) 0
Policy Loans, Net 0 (11) (2) (11)
Cost of Insurance (2) (35) (9) (2)
Policy Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions 9 776 107 113
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 11 888 164 103
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 12 1,351 102 116
Net Assets Beginning of Period 61 2,010 496 58
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 73 $ 3,361 $ 598 $ 174
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
MFS
Index Premier Emerging MFS
500 Growth Growth Research
(In thousands) Fund Portfolio Series Series
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (Note 3) 0 (4) (1) (2)
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 0 (4) (1) (2)
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 8 2 0 1
Net Change in Unrealized Appreciation
(Depreciation) During the Year 4 76 22 12
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 12 78 22 13
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 12 74 21 11
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 5 5 3 4
Policy Loading, Net (Note 3) 0 (2) 0 (2)
Contract Owner Deaths 0 0 0 0
Contract Owner Terminations 0 (6) 0 (7)
Policy Loans, Net (5) 0 0 0
Cost of Insurance (1) (6) (2) (3)
Policy Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions 170 935 396 631
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 169 926 397 623
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 181 1,000 418 634
Net Assets Beginning of Period 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 181 $ 1,000 $ 418 $ 634
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
AIM
AIM V.I. Capital
V.I. Value Appreciation 1997 1998
(In thousands) Fund Fund Trust Trust
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 32 $ 4 $ 0 $ 0
Mortality and Expense Charges (Note 3) (3) (1) 0 0
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 29 3 0 0
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 1 0 1 0
Net Change in Unrealized Appreciation
(Depreciation) During the Year 21 (4) (1) 2
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 22 3 0 0
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 51 (1) 0 2
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 2 2 0 0
Policy Loading, Net (Note 3) (1) 0 0 0
Contract Owner Deaths 0 0 0 0
Contract Owner Terminations (1) 0 0 0
Policy Loans, Net 0 0 0 0
Cost of Insurance (6) (1) 0 0
Policy Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions 856 334 (6) 0
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 850 335 (6) 0
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 901 334 (6) 2
Net Assets Beginning of Period 0 0 6 33
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 901 $ 334 $ 0 $ 35
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
1999 2000 2003 2004
(In thousands) Trust Trust Trust Trust
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (Note 3) 0 (1) 0 0
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 0 (1) 0 0
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 0 1 0 0
Net Change in Unrealized Appreciation
(Depreciation) During the Year 0 5 2 2
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 0 6 2 2
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 0 5 2 2
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners
Policy Loading, Net (Note 3) 2 9 0 0
Contract Owner Deaths 0 0 0 0
Contract Owner Terminations 0 0 0 0
Policy Loans, Net 0 0 0 0
Cost of Insurance 0 0 0 0
Policy Loan Processing Charges 0 (1) 0 0
Transfers Among Investment Divisions 0 0 0 0
0 (3) 0 0
Net Increase (Decrease) in Net Assets -------------------- -------------------- -------------------- --------------------
Resulting from Contract Transactions
2 5 0 0
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets
Net Assets Beginning of Period 2 10 2 2
6 79 40 21
Net Assets End of Period -------------------- -------------------- -------------------- --------------------
$ 8 $ 89 $ 42 $ 23
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------------------
2005 2007 2009 2010
(In thousands) Trust Trust Trust Trust
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (Note 3) 0 0 0 0
Transaction Charges (Note 3) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 0 0 0 0
Net Change in Unrealized Appreciation
(Depreciation) During the Year 4 0 1 3
-------------------- -------------------- -------------------- --------------------
Net Gain (Loss) on Investments 4 0 1 3
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 4 0 1 3
-------------------- -------------------- -------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 2 0 2 0
Policy Loading, Net (Note 3) 0 0 0 0
Contract Owner Deaths 0 0 0 0
Contract Owner Terminations 0 0 0 0
Policy Loans, Net 0 0 0 0
Cost of Insurance 0 0 0 0
Policy Loan Processing Charges 0 0 0 0
Transfers Among Investment Divisions 0 0 0 0
-------------------- -------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 2 0 2 0
-------------------- -------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 6 0 3 3
Net Assets Beginning of Period 34 9 7 23
-------------------- -------------------- -------------------- --------------------
Net Assets End of Period $ 40 $ 9 $ 10 $ 26
==================== ==================== ==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997 (continued)
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------
2013 2014
(In thousands) Trust Trust
-------------------- --------------------
<S> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0
Mortality and Expense Charges (Note 3) 0 (1)
Transaction Charges (Note 3) 0 0
-------------------- --------------------
Net Investment Income (Loss) 0 (1)
-------------------- --------------------
Realized and Unrealized Gains (Losses)
on Investments:
Net Realized Gains (Losses) (Note 2) 0 4
Net Change in Unrealized Appreciation
(Depreciation) During the Year 1 19
-------------------- --------------------
Net Gain (Loss) on Investments 1 23
-------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1 22
-------------------- --------------------
Contract Transactions:
Net Premiums Received from Contract Owners 1 5
Policy Loading, Net (Note 3) 0 1
Contract Owner Deaths 0 0
Contract Owner Terminations 0 0
Policy Loans, Net 0 0
Cost of Insurance 0 (1)
Policy Loan Processing Charges 0 0
Transfers Among Investment Divisions 0 74
-------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 1 79
-------------------- --------------------
Total Increase (Decrease) in Net Assets 2 101
Net Assets Beginning of Period 4 58
-------------------- --------------------
Net Assets End of Period $ 6 $ 159
==================== ====================
See notes to financial statements
</TABLE>
ML OF NEW YORK VARIABLE LIFE SEPARATE ACCOUNT II
ML LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
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 ML of New York's 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 Lynch & Co."). The Account is
registered as a unit investment trust under the Investment Company
Act of 1940 and consists of forty-two investment divisions (forty-
three during the year). The investment divisions are as follows:
Merrill Lynch Series Fund, Inc.: Ten of the investment divisions
each invest in the securities of a single mutual fund portfolio
of the Merrill Lynch Series Fund, Inc. ("Merrill Series Fund").
The investment advisor to the funds of the Merrill Series Fund
is Merrill Lynch Asset Management, L.P. ("MLAM"), an indirect
subsidiary of Merrill Lynch & Co.
Merrill Lynch Variable Series Funds, Inc.: Nine of the
investment divisions each invest in the securities of a single
mutual fund portfolio of the Merrill Lynch Variable Series
Funds, Inc. ("Merrill Variable Funds"). The investment advisor
to the funds of the Merrill Variable Funds is MLAM. The Capital
Focus Fund and Global Growth Focus Fund commenced operations on
July 21, 1999. 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.
Hotchkis & Wiley Variable Trust: One of the investment divisions
invests in the securities of a single mutual fund portfolio of
the Hotchkis & Wiley Variable Trust ("H&W Trust"). The
investment advisor to the fund of the H&W Trust is Hotchkis &
Wiley, a division of MLAM. This investment division commenced
operations on July 21, 1999.
Mercury Asset Management V.I. Funds, Inc.: One of the investment
divisions invests in the securities of a single mutual fund
portfolio of the Mercury Asset Management V.I. Funds, Inc.
("Mercury Funds"). The investment advisor to the fund of the
Mercury Funds is Mercury Asset Management International Ltd., an
indirect subsidiary of Merrill Lynch and Co. This investment
division commenced operations on July 21, 1999.
Alliance Variable Products Series Fund, Inc.: Two of the
investment divisions invest in the securities of a single mutual
fund portfolio of the Alliance Variable Products Series Fund,
Inc. ("Alliance Variable Fund"). The investment advisor to the
funds of the Alliance Variable Fund is Alliance Capital
Management L.P. The Quasar Portfolio Fund commenced operations
on July 21, 1999.
MFS Variable Insurance Trust: Two of the investment divisions
each invest in the securities of a single mutual fund portfolio
of the MFS Variable Insurance Trust ("MFS Variable Trust"). The
investment advisor to the funds of the MFS Variable Trust is
Massachusetts Financial Services Company.
AIM Variable Insurance Funds: Two of the investment divisions
each invest in the securities of a single mutual fund portfolio
of the AIM Variable Insurance Funds, Inc. ("AIM Variable
Funds"). The investment advisor to the funds of the AIM Variable
Funds is AIM Advisors, Inc.
The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury
Securities, Series A through L: Fifteen of the investment
divisions (sixteen 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 L
("Merrill Zero Trusts"). Each trust of the Merrill 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. Merrill Zero Trusts are sponsored by
Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"), a wholly
owned subsidiary of Merrill Lynch & Co. The 2019 Trust commenced
operations on July 21, 1999. The 1999 Trust matured on
February 16, 1999.
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.
2. SIGNIFICANT ACCOUNTING POLICIES
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.
Investments of the investment divisions are included in the
statement of assets and liabilities at the net asset value of
the shares/units held in the underlying funds/trusts, which
value their investments at market value.
Dividend income is recognized on the ex-dividend date. All
dividends are automatically reinvested.
Realized gains and losses on the sales of investments are
computed on the first in first out method.
Investment transactions are recorded on the trade date.
The operations of 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 that 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. CHARGES AND FEES
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. 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 is 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.
ML of New York pays all transaction charges to MLPF&S on the
sale of Zero Trusts units to the Account. ML of New York deducts
a daily asset charge against the assets of each trust for the
reimbursement of these transaction charges. The asset charge is
equivalent to an effective annual rate of .34% (annually at the
beginning of the year) of net assets for Contract owners.
4.UNIT VALUES
The following is a summary of unit values and units outstanding for
variable life insurance contracts and the expenses as a percentage
of average net assets, excluding expenses of the underlying funds for
each of the five years in the period ended December 31, 1999 or lesser
time period, if applicable. Total return calculations represent the
one year total return (or from inception to December 31 if less than
one year) and do not reflect the cost of insurance charge.
<TABLE>
<CAPTION>
Intermediate Long-Term
Money Government Corporate Capital
Reserve Bond Bond Stock
(In thousands, except unit values) Portfolio Portfolio Portfolio Portfolio
-------------------- ---------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
1999
Units 206 25 8 37
Unit Value $ 31.29 $ 46.52 $ 53.11 $ 109.89
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 6,449 $ 1,156 $ 435 $ 4,013
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return 4.08% -2.14% -3.23% 30.45%
1998
Units 205 24 8 35
Unit Value $ 30.06 $ 47.54 $ 54.88 $ 84.24
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 6,148 $ 1,133 $ 424 $ 2,961
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return 4.48% 7.96% 7.48% 14.52%
1997
Units 184 10 7 33
Unit Value $ 28.77 $ 44.03 $ 51.06 $ 73.56
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 5,291 $ 429 $ 334 $ 2,436
Ratio of Expenses to 0.90% 0.90% 0.90% 0.90%
Average Net Assets 4.50% 7.44% 7.82% 21.37%
Total Return
1996
Units 112 6 3 27
Unit Value $ 27.54 $ 40.98 $ 47.36 $ 60.61
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 3,075 $ 243 $ 137 $ 1,652
Ratio of Expenses to 0.90% 0.90% 0.90% 0.90%
Average Net Assets 4.39% 1.68% 1.84% 15.48%
Total Return
1995
Units 52 4 2 14
Unit Value $ 26.38 $ 40.31 $ 46.51 $ 52.48
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 1,370 $ 174 $ 93 $ 718
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return 4.87% 17.80% 19.58% 19.64%
</TABLE>
4.UNIT VALUES (continued)
<TABLE>
<CAPTION>
Growth Mutliple High Natural
Stock Strategy Yield Resources
(In thousands, except unit values) Portfolio Portfolio Portfolio Portfolio
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
1999
Units 65 67 32 13
Unit Value $ 109.87 $ 52.87 $ 30.87 $ 9.92
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 7,151 $ 3,530 $ 983 $ 130
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return 37.74% 19.13% 4.63% 24.37%
1998
Units 63 68 36 18
Unit Value $ 79.77 $ 44.38 $ 29.50 $ 7.98
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 5,035 $ 3,012 $ 1,060 $ 145
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return 36.94% 9.83% -6.04% -14.34%
1997
Units 57 68 24 17
Unit Value $ 58.25 $ 40.41 $ 31.40 $ 9.31
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 3,341 $ 2,745 $ 755 $ 157
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return 32.55% 18.09% 9.74% -11.77%
1996
Units 43 68 14 17
Unit Value $ 43.95 $ 34.21 $ 28.62 $ 10.56
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 1,904 $ 2,310 $ 413 $ 177
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return 18.48% 13.28% 11.30% 13.68%
1995
Units 29 59 7 14
Unit Value $ 37.09 $ 30.20 $ 25.71 $ 9.29
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 1,062 $ 1,789 $ 177 $ 128
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return 34.13% 16.49% 16.07% 11.21%
</TABLE>
4.UNIT VALUES (continued)
<TABLE>
<CAPTION>
Global International
Global Utility Equity
Strategy Balanced Focus Focus
(In thousands, except unit values) Portfolio Portfolio Fund Fund
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
1999
Units 171 34 10 75
Unit Value $ 32.90 $ 31.71 $ 22.60 $ 14.87
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 5,618 $ 1,065 $ 216 $ 1,115
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return 20.06% 7.58% 11.62% 36.39%
1998
Units 180 35 11 91
Unit Value $ 27.40 $ 29.48 $ 20.25 $ 10.90
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 4,939 $ 1,018 $ 218 $ 988
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return 8.51% 12.43% 22.94% 6.83%
1997
Units 184 29 9 99
Unit Value $ 25.25 $ 26.22 $ 16.47 $ 10.20
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 4,650 $ 764 $ 148 $ 1,010
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return 10.72% 15.88% 24.77% -5.41%
1996
Units 171 28 6 58
Unit Value $ 22.81 $ 22.62 $ 13.20 $ 10.79
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 3,895 $ 626 $ 84 $ 628
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return 12.75% 8.77% 11.94% 5.65%
1995
Units 134 16 1 33
Unit Value $ 20.23 $ 20.80 $ 11.79 $ 10.21
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 2,713 $ 337 $ 16 $ 338
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return 9.45% 20.50% 23.21% 4.53%
</TABLE>
4.UNIT VALUES (continued)
<TABLE>
<CAPTION>
Global Basic Developing Special
Bond Value Capital Value
Focus Focus Markets Focus Focus
(In thousands, except unit values) Fund Fund Fund Fund
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
1999
Units 7 220 55 41
Unit Value $ 12.55 $ 24.11 $ 10.80 $ 20.43
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 87 $ 5,312 $ 593 $ 833
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return -9.01% 20.03% 64.03% 32.94%
1998
Units 5 201 58 30
Unit Value $ 13.80 $ 20.09 $ 6.58 $ 15.37
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 71 $ 4,044 $ 382 $ 467
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return 11.61% 8.46% -30.02% -7.34%
1997
Units 6 181 63 10
Unit Value $ 12.36 $ 18.52 $ 9.41 $ 16.58
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 73 $ 3,361 $ 597 $ 174
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return 1.03% 19.54% -7.37% 10.72%
1996
Units 5 130 49 4
Unit Value $ 12.24 $ 15.49 $ 10.15 $ 14.98
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 61 $ 2,010 $ 496 $ 58
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return 7.04% 19.60% 9.58% -4.42%
1995
Units 0 58 35 Division
Unit Value $ 11.43 $ 12.96 $ 9.27 was not
--------------------- --------------------- --------------------- available
Net Assets $ 6 $ 748 $ 329
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90%
Total Return 15.65% 24.36% -1.97%
</TABLE>
4.UNIT VALUES (continued)
<TABLE>
<CAPTION>
Global
Index Capital Growth International
500 Focus Focus VIP
(In thousands, except unit values) Fund Fund Fund Portfolio
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
1999
Units 87 0 7 9
Unit Value $ 20.27 $ 10.38 $ 14.79 $ 11.47
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 1,761 $ 4 $ 108 $ 106
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return 19.41% -2.50% 69.39% 15.84%
1998
Units 40 Division Division Division
Unit Value $ 16.97 was not was not was not
--------------------- available available available
Net Assets $ 671
Ratio of Expenses to
Average Net Assets 0.90%
Total Return 27.12%
1997
Units 14 Division Division Division
Unit Value $ 13.35 was not was not was not
--------------------- available available available
Net Assets $ 181
Ratio of Expenses to
Average Net Assets 0.90%
Total Return 32.84%
1996
Units Division Division Division Division
Unit Value was not was not was not was not
available available available available
Net Assets
Ratio of Expenses to
Average Net Assets
Total Return
1995
Units Division Division Division Division
Unit Value was not was not was not was not
available available available available
Net Assets
Ratio of Expenses to
Average Net Assets
Total Return
</TABLE>
4.UNIT VALUES (continued)
<TABLE>
<CAPTION>
Mercury MFS
V.I. U.S. Premier Emerging
Large Cap Quasar Growth Growth
(In thousands, except unit values) Fund Portfolio Portfolio Series
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
1999
Units 18 10 225 104
Unit Value $ 12.04 $ 10.26 $ 25.51 $ 27.67
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 218 $ 102 $ 5,737 $ 2,888
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90% 0.90%
Total Return 34.91% 20.46% 31.12% 75.13%
1998
Units Division Division 143 82
Unit Value was not was not $ 19.46 $ 15.80
available available --------------------- ---------------------
Net Assets $ 2,777 $ 1,297
Ratio of Expenses to
Average Net Assets 0.90% 0.90%
Total Return 46.64% 32.95%
1997
Units Division Division 75 35
Unit Value was not was not $ 13.27 $ 11.88
available available --------------------- ---------------------
Net Assets $ 1,000 $ 418
Ratio of Expenses to
Average Net Assets 0.90% 0.90%
Total Return 34.01% 36.01%
1996
Units Division Division Division Division
Unit Value was not was not was not was not
available available available available
Net Assets
Ratio of Expenses to
Average Net Assets
Total Return
1995
Units Division Division Division Division
Unit Value was not was not was not was not
available available available available
Net Assets
Ratio of Expenses to
Average Net Assets
Total Return
</TABLE>
4.UNIT VALUES (continued)
<TABLE>
<CAPTION>
AIM
MFS AIM V.I. Capital
Research V.I. Value Appreciation 1997
(In thousands, except unit values) Series Fund Fund Trust
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
1999
Units 144 188 82 Division
Unit Value $ 18.06 $ 21.24 $ 19.11 was not
--------------------- --------------------- --------------------- available
Net Assets $ 2,600 $ 3,991 $ 1,576
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90%
Total Return 22.93% 28.73% 43.31%
1998
Units 103 138 59 Division
Unit Value $ 14.69 $ 16.50 $ 13.33 was not
--------------------- --------------------- --------------------- available
Net Assets $ 1,511 $ 2,273 $ 781
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90%
Total Return 22.28% 31.21% 18.23%
1997
Units 53 72 30 Division
Unit Value $ 12.01 $ 12.58 $ 11.28 matured during
--------------------- --------------------- --------------------- the year
Net Assets $ 634 $ 901 $ 334
Ratio of Expenses to
Average Net Assets 0.90% 0.90% 0.90%
Total Return 25.10% 28.42% 25.96%
1996
Units Division Division Division 0
Unit Value was not was not was not $ 21.02
available available available ---------------------
Net Assets $ 6
Ratio of Expenses to
Average Net Assets 1.24%
Total Return 3.83%
1995
Units Division Division Division 0
Unit Value was not was not was not $ 20.24
Net Assets available available available ---------------------
$ 4
Ratio of Expenses to
Average Net Assets 1.24%
Total Return 9.41%
</TABLE>
4.UNIT VALUES (continued)
<TABLE>
<CAPTION>
1998 1999 2000 2001
(In thousands, except unit values) Trust Trust Trust Trust
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
1999
Units Division Division 5 16
Unit Value was not matured during $ 21.23 $ 46.93
available the year --------------------- ---------------------
Net Assets $ 107 $ 770
Ratio of Expenses to
Average Net Assets 1.24% 1.24%
Total Return 3.22% 1.77%
1998
Units Division 0 5 17
Unit Value matured during $ 21.41 $ 20.57 $ 46.12
the year --------------------- --------------------- ---------------------
Net Assets $ 9 $ 99 $ 785
Ratio of Expenses to
Average Net Assets 1.24% 1.24% 1.24%
Total Return 4.55% 5.73% 6.77%
1997
Units 2 0 5 Division
Unit Value $ 20.94 $ 20.47 $ 19.45 was not
--------------------- --------------------- --------------------- available
Net Assets $ 35 $ 8 $ 89
Ratio of Expenses to
Average Net Assets 1.24% 1.24% 1.24%
Total Return 4.39% 4.87% 5.51%
1996
Units 2 0 4 Division
Unit Value $ 20.06 $ 19.52 $ 18.44 was not
--------------------- --------------------- --------------------- available
Net Assets $ 33 $ 6 $ 79
Ratio of Expenses to
Average Net Assets 1.24% 1.24% 1.24%
Total Return 3.41% 2.72% 1.87%
1995
Units 2 0 4 Division
Unit Value $ 19.40 $ 19.01 $ 18.10 was not
--------------------- --------------------- --------------------- available
Net Assets $ 31 $ 5 $ 68
Ratio of Expenses to
Average Net Assets 1.24% 1.24% 1.24%
Total Return 12.35% 15.04% 17.54%
</TABLE>
4.UNIT VALUES (continued)
<TABLE>
<CAPTION>
2003 2004 2005 2007
(In thousands, except unit values) Trust Trust Trust Trust
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
1999
Units 0 2 1 0
Unit Value $ 0.00 $ 14.44 $ 54.75 $ 32.46
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 0 $ 23 $ 46 $ 9
Ratio of Expenses to
Average Net Assets N/A 1.24% 1.24% 1.24%
Total Return N/A -3.74% -5.33% -8.49%
1998
Units 0 2 1 0
Unit Value $ 75.91 $ 15.00 $ 57.84 $ 35.48
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 37 $ 25 $ 35 $ 10
Ratio of Expenses to
Average Net Assets 1.24% 1.24% 1.24% 1.24%
Total Return 9.88% 10.31% 11.18% 13.39%
1997
Units 1 2 1 0
Unit Value $ 69.09 $ 13.60 $ 52.02 $ 31.29
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 42 $ 23 $ 40 $ 9
Ratio of Expenses to
Average Net Assets 1.24% 1.24% 1.24% 1.24%
Total Return 8.45% 9.06% 10.11% 11.95%
1996
Units 1 2 1 0
Unit Value $ 63.70 $ 12.47 $ 47.25 $ 27.95
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 40 $ 21 $ 34 $ 9
Ratio of Expenses to
Average Net Assets 1.24% 1.24% 1.24% 1.24%
Total Return -0.80% -1.21% -1.91% -3.13%
1995
Units 1 2 0 Division
Unit Value $ 64.22 $ 12.62 $ 48.17 was not
--------------------- --------------------- --------------------- available
Net Assets $ 39 $ 22 $ 24
Ratio of Expenses to
Average Net Assets 1.24% 1.24% 1.24%
Total Return 26.24% 27.27% 29.68%
</TABLE>
4.UNIT VALUES (continued)
<TABLE>
<CAPTION>
2009 2010 2013 2014
(In thousands, except unit values) Trust Trust Trust Trust
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
1999
Units 0 1 1 10
Unit Value $ 0.00 $ 26.11 $ 16.07 $ 15.79
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 0 $ 27 $ 9 $ 154
Ratio of Expenses to
Average Net Assets N/A 1.24% 1.24% 1.24%
Total Return N/A -11.58% -13.56% -14.35%
1998
Units 0 5 0 11
Unit Value $ 0.00 $ 29.53 $ 18.59 $ 18.44
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 0 $ 154 $ 9 $ 206
Ratio of Expenses to
Average Net Assets N/A 1.24% 1.24% 1.24%
Total Return N/A 14.56% 14.20% 13.88%
1997
Units 0 1 0 10
Unit Value $ 26.62 $ 25.78 $ 16.28 $ 16.19
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 10 $ 26 $ 6 $ 159
Ratio of Expenses to
Average Net Assets 1.24% 1.24% 1.24% 1.24%
Total Return 13.80% 14.64% 18.22% 19.65%
1996
Units 0 1 0 4
Unit Value $ 23.39 $ 22.49 $ 13.77 $ 13.53
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 7 $ 23 $ 4 $ 58
Ratio of Expenses to
Average Net Assets 1.24% 1.24% 1.24% 1.24%
Total Return -4.38% -4.84% -5.93% -6.55%
1995
Units 0 1 0 0
Unit Value $ 24.46 $ 23.63 $ 14.64 $ 0.00
--------------------- --------------------- --------------------- ---------------------
Net Assets $ 8 $ 25 $ 3 $ 0
Ratio of Expenses to
Average Net Assets 1.24% 1.24% 1.24% N/A
Total Return 38.56% 40.46% 47.04% N/A
</TABLE>
5.UNITS ISSUED AND REDEEMED
Units issued and redeemed by the investment divisions during 1999,
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Intermediate Long-Term
Money Government Corporate Capital
Reserve Bond Bond Stock
(In thousands) Portfolio Portfolio Portfolio Portfolio
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Outstanding at January 1, 1997 112 6 3 27
Activity during 1997:
Issued 847 5 4 11
Redeemed (775) (1) 0 (5)
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1997 184 10 7 33
Activity during 1998:
Issued 554 15 2 6
Redeemed (533) (1) (1) (4)
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1998 205 24 8 35
Activity during 1999:
Issued 378 3 2 6
Redeemed (377) (2) (2) (4)
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1999 206 25 8 37
=================== =================== =================== ===================
Growth Mutliple High Natural
Stock Strategy Yield Resources
Portfolio Portfolio Portfolio Portfolio
------------------- ------------------- ------------------- -------------------
Outstanding at January 1, 1997 43 68 14 17
Activity during 1997:
Issued 23 8 14 4
Redeemed (9) (8) (4) (4)
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1997 57 68 24 17
Activity during 1998:
Issued 12 24 17 2
Redeemed (6) (24) (5) (1)
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1998 63 68 36 18
Activity during 1997:
Issued 10 5 6 2
Redeemed (8) (6) (10) (7)
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1999 65 67 32 13
=================== =================== =================== ===================
</TABLE>
5.UNITS ISSUED AND REDEEMED (continued)
<TABLE>
<CAPTION>
Global International
Global Utility Equity
Strategy Balanced Focus Focus
(In thousands) Portfolio Portfolio Fund Fund
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Outstanding at January 1, 1997 171 28 6 58
Activity during 1997:
Issued 35 6 3 54
Redeemed (22) (5) 0 (13)
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1997 184 29 9 99
Activity during 1998:
Issued 34 7 2 38
Redeemed (38) (1) 0 (46)
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1998 180 35 11 91
Activity during 1999:
Issued 13 3 4 1
Redeemed (22) (4) (5) (17)
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1999 171 34 10 75
=================== =================== =================== ===================
Global Basic Developing Special
Bond Value Capital Value
Focus Focus Markets Focus Focus
Fund Fund Fund Fund
------------------- ------------------- ------------------- -------------------
Outstanding at January 1, 1997 5 130 49 4
Activity during 1997:
Issued 2 85 34 7
Redeemed (1) (34) (20) (1)
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1997 6 181 63 10
Activity during 1998:
Issued 1 52 10 22
Redeemed (2) (32) (15) (2)
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1998 5 201 58 30
Activity during 1999:
Issued 2 55 6 13
Redeemed 0 (36) (9) (2)
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1999 7 220 55 41
=================== =================== =================== ===================
</TABLE>
5.UNIT VALUES (continued)
<TABLE>
<CAPTION>
Global
Index Capital Growth International
500 Focus Focus VIP
(In thousands) Fund Fund Fund Portfolio
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Outstanding at January 1, 1997 0 0 0 0
Activity during 1997:
Issued 22 0 0 0
Redeemed (8) 0 0 0
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1997 14 0 0 0
Activity during 1998:
Issued 31 0 0 0
Redeemed (5) 0 0 0
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1998 40 0 0 0
Activity during 1999:
Issued 52 4 7 9
Redeemed (5) (4) 0 0
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1999 87 0 7 9
=================== =================== =================== ===================
Mercury MFS
V.I. U.S. Premier Emerging
Large Cap Quasar Growth Growth
Fund Portfolio Portfolio Series
------------------- ------------------- ------------------- -------------------
Outstanding at January 1, 1997 0 0 0 0
Activity during 1997:
Issued 0 0 75 35
Redeemed 0 0 0 0
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1997 0 0 75 35
Activity during 1998:
Issued 0 0 95 60
Redeemed 0 0 (27) (13)
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1998 0 0 143 82
Activity during 1999:
Issued 18 10 98 31
Redeemed 0 0 (16) (9)
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1999 18 10 225 104
=================== =================== =================== ===================
</TABLE>
5.UNIT VALUES (continued)
<TABLE>
<CAPTION>
AIM
MFS AIM V.I. Capital
Research V.I. Value Appreciation 1997
(In thousands) Series Fund Fund Trust
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Outstanding at January 1, 1997 0 0 0 0
Activity during 1997:
Issued 53 72 30 0
Redeemed 0 0 0 0
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1997 53 72 30 0
Activity during 1998:
Issued 57 70 30 0
Redeemed (7) (4) (1) 0
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1998 103 138 59 0
Activity during 1999:
Issued 46 55 25 0
Redeemed (5) (5) (2) 0
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1999 144 188 82 0
=================== =================== =================== ===================
1998 1999 2000 2001
Trust Trust Trust Trust
------------------- ------------------- ------------------- -------------------
Outstanding at January 1, 1997 2 0 4 0
Activity during 1997:
Issued 0 0 1 0
Redeemed 0 0 0 0
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1997 2 0 5 0
Activity during 1998:
Issued 0 0 0 17
Redeemed (2) 0 0 0
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1998 0 0 5 17
Activity during 1999:
Issued 0 0 0 0
Redeemed 0 0 0 (1)
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1999 0 0 5 16
=================== =================== =================== ===================
</TABLE>
5.UNIT VALUES (continued)
<TABLE>
<CAPTION>
2003 2004 2005 2007
(In thousands) Trust Trust Trust Trust
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Outstanding at January 1, 1997 1 2 1 0
Activity during 1997:
Issued 0 0 0 0
Redeemed 0 0 0 0
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1997 1 2 1 0
Activity during 1998:
Issued 0 0 0 0
Redeemed (1) 0 0 0
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1998 0 2 1 0
Activity during 1999:
Issued 0 0 0 0
Redeemed 0 0 0 0
------------------- ------------------- ------------------- -------------------
Outstanding at December 31, 1999 0 2 1 0
=================== =================== =================== ===================
2010 2013 2014
Trust Trust Trust
------------------- ------------------- -------------------
Outstanding at January 1, 1997 1 0 4
Activity during 1997:
Issued 0 0 11
Redeemed 0 0 (5)
------------------- ------------------- -------------------
Outstanding at December 31, 1997 1 0 10
Activity during 1998:
Issued 4 0 7
Redeemed 0 0 (6)
------------------- ------------------- -------------------
Outstanding at December 31, 1998 5 0 11
Activity during 1999:
Issued 4 1 0
Redeemed (8) 0 (1)
------------------- ------------------- -------------------
Outstanding at December 31, 1999 1 1 10
=================== =================== ===================
</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, 1999 and 1998, and
the related statements of earnings, comprehensive
income, stockholder's equity, and cash flows for each
of the three years in the period ended December 31,
1999. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain
reasonable assurance about whether the financial
statements are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the
financial statements. An audit also includes
assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement
presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present
fairly, in all material respects, the financial
position of the Company at December 31, 1999 and
1998, and the results of its operations and its cash
flows for each of the three years in the period ended
December 31, 1999 in conformity with generally
accepted accounting principles.
February 28, 2000
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
(Dollars in thousands, except common stock par value and shares)
<TABLE>
<CAPTION>
ASSETS 1999 1998
- ------ ------------ ------------
<S> <C> <C>
INVESTMENTS:
Fixed maturity securities, at estimated fair value
(amortized cost: 1999 - $166,016; 1998 - $197,588) $ 160,437 $ 200,681
Equity securities, at estimated fair value
(cost: 1999 - $19,782; 1998 - $14,684) 16,992 13,718
Policy loans on insurance contracts 88,165 88,083
------------ ------------
Total Investments 265,594 302,482
CASH AND CASH EQUIVALENTS 34,195 18,707
ACCRUED INVESTMENT INCOME 4,990 4,968
DEFERRED POLICY ACQUISITION COSTS 29,703 29,742
FEDERAL INCOME TAXES - DEFERRED 3,892 -
REINSURANCE RECEIVABLES 153 652
OTHER ASSETS 3,292 4,261
SEPARATE ACCOUNTS ASSETS 1,086,875 887,170
------------ ------------
TOTAL ASSETS $ 1,428,694 $ 1,247,982
============ ============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY 1999 1998
- ------------------------------------ ------------ ------------
<S> <C> <C>
LIABILITIES:
POLICYHOLDER LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 248,016 $ 269,246
Claims and claims settlement expenses 3,762 2,986
------------ ------------
Total policyholder liabilities and accruals 251,778 272,232
OTHER POLICYHOLDER FUNDS 1,195 1,783
FEDERAL INCOME TAXES - DEFERRED - 119
FEDERAL INCOME TAXES - CURRENT 1,420 1,347
AFFILIATED PAYABLES - NET 1,030 1,253
OTHER LIABILITIES 2,414 2,124
SEPARATE ACCOUNTS LIABILITIES 1,086,875 887,170
------------ ------------
Total Liabilities 1,344,712 1,166,028
------------ ------------
STOCKHOLDER'S EQUITY:
Common stock, $10 par value - 220,000 shares
authorized, issued and outstanding 2,200 2,200
Additional paid-in capital 66,259 66,259
Retained earnings 21,051 14,462
Accumulated other comprehensive loss (5,528) (967)
------------ ------------
Total Stockholder's Equity 83,982 81,954
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,428,694 $ 1,247,982
============ ============
</TABLE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 19,400 $ 21,549 $ 25,465
Net realized investment gains (losses) (3,100) (1,998) 1,947
Policy charge revenue 17,307 15,484 13,064
------------ ------------ ------------
Total Revenues 33,607 35,035 40,476
------------ ------------ ------------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 12,013 13,832 14,532
Market value adjustment expense 261 567 232
Policy benefits (net of reinsurance recoveries: 1999 - $542
1998 - $1,191; 1997 - $690) 632 1,630 781
Reinsurance premium ceded 1,822 1,705 1,584
Amortization of deferred policy acquisition costs 4,845 5,759 4,119
Insurance expenses and taxes 4,195 4,900 4,563
------------ ------------ ------------
Total Benefits and Expenses 23,768 28,393 25,811
------------ ------------ ------------
Earnings Before Federal Income Tax Provision 9,839 6,642 14,665
------------ ------------ ------------
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 4,805 3,337 2,905
Deferred (1,555) (1,465) 2,068
------------ ------------ ------------
Total Federal Income Tax Provision 3,250 1,872 4,973
------------ ------------ ------------
NET EARNINGS $ 6,589 $ 4,770 $ 9,692
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
NET EARNINGS $ 6,589 $ 4,770 $ 9,692
------------ ------------ ------------
OTHER COMPREHENSIVE LOSS
Net unrealized losses on available-for-sale securities:
Net unrealized holding losses arising during the period (14,221) (4,329) (413)
Reclassification adjustment for (gains) losses included
in net earnings 3,708 1,994 (1,771)
------------ ------------ ------------
Net unrealized losses on investment securities (10,513) (2,335) (2,184)
Adjustments for:
Policyholder liabilities 3,496 1,417 (70)
Deferred federal income taxes 2,456 321 789
------------ ------------ ------------
Total other comprehensive loss, net of tax (4,561) (597) (1,465)
------------ ------------ ------------
COMPREHENSIVE INCOME $ 2,028 $ 4,173 $ 8,227
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Retained comprehensive stockholder's
stock capital earnings income (loss) equity
----------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $ 2,200 $ 72,040 $ 9,219 $ 1,095 $ 84,554
Dividend to Parent (5,781) (9,219) (15,000)
Net earnings 9,692 9,692
Other comprehensive loss, net of tax (1,465) (1,465)
------------ ----------- ----------- ------------- ------------
BALANCE, DECEMBER 31, 1997 2,200 66,259 9,692 (370) 77,781
Net earnings 4,770 4,770
Other comprehensive loss, net of tax (597) (597)
------------ ----------- ----------- ------------- ------------
BALANCE, DECEMBER 31, 1998 2,200 66,259 14,462 (967) 81,954
Net earnings 6,589 6,589
Other comprehensive loss, net of tax (4,561) (4,561)
------------ ----------- ----------- ------------- ------------
BALANCE, DECEMBER 31, 1999 $ 2,200 $ 66,259 $ 21,051 $ (5,528) $ 83,982
============ =========== =========== ============= ============
</TABLE>
See accompanying notes to financial statements.
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 6,589 $ 4,770 $ 9,692
Noncash items included in earnings:
Amortization of deferred policy acquisition costs 4,845 5,759 4,119
Capitalization of policy acquisition costs (4,806) (5,095) (5,253)
Amortization (accretion) of investments 429 (262) (239)
Interest credited to policyholders' account balances 12,013 13,832 14,532
Benefit for deferred Federal income tax (1,555) (1,465) 2,068
(Increase) decrease in operating assets:
Accrued investment income (22) 448 536
Other 1,451 (1,079) 1,800
Increase (decrease) in operating liabilities:
Claims and claims settlement expenses 776 979 (565)
Other policyholder funds (588) (158) 781
Federal income taxes - current 73 (908) 156
Affiliated payables (223) (2,239) (1,534)
Other 290 (31) 506
Other operating activities:
Net realized investment (gains) losses 3,100 1,998 (1,947)
------------ ------------ ------------
Net cash and cash equivalents provided by operating activities 22,372 16,549 24,652
------------ ------------ ------------
Cash Flow From Investing Activities:
Proceeds from (payments for):
Sales of available-for-sale securities 171,785 102,967 88,882
Maturities of available-for-sale securities 40,227 59,161 51,060
Purchases of available-for-sale securities (189,067) (119,611) (120,965)
Mortgage loans principal payments received - - 2,057
Policy loans on insurance contracts (82) 80 (2,615)
------------ ------------ ------------
Net cash and cash equivalents provided by investing activities 22,863 42,597 18,419
------------ ------------ ------------
See accompanying notes to financial statements. (Continued)
</TABLE>
ML LIFE INSURANCE COMPANY OF NEW YORK
(a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Continued) (Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Financing Activities:
Proceeds from (payments for):
Dividends paid to parent $ - $ - $ (15,000)
Policyholder deposits 79,889 94,226 106,983
Policyholder withdrawals (including transfers to/from
separate accounts) (109,636) (144,728) (132,819)
------------ ------------ ------------
Net cash and cash equivalents used by financing activites (29,747) (50,502) (40,836)
------------ ------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 15,488 8,644 2,235
CASH AND CASH EQUIVALENTS:
Beginning of year 18,707 10,063 7,828
------------ ------------ ------------
End of year $ 34,195 $ 18,707 $ 10,063
============ ============ ============
Supplementary Disclosure of Cash Flow Information:
Cash paid to affiliates for:
Federal income taxes $ 4,732 $ 4,245 $ 2,749
Interest 85 148 494
</TABLE>
See accompanying notes to financial statements.
ML LIFE INSURANCE COMPANY OF NEW YORK
(A wholly owned subsidiary of Merrill Lynch Insurance Group,Inc.)
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business: ML Life Insurance Company
of New York (the "Company") is a wholly owned subsidiary of
Merrill Lynch Insurance Group, Inc. ("MLIG"). The Company is an
indirect wholly owned subsidiary of Merrill Lynch & Co.,Inc.
("Merrill Lynch & Co.").
The Company sells non-participating life insurance and annuity
products including variable life insurance, variable annuities,
market value adjusted annuities and immediate annuities. The
Company is licensed to sell insurance in nine states; however,
it currently limits its marketing activities to the State of
New York. The Company markets its products solely through the
retail network of Merrill Lynch, Pierce, Fenner & Smith,
Incorporated ("MLPF&S"), a wholly owned broker-dealer
subsidiary of Merrill Lynch & Co.
Basis of Reporting: The accompanying financial statements have
been prepared in conformity with generally accepted accounting
principles and prevailing industry practices, both of which
require management to make estimates that affect the reported
amounts and disclosure of contingencies in the financial
statements. Actual results could differ from those estimates.
For the purpose of reporting cashflows, cash and cash
equivalents include cash on hand and on deposit and short-term
investments with original maturities of three months or less.
To facilitate comparisons with the current year, certain amounts
in the prior years have been reclassified.
Revenue Recognition: Revenues for the Company's interest
sensitive life, interest-sensitive annuity, variable life and
variable annuity products consist of policy charges for
mortality risks and the cost of insurance, deferred sales
charges, policy administration charges and/or withdrawal charges
assessed against policyholders' account balances during the
period.
Investments: The Company's investments in fixed maturity and
equity securities are classified as available-for-sale and are
carried at estimated fair value with unrealized gains and losses
included in stockholder's equity as a component of accumulated
other comprehensive loss, net of tax. If management determines
that a decline in the value of a security is other-than-
temporary, the carrying value is adjusted to estimated fair
value and the decline in value is recorded as a net realized
investment loss.
For fixed maturity securities, premiums are amortized to the
earlier of the call or maturity date, discounts are accreted to
the maturity date, and interest income is accrued daily. For
equity securities, dividends are recognized on the ex-dividend
date. Realized gains and losses on the sale or maturity of the
investments are determined on the basis of specific
identification. Investment transactions are recorded on the
trade date.
Certain fixed maturity securities are considered non-investment
grade. The Company defines non-investment grade fixed maturity
securities as unsecured debt obligations that do not have a
rating equivalent to Standard and Poor's (or similar rating
agency) BBB- or higher.
All outstanding mortgage loans were repaid during 1997. The
Company recognized income from mortgage loans based on the cash
payment interest rate of the loan, which may have been different
from the accrual interest rate of the loan for certain mortgage
loans. The Company recognized a realized gain at the date of the
satisfaction of the loan at contractual terms for loans where
there was a difference between the cash payment interest rate
and the accrual interest rate. For all loans, the Company
stopped accruing income when an interest payment default either
occurred or was probable. Impairments of mortgage loans were
established as valuation allowances and recorded as a net
realized investment loss.
Policy loans on insurance contracts are stated at unpaid
principal balances.
Deferred Policy Acquisition Costs: Policy acquisition costs for
life and annuity contracts are deferred and amortized based on
the estimated future gross profits for each group of contracts.
These future gross profit estimates are subject to periodic
evaluation by the Company, with necessary revisions applied
against amortization to date. The impact of these revisions on
cumulative amortization is recorded as a charge or credit to
current operations. It is reasonably possible that estimates of
future gross profits could be reduced in the future,
resulting in a material reduction in the carrying amount of
deferred policy acquisition costs.
Policy acquisition costs are principally commissions and a
portion of certain other expenses relating to policy
acquisition, underwriting and issuance that are primarily
related to and vary with the production of new business.
Insurance expenses and taxes reported in the statements of
earnings are net of amounts deferred. Policy acquisition costs
can also arise from the acquisition or reinsurance of existing
inforce policies from other insurers. These costs include
ceding commissions and professional fees related to the
reinsurance assumed. The deferred costs are amortized in
proportion to the estimated future gross profits over the
anticipated life of the acquired insurance contracts utilizing
an interest methodology.
During 1990, the Company entered into an assumption reinsurance
agreement with an unaffiliated insurer. The acquisition costs
relating to this agreement are being amortized over a twenty-
five year period using an effective interest rate of 7.5%. This
reinsurance agreement provides for payment of contingent ceding
commissions based upon the persistency and mortality experience
of the insurance contracts assumed. Any payments made for the
contingent ceding commissions will be capitalized and amortized
using an identical methodology as that used for the initial
acquisition costs. The following is a reconciliation of the
acquisition costs related to the reinsurance agreement for the
years ended December 31:
1999 1998 1997
---------- ---------- ----------
Beginning balance $ 12,784 $ 16,550 $ 17,151
Capitalized amounts 1,336 691 577
Interest accrued 959 1,241 1,651
Amortization (2,683) (5,698) (2,829)
---------- ---------- ----------
Ending balance $ 12,396 $ 12,784 $ 16,550
========== ========== ==========
The following table presents the expected amortization, net of
interest accrued, of these deferred acquisition costs over the
next five years. The amortization may be adjusted based on
periodic evaluation of the expected gross profits on the
reinsured policies.
2000 $ 785
2001 $ 747
2002 $ 712
2003 $ 700
2004 $ 715
Separate Accounts: Separate Accounts are established in
conformity with New York State Insurance Law, the Company's
domiciliary state, and are generally not chargeable with
liabilities that arise from any other business of the Company.
Separate Accounts assets may be subject to general claims of
the Company only to the extent the value of such assets exceeds
Separate Accounts liabilities.
Net investment income and net realized and unrealized gains
(losses) attributable to Separate Accounts assets accrue
directly to the policyholder and are not reported as revenue in
the Company's Statement of Earnings.
Assets and liabilities of Separate Accounts, representing net
deposits and accumulated net investment earnings less fees,
held primarily for the benefit of policyholders, are shown as
separate captions in the balance sheets.
Policyholders' Account Balances: Liabilities for the Company's
universal life type contracts, including its life insurance and
annuity products, are equal to the full accumulation value of
such contracts as of the valuation date plus deficiency
reserves for certain products. Interest-crediting rates for the
Company's fixed-rate products are as follows:
Interest-sensitive life products 4.00%
Interest-sensitive deferred annuities 3.60% - 8.23%
Immediate annuities 3.00% - 10.00%
These rates may be changed at the option of the Company,
subject to minimum guarantees, after initial guaranteed rates
expire.
Claims and Claims Settlement Expenses: Liabilities for claims
and claims settlement expenses equal the death benefit for
claims that have been reported to the Company and an estimate
based upon prior experience for unreported claims.
Income Taxes: The results of operations of the Company are
included in the consolidated Federal income tax return of
Merrill Lynch & Co. The Company has entered into a tax-sharing
agreement with Merrill Lynch & Co. whereby the Company will
calculate its current tax provision based on its operations.
Under the agreement, the Company periodically remits to Merrill
Lynch & Co. its current federal tax liability.
The Company uses the asset and liability method in providing
income taxes on all transactions that have been recognized in
the financial statements. The asset and liability method
requires that deferred taxes be adjusted to reflect the tax
rates at which future taxable amounts will be settled or
realized. The effects of tax rate changes on future deferred
tax liabilities and deferred tax assets, as well as other
changes in income tax laws, are recognized in net earnings in
the period such changes are enacted. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amounts expected to be realized.
Insurance companies are generally subject to taxes on premiums
and in substantially all states are exempt from state income
taxes.
Accounting Pronouncements: In June 1999, the Financial
Accounting Standards Board deferred for one year the effective
date of the accounting and reporting requirements of SFAS No.
133, Accounting for Derivative Instruments and Hedging
Activities. The Company will adopt the provisions of SFAS No.
133 on January 1, 2001. The adoption of the standard is not
expected to have a material impact on the Company's financial
position or results of operations.
NOTE 2. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments are carried at fair value or amounts that
approximate fair value. The carrying value of financial
instruments as of December 31 were:
1999 1998
----------- -----------
Assets:
Fixed maturity securities (1) $ 160,437 $ 200,681
Equity securities (1) 16,992 13,718
Policy loans on insurance contracts (2) 88,165 88,083
Cash and cash equivalents (3) 34,195 18,707
Separate Accounts assets (4) 1,086,875 887,170
----------- -----------
Total financial instruments $1,386,664 $1,208,359
=========== ===========
(1) For publicly traded securities, the estimated fair value
is determined using quoted market prices. For securities
without a readily ascertainable market value, the Company
utilizes pricing services and broker quotes. Such estimated
fair values do not necessarily represent the values for
which these securities could have been sold at the dates of
the balance sheets. At December 31, 1999 and 1998,
securities without a readily ascertainable market value,
having an amortized cost of $19,734 and $33,427, had an
estimated fair value of $18,876 and $33,879, respectively.
(2) The Company estimates the fair value of policy loans as
equal to the book value of the loans. Policy loans are
fully collateralized by the account value of the associated
insurance contracts, and the spread between the policy loan
interest rate and the interest rate credited to the account
value held as collateral is fixed.
(3) The estimated fair value of cash and cash equivalents
approximates the carrying value.
(4) Assets held in Separate Accounts are carried at the net
asset value provided by the fund managers.
NOTE 3: INVESTMENTS
The amortized cost and estimated fair value of investments in
fixed maturity and equity securities as of December 31 were:
<TABLE>
<CAPTION>
1999
-----------------------------------------------------------------
Cost/ Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Fixed maturity securities:
Corporate debt securities $ 128,239 $ 600 $ 4,558 $ 124,281
Mortgage-backed securities 8,488 210 68 8,630
U.S. government and agencies 27,291 160 1,681 25,770
Foreign governments 1,998 - 242 1,756
----------- ----------- ----------- -----------
Total fixed maturity securities $ 166,016 $ 970 $ 6,549 $ 160,437
=========== =========== =========== ===========
Equity securities:
Non-redeemable preferred stocks $ 19,610 $ 25 $ 2,788 $ 16,847
Common stocks 172 - 27 145
----------- ----------- ----------- -----------
Total equity securities $ 19,782 $ 25 $ 2,815 $ 16,992
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
1998
-----------------------------------------------------------------
Cost/ Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Fixed maturity securities:
Corporate debt securities $ 159,421 $ 3,404 $ 1,224 $ 161,601
Mortgage-backed securities 13,258 443 54 13,646
U.S. government and agencies 22,912 869 48 23,734
Foreign governments 1,997 - 297 1,700
----------- ----------- ----------- -----------
Total fixed maturity securities $ 197,588 $ 4,716 $ 1,623 $ 200,681
=========== =========== =========== ===========
Equity securities:
Non-redeemable preferred stocks $ 13,361 $ 58 $ 257 $ 13,162
Common stocks 1,323 - 767 556
----------- ----------- ----------- -----------
Total equity securities $ 14,684 $ 58 $ 1,024 $ 13,718
=========== =========== =========== ===========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities at December 31, 1999 by contractual maturity were:
Estimated
Amortized Fair
Cost Value
----------- -----------
Fixed maturity securities:
Due in one year or less $ 25,889 $ 25,604
Due after one year through five years 84,457 81,926
Due after five years through ten years 23,956 22,216
Due after ten years 23,226 22,061
----------- -----------
157,528 151,807
Mortgage-backed securities 8,488 8,630
----------- -----------
Total fixed maturity securities $ 166,016 $ 160,437
=========== ===========
Fixed maturity securities not due at a single maturity date
have been included in the preceding table in the year of final
maturity. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment
penalties.
The amortized cost and estimated fair value of fixed maturity
securities at December 31, 1999 by rating agency equivalent
were:
Estimated
Amortized Fair
Cost Value
----------- -----------
AAA $ 51,304 $ 49,205
AA 9,173 8,982
A 53,218 51,402
BBB 46,788 45,403
Non-investment grade 5,533 5,445
----------- -----------
Total fixed maturity securities $ 166,016 $ 160,437
=========== ===========
The Company has recorded certain adjustments to policyholders'
account balances in conjunction with unrealized holding gains
or losses on investments classified as available-for-sale. The
Company adjusts those liabilities as if the unrealized holding
gains or losses had actually been realized, with corresponding
credits or charges reported in accumulated other comprehensive
loss, net of taxes. The components of net unrealized gains
(losses) included in accumulated other comprehensive loss as of
December 31 were as follows:
1999 1998
----------- -----------
Assets:
Fixed maturity securities $ (5,579) $ 3,093
Equity securities (2,790) (966)
Other assets (17) -
Federal income taxes - deferred 2,977 -
----------- -----------
(5,409) 2,127
----------- -----------
Liabilities:
Policyholders' account balances 119 3,615
Federal income taxes - deferred - (521)
----------- -----------
119 3,094
----------- -----------
Stockholder's equity:
Accumulated other comprehensive loss $ (5,528) $ (967)
=========== ===========
Proceeds and gross realized investment gains and losses from the
sale of available-for-sale securities for the years ended
December 31 were:
1999 1998 1997
-------- -------- --------
Proceeds $171,785 $102,967 $ 88,882
Gross realized investment gains 1,357 2,096 4,077
Gross realized investment lossess 4,457 4,094 2,130
The company owned investment securities of $989 and $1,104 that
were deposited with insurance regulatory authorities at December
31, 1999 and 1998, respectively.
Excluding investments in U.S. Government and Agencies, the
Company is not exposed to any significant concentration of
credit risk in its fixed maturity securities portfolio.
Net investment income arose from the following sources for the
years ended December 31:
1999 1998 1997
----------- ----------- -----------
Fixed maturity securities $ 12,921 $ 16,244 $ 19,815
Equity securities 1,637 734 761
Mortgage loans - - 81
Policy loans on insurance contracts 4,362 4,316 4,333
Cash and cash equivalents 932 761 1,293
Other 29 29 65
----------- ----------- -----------
Gross investment income 19,881 22,084 26,348
Less investment expenses (481) (535) (883)
----------- ----------- -----------
Net investment income $ 19,400 $ 21,549 $ 25,465
=========== =========== ===========
Net realized investment gains (losses), including changes in
valuation allowances, for the years ended December 31:
1999 1998 1997
---------- ---------- ----------
Fixed maturity securities $ (1,938) $ (1,944) $ (1,268)
Equity securities (1,162) (54) 3,215
---------- ---------- ----------
Net realized investment gains (losses) $ (3,100) $ (1,998) $ (1,947)
========== ========== ==========
NOTE 4: FEDERAL INCOME TAXES
The following is a reconciliation of the provision for income
taxes based on earnings before federal income taxes, computed
using the Federal statutory tax rate, with the provision for
income taxes for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Provision for income taxes computed at Federal
statutory rate $ 3,444 $ 2,325 $ 5,133
Decrease in income taxes resulting from:
Dividend received deduction (129) (300) (160)
Foreign tax credit (65) (153) -
----------- ----------- -----------
Federal income tax provision $ 3,250 $ 1,872 $ 4,973
=========== =========== ===========
</TABLE>
The Federal statutory rate for each of the three years in the
period ended December 31, 1999 was 35%.
The Company provides for deferred income taxes resulting from
temporary differences that arise from recording certain
transactions in different years for income tax reporting
purposes than for financial reporting purposes. The sources of
these differences and the tax effect of each are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Deferred policy acquisition costs $ 332 $ (158) $ 315
Policyholders' account balances (793) (659) (140)
Liability for guaranty fund assessments - - (50)
Investment adjustments (1,113) (629) 1,943
Other 19 (19) -
----------- ----------- -----------
Deferred Federal income tax provision (benefit) $ (1,555) $ (1,465) $ 2,068
=========== =========== ===========
</TABLE>
Deferred tax assets and liabilities as of December 31 are
determined as follows:
1999 1998
----------- -----------
Deferred tax assets:
Policyholders' account balances $ 5,816 $ 5,023
Investment adjustments 1,738 625
Net unrealized investment loss 2,977 521
Other - 19
----------- -----------
Total deferred tax assets 10,531 6,188
----------- -----------
Deferred tax liabilities:
Deferred policy acquisition costs 6,639 6,307
----------- -----------
Net deferred tax asset (liability) $ 3,892 $ (119)
=========== ===========
The Company anticipates that all deferred tax assets will be
realized, therefore no valuation allowance has been provided.
NOTE 5: REINSURANCE
In the normal course of business, the Company seeks to limit
its exposure to loss on any single insured life and to recover
a portion of benefits paid by ceding reinsurance to other
insurance enterprises or reinsurers under indemnity reinsurance
agreements, primarily excess coverage and coinsurance
agreements. The maximum amount of mortality risk retained by
the Company is approximately $300 on single life policies and
$500 on joint life policies.
Indemnity reinsurance agreements do not relieve the Company
from its obligations to policyholders. Failure of reinsurers to
honor their obligations could result in losses to the Company.
The Company regularly evaluates the financial condition of its
reinsurers so as to minimize its exposure to significant losses
from reinsurer insolvencies. The Company holds collateral under
reinsurance agreements in the form of letters of credit, trust
agreements and funds withheld totaling $131 that can be drawn
upon for delinquent reinsurance recoverables.
As of December 31, 1999, the Company had the following life
insurance inforce:
<TABLE>
<CAPTION>
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed to
amount companies companies amount net
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Life insurance in force $ 956,359 $ 157,279 $ 938,882 $1,737,962 54%
</TABLE>
NOTE 6: RELATED PARTY TRANSACTIONS
The Company and MLIG are parties to a service agreement
whereby MLIG has agreed to provide certain accounting, data
processing, legal, actuarial, management, advertising and other
services to the Company. Expenses incurred by MLIG, in relation
to this service agreement, are reimbursed by the Company on an
allocated cost basis. Charges billed to the Company by MLIG
pursuant to the agreement were $4,199, $4,767 and $4,305 for
1999, 1998 and 1997 respectively. Charges attributable to this
agreement are included in insurance expenses and taxes, except
for investment related expenses, which are included in net
investment income. The Company is allocated interest expense on
its accounts payable to MLIG that approximates the daily
Federal funds rate. Total intercompany interest incurred was
$54, $69 and $64 for 1999, 1998 and 1997, respectively.
Intercompany interest is included in net investment income.
The Company and Merrill Lynch Asset Management, LP ("MLAM") are
parties to a service agreement whereby MLAM has agreed to
provide certain invested asset management services to the
Company. The Company pays a fee to MLAM for these services
through the MLIG service agreement. Charges attributable to
this agreement and allocated to the Company by MLIG were $149,
$157 and $159 for 1999, 1998 and 1997, respectively.
The Company has a general agency agreement with Merrill Lynch
Life Agency Inc. ("MLLA") whereby registered representatives of
MLPF&S, who are the Company's licensed insurance agents,
solicit applications for contracts to be issued by the Company.
MLLA is paid commissions for the contracts sold by such agents.
Commissions paid to MLLA were $3,069, $3,798 and $4,130 for
1999, 1998 and 1997, respectively. Substantially all of these
commissions were capitalized as deferred policy acquisitions
costs and are being amortized in accordance with the policy
discussed in Note 1.
In connection with the acquisition of a block of variable life
insurance business from Monarch Life Insurance Company
("Monarch Life"), the Company borrowed funds from Merrill Lynch
& Co. to partially finance the transaction. As of December 31,
1999 and 1998, the outstanding loan balance was $290 and $434,
respectively. Repayments made on this loan during 1999, 1998
and 1997 were $144, $722 and $1,919, respectively. Loan
interest was calculated at LIBOR plus 150 basis points.
Intercompany interest paid during 1999, 1998 and 1997 was $31,
$79 and $359, respectively.
Affiliated agreements generally contain reciprocal indemnity
provisions pertaining to each party's representations and
contractual obligations thereunder.
NOTE 7: STOCKHOLDER'S EQUITY AND STATUTORY REGULATIONS
Notice of intention to declare a dividend must be filed with
the New York Superintendent of Insurance who may disallow the
payment. During 1999 and 1998, no dividend request was filed.
During 1997, the Company paid a dividend of $15,000 to MLIG.
Statutory capital and surplus at December 31, 1999 and 1998,
was $61,717 and $55,851, respectively.
Applicable insurance department regulations require that the
Company report its accounts in accordance with statutory
accounting practices. Statutory accounting practices differ
from principles utilized in these financial statements as
follows: policy acquisition costs are expensed as incurred,
future policy benefit reserves are established using different
actuarial assumptions, there is no provision for deferred
income taxes, and securities are valued on a different basis.
The Company's statutory net income for 1999, 1998 and 1997 was
$9,030, $5,405 and $9,888, respectively.
The National Association of Insurance Commissioners ("NAIC")
utilizes the Risk Based Capital ("RBC") adequacy monitoring
system. The RBC calculates the amount of adjusted capital that
a life insurance company should have based upon that company's
risk profile. As of December 31, 1999, and 1998, based on the
RBC formula, the Company's total adjusted capital level was
in excess of the minimum amount of capital required to avoid
regulatory action.
In March 1998, the NAIC adopted the Codification of Statutory
Accounting Principles ("Codification"). The Codification,
which is intended to standardize regulatory accounting and
reporting for the insurance industry, is proposed to be
effective January 1, 2001. However, statutory accounting
principles will continue to be established by individual state
laws and permitted practices and it is uncertain when, or if,
the state of New York will require adoption of Codification for
the preparation of statutory financial statements.
Codification is not expected to have a material impact on the
Company's capital requirements or statutory financial
statements.
The New York Insurance Department has recently concluded the
fieldwork for the Company's normal triennial examination for
the period ended December 31, 1998. At this time, the Company
is awaiting the results of the examination. Management
believes that the results of the examination will not have a
material impact on the Company's statutory financial
statements.
NOTE 8: COMMITMENTS AND CONTINGENCIES
State insurance laws generally require that all life insurers
who are licensed to transact business within a state become
members of the state's life insurance guaranty association.
These associations have been established for the protection of
policyholders from loss (within specified limits) as a result
of the insolvency of an insurer. At the time an insolvency
occurs, the guaranty association assesses the remaining members
of the association an amount sufficient to satisfy the
insolvent insurer's policyholder obligations (within specified
limits). Based upon the public information available at this
time, management believes the Company has no material financial
obligations to state guaranty associations.
In the normal course of business, the Company is subject to
various claims and assessments. Management believes the
settlement of these matters would not have a material effect on
the financial position or results of operations of the Company.
NOTE 9. SEGMENT INFORMATION
In reporting to management, the Company's operating results are
categorized into two business segments: Life Insurance and
Annuities. The Company's Life Insurance segment consists of
variable life insurance products and interest-sensitive life
insurance products. The Company's Annuity segment consists of
variable annuities and interest-sensitive annuities.
The Company's organization is structured in accordance with its
two business segments. Each segment has its own administrative
service center that provides product support to the Company and
customer service support to the Company's policyholders.
Additionally, the marketing and sales management functions,
within MLIG, are organized according to these two business
segments.
The accounting policies of the business segments are the same
as those described in the summary of significant accounting
policies. All revenue and expense transactions are recorded at
the product level and accumulated at the business segment level
for review by management.
The "Other" category, presented in the following segment
financial information, represents assets and the earnings on
those assets that do not support policyholder liabilities.
The following table summarizes each business segment's
contribution to the consolidated amounts:
<TABLE>
<CAPTION>
Life
1999 Insurance Annuities Other Total
------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest spread (a) $ 1,640 $ 3,108 $ 2,639 $ 7,387
Other revenues 8,453 5,873 (119) 14,207
----------- ----------- ----------- -----------
Net revenues 10,093 8,981 2,520 21,594
----------- ----------- ----------- -----------
Policy benefits 618 14 - 632
Reinsurance premium ceded 1,822 - - 1,822
Amortization of deferred policy
acquisition costs 2,100 2,745 - 4,845
Other non-interest expenses 1,662 2,794 - 4,456
----------- ----------- ----------- -----------
Total non-interest expenses 6,202 5,553 - 11,755
----------- ----------- ----------- -----------
Net earnings before Federal income
tax provision 3,891 3,428 2,520 9,839
Income tax expense 1,332 1,036 882 3,250
----------- ----------- ----------- -----------
Net earnings $ 2,559 $ 2,392 $ 1,638 $ 6,589
=========== =========== =========== ===========
Balance Sheet Information:
Total assets $ 519,774 $ 862,187 $ 46,733 $1,428,694
Deferred policy acquisition costs 15,082 14,621 - 29,703
Policyholder liabilities and accruals 103,146 148,632 - 251,778
Other policyholder funds 633 562 - 1,195
</TABLE>
<TABLE>
<CAPTION>
Life
1998 Insurance Annuities Other Total
------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest spread (a) $ 789 $ 3,876 $ 3,052 $ 7,717
Other revenues 8,472 5,377 (363) 13,486
----------- ----------- ----------- -----------
Net revenues 9,261 9,253 2,689 21,203
----------- ----------- ----------- -----------
Policy benefits 1,570 60 - 1,630
Reinsurance premium ceded 1,705 - - 1,705
Amortization of deferred policy
acquisition costs 3,571 2,188 - 5,759
Other non-interest expenses 1,973 3,494 - 5,467
----------- ----------- ----------- -----------
Total non-interest expenses 8,819 5,742 - 14,561
----------- ----------- ----------- -----------
Net earnings before Federal income
tax provision (benefit) 442 3,511 2,689 6,642
Income tax expense (benefit) (7) 938 941 1,872
----------- ----------- ----------- -----------
Net earnings $ 449 $ 2,573 $ 1,748 $ 4,770
=========== =========== =========== ===========
Balance Sheet Information:
Total assets $ 484,322 $ 720,478 $ 43,182 $1,247,982
Deferred policy acquisition costs 15,325 14,417 - 29,742
Policyholder liabilities and accruals 103,926 168,306 - 272,232
Other policyholder funds 1,319 464 - 1,783
</TABLE>
<TABLE>
<CAPTION>
Life
1997 Insurance Annuities Other Total
------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest spread (a) $ 1,399 $ 6,060 $ 3,474 $ 10,933
Other revenues 7,759 7,172 80 15,011
----------- ----------- ----------- -----------
Net revenues 9,158 13,232 3,554 25,944
----------- ----------- ----------- -----------
Policy benefits 781 - - 781
Reinsurance premium ceded 1,584 - - 1,584
Amortization of deferred policy
acquisition costs 1,992 2,127 - 4,119
Other non-interest expenses 1,747 3,048 - 4,795
----------- ----------- ----------- -----------
Total non-interest expenses 6,104 5,175 - 11,279
----------- ----------- ----------- -----------
Net earnings before Federal income
tax provision 3,054 8,057 3,554 14,665
Income tax expense 987 2,742 1,244 4,973
----------- ----------- ----------- -----------
Net earnings $ 2,067 $ 5,315 $ 2,310 $ 9,692
=========== =========== =========== ===========
Balance Sheet Information:
Total assets $ 456,240 $ 635,673 $ 46,668 $1,138,581
Deferred policy acquisition costs 17,506 12,900 - 30,406
Policyholder liabilities and accruals 103,677 205,663 - 309,340
Other policyholder funds 974 967 - 1,941
</TABLE>
(a) Management considers investment income net of interest
credited to policyholders' account balances in evaluating
results.
The table below summarizes the Company's net revenues by
product for 1999, 1998 and 1997:
1999 1998 1997
---------- ---------- ----------
Life Insurance
Variable life $ 9,656 $ 9,045 $ 8,828
Interest-sensitive whole life 437 216 330
---------- ---------- ----------
Total Life Insurance 10,093 9,261 9,158
---------- ---------- ----------
Annuities
Variable annuities 8,291 6,240 4,673
Interest-sensitive annuities 690 3,013 8,559
---------- ---------- ----------
Total Annuities 8,981 9,253 13,232
---------- ---------- ----------
Other 2,520 2,689 3,554
---------- ---------- ----------
Total $ 21,594 $ 21,203 $ 25,944
========== ========== ==========
* * * * * *
<PAGE>
PART II. OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
ML Life Insurance Company of New York's By-Laws provide, in Article VII,
Section 7.1 as follows:
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND INCORPORATORS. To the
extent permitted by the law of the State of New York and subject to all
applicable requirements thereof:
a) any person made or threatened to be made a party to any action or
proceeding, whether civil or criminal, by reason of the fact that he, his
testator, or intestate, is or was a director, officer, employee or
incorporator of the Company shall be indemnified by the Company;
b) any person made or threatened to be made a party to any action or
proceeding, whether civil or criminal, by reason of the fact that he, his
testator or intestate serves or served any other organization in any
capacity at the request of the Company may be indemnified by the Company;
and
c) the related expenses of any such person in any other of said
categories may be advanced by the Company.
Any persons serving as an officer, director or trustee of a corporation,
trust or other enterprise, including the Registrant, at the request of Merrill
Lynch are entitled to indemnification from Merrill Lynch, to the fullest extent
authorized or permitted by law, for liabilities with respect to actions taken or
omitted by such persons in any capacity in which such persons serve Merrill
Lynch or such other corporation, trust or other enterprise. Any action initiated
by any such person for which indemnification is provided shall be approved by
the Board of Directors of Merrill Lynch prior to such initiation.
DIRECTORS' AND OFFICERS' INSURANCE
Merrill Lynch has purchased from Corporate Officers' and Directors'
Assurance Company directors' and officers' liability insurance policies which
cover, in addition to the indemnification described above, liabilities for which
indemnification is not provided under the By-Laws. The Company will pay an
allocable portion of the insurance premium paid by Merrill Lynch with respect to
such insurance policies.
NEW YORK BUSINESS CORPORATION LAW
In addition, Sections 722, 723 and 724 of the New York Business Corporation
Law generally provide that a corporation has the power (and in some instances
the obligation) to indemnify a director or officer of the corporation, or a
person serving at the request of the corporation as a director or officer of
another corporation or other enterprise against any judgments, amounts paid in
settlement, and reasonably incurred expenses in a civil or criminal action or
proceeding if the director or officer acted in good faith in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation (or, in the case of a criminal action or proceeding, if he or she in
addition had no reasonable cause to believe that his or her conduct was
unlawful).
Insofar as indemnification for liability arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing
II-1
<PAGE>
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 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.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
OFFICERS AND DIRECTORS
AS OF OCTOBER 19, 1999
DIRECTORS
John L. Steffens
E. Stanley O'Neal
George A. Schieren
OFFICERS
<TABLE>
<S> <C>
John L. Steffens Chairman of the Board and Chief
Executive Officer
George A. Schieren General Counsel
John C. Stomber Treasurer
Andrea L. Dulberg Secretary
</TABLE>
EXECUTIVE VICE PRESIDENTS
<TABLE>
<S> <C>
Thomas W. Davis E. Stanley O'Neal
Barry S. Friedberg Thomas H. Patrick
Edward L. Goldberg Winthrop H. Smith, Jr.
Jerome P. Kenney Roger M. Vasey
</TABLE>
II-2
<PAGE>
SENIOR VICE PRESIDENTS
<TABLE>
<S> <C> <C>
Harry P. Allex Michael J.P. Marks Robert D. Sherman
Daniel H. Bayly G. Kelly Martin James F. Shoaf
Rosemary T. Berkery Robert J. McCann Howard P. Sorgen
Michael J. Castellano John T. McGowan John C. Stomber
Michael R. Cowan Andrew J. Melnick G. Stephen Thoma
Richard A. Dunn Athanassios N. Michas Arthur L. Thomas
Ahmass L. Fakahany Joseph H. Moglia Anthony J. Vespa
Richard M. Fuscone Carlos M. Morales Kevan V. Watts
Donald N. Gershuny Hisashi Moriya Madeline A. Weinstein
J. Michael Giles Thomas O. Muller III Joseph T. Willett
Mark B. Goldfus Daniel T. Napoli
Allen N. Jones John Qua
Theresa Lang George A. Schieren
Howard A. Shallcross
</TABLE>
FIRST VICE PRESIDENTS
<TABLE>
<S> <C>
Charles P. Borkowski, Jr. Lawrence W. Roberts
Matthias B. Bowman Eric M. Rosenberg
Richard M. Drew Stanley Schaefer
Harry J. Ferguson Barry G. Skolnick
Richard K. Gordon Arthur H. Sobel
Brian C. Henderson Kenneth S. Spirer
Michael Koeneke John B. Sprung
Jack Levy Paul A. Stein
Frank M. Macioce, Jr. Nathan C. Thorne
Donald N. Malawsky James R. Vallone
Barry J. Mandel
VICE PRESIDENTS ASSISTANT VICE PRESIDENTS
Leonard E. Accardo Gregory R. Krolikowski
Rudley B. Anthony Edward A. Mallaney
Joseph A. Boccuzzi ASSISTANT SECRETARIES
Robert G. Dieckmann Darryl W. Colletti
Freddy Enriquez Lawrence M. Egan, Jr.
Edward J. Gallagher, Jr. Andrea Lowenthal
Scott C. Harrison Margaret E. Nelson
Peter C. Lee
Richard D. Lilleston
Daniel R. Mayo
Avadhesh K. Nigam
David D. Northrop
George A. Ruth
John M. Sabatino
Michael S. Schreier
John P. Smith
</TABLE>
II-3
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The Prospectus consisting of 115 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)
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C> <C>
(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)
(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)
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C> <C>
(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)
(i) Form of Participation Agreement among ML Life Insurance
Company of New York, Hotchkis and Wiley Variable Trust, and
Hotchkis and Wiley (Incorporated by reference to ML of New
York Variable Annuity Separate Account A's Post-Effective
Amendment No. 12 to Form N-4 Registration No. 33-43654 Filed
May 1, 1998)
(j) Form of Participation Agreement between ML Life Insurance
Company of New York and Mercury Asset Management V.I. Funds,
Inc. (Incorporated by reference to ML of New York Variable
Annuity Separate Account A's Post-Effective Amendment
No. 14 to Form N-4 Registration No. 33-43654 Filed
April 16, 1999)
(k) Form of Participation Agreement Between Merrill Lynch
Variable Series Funds, Inc. and ML Life Insurance Company of
New York (Incorporated by Reference to ML of New York
Variable Annuity Separate Account A's Post-Effective
Amendment No. 10 to Form N-4, Registration No. 33-43654
Filed December 9, 1996).
(l) Form of Amendment to Participation Agreement Between Merrill
Lynch Variable Series Funds, Inc. and ML Life Insurance
Company of New York (Incorporated by Reference to ML of New
York Variable Annuity Separate Account A's Registration
Statement on Form N-4, Registration No. 333-34894 Filed
April 17, 2000.)
(m) Amendment to the 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 of New York Variable Annuity Separate
Account A's Registration Statement on Form N-4, Registration
No. 333-34894 Filed April 17, 2000.)
(n) Form of Amendment to 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 of New York Variable Annuity Separate
Account A's Post-Effective Amendment No. 12 to Form N-4,
Registration No. 33-43654 Filed May 1, 1998.)
(o) Amendment to the Participation Agreement Among ML Life
Insurance Company of New York, Alliance Capital Management
L.P., and Alliance Fund Distributors, Inc. Dated June 5,
1998. (Incorporated by Reference to ML of New York Variable
Life Separate Account II's Post-Effective Amendment No. 9 to
Form S-6, Registration No. 33-51702 Filed April 28, 2000.)
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C> <C> <C>
(p) Amendment to the Participation Agreement Among ML Life
Insurance Company of New York, Alliance Capital Management
L.P., and Alliance Fund Distributors, Inc. Dated July 22,
1999. (Incorporated by Reference to ML of New York Variable
Life Separate Account II's Post-Effective Amendment No. 9 to
Form S-6, Registration No. 33-51702 Filed April 28, 2000.)
(q) Amendment to Participation Agreement Between ML Life
Insurance Company of New York and Hotchkis and Wiley
Variable Trust Dated July 22, 1999. (Incorporated by
Reference to ML of New York Variable Life Separate Account
II's Post-Effective Amendment No. 9 to Form S-6,
Registration No. 33-51702 Filed April 28, 2000.)
(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)
(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. 33-51702 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. 33-51702 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)
</TABLE>
II-7
<PAGE>
<TABLE>
<S> <C> <C> <C>
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 Registrant's Post-Effective Amendment No. 2 to
Registrant's Form S-6 Registration No. 33-61670 Filed March
1, 1994)
(j) Power of Attorney of Allen N. Jones (Incorporated by
Reference to 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)
</TABLE>
II-8
<PAGE>
<TABLE>
<S> <C> <C> <C>
(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)
(q) Power of Attorney of Richard M. Drew
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-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
ML of New York Variable Life Separate Account II, hereby certifies that this
Post-Effective Amendment No. 9 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. 9 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 24th day of April 2000.
ML of New York Variable Life Separate Account II
(Registrant)
By: ML Life Insurance Company of New York
(Depositor)
<TABLE>
<S> <C> <C> <C>
Attest: /s/ Edward W. Diffin, Jr. By: /s/ Barry G. Skolnick
-------------------------------- --------------------------------
Edward W. Diffin, Jr. Barry G. Skolnick
Vice President Senior Vice President
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 9 to the Registration Statement has been signed
below by the following persons in the capacities indicated on April 24, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
*
- ------------------------------ Chairman of the Board, President, and Chief
Anthony J. Vespa Executive Officer
* Director, Senior Vice President, Chief
- ------------------------------ Financial Officer, Chief Actuary, and
Joseph E. Crowne, Jr. Treasurer
*
- ------------------------------ Director, Senior Vice President, and Chief
David M. Dunford Investment Officer
*
- ------------------------------ Director and Senior Vice President
Gail R. Farkas
*
- ------------------------------ Director, Vice President, and Senior Counsel
Michael P. Cogswell
*
- ------------------------------ Director
Frederick J.C. Butler
</TABLE>
II-10
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
*
- ------------------------------ Director
Richard M. Drew
*
- ------------------------------ Director
Robert L. Israeloff
*
- ------------------------------ Director
Allen N. Jones
*
- ------------------------------ Director
Robert A. King
*
- ------------------------------ Director
Stanley C. Peterson
*
- ------------------------------ Director
Irving M. Pollack
*
- ------------------------------ Director
Cynthia Kahn Sherman
</TABLE>
<TABLE>
<S> <C> <C>
*By: /s/ Barry G. Skolnick In his own capacity as Director, Senior Vice
------------------------- President, Secretary, General Counsel, and
Barry G. Skolnick as Attorney-In-Fact
</TABLE>
II-11
<PAGE>
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
7.(q) Power of Attorney of Richard M. Drew
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-12
<PAGE>
EXHIBIT 6
[ML LIFE INSURANCE COMPANY OF NEW YORK]
April 24, 2000
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. 9 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>
EXHIBIT 7(q)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Richard M. Drew, a member of the
Board of Directors of ML Life Insurance Company of New York (the "Company"),
whose signature appears below, constitutes and appoints Barry G. Skolnick and
Michael P. Cogswell, respectively, and each of them, his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all Registration Statements and Amendments
thereto, and to file the same, with all exhibits thereto, and other documents
in connection therewith, under the Investment Company Act of 1940, where
applicable, and the Securities Act of 1933, respectively, with the Securities
and Exchange Commission, for the purpose of registering any and all variable
life and variable annuity separate accounts (collectively "Separate
Accounts"), of the Company that may be established in connection with the
issuance of any and all variable life and variable annuity contracts funded
by such Separate Accounts, granting unto said attorney-in-fact and agent, and
each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done.
Date: March 29, 2000 /s/ RICHARD M. DREW
--------------------------------
Richard M. Drew
State of New York)
County of Queens)
On the 29 day of March, 2000, before me came Richard M. Drew, Director of
ML Life Insurance Company of New York, to me known to be said person and he
signed the above Power of Attorney on behalf of ML Life Insurance Company of New
York.
/s/ Peter A. Fermoselle
[SEAL] -------------------------------
Notary Public
Peter A. Fermoselle
Notary Public, State of New York
No. 01-4963227
Qualified in Queens County
Cert. filed in Nassau County
Commission Expires 6/10/2000
<PAGE>
EXHIBIT 8(a)
CONSENT
I hereby consent to the reference to my name under the heading "Legal
Matters" in the prospectus included in Post-Effective Amendment No. 9 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).
<TABLE>
<S> <C>
/s/ BARRY G. SKOLNICK
------------------------------------------------
Barry G. Skolnick, Esq.
Senior Vice President and General Counsel
</TABLE>
April 24, 2000
<PAGE>
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. 9 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.
<TABLE>
<S> <C>
/s/ SUTHERLAND ASBILL & BRENNAN LLP
------------------------------------------------
SUTHERLAND ASBILL & BRENNAN LLP
</TABLE>
Washington, D.C.
April 24, 2000
<PAGE>
EXHIBIT 8(d)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 9 to
Registration Statement No. 33-51794 of ML of New York Variable Life Separate
Account II on Form S-6 of our reports on (i) ML Life Insurance Company of New
York dated February 28, 2000, and (ii) ML of New York Variable Life
Separate Account II dated February 14, 2000, 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 24, 2000
