<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 4, 1996
REGISTRATION NO. 33-43053
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 8 [X]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 10 [X]
(CHECK APPROPRIATE BOX OR BOXES)
----------------------------------
MERRILL LYNCH LIFE VARIABLE ANNUITY
SEPARATE ACCOUNT
(EXACT NAME OF REGISTRANT)
MERRILL LYNCH LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(609) 282-1429
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
----------------------------------
BARRY G. SKOLNICK, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
MERRILL LYNCH LIFE INSURANCE COMPANY
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
STEPHEN E. ROTH, ESQ.
SUTHERLAND, ASBILL & BRENNAN, L.L.P.
1275 PENNSYLVANIA AVENUE, NW
WASHINGTON, D.C. 20004-2404
----------------------------------
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, an indefinite
amount of securities has been registered under the Securities Act of 1933 by
this Registration Statement. The Rule 24f-2 notice for fiscal year 1995 was
filed on February 28, 1996.
It is proposed that this filing will become effective (check appropriate space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on December 6, 1996 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on __________ pursuant to paragraph (a)(1) of Rule 485
(date)
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The prospectus and the statement of additional information incorporated by
reference therein contained in this registration statement also relate to
variable annuity contracts which are covered by an earlier registration
statement, File No. 33-43052.
Exhibit Index can be found on page C-7
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CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495(a) UNDER THE 1933 ACT)
<TABLE>
<CAPTION>
N-4 ITEM NUMBER AND CAPTION LOCATION
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PART A
1. Cover Page................................. Cover Page
2. Definitions................................ Definitions
3. Synopsis................................... Capsule Summary of the Contract
4. Condensed Financial Information............ Condensed Financial Information
5. General Description of Registrant,
Depositor, and Portfolio Companies......... Merrill Lynch Life Insurance Company; The
Variable Account; Investments of the
Variable Account; Variable Account Voting
Rights
6. Deductions................................. Capsule Summary of the Contract (Charges
and Deductions; Withdrawals); Charges and
Deductions; Description of the Contract
(Account Transfers; Withdrawals)
7. General Description of Variable Annuity
Contracts.................................. Capsule Summary of the Contract (The
Variable Account); Investments of the
Variable Account; Description of the
Contract; Merrill Lynch Life Insurance
Company; Variable Account Voting Rights;
State Regulation
8. Annuity Period............................. Capsule Summary of the Contract (Annuity
Payments); Description of the Contract
(Annuity Provisions)
9. Death Benefit.............................. Capsule Summary of the Contract (Payment on
Death); Description of the Contract
(Accumulation Provisions)
10. Purchases and Contract Value............... Capsule Summary of the Contract (Premiums);
Description of the Contract (Premiums);
Reports to Contract Owners
11. Redemptions................................ Capsule Summary of the Contract
(Withdrawals; Ten Day Review); Charges and
Deductions; (Contingent Deferred Sales
Charge); Description of the Contract;
(Premiums; Accumulation Provisions;
Withdrawals; Ten Day Right to Review)
12. Taxes...................................... Capsule Summary of the Contract; (Charges
and Deductions); (Premium Taxes); Federal
Income Taxes
13. Legal Proceedings.......................... Legal Proceedings
14. Table of Contents of the Statement of
Additional Information..................... Table of Contents of the Statement of
Additional Information
</TABLE>
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<TABLE>
<S> <C>
PART B
15. Cover Page................................. Cover Page
16. Table of Contents.......................... Table of Contents
17. General Information and History............ Part A: Merrill Lynch Life Insurance
Company
18. Services................................... Part B: Administrative Services
Arrangements
19. Purchase of Securities Being Offered....... Part A: Distribution of Contracts
20. Underwriters............................... Part B: Principal Underwriter
21. Calculation of Performance Data............ Not Applicable
22. Annuity Payments........................... Part A: Capsule Summary of the Contract
(Annuity Payments); Description of the
Contract (Annuity Provisions)
23. Financial Statements....................... Part A: Financial Statements; Part B:
Financial Statements; Financial Statements
of Merrill Lynch Life Variable Annuity
Separate Account; Financial Statements of
Merrill Lynch Life Insurance Company.
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
item, so numbered in Part C to this Registration Statement.
<PAGE> 4
PART A
INFORMATION REQUIRED IN A PROSPECTUS
<PAGE> 5
PROSPECTUS
DECEMBER 6, 1996
MERRILL LYNCH LIFE VARIABLE ANNUITY
SEPARATE ACCOUNT
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
FLEXIBLE PREMIUMS--NONPARTICIPATING
ISSUED BY
MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock, Arkansas 72201
Service Center: P.O. Box 44222, Jacksonville, Florida 32231-4222
4804 Deer Lake Drive East, Jacksonville, Florida 32246
Phone: (800) 535-5549
OFFERED THROUGH
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
The individual deferred variable annuity contract described in this Prospectus
(the "Contract") is designed to provide comprehensive and flexible ways to
invest and to create a source of income protection for later in life through the
payment of annuity benefits. An annuity is intended to be a long term
investment. Contract owners should consider their need for deferred income
before purchasing the Contract. The Contract is designed to provide annuity
payments in connection with retirement plans that may or may not qualify for
special federal income tax treatment under the Internal Revenue Code.
Both accumulation of the contract values and annuity payments may be on either a
fixed or variable basis, or on a combination fixed and variable basis. Benefits
on a fixed basis are provided by premiums and contract values allocated to the
Fixed Account. (See THE FIXED ACCOUNT on page 20.) Benefits on a variable basis
are provided by premiums and contract values allocated to the Variable Account.
Such variable benefits are not guaranteed as to fixed-dollar amount and will
vary according to investment performance. THIS PROSPECTUS DESCRIBES ONLY THE
VARIABLE ACCOUNT FEATURES OF THE CONTRACT EXCEPT WHERE SPECIFIC REFERENCE IS
MADE TO THE FIXED ACCOUNT.
The Variable Account is a segregated investment account of Merrill Lynch Life
Insurance Company ("Merrill Lynch Life"), which has been named the Merrill Lynch
Life Variable Annuity Separate Account. Premiums and contract values allocated
to the Variable Account will be invested in certain Funds that the contract
owner is eligible to select from the Merrill Lynch Variable Series Funds, Inc.
The contract owner bears the full investment risk with respect to such
investments.
This Prospectus contains information about the Contract and the Variable Account
that a prospective contract owner should know before investing. It should be
read and retained for future reference. Additional information about the
Contract and Variable Account is contained in a Statement of Additional
Information, dated December 6, 1996, which has been filed with the Securities
and Exchange Commission and is incorporated herein by reference. The Statement
of Additional Information is available on request and without charge by writing
or calling Merrill Lynch Life's Service Center at the address or phone number
set forth above. The table of contents for the Statement of Additional
Information is included on page 32 of this Prospectus.
THE PURCHASE OF THIS CONTRACT INVOLVES CERTAIN RISKS. BECAUSE IT IS A VARIABLE
ANNUITY, THE VALUE OF THE CONTRACT REFLECTS THE INVESTMENT PERFORMANCE OF THE
SELECTED INVESTMENT OPTIONS. INVESTMENT RESULTS CAN VARY BOTH UP AND DOWN AND
CAN EVEN DECREASE THE VALUE OF PREMIUM PAYMENTS. THEREFORE, CONTRACT OWNERS
COULD LOSE ALL OR PART OF THE MONEY THEY HAVE INVESTED. MERRILL LYNCH LIFE DOES
NOT GUARANTEE THE VALUE OF THE CONTRACT. RATHER, CONTRACT OWNERS BEAR ALL
INVESTMENT RISKS.
AN ANNUITY IS INTENDED TO BE A LONG TERM INVESTMENT. WITHDRAWALS OR SURRENDER OF
THE CONTRACT PREMATURELY MAY RESULT IN SUBSTANTIAL PENALTIES. CONTRACT OWNERS
SHOULD CONSIDER THEIR INCOME NEEDS BEFORE PURCHASING THE CONTRACT.
ALL WITHDRAWALS FROM AND SURRENDER OF THE CONTRACT ARE SUBJECT TO TAX, AND IF
TAKEN BEFORE AGE 59 1/2 MAY ALSO BE SUBJECT TO A 10% FEDERAL PENALTY TAX.
THIS CONTRACT PROVIDES A GUARANTEED DEATH BENEFIT THAT IS PAYABLE ONLY UPON THE
DEATH OF THE CONTRACT OWNER.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS
ATTACHED TO A CURRENT PROSPECTUS FOR MERRILL LYNCH VARIABLE SERIES
FUNDS, INC., WHICH SHOULD ALSO BE READ AND KEPT FOR REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
DEFINITIONS........................................................................... 4
CAPSULE SUMMARY OF THE CONTRACT....................................................... 5
FEE TABLE............................................................................. 8
CONDENSED FINANCIAL INFORMATION....................................................... 10
MERRILL LYNCH LIFE INSURANCE COMPANY.................................................. 12
THE VARIABLE ACCOUNT.................................................................. 12
FINANCIAL STATEMENTS.................................................................. 12
THE REINSURANCE AGREEMENT............................................................. 13
INVESTMENTS OF THE VARIABLE ACCOUNT................................................... 13
Eligible Funds...................................................................... 13
Reserve Assets Fund.............................................................. 14
Prime Bond Fund.................................................................. 14
High Current Income Fund......................................................... 14
Quality Equity Fund.............................................................. 15
Equity Growth Fund............................................................... 15
Global Strategy Focus Fund....................................................... 15
Natural Resources Focus Fund..................................................... 15
American Balanced Fund........................................................... 16
Index 500 Fund................................................................... 16
International Equity Focus Fund.................................................. 16
Basic Value Focus Fund........................................................... 16
Reinvestment........................................................................ 16
Substitution of Investments......................................................... 16
CHARGES AND DEDUCTIONS................................................................ 16
Contingent Deferred Sales Charge.................................................... 16
Contract Administration Charge...................................................... 17
Waiver of Charges................................................................... 17
Expense Risk Charge................................................................. 17
Mortality Risk Charge............................................................... 18
Distribution Expense Charge......................................................... 18
Payments of Charges and Deductions.................................................. 18
Premium Taxes....................................................................... 18
Fund Expenses....................................................................... 18
DESCRIPTION OF THE CONTRACT........................................................... 19
Premiums............................................................................ 19
Accumulation Provisions............................................................. 19
Accumulation Units............................................................... 19
Value of an Accumulation Unit.................................................... 19
Net Investment Factor............................................................ 19
Valuation Periods................................................................ 20
The Fixed Account................................................................... 20
Payment on Death.................................................................... 20
Beneficiary......................................................................... 21
Ownership........................................................................... 21
Account Transfers................................................................... 21
Withdrawals......................................................................... 22
Suspension of Payments.............................................................. 22
</TABLE>
2
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<TABLE>
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PAGE
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Annuity Provisions.................................................................. 22
Variable Annuity................................................................. 22
Selection of Annuity Date and Annuity Options.................................... 22
Change of Annuity Date or Annuity Option......................................... 22
Annuity Options.................................................................. 23
Minimum Annuity Payments......................................................... 23
First Variable Annuity Payment................................................... 23
Age Adjustment................................................................... 23
Number of Annuity Units.......................................................... 24
Value of Each Annuity Unit....................................................... 24
Subsequent Variable Annuity Payments............................................. 24
Assumed Investment Rate.......................................................... 24
Proof of Age, Sex and Survival................................................... 24
Notices and Elections............................................................... 24
Amendment of Contract............................................................... 24
Ten Day Right to Review............................................................. 25
FEDERAL INCOME TAXES.................................................................. 25
Introduction........................................................................ 25
Merrill Lynch Life's Tax Status..................................................... 25
Taxation of Annuities in General.................................................... 25
In General....................................................................... 25
Required Distributions........................................................... 25
Non-natural Owners............................................................... 26
Distributions.................................................................... 26
Penalty Tax...................................................................... 27
Internal Revenue Service Diversification Standards.................................. 27
Transfers, Assignments, or Exchanges of a Contract.................................. 27
Possible Changes in Taxation........................................................ 27
Other Tax Consequences.............................................................. 28
Qualified Plans..................................................................... 28
Individual Retirement Annuities and Individual Retirement Accounts............... 28
Pension and Profit Sharing Plans................................................. 28
Tax-Sheltered Annuities.......................................................... 29
Section 457 Deferred Compensation ("Section 457") Plans.......................... 29
Withholding...................................................................... 29
VARIABLE ACCOUNT VOTING RIGHTS........................................................ 30
REPORTS TO CONTRACT OWNERS............................................................ 30
DISTRIBUTION OF CONTRACTS............................................................. 30
STATE REGULATION...................................................................... 31
LEGAL PROCEEDINGS..................................................................... 31
EXPERTS............................................................................... 31
REGISTRATION STATEMENTS............................................................... 31
LEGAL MATTERS......................................................................... 31
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.............................. 32
APPENDIX.............................................................................. 33
</TABLE>
------------------------
No person has been authorized to give any information or to make any
representation other than that contained in this Prospectus in connection with
the offer contained in this Prospectus and, if given or made, such information
or representation must not be relied upon as having been authorized. This
Prospectus does not constitute an offer of, or solicitation of an offer to
acquire, any variable annuity contracts offered by this Prospectus in any
jurisdiction to anyone to whom it is unlawful to make such an offer or
solicitation in such jurisdiction.
3
<PAGE> 8
DEFINITIONS
accumulation unit: An index used to compute the value of each contract owner's
interest in the Variable Account prior to the annuity date. (See page 19.)
annuitant: The person on whose continuation of life annuity payments may
depend.
annuity: A series of predetermined periodic payments.
annuity date: The date on which annuity payments are to begin. (See page 22.)
annuity unit: An index used to compute variable annuity payments. (See page
23.)
beneficiary: The person to whom payment is to be made on the death of the
contract owner or annuitant. There may be both a contract owner's beneficiary
and an annuitant's beneficiary if the contract owner is not the annuitant.
Contract: A Contract offered by this Prospectus.
contract owner: The person entitled to exercise all rights under a Contract.
(See page 21.)
contract value: The sum of the value of a contract owner's Fixed Account and a
contract owner's interest in the Variable Account.
Funds: The mutual funds, or separate investment portfolios within a series
mutual fund, designated as eligible investments for the Variable Account. (See
page 13.)
fixed annuity: A series of periodic payments of predetermined amounts that do
not vary with investment experience.
net investment factor: An index used to measure the investment performance of a
subaccount of the Variable Account from one valuation period to the next. (See
page 19.)
nonqualified contract: A Contract issued in connection with a nonqualified
plan.
nonqualified plan: A retirement plan other than a qualified plan.
premiums: The money the contract owner pays Merrill Lynch Life for a Contract.
(See page 19.)
qualified contract: A Contract issued in connection with a qualified plan.
qualified plan: A retirement plan that receives favorable tax treatment under
Section 401, 403, 404, 408, 457 or any similar provision of the Internal Revenue
Code. (See page 28.)
Variable Account: A segregated investment account of Merrill Lynch Life
Insurance Company, named the Merrill Lynch Life Variable Annuity Separate
Account. (See page 12.)
subaccount: A division of the Variable Account consisting of the shares of a
particular Fund held by the Variable Account for all Contracts having a similar
tax status. (See page 12.)
valuation period: The interval from one valuation day of a Fund to the next
valuation day, measured from the time each day the Fund is valued. (See page
20.)
variable annuity: A series of periodic payments that vary in amount according
to investment experience. (See page 22.)
4
<PAGE> 9
CAPSULE SUMMARY OF THE CONTRACT
The following capsule summary is intended to provide a brief overview of the
Contract. More detailed information about the Contract can be found in the
sections of this Prospectus that follow, all of which should be read in their
entirety.
THE VARIABLE ACCOUNT
Premiums will be allocated to the Merrill Lynch Life Variable Annuity Separate
Account (the "Variable Account") a segregated investment account, or to the
Fixed Account described on page 20, as directed by the contract owner. The
Variable Account is divided into subaccounts corresponding to the Funds in which
premiums may be invested. For the first 14 days following the date of issue, all
premiums allocable to the Variable Account will be allocated to the Reserve
Assets Fund subaccount. Thereafter, the contract owner's interest in the
Variable Account will be reallocated to the subaccounts selected by the contract
owner. In the Commonwealth of Pennsylvania, all premiums will be invested as of
the date of issue in the subaccounts selected by the contract owner. The
contract owner may change the selection later, subject to certain conditions.
The contract value and the amount of the monthly annuity payments will reflect
the investment performance of the Funds selected. (See THE VARIABLE ACCOUNT on
page 12 and ACCOUNT TRANSFERS on page 21.)
THE FUNDS
The Funds in which premiums currently may be invested are certain separate
investment portfolios of the Merrill Lynch Variable Series Funds, Inc. They are
the Merrill Lynch Reserve Assets Fund, Prime Bond Fund, High Current Income
Fund, Quality Equity Fund, Equity Growth Fund, Global Strategy Focus Fund,
Natural Resources Focus Fund, American Balanced Fund, Index 500 Fund,
International Equity Focus Fund, and Basic Value Focus Fund. (See INVESTMENTS OF
THE VARIABLE ACCOUNT on page 13.)
RETIREMENT PLANS
The Contract may be issued pursuant to nonqualified retirement plans or plans
qualifying for special tax treatment as "H.R. 10" plans, Individual Retirement
Annuities or Individual Retirement Accounts, corporate pension and
profit-sharing plans, Tax-Sheltered Annuities or Section 457 deferred
compensation ("Section 457") plans. For each Fund, there is one subaccount for
nonqualified plans and one subaccount for qualified plans. (See QUALIFIED PLANS
on page 28.)
PREMIUMS
The full amount of all premiums will be invested initially. There is no
"front-end load." However, certain charges and deductions will be made from the
contract value. (See CHARGES AND DEDUCTIONS below.)
The Contract permits premiums to be paid on a flexible basis at any time in any
amount meeting Merrill Lynch Life's minimum requirements. The minimum initial
premium Merrill Lynch Life will accept is $1,500 for nonqualified Contracts and
$10 for qualified Contracts. For subsequent premiums, the minimum amount for
nonqualified Contracts is $300 ($50 in Tennessee) and the minimum amount for
qualified Contracts is the same as for the initial premium. (See PREMIUMS on
page 19.)
CHARGES AND DEDUCTIONS
A contingent deferred sales charge is deducted in the event of withdrawal of
contract values, subject to certain exceptions. If the contingent deferred sales
charge applies, it will equal the lesser of (a) 5% of the sum of the premiums
paid within 7 years prior to the date of withdrawal, adjusted for any prior
withdrawals, or (b) 5% of the amount withdrawn. This charge is paid to permit
Merrill Lynch Life to recover sales expenses it has incurred. Under no
circumstances will the charges ever exceed 5% of total premiums. (See CONTINGENT
DEFERRED SALES CHARGE on page 16.)
On each contract anniversary on or prior to the annuity date, Merrill Lynch Life
will deduct a contract administration charge of $30 from the contract value. It
will also be deducted upon full withdrawal of the
5
<PAGE> 10
contract value if such withdrawal is not on a contract anniversary. This charge
is made to reimburse Merrill Lynch Life for expenses related to administration
of the Contracts. (See CONTRACT ADMINISTRATION CHARGE on page 17.)
Merrill Lynch Life will deduct a daily expense risk charge. For nonqualified
Contracts, the charge will be equal to an annual rate of 0.50% of the sum of the
daily net asset values of all nonqualified subaccounts. For qualified Contracts,
the rate will be 0.20% of the sum of the daily net asset values of all qualified
subaccounts. This charge is made to compensate Merrill Lynch Life for the risk
of guaranteeing not to increase the contract administration charge regardless of
actual administrative costs. (See EXPENSE RISK CHARGE on page 17.)
Merrill Lynch Life will deduct a daily distribution expense charge equal to an
annual rate of 0.05% of the daily net asset value of the Variable Account. This
charge compensates Merrill Lynch Life in part for expenses incurred distributing
the Contracts. (See DISTRIBUTION EXPENSE CHARGE on page 18.) Merrill Lynch Life
will also deduct a daily mortality risk charge equal to an annual rate of 0.75%
of the daily net asset value of the Variable Account. This charge is made to
compensate Merrill Lynch Life for the mortality guarantees made under the
Contract. (See MORTALITY RISK CHARGE on page 18.)
Premium taxes payable to any government entity will be deducted at the annuity
date. Currently, premium taxes range from 0% to 5%. In those jurisdictions that
do not allow an insurance company to reduce its current taxable premium income
by the amount of any withdrawal, surrender or death benefit paid, Merrill Lynch
Life will also deduct a charge for these taxes on any withdrawal, surrender or
death benefit effected under the Contract. (See PREMIUM TAXES on page 18.)
ANNUITY PAYMENTS
Monthly annuity payments will start on the annuity date. The contract owner may
select the annuity date. He or she may also select an annuity payment option and
a different payment frequency. The contract owner may change his or her
selections later. (See CHANGE OF ANNUITY DATE OR ANNUITY OPTION on page 22.) The
amount of each variable annuity payment will depend on the investment
performance of the Funds the contract owner selects.
If the net contract value at the annuity date is less than $5,000 ($3,500 for
qualified Contracts), Merrill Lynch Life may pay the contract value in a lump
sum in lieu of annuity payments. For tax consequences of a lump sum payment, see
TAXATION OF ANNUITIES IN GENERAL on page 25. If any annuity payment would be
less than $50, Merrill Lynch Life may change the frequency of payments to such
intervals as will result in payments of at least $50. (See MINIMUM ANNUITY
PAYMENTS on page 23.)
ACCOUNT TRANSFERS
The contract owner may transfer all or part of the contract value between the
Variable Account and the Fixed Account and among subaccounts of the Variable
Account, subject to certain limitations. (See ACCOUNT TRANSFERS on page 21.) For
Contracts issued prior to April 30, 1986 and reinsured by Merrill Lynch Life,
see the Appendix for special provisions.
PAYMENT ON DEATH
If either the annuitant or the contract owner dies prior to the annuity date,
Merrill Lynch Life will pay the greater of (a) the sum of all premiums paid
(adjusted for any withdrawals) or (b) the then current contract value. No
contingent deferred sales charge will be imposed. (See PAYMENT ON DEATH on page
20.)
WITHDRAWALS
The contract owner may withdraw all or part of the accumulated contract value
prior to the earlier of the annuity date or the death of the annuitant. The
amount the contract owner withdraws must be at least $500. If the Contract is to
continue in force, the remaining contract value must be at least $500. If these
dollar limitations relating to partial withdrawals would prevent the contract
owner from making a partial withdrawal, he or she may nevertheless make a full
withdrawal of the contract value. A contingent deferred sales charge and a
contract administration charge may be imposed. (See WITHDRAWALS on page 22.)
Withdrawals will
6
<PAGE> 11
decrease the contract value. Withdrawals are subject to tax and prior to age
59 1/2 may also be subject to a 10% federal penalty tax. Revenue Code (see
TAXATION OF ANNUITIES IN GENERAL on page 25), and withdrawals under
Tax-Sheltered Annuities are restricted (see TAX-SHELTERED ANNUITIES on page 29).
TEN DAY REVIEW
When the contract owner receives the Contract, it should be reviewed carefully
to make sure it is what the contract owner intended to purchase. Generally,
within 10 days after the contract owner receives the Contract, he or she may
return it for a refund. Some states allow a longer period of time to return the
Contract. The Contract must be delivered to Merrill Lynch Life's Service Center
or to the Financial Consultant who sold it for a refund to be made. Merrill
Lynch Life will then refund to the contract owner the greater of all premiums
paid into the Contract or the contract value as of the date the Contract is
returned. For contracts issued in the Commonwealth of Pennsylvania, Merrill
Lynch Life will refund the contract owner's premiums allocated to the Fixed
Account plus the value of the contract owner's interest in the Variable Account
as of the date the Contract is returned. The Contract will then be deemed void.
7
<PAGE> 12
FEE TABLE
<TABLE>
<CAPTION>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
----------------------------------------------------------------------------------------------------
HIGH GLOBAL
RESERVE CURRENT QUALITY EQUITY STRATEGY NATURAL
ASSET PRIME INCOME EQUITY GROWTH FOCUS RESOURCES
FUND BOND FUND FUND FUND FUND FUND(f) FOCUS FUND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONTRACT OWNER TRANSACTION
EXPENSES:
Contingent Deferred Sales
Charge (as a percentage
of purchase payments or
amount withdrawn, as
applicable)(a).......... 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
ANNUAL CONTRACT
ADMINISTRATION CHARGE(b).. $30.00 $30.00 $30.00 $30.00 $30.00 $30.00 $30.00
SEPARATE ACCOUNT ANNUAL
EXPENSES (AS A PERCENTAGE
OF NET ASSETS):
Expense Risk Charge(c).... 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Mortality Risk Charge(d).. 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
Distribution Expense
Charge(d)............... 0.05% 0.05% 0.05% 0.05% 0.05% 0.05% 0.05%
----- ----- ----- ----- ----- ----- -----
TOTAL SEPARATE ACCOUNT
ANNUAL EXPENSES........... 1.30% 1.30% 1.30% 1.30% 1.30% 1.30% 1.30%
===== ===== ===== ===== ===== ===== =====
<CAPTION>
INTERNATIONAL BASIC
AMERICAN EQUITY VALUE
BALANCED INDEX 500 FOCUS FOCUS
FUND FUND FUND FUND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
CONTRACT OWNER TRANSACTION
EXPENSES:
Contingent Deferred Sales
Charge (as a percentage
of purchase payments or
amount withdrawn, as
applicable)(a).......... 5.00% 5.00% 5.00% 5.00%
ANNUAL CONTRACT
ADMINISTRATION CHARGE(b).. $30.00 $30.00 $30.00 $30.00
SEPARATE ACCOUNT ANNUAL
EXPENSES (AS A PERCENTAGE
OF NET ASSETS):
Expense Risk Charge(c).... 0.50% 0.50% 0.50% 0.50%
Mortality Risk Charge(d).. 0.75% 0.75% 0.75% 0.75%
Distribution Expense
Charge(d)............... 0.05% 0.05% 0.05% 0.05%
----- ----- ------ -----
TOTAL SEPARATE ACCOUNT
ANNUAL EXPENSES........... 1.30% 1.30% 1.30% 1.30%
===== ===== ====== =====
</TABLE>
<TABLE>
<CAPTION>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
-------------------------------------------------------------------------------------------
HIGH GLOBAL NATURAL
RESERVE PRIME CURRENT QUALITY EQUITY STRATEGY RESOURCES AMERICAN
ASSETS BOND INCOME EQUITY GROWTH FOCUS FOCUS BALANCED
FUND FUND FUND FUND FUND FUND(f) FUND FUND
------- ----- ------- ------- ------ -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MERRILL LYNCH VARIABLE
SERIES FUNDS, INC. ANNUAL
EXPENSES FOR THE YEAR
ENDED DECEMBER 31, 1995
(AS A PERCENTAGE OF
PORTFOLIO COMPANY NET
ASSETS):
Investment Advisory
Fees(e)................. 0.50% 0.45% 0.50% 0.46% 0.75% 0.65% 0.65% 0.55%
Other Expenses............ 0.11% 0.05% 0.05% 0.05% 0.06% 0.07% 0.13% 0.06%
------- ----- ------- ------- ------ --- --- ---
TOTAL MERRILL LYNCH
VARIABLE SERIES FUNDS,
INC. ANNUAL OPERATING
EXPENSES.................. 0.61% 0.50% 0.55% 0.51% 0.81% 0.72% 0.78% 0.61%
======= ====== ======= ======= ======= ======== ========= =========
<CAPTION>
INTERNATIONAL BASIC
INDEX EQUITY VALUE
500 FOCUS FOCUS
FUND(g) FUND FUND
------- ------------- -----
<S> <C> <C> <C>
MERRILL LYNCH VARIABLE
SERIES FUNDS, INC. ANNUAL
EXPENSES FOR THE YEAR
ENDED DECEMBER 31, 1995
(AS A PERCENTAGE OF
PORTFOLIO COMPANY NET
ASSETS):
Investment Advisory
Fees(e)................. 0.30% 0.75% 0.60%
Other Expenses............ 0.23% 0.14% 0.06%
------- --- -----
TOTAL MERRILL LYNCH
VARIABLE SERIES FUNDS,
INC. ANNUAL OPERATING
EXPENSES.................. 0.53% 0.89% 0.66%
======== ============ ======
</TABLE>
- ---------------
(a) A contingent deferred sales charge is imposed upon withdrawal of all or part
of the contract value. The charge is 5%, applied to the lesser of premiums
paid within the past 7 years (adjusted for any prior withdrawals) or the
amount withdrawn. There will be no charge for such part of the first
withdrawal in a contract year as does not exceed 10% of the premiums paid
prior to the date of withdrawal. (See page 16.)
(b) A contract administration charge of $30 per contract year is deducted from
each Contract. It is deducted from the contract value on each contract
anniversary on or prior to the annuity date and at full withdrawal if made
other than on a contract anniversary.
(c) The expense risk charge is stated as an annual percentage of the daily net
asset value of the Variable Account. The rate indicated is for nonqualified
Contracts. For qualified Contracts, the rate is 0.20%. (See page 17.)
(d) The mortality risk charge and the distribution expense charge are each
stated as an annual percentage of the daily net asset value of the Variable
Account. (See page 18.)
(e) See "Investments of the Variable Account" on page 13.
(f) Effective following the close of business on December 6, 1996, the Flexible
Strategy Fund was merged with and into the Global Strategy Focus Fund. See
the accompanying prospectus for Merrill Lynch Variable Series Funds, Inc.
for additional information regarding this change.
(g) "Other Expenses" and "Total Merrill Lynch Variable Series Funds, Inc. Annual
Operating Expenses" shown for the Index 500 Fund are based on expenses
estimated for the current fiscal year.
8
<PAGE> 13
<TABLE>
<CAPTION>
HIGH GLOBAL NATURAL
RESERVE CURRENT QUALITY EQUITY STRATEGY RESOURCES
ASSETS PRIME INCOME EQUITY GROWTH FOCUS FOCUS
FUND BOND FUND FUND FUND FUND FUND FUND
EXAMPLE SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- --------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
If the contract owner
surrenders his or her
Contract at the end of the
applicable time period,
the contract owner would
pay the following expenses
on a $1,000 investment,
assuming 5% annual return
on assets:
1-year................. $ 70 $ 69 $ 70 $ 69 $ 73 $ 72 $ 72
3-year................. 113 110 111 110 119 117 119
5-year................. 159 153 155 153 169 164 167
10-year................. 234 222 228 224 255 246 252
If the contract owner
annuitizes, or does not
surrender, at the end of
the applicable time
period, the contract owner
would pay the following
expenses on a $1,000
investment, assuming 5%
annual return on assets:
1-year................. $ 20 $ 19 $ 20 $ 19 $ 23 $ 22 $ 22
3-year................. 63 60 61 60 69 67 69
5-year................. 109 103 105 103 119 114 117
10-year................. 234 222 228 224 255 246 252
<CAPTION>
INTERNATIONAL BASIC
AMERICAN EQUITY VALUE
BALANCED INDEX 500 FOCUS FOCUS
FUND FUND FUND FUND
EXAMPLE SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- --------------------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
If the contract owner
surrenders his or her
Contract at the end of the
applicable time period,
the contract owner would
pay the following expenses
on a $1,000 investment,
assuming 5% annual return
on assets:
1-year................. $ 70 $ 70 $ 73 $ 71
3-year................. 113 111 122 115
5-year................. 159 154 173 161
10-year................. 234 226 264 240
If the contract owner
annuitizes, or does not
surrender, at the end of
the applicable time
period, the contract owner
would pay the following
expenses on a $1,000
investment, assuming 5%
annual return on assets:
1-year................. $ 20 $ 20 23 $ 21
3-year................. 63 61 72 65
5-year................. 109 104 123 111
10-year................. 234 226 $264 240
</TABLE>
The foregoing Fee Table and Example are intended to assist investors in
understanding the costs and expenses that a contract owner in the Merrill Lynch
Life Variable Annuity Separate Account will bear directly or indirectly with
respect to each Fund. The Fee Table and Example include charges and expenses of
the Variable Account as well as the Merrill Lynch Variable Series Funds, Inc.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR ANNUAL RATES OF RETURN OF ANY FUND. ACTUAL EXPENSES AND ANNUAL RATES
OF RETURN MAY BE MORE OR LESS THAN THOSE ASSUMED FOR THE PURPOSE OF THE EXAMPLE.
The Fee Table and Example do not include charges to contract owners for
reimbursement of premium taxes paid with respect to the Contract. Premium taxes
may be applicable. Refer to PREMIUM TAXES on page 18 for further information.
In the Example, the $30 contract administration charge was converted to a
percentage charge by dividing the total administration charges collected during
1995 by the average total contract values (excluding the value of Contracts in
the annuity period) during 1995. Contract values and administration charges
collected include amounts allocated to the Variable Account only. The percentage
charge so determined was added to the Total Separate Account Annual Expenses
(1.30%) and Total Merrill Lynch Variable Series Funds, Inc. Annual Expenses
(0.50% to 0.81%, depending on the Fund) shown above, and the resulting
percentage figure was multiplied by the average annual assets of the
hypothetical account to determine annual expenses.
9
<PAGE> 14
CONDENSED FINANCIAL INFORMATION
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
SCHEDULE OF ACCUMULATION UNIT VALUES*
FOR THE PERIOD JANUARY 1, 1986 THROUGH DECEMBER 31, 1995
*The accumulation unit values listed below for the periods January 1, 1986
through August 31, 1991 are for periods when the Contracts were funded through
the Merrill Lynch Variable Annuity Account of Family Life Insurance Company
("FLIC"). See page 12. On September 1, 1991, Merrill Lynch Life assumption
reinsured certain of FLIC's variable annuity contracts (see THE REINSURANCE
AGREEMENT on page 13). The financial performance of the Contracts shown in the
Schedule of Accumulation Unit Values, below, includes the performance of the
Contracts for periods prior to September 1, 1991 while part of the FLIC separate
account.
<TABLE>
<CAPTION>
NONQUALIFIED
CONTRACTS: 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Reserve Assets
Fund
January 1
value...... 14.068 14.728 15.407 16.252 17.44 18.55 19.38 19.76 20.04 20.54
December 31
value...... 14.728 15.407 16.252 17.439 18.55 19.38 19.76 20.04 20.54 21.41
Total units
outstanding
at
December
31......... 756,930.2 542,420.0 437,996.5 492,365.6 350,130.6
Prime Bond Fund
January 1
value...... 17.092 19.205 18.750 19.764 22.10 23.38 26.86 28.45 31.46 29.57
December 31
value...... 19.205 18.750 19.764 22.103 23.38 26.86 28.45 31.46 29.57 35.07
Total units
outstanding
at
December
31......... 618,656.9 667,898.6 741,333.5 610,532.0 510,791.1
High Current
Income Fund
January 1
value...... 17.795 19.637 20.127 22.632 23.76 21.62 30.51 36.15 42.06 40.03
December 31
value...... 19.637 20.127 22.632 23.760 21.62 30.51 36.15 42.06 40.03 46.32
Total units
outstanding
at
December
31......... 181,893.1 182,229.2 245,495.0 198,985.9 175,671.0
Quality Equity
Fund
January 1
value...... 17.330 20.594 20.188 22.626 29.21 29.03 37.30 37.81 42.76 41.71
December 31
value...... 20.594 20.188 22.626 29.210 29.03 37.30 37.81 42.76 41.71 50.48
Total units
outstanding
at
December
31......... 674,488.8 681,947.8 790,434.5 701,903.6 648,031.6
Equity Growth
Fund
January 1
value...... 15.223 17.835 13.681 14.079 16.20 13.99 20.73 20.35 23.66 21.66
December 31
value...... 17.835 13.681 14.079 16.205 13.99 20.73 20.35 23.66 21.66 31.20
Total units
outstanding
at
December
31......... 269,251.3 310,826.6 336,594.9 314,670.5 324,219.4
Flexible
Strategy Fund
April 30
(commencement) 10.000
January 1
value...... 10.132 10.245 11.252 13.36 13.82 17.06 17.55 20.07 18.98
December 31
value...... 10.132 10.245 11.252 13.362 13.82 17.06 17.55 20.07 18.98 21.99
Total units
outstanding
at
December
31......... 1,491,361.1 1,536,734.4 1,689,884.9 1,451,982.2 1,178,582.2
American
Balanced Fund
May 31
(commencement).. 10.000
January 1
value...... 10.332 12.05 12.04 14.34 14.96 16.76 15.85
December 31
value...... 10.332 12.047 12.04 14.34 14.96 16.76 15.85 18.91
Total units
outstanding
at
December
31......... 226,441.1 309,664.2 344,819.9 282,733.9 237,332.7
Natural
Resources
Focus Fund
May 31
(commencement).. 10.000
January 1
value...... 9.508 11.10 10.27 10.28 10.29 11.22 11.23
December 31
value...... 9.508 11.097 10.27 10.28 10.29 11.22 11.23 12.49
Total units
outstanding
at
December
31......... 36,077.3 50,350.7 97,956.9 92,609.5 81,046.5
</TABLE>
10
<PAGE> 15
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
SCHEDULE OF ACCUMULATION UNIT VALUES*
FOR THE PERIOD JANUARY 1, 1986 THROUGH DECEMBER 31, 1995
*The accumulation unit values listed below for the periods January 1, 1986
through August 31, 1991 are for periods when the Contracts were funded through
the Merrill Lynch Variable Annuity Account of Family Life Insurance Company
("FLIC"). See page 12. On September 1, 1991, Merrill Lynch Life assumption
reinsured certain of FLIC's variable annuity contracts (see THE REINSURANCE
AGREEMENT on page 13). The financial performance of the Contracts shown in the
Schedule of Accumulation Unit Values, below, includes the performance of the
Contracts for periods prior to September 1, 1991 while part of the FLIC separate
account.
<TABLE>
<CAPTION>
QUALIFIED
CONTRACTS: 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Reserve Assets
Fund
January 1
value........ 14.222 14.933 15.668 16.577 17.84 19.04 19.94 20.39 20.75 21.32
December 31
value........ 14.933 15.668 16.577 17.840 19.04 19.94 20.39 20.75 21.32 22.30
Total units
outstanding
at
December
31........... 574,284.7 370,601.0 308,644.8 252,365.2 194,679.2
Prime Bond Fund
January 1
value........ 17.436 19.649 19.241 20.347 22.82 24.21 27.90 29.64 32.87 30.98
December 31
value........ 19.649 19.241 20.347 22.823 24.21 27.90 29.64 32.87 30.98 36.86
Total units
outstanding
at
December
31........... 428,447.8 478,220.2 477,582.5 358,718.0 303,333.0
High Current
Income Fund
January 1
value........ 18.457 20.428 21.000 23.687 24.94 22.76 32.22 38.29 44.68 42.65
December 31
value........ 20.428 21.000 23.687 24.941 22.76 32.22 38.29 44.68 42.65 49.49
Total units
outstanding
at
December
31........... 74,457.7 73,582.5 93,456.4 92,839.7 79,516.1
Quality Equity
Fund
January 1
value........ 18.389 21.918 21.549 24.224 31.37 31.26 40.29 40.96 46.46 45.45
December 31
value........ 21.918 21.549 24.224 31.366 31.26 40.29 40.96 46.46 45.45 55.18
Total units
outstanding
at
December
31........... 432,953.7 457,836.2 516,176.0 469,259.2 412,217.8
Equity Growth
Fund
January 1
value........ 16.439 19.318 14.862 15.341 17.71 15.33 22.79 22.44 26.17 24.03
December 31
value........ 19.318 14.862 15.341 17.710 15.33 22.79 22.44 26.17 24.03 34.71
Total units
outstanding
at
December
31........... 139,492.7 156,274.5 195,677.9 184,213.2 188,466.9
Flexible Strategy
Fund
April 30
(commencement).. 10.000
January 1
value........ 10.152 10.295 11.341 13.51 14.02 17.35 17.90 20.53 19.47
December 31
value........ 10.152 10.295 11.341 13.508 14.02 17.35 17.90 20.53 19.47 22.63
Total units
outstanding
at
December
31........... 1,139,762.3 1,085,349.8 1,225,420.9 1,076,826.3 934,036.1
American Balanced
Fund
May 31
(commencement)... 10.000
January 1
value........ 10.350 12.10 12.13 14.49 15.17 17.04 16.17
December 31
value........ 10.350 12.104 12.13 14.49 15.17 17.04 16.17 19.34
Total units
outstanding
at
December
31........... 79,728.3 155,312.1 200,913.9 171,872.9 154,870.7
Natural Resources
Focus Fund
May 31
(commencement)... 10.000
January 1
value........ 9.524 11.15 10.35 10.39 10.43 11.40 11.45
December 31
value........ 9.524 11.149 10.35 10.39 10.43 11.40 11.45 12.78
Total units
outstanding
at
December
31........... 28,823.5 27,220.0 40,239.5 44,876.1 39,692.2
</TABLE>
11
<PAGE> 16
MERRILL LYNCH LIFE INSURANCE COMPANY
Merrill Lynch Life Insurance Company ("Merrill Lynch Life") is a stock life
insurance company organized under the laws of the State of Washington in 1986
and redomesticated under the laws of the State of Arkansas in 1991. Merrill
Lynch Life is an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc.,
a corporation whose common stock is traded on the New York Stock Exchange.
Merrill Lynch Life is authorized to sell life insurance and annuity contracts.
Merrill Lynch Life is admitted to do business in 49 states, Guam, the U.S.
Virgin Islands, and the District of Columbia.
All communications, including inquiries, concerning the Contract should be
addressed to Merrill Lynch Life's Service Center at the address printed on the
first page of this Prospectus.
On October 1, 1991, Tandem Insurance Group, Inc. (adba Tandem Life Insurance
Company) ("Tandem"), an affiliate of Merrill Lynch Life, merged with and into
Merrill Lynch Life. Merrill Lynch Life is the surviving company.
As a result of the merger, all contracts previously afforded by Tandem are now
afforded by Merrill Lynch Life. Thus, contract owners maintain their identical
coverage through Merrill Lynch Life.
In addition, the Tandem Variable Annuity Separate Account (the "Tandem Account")
was combined with the Variable Account. Assets of the Tandem Account have become
assets of the Merrill Lynch Life Account. These assets are segregated from all
of Merrill Lynch Life's other assets. The combination of accounts maintained all
investment options and had no adverse impact (including federal tax) on any
contract owners nor any impact on accumulation units, annuity units, or unit
values.
THE VARIABLE ACCOUNT
The establishment of the Variable Account was approved by Merrill Lynch Life's
Board of Directors on March 15, 1991. The Variable Account is registered with
the Securities and Exchange Commission as a unit investment trust pursuant to
the provisions of the Investment Company Act of 1940. Such registration does not
involve any supervision by the Securities and Exchange Commission of the
investment practices or policies of the Variable Account. The Variable Account
meets the definition of a separate account under the federal securities laws.
While the assets of the Variable Account are Merrill Lynch Life's property, as a
segregated investment account, Arkansas insurance law provides that assets of
the Variable Account equal to its reserves and other liabilities are not
chargeable with liabilities arising out of any other business Merrill Lynch Life
may conduct; however, obligations under the Contract are obligations of Merrill
Lynch Life. Income, gains and losses, whether or not realized, from assets
allocated to the Variable Account are, in accordance with the Contracts,
credited to or charged against the Variable Account without regard to other
income, gains or losses of Merrill Lynch Life. Merrill Lynch Life does not
guarantee the investment performance under the Contracts. Both the variable
contract value prior to the annuity date and the amount of any variable annuity
payments will vary with the performance of the investments selected by the
contract owner.
There are two subaccounts for each Fund. One subaccount is for qualified
Contracts and the other is for nonqualified Contracts. No transfers may be made
between a qualified and a nonqualified subaccount.
FINANCIAL STATEMENTS
Financial statements for Merrill Lynch Life and the Variable Account can be
found in the Statement of Additional Information. Because the Variable Account
acquired a majority of the assets of Merrill Lynch Variable Annuity Account of
Family Life Insurance Company ("FLIC") in connection with Merrill Lynch Life's
assumption reinsurance of certain variable annuity contracts of FLIC commencing
on September 1, 1991, the financial statements of the Variable Account include
the financial operations of the FLIC separate account for periods prior to
September 1, 1991. The Statement of Additional Information is available upon
request and without charge. This information can be obtained by writing to or
calling Merrill Lynch Life's Service Center at the address or telephone number
set forth on the first page of this Prospectus.
12
<PAGE> 17
THE REINSURANCE AGREEMENT
On March 22, 1991, Merrill Lynch Life and certain affiliated life insurance
companies entered into an assumption reinsurance agreement with Family Life
Insurance Company ("FLIC") relating to various policies including the FLIC
Contracts. The assumption reinsurance of the FLIC Contracts will take place in
several transactions. The first transaction was effected as of September 1,
1991, when Merrill Lynch Life assumption reinsured Contracts in 37 states, Guam
and the Virgin Islands. There have been various assumption reinsurance
transactions subsequent to September 1, 1991.
The FLIC Contracts, which participate in FLIC's Merrill Lynch Variable Annuity
Account, are identical to the Contracts described in this Prospectus, except
that the FLIC Contracts provide for a higher mortality risk charge (.80%
annually under the FLIC Contracts versus .75% annually under the Contracts
described in this Prospectus), but no distribution expense charge. Pursuant to
the agreement, FLIC agreed to transfer and Merrill Lynch Life agreed to assume
on an assumption reinsurance basis all of FLIC's obligations and liabilities
under certain of the Contracts to the maximum extent permitted by law. To
reflect its assumption of the FLIC Contracts, Merrill Lynch Life will issue a
certificate of assumption to the owners of the FLIC Contracts informing them of
Merrill Lynch Life's assumption of FLIC's liabilities under the Contract and of
the change in the components of the charges against separate account assets.
At such time as a Contract is assumption reinsured, assets held in FLIC's
Merrill Lynch Variable Annuity Account equal to the contract liabilities
attributable to the variable portion of the Contract will be transferred to the
Variable Account. Thereafter, the contract owner will deal directly with Merrill
Lynch Life and future premiums will be forwarded directly to Merrill Lynch Life.
The assumption reinsurance of the FLIC Contracts will not change the number of
accumulation or annuity units credited under the Contracts or the value of such
units, which will continue to be affected only by the investment performance of
the Funds. Contract values will be the same as they would have been had the
assumption reinsurance transaction not occurred, and there will be no adverse
tax consequences to a contract owner as a result of the assumption reinsurance
of his or her Contract.
INVESTMENTS OF THE VARIABLE ACCOUNT
ELIGIBLE FUNDS
Premiums will be allocated among one or more subaccounts for investment at net
asset value in shares of the Funds selected by the contract owner. No fee,
penalty or other charge will be imposed. To reduce Merrill Lynch Life's market
risk for cancellations during the TEN DAY RIGHT TO REVIEW described on page 25,
all premiums allocable to the Variable Account will be allocated to the Reserve
Assets Fund subaccount for the first 14 days following the date of issue.
Thereafter, the contract owner's interest in the Variable Account will be
reallocated to the subaccounts selected by the contract owner. In the
Commonwealth of Pennsylvania, all premiums will be invested as of the date of
issue in the subaccounts selected by the contract owner. Therefore, Pennsylvania
contract owners will bear the market risk during the right to review period.
Merrill Lynch Life may make additions to or deletions from the list of eligible
Funds as permitted by law. (See SUBSTITUTION OF INVESTMENTS on page 16.) The
contract owner may transfer all or part of his or her contract value from one
subaccount to another, except no transfer may be made within 30 days of the date
of issue. Transfers must be at least 30 days apart.
Each Fund is a separate investment portfolio of Merrill Lynch Variable Series
Funds, Inc., an open-end management investment company registered with the
Securities and Exchange Commission. Shares of the Merrill Lynch Variable Series
Funds, Inc. are currently sold only to Merrill Lynch Life, ML Life Insurance
Company of New York, and several insurance companies not affiliated with Merrill
Lynch Life or Merrill Lynch & Co., Inc. to fund benefits under certain variable
annuity and variable life insurance contracts. Shares of each Portfolio of the
Funds may be made available to the separate accounts of additional insurance
companies in the future.
It is conceivable that material conflicts could arise as a result of both
variable annuity and variable life insurance separate accounts investing in the
Funds. Although no material conflicts are foreseen, the
13
<PAGE> 18
participating insurance companies will monitor events in order to identify any
material conflicts between variable annuity and variable life insurance contract
owners to determine what action, if any, should be taken. Material conflicts
could result from such things as (1) changes in state insurance law, (2) changes
in federal income tax law or (3) differences between voting instructions given
by variable annuity and variable life insurance contract owners. If a conflict
occurs, Merrill Lynch Life may be required to eliminate one or more subaccounts
of the Variable Account or substitute a new subaccount. In responding to any
conflict, Merrill Lynch Life will take the action which it believes necessary to
protect its contract owners.
Each Fund receives investment advice from Merrill Lynch Asset Management, L.P.
("MLAM") which is paid fees by the Funds for its services. The fees charged to
each of the Funds are set forth in the summary of investment objectives below.
MLAM is a worldwide mutual fund leader with more than $196.4 billion in assets
under management. It is registered as an investment adviser under the Investment
Advisers Act of 1940. MLAM is an indirect subsidiary of Merrill Lynch & Co.,
Inc. MLAM's principal business address is 800 Scudders Mill Road, Plainsboro,
New Jersey 08536.
MLAM has entered into an agreement with Merrill Lynch Insurance Group, Inc.
("MLIG"), an affiliate of Merrill Lynch Life, with respect to administration
services for the Funds in connection with the Contracts and other variable life
insurance and variable annuity contracts issued by Merrill Lynch Life. Under
this agreement, MLAM pays compensation to MLIG in an amount equal to a portion
of the annual gross investment advisory fees paid by the Funds to MLAM
attributable to contracts issued by Merrill Lynch Life.
A summary of investment objectives of each Fund follows. There is no guarantee
that any Fund will meet its investment objective. Meeting the objectives depends
upon how well the Funds' management anticipates changing economic conditions.
More detailed information, including the risks associated with each Fund
(including any risks associated with investment in the High Current Income Fund)
and deductions from and expenses paid out of the assets of the Funds, may be
found in the current prospectus for the Merrill Lynch Variable Series Funds,
Inc. which is in the back of this booklet. Both prospectuses should be read in
full for a complete evaluation of the Contract.
Reserve Assets Fund
The Fund seeks preservation of capital, liquidity, and the highest possible
current income consistent with the foregoing objectives by investing in
short-term money market securities. The Fund invests in short-term United States
government securities; government agency securities; bank certificates of
deposit and bankers' acceptances; short-term corporate debt securities such as
commercial paper and variable amount master demand notes; repurchase agreements
and other money market instruments. MLAM receives from the Fund an advisory fee
at the annual rate of 0.50% of the first $500 million of the Fund's average
daily net assets; 0.425% of the next $250 million; 0.375% of the next $250
million; 0.35% of the next $500 million; 0.325% of the next $500 million; 0.30%
of the next $500 million; and 0.275% of the average daily net assets in excess
of $2.5 billion.
Prime Bond Fund
The Fund seeks to obtain as high a level of current income as is consistent with
the investment policies of the Fund and with prudent investment management, and
capital appreciation to the extent consistent with the foregoing objective. The
Fund invests primarily in long-term corporate bonds in the top three ratings
categories by established rating services. MLAM receives from the Fund an
advisory fee at the annual rate of 0.50% of the first $250 million of the
combined average daily net assets of the Fund and High Current Income Fund;
0.45% of the next $250 million; 0.40% of the next $250 million; and 0.35% of the
combined average daily net assets in excess of $750 million. The reduction of
the advisory fee applicable to the Fund is determined on a uniform percentage
basis as described in the Statement of Additional Information for the Funds.
High Current Income Fund
The Fund seeks to obtain as high a level of current income as is consistent with
the investment policies of the Fund and with prudent investment management, and
capital appreciation to the extent consistent with the
14
<PAGE> 19
foregoing objective. The Fund invests principally in fixed-income securities
that are rated in the lower rating categories of the established rating services
or in unrated securities of comparable quality (commonly known as "junk bonds").
Because investment in such securities entails relatively greater risk of loss of
income or principal, an investment in the High Current Income Fund may not be
appropriate as the exclusive investment to fund a Contract. In an effort to
minimize risk, the Fund will diversify its holdings among many issuers. However,
there can be no assurance that diversification will protect the Fund from
widespread defaults during periods of sustained economic downturn. MLAM receives
from the Fund an advisory fee at the annual rate of 0.55% of the first $250
million of the combined average daily net assets of the Fund and Prime Bond
Fund; 0.50% of the next $250 million; 0.45% of the next $250 million; and 0.40%
of the combined average daily net assets in excess of $750 million. The
reduction of the advisory fee applicable to the Fund is determined on a uniform
percentage basis as described in the Statement of Additional Information for the
Funds.
Quality Equity Fund
The Fund seeks to attain the highest total investment return consistent with
prudent risk. The Fund employs a fully managed investment policy utilizing
equity securities, primarily common stocks of large-capitalization companies, as
well as investment grade debt and convertible securities. Management of the Fund
will shift the emphasis among investment alternatives for capital growth,
capital stability, and income as market trends change. MLAM receives from the
Fund an advisory fee at the annual rate of 0.50% of the first $250 million of
average daily net assets; 0.45% of the next $50 million; 0.425% of the next $100
million; and 0.40% of the average daily net assets in excess of $400 million.
Equity Growth Fund
The Fund seeks to attain long-term growth of capital by investing primarily in
common stocks, of relatively small companies that management of the Fund
believes have special investment value and emerging growth companies regardless
of size. Such companies are selected by management on the basis of their
long-term potential for expanding their size and profitability or for gaining
increased market recognition for their securities. Current income is not a
factor in such selection. MLAM receives from the Fund an advisory fee at the
annual rate of 0.75% of the average daily net assets of the Fund. This is a
higher fee than that of many other mutual funds, but management of the Fund
believes it is justified by the high degree of care that must be given to the
initial selection and continuous supervision of the types of portfolio
securities in which the Fund invests.
Global Strategy Focus Fund
This Fund 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. The Fund seeks to achieve its objective
by investing primarily in securities of issuers located in the United States,
Canada, Western Europe and the Far East. MLAM receives from the Fund an advisory
fee at the annual rate of 0.65% of the average daily net assets of the Fund.
Effective following the close of business on December 6, 1996, the Flexible
Strategy Fund was merged with and into the Global Strategy Focus Fund.
Natural Resources Focus Fund
The Fund seeks to attain long-term growth of capital and protection of the
purchasing power of shareholders' capital by investing primarily in equity
securities of domestic and foreign companies with substantial natural resource
assets. MLAM receives from the Fund an advisory fee at the annual rate of 0.65%
of the average daily net assets of the Fund.
Merrill Lynch Life and Merrill Lynch Life Variable Annuity Separate Account
reserve the right to suspend the sale of units of the Natural Resources
subaccount in response to conditions in the securities markets or otherwise.
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American Balanced Fund
The Fund 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 is normally available from an
investment solely in debt securities by investing in a balanced portfolio of
fixed income and equity securities. MLAM receives from the Fund an advisory fee
at the annual rate of 0.55% of the average daily net assets of the Fund.
Index 500 Fund
This Fund seeks 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"). MLAM receives from the Fund an advisory
fee at an annual rate of 0.30% of the Fund's average daily net assets.
International Equity Focus Fund
This Fund seeks to obtain capital appreciation and, secondarily, income by
investing in a diversified portfolio of equity securities of issuers located in
countries other than the United States. Under normal conditions, at least 65% of
the Fund's net assets will be invested in such equity securities. MLAM receives
from the Fund an advisory fee at the annual rate of 0.75% of the average daily
net assets of the Fund.
Basic Value Focus Fund
This Fund seeks to attain capital appreciation, and secondarily, income by
investing in securities, primarily equities, that management of the Fund
believes are undervalued and therefore represent basic investment value.
Particular emphasis is placed on securities which provide an above-average
dividend return and sell at a below-average price/earnings ratio. MLAM receives
from the Fund an advisory fee at the annual rate of 0.60% of the average daily
net assets of the Fund.
REINVESTMENT
Fund distributions to the Variable Account are automatically reinvested in
additional Fund shares at net asset value.
SUBSTITUTION OF INVESTMENTS
Merrill Lynch Life may at its discretion substitute a different mutual fund for
any of the Funds shown on the Schedule page of a contract owner's Contract.
Substitution may be made with respect to both existing investments and the
investment of future premiums. However, no such substitution will be made
without any necessary approval of the Securities and Exchange Commission and
applicable state insurance departments. Contract owners will be notified of any
substitutions. Merrill Lynch Life may also add other Funds as eligible
investments of the Variable Account.
CHARGES AND DEDUCTIONS
CONTINGENT DEFERRED SALES CHARGE
Merrill Lynch Life does not make any deductions from premiums paid at the time
of purchase. The contingent deferred sales charge, when applicable, permits
Merrill Lynch Life to recover a portion of the expenses relating to the sale of
the Contract, including commissions, preparation of sales literature and other
promotional activity.
The contingent deferred sales charge is imposed at withdrawal of all or part of
the contract value. It will be the lesser of (a) 5% of the sum of the premiums
paid within 7 years prior to the date of withdrawal, adjusted for any prior
withdrawals, or (b) 5% of the amount withdrawn. The cumulative sum of all
contingent deferred sales charges made within 7 years prior to the date of
withdrawal will never be more than 5% of the sum of all premiums paid during the
same period. No charge will be made for such part of the first withdrawal in a
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<PAGE> 21
contract year as does not exceed 10% of the sum of premiums paid prior to the
date of withdrawal. Withdrawals will be deemed made first from premiums on a
first-in, first-out basis and then from any gain. Under no circumstances will
the cumulative sum of the contingent deferred sales charges ever exceed 5% of
total premiums. No charge will be imposed on any payment made due to death of
the annuitant or contract owner. (See PAYMENT ON DEATH on page 20.)
The contingent deferred sales charge may be reduced when sales of Contracts are
made to a trustee, employer or similar party pursuant to a retirement plan or
similar arrangement for sales of Contracts to a group of individuals if such
program results in a savings of sales expenses. The amount of reduction will
depend on such factors as the size of the group, the total amount of premiums
and other relevant factors that might tend to reduce expenses incurred in
connection with such sales. This reduction will not be unfairly discriminatory
to any contract owner. (See ACCUMULATION UNITS on page 19 for a discussion of
the effect the deduction of this charge may have on the number of accumulation
units credited to the Contract.)
Merrill Lynch Life's sales expenses relating to all Contracts will initially be
provided for out of Merrill Lynch Life's surplus. Any contingent deferred sales
charge imposed at withdrawal from a Contract is expected to recover only a
portion of the sales expenses relating to that Contract. Other sales expenses
will be recovered through the distribution expense charge described below. Sales
expenses not recovered through the contingent deferred sales charge and the
distribution expense charge will be recovered from profits derived primarily
from the mortality risk charge and expense risk charge described below.
CONTRACT ADMINISTRATION CHARGE
Merrill Lynch Life imposes a contract administration charge of $30 per contract
year for administration of the Contracts. It is deducted from the contract value
on each contract anniversary on or prior to the annuity date and at full
withdrawal if made other than on a contract anniversary. Such administration
includes issuing Contracts, maintenance of contract owner records, accounting,
valuation, regulatory compliance and reporting. Even though Merrill Lynch Life's
expenses may increase, the amount of the charge will not change. (See
ACCUMULATION UNITS on page 19 for a discussion of the effect the deduction of
this charge may have on the number of accumulation units credited to the
Contract.) The charge is designed only to reimburse Merrill Lynch Life for such
expenses on a cumulative basis.
WAIVER OF CHARGES
When permitted by the laws of the state in which the Contract is issued, the
contingent deferred sales charge and the contract administration charge will be
waived under a Contract issued by a trustee, employer or similar party pursuant
to a retirement plan or similar arrangement for the benefit of a group of
individuals where the initial premium is in the amount of $500,000 or more. As a
condition to the waiver, the contract owner must agree to a Contract endorsement
prohibiting the allocation of premiums and the transfer of contract values to
the Fixed Account.
EXPENSE RISK CHARGE
Merrill Lynch Life guarantees that the contract administration charge will not
increase, regardless of its actual expenses. To compensate for assuming this
expense risk, Merrill Lynch Life deducts an expense risk charge from the
Variable Account.
The charge is computed and deducted on a daily basis from each subaccount. For
nonqualified Contracts, on an annual basis it equals 0.5% of the daily net asset
value of the Variable Account. For qualified Contracts, the rate is 0.2% of the
daily net asset value of the Variable Account. If the expense risk charge is
insufficient to cover the actual cost of the expense risk, Merrill Lynch Life
will bear the loss. Conversely, if it is more than sufficient, the excess will
be part of Merrill Lynch Life's profit. The rate of the expense risk charge will
not change.
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MORTALITY RISK CHARGE
Although variable annuity payments will vary according to the performance of the
investments selected by the contract owner, annuity payments will not be
affected by the mortality experience (death rate) of persons receiving such
payments or of the general population. Merrill Lynch Life assumes this mortality
risk by virtue of annuity rates in the Contract that cannot be changed. Merrill
Lynch Life also guarantees a minimum payment on death of the annuitant or
contract owner prior to the annuity date. (See PAYMENT ON DEATH on page 20.) As
compensation for assuming these mortality risks, Merrill Lynch Life deducts a
mortality risk charge from the Variable Account.
This charge is computed and deducted on a daily basis from each subaccount, but
on an annual basis it equals 0.75% of the daily net asset value of the Variable
Account. If the amount is insufficient to cover the actual cost of the mortality
risk, Merrill Lynch Life bears the loss. Conversely, if the amount proves more
than sufficient, as anticipated, the excess will be part of Merrill Lynch Life's
profit. The amount of the mortality risk charge will not change.
DISTRIBUTION EXPENSE CHARGE
Merrill Lynch Life anticipates that the cost of distributing the Contracts will
exceed the amounts it receives from deferred sales charges. Merrill Lynch Life
deducts a distribution expense charge from the Variable Account to compensate
for some of the distribution costs it incurs in connection with the Contracts.
The distribution expense charge is computed and deducted on a daily basis from
each subaccount, but on an annual basis it equals 0.05% of the daily net asset
value of the Variable Account.
PAYMENTS OF CHARGES AND DEDUCTIONS
The expense risk charge, the mortality risk charge and the distribution expense
charge will be computed and deducted from each subaccount of the Variable
Account for each day the Contract is in force. The contract administration
charge and the contingent deferred sales charge will be deducted from the Fixed
Account and from each subaccount of the Variable Account in the ratio of each
contract owner's interest in each to his or her contract value.
PREMIUM TAXES
Various jurisdictions impose a premium tax on annuity purchase payments received
by insurance companies. Other jurisdictions impose a premium tax on the contract
value on the annuity date. These taxes will be paid by Merrill Lynch Life when
due. The dollar amount of any premium tax will be deducted from the contract
value at the annuity date. (See ACCUMULATION UNITS on page 19 for a discussion
of the effect the deduction of this charge may have on the number of
accumulation units credited to the Contract.) In those jurisdictions that do not
allow an insurance company to reduce its current taxable premium income by the
amount of any withdrawal, surrender or death benefit paid, Merrill Lynch Life
will also deduct a charge for these taxes on any withdrawal, surrender or death
benefit effected under the Contract. Premium taxes currently range from 0% to
5%.
Premium tax rates are subject to change by law, administrative interpretations
or court decisions. Premium tax amounts will depend on, among other things, the
contract owner's state of residence, Merrill Lynch Life's status within that
state and the premium tax laws of that state.
FUND EXPENSES
Merrill Lynch Variable Series Funds, Inc., in calculating the net asset values
of the Funds, deducts advisory fees and operating expenses from the assets of
each Fund. Information about those fees and expenses can be found in the
attached prospectus for the Funds and in its Statement of Additional
Information.
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DESCRIPTION OF THE CONTRACT
PREMIUMS
The minimum initial premium for nonqualified Contracts is $1,500. For qualified
Contracts it is $10. The minimum subsequent premium for nonqualified Contracts
is $300 ($50 in Tennessee) and for qualified Contracts it is the same as for the
initial premium. Subsequent premiums may be paid at any time without prior
notice to Merrill Lynch Life. Merrill Lynch Life's consent for subsequent
premiums is required only for Tax-Sheltered Annuities where there has been a
prior withdrawal from the Contract. The Contract will not be in default even if
no subsequent premiums are paid.
Application for a Contract or acceptance of the first premium is subject to
Merrill Lynch Life's underwriting rules for such transactions. Merrill Lynch
Life reserves the right to reject any application. A properly completed
application that is accompanied by the first premium and all information
necessary for the processing of the application will normally be accepted within
2 business days. If an application is not completed properly and therefore,
cannot be processed, and necessary information is not obtained within 5 business
days, Merrill Lynch Life will offer to return the premium.
ACCUMULATION PROVISIONS
Accumulation Units
Premiums are allocated to the subaccounts in accordance with the contract
owner's selection, except during the first 14 days following the date of issue
of the Contract when premiums directed to the Variable Account will be allocated
to the Reserve Assets Fund subaccount. (See discussion under ELIGIBLE FUNDS on
page 13.) At the end of the 14-day period, contract values will be reallocated
to each subaccount selected. In the Commonwealth of Pennsylvania, all premiums
will be invested as of the date of issue in the subaccounts selected by the
contract owner. Upon allocation, premiums are converted into accumulation units
for that subaccount. The number of accumulation units is determined by dividing
the amount allocated by the value of an accumulation unit for the valuation
period in which the premium is received at Merrill Lynch Life's Service Center
or, in the case of the first premium, is accepted by Merrill Lynch Life. The
number of accumulation units will not change as a result of investment
experience. However, accumulation units will be canceled in connection with any
withdrawal or transfer from a subaccount, the assessment of all or a portion of
the contract administration charge, contingent deferred sales charge or premium
taxes against the subaccount, or upon the payment of a death benefit or
commencement of annuity payments.
Value of an Accumulation Unit
For each subaccount, the value of an accumulation unit was set at the value of
the corresponding unit of the Merrill Lynch Variable Annuity Account of FLIC as
of the date of the first transfer of assets and liabilities pursuant to the
assumption reinsurance agreement between FLIC and Merrill Lynch Life described
on page 13. The value of an accumulation unit may increase or decrease from one
valuation period to the next. The value for any valuation period is determined
by multiplying the value of an accumulation unit for the last prior valuation
period by the net investment factor for that subaccount for the current
valuation period. It reflects the investment performance and expenses of the
Funds and the deduction of the daily expense, mortality and distribution
charges.
Net Investment Factor
The net investment factor is an index used to measure the investment performance
of a subaccount from one valuation period to the next. For any subaccount, the
net investment factor for a valuation period is determined by dividing (a) by
(b) and subtracting (c):
Where (a) is:
The net asset value per share of the Fund held in the subaccount, as of
the end of the valuation period;
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Plus
The per-share amount of any dividend or capital gain distributions by
the Fund if the "ex-dividend" date occurs in the valuation period.
Where (b) is:
The net asset value per share of the Fund held in the subaccount as of
the end of the last prior valuation period.
Where (c) is:
The sum of the daily expense risk charge, the daily mortality risk
charge and the daily distribution expense charge. (See CHARGES AND
DEDUCTIONS on page 16.) For nonqualified Contracts, on an annual basis
the amount of such charges equals 1.3% of the daily net asset value of
the Variable Account. For qualified Contracts, the amount equals 1.0% of
the daily net asset value of the Variable Account.
The net investment factor may be greater or less than one; therefore, the value
of an accumulation unit may increase or decrease. Merrill Lynch Life may adjust
the net investment factor to make provisions for any change in the law that
requires it to pay tax on capital gains in the Variable Account. (See FEDERAL
INCOME TAXES on page 25.)
Valuation Periods
A valuation period is the interval from one valuation day of a Fund to the next
valuation day, measured from the time each day the Fund is valued.
THE FIXED ACCOUNT
In addition to providing for the allocation of premiums to the subaccounts of
the Variable Account, the Contract also provides for allocation of premiums and
transfer of contract values to the Fixed Account, which accumulate at a
guaranteed interest rate and become part of Merrill Lynch Life's general
account. In the case of qualified contracts, loans also may be taken based on
Fixed Account contract values. (See TAX-SHELTERED ANNUITIES on page 29.) The
interests of contract owners arising from the allocation of premiums or the
transfer of contract values to the Fixed Account are not registered under the
Securities Act of 1933. Merrill Lynch Life's general account is not registered
as an investment company under the Investment Company Act of 1940. Accordingly,
the Fixed Account contract values are not subject to the provisions that would
apply if registration under such acts were required.
Merrill Lynch Life has been advised that the staff of the Securities and
Exchange Commission has not reviewed the disclosures in this Prospectus that
relate to the Fixed Account. Disclosures regarding the Fixed Account and the
general account, however, may be subject to certain generally applicable
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in the Prospectus.
PAYMENT ON DEATH
If either the annuitant or the contract owner dies prior to the annuity date,
Merrill Lynch Life will pay to the beneficiary, upon receipt of due proof of
death, the greater of (a) the sum of all premiums (adjusted for any withdrawals)
or (b) the contract value for the valuation period in which such proof is
received at Merrill Lynch Life's Service Center.
An annuitant's beneficiary may choose a lump sum or payment under any of the
annuity options of the Contract. A contract owner's beneficiary may receive
payment only as follows:
A surviving spouse of a deceased contract owner may choose a lump sum or payment
under any of the annuity options of the Contract. If the surviving spouse of the
deceased contract owner is both the contract owner's beneficiary and a
contingent owner (if a contingent owner has been named), he or she may choose to
continue the Contract in force after the contract owner's death. A contract
owner's beneficiary who is not the surviving spouse of the deceased contract
owner may choose (a) a lump sum, which must be paid within five years of
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the contract owner's death, (b) a life annuity option without guaranteed
payments, or (c) a life annuity option with guaranteed payments or a fixed
period annuity option where the period required for full distribution of the
payments guaranteed does not exceed the life expectancy of the contract owner's
beneficiary. Payment under (b) or (c), above, must start within one year of the
contract owner's death.
If all or part of a lump sum payment to a contract owner's beneficiary or
annuitant's beneficiary is used within 30 days as the premium for a new Contract
issued to the beneficiary, then the new Contract will be deemed a continuation
of the old Contract in computing withdrawal charges under the new Contract. For
tax consequences of lump sum payment, see TAXATION OF ANNUITIES IN GENERAL on
page 25.
If either the annuitant or the contract owner dies after the annuity date, any
guaranteed amounts remaining unpaid will continue to be paid pursuant to the
annuity option in force at the date of death, unless the beneficiary chooses to
receive the present value of the remaining guaranteed payments in a lump sum.
(See ANNUITY PROVISIONS on page 22.)
BENEFICIARY
The beneficiary is named in the application. If the contract owner is not the
annuitant, there may be one beneficiary to receive payment on the annuitant's
death and a different beneficiary to receive payment on the contract owner's
death. Unless the beneficiary has been irrevocably designated, the beneficiary
may be changed during the lifetime of the annuitant or contract owner, as the
case may be. The estate or heirs of a beneficiary who dies before payment is due
have no rights under the Contract. If no beneficiary survives when payment is
due, payment will be made to the contract owner or to the contract owner's
estate.
OWNERSHIP
The contract owner is the person entitled to exercise all rights under the
Contract. The annuitant is the contract owner unless otherwise designated in the
application or by endorsement. Only a contract owner who is not also the
annuitant may designate a contingent owner; however, a contract owner who is
also the annuitant may name his or her spouse as a contingent owner. A
contingent owner is the person who is to become contract owner at the death of
the prior contract owner if the Contract continues in force after the death of
the prior contract owner. Ownership of the Contract may be transferred to a new
contract owner. Such a transfer of ownership cancels any designation of
contingent owner, but does not affect a designation of beneficiary. If the
Contract is issued pursuant to a qualified plan, it may not be assigned, pledged
or transferred, unless permitted by law. A collateral assignment does not change
contract ownership. The rights of a collateral assignee have priority over the
rights of a beneficiary. Contract owners should consult a competent tax advisor
before making any such designations, transfers or assignments.
ACCOUNT TRANSFERS
The contract owner may transfer all or part of the contract value among the
Fixed Account and the subaccounts of the Variable Account, subject to the
following restrictions. No transfer may be made from one subaccount of the
Variable Account to another within 30 days of the date of issue or within 30
days of a prior transfer. A transfer from the Fixed Account to any subaccount of
the Variable Account may not be made within six months of the date of issue or
within six months of the date of any prior transfer to the Fixed Account except
for one transfer from the Fixed Account to one or more subaccounts of the
Variable Account in January of each year. Transfers from the Variable Account to
the Fixed Account must be at least 30 days apart. No transfers may be made
between the Fixed Account and the Variable Account after the annuity date.
For Contracts issued prior to April 30, 1986 and reinsured by Merrill Lynch
Life, see the Appendix on page 32 for special provisions. Contract owners may
make transfer requests in writing or by telephone, once Merrill Lynch Life
receives proper telephone transfer authorization. Transfer requests may also be
made through a Merrill Lynch Financial Consultant, once Merrill Lynch Life
receives proper authorization. Transfers will take effect as of the end of the
valuation period on the date the request is received at Merrill Lynch Life's
Service Center. Telephone transfer requests received after 4:00 p.m. (ET) will
be deemed to have been received the following business day.
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WITHDRAWALS
The contract owner may withdraw all or part of the contract value, less any
charges. For full withdrawal, the election must be accompanied by the Contract.
The election must be received by Merrill Lynch Life prior to the earlier of the
annuity date or the death of the annuitant. Under certain qualified plans, the
consent of the contract owner's spouse may be required.
On receipt of such an election, Merrill Lynch Life will cancel the number of
accumulation units necessary to equal the dollar amount of the withdrawal plus
any applicable contingent deferred sales charge or contract administration
charge. (See CHARGES AND DEDUCTIONS on page 16.) Unless otherwise requested,
partial withdrawals will be deducted from the Fixed Account and subaccounts of
the Variable Account in which the contract owner has an interest in the ratio of
his or her interest therein to the total contract value. Withdrawals and related
charges will be based on values for the valuation period in which the election
(and the Contract, if required) are received at Merrill Lynch Life's Service
Center. A withdrawal may be effected by telephone, once a proper authorization
form is submitted to Merrill Lynch Life's Service Center, if the amount
withdrawn is to be paid into a Merrill Lynch, Pierce, Fenner & Smith
Incorporated brokerage account. Otherwise, a withdrawal request must be
submitted by the contract owner in writing to Merrill Lynch Life's Service
Center. Telephone withdrawal requests received after 4:00 p.m. (ET) will be
deemed to have been received the following business day. A partial withdrawal
must be at least $500, and the remaining contract value must be at least $500;
otherwise, the partial withdrawal will not be permitted. Payment of withdrawals
may be deferred (see SUSPENSION OF PAYMENTS below and FEDERAL INCOME TAXES on
page 25), and withdrawals under Tax-Sheltered Annuities are restricted (see
TAX-SHELTERED ANNUITIES on page 29). Withdrawals will decrease the contract
value. Withdrawals are subject to tax and prior to age 59 1/2 may also be
subject to a 10% federal penalty tax. (See TAXATION OF ANNUITIES IN GENERAL on
page 25.)
SUSPENSION OF PAYMENTS
Payment of withdrawals will normally be made within 7 days. However, Merrill
Lynch Life reserves the right to defer any withdrawal payment or transfer of
values if (a) the New York Stock Exchange is closed (other than customary
weekend and holiday closings); (b) trading on the Exchange is restricted by the
Securities and Exchange Commission; (c) 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
its assets; or (d) the Securities and Exchange Commission by order so permits
for the protection of security holders.
ANNUITY PROVISIONS
Variable Annuity
A variable annuity is an annuity with payments that are not predetermined as to
dollar amount. Payments will vary according to the investment results of the
applicable subaccount. Annuity payments will be made to the contract owner
unless he or she specifies otherwise in writing. The contract owner may or may
not be the annuitant. The choice is made by the contract owner in the
application.
Selection of Annuity Date and Annuity Options
The contract owner may select the annuity date and an annuity option in the
application. If the contract owner does not do so, the annuity date will be the
first day of the next month after the annuitant's 75th birthday and the annuity
option will be a life annuity with a 10 year guarantee. The annuity date may not
be later than the first day of the next month after the annuitant's 85th
birthday. (For qualified Contracts, the annuity date may not be later than April
1 of the calendar year after the calendar year in which the annuitant attains
age 70.)
Change of Annuity Date or Annuity Option
The contract owner may change the annuity date or the annuity option by
telephone or written notice received at Merrill Lynch Life's Service Center at
least 30 days prior to the current annuity date.
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Annuity Options
The contract owner may select any one of the following variable annuity options
or any other option satisfactory to the contract owner and Merrill Lynch Life.
- - PAYMENTS FOR A FIXED PERIOD -- Payments will be made for the period chosen.
The period must be at least 5 years. With respect to the Variable Account
only, this option is not available until 3 years after the last premium
payment is made for this Contract, and the contract owner may at any time
choose to receive in a lump sum the present value of the remaining payments
commuted at 4% interest. Such lump sum payment will be considered a
withdrawal that may be subject to the contingent deferred sales charge. (See
WITHDRAWALS on page 22.) The contingent deferred sales charge does not apply
to any other variable annuity option. The mortality risk charge will continue
to be deducted under this option, as other options, even though under this
option Merrill Lynch Life assumes no mortality risk.
- - *LIFE ANNUITY -- Payments will be made for the life of the annuitant.
Payments will cease with the last payment due prior to the annuitant's death.
- - *JOINT AND SURVIVOR LIFE ANNUITY -- Payments will be made during the
lifetimes of the annuitant and a designated second person. Payments will
continue as long as either is living.
- - LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20 YEARS -- Payments will be
made for the life of the annuitant. A guaranteed payment period of either 10
or 20 years may be selected. If the annuitant dies during the guaranteed
period, the beneficiary may elect to receive in a lump sum the present value
of the remaining guaranteed payments computed at the interest rate in effect
when annuity payments began.
*These options are life annuities. It is possible under these options for a
payee to receive only one annuity payment if the annuitant (or the annuitant and
a designated second person) dies after the first payment, or to receive only two
annuity payments if the annuitant (or the annuitant and a designated second
person) dies after the second payment, and so on.
Minimum Annuity Payments
Annuity payments will be made monthly. The contract owner may elect quarterly,
semi-annual or annual payments, in which case the calculation of the periodic
annuity payments will be based on the monthly amount, adjusted by a factor that
takes into account the longer interval between payments. If any payment would be
less than $50 Merrill Lynch Life may change the frequency so payments are at
least $50 each. If the net contract value to be applied at the annuity date is
less than $5,000 ($3,500 for qualified Contracts), Merrill Lynch Life may elect
to pay such amount in a lump sum. For tax consequences of a lump sum payment,
see TAXATION OF ANNUITIES IN GENERAL on page 25.
First Variable Annuity Payment
The dollar amount of the first monthly variable annuity payment will be
determined by applying the contract owner's interest in the Variable Account,
less any premium taxes, to the annuity table for the annuity option chosen. The
annuity tables are in the Contract. The tables are based on the 1983 Table "a"
for Individual Annuity Valuation with interest at 4% and the annuitant's age set
back one year.
Age Adjustment
The Contract contains a formula for adjusting the age of the annuitant based on
the annuity date for purposes of determining the dollar amount of the first
monthly annuity payment for each $1,000 applied under an annuity option. If the
annuity date is between the years 1990 and 1999, the annuitant's age is reduced
one year. For each decade thereafter, the annuitant's age is reduced one
additional year. The maximum age adjustment is five years.
An age adjustment results in a reduction in the monthly annuity payments that
would otherwise be made. It may be advantageous, therefore, for the contract
owner to designate an annuity date that immediately precedes the date on which
an age adjustment would occur under the Contract. For example, annuity payment
rates for an annuitant with an annuity date in the year 2000 will be the same as
those for the year 1999, even
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though the annuitant is one year older, because the new decade results in the
annuitant's age being reduced by an additional year.
Number of Annuity Units
The number of Annuity Units for each applicable subaccount is the amount of the
first monthly annuity payment attributable to that subaccount divided by the
value of an annuity unit for that subaccount as of the annuity date. The amount
of the first payment attributable to a subaccount is based on the ratio of each
contract owner's interest in that subaccount at the annuity date to his or her
interest in all subaccounts. The number will not change as a result of
investment experience.
Value of Each Annuity Unit
For each subaccount the value of an annuity unit was set at the value of the
corresponding unit of the Merrill Lynch Variable Annuity Account of FLIC as of
the date of the first transfer of assets and liabilities pursuant to the
assumption reinsurance agreement between FLIC and Merrill Lynch Life described
on page 13. The value may increase or decrease from one valuation period to the
next. For any valuation period, the value of an annuity unit for a particular
subaccount is the value of an annuity unit for that subaccount for the last
prior valuation period multiplied by the net investment factor for that
subaccount for the current valuation period. The result is then multiplied by a
factor to neutralize the assumed investment rate of 4% built into the annuity
tables.
Subsequent Variable Annuity Payments
Subsequent variable annuity payments will vary in amount according to the
investment performance of the applicable subaccounts within the Variable
Account. The amount of subsequent annuity payments, which may change from month
to month, is equal to the number of annuity units for each subaccount chosen
multiplied by the value of an annuity unit for such subaccount for the valuation
period in which payment is due. Merrill Lynch Life guarantees that the amount of
each subsequent annuity payment will not be affected by variations in expenses
or mortality experience.
Assumed Investment Rate
A 4% assumed investment rate is built into the annuity tables in the Contract. A
higher assumption would mean a higher first annuity payment but more slowly
rising and more rapidly falling subsequent payments. A lower assumption would
have the opposite effect. If the actual net investment rate is 4% annually,
annuity payments will be level.
Proof of Age, Sex and Survival
Merrill Lynch Life may require proof of age, sex or survival of any person upon
whose continuation of life annuity payments depend.
NOTICES AND ELECTIONS
Generally, all notices and elections under the Contract must be in writing,
signed by the proper party and must be received at Merrill Lynch Life's Service
Center to be effective. However, reallocations, account transfers, withdrawals,
and changes of annuity date or annuity option may be made in writing or by
telephone, once Merrill Lynch Life receives proper telephone transfer
authorization. Merrill Lynch Life is not responsible for their validity. If
acceptable to Merrill Lynch Life, notices or elections relating to beneficiaries
and ownership will take effect as of the date such a request is signed unless
Merrill Lynch Life has already acted in reliance on the prior status.
AMENDMENT OF CONTRACT
At any time Merrill Lynch Life may amend the Contract as required to make it
conform with any law, regulation or ruling issued by any government agency to
which the Contract is subject.
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TEN DAY RIGHT TO REVIEW
When the owner receives the Contract, it should be reviewed carefully to make
sure it is what the contract owner intended to purchase. Generally, within 10
days after the contract owner receives the Contract, it may be returned for a
refund. Some states allow a longer period of time to return the Contract. The
Contract must be delivered to Merrill Lynch Life's Service Center or to the
Financial Consultant who sold it for a refund to be made. Merrill Lynch Life
will then refund to the contract owner the greater of all premiums paid into the
Contract or the contract value as of the date the Contract is returned. For
Contracts issued in the Commonwealth of Pennsylvania, Merrill Lynch Life will
refund the contract owner's premiums allocated to the Fixed Account plus the
value of the contract owner's interest in the Variable Account as of the date
the Contract is returned. The Contract will then be deemed void.
FEDERAL INCOME TAXES
INTRODUCTION
The Contracts are designed for use in connection with retirement plans that may
or may not be qualified plans under the provisions of the Internal Revenue Code.
The ultimate effect of federal income taxes on contract value, on annuity
payments and on the economic benefit to the contract owner, annuitant or
beneficiary depends on the type of retirement plan for which the Contract is
purchased, on whether the investments of the Variable Account meet Internal
Revenue Service diversification standards (discussed below) and on the tax and
employment status of the individual concerned. The following discussion is
general in nature and is not intended as tax advice. Each person concerned
should consult a competent tax advisor. This discussion is based on Merrill
Lynch Life's understanding of current federal income tax laws as currently
interpreted. No representation is made regarding the likelihood of continuation
of current federal income tax laws or of the current interpretations by the
Internal Revenue Service. MERRILL LYNCH LIFE DOES NOT MAKE ANY GUARANTEE
REGARDING THE TAX STATUS OF ANY CONTRACT OR ANY TRANSACTION INVOLVING THE
CONTRACTS.
MERRILL LYNCH LIFE'S TAX STATUS
Merrill Lynch Life is taxed as a life insurance company under the Internal
Revenue Code. The Variable Account is not a separate entity, and for tax
purposes its operations are a part of Merrill Lynch Life's. Therefore, Merrill
Lynch Life will be liable for any taxes attributable to the Variable Account.
(See THE VARIABLE ACCOUNT on page 12.)
Under existing federal income tax law, although investment income of the
Variable Account is includible in Merrill Lynch Life's gross income, no income
tax on such income is payable by Merrill Lynch Life. Merrill Lynch Life reserves
the right, however, to deduct from the Variable Account any such taxes imposed
in the future.
TAXATION OF ANNUITIES IN GENERAL
In General
Section 72 of the Internal Revenue Code governs taxation of annuities in
general. With respect to contracts held by natural persons, no taxes are imposed
on increases in the value of a contract until distribution occurs, either in the
form of a withdrawal or as annuity payments under the annuity option elected.
The taxable portion of a distribution (in the form of a single sum payment or an
annuity) is taxable as ordinary income. Additionally, certain transfers of a
Contract for less than adequate consideration, such as a gift, will trigger tax
on the excess of the net contract value over the contract owner's investment in
the Contract.
Required Distributions
In order to be treated as an annuity contract for federal income tax purposes,
Section 72(s) of the Code requires any nonqualified contract to provide that (a)
if any contract owner dies on or after the annuity commencement date but prior
to the time the entire interest in the Contract has been distributed, the
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remaining portion of such interest will be distributed at least as rapidly as
under the method of distribution being used as of the date of that contract
owner's death; and (b) if any contract owner dies prior to the annuity
commencement date, the entire interest in the Contract will be distributed
within five years after the date of the contract owner's death. These
requirements will be considered satisfied as to any portion of the contract
owner's interest which is payable to or for the benefit of a "designated
beneficiary" and which is distributed over the life of such "designated
beneficiary" or over a period not extending beyond the life expectancy of that
beneficiary, provided that such distributions begin within one year of that
owner's death. The contract owner's "designated beneficiary" (referred to herein
as the "Owner's Beneficiary") is the person designated by such contract owner as
a beneficiary and to whom ownership of the Contract passes by reason of death
and must be a natural person. However, if the contract owner's "designated
beneficiary" is the surviving spouse of the contract owner, the Contract may be
continued with the surviving spouse as the new owner.
The nonqualified contracts contain provisions which are intended to comply with
the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. Merrill Lynch Life intends
to review such provisions and modify them if necessary to assure that they
comply with the requirements of Code Section 72(s) when clarified by regulation
or otherwise. Other rules may apply to qualified contracts.
Non-natural Owners
Nonqualified contracts held by other than a natural person generally are not
treated as annuities, and the contract owner generally must include in income
any increase in the excess of the contract value over the contract owner's
investment in the contract. This is not applicable to trusts or other entities
acting as an agent for a natural person, and there are certain other exceptions
to this rule. Prospective contract owners who are not natural persons should
consult a competent tax adviser.
Distributions
The taxable portion of annuity payments is generally determined by a formula
that establishes the ratio that the cost basis of the contract bears to the
expected return under the contract. After such time as the sum of the nontaxable
portion of annuity payments received equals the sum of premium payments
(adjusted for any withdrawals or outstanding loans), all subsequent annuity
payments are fully taxable as ordinary income.
With respect to nonqualified plans, partial withdrawals of contract value are
treated as taxable income to the extent that the contract value just before the
withdrawal exceeds the investment in the contract. In the case of a withdrawal
under a qualified plan, a ratable portion of the amount received is taxable,
generally based on the ratio of the investment in the contract to the
individual's total accrued benefit under the retirement plan. The assignment or
pledge (or agreement to assign or pledge) of any portion of the value of the
Contract shall be treated as a withdrawal subject to this rule. Full withdrawals
are treated as taxable income to the extent that the net contract value
withdrawn exceeds the investment in the contract. Amounts may be distributed
from the Contract because of the death of an owner or the annuitant. Generally,
such amounts are includible in the income of the recipient as follows: (1) if
distributed in a lump sum, they are taxed in the same manner as a full surrender
as described above, or (2) if distributed under an annuity option, they are
taxed in the same manner as annuity payments, as described above.
All nonqualified annuity contracts entered into after October 21, 1988 that are
issued by Merrill Lynch Life (or its affiliates) to the same owner during any
calendar year are treated as one annuity contract for purposes of determining
the amount includable in gross income under Section 72(e) of the Internal
Revenue Code. In addition, the Treasury Department has specific authority to
issue regulations that prevent the avoidance of Section 72(e) through the serial
purchase of annuity contracts or otherwise. Congress has also indicated that the
Treasury Department may have authority to treat the combination purchase of an
immediate annuity contract and a separate deferred annuity contract as a single
annuity contract under its general authority to prescribe rules as may be
necessary to enforce the income tax laws.
For both withdrawals and annuity payments under some types of qualified plans,
there may be no investment in the contract within the meaning of Section 72 of
the Internal Revenue Code, and the total amount received may be taxable.
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Contract owners, annuitants and beneficiaries should seek competent financial
advice about the tax consequences of distributions under the retirement plan in
connection with which the Contracts are purchased.
Penalty Tax
A penalty tax is imposed equal to 10% of the taxable income portion of a
withdrawal. The penalty tax applies to both nonqualified and qualified
contracts, with different exceptions for each. The exceptions applicable to both
nonqualified and qualified contracts include (a) distributions made at or after
the contract owner's age 59 1/2, (b) distributions made on or after the contract
owner's death, (c) distributions attributable to the contract owner's
disability, and (d) substantially equal periodic payments for the contract
owner's life or life expectancy (or joint life or joint life expectancy of the
contract owner and a second person). There is an additional exception for
distributions under an immediate annuity contract applicable to nonqualified
contracts and Section 457 plans. Finally, there is an exception unique to
qualified contracts (not applicable to Individual Retirement Annuities and
Accounts) for distributions made to an employee after separation from service
after age 55. (For the tax treatment of any premiums paid prior to August 14,
1982, consult a tax advisor.)
INTERNAL REVENUE SERVICE DIVERSIFICATION STANDARDS
The Internal Revenue Service has published regulations prescribing
diversification standards to be met by nonqualified variable annuity contracts
as a condition to being taxed as annuities under Section 72 of the Internal
Revenue Code. The standards provide that investments of a subaccount of the
Variable Account are adequately diversified if no more than (a) 55% of the value
of its assets is represented by any one investment, (b) 70% is represented by
any two investments, (c) 80% is represented by any three investments, and (d)
90% is represented by any four investments. Each Fund is obligated to comply
with the diversification standards imposed by the Internal Revenue Service.
The Treasury Department has announced that the diversification regulations do
not provide guidance concerning the extent to which contract owners may direct
their investments to particular subaccounts of a separate account. Such guidance
will be included in regulations or Revenue Rulings under Section 817(d) of the
Internal Revenue Code relating to the definition of a variable contract. It is
unknown what standards will be adopted in such regulations. Merrill Lynch Life,
however, believes that according to current law the Contract will be treated as
an annuity for federal income tax purposes and that the Company, not the
contract owner, will be treated as the owner of the contract investments.
The ownership rights under the Contract are similar to, but different in certain
respects from, those described by the Internal Revenue Service in rulings in
which it determined that the owners were not owners of separate account assets.
For example, the owner of the Contract has additional flexibility in allocating
premium payments and account values. These differences could result in the owner
being treated as the owner of the assets of the Variable Account. Merrill Lynch
Life reserves the right to modify the Contract as necessary to prevent the
contract owner from being considered the owner of the assets of the Variable
Account for federal tax purposes. Any such changes will apply uniformly to
affected contract owners and will be made with such notice to affected contract
owners as is feasible under the circumstances.
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF A CONTRACT
A transfer of ownership of the Contract, the designation of an annuitant who is
not also the owner, or the exchange of the Contract may result in certain tax
consequences to the contract owner that are not discussed herein. A contract
owner contemplating any such transfer, assignment, or exchange should contact a
competent tax adviser with respect to the potential tax effects of such a
transaction.
POSSIBLE CHANGES IN TAXATION
In past years, legislation has been proposed that would have adversely modified
the federal taxation of certain annuities. For example, one such proposal would
have changed the tax treatment of non-qualified annuities that did not have
"substantial life contingencies" by taxing income as it is credited to the
annuity. Although, as of the date of this prospectus, Congress is not actively
considering any legislation regarding the taxation of annuities, there is always
the possibility that the tax treatment of annuities could change by legislation
or other
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means (such as IRS regulations, revenue rulings, judicial decisions, etc.).
Moreover, it is also possible that any change could be retroactive (that is,
effective prior to the date of the change).
OTHER TAX CONSEQUENCES
Merrill Lynch Life does not make any guarantee regarding the tax status of the
Contract or any transaction regarding the Contract. As noted above, the
foregoing discussion of the income tax consequences under the Contract is not
exhaustive and special rules are provided with respect to other tax situations
not discussed in the Prospectus. Further, the income tax consequences discussed
herein reflect the Company's understanding of current law and the law may
change. Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of distributions under the Contract depend
on the individual circumstances of each contract owner or recipient of the
distribution. A competent tax adviser should be consulted for further
information.
QUALIFIED PLANS
The Contracts are designed for use with several types of qualified plans. The
tax rules applicable to participants in such qualified plans vary according to
the type of plan and the terms and conditions of the plan itself. Therefore, no
attempt is made to provide more than general information about the use of the
Contracts with the various types of qualified plans. Contract owners, annuitants
and beneficiaries are cautioned that the rights of any person to any benefits
under such qualified plans may be subject to the terms and conditions of the
plans themselves, regardless of the terms and conditions of the Contract. Some
retirement plans are subject to distribution and other requirements that are not
incorporated into our Contract administration procedures. Contract owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
Contracts comply with applicable law. Following are brief descriptions of the
various types of qualified plans in connection with which Merrill Lynch Life
will issue a Contract. When issued in connection with qualified plans, a
Contract will be amended as necessary to conform to the requirements of the
Internal Revenue Code.
Individual Retirement Annuities and Individual Retirement Accounts
Section 408 of the Internal Revenue Code permits eligible individuals to
contribute to an individual retirement program known as an Individual Retirement
Annuity or Individual Retirement Account (each hereafter referred to as "IRA").
IRAs are subject to limits on the amount that may be contributed, the
contributions that may be deducted from taxable income, the persons who may be
eligible and on the time when distributions may commence. Also, distributions
from certain other types of qualified plans may be "rolled over" on a
tax-deferred basis into an IRA. Sales of the Contract for use with IRAs may be
subject to special disclosure requirements of the Internal Revenue Service.
Purchasers of the Contract for use with IRAs will be provided with supplemental
information required by the Internal Revenue Service or other appropriate
agency. Such purchasers will have the right to revoke the Contract within 7 days
of the earlier of the establishment of the IRA or the purchase of the Contract.
Purchasers should seek competent advice as to the suitability of the Contract
for use with IRAs.
Pension and Profit Sharing Plans
Sections 401(a) and 403(a) of the Internal Revenue Code permit corporate
employers to establish various types of retirement plans for employees. These
plans are limited by law as to maximum permissible contributions, distribution
dates, nonforfeitability of interest and tax rates applicable to distributions.
These retirement plans may permit the purchase of the Contracts to accumulate
retirement savings under the plans. Adverse tax or other legal consequences to
the plan, to the participant or to both may result if this Contract is assigned
or transferred to any individual as a means to provide benefit payments, unless
the plan complies with all legal requirements applicable to such benefits prior
to transfer of the Contract. Employers intending to use the Contracts in
connection with such plans should seek competent advice.
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Tax-Sheltered Annuities
Section 403(b) of the Internal Revenue Code permits public school employees and
employees of certain types of charitable, educational and scientific
organizations specified in Section 501(c)(3) of the Code to purchase annuity
contracts and, subject to certain limitations, exclude the amount of premiums
from gross income for tax purposes. These annuity contracts are commonly
referred to as "Tax-Sheltered Annuities." Premiums excluded from gross income
will be subject to FICA taxes. Purchasers using the Contracts as a Tax-Sheltered
Annuity should seek competent advice as to eligibility, limitations on
permissible amounts or premiums, and restrictions and tax consequences on
distribution. The restrictions on distributions include a PROHIBITION AGAINST
DISTRIBUTIONS FROM THE CONTRACT ATTRIBUTABLE TO CONTRIBUTIONS MADE PURSUANT TO A
SALARY REDUCTION AGREEMENT, unless made:
(a) After the contract owner attains age 59 1/2;
(b) Upon separation from service;
(c) Upon death or disability, or
(d) For an amount not greater than the total of such contributions in the case
of hardship.
The above restrictions apply to distributions of employee contributions made
after December 31, 1988, earnings on those contributions, and earnings on
amounts attributable to employee contributions that are held as of December 31,
1988. They do not apply to distributions of any employer or other after-tax
contributions, employee contributions made on or before December 31, 1988, and
earnings credited to employee contributions before December 31, 1988.
Owners of Tax-Sheltered Annuities may receive Contract loans. Contract
loans that satisfy certain requirements with respect to loan amount and
repayment are not treated as taxable distributions. If these requirements are
not satisfied, or if the Contract terminates while a loan is outstanding, the
loan balance will be treated as a taxable distribution and may be subject to
penalty tax, and the treatment of the Contract under section 403(b) may be
adversely affected. In addition, if the section 403(b) plan is subject to the
Employee Retirement Income Security Act of 1974 ("ERISA"), a Contract loan will
be treated as a "prohibited transaction" subject to certain penalties unless
additional ERISA requirements are satisfied. The Owner of a Tax-Sheltered
Annuity should seek competent advice before requesting a Contract loan.
Section 457 Deferred Compensation ("Section 457") Plans
Under Section 457 of the Internal Revenue Code, employees and independent
contractors who perform services for tax-exempt employers may participate in a
Section 457 plan of their employer allowing them to defer part of their salary
or other compensation. The amount deferred and any income on such amount will
not be taxable until paid or otherwise made available to the employee.
The maximum amount that can be deferred under a Section 457 plan in any tax year
is ordinarily one-third of the employee's includible compensation, up to $7,500.
Includible compensation means earnings for services rendered to the employer
which is includible in the employee's gross income, but excluding any
contributions under the Section 457 plan or a Tax-Sheltered Annuity. During the
last three years before an individual attains normal retirement age additional
"catch-up" deferrals are permitted.
The deferred amounts will be used by the employer to purchase the Contracts. The
Contracts will be owned by the employer and will be subject to the claims of the
employer's creditors. The employee has no rights or vested interest in the
Contract and is only entitled to payment in accordance with the Section 457 plan
provisions. Present federal income tax law does not allow tax-free transfers or
rollovers for amounts accumulated in a Section 457 plan except for transfers to
other Section 457 plans in certain limited cases.
Withholding
Pension and annuity distributions generally are subject to withholding for the
recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. As of
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January 1, 1993, Merrill Lynch Life is generally required to withhold on
distributions under qualified contracts.
VARIABLE ACCOUNT VOTING RIGHTS
In accordance with its view of present applicable law, Merrill Lynch Life will
vote the shares of the Funds held in the Variable Account at any special
meetings of the shareholders of the Funds according to instructions received
from persons having a voting interest in the Variable Account. Merrill Lynch
Life will vote shares attributable to Contracts for which it has not received
instructions in the same proportion as it votes shares for which it has received
instructions. Shares not attributable to Contracts will also be voted in the
same proportion as shares in the respective subaccounts for which instructions
are received. If, however, the Investment Company Act of 1940 should be amended,
or if the present interpretation thereof should change, and as a result Merrill
Lynch Life determines that it is permitted to vote the shares of the Funds in
its own right, Merrill Lynch Life may elect to do so.
The person having the voting interest under a Contract is the contract owner.
Prior to the annuity date, the number of shares of each Fund for which voting
instructions may be given by a contract owner is determined by dividing the
contract owner's interest in the applicable subaccount by the net asset value
per share of that Fund. After the annuity date, the number of shares of each
Fund for which voting instruction may be given is determined by dividing the
reserve for such Contract allocated to the applicable subaccount by the net
asset value per share of that Fund. The votes attributable to such a Contract
will decrease as the reserves underlying the Contract decrease.
The number of Fund shares for which voting instructions may be given will be
determined as of a date to be chosen by Merrill Lynch Life, not more than 90
days prior to the meeting of the Fund.
Each person having a voting interest in the Variable Account will receive
periodic reports relating to the Funds in which he or she has an interest,
including proxy material and a form with which to give voting instructions.
REPORTS TO CONTRACT OWNERS
Merrill Lynch Life will mail to each contract owner at his or her last address
on record at least annually prior to the annuity date a report containing such
information as may be required by any applicable law or regulation and a
statement showing the current number of accumulation units attributable to the
Contract, the value per accumulation unit, the value of his or her interest in
the Variable Account and the total contract value.
DISTRIBUTION OF CONTRACTS
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") is the principal
underwriter of the Contract. It was organized in 1958 under the laws of the
state of Delaware and is registered as a broker-dealer under the Securities
Exchange Act of 1934. It is a member of the National Association of Securities
Dealers, Inc. ("NASD"). MLPF&S' principal business address is World Financial
Center, 250 Vesey Street, New York, New York 10281.
Contracts are sold by registered representatives (Financial Consultants) of
MLPF&S who are also licensed through various Merrill Lynch Life Agencies
("MLLA") as insurance agents for Merrill Lynch Life. Merrill Lynch Life has
entered into a distribution agreement with MLPF&S and a companion sales
agreement with MLLA through which agreements the Contracts are sold and the
Financial Consultants are compensated by MLLA and/or MLPF&S. The maximum
compensation paid to the Financial Consultant is 2.3% of each premium. In
addition, on the annuity date, the Financial Consultant will receive additional
compensation of no more than 1.4% of the contract value. Additional annual
compensation of no more than 0.10% of the contract value may also be paid to the
Financial Consultant.
The maximum commission Merrill Lynch Life will pay to MLLA to be used to pay
commissions to Financial Consultants is 5% of each premium.
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MLPF&S may arrange for sales of the Contract by other broker-dealers who are
registered under the Securities Act of 1934 and are members of the NASD.
Registered representatives of these other broker-dealers may be compensated on a
different basis than MLPF&S registered representatives.
STATE REGULATION
Merrill Lynch Life is subject to the laws of the State of Arkansas and to the
regulations of the Arkansas Insurance Department. It is also subject to the
insurance laws and regulations of all jurisdictions in which it is licensed to
do business.
An annual statement in the prescribed form is filed with the insurance
departments of jurisdictions where Merrill Lynch Life does business disclosing
the Company's operations for the preceding year and its financial condition as
of the end of that year. Insurance department regulation includes periodic
examination to verify Contract liabilities and reserves and to determine
solvency and compliance with all insurance laws and regulations. Merrill Lynch
Life's books and accounts are subject to insurance department review at all
times. A full examination of Merrill Lynch Life's operations is conducted
periodically by the Arkansas Insurance Department and under the auspices of the
National Association of Insurance Commissioners.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party or to
which the assets of the Variable Account are subject. Merrill Lynch Life and
MLPF&S are engaged in various kinds of routine litigation that, in the Company's
judgment, is not of material importance in relation to Merrill Lynch Life's
total assets. No such litigation relates to the Variable Account.
EXPERTS
The financial statements of Merrill Lynch Life as of December 31, 1995 and 1994
and for each of the three years in the period ended December 31, 1995 and of the
Accounts as of December 31, 1995 and for the periods presented in the Statement
of Additional Information have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing therein, and are
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 10281-1420.
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.
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,
Merrill Lynch Life's Senior Vice President and General Counsel. Sutherland,
Asbill & Brennan, L.L.P. of Washington, D.C. has provided advice on certain
matters relating to federal securities laws.
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TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
Principal Underwriter
Financial Statements
Administrative Services Arrangements
Financial Statements of Merrill Lynch Life Variable Annuity
Separate
Account
Financial Statements of Merrill Lynch Life Insurance Company
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APPENDIX
APPLICABLE ONLY TO CONTRACTS ISSUED PRIOR TO APRIL 30, 1986
If the contract owner's Contract was issued prior to April 30, 1986 and
assumption reinsured by Merrill Lynch Life ("old Contract"), the contract owner
may transfer all of the contract value at net asset value to a new Contract
described in this Prospectus. No contingent deferred sales charge will be
imposed on such transfer, and the new Contract will be deemed a continuation of
the old Contract in computing withdrawal charges under the new Contract.
Contracts issued prior to April 30, 1986, contain variable contract charges
identical in aggregate amount to the charges contained in the new Contracts,
except that the contingent deferred sales charge applies with respect to the old
Contracts to withdrawals of any amount during the first contract year. The new
Contracts provide that the contingent deferred sales charge does not apply to a
withdrawal up to 10% of the sum of premiums paid during the first contract year.
After the first contract year, both the old and new Contracts permit
withdrawals, without charge, of up to 10% of the sum of premiums paid prior to
the date of withdrawal.
In all other respects, both old and new Contracts are substantially similar,
except as follows:
1. The old Contracts do not provide for a Fixed Account (see THE FIXED ACCOUNT
on page 20).
2. The old Contracts do not provide for an annuity option of payments for a
fixed period (see ANNUITY OPTIONS on page 23).
3. The old Contracts contain different annuity tables for use in determining the
amount of the first variable annuity payment under the annuity options offered.
The annuity tables in the old Contracts are more favorable to contract owners
than the new Contracts' annuity tables and do not provide for an age adjustment
based on the year in which annuity payments commence. The annuity tables for
both new and old Contracts provide minimum guarantees.
4. Old Contracts, unlike new Contracts, permit a contract owner to transfer all
or part of his or her contract value to or from certain other fixed annuity
contracts issued or reinsured by Merrill Lynch Life to the contract owner.
Transfers must be at least $300, and for a partial transfer the remaining
contract value must be at least $100. All transfers must be at least 6 months
apart and must be made prior to the death of the annuitant and at least 30 days
prior to the annuity date. The primary purpose of this transfer provision is to
provide the contract owner with a means for transfer in and out of Merrill Lynch
Life's companion fixed annuity, a feature unnecessary with respect to the new
Contracts, because of the existence of the Fixed Account.
Any contract owner contemplating an exchange of Contracts should carefully
consider the potential adverse effect on the level of future annuity payments
that may result from an exchange to a new Contract.
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PART B
INFORMATION REQUIRED IN A STATEMENT
OF ADDITIONAL INFORMATION
<PAGE> 39
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 6, 1996
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
FLEXIBLE PREMIUMS--NONPARTICIPATING
ISSUED BY
MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock, Arkansas 72201
Service Center: P.O. Box 44222, Jacksonville, FL 32231-4222
4804 Deer Lake Drive East, Jacksonville, Florida 32246
Phone: (800) 535-5549
OFFERED THROUGH
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
Premiums for the Contract described in the Prospectus will be allocated to the
Merrill Lynch Life Variable Annuity Separate Account ("Variable Account"), a
segregated investment account of Merrill Lynch Life Insurance Company ("Merrill
Lynch Life"), unless allocation to the Fixed Account is selected. Premiums and
contract values allocated to the Variable Account will be invested in certain
Funds selected by the contract owner of the Merrill Lynch Variable Series Funds,
Inc., except that, for the first 14 days following the date of issue, such
premiums will be allocated to the Reserve Assets Fund Subaccounts. In the
Commonwealth of Pennsylvania, all premiums will be invested as of the date of
issue in the subaccounts selected by the contract owner. The contract owner
bears the full investment risk with respect to such investments.
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus of the Variable Account, dated December 6,
1996. The Prospectus may be obtained without charge by writing to or calling
Merrill Lynch Life's Service Center at the address or phone number set forth
above.
<PAGE> 40
TABLE OF CONTENTS
<TABLE>
<S> <C>
Principal Underwriter................................................. 2
Financial Statements.................................................. 2
Administrative Services Arrangements.................................. 2
Financial Statements of Merrill Lynch Life Variable Annuity Separate
Account............................................................. S-1
Financial Statements of Merrill Lynch Life Insurance Company.......... G-1
</TABLE>
PRINCIPAL UNDERWRITER
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), an affiliate of
Merrill Lynch Life performs all sales and distribution functions regarding the
Contracts and may be deemed the principal underwriter of Merrill Lynch Life
Variable Annuity Separate Account (the "Variable Account") under the Investment
Company Act of 1940. The offering of the Contracts relates to Merrill Lynch
Life's assumption reinsurance of the Contracts previously issued by Family Life
Insurance Company ("FLIC") and offers may also be made from time to time to the
general public. The offering of the interests under the Contracts is continuous.
For the years ended December 31, 1995, 1994 and 1993, MLPF&S received in
connection with the sale of the Contracts $0.7 million, $0.8 million and $1
million, respectively.
FINANCIAL STATEMENTS
The financial statements of Merrill Lynch Life included in this Statement of
Additional Information should be distinguished from the financial statements of
the Variable Account and should be considered only as bearing upon the ability
of Merrill Lynch Life to meet any obligations it may have under the Contract.
Because the Variable Account acquired a majority of the assets of Merrill Lynch
Variable Annuity Account of FLIC in connection with Merrill Lynch Life's
assumption reinsurance of certain variable annuity contracts of FLIC commencing
on September 1, 1991, the financial statements of the Variable Account include
the financial operations of the FLIC separate account for periods prior to
September 1, 1991.
ADMINISTRATIVE SERVICES ARRANGEMENTS
Merrill Lynch Life has entered into a Service Agreement with its parent, Merrill
Lynch Insurance Group, Inc. ("MLIG") pursuant to which Merrill Lynch Life can
arrange for MLIG to provide directly or through affiliates certain services.
Pursuant to this agreement, Merrill Lynch Life has arranged for MLIG to provide
administrative services for the Variable Account and the Contracts, and MLIG, in
turn, has arranged for a subsidiary, Merrill Lynch Insurance Group Services,
Inc. ("MLIG Services"), to provide these services. Compensation for these
services, which will be paid by Merrill Lynch Life, will be based on the charges
and expenses incurred by MLIG Services, and will reflect MLIG Services' actual
costs. For the years ended December 31, 1995, 1994 and 1993, Merrill Lynch Life
paid administrative services fees of $43.0 million, $44.2 million and $55.8
million, respectively.
2
<PAGE> 41
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Merrill Lynch Life Insurance Company:
We have audited the accompanying statement of net assets of
Merrill Lynch Life Variable Annuity Separate Account (the
"Account") as of December 31, 1995 and the related
statements of operations and changes in net assets for each
of the two years in the period then ended. These financial
statements are the responsibility of the management of
Merrill Lynch Life Insurance Company. Our responsibility is
to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation
of mutual fund securities owned at December 31, 1995, by
correspondence with the funds' custodian. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial position of the Account
at December 31, 1995 and the results of its operations and
the changes in its net assets for the above periods in
conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an
opinion on the basic financial statements taken as a whole.
The supplemental schedules included herein are presented for
the purpose of additional analysis and are not a required
part of the basic financial statements. These schedules are
the responsibility of the Company's management. Such
schedules have been subjected to the auditing procedures
applied in our audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects
when considered in relation to the basic financial
statements taken as a whole.
\s\Deloitte & Touche LLP
January 18, 1996
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS AT DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Market
Cost Shares Value
======================= ======================= =======================
<S> <C> <C> <C>
ASSETS:
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Reserve Assets Fund $ 11,840,299 11,840,299 $ 11,840,299
Prime Bond Fund 28,258,182 2,337,418 29,100,854
High Current Income Fund 12,277,048 1,073,342 12,075,094
Quality Equity Fund 44,108,161 1,693,261 55,471,241
Equity Growth Fund 11,769,246 595,464 16,661,071
Flexible Strategy Fund 41,149,639 2,857,602 47,064,699
American Balanced Fund 6,634,543 493,397 7,484,839
Natural Resources Focus Fund 1,412,409 127,187 1,519,885
----------------------- -----------------------
TOTAL ASSETS $ 157,449,527 181,217,982
======================= -----------------------
LIABILITIES:
Due to Merrill Lynch Life Insurance Company 40,605
-----------------------
TOTAL LIABILITIES 40,605
-----------------------
NET ASSETS $ 181,177,377
=======================
</TABLE>
See Notes to Financial Statements
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
================================================================================
<TABLE>
<CAPTION>
1995 1994
======================= =======================
<S> <C> <C>
Investment Income:
Reinvested Dividends $ 8,474,693 $ 9,687,712
Mortality and Expense Charges (Note 4) (2,068,466) (2,239,090)
----------------------- -----------------------
Net Investment Income 6,406,227 7,448,622
----------------------- -----------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains 3,562,843 3,879,896
Net Unrealized Gains (Losses) 20,887,037 (19,576,263)
----------------------- -----------------------
Net Realized and Unrealized Gains (Losses) 24,449,880 (15,696,367)
----------------------- -----------------------
Increase (Decrease) in Net Assets
Resulting from Operations 30,856,107 (8,247,745)
----------------------- -----------------------
Changes from Principal Transactions:
Transfer of Net Premiums 2,148,026 2,949,329
Transfer of Contract Owner Withdrawals (27,074,144) (28,182,329)
Transfers Out - Net (243,238) (571,028)
Transfer of Benefit Payments of Annuitized Contracts (152,562) (94,424)
Transfer of Contract Administration Charges (Note 4) (120,746) (26,754)
Net Assets Transferred under Assumption Reinsurance Agreement (Note 2) 0 445,900
----------------------- -----------------------
Decrease in Net Assets
Resulting from Principal Transactions (25,442,664) (25,479,306)
----------------------- -----------------------
Increase (Decrease) in Net Assets 5,413,443 (33,727,051)
Net Assets Beginning Balance 175,763,934 209,490,985
----------------------- -----------------------
Net Assets Ending Balance $ 181,177,377 $ 175,763,934
======================= =======================
Comprised of:
Contracts in the Accumulation Period $ 179,813,386 $ 175,097,847
Contracts in the Annuity Period 1,363,991 666,087
----------------------- -----------------------
Net Assets $ 181,177,377 $ 175,763,934
======================= =======================
</TABLE>
See Notes to Financial Statements
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. Merrill Lynch Life Variable Annuity Separate Account
("Account"), a separate account of Merrill Lynch Life
Insurance Company ("Merrill Lynch Life"), was
established to support Merrill Lynch Life's operations
with respect to certain variable annuity contracts
("Contracts"). The Account is governed by Arkansas
State Insurance Law. Merrill Lynch Life is an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc.
("Merrill"). The Account is a registered unit
investment trust under the Investment Company Act of
1940 and consists of eight investment divisions. The
investment divisions each invest in the securities of a
single mutual fund portfolio of the Merrill Lynch
Variable Series Funds, Inc. ("Series Funds"). The
portfolios of the Series Funds have varying investment
objectives relative to growth of capital and income.
The Series Funds receives investment advice from Merrill
Lynch Asset Management, L.P., an indirect subsidiary of
Merrill, for a fee calculated at an effective annual
rate ranging from 0.275% to 0.75% of net assets of the
Series Funds.
The assets of the Account are registered in the name of
Merrill Lynch Life. The portion of the Account's assets
applicable to the Contracts are not chargeable with
liabilities arising out of any other business Merrill
Lynch Life may conduct. There are two sub-accounts for
each investment division. One sub-account is for
Contracts issued in connection with retirement plans that
are qualified under the Internal Revenue Code, and the
other is for non-qualified Contracts. No transfers may
be made between a qualified and a non-qualified sub-
account.
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 Arkansas State Insurance Law to provide for death
benefits (without regard to the minimum death benefit
guarantee) and other Contract benefits
To facilitate comparisons with the current year, certain
amounts in the prior year have been reclassified.
2. As a result of an Assumption Reinsurance Agreement
between Family Life Insurance Company ("Family Life")
and Merrill Lynch Life, assets along with related
contractual liabilities of approximately $446,000 were
transferred to the Account from Family Life's Merrill
Lynch Variable Annuity Account on various dates during
1994.
3. The following is a summary of significant accounting
policies of the Account:
Investments in the divisions are included in the
statement of net assets at the net asset values of the
Series Funds shares held.
Dividend income is recognized on the ex-dividend date.
All dividends are automatically reinvested.
Realized gains and losses on the sales of investments are
computed on the first in first out method.
The operations of the Account are included in the Federal
income tax return of Merrill Lynch Life. Under the
provisions of the Contracts, Merrill Lynch Life 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, Merrill Lynch Life pays no tax on
investment income and capital gains reflected in variable
annuity Contract reserves. However, Merrill Lynch Life
retains the right to charge for any Federal income tax
incurred which is attributable to the Account if the law
is changed. Charges for state and local taxes, if any,
attributable to the Account may also be made.
4. Merrill Lynch Life deducts a contract administration
charge of $30 for each Contract on each Contract's
anniversary on or prior to the annuity date and upon full
withdrawal if made other than on a Contract anniversary.
The contract administration charge is borne by Contract
owners by redeeming accumulation units with a value equal
to the charge.
Merrill Lynch Life deducts a daily expense risk charge.
For non-qualified Contracts, the charge is equal to an
annual rate of 0.5% of the sum of the daily net asset
values of all non-qualified sub-accounts. For qualified
Contracts, the rate is 0.2% of the sum of the daily net
asset values of all qualified sub-accounts. This charge
is made to compensate Merrill Lynch Life for the risk of
guaranteeing not to increase the contract administration
charge regardless of actual administrative costs.
Merrill Lynch Life deducts a daily distribution expense
charge equal to an annual rate of 0.05% of the daily net
asset value of the Account. This charge compensates
Merrill Lynch Life in part for expenses it incurs in
distributing the Contracts.
Merrill Lynch Life deducts a daily mortality risk charge
equal to an annual rate of 0.75% of the daily net asset
value of the Account. This charge is made to compensate
Merrill Lynch Life for the mortality guarantees it makes
under the Contract.
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Total
Total Non- Total
Separate Qualified Qualified
Account Contracts Contracts
======================= ======================= =======================
<S> <C> <C> <C>
Investment Income:
Reinvested Dividends $ 8,474,693 $ 5,128,563 $ 3,346,130
Mortality and Expense Charges (2,068,466) (1,362,484) (705,982)
----------------------- ----------------------- -----------------------
Net Investment Income 6,406,227 3,766,079 2,640,148
----------------------- ----------------------- -----------------------
Realized and Unrealized Gains:
Net Realized Gains 3,562,843 1,935,122 1,627,721
Net Unrealized Gains 20,887,037 12,423,909 8,463,128
----------------------- ----------------------- -----------------------
Net Realized and Unrealized Gains 24,449,880 14,359,031 10,090,849
----------------------- ----------------------- -----------------------
Increase in Net Assets
Resulting from Operations 30,856,107 18,125,110 12,730,997
----------------------- ----------------------- -----------------------
Changes from Principal Transactions:
Transfer of Net Premiums 2,148,026 263,025 1,885,001
Transfer of Contract Owner Withdrawals (27,074,144) (15,281,007) (11,793,137)
Transfers In (Out) - Net (243,238) (432,545) 189,307
Transfer of Benefit Payments of Annuitized Contracts (152,562) (114,164) (38,398)
Transfer of Contract Administration Charges (120,746) (62,199) (58,547)
----------------------- ----------------------- -----------------------
Decrease in Net Assets
Resulting from Principal Transactions (25,442,664) (15,626,890) (9,815,774)
----------------------- ----------------------- -----------------------
Increase in Net Assets 5,413,443 2,498,220 2,915,223
Net Assets Beginning Balance 175,763,934 105,294,135 70,469,799
----------------------- ----------------------- -----------------------
Net Assets Ending Balance $ 181,177,377 $ 107,792,355 $ 73,385,022
======================= ======================= =======================
Comprised of:
Contracts in the Accumulation Period $ 179,813,386 $ 106,859,122 $ 72,954,264
Contracts in the Annuity Period 1,363,991 933,233 430,758
----------------------- ----------------------- -----------------------
Net Assets $ 181,177,377 $ 107,792,355 $ 73,385,022
======================= ======================= =======================
</TABLE>
NOTE: A Qualified contract is a contract issued in connection with a retirement
plan that receives a favorable tax treatment under sections 401, 403,
408, or 457 or any similar provision of the Internal Revenue Code. A
Nonqualified contract is a contract other than a Qualified contract.
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Total
Total Non- Total
Separate Qualified Qualified
Account Contracts Contracts
======================= ======================= =======================
<S> <C> <C> <C>
Investment Income:
Reinvested Dividends $ 9,687,712 $ 5,846,180 $ 3,841,532
Mortality and Expense Charges (2,239,090) (1,476,613) (762,477)
----------------------- ----------------------- -----------------------
Net Investment Income 7,448,622 4,369,567 3,079,055
----------------------- ----------------------- -----------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains 3,879,896 2,405,174 1,474,722
Net Unrealized Losses (19,576,263) (11,879,156) (7,697,107)
----------------------- ----------------------- -----------------------
Net Realized and Unrealized Losses (15,696,367) (9,473,982) (6,222,385)
----------------------- ----------------------- -----------------------
Decrease in Net Assets
Resulting from Operations (8,247,745) (5,104,415) (3,143,330)
----------------------- ----------------------- -----------------------
Changes from Principal Transactions:
Transfer of Net Premiums 2,949,329 48,008 2,901,321
Transfer of Contract Owner Withdrawals (28,182,329) (14,537,564) (13,644,765)
Transfers Out - Net (571,028) (336,754) (234,274)
Transfer of Benefit Payments of Annuitized Contracts (94,424) (69,741) (24,683)
Transfer of Contract Administration Charges (26,754) (11,458) (15,296)
Net Assets Transferred under Assumption Reinsurance Agreement 445,900 328,548 117,352
----------------------- ----------------------- -----------------------
Decrease in Net Assets
Resulting from Principal Transactions (25,479,306) (14,578,961) (10,900,345)
----------------------- ----------------------- -----------------------
Decrease in Net Assets (33,727,051) (19,683,376) (14,043,675)
Net Assets Beginning Balance 209,490,985 124,977,511 84,513,474
----------------------- ----------------------- -----------------------
Net Assets Ending Balance $ 175,763,934 $ 105,294,135 $ 70,469,799
======================= ======================= =======================
Comprised of:
Contracts in the Accumulation Period $ 175,097,847 $ 104,769,096 $ 70,328,751
Contracts in the Annuity Period 666,087 525,039 141,048
----------------------- ----------------------- -----------------------
Net Assets $ 175,763,934 $ 105,294,135 $ 70,469,799
======================= ======================= =======================
</TABLE>
NOTE: A Qualified contract is a contract issued in connection with a retirement
plan that receives a favorable tax treatment under sections 401, 403,
408, or 457 or any similar provision of the Internal Revenue Code. A
Nonqualified contract is a contract other than a Qualified contract.
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - NONQUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Total High
Non- Reserve Prime Current
qualified Assets Bond Income
Contracts Fund Fund Fund
===================== ==================== ==================== ====================
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 5,128,563 $ 487,528 $ 1,231,311 $ 815,424
Mortality and Expense Charges (1,362,484) (114,650) (225,357) (105,441)
--------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 3,766,079 372,878 1,005,954 709,983
--------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 1,935,122 0 (27,549) (80,626)
Net Unrealized Gains 12,423,909 0 2,008,443 553,216
--------------------- -------------------- -------------------- --------------------
Net Realized and Unrealized Gains 14,359,031 0 1,980,894 472,590
--------------------- -------------------- -------------------- --------------------
Increase in Net Assets
Resulting from Operations 18,125,110 372,878 2,986,848 1,182,573
--------------------- -------------------- -------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 263,025 13,282 39,737 17,750
Transfer of Contract Owner Withdrawals (15,281,007) (1,915,410) (2,181,449) (1,571,554)
Transfers In (Out) - Net (432,545) (1,074,629) (956,699) 555,255
Transfer of Benefit Payments
on Annuitized Contracts (114,164) (6,594) (16,263) (7,778)
Transfer of Contract Administration Charges (62,199) (5,191) (9,315) (4,525)
--------------------- -------------------- -------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (15,626,890) (2,988,542) (3,123,989) (1,010,852)
--------------------- -------------------- -------------------- --------------------
Increase (Decrease) in Net Assets 2,498,220 (2,615,664) (137,141) 171,721
Net Assets Beginning Balance 105,294,135 10,111,960 18,050,583 7,965,360
--------------------- -------------------- -------------------- --------------------
Net Assets Ending Balance $ 107,792,355 $ 7,496,296 $ 17,913,442 $ 8,137,081
===================== ==================== ==================== ====================
Comprised of:
Contracts in the Accumulation Period $ 106,859,122 $ 7,446,719 $ 17,769,487 $ 8,068,308
Contracts in the Annuity Period 933,233 49,577 143,955 68,773
--------------------- -------------------- -------------------- --------------------
Total Contract Owners' Balances $ 107,792,355 $ 7,496,296 $ 17,913,442 $ 8,137,081
===================== ==================== ==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - NONQUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
===============================================================
Quality Equity Flexible
Equity Growth Strategy
Fund Fund Fund
===================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 1,104,008 $ 31,147 $ 1,257,059
Mortality and Expense Charges (403,324) (103,585) (340,597)
--------------------- -------------------- --------------------
Net Investment Income (Loss) 700,684 (72,438) 916,462
--------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 978,150 319,960 657,622
Net Unrealized Gains 4,309,779 2,582,532 2,309,994
--------------------- -------------------- --------------------
Net Realized and Unrealized Gains 5,287,929 2,902,492 2,967,616
--------------------- -------------------- --------------------
Increase in Net Assets
Resulting from Operations 5,988,613 2,830,054 3,884,078
--------------------- -------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 75,288 41,770 64,192
Transfer of Contract Owner Withdrawals (3,460,102) (614,431) (5,143,297)
Transfers In (Out) - Net 898,354 1,060,737 (401,958)
Transfer of Benefit Payments
on Annuitized Contracts (44,141) (14,450) (22,762)
Transfer of Contract Administration Charges (18,954) (4,643) (16,614)
--------------------- -------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (2,549,555) 468,983 (5,520,439)
--------------------- -------------------- --------------------
Increase (Decrease) in Net Assets 3,439,058 3,299,037 (1,636,361)
Net Assets Beginning Balance 29,273,579 6,816,608 27,553,383
--------------------- -------------------- --------------------
Net Assets Ending Balance $ 32,712,637 $ 10,115,645 $ 25,917,022
===================== ==================== ====================
Comprised of:
Contracts in the Accumulation Period $ 32,373,253 $ 9,989,413 $ 25,739,147
Contracts in the Annuity Period 339,384 126,232 177,875
--------------------- -------------------- --------------------
Total Contract Owners' Balance $ 32,712,637 $ 10,115,645 $ 25,917,022
===================== ==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - NONQUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==========================================
Natural
American Resources
Balanced Focus
Fund Fund
===================== ====================
<S> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 182,255 $ 19,831
Mortality and Expense Charges (57,244) (12,286)
--------------------- --------------------
Net Investment Income (Loss) 125,011 7,545
--------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 91,096 (3,531)
Net Unrealized Gains 564,537 95,408
--------------------- --------------------
Net Realized and Unrealized Gains 655,633 91,877
--------------------- --------------------
Increase in Net Assets
Resulting from Operations 780,644 99,422
--------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 8,206 2,800
Transfer of Contract Owner Withdrawals (355,102) (39,662)
Transfers In (Out) - Net (423,463) (90,142)
Transfer of Benefit Payments
on Annuitized Contracts (2,176) 0
Transfer of Contract Administration Charges (2,516) (441)
--------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (775,051) (127,445)
--------------------- --------------------
Increase (Decrease) in Net Assets 5,593 (28,023)
Net Assets Beginning Balance 4,482,368 1,040,294
--------------------- --------------------
Net Assets Ending Balance $ 4,487,961 $ 1,012,271
===================== ====================
Comprised of:
Contracts in the Accumulation Period $ 4,460,524 $ 1,012,271
Contracts in the Annuity Period 27,437 0
--------------------- --------------------
Total Contract Owners' Balance $ 4,487,961 $ 1,012,271
===================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - NONQUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
High
Reserve Prime Current
Assets Bond Income
Fund Fund Fund
==================== ==================== ====================
<S> <C> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1995 347,815.0 506,686.3 174,186.3
Accumulation Units Equivalent to Annuity Units Allocable to
Contracts in Annuity Period at December 31, 1995 2,315.6 4,104.8 1,484.7
-------------------- -------------------- --------------------
Total Units Outstanding at December 31, 1995 350,130.6 510,791.1 175,671.0
==================== ==================== ====================
Accumulation Unit Value at December 31, 1995 $ 21.41 $ 35.07 $ 46.32
==================== ==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - NONQUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Quality Equity Flexible
Equity Growth Strategy
Fund Fund Fund
==================== ==================== ====================
<S> <C> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1995 641,308.5 320,173.5 1,170,493.3
Accumulation Units Equivalent to Annuity Units Allocable to
Contracts in Annuity Period at December 31, 1995 6,723.1 4,045.9 8,088.9
-------------------- -------------------- --------------------
Total Units Outstanding at December 31, 1995 648,031.6 324,219.4 1,178,582.2
==================== ==================== ====================
Accumulation Unit Value at December 31, 1995 $ 50.48 $ 31.20 $ 21.99
==================== ==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - NONQUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
=========================================
Natural
American Resources
Balanced Focus
Fund Fund
==================== ====================
<S> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1995 235,881.8 81,046.5
Accumulation Units Equivalent to Annuity Units Allocable to
Contracts in Annuity Period at December 31, 1995 1,450.9 0.0
-------------------- --------------------
Total Units Outstanding at December 31, 1995 237,332.7 81,046.5
==================== ====================
Accumulation Unit Value at December 31, 1995 $ 18.91 $ 12.49
==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - NONQUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Total High
Non- Reserve Prime Current
qualified Assets Bond Income
Contracts Fund Fund Fund
===================== ==================== ==================== ====================
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 5,846,180 $ 373,517 $ 1,594,361 $ 823,398
Mortality and Expense Charges (1,476,613) (128,165) (252,571) (116,614)
--------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 4,369,567 245,352 1,341,790 706,784
--------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains 2,405,174 0 118,236 324,459
Net Unrealized Losses (11,879,156) 0 (2,756,448) (1,467,899)
--------------------- -------------------- -------------------- --------------------
Net Realized and Unrealized Losses (9,473,982) 0 (2,638,212) (1,143,440)
--------------------- -------------------- -------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Operations (5,104,415) 245,352 (1,296,422) (436,656)
--------------------- -------------------- -------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 48,008 (318,149) 35,173 9,704
Transfer of Contract Owner Withdrawals (14,537,564) (1,513,677) (2,928,942) (1,097,801)
Transfers In (Out) - Net (336,754) 2,901,045 (1,170,884) (867,856)
Transfer of Benefit Payments
on Annuitized Contracts (69,741) (6,685) (5,781) (7,647)
Transfer of Contract Administration Charges (11,458) (1,643) (1,501) (681)
Net Assets Transferred under Assumption
Reinsurance Agreement 328,548 26,204 98,547 40,702
--------------------- -------------------- -------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (14,578,961) 1,087,095 (3,973,388) (1,923,579)
--------------------- -------------------- -------------------- --------------------
Increase (Decrease) in Net Assets (19,683,376) 1,332,447 (5,269,810) (2,360,235)
Net Assets Beginning Balance 124,977,511 8,779,513 23,320,393 10,325,595
--------------------- -------------------- -------------------- --------------------
Net Assets Ending Balance $ 105,294,135 $ 10,111,960 $ 18,050,583 $ 7,965,360
===================== ==================== ==================== ====================
Comprised of:
Contracts in the Accumulation Period $ 104,769,096 $ 10,058,122 $ 18,003,868 $ 7,898,666
Contracts in the Annuity Period 525,039 53,838 46,715 66,694
--------------------- -------------------- -------------------- --------------------
Total Contract Owners' Balance $ 105,294,135 $ 10,111,960 $ 18,050,583 $ 7,965,360
===================== ==================== ==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - NONQUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
===============================================================
Quality Equity Flexible
Equity Growth Strategy
Fund Fund Fund
===================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 1,076,258 $ 71,934 $ 1,730,192
Mortality and Expense Charges (405,031) (97,081) (398,925)
--------------------- -------------------- --------------------
Net Investment Income (Loss) 671,227 (25,147) 1,331,267
--------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains 982,475 172,085 628,370
Net Unrealized Losses (2,474,097) (879,487) (3,737,958)
--------------------- -------------------- --------------------
Net Realized and Unrealized Losses (1,491,622) (707,402) (3,109,588)
--------------------- -------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Operations (820,395) (732,549) (1,778,321)
--------------------- -------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 138,879 31,499 138,539
Transfer of Contract Owner Withdrawals (3,268,713) (649,881) (4,442,882)
Transfers In (Out) - Net (646,932) 199,615 (302,215)
Transfers of Benefit Payments
on Annuitized Contracts (31,619) (8,544) (9,465)
Transfer of Contract Administration Charges (2,673) (676) (3,722)
Net Assets Transferred under Assumption
Reinsurance Agreement 105,116 12,159 42,859
--------------------- -------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (3,705,942) (415,828) (4,576,886)
--------------------- -------------------- --------------------
Increase (Decrease) in Net Assets (4,526,337) (1,148,377) (6,355,207)
Net Assets Beginning Balance 33,799,916 7,964,985 33,908,590
--------------------- -------------------- --------------------
Net Assets Ending Balance $ 29,273,579 $ 6,816,608 $ 27,553,383
===================== ==================== ====================
Comprised of:
Contracts in the Accumulation Period $ 29,043,048 $ 6,769,305 $ 27,473,425
Contracts in the Annuity Period 230,531 47,303 79,958
--------------------- -------------------- --------------------
Total Contract Owners' Balance $ 29,273,579 $ 6,816,608 $ 27,553,383
===================== ==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - NONQUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==========================================
Natural
American Resources
Balanced Focus
Fund Fund
===================== ====================
<S> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 159,575 $ 16,945
Mortality and Expense Charges (63,084) (15,142)
--------------------- --------------------
Net Investment Income (Loss) 96,491 1,803
--------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains 174,836 4,713
Net Unrealized Losses (557,938) (5,329)
--------------------- --------------------
Net Realized and Unrealized Losses (383,102) (616)
--------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Operations (286,611) 1,187
--------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 8,644 3,719
Transfer of Contract Owner Withdrawals (496,315) (139,353)
Transfers In (Out) - Net (522,620) 73,093
Transfer of Benefit Payments
on Annuitized Contracts 0 0
Transfer of Contract Administration Charges (481) (81)
Net Assets Transferred under Assumption
Reinsurance Agreement 0 2,961
--------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (1,010,772) (59,661)
--------------------- --------------------
Increase (Decrease) in Net Assets (1,297,383) (58,474)
Net Assets Beginning Balance 5,779,751 1,098,768
--------------------- --------------------
Net Assets Ending Balance $ 4,482,368 $ 1,040,294
===================== ====================
Comprised of:
Contracts in the Accumulation Period $ 4,482,368 $ 1,040,294
Contracts in the Annuity Period 0 0
--------------------- --------------------
Total Contract Owners' Balances $ 4,482,368 $ 1,040,294
===================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - NONQUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
High
Reserve Prime Current
Assets Bond Income
Fund Fund Fund
==================== ==================== ====================
<S> <C> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1994 489,744.2 608,952.0 197,319.8
Accumulation Units Equivalent to Annuity Units Allocable to
Contracts in Annuity Period at December 31, 1994 2,621.4 1,580.0 1,666.1
-------------------- -------------------- --------------------
Total Units Outstanding at December 31, 1994 492,365.6 610,532.0 198,985.9
==================== ==================== ====================
Accumulation Unit Value at December 31, 1994 $ 20.54 $ 29.57 $ 40.03
==================== ==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - NONQUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Quality Equity Flexible
Equity Growth Strategy
Fund Fund Fund
==================== ==================== ====================
<S> <C> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1994 696,376.1 312,486.9 1,447,768.7
Accumulation Units Equivalent to Annuity Units Allocable to
Contracts in Annuity Period at December 31, 1994 5,527.5 2,183.6 4,213.5
-------------------- -------------------- --------------------
Total Units Outstanding at December 31, 1994 701,903.6 314,670.5 1,451,982.2
==================== ==================== ====================
Accumulation Unit Value at December 31, 1994 $ 41.71 $ 21.66 $ 18.98
==================== ==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - NONQUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
=========================================
Natural
American Resources
Balanced Focus
Fund Fund
==================== ====================
<S> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1994 282,733.9 92,609.5
Accumulation Units Equivalent to Annuity Units Allocable to
Contracts in Annuity Period at December 31, 1994 0.0 0.0
-------------------- --------------------
Total Units Outstanding at December 31, 1994 282,733.9 92,609.5
==================== ====================
Accumulation Unit Value at December 31, 1994 $ 15.85 $ 11.23
==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - QUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
High
Total Reserve Prime Current
Qualified Assets Bond Income
Contracts Fund Fund Fund
===================== ==================== ==================== ====================
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 3,346,130 $ 266,215 $ 779,205 $ 393,672
Mortality and Expense Charges (705,982) (48,317) (109,227) (39,102)
--------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 2,640,148 217,898 669,978 354,570
--------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 1,627,721 0 20,009 (29,616)
Net Unrealized Gains 8,463,128 0 1,248,712 265,190
--------------------- -------------------- -------------------- --------------------
Net Realized and Unrealized Gains 10,090,849 0 1,268,721 235,574
--------------------- -------------------- -------------------- --------------------
Increase in Net Assets
Resulting from Operations 12,730,997 217,898 1,938,699 590,144
--------------------- -------------------- -------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 1,885,001 163,971 335,187 84,878
Transfer of Contract Owner Withdrawals (11,793,137) (1,384,792) (1,800,688) (697,898)
Transfers In (Out) - Net 189,307 (29,963) (388,386) 1,344
Transfer of Benefit Payments
on Annuitized Contracts (38,398) (2,383) (11,120) 0
Transfer of Contract Administration Charges (58,547) (4,808) (7,460) (2,535)
--------------------- -------------------- -------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (9,815,774) (1,257,975) (1,872,467) (614,211)
--------------------- -------------------- -------------------- --------------------
Increase (Decrease) in Net Assets 2,915,223 (1,040,077) 66,232 (24,067)
Net Assets Beginning Balance 70,469,799 5,381,423 11,114,624 3,959,317
--------------------- -------------------- -------------------- --------------------
Net Assets Ending Balance $ 73,385,022 $ 4,341,346 $ 11,180,856 $ 3,935,250
===================== ==================== ==================== ====================
Comprised of:
Contracts in the Accumulation Period $ 72,954,264 $ 4,320,130 $ 11,111,954 $ 3,935,250
Contracts in the Annuity Period 430,758 21,216 68,902 0
--------------------- -------------------- -------------------- --------------------
Total Contract Owners' Balance $ 73,385,022 $ 4,341,346 $ 11,180,856 $ 3,935,250
===================== ==================== ==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - QUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
===============================================================
Quality Equity Flexible
Equity Growth Strategy
Fund Fund Fund
===================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 796,672 $ 21,350 $ 961,624
Mortality and Expense Charges (218,042) (49,985) (206,592)
--------------------- -------------------- --------------------
Net Investment Income (Loss) 578,630 (28,635) 755,032
--------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 822,264 281,374 444,026
Net Unrealized Gains 2,865,864 1,753,667 1,926,979
--------------------- -------------------- --------------------
Net Realized and Unrealized Gains 3,688,128 2,035,041 2,371,005
--------------------- -------------------- --------------------
Increase in Net Assets
Resulting from Operations 4,266,758 2,006,406 3,126,037
--------------------- -------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 565,557 166,027 495,856
Transfer of Contract Owner Withdrawals (3,110,527) (765,885) (3,508,036)
Transfers In (Out) - Net (265,737) 713,692 79,148
Transfer of Benefit Payments
on Annuitized Contracts (20,186) 0 (4,709)
Transfer of Contract Administration Charges (18,748) (4,795) (17,621)
--------------------- -------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (2,849,641) 109,039 (2,955,362)
--------------------- -------------------- --------------------
Increase (Decrease) in Net Assets 1,417,117 2,115,445 170,675
Net Assets Beginning Balance 21,329,062 4,426,242 20,966,563
--------------------- -------------------- --------------------
Net Assets Ending Balance $ 22,746,179 $ 6,541,687 $ 21,137,238
===================== ==================== ====================
Comprised of:
Contracts in the Accumulation Period $ 22,449,586 $ 6,541,687 $ 21,093,191
Contracts in the Annuity Period 296,593 0 44,047
--------------------- -------------------- --------------------
Total Contract Owners' Balance $ 22,746,179 $ 6,541,687 $ 21,137,238
===================== ==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - QUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==========================================
Natural
American Resources
Balanced Focus
Fund Fund
===================== ====================
<S> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 116,670 $ 10,722
Mortality and Expense Charges (29,343) (5,374)
--------------------- --------------------
Net Investment Income (Loss) 87,327 5,348
--------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 84,660 5,004
Net Unrealized Gains 354,234 48,482
--------------------- --------------------
Net Realized and Unrealized Gains 438,894 53,486
--------------------- --------------------
Increase in Net Assets
Resulting from Operations 526,221 58,834
--------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 62,918 10,607
Transfer of Contract Owner Withdrawals (428,250) (97,061)
Transfers In (Out) - Net 57,844 21,365
Transfer of Benefit Payments
on Annuitized Contracts 0 0
Transfer of Contract Administration Charges (2,065) (515)
--------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (309,553) (65,604)
--------------------- --------------------
Increase (Decrease) in Net Assets 216,668 (6,770)
Net Assets Beginning Balance 2,778,532 514,036
--------------------- --------------------
Net Assets Ending Balance $ 2,995,200 $ 507,266
===================== ====================
Comprised of:
Contracts in the Accumulation Period $ 2,995,200 $ 507,266
Contracts in the Annuity Period 0 0
--------------------- --------------------
Total Contract Owners' Balance $ 2,995,200 $ 507,266
===================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - QUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
High
Reserve Prime Current
Assets Bond Income
Fund Fund Fund
==================== ==================== ====================
<S> <C> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1995 193,727.8 301,463.8 79,516.1
Accumulation Units Equivalent to Annuity Units Allocable to
Contracts in Annuity Period at December 31, 1995 951.4 1,869.3 0.0
-------------------- -------------------- --------------------
Total Units Outstanding at December 31, 1995 194,679.2 303,333.1 79,516.1
==================== ==================== ====================
Accumulation Unit Value at December 31, 1995 $ 22.30 $ 36.86 $ 49.49
==================== ==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - QUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Quality Equity Flexible
Equity Growth Strategy
Fund Fund Fund
==================== ==================== ====================
<S> <C> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1995 406,842.8 188,466.9 932,089.7
Accumulation Units Equivalent to Annuity Units Allocable to
Contracts in Annuity Period at December 31, 1995 5,375.0 0.0 1,946.4
-------------------- -------------------- --------------------
Total Units Outstanding at December 31, 1995 412,217.8 188,466.9 934,036.1
==================== ==================== ====================
Accumulation Unit Value at December 31, 1995 $ 55.18 $ 34.71 $ 22.63
==================== ==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - QUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1995
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
=========================================
Natural
American Resources
Balanced Focus
Fund Fund
==================== ====================
<S> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1995 154,870.7 39,692.2
Accumulation Units Equivalent to Annuity Units Allocable to
Contracts in Annuity Period at December 31, 1995 0.0 0.0
-------------------- --------------------
Total Units Outstanding at December 31, 1995 154,870.7 39,692.2
==================== ====================
Accumulation Unit Value at December 31, 1995 $ 19.34 $ 12.78
==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - QUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
High
Total Reserve Prime Current
Qualified Assets Bond Income
Contracts Fund Fund Fund
===================== ==================== ==================== ====================
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 3,841,532 $ 212,896 $ 1,039,359 $ 391,041
Mortality and Expense Charges (762,477) (57,509) (125,851) (42,808)
--------------------- -------------------- -------------------- --------------------
Net Investment Income (Loss) 3,079,055 155,387 913,508 348,233
--------------------- -------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains 1,474,722 0 89,787 39,761
Net Unrealized Losses (7,697,107) 0 (1,805,419) (595,737)
--------------------- -------------------- -------------------- --------------------
Net Realized and Unrealized Losses (6,222,385) 0 (1,715,632) (555,976)
--------------------- -------------------- -------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Operations (3,143,330) 155,387 (802,124) (207,743)
--------------------- -------------------- -------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 2,901,321 573,241 462,565 95,287
Transfer of Contract Owner Withdrawals (13,644,765) (1,528,449) (2,898,797) (628,892)
Transfers In (Out) - Net (234,274) (219,312) (1,334,718) 526,167
Transfer of Benefit Payments
on Annuitized Contracts (24,683) (2,387) (8,469) 0
Transfer of Contract Administration Charges (15,296) (1,692) (2,669) (922)
Net Assets Transferred under Assumption
Reinsurance Agreement 117,352 0 829 0
--------------------- -------------------- -------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (10,900,345) (1,178,599) (3,781,259) (8,360)
--------------------- -------------------- -------------------- --------------------
Increase (Decrease) in Net Assets (14,043,675) (1,023,212) (4,583,383) (216,103)
Net Assets Beginning Balance 84,513,474 6,404,635 15,698,007 4,175,420
--------------------- -------------------- -------------------- --------------------
Net Assets Ending Balance $ 70,469,799 $ 5,381,423 $ 11,114,624 $ 3,959,317
===================== ==================== ==================== ====================
Comprised of:
Contracts in the Accumulation Period $ 70,328,751 $ 5,358,801 $ 11,092,312 $ 3,959,317
Contracts in the Annuity Period 141,048 22,622 22,312 0
--------------------- -------------------- -------------------- --------------------
Total Contract Owners' Balance $ 70,469,799 $ 5,381,423 $ 11,114,624 $ 3,959,317
===================== ==================== ==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - QUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
===============================================================
Quality Equity Flexible
Equity Growth Strategy
Fund Fund Fund
===================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 761,797 $ 46,224 $ 1,283,716
Mortality and Expense Charges (223,079) (50,852) (225,801)
--------------------- -------------------- --------------------
Net Investment Income (Loss) 538,718 (4,628) 1,057,915
--------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains 543,800 185,827 517,931
Net Unrealized Losses (1,578,201) (597,254) (2,775,184)
--------------------- -------------------- --------------------
Net Realized and Unrealized Losses (1,034,401) (411,427) (2,257,253)
--------------------- -------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Operations (495,683) (416,055) (1,199,338)
--------------------- -------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 748,065 219,376 703,198
Transfer of Contract Owner Withdrawals (3,029,491) (576,190) (4,197,525)
Transfers In (Out) - Net 28,968 68,904 421,502
Transfer of Benefit Payments
on Annuitized Contracts (9,141) 0 (4,686)
Transfer of Contract Administration Charges (3,965) (1,263) (3,953)
Net Assets Transferred under Assumption
Reinsurance Agreement 13,285 10,685 92,553
--------------------- -------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (2,252,279) (278,488) (2,988,911)
--------------------- -------------------- --------------------
Increase (Decrease) in Net Assets (2,747,962) (694,543) (4,188,249)
Net Assets Beginning Balance 24,077,024 5,120,785 25,154,812
--------------------- -------------------- --------------------
Net Assets Ending Balance $ 21,329,062 $ 4,426,242 $ 20,966,563
===================== ==================== ====================
Comprised of:
Contracts in the Accumulation Period $ 21,275,233 $ 4,426,242 $ 20,924,278
Contracts in the Annuity Period 53,829 0 42,285
--------------------- -------------------- --------------------
Total Contract Owners' Balance $ 21,329,062 $ 4,426,242 $ 20,966,563
===================== ==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - QUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==========================================
Natural
American Resources
Balanced Focus
Fund Fund
===================== ====================
<S> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 99,715 $ 6,784
Mortality and Expense Charges (31,633) (4,944)
--------------------- --------------------
Net Investment Income (Loss) 68,082 1,840
--------------------- --------------------
Realized and Unrealized Gains (Losses):
Net Realized Gains 96,960 656
Net Unrealized Losses (344,505) (807)
--------------------- --------------------
Net Realized and Unrealized Losses (247,545) (151)
--------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Operations (179,463) 1,689
--------------------- --------------------
Changes from Principal Transactions:
Transfer of Net Premiums 82,859 16,730
Transfer of Contract Owner Withdrawals (766,582) (18,839)
Transfers In (Out) - Net 218,571 55,644
Transfers of Benefit Payments
on Annuitized Contracts 0 0
Transfer of Contract Administration Charges (743) (89)
Net Assets Transferred under Assumption
Reinsurance Agreement 0 0
--------------------- --------------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions (465,895) 53,446
--------------------- --------------------
Increase (Decrease) in Net Assets (645,358) 55,135
Net Assets Beginning Balance 3,423,890 458,901
--------------------- --------------------
Net Assets Ending Balance $ 2,778,532 $ 514,036
===================== ====================
Comprised of:
Contracts in the Accumulation Period $ 2,778,532 $ 514,036
Contracts in the Annuity Period 0 0
--------------------- --------------------
Total Contract Owners' Balance $ 2,778,532 $ 514,036
===================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - QUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
High
Reserve Prime Current
Assets Bond Income
Fund Fund Fund
==================== ==================== ====================
<S> <C> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1994 251,304.3 357,997.9 92,839.7
Accumulation Units Equivalent to Annuity Units Allocable to
Contracts in Annuity Period at December 31, 1994 1,060.9 720.1 0.0
-------------------- -------------------- --------------------
Total Units Outstanding at December 31, 1994 252,365.2 358,718.0 92,839.7
==================== ==================== ====================
Accumulation Unit Value at December 31, 1994 $ 21.32 $ 30.98 $ 42.65
==================== ==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - QUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Quality Equity Flexible
Equity Growth Strategy
Fund Fund Fund
==================== ==================== ====================
<S> <C> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1994 468,074.9 184,213.2 1,074,654.6
Accumulation Units Equivalent to Annuity Units Allocable to
Contracts in Annuity Period at December 31, 1994 1,184.3 0.0 2,171.7
-------------------- -------------------- --------------------
Total Units Outstanding at December 31, 1994 469,259.2 184,213.2 1,076,826.3
==================== ==================== ====================
Accumulation Unit Value at December 31, 1994 $ 45.45 $ 24.03 $ 19.47
==================== ==================== ====================
</TABLE>
<PAGE>
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND
CHANGES IN NET ASSETS - QUALIFIED CONTRACTS
FOR THE YEAR ENDED DECEMBER 31, 1994
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
=========================================
Natural
American Resources
Balanced Focus
Fund Fund
==================== ====================
<S> <C> <C>
Accumulation Units Allocable to Contracts in
Accumulation Period at December 31, 1994 171,872.9 44,876.1
Accumulation Units Equivalent to Annuity Units Allocable to
Contracts in Annuity Period at December 31, 1994 0.0 0.0
-------------------- --------------------
Total Units Outstanding at December 31, 1994 171,872.9 44,876.1
==================== ====================
Accumulation Unit Value at December 31, 1994 $ 16.17 $ 11.45
==================== ====================
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Merrill Lynch Life Insurance Company:
We have audited the accompanying balance sheets of Merrill Lynch
Life Insurance Company (the "Company"), a wholly-owned subsidiary
of Merrill Lynch Insurance Group, Inc., as of December 31, 1995
and 1994, and the related statements of earnings, stockholder's
equity, and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Company at
December 31, 1995 and 1994, and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
February 26, 1996
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
(Dollars in Thousands)
==============================================================================
<TABLE>
<CAPTION>
ASSETS 1995 1994
------------ ------------
<S> <C> <C>
INVESTMENTS:
Fixed maturity securities available for sale, at estimated fair value
(amortized cost: 1995 - $3,648,983; 1994 - $4,014,272) $ 3,807,870 $ 3,867,833
Equity securities available for sale, at estimated fair value
(cost: 1995 - $19,683; 1994 - $15,946) 21,433 16,777
Mortgage loans on real estate 121,248 149,249
Real estate held for sale
(accumulated depreciation: 1995 - $81; 1994 - $515) 5,874 12,955
Policy loans on insurance contracts 1,039,267 985,213
------------ ------------
Total Investments 4,995,692 5,032,027
CASH AND CASH EQUIVALENTS 48,924 139,087
ACCRUED INVESTMENT INCOME 91,942 95,133
DEFERRED POLICY ACQUISITION COSTS 372,418 466,334
FEDERAL INCOME TAXES - DEFERRED 2,222 38,919
REINSURANCE RECEIVABLES 1,552 1,832
RECEIVABLES FROM AFFILIATES - NET 0 3,113
OTHER ASSETS 54,900 28,656
SEPARATE ACCOUNTS ASSETS 6,834,353 5,798,973
------------ -------------
TOTAL ASSETS $12,402,003 $11,604,074
============ =============
</TABLE>
See notes to financial statements.
<PAGE>
==============================================================================
<TABLE>
(caption>
LIABILITIES AND STOCKHOLDER'S EQUITY 1995 1994
-------------- ------------
<S> <C> <C>
LIABILITIES:
POLICY LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 4,851,718 $ 5,148,971
Claims and claims settlement expenses 29,812 26,177
------------- ------------
Total policy liabilities and accruals 4,881,530 5,175,148
OTHER POLICYHOLDER FUNDS 13,607 21,221
LIABILITY FOR GUARANTY FUND ASSESSMENTS 21,144 24,774
OTHER LIABILITIES 53,566 36,775
FEDERAL INCOME TAXES - CURRENT 7,033 2,274
AFFILIATED PAYABLES - NET 2,429 0
SEPARATE ACCOUNTS LIABILITIES 6,825,857 5,784,311
------------- ------------
Total Liabilities 11,805,166 11,044,503
------------- ------------
STOCKHOLDER'S EQUITY:
Common stock, $10 par value - 200,000 shares
authorized, issued and outstanding 2,000 2,000
Additional paid-in capital 501,455 535,450
Retained earnings 76,482 66,005
Net unrealized investment gain (loss) 16,900 (43,884)
------------- ------------
Total Stockholder's Equity 596,837 559,571
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $12,402,003 $11,604,074
============= ============
</TABLE>
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
===================================================================
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 376,166 $ 433,536 $ 586,461
Net realized investment gains (losses) 4,525 (14,543) 63,052
Policy charge revenue 141,722 126,284 95,684
----------- ----------- -----------
Total Revenues 522,413 545,277 745,197
----------- ----------- -----------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 261,760 313,585 454,671
Market value adjustment expense 5,805 6,307 30,816
Policy benefits (net of reinsurance recoveries: 1995 - $6,482;
1994 - $6,338; 1993 - $6,004) 19,374 16,858 17,030
Reinsurance premium ceded 13,896 13,909 12,665
Amortization of deferred policy acquisition costs 58,669 69,662 109,456
Insurance expenses and taxes 44,124 35,073 47,784
----------- ----------- -----------
Total Benefits and Expenses 403,628 455,394 672,422
----------- ----------- -----------
Earnings Before Federal Income Tax Provision 118,785 89,883 72,775
----------- ----------- -----------
FEDERAL INCOME TAX PROVISION:
Current 38,335 22,503 20,112
Deferred 3,968 1,375 4,803
----------- ----------- -----------
Total Federal Income Tax Provision 42,303 23,878 24,915
----------- ----------- -----------
NET EARNINGS $ 76,482 $ 66,005 $ 47,860
=========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
===========================================================================
<TABLE>
<CAPTION>
Net
Additional unrealized Total
Common paid-in Retained investment stockholder's
stock capital earnings gain (loss) equity
---------- ------------ ------------ -------------- -----------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 $ 2,000 $ 654,717 $ 102,873 $ 2,884 $ 762,474
Dividend to Parent (17,127) (102,873) (120,000)
Net earnings 47,860 47,860
Net unrealized investment loss (3,279) (3,279)
---------- ------------ ------------ --------------- ----------------
BALANCE, DECEMBER 31, 1993 2,000 637,590 47,860 (395) 687,055
Dividend to Parent (102,140) (47,860) (150,000)
Net earnings 66,005 66,005
Net unrealized investment loss (43,489) (43,489)
---------- ------------ ------------ --------------- ----------------
BALANCE, DECEMBER 31, 1994 2,000 535,450 66,005 (43,884) 559,571
Dividend to Parent (33,995) (66,005) (100,000)
Net earnings 76,482 76,482
Net unrealized investment gain 60,784 60,784
---------- ------------ ------------ -------------- -----------------
BALANCE, DECEMBER 31, 1995 $ 2,000 $ 501,455 $ 76,482 $ 16,900 $ 596,837
========== ============ ============ ============== =================
</TABLE>
See notes to financial statements.
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1994
(Dollars in Thousands)
=========================================================================
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 76,482 $ 66,005 $ 47,860
Adjustments to reconcile net earnings to net
cash and cash equivalents provided (used)
by operating activities:
Amortization of deferred policy acquisition
costs 58,669 69,662 109,456
Capitalization of policy acquisition costs (54,014) (108,829) (91,189)
Depreciation, (accretion) and amortization of investments (6,763) (4,516) 1,142
Net realized investment (gains) losses (4,525) 14,543 (63,052)
Interest credited to policyholders' account balances 261,760 313,585 454,671
Provision for deferred Federal income tax 3,968 1,375 4,803
Cash and cash equivalents provided (used) by
changes in operating assets and liabilities:
Accrued investment income 3,191 25,204 18,460
Receivables from affiliates - net 5,542 (2,324) (3,427)
Claims and claims settlement expenses 3,635 5,882 12,730
Federal income taxes - current 4,759 (7,848) (19,888)
Other policyholder funds (7,614) (7,547) 14,131
Liability for guaranty fund assessments (3,630) (3,309) 979
Policy loans (54,054) (60,634) (90,118)
Investment trading securities 0 11,352 (145,972)
Other, net (9,296) (39,206) 49,424
Net cash and cash equivalents provided ------------- ------------ -------------
by operating activities 278,110 273,395 300,010
------------- ------------ -------------
</TABLE>
(Continued)
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Concluded) (Dollars In Thousands)
========================================================================
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------ -------------
<S> <C> <C> <C>
INVESTING ACTIVITIES:
Fixed maturity securities sold 618,101 845,227 571,337
Fixed maturity securities matured 570,923 1,323,705 2,776,992
Fixed maturity securities purchased (814,535) (676,976) (1,866,857)
Equity securities available for sale sold 15,723 18,868 6,451
Equity securities available for sale purchased (17,984) (1,998) (8,983)
Mortgage loans on real estate principal payments received 30,767 32,341 35,561
Mortgage loans on real estate acquired (3,608) 0 (674)
Real estate held for sale sold 9,710 25,346 7,408
Real estate held for sale - improvements acquired (683) (1,060) 0
Recapture of investment in Separate Accounts 6,559 0 29,389
Investment in Separate Accounts (377) (15,212) (20,000)
------------- ------------ -------------
Net cash and cash equivalents provided
by investing activities 414,596 1,550,241 1,530,624
------------- ------------ -------------
FINANCING ACTIVITIES:
Dividends paid to parent (100,000) (150,000) (120,000)
Policyholders' account balances:
Deposits 567,430 966,861 814,314
Withdrawals (net of transfers to/from Separate Accounts) (1,250,299) (2,623,628) (2,574,854)
------------- ------------ -------------
Net cash and cash equivalents used
by financing activities (782,869) (1,806,767) (1,880,540)
------------- ------------ -------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (90,163) 16,869 (49,906)
CASH AND CASH EQUIVALENTS
Beginning of year 139,087 122,218 172,124
------------- ------------ -------------
End of year $ 48,924 $ 139,087 $ 122,218
============= ============ =============
Supplementary Disclosure of Cash Flow Information:
Cash paid for:
Federal income taxes $ 33,576 $ 30,351 $ 40,000
Intercompany interest 1,310 679 737
</TABLE>
See notes to financial statements.
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly-owned subsidiary of Merrill Lynch Insurance Group,
Inc.)
NOTES TO FINANCIAL STATEMENTS
(Dollars in Thousands)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Reporting: Merrill Lynch Life Insurance Company (the
"Company") is a wholly-owned subsidiary of Merrill Lynch
Insurance Group, Inc. ("MLIG"). The Company is an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("Merrill
Lynch & Co.").
The Company sells non-participating life insurance and annuity
products which comprise one business segment. The primary
products that the Company currently markets are immediate
annuities, market value adjusted annuities, variable life
insurance and variable annuities. The Company is currently
licensed to sell insurance in forty-nine states, the District
of Columbia, the U.S. Virgin Islands and Guam. The Company
markets its products solely through the retail network of
Merrill Lynch Pierce, Fenner & Smith, Incorporated ("MLPF&S"),
a wholly-owned subsidiary of Merrill Lynch & Co.
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles for
stock life insurance companies. The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition: Revenues for the Company's interest
sensitive life, interest sensitive annuity, variable life and
variable annuity products consist of policy charges for the
cost of insurance, deferred sales charges, policy
administration charges and/or withdrawal charges assessed
against policyholders' account balances during the period.
Policyholders' Account Balances: Liabilities for the Company's
universal life type contracts, including its life insurance and
annuity products, are equal to the full accumulation value of
such contracts as of the valuation date plus deficiency
reserves for certain products. Interest crediting rates for the
Company's fixed rate products are as follows:
Interest sensitive life products 4.00% - 6.90%
Interest sensitive deferred annuities 3.08% - 8.77%
Immediate annuities 4.00% -10.00%
These rates may be changed at the option of the Company,
subject to minimum guarantees, after initial guaranteed rates
expire.
Liabilities for unpaid claims equal the death benefit for those
claims which have been reported to the Company and an estimate
based upon prior experience for those claims which are
unreported as of the valuation date.
Reinsurance: In the normal course of business, the Company
seeks to limit its exposure to loss on any single insured life
and to recover a portion of benefits paid by ceding reinsurance
to other insurance enterprises or reinsurers under indemnity
reinsurance agreements, primarily excess coverage and
coinsurance agreements. The maximum amount of mortality risk
retained by the Company is approximately $500 on a single life.
<PAGE>
Indemnity reinsurance agreements do not relieve the Company
from its obligations to policyholders. Failure of reinsurers
to honor their obligations could result in losses to the
Company. The Company regularly evaluates the financial
condition of its reinsurers so as to minimize its exposure to
significant losses from reinsurer insolvencies. The Company
holds collateral under reinsurance agreements in the form of
letters of credit and funds withheld totaling $567 that can be
drawn upon for delinquent reinsurance recoverables.
As of December 31, 1995, the Company had life insurance in-
force which was ceded to other life insurance companies of
$2,302,776.
Deferred Policy Acquisition Costs: Policy acquisition costs
for life and annuity contracts are deferred and amortized based
on the estimated future gross profits for each group of
contracts. These future gross profit estimates are subject to
periodic evaluation by the Company, with necessary revisions
applied against amortization to date. It is reasonably
possible that estimates of future gross profits could be
reduced in the future, resulting in a material reduction in the
carrying amount of deferred policy acquisition costs.
Policy acquisition costs are principally commissions and a
portion of certain other expenses relating to policy
acquisition, underwriting and issuance, which are primarily
related to and vary with the production of new business.
Certain costs and expenses reported in the statements of
earnings are net of amounts deferred. Policy acquisition costs
can also arise from the acquisition or reinsurance of existing
in-force policies from other insurers. These costs include
ceding commissions and professional fees related to the
reinsurance assumed.
Included in deferred policy acquisition costs are those costs
related to the acquisition by assumption reinsurance of
insurance contracts from unaffiliated insurers. The deferred
costs are amortized in proportion to the estimated future gross
profits over the anticipated life of the acquired insurance
contracts utilizing an interest methodology.
The Company has entered into an assumption reinsurance
agreement with an unaffiliated insurer. The acquisition costs
relating to this agreement are being amortized over a twenty-
year period using an effective interest rate of 9.01%. This
reinsurance agreement provides for payment of contingent ceding
commissions based upon the persistency and mortality experience
of the insurance contracts assumed. Any payments made for the
contingent ceding commissions will be capitalized and amortized
using an identical methodology as that used for the initial
acquisition costs. The following is a reconciliation of the
acquisition costs related to the reinsurance agreement for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Beginning balance $ 133,388 $ 139,647 $ 150,450
Capitalized amounts 13,708 12,517 6,987
Interest accrued 11,620 12,582 13,136
Amortization (33,883) (31,358) (30,926)
---------- ---------- ----------
Ending balance $ 124,833 $ 133,388 $ 139,647
========== ========== ==========
</TABLE>
The following table presents the expected amortization, net of
interest accrued, of these deferred acquisition costs over the
next five years. The amortization may be adjusted based on
periodic evaluation of the expected gross profits on the
reinsured policies.
1996 $14,917
1997 11,418
1998 7,639
1999 6,676
2000 6,028
Investments: In accordance with Statement of Financial
Accounting Standards ("SFAS") No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS No. 115"),
<PAGE>
the Company classifies its investments in fixed maturity
securities and equity securities as available for sale
securities. These securities may be sold for the Company's
general liquidity needs, asset/liability management strategy,
credit dispositions and investment opportunities. These
securities are carried at estimated fair value with unrealized
gains and losses included in stockholder's equity. If a decline
in value of a security is determined by management to be other
than temporary, the carrying value is adjusted to the estimated
fair value at the date of this determination and recorded in
the net realized investment gains (losses) caption of the
statement of earnings.
During 1993 and 1994, the Company utilized the trading
securities classification available under SFAS No. 115. Trading
securities represented securities that were managed with an
investment objective to maximize total return subject to the
Company's quality guidelines. These securities were carried at
estimated fair value with unrealized gains and losses included
in the statement of earnings. All securities that were
classified as trading securities on November 1, 1994 were
transferred to the available for sale classification at their
respective estimated fair values on that date. The difference
between the market value at November 1, 1994 and par value will
be amortized into income based on the Company's premium
amortization and discount accrual policies.
For fixed maturity securities, premiums are amortized to the
earlier of the call or maturity date, discounts are accreted to
the maturity date and interest income is accrued daily. For
equity securities, dividends are recognized on the ex-dividend
date. Realized gains and losses on the sale or maturity of the
investments are determined on the basis of identified cost.
Fixed maturity securities may contain securities which are
considered high yield. The Company defines high yield fixed
maturity securities as unsecured corporate debt obligations
which do not have a rating equivalent to Standard and Poor's
(or similar rating agency) BBB or higher, and are not
guaranteed by an agency of the federal government. Probable
losses are recognized in the period that a decline in value is
determined to be other than temporary.
During 1994, the Company adopted SFAS No. 119, "Disclosure
about Derivative Financial Instruments and Fair Value of
Financial Instruments" ("SFAS No. 119"). SFAS No. 119 requires
increased disclosures regarding derivative financial
instruments. SFAS No. 119 defines derivative financial
instruments as futures, forward, swap and option contracts or
other financial instruments with similar characteristics. As of
December 31, 1995 and 1994, the Company holds only interest
rate swap contracts.
The Company has outstanding certain interest rate swap
contracts which are carried at estimated fair value and
recorded as a component of fixed maturity securities available
for sale. Interest income, realized gains and losses and
unrealized gains and losses are recorded on the same basis as
fixed maturity securities available for sale.
Mortgage loans on real estate are stated at unpaid principal
balances net of valuation allowances. Such valuation allowances
are based on the decline in value expected to be realized on
those mortgage loans which may not be collectible in full. In
establishing valuation allowances management considers, among
other things, the estimated fair value of the underlying
collateral.
The Company recognizes income from mortgage loans on real
estate based on the cash payment interest rate of the loan,
which may be different from the accrual interest rate of the
loan for certain outstanding mortgage loans. The Company will
recognize a realized gain at the date of the satisfaction of
the loan at contractual terms for loans where there is a
difference between the cash payment interest rate and the
accrual interest rate. For all loans the Company stops accruing
income when an interest payment default either occurs or is
probable.
During 1995 the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" ("SFAS No. 114") and SFAS
No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures" which was an amendment to
SFAS No. 114. SFAS No. 114, as amended, requires that for
impaired loans, the impairment shall be measured based on the
present value of expected future cash flows discounted at the
loan's effective interest rate or the fair value of the
collateral. Impairments of mortgage loans on real estate are
established as valuation allowances and recorded to net
realized investment gains or losses. There was no impact on
either financial position or earnings as a result of adopting
SFAS No. 114, as amended.
<PAGE>
The Company has previously made commercial mortgage loans
collateralized by real estate and direct investments in
commercial real estate. The return on and the ultimate
recovery of these loans and investments are generally dependent
on the successful operation, sale or refinancing of the real
estate. The Company employs a system to monitor the effects of
current and expected real estate market conditions and other
factors when assessing the collectability of mortgage loans and
the recoverability of the Company's real estate investments.
When, in management's judgment, these assets are impaired,
appropriate losses are recorded. Such estimates necessarily
include assumptions, which may include anticipated improvements
in selected market conditions for real estate, which may or may
not occur. The more significant assumptions management
considers involve estimates of the following: lease absorption
and sales rate; real estate values and rates of return;
operating expenses; required capital improvements; inflation;
and sufficiency of any collateral independent of the real
estate. Management believes that the carrying value
approximates the fair value of these investments.
Real estate available for sale, including real estate acquired
in satisfaction of debt subsequent to its acquisition date, is
stated at depreciated cost less valuation allowances and
estimated selling costs. Depreciation is computed using the
straight-line method over the estimated useful lives of the
properties, which generally is 40 years.
Policy loans on insurance contracts are stated at unpaid
principal balances.
Federal Income Taxes: The results of operations of the Company
are included in the consolidated Federal income tax return of
Merrill Lynch & Co. The Company has entered into a tax-sharing
agreement with Merrill Lynch & Co. whereby the Company will
calculate its current tax provision based on its operations.
Under the agreement, the Company periodically remits to Merrill
Lynch & Co. its current Federal tax liability.
The Company accounts for Federal Income Taxes in compliance
with SFAS No. 109, "Accounting for Income Taxes" ("SFAS No.
109") which requires an asset and liability method in recording
income taxes on all transactions that have been recognized in
the financial statements. SFAS No. 109 provides that deferred
taxes be adjusted to reflect tax rates at which future tax
liabilities or assets are expected to be settled or realized.
Separate Accounts: The Separate Accounts are established in
conformity with Arkansas insurance law, the Company's
domiciliary state, and are generally not chargeable with
liabilities that arise from any other business of the Company.
Separate Accounts assets may be subject to General Account
claims only to the extent the value of such assets exceeds the
Separate Accounts liabilities.
Assets and liabilities of the Separate Accounts, representing
net deposits and accumulated net investment earnings less fees,
held primarily for the benefit of policyholders, are shown as
separate captions in the balance sheets.
Statements of Cash Flows: For the purpose of reporting cash
flows, cash and cash equivalents include cash on hand and on
deposit and short-term investments with original maturities of
three months or less.
Reclassifications: To facilitate comparisons with the current
year, certain amounts in the prior years have been
reclassified.
<PAGE>
NOTE 2. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments which approximates
the estimated fair value of these financial instruments as of
December 31 were:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Assets:
Fixed maturity securities available for sale:
Securities (1) $ 3,807,310 $ 3,866,886
Interest rate swaps (2) 560 947
------------ ------------
Total fixed maturity securities available for sale 3,807,870 3,867,833
------------ ------------
Equity securities available for sale (1) 21,433 16,777
Mortgage loans on real estate (3) 121,248 149,249
Policy loans on insurance contracts (4) 1,039,267 985,213
Cash and cash equivalents (5) 48,924 139,087
Separate Accounts assets (6) 6,834,353 5,798,973
------------ ------------
Total financial instruments recorded as assets $11,873,095 $10,957,132
============ ============
</TABLE>
(1) For publicly traded securities, the estimated fair value
is determined using quoted market prices. For securities
without a readily ascertainable market value, the Company
has determined an estimated fair value using a discounted
cash flow approach, including provision for credit risk,
based upon the assumption that such securities will be
held to maturity. Such estimated fair values do not
necessarily represent the values for which these
securities could have been sold at the dates of the
balance sheets. At December 31, 1995 and 1994, securities
without a readily ascertainable market value, having an
amortized cost of $425,469 and $564,665, had an estimated
fair value of $448,785 and $564,682, respectively.
(2) Estimated fair values for the Company's interest rate
swaps are based on a discounted cash flow approach.
(3) The estimated fair value of mortgage loans on real estate
approximates the carrying value. See Note 1 for a
discussion of the Company's valuation process.
(4) 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.
(5) The estimated fair value of cash and cash equivalents
approximates the carrying value.
(6) Assets held in the Separate Accounts are carried at quoted
market values.
<PAGE>
NOTE 3. INVESTMENTS
The amortized cost (cost for equity securities) and estimated
fair value of investments in fixed maturity securities and
equity securities as of December 31 were:
<TABLE>
<CAPTION>
1995
----
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Fixed maturity securities available for sale:
Corporate debt $ 2,917,628 $ 138,159 $ 7,526 $ 3,048,261
Mortgage-backed securities 625,866 22,098 717 647,247
U.S. Government and agencies 99,213 6,286 0 105,499
Municipals 4,277 532 0 4,809
Foreign governments 1,999 55 0 2,054
------------ ------------ ------------ ------------
Total fixed maturity securities
available for sale $ 3,648,983 $ 167,130 $ 8,243 $ 3,807,870
============ ============ ============ ============
Equity securities available for sale:
Common stocks $ 2,746 $ 498 $ 63 $ 3,181
Non-redeemable preferred stocks 16,937 1,428 113 18,252
------------ ------------ ------------ ------------
Total equity securities available for sale $ 19,683 $ 1,926 $ 176 $ 21,433
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
1994
----
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Fixed maturity securities available for sale:
Corporate debt $ 2,968,683 $ 20,386 $ 139,915 $ 2,849,154
Mortgage-backed securities 897,290 5,764 29,243 873,811
U.S. Government and agencies 139,513 1,059 4,392 136,180
Municipals 4,588 115 0 4,703
Foreign governments 4,198 0 213 3,985
------------ ------------ ------------ ------------
Total fixed maturity securities
available for sale $ 4,014,272 $ 27,324 $ 173,763 $ 3,867,833
============ ============ ============ ============
Equity securities available for sale:
Common stocks $ 8,489 $ 641 $ 632 $ 8,498
Non-redeemable preferred stocks 7,457 1,092 270 8,279
------------ ------------ ------------ ------------
Total equity securities available for sale $ 15,946 $ 1,733 $ 902 $ 16,777
============ ============ ============ ============
</TABLE>
<PAGE>
The amortized cost and estimated fair value of fixed maturity
securities available for sale at December 31, 1995 by
contractual maturity were:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
------------ ------------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 288,438 $ 290,754
Due after one year through five years 1,678,038 1,741,211
Due after five years through ten years 904,067 964,956
Due after ten years 152,574 163,702
------------ ------------
3,023,117 3,160,623
Mortgage-backed securities 625,866 647,247
Total fixed maturity securities ------------ ------------
available for sale $ 3,648,983 $ 3,807,870
============ ============
</TABLE>
Fixed maturity securities not due at a single maturity date
have been included in the preceding table in the year of final
maturity. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment
penalties.
The amortized cost and estimated fair value of fixed maturity
securities available for sale at December 31, 1995 by rating
agency equivalent were:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
------------ ------------
<S> <C> <C>
AAA $ 848,951 $ 881,712
AA 243,349 253,214
A 1,059,367 1,105,910
BBB 1,292,081 1,356,964
Non-investment grade 205,235 210,070
Total fixed maturity securities ------------ ------------
available for sale $ 3,648,983 $ 3,807,870
============ ============
</TABLE>
The Company has recorded certain adjustments to deferred policy
acquisition costs and policyholders' account balances in
connection with adjustments required by SFAS No. 115. The
Company adjusts those assets and liabilities that would have
been adjusted had the unrealized investment gains or losses
from securities classified as available for sale actually been
realized with corresponding credits or charges reported
directly to stockholder's equity. The following reconciles the
net unrealized investment gain (loss) as of December 31:
<PAGE>
<TABLE>
<CAPTION>
1995 1994
---------- -----------
<S> <C> <C>
Assets:
Fixed maturity securities available for sale $ 158,887 $ (146,439)
Equity securities available for sale 1,750 831
Deferred policy acquisition costs (17,041) 72,220
Federal income taxes - deferred (9,100) 23,629
Separate Account assets (164) (549)
---------- -----------
134,332 (50,308)
---------- -----------
Liabilities:
Policyholders' account balances 117,432 (6,424)
---------- -----------
Stockholder's equity:
Net unrealized investment gain (loss) $ 16,900 $ (43,884)
========== ===========
</TABLE>
The Company has entered into interest rate swap contracts for
the purpose of minimizing exposure to fluctuations in interest
rates of specific assets held. The notional amount of such
swaps outstanding at December 31, 1995 and 1994 was $30,000.
The Company has outstanding at December 31, 1995, three
interest rate swap contracts for which the Company pays the six
month LIBOR interest rate and receives a weighted average 9.8%.
The outstanding interest rate swap contracts at December 31,
1995 will expire at various times during 1996. The average
unexpired term at December 31, 1995 and 1994 was .25 years and
1.2 years, respectively. All three interest rate swap contracts
were with investment grade counterparties at December 31, 1995.
There are no outstanding interest rate swaps in a loss position
at December 31, 1995 and 1994. During 1995, 1994 and 1993, a
net investment gain of $0, $470 and $0, respectively, was
recorded in connection with interest rate swap activity.
During 1995, 1994 and 1993, the Company did not enter into
either matched or unmatched interest rate swap arrangements and
did not act as an intermediary or broker in interest rate
swaps.
Proceeds and gross realized investment gains and losses from
the sale of fixed maturity securities available for sale and
held to maturity for the years ended December 31 were:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- -----------
<S> <C> <C> <C>
Proceeds $ 618,101 $ 845,227 $ 571,337
Gross realized investment gains 11,694 8,398 71,599
Gross realized investment losses 9,786 9,823 4,126
</TABLE>
During 1994, the Company ceased utilizing the trading
securities classification. At the date of this action, the
securities classified as trading were transferred to the
available for sale portfolio at their estimated fair value. The
estimated fair value of fixed maturity securities and equity
securities transferred at the date of transfer was $134,984 and
$6,989, respectively. At the date of transfer, amortized cost
exceeded estimated fair value by $2,995. During 1994 and 1993,
$(7,285) and $4,291, respectively, of unrealized holding gains
(losses) from investment trading securities were recorded in
net realized investment gains (losses).
The Company had investment securities of $28,166 and $26,651
held on deposit with insurance regulatory authorities at
December 31, 1995 and 1994, respectively.
At December 31, 1995 and 1994, the Company retained $8,496 and
$14,662 in the Separate Accounts, including unrealized losses
of $164 and $549, respectively. The investments in the
<PAGE>
Separate Accounts are for the purpose of providing original
funding of certain mutual fund portfolios available as
investment options to variable life and annuity policyholders.
The Company's investment in mortgage loans on real estate are
principally collateralized by commercial real estate. The
largest concentrations of commercial real estate mortgage loans
at December 31, 1995, as measured by the outstanding principal
balance, are for properties located in California ($36,476 or
23%), Illinois ($28,299 or 18%) and Rhode Island ($19,404 or
12%).
The carrying value and established valuation allowances of
impaired mortgage loans on real estate as of December 31, 1995
and 1994 are:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Carrying value $ 88,068 $ 71,973
Valuation allowance 35,881 40,070
</TABLE>
Additional information on impaired loans for the years ended
December 31 follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Average investment in impaired loans $123,949 $112,043 $109,876
Interest income recognized (cash-basis) 5,482 6,542 7,387
</TABLE>
For the years ended December 31, 1995, 1994 and 1993, $1,300,
$4,652 and 29,555, respectively, of real estate was acquired in
satisfaction of debt.
Net investment income arose from the following sources for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Fixed maturity securities $ 305,648 $ 368,023 $ 511,655
Equity securities 1,329 2,408 4,143
Mortgage loans on real estate 12,250 15,014 20,342
Real estate held for sale 153 406 32
Policy loans on insurance contracts 53,576 50,232 46,129
Cash equivalents 8,463 5,936 3,480
Other 1,753 (447) 7,655
__________ __________ __________
Gross investment income 383,172 441,572 593,436
Less investment expenses (7,006) (8,036) (6,975)
__________ __________ __________
Net investment income $ 376,166 $ 433,536 $ 586,461
========== ========== ==========
</TABLE>
<PAGE>
Net realized investment gains (losses), including changes in
valuation allowances for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ---------- ----------
<S> <C> <C> <C>
Fixed maturity securities available for sale $ 1,908 $ (1,425) $ 67,473
Fixed maturity securities held for trading 0 (11,889) 5,562
Equity securities available for sale 1,475 1,490 22
Equity securities held for trading 0 (580) 2,587
Investment in Separate Account (369) 0 1,422
Mortgage loans on real estate 334 (4,967) (9,310)
Real estate held for sale 1,177 2,828 (4,733)
Other 0 0 29
-------- ---------- ---------
Net realized investment gains (losses) $ 4,525 $ (14,543) $ 63,052
======== ========== =========
</TABLE>
The following is a reconciliation of the change in valuation
allowances which have been deducted in arriving at investment
carrying values, as presented in the balance sheet, and changes
thereto of the following classifications of investments for the
years ended December 31:
<TABLE>
<CAPTION>
Balance at Additions Balance at
Beginning Charged to Write - End
of Year Operations Downs of Year
---------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Mortgage loans on real estate:
1995 $ 40,070 $ 0 $ 4,189 $ 35,881
1994 45,924 4,966 10,820 40,070
1993 55,610 9,310 18,996 45,924
Real estate held for sale:
1995 5,766 0 3,566 2,200
1994 7,628 0 1,862 5,766
1993 4,300 3,328 0 7,628
</TABLE>
The Company held investments at December 31, 1995 of $8,609
which have been non-income producing for the preceding twelve
months.
During 1994, the Company committed to participate in a limited
partnership that invests in leveraged transactions. As of
December 31, 1995, $920 has been advanced towards the Company's
$10,000 commitment to the limited partnership.
NOTE 4. FEDERAL INCOME TAXES
The following is a reconciliation of the provision for income
taxes based on income before income taxes, computed using the
Federal statutory tax rate, with the provision for income taxes
for the years ended December 31:
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Provision for income taxes computed at Federal
statutory rate $ 41,575 $ 31,459 $ 25,471
Increase (decrease) in income taxes resulting from:
Release of policyholders' surplus 1,991 0 0
Tax deductible interest (718) 0 0
Federal tax rate increase 0 0 (631)
Dividend received deduction (532) (7,363) (28)
Other (13) (218) 103
--------- --------- ---------
Federal income tax provision $ 42,303 $ 23,878 $ 24,915
========= ========= =========
</TABLE>
The Federal statutory rate for each of the three years in the
period ended December 31, 1995 was 35%.
The Company provides for deferred income taxes resulting from
temporary differences which arise from recording certain
transactions in different years for income tax reporting
purposes than for financial reporting purposes. The sources of
these differences and the tax effect of each are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- ---------- ---------
<S> <C> <C> <C>
Deferred policy acquisition costs $ (2,179) $ 6,416 $ (9,030)
Policyholders' account balances 66 5,322 6,433
Estimated liability for guaranty fund assessments 249 (153) (1,066)
Investment adjustments 5,563 3,276 7,941
Other 269 (13,486) 525
Deferred Federal income tax --------- ---------- ---------
provision $ 3,968 $ 1,375 $ 4,803
========= ========== =========
</TABLE>
Deferred tax assets and liabilities as of December 31, are
determined as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Deferred tax assets:
Policyholders' account balances $ 94,087 $ 94,153
Net unrealized investment losses 0 23,629
Investment adjustments 10,793 16,356
Estimated liability for guaranty fund assessments 7,331 7,580
---------- ----------
Total deferred tax assets 112,211 141,718
---------- ----------
Deferred tax liabilities:
Deferred policy acquisition costs 96,862 99,041
Net unrealized investment gains 9,100 0
Other 4,027 3,758
---------- ----------
Total deferred tax liabilities 109,989 102,799
---------- ----------
Net deferred tax asset $ 2,222 $ 38,919
========== ==========
</TABLE>
The Company anticipates that all deferred tax assets will be
realized, therefore no valuation allowance has been provided.
<PAGE>
NOTE 5. RELATED PARTY TRANSACTIONS
The Company and MLIG are parties to a service agreement whereby
MLIG has agreed to provide certain data processing, legal,
actuarial, management, advertising and other services to the
Company. Expenses incurred by MLIG in relation to this service
agreement are reimbursed by the Company on an allocated cost
basis. Charges billed to the Company by MLIG pursuant to the
agreement were $43,039, $44,176 and $55,843 for the years ended
December 31, 1995, 1994 and 1993, respectively. The Company is
allocated interest expense on its accounts payable to MLIG
which approximates the daily Federal funds rate. Total
intercompany interest paid was $1,310, $679 and $737 for 1995,
1994 and 1993, respectively.
The Company and Merrill Lynch Asset Management, L.P. ("MLAM")
are parties to a service agreement whereby MLAM has agreed to
provide certain invested asset management services to the
Company. The Company pays a fee to MLAM for these services
through the MLIG service agreement. Charges attributable to
this agreement and allocated to the Company by MLIG were
$2,635, $2,732 and $2,800 for 1995, 1994 and 1993,
respectively.
MLAM and MLIG have entered into an agreement with respect to
administrative services for the Merrill Lynch Series Fund, Inc.
("Series Fund") and Merrill Lynch Variable Series Funds, Inc.
("Variable Series Funds"). The Company invests in the various
mutual fund portfolios of the Series Fund and the Variable
Series Funds in connection with the variable life and variable
annuities the Company has in-force. Under this agreement, MLAM
pays compensation to MLIG in an amount equal to a portion of
the annual gross investment advisory fees paid by the Series
Fund and the Variable Series Funds to MLAM. The Company
received from MLIG it's allocable share of such compensation in
the amount of $13,293 and $12,600 during 1995 and 1994,
respectively.
The Company has a general agency agreement with Merrill Lynch
Life Agency Inc. ("MLLA") whereby registered representatives of
MLPF&S, who are the Company's licensed insurance agents,
solicit applications for contracts to be issued by the Company.
MLLA is paid commissions for the contracts sold by such agents.
Commissions paid to MLLA were $43,984, $84,231 and $67,102 for
1995, 1994 and 1993, respectively. Substantially all of these
commissions were capitalized as deferred policy acquisition
costs and are being amortized in accordance with the policy
discussed in Note 1.
The Company has entered into certain interest rate swap
contracts with Merrill Lynch Capital Services, Inc. ("MLCS")
with a guarantee from Merrill Lynch & Co. As of December 31,
1995 and 1994, the notional amount of such interest rate swap
contracts outstanding was $10,000. During 1994, the Company and
MLCS terminated certain interest rate swap contracts resulting
in the Company paying a net consideration of $2,043. Net
interest received from these interest rate swap contracts was
$256, $782, and $6,876 for 1995, 1994 and 1993, respectively
(See Note 3).
NOTE 6. STOCKHOLDER'S EQUITY AND STATUTORY REGULATIONS
During 1995, 1994, and 1993 the Company paid dividends of
$100,000, $150,000, and $120,000, respectively, to MLIG. Of
these stockholder's dividends, $73,757, $112,779, and $75,012,
respectively, were extraordinary dividends as defined by
Arkansas Insurance Law and were paid pursuant to approval
granted by the Arkansas Insurance Commissioner.
At December 31, 1995 and 1994, approximately $30,195 and
$26,243, respectively, of stockholder's equity was available
for distribution to MLIG. Statutory capital and surplus at
December 31, 1995 and 1994, was $303,950 and $264,432,
respectively.
Applicable insurance department regulations require that the
Company report its accounts in accordance with statutory
accounting practices. Statutory accounting practices primarily
differ from the principles utilized in these financial
statements by charging policy acquisition costs to expense as
incurred, establishing future policy benefit reserves using
different actuarial assumptions, not providing for deferred
income taxes and valuing securities on a different basis. The
<PAGE>
Company's statutory net income for 1995, 1994 and 1993 was
$121,451, $42,382 and $45,604, respectively.
The National Association of Insurance Commissioners ("NAIC")
utilizes the Risk Based Capital ("RBC") adequacy monitoring
system. The RBC calculates the amount of adjusted capital which
a life insurance company should have based upon that company's
risk profile. As of December 31, 1995 and 1994, based on the
RBC formula, the Company's total adjusted capital level was
395% and 270%, respectively, of the minimum amount of capital
required to avoid regulatory action.
NOTE 7. COMMITMENTS AND CONTINGENCIES
State insurance laws generally require that all life insurers
who are licensed to transact business within a state become
members of the state's life insurance guaranty association.
These associations have been established for the protection of
policyholders from loss (within specified limits) as a result
of the insolvency of an insurer. At the time an insolvency
occurs, the guaranty association assesses the remaining members
of the association an amount sufficient to satisfy the
insolvent insurer's policyholder obligations (within specified
limits). During 1991, and to a lesser extent 1992, there were
certain highly publicized life insurance insolvencies. The
Company has utilized public information to estimate what future
assessments it will incur as a result of these insolvencies.
At December 31, 1995 and 1994, the Company has established an
estimated liability for future guaranty fund assessments of
$21,144 and $24,774, respectively. The Company regularly
monitors public information regarding insurer insolvencies and
will adjust its estimated liability when appropriate.
In the normal course of business, the Company is subject to
various claims and assessments. Management believes the
settlement of these matters would not have a material effect on
the financial position or results of operations of the Company.
* * * * * *
<PAGE> 42
PART C
OTHER INFORMATION
<PAGE> 43
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<S> <C>
(a) FINANCIAL STATEMENTS
(1) Financial Statements of Merrill Lynch Life Variable Annuity Separate Account for
the three years ended December 31, 1995 and the Notes relating thereto appear in
the Statement of Additional Information (Part B of the Registration Statement)
(2) Financial Statements of Merrill Lynch Life Insurance Company for the three years
ended December 31, 1995 and the Notes relating thereto appear in the Statement
of Additional Information (Part B of the Registration Statement)
(b) EXHIBITS
(1) Resolution of the Board of Directors of Merrill Lynch Life Insurance Company
establishing the Merrill Lynch Life Variable Annuity Separate Account.
(2) Not Applicable.
(3) Underwriting Agreement Between Merrill Lynch Life Insurance Company and Merrill
Lynch, Pierce, Fenner & Smith Incorporated.
(4)(a) Individual Variable Annuity Contract issued by Family Life Insurance Company.
(b) Individual Variable Annuity Contract Issued by Merrill Lynch Life Insurance
Company (Incorporated by Reference to Registrant's Post-Effective Amendment No.
3 to Form N-4, Registration No. 33-43053 Filed August 6, 1993).
(c) Endorsements to Individual Variable Annuity Contract Issued by Family Life
Insurance Company.
(d) Assumption Certificate.
(e) Assumption Certificate for use in Illinois.
(f) Assumption Certificate for use in Tennessee.
(g) Assumption Certificate of Tandem Insurance Group, Inc. and Company Name Change
and Home Office Address Change Endorsement.
(h) Endorsement to Individual Variable Annuity Contract Issued by Merrill Lynch Life
Insurance Company or Family Life Insurance Company (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 4 to Form N-4, Registration No.
33-43053 Filed April 25, 1994).
(5) Annuity Application for Fixed and Variable Annuities (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 3 to Form N-4, Registration No.
33-43053 Filed August 6, 1993).
(6)(a) Articles of Amendment, Restatement and Redomestication of the Articles of
Incorporation of Merrill Lynch Life Insurance Company.
(b) Amended and Restated By-Laws of Merrill Lynch Life Insurance Company.
(7) Assumption Reinsurance Agreement Between Merrill Lynch Life Insurance Company,
Tandem Insurance Group, Inc. and Royal Tandem Life Insurance Company and Family
Life Insurance Company.
(8)(a) Amended General Agency Agreement Between Merrill Lynch Life Insurance Company
and Merrill Lynch Life Agency, Inc. (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 4 to Form N-4, Registration No. 33-43053 Filed
April 25, 1994).
(b) Indemnity Agreement Between Merrill Lynch Life Insurance Company and Merrill
Lynch Life Agency, Inc.
(c) Agreement Between Merrill Lynch Life Insurance Company and Merrill Lynch
Variable Series Funds, Inc. Relating to Maintaining Constant Net Asset Value for
the Reserve Assets Fund.
(d) Agreement Between Merrill Lynch Life Insurance Company and Merrill Lynch
Variable Series Funds, Inc. Relating to Valuation and Purchase Procedures.
(e) Plan and Agreement of Merger Between Merrill Lynch Life Insurance Company and
Tandem Insurance Group, Inc.
</TABLE>
C-1
<PAGE> 44
<TABLE>
<S> <C> <C>
(f) Amended Service Agreement Between Merrill Lynch Life Insurance Company and
Merrill Lynch Insurance Group, Inc. (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 4 to Form N-4, Registration No. 33-43053 Filed
April 25, 1994).
(g) Indemnity Agreement Between Merrill Lynch Life Insurance Company and Merrill
Lynch Life Agency, Inc.
(h) Management Agreement Between Merrill Lynch Life Insurance Company and Merrill
Lynch Asset Management, Inc.
(i) Reimbursement Agreement Between Merrill Lynch Asset Management, Inc. and Merrill
Lynch Life Agency.
(j) Form of Participation Agreement Between Merrill Lynch Variable Series Funds,
Inc., 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. 4 to Form N-4, Registration No.
33-43053 Filed April 25, 1994).
(k) Form of Addendum to General Agency Compensation Schedule (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 3 to Form N-4,
Registration No. 33-43053 Filed August 6, 1993.
(9) Opinion of Barry G. Skolnick, Esq. and Consent to its use as to the legality of
the securities being registered.
(10)(a) Written Consent of Sutherland, Asbill & Brennan, L.L.P.
(b) Written Consent of Deloitte & Touche LLP, independent auditors.
(11) Not Applicable.
(12) Not Applicable.
(13) Not Applicable.
(14)(a) Power of Attorney from Joseph E. Crowne, Jr. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 4 to Form N-4, Registration No.
33-43053 Filed April 25, 1994).
(b) Power of Attorney from David M. Dunford (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 4 to Form N-4, Registration No.
33-43053 Filed April 25, 1994).
(c) Power of Attorney from John C.R. Hele (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 4 to Form N-4, Registration No. 33-43053 Filed
April 25, 1994).
(d) Power of Attorney from Allen N. Jones (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 4 to Form N-4, Registration No. 33-43053 Filed
April 25, 1994).
(e) Power of Attorney from Barry G. Skolnick (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 4 to Form N-4, Registration No.
33-43053 Filed April 25, 1994).
(f) Power of Attorney from Anthony J. Vespa (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 4 to Form N-4, Registration No.
33-43053 Filed April 25, 1994).
(g) Power of Attorney from Gail R. Farkas (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 6 to Form N-4, Registration No. 33-43053 Filed
April 26, 1996).
</TABLE>
C-2
<PAGE> 45
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR*
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS ADDRESS POSITION WITH DEPOSITOR*
- --------------------- -------------------------- ----------------------------------------
<S> <C> <C>
Joseph E. Crowne, Jr. 800 Scudders Mill Road Director, Senior Vice President,
Plainsboro, NJ 08536 Chief Financial Officer, Chief Actuary,
and Treasurer.
David M. Dunford 800 Scudders Mill Road Director, Senior Vice President and
Plainsboro, NJ 08536 Chief Investment Officer.
Gail R. Farkas 800 Scudders Mill Road Director and Senior Vice President.
Plainsboro, NJ 08536
Barry G. Skolnick 800 Scudders Mill Road Director, Senior Vice President General
Plainsboro, NJ 08536 Counsel, and Secretary.
Anthony J. Vespa 800 Scudders Mill Road Director, Chairman of the Board,
Plainsboro, NJ 08536 President and Chief Executive Officer.
Deborah J. Adler 800 Scudders Mill Road Vice President and Actuary.
Plainsboro, NJ 08536
Charles J. Cavanaugh 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Robert J. Boucher 1414 Main Street Senior Vice President, Variable Life
Springfield, MA 01102 Administration.
Michael P. Cogswell 800 Scudders Mill Road Vice President and Senior Counsel.
Plainsboro, NJ 08536
Edward W. Diffin, Jr. 800 Scudders Mill Road Vice President and Senior Counsel.
Plainsboro, NJ 08536
Eileen Dyson 4804 Deer Lake Drive East Vice President and Assistant Secretary.
Jacksonville, FL 32246
Diana Joyner 1414 Main Street Vice President.
Springfield, MA 01102
Peter P. Massa 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Kelly A. O'Dea 800 Scudders Mill Road Vice President and Senior Compliance
Plainsboro, NJ 08536 Officer.
Shelley K. Parker 1414 Main Street Vice President and Assistant Secretary.
Springfield, MA 01102
Julia Raven 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Lori M. Salvo 800 Scudders Mill Road Vice President and Senior Counsel.
Plainsboro, NJ 08536
John A. Shea 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Frederick H. Steele 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Thomas J. Thatcher 4804 Deer Lake Drive East Vice President and Assistant Secretary.
Jacksonville, FL 32246
Robert J. Viamari 1414 Main Street Vice President and Assistant Secretary.
Springfield, MA 01102
Chester Westergard 425 West Capital Avenue Vice President.
Capital Towers, Suite 200
Little Rock, AR 72201
Denis G. Wuestman 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
</TABLE>
- ---------------
* Each director is elected to serve until the next annual shareholder meeting or
until his or her successor is elected and shall have qualified.
C-3
<PAGE> 46
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
Merrill Lynch Life Insurance Company is an indirect wholly-owned subsidiary of
Merrill Lynch & Co., Inc.
A list of subsidiaries of Merrill Lynch & Co., Inc. appears below.
<PAGE>
MLCOSUBO395
SUBSIDIARIES OF THE REGISTRANT
The following are subsidiaries of ML & Co. as of March 24, 1995 and the
states or jurisdictions in which they are organized. Indentation indicates the
principal parent of each subsidiary. Except as otherwise specified, in each case
ML & Co. owns, directly or indirectly, at least 99% of the voting securities of
each subsidiary. The names of particular subsidiaries have been omitted because,
considered in the aggregate as a single subsidiary, they would not constitute,
as of the end of the year covered by this report, a "significant subsidiary" as
that term is defined in Rule 1.02(v) of Regulation S-X under the Securities
Exchange Act of 1934.
<TABLE>
<CAPTION>
STATE OR
JURISDICTION
NAME OR ENTITY
- -------------------------------------------------------------------------------------- --------------------------
<S> <C>
Merrill Lynch & Co., Inc. ............................................................ Delaware
Merrill Lynch, Pierce, Fenner & Smith Incorporated(1)............................... Delaware
Broadcort Capital Corp. .......................................................... Delaware
Merrill Lynch & Co., Canada Ltd. ................................................. Ontario
Merrill Lynch Canada Incorporated/Incorporee.................................... Nova Scotia
Merrill Lynch Life Agency Inc.(2)................................................. Washington
Merrill Lynch Princeton Incorporated.............................................. Delaware
ROC Denver, Inc. ................................................................. Delaware
R.O.C. Florida, Inc. ............................................................. Florida
ROC Texas, Inc. .................................................................. Texas
Wagner Stott Clearing Corp.(3).................................................... Delaware
Green Equity, Inc. ................................................................. New Jersey
Merrill Lynch Bank & Trust Co. ..................................................... New Jersey
Merrill Lynch Capital Services, Inc. ............................................... Delaware
Merrill Lynch Derivative Products, Inc.(4).......................................... Delaware
Merrill Lynch Government Securities Inc. ........................................... Delaware
Merrill Lynch Government Securities of Puerto Rico S.A. .......................... Delaware
Merrill Lynch Money Markets Inc. ................................................. Delaware
Merrill Lynch Group, Inc. .......................................................... Delaware
HQ North Company, Inc. ........................................................... New York
Investor Protection Insurance Company............................................. Vermont
Merrill Lynch Capital Partners, Inc. ............................................. Delaware
Merrill Lynch Fiduciary Services, Inc. ........................................... New York
Merrill Lynch Futures Inc. ....................................................... Delaware
Merrill Lynch, Hubbard Inc.(5).................................................... Delaware
Merrill Lynch Insurance Group, Inc. .............................................. Delaware
Merrill Lynch Life Insurance Company............................................ Arkansas
ML Life Insurance Company of New York........................................... New York
Merrill Lynch International Finance Corporation................................... New York
Merrill Lynch International Bank Limited........................................ England
Merrill Lynch Bank (Suisse) S.A. ............................................. Switzerland
Merrill Lynch Trust Company (Jersey) Limited.................................. Jersey,
Channel Islands
Merrill Lynch L.P. Holdings, Inc. ................................................ Delaware
Merrill Lynch MBP Inc. ........................................................... Delaware
Merrill Lynch Mortgage Capital Inc. .............................................. Delaware
Merrill Lynch National Financial.................................................. Utah
Merrill Lynch Private Capital Inc.(6)............................................. Delaware
Merrill Lynch Trust Company....................................................... New Jersey
Merrill Lynch Business Financial Services Inc. ................................. Delaware
Merrill Lynch Credit Corporation................................................ Delaware
Merrill Lynch Home Equity Acceptance, Inc. ................................... Delaware
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE OR
JURISDICTION
NAME OR ENTITY
- -------------------------------------------------------------------------------------- --------------------------
<S> <C>
Merrill Lynch & Co., Inc.
Merrill Lynch International Incorporated (cont'd)
Merrill Lynch Trust Company....................................................... Florida
Merrill Lynch Trust Company of America............................................ Illinois
Merrill Lynch Trust Company of California......................................... California
Merrill Lynch Trust Company of Texas.............................................. Texas
Merrill Lynch/WFC/L, Inc. ........................................................ New York
ML Futures Investment Partners Inc. .............................................. Delaware
ML IBK Positions Inc. ............................................................ Delaware
Merrill Lynch Capital Corporation(7)............................................ Delaware
ML Leasing Equipment Corp.(8)..................................................... Delaware
Merlease Leasing Corp. ......................................................... Delaware
Merrill Lynch Venture Capital Inc. ............................................. Delaware
Princeton Services, Inc.(9)....................................................... Delaware
Merrill Lynch International Incorporated............................................ Delaware
Merrill Lynch GFX, Inc. .......................................................... Delaware
Merrill Lynch International (Australia) Limited................................... New South Wales
Merrill Lynch International Bank.................................................. United States
Merrill Lynch International Holdings Inc. ........................................ Delaware
Merrill Lynch Bank (Austria) Aktiengesellschaft A.G. ........................... Austria
Merrill Lynch Bank and Trust Company (Cayman) Limited........................... Cayman Islands,
British West Indies
Merrill Lynch International & Co.(10)......................................... Netherlands Antilles
Merrill Lynch Capital Markets A.G. ............................................. Switzerland
Merrill Lynch Europe Limited.................................................... England
Merrill Lynch International Limited........................................... England
Merrill Lynch Capital Markets PLC............................................. England
Merrill Lynch, Pierce, Fenner & Smith (Brokers & Dealers) Limited............. England
Merrill Lynch Europe Ltd. ...................................................... Cayman Islands,
British West Indies
Merrill Lynch Holding GmbH(11).................................................. Fed. Rep. of Germany
Merrill Lynch Bank A.G. ...................................................... Fed. Rep. of Germany
Merrill Lynch GmbH............................................................ Fed. Rep. of Germany
Merrill Lynch Holding S.A.F. ................................................... France
Merrill Lynch Capital Markets (France) S.A. .................................. France
Merrill Lynch Hong Kong Securities Limited...................................... Hong Kong
Merrill Lynch Japan Incorporated.................................................. Delaware
Merrill Lynch Specialists Inc. ..................................................... Delaware
<FN>
- ------------------------
(1) MLPF&S also conducts business as "Merrill Lynch & Co."
(2) Similarly named affiliates and subsidiaries that engage in the sale of life
insurance and annuity products are incorporated in various other
jurisdictions.
(3) The preferred stock of the corporation is owned by an unaffiliated group of
investors.
(4) ML & Co. owns 100% of this corporation's outstanding common voting stock.
100% of the outstanding preferred voting stock is held by outside parties.
The board of directors consist of 10 members, 9 of which are ML & Co.
employees and 1 of which represents outside parties.
(5) This corporation has more than 30 direct or indirect subsidiaries operating
in the United States and serving as either general partners or associate
general partners of real estate limited partnerships.
(6) This corporation has 12 subsidiaries which have engaged in direct principal
lending and investment management.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(7) This company has 10 subsidiaries holding or having a direct or indirect
interest in specific investments on its behalf.
(8) This corporation has more than 45 direct or indirect subsidiaries operating
in the United States and serving as either general partners or associate
general partners of limited partnerships.
(9) This corporation is the general partner of Merrill Lynch Asset Management,
L.P. (whose limited partner is ML & Co.).
(10) A partnership among subsidiaries of ML & Co.
(11) ML & Co. holds a 50% interest in this corporation, with the remaining 50%
interest held by an outside party.
</TABLE>
ITEM 27. NUMBER OF CONTRACTS
As of October 31, 1996, there were 2,686 Qualified Contracts and 2,442
Non-Qualified Contracts.
ITEM 28. INDEMNIFICATION
There is no indemnification of the principal underwriter, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, with respect to the Contract.
The indemnity agreement between Merrill Lynch Life Insurance Company ("Merrill
Lynch Life") and its affiliate Merrill Lynch Life Agency, Inc. ("MLLA"), with
respect to MLLA's general agency responsibilities on behalf of Merrill Lynch
Life and the Contract, provides:
Merrill Lynch Life will indemnify and hold harmless MLLA and all persons
associated with MLLA as such term is defined in Section 3(a)(21) of the
Securities Exchange Act of 1934 against all claims, losses, liabilities and
expenses, to include reasonable attorneys' fees, arising out of the sale by
MLLA of insurance products under the above-referenced Agreement, provided
that Merrill Lynch Life shall not be bound to indemnify or hold harmless
MLLA or its associated persons for claims, losses, liabilities and expenses
arising directly out of the willful misconduct or negligence of MLLA or its
associated persons.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Merrill Lynch, Pierce, Fenner & Smith Incorporated also acts as principal
underwriter for the following additional funds: CBA Money Fund; CMA Government
Securities Fund; CMA Money Fund; CMA Tax-Exempt Fund; CMA Treasury Fund; CMA
Multi-State Municipal Series Trust; The Corporate Fund Investment Accumulation
Program, Inc.; The Municipal Fund Investment Accumulation Program, Inc.;
Corporate Income Fund; Equity Income Fund; The Fund of Stripped ("Zero") U.S.
Treasury Securities; The GNMA Investment Accumulation Program; Government
Security Income Fund; International Bond Fund; The Merrill Lynch Fund of
Stripped ("Zero") U.S. Treasury Securities; Merrill Lynch Trust for Government
Securities; Municipal Income Fund; and Municipal Investment Trust Fund.
Merrill Lynch, Pierce, Fenner & Smith Incorporated also acts as principal
underwriter for the following additional accounts: Merrill Lynch Life Variable
Annuity Separate Account A; Merrill Lynch Life Variable Life Separate Account B;
Merrill Lynch Life Variable Life Separate Account II; ML of New York Variable
Life Separate Account; ML of New York Variable Life Separate Account II; ML of
New York Variable Annuity Separate Account; ML of New York Variable Annuity
Separate Account A; ML of New York Variable Annuity Separate Account B; and
Merrill Lynch Variable Life Separate Account.
C-4
<PAGE> 47
(b) The directors, president, treasurer and executive vice presidents of Merrill
Lynch, Pierce, Fenner & Smith Incorporated are as follows:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES WITH UNDERWRITER
----------------------------------------- -----------------------------------------
<S> <C>
Herbert M. Allison, Jr.*................. Director and Executive Vice President
Barry S. Friedberg*...................... Executive Vice President
Edward L. Goldberg*...................... Executive Vice President
Stephen L. Hammerman*.................... Director and Chairman
Jerome P. Kenney*........................ Executive Vice President
David H. Komansky*....................... Director, President and Chief Executive
Officer
Theresa Lang*............................ Senior Vice President and Treasurer
Daniel T. Napoli*........................ Senior Vice President
Thomas H. Patrick*....................... Executive Vice President
George A. Schieren....................... General Counsel
Winthrop H. Smith, Jr.*.................. Executive Vice President
John L. Steffens*........................ Director and Executive Vice President
Daniel P. Tully*......................... Director
Roger M. Vasey*.......................... Executive Vice President
</TABLE>
- ---------------
* World Financial Center, 250 Vesey Street, New York, NY 10281
(c) Not Applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, and records required to be maintained by Section 31(a) of
the 1940 Act and the rules promulgated thereunder are maintained by the
depositor at the principal executive offices at 800 Scudders Mill Road,
Plainsboro, New Jersey 08536 and the Service Center at 4804 Deer Lake Drive
East, Jacksonville, Florida 32246.
ITEM 31. NOT APPLICABLE
ITEM 32. UNDERTAKINGS AND REPRESENTATIONS
(a) Registrant undertakes to file a post-effective amendment to the Registrant
Statement as frequently as is necessary to ensure that the audited financial
statements in the Registration Statement are never more than 16 months old for
so long as payments under the variable annuity contracts may be accepted.
(b) Registrant undertakes to include either (1) as part of any application to
purchase a contract offered by the prospectus, a space that an applicant can
check to request a statement of additional information, or (2) a postcard or
similar written communication affixed to or included in the prospectus that the
applicant can remove to send for a statement of additional information.
(c) Registrant undertakes to deliver any statement of additional information and
any financial statements required to be made available under this Form promptly
upon written or oral request.
(d) Merrill Lynch Life Insurance Company is relying on a no-action letter issued
to the American Counsel of Life Insurance published November 28, 1988. The
no-action letter provides certain assurances relating to variable annuity
registrants' compliance with Section 403(b)(11) of the Internal Revenue Code and
Sections 22(e), 27(c)(1) and 27(d) of the Investment Company Act of 1940.
Merrill Lynch Life hereby represents that it has complied with the provisions of
paragraph (1) through (4) of said no-action letter.
(e) Merrill Lynch Life Insurance Company 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 Merrill Lynch Life Insurance Company.
C-5
<PAGE> 48
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Merrill Lynch Life Variable Annuity Separate Account,
certifies that it meets the requirements of Securities Act Rule 485(b) for
effectiveness of this Post-Effective Amendment No. 8 to the Registration
Statement and has caused this Registration Statement to be signed on its behalf,
in the City of Plainsboro, State of New Jersey, on the 3rd day of December,
1996.
<TABLE>
<S> <C>
ATTEST: MERRILL LYNCH LIFE VARIABLE ANNUITY
SEPARATE ACCOUNT
(Registrant)
/s/ SANDRA K. DOMINGUES By: /s/ BARRY G. SKOLNICK
- --------------------------------------------- -----------------------------------------
Sandra K. Domingues Barry G. Skolnick
Assistant Secretary Senior Vice President of
Merrill Lynch Life Insurance Company
ATTEST: MERRILL LYNCH LIFE INSURANCE COMPANY
(Depositor)
/s/ SANDRA K. DOMINGUES By: /s/ BARRY G. SKOLNICK
- --------------------------------------------- -----------------------------------------
Sandra K. Domingues Barry G. Skolnick
Assistant Secretary Senior Vice President
</TABLE>
As required by the Securities Act of 1933, this Post-Effective Amendment No. 8
to the Registration Statement has been signed below by the following persons in
the capacities indicated on December 3, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ---------------------------------------------
<S> <C>
* Director, Chairman of the Board, President,
- --------------------------------------------- and Chief Executive Officer
Anthony J. Vespa
* Director, Senior Vice President, Chief
- --------------------------------------------- Financial Officer, Chief Actuary, and
Joseph E. Crowne, Jr. Treasurer
* Director, Senior Vice President and Chief
- --------------------------------------------- Investment Officer
David M. Dunford
* Director and Senior Vice President
- ---------------------------------------------
Gail R. Farkas
By: /s/ BARRY G. SKOLNICK In his own capacity as Director, Senior Vice
----------------------------------------- President, General Counsel, and Secretary
Barry G. Skolnick and as Attorney-In-Fact
</TABLE>
C-6
<PAGE> 49
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- -------- ---------------------------------------------------------------------------- -----
<S> <C> <C>
(1) Resolution of the Board of Directors of Merrill Lynch Life Insurance Company
establishing the Merrill Lynch Life Variable Annuity Separate Account. ...
(3) Underwriting Agreement Between Merrill Lynch Life Insurance Company and
Merrill Lynch, Pierce, Fenner & Smith Incorporated. ......................
(4)(a) Individual Variable Annuity Contract issued by Family Life Insurance
Company. .................................................................
(c) Endorsements to Individual Variable Annuity Contract Issued by Family Life
Insurance Company. .......................................................
(d) Assumption Certificate. ....................................................
(e) Assumption Certificate for use in Illinois. ................................
(f) Assumption Certificate for use in Tennessee. ...............................
(g) Assumption Certificate of Tandem Insurance Group, Inc. and Company Name
Change and Home Office Address Change Endorsement. .......................
(6)(a) Articles of Amendment, Restatement and Redomestication of the Articles of
Incorporation of Merrill Lynch Life Insurance Company. ...................
(b) Amended and Restated By-Laws of Merrill Lynch Life Insurance Company. ......
(7) Assumption Reinsurance Agreement Between Merrill Lynch Life Insurance
Company, Tandem Insurance Group, Inc. and Royal Tandem Life Insurance
Company and Family Life Insurance Company. ...............................
(8)(b) Indemnity Agreement Between Merrill Lynch Life Insurance Company and Merrill
Lynch Life Agency, Inc. ..................................................
(c) Agreement Between Merrill Lynch Life Insurance Company and Merrill Lynch
Variable Series Funds, Inc. Relating to Maintaining Constant Net Asset
Value for the Reserve Assets Fund. .......................................
(d) Agreement Between Merrill Lynch Life Insurance Company and Merrill Lynch
Variable Series Funds, Inc. Relating to Valuation and Purchase
Procedures. ..............................................................
(e) Plan and Agreement of Merger Between Merrill Lynch Life Insurance Company
and Tandem Insurance Group, Inc. .........................................
(g) Indemnity Agreement Between Merrill Lynch Life Insurance Company and Merrill
Lynch Life Agency, Inc. ..................................................
(h) Management Agreement Between Merrill Lynch Life Insurance Company and
Merrill Lynch Asset Management, Inc. .....................................
(i) Reimbursement Agreement Between Merrill Lynch Asset Management, Inc. and
Merrill Lynch Life Agency. ...............................................
(9) Opinion of Barry G. Skolnick, Esq. and Consent to its use as to the legality
of the securities being registered........................................
(10)(a) Written Consent of Sutherland, Asbill & Brennan, L.L.P. ....................
(b) Written Consent of Deloitte & Touche LLP, independent auditors..............
</TABLE>
C-7
<PAGE> 1
EXHIBIT (1)
MERRILL LYNCH LIFE INSURANCE COMPANY
BOARD OF DIRECTORS CONSENT TO CORPORATE ACTION
PURSUANT TO ARTICLE III OF THE BY-LAWS
MARCH 15, 1991 RESOLUTION RE APPROVAL OF
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
WHEREAS, the Board of Directors of Merrill Lynch Life
Insurance Company ("Company") desire that the Company assume and issue variable
annuity insurance contracts ("Contracts") pursuant to Washington Insurance Law
(the "Insurance Law"); and,
WHEREAS, the Contracts may be subject to registration with the
Securities and Exchange Commission ("Commission"); and
WHEREAS, The Insurance Law permits the Company to fund the
Contracts through a separate account; be it
RESOLVED, that the Company is authorized to assume and issue
the Contracts and register the Contracts with the Commission on the appropriate
Registration Statement; and be it
FURTHER RESOLVED, that the Company shall establish on or prior
to the date the Contracts are first assumed or issued a separate account
pursuant to the Insurance Law designated the Merrill Lynch Life Variable
Annuity Separate Account (hereinafter the "Separate Account") for the following
uses and purposes, and subject to such conditions as hereinafter set forth; and
be it
<PAGE> 2
FURTHER RESOLVED, that the Separate Account shall fund
Contracts assumed or issued by the Company into which account are allocated
amounts paid to and held by the Company under the Contracts; and be it
FURTHER RESOLVED, that the President, any Vice President or
the General Counsel, and each of them, with full power to act without the
others, be, and each of them is, hereby authorized during the first 12 months
after establishment of the Separate Account to cause the Company to allocate
and contribute to the Separate Account, for a limited period and without the
purpose of funding Contracts, funds which the Company might otherwise invest,
if necessary to comply with the Insurance Law for the purpose of commencing the
Separate Account's operation; and be it
FURTHER RESOLVED, that the Board of Directors of the Company
reserves the right to change the designation of the Separate Account hereafter
to such other designation as it may deem necessary or appropriate; and be it
FURTHER RESOLVED, that the President, any Vice President or
the General Counsel, and each of them, with full power to act without the
others, with such assistance from the Company's independent certified public
accountants and independent consultants or others as they may require, be, and
each of them is, hereby authorized and directed to take all action necessary
to: (a) register the Contracts in such amounts, which may be an indefinite
amount, as the said officer of the Company shall deem appropriate pursuant to
one or more registration statements in an offering made under the Securities
Act of 1933, as amended (the "Registration Statements"); (b) register the
Separate Account as an investment company pursuant to the Investment Company
Act of 1940 as amended; (c) file such request for exemptive relief from or
other orders pursuant to, provisions of the Investment Company Act of 1940 as
the said officer shall deem necessary or appropriate; and, (d) take all other
actions which are necessary or appropriate in connection with the offer and
sale of the Contracts and the operation of the Separate Account in order to
comply with the Securities Act of
- 2 -
<PAGE> 3
1933, as amended, the Investment Company Act of 1940, as amended, and all other
applicable federal, state or local laws and the rules and regulations
promulgated thereunder, including the filing of any amendments or supplements
to the Registration Statements; and be it
FURTHER RESOLVED, that Barry Skolnick, Senior Vice President
and General Counsel of the Company, be and hereby is, duly appointed as agent
for service of process in connection with the Registration Statements including
all amendments and supplements thereto; and be it
FURTHER RESOLVED, that the President, and Vice President or
the General Counsel, and each of them, with full power to act without the
others, be, and each of them is, hereby authorized on behalf of the Separate
Account and on behalf of the Company to take any and all action that such
officer may deem necessary or appropriate in connection with the assumption,
offer and sale of the Contracts, including the preparation and filing of any
registrations or qualifications, whether in respect of the Company, its
officers, agents and employees, or of the Contracts, under the insurance and
securities laws of any of the states of the United States of America and any
other necessary or appropriate jurisdictions, and in connection therewith to
prepare, execute, deliver and file all applications, reports, undertakings,
resolutions, consents to service of process and other documents and instruments
as may be necessary or appropriate under laws of any such jurisdiction and to
take any and all other actions which the said officers or legal counsel of the
Company may deem necessary or appropriate (including entering into whatever
agreements and contracts may be necessary) in order to establish or maintain
such registrations or qualifications or exemptions therefrom; and be it
- 3 -
<PAGE> 4
FURTHER RESOLVED, that the President, any Vice President or
the General Counsel, and each of them, with full power to act without the
others, be, and each of them is, hereby authorized on behalf of the Company to
execute and file irrevocable written consents in connection with the Separate
Account to be used in such states wherein such consents to service of process
may be required under applicable laws in connection with said registration or
qualification of the Contracts and to appoint the appropriate state officials,
or such other person as may be allowed by said insurance or securities laws,
agent of the Company for the purpose of receiving and accepting process; and be
it
FURTHER RESOLVED, that the President, any Vice President or
the General Counsel, and each of them, with full power to act without the
others, be, and each of them is, hereby authorized to execute such agreement or
agreements in such form and with such terms as such officer may deem necessary
or appropriate with Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill") or any other entity approved by the Company pursuant to which
Merrill or such other entity will be appointed to act as principal underwriter
and distributor of the Contracts on such terms and conditions as said officer,
in his sole discretion, may deem appropriate; and be it
FURTHER RESOLVED, that the President, any Vice President or
the General Counsel, and each of them, with full power to act without the
others, be, and each of them is, hereby authorized to execute and deliver such
agreements and other documents and to do all such acts and things as may be
deemed necessary or appropriate to carry out the foregoing resolutions and the
intent and purposes thereof; and be it
- 4 -
<PAGE> 5
FURTHER RESOLVED, that in establishing the Separate Account
the Company shall meet the requirements of Section 4240 of the Insurance Law
and be it
FURTHER RESOLVED, that the Company shall, and it hereby does,
adopt and establish the following Standards of Suitability with regard to the
Contracts:
1. Unless the Company has reasonable grounds to believe the
purchase of a Contract is suitable for the applicant on the
basis of information concerning the applicant's
insurance and investment objectives, financial situations and
needs, and any other information known to the Company or the
agent making the recommendation:
(a) no recommendation shall be made to an applicant to
purchase such Contract and
(b) no such Contract shall be issued.
2. Each applicant will be provided with a current prospectus
relating to the Contract.
- 5 -
<PAGE> 1
EXHIBIT (3)
UNDERWRITING AGREEMENT
AGREEMENT made this ___ day of ________, 1991, by and between Merrill
Lynch Life Insurance Company ("Merrill Lynch Life"), an Arkansas corporation,
and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a Delaware
corporation.
W I T N E S S E T H :
WHEREAS, Merrill Lynch Life has established a separate account
entitled the Merrill Lynch Life Variable Annuity Separate Account for the
purposes of issuing certain variable annuity contracts ("Contracts");
WHEREAS, Merrill Lynch Life wishes to arrange for the underwriting of
the Contracts in conformity with the requirements of the Securities Exchange
Act of 1934 ("1934 Act"); and
WHEREAS, MLPF&S is registered with the Securities and Exchange
Commission ("SEC") as a broker-dealer under the 1934 Act and is a member of the
National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, the parties hereto agree as follows:
1. Merrill Lynch Life hereby appoints MLPF&S as its
exclusive representative for the distribution of the Contracts, and MLPF&S
hereby agrees to use its best efforts to sell and distribute the Contracts
through its registered representatives; provided, that with the approval of
Merrill Lynch Life, MLPF&S may arrange with other broker-dealers for the sale
of the Contracts and execute agreements relating thereto upon such terms and
conditions as MLPF&S deems appropriate.
2. Unless otherwise permitted by applicable law, each
person engaged in the sale of the Contracts must be both an agent of Merrill
Lynch Life and a person associated with a broker or dealer" as that term is
defined in Section 3(a)(18) of the 1934 Act. With respect to all persons
associated with it who will be engaged in the sale of the Contracts, MLPF&S
will be responsible for their training, qualification, registration,
supervision and control in the manner and to the extent required by the
applicable rules of the SEC and NASD and by any applicable securities laws or
rules of the various states relating to the sale of the Contracts. Merrill
Lynch Life reserves the right to refuse to appoint any person proposed to be
associated with MLPF&S as an agent, or if appointed, to terminate such
appointment in its sole discretion. From time to time as
<PAGE> 2
requested by Merrill Lynch Life, MLPF&S will furnish to it a list of all
persons associated with it authorized to sell the Contracts.
3. MLPF&S will prepare and maintain all books and
records relating to the Contracts which are required to be maintained by it
under the 1934 Act.
4. MLPF&S will not accept or receive on behalf of
Merrill Lynch Life any Contract purchase payment except the first. Any first
payment received by MLPF&S will be made payable to Merrill Lynch Life and will
be forwarded promptly to Merrill Lynch Life, or the service office designated
by it accompanied by a complete Contract application. Merrill Lynch Life
reserves the right to reject any contract request in its sole discretion.
5. Merrill Lynch Life will furnish MLPF&S currently
effective prospectuses relating to the Contracts in such numbers as MLPF&S may
reasonably require from time to time. MLPF&S will use its best efforts to
obtain any approvals or clearances required from the NASD with respect to all
sales materials relating to the Contracts. Any sales materials relating to the
Contracts prepared by MLPF&S must be approved by Merrill Lynch Life prior to
their use.
6. All commissions payable by Merrill Lynch Life in
connection with Contract sales will be payable to the appropriate general agent
affiliated with MLPF&S in accordance with terms of the agreement with such
general agent then in effect. If any provision of any such agreement
applicable to the Contracts conflicts with any provision of this Agreement, the
provision of this Agreement shall govern.
7. This Agreement may be terminated at any time by
either party hereto on sixty (60) days' written notice.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the day and year first above written.
MERRILL LYNCH LIFE INSURANCE COMPANY
By:
---------------------------------
ATTEST
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<PAGE> 3
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
--------------------------------
ATTEST
- ----------------------------
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<PAGE> 1
EXHIBIT (4)(a)
FAMILY LIFE INSURANCE COMPANY
Park Place, Seattle, Washington 98101
FAMILY LIFE INSURANCE COMPANY will make monthly annuity payments for the life
of the Annuitant or as otherwise provided in this contract. Payments will be
made to the Owner starting on the annuity date.
This is a legal contract between you and us. Please read the contract
carefully. ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CONTRACT WHEN
BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE
NOT GUARANTEED AS TO FIXED-DOLLAR AMOUNT.
TEN DAY RIGHT TO REVIEW CONTRACT. You may cancel this contract within ten days
after its receipt. Simply return or mail it to us or our agent. Within seven
days we will refund the greater of the contract value or all of your premiums.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. PREMIUMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. THE VARIABLE ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. FIXED ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. CHARGES AND DEDUCTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6. PAYMENT AT DEATH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7. WITHDRAWALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8. LOAN PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9. ANNUITY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10. VARIABLE ACCOUNT ANNUITY PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11. FIXED ACCOUNT ANNUITY PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12. ANNUITY OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13. ANNUITY OPTION TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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<PAGE> 3
DEFINITIONS
1. FIXED ANNUITY: A series of periodic payments of predetermined
amounts that do not vary with investment experience.
2. VARIABLE ANNUITY: A series of periodic payments that vary in
amount according to investment experience.
3. ANNUITANT: Annuity payments may depend upon the continuation
of life of a person. That person is called an annuitant. The Annuitant for
this contract is named on the schedule page.
4. ANNUITY DATE: The date on which annuity payments are to
start.
5. PREMIUMS: The money you pay us for this contract.
6. CONTRACT VALUE: The sum of the value of your Fixed Account
and your interest in the Variable Account.
7. ACCUMULATION UNIT. An index used to compute the value of your
interest in the Variable Account prior to the annuity date.
8. ANNUITY UNIT: An index used to compute variable annuity
payments made from the Variable Account.
9. QUALIFIED PLAN: A retirement plan that receives favorable tax
treatment under Section 401, 403, 404, 408, 457 or any similar provision of the
Internal Revenue Code.
10. NONQUALIFIED PLAN: A retirement plan other than a qualified
plan.
11. OWNER: The person entitled to exercise all nights under the
contract. In this contract, "you" means Owner.
12. CONTINGENT OWNERS: The person who is to become Owner at death
of the prior Owner.
13. CO-ANNUITANTS: If two persons are named as Co-Annuitants on
the schedule page, then wherever used in this contract: "Annuitant" means the
Co-Annuitants; death of the Annuitant refers to death of both Co-Annuitants;
and age of the Annuitant refers to age of the order Co-Annuitant. The
Co-Annuitants are joint owners, and each is the Contingent Owner of the other's
interest in this contract. No other Contingent Owner may be named. Only
Options 1, 2 and 6 are available annuity
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options while both Co-Annuitants are alive, and Option 6 will apply if no
annuity option is chosen.
14. DEBT: The balance of any loan under Section 8, plus accrued
interest.
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<PAGE> 5
1. PREMIUMS
1.1 MINIMUM PREMIUMS: The minimum premium is $300 for
nonqualified plans and $10 for qualified plans. Premiums may be paid at any
time without prior notice to us.
1.2 NO DEFAULT: The contract will not be in default even if no
further premiums are paid. The contract will continue in force unless the full
contract value is withdrawn.
1.3 PREMIUM ALLOCATION: Your premiums will be allocated to the
Fixed Account or the sub-accounts of the Variable Account as you direct.
1.4 ACCOUNT TRANSFERS: Upon notice to us, you may transfer all or
part of your contract value amount the Fixed Account and the sub-accounts of
the Variable Account, except as limited by Section 8. No transfers may be made
between the Fixed Account and the Variable Account within 6 months after the
date of issue. Transfers between the Fixed Account and the Variable Account
must be at least 6 months apart. No transfers may be made between the Fixed
Account and Variable Account after the Annuity Date. No transfer between
sub-accounts of the Variable Account may be made within 30 days after the date
of issue. Transfers between sub-accounts of the Variable Account must be at
least 30 days apart.
2. THE VARIABLE ACCOUNT
2.1 THE VARIABLE ACCOUNT: The Variable Account is named on the
schedule page. It is a separate investment account of Family Life Insurance
Company. Assets allocated to the Variable Account remain our property but are
not subject to claims arising out of other business we may conduct.
2.2 ELIGIBLE MUTUAL FUNDS: current eligible mutual funds are
shown on the schedule page. For each eligible mutual fund there is one
sub-account for qualified plans and one sub-account for nonqualified plans. No
transfer may be made between qualified and nonqualified sub-accounts.
2.3 SUBSTITUTION OF INVESTMENTS: We may at our discretion
substitute a different mutual fund for any of the mutual funds shown on the
schedule page. Such substitution may be made with respect to existing
investments and the investment of future premiums.
2.4 NUMBER OF ACCUMULATION UNITS: For each sub-account of the
Variable Account, the number of your Accumulation Units is the sum of:
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<PAGE> 6
Each premium allocated to the sub-account;
Divided by
The value of an Accumulation Unit for that sub-account for the
valuation period in which we received the premium.
The number will be adjusted for transfers, withdrawals and charges.
Adjustments will be made as of the valuation period in which we receive all
requirements for the transaction, as appropriate.
2.5 VALUE OF EACH ACCUMULATION UNIT: For each sub-account of the
Variable Account, the value of an Accumulation Unit was arbitrarily set at $10
when the sub-account was established. The value may increase or decrease from
one valuation period to the next. For any valuation period the value is:
The value of an Accumulation Unit for the last prior valuation
period.
Multiplied by
The Net Investment Factor for that sub-account for the current
valuation period.
2.6 NET INVESTMENT FACTOR: This is an index used to measure the
investment performance of a sub-account of the Variable Account from one
valuation period to the next. For any sub-account, the Net Investment Factor
for a valuation period is found by dividing (a) by (b) and subtracting (c):
Where (a) is:
The net asset value per share of the mutual fund held
in the sub-account, as of the end of the valuation
period;
Plus
The per-share amount of any dividend or capital gain
distributions by the mutual fund if the "ex-dividend"
date occurs in the valuation period;
Where (b) is:
The net asset value per share of the mutual fund held
in the sub-account as of the end of the last prior
valuation period;
Where (c) is:
The sum of the daily expense risk charge and the
daily mortality risk charge. See Section 4. On an
annual basis, the sum of such charges for
nonqualified plans equals 1.3% of the daily net
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<PAGE> 7
asset value of the Separate Account. For qualified
plans the sum is 1.0% on the same basis.
We may adjust the Net Investment Factor to make provision for any change in tax
law that requires us to pay tax on capital gains in the Variable Account.
2.7 VALUATION PERIOD: This is the interval from one valuation day
of an eligible mutual fund to the next day. It is measured from the time each
day at which each mutual fund is valued.
3. FIXED ACCOUNT
3.1 FIXED ACCOUNT VALUE: Your Fixed Account value is the sum of
all your premiums allocated to the Fixed Account, as adjusted for credited
interest, transfers, withdrawals, payments under annuity options and charges.
Interest will be credited on your Fixed Account value from date of our receipt
of funds to date of our disbursement.
3.2 INTEREST: Prior to the annuity date interest will be credited
on your Fixed Account value at a guaranteed annual rate of 4.5%. We may also
credit additional interest at our discretion at a rate determined for each
calendar year. We guarantee that rate for the full calendar year. We will
notify you of the rate at the start of each year.
4. CHARGES AND DEDUCTIONS
4.1 CONTRACT ADMINISTRATION CHARGE: This charge of $30 will be
deducted on each contract anniversary that occurs on or prior to the annuity
date. It will also be deducted when the contract value is withdrawn in full if
withdrawal is not on a contract anniversary. This charge will never increase.
4.2 VARIABLE ACCOUNT EXPENSE RISK CHARGE. This charge is made to
compensate us for guaranteeing that the contract administration charge will
never increase. For Nonqualified Plans, on an annual basis it equals 0.5% of
the daily net asset value of the Variable Account. For Qualified Plans, it is
0.2% on the same basis. This charge does not apply to contract values in the
Fixed Account.
4.3 VARIABLE ACCOUNT MORTALITY RISK CHARGE: This charge is made
to compensate us for the mortality guarantees we make under this contract. On
an annual basis it equals 0.8% of the daily net asset value if the Variable
Account. This charge does not apply to contract values in the Fixed Account.
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<PAGE> 8
4.4 CONTINGENT DEFERRED SALES CHARGE. This charge may be deducted
upon withdrawal of the contract value in whole or in part. See Section 7.
4.5 PREMIUM TAXES. Any premium taxes imposed by a state or other
government will be deducted at the annuity date.
4.6 PAYMENT OF DEDUCTIONS: The expense risk charge and the
mortality risk charge will be computed and deducted from each sub-account of
the Variable Account for each day the contract is in force. Other charges will
be deducted from the Fixed Account and from each sub-account of the Variable
Account in the ratio of your interest in each to your contract value; however,
if a loan is outstanding under Section 8, no part of the Contingent Deferred
Sales Charge will be deducted from the loan security reserve except in the case
of a withdrawal from the loan security reserve under Section 8.4 or 8.5 to
repay the loan.
5. GENERAL PROVISIONS
5.1 BENEFICIARY: A beneficiary is the person who is to receive
payment under Section 6 on death of the Annuitant or Owner, as applicable. If
the Owner is not the Annuitant, you may, if you desire, name one beneficiary to
receive payment on death of the Owner ("Owner's Beneficiary") and a different
beneficiary to receive payment on death of the Annuitant ("Annuitant's
Beneficiary"). If the Owner is the Annuitant, then the Owner's Beneficiary
must be the same person as the Annuitant's Beneficiary. See Section 6.
You choose the beneficiary in the application. You may charge the Annuitant's
Beneficiary while the Annuitant is alive. You may change the Owner's
Beneficiary while the Owner is alive.
You may name a beneficiary irrevocably. If you do so, a change can be made
later only with the beneficiary's written consent.
If a beneficiary does not survive the deceased, the estate or heirs of such
beneficiary have no rights under this contract. If no beneficiary survives the
deceased, payment will be made to you or your estate.
5.2 OWNERSHIP OF CONTRACT: Unless another owner is named in the
application or an endorsement, the Annuitant is the Owner.
Only an Owner who is not the Annuitant may name or change a Contingent Owner,
except that an Owner who is also the Annuitant may name his or her spouse as
Contingent Owner.
Upon notice to us you may assign the contract to a new owner. The assignment
cancels a designation of Contingent Owner. It does not change the beneficiary.
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<PAGE> 9
5.3 COLLATERAL ASSIGNMENT: Upon notice to us you may make a
collateral assignment. It does not change contract ownership. The rights of
an assignee have priority over the rights of a beneficiary.
5.4 NOTICES, CHANGES AND CHOICES. To be effective, all notices,
changes and choices you may make under this contract must be in writing, signed
and received by us at our home office, except that account transfers may be
made by telephone. If acceptable to us, notices, changes and choices relating
to beneficiaries and ownership will take effect as of the date signed unless we
have already acted in response on the prior status. We are not responsible for
their validity.
5.5 RESTRICTIONS OF QUALIFIED PLANS: If this contract is issued
pursuant to a qualified plan, it may not be assigned, pledged or transferred
unless permitted by law.
5.6 MISSTATEMENT OF AGE OR SEX: If the age or sex of the
Annuitant or a joint annuitant is misstated, annuity payments will be adjusted
to reflect the correct age and sex. Any amount we have overpaid as the result
of such misstatement will be deducted from the next payments due under this
contract. Interest on the overpayment will be charged at the rate of 6% per
year. Any amount we have underpaid will be paid in full with the next payment
due under this contract. We will pay interest on the underpayment at the rate
of 6% per year.
5.7 PROOF OF AGE, SEX OR SURVIVAL: We may require satisfactory
proof of age, sex or survival of any person on whose continued life any payment
under this contract depends.
5.8 INCONTESTABILITY: We will not contest this contract.
5.9 THE CONTRACT: This contract, its attached application and any
endorsements are the entire contract. It is issued in consideration of the
application and payment of the first premium.
Only our President, a Vice President, Secretary or Assistant Secretary may
change the contract. Any change must be in writing.
At any time we may make such changes in this contract as are required to make
it conform with any law, regulation or ruling issued by a government agency.
5.10 NONPARTICIPATING: This contract is nonparticipating. It does
not share in our surplus.
5.11 DATES: Contract years and anniversaries are measured from
the Date of Issue.
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<PAGE> 10
5.12 CONTRACT PAYMENTS: All sums payable to or by us are payable
at our home office. We may require return of this contract prior to making
payment. Paid-up annuity benefits, contract withdrawal values and death
benefits are not less than the minimum required by any statute of the state in
which the contract is delivered.
5.13 PROTECTION OF PROCEEDS: Payments under this contract may not
be assigned by the payee prior to their due dates. To the extent allowed by
law, payments are not subject to legal process for debts of a payee.
5.14 PERIODIC REPORTS: At least once a year prior to the annuity
date we will furnish you a report of your contract value. For the Variable
Account it will set forth the current number of Accumulation Units, the value
per Accumulation Unit and the total account value. Each person with voting
rights in the Variable Account will be furnished reports required by the
Investment Company Act of 1940.
6. PAYMENT AT DEATH
6.1 DEATH OF OWNER
(Including an Annuitant Who is Also an Owner)
6.1.1 DEATH PRIOR TO ANNUITY DATE: On death of an Owner
prior to the annuity date, we will pay to the Owner's Beneficiary the death
benefit representing such Owner's interest in the contract, unless Section
6.1.3 is chosen. The death benefit is the greater of:
(a) The sum of all your premiums, adjusted for
withdrawals and related charges; or
(b) The contract value as of the date we receive
due proof of death at our home office.
Payment will be made in a lump sum unless Section 6.1.2 or Section 6.1.3 is
chosen.
6.1.2 ANNUITY OPTION: If the Owner's Beneficiary is the
surviving spouse of the decreased Owner, he or she may choose to receive
payments under any of the annuity options of this contract. For any other
Owner's Beneficiary, only those options are available that provide for full
payment of such Owner's interest in the contract:
(a) Within five years of the date of such Owner's
death;
(b) Over the lifetime of the new owner of this
contract, or
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<PAGE> 11
(c) Over a period that does not exceed the life
expectancy, as defined by Internal Revenue
Service regulations, of the new owner of this
contract.
Subparagraphs (b) and (c) apply only to individuals, and such payments must
start within one year of the date of such Owner's death. For Qualified Plans,
any annuity option chosen must meet the requirements of the Internal Revenue
Code.
6.1.3 CONTRACT CONTINUATION OPTION: If the surviving
spouse of the deceased Owner is the Owner's Beneficiary and is also the
Contingent Owner, such spouse may choose to continue this contract in force on
the same terms as before such Owner's death, and the spouse shall thereafter be
the Annuitant. This option is also available if the surviving spouse and the
deceased spouse were Co-Annuitants.
6.1.4 ROLLOVER OPTION: If all or part of a lump sum
payment under Section 6.1.1 is used within 30 days as the premium for a new
contract issued to the Owner's Beneficiary on the same form as this contract,
then the new contract will be deemed a continuation of this contract in
computing withdrawal charges under the new contract.
6.1.5 DEATH AFTER ANNUITY DATE: See Section 12.8.
6.2 DEATH OF ANNUITANT WHO IS NOT AN OWNER
6.2.1 DEATH BEFORE THE ANNUITY DATE: On death prior to the
annuity date of an Annuitant who is not an Owner, we will pay to the
Annuitant's Beneficiary the greater of:
(a) The sum of all your premiums, adjusted for
withdrawals and related charges; or
(b) The contract value as of the date we receive
due proof of death at our home office.
Payment will be in a lump sum unless one of the annuity options is chosen. If
this contract is owned by a corporation or other non-individual, only those
options are available that provide for full payment within 5 years of the
Annuitant's death. Such payments must start within one year of the Annuitant's
death.
6.2.2 ROLLOVER OPTION: If all or part of a lump sum under
Section 6.2.1 is used within 30 days as the purchase payment for a new contract
issued to the Annuitant's Beneficiary on the same form as this contract, then
the new contract will be deemed a continuation, of this contract in computing
withdrawal charges under the new contract.
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<PAGE> 12
6.2.3 DEATH AFTER THE ANNUITY DATE: See Section 12.8.
6.3 DEATH OF BOTH OWNER AND ANNUITANT
6.3.1 ONE PAYMENT ONLY: Payment will be made pursuant to
either Section 6.1.1. or 6.2.1, but not both, according to whichever first
becomes applicable.
6.3.2 SIMULTANEOUS DEATH: If an Owner is not also an
Annuitant, then in the event of death of both the Owner and the Annuitant under
circumstances in which it cannot be determined who died first, payment will be
made 50% to the Owner's Beneficiary pursuant to Section 6.1.1 and 50% to the
Annuitant's Beneficiary pursuant to Section 6.2.1.
7. WITHDRAWALS
7.1 WITHDRAWALS. Subject to Section 8, you may withdraw all or
part of the contract value, less any charges. Notice to us must be received
prior to the earlier of the annuity date or the death of the Annuitant. For
full withdrawal, this contract must be surrendered to our home office. For
partial withdrawals, the withdrawal must be at least $500, and the remaining
contract value must be at least $500.
7.2 CONTINGENT DEFERRED SALES CHARGE: This charge will be made at
withdrawal. It will be the lesser of:
(a) 5% of the sum of the premiums paid within 7 years
prior to the date of withdrawal, adjusted for any
prior withdrawals; or
(b) 5% of the amount withdrawn.
The cumulative sum of such charges made within 7 years prior to the date of
withdrawal will never be more than 5% of the sum of all premiums paid during
the same period.
No charge will be made for such part of the first withdrawal in a contract year
as does not exceed 10% of the sum of premiums paid prior to the date of
withdrawal.
In computing the charge, withdrawals will be deemed made first from premiums on
a first-in, first-out basis and then from any gain in contract value.
7.3 PAYMENT OF WITHDRAWALS. Unless you notify us otherwise,
partial withdrawals will be deducted from the Fixed Account and each
sub-account of the Variable Account int he ratio of your interest in each to
your contract value. Withdrawals will be based on values for the valuation
period in which the
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notice (and contract if required) is received at our home office. We may defer
withdrawals from the Fixed Account for up to 6 months. Payment of Variable
Account withdrawals will be made within 7 days, but we may defer payment if:
(a) The New York Stock Exchange is closed;
(b) Trading on the New York Stock Exchange is restricted;
(c) An emergency exists such that it is not reasonably
practical to dispose of securities in the Separate
Account or to determine the value of its assets; or
(d) The Securities and Exchange Commission by order so
permits for the protection of security holders.
Conditions (b) and (c) will be decided by or in accordance with rules of the
Securities and Exchange Commission.
8. LOAN PROVISIONS
8.1 CONTRACT LOANS: If this contract was issued in connection
with a qualified plan under Section 401(a) or 403(b) of the Internal Revenue
Code, you may borrow money from us using this contract as security. The loan
may not exceed 75% of your Fixed Account value on the date of the loan. Only
one loan may be outstanding at any time. The minimum loan amount is $1,500.
We may require a signed loan agreement. We have the option to delay making a
loan for up to six months. YOU ARE CAUTIONED THAT IN SOME CASES A LOAN MAY
HAVE FEDERAL INCOME TAX CONSEQUENCES. YOU SHOULD CONSULT YOUR TAX ADVISOR
BEFORE REQUESTING A LOAN.
8.2 LOAN SECURITY RESERVE: On the date a loan is made, part of
your Fixed Account value, equal to 133 1/3% of the loan amount, will be
designated as a loan security reserve. The loan security reserve may not be
transferred to the Variable Account nor may it be withdrawn.
8.3 INTEREST: Interest on the loan will accrue at the rate of
6.5% per year. It is due and payable on each anniversary of the loan. If
interest is not paid when due, it will be added to the loan and will bear
interest at the same rate. On that part of your Fixed Account value that is
equal to your debt, we will credit interest at an annual rate of only 4.5%.
8.4 LOAN REPAYMENT: You may make full or partial repayment of
your debt at any time, either by check or by authorizing us to withdraw the
amount of your debt and any applicable Contingent Deferred Sales charge from
the loan security reserve. no loans, withdrawals or transfers from the Fixed
Account may be made within 60 days after a loan has been repaid by check. Your
debt will be deducted from any payment made by reason of the death of an
Annuitant or Owner or upon any surrender of the contract.
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<PAGE> 14
8.5 DUE DATE AND DEFAULT. Your debt must be repaid on the
earliest of (a) the fifth anniversary of the date of the loan, (b) 60 days
prior to the annuity date if repaid by check, or (c) the annuity date if repaid
by withdrawal from the loan security reserve. If not repaid when due, we will
withdraw from the loan security reserve an amount equal to the sum of your debt
and any Contingent Deferred Sales Charge applicable to such withdrawal. Any
income tax withholding required by Internal Revenue Service regulations will
also be deducted from the loan security reserve.
9. ANNUITY PROVISIONS
9.1 ANNUITY DATE: The annuity date must be on the first day of a
month. It may not be later than the first day of the next month after the
Annuitant's 85th birthday. If you have not chose an annuity date, it will be
the first day of the next month after the Annuitant's 75th birthday. You may
change the annuity date up to 30 days prior to the annuity date.
9.2 ANNUITY OPTIONS. If you have not chose an annuity option.
Option 4 will apply with a 10-year guarantee period. You may change options
only up to 30 days prior to the annuity date. You may choose one option for
the Fixed Account and one option for the Variable Account. An option not set
forth in the contract may be chosen if acceptable to us.
9.3 MINIMUM ANNUITY PAYMENT. If the net contract value to be
applied at the annuity date is less than $5,000, we may pay such amount in a
lump sum. If any payment would be less than $50, we may change the frequency
so payments are at least $50 each.
10. VARIABLE ACCOUNT ANNUITY PAYMENTS
10.1 FIRST VARIABLE ANNUITY PAYMENT: Applicable premium taxes
imposed by a state or other government will be deducted from the value of your
interest in the Variable Account at the annuity date. The remaining value will
be applied to the annuity table for the option chosen. Only Options 2, 3, 4
and 6 are available in the Variable Account. The annuity tables show the
amount of the first payment for each $1,000 so applied, according to the age
and sex at the annuity date. The tables are based on the 1983 Table "a" for
Individual Annuity Valuation with interest at 4%.
10.2 NUMBER OF VARIABLE ANNUITY UNITS: The number of units for
each sub-account you have chose is:
The amount of the first monthly variable annuity payment
attributable to that sub-account;
Divided by
- 12 -
<PAGE> 15
The value of an Annuity Unit for the sub-account as of the
annuity date.
The number is fixed except for adjustments for sub-account, transfers.
Adjustments will be made as of the valuation date in which we receive all
requirements for the transfer, as appropriate.
10.3 VALUE OF EACH ANNUITY UNIT: For each sub-account, the value
of an Annuity Unit was arbitrarily set at $10 when the sub-account was
established. The value may increase or decrease from one valuation period to
the next. For any valuation period that value is:
The value of an Annuity Unit for the last prior valuation
period;
Multiplied by
The Net Investment Factor for that sub-account for the current
valuation period;
Multiplied by
An interest factor to neutralize the assumed investment rate
of 4% built into the annuity tables.
10.4 SUBSEQUENT VARIABLE ANNUITY PAYMENTS: Payments after the
first will vary in amount according to the investment performance of the
sub-account of sub-accounts you have chosen. The amount may change from month
to month. The amount may change from month to month. The amount of each
subsequent payment is the sum of:
The number of Annuity Units for each sub-account;
Multiplied by
The value of an Annuity Unit for that sub-account for the
valuation period in which payment is due.
We guarantee that subsequent annuity payments will not be affected by
variations in our expenses or mortality experience.
11. FIXED ACCOUNT ANNUITY PAYMENTS
11.1 AMOUNT OF ANNUITY PAYMENTS: Applicable premium taxes imposed
by a state or other government will e deducted from your fixed Account value at
the annuity date. The remaining value will be applied to the annuity option
chose at our current annuity rates, which will be furnished on request. The
rates will assume interest of not less than 4%. They will not be less
- 13 -
<PAGE> 16
favorable than those shown in the annuity tables in this contract. The tables
show the minimum guaranteed amount of each monthly payment for each $1,000 so
applied, according to age and sex at the annuity date. The tables are based on
the 1983 Table "a" for Individual Annuity Valuation with interest at 4%.
12. ANNUITY OPTIONS
(*Only Options 2, 3, 4 and 6 are available in the Variable Account)
12.1 OPTION 1 - PAYMENTS OF A FIXED AMOUNT: Equal payments in the
amount chosen will be made until your Fixed Account value is exhausted. The
term over which such payments are made must be at least 5 years.
*12.2 OPTION 2 - PAYMENTS FOR A FIXED PERIOD. Payments will be made
for the period chosen. The period must be at least 5 years. With respect to
the Variable Account only, this Option 2 is not available until 3 years after
the last premium payment is made for this contract, and you may at any time
choose to receive in a lump sum the present value of the remaining payments
commuted at 6.5% interest.
*12.3 OPTION 3 - LIFE ANNUITY: Payments will be made for the life
of the Annuitant. Payments will cease with the last payment due prior to the
Annuitant's death.
*12.4 OPTION 4 - LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 or 20
YEARS: Payments will be made for the guaranteed period chose (10 or 20 years)
and as long thereafter as the Annuitant lives.
12.5 OPTION 5 - LIFE WITH GUARANTEED RETURN OF FIXED ACCOUNT VALUE:
Payments will be made until the sum of the annuity payments equals the Fixed
Account value at the annuity date, and as long thereafter as the Annuitant
lives.
*12.6 OPTION 6 - JOINT AND SURVIVOR LIFE ANNUITY: Payments will be
made during the lifetimes of the Annuitant and a designated second person. The
amount of such payments will not change by reason of the death of the first
joint annuitant to die.
12.7 OPTION 7 - QUALIFIED PLAN OPTION: This option is available
only for Qualified Plans. Annuity payments may be based on (a) the life
expectancy of the Annuitant, (b) the joint life expectancy of the Annuitant and
his or her spouse, or (c) the life expectancy of the surviving spouse if the
Annuitant dies before the annuity date. Payments will be made annually. Each
annual payment will be qual to your fixed Account value on that January 1
divided by the applicable current life expectancy, as
- 14 -
<PAGE> 17
defined by Internal Revenue Service regulations. Each subsequent payment will
be made on the anniversary of the annuity date. Interest will be credited at
our current rate for this option. The rate will not be less than 4%. On death
of the measuring life or lives prior to full distribution of the Fixed Account
value, the remaining Fixed Account value will be paid to the beneficiary in a
lump sum.
12.8 DEATH OF ANNUITANT: On death of the Annuitant while
guaranteed amounts remain unpaid under Option 1, 2, 4 or 5, the beneficiary may
choose either:
(a) To have the payments continued for the amount or
period guaranteed; or
(b) To receive the present value of the remaining
guaranteed payments in a lump sum.
If a beneficiary dies while guaranteed amounts remain unpaid, the present value
will be paid in a lump sum to the beneficiary's estate.
Present values will be computed at the interest rate that was used to compute
the amount of the initial annuity payment.
12.9 PAYMENT: Except for Option 7, payment will be made on the
first day of each month starting with the annuity date, but prior to the
annuity date you may choose a less frequent payment interval instead. The
amount of each payment on an annual, semiannual or quarterly basis will be not
less than the monthly payment computed from the annuity tables in this contract
multiplied by the appropriate factor:
<TABLE>
<CAPTION>
Annual Semiannual Quarterly
------ ---------- ---------
<S> <C> <C>
11,787 5.951 2.990
</TABLE>
- 15 -
<PAGE> 18
13. ANNUITY OPTION TABLES
<TABLE>
<CAPTION>
MINIMUM FIRST MONTHLY ANNUITY PAYMENT FOR EACH $1,000 APPLIED UNDER OPTION
OPTION 2 (Payments for a Fixed Period)
------------------------------------------------------------------------------------------------
Years Each Years Each Years Each
Payable Payment Payable Payment Payable Payment
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6 15.56 11 9.31 16 7.00
7 13.59 12 8.69 17 6.71
8 12.12 13 8.17 18 6.44
9 10.97 14 7.72 19 6.21
10 10.06 15 7.34 20 6.00
------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OPTION 3 (Life Annuity), OPTION 4 (Life Annuity with 10 or 20 Years Guaranteed)
and OPTION 5 (Return of Fixed Account Value Guaranteed)
--------------------------------------------------------------------------------------------------------------------------
*Adjusted Life 10 Years 20 Years Return of *Adjusted Life 10 Years 20 Years Return of
Male Age Annuity Guaranteed Guaranteed Account Value Female Age Annuity Guaranteed Guaranteed Account Value
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56 5.39 5.29 5.00 5.13 56 4.92 4.87 4.73 4.77
57 5.49 5.38 5.06 5.21 57 5.00 4.95 4.79 4.85
58 5.61 5.48 5.12 5.30 58 5.09 5.03 4.85 4.92
59 5.73 5.59 5.18 5.40 59 5.19 5.12 4.91 5.00
60 5.86 5.70 5.24 5.50 60 5.29 5.22 4.98 5.09
61 6.00 5.82 5.31 5.60 61 5.40 5.32 5.05 5.18
62 6.15 5.95 5.37 5.72 62 5.52 5.42 5.11 5.27
63 6.32 6.08 5.43 5.83 63 5.65 5.53 5.18 5.37
64 6.49 6.21 5.48 5.96 64 5.78 5.65 5.25 5.48
65 6.68 6.35 5.54 6.09 65 5.92 5.77 5.32 5.59
66 6.88 8.50 5.59 6.23 66 6.08 5.90 5.39 5.71
67 7.09 6.65 5.64 6.38 67 6.24 6.04 5.45 5.83
68 7.31 6.81 5.69 6.53 68 6.42 6.19 5.51 5.97
69 7.56 6.97 5.73 6.69 69 6.61 6.34 5.58 6.11
70 7.82 7.14 5.77 6.86 70 6.81 6.50 5.63 6.26
71 8.09 7.31 5.81 7.04 71 7.04 6.67 5.69 6.42
72 8.39 7.48 5.84 7.23 72 7.28 6.84 5.73 6.59
73 9.71 7.65 5.87 7.43 73 7.54 7.02 5.78 6.77
74 9.05 7.83 5.89 7.64 74 7.83 7.21 5.82 6.97
75 9.41 8.00 5.91 7.86 75 8.14 7.40 5.85 7.17
76 9.81 8.17 5.93 8.10 76 8.47 7.60 5.88 7.39
77 10.23 8.34 5.95 8.34 77 8.83 7.80 5.91 7.62
78 10.68 8.50 5.96 8.60 78 9.23 7.99 5.93 7.86
79 11.16 8.66 5.97 8.87 79 9.65 8.19 5.94 8.13
80 11.68 8.81 5.98 9.16 80 10.12 8.38 5.96 8.40
81 12.23 8.95 5.99 9.45 81 10.62 8.57 5.97 8.69
82 12.81 9.09 5.99 9.76 82 11.16 8.74 5.98 9.01
83 13.44 9.21 5.99 10.09 83 11.76 8.91 5.99 9.34
84 14.09 9.32 6.00 10.44 84 12.39 9.06 5.99 9.68
85 14.79 9.43 6.00 10.78 85 13.08 9.21 6.00 10.04
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OPTION 6 (Joint and Survivor Life Annuity)
- -----------------------------------------------------------------------------------------------------------------------------
*Adjusted *Adjusted Male Age *Adjusted
Female --------------------------------------------------------------------------------------------------- Female
Age 50 55 60 65 70 75 80 85 Age
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 4.19 4.27 4.34 4.39 4.43 4.45 4.47 4.48 50
55 4.32 4.45 4.55 4.64 4.71 4.76 4.79 4.81 55
60 4.45 4.62 4.79 4.94 5.06 5.14 5.20 5.24 60
65 4.56 4.79 5.03 5.27 5.47 5.63 5.74 5.82 65
70 4.65 4.94 5.27 5.61 5.94 6.22 6.44 6.59 70
75 4.73 5.06 5.46 5.93 6.43 6.90 7.31 7.61 75
80 4.78 5.15 5.62 6.20 6.87 7.60 8.30 8.89 80
85 4.81 5.21 5.72 6.39 7.23 8.22 9.29 10.32 85
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Information for ages not shown will be furnished on request.
*"Adjusted Age" means attained age at last birthday adjusted as follows:
<TABLE>
<CAPTION>
Annuity Date Adjusted Age
------------ ------------
<S> <C>
Before 1990 Actual age
1990 - 1999 Subtract 1 year from actual age
2000 - 2009 Subtract 2 years from actual age
2010 - 2019 Subtract 3 years from actual age
2020 - 2029 Subtract 4 years from actual
2030 and after Subtract 5 years from actual age
</TABLE>
- 16 -
<PAGE> 19
Family Life Insurance Company
Park Place, Seattle, Washington 98101
Individual Variable Annuity Contract
Flexible Premiums - Nonparticipating
- 17 -
<PAGE> 1
EXHIBIT (4)(c)
FAMILY LIFE INSURANCE COMPANY
QUALIFIED PLAN ENDORSEMENT
With respect to contract values allocable to purchase payments made on or after
August 1, 1983, annuity payments will be determined according to the following
tables, instead of the tables set forth in the contract to which this
endorsement is attached:
ANNUITY OPTION TABLES
FIRST MONTHLY VARIABLE ANNUITY PAYMENT FOR EACH
$1,000 APPLIED UNDER OPTION
OPTION 1 (Life Annuity) and OPTION 3
(Life Annuity with 10 or 20 Years Guaranteed)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age Life 10 Years 20 Years Age Life 10 Years 20 Years
Annuity Guaranteed Guaranteed Annuity Guaranteed Guaranteed
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 4.80 4.75 4.60 69 7.30 6.82 5.72
51 4.87 4.82 4.66
52 4.96 4.89 4.71 70 7.54 6.99 5.77
53 5.03 4.97 4.77 71 7.81 7.17 5.81
54 5.12 5.04 4.82 72 8.10 7.35 5.85
73 8.41 7.54 5.88
55 5.21 5.13 4.88 74 8.75 7.73 5.91
56 5.31 5.21 4.94
57 5.41 5.30 5.00 75 9.12 7.92 5.93
58 5.52 5.40 5.07 76 9.51 8.12 5.95
59 5.64 5.50 5.13 77 9.95 8.31 5.96
78 10.42 8.50 5.97
60 5.76 5.60 5.19 79 10.93 8.69 5.98
61 5.88 5.71 5.26
62 6.02 5.83 5.32 80 11.49 8.86 5.99
63 6.17 5.95 5.38 81 12.10 9.03 5.99
64 6.32 6.08 5.45 82 12.76 9.19 6.00
83 13.49 9.34 6.00
65 6.49 6.21 5.51 84 14.28 9.47 6.00
66 6.67 6.35 5.58
67 6.88 6.60 5.62 85 15.15 9.58 6.00
68 7.07 6.66 5.67
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
OPTION 2 (Joint and Survivor Life Annuity)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Age of Joint Annuitant Age of
Annuitant -------------------------------------------------------------------------------------- Annuitant
50 55 60 65 70 75 80 85
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 4.27 4.38 4.49 4.55 4.65 4.70 4.74 4.77 50
55 4.39 4.55 4.70 4.84 4.96 5.05 5.12 5.16 55
60 4.49 4.70 4.92 5.13 5.32 5.47 5.58 5.66 60
65 4.58 4.84 5.13 5.43 5.73 5.98 6.18 6.31 65
70 4.65 4.96 5.32 5.73 6.16 6.58 6.93 7.19 70
75 4.70 5.05 5.47 5.98 6.58 7.23 7.85 8.35 75
80 4.74 5.12 5.58 6.18 6.93 7.85 8.84 9.77 80
85 4.77 5.16 5.66 6.31 7.19 8.35 9.77 11.31 85
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
"Age means attained age at last birthday. Information for ages not shown will
be furnished on request.
The above tables are based on the combined male/female 1971 Individual Annuity
Mortality Table (set back one year) with interest at 4%. The annuity tables
set forth in the contract will continue to apply to contract values allocable
to purchase payments made prior to August 1, 1983.
FAMILY LIFE INSURANCE COMPANY
/s/ D. MCKAY SNOW
-----------------------------
D. McKay Snow
Secretary
- 1 -
<PAGE> 2
FAMILY LIFE LIFE INSURANCE COMPANY
Tax-Sheltered Annuity Endorsement - Employer Contributions
The contract to which this endorsement is attached is amended
as follows:
Any withdrawal of employer contributions to this
contract may be made only with the written consent of
the employer.
This endorsement controls over any contrary provisions of the
contract.
FAMILY LIFE INSURANCE COMPANY
By /s/ D. MCKAY SNOW
---------------------------
D. McKay Snow
Secretary
- 2 -
<PAGE> 3
FAMILY LIFE INSURANCE COMPANY
ANNUITY CONTRACT ENDORSEMENT
As required by Section 72(s) of the Internal Revenue Code as added by the Tax
Reform Act of 1984, the contract is amended as follows:
1. The following provision is added to the contract:
If the Owner is not also the Annuitant, you may, if you desire, name
one beneficiary to receive payment on death of the Owner ("Owner's
Beneficiary") and a different beneficiary to receive payment on death
of the Annuitant ("Annuitant's Beneficiary"). If the Owner is also
the Annuitant, then the Owner's Beneficiary and the Annuitant's
Beneficiary must be the same person.
2. The "PROVISIONS ON PAYMENT AT DEATH" of the contract are deleted and
replaced by the following provisions:
PROVISIONS ON PAYMENT AT DEATH
1. DEATH OF OWNER
(Including an Annuitant Who is Also the Owner)
1.1 DEATH PRIOR TO ANNUITY DATE: On death of the Owner prior to
the annuity date, we will pay to the Owner's Beneficiary the death
benefit representing the Owner's interest in the contract, unless
Section 1.3 is chosen. The death benefit is the greater of:
(1) The sum of all your purchase payments, adjusted for
withdrawals and contract transfers; or
(2) The contract value as of the date we receive such
proof at our home office.
Payment will be in a lump sum unless Section 1.2 is chosen. The
Internal Revenue Code requires that payment be made no later than 5
years after the date of the Owner's death, except as stated in
Sections 1.2 and 1.3 (Sections 1.2 and 1.3 are not available if this
contract contains an IRA Endorsement).
1.2 ANNUITY OPTION: If the Owner's Beneficiary is the surviving
spouse of the Owner, he or she may choose to receive payments under
any of the annuity options of this contract. For any other Owner's
Beneficiary, only those options are available that provide for
complete distribution of the Owner's interest in the contract:
(1) Within five years of the date of the Owner's death;
(2) Over the lifetime of the Owner's Beneficiary; or
(3) Over a period that does not exceed the life
expectancy of the Owner's Beneficiary, as defined by
Internal Revenue Service regulations.
Subparagraphs (2) and (3) apply only to individuals, and such payments
must start within one year of the date of the Owner's death.
1.3 CONTRACT CONTINUATION OPTION: If the surviving spouse of the
Owner is the Owner's Beneficiary and is also the contingent owner, and
if the deceased Owner was not the Annuitant, such spouse may choose to
continue this contract in force on the same terms as before the
Owner's death.
1.4 ROLLOVER OPTION: If all or part of a lump sum payment under
Section 1.1 is used within 30 days as the purchase payment for a new
contract issued to the Owner's Beneficiary on the same form as this
contract,then the new contract will be deemed a continuation of this
contract in computing withdrawal charges under the new contract.
1.5 DEATH AFTER ANNUITY DATE: On death of the Owner after the
annuity date, any guaranteed amounts remaining unpaid will continue to
be paid pursuant to the annuity option in force at the date of death.
- 3 -
<PAGE> 4
2. DEATH OF ANNUITANT WHO IS NOT THE OWNER
2.1 DEATH BEFORE THE ANNUITY DATE: On death prior to the annuity
date of an Annuitant who is not the Owner, we will pay the contract
value to the Annuitant's Beneficiary. The contract value will be
determined as of the date we receive due proof of death at our home
office. Payment will be in a lump sum unless one of the annuity
options is chosen.
2.2 ROLLOVER OPTION: If all or part of a lump sum payment under
Section 2.1 is used within 30 days as the purchase payment for a new
contract issued to the Annuitant's Beneficiary on the same form as
this contract, then the new contract will be deemed a continuation of
this contract in computing withdrawal charges under the new contract.
2.3 DEATH AFTER THE ANNUITY DATE: On death of the Annuitant after
the annuity date, any guaranteed amounts remaining unpaid will
continue to be paid pursuant to the annuity option in force at the
date of death.
3. DEATH OF BOTH OWNER AND ANNUITANT
3.1 ONE PAYMENT ONLY: Payment will be made pursuant to either
Section 1.1 or 2.1, but not both, according to whichever first becomes
applicable.
3.2 SIMULTANEOUS DEATH: If the Owner is not also the Annuitant,
then in the event of death of both the Owner and the Annuitant under
circumstances in which it cannot be determined who died first, payment
will be made 50% to the Owner's Beneficiary pursuant to Section 1.1
and 50% to the Annuitant's Beneficiary pursuant to Section 2.1.
3. Section 1 of the "GENERAL PROVISIONS" of the contract is amended to
read:
1. BENEFICIARY: A beneficiary is the person designated to
receive:
(1) Payment on death of the Owner or the Annuitant prior
to the annuity date; or
(2) Guaranteed annuity payments, if any, on death of the
payee on or after the annuity date.
You may change the Owner's Beneficiary while the Owner is alive. You
may change the Annuitant's Beneficiary while the Annuitant is alive.
You may name a beneficiary irrevocably. If you do so, a change can be
made later only with such beneficiary's written consent.
The estate of heirs of a beneficiary who dies before payment is due
have no rights under this contract. If no beneficiary survives when
payment is due, payment will be made to the Owner or the Owner's
estate.
This amendment controls over any contrary provision of the contract.
FAMILY LIFE INSURANCE COMPANY
By /s/ D. MCKAY SNOW
---------------------------
D. McKay Snow
Secretary
- 4 -
<PAGE> 5
FAMILY LIFE INSURANCE COMPANY
QUALIFIED RETIREMENT PLAN ENDORSEMENT - VARIABLE ANNUITY
The contract to which this endorsement is attached is amended as follows:
1. This Contract was issued to a custodian or trustee of a qualified
retirement plan. Such custodian or trustee is the Owner and
beneficiary unless the Contract is distributed by the custodian or
trustee to the Annuitant. Upon any such distribution, the Annuitant
becomes the Owner. After such distribution the Contract is
nontransferable and may not be sold, assigned, discounted or pledged
as security for a loan or a security for any other obligation, nor may
a Contingent Owner be designated. Annuity payments under the Contract
cannot be surrendered, commuted, assigned, encumbered or anticipated
in any way.
2. The annuity date may not be later than the first day of the last month
of the taxable year in which the Annuitant attains age 70 1/2 (unless
the Annuitant is then still a covered employee of the employer
maintaining the plan and is not then a "key employee" under a
"top-heavy" plan as defined in Section 416 of the Internal Revenue
Code).
3. If "OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY" is chosen, the second
person must be the spouse of the Annuitant.
4. Under "OPTION 3 - LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20
YEARS," only the 10 year guaranteed period is available.
5. The rollover option and the annuity options of the Provisions on
Payment as Death are not available to the beneficiary on the
Annuitant's death. The Annuitant's entire interest in the Contract
must be distributed within 5 years after the Annuitant's death
(subject to the provisions of Option 3 if such option is in force
prior to the Annuitant's death).
This endorsement controls over any contrary provision of the Contract.
FAMILY LIFE INSURANCE COMPANY
By: /s/ D. MCKAY SNOW
---------------------------------
D. McKay Snow
Secretary
- 5 -
<PAGE> 6
FAMILY LIFE INSURANCE COMPANY
Individual Retirement Annuity Endorsement -- Variable Annuity
The Contract to which this endorsement is attached is amended as follows:
1. The Annuitant is the Owner. The Contract is established for the
exclusive benefit of the Owner or his or her beneficiaries. The
Contract is nontransferable and may not be sold, assigned, discounted
or pledged as security for a loan or as security for any other
obligation, nor may a Contingent Owner be designated. The annuity
payable under this contract cannot be surrendered, commuted, assigned,
encumbered or anticipated in any way. The interest of the Owner is
nonforfeitable.
2. For any calendar year, purchase payments under the Contract may not
exceed the less of $2,000 or 100% of compensation, except as permitted
by sections 402(a)(5), 402(a)(4), 403(b)(8), 405(d)(3). 408(d)(3) or
409(b)(3)(C) of the Internal Revenue Code with respect to rollover
contributions. In the case of a spousal IRA, the maximum contribution
may not exceed the lesser of $2,250 or 100% of compensation. But no
more than $2,000 may be contributed to either spouse's IRA.
3. The annuity date may not be later than the first day of the last month
of the taxable year in which Annuitant attains age 70 1/2.
4. If "OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY" is chosen, the second
person must be the spouse of the Annuitant.
5. Under "OPTION 3- LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20
YEARS," only the 10 year guaranteed period is available to you or your
beneficiary.
6. The Rollover Option and the annuity option: of the Provisions on
Payment at Death are not available. Your entire interest in the
Contract must be distributed within 5 years after your death.
7. Except in the case of your death or disability or attainment of age 59
1/2, before distributing any amount from the Contract, we must receive
from you a signed declaration of your intention as to the disposition
of the amount distributed.
8. You may revoke the Contract by mailing or delivering, at your option,
a written notice of revocation on or before that tenth day after your
receipt of the Contract. Upon revocation you are entitled to a return
of the entire purchase payment without adjustment for such items as
sales commissions, administrative expenses or fluctuation in market
value. If you mail the notice, it shall be deemed mailed on the date
of the postmark if deposited in the mail in the United States in an
envelope or other appropriate wrapper, first class postage prepaid and
properly registration.
9. Any refund of premiums (other than those attributable to excess
contributions) will be applied before the close of the calendar year
following the year of the refund toward the payment of future premiums
or the purchase of additional benefits.
10. At our option, we may either accept additional future payments or
terminate the Contract by payment of the contract value if no purchase
payments have been received for two full consecutive policy years and
the paid-up annuity benefit at maturity would be less than $20 per
month.
11. We have the limited right to amend this contract at any time without
your consent to conform the contract to changes in the Internal
Revenue Code or in regulations or rulings of the Internal Revenue
Service relating to Individual Retirement Annuity contracts. We will
promptly provide you with a copy of any such amendment.
12. The minimum purchase payment for this Contract is $10.
This endorsement controls over any contrary provision of the Contract.
FAMILY LIFE INSURANCE COMPANY
By /s/ D. MCKAY SNOW
---------------------------
D. McKay Snow
Secretary
- 6 -
<PAGE> 7
FAMILY LIFE INSURANCE COMPANY
PUBLIC EMPLOYEE DEFERRED COMPENSATION PLAN ENDORSEMENT
The Contract to which this endorsement is attached is amended
as follows:
1. This Contract is issued to an employer defined in
Section 457 of the Internal Revenue Code. Such
employer is the Owner and beneficiary of the
Contract. The Annuitant has no vested rights in the
Contract.
2. The minimum purchase payment for this Contract is
$10.
3. If a JOINT AND SURVIVOR LIFE ANNUITY is chosen, the
second person must be the spouse of the Annuitant.
This endorsement controls over any contrary provision of the
Contract.
FAMILY LIFE INSURANCE COMPANY
By /s/ D. MCKAY SNOW
--------------------------
D. McKay Snow
- 7 -
<PAGE> 8
FAMILY LIFE INSURANCE COMPANY
INDIVIDUAL RETIREMENT ACCOUNT ENDORSEMENT - VARIABLE ANNUITY
This contract is amended as follows:
1. This contract was issued to a custodian or trustee of an Individual
Retirement Account. Such custodian or trustee is the Owner and
beneficiary. Annuity payments under the contract cannot be
surrendered, commuted, assigned, encumbered or anticipated in any way.
The interest of the Annuitant is nonforfeitable.
2. The minimum purchase payment for the contract is $10.
3. The annuity date may not be later than the first day of the last month
of the taxable year in which the Annuitant attains age 70 1/2.
4. If OPTION 2 - JOINT AND SURVIVOR LIFE ANNUITY is chosen, the second
person must be the spouse of the Annuitant. If the Annuitant dies
before the annuity date, Option 2 is not available to the beneficiary.
5. Under OPTION 3 - LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 or 20
YEARS, only the 10 year guaranteed period is available.
6. The rollover option and the annuity options of the Provisions on
Payment at Death are not available on death of the Annuitant.
7. We have the limited right to amend this contract at any time without
your consent to conform the contract to changes in the Internal
Revenue Code or in regulations or rulings of the Internal Revenue
Service relating to Individual Retirement Accounts, subject to the
approval of the insurance regulator of our state. We will promptly
provide you with a copy of any such amendment.
This endorsement controls over any contrary provision of the contract.
FAMILY LIFE INSURANCE COMPANY
By /s/ D. MCKAY SNOW
---------------------------
D. McKay Snow
Secretary
- 8 -
<PAGE> 9
FAMILY LIFE INSURANCE COMPANY
QUALIFIED PLAN ENDORSEMENT
The following tables are substituted for the tables set forth in the contract
to which this endorsement is attached:
ANNUITY OPTION TABLES
FIRST MONTHLY VARIABLE ANNUITY PAYMENT FOR EACH
$1,000 APPLIED UNDER OPTION
OPTION 1 (Life Annuity) and OPTION 3
(Life Annuity with 10 or 20 Years Guaranteed)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age Life 10 Years 20 Years Age Life 10 Years 20 Years
Annuity Guaranteed Guaranteed Annuity Guaranteed Guaranteed
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 4.80 4.75 4.60 69 7.30 6.82 5.72
51 4.87 4.82 4.66
52 4.96 4.89 4.71 70 7.54 6.99 5.77
53 5.03 4.97 4.77 71 7.81 7.17 5.81
54 5.12 5.04 4.82 72 8.10 7.35 5.85
73 8.41 7.54 5.88
55 5.21 5.13 4.88 74 8.75 7.73 5.91
56 5.31 5.21 4.94
57 5.41 5.30 5.00 75 9.12 7.92 5.93
58 5.52 5.40 5.07 76 9.51 8.12 5.95
59 5.64 5.50 5.13 77 9.95 8.31 5.96
78 10.42 8.50 5.97
60 5.76 5.60 5.19 79 10.93 8.69 5.98
61 5.88 5.71 5.26
62 6.02 5.83 5.32 80 11.49 8.86 5.99
63 6.17 5.95 5.38 81 12.10 9.03 5.99
64 6.32 6.08 5.45 82 12.76 9.19 6.00
83 13.49 9.34 6.00
65 6.49 6.21 5.51 84 14.28 9.47 6.00
66 6.67 6.35 5.58
67 6.88 6.60 5.62 85 15.15 9.58 6.00
68 7.07 6.66 5.67
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
OPTION 2 (Joint and Survivor Life Annuity)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Age of Age of Joint Annuitant Age of
Annuitant ------------------------------------------------------------------------------------------ Annuitant
50 55 60 65 70 75 80 85
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 4.27 4.39 4.49 4.58 4.65 4.70 4.74 4.77 50
55 4.39 4.55 4.70 4.84 4.96 5.05 5.12 5.16 55
60 4.49 4.70 4.92 5.13 5.32 5.47 5.58 5.66 60
65 4.58 4.84 5.13 5.43 5.73 5.98 6.18 6.31 65
70 4.65 4.96 5.32 5.73 6.16 6.58 6.93 7.19 70
75 4.70 5.05 5.47 5.98 6.58 7.23 7.85 8.35 75
80 4.74 5.12 5.58 6.18 6.93 7.85 8.84 9.77 80
85 4.77 5.16 5.66 6.31 7.19 8.35 9.77 11.31 85
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The above tables are based on the combined male/female 1971 Individual Annuity
Mortality Table (set back one year) with interest at 4%.
FAMILY LIFE INSURANCE COMPANY
/s/ D. MCKAY SNOW
----------------------------
D. McKay Snow
Secretary
- 9 -
<PAGE> 1
EXHIBIT (4)(d)
(To be utilized for current
variable annuity contracts.)
ASSUMPTION CERTIFICATE
Policy or Contract Number:______________________________
This is to certify that as of 12:01 a.m. (at the address of the owner
of the above captioned policy or contract) on ________, 19___, (Name of
Reinsurer) , a _______________ stock insurance company, hereby assumes all
liability for performance of the terms of the policy or contract identified
above and issued by FAMILY LIFE INSURANCE COMPANY, a Washington stock insurance
company, the same as if it had been originally issued by (Name of Reinsurer)
.
The Variable Account mortality risk charge described in Section 4.3 of
the contract, which on an annual basis equals 0.8% of the daily net asset value
of the Variable Account, is modified so that a portion of such charge,
equivalent on an annual basis to 0.05% of such daily net asset value, will be
for distribution expenses and the remainder, equivalent on an annual basis to
0.75% of such daily net asset value, will be for mortality guarantees made
under the contract. This change has no impact, favorable or unfavorable, on
your contract value.
Signed at the executive office of (Name of Reinsurer) at
---------------------------
________________________.
-------------------------------
, President
-------------------------------
, Secretary
IMPORTANT
This certificate becomes a part of your policy and should be attached thereto.
All correspondence and inquiries should be directed to (Name of Reinsurer) ,
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
(address).
- --------------
Form No.________
<PAGE> 1
EXHIBIT (4)(e)
(To be utilized for current
variable annuity contracts.)
ASSUMPTION CERTIFICATE
- -------------------------
- -------------------------
- -------------------------
Policy Number:
-------------------------------
This is to certify that as of 12:01 a.m. (standard time at the address
of the owner of the above captioned policy or contract) on
_____________________, 1991, MERRILL LYNCH LIFE INSURANCE COMPANY, a Washington
stock insurance company, hereby assumes all liability for performance of the
terms of the policy identified above and issued by FAMILY LIFE INSURANCE
COMPANY, a Washington stock insurance company, the same as if it had been
originally issued by MERRILL LYNCH LIFE INSURANCE COMPANY.
The Variable Account mortality risk charge described in Section 4.3 of
the contract, which on an annual basis equals 0.8% of the daily net asset
value of the Variable Account, is modified so that a portion of such charge,
equivalent on an annual basis to 0.05% of such daily net asset value, will be
for distribution expenses and the remainder, equivalent on an annual basis to
0.75% of such daily net asset value, will be for mortality guarantees made
under the contract. This change has no impact, favorable or unfavorable, on
your contract value.
You have the right to reject the assumption and remain with FAMILY
LIFE INSURANCE COMPANY by notifying either FAMILY LIFE INSURANCE COMPANY or
MERRILL LYNCH LIFE INSURANCE COMPANY in writing of such rejection within 10
days of the date of the mailing of this Assumption Certificate.
With respect to the Policyholders who are obligated to make further
periodic premium payments, the Policyholder, by making the next premium
payment, consents to the assumption by MERRILL LYNCH LIFE INSURANCE COMPANY of
all of the obligations and liability of FAMILY LIFE INSURANCE COMPANY. Premium
notices, as required by law or by contract, will be sent by MERRILL LYNCH LIFE
INSURANCE COMPANY and all premiums or annuity considerations now or hereafter
due on this Policy are payable to MERRILL LYNCH LIFE INSURANCE COMPANY at its
Policyholder Service Center, 4655 Salisbury Road, Jacksonville, Florida 32256.
- 1 -
<PAGE> 2
Signed at the executive offices of MERRILL LYNCH LIFE INSURANCE
COMPANY, at Plainsboro, New Jersey.
---------------------------------
, President
---------------------------------
, Secretary
IMPORTANT
This certificate becomes a part of your policy and should be attached thereto.
All correspondence and inquiries should be directed to Merrill Lynch Life
Insurance Company, Policyholder Service Center, 4655 Salisbury Road,
Jacksonville, Florida 32256.
ML-VAC1 IL (4/91)
- 2 -
<PAGE> 1
EXHIBIT (4)(f)
(To be utilized for current
variable annuity contracts)
ASSUMPTION CERTIFICATE
Policy or Contract Number:
---------------------------------
This is to certify that as of 12:01 a.m. (standard time at the address
of the owner of the above captioned policy or contract) on
_____________________, 19___, MERRILL LYNCH LIFE INSURANCE COMPANY, a
Washington stock insurance company, hereby assumes all liability for
performance of the terms of the policy or contract identified above and issued
by FAMILY LIFE INSURANCE COMPANY, a Washington stock insurance company, the
same as if it had been originally issued by MERRILL LYNCH LIFE INSURANCE
COMPANY.
The Variable Account mortality risk charge described in Section 4.3 of
the contract, which on an annual basis equals 0.8% of the daily net asset
value of the Variable Account, is modified so that a portion of such charge,
equivalent on an annual basis to 0.05% of such daily net asset value, will be
for distribution expenses and the remainder, equivalent on an annual basis to
0.75% of such daily net asset value, will be for mortality guarantees made
under the contract. This change has no impact, favorable or unfavorable, on
your contract value.
You may reject this assumption. If you wish to reject this
reinsurance, you have sixty (60) days after receipt of this notice to file
written notice with Merrill Lynch Life Insurance Company at the following
address:
Merrill Lynch Life Insurance Company
Policyholder Service Center
4655 Salisbury Road
Jacksonville, Florida 32256
If you reject the assumption, your old policy will remain in effect with Family
Life Insurance Company and you should continue to pay premiums to Family Life
Insurance Company unless you apply for cash surrender. Upon application,
Family Life Insurance Company will refund to you any unearned premium and/or
cash surrender value you are entitled to, less any loan or lien on policy, and
less any surrender charge.
- 1 -
<PAGE> 2
Signed at the executive offices of MERRILL LYNCH LIFE INSURANCE
COMPANY, at Plainsboro, New Jersey.
---------------------------------
President
---------------------------------
Secretary
STAMP
STATE OF TENNESSEE
1991
ML-VAC1-TN (3/91)
- 2 -
<PAGE> 3
IMPORTANT
This certificate becomes a part of your policy and should be attached thereto.
All correspondence and inquiries should be directed to Merrill Lynch Life
Insurance Company, Policyholder Service Center, 4655 Salisbury Road,
Jacksonville, Florida 23356.
ML-VAC1-TN (3/91)
- 3 -
<PAGE> 1
EXHIBIT (4)(g)
(To be utilized for current
variable annuity contracts.)
ASSUMPTION CERTIFICATE
Policy or Contract Number:
-------------------------------------------
This is to certify that as of 12:01 a.m. (at the address of the owner
of the above captioned policy or contract) on _________, 19___, (Name of
Reinsurer) , a ________________ stock insurance company, hereby assumes all
liability for performance of the terms of the policy or contract identified
above and issued by FAMILY LIFE INSURANCE COMPANY, a Washington stock insurance
company, the same as if it had been originally issued by (Name of Reinsurer)
.
The Variable Account mortality risk charge described in Section 4.3 of
the contract, which on an annual basis equals 0.8% of the daily net asset value
of the Variable Account, is modified so that a portion of such charge,
equivalent on an annual basis to 0.05% of such daily net asset value, will be
for distribution expenses and the remainder, equivalent on an annual basis to
0.75% of such daily net asset value, will be for mortality guarantees made
under the contract. This change has no impact, favorable or unfavorable, on
your contract value.
Signed at the executive office of (Name of Reinsurer) at
--------------------------
________________________.
-------------------------
, President
-------------------------
, Secretary
IMPORTANT
This certificate becomes a part of your policy and should be attached thereto.
All correspondence and inquiries should be directed to (Name of Reinsurer) ,
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
(address).
- --------------
Form No.________
<PAGE> 2
MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock, Arkansas
COMPANY NAME CHANGE AND
HOME OFFICE ADDRESS CHANGE
ENDORSEMENT
Effective October 1, 1991, Tandem Insurance Group, Inc. merged into
Merrill Lynch Life Insurance Company. Merrill Lynch Life Insurance Company is
the surviving company. Accordingly, all references in the policy to the name
Tandem Insurance Group, Inc. are replaced with the name Merrill lynch Life
Insurance Company as of such date. Merrill Lynch Life Insurance Company is an
Arkansas corporation. Therefore, all references in the policy to Illinois are
changed to Arkansas. Also, the home office address of Chicago, Illinois is
changed to Little Rock, Arkansas.
For all policies other than variable life insurance policies, the
address to which you should communicate with the Company remains:
Merrill Lynch Life Insurance Company
Administrative Office:
P.O. Box 44223
Jacksonville, Florida 32231-4223
1-800-535-5549
For all variable life insurance policies, the address to which you
should communicate with the Company remains:
Merrill Lynch Life Insurance Company
Service Center
P.O. Box 9025
Springfield, Massachusetts 01102-9025
-----------------------------
Secretary
All other provisions of the policy remain unchanged.
IMPORTANT: This endorsement becomes a part of your policy. It
should be attached to and kept with your policy.
Form #ML 002 (9/91) to be attached to and kept with your policy.
<PAGE> 1
EXHIBIT (6)(a)
ARTICLES OF AMENDMENT,
RESTATEMENT, AND REDOMESTICATION
OF THE
ARTICLES OF INCORPORATION
OF
MERRILL LYNCH LIFE INSURANCE COMPANY
A Stock Insurance Company Redomesticated from the State of
Washington to the State of Arkansas
Merrill Lynch Life Insurance Company (the "Corporation"), by its
President and Secretary, does hereby certify that upon the written
authorization of its sole shareholder on August 6, 1991 the Amended and
Restated Articles of Incorporation set forth below were adopted in order to
effect the redomestication of the Corporation from the State of Washington to
the State of Arkansas, thereby amending and restating in their entirety the
original Articles of Incorporation of the Corporation which became effective on
January 27, 1986 and all amendments thereto. Such Amended and Restated Articles
of Incorporation and such redomestication shall be effective on the date these
Articles are endorsed with the "approval" of the Arkansas Insurance
Commissioner and placed on file in his office.
The text of the Articles of Incorporation are amended and completely
restated so as to provide as follows:
ARTICLE I - NAME
The name of the corporation shall be Merrill Lynch Life Insurance
Company.
ARTICLE II - LOCATION
The home office and principal place of business of the Corporation in
this state shall be located in Little Rock, Pulaski County, Arkansas.
The Corporation may establish or discontinue, from time to time, such
other offices and places of business within or without this state as the
Corporation may deem proper for the conduct of the Corporation's business.
ARTICLE III - PURPOSES AND POWERS
(a) The general nature of the business to be transacted by the
Corporation is to act as an "insurer" as defined in A. C. A. Sections
23-60-102 for the kinds of insurance identified as "life" in A.C.A. Section
23-62-102, including but not limited to, annuities and variable life insurance
and variable annuities, and "disability"
Page 1 of 5 Pages
<PAGE> 2
in A.C.A. Section 23-62-103, and to conduct such other business or perform such
other acts as are necessary or incidental to conducting such insurance
business.
(b) The Corporation shall have all of the general and special powers
granted by the State of Arkansas and any other state or jurisdiction in which
it may be authorized to do business.
The Corporation shall also have power to invest and reinvest its
funds; to prosecute suits, actions, and other proceedings to protect its
property, assets and rights; to lend upon, purchase, hold, guarantee, endorse,
mortgage, encumber, pledge, hypothecate, sell, assign, transfer, convey, lease
or otherwise dispose of, mortgage or deal in any personal property, real
property or rights or interests in either, including the establishment of
separate accounts and allocating thereto amounts to provide for life insurance
or annuities payable in fixed or variable amounts or both; to secure, mortgage,
pledge or borrow on any corporate assets or property other than trusts or
fiduciary property; to compromise claims, to lend money, negotiate loans, buy
and sell bonds, debentures, coupons and other securities not prohibited by law,
to issue bonds and promissory notes either secured or unsecured; and to pay
dividends to stockholders.
The Corporation shall also have power to indemnify the officers and
directors during their term of office or thereafter for actions arising during
their term of office, either directly or through the purchase of insurance, for
expenditures as parties to suits by or in the right of the Corporation or other
than by or in the right of the Corporation to the extent permitted by the
Statutes of Arkansas and as shall be provided in the By-laws.
ARTICLE IV - DIRECTORS
The Board of Directors shall conduct the affairs of the Corporation
and may adopt, alter, amend or repeal By-Laws for the governance and management
of the affairs and business of the Corporation. The number of directors of the
Corporation shall from time to time be fixed by or otherwise provided for in
the By-laws, but shall never number less than three. The initial Board of
Directors of the Corporation consisted of Messrs. Fenwick J. Crane, Gerald F.
Fehr, D. McKay Snow, Robert J. Newell and Dakin B. Ferris. The current Board of
Directors, who shall serve until re-elected or replaced by the stockholders in
accordance with the Bylaws are:
David Marshall Dunford John Carroll Ramsey Hele
376 Carter Road 304 Trinity Court, Apt. 6
Princeton, NJ 08540 Princeton, NJ 08540
Page 2 of 5 Pages
<PAGE> 3
Kenneth Wayne Kaczmarek Thomas Harold Patrick
89 Lambert Drive 122 Brinker Road
Princeton, NJ 08540 Barrington, IL 60010
Barry Gordon Skolnick
120 Woodview Drive
Belle Mead, NJ 08502
ARTICLE V - DURATION
This Corporation shall have perpetual existence.
ARTICLE VI - CAPITAL STOCK
The authorized capital stock of the Corporation shall be ten million
dollars ($10,000,000), divided into one million shares (1,000,000) of
nonassessable common stock with a par value of ten dollars ($10.00) per share.
The common stock shall have voting rights for the election of directors and for
all other purposes, each holder of common stock being entitled to one vote for
each share thereof held by such holder, except as otherwise required by law.
ARTICLE VII - AMENDMENT
These Articles may be amended by written authorization of the holders
of a majority of the voting power of the Corporation's outstanding capital
stock or by affirmative vote of a majority voting at a lawful meeting of
stockholders of which the notice given to stockholders included due notice of
the proposal to amend.
ARTICLE VIII - MEETINGS OF STOCKHOLDERS
Meetings of stockholders of the Corporation shall be held in the city
or town of its principal office or place of business in Arkansas or in such
other place within the State of Arkansas as shall be designated by the Board of
Directors of the Corporation.
ARTICLE IX - ORIGINAL INCORPORATORS
The names and resident addresses of the original incorporators of the
Corporation, which at that time was incorporated under the laws of the State of
Washington, were:
Fenwick J. Crane Gerald F. Fehr
1571 Parkside Drive East 8615 Inverness Drive N.E.
Seattle, Washington 98112 Seattle, Washington 98115
D. McKay Snow Robert J. Newell
13011 N.E. First 16312 Inglewood Lane N.E.
Bellevue, Washington 98005 Bothell, Washington 98011
Page 3 of 5 Pages
<PAGE> 4
Craig F. Likkel
23591 27th Place West
Brier, Washington 98036
IN WITNESS WHEREOF, the undersigned President and Secretary of Merrill
Lynch Life Insurance Company do hereby declare and certify that the statements
set forth hereinabove are true and have hereunto set their hands this 6th day
of August, 1991.
MERRILL LYNCH LIFE INSURANCE COMPANY
By: /s/ THOMAS H. PATRICK
---------------------------------
Thomas H. Patrick, President
[SEAL]
ATTEST:
By: /s/ BARRY G. SKOLNICK
-------------------------------
Barry G. Skolnick, Secretary
Page 4 of 5 Pages
<PAGE> 5
STATE OF )
) ss: ACKNOWLEDGMENT
COUNTY OF )
On this ____ day of ___________________ , 1991, before me, the
undersigned, a Notary Public, (or before any officer within this State or
without the State now qualified under existing law to take acknowledgments),
duly commissioned, qualified and acting, within and for said County and State,
appeared in person the within named Thomas H. Patrick and Barry G. Skolnick,
(being the person or persons authorized by said corporation to execute such
instrument, stating their respective capacities in that behalf), to me
personally well known, who stated that they were the President and Secretary of
the Merrill Lynch Life Insurance Company, and were duly authorized in their
respective capacities to execute the foregoing instruments for and in the name
and behalf of said corporation, and further stated and acknowledged that they
had so signed, executed and delivered said foregoing instrument for the
consideration, uses and purposes therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal
this 6th day of August, 1991.
/s/ SANDRA K. KELLY
-----------------------
Sandra K. Kelly
Notary Public
My Commission Expires: STAMP
SANDRA K. KELLY
- -----------------------
A Notary Public of New Jersey
(SEAL)
My Commission Expires April 3, 1994
Page 5 of 5 Pages
<PAGE> 1
EXHIBIT (6)(b)
AMENDED AND RESTATED
BY-LAWS
OF
MERRILL LYNCH LIFE INSURANCE COMPANY
(AN ARKANSAS CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
OFFICES
Section 1. Registered Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Notice of Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 4. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 5. Notice of Social Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 6. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 7. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 8. Order of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 9. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 10. List of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 11. Inspectors of Votes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 12. Actions Without a Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2. Number, Qualification, Election and
Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3. Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4. Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 5. Vacancies; Newly Created
Directorships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
MEETINGS OF THE BOARD OF DIRECTORS
Section 6. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 7. Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 8. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 9. Special Meetings; Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 10. Quorum and Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
COMMITTEES OF DIRECTORS
Section 11. Executive Committee; How Constituted
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C>
and Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 12. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 13. Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 14. Quorum and Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 15. Other Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 16. Minutes of Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
GENERAL
Section 17. Actions Without A Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 18. Presence at Meetings by Means of
Communications Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
NOTICES
Section 1. Type of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V
OFFICERS
Section 1. Elected and Appointed Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Section 2. Time of Election or Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Section 3. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Section 4. Duties of the Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Section 5. Duties of the President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Section 6. Duties of Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Section 7. Duties of the Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Section 8. Duties of the Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 9. Duties of the Controller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
ARTICLE VI
INDEMNIFICATION
Section 1. Actions Other Than by or in the
Right of the Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Section 2. Actions by or in the Right of the
Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Section 3. Right to Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Section 4. Determination of Right to Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 5. Advancement of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 6. Other Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 7. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 8. Definition of Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 9. Other Terms Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Section 10. Continuation of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
ARTICLE VII
</TABLE>
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<TABLE>
<S> <C>
CERTIFICATES REPRESENTING STOCK
Section 1. Right to Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Section 2. Facsimile Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 3. Lost, Stolen, or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 4. Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 5. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 6. Registered Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Section 2. Signatures on Negotiable Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Section 3. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Section 4. Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
ARTICLE IX
AMENDMENTS
</TABLE>
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ARTICLE I
OFFICES
Section 1. Registered Office. The address of the registered office
of the Corporation shall be such location in the State of Arkansas as may be
determined by the Board of Directors from time to time.
Section 2. Other Offices. The Corporation may also have offices at
such other place or places, both within and without the State of Arkansas, as
the Board of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings. All meetings of the
stockholders for the election of directors shall be held at such time and place
within the State of Arkansas, as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting. Meetings of
stockholders for any other purpose may be held at such time and place within
the State of Arkansas as shall be stated in the notice of the meeting or in a
duly executed waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of stockholders shall be
held on such date and time as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting, at which the
stockholders shall elect by a plurality vote by written ballot a Board of
Directors and transact such other business as may properly be brought before
the meeting.
Section 3. Notice of Annual Meetings. Written notice of the annual
meeting, stating the place, date, and hour of the meeting, shall be given to
each stockholder of record entitled to vote at such meeting not less than 10 or
more than 60 days before the date of the meeting.
Section 4. Special Meetings. Special meetings of the stockholders
for any purpose or purposes, unless otherwise prescribed by statute or the
Articles of Incorporation, may be called at any time by order of the Board of
Directors and shall be called by the Chairman of the Board, the President, or
the Secretary at the request in writing of a majority of the Board of
Directors. Such request shall state the purpose or purposes of the proposed
special meeting.
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Section 5. Notice of Social Meetings. Written notice of a special
meeting, stating the place, date, and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given to each stockholder of
record entitled to vote at such meeting not less than 10 or more than 60 days
before the date of the meeting.
Section 6. Quorum. Except as otherwise provided by statute or the
Articles of Incorporation, the holders of stock having a majority of the voting
power of the stock entitled to be voted thereat, present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at all meetings of the stockholders. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time without notice (other than
announcement at the meeting at which the adjournment is taken of the time and
place of the adjourned meeting) until a quorum shall be present or represented.
At such adjourned meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the meeting
as originally notified. If the adjournment is for more than 30 days, or if
after the adjournment a new record date is fixed for the adjourned meeting,
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 7. Organization. At each meeting of the stockholders, the
Chairman of the Board or the President, determined as provided in Article V of
these By-Laws, or if those officers shall be absent therefrom, another officer
of the Corporation chosen as chairman by those stockholders present in person
or by proxy and entitled to vote thereat, or if all the officers of the
Corporation shall be absent therefrom, a stockholder holding of record shares
of stock of the Corporation so chosen, shall act as chairman of the meeting and
preside thereat. The Secretary, or if he shall be absent from such meeting or
shall be required pursuant to the provisions of this Section 7 to act as
chairman of such meeting, the person (who shall be an Assistant Secretary, if
an Assistant Secretary shall be present thereat) whom the chairman of such
meeting shall appoint, shall act as secretary of such meeting and keep the
minutes thereof.
Section 8. Order of Business. The order of business at all meetings
of stockholders shall be as determined by the chairman of the meeting or as is
otherwise determined by the vote of the holders of a majority of the shares of
stock present in person or by proxy and entitled to vote without regard to
class or series at the meeting.
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Section 9. Voting. Except as otherwise provided in the Articles of
Incorporation, each stockholder shall, at each meeting of the stockholders, be
entitled to one vote in person or by proxy for each share of stock of the
Corporation held by him and registered in his name on the books of the
Corporation on the date fixed pursuant to the provisions of Section 5 of
Article VII of these By-Laws as the record date for the determination of
stockholders who shall be entitled to notice of and to vote at such meeting.
Shares of its own stock belonging to the Corporation or to another corporation,
if a majority of the shares entitled to vote in the election or directors of
such other corporation is held directly or indirectly by the Corporation, shall
not be entitled to vote. Any vote by stock of the Corporation may be given at
any meeting of the stockholders by the stockholder entitled thereto, in person
or by his proxy appointed by an instrument in writing subscribed by such
stockholder or by his attorney "hereunto duly authorized and delivered to the
Secretary of the Corporation or to the secretary of the meeting; provided,
however, that no proxy shall be voted acted upon after three years from its
date, unless said proxy shall provide for a longer period. Each proxy shall be
revocable at will and this provision cannot be waived unless expressly provided
otherwise by statute. At all meetings of the stockholders all matters, except
where other provision is made by law, the Articles of Incorporation, or these
By-Laws, shall be decided by the vote of a majority of the votes cast by the
stockholders present in person or by proxy and entitled to vote thereat, a
quorum being present. Unless demanded by the holders of a majority of the
shares present in person or by proxy at any meeting of the stockholders and
entitled to vote thereat, or so directed by the chairman of the meeting, the
vote thereat on any question other than the election or removal of directors
need not be by written ballot. Upon a demand of any such stockholder for a
vote by written ballot on any question or at the direction or such chairman
that a vote by written ballot be taken on any question, such vote shall be
taken by written ballot. On a vote by written ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
Section 10. List of Stockholders. It shall be the duty of the
Secretary or other officer of the Corporation who shall have charge of its
stock ledger, either directly or through another officer of the Corporation
designated by him or through a transfer agent appointed by the Board of
Directors, to prepare and make, at least 10 days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote thereat,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least
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10 days before said meeting, either at a place within the city where said
meeting is to be held, which place shall be specified in the notice of said
meeting, or, if not so specified, at the place where said meeting is to be
held. The list shall also be produced and kept at the time and place of said
meeting during the whole time thereof, and may be inspected by any stockholder
of record who shall be present thereat. The stock ledger shall be the only
evidence as to who are the stockholders entitled to examine the stock ledger,
such list or the books of the Corporation, or to vote in person or by proxy at
any meeting of stockholders.
Section 11. Inspectors of Votes. At each meeting of the
stockholders, the chairman of such meeting may appoint two Inspectors of Votes
to act thereat, unless the Board of Directors shall have theretofore made such
appointments. Each Inspector of Votes so appointed shall first subscribe an
oath or affirmation faithfully to execute the duties of an Inspector of Votes
at such meeting with strict impartiality and according to the best of his
ability. Such Inspectors of Votes, if any, shall take charge of the ballots,
if any, at such meeting and, after the balloting thereat on any question, shall
count the ballots cast thereon and shall make a report in writing to the
secretary of such meeting of the results thereof. An Inspector of Votes need
not be a stockholder of the Corporation, and any officer of the Corporation may
be an Inspector of Votes on any question other than a vote for or against his
election to any position with the Corporation or on any other question in which
he may be directly interested.
Section 12. Actions Without a Meeting. Any action required to be
taken at any annual or special meeting of stockholders of the Corporation, or
any action which may be taken at any annual or special meeting of stockholders,
may be taken without a meeting, without prior notice, and without a vote if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereat were present and voted. Prompt notice of
the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers. The business and affairs of the Corporation shall
be managed by its Board of Directors, which shall have and may exercise all
such powers of the Corporation and do all such lawful acts and things as are
not by statute, the
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Articles of Incorporation, or these By-Laws directed or required to be
exercised or done by the stockholders.
Section 2. Number, Qualification, Election and Term of Office. The
number of directors which shall constitute the whole Board of Directors shall
not be less than three (3) nor more than twenty (20). Within the limits above
specified, the number of directors that shall constitute the whole Board of
Directors shall be determined by resolution of the Board of Directors or by the
stockholders at any annual or special meeting or otherwise pursuant to action
of the stockholders. Directors need not be stockholders. The directors shall
be elected at the annual meeting of the stockholders, except as provided in
Sections 4 and 5 of this Article III, and each director elected shall hold
office until the next annual meeting of the stockholders or until his successor
is duly elected and qualified, or until his death or retirement or until he
resigns or is removed in the manner hereinafter provided. The Board of
Directors or the stockholders may fix, from time to time, such qualifications,
if any, for elections as a director or the continued holding of such office as
they deem appropriate in view of the Corporation's business.
Section 3. Resignations. Any director may resign at any time by
giving written notice of his resignation to the Corporation. Any such
resignation shall take effect at the time specified therein, or if the time
when it shall become effective shall not be specified therein, then it shall
take effect immediately upon its receipt by the Secretary. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 4. Removal of Directors. Any director may be removed, either
with or without cause, at any time, by the affirmative vote of a majority in
voting interest of the stockholders of record of the Corporation entitled to
vote, given at an annual meeting or at a special meeting of the stockholders
called for that purpose. The vacancy in the Board of Directors caused by any
such removal shall be filled by the stockholders at such meeting or, if not so
filled, by the Board of Directors as provided in Section 5 of this Article III.
Section 5. Vacancies; Newly Created Directorships. Any directorship
created by an increase in the number of directors or any vacancy resulting from
the removal or resignation of any director may be filled by a majority of the
directors then in office though less than a quorum, or by a sole remaining
director, or pursuant to the affirmative vote of a majority of the shares of
capital stock of the Corporation entitled to vote thereon, either at an annual
meeting of the stockholders or at a special meeting of such holders called for
that purpose. The director so elected shall hold office until the next annual
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meeting of stockholders and until a successor is elected and qualified, unless
sooner displaced.
MEETINGS OF THE BOARD OF DIRECTORS
Section 6. Place of Meetings. The Board of Directors of the
Corporation may hold meetings, both regular and special, either within or
without the State of Arkansas.
Section 7. Annual Meetings. The first meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting to the newly elected directors
shall be necessary in order legally to constitute the meeting, provided a
quorum shall be present. In the event such meeting is not held immediately
following the annual meeting of stockholders, or if the latter meeting is
handled by written consent, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, or as shall be specified in a written
waiver signed by all of the directors.
Section 8. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board of Directors.
Section 9. Special Meetings; Notice. Special meetings of the Board
of Directors may be called by the Secretary at the request of the Chairman of
the Board or the President on 24 hours' notice to each director, either
personally or by telephone or by mail, telegraph, telex, cable, wireless, or
other form of recorded communication; special meetings shall be called by the
Secretary in like manner and on like notice on the written request of any
director. Notice of any such meeting need not be given to any director,
however, if waived by him in writing or by telegraph, telex, cable, wireless,
or other form of recorded communication, or if he shall be present at such
meeting.
Section 10. Quorum and Manner of Acting. At all meetings of the
Board of Directors, a majority of the directors at the time in office (but not
less than one-third of the whole Board of Directors, but in any event not less
than two directors) shall constitute a quorum for the transaction of business,
and the act of a majority of the directors present at any meeting at which a
quorum is present shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute or by the Articles of Incorporation.
If a quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
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COMMITTEES OF DIRECTORS
Section 11. Executive Committee; How Constituted and Powers. The
Board of Directors may in its discretion, by resolution passed by a majority of
the whole Board of Directors, designate an Executive Committee consisting of
two or more of the directors of the Corporation. Subject to any applicable
statutes, the Articles of Incorporation, and these By-Laws, the Executive
Committee shall have and may exercise, when the Board of Directors is not in
session, all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and shall have the
power to authorize the seal of the Corporation to be affixed to all papers
which may require it; but the Executive Committee shall not have the power to
fill vacancies in the Board of Directors, the Executive Committee, or any other
committee of directors or to elect or approve officers of the Corporation. The
Executive Committee shall have the power and authority to authorize the
issuance of common stock and grant and authorize options and other rights with
respect to such issuance. The Board of Directors shall have the power at any
time, by resolution passed by a majority of the whole Board of Directors, to
change the membership of the Executive Committee, to fill all vacancies in it,
or to dissolve it, either with or without cause.
Section 12. Organization. The Chairman of the Executive Committee,
to be selected by the Board of Directors, shall act as chairman at all meetings
of the Executive Committee and the Secretary shall act as secretary thereof.
In case of the absence from any meeting of the Executive Committee of the
Chairman of the Executive Committee or the Secretary, the Executive Committee
may appoint a chairman or secretary, as the case may be, of the meeting.
Section 13. Meetings. Regular meetings of the Executive Committee,
of which no notice shall be necessary, may be held on such days and at such
places, within or without the State of Arkansas, as shall be fixed by
resolution adopted by a majority of the Executive Committee and communicated in
writing to all its members. Special meetings of the Executive Committee shall
be held whenever called by the Chairman of the Executive Committee or a
majority of the members of the Executive Committee then in office. Notice of
each special meeting of the Executive Committee shall be given by mail,
telegraph, telex, cable, wireless, or other form of recorded communication or
be delivered personally or by telephone to each member of the Executive
Committee not later than the day before the day on which such meeting is to be
held. Notice of any such meeting need not be given to any member of the
Executive Committee, however, if waived by him in writing or by telegraph,
telex, cable, wireless, or other form of recorded communication, or if he shall
be present at such meeting; and any meeting of the Executive
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Committee shall be a legal meeting without any notice thereof having been
given, if all the members of the Executive Committee shall be present thereat.
Subject to the provisions of this Article III, the Executive Committee, by
resolution adopted by a majority of the whole Executive Committee, shall fix
its own rules of procedure.
Section 14. Quorum and Manner of Acting. One third of the members of
the Executive Committee, but in no event less than two members, shall
constitute a quorum for the transaction of business, and the act of a majority
of those present at a meeting thereof at which a quorum is present shall be the
act of the Executive Committee.
Section 15. Other Committees. The Board of Directors may, by
resolution or resolutions passed by a majority of the whole Board of Directors,
designate one or more other committees, including an Investment Committee to be
charged with the supervision and making of investments and loans of the
Corporation, consisting of one or more directors of the Corporation, which, to
the extent provided in said resolution or resolutions, shall have and may
exercise, subject to any applicable statutes, the Articles of Incorporation,
and these By-Laws, the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and shall have the
power to authorize the seal of the Corporation to be affixed to all papers
which may require it; but no such committee shall have the power to fill
vacancies in the Board of Directors, the Executive Committee, or any other
committee or in their respective membership, to appoint or remove officers of
the Corporation, or to authorize the issuance of shares of the capital stock of
the Corporation, except that such a committee may, to the extent provided in
said resolutions, grant and authorize options and other rights with respect to
the common stock of the Corporation pursuant to and in accordance with any plan
approved by the Board of Directors. Such committee or committees shall have
such name or names as may be determined from time to time by resolution adopted
by the Board of Directors. A majority of all the members of any such committee
may determine its action and fix the time and place of its meetings and specify
what notice thereof, if any, shall be given, unless the Board of Directors
shall otherwise provide. The Board of Directors shall have power to change the
members of any such committee at any time to fill vacancies, and to discharge
any such committee, either with or without cause, at any time.
Section 16. Minutes of Committees. Each committee shall keep regular
minutes of its meetings and proceedings and report the same to the Board of
Directors at the next meeting thereof.
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GENERAL
Section 17. Actions Without A Meeting. Unless otherwise restricted
by the Articles of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board
of Directors or committee, as the case may be, consent thereto in writing and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or the committee.
Section 18. Presence at Meetings by Means of Communications
Equipment. Members of the Board of Directors, or of any committee designated
by the Board of Directors, may participate in a meeting of the Board of
Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting conducted pursuant
to this Section 20 shall constitute presence in person at such meeting.
ARTICLE IV
NOTICES
Section 1. Type of Notice. Whenever, under the provisions of any
applicable statute, the Articles of Incorporation, or these By-Laws, notice is
required to be given to any director or stockholder, it shall not be construed
to mean personal notice, but such notice may be given in writing, in person or
by mail, addressed to such director or stockholder, at his address as it
appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given in
any manner permitted by Article III hereof and shall be deemed to be given at
the time when first transmitted by the method of communication so permitted.
Section 2. Waiver of Notice. Whenever any notice is required to be
given under the provisions of any applicable statute, the Articles of
Incorporation, or these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto, and transmission of a
waiver of notice by a director of stockholder by mail, telegraph, telex, cable,
wireless, or other form of recorded communication may constitute such a waiver.
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ARTICLE V
OFFICERS
Section 1. Elected and Appointed Officers. The elected officers of
the Corporation shall be a President (who shall be a director), one or more
Vice Presidents, with or without such descriptive titles as the Board of
Directors shall deem appropriate, a Secretary, and a Treasurer, and, if the
Board of Directors so elects, a Chairman of the Board (who shall be a director)
and a Controller. The Board of Directors or the Executive Committee of the
Board of Directors by resolution also may appoint one or more Assistant Vice
Presidents, Assistant Treasurers, Assistant Secretaries, Assistant Controllers,
and such either officers and agents as from time to time may appear to be
necessary or advisable in the conduct of the affairs of the Corporation.
Section 2. Time of Election or Appointment. The Board of Directors
at its annual meeting shall elect or appoint, as the case may be, the officers
to fill the positions designated in or pursuant to Section 1 of this Article V.
Officers of the Corporation may also be elected or appointed, as the case may
be, at any other time.
Section 3. Term. Each officer of the Corporation shall hold his
office until his successor is duly elected or appointed and qualified or until
his earlier resignation or removal. Any officer may resign at any time upon
written notice to the Corporation. Any officer elected or appointed by the
Board of Directors or the Executive Committee may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors. Any vacancy
occurring in any office of the Corporation by death, resignation, removal, or
otherwise may be filled by the Board of Directors or the appropriate committee
thereof.
Section 4. Duties of the Chairman of the Board. The Chairman of the
Board, if so elected in accordance with Section 1. of Article V., shall be the
Chief Executive Officer of the Corporation and, subject to the provisions of
these By-Laws, shall have general supervision of the affairs of the Corporation
and shall have general and active control of all its business. He shall
preside, when present, at all meetings of shareholders and at all meetings of
the Board of Directors. He shall see that all orders and resolutions of the
Board of Directors and the shareholders are carried into effect. He shall have
general authority to execute bonds, deeds, and contracts in the name of the
Corporation and affix the corporate seal thereto; to sign stock certificates;
to cause the employment or appointment of such officers, employees, and agents
of the Corporation as the proper conduct of operations may require, and to fix
their
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compensation, subject to the provisions of these By-Laws; to remove or suspend
any employee or agent who was employed or appointed under his authority or
under authority of an officer subordinate to him; to suspend for cause, pending
final action by the authority that elected or appointed him, any officer
subordinate to the Chairman of the Board; in coordination with the other
officers and directors of the corporation, to develop the Corporation's basic
strategic and long-range plans, including marketing programs, expansion plans,
and financial structure; and, in general, to exercise all of the powers and
authority usually appertaining to the chief executive officer of a corporation,
except as otherwise provided in these By-Laws.
Section 5. Duties of the President. In the absence of a Chairman of
the Board, the President shall be the Chief Executive Officer of the
Corporation, and shall have the duties and responsibilities and the authority
and power of the Chairman of the Board. The President or a designated Vice
President shall be the Chief Operating Officer of the Corporation and as such
shall have, subject to review and approval of the Chairman of the Board, the
responsibility for the day-to-day operations of the Corporation and long-range
plans, including marketing programs, expansion plans, and financial structure;
and, in general, to exercise all of the powers and authority usually
appertaining to the chief executive officer of a corporation, except as
otherwise provided in these By-Laws.
Section 6. Duties of Vice Presidents. In the absence of the
President or in the event of his inability or refusal to act, the Vice
President (or in the event there be more than one Vice President, the Vice
Presidents in the order or manner designated, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the President and, when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. The Vice Presidents shall perform
such other duties and have such other powers and designations as the Board of
Directors or the President may from time to time prescribe.
Section 7. Duties of the Secretary. The Secretary shall attend all
meetings of the Board of Directors and all meetings of the stockholders and
record all the proceedings of the meetings of the Corporation and of the Board
of Directors in a book to be kept for that purpose and shall perform like
duties for the Executive Committee or other standing committees when required.
He shall give, or cause to be given, notice of all meetings of the stockholders
and special meetings of the Board of Directors, and shall perform such other
duties as may be prescribed by the Board of Directors or the President, under
whose supervision he shall be. He shall have custody of the corporate seal of
the Corporation, and he, or an Assistant Secretary, shall have authority to
affix the same to any instrument requiring it, and
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<PAGE> 16
when so affixed, it may be attested by his signature or by the signature of
such Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the
affixing by his signature. The Secretary shall keep and account for all books,
documents, papers, and records of the Corporation, except those for which some
other officer or agent is properly accountable. He shall have authority to
sign stock certificates and shall generally perform all the duties usually
appertaining to the office of the secretary of a corporation.
Section 8. Duties of the Treasurer. The Treasurer shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation
and shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the
Board of Directors. He shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, he shall give the
Corporation a bond which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement, or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in his possession or under his control belonging to the Corporation. The
Treasurer shall perform such other duties as may be prescribed by the Board of
Directors, the President, or any such Vice President in charge of finance.
Section 9. Duties of the Controller. The Controller, if one is
appointed, shall have supervision of the accounting practices of the
Corporation and shall prescribe the duties and powers of any other accounting
personnel of the Corporation. He shall cause to be maintained an adequate
system of financial control through a program of budgets and interpretive
reports. He shall initiate and enforce measures and procedures whereby the
business of the Corporation shall be conducted with the maximum efficiency and
economy. If required, he shall prepare a monthly report covering the operating
results of the Corporation. The Controller shall be under the supervision of
the Vice President in charge of finance, if one is so designated, and he shall
perform such other duties as may be prescribed by the Board of Directors, the
President, or any such Vice President in charge of finance.
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<PAGE> 17
ARTICLE VI
INDEMNIFICATION
Section 1. Actions Other Than by or in the Right of the Corporation.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer or employee of the Corporation,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 2. Actions by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the Corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer or employee of the Corporation,
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the Court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other Court shall deem proper.
Section 3. Right to Indemnification. To the extent that a director,
officer of employee of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections
1 and 2 of this
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Article, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 4. Determination of Right to Indemnification. Any
indemnification under Sections 1 and 2 of this Article (unless ordered by a
Court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, or employee
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Sections 1 and 2 of this Article. Such determination
shall be made (i) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable,
a quorum of disinterested directors so directs, by independent legal counsel in
a written opinion, or (iii) by the stockholders.
Section 5. Advancement of Expenses. Expenses incurred by an officer
or director in defending a civil or criminal action, suit or proceeding may be
paid by the Corporation, in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation as authorized in
this Article. Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
Section 6. Other Rights and Remedies. The indemnification and
advancement of expenses provided by or granted pursuant to the other Sections
of this Article shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
Section 7. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article.
Section 8. Definition of Corporation. For purposes of this Article,
references to "the Corporation" shall include, in addition to the resulting
Corporation, any constituent
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<PAGE> 19
corporation (including any constituent of a constituent) absorbed, in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee, or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article with respect to the resulting or surviving Corporation as he would have
with respect to such constituent corporation if its separate existence had
continued.
Section 9. Other Terms Defined. For purposes of this Article,
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee,
or agent of the corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation"
as referred to in this Article.
Section 10. Continuation of Indemnification. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article shall
continue as to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefits of the heirs, executors and
administrators of such person.
ARTICLE VII
CERTIFICATES REPRESENTING STOCK
Section 1. Right to Certificate. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board, the President, or a Vice
President and by the Secretary or an Assistant Secretary of the Corporation,
certifying the number of shares owned by him in the Corporation. If the
Corporation shall be authorized to "sue more than one class of stock or more
than one series of any class, the powers, designations, preferences, and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations, or restrictions of
such preferences or rights shall be set forth in full or summarized on the face
or
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<PAGE> 20
basic of the certificate which the Corporation shall issue to represent such
class or series of stock; provided, that, except as otherwise provided by any
applicable statute, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock a statement that the
Corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences, and relative, participating, optional, or
other special rights of each class of stock or series thereof and the
qualifications, limitations, or restrictions of such preferences or rights.
Section 2. Facsimile Signatures. Any of or all the signatures on the
certificate may be facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the
date of issue.
Section 3. Lost, Stolen, or Destroyed Certificates. The Board of
Directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation and
alleged to have been lost, stolen, or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. When authorizing such issue of a new certificate
or certificates, the Board of Directors may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen, or destroyed certificate or certificates, or his legal representative,
to advertise the same in such manner as it shall require or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen, or destroyed or the issuance of such new
certificate.
Section 4. Transfers. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation, or authority to
transfer, and with proof of authenticity of signature, it shall be the duty of
the Corporation, subject to any proper restrictions on transfer, to issue a new
certificate to the person entitled thereto, cancel the old certificate, and
record the transaction upon its books.
Section 5. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other
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<PAGE> 21
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be less than 10 or more than 40 days before the date of
such meeting or any other action. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.
Section 6. Registered Stockholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and to
hold liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not provided by the laws of the State of Arkansas.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, if any, subject to any applicable statutes and the provisions of
the Articles of Incorporation, may be declared by the Board of Directors (but
not any committee thereof) at any regular meeting, pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital stock, subject to
any applicable statutes and the provisions of the Articles of Incorporation.
Section 2. Signatures on Negotiable Instruments. All bills, notes,
checks or other instruments for the payment of money shall be signed or
countersigned by such officers or agents and in such manner as, from time to
time, may be prescribed by resolution (whether general or special of the Board
of Directors, or may be prescribed by any officer or officers, or any officer
and agent jointly, thereunto duly authorized by the Board of Directors.
Section 3. Fiscal Year. The fiscal year of the Corporation shall end
on the final Friday of December in each year and the succeeding fiscal year
shall begin on the day next succeeding the last day of the preceding fiscal
year.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of incorporation of the
Corporation, and the word, "Arkansas." The
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seal may be used by causing it or a facsimile thereof to be impressed, affixed,
reproduced, or otherwise.
ARTICLE IX
AMENDMENTS
These By-Laws may be altered, amended, or repealed or new By-Laws may
be adopted by the stockholders or by the Board of Directors at any regular
meeting of the stockholders or the Board of Directors or at any special meeting
of the stockholders or the Board of Directors if notice of such alteration,
amendment, repeal, or adoption of new By-Laws be contained in the notice of
such special meeting.
Secretary's Certificate
I, Barry Gordon Skolnick, being the duly elected, authorized and
acting Secretary of Merrill Lynch Life Insurance Company, do hereby certify
that the foregoing By-Laws were duly adopted by the Board of Directors as of
the __ day of ____________, 1991.
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of
_______________, 1991.
-------------------------------
Barry Gordon Skolnick
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<PAGE> 1
EXHIBIT (7)
ASSUMPTION REINSURANCE AGREEMENT
Between
Merrill Lynch Life Insurance Company
Tandem Insurance Group, Inc.
Royal Tandem Life Insurance Company
and
Family Life Insurance Company
Dated: March 21, 1991
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
A. Administrative Services Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
B. Assumption Closings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
C. Assumption Date(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
D. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
E. Indemnity Reinsurance Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
F. Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
G. Stock Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
ASSUMPTION OF RISK . . . . . . . . . . . . . . . . . . . . . 2
A. Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
B. Assumption on Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
C. Assumption After the Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
D. Assumption Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
TRANSFER OF ASSETS . . . . . . . . . . . . . . . . . . . . . 5
A. Assets Other Than Separate Account Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
B. Separate Account Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
C. Ceding Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
D. Release of MLLIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE IV
BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE V
ASSUMPTION CERTIFICATES . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS (cont.)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FLIC . . . . . . . . . . . . . . . . 7
A. Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
B. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
C. Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
D. Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF REINSURERS . . . . . . . . . . . . . . . 9
A. Representations and Warranties of MLLIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1. Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3. Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4. Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
B. Representations and Warranties of TIG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1. Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3. Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4. Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
C. Representations and Warranties of TIG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1. Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3. Effect of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4. Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VIII
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS (cont.)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE IX
ARBITRATION . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE X
NOTICE . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XI
CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . . . 23
A. Governmental Filings and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
B. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
C. Establishment of Separate Accounts by MLLIC,
TIG and Royal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
D. No Pending Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XII
EFFECTIVE DATE, CLOSING AND LOCATION . . . . . . . . . . . . . . . . 25
ARTICLE XIII
TERMINATION . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XIV
COVENANTS OF FLIC . . . . . . . . . . . . . . . . . . . . 26
A. Nonsolicitation of Policyholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
B. Covenant Not to Disclose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
C. Conflicting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE XV
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 28
A. Acknowledgement of Indemnity Reinsurance Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
B. Maintenance of Separate Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
C. Acknowledgement of Administrative Services Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
D. Trademark and Other Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
E. No Ceding Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
F. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
- iii -
<PAGE> 5
TABLE OF CONTENTS (cont.)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
G. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
H. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
I. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
J. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
K. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
- iv -
<PAGE> 6
EXHIBITS
A. ADMINISTRATIVE SERVICE AGREEMENT BETWEEN FLIC AND MLLIC
B. INDEMNITY REINSURANCE AGREEMENT BETWEEN FLIC AND MLLIC
C. POLICIES TO BE ASSUMED BY MERRILL LYNCH LIFE INSURANCE COMPANY
D. POLICIES TO BE ASSUMED BY TANDEM INSURANCE GROUP, INC.
E. POLICIES TO BE ASSUMED BY ROYAL TANDEM LIFE INSURANCE COMPANY
F. ASSUMPTION CERTIFICATE
- v -
<PAGE> 7
ASSUMPTION REINSURANCE AGREEMENT
This Assumption Reinsurance Agreement ("Agreement") is made and
entered into this 21st day of March, 1991, by and between Merrill Lynch Life
Insurance Company, a Washington insurance corporation ("MLLIC"), Tandem
Insurance Group, Inc., an Illinois corporation ("TIG"), Royal Tandem Life
Insurance Company, a New York corporation ("Royal"), (MLLIC, TIG and Royal are
also individually referred to herein as "Reinsurer" and collectively as
"Reinsurers") and Family Life Insurance Company, a Washington insurance
corporation ("FLIC").
ARTICLE I
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
following definitions:
A. Administrative Services Agreement shall mean the Administrative
Services Agreement between FLIC and MLLIC dated _________________ and
attached hereto as Exhibit A.
B. Assumption Closings shall mean the closings at which any of the
Policies are assumed on an assumption reinsurance basis by a Reinsurer
as contemplated by Article II.
C. Assumption Date(s) shall mean, with respect to any of the Policies,
the date on which a particular policy or contract included in the
Policies is assumed by a Reinsurer pursuant to Article II.
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D. Effective Date shall mean such date as is described in Article XII,
which date shall be the initial Assumption Date.
E. Indemnity Reinsurance Agreement shall mean the Indemnity Reinsurance
Agreement between FLIC and MLLIC dated December 28, 1990, and attached
hereto as Exhibit B.
F. Policies shall mean, collectively, all life insurance policies and
annuity contracts of FLIC which are subject to the Indemnity
Reinsurance Agreement, and as to each Reinsurer individually, shall
mean those of the Policies reinsured by MLLIC, TIG or Royal as
identified by form number and jurisdiction in Exhibits C, D and E to
this Agreement respectively.
G. Stock Purchase Agreement shall mean the proposed agreement between
Merrill Lynch Insurance Group, Inc., Family Life Insurance Company,
Financial Industries Corporation and an affiliated company of
Financial Industries Corporation, pursuant to which it is intended
that controlling interest of FLIC will be acquired by an affiliated
company of Financial Industries Corporation.
ARTICLE II
ASSUMPTION OF RISK
A. Generally.
FLIC hereby agrees to cede, transfer, sell, bargain and convey unto
the Reinsurers by way of assumption reinsurance all of its obligations, rights,
privileges and liabilities under the
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Policies, and the Reinsurers hereby agree to assume, subject to the terms and
conditions of this Agreement, all obligations and liabilities of FLIC with
respect to the Policies under the terms of each policy or contract included in
the Policies to the maximum extent allowed by law. In connection with such
assumption the Reinsurers shall be entitled to any and all defenses, offsets,
counterclaims, and cross actions to which FLIC would otherwise be entitled,
whether the same be known to exist or hereafter discovered.
B. Assumption on Effective Date.
On the Effective Date of this Agreement, which shall be the initial
Assumption Date, each Reinsurer shall assumption reinsure in accordance with
the terms of this Agreement, all of the Policies which are in force at that
time and as to which the policyowners or contractowners thereof reside in
jurisdictions where the Reinsurer designated to assume such of the Policies, as
stated in Exhibits C, D and E, is authorized or permitted by law to assumption
reinsure such Policies.
C. Assumption After the Effective Date.
After the Effective Date, FLIC and Reinsurers shall make all required
regulatory filings and use their best efforts to obtain all licenses,
authorizations and regulatory approvals necessary for the assumption by
Reinsurers of any of the Policies which Reinsurers could not lawfully assume on
the Effective Date. Both FLIC and Reinsurers shall assist each other by
providing all necessary information and assistance as shall be reasonably
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requested by the other party for purposes of satisfying all regulatory
requirements relating to the assumption by Reinsurers of all Policies. After
satisfying all necessary legal requirements in a jurisdiction, the appropriate
Reinsurer shall have the obligation from time to time to assume those Policies
whose owners reside in such jurisdiction at an Assumption Closing.
Reinsurers agree to undertake the responsibility to take all actions
necessary to accomplish the purposes of this Article II.C. and further agree
that FLIC shall be required to take independent corporate action, at no expense
to FLIC, only when such action by FLIC is necessary as a precondition to
proceeding to an Assumption Closing as to a particular jurisdiction.
D. Assumption Closing.
Each assumption by a Reinsurer of Policies shall take place at an
Assumption Closing to be held at such location as is mutually agreed by the
parties, at a time and date, designated by the Reinsurer, after all necessary
legal requirements for such assumption have been met (including the expiration
or termination of all applicable waiting periods, if any, including any
extensions thereof, required under the Hart-Scott-Rodino Antitrust Improvements
Act).
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ARTICLE III
TRANSFER OF ASSETS
On each Assumption Date(s), including the initial Assumption
Date, as to each of the Policies to be assumption reinsured on such date(s):
A. Assets Other Than Separate Account Assets.
1. If MLLIC is the assuming Reinsurer, MLLIC shall retain
statutorily admissible assets equal to the statutory reserve
established by MLLIC for such Policies pursuant to the
Indemnity Reinsurance Agreement, computed in accordance with
statutory accounting requirements.
2. If TIG or Royal is the assuming Reinsurer, MLLIC shall
transfer to TIG or Royal, as the case may be, statutorily
admissible assets equal to the statutory reserve established
by MLLIC for such Policies pursuant to the Indemnity
Reinsurance Agreement, computed in accordance with statutory
accounting requirements.
B. Separate Account Assets. FLIC shall transfer to MLLIC, TIG or Royal,
as the case may be, assets representing the contract liabilities
attributable to the variable portion of the variable annuity contracts
participating in the separate account known as the Merrill Lynch
Variable Annuity Account.
C. Ceding Commission. Any transfer of assets by MLLIC to TIG or Royal as
identified in A. above shall be reduced by the appropriate proportion
of the ceding commission previously
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paid by MLLIC to FLIC pursuant to the Indemnity Reinsurance Agreement.
D. Release of MLLIC. Upon any asset transfers identified in A. and B.
above, MLLIC shall be released from any and all liability under the
Indemnity Reinsurance Agreement as to those of the Policies assumed
at any Assumption Closing at which such asset transfers occurred to
the extent that such liability is transferred to the appropriate
Reinsurer.
ARTICLE IV
BOOKS AND RECORDS
On the Assumption Dates FLIC shall transfer and deliver to the
appropriate Reinsurer, at no expense to FLIC, all books, records, computer
files, computer tapes and discs, other software and correspondence pertaining
to the Policies assumption reinsured on such dates as may be required by the
Reinsurer for the proper administration and servicing thereof, to the extent
that MLLIC does not already have possession thereof pursuant to the
Administrative Services Agreement. All correspondence and inquiries concerning
any of the Policies which are received by FLIC subsequent to the Assumption
Date of such of the Policies shall be promptly forwarded to Merrill Lynch
Insurance Group Services, Inc., 4655 Salisbury Road, Suite 400, Jacksonville,
Florida, 32256, Attention: Manager, Policyholder Services Department.
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ARTICLE V
ASSUMPTION CERTIFICATES
As soon as possible after the Assumption Dates, and in any event
within the time prescribed by applicable insurance laws, the appropriate
Reinsurer shall mail to the last known address of each policyowner or
contractowner of the Policies an Assumption Certificate in a form substantially
similar to the form attached hereto as Exhibit F or in such other form as may
be required by the insurance regulatory authority of the state in which the
policyowner or contractowner resides.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FLIC
FLIC hereby represents and warrants to the Reinsurers that:
A. Organization, Standing and Power. FLIC is a corporation duly
organized, validly existing, and in good standing under the laws of
the State of Washington and is duly licensed, qualified or admitted to
do business and is in good standing in all jurisdictions in which the
ownership, use or leasing of its assets or properties or the conduct
or nature of its business makes such licensing, qualification or
admission necessary. FLIC is not licensed to do an insurance business
in the State of New York. FLIC has full corporate power and authority
to enter into this Agreement and perform its obligations hereunder.
B. Authority. The execution, delivery and compliance with the terms of
this Agreement by FLIC and performance by FLIC of
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its obligations hereunder has been duly and validly authorized by all
necessary corporate action on the part of FLIC and this Agreement
constitutes a valid and binding obligation of FLIC which is
enforceable against FLIC in accordance with its terms.
C. Effect of Agreement. The execution and delivery of this Agreement by
FLIC does not and the performance by FLIC of its obligations under
this Agreement will not:
(1) violate any existing term or provision of any law or any writ,
judgment, decree, injunction or similar order applicable to
FLIC;
(2) conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a
default under, any of the terms, conditions, or provisions of
the articles or certificate of incorporation or bylaws of
FLIC;
(3) result in the creation or imposition of any lien, charge, or
encumbrance upon FLIC or any of its assets or properties that
individually or in the aggregate with any other liens,
charges, or encumbrances has or may reasonably be expected to
have a material adverse effect on the validity or
enforceability of this Agreement, or on the ability of FLIC to
perform its obligations under this Agreement; or
(4) conflict with or result in a violation or breach of, or
constitute (with or without notice or lapse of time or
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both) a default under, or give to any person or entity any
right of termination, cancellation, acceleration, or
modification in or with respect to, any contract or agreement
to which FLIC is a party or by which its assets or properties
may be bound, and as to which any such conflicts, violations,
breaches, defaults or rights individually or in the aggregate
have or may reasonably be expected to have a material adverse
effect on the validity or enforceability of this Agreement, or
on the ability of FLIC to perform its obligations under this
Agreement, except as to any rights preserved by federal or
state laws to the policyholders or contractholders of the
Policies.
D. Brokers and Finders. All negotiations relative to this Agreement and
the transaction contemplated hereby have been carried out by FLIC
directly with the Reinsurers without the intervention of any person on
behalf of FLIC (except firms engaged by and to be compensated solely
by FLIC) in such manner as to give rise to any valid claim by any
person against the Reinsurers for a finder's fee, brokerage commission
or similar payment.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF REINSURERS
A. Representations and Warranties of MLLIC. MLLIC hereby represents and
warrants to FLIC that:
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1. Organization, Standing and Power. MLLIC is a corporation duly
organized, validly existing, and in good standing under the
laws of the State of Washington and is duly licensed,
qualified or admitted to do business and is in good standing
in all jurisdictions in which the ownership, use or leasing of
its assets or properties or the conduct or nature of its
business makes such licensing, qualification or admission
necessary, except as previously disclosed by MLLIC to FLIC in
writing. MLLIC has full corporate power and authority to
enter into this Agreement and to perform its obligations
hereunder, subject to the limitation of authority stated
herein and any contrary finding of any regulatory authority as
described in Article XI A. herein.
2. Authority. The execution, delivery and compliance with the
terms of this Agreement by MLLIC and performance by MLLIC of
its obligations hereunder has been duly and validly authorized
by all necessary corporate action on the part of MLLIC and
this Agreement constitutes a valid and binding obligation of
MLLIC which is enforceable against MLLIC in accordance with
its terms.
3. Effect of Agreement. The execution and delivery of this
Agreement by MLLIC do not, and the performance by MLLIC of its
obligations under this Agreement will not:
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(a) violate any existing term or provision of any law or
any writ, judgment, decree, injunction or similar
order applicable to MLLIC;
(b) conflict with or result in a violation or breach of,
or constitute (with or without notice or lapse of
time or both) a default under, any of the terms,
conditions, or provisions of the articles or
certificate of incorporation or bylaws of MLLIC;
(c) result in the creation or imposition of any lien,
charge, or encumbrance upon MLLIC or any of its
assets or properties that individually or in the
aggregate with any other liens, charges, or
encumbrances has or may reasonably be expected to
have a material adverse effect on the validity or
enforceability of this Agreement, or on the ability
of MLLIC to perform its obligations under this
Agreement; or
(d) conflict with or result in a violation or breach of,
or constitute (with or without notice or lapse of
time or both) a default under, or give to any person
or entity any right of termination, cancellation,
acceleration, or modification in or with respect to,
any contract or agreement to which MLLIC is a
party or by which its assets or properties may be
bound, and as to which any such
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conflicts, violations, breaches, defaults or rights
individually or in the aggregate have or may
reasonably be expected to have a material adverse
effect on the validity or enforceability of this
Agreement, or on the ability of MLLIC to perform its
obligations under this Agreement.
4. Brokers and Finders. All negotiations relative to this
Agreement and the transaction contemplated hereby have been
carried out by MLLIC directly with FLIC without the
intervention of any person on behalf of MLLIC (except firms
engaged by and to be compensated solely by MLLIC) in such
manner as to give rise to any valid claim by any person
against FLIC for a finder's fee, brokerage commission or
similar payment.
B. Representations and Warranties of TIG. TIG hereby represents and
warrants to FLIC that:
1. Organization, Standing and Power. TIG is a corporation duly
organized, validly existing, and in good standing under the
laws of the State of Illinois and is duly licensed, qualified
or admitted to do business and is in good standing in all
jurisdictions in which the ownership, use or leasing of its
assets or properties or the conduct or nature of its business
makes such licensing, qualification or admission necessary
except as previously disclosed by TIG to FLIC in writing. TIG
has full corporate power and authority to enter into
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this Agreement and to perform its obligations hereunder,
subject to the limitation of authority stated herein and any
contrary finding of any regulatory authority as described in
Article XI A. herein.
2. Authority. The execution, delivery and compliance with the
terms of this Agreement by TIG and performance by TIG of its
obligations hereunder has been duly and validly authorized by
all necessary corporate action on the part of TIG and this
Agreement constitutes a valid and binding obligation of TIG
which is enforceable against TIG in accordance with its terms.
3. Effect of Agreement. The execution and delivery of this
Agreement by TIC, do not, and the performance by TIG of its
obligations under this Agreement will not:
(a) violate any existing term or provision of any law or
any writ, judgment, decree, injunction or similar
order applicable to TIG;
(b) conflict with or result in a violation or breach of,
or constitute (with or without notice or lapse of
time or both) a default under, any of the terms,
conditions, or provisions of the articles or
certificate of incorporation or bylaws of TIG;
(c) result in the creation or imposition of any lien,
charge, or encumbrance upon TIG or any of its assets
or properties that individually or in the
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aggregate with any other liens, charges, or
encumbrances has or may reasonably be expected to
have a material adverse effect on the validity or
enforceability of this Agreement, or on the ability
of TIG to perform its obligations under this
Agreement; or
(d) conflict with or result in a violation or breach of,
or constitute (with or without notice or lapse of
time or both) a default under, or give to any person
or entity any right of termination, cancellation,
acceleration, or modification in or with respect to,
any contract or agreement to which TIG is a party or
by which its assets or properties may be bound, and
as to which any such conflicts, violations, breaches,
defaults or rights individually or in the aggregate
have or may reasonably be expected to have a material
adverse effect on the validity or enforceability of
this Agreement, or on the ability of TIG to perform
its obligations under this Agreement.
4. Brokers and Finders. All negotiations relative to this
Agreement and the transaction contemplated hereby have been
carried out by TIG directly with FLIC without the intervention
of any person on behalf of TIG (except firms engaged by and to
be compensated solely by TIG) in such manner as to give rise
to any valid claim by
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any person against FLIC for a finder's fee, brokerage
commission or similar payment.
C. Representations and Warranties of Royal. Royal hereby represents and
warrants to FLIC that:
1. Organization, Standing and Power. Royal is a corporation duly
organized, validly existing, and in good standing under the
laws of the State of New York and is duly licensed, qualified
or admitted to do business and is in good standing in all
jurisdictions in which the ownership, use or leasing of its
assets or properties or the conduct or nature of its business
makes such licensing, qualification or admission necessary,
except as previously disclosed by Royal to FLIC in writing.
Royal has full corporate power and authority to enter into
this Agreement and to perform its obligations hereunder,
subject to the limitation of authority stated herein and any
contrary finding of any regulatory authority as described in
Article XI A. herein.
2. Authority. The execution, delivery and compliance with the
terms of this Agreement by Royal and performance by Royal of
its obligations hereunder has been duly and validly authorized
by all necessary corporate action on the part of Royal and
this Agreement constitutes a valid and binding obligation of
Royal which is enforceable against Royal in accordance with
its terms.
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3. Effect of Agreement. The execution and delivery of this
Agreement by Royal do not, and the performance by Royal of its
obligations under this Agreement will not:
(a) violate any existing term or provision of any law or
any writ, judgment, decree, injunction or similar
order applicable to Royal;
(b) conflict with or result in a violation or breach of,
or constitute (with or without notice or lapse of
time or both) a default under, any of the terms,
conditions, or provisions of the articles or
certificate of incorporation or bylaws of Royal;
(c) result in the creation or imposition of any lien,
charge, or encumbrance upon Royal or any of its
assets or properties that individually or in the
aggregate with any other liens, charges, or
encumbrances has or may reasonably be expected to
have a material adverse effect on the validity or
enforceability of this Agreement, or on the ability
of Royal to perform its obligations under this
Agreement; or
(d) conflict with or result in a violation or breach of,
or constitute (with or without notice or lapse of
time or both) a default under, or give to any person
or entity any right of termination, cancellation,
acceleration, or modification in or
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with respect to, any contract or agreement to which
Royal is a party or by which its assets or properties
may be bound, and as to which any such conflicts,
violations, breaches, defaults or rights individually
or in the aggregate have or may reasonably be
expected to have a material adverse effect on the
validity or enforceability of this Agreement, or on
the ability of Royal to perform its obligations under
this Agreement.
4. Brokers and Finders. All negotiations relative to this
Agreement and the transaction contemplated hereby have been
carried out by Royal directly with FLIC without the
intervention of any person on behalf of Royal (except firms
engaged by and to be compensated solely by Royal) in such
manner as to give rise to any valid claim by any person
against FLIC for a finder's fee, brokerage commission or
similar payment.
ARTICLE VIII
INDEMNIFICATION
Each Reinsurer agrees that it will investigate, pay, defend or settle
and bear the sole cost and expense of all claims, surrenders and litigation
which are incurred under the Policies assumed by it hereunder on and after the
respective Assumption Dates and that it will indemnify FLIC, FLIC's directors,
officers, employees, agents and successors and assigns and agrees to hold FLIC
free and harmless of and from any and all loss,
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liability and expense (including but not limited to extra contractual,
punitive, exemplary and/or consequential damages, reasonable attorneys fees and
court costs or settlement fees or costs) upon or by reason of such claims,
surrenders or litigation in connection with the Policies.
In the event of a claim or surrender payment being made or litigation
expense being incurred by FLIC on or after the Assumption Dates in connection
with the Policies assumed on such Assumption Dates, FLIC shall notify the
appropriate Reinsurer of such payment and such Reinsurer shall promptly
reimburse FLIC to the extent of any such payment or incurred expense.
If process is served upon FLIC with respect to any of the Polices
after the Assumption Date as to such of the Policies, FLIC shall give prompt
notice thereof to the appropriate Reinsurer, and such Reinsurer then, in its
own name and at its own cost and expense, may interpose any defense in, or may
settle, compromise or otherwise dispose of, such action at such Reinsurer's
discretion. Any correspondence or inquiries or requests related to any of the
Policies assumption reinsured hereunder shall promptly be forwarded by FLIC to
the appropriate Reinsurer.
Subject to the conditions and provisions of this Agreement, each
Reinsurer hereby agrees to indemnify and hold FLIC or any successor of FLIC
harmless, as to the Policies assumed by that Reinsurer, from and against any
and all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities,
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deficiencies, costs and expenses of all kinds whatsoever, including, without
limitation, interest, penalties and reasonable attorneys' fees, damages,
awards, and fines assessed against or imposed upon or incurred by the party
indemnified (collectively, "Losses") arising or resulting from a breach of any
term, condition or provision contained in this Agreement or any facts or
circumstances constituting such a breach by the indemnifying party, other than
for Losses arising or resulting from the gross negligence or willful misconduct
of FLIC.
The party indemnified shall give the indemnifying party ten (10) days
written notice of any claims asserted against or imposed upon or incurred by
the party indemnified, for which indemnification or reimbursement may be sought
on account of the provisions of this Agreement, but the omission so to notify
the indemnifying party shall not release that party from any liability which it
may have to the party indemnified otherwise than on account of the provisions
of this Agreement.
The indemnifying party may give the party indemnified written notice,
within five (5) days of receipt of written notice of claim as required above,
of its election to conduct the defense of such demand, claim, action, or
proceeding or other matter as set out above at its own expense. If the
indemnifying party has given the party indemnified notice of election to
conduct the defense, the party indemnified shall nevertheless have the right to
participate in the defense thereof, but such participation shall be fully at
the expense of the party
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indemnified without a right of further reimbursement of the expense of such
participation. If the indemnifying party shall not notify the party
indemnified of its election of the right to defend such claim, action or
proceeding, the party indemnified may, but need not, conduct the defense of any
claim, action or proceeding. The party indemnified may at any time notify the
indemnifying party of its intention to settle, compromise or satisfy any such
claim, action or proceeding (the defense of which the indemnifying party has
not previously elected to conduct) and may make such settlement, compromise or
satisfaction (at the indemnifying party's expense) unless the indemnifying
party shall notify the party indemnified in writing within fifteen (15) days
after receipt of such notice of intention to settle, compromise or satisfy its
election to assume at its sole expense the defense of any such claim, action or
proceeding and promptly thereafter take appropriate action to implement such
defense. Any such settlement, compromise or satisfaction made by the party
indemnified of, or any such final judgment or decree entered in any claim,
action or proceeding defended only by the party indemnified shall be deemed to
have been consented to by, and shall be binding upon, the indemnifying party as
fully as though it alone has assumed the defense thereof and a final judgment
or decree had been entered in such proceeding or action by a court of competent
jurisdiction in the amount of such settlement, compromise, judgment or decree.
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ARTICLE IX
ARBITRATION
Any dispute which may arise under this Agreement between FLIC and any
Reinsurer shall be settled by an equitable rather than a strictly legal
interpretation pursuant to arbitration conducted in accordance with the
commercial Rules of the American Arbitration Association. In such cases, the
parties will submit their differences to three (3) arbiters, who shall be
officers of insurance companies other than the parties and their affiliates, or
subsidiaries: one (1) to be selected by FLIC, one (1) to be selected by the
Reinsurer, and the third to be selected by the arbiters named by the parties
herein. In the event of disagreement between the arbiters, the decisions will
rest with the majority. The decision of the majority of the arbiters shall be
binding upon the parties herein without appeal. The arbiters will be relieved
of all judicial formality and may abstain from the strict rules of law.
Arbitration may be initiated by either FLIC or the Reinsurer (the
petitioner) by written notice to the other party identifying the nature of the
dispute, demanding arbitration and naming its arbiter. The other party (the
respondent) shall have 10 days after receipt of said notice within which to
designate its arbiter. The third arbiter shall be chosen by the two arbiters
named by the parties within 10 days thereafter and the arbitration shall be
held at the place hereinafter set forth 10 days after the appointment of the
third arbiter. Should the two
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arbiters not be able to agree on the choice of the third, then the appointment
shall be as follows: Each party will chose three arbiters, two of which shall
be refused by the opposing party. The third arbiter shall then be selected by
lot from the remaining two. If the respondent does not name its arbiter and
the respondent will not be aggrieved thereby.
Arbitration shall take place in Philadelphia, Pennsylvania or any
other site agreed upon by the arbiters. The expense of the arbitration
proceeding shall be borne by the losing party; provided that each party shall
be responsible for expenses it incurs with respect to preparation for and
presentation of evidence and witnesses at the proceeding, including the expense
of the arbiter it selects. The decision of the arbiters may be entered as a
final judgment in any court of competent jurisdiction.
ARTICLE X
NOTICE
Any notice allowed or required by the provisions of this Agreement
shall be sent by certified mail, postage pre-paid, return receipt requested, to
each party addressed as follows or to such other address as may be requested by
such party by giving notice pursuant to this provision:
FLIC FAMILY LIFE INSURANCE COMPANY
1200 Sixth Avenue
Seattle, Washington 98010-3148
Attention: President
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with a copy to: Family Life Insurance Company
1200 Sixth Avenue
Seattle, Washington 98010-3148
Attention: General Counsel
MLLIC MERRILL LYNCH LIFE INSURANCE COMPANY
1200 Sixth Avenue
Seattle, Washington 98010-3148
Attention: President
with a copy to: Merrill Lynch Insurance Group, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Attention: General Counsel
TIG Tandem Insurance Group, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Attention: President
with a copy to: Merrill Lynch Insurance Group, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Attention: General Counsel
Royal Royal Tandem Life Insurance
2 Penn Plaza
New York, New York 10016
Attention: President
with a copy to: Merrill Lynch Insurance Group, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Attention: General Counsel
ARTICLE XI
CONDITIONS PRECEDENT TO CLOSING
The obligation of either FLIC or the appropriate Reinsurer to
effectuate an Assumption Closing(s) on each Assumption Date(s) shall be subject
to the following conditions having been complied with on or before each
Assumption Date(s) with respect to those of the Policies assumed on such date:
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A. Governmental Filings and Approvals. All required filings with and
consents and approvals of state insurance regulatory authorities have
been made or obtained. The Insurance Commissioner or the State of
Washington shall approve or not express objection to this Agreement.
If the approval or consent of any insurance regulatory authority other
than the Insurance Commissioner of the State of Washington is
required, the failure to acquire the approval or consent of such
regulatory authority shall not void this Agreement. Rather, the lack
of such approval or consent shall preclude an Assumption Closing
respecting any of the Policies affected thereby until the approval or
consent of any such regulatory authority has been obtained;
B. Consents.
All consents required from third parties other than regulatory
authorities shall have been obtained;
C. Establishment of Separate Accounts by MLLIC, TIG and Royal.
All necessary consents or approvals of the U.S. Securities and
Exchange Commission and any other appropriate regulatory authorities
shall have been obtained to allow MLLIC, TIG and Royal to establish
new separate accounts and to permit the transfer of the assets
attributable to the variable portion of the variable annuity contracts
reinsured hereunder in the Merrill Lynch Variable Annuity Account from
FLIC to the new MLLIC, TIG or Royal separate account on the Effective
Date, and registration statements filed on behalf of the MLLIC,
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TIG or Royal separate accounts pursuant to the Securities Act of 1993
relating to the variable annuity contracts to be assumption reinsured
by MLLIC, TIG or Royal shall have been declared effective;
D. No Pending Actions. No action, suit or proceeding by any governmental
or regulatory authority seeking to restrain or prohibit the consummation of
this transaction shall be threatened by any governmental or regulatory
authority of competent jurisdiction.
ARTICLE XII
EFFECTIVE DATE, CLOSING AND LOCATION
The Effective Date shall be such time and date as is designated by the
Reinsurers, which shall be on or before, or as soon as reasonably practicable
after, the closing date of the Stock Purchase Agreement, based upon the
Reinsurers actively pursuing any and all necessary regulatory approvals or
consents related to this Agreement in a timely fashion. The initial Assumption
Closing shall occur on the Effective Date and shall take place at such location
as FLIC and Reinsurers may unanimously agree.
ARTICLE XIII
TERMINATION
A. This Agreement may be terminated and abandoned without liability to
the terminating party on or prior to the Effective Date by unanimous
consent of FLIC and the Reinsurers.
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<PAGE> 32
B. This Agreement shall be terminated after the Effective Date:
1. By unanimous written consent of FLIC and the Reinsurers; or
2. On the final Assumption Date. The final Assumption Date is
the Assumption Date of any Policies the policyowners or
contractowners of which reside in the jurisdiction which is
the final jurisdiction in which any Reinsurer must obtain any
necessary licensure, authority or approval from regulatory
authorities to assumption reinsure the last of the Policies to
be assumed.
3. The indemnification provisions of ARTICLE VIII herein shall survive
the termination of this Agreement under this section B.
ARTICLE XIV
COVENANTS OF FLIC
A. Nonsolicitation of Policyholders. FLIC covenants and agrees that for
a period of ten years after the Effective Date, it will not, whether
for its own account or for the account of any other person, firm,
corporation or other business organization, use a list of all or any
portion of the policyholders or contractholders of the Policies to
solicit such policyholders or contractholders, provide a list of all
or any portion of such policyholders or contractholders to any third
party or intentionally interfere with any Reinsurer's relationship
with any such policyholders or
- 26 -
<PAGE> 33
contractholders. This covenant shall not preclude FLIC from
soliciting or issuing a policy to any policyholder or contractholder
of the Policies if the initial contract and the relationship between
FLIC and such policyholder or contractholder are established totally
independent of the list of all or any portion of the policyholders or
contractholders of the Policies which may be accessible to FLIC, and
are otherwise established in FLIC's normal course of business.
B. Covenant Not to Disclose. FLIC covenants and agrees that it will not
at any time reveal, divulge or make known to any person (other than
the Reinsurers, or any of their respective officers, employees or
agents) or use for FLIC's own account the names and addresses of the
policyholders or contractholders of the Policies or any other
confidential or proprietary records, data, trade secrets or other
information relating to such policyholders or contractholders, or the
Policies. FLIC further covenants and agrees that it shall retain all
such knowledge and information which it shall acquire or develop
respecting such confidential information in trust for the exclusive
benefit of the Reinsurers and their successors and assigns.
C. Conflicting Agreements. The provisions of this Article shall
supersede and be controlling as to any provisions to the contrary or
inconsistent herewith in any agents contracts or agreements between
FLIC and the agents who
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<PAGE> 34
produced the Policies or any other agreement which contains provisions
relating to this subject matter.
ARTICLE XV
MISCELLANEOUS
A. Acknowledgement of Indemnity Reinsurance Agreement. FLIC and the
Reinsurers acknowledge the existence of the Indemnity Reinsurance
Agreement and agree that any of the Policies intended to be assumption
reinsured pursuant to this Agreement but which, for any regulatory or
other reason, may not be assumption reinsured as of the Effective
Date, shall continue to be indemnity reinsured under the Indemnity
Reinsurance Agreement until such time as they may be assumption
reinsured under this Agreement. FLIC further agrees that as to any
policyholders or contractholders whose policies or contracts were
initially assumed by a Reinsurer, but which, due to any right of
rejection, regulatory action or any other reason must remain with or
be returned to FLIC, such policies or contracts will be treated as the
same and continuing FLIC policies or contracts as existed on the
Effective Date and not as newly issued policies or contracts.
B. Maintenance of Separate Account. In order to accommodate any variable
annuity contractholders of FLIC whose contracts for any reason cannot
be assumed by MLLIC, TIG or Royal on the Effective Date, and therefore
whose contracts must remain with or be returned to FLIC after the
Effective Date,
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<PAGE> 35
and to otherwise facilitate the Indemnity Reinsurance Agreement, FLIC
agrees to maintain the separate account known as the Merrill Lynch
Variable Annuity Account, at no expense to FlIC.
C. Acknowledgement of Administrative Services Agreement. FLIC and MLLIC
acknowledge that the Administrative Services Agreement is to become
effective as of the closing date of the Stock Purchase Agreement and
that, pursuant to the Administrative Services Agreement, MLLIC will
administer and service such of the Policies that must remain indemnity
reinsured after the closing date of the Stock Purchase Agreement for
the period of time that such of the Policies remain indemnity
reinsured under the Indemnity Reinsurance Agreement.
D. Trademark and Other Considerations. On the Effective Date, FLIC shall
transfer to the appropriate Reinsurer all of FLIC's rights, title and
interest in and to any and all service marks, tradenames and
trademarks, whether common law or registered (federal or state), which
are used exclusively in connection with the Policies, except any
relating to a corporate name now used by FLIC (the "Transferred
Names"), any and all copyrights and copyrighted materials, whether
common law or registered (federal or state), which are used
exclusively in connection therewith (the "Transferred Copyrights"),
including, without limitation, any and all registrations of such
Transferred Names or Transferred
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<PAGE> 36
Copyrights and any and all forms or other documents whatsoever
relating thereto. The appropriate Reinsurer shall grant to FLIC a
royalty free license to use any and all services marks, tradenames and
trademarks, whether common law or registered (federal or state), which
are used exclusively in connection with the Policies, except any
relating to a corporate name now used by FLIC ("Licensed Names"), any
and all copyrights and copy righted materials, whether common law or
registered (federal or state), which are used in connection with the
Policies (the "Licensed Copyrights"), including, without limitation,
any and all registrations of such Licensed Names or Licensed
Copyrights, and any and all forms for other documents whatsoever
relating thereto for such time as this Agreement remains in effect.
In addition, FLIC shall permit the appropriate Reinsurer to use and
copy any and all policy forms, insurance forms and filings and other
registrations and similar documents relating to the Policies.
The use by FLIC of the aforesaid license shall be limited to the
marketing of insurance products by FLIC through insurance producers
who are affiliated with Merrill Lynch, Pierce, Fenner & Smith,
Incorporated.
E. No Ceding Commissions. No fee or commission shall be payable with
respect to this Agreement either by FLIC to any Reinsurer or by any
Reinsurer to FLIC.
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<PAGE> 37
F. Entire Agreement. This Agreement, including the exhibits attached
hereto and pertinent provisions of the Stock Purchase Agreement,
constitutes the entire understanding between FLIC and the Reinsurers.
G. Amendment. This Agreement cannot be changed, modified or varied
except in writing signed by duly authorized representatives of both
FLIC and the Reinsurers, except that the Reinsurers may unanimously
agree in writing to amend Exhibits C, D and E to this Agreement
without the consent of FLIC, provided such amendment shall not result
in the removal of any of the Policies from the coverage of this
Agreement.
H. Costs and Expenses. Subject to the terms of the Administrative
Services Agreement and this Agreement, whether or not the transaction
contemplated hereby is consummated, all costs and expenses incurred in
connection with this Agreement and the transaction contemplated hereby
shall be paid by the party incurring such costs and expenses.
I. Further Assurances. FLIC and the Reinsurers agree to perform such
additional acts and execute such additional documents and agreements
as may be necessary or desirable to carry out the purpose and
objectives of this Agreement.
J. Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original,
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<PAGE> 38
but all of which shall constitute one and the same instrument.
K. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns.
IN WITNESS WHEREOF, FLIC, MLLIC, TIG and Royal have caused this Agreement to be
executed by their respective officers duly authorized to do so, as of the date
first written above.
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<PAGE> 39
FAMILY LIFE INSURANCE COMPANY
ATTEST: /s/ EILEEN DYSON BY: /s/ BARRY G. SKOLNICK
--------------------------- ---------------------------
Eileen Dyson Barry G. Skolnick
TITLE: Vice President
------------------------
MERRILL LYNCH LIFE INSURANCE COMPANY
ATTEST: /s/ EILEEN DYSON BY: /s/ BARRY G. SKOLNICK
--------------------------- ---------------------------
Eileen Dyson Barry G. Skolnick
TITLE: Senior Vice President
------------------------
TANDEM INSURANCE GROUP, INC.
ATTEST: /s/ EILEEN DYSON BY: /s/ BARRY G. SKOLNICK
--------------------------- ---------------------------
Eileen Dyson Barry G. Skolnick
TITLE: Senior Vice President
------------------------
ROYAL TANDEM LIFE INSURANCE COMPANY
ATTEST: /s/ EILEEN DYSON BY: /s/ BARRY G. SKOLNICK
--------------------------- ---------------------------
Eileen Dyson Barry G. Skolnick
TITLE: Senior Vice President
------------------------
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<PAGE> 40
EXHIBIT A
to
ASSUMPTION REINSURANCE AGREEMENT
Administrative Services Agreement
between
FLIC and MLLIC
<PAGE> 41
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made as of the ____ day of _______________, 19__, by
and between the Family Life Insurance Company ("FLIC") and Merrill Lynch Life
Insurance Company ("MLLIC"), both insurance corporations domiciled in the state
of Washington.
WHEREAS, MLLIC AND FLIC have entered into an Indemnity
Reinsurance Agreement dated December 28, 1990, in connection with the
restructuring of FLIC in preparation for the sale of FLIC to a third party; and
WHEREAS, MLLIC acknowledges that certain of the life insurance
policies and annuity contracts issued by FLIC and reinsured under said
Indemnity Reinsurance Agreement are to be assumed by MLLIC or insurers
affiliated with MLLIC, following the completion of the sale of FLIC to a third
party; and
WHEREAS, FLIC desires to appoint MLLIC to service certain of
FLIC's life insurance policies and annuity contracts and MLLIC desires to
accept such appointment.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
SECTION 1
Terms of Appointment
1.01 Subject to the conditions set forth in this
Agreement, FLIC hereby employs and appoints MLLIC to service the life insurance
policies and annuity contracts which are the subject of the Indemnity
Reinsurance Agreement between FLIC and MLLIC dated December 28, 1990 (the
"Indemnity Reinsurance Agreement"), and which have not been assumption
reinsured by
<PAGE> 42
MLLIC, Tandem Insurance Group, Inc. ("TIG") or Royal Tandem Life Insurance
Company ("Royal") pursuant to the Assumption Reinsurance Agreement between
FLIC, MLLIC, TIG and Royal dated March 21, 1991 ("Assumption Reinsurance
Agreement"), as well as FLIC's variable annuity contracts known as the Real
Estate Variable Annuity contracts (Form AY-7). Such life insurance policies
and annuity contracts are hereinafter referred to as the "Policies".
1.02 MLLIC hereby accepts such employment and
appointment and agrees that on and after the Effective Date of its appointment
it will act for FLIC in servicing the Policies.
1.03 MLLIC agrees to provide the necessary
facilities, equipment, and personnel to perform its duties and obligations
hereunder in accordance with industry practice, either directly or by
subcontract with any other party.
1.04 MLLIC agrees that it will perform, either
directly or by subcontract with any other party, all functions necessary for
the proper administration of the Policies, which includes but is not limited
to, those contract servicing functions as set forth in Exhibit A attached
hereto and made a part hereof.
SECTION 2
Term
2.01 Subject to termination as hereinafter provided, this
Agreement shall remain in full force and effect for such
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<PAGE> 43
period of time as the Indemnity reinsurance Agreement shall remain in effect.
SECTION 3
Fees
3.01 In recognition of the fact that, during the
term of this Agreement, MLLIC will assume by indemnity reinsurance 100% of
FLIC's liabilities under the Policies pursuant to the Indemnity Reinsurance
Agreement and that MLLIC will therefore retain all revenue and profit with
respect to the Policies, the parties agree that the sole consideration to be
paid by FLIC to MLLIC for MLLIC's services under this Agreement shall be one
dollar ($1.00) per year.
SECTION 4
Representations and Warranties of MLLIC
MLLIC represents and warrants to FLIC as follows:
4.01 It is a corporation duly organized and
existing and in good standing under the laws of the State of Washington.
4.02 It is empowered under applicable laws and by
its charter and bylaws to enter into and perform the services contemplated in
this Agreement.
4.03 All requisite corporate proceedings have been
taken to authorize it to enter into and perform the services contemplated in
this Agreement.
4.04 All of the prospectuses, Securities and
Exchange Commission ("SEC") registration statements, insurance
- 3 -
<PAGE> 44
policies, annuity contracts and other forms necessary to the performance of
this Agreement shall have received and will continue to receive all required
approvals of regulatory agencies and shall be in compliance with all federal,
state, and local laws and regulations.
SECTION 5
Representations and Warranties of FLIC]
FLIC represents and warrants to MLLIC as follows:
5.01 It is a corporation duly organized and
existing and in good standing under the laws of the State of Washington.
5.02 It is empowered under the applicable laws and
regulations and by its charter and bylaws to enter into and perform this
Agreement.
5.03 All requisite corporate proceedings have been
taken to authorize it to enter into and perform this Agreement.
SECTION 6
Indemnification
6.01 MLLIC shall not be responsible for, and FLIC
irrevocably releases and shall indemnity and hold MLLIC harmless from and
against, any and all costs, expenses, losses, damages, charges, counsel fees,
payments and liability, which may be asserted against MLLIC or for which it may
be held to be liable, arising solely out of or solely attributable to FLIC's
gross negligence or willful misconduct; provided that only those acts or
omissions of FLIC which occur after the closing date of the
- 4 -
<PAGE> 45
Stock Purchase Agreement between Merrill Lynch Insurance Group, Inc., FLIC,
Financial Industries Corp. and an affiliate of Financial Industries Corp. dated
March 19, 1991, (the "Stock Purchase Agreement") may give rise to MLLIC's right
to indemnification as above stated.
6.02 MLLIC shall be responsible for and shall
indemnify and hold FLIC harmless from and against any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liability arising out of
or attributable to MLLIC's willful refusal or failure to comply with the terms
of this Agreement, or which arise out of MLLIC's negligence or willful
misconduct or which arise out of the breach of any representation or warranty
of MLLIC hereunder.
6.03 At any time MLLIC may contact a person
indicated on FLIC's "Schedule of Authorized Personnel" as a person authorized
to give instructions under this section with respect to any matter arising in
connection with this Agreement.
6.04 FLIC shall immediately provide MLLIC with
written notice of any change of authority of persons authorized and enumerated
in Exhibit B to provide MLLIC with instructions or directions relating to
service to be performed by MLLIC under this Agreement.
6.05 In no event and under no circumstances shall
either party under this Agreement be liable to the other party under any
provision of this Agreement for consequential damages.
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<PAGE> 46
SECTION 7
Covenants of FLIC and MLLIC
7.01 MLLIC shall establish and maintain facilities
and procedures for the safekeeping of policy forms, check forms and facsimile
signature imprinting devices, if any, and all other documents, reports,
records, books, files, and other materials relative to this Agreement.
7.02 FLIC shall have full and free access, during
ordinary business hours, to all documents, records, reports, books, files, and
other materials relative to this Agreement and maintained by MLLIC.
7.03 It is expressly understood and agreed that
all documents, reports, records, books, files and other materials relative to
this Agreement shall be the sole property of FLIC and that such property shall
be held by MLLIC, in accordance with this Agreement, during the term of this
Agreement and shall be surrendered to FLIC promptly upon request.
7.04 FLIC shall, on a timely basis, provide MLLIC,
at no expense to FLIC, with all information in FLIC's possession which MLLIC
may reasonably request to assist MLLIC in performing the service functions
MLLIC undertakes under this Agreement.
7.05 Nothing contained herein shall create, or be
deemed or considered by the parties hereto or by any third party as creating,
the relationship of principal and agent or of partnership or of joint venture
between the parties hereto.
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<PAGE> 47
SECTION 8
Termination of Agreement
8.01 This Agreement may be terminated by mutual
agreement of the parties at any time.
8.02 This Agreement is automatically terminated
upon termination of the Indemnity Reinsurance Agreement.
8.03 If either of the parties hereto shall
materially breach this Agreement or be materially in default in the performance
of any of its duties and obligations hereunder (the defaulting party), the
other party hereto may give written notice thereof to the defaulting party and
if such default or breach shall not have been remedied within thirty (30) days
after such written notice is given, then the party giving such written notice
may terminate this Agreement by giving thirty (30) days written notice of such
termination to the defaulting party. Termination of this Agreement by default
or breach by FLIC shall not constitute a waiver of any rights of MLLIC in
reference to services performed prior to such termination or rights of MLLIC to
be reimbursed for out-of-pocket expenditures; termination of this Agreement by
default or breach by MLLIC shall not constitute a waiver by FLIC of any other
rights it might have under this Agreement.
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<PAGE> 48
SECTION 9
Assignment
9.01 Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party hereto without the prior written
consent of the other; however, MLLIC shall have the right at its sole
discretion to subcontract any and all of its duties under this Agreement to any
affiliate or any other party. No such subcontract shall act so as to relieve
MLLIC of any and all of its responsibilities hereunder to FLIC.
9.02 This Agreement shall insure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
SECTION 10
Miscellaneous
10.01 FLIC or its duly authorized independent auditors and
appropriate regulatory agencies will have the right under this Agreement to
perform on-site audits of records and accounts directly pertaining to the
Policies services by MLLIC hereunder at MLLIC's offices in accordance with
reasonable procedures and at reasonable frequencies. MLLIC will make available
to FLIC's auditors and representatives of the appropriate regulatory agencies
all reasonably requested records, data and access to operating procedures.
10.02 The parties hereto agree that all tapes, books,
reference manuals, instructions, records, information and data pertaining to
the business of the other party, and the
- 8 -
<PAGE> 49
policy or contract owners serviced for FlIC hereunder which are exchanged or
received pursuant to the negotiation of and/or the carrying out of this
Agreement shall remain confidential and shall not be voluntarily disclosed to
any other person, other than as provided in section 10.01 above. Subject to
FLIC's right of access to any such information or documents as may be necessary
for FLIC to comply with required state or federal reports or filings, all such
tapes, books, reference manuals, instructions, records, information and data in
the possession of each of the parties hereto shall remain with or be returned
to as the case may be, FLIC or MLLIC, upon the termination of this Agreement,
subject to the terms of the Indemnity Reinsurance Agreement and the Assumption
Reinsurance Agreement.
10.03 It is understood and agreed that all services
performed hereunder by MLLIC shall be as an independent contractor and not as
an employee of FLIC.
10.04 It is understood and agreed that this Agreement shall
supersede the Service Agreement between Merrill Lynch Insurance Group, Inc.,
FLIC and MLLIC dated November 29, 1990 as to the Policies and shall be
substituted for such Service Agreement in Article VI A. 2.(b) of the Indemnity
Reinsurance Agreement.
10.05 This Agreement, the Indemnity Reinsurance Agreement
and the Assumption Reinsurance Agreement, constitute the entire agreement
between the parties hereto as to the subject matter hereof, and supersede any
prior agreement with respect to
- 9 -
<PAGE> 50
the subject matter hereof, whether oral or written. This Agreement may not be
modified except in a written instrument executed by both of the parties hereto.
SECTION 11
Effective Date
11.01 This Agreement shall become effective (the "Effective
Date") on the same date as the closing date of the Stock Purchase Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf by and through
their duly authorized officers as of the day and year first above written.
FAMILY LIFE INSURANCE COMPANY
Attest By:
-------------- --------------------------------
-----------------------------------
Title
MERRILL LYNCH LIFE INSURANCE COMPANY
Attest By:
-------------- --------------------------------
-----------------------------------
Title
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<PAGE> 51
EXHIBIT A
LIFE INSURANCE AND FIXED AND VARIABLE ANNUITY
CONTRACT SERVICING FUNCTIONS
PERFORMED BY MERRILL LYNCH LIFE INSURANCE COMPANY
FOR
FAMILY LIFE INSURANCE COMPANY
A. CONTRACT ISSUE AND UNDERWRITING
1. Reviews form of application and applies FLIC's issue and
underwriting criteria to application for an insurance to
annuity contract. (The above criteria shall be the issue and
underwriting criteria of FLIC on the Effective Date of this
Agreement and such criteria may be amended only by mutual
written agreement of FLIC and MLLIC.) Causes to have printed
and maintains supply of insurance and annuity contracts.
2. Prepares contract data page and issues contract for paid
business and mails to contract owners or agents.
3. Establishes and maintains all policyholder, participant,
annuitant, and contract owner records, as applicable. Upon
request of FLIC or insurance regulatory authorities a complete
copy of any record will be forwarded to the requesting party
by overnight delivery.
4. Maintains and preserves records with respect to the Merrill
Lynch Variable Annuity Account as required by Rules 31a-1 and
31a-2 under the Investment Company Act of 1940.
5. Notifies dealer/agent of any error or missing data needed to
establish policy holder, participant, annuitant or contract
owner records.
6. Causes to have printed and maintains supply of confirmation
statements. Prepares and mails confirmation statements of
purchases to contract owners with copies to dealer/agents.
7. Deposits monies received with application into depository
account of FLIC.
8. Causes to have printed and maintains inventory of all
issue-related forms, contracts, endorsements and adoption
agreements.
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<PAGE> 52
B. BILLINGS AND COLLECTION
1. Receives purchase payments and reconciles amount paid with
returned billing statements or other remittance media.
2. Prepares and mails confirmation statement of premiums or
purchase payments to policyholders with copies to
dealer/agents.
3. Prepares pre-authorized checks ("PAC"), individual bills, or
group billing lists for all periodic payment contracts
(confirmation statement can double as billing statement, if
desired). Causes to be printed and maintains supply of PAC
authorization forms.
4. Generates and deposits pre-authorized checks on appropriate
schedule.
5. Updates the contract owner master records and all other
records to reflect payments received.
6. Deposits all cash received under the contracts into a
designated bank account.
7. Transmits bank transfer authorization summaries prepared for
each valuation period on variable contracts.
C. BANKING
1. Copies all checks and assigns them a control number.
Balances, edits, endorses and prepares daily deposits.
Generates pre-authorized checks on scheduled basis.
2. Deposits are placed into a depository account.
3. Transfers funds from the depository account to one of the
following:
a. General Account of FLIC
b. Investment Vehicles(s) Custodian Account(s)
in the case of variable contracts
c. Disbursement Account of FLIC
4. Prepares checks for policyholder annuitants in "payout" phase.
Checks are also prepared for partial and full surrenders as
well as death claims.
D. ACCOUNTING/AUDITING
1. Retains systems generated reports in accordance with a
retention schedule mutually established. Provides
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<PAGE> 53
access to such reports for internal and external auditing.
2. Cooperates in annual audit of general account and separate
account financials conducted for purposes of financial
statement certification and publication and accommodates other
client or regulatory audits, as required.
3. Provides information for general ledger maintenance.
E. CONTRACT OWNER SERVICES/RECORD MAINTENANCE
1. Receives and implements all contract owner service requests
including information requests, beneficiary changes, transfer
of assets between eligible investment vehicles, and changes of
any other information maintained on the system.
2. Researches all inquiries using both data stored in the system
and microfilm records. Responds directly to any questions or
inquiries as mutually defined.
3. Provides a set of transaction registers confirming all changes
made to policyholder, participant, annuitant or contract owner
accounts. Copies all communications from participants,
annuitants, and contract owners. A copy will be delivered
promptly to the FLIC at its principal office upon FLIC's
request or that of any insurance regulatory authority.
Further, upon request of FLIC or insurance regulatory
authorities a complete copy of any record will be forwarded to
the requesting party by overnight delivery.
4. Reviews forms, causes to be printed and maintains adequate
supply for field use.
5. Copies of complaints will be promptly delivered to FLIC at its
principal office.
6. Communicates all interest rate changes and other changes with
regard to the Policies to policyholders and contractholders
and to FLIC's agents who market and service the Policies.
F. DISBURSEMENT (SURRENDERS, CLAIMS)
1. Receives requests for partial or full surrenders and death
claims from contract owners and beneficiaries. Retains and
accounts for any contract administrative charges and
applicable premium taxes.
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<PAGE> 54
2. Processes all surrender requests and death claims against the
policyholder and the participant master files pursuant to
FLIC's guidelines. (FLIC's guidelines shall be those in
effect on the Effective Date of this Agreement and such
guidelines may be amended only by mutual written agreement of
FLIC and MLLIC.)
3. Prepares checks for surrenders and death claims and forwards
to contract owner or beneficiary (including confirmation).
4. Prepares and mails confirmation statements of disbursement
transactions to contract owners with copies to dealer/agents.
5. Prepares report on surrenders and death claims.
6. Reviews, causes to have printed, and maintains adequate supply
of checks.
7. Provides information about death claims to FLIC at its
principal office.
8. Withholds appropriate federal and state income tax.
G. COMMISSIONS
1. Receives application and payment from field. Verifies
validity of application and license status of both writing and
general agents.
2. Creates and maintains detailed commission transaction records
for each financial transaction processed.
3. Creates commission adjustment transactions as necessary due to
cancellations, lapses, and the like.
4. Prepares commission statements and checks including overrides
to three levels.
5. Prepares commission interface to FLIC in machine readable form
as required.
6. Creates agent tax reporting forms.
H. BENEFIT PROCESSING
1. Receives information for policyholders or annuitants going
into the annuity (payout) phase.
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<PAGE> 55
2. Calculates the amount of the initial amount for payout based
on tables supplied by FLIC.
3. Deducts applicable premium taxes.
4. Establishes and maintains policyholder and annuitant records.
5. Withholds appropriate federal and state income tax.
I. PROXY PROCESSING
1. Receives record date information and proxy solicitation from
underlying investment vehicle(s).
2. Prepares proxy ballots.
3. Mails solicitation and resolicitations, if necessary.
4. Maintains all proxy registers and other required proxy
material.
J. PERIODIC REPORTS TO CONTRACT OWNERS
1. Prepares and mails statement of account to each participant,
annuitant or contract owner. Mails on required schedule.
2. Inserts and mails all semi-annual reports of the underlying
funds to variable contract owners.
K. REGULATORY REPORTS AND FILINGS
1. Provides relevant financial information for preparation of
general account and separate account convention blanks.
2. Prepare Federal Tax Reports 1099-R, W-2P, W-2 and 5498 for
contract owners as required. Mails to contract owners and
appropriate authorities.
3. Responds to any requests from plan administrators or trustees
for information affecting the plan or participants for
qualified plans.
4. Responds to requests for calculations applicable to annuity
payments as may be necessary for tax calculations.
5. Provides relevant financial data for preparation of Separate
Account Annual SEC Reports and any other
- 5 -
<PAGE> 56
reports or filings required for registered investment
companies.
6. Drafts and files Registration Statements and other SEC related
documents, where required, and performs services necessary to
meet SEC requirements with respect to any of the Policies
which are variable contracts.
7. Prepares and submits all state insurance regulatory policy
form filings required with respect to the Policies.
L. AGENT LICENSE RECORDKEEPING
1. Receives agent license status information from FLIC.
(a) New Agents
(b) Changes in Status
(c) Agents Terminated
2. Edits against agent records when processing transactions
against a policy.
M. ADVERTISING AND MARKETING
1. Develops all advertising materials to be used in connection
with the Policies and provides for dissemination to FLIC's
agents and the general public, subject to FLIC's guidelines.
(FLIC's guidelines shall be those in effect on the Effective
Date of this Agreement and such guidelines may be amended only
by mutual written agreement of FLIC and MLLIC. Such
guidelines and all advertising material must be maintained in
compliance with applicable laws and regulations, as amended,
at all times.)
2. Makes all filings and obtains any regulatory approvals
required with regard to advertising of the Policies.
N. VALUATION OF RESERVES AND ACTUARIAL OPINION
1. Designs, maintains and executes systems to provide the
necessary valuation of reserves and related items as required
for statutory, GAAP, and tax accounting.
2. Provides the formal actuarial opinion and related reports
required by NAIC Annual Statement blank, the SEC and external
auditors.
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<PAGE> 57
O. REGULATORY SUPERVISION AND COMPLIANCE
1. Provides regulatory supervision and compliance, to the extent
MLLIC is legally permitted, as to all servicing functions
contemplated by this Agreement.
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<PAGE> 58
EXHIBIT B
FAMILY LIFE INSURANCE COMPANY
SCHEDULE OF AUTHORIZED PERSONNEL
The following individuals are authorized to give information or direction to
MLLIC with respect to matters arising in connection with the servicing to be
performed under this Agreement:
Michael F. Schundler - Senior Vice President and Controller
David V. Johnson - Senior Vice President
<PAGE> 59
EXHIBIT B
to
ASSUMPTION REINSURANCE AGREEMENT
Indemnity Reinsurance Agreement
between
FLIC and MLLIC
<PAGE> 60
INDEMNITY REINSURANCE AGREEMENT
Between
FAMILY LIFE INSURANCE COMPANY
and
MERRILL LYNCH LIFE INSURANCE COMPANY
Dated: December 28, 1990
--
<PAGE> 61
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 1
A. Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
B. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
C. Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
D. Policy Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
E. Qualifying Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
F. Reinsurance Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
G. Separate Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
H. Statutory Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
I. Third Party Reinsurance Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
SCOPE OF REINSURANCE . . . . . . . . . . . . . . . . . . . . 2
A. Coinsurance of General Account Statutory Reserve
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1. Coinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Reserve Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
B. Modified Coinsurance of Separate Account Statutory
Reserve Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III
LIABILITY . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE IV
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . 3
A. Reinsurance Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
B. Administration of Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
</TABLE>
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<PAGE> 62
TABLE OF CONTENTS (cont.)
<TABLE>
<CAPTION>
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<S> <C> <C>
C. Third Party Reinsurance Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
D. Policy Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
E. Declaration of Policy Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
F. Oversights - Clerical Errors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
G. Access to Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
H. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
I. Headings and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
J. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
K. Regulatory Filings and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
L. Guaranty Fund Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
M. No Additional Reinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
N. Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
O. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
P. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE V
RESERVES . . . . . . . . . . . . . . . . . . . . . . . . 5
A. Establishment of General Account Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
B. Establishment of Separate Account Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1. Policy Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2. Policy Account Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
C. Reserve Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
D. Reserve Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE VI
ACCOUNTING AND SETTLEMENT . . . . . . . . . . . . . . . . . . . 6
A. Net Daily Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
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<PAGE> 63
TABLE OF CONTENTS (cont.)
<TABLE>
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B. Benefit Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1. Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2. Joint Payment Account Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
C. Cash Settlement and Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1. Daily Cash Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2. Monthly Cash Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3. Form of Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4. Right to Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. General Right of Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VII
TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . 10
A. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
B. Termination by MLLIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VIII
INSOLVENCY . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IX
ARBITRATION . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE X
PARTIES TO AGREEMENT . . . . . . . . . . . . . . . . . . . 12
ARTICLE XI
EFFECTIVE DATE AND CLOSING . . . . . . . . . . . . . . . . . 12
ARTICLE XII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 12
ARTICLE XIII
COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE XIV
EXECUTION . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
- iii -
<PAGE> 64
EXHIBITS
A. Policies Reinsured
B. Third Party Reinsurance Agreements
C. Service Agreement between Merrill Lynch Insurance Group, Inc., FLIC
and MLLIC dated November 29, 1990
- iv -
<PAGE> 65
INDEMNITY REINSURANCE AGREEMENT
This Agreement is executed this 28th day of December, 1990 by and between
FAMILY LIFE INSURANCE COMPANY, a Washington insurance corporation ("FLIC") and
MERRILL LYNCH LIFE INSURANCE COMPANY, a Washington insurance corporation
("MLLIC"). FLIC and MLLIC mutually agree to reinsure on the terms and
conditions set out below.
ARTICLE I
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
following definitions:
A. Business Day shall mean a day other than a Saturday or Sunday on which
banks are not required or permitted to close in the sate of
Washington.
B. Effective Date shall mean the date this Indemnity Reinsurance
Agreement becomes effective as stated in Article XI.
C. Policies shall mean all insurance policies and annuity contracts
indemnity reinsured under this Agreement, as specified in Exhibit A
attached to this Agreement.
D. Policy Account shall mean the portion of the Separate Account assets
and liabilities as shall from time to time relate to the Policies.
E. Qualifying Assets shall mean assets which qualify as admissible assets
of MLLIC under statutory accounting principles and the laws and
regulations of the State of Washington.
F. Reinsurance Period shall mean the period of time from the Effective
Date of this Agreement through the termination of this Agreement.
G. Separate Account means the "Merrill Lynch Variable Annuity Account" of
FLIC as described in the prospectuses relating to the variable annuity
contracts included in the Policies.
H. Statutory Reserve shall mean all reserves computed in accordance with
statutory accounting requirements.
I. Third Party Reinsurance Agreements shall mean the third party
reinsurance agreements listed on Exhibit B to this Agreement, under
which FLIC cedes a portion of its net risk retained under the
Policies.
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<PAGE> 66
ARTICLE II
SCOPE OF REINSURANCE
MLLIC agrees to assume from and indemnify FLIC and FLIC agrees to cede to and
reinsure with MLLIC, on an indemnity reinsurance basis, one hundred percent
(100%) of FLIC's liability which remains under the Policies after reinsurance
under the third Party Reinsurance Agreements, in accordance with the terms and
conditions of this Agreement. If, and to the extent, MLLIC may be precluded by
the law of any jurisdiction from indemnity reinsuring the Policies owned by
residents of that jurisdiction, such Policies will be indemnity reinsured in
accordance with the provisions of this Agreement as soon as practicable after
the preclusion is removed as to such jurisdiction.
A. Coinsurance of General Account Statutory Reserve Liabilities.
1. Coinsurance. The indemnity reinsurance effected under this
Agreement shall be based on 100% coinsurance with respect to
general account Statutory Reserve liabilities established by
FLIC with respect to the Policies.
2. Reserve Transfers. As to Policies in force on the Effective
Date, FLIC shall transfer Qualifying Assets to MLLIC in an
amount equal to the excess of (i) aggregate Statutory Reserve
liabilities established by FLIC with respect to the Policies
over (ii) separate account Statutory Reserves established by
FLIC with respect to the Policies plus a ceding commission of
Seventy-Five Million Dollars ($75,000,000).
B. Modified Coinsurance of Separate Account Statutory Reserve
Liabilities. The indemnity reinsurance effected under this Agreement
shall be based on 100% modified coinsurance with respect to separate
account Statutory Reserve liabilities established with respect to the
Policies.
ARTICLE III
LIABILITY
The liability of MLLIC on any Policy shall begin simultaneously with that of
FLIC, but not prior to the Effective Date of this Agreement. The reinsurance
under this Agreement with respect to any Policy shall continue for as long as
the liability of FLIC under such Policy continues, subject to the provisions of
Article VII.
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<PAGE> 67
ARTICLE IV
GENERAL PROVISIONS
A. Reinsurance Conditions. The reinsurance hereunder is subject to the
same limitations and conditions as the insurance provided under the
Policies, except as otherwise specifically provided herein.
B. Administration of Policies. FLIC, or its designee, shall administer
and service all Policies reinsured hereunder and perform all
accounting for such Policies commencing on the Effective Date of this
Agreement.
C. Third Party Reinsurance Agreements. FLIC represents to MLLIC that the
Third Party Reinsurance Agreements constitute all reinsurance treaties
or agreements entered into by FLIC with respect to the Policies. FLIC
further represents and warrants that the Third Party Reinsurance
Agreements remain in full force and effect and that no party is in
default under any Third Party Reinsurance Agreement.
D. Policy Changes. FLIC agrees to obtain MLLIC's prior written approval
of any changes FLIC makes in policy and contract forms reinsured
hereunder that would require filings with state regulatory
authorities. MLLIC's liability for risks reinsured under this
Agreement shall be increased or decreased by 100% of the increase or
decrease in FLIC's liability attributable to such changes.
E. Declaration of Policy Interest Rates. Some of the Policies ceded
under this Agreement provide that FLIC may in its discretion, from
time to time, as provided in the policy or contract, declare interest
rates that are used to determine policy or contract values. During
the Reinsurance Period, FLIC agrees that MLLIC shall have the right to
designate such discretionary interest rates to be declared on the
Policies and the effective dates thereof, subject to the approval of
FLIC, which approval will not be unreasonably withheld. FLIC and
MLLIC will by letter agreement establish a procedure whereby FLIC will
indicate its approval of interest rates and the effective dates
thereof, as designated by MLLIC within two Business Days of receipt
thereof from MLLIC. FLIC agrees to allow MLLIC to be the source of
communication of such interest rate changes and their effective dates
to FLIC's agents who are marketing the Policies.
F. Oversights - Clerical Errors. Should FLIC fail to state accurately
the amount of business to be ceded in accordance with the provisions
of this Agreement, or should FLIC or MLLIC fail to comply with any of
the other terms of this
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<PAGE> 68
Agreement, and if this is shown to be unintentional and the result of
a misunderstanding, oversight or clerical error on the part of either
FLIC or MLLIC, then this Agreement shall not be deemed abrogated
thereby, but both companies shall be restored to the position they
would have occupied had no such oversight or misunderstanding or
clerical error occurred.
G. Access to Records. FLIC, MLLIC or their duly accredited
representatives shall have the right to audit and review the business
records and practices of the other which relate to the Policies
reinsured hereunder. Such audits shall be conducted at the expense of
the auditing party and shall occur during the normal business hours of
the party being audited. The party being audited shall have a duty to
cooperate fully with such audit and shall make available all materials
requested by the auditing party.
H. Amendments. This Agreement may be amended by mutual agreement of the
parties. Any such Amendments shall be in writing and executed by an
officer of each party.
I. Headings and Exhibits. Article and Paragraph headings are not a part
of this Agreement and shall not affect the terms hereof. The Exhibits
attached are part of this Agreement.
J. Notice. Any notice allowed or required by the provisions cf this
Agreement shall be sent by certified mail, postage prepaid, return
receipt requested, to each party addressed as follows or to such other
address as may be requested by such party by giving notice pursuant to
this provision:
FLIC FAMILY LIFE INSURANCE CoMPANY
1200 Sixth Avenue
Seattle, Washington 98010-3148
Attention: President
with a copy to:
Mr. D. McKay Snow
Senior Vice President and General Counsel
Family Life Insurance Company
1200 Sixth Avenue
Seattle, Washington 98010-3148
MLLIC MERRILL LYNCH LIFE INSURANCE COMPANY
1200 Sixth Avenue
Seattle, Washington 98010-3148
Attention: President
- 4 -
<PAGE> 69
with a copy to:
Merrill Lynch Insurance Group, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Attention: General Counsel
K. Regulatory Filings and Approvals. It shall be a condition precedent
to closing that any regulatory filings or approvals, required in the
opinion of FLIC and MLLIC to be made or obtained prior to the closing
of this Agreement, are in fact made or obtained before the Effective
Date.
L. Guaranty Fund Assessments. In the event FLIC is required to pay any
assessment to any insurance guaranty or insolvency or other similar
fund maintained by any jurisdiction, the portion, if any, of FLIC's
assessment that relates to Policies reinsured hereunder (the "Related
Assessment") shall be paid by MLLIC. MLLIC shall pay to FLIC any
Related Assessment which shall have become due, promptly on demand
therefor by FLIC. If at any time FLIC shall be allowed to recover any
such assessment (e.g., through policy surcharges or reduction of
premium taxes) the portion of any such recovery received or otherwise
realized any FLIC shall be paid to MLLIC (based upon the total portion
of such recovery attributable to Policies reinsured by MLLIC).
M. No Additional Reinsurance. No additional reinsurance treaties or
agreements will be effected by FLIC with respect to the Policies after
the date of this Agreement without written consent of MLLIC. In
addition, FLIC will not amend any terms of its existing reinsurance
treaties or agreements without the prior written consent of MLLIC.
N. Further Actions. Both FLIC and MLLIC shall take all such further
actions and shall execute all such further agreements and documents,
as shall be reasonably requested by either FLIC or MLLIC to effect
this transaction.
O. Governing Law. This Agreement shall be governed by the laws of the
State of Washington.
P. Entire Agreement. This Agreement, including the exhibits attached
hereto, constitutes the entire understanding between FLIC and MLLIC
with regard to this subject matter.
ARTICLE V
RESERVES
A. Establishment of General Account Reserve. MLLIC shall be responsible
for establishing and maintaining the proper
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<PAGE> 70
general account Statutory Reserves for the Policies as required by
state insurance regulatory authorities and as is consistent with
coinsurance accounting principles.
B. Establishment of Separate Account Reserves.
1. Policy Account. For each Policy which is a variable annuity
contract, an amount equal to the Merrill Lynch Variable
Annuity Account value or for variable annuity contracts
annuitized on a variable basis, the annuitized contract
reserves, shall be held by FLIC in the Separate Account.
2. Policy Account Reserve. The total Policy Account Statutory
Reserve liability for each Policy relating to the assets held
in the Policy Account pursuant to Article V B. 1. shall be
shown by FLIC on its Separate Account balance sheet,
consistent with modified coinsurance accounting principles.
C. Reserve Reports. FLIC or its designee shall provide MLLIC, within
five (5) Business Days after the end of each calendar month, valuation
summary reports which shall itemize reserves and contracts in force by
plan code, in a format mutually agreed upon by FLIC and MLLIC. Such
reports shall reflect 100% of any changes in the reserves described in
Article V A. above which occurred during the accounting period for
which such reports are made. These reports shall include statutory,
tax and generally accepted accounting principles ("GAAP") reserves.
D. Reserve Credit. MLLIC shall take all steps necessary (including,
without limitation, at MLLIC's sole election, permitting FLIC to
withhold funds, establishing a reserve trust account or post a letter
of credit) to cause the full statutory reserve credit contemplated
under this Agreement to be available to FLIC in each applicable
jurisdiction as of the filing of any quarterly or annual financial
statements by FLIC.
ARTICLE VI
ACCOUNTING AND SETTLEMENT
A. Net Daily Adjustment. FLIC shall pay to MLLIC, or MLLIC shall pay to
FLIC, as the case may be, on each Business Day, any Net Daily
Adjustment for the preceding Business Day. The Net Daily Adjustment
shall, for Policies reinsured by MLLIC, be the amount calculated by
comparing:
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<PAGE> 71
1. the sum of:
(a) the gross premiums collected on all Policies;
(b) the interest payments and principal repayments on all Policy
loans;
(c) the mortality risk, expense risk and other Policy charges
collected and withdrawn from the Separate Account;
(d) the amount of funds transferred from the Separate Account to
the general account of FLIC in connection with the payment of
surrender, death, withdrawal, annuity or Policy loan benefits,
or in connection with a transfer to a fixed account option
within a variable annuity Policy;
(e) the amount of any net gain from any investment or
disinvestment in the Separate Account, whenever occurring,
having resulted in a value other than the corresponding value
charged or credited under the Policies (i.e., breakage); and
(f) any other fees, charges, premiums or costs, or portion
thereof, collected during the preceding Business Day, which
would be payable to the general account of FLIC in the absence
of this indemnity reinsurance of the Policies.
2. with the sum of the following:
(a) the commissions paid (net of refunds), as specified in the
FLIC General Agency Agreement with Merrill Lynch Life Agency,
Inc., for all Policies;
(b) the administrative expense allowances, defined as any net
charges under the Service Agreement between Merrill Lynch
Insurance Group, Inc., FLIC and MLLIC dated November 29, 1990,
("Service Agreement"), attached hereto as Exhibit "C", payable
by FLIC for the administration of the Policies, or any charges
payable by FLIC to MLLIC under any subsequent services
agreement which supersedes the Services Agreement;
(c) the amount of any state, municipal or other premium or gross
receipts taxes paid with respect to Policy premiums collected;
(d) the amount of brokerage and any similar charges paid by FLIC
in connection with the purchase, sale, redemption or
maintenance of Separate Account assets;
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<PAGE> 72
(e) the Third Party Reinsurance premiums paid by FLIC;
(f) the Policy benefits paid, including death benefits (net of
Third Party Reinsurance reimbursements), full or partial cash
surrender benefits, full or partial withdrawal benefits,
maturity benefits, annuity payments, Policy loan benefits and
premium (or other) refunds;
(g) the amount of funds transferred from the general account of
FLIC to the Separate Account in connection with maintaining
the Policy Account;
(h) the amount of any net loss from any investment or
disinvestment in the Separate Account, whenever occurring,
having resulted in a value other than the corresponding value
charged or credited under the Policies (i.e., breakage); and
(i) any other fees, charges, premiums or costs, or portion
thereof, payable on such day by the general account of FLIC
under the terms of the Policies.
Reimbursements listed above shall not be made with respect to items
accrued by FLIC prior to the Effective Date.
If the sum of items in 1. exceeds the sum of items in 2. for the
preceding Business Day, then (subject to the provisions of Section C.) such
excess shall be paid by FLIC to MLLIC by wire transfer of immediately available
funds before the end of business on the current Business Day. Conversely, if
the sum of the items in 2. exceeds the sum of the items in 1. for the preceding
Business Day, then (subject to the provisions of Section C.) such excess shall
be paid by MLLIC to FLIC by wire transfer of immediately available funds before
the end of business on the current Business Day.
B. Benefit Payments.
1. Generally.
(a) The amount of MLLIC's payment with respect to benefit
payments under the Policies as identified in A. 2.
(f) above shall be net of MLLIC's share of the
amounts then held in the Policies Account pursuant to
Article V B. 1. hereof, or transferred from the
Separate Account pursuant to A. 1. (d) above.
(b) MLLIC shall have full responsibility and authority
for all benefit payment determinations or
settlements, and shall be solely responsible for
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<PAGE> 73
all expenses associated with benefit payment
determinations or settlements. Such benefit payment
authority shall be subject to FLIC's guidelines as in
effect on the Effective Date of this Agreement and
any amendments to such guidelines may only be made by
mutual written agreement of FLIC and MLLIC.
2. Joint Payment Account Option. At any time during the
Reinsurance Period, upon ten (10) days notice to FLIC, MLLIC
at its sole option may require the establishment of a joint
bank account for the purpose of making such benefit payments
of the type identified in A. 2. (f) above, with the signatures
of both FLIC and MLLIC required for checks drawn on such
account.
C. Cash Settlement and Accounting.
1. Daily Cash Settlements. At the end of each Business Day, FLIC
shall notify MLLIC of the payments required the next Business
Day under Section A. above. MLLIC or FLIC, as the case may
be, shall make the required payments on such next Business Day
by wire transfer of New York clearinghouse funds. Daily
statements may be based upon reasonable approximations. Daily
statements shall be in a form agreed to by FLIC and MLLIC in
writing.
2. Monthly Cash Statements. At the end of the Business Day next
succeeding the end of each calendar month, FLIC will provide
MLLIC with a statement for the month. Monthly statements
shall be in a form agreed to by FLIC and MLLIC in writing.
The statement may reflect a correction or adjustment, in which
event MLLIC or FLIC, as the case may be, shall make any
required payment on the day following notification thereof in
accordance with the method for cash payments prescribed by
Section C. 1. above. Any further adjustment as may be
required shall be made promptly following agreement of the
parties or completion of any audit pursuant to Section C. 4.
below.
3. Form of Statements. All statements provided pursuant to
Sections C. 1. and 2. above shall summarize the items to be
settled in reasonable detail. It is intended that the
statements be transmitted by facsimile or other similar means
of convenient written communication, but, in the event that
any statement cannot be transmitted after application of
reasonable efforts, FLIC may notify MLLIC of any settlement
due by oral communication, in which case FLIC shall provide
- 9 -
<PAGE> 74
hard copy of the settlement statement as promptly as
practicable.
4. Right to Audit. MLLIC shall have the right to audit the
amounts contained in any statements delivered under Section C.
3. For such purposes, MLLIC and its employees, professional
advisors and agents shall have a right to review and copy the
relevant books and records of FLIC and to discuss such matters
with employees of FLIC during normal business hours. FLIC
agrees to instruct its independent public accountants and
actuaries to provide information to MLLIC and render
reasonable assistance to them in conducting any such audit.
5. General Right of Offset. Notwithstanding any provision of
this Agreement, any and all amounts due from MLLIC to FLIC or
from FLIC to MLLIC under this Agreement may be offset against
amounts due from one party to the other under this Agreement
or under any other written agreement hereafter entered into by
and between the parties, in settling and making payments on a
net basis of amounts due under this Agreement and any
subsequent written agreements.
ARTICLE VII
TERM AND TERMINATIoN
A. Term. Except as otherwise provided herein, this Agreement shall be
for an unlimited duration.
B. Termination by MLLIC. MLLIC shall have the right to terminate this
Agreement, with or without cause, upon thirty (30) days notice to FLIC
with respect to future business only, without recapture, unless the
parties otherwise mutually agree.
ARTICLE VIII
INSOLVENCY
Any risks or obligations reinsured pursuant to this Agreement shall be
payable by MLLIC on the basis of the liability under this Agreement without
diminution because of any insolvency of FLIC. In the event of insolvency and
the appointment of a conservator, liquidator or statutory successor of FLIC,
all amounts payable by MLLIC hereunder shall be payable to such conservator,
liquidator or statutory successor immediately upon demand, with reasonable
provision for verification, on the basis of claims allowed against the
insolvent company by any court of competent jurisdiction or by any conservator
or statutory
- 10 -
<PAGE> 75
successor of FLIC having authority to allow such claims, without diminution
because of such insolvency or because such conservator, liquidator or statutory
successor has failed to pay all or a portion of any claim. Payments by MLLIC
as set forth above shall be made directly to FLIC or to its conservator,
liquidator or statutory successor. The conservator, liquidator or statutory
successor of FLIC shall give written notice of the pendency of any claim
against FLIC indicating the Policy reinsured within a reasonable time after
such claim is filed, and MLLIC may interpose, at its own expense in the
proceeding where such claim is to be adjudicated, any defense or defenses which
MLLIC may deem available to FLIC or its conservator, liquidator or statutory
successor. The expense thus incurred by MLLIC shall be payable subject to
court approval out of the estate of FLIC as part of the expense of conservation
or liquidation to the extent of a proportionate share of the benefit which may
accrue to said estate solely as a result of the defense undertaken by MLLIC.
Any debts or credits, liquidated or unliquidated, in favor of or against either
FLIC or MLLIC with respect to this Agreement which exist on the date of the
entry of a receivership or liquidation order, are deemed mutual debits or
credits as the case may be and shall be set off and only the balance shall be
allowed or paid.
ARTICLE IX
ARBITRATION
Any dispute which may arise between FLIC and MLLIC under this
Agreement shall be settled by an equitable rather than a strictly legal
interpretation pursuant to arbitration conducted in accordance with the
commercial Rules of the American Arbitration Association. In such cases, the
parties will submit their differences to three (3) arbiters, who shall be
officers of insurance companies other than the parties and their affiliates, or
subsidiaries: one (1) to be selected by FLIC, one (1) to be selected by MLLIC,
and the third to be selected by the arbiters named by the parties herein. In
the event of disagreement between the arbiters, the decisions will rest with
the majority. The decision of the majority of the arbiters shall be binding
upon the parties herein without appeal. The arbiters will be relieved of all
judicial formality and may abstain from the strict rules of law.
Arbitration may be initiated by either FLIC or MLLIC (the petitioner)
by written notice to the other party identifying the nature of the dispute,
demanding arbitration and naming its arbiter. The other party (the respondent)
shall have 10 days after receipt of said notice within which to designate its
arbiter. The third arbiter shall be chosen by the two arbiters named by the
parties within 10 days thereafter and the arbitration shall be held at the
place hereinafter set forth 10 days after the appointment of the third arbiter.
Should the two
- 11 -
<PAGE> 76
arbiters not be able to agree on the choice of the third, then the appointment
shall be as follows: Each party will chose three arbiters, two of which shall
be refused by the opposing party. The third arbiter shall then be selected by
lot from the remaining two. If the respondent does not name its arbiter within
10 days, the petitioner may designate the second arbiter and the respondent
will not be aggrieved thereby.
Arbitration shall take place in New York, New York or any other site
agreed upon by the arbiters. The expense of the arbitration proceeding shall
be borne by the losing party; provided that each party shall be responsible for
expenses it incurs with respect to preparation for and presentation of evidence
and witnesses at the proceeding, including the expense of the arbiter it
selects. The decision of the arbiters may be entered as a final judgment on
any court of competent jurisdiction.
ARTICLE X
PARTIES TO AGREEMENT
This Agreement is an indemnity reinsurance agreement solely between
FLIC and MLLIC and performance of the obligations of each party under this
Agreement shall be rendered solely to the ether party. In no instance shall
anyone other than FLIC or MLLIC have any rights under this Agreement, and FLIC
shall be and remain solely liable to any policyholder, contractholder or
beneficiary under any policy or contract reinsured hereunder.
ARTICLE XI
EFFECTIVE DATE AND CLOSING
This Agreement shall become effective on December 25, 1990 but assets
and liabilities shall be valued as of 11:59 p.m., Eastern Standard Time on
December 31, 1990.
ARTICLE XII
MISCELLANEOUS
The invalidity or unenforceability of any term or provision hereof
shall not affect the validity or enforceability of any other term or provision
hereof. No provision of this Agreement shall be construed against either party
on the ground that such party drafted the provision or caused it to be drafted.
This Agreement shall bind and inure to the sole benefit of the Parties and
their respective successors and assigns and shall not confer any benefit on any
other person.
- 12 -
<PAGE> 77
ARTICLE XIII
COUNTERPARTS
This Agreement may be executed in counterparts with the same effect as if FLIC
and MLLIC had executed a single instrument. Each counterpart shall be deemed
an original of this Agreement.
ARTICLE XIV
EXECUTION
IN WITNESS WHEREOF, FLIC and MLLIC have caused this Agreement to be executed by
their respective officers duly authorized to do so, as of the date first
written above.
FAMILY LIFE INSURANCE COMPANY
BY: /s/ D. MCKAY SNOW BY: /s/ CRAIG F. LIKKEL
----------------------------- ---------------------------
D. McKay Snow Craig F. Likkel
TITLE: Senior Vice President TITLE:Vice President & Actuary
-------------------------- ------------------------
MERRILL LYNCH LIFE INSURANCE COMPANY
BY: /s/ KENNETH KACZMAREK BY: /s/ CRAIG F. LIKKEL
-------------------------------- --------------------------
Kenneth Kaczmarek Craig F. Likkel
TITLE:Senior Vice President, C.F.O. TITLE:Vice President & Actuary
----------------------------- ------------------------
- 13 -
<PAGE> 78
EXHIBIT A
to
INDEMNITY REINSURANCE AGREEMENT
The life insurance policies and annuity contracts 100% indemnity reinsured
pursuant to this Agreement are all policies and contracts of the form numbers
and descriptions listed below which:
(1) are in force on the Effective Date of this Agreement; or
(2) are issued by FLIC on or after the Effective Date of this Agreement
and during the Reinsurance Period.
FLIC also agrees to take, upon MLLIC's request, all actions necessary to market
all policy and contract forms of a similar nature as MLLIC may develop and
designate in the future and further agrees that all such policies and contracts
will be added to the above list of forms which are covered by this Agreement.
<TABLE>
<CAPTION>
Policy Number Description
- ------------- -----------
LIFE
<S> <C>
AL- 698 Single Premium Whole Life (NJ)
AL- 772 Single Premium Whole Life (Enhanced version)
AL- 773 NC version of AL- 772
AL- 774 1187 MN version of AL- 772
AL- 790 Single Premium Whole Life (Rate version)
AL- 792 Second-to-die Single Premium Whole Life
AL- 798 NC version of AL- 790
AL- 799 1187 MN version of AL- 790
AL- 819 NC version of AL- 792
AL- 820 1187 MN version of AL- 792
AL- 858 CA/WA version of AL- 772
AL- 863 CA/WA version of AL- 790
AL- 877 CA/WA version of AL- 792
AL- 917 IN version of AL- 792
AL-1031 Seven Pay Whole Life
AL-1041 Interest-Sensitive Whole Life
AL-1122 NC version of AL-1041
* AL- 710 MN version of AL-698
ANNUITIES
AY- 2 1185 Variable Annuity
AY- 9 286 Single Premium Deferred Annuity
AY- 9 483 PA version of AY- 9 286
AY- 15 486 Flexible Premium Annuity
AY- 16 988 MN version of AY- 2 1185
AY- 17 988 MN version of AY- 15 486
AY- 19 988 MN version of AY- 9 286
</TABLE>
<PAGE> 79
<TABLE>
<S> <C> <C>
AY- 24 988 OR version of AY- 2 1185
AY- 25 988 OR qualified version of AY- 2 1185
AY- 26 OR qualified version of AY- 9 286
AY- 27 OR qualified version of AY- 15 486
AY- 31 Single Premium Deferred Annuity
(Select 1 & 3 Year, no bailout)
AY- 32 Single Premium Deferred Annuity
(Select 1 & 3 Year, bailout)
AY- 33 Single Premium Deferred Annuity
(Select 4 year guarantee)
AY- 68 583 Structured Settlement Annuity (with
life contingency)
AY-326 MA version of AY- 9 286
AY-360 Group Modified Guaranteed Annuity
AY-371 Immediate Annuity
* AY- 2 1180 Variable Annuity
* AY- 2 182 Variable Annuity
* AY- 3 1180 Companion Fixed to Variable Annuity
* AY- 3 182 Companion Fixed to Variable Annuity
* AY- 3 283 Companion Fixed to Variable Annuity
* AY- 4 Structured Settlement Annuity (without
life contingency)
</TABLE>
* No longer issued
<PAGE> 80
EXHIBIT B
to
INDEMNITY REINSURANCE AGREEMENT
Third Party Reinsurance Agreements
Life Automatic Reinsurance Agreement (No. 2240-7), effective June 1, 1986, by
and between Family Life Insurance Company and Transamerica Occidental Life
Insurance Company.
Reinsurance Agreement, effective June 2, 1986, by and between Family Life
Insurance Company and The Lincoln National Life Insurance Company.
Automatic Reinsurance Agreement, effective January 1, 1988, by and between
Family Life Insurance Company and North American Reassurance Company.
Automatic Reinsurance Agreement, effective October 1, 1989, by and between
Family Life Insurance Company and North American Reassurance Company.
Automatic Reinsurance Agreement (No. 1183), effective August 1, 1989, by and
between Family Life Insurance Company and Phoenix Mutual Life Insurance
Company.
<PAGE> 81
EXHIBIT C
to
INDEMNITY REINSURANCE AGREEMENT
Service Agreement
between
Merrill Lynch Insurance Group, Inc.
FLIC and MLLIC
dated November 29, 1990
<PAGE> 82
SERVICE AGREEMENT
BETWEEN
MERRILL LYNCH INSURANCE GROUP, INC.,
FAMILY LIFE INSURANCE COMPANY
AND
MERRILL LYNCH LIFE INSURANCE COMPANY
This Service Agreement is entered into as of the 29th day of November,
1990 between Family Life Insurance Company, a Washington corporation ("FLIC"),
Merrill Lynch Life Insurance Company, a Washington corporation ("MLLIC") and
Merrill Lynch Insurance Group, Inc., a Delaware corporation, for itself and for
its affiliates other than FLIC and MLLIC ("MLIG").
W I T N E S S E T H:
WHEREAS, FLIC is a wholly-owned subsidiary of MLIG, and MLLIC is a
wholly-owned subsidiary of FLIC and
WHEREAS, each party to this Agreement desires to utilize certain
services to be provided by the other parties in carrying out certain of their
respective corporate functions, and
WHEREAS, each party is willing to furnish, or cause its affiliates to
furnish, such services on the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties do hereby mutually agree as follows,
effective as to FLIC and MLLIC respectively, only so long as it is an affiliate
of MLIG:
<PAGE> 83
- 2 -
1. Each party will provide or contract or arrange with any of its
affiliates for the providing of, as available, services as listed in Exhibit I
hereto, if and to the extent requested by the other. Exhibit I may be modified
from time to time by agreement between the parties.
2. For services provided, the service recipient agrees to pay the
service provider:
(a) the amounts as may be specified in one or more
Schedules, pertaining to particular categories of services, as may be executed
by the parties and attached to and incorporated into this Agreement; or
(b) if not so specified, to pay those charges (direct and
indirect) and expenses incurred by the service provider which, as reasonably
determined by the service provider and demonstrated to the reasonable
satisfaction of service recipient, reflect actual cost of such services to the
service provider, provided that
(1) charges and expenses for personnel shall be
based on a reasonable allocation of the time
spent on service recipient matters relative
to time spent on other matters;
<PAGE> 84
- 3 -
(2) charges and expenses for property or other
services shall be based on a reasonable
allocation of the proportion of and period of
time such property or services is utilized
for service recipient matters relative to
that utilized for other matters, and;
(3) no charges or expenses shall exceed those
charged by the service provider in the
relevant market for comparable personnel,
property or services as the case may be.
After the end of each month, the service provider will send the service
recipient a bill covering service charges and expenses which have been
incurred, or the amount of which has been ascertained, during such month, and
the service recipient will pay for such charges and expenses upon receipt of
the bill.
3. The books, accounts and records of MLIG, its affiliates
providing services hereunder, FLIC and MLLIC as to all transactions hereunder
shall be maintained so as to clearly and accurately disclose the nature and
details of the transactions, including such accounting information as is
necessary to support the reasonableness of the charges, expenses or fees
hereunder. The service recipient shall have the right, at its own expense,
<PAGE> 85
- 4 -
and at any reasonable time, to make an audit of the services rendered and the
amounts charged therefor.
4. The term of this Agreement shall commence as of the date
hereinabove indicated and continue until December 31, 1990, and thereafter
shall be deemed to be renewed automatically, upon the same terms and
conditions, for successive periods of one year each, until any party, at least
60 days prior to the expiration of the original term or of any extended term,
shall give written notice to the other parties of its intention not to renew
the Agreement, provided that, notwithstanding the foregoing, electronic data
processing services will be made available to the service recipient for up to
six months following any such termination, if the service recipient shall so
request.
5. It is understood that (a) MLIG, any of its affiliates or
subsidiaries, will invest for their own account and may act as investment
advisor for others and that MLIG or such others or persons or organizations
affiliated with MLIG could have investment interests adverse to the interests
of FLIC or MLLIC in the same or related investments; (b) MLIG is not obligated
to make available to FLIC or MLLIC any particular investment opportunity which
comes to MLIG or its subsidiaries or affiliates, regardless of whether such
opportunity is consistent with the investment policies of FLIC or MLLIC; and
(c) FLIC and MLLIC shall retain full control over their respective investment
activities, and MLIG
<PAGE> 86
- 5 -
or any of its affiliates or subsidiaries shall have no power or authority by
virtue of this Agreement, whether as agent or otherwise, to obligate or commit
FLIC or MLLIC for the acquisition or disposition of any investment.
6. All differences between MLIG, FLIC and MLLIC on which
agreement cannot be reached will be decided by arbitration. The arbitrators
will interpret this Agreement in accordance with the usual business practices,
rather than strict technicalities or rules of law. Three arbitrators will
decide any differences. They must be officers of life insurance companies
other than the parties to this agreement, their parents, subsidiaries and
affiliates. One of the arbitrators is to be appointed by service provider and
one by the service recipient, and these two will select a third. If the two
are unable to agree on a third, the choice will be left to the President of the
American Council of Life Insurance or its successor organization. The
arbitrators' decision will be by majority vote and no appeal will be taken from
it. The costs of the arbitration will be borne by the losing party unless the
arbitrators decide otherwise.
7. No assignment of this Agreement shall be made by any party
without the consent of the other parties.
<PAGE> 87
- 6 -
8. Subject to the foregoing Clause 7, this Agreement shall inure
to the benefit of and be binding upon the successors and assigns of the parties
hereto.
9. This Agreement shall supersede that Management Services
Agreement between FLIC and MLLiC dated April 28, 1986.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
MERRILL LYNCH INSURANCE GROUP, INC.
By:
-------------------------------
FAMILY LIFE INSURANCE COMPANY
By:
-------------------------------
MERRILL LYNCH LIFE INSURANCE COMPANY
By:
-------------------------------
<PAGE> 88
- 7 -
EXHIBIT I
To Service Agreement
Between MLIG, FLIC and MLLIC
Personnel, Property and Services (except as provided under separate agreements
or Schedules):
1. Accounting and auditing.
2. Actuarial.
3. Administration.
4. Advertising, marketing and public relations.
5. Claims (pursuant to the service recipient's
guidelines and subject to final approval by the
service recipient).
6. Corporate Secretary.
7. Development of software programs.
8. Electronic data processing.
9. Financial and cash advice or management.
10. Investment advisory or management.
11. Legal.
12. Office and general supplies.
13. Payroll services.
14. Personnel.
15. Premium billing and collection.
16. Printing.
17. Product design and development.
18. Regulatory filings and reports.
19. Storage.
<PAGE> 89
- 8 -
20. Underwriting (pursuant to the service recipient's
guidelines and subject to final approval by the
service recipient).
<PAGE> 90
AMENDMENT NO. 1
to
INDEMNITY REINSURANCE AGREEMENT
between
FAMILY LIFE INSURANCE COMPANY
and
MERRILL LYNCH LIFE INSURANCE COMPANY
dated December 28, 1990
(hereafter referred to as "Agreement")
The Agreement, to which this amendment is attached and made a
part of, is amended this 21st day of March, 1991 as follows:
A) Article V D. is replaced as follows:
"If, under the insurance laws and regulations of any
jurisdiction the full statutory reserve credit contemplated by
this Agreement is or becomes unavailable to FLIC as to such
jurisdiction, MLLIC shall take any and all action necessary to
make such full statutory reserve credit available to FLIC. In
doing so, MLLIC shall have the discretion to utilize any means
available under the laws of the applicable jurisdiction to
make such full statutory reserve credit available to FLIC,
which may include, but not be limited to, permitting FLIC to
withhold funds, establishing a reserve trust account or
posting a letter of credit. If a letter of credit is utilized
it shall be furnished and maintained by MLLIC for the benefit
of FLIC and be clean, irrevocable and unconditional and
otherwise of such nature and amount as to satisfy the
requirements of the particular jurisdiction for purposes of
establishing full statutory reserve credit for FLIC.
In the event that MLLIC shall fail or refuse to
fulfill any of its obligations under this Agreement relating
to the payment of
Page 1 of 3
<PAGE> 91
liability, FLIC shall be entitled to proceed under the terms
and conditions of any letter of credit, trust agreement or any
other agreement relating to the same and seize and take
possession of the funds represented by the same and apply
those funds to reduce MLLIC's obligations to FLIC."
B) Paragraph 1.(a) of Section A., Net Daily Adjustment,
of Article VI, ACCOUNTING AND SETTLEMENT is replaced as follows:
"the gross premium collected on all policies, net of premiums
to be allocated to the Separate Account pursuant to contract
owner instructions;"
C) Exhibit A to the Agreement is amended as follows:
1. to add the following to the second full
paragraph thereof: "Any expenses incurred by
FLIC in connection with the actions it may be
necessarily required to take regarding the
marketing of additional policy and contract
forms shall be the responsibility of, and
shall be paid or reimbursed by, MLLIC."
2. to delete "(NJ)" from the description of
policy form number AL- 698; and
3. to add the following policies:
LIFE:
AL- 698-1 Texas version of AL- 698
with 1 year guarantee
AL- 698-3 Texas version of AL- 698
with 3 year guarantee
AL- 698-5 Texas version of AL- 698
with 5 year guarantee
AL- 772-1 Texas version of AL- 772
with 1 year guarantee
AL- 772-3 Texas version of AL- 772
with 3 year guarantee
AL- 772-5 Texas version of AL- 772
Page 2 of 3
<PAGE> 92
with 5 year guarantee
AL- 790-1 Texas version of AL- 790
with 1 year guarantee
AL- 790-3 Texas version of AL- 790
with 1 year guarantee
AL- 790-5 Texas version of AL- 790
with 5 year guarantee
FIXED ANNUITIES:
AY- 9 483-1 Texas version of AY- 9 483
with 1 year guarantee
AY- 9 483-3 Texas version of AY- 9 483
with 3 year guarantee
AY- 9 483-5 Texas version of AY- 9 483
with 5 year guarantee
AY-70 Connecticut version of
AY- 9 286
IN WITNESS WHEREOF, FLIC and MLLIC have caused this Amendment
to be executed by their respective officers duly authorized to do so.
FAMILY LIFE INSURANCE COMPANY
BY
-------------------------------------
TITLE
----------------------------------
MERRILL LYNCH LIFE INSURANCE COMPANY
BY
-------------------------------------
TITLE
----------------------------------
Page 3 of 3
<PAGE> 93
EXHIBIT C
to
ASSUMPTION REINSURANCE AGREEMENT
Policies to be Assumed by MERRILL LYNCH LIFE INSURANCE COMPANY
All policies and contracts listed below the owners of which reside in the
listed jurisdictions, which are in force on the Effective Date of this
Agreement or are issued by FLIC subsequently thereto pursuant to the Stock
Purchase Agreement and the Indemnity Reinsurance Agreement.
<TABLE>
<CAPTION>
JURISDICTIONS POLICY FORM NUMBERS AND DESCRIPTION
- ------------- -----------------------------------
LIFE:
<S> <C> <C>
District of Columbia,
Guam, the Virgin Islands AL - 698 Single Premium Whole Life
and all states except AL - 698-1 TX version of AL - 698 with 1 year guarantee
Alabama, Maine, New AL - 698-3 TX version of AL - 698 with 3 year guarantee
Hampshire, New York, AL - 698-5 TX version of AL - 698 with 5 year guarantee
North Carolina, Ohio and AL - 772 Single Premium Whole Life (Enhanced version)
Vermont AL - 772-1 TX version of AL - 772 with 1 year guarantee
AL - 772-3 TX version of AL - 772 with 3 year guarantee
AL - 772-5 TX version of AL - 772 with 5 year guarantee
AL - 774 1187 MN version of AL - 772
AL - 790 Single Premium Whole Life (Rate version)
AL - 790-1 TX version of AL - 790 with 1 year guarantee
AL - 790-3 TX version of AL - 790 with 3 year guarantee
AL - 790-5 TX version of AL - 790 with 5 year guarantee
AL - 792 Second-to-die Single Premium Whole Life
AL - 799 1187 MN version of AL - 790
AL - 820 1187 MN version of AL - 792
AL - 858 CA/WA version of AL - 772
AL - 863 CA/WA version of AL - 790
AL - 877 CA/WA version of AL - 792
AL - 917 IN version of AL - 792
AL - 1031 Seven Pay Whole Life
AL - 1041 Interest-Sensitive Whole Life
*AL - 710 MN version of AL - 698
FIXED ANNUITIES:
AY - 9 286 Single Premium Deferred Annuity
AY - 9 483 PA version of AY - 9 286
AY - 9 483-1 TX version of AY - 9 483 with 1 year guarantee
AY - 9 483-3 TX version of AY - 9 483 with 3 year guarantee
AY - 9 483-5 TX version of AY - 9 483 with 5 year guarantee
AY - 15 486 Flexible Premium Annuity
AY - 17 988 MN version of AY - 15 286
AY - 19 988 MN version of AY - 9 286
AY - 26 OR qualified version of AY - 9 286
AY - 27 OR qualified version of AY - 15 286
AY - 31 Single Premium Deferred Annuity (Select 1 & 3 Year, no bailout)
AY - 32 Single Premium Deferred Annuity (Select 1 & 3 Year, bailout)
AY - 33 Single Premium Deferred Annuity (Select 5 year guarantee)
AY - 68 583 Structured Settlement Annuity (with life contingency)
AY - 79 CT version of AY - 9 286
AY - 326 MA version of AY - 9 286
AY - 360 Group Modified Guaranteed Annuity
AY - 371 Immediate Annuity
*AY - 4 Structured Settlement Annuity (without life contingency)
</TABLE>
<PAGE> 94
EXHIBIT C
to
ASSUMPTION REINSURANCE AGREEMENT (cont.)
VARIABLE ANNUITIES:
<TABLE>
<S> <C> <C>
District of Columbia,
Guam, the Virgin Islands AY - 2 1185 Variable Annuity
and all states except AY - 24 988 OR version of AY - 2 1185
Alabama, Delaware, Maine, AY - 25 988 OR qualified version of AY - 2 1185
Minnesota, New Hampshire, *AY - 2 1180 Variable Annuity
New York, North Carolina, *AY - 2 182 Variable Annuity
Ohio and Vermont *AY - 3 1180 Companion Fixed to Variable Annuity
*AY - 3 182 Companion Fixed to Variable Annuity
*AY - 3 283 Companion Fixed to Variable Annuity
*No longer issued
</TABLE>
<PAGE> 95
EXHIBIT D
to
ASSUMPTION REINSURANCE AGREEMENT
Policies to be Assumed by TANDEM INSURANCE GROUP, INC.
All policies and contracts listed below the owners of which reside in the
listed jurisdictions, which are in force on the Effective Date of this
Agreement or are issued by FLIC subsequently thereto pursuant to the Stock
Purchase Agreement and the Indemnity Reinsurance Agreement.
JURISDICTIONS POLICY FORM NUMBERS AND DESCRIPTION
<PAGE> 96
EXHIBIT E
to
ASSUMPTION REINSURANCE AGREEMENT
Policies to be Assumed by ROYAL TANDEM LIFE INSURANCE COMPANY
All policies and contracts listed below the owners of which reside in the
listed jurisdictions, which are in force on the Effective Date of this
Agreement or are issued by FLIC subsequently thereto pursuant to the Stock
Purchase Agreement and the Indemnity Reinsurance Agreement.
JURISDICTIONS POLICY FORM NUMBERS AND DESCRIPTION
<PAGE> 97
EXHIBIT F
to
ASSUMPTION REINSURANCE AGREEMENT
ASSUMPTION CERTIFICATE
Policy or Contract Number:
---------------------------------------
This is to certify that as of 12:01 a.m. (standard time at the address
of the owner of the above captioned policy or contract) on _________________,
1991, (Name of Reinsurer) , a _________________ stock insurance company,
hereby assumes all liability for performance of the terms of the policy or
contract identified above and issued by FAMILY LIFE INSURANCE COMPANY, a
Washington stock insurance company, the same as if it had been originally
issued by (Name of Reinsurer) .
Signed at the executive offices of (Name of Reinsurer) at
______________________.
------------------------------------------------
, President
------------------------------------------------
, Secretary
IMPORTANT
This certificate becomes a part of your policy and should be attached thereto.
All correspondence and inquiries should be directed to (Name of
Reinsurer) , ____________________________________
____________________________________ (address).
Form No.
-----------
<PAGE> 1
Exhibit (8)(b)
INDEMNITY AGREEMENT
In consideration for the agreement of Merrill Lynch Life Agency, Inc.
("MLLA") to enter into the General Agent's Agreement ("Merrill Lynch Life") and
other good and valuable consideration, Merrill Lynch Life hereby agrees as
follows:
Merrill Lynch Life will indemnify and hold harmless MLLA and
all persons associated with MLLA as such term is defined in Section
3(a)(21) of the Securities Exchange Act of 1934 against all claims,
losses, liabilities and expenses, to include reasonable attorneys'
fees, arising out of the sale by MLLA of insurance products under the
above referenced Agreement, provided that Merrill Lynch Life shall not
be bound to indemnity or hold harmless MLLA or its associated persons
for claims, losses, liabilities and expenses arising on or after the
date of this Indemnity Agreement directly out of the willful
misconduct or negligence of MLLA or its associated persons.
This Indemnification shall survive the termination of the Agreement
for any claims arising thereunder for sales prior to such termination.
MERRILL LYNCH LIFE INSURANCE COMPANY
Dated: By:
------------- -------------------------------
MERRILL LYNCH LIFE AGENCY, INC.
Dated: By:
------------- -------------------------------
<PAGE> 1
EXHIBIT (8)(c)
A G R E E M E N T
AGREEMENT, dated as of ______________, 1991, between Merrill Lynch
Variable Series Fund, Inc., a Maryland corporation (the "Company"), and Merrill
Lynch Life Insurance Company, a State of Washington corporation ("Merrill Lynch
Life").
WHEREAS, through Merrill Lynch Funds Distributor, Inc. (the
"Distributor"), the Company proposes to issue to Merrill Lynch Life shares of
the Common Stock of the Company's Reserve Assets Fund (the "Shares");
WHEREAS, it is anticipated that on any particular day on which the net
asset value per share of the Shares is determined, the net income of the
Reserve Assets Fund (the "Fund") may be negative; and
WHEREAS, if the net income of the Fund is negative, it may be
necessary to reduce the number of outstanding Shares and, accordingly, it may
be necessary for Merrill Lynch Life to return to the Company a certain number
of Shares held by it to effect such reduction;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto hereby agree:
1. The Company shall cause the Distributor to sell the
Shares to Merrill Lynch Life.
2. As long as it shall be the intention of the Company
to maintain the net asset value per share of the Fund at $1.00, on any day on
which (a) the net asset value per share of the Shares is determined, (b)
Merrill Lynch Asset Management, Inc. ("MLAM") determines, in the manner
described in the then current Prospectus of the Company (the "Prospectus"),
that the net income of the Fund on such day is negative, and (c) MLAM delivers
a certificate to the Transfer Agent (as defined in the Prospectus) setting
forth the reduction in the number of outstanding Shares to be effected as
described in the Prospectus in connection with such determination, Merrill
Lynch Life agrees to return to the Company its pro rata share of the number of
Shares to be reduced and agrees that, upon delivery of such certificate, (a)
its ownership interest in the Shares so to be returned shall immediately cease,
(b) such Shares shall be deemed to have been cancelled and to be no longer
outstanding, and (c) all rights in respect of such Shares shall cease.
3. It is hereby agreed that, notwithstanding that the
Distributor no longer sells Shares to Merrill Lynch Life, as long as Merrill
Lynch Life shall hold Shares, it shall be bound by the terms of this Agreement.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
above written.
MERRILL LYNCH VARIABLE SERIES
FUNDS, INC.
By:
-------------------------
Attest:
- -----------------------------
MERRILL LYNCH LIFE INSURANCE
COMPANY
By:
-------------------------
Attest:
- ------------------------------
- 2 -
<PAGE> 1
EXHIBIT (8)(d)
A G R E E M E N T
AGREEMENT dated _________________, 1991, by and between Merrill Lynch
Life Insurance Company ("Merrill Lynch Life"), a State of Washington
corporation, on its own behalf and on behalf of Merrill Lynch Life Variable
Annuity Separate Account (the "Variable Annuity Accounts"), and Merrill Lynch
Variable Series Funds, Inc. (the "Company").
W I T N E S S E T H:
WHEREAS, the Variable Annuity Account is a separate account
established and maintained by Merrill Lynch Life pursuant to the laws of the
State of Washington for variable annuity contracts issued or reissued by
Merrill Lynch Life;
WHEREAS, the Variable Annuity Account is to be registered as an
open-end management company organized as a series fund under the Investment
Company Act;
WHEREAS, the Company is registered as an open-end management company
organized as a series fund under the Investment Company Act;
WHEREAS, the Company is now comprised of eight funds but may add
additional funds;
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Merrill Lynch Life intends to purchase shares of such funds as are
authorized by the Company on behalf of the Variable Annuity Account to fund
benefits under the variable annuity contracts;
NOW, THEREFORE, Merrill Lynch Life and the Company hereby agree as
follows:
1. Merrill Lynch Life shall pay for the costs of
printing the Company's semi-annual and annual shareholder reports and
prospectuses.
2. On each day on which the net asset value of the
shares of any portfolio of the Company is required to be calculated pursuant to
the requirements of the Investment Company Act, the Company shall provide
Merrill Lynch Life with the net asset values of such funds by 5:00 p.m. (New
York time). The Company shall also provide Merrill Lynch Life with daily
reports of interest and dividend income and realized capital gains and losses
for each portfolio. This information shall also be provided by 5:00 p.m.
- 1 -
<PAGE> 2
(New York time) on each day on which such net asset value is calculated.
3. A redemption of the Company's shares shall be settled
regular way.
4. This Agreement shall remain in effect until
terminated by the mutual written consent of the parties hereto.
5. This Agreement shall be subject to the provisions of
the Investment Company Act, the Securities Act of 1933 and the Securities
Exchange Act of 1934 and the rules, regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant, and the terms hereof shall be
interpreted and construed in accordance therewith.
6. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
MERRILL LYNCH LIFE INSURANCE COMPANY
By:
-------------------------------
Attest:
------------------
MERRILL LYNCH VARIABLE SERIES FUNDS,
INC.
By:
------------------------------
Attest:
--------------------
- 2 -
<PAGE> 1
EXHIBIT (8)(e)
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER ("Agreement"), is entered into on
this the ____ day of _________________, 1991, by and between MERRILL LYNCH LIFE
INSURANCE COMPANY, an Arkansas life insurance corporation with its home office
in Arkansas located at 320 West Capitol Avenue, Suite 1000, Little Rock,
Arkansas 72201 (hereinafter sometimes referred to as "MLLIC" or the "Surviving
Corporation"), and TANDEM INSURANCE GROUP, INC., an Illinois life insurance
corporation with its home office in Illinois located at 10 South LaSalle
Street, Chicago, Illinois, (hereinafter sometimes referred to as "Tandem")
(said life insurance corporations being hereinafter sometimes collectively
referred to as the "Constituent Corporations").
RECITALS
1. MLLIC is a corporation duly organized and existing under the
laws of the State of Arkansas, having been originally incorporated on January
27, 1986, and has on the date hereof an authorized capital consisting of
1,000,000 shares of common stock of the par value of $10.00 per share, of
which, on the date hereof, 200,000 shares are issued and outstanding, all of
which shares are owned legally and beneficially by Merrill Lynch Insurance
Group, Inc. ("MLIG").
2. Tandem is a corporation duly organized and existing under the
laws of the State of Illinois, having been originally incorporated on August
11, 1952, and has on the date hereof an authorized capital consisting of
5,000,000 shares of common stock
<PAGE> 2
of the par value of $1.10 per share, of which, on the date hereof, 1,100,000
shares are issued and outstanding, all of which shares are owned legally and
beneficially by MLIG.
3. The Board of Directors of each of the Constituent Corporations
deems it advisable and in the best interest of said corporations that Tandem be
merged into MLLIC as provided herein and has approved of this Agreement.
In consideration of the premises and the mutual agreements
herein contained, the parties hereto, in accordance with the applicable
provisions of the laws of the State of Arkansas and the State of Illinois, do
hereby agree as follows:
1. Merger. Tandem shall be merged with and into MLLIC. On and
after the effective date of this contemplated merger:
(a) MLLIC shall be the Surviving Corporation and shall
continue to exist as a domestic stock life insurance company under the laws of
the State of Arkansas. As the Surviving Corporation, MLLIC shall possess all
rights, privileges, powers, franchises, and immunities of a public as well as
of a private nature and be subject to all the liabilities and duties of each of
the Constituent Corporations so merged, and all, and singular, of the rights,
privileges, powers, franchises, and immunities of each of the Constituent
Corporations and all property, real, personal, and mixed, and all debts owing
on whatever account and all other things in action of or belonging to each of
the Constituent Corporations shall be transferred to and vested in the
Surviving Corporation without further act or deed. All property, rights,
privileges,
- 2 -
<PAGE> 3
powers, franchises, and immunities and all and every other interest shall be
thereafter the property of the Surviving Corporation as effectually as they
were of the several and respective Constituent Corporations. In particular,
without limiting the foregoing, each separate account duly established by each
of the Constituent Corporations prior to the effective date of the contemplated
merger shall, on and after the effective date of the contemplated merger, be a
duly established separate account of the Surviving Corporation as though it had
been originally established by the Surviving Corporation. However, all rights
of creditors and all liens upon the property of any of the Constituent
Corporations shall be preserved unimpaired, limited in lien to the property
affected by the lien at the time of the merger. All debts, liabilities, and
duties of the respective Constituent Corporations shall thenceforth attach to
the Surviving Corporation and may be enforced against it to the same extent as
if the debts, liabilities, and duties had been incurred or contracted by it.
(b) Tandem, as a Constituent Corporation, pursuant to the
Illinois Insurance Code and the Arkansas Insurance Code, shall cease to exist,
and its property and obligations shall become the property and obligations of
MLLIC as the Surviving Corporation.
2. Name and State of Domicile of Surviving Corporation. Upon the
effectiveness of the merger, the name of the Surviving Corporation shall remain
Merrill Lynch Life Insurance Company and the state of domicile shall remain the
State of Arkansas.
- 3 -
<PAGE> 4
3. Article of Incorporation; Bylaws. The Articles of
Incorporation as amended and Bylaws as amended of MLLIC shall continue as the
Articles of Incorporation and Bylaws of the Surviving Corporation.
4. Directors. The members of the Board of Directors of MMLIC
shall be the members of the Board of Directors of the Surviving Corporation
until their successors are duly elected and qualified under the Bylaws of the
Surviving Corporation.
5. Shares of Survivor. Each share of the common stock of MLLIC
outstanding on the effective date of the merger shall thereupon, without
further action, be one share of the common stock of the Surviving Corporation,
without the issuance or exchange of new shares or share certificates, and no
additional shares of the Surviving Corporation shall be issued.
6. Cancellation of Tandem Shares. All authorized and outstanding
shares of the common stock of Tandem, such shares being owned in their entirety
by MLIG, and all rights in respect thereof, shall be cancelled forthwith on the
effective date of the merger, and the certificates representing such shares
shall be surrendered and cancelled, and no shares of the Surviving Corporation
shall be issued in lieu thereof.
7. Approvals. This Agreement shall be submitted for adoption or
approval to (1) the shareholder of MLLIC, (2) the shareholder of Tandem, (3)
the Insurance Commissioner for the State of Arkansas, (4) the Director of
Insurance for the State of Illinois, and (5) the insurance regulatory
authorities of other
- 4 -
<PAGE> 5
states, if any, which may require such submission. If and when all such
required adoptions and approvals are obtained, the officers of each of the
Constituent Corporations shall, and are hereby authorized and directed to,
perform all such further acts, and execute and deliver to the proper
authorities for filing all documents, as may be necessary or proper to render
effective the merger contemplated by this Agreement.
8. Abandonment of Agreement. Notwithstanding any of the
provisions of this Agreement, the Board of Directors of MLLIC, at any time
before or after approval by shareholders of either or both corporations, and
prior to the effective date of the merger herein contemplated, and for any
reason they may deem sufficient and proper, shall have the power and authority
to abandon and refrain from making effective the contemplated merger as set
forth herein; in which case this Agreement shall thereby be cancelled and
become null and void.
9. Effective Date and Time. The effective date and time for the
merger contemplated herein shall be at the close of the business day on the
date on which all filings required in the States of Arkansas and Illinois to
effect the proposed merger have been completed.
IN WITNESS WHEREOF, the Board of Directors of each of the Constituent
Corporations, pursuant to a resolution unanimously adopted by written consent
has caused this Agreement to be executed as of the day and year first above
written.
- 5 -
<PAGE> 6
<TABLE>
<CAPTION>
DIRECTORS OF MERRILL LYNCH LIFE DIRECTORS OF TANDEM INSURANCE
INSURANCE COMPANY, Surviving GROUP, INC.
Corporation:
<S> <C>
- -------------------------------- -------------------------------
David M. Dunford David M. Dunford
- -------------------------------- -------------------------------
Kenneth W. Kaczmarek Kenneth W. Kaczmarek
- -------------------------------- -------------------------------
Thomas H. Patrick Nicholas F. McClanahan
- -------------------------------- -------------------------------
John C. R. Hele Thomas H. Patrick
- -------------------------------- -------------------------------
Barry G. Skolnick Barry G. Skolnick
-------------------------------
John A. Zwald
ATTEST: ATTEST:
- -------------------------------- -------------------------------
Secretary Secretary
( S E A L ) ( S E A L )
</TABLE>
- 6 -
<PAGE> 7
CERTIFICATE OF SECRETARY
(Merrill Lynch Life Insurance Company)
I, Barry G. Skolnick, do hereby certify that I am the duly
elected, qualified and acting Secretary of Merrill Lynch Life Insurance Company
(the "Corporation"), an Arkansas corporation, and am the lawful keeper of its
corporate records, and do further certify that a Plan and Agreement of Merger
dated ________________, 1991, between the Corporation and Tandem Insurance
Group, Inc., an Illinois corporation, was approved by the sole shareholder of
the Corporation at a special meeting held upon proper notice or waiver thereof
on ___________________, 1991, by the unanimous vote of 200,000 shares of common
voting stock, being 100 percent of the Corporation's issued and outstanding
shares of common voting stock, in favor of adoption and approval of the
foregoing Plan and Agreement.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of the
Corporation this ____ day of ____________________, 1991.
------------------------------
Secretary
( S E A L )
- 7 -
<PAGE> 8
CERTIFICATE OF SECRETARY
(Tandem Insurance Group, Inc.)
I, Barry G. Skolnick, do hereby certify that I am the duly
elected, qualified and acting Secretary of Tandem Insurance Group, Inc. (the
"Corporation"), an Illinois corporation, and am the lawful keeper of its
corporate records, and do further certify that a Plan and Agreement of Merger
dated _____________, 1991, between the Corporation and Merrill Lynch Life
Insurance Company, an Arkansas corporation, was approved by the sole
shareholder of the Corporation at a special meeting held upon proper notice or
waiver thereof on ______________, 1991, by the unanimous vote of 1,100,000
shares of common voting stock, being 100 percent of the Corporation's issued
and outstanding shares of common voting stock, in favor of adoption and
approval of the foregoing Plan and Agreement of Merger.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of the
Corporation this ____ day of _______________, 1991.
------------------------------
Secretary
( S E A L )
- 8 -
<PAGE> 9
IN WITNESS WHEREOF, the Constituent Corporations have caused
this Agreement to be executed in their corporate names by their respective
officers this _____ day of _______________, 1991.
MERRILL LYNCH LIFE INSURANCE COMPANY
By:
---------------------------------
President
ATTEST:
- ----------------------------
Secretary
( S E A L )
TANDEM INSURANCE GROUP, INC.
By:
---------------------------------
President
ATTEST:
- -----------------------------
Secretary
( S E A L )
- 9 -
<PAGE> 10
ACKNOWLEDGEMENT
STATE OF NEW JERSEY
COUNTY OF MIDDLESEX
I, the undersigned, a Notary Public, within and for the county and
state aforesaid, do hereby certify that on this ______ day of ____________,
1991, personally appeared before me Thomas H. Patrick and Barry G. Skolnick,
who, being by me first duly sworn, declared that they are the President and
Secretary, respectively, of Merrill Lynch Life Insurance Company, that they
signed the foregoing document as President and Secretary of said Company, and
that the statements therein contained are true.
--------------------------------
Notary Public
My Commission Expires:
ACKNOWLEDGMENT
STATE OF NEW JERSEY
COUNTY OF MIDDLESEX
I, the undersigned, a Notary Public, within and for the county and
state aforesaid, do hereby certify that on this ____ day of ____________, 1991,
personally appeared before me Thomas H. Patrick and Barry G. Skolnick, who,
being by me first duly sworn, declared that they are the President and
Secretary, respectively, of Tandem Insurance Group, Inc., that they signed the
foregoing document as President and Secretary of said Company, and that the
statements therein contained are true.
--------------------------------
Notary Public
My Commission Expires:
- -------------------------
- 10 -
<PAGE> 1
Exhibit (8)(g)
INDEMNITY AGREEMENT
In consideration for the agreement of Merrill Lynch Life Agency, Inc.
("MLLA") to enter into the General Agent's Agreement ("Merrill Lynch Life") and
other good and valuable consideration, Merrill Lynch Life hereby agrees as
follows:
Merrill Lynch Life will indemnify and hold harmless MLLA and
all persons associated with MLLA as such term is defined in Section
3(a)(21) of the Securities Exchange Act of 1934 against all claims,
losses, liabilities and expenses, to include reasonable attorneys'
fees, arising out of the sale by MLLA of insurance products under the
above referenced Agreement, provided that Merrill Lynch Life shall not
be bound to indemnity or hold harmless MLLA or its associated persons
for claims, losses, liabilities and expenses arising on or after the
date of this Indemnity Agreement directly out of the willful
misconduct or negligence of MLLA or its associated persons.
This Indemnification shall survive the termination of the Agreement
for any claims arising thereunder for sales prior to such termination.
MERRILL LYNCH LIFE INSURANCE COMPANY
Dated: 1/27/92 By: /s/ BARRY G. SKOLNICK
------------- -------------------------------
Barry G. Skolnick
MERRILL LYNCH LIFE AGENCY, INC.
Dated: 1/27/92 By: /s/ WILLIAM A. WILDE
------------- -------------------------------
William A. Wilde
<PAGE> 1
EXHIBIT (8)(h)
MANAGEMENT AGREEMENT
AGREEMENT made as of this 30th day of August, 1991, by and between
MERRILL LYNCH LIFE INSURANCE COMPANY, an Arkansas corporation (hereinafter
referred to as the "Client"), and MERRILL LYNCH ASSET MANAGEMENT, INC., a
Delaware corporation (hereinafter referred to as the "Manager").
W I T N E S S E T H
WHEREAS, the Client is engaged in business as an insurance company
subject to regulation under the laws of each state in which it does business;
and
WHEREAS, the Manager is engaged principally in rendering management
and investment advisory services and is registered as an investment adviser
under the Investment Advisers Act of 1940; and
WHEREAS, the Client desires to retain the Manager to provide
investment advisory services to the Client in the manner and on the terms
hereinafter set forth; and
WHEREAS, the Manager is willing to provide investment advisory
services to the Client on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Client and the Manager hereby agree as follows:
<PAGE> 2
1. Appointment and Duties of Manager
The Client hereby appoints the Manager as investment manager of such
portion of the Client's investment portfolio as is designated from time to time
by the Client to the Manager in writing (the "Portfolio") and to furnish, or
arrange for affiliates to furnish, the investment advisory services described
below, on the terms and conditions set forth in this Agreement. The Manager
hereby accepts such appointment and agrees during such period, at its own
expense, to render, or arrange for the rendering of, such services and to
assume the obligations herein set forth for the compensation provided for
herein. Except as limited below and in the Statement of Investment Policy and
Guidelines attached hereto, the Manager shall have full discretion, as the
Client's agent and attorney-in-fact, to make purchases and sales of investments
on the Client's behalf and otherwise to act at the Manager's discretion in the
management of the Portfolio.
The Manager shall provide (or arrange for affiliates to provide) the
Client with such investment research, advice and supervision and written
reports as the latter may from time to time (but no less frequently than
monthly) consider necessary for the proper supervision of the assets of the
Client, shall furnish continuously an investment program for the Client and
shall have full discretion as the Client's agent and attorney-in-fact, to
determine from time to time which securities shall be purchased, sold, modified
or exchanged and what portion of the assets of the
- 2 -
<PAGE> 3
Client shall be held in (i) the various securities in which the Client invests,
(ii) options, (iii) futures, (iv) options on futures or (v) cash, subject only
to the restrictions of applicable law and the Client's investment objectives,
investment policies and investment restrictions as the same are in each case
advised in writing by the Client to the Manager. Without limiting the
foregoing, the Manager shall have authority to approve the restructuring of
investments held in the Portfolio, either through changes in the terms of the
security (including changes in voting rights, dividend rights, interest rates,
maturity, conversion rights or other rights or preferences relating to the
security) or through the substitution of new securities, having such terms and
provisions as may be deemed appropriate by the Manager in light of the
prevailing circumstances, for securities held in the Portfolio. The Manager
shall make decisions for the Client as to foreign currency matters and make
determinations as to foreign exchange contracts, foreign currency options,
foreign currency futures and related options on foreign currency futures. The
Manager shall make decisions for the Client as to the manner in which voting
rights, rights to consent to corporate action and any other rights pertaining
to the Client's Portfolio securities shall be exercised and shall have the
authority, as the Client's agent and attorney-in fact, to exercise such rights
on behalf of the Client. The Manager may temporarily invest the Client's cash
in
- 3 -
<PAGE> 4
a money market fund which employs the Manager or an affiliate as its investment
adviser.
2. Portfolio Transactions
The Client authorizes the Manager to establish accounts in the
Client's name with Brokerage Firms that are members of the National Association
of Security Dealers and/or members of the Regional or National Securities
Exchanges including the Manager's affiliate MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED (MERRILL LYNCH) and to buy, sell or otherwise effect
transactions in stocks, bonds and any other securities for the Client's
accounts and in the Client's name and the Client empowers such firms to follow
the Manager's instructions.
The Client agrees that, if Merrill Lynch effects investment
transactions-for the Client, it may act as principal, or as agent for both
sides of a transaction, in accordance with applicable law. When Merrill Lynch
acts as agent for both sides of a transaction, it may be paid commissions from,
and has duties to, the opposing ideas. If Merrill Lynch effects transactions
on the Client's behalf on a stock exchange, it may retain the compensation it
is paid for such services, in accordance with applicable law. The Manager is
required by Section 11(a) of the Securities Exchange Act of 1934 to include the
preceding sentence in this agreement for clients who are companies, governments
and other institutions.
- 4 -
<PAGE> 5
Investment firms, including Merrill Lynch, may be compensated from the
Client's Portfolio at their standard rates for effecting investment
transactions on the Client's behalf.
3. Administration
The Manager is a registered investment adviser under the Investment
Advisers Act of 1940.
The Client acknowledges that it has received the Manager's disclosure
statement. The Client represents that the person entering this agreement on
the Client's behalf has full power and authority to do so and that it is
binding.
The Client agrees to notify the Manager prior to giving any
instruction to an investment firm or custodian regarding the commitment,
withdrawal or investment of the Portfolio. The Manager is under no duty to
enter into any transaction with respect to assets which are not readily
available for delivery.
The Client will instruct any investment firm or custodian to transmit
simultaneously to the Client and to the Manager all confirmations and periodic
statements.
The Manager will send the Client current valuations of the Client's
account at least four times annually.
Employees of the Manager's affiliates may receive credits or
compensation for transactions effected on the Client's behalf.
The Client acknowledges that the Managers affiliates may have
investment banking relationships with publicly traded companies and that
employees of the Manager's affiliates may act
- 5 -
<PAGE> 6
as directors of publicly traded companies, which at times may preclude the
Manager from effecting transactions on the Client's behalf in securities of
such companies.
4. Limitation of Liability
The Manager will not be liable for the consequences of any investment
decision or related activities made or omitted in accordance with Section 1
hereof, except for loss incurred as a result of the Manager's gross negligence
or willful or reckless misconduct. The Manager will not be liable for loss
incurred by any other person or as a result of any person other than the
Manager, whether or not its affiliate. These limitations of liability also
apply to the Manager's directors, officers, employees and agents.
5. Choice of Law
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS MAY BE PREEMPTED BY FEDERAL
LAW.
6. Custody
Seattle First National Bank will act as custodian of the Portfolio.
The Manager will never receive or physically control the Portfolio. The
Client's money market fund shares may be recorded in the Client's name at a
transfer agent.
- 6 -
<PAGE> 7
The Manager will not be responsible for making any tax credit or
similar claim or any legal filing on the Client's behalf.
7. Fees
In compensation for the Manager's services hereunder, the Client shall
periodically pay to the Manager, upon demand of the Manager (but no less
frequently than annually), a fee equal to the sum of (i) the Manager's costs,
expenses and disbursements incurred during such period in connection with its
services hereunder and (ii) 10% of the amount calculated pursuant to clause (i)
hereof.
8. Termination
This agreement shall remain in force until further notice. The Client
will be entitled to terminate this agreement at any time, effective from the
time the Manager receives written notification or such other time as may be
mutually agreed upon, subject to the settlement of transactions in progress.
There will be no penalty charge on termination. This agreement will also be
terminated on the fifth day after the Manager ends the Client notice in writing
of the Manager's intent to terminate this agreement or such other time as may
be mutually agreed upon, also subject to the settlement of transactions in
progress. The Manager may not assign this agreement without the Client's prior
consent.
- 7 -
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed an delivered this
Agreement as of the date first above written.
MERRILL LYNCH LIFE INSURANCE COMPANY
By: /s/ BARRY G. SKOLNICK
---------------------------------------
Barry G. Skolnick
Senior Vice President
Date of Execution: 8/30/91
--------------------
MERRILL LYNCH ASSET MANAGEMENT, INC.
By: /s/ N. JOHN HEWITT
---------------------------------------
N. John Hewitt
Senior Vice President
Date of Execution: August 30, 1991
--------------------
- 8 -
<PAGE> 9
STATEMENT OF
INVESTMENT POLICY AND GUIDELINES
FOR THE MLIG INVESTMENT PORTFOLIOS
I. Investment Goal
Merrill Lynch Insurance Group policy regarding investments supporting
its insurance in force is currently, and will remain, one of
maximizing value for its policyholders and equity owners, consistent
with concern for the safety of investments over the long and short
term.
MLIG Investment Management group will pursue this objective by
allocating the policy premiums and the investment income among a broad
array of asset types and asset classes and by choosing appropriate
investment management corporations to manage such investments.
Assets will be segregated into individual portfolios, so that the
investments within each such portfolio are optimal to support the
individual product line, and so as to satisfy all legal and regulatory
requirements.
The MLIG Investment Management group will set portfolio policies that
govern such investments; set appropriate risk levels, normal asset
mixes and the ranges within which the portfolio managers can deviate
from those sector levels or risk measures. The MLIG Investment
Management group will take efforts to hedge away any excess risks
beyond the tolerance levels, so that the portfolios achieve the
desired results, while staying within the appropriate risk parameters.
In addition, the MLIG Investment Management group will closely monitor
the performance of the portfolio managers to ensure that there is
appropriate asset/liability match, and that the actions of the
portfolio managers are commensurate with maximizing the value of
owners' equity.
The MLIG Investment Management group will continue to play an active
role in ensuring that the risks and rewards of all available
investment choices are fully factored into the design and pricing of
new MLIG products.
II. Portfolio Risk Levels
A major objective in investment management is to have necessary and
sufficient assets to satisfy insurance liabilities at all times.
<PAGE> 10
The investment risks in meeting such an objective can be categorized
as either interest rate risk (duration, convexity and volatility) or
credit risk (default and yield spread risk).
Managing interest rate risk remains one of the key functions of the
MLIG Investment Management group. Significant changes in interest
rates, the shape of the yield curve or in interest rate volatility can
have pronounced impact on the assets of the insurance company.
"Immunizing" the insurance company's wealth against substantial shifts
in interest rates therefore remain a major objective.
Since MLIG insurance products are "customized" liabilities, the
Investment Management group will periodically meet with the actuaries
to assess the key risk attributes of the liabilities (i.e. duration,
convexity) of the MLIG products, the underlying cash flows of the
liabilities and the sensitivity of the liability market values to
changes in interest rates (both parallel and non-parallel yield curve
shifts).
These liability risk measures will be updated monthly, reflecting the
influx of new business and the aging of old policies. Such
information will be provided to the appropriate investment managers by
the MLIG Investment Management Group on a monthly basis.
The risk parameters (i.e. duration and convexity) for the assets will
be established in accordance with the same measures for liabilities,
so that under normal conditions changes in interest rates will have
offsetting impact on the firm's assets and liabilities.
Portfolio managers, however, may be allowed to deviate from the risk
guidelines, depending on their interest rate outlook and yield curve
perspective. Deviations beyond +/- 1 of the effective duration,
however, require the approval of the Investment Committee and the
involvement of the Investment Management group in adequately hedging
the interest rate risk.
The credit risk is to be controlled by adhering to the sector exposure
in accordance with the guidelines established for various asset
classes. The portfolio managers, however, may deviate from those
norms based on their relative value perspective, subject to maximum
limits imposed by the following portfolio guidelines.
- 2 -
<PAGE> 11
III. Asset Classes/Instruments
Federal, State and other local laws that govern insurance companies
stipulate "eligible investments" for insurance companies. Not
withstanding anything listed below, those laws take precedence in what
may be termed as viable investment alternatives for the insurance
company assets:
In general, portfolio managers can invest in following assets subject
to limitations listed in following paragraphs:
- Short-term instruments including Certificates of Deposits,
Commercial Paper, Bankers Acceptances, Medium-Term Notes, Euro
CDs, Treasury Bills, Repurchase and Reverse Repurchase
agreements
- U.S. Treasury and Agency debt obligations
- Mortgage-backed securities (including collateralized mortgage
obligations) and Asset-Backed Securities of any federal agency
or private issuers.
- Both publicly- and privately-placed Corporate Debt Securities,
including convertible bonds, of Domestic, Euro and Foreign
issuers
- Equity securities including preferred stocks, stock warrants
and equity options.
- Equity and fixed-income derivative securities, including
futures, options, options on futures, interest rate caps,
floors and index-linked securities.
- Swap agreements including interest rate, currency and
derivative swap products.
- Commercial mortgages including equity interest in real
properties.
IV. Limitations of Investments
Portfolio managers will be allowed to invest in following asset
classes, subject to certain limitations as set forth below. Size
limitations apply to individual issuers in aggregate, irrespective of
the differences among individual issues of the same issuer or their
seniority in claims.
A. Securities issued by the United States Treasury or an agency
of the United States Government which are backed
- 3 -
<PAGE> 12
by the full faith and credit of the United States Government
in any amount are authorized.
B. Mortgage-backed securities issued by the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage
Association or the Government National Mortgage Association in
any amount are authorized.
C. Mortgage-backed securities collateralized by single family
residential mortgage loans (i.e., collateralized mortgage
obligations, private participations) shall conform to the
following size limits per issuer as rated by either Moody's or
Standard and Poors.
<TABLE>
<CAPTION>
Rating Maximum per Issuer
------ ------------------
<S> <C>
AAA $100 Million
AA $ 75 Million
A $ 50 Million
BAA $ 25 Million
</TABLE>
Federally sponsored agencies' REMIC CMOs, however, are not
subject to such size limits.
D. Interest rate sensitive derivative mortgage-backed securities
such as Interest-Only and Principal-Only securities (IO/PO) or
residual CMO tranches shall conform to a size limit per issuer
of $50 million and shall in no case exceed 5% of the book
value of the portfolio.
E. Commercial mortgages may be included, not exceeding a total of
$500 million. No single mortgage shall exceed $10 million
without prior authorization of the Investment Committee.
Investments in undeveloped or under-developed properties,
investments where the LTV (loan-to-value) ratio exceeds 80% or
investments where the occupancy rate is less then 75% also
require the explicit prior approval of the Investment
Committee.
F. Securities collateralized by other assets (credit cards, auto
loans, mobile homes, and other loans or receivables) may be
purchased only if investment grade. Per issuer maximums shall
conform to those in place for investment grade securities.
G. Investment grade corporate bond size limits per issuer are as
follows:
- 4 -
<PAGE> 13
<TABLE>
<CAPTION>
Rating Maximum per Issuer
------ ------------------
<S> <C>
AAA $100 Million
AA $ 75 Million
A $ 50 Million
BAA $ 25 Million
</TABLE>
H. Non-investment grade bond size limits are as follows:
<TABLE>
<CAPTION>
Rating Maximum per Issuer
------ ------------------
<S> <C>
BB $ 8 Million
B and lower $ 5 Million
</TABLE>
The percentage of bonds below investment grade should be
targeted to be maintained at a level below 10% of the book
value of the portfolio.
I. Private placements may be included, not exceeding a total of
$2 billion. Per-issuer maximums shall conform to those in
place for investment grade and non-investment grade holdings.
J. Investments in Convertible bonds or other forms of equity
participation are allowed subject to a maximum of $100
million. Individual investments in excess of $5 million
require prior approval of the Investment Committee.
K. Investments in International bonds, Currencies or Swaps are
allowed subject a maximum of $250 million. Individual
investments in excess of $10 million require prior approval of
the Investment Committee.
L. Investments in Financial Futures, Options, Options on Futures,
Interest rate Caps or Floors are allowed for hedging purposes
only, subject to guidelines approved by the Investment
Committee.
M. Investments with durations longer than 10 years, or those
whose durations change by more than 50% for 200 basis point
change in interest rates in either direction require
notification to the Investment Committee.
N. Notwithstanding the above guidelines, all investments will
comply with the appropriate Federal, State and other legal
regulations.
- 5 -
<PAGE> 14
V. Operating Guidelines
In order to comply with the Portfolio Guidelines and to achieve
efficiencies in controlling the investment function, the following
operating guidelines will apply to all portfolio managers.
A. Available funds must be promptly invested. This normally
means two weeks, with the exceptions of situations where
securities are purchased with advance settlement dates.
B. Trades must be reported to MLIG no later than the next
business day following the day the trade is made.
C. Mortgage security purchases shall in all aspects qualify as
"good delivery" under Public Security Association standards.
D. The investment managers will notify MLIG of any changes in
ratings of MLIG holdings by established rating agencies, on a
monthly basis.
E. Quarterly review shall be conducted by investment managers
investigating all Watch List issues for continued credit
worthiness. All other credit positions shall be reviewed
manually or as circumstances dictate.
F. All portfolios will be managed with the objective of
maintaining asset/liability duration and convexity within
previously agreed upon bounds.
VI. Hedging interest rate risks
In addition to interest rate risks of the asset portfolios, certain
MLIG products may have embedded options (such as guaranteed renewal
rates) that may expose MLIG to significant changes interest rates.
To hedge the risks of the overall asset portfolio and those inherent
in MLIG products, the MLIG Investment Management group will, from time
to time, be involved in hedging programs using both exchange-traded
and over-the-counter options, futures, options on futures, interest
rate caps or floors in sizes approved by the Investment Committee.
The hedges will be reviewed by the Investment Committee periodically
for its intended purpose and its cost effectiveness.
- 6 -
<PAGE> 15
VII. Performance Measurement
The true gauge of the performance of the insurance portfolios should
be its periodic total return, that implicitly and fairly accounts for
all the risks assumed by the portfolio managers. (While yield
enhancement is an important component of successful portfolio
management, it is not a true measure of investment performance.)
Total returns will be measured on a time weighted basis (since
portfolio managers have no control over the timing of cash inflows and
outflows) and will include capital appreciation, paydown return and
income return for the period.
All portfolios will be marked-to-market at the end of each month, and
total returns will be computed for the month. (Monthly returns will
be "chain-linked" to calculate quarterly and annual total return
performance)
The total return performance of the asset portfolios will then be
measured against a benchmark index, which would reflect the risk and
return characteristics of the liabilities.
The benchmark index will be created by the Investment Management group
with the help of MLIG actuaries and the investment managers, and will
be reviewed monthly to ensure that it continues to reflect the risk
and return characteristics of the firm's liabilities.
VIII. Reporting
Detailed analysis of the periodic total returns and risk attributes
(i.e. duration, convexity etc.) of each portfolio and the overall
insurance investment portfolio will be made available through a
performance attribution report for management reporting by the MLIG
Investment Group each month.
In addition, the following periodic meetings will be scheduled to
monitor investment activities of the investment managers.
A. Quarterly Portfolio Status Update
Four conferences per year will be held to review portfolio
structure (interest rate risk, sector diversification etc.),
investment strategy, transactions and portfolio performance.
- 7 -
<PAGE> 16
B. Quarterly Credit Status Update
Four conferences per year will be held to review appropriate
financial and operating data on each credit Watch List issue.
C. Other Reporting as Required
Brief summaries stating opinion about continued credit
worthiness and outlook for an issuer, whenever holding a
position in this company becomes questionable.
- 8 -
<PAGE> 1
EXHIBIT (8)(i)
REIMBURSEMENT AGREEMENT
Agreement, dated as of February 3, 1992 between Merrill Lynch
Investment Management, Inc., doing business as Merrill Lynch Asset Management,
("MLAM") and Merrill Lynch Life Agency, Inc. ("MLLA").
WHEREAS, MLAM is the investment adviser for Merrill Lynch
Variable Series Funds, Inc. (the "Fund"), a series fund presently consisting of
ten separate portfolios and which may consist of additional portfolios in the
future (the "Portfolios"); and
WHEREAS, shares of the Fund are held by various separate
accounts to fund benefits under variable annuity contracts issued by Family
Life Insurance Company, Merrill Lynch Life Insurance Co. and ML Life Insurance
Co. of New York (the "Contracts"); and
WHEREAS, MLLA is one of the principal distributors of the
Contracts; and
WHEREAS, MLAM and the Fund are parties to investment advisory
agreements with respect to the Portfolios which provide for an expense
limitation which, in general terms, requires that MLAM reimburse the Fund for
ordinary operating expenses to the extent required under the most restrictive
expense limitation set forth in state securities laws or regulations thereunder
(the "Investment Advisory Agreements"); and
<PAGE> 2
WHEREAS, MLLA and MLAM desire to further limit such ordinary
operating expenses of the present Portfolios of the Fund and Portfolios which
may be created in the future;
NOW, THEREFORE, in consideration of the premises and the
mutual promises and covenants hereinafter set forth, it is hereby agreed that:
1. Commencing on February 10, 1992, MLLA shall:
a. reimburse the Fund with respect to each
Portfolio in an amount equal to the amount by which the aggregate operating
expenses of such Portfolio during such period less interest, taxes, brokerage
fees and commissions and extraordinary charges such as litigation costs during
such period exceed 1.25% of the average daily net assets of such Portfolio; and
b. indirectly reimburse the Fund, by reimbursing
MLAM, with respect to any amounts MLAM is required to pay and does pay to the
Fund by reduction of its fee pursuant to the expense limitation provisions of
the Investment Advisory Agreement.
- 2 -
<PAGE> 3
2. This Agreement may not be amended, modified or
terminated except pursuant to a writing executed on behalf of each of the
parties hereto.
MERRILL LYNCH INVESTMENT MANAGEMENT, INC.
By /s/ TERRY K. GLENN
--------------------------------
Terry K. Glenn
MERRILL LYNCH LIFE AGENCY, INC.
By /s/ WILLIAM A. WILDE
--------------------------------
William A. Wilde
- 3 -
<PAGE> 1
EXHIBIT (9)
November 22, 1996
Board of Directors
Merrill Lynch Life Insurance Company
800 Scudders Mill Road
Plainsboro, New Jersey 08536
To The Board Of Directors:
In my capacity as General Counsel of Merrill Lynch Life Insurance Company (the
"Company"), I have supervised the preparation of Post Effective Amendment No. 8
to the registration statements on Form N-4 of the Merrill Lynch Life Variable
Annuity Separate Account (the "Account") File No. 33-43053 to be filed by the
Company with the Securities and Exchange Commission under the Securities Act
of 1933 and the Investment Company Act of 1940. Such registration statements
describe certain individual variable annuity contracts which will participate
in the Account.
I am of the following opinion:
1. The Company has been duly organized under the laws of the State of
Arkansas and is a validly existing corporation.
2. The individual variable annuity contracts, when issued in accordance
with the prospectus contained in the aforesaid registration statements
and upon compliance with applicable local law, will be legal and
binding obligations of the Company in accordance with their terms.
3. The Account is duly created and validly existing as a separate account
of the Company pursuant to Arkansas law.
4. The assets held in the Account equal to the reserves and other
contract liabilities with respect to the Account will not be
chargeable with liabilities arising out of any other business the
Company may conduct.
In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as in my judgment are necessary or
appropriate.
I hereby consent to the filing of this opinion as an exhibit to the aforesaid
registration statements and to the reference to me under the caption "Legal
Matters" in the prospectus contained in said registration statements.
Very truly yours,
/s/ Barry G. Skolnick
Barry G. Skolnick
Senior Vice President, and
General Counsel
<PAGE> 1
EXHIBIT 10(a)
December 3, 1996
Board of Directors
Merrill Lynch Life Insurance Company
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Gentlemen:
We hereby consent to the reference to our name under the caption
"Legal Matters" in the Prospectus filed as part of Post-Effective Amendment
No. 8 to Form N-4 (File No. 33-43053) for Merrill Lynch Life Variable Annuity
Separate Account of Merrill Lynch Life Insurance Company. 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.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN, L.L.P.
By /s/ Kimberly J. Smith
--------------------------
Kimberly J. Smith
<PAGE> 1
EXHIBIT (10)(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 8 to Registration
Statement No. 33-43053 of Merrill Lynch Life Variable Annuity Separate Account
on Form N-4 of our reports on (i) Merrill Lynch Life Insurance Company dated
February 26, 1996, and (ii) Merrill Lynch Life Variable Annuity Separate
Account dated January 18, 1996, appearing in the Statement of Additional
Information, which is a part of such Registration Statement, and to the
reference to us under the heading "Experts" in the Prospectus, which is a part
of such Registration Statement.
/s/ Deloitte & Touche LLP
New York, New York
December 5, 1996
