<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 16, 2000.
REGISTRATION NOS. 333-90243
AND 811-6459
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. 1 /X/
POST-EFFECTIVE AMENDMENT NO. / /
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 18 /X/
------------------
MERRILL LYNCH LIFE VARIABLE ANNUITY
SEPARATE ACCOUNT A
(EXACT NAME OF REGISTRANT)
MERRILL LYNCH LIFE INSURANCE
COMPANY
(NAME OF DEPOSITOR)
800 SCUDDERS MILL ROAD, PLAINSBORO, NEW JERSEY 08536
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(609) 282-1429
------------------------
<TABLE>
<S> <C>
NAME AND ADDRESS OF AGENT FOR SERVICE: COPY TO:
BARRY G. SKOLNICK, ESQ. STEPHEN E. ROTH, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL KIMBERLY J. SMITH, ESQ.
MERRILL LYNCH LIFE INSURANCE COMPANY SUTHERLAND ASBILL & BRENNAN LLP
800 SCUDDERS MILL ROAD 1275 PENNSYLVANIA AVENUE, N.W.
PLAINSBORO, NEW JERSEY 08536 WASHINGTON, D.C. 20004-2415
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER EFFECTIVENESS OF THE REGISTRATION STATEMENT.
------------------------
TITLE OF SECURITIES BEING REGISTERED:
UNITS OF INTEREST IN A SEPARATE ACCOUNT UNDER FLEXIBLE PREMIUM INDIVIDUAL
DEFERRED VARIABLE ANNUITY CONTRACTS.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
SHALL DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
This information is subject to completion or change. A registration statement
for these securities has been filed with the Securities and Exchange Commission.
These securities may not be sold and offers to buy may not be accepted prior to
the registration statement becoming effective. This prospectus is not an offer
to sell and is not a solicitation of an offer to buy. There will be no sales of
these securities in any state in which such offer, solicitation, or sale would
be unlawful prior to registration or qualification under the laws of the state.
<PAGE>
DATE OF PRELIMINARY PROSPECTUS MARCH 16, 2000
Merrill Lynch Life Variable Annuity Separate Account A (the "Account")
FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
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
This prospectus gives you information you need to know before you invest. Keep
it for future reference. Address all communications concerning the Contract to
our Service Center at the address above.
The variable annuity contract described here provides a variety of investment
features. It also provides options for income protection later in life. It is
important that you understand how the contract works, and its benefits, costs,
and risks. First, some basics.
WHAT IS AN ANNUITY?
An annuity provides for the systematic liquidation of a sum of money at the
annuity date through a variety of annuity options. Each annuity option has
different protection features intended to cover different kinds of income needs.
Many of these annuity options provide income streams that can't be outlived.
WHAT IS A VARIABLE ANNUITY?
A variable annuity bases its benefits on the performance of underlying
investments. These investments may typically include stocks, bonds, and money
market instruments. The annuity described here is a variable annuity.
WHAT ARE THE RISKS IN OWNING A VARIABLE ANNUITY?
A variable annuity does not guarantee the performance of the underlying
investments. The performance can go up or down. It can even decrease the value
of money you've put in. You bear all of this risk. You could lose all or part of
the money you've put in.
<PAGE>
HOW DOES THIS ANNUITY WORK?
We put your premium payments as you direct into one or more subaccounts of the
Account. In turn, we invest each subaccount's assets in corresponding portfolios
("Funds") of the following:
<TABLE>
<C> <C> <S>
- MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
- Basic Value Focus Fund
- Domestic Money Market Fund
- Fundamental Growth Focus Fund
- Government Bond Fund
- Index 500 Fund
- AIM VARIABLE INSURANCE FUNDS, INC.
- AIM V.I. International Equity Fund
- AIM V.I. Value Fund
- ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
- Growth and Income Portfolio
- Premier Growth Portfolio
- MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-
- MFS Emerging Growth Series
- MFS Growth With Income Series
- HOTCHKIS AND WILEY VARIABLE TRUST
- International VIP Portfolio
- DAVIS VARIABLE ACCOUNT FUND, INC.
- Davis Value Portfolio
- DELAWARE GROUP PREMIUM FUND, INC.
- Trend Series
- PIMCO VARIABLE INSURANCE TRUST
- Total Return Bond Portfolio
- SELIGMAN PORTFOLIOS, INC.
- Seligman Small-Cap Value Portfolio
- VAN KAMPEN LIFE INVESTMENT TRUST
- Emerging Growth Portfolio
</TABLE>
The value of your Contract at any point in time up to the annuity date is called
your contract value. Before the annuity date, you are generally free to direct
your contract value among the subaccounts as you wish. You may also withdraw all
or part of your contract value. If you die before the annuity date, we pay a
death benefit to your beneficiary.
We've designed this annuity as a long-term investment. Any money you take out of
the Contract is subject to tax, and if taken before age 59 1/2 may also be
subject to a 10% federal penalty tax. FOR THESE REASONS, YOU NEED TO CONSIDER
YOUR CURRENT AND SHORT-TERM INCOME NEEDS CAREFULLY BEFORE YOU DECIDE TO BUY THE
CONTRACT.
WHAT DOES THIS ANNUITY COST?
THIS ANNUITY DOES NOT IMPOSE ANY SALES CHARGES -- ON EITHER PURCHASES OR
WITHDRAWALS. However, we impose a number of other charges, including an
asset-based insurance charge. We provide more details on this charge, as well as
a description of all other charges, later in the prospectus.
************************************************************************
This prospectus contains information about the Contract and the Account that you
should know before you invest. A Statement of Additional Information contains
more information about the Contract and the Account. We have filed the
preliminary Statement of Additional Information, with the same preliminary date,
with the Securities and Exchange Commission. We incorporate this Statement of
Additional Information by reference. If you want to obtain this Statement of
Additional Information, simply call or write us at the phone number or address
noted above. There is no charge to obtain it. The table of contents for this
Statement of Additional Information is found on page 43 of this prospectus.
The Securities and Exchange Commission ("SEC") maintains a web site that
contains the Statement of Additional Information, material incorporated by
reference, and other information regarding registrants that file electronically
with the SEC. The address of the site is http://www.sec.gov.
2
<PAGE>
CURRENT PROSPECTUSES FOR THE MERRILL LYNCH VARIABLE SERIES FUNDS, INC., AIM
VARIABLE INSURANCE FUNDS, INC., ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.,
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-, HOTCHKIS AND WILEY
VARIABLE TRUST, DAVIS VARIABLE ACCOUNT FUND, INC., DELAWARE GROUP PREMIUM FUND,
INC., PIMCO VARIABLE INSURANCE TRUST, SELIGMAN PORTFOLIOS, INC., AND VAN KAMPEN
LIFE INVESTMENT TRUST MUST ACCOMPANY THIS PROSPECTUS. PLEASE READ THESE
DOCUMENTS CAREFULLY AND RETAIN THEM FOR FUTURE REFERENCE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE CONTRACTS OR
DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
--------
<S> <C>
DEFINITIONS................................................. 7
CAPSULE SUMMARY OF THE CONTRACT............................. 8
Premiums................................................ 8
The Account............................................. 8
The Funds Available For Investment...................... 8
Fees and Charges........................................ 9
Asset-Based Insurance Charge....................... 9
Contract Fee....................................... 9
Premium Taxes...................................... 9
Fund Expenses...................................... 9
Transfers Among Subaccounts............................. 9
Withdrawals............................................. 10
Death Benefit........................................... 10
Annuity Payments........................................ 10
Ten Day Review.......................................... 10
FEE TABLE................................................... 11
YIELDS AND TOTAL RETURNS.................................... 13
MERRILL LYNCH LIFE INSURANCE COMPANY........................ 14
THE ACCOUNT................................................. 14
Segregation of Account Assets........................... 14
Number of Subaccounts; Subaccount Investments........... 15
INVESTMENTS OF THE ACCOUNT.................................. 15
General Information and Investment Risks................ 15
Merrill Lynch Variable Series Funds, Inc................ 15
Basic Value Focus Fund............................. 16
Domestic Money Market Fund......................... 16
Fundamental Growth Focus Fund...................... 16
Government Bond Fund............................... 16
Index 500 Fund..................................... 16
AIM Variable Insurance Funds, Inc....................... 16
AIM V.I. International Equity Fund................. 17
AIM V.I. Value Fund................................ 17
Alliance Variable Products Series Fund, Inc............. 17
Growth and Income Portfolio........................ 17
Premier Growth Portfolio........................... 17
MFS-Registered Trademark- Variable Insurance
Trust-SM-............................................... 17
MFS Emerging Growth Series......................... 18
MFS Growth With Income Series...................... 18
Hotchkis and Wiley Variable Trust....................... 18
International VIP Portfolio........................ 18
Davis Variable Account Fund, Inc........................ 19
Davis Value Portfolio.............................. 19
Delaware Group Premium Fund, Inc........................ 19
Trend Series....................................... 19
PIMCO Variable Insurance Trust.......................... 19
Total Return Bond Portfolio........................ 20
Seligman Portfolios, Inc................................ 20
Seligman Small-Cap Value Portfolio................. 20
Van Kampen Life Investment Trust........................ 20
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Emerging Growth Portfolio.......................... 20
Purchases and Redemptions of Fund Shares;
Reinvestment............................................ 21
Material Conflicts, Substitution of Investments and
Changes to the Account.................................. 21
CHARGES AND DEDUCTIONS...................................... 21
Asset-Based Insurance Charge............................ 21
Contract Fee............................................ 22
Other Charges........................................... 22
Transfer Charges................................... 22
Tax Charges........................................ 22
Fund Expenses...................................... 23
Premium Taxes........................................... 23
FEATURES AND BENEFITS OF THE CONTRACT....................... 23
Ownership of The Contract............................... 23
Issuing the Contract.................................... 24
Issue Age.......................................... 24
Information We Need To Issue The Contract.......... 24
Ten Day Right to Review............................ 24
Premiums................................................ 24
Minimum and Maximum Premiums....................... 24
How to Make Payments............................... 24
Automatic Investment Feature....................... 25
Premium Investments................................ 25
Accumulation Units...................................... 25
How Are My Contract Transactions Priced?................ 25
How Do We Determine The Number of Units?................ 26
ADDITIONAL PROVISIONS APPLICABLE TO ALL CONTRACTS........... 26
Death of Annuitant Prior to Annuity Date................ 26
Transfers Among Subaccounts............................. 26
Dollar Cost Averaging Program........................... 27
What Is It?........................................ 27
Participating in the DCA Program................... 27
Minimum Amounts.................................... 27
When Do We Make DCA Transfers?..................... 28
Asset Allocation Program................................ 28
Rebalancing Program..................................... 29
Withdrawals and Surrenders.............................. 29
When and How Withdrawals are Made.................. 29
Minimum Amounts.................................... 30
Systematic Withdrawal Program...................... 30
Surrenders......................................... 30
Payments to Contract Owners............................. 30
Contract Changes........................................ 30
Death Benefit........................................... 31
General............................................ 31
Spousal Continuation............................... 31
Calculation of Death Benefit....................... 31
Maximum Anniversary Value.......................... 32
Annuity Payments........................................ 32
Annuity Options......................................... 33
How We Determine Present Value of Future Guaranteed
Annuity Payments..................................... 33
Payments of a Fixed Amount......................... 33
Payments for a Fixed Period........................ 34
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Life Annuity....................................... 34
Life Annuity With Payments Guaranteed for 5, 10,
15, or 20 Years...................................... 34
Life Annuity With Guaranteed Return of Contract
Value................................................ 34
Joint and Survivor Life Annuity.................... 34
Joint and Survivor Life Annuity with Payments
Guaranteed for 5, 10, 15, or 20 Years................ 34
Individual Retirement Account Annuity.............. 34
Gender-Based Annuity Purchase Rates..................... 35
FEDERAL INCOME TAXES........................................ 35
Federal Income Taxes.................................... 35
Tax Status of the Contract.............................. 35
Diversification Requirements....................... 35
Owner Control...................................... 35
Required Distributions............................. 36
Taxation of Annuities................................... 36
In General......................................... 36
Withdrawals and Surrenders......................... 36
Annuity Payments................................... 36
Taxation of Death Benefit Proceeds................. 37
Penalty Tax on Some Withdrawals......................... 37
Transfers, Assignments, or Exchanges of a Contract...... 37
Withholding............................................. 37
Multiple Contracts...................................... 37
Possible Changes In Taxation............................ 37
Possible Charge For Our Taxes........................... 38
Individual Retirement Annuities......................... 38
Traditional IRAs................................... 38
Roth IRAs.......................................... 38
Tax Sheltered Annuities............................ 38
Other Tax Issues For IRAs and Roth IRAs............ 39
OTHER INFORMATION........................................... 39
Notices and Elections................................... 39
Voting Rights........................................... 39
Reports to Contract Owners.............................. 40
Selling the Contract.................................... 40
State Regulation........................................ 40
State Variations........................................ 41
Legal Proceedings....................................... 41
Experts................................................. 41
Legal Matters........................................... 41
Registration Statements................................. 41
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL
INFORMATION............................................... 42
APPENDIX A.................................................. 43
</TABLE>
6
<PAGE>
DEFINITIONS
ACCUMULATION UNIT: A unit of measure used to compute the value of your interest
in a subaccount prior to the annuity date.
ANNUITANT: Annuity payments may depend upon the continuation of a person's life.
That person is called the annuitant.
ANNUITY DATE: The date on which annuity payments are scheduled to begin.
ATTAINED AGE: The age of a person on the contract date plus the number of full
contract years since the contract date.
BENEFICIARY(S): The person(s) designated by you to receive payment upon the
death of an owner prior to the annuity date.
CONTRACT ANNIVERSARY: The yearly anniversary of the contract date.
CONTRACT DATE: The effective date of the Contract. This is usually the business
day we receive your initial premium at our Service Center.
CONTRACT VALUE: The value of your interest in the Account.
CONTRACT YEAR: The period from the contract date to the first contract
anniversary, and thereafter, the period from one contract anniversary to the
next contract anniversary.
INDIVIDUAL RETIREMENT ACCOUNT OR ANNUITY ("IRA"): A retirement arrangement
meeting the requirements of Section 408 of the Internal Revenue Code ("IRC").
NET INVESTMENT FACTOR: An index used to measure the investment performance of a
subaccount from one valuation period to the next.
NONQUALIFIED CONTRACT: A Contract issued in connection with a retirement
arrangement other than a qualified plan described under Section 401, 403, 408,
457 or any similar provisions of the IRC.
TAX SHELTERED ANNUITY: A Contract issued in connection with a retirement
arrangement that receives favorable tax status under Section 403(b) of the IRC.
VALUATION PERIOD: The interval from one determination of the net asset value of
a subaccount to the next. Net asset values are determined as of the close of
business on each day the New York Stock Exchange is open.
7
<PAGE>
CAPSULE SUMMARY OF THE CONTRACT
This capsule summary provides 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.
PREMIUMS
Generally, before the annuity date you can pay premiums as often as you like.
The minimum initial premium is $25,000. Subsequent premiums generally must be
$100 or more. The maximum premium that will be accepted without Company approval
is $1,000,000. Under an automatic investment feature, you can make subsequent
premium payments systematically from your Merrill Lynch brokerage account. For
more information, see "Automatic Investment Feature".
The Contract is available as a non-qualified contract or may be issued as an IRA
or purchased through an established IRA or Roth IRA custodial account with
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"). Federal law
limits maximum annual contributions to IRAs and Roth IRAs. Transfer amounts from
tax sheltered annuity plans that are not subject to the Employee Retirement
Income Security Act of 1974, as amended, will be accepted as premium payments,
as permitted by law. Other premium payments will not be accepted under a
Contract used as a tax sheltered annuity.
Tax favored arrangements, including IRAs and Roth IRAs, should carefully
consider the costs and benefits of the Contracts (including annuity income
benefits) before purchasing the Contract, since the tax arrangement itself
provides for tax-sheltered growth.
We offer another variable annuity contract that has a different death benefit,
contract features, fund selections, and optional programs. However, this other
contract also has different charges that would affect your subaccount
performance and contract values. To obtain more information about this other
contract, contact our Service Center or your Financial Consultant.
THE ACCOUNT
As you direct, we will put premiums into the subaccounts corresponding to the
Funds in which we invest your contract value. For the first 14 days following
the contract date, we put all premiums into the Domestic Money Market
Subaccount. After the 14 days, we'll put the money into the subaccounts you've
selected. In Pennsylvania, however, we won't wait 14 days. Instead, we'll invest
your premium immediately in the subaccounts you've selected. Currently, you may
allocate premiums or contract value among 10 of the available subaccounts.
Generally, within certain limits you may transfer contract value periodically
among subaccounts.
THE FUNDS AVAILABLE FOR INVESTMENT
<TABLE>
<S> <C>
- --ARROW-- FUNDS OF MERRILL LYNCH VARIABLE SERIES --ARROW-- FUNDS OF HOTCHKIS AND WILEY VARIABLE TRUST
FUNDS, INC.
--ARROW-- Basic Value Focus Fund --ARROW-- International VIP Portfolio
--ARROW-- Domestic Money Market Fund --ARROW-- FUNDS OF DAVIS VARIABLE ACCOUNT FUND, INC.
--ARROW-- Fundamental Growth Focus Fund --ARROW-- Davis Value Portfolio
--ARROW-- Government Bond Fund --ARROW-- FUNDS OF DELAWARE GROUP PREMIUM FUND, INC.
--ARROW-- Index 500 Fund --ARROW-- Trend Series
- --ARROW-- FUNDS OF AIM VARIABLE INSURANCE FUNDS, INC. --ARROW-- FUNDS OF PIMCO VARIABLE INSURANCE TRUST
--ARROW-- AIM V.I. International Equity Fund --ARROW-- Total Return Bond Portfolio
--ARROW-- AIM V.I. Value Fund --ARROW-- FUNDS OF SELIGMAN PORTFOLIOS, INC.
- --ARROW-- FUNDS OF ALLIANCE VARIABLE PRODUCTS SERIES --ARROW-- Seligman Small-Cap Value Portfolio
FUND, INC.
--ARROW-- Growth and Income Portfolio --ARROW-- FUNDS OF VAN KAMPEN LIFE INVESTMENT TRUST
--ARROW-- Premier Growth Portfolio --ARROW-- Emerging Growth Portfolio
- --ARROW-- FUNDS OF MFS-REGISTERED TRADEMARK- VARIABLE
INSURANCE TRUST-SM-
--ARROW-- MFS Emerging Growth Series
--ARROW-- MFS Growth With Income Series
</TABLE>
8
<PAGE>
If you want detailed information about the investment objectives of the Funds,
see "Investments of the Account" and the prospectuses for the Funds.
FEES AND CHARGES
ASSET-BASED INSURANCE CHARGE
We currently impose an asset-based insurance charge of 1.59% annually to cover
certain risks. It will never exceed 1.59% annually.
The asset-based insurance charge compensates us for:
- costs associated with the establishment and administration of the
Contract;
- mortality risks we assume for the annuity payment and death benefit
guarantees made under the Contract; and
- expense risks we assume to cover Contract maintenance expenses.
We deduct the asset-based insurance charge daily from the net asset value of
the subaccounts. This charge ends on the annuity date.
CONTRACT FEE
We impose a $40 contract fee each year and upon a full withdrawal to reimburse
us for expenses related to maintenance of the Contract only if the greater of
contract value, or premiums less withdrawals, is less than $25,000.
Accordingly, if your withdrawals have not decreased your investment in the
Contract below $25,000, we will not impose this annual fee. We may also waive
this fee in certain circumstances where you own at least three Contracts. This
fee ends after the annuity date.
PREMIUM TAXES
On the annuity date, we deduct a charge for any premium taxes imposed by a
state or local government. Premium tax rates vary from jurisdiction to
jurisdiction. They currently range from 0% to 5%.
FUND EXPENSES
The Funds deduct advisory fees and operating expenses from assets.
You can find detailed information about all fees and charges imposed on the
Contract under "Charges and Deductions".
TRANSFERS AMONG SUBACCOUNTS
Before the annuity date, you may transfer all or part of your contract value
among the subaccounts up to twelve times per contract year without charge. You
may make more than twelve transfers among available subaccounts, but we may
charge $25 per extra transfer. (See "Transfers".)
Several specialized transfer programs are available under the Contract. You
cannot use more than one such program at a time.
9
<PAGE>
- First, we offer a Dollar Cost Averaging Program where money you've put in
a designated subaccount is systematically transferred monthly into other
subaccounts you select without charge. The main objective of this program
is to minimize the impact of short-term price fluctuations to allow you to
take advantage of market fluctuations. (See "Dollar Cost Averaging
Program".) (There is no guarantee that Dollar Cost Averaging will result
in lower average prices or protect against market loss.)
- Second, through participation in the Asset Allocation Program, you may
select one of five asset allocation models. Your contract value is
rebalanced quarterly based on the asset allocation model selected. (See
"Asset Allocation Program".)
- Third, you may also choose to participate in a Rebalancing Program where
we automatically reallocate your contract value quarterly in order to
maintain a particular percentage allocation among the subaccounts that you
select. (See "Rebalancing Program".)
WITHDRAWALS
You can withdraw money from the Contract six times each contract year.
Additionally, under a Systematic Withdrawal Program, you may have automatic
withdrawals of a specified dollar amount made monthly, quarterly, semi-annually,
or annually. These systematic withdrawals are in addition to the annual six
withdrawals permitted under the Contract. For more information, see "Systematic
Withdrawal Program".
A withdrawal may have adverse tax consequences, including the imposition of a
penalty tax on withdrawals prior to age 59 1/2 (see "Federal Income Taxes").
DEATH BENEFIT
Regardless of investment experience, the Contract provides a guaranteed minimum
death benefit if you die before the annuity date.
If you are age 80 or over when the Contract is issued, the death benefit equals
the greater of premiums less adjusted withdrawals or the contract value. If you
are under age 80 when the Contract is issued, the death benefit equals the
greatest of premiums less adjusted withdrawals, the contract value, or the
Maximum Anniversary Value. The Maximum Anniversary Value equals the greatest
anniversary value for the Contract.
You can find more detailed information about the death benefit and how it is
calculated, including age limitations that apply, under "Death Benefit".
ANNUITY PAYMENTS
Annuity payments begin on the annuity date and are made under the annuity option
you select. You may select an annuity date that cannot be later than the
annuitant's 90th birthday. If you do not select an annuity date, the annuity
date for nonqualified Contracts is the annuitant's 90th birthday. The annuity
date for IRA or tax sheltered annuity Contracts is when the owner/annuitant
reaches age 70 1/2.
Details about the annuity options available under the Contract can be found
under "Annuity Options".
TEN DAY REVIEW
When you receive the Contract, read it carefully to make sure it's what you
want. Generally, within 10 days after you receive the Contract, you may return
it for a refund. Some states allow a longer period of time to return the
Contract. To get a refund, return the Contract to the Service Center or to the
Financial Consultant who sold it. We will then refund the greater of all
premiums paid into the Contract or the contract value as of the date you return
the Contract. For contracts issued in Pennsylvania, we'll refund the contract
value as of the date you return the Contract.
10
<PAGE>
FEE TABLE
A. Contract Owner Transaction Expenses
1.Sales Load Imposed on Premium ................................... None
2.Contingent Deferred Sales Charge ................................ None
3.Transfer Fee ..................................................... $25
The first 12 transfers among subaccounts in a contract year are
free. We currently do not, but may in the future, charge a $25 fee
on all subsequent transfers.
The Fee Table and Examples do not include charges to contract owners
for premium taxes. Premium taxes may be applicable. Refer to the
"Premium Taxes" section in this Prospectus for further details.
B. Annual Contract Fee ................................................ $40
The Contract Fee will be assessed annually on each contract
anniversary and upon a full withdrawal only if the greater of contract
value, or premiums less withdrawals, is less than $25,000.
C. Separate Account Annual Expenses (as a percentage of contract value)
Current and Maximum Asset-Based Insurance Charge ................. 1.59%
D. Fund Expenses for the Year Ended December 31, 1999 (see "Notes to Fee
Table") (as a percentage of each Fund's average net assets)
<TABLE>
<CAPTION>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. (CLASS A SHARES)
--------------------------------------------------------------
DOMESTIC FUNDAMENTAL
BASIC VALUE MONEY GROWTH GOVERNMENT
ANNUAL EXPENSES FOCUS MARKET FOCUS (A) BOND INDEX 500
- --------------- ----------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees............. .60% .50% .65% .50% .30%
Other Expenses....................... .06% .05% .15% .05% .05%
Total Annual Operating Expenses...... .66% .55% .80% .55% .35%
Expense Reimbursements............... --% --% --% --% --%
Net Expenses......................... .66% .55% .80% .55% .35%
</TABLE>
<TABLE>
<CAPTION>
AIM ALLIANCE VARIABLE MFS-REGISTERED TRADEMARK- HOTCHKIS
VARIABLE PRODUCTS SERIES VARIABLE AND WILEY
INSURANCE FUND, INC. INSURANCE VARIABLE
FUNDS, INC. (CLASS A SHARES) TRUST-SM- TRUST
------------------------ -------------------- ------------------------- -------------
MFS
AIM V.I. GROWTH MFS GROWTH
INTERNATIONAL AIM V.I. AND PREMIER EMERGING WITH INTERNATIONAL
ANNUAL EXPENSES EQUITY VALUE INCOME GROWTH(B) GROWTH(C) INCOME(C) VIP
- --------------- ------------- -------- -------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory Fees............. .75% .61% .63% 1.00% .75% .75% .75%
Other Expenses....................... .22% .15% .08% .05% .09% .13% .26%
Total Annual Operating Expenses...... .97% .76% .71% 1.05% .84% .88% 1.01%
Expense Reimbursements............... --% --% --% --% --% --% --%
Net Expenses......................... .97% .76% .71% 1.05% .84% .88% 1.01%
</TABLE>
<TABLE>
<CAPTION>
DAVIS DELAWARE PIMCO
VARIABLE GROUP VARIABLE VAN KAMPEN
ACCOUNT PREMIUM INSURANCE SELIGMAN LIFE INVESTMENT
FUND, INC. FUND, INC. TRUST PORTFOLIOS, INC. TRUST
---------- ---------- --------- ---------------- ---------------
TOTAL SELIGMAN
DAVIS TREND RETURN SMALL-CAP EMERGING
ANNUAL EXPENSES VALUE SERIES BOND VALUE (B) GROWTH (C)
- --------------- ---------- ---------- --------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Investment Advisory Fees............. .75% .75% .40% 1.00% .70%
Other Expenses....................... .25% .07% .35% .41% .18%
Total Annual Operating Expenses...... 1.00% .82% .75% 1.41% .88%
Expense Reimbursements............... --% --% .10% -- --
Net Expenses......................... 1.00% .82% .65% 1.41% .88%
</TABLE>
11
<PAGE>
EXAMPLES OF CHARGES
If you surrender or annuitize your Contract at the end of the applicable time
period, you would pay the following cumulative expenses on each $1,000 invested,
assuming 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SUBACCOUNT INVESTING IN:
Basic Value Focus Fund+................................. $23 $72 $123 $264
Domestic Money Market Fund+............................. 22 69 117 252
Fundamental Growth Focus Fund+.......................... 25 76 130 278
Government Bond Fund+................................... 22 69 117 252
Index 500 Fund+......................................... 20 62 107 231
AIM V.I. International Equity Fund...................... 27 81 139 295
AIM V.I. Value Fund..................................... 24 75 128 274
Growth and Income Portfolio+............................ 24 74 126 269
Premier Growth Portfolio+............................... 27 84 143 303
MFS Emerging Growth Series.............................. 25 78 132 282
MFS Growth With Income Series........................... 26 79 134 286
International VIP Portfolio............................. 27 83 141 299
Davis Value Portfolio................................... 27 82 141 298
Trend Series............................................ 25 77 131 280
Total Return Bond Portfolio............................. 23 72 123 263
Seligman Small-Cap Value Portfolio...................... 31 95 161 338
Emerging Growth Portfolio............................... 26 79 134 286
</TABLE>
- ---------
<TABLE>
<S> <C>
+ Class A Shares.
</TABLE>
Because there is no contingent deferred sales charge, you would pay the same
expenses whether you surrender your Contract at the end of the applicable time
period or not, based on the same assumptions.
--------------------------
The preceding Fee Table and Examples help you understand the costs and expenses
you will bear, directly or indirectly. The Fee Table and Examples include
expenses and charges of the Account as well as the Funds. The Examples do not
reflect the $40 contract fee because, based on our estimates of average contract
size and withdrawals, its effect on the examples shown would be negligible.
Premium taxes may also be applicable. See the Charges and Deductions section in
this Prospectus and the Fund prospectuses for a further discussion of fees and
charges.
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
EXAMPLES.
THE SUBACCOUNTS AVAILABLE UNDER THE CONTRACT HAVE NOT YET COMMENCED OPERATIONS.
THEREFORE, THERE IS NO HISTORY OF ACCUMULATION UNIT VALUES FOR THESE
SUBACCOUNTS.
NOTES TO FEE TABLE
(a) "Other Expenses" and "Net Expenses" shown for the Fundamental Growth Focus
Fund are based on expenses estimated for the current fiscal year.
(b) The Fee Table does not reflect fees waived or expenses assumed by J. & W.
Seligman & Co. Incorporated ("Seligman") for the Seligman Small-Cap Value
Portfolio during the year ended December 31, 1999. Such waivers and
assumption of expenses were made on a voluntary basis, and may be
discontinued or reduced at any time without notice. During the fiscal year
ended December 31, 1999, Seligman waived fees and expense totaling 0.41%
for the Seligman Small-Cap Value Portfolio. Considering such
reimbursements, "Net Expenses" would have been 1.00%.
(c) The MFS Emerging Growth Series and the MFS Growth With Income Series have
an expense offset arrangement which reduces each Fund's custodian fee based
upon the amount of cash maintained by the Fund with its custodian and
dividend disbursing agent. Each Fund may enter into such arrangements and
directed brokerage arrangements, which would also have the effect of
reducing the Fund's expenses. "Other Expenses" do not take into account
these expense reductions, and are therefore higher than the actual expenses
of the Funds. Had these fee reductions been taken into account, "Net
Expenses" would have been 0.83% for the Emerging Growth Series and 0.87%
for the Growth With Income Series.
(d) The Fee Table does not reflect fees waived or expenses assumed by Van
Kampen Asset Management Inc. ("Van Kampen Management") for the Emerging
Growth Portfolio during the year ended December 31, 1999. Such waivers and
assumption of expenses were made on a voluntary basis, and may be
discontinued or reduced at any time without notice. During the fiscal year
ended December 31, 1999, Van Kampen Management waived fees and expense
totaling 0.03% for the Emerging Growth Portfolio. Considering such
reimbursements, "Net Expenses" would have been 0.85%.
12
<PAGE>
YIELDS AND TOTAL RETURNS
From time to time, we may advertise yields, effective yields, and total returns
for the subaccounts. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND DO NOT
INDICATE OR PROJECT FUTURE PERFORMANCE. We may also advertise performance of the
subaccounts in comparison to certain performance rankings and indices. More
detailed information on the calculation of performance information, as well as
comparisons with unmanaged market indices, appears in the Statement of
Additional Information.
Effective yields and total returns for a subaccount are based on the investment
performance of the corresponding Fund. Fund expenses influence Fund performance.
The yield of the Domestic Money Market Subaccount refers to the annualized
income generated by an investment in the subaccount over a specified 7-day
period. The yield is calculated by assuming that the income generated for that
7-day period is generated each 7-day period over a 52-week period and is shown
as a percentage of the investment. The effective yield is calculated similarly
but, when annualized, the income earned by an investment is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment.
The yield of a subaccount (besides the Domestic Money Market Subaccount) refers
to the annualized income generated by an investment in the subaccount over a
specified 30-day or one month period. The yield is calculated by assuming the
income generated by the investment during that 30-day or one-month period is
generated each period over 12 months and is shown as a percentage of the
investment.
The average annual total return of a subaccount refers to return quotations
assuming an investment has been held in each subaccount for 1, 5 and 10 years,
or for a shorter period, if applicable. The average annual total returns
represent the average compounded rates of return that would cause an initial
investment of $1,000 to equal the value of that investment at the end of each
period. These percentages exclude any deductions for premium taxes.
We may also advertise or present yield or total return performance information
computed on different bases, but this information will always be accompanied by
average annual total returns for the corresponding subaccounts. We may also
advertise total return performance information for the Funds. We may also
present total return performance information for a subaccount for periods before
the date the subaccount commenced operations. If we do, we'll base performance
of the corresponding Fund as if the subaccount existed for the same periods as
those indicated for the corresponding Fund, with a level of fees and charges
equal to those currently imposed under the Contracts. We may also present total
performance information for a hypothetical Contract assuming allocation of the
initial premium to more than one subaccount or assuming monthly transfers from
one subaccount to designated other subaccounts under a Dollar Cost Averaging
Program. We may also present total performance information for a hypothetical
Contract assuming participation in the Asset Allocation Program or the
Rebalancing Program. This information will reflect the performance of the
affected subaccounts for the duration of the allocation under the hypothetical
Contract. It will also reflect the deduction of charges described above. This
information may also be compared to various indices.
Advertising and sales literature for the Contracts may also compare the
performance of the subaccounts and Funds to the performance of other variable
annuity issuers in general or to the performance of particular types of variable
annuities investing in mutual funds, with investment objectives similar to each
of the Funds corresponding to the subaccounts.
Performance information may also be based on rankings by services which monitor
and rank the performance of variable annuity issuers in each of the major
categories of investment objectives on an industry-wide basis.
13
<PAGE>
Ranking services we may use as sources of performance comparison are Lipper,
VARDS, CDA/Weisenberger, Morningstar, MICROPAL, and Investment Company Data,
Inc.
Advertising and sales literature for the Contracts may also compare the
performance of the subaccounts to the Standard & Poor's Index of 500 Common
Stocks, the Morgan Stanley EAFE Index, the Russell 2000 Index and the Dow Jones
Indices, all widely used measures of stock market performance. These unmanaged
indices assume the reinvestment of dividends, but do not reflect any deduction
for the expense of operating or managing an investment portfolio. Other sources
of performance comparison that we may use are Chase Investment Performance
Digest, Money, Forbes, Fortune, Business Week, Financial Services Weekly,
Kiplinger Personal Finance, Wall Street Journal, USA Today, Barrons, U.S. News &
World Report, Strategic Insight, Donaghues, Investors Business Daily, and
Ibbotson Associates.
Advertising and sales literature for the Contracts may also contain information
on the effect of tax deferred compounding on subaccount investment returns, or
returns in general. The tax deferral may be illustrated by graphs and charts and
may include a comparison at various points in time of the return from an
investment in a Contract (or returns in general) on a tax-deferred basis
(assuming one or more tax rates) with the return on a currently taxable basis.
MERRILL LYNCH LIFE INSURANCE COMPANY
We are a stock life insurance company organized under the laws of the State of
Washington on January 27, 1986. We changed our corporate location to Arkansas on
August 31, 1991. We are an indirect wholly owned subsidiary of Merrill Lynch &
Co., Inc., a corporation whose common stock is traded on the New York Stock
Exchange.
Our financial statements can be found in the Statement of Additional
Information. You should consider them only in the context of our ability to meet
any Contract obligation.
THE ACCOUNT
The Merrill Lynch Life Variable Annuity Separate Account A (the "Account")
offers through its subaccounts a variety of investment options. Each option has
a different investment objective.
We established the Account on August 6, 1991. It is governed by Arkansas law,
our state of domicile. The Account is registered with the Securities and
Exchange Commission as a unit investment trust under the Investment Company Act
of 1940. The Account meets the definition of a separate account under the
federal securities laws. The Account's assets are SEGREGATED from all of our
other assets.
SEGREGATION OF ACCOUNT ASSETS
Obligations to contract owners and beneficiaries that arise under the Contract
are our obligations. We own all of the assets in the Account. The Account's
income, gains, and losses, whether or not realized, derived from Account assets
are credited to or charged against the Account without regard to our other
income, gains or losses. The assets in each Account will always be at least
equal to the reserves and other liabilities of the Account. If the Account's
assets exceed the required reserves and other Contract liabilities, we may
transfer the excess to our general account. Under Arkansas insurance law the
assets in the Account, to the extent of its reserves and liabilities, may not be
charged with liabilities arising out of any other business we conduct nor may
the assets of the Account be charged with any liabilities of other separate
accounts.
14
<PAGE>
NUMBER OF SUBACCOUNTS; SUBACCOUNT INVESTMENTS
There are 17 subaccounts currently available through the Account. All
subaccounts invest in a corresponding portfolio of the Merrill Lynch Variable
Series Funds, Inc. (the "Variable Series Funds"); the AIM Variable Insurance
Funds, Inc. (the "AIM V.I. Funds"); the Alliance Variable Products Series Fund,
Inc. (the "Alliance Fund"); the MFS-Registered Trademark- Variable Insurance
Trust-SM- (the "MFS Trust"); the Hotchkis and Wiley Variable Trust (the
"Hotchkis and Wiley Trust"); the Davis Variable Account Fund, Inc. (the "Davis
Fund"); the Delaware Group Premium Fund, Inc. (the "Delaware Fund"); the PIMCO
Variable Insurance Trust (the "PIMCO Trust"); the Seligman Portfolios, Inc. (the
"Seligman Portfolios"); or the Van Kampen Life Investment Trust (the "Van Kampen
Trust"). Additional subaccounts may be added or closed in the future.
Although the investment objectives and policies of certain Funds are similar to
the investment objectives and policies of other portfolios that may be managed
or sponsored by the same investment adviser, manager, or sponsor, nevertheless,
we do not represent or assure that the investment results will be comparable to
any other portfolio, even where the investment advisors or manager is the same.
Differences in portfolio size, actual investments held, fund expenses, and other
factors all contribute to differences in fund performance. For all of these
reasons, you should expect investment results to differ. In particular, certain
funds available only through the Contract have names similar to funds not
available through the Contract. The performance of a fund not available through
the Contract does not indicate performance of the similarly named fund available
through the Contract.
INVESTMENTS OF THE ACCOUNT
GENERAL INFORMATION AND INVESTMENT RISKS
Information about investment objectives, management, policies, restrictions,
expenses, risks, and all other aspects of fund operations can be found in the
Funds' prospectuses and Statements of Additional Information. Read these
carefully before investing. Fund shares are currently sold to our separate
accounts as well as separate accounts of ML Life Insurance Company of New York
(an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc.), and
insurance companies not affiliated with us, to fund benefits under certain
variable annuity and variable life insurance contracts. Shares of these funds
may be offered in the future to certain pension or retirement plans.
Generally, you should consider the funds as long-term investments and vehicles
for diversification, but not as a balanced investment program. Many of these
funds may not be appropriate as the exclusive investment to fund a Contract for
all contract owners. The Fund prospectuses also describe certain additional
risks, including investing on an international basis or in foreign securities
and investing in lower rated or unrated fixed income securities. There is no
guarantee that any fund will be able to meet its investment objectives. Meeting
these objectives depends upon future economic conditions and upon how well Fund
management anticipates changes in economic conditions.
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
The Merrill Lynch Variable Series Funds, Inc. ("Variable Series Funds") is
registered with the Securities and Exchange Commission as an open-end management
investment company. It currently offers the Account Class A shares of 5 of its
separate investment mutual fund portfolios.
Merrill Lynch Asset Management, L.P. ("MLAM") is the investment adviser to the
Variable Series Funds. MLAM, together with its affiliates, Fund Asset
Management, L.P., Mercury Asset Management International Ltd., and Hotchkis and
Wiley, is a worldwide mutual fund leader, and has a total of $501.68 billion in
investment company and other portfolio assets under management as of the end of
February 1999. It is
15
<PAGE>
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. As the
investment adviser, it is paid fees by these Funds for its services. The fees
charged to each of these Funds are set forth in the summary below.
MLAM has entered into an agreement with Merrill Lynch Insurance Group, Inc.
("MLIG"), an affiliate of ours, under which MLIG provides administration
services for the Funds of Variable Series Funds used with the Contracts and
other variable life insurance and variable annuity contracts we issue. Under
this agreement, MLAM compensates MLIG in an amount equal to a portion of the
annual gross investment advisory fees paid by these Funds to MLAM attributable
to contracts we issue. MLAM and Merrill Lynch Life Agency, Inc. have entered
into a Reimbursement Agreement that limits the operating expenses paid by each
Fund of the Variable Series Funds in a given year to 1.25% of its average net
assets (see "Selling the Contract").
BASIC VALUE FOCUS FUND. This Fund seeks capital appreciation and, secondarily,
income by investing in securities, primarily equities, that management of the
Fund believes are undervalued and therefore represent basic investment value.
MLAM receives an advisory fee from the Fund at the annual rate of 0.60% of the
average daily net assets of the Fund.
DOMESTIC MONEY MARKET FUND. This Fund seeks to preserve capital, maintain
liquidity, and achieve the highest possible current income consistent with the
foregoing objectives by investing in short-term domestic money market
securities. MLAM receives an advisory fee from the Fund at the annual rate of
0.50% of the average daily net assets of the Fund.
FUNDAMENTAL GROWTH FOCUS FUND. This Fund seeks long-term growth of capital. The
Fund purchases primarily common stocks of U.S. companies that Fund management
believes have shown above-average rates of growth earnings over the long-term.
The Fund will invest at least 65% of its total assets in equity securities. MLAM
receives an advisory fee from the Fund at an annual rate of 0.65% of the average
daily net assets of the Fund.
GOVERNMENT BOND FUND. This Fund seeks the highest possible current income
consistent with the protection of capital afforded by investing in debt
securities issued or guaranteed by the United States Government, its agencies or
instrumentalities. MLAM receives an advisory fee from the Fund at an annual rate
of 0.50% 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 an advisory
fee from the Fund at an annual rate of 0.30% of the Fund's average daily net
assets.
AIM VARIABLE INSURANCE FUNDS
AIM Variable Insurance Funds ("AIM V.I. Funds") is registered with the
Securities and Exchange Commission as an open-end, series, management investment
company. It currently offers the Account two of its separate investment
portfolios.
AIM Advisors, Inc. ("AIM"), 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173, serves as the investment adviser to each of the Funds of AIM V.I.
Funds. AIM has acted as an investment adviser since its organization in 1976.
Today AIM, together with its subsidiaries, advises or manages over 120
investment portfolios, including the Funds, encompassing a broad range of
investment objectives. As the investment adviser, AIM receives compensation from
the Funds for its services. The fees charged to each of these Funds are set
forth in the summary of investment objectives below.
16
<PAGE>
AIM has entered into an agreement with us with respect to administrative
services for these Funds in connection with the Contracts. Under this agreement,
AIM pays us compensation in an amount equal to a percentage of the average net
assets of these Funds attributable to the Contracts.
AIM V.I. INTERNATIONAL EQUITY FUND. This Fund seeks to provide long-term growth
of capital by investing in a diversified portfolio of international equity
securities whose issuers are considered to have strong earnings momentum. AIM
receives an advisory fee from the Fund at an annual rate of 0.75% of the average
daily net assets of the Fund.
AIM V.I. VALUE FUND. This Fund seeks to achieve long-term growth of capital by
investing primarily in equity securities judged by AIM to be undervalued
relative to AIM's appraisal of the current or projected earnings of the
companies issuing the securities, or relative to current market values of assets
owned by the companies issuing the securities or relative to the equity market
generally. Income is a secondary objective. AIM receives an advisory fee from
the Fund at an annual rate of 0.65% of the first $250 million of the Fund's
average daily net assets and 0.60% of the Fund's average daily net assets in
excess of $250 million.
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Alliance Variable Products Series Fund, Inc. ("Alliance Fund") is registered
with the Securities and Exchange Commission as an open-end management investment
company. It currently offers the Account Class A shares of two of its separate
investment portfolios. Alliance Capital Management L.P. ("Alliance"), a Delaware
limited partnership with principal offices at 1345 Avenue of the Americas, New
York, New York 10105 serves as the investment adviser to each Fund of the
Alliance Fund. Alliance Capital Management Corporation ("ACMC"), the sole
general partner of Alliance, is an indirect wholly owned subsidiary of The
Equitable Life Assurance Society of the United States, which is in turn a wholly
owned subsidiary of AXA Financial, Inc., a holding company which is controlled
by AXA, a French insurance holding company for an international group of
insurance and related financial services companies. As the investment adviser,
Alliance is paid fees by the Fund for its services. The fees charged to the Fund
are set forth in the summary of investment objective below.
Alliance Fund Distributors, Inc. ("AFD"), an affiliate of Alliance, has entered
into an agreement with us with respect to administrative services for the Fund
in connection with the Contracts. Under this agreement, AFD pays us compensation
in an amount equal to a percentage of the average net assets of the Fund
attributable to the Contracts.
GROWTH AND INCOME PORTFOLIO. This Fund seeks reasonable current income and
reasonable opportunity for appreciation through investing primarily in
dividend-paying stocks of good quality. Alliance receives an advisory fee from
the Fund at an annual rate of 0.63% of the average daily net assets of the Fund.
PREMIER GROWTH PORTFOLIO. This Fund seeks growth of capital by pursuing
aggressive investment policies. Since investments will be made based upon their
potential for capital appreciation, current income is incidental to the
objective of capital growth. Alliance receives an advisory fee from the Fund at
an annual rate of 1.00% of the Fund's average daily net assets.
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-
MFS-Registered Trademark- Variable Insurance Trust-SM- ("MFS Trust") is
registered with the Securities and Exchange Commission as an open-end management
investment company. It currently offers the Account two of its separate
investment portfolios.
17
<PAGE>
Massachusetts Financial Services Company ("MFS"), a Delaware corporation, 500
Boylston Street, Boston, Massachusetts 02116, serves as the investment adviser
to each Fund of MFS Trust. MFS is a subsidiary of Sun Life of Canada (U.S.)
Financial Services Holdings, Inc., which, in turn, is a indirect wholly owned
subsidiary of Sun Life Assurance Company of Canada. As the investment adviser,
MFS is paid fees by the Fund for its services. The fees charged to the Fund are
set forth in the summary of investment objective below.
MFS has entered into an agreement with MLIG with respect to administrative
services for the Fund in connection with the Contracts and certain contracts
issued by ML Life Insurance Company of New York. Under this agreement, MFS pays
compensation to MLIG in an amount equal to a percentage of the average net
assets of the Fund attributable to such contracts.
MFS EMERGING GROWTH SERIES. This Fund seeks long-term growth of capital. The
Fund invests, under normal market conditions, at least 65% of its total assets
in common stocks and related securities of emerging growth companies. These
companies are companies that the Fund's adviser believes are either early in
their life cycle but have the potential to become major enterprises or are major
enterprises whose rates of earnings growth are expected to accelerate. MFS
receives an advisory fee from the Fund at an annual rate of 0.75% of the average
daily net assets of the Fund.
MFS GROWTH WITH INCOME SERIES. This Fund seeks to provide reasonable current
income and long-term growth of capital and income. Under normal conditions, the
Fund invests at least 65% of its total assets in common stock and related
securities. Although the Fund may invest in companies of any size, it primarily
invests in companies with larger market capitalizations and attractive
valuations based on current and expected earnings or cash flow. MFS receives an
advisory fee from the Fund at an annual rate of 0.75% of the average daily net
assets of the Fund.
HOTCHKIS AND WILEY VARIABLE TRUST
Hotchkis and Wiley Variable Trust ("Hotchkis and Wiley Trust"), a Massachusetts
business trust, is registered with the Securities and Exchange Commission as an
open-end management investment company. The Hotchkis and Wiley Trust is intended
to serve as the investment medium for variable annuity contracts and variable
life insurance policies to be offered by the separate accounts of certain
insurance companies.
Hotchkis and Wiley, 725 S. Figueroa Street, Suite 4000, Los Angeles, California
90017-5400, serves as the investment adviser to the International VIP Portfolio
and generally administers the affairs of the Hotchkis and Wiley Trust. Hotchkis
and Wiley is a division of MLAM. As the investment adviser, Hotchkis and Wiley
is paid fees by the Fund for its services. The fees charged to the Fund for
advisory services are set forth in the summary of investment objective below.
Hotchkis and Wiley has entered into an agreement with MLIG with respect to
administrative services for the Fund in connection with the Contracts. Under
this agreement, Hotchkis and Wiley pays compensation to MLIG in an amount equal
to a portion of the annual gross investment advisory fees paid by the
International VIP Portfolio to Hotchkis and Wiley attributable to the Contracts.
INTERNATIONAL VIP PORTFOLIO. The Fund's investment objective is to provide
current income and long-term growth of income, accompanied by growth of capital.
The Fund invests at least 65% of its total assets in stocks in at least ten
foreign markets. In investing the Fund, Hotchkis and Wiley follows a VALUE
style. This means that it buys stocks that it believes are currently undervalued
by the market and thus have a lower price than their true worth. Hotchkis and
Wiley receives from the Fund an advisory fee at an annual rate of 0.75% of the
Fund's average daily net assets.
18
<PAGE>
DAVIS VARIABLE ACCOUNT FUND, INC.
Davis Variable Account Fund, Inc. ("Davis Fund") is registered with the
Securities and Exchange Commission as an open-end management investment company.
It currently offers the Account one of its portfolios. Davis Selected Advisers,
LP ("Davis Advisers"), located at 2949 East Elvira Road, Tucson, Arizona 85706,
is the investment adviser to the Davis Value Portfolio. Davis Selected
Advisers-NY, Inc. ("Davis Advisers-NY"), located at 609 Fifth Avenue, New York,
New York 10017 serves as the sub-adviser to the Davis Value Portfolio. Davis
Advisers-NY is a wholly owned subsidiary of Davis Advisers. Davis Advisers pays
the sub-advisory fee, not the Davis Value Portfolio. The fees charged to the
Fund for advisory services are set forth in the summary of investment objective
below.
Davis Advisers has entered into an agreement with us with respect to
administrative services for the Fund in connection with the Contracts. Under
this agreement, Davis Advisers pays us compensation in an amount equal to a
percentage of the average net assets of the Fund attributable to the Contracts.
DAVIS VALUE PORTFOLIO. This Fund seeks to provide growth of capital. The Fund
invests primarily in common stock of U.S. companies with market capitalizations
of at least $5 billion. These companies are selected based on their potential
for long-term growth, long-term return, and minimum risk. Davis Advisers
receives an advisory fee at an annual rate of 0.75% of the average daily net
assets of the Fund.
DELAWARE GROUP PREMIUM FUND
Delaware Group Premium Fund ("Delaware Fund") is registered with the Securities
and Exchange Commission as an open-end management investment company. It
currently offers the Account one of its investment portfolios. Delaware
Management Company, located at One Commerce Square, Philadelphia, Pennsylvania
19103, serves as the investment adviser to the Trend Series. Delaware Management
Company is a series of Delaware Management Business Trust, which is an indirect,
wholly owned subsidiary of Delaware Management Holdings, Inc. The fees charged
to the Fund for advisory services are set forth in the summary of investment
objective below.
Delaware Distributors, LP ("DDLP"), the national distributor for Delaware Fund
has entered into an agreement with us with respect to administrative services
for the Fund in connection with the Contracts. Under this agreement, DDLP pays
us compensation in an amount equal to a percentage of the average net assets of
the Fund attributable to the Contracts.
TREND SERIES. This Fund seeks long-term capital appreciation. The Fund invests
primarily in stocks of small, growth-oriented companies that Fund management
believes are responsive to changes within the marketplace and which management
believes have fundamental characteristics to support continued growth. Delaware
Management Company receives an advisory fee from the Fund at an annual rate of
0.75% on the first $500 million, 0.70% on the next $500 million, 0.65% on the
next $1.5 million, and 0.60% on assets over $2.5 million of the average daily
net assets of the Fund.
PIMCO VARIABLE INSURANCE TRUST
PIMCO Variable Insurance Trust ("PIMCO Trust") is registered with the Securities
and Exchange Commission as an open-end management investment company. It
currently offers one of its portfolios to the Account. Pacific Investment
Management Company ("PIMCO"), located at 840 Newport Center Drive, Suite 300
Newport Beach, California 92660, serves as the investment adviser to the Total
Return Bond Portfolio. PIMCO is a wholly owned subsidiary partnership of PIMCO
Advisors, L.P. The fees charged to the Fund for advisory services are set forth
in the summary of investment objective below.
19
<PAGE>
PIMCO has entered into an agreement with us with respect to administrative
services for the Fund in connection with the Contracts. Under this agreement,
PIMCO pays us compensation in an amount equal to a percentage of the average net
assets of the Fund attributable to the Contracts.
TOTAL RETURN BOND PORTFOLIO. This Fund seeks to maximize total return,
consistent with preservation of capital and prudent investment management. Under
normal circumstances, the Fund invests at least 65% of its assets in a
diversified portfolio of fixed income instruments of varying maturities. The
average portfolio duration normally varies within a three- to six-year time
frame based on PIMCO's forecast for interest rates. PIMCO receives an advisory
fee at an annual rate of 0.40% of the average daily net assets of the Fund.
SELIGMAN PORTFOLIOS, INC.
Seligman Portfolios, Inc. ("Seligman Portfolios") is registered with the
Securities and Exchange Commission as an open-end management investment company.
It currently offers the Account one of its portfolios, the Small-Cap Value
Portfolio. J. & W. Seligman & Co. Incorporated ("Seligman"), located at 100 Park
Avenue, New York, New York 10017 serves as the investment manager to the
Seligman Small-Cap Value Portfolio. The fees charged to the Fund for advisory
services are set forth in the summary of investment objective below.
Seligman has entered into an agreement with us with respect to administrative
services for the Fund in connection with the Contracts. Under this agreement,
Seligman pays us compensation in an amount equal to a percentage of the average
net assets of the Fund attributable to the Contracts.
SELIGMAN SMALL-CAP VALUE PORTFOLIO. This Fund seeks long-term capital
appreciation. Generally, the Fund invests at least 65% of its total assets in
the common stocks of "value" companies with small market capitalization that the
Fund manager believes have been undervalued, either historically, by the market,
or by their peers. Seligman receives an advisory fee at an annual rate of 1.00%
on the first $500 million, .90% on the next $500 million, and .80% thereafter of
the average daily net assets of the Fund.
VAN KAMPEN LIFE INVESTMENT TRUST
Van Kampen Life Investment Trust ("Van Kampen Trust") is registered with the
Securities and Exchange Commission as a diversified open-end management company.
It currently offers the Account one of its separate investment portfolios. Van
Kampen Asset Management Inc. ("Van Kampen Management") is the portfolio's
investment adviser. Van Kampen Management is located at 1 Parkview Plaza,
Oakbrook Terrace, Illinois 60181-5555, and is a wholly owned subsidiary of Van
Kampen Investment Inc. Van Kampen Investments Inc. is a diversified asset
management company with more than two million retail investor accounts,
extensive capabilities for managing institutional portfolios, and more than
$90 billion under management or supervision as of December 31, 1999. Van Kampen
Funds Inc., the distributor of the Fund, is also a wholly owned subsidiary of
Van Kampen Investments Inc. Van Kampen Investments Inc. is an indirect wholly
owned subsidiary of Morgan Stanley Dean Witter & Co. As the investment adviser,
Van Kampen Management is paid fees by the Fund for its services. The fees to the
Fund are set forth in the summary of investment objective below.
Van Kampen Management has entered into an agreement with us with respect to
administrative services for the Fund in connection with the Contracts. Under
this agreement, Van Kampen Management pays us compensation in an amount equal to
a percentage of the average net assets of the Fund attributable to the
Contracts.
EMERGING GROWTH PORTFOLIO. The investment objective of the Fund is to seek
capital appreciation. Under normal market conditions, the Fund's investment
adviser seeks to achieve the Fund's investment objective by investing at least
65% of the Fund's total assets in common stocks of emerging growth companies.
Emerging growth companies are those companies in the early stages of their life
cycles that the Fund's investment adviser
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believes have the potential to become major enterprises. Van Kampen Management
receives an advisory fee from the Fund at an annual rate of 0.70% of the average
daily net assets of the Fund.
PURCHASES AND REDEMPTIONS OF FUND SHARES; REINVESTMENT
The Account will purchase and redeem shares of the Funds at net asset value to
provide benefits under the Contract. Fund distributions to the Account are
automatically reinvested at net asset value in additional shares of the Funds.
MATERIAL CONFLICTS, SUBSTITUTION OF INVESTMENTS AND CHANGES TO THE ACCOUNT
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 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, we
may be required to eliminate one or more subaccounts of the Account or
substitute a new subaccount. In responding to any conflict, we will take the
action we believe necessary to protect our contract owners.
We may substitute a different investment option for any of the current Funds. We
can do this for both existing investments and the investment of future premiums.
However, before any such substitution, we would need the approval of the
Securities and Exchange Commission and applicable state insurance departments.
We will notify you of any substitutions.
We may also add new subaccounts to the Account, eliminate subaccounts in the
Account, deregister the Account under the Investment Company Act of 1940 (the
"1940 Act"), make any changes required by the 1940 Act, operate the Account as a
managed investment company under the 1940 Act or any other form permitted by
law, transfer all or a portion of the assets of a subaccount or separate account
to another subaccount or separate account pursuant to a combination or
otherwise, and create new separate accounts. Before we make certain changes we
need approval of the Securities and Exchange Commission and applicable state
insurance departments. We will notify you of any changes.
CHARGES AND DEDUCTIONS
We deduct the charges described below to cover costs and expenses, services
provided, and risks assumed under the Contracts. The amount of a charge may not
necessarily correspond to the costs associated with providing the services or
benefits.
ASSET-BASED INSURANCE CHARGE
We currently impose an asset-based insurance charge on the Account that equals
1.59% annually. It will never exceed 1.59%.
We deduct this charge daily from the net asset value of the subaccounts. This
amount compensates us for mortality risks we assume for the annuity payment and
death benefit guarantees made under the Contract. These guarantees include
making annuity payments which won't change based on our actual mortality
experience, and providing a guaranteed minimum death benefit under the Contract.
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The charge also compensates us for expense risks we assume to cover Contract
maintenance expenses. These expenses may include issuing Contracts, maintaining
records, and performing accounting, regulatory compliance, and reporting
functions. Finally, this charge compensates us for costs associated with the
establishment and administration of the Contract, including programs like
transfers and Dollar Cost Averaging.
If the asset-based insurance charge is inadequate to cover the actual expenses
of mortality, maintenance, and administration, we will bear the loss. If the
charge exceeds the actual expenses, we will add the excess to our profit and it
may be used to finance distribution expenses.
CONTRACT FEE
We may charge a $40 contract fee each year. We will only impose this fee if the
greater of contract value, or premiums less withdrawals, is less than $25,000.
Accordingly, if you have not made any withdrawals from your Contract (or your
withdrawals have not decreased your investment in the Contract below $25,000),
we will not impose this annual fee.
The contract fee reimburses us for additional expenses related to maintenance of
certain Contracts with lower contract values. We do not deduct the contract fee
after the annuity date. The contract fee will never increase.
If the contract fee applies, we will deduct it as follows:
- We deduct this fee from your contract value on each contract anniversary
that occurs on or before the annuity date.
- We deduct this fee from your contract value if you surrender the contract
on any date other than a contract anniversary.
- We deduct this fee on a pro rata basis from among all subaccounts in which
your contract value is invested.
Currently, a contract owner of three or more Contracts will be assessed no more
than $120 in contract fees annually. We reserve the right to change this limit
on contract fees at any time.
OTHER CHARGES
TRANSFER CHARGES
You may make up to twelve transfers among subaccounts per contract year without
charge. If you make more than twelve, we may, but currently do not, charge you
$25 for each extra transfer. We deduct this charge pro rata from the subaccounts
from which you are transferring contract value. Currently, transfers made by us
under the Dollar Cost Averaging Program, the Asset Allocation Program, and the
Rebalancing Program will not count toward the twelve transfers permitted among
subaccounts per contract year without charge. (See "Dollar Cost Averaging
Program", "Asset Allocation Program", "Rebalancing Program", and "Transfers".)
TAX CHARGES
We reserve the right, subject to any necessary regulatory approval, to charge
for assessments or federal premium taxes or federal, state or local excise,
profits or income taxes measured by or attributable to the receipt of premiums.
We also reserve the right to deduct from the Account any taxes imposed on the
Account's investment earnings. (See "Tax Status of the Contract".)
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FUND EXPENSES
In calculating net asset value, the Funds deduct advisory fees and operating
expenses from assets. Information about those fees and expenses can be found in
the prospectuses for the Funds, and in the Statement of Additional Information
for each Fund.
PREMIUM TAXES
Various states and municipalities impose a premium tax on annuity premiums when
they are received by an insurance company. In other jurisdictions, a premium tax
is paid on the contract value on the annuity date.
Premium tax rates vary from jurisdiction to jurisdiction and currently range
from 0% to 5%. Although we pay these taxes when due, we won't deduct them from
your contract value until the annuity date. 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, we will also deduct a
charge for these taxes on any withdrawal, surrender or death benefit paid under
the Contract.
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, our status within that state, and the
premium tax laws of that state.
FEATURES AND BENEFITS OF THE CONTRACT
As we describe the contract, we will often use the word "you". In this context
"you" means "contract owner".
OWNERSHIP OF THE CONTRACT
The contract owner is entitled to exercise all rights under the Contract. Unless
otherwise specified, the purchaser of the Contract will be the contract owner.
The Contract can be owned by a trust or a corporation. However, special tax
rules apply to Contracts owned by "non-natural persons" such as corporations or
trusts. If you are a human being, you are considered a "natural person." You may
designate a beneficiary. If you die, the beneficiary will receive a death
benefit. You may also designate an annuitant. You may change the annuitant at
any time prior to the annuity date. If you don't select an annuitant, you are
the annuitant.
If a non-natural person owns the Contract and changes the annuitant, the
Internal Revenue Code (IRC) requires us to treat the change as the death of a
contract owner. We will then pay the beneficiary the death benefit.
Only spouses may be co-owners of the Contract, except in Pennsylvania, New
Jersey, and Oregon. When co-owners are established, they exercise all rights
under the Contract jointly unless they elect otherwise. Co-owner spouses must
each be designated as beneficiary for the other. Co-owners may also designate a
beneficiary to receive benefits on the surviving co-owner's death. IRA Contracts
may not have co-owners.
You may assign the Contract to someone else by giving notice to our Service
Center. Only complete ownership of the Contract may be assigned to someone else.
You can't do it in part. An assignment to a new owner cancels all prior
beneficiary designations except a prior irrevocable beneficiary designation.
Assignment of the Contract may have tax consequences or may be prohibited on
certain IRA Contracts, so you should consult with a qualified tax adviser before
assigning the Contract. (See "Federal Income Taxes".)
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ISSUING THE CONTRACT
ISSUE AGE
You can buy a nonqualified Contract if you (and any co-owner) are less than 90
years old. Annuitants on nonqualified Contracts must also be less than 90 years
old when we issue the Contract. For qualified Contracts owned by natural
persons, the contract owner and annuitant must be the same person. Contract
owners and annuitants on qualified Contracts must be less than 70 1/2 years old
when we issue the Contract.
INFORMATION WE NEED TO ISSUE THE CONTRACT
Before we issue the Contract, we need certain information from you. We may
require you to complete and return a written application in certain
circumstances, such as when the Contract is being issued to replace, or in
exchange for, another annuity or life insurance contract. Once we review and
approve that information or application, and you pay the initial premium, we'll
issue a Contract. Generally, we'll issue the Contract and invest the premium
within two business days of our receiving your premium. If we haven't received
necessary information within five business days, however, we will offer to
return the premium and no Contract will be issued. You can consent to our
holding the premium until we get all necessary information, and then we will
invest the premium within two business days after we get the information.
TEN DAY RIGHT TO REVIEW
When you get the Contract, review it carefully to make sure it is what you
intended to purchase. Generally, within ten days after you receive the Contract,
you may return it for a refund. The Contract will then be deemed void. You may
have a longer period to return the Contract in certain states, or if the
Contract is replacing another contract. To get a refund, return the Contract to
our Service Center or to the Financial Consultant who sold it. We will then
refund 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 Pennsylvania,
we'll refund the contract value as of the date the Contract is returned.
PREMIUMS
MINIMUM AND MAXIMUM PREMIUMS
Initial premium payments must be $25,000 or more. Subsequent premium payments
generally must be $100 or more. You can make subsequent premium payments at any
time before the annuity date. The maximum premium that will be accepted without
Company approval is $1,000,000. We also reserve the right to reject subsequent
premium payments.
The Contract is available as a non-qualified contract or may be issued as an IRA
or purchased through an established IRA or Roth IRA custodial account with
MLPF&S. Federal law limits maximum annual contributions to IRAs and Roth IRAs.
Transfer amounts from tax-sheltered annuity plans that are not subject to the
Employee Retirement Income Security Act of 1974, as amended, will be accepted as
premium payments, as permitted by law. Other premium payments will not be
accepted under a Contract used as a tax sheltered annuity. We may waive the $100
minimum for premiums paid under IRA Contracts held in custodial accounts with
MLPF&S where you're transferring the complete cash balance of such account into
a Contract.
HOW TO MAKE PAYMENTS
You can pay premiums directly to our Service Center at the address printed on
the cover of this Prospectus or have money debited from your MLPF&S brokerage
account.
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AUTOMATIC INVESTMENT FEATURE
You may make systematic premium payments on a monthly, quarterly, semi-annual or
annual basis. Each payment must be for at least $100. Premiums paid under this
feature must be deducted from an MLPF&S brokerage account specified by you and
acceptable to us. You must specify how premiums paid under this feature will be
allocated among the subaccounts. If you select the Asset Allocation Program or
the Rebalancing Program, premiums will be allocated based on the model or the
specified subaccounts and percentages you have selected. You may change the
specified premium amount, the premium allocation, or cancel the Automatic
Investment Feature at any time upon notice to us. We reserve the right to make
changes to this program at any time.
PREMIUM INVESTMENTS
For the first 14 days following the contract date, we'll hold all premiums in
the Domestic Money Market Subaccount. After the 14 days, we'll reallocate the
contract value to the subaccounts you selected. (In Pennsylvania, we'll invest
all premiums as of the contract date in the subaccounts you selected.)
Currently, you may allocate your premium among 10 of the subaccounts.
Allocations must be made in whole numbers. For example, 12% of a premium
received may be allocated to the Basic Value Focus Subaccount, 58% allocated to
the Government Bond Subaccount, and 30% allocated to the Index 500 Subaccount
However, you may not allocate 33 1/2% to the Basic Value Focus Subaccount and
66 2/3% to the Government Bond Subaccount. If we don't get allocation
instructions when we receive subsequent premiums, we will allocate those
premiums according to the allocation instructions you last gave us. We reserve
the right to modify the limit on the number of subaccounts to which future
allocations may be made.
ACCUMULATION UNITS
Each subaccount has a distinct value, called the accumulation unit value. The
accumulation unit value for a subaccount varies daily with the performance and
expenses of the corresponding fund. We use this value to determine the number of
subaccount accumulation units represented by your investment in a subaccount.
HOW ARE MY CONTRACT TRANSACTIONS PRICED?
We calculate an accumulation unit value for each
subaccount at the close of business on each day that
the New York Stock Exchange is open. Transactions are
priced, which means that accumulation units in your
Contract are purchased (added to your Contract) or
redeemed (taken out of your contract), at the unit
value next calculated after our Service Center
receives notice of the transaction. For premium
payments and transfers into a subaccount, units are
purchased. For payment of Contract proceeds (i.e.,
withdrawals, surrenders, annuitization, and death
benefits), transfers out of a subaccount, and
deductions for any contract fee, any transfer charge,
and any premium taxes due, units are redeemed.
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HOW DO WE DETERMINE THE NUMBER OF UNITS?
We determine the number of units by dividing the
dollar value of the amount of the purchase or transfer
allocated to the subaccount by the value of one
accumulation unit for that subaccount for the
valuation period in which the purchase or transfer is
made. The number of accumulation units in each
subaccount credited to a Contract will therefore
increase or decrease as these transactions are made.
The number of subaccount accumulation units credited
to a Contract will not change as a result of
investment experience or the deduction of asset-based
insurance charges. Instead, this charge and investment
experience are reflected in the accumulation unit
value.
When we first established each subaccount, we arbitrarily set the value of an
accumulation unit at $10. Accumulation unit values increase, decrease, or stay
the same from one valuation period to the next. An accumulation unit value for
any valuation period is determined by multiplying the accumulation unit value
for the prior valuation period by the net investment factor for the subaccount
for the current valuation period.
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, we
determine the net investment factor by dividing the value of the assets of the
subaccount for that valuation period by the value of the assets of the
subaccount for the preceding valuation period. We subtract from that result the
daily equivalent of the asset-based insurance charge for the valuation period.
We also take reinvestment of dividends and capital gains into account when we
determine the net investment factor.
We may adjust the net investment factor to make provisions for any change in tax
law that requires us to pay tax on earnings in the Account or any charge that
may be assessed against the Account for assessments or premium taxes or federal,
state or local excise, profits or income taxes measured by or attributable to
the receipt of premiums. (See "Other Charges".)
ADDITIONAL PROVISIONS APPLICABLE TO ALL CONTRACTS
DEATH OF ANNUITANT PRIOR TO ANNUITY DATE
If the annuitant dies before the annuity date, and the annuitant is not a
contract owner, the owner may designate a new annuitant. If a new annuitant is
not designated, the contract owner will become the annuitant unless any owner is
not a natural person. If any contract owner is not a natural person, no new
annuitant may be named and the death benefit will be paid to the beneficiary.
TRANSFERS AMONG SUBACCOUNTS
Before the annuity date, you may transfer all or part of your contract value
among the subaccounts up to twelve times per contract year without charge. You
can make additional transfers among subaccounts, but we may charge you $25 for
each extra transfer. We will deduct the transfer charge pro rata from among the
subaccounts you're transferring from. Currently, transfers made by us under the
Dollar Cost Averaging Program, the Asset Allocation Program, and the Rebalancing
Program will not count toward the twelve transfers permitted among subaccounts
per contract year without charge. (See "Dollar Cost Averaging
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Program", "Asset Allocation Program", and "Rebalancing Program".) We reserve the
right to change the number of additional transfers permitted each contract year.
Transfers among subaccounts may be made in specific dollar amounts or as a
percentage of contract value. You must transfer at least $100 or the total value
of a subaccount, if less.
You may request transfers in writing or by telephone, once we get proper
telephone transfer authorization. Transfer requests may also be made through
your Merrill Lynch Financial Consultant, or another person you designate, once
we receive proper authorization. Transfers will take effect as of the end of the
valuation period on the date the Service Center receives the request. We will
consider telephone transfer requests received after 4:00 p.m. (ET) to be
received the following business day.
An excessive number of transfers, including short-term "market timing"
transfers, may adversely affect the performance of the underlying fund in which
a subaccount invests. If, in our sole opinion, a pattern of excessive transfers
develops, we reserve the right not to process a transfer request. We also
reserve the right not to process a transfer request when the sale or purchase of
shares of a Fund is not reasonably practicable due to actions taken or
limitations imposed by the Fund.
DOLLAR COST AVERAGING PROGRAM
WHAT IS IT?
The Contract offers an optional transfer program called Dollar Cost Averaging
("DCA"). This program allows you to reallocate money at monthly intervals from a
designated subaccount to one or more other subaccounts. The DCA Program is
intended to reduce the effect of short term price fluctuations on investment
cost. Since we transfer the same dollar amount to selected subaccounts monthly,
the DCA Program allows you to purchase more accumulation units when prices are
low and fewer accumulation units when prices are high. Therefore, you may
achieve a lower average cost per accumulation unit over the long-term. However,
it is important to understand that a DCA Program does not assure a profit or
protect against loss in a declining market. If you choose to participate in the
DCA Program you should have the financial ability to continue making investments
through periods of fluctuating markets.
If you choose to participate in the DCA Program, each month we will transfer
amounts from the subaccount that you designate and allocate them, in accordance
with your allocation instructions, to the subaccounts that you select.
If you choose the Asset Allocation Program or the Rebalancing Program, you
cannot use the DCA Program. We reserve the right to make changes to this program
at any time.
PARTICIPATING IN THE DCA PROGRAM
You can choose the DCA Program any time before the annuity date. To choose the
DCA Program, we must receive a written request from you. Once you start using
the DCA Program, you must continue it for at least three months. After three
months, you may cancel the DCA Program at any time by notifying us in writing.
Once you reach the annuity date, you may no longer use this program.
MINIMUM AMOUNTS
To elect the DCA Program, you need to have a minimum amount of money in the
designated subaccount. We determine the amount required by multiplying the
specified length of your DCA Program in months by your specified monthly
transfer amount. Amounts of $100 or more must be allotted for transfer each
month in the DCA Program. We reserve the right to change these minimums.
Allocations must be designated in whole
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percentage increments. No specific dollar amount designations may be made.
Should the amount in your selected subaccount drop below the selected monthly
transfer amount, we'll notify you that you need to put more money in to continue
the program.
WHEN DO WE MAKE DCA TRANSFERS?
You select the date for DCA transfers. We will make the first DCA transfer on
the selected date following the later of 14 days after the contract date or the
date we receive notice of your DCA election at our Service Center. We'll make
subsequent DCA transfers on the same day of each succeeding month. Currently, we
don't charge for DCA transfers; they are in addition to the twelve annual
transfers permitted without charge under the Contract.
ASSET ALLOCATION PROGRAM
Under the Asset Allocation Program, we will allocate your premiums and rebalance
your contract value according to an asset allocation model you select based on
your investment goals and risk tolerance. There are currently five asset
allocation models to choose from:
- Capital Preservation
- Current Income
- Income and Growth
- Long-Term Growth
- Aggressive Growth
Each model identifies specific subaccounts and the percentage of premium or
contract value which should be allocated to each of those subaccounts. We may
periodically adjust the composition of each model. Any adjustments become
effective at the end of the calendar quarter.
The asset allocation models are not recommendations, have not been designed with
your specific financial circumstances in mind, and may not be appropriate for
any particular individual. There may be other allocations that would be more
appropriate to satisfy your needs and goals.
When you elect the Asset Allocation Program, we allocate your premium or
contract value in accordance with your selected model. On the last business day
of each calendar quarter, we automatically reallocate your contract value to
maintain the subaccounts and percentages for your selected model.
We perform this periodic rebalancing to take account of:
- increases and decreases in contract value in each subaccount due to
subaccount performance,
- increases and decreases in contract value in each subaccount due to
withdrawals, transfers, and premiums, and
- any adjustments we make to your selected model.
Asset allocation can be elected at issue or at any time subsequent. To elect the
Asset Allocation Program, we must receive a written request from you. If you
elect the Asset Allocation Program, you must include all contract value in the
program. We allocate all systematic investment premiums and, unless you instruct
us otherwise, all other premiums in accordance with your selected model. The
asset allocation model that you select under the program will override any prior
percentage allocations that you have chosen and we will allocate all future
premiums accordingly. You may change your selected model at any time. Once
elected, you may instruct us, in a written form satisfactory to us, at any time
to terminate the program. Currently, we don't
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charge for transfers under this program; they are in addition to the twelve
annual transfers permitted without charge under the Contract.
We reserve the right to make changes to this program at any time. If you choose
the Rebalancing Program or the DCA Program, you cannot use the Asset Allocation
Program.
REBALANCING PROGRAM
You may choose the Rebalancing Program, where you select the percentage of
premiums and contract value which are to be allocated to the subaccounts you
select based on your investment goals and risk tolerance.
When you elect the Rebalancing Program, we allocate your premiums or contract
value in accordance with the subaccounts and percentages you have selected. On
the last business day of each calendar quarter, we automatically reallocate your
contract value to maintain the particular percentage allocation among the
subaccounts that you have selected.
We perform this periodic rebalancing to take account of:
- increases and decreases in contract value in each subaccount due to
subaccount performance, and
- increases and decreases in contract value in each subaccount due to
withdrawals, transfers, and premiums.
The Rebalancing Program can be elected at issue or at any time subsequent. To
elect the Rebalancing Program, we must receive a written request from you. If
you elect the Rebalancing Program, you must include all contract value in the
program. We allocate all systematic investment premiums and, unless you instruct
us otherwise, all other premiums in accordance with the particular percentage
allocation among the subaccounts that you have selected. The percentages that
you select under the Rebalancing Program will override any prior percentage
allocations that you have chosen and we will allocate all future premiums
accordingly. You may change your allocations at any time. Once elected, you may
instruct us, in a written form satisfactory to us, at any time to terminate the
program. Currently, we don't charge for transfers under this program; they are
in addition to the twelve annual transfers permitted without charge under the
Contract.
We reserve the right to make changes to this program at any time. If you choose
the Asset Allocation Program or the DCA Program, you cannot use the Rebalancing
Program.
WITHDRAWALS AND SURRENDERS
WHEN AND HOW WITHDRAWALS ARE MADE
Before the annuity date, you may make lump-sum withdrawals from the Contract up
to six times per contract year. In addition, you may make systematic
withdrawals, discussed below. Withdrawals are subject to tax and prior to age
59 1/2 may also be subject to a 10% federal penalty tax. (See "Federal Income
Taxes".)
Unless you direct us otherwise, we will make lump-sum withdrawals from
subaccounts in the same proportion as the subaccounts bear to your contract
value. You may make a withdrawal request in writing to our Service Center. You
may withdraw money by telephone, once you've submitted a proper telephone
authorization form to our Service Center, but only if the amount withdrawn is to
be paid into a Merrill Lynch brokerage account. We will consider telephone
withdrawal requests received after 4:00 p.m. (ET) to be received the following
business day.
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MINIMUM AMOUNTS
The minimum amount that may be withdrawn is $100. At least $5,000 must remain in
the Contract after you make a withdrawal. We reserve the right to change these
minimums.
SYSTEMATIC WITHDRAWAL PROGRAM
You may have automatic withdrawals of a specified dollar amount made monthly,
quarterly, semi-annually or annually. Each withdrawal must be for at least $100
and the remaining contract value must be at least $5,000. You may change the
specified dollar amount or frequency of withdrawals or stop the Systematic
Withdrawal Program at any time upon notice to us. We will make systematic
withdrawals from subaccounts in the same proportion as the subaccounts bear to
your contract value. These systematic withdrawals are in addition to the six
lump-sum withdrawals permitted each year under the Contract. We reserve the
right to restrict the maximum amount that may be withdrawn each year under the
Systematic Withdrawal Program and to make any other changes to this program at
any time.
SURRENDERS
At any time before the annuity date you may surrender the Contract through a
full withdrawal. The Contract must be delivered to our Service Center. We will
pay you an amount equal to the contract value as of the end of the valuation
period when we process the surrender, minus the contract fee, if applicable, and
minus any applicable charge for premium taxes. (See "Charges and Deductions".)
PAYMENTS TO CONTRACT OWNERS
We'll make any payments to you usually within seven days of our Service Center
receiving your proper request. However, we may delay any payment, or delay
processing any annuity payment or transfer request if:
(a) the New York Stock Exchange is closed;
(b) trading on the New York Stock Exchange is restricted by the Securities
and Exchange Commission;
(c) the Securities and Exchange Commission declares that an emergency exists
making it not reasonably practicable to dispose of securities held in the
Account or to determine the value of the Account's assets;
(d) the Securities and Exchange Commission by order so permits for the
protection of security holders; or
(e) payment is derived from a check used to make a premium payment which has
not cleared through the banking system.
CONTRACT CHANGES
Requests to change the owner, beneficiary, annuitant, or annuity date of a
Contract will take effect as of the date you sign such a request, unless we have
already acted in reliance on the prior status. We are not responsible for the
validity of such a request.
If you change the owner or annuitant on a nonqualified Contract, the new owner
or annuitant must be less than 90 years old. For qualified Contracts, if you
change the owner or annuitant, the new owner or annuitant must be less than
70 1/2 years old.
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DEATH BENEFIT
GENERAL
Regardless of investment experience, the Contract provides a guaranteed minimum
death benefit to the beneficiary if you die before the annuity date. (If an
owner is a non-natural person, then the death of the annuitant will be treated
as the death of the owner.)
We will pay the death benefit in a lump sum unless the beneficiary chooses an
annuity payment option available under the Contract. (See "Annuity Options".)
However, if you die before the annuity date, federal tax law generally requires
us to distribute the entire contract value within five years of the date of
death. Special rules may apply to a surviving spouse. (See "Federal Income
Taxes".)
We determine the death benefit as of the date we receive certain information at
our Service Center. We call this information due proof of death. It consists of
the Beneficiary Statement, a certified copy of the death certificate, and any
additional documentation we may need to process the death claim. If we haven't
received the other documents within 60 days following our receipt of a certified
death certificate, we will consider due proof of death to have been received and
we will pay the death benefit in a lump sum.
Unless you irrevocably designated a beneficiary, you may change the beneficiary
at any time before the annuity date.
SPOUSAL CONTINUATION
If your beneficiary is your surviving spouse, your spouse may elect to continue
the Contract if you die before the annuity date. Your spouse becomes the
contract owner and the beneficiary until your spouse names a new beneficiary. If
the death benefit which would have been paid to the surviving spouse is greater
than the contract value as of the date we determine the death benefit, we will
increase the contract value of the continued Contract to equal the death benefit
we would have paid to the surviving spouse. Your interest in each subaccount
will be increased by the ratio of your contract value in each subaccount to your
contract value.
CALCULATION OF DEATH BENEFIT
If you (or the older owner, if the Contract has co-owners, or the annuitant, if
the owner is a non-natural person) are age 80 or over on the contract date, the
death benefit is the greater of:
<TABLE>
<S> <C> <C>
(i) the premiums paid For this formula, each "adjusted"
into the Contract withdrawal equals the amount
less "adjusted" withdrawn multiplied by (a)
withdrawals from DIVIDED BY (b) where:
the Contract; or a = premiums paid into the Contract
less previous
"adjusted" withdrawals; and
(ii) the contract value. b = the contract value. Both (a) and (b) are
calculated immediately prior to the
withdrawal.
</TABLE>
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<PAGE>
If you (or the older owner, if the Contract has co-owners, or the annuitant, if
the owner is a non-natural person) are under age 80 on the contract date, the
death benefit is the greatest of:
<TABLE>
<S> <C> <C>
(i) the premiums paid into For this formula, each "adjusted"
the Contract less withdrawal equals the amount
"adjusted" withdrawals withdrawn multiplied by the greater
from the Contract; of (a) or (b) DIVIDED BY (c) where:
(ii) the contract value; or a = premiums paid into the Contract
less previous "adjusted"
withdrawals;
(iii) the Maximum Anniversary Value. b = the Maximum Anniversary Value; and
c = the contract value.
Values for (a), (b), and (c) are
calculated immediately prior to the
withdrawal.
</TABLE>
MAXIMUM ANNIVERSARY VALUE
The Maximum Anniversary Value is equal to the greatest anniversary value for the
Contract. An anniversary value is equal to the contract value on a contract
anniversary increased by premium payments and decreased by "adjusted"
withdrawals since that anniversary. "Adjusted" withdrawals are calculated
according to the formula that appears immediately above this section.
To determine the Maximum Anniversary Value, we will calculate an anniversary
value for each contract anniversary through the earlier of your attained age 80
or the anniversary on or prior to your date of death. If the contract has
co-owners, we will calculate the anniversary value through the earlier of the
older owner's attained age 80 or the anniversary on or prior to any owner's date
of death if a death benefit is payable. If an owner is a non-natural person,
then the annuitant's age, rather than the owner's, will be used.
We will calculate the Maximum Anniversary Value based on your age (or the age of
the older owner, if the Contract has co-owners, or the annuitant, if the owner
is a non-natural person) on the contract date. Subsequent changes in owner will
not increase the period of time used to determine the Maximum Anniversary Value.
If a new owner has not reached attained age 80 and is older than the owner whose
age is being used to determine the Maximum Anniversary Value at the time of the
ownership change, the period of time used in the calculation of the Maximum
Anniversary Value will be based on the age of the new owner at the time of the
ownership change. If at the time of an ownership change the new owner is
attained age 80 or over, we will use the Maximum Anniversary Value as of the
anniversary on or prior to the ownership change, increased by premium payments
and decreased by "adjusted" withdrawals since that anniversary.
FOR AN EXAMPLE OF THE CALCULATION OF DEATH BENEFIT, SEE APPENDIX A.
ANNUITY PAYMENTS
We'll make the first annuity payment on the annuity date, and payments will
continue according to the annuity option selected. When you first buy the
Contract, the annuity date for non-qualified Contracts is the annuitant's 90th
birthday. The annuity date for IRA or tax sheltered annuity Contracts is when
the owner/annuitant reaches age 70 1/2. However, you may specify an earlier
annuity date. You may change the annuity date at any time before the annuity
date.
Contract owners may select from a variety of fixed annuity payment options, as
outlined below in "Annuity Options." If you don't choose an annuity option,
we'll use the Life Annuity with Payments Guaranteed for 10
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Years annuity option when the contract owner reaches age 90 (age 70 1/2 for an
IRA Contract or tax-sheltered annuity). You may change the annuity option before
the annuity date. We reserve the right to limit annuity options available to IRA
contract owners to comply with the Internal Revenue Code or regulations under
it.
We determine the dollar amount of annuity payments by applying your contract
value on the annuity date to our then current annuity purchase rates less any
applicable premium tax. Purchase rates show the amount of periodic payment that
a $1000 value buys. These rates are based on the annuitant's age and sex (where
permitted) at the time payments begin, and will assume interest of not less than
3% per year. The rates will never be less than those shown in the Contract.
If the age and/or sex of the annuitant was misstated to us, resulting in an
incorrect calculation of annuity payments, we will adjust future annuity
payments to reflect the correct age and/or sex. We will deduct any amount we
overpaid as the result of a misstatement from future payments with 6% annual
interest charges. Likewise, if we underpaid any amount as the result of a
misstatement, we correct it with the next payment made with 6% annual interest
credited.
If the contract value on the annuity date after the deduction of any applicable
premium taxes is less than $5,000, we may cash out your Contract in a lump sum.
If any annuity payment would be less than $50 (or a different minimum amount, if
required by state law), we may change the frequency of payments so that all
payments will be at least $50 (or the minimum amount required by state law).
Unless you tell us differently, we'll make annuity payments directly to your
Merrill Lynch brokerage account.
ANNUITY OPTIONS
We currently provide the following fixed annuity payment options. After the
annuity date, your contract value does not vary with the performance of the
Account. We may in the future offer more options. If you or the annuitant dies
while guaranteed payments remain unpaid, several options provide the ability to
take the present value of future guaranteed payments in a lump sum.
HOW WE DETERMINE PRESENT VALUE OF FUTURE
GUARANTEED ANNUITY PAYMENTS
Present value refers to the amount of money needed
today to fund the remaining guaranteed payments under
the annuity payment option you select. The primary
factor in determining present value is the interest
rate assumption we use. If you are receiving annuity
payments under an option that gives you the ability to
take the present value of future payments in a lump
sum and you elect to take the lump sum, we will use
the same interest rate assumption in calculating the
present value that we used to determine your payment
stream at the time your annuity payments commenced.
PAYMENTS OF A FIXED AMOUNT
We will make equal payments in an amount you choose until the sum of all
payments equals the contract value applied, increased for interest credited of
at least 3%. The amount you choose must provide at least five years of payments.
These payments don't depend on the annuitant's life. If the annuitant dies
before the guaranteed amount has been paid, you may elect to have payments
continued for the amount guaranteed or to receive the present value of the
remaining guaranteed payments in a lump sum. If the contract owner dies while
guaranteed amounts remain unpaid, the beneficiary may elect to receive the
present value of the remaining guaranteed payments in a lump sum.
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<PAGE>
PAYMENTS FOR A FIXED PERIOD
We will make equal payments for a period you select of at least five years.
These payments don't depend on the annuitant's life. If the annuitant dies
before the end of the period, you may elect to have payments continued for the
period guaranteed or to receive the present value of the remaining guaranteed
payments in a lump sum. If the contract owner dies while guaranteed amounts
remain unpaid, the beneficiary may elect to receive the present value of the
remaining guaranteed payments in a lump sum.
*LIFE ANNUITY
We make payments for as long as the annuitant lives. Payments will cease with
the last payment made before the annuitant's death.
LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 5, 10, 15, OR 20 YEARS
We make payments for as long as the annuitant lives. In addition, even if the
annuitant dies before the period ends, we guarantee payments for either 5, 10,
15, or 20 years as you selected. If the annuitant dies before the guaranteed
period ends, you may elect to have payments continued for the period guaranteed
or to receive the present value of the remaining guaranteed payments in a lump
sum. If the contract owner dies while guaranteed amounts remain unpaid, the
beneficiary may elect to receive the present value of the remaining guaranteed
payments in a lump sum.
LIFE ANNUITY WITH GUARANTEED RETURN OF CONTRACT VALUE
We make payments for as long as the annuitant lives. In addition, even if the
annuitant dies, we guarantee payments until the sum of all annuity payments
equals the contract value applied. If the annuitant dies while guaranteed
amounts remain unpaid, you may elect to have payments continued for the amount
guaranteed or to receive the present value of the remaining guaranteed amount in
a lump sum. If the contract owner dies while guaranteed amounts remain unpaid,
the beneficiary may elect to receive the present value of the remaining
guaranteed amount in a lump sum.
*JOINT AND SURVIVOR LIFE ANNUITY
We make payments for the lives of the annuitant and a designated second person.
Payments will continue as long as either one is living.
JOINT AND SURVIVOR LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 5, 10, 15, OR
20 YEARS
We make payments during the lives of the annuitant and a designated second
person. Payments will continue as long as either one is living. In addition,
even if the annuitant and the designated second person die before the guaranteed
period ends, we guarantee payments for either 5, 10, 15, or 20 years as you
selected. If the annuitant and the designated second person die before the end
of the period, you may elect to have payments continued for the period
guaranteed or to receive the present value of the remaining guaranteed payments
in a lump sum. If the contract owner dies while guaranteed amounts remain
unpaid, the beneficiary may elect to receive the present value of the remaining
guaranteed payments in a lump sum.
INDIVIDUAL RETIREMENT ACCOUNT ANNUITY
This annuity option is available only to IRA contract owners. Payments will be
made annually based on either (a) the life expectancy of the annuitant; (b) the
joint life expectancy of the annuitant and his or her spouse; (c) the life
expectancy of the surviving spouse if the annuitant dies before the annuity
date. Each annual
- -------------
* These options are "pure" life annuities. Therefore, it is possible for the
payee to receive only one annuity payment if the person (or persons) on
whose life (lives) payment is based dies after only one payment or to
receive only two annuity payments if that person (those persons) dies after
only two payments, etc.
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<PAGE>
payment will be equal to the remaining contract value on January 1, divided by
the applicable current life expectancy, as 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, but
will not be less than 3%. On the death of the measuring life or lives prior to
full distribution of the remaining value, we will pay that value to the
beneficiary in a lump sum.
GENDER-BASED ANNUITY PURCHASE RATES
Generally, the Contract provides for gender-based annuity purchase rates when
life annuity options are chosen. However, in states that have adopted
regulations prohibiting gender-based rates, blended unisex annuity purchase
rates will be applied to both male and female annuitants. Unisex annuity
purchase rates will provide the same annuity payments for male or female
annuitants that are the same age on their annuity dates.
Employers and employee organizations considering purchase of the Contract should
consult with their legal advisor to determine whether purchasing a Contract
containing gender-based annuity purchase rates is consistent with Title VII of
the Civil Rights Act of 1964 or other applicable law. We may offer such contract
owners Contracts containing unisex annuity purchase rates.
FEDERAL INCOME TAXES
FEDERAL INCOME TAXES
The following summary discussion is based on our understanding of current
federal income tax law as the Internal Revenue Service (IRS) now interprets it.
We can't guarantee that the law or the IRS's interpretation won't change. It
does not purport to be complete or to cover all tax situations. This discussion
is not intended as tax advice. Counsel or other tax advisors should be consulted
for further information.
We haven't considered any applicable federal gift, estate or any state or other
tax laws. Of course, your own tax status or that of your beneficiary can affect
the tax consequences of ownership or receipt of distributions.
TAX STATUS OF THE CONTRACT
DIVERSIFICATION REQUIREMENTS
Section 817(h) of the Internal Revenue Code (IRC) and the regulations under it
provide that separate account investments underlying a contract must be
"adequately diversified" for it to qualify as an annuity contract under IRC
section 72. The Account, through the subaccounts, intends to comply with the
diversification requirements of the regulations under Section 817(h). This will
affect how we make investments.
OWNER CONTROL
In certain circumstances, owners of variable annuity contracts have been
considered for Federal income tax purposes to be the owners of the assets of the
separate account supporting their Contracts due to their ability to exercise
investment control over those assets. When this is the case, the contract owners
have been currently taxed on income and gains attributable to the separate
account assets. There is little guidance in this area, and some features such as
the flexibility of an owner to allocate premium payments and transfer contract
accumulation values, have not been explicitly addressed in IRS published
rulings. While we believe that the Contracts do not give owners investment
control over Account assets, we reserve the right to modify the Contracts as
necessary to prevent an owner from being treated as the owner of the Account
assets supporting the Contract.
35
<PAGE>
REQUIRED DISTRIBUTIONS
To qualify as an annuity contract under Section 72(s) of the IRC, a
non-qualified annuity contract must provide that: (a) if any owner dies on or
after the annuity starting date but before all amounts under the Contract have
been distributed, the remaining amounts will be distributed at least as quickly
as under the method being used when the owner died; and (b) if any owner dies
before the annuity starting date, all amounts under the Contract will be
distributed within five years of the date of death. So long as the distributions
begin within a year of the owner's death, the IRS will consider these
requirements satisfied for any part of the owner's interest payable to or for
the benefit of a "designated beneficiary" and distributed over the beneficiary's
life or over a period that cannot exceed the beneficiary's life expectancy. A
designated beneficiary is the person the owner names as beneficiary and who
assumes ownership when the owner dies. A designated beneficiary must be a
natural person. If the deceased owner's spouse is the designated beneficiary, he
or she can continue the Contract when such contract owner dies.
The Contract is designed to comply with Section 72(s). We will review the
Contract and amend it if necessary to make sure that it continues to comply with
the section's requirements.
Other rules regarding required distributions apply to Individual Retirement
Annuities.
TAXATION OF ANNUITIES
IN GENERAL
IRC Section 72 governs annuity taxation generally. We believe an owner who is a
natural person usually won't be taxed on increases in the value of a contract
until there is a distribution (i.e., the owner withdraws all or part of the
accumulation or takes annuity payments). Assigning, pledging, or agreeing to
assign or pledge any part of the accumulation usually will be considered a
distribution. Distributions of accumulated investment earnings are taxable as
ordinary income.
The owner of any annuity contract who is not a natural person (e.g., a
corporation or a trust) generally must include in income any increase in the
excess of the accumulation over the "investment in the contract" during the
taxable year. There are some exceptions to this rule and a prospective owner
that is not a natural person may wish to discuss them with a competent tax
advisor.
The following discussion applies generally to Contracts owned by a natural
person:
WITHDRAWALS AND SURRENDERS
When you take a withdrawal from a Contract, the amount received generally will
be treated as ordinary income subject to tax up to an amount equal to the excess
(if any) of the contract value immediately before the distribution over the
investment in the Contract (generally, the premiums or other consideration paid
for the Contract, reduced by any amount previously distributed from the Contract
that was not subject to tax) at that time. Other rules apply to Individual
Retirement Annuities.
If you withdraw your entire contract value, you will be taxed only on the part
that exceeds your investment in the Contract.
ANNUITY PAYMENTS
Although tax consequences may vary depending on the annuity option selected
under an annuity contract, a portion of each annuity payment is generally not
taxed and the remainder is taxed as ordinary income. The non-taxable portion of
an annuity payment is generally determined in a manner that is designed to allow
you to recover your investment in the Contract ratably on a tax-free basis over
the expected stream of annuity
36
<PAGE>
payments, as determined when annuity payments start. Once your investment in the
Contract has been fully recovered, however, the full amount of each annuity
payment is subject to tax as ordinary income.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be paid from a Contract because an owner or annuitant (if an owner
is not a natural person) has died. If the payments are made in a single sum,
they're taxed the same way a full withdrawal from the Contract is taxed. If they
are distributed as annuity payments, they're taxed as annuity payments.
PENALTY TAX ON SOME WITHDRAWALS
You may have to pay a penalty tax (10 percent of the amount treated as taxable
income) on some withdrawals. However, there is usually no penalty on
distributions:
(1) on or after you reach age 59 1/2;
(2) after you die (or after the annuitant dies, if an owner isn't an
individual);
(3) after you become disabled; or
(4) that are part of a series of substantially equal periodic (at least
annual) payments for your life (or life expectancy) or the joint lives (or
life expectancies) of you and your beneficiary.
Other exceptions may be applicable under certain circumstances and special rules
may apply in connection with the exceptions listed above. Also, additional
exceptions apply to distributions from an Individual Retirement Annuity. You
should consult a tax adviser with regard to exceptions from the penalty tax.
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF A CONTRACT
Transferring or assigning ownership of the Contract, designating a payee or
beneficiary who is not also the owner, or exchanging a Contract can have other
tax consequences that we don't discuss here. If you're thinking about any of
those transactions, contact a tax advisor.
WITHHOLDING
Annuity distributions usually 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. However, recipients can usually
choose not to have tax withheld from distributions.
MULTIPLE CONTRACTS
All non-qualified deferred annuity Contracts that we (or our affiliates) issue
to the same owner during any calendar year are generally treated as one annuity
Contract for purposes of determining the amount includible in such owner's
income when a taxable distribution occurs. This could affect when income is
taxable and how much is subject to the ten percent penalty tax discussed above.
POSSIBLE CHANGES IN TAXATION
Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the Contracts could change by legislation
or other means. It is also possible that any change could be retroactive (that
is, effective prior to the date of the change). A tax adviser should be
consulted with respect to legislative developments and their effect on the
Contract.
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<PAGE>
POSSIBLE CHARGE FOR OUR TAXES
Currently we don't charge the Account for any federal, state, or local taxes on
them or the Contracts (other than premium taxes), but we reserve the right to
charge the Account or the Contracts for any tax or other cost resulting from the
tax laws that we believe should be attributed to them.
INDIVIDUAL RETIREMENT ANNUITIES
TRADITIONAL IRAS
Section 408 of the IRC permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity" or
"IRA." This Contract is available for purchase either as an IRA or through an
established IRA custodial account with MLPF&S. An individual may make annual
contributions of up to the lesser of $2,000 or 100% of adjusted gross income to
an IRA. The contributions may be deductible in whole or in part, depending on
the individual's income. Distributions from certain pension plans may be "rolled
over" into an IRA on a tax-deferred basis without regard to these limits.
Amounts in the IRA (other than nondeductible contributions) are taxed when
distributed from the IRA. A 10% penalty tax generally applies to distributions
made before age 59 1/2, unless certain exceptions apply. IRAs have minimum
distribution rules that govern the timing and amount of distributions. You
should refer to your adoption agreement or consult a tax advisor for more
information about these distribution rules. Adverse tax consequences may result
if you do not ensure that contributions, distributions and other transactions
with respect to the Contract comply with the law. The IRS has not reviewed the
Contract for qualification as an IRA, and has not addressed in a ruling of
general applicability whether a death benefit provision such as the enhanced
death benefit provision in the Contract comports with IRA qualification
requirements.
ROTH IRAS
A Contract is available for purchase by an individual who has separately
established a Roth IRA custodial account with MLPF&S. Roth IRAs, as described in
section 408A of the IRC, permit certain eligible individuals to contribute to
make non-deductible contributions to a Roth IRA in cash or as a rollover or
transfer from another Roth IRA or other IRA. An individual may make annual
contributions to a Roth IRA of up to the lesser of $2,000 or 100% of adjusted
gross income. A rollover from or conversion of an IRA to a Roth IRA is generally
subject to tax and other special rules apply. You may wish to consult a tax
adviser before combining any converted amounts with any other Roth IRA
contributions, including any other conversion amounts from other tax years.
Distributions from a Roth IRA generally are not taxed, except that, once
aggregate distributions exceed contributions to the Roth IRA, income tax and a
10% penalty tax may apply to distributions made (1) before age 59 1/2 (subject
to certain exceptions) or (2) during the five taxable years starting with the
year in which the first contribution is made to any Roth IRA. A 10% penalty tax
may apply to amounts attributable to a conversion from an IRA if they are
distributed during the five taxable years beginning with the year in which the
conversion was made.
TAX SHELTERED ANNUITIES
Section 403(b) of the IRC allow employees of certain Section 501(c)(3)
organizations and public schools to exclude from their gross income the premium
payments made, within certain limits, on a contract that will provide an annuity
for the employee's retirement. Transfer amounts from tax sheltered annuity plans
that are not subject to the Employee Retirement Income Security Act of 1974, as
amended, are accepted as premium payments, as permitted by law, under a
Contract. Other premium payments, including premium payments subject to IRC
Section 402(g), will not be accepted. Distributions of (1) salary reduction
contributions made in years beginning after December 31, 1988; (2) earnings on
those contributions; and (3) earnings on amounts held as of the last year
beginning before January 1, 1989, are not allowed prior to age 59 1/2,
separation from service, death or disability. Salary reduction contributions may
also be distributed upon hardship, but would generally be subject to penalties.
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<PAGE>
OTHER TAX ISSUES FOR IRAS AND ROTH IRAS
Total annual contributions to all of an individual's IRAs and Roth IRAs may not
exceed $2,000 or 100% of the individual's adjusted gross income. Distributions
from an IRA or Roth IRA generally are subject to withholding for the
participant's federal income tax liability. The withholding rate varies
according to the type of distribution and the owner's tax status. The owner will
be provided the opportunity to elect not have tax withheld from distributions.
OTHER INFORMATION
NOTICES AND ELECTIONS
You must send any changes, notices, and/or choices for your Contract to our
Service Center. These requests must be in writing and signed unless you have
submitted a telephone authorization form. If you have submitted an authorization
form, you may make the following choices via telephone:
1. Transfers
2. Premium allocation
3. Withdrawals, other than full surrenders
4. Requests to change the annuity date
5. Requests to change the annuity option
6. Requests to change the owner, beneficiary, or annuitant
We will use reasonable procedures to confirm that a telephone request is proper.
These procedures may include possible tape recording of telephone calls and
obtaining appropriate identification before effecting any telephone
transactions. We do not have any liability if we act on a request that we
reasonably believe is proper.
VOTING RIGHTS
We own all Fund shares held in the Account. As the owner, we have the right to
vote on any matter put to vote at any Funds' shareholder meetings. However, we
will vote all Fund shares attributable to Contracts by following instructions we
receive from you. If we don't receive voting instructions, we'll vote those
shares in the same proportion as shares for which we receive instructions. We
determine the number of shares you may give voting instructions on by dividing
your interest in a subaccount by the net asset value per share of the
corresponding Fund. We'll determine the number of shares you may give voting
instructions on as of a record date we choose. We may vote Fund shares in our
own right if laws change to permit us to do so.
You have voting rights until the annuity date. You may give voting instructions
concerning:
(1) the election of a Fund's Board of Directors;
(2) ratification of a Fund's independent accountant;
(3) approval of the investment advisory agreement for a Fund corresponding to
your selected subaccounts;
(4) any change in a fundamental investment policy of a Fund corresponding to
your selected subaccounts; and
(5) any other matter requiring a vote of the Fund's shareholders.
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<PAGE>
REPORTS TO CONTRACT OWNERS
At least once each contract year before the annuity date, we will send you
information about your Contract. It will outline all your Contract transactions
during the year, your Contract's current number of accumulation units in each
subaccount, the value of each accumulation unit of each subaccount, and the
contract value.
You will also receive an annual and a semi-annual report containing financial
statements and a list of portfolio securities of the Funds.
SELLING THE CONTRACT
MLPF&S is the principal underwriter of the Contract. Its principal business
address is World Financial Center, 250 Vesey Street, New York, New York 10281.
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. MLPF&S is an
indirect wholly owned subsidiary of Merrill Lynch & Co., Inc.
Registered representatives (Financial Consultants) of MLPF&S sell the Contract.
These Financial Consultants are also licensed through various Merrill Lynch Life
Agencies as our insurance agents. Through a distribution agreement we have with
MLPF&S and companion sales agreements we have with the Merrill Lynch Life
Agencies, Merrill Lynch Life Agencies and/or MLPF&S compensate the Financial
Consultants. The maximum commission paid to a Financial Consultant is 0.51% of
each premium. In addition, on the annuity date, the Financial Consultant will
receive compensation of up to 1.5% of contract value. Financial Consultants may
also be paid additional annual compensation of up to 0.51% of contract value.
Reduced compensation may be paid on Contracts purchased by our employees or
their spouses or dependents. Compensation may be paid in the form of non-cash
compensation, subject to applicable regulatory requirements.
The maximum commission we will pay to the applicable insurance agency to be used
to pay commissions to Financial Consultants is 1.00% of each premium and up to
1.00% of contract value. In addition, the maximum commission we will pay to the
applicable insurance agency on the annuity date is 3.00% of contract value.
MLPF&S may arrange for sales of the Contract by other broker-dealers. Registered
representatives of these other broker-dealers may be compensated on a different
basis than MLPF&S Financial Consultants.
STATE REGULATION
We are subject to the laws of the State of Arkansas and to the regulations of
the Arkansas Insurance Department. We are also subject to the insurance laws and
regulations of all jurisdictions in which we're licensed to do business.
We file an annual statement with the insurance departments of jurisdictions
where we do business. The statement discloses our operations for the preceding
year and our financial condition as of the end of that year. Our books and
accounts are subject to insurance department review at all times. The Arkansas
Insurance Department, in conjunction with the National Association of Insurance
Commissions, conducts a full examination of our operations periodically.
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STATE VARIATIONS
Any state variations in the Contracts are covered in a special policy form for
use in that state. This prospectus provides a general description of the
Contract. Your actual policy and any endorsements are the controlling documents.
If you would like to review a copy of the policy and endorsements, contact our
Service Center.
LEGAL PROCEEDINGS
There are no legal proceedings involving the Account. We and MLPF&S are engaged
in various kinds of routine litigation that, in our judgment, are not material
to our total assets.
EXPERTS
Deloitte & Touche LLP, independent auditors, have audited our financial
statements as of December 31, 1999 and 1998 and for each of the three years in
the period ended December 31, 1999. They've also audited the financial
statements of the Account as of December 31, 1999 and for the periods presented
in the Statement of Additional Information. We include these financial
statements in reliance upon the reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing. Their principal business
address is Two World Financial Center, New York, New York 10281-1420.
LEGAL MATTERS
Our organization, our authority to issue the Contract, and the validity of the
form of the Contract have been passed upon by Barry G. Skolnick, our Senior Vice
President and General Counsel. Sutherland Asbill & Brennan LLP of Washington,
D.C. has provided advice on certain matters relating to federal securities laws.
REGISTRATION STATEMENTS
Registration Statements that relate to the Contract and its investment options
have been filed with the Securities and Exchange Commission under the Securities
Act of 1933 and the Investment Company Act of 1940. This Prospectus does not
contain all of the information in the registration statements. You can obtain
the omitted information from the Securities and Exchange Commission's principal
office in Washington, D.C., upon payment of a prescribed fee.
41
<PAGE>
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
The contents of the Statement of Additional Information for the Contract include
the following:
OTHER INFORMATION
Principal Underwriter
Financial Statements
Administrative Services Arrangements
CALCULATION OF YIELDS AND TOTAL RETURNS
FINANCIAL STATEMENTS OF MERRILL LYNCH LIFE VARIABLE ANNUITY
SEPARATE ACCOUNT A
FINANCIAL STATEMENTS OF MERRILL LYNCH LIFE INSURANCE COMPANY
42
<PAGE>
APPENDIX A
Example: Assume that you are under age 80 at issue. You pay an initial
premium of $100,000 on June 1, 2000 and a subsequent premium of $10,000 on
December 1, 2001. You also make a withdrawal of $50,000 on January 1,
2002. Your death benefit, based on HYPOTHETICAL Contract values and
transactions, and resulting hypothetical maximum anniversary values
("MAV"), are illustrated below. This example assumes hypothetical positive
and negative investment performance of the Account, as indicated, to
demonstrate the calculation of the death benefit value. There is, of
course, no assurance that the Account will experience positive investment
performance. The example does not reflect the deduction of fees and
charges. FOR A DETAILED EXPLANATION OF HOW WE CALCULATE THE DEATH BENEFIT,
SEE "DEATH BENEFIT."
<TABLE>
<CAPTION>
(A) (B)
-------------------- ---------- -------------
TRANSACTIONS PREMS
-------------------- LESS ADJ. MAX ANNIV.
DATE PREM. WITHDR. WITHDRS. VALUE (MAV)
- ---------------------------------------------------------------------- -------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
06/01/00 THE CONTRACT IS ISSUED 100,000 100,000 0
MAV is $0 until first contract anniversary
06/01/01 FIRST CONTRACT ANNIVERSARY 100,000 110,000
Assume contract value increased by $10,000 due to positive
investment performance
Anniversary value for 6/1/2001 = Contract value on 6/1/2001
= $110,000
MAV = greatest of anniversary values = $110,000
12/01/01 OWNER PUTS IN $10,000 ADDITIONAL PREMIUM 10,000 110,000 120,000
Assume contract value decreased by $6,000 due to negative
investment performance
Anniversary value for 6/1/2001 = Contract value on 6/1/2001
+ premiums added since that anniversary = $110,000 + $10,000
= $120,000
MAV = greatest of anniversary values = $120,000
01/01/02 OWNER TAKES A $50,000 WITHDRAWAL 50,000 50,000 60,000
Assume contract value decreased by $14,000 due to negative
investment performance
Anniversary value for 6/1/2001 = contract value on 6/1/2001
+ premiums added - adjusted withdrawals since that
anniversary = $110,000 + $10,000 - $60,000 = $60,000
Adjusted withdrawal = withdrawal X maximum (MAV, prems -
adj. withdrs.)
contract value
= $50,000 x maximum (120,000, 110,000)/100,000
= $50,000 x 120,000/100,000 = $60,000
(Note: all values are determined immediately prior to the
withdrawal)
MAV = greatest of anniversary values = $60,000
06/01/02 SECOND CONTRACT ANNIVERSARY 50,000 60,000
Assume contract value increased by $5,000 due to positive
investment performance
Anniversary value for 6/1/2001 = $60,000
Anniversary value for 6/1/2002 = contract value on 6/1/2002
= $55,000
MAV = greatest of anniversary values = maximum ($60,000,
$55,000) = $60,000
06/01/03 THIRD CONTRACT ANNIVERSARY 50,000 65,000
Assume contract value increased by $10,000 due to positive
investment performance
Anniversary value for 6/1/2001 = $60,000
Anniversary value for 6/1/2002 = contract value on 6/1/2002
= $55,000
Anniversary value for 6/1/2003 = contract value on 6/1/2003
= $65,000
MAV = greatest of anniversary values = maximum ($60,000,
$55,000, $65,000) = $65,000
<CAPTION>
(C)
------------ --------------------------------
CONTRACT
DATE VALUE DEATH BENEFIT
- -------- ------------ --------------------------------
<S> <C> <C>
06/01/00 100,000 100,000 maximum of (A), (B), (C)
06/01/01 110,000 110,000 maximum of (A), (B), (C)
12/01/01 114,000 120,000 maximum of (A), (B), (C)
01/01/02 50,000 60,000 maximum of (A), (B), (C)
06/01/02 55,000 60,000 maximum of (A), (B), (C)
06/01/03 65,000 65,000 maximum of (A), (B), (C)
</TABLE>
43
<PAGE>
DATE OF PRELIMINARY
STATEMENT OF ADDITIONAL INFORMATION
MARCH 16, 2000
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
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
This individual deferred variable annuity contract (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 issued by Merrill Lynch Life Insurance Company ("Merrill Lynch
Life") both on a nonqualified basis, and as an Individual Retirement Annuity
("IRA") that is given qualified tax status. The Contract may also be purchased
through an established IRA or Roth IRA custodial account with Merrill Lynch,
Pierce, Fenner & Smith Incorporated. Transfer amounts from tax sheltered annuity
plans that are not subject to the Employee Retirement Income Security Act of
1974, as amended, will be accepted as premium payments, as permitted by law.
Other premium payments will not be accepted under a Contract used as a tax
sheltered annuity.
This Statement of Additional Information is not a Prospectus and should be read
together with the Contract's Preliminary Prospectus with the same date, which is
available on request and without charge by writing to or calling Merrill Lynch
Life at the Service Center address or phone number set forth above.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
OTHER INFORMATION........................................... 3
Principal Underwriter....................................... 3
Financial Statements........................................ 3
Administrative Services Arrangements........................ 3
CALCULATION OF YIELDS AND TOTAL RETURNS..................... 3
Money Market Yields......................................... 3
Other Subaccount Yields..................................... 4
Total Returns............................................... 5
FINANCIAL STATEMENTS OF MERRILL LYNCH LIFE VARIABLE ANNUITY
SEPARATE ACCOUNT A........................................ S-1
FINANCIAL STATEMENTS OF MERRILL LYNCH LIFE INSURANCE
COMPANY................................................... G-1
</TABLE>
2
<PAGE>
OTHER INFORMATION
PRINCIPAL UNDERWRITER
Merrill Lynch, Pierce, Fenner & Smith Incorporated, 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 A (the "Account") under the Investment Company
Act of 1940. The offering is continuous. MLPF&S has not received any payments or
commissions in connection with the sale of the Contracts in the past three
years.
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 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.
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 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. No amounts paid pursuant to this agreement in the past three years were
attributable to the Contracts.
CALCULATION OF YIELDS AND TOTAL RETURNS
MONEY MARKET YIELD
From time to time, Merrill Lynch Life may quote in advertisements and sales
literature the current annualized yield for the Domestic Money Market Subaccount
for a 7-day period in a manner that does not take into consideration any
realized or unrealized gains or losses on shares of the underlying Funds or on
their respective portfolio securities. The current annualized yield is computed
by: (a) determining the net change (exclusive of realized gains and losses on
the sales of securities and unrealized appreciation and depreciation) at the end
of the 7-day period in the value of a hypothetical account under a Contract
having a balance of 1 unit at the beginning of the period, (b) dividing such net
change in account value by the value of the account at the beginning of the
period to determine the base period return; and (c) annualizing this quotient on
a 365-day basis. The net change in account value reflects: (1) net income from
the Fund attributable to the hypothetical account; and (2) charges and
deductions imposed under the Contract which are attributable to the hypothetical
account. The charges and deductions include the per unit charges for the
hypothetical account for: (1) the asset-based insurance charge; and (2) the
annual contract fee. For purposes of calculating current yield for a Contract,
an average per unit contract fee is used. Based on our current estimates of
average contract
3
<PAGE>
size and withdrawals, we have assumed the average per unit contract fee to be
0.00%. Current yield will be calculated according to the following formula:
Current Yield = ((NCF - ES/UV) x (TO THE POWER OF 365/7)
Where:
<TABLE>
<S> <C> <C>
NCF = the net change in the value of the Fund (exclusive of
realized gains and losses on the sale of securities and
unrealized appreciation and depreciation) for the 7-day
period attributable to a hypothetical account having a
balance of 1 unit.
ES = per unit expenses for the hypothetical account for the 7-day
period.
UV = the unit value on the first day of the 7-day period.
</TABLE>
The current yield for the Domestic Money Market Subaccount for the 7-day period
ended December 31, 1999 was 3.83%.
Merrill Lynch Life also may quote the effective yield of the Domestic Money
Market Subaccount for the same 7-day period, determined on a compounded basis.
The effective yield is calculated by compounding the unannualized base period
return according to the following formula:
Effective Yield = (1 + ((NCF - ES)/UV))TO THE POWER OF (365/7) - 1
Where:
<TABLE>
<S> <C> <C>
NCF = the net change in the value of the Fund (exclusive of
realized gains and losses on the sale of securities and
unrealized appreciation and depreciation) for the 7-day
period attributable to a hypothetical account having a
balance of 1 unit.
ES = per unit expenses of the hypothetical account for the 7-day
period.
UV = the unit value for the first day of the 7-day period.
</TABLE>
The effective yield for the Domestic Money Market Subaccount for the 7-day
period ended December 31, 1999 was 3.91%.
Because of the charges and deductions imposed under the Contract, the yield for
the Domestic Money Market Subaccount will be lower than the yield for the
corresponding underlying Fund.
The yields on amounts held in the Domestic Money Market Subaccount normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. The actual yield for the subaccount is affected by changes in interest
rates on money market securities, average portfolio maturity of the underlying
Fund, the types and qualities of portfolio securities held by the Fund and the
Fund's operating expenses. Yields on amounts held in the Domestic Money Market
Subaccount may also be presented for periods other than a 7-day period.
OTHER SUBACCOUNT YIELDS
From time to time, Merrill Lynch Life may quote in sales literature or
advertisements the current annualized yield of one or more of the subaccounts
(other than the Domestic Money Market Subaccount) for a Contract for 30-day or
one-month period. The annualized yield of a subaccount refers to income
generated by the subaccount over a specified 30-day or one-month period. Because
the yield is annualized, the yield generated by the subaccount during the 30-day
or one-month period is assumed to be generated each period over a 12-month
period. The yield is computed by: (1) dividing the net investment income of the
Fund attributable to the subaccount units less subaccount expenses for the
period; by (2) the maximum offering price per unit on the last day of the period
times the daily average
4
<PAGE>
number of units outstanding for the period; then (3) compounding that yield for
a 6-month period; and then (4) multiplying that result by 2. Expenses
attributable to the subaccount include the asset-based insurance charge and the
annual contract fee. For purposes of calculating the 30-day or one-month yield,
an average contract fee per dollar of contract value in the subaccount is used
to determine the amount of the charge attributable to the subaccount for the
30-day or one-month period. Based on our current estimates of average contract
size and withdrawals, we have assumed the average contract fee to be 0.00%. The
30-day or one-month yield is calculated according to the following formula:
Yield = 2 ((((NI - ES)/(U x UV)) + 1)TO THE POWER OF (6) - 1)
Where:
<TABLE>
<S> <C> <C>
NI = net investment income of the Fund for the 30-day or
one-month period attributable to the subaccount's units.
ES = expenses of the subaccount for the 30-day or one-month
period.
U = the average number of units outstanding.
UV = the unit value at the close of the last day in the 30-day or
one-month
</TABLE>
Currently, Merrill Lynch Life may quote yields on bond subaccounts. The yield
for the Government Bond Subaccount for the 30-day period ended December 31, 1999
was 4.44%. Because of the charges and deductions imposed under the Contracts,
the yield for a subaccount will be lower than the yield for the corresponding
Fund.
The yield on the amounts held in the subaccounts normally will fluctuate over
time. Therefore, the disclosed yield for any given past period is not an
indication or representation of future yields or rates of return. A subaccount's
actual yield is affected by the types and quality of portfolio securities held
by the corresponding Fund, and its operating expenses.
TOTAL RETURNS
From time to time, Merrill Lynch Life also may quote in sales literature or
advertisements, total returns, including average annual total returns for one or
more of the subaccounts for various periods of time. Average annual total
returns will be provided for a subaccount for 1, 5 and 10 years, or for a
shorter period, if applicable.
5
<PAGE>
For the year ended December 31, 1999, average annual total returns were:
<TABLE>
<CAPTION>
SINCE
NAME OF SUBACCOUNT 1 YEAR 5 YEAR 10 YEAR INCEPTION
- ------------------ --------------- -------- -------- ---------------
<S> <C> <C> <C> <C>
Basic Value Focus Fund 19.21% 17.47% n/a 14.76%
Domestic Money Market Fund 3.19% 3.55% n/a 2.96%
Fundamental Growth Focus Fund n/a n/a n/a n/a
Government Bond Fund -3.35% 4.87% n/a 4.42%
Index 500 Fund 18.60% n/a n/a 25.22
AIM V.I. International Equity Fund n/a n/a n/a n/a
AIM V.I. Value Fund 27.85% n/a n/a 27.26%
Growth and Income Portfolio n/a n/a n/a n/a
Premier Growth Portfolio 30.22% n/a n/a 35.17%
MFS Emerging Growth Series 73.92% n/a n/a 38.84%
MFS Growth With Income Series n/a n/a n/a n/a
International VIP Portfolio 19.78% n/a n/a 8.36%
Davis Value Portfolio n/a n/a n/a n/a
Trend Series n/a n/a n/a n/a
Total Return Bond Portfolio n/a n/a n/a n/a
Seligman Small-Cap Value Portfolio n/a n/a n/a n/a
Emerging Growth Portfolio n/a n/a n/a n/a
</TABLE>
Total returns assume the Contract was surrendered at the end of the period
shown, and are not indicative of performance if the Contract was continued for a
longer period. The Contract does not impose any surrender charge.
Average annual total returns for other periods of time may also be disclosed
from time to time. For example, average annual total returns may be provided
based on the assumption that a subaccount had been in existence and had invested
in the corresponding underlying Fund for the same period as the corresponding
Fund had been in operation. The Funds commenced operations as indicated below:
<TABLE>
<CAPTION>
FUND COMMENCED OPERATIONS
- ---- --------------------
<S> <C>
Basic Value Focus Fund July 1, 1993
Domestic Money Market Fund February 21, 1992
Fundamental Growth Focus Fund March 28, 2000
Government Bond Fund May 16, 1994
Index 500 Fund December 18, 1996
AIM V.I. International Equity Fund May 5, 1993
AIM V.I. Value Fund May 5, 1993
Growth and Income Portfolio January 14, 1991
Premier Growth Portfolio June 26, 1992
MFS Emerging Growth Series July 24, 1995
MFS Growth With Income Series October 9, 1995
International VIP Portfolio June 10, 1998
Davis Value Portfolio July 1, 1999
Trend Series December 27, 1993
Total Return Bond Portfolio December 31, 1997
Seligman Small-Cap Value Portfolio May 1, 1998
Emerging Growth Portfolio July 3, 1995
</TABLE>
Average annual total returns represent the average annual compounded rates of
return that would equate an initial investment of $1,000 under a Contract to the
redemption value or that investment as of the last day of each of the periods.
The ending date for each period for which total return quotations are provided
will generally be as of the most recent calendar quarter-end.
6
<PAGE>
Average annual total returns are calculated using subaccount unit values
calculated on each valuation day based on the performance of the corresponding
underlying Fund, the deductions for the asset-based insurance charge and the
contract fee, and assume a surrender of the Contract at the end of the period
for the return quotation (although the Contract does not impose a surrender
charge). For purposes of calculating total return, an average per dollar
contract fee attributable to the hypothetical account for the period is used.
Based on our current estimates of average contract size and withdrawals, we have
assumed the average contract fee to be 0.00%. The total return is then
calculated according to the following formula:
TR = ((ERV/P)TO THE POWER OF (1/N)) + 1
Where:
<TABLE>
<S> <C> <C>
TR = the average annual total return net of subaccount recurring
charges (such as the asset- based insurance charge and
contract fee).
ERV = the ending redeemable value at the end of the period of the
hypothetical account with an initial payment of $1,000.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
</TABLE>
From time to time, Merrill Lynch Life also may quote in sales literature or
advertisements total returns for other periods.
From time to time, Merrill Lynch Life also may quote in sales literature or
advertisements total returns or other performance information for a hypothetical
Contract assuming the initial premium is allocated to more than one subaccount
or assuming monthly transfers from a specified subaccount to one or more
designated subaccounts under a dollar cost averaging program. Merrill Lynch Life
also may quote in sales literature or advertisements total returns or other
performance information for a hypothetical Contract assuming participation in an
asset allocation or rebalancing program. These returns will reflect the
performance of the affected subaccount(s) for the amount and duration of the
allocation to each subaccount for the hypothetical Contract. They also will
reflect the deduction of charges described above. For example, total return
information for a Contract with a dollar cost averaging program for a 12-month
period will assume commencement of the program at the beginning of the most
recent 12-month period for which average annual total return information is
available. This information will assume an initial lump-sum investment in a
specified subaccount (the "DCA subaccount") at the beginning of that period and
monthly transfers of a portion of the contract value from the DCA subaccount to
designated other subaccount(s) during the 12-month period. The total return for
the Contract for this 12-month period therefore will reflect the return on the
portion of the contract value that remains invested in the DCA subaccount for
the period it is assumed to be so invested, as affected by monthly transfers,
and the return on amounts transferred to the designated other subaccounts for
the period during which those amounts are assumed to be invested in those
subaccounts. The return for an amount invested in a subaccount will be based on
the performance of that subaccount for the duration of the investment, and will
reflect the charges described above. Performance information for a dollar
cost-averaging program also may show the returns for various periods for a
designated subaccount assuming monthly transfers to the subaccount, and may
compare those returns to returns assuming an initial lump-sum investment in that
subaccount. This information also may be compared to various indices, such as
the Merrill Lynch 91-day Treasury Bills index or the U.S. Treasury Bills index
and may be illustrated by graphs, charts, or otherwise.
7
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Merrill Lynch Life Insurance Company:
We have audited the accompanying statement of assets and
liabilities of each of the divisions of Merrill Lynch
Life Variable Annuity Separate Account A, comprised of
divisions investing in the Domestic Money Market Fund, Prime
Bond Fund, High Current Income Fund, Quality Equity Fund,
Special Value Focus Fund, American Balanced Fund, Natural
Resources Focus Fund, Global Strategy Focus Fund, Global
Utility Focus Fund, International Equity Focus Fund, Global
Bond Focus Fund, Basic Value Focus Fund, Government Bond
Fund, Developing Capital Markets Focus Fund, Index 500 Fund,
Global Growth Focus Fund, Capital Focus Fund, International
VIP Portfolio, Mercury V.I. U.S. Large Cap Fund
(commencement of operations June 18, 1999), 1999 ML Select
Ten V.I. Trust (commencement of operations April 29, 1999),
1998 ML Select Ten V.I. Trust (commencement of operations
May 1, 1998 through April 30, 1999), Quasar Portfolio,
Premier Growth Portfolio, MFS Emerging Growth Series, MFS
Research Series, AIM V.I. Value Fund, and the AIM Capital
Appreciation Fund (collectively, the "Divisions") as of
December 31, 1999 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 of 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, 1999. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial position of the
Divisions as of December 31, 1999 and the results of their
operations and the changes in their net assets for each of
the two years in the period then ended, in conformity with
generally accepted accounting principles.
February 14, 2000
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Domestic High
Money Prime Current
Market Bond Income
Fund Fund Fund
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Domestic Money Market Fund, 425,518 shares
(Cost $425,518) $ 425,518 $ $
Prime Bond Fund, 43,432 shares
(Cost $516,192) 483,829
High Current Income Fund, 46,831 shares
(Cost $512,167) 449,107
-------------------- -------------------- --------------------
Total Assets 425,518 483,829 449,107
Liabilities
Due to Merrill Lynch Life Insurance Company 126 139 124
-------------------- -------------------- --------------------
Net Assets $ 425,392 $ 483,690 $ 448,983
==================== ==================== ====================
Net Assets
Accumulation Units 425,392 483,690 448,983
Retained in Separate Account A by Merrill Lynch Life
Insurance Company (Note 5) 0 0 0
-------------------- -------------------- --------------------
Total Net Assets $ 425,392 $ 483,690 $ 448,983
==================== ==================== ====================
Units Outstanding (Note 7) 33,182 32,859 26,536
==================== ==================== ====================
Unit Value $ 12.82 $ 14.72 $ 16.92
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Special
Quality Value American
Equity Focus Balanced
Fund Fund Fund
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Quality Equity Fund, 20,807 shares
(Cost $654,000) $ 830,840 $ $
Special Value Focus Fund, 19,840 shares
(Cost $444,587) 463,266
American Balanced Fund, 9,850 shares
(Cost $140,103) 145,780
-------------------- -------------------- --------------------
Total Assets 830,840 463,266 145,780
Liabilities
Due to Merrill Lynch Life Insurance Company 245 136 43
-------------------- -------------------- --------------------
Net Assets $ 830,595 $ 463,130 $ 145,737
==================== ==================== ====================
Net Assets
Accumulation Units $ 830,595 $ 463,130 $ 145,737
Retained in Separate Account A by Merrill Lynch Life
Insurance Company (Note 5) 0 0 0
-------------------- -------------------- --------------------
Total Net Assets $ 830,595 $ 463,130 $ 145,737
==================== ==================== ====================
Units Outstanding (Note 7) 28,750 22,647 7,254
==================== ==================== ====================
Unit Value $ 28.89 $ 20.45 $ 20.09
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
===============================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Natural Global Global
Resources Strategy Utility
Focus Focus Focus
Fund Fund Fund
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Natural Resources Focus Fund, 1,411 shares
(Cost $15,724) $ 13,379 $ $
Global Strategy Focus Fund, 45,700 shares
(Cost $581,943) 645,739
Global Utility Focus Fund, 6,701 shares
(Cost $78,998) 112,910
-------------------- -------------------- --------------------
Total Assets 13,379 645,739 112,910
Liabilities
Due to Merrill Lynch Life Insurance Company 4 190 33
-------------------- -------------------- --------------------
Net Assets $ 13,375 $ 645,549 $ 112,877
==================== ==================== ====================
Net Assets
Accumulation Units $ 13,375 $ 645,549 $ 112,877
Retained in Separate Account A by Merrill Lynch Life
Insurance Company (Note 5) 0 0 0
-------------------- -------------------- --------------------
Total Net Assets $ 13,375 $ 645,549 $ 112,877
==================== ==================== ====================
Units Outstanding (Note 7) 1,055 31,676 5,103
==================== ==================== ====================
Unit Value $ 12.68 $ 20.38 $ 22.12
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
===============================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
International Global Basic
Equity Bond Value
Focus Focus Focus
Fund Fund Fund
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
International Equity Focus Fund, 11,633 shares
(Cost $130,509) $ 162,739 $ $
Global Bond Focus Fund, 4,855 shares
(Cost $46,360) 41,654
Basic Value Focus Fund, 59,313 shares
(Cost $799,959) 806,653
-------------------- -------------------- --------------------
Total Assets 162,739 41,654 806,653
Liabilities
Due to Merrill Lynch Life Insurance Company 48 12 239
-------------------- -------------------- --------------------
Net Assets $ 162,691 $ 41,642 $ 806,414
==================== ==================== ====================
Net Assets
Accumulation Units $ 162,691 $ 41,642 $ 806,414
Retained in Separate Account A by Merrill Lynch Life
Insurance Company (Note 5) 0 0 0
-------------------- -------------------- --------------------
Total Net Assets $ 162,691 $ 41,642 $ 806,414
==================== ==================== ====================
Units Outstanding (Note 7) 10,055 3,372 32,438
==================== ==================== ====================
Unit Value $ 16.18 $ 12.35 $ 24.86
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
===============================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Developing
Government Capital Markets Index
Bond Focus 500
Fund Fund Fund
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Government Bond Fund, 33,692 shares
(Cost $355,555) $ 337,926 $ $
Developing Capital Markets Focus Fund, 8,281 shares
(Cost $79,637) 85,627
Index 500 Fund, 24,413 shares
(Cost $370,878) 457,239
-------------------- -------------------- --------------------
Total Assets 337,926 85,627 457,239
Liabilities
Due to Merrill Lynch Life Insurance Company 101 25 135
-------------------- -------------------- --------------------
Net Assets $ 337,825 $ 85,602 $ 457,104
==================== ==================== ====================
Net Assets
Accumulation Units $ 337,825 $ 85,602 $ 457,104
Retained in Separate Account A by Merrill Lynch Life
Insurance Company (Note 5) 0 0 0
-------------------- -------------------- --------------------
Total Net Assets $ 337,825 $ 85,602 $ 457,104
==================== ==================== ====================
Units Outstanding (Note 7) 26,087 8,168 22,901
==================== ==================== ====================
Unit Value $ 12.95 $ 10.48 $ 19.96
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Global
Growth Capital International
Focus Focus VIP
Fund Fund Portfolio
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Global Growth Focus Fund, 11,094 shares
(Cost $123,661) $ 163,968 $ $
Capital Focus Fund, 3,093 shares
(Cost $29,989) 31,451
Investments in Hotchkis & Wiley Variable Trust (Note 1):
International VIP Portfolio, 22,429 shares
(Cost $223,508) 258,378
-------------------- -------------------- --------------------
Total Assets 163,968 31,451 258,378
Liabilities
Due to Merrill Lynch Life Insurance Company 48 10 76
-------------------- -------------------- --------------------
Net Assets $ 163,920 $ 31,441 $ 258,302
==================== ==================== ====================
Net Assets
Accumulation Units $ 163,920 $ 30,886 $ 258,302
Retained in Separate Account A by Merrill Lynch Life
Insurance Company (Note 5) 0 555 0
-------------------- -------------------- --------------------
Total Net Assets $ 163,920 $ 31,441 $ 258,302
==================== ==================== ====================
Units Outstanding (Note 7) 11,159 2,999 22,678
==================== ==================== ====================
Unit Value $ 14.69 $ 10.30 $ 11.39
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Mercury
V.I. U.S. 1999 ML
Large Cap Select Ten Quasar
Fund V.I. Trust Portfolio
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Mercury Asset Management V.I. Funds, Inc. (Note 1):
Mercury V.I. U.S. Large Cap Fund, 1,482 shares
(Cost $15,586) $ 17,821 $ $
Investments in Defined Asset Funds, Equity Investor Fund (Note 1):
1999 ML Select Ten V.I. Trust, 64,601 shares
(Cost $70,384) 60,595
Investments in Alliance Variable Products Series Fund, Inc (Note 1):
Quasar Portfolio, 5,912 shares
(Cost $67,387) 76,852
-------------------- -------------------- --------------------
Total Assets 17,821 60,595 76,852
Liabilities
Due to Merrill Lynch Life Insurance Company 3 18 23
-------------------- -------------------- --------------------
Net Assets $ 17,818 $ 60,577 $ 76,829
==================== ==================== ====================
Net Assets
Accumulation Units $ 11,771 $ 60,577 $ 76,829
Retained in Separate Account A by Merrill Lynch Life
Insurance Company (Note 5) 6,047 0 0
-------------------- -------------------- --------------------
Total Net Assets $ 17,818 $ 60,577 $ 76,829
==================== ==================== ====================
Units Outstanding (Note 7) 983 6,451 7,761
==================== ==================== ====================
Unit Value $ 11.98 $ 9.39 $ 9.90
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
MFS
Premier Emerging MFS
Growth Growth Research
Portfolio Series Series
(In thousands, except unit values) ==================== ==================== ====================
<S> <C> <C> <C>
Assets
Investments in Alliance Variable Products Series Fund, Inc (Note 1):
Premier Growth Portfolio, 26,506 shares
(Cost $691,335) $ 1,072,154 $ $
Investments in MFS Variable Insurance Trust (Note 1):
MFS Emerging Growth Series, 12,775 shares
(Cost $235,608) 484,688
MFS Research Series, 13,089 shares
(Cost $215,319) 305,507
-------------------- -------------------- --------------------
Total Assets 1,072,154 484,688 305,507
Liabilities
Due to Merrill Lynch Life Insurance Company 317 142 90
-------------------- -------------------- --------------------
Net Assets $ 1,071,837 $ 484,546 $ 305,417
==================== ==================== ====================
Net Assets
Accumulation Units $ 1,071,837 $ 484,546 $ 305,417
Retained in Separate Account A by Merrill Lynch Life
Insurance Company (Note 5) 0 0 0
-------------------- -------------------- --------------------
Total Net Assets $ 1,071,837 $ 484,546 $ 305,417
==================== ==================== ====================
Units Outstanding (Note 7) 42,584 17,749 17,139
==================== ==================== ====================
Unit Value $ 25.17 $ 27.30 $ 17.82
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
=========================================
AIM
AIM V.I. Capital
V.I. Value Appreciation
Fund Fund
(In thousands, except unit values) ==================== ====================
<S> <C> <C>
Assets
Investments in AIM Variable Insurance Funds, Inc. (Note 1):
AIM V.I. Value Fund, 16,276 shares
(Cost $402,394) $ 545,258 $
AIM V.I. Capital Appreciation Fund, 4,496 shares
(Cost $105,696) 159,968
-------------------- --------------------
Total Assets 545,258 159,968
Liabilities
Due to Merrill Lynch Life Insurance Company 162 47
-------------------- --------------------
Net Assets $ 545,096 $ 159,921
==================== ====================
Net Assets
Accumulation Units $ 545,096 $ 159,921
Retained in Separate Account A by Merrill Lynch Life
Insurance Company (Note 5) 0 0
-------------------- --------------------
Total Net Assets $ 545,096 $ 159,921
==================== ====================
Units Outstanding (Note 7) 26,007 8,479
==================== ====================
Unit Value $ 20.96 $ 18.86
==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Domestic High
Money Prime Current
Market Bond Income
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 19,316 $ 35,945 $ 50,612
Mortality and Expense Charges (Note 3) (5,095) (6,350) (5,742)
Administrative Charges (Note 3) (408) (508) (459)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 13,813 29,087 44,411
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 0 (5,582) (15,450)
Net Change In Unrealized Appreciation
(Depreciation) During the Year 0 (42,613) (8,706)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 0 (48,195) (24,156)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 13,813 (19,108) 20,255
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 977,544 4,318 6,512
Contract Owner Withdrawals (136,408) (44,161) (36,245)
Net Transfers In (Out) (Note 4) (806,760) 18,277 (11,325)
Contract Maintenance Charges (Note 3) (62) (119) (130)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 34,314 (21,685) (41,188)
-------------------- -------------------- --------------------
Increase (Decrease) in Amounts Retained
in Separate Account A, net 0 0 0
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 48,127 (40,793) (20,933)
Net Assets Beginning of Period 377,265 524,483 469,916
-------------------- -------------------- --------------------
Net Assets End of Period $ 425,392 $ 483,690 $ 448,983
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Special
Quality Value American
Equity Focus Balanced
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 167,734 $ 52,283 $ 30,545
Mortality and Expense Charges (Note 3) (9,273) (4,794) (1,894)
Administrative Charges (Note 3) (742) (383) (151)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 157,719 47,106 28,500
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 30,501 (3,647) 3,154
Net Change In Unrealized Appreciation
(Depreciation) During the Year 9,963 69,787 (21,359)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 40,464 66,140 (18,205)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 198,183 113,246 10,295
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 5,883 2,906 0
Contract Owner Withdrawals (69,769) (26,431) (13,176)
Net Transfers In (Out) (Note 4) (52,399) (17,171) (16,375)
Contract Maintenance Charges (Note 3) (202) (108) (48)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (116,487) (40,804) (29,599)
-------------------- -------------------- --------------------
Increase (Decrease) in Amounts Retained
in Separate Account A, net 0 0 0
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 81,696 72,442 (19,304)
Net Assets Beginning of Period 748,899 390,688 165,041
-------------------- -------------------- --------------------
Net Assets End of Period $ 830,595 $ 463,130 $ 145,737
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Natural Global Global
Resources Strategy Utility
Focus Focus Focus
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 313 $ 84,773 $ 15,040
Mortality and Expense Charges (Note 3) (175) (7,755) (1,412)
Administrative Charges (Note 3) (14) (620) (113)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 124 76,398 13,515
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (1,198) 14,199 9,554
Net Change In Unrealized Appreciation
(Depreciation) During the Year 4,175 20,188 (11,924)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 2,977 34,387 (2,370)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 3,101 110,785 11,145
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 0 4,253 0
Contract Owner Withdrawals (1,302) (50,617) (9,999)
Net Transfers In (Out) (Note 4) (2,733) (105,406) (14,750)
Contract Maintenance Charges (Note 3) (5) (215) (31)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (4,040) (151,985) (24,780)
-------------------- -------------------- --------------------
Increase (Decrease) in Amounts Retained
in Separate Account A, net 0 0 0
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (939) (41,200) (13,635)
Net Assets Beginning of Period 14,314 686,749 126,512
-------------------- -------------------- --------------------
Net Assets End of Period $ 13,375 $ 645,549 $ 112,877
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
International Global Basic
Equity Bond Value
Focus Focus Focus
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 7,966 $ 2,889 $ 163,744
Mortality and Expense Charges (Note 3) (1,865) (627) (8,572)
Administrative Charges (Note 3) (149) (50) (686)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 5,952 2,212 154,486
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (1,717) (412) 8,015
Net Change In Unrealized Appreciation
(Depreciation) During the Year 41,536 (6,979) (53,142)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 39,819 (7,391) (45,127)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 45,771 (5,179) 109,359
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 0 0 11,021
Contract Owner Withdrawals (12,706) (4,959) (42,778)
Net Transfers In (Out) (Note 4) (33,531) (9,837) 141,750
Contract Maintenance Charges (Note 3) (57) (15) (177)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (46,294) (14,811) 109,816
-------------------- -------------------- --------------------
Increase (Decrease) in Amounts Retained
in Separate Account A, net 0 0 0
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (523) (19,990) 219,175
Net Assets Beginning of Period 163,214 61,632 587,239
-------------------- -------------------- --------------------
Net Assets End of Period $ 162,691 $ 41,642 $ 806,414
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Developing
Government Capital Markets Index
Bond Focus 500
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 21,411 $ 1,710 $ 16,272
Mortality and Expense Charges (Note 3) (4,253) (778) (5,264)
Administrative Charges (Note 3) (340) (62) (421)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 16,818 870 10,587
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (3) (5,016) 39,321
Net Change In Unrealized Appreciation
(Depreciation) During the Year (27,400) 35,906 22,491
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments (27,403) 30,890 61,812
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (10,585) 31,760 72,399
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 2,843 959 14,392
Contract Owner Withdrawals (24,342) (3,593) (19,854)
Net Transfers In (Out) (Note 4) 45,493 3,201 66,848
Contract Maintenance Charges (Note 3) (54) (19) (79)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 23,940 548 61,307
-------------------- -------------------- --------------------
Increase (Decrease) in Amounts Retained
in Separate Account A, net 0 0 0
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 13,355 32,308 133,706
Net Assets Beginning of Period 324,470 53,294 323,398
-------------------- -------------------- --------------------
Net Assets End of Period $ 337,825 $ 85,602 $ 457,104
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Global
Growth Capital International
Focus Focus VIP
Fund Fund Portfolio
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 2,077 $ 1,021 $ 1,390
Mortality and Expense Charges (Note 3) (1,513) (305) (2,571)
Administrative Charges (Note 3) (121) (24) (206)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 443 692 (1,387)
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 3,667 217 (7,998)
Net Change In Unrealized Appreciation
(Depreciation) During the Year 38,799 896 39,960
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 42,466 1,113 31,962
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 42,909 1,805 30,575
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 1,856 1,809 1,660
Contract Owner Withdrawals (5,856) (745) (11,889)
Net Transfers In (Out) (Note 4) 111,126 11,852 (28,213)
Contract Maintenance Charges (Note 3) (21) (5) (37)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 107,105 12,911 (38,479)
-------------------- -------------------- --------------------
Increase (Decrease) in Amounts Retained
in Separate Account A, net (3,290) (8,750) 0
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 146,724 5,966 (7,904)
Net Assets Beginning of Period 17,196 25,475 266,206
-------------------- -------------------- --------------------
Net Assets End of Period $ 163,920 $ 31,441 $ 258,302
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Mercury
V.I. U.S. 1999 ML 1998 ML
Large Cap Select Ten Select Ten
Fund V.I. Trust V.I. Trust
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 59 $ 768 $ 142
Mortality and Expense Charges (Note 3) (34) (586) (123)
Administrative Charges (Note 3) (3) (47) (10)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 22 135 9
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 20 (1,684) 3,621
Net Change In Unrealized Appreciation
(Depreciation) During the Year 1,219 (9,789) (700)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 1,239 (11,473) 2,921
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,261 (11,338) 2,930
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 878 2,626 1,124
Contract Owner Withdrawals (90) (2,278) (236)
Net Transfers In (Out) (Note 4) 9,722 71,580 (24,734)
Contract Maintenance Charges (Note 3) 0 (8) (1)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 10,510 71,920 (23,847)
-------------------- -------------------- --------------------
Increase (Decrease) in Amounts Retained
in Separate Account A, net 6,047 (5) 0
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 17,818 60,577 (20,917)
Net Assets Beginning of Period 0 0 20,917
-------------------- -------------------- --------------------
Net Assets End of Period $ 17,818 $ 60,577 $ 0
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
MFS
Premier Emerging
Quasar Growth Growth
Portfolio Portfolio Series
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 56 $ 11,371 $ 0
Mortality and Expense Charges (Note 3) (519) (10,226) (3,492)
Administrative Charges (Note 3) (41) (818) (279)
-------------------- -------------------- --------------------
Net Investment Income (Loss) (504) 327 (3,771)
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (234) 35,237 2,757
Net Change In Unrealized Appreciation
(Depreciation) During the Year 9,879 193,858 198,193
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 9,645 229,095 200,950
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 9,141 229,422 197,179
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 1,384 21,828 7,855
Contract Owner Withdrawals (1,521) (37,931) (12,050)
Net Transfers In (Out) (Note 4) 57,478 233,121 82,702
Contract Maintenance Charges (Note 3) (7) (161) (60)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 57,334 216,857 78,447
-------------------- -------------------- --------------------
Increase (Decrease) in Amounts Retained
in Separate Account A, net 0 0 0
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 66,475 446,279 275,626
Net Assets Beginning of Period 10,354 625,558 208,920
-------------------- -------------------- --------------------
Net Assets End of Period $ 76,829 $ 1,071,837 $ 484,546
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
AIM V.I.
MFS AIM V.I. Capital
Research Value Appreciation
Series Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 2,993 $ 8,995 $ 3,374
Mortality and Expense Charges (Note 3) (3,085) (5,229) (1,386)
Administrative Charges (Note 3) (247) (418) (111)
-------------------- -------------------- --------------------
Net Investment Income (Loss) (339) 3,348 1,877
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 4,059 9,744 2,019
Net Change In Unrealized Appreciation
(Depreciation) During the Year 51,107 94,933 42,440
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 55,166 104,677 44,459
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 54,827 108,025 46,336
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 7,367 13,978 3,381
Contract Owner Withdrawals (11,018) (21,606) (5,263)
Net Transfers In (Out) (Note 4) 45,757 148,457 19,341
Contract Maintenance Charges (Note 3) (54) (79) (26)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 42,052 140,750 17,433
-------------------- -------------------- --------------------
Increase (Decrease) in Amounts Retained
in Separate Account A, net 0 0 0
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 96,879 248,775 63,769
Net Assets Beginning of Period 208,538 296,321 96,152
-------------------- -------------------- --------------------
Net Assets End of Period $ 305,417 $ 545,096 $ 159,921
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Domestic High
Money Prime Current
Market Bond Income
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 16,161 $ 31,271 $ 50,689
Mortality and Expense Charges (Note 3) (3,989) (6,148) (6,408)
Administrative Charges (Note 3) (319) (492) (513)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 11,853 24,631 43,768
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 0 (1,410) (8,728)
Net Change In Unrealized Appreciation
(Depreciation) During the Year 0 7,222 (59,393)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 0 5,812 (68,121)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 11,853 30,443 (24,353)
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 891,356 5,698 7,990
Contract Owner Withdrawals (37,546) (34,805) (34,175)
Net Transfers In (Out) (Note 4) (783,504) 61,038 15,041
Contract Maintenance Charges (Note 3) (56) (122) (143)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 70,250 31,809 (11,287)
-------------------- -------------------- --------------------
Increase in Amounts Retained
in Separate Account A, net 0 0 0
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 82,103 62,252 (35,640)
Net Assets Beginning of Period 295,162 462,231 505,556
-------------------- -------------------- --------------------
Net Assets End of Period $ 377,265 $ 524,483 $ 469,916
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Special
Quality Value American
Equity Focus Balanced
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 107,493 $ 97,154 $ 19,199
Mortality and Expense Charges (Note 3) (9,379) (5,215) (2,094)
Administrative Charges (Note 3) (750) (417) (168)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 97,364 91,522 16,937
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 29,271 (928) 2,921
Net Change In Unrealized Appreciation
(Depreciation) During the Year (28,226) (119,246) (967)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 1,045 (120,174) 1,954
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 98,409 (28,652) 18,891
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 7,301 4,213 0
Contract Owner Withdrawals (46,903) (23,159) (11,546)
Net Transfers In (Out) (Note 4) (68,149) 18,653 (15,077)
Contract Maintenance Charges (Note 3) (223) (132) (55)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (107,974) (425) (26,678)
-------------------- -------------------- --------------------
Increase in Amounts Retained
in Separate Account A, net 0 0 0
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (9,565) (29,077) (7,787)
Net Assets Beginning of Period 758,464 419,765 172,828
-------------------- -------------------- --------------------
Net Assets End of Period $ 748,899 $ 390,688 $ 165,041
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Natural Global Global
Resources Strategy Utility
Focus Focus Focus
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 3,760 $ 126,486 $ 9,038
Mortality and Expense Charges (Note 3) (238) (9,206) (1,520)
Administrative Charges (Note 3) (19) (736) (122)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 3,503 116,544 7,396
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (2,144) 4,482 7,074
Net Change In Unrealized Appreciation
(Depreciation) During the Year (4,481) (70,282) 10,189
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments (6,625) (65,800) 17,263
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (3,122) 50,744 24,659
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 0 7,179 0
Contract Owner Withdrawals (1,537) (49,358) (9,128)
Net Transfers In (Out) (Note 4) (5,715) (98,000) (12,334)
Contract Maintenance Charges (Note 3) (7) (267) (37)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (7,259) (140,446) (21,499)
-------------------- -------------------- --------------------
Increase in Amounts Retained
in Separate Account A, net 0 0 0
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (10,381) (89,702) 3,160
Net Assets Beginning of Period 24,695 776,451 123,352
-------------------- -------------------- --------------------
Net Assets End of Period $ 14,314 $ 686,749 $ 126,512
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
International Global Basic
Equity Bond Value
Focus Focus Focus
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 31,424 $ 3,799 $ 84,619
Mortality and Expense Charges (Note 3) (3,432) (809) (7,457)
Administrative Charges (Note 3) (275) (65) (597)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 27,717 2,925 76,565
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (8,147) (685) 12,750
Net Change In Unrealized Appreciation
(Depreciation) During the Year 8,114 4,544 (48,970)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments (33) 3,859 (36,220)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 27,684 6,784 40,345
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 1,406 378 12,716
Contract Owner Withdrawals (15,579) (4,951) (29,836)
Net Transfers In (Out) (Note 4) (227,630) (10,084) 29,987
Contract Maintenance Charges (Note 3) (92) (19) (172)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (241,895) (14,676) 12,695
-------------------- -------------------- --------------------
Increase in Amounts Retained
in Separate Account A, net 0 0 0
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (214,211) (7,892) 53,040
Net Assets Beginning of Period 377,425 69,524 534,199
-------------------- -------------------- --------------------
Net Assets End of Period $ 163,214 $ 61,632 $ 587,239
==================== ==================== ====================
(/Table>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Developing
Government Capital Markets Index
Bond Focus 500
Fund Fund Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 12,677 $ 1,485 $ 11,214
Mortality and Expense Charges (Note 3) (2,798) (1,193) (3,333)
Administrative Charges (Note 3) (224) (95) (267)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 9,655 197 7,614
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 498 (18,237) 11,102
Net Change In Unrealized Appreciation
(Depreciation) During the Year 4,897 (19,779) 40,479
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 5,395 (38,016) 51,581
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 15,050 (37,819) 59,195
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 4,989 1,191 10,033
Contract Owner Withdrawals (10,790) (4,286) (9,963)
Net Transfers In (Out) (Note 4) 148,353 (25,327) 85,628
Contract Maintenance Charges (Note 3) (37) (30) (53)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 142,515 (28,452) 85,645
-------------------- -------------------- --------------------
Increase in Amounts Retained
in Separate Account A, net 0 0 0
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 157,565 (66,271) 144,840
Net Assets Beginning of Period 166,905 119,565 178,558
-------------------- -------------------- --------------------
Net Assets End of Period $ 324,470 $ 53,294 $ 323,398
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
Global
Growth Capital International
Focus Focus VIP
Fund Fund Portfolio
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 0 $ 0 $ 1,091
Mortality and Expense Charges (Note 3) (56) (64) (1,588)
Administrative Charges (Note 3) (5) (5) (127)
-------------------- -------------------- --------------------
Net Investment Income (Loss) (61) (69) (624)
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) (3) (30) (224)
Net Change In Unrealized Appreciation
(Depreciation) During the Year 1,262 782 (5,089)
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 1,259 752 (5,313)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,198 683 (5,937)
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 687 1,568 639
Contract Owner Withdrawals (102) (191) (4,618)
Net Transfers In (Out) (Note 4) 12,168 14,632 276,146
Contract Maintenance Charges (Note 3) (1) (1) (24)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 12,752 16,008 272,143
-------------------- -------------------- --------------------
Increase in Amounts Retained
in Separate Account A, net 3,246 8,784 0
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 17,196 25,475 266,206
Net Assets Beginning of Period 0 0 0
-------------------- -------------------- --------------------
Net Assets End of Period $ 17,196 $ 25,475 $ 266,206
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
1998 ML Premier
Select Ten Quasar Growth
V.I. Trust Portfolio Portfolio
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 119 $ 106 $ 386
Mortality and Expense Charges (Note 3) (73) (44) (5,069)
Administrative Charges (Note 3) (6) (3) (406)
-------------------- -------------------- --------------------
Net Investment Income (Loss) 40 59 (5,089)
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 0 (209) 1,828
Net Change In Unrealized Appreciation
(Depreciation) During the Year 700 (414) 163,301
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 700 (623) 165,129
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 740 (564) 160,040
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 1,425 745 15,718
Contract Owner Withdrawals (42) (72) (13,936)
Net Transfers In (Out) (Note 4) 18,796 10,246 230,581
Contract Maintenance Charges (Note 3) (2) (1) (86)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 20,177 10,918 232,277
-------------------- -------------------- --------------------
Increase in Amounts Retained
in Separate Account A, net 0 0 0
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 20,917 10,354 392,317
Net Assets Beginning of Period 0 0 233,241
-------------------- -------------------- --------------------
Net Assets End of Period $ 20,917 $ 10,354 $ 625,558
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
==============================================================
MFS
Emerging MFS AIM V.I.
Growth Research Value
Series Series Fund
(In thousands) ==================== ==================== ====================
<S> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 1,213 $ 3,414 $ 13,521
Mortality and Expense Charges (Note 3) (1,883) (2,039) (2,363)
Administrative Charges (Note 3) (151) (163) (189)
-------------------- -------------------- --------------------
Net Investment Income (Loss) (821) 1,212 10,969
-------------------- -------------------- --------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 485 2,819 273
Net Change In Unrealized Appreciation
(Depreciation) During the Year 44,127 28,946 42,994
-------------------- -------------------- --------------------
Net Gain (Loss) on Investments 44,612 31,765 43,267
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 43,791 32,977 54,236
-------------------- -------------------- --------------------
Contract Transactions:
Premiums Received from Contract Owners 5,523 6,243 8,264
Contract Owner Withdrawals (4,599) (6,902) (6,929)
Net Transfers In (Out) (Note 4) 89,495 68,028 138,264
Contract Maintenance Charges (Note 3) (39) (41) (43)
-------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions 90,380 67,328 139,556
-------------------- -------------------- --------------------
Increase in Amounts Retained
in Separate Account A, net 0 0 0
-------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets 134,171 100,305 193,792
Net Assets Beginning of Period 74,749 108,233 102,529
-------------------- -------------------- --------------------
Net Assets End of Period $ 208,920 $ 208,538 $ 296,321
==================== ==================== ====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998 (continued)
================================================================================
<TABLE>
<CAPTION>
Divisions Investing In
=====================
AIM V.I.
Capital
Appreciation
Fund
(In thousands) ====================
<S> <C>
Investment Income (Loss):
Reinvested Dividends (Note 2) $ 2,566
Mortality and Expense Charges (Note 3) (960)
Administrative Charges (Note 3) (77)
--------------------
Net Investment Income (Loss) 1,529
--------------------
Realized and Unrealized Gains (Losses)
On Investments:
Net Realized Gains (Losses) (Note 2) 1,802
Net Change In Unrealized Appreciation
(Depreciation) During the Year 7,471
--------------------
Net Gain (Loss) on Investments 9,273
--------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 10,802
--------------------
Contract Transactions:
Premiums Received from Contract Owners 3,463
Contract Owner Withdrawals (2,913)
Net Transfers In (Out) (Note 4) (16,530)
Contract Maintenance Charges (Note 3) (20)
--------------------
Net Increase (Decrease) in Net Assets
Resulting from Contract Transactions (16,000)
--------------------
Increase in Amounts Retained
in Separate Account A, net 0
--------------------
Total Increase (Decrease) in Net Assets (5,198)
Net Assets Beginning of Period 101,350
--------------------
Net Assets End of Period $ 96,152
====================
</TABLE>
See notes to financial statements
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
MERRILL LYNCH LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Merrill Lynch Life Variable Annuity Separate Account A
("Separate Account A"), 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"). Separate Account A is governed by Arkansas
State Insurance Law. Merrill Lynch Life is an indirect
wholly owned subsidiary of Merrill Lynch & Co., Inc.
("Merrill Lynch & Co."). Separate Account A is
registered as a unit investment trust under the
Investment Company Act of 1940 and consists of twenty-six
investment divisions. The investment divisions are as
follows:
- Merrill Lynch Variable Series Funds, Inc.: Seventeen
of the investment divisions each invest in the
securities of a single mutual fund portfolio of the
Merrill Lynch Variable Series Funds, Inc. ("Merrill
Variable Funds"). The investment advisor to the funds
of the Merrill Variable Funds is Merrill Lynch Asset
Management, L.P. ("MLAM), an indirec t subsidiary of
Merrill Lynch & Co. Effective following the close of
business on June 5, 1998, the International Equity
Focus Fund and Global Bond Focus Fund were closed to
allocations of premiums and contract value. Three
other investment divisions; Natural Resources Focus
Fund, American Balanced Fund and Global Utility Focus
Fund have been closed to allocations of premiums and
contract value since 1996.
- Hotchkis & Wiley Variable Trust: One of the investment
divisions invests in the securities of a single mutual
fund portfolio of the Hotchkis & Wiley Variable Trust
("H&W Trust"). The investment advisor to the fund
of the H&W Trust is Hotchkis & Wiley, a division of
MLAM.
- Mercury Asset Management V.I. Funds, Inc.: One of the
investment divisions invests in the securities of a
single mutual fund portfolio of the Mercury Asset
Management V.I. Funds, Inc. ("Mercury Funds"). The
investment advisor to the fund of the Mercury Funds is
Mercury Asset Management International, Ltd., a
division of Merrill Lynch & Co. This investment
division commenced operations on June 18, 1999.
- Defined Asset Funds, Equity Investor Fund: One of
the investment divisions invests in the securities of
a single unit investment trust of the Equity Investor
Fund. Equity Investor Fund is sponsored by Merrill
Lynch, Pierce, Fenner & Smith, Incorporated, a wholly
owned subsidiary of Merrill Lynch & Co. The unit
investment trust of the Equity Investor Fund has
annual rollovers that occur on or about May 1 of each
year.
- Alliance Variable Products Series Fund, Inc.: Two
investment divisions each invest in the securities of
a single mutual fund portfolio of the Alliance
Variable Products Series Fund, Inc. ("Alliance
Variable Fund"). The investment advisor to the funds
of the Alliance Variable Fund is Alliance Capital
Management, L.P.
- MFS Variable Insurance Trust: Two of the investment
divisions each invest in the securities of a single
mutual fund portfolio of the MFS Variable Insurance
Trust ("MFS Variable Trust"). The investment advisor
to the funds of the MFS Variable Trust is
Massachusetts Financial Services Company.
- AIM Variable Insurance Funds, Inc.: Two of the
investment divisions each invest in the securities of
a single mutual fund portfolio of the AIM Variable
Insurance Funds, Inc. ("AIM Variable Funds"). The
investment advisor to the funds of the AIM Variable
Funds is AIM Advisors, Inc.
The assets of Separate Account A are registered in the
name of Merrill Lynch Life. The portion of Separate
Account A's assets applicable to the Contracts are not
chargeable with liabilities arising out of any other
business Merrill Lynch Life may conduct.
The change in net assets accumulated in Separate Account
A 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.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements included herein have been
prepared in accordance with generally accepted accounting
principles for variable annuity separate accounts
registered as unit investment trusts. The preparation of
financial statements in conformity with generally
accepted accounting principles requires management to
make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Investments of the investment divisions are included in
the statement of assets and liabilities at the net asset
value of the shares held in the underlying funds, which
value their investments at market value.
Dividend income is recognized on the ex-dividend date.
All dividends are automatically reinvested.
Realized gains and losses on the sales of investments are
computed on the first in first out method.
Investment transactions are recorded on the trade date.
The operations of Separate Account A 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 Separate Account A for any Federal
income tax attributable to Separate Account A. No charge
is currently being made against Separate Account A 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 that is attributable to
Separate Account A if the law is changed. Charges for
state and local taxes, if any, attributable to Separate
Account A may also be made.
3. CHARGES AND FEES
Merrill Lynch Life assumes mortality and expense risks
related to Contracts investing in Separate Account A and
deducts daily charges at a rate of 1.25% (on an annual
basis) of the net assets of Separate Account A to cover
these risks.
An administration charge of .10% (on an annual basis) is
deducted daily from the net asset value of Separate
Account A. This charge is made to reimburse Merrill Lynch
Life for costs associated with the establishment and
administration of Separate Account A.
Merrill Lynch Life deducts a contract maintenance charge
of $40 for each Contract on each Contract's anniversary
that occurs on or prior to the annuity date. It is also
deducted when the Contract is surrendered if it is
surrendered on any date other than a contract anniversary
date. The contract maintenance charge is borne by
Contract owners by redeeming accumulation units with a
value equal to the charge. This charge is waived on all
Contracts with a Contract value equal to or greater than
$50,000 on the date the charge would otherwise be
deducted, and in certain circumstances where multiple
contracts are owned.
Contract owners may make up to six transfers among the
Separate Account A divisions per contract year without
charge. Certain transfers from the Equity Investor Fund
do not count towards the six transfers. Additional
transfers may be permitted at a charge of $25 per
transfer.
4. NET TRANSFERS
Net transfers include transfers between Separate Account
A investment divisions, as well as transfers from
Separate Account A investment divisions to the Reserve
Assets Fund investment division of Merrill Lynch Life
Variable Annuity Separate Account B.
5. INVESTMENTS IN SEPARATE ACCOUNT
The $6.6 million in net assets retained by Merrill Lynch
Life in Separate Account A represent an investment by
Merrill Lynch Life in certain investment divisions to
facilitate the establishment of those investment
divisions. Merrill Lynch Life's investment is not subject
to charges for mortality and expense risks and may be
transferred to Merrill Lynch Life's General Account.
6. UNIT VALUES
The following is a summary of unit values and units
outstanding for variable annuity contracts and the
expenses as a percentage of average net assets, excluding
expenses of the underlying funds for each of the five
years in the period ended December 31, 1999 or lesser
time period, if applicable. For all funds excluding the
Domestic Money Market Fund the total return calculations
represent the one year total return (or from inception to
December 31 if less than one year) and do not reflect the
contingent deferred sales charge. Total return
calculations for the Domestic Money Market Fund represent
the effective yield for the seven day period ended
December 31.
Domestic Money Market Fund
-------------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 33,182 $12.82 $425,392 1.35% 4.02%
1998 30,449 12.39 377,265 1.35 3.41
1997 24,720 11.94 295,161 1.35 4.05
1996 22,092 11.50 254,057 1.35 3.76
1995 25,643 11.09 284,378 1.35 3.89
Prime Bond Fund
--------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 32,859 $14.72 $483,690 1.35% -3.76%
1998 34,325 15.28 524,483 1.35 6.30
1997 32,189 14.36 462,231 1.35 7.07
1996 34,996 13.40 468,950 1.35 0.80
1995 31,554 13.29 419,350 1.35 18.34
High Current Income Fund
------------------------ Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 26,536 $16.92 $448,983 1.35% 4.43%
1998 29,043 16.18 469,916 1.35 -4.48
1997 29,862 16.93 505,557 1.35 9.40
1996 24,632 15.46 380,807 1.35 9.57
1995 23,079 14.08 324,951 1.35 15.62
Quality Equity Fund
------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 28,750 $28.89 $830,595 1.35% 29.54%
1998 33,613 22.28 748,899 1.35 13.92
1997 38,816 19.54 758,463 1.35 21.92
1996 42,909 16.01 686,968 1.35 15.77
1995 39,846 13.77 548,685 1.35 21.29
Special Value Focus Fund
------------------------ Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 22,647 $20.45 $463,130 1.35% 32.22%
1998 25,287 15.45 390,688 1.35 -7.85
1997 25,061 16.75 419,765 1.35 10.11
1996 26,282 15.20 399,487 1.35 6.56
1995 21,158 14.25 301,496 1.35 43.80
American Balanced Fund
---------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 7,254 $20.09 $145,737 1.35% 7.16%
1998 8,812 18.73 165,041 1.35 11.93
1997 10,337 16.72 172,828 1.35 15.42
1996 12,954 14.47 187,443 1.35 7.95
1995 13,988 13.37 187,025 1.35 19.29
Natural Resources Focus Fund
---------------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 1,055 $12.68 $13,375 1.35% 24.94%
1998 1,412 10.14 14,314 1.35 -16.52
1997 2,034 12.14 24,695 1.35 -13.78
1996 2,972 14.06 41,784 1.35 10.70
1995 3,137 12.56 39,395 1.35 12.22
Global Strategy Focus Fund
-------------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 31,676 $20.38 $645,549 1.35% 19.63%
1998 40,350 17.02 686,749 1.35 7.31
1997 48,987 15.85 776,452 1.35 10.33
1996 54,188 14.35 777,595 1.35 11.33
1995 39,315 12.85 505,203 1.35 9.21
Global Utility Focus Fund
------------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 5,103 $22.12 $112,877 1.35% 11.01%
1998 6,354 19.91 126,512 1.35 22.27
1997 7,582 16.27 123,352 1.35 24.09
1996 10,021 13.10 131,272 1.35 10.50
1995 11,837 11.75 139,087 1.35 23.45
International Equity Focus Fund
------------------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 10,055 $16.18 $162,691 1.35% 35.65%
1998 13,704 11.91 163,214 1.35 6.25
1997 33,699 11.20 377,426 1.35 -5.93
1996 26,447 11.90 314,718 1.35 4.49
1995 21,726 11.31 245,727 1.35 4.54
Global Bond Focus Fund
---------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 3,372 $12.35 $ 41,642 1.35% -9.50%
1998 4,522 13.63 61,632 1.35 11.00
1997 5,666 12.27 69,523 1.35 0.48
1996 7,187 12.20 87,677 1.35 6.21
1995 6,621 11.45 75,812 1.35 15.28
Basic Value Focus Fund
---------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 32,438 $24.86 $806,414 1.35% 19.37%
1998 28,219 20.81 587,239 1.35 7.87
1997 27,722 19.27 534,199 1.35 18.89
1996 28,054 16.19 454,195 1.35 18.05
1995 20,469 13.60 278,373 1.35 24.62
Government Bond Fund
-------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 26,087 $12.95 $337,825 1.35% -3.21%
1998 24,287 13.36 324,470 1.35 7.20
1997 13,406 12.45 166,905 1.35 7.32
1996 7,173 11.59 83,139 1.35 1.40
1995 3,418 11.42 39,033 1.35 13.15
Developing Capital Markets Focus Fund
------------------------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 8,168 $10.48 $ 85,602 1.35% 63.14%
1998 8,301 6.42 53,294 1.35 -30.40
1997 12,982 9.21 119,564 1.35 -7.88
1996 7,961 9.99 79,527 1.35 8.14
1995 4,913 9.16 44,999 1.35 -1.74
Index 500 Fund
-------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 22,901 $19.96 $457,104 1.35% 18.77%
1998 19,261 16.79 323,398 1.35 26.43
1997 13,456 13.27 178,558 1.35 30.91
1996 33 10.12 334 1.35 1.14
Global Growth Focus Fund
------------------------ Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 11,159 $14.69 $163,920 1.35% 36.70%
1998 1,299 10.74 13,950 1.35 13.02
Capital Focus Fund
------------------ Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 2,999 $10.30 $30,886 1.35% 6.30%
1998 1,724 9.68 16,691 1.35 -5.60
International VIP Portfolio
--------------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 22,678 $11.39 $258,302 1.35% 19.93%
1998 28,051 9.49 266,206 1.35 -8.92
Mercury V.I. U.S. Large Cap Fund
-------------------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 983 $11.98 $11,771 1.35% 39.80%
1999 ML Select 10 V.I. Trust
---------------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 6,451 $ 9.39 $60,577 1.35% -7.34%
1998 ML Select 10 V.I. Trust
---------------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1998 2,067 $10.12 $20,917 1.35% 1.90%
Quasar Portfolio
---------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 7,761 $ 9.90 $76,829 1.35% 15.39%
1998 1,208 8.57 10,354 1.35 -23.80
Premier Growth Portfolio
------------------------ Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 42,584 $25.17 $1,071,837 1.35% 30.41%
1998 32,446 19.28 625,558 1.35 45.84
1997 17,657 13.21 233,244 1.35 31.95
1996 15 10.00 146 1.35 -0.08
MFS Emerging Growth Series
-------------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 17,749 $27.30 $484,546 1.35% 74.17%
1998 13,341 15.66 208,920 1.35 32.23
1997 6,319 11.83 74,749 1.35 20.15
1996 24 9.83 235 1.35 -1.75
MFS Research Series
------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 17,139 $17.82 $305,417 1.35% 22.26%
1998 14,323 14.56 208,538 1.35 21.61
1997 9,050 11.96 108,233 1.35 18.53
1996 25 10.08 253 1.35 0.70
AIM V.I. Value Fund
------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 26,007 $20.96 $545,096 1.35% 28.03%
1998 18,124 16.35 296,321 1.35 30.50
1997 8,189 12.52 102,528 1.35 21.91
1996 30 10.26 306 1.35 2.49
AIM V.I. Capital Appreciation Fund
---------------------------------- Expenses
Net Assets as a % of
--------------------- Average Total
December 31, Units Unit Value (000's) Net Assets Return
-----------------------------------------------------------------
1999 8,479 $18.86 $159,921 1.35% 42.53%
1998 7,273 13.22 96,152 1.35 17.59
1997 9,025 11.23 101,349 1.35 11.87
1996 53 10.03 532 1.35 0.16
7. UNITS ISSUED AND REDEEMED
Units issued and redeemed by Separate Account A during 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
Domestic High Special
Money Prime Current Quality Value
Market Bond Income Equity Focus
Fund Fund Fund Fund Fund
(In thousands) =============== =============== =============== =============== ===============
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1998 24,720 32,189 29,862 38,816 25,061
Activity during 1998:
Issued 74,827 6,239 4,841 1,478 3,804
Redeemed (69,098) (4,103) (5,660) (6,681) (3,578)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1998 30,449 34,325 29,043 33,613 25,287
Activity during 1999:
Issued 78,933 3,073 3,049 805 2,304
Redeemed (76,200) (4,539) (5,556) (5,668) (4,944)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1999 33,182 32,859 26,536 28,750 22,647
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Natural Global Global International
American Resources Strategy Utility Equity
Balanced Focus Focus Focus Focus
Fund Fund Fund Fund Fund
(In thousands) =============== =============== =============== =============== ===============
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1998 10,337 2,034 48,987 7,582 33,699
Activity during 1998:
Issued 27 7 1,032 17 1,773
Redeemed (1,552) (629) (9,669) (1,245) (21,768)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1998 8,812 1,412 40,350 6,354 13,704
Activity during 1999:
Issued 35 6 535 35 32
Redeemed (1,593) (363) (9,209) (1,286) (3,681)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1999 7,254 1,055 31,676 5,103 10,055
=============== =============== =============== =============== ===============
</TABLE>
7. UNITS ISSUED AND REDEEMED (continued)
<TABLE>
<CAPTION>
Global Basic Developing
Bond Value Government Capital Markets Index
Focus Focus Bond Focus 500
Fund Fund Fund Fund Fund
(In thousands) =============== =============== =============== =============== ===============
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1998 5,666 27,722 13,406 12,982 13,456
Activity during 1998:
Issued 135 4,570 12,360 1,337 10,293
Redeemed (1,279) (4,073) (1,479) (6,018) (4,488)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1998 4,522 28,219 24,287 8,301 19,261
Activity during 1999:
Issued 15 7,623 5,195 2,077 11,236
Redeemed (1,165) (3,404) (3,395) (2,210) (7,596)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1999 3,372 32,438 26,087 8,168 22,901
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Global Mercury
Growth Capital International V.I. U.S 1999 ML
Focus Focus VIP Large Cap Select Ten
Fund Fund Portfolio Fund V.I. Trust
(In thousands) =============== =============== =============== =============== ===============
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1998 0 0 0 0 0
Activity during 1998:
Issued 1,387 1,808 28,983 0 0
Redeemed (88) (84) (932) 0 0
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1998 1,299 1,724 28,051 0 0
Activity during 1999:
Issued 14,639 1,587 9,251 1,016 9,873
Redeemed (4,779) (312) (14,624) (33) (3,422)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1999 11,159 2,999 22,678 983 6,451
=============== =============== =============== =============== ===============
</TABLE>
7. UNITS ISSUED AND REDEEMED (continued)
<TABLE>
<CAPTION>
MFS
1998 ML Premier Emerging MFS
Select Ten Quasar Growth Growth Research
V.I. Trust Portfolio Portfolio Series Series
(In thousands) =============== =============== =============== =============== ===============
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1998 0 0 17,657 6,319 9,050
Activity during 1998:
Issued 2,082 1,294 16,166 7,643 7,142
Redeemed (15) (86) (1,377) (621) (1,869)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1998 2,067 1,208 32,446 13,341 14,323
Activity during 1999:
Issued 1,445 6,891 15,556 5,519 4,386
Redeemed (3,512) (338) (5,418) (1,111) (1,570)
--------------- --------------- --------------- --------------- ---------------
Outstanding at December 31, 1999 0 7,761 42,584 17,749 17,139
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
AIM V.I.
AIM V.I. Capital
Value Appreciation
Fund Fund
(In thousands) =============== ===============
<S> <C> <C>
Outstanding at January 1, 1998 8,189 9,025
Activity during 1998:
Issued 10,670 2,327
Redeemed (735) (4,079)
--------------- ---------------
Outstanding at December 31, 1998 18,124 7,273
Activity during 1999:
Issued 10,538 2,069
Redeemed (2,655) (863)
--------------- ---------------
Outstanding at December 31, 1999 26,007 8,479
=============== ===============
</TABLE>
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, 1999
and 1998, and the related statements of earnings, comprehensive
income, stockholder's equity, and cash flows for each of the
three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Company at
December 31, 1999 and 1998, and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted
accounting principles.
February 28, 2000
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
(Dollars in thousands, except common stock par value and shares)
<TABLE>
<CAPTION>
ASSETS 1999 1998
- ------ ------------ ------------
<S> <C> <C>
INVESTMENTS:
Fixed maturity securities, at estimated fair value
(amortized cost: 1999 - $2,228,921; 1998 - $2,504,599) $ 2,138,335 $ 2,543,097
Equity securities, at estimated fair value
(cost: 1999 - $214,153; 1998 - $162,710) 186,575 158,591
Trading account securities, at estimated fair value 22,212 17,280
Real estate held-for-sale 20,072 25,960
Policy loans on insurance contracts 1,159,163 1,139,456
------------ -----------
Total Investments 3,526,357 3,884,384
CASH AND CASH EQUIVALENTS 92,181 95,377
ACCRUED INVESTMENT INCOME 73,167 73,459
DEFERRED POLICY ACQUISITION COSTS 475,915 405,640
FEDERAL INCOME TAXES - DEFERRED 37,383 9,403
REINSURANCE RECEIVABLES 4,194 2,893
AFFILIATED RECEIVABLES - NET 287 -
RECEIVABLES FROM SECURITIES SOLD 566 14,938
OTHER ASSETS 47,437 46,512
SEPARATE ACCOUNTS ASSETS 12,860,562 10,571,489
------------ ------------
TOTAL ASSETS $17,118,049 $15,104,095
============ ============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY 1999 1998
- ------------------------------------ ------------ ------------
<S> <C> <C>
LIABILITIES:
POLICYHOLDER LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 3,587,867 $ 3,816,744
Claims and claims settlement expenses 85,696 63,925
------------ ------------
Total policyholder liabilities and accruals 3,673,563 3,880,669
OTHER POLICYHOLDER FUNDS 25,095 20,802
LIABILITY FOR GUARANTY FUND ASSESSMENTS 14,889 13,864
FEDERAL INCOME TAXES - CURRENT 12,806 15,840
AFFILIATED PAYABLES - NET - 822
PAYABLES FOR SECURITIES PURCHASED 339 10,541
UNEARNED POLICY CHARGE REVENUE 77,663 55,235
OTHER LIABILITIES 25,868 24,273
SEPARATE ACCOUNTS LIABILITIES 12,853,960 10,559,459
------------ ------------
Total Liabilities 16,684,183 14,581,505
------------ ------------
STOCKHOLDER'S EQUITY:
Common stock ($10 par value; authorized: 1,000,000 shares;
issued and outstanding: 1999 - 250,000 shares,
1998 - 200,000 shares) 2,500 2,000
Additional paid-in capital 347,324 347,324
Retained earnings 134,127 173,496
Accumulated other comprehensive loss (50,085) (230)
------------ ------------
Total Stockholder's Equity 433,866 522,590
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $17,118,049 $15,104,095
============ ============
</TABLE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 253,835 $ 272,038 $ 308,702
Net realized investment gains 8,875 12,460 13,289
Policy charge revenue 233,029 197,662 178,933
------------ ------------- ------------
Total Revenues 495,739 482,160 500,924
------------ ------------- ------------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 175,839 195,676 209,542
Market value adjustment expense 2,400 5,528 4,079
Policy benefits (net of reinsurance recoveries: 1999 - $14,175;
1998 - $9,761; 1997 - $10,439) 32,983 31,891 27,029
Reinsurance premium ceded 21,691 19,972 17,879
Amortization of deferred policy acquisition costs 65,607 44,835 72,111
Insurance expenses and taxes 53,377 51,735 49,105
------------ ------------ ------------
Total Benefits and Expenses 351,897 349,637 379,745
------------ ------------ ------------
Earnings Before Federal Income Tax Provision 143,842 132,523 121,179
FEDERAL INCOME TAX PROVISION (BENEFIT):
Current 48,846 40,535 52,705
Deferred (1,135) (773) (12,261)
------------ ------------ ------------
Total Federal Income Tax Provision 47,711 39,762 40,444
------------ ------------ ------------
NET EARNINGS $ 96,131 $ 92,761 $ 80,735
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
NET EARNINGS $ 96,131 $ 92,761 $ 80,735
------------ ------------ ------------
OTHER COMPREHENSIVE INCOME (LOSS):
Net unrealized gains (losses) on available-for-sale securities:
Net unrealized holding gains (losses) arising during the period (143,202) (31,718) 22,347
Reclassification adjustment for gains included in net earnings (8,347) (15,932) (12,390)
------------ ------------ ------------
Net unrealized gains (losses) on investment securities (151,549) (47,650) 9,957
Adjustments for:
Policyholder liabilities 31,959 14,483 10,094
Deferred policy acquisition costs 42,890 5,129 (822)
Deferred federal income taxes 26,845 9,813 (6,730)
------------ ------------ ------------
Total other comprehensive income (loss), net of tax (49,855) (18,225) 12,499
------------ ------------ ------------
COMPREHENSIVE INCOME $ 46,276 $ 74,536 $ 93,234
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
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, 1999, 1998 AND 1997
(Dollars in thousands, except common stock par value and shares)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Retained comprehensive stockholder's
stock capital earnings income (loss) equity
----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $ 2,000 $ 402,937 $ 79,387 $ 5,496 $ 489,820
Dividend to Parent (55,613) (79,387) (135,000)
Net earnings 80,735 80,735
Other comprehensive income, net of tax 12,499 12,499
----------- ----------- ----------- ------------- -------------
BALANCE, DECEMBER 31, 1997 2,000 347,624 80,735 17,995 448,054
Net earnings 92,761 92,761
Other comprehensive loss, net of tax (18,225) (18,225)
----------- ----------- ----------- ------------- -------------
BALANCE, DECEMBER 31, 1998 2,000 347,324 173,496 (230) 522,590
Stock dividend paid to parent
($10 par value, 500 shares) 500 (500) -
Cash dividend paid to parent (135,000) (135,000)
Net earnings 96,131 96,131
Other comprehensive loss, net of tax (49,855) (49,855)
----------- ----------- ----------- ------------- -------------
BALANCE, DECEMBER 31, 1999 $ 2,500 $ 347,324 $ 134,127 $ (50,085) $ 433,866
=========== =========== =========== ============= =============
</TABLE>
See accompanying notes to financial statements.
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, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 96,131 $ 92,761 $ 80,735
Noncash items included in earnings:
Amortization of deferred policy acquisition costs 65,607 44,835 72,111
Capitalization of policy acquisition costs (92,992) (80,241) (71,577)
Amortization (accretion) of investments (1,649) (5,350) (4,672)
Interest credited to policyholders' account balances 175,839 195,676 209,542
Benefit for deferred Federal income tax (1,135) (773) (12,261)
(Increase) decrease in operating assets:
Trading account securities (154) (287) (14,928)
Accrued investment income 292 4,765 7,962
Affiliated receivables (287) 166 (166)
Other (2,230) 1,565 (5,470)
Increase (decrease) in operating liabilities:
Claims and claims settlement expenses 21,771 13,351 10,908
Other policyholder funds 4,293 (6,358) 7,740
Liability for guaranty fund assessments 1,025 (1,510) (3,399)
Federal income taxes - current (3,034) (8,598) 3,470
Affiliated payables (822) 822 (6,164)
Unearned policy charge revenue 22,428 23,133 11,269
Other 1,595 1,941 5,922
Other operating activities:
Net realized investment gains (excluding gains on cash and
cash equivalents) (8,892) (12,460) (13,289)
------------ ------------ ------------
Net cash and cash equivalents provided by operating activities 277,786 263,438 277,733
------------ ------------ ------------
Cash Flow From Investing Activities:
Proceeds from (payments for):
Sales of available-for-sale securities 595,836 893,619 846,041
Maturities of available-for-sale securities 378,914 451,759 595,745
Purchases of available-for-sale securities (748,436) (1,028,086) (1,156,222)
Mortgage loans principal payments received - - 68,864
Purchases of mortgage loans - - (5,375)
Sales of real estate held-for-sale 13,282 14,135 6,060
Policy loans on insurance contracts (19,707) (21,317) (26,068)
Recapture of investment in separate accounts 12,267 - 11,026
Investment in separate accounts (5,381) (12,000) (21)
------------ ------------ ------------
Net cash and cash equivalents provided by investing activities 226,775 298,110 340,050
------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements. (Continued)
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, 1999, 1998 AND 1997
(Continued) (Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Financing Activities:
Proceeds from (payments for):
Dividends paid to parent $ (135,000) $ - $ (135,000)
Policyholder deposits 1,196,120 1,042,509 1,101,934
Policyholder withdrawals (including transfers to/from separate (1,568,877) (1,595,068) (1,593,320)
accounts) ------------ ------------ ------------
Net cash and cash equivalents used by financing activities: (507,757) (552,559) (626,386)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,196) 8,989 (8,603)
CASH AND CASH EQUIVALENTS
Beginning of year 95,377 86,388 94,991
------------ ------------ ------------
End of year $ 92,181 $ 95,377 $ 86,388
============ ============ ============
Supplementary Disclosure of Cash Flow Information:
Cash paid to affiliates for:
Federal income taxes $ 51,880 $ 49,133 $ 49,235
Interest 688 860 842
</TABLE>
See accompanying notes to financial statements.
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
Description of Business: 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 including variable life insurance, variable annuities,
market value adjusted annuities and immediate annuities. The
Company is currently licensed to sell insurance in forty-nine
states, the District of Columbia, Puerto Rico, 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 broker-dealer
subsidiary of Merrill Lynch & Co.
Basis of Reporting: The accompanying financial statements have
been prepared in conformity with generally accepted accounting
principles and prevailing industry practices, both of which
require management to make estimates that affect the reported
amounts and disclosure of contingencies in the financial
statements. Actual results could differ from those estimates.
For the purpose of reporting cashflows, cash and cash
equivalents include cash on hand and on deposit and short-term
investments with original maturities of three months or less.
To facilitate comparisons with the current year, certain
amounts in the prior years have been reclassified.
Revenue Recognition: Revenues for the Company's interest-
sensitive life, interest-sensitive annuity, variable life and
variable annuity products consist of policy charges for
mortality risks and the cost of insurance, deferred sales
charges, policy administration charges and/or withdrawal
charges assessed against policyholders' account balances during
the period.
Investments: The Company's investments in debt and equity
securities are classified as either available-for-sale or
trading and are reported at estimated fair value. Unrealized
gains and losses on available-for-sale securities are included
in stockholder's equity as a component of accumulated other
comprehensive loss, net of tax. Unrealized gains and losses on
trading account securities are included in net realized
investment gains (losses). If management determines that a
decline in the value of a security is other-than-temporary, the
carrying value is adjusted to estimated fair value and the
decline in value is recorded as a net realized investment loss.
For fixed maturity securities, premiums are amortized to the
earlier of the call or maturity date, discounts are accreted to
the maturity date, and interest income is accrued daily. For
equity securities, dividends are recognized on the ex-dividend
date. Realized gains and losses on the sale or maturity of the
investments are determined on the basis of specific
identification. Investment transactions are recorded on the
trade date.
Certain fixed maturity securities are considered non-investment
grade. The Company defines non-investment grade fixed maturity
securities as unsecured debt obligations that do not have a
rating equivalent to Standard and Poor's (or similar rating
agency) BBB- or higher.
All outstanding mortgage loans were repaid during 1997. The
Company recognized income from mortgage loans based on the cash
payment interest rate of the loan, which may have been
different from the accrual interest rate of the loan for
certain mortgage loans. The Company recognized a realized gain
at the date of the satisfaction of the loan at contractual
terms for loans where there was a difference between the cash
payment interest rate and the accrual interest rate. For all
loans the Company stopped accruing income when an interest
payment default either occurred or was probable. Impairments of
mortgage loans were established as valuation allowances and
recorded as a net realized investment loss.
Real estate held-for-sale is stated at estimated fair value
less estimated selling costs.
Policy loans on insurance contracts are stated at unpaid
principal balances.
Investments in limited partnerships are carried at cost.
Deferred Policy Acquisition Costs: Policy acquisition costs for
life and annuity contracts are deferred and amortized based on
the estimated future gross profits for each group of contracts.
These future gross profit estimates are subject to periodic
evaluation by the Company, with necessary revisions applied
against amortization to date. The impact of these revisions on
cumulative amortization is recorded as a charge or credit to
current operations. It is reasonably possible that estimates of
future gross profits could be reduced in the future, resulting
in a material reduction in the carrying amount of deferred
policy acquisition costs.
Policy acquisition costs are principally commissions and a
portion of certain other expenses relating to policy
acquisition, underwriting and issuance that are primarily
related to and vary with the production of new business.
Insurance expenses and taxes reported in the statements of
earnings are net of amounts deferred. Policy acquisition costs
can also arise from the acquisition or reinsurance of existing
in-force policies from other insurers. These costs include
ceding commissions and professional fees related to the
reinsurance assumed. The deferred costs are amortized in
proportion to the estimated future gross profits over the
anticipated life of the acquired insurance contracts utilizing
an interest methodology.
During 1990, the Company entered into an assumption
reinsurance agreement with an unaffiliated insurer. The
acquisition costs relating to this agreement are being
amortized over a twenty-five year period using an effective
interest rate of 7.5%. This reinsurance agreement provides for
payment of contingent ceding commissions based upon the
persistency and mortality experience of the insurance contracts
assumed. Any payments made for the contingent ceding
commissions are capitalized and amortized using an identical
methodology as that used for the initial acquisition costs. The
following is a reconciliation of the acquisition costs related
to the reinsurance agreement for the years ended December 31:
1999 1998 1997
---------- ---------- ----------
Beginning balance $ 101,793 $ 102,252 $ 112,249
Capitalized amounts 11,759 6,085 5,077
Interest accrued 7,634 7,669 9,653
Amortization (19,112) (14,213) (24,727)
---------- ---------- ----------
Ending balance $ 102,074 $ 101,793 $ 102,252
========== ========== ==========
The following table presents the expected amortization, net of
interest accrued, of these deferred acquisition costs over the
next five years. The amortization may be adjusted based on
periodic evaluation of the expected gross profits on the
reinsured policies.
2000 $6,110
2001 $5,670
2002 $5,400
2003 $5,386
2004 $5,619
Separate Accounts: Separate Accounts are established in
conformity with Arkansas State Insurance law, the Company's
domiciliary state, and are generally not chargeable with
liabilities that arise from any other business of the Company.
Separate Accounts assets may be subject to general claims of
the Company only to the extent the value of such assets exceeds
Separate Accounts liabilities. At December 31, 1999 and 1998,
the Company's Separate Accounts assets exceeded Separate
Accounts liabilities by $6,602 and $12,030, respectively. This
excess represents the Company's temporary investment in certain
Separate Accounts investment divisions that were made to
facilitate the establishment of those investment divisions.
Net investment income and net realized and unrealized gains
(losses) attributable to Separate Accounts assets accrue
directly to the policyholder and are not reported as revenue in
the Company's Statement of Earnings.
Assets and liabilities of Separate Accounts, representing net
deposits and accumulated net investment earnings less fees,
held primarily for the benefit of policyholders, are shown as
separate captions in the balance sheets.
Policyholders' Account Balances: Liabilities for the Company's
universal life type contracts, including its life insurance and
annuity products, are equal to the full accumulation value of
such contracts as of the valuation date plus deficiency
reserves for certain products. Interest-crediting rates for the
Company's fixed-rate products are as follows:
Interest-sensitive life products 4.00% - 4.85%
Interest-sensitive deferred annuities 3.60% - 8.61%
Immediate annuities 3.00% - 10.00%
These rates may be changed at the option of the Company,
subject to minimum guarantees, after initial guaranteed rates
expire.
Claims and Claims Settlement Expenses: Liabilities for claims
and claims settlement expenses equal the death benefit for
claims that have been reported to the Company and an estimate
based upon prior experience for unreported claims.
Additionally, the Company has established a mortality benefit
accrual for its variable annuity products.
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 income tax liability.
The Company uses the asset and liability method in providing
income taxes on all transactions that have been recognized in
the financial statements. The asset and liability method
requires that deferred taxes be adjusted to reflect the tax
rates at which future taxable amounts will be settled or
realized. The effects of tax rate changes on future deferred
tax liabilities and deferred tax assets, as well as other
changes in income tax laws, are recognized in net earnings in
the period such changes are enacted. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amounts expected to be realized.
Insurance companies are generally subject to taxes on premiums
and in substantially all states are exempt from state income
taxes.
Unearned Policy Charge Revenue: Certain variable life insurance
products contain policy charges that are assessed at policy
issuance. These policy charges are deferred and amortized into
policy charge revenue based on the estimated future gross
profits for each group of contracts. The Company records a
liability equal to the unamortized balance of these policy
charges.
Accounting Pronouncements: In June 1999, the Financial
Accounting Standards Board deferred for one year the effective
date of the accounting and reporting requirements of SFAS No.
133, Accounting for Derivative Instruments and Hedging
Activities. The Company will adopt the provisions of SFAS No.
133 on January 1, 2001. The adoption of the standard is not
expected to have a material impact on the Company's financial
position or results of operations.
NOTE 2. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments are carried at fair value or amounts that
approximate fair value. The carrying value of financial
instruments as of December 31 were:
1999 1998
------------ ------------
Assets:
Fixed maturity securities (1) $ 2,138,335 $ 2,543,097
Equity securities (1), (2) 186,575 158,591
Trading account securities (1) 22,212 17,280
Policy loans on insurance contracts (3) 1,159,163 1,139,456
Cash and cash equivalents (4) 92,181 95,377
Separate Accounts assets (5) 12,860,562 10,571,489
------------ ------------
Total financial instruments $16,459,028 $14,525,290
============ ============
(1) For publicly traded securities, the estimated fair value is
determined using quoted market prices. For securities without a
readily ascertainable market value, the Company utilizes pricing
services and broker quotes. Such estimated fair values do not
necessarily represent the values for which these securities could
have been sold at the dates of the balance sheets. At December
31, 1999 and 1998, securities without a readily ascertainable
market value, having an amortized cost of $440,947 and $376,993,
had an estimated fair value of $417,710 and $375,470,
respectively.
(2) The Company has investments in two limited partnerships that
do not have readily ascertainable market values. Management has
estimated the fair value as equal to cost based on the review of
the underlying investments of the partnerships. At December 31,
1999 and 1998, the Company's limited partnership investments were
$10,427 and $11,569, respectively.
(3) The Company estimates the fair value of policy loans as
equal to the book value of the loans. Policy loans are fully
collateralized by the account value of the associated insurance
contracts, and the spread between the policy loan interest rate
and the interest rate credited to the account value held as
collateral is fixed.
(4) The estimated fair value of cash and cash equivalents
approximates the carrying value.
(5) Assets held in Separate Accounts are carried at the net
asset value provided by the fund managers.
NOTE 3. INVESTMENTS
The amortized cost and estimated fair value of investments in
fixed maturity securities and equity securities (excluding
trading account securities) as of December 31 were:
<TABLE>
<CAPTION>
1999
---------------------------------------------------------
Cost/ Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Fixed maturity securities:
Corporate debt securities $ 1,912,965 $ 8,778 $ 85,108 $ 1,836,635
Mortgage-backed securities 119,195 1,760 1,036 119,919
U.S. Government and agencies 149,835 408 12,306 137,937
Foreign governments 25,290 61 2,969 22,382
Municipals 21,636 152 326 21,462
------------ ------------ ------------ ------------
Total fixed maturity securities $ 2,228,921 $ 11,159 $ 101,745 $ 2,138,335
============ ============ ============ ============
Equity securities:
Non-redeemable preferred stocks $ 203,726 $ 43 $ 27,621 $ 176,148
Limited partnerships 10,427 - - 10,427
------------ ------------ ------------ ------------
Total equity securities $ 214,153 $ 43 $ 27,621 $ 186,575
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
1998
---------------------------------------------------------
Cost/ Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Fixed maturity securities:
Corporate debt securities $ 2,079,867 $ 56,703 $ 29,078 $ 2,107,492
Mortgage-backed securities 229,197 7,908 43 237,062
U.S. Government and agencies 150,500 6,393 1,328 155,565
Foreign governments 21,157 35 2,996 18,196
Municipals 23,878 905 1 24,782
------------ ------------ ------------ ------------
Total fixed maturity securities $ 2,504,599 $ 71,944 $ 33,446 $ 2,543,097
============ ============ ============ ============
Equity securities:
Non-redeemable preferred stocks $ 151,130 $ 699 $ 4,823 $ 147,006
Limited partnerships 11,569 - - 11,569
Common stocks 11 5 - 16
------------ ------------ ------------ ------------
Total equity securities $ 162,710 $ 704 $ 4,823 $ 158,591
============ ============ ============ ============
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities at December 31, 1999 by contractual maturity were:
Estimated
Amortized Fair
Cost Value
Fixed maturity securities: ----------- -----------
Due in one year or less $ 250,435 $ 250,396
Due after one year through five years 935,856 912,037
Due after five years through ten years 563,026 524,231
Due after ten years 360,409 331,752
----------- -----------
2,109,726 2,018,416
Mortgage-backed securities 119,195 119,919
----------- -----------
Total fixed maturity securities $2,228,921 $2,138,335
=========== ===========
Fixed maturity securities not due at a single maturity date
have been included in the preceding table in the year of final
maturity. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment
penalties.
The amortized cost and estimated fair value of fixed maturity
securities at December 31, 1999 by rating agency equivalent
were:
Estimated
Amortized Fair
Cost Value
----------- -----------
AAA $ 396,644 $ 380,538
AA 196,792 188,710
A 670,531 645,929
BBB 884,446 847,858
Non-investment grade 80,508 75,300
----------- -----------
Total fixed maturity securities $2,228,921 $2,138,335
=========== ===========
The Company has recorded certain adjustments to deferred policy
acquisition costs and policyholders' account balances in
connection with unrealized holding gains or losses on
investments classified as available-for-sale. The Company
adjusts those assets and liabilities as if the unrealized
holding gains or losses had actually been realized, with
corresponding credits or charges reported in accumulated other
comprehensive loss, net of taxes. The components of net
unrealized gains (losses) included in accumulated other
comprehensive loss at December 31 were as follows:
1999 1998
------------ -----------
Assets:
Fixed maturity securities $ (90,586) $ 38,498
Equity securities (27,578) (4,119)
Deferred policy acquisition costs 42,567 (323)
Federal income taxes - deferred 26,969 124
Other assets (4) -
Separate Accounts assets 1,028 30
------------ -----------
(47,604) 34,210
------------ -----------
Liabilities:
Policyholders' account balances 2,481 34,440
------------ -----------
Stockholder's equity:
Accumulated other comprehensive loss $ (50,085) $ (230)
============ ===========
The Company maintains a trading portfolio comprised of
convertible debt and equity securities. The net unrealized
holdings gains on trading account securities included in net
realized investment gains were $3,112, $932 and $520 at
December 31, 1999, 1998 and 1997, respectively.
Proceeds and gross realized investment gains and losses from
the sale of available-for-sale securities for the years ended
December 31 were:
1999 1998 1997
---------- ---------- ----------
Proceeds $ 595,836 $ 893,619 $ 846,041
Gross realized investment gains 12,196 20,232 16,783
Gross realized investment losses 15,936 17,429 7,193
The Company had investment securities with a carrying value
of $24,697 and $27,189 that were deposited with insurance
regulatory authorities at December 31, 1999 and 1998,
respectively.
Excluding investments in U.S. Government and Agencies the
Company is not exposed to any significant concentration of
credit risk in its fixed maturity securities portfolio.
Net investment income arose from the following sources for the
years ended December 31:
1999 1998 1997
---------- ---------- ----------
Fixed maturity securities $ 170,376 $ 202,313 $ 236,325
Equity securities 16,630 9,234 3,020
Mortgage loans - - 4,627
Real estate held-for-sale 3,792 2,264 1,939
Policy loans on insurance contracts 60,445 59,236 57,998
Cash and cash equivalents 7,995 3,912 9,570
Other 88 761 709
---------- ---------- ----------
Gross investment income 259,326 277,720 314,188
Less investment expenses (5,491) (5,682) (5,486)
---------- ---------- ----------
Net investment income $ 253,835 $ 272,038 $ 308,702
========== ========== ==========
Net realized investment gains (losses), including changes in
valuation allowances for the years ended December 31 were as follows:
1999 1998 1997
---------- ---------- ----------
Fixed maturity securities $ (3,721) $ 2,617 $ 6,149
Equity securities (19) 186 3,441
Trading account securities 4,778 1,368 697
Investment in Separate Accounts 460 - 1,005
Mortgage loans - - 6,252
Real estate held-for-sale 7,394 8,290 (4,252)
Cash and cash equivalents (17) (1) (3)
---------- ---------- ----------
Net realized investment gains $ 8,875 $ 12,460 $ 13,289
========== ========== ==========
NOTE 4. FEDERAL INCOME TAXES
The following is a reconciliation of the provision for income
taxes based on earnings before income taxes, computed using the
Federal statutory tax rate, with the provision for income taxes
for the years ended December 31:
1999 1998 1997
--------- --------- ---------
Provision for income taxes
computed at Federal stautory rate $ 50,345 $ 46,383 $ 42,413
Decrease in income taxes resulting from:
Dividend received deduction (1,594) (3,664) (1,969)
Foreign tax credit (1,040) (2,957) -
--------- --------- ---------
Federal income tax provision $ 47,711 $ 39,762 $ 40,444
========= ========= =========
The Federal statutory rate for each of the three years in the
period ended December 31, 1999 was 35%.
The Company provides for deferred income taxes resulting from
temporary differences that arise from recording certain
transactions in different years for income tax reporting
purposes than for financial reporting purposes. The sources of
these differences and the tax effect of each are as follows:
1999 1998 1997
---------- ---------- ----------
Deferred policy acquisition costs $ 8,822 $ 11,062 $ (2,422)
Policyholders' account balances (9,635) (10,950) (16,099)
Liability for guaranty fund assessments (359) 529 1,190
Investment adjustments (27) (1,350) 5,070
Other 64 (64) -
---------- ---------- ----------
Deferred Federal income tax benefit $ (1,135) $ (773) $ (12,261)
========== ========== ==========
Deferred tax assets and liabilities as of December 31 are
determined as follows:
1999 1998
----------- -----------
Deferred tax assets:
Policyholders' account balances $ 115,767 $ 106,132
Investment adjustments 1,978 1,951
Liability for guaranty fund assessments 5,211 4,852
Net unrealized investment loss on
investment securities 26,969 124
---------- -----------
Total deferred tax assets 149,925 113,059
----------- -----------
Deferred tax liabilities:
Deferred policy acquisition costs 108,554 99,732
Other 3,988 3,924
----------- -----------
Total deferred tax liabilities 112,542 103,656
----------- -----------
Net deferred tax asset $ 37,383 $ 9,403
=========== ===========
The Company anticipates that all deferred tax assets will be
realized; therefore no valuation allowance has been provided.
NOTE 5. REINSURANCE
In the normal course of business, the Company seeks to limit
its exposure to loss on any single insured life and to recover
a portion of benefits paid by ceding reinsurance to other
insurance enterprises or reinsurers under indemnity reinsurance
agreements, primarily excess coverage and coinsurance
agreements. The maximum amount of mortality risk retained by
the Company is approximately $500 on single life policies and
$750 on joint life policies.
Indemnity reinsurance agreements do not relieve the Company
from its obligations to policyholders. Failure of reinsurers to
honor their obligations could result in losses to the Company.
The Company regularly evaluates the financial condition of its
reinsurers so as to minimize its exposure to significant losses
from reinsurer insolvencies. The Company holds collateral under
reinsurance agreements in the form of letters of credit and
funds withheld totaling $686 that can be drawn upon for
delinquent reinsurance recoverables.
As of December 31, 1999 the Company had the following life
insurance inforce:
<TABLE>
<CAPTION>
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed to
amount companies companies amount net
------------ ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Life insurance in force $14,356,639 $ 3,670,860 $ 2,001 $10,687,780 0.02%
</TABLE>
The Company has entered into an indemnity reinsurance agreement
with an unaffiliated insurer whereby the Company coinsures, on
a modified coinsurance basis, 50% of the unaffiliated insurer's
variable annuity premiums sold through the Merrill Lynch & Co.
distribution system.
NOTE 6. RELATED PARTY TRANSACTIONS
The Company and MLIG are parties to a service agreement whereby
MLIG has agreed to provide certain accounting, data processing,
legal, actuarial, management, advertising and other services to
the Company. Expenses incurred by MLIG in relation to this
service agreement are reimbursed by the Company on an allocated
cost basis. Charges billed to the Company by MLIG pursuant to
the agreement were $43,410, $43,179 and $43,028 for the years
ended December 31, 1999, 1998 and 1997, respectively. Charges
attributable to this agreement are included in insurance
expenses and taxes, except for investment related expenses,
which are included in net investment income. The Company is
allocated interest expense on its accounts payable to MLIG that
approximates the daily Federal funds rate. Total intercompany
interest incurred was $688, $860 and $842 for 1999, 1998 and
1997, respectively. Intercompany interest is included in net
investment income.
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
$1,823, $1,915 and $1,913 for 1999, 1998 and 1997,
respectively.
MLIG has entered into agreements with MLAM and Hotchkis & Wiley
("H&W"), a division of MLAM, with respect to administrative
services for the Merrill Lynch Series Fund, Inc., Merrill Lynch
Variable Series Funds, Inc., and Hotchkis & Wiley Variable
Trust (collectively, "the Funds"). The Company invests in the
various mutual fund portfolios of the Funds in connection with
the variable life insurance and annuity contracts the Company
has inforce. Under this agreement, MLAM and H&W pay
compensation to MLIG in an amount equal to a portion of the
annual gross investment advisory fees paid by the Funds to MLAM
and H&W. The Company received from MLIG its allocable share of
such compensation in the amount of $21,630, $20,289 and $19,057
during 1999, 1998 and 1997, respectively. Revenue attributable
to these agreements is included in policy charge revenue.
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 $88,955, $79,117 and $72,729 for
1999, 1998 and 1997, 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.
Affiliated agreements generally contain reciprocal indemnity
provisions pertaining to each party's representations and
contractual obligations thereunder.
During 1997, the Company sold its investment in 2141 E.
Camelback, Corp. to Merrill Lynch Mortgage Capital, Inc. The
investment was sold at its carrying value of $5,375.
NOTE 7. STOCKHOLDER'S EQUITY AND STATUTORY REGULATIONS
During 1999 and 1997, the Company paid cash dividends of
$135,000 to MLIG. Of these cash dividends, $105,793 and
$110,030, respectively, were extraordinary dividends as defined
by Arkansas Insurance Law and were paid pursuant to approval
granted by the Arkansas Insurance Commissioner. The Company
also paid a $500 stock dividend to MLIG during 1999. The
Company paid no cash or stock dividends in 1998.
At December 31, 1999 and 1998, approximately $26,518 and
$29,707, respectively, of stockholder's equity was available
for distribution to MLIG. Statutory capital and surplus at
December 31, 1999 and 1998, were $267,679 and $299,069,
respectively.
Applicable insurance department regulations require that the
Company report its accounts in accordance with statutory
accounting practices. Statutory accounting practices differ
from principles utilized in these financial statements as
follows: policy acquisition costs are expensed as incurred,
future policy benefit reserves are established using different
actuarial assumptions, there is no provision for deferred
income taxes, and securities are valued on a different basis.
The Company's statutory net income for 1999, 1998 and 1997 was
$106,266, $55,813 and $81,963, respectively.
The National Association of Insurance Commissioners ("NAIC")
utilizes the Risk Based Capital ("RBC") adequacy monitoring
system. The RBC calculates the amount of adjusted capital that
a life insurance company should have based upon that company's
risk profile. As of December 31, 1999 and 1998, based on the
RBC formula, the Company's total adjusted capital level was in
excess of the minimum amount of capital required to avoid
regulatory action.
In March 1998, the NAIC adopted the Codification of Statutory
Accounting Principles ("Codification"). The Codification,
which is intended to standardize regulatory accounting and
reporting for the insurance industry, is proposed to be
effective January 1, 2001. However, statutory accounting
principles will continue to be established by individual state
laws and permitted practices. Codification is not expected to
have a material impact on the Company's capital requirements or
statutory financial statements.
NOTE 8. COMMITMENTS AND CONTINGENCIES
State insurance laws generally require that all life insurers
who are licensed to transact business within a state become
members of the state's life insurance guaranty association.
These associations have been established for the protection of
policyholders from loss (within specified limits) as a result
of the insolvency of an insurer. At the time an insolvency
occurs, the guaranty association assesses the remaining members
of the association an amount sufficient to satisfy the
insolvent insurer's policyholder obligations (within specified
limits). The Company has utilized public information to
estimate what future assessments it will incur as a result of
insolvencies. At December 31, 1999 and 1998, the Company has
established an estimated liability for future guaranty fund
assessments of $14,889 and $13,864, respectively. The Company
regularly monitors public information regarding insurer
insolvencies and adjusts its estimated liability as 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.
During 1994, the Company committed to participate in a limited
partnership that invests in leveraged transactions. As of
December 31, 1999, $8,116 has been advanced towards the
Company's $10,000 commitment to the limited partnership.
NOTE 9. SEGMENT INFORMATION
In reporting to management, the Company's operating results are
categorized into two business segments: Life Insurance and
Annuities. The Company's Life Insurance segment consists of
variable life insurance products and interest-sensitive life
products. The Company's Annuity segment consists of variable
annuities and interest sensitive annuities.
The Company's organization is structured in accordance with its
two business segments. Each segment has its own administrative
service center that provides product support to the Company and
customer service support to the Company's policyholders.
Additionally, marketing and sales management functions, within
MLIG, are organized according to these two business segments.
The accounting policies of the business segments are the same
as those described in the summary of significant accounting
policies. All revenue and expense transactions are recorded at
the product level and accumulated at the business segment level
for review by management.
The "Other" category, presented in the following segment
financial information, represents assets and the earnings on
those assets that do not support policyholder liabilities.
The following table summarizes each business segment's
contribution to the consolidated amounts:
<TABLE>
<CAPTION>
Life
1999 Insurance Annuities Other Total
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net interest spread (a) $ 36,805 $ 31,098 $ 10,093 $ 77,996
Other revenues 94,821 140,541 6,542 241,904
------------ ------------ ------------ ------------
Net revenues 131,626 171,639 16,635 319,900
------------ ------------ ------------ ------------
Policy benefits 16,569 16,414 - 32,983
Reinsurance premium ceded 21,691 - - 21,691
Amortization of deferred policy
acquisition costs 22,464 43,143 - 65,607
Other non-interest expenses 16,728 39,049 - 55,777
------------ ------------ ------------ ------------
Total non-interest expenses 77,452 98,606 - 176,058
------------ ------------ ------------ ------------
Net earnings before Federal income
tax provision 54,174 73,033 16,635 143,842
Income tax expense 18,442 23,447 5,822 47,711
------------ ------------ ------------ ------------
Net earnings $ 35,732 $ 49,586 $ 10,813 $ 96,131
============ ============ ============ ============
Balance Sheet Information:
Total assets $ 6,492,686 $10,523,453 $ 101,910 $17,118,049
Deferred policy acquisition costs 251,017 224,898 - 475,915
Policyholder liabilities and accruals 2,150,671 1,522,892 - 3,673,563
Other policyholder funds 18,345 6,750 - 25,095
</TABLE>
<TABLE>
<CAPTION>
Life
1998 Insurance Annuities Other Total
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net interest spread (a) $ 35,228 $ 32,765 $ 8,369 $ 76,362
Other revenues 84,836 124,864 422 210,122
------------ ------------ ------------ ------------
Net revenues 120,064 157,629 8,791 286,484
------------ ------------ ------------ ------------
Policy benefits 18,397 13,494 - 31,891
Reinsurance premium ceded 19,972 - - 19,972
Amortization of deferred policy
acquisition costs 13,040 31,795 - 44,835
Other non-interest expenses 18,030 39,233 - 57,263
------------ ------------ ------------ ------------
Total non-interest expenses 69,439 84,522 - 153,961
------------ ------------ ------------ ------------
Net earnings before Federal
income tax provision 50,625 73,107 8,791 132,523
Income tax expense 16,033 20,653 3,076 39,762
------------ ------------ ------------ ------------
Net earnings $ 34,592 $ 52,454 $ 5,715 $ 92,761
============ ============ ============ ============
Balance Sheet Information:
Total assets $ 6,069,649 $ 8,885,981 $ 148,465 $15,104,095
Deferred policy acquisition costs 207,713 197,927 - 405,640
Policyholder liabilities and accruals 2,186,001 1,694,668 - 3,880,669
Other policyholder funds 16,033 4,769 - 20,802
</TABLE>
<TABLE>
<CAPTION>
Life
1997 Insurance Annuities Other Total
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net interest spread (a) $ 38,826 $ 47,973 $ 12,361 $ 99,160
Other revenues 86,301 102,782 3,139 192,222
------------ ------------ ------------ ------------
Net revenues 125,127 150,755 15,500 291,382
------------ ------------ ------------ ------------
Policy benefits 15,876 11,153 - 27,029
Reinsurance premium ceded 17,879 - - 17,879
Amortization of deferred policy
acquisition costs 36,180 35,931 - 72,111
Other non-interest expenses 16,545 36,639 - 53,184
------------ ------------ ------------ ------------
Total non-interest expenses 86,480 83,723 - 170,203
------------ ------------ ------------ ------------
Net earnings before Federal
income tax provision 38,647 67,032 15,500 121,179
Income tax expense 12,753 22,265 5,426 40,444
------------ ------------ ------------ ------------
Net earnings $ 25,894 $ 44,767 $ 10,074 $ 80,735
============ ============ ============ ============
Balance Sheet Information:
Total assets $ 5,925,872 $ 7,998,461 $ 129,248 $14,053,581
Deferred policy acquisition costs 182,610 182,495 - 365,105
Policyholder liabilities and accruals 2,229,533 2,009,151 - 4,238,684
Other policyholder funds 18,788 8,372 - 27,160
</TABLE>
(a) Management considers investment income net of interest
credited to policyholders' account balances in evaluating
results.
The table below summarizes the Company's net revenues by
product for 1999, 1998, and 1997:
1999 1998 1997
---------- ---------- ----------
Life Insurance
Variable life insurance $ 104,036 $ 91,806 $ 92,245
Interest-sensitive life insurance 27,590 28,258 32,882
---------- ---------- ----------
Total Life Insurance 131,626 120,064 125,127
---------- ---------- ----------
Annuities
Variable annuities 130,039 105,545 88,509
Interest-sensitive annuities 41,600 52,084 62,246
---------- ---------- ----------
Total Annuities 171,639 157,629 150,755
---------- ---------- ----------
Other 16,635 8,791 15,500
---------- ---------- ----------
Total $ 319,900 $ 286,484 $ 291,382
========== ========== ==========
* * * * *
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<S> <C> <C> <C>
(a) Financial Statements
(1) Financial Statements of Merrill Lynch Life Variable Annuity
Separate Account A as of December 31, 1999 and for the two
years ended December 31, 1999 and the Notes relating
thereto appear in the Statement of Additional Information.
(2) Financial Statements of Merrill Lynch Life Insurance Company
for the three years ended December 31, 1999 and the Notes
relating thereto appear in the Statement of Additional
Information.
(b) Exhibits
(1) Resolution of the Board of Directors of Merrill Lynch Life
Insurance Company establishing the Merrill Lynch Life
Variable Annuity Separate Account A. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 10
to Form N-4, Registration No. 33-43773 Filed December 10,
1996.)
(2) Not Applicable.
(3) Underwriting Agreement Between Merrill Lynch Life Insurance
Company and Merrill Lynch, Pierce, Fenner & Smith
Incorporated. (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 10 to Form N-4, Registration
No. 33-43773 Filed December 10, 1996.)
(4) (a) Form of Contract for the Flexible Premium Individual
Deferred Variable Annuity. (Incorporated by Reference to
Registrant's Registration Statement on Form N-4,
Registration No. 333-90243 Filed November 3, 1999.)
(b) Individual Retirement Annuity Endorsement. (Incorporated by
Reference to Registrant's Registration Statement on
Form N-4, Registration No. 333-90243 Filed November 3,
1999.)
(c) Tax-Sheltered Annuity Endorsement. (Incorporated by
Reference to Registrant's Registration Statement on
Form N-4, Registration No. 333-90243 Filed November 3,
1999.)
(5) Form of Application for the Flexible Premium Individual
Deferred Variable Annuity. (Incorporated by Reference to
Registrant's Registration Statement on Form N-4,
Registration No. 333-90243 Filed November 3, 1999.)
(6) (a) Articles of Amendment, Restatement and Redomestication of
the Articles of Incorporation of Merrill Lynch Life
Insurance Company. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43773 Filed December 10, 1996.)
(b) Amended and Restated By-Laws of Merrill Lynch Life Insurance
Company. (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 10 to Form N-4, Registration
No. 33-43773 Filed December 10, 1996.)
(7) Not Applicable.
(8) (a) Amended General Agency Agreement. (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 5 to
Form N-4, Registration No. 33-43773 Filed April 28, 1994.)
(b) Indemnity Agreement Between Merrill Lynch Life Insurance
Company and Merrill Lynch Life Agency, Inc. (Incorporated
by Reference to Registrant's Post-Effective Amendment
No. 10 to Form N-4, Registration No. 33-43773 Filed
December 10, 1996.)
</TABLE>
C-1
<PAGE>
<TABLE>
<S> <C> <C> <C>
(c) Management Agreement Between Merrill Lynch Life Insurance
Company and Merrill Lynch Asset Management, Inc.
(Incorporated by Reference to Registrant's Post- Effective
Amendment No. 10 to Form N-4, Registration No. 33-43773
Filed December 10, 1996.)
(d) Agreement Between Merrill Lynch Life Insurance Company and
Merrill Lynch Variable Series Funds, Inc. Relating to
Maintaining Constant Net Asset Value for the Domestic Money
Market Fund. (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 10 to Form N-4, Registration
No. 33-43773 File December 10, 1996.)
(e) Agreement Between Merrill Lynch Life Insurance Company and
Merrill Lynch Variable Series Funds, Inc. Relating to
Valuation and Purchase Procedures. (Incorporated by
Reference to Registrant's Post Effective Amendment No. 10
to Form N-4, Registration No. 33-43773 Filed December 10,
1996.)
(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. 5 to Form N-4, Registration No. 33-43773
Filed April 28, 1994.)
(g) Reimbursement Agreement Between Merrill Lynch Asset
Management, L.P. and Merrill Lynch Life Agency, Inc.
(Incorporated by Reference to Registrant's Post-Effective
Amendment No. 10 to Form N-4, Registration No. 33-43773
Filed December 10, 1996.)
(h) Amendment to the Reimbursement Agreement Between Merrill
Lynch Asset Management, L.P. and Merrill Lynch Life Agency,
Inc. (Incorporated by Reference to Registrant's
Registration Statement on Form N-4, Registration
No. 333-90243 Filed November 3, 1999.)
(i) Form of Participation Agreement Between Merrill Lynch
Variable Series Funds, Inc. and Merrill Lynch Life
Insurance Company. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43773 Filed December 10, 1996.)
(j) Amendment to the Participation Agreement Between Merrill
Lynch Variable Series Funds, Inc. and Merrill Lynch Life
Insurance Company. (Incorporated by Reference to
Registrant's Registration Statement on Form N-4,
Registration No. 333-90243 Filed November 3, 1999.)
(k) Participation Agreement By And Among AIM Variable Insurance
Funds, Inc., AIM Distributors, Inc., and Merrill Lynch Life
Insurance Company. (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 11 to Form N-4,
Registration No. 33-43773 Filed April 23, 1997.)
(l) Amendment to the Participation Agreement By And Among AIM
Variable Insurance Funds, Inc., AIM Distributors, Inc., and
Merrill Lynch Life Insurance Company. (Incorporated by
Reference to Registrant's Registration Statement on
Form N-4, Registration No. 333-90243 Filed November 3,
1999.)
(m) Form of Participation Agreement Among Merrill Lynch Life
Insurance Company, Alliance Capital Management L.P., and
Alliance Fund Distributors, Inc. (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 10 to
Form N-4, Registration No. 33-43773 Filed December 10,
1996.)
(n) Amendment to the Participation Agreement Among Merrill Lynch
Life Insurance Company, Alliance Capital Management L.P.,
and Alliance Fund Distributors, Inc. dated May 1, 1997.
(Incorporated by Reference to Registrant's Registration
Statement on Form N-4, Registration No. 333-90243 Filed
November 3, 1999.)
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
(o) Amendment to the Participation Agreement Among Merrill Lynch
Life Insurance Company, Alliance Capital Management L.P.,
and Alliance Fund Distributors, Inc. dated June 5, 1998.
(Incorporated by Reference to Registrant's Registration
Statement on Form N-4, Registration No. 333-90243 Filed
November 3, 1999.)
(p) Amendment to the Participation Agreement Among Merrill Lynch
Life Insurance Company, Alliance Capital Management L.P.,
and Alliance Fund Distributors, Inc. dated July 22, 1999.
(Incorporated by Reference to Registrant's Registration
Statement on Form N-4, Registration No. 333-90243 Filed
November 3, 1999.)
(q) Form of Participation Agreement Among MFS-Registered
Trademark- Variable Insurance Trust -SM- Merrill Lynch Life
Insurance Company, and Massachusetts Financial Services
Company. (Incorporated by Reference to Registrant's
Post-Effective Amendment No 10 to Form N-4, Registration
No. 33-43773 Filed December 10, 1996.)
(r) Amendment to the Participation Agreement Among
MFS-Registered Trademark- Variable Insurance Trust -SM-,
Merrill Lynch Life Insurance Company, and Massachusetts
Financial Services Company dated May 1, 1997. (Incorporated
by Reference to Registrant's Registration Statement on
Form N-4, Registration No. 333-90243 Filed November 3,
1999.)
(s) Form of Participation Agreement Among Merrill Lynch Life
Insurance Company and Hotchkis and Wiley Variable Trust.
(Incorporated by Reference to Registrant's Post-Effective
Amendment No. 12 to Form N-4, Registration No. 33-43773
Filed May 1, 1998.)
(t) Amendment to the Participation Agreement Among Merrill Lynch
Life Insurance Company and Hotchkis and Wiley Variable
Trust. (Incorporated by Reference to Registrant's
Registration Statement on Form N-4, Registration
No. 333-90243 Filed November 3, 1999.)
(u) Form of Participation Agreement Between Davis Variable
Account Fund, Inc. and Merrill Lynch Life Insurance
Company. (To be filed by amendment.)
(v) Form of Participation Agreement Between Delaware Group
Premium Fund, Inc. and Merrill Lynch Life Insurance
Company. (To be filed by amendment.)
(w) Form of Participation Agreement Between PIMCO Variable
Insurance Trust and Merrill Lynch Life Insurance Company.
(To be filed by amendment.)
(x) Form of Participation Agreement Between Seligman Portfolios,
Inc. and Merrill Lynch Life Insurance Company. (To be filed
by amendment.)
(y) Form of Participation Agreement Between Van Kampen Life
Investment Trust and Merrill Lynch Life Insurance Company.
(To be filed by amendment.)
(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 LLP.
(b) Written Consent of Deloitte & Touche LLP, independent
auditors.
(c) Written Consent of Barry G. Skolnick, Esq. (See Exhibit 9.)
(11) Not Applicable.
(12) Not Applicable.
(13) Schedule of Performance Computations.
(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. 33-43773 Filed
March 2,1994.)
(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. 33-43773 Filed March 2, 1994.)
</TABLE>
C-3
<PAGE>
<TABLE>
<S> <C> <C> <C>
(c) Power of Attorney from Barry G. Skolnick. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 4 to
Form N-4, Registration No. 33-43773 Filed March 2, 1994.)
(d) Power of Attorney from Anthony J. Vespa. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 4 to
Form N-4, Registration No. 33-43773 Filed March 2, 1994.)
(e) Power of Attorney from Gail R. Farkas. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 8 to
Form N-4, Registration No. 33-43773 Filed April 25, 1996.)
</TABLE>
ITEM 25. DIRECTORS AND OFFICERS OF MERRILL LYNCH LIFE INSURANCE COMPANY
<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
Plainsboro, NJ 08536 and 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,
Plainsboro, NJ 08536 General Counsel and Secretary
Anthony J. Vespa 800 Scudders Mill Road Director, Chairman of the Board,
Plainsboro, NJ 08536 Chief Executive Officer and
President
Deborah J. Adler 800 Scudders Mill Road Vice President and Actuary
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
Linda Gillis 4804 Deer Lake Drive East Vice President and Assistant
Jacksonville, FL 32246 Secretary
Diana Joyner 1414 Main Street Vice President
Springfield, MA 01102
Robin A. Maston 800 Scudder Mill Road Vice President and Senior Compliance
Plainsboro, NJ 08536 Officer
Kelly A. O'Dea 800 Scudders Mill Road Vice President and Senior
Plainsboro, NJ 08536 Compliance Officer
Robert Ostrander 1414 Main Street Vice President and Controller
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
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS ADDRESS POSITION WITH DEPOSITOR*
- ---------------------------- ------------------------------------- ------------------------------------
<S> <C> <C>
Frederick H. Steele 800 Scudders Mill Road Vice President
Plainsboro, NJ 08536
Tracy A. Bartoy 4804 Deer Lake Drive East Vice President and Assistant
Jacksonville, FL 32247 Secretary
Robert J. Viamari 1414 Main Street Vice President and Assistant
Springfield, MA 01102 Secretary
Chester Westergard 2200 Rodney Parham Road Suite 300 Vice President
Little Rock, AR 72212
Denis G. Wuestman 800 Scudders Mill Road Vice President
Plainsboro, NJ 08536
Matthew J. Rider 800 Scudders Mill Road Vice President
Plainsboro, NJ 08536
Donald C. Stevens, III 800 Scudders Mill Road Vice President and Controller
Plainsboro, NJ 08536
Jeanne Markey 800 Scudders Mill Road Vice President
Plainsboro, NJ 08536
Shelley K. Parker 1414 Main Street Vice President and Assistant
Springfield, MA 01102 Secretary
Amy S. Winston 800 Scudders Mill Road Vice President and
Plainsboro, NJ 08536 Director of Compliance
</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.
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. ("ML & Co."). A list of subsidiaries of ML & Co.
appears below.
SUBSIDIARIES OF THE REGISTRANT
The following are subsidiaries of ML & Co. as of February 25, 2000 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(w) of Regulation S-X under the Securities
Exchange Act of 1934.
<TABLE>
<CAPTION>
STATE OF
JURISDICTION OF
NAME ENTITY
- ---- -------------------
<S> <C>
Merrill Lynch & Co., Inc.................................... Delaware
Merrill Lynch, Pierce, Fenner & Smith Incorporated(1)..... Delaware
Broadcort Capital Corp.................................. Delaware
Merrill Lynch Life Agency Inc.(2)....................... Washington
Merrill Lynch Professional Clearing Corp.(3)............ Delaware
Merrill Lynch Bank & Trust Co............................. New Jersey
Merrill Lynch Capital Services, Inc....................... Delaware
Merrill Lynch Government Securities, Inc.................. Delaware
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
STATE OF
JURISDICTION OF
NAME ENTITY
- ---- -------------------
<S> <C>
Merrill Lynch Money Markets Inc......................... Delaware
Merrill Lynch Group, Inc.................................. Delaware
Merrill Lynch & Co., Canada Ltd......................... Ontario
Merrill Lynch Canada Inc.............................. Canada
Mercury Asset Management Group Ltd.(4).................. England
Mercury Asset Management Holdings Ltd................. England
Merrill Lynch Asset Management L.P.(5).................. Delaware
Merrill Lynch Capital Partners, Inc..................... Delaware
Merrill Lynch Futures Inc............................... 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 Group Holdings Limited.................. Ireland
Merrill Lynch Capital Markets Bank Limited.......... Ireland
Merrill Lynch Mortgage Capital Inc...................... Delaware
Merrill Lynch Bank USA.................................. Utah
Merrill Lynch Trust Company(6).......................... New Jersey
Merrill Lynch Business Financial Services Inc......... Delaware
Merrill Lynch Credit Corporation...................... Delaware
Merrill Lynch Investment Partners Inc................... Delaware
MLDP Holdings, Inc.(7).................................. Delaware
Merrill Lynch Derivative Products AG.................. Switzerland
ML IBK Positions, Inc................................... Delaware
Merrill Lynch Capital Corporation..................... Delaware
ML Leasing Equipment Corp.(8)........................... Delaware
Merrill Lynch International Incorporated.................. Delaware
Merrill Lynch (Australasia) Pty Limited................. New South Wales
Merrill Lynch International (Australia) Limited(9).... New South Wales
Merrill Lynch International Bank........................ United States
Merrill Lynch International Holdings Inc................ Delaware
Merrill Lynch Bank and Trust Company (Cayman)
Limited............................................. Cayman Islands
British West Indies
Merrill Lynch Capital Markets AG...................... Switzerland
Merrill Lynch Europe PLC.............................. England
Merrill Lynch Europe Holdings Limited............... England
Merrill Lynch International(10)................... England
Merrill Lynch, Pierce, Fenner & Smith (Brokers &
Dealers)
Limited........................................... England
Merrill Lynch Europe Ltd.............................. Cayman Islands,
British West Indies
Merrill Lynch France.................................. France
Merrill Lynch Capital Markets (France) S.A.......... France
Merrill Lynch (Asia Pacific) Limited.................. Hong Kong
Merrill Lynch Far East Limited...................... Hong Kong
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
STATE OF
JURISDICTION OF
NAME ENTITY
- ---- -------------------
<S> <C>
Merrill Lynch Japan Incorporated........................ Cayman Islands,
British West Indies
</TABLE>
- ------------------------
(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) Held through several intermediate holding companies.
(5) Merrill Lynch Asset Management L.P. is a limited partnership whose general
partner is Princeton Services, Inc. and whose limited partner is ML & Co.
(6) Similarly named affiliates and subsidiaries that provide trust and custodial
services are incorporated in various other jurisdictions.
(7) Merrill Lynch Group, Inc. owns 100% of this corporation's outstanding common
voting stock. 100% of the outstanding preferred voting stock is held by
outside parties.
(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) Held through an intermediate subsidiary.
(10) Partially owned by another indirect subsidiary of ML & Co.
ITEM 27. NUMBER OF CONTRACTOWNERS
As of the date hereof, there are no owners of the Contracts.
ITEM 28. INDEMNIFICATION
The following provisions regarding the Indemnification of Directors and
Officers of the Registrant are applicable:
AMENDED AND RESTATED BY-LAWS OF MERRILL LYNCH LIFE INSURANCE COMPANY,
ARTICLE VI
SECTIONS 1, 2, 3 AND 4--INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND INCORPORATORS
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
C-7
<PAGE>
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 or 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 or
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 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.
BY-LAWS OF MERRILL LYNCH & CO., INC.,
SECTION 2--INDEMNIFICATION BY CORPORATION
Any persons serving as an officer, director or trustee of a corporation,
trust, or other enterprise, including the Registrant, at the request of Merrill
Lynch are entitled to indemnification from Merrill Lynch, to the fullest extent
authorized or permitted by law, for liabilities with respect to actions taken or
omitted by such persons in any capacity in which such persons serve Merrill
Lynch or such other corporation, trust, or other enterprise. Any action
initiated by any such person for which indemnification is provided shall be
approved by the Board of Directors of Merrill Lynch prior to such initiation.
OTHER 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
Registration 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,
C-8
<PAGE>
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 UNDERWRITER
(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; The Corporate
Fund Accumulation Program, Inc.; CMA Treasury Fund; CMA Multi-State Municipal
Series Trust; Corporate Income Fund; Defined Asset Funds--Municipal Insured
Series; Equity Investor Fund; The Fund of Stripped (Zero) U.S. Treasury
Securities; The GNMA Investment Accumulation Program; Government Securities
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; Municipal Investment Trust Fund; and The Municipal Fund
Accumulation Program, Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated also acts as principal
underwriter for the following additional accounts: Merrill Lynch Life Variable
Annuity Separate Account B; Merrill Lynch Life Variable Life Separate Account;
Merrill Lynch Life Variable Life Separate Account II; Merrill Lynch Life
Variable Annuity Separate Account; 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; and ML of New York Variable Annuity Separate Account B.
(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>
John L. Steffens* Director, Chairman of the Board and Chief
Executive Officer
Thomas W. Davis Executive Vice President
Barry S. Friedberg* Executive Vice President
Edward L. Goldberg* Executive Vice President
Jerome P. Kenney* Executive Vice President
E. Stanley O'Neal Executive Vice President and Director
Thomas H. Patrick* Executive Vice President
George A. Schieren Director, General Counsel and Senior Vice
President
Winthrop H. Smith, Jr.* Executive Vice President
Roger M. Vasey* Executive Vice President
John C. Stomber* Senior Vice President and Treasurer
</TABLE>
- ------------------------
* World Financial Center, 250 Vesey Street, New York, NY 10281
(c) Not Applicable
ITEM 30. LOCATION OF BOOKS 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
C-9
<PAGE>
800 Scudders Mill Road, Plainsboro, New Jersey 08536 and the Service Center at
4804 Deer Lake Drive East, Jacksonville, Florida 32246.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS AND REPRESENTATIONS.
(a) Registrant undertakes to file a post-effective amendment to the
Registration 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 communications 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 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.
(e) Registrant hereby represents that it is relying on the American Council
of Life Insurance (avail. Nov. 28, 1988) no-action letter with respect to
Contracts used in connection with retirement plans meeting the requirements of
Section 403(b) of the Internal Revenue Code, and represents further that it will
comply with the provisions of paragraphs (1) through (4) set forth in that
no-action letter.
C-10
<PAGE>
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 A,
has caused this registration statement to be signed on its behalf, in the City
of Plainsboro, and the State of New Jersey, on this 14th day of March, 2000.
<TABLE>
<S> <C> <C> <C>
Merrill Lynch Life Variable Annuity
Separate Account A
(Registrant)
Attest: /s/ EDWARD W. DIFFIN, JR. By: /s/ BARRY G. SKOLNICK
------------------------------------ ------------------------------------
Edward W. Diffin, Jr. Barry G. Skolnick
Vice President and Senior Counsel Senior Vice President of
Merrill Lynch Life Insurance Company
Merrill Lynch Life Insurance Company
(Depositor)
Attest: /s/ EDWARD W. DIFFIN, JR. By: /s/ BARRY G. SKOLNICK
------------------------------------ ------------------------------------
Edward W. Diffin, Jr. Barry G. Skolnick
Vice President and Senior Counsel Senior Vice President
</TABLE>
As required by the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities indicated on March 14,
2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Chairman of the Board, President and Chief
- ------------------------------------------- Executive Officer
Anthony J. Vespa
* Director, Senior Vice President, Chief
- ------------------------------------------- Financial Officer, Chief Actuary and
Joseph E. Crowne, Jr. Treasurer
* Director, Senior Vice President, and Chief
- ------------------------------------------- Investment Officer
David M. Dunford
* Director and Senior Vice President
- -------------------------------------------
Gail R. Farkas
*By: /s/ BARRY G. SKOLNICK
- -------------------------------------------
Barry G. Skolnick In his own capacity as Director, Senior Vice
President, General Counsel, and Secretary
and as Attorney-In-Fact
</TABLE>
C-11
<PAGE>
EXHIBIT LIST
<TABLE>
<S> <C> <C>
Exhibit 9 Opinion of Barry G. Skolnick, Esq. and Consent to its use as
to the legality of the securities being registered
Exhibit 10(a) Written Consent of Sutherland Asbill & Brennan LLP
Exhibit 10(b) Written Consent of Deloitte & Touche LLP, independent
auditors
Exhibit 13 Schedule of Performance Computations
</TABLE>
C-12
<PAGE>
EXHIBIT 9
OPINION OF BARRY G. SKOLNICK, ESQ. AND
CONSENT TO ITS USE AS TO THE LEGALITY OF THE SECURITIES BEING REGISTERED
<PAGE>
[MERRILL LYNCH LIFE INSURANCE COMPANY LETTERHEAD]
March 14, 2000
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 Pre-Effective Amendment No. 1
to the registration statement on Form N-4 of the Merrill Lynch Life Variable
Annuity Separate Account A (File No. 33-90243) (the "Account") 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 statement
describes certain flexible premium individual deferred 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 flexible premium individual deferred variable annuity contracts,
when issued in accordance with the prospectus contained in the
aforesaid registration statement and upon compliance with applicable
local law, will be legal and binding obligations of the Company in
accordance with their terms.
3. The Account is duly created and validly existing as a separate
account 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 statement and to the reference to me under the caption "Legal
Matters" in the prospectus contained in said registration statement.
<PAGE>
Very truly yours,
/s/ Barry G. Skolnick
----------------------------
Barry G. Skolnick
Senior Vice President and
General Counsel
<PAGE>
EXHIBIT 10(a)
WRITTEN CONSENT OF SUTHERLAND ASBILL & BRENNAN LLP
<PAGE>
[SUTHERLAND ASBILL & BRENNAN LLP LETTERHEAD]
CONSENT OF SUTHERLAND ASBILL & BRENNAN LLP
We hereby consent to the reference to our name under the caption "Legal Matters"
in the Prospectus filed as part of Pre-Effective Amendment No. 1 to Form N-4
(File No. 333-90243) for Merrill Lynch Life Variable Annuity Separate Account A
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.
SUTHERLAND ASBILL & BRENNAN LLP
/s/ Kimberly J. Smith
-------------------------------
Kimberly J. Smith, Esq.
Washington, D.C.
March 16, 2000
<PAGE>
EXHIBIT 10(b)
WRITTEN CONSENT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS
<PAGE>
[DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Pre-Effective Amendment No. 1 to Registration
Statement No. 333-90243 of Merrill Lynch Life Variable Annuity Separate
Account A on Form N-4 of our reports on (i) Merrill Lynch Life Insurance
Company dated February 28, 2000, and (ii) Merrill Lynch Life Variable Annuity
Separate Account A dated February 14, 2000, 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
March 10, 2000
<PAGE>
There is a $40 Contract Fee applied to the contract only if the greater of
premiums less withdrawals and contract value is less than $25,000. It is
calculated and deducted proportionately from each subaccount on the contract
anniversary or at full surrender based on the contract value at that time.
DOMESTIC MONEY MARKET SUB-ACCOUNT
Note that the information presented below is hypothetical.
7-Day Current Yield
Current Yield = ((NCS-ES)/UV/7) x 365
where NCS = the net change in the value of the Series
(exclusive of realized gains and losses on the
sale of securities and unrealized appreciation
and depreciation) for the 7-day period
attributable to a hypothetical account having a
balance of 1 Sub-Account unit.
ES = AIC + CMC
where ES = per unit expenses of the Sub-Account for the
7-day period
AIC = per unit Asset Based Insurance Charges Deducted
for the 7-day period
CMC = per unit Contract fee deducted for the 7-day
period
= 0
since AAV = Average Accumulated Value of Contracts on the
last day of the 7-day period
= $80,000
UV = the unit value on the first day of the 7-day
period
= 10.00000
Totals for 7-day period:
<TABLE>
<CAPTION>
NCS AIC CMC
--- --- ---
<S> <C> <C>
0.012984 0.003049 0
= ((.012984 - .003049 - 0)/10.000000)/7 x 365
= 5.18% = 7-Day Current Yield
</TABLE>
<PAGE>
DOMESTIC MONEY MARKET SUB-ACCOUNT
7-Day Effective Yield
Effective Yield = ((1 + (NCS - ES)/UV) (CIRCUMFLEX) (365/7)) - 1
where NCS, ES, and UV are calculated as for the 7-Day Current Yield
7-Day Effective Yield = 5.31%
VARIABLE SUB-ACCOUNTS
Government Bond, PIMCO Total Return Bond
Note that the information presented below is hypothetical.
30-Day Yield
Yield = (2 x (((NI-ES)/(U x UV)) + 1) TO THE POWER OF ^ 6 - 1)
where NI = Net income of the portfolio for the 30-day period
attributable to the Sub-Account's units
ES = AIC + CMC
where ES = Expenses of the Sub-Account for the 30-day period
AIC = Asset Based Insurance charges deducted from the
Sub-Account for the 30-day period
CMC = Contract fee deducted from the Sub-Account for
the 30-day period
= $0
since AAV = Average Accumulated Value of Contracts on the
last day of the 30-day period
= $80,000
U = the average number of units outstanding,
which equals the number of units on the
first day of the 30-day period plus the
number of units on the last day of the
30-day period, the sum of which is divided
by 2
UV = the unit value at the close of the last day in
the 30-day period
<PAGE>
<TABLE>
<CAPTION>
NI AIC CMC U UV
---- ----- ----- --- ----
<S> <C> <C> <C> <C>
$25,000.00 $5,136.99 $0 500,000 $10.0635
</TABLE>
Based on the above hypothetical figures and the formulas presented, the 30-day
yield would be:
30-day Yield = 4.78%
VARIABLE SUB-ACCOUNTS
Basic Value Focus, Domestic Money Market, Fundamental Growth Focus, Government
Bond, Index 500, AIM V.I. International Equity, AIM V.I. Value, Alliance Growth
and Income, Alliance Premier Growth, MFS Emerging Growth, MFS Growth With
Income, Hotchkis and Wiley International VIP, Davis Value, Delaware Trend, PIMCO
Total Return Bond, Seligman Small-Cap Value, Van Kampen Emerging Growth.
Note that the information presented below is hypothetical.
Total Return
Total Return = ((ERV/P) - 1)
where ERV = the value, at the end of the applicable period,
of a hypothetical $1,000 investment made at the
beginning of the applicable period. It is
assumed that all dividends and capital gains
distributions are reinvested.
P = a hypothetical initial investment of $1,000
ERV = (1,000 x ((EUV-BUV) / BUV)) + 1,000 - CMC
where EUV = Unit Value at the end of the period
BUV = Unit Value at the beginning of the period
CMC = Contract Fee attributable to the hypothetical
account for the period
= $0
since AAV = Average Accumulated Value of Contracts on the
last day of the period
= $80,000
<PAGE>
<TABLE>
<CAPTION>
BUV EUV CMC ERV
----- ----- ----- -----
<S> <C> <C> <C>
10 11.25 0 1125.00
</TABLE>
Thus the Total Return over the assumed two year period is:
Total Return = 12.5%
Average Annual Total Return
the Average Annual Total Return would be calculated as follow:
Average Annual Total Return = ((ERV/P) (circumflex) (1/N) - 1)
where ERV and P are defined as above
and N = Number of years
= 2
which, based on the above information would yield 6.07% as an Average Annual
Total Return.
