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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 9, 1996
REGISTRATION NO. 33-45379
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-4 [_]
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. [_]
POST-EFFECTIVE AMENDMENT NO. 10 [X]
AND [_]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 10 [X]
(CHECK APPROPRIATE BOX OR BOXES)
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MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT B
(EXACT NAME OF REGISTRANT)
MERRILL LYNCH LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(609) 282-1429
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
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BARRY G. SKOLNICK, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
MERRILL LYNCH LIFE INSURANCE COMPANY
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
COPY TO:
STEPHEN E. ROTH, ESQ.
SUTHERLAND, ASBILL & BRENNAN, L.L.P.
1275 PENNSYLVANIA AVENUE, NW
WASHINGTON, D.C. 20004-2404
----------------
The Registrant has registered an indefinite amount of securities pursuant to
Rule 24f-2 under the Investment Company Act of 1940. The Rule 24f-2 notice for
fiscal year 1995 was filed on February 28, 1996.
It is proposed that this filing will become effective (check appropriate
space):
[X]immediately upon filing pursuant to paragraph (b) of Rule 485
[_]on pursuant to paragraph (b) of Rule 485
------------
(date)
[_]60 days after filing pursuant to paragraph (a) of Rule 485
[_]on pursuant to paragraph (a) of Rule 485
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(date)
EXHIBIT INDEX CAN BE FOUND ON PAGE C-8
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CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495(A) UNDER THE 1933 ACT)
<TABLE>
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N-4 ITEM NUMBER AND CAPTION LOCATION
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PART A
<C> <S> <C>
1. Cover Page.................. Cover Page
2. Definitions................. Definitions
3. Synopsis.................... Fee Table
4. Condensed Financial Informa- Accumulation Unit Value Table; Yields and
tion........................ Total Returns
Part B: Calculation of Yields and Total
Returns
5. General Description of
Registrant Depositor, and Merrill Lynch Life Insurance Company; The
Portfolio Companies......... Accounts; Investments of the Accounts
6. Deductions and Expenses..... Capsule Summary of the Contract (Fees and
Charges; Transfers; Withdrawals); Charges
and Deductions; Description of the
Contract (Accumulation Units; Transfers;
Withdrawals and Surrenders; Payments to
Contract Owners)
7. General Description of Vari-
able Annuity Contracts..... Capsule Summary of the Contract (The
Accounts; The Funds; Premiums; Annuity
Payments; Transfers; Withdrawals, Ten Day
Review); The Accounts; Description of the
Contract; Other Information (Voting
Rights; State Regulation)
8. Annuity Period.............. Capsule Summary of the Contract (Annuity
Payments); Description of the Contract
(Annuity Date; Annuity Options)
9. Death Benefit............... Capsule Summary of the Contract (Death
Benefit); Description of the Contract
(Death Benefit; Death of Annuitant);
Federal Income Tax (Taxation of Annuities)
10. Purchases and Contract Val- Capsule Summary of the Contract (The
ue.......................... Accounts; Premiums); Description of the
Contract (Premiums; Premium Investments;
Accumulation Units); Other Information
(Reports to Contract Owners)
Part B: Other Information (Principal
Underwriter)
11. Redemptions................. Capsule Summary of the Contract (Ten Day
Review); Charges and Deductions;
Description of the Contract (Issuing the
Contract; Ten Day Right to Review;
Withdrawals and Surrenders; Payments to
Contract Owners; Annuity Options)
12. Taxes....................... Capsule Summary of the Contract (Fees and
Deductions (Premium Taxes; Other Charges);
Description of the Contract (Accumulation
Units; Death Benefit; Withdrawals and
Surrenders; Annuity Options); Federal
Income Taxes
</TABLE>
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<TABLE>
<CAPTION>
N-4 ITEM NUMBER AND CAPTION LOCATION
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<C> <S> <C>
13. Legal Proceedings.......... Other Information (Legal Proceedings)
14. Table of Contents of the
Statement of Additional Table of Contents of the Statement of
Information................ Additional Information
PART B
15. Cover Page................. Cover Page
16. Table of Contents.......... Table of Contents
17. General Information and Part A: Merrill Lynch Life Insurance
History.................... Company; The Accounts; Investments of the
Accounts
Part B: Other Information (General
Information and History)
18. Services................... Part A: Other Information (Experts)
Part B: Administrative Service Arrangements
19. Purchase of Securities Be- Part A: Other Information (Selling the
ing Offered................ Contract)
20. Underwriters............... Part A: Other Information (Selling the
Contract)
Part B: Other Information (Principal
Underwriter)
Calculation of Performance
21. Data....................... Part A: Yields and Total Returns
Part B: Calculation of Yields and Total
Returns
22. Annuity Payments........... Part A: Capsule Summary of the Contract
(Annuity Payments); Description of the
Contract (Annuity Date; Annuity Options)
23. Financial Statements....... Other Information (Financial Statements);
Financial Statements of Merrill Lynch Life
Variable Annuity Separate Account A;
Financial Statements of Merrill Lynch Life
Variable Annuity Separate Account B;
Financial Statements of Merrill Lynch Life
Insurance Company.
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
DECEMBER 9, 1996
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
AND
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT B
FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
ALSO KNOWN AS
MODIFIED SINGLE 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
The individual deferred variable annuity contract described in this Prospectus
(the "Contract") is designed to provide comprehensive and flexible ways to
invest and to create a source of income protection for later in life through
the payment of annuity benefits. 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.
Premiums will be allocated as the contract owner directs into one or more
subaccounts of Merrill Lynch Life Variable Annuity Separate Account A
("Account A") and/or Merrill Lynch Life Variable Annuity Separate Account B
("Account B"), (together, the "Accounts"). The assets of each of the
subaccounts will be invested in a corresponding mutual fund portfolio of the
Merrill Lynch Variable Series Funds, Inc.; AIM Variable Insurance Funds, Inc.;
Alliance Variable Products Series Fund, Inc.; and MFS Variable Insurance Trust
(each portfolio, a "Fund"; collectively, the "Funds"). Currently, there are
seventeen subaccounts available through Account A and one subaccount available
through Account B. Three additional subaccounts previously available though
Account A are no longer available for the allocation of premiums or contract
value. Other subaccounts and corresponding investment options may be added in
the future. The value of a contract owner's investment in each subaccount will
vary with investment experience, and it is the contract owner who bears the
full investment risk with respect to his or her investments.
The Contract provides a choice of fixed annuity payment options. On the
annuity date, the entire contract value, after the deduction of a charge for
any applicable premium taxes, will be transferred to Merrill Lynch Life's
general account, from which the annuity payments will be made. Prior to the
annuity date, the contract owner may make transfers among Account A
subaccounts, limited transfers from Account A into Account B, and full or
partial withdrawals from the Contract to suit investment and liquidity needs.
Withdrawals may be taxable and may be subject to a contingent deferred sales
charge.
This Prospectus contains information about the Contract and the Accounts that
a prospective contract owner should know before investing. Additional
information about the Contract and the Accounts is contained in a Statement of
Additional Information, dated December 9, 1996, which has been filed with the
Securities and Exchange Commission and is incorporated herein by reference.
The Statement of Additional Information is available on request and without
charge by writing to or calling Merrill Lynch Life at the Service Center
address or phone number set forth above. The table of contents for the
Statement of Additional Information is included on page 38 of this Prospectus.
THE PURCHASE OF THIS CONTRACT INVOLVES CERTAIN RISKS. BECAUSE IT IS A VARIABLE
ANNUITY, THE VALUE OF THE CONTRACT REFLECTS THE INVESTMENT PERFORMANCE OF THE
SELECTED INVESTMENT OPTIONS. INVESTMENT RESULTS CAN VARY BOTH UP AND DOWN AND
CAN EVEN DECREASE THE VALUE OF PREMIUM PAYMENTS. THEREFORE, CONTRACT OWNERS
COULD LOSE ALL OR PART OF THE MONEY THEY HAVE INVESTED. MERRILL LYNCH LIFE
DOES NOT GUARANTEE THE VALUE OF THE CONTRACT. RATHER, CONTRACT OWNERS BEAR ALL
INVESTMENT RISKS.
AN ANNUITY IS INTENDED TO BE A LONG TERM INVESTMENT. WITHDRAWALS OR SURRENDER
OF THE CONTRACT PREMATURELY MAY RESULT IN SUBSTANTIAL PENALTIES. CONTRACT
OWNERS SHOULD CONSIDER THEIR INCOME NEEDS BEFORE PURCHASING THE CONTRACT.
ALL WITHDRAWALS FROM AND SURRENDER OF THE CONTRACT ARE SUBJECT TO TAX, AND IF
TAKEN BEFORE AGE 59 1/2 MAY ALSO BE SUBJECT TO A 10% FEDERAL PENALTY TAX.
THIS CONTRACT PROVIDES A GUARANTEED DEATH BENEFIT THAT IS PAYABLE ONLY UPON
THE DEATH OF THE CONTRACT OWNER. THE 5% GROWTH GUARANTEED ON CERTAIN PREMIUMS
FOR DEATH BENEFIT PURPOSES IS NOT A GUARANTEE OF CONTRACT VALUE, NOR IS IT
APPLICABLE TO ANY OTHER FEATURE OF THE CONTRACT.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS ATTACHED
TO CURRENT PROSPECTUSES FOR THE FUNDS WHICH SHOULD ALSO BE READ AND KEPT FOR
REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
DEFINITIONS............................................................ 4
CAPSULE SUMMARY OF THE CONTRACT........................................ 5
FEE TABLE.............................................................. 9
ACCUMULATION UNIT VALUES............................................... 13
YIELDS AND TOTAL RETURNS............................................... 15
MERRILL LYNCH LIFE INSURANCE COMPANY................................... 16
THE ACCOUNTS........................................................... 16
INVESTMENTS OF THE ACCOUNTS............................................ 17
Merrill Lynch Variable Series Funds, Inc. ........................... 17
Domestic Money Market Fund......................................... 18
Prime Bond Fund.................................................... 18
High Current Income Fund........................................... 18
Quality Equity Fund................................................ 18
Equity Growth Fund................................................. 18
Natural Resources Focus Fund....................................... 19
American Balanced Fund............................................. 19
Global Strategy Focus Fund......................................... 19
Basic Value Focus Fund............................................. 19
Global Bond Focus Fund............................................. 19
Global Utility Focus Fund.......................................... 19
International Equity Focus Fund.................................... 20
Government Bond Fund............................................... 20
Developing Capital Markets Focus Fund.............................. 20
Reserve Assets Fund................................................ 20
Index 500 Fund..................................................... 20
AIM Variable Insurance Funds, Inc. .................................. 20
AIM V.I. Capital Appreciation Fund................................. 21
AIM V.I. Value Fund................................................ 21
Alliance Variable Products Series Fund, Inc. ........................ 21
Premier Growth Portfolio........................................... 22
MFS Variable Insurance Trust......................................... 22
Emerging Growth Series............................................. 22
Research Series.................................................... 22
Purchases and Redemptions of Fund Shares; Reinvestment............... 22
Material Conflicts, Substitution of Investments and Changes to
Accounts........................................................... 22
CHARGES AND DEDUCTIONS................................................. 23
Contract Maintenance Charge.......................................... 23
Mortality and Expense Risk Charge.................................... 23
Administration Charge................................................ 24
Contingent Deferred Sales Charge..................................... 24
Premium Taxes........................................................ 25
Other Charges........................................................ 25
DESCRIPTION OF THE CONTRACT............................................ 26
Ownership of the Contract............................................ 26
Issuing the Contract................................................. 26
Ten Day Right to Review.............................................. 26
Contract Changes..................................................... 26
Premiums............................................................. 27
Premium Investments.................................................. 27
Accumulation Units................................................... 27
Death Benefit........................................................ 28
Death of Annuitant................................................... 29
Transfers............................................................ 29
Dollar Cost Averaging................................................ 30
</TABLE>
2
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<TABLE>
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PAGE
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Merrill Lynch Retirement Plus Advisor SM................................. 30
Withdrawals and Surrenders............................................... 31
Payments to Contract Owners.............................................. 32
Annuity Date............................................................. 32
Annuity Options.......................................................... 33
Unisex................................................................... 34
FEDERAL INCOME TAXES....................................................... 34
Introduction............................................................. 34
Merrill Lynch Life's Tax Status.......................................... 34
Taxation of Annuities.................................................... 35
Internal Revenue Service Diversification Standards....................... 36
IRA Contracts............................................................ 37
Transfers, Assignments, or Exchanges of a Contract....................... 37
Withholding.............................................................. 37
Possible Changes in Taxation............................................. 38
Other Tax Consequences................................................... 38
OTHER INFORMATION.......................................................... 38
Voting Rights............................................................ 38
Reports to Contract Owners............................................... 38
Selling the Contract..................................................... 39
State Regulation......................................................... 39
Legal Proceedings........................................................ 39
Experts.................................................................. 40
Legal Matters............................................................ 40
Registration Statements.................................................. 40
Table of Contents of the Statement of Additional Information............. 40
</TABLE>
3
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DEFINITIONS
Accounts: Two segregated investment accounts of Merrill Lynch Life Insurance
Company, named Merrill Lynch Life Variable Annuity Separate Account A and
Merrill Lynch Life Variable Annuity Separate Account B. (See page 15.)
account value: The value of a contract owner's interest in a particular
Account.
accumulation unit: An index used to compute the value of the contract owner's
interest in a subaccount prior to the annuity date. (See page 26.)
annuitant: The person on whose continuation of life annuity payments may
depend.
annuity date: The date on which annuity payments begin. (See page 31.)
beneficiary: The person to whom payment is to be made on the death of the
contract owner.
Contract: The variable annuity offered by this Prospectus.
contract anniversary: The same date each year as the date of issue of the
Contract.
contract owner: The person entitled to exercise all rights under the Contract.
(See page 25.)
contract value: The value of a contract owner's interest in the Accounts.
contract year: The period from one contract anniversary to the day preceding
the next contract anniversary.
date of issue: The date on which an initial premium is received and required
contract owner information is approved by Merrill Lynch Life. (See page 25.)
due proof of death: A certified copy of the death certificate, Beneficiary
Statement, and any additional paperwork necessary to process the death claim.
Funds: The mutual funds, or separate investment portfolios within a series
mutual fund, designated as eligible investments for the Accounts. (See page
16.)
Individual Retirement Account or Annuity ("IRA"): A Contract issued in
connection with a retirement arrangement that receives favorable tax status
under Section 408 of the Internal Revenue Code.
monthiversary: The same date of each month as the date on which the Contract
was issued.
net investment factor: An index used to measure the investment performance of
a subaccount from one valuation period to the next. (See page 22.)
nonqualified contract: A Contract issued in connection with a retirement
arrangement other than a qualified arrangement described under Section 401,
403, 408, 457 or any similar provisions of the Internal Revenue Code.
premiums: Money paid into the Contract. (See page 26.)
subaccount: A division of each of the Accounts consisting of the shares of a
particular Fund held by that Account.
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. (See page 27.)
variable annuity: A contract with a value that reflects investment experience
prior to the annuity date, and provides periodic payments of set amounts after
the annuity date.
4
<PAGE>
CAPSULE SUMMARY OF THE CONTRACT
The following capsule summary is intended to provide a brief overview of the
Contract. More detailed information about the Contract can be found in the
sections of this Prospectus that follow, all of which should be read in their
entirety.
THE ACCOUNTS
Premiums will be allocated to Merrill Lynch Life Variable Annuity Separate
Account A ("Account A") and/or Merrill Lynch Life Variable Annuity Separate
Account B ("Account B") segregated investment accounts (together, the
"Accounts"), as directed by the contract owner. The Accounts are divided into
subaccounts corresponding to the Funds in which contract value may be
invested. Premiums are not invested directly in the underlying Funds. For the
first 14 days following the date of issue, all premiums directed into Account
A will be allocated to the Domestic Money Market Fund Subaccount. Thereafter,
the account value will be reallocated to the Account A subaccounts selected.
In the Commonwealth of Pennsylvania, all premiums will be invested as of the
date of issue in the subaccounts selected by the contract owner. Account A
account value may be periodically transferred among Account A subaccounts,
subject to certain limitations. Currently, a contract owner may allocate
premiums or contract value among a total of eighteen subaccounts. The contract
value and annuity payments will reflect the investment performance of the
Funds selected. (See THE ACCOUNTS on page 15 and TRANSFERS on page 28.)
THE FUNDS
The Funds are separate investment mutual fund portfolios of the Merrill Lynch
Variable Series Funds, Inc. ("Merrill Variable Funds"); AIM Variable Insurance
Funds, Inc. ("AIM V.I. Funds"); Alliance Variable Products Series Fund, Inc.
("Alliance Series Fund"); and MFS Variable Insurance Trust ("MFS Insurance
Trust") (each portfolio, a "Fund"; collectively, the "Funds"). The following
eighteen Funds are currently available for contract owner investment
(seventeen available through Account A and one available through Account B),
each with a different investment objective: Domestic Money Market Fund, Prime
Bond Fund, High Current Income Fund, Quality Equity Fund, Equity Growth Fund,
Global Strategy Focus Fund, Basic Value Focus Fund, Global Bond Focus Fund,
International Equity Focus Fund, Government Bond Fund, Developing Capital
Markets Focus Fund, Index 500 Fund, and Reserve Assets Fund, each of Merrill
Variable Funds; AIM V.I. Capital Appreciation Fund and AIM V.I. Value Fund,
each of AIM V.I. Funds; Premier Growth Portfolio of Alliance Series Fund; and
Emerging Growth Series and Research Series, each of MFS Insurance Trust.
(Subaccounts investing in the Natural Resources Focus Fund, the American
Balanced Fund, and the Global Utility Focus Fund of Merrill Variable Funds
were closed to allocations of premiums and contract value following the close
of business on December 6, 1996.) Other investment options may be added in the
future. (See INVESTMENTS OF THE ACCOUNTS on page 16.)
Detailed information about the investment objectives of the Funds can be found
under INVESTMENTS OF THE ACCOUNTS on page 16 and in the attached prospectuses
for the Funds.
PREMIUMS
The Contract generally allows contract owners the flexibility to make premium
payments as often as desired. The Contract is purchased by making an initial
premium payment of $5,000 or more on a nonqualified Contract and $2,000 or
more on an IRA Contract. Subsequent premium payments generally must be $300 or
more and can be made at any time prior to the annuity date. Maximum annual
contributions to IRA Contracts are limited by federal law. Under an automatic
investment feature, subsequent premium payments can be systematically made
from a Merrill Lynch, Pierce, Fenner & Smith Incorporated brokerage account. A
Financial Consultant should be contacted for additional information. Merrill
Lynch Life reserves the right to refuse to accept subsequent premium payments,
if required by law. (See PREMIUMS on page 26.)
FEES AND CHARGES
A charge is made to reimburse Merrill Lynch Life for expenses related to
maintenance of the Contract. A $40 contract maintenance charge will be
deducted from the contract value on each
5
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contract anniversary that occurs on or prior to the annuity date. It will also
be deducted when the Contract is surrendered, if it is surrendered on any date
other than a contract anniversary. This charge will be 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. It is not deducted after the annuity date.
A mortality and expense risk charge is imposed on the Accounts. It equals
1.25% annually for Account A and 0.65% annually for Account B and is deducted
daily from the net asset value of the Accounts. Of this amount, 0.75% annually
for Account A and 0.35% annually for Account B is attributable to mortality
risks assumed by Merrill Lynch Life for the annuity payment and death benefit
guarantees made under the Contract. The remainder, 0.50% annually for Account
A and 0.30% annually for Account B, is attributable to expense risks assumed
by Merrill Lynch Life should the contract maintenance and administration
charges be insufficient to cover all Contract maintenance and administration
expenses.
An administration charge is made to reimburse Merrill Lynch Life for costs
associated with the establishment and administration of the Contract. A charge
of 0.10% annually will be deducted daily only from the net asset value of
Account A. No administration charge is imposed on the assets of Account B.
A contingent deferred sales charge may be imposed on withdrawals and
surrenders from Account A. The maximum contingent deferred sales charge is 7%
of premium withdrawn during the first year after that premium is paid,
decreasing by 1% annually to 0% after year seven. No contingent deferred sales
charge will be imposed on withdrawals or surrenders from Account B. In
addition, no contingent deferred sales charge will be imposed on withdrawals
or surrenders from Contracts purchased by employees of Merrill Lynch Life or
its affiliates or from Contracts purchased by the employees' spouses or
dependents, where permitted by state regulation.
A charge for any premium taxes imposed by a state or local government will be
deducted from the contract value on the annuity date. Premium tax rates vary
from jurisdiction to jurisdiction and currently range from 0% to 5%. In those
jurisdictions that do not allow an insurance company to reduce its current
taxable premium income by the amount of any withdrawal, surrender or death
benefit paid, Merrill Lynch Life will also deduct a charge for these taxes on
any withdrawal, surrender or death benefit effected under the Contract.
Merrill Lynch Life reserves 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. Merrill Lynch Life also reserves the right to deduct from
the Accounts any taxes imposed on the Accounts' investment earnings. (See
MERRILL LYNCH LIFE'S TAX STATUS on page 33.)
Detailed information about fees and charges imposed on the Contract can be
found under CHARGES AND DEDUCTIONS on page 22.
ANNUITY PAYMENTS
The Contract provides a choice of fixed annuity payment options. On the
annuity date, the entire contract value will be transferred to Merrill Lynch
Life's general account, from which the annuity payments will be made. The
amount of each payment is predetermined.
The contract owner selects an annuity date when annuity payments will begin.
Contract owners may change the annuity date up to 30 days prior to that date.
However, the annuity date for nonqualified Contracts may not be later than the
annuitant's 85th birthday. The annuity date for IRA Contracts will not be
later than when the owner/annuitant reaches the age of 70 1/2 unless the
contract owner selects a later annuity date.
If the contract value on the annuity date after the deduction of any
applicable premium taxes is less than $5,000 (or a different minimum amount,
if required by state law), Merrill Lynch Life
6
<PAGE>
may pay the annuity benefits in a lump sum, rather than as periodic payments.
If any annuity payment would be less than $50 (or a different minimum amount,
if required by state law), Merrill Lynch Life may change the frequency of
payments so that all payments will be at least $50 (or the minimum amount
required by state law). All annuity payments will be directly transferred to
the contract owner's designated Merrill Lynch, Pierce, Fenner & Smith
Incorporated brokerage account, unless otherwise specified.
Details about the annuity options available under the Contract can be found
under ANNUITY OPTIONS on page 32.
TRANSFERS
Once each contract year, contract owners may transfer from Account A to
Account B an amount equal to any gain in account value and/or any premium not
subject to a contingent deferred sales charge. Where permitted by state
regulation, once each contract year, contract owners may transfer all or a
portion of the greater of that amount or 10% of premiums subject to a
contingent deferred sales charge (minus any of that premium already withdrawn
or transferred). Additionally, where permitted by state regulation, periodic
transfers of all or a portion of the greater amount, determined at the time of
each periodic transfer, are permitted, on a monthly, quarterly, semi-annual or
annual basis.
This is the only amount which may be transferred from Account A to Account B
during that contract year. There is no charge imposed on the transfer of this
amount. No transfers are permitted from Account B to Account A.
Prior to their annuity date, contract owners may transfer all or part of their
Account A value among the subaccounts of Account A up to six times per
contract year without charge. Additional transfers among Account A subaccounts
may be made at a charge of $25 per transfer. Contract owners may elect a
Dollar Cost Averaging feature in which Account A value invested in the
Domestic Money Market Subaccount may be systematically transferred among the
other Account A subaccounts on a monthly basis without charge, subject to
certain limitations. In addition, through participation in the Merrill Lynch
RPA SM program, contract owners may have their Account A values allocated in
accordance with an investment program consistent with the contract owner's
investment profile. (See TRANSFERS on page 28; DOLLAR COST AVERAGING on page
29; and MERRILL LYNCH RETIREMENT PLUS ADVISOR SM on page 29.)
Effective following the close of business on December 6, 1996, transfers may
no longer be made to the Natural Resources Focus Subaccount, the American
Balanced Subaccount, or the Global Utility Focus Subaccount.
WITHDRAWALS
Contract owners may make up to six withdrawals from the Contract per contract
year. Value withdrawn from Account A is generally subject to a contingent
deferred sales charge. (See CONTINGENT DEFERRED SALES CHARGE on page 23.)
However, a contingent deferred sales charge will not be applied to the first
withdrawal in any contract year out of Account A to the extent that the
withdrawal consists of gain and/or any premium not subject to such a charge.
Where permitted by state regulation, a contingent deferred sales charge will
not be applied to that portion of the first withdrawal from Account A in any
contract year that does not exceed the greater of any gain in account value
and/or any premium not subject to a contingent deferred sales charge and 10%
of premiums subject to a contingent deferred sales charge (minus any of that
premium already transferred out of Account A). Additionally, where permitted
by state regulation, the amount withdrawn may be elected to be paid on a
monthly, quarterly, semi-annual or annual basis.
The first withdrawal of the contract year out of Account A will be treated as
withdrawing gain in account value first, followed by premium not subject to a
contingent deferred sales charge, then followed by premium subject to such a
charge. If the amount withdrawn is paid on a monthly, quarterly, semi-annual
or annual basis, all such payments will be treated in the same way. All
subsequent withdrawals in a contract year will be treated as withdrawing
premium accumulated the longest first. (See WITHDRAWALS AND SURRENDERS on page
30.)
7
<PAGE>
Value withdrawn from Account B is not subject to any contingent deferred sales
charge. In addition, no contingent deferred sales charge will be imposed on
withdrawals from Contracts purchased by employees of Merrill Lynch Life or its
affiliates or from Contracts purchased by the employees' spouses or
dependents, where permitted by state regulation.
In addition to the six withdrawals permitted each contract year, the value in
Account B may be automatically withdrawn on a monthly, quarterly, semi-annual,
or annual basis. These automatic withdrawals are not subject to any contingent
deferred sales charge. (See WITHDRAWALS AND SURRENDERS on page 30.)
Withdrawals will decrease the contract value. Withdrawals from either Account
A or Account B 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 on page 33.)
DEATH BENEFIT
The Contract provides a death benefit feature that guarantees a death benefit
if the contract owner dies prior to the annuity date, regardless of investment
experience. A Contract's death benefit is equal to the greater of (a) the sum
of the excess, if any, of premiums paid into Account A with interest on them
from the date received at an interest rate compounded daily to yield 5%
annually, over transfers to Account B and withdrawals from Account A
multiplied by a rate compounded daily from the date of transfer or withdrawal
to yield 5% annually, plus the value of Account B; or (b) the contract value.
There are limits on the period during which interest will accrue for purposes
of this calculation. For Contracts issued beginning June 1, 1995 (or later as
state approvals are obtained), interest shall accrue only until the earliest
of the last day of the 20th contract year, the last day of the contract year
in which the contract owner (annuitant when the contract owner is not a
natural person) attains age 80, or the date of the contract owner's
(annuitant's when the contract owner is not a natural person) death. For
Contracts issued prior to June 1, 1995, and for Contracts issued on or after
that date but before state approvals are obtained, interest shall accrue only
until the last day of the 20th contract year. If the contract owner dies prior
to the annuity date, Merrill Lynch Life will pay the Contract's death benefit
to the owner's beneficiary. (See DEATH BENEFIT on page 27.)
TEN DAY REVIEW
When the contract owner receives the Contract, it should be reviewed carefully
to make sure it is what the contract owner intended to purchase. Generally,
within 10 days after the contract owner receives the Contract, it may be
returned for a refund. Some states allow a longer period of time to return the
Contract. The Contract must be delivered to Merrill Lynch Life's Service
Center or to the Financial Consultant who sold it for a refund to be made.
Merrill Lynch Life will then refund to the contract owner the greater of all
premiums paid into the Contract or the contract value as of the date the
Contract is returned. For contracts issued in the Commonwealth of
Pennsylvania, Merrill Lynch Life will refund the contract value as of the date
the Contract is returned. The Contract will then be deemed void. (See TEN DAY
RIGHT TO REVIEW on page 25.)
8
<PAGE>
FEE TABLE
<TABLE>
<C> <S> <C>
A.Contract Owner Transaction Expenses
1. Sales Load Imposed on Premium...................................... None
2. Contingent Deferred Sales Charge
</TABLE>
<TABLE>
<CAPTION>
COMPLETE YEARS ELAPSED SINCE CONTINGENT DEFERRED SALES CHARGE AS A
PAYMENT OF PREMIUM PERCENTAGE OF PREMIUM WITHDRAWN
---------------------------- -------------------------------------
<S> <C>
0 years 7.00%
1 year 6.00%
2 years 5.00%
3 years 4.00%
4 years 3.00%
5 years 2.00%
6 years 1.00%
7 or more years 0.00%
</TABLE>
<TABLE>
<C> <S> <C>
3. Transfer Fee........................................................ $25
The first 6 transfers among Separate Account A subaccounts in a contract
year are free. A $25 fee may be charged on all subsequent transfers. These
rules apply only to transfers among Separate Account A subaccounts. They do
not apply to transfers from Separate Account A to Separate Account B. No
transfers may be made from Separate Account B.
B. Annual Contract Maintenance Charge...................................... $40
The Contract Maintenance Charge will be assessed annually on each
contract anniversary, only if the contract value is less than $50,000.
C. Separate Account Annual Expenses (as a percentage of account value)
</TABLE>
<TABLE>
<CAPTION>
SEPARATE ACCT A SEPARATE ACCT B
--------------- ---------------
<S> <C> <C>
Mortality and Expense Risk Charge......... 1.25% .65%
Administration Charge..................... .10% .00%
---- ---
Total Separate Account Annual Expenses.... 1.35% .65%
</TABLE>
<TABLE>
<S> <C>
D. Fund Expenses for the Year Ended December 31, 1995 (a)(b)(c) (as a
percentage of each Fund's net assets)
</TABLE>
<TABLE>
<CAPTION>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
-----------------------------------------------------------
HIGH NATURAL GLOBAL
RESERVE PRIME CURRENT QUALITY EQUITY RESOURCES STRATEGY
ANNUAL EXPENSES ASSETS BOND INCOME EQUITY GROWTH FOCUS* FOCUS(D)
--------------- ------- ----- ------- ------- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory
Fees................... .50% .45% .50% .46% .75% .65% .65%
Other Expenses.......... .11% .05% .05% .05% .06% .13% .07%
Total Annual Operating
Expenses............... .61% .50% .55% .51% .81% .78% .72%
</TABLE>
<TABLE>
<CAPTION>
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. (CONT'D)
-------------------------------------------------------------
DOMESTIC BASIC GLOBAL GLOBAL INTERNATIONAL
AMERICAN MONEY VALUE BOND UTILITY EQUITY
ANNUAL EXPENSES BALANCED* MARKET (A) FOCUS FOCUS(D) FOCUS* FOCUS
--------------- --------- ---------- ----- -------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory
Fees................... .55% .50% .60% .60% .60% .75%
Other Expenses.......... .06% .05% .06% .08% .06% .14%
Total Annual Operating
Expenses............... .61% .55% .66% .68% .66% .89%
</TABLE>
<TABLE>
<CAPTION>
ALLIANCE
VARIABLE
MERRILL LYNCH PRODUCTS
VARIABLE SERIES AIM VARIABLE SERIES MFS VARIABLE
FUNDS, INC. (CONT'D) INSURANCE FUNDS, INC. FUND, INC. INSURANCE TRUST
----------------------------------- --------------------- ------------ -------------------
DEVELOPING AIM V.I.
CAPITAL CAPITAL AIM V.I. PREMIER EMERGING
GOVERNMENT MARKETS INDEX 500 APPRECIATION VALUE GROWTH GROWTH RESEARCH
ANNUAL EXPENSES BOND (A)(B)(D) FOCUS (C) FUND(B) FUND FUND PORTFOLIO(E) SERIES(F) SERIES(F)
--------------- -------------- ---------- --------- ------------ -------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory
Fees................... .50% 1.00% .30% .65% .65% .76% .75% .75%
Other Expenses.......... .16% .25% .23% .10% .10% .19% .50% .50%
Total Annual Operating
Expenses............... .66% 1.25% .53% .75% .75% .95% 1.25% 1.25%
</TABLE>
- --------
* Closed to allocations of premiums or contract value following the close of
business on December 6, 1996.
9
<PAGE>
EXAMPLES OF CHARGES
If the Contract is surrendered at the end of the applicable time period:
The following cumulative expenses would be paid 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>
Separate Account B subaccount investing
in:
Reserve Assets Fund.................... $84 $ 94 $106 $166
Separate Account A subaccount investing
in:
Prime Bond Fund........................ $90 $112 $137 $231
High Current Income Fund............... $91 $114 $140 $236
Quality Equity Fund.................... $90 $113 $138 $232
Equity Growth Fund..................... $93 $122 $153 $264
Natural Resources Focus Fund*.......... $93 $121 $152 $260
Global Strategy Focus Fund............. $92 $119 $148 $254
American Balanced Fund*................ $91 $116 $143 $243
Domestic Money Market Fund............. $91 $114 $140 $236
Basic Value Focus Fund................. $92 $117 $145 $248
Global Bond Focus Fund................. $92 $118 $146 $250
Global Utility Focus Fund*............. $92 $117 $145 $248
International Equity Focus Fund........ $94 $124 $157 $272
Government Bond Fund................... $92 $117 $145 $248
Developing Capital Markets Focus Fund.. $98 $135 $176 $308
Index 500 Fund......................... $90 $113 $139 $234
AIM V.I. Capital Appreciation Fund..... $93 $120 $150 $257
AIM V.I. Value Fund.................... $93 $120 $150 $257
Premier Growth Portfolio............... $95 $126 $160 $278
Emerging Growth Series................. $98 $135 $176 $308
Research Series........................ $98 $135 $176 $308
If the Contract is annuitized, or not surrendered, at the end of the applicable
time period:
The following cumulative expenses would be paid on each $1,000 invested,
assuming 5% annual return on assets:
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Separate Account B subaccount investing
in:
Reserve Assets Fund.................... $14 $ 44 $ 76 $166
Separate Account A subaccount investing
in:
Prime Bond Fund........................ $20 $ 62 $107 $231
High Current Income Fund............... $21 $ 64 $110 $236
Quality Equity Fund.................... $20 $ 63 $108 $232
Equity Growth Fund..................... $23 $ 72 $123 $264
Natural Resources Focus Fund*.......... $23 $ 71 $122 $260
Global Strategy Focus Fund............. $22 $ 69 $118 $254
American Balanced Fund*................ $21 $ 66 $113 $243
Domestic Money Market Fund............. $21 $ 64 $110 $236
Basic Value Focus Fund................. $22 $ 67 $115 $248
Global Bond Focus Fund................. $22 $ 68 $116 $250
Global Utility Focus Fund*............. $22 $ 67 $115 $248
International Equity Focus Fund........ $24 $ 74 $127 $272
Government Bond Fund................... $22 $ 67 $115 $248
Developing Capital Markets Focus Fund.. $28 $ 85 $146 $308
Index 500 Fund......................... $20 $ 63 $109 $234
AIM V.I. Capital Appreciation Fund..... $23 $ 70 $120 $257
AIM V.I. Value Fund.................... $23 $ 70 $120 $257
Premier Growth Portfolio............... $25 $ 76 $130 $278
Emerging Growth Series................. $28 $ 85 $146 $308
Research Series........................ $28 $ 85 $146 $308
</TABLE>
- --------
* Closed to allocations of premiums or contract value following the close of
business on December 6, 1996.
10
<PAGE>
The preceding Fee Table and Examples are intended to assist investors in
understanding the costs and expenses that a contract owner will bear, directly
or indirectly. The Fee Table and Examples include expenses and charges of the
Accounts as well as the Funds. The Examples also reflect the $40 contract
maintenance charge as .089% of assets, determined by dividing the total amount
of such charges collected by the total average net assets of the subaccounts.
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 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.
NOTES TO FEE TABLE
(a) The Fee Table does not reflect any fees waived or expenses assumed by
Merrill Lynch Asset Management, L.P. ("MLAM") during the year ended
December 31, 1995 with respect to any Fund because such waivers and
assumption of expenses were made on a voluntary basis and MLAM may
discontinue or reduce any such waiver or assumption of expenses at any
time without notice. During the fiscal year ended December 31, 1995, MLAM
waived management fees and reimbursed expenses totaling 0.66% for the
Intermediate Government Bond Fund and 0.95% for the International Bond
Fund after which each such Fund's total expense ratio, net of
reimbursement, was 0.00% for the Intermediate Government Bond Fund, and
0.00% for the International Bond Fund. See also notes (b) and (c).
(b) "Other Expenses" and "Total Annual Operating Expenses" shown for
Government Bond Fund and Index 500 Fund are based on expenses estimated
for the current fiscal year.
(c) MLAM and Merrill Lynch Life Agency, Inc. have entered into a Reimbursement
Agreement that limits the operating expenses paid by each Fund of the
Merrill Variable Funds in a given year to 1.25% of its average net assets.
This Reimbursement Agreement is expected to remain in effect for the
current year. Pursuant to this Reimbursement Agreement, the Developing
Capital Markets Focus Fund was reimbursed for a portion of its operating
expenses for 1995. Absent the reimbursement, "Other Expenses" for this
Fund would have been 0.36%. Expenses shown for all other Funds of the
Merrill Variable Funds do not reflect any reimbursement under the
Reimbursement Agreement.
(d) Effective following the close of business on December 6, 1996, (i) the
International Bond Fund was merged with and into the former World Income
Focus Fund; the World Income Focus Fund was renamed the Global Bond Focus
Fund and its investment objective was modified; (ii) the Flexible Strategy
Fund was merged with and into the Global Strategy Focus Fund; and (iii)
the Intermediate Government Bond Fund was renamed the Government Bond Fund
and its investment objective was modified. See the accompanying prospectus
for Merrill Variable Funds for additional information regarding these
changes.
(e) The Fee Table reflects fees waived or expenses assumed by Alliance Capital
Management L.P. ("Alliance") during the year ended December 31, 1995. Such
waivers and assumption of expenses were made on a voluntary basis and
Alliance may discontinue or reduce any such waiver or assumption of
expenses at any time without notice; however, Alliance intends to continue
such reimbursements for the foreseeable future. During the fiscal year
ended December 31, 1995, Alliance waived management fees totaling 0.24%
for the Premier Growth Portfolio. Without such reimbursements, "Investment
Advisory Fees" would have been 1.00% and "Total Annual Operating Expenses"
would have been 1.19%.
11
<PAGE>
(f) Massachusetts Financial Services Company ("MFS") has agreed to bear,
subject to reimbursement, expenses for each of the Emerging Growth Series
and Research Series such that each Series's aggregate operating expenses
shall not exceed, on an annualized basis, 1.00% of the average daily net
assets of the Series from November 2, 1994 through December 31, 1996,
1.25% of the average daily net assets of the Series from January 1, 1997
through December 31, 1998; and 1.50% of the average daily net assets of
the Series from January 1, 1999 through December 31, 2004; provided
however that this obligation may be terminated or revised at any time.
Absent this expense arrangement, "Other Expenses" for the Emerging Growth
Series and Research Series would be 2.16% and 3.15%, respectively, and
"Total Operating Expenses" would be 2.91% and 3.90%, respective for these
Series for the year ending December 31, 1995.
12
<PAGE>
ACCUMULATION UNIT VALUES
(CONDENSED FINANCIAL INFORMATION)
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------------------------
DOMESTIC MONEY MARKET PRIME BOND
-------------------------------------- --------------------------------------
1/1/95 1/1/94 1/1/93 1/1/95 1/1/94 1/1/93
TO TO TO TO TO TO
12/31/95 12/31/94 12/31/93 12/31/95 12/31/94 12/31/93
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1)Accumulation
unit value at
beginning of
period........ $10.64 $10.37 $10.20 $11.21 $11.94 $10.80
(2)Accumulation
unit value at
end of
period........ $11.09 $10.64 $10.37 $13.29 $11.21 $11.94
(3)Number of
accumulation
units
outstanding at end of period..25,642,773.0 32,396,626.5 15,662,277.0 31,553,814.4 29,135,349.6 20,094,427.0
<CAPTION>
QUALITY EQUITY EQUITY GROWTH
-------------------------------------- --------------------------------------
1/1/95 1/1/94 1/1/93 1/1/95 1/1/94 1/1/93
TO TO TO TO TO TO
12/31/95 12/31/94 12/31/93 12/31/95 12/31/94 12/31/93
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1)Accumulation
unit value at
beginning of
period........ $11.38 $11.67 $10.33 $9.90 $10.82 $9.31
(2)Accumulation
unit value at
end of
period........ $13.77 $11.38 $11.67 $14.25 $9.90 $10.82
(3)Number of
accumulation
units
outstanding at end of period..39,846,415.5 33,600,288.0 19,415,425.1 21,157,583.8 14,844,233.7 7,108,268.0
<CAPTION>
AMERICAN BALANCED NATURAL RESOURCES FOCUS
-------------------------------------- --------------------------------------
1/1/95 1/1/94 1/1/93 1/1/95 1/1/94 1/1/93
TO TO TO TO TO TO
2/31/95 12/31/94 12/31/93 12/31/95 12/31/94 12/31/93
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1)Accumulation
unit value at
beginning of
period........ $11.21 $11.86 $10.60 $11.30 $11.29 $10.36
(2)Accumulation
unit value at
end of
period........ $13.37 $11.21 $11.86 $12.56 $11.30 $11.29
(3)Number of
accumulation
units
outstanding at end of period..13,988,384.1 12,253,488.1 7,844,224.7 3,136,512.9 3,158,540.0 1,052,692.5
<CAPTION>
BASIC VALUE FOCUS WORLD INCOME FOCUS
-------------------------------------- --------------------------------------
1/1/95 1/1/94 7/1/93* 1/1/95 1/1/94 7/1/93*
TO TO TO TO TO TO
12/31/95 12/31/94 12/31/93 12/31/95 12/31/94 12/31/93
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
(1)Accumulation
unit value at
beginning of
period........ $10.98 $10.88 $10.00 $9.94 $10.52 $10.00
(2)Accumulation
unit value at
end of
period........ $13.60 $10.98 $10.88 $11.45 $9.94 $10.52
(3)Number of
accumulation
units
outstanding at end of period..20,468,571.0 13,875,148.9 3,847,716.5 6,621,174.7 6,989,051.9 4,305,872.9
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------
HIGH CURRENT INCOME
--------------------------------------
1/1/95 1/1/94 1/1/93
TO TO TO
12/31/95 12/31/94 12/31/93
------------ ------------ ------------
<S> <C> <C> <C>
(1)Accumulation
unit value at
beginning of
period........ $12.18 $12.80 $11.01
(2)Accumulation
unit value at
end of
period........ $14.08 $12.18 $12.80
(3)Number of
accumulation
units
outstanding at end of period..23,078,926.0 18,784,994.7 10,628,528.5
<CAPTION>
FLEXIBLE STRATEGY
--------------------------------------
1/1/95 1/1/94 1/1/93
TO TO TO
12/31/95 12/31/94 12/31/93
------------ ------------ ------------
<S> <C> <C> <C>
(1)Accumulation
unit value at
beginning of
period........ $11.22 $11.87 $10.39
(2)Accumulation
unit value at
end of
period........ $13.00 $11.22 $11.87
(3)Number of
accumulation
units
outstanding at end of period..19,761,710.2 18,841,816.9 10,396,852.3
<CAPTION>
GLOBAL STRATEGY FOCUS
--------------------------------------
1/1/95 1/1/94 1/1/93
TO TO TO
12/31/95 12/31/94 12/31/93
------------ ------------ ------------
<S> <C> <C> <C>
(1)Accumulation
unit value at
beginning of
period........ $11.78 $12.12 $10.15
(2)Accumulation
unit value at
end of
period........ $12.85 $11.78 $12.12
(3)Number of
accumulation
units
outstanding at end of period..39,315,443.7 40,759,049.2 20,198,586.7
<CAPTION>
GLOBAL UTILITY FOCUS
--------------------------------------
1/1/95 1/1/94 7/1/93*
TO TO TO
12/31/95 12/31/94 12/31/93
------------ ------------ ------------
<S> <C> <C> <C>
(1)Accumulation
unit value at
beginning of
period........ $9.58 $10.61 $10.00
(2)Accumulation
unit value at
end of
period........ $11.75 $9.58 $10.61
(3)Number of
accumulation
units
outstanding at end of period..11,837,175.7 12,374,137.9 8,953,967.1
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL
EQUITY FOCUS RESERVE ASSETS
------------------------------------- -----------------------------------
1/1/95 1/1/94 7/1/93* 1/1/95 1/1/94 1/1/93
TO TO TO TO TO TO
12/31/95 12/31/94 12/31/93 12/31/95 12/31/94 12/31/93
------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(1)Accumulation unit value at
beginning of period......... $10.87 $10.96 $10.00 $10.76 $10.43 $10.22
(2)Accumulation unit value at
end of period............... $11.31 $10.87 $10.96 $11.29 $10.76 $10.43
(3)Number of accumulation
units
outstanding at end of period..21,726,485.8 21,157,145.1 6,329,646.2 1,002,197.4 1,286,558.6 1,173,856.5
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE DEVELOPING CAPITAL
INTERNATIONAL BOND GOVERNMENT BOND MARKETS FOCUS
--------------------- ----------------------- -----------------------
1/1/95 5/16/94* 1/1/95 5/16/94* 1/1/95 5/16/94*
TO TO TO TO TO TO
12/31/95 12/31/94 12/31/95 12/31/94 12/31/95 12/31/94
----------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(1)Accumulation unit value at
beginning of period......... $9.93 $10.00 $10.08 $10.00 $9.38 $10.00
(2)Accumulation unit value at
end of period............... $11.40 $9.93 $11.42 $10.08 $9.16 $9.38
(3)Number of accumulation
units
outstanding at end of period..1,191,641.1 464,604.1 3,417,936.4 1,484,500.1 4,912,543.0 2,702,530.7
</TABLE>
- -----
* Commencement of business
14
<PAGE>
YIELDS AND TOTAL RETURNS
From time to time, Merrill Lynch Life may advertise yields, effective yields,
and total returns for the Account A subaccounts and the Account B subaccount.
These figures are based on historical earnings and do not indicate or project
future performance. Merrill Lynch Life also from time to time may advertise
performance of the subaccounts relative to certain performance rankings and
indices. More detailed information as to 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. A Fund's performance in part
reflects that Fund's expenses. Merrill Lynch Asset Management, L.P. ("MLAM")
and Merrill Lynch Life Agency, Inc. (see SELLING THE CONTRACT on page 39) have
entered into a Reimbursement Agreement that limits the operating expenses paid
by each Fund of the Merrill Variable Funds in a given year to 1.25% of its
average net assets.
The yields of the Domestic Money Market Subaccount and the Reserve Assets
Subaccount refer to the annualized income generated by an investment in each
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 in the subaccount or Account 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 an Account A subaccount (other than 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 that the income generated by the investment during that
30-day or one-month period is generated each period over a 12-month period and
is shown as a percentage of the investment.
The average annual total return of a subaccount refers to return quotations
assuming an investment under a Contract has been held in each subaccount for
1, 5 and 10 years, or for a shorter period, if applicable. The average annual
total return quotations represent the average compounded rates of return that
would equate an initial investment of $1,000 under a Contract to the
redemption value of that investment as of the last day of each of the periods
for which return quotations are provided. Average annual total return
information shows the average percentage change in the value of an investment
in a subaccount (including any contingent deferred sales charge that would
apply if an owner terminated the Contract at the end of each period indicated,
but excluding any deductions for premium taxes).
Merrill Lynch Life may, in addition, advertise or present yield or total
return performance information computed on different bases. Merrill Lynch Life
may present total return information computed on the same basis as described
above, except the information will not reflect a deduction for the contingent
deferred sales charge. This presentation assumes that an investment in the
Contract will persist beyond the period when the contingent deferred sales
charge applies, consistent with the long-term investment and retirement
objectives of the Contract. Merrill Lynch Life may also advertise total return
performance information for the Funds, but this information will always be
accompanied by average annual total returns for the corresponding subaccounts.
Merrill Lynch Life may also present total return performance information for a
subaccount for periods prior to the date the subaccount commenced operations
based on the performance of the corresponding Fund and the assumption that the
subaccount was in existence for the same periods as those indicated for the
corresponding Fund, with a level of fees and charges approximately equal to
those currently imposed under the Contracts. Merrill Lynch Life 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 the Domestic Money Market Subaccount to designated
subaccounts under a dollar cost averaging program. This information will
reflect the performance of the affected subaccounts for the duration of the
allocation under the hypothetical Contract. It also will reflect the deduction
of charges described
15
<PAGE>
above except for the contingent deferred sales charge. 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, or series of 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. Some
services' rankings include variable life insurance issuers as well as variable
annuity issuers, while others' rankings compare only variable annuity issuers.
Performance analysis prepared by services may rank such issuers on the basis
of total return, assuming reinvestment of distributions, but do not take sales
charges, redemption fees or certain expense deductions at the separate account
level into consideration. In addition, some such services prepare risk-
adjusted rankings, which consider the effect of market risk on total return
performance. This type of ranking provides data as to which funds provide the
highest total return within various categories of funds defined by the degree
of risk inherent in their investment objectives. Ranking services Merrill
Lynch Life 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 Merrill Lynch Life 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, which may be illustrated by graphs, charts or
otherwise and which 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
Merrill Lynch Life Insurance Company ("Merrill Lynch Life") is a stock life
insurance company organized under the laws of the State of Washington in 1986
and redomesticated under the laws of the State of Arkansas in 1991. Merrill
Lynch Life is an indirect wholly owned subsidiary of Merrill Lynch & Co.,
Inc., a corporation whose common stock is traded on the New York Stock
Exchange.
Merrill Lynch Life's financial statements can be found in the Statement of
Additional Information and should only be considered in the context of its
ability to meet any obligations it may have under the Contract.
All communications concerning the Contract should be addressed to Merrill
Lynch Life's Service Center at the address printed on the first page of this
Prospectus.
THE ACCOUNTS
Contract owners may direct their premiums into one or both of two segregated
investment accounts available to the Contract (the "Accounts"). The Merrill
Lynch Life Variable Annuity Separate Account A ("Account A") offers a variety
of investment options, each with a different
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investment objective, through its subaccounts. The Merrill Lynch Life Variable
Annuity Separate Account B ("Account B") offers a money market investment
through its subaccount.
The Accounts were established on August 6, 1991, as separate investment
accounts. They are registered with the Securities and Exchange Commission as
unit investment trusts pursuant to the Investment Company Act of 1940. Their
registration does not involve any supervision by the Securities and Exchange
Commission over the investment policies or practices of the Accounts. The
Accounts each meet the definition of a separate account under the federal
securities laws. The Accounts' assets are segregated from all of Merrill Lynch
Life's other assets.
Obligations to contract owners and beneficiaries that arise under the Contract
are obligations of Merrill Lynch Life. Merrill Lynch Life owns all of the
assets in the Accounts. With respect to each Account, income, gains, and
losses, whether or not realized, from assets allocated to that Account are, in
accordance with the Contracts, credited to or charged against the Account
without regard to other income, gains or losses of Merrill Lynch Life. As
required, the assets in each Account will always be at least equal to the
reserves and other liabilities of the Account. If the assets exceed the
required reserves and other Contract liabilities (which will always be at
least equal to the aggregate contract value allocated to the Account under the
Contracts), Merrill Lynch Life may transfer the excess to its general account.
Arkansas insurance law provides that each Account's assets, to the extent of
its reserves and liabilities, may not be charged with liabilities arising out
of any other business Merrill Lynch Life conducts nor may the assets of either
Account be charged with any liabilities of the other Account.
There are seventeen subaccounts currently available through Account A and one
subaccount currently available through Account B. Effective following the
close of business on December 6, 1996, three additional subaccounts previously
available through Account A (the Natural Resources Focus Subaccount, the
American Balanced Subaccount, and the Global Utility Focus Subaccount) were
closed to allocations of premiums and contract value. All subaccounts invest
in a corresponding mutual fund portfolio of the Merrill Variable Funds; AIM
V.I. Funds; Alliance Series Fund; or MFS Insurance Trust. Additional
subaccounts may be added in the future.
The Accounts' financial statements can be found in the Statement of Additional
Information.
INVESTMENTS OF THE ACCOUNTS
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
The Merrill Lynch Variable Series Funds, Inc. ("Merrill Variable Funds") is
registered with the Securities and Exchange Commission as an open-end
management investment company. It currently offers the Accounts sixteen of its
separate investment mutual fund portfolios. The Reserve Assets Fund is
available only to Account B. The fifteen remaining Funds of Merrill Variable
Funds (three of which were closed to allocations of premiums and contract
value) are available only to Account A. These Funds' shares are currently sold
only to separate accounts of Merrill Lynch Life, ML Life Insurance Company of
New York (an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc.),
and several insurance companies not affiliated with Merrill Lynch Life or
Merrill Lynch & Co., Inc. to fund benefits under certain variable annuity and
variable life insurance contracts. Shares of each of these Funds may be made
available to separate accounts of additional insurance companies in the
future.
Merrill Lynch Asset Management, L.P. ("MLAM") is the investment adviser to the
Funds of Merrill Variable Funds. MLAM is a worldwide mutual fund leader with
more than $145.7 billion in assets under management. It is registered as an
investment adviser under the Investment Advisers Act of 1940. MLAM is an
indirect subsidiary of Merrill Lynch & Co., Inc. MLAM's principal business
address is 800 Scudders Mill Road, Plainsboro, New Jersey 08536. As the
investment adviser, MLAM is paid fees by these Funds for its services. The
fees charged to each of these Funds are set forth in the summary of investment
objectives below.
MLAM has entered into an agreement with Merrill Lynch Insurance Group, Inc.
("MLIG"), an affiliate of Merrill Lynch Life, with respect to administration
services for the Funds of Merrill Variable Funds in connection with the
Contracts and other variable life insurance and variable annuity contracts
issued by Merrill Lynch Life. Under this agreement, MLAM pays compensation to
MLIG in an amount equal to a portion of the annual gross investment advisory
fees paid by
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these Funds to MLAM attributable to contracts issued by Merrill Lynch Life.
Details about these Funds, including their investment objectives, management,
policies, restrictions, their expenses and risks associated with investments
therein (including any risks associated with investment in the High Current
Income Fund), and all other aspects of these Funds' operation can be found in
the attached prospectus for the Merrill Variable Funds and in their Statement
of Additional Information, which should also be read carefully before
investing. There is no guarantee that any Fund will meet its investment
objective. Meeting the objectives depends upon how well these Funds'
management anticipates changing economic conditions.
DOMESTIC MONEY MARKET FUND. This Fund seeks preservation of capital,
liquidity, and the highest possible current income consistent with the
foregoing objectives by investing in short-term money market securities. The
Fund invests in short-term United States government securities; government
agency securities; bank certificates of deposit and bankers' acceptances;
short-term corporate debt securities such as commercial paper and variable
amount master demand notes; repurchase agreements and other domestic money
market instruments. MLAM receives from the Fund an advisory fee at the annual
rate of 0.50% of the average daily net assets of the Fund.
PRIME BOND FUND. This Fund seeks to obtain as high a level of current income
as is consistent with the investment policies of the Fund and with prudent
investment management, and capital appreciation to the extent consistent with
the foregoing objective. The Fund invests primarily in long-term corporate
bonds rated in the top three ratings categories by established rating
services. MLAM receives from the Fund an advisory fee at the annual rate of
0.50% of the first $250 million of the combined average daily nets assets of
the Fund and High Current Income Fund; 0.45% of the next $250 million; 0.40%
of the next $250 million; and 0.35% of the combined average daily net assets
in excess of $750 million. The reduction of the advisory fee applicable to the
Fund is determined on a uniform percentage basis as described in the Statement
of Additional Information for the Merrill Variable Funds.
HIGH CURRENT INCOME FUND. This Fund seeks to obtain as high a level of current
income as is consistent with the investment policies of the Fund and with
prudent investment management, and capital appreciation to the extent
consistent with the foregoing objective. The Fund invests principally in
fixed-income securities that are rated in the lower rating categories of the
established rating services or in unrated securities of comparable quality
(commonly known as "junk bonds"). Because investment in such securities
entails relatively greater risk of loss of income or principal, an investment
in the High Current Income Fund may not be appropriate as the exclusive
investment to fund a Contract. In an effort to minimize risk, the Fund will
diversify its holdings among many issuers. However, there can be no assurance
that diversification will protect the Fund from widespread defaults during
periods of sustained economic downturn. MLAM receives from the Fund an
advisory fee at the annual rate of 0.55% of the first $250 million of the
combined average daily net assets of the Fund and Prime Bond Fund; 0.50% of
the next $250 million; 0.45% of the next $250 million; and 0.40% of the
combined average daily net assets in excess of $750 million. The reduction of
the advisory fee applicable to the Fund is determined on a uniform percentage
basis as described in the Statement of Additional Information for the Merrill
Variable Funds.
QUALITY EQUITY FUND. This Fund seeks to attain the highest total investment
return consistent with prudent risk. The Fund employs a fully managed
investment policy utilizing equity securities, primarily common stocks of
large-capitalization companies, as well as investment grade debt and
convertible securities. Management of the Fund will shift the emphasis among
investment alternatives for capital growth, capital stability, and income as
market trends change. MLAM receives from the Fund an advisory fee at the
annual rate of 0.50% of the first $250 million of average daily net assets;
0.45% of the next $50 million; 0.425% of the next $100 million; and 0.40% of
the average daily net assets in excess of $400 million.
EQUITY GROWTH FUND. This Fund seeks to attain long-term growth of capital by
investing in a diversified portfolio of securities, primarily common stocks,
of relatively small companies that management of the Fund believes have
special investment value and emerging growth companies regardless of size.
Such companies are selected by management on the basis of their long-term
potential for expanding their size and profitability or for gaining increased
market recognition for
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their securities. Current income is not a factor in such selection. MLAM
receives from the Fund an advisory fee at the annual rate of 0.75% of the
average daily net assets of the Fund. This is a higher fee than that of many
other mutual funds, but management of the Fund believes it is justified by the
high degree of care that must be given to the initial selection and continuous
supervision of the types of portfolio securities in which the Fund invests.
NATURAL RESOURCES FOCUS FUND. This Fund seeks to attain long-term growth of
capital and protection of the purchasing power of capital by investing
primarily in equity securities of domestic and foreign companies with
substantial natural resource assets. MLAM receives from the Fund an advisory
fee at the annual rate of 0.65% of the average daily net assets of the Fund.
Merrill Lynch Life and Account A reserve the right to suspend the sale of
units of the Natural Resources Focus Subaccount in response to conditions in
the securities markets or otherwise.
The subaccount corresponding to this Fund was closed to allocations of
premiums and contract value following the close of business on December 6,
1996.
AMERICAN BALANCED FUND. This Fund seeks a level of current income and a degree
of stability of principal not normally available from an investment solely in
equity securities and the opportunity for capital appreciation greater than is
normally available from an investment solely in debt securities by investing
in a balanced portfolio of fixed income and equity securities. MLAM receives
from the Fund an advisory fee at the annual rate of 0.55% of the average daily
net assets of the Fund.
The subaccount corresponding to this Fund was closed to allocations of
premiums and contract value following the close of business on December 6,
1996.
GLOBAL STRATEGY FOCUS FUND. This Fund seeks high total investment return by
investing primarily in a portfolio of equity and fixed income securities,
including convertible securities, of U.S. and foreign issuers. The Fund seeks
to achieve its objective by investing primarily in securities of issuers
located in the United States, Canada, Western Europe and the Far East. MLAM
receives from the Fund an advisory fee at the annual rate of 0.65% of the
average daily net assets of the Fund.
Effective following the close of business on December 6, 1996, the Flexible
Strategy Fund was merged with and into the Global Strategy Focus Fund.
BASIC VALUE FOCUS FUND. This Fund seeks to attain capital appreciation, and
secondarily, income by investing in securities, primarily equities, that
management of the Fund believes are undervalued and therefore represent basic
investment value. Particular emphasis is placed on securities which provide an
above-average dividend return and sell at a below-average price/earnings
ratio. MLAM receives from the Fund an advisory fee at the annual rate of 0.60%
of the average daily net assets of the Fund.
GLOBAL BOND FOCUS FUND (FORMERLY, THE WORLD INCOME FOCUS FUND). This Fund
seeks to provide high total investment return by investing in a global
portfolio of fixed income securities denominated in various currencies,
including multinational currency units. The Fund seeks to achieve this
objective by investing in fixed income securities, which have a credit rating
of A or better by Standard & Poor's or by Moody's or commercial paper rated A-
1 by Standard & Poor's or Prime-1 by Moody's or obligations that MLAM has
determined to be of similar creditworthiness. MLAM receives from the Fund an
advisory fee at the annual rate of 0.60% of the average daily net assets of
the Fund.
Effective following the close of business on December 6, 1996, the
International Bond Fund was merged with and into the Global Bond Focus Fund.
GLOBAL UTILITY FOCUS FUND. This Fund seeks to obtain capital appreciation and
current income through investment of at least 65% of its total assets in
equity and debt securities issued by domestic and foreign companies which are,
in the opinion of management of the Fund, primarily engaged in the ownership
or operation of facilities used to generate, transmit or distribute
electricity, telecommunications, gas or water. MLAM receives from the Fund an
advisory fee at the annual rate of 0.60% of the average daily net assets of
the Fund.
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The subaccount corresponding to this Fund was closed to allocations of
premiums and contract value following the close of business on December 6,
1996.
INTERNATIONAL EQUITY FOCUS FUND. This Fund seeks to obtain capital
appreciation and, secondarily, income by investing in a diversified portfolio
of equity securities, of issuers located in countries other than the United
States. Under normal conditions, at least 65% of the Fund's net assets will be
invested in such equity securities. MLAM receives from the Fund an advisory
fee at the annual rate of 0.75% of the average daily net assets of the Fund.
GOVERNMENT BOND FUND (FORMERLY, THE INTERMEDIATE GOVERNMENT BOND FUND). This
Fund seeks to achieve the highest possible current income consistent with the
protection of capital. It invests in debt securities issued or guaranteed by
the United States Government, its agencies or instrumentalities. MLAM receives
from the Fund an advisory fee at an annual rate of 0.50% of the average daily
net assets of the Fund.
DEVELOPING CAPITAL MARKETS FOCUS FUND. This Fund seeks long-term capital
appreciation by investing in securities, principally equities, of issuers in
countries having smaller capital markets. For purposes of its investment
objective, the Fund considers countries having smaller capital markets to be
all countries other than the four countries having the largest equity market
capitalizations. The Developing Capital Markets Focus Fund has established no
rating criteria for the debt securities in which it may invest, and will rely
on the investment adviser's judgment in evaluating the creditworthiness of an
issuer of such securities. In an effort to minimize the risk, the Fund will
diversify its holdings among many issuers. However, there can be no assurance
that diversification will protect the Fund from widespread defaults during
periods of sustained economic downturn. Because investment in the Developing
Capital Markets Focus Fund entails relatively greater risk of loss of income
or principal, an investment in the Fund may not be appropriate as the
exclusive investment to fund a Contract. MLAM receives from the Fund an
advisory fee at an annual rate of 1.00% of the average daily net assets of the
Fund.
RESERVE ASSETS FUND. This Fund seeks preservation of capital, liquidity, and
the highest possible current income consistent with the foregoing objectives
by investing in short-term money market securities. The Fund invests in short-
term United States government securities; government agency securities; bank
certificates of deposit and bankers' acceptances; short-term corporate debt
securities such as commercial paper and variable amount master demand notes;
repurchase agreements and other money market instruments. MLAM receives from
the Fund an advisory fee at the annual rate of 0.50% of the first $500 million
of the Fund's average daily net assets; 0.425% of the next $250 million;
0.375% of the next $250 million; 0.35% of the next $500 million; 0.325% of the
next $500 million; 0.30% of the next $500 million; and 0.275% of the average
daily net assets in excess of $2.5 billion.
INDEX 500 FUND. This Fund seeks investment results that, before expenses,
correspond to the aggregate price and yield performance of the Standard &
Poor's 500 Composite Stock Price Index (the "S&P 500 Index"). MLAM receives
from the Fund an advisory fee at an annual rate of 0.30% of the Fund's average
daily net assets.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Variable Insurance Funds, Inc. ("AIM V.I. Funds") is registered with the
Securities and Exchange Commission as an open-end management investment
company. It currently offers Account A two of its separate investment
portfolios. Shares of the Funds of AIM V.I. Funds are currently offered only
to insurance company separate accounts to fund the benefits of variable
annuity contracts and variable life insurance policies. Shares of these Funds
may be offered, in the future, to certain pension or retirement plans.
A I M Advisors, Inc. ("AIM"), 11 Greenway Plaza, Suite 1919, Houston, Texas
77046-1173, serves as the investment adviser to each of the Funds of AIM V.I.
Funds. AIM was organized in 1976, and, together with its affiliates, manages
or advises 43 investment company portfolios (including these Funds). As of
December 5, 1996, the total assets of the mutual funds advised or managed by
AIM and its affiliates were approximately $62 billion. AIM is a wholly-owned
subsidiary of AIM Management, a holding company. As the investment adviser,
AIM is paid fees by these Funds for its services. The fees charged to each of
these Funds are set forth in the summary of investment objectives below.
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AIM V.I. Funds has entered into an Administrative Services Agreement with AIM,
pursuant to which AIM has agreed to provide certain accounting and other
administrative services to these Funds, including the services of a principal
financial officer and related staff. As compensation to AIM for its services
under the Administrative Services Agreement, these Funds reimburse AIM for
expenses incurred by AIM or its affiliates in connection with such services.
AIM has entered into an agreement with Merrill Lynch Life with respect to
administrative services for these Funds in connection with the Contracts.
Under this agreement, AIM pays compensation to Merrill Lynch Life in an amount
equal to a percentage of the average net assets of these Funds attributable to
the Contracts.
AIM V.I. CAPITAL APPRECIATION FUND. This Fund seeks to provide capital
appreciation through investments in common stocks, with emphasis on medium-
sized and smaller emerging growth companies. AIM will be particularly
interested in companies that are likely to benefit from new or innovative
products, services or processes that should enhance such companies' prospects
for future growth in earnings. As a result of this policy, the market prices
of many of the securities purchased and held by this Fund may fluctuate
widely. Any income received from securities held by the Fund will be
incidental, and a contract owner should not consider a purchase of shares of
the Fund as equivalent to a complete investment program. The Capital
Appreciation Fund's portfolio is primarily comprised of securities of two
basic categories of companies: (1) "core" companies, which AIM considers to
have experienced above-average and consistent long-term growth in earnings and
to have excellent prospects for outstanding future growth, and (2) "earnings
acceleration" companies which AIM believes are currently enjoying a dramatic
increase in profits. AIM receives from the Fund an advisory fee at an annual
rate of 0.65% of the Fund's average daily net assets.
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 the current or projected earnings of the companies issuing the
securities, or relative to current market values of assets owned by the
companies issuing the securities or relative to the equity markets generally.
Income is a secondary objective. The Subaccount investing in this Fund should
not be selected by contract owners who seek income as their primary investment
objective. AIM receives from the Fund an advisory fee at an annual rate of
0.65% of the Fund's average daily net assets.
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Alliance Variable Products Series Fund, Inc. ("Alliance Series Fund") is
registered with the Securities and Exchange Commission as an open-end
management investment company. It currently offers Account A one of its
separate investment portfolios. This Fund 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.
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 Series
Fund. Alliance is an international investment manager supervising client
accounts with assets of March 1, 1996 totaling more than $156 billion (of
which approximately $48 billion represented the assets of investment
companies). Alliance Capital Management Corporation ("ACMC"), the sole general
partner of Alliance, is an indirect wholly-owned subsidiary of The Equitable
Life Assurance Society of the United States, which is in turn a wholly-owned
subsidiary of the Equitable Companies Incorporated, a holding company which is
controlled by AXA, a French insurance holding company. As the investment
adviser, Alliance is paid fees by this Fund for its services. The fees charged
to this 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 Merrill Lynch Life with respect to
administrative services for these Funds in connection with the Contracts.
Under this agreement, AFD pays compensation to Merrill Lynch Life in an amount
equal to a percentage of the average net assets of these Funds attributable to
the Contracts.
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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 will be incidental to
the objective of capital growth. Because of the market risks inherent in any
investment, the selection of securities on the basis of their appreciation
possibilities cannot ensure against possible loss in value. This Fund is
therefore not intended for contract owners whose principal objective is
assured income and conservation of capital. Alliance receives from the Fund an
advisory fee at an annual rate of 1.00% of the Fund's average daily net
assets.
MFS VARIABLE INSURANCE TRUST
MFS Variable Insurance Trust ("MFS Insurance Trust") is registered with the
Securities and Exchange Commission as an open-end management investment
company. It currently offers Account A two of its separate investment
portfolios. The Funds of MFS Insurance Trust are 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.
Massachusetts Financial Services Company ("MFS"), a Delaware corporation, 500
Boylston Street, Boston, Massachusetts 02116, serves as the investment adviser
to each of the Funds of MFS Insurance Trust. MFS is America's oldest mutual
fund organization. MFS and its predecessor organizations have a history of
money management dating from 1924 and the founding of the first mutual fund in
the United States, Massachusetts Investors Trust. Net assets under the
management of the MFS organization were approximately $45.7 billion as of
April 30, 1996. MFS is a subsidiary of Sun Life of Canada (U.S.), which, in
turn, is a wholly-owned subsidiary of Sun Life Assurance Company of Canada. As
the investment adviser, MFS is paid fees by each of these Funds for its
services. The fees charged to these Funds are set forth in the summary of
investment objectives below.
MFS has entered into an agreement with MLIG with respect to administrative
services for these Funds in connection with the Contracts and certain
contracts issued by Merrill Lynch Life. Under this agreement, MFS pays
compensation to MLIG in an amount equal to a percentage of the average net
assets of these Funds attributable to such contracts.
EMERGING GROWTH SERIES. This Fund seeks long-term growth of capital by
investing primarily (i.e., at least 80% of its assets under normal
circumstances) in common stocks of emerging growth companies. Emerging growth
companies include companies that MFS believes are early in their life cycle
but which have the potential to become major enterprises. Dividend and
interest income from portfolio securities, if any, is incidental to the Fund's
objective of long-term growth of capital. MFS receives from the Fund an
advisory fee at an annual rate of 0.75% of average daily net assets of the
Fund.
RESEARCH SERIES. This Fund seeks to provide long-term growth of capital and
future income. The portfolio securities of this Fund are selected by the
investment research analysts in the Equity Research Group of MFS. The Fund's
assets are allocated to industry groups (e.g., pharmaceuticals, retail and
computer software). The allocation by industry group is determined by the
analysts acting together. Individual analysts are then responsible for
selecting what they view as the securities best suited to meet the Fund's
investment objective within their assigned industry group. MFS receives from
the Fund an advisory fee at an annual rate of 0.75% of average daily net
assets of the Fund.
PURCHASES AND REDEMPTIONS OF FUND SHARES; REINVESTMENT
The Accounts will purchase and redeem shares of the Funds to the extent
necessary to provide benefits under the Contract or for such other purposes as
may be consistent with the Contract. The Accounts will purchase and redeem
shares of the Funds at net asset value. Fund distributions to the Accounts are
automatically reinvested in additional shares of the Funds at net asset value.
MATERIAL CONFLICTS, SUBSTITUTION OF INVESTMENTS AND CHANGES TO ACCOUNTS
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
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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, Merrill Lynch Life may be
required to eliminate one or more subaccounts of Separate Account A or
Separate Account B or substitute a new subaccount. In responding to any
conflict, Merrill Lynch Life will take the action which it believes necessary
to protect its contract owners.
Merrill Lynch Life may substitute a different investment option for any of the
current Funds. Substitution may be made with respect to both existing
investments and the investment of future premiums. However, no such
substitution will be made without any necessary approval of the Securities and
Exchange Commission and applicable state insurance departments. Contract
owners will be notified of any substitutions. Additional investment options
may be added in the future as eligible investments through the Accounts.
In addition, Merrill Lynch Life may make additional subaccounts available to
either Account, eliminate subaccounts in either Account, deregister either or
both of the Accounts under the Investment Company Act of 1940 (the "1940
Act"), make any changes required by the 1940 Act, operate either or both
Accounts 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
account to another subaccount or Account pursuant to a combination or
otherwise, and create new accounts. No such changes will be made without any
necessary approval of the Securities and Exchange Commission and applicable
state insurance departments. Contract owners will be notified of any changes.
CHARGES AND DEDUCTIONS
CONTRACT MAINTENANCE CHARGE
A charge is made to reimburse Merrill Lynch Life for expenses related to
maintenance of the Contract. These expenses include issuing Contracts,
maintaining records, and performing accounting, regulatory compliance, and
reporting functions. This $40 maintenance charge will be deducted from the
contract value on each contract anniversary that occurs on or prior to the
annuity date. It will also be deducted when the Contract is surrendered if it
is surrendered on any date other than a contract anniversary. The contract
maintenance charge will be deducted on a pro rata basis from among all
subaccounts in which contract value is invested. (See ACCUMULATION UNITS on
page 27 for a discussion of the effect the deduction of this charge will have
on the number of accumulation units credited to a Contract.)
This charge will be waived on all Contracts with a contract value equal to or
greater than $50,000
on the date the charge would otherwise be deducted. It is not deducted after
the annuity date.
Currently, a contract owner of three or more Contracts will be assessed no
more than $120 in Contract Maintenance Charges annually, regardless of the
number of Contracts owned. Once Contract Maintenance Charges in an amount
equal to $120 have been paid in a calendar year by a contract owner, remaining
Contract Maintenance Charges to which the contract owner would otherwise be
subject in the same calendar year will be waived. Merrill Lynch Life reserves
the right to discontinue this waiver at any time.
Merrill Lynch Life does not expect to profit from this charge. The contract
maintenance charge will never increase.
MORTALITY AND EXPENSE RISK CHARGE
A mortality and expense risk charge is imposed on the Accounts. It equals
1.25% annually for Account A and 0.65% annually for Account B deducted daily
from the net asset value of the Accounts. Of this amount, 0.75% annually for
Account A and 0.35% annually for Account B is attributable to mortality risks
assumed by Merrill Lynch Life for the annuity payment and death benefit
guarantees made under the Contract. These guarantees include making annuity
payments unaffected by mortality experience and providing a minimum death
benefit under the Contract.
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Additionally, of the total mortality and expense risk charge, 0.50% annually
for Account A and 0.30% annually for Account B is attributable to expense
risks assumed by Merrill Lynch Life should the contract maintenance and
administration charges be insufficient to cover all Contract maintenance and
administration expenses.
The mortality and expense risk charge is greater for Account A than for
Account B because a greater death benefit and higher administrative expenses
are attributable to Account A. If the mortality and expense risk charge is
inadequate to cover the actual expenses of mortality, maintenance, and
administration, Merrill Lynch Life will bear the loss. If the charge exceeds
the actual expenses, the excess will be added to Merrill Lynch Life's profit.
The mortality and expense risk charge will never increase.
ADMINISTRATION CHARGE
An administration charge is made to reimburse Merrill Lynch Life for costs
associated with the establishment and administration of Account A. This charge
covers such expenses as optional contract transactions (for example,
processing transfers and Dollar Cost Averaging transactions). A charge of
0.10% annually will be deducted daily only from the net asset value of Account
A. Merrill Lynch Life does not expect to profit from this charge. The
administration charge will never increase.
CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge may be imposed on withdrawals and
surrenders from Account A. This charge reimburses Merrill Lynch Life for
expenses relating to the sale of the Contract, such as commissions,
preparation of sales literature, and other promotional activity. The charge is
imposed only on premium withdrawn or surrendered from Account A that was held
for less than seven years. However, where permitted by state regulation, up to
10% of this premium will not be subject to such a charge if withdrawn or
surrendered from Account A during the first withdrawal of the contract year,
whether paid in a lump sum or elected to be paid on a monthly, quarterly,
semi-annual or annual basis. In addition, where permitted by state regulation,
no contingent deferred sales charge will be imposed on any premium withdrawn
or surrendered from Contracts purchased by employees of Merrill Lynch Life or
its affiliates or from Contracts purchased by the employees' spouses or
dependents.
The maximum contingent deferred sales charge is 7% of the premium withdrawn
during the first year after that premium is paid, decreasing by 1% annually to
0% after year seven, as shown below.
<TABLE>
<CAPTION>
NUMBER OF COMPLETE YEARS
ELAPSED SINCE PREMIUM WAS PAID CONTINGENT DEFERRED SALES CHARGE
------------------------------ --------------------------------
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
</TABLE>
Contingent deferred sales charges are calculated on total premiums withdrawn
or surrendered from Account A, but not to exceed the account value. Gain in
account value is never subject to a contingent deferred sales charge. (See
page 31 for a discussion of the rules for determining whether a withdrawal is
considered to come from premiums or gain for contingent deferred sales charge
purposes.) For example, if a contract owner made a $5,000 premium payment to
Account A and withdrew the entire $5,000 three years later when there had been
no gain or loss on that premium, a 4% contingent deferred sales charge would
be imposed on the $5,000 withdrawal. If that contract owner had made a $5,000
premium payment to Account A and due to negative investment experience only
$4,500 remained in Account A when the contract owner withdrew it
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<PAGE>
three years later, a 4% contingent deferred sales charge would be imposed only
on $4,500 of the original premium. If instead the $5,000 premium payment the
contract owner made to Account A grew to $5,500 due to positive investment
experience, and the contract owner withdrew $200 of gain in account value as
the first withdrawal three years later, and thereafter withdrew the remaining
$5,300 in a subsequent withdrawal that same year, no contingent deferred sales
charge would be imposed on the $200 first withdrawn (as it represents gain in
account value and not premium) and a 4% contingent deferred sales charge would
be imposed only on $5,000 of the $5,300 subsequent withdrawal (as $300 of that
amount represents gain in account value).
When imposed, the contingent deferred sales charge will be deducted on a pro
rata basis from among the subaccounts in which the contract owner has
invested, on the basis of the contract owner's interest in each subaccount to
the Account A account value. (See WITHDRAWALS AND SURRENDERS on page 31 and
ACCUMULATION UNITS on page 27 for a discussion of the effect the deduction of
this charge will have on the number of accumulation units credited to a
Contract.)
To the extent that the contingent deferred sales charge is inadequate to
recover all sales expenses associated with the Contract, the deficiency will
be met by Merrill Lynch Life's surplus, which may be partly derived from the
mortality and expense risk charge on the Contract.
No contingent deferred sales charge will be imposed on withdrawals or
surrenders from Account B.
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%. Merrill Lynch Life will pay these taxes when due, and a charge
for any premium taxes imposed by a state or local government will be deducted
from the contract value on the annuity date. (See ACCUMULATION UNITS on page
27 for a discussion of the effect the deduction of this charge will have on
the number of accumulation units credited to a Contract.) In those
jurisdictions that do not allow an insurance company to reduce its current
taxable premium income by the amount of any withdrawal, surrender or death
benefit paid, Merrill Lynch Life will also deduct a charge for these taxes on
any withdrawal, surrender or death benefit effected under the Contract.
Premium tax rates are subject to change by law, administrative
interpretations, or court decisions. Premium tax amounts will depend on, among
other things, the contract owner's state of residence, Merrill Lynch Life's
status within that state, and the premium tax laws of that state.
OTHER CHARGES
Contract owners may make up to six transfers among Account A subaccounts per
contract year without charge. Additional transfers may be permitted at a
charge of $25 per transfer. (See TRANSFERS on page 29.)
Merrill Lynch Life reserves 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. Merrill Lynch Life also reserves the right to deduct from
the Accounts any taxes imposed on the Accounts' investment earnings. (See
MERRILL LYNCH LIFE'S TAX STATUS on page 34.)
In calculating the net asset values of the Funds, advisory fees and operating
expenses are deducted from the assets of each Fund. Information about those
fees and expenses can be found in the attached prospectuses for the Funds and
in the Statement of Additional Information for each Fund.
Fees associated with participation in the Merrill Lynch RPA SM program are
paid by the participating contract owner and are not deducted from the
contract value or imposed on the Accounts. (See MERRILL LYNCH RETIREMENT PLUS
ADVISOR SM on page 30.)
25
<PAGE>
DESCRIPTION OF THE CONTRACT
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 owner may designate a beneficiary. The beneficiary will
receive all outstanding Contract benefits if the owner dies. The contract
owner may also designate an annuitant. The annuitant may be changed at any
time prior to the annuity date. If no annuitant is selected, the contract
owner will be the annuitant. If the annuitant is changed on a contract owned
by other than a natural person, the change will be treated as the death of the
contract owner for purposes of the Internal Revenue Code. Merrill Lynch Life
will then pay to the owner's beneficiary the contract value, less any
applicable fees and charges.
The Contract may be assigned to another owner upon notice to Merrill Lynch
Life's Service Center. The Contract may only be assigned to another owner in
full, not in part. An assignment to a new owner cancels all prior beneficiary
designations except for those prior beneficiary designations that have been
made irrevocably. Assignment of the Contract may have tax consequences or may
be prohibited on certain IRA Contracts, so the contract owner should consult
with a qualified tax adviser before assigning the Contract. (See FEDERAL
INCOME TAXES on page 34.)
Only spouses may be co-owners of the Contract. 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.
ISSUING THE CONTRACT
A nonqualified Contract may generally be issued to contract owners who are
less than 85 years of age. Annuitants on nonqualified Contracts must also be
less than age 85 at issue. For IRA Contracts owned by natural persons, the
contract owner and annuitant must be the same person. Therefore, contract
owners and annuitants on IRA Contracts must be less than age 70 1/2 at issue.
Before issuing the Contract, Merrill Lynch Life requires certain information
from the prospective contract owner. Once that information is reviewed and
approved, and the prospective contract owner submits an initial premium, a
Contract will be issued. Generally, this review and approval process is
completed and the premium invested within two business days, but if any
necessary information has not been obtained within five business days, Merrill
Lynch Life will offer to return the premium and no Contract will be processed.
If the prospective contract owner instead consents, Merrill Lynch Life will
hold the premium until all necessary information is obtained, and will then
invest the premium within two business days after obtaining the information.
The initial premium will be invested as described under PREMIUM INVESTMENTS on
page 27.
The date of issue will be the date the required information and initial
premium are received at Merrill Lynch Life's Service Center.
TEN DAY RIGHT TO REVIEW
When the contract owner receives the Contract, it should be reviewed carefully
to make sure it is what the contract owner intended to purchase. Generally,
within 10 days after the contract owner receives the Contract, he or she may
return it for a refund. Some states allow a longer period of time to return
the Contract. The Contract must be delivered to Merrill Lynch Life's Service
Center or to the Financial Consultant who sold it for a refund to be made.
Merrill Lynch Life will then refund to the contract owner the greater of all
premiums paid into the Contract or the contract value as of the date the
Contract is returned. For contracts issued in the Commonwealth of
Pennsylvania, Merrill Lynch Life will refund the contract value as of the date
the Contract is returned. The Contract will then be deemed void.
CONTRACT CHANGES
Requests to change the owner, beneficiary, annuitant, or annuity date of a
Contract will take effect as of the date such a request is signed by the
contract owner, unless Merrill Lynch Life has
26
<PAGE>
already acted in reliance on the prior status. Such changes may have tax
consequences. See FEDERAL INCOME TAXES on page 34. See also OWNERSHIP OF THE
CONTRACT on page 26.
PREMIUMS
Initial premium payments must be $5,000 or more on a nonqualified Contract and
$2,000 or more on an IRA Contract. Subsequent premium payments generally must
be $300 or more and can be made at any time prior to the annuity date. (The
$300 minimum may be waived in connection with premiums paid under IRA
Contracts that are held in Retirement Plan Operations (RPO) accounts of
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), in order to
transfer any existing cash balance of such account, in full, into a Contract.)
Merrill Lynch Life reserves the right to refuse to accept subsequent premium
payments, if required by law.
Premium payments can be made directly by the contract owner or debited from
his or her MLPF&S brokerage account and must be transmitted to Merrill Lynch
Life's Service Center at the address printed on the cover of this Prospectus.
Under an automatic investment feature, premium payments can also be made
systematically on a monthly, quarterly, semi-annual or annual basis from a
MLPF&S brokerage account. Subsequent premium payments made under the automatic
investment feature are subject to a $100 (not $300) minimum. A Financial
Consultant should be contacted for additional information. The automatic
investment feature may be canceled by the contract owner at any time. Once
canceled, it can not be activated again until the next contract year. Maximum
annual contributions to IRA Contracts are limited by federal law.
PREMIUM INVESTMENTS
For the first 14 days following the date of issue, all premiums directed into
Account A will be held in the Domestic Money Market Subaccount. Thereafter,
the account value will be reallocated to the Account A subaccounts selected.
In the Commonwealth of Pennsylvania, all premiums will be invested as of the
date of issue in the subaccounts selected by the contract owner. Subsequent
premiums allocated to Account A will be directly placed in the subaccounts
selected as of the end of the valuation period in which they are received at
Merrill Lynch Life's Service Center. Premiums directed into Account B will be
directly placed in the Reserve Assets Subaccount on the issue date. Subsequent
premiums allocated to Account B will be directly placed in its Reserve Assets
Subaccount as of the end of the valuation period in which they are received at
Merrill Lynch Life's Service Center. Currently, a contract owner may allocate
his or her premium among eighteen subaccounts (seventeen available through
Account A and one available through Account B); allocations must be made in
increments that are even multiples of 10%. For example, 10% of a premium
received may be allocated to the Prime Bond Fund, 40% allocated to the High
Current Income Fund, and 50% allocated to the Quality Equity Fund. However, a
contract owner may not allocate 33 1/3% to the Prime Bond Fund and 66 2/3% to
the High Current Income Fund. If allocation instructions are not given with
subsequent premiums received, Merrill Lynch Life will allocate those premiums
according to the allocation instructions last received from the contract
owner. Merrill Lynch Life reserves 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 varies daily, as described below. This value is used
to determine the number of subaccount accumulation units represented by a
contract owner's investment in a subaccount. When a contract owner invests a
premium or transfers an amount to a subaccount, accumulation units in that
subaccount are purchased and credited to the Contract. Conversely, when a
contract owner withdraws contract value or transfers an amount from a
subaccount, accumulation units credited to the Contract in that subaccount are
redeemed. Similarly, when a deduction is made under a Contract for the
contract maintenance charge, any contingent deferred sales charges, any
transfer charge and any premium taxes due, accumulation units credited to the
Contract in the subaccounts are redeemed. (See CHARGES AND DEDUCTIONS on page
23 for a discussion concerning the
27
<PAGE>
allocation of charges to subaccounts.) The number of accumulation units in a
subaccount so purchased or redeemed for a Contract is based on the
subaccount's accumulation unit value as of the end of the valuation period
during which the purchase or redemption is made. It is determined by dividing
the dollar value of the amount of the purchase or redemption allocated to the
subaccount by the value of one accumulation unit for that subaccount for the
valuation period in which the transfer is effected. The number of accumulation
units in each subaccount credited to a Contract will therefore increase or
decrease as these transactions are effected.
The number of subaccount accumulation units credited to a Contract will not
change as a result of investment experience or the deduction of mortality and
expense risk and administration charges. Instead, these charges and investment
experience will be reflected in the accumulation unit value.
For each subaccount, the value of an accumulation unit was arbitrarily set at
$10 when it was established. Accumulation unit values may increase or decrease
from one valuation period to the next. A valuation period is the interval from
one determination of the net asset value of a subaccount to the next, measured
from the time each day the Funds are valued. The Funds are valued at the close
of business on each day the New York Stock Exchange is open. An accumulation
unit value for any valuation period is determined by multiplying the
accumulation unit value for the last prior valuation period by the net
investment factor for the subaccount for the current valuation period. The
Funds' investment performance, expenses, and the deduction of asset-based
charges affect the accumulation unit value.
The net investment factor is an index used to measure the investment
performance of a subaccount from one valuation period to the next. For any
subaccount, the net investment factor is determined 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, and subtracting
from the result the valuation period equivalent of the annual administration
and mortality and expense risk charges. Merrill Lynch Life may adjust the net
investment factor to make provisions for any change in the law that requires
it to pay tax on capital gains in the Accounts or for any assessments or
federal premium taxes or federal, state or local excise, profits or income
taxes measured by or attributable to the receipt of premiums. (See OTHER
CHARGES on page 25).
The net investment factor may be greater or less than one. Therefore, the
value of an accumulation unit may increase or decrease.
DEATH BENEFIT
Prior to the annuity date, the Contract provides a death benefit feature that
guarantees a death benefit if the contract owner dies, regardless of
investment experience. A Contract's death benefit is equal to the greater of
(a) the sum of the excess, if any, of premiums paid into Account A with
interest on them from the date received at an interest rate compounded daily
to yield 5% annually, over transfers to Account B and withdrawals from Account
A multiplied by a rate compounded daily from the date of transfer or
withdrawal to yield 5% annually, plus the value of Account B; or (b) the
contract value. There are limits on the period during which interest will
accrue for purposes of this calculation. For Contracts issued beginning June
1, 1995 (or later as state approvals are obtained), interest shall accrue only
until the earliest of the last day of the 20th contract year, the last day of
the contract year in which the contract owner (annuitant when the contract
owner is not a natural person) attains age 80, or the date of the contract
owner's (annuitant's when the contract owner is not a natural person) death.
For Contracts issued prior to June 1, 1995, and for Contracts issued on or
after that date but before state approvals are obtained, interest shall accrue
only until the last day of the 20th contract year. If the contract owner dies
prior to the annuity date, Merrill Lynch Life will pay the Contract's death
benefit to the owner's beneficiary. Unless the beneficiary has been
irrevocably designated, the contract owner may change the beneficiary at any
time prior to the annuity date.
If the owner's beneficiary is his or her surviving spouse, the spouse may
elect to continue the Contract in force on the same terms as applicable before
the owner's death, and the spouse will then become the contract owner and the
beneficiary until a new beneficiary is named.
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<PAGE>
The death benefit will be paid in a lump sum unless the beneficiary chooses an
annuity payment option available under the Contract. (See ANNUITY OPTIONS on
page 33.) However, if the contract owner dies before the annuity date, federal
tax law generally requires the entire contract value to be distributed within
five years of the date of death. Special rules may apply to the surviving
spouse. (See FEDERAL INCOME TAXES on page 34.)
The death benefit is determined as of the date Merrill Lynch Life receives due
proof of death at its Service Center. Due proof of death is received as of the
date Merrill Lynch Life receives a certified copy of the contract owner's
death certificate, the Beneficiary Statement, and any other paperwork
necessary to process the death claim. If other documents have not been
received by the 60th day following receipt of the certified death certificate,
due proof of death will be deemed to have been received and the death benefit
will be paid in a lump sum.
DEATH OF ANNUITANT
If the annuitant dies prior to the annuity date, and the annuitant is not the
contract owner, the owner may designate a new annuitant. If a new annuitant is
not designated, the contract owner will become the annuitant unless the owner
is not a natural person. If the contract owner is not a natural person, no new
annuitant may be named and the death benefit will be paid.
If the annuitant dies after the annuity date, while guaranteed amounts remain
unpaid, the contract owner may either (a) have payments continue for the
amount or period guaranteed; or (b) receive the present value of the remaining
guaranteed payments in a lump sum. If the contract owner dies while guaranteed
amounts remain unpaid, his or her beneficiary may either (a) have payments
continue for the amount or period guaranteed; or (b) receive the present value
of the remaining guaranteed payments in a lump sum.
TRANSFERS
Once each contract year, contract owners may transfer from Account A to
Account B an amount equal to any gain in account value and/or any premium not
subject to a contingent deferred sales charge, determined as of the date the
request is received. Where permitted by state regulation, once each contract
year, contract owners may transfer from Account A to Account B all or a
portion of the greater of that amount or 10% of premiums subject to a
contingent deferred sales charge determined as of the date the request is
received (minus any of that premium already withdrawn or transferred).
Additionally, where permitted by state regulation, periodic transfers of all
or a portion of the greater amount, determined at the time of each periodic
transfer, are permitted, on a monthly, quarterly, semi-annual or annual basis.
Periodic transfers may be canceled by the contract owner at any time. Once
canceled, they can not be activated again until the next contract year.
Generally, the amount transferred will be deducted on a pro rata basis from
among the affected Account A subaccounts, on the basis of the contract owner's
interest in each subaccount to the Account A account value, unless the
contract owner requests otherwise. However, if the amount will be transferred
on a monthly, quarterly, semi-annual or annual basis, it must be deducted on a
pro rata basis. This is the only amount which may be transferred from Account
A to Account B during that contract year. There is no charge imposed on the
transfer of this amount. No transfers are permitted from Account B to Account
A.
Prior to the annuity date, contract owners may transfer all or part of their
Account A value among the subaccounts of Account A up to six times per
contract year without charge. Additional transfers among Account A subaccounts
may be made at a charge of $25 per transfer. Currently, there is no charge for
additional transfers. The transfer charge will be deducted on a pro rata basis
from among the subaccounts from which account value is being transferred.
Merrill Lynch Life reserves the right to change the number of additional
transfers permitted each contract year, as appropriate.
Transfers among subaccounts may be made in specific dollar amounts or as a
percentage of Account A value. Requests to transfer dollar amounts must be for
at least $300 or the total value of a subaccount, if less. Requests to
transfer a percentage of Account A value are also subject to a
29
<PAGE>
$300 minimum, with allocations in increments that are even multiples of 10%.
For example, 20% of the $1,500 Account A value in the Prime Bond Fund may be
transferred to the High Current Income Fund, but 15 1/2% may not.
Contract owners may make transfer requests in writing or by telephone, once
Merrill Lynch Life receives proper telephone transfer authorization. Transfer
requests may also be made through a Merrill Lynch Financial Consultant, once
Merrill Lynch Life receives proper authorization. Transfers will take effect
as of the end of the valuation period on the date the request is received at
Merrill Lynch Life's Service Center. Telephone transfer requests received
after 4:00 p.m. (ET) will be deemed to have been received the following
business day.
DOLLAR COST AVERAGING
The Contract offers an additional optional transfer feature called Dollar Cost
Averaging. This feature allows contract owners to reallocate value from the
Account A Domestic Money Market Subaccount to any of the remaining Account A
investment options. Amounts will be transferred monthly to the subaccounts
specified by the contract owner. Amounts of $1,000 or more must be allotted
for transfer each month in the Dollar Cost Averaging feature. Allocations must
be designated in percentage increments that are even multiples of 10%. No
specific dollar amount designations may be made. Merrill Lynch Life reserves
the right to change these minimums.
Contract owners may apply for the Dollar Cost Averaging feature at any time
prior to the annuity date. Dollar Cost Averaging transfers may continue for
anywhere from 12 to 36 months (or to the annuity date, if earlier), subject to
availability of Domestic Money Market Subaccount value for this purpose. When
the Dollar Cost Averaging feature is elected, an amount equal to the total to
be transferred during the term of the feature must have been deposited into
the Domestic Money Market Subaccount. Should the owner's interest in the
Domestic Money Market Subaccount drop below the selected monthly transfer
amount, Merrill Lynch Life will notify the contract owner that an additional
premium payment will be necessary in that subaccount if he or she wants to
continue in the Dollar Cost Averaging feature.
The first Dollar Cost Averaging transfer will be effected on the first
monthiversary date after Merrill Lynch Life receives the contract owner's
election at its Service Center. Subsequent Dollar Cost Averaging transfers
will take effect as of the end of the valuation period on each of the
Contract's monthiversary dates.
The main objective of the Dollar Cost Averaging feature is to shield
investment from short term price fluctuations. Since the same dollar amount is
transferred to selected subaccounts each month, more accumulation units are
purchased in a subaccount when their value is low and fewer accumulation units
are purchased when their value is high. Therefore, a lower than average cost
of purchasing accumulation units may be achieved over the long term. This plan
of investing allows contract owners to take advantage of investment
fluctuations, but does not assure a profit or protect against a loss in
declining markets.
There is no charge imposed on Dollar Cost Averaging transfers. These transfers
are in addition to the annual transfers permitted under the Contract, as
described above.
Dollar Cost Averaging is an investment strategy and does not guarantee an
investment gain, nor will it protect against an investment loss when markets
have declined.
MERRILL LYNCH RETIREMENT PLUS ADVISOR/SM/
Subject to certain eligibility requirements, a contract owner may elect to
participate in the Merrill Lynch Retirement Plus Advisor SM ("RPA") program.
Through RPA, premiums and Account A values are allocated and transferred
periodically among the subaccounts of Account A, in accordance with an
investment program developed by Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S") that is consistent with the contract owner's
investment profile. MLPF&S is registered as an investment adviser under the
Investment Advisers Act of 1940.
Prior to participating in this program, a contract owner must complete an RPA
profiling questionnaire and client agreement for each contract under which
Account A values will be allocated pursuant to the RPA program.
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<PAGE>
If premiums and Account A values under a contract are being invested pursuant
to the RPA program, then Dollar Cost Averaging is not available for the
contract. In addition, the contract owner's participation in the RPA program
may be terminated in the discretion of MLPF&S if a contract owner requests a
transfer while the RPA program is in effect; such contract owner-initiated
transfers may be inconsistent with investment strategies being implemented
through the program.
RPA program transfers of Account A values are not subject to any transfer
charge. Fees associated with participation in the RPA program, which are
imposed by MLPF&S are paid by the participating contract owner directly
through the contract owner's Merrill Lynch brokerage account, and are not
deducted from the contract value or imposed on the Accounts.
A contract owner wishing to participate in the RPA program should consult with
his or her Financial Consultant for additional information regarding the
availability of the program and specific eligibility requirements.
Participation in the program does not guarantee that a contract owner will
attain his or her investment goals. In addition, the program does not
guarantee investment gains, or protect against investment losses.
WITHDRAWALS AND SURRENDERS
Withdrawals may be made from the Contract up to six times per contract year
prior to the annuity date. The first withdrawal from Account A in any contract
year will be effected as if gain in account value and premium not subject to a
contingent deferred sales charge is withdrawn first, followed by premium on a
"first-in, first-out" basis. A contingent deferred sales charge will not be
applied to the first withdrawal in any contract year out of Account A to the
extent that the withdrawal consists of gain and/or any premium not subject to
such a charge. Where permitted by state regulation, a contingent deferred
sales charge will not be applied to that portion of the first withdrawal from
Account A in any contract year that does not exceed the greater of (a) or (b)
where (a) is 10% of total premiums paid into Account A that are subject to a
contingent deferred sales charge determined as of the date the request is
received, less any prior amount withdrawn or transferred from Account A to
Account B in the contract year, and (b) is the gain in Account A plus premiums
allocated to Account A as of the date the request is received that are not
subject to a contingent deferred sales charge.
Additionally, where permitted by state regulation, the amount withdrawn may be
paid on a monthly, quarterly, semi-annual or annual basis, if the contract
owner so elects. Withdrawals are subject to tax and prior to age 59 1/2 may
also be subject to a 10% federal penalty tax. (See PENALTY TAXES on page 36.)
All subsequent withdrawals from Account A in the same contract year will be
effected as if premium is withdrawn on a "first-in, first-out" basis before
any gain in account value is withdrawn. Therefore, premium accumulated the
longest will be withdrawn first. These withdrawals are subject to a contingent
deferred sales charge. (See CONTINGENT DEFERRED SALES CHARGE on page 24.)
There are no contingent deferred sales charges imposed on any withdrawals from
Account B. In addition, no contingent deferred sales charge will be imposed on
withdrawals from Account A on a Contract purchased by an employee of Merrill
Lynch Life or its affiliates or purchased by the employee's spouse or
dependents, where permitted by state regulation.
In addition, the contract owner may request monthly, quarterly, semiannual, or
annual automatic withdrawals from Account B. This optional automatic
withdrawal program can be activated or canceled by the contract owner once
each contract year. Once canceled, the program can not be activated again
until the next contract year. Withdrawal amounts may be increased or decreased
at any time, once Merrill Lynch Life receives a proper request at its Service
Center. There are no contingent deferred sales charges imposed on automatic
withdrawals from Account B. These withdrawals are in addition to the annual
withdrawals permitted under the Contract, as described above. Automatic
withdrawals may be included in the contract owner's gross income in
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the year in which the withdrawal occurs. (See DISTRIBUTIONS on page 35.)
Withdrawals may be taxable and subject to a 10% tax penalty. (See PENALTY
TAXES on page 36.)
If the contract owner has elected both the automatic withdrawal program and a
withdrawal from Account A on a monthly, quarterly, semi-annual or annual
basis, both forms of withdrawal must be paid out on the same date(s).
The minimum amount that may be withdrawn is $300. At least $2,000 must remain
in the Contract after a withdrawal is made. Merrill Lynch Life reserves the
right to change these minimums. Withdrawals will be effected as of the end of
the valuation period on the date the request is received at Merrill Lynch
Life's Service Center. Unless otherwise directed by the contract owner,
withdrawals will be taken from subaccounts in the same proportion as the
owner's contract value bears to the subaccounts of the Accounts from which the
withdrawal is made. A withdrawal may be effected by telephone, once a proper
authorization form is submitted to Merrill Lynch Life's Service Center, if the
amount withdrawn is to be paid into a Merrill Lynch, Pierce, Fenner & Smith
Incorporated brokerage account. Otherwise, a withdrawal request must be
submitted by the contract owner in writing to Merrill Lynch Life's Service
Center. Telephone withdrawal requests received after 4:00 p.m. (ET) will be
deemed to have been received the following business day.
The Contract may be surrendered at any time prior to the annuity date. To
surrender the Contract through a full withdrawal, the Contract must be
delivered to Merrill Lynch Life's Service Center. The surrender will be
effected as of the end of the valuation period on the date the Contract is
received at Merrill Lynch Life's Service Center. The amount payable on
surrender is the contract value as of the end of the valuation period when the
surrender is effected, less any applicable contingent deferred sales charge,
less the contract maintenance charge if the contract value is less than
$50,000 and that valuation period is not a contract anniversary, less any
applicable charge for premium taxes. (See CHARGES AND DEDUCTIONS on page 23.)
Withdrawals will decrease the contract value. Withdrawals from either Account
A or Account B 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 on page 34.)
PAYMENTS TO CONTRACT OWNERS
Merrill Lynch Life will generally pay the amount of any withdrawal or
surrender, any annuity payment or death benefit, minus any applicable charges,
premium taxes or tax withholding, within seven days of receipt of a proper
request at its Service Center. However, Merrill Lynch Life may delay the
payment of any withdrawal, surrender, or death benefit, or the processing of
any annuity payment or transfer request if (a) the New York Stock Exchange is
closed, other than for a customary weekend or holiday; (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
such that it is not reasonably practical to dispose of securities held in the
Accounts or to determine the value of their 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.
ANNUITY DATE
The contract owner selects an annuity date when the Contract is applied for.
The annuity date may be changed by telephone or by written notice submitted to
Merrill Lynch Life's Service Center, up to 30 days prior to that date.
Generally, the annuity date for nonqualified Contracts may not be later than
the annuitant's 85th birthday. For IRA Contracts, the annuity date may not be
later than when the owner/annuitant reaches the age of 70 2/3 unless the
contract owner selects a later annuity date. If no annuity date is chosen, the
annuity date will automatically be the date on which the annuitant reaches age
85 or 70 1/2, as outlined above.
The first annuity payment will be made on the annuity date, and payments will
continue thereafter according to the schedule of the annuity option selected.
Contract owners may select from a variety of fixed annuity payment options, as
outlined below in ANNUITY OPTIONS on page 33.
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ANNUITY OPTIONS
The Contract provides a choice of fixed annuity payment options. If an annuity
option is not chosen by the contract owner, Merrill Lynch Life will
automatically effect the Life Annuity with Payments Guaranteed for 10 Years
annuity option when the contract owner reaches age 85 (age 70 1/2 for an IRA
Contract). The annuity option may be changed up to 30 days prior to the
annuity date. Merrill Lynch Life reserves the right to limit annuity options
available to IRA contract owners to comply with provisions of the Internal
Revenue Code or regulations thereunder. On the annuity date, the entire
contract value, after a deduction for the cost of any applicable premium
taxes, will be transferred to Merrill Lynch Life's general account, from which
the annuity payments will be made. The amount of each payment is
predetermined.
The dollar amount of annuity payments is determined by the contract value on
the annuity date, applied to Merrill Lynch Life's then current annuity
purchase rates. These rates will be furnished on request. The rates will never
be less favorable than those shown in the Contract.
If the age and/or sex of the annuitant was misstated to Merrill Lynch Life,
resulting in an incorrect calculation of annuity payments on a Contract,
future annuity payments on that Contract will be adjusted to reflect the
correct age and/or sex. Any amount Merrill Lynch Life overpaid as the result
of a misstatement will be deducted from future payments with 6% annual
interest charges. Any amount Merrill Lynch Life underpaid as the result of a
misstatement will be paid in full with the next payment made with 6% annual
interest credited.
If the contract value on the annuity date, after the deduction for the cost of
any applicable premium taxes, is less than $5,000 (or a different minimum
amount, if required by state law), Merrill Lynch Life may pay the annuity
benefits in a lump sum, rather than as periodic payments. If any annuity
payment would be less than $50 (or a different minimum amount, if required by
state law), the frequency of payments may be changed so that all payments will
be at least $50 (or the minimum amount required by state law). Otherwise, the
contract owner has the following annuity payment options. Merrill Lynch Life
reserves the right to permit additional annuity payment options.
.. PAYMENTS OF A FIXED AMOUNT--Equal payments in an amount chosen by the
contract owner will be guaranteed until the sum of all annuity payments
equals the contract value transferred to Merrill Lynch Life's general
account on the annuity date, adjusted for interest credited as shown in the
Contract. The amount chosen must provide for payments for at least five
years. Payments are guaranteed irrespective of the annuitant's life. If the
annuitant dies before the end of the guarantee period, the contract owner
may elect to receive the present value of the remaining guaranteed payments
in a lump sum. If the contract owner dies while guaranteed amounts remain
unpaid, his or her beneficiary may elect to receive the present value of
the remaining guaranteed payments in a lump sum.
.. PAYMENTS FOR A FIXED PERIOD--Payments will be made for five years or a
longer period if selected by the contract owner. Payments are guaranteed
irrespective of the annuitant's life. If the annuitant dies before the end
of the guarantee period, the contract owner may elect to receive the
present value of the remaining guaranteed payments in a lump sum. If the
contract owner dies while guaranteed amounts remain unpaid, his or her
beneficiary may elect to receive the present value of the remaining
guaranteed payments in a lump sum.
.. *LIFE ANNUITY--Payments will be made for the life of the annuitant.
Payments will cease with the last payment due before the annuitant's death.
.. LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20 YEARS--Payments will be
made for the life of the annuitant. In addition, even if the annuitant dies
before the guarantee period ends, payments will be guaranteed for either 10
or 20 years as selected by the contract owner. If the annuitant dies before
the end of the guarantee period, the contract owner may elect to receive
the present value of the remaining guaranteed payments in a lump sum. If
the contract owner dies while guaranteed amounts remain unpaid, his or her
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--Payments will be
made for the life of the annuitant. In addition, even if the annuitant dies
beforehand, payments will be
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guaranteed until the sum of all annuity payments equals the contract value
transferred to Merrill Lynch Life's general account on the annuity date,
adjusted for interest credited as shown in the Contract.
.. *JOINT AND SURVIVOR LIFE ANNUITY--Payments will be made for the lives of
the annuitant and a designated second person. Payments will continue as
long as either one is living.
.. 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 owner/ annuitant; (b) the joint life
expectancy of the owner/annuitant and his or her spouse; or (c) the life
expectancy of the surviving spouse if the owner/annuitant dies before the
annuity date. Each annual payment will be equal to the remaining contract
value transferred to Merrill Lynch Life's general account, divided by the
then current life expectancy chosen, as defined by Internal Revenue Service
regulations. Payments will be made on each anniversary of the annuity date.
If the measuring life or lives dies before the remaining value has been
distributed, that value will be paid to the contract owner in a lump sum.
* These options are 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.
UNISEX
Generally, the Contract provides for sex-distinct annuity purchase rates for
life annuities. However, in those states that have adopted regulations
prohibiting sex-distinct rates, blended unisex annuity purchase rates for life
annuities will be applied, whether the annuitant is male or female. 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 purchasing the Contract
should consult with their legal adviser to determine whether purchasing the
Contract based on sex-distinct annuity purchase rates is consistent with Title
VII of the Civil Rights Act of 1964 or other applicable law. Merrill Lynch
Life may offer such contract owners Contracts based on unisex annuity purchase
rates.
FEDERAL INCOME TAXES
INTRODUCTION
The Contracts are designed for use in connection with retirement plans that
are not qualified plans under the provisions of the Internal Revenue Code and
also Individual Retirement Annuities (IRAs). The ultimate effect of federal
income taxes on contract value, on annuity payments, and on the economic
benefit to the contract owner, depends on the type of retirement plan for
which the Contract is purchased, on whether the investments of the Accounts
meet Internal Revenue Service diversification standards (discussed below) and
on the tax status of the individual concerned. The following discussion is
general in nature and is not intended as tax advice. This discussion is not
intended to address the tax consequences resulting from all situations in
which a person may by entitled to or may receive a distribution under the
Contract. Contract owners should consult a competent tax adviser before
initiating any transaction. This discussion is based on the Company's
understanding of current federal income tax laws as currently interpreted by
the Internal Revenue Service and generally does not discuss or consider any
applicable state or other tax laws. No representation is made as to the
likelihood of continuation of current federal income tax laws or of the
current interpretations by the Internal Revenue Service. MERRILL LYNCH LIFE
DOES NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY CONTRACT OR ANY
TRANSACTION INVOLVING THE CONTRACTS.
MERRILL LYNCH LIFE'S TAX STATUS
Merrill Lynch Life is taxed as a life insurance company under the Internal
Revenue Code. The Accounts are not a separate entity and for tax purposes
their operations are part of the
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Company's. Therefore, the Company will be liable for any taxes attributable to
the Accounts. Under existing federal income tax law the investment income of
the Accounts is includable in the Company's gross income. Merrill Lynch Life
currently incurs no income taxes on this income. Merrill Lynch Life reserves
the right, however, to deduct from the Accounts any such taxes which are
imposed on the investment earnings or taxes measured by or attributable to the
receipt of premium.
TAXATION OF ANNUITIES
In General
Section 72 of the Internal Revenue Code governs taxation of annuities in
general. With respect to contracts held by natural persons, Merrill Lynch Life
believes that the contract owner is not taxed on increases in the value of the
Contract until distribution occurs, either in the form of a withdrawal or as
annuity payments under the annuity option elected. The taxable portion of a
distribution (in the form of a single sum payment or an annuity) is taxable as
ordinary income. Additionally, certain transfers of a Contract for less than
full consideration, such as a gift, will trigger tax on the excess of the net
contract value over the contract owner's investment in the Contract.
Required Distributions
In order to be treated as an annuity contract for federal income tax purposes,
section 72(s) of the Code requires any nonqualified Contract to provide that
(a) if any contract owner dies on or after the annuity commencement date but
prior to the time the entire interest in the Contract has been distributed,
the remaining portion of such interest will be distributed at least as rapidly
as under the method of distribution being used as of the date of that contract
owner's death; and (b) if any contract owner dies prior to the annuity
commencement date, the entire interest in the Contract will be distributed
within five years after the date of the contract owner's death. These
requirements will be considered satisfied as to any portion of the contract
owner's interest which is payable to or for the benefit of a "designated
beneficiary" and which is distributed over the life of such "designated
beneficiary" or over a period not extending beyond the life expectancy of that
beneficiary, provided that such distributions begin within one year of that
owner's death. The contract owner's "designated beneficiary" (referred to
herein as the "Owner's Beneficiary") is the person designated by such contract
owner as a beneficiary and to whom ownership of the Contract passes by reason
of death and must be a natural person. However, if the contract owner's
"designated beneficiary" is the surviving spouse of the contract owner, the
Contract may be continued with the surviving spouse as the new owner. Solely
for purposes of applying the provisions of Section 72(s) of the Code, when
nonqualified Contracts are held by other than a natural person, the death of,
or change of, the annuitant is treated as the death of the contract owner.
The nonqualified Contracts contain provisions which are intended to comply
with the requirements of section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. The Company intends to
review such provisions and modify them if necessary to assure that they comply
with the requirements of Code section 72(s) when clarified by regulation or
otherwise. Other rules may apply to IRAs.
Non-natural Owners
Nonqualified contracts held by other than a natural person generally are not
treated as annuities, and the contract owner generally must include in income
any increase in the excess of the contract value over the contract owner's
investment in the Contract. This is not applicable to trusts or other entities
acting as an agent for a natural person, and there are certain other
exceptions to this rule. Prospective contract owners who are not natural
persons should consult a competent tax adviser.
Distributions
The taxable portion of annuity payments is generally determined by a formula
that establishes the ratio that the cost basis of the contract bears to the
expected return under the contract. After
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such time as the sum of the nontaxable portion of annuity payments received
equals the sum of premium payments (adjusted for any withdrawals or
outstanding loans), all subsequent annuity payments are fully taxable as
ordinary income. With respect to nonqualified Contracts, partial withdrawals
of contract value are treated as taxable income to the extent that the
contract value just before the withdrawal exceeds the investment in the
Contract. The assignment or pledge (or agreement to assign or pledge) of any
portion of the value of the Contract shall be treated as a withdrawal subject
to this rule. Full withdrawals are treated as taxable income under section
72(e) of the Internal Revenue Code to the extent that the net amount received
exceeds the investment in the Contract. (For the tax treatment of any premium
paid prior to August 14, 1982, under another annuity contract, which contract
has been exchanged for this Contract, consult your tax adviser.) Amounts may
be distributed from a Contract because of the death of the owner. Generally,
such amounts are includable in the income of the recipient as follows: (1) if
distributed in a lump sum, the amount is taxed in the same manner as a full
withdrawal; or (2) if distributed under a payment option, the amounts are
taxed in the same manner as annuity payments. For both withdrawals and annuity
payments under IRAs, there may be no cost basis in the contract within the
meaning of Section 72 of the Internal Revenue Code, and the total amount
received may be taxable as ordinary income.
Multiple Annuity Contracts
All nonqualified annuity contracts entered into after October 21, 1988 that
are issued by Merrill Lynch Life (or its affiliates) to the same owner during
any calendar year are treated as one annuity contract for purposes of
determining the amount includable in gross income under Section 72(e) of the
Internal Revenue Code. In addition, the Treasury Department has specific
authority to issue regulations that prevent the avoidance of Section 72(e)
through the serial purchase of annuity contracts or otherwise. Congress has
also indicated that the Treasury Department may have authority to treat the
combination purchase of an immediate annuity contract and a separate deferred
annuity contract as a single annuity contract under its general authority to
prescribe rules as may be necessary to enforce the income tax laws.
Penalty Taxes
A penalty tax may be imposed equal to 10% of the taxable income portion of a
withdrawal. The penalty tax applies to both nonqualified Contracts and IRAs,
with different exceptions for each. The exceptions applicable to both
nonqualified Contracts and IRAs include (a) distributions made at or after the
contract owner attains age 59 1/2, (b) distributions made on or after the
contract owner's death, (c) distributions attributable to the contract owner's
disability, and (d) substantially equal periodic payments for the contract
owner's life or life expectancy (or joint life or joint life expectancy of the
contract owner and a second designated person). In certain circumstances,
other exceptions may apply. Other tax penalties may apply to certain
distributions loans and other transactions under IRAs.
INTERNAL REVENUE SERVICE DIVERSIFICATION STANDARDS
The Internal Revenue Service has published regulations prescribing
diversification standards to be met by nonqualified variable annuity contracts
as a condition to being taxed as annuities under Section 72 of the Internal
Revenue Code. The standards provide that investments of a subaccount of the
Accounts are adequately diversified if no more than (a) 55% of the value of
its assets is represented by any one investment, (b) 70% is represented by any
two investments, (c) 80% is represented by any three investments, and (d) 90%
is represented by any four investments. Each Fund is obligated to comply with
the diversification standards imposed by the Internal Revenue Service.
The Treasury Department has announced that the diversification regulations do
not provide guidance concerning the extent to which contract owners may direct
their investments to particular subaccounts of a separate account. Such
guidance will be included in regulations or Revenue Rulings under Section
817(d) of the Internal Revenue Code relating to the definition of a variable
contract. It is unknown what standards will be adopted in such regulations.
Merrill Lynch Life, however, believes that according to current law the
Contract will be treated as an
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annuity for federal income tax purposes and that the Company, not the contract
owner, will be treated as the owner of the contract investments.
The ownership rights under the Contract are similar to, but different in
certain respects from, those described by the Internal Revenue Service in
rulings in which it determined that the owners were not owners of separate
account assets. For example, the owner of the Contract has additional
flexibility in allocating premium payments and account values. These
differences could result in the owner being treated as the owner of the assets
of the Accounts. Merrill Lynch Life reserves the right to modify the Contract
as necessary to prevent the contract owner from being considered the owner of
the assets of the Accounts for federal tax purposes. Any such changes will
apply uniformly to affected contract owners and will be made with such notice
to affected contract owners as is feasible under the circumstances.
IRA CONTRACTS
Section 408 of the Internal Revenue Code permits eligible individuals to
contribute to an individual retirement program known as an Individual
Retirement Annuity ("IRA"). IRAs are subject to limits on the amount that may
be contributed, the contributions that may be deducted from taxable income,
the persons who may be eligible, and on the time when distributions may
commence and the duration of those distributions. Also, distributions from
certain other types of qualified plans may be "rolled over" on a tax-deferred
basis into an IRA. The ultimate effect of federal income taxes on the amounts
contributed to and held under a Contract, on annuity payments, and on the
economic benefit to the contract owner, the annuitant, or the beneficiary
depends on the tax and employment status of the individual concerned and on
Merrill Lynch Life's tax status. In addition, certain requirements must be
satisfied in purchasing an IRA with proceeds from a tax qualified retirement
plan and receiving distributions from an IRA in order to continue receiving
favorable tax treatment. Sales of the Contract for use with IRAs may be
subject to special disclosure requirements of the Internal Revenue Service.
Purchasers of the Contract for use with IRAs will be provided with
supplemental information required by the Internal Revenue Service or other
appropriate agency. Such purchasers will have the right to revoke the Contract
within seven days of the earlier of the establishment of the IRA or the
purchase of the Contract. Purchasers should seek competent tax advice as to
the suitability of the Contract for use with or as an IRA. The Internal
Revenue Service 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 provision in the Contract comports with IRA
qualification requirements.
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF A CONTRACT
A transfer of ownership of the Contract, the designation of an annuitant who
is not also the owner, or the exchange of the Contract may result in certain
tax consequences to the contract owner that are not discussed herein. A
contract owner contemplating any such transfer, assignment, or exchange should
contact a competent tax adviser with respect to the potential tax effects of
such a transaction.
WITHHOLDING
Unless the contract owner elects to the contrary, the taxable portion of any
amounts received under the Contract will be subject to withholding to meet
federal and state income tax obligations. The rate of withholding on annuity
payments will generally be determined on the basis of the withholding
certificate filed by the contract owner with Merrill Lynch Life. If no such
certificate is filed, the contract owner will be treated, for purposes of
determining the withholding rate, as a married person with three exemptions.
The rate of withholding on all other payments made under the Contract, such as
amounts received upon withdrawals, will generally be 10%. Thus, if the
contract owner fails to elect that there be no withholding, Merrill Lynch Life
will withhold from every withdrawal or annuity payment the appropriate
percentage of the amount of the payment that is taxable. Merrill Lynch Life
will provide the contract owner with forms and instructions concerning the
right to elect that no
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amount be withheld from payments. Generally, there will be no withholding for
taxes until payments are actually received under the Contract.
POSSIBLE CHANGES IN TAXATION
In past years, legislation has been proposed that would have adversely
modified the federal taxation of certain annuities. For example, one such
proposal would have changed the tax treatment of non-qualified annuities that
did not have "substantial life contingencies" by taxing income as it is
credited to the annuity. Although, as of the date of this prospectus, Congress
is not actively considering any legislation regarding the taxation of
annuities, there is always the possibility that the tax treatment of annuities
could change by legislation or other means (such as IRS regulations, revenue
rulings, judicial decisions, etc.). Moreover, it is also possible that any
change could be retroactive (that is, effective prior to the date of the
change).
OTHER TAX CONSEQUENCES
Merrill Lynch Life does not make any guarantee regarding the tax status of the
Contract or any transaction regarding the Contract. As noted above, the
foregoing discussion of the income tax consequences under the Contract is not
exhaustive and special rules are provided with respect to other tax situations
not discussed in the Prospectus. Further, the income tax consequences
discussed herein reflect the Company's understanding of current law and the
law may change. Federal estate and state and local estate, inheritance, and
other tax consequences of ownership or receipt of distributions under the
Contract depend on the individual circumstances of each contract owner or
recipient of the distribution. A competent tax adviser should be consulted for
further information.
OTHER INFORMATION
VOTING RIGHTS
Merrill Lynch Life is the legal owner of all Fund shares held in the Accounts.
As the owner, it has the right to vote on any matter put to vote at the Funds'
shareholder meetings. However, Merrill Lynch Life will vote all Fund shares
attributable to Contracts according to instructions received from contract
owners. Shares attributable to Contracts for which no voting instructions are
received will be voted in the same proportion as shares in the respective
subaccounts for which instructions are received. Shares not attributable to
Contracts will also be voted in the same proportion as shares in the
respective subaccounts for which instructions are received. If any federal
securities laws or regulations, or their present interpretation, change to
permit Merrill Lynch Life to vote Fund shares in its own right, it may elect
to do so.
Contract owners have voting rights prior to their annuity date. They may give
voting instructions concerning (1) the election of the Funds' Board of
Directors; (2) ratification of the Funds' independent accountant; (3) approval
of the investment advisory agreement for a Fund corresponding to the contract
owner's selected subaccounts; (4) any change in the fundamental investment
policy of a Fund corresponding to the contract owner's selected subaccounts;
and (5) any other matter requiring a vote of the Funds' shareholders. The
number of shares for which a contract owner may give voting instructions prior
to the annuity date is determined by dividing the contract owner's interest in
a subaccount by the net asset value per share of the corresponding Fund. The
number of shares for which contract owners may give voting instructions will
be determined as of a record date chosen by Merrill Lynch Life. The record
date will be no earlier than 90 days prior to the shareholders meeting.
After the annuity date, contract owners no longer have voting rights, since
their contract value has then been moved out of the Funds.
Contract owners will receive periodic reports relating to the Funds in which
they have an interest including proxy material and voting instruction forms.
REPORTS TO CONTRACT OWNERS
At least once each contract year prior to the annuity date, contract owners
will be sent a statement that provides information pertinent to their own
Contract. The statement will outline
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all Contract transactions during the year, the Contract's current number of
accumulation units, the value of each accumulation unit, and the total
contract value.
Contract owners will also be sent an annual and a semiannual report containing
financial statements and a list of portfolio securities of the Funds, as
required by the Investment Company Act of 1940.
SELLING THE CONTRACT
Merrill Lynch, Pierce, Fenner & Smith Incorporated is the principal
underwriter of the Contract. It was organized in 1958 under the laws of the
state of Delaware and is registered as a broker-dealer under the Securities
Exchange Act of 1934. It is a member of the National Association of Securities
Dealers, Inc. ("NASD"). Merrill Lynch, Pierce, Fenner & Smith Incorporated's
principal business address is World Financial Center, 250 Vesey Street, New
York, New York 10281.
Contracts are sold by registered representatives (Financial Consultants) of
Merrill Lynch, Pierce, Fenner & Smith Incorporated who are also licensed
through various Merrill Lynch Life Agencies as insurance agents for Merrill
Lynch Life. Merrill Lynch Life has entered into a distribution agreement with
Merrill Lynch, Pierce, Fenner & Smith Incorporated and companion sales
agreements with the Merrill Lynch Life Agencies through which agreements the
Contracts are sold and the Financial Consultants are compensated by Merrill
Lynch Life Agencies and/or Merrill Lynch, Pierce, Fenner & Smith Incorporated.
The maximum commission paid to the Financial Consultant is 2.0% of each
premium allocated to Separate Account A. In addition, on the annuity date, the
Financial Consultant will receive compensation of no more than 1.4% of
contract value not subject to a contingent deferred sales charge. Additional
annual compensation of no more than 0.50% of contract value may also be paid
to the Financial Consultant. Commission may be paid in the form of non-cash
compensation. No commission or annuity date compensation will be paid on
Contracts purchased by employees of Merrill Lynch Life or its affiliates or
Contracts purchased by the employees' spouses or dependents.
The maximum commission Merrill Lynch Life will pay to the applicable insurance
agency to be used to pay commissions to Financial Consultants is 5.0% of each
premium allocated to Separate Account A.
Merrill Lynch, Pierce, Fenner & Smith Incorporated may arrange for sales of
the Contract by other broker-dealers who are registered under the Securities
Exchange Act of 1934 and are members of the NASD. Registered representatives
of these other broker-dealers may be compensated on a different basis than
Merrill Lynch, Pierce, Fenner & Smith Incorporated registered representatives.
STATE REGULATION
Merrill Lynch Life is subject to the laws of the State of Arkansas and to the
regulations of the Arkansas Insurance Department. It is also subject to the
insurance laws and regulations of all jurisdictions in which it is licensed to
do business.
An annual statement in the prescribed form is filed with the insurance
departments of jurisdictions where Merrill Lynch Life does business disclosing
the Company's operations for the preceding year and its financial condition as
of the end of that year. Insurance department regulation includes periodic
examination to verify Contract liabilities and reserves and to determine
solvency and compliance with all insurance laws and regulations. Merrill Lynch
Life's books and accounts are subject to insurance department review at all
times. A full examination of Merrill Lynch Life's operations is conducted
periodically by the Arkansas Insurance Department and under the auspices of
the National Association of Insurance Commissioners.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Accounts are a party or to which
the assets of the Accounts are subject. Merrill Lynch Life and Merrill Lynch,
Pierce, Fenner & Smith Incorporated are engaged in various kinds of routine
litigation that, in the Company's judgment, is not material to its total
assets. No litigation relates to the Accounts.
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EXPERTS
The financial statements of Merrill Lynch Life as of December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995 and
of the Accounts as of December 31, 1995 and for the periods presented in the
Statement of Additional Information have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports appearing therein, and
are included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing. Deloitte & Touche LLP's
principal business address is Two World Financial Center, New York, New York
10281-1420.
LEGAL MATTERS
The organization of the Company, its authority to issue the Contract, and the
validity of the form of the Contract have been passed upon by Barry G.
Skolnick, Merrill Lynch Life's Senior Vice President and General Counsel.
Sutherland, Asbill & Brennan, L.L.P. of Washington, D.C. has provided advice
on certain matters relating to federal securities laws.
REGISTRATION STATEMENTS
Registration statements have been filed with the Securities and Exchange
Commission under the Securities Act of 1933 and the Investment Company Act of
1940 that relate to the Contract and its investment options. This Prospectus
does not contain all of the information in the registration statements as
permitted by Securities and Exchange Commission regulations. The omitted
information can be obtained from the Securities and Exchange Commission's
principal office in Washington, D.C., upon payment of a prescribed fee.
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 VARIABLE ANNUITY SEPARATE
ACCOUNT B
FINANCIAL STATEMENTS OF MERRILL LYNCH LIFE INSURANCE COMPANY
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STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 9, 1996
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
AND
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT B
FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
ALSO KNOWN AS
MODIFIED SINGLE 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.
This Statement of Additional Information is not a Prospectus and should be
read together with the Contract's Prospectus dated December 9, 1996, 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
FINANCIAL STATEMENTS OF MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE
ACCOUNT A............................................................... S-1
FINANCIAL STATEMENTS OF MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE
ACCOUNT B............................................................... S-22
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 and Merrill Lynch Life Variable Annuity
Separate Account B (the "Accounts") under the Investment Company Act of 1940.
The offering is continuous. For the years ended December 31, 1995, 1994, and
1993, Merrill Lynch, Pierce, Fenner & Smith Incorporated received $24.2
million, $59.1 million and $51.9 million respectively, in commissions in
connection with the sale of the Contracts.
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 Accounts 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 Accounts and the Contracts, and
MLIG, in turn, has arranged for a subsidiary, Merrill Lynch Insurance Group
Services, Inc. ("MLIG Services"), to provide these services. Compensation for
these services, which will be paid by Merrill Lynch Life, will be based on the
charges and expenses incurred by MLIG Services, and will reflect MLIG
Services' actual costs. For the years ended December 31, 1995, 1994 and 1993,
Merrill Lynch Life paid administrative services fees of $43.0 million, $44.2
million, and $55.8 million respectively.
CALCULATION OF YIELDS AND TOTAL RETURNS
MONEY MARKET YIELDS
From time to time, Merrill Lynch Life may quote in advertisements and sales
literature the current annualized yield for the Domestic Money Market
Subaccount of Account A and the Reserve Assets Subaccount of Account B 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 mortality and expense risk charge;
(2) the administration charge in the case of the Domestic Money Market
Subaccount; and (3) the annual contract maintenance charge. For purposes of
calculating current yields for a Contract, an average per unit contract
maintenance charge is used, as described below. Current yield will be
calculated according to the following formula:
Current Yield = ((NCF - ES/UV) X (365/7)
Where:
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.
3
<PAGE>
Merrill Lynch Life also may quote the effective yield of the Domestic Money
Market Subaccount or the Reserve Assets 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))/365/7/ - 1
Where:
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.
The effective yield for the Domestic Money Market subaccount for the 7-day
period ended December 31, 1995 was 3.89%. The effective yield for the Reserve
Assets subaccount for the 7-day period ended December 31, 1995 was 4.66%.
Because of the charges and deductions imposed under the Contract, the yield
for the Domestic Money Market Subaccount and the Reserve Assets Subaccount
will be lower than the yield for the corresponding underlying Fund.
The yields on amounts held in the Domestic Money Market Subaccount or the
Reserve Assets 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 those
subaccounts 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 and
Reserve Assets 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 Account A
subaccounts (other than the Domestic Money Market Subaccount) for a contract
for 30-day or one-month periods. 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 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 mortality and expense risk charge, the
administration charge and the annual contract maintenance charge. For purposes
of calculating the 30-day or one-month yield, an average contract maintenance
charge 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; as described below. The 30-day or one-month yield is calculated
according to the following formula:
Yield = 2 X ((((NI - ES)/(U X UV)) + 1)/6/ - 1)
Where:
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 period.
4
<PAGE>
Currently, Merrill Lynch Life may quote yields on bond subaccounts within
Account A. The yield for those subaccounts for the 30-day period ended
December 31, 1995 was:
<TABLE>
<CAPTION>
NAME OF SUBACCOUNT YIELD
------------------ -----
<S> <C>
Prime Bond 4.52%
High Current Income 8.62%
Global Bond Focus (formerly, World
Income Focus) 7.36%
Government Bond (formerly,
Intermediate Government Bond) 4.16%
</TABLE>
Because of the charges and deductions imposed under the contracts, the yield
for an Account A subaccount will be lower than the yield for the corresponding
Fund.
The yield on the amounts held in the Account A 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.
Yield calculations do not take into account the declining contingent deferred
sales charge under the Contract of amounts surrendered or withdrawn under the
Contract deemed to consist of premiums paid within the preceding seven years.
A contingent deferred sales charge will not be imposed on the first withdrawal
in any Contract year to the extent that it is deemed to consist of gain on
premiums paid during the preceding seven contract years and/or premiums not
subject to such a charge.
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. For the year ended December 31, 1995, returns
were:
<TABLE>
<CAPTION>
NAME OF SUBACCOUNT RETURN
------------------ ------
<S> <C>
Prime Bond 11.34%
High Current Income 8.62%
Quality Equity 14.29%
Equity Growth 36.80%
Natural Resources Focus* 5.22%
American Balanced* 12.29%
Global Strategy Focus 2.27%
Basic Value Focus 17.62%
Global Bond Focus (formerly, World
Income Focus) 8.28%
Global Utility Focus* 16.45%
International Equity Focus -2.08%
Government Bond (formerly,
Intermediate Government Bond) 6.15%
Developing Capital Markets Focus -7.92%
</TABLE>
Performance information for the Index 500, AIM V.I. Capital Appreciation, AIM
V.I. Value, Premier Growth, Emerging Growth, and Research Subaccounts are not
included because they had not commenced operations as of December 31, 1995.
Total returns assume the Contract was surrendered at the end of the period
shown, and are not indicative of performance if the Contract were continued
for a longer period.
- --------
* Closed to allocations of premiums or contract value following the close of
business on December 6, 1996.
5
<PAGE>
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>
COMMENCED
FUND OPERATIONS
---- ----------
<S> <C>
Prime Bond April 20, 1982
High Current Income April 20, 1982
Quality Equity April 20, 1982
Equity Growth April 20, 1982
Natural Resources Focus* June 1, 1988
American Balanced* June 1, 1988
Global Strategy Focus February 14, 1992
Basic Value Focus July 1, 1993
Global Bond Focus (formerly, World
Income Focus) July 1, 1993
Global Utility Focus* July 1, 1993
International Equity Focus July 1, 1993
Government Bond (formerly,
Intermediate Government Bond) May 1, 1994
Developing Capital Markets Focus May 1, 1994
</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.
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 mortality and expense risk charge, the
administration charge (in the case of Account A subaccounts), and the contract
maintenance charge, and assume a surrender of the Contract at the end of the
period for the return quotation. Total returns therefore reflect a deduction
of the contingent deferred sales charge for any period of less than seven
years. For purposes of calculating total return, an average per dollar
contract maintenance charge attributable to the hypothetical account for the
period is used, as described below. The total return is then calculated
according to the following formula:
TR = ((ERV/P)/1/N/) - 1
Where:
TR = the average annual total return net of subaccount recurring charges
(such as the mortality and expense risk charge, administration
charge, if applicable, and contract maintenance charge).
ERV= the ending redeemable value (net of any applicable contingent
deferred sales charge) 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.
From time to time, Merrill Lynch Life also may quote in sales literature or
advertisements, total returns that do not reflect the contingent deferred
sales charge. These are calculated in exactly the same way as average annual
total returns described above, except that the ending redeemable value of the
hypothetical account for the period is replaced with an ending value for the
period that does not take into account any contingent deferred sales charge on
surrender of the Contract. In addition, such nonstandard returns may also be
quoted for other periods.
- --------
* The subaccount corresponding to this Fund was closed to allocations of
premiums or contract value following the close of business on December 6,
1996.
6
<PAGE>
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 the Domestic Money Market
Subaccount to one or more designated subaccounts under a dollar cost averaging
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 except for the contingent deferred sales charge. 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 the Domestic Money Market Subaccount at the beginning of that
period and monthly transfers of a portion of the contract value from that
subaccount to designated 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
Domestic Money Market 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 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 other than the contingent deferred sales charge. 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
<PAGE>
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(1) Financial Statements of Merrill Lynch Life Variable Annuity Separate
Account A as of December 31, 1995 and for the two years ended
December 31, 1995 and the Notes relating thereto appear in the
Statement of Additional Information (Part B of the Registration
Statement)
(2) Financial Statements of Merrill Lynch Life Variable Annuity Separate
Account B as of December 31, 1995 and for the two years ended
December 31, 1995 and the Notes relating thereto appear in the
Statement of Additional Information (Part B of the Registration
Statement)
(3) Financial Statements of Merrill Lynch Life Insurance Company for the
three years ended December 31, 1995 and the Notes relating thereto
appear in the Statement of Additional Information (Part B of the
Registration Statement)
(b) Exhibits
(1) Resolution of the Board of Directors of Merrill Lynch Life Insurance
Company establishing the Merrill Lynch Life Variable Annuity
Separate Account A and Merrill Lynch Life Variable Annuity Separate
Account B (Incorporated by Reference to Post-Effective Amendment No.
10 to Form N-4, Registration No. 33-43773 Filed December 9, 1996).
(2) Not Applicable
(3) Underwriting Agreement Between Merrill Lynch Life Insurance Company and
Merrill Lynch, Pierce, Fenner & Smith Incorporated (Incorporated by
Reference to Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43773 Filed December 9, 1996).
(4)(a) Individual Variable Annuity Contract issued by Merrill Lynch Life
Insurance Company (Incorporated by Reference to Post-Effective
Amendment No. 10 to Form N-4, Registration No. 33-43773 Filed
December 9, 1996).
(b) Merrill Lynch Life Insurance Company Contingent Deferred Sales Charge
Waiver Endorsement (Incorporated by Reference to Post-Effective
Amendment No. 10 to Form N-4, Registration No. 33-43773 Filed
December 9, 1996).
(c) Individual Retirement Annuity Endorsement (Incorporated by Reference to
Post-Effective Amendment No. 10 to Form N-4, Registration No.
33-43773 Filed December 9, 1996).
(d) Merrill Lynch Life Insurance Company Endorsement (Incorporated by
reference to Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43773 Filed December 9, 1996).
(e) Individual Variable Annuity Contract (revised) issued by Merrill Lynch
Life Insurance Company (ML-VA-002) (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 7 to Form N-4,
Registration No. 33-45379 Filed April 26, 1995).
(f) Merrill Lynch Life Insurance Company Endorsement (ML008) (Incorporated
by Reference to Registrant's Post-Effective Amendment No. 7 to Form
N-4, Registration No. 33-45379 Filed April 26, 1995).
(g) Merrill Lynch Life Insurance Company Individual Variable Annuity
Contract (ML-VA-001) (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 7 to Form N-4, Registration No. 33-
45379 Filed April 26, 1995).
(5) Not Applicable
(6) (a) Articles of Amendment, Restatement and Redomestication of the
Articles of Incorporation of Merrill Lynch Life Insurance Company
(Incorporated by Reference to Post-Effective Amendment No. 10 to
Form N-4, Registration No. 33-43773 Filed December 9, 1996).
(b) Amended and Restated By-laws of Merrill Lynch Life Insurance Company
(Incorporated by Reference to Post-Effective Amendment No. 10 to
Form N-4, Registration No. 33-43773 Filed December 9, 1996).
(7) Not Applicable
C-1
<PAGE>
(8)(a) Amended General Agency Agreement (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 5 to Form N-4,
Registration No. 33-45379 Filed April 28, 1994).
(b) Indemnity Agreement Between Merrill Lynch Life Insurance Company and
Merrill Lynch Life Agency, Inc. (Incorporated by Reference to Post-
Effective Amendment No. 10 to Form N-4, Registration No. 33-43773
Filed December 9, 1996).
(c) Management Agreement Between Merrill Lynch Life Insurance Company and
Merrill Lynch Asset Management, Inc. (Incorporated by Reference to
Post-Effective Amendment No. 10 to Form N-4, Registration No. 33-
43773 Filed December 9, 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 Reserve Assets Fund (Incorporated by
Reference to Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43773 Filed December 9, 1996).
(e) 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 Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43773 Filed December 9, 1996).
(f) Agreement Between Merrill Lynch Life Insurance Company and Merrill
Lynch Variable Series Funds, Inc. Relating to Valuation and Purchase
Procedures (Incorporated by Reference to Post-Effective Amendment No.
10 to Form N-4, Registration No. 33-43773 Filed December 9, 1996).
(g) 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. 33-45379 Filed April 28, 1994).
(h) Reimbursement Agreement Between Merrill Lynch Asset Management, Inc.
and Merrill Lynch Life Agency (Incorporated by Reference to Post-
Effective Amendment No. 10 to Form N-4, Registration No. 33-43773
Filed December 9, 1996).
(i) Form of Participation Agreement Between Merrill Lynch Variable Series
Funds, Inc., Merrill Lynch Life Insurance Company, Merrill Lynch Life
Insurance Company, and Family Life Insurance Company (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 5 to Form N-4,
Registration No. 33-45379 Filed April 28, 1994).
(j) Form of Participation Agreement Between Merrill Lynch Variable Series
Funds, Inc. and Merrill Lynch Life Insurance Company. (Incorporated
by Reference to Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43773 Filed December 9, 1996).
(9) Opinion of Barry G. Skolnick, Esq. and Consent to its use as to the
legality of the securities being registered.
(10)(a) Written Consent of Sutherland, Asbill & Brennan, L.L.P.
(b) Written Consent of Deloitte & Touche LLP, independent auditors.
(11) Not Applicable
(12) Not Applicable
(13) Schedule for Computation of Performance Quotations (Incorporated by
Reference to Post-Effective Amendment No. 10 to Form N-4,
Registration No. 33-43773 Filed December 9, 1996).
(14)(a) Power of Attorney from Joseph E. Crowne, Jr. (Incorporated by
Reference to 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
Post-Effective Amendment No. 4 to Form N-4, Registration No. 33-43773
Filed March 2, 1994).
(c) Power of Attorney from John C.R. Hele (Incorporated by Reference to
Post-Effective Amendment No. 4 to Form N-4, Registration No. 33-43773
Filed March 2, 1994).
C-2
<PAGE>
(d) Power of Attorney from Allen N. Jones (Incorporated by Reference to
Post-Effective Amendment No. 4 to Form N-4, Registration
No. 33-43773 Filed March 2, 1994).
(e) Power of Attorney from Barry G. Skolnick (Incorporated by Reference to
Post-Effective Amendment No. 4 to Form N-4, Registration
No. 33-43773 Filed March 2, 1994).
(f) Power of Attorney from Anthony J. Vespa (Incorporated by Reference to
Post-Effective Amendment No. 4 to Form N-4, Registration
No. 33-43773 Filed March 2, 1994).
(g) 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).
C-3
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR*
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS ADDRESS POSITION WITH DEPOSITOR*
- --------------------- -------------------------- -------------------------------
<S> <C> <C>
Joseph E. Crowne, Jr. 800 Scudders Mill Road Director, Senior Vice
Plainsboro, NJ 08536 President, 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
Plainsboro, NJ 08536 President.
Barry G. Skolnick 800 Scudders Mill Road Director, Senior Vice
Plainsboro, NJ 08536 President, General Counsel and
Secretary.
Anthony J. Vespa 800 Scudders Mill Road Director, Chairman of the
Plainsboro, NJ 08536 Board, Chief Executive Officer
and President.
Deborah J. Adler 800 Scudders Mill Road Vice President and Actuary.
Plainsboro, NJ 80536
Robert J. Boucher 1414 Main Street Senior Vice President, Variable
Springfield, MA 01102 Life Administration.
Charles J. Cavanaugh 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Michael P. Cogswell 800 Scudders Mill Road Vice President and Senior
Plainsboro, NJ 08536 Counsel.
Edward W. Diffin, Jr. 800 Scudders Mill Road Vice President and Senior
Plainsboro, NJ 08536 Counsel.
Eileen Dyson 4804 Deer Lake Drive East Vice President and Assistant
Jacksonville, FL 32246 Secretary.
Diana Joyner 1414 Main Street Vice President.
Springfield, MA 01102
Peter P. Massa 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Kelly A. O'Dea 800 Scudders Mill Road Vice President and Senior
Plainsboro, NJ 08536 Compliance Officer.
Shelley K. Parker 1414 Main Street Vice President and Assistant
Springfield, MA 01102 Secretary.
Julia Raven 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Lori M. Salvo 800 Scudders Mill Road Vice President and Senior
Plainsboro, NJ 08536 Counsel.
John A. Shea 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Frederick H. Steele 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Thomas J. Thatcher 4804 Deer Lake Drive East Vice President and Assistant
Jacksonville, FL 32246 Secretary.
Robert J. Viamari 1414 Main Street Vice President and Assistant
Springfield, MA 01102 Secretary.
Chester Westergard 425 West Capital Avenue Vice President.
Capital Towers, Suite 200
Little Rock, AR 72201
Denis G. Wuestman 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
</TABLE>
- ---------------------
* Each director is elected to serve until the next annual shareholder meeting
or until his or her successor is elected and shall have qualified.
C-4
<PAGE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
Merrill Lynch Life Insurance Company is an indirect wholly-owned subsidiary
of Merrill Lynch & Co., Inc.
A list of subsidiaries of Merrill Lynch & Co., Inc. appears below.
<PAGE>
MLCOSUBO395
SUBSIDIARIES OF THE REGISTRANT
The following are subsidiaries of ML & Co. as of March 24, 1995 and the
states or jurisdictions in which they are organized. Indentation indicates the
principal parent of each subsidiary. Except as otherwise specified, in each case
ML & Co. owns, directly or indirectly, at least 99% of the voting securities of
each subsidiary. The names of particular subsidiaries have been omitted because,
considered in the aggregate as a single subsidiary, they would not constitute,
as of the end of the year covered by this report, a "significant subsidiary" as
that term is defined in Rule 1.02(v) of Regulation S-X under the Securities
Exchange Act of 1934.
<TABLE>
<CAPTION>
STATE OR
JURISDICTION
NAME OR ENTITY
- -------------------------------------------------------------------------------------- --------------------------
<S> <C>
Merrill Lynch & Co., Inc. ............................................................ Delaware
Merrill Lynch, Pierce, Fenner & Smith Incorporated(1)............................... Delaware
Broadcort Capital Corp. .......................................................... Delaware
Merrill Lynch & Co., Canada Ltd. ................................................. Ontario
Merrill Lynch Canada Incorporated/Incorporee.................................... Nova Scotia
Merrill Lynch Life Agency Inc.(2)................................................. Washington
Merrill Lynch Princeton Incorporated.............................................. Delaware
ROC Denver, Inc. ................................................................. Delaware
R.O.C. Florida, Inc. ............................................................. Florida
ROC Texas, Inc. .................................................................. Texas
Wagner Stott Clearing Corp.(3).................................................... Delaware
Green Equity, Inc. ................................................................. New Jersey
Merrill Lynch Bank & Trust Co. ..................................................... New Jersey
Merrill Lynch Capital Services, Inc. ............................................... Delaware
Merrill Lynch Derivative Products, Inc.(4).......................................... Delaware
Merrill Lynch Government Securities Inc. ........................................... Delaware
Merrill Lynch Government Securities of Puerto Rico S.A. .......................... Delaware
Merrill Lynch Money Markets Inc. ................................................. Delaware
Merrill Lynch Group, Inc. .......................................................... Delaware
HQ North Company, Inc. ........................................................... New York
Investor Protection Insurance Company............................................. Vermont
Merrill Lynch Capital Partners, Inc. ............................................. Delaware
Merrill Lynch Fiduciary Services, Inc. ........................................... New York
Merrill Lynch Futures Inc. ....................................................... Delaware
Merrill Lynch, Hubbard Inc.(5).................................................... Delaware
Merrill Lynch Insurance Group, Inc. .............................................. Delaware
Merrill Lynch Life Insurance Company............................................ Arkansas
ML Life Insurance Company of New York........................................... New York
Merrill Lynch International Finance Corporation................................... New York
Merrill Lynch International Bank Limited........................................ England
Merrill Lynch Bank (Suisse) S.A. ............................................. Switzerland
Merrill Lynch Trust Company (Jersey) Limited.................................. Jersey,
Channel Islands
Merrill Lynch L.P. Holdings, Inc. ................................................ Delaware
Merrill Lynch MBP Inc. ........................................................... Delaware
Merrill Lynch Mortgage Capital Inc. .............................................. Delaware
Merrill Lynch National Financial.................................................. Utah
Merrill Lynch Private Capital Inc.(6)............................................. Delaware
Merrill Lynch Trust Company....................................................... New Jersey
Merrill Lynch Business Financial Services Inc. ................................. Delaware
Merrill Lynch Credit Corporation................................................ Delaware
Merrill Lynch Home Equity Acceptance, Inc. ................................... Delaware
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATE OR
JURISDICTION
NAME OR ENTITY
- -------------------------------------------------------------------------------------- --------------------------
<S> <C>
Merrill Lynch & Co., Inc.
Merrill Lynch International Incorporated (cont'd)
Merrill Lynch Trust Company....................................................... Florida
Merrill Lynch Trust Company of America............................................ Illinois
Merrill Lynch Trust Company of California......................................... California
Merrill Lynch Trust Company of Texas.............................................. Texas
Merrill Lynch/WFC/L, Inc. ........................................................ New York
ML Futures Investment Partners Inc. .............................................. Delaware
ML IBK Positions Inc. ............................................................ Delaware
Merrill Lynch Capital Corporation(7)............................................ Delaware
ML Leasing Equipment Corp.(8)..................................................... Delaware
Merlease Leasing Corp. ......................................................... Delaware
Merrill Lynch Venture Capital Inc. ............................................. Delaware
Princeton Services, Inc.(9)....................................................... Delaware
Merrill Lynch International Incorporated............................................ Delaware
Merrill Lynch GFX, Inc. .......................................................... Delaware
Merrill Lynch International (Australia) Limited................................... New South Wales
Merrill Lynch International Bank.................................................. United States
Merrill Lynch International Holdings Inc. ........................................ Delaware
Merrill Lynch Bank (Austria) Aktiengesellschaft A.G. ........................... Austria
Merrill Lynch Bank and Trust Company (Cayman) Limited........................... Cayman Islands,
British West Indies
Merrill Lynch International & Co.(10)......................................... Netherlands Antilles
Merrill Lynch Capital Markets A.G. ............................................. Switzerland
Merrill Lynch Europe Limited.................................................... England
Merrill Lynch International Limited........................................... England
Merrill Lynch Capital Markets PLC............................................. England
Merrill Lynch, Pierce, Fenner & Smith (Brokers & Dealers) Limited............. England
Merrill Lynch Europe Ltd. ...................................................... Cayman Islands,
British West Indies
Merrill Lynch Holding GmbH(11).................................................. Fed. Rep. of Germany
Merrill Lynch Bank A.G. ...................................................... Fed. Rep. of Germany
Merrill Lynch GmbH............................................................ Fed. Rep. of Germany
Merrill Lynch Holding S.A.F. ................................................... France
Merrill Lynch Capital Markets (France) S.A. .................................. France
Merrill Lynch Hong Kong Securities Limited...................................... Hong Kong
Merrill Lynch Japan Incorporated.................................................. Delaware
Merrill Lynch Specialists Inc. ..................................................... Delaware
<FN>
- ------------------------
(1) MLPF&S also conducts business as "Merrill Lynch & Co."
(2) Similarly named affiliates and subsidiaries that engage in the sale of life
insurance and annuity products are incorporated in various other
jurisdictions.
(3) The preferred stock of the corporation is owned by an unaffiliated group of
investors.
(4) ML & Co. owns 100% of this corporation's outstanding common voting stock.
100% of the outstanding preferred voting stock is held by outside parties.
The board of directors consist of 10 members, 9 of which are ML & Co.
employees and 1 of which represents outside parties.
(5) This corporation has more than 30 direct or indirect subsidiaries operating
in the United States and serving as either general partners or associate
general partners of real estate limited partnerships.
(6) This corporation has 12 subsidiaries which have engaged in direct principal
lending and investment management.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(7) This company has 10 subsidiaries holding or having a direct or indirect
interest in specific investments on its behalf.
(8) This corporation has more than 45 direct or indirect subsidiaries operating
in the United States and serving as either general partners or associate
general partners of limited partnerships.
(9) This corporation is the general partner of Merrill Lynch Asset Management,
L.P. (whose limited partner is ML & Co.).
(10) A partnership among subsidiaries of ML & Co.
(11) ML & Co. holds a 50% interest in this corporation, with the remaining 50%
interest held by an outside party.
</TABLE>
ITEM 27. NUMBER OF CONTRACTS
The number of contracts in force as of October 31, 1996 was 68,255.
ITEM 28. INDEMNIFICATION
There is no indemnification of the principal underwriter, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, with respect to the Contract.
The indemnity agreement between Merrill Lynch Life Insurance Company ("Mer-
rill 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 per-
sons associated with MLLA as such term is defined in Section 3(a)(21)
of the Securities Exchange Act of 1934 against all claims, losses, lia-
bilities 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, 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 Regis-
trant in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the securi-
ties being registered, the Registrant will, unless in the opinion of its coun-
sel 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 fi-
nal adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Merrill Lynch, Pierce, Fenner & Smith Incorporated also acts as principal
underwriter for the following additional funds: CBA Money Fund; CMA Government
Securities Fund; CMA Money Fund; CMA Tax-Exempt Fund; CMA Treasury Fund; CMA
Multi-State Municipal Series Trust; Corporate Income Fund; Equity Income Fund;
The Fund of Stripped ("Zero") U.S. Treasury Securities; The GNMA Investment
Accumulation Program; Government Security Income Fund; International Bond
Fund; The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities;
Merrill Lynch Trust for Government Securities; Municipal Income Fund; and Mu-
nicipal Investment Trust Fund.
Merrill Lynch, Pierce, Fenner & Smith Incorporated also acts as principal
underwriter for the following additional accounts: Merrill Lynch Life Variable
Annuity Separate Account A; Merrill Lynch Life Variable Life Separate Account;
Merrill Lynch Life Variable Life Separate Account II; Merrill Lynch Life Vari-
able 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 An-
nuity Separate Account; ML of New York Variable Annuity Separate Account A;
and ML of New York Variable Annuity Separate Account B.
C-5
<PAGE>
(b)The directors, president, treasurer and executive vice presidents of
Merrill Lynch, Pierce, Fenner & Smith Incorporated are as follows:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES WITH UNDERWRITER
------------------------- --------------------------------------
<S> <C>
Herbert M. Allison, Jr.* Director and Executive Vice President
Barry S. Friedberg* Executive Vice President
Edward L. Goldberg* Executive Vice President
Stephen L. Hammerman* Director and Chairman
Jerome P. Kenney* Executive Vice President
David H. Komansky* Director and President
Theresa Lang* Senior Vice President and Treasurer
Daniel T. Napoli* Senior Vice President
Thomas H. Patrick* Executive Vice President
George A. Schieren General Counsel
Winthrop H. Smith, Jr.* Executive Vice President
John L. Steffens* Director and Executive Vice President
Daniel P. Tully* Director
Roger M. Vasey* Executive Vice President
</TABLE>
- ---------------------
* World Financial Center, 250 Vesey Street, New York, NY 10281
(c) Not Applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, and records required to be maintained by Section 31(a)
of the 1940 Act and the rules promulgated thereunder are maintained by the de-
positor at the principal executive offices at 800 Scudders Mill Road,
Plainsboro, New Jersey 08536 and the Service Center at 4804 Deer Lake Drive
East, Jacksonville, Florida 32246.
ITEM 31. Not Applicable
ITEM 32. UNDERTAKINGS AND REPRESENTATIONS
(a) Registrant undertakes to file a post-effective amendment to the Regis-
trant Statement as frequently as is necessary to ensure that the audited fi-
nancial statements in the Registration Statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be ac-
cepted.
(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 rela-
tion to the services rendered, the expenses expected to be incurred, and the
risks assumed by Merrill Lynch Life Insurance Company.
C-6
<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 B,
certifies that this Post-Effective Amendment meets all the requirements for
effectiveness under paragraph (b) of Rule 485, and accordingly, has caused
this Amendment to be signed on its behalf, in the City of Plainsboro, State of
New Jersey, on the 3rd day of December, 1996.
Merrill Lynch Life Variable Annuity
Separate Account B
(Registrant)
Attest: /s/ Sandra K. Domingues By: /s/ Barry G. Skolnick
________________________________ __________________________________
Sandra K. Domingues Barry G. Skolnick
Assistant Vice President Senior Vice President of Merrill
Lynch Life Insurance Company
Merrill Lynch Life Insurance Company
(Depositor)
Attest: /s/ Sandra K. Domingues By: /s/ Barry G. Skolnick
________________________________ __________________________________
Sandra K. Domingues Barry G. Skolnick
Assistant Vice President Senior Vice President
As required by the Securities Act of 1933, this Post-Effective Amendment No.
10 to the Registration Statement has been signed below by the following per-
sons in the capacities indicated on December 3, 1996.
SIGNATURE TITLE
* Chairman of the Board, President and
_____________________________________ Chief Executive Officer
Anthony J. Vespa
* Director, Senior Vice President, Chief
_____________________________________ Financial Officer, Chief Actuary and
Treasurer
Joseph E. Crowne, Jr.
* Director, Senior Vice President, and
_____________________________________ Chief Investment Officer
David M. Dunford
* Director and Senior Vice President
_____________________________________
Gail R. Farkas
*By: /s/ Barry G. Skolnick
________________________________ In his own capacity as Director,
Barry G. Skolnick Senior Vice President, General
Counsel, and Secretary and as
Attorney-In-Fact
C-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
---------- ----------- --------
<C> <S> <C>
(9) Opinion of Barry G. Skolnick, Esq. and Consent to its
use as to the legality of the securities being
registered............................................. C-
(10)(a) Written Consent of Sutherland, Asbill & Brennan,
L.L.P. ................................................ C-
(10)(b) Written Consent of Deloitte & Touche LLP, independent
auditors............................................... C-
</TABLE>
C-8
<PAGE>
EXHIBIT (9)
November 22, 1996
Board of Directors
Merrill Lynch Life Insurance Company
800 Scudders Mill Road
Plainsboro, New Jersey 08536
To The Board Of Directors:
In my capacity as General Counsel of Merrill Lynch Life Insurance Company
(the "Company"), I have supervised the preparation Post-Effective Amendment No.
10 to the registration statements on Form N-4 of the Merrill Lynch Life Variable
Annuity Separate Account A (File No. 33-43773) and Merrill Lynch Life Variable
Annuity Separate Account B (File No. 33-45379) (the "Accounts") to be filed by
the Company with the Securities and Exchange Commission under the Securities Act
of 1933 and the Investment Company Act of 1940. Such registration statements
describe certain individual variable annuity contracts which will participate in
the Accounts.
I am of the following opinion:
1. The Company has been duly organized under the laws of the State of
Arkansas and is a validly existing corporation.
2. The individual variable annuity contracts, when issued in
accordance with the prospectus contained in the aforesaid
registration statements and upon compliance with applicable local
law, will be legal and binding obligations of the Company in
accordance with their terms.
3. The Accounts are duly created and validly existing as separate
accounts of the Company pursuant to Arkansas law.
4. The assets held in the Accounts equal to the reserves and other
contract liabilities with respect to the Accounts will not be
chargeable with liabilities arising out of any other business the
Company may conduct.
In arriving at the foregoing opinion, I have made such examination of law
and examined such records and other documents as in my judgment are necessary or
appropriate.
I hereby consent to the filing of this opinion as an exhibit to the
aforesaid registration statements and to the reference to me under the caption
"Legal Matters" in the prospectus contained in said registration statements.
Very truly yours,
/s/ Barry G. Skolnick
Barry G. Skolnick
Senior Vice President and
General Counsel
<PAGE>
EXHIBIT (10)(a)
December 6, 1996
Board of Directors
Merrill Lynch Life Insurance Company
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus filed as part of Post-Effective Amendment No. 10 to
Form N-4 (File No. 33-45379) for Merrill Lynch Life Variable Annuity Separate
Account B of Merrill Lynch Life Insurance Company. In giving this consent, we do
not admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN, L.L.P.
By /s/ Kimberly J. Smith
---------------------------------
Kimberly J. Smith
<PAGE>
EXHIBIT (10)(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 10 to
Registration Statement No. 33-45379 of Merrill Lynch Life Variable Annuity
Separate Account B on Form N-4 of our reports on (i) Merrill Lynch Life
Insurance Company dated February 26, 1996, and (ii) Merrill Lynch Life Variable
Annuity Separate Account B dated January 18, 1996, appearing in the Statement of
Additional Information, which is a part of such Registration Statement, and to
the reference to us under the heading "Experts" in the Prospectus, which is a
part of such Registration Statement.
/s/ Deloitte & Touche LLP
New York, New York
December 5, 1996
