<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1997
REGISTRATION NO. 33-55472
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 8
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF THE SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
------------------------
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
(Exact name of trust)
MERRILL LYNCH LIFE INSURANCE COMPANY
(Name of depositor)
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(Complete address of depositor's principal executive offices)
------------------------
BARRY G. SKOLNICK, ESQ.
Senior Vice President & General Counsel
Merrill Lynch Life Insurance Company
800 Scudders Mill Road
Plainsboro, New Jersey 08536
(Name and complete address of agent for service)
------------------------
Copy to:
STEPHEN E. ROTH, ESQ.
Sutherland, Asbill & Brennan, L.L.P.
1275 Pennsylvania Avenue, NW
Washington, DC 20004-2404
------------------------
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Check box if it is proposed that the filing will become effective on (date)
at (time) pursuant to Rule 487 [ ]
Pursuant to Rule 24f-2 of the Investment Company Act of 1940, the
Registrant has registered an indefinite amount of securities under the
Securities Act of 1933. The Registrant filed the 24f-2 Notice for the year ended
December 31, 1996 on February 26, 1997.
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<PAGE> 2
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
------------------------
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-8B-2
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<TABLE>
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N-8B-2 ITEM CAPTION IN PROSPECTUS
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1 Cover Page
2 Cover Page
3 Facts About the Separate Account, the Funds, the Zero Trusts and Merrill Lynch
Life; More About the Separate Account and its Divisions
4 Facts About the Separate Account, the Funds, the Zero Trust and Merrill Lynch
Life (Merrill Lynch Life and MLPF&S); More About the Contract (Selling the
Contracts)
5 Facts About the Separate Account, the Funds, the Zero Trusts and Merrill Lynch
Life (Merrill Lynch Life and MLPF&S); More About Merrill Lynch Life Insurance
Company (State Regulation)
6 Facts About the Separate Account, the Funds, the Zero Trusts and Merrill Lynch
Life (The Separate Account)
7 Not Applicable
8 Experts
9 More About Merrill Lynch Life Insurance Company (Legal Proceedings)
10 Summary of the Contract; Facts About the Contract; More About the Contract; More
About the Separate Account and its Divisions
11 Summary of the Contract (The Investment Divisions); Facts About the Separate
Account, the Funds, the Zero Trusts and Merrill Lynch Life; More About the
Separate Account and its Divisions (About the Separate Account; The Zero
Trusts)
12 Summary of the Contract (The Investment Divisions); Facts About the Separate
Account, the Funds, the Zero Trusts and Merrill Lynch Life; More About the
Separate Account and its Divisions
13 Summary of the Contract (Loans; Fees and Charges); Facts About the Contract
(Charges Deducted from the Investment Base; Contract Loading; Charges to the
Separate Account; Guarantee Period; Cash Value; Loans; Partial Withdrawals;
Death Benefit Proceeds; Payment of Death Benefit Proceeds; Rights to Cancel or
Convert); More About the Contract (Group or Sponsored Arrangements; Merrill
Lynch Life's Income Taxes); More About the Separate Account and its Divisions
(Charges to Fund Assets)
14 Facts About the Contract (Who May Be Covered; Purchasing a Contract; Additional
Payments); More About the Contract (Other Contract Provisions)
15 Summary of the Contract (Availability and Payments); Facts About the Contract
(Purchasing a Contract; Additional Payments); More About the Contract (Income
Plans)
16 Facts About the Separate Account, the Funds, the Zero Trusts and Merrill Lynch
Life; More About the Separate Account and its Divisions.
17 Summary of the Contract (Net Cash Surrender Value; Rights to Cancel ("Free Look"
Period) or Convert; Partial Withdrawals); Facts About the Contract (Cash Value;
Partial Withdrawals; Rights to Cancel or Convert); More About the Contract
(Using the Contract; Some Administrative Procedures)
18 Facts About the Separate Account, the Funds, the Zero Trusts and Merrill Lynch
Life; More About the Separate Account and its Divisions
</TABLE>
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<TABLE>
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N-8B-2 ITEM CAPTION IN PROSPECTUS
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19 More About Merrill Lynch Life Insurance Company
20 Not Applicable
21 Summary of the Contract (Loans); Facts About the Contract (Loans)
22 Not Applicable
23 Not Applicable
24 Not Applicable
25 Facts About the Separate Account, the Funds, the Zero Trusts and Merrill Lynch
Life (Merrill Lynch Life and MLPF&S); More About Merrill Lynch Life Insurance
Company
26 Note Applicable
27 Facts About the Separate Account, the Funds, the Zero Trusts and Merrill Lynch
Life (Merrill Lynch Life and MLPF&S); More About Merrill Lynch Life Insurance
Company
28 More About Merrill Lynch Life Insurance Company (Directors and Executive
Officers)
29 Facts About the Separate Account, the Funds, the Zero Trusts and Merrill Lynch
Life (Merrill Lynch Life and MLPF&S)
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Facts About the Separate Account, the Funds, the Zero Trusts and Merrill Lynch
Life (Merrill Lynch Life and MLPF&S)
36 Not Applicable
37 Not Applicable
38 Facts About the Separate Account, the Funds, the Zero Trusts and Merrill Lynch
Life (Merrill Lynch Life and MLPF&S); More About the Contract (Selling the
Contracts)
39 Facts About the Separate Account, the Funds, the Zero Trusts and Merrill Lynch
Life (Merrill Lynch Life and MLPF&S); More About the Contract (Selling the
Contracts)
40 More About the Contract (Selling the Contracts)
41 Facts About the Separate Account, the Funds, the Zero Trusts and Merrill Lynch
Life (Merrill Lynch Life and MLPF&S); More About the Contract (Selling the
Contracts)
42 Not Applicable
43 Not Applicable
44 Facts About the Contract; More About the Contract
45 Not Applicable
46 Summary of the Contract; Facts About the Contract (Cash Value; Partial
Withdrawals)
47 Summary of the Contract (The Investment Divisions); Facts About the Separate
Account, the Funds, the Zero Trusts and Merrill Lynch Life; More About the
Separate Account and its Divisions
48 Facts About the Separate Account, the Funds, the Zero Trusts and Merrill Lynch
Life (Merrill Lynch Life and MLPF&S); More About Merrill Lynch Life (State
Regulation)
49 Facts About the Separate Account, the Funds, the Zero Trusts and Merrill Lynch
Life; Facts About the Contract (Charges Deducted from the Investment Base;
Contract Loading; Charges to the Separate Account); More About the Contract
(Selling the Contracts)
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N-8B-2 ITEM CAPTION IN PROSPECTUS
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50 Not Applicable
51 Facts About the Contract; More About the Contract
52 Facts About the Separate Account, the Funds, the Zero Trusts and Merrill Lynch
Life; More About the Separate Account and its Investment Divisions
53 More About the Contract (Tax Considerations; Merrill Lynch Life's Income Taxes)
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 More About Merrill Lynch Life Insurance Company (Financial Statements)
</TABLE>
<PAGE> 5
PROSPECTUS
May 1, 1997
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR VARIABLE
UNIVERSAL LIFE INSURANCE CONTRACT
ISSUED BY
MERRILL LYNCH LIFE INSURANCE COMPANY
HOME OFFICE: LITTLE ROCK, ARKANSAS 72201
SERVICE CENTER: P.O. BOX 9025
SPRINGFIELD, MASSACHUSETTS 01102-9025
1414 MAIN STREET, THIRD FLOOR
SPRINGFIELD, MASSACHUSETTS 01104-1007
PHONE: (800) 354-5333
OFFERED THROUGH
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
This Prospectus is for a flexible premium joint and last survivor variable
universal life insurance contract (the "Contract") offered by Merrill Lynch Life
Insurance Company ("Merrill Lynch Life"), a subsidiary of Merrill Lynch & Co.,
Inc.
Through the first 14 days following the in force date, the initial payment less
contract loading will be invested only in the division investing in the Money
Reserve Portfolio. Thereafter, the investment base will be reallocated to any
five of the 38 investment divisions of Merrill Lynch Variable Life Separate
Account (the "Separate Account"), the Merrill Lynch Life separate investment
account available under the Contract. The investments available through the
investment divisions include ten mutual fund portfolios of the Merrill Lynch
Series Fund, Inc.; seven mutual fund portfolios of the Merrill Lynch Variable
Series Funds, Inc.; two mutual fund portfolios of the AIM Variable Insurance
Funds, Inc.; one mutual fund portfolio of the Alliance Variable Products Series
Fund, Inc.; two mutual fund portfolios of the MFS Variable Insurance Trust; and
sixteen unit investment trusts in The Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities. Currently, the contract owner may change his or her
investment allocation as many times as desired.
The Contract provides an estate benefit through life insurance coverage on the
lives of two insureds with proceeds payable upon the death of the last surviving
insured. The Contract offers two death benefit options. At the election of the
contract owner, the death benefit may include the Contract's cash value.
Contract owners may purchase additional insurance through an additional
insurance rider, the amount of which may be increased or decreased subject to
certain conditions. Merrill Lynch Life guarantees that the coverage will remain
in force for the guarantee period. Each payment will extend the guarantee period
until such time as the guarantee period extends to the younger insured's
attained age 100. During this guarantee period, Merrill Lynch Life will
terminate the Contract only if the debt exceeds certain contract values. After
the guarantee period, the Contract will remain in force as long as there is not
excessive debt and as long as the cash value is sufficient to cover the charges
due. While the Contract is in force, the death benefit may vary to reflect the
investment results of the investment divisions chosen, but will generally never
be less than the current face amount or, after the younger insured's attained
age 100, the post-100 death benefit.
The Contract allows for additional payments. Contract owners may also borrow up
to the total loan value of the Contract, make partial withdrawals or turn in the
Contract for its net cash surrender value. The net cash surrender value will
vary with the investment results of the investment divisions chosen. Merrill
Lynch Life does not guarantee any minimum net cash surrender value.
It may not be advantageous to replace existing insurance with the Contract.
Within certain limits the Contract may be converted to a contract with benefits
that do not vary with the investment results of a separate account.
THE PURCHASE OF THIS CONTRACT INVOLVES CERTAIN RISKS. BECAUSE IT IS A VARIABLE
LIFE INSURANCE CONTRACT, THE VALUE OF THE CONTRACT REFLECTS THE INVESTMENT
PERFORMANCE OF THE SELECTED INVESTMENT OPTIONS. INVESTMENT RESULTS CAN VARY BOTH
UP AND DOWN AND CAN EVEN DECREASE THE VALUE OF PREMIUM PAYMENTS. THEREFORE,
CONTRACT OWNERS COULD LOSE ALL OR PART OF THE MONEY THEY HAVE INVESTED. MERRILL
LYNCH LIFE DOES NOT GUARANTEE THE VALUE OF THE CONTRACT. RATHER, CONTRACT OWNERS
BEAR ALL INVESTMENT RISKS.
LIFE INSURANCE IS INTENDED TO BE A LONG-TERM INVESTMENT. CONTRACT OWNERS SHOULD
EVALUATE THEIR INSURANCE NEEDS AND THE CONTRACT'S LONG-TERM INVESTMENT POTENTIAL
AND RISKS BEFORE PURCHASING THE CONTRACT.
PARTIAL WITHDRAWALS AND SURRENDER OF THE CONTRACT ARE SUBJECT TO TAX, AND IF
TAKEN BEFORE THE CONTRACT OWNER ATTAINS AGE 59 1/2 MAY ALSO BE SUBJECT TO A 10%
FEDERAL PENALTY TAX. LOANS MAY BE TAXABLE IF THE CONTRACT BECOMES A "MODIFIED
ENDOWMENT CONTRACT."
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT MUST BE
ACCOMPANIED BY CURRENT PROSPECTUSES FOR THE MERRILL LYNCH SERIES FUND, INC.; THE
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.; THE AIM VARIABLE INSURANCE FUNDS,
INC.; THE ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.; THE MFS VARIABLE
INSURANCE TRUST; AND THE MERRILL LYNCH FUND OF STRIPPED ("ZERO") U.S. TREASURY
SECURITIES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 6
TABLE OF CONTENTS
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IMPORTANT TERMS....................................................................... 4
SUMMARY OF THE CONTRACT
Purpose of the Contract............................................................. 5
Availability and Payments........................................................... 5
CMA(R) Insurance Service............................................................ 6
The Investment Divisions............................................................ 6
How the Death Benefit Varies........................................................ 6
How the Investment Base Varies...................................................... 7
Net Cash Surrender Value............................................................ 7
Illustrations....................................................................... 7
Replacement of Existing Coverage.................................................... 7
Rights to Cancel ("Free Look" Period) or Convert.................................... 7
How Death Benefit and Cash Value Increases are Taxed................................ 7
Loans............................................................................... 8
Partial Withdrawals................................................................. 8
Fees and Charges.................................................................... 8
FACTS ABOUT THE SEPARATE ACCOUNT, THE FUNDS, THE ZERO TRUSTS AND MERRILL LYNCH LIFE
The Separate Account................................................................ 9
The Series Fund..................................................................... 9
The Variable Series Funds........................................................... 10
The AIM V.I. Funds.................................................................. 11
The Alliance Fund................................................................... 12
The MFS Trust....................................................................... 12
Certain Risks of the Funds.......................................................... 12
The Zero Trusts..................................................................... 13
Merrill Lynch Life and MLPF&S....................................................... 14
FACTS ABOUT THE CONTRACT
Who May be Covered.................................................................. 14
Purchasing a Contract............................................................... 14
Additional Insurance Rider.......................................................... 15
Additional Payments................................................................. 16
Effect of Additional Payments....................................................... 16
Investment Base..................................................................... 17
Charges Deducted from the Investment Base........................................... 18
Contract Loading.................................................................... 18
Charges to the Separate Account..................................................... 19
Charges to Fund Assets.............................................................. 19
Guarantee Period.................................................................... 20
Cash Value.......................................................................... 21
Loans............................................................................... 22
Partial Withdrawals................................................................. 23
Death Benefit Proceeds.............................................................. 24
Payment of Death Benefit Proceeds................................................... 26
Accelerated Benefit Rider........................................................... 27
Rights to Cancel or Convert......................................................... 27
Reports to Contract Owners.......................................................... 27
MORE ABOUT THE CONTRACT
Using the Contract.................................................................. 28
Some Administrative Procedures...................................................... 29
Other Contract Provisions........................................................... 30
Income Plans........................................................................ 31
Group or Sponsored Arrangements..................................................... 32
Unisex Legal Considerations for Employers........................................... 32
</TABLE>
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Selling the Contracts............................................................... 32
Tax Considerations.................................................................. 33
Merrill Lynch Life's Income Taxes................................................... 36
Reinsurance......................................................................... 37
MORE ABOUT THE SEPARATE ACCOUNT AND ITS DIVISIONS
About the Separate Account.......................................................... 37
Changes Within the Account.......................................................... 37
Net Rate of Return for an Investment Division....................................... 37
The Funds........................................................................... 38
The Zero Trusts..................................................................... 40
ILLUSTRATIONS
Illustrations of Death Benefits, Investment Base, Net Cash Surrender Values and
Accumulated Payments............................................................. 41
EXAMPLES
Additional Payments................................................................. 47
Partial Withdrawals................................................................. 48
Changing the Death Benefit Option................................................... 49
Reduction in Face Amount............................................................ 50
MORE ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY
Directors and Executive Officers.................................................... 51
Services Arrangement................................................................ 51
State Regulation.................................................................... 51
Legal Proceedings................................................................... 52
Experts............................................................................. 52
Legal Matters....................................................................... 52
Registration Statements............................................................. 52
Financial Statements................................................................ 52
Financial Statements of Merrill Lynch Variable Life Separate Account................ S-1
Financial Statements of Merrill Lynch Life Insurance Company........................ G-1
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
3
<PAGE> 8
IMPORTANT TERMS
additional payment: is a payment which may be made after the "free look"
period. Additional payments do not require evidence of insurability.
adjusted face amount: is equal to the lesser of the face amount at the younger
insured's attained age 100, and the cash value as of the date of death plus the
net amount at risk at the younger insured's attained age 100. The adjusted face
amount is used to determine the death benefit under option 1 at and after the
younger insured's attained age 100.
attained age: is, for each insured, the issue age of the insured plus the
number of full years since the contract date.
base premium: is the amount equal to the level annual premium which would be
necessary for the face amount of the Contract to endow on the contract
anniversary nearest the younger insured's age 100. Merrill Lynch Life assumes
death benefit option 1 is elected and further assumes a 5% annual rate of return
on the base premium less contract loading and a maximum cost of insurance
charge. Once determined, the base premium will not change.
cash value: is equal to the investment base plus any unearned charges for cost
of insurance and rider costs plus any debt less any accrued net loan cost since
the last contract anniversary (or since the contract date during the first
contract year).
cash value corridor factor: is used to determine the amount of death benefit
purchased by $1.00 of cash value. Merrill Lynch Life uses this factor in the
calculation of the variable insurance amount to make sure that the Contract
always meets the requirements of what constitutes a life insurance contract
under the Internal Revenue Code.
contract anniversary: is the same date of each year as the contract date.
contract date: is used to determine processing dates, contract years and
anniversaries. It is usually the business day next following the receipt of the
initial payment at the Service Center. It is also referred to as the policy
date.
contract loading: is chargeable to all payments for sales load, federal tax and
premium tax charges.
death benefit: prior to the younger insured's attained age 100, if option 1 is
elected, it is the larger of the face amount and the variable insurance amount;
if option 2 is elected, it is the larger of the face amount plus the cash value
and the variable insurance amount. At and after the younger insured's attained
age 100, the post-100 death benefit will apply.
death benefit proceeds: are equal to the death benefit plus the amount of any
insurance provided by a rider, less any debt.
debt: is the sum of all outstanding loans on a Contract plus accrued interest.
excess sales load: a portion of the sales load calculated during the first two
policy years that may be refunded in the event of lapse or surrender during the
first two policy years. After policy year two, the excess sales load is zero.
face amount: is the minimum death benefit prior to the younger insured's
attained age 100, as long as the Contract remains in force. The face amount will
change if a change in death benefit option is made or if a partial withdrawal is
taken, and can be reduced subject to certain conditions.
fixed base: is calculated in the same manner as the cash value except that 4.5%
is substituted for the net rate of return, the guaranteed maximum cost of
insurance rates and guaranteed maximum rider costs are substituted for current
rates and loans and repayments are not taken into account. After the end of the
guarantee period, the fixed base is zero.
4
<PAGE> 9
guarantee period: is the time guaranteed that the Contract will remain in force
regardless of investment experience, unless the debt exceeds certain values. It
is the period that a comparable fixed life insurance contract (same face amount,
payments made, guaranteed mortality table, contract loading and guaranteed
maximum rider costs) would remain in force if credited with 4.5% interest per
year.
in force date: is the date when the underwriting process is complete, the
initial payment is received and outstanding contract amendments (if any) are
received.
initial payment: is the payment required to put the Contract into effect.
investment base: is the amount available under a Contract for investment in the
Separate Account at any time. A contract owner's investment base is the sum of
the amounts invested in each of the selected investment divisions.
investment division: is any division in the Separate Account.
issue age: is, for each insured, the insured's age as of his or her birthday
nearest the contract date.
issue date: is the date that the Contract is issued. The contestable and
suicide periods are measured from this date.
net amount at risk: is the excess, as of a processing date, of the death
benefit (adjusted for interest at an annual rate of 4.5%) over the cash value,
but before the deduction for cost of insurance. The net amount at risk at the
younger insured's attained age 100 is used to determine the death benefit under
option 1 at and after the younger insured's attained age 100.
net cash surrender value: is equal to the cash value less debt.
processing dates: are the contract date and the first day of each contract
quarter thereafter. Processing dates are the days when Merrill Lynch Life
deducts certain charges from the investment base.
processing period: is the period between consecutive processing dates.
target premium: is equal to 75% of the base premium.
variable insurance amount: is computed daily by multiplying the cash value
(plus certain excess sales load during the first 24 months after the Contract is
issued) by the cash value corridor factor for the younger insured at his or her
attained age.
SUMMARY OF THE CONTRACT
PURPOSE OF THE CONTRACT
This flexible premium joint and last survivor variable universal life insurance
contract offers a choice of investments and an opportunity for the Contract's
investment base, cash value and death benefit to grow based on investment
results.
Merrill Lynch Life does not guarantee that contract values will increase.
Depending on the investment results of selected investment divisions, the
investment base, cash value and death benefit may increase or decrease on any
day. The contract owner bears the investment risk. Merrill Lynch Life guarantees
to keep the Contract in force during the guarantee period subject to the effect
of any debt.
Life insurance is not a short-term investment. The contract owner should
evaluate the need for insurance and the Contract's long-term investment
potential and risks before purchasing a Contract.
AVAILABILITY AND PAYMENTS
The Contract is available in most jurisdictions in which Merrill Lynch Life does
business. A Contract may be issued for insureds from age 20 through age 85.
5
<PAGE> 10
Merrill Lynch Life will not accept an initial payment that provides a guarantee
period of less than three months. The guarantee period is the period of time
Merrill Lynch Life guarantees that the Contract will remain in force regardless
of investment experience unless the debt exceeds certain values.
Contract owners may make additional payments. Contract owners may specify an
additional payment amount on the application to be paid on either a monthly,
quarterly, semi-annual or annual basis. For additional payments not being
withdrawn from a CMA account, Merrill Lynch Life will send reminder notices for
such amounts.
The Contract is not available to insure residents of certain municipalities in
Kentucky where premium taxes in excess of a certain level are imposed.
CMA(R) INSURANCE SERVICE
Contract owners who subscribe to the Merrill Lynch Cash Management Account(R)
financial service ("CMA account") may elect to have their Contract linked to
their CMA account electronically. Certain transactions will be reflected in
monthly CMA account statements. Payments may be transferred to and from the
Contract through a CMA account.
THE INVESTMENT DIVISIONS
Through the first 14 days following the in force date, the initial payment less
contract loading will be invested in the investment division of the Separate
Account investing in the Money Reserve Portfolio. Thereafter, the investment
base will be reallocated to up to five of the 38 investment divisions in the
Separate Account. (See "Changing the Allocation" on page 17.)
Payments are invested in investment divisions of the Separate Account. Ten
investment divisions of the Separate Account invest exclusively in shares of
designated mutual fund portfolios of the Merrill Lynch Series Fund, Inc. (the
"Series Fund"). Seven investment divisions of the Separate Account invest
exclusively in Class A shares of designated mutual fund portfolios of the
Merrill Lynch Variable Series Funds, Inc. (the "Variable Series Funds"). Two
investment divisions of the Separate Account invest exclusively in shares of
designated mutual fund portfolios of the AIM Variable Insurance Funds, Inc. (the
"AIM V.I. Funds"). One investment division of the Separate Account invests
exclusively in shares of a designated mutual fund portfolio of the Alliance
Variable Products Series Fund, Inc. (the "Alliance Fund"). Two investment
divisions of the Separate Account invest exclusively in shares of designated
mutual fund portfolios of the MFS Variable Insurance Trust (the "MFS Trust").
Each mutual fund portfolio has a different investment objective. The other
sixteen investment divisions invest in units of designated unit investment
trusts in The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities
(the "Zero Trusts"). The contract owner's payments are not invested directly in
the Series Fund, the Variable Series Funds, the AIM V.I. Funds, the Alliance
Fund, or the MFS Trust (each, a "Fund"; collectively, the "Funds"); or in the
Zero Trusts.
HOW THE DEATH BENEFIT VARIES
Contract owners elect a death benefit option on the application. Under option 1,
the death benefit equals the larger of the face amount or the variable insurance
amount. Under option 2, the death benefit equals the larger of the sum of the
face amount plus the cash value or the variable insurance amount. Subject to
certain conditions, contract owners may change the death benefit option and
reduce the face amount. The death benefit may increase or decrease on any day
depending on the investment results of the investment divisions chosen by the
contract owner. Death benefit proceeds equal the death benefit reduced by any
debt and increased by any rider benefits payable. (See "Death Benefit Proceeds"
on page 24.) If the last surviving insured dies at or after the younger
insured's attained age 100, the post-100 death benefit proceeds will be paid.
(See "Post-100 Death Benefit" on page 26.)
- ---------------
Cash Management Account and CMA are registered trademarks of Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
6
<PAGE> 11
HOW THE INVESTMENT BASE VARIES
A Contract's investment base is the amount available for investment at any time.
On the contract date(usually the business day next following receipt of the
initial payment at the Service Center), the investment base is equal to the
initial payment less contract loading and charges for cost of insurance and
rider costs. Afterwards, it varies daily based on investment performance of the
investment divisions chosen. The contract owner bears the risk of poor
investment performance and receives the benefit of favorable investment
performance. Contract owners may wish to consider diversifying their investment
in the Contract by allocating the investment base to two or more investment
divisions.
NET CASH SURRENDER VALUE
Contract owners may surrender their Contracts at any time and receive the net
cash surrender value. The net cash surrender value varies daily based on
investment performance of the investment divisions chosen. Merrill Lynch Life
doesn't guarantee any minimum net cash surrender value. If the Contract is
surrendered within 24 months after issue, the contract owner will receive
certain excess sales load. (See "Contract Loading -- Excess Sales Load" on page
18.)
ILLUSTRATIONS
Illustrations in this Prospectus or used in connection with the purchase of the
Contract are based on hypothetical investment rates of return. These rates are
not guaranteed. They are illustrative only and should not be deemed a
representation of past or future performance. Actual rates of return may be more
or less than those reflected in the illustrations and, therefore, actual values
will be different than those illustrated.
REPLACEMENT OF EXISTING COVERAGE
Before purchasing a Contract, the contract owner should ask his or her Merrill
Lynch registered representative if changing, or adding to, current insurance
coverage would be advantageous. Generally, it is not advisable to purchase
another contract as a replacement for existing coverage. In particular,
replacement should be carefully considered if the decision to replace existing
coverage is based solely on a comparison of contract illustrations.
RIGHTS TO CANCEL ("FREE LOOK" PERIOD) OR CONVERT
Once the Contract owner receives the Contract, he or she should review it
carefully to make sure it is what he or she intended to purchase. Generally, a
Contract may be returned for a refund within the later of ten days after the
contract owner receives it, 45 days after the contract owner completes the
application, or ten days after Merrill Lynch Life mails or personally delivers
the Notice of Withdrawal Right to the contract owner. If the Contract is
returned during the "free look" period, Merrill Lynch Life will refund the
initial payment without interest.
Once the Contract is issued, a contract owner may also convert the Contract
within 24 months after issue to a contract with benefits that do not vary with
the investment results of a separate account. (See "Converting the Contract" on
page 27.)
HOW DEATH BENEFIT AND CASH VALUE INCREASES ARE TAXED
Under current federal tax law, life insurance contracts receive tax-favored
treatment. The death benefit is generally excludable from the beneficiary's
gross income for federal income tax purposes, according to Section 101(a)(1) of
the Internal Revenue Code. An owner of a life insurance contract is not taxed on
any increase in the cash value while the contract remains in force.
A Contract may be a "modified endowment contract" under federal tax law
depending upon the amount of payments made in relation to the death benefit
provided under the Contract. If the Contract is a modified endowment contract,
certain distributions made during either insured's lifetime, such as loans and
partial
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<PAGE> 12
withdrawals from, and collateral assignments of, the Contract are includable in
gross income on an income-first basis. A 10% penalty tax may also be imposed on
distributions made before the contract owner attains age 59 1/2. Contracts that
are not modified endowment contracts under federal tax law receive preferential
tax treatment with respect to certain distributions.
For a discussion of the tax issues associated with this Contract, see "Tax
Considerations" on page 33.
LOANS
Contract owners may borrow up to the total loan value of their Contracts, which
is 90% of the cash value. The maximum loan amount that may be borrowed at any
time is the difference between the total loan value and debt. (See "Loans" on
page 22.)
Debt is deducted from the amount payable on surrender of the Contract and is
also subtracted from any death benefit payable. Loan interest accrues daily and,
IF IT IS NOT PAID EACH YEAR, IT IS CAPITALIZED AND ADDED TO THE OUTSTANDING LOAN
AMOUNT. If the Contract is a modified endowment contract, the amount of
capitalized interest will be treated as a taxable distribution. Depending upon
investment performance of the divisions and the amounts borrowed, loans may
cause a Contract to lapse. If the Contract lapses with a loan outstanding,
adverse tax consequences may result. Policy debt is considered part of total
cash value which is used to calculate gain. (See "Tax Considerations" on page
33.)
PARTIAL WITHDRAWALS
Contract owners may make partial withdrawals beginning in the second contract
year, subject to certain conditions. (See "Partial Withdrawals" on page 23.)
FEES AND CHARGES
Contract Loading. Merrill Lynch Life deducts certain charges from all payments
before they are invested in the investment divisions. These charges are:
- Sales load equal to 46.25% of each payment through the second base
premium and 1.25% of each payment thereafter.
- State and local premium tax charge of 2.5% of each payment.
- A charge for federal taxes of 1.25% of each payment.
(See "Contract Loading" on page 18.)
Investment Base Charges. Merrill Lynch Life deducts certain charges from the
investment base. The charges deducted are as follows:
- On the contract date and on all processing dates after the contract date,
Merrill Lynch Life makes deductions for cost of insurance (see "Cost of
Insurance" on page 18) and any rider costs (see "Additional Insurance
Rider" on page 15).
- On each contract anniversary, Merrill Lynch Life makes deductions for the
net loan cost if there has been any debt during the prior year. It equals
a maximum of 2% of the debt per year.
Separate Account Charges. There are certain charges deducted daily from the
investment results of the investment divisions in the Separate Account. These
charges are:
- an asset charge designed to cover mortality and expense risks deducted
from all investment divisions which is equivalent to .90% annually at the
beginning of the year; and
- a trust charge deducted from only those investment divisions investing in
the Zero Trusts, which is currently equivalent to .34% annually at the
beginning of the year and will never exceed .50% annually.
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Advisory Fees. The portfolios in the Funds pay monthly advisory fees and other
expenses. (See "Charges to Fund Assets" on page 19.)
This summary is intended to provide only a very brief overview of the more
significant aspects of the Contract. Further detail is provided in this
Prospectus and in the Contract. The Contract together with its attached
applications, medical exam(s), amendments, riders and endorsements constitutes
the entire agreement between the contract owner and Merrill Lynch Life and
should be retained.
For the definition of certain terms used in this Prospectus, see "Important
Terms" on page 4.
FACTS ABOUT THE SEPARATE ACCOUNT, THE FUNDS,
THE ZERO TRUSTS AND MERRILL LYNCH LIFE
THE SEPARATE ACCOUNT
The Separate Account is a separate investment account established by Merrill
Lynch Life on November 16, 1990. It is registered with the Securities and
Exchange Commission as a unit investment trust pursuant to the Investment
Company Act of 1940. This registration does not involve any supervision by the
Securities and Exchange Commission over the investment policies or practices of
the Separate Account. It meets the definition of a separate account under the
federal securities laws. The Separate Account is used to support the Contract as
well as to support other variable life insurance contracts issued by Merrill
Lynch Life.
Merrill Lynch Life owns all of the assets in the Separate Account. The assets of
the Separate Account are kept separate from Merrill Lynch Life's general account
and any other separate accounts it may have. Arkansas insurance law provides
that the Separate Account's assets, to the extent of its reserves and
liabilities, may not be charged with liabilities arising out of any other
business Merrill Lynch Life conducts.
Obligations to contract owners and beneficiaries that arise under the Contract
are obligations of Merrill Lynch Life. Income, gains, and losses, whether or not
realized, from assets allocated are, in accordance with the Contracts, credited
to or charged against the Separate Account without regard to other income, gains
or losses of Merrill Lynch Life. As required, the assets in the Separate Account
will always be at least equal to the reserves and other liabilities of the
Separate Account. If the assets exceed the required reserves and other Contract
liabilities (which will always be at least equal to the aggregate contract value
allocated to the Separate Account under the Contracts), Merrill Lynch Life may
transfer the excess to its general account.
There are currently 38 investment divisions in the Separate Account. Ten invest
in shares of a specific portfolio of the Series Fund. Seven invest in shares of
a specific portfolio of the Variable Series Funds. Two invest in shares of a
specific portfolio of the AIM V.I. Funds. One invests in shares of a specific
portfolio of the Alliance Fund. Two invest in shares of a specific portfolio of
the MFS Trust. Sixteen invest in units of a specific Zero Trust. Complete
information about the Funds and the Zero Trusts, including the risks associated
with each portfolio (including specific risks associated with investment in the
High Yield Portfolio of the Series Fund) can be found in the accompanying
prospectuses. They should be read in conjunction with this Prospectus.
THE SERIES FUND
The Series Fund is registered with the Securities and Exchange Commission as an
open-end management investment company and its investment adviser is Merrill
Lynch Asset Management, L.P. ("MLAM"). All of its ten mutual fund portfolios are
currently available through the Separate Account. The investment objectives of
the Series Fund portfolios are described below. There is no guarantee that any
portfolio will be able to meet its investment objective.
Money Reserve Portfolio seeks to preserve capital, maintain liquidity and
achieve the highest possible current income consistent with those objectives by
investing in short-term money market securities.
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Intermediate Government Bond Portfolio seeks to obtain the highest level of
current income consistent with the protection of capital afforded by investing
in debt securities issued or guaranteed by the U.S. Government or its agencies
with a maximum maturity of 15 years.
Long-Term Corporate Bond Portfolio primarily seeks to provide as high a level of
current income as is believed to be consistent with prudent investment risk and
secondarily seeks the preservation of capital. In seeking to achieve these
objectives, the Portfolio invests at least 80% of the value of its assets in
debt securities that have a rating within the three highest grades of Moody's or
Standard & Poor's.
High Yield Portfolio primarily seeks as high a level of current income as is
believed to be consistent with prudent management, and secondarily capital
appreciation when consistent with its primary objective. The Portfolio seeks to
achieve its investment objective by investing principally in fixed income
securities rated in the lower categories of the established rating services or
in unrated securities of comparable quality (including securities commonly known
as "junk bonds").
Capital Stock Portfolio seeks long-term growth of capital and income, plus
moderate current income. It generally invests in equity securities considered to
be of good or improving quality or considered to be undervalued based on
criteria such as historical price/book value and price/earnings ratios.
Growth Stock Portfolio seeks long-term growth of capital by investing in a
diversified portfolio of securities, primarily common stocks, of aggressive
growth companies considered to have special investment value.
Multiple Strategy Portfolio seeks a high total investment return consistent with
prudent risk through a fully managed investment policy utilizing equity
securities, intermediate and long-term debt securities and money market
securities.
Natural Resources Portfolio seeks long-term growth of capital and protection of
the purchasing power of shareholders' capital by investing primarily in equity
securities of domestic and foreign companies with substantial natural resource
assets.
Global Strategy Portfolio seeks high total investment return by investing
primarily in a portfolio of equity and fixed-income securities, including
convertible securities, of U.S. and foreign issuers.
Balanced Portfolio seeks a level of current income and a degree of stability of
principal not normally available from an investment solely in equity securities
and the opportunity for capital appreciation greater than that normally
available from an investment solely in debt securities by investing in a
balanced portfolio of fixed-income and equity securities.
MLAM is indirectly owned and controlled by Merrill Lynch & Co., Inc. and is a
registered adviser under the Investment Advisers Act of 1940. The Series Fund,
as part of its operating expenses, pays an investment advisory fee to MLAM. (See
"Charges to Fund Assets" on page 19.)
THE VARIABLE SERIES FUNDS
The Variable Series Funds is registered with the Securities and Exchange
Commission as an open-end management investment company and its investment
adviser is MLAM. Seven of its 16 mutual fund portfolios are currently available
through the Separate Account. The investment objectives of the seven available
Variable Series Funds portfolios are described below. There is no guarantee that
any portfolio will be able to meet its investment objective.
Basic Value Focus Fund seeks capital appreciation, and secondarily, income by
investing in securities, primarily equities, that management of the Fund
believes are undervalued and therefore represent basic investment value.
Particular emphasis is placed on securities that provide an above-average
dividend return and sell at a below-average price/earnings ratio.
Global Bond Focus Fund (formerly the World Income Focus Fund) seeks to provide
high total investment return by investing in a global portfolio of fixed income
securities denominated in various currencies, including multinational currency
units. The Fund will invest in fixed income securities that have a credit rating
of A or
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better by Standard & Poor's or by Moody's or commercial paper rated A-1 by
Standard & Poor's or Prime-1 by Moody's or obligations that MLAM has determined
to be of similar creditworthiness.
Global Utility Focus Fund seeks 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.
International Equity Focus 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.
Developing Capital Markets Focus Fund seeks long-term capital appreciation by
investing in securities, principally equities, of issuers in countries having
smaller capital markets. For purposes of its investment objective, the Fund
considers countries having smaller capital markets to be all countries other
than the four countries having the largest equity market capitalizations.
Equity Growth 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 of emerging growth companies regardless of size. Such companies are
selected by management on the basis of their long-term potential for expanding
their size and profitability or for gaining increased market recognition for
their securities. Current income is not a factor in such selection.
Index 500 Fund seeks to provide investment results that, before expenses,
correspond to the aggregate price and yield performance of the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500 Index").
The Variable Series Funds, as part of its operating expenses, pays an investment
advisory fee to MLAM. (See "Charges to Fund Assets" on page 19.)
THE AIM V.I. FUNDS
The AIM V.I. Funds is registered with the Securities and Exchange Commission as
an open-end, series, management investment company and its investment adviser is
A I M Advisors, Inc. ("AIM"). Two of its mutual fund portfolios are currently
available through the Separate Account. The investment objectives of the two
available AIM V.I. Funds portfolios are described below. There is no guarantee
that any portfolio will be able to meet its investment objective.
AIM V.I. Capital Appreciation Fund seeks capital appreciation through
investments in common stocks, with emphasis on medium-sized and smaller emerging
growth companies. The portfolio is primarily comprised of securities of two
basic categories of companies: (1) "core" companies, which AIM considers to have
experienced above-average and consistent long-term growth in earnings 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 V.I. Value Fund seeks to achieve long-term growth of capital by investing
primarily in equity securities judged by AIM to be undervalued relative to the
current or projected earnings of the companies issuing the securities, or
relative to current market values of assets owned by the companies issuing the
securities or relative to the equity markets generally. Income is a secondary
objective. The investment division investing in this Fund should not be selected
by contract owners who seek income as their primary investment objective.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, is a wholly owned
subsidiary of A I M Management Group Inc., an indirect subsidiary of AMVESCO plc
(formerly INVESCO plc). AIM is a registered adviser under the Investment
Advisers Act of 1940. AIM was organized in 1976, and, together with its domestic
subsidiaries, manages or advises 48 investment company portfolios (including the
AIM V.I. Funds). The AIM V.I. Funds, as part of its operating expenses, pays an
investment advisory fee to AIM. (See "Charges to Fund Assets" on page 19.)
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THE ALLIANCE FUND
The Alliance Fund is registered with the Securities and Exchange Commission as
an open-end management investment company and its investment adviser is Alliance
Capital Management L.P. ("Alliance"). One of its mutual fund portfolios is
currently available through the Separate Account. The investment objective of
the available Alliance Fund portfolio is described below. There is no guarantee
that this portfolio will be able to meet its investment objective.
Premier Growth Portfolio seeks growth of capital by pursuing aggressive
investment policies. Since investments will be made based upon their potential
for capital appreciation, current income will be incidental to the objective of
capital growth. Because of the market risks inherent in any investment, the
selection of securities on the basis of their appreciation possibilities cannot
ensure against possible loss in value.
Alliance, a Delaware limited partnership with principal offices at 1345 Avenue
of the Americas, New York, New York 10105, is a registered adviser under the
Investment Advisers Act of 1940. Alliance Capital Management Corporation
("ACMC"), the sole general partner of Alliance, is an indirect wholly-owned
subsidiary of The Equitable Life Assurance Society of the United States, which
is in turn a wholly-owned subsidiary of the Equitable Companies Incorporated, a
holding company which is controlled by AXA, a French insurance holding company.
The Alliance Fund, as part of its operating expenses, pays an investment
advisory fee to Alliance. (See "Charges to Fund Assets" on page 19.)
THE MFS TRUST
The MFS Trust is registered with the Securities and Exchange Commission as an
open-end management investment company and its investment adviser is
Massachusetts Financial Services Company ("MFS"). Two of its mutual fund
portfolios are currently available through the Separate Account. The investment
objectives of the available MFS Trust portfolios are described below. There is
no guarantee that any portfolio will be able to meet its investment objective.
MFS Emerging Growth Series seeks to provide long-term growth of capital by
investing primarily (i.e., at least 80% of its assets under normal
circumstances) in common stocks of emerging growth companies. Emerging growth
companies include companies that MFS believes are early in their life cycle but
which have the potential to become major enterprises. Dividend and interest
income from portfolio securities, if any, is incidental to the Fund's objective
of long-term growth of capital.
MFS Research Series seeks to provide long-term growth of capital and future
income. The portfolio securities of the MFS Research Series are selected by a
committee of investment research analysts. This committee includes investment
analysts employed not only by the Adviser but also by MFS International (U.K.)
Limited, a wholly-owned subsidiary of MFS. The Series' assets are allocated
among industries by the analysts acting together as a group. Individual analysts
are then responsible for selecting what they view as the securities best suited
to meet the Series' investment objective within their assigned industry
responsibility.
MFS, a Delaware corporation, 500 Boylston Street, Boston, Massachusetts 02116,
is a subsidiary of Sun Life of Canada (U.S.), which, in turn, is a wholly-owned
subsidiary of Sun Life Assurance Company of Canada, and is a registered adviser
under the Investment Advisers Act of 1940. MFS is America's oldest mutual fund
organization. MFS and its predecessor organizations have a history of money
management dating from 1924 and the founding of the first mutual fund in the
United States, Massachusetts Investors Trust. The MFS Trust, as part of its
operating expenses, pays an investment advisory fee to MFS. (See "Charges to
Fund Assets" on page 19.)
CERTAIN RISKS OF THE FUNDS
Investment in lower-rated debt securities, such as those in which the High Yield
Portfolio of the Series Fund, and the Developing Capital Markets Focus and
International Equity Focus Funds of the Variable Series Funds, expect to invest,
entails relatively greater risk of loss of income or principal. The Developing
Capital Markets Focus Fund of the Variable Series Funds has no established
rating criteria for the debt securities in which it may invest, and will rely on
the investment adviser's judgment in evaluating the creditworthiness of an
issuer of such securities. In an effort to minimize risk, these portfolios will
diversify holdings among many
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issuers. However, there can be no assurance that diversification will protect
these portfolios from widespread defaults during periods of sustained economic
downturn.
In seeking to protect the purchasing power of capital, the Natural Resources
Portfolio of the Series Fund reserves the right, when management anticipates
significant economic, political, or financial instability, such as high
inflationary pressures or upheaval in foreign currency exchange markets, to
invest a majority of its assets in companies that explore for, extract, process
or deal in gold or in asset-based securities indexed to the value of gold
bullion. The Natural Resources Portfolio will not concentrate its investments in
such securities until it has been advised that the Contracts' federal tax status
will not be adversely affected as a result.
In selecting investments for the AIM V.I. Capital Appreciation Fund, AIM is
particularly interested in companies that are likely to benefit from new or
innovative products, services or processes that should enhance such companies'
prospects for future growth in earnings. As a result of this policy, the market
prices of many of the securities purchased and held by this 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.
For the MFS Emerging Growth Series, the nature of investing in emerging growth
companies involves greater risk than is customarily associated with investments
in more established companies. Emerging growth companies often have limited
product lines, markets or financial resources, and they may be dependent on
one-person management. In addition, there may be less research available on many
promising small and medium sized emerging growth companies, making it more
difficult to find and analyze these companies. The securities of emerging growth
companies may have limited marketability and may be subject to abrupt or erratic
market movements than securities of larger, more established growth companies or
the market averages in general. Shares of the MFS Emerging Growth Series,
therefore, are subject to greater fluctuation in value than shares of a
conservative equity fund or of a growth fund which invests entirely in proven
growth stocks.
Because investment in these Portfolios and Funds entails relatively greater risk
of loss of income or principal, it may not be appropriate to allocate all
payments and investment base to an investment division that invests in one of
these Portfolios or Funds.
THE ZERO TRUSTS
The Zero Trusts was formed to provide safety of capital and a high yield to
maturity. It seeks this through U.S. Government-backed investments which make no
periodic interest payments and, therefore, are purchased at a deep discount.
When held to maturity the investments should receive approximately a fixed
yield. The value of Zero Trust units before maturity varies more than it would
if the Zero Trusts contained interest-bearing U.S. Treasury securities of
comparable maturities.
The Zero Trust portfolios consist mainly of:
- bearer debt obligations issued by the U.S. Government stripped of their
unmatured interest coupons;
- coupons stripped from U.S. debt obligations; and
- receipts and certificates for such stripped debt obligations and coupons.
The Zero Trusts currently available have maturity dates in years 1998 through
2011, 2013 and 2014.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of
Merrill Lynch & Co., Inc., is the sponsor for the Zero Trusts. The sponsor will
sell units of the Zero Trusts to the Separate Account and has agreed to
repurchase units when Merrill Lynch Life needs to sell them to pay benefits and
make reallocations. Merrill Lynch Life pays the sponsor a fee for these
transactions and is reimbursed through the trust charge assessed to the
divisions investing in the Zero Trusts. (See "Charges to Divisions Investing in
the Zero Trusts" on page 19.)
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MERRILL LYNCH LIFE AND MLPF&S
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. It is an indirect wholly owned subsidiary of Merrill Lynch
& Co., Inc. Merrill Lynch Life is authorized to sell life insurance and
annuities in 49 states, Guam, the U.S. Virgin Islands and the District of
Columbia. It is also authorized to offer variable life insurance and variable
annuities in most jurisdictions.
MLPF&S is a wholly owned subsidiary of Merrill Lynch & Co., Inc. and provides a
broad range of securities brokerage and investment banking services in the
United States. It provides marketing services for Merrill Lynch Life and is the
principal underwriter of the Contracts issued through the Separate Account.
Merrill Lynch Life retains MLPF&S to provide services relating to the Contracts
under a distribution agreement. (See "Selling the Contracts" on page 32.)
FACTS ABOUT THE CONTRACT
WHO MAY BE COVERED
The Contract is available in most jurisdictions in which Merrill Lynch Life does
business. Merrill Lynch Life will issue a Contract on the lives of two insureds
provided the relationship among the applicant and the insureds meets Merrill
Lynch Life's insurable interest requirements and provided neither insured is
over age 85 or under age 20. The insureds' issue ages will be determined using
their ages as of their birthdays nearest the contract date. The insureds must
also meet Merrill Lynch Life's medical and other underwriting requirements,
which will include undergoing a medical examination.
Merrill Lynch Life assigns insureds to underwriting classes which determine the
cost of insurance rates used in calculating cost of insurance deductions.
Contracts may be issued on insureds in standard, non-smoker or preferred
non-smoker underwriting classes. Contracts may also be issued on insureds in a
substandard underwriting class. For a discussion of the effect of underwriting
classification on deductions for cost of insurance, see "Cost of Insurance" on
page 18.
PURCHASING A CONTRACT
To purchase a Contract, the contract owner must complete an application and make
a payment. The payment is required to put the Contract into effect. In the
application, the contract owner selects the face amount of the Contract. The
amount of the minimum initial payment for a given Contract depends on the face
amount selected and the issue age, sex and underwriting class of each of the
insureds. Merrill Lynch Life will not accept an initial payment for a specified
face amount that will provide a guarantee period of less than three months. (See
"Selecting the Initial Face Amount" and "Initial Guarantee Period" on page 15.)
Merrill Lynch Life also will not accept an initial payment that would cause the
Contract to fail to qualify as life insurance under federal tax law as
interpreted by Merrill Lynch Life.
Insurance coverage generally begins as of the contract date, which is usually
the next business day following receipt of the initial payment at Merrill Lynch
Life's Service Center. Temporary life insurance coverage may be provided prior
to the contract date under the terms of a temporary insurance agreement. In
accordance with Merrill Lynch Life's underwriting rules, temporary life
insurance coverage may not exceed $300,000 and may not be in effect for more
than 90 days. As provided for under state insurance law, the contract owner, to
preserve insurance age, may be permitted to backdate the Contract. In no case
may the contract date be more than six months prior to the date the application
was completed. Charges for cost of insurance and rider costs for the backdated
period are deducted on the contract date.
If Merrill Lynch Life determines that, based on the contract owner's initial
payment and face amount, the Contract will be a modified endowment contract,
Merrill Lynch Life will issue the Contract provided the contract owner signs a
statement acknowledging that the Contract is a modified endowment contract or
agrees either to reduce the initial payment or to increase the face amount to a
level at which the Contract will not be
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a modified endowment contract. For a discussion of the tax consequences of
purchasing a modified endowment contract, see "Tax Considerations" on page 33.
Selecting the Initial Face Amount. The minimum initial face amount is $250,000.
The maximum face amount that may be specified for a given initial payment is the
amount which will provide an initial guarantee period of at least three months.
For the same initial payment amount, the larger the face amount requested, the
shorter the guarantee period. The initial face amount will change if the
contract owner changes the death benefit option or takes a partial withdrawal.
Subject to certain conditions, the contract owner may purchase additional
insurance coverage through an additional insurance rider, or reduce the face
amount. (See "Additional Insurance Rider" below and "Death Benefit
Proceeds -- Reducing the Face Amount" on page 25.)
Initial Guarantee Period. The initial guarantee period for a Contract will be
determined by the initial payment, face amount and any additional insurance
rider face amount. The guarantee period will be adjusted each time an additional
payment is made, when a partial withdrawal is taken, when a death benefit option
change or face amount reduction results in a change in or reduction of face
amount and when the additional insurance rider face amount is increased or
decreased.
The guarantee period is the period of time Merrill Lynch Life guarantees that
the Contract will remain in force regardless of investment experience unless the
debt exceeds certain values. The guarantee period is based on the guaranteed
maximum cost of insurance rates in the Contract, guaranteed maximum rider costs
(if an additional insurance rider is elected), the contract loading and a 4.5%
interest assumption. This means that for a given initial payment and face
amount, different joint insureds will have different guarantee periods depending
on the age, sex and underwriting class of each of the insureds. For example,
older joint insureds will have a shorter guarantee period than younger joint
insureds in the same underwriting classes.
The maximum guarantee period is until the younger insured's attained age 100.
(See "More About the Contract -- Other Contract Provisions -- State Variations"
on page 31 for information about certain variations in determining the guarantee
period that may apply to the Contract.)
ADDITIONAL INSURANCE RIDER
The contract owner may purchase additional insurance coverage payable to the
beneficiary on the death of the last surviving insured. Additional insurance
coverage may be purchased through an additional insurance rider when the
Contract is purchased. Under Merrill Lynch Life's current procedures, the
maximum additional insurance rider face amount at the time the Contract is
purchased is three times the face amount of the Contract. The rider can also be
added on any contract anniversary thereafter, as long as an application is
completed, satisfactory evidence of insurability of both insureds is provided,
and neither insured has attained the age of 86. The minimum additional insurance
rider face amount at any time is $100,000. A cost of insurance charge for the
rider ("rider charge") will be deducted from the Contract's investment base on
each processing date. The rider charge will be based on the same cost of
insurance rates as the Contract. (See "Cost of Insurance" on page 18.) Because
insurance coverage through an additional insurance rider is purchased through
deductions from the Contract's investment base that are not taken into account
in determining the base premium, there is no additional contract loading
associated with this coverage.
Beginning in contract year 2, the additional insurance rider face amount may be
increased (subject to evidence of insurability of both insureds) or decreased
once each year; however, any change in the additional insurance rider face
amount must be elected prior to the younger insured's attained age 86 and must
be at least $100,000. The effective date of the change will be the contract
anniversary next following underwriting approval of the change. As of the
effective date of the increase or decrease in the additional insurance rider
face amount, Merrill Lynch Life uses the existing fixed base and the face amount
of the Contract plus the new additional insurance rider face amount to calculate
a new guarantee period. A decrease in the additional insurance rider face amount
will increase the guarantee period. An increase in the additional insurance
rider face amount will decrease the guarantee period. Unless in connection with
a termination of the rider, Merrill
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Lynch Life will not allow a decrease in rider face amount if the resulting face
amount would be less than $100,000; if the resulting guarantee period would
extend beyond the younger insured's attained age 100; or if the decrease would
cause the Contract to fail to qualify as life insurance under federal income tax
laws as interpreted by us.
A decrease in the additional insurance rider face amount can cause a Contract
which is not a modified endowment contract to become a modified endowment
contract. In such a case, Merrill Lynch Life will not process the decrease until
the contract owner confirms in writing his or her intent to convert the Contract
to a modified endowment contract. For a discussion of the tax consequences of
increasing or decreasing the additional insurance rider face amount, see "Tax
Considerations" on page 33.
Any additional insurance rider coverage terminates on the earlier of the date
the Contract terminates or lapses, or at the younger insured's attained age 100.
ADDITIONAL PAYMENTS
After the "free look" period and prior to the younger insured's attained age
100, contract owners may make additional payments provided one of the insured's
is living. Additional payments must be submitted with an additional payment
form. The minimum Merrill Lynch Life will accept for these payments is $100. For
Contracts that are not modified endowment contracts, making an additional
payment may cause them to become modified endowment contracts. (See "Tax
Considerations" on page 33.) Merrill Lynch Life will return that portion of any
additional payment beyond that necessary to extend the guarantee period to the
younger insured's attained age 100. Merrill Lynch Life will also return that
portion of any additional payment that would cause the Contract to fail to
qualify as life insurance under federal tax law as interpreted by Merrill Lynch
Life.
Contract owners may specify an additional payment amount on the application to
be paid on either an annual, semi-annual, quarterly, or monthly basis. For
additional payments not being withdrawn from a CMA account, Merrill Lynch Life
will send the contract owner reminder notices. If a contract owner has the CMA
Insurance Service, such additional payments may be withdrawn automatically from
his or her CMA account and transferred to his or her Contract. The withdrawals
will continue under the selected plan until Merrill Lynch Life is notified
otherwise.
EFFECT OF ADDITIONAL PAYMENTS
Generally, any additional payments will be accepted the day they are received at
the Service Center. However, if acceptance of any portion of the payment would
cause a Contract which is not a modified endowment contract to become a modified
endowment contract, to the extent feasible, Merrill Lynch Life will not accept
that portion of the payment unless the contract owner confirms in writing his or
her intent to convert the Contract to a modified endowment contract. Merrill
Lynch Life may return that portion of the payment pending receipt of
instructions from the contract owner.
On the date Merrill Lynch Life receives and accepts an additional payment,
Merrill Lynch Life will:
- increase the Contract's investment base by the amount of the payment less
contract loading applicable to the payment;
- reflect the additional payment in the calculation of the variable
insurance amount (see "Variable Insurance Amount" on page 24); and
- increase the fixed base by the amount of the payment less contract
loading applicable to the payment (see "The Contract's Fixed Base" on
page 21).
As of the processing date on or next following receipt and acceptance of an
additional payment, Merrill Lynch Life will increase the guarantee period if the
guarantee period prior to receipt and acceptance of an additional payment does
not extend beyond the younger insured's attained age 100.
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Merrill Lynch Life will determine the increase in the guarantee period by taking
the immediate increase in the cash value resulting from the additional payment
and adding to that interest at the annual rate of 4.5% for the period from the
date Merrill Lynch Life receives and accepts the payment to the contract
processing date on or next following such date. This is the guarantee adjustment
amount. The guarantee adjustment amount is added to the fixed base and the
resulting new fixed base is used to calculate a new guarantee period. For a
discussion of the effect of additional payments on a Contract's guarantee
period, see "Additional Payments" in the Examples on page 47.
If any excess sales load has been applied to keep the Contract in force, any
additional payment, less contract loading will first be applied to recover such
excess sales load (see "Excess Sales Load" on page 18). Next, unless specified
otherwise, if there is any debt, any payment made will be applied as a loan
repayment, with any excess applied as an additional payment. (See "Loans" on
page 22.)
INVESTMENT BASE
A Contract's investment base is the amount available for investment at any time.
It is the sum of the amounts invested in each of the investment divisions. On
the contract date, the investment base equals the initial payment less contract
loading and charges for cost of insurance and rider costs. Merrill Lynch Life
adjusts the investment base daily to reflect the investment performance of the
investment divisions the contract owner has selected. (See "Net Rate of Return
for an Investment Division" on page 37.) The investment performance reflects the
deduction of Separate Account charges. (See "Charges to the Separate Account" on
page 19.)
Partial withdrawals, loans and deductions for cost of insurance, rider costs and
net loan cost decrease the investment base. (See "Charges Deducted from the
Investment Base" on page 18, "Partial Withdrawals" on page 23 and "Loans" on
page 22.) Loan repayments and additional payments increase it. Contract owners
may elect from which investment divisions loans and partial withdrawals are
taken and to which investment divisions repayments and additional payments are
added. If an election is not made, Merrill Lynch Life will allocate increases
and decreases proportionately to the contract owner's investment base as then
allocated in the investment divisions.
Initial Investment Allocation and Preallocation. Through the first 14 days
following the in force date, the initial payment less contract loading will
remain in the division investing in the Money Reserve Portfolio. Thereafter, the
investment base will be reallocated to the investment divisions selected by the
contract owner on the application, if different. The contract owner may select
up to five of the 38 investment divisions in the Separate Account.
Changing the Allocation. After the "free look" period, a contract owner's
investment base may be invested in up to five investment divisions at any one
time. Currently, investment allocations may be changed as often as desired.
Merrill Lynch Life reserves the right to charge up to $25 for each change in
excess of six each year. In order to change their investment base allocation,
contract owners must call or write to the Service Center. (See "Some
Administrative Procedures" on page 29.)
Zero Trust Allocations. Merrill Lynch Life will notify contract owners 30 days
before a Zero Trust in which they have invested matures. Contract owners must
notify Merrill Lynch Life by calling or writing at least seven days before the
maturity date how to reinvest their funds in the division investing in that Zero
Trust. If Merrill Lynch Life is not notified, it will move the contract owner's
investment base in that division to the investment division investing in the
Money Reserve Portfolio.
Units of a specific Zero Trust may no longer be available when a request for
allocation is received. Should this occur, Merrill Lynch Life will attempt to
notify the contract owner immediately so that the request can be changed.
Allocation to the Division Investing in the Natural Resources
Portfolio. Merrill Lynch Life and the Separate Account reserve the right to
suspend the sale of units of the investment division investing in the Natural
Resources Portfolio in response to conditions in the securities markets or
otherwise.
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CHARGES DEDUCTED FROM THE INVESTMENT BASE
The charges described below are deducted pro-rata from the investment base on
processing dates.
Cost of Insurance. Merrill Lynch Life deducts the cost of insurance from the
investment base on the contract date and on each processing date thereafter
prior to the younger insured's attained age 100. This charge compensates Merrill
Lynch Life for the cost of providing life insurance coverage for the insureds.
It is based on the underwriting class, sex (except where unisex rates are
required by state law) and attained age of each insured and the Contract's net
amount at risk.
To determine the cost of insurance, Merrill Lynch Life multiplies the current
cost of insurance rate by the Contract's net amount at risk. The net amount at
risk is the difference, as of a processing date, between the death benefit
(adjusted for interest at an annual rate of 4.5%) and the cash value, but before
the deduction for cost of insurance. (See "More About the Contract -- Other
Contract Provisions -- State Variations" on page 31 for information about
certain variations in determining the cost of insurance that may apply to the
Contract.)
Current cost of insurance rates may be equal to or less than the guaranteed cost
of insurance rates depending on the underwriting class, sex (except where unisex
rates are required by state law) and attained age of each insured. Current cost
of insurance rates are lower for insureds in a preferred non-smoker underwriting
class than for insureds of the same age in a non-smoker underwriting class and
are lower for insureds in a non-smoker underwriting class than for insureds of
the same age and sex in a standard underwriting class.
Merrill Lynch Life guarantees that the current cost of insurance rates will
never exceed the maximum guaranteed rates shown in the Contract. The maximum
guaranteed rates for Contracts (other than those issued on a substandard basis)
do not exceed the rates based on the 1980 Commissioners Standard Ordinary
Mortality Table (CSO Table). Merrill Lynch Life may use rates that are equal to
or less than these rates, but never greater. The maximum rates for Contracts
issued on a substandard basis are based on a multiple of the 1980 CSO Table. Any
change in the cost of insurance rates will apply to all joint insureds of the
same age, sex, and underwriting class whose Contracts have been in force for the
same length of time.
Net Loan Cost. The net loan cost is explained under "Loans" on page 22.
Rider Charges. Rider charges are deducted on the contract date and on each
processing date thereafter. These charges are explained under "Additional
Insurance Rider" on page 15.
CONTRACT LOADING
Chargeable to each payment is an amount called the contract loading. The
contract loading equals 50% of each payment made until cumulative payments have
been made in an amount equal to two base premiums, and 5% of each payment
thereafter. This charge consists of a sales load, a charge for federal taxes and
a state and local premium tax charge.
The sales load, equal to 46.25% of each payment through the second base premium
and 1.25% of each payment thereafter, compensates Merrill Lynch Life for sales
expenses and the costs for underwriting and issuing the Contract. The sales load
may be reduced in certain group or sponsored arrangements as described on page
32.
The charge for federal taxes is equal to 1.25% of each payment.
The state and local premium tax charge is equal to 2.5% of each payment.
Excess Sales Load. Excess sales load is equal to any sales load deducted from
the first two base premiums in excess of 30% of premiums paid up to an amount
equal to the first base premium, and then 10% of the
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premiums paid up to an amount equal to the second base premium. It is calculated
and applied in the following situations only during the first 24 months after
the Contract is issued:
- It is refunded if the Contract is surrendered or lapses during the first
24 months after issue except to the extent that it has been previously
applied to keep the Contract in force.
- It is added to the cash value so as to keep the Contract in force if debt
exceeds the larger of (i) cash value plus any excess sales load not
previously applied to keep the Contract in force and (ii) the fixed base
during the first 24 months after issue.
- It is added to the cash value in determining the variable insurance
amount during the first 24 months after issue.
In the event that certain Contract changes resulting in a reduction in face
amount occur prior to the end of the first two policy years, Merrill Lynch Life
may adjust the amount of excess sales load under a Contract if and to the extent
deemed necessary to comply with the Investment Company Act of 1940.
CHARGES TO THE SEPARATE ACCOUNT
Each day Merrill Lynch Life deducts an asset charge from each division of the
Separate Account. The total amount of this charge is computed at .90% annually
at the beginning of the year. Of this amount, .75% is for
- the risk assumed by Merrill Lynch Life that insureds as a group will live
for a shorter time than actuarial tables predict. As a result, Merrill
Lynch Life would be paying more in death benefits than planned; and
- the risk assumed by Merrill Lynch Life that it will cost more to issue
and administer the Contracts than expected.
The remaining amount, .15%, is for
- the risk assumed by Merrill Lynch Life with respect to potentially
unfavorable investment results. This risk is that the Contract's cash
value cannot cover the charges due during the guarantee period.
The total asset charge may not be increased.
Charges to Divisions Investing in the Zero Trusts. Merrill Lynch Life assesses
a daily trust charge against the assets of each division investing in the Zero
Trusts. This charge reimburses Merrill Lynch Life for the transaction charge
paid to MLPF&S when units are sold to the Separate Account.
The trust charge is currently equivalent to .34% annually at the beginning of
the year. It may be increased, but will not exceed .50% annually at the
beginning of the year. The charge is based on cost (taking into account loss of
interest) with no expected profit.
Tax Charges. Merrill Lynch Life has the right under the Contract to impose a
charge against Separate Account assets for any taxes imposed on the Separate
Account's investment earnings. (See "Merrill Lynch Life's Income Taxes" on page
36.)
CHARGES TO FUND ASSETS
Charges to Series Fund Assets. The Series Fund incurs operating expenses and
pays a monthly advisory fee to MLAM. This fee equals an annual rate of:
- .50% of the first $250 million of the aggregate average daily net assets
of the Series Fund;
- .45% of the next $50 million of such assets;
- .40% of the next $100 million of such assets;
- .35% of the next $400 million of such assets; and
- .30% of such assets over $800 million.
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One or more of the insurance companies investing in the Series Fund has agreed
to reimburse the Series Fund so that the ordinary expenses of each portfolio
(which include the monthly advisory fee) do not exceed .50% of the portfolio's
average daily net assets. These companies have also agreed to reimburse MLAM for
any amounts it pays under the investment advisory agreement, as described below.
These reimbursement obligations will remain in effect so long as the advisory
agreement remains in effect and cannot be amended or terminated without Series
Fund approval.
Charges to Variable Series Funds Assets. The Variable Series Funds incurs
operating expenses and pays a monthly advisory fee to MLAM. This fee equals an
annual rate of .60% of the average daily net assets of the Basic Value Focus
Fund, Global Bond Focus Fund and Global Utility Focus Fund. This fee equals an
annual rate of .30%, .75%, 1.00%, and .75% of the average daily net assets of
the Index 500 Fund, the International Equity Focus Fund, the Developing Capital
Markets Focus Fund and the Equity Growth Fund, respectively.
MLAM and Merrill Lynch Life Agency, Inc. have entered into two agreements which
limit the operating expenses paid by each Fund in a given year to 1.25% of its
average daily net assets, which is less than the expense limitations imposed by
state securities laws or published regulations thereunder. These reimbursement
agreements provide that any expenses in excess of 1.25% of average daily net
assets will be reimbursed to the Fund by MLAM which, in turn, will be reimbursed
by Merrill Lynch Life Agency, Inc.
Charges to AIM V.I. Funds Assets. The AIM V.I. Funds incurs operating expenses
and pays a monthly advisory fee to AIM, which serves as the investment adviser
to each fund of the AIM V.I. Funds. As the investment adviser, AIM receives from
the AIM V.I. Capital Appreciation Fund and the AIM V.I. Value Fund an advisory
fee at an annual rate of .65% of each fund's average daily net assets.
Charges to Alliance Fund Assets. The Alliance Fund incurs operating expenses
and pays a monthly advisory fee to Alliance, which serves as the investment
adviser to each fund of the Alliance Fund. As the investment adviser, Alliance
receives from the Alliance Premier Growth Portfolio an advisory fee at an annual
rate of 1.00% of the fund's average daily net assets.
Alliance voluntarily waives fees and expenses that exceed .95% of the average
net assets of the Alliance Fund. Alliance may discontinue or reduce any waivers
or assumptions of expenses at any time without notice. Alliance, however,
intends to continue such reimbursements for the foreseeable future.
Charges to MFS Trust Assets. The MFS Trust incurs operating expenses and pays a
monthly advisory fee to MFS, which serves as the investment adviser to each of
the funds of MFS Trust. As the investment adviser, MFS receives from the MFS
Emerging Growth Series and MFS Research Series an advisory fee, computed and
paid monthly, at an annual rate of .75% of the average daily net assets of the
respective fund.
Subject to termination or revision at the sole discretion of MFS, MFS has agreed
to bear expenses of the MFS Emerging Growth Series and the MFS Research Series
(the "Series") such that each Series' expenses, except for management fees
("Other Expenses"), do not exceed .25% of the average daily net assets of the
Series. The obligation of MFS to bear Other Expenses for a Series terminates on
the last day of the Series' fiscal year in which Other Expenses are less than or
equal to .25%.
GUARANTEE PERIOD
Merrill Lynch Life guarantees that the Contract will stay in force for the
guarantee period unless the debt exceeds certain contract values. (See "Loans"
on page 22.) Additional payments will extend the guarantee period until such
time as it extends to the younger insured's attained age 100. The guarantee
period will be affected by partial withdrawals, by changes in death benefit
options, by reductions of face amount and by increases and decreases in the face
amount of the additional insurance rider. A reserve is held in Merrill Lynch
Life's general account to support this guarantee. The guarantee period never
extends beyond the younger insured's attained age 100.
When the Guarantee Period Does Not Extend to the Younger Insured's Attained Age
100. After the end of the guarantee period, Merrill Lynch Life may cancel the
Contract if the cash value plus certain excess sales
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load on a processing date is insufficient to cover charges due on that date.
(See "Charges Deducted from the Investment Base" on page 18 and "Contract
Loading -- Excess Sales Load" on page 18.)
Merrill Lynch Life will notify the contract owner at the owner's last known
address before cancelling the Contract. The contract owner will then have 61
days to pay an amount which, after deducting contract loading, equals at least
three times the charges that were due (and not deducted) on the processing date
when the cash value was determined to be insufficient, plus any excess sales
load previously applied to keep the Contract in force. If this amount is paid,
Merrill Lynch Life will deduct the charges due on the processing date and apply
the balance to the investment base. Merrill Lynch Life will cancel the Contract
at the end of this grace period if payment has not yet been received. At that
time, Merrill Lynch Life will deduct any charges for cost of insurance and rider
costs applicable to the grace period and refund any unearned charges for cost of
insurance, rider costs and any excess sales load not previously applied to keep
the Contract in force.
Subject to state regulation, if Merrill Lynch Life cancels a Contract, it may be
reinstated prior to the younger insured's attained age 100 and while both
insureds are still living if:
- the reinstatement is requested within three years after the end of the
grace period;
- Merrill Lynch Life receives satisfactory evidence of the insureds'
insurability; and
- the reinstatement payment is made. The reinstatement payment is the
minimum payment for which Merrill Lynch Life would then issue a Contract
for the minimum guarantee period with the same face amount as the
original Contract, based on the insureds' attained ages and underwriting
classes as of the effective date of the reinstated Contract.
A reinstated Contract will be effective on the processing date on or next
following the date the reinstatement application is approved.
The Contract's Fixed Base. On the contract date, the fixed base equals the cash
value. From then on, the fixed base is calculated in the same manner as the cash
value except that the calculation substitutes 4.5% for the net rate of return,
the guaranteed maximum cost of insurance rates and guaranteed maximum rider
costs are substituted for the current rates and it is calculated as though there
had been no loans or repayments. The fixed base is equivalent to the cash value
for a comparable fixed benefit contract with the same face amount and guarantee
period. After the end of the guarantee period the fixed base is zero. The fixed
base is used to limit Merrill Lynch Life's right to cancel the Contract during
the guarantee period. (See "More About the Contract -- Other Contract
Provisions -- State Variations" on page 31 for information about certain
variations in determining the fixed base that may apply to the Contract.)
Automatic Adjustment. On any contract anniversary, if the cash value is greater
than the fixed base necessary to cause the guarantee period to extend until the
younger insured's attained age 100, the guarantee period will be extended to the
younger insured's attained age 100.
CASH VALUE
A Contract's cash value fluctuates daily with the investment results of the
investment divisions selected. Merrill Lynch Life does not guarantee any minimum
cash value. The cash value on any date equals the total investment base plus
debt plus unearned charges for cost of insurance and rider costs less any
accrued net loan cost since the last contract anniversary (or since the contract
date during the first contract year).
Cancelling the Contract. A contract owner may cancel the Contract at any time
while either insured is living. The request must be in writing in a form
satisfactory to Merrill Lynch Life. All rights to death benefits will end on the
date the written request is sent to Merrill Lynch Life.
The contract owner will then receive the net cash surrender value. The contract
owner may elect to receive this amount either in a single payment or under one
or more income plans described on page 31. The net cash surrender value will be
determined as of the date of receipt of the written request at the Service
Center.
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If the Contract is cancelled during the first 24 months after the issue date of
the Contract, excess sales load as described under "Excess Sales Load" on page
18, will be refunded except to the extent previously applied to keep the
Contract in force. (See "Contract Loading -- Excess Sales Load" on page 18.)
LOANS
At any time after the "free look" period and prior to the younger insured's
attained age 100, contract owners may use the Contract as collateral to borrow
funds from Merrill Lynch Life. The minimum loan is $1,000. Preferred loans are
available beginning on the later of the tenth contract anniversary or the
younger insured's attained age 55. See "Net Loan Cost" on page 20. Contract
owners may repay all or part of the loan at any time during either insured's
lifetime. Each repayment must be for at least $1,000 or the amount of the debt,
if less. Certain states won't permit establishing a minimum amount that can be
borrowed or repaid. If any excess sales load was previously applied to keep the
Contract in force, any loan repayment will first be applied to repay such excess
sales load.
When a loan is taken, Merrill Lynch Life transfers a portion of the contract
owner's investment base equal to the amount borrowed out of the investment
divisions and holds it as collateral in its general account. When a loan
repayment is made, Merrill Lynch Life transfers an amount equal to the repayment
from the general account to the investment divisions. The contract owner may
select from which divisions borrowed amounts should be taken and which divisions
should receive repayments (including interest payments). Otherwise, Merrill
Lynch Life will take the borrowed amounts proportionately from and make
repayments proportionately to the contract owner's investment base as then
allocated in the investment divisions.
If a contract owner has the CMA Insurance Service, loans may be transferred to
and loan repayments transferred from his or her CMA account.
For a discussion of the tax consequences associated with a loan, see "Tax
Considerations" on page 33.
Effect on Death Benefit and Cash Value. Whether or not a loan is repaid, taking
a loan will have a permanent effect on a Contract's cash value and may have a
permanent effect on its death benefit. This is because the collateral for a loan
does not participate in the performance of the investment divisions while the
loan is outstanding. If the amount credited to the collateral is more than what
is earned in the investment divisions, the cash value may be higher as a result
of the loan, as may be the death benefit. Conversely, if the amount credited is
less, the cash value will be lower, as may be the death benefit. In that case,
the lower cash value may cause the Contract to lapse sooner than if no loan had
been taken.
Loan Value. The total loan value of a Contract equals 90% of its cash value.
Once available, the preferred loan value is calculated on each contract
anniversary. The preferred loan value for the contract year is equal to 12% of
the cash value less existing debt on the contract anniversary. This amount is
available each contract year, and is applied (i) first, to convert any existing
debt to preferred loan status; and (ii) then, is available for new loans. The
sum of all outstanding loan amounts plus accrued interest is called debt. The
maximum amount that can be borrowed at any time is the difference between the
total loan value and the debt.
Interest. While a loan is outstanding, Merrill Lynch Life may charge interest
at a maximum rate of 6% annually, subject to state regulation. Currently Merrill
Lynch Life charges interest of 5.25% annually. Interest accrues each day and
payments are due at the end of each contract year. If the interest isn't paid
when due, it is added to the outstanding loan amount. Interest paid on a loan
generally is not tax deductible.
The amount held in Merrill Lynch Life's general account as collateral for a loan
earns interest at a minimum of 4% annually. Currently the preferred loan
collateral amount earns interest at an annual rate of 5.25%. The loan collateral
amount in excess of the preferred loan collateral amount earns interest at an
annual rate of 4.50%.
Merrill Lynch Life may change the interest rates currently charged on loans and
the rates of interest earned on the loan collateral amounts. Any such changes
will be effective on the contract anniversary following the date such rates are
declared.
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(See "More About the Contract -- Other Contract Provisions -- State Variations"
on page 31 or information about certain variations in loan interest charged, and
interest credited to collateral amounts, that may apply to the Contract.)
Net Loan Cost. Whether or not loan interest is paid when due, on the contract
anniversary, Merrill Lynch Life reduces the investment base by the net loan cost
(the difference between the interest charged and the earnings on the amount held
as collateral in the general account). Since the interest charged on preferred
loans is 5.25% and the preferred loan collateral amount earns interest at an
annual rate of 5.25%, the current net loan cost on preferred loan amounts is
zero. Since the interest charged on loans in excess of the preferred loan amount
is 5.25%, and the loan collateral amount in excess of the preferred loan
collateral amount earns interest at an annual rate of 4.50%, the current net
loan cost on such loans is .75%. The net loan cost is taken into account in
determining the net cash surrender value of the Contract if the date of
surrender is not a contract anniversary.
Cancellation Due to Excess Debt. If on a processing date the debt exceeds the
larger of (i) cash value plus certain excess sales load and less charges due on
that date and (ii) the fixed base (if any), Merrill Lynch Life will cancel the
Contract 61 days after a notice of intent to terminate the Contract is mailed to
the contract owner unless Merrill Lynch Life has received at least the minimum
repayment amount specified in the notice. During the first 24 months after the
Contract is issued, Merrill Lynch Life will add excess sales load to the cash
value as necessary to keep the Contract in force if debt exceeds the larger of
the cash value less charges due and the fixed base. (See "Contract Loading -
Excess Sales Load" on page 18.) Upon termination, Merrill Lynch Life will deduct
any charges for cost of insurance and rider costs that may be applicable to the
61-day period and refund any unearned charges for cost of insurance, rider costs
and any excess sales load not previously applied to keep the Contract in force.
If the Contract lapses with a loan outstanding, adverse tax consequences may
result. (See "Tax Considerations" on page 33.)
PARTIAL WITHDRAWALS
Beginning in the second contract year and prior to the younger insured's
attained age 100, and subject to state regulation, a contract owner may make
partial withdrawals by submitting a request in a form satisfactory to Merrill
Lynch Life. The effective date of the withdrawal is the date a withdrawal
request is received at the Service Center. Contract owners may elect to receive
the withdrawal amount either in a single payment or, subject to Merrill Lynch
Life's rules, under one or more income plans.
Contract owners may make one partial withdrawal each contract year. The minimum
amount for each partial withdrawal is $1,000. Following a partial withdrawal,
the remaining cash value less debt must equal or exceed $5,000 and the remaining
face amount must be at least $250,000. The amount of any partial withdrawal may
not exceed the total loan value as of the effective date of the partial
withdrawal less any debt. A partial withdrawal may not be repaid. A partial
withdrawal will not be permitted if after the withdrawal the guarantee period
would extend beyond the younger insured's attained age 100.
Effect on Investment Base, Fixed Base, Cash Value and Death Benefit. As of the
effective date of the withdrawal, the investment base, fixed base, cash value
and, if the contract owner has elected death benefit option 1, the face amount
of the Contract will each be reduced by the amount of the partial withdrawal.
Merrill Lynch Life allocates this reduction proportionately to the investment
base in each of the contract owner's investment divisions unless notified
otherwise. The variable insurance amount will also reflect the partial
withdrawal as of the effective date.
Effect on Guarantee Period. As of the processing date on or next following the
effective date of a partial withdrawal, Merrill Lynch Life calculates a new
guarantee period. This is done by taking the immediate decrease in cash value
resulting from the partial withdrawal and adding to that amount interest at an
annual rate of 4.5% for the period from the date of withdrawal to the contract
processing date on or next following such date. This is the guarantee adjustment
amount. The guarantee adjustment amount is subtracted from the fixed base and
the resulting new fixed base is used to calculate a new guarantee period. For a
discussion of the
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effect of partial withdrawals on a Contract's guarantee period, see "Partial
Withdrawals" in the Examples on page 48.
A partial withdrawal will not be permitted if after the withdrawal, the Contract
would not qualify as life insurance under federal tax law. A partial withdrawal
may cause a Contract which is not a modified endowment contract to become a
modified endowment contract. In such a case, Merrill Lynch Life will not process
the partial withdrawal until the contract owner confirms in writing his or her
intent to convert the Contract to a modified endowment contract. For a
discussion of the tax issues associated with a partial withdrawal, see "Tax
Considerations" on page 33.
DEATH BENEFIT PROCEEDS
Merrill Lynch Life will pay the death benefit proceeds to the beneficiary upon
receipt of all information needed to process the payment, including due proof of
the death of the last surviving insured. Proof of death for both insureds must
be received. There is no death benefit payable at the first death. When Merrill
Lynch Life is first provided reliable notification of the last surviving
insured's death by a representative of the owner or the insured, investment base
may be transferred to the division investing in the Money Reserve Portfolio,
pending payment of death benefit proceeds.
If one of the insureds should die within two years from the Contract's issue
date, within two years from the
effective date of any requested change in the death benefit option requiring
evidence of insurability, or within two years of an increase in the additional
insurance rider face amount, due proof of the insured's death should be sent
promptly to the Service Center since Merrill Lynch Life may pay only a limited
benefit or contest the Contract. (See "Incontestability" on page 30 and "Payment
in Case of Suicide" on page 30.)
Death Benefit Proceeds. The death benefit payable depends on the death benefit
option in effect on the date of death.
- Under option 1, the death benefit is equal to the larger of the face
amount or the variable insurance amount.
- Under option 2, the death benefit is equal to the larger of the face
amount plus the cash value or the variable insurance amount.
Contract owners who wish to have investment experience reflected in insurance
coverage should choose option 2. Contract owners who wish to have insurance
coverage that generally does not vary in amount should choose option 1.
The death benefit will never be less than the amount required to keep the
Contract qualified as life insurance under federal income tax laws.
To determine the death benefit proceeds, Merrill Lynch Life will subtract from
the death benefit any debt and add to the death benefit any rider benefits
payable.
The values used in calculating the death benefit proceeds are as of the date of
death. If the last surviving insured dies during the grace period, the death
benefit proceeds equal the death benefit proceeds in effect immediately prior to
the grace period reduced by any overdue charges. (See "When the Guarantee Period
Does Not Extend to the Younger Insured's Attained Age 100" on page 20.)
If the last surviving insured dies at or after the younger insured's attained
age 100, we will instead pay the beneficiary the post-100 death benefit proceeds
(see "Post-100 Death Benefit Proceeds" on page 26).
Variable Insurance Amount. Merrill Lynch Life determines the variable insurance
amount daily by:
- calculating the cash value (plus excess sales load during the first 24
months after the Contract is issued); and
- multiplying it by the cash value corridor factor (explained below) for
the younger insured at his or her attained age.
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The variable insurance amount will never be less than required by federal tax
law.
Cash Value Corridor Factor. The cash value corridor factor is used to determine
the amount of death benefit purchased by $1.00 of cash value. It is based on the
attained age of the younger insured on the date of calculation. It decreases
daily as the younger insured's age increases. As a result, the variable
insurance amount as a multiple of the cash value will decrease over time. A
table of cash value corridor factors as of each anniversary is included in the
Contract.
Table of Illustrative Cash Value Corridor Factors
on Anniversaries
<TABLE>
<CAPTION>
ATTAINED
AGE FACTOR
- ------------- ------------
<S> <C>
40 and under 250%
45 215%
55 150%
65 120%
75-90 105%
95 and over 100%
</TABLE>
Changing the Death Benefit Option. On each contract anniversary beginning with
the first and provided that neither insured has attained age 86, the contract
owner may change the death benefit option. The effective date of the change will
be the contract anniversary next following approval of the change. Merrill Lynch
Life will change the face amount in order to keep the death benefit constant on
the effective date of the change. Therefore, if the change is from option 1 to
option 2, the face amount of the Contract will be decreased by the cash value on
the date of the change. A change in the death benefit option will not be
permitted if it would result in a face amount of less than $250,000 or if the
resulting guarantee period would extend beyond the younger insured's attained
age 100. If the change is from option 2 to option 1, the face amount of the
Contract will be increased by the cash value on the date of the change. For a
discussion of the effect of a change in the death benefit option on a Contract,
see "Changing the Death Benefit Option" in the Examples on page 49.
If the contract owner requests a change in the death benefit option from option
1 to option 2, evidence of insurability in a form satisfactory to Merrill Lynch
Life that the insureds are insurable may be required. In no event will a change
be permitted if, after the change, the Contract would not qualify as life
insurance under federal tax laws as interpreted by Merrill Lynch Life.
As of the effective date of a change in the death benefit option which results
in a change in the face amount, Merrill Lynch Life calculates a new guarantee
period using the new face amount (plus the additional insurance rider face
amount) and the fixed base on that date.
A change in the death benefit option may cause a Contract which is not a
modified endowment contract to become a modified endowment contract. In such a
case, Merrill Lynch Life will not process the change until the contract owner
confirms in writing his or her intent to convert the Contract to a modified
endowment contract. For a discussion of the tax issues associated with a change
in the death benefit option, see "Tax Considerations" on page 33.
Reducing the Face Amount. Beginning in contract year four and after two base
premiums have been paid, and provided that neither insured has attained age 86,
the contract owner may elect to reduce the face amount once each contract year.
The effective date of the change will be the contract anniversary next following
approval of the change. The minimum amount for each face amount reduction is
$100,000. A reduction in face amount will not be permitted if it would result in
a face amount of less than $250,000 or if the resulting guarantee period would
extend beyond the younger insured's attained age 100.
Merrill Lynch Life will not effect a requested face amount reduction to the
extent that, after the reduction, the Contract would not qualify as life
insurance under federal tax laws as interpreted by Merrill Lynch Life.
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As of the effective date of a reduction in face amount, Merrill Lynch Life
calculates a new guarantee period using the new face amount (plus the additional
insurance rider face amount) and the fixed base on that date.
A reduction in face amount may cause a Contract which is not a modified
endowment contract to become a modified endowment contract. In such a case,
Merrill Lynch Life will not process the reduction until the contract owner
confirms in writing his or her intent to convert the Contract to a modified
endowment contract. For a discussion of the tax issues associated with a
reduction in face amount, see "Tax Considerations" on page 33.
Post-100 Death Benefit Proceeds. The death benefit proceeds at and after the
younger insured's attained age 100 depend upon the death benefit option in
effect on the date of death.
If option 1 is in effect, the post-100 death benefit is calculated based on the
cash value and the adjusted face amount where:
- the adjusted face amount equals the lesser of:
(1) the face amount at the younger insured's attained age 100, and
(2) the cash value as of the date of death plus the net amount at risk at
the younger insured's attained age 100.
- the net amount at risk at the younger insured's attained age 100 equals
the face amount at the younger insured's attained age 100 less the cash
value at that time.
- the death benefit equals the greater of:
(1) the cash value as of the date of death, and,
(2) the adjusted face amount.
If option 2 is in effect, the post-100 death benefit is equal to the face amount
at the younger insured's attained age 100 plus the cash value as of the date of
death.
To determine the post-100 death benefit proceeds under either option, Merrill
Lynch Life will subtract from the death benefit any debt.
Benefits at the Younger Insured's Attained Age 100. At the younger insured's
attained age 100, the guarantee period, if any, ends. Cash value will continue
to increase or decrease depending on the investment experience of the investment
divisions to which the Contract's investment base is allocated. Upon the death
of the last surviving insured, Merrill Lynch Life will pay the beneficiary the
post-100 death benefit proceeds.
At and after the younger insured's attained age 100, cost of insurance charges
will no longer be deducted. Loan repayments will be accepted. Net loan cost will
continue to be deducted and loan interest charges will continue to accrue.
Additional payments, partial withdrawals and additional loans will not be
permitted. Any additional insurance rider coverage terminates.
The tax treatment of the post-100 benefits is unclear. A contract owner should
consult a tax advisor about the tax consequences associated with such benefits.
PAYMENT OF DEATH BENEFIT PROCEEDS
Merrill Lynch Life will generally pay the death benefit proceeds to the
beneficiary within seven days after all the information needed to process the
payment is received at its Service Center. Merrill Lynch Life will add interest
from the date of the last surviving insured's death to the date of payment at an
annual rate of at least 4%. The beneficiary may elect to receive the proceeds
either in a single payment or under one or more income plans described on page
31.
Payment may be delayed if the Contract is being contested or under the
circumstances described in "Using the Contract" on page 28 and "Other Contract
Provisions" on page 30. If a delay is necessary and death of the last surviving
insured occurs prior to the end of the guarantee period, Merrill Lynch Life may
delay payment
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<PAGE> 31
of any excess of the death benefit over the face amount. After the guarantee
period has expired, Merrill Lynch Life may delay payment of the entire death
benefit.
ACCELERATED BENEFIT RIDER
In the future, Merrill Lynch Life may offer an Accelerated Benefit Rider (an
"ABR") that would be added to the Contract at the time the Contract is issued.
If an ABR is offered, it is expected to permit the contract owner to receive,
upon request and subject to approval by Merrill Lynch Life, accelerated payment
of part of the Contract's death benefit, adjusted to reflect current value, if
the last surviving insured develops a non-correctable illness or physical
condition which with reasonable medical certainty is expected to result in his
or her death within 12 months, subject to certain conditions. Certain
administrative charges may be imposed in connection with payments under an ABR.
Pursuant to the recently enacted Health Insurance Portability and Accountability
Act of 1996 ("HIPAA"), Merrill Lynch Life believes that, for federal income tax
purposes, accelerated benefit payments should be fully excludable from the gross
income of the beneficiary, as long as the beneficiary is the insured under the
Contract. However, a contact owner should consult a tax advisor before adding
the ABR or requesting an accelerated benefit payment under the ABR.
RIGHTS TO CANCEL OR CONVERT
"Free Look" Period. A contract owner may cancel his or her Contract during the
"free look" period by returning it for a refund. Generally, the "free look"
period ends the later of ten days after the Contract is received, 45 days after
the contract owner completes the application or ten days after Merrill Lynch
Life mails or personally delivers to the contract owner the Notice of Withdrawal
Right. To cancel the Contract during the "free look" period, the contract owner
must mail or deliver the Contract to Merrill Lynch Life's Service Center or to
the registered representative who sold it. Merrill Lynch Life will refund the
payment made without interest. If cancelled, Merrill Lynch Life may require the
contract owner to wait six months before applying again.
Converting the Contract. A contract owner may convert the Contract for a joint
and last survivor contract with benefits that do not vary with the investment
results of a separate account. Once a contract owner exercises this right, the
investment base and additional payments may not be allocated to the Separate
Account. A request to convert must be made in writing within 24 months after the
issue date of the Contract provided one of the insured's is living. The
conversion will not require evidence of insurability.
The conversion will be accomplished by adding an endorsement to the Contract and
transferring, without charge, the investment base in the Separate Account to the
guaranteed interest division ("GID"). Assets in the guaranteed interest division
are held in Merrill Lynch Life's general account. The investment base at the
time of conversion and any additional payments will remain in the guaranteed
interest division and be credited with interest at a rate declared by Merrill
Lynch Life. A declared interest rate for any amount allocated to the guaranteed
interest division will be in effect for at least one year. After conversion, the
Contract will not be subject to charges to the Separate Account. For a
discussion of the tax consequences of converting the Contract, see "Tax
Considerations" on page 33.
REPORTS TO CONTRACT OWNERS
After the end of each processing period, contract owners will be sent a
statement of the allocation of their investment base, death benefit, cash value,
any debt and, if there has been a change, the face amount, the guarantee period
and the additional insurance rider face amount. All figures will be as of the
end of the immediately preceding processing period. The statement will show the
amounts deducted from or added to the investment base during the processing
period. The statement will also include any other information that may be
currently required by a contract owner's state.
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<PAGE> 32
Contract owners will receive confirmation of all financial transactions. Such
confirmations will show the price per unit of each of the contract owner's
investment divisions, the number of units a contract owner has in the investment
division and the value of the investment division computed by multiplying the
quantity of units by the price per unit. (See "Net Rate of Return for an
Investment Division" on page 37.) The sum of the values in each investment
division is a contract owner's investment base.
Contract owners will also be sent an annual and a semi-annual report containing
financial statements and a list of portfolio securities of the Funds, as
required by the Investment Company Act of 1940.
CMA Account Reporting. Contract owners who have the CMA Insurance Service will
have certain Contract information included as part of their regular monthly CMA
account statement. It will list the investment base allocation, death benefit,
cash value, debt and any CMA account activity affecting the Contract during the
month.
MORE ABOUT THE CONTRACT
USING THE CONTRACT
Ownership. The contract owner is usually one of the insureds, unless another
owner has been named in the application. The contract owner has all rights and
options described in the Contract.
The contract owner may want to name a contingent owner. If the contract owner
dies before the last surviving insured, the contingent owner will own the
contract owner's interest in the Contract and have all of the contract owner's
rights. If the contract owner doesn't name a contingent owner, the contract
owner's estate will own the contract owner's interest in the Contract upon the
owner's death.
If there is more than one contract owner, Merrill Lynch Life will treat the
owners as joint tenants with rights of survivorship unless the ownership
designation provides otherwise. The owners must exercise their rights and
options jointly, except that any one of the owners may reallocate the Contract's
investment base by phone if the owner provides the personal identification
number as well as the Contract number. One contract owner must be designated, in
writing, to receive all notices, correspondence and tax reporting to which
contract owners are entitled under the Contract.
Changing the Owner. During either insured's lifetime, with the consent of any
irrevocable beneficiary, the contract owner has the right to transfer ownership
of the Contract. The new owner will have all rights and options described in the
Contract. The change will be effective as of the day the notice is signed, but
will not affect any payment made or action taken by Merrill Lynch Life before
receipt of the notice of the change at the Service Center. Changing the owner
may have tax consequences. (See "Tax Considerations" on page 33.)
Assigning the Contract as Collateral. Contract owners may assign the Contract
as collateral security for a loan or other obligation. This does not change the
ownership. However, the contract owner's rights and any beneficiary's rights are
subject to the terms of the assignment. Contract owners must give satisfactory
written notice at the Service Center in order to make or release an assignment.
Merrill Lynch Life is not responsible for the validity of any assignment.
For a discussion of the tax issues associated with a collateral assignment, see
"Tax Considerations" on page 33.
Naming Beneficiaries. Merrill Lynch Life will pay the primary beneficiary the
death benefit proceeds of the Contract on the last surviving insured's death. If
the primary beneficiary has died, Merrill Lynch Life will pay the contingent
beneficiary. If no contingent beneficiary is living, Merrill Lynch Life will pay
the estate of the last surviving insured.
A contract owner may name more than one person as primary or contingent
beneficiaries. Merrill Lynch Life will pay proceeds in equal shares to the
surviving beneficiaries unless the beneficiary designation provides otherwise.
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<PAGE> 33
A contract owner has the right to change beneficiaries during either insured's
lifetime, unless the primary beneficiary designation has been made irrevocable.
If the designation is irrevocable, the primary beneficiary must consent when
certain rights and options are exercised under this Contract. If the beneficiary
is changed, the change will take effect as of the day the notice is signed, but
will not affect any payment made or action taken by Merrill Lynch Life before
receipt of the notice of the change at the Service Center.
How Merrill Lynch Life Makes Payments. Merrill Lynch Life generally pays death
benefit proceeds, partial withdrawals, loans and net cash surrender value on
cancellation from the Separate Account within seven days after the Service
Center receives all the information needed to process the payment.
However, it may delay payment from the Separate Account if it isn't practical
for Merrill Lynch Life to value or dispose of Trust units, Series Fund shares or
Variable Series Funds shares because:
- the New York Stock Exchange is closed, other than for a customary weekend
or holiday; or
- trading on the New York Stock Exchange is restricted by the Securities
and Exchange Commission; or
- the Securities and Exchange Commission declares that an emergency exists
such that it is not reasonably practical to dispose of securities held in
the Separate Account or to determine the value of their assets; or
- the Securities and Exchange Commission by order so permits for the
protection of contract owners.
SOME ADMINISTRATIVE PROCEDURES
Described below are certain administrative procedures. Merrill Lynch Life
reserves the right to modify them or to eliminate them. For administrative and
tax purposes, Merrill Lynch Life may from time to time require that specific
forms be completed in order to accomplish certain transactions, including
surrenders.
Personal Identification Number. Merrill Lynch Life will send each contract
owner a four-digit personal identification number ("PIN") shortly after the
Contract is placed in force and before the end of the "free look" period. This
number must be given when the contract owner calls the Service Center to get
information about the Contract, to make a loan (if an authorization is on file),
or to make other requests. Each PIN will be accompanied by a notice reminding
the contract owner that all of the investment base is in the division investing
in the Money Reserve Portfolio and will be reallocated to the investment
divisions selected at the time of application. The notice sent to contract
owners who did not choose to preallocate investment base will indicate that the
allocation to the Money Reserve Portfolio may be changed by calling or writing
to the Service Center. (See "Changing the Allocation" on page 17.)
Reallocating the Investment Base. Contract owners can reallocate their
investment base either in writing in a form satisfactory to Merrill Lynch Life
or by phone. If the reallocation is requested by phone, contract owners must
give their personal identification number as well as their Contract number.
Merrill Lynch Life will give a confirmation number over the phone and then
follow up in writing.
Requesting a Loan. A loan may be requested in writing in a form satisfactory to
Merrill Lynch Life or, if all required authorization forms are on file, by
phone. Once the authorization has been received at the Service Center, contract
owners can call the Service Center, give their Contract number, name and
personal identification number, and tell Merrill Lynch Life the loan amount and
from which divisions the loan should be transferred.
Upon request, Merrill Lynch Life will wire the funds to the contract owner's
account at the financial institution named on the contract owner's
authorization. Merrill Lynch Life will generally wire the funds within two
working days of receipt of the request. If the contract owner has the CMA
Insurance Service, funds may be transferred directly to that CMA account.
Requesting Partial Withdrawals. Beginning in the second contract year, partial
withdrawals may be requested in writing in a form satisfactory to Merrill Lynch
Life. A contract owner may request a partial withdrawal by phone if all required
phone authorization forms are on file. Once the authorization has been
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<PAGE> 34
received at the Service Center, contract owners can call the Service Center,
give their Contract number, name and personal identification number, and tell
Merrill Lynch Life how much to withdraw and from which investment divisions.
Upon request, Merrill Lynch Life will wire the funds to the contract owner's
account at the financial institution named on the contract owner's
authorization. Merrill Lynch Life will generally wire the funds within two
working days of receipt of the request. If the contract owner has the CMA
Insurance Service, funds may be transferred directly to that CMA account.
Telephone Requests. A telephone request for a loan, partial withdrawal or a
reallocation received before 4 p.m. (ET) generally will be processed the same
day. A request received at or after 4 p.m. (ET) will be processed the following
business day. Merrill Lynch Life reserves the right to change or discontinue
telephone transfer procedures.
Merrill Lynch Life will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. These procedures may
include, but are not limited to, possible recording of telephone calls and
obtaining appropriate identification before effecting any telephone
transactions. Merrill Lynch Life will not be liable for following telephone
instructions that it reasonably believes to be genuine.
OTHER CONTRACT PROVISIONS
In Case of Errors in the Application. If an age or sex given in the application
is wrong, it could mean that the face amount or any other Contract benefit is
wrong. Merrill Lynch Life will pay what the payments made would have bought for
the guarantee period at the true age or sex.
Incontestability. Merrill Lynch Life will rely on statements made in the
applications. Legally, they are considered representations, not warranties.
Merrill Lynch Life can contest the validity of a Contract if any material
misstatements are made in the initial application or any application for
reinstatement. Merrill Lynch Life can also contest the validity of any change in
face amount due to a change in death benefit option or any increase in the
additional insurance rider face amount requested if any material misstatements
are made in any application required for the change or increase.
Subject to state regulation, Merrill Lynch Life will not contest the validity of
a Contract after it has been in effect during the lifetimes of both insureds for
two years from the date of issue or the date of any reinstatement. A change in
face amount due to a change in the death benefit option or any increase in the
additional insurance rider face amount won't be contested after the change or
increase has been in effect during the lifetimes of both insureds for two years
from the date of the change.
At the end of the second contract year, Merrill Lynch Life will mail the
contract owner a notice requesting that he or she tell Merrill Lynch Life if
either insured has died. Failure to tell Merrill Lynch Life of the death of
either insured will not avoid a contest if Merrill Lynch Life has grounds to do
so, even if the Contract is still in force.
Payment in Case of Suicide. Subject to state regulation, if either insured
commits suicide within two years from the Contract's issue date or the date of
any reinstatement, Merrill Lynch Life will pay only a limited death benefit and
then terminate the Contract. The benefit will be equal to the amount of the
payments made, reduced by any debt and partial withdrawals.
Subject to state regulation, if either insured commits suicide within two years
of the effective date of a change in the death benefit option requiring evidence
of insurability or of the effective date of an increase in the additional
insurance rider face amount, any amount of death benefit which would not be
payable except for the fact that the face amount was increased will be limited
to the amount of cost of insurance deductions made for the increase.
Establishing Survivorship. If Merrill Lynch Life is unable to determine which
of the insureds was the last survivor on the basis of the proofs of death
provided, it will consider insured No. 1 as designated in the application to be
the last surviving insured.
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Contract Changes -- Applicable Federal Tax Law. To receive the tax treatment
accorded to life insurance under federal income tax law, the Contract must
qualify initially and continue to qualify as life insurance under the Internal
Revenue Code or successor law. Therefore, to maintain this qualification to the
maximum extent of the law, Merrill Lynch Life reserves the right to return any
additional payments that would cause the Contract to fail to qualify as life
insurance under applicable tax law as interpreted by Merrill Lynch Life.
Further, Merrill Lynch Life reserves the right to make changes in the Contract
or its riders or to make distributions from the Contract to the extent it is
necessary to continue to qualify the Contract as life insurance. Any changes
will apply uniformly to all Contracts that are affected and contract owners will
be given advance written notice of such changes.
Policy Split Rider. This rider allows the contract owner to split the Contract
into two new individual contracts upon divorce of the insureds or if certain
federal tax law changes occur. Certain conditions described in the rider,
including evidence of insurability of both insureds, must be met before the
rider's benefit can be exercised. For more information about this rider and the
conditions and rules relating to the exercise of any rights under the rider, the
contract owner should call the Service Center. The Service Center can also
provide the contract owner with a prospectus for the individual contract. For a
discussion of the possible tax consequences of splitting the Contract, see "Tax
Considerations" on page 33.
State Variations. Certain Contract features, including the "free look" right,
are subject to state variation. The contract owner should read his or her
Contract carefully to determine whether any variations apply in the state in
which the Contract is issued.
Contracts issued prior to certain state approvals having been obtained use a 5%,
rather than a 4 1/2%, assumed interest rate for purposes of determining the
contract's guarantee period, fixed base, and cost of insurance charges. These
contracts also use a 4%, rather than a 3%, assumed interest rate for purposes of
calculating income plan payment amounts.
In addition, under these contracts, the interest charged on loans is 5.75%,
rather than 5.25%; however, preferred loan collateral earns interest at an
annual rate of 5.75%, and the loan collateral amount in excess of the preferred
loan collateral amount earns interest at an annual rate of 5%. Accordingly, the
net loan cost under these contracts is 0% for preferred loan amounts, and 0.75%
for loans in excess of the preferred loan amount.
INCOME PLANS
Merrill Lynch Life offers several income plans to provide for payment of the
death benefit proceeds to the beneficiary. The contract owner may choose one or
more income plans at any time during the lifetime of either insured. If no plan
has been chosen when the last surviving insured dies, the beneficiary has one
year to apply the death benefit proceeds either paid or payable to that
beneficiary to one or more of the plans. The contract owner may also choose one
or more income plans if the Contract is cancelled or a partial withdrawal is
taken. Merrill Lynch Life's approval is needed for any plan where any income
payment would be less than $100. Payments under these plans do not depend on the
investment results of a separate account.
Income plans include:
Annuity Plan. An amount can be used to purchase a single premium immediate
annuity.
Interest Payment. Amounts can be left with Merrill Lynch Life to earn
interest at an annual rate of at least 3%. Interest payments can be made
annually, semiannually, quarterly or monthly.
Income for a Fixed Period. Payments are made in equal installments for a
fixed number of years.
Income for Life. Payments are made in equal monthly installments until
death of a named person or end of a designated period, whichever is later.
The designated period may be for 10 or 20 years.
Income of a Fixed Amount. Payments are made in equal installments until
proceeds applied under the option and interest on unpaid balance at not
less than 3% per year are exhausted.
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Joint Life Income. Payments are made in monthly installments as long as at
least one of two named persons is living. While both are living, full
payments are made. If one dies, payments at two-thirds of the full amount
are made. Payments end completely when both named persons die.
Once in effect, some of the plans may not provide any surrender rights.
(See "More About the Contract--Other Contract Provisions--State Variations" on
page 31 for information about certain variations in income plans that may apply
to the Contract.)
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, Merrill Lynch Life may reduce the
sales load, cost of insurance rates and the minimum payment and may modify
underwriting classifications and requirements.
Group arrangements include those in which a trustee or an employer, for example,
purchases Contracts covering a group of individuals on a group basis. Sponsored
arrangements include those in which an employer allows Merrill Lynch Life to
sell Contracts to its employees on an individual basis. Costs for sales,
administration and mortality generally vary with the size and stability of the
group and the reasons the Contracts are purchased, among other factors. Merrill
Lynch Life takes all these factors into account when reducing charges. To
qualify for reduced charges, a group or sponsored arrangement must meet certain
requirements, including requirements for size and number of years in existence.
Group or sponsored arrangements that have been set up solely to buy Contracts or
that have been in existence less than six months will not qualify for reduced
charges.
Merrill Lynch Life makes any reductions according to rules in effect when an
application for a Contract or additional payment is approved. It may change
these rules from time to time. However, reductions in charges will not
discriminate unfairly against any person.
UNISEX LEGAL CONSIDERATIONS FOR EMPLOYERS
In 1983 the Supreme Court held in Arizona Governing Committee v. Norris that
optional annuity benefits provided under an employee's deferred compensation
plan could not, under Title VII of the Civil Rights Act of 1964, vary between
men and women. In addition, legislative, regulatory or decisional authority of
some states may prohibit use of sex-distinct mortality tables under certain
circumstances.
Generally, the Contracts offered by this Prospectus are based on mortality
tables that distinguish between men and women. As a result, the Contract pays
different benefits to men and women of the same age. Employers and employee
organizations should check with their legal advisers before purchasing
Contracts.
Some states prohibit the use of actuarial tables that distinguish between men
and women in determining payments and contract benefits for contracts issued on
the lives of their residents. Therefore, Contracts offered in this Prospectus to
insure residents of these states will have unisex payments and benefits which
are based on actuarial tables that do not differentiate on the basis of sex.
SELLING THE CONTRACTS
MLPF&S is the principal underwriter of the Contract. It was organized in 1958
under the laws of the state of Delaware and is registered as a broker dealer
under the Securities Exchange Act of 1934. It is a member of the National
Association of Securities Dealers, Inc. ("NASD"). The principal business address
of MLPF&S is World Financial Center, 250 Vesey Street, New York, New York 10281.
MLPF&S also acts as principal underwriter of other variable life insurance and
variable annuity contracts issued by Merrill Lynch Life, as well as variable
life insurance and variable annuity contracts issued by ML Life Insurance
Company of New York, an affiliate of Merrill Lynch Life. MLPF&S also acts as
principal underwriter of certain mutual funds managed by MLAM, the investment
adviser for the Series Fund and the Variable Series Funds.
Contracts are sold by registered representatives of MLPF&S who are also licensed
through various Merrill Lynch Life Agencies as insurance agents for Merrill
Lynch Life. Merrill Lynch Life has entered into a
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distribution agreement with MLPF&S and companion sales agreements with the
Merrill Lynch Life Agencies through which agreements the Contracts and other
variable life insurance contracts issued through the Separate Account are sold
and the registered representatives are compensated by Merrill Lynch Life
Agencies and/or MLPF&S.
The maximum commissions Merrill Lynch Life will pay to the applicable insurance
agency to be used to pay commissions to registered representatives are as
follows: 95% of the target premium under the Contract; plus 3% of payments
thereafter. In addition, an amount equal to .11% of persisting investment base
under a Contract may be paid on an annual basis. Commissions may be paid in the
form of non-cash compensation.
The amounts paid under the distribution and sales agreements for the Separate
Account for the years ended December 31, 1996, and December 31, 1995 and
December 31, 1994 were $10,059,108, $8,375,066 and $8,456,418, respectively.
MLPF&S may arrange for sales of the Contract by other broker-dealers who are
registered under the Securities Exchange Act of 1934 and are members of the
NASD. Registered representatives of these other broker-dealers may be
compensated on a different basis than MLPF&S registered representatives.
TAX CONSIDERATIONS
Definition of Life Insurance. In order to qualify as a life insurance contract
for federal tax purposes, the Contract must meet the definition of a life
insurance contract which is set forth in Section 7702 of the Internal Revenue
Code of 1986, as amended (the "Code"). The manner in which Section 7702 should
be applied to certain features of the Contract offered in this Prospectus is not
directly addressed by Section 7702. Nevertheless, Merrill Lynch Life believes it
is reasonable to conclude that the Contract will meet the Section 7702
definition of a life insurance contract, so that:
- the death benefit should be fully excludable from the gross income of the
beneficiary under Section 101(a)(1) of the Code; and
- the contract owner should not be considered in constructive receipt of
the cash value, including any increases, until actual cancellation of the
Contract (see "Tax Treatment of Loans and Other Distributions" on page
34).
In the absence of final regulations or other pertinent interpretations of
Section 7702, however, there is necessarily some uncertainty as to whether a
Contract will meet the statutory life insurance contract definition,
particularly if it insures substandard risks. If a Contract were determined not
to be a life insurance contract for purposes of Section 7702, such Contract
would not provide most of the tax advantages normally provided by a life
insurance contract.
Merrill Lynch Life thus reserves the right to make changes in the Contract if
such changes are deemed necessary to attempt to assure its qualification as a
life insurance contract for tax purposes. (See "Contract Changes -- Applicable
Federal Tax Law" on page 31.)
Diversification. Section 817(h) of the Code provides that separate account
investments (or the investments of a mutual fund, the shares of which are owned
by separate accounts of insurance companies) underlying the Contract must be
"adequately diversified" in accordance with Treasury regulations in order for
the Contract to qualify as life insurance. The Treasury Department has issued
regulations prescribing the diversification requirements in connection with
variable contracts. The Separate Account, through the Funds, intends to comply
with these requirements. Each Fund is obligated to comply with the
diversification requirements prescribed by the Treasury Department.
In connection with the issuance of the temporary diversification regulations,
the Treasury Department stated that it anticipates the issuance of regulations
or rulings prescribing the circumstances in which an owner's control of the
investments of a separate account may cause the owner, rather than the insurance
company, to be treated as the owner of the assets in the account. If the
contract owner is considered the owner of the assets of the Separate Account,
income and gains from the account would be included in the owner's gross income.
The ownership rights under the Contract offered in this Prospectus are similar
to, but different in certain respects from, those described by the Internal
Revenue Service in rulings in which it determined that the
33
<PAGE> 38
owners were not owners of separate account assets. For example, the owner of the
Contract has additional flexibility in allocating payments and cash values.
These differences could result in the owner being treated as the owner of the
assets of the Separate Account. In addition, Merrill Lynch Life does not know
what standards will be set forth in the regulations or rulings which the
Treasury has stated it expects to be issued. Merrill Lynch Life therefore
reserves the right to modify the Contract as necessary to attempt to prevent the
contract owner from being considered an owner of the assets of the Separate
Account.
Tax Treatment of Loans and Other Distributions. Federal tax law establishes a
class of life insurance contracts referred to as modified endowment contracts. A
modified endowment contract is any contract which satisfies the definition of
life insurance set forth in Section 7702 of the Code but fails to meet the 7-pay
test. This test applies a cumulative limit on the amount of payments that can be
made into a contract each year in the first seven contract years in order to
avoid modified endowment treatment. In effect, compliance with the 7-pay test
requires that contracts be purchased with a higher face amount for a given
initial payment than would otherwise be required, at a minimum, to meet the
definition of life insurance. Contracts that do not satisfy the 7-pay test,
including contracts which initially satisfied the 7-pay test but later failed
the test, will be considered modified endowment contracts subject to the
following distribution rules. Loans and partial withdrawals from, as well as
collateral assignments of, modified endowment contracts will be treated as
distributions to the contract owner. Furthermore, if the loan interest is
capitalized by adding the amount due to the balance of the loan, the amount of
the capitalized interest will be treated as a distribution which may be subject
to income tax, to the extent of the income in the contract. All pre-death
distributions (including loans, capitalized interest, partial withdrawals,
collateral assignments and complete surrenders) from these contracts will be
included in gross income on an income-first basis to the extent of any income in
the contract (the cash value less the contract owner's investment in the
contract) immediately before the distribution.
The law also imposes a 10% penalty tax on pre-death distributions (including
loans, capitalized interest, collateral assignments, partial withdrawals and
complete surrenders) from modified endowment contracts to the extent they are
included in income, unless such amounts are distributed on or after the taxpayer
attains age 59 1/2, because the taxpayer is disabled, or as substantially equal
periodic payments over the taxpayer's life (or life expectancy) or over the
joint lives (or joint life expectancies) of the taxpayer and his or her
beneficiary.
Contracts that comply with the 7-pay test will not be classified as modified
endowment contracts. Loans from contracts that are not modified endowment
contracts generally will be considered indebtedness of an owner and no part of a
loan generally will constitute income to the owner. (The treatment of a
preferred loan is unclear; such a loan may be considered a withdrawal instead of
an indebtedness of the contract owner.) In addition, pre-death distributions
from these contracts will generally not be included in gross income to the
extent that the amount received does not exceed the owner's investment in the
contract. An exception to this general rule may occur in the case of a decrease
in the death benefit provided in respect of a contract (possibly resulting from
a partial withdrawal) or any other change that reduces benefits under the
contract in the first 15 years after the contract is issued and that results in
a cash distribution to the contract owner in order for the contract to continue
complying with the Section 7702 definitional limits. Such a cash distribution
may be taxed in whole or in part as ordinary income (to the extent of any gain
in the contract) under rules prescribed in Section 7702.
A lapse of a contract that is not a modified endowment contract with an
outstanding loan will result in the treatment of the loan cancellation
(including the accrued interest) as a distribution under the contract and may be
taxable.
Compliance with the 7-pay test does not imply or guarantee that only seven
payments will be required for the initial death benefit to be guaranteed for
life. Making additional payments or reducing the benefits (for example, through
a partial withdrawal, a change in death benefit option, a decrease in face
amount of the base policy or an additional insurance rider, or terminating
additional benefits under a rider) may violate the 7-pay test or, at a minimum,
reduce the amount that may be paid in the future under the 7-pay test. Further,
reducing the death benefit at any time will require retroactive retesting and
will probably result in a failure of
34
<PAGE> 39
the 7-pay test regardless of any efforts by Merrill Lynch Life to provide a
payment schedule that will not violate the 7-pay test.
Any contract received in an exchange for a modified endowment contract will be
considered a modified endowment contract and will be subject to the tax
treatment accorded to modified endowment contracts that is described in the
Prospectus. A contract that is not originally classified as a modified endowment
contract can become so classified if there is a reduction in benefits at any
time (including, for example, by a decrease in the face amount or a change in
death benefit option) or if a material change is made in the contract at any
time. (A material change includes, but is not limited to, a change in the
benefits that was not reflected in a prior 7-pay test computation, such as a
change in death benefit option.) This could result from additional payments made
after 7-pay test calculations done at the time of the contract exchange.
Contract owners may choose not to exercise their right to make additional
payments, in order to preserve their contract's current tax treatment.
If a contract becomes a modified endowment contract, distributions that occur
during the contract year it becomes a modified endowment contract and any
subsequent contract year will be taxed as distributions from a modified
endowment contract. In addition, distributions from a contract within two years
before it becomes a modified endowment contract will be taxed in this manner.
This means that a distribution made from a contract that is not a modified
endowment contract could later become taxable as a distribution from a modified
endowment contract.
Special Treatment of Loans on the Contract. If there is any borrowing against
the Contract, whether a modified endowment contract or not, the interest paid on
loans generally is not tax deductible.
Aggregation of Modified Endowment Contracts. In the case of a pre-death
distribution (including a loan, capitalized interest, partial withdrawal,
collateral assignment or complete surrender) from a contract that is treated as
a modified endowment contract under the rules described above, a special
aggregation requirement may apply for purposes of determining the amount of the
income on the contract. Specifically, if Merrill Lynch Life or any of its
affiliates issues to the same contract owner more than one modified endowment
contract within a calendar year, then for purposes of measuring the income on
the contract with respect to a distribution from any of those contracts, the
income on the contract for all those contracts will be aggregated and attributed
to that distribution.
Tax Treatment of Policy Split. The policy split rider permits a Contract to be
split into two individual contracts upon the occurrence of a divorce of joint
insureds or certain changes in federal estate tax law. A policy split could have
adverse tax consequences; for example, it is not clear whether a policy split
will be treated as a nontaxable exchange under Sections 1031 through 1043 of the
Code. If a policy split is not treated as a nontaxable exchange, a split could
result in the recognition of taxable income in an amount up to any gain in the
Contract at the time of the split. In addition, it is not clear whether the
individual contracts that result from a policy split would in all circumstances
be treated as life insurance contracts for federal income tax purposes and, if
so treated, whether the individual contracts would be classified as modified
endowment contracts. (See "Tax Treatment of Loans and Other Distributions" on
page 34.) Before the contract owner exercises rights provided by the policy
split rider, it is important that he or she consult with a competent tax advisor
regarding the possible consequences of a policy split.
Accelerated Benefit Rider. Merrill Lynch Life believes that, for federal income
tax purposes, an accelerated benefit payment made under the ABR should be fully
excludable from the gross income of the beneficiary, as long as the beneficiary
is the insured under the Contract. However, a contract owner should consult a
tax advisor before adding the ABR or requesting an accelerated benefit payment
under the ABR.
Other Tax Considerations. The transfer of the Contract or the designation of a
beneficiary may have federal, state, and/or local transfer and inheritance tax
consequences, including the imposition of gift, estate and generation skipping
transfer taxes. For example, the transfer of the Contract to, or the designation
as beneficiary of, or the payment of proceeds to, a person who is assigned to a
generation which is two or more
35
<PAGE> 40
generations below the generation assignment of the contract owner, may have
generation skipping transfer tax considerations under Section 2601 of the Code.
The individual situation of each contract owner or beneficiary will determine
the extent, if any, to which federal, state and local transfer taxes may be
imposed. The contract owner should consult with a tax advisor for specific
information in connection with these taxes.
The particular situation of each contract owner or beneficiary will determine
how ownership or receipt of contract proceeds will be treated for purposes of
federal estate tax, as well as state and local estate, inheritance, generation
skipping and other taxes.
Other Transactions. Changing the contract owner or the face amount of the base
contract or an additional insurance rider may have tax consequences. Exchanging
this Contract for another involving the same insureds should have no federal
income tax consequences if there is no debt and no cash or other property is
received, according to Section 1035(a)(1) of the Code. In addition, exchanging
this Contract for more than one contract, or exchanging this Contract and one or
more other contracts for a single contract, in certain circumstances, may be
treated as an exchange under Section 1035, as long as all such contracts involve
the same insureds. Any new contract would have to satisfy the 7-pay test from
the date of the exchange to avoid characterization as a modified endowment
contract. An exchange for a new contract may, however, result in a loss of
grandfathering status for statutory changes made after the old contract was
issued. Changing the insureds under this Contract may not be treated as an
exchange under Section 1035, but rather as a taxable exchange. A tax advisor
should be consulted before effecting any exchange, since even if an exchange is
within Section 1035(a), the exchange may have tax consequences other than
immediate recognition of income.
In addition, the Contract may be used in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary depending on the particular
facts and circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a contract in any arrangement the value of which
depends in part on its tax consequences, you should be sure to consult a
qualified tax advisor regarding the tax attributes of the particular
arrangement.
Ownership of This Contract by Non-Natural Persons. The above discussion of the
tax consequences arising from the purchase, ownership and transfer of the
Contract has assumed that the owner of the Contract consists of one or more
individuals. Organizations exempt from taxation under Section 501(a) of the Code
may be subject to additional or different tax consequences with respect to
transactions such as contract loans. Further, organizations purchasing Contracts
covering the life of an individual who is an officer or employee, or is
financially interested in, the taxpayer's trade or business, should consult a
tax advisor regarding possible tax consequences associated with a contract prior
to the acquisition of this Contract and also before entering into any subsequent
changes to or transactions under this Contract.
Merrill Lynch Life does not make any guarantee regarding the tax status of any
Contract or any transaction regarding the Contract.
The above discussion is not intended as tax advice. For tax advice contract
owners should consult a competent tax advisor. Although this tax discussion is
based on Merrill Lynch Life's understanding of federal income tax laws as they
are currently interpreted, it can't guarantee that those laws or interpretations
will remain unchanged.
MERRILL LYNCH LIFE'S INCOME TAXES
Insurance companies are generally required to capitalize and amortize certain
policy acquisition expenses over a ten-year period rather than currently
deducting such expenses. This treatment applies to the deferred acquisition
expenses of a Contract and results in a significantly higher corporate income
tax liability for Merrill Lynch Life in early contract years. Merrill Lynch Life
makes a charge to compensate Merrill Lynch Life for the anticipated higher
corporate income taxes that result from the receipt of payments under a
Contract. (See "Contract Loading" on page 18.)
36
<PAGE> 41
Currently, Merrill Lynch Life makes no charges to the Separate Account for any
federal, state or local taxes that it incurs that may be attributable to the
Separate Account or to the Contracts. Merrill Lynch Life, however, reserves the
right to make a charge for assessments of federal premium taxes or federal,
state or local excise, profits or income taxes measured by or attributable to
the receipt of premiums.
REINSURANCE
Merrill Lynch Life intends to reinsure some of the risks assumed under the
Contracts.
MORE ABOUT THE SEPARATE ACCOUNT AND ITS DIVISIONS
ABOUT THE SEPARATE ACCOUNT
The Separate Account is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940 as a unit investment trust. This
registration does not involve any supervision by the Securities and Exchange
Commission of Merrill Lynch Life's management or the management of the Separate
Account. The Separate Account is also governed by the laws of the State of
Arkansas, Merrill Lynch Life's state of domicile.
Merrill Lynch Life owns all of the assets of the Separate Account. These assets
are held separate and apart from all of Merrill Lynch Life's other assets.
Merrill Lynch Life maintains records of all purchases and redemptions of shares
of the Funds and units of the Zero Trusts by each of the investment divisions.
CHANGES WITHIN THE ACCOUNT
Merrill Lynch Life may from time to time make additional investment divisions
available to contract owners. These divisions will invest in investment
portfolios Merrill Lynch Life finds suitable for the Contracts. Merrill Lynch
Life also has the right to eliminate investment divisions from the Separate
Account, to combine two or more investment divisions, or to substitute a new
portfolio for the portfolio in which an investment division invests. A
substitution may become necessary if, in Merrill Lynch Life's judgment, a
portfolio no longer suits the purposes of the Contracts. This may happen due to
a change in laws or regulations or in a portfolio's investment objectives or
restrictions, or because the portfolio is no longer available for investment, or
for some other reason. Merrill Lynch Life would get any required prior approval
from the Arkansas State Insurance Department and the Securities and Exchange
Commission before making such a substitution. It would also get any other
required approvals before making such a substitution.
Subject to any required regulatory approvals, Merrill Lynch Life reserves the
right to transfer assets of the Separate Account or of any of the investment
divisions to another separate account or investment division.
When permitted by law, Merrill Lynch Life reserves the right to:
- deregister the Separate Account under the Investment Company Act of 1940;
- operate the Separate Account as a management company under the Investment
Company Act of 1940;
- restrict or eliminate any voting rights of contract owners, or other
persons who have voting rights as to the Separate Account; and
- combine the Separate Account with other separate accounts.
NET RATE OF RETURN FOR AN INVESTMENT DIVISION
Each investment division has a distinct unit value (also referred to as "price"
or "separate account index" in reports furnished to the contract owner by
Merrill Lynch Life). When payments or other amounts are allocated to an
investment division, a number of units are purchased based on the value of a
unit of the investment division as of the end of the valuation period during
which the allocation is made. When amounts
37
<PAGE> 42
are transferred out of, or deducted from, an investment division, units are
redeemed in a similar manner. A valuation period is each business day together
with any non-business days before it. A business day for an investment division
is any day the New York Stock Exchange is open or the SEC requires that the net
asset value of an investment division be determined.
For each investment division, the separate account index was initially set at
$10.00. The separate account index for each subsequent valuation period
fluctuates based upon the net rate of return for that period. Merrill Lynch Life
determines the net rate of return of an investment division at the end of each
valuation period. The net rate of return reflects the investment performance of
the division for the valuation period and is net of the charges to the Separate
Account described on page 19.
For divisions investing in the Funds, shares are valued at net asset value and
reflect reinvestment of any dividends or capital gains distributions declared by
the Funds.
For divisions investing in the Zero Trusts, units of each Zero Trust are valued
at the sponsor's repurchase price, as explained in the prospectus for the Zero
Trusts.
THE FUNDS
Buying and Redeeming Shares. The Funds sell and redeem their shares at net
asset value. Any dividend or capital gain distribution will be reinvested at net
asset value in shares of the same portfolio.
Voting Rights. Merrill Lynch Life is the legal owner of all Fund shares held in
the Separate Account. As the owner, Merrill Lynch Life 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 investment divisions for which instructions are
received. Shares not attributable to Contracts will also be voted in the same
proportion as shares in the respective divisions for which instructions are
received. If any federal securities laws or regulations, or their present
interpretation, change to permit Merrill Lynch Life to vote Fund shares in its
own right, it may elect to do so.
Merrill Lynch Life determines the number of shares that contract owners have in
an investment division by dividing their Contract's investment base in that
division by the net asset value of one share of the portfolio. Fractional votes
will be counted. Merrill Lynch Life will determine the number of shares for
which a contract owner may give voting instructions 90 days or less before each
Fund meeting. Merrill Lynch Life will request voting instructions by mail at
least 14 days before the meeting.
Under certain circumstances, Merrill Lynch Life may be required by state
regulatory authorities to disregard voting instructions. This may happen if
following the instructions would mean voting to change the sub-classification or
investment objectives of the portfolios, or to approve or disapprove an
investment advisory contract.
Merrill Lynch Life may also disregard instructions to vote for changes in the
investment policy or the investment adviser if it disapproves of the proposed
changes. Merrill Lynch Life would disapprove a proposed change only if it was:
- contrary to state law;
- prohibited by state regulatory authorities; or
- decided by management that the change would result in overly speculative
or unsound investments.
If Merrill Lynch Life disregards voting instructions, it will include a summary
of its actions in the next semi-annual report.
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<PAGE> 43
Resolving Material Conflicts. Shares of the Series Fund are available for
investment by Merrill Lynch Life, ML Life Insurance Company of New York (an
indirect wholly owned subsidiary of Merrill Lynch & Co., Inc.) and Monarch Life
Insurance Company (an insurance company not affiliated with Merrill Lynch Life
or Merrill Lynch & Co., Inc.). Shares of the Variable Series Funds, the AIM V.I.
Funds, the Alliance Fund, and the MFS Trust are sold to separate accounts of
Merrill Lynch Life, ML Life Insurance Company of New York, and insurance
companies not affiliated with Merrill Lynch Life or Merrill Lynch & Co., Inc. to
fund benefits under variable life insurance and variable annuity contracts, and
may be sold to certain qualified plans.
It is possible that differences might arise between Merrill Lynch Life's
Separate Account and one or more of the other separate accounts which invest in
the Funds. In some cases, it is possible that the differences could be
considered "material conflicts". Such a "material conflict" could also arise due
to changes in the law (such as state insurance law or federal tax law) which
affect these different variable life insurance and variable annuity separate
accounts. It could also arise by reason of difference in voting instructions
from Merrill Lynch Life's contract owners and those of the other insurance
companies, or for other reasons. Merrill Lynch Life will monitor events to
determine how to respond to such conflicts. If a conflict occurs, Merrill Lynch
Life may be required to eliminate one or more investment divisions of the
Separate Account which invest in the Funds or substitute a new portfolio for a
portfolio in which a division invests. In responding to any conflict, Merrill
Lynch Life will take the action which it believes necessary to protect its
contract owners, consistent with applicable legal requirements.
Administration Services Arrangements. MLAM has entered into an agreement with
Merrill Lynch Insurance Group, Inc. ("MLIG"), Merrill Lynch Life's parent, with
respect to administration services for the Series Fund and the Variable Series
Funds in connection with the Contracts and other variable life insurance and
variable annuity contracts issued by Merrill Lynch Life. Under this agreement,
MLAM pays compensation to MLIG in an amount equal to a portion of the annual
gross investment advisory fees paid by the Series Fund and the Variable Series
Funds to MLAM attributable to variable contracts issued by Merrill Lynch Life.
AIM V.I. Funds has entered into an Administrative Services Agreement with AIM,
pursuant to which AIM has agreed to provide certain accounting and other
administrative services to the AIM V.I. Funds, including the services of a
principal financial officer and related staff. As compensation to AIM for its
services under the Administrative Services Agreement, the AIM V.I. Funds
reimburse AIM for expenses incurred by AIM or its affiliates in connection with
such services. AIM has entered into an agreement with Merrill Lynch Life with
respect to administrative services for the AIM V.I. 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 the AIM V.I. Funds
attributable to the Contracts.
Alliance Fund Distributors, Inc. ("AFD"), an affiliate of Alliance, has entered
into an agreement with Merrill Lynch Life with respect to administrative
services for the Alliance Fund 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 the Alliance Fund attributable to the
Contracts.
MFS has entered into an agreement with MLIG with respect to administrative
services for the MFS Trust in connection with the Contracts and certain
contracts issued by ML Life Insurance Company of New York. Under this agreement,
MFS pays compensation to MLIG in an amount equal to a percentage of the average
net assets of the MFS Trust attributable to such contracts.
39
<PAGE> 44
THE ZERO TRUSTS
The 16 Zero Trusts:
<TABLE>
<CAPTION>
TARGETED RATE OF
RETURN
TO MATURITY AS
ZERO TRUST MATURITY DATE OF APRIL 16, 1997
- ----------- ------------------ -----------------
<C> <S> <C>
1998 February 15, 1998 4.35%
1999 February 15, 1999 5.11%
2000 February 15, 2000 5.28%
2001 February 15, 2001 5.33%
2002 February 15, 2002 5.46%
2003 August 15, 2003 5.57%
2004 February 15, 2004 5.64%
2005 February 15, 2005 5.59%
2006 February 15, 2006 5.45%
2007 February 15, 2007 5.56%
2008 February 15. 2008 5.83%
2009 February 15, 2009 5.86%
2010 February 15, 2010 5.94%
2011 February 15, 2011 5.92%
2013 February 15, 2013 6.00%
2014 February 15, 2014 6.09%
</TABLE>
Targeted Rate of Return to Maturity
Because the underlying securities in the Zero Trusts will grow to their face
value on the maturity date, it is possible to estimate a compound rate of growth
to maturity for the Zero Trust units.
But because the units are held in the Separate Account, the asset charge and the
trust charge (described in "Charges to the Separate Account" on page 19) must be
taken into account in estimating a targeted rate of return for the Separate
Account. The targeted rate of return to maturity for the Separate Account
depends on the compound rate of growth adjusted for these charges. It does not,
however, represent the actual return on a payment Merrill Lynch Life might
receive under the Contract on that date, since it does not reflect the charges
for contract loading deducted from payments to a Contract, charges for cost of
insurance and rider costs and any net loan cost deducted from a Contract's
investment base.
Since the value of the Zero Trust units will vary daily to reflect the market
value of the underlying securities, the compound rate of growth to maturity for
the Zero Trust units and the targeted rate of return to maturity for the
Separate Account will vary correspondingly.
40
<PAGE> 45
ILLUSTRATIONS
ILLUSTRATIONS OF DEATH BENEFITS, INVESTMENT BASE, NET CASH SURRENDER VALUES AND
ACCUMULATED PAYMENTS
The tables on pages 43 through 46 demonstrate the way in which the Contract
works. The tables are based on the following ages (to age 99 of the younger
insured), face amounts, payments and guarantee periods and show values based
upon both current and maximum mortality charges.
1. The illustration on page 43 is for a Contract issued to a male age
65 and a female age 60 both in the standard non-smoker underwriting class
with annual payments of $42,132 through contract year 37, an initial face
amount of $1.5 million, an initial guarantee period of 7.50 years and
coverage under death benefit option 1. It assumes current mortality
charges.
2. The illustration on page 44 is for a Contract issued to a male age
65 and a female age 60 both in the standard non-smoker underwriting class
with annual payments of $42,132 through contract year 37, an initial face
amount of $1.5 million, an initial guarantee period of 7.50 years and
coverage under death benefit option 1. It assumes maximum mortality
charges.
3. The illustration on page 45 is for a Contract issued to a male age
65 and a female age 60 both in the standard non-smoker underwriting class
with annual payments of $155,169 through contract year 32, an initial face
amount of $1.5 million, an initial guarantee period of 14.50 years and
coverage under death benefit option 2. It assumes current mortality
charges.
4. The illustration on page 46 is for a Contract issued to a male age
65 and a female age 60 both in the standard non-smoker underwriting class
with annual payments of $155,169 through contract year 32, an initial face
amount of $1.5 million, an initial guarantee period of 14.50 years and
coverage under death benefit option 2. It assumes maximum mortality
charges.
The tables show how the death benefit, investment base and net cash surrender
value may vary over an extended period of time assuming hypothetical rates of
return (i.e., investment income and capital gains and losses, realized or
unrealized) equivalent to constant gross annual rates of 0%, 6% and 12%.
The death benefit, investment base and net cash surrender value for a Contract
would be different from those shown if the actual rates of return averaged 0%,
6% and 12% over a period of years, but also fluctuated above or below those
averages for individual contract years.
The amounts shown for the death benefit, investment base and net cash surrender
value as of the end of each contract year take into account the daily asset
charge in the Separate Account equivalent to .90% (annually at the beginning of
the year) of assets attributable to the Contracts at the beginning of the year.
The amounts shown in the tables also assume an additional charge of .52%. This
charge assumes that investment base is allocated equally among all investment
divisions and is based on the 1996 expenses (including monthly advisory fees)
for the Funds and the current trust charge. This charge also reflects expense
reimbursements made in 1996 to certain portfolios by the investment adviser to
the respective portfolio. These reimbursements amounted to .06%, .07%, .16%,
.48%, and .28% of the average daily net assets of the Developing Capital Markets
Focus Fund, the Natural Resources Portfolio, the MFS Emerging Growth Series, the
MFS Research Series, and the Premier Growth Portfolio, respectively. (See
"Charges to Fund Assets" on page 19.) The actual charge under a Contract for
Fund expenses and the trust charge will depend on the actual allocation of the
investment base and may be higher or lower depending on how the investment base
is allocated.
Taking into account the .90% asset charge in the Separate Account and the .52%
charge described above, the gross annual rates of investment return of 0%, 6%
and 12% correspond to net annual rates of -1.42%, 4.53%, and 10.48%,
respectively. The gross returns are before any deductions and should not be
compared to rates which are after deduction of charges.
41
<PAGE> 46
The hypothetical returns shown on the tables are without any income tax charges
that may be attributable to the Separate Account in the future, although they do
reflect the charge for federal taxes included in the contract loading. (See
"Contract Loading" on page 18.) In order to produce after tax returns of 0%, 6%
and 12%, the Funds would have to earn a sufficient amount in excess of 0% or 6%
or 12% to cover any tax charges attributable to the Separate Account.
The second column of the tables shows the amount which would accumulate if an
amount equal to the payments were invested to earn interest (after taxes) at 5%
compounded annually.
Merrill Lynch Life will furnish upon request a personalized illustration
reflecting the proposed insureds' ages, face amount and the payment amounts
requested. The illustration will show both current and guaranteed cost of
insurance rates and will assume that the proposed insureds are in a standard
non-smoker underwriting class.
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<PAGE> 47
JOINT INSUREDS: FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
STANDARD NON-SMOKER UNDERWRITING CLASS
ANNUAL PAYMENTS OF $42,132 FOR 37 YEARS
FACE AMOUNT(1): $1.5 MILLION INITIAL GUARANTEE PERIOD: 7.50 YEARS
DEATH BENEFIT OPTION 1
BASED ON CURRENT MORTALITY CHARGES
<TABLE>
<CAPTION>
TOTAL
PAYMENTS END OF YEAR
MADE PLUS DEATH BENEFIT(3)
INTEREST ASSUMING HYPOTHETICAL GROSS
AT 5% AS ANNUAL RATE OF RETURN OF
OF END OF ---------------------------------
CONTRACT YEAR PAYMENTS(2)(6) YEAR 0% 6% 12%
- ------------------------------------- ------ --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1................................... 42,132 44,239 1,500,000 1,500,000 1,500,000
2................................... 42,132 90,689 1,500,000 1,500,000 1,500,000
3................................... 42,132 139,462 1,500,000 1,500,000 1,500,000
4................................... 42,132 190,674 1,500,000 1,500,000 1,500,000
5................................... 42,132 244,446 1,500,000 1,500,000 1,500,000
6................................... 42,132 300,907 1,500,000 1,500,000 1,500,000
7................................... 42,132 360,191 1,500,000 1,500,000 1,500,000
8................................... 42,132 422,439 1,500,000 1,500,000 1,500,000
9................................... 42,132 487,800 1,500,000 1,500,000 1,500,000
10................................... 42,132 556,429 1,500,000 1,500,000 1,500,000
15................................... 42,132 954,606 1,500,000 1,500,000 1,500,000
20................................... 42,132 1,462,793 1,500,000 1,500,000 2,103,165
30................................... 42,132 2,939,164 1,500,000 1,779,257 5,552,647
40................................... 0 5,204,556 1,500,000 2,598,436 14,105,889
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR
INVESTMENT BASE AND END OF YEAR
NET CASH SURRENDER VALUE(3)(4) CASH VALUE(3)(5)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
-------------------------------- --------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
- ------------------------------------- ------- -------- --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1................................... 20,504 21,748 22,992 20,504 21,748 22,992
2................................... 42,098 45,956 49,962 42,098 45,956 49,962
3................................... 80,236 89,131 98,650 80,236 89,131 98,650
4................................... 117,765 134,196 152,376 117,765 134,196 152,376
5................................... 154,654 181,199 211,634 154,654 181,199 211,634
6................................... 190,896 230,213 276,995 190,896 230,213 276,995
7................................... 226,447 281,286 349,062 226,447 281,286 349,062
8................................... 261,282 334,480 428,523 261,282 334,480 428,523
9................................... 295,347 389,845 516,129 295,347 389,845 516,129
10................................... 328,634 447,476 612,762 328,634 447,476 612,762
15................................... 475,896 767,680 1,222,764 475,896 767,680 1,222,764
20................................... 568,190 1,146,269 2,003,014 568,190 1,146,269 2,003,014
30................................... 327,821 1,694,531 5,288,235 327,821 1,694,531 5,288,235
40................................... 0 2,598,436 14,106,889 0 2,598,436 14,105,889
</TABLE>
(1) Assumes no additional insurance rider face amount.
(2) All payments are illustrated as if made at the beginning of the contract
year.
(3) Assumes annual payments are made and no loans or withdrawals have been
taken.
(4) Investment base will equal net cash surrender value on each contract
anniversary. If the Contract is surrendered or lapses within 24 months after
issue, the contract owner will also receive any excess sales load previously
deducted, except to the extent it is applied to keep the Contract in force.
(5) Cash value will equal investment base and net cash surrender value on each
contract anniversary if no loans have been taken.
(6) The payments shown may extend beyond the year in which the automatic
adjustment is made. At annual rates of return of 6% and 12% and current
mortality charges, the guarantee period extends until the younger insured's
attained age 100 in contract years 20 and 14, respectively. Once the
guarantee period extends until the younger insured's attained age 100, no
more payments would be accepted. Values shown at annual rates of return of
0%, 6% and 12% do not reflect any payments shown after the guarantee period
extends until the younger insured's attained age 100.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST
RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND CASH VALUE
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF RETURN AVERAGED
0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY
MERRILL LYNCH LIFE OR THE FUNDS OR THE ZERO TRUSTS THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
43
<PAGE> 48
JOINT INSUREDS: FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
STANDARD NON-SMOKER UNDERWRITING CLASS
ANNUAL PAYMENTS OF $42,132 FOR 37 YEARS
FACE AMOUNT(1): $1.5 MILLION INITIAL GUARANTEE PERIOD: 7.50 YEARS
DEATH BENEFIT OPTION 1
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
TOTAL
PAYMENTS END OF YEAR
MADE PLUS DEATH BENEFIT(3)
INTEREST ASSUMING HYPOTHETICAL GROSS
AT 5% AS ANNUAL RATE OF RETURN OF
OF END OF ----------------------------------
CONTRACT YEAR PAYMENTS(2)(6) YEAR 0% 6% 12%
- ---------------------------------------- ------ --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
1...................................... 42,132 44,239 1,500,000 1,500,000 1,500,000
2...................................... 42,132 90,689 1,500,000 1,500,000 1,500,000
3...................................... 42,132 139,462 1,500,000 1,500,000 1,500,000
4...................................... 42,132 190,674 1,500,000 1,500,000 1,500,000
5...................................... 42,132 244,446 1,500,000 1,500,000 1,500,000
6...................................... 42,132 300,907 1,500,000 1,500,000 1,500,000
7...................................... 42,132 360,191 1,500,000 1,500,000 1,500,000
8...................................... 42,132 422,439 1,500,000 1,500,000 1,500,000
9...................................... 42,132 487,800 1,500,000 1,500,000 1,500,000
10...................................... 42,132 556,429 1,500,000 1,500,000 1,500,000
15...................................... 42,132 954,606 1,500,000 1,500,000 1,500,000
20...................................... 42,132 1,462,793 1,500,000 1,500,000 1,918,314
30...................................... 42,132 2,939,164 1,500,000 1,500,000 4,907,568
40...................................... 0 5,204,556 1,500,000 1,676,016 12,257,076
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR
INVESTMENT BASE AND END OF YEAR
NET CASH SURRENDER VALUE(3)(4) CASH VALUE(3)(5)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
------------------------------------ ----------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
- ----------------------------------- ------- --------- ---------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1................................. 20,504 21,748 22,992 20,504 21,748 22,992
2................................. 41,928 45,780 49,780 41,928 45,780 49,780
3................................. 79,237 88,088 97,563 79,237 88,088 97,563
4................................. 115,182 131,461 149,488 115,182 131,461 149,488
5................................. 149,620 175,798 205,855 149,620 175,798 205,855
6................................. 182,392 220,981 267,000 182,392 220,981 267,000
7................................. 213,270 266,832 333,260 213,270 266,832 333,260
8................................. 242,156 313,313 405,188 242,156 313,313 405,188
9................................. 268,806 360,255 483,314 268,806 360,255 483,314
10................................. 292,985 407,525 568,323 292,985 407,525 568,323
15................................. 364,233 642,642 1,134,531 364,233 642,642 1,134,531
20................................. 290,186 856,952 1,827,042 290,186 856,952 1,827,042
30................................. 0 1,197,603 4,673,874 0 1,197,603 4,673,874
40................................. 0 1,676,016 12,257,076 0 1,676,016 12,257,076
</TABLE>
(1) Assumes no additional insurance rider face amount.
(2) All payments are illustrated as if made at the beginning of the contract
year.
(3) Assumes annual payments are made and no loans or withdrawals have been
taken.
(4) Investment base will equal net cash surrender value on each contract
anniversary. If the Contract is surrendered or lapses within 24 months after
issue, the contract owner will also receive any excess sales load previously
deducted, except to the extent it is applied to keep the Contract in force.
(5) Cash value will equal investment base and net cash surrender value on each
contract anniversary if no loans have been taken.
(6) The payments shown may extend beyond the year in which the automatic
adjustment is made. At annual rates of return of 6% and 12% and maximum
mortality charges, the guarantee period extends until the younger insured's
attained age 100 in contract years 34 and 15, respectively. Once the
guarantee period extends until the younger insured's attained age 100, no
more payments would be accepted. Values shown at annual rates of return of
0%, 6% and 12% do not reflect any payments shown after the guarantee period
extends until the younger insured's attained age 100.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST
RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND CASH VALUE
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF RETURN AVERAGED
0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY
MERRILL LYNCH LIFE OR THE FUNDS OR THE ZERO TRUSTS THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
44
<PAGE> 49
JOINT INSUREDS: FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
STANDARD NON-SMOKER UNDERWRITING CLASS
ANNUAL PAYMENTS OF $155,169 FOR 32 YEARS
FACE AMOUNT(1): $1.5 MILLION INITIAL GUARANTEE PERIOD: 14.50 YEARS
DEATH BENEFIT OPTION 2
BASED ON CURRENT MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
DEATH BENEFIT(3)
TOTAL PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL RATE OF RETURN OF
INTEREST AT 5% AS -----------------------------------------------------------
CONTRACT YEAR PAYMENTS(2)(6) OF END OF YEAR 0% 6% 12%
- ----------------------- -------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
1..................... 155,169 162,927 1,609,474 1,616,087 1,622,701
2..................... 155,169 334,001 1,752,532 1,774,703 1,797,662
3..................... 155,169 513,629 1,893,501 1,940,445 1,990,898
4..................... 155,169 702,238 2,032,376 2,113,599 2,204,285
5..................... 155,169 900,277 2,169,135 2,294,448 2,439,882
6..................... 155,169 1,108,218 2,303,783 2,483,314 2,699,988
7..................... 155,169 1,326,556 2,436,280 2,680,488 2,987,098
8..................... 155,169 1,555,811 2,566,599 2,886,287 3,303,979
9..................... 155,169 1,796,529 2,694,677 3,101,005 3,653,653
10..................... 155,169 2,049,283 2,820,498 3,324,998 4,039,506
15..................... 155,169 3,515,739 3,404,739 4,586,246 6,644,656
20..................... 155,169 5,387,349 3,873,924 6,075,311 9,832,831
30..................... 155,169 10,824,707 4,106,699 8,658,212 22,804,981
40..................... 0 18,125,780 1,504,717 9,457,114 55,446,105
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR
INVESTMENT BASE AND END OF YEAR
NET CASH SURRENDER VALUE(3)(4) CASH VALUE(3)(5)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
------------------------------------ ------------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
- ---------------------------------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1................................ 109,474 116,087 122,701 109,474 116,087 122,701
2................................ 252,532 274,703 297,662 252,532 274,703 297,662
3................................ 393,501 440,445 490,898 393,501 440,445 490,898
4................................ 532,376 613,599 704,285 532,376 613,599 704,285
5................................ 669,135 794,448 939,882 669,135 794,448 939,882
6................................ 803,783 983,314 1,199,988 803,783 983,314 1,199,988
7................................ 936,280 1,180,488 1,487,098 936,280 1,180,488 1,487,098
8................................ 1,066,599 1,386,287 1,803,979 1,066,599 1,386,287 1,803,979
9................................ 1,194,677 1,601,005 2,153,653 1,194,677 1,601,005 2,153,653
10................................ 1,320,498 1,824,998 2,539,506 1,320,498 1,824,998 2,539,506
15................................ 1,904,739 3,086,246 5,144,656 1,904,739 3,086,246 5,144,656
20................................ 2,373,924 4,575,311 8,332,831 2,373,924 4,575,311 8,332,831
30................................ 2,606,699 7,158,212 21,304,981 2,606,699 7,158,212 21,304,981
40................................ 4,717 7,957,114 53,946,105 4,717 7,957,114 53,946,105
</TABLE>
(1) Assumes no additional insurance rider face amount.
(2) All payments are illustrated as if made at the beginning of the contract
year.
(3) Assumes annual payments are made and no loans or withdrawals have been
taken.
(4) Investment base will equal net cash surrender value on each contract
anniversary. If the Contract is surrendered or lapses within 24 months after
issue, the contract owner will also receive any excess sales load previously
deducted, except to the extent it is applied to keep the Contract in force.
(5) Cash value will equal investment base and net cash surrender value on each
contract anniversary if no loans have been taken.
(6) The payments shown may extend beyond the year in which the automatic
adjustment is made. At annual rates of return of 6% and 12% and current
mortality charges, the guarantee period extends until the younger insured's
attained age 100 in contract years 25 and 15, respectively. Once the
guarantee period extends until the younger insured's attained age 100, no
more payments would be accepted. Values shown at annual rates of return of
0%, 6% and 12% do not reflect any payments shown after the guarantee period
extends until the younger insured's attained age 100.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST
RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND CASH VALUE
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF RETURN AVERAGED
0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY
MERRILL LYNCH LIFE OR THE FUNDS OR THE ZERO TRUSTS THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
45
<PAGE> 50
JOINT INSUREDS: FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
STANDARD NON-SMOKER UNDERWRITING CLASS
ANNUAL PAYMENTS OF $155,169 FOR 32 YEARS
FACE AMOUNT(1): $1.5 MILLION INITIAL GUARANTEE PERIOD: 14.50 YEARS
DEATH BENEFIT OPTION 2
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
DEATH BENEFIT(3)
TOTAL PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL RATE OF RETURN OF
INTEREST AT 5% AS -----------------------------------------------------------
CONTRACT YEAR PAYMENTS(2)(6) OF END OF YEAR 0% 6% 12%
- ---------------------------- -------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
1.......................... 155,169 162,927 1,609,474 1,616,087 1,622,701
2.......................... 155,169 334,001 1,752,357 1,774,522 1,797,475
3.......................... 155,169 513,629 1,892,451 1,939,346 1,989,748
4.......................... 155,169 702,238 2,029,609 2,110,654 2,201,156
5.......................... 155,169 900,277 2,163,645 2,288,504 2,433,459
6.......................... 155,169 1,108,218 2,294,341 2,472,923 2,688,568
7.......................... 155,169 1,326,556 2,421,383 2,663,833 2,968,486
8.......................... 155,169 1,555,811 2,544,598 2,861,295 3,275,576
9.......................... 155,169 1,796,529 2,663,625 3,065,181 3,612,246
10.......................... 155,169 2,049,283 2,778,107 3,275,349 3,981,153
15.......................... 155,169 3,515,739 3,264,114 4,408,631 6,416,759
20.......................... 155,169 5,387,349 3,532,080 5,612,492 9,426,261
30.......................... 155,169 10,824,707 2,814,969 7,507,527 20,077,133
40.......................... 0 18,125,780 1,500,000 1,610,242 40,911,722
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR
INVESTMENT BASE AND END OF YEAR
NET CASH SURRENDER VALUE(3)(4) CASH VALUE(3)(5)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
------------------------------------ ------------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
- ---------------------------------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1................................ 109,474 116,087 122,701 109,474 116,087 122,701
2................................ 252,357 274,522 297,475 252,357 274,522 297,475
3................................ 392,451 439,346 489,748 392,451 439,346 489,748
4................................ 529,609 610,654 701,156 529,609 610,654 701,156
5................................ 663,645 788,504 933,459 663,645 788,504 933,459
6................................ 794,341 972,923 1,188,568 794,341 972,923 1,188,568
7................................ 921,383 1,163,833 1,468,486 921,383 1,163,833 1,468,486
8................................ 1,044,598 1,361,295 1,775,576 1,044,598 1,361,295 1,775,576
9................................ 1,163,625 1,565,181 2,112,246 1,163,625 1,565,181 2,112,246
10................................ 1,278,107 1,775,349 2,481,153 1,278,107 1,775,349 2,481,153
15................................ 1,764,114 2,908,631 4,916,759 1,764,114 2,908,631 4,916,759
20................................ 2,032,080 4,112,492 7,926,261 2,032,080 4,112,492 7,926,261
30................................ 1,314,969 6,007,527 18,577,133 1,314,969 6,007,527 18,577,133
40................................ 0 110,242 39,411,722 0 110,242 39,411,722
</TABLE>
(1) Assumes no additional insurance rider face amount.
(2) All payments are illustrated as if made at the beginning of the contract
year.
(3) Assumes annual payments are made and no loans or withdrawals have been
taken.
(4) Investment base will equal net cash surrender value on each contract
anniversary. If the Contract is surrendered or lapses within 24 months after
issue, the contract owner will also receive any excess sales load previously
deducted, except to the extent it is applied to keep the Contract in force.
(5) Cash value will equal investment base and net cash surrender value on each
contract anniversary if no loans have been taken.
(6) The payments shown may extend beyond the year in which the automatic
adjustment is made. At annual rates of return of 6% and 12% and maximum
mortality charges, the guarantee period extends until the younger insured's
attained age 100 in contract years 32 and 16. Once the guarantee period
extends until the younger insured's attained age 100, no more payments would
be accepted. Values shown at annual rates of return of 0%, 6% and 12% do not
reflect any payments shown after the guarantee period extends until the
younger insured's attained age 100.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST
RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND CASH VALUE
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF RETURN AVERAGED
0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY
MERRILL LYNCH LIFE OR THE FUNDS OR THE ZERO TRUSTS THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
46
<PAGE> 51
EXAMPLES
ADDITIONAL PAYMENTS
As of the processing date on or next following receipt and acceptance of an
additional payment, Merrill Lynch Life will increase the guarantee period if the
guarantee period prior to receipt and acceptance of an additional payment does
not extend to the younger insured's attained age 100.
Merrill Lynch Life will determine the increase in the guarantee period by taking
the immediate increase in the cash value resulting from the additional payment
and adding to that interest at the annual rate of 4.5% for the period from the
date Merrill Lynch Life receives and accepts the payment to the contract
processing date on or next following such date. This is the guarantee adjustment
amount. The guarantee adjustment amount is added to the fixed base and the
resulting new fixed base is used to calculate a new guarantee period.
The amount of the increase in the guarantee period will depend on the amount of
the additional payment and the contract year in which it is received and
accepted. If additional payments of different amounts were made at the same time
to equivalent Contracts, the Contract to which the larger payment is applied
would have a larger increase in the guarantee period.
Example 1 shows the effect on the guarantee period of a $42,132 additional
payment received and accepted at the beginning of contract year ten. Example 2
shows the effect of a $84,264 additional payment received and accepted at the
beginning of contract year ten. Example 3 shows the effect of a $42,132
additional payment received and accepted at the beginning of contract year 15.
All three examples assume that death benefit option 1 has been elected, that
annual payments of $42,132 have been made up to the contract year reflected in
the example and that no other contract transactions have been made.
FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
INITIAL PAYMENT PLUS ANNUAL PAYMENTS OF $42,132
FACE AMOUNT: $1.5 MILLION
INITIAL GUARANTEE PERIOD: 7.50 YEARS
DEATH BENEFIT OPTION: 1
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
EXAMPLE 1
- -------------------------------------------
<S> <C> <C>
CONTRACT ADDITIONAL INCREASE IN
YEAR PAYMENT GUARANTEE PERIOD
- --------- ----------- -----------------
<CAPTION>
<S> <C> <C>
10 $42,132 1 year
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 2
- -------------------------------------------
CONTRACT ADDITIONAL INCREASE IN
YEAR PAYMENT GUARANTEE PERIOD
- --------- ----------- -----------------
<S> <C> <C>
10 $84,264 2 years
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 3
- -------------------------------------------
CONTRACT ADDITIONAL INCREASE IN
YEAR PAYMENT GUARANTEE PERIOD
- --------- ----------- -----------------
<S> <C> <C>
15 $42,132 .75 years
</TABLE>
47
<PAGE> 52
PARTIAL WITHDRAWALS
As of the processing date on or next following the effective date of a partial
withdrawal, Merrill Lynch Life calculates a new guarantee period. This is done
by taking the immediate decrease in cash value resulting from the partial
withdrawal and adding to that amount interest at an annual rate of 4.5% for the
period from the date of the withdrawal to the contract processing date on or
next following such date. This is the guarantee adjustment amount. The guarantee
adjustment amount is subtracted from the fixed base and the resulting new fixed
base is used to calculate a new guarantee period.
The amount of the reduction in the guarantee period will depend on the amount of
the withdrawal, the face amount at the time of the withdrawal and the contract
year in which the withdrawal is made. If made at the same time to equivalent
Contracts, a larger withdrawal would result in a greater reduction in the
guarantee period than a smaller withdrawal. The same partial withdrawal made at
the same time from Contracts with the same guarantee periods but with different
face amounts would result in a greater reduction in the guarantee period for the
Contract with the smaller face amount.
Examples 1 and 2 show the effect on the guarantee period of partial withdrawals
for $30,000 and $60,000 taken at the beginning of contract year five. Example 3
shows the effect on the guarantee period of a $60,000 partial withdrawal taken
at the beginning of contract year ten. All three examples assume that death
benefit option 1 has been elected, that annual payments of $42,132 have been
made up to the contract year reflected in the example and that no other contract
transactions have been made.
FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
INITIAL PAYMENT PLUS ANNUAL PAYMENTS OF $42,132
FACE AMOUNT: $1.5 MILLION
GUARANTEE PERIOD: 7.50 YEARS
DEATH BENEFIT OPTION: 1
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
EXAMPLE 1
- -------------------------------------------
CONTRACT PARTIAL DECREASE IN
YEAR WITHDRAWAL GUARANTEE PERIOD
- --------- ----------- -----------------
<S> <C> <C>
5 $30,000 1.25 years
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 2
- -------------------------------------------
CONTRACT PARTIAL DECREASE IN
YEAR WITHDRAWAL GUARANTEE PERIOD
- --------- ----------- -----------------
<S> <C> <C>
5 $60,000 3 years
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 3
- -------------------------------------------
CONTRACT PARTIAL DECREASE IN
YEAR WITHDRAWAL GUARANTEE PERIOD
- --------- ----------- -----------------
<S> <C> <C>
10 $60,000 1 year
</TABLE>
48
<PAGE> 53
CHANGING THE DEATH BENEFIT OPTION
On each contract anniversary beginning with the first, the contract owner may
change the death benefit option by switching from option 1 to option 2 or from
option 2 to option 1. Merrill Lynch Life will change the face amount of the
Contract in order to keep the death benefit constant on the effective date of
the change. Therefore, if the change is from option 1 to option 2, the face
amount of the Contract will be decreased by the cash value on the date of the
change. If the change is from option 2 to option 1, the face amount of the
Contract will be increased by the cash value on the date of the change.
Example 1 shows the effect on the face amount of a change from option 1 to
option 2 and Example 2 shows the effect on the face amount of a change from
option 2 to option 1. The face amount before each change is $500,000.
EXAMPLE 1
------------------------------------------------------------
Before Option Change
Death Benefit under Option 1: $500,000
Face Amount: $500,000
Cash Value: $40,000
After Option Change
Death Benefit under Option 2: $500,000
Face Amount: $460,000
Cash Value: $40,000
EXAMPLE 2
------------------------------------------------------------
Before Option Change
Death Benefit under Option 2: $540,000
Face Amount: $500,000
Cash Value: $40,000
After Option Change
Death Benefit under Option 1: $540,000
Face Amount: $540,000
Cash Value: $40,000
49
<PAGE> 54
REDUCTION IN FACE AMOUNT
As of the contract anniversary next following approval of a reduction in face
amount, Merrill Lynch Life calculates a new guarantee period using the new lower
face amount (plus any additional insurance rider face amount) and the fixed base
on that date.
The amount of the increase in the guarantee period will depend on the amount of
the reduction in face amount, the face amount at the time of the reduction and
the contract year in which it is effective. If face amount reductions of
different amounts were made at the same time to equivalent contracts, the
contract to which the larger face amount reduction is applied would have a
larger increase in the guarantee period.
Example 1 shows the effect on the guarantee period of a $100,000 reduction in
face amount effective at the beginning of contract year ten. Example 2 shows the
effect on the guarantee period of a $200,000 reduction in face amount effective
at the beginning of contract year ten. Example 3 shows the effect on the
guarantee period of a $200,000 reduction in face amount effective at the
beginning of contract year fifteen. All three examples assume that death benefit
option 1 has been elected, that annual payments have been made up to the
contract year reflected in the example and that no other contract transactions
have been made.
FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
INITIAL PAYMENT PLUS ANNUAL PAYMENTS OF $42,132
FACE AMOUNT: $1.5 MILLION
INITIAL GUARANTEE PERIOD: 7.5 YEARS
DEATH BENEFIT OPTION: 1
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
EXAMPLE 1
- ----------------------------------------------------------
CONTRACT FACE AMOUNT INCREASE IN
YEAR REDUCTION GUARANTEE PERIOD
- --------- ------------ -----------------
<S> <C> <C>
10 $100,000 .75 yrs
<CAPTION>
EXAMPLE 2
- ----------------------------------------------------------
CONTRACT FACE AMOUNT INCREASE IN
YEAR REDUCTION GUARANTEE PERIOD
- --------- ------------ -----------------
<S> <C> <C>
10 $200,000 1.5 yrs
<CAPTION>
EXAMPLE 3
- ----------------------------------------------------------
CONTRACT FACE AMOUNT INCREASE IN
YEAR REDUCTION GUARANTEE PERIOD
- --------- ------------ -----------------
<S> <C> <C>
15 $200,000 1.75 yrs
</TABLE>
The reduction will not be permitted if the face amount would be less than
$250,000 or if the resulting guarantee period would extend beyond the younger
insured's attained age 100.
50
<PAGE> 55
MORE ABOUT MERRLLL LYNCH LIFE INSURANCE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
Merrill Lynch Life's directors and executive officers and their positions with
Merrill Lynch Life are as follows:
<TABLE>
<CAPTION>
NAME POSITION(S) WITH THE COMPANY
- ------------------------------ ------------------------------------
<S> <C>
Anthony J. Vespa Chairman of the Board, President,
and Chief Executive Officer
Joseph E. Crowne, Jr. Director, Senior Vice President,
Chief Financial Officer, Chief
Actuary, and Treasurer
Barry G. Skolnick Director, Senior Vice President,
General Counsel, and Secretary
David M. Dunford Director, Senior Vice President, and
Chief Investment Officer
Gail R. Farkas Director and Senior Vice President
Robert J. Boucher Senior Vice President, Variable Life
Administration
</TABLE>
Each director is elected to serve until the next annual meeting of shareholders
or until his or her successor is elected and shall have qualified. Each has held
various executive positions with insurance company subsidiaries of Merrill Lynch
Life's indirect parent, Merrill Lynch & Co., Inc. The principal positions of
Merrill Lynch Life's directors and executive officers for the past five years
are listed below:
Mr. Vespa joined Merrill Lynch Life in January 1994. Since February 1994, he has
held the position of Senior Vice President of MLPF&S. From February 1991 to
February 1994, he held the position of District Director and First Vice
President of MLPF&S.
Mr. Crowne joined Merrill Lynch Life in June 1991.
Mr. Skolnick joined Merrill Lynch Life in November 1990. Since May 1992, he has
held the position of Assistant General Counsel of Merrill Lynch & Co., Inc. and
First Vice President of MLPF&S.
Mr. Dunford joined Merrill Lynch Life in July 1990.
Ms. Farkas joined Merrill Lynch Life in August 1995. Prior to August 1995 she
held the position of Director of Market Planning of MLPF&S.
Mr. Boucher joined Merrill Lynch Life in May 1992.
No shares of Merrill Lynch Life are owned by any of its officers or directors,
as it is a wholly owned subsidiary of MLIG. The officers and directors of
Merrill Lynch Life, both individually and as a group, own less than one percent
of the outstanding shares of common stock of Merrill Lynch & Co., Inc.
SERVICES ARRANGEMENT
Merrill Lynch Life and MLIG are parties to a service agreement pursuant to which
MLIG has agreed to provide certain data processing, legal, actuarial,
management, advertising and other services to Merrill Lynch Life, including
services related to the Separate Account and the Contracts. Expenses incurred by
MLIG in relation to this service agreement are reimbursed by Merrill Lynch Life
on an allocated cost basis. Charges billed to Merrill Lynch Life by MLIG
pursuant to the agreement were $44.5 million for the year ended December 31,
1996.
STATE REGULATION
Merrill Lynch Life is subject to the laws of the State of Arkansas and to the
regulations of the Arkansas Insurance Department (the "Insurance Department"). A
detailed financial statement in the prescribed form
51
<PAGE> 56
(the "Annual Statement") is filed with the Insurance Department each year
covering Merrill Lynch Life's operations for the preceding year and its
financial condition as of the end of that year. Regulation by the Insurance
Department includes periodic examination to determine contract liabilities and
reserves so that the Insurance Department may certify that these items are
correct. Merrill Lynch Life's books and accounts are subject to review by the
Insurance Department at all times. A full examination of Merrill Lynch Life's
operations is conducted periodically by the Insurance Department and under the
auspices of the National Association of Insurance Commissioners. Merrill Lynch
Life is also subject to the insurance laws and regulations of all jurisdictions
in which it is licensed to do business.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. Merrill Lynch Life and
MLPF&S are engaged in various kinds of routine litigation that, in the Company's
judgment, is not material to Merrill Lynch Life's total assets or to MLPF&S.
EXPERTS
The financial statements of Merrill Lynch Life as of December 31, 1996 and 1995
and for each of the three years in the period ended December 31, 1996 and of the
Separate Account as of December 31, 1996 and for the periods presented, included
in this Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports appearing herein, and have been so included
in reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing. Deloitte & Touche LLP's principal business address
is Two World Financial Center, New York, New York 10281-1433.
Actuarial matters included in this Prospectus have been examined by Joseph E.
Crowne, Jr., F.S.A., Chief Actuary and Chief Financial Officer of Merrill Lynch
Life, as stated in his opinion filed as an exhibit to the registration
statement.
LEGAL MATTERS
The organization of the Company, its authority to issue the Contract, and the
validity of the form of the Contract have been passed upon by Barry G. Skolnick,
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 and tax laws.
REGISTRATION STATEMENTS
Registration statements have been filed with the Securities and Exchange
Commission under the Securities Act of 1933 and the Investment Company Act of
1940 that relate to the Contract and its investment options. This Prospectus
does not contain all of the information in the registration statements as
permitted by Securities and Exchange Commission regulations. The omitted
information can be obtained from the Securities and Exchange Commission's
principal office in Washington, D.C., upon payment of a prescribed fee.
FINANCIAL STATEMENTS
The financial statements of Merrill Lynch Life, included herein, should be
distinguished from the financial statements of the Separate Account and should
be considered only as bearing upon the ability of Merrill Lynch Life to meet its
obligations under the Contracts.
52
<PAGE> 57
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Merrill Lynch Life Insurance Company:
We have audited the accompanying statement of net assets of
Merrill Lynch Variable Life Separate Account (the "Account")
as of December 31, 1996 and the related statements of
operations and changes in net assets for each of the three
years in the period then ended. These financial statements
are the responsibility of the management of Merrill Lynch
Life Insurance Company. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation
of mutual fund and unit investment trust securities owned at
December 31, 1996. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial position of the Account
at December 31, 1996 and the results of its operations and
the changes in its net assets for the above periods in
conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an
opinion on the basic financial statements taken as a whole.
The supplemental schedules included herein are presented for
the purpose of additional analysis and are not a required
part of the basic financial statements. These schedules are
the responsibility of the Company's management. Such
schedules have been subjected to the auditing procedures
applied in our audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects
when considered in relation to the basic financial
statements taken as a whole.
January 31, 1997
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS: Cost Shares Market Value
------------------- ------------------- -------------------
<S> <C> <C> <C>
Investments in Merrill Lynch Series Fund, Inc. (Note 1):
Money Reserve Portfolio $ 55,275,547 55,275,547 $ 55,275,547
Intermediate Government Bond Portfolio 14,725,548 1,358,772 14,851,382
Long-Term Corporate Bond Portfolio 10,775,240 934,026 10,769,315
Capital Stock Portfolio 23,875,222 1,112,039 25,854,917
Growth Stock Portfolio 20,280,019 899,170 24,987,943
Multiple Strategy Portfolio 19,300,694 1,190,211 20,388,320
High Yield Portfolio 12,864,182 1,439,553 13,171,913
Natural Resources Portfolio 2,056,235 243,754 2,240,103
Global Strategy Portfolio 25,105,553 1,669,949 28,055,140
Balanced Portfolio 7,823,111 558,316 8,575,730
------------------- -------------------
192,081,351 204,170,310
------------------- -------------------
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Global Utility Focus Fund 1,037,080 93,911 1,144,773
International Equity Focus Fund 7,393,980 669,887 7,790,785
Global Bond Focus Fund 928,585 96,555 942,375
Basic Value Focus Fund 16,712,803 1,312,709 19,349,327
Developing Capital Markets Focus Fund 4,780,650 491,493 4,939,502
Equity Growth Fund 1,629,219 63,605 1,667,726
------------------- -------------------
32,482,317 35,834,488
------------------- -------------------
Units
-----------------
Investments in the Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A through K (Note 1):
1997 Trust 322,907 354,958 353,858
1998 Trust 856,433 1,037,641 976,576
1999 Trust 1,010,910 1,311,236 1,161,112
2000 Trust 686,891 955,851 796,577
2001 Trust 155,752 209,705 164,464
2002 Trust 580,631 845,174 620,273
2003 Trust 188,863 318,255 211,283
2004 Trust 810,403 1,492,370 955,117
2005 Trust 660,931 1,175,751 709,542
2006 Trust 212,687 408,939 234,559
2007 Trust 26,423 61,585 32,890
2008 Trust 230,749 499,364 243,865
2009 Trust 68,393 197,438 90,051
2010 Trust 544,670 1,325,121 558,817
2011 Trust 216,344 812,409 322,859
2013 Trust 107,368 343,708 117,888
2014 Trust 2,367,598 8,012,514 2,532,996
------------------- -------------------
9,047,953 10,082,727
------------------- -------------------
TOTAL ASSETS $ 233,611,621 250,087,525
=================== -------------------
LIABILITIES:
Payable to Merrill Lynch Life Insurance Company 11,163,203
-------------------
TOTAL LIABILITIES 11,163,203
-------------------
NET ASSETS $ 238,924,322
===================
</TABLE>
See Notes to Financial Statements
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------------ ------------------ ------------------
<S> <C> <C> <C>
Investment Income:
Reinvested Dividends $ 12,043,745 $ 7,040,646 $ 3,610,497
Mortality and Expense Charges (Note 3) (1,751,522) (1,098,797) (542,446)
Transaction Charges (Note 4) (28,838) (18,263) (3,767)
------------------ ------------------ ------------------
Net Investment Income 10,263,385 5,923,586 3,064,284
------------------ ------------------ ------------------
Realized and Unrealized Gains (Losses):
Net Realized Losses (45,179) (309,482) (218,534)
Net Unrealized Gains (Losses) 8,986,838 10,659,883 (4,239,903)
------------------ ------------------ ------------------
Net Realized and Unrealized Gains (Losses) 8,941,659 10,350,401 (4,458,437)
------------------ ------------------ ------------------
Increase (Decrease) in Net Assets
Resulting from Operations 19,205,044 16,273,987 (1,394,153)
------------------ ------------------ ------------------
Changes from Principal Transactions:
Transfers of Net Premiums 70,164,840 57,600,863 51,971,799
Transfers of Policy Loading, Net (Note 3) 3,408,619 2,992,695 3,241,522
Transfers Due to Deaths (813,683) (1,461,703) (29,512)
Transfers Due to Other Terminations (2,808,710) (2,139,618) (493,701)
Transfers Due to Policy Loans (2,600,351) (1,721,984) (1,463,743)
Transfers of Cost of Insurance (3,101,640) (2,101,569) (1,296,287)
Transfers of Loan Processing Charges (50,705) (28,928) (8,161)
------------------ ------------------ ------------------
Increase in Net Assets
Resulting from Principal Transactions 64,198,370 53,139,756 51,921,917
------------------ ------------------ ------------------
Increase in Net Assets 83,403,414 69,413,743 50,527,764
Net Assets Beginning Balance 155,520,908 86,107,165 35,579,401
------------------ ------------------ ------------------
Net Assets Ending Balance $ 238,924,322 $ 155,520,908 $ 86,107,165
================== ================== ==================
</TABLE>
See Notes to Financial Statements
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
Notes to Financial Statements
1. Merrill Lynch Variable Life Separate Account ("Account"),
a separate account of Merrill Lynch Life Insurance
Company ("Merrill Lynch Life") was established to support
the operations with respect to certain variable life
insurance contracts ("Contracts"). The Account is
governed by Arkansas State Insurance Law. Merrill Lynch
Life is an indirect wholly-owned subsidiary of Merrill
Lynch & Co., Inc. ("Merrill"). The Account is registered
as a unit investment trust under the Investment Company
Act of 1940 and consists of thirty-three investment
divisions (thirty-five during the year). Ten of the
investment divisions each invest in the securities of a
single mutual fund portfolio of the Merrill Lynch Series
Fund, Inc. Six of the investment divisions each invest in
the securities of a single mutual fund portfolio of the
Merrill Lynch Variable Series Funds, Inc. (See Note 5).
Seventeen of the investment divisions (eighteen during
the year) each invest in the securities of a single trust
of the Merrill Lynch Fund of Stripped ("Zero") U.S.
Treasury Securities, Series A through K ("Zero Trusts").
Each trust of the Zero Trusts consists of Stripped
Treasury Securities with a fixed maturity date and a
Treasury Note deposited to provide income to pay expenses
of the trust.
The assets of the Account are registered in the name of
Merrill Lynch Life. The portion of the Account's assets
attributable to the Contracts are not chargeable with
liabilities arising out of any other business Merrill
Lynch Life may conduct.
The change in net assets accumulated in the Account
provides the basis for the periodic determination of the
amount of increased or decreased benefits under the
Contracts.
The net assets may not be less than the amount required
under Arkansas State Insurance Law to provide for death
benefits (without regard to the minimum death benefit
guarantee) and other Contract benefits.
The financial statements included herein have been
prepared in accordance with generally accepted accounting
principles for variable life separate accounts registered
as unit investment trusts. The preparation of financial
statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
2. The following is a summary of significant accounting
policies of the Account:
Investments in the divisions are included in the
statement of net assets at the net asset value of the
shares and units held.
Dividend income is recognized on the ex-dividend date.
All dividends are automatically reinvested.
Realized gains and losses on the sales of investments are
computed on the first in first out method.
The operations of the Account are included in the Federal
income tax return of Merrill Lynch Life. Under the
provisions of the Contracts, Merrill Lynch Life has the
right to charge the Account for any Federal income tax
attributable to the Account. No charge is currently being
made against the Account for such tax since, under
current tax law, Merrill Lynch Life pays no tax on
investment income and capital gains reflected in variable
life insurance contract reserves. However, Merrill Lynch
Life retains the right to charge for any Federal income
tax incurred which is attributable to the Account if the
law is changed. Contract loading, however, includes a
charge for a significantly higher Federal income tax
liability of Merrill Lynch Life (see Note 3). Charges for
state and local taxes, if any, attributable to the
Account may also be made.
3. Merrill Lynch Life assumes mortality and expense risks
related to Contracts investing in the Account and deducts
a daily charges at a rate of .90% (on an annual basis) of
the net assets of the Account to cover these risks.
Merrill Lynch Life makes certain deductions from each
premium. For certain Contracts, the deductions are made
before the premium is allocated to the Account. For other
Contracts, the deductions are taken in equal installments
on the first through tenth Contract anniversaries. The
deductions are for (1) sales load, (2) Federal income
taxes, and (3) state and local premium taxes.
In addition, the cost of providing life insurance
coverage for the insureds will be deducted on the dates
specified by the Contract. This cost will vary dependent
upon the insured's underwriting class, sex (except where
unisex rates are required by state law), attained age of
each insured and the Contract's net amount at risk.
4. Merrill Lynch Life pays all transaction charges to
Merrill Lynch, Pierce, Fenner & Smith Inc., a subsidiary
of Merrill and sponsor of the Zero Trusts, on the sale of
Zero Trust units to the Account. Merrill Lynch Life
deducts a daily asset charge against the assets of each
trust for the reimbursement of these transaction charges.
The asset charge is equivalent to an effective annual
rate of .34% (annually at the beginning of the year) of
net assets for Contract owners.
5. Effective following the close of business on December 6,
1996, the International Bond Fund was merged with and
into the former World Income Focus Fund; the World Income
Focus Fund was renamed the Global Bond Focus Fund; and
the Fund's investment objective was modified.
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Divisions Investing In
----------------------------------------------------
Intermediate Long-Term
Total Money Government Corporate
Separate Reserve Bond Bond
Account Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 12,043,745 $ 2,259,703 $ 882,178 $ 625,900
Mortality and Expense Charges (1,751,522) (338,561) (118,016) (83,645)
Transaction Charges (28,838) 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 10,263,385 1,921,142 764,162 542,255
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (45,179) 0 18,190 (69,537)
Net Unrealized Gains (Losses) 8,986,838 0 (494,507) (262,935)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 8,941,659 0 (476,317) (332,472)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 19,205,044 1,921,142 287,845 209,783
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 70,164,840 57,111,336 274,240 441,258
Transfers of Policy Loading, Net 3,408,619 3,817,075 (65,305) (45,661)
Transfers Due to Deaths (813,683) (279,751) (18,739) (40,588)
Transfers Due to Other Terminations (2,808,710) (380,432) (76,682) (101,534)
Transfers Due to Policy Loans (2,600,351) (1,084,294) (52,385) (42,333)
Transfers of Cost of Insurance (3,101,640) (629,669) (140,278) (119,430)
Transfers of Loan Processing Charges (50,705) (10,186) (1,605) (1,801)
Transfers Among Investment Divisions 0 (49,154,498) 2,922,480 2,331,559
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 64,198,370 9,389,581 2,841,726 2,421,470
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 83,403,414 11,310,723 3,129,571 2,631,253
Net Assets Beginning Balance 155,520,908 32,871,637 11,703,850 8,125,727
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 238,924,322 $ 44,182,360 $ 14,833,421 $ 10,756,980
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Capital Growth Multiple High
Stock Stock Strategy Yield
Portfolio Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 2,849,273 $ 474,609 $ 2,134,807 $ 991,648
Mortality and Expense Charges (189,168) (168,016) (161,312) (93,784)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 2,660,105 306,593 1,973,495 897,864
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (192,580) 76,061 (205,247) (38,619)
Net Unrealized Gains (Losses) 677,575 2,799,507 511,360 263,711
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 484,995 2,875,568 306,113 225,092
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 3,145,100 3,182,161 2,279,608 1,122,956
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 2,079,423 1,942,040 1,309,262 764,317
Transfers of Policy Loading, Net (43,754) (21,164) (65,905) (51,806)
Transfers Due to Deaths (92,681) (8,492) (75,789) (3,979)
Transfers Due to Other Terminations (321,383) (260,142) (312,254) (358,814)
Transfers Due to Policy Loans (145,225) (397,438) (171,503) (204,029)
Transfers of Cost of Insurance (328,889) (333,742) (276,061) (163,545)
Transfers of Loan Processing Charges (5,535) (6,120) (4,502) (4,660)
Transfers Among Investment Divisions 4,872,794 7,878,892 1,654,189 4,143,862
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 6,014,750 8,793,834 2,057,437 4,121,346
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 9,159,850 11,975,995 4,337,045 5,244,302
Net Assets Beginning Balance 16,702,494 13,013,803 16,039,254 7,922,131
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 25,862,344 $ 24,989,798 $ 20,376,299 $ 13,166,433
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Global
Natural Global Utility
Resources Strategy Balanced Focus
Portfolio Portfolio Portfolio Fund
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 35,904 $ 658,077 $ 339,821 $ 26,694
Mortality and Expense Charges (18,240) (216,109) (61,936) (6,067)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 17,664 441,968 277,885 20,627
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 88,450 51,512 16,557 6,978
Net Unrealized Gains (Losses) 143,526 2,581,792 341,710 68,172
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 231,976 2,633,304 358,267 75,150
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 249,640 3,075,272 636,152 95,777
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 181,972 2,473,052 553,126 47,855
Transfers of Policy Loading, Net (3,920) (44,092) (27,821) 40
Transfers Due to Deaths 0 (158,560) (1,125) 0
Transfers Due to Other Terminations (55,127) (514,227) (209,048) (554)
Transfers Due to Policy Loans (22,880) (192,425) (60,254) (5,578)
Transfers of Cost of Insurance (28,415) (421,815) (118,014) (10,007)
Transfers of Loan Processing Charges (167) (6,017) (2,108) (145)
Transfers Among Investment Divisions 291,252 3,487,282 2,554,987 650,138
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 362,715 4,623,198 2,689,743 681,749
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 612,355 7,698,470 3,325,895 777,526
Net Assets Beginning Balance 1,627,177 20,342,494 5,247,662 366,959
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 2,239,532 $ 28,040,964 $ 8,573,557 $ 1,144,485
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
International Global Basic
Equity Bond Value International
Focus Focus Focus Bond
Fund Fund Fund Fund
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 58,526 $ 29,074 $ 596,893 $ 19,027
Mortality and Expense Charges (55,091) (3,779) (118,246) (2,285)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 3,435 25,295 478,647 16,742
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 1,353 347 54,169 (2,241)
Net Unrealized Gains (Losses) 266,897 7,902 1,807,802 (796)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 268,250 8,249 1,861,971 (3,037)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 271,685 33,544 2,340,618 13,705
---------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 756,559 40,516 1,276,821 44,422
Transfers of Policy Loading, Net (3,515) 509 (5,302) 902
Transfers Due to Deaths (33,903) 0 (68,358) (877)
Transfers Due to Other Terminations (41,605) (552) (123,456) 1,893
Transfers Due to Policy Loans (64,171) 0 (76,540) (988)
Transfers of Cost of Insurance (114,440) (5,978) (241,687) (4,818)
Transfers of Loan Processing Charges (1,964) (147) (2,269) (41)
Transfers Among Investment Divisions 2,803,185 284,230 7,975,786 218,985
Transfer of Merged Funds 0 367,255 0 (367,255)
---------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 3,300,146 685,833 8,734,995 (107,777)
---------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 3,571,831 719,377 11,075,613 (94,072)
Net Assets Beginning Balance 4,222,913 219,182 8,270,093 94,072
---------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 7,794,744 $ 938,559 $ 19,345,706 $ 0
================ ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Developing
Capital Equity
Markets Focus Growth 1996 1997
Fund Fund Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 61,179 $ 432 $ 0 $ 0
Mortality and Expense Charges (36,040) (4,712) (249) (2,858)
Transaction Charges 0 0 (91) (1,075)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 25,139 (4,280) (340) (3,933)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (20,703) (914) 10,567 1,373
Net Unrealized Gains (Losses) 250,904 38,506 (9,400) 14,566
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 230,201 37,592 1,167 15,939
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 255,340 33,312 827 12,006
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 610,043 25,818 0 3,518
Transfers of Policy Loading, Net 11,064 1,255 (728) (2,396)
Transfers Due to Deaths (30,841) 0 0 0
Transfers Due to Other Terminations (31,692) (1,214) 159 (67)
Transfers Due to Policy Loans (57,503) 0 0 1,090
Transfers of Cost of Insurance (64,681) (7,114) (210) (3,936)
Transfers of Loan Processing Charges (863) (221) 23 (46)
Transfers Among Investment Divisions 1,835,923 1,615,438 (222,425) 65,390
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 2,271,450 1,633,962 (223,181) 63,553
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 2,526,790 1,667,274 (222,354) 75,559
Net Assets Beginning Balance 2,407,606 0 222,354 277,986
------------------ ----------------- ----------------- -----------------
Net Assets Ending Balance $ 4,934,396 $ 1,667,274 $ 0 $ 353,545
================== ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
1998 1999 2000 2001
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (8,548) (9,461) (6,622) (967)
Transaction Charges (3,218) (3,562) (2,493) (365)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (11,766) (13,023) (9,115) (1,332)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 6,017 5,854 12,442 700
Net Unrealized Gains (Losses) 37,385 37,303 12,222 4,215
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 43,402 43,157 24,664 4,915
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 31,636 30,134 15,549 3,583
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 2,729 2,079 11,888 1,320
Transfers of Policy Loading, Net (7,282) (9,924) (4,276) (634)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (17,187) 13,021 (80) (9,468)
Transfers Due to Policy Loans (34) 3,211 (12,327) 0
Transfers of Cost of Insurance (6,841) (12,333) (7,564) (930)
Transfers of Loan Processing Charges (90) (606) (122) (44)
Transfers Among Investment Divisions 151,070 136,353 52,712 114,790
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 122,365 131,801 40,231 105,034
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 154,001 161,935 55,780 108,617
Net Assets Beginning Balance 821,981 998,741 740,415 55,744
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 975,982 $ 1,160,676 $ 796,195 $ 164,361
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2002 2003 2004 2005
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (4,865) (1,249) (7,310) (7,624)
Transaction Charges (1,836) (471) (2,753) (2,871)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (6,701) (1,720) (10,063) (10,495)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 3,431 936 17,968 48,027
Net Unrealized Gains (Losses) 10,227 4,471 (10,934) (65,787)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 13,658 5,407 7,034 (17,760)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 6,957 3,687 (3,029) (28,255)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 9,067 24,881 21,785
Transfers of Policy Loading, Net (2,544) (127) (5,811) (3,031)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (335) (86) 17,456 (23,693)
Transfers Due to Policy Loans (3,280) 0 (3,357) (2,263)
Transfers of Cost of Insurance (6,687) (2,134) (11,301) (8,848)
Transfers of Loan Processing Charges (65) (369) (254) (38)
Transfers Among Investment Divisions 429,537 95,804 127,953 115,644
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 416,626 102,155 149,567 99,556
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 423,583 105,842 146,538 71,301
Net Assets Beginning Balance 196,420 105,346 808,228 637,825
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 620,003 $ 211,188 $ 954,766 $ 709,126
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2006 2007 2008 2009
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (1,207) (282) (1,849) (689)
Transaction Charges (456) (107) (697) (259)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (1,663) (389) (2,546) (948)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 655 202 2,072 542
Net Unrealized Gains (Losses) 3,403 (764) (4,484) (1,142)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 4,058 (562) (2,412) (600)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 2,395 (951) (4,958) (1,548)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 1,301 33,415 0
Transfers of Policy Loading, Net (506) (218) 556 (158)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (15) (2) (65) (22)
Transfers Due to Policy Loans 0 0 1,630 0
Transfers of Cost of Insurance (1,015) (385) (2,980) (1,195)
Transfers of Loan Processing Charges (23) (1) (304) (4)
Transfers Among Investment Divisions 162,335 2 22,434 20,781
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 160,776 697 54,686 19,402
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 163,171 (254) 49,728 17,854
Net Assets Beginning Balance 71,281 33,130 194,013 72,146
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 234,452 $ 32,876 $ 243,741 $ 90,000
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2010 2011 2013 2014
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (3,648) (2,818) (822) (15,447)
Transaction Charges (1,376) (1,061) (310) (5,837)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (5,024) (3,879) (1,132) (21,284)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (1,501) 3,521 2,269 55,970
Net Unrealized Gains (Losses) 5,242 (124,824) (1,550) 75,563
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 3,741 (121,303) 719 131,533
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (1,283) (125,182) (413) 110,249
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 2,719 2,406 47,499 68,173
Transfers of Policy Loading, Net 4,058 (1,867) 4,531 (13,624)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (218) (13) 26 (1,298)
Transfers Due to Policy Loans (7,845) 0 370 0
Transfers of Cost of Insurance (3,366) (3,609) (1,853) (17,870)
Transfers of Loan Processing Charges (48) (6) (69) (288)
Transfers Among Investment Divisions 266,394 108,244 120 1,986,378
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 261,694 105,155 50,624 2,021,471
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 260,411 (20,027) 50,211 2,131,720
Net Assets Beginning Balance 298,173 342,790 67,623 399,658
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 558,584 $ 322,763 $ 117,834 $ 2,531,378
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------
Intermediate Long-Term
Total Money Government Corporate
Separate Reserve Bond Bond
Account Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 7,040,646 $ 2,042,506 $ 590,260 $ 471,729
Mortality and Expense Charges (1,098,797) (276,122) (77,890) (60,109)
Transaction Charges (18,263) 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 5,923,586 1,766,384 512,370 411,620
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (309,482) 0 (161,089) (84,296)
Net Unrealized Gains (Losses) 10,659,883 0 967,267 831,382
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 10,350,401 0 806,178 747,086
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 16,273,987 1,766,384 1,318,548 1,158,706
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 57,600,863 48,585,875 237,242 206,770
Transfers of Policy Loading, Net 2,992,695 3,263,562 (47,077) (58,349)
Transfers Due to Deaths (1,461,703) (89,375) (242,713) (243,177)
Transfers Due to Other Terminations (2,139,618) (281,643) (15,301) (159,890)
Transfers Due to Policy Loans (1,721,984) (662,050) (21,269) (22,813)
Transfers of Cost of Insurance (2,101,569) (539,265) (95,544) (78,535)
Transfers of Loan Processing Charges (28,928) (4,005) (2,139) (1,110)
Transfers Among Investment Divisions 0 (45,681,956) 5,740,096 2,729,204
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 53,139,756 4,591,143 5,553,295 2,372,100
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 69,413,743 6,357,527 6,871,843 3,530,806
Net Assets Beginning Balance 86,107,165 26,514,110 4,832,007 4,594,921
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 155,520,908 $ 32,871,637 $ 11,703,850 $ 8,125,727
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Capital Growth Multiple High
Stock Stock Strategy Yield
Portfolio Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 702,946 $ 332,737 $ 1,029,923 $ 530,868
Mortality and Expense Charges (109,563) (73,632) (120,845) (48,511)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 593,383 259,105 909,078 482,357
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (57,970) (58,237) (148,847) (47,719)
Net Unrealized Gains (Losses) 1,648,314 2,148,543 1,270,564 250,744
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 1,590,344 2,090,306 1,121,717 203,025
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 2,183,727 2,349,411 2,030,795 685,382
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 1,137,847 1,068,231 1,066,156 579,214
Transfers of Policy Loading, Net (62,080) 6,422 (44,104) 3,154
Transfers Due to Deaths (306,000) (10,301) (65,938) (2,080)
Transfers Due to Other Terminations (273,101) (97,817) (337,461) (42,371)
Transfers Due to Policy Loans (216,960) (102,930) (92,141) (72,558)
Transfers of Cost of Insurance (192,230) (159,365) (203,001) (105,754)
Transfers of Loan Processing Charges (2,660) (2,120) (2,802) (2,953)
Transfers Among Investment Divisions 7,075,715 5,643,336 3,815,780 4,138,536
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 7,160,531 6,345,456 4,136,489 4,495,188
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 9,344,258 8,694,867 6,167,284 5,180,570
Net Assets Beginning Balance 7,358,236 4,318,936 9,871,970 2,741,561
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 16,702,494 $ 13,013,803 $ 16,039,254 $ 7,922,131
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Global
Natural Global Utility
Resources Strategy Balanced Focus
Portfolio Portfolio Portfolio Fund
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 23,752 $ 808,709 $ 274,872 $ 7,374
Mortality and Expense Charges (12,008) (159,374) (37,964) (1,669)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 11,744 649,335 236,908 5,705
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 47,638 56,413 (36,077) 2,396
Net Unrealized Gains (Losses) 74,639 917,790 540,526 41,816
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 122,277 974,203 504,449 44,212
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 134,021 1,623,538 741,357 49,917
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 173,219 2,484,243 437,292 12,013
Transfers of Policy Loading, Net (227) (1,635) (32,229) (1,185)
Transfers Due to Deaths 0 (257,767) (244,352) 0
Transfers Due to Other Terminations (27,497) (449,161) (88,275) (305)
Transfers Due to Policy Loans (11,517) (299,628) (12,334) 0
Transfers of Cost of Insurance (25,805) (358,387) (80,463) (3,959)
Transfers of Loan Processing Charges (319) (4,268) (1,398) (34)
Transfers Among Investment Divisions 365,584 3,046,233 1,511,909 246,773
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 473,438 4,159,630 1,490,150 253,303
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 607,459 5,783,168 2,231,507 303,220
Net Assets Beginning Balance 1,019,718 14,559,326 3,016,155 63,739
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 1,627,177 $ 20,342,494 $ 5,247,662 $ 366,959
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
International Global Basic
Equity Bond Value International
Focus Focus Focus Bond
Fund Fund Fund Fund
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 87,517 $ 8,615 $ 106,693 $ 8,339
Mortality and Expense Charges (23,269) (756) (34,416) (909)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 64,248 7,859 72,277 7,430
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (50,146) 23 2,816 1,587
Net Unrealized Gains (Losses) 207,950 6,982 824,592 1,447
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 157,804 7,005 827,408 3,034
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 222,052 14,864 899,685 10,464
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 484,768 18,466 527,518 12,428
Transfers of Policy Loading, Net (7,642) 825 (2,243) (784)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (123,171) (121) (59,804) (2,748)
Transfers Due to Policy Loans (98,219) 9,020 (13,838) 7,037
Transfers of Cost of Insurance (67,572) (1,412) (88,195) (3,757)
Transfers of Loan Processing Charges (704) (83) (1,106) (86)
Transfers Among Investment Divisions 1,625,203 125,435 5,642,607 (13,353)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 1,812,663 152,130 6,004,939 (1,263)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 2,034,715 166,994 6,904,624 9,201
Net Assets Beginning Balance 2,188,198 52,188 1,365,469 84,871
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 4,222,913 $ 219,182 $ 8,270,093 $ 94,072
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Developing
Capital
Markets Focus 1995 1996 1997
Fund Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 13,806 $ 0 $ 0 $ 0
Mortality and Expense Charges (13,411) (1,483) (1,358) (1,725)
Transaction Charges 0 (558) (514) (652)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 395 (2,041) (1,872) (2,377)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (43,247) 12,157 789 310
Net Unrealized Gains (Losses) 31,160 (1,196) 8,972 16,365
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (12,087) 10,961 9,761 16,675
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (11,692) 8,920 7,889 14,298
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 446,742 0 6,557 2,609
Transfers of Policy Loading, Net 6,365 (1,240) 186 237
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (24,891) (5,133) (118) (168)
Transfers Due to Policy Loans (17,128) 0 (9,116) 0
Transfers of Cost of Insurance (39,732) (1,291) (1,698) (2,572)
Transfers of Loan Processing Charges (2,002) 10 (40) (26)
Transfers Among Investment Divisions 567,104 (117,487) 178,394 231,794
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 936,458 (125,141) 174,165 231,874
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 924,766 (116,221) 182,054 246,172
Net Assets Beginning Balance 1,482,840 116,221 40,300 31,814
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 2,407,606 $ 0 $ 222,354 $ 277,986
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
1998 1999 2000 2001
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (7,049) (7,718) (5,481) (915)
Transaction Charges (2,664) (2,917) (2,070) (345)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (9,713) (10,635) (7,551) (1,260)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 12,007 9,541 1,741 12,302
Net Unrealized Gains (Losses) 83,423 113,158 98,041 4,321
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 95,430 122,699 99,782 16,623
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 85,717 112,064 92,231 15,363
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 1,898 3,995 23,896 1,194
Transfers of Policy Loading, Net (17,373) (3,399) (2,494) (381)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (132,812) (540) 110 3
Transfers Due to Policy Loans 7 (60,000) (2,825) (3,268)
Transfers of Cost of Insurance (7,052) (9,302) (7,926) (1,541)
Transfers of Loan Processing Charges (95) (243) (205) (1)
Transfers Among Investment Divisions 777,277 802,185 350,856 (5,671)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 621,850 732,696 361,412 (9,665)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 707,567 844,760 453,643 5,698
Net Assets Beginning Balance 114,414 153,981 286,772 50,046
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 821,981 $ 998,741 $ 740,415 $ 55,744
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2002 2003 2004 2005
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (1,352) (911) (6,222) (4,063)
Transaction Charges (511) (344) (2,348) (1,537)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (1,863) (1,255) (8,570) (5,600)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 385 6,784 30,917 1,337
Net Unrealized Gains (Losses) 29,570 17,905 150,791 113,569
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 29,955 24,689 181,708 114,906
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 28,092 23,434 173,138 109,306
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 0 30,500 10,212
Transfers of Policy Loading, Net (831) 217 (3,307) 460
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (63) (59) (226) 245
Transfers Due to Policy Loans 0 0 (10,000) 0
Transfers of Cost of Insurance (1,137) (1,521) (8,914) (4,000)
Transfers of Loan Processing Charges (10) (9) (204) (54)
Transfers Among Investment Divisions 72,433 77,361 219,263 491,998
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 70,392 75,989 227,112 498,861
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 98,484 99,423 400,250 608,167
Net Assets Beginning Balance 97,936 5,923 407,978 29,658
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 196,420 $ 105,346 $ 808,228 $ 637,825
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2006 2007 2008 2009
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (540) (221) (614) (898)
Transaction Charges (204) (83) (233) (338)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (744) (304) (847) (1,236)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 293 163 3,614 20,240
Net Unrealized Gains (Losses) 17,073 7,219 17,580 16,726
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 17,366 7,382 21,194 36,966
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 16,622 7,078 20,347 35,730
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 1,010 20,456 5,576
Transfers of Policy Loading, Net (472) (226) 735 (225)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (10) (17) (122) 48
Transfers Due to Policy Loans 0 0 (7,000) 0
Transfers of Cost of Insurance (468) (401) (1,408) (719)
Transfers of Loan Processing Charges (2) (3) (19) 7
Transfers Among Investment Divisions 4,258 24,705 154,313 (120,220)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 3,306 25,068 166,955 (115,533)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 19,928 32,146 187,302 (79,803)
Net Assets Beginning Balance 51,353 984 6,711 151,949
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 71,281 $ 33,130 $ 194,013 $ 72,146
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2010 2011 2013 2014
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (2,316) (2,403) (525) (2,555)
Transaction Charges (875) (907) (198) (965)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (3,191) (3,310) (723) (3,520)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 87,387 2,349 12,386 52,571
Net Unrealized Gains (Losses) 5,161 98,680 14,348 84,461
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 92,548 101,029 26,734 137,032
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 89,357 97,719 26,011 133,512
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 2,682 0 105 12,149
Transfers of Policy Loading, Net (1,327) (1,656) (847) 1,865
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (16,958) (81) 2 (162)
Transfers Due to Policy Loans 0 0 (2,454) 0
Transfers of Cost of Insurance (1,969) (2,650) (1,359) (2,665)
Transfers of Loan Processing Charges (18) (13) (189) (25)
Transfers Among Investment Divisions 67,414 92,008 (25,040) 145,953
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 49,824 87,608 (29,782) 157,115
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 139,181 185,327 (3,771) 290,627
Net Assets Beginning Balance 158,992 157,463 71,394 109,031
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 298,173 $ 342,790 $ 67,623 $ 399,658
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------
Intermediate Long-Term
Total Money Government Corporate
Separate Reserve Bond Bond
Account Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 3,610,497 $ 950,581 $ 285,253 $ 425,190
Mortality and Expense Charges (542,446) (170,748) (28,708) (37,653)
Transaction Charges (3,767) 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 3,064,284 779,833 256,545 387,537
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (218,534) 0 (60,235) (25,319)
Net Unrealized Gains (Losses) (4,239,903) 0 (350,295) (600,392)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (4,458,437) 0 (410,530) (625,711)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (1,394,153) 779,833 (153,985) (238,174)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 51,971,799 47,324,731 187,931 92,352
Transfers of Policy Loading, Net 3,241,522 3,195,360 (8,955) (18,352)
Transfers Due to Deaths (29,512) (6,644) 0 (2,647)
Transfers Due to Other Terminations (493,701) (172,019) (13,442) (12,312)
Transfers Due to Policy Loans (1,463,743) (610,255) (142,120) (12,546)
Transfers of Cost of Insurance (1,296,287) (390,815) (43,069) (51,233)
Transfers of Loan Processing Charges (8,161) (1,637) (913) (376)
Transfers Among Investment Divisions 0 (35,662,412) 2,882,108 1,212,618
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 51,921,917 13,676,309 2,861,540 1,207,504
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 50,527,764 14,456,142 2,707,555 969,330
Net Assets Beginning Balance 35,579,401 12,057,968 2,124,452 3,625,591
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 86,107,165 $ 26,514,110 $ 4,832,007 $ 4,594,921
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Capital Growth Multiple High
Stock Stock Strategy Yield
Portfolio Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 361,177 $ 287,424 $ 661,067 $ 215,561
Mortality and Expense Charges (49,108) (26,158) (68,143) (18,453)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 312,069 261,266 592,924 197,108
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (4,588) (38,883) (57,248) (21,634)
Net Unrealized Gains (Losses) (631,923) (347,941) (957,925) (232,926)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (636,511) (386,824) (1,015,173) (254,560)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (324,442) (125,558) (422,249) (57,452)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 740,725 500,203 513,551 258,413
Transfers of Policy Loading, Net (121,761) 19,520 36,858 5,702
Transfers Due to Deaths 0 0 (4,590) (2,687)
Transfers Due to Other Terminations (52,016) (12,269) (45,256) (27,551)
Transfers Due to Policy Loans (71,717) (15,306) (142,921) (131,734)
Transfers of Cost of Insurance (108,205) (81,834) (133,481) (56,140)
Transfers of Loan Processing Charges (928) (741) (1,011) (255)
Transfers Among Investment Divisions 4,257,528 2,313,575 6,058,382 1,520,909
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 4,643,626 2,723,148 6,281,532 1,566,657
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 4,319,184 2,597,590 5,859,283 1,509,205
Net Assets Beginning Balance 3,039,052 1,721,346 4,012,687 1,232,356
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 7,358,236 $ 4,318,936 $ 9,871,970 $ 2,741,561
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Global
Natural Global Utility
Resources Strategy Balanced Focus
Portfolio Portfolio Portfolio Fund
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 11,993 $ 307,203 $ 96,724 $ 489
Mortality and Expense Charges (6,508) (95,867) (22,533) (111)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 5,485 211,336 74,191 378
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 1,420 42,186 (22,332) (4)
Net Unrealized Gains (Losses) (24,535) (712,889) (174,733) (2,295)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (23,115) (670,703) (197,065) (2,299)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (17,630) (459,367) (122,874) (1,921)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 163,578 1,592,234 220,509 0
Transfers of Policy Loading, Net 9,677 90,005 26,326 (162)
Transfers Due to Deaths 0 (7,628) (5,316) 0
Transfers Due to Other Terminations (1,141) (121,934) (39,643) (38)
Transfers Due to Policy Loans (7,332) (174,375) (107,866) 0
Transfers of Cost of Insurance (17,949) (301,516) (50,834) (387)
Transfers of Loan Processing Charges (96) (1,317) (156) (6)
Transfers Among Investment Divisions 520,012 8,328,156 1,725,495 66,253
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 666,749 9,403,625 1,768,515 65,660
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 649,119 8,944,258 1,645,641 63,739
Net Assets Beginning Balance 370,599 5,615,068 1,370,514 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 1,019,718 $ 14,559,326 $ 3,016,155 $ 63,739
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
International Global Basic
Equity Bond Value International
Focus Focus Focus Bond
Fund Fund Fund Fund
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 1,561 $ 1,593 $ 1,754 $ 2,927
Mortality and Expense Charges (3,570) (106) (2,016) (257)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (2,009) 1,487 (262) 2,670
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (231) (988) 169 147
Net Unrealized Gains (Losses) (78,043) (1,095) 4,130 (651)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (78,274) (2,083) 4,299 (504)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (80,283) (596) 4,037 2,166
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 111,017 0 72,775 33,800
Transfers of Policy Loading, Net 2,406 (11) (675) 180
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (3,405) (30) 776 (1)
Transfers Due to Policy Loans 310 (7,961) (1,349) (8,041)
Transfers of Cost of Insurance (20,300) (1,034) (9,133) (1,325)
Transfers of Loan Processing Charges (266) (4) (140) (7)
Transfers Among Investment Divisions 2,178,719 61,824 1,299,178 58,099
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 2,268,481 52,784 1,361,432 82,705
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 2,188,198 52,188 1,365,469 84,871
Net Assets Beginning Balance 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 2,188,198 $ 52,188 $ 1,365,469 $ 84,871
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Developing
Capital
Markets Focus 1994 1995 1996
Fund Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (2,550) (15) (406) (156)
Transaction Charges 0 (6) (154) (60)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (2,550) (21) (560) (216)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (98) 80 7 15
Net Unrealized Gains (Losses) (123,212) (16) 1,196 386
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (123,310) 64 1,203 401
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (125,860) 43 643 185
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 112,249 0 0 1,679
Transfers of Policy Loading, Net 3,647 (230) (80) (378)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (3,448) (23) 42 (22)
Transfers Due to Policy Loans (7,813) 0 0 0
Transfers of Cost of Insurance (14,744) (81) (636) (259)
Transfers of Loan Processing Charges (184) 0 (10) (3)
Transfers Among Investment Divisions 1,518,993 (1,690) 116,007 36,857
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 1,608,700 (2,024) 115,323 37,874
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 1,482,840 (1,981) 115,966 38,059
Net Assets Beginning Balance 0 1,981 255 2,241
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 1,482,840 $ 0 $ 116,221 $ 40,300
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
1997 1998 1999 2000
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (110) (2,744) (312) (847)
Transaction Charges (41) (1,035) (119) (321)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (151) (3,779) (431) (1,168)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 57 (4,839) (6) (1,056)
Net Unrealized Gains (Losses) (104) (2,597) (259) (816)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (47) (7,436) (265) (1,872)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (198) (11,215) (696) (3,040)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 6,745 661 0 23,597
Transfers of Policy Loading, Net 335 (860) (408) 1,020
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (14) 9,883 (88) (342)
Transfers Due to Policy Loans 0 (1,199) 0 (9,218)
Transfers of Cost of Insurance (531) (423) (560) (4,141)
Transfers of Loan Processing Charges (3) (8) (12) (19)
Transfers Among Investment Divisions 18,538 99,872 155,745 233,354
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 25,070 107,926 154,677 244,251
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 24,872 96,711 153,981 241,211
Net Assets Beginning Balance 6,942 17,703 0 45,561
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 31,814 $ 114,414 $ 153,981 $ 286,772
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2001 2002 2003 2004
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (161) (326) (25) (759)
Transaction Charges (61) (124) (9) (290)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (222) (450) (34) (1,049)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 42 (4) (53) (22)
Net Unrealized Gains (Losses) (670) (154) 58 4,857
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (628) (158) 5 4,835
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (850) (608) (29) 3,786
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 0 2,254 9,684
Transfers of Policy Loading, Net (180) 38 (223) 566
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (24) 419 1 409
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (111) (297) (150) (1,422)
Transfers of Loan Processing Charges (3) (8) 0 (24)
Transfers Among Investment Divisions 41,783 98,392 (3,544) 394,979
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 41,465 98,544 (1,662) 404,192
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 40,615 97,936 (1,691) 407,978
Net Assets Beginning Balance 9,431 0 7,614 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 50,046 $ 97,936 $ 5,923 $ 407,978
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2005 2006 2007 2008
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (66) (99) (3) (3)
Transaction Charges (25) (38) (1) (1)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (91) (137) (4) (4)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (29) (2) (1) 0
Net Unrealized Gains (Losses) 830 1,397 12 19
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 801 1,395 11 19
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 710 1,258 7 15
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 0 0 0
Transfers of Policy Loading, Net 150 (150) 100 0
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (17) (28) (1) (4)
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (417) (175) (39) (12)
Transfers of Loan Processing Charges (2) (4) 0 (1)
Transfers Among Investment Divisions 29,234 50,452 917 6,713
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 28,948 50,095 977 6,696
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 29,658 51,353 984 6,711
Net Assets Beginning Balance 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 29,658 $ 51,353 $ 984 $ 6,711
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2009 2010 2011 2013
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (295) (1,584) (1,458) (476)
Transaction Charges (113) (598) (550) (180)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (408) (2,182) (2,008) (656)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 1 (23,419) 899 (2,567)
Net Unrealized Gains (Losses) 6,074 3,586 (22,160) (2,191)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 6,075 (19,833) (21,261) (4,758)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 5,667 (22,015) (23,269) (5,414)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 787 0 987
Transfers of Policy Loading, Net 1,250 2,479 (2,030) 195
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (75) 13 8 (46)
Transfers Due to Policy Loans 0 0 0 (12,300)
Transfers of Cost of Insurance (393) (1,159) (1,439) (1,771)
Transfers of Loan Processing Charges (12) 0 0 (6)
Transfers Among Investment Divisions 145,512 49,193 228 85,368
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 146,282 51,313 (3,233) 72,427
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 151,949 29,298 (26,502) 67,013
Net Assets Beginning Balance 0 129,694 183,965 4,381
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 151,949 $ 158,992 $ 157,463 $ 71,394
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Division Investing In
---------------------
2014
Trust
-----------------
<S> <C>
Investment Income (Loss):
Reinvested Dividends $ 0
Mortality and Expense Charges (112)
Transaction Charges (41)
-----------------
Net Investment Income (Loss) (153)
-----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 1
Net Unrealized Gains (Losses) 5,374
-----------------
Net Realized and Unrealized Gains (Losses) 5,375
-----------------
Increase (Decrease) in Net Assets
Resulting from Operations 5,222
-----------------
Changes from Principal Transactions:
Transfers of Net Premiums 1,337
Transfers of Policy Loading, Net 163
Transfers Due to Deaths 0
Transfers Due to Other Terminations (63)
Transfers Due to Policy Loans 0
Transfers of Cost of Insurance (272)
Transfers of Loan Processing Charges (9)
Transfers Among Investment Divisions 102,653
-----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 103,809
-----------------
Increase (Decrease) in Net Assets 109,031
Net Assets Beginning Balance 0
-----------------
Net Assets Ending Balance $ 109,031
=================
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Merrill Lynch Life Insurance Company:
We have audited the accompanying balance sheets of Merrill Lynch
Life Insurance Company (the "Company"), a wholly-owned subsidiary
of Merrill Lynch Insurance Group, Inc., as of December 31, 1996
and 1995, and the related statements of earnings, stockholder's
equity, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Company at
December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted
accounting principles.
February 24, 1997
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Assets
- ------
INVESTMENTS:
Fixed maturity securities, at estimated fair value
(amortized cost: 1996 - $3,232,643; 1995 - $3,648,983) $ 3,301,588 $ 3,807,870
Equity securities, at estimated fair value
(cost: 1996 - $32,988; 1995 - $19,683) 35,977 21,433
Mortgage loans 70,503 121,248
Real estate held-for-sale 28,851 5,874
Policy loans on insurance contracts 1,092,071 1,039,267
-------------- --------------
Total Investments 4,528,990 4,995,692
-------------- --------------
CASH AND CASH EQUIVALENTS 94,991 48,924
ACCRUED INVESTMENT INCOME 86,186 91,942
DEFERRED POLICY ACQUISITION COSTS 366,461 372,418
FEDERAL INCOME TAXES - DEFERRED - 2,222
REINSURANCE RECEIVABLES 2,642 1,552
OTHER ASSETS 42,861 54,900
SEPARATE ACCOUNTS ASSETS 7,615,362 6,834,353
-------------- --------------
TOTAL ASSETS $ 12,737,493 $ 12,402,003
============== ==============
</TABLE>
See notes to financial statements.
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
(continued)(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
LIABILITIES:
POLICY LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 4,480,048 $ 4,851,718
Claims and claims settlement expenses 39,666 29,812
-------------- --------------
Total policy liabilities and accruals 4,519,714 4,881,530
OTHER POLICYHOLDER FUNDS 19,420 13,607
LIABILITY FOR GUARANTY FUND ASSESSMENTS 18,773 21,144
FEDERAL INCOME TAXES - DEFERRED 6,714 -
FEDERAL INCOME TAXES - CURRENT 20,968 7,033
AFFILIATED PAYABLES - NET 6,164 2,429
OTHER LIABILITIES 50,726 53,566
SEPARATE ACCOUNTS LIABILITIES 7,605,194 6,825,857
-------------- --------------
Total Liabilities 12,247,673 11,805,166
-------------- --------------
STOCKHOLDER'S EQUITY:
Common stock, $10 par value - 200,000 shares
authorized, issued and outstanding 2,000 2,000
Additional paid-in capital 402,937 501,455
Retained earnings 79,387 76,482
Net unrealized investment gain on investment securities 5,496 16,900
-------------- --------------
Total Stockholder's Equity 489,820 596,837
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 12,737,493 $ 12,402,003
============== ==============
</TABLE>
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 336,661 $ 376,166 $ 433,536
Net realized investment gains (losses) 8,862 4,525 (14,543)
Policy charge revenue 158,829 141,722 126,284
----------- ----------- -----------
Total Revenues 504,352 522,413 545,277
----------- ----------- -----------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 235,255 261,760 313,585
Market value adjustment expense 6,071 5,805 6,307
Policy benefits (net of reinsurance recoveries: 1996 - $8,317;
1995 - $6,482; 1994 - $6,338) 21,052 19,374 16,858
Reinsurance premium ceded 15,582 13,896 13,909
Amortization of deferred policy acquisition costs 62,036 58,669 69,662
Insurance expenses and taxes 47,077 44,124 35,073
----------- ----------- -----------
Total Benefits and Expenses 387,073 403,628 455,394
----------- ----------- -----------
Earnings Before Federal Income Tax Provision 117,279 118,785 89,883
----------- ----------- -----------
FEDERAL INCOME TAX PROVISION:
Current 22,814 38,335 22,503
Deferred 15,078 3,968 1,375
----------- ----------- -----------
Total Federal Income Tax Provision 37,892 42,303 23,878
----------- ----------- -----------
NET EARNINGS $ 79,387 $ 76,482 $ 66,005
=========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
Net
Additional unrealized Total
Common paid-in Retained investment stockholder's
stock capital earnings gain (loss) equity
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 $ 2,000 $ 637,590 $ 47,860 $ (395) $ 687,055
Dividend to Parent (102,140) (47,860) (150,000)
Net earnings 66,005 66,005
Net unrealized investment loss (43,489) (43,489)
------------ ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1994 2,000 535,450 66,005 (43,884) 559,571
Dividend to Parent (33,995) (66,005) (100,000)
Net earnings 76,482 76,482
Net unrealized investment gain 60,784 60,784
------------ ------------ ------------- ------------ ------------
BALANCE, DECEMBER 31, 1995 2,000 501,455 76,482 16,900 596,837
Dividend to Parent (98,518) (76,482) (175,000)
Net earnings 79,387 79,387
Net unrealized investment loss (11,404) (11,404)
------------ ------------ ------------- ------------ ------------
BALANCE, DECEMBER 31, 1996 $ 2,000 $ 402,937 $ 79,387 $ 5,496 $ 489,820
============ ============ ============= ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 79,387 $ 76,482 $ 66,005
Adjustments to reconcile net earnings to net cash and
cash equivalents provided (used) by operating activities:
Amortization of deferred policy acquisition costs 62,036 58,669 69,662
Capitalization of policy acquisition costs (43,668) (54,014) (108,829)
Amortization, (accretion) and depreciation of investments (4,836) (6,763) (4,516)
Net realized investment (gains) losses (8,862) (4,525) 14,543
Interest credited to policyholders' account balances 235,255 261,760 313,585
Provision for deferred Federal income tax 15,078 3,968 1,375
Changes in operating assets and liabilities:
Accrued investment income 5,756 3,191 25,204
Affiliated payables - net 3,735 5,542 (2,324)
Claims and claims settlement expenses 9,854 3,635 5,882
Federal income taxes - current 13,935 4,759 (7,848)
Other policyholder funds 5,813 (7,614) (7,547)
Liability for guaranty fund assessments (2,371) (3,630) (3,309)
Policy loans on insurance contracts (52,804) (54,054) (60,634)
Trading investment securities - - 11,352
Other, net 8,106 (9,296) (39,206)
Net cash and cash equivalents provided ----------- ----------- ----------
by operating activities 326,414 278,110 273,395
----------- ----------- ----------
</TABLE>
(Continued)
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Continued) (Dollars In Thousands)
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
INVESTING ACTIVITIES:
Sales of available-for-sale securities $ 834,120 $ 633,824 $ 864,095
Maturities of available-for-sale securities 536,449 570,923 1,323,705
Purchases of available-for-sale securities (954,368) (832,519) (678,974)
Mortgage loans principal payments received 22,789 30,767 32,341
Purchases of mortgage loans - (3,608) -
Sales of real estate held-for-sale 5,407 9,710 25,346
Improvements to real estate held-for-sale - improvements acquired - (683) (1,060)
Recapture of investment in Separate Accounts 8,829 6,559 -
Investment in Separate Accounts (10,063) (377) (15,212)
------------- ------------- -------------
Net cash and cash equivalents provided by investing activities 443,163 414,596 1,550,241
------------- ------------- -------------
FINANCING ACTIVITIES:
Dividends paid to parent (175,000) (100,000) (150,000)
Policyholders' account balances:
Deposits 542,062 567,430 966,861
Withdrawals (net of transfers to/from Separate Accounts) (1,090,572) (1,250,299) (2,623,628)
------------- ------------ ------------
Net cash and cash equivalents used by financing activities (723,510) (782,869) (1,806,767)
------------- ------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 46,067 (90,163) 16,869
CASH AND CASH EQUIVALENTS
Beginning of year 48,924 139,087 122,218
------------- ------------ ------------
End of year $ 94,991 $ 48,924 $ 139,087
============= ============ ============
Supplementary Disclosure of Cash Flow Information:
Cash paid to affiliates for:
Federal income taxes $ 8,880 $ 33,576 $ 30,351
Intercompany interest 988 1,310 679
</TABLE>
See notes to financial statements.
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
(Dollars in Thousands)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Reporting: Merrill Lynch Life Insurance Company (the
"Company") is a wholly-owned subsidiary of Merrill Lynch
Insurance Group, Inc. ("MLIG"). The Company is an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("Merrill
Lynch & Co.").
The Company sells non-participating life insurance and annuity
products which comprise one business segment. The primary
products that the Company currently markets are immediate
annuities, market value adjusted annuities, variable life
insurance and variable annuities. The Company is currently
licensed to sell insurance in forty-nine states, the District
of Columbia, the U.S. Virgin Islands and Guam. The Company
markets its products solely through the retail network of
Merrill Lynch, Pierce, Fenner & Smith, Incorporated ("MLPF&S"),
a wholly-owned subsidiary of Merrill Lynch & Co.
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles and
prevailing industry practices, both of which require management
to make estimates that affect the reported amounts and
disclosure of contingencies in the financial statements. Actual
results could differ from those estimates.
Revenue Recognition: Revenues for the Company's interest-
sensitive life, interest-sensitive annuity, variable life and
variable annuity products consist of policy charges for the
cost of insurance, deferred sales charges, policy
administration charges and/or withdrawal charges assessed
against policyholders' account balances during the period.
Policyholders' Account Balances: Liabilities for the Company's
universal life type contracts, including its life insurance and
annuity products, are equal to the full accumulation value of
such contracts as of the valuation date plus deficiency
reserves for certain products. Interest-crediting rates for the
Company's fixed-rate products are as follows:
Interest-sensitive life products 4.00% - 5.75%
Interest-sensitive deferred annuities 3.20% - 8.77%
Immediate annuities 3.00% - 10.00%
These rates may be changed at the option of the Company,
subject to minimum guarantees, after initial guaranteed rates
expire.
Liabilities for unpaid claims equal the death benefit for those
claims which have been reported to the Company and an estimate
based upon prior experience for those claims which are
unreported.
Reinsurance: In the normal course of business, the Company
seeks to limit its exposure to loss on any single insured life
and to recover a portion of benefits paid by ceding reinsurance
to other insurance enterprises or reinsurers under indemnity
reinsurance agreements, primarily excess coverage and
coinsurance agreements. The maximum amount of mortality risk
retained by the Company is approximately $500 on a single life.
Indemnity reinsurance agreements do not relieve the Company
from its obligations to policyholders. Failure of reinsurers to
honor their obligations could result in losses to the Company.
The Company regularly evaluates the financial condition of its
reinsurers so as to minimize its exposure to significant losses
from reinsurer insolvencies. The Company holds collateral under
reinsurance agreements in the form of letters of credit and
funds withheld totaling $576 that can be drawn upon for
delinquent reinsurance recoverables.
As of December 31, 1996, the Company had life insurance in-
force that was ceded to other life insurance companies of
$2,511,780.
Deferred Policy Acquisition Costs: Policy acquisition costs for
life and annuity contracts are deferred and amortized based on
the estimated future gross profits for each group of contracts.
These future gross profit estimates are subject to periodic
evaluation by the Company, with necessary revisions applied
against amortization to date. It is reasonably possible that
estimates of future gross profits could be reduced in the
future, resulting in a material reduction in the carrying
amount of deferred policy acquisition costs.
Policy acquisition costs are principally commissions and a
portion of certain other expenses relating to policy
acquisition, underwriting and issuance, that are primarily
related to and vary with the production of new business.
Certain costs and expenses reported in the statements of
earnings are net of amounts deferred. Policy acquisition costs
can also arise from the acquisition or reinsurance of existing
in-force policies from other insurers. These costs include
ceding commissions and professional fees related to the
reinsurance assumed. The deferred costs are amortized in
proportion to the estimated future gross profits over the
anticipated life of the acquired insurance contracts utilizing
an interest methodology.
The Company has entered into an assumption reinsurance
agreement with an unaffiliated insurer. The acquisition costs
relating to this agreement are being amortized over a twenty-
year period using an effective interest rate of 9.01%. This
reinsurance agreement provides for payment of contingent ceding
commissions based upon the persistency and mortality experience
of the insurance contracts assumed. Any payments made for the
contingent ceding commissions will be capitalized and amortized
using an identical methodology as that used for the initial
acquisition costs. The following is a reconciliation of the
acquisition costs related to the reinsurance agreement for the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Beginning balance $ 124,833 $ 133,388 $ 139,647
Capitalized amounts 5,077 13,708 12,517
Interest accrued 10,669 11,620 12,582
Amortization (28,330) (33,883) (31,358)
----------- ----------- -----------
Ending balance $ 112,249 $ 124,833 $ 133,388
=========== =========== ===========
</TABLE>
The following table presents the expected amortization, net of
interest accrued, of these deferred acquisition costs over the
next five years. The amortization may be adjusted based on
periodic evaluation of the expected gross profits on the
reinsured policies.
1997 $12,547
1998 8,958
1999 8,474
2000 8,142
2001 7,811
Investments: The Company's investments in fixed maturity and
equity securities are classified as available-for-sale
securities, which are carried at estimated fair value with
unrealized gains and losses included in stockholder's equity.
If a decline in value of a security is determined by management
to be other-than-temporary, the carrying value is adjusted to
the estimated fair value at the date of this determination and
recorded in theas net realized investment gains (losses).
During 1994, the Company classified certain of its investments
as trading securities, which were carried at estimated fair
value with unrealized gains and losses included in the
statements of earnings. All securities that were classified as
trading securities on November 1, 1994 were transferred to the
available-for-sale classification at their respective estimated
fair values on that date. The difference between the market
value at November 1, 1994 and par value is being amortized into
income based on the Company's premium amortization and discount
accretion policies.
For fixed maturity securities, premiums are amortized to the
earlier of the call or maturity date, discounts are accreted to
the maturity date, and interest income is accrued daily. For
equity securities, dividends are recognized on the ex-dividend
date. Realized gains and losses on the sale or maturity of the
investments are determined on the basis of identified cost.
Fixed maturity securities may contain securities which are
considered non-investment grade. The Company defines non-
investment grade fixed maturity securities as unsecured
corporate debt obligations that do not have a rating equivalent
to Standard and Poor's (or similar rating agency) BBB or higher
and are not guaranteed by an agency of the Federal government.
The Company has outstanding certain interest rate swap
contracts that are carried at estimated fair value and recorded
as a component of fixed maturity securities. Interest income
and realized and unrealized gains and losses are recorded on
the same basis as fixed maturity securities available-for-sale.
Mortgage loans are stated at unpaid principal balances, net of
valuation allowances. Such valuation allowances are based on
the decline in value expected to be realized on mortgage loans
that may not be collectible in full. In establishing valuation
allowances, management considers, among other things, the
estimated fair value of the underlying collateral.
The Company recognizes income from mortgage loans based on the
cash payment interest rate of the loan, which may be different
from the accrual interest rate of the loan for certain
outstanding mortgage loans. The Company will recognize a
realized gain at the date of the satisfaction of the loan at
contractual terms for loans where there is a difference between
the cash payment interest rate and the accrual interest rate.
For all loans the Company stops accruing income when an
interest payment default either occurs or is probable.
Impairments of mortgage loans are established as valuation
allowances and recorded to net realized investment gains or
losses.
The Company has previously made commercial mortgage loans
collateralized by real estate. The return on and the ultimate
recovery of these loans are generally dependent on the
successful operation, sale or refinancing of the real estate.
The Company monitors the effects of current and expected real
estate market conditions and other factors when assessing the
collectibility of mortgage loans. When, in management's
judgment, these assets are impaired, appropriate losses are
recorded. Such estimates necessarily include assumptions, which
may include anticipated improvements in selected market
conditions for real estate, which may or may not occur. The
more significant assumptions management considers involve
estimates of the following: lease absorption and sales rate;
real estate values and rates of return; operating expenses;
required capital improvements; inflation; and sufficiency of
any collateral independent of the real estate. Management
believes that the carrying value approximates the fair value of
these investments.
Real estate held-for-sale, is stated at cost less valuation
allowances and estimated selling costs.
Policy loans on insurance contracts are stated at unpaid
principal balances.
Income Taxes: The results of operations of the Company are
included in the consolidated Federal income tax return of
Merrill Lynch & Co. The Company has entered into a tax-sharing
agreement with Merrill Lynch & Co. whereby the Company will
calculate its current tax provision based on its operations.
Under the agreement, the Company periodically remits to Merrill
Lynch & Co. its current Federal tax liability.
The Company uses the asset and liability method in providing
income taxes on all transactions that have been recognized in
the financial statements. The asset and liability method
requires that deferred taxes be adjusted to reflect the tax
rates at which future taxable amounts will be settled or
realized. The effects of tax rate changes on future deferred
tax liabilities and deferred tax assets, as well as other
changes in income tax laws, are recognized in net earnings in
the period such changes are enacted. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amounts expected to be realized.
Insurance companies are generally subject to taxes on premiums
and in substantially all states are exempt from state income
taxes.
Separate Accounts: Separate Accounts are established in
conformity with Arkansas State Insurance law, the Company's
domiciliary state, and are generally not chargeable with
liabilities that arise from any other business of the Company.
Separate Accounts assets may be subject to general claims of
the Company only to the extent the value of such assets exceeds
Separate Accounts liabilities.
Assets and liabilities of Separate Accounts, representing net
deposits and accumulated net investment earnings less fees,
held primarily for the benefit of policyholders, are shown as
separate captions in the balance sheets.
Statements of Cash Flows: For the purpose of reporting cash
flows, cash and cash equivalents include cash on hand and on
deposit and short-term investments with original maturities of
three months or less.
Reclassifications: To facilitate comparisons with the current
year, certain amounts in the prior years have been
reclassified.
<PAGE>
NOTE 2. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments are carried at fair value or amounts that
approximate the fair value. The carrying value of financial
instruments as of December 31 were:
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Assets:
Fixed maturity securities:
Securities (1) $ 3,301,858 $ 3,807,310
Interest rate swaps (2) (270) 560
-------------- --------------
Total fixed maturity securities 3,301,588 3,807,870
-------------- --------------
Equity securities (1) 35,977 21,433
Mortgage loans (3) 70,503 121,248
Policy loans on insurance contracts (4) 1,092,071 1,039,267
Cash and cash equivalents (5) 94,991 48,924
Separate Accounts assets (6) 7,615,362 6,834,353
-------------- ---------------
Total financial instruments recorded as assets $ 12,210,492 $ 11,873,095
============== ===============
</TABLE>
(1) For publicly traded securities, the estimated fair value
is determined using quoted market prices. For securities
without a readily ascertainable market value, the Company
has determined an estimated fair value using a discounted
cash flow model, including provision for credit risk,
based upon the assumption that such securities will be
held to maturity. Such estimated fair values do not
necessarily represent the values for which these
securities could have been sold at the dates of the
balance sheets. At December 31, 1996 and 1995, securities
without a readily ascertainable market value, having an
amortized cost of $338,515, and $425,469, had an estimated
fair value of $348,066, and $448,785, respectively.
(2) Estimated fair values for the Company's interest rate
swaps are based on a discounted cash flow model.
(3) The estimated fair value of mortgage loans approximates
the carrying value. See Note 1 for a discussion of the
Company's valuation process.
(4) The Company estimates the fair value of policy loans as
equal to the book value of the loans. Policy loans are
fully collateralized by the account value of the
associated insurance contracts, and the spread between the
policy loan interest rate and the interest rate credited
to the account value held as collateral is fixed.
(5) The estimated fair value of cash and cash equivalents
approximates the carrying value.
(6) Assets held in Separate Accounts are carried at quoted
market values.
<PAGE>
NOTE 3. INVESTMENTS
The amortized cost and estimated fair value of investments in
fixed maturity securities and equity securities as of December
31 were:
<TABLE>
<CAPTION>
1996
------------------------------------------------------------------------
Cost / Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Fixed maturity securities:
Corporate debt securities $ 2,652,225 $ 67,590 $ 11,765 $ 2,708,050
Mortgage-backed securities 503,997 12,447 1,948 514,496
U.S. Government and agencies 54,386 2,303 158 56,531
Foreign governments 18,111 182 140 18,153
Municipals 3,924 434 - 4,358
-------------- -------------- -------------- --------------
Total fixed maturity securities $ 3,232,643 $ 82,956 $ 14,011 $ 3,301,588
============== ============== ============== ==============
Equity securities:
Non-redeemable preferred stocks $ 30,554 $ 2,983 $ 85 $ 33,452
Common stocks 2,434 91 - 2,525
--------------- -------------- -------------- --------------
Total equity securities $ 32,988 $ 3,074 $ 85 $ 35,977
=============== ============== ============== ==============
1995
------------------------------------------------------------------------
Cost / Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------- -------------- -------------- --------------
Fixed maturity securities:
Corporate debt securities $ 2,917,628 $ 138,159 $ 7,526 $ 3,048,261
Mortgage-backed securities 625,866 22,098 717 647,247
U.S. Government and agencies 95,002 6,061 - 101,063
Foreign governments 6,210 280 - 6,490
Municipals 4,277 532 - 4,809
-------------- -------------- -------------- --------------
Total fixed maturity securities $ 3,648,983 $ 167,130 $ 8,243 $ 3,807,870
============== ============== ============== ==============
Equity securities:
Non-redeemable preferred stocks $ 16,937 $ 1,428 $ 113 $ 18,252
Common stocks 2,746 498 63 3,181
-------------- -------------- -------------- --------------
Total equity securities $ 19,683 $ 1,926 $ 176 $ 21,433
============== ============== ============== ==============
</TABLE>
<PAGE>
The amortized cost and estimated fair value of fixed maturity
securities at December 31, 1996 by contractual maturity were:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
------------- -------------
<S> <C> <C>
Fixed maturity securities:
Due in one year or less $ 270,571 $ 271,303
Due after one year through five years 1,486,819 1,521,334
Due after five years through ten years 763,475 781,372
Due after ten years 207,781 213,083
------------- -------------
2,728,646 2,787,092
Mortgage-backed securities 503,997 514,496
------------- -------------
Total fixed maturity securities $ 3,232,643 $ 3,301,588
============= =============
</TABLE>
Fixed maturity securities not due at a single maturity date
have been included in the preceding table in the year of final
maturity. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment
penalties.
The amortized cost and estimated fair value of fixed maturity
securities at December 31, 1996 by rating agency equivalent
were:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
------------- -------------
<S> <C> <C>
AAA $ 716,749 $ 730,513
AA 181,962 185,000
A 910,355 932,417
BBB 1,245,457 1,272,901
Non-investment grade 178,120 180,757
------------- -------------
Total fixed maturity securities $ 3,232,643 $ 3,301,588
============= =============
</TABLE>
<PAGE>
The Company has recorded certain adjustments to deferred policy
acquisition costs and policyholders' account balances in
connection with investments classified as available-for-sale.
The Company adjusts those assets and liabilities as if the
unrealized investment gains or losses from securities
classified as available-for-sale had actually been realized,
with corresponding credits or charges reported directly to
stockholder's equity. The following reconciles the net
unrealized investment gain on investment securities classified
as available-for-sale as of December 31:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Assets:
Fixed maturity securities $ 68,945 $ 158,887
Equity securities 2,989 1,750
Deferred policy acquisition costs (4,630) (17,041)
Federal income taxes - deferred (2,959) (9,100)
Separate Accounts assets 168 (164)
------------- -------------
64,513 134,332
------------- -------------
Liabilities:
Policyholders' account balances 59,017 117,432
------------- -------------
Stockholder's equity:
Net unrealized investment gain on investment securities $ 5,496 $ 16,900
============= =============
</TABLE>
The Company has entered into interest rate swap contracts for
the purpose of minimizing exposure to fluctuations in interest
rates related to specific investment securities held.
The notional amount of such swaps outstanding at December 31,
1996 and 1995 was approximately $9,000 and $30,000,
respectively. The swaps were transacted with investment
grade counterparties. As of December 31, 1996, the Company's
interest rate swap contract was in a $270 unrealized loss
position. There were no outstanding interest rate swaps in a
loss position at December 31, 1995. During 1994, net realized
investment gains of $470 were recorded in connection with
interest rate swap activity. During 1996 and 1995, there
were no realized investment gains or losses recorded.
Proceeds and gross realized investment gains and losses from
the sale of available-for-sale securities for the years ended
December 31 were:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Proceeds $ 834,120 $ 633,824 $ 864,095
Gross realized investment gains 19,078 14,196 11,091
Gross realized investment losses 10,749 10,813 11,026
</TABLE>
During 1994, $7,285 of unrealized holding losses from
investment trading securities were recorded in net realized
investment gains (losses).
The Company owned investment securities with a carrying
value of $27,726 and $28,166 that were deposited with
insurance regulatory authorities at December 31, 1996 and
1995, respectively.
At December 31, 1996 and 1995, the Company had invested
$10,168 and $8,496 in Separate Accounts, including unrealized
gains (losses) of $168 and $(164), respectively. The
investments in Separate Accounts are for the purpose of
providing original funding of certain mutual fund portfolios
available as investment options to variable life and annuity
policyholders.
The Company's investment in mortgage loans are principally
collateralized by commercial real estate. The largest
concentrations of commercial real estate mortgage loans at
December 31, 1996, as measured by the outstanding principal
balance, are for properties located in Illinois ($27,877 or
32%), Rhode Island ($19,291 or 22%) and California ($11,953 or
14%).
The carrying value and established valuation allowances of
impaired mortgage loans on real estate as of December 31, 1996
and 1995 are:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Carrying value $ 44,239 $ 88,068
Valuation allowance 17,652 35,881
</TABLE>
Additional information on impaired loans for the years ended
December 31 follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
Average investment in impaired loans $ 61,891 $ 123,949 $ 112,043
Interest income recognized (cash-basis) 4,848 5,482 6,542
</TABLE>
For the years ended December 31, 1996, 1995 and 1994, $28,555,
$1,300 and $4,652, respectively, of real estate held-for-sale
was acquired in satisfaction of debt.
<PAGE>
Net investment income arose from the following sources for the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
Fixed maturity securities $ 266,916 $ 305,648 $ 368,023
Equity securities 1,876 1,329 2,408
Mortgage loans 9,764 12,250 15,014
Real estate held-for-sale 563 153 406
Policy loans on insurance contracts 56,512 53,576 50,232
Cash and cash equivalents 6,710 8,463 5,936
Other 899 1,753 (447)
----------- ----------- ------------
Gross investment income 343,240 383,172 441,572
Less investment expenses (6,579) (7,006) (8,036)
----------- ----------- ------------
Net investment income $ 336,661 $ 376,166 $ 433,536
=========== =========== ============
</TABLE>
Net realized investment gains (losses), including changes in
valuation allowances for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
Fixed maturity securities $ 4,690 $ 1,908 $ (13,314)
Equity securities 3,639 1,475 910
Investment in Separate Accounts 106 (369) -
Mortgage loans 599 334 (4,967)
Real estate held-for-sale (171) 1,177 2,828
Cash and cash equivalents (1) - -
----------- ----------- -----------
Net realized investment gains (losses) $ 8,862 $ 4,525 $ (14,543)
=========== =========== ===========
</TABLE>
The following is a reconciliation of the change in valuation
allowances that have been recorded to reflect other-than-
temporary declines in estimated fair value of mortgage loans
and real estate held-for-sale for the years ended December 31:
<TABLE>
<CAPTION>
Balance at Additions Balance at
Beginning Charged to Write - End
of Year Operations Downs of Year
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Mortgage loans:
1996 $ 35,881 $ - $ 18,229 $ 17,652
1995 40,070 - 4,189 35,881
1994 45,924 4,966 10,820 40,070
Real estate held-for-sale:
1996 2,200 - - 2,200
1995 5,766 - 3,566 2,200
1994 7,628 - 1,862 5,766
</TABLE>
<PAGE>
The Company held investments at December 31, 1996 of $1,182
which have been non-income producing for the preceding twelve
months.
During 1994, the Company committed to participate in a limited
partnership that invests in leveraged transactions. As of
December 31, 1996, $2,027 has been advanced towards the
Company's $10,000 commitment to the limited partnership.
NOTE 4. FEDERAL INCOME TAXES
The following is a reconciliation of the provision for income
taxes based on earnings before income taxes, computed using the
Federal statutory tax rate, with the provision for income taxes
for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Provision for income taxes computed at Federal statutory rate $ 41,048 $ 41,575 $ 31,459
Increase (decrease) in income taxes resulting from:
Release of policyholders' surplus - 1,991 -
Tax deductible interest - (718) -
Dividend received deduction (3,135) (532) (7,363)
Other (21) (13) (218)
----------- ----------- -----------
Federal income tax provision $ 37,892 $ 42,303 $ 23,878
=========== =========== ===========
</TABLE>
The Federal statutory rate for each of the three years in the
period ended December 31, 1996 was 35%.
The Company provides for deferred income taxes resulting from
temporary differences that arise from recording certain
transactions in different years for income tax reporting
purposes than for financial reporting purposes. The sources of
these differences and the tax effect of each are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Deferred policy acquisition costs $ (5,770) $ (2,179) $ 6,416
Policyholders' account balances 15,004 66 5,322
Liability for guaranty fund assessments 760 249 (153)
Investment adjustments 5,122 5,563 3,276
Other (38) 269 (13,486)
------------ ----------- -----------
Deferred Federal income tax provision $ 15,078 $ 3,968 $ 1,375
============ =========== ===========
</TABLE>
<PAGE>
Deferred tax assets and liabilities as of December 31 are
determined as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Policyholders' account balances $ 79,083 $ 94,087
Investment adjustments 5,671 10,793
Liability for guaranty fund assessments 6,571 7,331
----------- -----------
Total deferred tax assets 91,325 112,211
=========== ===========
Deferred tax liabilities:
Deferred policy acquisition costs 91,092 96,862
Net unrealized investment gain on investment securities 2,959 9,100
Other 3,988 4,027
----------- -----------
Total deferred tax liabilities 98,039 109,989
----------- -----------
Net deferred tax asset (liability) $ (6,714) $ 2,222
=========== ===========
</TABLE>
The Company anticipates that all deferred tax assets will be
realized; therefore no valuation allowance has been provided.
<PAGE>
NOTE 5. RELATED PARTY TRANSACTIONS
The Company and MLIG are parties to a service agreement whereby
MLIG has agreed to provide certain accounting, data processing,
legal, actuarial, management, advertising and other services to
the Company. Expenses incurred by MLIG in relation to this
service agreement are reimbursed by the Company on an allocated
cost basis. Charges billed to the Company by MLIG pursuant to
the agreement were $43,515, $41,729 and $43,497 for the years
ended December 31, 1996, 1995 and 1994, respectively. The
Company is allocated interest expense on its accounts payable
to MLIG which approximates the daily Federal funds rate. Total
intercompany interest paid was $988, $1,310 and $679 for 1996,
1995 and 1994, respectively.
The Company and Merrill Lynch Asset Management, L.P. ("MLAM")
are parties to a service agreement whereby MLAM has agreed to
provide certain invested asset management services to the
Company. The Company pays a fee to MLAM for these services
through the MLIG service agreement. Charges attributable to
this agreement and allocated to the Company by MLIG were
$2,279, $2,635 and $2,732 for 1996, 1995 and 1994,
respectively.
MLAM and MLIG have entered into an agreement with respect to
administrative services for the Merrill Lynch Series Fund, Inc.
("Series Fund") and Merrill Lynch Variable Series Funds, Inc.
("Variable Series Funds"). The Company invests in the various
mutual fund portfolios of the Series Fund and the Variable
Series Funds in connection with the variable life and annuities
the Company has in-force. Under this agreement, MLAM pays
compensation to MLIG in an amount equal to a portion of the
annual gross investment advisory fees paid by the Series Fund
and the Variable Series Funds to MLAM. The Company received
from MLIG its allocable share of such compensation in the
amount of $16,514, $13,293 and $12,600 during 1996, 1995 and
1994, respectively.
The Company has a general agency agreement with Merrill Lynch
Life Agency Inc. ("MLLA") whereby registered representatives of
MLPF&S, who are the Company's licensed insurance agents,
solicit applications for contracts to be issued by the Company.
MLLA is paid commissions for the contracts sold by such agents.
Commissions paid to MLLA were $42,639, $43,984 and $84,231 for
1996, 1995 and 1994, respectively. Substantially all of these
commissions were capitalized as deferred policy acquisition
costs and are being amortized in accordance with the policy
discussed in Note 1.
The Company has entered into interest rate swap contracts with
Merrill Lynch Capital Services, Inc. ("MLCS") with a guarantee
from Merrill Lynch & Co. As of December 31, 1996 and 1995, the
notional amount of such interest rate swap contracts
outstanding was $9,000 and $10,000, respectively. During 1994,
the Company and MLCS terminated certain interest rate swap
contracts resulting in the Company paying a net consideration
of $2,043. Net interest received from these interest rate swap
contracts was $(117), $256, and $782 for 1996, 1995 and 1994,
respectively.
<PAGE>
NOTE 6. STOCKHOLDER'S EQUITY AND STATUTORY REGULATIONS
During 1996, 1995, and 1994 the Company paid dividends of
$175,000, $100,000, and $150,000, respectively, to MLIG. Of
these stockholder's dividends, $175,000, $73,757, and $112,779,
respectively, were extraordinary dividends as defined by
Arkansas Insurance Law and were paid pursuant to approval
granted by the Arkansas Insurance Commissioner.
At December 31, 1996 and 1995, approximately $24,970 and
$30,195, respectively, of stockholder's equity was available
for distribution to MLIG. Statutory capital and surplus at
December 31, 1996 and 1995, was $251,697 and $303,950,
respectively.
Applicable insurance department regulations require that the
Company report its accounts in accordance with statutory
accounting practices. Statutory accounting practices primarily
differ from the principles utilized in these financial
statements by charging policy acquisition costs to expense as
incurred, establishing future policy benefit reserves using
different actuarial assumptions, not providing for deferred
income taxes, and valuing securities on a different basis. The
Company's statutory net income for 1996, 1995 and 1994 was
$93,532, $121,451 and $42,382, respectively.
The National Association of Insurance Commissioners ("NAIC")
utilizes the Risk Based Capital ("RBC") adequacy monitoring
system. The RBC calculates the amount of adjusted capital which
a life insurance company should have based upon that company's
risk profile. As of December 31, 1996 and 1995, based on the
RBC formula, the Company's total adjusted capital level was
403% and 395%, respectively, of the minimum amount of capital
required to avoid regulatory action.
NOTE 7. COMMITMENTS AND CONTINGENCIES
State insurance laws generally require that all life insurers
who are licensed to transact business within a state become
members of the state's life insurance guaranty association.
These associations have been established for the protection of
policyholders from loss (within specified limits) as a result
of the insolvency of an insurer. At the time an insolvency
occurs, the guaranty association assesses the remaining members
of the association an amount sufficient to satisfy the
insolvent insurer's policyholder obligations (within specified
limits). During 1991, and to a lesser extent 1992, there were
certain highly publicized life insurance insolvencies. The
Company has utilized public information to estimate what future
assessments it will incur as a result of these insolvencies. At
December 31, 1996 and 1995, the Company has established an
estimated liability for future guaranty fund assessments of
$18,773 and $21,144, respectively. The Company regularly
monitors public information regarding insurer insolvencies and
will adjusts its estimated liability as appropriate.
In the normal course of business, the Company is subject to
various claims and assessments. Management believes the
settlement of these matters would not have a material effect on
the financial position or results of operations of the Company.
* * * * * *
<PAGE> 58
PROSPECTUS
May 1, 1997
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR VARIABLE
UNIVERSAL LIFE INSURANCE CONTRACT
ISSUED BY
MERRILL LYNCH LIFE INSURANCE COMPANY
HOME OFFICE: LITTLE ROCK, ARKANSAS 72201
SERVICE CENTER: P.O. BOX 9025
SPRINGFIELD, MASSACHUSETTS 01102-9025
1414 MAIN STREET, THIRD FLOOR
SPRINGFIELD, MASSACHUSETTS 01104-1007
PHONE: (800) 354-5333
OFFERED THROUGH
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
This Prospectus is for a flexible premium joint and last survivor variable
universal life insurance contract (the "Contract"). As of the date of this
prospectus, the Contract is only offered by Merrill Lynch Life Insurance Company
("Merrill Lynch Life"), a subsidiary of Merrill Lynch & Co., Inc., in
Massachusetts, Pennsylvania, and Vermont.
During the "free look" period, the initial payment less contract loading will be
invested only in the division investing in the Money Reserve Portfolio. After
the "free look" period, the contract owner may invest in up to any five of the
38 investment divisions of Merrill Lynch Variable Life Separate Account (the
"Separate Account"), the Merrill Lynch Life separate investment account
available under the Contract. The investments available through the investment
divisions include ten mutual fund portfolios of the Merrill Lynch Series Fund,
Inc.; seven mutual fund portfolios of the Merrill Lynch Variable Series Funds,
Inc.; two mutual fund portfolios of the AIM Variable Insurance Funds, Inc.; one
mutual fund portfolio of the Alliance Variable Products Series Fund, Inc.; two
mutual fund portfolios of the MFS Variable Insurance Trust; and sixteen unit
investment trusts in The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury
Securities. Currently, the contract owner may change his or her investment
allocation as many times as desired.
The Contract provides an estate benefit through life insurance coverage on the
lives of two insureds with proceeds payable upon the death of the last surviving
insured. The Contract offers two death benefit options. At the election of the
contract owner, the death benefit may include the Contract's cash value.
Contract owners may purchase additional insurance through an additional
insurance rider, the amount of which may be increased or decreased subject to
certain conditions. Merrill Lynch Life guarantees that the coverage will remain
in force for the guarantee period. Each payment will extend the guarantee period
until such time as the guarantee period is established for the whole of life of
the younger insured. During this guarantee period, Merrill Lynch Life will
terminate the Contract only if the debt exceeds certain contract values. After
the guarantee period, the Contract will remain in force as long as there is not
excessive debt and as long as the cash value is sufficient to cover the charges
due. While the Contract is in force, the death benefit may vary to reflect the
investment results of the investment divisions chosen, but will generally never
be less than the current face amount.
The Contract allows for additional payments. Contract owners may also borrow up
to the loan value of the Contract, make partial withdrawals or turn in the
Contract for its net cash surrender value. The net cash surrender value will
vary with the investment results of the investment divisions chosen. Merrill
Lynch Life does not guarantee any minimum net cash surrender value.
It may not be advantageous to replace existing insurance with the Contract.
Within certain limits the Contract may be converted to a contract with benefits
that do not vary with the investment results of a separate account.
THE PURCHASE OF THIS CONTRACT INVOLVES CERTAIN RISKS. BECAUSE IT IS A VARIABLE
LIFE INSURANCE CONTRACT, THE VALUE OF THE CONTRACT REFLECTS THE INVESTMENT
PERFORMANCE OF THE SELECTED INVESTMENT OPTIONS. INVESTMENT RESULTS CAN VARY BOTH
UP AND DOWN AND CAN EVEN DECREASE THE VALUE OF PREMIUM PAYMENTS. THEREFORE,
CONTRACT OWNERS COULD LOSE ALL OR PART OF THE MONEY THEY HAVE INVESTED. MERRILL
LYNCH LIFE DOES NOT GUARANTEE THE VALUE OF THE CONTRACT. RATHER, CONTRACT OWNERS
BEAR ALL INVESTMENT RISKS.
LIFE INSURANCE IS INTENDED TO BE A LONG-TERM INVESTMENT. CONTRACT OWNERS SHOULD
EVALUATE THEIR INSURANCE NEEDS AND THE CONTRACT'S LONG-TERM INVESTMENT POTENTIAL
AND RISKS BEFORE PURCHASING THE CONTRACT.
PARTIAL WITHDRAWALS AND SURRENDER OF THE CONTRACT ARE SUBJECT TO TAX, AND IF
TAKEN BEFORE THE CONTRACT OWNER ATTAINS AGE 59 1/2 MAY ALSO BE SUBJECT TO A 10%
FEDERAL PENALTY TAX. LOANS MAY BE TAXABLE IF THE CONTRACT BECOMES A "MODIFIED
ENDOWMENT CONTRACT."
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT MUST BE
ACCOMPANIED BY CURRENT PROSPECTUSES FOR THE MERRILL LYNCH SERIES FUND, INC.; THE
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.; THE AIM VARIABLE INSURANCE FUNDS,
INC.; THE ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.; THE MFS VARIABLE
INSURANCE TRUST; AND THE MERRILL LYNCH FUND OF STRIPPED ("ZERO") U.S. TREASURY
SECURITIES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 59
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
IMPORTANT TERMS........................................................................ 4
SUMMARY OF THE CONTRACT
Purpose of the Contract.............................................................. 5
Availability and Payments............................................................ 5
CMA(R) Insurance Service............................................................. 6
The Investment Divisions............................................................. 6
How the Death Benefit Varies......................................................... 6
How the Investment Base Varies....................................................... 6
Net Cash Surrender Value............................................................. 7
Illustrations........................................................................ 7
Replacement of Existing Coverage..................................................... 7
Rights to Cancel ("Free Look" Period) or Convert..................................... 7
How Death Benefit and Cash Value Increases are Taxed................................. 7
Loans................................................................................ 8
Partial Withdrawals.................................................................. 8
Fees and Charges..................................................................... 8
FACTS ABOUT THE SEPARATE ACCOUNT, THE FUNDS, THE ZERO TRUSTS AND MERRILL LYNCH LIFE
The Separate Account................................................................. 9
The Series Fund...................................................................... 9
The Variable Series Funds............................................................ 10
The AIM V.I. Funds................................................................... 11
The Alliance Fund.................................................................... 11
The MFS Trust........................................................................ 12
Certain Risks of the Funds........................................................... 12
The Zero Trusts...................................................................... 13
Merrill Lynch Life and MLPF&S........................................................ 13
FACTS ABOUT THE CONTRACT
Who May be Covered................................................................... 14
Purchasing a Contract................................................................ 14
Additional Insurance Rider........................................................... 15
Additional Payments.................................................................. 16
Effect of Additional Payments........................................................ 16
Investment Base...................................................................... 17
Charges Deducted from the Investment Base............................................ 17
Contract Loading..................................................................... 18
Charges to the Separate Account...................................................... 18
Charges to Fund Assets............................................................... 19
Guarantee Period..................................................................... 20
Cash Value........................................................................... 21
Loans................................................................................ 21
Partial Withdrawals.................................................................. 22
Death Benefit Proceeds............................................................... 23
Payment of Death Benefit Proceeds.................................................... 24
Rights to Cancel or Convert.......................................................... 25
Reports to Contract Owners........................................................... 25
MORE ABOUT THE CONTRACT
Using the Contract................................................................... 26
Some Administrative Procedures....................................................... 27
Other Contract Provisions............................................................ 28
Income Plans......................................................................... 29
Group or Sponsored Arrangements...................................................... 29
Unisex Legal Considerations for Employers............................................ 30
Selling the Contracts................................................................ 30
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Tax Considerations................................................................... 31
Merrill Lynch Life's Income Taxes.................................................... 34
Reinsurance.......................................................................... 34
MORE ABOUT THE SEPARATE ACCOUNT AND ITS DIVISIONS
About the Separate Account........................................................... 34
Changes Within the Account........................................................... 34
Net Rate of Return for an Investment Division........................................ 35
The Funds............................................................................ 35
The Zero Trusts...................................................................... 37
ILLUSTRATIONS
Illustrations of Death Benefits, Investment Base, Net Cash Surrender Values and
Accumulated Payments.............................................................. 38
EXAMPLES
Additional Payments.................................................................. 44
Partial Withdrawals.................................................................. 45
Changing the Death Benefit Option.................................................... 46
MORE ABOUT MERRILL LYNCH LIFE INSURANCE COMPANY
Directors and Executive Officers..................................................... 47
Services Arrangement................................................................. 47
State Regulation..................................................................... 47
Legal Proceedings.................................................................... 48
Experts.............................................................................. 48
Legal Matters........................................................................ 48
Registration Statements.............................................................. 48
Financial Statements................................................................. 48
Financial Statements of Merrill Lynch Variable Life Separate Account................. S-1
Financial Statements of Merrill Lynch Life Insurance Company......................... G-1
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
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IMPORTANT TERMS
additional payment: is a payment which may be made after the "free look"
period. Additional payments do not require evidence of insurability.
attained age: is, for each insured, the issue age of the insured plus the
number of full years since the contract date.
base premium: is the amount equal to the level annual premium necessary for the
face amount of the Contract to endow at the younger insured's age 100. Merrill
Lynch Life assumes death benefit option 1 is elected and further assumes a 5%
annual rate of return on the base premium less contract loading and a maximum
cost of insurance charge. Once determined, the base premium will not change.
cash value: is equal to the investment base plus any unearned charges for cost
of insurance and rider costs plus any debt less any accrued net loan cost since
the last contract anniversary (or since the contract date during the first
contract year).
cash value corridor factor: is used to determine the amount of death benefit
purchased by $1.00 of cash value. Merrill Lynch Life uses this factor in the
calculation of the variable insurance amount to make sure that the Contract
always meets the requirements of what constitutes a life insurance contract
under the Internal Revenue Code.
contract anniversary: is the same date of each year as the contract date.
contract date: is used to determine processing dates, contract years and
anniversaries. It is usually the business day next following the receipt of the
initial payment at the Service Center. It is also referred to as the policy
date.
contract loading: is chargeable to all payments for sales load, federal tax and
premium tax charges.
death benefit: if option 1 is elected, it is the larger of the face amount and
the variable insurance amount; if option 2 is elected, it is the larger of the
face amount plus the cash value and the variable insurance amount.
death benefit proceeds: are equal to the death benefit plus the amount of any
insurance provided by a rider less any debt.
debt: is the sum of all outstanding loans on a Contract plus accrued interest.
excess sales load: a portion of the sales load calculated during the first two
policy years that may be refunded in the event of surrender during the first two
policy years. After policy year two, the excess load is zero.
face amount: is the minimum death benefit as long as the Contract remains in
force. The face amount will change if a change in death benefit option is made
or if a partial withdrawal is taken.
fixed base: is calculated in the same manner as the cash value except that 5%
is substituted for the net rate of return, the guaranteed maximum cost of
insurance rates and guaranteed maximum rider costs are substituted for current
rates and loans and repayments are not taken into account. After the end of the
guarantee period, the fixed base is zero.
guarantee period: is the time guaranteed that the Contract will remain in force
regardless of investment experience, unless the debt exceeds certain values. It
is the period that a comparable fixed life insurance contract (same face amount,
payments made, guaranteed mortality table, contract loading and guaranteed
maximum rider costs) would remain in force if credited with 5% interest per
year.
in force date: is the date when the underwriting process is complete, the
initial payment is received and outstanding contract amendments (if any) are
received.
initial payment: is the payment required to put the Contract into effect.
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investment base: is the amount available under a Contract for investment in the
Separate Account at any time. A contract owner's investment base is the sum of
the amounts invested in each of the selected investment divisions.
investment division: is any division in the Separate Account.
issue age: is, for each insured, the insured's age as of his or her birthday
nearest the contract date.
issue date: is the date that the Contract is issued. The contestable and
suicide periods are measured from this date.
net amount at risk: is the excess, as of a processing date, of the death
benefit (adjusted for interest at an annual rate of 5%) over the cash value, but
before the deduction for cost of insurance.
net cash surrender value: is equal to the cash value less debt.
processing dates: are the contract date and the first day of each contract
quarter thereafter. Processing dates are the days when Merrill Lynch Life
deducts certain charges from the investment base.
processing period: is the period between consecutive processing dates.
target premium: is equal to 75% of the base premium.
variable insurance amount: is computed daily by multiplying the cash value
(plus certain excess sales load during the first 24 months after the Contract is
issued) by the cash value corridor factor for the younger insured at his or her
attained age.
SUMMARY OF THE CONTRACT
PURPOSE OF THE CONTRACT
This flexible premium joint and last survivor variable universal life insurance
contract offers a choice of investments and an opportunity for the Contract's
investment base, cash value and death benefit to grow based on investment
results.
Merrill Lynch Life does not guarantee that contract values will increase.
Depending on the investment results of selected investment divisions, the
investment base, cash value and death benefit may increase or decrease on any
day. The contract owner bears the investment risk. Merrill Lynch Life guarantees
to keep the Contract in force during the guarantee period subject to the effect
of any debt.
Life insurance is not a short-term investment. The contract owner should
evaluate the need for insurance and the Contract's long-term investment
potential and risks before purchasing a Contract.
AVAILABILITY AND PAYMENTS
The Contract is available in most jurisdictions in which Merrill Lynch Life does
business. A Contract may be issued for insureds from age 20 through age 85. The
minimum initial payment is 75% of the base premium.
Merrill Lynch Life will not accept an initial payment that provides a guarantee
period of less than two years. The guarantee period is the period of time
Merrill Lynch Life guarantees that the Contract will remain in force regardless
of investment experience unless the debt exceeds certain values.
Contract owners may make additional payments. Contract owners may specify an
additional payment amount on the application to be paid on either a quarterly or
annual basis. For additional payments not being withdrawn from a CMA account,
Merrill Lynch Life will send reminder notices for such amounts beginning in the
second contract year.
The Contract is not available to insure residents of certain municipalities in
Kentucky where premium taxes in excess of a certain level are imposed.
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CMA(R) INSURANCE SERVICE
Contract owners who subscribe to the Merrill Lynch Cash Management Account(R)
financial service ("CMA account") may elect to have their Contract linked to
their CMA account electronically. Certain transactions will be reflected in
monthly CMA account statements. Payments may be transferred to and from the
Contract through a CMA account.
THE INVESTMENT DIVISIONS
During the "free look" period, the initial payment less contract loading will be
invested in the investment division of the Separate Account investing in the
Money Reserve Portfolio. After the "free look" period, the contract owner may
select up to five of the 38 investment divisions in the Separate Account. (See
"Changing the Allocation" on page 17.)
Payments are invested in investment divisions of the Separate Account. Ten
investment divisions of the Separate Account invest exclusively in shares of
designated mutual fund portfolios of the Merrill Lynch Series Fund, Inc. (the
"Series Fund"). Seven investment divisions of the Separate Account invest
exclusively in Class A shares of designated mutual fund portfolios of the
Merrill Lynch Variable Series Funds, Inc. (the "Variable Series Funds"). Two
investment divisions of the Separate Account invest exclusively in shares of
designated mutual fund portfolios of the AIM Variable Insurance Funds, Inc. (the
"AIM V.I. Funds"). One investment division of the Separate Account invests
exclusively in shares of a designated mutual fund portfolio of the Alliance
Variable Products Series Fund, Inc. (the "Alliance Fund"). Two investment
divisions of the Separate Account invest exclusively in shares of designated
mutual fund portfolios of the MFS Variable Insurance Trust (the "MFS Trust").
Each mutual fund portfolio has a different investment objective. The other
sixteen investment divisions invest in units of designated unit investment
trusts in The Merrill Lynch Fund of Stripped ("Zero") U.S. Treasury Securities
(the "Zero Trusts"). The contract owner's payments are not invested directly in
the Series Fund, the Variable Series Funds, the AIM V.I. Funds, the Alliance
Fund, or the MFS Trust (each, a "Fund"; collectively, the "Funds"); or in the
Zero Trusts.
HOW THE DEATH BENEFIT VARIES
Contract owners elect a death benefit option on the application. Under option 1,
the death benefit equals the larger of the face amount or the variable insurance
amount. Under option 2, the death benefit equals the larger of the sum of the
face amount plus the cash value or the variable insurance amount. Subject to
certain conditions, contract owners may change the death benefit option. The
death benefit may increase or decrease on any day depending on the investment
results of the investment divisions chosen by the contract owner. Death benefit
proceeds equal the death benefit reduced by any debt and increased by any rider
benefits payable. (See "Death Benefit Proceeds" on page 23.)
HOW THE INVESTMENT BASE VARIES
A Contract's investment base is the amount available for investment at any time.
On the contract date(usually the business day next following receipt of the
initial payment at the Service Center), the investment base is equal to the
initial payment less contract loading and charges for cost of insurance and
rider costs. Afterwards, it varies daily based on investment performance of the
investment divisions chosen. The contract owner bears the risk of poor
investment performance and receives the benefit of favorable investment
performance. Contract owners may wish to consider diversifying their investment
in the Contract by allocating the investment base to two or more investment
divisions.
- ---------------
Cash Management Account and CMA are registered trademarks of Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
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NET CASH SURRENDER VALUE
Contract owners may surrender their Contracts at any time and receive the net
cash surrender value. The net cash surrender value varies daily based on
investment performance of the investment divisions chosen. Merrill Lynch Life
doesn't guarantee any minimum net cash surrender value. If the Contract is
surrendered within 24 months after issue, the contract owner will receive
certain excess sales load. (See "Contract Loading -- Excess Sales Load" on page
18.)
ILLUSTRATIONS
Illustrations in this Prospectus or used in connection with the purchase of the
Contract are based on hypothetical investment rates of return. These rates are
not guaranteed. They are illustrative only and should not be deemed a
representation of past or future performance. Actual rates of return may be more
or less than those reflected in the illustrations and, therefore, actual values
will be different than those illustrated.
REPLACEMENT OF EXISTING COVERAGE
Before purchasing a Contract, the contract owner should ask his or her Merrill
Lynch registered representative if changing, or adding to, current insurance
coverage would be advantageous. Generally, it is not advisable to purchase
another contract as a replacement for existing coverage. In particular,
replacement should be carefully considered if the decision to replace existing
coverage is based solely on a comparison of contract illustrations.
RIGHTS TO CANCEL ("FREE LOOK" PERIOD) OR CONVERT
Once the Contract owner receives the Contract, he or she should review it
carefully to make sure it is what he or she intended to purchase. Generally, a
Contract may be returned for a refund within the later of ten days after the
contract owner receives it, 45 days after the contract owner completes the
application, or ten days after Merrill Lynch Life mails or personally delivers
the Notice of Withdrawal Right to the contract owner. If the Contract is
returned during the "free look" period, Merrill Lynch Life will refund the
initial payment without interest.
Once the Contract is issued, a contract owner may also convert the Contract
within 24 months after issue to a contract with benefits that do not vary with
the investment results of a separate account. (See "Converting the Contract" on
page 25.)
HOW DEATH BENEFIT AND CASH VALUE INCREASES ARE TAXED
Under current federal tax law, life insurance contracts receive tax-favored
treatment. The death benefit is generally excludable from the beneficiary's
gross income for federal income tax purposes, according to Section 101(a)(1) of
the Internal Revenue Code. An owner of a life insurance contract is not taxed on
any increase in the cash value while the contract remains in force.
A Contract may be a "modified endowment contract" under federal tax laws
depending upon the amount of payments made in relation to the death benefit
provided under the Contract. If the Contract is a modified endowment contract,
certain distributions made during either insured's lifetime, such as loans,
partial withdrawals, collateral assignments, capitalized interest, and complete
surrender, are includable in gross income on an income-first basis. A 10%
penalty tax may also be imposed on distributions made before the contract owner
attains age 59 1/2. Contracts that are not modified endowment contracts under
federal tax law receive preferential tax treatment with respect to certain
distributions.
For a discussion of the tax issues associated with this Contract, see "Tax
Considerations" on page 31.
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LOANS
Contract owners may borrow up to the loan value of their Contracts, which is 90%
of the cash value. The maximum loan amount that may be borrowed at any time is
the difference between the loan value and debt. (See "Loans" on page 21.)
Debt is deducted from the amount payable on surrender of the Contract and is
also subtracted from any death benefit payable. Loan interest accrues daily and,
IF IT IS NOT PAID EACH YEAR, IT IS CAPITALIZED AND ADDED TO THE OUTSTANDING LOAN
AMOUNT. If the Contract is a modified endowment contract, the amount of
capitalized interest will be treated as a taxable distribution. Depending upon
investment performance of the divisions and the amounts borrowed, loans may
cause a Contract to lapse. If the Contract lapses with a loan outstanding,
adverse tax consequences may result. Policy debt is considered part of total
cash value which is used to calculate gain. (See "Tax Considerations" on page
31.)
PARTIAL WITHDRAWALS
Contract owners may make partial withdrawals beginning in contract year sixteen,
subject to certain conditions. (See "Partial Withdrawals" on page 22.)
FEES AND CHARGES
Contract Loading. Merrill Lynch Life deducts certain charges from all payments
before they are invested in the investment divisions. These charges are:
- Sales load equal to 46.25% of each payment through the second base
premium and 1.25% of each payment thereafter.
- State and local premium tax charge of 2.5% of each payment.
- A charge for federal taxes of 1.25% of each payment.
(See "Contract Loading" on page 18.)
Investment Base Charges. Merrill Lynch Life deducts certain charges from the
investment base. The charges deducted are as follows:
- On the contract date and on all processing dates after the contract date,
Merrill Lynch Life makes deductions for cost of insurance (see "Cost of
Insurance" on page 17) and any rider costs (see "Additional Insurance
Rider" on page 15).
- On each contract anniversary, Merrill Lynch Life makes deductions for the
net loan cost if there has been any debt during the prior year. It equals
a maximum of 2% of the debt per year.
Separate Account Charges. There are certain charges deducted daily from the
investment results of the investment divisions in the Separate Account. These
charges are:
- an asset charge designed to cover mortality and expense risks deducted
from all investment divisions which is equivalent to .90% annually at the
beginning of the year; and
- a trust charge deducted from only those investment divisions investing in
the Zero Trusts, which is currently equivalent to .34% annually at the
beginning of the year and will never exceed .50% annually.
Advisory Fees. The portfolios in the Funds pay monthly advisory fees and other
expenses. (See "Charges to Fund Assets" on page 19.)
This summary is intended to provide only a very brief overview of the more
significant aspects of the Contract. Further detail is provided in this
Prospectus and in the Contract. The Contract together with its attached
applications, medical exam(s), amendments, riders and endorsements constitutes
the entire agreement between the contract owner and Merrill Lynch Life and
should be retained.
For the definition of certain terms used in this Prospectus, see "Important
Terms" on page 4.
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FACTS ABOUT THE SEPARATE ACCOUNT, THE FUNDS,
THE ZERO TRUSTS AND MERRILL LYNCH LIFE
THE SEPARATE ACCOUNT
The Separate Account is a separate investment account established by Merrill
Lynch Life on November 16, 1990. It is registered with the Securities and
Exchange Commission as a unit investment trust pursuant to the Investment
Company Act of 1940. This registration does not involve any supervision by the
Securities and Exchange Commission over the investment policies or practices of
the Separate Account. It meets the definition of a separate account under the
federal securities laws. The Separate Account is used to support the Contract as
well as to support other variable life insurance contracts issued by Merrill
Lynch Life.
Merrill Lynch Life owns all of the assets in the Separate Account. The assets of
the Separate Account are kept separate from Merrill Lynch Life's general account
and any other separate accounts it may have. Arkansas insurance law provides
that the Separate Account's assets, to the extent of its reserves and
liabilities, may not be charged with liabilities arising out of any other
business Merrill Lynch Life conducts.
Obligations to contract owners and beneficiaries that arise under the Contract
are obligations of Merrill Lynch Life. Income, gains, and losses, whether or not
realized, from assets allocated are, in accordance with the Contracts, credited
to or charged against the Separate Account without regard to other income, gains
or losses of Merrill Lynch Life. As required, the assets in the Separate Account
will always be at least equal to the reserves and other liabilities of the
Separate Account. If the assets exceed the required reserves and other Contract
liabilities (which will always be at least equal to the aggregate contract value
allocated to the Separate Account under the Contracts), Merrill Lynch Life may
transfer the excess to its general account.
There are currently 38 investment divisions in the Separate Account. Ten invest
in shares of a specific portfolio of the Series Fund. Seven invest in shares of
a specific portfolio of the Variable Series Funds. Two invest in shares of a
specific portfolio of the AIM V.I. Funds. One invests in shares of a specific
portfolio of the Alliance Fund. Two invest in shares of a specific portfolio of
the MFS Trust. Sixteen invest in units of a specific Zero Trust. Complete
information about the Funds and the Zero Trusts, including the risks associated
with each portfolio (including specific risks associated with investment in the
High Yield Portfolio of the Series Fund) can be found in the accompanying
prospectuses. They should be read in conjunction with this Prospectus.
THE SERIES FUND
The Series Fund is registered with the Securities and Exchange Commission as an
open-end management investment company and its investment adviser is Merrill
Lynch Asset Management, L.P. ("MLAM"). All of its ten mutual fund portfolios are
currently available through the Separate Account. The investment objectives of
the Series Fund portfolios are described below. There is no guarantee that any
portfolio will be able to meet its investment objective.
Money Reserve Portfolio seeks to preserve capital, maintain liquidity and
achieve the highest possible current income consistent with those objectives by
investing in short-term money market securities.
Intermediate Government Bond Portfolio seeks to obtain the highest level of
current income consistent with the protection of capital afforded by investing
in debt securities issued or guaranteed by the U.S. Government or its agencies
with a maximum maturity of 15 years.
Long-Term Corporate Bond Portfolio primarily seeks to provide as high a level of
current income as is believed to be consistent with prudent investment risk, and
secondarily seeks the preservation of capital. In seeking to achieve these
objectives, the Portfolio invests at least 80% of the value of its assets in
debt securities that have a rating within the three highest grades of Moody's or
Standard & Poor's.
High Yield Portfolio primarily seeks as high a level of current income as is
believed to be consistent with prudent management, and secondarily capital
appreciation when consistent with its primary objective. The
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Portfolio seeks to achieve its investment objective by investing principally in
fixed income securities rated in the lower categories of the established rating
services or in unrated securities of comparable quality (including securities
commonly known as "junk bonds").
Capital Stock Portfolio seeks long-term growth of capital and income, plus
moderate current income. It generally invests in equity securities considered to
be of good or improving quality or considered to be undervalued based on
criteria such as historical price/book value and price/earnings ratios.
Growth Stock Portfolio seeks long-term growth of capital by investing in a
diversified portfolio of securities, primarily common stocks, of aggressive
growth companies considered to have special investment value.
Multiple Strategy Portfolio seeks a high total investment return consistent with
prudent risk through a fully managed investment policy utilizing equity
securities, intermediate and long-term debt securities and money market
securities.
Natural Resources Portfolio seeks long-term growth of capital and protection of
the purchasing power of shareholders' capital by investing primarily in equity
securities of domestic and foreign companies with substantial natural resource
assets.
Global Strategy Portfolio seeks high total investment return by investing
primarily in a portfolio of equity and fixed-income securities, including
convertible securities, of U.S. and foreign issuers.
Balanced Portfolio seeks a level of current income and a degree of stability of
principal not normally available from an investment solely in equity securities
and the opportunity for capital appreciation greater than that normally
available from an investment solely in debt securities by investing in a
balanced portfolio of fixed-income and equity securities.
MLAM is indirectly owned and controlled by Merrill Lynch & Co., Inc. and is a
registered adviser under the Investment Advisers Act of 1940. The Series Fund,
as part of its operating expenses, pays an investment advisory fee to MLAM. (See
"Charges to Fund Assets" on page 19.)
THE VARIABLE SERIES FUNDS
The Variable Series Funds is registered with the Securities and Exchange
Commission as an open-end management investment company and its investment
adviser is MLAM. Seven of its 16 mutual fund portfolios are currently available
through the Separate Account. The investment objectives of the seven available
Variable Series Funds portfolios are described below. There is no guarantee that
any portfolio will be able to meet its investment objective.
Basic Value Focus Fund seeks capital appreciation, and secondarily, income by
investing in securities, primarily equities, that management of the Fund
believes are undervalued and therefore represent basic investment value.
Particular emphasis is placed on securities that provide an above-average
dividend return and sell at a below-average price/earnings ratio.
Global Bond Focus Fund (formerly the World Income Focus Fund) seeks to provide
high total investment return by investing in a global portfolio of fixed income
securities denominated in various currencies, including multinational currency
units. The Fund will invest in fixed income securities that have a credit rating
of A or better by Standard & Poor's or by Moody's or commercial paper rated A-1
by Standard & Poor's or Prime-1 by Moody's or obligations that MLAM has
determined to be of similar creditworthiness.
Global Utility Focus Fund seeks 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.
International Equity Focus 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.
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Developing Capital Markets Focus Fund seeks long-term capital appreciation by
investing in securities, principally equities, of issuers in countries having
smaller capital markets. For purposes of its investment objective, the Fund
considers countries having smaller capital markets to be all countries other
than the four countries having the largest equity market capitalizations.
Equity Growth 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 of emerging growth companies regardless of size. Such companies are
selected by management on the basis of their long-term potential for expanding
their size and profitability or for gaining increased market recognition for
their securities. Current income is not a factor in such selection.
Index 500 Fund seeks to provide investment results that, before expenses,
correspond to the aggregate price and yield performance of the Standard & Poor's
500 Composite Stock Price Index (the "S&P 500 Index").
The Variable Series Funds, as part of its operating expenses, pays an investment
advisory fee to MLAM. (See "Charges to Fund Assets" on page 19.)
THE AIM V.I. FUNDS
The AIM V.I. Funds is registered with the Securities and Exchange Commission as
an open-end, series, management investment company and its investment adviser is
A I M Advisors, Inc. ("AIM"). Two of its mutual fund portfolios are currently
available through the Separate Account. The investment objectives of the two
available AIM V.I. Funds portfolios are described below. There is no guarantee
that any portfolio will be able to meet its investment objective.
AIM V.I. Capital Appreciation Fund seeks capital appreciation through
investments in common stocks, with emphasis on medium-sized and smaller emerging
growth companies. The portfolio is primarily comprised of securities of two
basic categories of companies: (1) "core" companies, which AIM considers to have
experienced above-average and consistent long-term growth in earnings 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 V.I. Value Fund seeks to achieve long-term growth of capital by investing
primarily in equity securities judged by AIM to be undervalued relative to the
current or projected earnings of the companies issuing the securities, or
relative to current market values of assets owned by the companies issuing the
securities or relative to the equity markets generally. Income is a secondary
objective. The investment division investing in this Fund should not be selected
by contract owners who seek income as their primary investment objective.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, is a wholly owned
subsidiary of A I M Management Group, Inc., an indirect subsidiary of AMVESCO
plc (formerly INVESCO plc). AIM is a registered adviser under the Investment
Advisers Act of 1940. AIM was organized in 1976, and, together with its domestic
subsidiaries, manages or advises 48 investment company portfolios (including the
AIM V.I. Funds). The AIM V.I. Funds, as part of its operating expenses, pays an
investment advisory fee to AIM. (See "Charges to Fund Assets" on page 19.)
THE ALLIANCE FUND
The Alliance Fund is registered with the Securities and Exchange Commission as
an open-end management investment company and its investment adviser is Alliance
Capital Management L.P. ("Alliance"). One of its mutual fund portfolios is
currently available through the Separate Account. The investment objective of
the available Alliance Fund portfolio is described below. There is no guarantee
that this portfolio will be able to meet its investment objective.
Premier Growth Portfolio seeks growth of capital by pursuing aggressive
investment policies. Since investments will be made based upon their potential
for capital appreciation, current income will be incidental to the
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objective of capital growth. Because of the market risks inherent in any
investment, the selection of securities on the basis of their appreciation
possibilities cannot ensure against possible loss in value.
Alliance, a Delaware limited partnership with principal offices at 1345 Avenue
of the Americas, New York, New York 10105, is a registered adviser under the
Investment Advisers Act of 1940. Alliance Capital Management Corporation
("ACMC"), the sole general partner of Alliance, is an indirect wholly-owned
subsidiary of The Equitable Life Assurance Society of the United States, which
is in turn a wholly-owned subsidiary of the Equitable Companies Incorporated, a
holding company which is controlled by AXA, a French insurance holding company.
The Alliance Fund, as part of its operating expenses, pays an investment
advisory fee to Alliance. (See "Charges to Fund Assets" on page 19.)
THE MFS TRUST
The MFS Trust is registered with the Securities and Exchange Commission as an
open-end management investment company and its investment adviser is
Massachusetts Financial Services Company ("MFS"). Two of its mutual fund
portfolios are currently available through the Separate Account. The investment
objectives of the available MFS Trust portfolios are described below. There is
no guarantee that any portfolio will be able to meet its investment objective.
MFS Emerging Growth Series seeks to provide long-term growth of capital by
investing primarily (i.e., at least 80% of its assets under normal
circumstances) in common stocks of emerging growth companies. Emerging growth
companies include companies that MFS believes are early in their life cycle but
which have the potential to become major enterprises. Dividend and interest
income from portfolio securities, if any, is incidental to the Fund's objective
of long-term growth of capital.
MFS Research Series seeks to provide long-term growth of capital and future
income. The portfolio securities of the MFS Research Series are selected by a
committee of investment research analysts. This committee includes investment
analysts employed not only by the Adviser but also by MFS International (U.K.)
Limited, a wholly-owned subsidiary of MFS. The Series' assets are allocated
among industries by the analysts acting together as a group. Individual analysts
are then responsible for selecting what they view as the securities best suited
to meet the Series' investment objective within their assigned industry
responsibility.
MFS, a Delaware corporation, 500 Boylston Street, Boston, Massachusetts 02116,
is a subsidiary of Sun Life of Canada (U.S.), which, in turn, is a wholly-owned
subsidiary of Sun Life Assurance Company of Canada, and is a registered adviser
under the Investment Advisers Act of 1940. MFS is America's oldest mutual fund
organization. MFS and its predecessor organizations have a history of money
management dating from 1924 and the founding of the first mutual fund in the
United States, Massachusetts Investors Trust. The MFS Trust, as part of its
operating expenses, pays an investment advisory fee to MFS. (See "Charges to
Fund Assets" on page 19.)
CERTAIN RISKS OF THE FUNDS
Investment in lower-rated debt securities, such as those in which the High Yield
Portfolio of the Series Fund, and the Developing Capital Markets Focus and
International Equity Focus Funds of the Variable Series Funds, expect to invest,
entails relatively greater risk of loss of income or principal. The Developing
Capital Markets Focus Fund of the Variable Series Funds has no established
rating criteria for the debt securities in which it may invest, and will rely on
the investment adviser's judgment in evaluating the creditworthiness of an
issuer of such securities. In an effort to minimize risk, these portfolios will
diversify holdings among many issuers. However, there can be no assurance that
diversification will protect these portfolios from widespread defaults during
periods of sustained economic downturn.
In seeking to protect the purchasing power of capital, the Natural Resources
Portfolio of the Series Fund reserves the right, when management anticipates
significant economic, political, or financial instability, such as high
inflationary pressures or upheaval in foreign currency exchange markets, to
invest a majority of its assets in companies that explore for, extract, process
or deal in gold or in asset-based securities indexed to the value
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of gold bullion. The Natural Resources Portfolio will not concentrate its
investments in such securities until it has been advised that the Contract's
federal tax status will not be adversely affected as a result.
In selecting investments for the AIM V.I. Capital Appreciation Fund, AIM is
particularly interested in companies that are likely to benefit from new or
innovative products, services or processes that should enhance such companies'
prospects for future growth in earnings. As a result of this policy, the market
prices of many of the securities purchased and held by this 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.
For the MFS Emerging Growth Series, the nature of investing in emerging growth
companies involves greater risk than is customarily associated with investments
in more established companies. Emerging growth companies often have limited
product lines, markets or financial resources, and they may be dependent on
one-person management. In addition, there may be less research available on many
promising small and medium sized emerging growth companies, making it more
difficult to find and analyze these companies. The securities of emerging growth
companies may have limited marketability and may be subject to abrupt or erratic
market movements than securities of larger, more established growth companies or
the market averages in general. Shares of the MFS Emerging Growth Series,
therefore, are subject to greater fluctuation in value than shares of a
conservative equity fund or of a growth fund which invests entirely in proven
growth stocks.
Because investment in these Portfolios and Funds entails relatively greater risk
of loss of income or principal, it may not be appropriate to allocate all
payments and investment base to an investment division that invests in one of
these Portfolios or Funds.
THE ZERO TRUSTS
The Zero Trusts was formed to provide safety of capital and a high yield to
maturity. It seeks this through U.S. Government-backed investments which make no
periodic interest payments and, therefore, are purchased at a deep discount.
When held to maturity the investments should receive approximately a fixed
yield. The value of Zero Trust units before maturity varies more than it would
if the Zero Trusts contained interest-bearing U.S. Treasury securities of
comparable maturities.
The Zero Trust portfolios consist mainly of:
- bearer debt obligations issued by the U.S. Government stripped of their
unmatured interest coupons;
- coupons stripped from U.S. debt obligations; and
- receipts and certificates for such stripped debt obligations and coupons.
The Zero Trusts currently available have maturity dates in years 1998 through
2011, 2013 and 2014.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of
Merrill Lynch & Co., Inc., is the sponsor for the Zero Trusts. The sponsor will
sell units of the Zero Trusts to the Separate Account and has agreed to
repurchase units when Merrill Lynch Life needs to sell them to pay benefits and
make reallocations. Merrill Lynch Life pays the sponsor a fee for these
transactions and is reimbursed through the trust charge assessed to the
divisions investing in the Zero Trusts. (See "Charges to Divisions Investing in
the Zero Trusts" on page 19.)
MERRILL LYNCH LIFE AND MLPF&S
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. It is an indirect wholly owned subsidiary of Merrill Lynch
& Co., Inc. Merrill Lynch Life is authorized to sell life insurance and
annuities in 49 states, Guam, the U.S. Virgin Islands and the District of
Columbia. It is also authorized to offer variable life insurance and variable
annuities in most jurisdictions.
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MLPF&S is a wholly owned subsidiary of Merrill Lynch & Co., Inc. and provides a
broad range of securities brokerage and investment banking services in the
United States. It provides marketing services for Merrill Lynch Life and is the
principal underwriter of the Contracts issued through the Separate Account.
Merrill Lynch Life retains MLPF&S to provide services relating to the Contracts
under a distribution agreement. (See "Selling the Contracts" on page 30.)
FACTS ABOUT THE CONTRACT
WHO MAY BE COVERED
The Contract is available in most jurisdictions in which Merrill Lynch Life does
business. Merrill Lynch Life will issue a Contract on the lives of two insureds
provided the relationship among the applicant and the insureds meets Merrill
Lynch Life's insurable interest requirements and provided neither insured is
over age 85 or under age 20. The insureds' issue ages will be determined using
their ages as of their birthdays nearest the contract date. The insureds must
also meet Merrill Lynch Life's medical and other underwriting requirements,
which will include undergoing a medical examination.
Merrill Lynch Life assigns insureds to underwriting classes which determine the
current cost of insurance rates used in calculating cost of insurance
deductions. Contracts may be issued on insureds in standard, non-smoker or
preferred non-smoker underwriting classes. Contracts may also be issued on
insureds in a substandard underwriting class. For a discussion of the effect of
underwriting classification on deductions for cost of insurance, see "Cost of
Insurance" on page 17.
PURCHASING A CONTRACT
To purchase a Contract, the contract owner must complete an application and make
a payment. The payment is required to put the Contract into effect. In the
application, the contract owner selects the face amount of the Contract. The
amount of the minimum initial payment for a given Contract depends on the face
amount selected and the issue age, sex and underwriting class of each of the
insureds. The minimum initial payment for any Contract is 75% of the base
premium. Merrill Lynch Life will not accept an initial payment for a specified
face amount that will provide a guarantee period of less than two years. (See
"Selecting the Initial Face Amount" below and "Initial Guarantee Period" on page
15.) Merrill Lynch Life also will not accept an initial payment that would cause
the Contract to fail to qualify as life insurance under federal tax law as
interpreted by Merrill Lynch Life.
Insurance coverage generally begins as of the contract date, which is usually
the next business day following receipt of the initial payment at Merrill Lynch
Life's Service Center. Temporary life insurance coverage may be provided prior
to the contract date under the terms of a temporary insurance agreement. In
accordance with Merrill Lynch Life's underwriting rules, temporary life
insurance coverage may not exceed $300,000 and may not be in effect for more
than 90 days. As provided for under state insurance law, the contract owner, to
preserve insurance age, may be permitted to backdate the Contract. In no case
may the contract date be more than six months prior to the date the application
was completed. Charges for cost of insurance and rider costs for the backdated
period are deducted on the contract date.
If Merrill Lynch Life determines that, based on the contract owner's initial
payment and face amount, the Contract will be a modified endowment contract,
Merrill Lynch Life will issue the Contract provided the contract owner signs a
statement acknowledging that the Contract is a modified endowment contract or
agrees either to reduce the initial payment or to increase the face amount to a
level at which the Contract will not be a modified endowment contract. For a
discussion of the tax consequences of purchasing a modified endowment contract,
see "Tax Considerations" on page 31.
Selecting the Initial Face Amount. The minimum initial face amount is $250,000
or that face amount which generates a $4,000 base premium, if larger. The
maximum face amount that may be specified for a given initial payment is the
amount which will provide an initial guarantee period of at least two years. For
the same
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initial payment amount, the larger the face amount requested, the shorter the
guarantee period. The initial face amount will change if the contract owner
changes the death benefit option or takes a partial withdrawal. Subject to
certain conditions, the contract owner may purchase additional insurance
coverage through an additional insurance rider. (See "Additional Insurance
Rider" below.)
Initial Guarantee Period. The initial guarantee period for a Contract will be
determined by the initial payment, face amount and any additional insurance
rider face amount. The guarantee period will be adjusted each time an additional
payment is made, when a partial withdrawal is taken, when a death benefit option
change results in a change in face amount, and when the additional insurance
rider face amount is increased or decreased.
The guarantee period is the period of time Merrill Lynch Life guarantees that
the Contract will remain in force regardless of investment experience unless the
debt exceeds certain values. The guarantee period is based on the guaranteed
maximum cost of insurance rates in the Contract, guaranteed maximum rider costs
(if an additional insurance rider is elected), the contract loading and a 5%
interest assumption. This means that for a given initial payment and face
amount, different joint insureds will have different guarantee periods depending
on the age, sex and underwriting class of each of the insureds. For example,
older joint insureds will have a shorter guarantee period than younger joint
insureds in the same underwriting classes.
The maximum guarantee period is for the whole of life of the younger insured.
ADDITIONAL INSURANCE RIDER
The contract owner may purchase additional insurance coverage payable to the
beneficiary on the death of the last surviving insured. Additional insurance
coverage may be purchased through an additional insurance rider when the
Contract is purchased. Under Merrill Lynch Life's current procedures, the
maximum additional insurance rider face amount at the time the Contract is
purchased is three times the face amount of the Contract. The rider can also be
added on any contract anniversary thereafter, as long as an application is
completed, satisfactory evidence of insurability of both insureds is provided,
and at least one insured has not attained the age of 85. The minimum additional
insurance rider face amount at any time is $100,000. A cost of insurance charge
for the rider ("rider charge") will be deducted from the Contract's investment
base on each processing date. The rider charge will be based on the same cost of
insurance rates as the Contract. (See "Cost of Insurance" on page 17.) Because
insurance coverage through an additional insurance rider is purchased through
deductions from the Contract's investment base that are not taken into account
in determining the base premium, there is no additional contract loading
associated with this coverage.
Once each year, the additional insurance rider face amount may be increased
(subject to evidence of insurability of both insureds) or decreased (after the
seventh contract anniversary); however, any change in the additional insurance
rider face amount must be at least $100,000. The effective date of the change
will be the contract anniversary next following underwriting approval of the
change. As of the effective date of the increase or decrease in the additional
insurance rider face amount, Merrill Lynch Life uses the existing fixed base and
the face amount of the Contract plus the new additional insurance rider face
amount to calculate a new guarantee period. A decrease in the additional
insurance rider face amount will increase the guarantee period. An increase in
the additional insurance rider face amount will decrease the guarantee period.
An increase will not be allowed on the first contract anniversary if the face
amount of the Contract plus the new rider face amount provide a guarantee period
of less than one year from the effective date of the increase.
A decrease in the additional insurance rider face amount can cause a Contract
which is not a modified endowment contract to become a modified endowment
contract. In such a case, Merrill Lynch Life will not process the decrease until
the contract owner confirms in writing his or her intent to convert the Contract
to a modified endowment contract. For a discussion of the tax consequences of
increasing or decreasing the additional insurance rider face amount, see "Tax
Considerations" on page 31.
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ADDITIONAL PAYMENTS
After the "free look" period, contract owners may make additional payments while
the insured is living. Additional payments must be submitted with an additional
payment form. The minimum Merrill Lynch Life will accept for these payments is
$100. For Contracts that are not modified endowment contracts, making an
additional payment may cause them to become modified endowment contracts. (See
"Tax Considerations" on page 31.) Merrill Lynch Life will return that portion of
any additional payment beyond that necessary to extend the guarantee period to
the whole of life of the younger insured. Merrill Lynch Life will also return
that portion of any additional payment that would cause the Contract to fail to
qualify as life insurance under federal tax law as interpreted by Merrill Lynch
Life.
Contract owners may specify an additional payment amount on the application to
be paid on either an annual or quarterly basis. For additional payments not
being withdrawn from a CMA account, Merrill Lynch Life will send the contract
owner reminder notices beginning in the second contract year. If a contract
owner has the CMA Insurance Service, such additional payments may be withdrawn
automatically from his or her CMA account and transferred to his or her
Contract. The withdrawals will continue under the selected plan until Merrill
Lynch Life is notified otherwise.
EFFECT OF ADDITIONAL PAYMENTS
Generally, any additional payments will be accepted the day they are received at
the Service Center. However, if acceptance of any portion of the payment would
cause a Contract which is not a modified endowment contract to become a modified
endowment contract, to the extent feasible, Merrill Lynch Life will not accept
that portion of the payment unless the contract owner confirms in writing his or
her intent to convert the Contract to a modified endowment contract. Merrill
Lynch Life may return that portion of the payment pending receipt of
instructions from the contract owner.
On the date Merrill Lynch Life receives and accepts an additional payment,
Merrill Lynch Life will:
- increase the Contract's investment base by the amount of the payment less
contract loading applicable to the payment;
- reflect the additional payment in the calculation of the variable
insurance amount (see "Variable Insurance Amount" on page 24); and
- increase the fixed base by the amount of the payment less contract
loading applicable to the payment (see "The Contract's Fixed Base" on
page 21).
As of the processing date on or next following receipt and acceptance of an
additional payment, Merrill Lynch Life will increase the guarantee period if the
guarantee period prior to receipt and acceptance of an additional payment is
less than for the whole of life of the younger insured.
Merrill Lynch Life will determine the increase in the guarantee period by taking
the immediate increase in the cash value resulting from the additional payment
and adding to that interest at the annual rate of 5% for the period from the
date Merrill Lynch Life receives and accepts the payment to the contract
processing date on or next following such date. This is the guarantee adjustment
amount. The guarantee adjustment amount is added to the fixed base and the
resulting new fixed base is used to calculate a new guarantee period. For a
discussion of the effect of additional payments on a Contract's guarantee
period, see "Additional Payments" in the Examples on page 44.
If any excess sales load has been applied to keep the Contract in force, any
additional payment, less contract loading, will first be applied to recover such
excess load (see "Excess Sales Load" on page 18). Next, unless specified
otherwise, if there is any debt, any payment made will be applied as a loan
repayment, with any excess applied as an additional payment. (See "Loans" on
page 21.)
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INVESTMENT BASE
A Contract's investment base is the amount available for investment at any time.
It is the sum of the amounts invested in each of the investment divisions. On
the contract date, the investment base equals the initial payment less contract
loading and charges for cost of insurance and rider costs. Merrill Lynch Life
adjusts the investment base daily to reflect the investment performance of the
investment divisions the contract owner has selected. (See "Net Rate of Return
for an Investment Division" on page 35.) The investment performance reflects the
deduction of Separate Account charges. (See "Charges to the Separate Account" on
page 18.)
Partial withdrawals, loans and deductions for cost of insurance, rider costs and
net loan cost decrease the investment base. (See "Charges Deducted from the
Investment Base" below, "Partial Withdrawals" on page 22 and "Loans" on page
21.) Loan repayments and additional payments increase it. Contract owners may
elect from which investment divisions loans and partial withdrawals are taken
and to which investment divisions repayments and additional payments are added.
If an election is not made, Merrill Lynch Life will allocate increases and
decreases proportionately to the contract owner's investment base as then
allocated in the investment divisions.
Initial Investment Allocation and Preallocation. During the "free look" period,
the initial payment less contract loading will be invested in the division
investing in the Money Reserve Portfolio. After the "free look" period, the
contract owner may invest in up to five of the 38 investment divisions in the
Separate Account.
Once Merrill Lynch Life's preallocation procedures are available in the state in
which the Contract is issued, the following process will apply to initial
payments. Through the first 14 days following the in force date, the initial
payment less contract loading will remain in the division investing in the Money
Reserve Portfolio. Thereafter, the investment base may be reallocated to the
investment divisions selected by the contract owner on the application, if
different. The contract owner may select up to five of the 38 investment
divisions in the Separate Account.
Changing the Allocation. After the "free look" period, a contract owner's
investment base may be invested in up to five investment divisions at any one
time. Currently, investment allocations may be changed as often as desired.
Merrill Lynch Life reserves the right to charge up to $25 for each change in
excess of six each year. In order to change their investment base allocation,
contract owners must call or write to the Service Center. (See "Some
Administrative Procedures" on page 27.)
Zero Trust Allocations. Merrill Lynch Life will notify contract owners 30 days
before a Zero Trust in which they have invested matures. Contract owners must
notify Merrill Lynch Life by calling or writing at least seven days before the
maturity date how to reinvest their funds in the division investing in that Zero
Trust. If Merrill Lynch Life is not notified, it will move the contract owner's
investment base in that division to the investment division investing in the
Money Reserve Portfolio.
Units of a specific Zero Trust may no longer be available when a request for
allocation is received. Should this occur, Merrill Lynch Life will attempt to
notify the contract owner immediately so that the request can be changed.
Allocation to the Division Investing in the Natural Resources
Portfolio. Merrill Lynch Life and the Separate Account reserve the right to
suspend the sale of units of the investment division investing in the Natural
Resources Portfolio in response to conditions in the securities markets or
otherwise.
CHARGES DEDUCTED FROM THE INVESTMENT BASE
The charges described below are deducted pro-rata from the investment base on
processing dates.
Cost of Insurance. Merrill Lynch Life deducts the cost of insurance from the
investment base on the contract date and on each processing date thereafter.
This charge compensates Merrill Lynch Life for the cost of providing life
insurance coverage for the insureds. It is based on the underwriting class, sex
(except where unisex rates are required by state law) and attained age of each
insured and the Contract's net amount at risk.
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To determine the cost of insurance, Merrill Lynch Life multiplies the current
cost of insurance rate by the Contract's net amount at risk. The net amount at
risk is the difference, as of a processing date, between the death benefit
(adjusted for interest at an annual rate of 5%) and the cash value, but before
the deduction for cost of insurance.
Current cost of insurance rates may be equal to or less than the guaranteed cost
of insurance rates depending on the underwriting class, sex (except where unisex
rates are required by state law) and attained age of each insured. Current cost
of insurance rates are lower for insureds in a preferred non-smoker underwriting
class than for insureds of the same age in a non-smoker underwriting class and
are lower for insureds in a non-smoker underwriting class than for insureds of
the same age and sex in a standard underwriting class.
Merrill Lynch Life guarantees that the current cost of insurance rates will
never exceed the maximum guaranteed rates shown in the Contract. The maximum
guaranteed rates for Contracts (other than those issued on a substandard basis)
do not exceed the rates based on the 1980 Commissioners Standard Ordinary
Mortality Table (CSO Table). Merrill Lynch Life may use rates that are equal to
or less than these rates, but never greater. The maximum rates for Contracts
issued on a substandard basis are based on a multiple of the 1980 CSO Table. Any
change in the cost of insurance rates will apply to all joint insureds of the
same age, sex, and underwriting class whose Contracts have been in force for the
same length of time.
Net Loan Cost. The net loan cost is explained under "Loans" on page 21.
Rider Charges. Rider charges are deducted on the contract date and on each
processing date thereafter. These charges are explained under "Additional
Insurance Rider" on page 15.
CONTRACT LOADING
Chargeable to each payment is an amount called the contract loading. The
contract loading equals 50% of each payment made until cumulative payments have
been made in an amount equal to two base premiums, and 5% of each payment
thereafter. This charge consists of a sales load, a charge for federal taxes and
a state and local premium tax charge.
The sales load, equal to 46.25% of each payment through the second base premium
and 1.25% of each payment thereafter, compensates Merrill Lynch Life for sales
expenses and the costs for underwriting and issuing the Contract. The sales load
may be reduced in certain group or sponsored arrangements as described on page
29.
The charge for federal taxes is equal to 1.25% of each payment.
The state and local premium tax charge is equal to 2.5% of each payment.
Excess Sales Load. Excess sales load is equal to any sales load deducted from
the first two base premiums in excess of 30% of premiums paid up to an amount
equal to the first base premium, and then 10% of the premiums paid up to an
amount equal to the second base premium. It is calculated and applied in the
following situations only during the first 24 months after the Contract is
issued:
- It is refunded if the Contract is surrendered during the first 24 months
after issue.
- It is added to the cash value so as to keep the Contract in force if debt
exceeds the larger of (i) cash value plus any excess sales load not
previously applied to keep the Contract in force and (ii) the fixed base
during the first 24 months after issue.
- It is added to the cash value in determining the variable insurance
amount during the first 24 months after issue.
CHARGES TO THE SEPARATE ACCOUNT
Each day Merrill Lynch Life deducts an asset charge from each division of the
Separate Account. The total amount of this charge is computed at .90% annually
at the beginning of the year. Of this amount, .75% is for
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- the risk assumed by Merrill Lynch Life that insureds as a group will live
for a shorter time than actuarial tables predict. As a result, Merrill
Lynch Life would be paying more in death benefits than planned; and
- the risk assumed by Merrill Lynch Life that it will cost more to issue
and administer the Contracts than expected.
The remaining amount, .15%, is for
- the risk assumed by Merrill Lynch Life with respect to potentially
unfavorable investment results. This risk is that the Contract's cash
value cannot cover the charges due during the guarantee period.
The total asset charge may not be increased.
Charges to Divisions Investing in the Zero Trusts. Merrill Lynch Life assesses
a daily trust charge against the assets of each division investing in the Zero
Trusts. This charge reimburses Merrill Lynch Life for the transaction charge
paid to MLPF&S when units are sold to the Separate Account.
The trust charge is currently equivalent to .34% annually at the beginning of
the year. It may be increased, but will not exceed .50% annually at the
beginning of the year. The charge is based on cost (taking into account loss of
interest) with no expected profit.
Tax Charges. Merrill Lynch Life has the right under the Contract to impose a
charge against Separate Account assets for any taxes imposed on the Separate
Account's investment earnings. (See "Merrill Lynch Life's Income Taxes" on page
34.)
CHARGES TO FUND ASSETS
Charges to Series Fund Assets. The Series Fund incurs operating expenses and
pays a monthly advisory fee to MLAM. This fee equals an annual rate of:
- .50% of the first $250 million of the aggregate average daily net assets
of the Series Fund;
- .45% of the next $50 million of such assets;
- .40% of the next $100 million of such assets;
- .35% of the next $400 million of such assets; and
- .30% of such assets over $800 million.
One or more of the insurance companies investing in the Series Fund has agreed
to reimburse the Series Fund so that the ordinary expenses of each portfolio
(which include the monthly advisory fee) do not exceed .50% of the portfolio's
average daily net assets. These companies have also agreed to reimburse MLAM for
any amounts it pays under the investment advisory agreement, as described below.
These reimbursement obligations will remain in effect so long as the advisory
agreement remains in effect and cannot be amended or terminated without Series
Fund approval.
Charges to Variable Series Funds Assets. The Variable Series Funds incurs
operating expenses and pays a monthly advisory fee to MLAM. This fee equals an
annual rate of .60% of the average daily net assets of the Basic Value Focus
Fund, Global Bond Focus Fund and Global Utility Focus Fund. This fee equals an
annual rate of .30%, .75%, 1.00%, and .75% of the average daily net assets of
the Index 500 Fund, the International Equity Focus Fund, the Developing Capital
Markets Focus Fund, and the Equity Growth Fund, respectively.
MLAM and Merrill Lynch Life Agency, Inc. have entered into two agreements which
limit the operating expenses paid by each Fund in a given year to 1.25% of its
average daily net assets, which is less than the expense limitations imposed by
state securities laws or published regulations thereunder. These reimbursement
agreements provide that any expenses in excess of 1.25% of average daily net
assets will be reimbursed to the Fund by MLAM which, in turn, will be reimbursed
by Merrill Lynch Life Agency, Inc.
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Charges to AIM V.I. Funds Assets. The AIM V.I. Funds incurs operating expenses
and pays a monthly advisory fee to AIM, which serves as the investment adviser
to each fund of the AIM V.I. Funds. As the investment adviser, AIM receives from
the AIM V.I. Capital Appreciation Fund and the AIM V.I. Value Fund an advisory
fee at an annual rate of .65% of each fund's average daily net assets.
Charges to Alliance Fund Assets. The Alliance Fund incurs operating expenses and
pays a monthly advisory fee to Alliance, which serves as the investment adviser
to each fund of the Alliance Fund. As the investment adviser, Alliance receives
from the Alliance Premier Growth Portfolio an advisory fee at an annual rate of
1.00% of the fund's average daily net assets.
Alliance voluntarily waives fees and expenses that exceed .95% of the average
net assets of the Alliance Fund. Alliance may discontinue or reduce any waivers
or assumptions of expenses at any time without notice. Alliance, however,
intends to continue such reimbursements for the foreseeable future.
Charges to MFS Trust Assets. The MFS Trust incurs operating expenses and pays a
monthly advisory fee to MFS, which serves as the investment adviser to each of
the funds of MFS Trust. As the investment adviser, MFS receives from the MFS
Emerging Growth Series and MFS Research Series an advisory fee, computed and
paid monthly, at an annual rate of .75% of the average daily net assets of the
respective fund.
Subject to termination or revision at the sole discretion of MFS, MFS has agreed
to bear expenses of the MFS Emerging Growth Series and the MFS Research Series
(the "Series") such that each Series' expenses, except for management fees
("Other Expenses"), do not exceed .25% of the average daily net assets of the
Series. The obligation of MFS to bear Other Expenses for a Series terminates on
the last day of the Series' fiscal year in which Other Expenses are less than or
equal to .25%.
GUARANTEE PERIOD
Merrill Lynch Life guarantees that the Contract will stay in force for the
guarantee period unless the debt exceeds certain contract values. (See "Loans"
on page 21.) Additional payments will extend the guarantee period until such
time as it is guaranteed for the whole of life of the younger insured. The
guarantee period will be affected by partial withdrawals, by changes in death
benefit options, and by increases and decreases in the face amount of the
additional insurance rider. A reserve is held in Merrill Lynch Life's general
account to support this guarantee.
When the Guarantee Period is Less Than for Life. After the end of the guarantee
period, Merrill Lynch Life may cancel the Contract if the cash value plus
certain excess sales load on a processing date is insufficient to cover charges
due on that date. (See "Charges Deducted from the Investment Base" on page 17
and "Contract Loading -- Excess Sales Load" on page 18.)
Merrill Lynch Life will notify the contract owner at the owner's last known
address before cancelling the Contract. The contract owner will then have 61
days to pay an amount which, after deducting contract loading, equals at least
three times the charges that were due (and not deducted) on the processing date
when the cash value was determined to be insufficient, plus any excess sales
load previously applied to keep the Contract in force. If this amount is paid,
Merrill Lynch Life will deduct the charges due on the processing date and apply
the balance to the investment base. Merrill Lynch Life will cancel the Contract
at the end of this grace period if payment has not yet been received. At that
time, Merrill Lynch Life will deduct any charges for cost of insurance and rider
costs applicable to the grace period and refund any unearned charges for the
cost of insurance, rider costs and any excess sales load not previously applied
to keep the Contract in force.
Subject to state regulation, if Merrill Lynch Life cancels a Contract, it may be
reinstated while both insureds are still living if:
- the reinstatement is requested within three years after the end of the
grace period;
- Merrill Lynch Life receives satisfactory evidence of the insureds'
insurability; and
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- the reinstatement payment is made. The reinstatement payment is the
minimum payment for which Merrill Lynch Life would then issue a Contract
for the minimum guarantee period with the same face amount as the
original Contract, based on the insureds' attained ages and underwriting
classes as of the effective date of the reinstated Contract.
A reinstated Contract will be effective on the processing date on or next
following the date the reinstatement application is approved.
The Contract's Fixed Base. On the contract date, the fixed base equals the cash
value. From then on, the fixed base is calculated in the same manner as the cash
value except that the calculation substitutes 5% for the net rate of return, the
guaranteed maximum cost of insurance rates and guaranteed maximum rider costs
are substituted for the current rates and it is calculated as though there had
been no loans or repayments. The fixed base is equivalent to the cash value for
a comparable fixed benefit contract with the same face amount and guarantee
period. After the end of the guarantee period the fixed base is zero. The fixed
base is used to limit Merrill Lynch Life's right to cancel the Contract during
the guarantee period.
Automatic Adjustment. On any contract anniversary, if the cash value is greater
than the fixed base necessary to cause the guarantee period to equal the whole
of life of the younger insured, the guarantee period will be extended to the
whole of life of the younger insured.
CASH VALUE
A Contract's cash value fluctuates daily with the investment results of the
investment divisions selected. Merrill Lynch Life does not guarantee any minimum
cash value. The cash value on any date equals the total investment base plus
debt plus unearned charges for cost of insurance and rider costs less any
accrued net loan cost since the last contract anniversary (or since the contract
date during the first contract year).
Cancelling the Contract. A contract owner may cancel the Contract at any time
while either insured is living. The request must be in writing in a form
satisfactory to Merrill Lynch Life. All rights to death benefits will end on the
date the written request is sent to Merrill Lynch Life.
The contract owner will then receive the net cash surrender value. The contract
owner may elect to receive this amount either in a single payment or under one
or more income plans described on page 27. The net cash surrender value will be
determined as of the date of receipt of the written request at the Service
Center.
If the Contract is cancelled during the first 24 months after the issue date of
the Contract, excess sales load, as described under "Excess Sales Load" on page
18, will be refunded except to the extent previously applied to keep the
Contract in force. (See "Contract Loading - Excess Sales Load" on page 18.)
LOANS
Contract owners may use the Contract as collateral to borrow funds from Merrill
Lynch Life. The minimum loan is $1,000. Contract owners may repay all or part of
the loan at any time during either insured's lifetime. Each repayment must be
for at least $1,000 or the amount of the debt, if less. Certain states won't
permit establishing a minimum amount that can be borrowed or repaid. If any
excess sales load was previously applied to keep the Contract in force, any loan
repayment will first be applied to repay such excess sales load.
When a loan is taken, Merrill Lynch Life transfers a portion of the contract
owner's investment base equal to the amount borrowed out of the investment
divisions and holds it as collateral in its general account. When a loan
repayment is made, Merrill Lynch Life transfers an amount equal to the repayment
from the general account to the investment divisions. The contract owner may
select from which divisions borrowed amounts should be taken and which divisions
should receive repayments (including interest payments). Otherwise, Merrill
Lynch Life will take the borrowed amounts proportionately from and make
repayments proportionately to the contract owner's investment base as then
allocated in the investment divisions.
If a contract owner has the CMA Insurance Service, loans may be transferred to
and loan repayments transferred from his or her CMA account.
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Effect on Death Benefit and Cash Value. Whether or not a loan is repaid, taking
a loan will have a permanent effect on a Contract's cash value and may have a
permanent effect on its death benefit. This is because the collateral for a loan
does not participate in the performance of the investment divisions while the
loan is outstanding. If the amount credited to the collateral is more than what
is earned in the investment divisions, the cash value may be higher as a result
of the loan, as may be the death benefit. Conversely, if the amount credited is
less, the cash value will be lower, as may be the death benefit. In that case,
the lower cash value may cause the Contract to lapse sooner than if no loan had
been taken.
Loan Value. The loan value of a Contract equals 90% of its cash value. The sum
of all outstanding loan amounts plus accrued interest is called debt. The
maximum amount that can be borrowed at any time is the difference between the
loan value and the debt.
Interest. While a loan is outstanding, Merrill Lynch Life may charge interest
at a maximum rate of 6% annually, subject to state regulation. Currently Merrill
Lynch Life charges interest of 5.75% annually. Interest accrues each day and
payments are due at the end of each contract year. IF THE INTEREST ISN'T PAID
WHEN DUE, IT IS ADDED TO THE OUTSTANDING LOAN AMOUNT. Interest paid on a loan
generally is not tax deductible.
The amount held in Merrill Lynch Life's general account as collateral for a loan
earns interest at a minimum of 4% annually. Currently a loan amount earns
interest at 5%.
Merrill Lynch Life may change the interest rates currently charged on loans and
the rates of interest earned on the loan collateral amounts. Any such changes
will be effective on the contract anniversary following the date such rates are
declared.
Net Loan Cost. Whether or not loan interest is paid when due, on the contract
anniversary, Merrill Lynch Life reduces the investment base by the net loan cost
(the difference between the interest charged and the earnings on the amount held
as collateral in the general account) and adds that amount to the amount held in
the general account as collateral for the loan. Since the interest charged is
5.75% and the collateral earnings on such amounts are 5%, the current net loan
cost on loaned amounts is .75%. The net loan cost is taken into account in
determining the net cash surrender value of the Contract if the date of
surrender is not a contract anniversary.
Cancellation Due to Excess Debt. If on a processing date the debt exceeds the
larger of (i) the cash value plus certain excess sales load, and less charges
due on that date, and (ii) the fixed base (if any), Merrill Lynch Life will
cancel the Contract 61 days after a notice of intent to terminate the Contract
is mailed to the contract owner unless Merrill Lynch Life has received at least
the minimum repayment amount specified in the notice. During the first 24 months
after the Contract is issued, Merrill Lynch Life will add excess sales load to
the cash value as necessary to keep the Contract in force if debt exceeds the
larger of the cash value less charges due and the fixed base. (See "Contract
Loading -- Excess Sales Load" on page 18.) Upon termination, Merrill Lynch Life
will deduct any charges for cost of insurance and rider costs that may be
applicable to the 61-day period and refund any unearned charges for cost of
insurance, riders costs and any excess sales load not previously applied to keep
the Contract in force. If the Contract lapses with a loan outstanding, adverse
tax consequences may result. (See "Tax Considerations" on page 31.)
PARTIAL WITHDRAWALS
Beginning in contract year sixteen, and subject to state regulation, a contract
owner may make partial withdrawals by submitting a request in a form
satisfactory to Merrill Lynch Life. The effective date of the withdrawal is the
date a withdrawal request is received at the Service Center. Contract owners may
elect to receive the withdrawal amount either in a single payment or, subject to
Merrill Lynch Life's rules, under one or more income plans.
Contract owners may make one partial withdrawal each contract year. The minimum
amount for each partial withdrawal is $1,000. The remaining cash value less debt
following a partial withdrawal must equal or exceed $5,000. The amount of any
partial withdrawal may not exceed the loan value as of the effective date of the
partial withdrawal less any debt. A partial withdrawal may not be repaid.
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Effect on Investment Base, Fixed Base, Cash Value and Death Benefit. As of the
effective date of the withdrawal, the investment base, fixed base, cash value
and, if the contract owner has elected death benefit option 1, the face amount
of the Contract will each be reduced by the amount of the partial withdrawal.
Merrill Lynch Life allocates this reduction proportionately to the investment
base in each of the contract owner's investment divisions unless notified
otherwise. The variable insurance amount will also reflect the partial
withdrawal as of the effective date.
Effect on Guarantee Period. As of the processing date on or next following the
effective date of a partial withdrawal, Merrill Lynch Life calculates a new
guarantee period. This is done by taking the immediate decrease in cash value
resulting from the partial withdrawal and adding to that amount interest at an
annual rate of 5% for the period from the date of withdrawal to the contract
processing date on or next following such date. This is the guarantee adjustment
amount. The guarantee adjustment amount is subtracted from the fixed base and
the resulting new fixed base is used to calculate a new guarantee period. For a
discussion of the effect of partial withdrawals on a Contract's guarantee
period, see "Partial Withdrawals" in the Examples on page 45.
A partial withdrawal may cause a Contract which is not a modified endowment
contract to become a modified endowment contract. In such a case, Merrill Lynch
Life will not process the partial withdrawal until the contract owner confirms
in writing his or her intent to convert the Contract to a modified endowment
contract. For a discussion of the tax issues associated with a partial
withdrawal, see "Tax Considerations" on page 31.
DEATH BENEFIT PROCEEDS
Merrill Lynch Life will pay the death benefit proceeds to the beneficiary upon
receipt of all information needed to process the payment, including due proof of
the death of the last surviving insured. Proof of death for both insureds must
be received. There is no death benefit payable at the first death. When Merrill
Life is first provided reliable notification of the last surviving insured's
death by a representative of the owner or the insured, investment base may be
transferred to the division investing in the Money Reserve Portfolio, pending
payment of death benefit proceeds.
If one of the insureds should die within two years from the Contract's issue
date, within two years from the effective date of any requested change in the
death benefit option requiring evidence of insurability, or within two years of
an increase in the additional insurance rider face amount, due proof of the
insured's death should be sent promptly to the Service Center since Merrill
Lynch Life may pay only a limited benefit or contest the Contract. (See
"Incontestability" and "Payment in Case of Suicide" on page 28.)
Death Benefit Proceeds. The death benefit payable depends on the death benefit
option in effect on the date of death.
- Under option 1, the death benefit is equal to the larger of the face
amount or the variable insurance amount.
- Under option 2, the death benefit is equal to the larger of the face
amount plus the cash value or the variable insurance amount.
Contract owners who wish to have investment experience reflected in insurance
coverage should choose option 2. Contract owners who wish to have insurance
coverage that generally does not vary in amount should choose option 1.
The death benefit will never be less than the amount required to keep the
Contract qualified as life insurance under federal income tax laws.
To determine the death benefit proceeds, Merrill Lynch Life will subtract from
the death benefit any debt and add to the death benefit any rider benefits
payable.
The values used in calculating the death benefit proceeds are as of the date of
death. If the last surviving insured dies during the grace period, the death
benefit proceeds equal the death benefit proceeds in effect
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immediately prior to the grace period reduced by any overdue charges. (See "When
the Guarantee Period is Less Than for Life" on page 20.)
Variable Insurance Amount. Merrill Lynch Life determines the variable insurance
amount daily by:
- calculating the cash value (plus any excess sales load during the first
24 months after the Contract is issued); and
- multiplying it by the cash value corridor factor (explained below) for
the younger insured at his or her attained age.
The variable insurance amount will never be less than required by federal tax
law.
Cash Value Corridor Factor. The cash value corridor factor is used to determine
the amount of death benefit purchased by $1.00 of cash value. It is based on the
attained age of the younger insured on the date of calculation. It decreases
daily as the younger insured's age increases. As a result, the variable
insurance amount as a multiple of the cash value will decrease over time. A
table of cash value corridor factors as of each anniversary is included in the
Contract.
Table of Illustrative Cash Value Corridor Factors
on Anniversaries
<TABLE>
<CAPTION>
ATTAINED
AGE FACTOR
----------------------------------- ------
<S> <C>
40 and under 250%
45 215%
55 150%
65 120%
75-90 105%
95 and over 100%
</TABLE>
Changing the Death Benefit Option. On each contract anniversary beginning with
the fifteenth, the contract owner may change the death benefit option. Merrill
Lynch Life will change the face amount in order to keep the death benefit
constant on the effective date of the change. Therefore, if the change is from
option 1 to option 2, the face amount of the Contract will be decreased by the
cash value on the date of the change. A change in the death benefit option will
not be permitted if it would result in a face amount of less than $100,000. If
the change is from option 2 to option 1, the face amount of the Contract will be
increased by the cash value on the date of the change. For a discussion of the
effect of a change in the death benefit option on a Contract, see "Changing the
Death Benefit Option" in the Examples on page 46.
If the contract owner requests a change in the death benefit option from option
1 to option 2, evidence of insurability in a form satisfactory to Merrill Lynch
Life that the insureds are insurable may be required. In no event will a change
be permitted if, after the change, the Contract would not qualify as life
insurance under federal tax laws as interpreted by Merrill Lynch Life.
A change in the death benefit option may cause a Contract which is not a
modified endowment contract to become a modified endowment contract. In such a
case, Merrill Lynch Life will not process the change until the contract owner
confirms in writing his or her intent to convert the Contract to a modified
endowment contract. For a discussion of the tax issues associated with a change
in the death benefit option, see "Tax Considerations" on page 31.
PAYMENT OF DEATH BENEFIT PROCEEDS
Merrill Lynch Life will generally pay the death benefit proceeds to the
beneficiary within seven days after all the information needed to process the
payment is received at its Service Center. Merrill Lynch Life will add interest
from the date of the last surviving insured's death to the date of payment at an
annual rate of at least
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4%. The beneficiary may elect to receive the proceeds either in a single payment
or under one or more income plans described on page 29.
Payment may be delayed if the Contract is being contested or under the
circumstances described in "Using the Contract" on page 26 and "Other Contract
Provisions" on page 28. If a delay is necessary and death of the last surviving
insured occurs prior to the end of the guarantee period, Merrill Lynch Life may
delay payment of any excess of the death benefit over the face amount. After the
guarantee period has expired, Merrill Lynch Life may delay payment of the entire
death benefit.
RIGHTS TO CANCEL OR CONVERT
"Free Look" Period. A contract owner may cancel his or her Contract during the
"free look" period by returning it for a refund. Generally, the "free look"
period ends the later of ten days after the Contract is received, 45 days after
the contract owner completes the application or ten days after Merrill Lynch
Life mails or personally delivers to the contract owner the Notice of Withdrawal
Right. To cancel the Contract during the "free look" period, the contract owner
must mail or deliver the Contract to Merrill Lynch Life's Service Center or to
the registered representative who sold it. Merrill Lynch Life will refund the
payment made without interest. If cancelled, Merrill Lynch Life may require the
contract owner to wait six months before applying again.
Converting the Contract. A contract owner may convert the Contract for a joint
and last survivor contract with benefits that do not vary with the investment
results of a separate account. Once a contract owner exercises this right, the
investment base and additional payments may not be allocated to the Separate
Account. A request to convert must be made in writing within 24 months after the
issue date of the Contract while the insured is living. The conversion will not
require evidence of insurability.
The conversion will be accomplished by adding an endorsement to the Contract and
transferring, without charge, the investment base in the Separate Account to the
guaranteed interest division ("GID"). Assets in the guaranteed interest division
are held in Merrill Lynch Life's general account. The investment base at the
time of conversion and any additional payments will remain in the guaranteed
interest division and be credited with interest at a rate declared by Merrill
Lynch Life. A declared interest rate for any amount allocated to the guaranteed
interest division will be in effect for at least one year. After conversion, the
Contract will not be subject to charges to the Separate Account. For a
discussion of the tax consequences of converting the Contract, see "Tax
Considerations" on page 31.
REPORTS TO CONTRACT OWNERS
After the end of each processing period, contract owners will be sent a
statement of the allocation of their investment base, death benefit, cash value,
any debt and, if there has been a change, the face amount, the guarantee period
and the additional insurance rider face amount. All figures will be as of the
end of the immediately preceding processing period. The statement will show the
amounts deducted from or added to the investment base during the processing
period. The statement will also include any other information that may be
currently required by a contract owner's state.
Contract owners will receive confirmation of all financial transactions. Such
confirmations will show the price per unit of each of the contract owner's
investment divisions, the number of units a contract owner has in the investment
division and the value of the investment division computed by multiplying the
quantity of units by the price per unit. (See "Net Rate of Return for an
Investment Division" on page 35.) The sum of the values in each investment
division is a contract owner's investment base.
Contract owners will also be sent an annual and a semi-annual report containing
financial statements and a list of portfolio securities of the Funds, as
required by the Investment Company Act of 1940.
CMA Account Reporting. Contract owners who have the CMA Insurance Service will
have certain Contract information included as part of their regular monthly CMA
account statement. It will list the investment base
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allocation, death benefit, cash value, debt and any CMA account activity
affecting the Contract during the month.
MORE ABOUT THE CONTRACT
USING THE CONTRACT
Ownership. The contract owner is usually one of the insureds, unless another
owner has been named in the application. The contract owner has all rights and
options described in the Contract.
The contract owner may want to name a contingent owner. If the contract owner
dies before the last surviving insured, the contingent owner will own the
contract owner's interest in the Contract and have all the contract owner's
rights. If the contract owner doesn't name a contingent owner, the contract
owner's estate will own the contract owner's interest in the Contract upon the
owner's death.
If there is more than one contract owner, Merrill Lynch Life will treat the
owners as joint tenants with rights of survivorship unless the ownership
designation provides otherwise. The owners must exercise their rights and
options jointly, except that any one of the owners may reallocate the Contract's
investment base by phone if the owner provides the personal identification
number as well as the Contract number. One contract owner must be designated, in
writing, to receive all notices, correspondence and tax reporting to which
contract owners are entitled under the Contract.
Changing the Owner. During either insured's lifetime, with the consent of any
irrevocable beneficiary, the contract owner has the right to transfer ownership
of the Contract. The new owner will have all rights and options described in the
Contract. The change will be effective as of the day the notice is signed, but
will not affect any payment made or action taken by Merrill Lynch Life before
receipt of the notice of the change at the Service Center. Changing the owner
may have tax consequences. (See "Tax Considerations" on page 31.)
Assigning the Contract as Collateral. Contract owners may assign the Contract
as collateral security for a loan or other obligation. This does not change the
ownership. However, the contract owner's rights and any beneficiary's rights are
subject to the terms of the assignment. Contract owners must give satisfactory
written notice at the Service Center in order to make or release an assignment.
Merrill Lynch Life is not responsible for the validity of any assignment.
For a discussion of the tax issues associated with a collateral assignment, see
"Tax Considerations" on page 31.
Naming Beneficiaries. Merrill Lynch Life will pay the primary beneficiary the
death benefit proceeds of the Contract on the last surviving insured's death. If
the primary beneficiary has died, Merrill Lynch Life will pay the contingent
beneficiary. If no contingent beneficiary is living, Merrill Lynch Life will pay
the estate of the last surviving insured .
A contract owner may name more than one person as primary or contingent
beneficiaries. Merrill Lynch Life will pay proceeds in equal shares to the
surviving beneficiaries unless the beneficiary designation provides otherwise.
A contract owner has the right to change beneficiaries during either insured's
lifetime, unless the primary beneficiary designation has been made irrevocable.
If the designation is irrevocable, the primary beneficiary must consent when
certain rights and options are exercised under this Contract. If the beneficiary
is changed, the change will take effect as of the day the notice is signed, but
will not affect any payment made or action taken by Merrill Lynch Life before
receipt of the notice of the change at the Service Center.
Maturity Proceeds. The maturity date is the contract anniversary nearest the
younger insured's 100th birthday. On the maturity date, Merrill Lynch Life will
pay the net cash surrender value to the contract owner, provided either insured
is still living at that time and the Contract is in effect at that time.
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How Merrill Lynch Life Makes Payments. Merrill Lynch Life generally pays death
benefit proceeds, partial withdrawals, loans and net cash surrender value on
cancellation from the Separate Account within seven days after the Service
Center receives all the information needed to process the payment.
However, it may delay payment from the Separate Account if it isn't practical
for Merrill Lynch Life to value or dispose of Trust units, Series Fund shares or
Variable Series Funds shares because:
- the New York Stock Exchange is closed, other than for a customary weekend
or holiday; or
- trading on the New York Stock Exchange is restricted by the Securities
and Exchange Commission; or
- the Securities and Exchange Commission declares that an emergency exists
such that it is not reasonably practical to dispose of securities held in
the Separate Account or to determine the value of their assets; or
- the Securities and Exchange Commission by order so permits for the
protection of contract owners.
SOME ADMINISTRATIVE PROCEDURES
Described below are certain administrative procedures. Merrill Lynch Life
reserves the right to modify them or to eliminate them. For administrative and
tax purposes, Merrill Lynch Life may from time to time require that specific
forms be completed in order to accomplish certain transactions, including
surrenders.
Personal Identification Number. Merrill Lynch Life will send each contract
owner a four-digit personal identification number ("PIN") shortly after the
Contract is placed in force and before the end of the "free look" period. This
number must be given when a contract owner calls the Service Center to get
information about the Contract, to make a loan (if an authorization is on file),
or to make other requests. Each PIN will be accompanied by a notice reminding
the contract owner that all of the investment base is in the division investing
in the Money Reserve Portfolio, and that this allocation may be changed by
calling or writing to the Service Center. (See "Changing the Allocation" on page
17.)
Reallocating the Investment Base. Contract owners can reallocate their
investment base either in writing in a form satisfactory to Merrill Lynch Life
or by phone. If the reallocation is requested by phone, contract owners must
give their personal identification number as well as their Contract number.
Merrill Lynch Life will give a confirmation number over the phone and then
follow up in writing.
Requesting a Loan. A loan may be requested in writing in a form satisfactory to
Merrill Lynch Life or, if all required authorization forms are on file, by
phone. Once the authorization has been received at the Service Center, contract
owners can call the Service Center, give their Contract number, name and
personal identification number, and tell Merrill Lynch Life the loan amount and
from which divisions the loan should be transferred.
Upon request, Merrill Lynch Life will wire the funds to the contract owner's
account at the financial institution named on the contract owner's
authorization. Merrill Lynch Life will generally wire the funds within two
working days of receipt of the request. If the contract owner has the CMA
Insurance Service, funds may be transferred directly to that CMA account.
Requesting Partial Withdrawals. Beginning in contract year 16, partial
withdrawals may be requested in writing in a form satisfactory to Merrill Lynch
Life. A contract owner may request a partial withdrawal by phone if all required
phone authorization forms are on file. Once the authorization has been received
at the Service Center, contract owners can call the Service Center, give their
Contract number, name and personal identification number, and tell Merrill Lynch
Life how much to withdraw and from which investment divisions.
Upon request, Merrill Lynch Life will wire the funds to the contract owner's
account at the financial institution named on the contract owner's
authorization. Merrill Lynch Life will generally wire the funds within two
working days of receipt of the request. If the contract owner has the CMA
Insurance Service, funds may be transferred directly to that CMA account.
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Telephone Requests. A telephone request for a loan, partial withdrawal or a
reallocation received before 4 p.m. (ET) generally will be processed the same
day. A request received at or after 4 p.m. (ET) will be processed the following
business day. Merrill Lynch Life reserves the right to change or discontinue
telephone transfer procedures.
Merrill Lynch Life will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. These procedures may
include, but are not limited to, possible recording of telephone calls and
obtaining appropriate identification before effecting any telephone
transactions. Merrill Lynch Life will not be liable for following telephone
instructions that it reasonably believes to be genuine.
OTHER CONTRACT PROVISIONS
In Case of Errors in the Application. If an age or sex given in the application
is wrong, it could mean that the face amount or any other Contract benefit is
wrong. Merrill Lynch Life will pay what the payments made would have bought for
the guarantee period at the true age or sex.
Incontestability. Merrill Lynch Life will rely on statements made in the
applications. Legally, they are considered representations, not warranties.
Merrill Lynch Life can contest the validity of a Contract if any material
misstatements are made in the initial application or any application for
reinstatement. Merrill Lynch Life can also contest the validity of any change in
face amount due to a change in death benefit option or any increase in the
additional insurance rider face amount requested if any material misstatements
are made in any application required for the change or increase.
Subject to state regulation, Merrill Lynch Life will not contest the validity of
a Contract after it has been in effect during the lifetimes of both insureds for
two years from the date of issue or the date of any reinstatement. A change in
face amount due to a change in the death benefit option or any increase in the
additional insurance rider face amount won't be contested after the change or
increase has been in effect during the lifetimes of both insureds for two years
from the date of the change.
At the end of the second contract year, Merrill Lynch Life will mail the
contract owner a notice requesting that he or she tell Merrill Lynch Life if
either insured has died. Failure to tell Merrill Lynch Life of the death of
either insured will not avoid a contest if Merrill Lynch Life has grounds to do
so, even if the Contract is still in force.
Payment in Case of Suicide. Subject to state regulation, if either insured
commits suicide within two years from the Contract's issue date or the date of
any reinstatement, Merrill Lynch Life will pay only a limited death benefit and
then terminate the Contract. The benefit will be equal to the amount of the
payments made, reduced by any debt.
Subject to state regulation, if either insured commits suicide within two years
of the effective date of a change in the death benefit option requiring evidence
of insurability or of the effective date of an increase in the additional
insurance rider face amount, any amount of death benefit which would not be
payable except for the fact that the face amount was increased will be limited
to the amount of cost of insurance deductions made for the increase.
Establishing Survivorship. If Merrill Lynch Life is unable to determine which
of the insureds was the last survivor on the basis of the proofs of death
provided, it will consider insured No. 1 as designated in the application to be
the last surviving insured.
Contract Changes - Applicable Federal Tax Law. To receive the tax treatment
accorded to life insurance under federal income tax law, the Contract must
qualify initially and continue to qualify as life insurance under the Internal
Revenue Code or successor law. Therefore, to maintain this qualification to the
maximum extent of the law, Merrill Lynch Life reserves the right to return any
additional payments that would cause the Contract to fail to qualify as life
insurance under applicable tax law as interpreted by Merrill Lynch Life.
Further, Merrill Lynch Life reserves the right to make changes in the Contract
or its riders or to make distributions from the Contract to the extent it is
necessary to continue to qualify the Contract as life
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insurance. Any changes will apply uniformly to all Contracts that are affected
and contract owners will be given advance written notice of such changes.
Policy Split Rider. This rider allows the contract owner to split the Contract
into two new individual contracts upon divorce of the insureds or if certain
federal tax law changes occur. Certain conditions described in the rider,
including evidence of insurability of both insureds, must be met before the
rider's benefit can be exercised. For more information about this rider and the
conditions and rules relating to the exercise of any rights under the rider, the
contract owner should call the Service Center. The Service Center can also
provide the contract owner with a prospectus for the individual contract. For a
discussion of the possible tax consequences of splitting the Contract, see "Tax
Considerations" on page 31.
State Variations. Certain Contract features, including the "free look" right,
are subject to state variation. The contract owner should read his or her
Contract carefully to determine whether any variations apply in the state in
which the Contract is issued.
INCOME PLANS
Merrill Lynch Life offers several income plans to provide for payment of the
death benefit proceeds to the beneficiary. The contract owner may choose one or
more income plans at any time during the lifetime of either insured. If no plan
has been chosen when the last surviving insured dies, the beneficiary has one
year to apply the death benefit proceeds either paid or payable to that
beneficiary to one or more of the plans. The contract owner may also choose one
or more income plans if the Contract is cancelled or a partial withdrawal is
taken. Merrill Lynch Life's approval is needed for any plan where any income
payment would be less than $100. Payments under these plans do not depend on the
investment results of a separate account.
Income plans include:
Annuity Plan. An amount can be used to purchase a single premium immediate
annuity.
Interest Payment. Amounts can be left with Merrill Lynch Life to earn
interest at an annual rate of at least 3%. Interest payments can be made
annually, semiannually, quarterly or monthly.
Income for a Fixed Period. Payments are made in equal installments for a
fixed number of years.
Income for Life. Payments are made in equal monthly installments until
death of a named person or end of a designated period, whichever is later.
The designated period may be for 10 or 20 years.
Income of a Fixed Amount. Payments are made in equal installments until
proceeds applied under the option and interest on unpaid balance at not
less than 3% per year are exhausted.
Joint Life Income. Payments are made in monthly installments as long as at
least one of two named persons is living. While both are living, full
payments are made. If one dies, payments at two-thirds of the full amount
are made. Payments end completely when both named persons die.
Once in effect, some of the plans may not provide any surrender rights.
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, Merrill Lynch Life may reduce the
sales load, cost of insurance rates and the minimum payment and may modify
underwriting classifications and requirements.
Group arrangements include those in which a trustee or an employer, for example,
purchases Contracts covering a group of individuals on a group basis. Sponsored
arrangements include those in which an employer allows Merrill Lynch Life to
sell Contracts to its employees on an individual basis. Costs for sales,
administration and mortality generally vary with the size and stability of the
group and the reasons the Contracts are purchased, among other factors. Merrill
Lynch Life takes all these factors into account when reducing charges. To
qualify for reduced charges, a group or sponsored arrangement must meet certain
requirements, including requirements for size and number of years in existence.
Group or sponsored
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arrangements that have been set up solely to buy Contracts or that have been in
existence less than six months will not qualify for reduced charges.
Merrill Lynch Life makes any reductions according to rules in effect when an
application for a Contract or additional payment is approved. It may change
these rules from time to time. However, reductions in charges will not
discriminate unfairly against any person.
UNISEX LEGAL CONSIDERATIONS FOR EMPLOYERS
In 1983 the Supreme Court held in Arizona Governing Committee v. Norris that
optional annuity benefits provided under an employee's deferred compensation
plan could not, under Title VII of the Civil Rights Act of 1964, vary between
men and women. In addition, legislative, regulatory or decisional authority of
some states may prohibit use of sex-distinct mortality tables under certain
circumstances.
Generally, the Contracts offered by this Prospectus are based on mortality
tables that distinguish between men and women. As a result, the Contract pays
different benefits to men and women of the same age. Employers and employee
organizations should check with their legal advisers before purchasing
Contracts.
Some states prohibit the use of actuarial tables that distinguish between men
and women in determining payments and contract benefits for contracts issued on
the lives of their residents. Therefore, Contracts offered in this Prospectus to
insure residents of these states will have unisex payments and benefits which
are based on actuarial tables that do not differentiate on the basis of sex.
SELLING THE CONTRACTS
MLPF&S is the principal underwriter of the Contract. It was organized in 1958
under the laws of the state of Delaware and is registered as a broker dealer
under the Securities Exchange Act of 1934. It is a member of the National
Association of Securities Dealers, Inc. ("NASD"). The principal business address
of MLPF&S is World Financial Center, 250 Vesey Street, New York, New York 10281.
MLPF&S also acts as principal underwriter of other variable life insurance and
variable annuity contracts issued by Merrill Lynch Life, as well as variable
life insurance and variable annuity contracts issued by ML Life Insurance
Company of New York, an affiliate of Merrill Lynch Life. MLPF&S also acts as
principal underwriter of certain mutual funds managed by MLAM, the investment
adviser for the Series Fund and the Variable Series Funds.
Contracts are sold by registered representatives of MLPF&S who are also licensed
through various Merrill Lynch Life Agencies as insurance agents for Merrill
Lynch Life. Merrill Lynch Life has entered into a distribution agreement with
MLPF&S and companion sales agreements with the Merrill Lynch Life Agencies
through which agreements the Contracts and other variable life insurance
contracts issued through the Separate Account are sold and the registered
representatives are compensated by Merrill Lynch Life Agencies and/or MLPF&S.
The maximum commissions Merrill Lynch Life will pay to the applicable insurance
agency to be used to pay commissions to registered representatives are as
follows: 95% of the target premium under the Contract; plus 3% of payments
thereafter. In addition, an amount equal to .11% of persisting investment base
under a Contract may be paid on an annual basis. Commissions may be paid in the
form of non-cash compensation.
The amounts paid under the distribution and sales agreements for the Separate
Account for the years ended December 31, 1996, and December 31, 1995 and
December 31, 1994 were $10,059,108, $8,375,066 and $8,456,418, respectively.
MLPF&S may arrange for sales of the Contract by other broker-dealers who are
registered under the Securities Exchange Act of 1934 and are members of the
NASD. Registered representatives of these other broker-dealers may be
compensated on a different basis than MLPF&S registered representatives.
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TAX CONSIDERATIONS
Definition of Life Insurance. In order to qualify as a life insurance contract
for federal tax purposes, the Contract must meet the definition of a life
insurance contract which is set forth in Section 7702 of the Internal Revenue
Code of 1986, as amended (the "Code"). The manner in which Section 7702 should
be applied to certain features of the Contract offered in this Prospectus is not
directly addressed by Section 7702. Nevertheless, Merrill Lynch Life believes it
is reasonable to conclude that the Contract will meet the Section 7702
definition of a life insurance contract, so that:
- the death benefit should be fully excludable from the gross income of the
beneficiary under Section 101(a)(1) of the Code; and
- the contract owner should not be considered in constructive receipt of
the cash value, including any increases, until actual cancellation of the
Contract (see "Tax Treatment of Loans and Other Distributions" below).
In the absence of final regulations or other pertinent interpretations of
Section 7702, however, there is necessarily some uncertainty as to whether a
Contract will meet the statutory life insurance contract definition,
particularly if it insures substandard risks. If a Contract were determined not
to be a life insurance contract for purposes of Section 7702, such Contract
would not provide most of the tax advantages normally provided by a life
insurance contract.
Merrill Lynch Life thus reserves the right to make changes in the Contract if
such changes are deemed necessary to attempt to assure its qualification as a
life insurance contract for tax purposes. (See "Contract Changes--Applicable
Federal Tax Law" on page 28.)
Diversification. Section 817(h) of the Code provides that separate account
investments (or the investments of a mutual fund, the shares of which are owned
by separate accounts of insurance companies) underlying the Contract must be
"adequately diversified" in accordance with Treasury regulations in order for
the Contract to qualify as life insurance. The Treasury Department has issued
regulations prescribing the diversification requirements in connection with
variable contracts. The Separate Account, through the Funds, intends to comply
with these requirements. Each Fund is obligated to comply with the
diversification requirements prescribed by the Treasury Department.
In connection with the issuance of the temporary diversification regulations,
the Treasury Department stated that it anticipates the issuance of regulations
or rulings prescribing the circumstances in which an owner's control of the
investments of a separate account may cause the owner, rather than the insurance
company, to be treated as the owner of the assets in the account. If the
contract owner is considered the owner of the assets of the Separate Account,
income and gains from the account would be included in the owner's gross income.
The ownership rights under the Contract offered in this Prospectus are similar
to, but different in certain respects from, those described by the Internal
Revenue Service in rulings in which it determined that the owners were not
owners of separate account assets. For example, the owner of the Contract has
additional flexibility in allocating payments and cash values. These differences
could result in the owner being treated as the owner of the assets of the
Separate Account. In addition, Merrill Lynch Life does not know what standards
will be set forth in the regulations or rulings which the Treasury has stated it
expects to be issued. Merrill Lynch Life therefore reserves the right to modify
the Contract as necessary to attempt to prevent the contract owner from being
considered an owner of the assets of the Separate Account.
Tax Treatment of Loans and Other Distributions. Federal tax law establishes a
class of life insurance contracts referred to as modified endowment contracts. A
modified endowment contract is any contract which satisfies the definition of
life insurance set forth in Section 7702 of the Code but fails to meet the 7-pay
test. This test applies a cumulative limit on the amount of payments that can be
made into a contract each year in the first seven contract years in order to
avoid modified endowment treatment. In effect, compliance with the 7-pay test
requires that contracts be purchased with a higher face amount for a given
initial payment than would otherwise be required, at a minimum, to meet the
definition of life insurance. Contracts that do not
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satisfy the 7-pay test, including contracts which initially satisfied the 7-pay
test but later failed the test, will be considered modified endowment contracts
subject to the following distribution rules. Loans and partial withdrawals from,
as well as collateral assignments of, modified endowment contracts will be
treated as distributions to the contract owner. Furthermore, if the loan
interest is capitalized by adding the amount due to the balance of the loan, the
amount of the capitalized interest will be treated as a distribution which may
be subject to income tax, to the extent of the income in the contract. All
pre-death distributions (including loans, capitalized interest, partial
withdrawals, collateral assignments and complete surrenders) from these
contracts will be included in gross income on an income-first basis to the
extent of any income in the contract (the cash value less the contract owner's
investment in the contract) immediately before the distribution.
The law also imposes a 10% penalty tax on pre-death distributions (including
loans, capitalized interest, collateral assignments, partial withdrawals and
complete surrenders) from modified endowment contracts to the extent they are
included in income, unless such amounts are distributed on or after the taxpayer
attains age 59 1/2, because the taxpayer is disabled, or as substantially equal
periodic payments over the taxpayer's life (or life expectancy) or over the
joint lives (or joint life expectancies) of the taxpayer and his or her
beneficiary.
Contracts that comply with the 7-pay test will not be classified as modified
endowment contracts. Loans from contracts that are not modified endowment
contracts will be considered indebtedness of an owner and no part of a loan will
constitute income to the owner. In addition, pre-death distributions from these
contracts will generally not be included in gross income to the extent that the
amount received does not exceed the owner's investment in the contract. A lapse
of such a contract with an outstanding loan will result in the treatment of the
loan cancellation (including the accrued interest) as a distribution under the
contract and may be taxable.
Compliance with the 7-pay test does not imply or guarantee that only seven
payments will be required for the initial death benefit to be guaranteed for
life. Making additional payments or reducing the benefits (for example, through
a partial withdrawal, a change in death benefit option or terminating additional
benefits under a rider) may violate the 7-pay test or, at a minimum, reduce the
amount that may be paid in the future under the 7-pay test. Further, reducing
the death benefit at any time will require retroactive retesting and will
probably result in a failure of the 7-pay test regardless of any efforts by
Merrill Lynch Life to provide a payment schedule that will not violate the 7-pay
test.
Any contract received in an exchange for a modified endowment contract will be
considered a modified endowment contract and will be subject to the tax
treatment accorded to modified endowment contracts that is described in the
Prospectus. A contract that is not originally classified as a modified endowment
contract can become so classified if there is a reduction in benefits at any
time (including, for example, by a decrease in the additional insurance rider
face amount or a change in death benefit option) or if a material change is made
in the contract at any time. (A material change includes, but is not limited to,
a change in the benefits that was not reflected in a prior 7-pay test
computation, such as a change in death benefit option.) This could result from
additional payments made after 7-pay test calculations done at the time of the
contract exchange. Contract owners may choose not to exercise their right to
make additional payments, in order to preserve their contract's current tax
treatment.
If a contract becomes a modified endowment contract, distributions that occur
during the contract year it becomes a modified endowment contract and any
subsequent contract year will be taxed as distributions from a modified
endowment contract. In addition, distributions from a contract within two years
before it becomes a modified endowment contract will be taxed in this manner.
This means that a distribution made from a contract that is not a modified
endowment contract could later become taxable as a distribution from a modified
endowment contract.
Special Treatment of Loans on the Contract. If there is any borrowing against
the Contract, whether a modified endowment contract or not, the interest paid on
loans generally is not tax deductible.
Aggregation of Modified Endowment Contracts. In the case of a pre-death
distribution (including a loan, capitalized interest, partial withdrawal,
collateral assignment or complete surrender) from a contract that is treated as
a modified endowment contract under the rules described above, a special
aggregation requirement
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may apply for purposes of determining the amount of the income on the contract.
Specifically, if Merrill Lynch Life or any of its affiliates issues to the same
contract owner more than one modified endowment contract within a calendar year,
then for purposes of measuring the income on the contract with respect to a
distribution from any of those contracts, the income on the contract for all
those contracts will be aggregated and attributed to that distribution.
Tax Treatment of Policy Split. The policy split rider permits a Contract to be
split into two individual contracts upon the occurrence of a divorce of joint
insureds or certain changes in federal estate tax law. A policy split could have
adverse tax consequences; for example, it is not clear whether a policy split
will be treated as a nontaxable exchange under Sections 1031 through 1043 of the
Code. If a policy split is not treated as a nontaxable exchange, a split could
result in the recognition of taxable income in an amount up to any gain in the
Contract at the time of the split. In addition, it is not clear whether the
individual contracts that result from a policy split would in all circumstances
be treated as life insurance contracts for federal income tax purposes and, if
so treated, whether the individual contracts would be classified as modified
endowment contracts. (See "Tax Treatment of Loans and Other Distributions" on
page 31.) Before the contract owner exercises rights provided by the policy
split rider, it is important that he or she consult with a competent tax advisor
regarding the possible consequences of a policy split.
Other Tax Considerations. The transfer of the Contract or the designation of a
beneficiary may have federal, state, and/or local transfer and inheritance tax
consequences, including the imposition of gift, estate and generation skipping
transfer taxes. For example, the transfer of the Contract to, or the designation
as beneficiary of, or the payment of proceeds to, a person who is assigned to a
generation which is two or more generations below the generation assignment of
the contract owner, may have generation skipping transfer tax considerations
under Section 2601 of the Code.
The individual situation of each contract owner or beneficiary will determine
the extent, if any, to which federal, state and local transfer taxes may be
imposed. The contract owner should consult with a tax advisor for specific
information in connection with these taxes.
The particular situation of each contract owner or beneficiary will determine
how ownership or receipt of contract proceeds will be treated for purposes of
federal estate tax, as well as state and local estate, inheritance, generation
skipping and other taxes.
Other Transactions. Changing the contract owner or an additional insurance
rider's face amount may have tax consequences. Exchanging this Contract for
another involving the same insureds should have no federal income tax
consequences if there is no debt and no cash or other property is received,
according to Section 1035(a)(1) of the Code. In addition, exchanging this
Contract for more than one contract, or exchanging this Contract and one or more
other contracts for a single contract, in certain circumstances, may be treated
as an exchange under Section 1035, as long as all such contracts involve the
same insureds. Any new contract would have to satisfy the 7-pay test from the
date of the exchange to avoid characterization as a modified endowment contract.
An exchange for a new contract may, however, result in a loss of grandfathering
status for statutory changes made after the old contract was issued. Changing
the insureds under this Contract may not be treated as an exchange under Section
1035, but rather as a taxable exchange. A tax advisor should be consulted before
effecting any exchange, since even if an exchange is within Section 1035(a), the
exchange may have tax consequences other than immediate recognition of income.
In addition, the Contract may be used in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary depending on the particular
facts and circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a contract in any arrangement the value of which
depends in part on its tax consequences, you should be sure to consult a
qualified tax advisor regarding the tax attributes of the particular
arrangement.
Ownership of This Contract by Non-Natural Persons. The above discussion of the
tax consequences arising from the purchase, ownership and transfer of the
Contract has assumed that the owner of the Contract consists
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of one or more individuals. Organizations exempt from taxation under Section
501(a) of the Code may be subject to additional or different tax consequences
with respect to transactions such as contract loans. Further, organizations
purchasing Contracts covering the life of an individual who is an officer or
employee, or is financially interested in, the taxpayer's trade or business,
should consult a tax advisor regarding possible tax consequences associated with
a contract prior to the acquisition of this Contract and also before entering
into any subsequent changes to or transactions under this Contract.
Merrill Lynch Life does not make any guarantee regarding the tax status of any
Contract or any transaction regarding the Contract.
The above discussion is not intended as tax advice. For tax advice contract
owners should consult a competent tax advisor. Although this tax discussion is
based on Merrill Lynch Life's understanding of federal income tax laws as they
are currently interpreted, it can't guarantee that those laws or interpretations
will remain unchanged.
MERRILL LYNCH LIFE'S INCOME TAXES
Insurance companies are generally required to capitalize and amortize certain
policy acquisition expenses over a ten-year period rather than currently
deducting such expenses. This treatment applies to the deferred acquisition
expenses of a Contract and results in a significantly higher corporate income
tax liability for Merrill Lynch Life in early contract years. Merrill Lynch Life
makes a charge to compensate Merrill Lynch Life for the anticipated higher
corporate income taxes that result from the receipt of payments under a
Contract. (See "Contract Loading" on page 18.)
Currently, Merrill Lynch Life makes no charges to the Separate Account for any
federal, state or local taxes that it incurs that may be attributable to the
Separate Account or to the Contracts. Merrill Lynch Life, however, reserves the
right to make a charge for assessments of federal premium taxes or federal,
state or local excise, profits or income taxes measured by or attributable to
the receipt of premiums.
REINSURANCE
Merrill Lynch Life intends to reinsure some of the risks assumed under the
Contracts.
MORE ABOUT THE SEPARATE ACCOUNT AND ITS DIVISIONS
ABOUT THE SEPARATE ACCOUNT
The Separate Account is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940 as a unit investment trust. This
registration does not involve any supervision by the Securities and Exchange
Commission of Merrill Lynch Life's management or the management of the Separate
Account. The Separate Account is also governed by the laws of the State of
Arkansas, Merrill Lynch Life's state of domicile.
Merrill Lynch Life owns all of the assets of the Separate Account. These assets
are held separate and apart from all of Merrill Lynch Life's other assets.
Merrill Lynch Life maintains records of all purchases and redemptions of shares
of the Funds and units of the Zero Trusts by each of the investment divisions.
CHANGES WITHIN THE ACCOUNT
Merrill Lynch Life may from time to time make additional investment divisions
available to contract owners. These divisions will invest in investment
portfolios Merrill Lynch Life finds suitable for the Contracts. Merrill Lynch
Life also has the right to eliminate investment divisions from the Separate
Account, to combine two or more investment divisions, or to substitute a new
portfolio for the portfolio in which an investment division invests. A
substitution may become necessary if, in Merrill Lynch Life's judgment, a
portfolio no longer suits the purposes of the Contracts. This may happen due to
a change in laws or regulations or in a portfolio's
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investment objectives or restrictions, or because the portfolio is no longer
available for investment, or for some other reason. Merrill Lynch Life would get
any required prior approval from the Arkansas State Insurance Department and the
Securities and Exchange Commission before making such a substitution. It would
also get any other required approvals before making such a substitution.
Subject to any required regulatory approvals, Merrill Lynch Life reserves the
right to transfer assets of the Separate Account or of any of the investment
divisions to another separate account or investment division.
When permitted by law, Merrill Lynch Life reserves the right to:
- deregister the Separate Account under the Investment Company Act of 1940;
- operate the Separate Account as a management company under the Investment
Company Act of 1940;
- restrict or eliminate any voting rights of contract owners, or other
persons who have voting rights as to the Separate Account; and
- combine the Separate Account with other separate accounts.
NET RATE OF RETURN FOR AN INVESTMENT DIVISION
Each investment division has a distinct unit value (also referred to as "price"
or "separate account index" in reports furnished to the contract owner by
Merrill Lynch Life). When payments or other amounts are allocated to an
investment division, a number of units are purchased based on the value of a
unit of the investment division as of the end of the valuation period during
which the allocation is made. When amounts are transferred out of, or deducted
from, an investment division, units are redeemed in a similar manner. A
valuation period is each business day together with any non-business days before
it. A business day for an investment division is any day the New York Stock
Exchange is open or the SEC requires that the net asset value of an investment
division be determined.
For each investment division, the separate account index was initially set at
$10.00. The separate account index for each subsequent valuation period
fluctuates based upon the net rate of return for that period. Merrill Lynch Life
determines the net rate of return of an investment division at the end of each
valuation period. The net rate of return reflects the investment performance of
the division for the valuation period and is net of the charges to the Separate
Account described on page 18.
For divisions investing in the Funds, shares are valued at net asset value and
reflect reinvestment of any dividends or capital gains distributions declared by
the Funds.
For divisions investing in the Zero Trusts, units of each Zero Trust are valued
at the sponsor's repurchase price, as explained in the prospectus for the Zero
Trusts.
THE FUNDS
Buying and Redeeming Shares. The Funds sell and redeem their shares at net
asset value. Any dividend or capital gain distribution will be reinvested at net
asset value in shares of the same portfolio.
Voting Rights. Merrill Lynch Life is the legal owner of all Fund shares held in
the Separate Account. As the owner, Merrill Lynch Life 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 investment divisions for which instructions are
received. Shares not attributable to Contracts will also be voted in the same
proportion as shares in the respective divisions for which instructions are
received. If any federal securities laws or regulations, or their present
interpretation, change to permit Merrill Lynch Life to vote Fund shares in its
own right, it may elect to do so.
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Merrill Lynch Life determines the number of shares that contract owners have in
an investment division by dividing their Contract's investment base in that
division by the net asset value of one share of the portfolio. Fractional votes
will be counted. Merrill Lynch Life will determine the number of shares for
which a contract owner may give voting instructions 90 days or less before each
Fund meeting. Merrill Lynch Life will request voting instructions by mail at
least 14 days before the meeting.
Under certain circumstances, Merrill Lynch Life may be required by state
regulatory authorities to disregard voting instructions. This may happen if
following the instructions would mean voting to change the sub-classification or
investment objectives of the portfolios, or to approve or disapprove an
investment advisory contract.
Merrill Lynch Life may also disregard instructions to vote for changes in the
investment policy or the investment adviser if it disapproves of the proposed
changes. Merrill Lynch Life would disapprove a proposed change only if it was:
- contrary to state law;
- prohibited by state regulatory authorities; or
- decided by management that the change would result in overly speculative
or unsound investments.
If Merrill Lynch Life disregards voting instructions, it will include a summary
of its actions in the next semi-annual report.
Resolving Material Conflicts. Shares of the Series Fund are available for
investment by Merrill Lynch Life, ML Life Insurance Company of New York (an
indirect wholly owned subsidiary of Merrill Lynch & Co., Inc.) and Monarch Life
Insurance Company (an insurance company not affiliated with Merrill Lynch Life
or Merrill Lynch & Co., Inc.). Shares of the Variable Series Funds, the AIM V.I.
Funds, the Alliance Fund, and the MFS Trust are sold to separate accounts of
Merrill Lynch Life, ML Life Insurance Company of New York and insurance
companies not affiliated with Merrill Lynch Life or Merrill Lynch & Co., Inc. to
fund benefits under variable life insurance and variable annuity contracts, and
may be sold to certain qualified plans.
It is possible that differences might arise between Merrill Lynch Life's
Separate Account and one or more of the other separate accounts which invest in
the Funds. In some cases, it is possible that the differences could be
considered "material conflicts". Such a "material conflict" could also arise due
to changes in the law (such as state insurance law or federal tax law) which
affect these different variable life insurance and variable annuity separate
accounts. It could also arise by reason of difference in voting instructions
from Merrill Lynch Life's contract owners and those of the other insurance
companies, or for other reasons. Merrill Lynch Life will monitor events to
determine how to respond to such conflicts. If a conflict occurs, Merrill Lynch
Life may be required to eliminate one or more investment divisions of the
Separate Account which invest in the Funds or substitute a new portfolio for a
portfolio in which a division invests. In responding to any conflict, Merrill
Lynch Life will take the action which it believes necessary to protect its
contract owners consistent with applicable legal requirements.
Administration Services Arrangements. MLAM has entered into an agreement with
Merrill Lynch Insurance Group, Inc. ("MLIG"), Merrill Lynch Life's parent, with
respect to administration services for the Series Fund and the Variable Series
Funds in connection with the Contracts and other variable life insurance and
variable annuity contracts issued by Merrill Lynch Life. Under this agreement,
MLAM pays compensation to MLIG in an amount equal to a portion of the annual
gross investment advisory fees paid by the Series Fund and the Variable Series
Funds to MLAM attributable to variable contracts issued by Merrill Lynch Life.
AIM V.I. Funds has entered into an Administrative Services Agreement with AIM,
pursuant to which AIM has agreed to provide certain accounting and other
administrative services to the AIM V.I. Funds, including the services of a
principal financial officer and related staff. As compensation to AIM for its
services under the Administrative Services Agreement, the AIM V.I. Funds
reimburse AIM for expenses incurred by AIM or its
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affiliates in connection with such services. AIM has entered into an agreement
with Merrill Lynch Life with respect to administrative services for the AIM V.I.
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 the AIM V.I. Funds attributable to the Contracts.
Alliance Fund Distributors, Inc. ("AFD"), an affiliate of Alliance, has entered
into an agreement with Merrill Lynch Life with respect to administrative
services for the Alliance Fund 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 the Alliance Fund attributable to the
Contracts.
MFS has entered into an agreement with MLIG with respect to administrative
services for the MFS Trust in connection with the Contracts and certain
contracts issued by ML Life Insurance Company of New York. Under this agreement,
MFS pays compensation to MLIG in an amount equal to a percentage of the average
net assets of the MFS Trust attributable to such contracts.
THE ZERO TRUSTS
The 16 Zero Trusts:
<TABLE>
<CAPTION>
TARGETED RATE OF RETURN
TO MATURITY AS
ZERO TRUST MATURITY DATE OF APRIL 16, 1997
- ----------- ------------------ -----------------------
<S> <C> <C>
1998 February 15, 1998 4.35%
1999 February 15, 1999 5.11%
2000 February 15, 2000 5.28%
2001 February 15, 2001 5.33%
2002 February 15, 2002 5.46%
2003 August 15, 2003 5.57%
2004 February 15, 2004 5.64%
2005 February 15, 2005 5.59%
2006 February 15, 2006 5.45%
2007 February 15, 2007 5.56%
2008 February 15. 2008 5.83%
2009 February 15, 2009 5.86%
2010 February 15, 2010 5.94%
2011 February 15, 2011 5.92%
2013 February 15, 2013 6.00%
2014 February 15, 2014 6.09%
</TABLE>
Targeted Rate of Return to Maturity
Because the underlying securities in the Zero Trusts will grow to their face
value on the maturity date, it is possible to estimate a compound rate of growth
to maturity for the Zero Trust units.
But because the units are held in the Separate Account, the asset charge and the
trust charge (described in "Charges to the Separate Account" on page 18) must be
taken into account in estimating a targeted rate of return for the Separate
Account. The targeted rate of return to maturity for the Separate Account
depends on the compound rate of growth adjusted for these charges. It does not,
however, represent the actual return on a payment Merrill Lynch Life might
receive under the Contract on that date, since it does not reflect the charges
for contract loading deducted from payments to a Contract, charges for cost of
insurance and rider costs and any net loan cost deducted from a Contract's
investment base.
Since the value of the Zero Trust units will vary daily to reflect the market
value of the underlying securities, the compound rate of growth to maturity for
the Zero Trust units and the targeted rate of return to maturity for the
Separate Account will vary correspondingly.
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ILLUSTRATIONS
ILLUSTRATIONS OF DEATH BENEFITS, INVESTMENT BASE, NET CASH SURRENDER VALUES AND
ACCUMULATED PAYMENTS
The tables on pages 40 through 43 demonstrate the way in which the Contract
works. The tables are based on the following ages (to age 99 of the younger
insured), face amounts, payments and guarantee periods and show values based
upon both current and maximum mortality charges.
1. The illustration on page 40 is for a Contract issued to a male age
65 and a female age 60 both in the standard non-smoker underwriting class
with annual payments of $40,114 through contract year 37, an initial face
amount of $1.5 million, an initial guarantee period of 7.25 years and
coverage under death benefit option 1. It assumes current mortality
charges.
2. The illustration on page 41 is for a Contract issued to a male age
65 and a female age 60 both in the standard non-smoker underwriting class
with annual payments of $40,114 through contract year 37, an initial face
amount of $1.5 million, an initial guarantee period of 7.25 years and
coverage under death benefit option 1. It assumes maximum mortality
charges.
3. The illustration on page 42 is for a Contract issued to a male age
65 and a female age 60 both in the standard non-smoker underwriting class
with annual payments of $142,166 through contract year 32, an initial face
amount of $1.5 million, an initial guarantee period of 14 years and
coverage under death benefit option 2. It assumes current mortality
charges.
4. The illustration on page 43 is for a Contract issued to a male age
65 and a female age 60 both in the standard non-smoker underwriting class
with annual payments of $142,166 through contract year 32, an initial face
amount of $1.5 million, an initial guarantee period of 14 years and
coverage under death benefit option 2. It assumes maximum mortality
charges.
The tables show how the death benefit, investment base and net cash surrender
value may vary over an extended period of time assuming hypothetical rates of
return (i.e., investment income and capital gains and losses, realized or
unrealized) equivalent to constant gross annual rates of 0%, 6% and 12%.
The death benefit, investment base and net cash surrender value for a Contract
would be different from those shown if the actual rates of return averaged 0%,
6% and 12% over a period of years, but also fluctuated above or below those
averages for individual contract years.
The amounts shown for the death benefit, investment base and net cash surrender
value as of the end of each contract year take into account the daily asset
charge in the Separate Account equivalent to .90% (annually at the beginning of
the year) of assets attributable to the Contracts at the beginning of the year.
The amounts shown in the tables also assume an additional charge of .52%. This
charge assumes that investment base is allocated equally among all investment
divisions and is based on the 1996 expenses (including monthly advisory fees)
for the Funds and the current trust charge. This charge also reflects expense
reimbursements made in 1996 to certain portfolios by the investment adviser to
the respective portfolio. These reimbursements amounted to .06%, .07%, .16%,
.48%, and .28% of the average daily net assets of the Developing Capital Markets
Focus Fund, the Natural Resources Portfolio, the MFS Emerging Growth Series, the
MFS Research Series, and the Premier Growth Portfolio, respectively. (See
"Charges to Fund Assets" on page 19.) The actual charge under a Contract for
Fund expenses and the trust charge will depend on the actual allocation of the
investment base and may be higher or lower depending on how the investment base
is allocated.
Taking into account the .90% asset charge in the Separate Account and the .52%
charge described above, the gross annual rates of investment return of 0%, 6%
and 12% correspond to net annual rates of -1.42%, 4.53%,
38
<PAGE> 96
and 10.48%, respectively. The gross returns are before any deductions and should
not be compared to rates which are after deduction of charges.
The hypothetical returns shown on the tables are without any income tax charges
that may be attributable to the Separate Account in the future, although they do
reflect the charge for federal taxes included in the contract loading. (See
"Contract Loading" on page 18.) In order to produce after tax returns of 0%, 6%
and 12%, the Funds would have to earn a sufficient amount in excess of 0% or 6%
or 12% to cover any tax charges attributable to the Separate Account.
The second column of the tables shows the amount which would accumulate if an
amount equal to the payments were invested to earn interest (after taxes) at 5%
compounded annually.
Merrill Lynch Life will furnish upon request a personalized illustration
reflecting the proposed insureds' ages, face amount and the payment amounts
requested. The illustration will also use current cost of insurance rates and
will assume that the proposed insureds are in a standard non-smoker underwriting
class.
39
<PAGE> 97
JOINT INSUREDS: FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
STANDARD NON-SMOKER UNDERWRITING CLASS
ANNUAL PAYMENTS OF $40,114 FOR 37 YEARS
FACE AMOUNT(1): $1.5 MILLION INITIAL GUARANTEE PERIOD: 7.25 YEARS
DEATH BENEFIT OPTION 1
BASED ON CURRENT MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT(3)(7)
PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL RATE OF RETURN OF
INTEREST AT 5% AS -----------------------------------
CONTRACT YEAR PAYMENTS(2)(6) OF END OF YEAR 0% 6% 12%
- --------------------------------------- -------------- ----------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1..................................... 40,114 42,120 1,500,000 1,500,000 1,500,000
2..................................... 40,114 86,346 1,500,000 1,500,000 1,500,000
3..................................... 40,114 132,783 1,500,000 1,500,000 1,500,000
4..................................... 40,114 181,542 1,500,000 1,500,000 1,500,000
5..................................... 40,114 232,739 1,500,000 1,500,000 1,500,000
6..................................... 40,114 286,496 1,500,000 1,500,000 1,500,000
7..................................... 40,114 342,941 1,500,000 1,500,000 1,500,000
8..................................... 40,114 402,208 1,500,000 1,500,000 1,500,000
9..................................... 40,114 464,438 1,500,000 1,500,000 1,500,000
10..................................... 40,114 529,780 1,500,000 1,500,000 1,500,000
15..................................... 40,114 908,886 1,500,000 1,500,000 1,500,000
20..................................... 40,114 1,392,732 1,500,000 1,500,000 1,981,491
30..................................... 40,114 2,798,389 1,500,000 1,715,100 5,233,312
40..................................... 0 4,955,270 0 0 0
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR
INVESTMENT BASE AND END OF YEAR
NET CASH SURRENDER VALUE(3)(4) CASH VALUE(3)(5)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
---------------------------------- ----------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
- --------------------------------------- ------- --------- ---------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1..................................... 19,510 20,693 21,877 19,510 20,693 21,877
2..................................... 38,331 41,898 45,607 38,331 41,898 45,607
3..................................... 74,630 82,883 91,718 74,630 82,883 91,718
4..................................... 110,345 125,657 142,595 110,345 125,657 142,595
5..................................... 145,444 170,262 198,701 145,444 170,262 198,701
6..................................... 179,919 216,768 260,577 179,919 216,768 260,577
7..................................... 213,725 265,212 328,786 213,725 266,212 328,786
8..................................... 246,835 315,654 403,977 246,835 315,654 403,977
9..................................... 279,193 368,132 486,852 279,193 368,132 486,852
10..................................... 310,791 422,736 578,242 310,791 422,736 578,242
15..................................... 449,617 725,014 1,153,606 449,617 725,014 1,153,606
20..................................... 532,269 1,077,487 1,887,134 532,269 1,077,487 1,887,134
30..................................... 246,747 1,633,429 4,984,107 246,747 1,633,429 4,984,107
40..................................... 0 2,505,801 13,300,281 0 2,505,801 13,300,281
</TABLE>
(1) Assumes no additional insurance rider face amount.
(2) All payments are illustrated as if made at the beginning of the contract
year.
(3) Assumes annual payments are made and no loans or withdrawals have been
taken.
(4) Investment base will equal net cash surrender value on each contract
anniversary. If the Contract is surrendered within 24 months after issue,
the contract owner will also receive any excess sales load previously
deducted.
(5) Cash value will equal investment base and net cash surrender value on each
contract anniversary if no loans have been taken.
(6) The payments shown may extend beyond the year in which the automatic
adjustment is made. At annual rates of return of 6% and 12% and current
mortality charges, the guarantee period reaches life of the younger insured
in contract years 27 and 16, respectively. Once a guarantee of life is
reached, no more payments would be accepted. Values shown at annual rates of
return of 0%, 6% and 12% do not reflect any payments shown after a guarantee
period of life is reached.
(7) At contract year 40, on the contract anniversary nearest the younger
insured's 100th birthday, the Contract reaches its maturity date and a death
benefit is no longer provided. On the maturity date, the net cash surrender
value is paid to the contract owner, provided either insured is still
living.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST
RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND CASH VALUE
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF RETURN AVERAGED
0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY
MERRILL LYNCH LIFE OR THE FUNDS OR THE ZERO TRUSTS THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
40
<PAGE> 98
JOINT INSUREDS: FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
STANDARD NON-SMOKER UNDERWRITING CLASS
ANNUAL PAYMENTS OF $40,114 FOR 37 YEARS
FACE AMOUNT(1): $1.5 MILLION INITIAL GUARANTEE PERIOD: 7.25 YEARS
DEATH BENEFIT OPTION 1
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT(3)(7)
PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL RATE OF RETURN OF
INTEREST AT 5% AS -----------------------------------------------------------
CONTRACT YEAR PAYMENTS(2)(6) OF END OF YEAR 0% 6% 12%
- ---------------------------- -------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
1.......................... 40,114 42,120 1,500,000 1,500,000 1,500,000
2.......................... 40,114 86,346 1,500,000 1,500,000 1,500,000
3.......................... 40,114 132,783 1,500,000 1,500,000 1,500,000
4.......................... 40,114 181,542 1,500,000 1,500,000 1,500,000
5.......................... 40,114 232,739 1,500,000 1,500,000 1,500,000
6.......................... 40,114 286,496 1,500,000 1,500,000 1,500,000
7.......................... 40,114 342,941 1,500,000 1,500,000 1,500,000
8.......................... 40,114 402,208 1,500,000 1,500,000 1,500,000
9.......................... 40,114 464,438 1,500,000 1,500,000 1,500,000
10.......................... 40,114 529,780 1,500,000 1,500,000 1,500,000
15.......................... 40,114 908,886 1,500,000 1,500,000 1,500,000
20.......................... 40,114 1,392,732 1,500,000 1,500,000 1,769,354
30.......................... 40,114 2,798,389 1,500,000 1,500,000 4,529,959
40.......................... 0 4,955,270 0 0 0
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR
INVESTMENT BASE AND END OF YEAR
NET CASH SURRENDER VALUE(3)(4) CASH VALUE(3)(5)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
---------------------------------- --------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
- -------------------------------------- ------- ------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
1.................................... 19,510 20,693 21,877 19,510 20,693 21,877
2.................................... 38,161 41,722 45,425 38,161 41,722 45,425
3.................................... 73,628 81,836 90,627 73,628 81,836 90,627
4.................................... 107,751 122,910 139,692 107,751 122,910 139,692
5.................................... 140,383 164,829 192,883 140,383 164,829 192,883
6.................................... 171,361 207,467 250,496 171,361 207,467 250,496
7.................................... 200,449 250,630 312,817 200,449 250,630 312,817
8.................................... 227,544 294,262 380,338 227,544 294,262 380,338
9.................................... 252,391 338,174 453,518 252,391 338,174 453,518
10.................................... 274,745 382,203 532,954 274,745 382,203 532,954
15.................................... 335,935 596,410 1,056,894 335,935 596,410 1,056,894
20.................................... 246,951 772,573 1,685,099 246,951 772,573 1,685,099
30.................................... 0 669,623 4,314,246 0 669,623 4,314,246
40.................................... 0 0 11,324,153 0 0 11,324,153
</TABLE>
(1) Assumes no additional insurance rider face amount.
(2) All payments are illustrated as if made at the beginning of the contract
year.
(3) Assumes annual payments are made and no loans or withdrawals have been
taken.
(4) Investment base will equal net cash surrender value on each contract
anniversary. If the Contract is surrendered within 24 months after issue,
the contract owner will also receive any excess sales load previously
deducted.
(5) Cash value will equal investment base and net cash surrender value on each
contract anniversary if no loans have been taken.
(6) The payments shown may extend beyond the year in which the automatic
adjustment is made. At an annual rate of return of 12% and maximum mortality
charges, the guarantee period reaches life of the younger insured in
contract year 15. Once a guarantee of life is reached, no more payments
would be accepted. Values shown at annual rates of return of 0%, 6% and 12%
do not reflect any payments shown after a guarantee of life is reached.
(7) At contract year 40, on the contract anniversary nearest the younger
insured's 100th birthday, the Contract reaches its maturity date and a death
benefit is no longer provided. On the maturity date, the net cash surrender
value is paid to the contract owner, provided either insured is still
living.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST
RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND CASH VALUE
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF RETURN AVERAGED
0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY
MERRILL LYNCH LIFE OR THE FUNDS OR THE ZERO TRUSTS THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
41
<PAGE> 99
JOINT INSUREDS: FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
STANDARD NON-SMOKER UNDERWRITING CLASS
ANNUAL PAYMENTS OF $142,166 FOR 32 YEARS
FACE AMOUNT(1): $1.5 MILLION INITIAL GUARANTEE PERIOD: 14 YEARS
DEATH BENEFIT OPTION 2
BASED ON CURRENT MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
TOTAL DEATH BENEFIT(3)(7)
PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL RATE OF RETURN OF
INTEREST AT 5% AS ------------------------------------
CONTRACT YEAR PAYMENTS(2)(6) OF END OF YEAR 0% 6% 12%
- -------------------------------------- -------------- ----------------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
1.................................... 142,166 149,274 1,597,297 1,603,175 1,609,054
2.................................... 142,166 306,012 1,729,346 1,748,294 1,768,938
3.................................... 142,166 470,587 1,858,959 1,899,928 1,945,517
4.................................... 142,166 643,391 1,986,647 2,058,334 2,140,501
5.................................... 142,166 824,835 2,112,391 2,223,768 2,355,766
6.................................... 142,166 1,015,351 2,236,187 2,396,521 2,593,410
7.................................... 142,166 1,215,393 2,358,004 2,576,852 2,855,704
8.................................... 142,166 1,425,437 2,477,808 2,765,044 3,145,169
9.................................... 142,166 1,645,983 2,595,545 2,961,359 3,464,553
10.................................... 142,166 1,877,556 2,711,184 3,166,115 3,816,944
15.................................... 142,166 3,221,125 3,239,190 4,317,307 6,194,240
20.................................... 142,166 4,935,897 3,660,692 5,669,092 8,091,582
30.................................... 142,166 9,917,614 3,808,060 8,268,578 20,798,051
40.................................... 0 16,606,869 0 0 0
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR
INVESTMENT BASE AND
NET CASH SURRENDER VALUE(3)(4) END OF YEAR
CASH VALUE(3)(5)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
------------------------------------ ------------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
- ------------------------------------ --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1.................................. 97,297 103,175 109,054 97,297 103,175 109,054
2.................................. 229,346 248,294 268,938 229,346 248,294 268,938
3.................................. 358,959 399,928 445,517 358,959 399,928 445,517
4.................................. 486,647 558,334 640,501 486,647 558,334 640,501
5.................................. 612,391 723,768 855,766 612,391 723,768 855,766
6.................................. 736,187 896,521 1,093,410 736,187 896,521 1,093,410
7.................................. 858,004 1,076,852 1,355,704 858,004 1,076,852 1,355,704
8.................................. 977,808 1,265,044 1,645,169 977,808 1,265,044 1,645,169
9.................................. 1,086,545 1,461,359 1,964,553 1,095,545 1,461,359 1,964,553
10.................................. 1,211,184 1,666,115 2,316,944 1,211,184 1,666,115 2,316,944
15.................................. 1,739,190 2,817,307 4,694,240 1,739,190 2,817,307 4,694,240
20.................................. 2,160,692 4,169,092 7,591,582 2,160,692 4,169,092 7,591,582
30.................................. 2,308,060 6,768,678 19,298,051 2,308,060 6,768,578 19,298,051
40.................................. 0 7,355,758 48,511,370 0 7,355,758 48,511,370
</TABLE>
(1) Assumes no additional insurance rider face amount.
(2) All payments are illustrated as if made at the beginning of the contract
year.
(3) Assumes annual payments are made and no loans or withdrawals have been
taken.
(4) Investment base will equal net cash surrender value on each contract
anniversary. If the Contract is surrendered within 24 months after issue,
the contract owner will also receive any excess sales load previously
deducted.
(5) Cash value will equal investment base and net cash surrender value on each
contract anniversary if no loans have been taken.
(6) The payments shown may extend beyond the year in which the automatic
adjustment is made. At annual rates of return of 6% and 12% and current
mortality charges, the guarantee period reaches life of the younger insured
in contract years 27 and 15, respectively. Once a guarantee of life is
reached, no more payments would be accepted. Values shown at annual rates of
return of 0%, 6% and 12% do not reflect any payments shown after a guarantee
of life is reached.
(7) At contract year 40, on the contract anniversary nearest the younger
insured's 100th birthday, the Contract reaches its maturity date and a death
benefit is no longer provided. On the maturity date, the net cash surrender
value is paid to the contract owner, provided either insured is still
living.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST
RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND CASH VALUE
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF RETURN AVERAGED
0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY
MERRILL LYNCH LIFE OR THE FUNDS OR THE ZERO TRUSTS THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
42
<PAGE> 100
JOINT INSUREDS: FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
STANDARD NON-SMOKER UNDERWRITING CLASS
ANNUAL PAYMENTS OF $142,166 FOR 32 YEARS
FACE AMOUNT(1): $1.5 MILLION INITIAL GUARANTEE PERIOD: 14 YEARS
DEATH BENEFIT OPTION 2
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
END OF YEAR
DEATH BENEFIT(3)(7)
TOTAL PAYMENTS ASSUMING HYPOTHETICAL GROSS
MADE PLUS ANNUAL RATE OF RETURN OF
INTEREST AT 5% AS -----------------------------------------------------------
CONTRACT YEAR PAYMENTS(2)(6) OF END OF YEAR 0% 6% 12%
- ---------------------------- -------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
1.......................... 142,166 149,274 1,597,297 1,603,175 1,609,054
2.......................... 142,166 306,012 1,728,176 1,748,113 1,768,751
3.......................... 142,166 470,587 1,856,437 1,898,829 1,944,367
4.......................... 142,166 643,391 1,981,931 2,055,391 2,137,373
5.......................... 142,166 824,835 2,104,469 2,217,828 2,349,347
6.......................... 142,166 1,015,351 2,223,831 2,386,136 2,581,997
7.......................... 142,166 1,215,393 2,339,701 2,560,206 2,837,104
8.......................... 142,166 1,425,437 2,451,903 2,740,068 3,116,784
9.......................... 142,166 1,645,983 2,560,077 2,925,558 3,423,173
10.......................... 142,166 1,877,556 2,663,861 3,116,498 3,758,629
15.......................... 142,166 3,221,125 3,098,655 4,139,808 5,966,497
20.......................... 142,166 4,935,897 3,319,046 5,206,557 8,665,109
30.......................... 142,166 9,917,614 2,516,466 6,716,979 18,015,847
40.......................... 0 16,606,869 0 0 0
</TABLE>
<TABLE>
<CAPTION>
END OF YEAR
INVESTMENT BASE AND END OF YEAR
NET CASH SURRENDER VALUE(3)(4) CASH VALUE(3)(5)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
------------------------------------ ------------------------------------
CONTRACT YEAR 0% 6% 12% 0% 6% 12%
- ---------------------------------------------- --------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1............................................ 97,297 103,175 109,054 97,297 103,175 109,054
2............................................ 228,176 248,113 268,751 228,176 248,113 268,751
3............................................ 356,437 398,829 444,367 356,437 398,829 444,367
4............................................ 481,931 555,391 637,373 481,931 555,391 637,373
5............................................ 604,469 717,828 849,347 604,469 717,828 849,347
6............................................ 723,831 886,136 1,081,997 723,831 886,136 1,081,997
7............................................ 839,701 1,060,206 1,337,104 839,701 1,060,206 1,337,104
8............................................ 951,903 1,240,068 1,616,784 951,903 1,240,068 1,616,784
9............................................ 1,060,077 1,425,558 1,923,173 1,060,077 1,425,558 1,923,173
10............................................ 1,163,861 1,616,498 2,258,629 1,163,861 1,616,498 2,258,629
15............................................ 1,598,655 2,639,808 4,466,497 1,598,655 2,639,808 4,466,497
20............................................ 1,819,046 3,706,557 7,165,109 1,819,046 3,706,557 7,165,109
30............................................ 1,016,466 5,216,979 16,515,847 1,016,466 5,216,979 16,515,847
40............................................ 0 0 33,790,256 0 0 33,790,256
</TABLE>
(1) Assumes no additional insurance rider face amount.
(2) All payments are illustrated as if made at the beginning of the contract
year.
(3) Assumes annual payments are made and no loans or withdrawals have been
taken.
(4) Investment base will equal net cash surrender value on each contract
anniversary. If the Contract is surrendered within 24 months after issue,
the contract owner will also receive any excess sales load previously
deducted.
(5) Cash value will equal investment base and net cash surrender value on each
contract anniversary if no loans have been taken.
(6) The payments shown may extend beyond the year in which the automatic
adjustment is made. At an annual rate of return of 12% and maximum mortality
charges, the guarantee period reaches life of the younger insured in
contract year 16. Once a guarantee of life is reached, no more payments
would be accepted. Values shown at annual rates of return of 0%, 6% and 12%
do not reflect any payments shown after a guarantee of life is reached.
(7) At contract year 40, on the contract anniversary nearest the younger
insured's 100th birthday, the Contract reaches its maturity date and a death
benefit is no longer provided. On the maturity date, the net cash surrender
value is paid to the contract owner, provided either insured is still
living.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE ILLUSTRATED AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS SELECTED, PREVAILING INTEREST
RATES AND RATES OF INFLATION. THE DEATH BENEFIT, INVESTMENT BASE AND CASH VALUE
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS RATES OF RETURN AVERAGED
0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS. NO REPRESENTATIONS CAN BE MADE BY
MERRILL LYNCH LIFE OR THE FUNDS OR THE ZERO TRUSTS THAT THESE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
43
<PAGE> 101
EXAMPLES
ADDITIONAL PAYMENTS
As of the processing date on or next following receipt and acceptance of an
additional payment, Merrill Lynch Life will increase the guarantee period if the
guarantee period prior to receipt and acceptance of an additional payment is
less than for the whole of life of the younger insured.
Merrill Lynch Life will determine the increase in the guarantee period by taking
the immediate increase in the cash value resulting from the additional payment
and adding to that interest at the annual rate of 5% for the period from the
date Merrill Lynch Life receives and accepts the payment to the contract
processing date on or next following such date. This is the guarantee adjustment
amount. The guarantee adjustment amount is added to the fixed base and the
resulting new fixed base is used to calculate a new guarantee period.
The amount of the increase in the guarantee period will depend on the amount of
the additional payment and the contract year in which it is received and
accepted. If additional payments of different amounts were made at the same time
to equivalent Contracts, the Contract to which the larger payment is applied
would have a larger increase in the guarantee period.
Example 1 shows the effect on the guarantee period of a $40,114 additional
payment received and accepted at the beginning of contract year ten. Example 2
shows the effect of a $80,228 additional payment received and accepted at the
beginning of contract year ten. Example 3 shows the effect of a $40,114
additional payment received and accepted at the beginning of contract year 11.
All three examples assume that death benefit option 1 has been elected, that
annual payments of $40,114 have been made up to the contract year reflected in
the example and that no other contract transactions have been made.
FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
INITIAL PAYMENT PLUS ANNUAL PAYMENTS OF $40,114
FACE AMOUNT: $1.5 MILLION
INITIAL GUARANTEE PERIOD: 7.25 YEARS
DEATH BENEFIT OPTION: 1
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
EXAMPLE 1
------------------------------------------
CONTRACT ADDITIONAL INCREASE IN
YEAR PAYMENT GUARANTEE PERIOD
-------- ---------- ----------------
<S> <C> <C> <C>
10 $40,114 1 year
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 2
------------------------------------------
CONTRACT ADDITIONAL INCREASE IN
YEAR PAYMENT GUARANTEE PERIOD
-------- ---------- ----------------
<S> <C> <C> <C>
10 $80,228 2 years
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 3
------------------------------------------
CONTRACT ADDITIONAL INCREASE IN
YEAR PAYMENT GUARANTEE PERIOD
-------- ---------- ----------------
<S> <C> <C> <C>
11 $40,114 .5 years
</TABLE>
44
<PAGE> 102
PARTIAL WITHDRAWALS
As of the processing date on or next following the effective date of a partial
withdrawal, Merrill Lynch Life calculates a new guarantee period. This is done
by taking the immediate decrease in cash value resulting from the partial
withdrawal and adding to that amount interest at an annual rate of 5% for the
period from the date of the withdrawal to the contract processing date on or
next following such date. This is the guarantee adjustment amount. The guarantee
adjustment amount is subtracted from the fixed base and the resulting new fixed
base is used to calculate a new guarantee period.
The amount of the reduction in the guarantee period will depend on the amount of
the withdrawal, the face amount at the time of the withdrawal and the contract
year in which the withdrawal is made. If made at the same time to equivalent
Contracts, a larger withdrawal would result in a greater reduction in the
guarantee period than a smaller withdrawal. The same partial withdrawal made at
the same time from Contracts with the same guarantee periods but with different
face amounts would result in a greater reduction in the guarantee period for the
Contract with the smaller face amount.
Examples 1 and 2 show the effect on the guarantee period of partial withdrawals
for $30,000 and $60,000 taken at the beginning of contract year sixteen. Example
3 shows the effect on the guarantee period of a $60,000 partial withdrawal taken
at the beginning of contract year eighteen. All three examples assume that death
benefit option 1 has been elected, that annual payments of $40,114 have been
made up to the contract year reflected in the example and that no other contract
transactions have been made.
FEMALE ISSUE AGE 60/MALE ISSUE AGE 65
INITIAL PAYMENT PLUS ANNUAL PAYMENTS OF $40,114
FACE AMOUNT: $1.5 MILLION
GUARANTEE PERIOD: 7.25 YEARS
DEATH BENEFIT OPTION: 1
BASED ON MAXIMUM MORTALITY CHARGES
<TABLE>
<CAPTION>
EXAMPLE 1
------------------------------------------
CONTRACT PARTIAL DECREASE IN
YEAR WITHDRAWAL GUARANTEE PERIOD
-------- ---------- ----------------
<S> <C> <C> <C>
16 $30,000 .25 years
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 2
------------------------------------------
CONTRACT PARTIAL DECREASE IN
YEAR WITHDRAWAL GUARANTEE PERIOD
-------- ---------- ----------------
<S> <C> <C> <C>
16 $60,000 .75 years
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 3
------------------------------------------
CONTRACT PARTIAL DECREASE IN
YEAR WITHDRAWAL GUARANTEE PERIOD
-------- ---------- ----------------
<S> <C> <C> <C>
18 $60,000 .75 years
</TABLE>
45
<PAGE> 103
CHANGING THE DEATH BENEFIT OPTION
On each contract anniversary beginning with the fifteenth, the contract owner
may change the death benefit option by switching from option 1 to option 2 or
from option 2 to option 1. Merrill Lynch Life will change the face amount of the
Contract in order to keep the death benefit constant on the effective date of
the change. Therefore, if the change is from option 1 to option 2, the face
amount of the Contract will be decreased by the cash value on the date of the
change. If the change is from option 2 to option 1, the face amount of the
Contract will be increased by the cash value on the date of the change.
Example 1 shows the effect on the face amount of a change from option 1 to
option 2 and Example 2 shows the effect on the face amount of a change from
option 2 to option 1. The face amount before each change is $500,000.
EXAMPLE 1
------------------------------------------------------------
Before Option Change
Death Benefit under Option 1: $500,000
Face Amount: $500,000
Cash Value: $40,000
After Option Change
Death Benefit under Option 2: $500,000
Face Amount: $460,000
Cash Value: $40,000
EXAMPLE 2
------------------------------------------------------------
Before Option Change
Death Benefit under Option 2: $540,000
Face Amount: $500,000
Cash Value: $40,000
After Option Change
Death Benefit under Option 1: $540,000
Face Amount: $540,000
Cash Value: $40,000
46
<PAGE> 104
MORE ABOUT MERRLLL LYNCH LIFE INSURANCE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
Merrill Lynch Life's directors and executive officers and their positions with
Merrill Lynch Life are as follows:
<TABLE>
<CAPTION>
NAME POSITION(S) WITH THE COMPANY
- ------------------------------ -------------------------------------
<S> <C>
Anthony J. Vespa Chairman of the Board, President, and
Chief Executive Officer
Joseph E. Crowne, Jr. Director, Senior Vice President,
Chief Financial Officer, Chief
Actuary, and Treasurer
Barry G. Skolnick Director, Senior Vice President,
General Counsel, and Secretary
David M. Dunford Director, Senior Vice President, and
Chief Investment Officer
Gail R. Farkas Director and Senior Vice President
Robert J. Boucher Senior Vice President, Variable Life
Administration
</TABLE>
Each director is elected to serve until the next annual meeting of shareholders
or until his or her successor is elected and shall have qualified. Each has held
various executive positions with insurance company subsidiaries of Merrill Lynch
Life's indirect parent, Merrill Lynch & Co., Inc. The principal positions of
Merrill Lynch Life's directors and executive officers for the past five years
are listed below:
Mr. Vespa joined Merrill Lynch Life in January 1994. Since February 1994, he has
held the position of Senior Vice President of MLPF&S. From February 1991 to
February 1994, he held the position of District Director and First Vice
President of MLPF&S.
Mr. Crowne joined Merrill Lynch Life in June 1991.
Mr. Skolnick joined Merrill Lynch Life in November 1990. Since May 1992, he has
held the position of Assistant General Counsel of Merrill Lynch & Co., Inc. and
First Vice President of MLPF&S.
Mr. Dunford joined Merrill Lynch Life in July 1990.
Ms. Farkas joined Merrill Lynch Life in August 1995. Prior to August 1995 she
held the position of Director of Market Planning of MLPF&S.
Mr. Boucher joined Merrill Lynch Life in May 1992.
No shares of Merrill Lynch Life are owned by any of its officers or directors,
as it is a wholly owned subsidiary of MLIG. The officers and directors of
Merrill Lynch Life, both individually and as a group, own less than one percent
of the outstanding shares of common stock of Merrill Lynch & Co., Inc.
SERVICES ARRANGEMENT
Merrill Lynch Life and MLIG are parties to a service agreement pursuant to which
MLIG has agreed to provide certain data processing, legal, actuarial,
management, advertising and other services to Merrill Lynch Life, including
services related to the Separate Account and the Contracts. Expenses incurred by
MLIG in relation to this service agreement are reimbursed by Merrill Lynch Life
on an allocated cost basis. Charges billed to Merrill Lynch Life by MLIG
pursuant to the agreement were $44.5 million for the year ended December 31,
1996.
STATE REGULATION
Merrill Lynch Life is subject to the laws of the State of Arkansas and to the
regulations of the Arkansas Insurance Department (the "Insurance Department"). A
detailed financial statement in the prescribed form
47
<PAGE> 105
(the "Annual Statement") is filed with the Insurance Department each year
covering Merrill Lynch Life's operations for the preceding year and its
financial condition as of the end of that year. Regulation by the Insurance
Department includes periodic examination to determine contract liabilities and
reserves so that the Insurance Department may certify that these items are
correct. Merrill Lynch Life's books and accounts are subject to review by the
Insurance Department at all times. A full examination of Merrill Lynch Life's
operations is conducted periodically by the Insurance Department and under the
auspices of the National Association of Insurance Commissioners. Merrill Lynch
Life is also subject to the insurance laws and regulations of all jurisdictions
in which it is licensed to do business.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. Merrill Lynch Life and
MLPF&S are engaged in various kinds of routine litigation that, in the Company's
judgment, is not material to Merrill Lynch Life's total assets or to MLPF&S.
EXPERTS
The financial statements of Merrill Lynch Life as of December 31, 1996 and 1995
and for each of the three years in the period ended December 31, 1996 and of the
Separate Account as of December 31, 1996 and for the periods presented, included
in this Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports appearing herein, and have been so included
in reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing. Deloitte & Touche LLP's principal business address
is Two World Financial Center, New York, New York 10281-1433.
Actuarial matters included in this Prospectus have been examined by Joseph E.
Crowne, Jr., F.S.A., Chief Actuary and Chief Financial Officer of Merrill Lynch
Life, as stated in his opinion filed as an exhibit to the registration
statement.
LEGAL MATTERS
The organization of the Company, its authority to issue the Contract, and the
validity of the form of the Contract have been passed upon by Barry G. Skolnick,
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 and tax laws.
REGISTRATION STATEMENTS
Registration statements have been filed with the Securities and Exchange
Commission under the Securities Act of 1933 and the Investment Company Act of
1940 that relate to the Contract and its investment options. This Prospectus
does not contain all of the information in the registration statements as
permitted by Securities and Exchange Commission regulations. The omitted
information can be obtained from the Securities and Exchange Commission's
principal office in Washington, D.C., upon payment of a prescribed fee.
FINANCIAL STATEMENTS
The financial statements of Merrill Lynch Life, included herein, should be
distinguished from the financial statements of the Separate Account and should
be considered only as bearing upon the ability of Merrill Lynch Life to meet its
obligations under the Contracts.
48
<PAGE> 106
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Merrill Lynch Life Insurance Company:
We have audited the accompanying statement of net assets of
Merrill Lynch Variable Life Separate Account (the "Account")
as of December 31, 1996 and the related statements of
operations and changes in net assets for each of the three
years in the period then ended. These financial statements
are the responsibility of the management of Merrill Lynch
Life Insurance Company. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation
of mutual fund and unit investment trust securities owned at
December 31, 1996. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial position of the Account
at December 31, 1996 and the results of its operations and
the changes in its net assets for the above periods in
conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an
opinion on the basic financial statements taken as a whole.
The supplemental schedules included herein are presented for
the purpose of additional analysis and are not a required
part of the basic financial statements. These schedules are
the responsibility of the Company's management. Such
schedules have been subjected to the auditing procedures
applied in our audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects
when considered in relation to the basic financial
statements taken as a whole.
January 31, 1997
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENT OF NET ASSETS AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS: Cost Shares Market Value
------------------- ------------------- -------------------
<S> <C> <C> <C>
Investments in Merrill Lynch Series Fund, Inc. (Note 1):
Money Reserve Portfolio $ 55,275,547 55,275,547 $ 55,275,547
Intermediate Government Bond Portfolio 14,725,548 1,358,772 14,851,382
Long-Term Corporate Bond Portfolio 10,775,240 934,026 10,769,315
Capital Stock Portfolio 23,875,222 1,112,039 25,854,917
Growth Stock Portfolio 20,280,019 899,170 24,987,943
Multiple Strategy Portfolio 19,300,694 1,190,211 20,388,320
High Yield Portfolio 12,864,182 1,439,553 13,171,913
Natural Resources Portfolio 2,056,235 243,754 2,240,103
Global Strategy Portfolio 25,105,553 1,669,949 28,055,140
Balanced Portfolio 7,823,111 558,316 8,575,730
------------------- -------------------
192,081,351 204,170,310
------------------- -------------------
Investments in Merrill Lynch Variable Series Funds, Inc. (Note 1):
Global Utility Focus Fund 1,037,080 93,911 1,144,773
International Equity Focus Fund 7,393,980 669,887 7,790,785
Global Bond Focus Fund 928,585 96,555 942,375
Basic Value Focus Fund 16,712,803 1,312,709 19,349,327
Developing Capital Markets Focus Fund 4,780,650 491,493 4,939,502
Equity Growth Fund 1,629,219 63,605 1,667,726
------------------- -------------------
32,482,317 35,834,488
------------------- -------------------
Units
-----------------
Investments in the Merrill Lynch Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A through K (Note 1):
1997 Trust 322,907 354,958 353,858
1998 Trust 856,433 1,037,641 976,576
1999 Trust 1,010,910 1,311,236 1,161,112
2000 Trust 686,891 955,851 796,577
2001 Trust 155,752 209,705 164,464
2002 Trust 580,631 845,174 620,273
2003 Trust 188,863 318,255 211,283
2004 Trust 810,403 1,492,370 955,117
2005 Trust 660,931 1,175,751 709,542
2006 Trust 212,687 408,939 234,559
2007 Trust 26,423 61,585 32,890
2008 Trust 230,749 499,364 243,865
2009 Trust 68,393 197,438 90,051
2010 Trust 544,670 1,325,121 558,817
2011 Trust 216,344 812,409 322,859
2013 Trust 107,368 343,708 117,888
2014 Trust 2,367,598 8,012,514 2,532,996
------------------- -------------------
9,047,953 10,082,727
------------------- -------------------
TOTAL ASSETS $ 233,611,621 250,087,525
=================== -------------------
LIABILITIES:
Payable to Merrill Lynch Life Insurance Company 11,163,203
-------------------
TOTAL LIABILITIES 11,163,203
-------------------
NET ASSETS $ 238,924,322
===================
</TABLE>
See Notes to Financial Statements
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------------ ------------------ ------------------
<S> <C> <C> <C>
Investment Income:
Reinvested Dividends $ 12,043,745 $ 7,040,646 $ 3,610,497
Mortality and Expense Charges (Note 3) (1,751,522) (1,098,797) (542,446)
Transaction Charges (Note 4) (28,838) (18,263) (3,767)
------------------ ------------------ ------------------
Net Investment Income 10,263,385 5,923,586 3,064,284
------------------ ------------------ ------------------
Realized and Unrealized Gains (Losses):
Net Realized Losses (45,179) (309,482) (218,534)
Net Unrealized Gains (Losses) 8,986,838 10,659,883 (4,239,903)
------------------ ------------------ ------------------
Net Realized and Unrealized Gains (Losses) 8,941,659 10,350,401 (4,458,437)
------------------ ------------------ ------------------
Increase (Decrease) in Net Assets
Resulting from Operations 19,205,044 16,273,987 (1,394,153)
------------------ ------------------ ------------------
Changes from Principal Transactions:
Transfers of Net Premiums 70,164,840 57,600,863 51,971,799
Transfers of Policy Loading, Net (Note 3) 3,408,619 2,992,695 3,241,522
Transfers Due to Deaths (813,683) (1,461,703) (29,512)
Transfers Due to Other Terminations (2,808,710) (2,139,618) (493,701)
Transfers Due to Policy Loans (2,600,351) (1,721,984) (1,463,743)
Transfers of Cost of Insurance (3,101,640) (2,101,569) (1,296,287)
Transfers of Loan Processing Charges (50,705) (28,928) (8,161)
------------------ ------------------ ------------------
Increase in Net Assets
Resulting from Principal Transactions 64,198,370 53,139,756 51,921,917
------------------ ------------------ ------------------
Increase in Net Assets 83,403,414 69,413,743 50,527,764
Net Assets Beginning Balance 155,520,908 86,107,165 35,579,401
------------------ ------------------ ------------------
Net Assets Ending Balance $ 238,924,322 $ 155,520,908 $ 86,107,165
================== ================== ==================
</TABLE>
See Notes to Financial Statements
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
Notes to Financial Statements
1. Merrill Lynch Variable Life Separate Account ("Account"),
a separate account of Merrill Lynch Life Insurance
Company ("Merrill Lynch Life") was established to support
the operations with respect to certain variable life
insurance contracts ("Contracts"). The Account is
governed by Arkansas State Insurance Law. Merrill Lynch
Life is an indirect wholly-owned subsidiary of Merrill
Lynch & Co., Inc. ("Merrill"). The Account is registered
as a unit investment trust under the Investment Company
Act of 1940 and consists of thirty-three investment
divisions (thirty-five during the year). Ten of the
investment divisions each invest in the securities of a
single mutual fund portfolio of the Merrill Lynch Series
Fund, Inc. Six of the investment divisions each invest in
the securities of a single mutual fund portfolio of the
Merrill Lynch Variable Series Funds, Inc. (See Note 5).
Seventeen of the investment divisions (eighteen during
the year) each invest in the securities of a single trust
of the Merrill Lynch Fund of Stripped ("Zero") U.S.
Treasury Securities, Series A through K ("Zero Trusts").
Each trust of the Zero Trusts consists of Stripped
Treasury Securities with a fixed maturity date and a
Treasury Note deposited to provide income to pay expenses
of the trust.
The assets of the Account are registered in the name of
Merrill Lynch Life. The portion of the Account's assets
attributable to the Contracts are not chargeable with
liabilities arising out of any other business Merrill
Lynch Life may conduct.
The change in net assets accumulated in the Account
provides the basis for the periodic determination of the
amount of increased or decreased benefits under the
Contracts.
The net assets may not be less than the amount required
under Arkansas State Insurance Law to provide for death
benefits (without regard to the minimum death benefit
guarantee) and other Contract benefits.
The financial statements included herein have been
prepared in accordance with generally accepted accounting
principles for variable life separate accounts registered
as unit investment trusts. The preparation of financial
statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
2. The following is a summary of significant accounting
policies of the Account:
Investments in the divisions are included in the
statement of net assets at the net asset value of the
shares and units held.
Dividend income is recognized on the ex-dividend date.
All dividends are automatically reinvested.
Realized gains and losses on the sales of investments are
computed on the first in first out method.
The operations of the Account are included in the Federal
income tax return of Merrill Lynch Life. Under the
provisions of the Contracts, Merrill Lynch Life has the
right to charge the Account for any Federal income tax
attributable to the Account. No charge is currently being
made against the Account for such tax since, under
current tax law, Merrill Lynch Life pays no tax on
investment income and capital gains reflected in variable
life insurance contract reserves. However, Merrill Lynch
Life retains the right to charge for any Federal income
tax incurred which is attributable to the Account if the
law is changed. Contract loading, however, includes a
charge for a significantly higher Federal income tax
liability of Merrill Lynch Life (see Note 3). Charges for
state and local taxes, if any, attributable to the
Account may also be made.
3. Merrill Lynch Life assumes mortality and expense risks
related to Contracts investing in the Account and deducts
a daily charges at a rate of .90% (on an annual basis) of
the net assets of the Account to cover these risks.
Merrill Lynch Life makes certain deductions from each
premium. For certain Contracts, the deductions are made
before the premium is allocated to the Account. For other
Contracts, the deductions are taken in equal installments
on the first through tenth Contract anniversaries. The
deductions are for (1) sales load, (2) Federal income
taxes, and (3) state and local premium taxes.
In addition, the cost of providing life insurance
coverage for the insureds will be deducted on the dates
specified by the Contract. This cost will vary dependent
upon the insured's underwriting class, sex (except where
unisex rates are required by state law), attained age of
each insured and the Contract's net amount at risk.
4. Merrill Lynch Life pays all transaction charges to
Merrill Lynch, Pierce, Fenner & Smith Inc., a subsidiary
of Merrill and sponsor of the Zero Trusts, on the sale of
Zero Trust units to the Account. Merrill Lynch Life
deducts a daily asset charge against the assets of each
trust for the reimbursement of these transaction charges.
The asset charge is equivalent to an effective annual
rate of .34% (annually at the beginning of the year) of
net assets for Contract owners.
5. Effective following the close of business on December 6,
1996, the International Bond Fund was merged with and
into the former World Income Focus Fund; the World Income
Focus Fund was renamed the Global Bond Focus Fund; and
the Fund's investment objective was modified.
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Divisions Investing In
----------------------------------------------------
Intermediate Long-Term
Total Money Government Corporate
Separate Reserve Bond Bond
Account Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 12,043,745 $ 2,259,703 $ 882,178 $ 625,900
Mortality and Expense Charges (1,751,522) (338,561) (118,016) (83,645)
Transaction Charges (28,838) 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 10,263,385 1,921,142 764,162 542,255
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (45,179) 0 18,190 (69,537)
Net Unrealized Gains (Losses) 8,986,838 0 (494,507) (262,935)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 8,941,659 0 (476,317) (332,472)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 19,205,044 1,921,142 287,845 209,783
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 70,164,840 57,111,336 274,240 441,258
Transfers of Policy Loading, Net 3,408,619 3,817,075 (65,305) (45,661)
Transfers Due to Deaths (813,683) (279,751) (18,739) (40,588)
Transfers Due to Other Terminations (2,808,710) (380,432) (76,682) (101,534)
Transfers Due to Policy Loans (2,600,351) (1,084,294) (52,385) (42,333)
Transfers of Cost of Insurance (3,101,640) (629,669) (140,278) (119,430)
Transfers of Loan Processing Charges (50,705) (10,186) (1,605) (1,801)
Transfers Among Investment Divisions 0 (49,154,498) 2,922,480 2,331,559
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 64,198,370 9,389,581 2,841,726 2,421,470
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 83,403,414 11,310,723 3,129,571 2,631,253
Net Assets Beginning Balance 155,520,908 32,871,637 11,703,850 8,125,727
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 238,924,322 $ 44,182,360 $ 14,833,421 $ 10,756,980
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Capital Growth Multiple High
Stock Stock Strategy Yield
Portfolio Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 2,849,273 $ 474,609 $ 2,134,807 $ 991,648
Mortality and Expense Charges (189,168) (168,016) (161,312) (93,784)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 2,660,105 306,593 1,973,495 897,864
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (192,580) 76,061 (205,247) (38,619)
Net Unrealized Gains (Losses) 677,575 2,799,507 511,360 263,711
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 484,995 2,875,568 306,113 225,092
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 3,145,100 3,182,161 2,279,608 1,122,956
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 2,079,423 1,942,040 1,309,262 764,317
Transfers of Policy Loading, Net (43,754) (21,164) (65,905) (51,806)
Transfers Due to Deaths (92,681) (8,492) (75,789) (3,979)
Transfers Due to Other Terminations (321,383) (260,142) (312,254) (358,814)
Transfers Due to Policy Loans (145,225) (397,438) (171,503) (204,029)
Transfers of Cost of Insurance (328,889) (333,742) (276,061) (163,545)
Transfers of Loan Processing Charges (5,535) (6,120) (4,502) (4,660)
Transfers Among Investment Divisions 4,872,794 7,878,892 1,654,189 4,143,862
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 6,014,750 8,793,834 2,057,437 4,121,346
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 9,159,850 11,975,995 4,337,045 5,244,302
Net Assets Beginning Balance 16,702,494 13,013,803 16,039,254 7,922,131
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 25,862,344 $ 24,989,798 $ 20,376,299 $ 13,166,433
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Global
Natural Global Utility
Resources Strategy Balanced Focus
Portfolio Portfolio Portfolio Fund
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 35,904 $ 658,077 $ 339,821 $ 26,694
Mortality and Expense Charges (18,240) (216,109) (61,936) (6,067)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 17,664 441,968 277,885 20,627
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 88,450 51,512 16,557 6,978
Net Unrealized Gains (Losses) 143,526 2,581,792 341,710 68,172
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 231,976 2,633,304 358,267 75,150
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 249,640 3,075,272 636,152 95,777
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 181,972 2,473,052 553,126 47,855
Transfers of Policy Loading, Net (3,920) (44,092) (27,821) 40
Transfers Due to Deaths 0 (158,560) (1,125) 0
Transfers Due to Other Terminations (55,127) (514,227) (209,048) (554)
Transfers Due to Policy Loans (22,880) (192,425) (60,254) (5,578)
Transfers of Cost of Insurance (28,415) (421,815) (118,014) (10,007)
Transfers of Loan Processing Charges (167) (6,017) (2,108) (145)
Transfers Among Investment Divisions 291,252 3,487,282 2,554,987 650,138
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 362,715 4,623,198 2,689,743 681,749
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 612,355 7,698,470 3,325,895 777,526
Net Assets Beginning Balance 1,627,177 20,342,494 5,247,662 366,959
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 2,239,532 $ 28,040,964 $ 8,573,557 $ 1,144,485
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
International Global Basic
Equity Bond Value International
Focus Focus Focus Bond
Fund Fund Fund Fund
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 58,526 $ 29,074 $ 596,893 $ 19,027
Mortality and Expense Charges (55,091) (3,779) (118,246) (2,285)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 3,435 25,295 478,647 16,742
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 1,353 347 54,169 (2,241)
Net Unrealized Gains (Losses) 266,897 7,902 1,807,802 (796)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 268,250 8,249 1,861,971 (3,037)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 271,685 33,544 2,340,618 13,705
---------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 756,559 40,516 1,276,821 44,422
Transfers of Policy Loading, Net (3,515) 509 (5,302) 902
Transfers Due to Deaths (33,903) 0 (68,358) (877)
Transfers Due to Other Terminations (41,605) (552) (123,456) 1,893
Transfers Due to Policy Loans (64,171) 0 (76,540) (988)
Transfers of Cost of Insurance (114,440) (5,978) (241,687) (4,818)
Transfers of Loan Processing Charges (1,964) (147) (2,269) (41)
Transfers Among Investment Divisions 2,803,185 284,230 7,975,786 218,985
Transfer of Merged Funds 0 367,255 0 (367,255)
---------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 3,300,146 685,833 8,734,995 (107,777)
---------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 3,571,831 719,377 11,075,613 (94,072)
Net Assets Beginning Balance 4,222,913 219,182 8,270,093 94,072
---------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 7,794,744 $ 938,559 $ 19,345,706 $ 0
================ ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Developing
Capital Equity
Markets Focus Growth 1996 1997
Fund Fund Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 61,179 $ 432 $ 0 $ 0
Mortality and Expense Charges (36,040) (4,712) (249) (2,858)
Transaction Charges 0 0 (91) (1,075)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 25,139 (4,280) (340) (3,933)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (20,703) (914) 10,567 1,373
Net Unrealized Gains (Losses) 250,904 38,506 (9,400) 14,566
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 230,201 37,592 1,167 15,939
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 255,340 33,312 827 12,006
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 610,043 25,818 0 3,518
Transfers of Policy Loading, Net 11,064 1,255 (728) (2,396)
Transfers Due to Deaths (30,841) 0 0 0
Transfers Due to Other Terminations (31,692) (1,214) 159 (67)
Transfers Due to Policy Loans (57,503) 0 0 1,090
Transfers of Cost of Insurance (64,681) (7,114) (210) (3,936)
Transfers of Loan Processing Charges (863) (221) 23 (46)
Transfers Among Investment Divisions 1,835,923 1,615,438 (222,425) 65,390
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 2,271,450 1,633,962 (223,181) 63,553
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 2,526,790 1,667,274 (222,354) 75,559
Net Assets Beginning Balance 2,407,606 0 222,354 277,986
------------------ ----------------- ----------------- -----------------
Net Assets Ending Balance $ 4,934,396 $ 1,667,274 $ 0 $ 353,545
================== ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
1998 1999 2000 2001
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (8,548) (9,461) (6,622) (967)
Transaction Charges (3,218) (3,562) (2,493) (365)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (11,766) (13,023) (9,115) (1,332)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 6,017 5,854 12,442 700
Net Unrealized Gains (Losses) 37,385 37,303 12,222 4,215
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 43,402 43,157 24,664 4,915
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 31,636 30,134 15,549 3,583
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 2,729 2,079 11,888 1,320
Transfers of Policy Loading, Net (7,282) (9,924) (4,276) (634)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (17,187) 13,021 (80) (9,468)
Transfers Due to Policy Loans (34) 3,211 (12,327) 0
Transfers of Cost of Insurance (6,841) (12,333) (7,564) (930)
Transfers of Loan Processing Charges (90) (606) (122) (44)
Transfers Among Investment Divisions 151,070 136,353 52,712 114,790
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 122,365 131,801 40,231 105,034
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 154,001 161,935 55,780 108,617
Net Assets Beginning Balance 821,981 998,741 740,415 55,744
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 975,982 $ 1,160,676 $ 796,195 $ 164,361
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2002 2003 2004 2005
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (4,865) (1,249) (7,310) (7,624)
Transaction Charges (1,836) (471) (2,753) (2,871)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (6,701) (1,720) (10,063) (10,495)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 3,431 936 17,968 48,027
Net Unrealized Gains (Losses) 10,227 4,471 (10,934) (65,787)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 13,658 5,407 7,034 (17,760)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 6,957 3,687 (3,029) (28,255)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 9,067 24,881 21,785
Transfers of Policy Loading, Net (2,544) (127) (5,811) (3,031)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (335) (86) 17,456 (23,693)
Transfers Due to Policy Loans (3,280) 0 (3,357) (2,263)
Transfers of Cost of Insurance (6,687) (2,134) (11,301) (8,848)
Transfers of Loan Processing Charges (65) (369) (254) (38)
Transfers Among Investment Divisions 429,537 95,804 127,953 115,644
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 416,626 102,155 149,567 99,556
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 423,583 105,842 146,538 71,301
Net Assets Beginning Balance 196,420 105,346 808,228 637,825
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 620,003 $ 211,188 $ 954,766 $ 709,126
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2006 2007 2008 2009
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (1,207) (282) (1,849) (689)
Transaction Charges (456) (107) (697) (259)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (1,663) (389) (2,546) (948)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 655 202 2,072 542
Net Unrealized Gains (Losses) 3,403 (764) (4,484) (1,142)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 4,058 (562) (2,412) (600)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 2,395 (951) (4,958) (1,548)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 1,301 33,415 0
Transfers of Policy Loading, Net (506) (218) 556 (158)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (15) (2) (65) (22)
Transfers Due to Policy Loans 0 0 1,630 0
Transfers of Cost of Insurance (1,015) (385) (2,980) (1,195)
Transfers of Loan Processing Charges (23) (1) (304) (4)
Transfers Among Investment Divisions 162,335 2 22,434 20,781
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 160,776 697 54,686 19,402
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 163,171 (254) 49,728 17,854
Net Assets Beginning Balance 71,281 33,130 194,013 72,146
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 234,452 $ 32,876 $ 243,741 $ 90,000
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2010 2011 2013 2014
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (3,648) (2,818) (822) (15,447)
Transaction Charges (1,376) (1,061) (310) (5,837)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (5,024) (3,879) (1,132) (21,284)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (1,501) 3,521 2,269 55,970
Net Unrealized Gains (Losses) 5,242 (124,824) (1,550) 75,563
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 3,741 (121,303) 719 131,533
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (1,283) (125,182) (413) 110,249
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 2,719 2,406 47,499 68,173
Transfers of Policy Loading, Net 4,058 (1,867) 4,531 (13,624)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (218) (13) 26 (1,298)
Transfers Due to Policy Loans (7,845) 0 370 0
Transfers of Cost of Insurance (3,366) (3,609) (1,853) (17,870)
Transfers of Loan Processing Charges (48) (6) (69) (288)
Transfers Among Investment Divisions 266,394 108,244 120 1,986,378
Transfer of Merged Funds 0 0 0 0
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 261,694 105,155 50,624 2,021,471
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 260,411 (20,027) 50,211 2,131,720
Net Assets Beginning Balance 298,173 342,790 67,623 399,658
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 558,584 $ 322,763 $ 117,834 $ 2,531,378
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------
Intermediate Long-Term
Total Money Government Corporate
Separate Reserve Bond Bond
Account Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 7,040,646 $ 2,042,506 $ 590,260 $ 471,729
Mortality and Expense Charges (1,098,797) (276,122) (77,890) (60,109)
Transaction Charges (18,263) 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 5,923,586 1,766,384 512,370 411,620
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (309,482) 0 (161,089) (84,296)
Net Unrealized Gains (Losses) 10,659,883 0 967,267 831,382
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 10,350,401 0 806,178 747,086
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 16,273,987 1,766,384 1,318,548 1,158,706
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 57,600,863 48,585,875 237,242 206,770
Transfers of Policy Loading, Net 2,992,695 3,263,562 (47,077) (58,349)
Transfers Due to Deaths (1,461,703) (89,375) (242,713) (243,177)
Transfers Due to Other Terminations (2,139,618) (281,643) (15,301) (159,890)
Transfers Due to Policy Loans (1,721,984) (662,050) (21,269) (22,813)
Transfers of Cost of Insurance (2,101,569) (539,265) (95,544) (78,535)
Transfers of Loan Processing Charges (28,928) (4,005) (2,139) (1,110)
Transfers Among Investment Divisions 0 (45,681,956) 5,740,096 2,729,204
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 53,139,756 4,591,143 5,553,295 2,372,100
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 69,413,743 6,357,527 6,871,843 3,530,806
Net Assets Beginning Balance 86,107,165 26,514,110 4,832,007 4,594,921
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 155,520,908 $ 32,871,637 $ 11,703,850 $ 8,125,727
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Capital Growth Multiple High
Stock Stock Strategy Yield
Portfolio Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 702,946 $ 332,737 $ 1,029,923 $ 530,868
Mortality and Expense Charges (109,563) (73,632) (120,845) (48,511)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 593,383 259,105 909,078 482,357
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (57,970) (58,237) (148,847) (47,719)
Net Unrealized Gains (Losses) 1,648,314 2,148,543 1,270,564 250,744
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 1,590,344 2,090,306 1,121,717 203,025
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 2,183,727 2,349,411 2,030,795 685,382
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 1,137,847 1,068,231 1,066,156 579,214
Transfers of Policy Loading, Net (62,080) 6,422 (44,104) 3,154
Transfers Due to Deaths (306,000) (10,301) (65,938) (2,080)
Transfers Due to Other Terminations (273,101) (97,817) (337,461) (42,371)
Transfers Due to Policy Loans (216,960) (102,930) (92,141) (72,558)
Transfers of Cost of Insurance (192,230) (159,365) (203,001) (105,754)
Transfers of Loan Processing Charges (2,660) (2,120) (2,802) (2,953)
Transfers Among Investment Divisions 7,075,715 5,643,336 3,815,780 4,138,536
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 7,160,531 6,345,456 4,136,489 4,495,188
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 9,344,258 8,694,867 6,167,284 5,180,570
Net Assets Beginning Balance 7,358,236 4,318,936 9,871,970 2,741,561
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 16,702,494 $ 13,013,803 $ 16,039,254 $ 7,922,131
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Global
Natural Global Utility
Resources Strategy Balanced Focus
Portfolio Portfolio Portfolio Fund
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 23,752 $ 808,709 $ 274,872 $ 7,374
Mortality and Expense Charges (12,008) (159,374) (37,964) (1,669)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 11,744 649,335 236,908 5,705
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 47,638 56,413 (36,077) 2,396
Net Unrealized Gains (Losses) 74,639 917,790 540,526 41,816
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 122,277 974,203 504,449 44,212
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 134,021 1,623,538 741,357 49,917
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 173,219 2,484,243 437,292 12,013
Transfers of Policy Loading, Net (227) (1,635) (32,229) (1,185)
Transfers Due to Deaths 0 (257,767) (244,352) 0
Transfers Due to Other Terminations (27,497) (449,161) (88,275) (305)
Transfers Due to Policy Loans (11,517) (299,628) (12,334) 0
Transfers of Cost of Insurance (25,805) (358,387) (80,463) (3,959)
Transfers of Loan Processing Charges (319) (4,268) (1,398) (34)
Transfers Among Investment Divisions 365,584 3,046,233 1,511,909 246,773
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 473,438 4,159,630 1,490,150 253,303
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 607,459 5,783,168 2,231,507 303,220
Net Assets Beginning Balance 1,019,718 14,559,326 3,016,155 63,739
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 1,627,177 $ 20,342,494 $ 5,247,662 $ 366,959
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
International Global Basic
Equity Bond Value International
Focus Focus Focus Bond
Fund Fund Fund Fund
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 87,517 $ 8,615 $ 106,693 $ 8,339
Mortality and Expense Charges (23,269) (756) (34,416) (909)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 64,248 7,859 72,277 7,430
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (50,146) 23 2,816 1,587
Net Unrealized Gains (Losses) 207,950 6,982 824,592 1,447
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 157,804 7,005 827,408 3,034
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 222,052 14,864 899,685 10,464
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 484,768 18,466 527,518 12,428
Transfers of Policy Loading, Net (7,642) 825 (2,243) (784)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (123,171) (121) (59,804) (2,748)
Transfers Due to Policy Loans (98,219) 9,020 (13,838) 7,037
Transfers of Cost of Insurance (67,572) (1,412) (88,195) (3,757)
Transfers of Loan Processing Charges (704) (83) (1,106) (86)
Transfers Among Investment Divisions 1,625,203 125,435 5,642,607 (13,353)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 1,812,663 152,130 6,004,939 (1,263)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 2,034,715 166,994 6,904,624 9,201
Net Assets Beginning Balance 2,188,198 52,188 1,365,469 84,871
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 4,222,913 $ 219,182 $ 8,270,093 $ 94,072
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Developing
Capital
Markets Focus 1995 1996 1997
Fund Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 13,806 $ 0 $ 0 $ 0
Mortality and Expense Charges (13,411) (1,483) (1,358) (1,725)
Transaction Charges 0 (558) (514) (652)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 395 (2,041) (1,872) (2,377)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (43,247) 12,157 789 310
Net Unrealized Gains (Losses) 31,160 (1,196) 8,972 16,365
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (12,087) 10,961 9,761 16,675
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (11,692) 8,920 7,889 14,298
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 446,742 0 6,557 2,609
Transfers of Policy Loading, Net 6,365 (1,240) 186 237
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (24,891) (5,133) (118) (168)
Transfers Due to Policy Loans (17,128) 0 (9,116) 0
Transfers of Cost of Insurance (39,732) (1,291) (1,698) (2,572)
Transfers of Loan Processing Charges (2,002) 10 (40) (26)
Transfers Among Investment Divisions 567,104 (117,487) 178,394 231,794
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 936,458 (125,141) 174,165 231,874
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 924,766 (116,221) 182,054 246,172
Net Assets Beginning Balance 1,482,840 116,221 40,300 31,814
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 2,407,606 $ 0 $ 222,354 $ 277,986
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
1998 1999 2000 2001
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (7,049) (7,718) (5,481) (915)
Transaction Charges (2,664) (2,917) (2,070) (345)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (9,713) (10,635) (7,551) (1,260)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 12,007 9,541 1,741 12,302
Net Unrealized Gains (Losses) 83,423 113,158 98,041 4,321
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 95,430 122,699 99,782 16,623
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 85,717 112,064 92,231 15,363
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 1,898 3,995 23,896 1,194
Transfers of Policy Loading, Net (17,373) (3,399) (2,494) (381)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (132,812) (540) 110 3
Transfers Due to Policy Loans 7 (60,000) (2,825) (3,268)
Transfers of Cost of Insurance (7,052) (9,302) (7,926) (1,541)
Transfers of Loan Processing Charges (95) (243) (205) (1)
Transfers Among Investment Divisions 777,277 802,185 350,856 (5,671)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 621,850 732,696 361,412 (9,665)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 707,567 844,760 453,643 5,698
Net Assets Beginning Balance 114,414 153,981 286,772 50,046
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 821,981 $ 998,741 $ 740,415 $ 55,744
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2002 2003 2004 2005
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (1,352) (911) (6,222) (4,063)
Transaction Charges (511) (344) (2,348) (1,537)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (1,863) (1,255) (8,570) (5,600)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 385 6,784 30,917 1,337
Net Unrealized Gains (Losses) 29,570 17,905 150,791 113,569
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 29,955 24,689 181,708 114,906
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 28,092 23,434 173,138 109,306
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 0 30,500 10,212
Transfers of Policy Loading, Net (831) 217 (3,307) 460
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (63) (59) (226) 245
Transfers Due to Policy Loans 0 0 (10,000) 0
Transfers of Cost of Insurance (1,137) (1,521) (8,914) (4,000)
Transfers of Loan Processing Charges (10) (9) (204) (54)
Transfers Among Investment Divisions 72,433 77,361 219,263 491,998
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 70,392 75,989 227,112 498,861
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 98,484 99,423 400,250 608,167
Net Assets Beginning Balance 97,936 5,923 407,978 29,658
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 196,420 $ 105,346 $ 808,228 $ 637,825
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2006 2007 2008 2009
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (540) (221) (614) (898)
Transaction Charges (204) (83) (233) (338)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (744) (304) (847) (1,236)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 293 163 3,614 20,240
Net Unrealized Gains (Losses) 17,073 7,219 17,580 16,726
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 17,366 7,382 21,194 36,966
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 16,622 7,078 20,347 35,730
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 1,010 20,456 5,576
Transfers of Policy Loading, Net (472) (226) 735 (225)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (10) (17) (122) 48
Transfers Due to Policy Loans 0 0 (7,000) 0
Transfers of Cost of Insurance (468) (401) (1,408) (719)
Transfers of Loan Processing Charges (2) (3) (19) 7
Transfers Among Investment Divisions 4,258 24,705 154,313 (120,220)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 3,306 25,068 166,955 (115,533)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 19,928 32,146 187,302 (79,803)
Net Assets Beginning Balance 51,353 984 6,711 151,949
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 71,281 $ 33,130 $ 194,013 $ 72,146
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2010 2011 2013 2014
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (2,316) (2,403) (525) (2,555)
Transaction Charges (875) (907) (198) (965)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (3,191) (3,310) (723) (3,520)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 87,387 2,349 12,386 52,571
Net Unrealized Gains (Losses) 5,161 98,680 14,348 84,461
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 92,548 101,029 26,734 137,032
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 89,357 97,719 26,011 133,512
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 2,682 0 105 12,149
Transfers of Policy Loading, Net (1,327) (1,656) (847) 1,865
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (16,958) (81) 2 (162)
Transfers Due to Policy Loans 0 0 (2,454) 0
Transfers of Cost of Insurance (1,969) (2,650) (1,359) (2,665)
Transfers of Loan Processing Charges (18) (13) (189) (25)
Transfers Among Investment Divisions 67,414 92,008 (25,040) 145,953
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 49,824 87,608 (29,782) 157,115
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 139,181 185,327 (3,771) 290,627
Net Assets Beginning Balance 158,992 157,463 71,394 109,031
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 298,173 $ 342,790 $ 67,623 $ 399,658
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------
Intermediate Long-Term
Total Money Government Corporate
Separate Reserve Bond Bond
Account Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 3,610,497 $ 950,581 $ 285,253 $ 425,190
Mortality and Expense Charges (542,446) (170,748) (28,708) (37,653)
Transaction Charges (3,767) 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 3,064,284 779,833 256,545 387,537
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (218,534) 0 (60,235) (25,319)
Net Unrealized Gains (Losses) (4,239,903) 0 (350,295) (600,392)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (4,458,437) 0 (410,530) (625,711)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (1,394,153) 779,833 (153,985) (238,174)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 51,971,799 47,324,731 187,931 92,352
Transfers of Policy Loading, Net 3,241,522 3,195,360 (8,955) (18,352)
Transfers Due to Deaths (29,512) (6,644) 0 (2,647)
Transfers Due to Other Terminations (493,701) (172,019) (13,442) (12,312)
Transfers Due to Policy Loans (1,463,743) (610,255) (142,120) (12,546)
Transfers of Cost of Insurance (1,296,287) (390,815) (43,069) (51,233)
Transfers of Loan Processing Charges (8,161) (1,637) (913) (376)
Transfers Among Investment Divisions 0 (35,662,412) 2,882,108 1,212,618
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 51,921,917 13,676,309 2,861,540 1,207,504
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 50,527,764 14,456,142 2,707,555 969,330
Net Assets Beginning Balance 35,579,401 12,057,968 2,124,452 3,625,591
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 86,107,165 $ 26,514,110 $ 4,832,007 $ 4,594,921
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Capital Growth Multiple High
Stock Stock Strategy Yield
Portfolio Portfolio Portfolio Portfolio
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 361,177 $ 287,424 $ 661,067 $ 215,561
Mortality and Expense Charges (49,108) (26,158) (68,143) (18,453)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 312,069 261,266 592,924 197,108
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (4,588) (38,883) (57,248) (21,634)
Net Unrealized Gains (Losses) (631,923) (347,941) (957,925) (232,926)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (636,511) (386,824) (1,015,173) (254,560)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (324,442) (125,558) (422,249) (57,452)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 740,725 500,203 513,551 258,413
Transfers of Policy Loading, Net (121,761) 19,520 36,858 5,702
Transfers Due to Deaths 0 0 (4,590) (2,687)
Transfers Due to Other Terminations (52,016) (12,269) (45,256) (27,551)
Transfers Due to Policy Loans (71,717) (15,306) (142,921) (131,734)
Transfers of Cost of Insurance (108,205) (81,834) (133,481) (56,140)
Transfers of Loan Processing Charges (928) (741) (1,011) (255)
Transfers Among Investment Divisions 4,257,528 2,313,575 6,058,382 1,520,909
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 4,643,626 2,723,148 6,281,532 1,566,657
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 4,319,184 2,597,590 5,859,283 1,509,205
Net Assets Beginning Balance 3,039,052 1,721,346 4,012,687 1,232,356
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 7,358,236 $ 4,318,936 $ 9,871,970 $ 2,741,561
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Global
Natural Global Utility
Resources Strategy Balanced Focus
Portfolio Portfolio Portfolio Fund
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 11,993 $ 307,203 $ 96,724 $ 489
Mortality and Expense Charges (6,508) (95,867) (22,533) (111)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) 5,485 211,336 74,191 378
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 1,420 42,186 (22,332) (4)
Net Unrealized Gains (Losses) (24,535) (712,889) (174,733) (2,295)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (23,115) (670,703) (197,065) (2,299)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (17,630) (459,367) (122,874) (1,921)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 163,578 1,592,234 220,509 0
Transfers of Policy Loading, Net 9,677 90,005 26,326 (162)
Transfers Due to Deaths 0 (7,628) (5,316) 0
Transfers Due to Other Terminations (1,141) (121,934) (39,643) (38)
Transfers Due to Policy Loans (7,332) (174,375) (107,866) 0
Transfers of Cost of Insurance (17,949) (301,516) (50,834) (387)
Transfers of Loan Processing Charges (96) (1,317) (156) (6)
Transfers Among Investment Divisions 520,012 8,328,156 1,725,495 66,253
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 666,749 9,403,625 1,768,515 65,660
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 649,119 8,944,258 1,645,641 63,739
Net Assets Beginning Balance 370,599 5,615,068 1,370,514 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 1,019,718 $ 14,559,326 $ 3,016,155 $ 63,739
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
International Global Basic
Equity Bond Value International
Focus Focus Focus Bond
Fund Fund Fund Fund
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 1,561 $ 1,593 $ 1,754 $ 2,927
Mortality and Expense Charges (3,570) (106) (2,016) (257)
Transaction Charges 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (2,009) 1,487 (262) 2,670
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (231) (988) 169 147
Net Unrealized Gains (Losses) (78,043) (1,095) 4,130 (651)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (78,274) (2,083) 4,299 (504)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (80,283) (596) 4,037 2,166
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 111,017 0 72,775 33,800
Transfers of Policy Loading, Net 2,406 (11) (675) 180
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (3,405) (30) 776 (1)
Transfers Due to Policy Loans 310 (7,961) (1,349) (8,041)
Transfers of Cost of Insurance (20,300) (1,034) (9,133) (1,325)
Transfers of Loan Processing Charges (266) (4) (140) (7)
Transfers Among Investment Divisions 2,178,719 61,824 1,299,178 58,099
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 2,268,481 52,784 1,361,432 82,705
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 2,188,198 52,188 1,365,469 84,871
Net Assets Beginning Balance 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 2,188,198 $ 52,188 $ 1,365,469 $ 84,871
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
Developing
Capital
Markets Focus 1994 1995 1996
Fund Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (2,550) (15) (406) (156)
Transaction Charges 0 (6) (154) (60)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (2,550) (21) (560) (216)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (98) 80 7 15
Net Unrealized Gains (Losses) (123,212) (16) 1,196 386
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (123,310) 64 1,203 401
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (125,860) 43 643 185
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 112,249 0 0 1,679
Transfers of Policy Loading, Net 3,647 (230) (80) (378)
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (3,448) (23) 42 (22)
Transfers Due to Policy Loans (7,813) 0 0 0
Transfers of Cost of Insurance (14,744) (81) (636) (259)
Transfers of Loan Processing Charges (184) 0 (10) (3)
Transfers Among Investment Divisions 1,518,993 (1,690) 116,007 36,857
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 1,608,700 (2,024) 115,323 37,874
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 1,482,840 (1,981) 115,966 38,059
Net Assets Beginning Balance 0 1,981 255 2,241
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 1,482,840 $ 0 $ 116,221 $ 40,300
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
1997 1998 1999 2000
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (110) (2,744) (312) (847)
Transaction Charges (41) (1,035) (119) (321)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (151) (3,779) (431) (1,168)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 57 (4,839) (6) (1,056)
Net Unrealized Gains (Losses) (104) (2,597) (259) (816)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (47) (7,436) (265) (1,872)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (198) (11,215) (696) (3,040)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 6,745 661 0 23,597
Transfers of Policy Loading, Net 335 (860) (408) 1,020
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (14) 9,883 (88) (342)
Transfers Due to Policy Loans 0 (1,199) 0 (9,218)
Transfers of Cost of Insurance (531) (423) (560) (4,141)
Transfers of Loan Processing Charges (3) (8) (12) (19)
Transfers Among Investment Divisions 18,538 99,872 155,745 233,354
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 25,070 107,926 154,677 244,251
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 24,872 96,711 153,981 241,211
Net Assets Beginning Balance 6,942 17,703 0 45,561
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 31,814 $ 114,414 $ 153,981 $ 286,772
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2001 2002 2003 2004
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (161) (326) (25) (759)
Transaction Charges (61) (124) (9) (290)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (222) (450) (34) (1,049)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 42 (4) (53) (22)
Net Unrealized Gains (Losses) (670) (154) 58 4,857
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) (628) (158) 5 4,835
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations (850) (608) (29) 3,786
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 0 2,254 9,684
Transfers of Policy Loading, Net (180) 38 (223) 566
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (24) 419 1 409
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (111) (297) (150) (1,422)
Transfers of Loan Processing Charges (3) (8) 0 (24)
Transfers Among Investment Divisions 41,783 98,392 (3,544) 394,979
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 41,465 98,544 (1,662) 404,192
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 40,615 97,936 (1,691) 407,978
Net Assets Beginning Balance 9,431 0 7,614 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 50,046 $ 97,936 $ 5,923 $ 407,978
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2005 2006 2007 2008
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (66) (99) (3) (3)
Transaction Charges (25) (38) (1) (1)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (91) (137) (4) (4)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) (29) (2) (1) 0
Net Unrealized Gains (Losses) 830 1,397 12 19
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 801 1,395 11 19
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 710 1,258 7 15
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 0 0 0
Transfers of Policy Loading, Net 150 (150) 100 0
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (17) (28) (1) (4)
Transfers Due to Policy Loans 0 0 0 0
Transfers of Cost of Insurance (417) (175) (39) (12)
Transfers of Loan Processing Charges (2) (4) 0 (1)
Transfers Among Investment Divisions 29,234 50,452 917 6,713
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 28,948 50,095 977 6,696
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 29,658 51,353 984 6,711
Net Assets Beginning Balance 0 0 0 0
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 29,658 $ 51,353 $ 984 $ 6,711
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Divisions Investing In
-----------------------------------------------------------------------
2009 2010 2011 2013
Trust Trust Trust Trust
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment Income (Loss):
Reinvested Dividends $ 0 $ 0 $ 0 $ 0
Mortality and Expense Charges (295) (1,584) (1,458) (476)
Transaction Charges (113) (598) (550) (180)
----------------- ----------------- ----------------- -----------------
Net Investment Income (Loss) (408) (2,182) (2,008) (656)
----------------- ----------------- ----------------- -----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 1 (23,419) 899 (2,567)
Net Unrealized Gains (Losses) 6,074 3,586 (22,160) (2,191)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gains (Losses) 6,075 (19,833) (21,261) (4,758)
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Operations 5,667 (22,015) (23,269) (5,414)
----------------- ----------------- ----------------- -----------------
Changes from Principal Transactions:
Transfers of Net Premiums 0 787 0 987
Transfers of Policy Loading, Net 1,250 2,479 (2,030) 195
Transfers Due to Deaths 0 0 0 0
Transfers Due to Other Terminations (75) 13 8 (46)
Transfers Due to Policy Loans 0 0 0 (12,300)
Transfers of Cost of Insurance (393) (1,159) (1,439) (1,771)
Transfers of Loan Processing Charges (12) 0 0 (6)
Transfers Among Investment Divisions 145,512 49,193 228 85,368
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 146,282 51,313 (3,233) 72,427
----------------- ----------------- ----------------- -----------------
Increase (Decrease) in Net Assets 151,949 29,298 (26,502) 67,013
Net Assets Beginning Balance 0 129,694 183,965 4,381
----------------- ----------------- ----------------- -----------------
Net Assets Ending Balance $ 151,949 $ 158,992 $ 157,463 $ 71,394
================= ================= ================= =================
</TABLE>
<PAGE>
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
MERRILL LYNCH LIFE INSURANCE COMPANY
SUPPLEMENTAL CONSOLIDATING SCHEDULE OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Division Investing In
---------------------
2014
Trust
-----------------
<S> <C>
Investment Income (Loss):
Reinvested Dividends $ 0
Mortality and Expense Charges (112)
Transaction Charges (41)
-----------------
Net Investment Income (Loss) (153)
-----------------
Realized and Unrealized Gains (Losses):
Net Realized Gains (Losses) 1
Net Unrealized Gains (Losses) 5,374
-----------------
Net Realized and Unrealized Gains (Losses) 5,375
-----------------
Increase (Decrease) in Net Assets
Resulting from Operations 5,222
-----------------
Changes from Principal Transactions:
Transfers of Net Premiums 1,337
Transfers of Policy Loading, Net 163
Transfers Due to Deaths 0
Transfers Due to Other Terminations (63)
Transfers Due to Policy Loans 0
Transfers of Cost of Insurance (272)
Transfers of Loan Processing Charges (9)
Transfers Among Investment Divisions 102,653
-----------------
Increase (Decrease) in Net Assets
Resulting from Principal Transactions 103,809
-----------------
Increase (Decrease) in Net Assets 109,031
Net Assets Beginning Balance 0
-----------------
Net Assets Ending Balance $ 109,031
=================
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Merrill Lynch Life Insurance Company:
We have audited the accompanying balance sheets of Merrill Lynch
Life Insurance Company (the "Company"), a wholly-owned subsidiary
of Merrill Lynch Insurance Group, Inc., as of December 31, 1996
and 1995, and the related statements of earnings, stockholder's
equity, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of the Company at
December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted
accounting principles.
February 24, 1997
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Assets
- ------
INVESTMENTS:
Fixed maturity securities, at estimated fair value
(amortized cost: 1996 - $3,232,643; 1995 - $3,648,983) $ 3,301,588 $ 3,807,870
Equity securities, at estimated fair value
(cost: 1996 - $32,988; 1995 - $19,683) 35,977 21,433
Mortgage loans 70,503 121,248
Real estate held-for-sale 28,851 5,874
Policy loans on insurance contracts 1,092,071 1,039,267
-------------- --------------
Total Investments 4,528,990 4,995,692
-------------- --------------
CASH AND CASH EQUIVALENTS 94,991 48,924
ACCRUED INVESTMENT INCOME 86,186 91,942
DEFERRED POLICY ACQUISITION COSTS 366,461 372,418
FEDERAL INCOME TAXES - DEFERRED - 2,222
REINSURANCE RECEIVABLES 2,642 1,552
OTHER ASSETS 42,861 54,900
SEPARATE ACCOUNTS ASSETS 7,615,362 6,834,353
-------------- --------------
TOTAL ASSETS $ 12,737,493 $ 12,402,003
============== ==============
</TABLE>
See notes to financial statements.
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
(continued)(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
LIABILITIES:
POLICY LIABILITIES AND ACCRUALS:
Policyholders' account balances $ 4,480,048 $ 4,851,718
Claims and claims settlement expenses 39,666 29,812
-------------- --------------
Total policy liabilities and accruals 4,519,714 4,881,530
OTHER POLICYHOLDER FUNDS 19,420 13,607
LIABILITY FOR GUARANTY FUND ASSESSMENTS 18,773 21,144
FEDERAL INCOME TAXES - DEFERRED 6,714 -
FEDERAL INCOME TAXES - CURRENT 20,968 7,033
AFFILIATED PAYABLES - NET 6,164 2,429
OTHER LIABILITIES 50,726 53,566
SEPARATE ACCOUNTS LIABILITIES 7,605,194 6,825,857
-------------- --------------
Total Liabilities 12,247,673 11,805,166
-------------- --------------
STOCKHOLDER'S EQUITY:
Common stock, $10 par value - 200,000 shares
authorized, issued and outstanding 2,000 2,000
Additional paid-in capital 402,937 501,455
Retained earnings 79,387 76,482
Net unrealized investment gain on investment securities 5,496 16,900
-------------- --------------
Total Stockholder's Equity 489,820 596,837
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 12,737,493 $ 12,402,003
============== ==============
</TABLE>
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Investment revenue:
Net investment income $ 336,661 $ 376,166 $ 433,536
Net realized investment gains (losses) 8,862 4,525 (14,543)
Policy charge revenue 158,829 141,722 126,284
----------- ----------- -----------
Total Revenues 504,352 522,413 545,277
----------- ----------- -----------
BENEFITS AND EXPENSES:
Interest credited to policyholders' account balances 235,255 261,760 313,585
Market value adjustment expense 6,071 5,805 6,307
Policy benefits (net of reinsurance recoveries: 1996 - $8,317;
1995 - $6,482; 1994 - $6,338) 21,052 19,374 16,858
Reinsurance premium ceded 15,582 13,896 13,909
Amortization of deferred policy acquisition costs 62,036 58,669 69,662
Insurance expenses and taxes 47,077 44,124 35,073
----------- ----------- -----------
Total Benefits and Expenses 387,073 403,628 455,394
----------- ----------- -----------
Earnings Before Federal Income Tax Provision 117,279 118,785 89,883
----------- ----------- -----------
FEDERAL INCOME TAX PROVISION:
Current 22,814 38,335 22,503
Deferred 15,078 3,968 1,375
----------- ----------- -----------
Total Federal Income Tax Provision 37,892 42,303 23,878
----------- ----------- -----------
NET EARNINGS $ 79,387 $ 76,482 $ 66,005
=========== =========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
Net
Additional unrealized Total
Common paid-in Retained investment stockholder's
stock capital earnings gain (loss) equity
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 $ 2,000 $ 637,590 $ 47,860 $ (395) $ 687,055
Dividend to Parent (102,140) (47,860) (150,000)
Net earnings 66,005 66,005
Net unrealized investment loss (43,489) (43,489)
------------ ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1994 2,000 535,450 66,005 (43,884) 559,571
Dividend to Parent (33,995) (66,005) (100,000)
Net earnings 76,482 76,482
Net unrealized investment gain 60,784 60,784
------------ ------------ ------------- ------------ ------------
BALANCE, DECEMBER 31, 1995 2,000 501,455 76,482 16,900 596,837
Dividend to Parent (98,518) (76,482) (175,000)
Net earnings 79,387 79,387
Net unrealized investment loss (11,404) (11,404)
------------ ------------ ------------- ------------ ------------
BALANCE, DECEMBER 31, 1996 $ 2,000 $ 402,937 $ 79,387 $ 5,496 $ 489,820
============ ============ ============= ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(A wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 79,387 $ 76,482 $ 66,005
Adjustments to reconcile net earnings to net cash and
cash equivalents provided (used) by operating activities:
Amortization of deferred policy acquisition costs 62,036 58,669 69,662
Capitalization of policy acquisition costs (43,668) (54,014) (108,829)
Amortization, (accretion) and depreciation of investments (4,836) (6,763) (4,516)
Net realized investment (gains) losses (8,862) (4,525) 14,543
Interest credited to policyholders' account balances 235,255 261,760 313,585
Provision for deferred Federal income tax 15,078 3,968 1,375
Changes in operating assets and liabilities:
Accrued investment income 5,756 3,191 25,204
Affiliated payables - net 3,735 5,542 (2,324)
Claims and claims settlement expenses 9,854 3,635 5,882
Federal income taxes - current 13,935 4,759 (7,848)
Other policyholder funds 5,813 (7,614) (7,547)
Liability for guaranty fund assessments (2,371) (3,630) (3,309)
Policy loans on insurance contracts (52,804) (54,054) (60,634)
Trading investment securities - - 11,352
Other, net 8,106 (9,296) (39,206)
Net cash and cash equivalents provided ----------- ----------- ----------
by operating activities 326,414 278,110 273,395
----------- ----------- ----------
</TABLE>
(Continued)
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Continued) (Dollars In Thousands)
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
INVESTING ACTIVITIES:
Sales of available-for-sale securities $ 834,120 $ 633,824 $ 864,095
Maturities of available-for-sale securities 536,449 570,923 1,323,705
Purchases of available-for-sale securities (954,368) (832,519) (678,974)
Mortgage loans principal payments received 22,789 30,767 32,341
Purchases of mortgage loans - (3,608) -
Sales of real estate held-for-sale 5,407 9,710 25,346
Improvements to real estate held-for-sale - improvements acquired - (683) (1,060)
Recapture of investment in Separate Accounts 8,829 6,559 -
Investment in Separate Accounts (10,063) (377) (15,212)
------------- ------------- -------------
Net cash and cash equivalents provided by investing activities 443,163 414,596 1,550,241
------------- ------------- -------------
FINANCING ACTIVITIES:
Dividends paid to parent (175,000) (100,000) (150,000)
Policyholders' account balances:
Deposits 542,062 567,430 966,861
Withdrawals (net of transfers to/from Separate Accounts) (1,090,572) (1,250,299) (2,623,628)
------------- ------------ ------------
Net cash and cash equivalents used by financing activities (723,510) (782,869) (1,806,767)
------------- ------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 46,067 (90,163) 16,869
CASH AND CASH EQUIVALENTS
Beginning of year 48,924 139,087 122,218
------------- ------------ ------------
End of year $ 94,991 $ 48,924 $ 139,087
============= ============ ============
Supplementary Disclosure of Cash Flow Information:
Cash paid to affiliates for:
Federal income taxes $ 8,880 $ 33,576 $ 30,351
Intercompany interest 988 1,310 679
</TABLE>
See notes to financial statements.
<PAGE>
MERRILL LYNCH LIFE INSURANCE COMPANY
(a wholly-owned subsidiary of Merrill Lynch Insurance Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
(Dollars in Thousands)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Reporting: Merrill Lynch Life Insurance Company (the
"Company") is a wholly-owned subsidiary of Merrill Lynch
Insurance Group, Inc. ("MLIG"). The Company is an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("Merrill
Lynch & Co.").
The Company sells non-participating life insurance and annuity
products which comprise one business segment. The primary
products that the Company currently markets are immediate
annuities, market value adjusted annuities, variable life
insurance and variable annuities. The Company is currently
licensed to sell insurance in forty-nine states, the District
of Columbia, the U.S. Virgin Islands and Guam. The Company
markets its products solely through the retail network of
Merrill Lynch, Pierce, Fenner & Smith, Incorporated ("MLPF&S"),
a wholly-owned subsidiary of Merrill Lynch & Co.
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles and
prevailing industry practices, both of which require management
to make estimates that affect the reported amounts and
disclosure of contingencies in the financial statements. Actual
results could differ from those estimates.
Revenue Recognition: Revenues for the Company's interest-
sensitive life, interest-sensitive annuity, variable life and
variable annuity products consist of policy charges for the
cost of insurance, deferred sales charges, policy
administration charges and/or withdrawal charges assessed
against policyholders' account balances during the period.
Policyholders' Account Balances: Liabilities for the Company's
universal life type contracts, including its life insurance and
annuity products, are equal to the full accumulation value of
such contracts as of the valuation date plus deficiency
reserves for certain products. Interest-crediting rates for the
Company's fixed-rate products are as follows:
Interest-sensitive life products 4.00% - 5.75%
Interest-sensitive deferred annuities 3.20% - 8.77%
Immediate annuities 3.00% - 10.00%
These rates may be changed at the option of the Company,
subject to minimum guarantees, after initial guaranteed rates
expire.
Liabilities for unpaid claims equal the death benefit for those
claims which have been reported to the Company and an estimate
based upon prior experience for those claims which are
unreported.
Reinsurance: In the normal course of business, the Company
seeks to limit its exposure to loss on any single insured life
and to recover a portion of benefits paid by ceding reinsurance
to other insurance enterprises or reinsurers under indemnity
reinsurance agreements, primarily excess coverage and
coinsurance agreements. The maximum amount of mortality risk
retained by the Company is approximately $500 on a single life.
Indemnity reinsurance agreements do not relieve the Company
from its obligations to policyholders. Failure of reinsurers to
honor their obligations could result in losses to the Company.
The Company regularly evaluates the financial condition of its
reinsurers so as to minimize its exposure to significant losses
from reinsurer insolvencies. The Company holds collateral under
reinsurance agreements in the form of letters of credit and
funds withheld totaling $576 that can be drawn upon for
delinquent reinsurance recoverables.
As of December 31, 1996, the Company had life insurance in-
force that was ceded to other life insurance companies of
$2,511,780.
Deferred Policy Acquisition Costs: Policy acquisition costs for
life and annuity contracts are deferred and amortized based on
the estimated future gross profits for each group of contracts.
These future gross profit estimates are subject to periodic
evaluation by the Company, with necessary revisions applied
against amortization to date. It is reasonably possible that
estimates of future gross profits could be reduced in the
future, resulting in a material reduction in the carrying
amount of deferred policy acquisition costs.
Policy acquisition costs are principally commissions and a
portion of certain other expenses relating to policy
acquisition, underwriting and issuance, that are primarily
related to and vary with the production of new business.
Certain costs and expenses reported in the statements of
earnings are net of amounts deferred. Policy acquisition costs
can also arise from the acquisition or reinsurance of existing
in-force policies from other insurers. These costs include
ceding commissions and professional fees related to the
reinsurance assumed. The deferred costs are amortized in
proportion to the estimated future gross profits over the
anticipated life of the acquired insurance contracts utilizing
an interest methodology.
The Company has entered into an assumption reinsurance
agreement with an unaffiliated insurer. The acquisition costs
relating to this agreement are being amortized over a twenty-
year period using an effective interest rate of 9.01%. This
reinsurance agreement provides for payment of contingent ceding
commissions based upon the persistency and mortality experience
of the insurance contracts assumed. Any payments made for the
contingent ceding commissions will be capitalized and amortized
using an identical methodology as that used for the initial
acquisition costs. The following is a reconciliation of the
acquisition costs related to the reinsurance agreement for the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Beginning balance $ 124,833 $ 133,388 $ 139,647
Capitalized amounts 5,077 13,708 12,517
Interest accrued 10,669 11,620 12,582
Amortization (28,330) (33,883) (31,358)
----------- ----------- -----------
Ending balance $ 112,249 $ 124,833 $ 133,388
=========== =========== ===========
</TABLE>
The following table presents the expected amortization, net of
interest accrued, of these deferred acquisition costs over the
next five years. The amortization may be adjusted based on
periodic evaluation of the expected gross profits on the
reinsured policies.
1997 $12,547
1998 8,958
1999 8,474
2000 8,142
2001 7,811
Investments: The Company's investments in fixed maturity and
equity securities are classified as available-for-sale
securities, which are carried at estimated fair value with
unrealized gains and losses included in stockholder's equity.
If a decline in value of a security is determined by management
to be other-than-temporary, the carrying value is adjusted to
the estimated fair value at the date of this determination and
recorded in theas net realized investment gains (losses).
During 1994, the Company classified certain of its investments
as trading securities, which were carried at estimated fair
value with unrealized gains and losses included in the
statements of earnings. All securities that were classified as
trading securities on November 1, 1994 were transferred to the
available-for-sale classification at their respective estimated
fair values on that date. The difference between the market
value at November 1, 1994 and par value is being amortized into
income based on the Company's premium amortization and discount
accretion policies.
For fixed maturity securities, premiums are amortized to the
earlier of the call or maturity date, discounts are accreted to
the maturity date, and interest income is accrued daily. For
equity securities, dividends are recognized on the ex-dividend
date. Realized gains and losses on the sale or maturity of the
investments are determined on the basis of identified cost.
Fixed maturity securities may contain securities which are
considered non-investment grade. The Company defines non-
investment grade fixed maturity securities as unsecured
corporate debt obligations that do not have a rating equivalent
to Standard and Poor's (or similar rating agency) BBB or higher
and are not guaranteed by an agency of the Federal government.
The Company has outstanding certain interest rate swap
contracts that are carried at estimated fair value and recorded
as a component of fixed maturity securities. Interest income
and realized and unrealized gains and losses are recorded on
the same basis as fixed maturity securities available-for-sale.
Mortgage loans are stated at unpaid principal balances, net of
valuation allowances. Such valuation allowances are based on
the decline in value expected to be realized on mortgage loans
that may not be collectible in full. In establishing valuation
allowances, management considers, among other things, the
estimated fair value of the underlying collateral.
The Company recognizes income from mortgage loans based on the
cash payment interest rate of the loan, which may be different
from the accrual interest rate of the loan for certain
outstanding mortgage loans. The Company will recognize a
realized gain at the date of the satisfaction of the loan at
contractual terms for loans where there is a difference between
the cash payment interest rate and the accrual interest rate.
For all loans the Company stops accruing income when an
interest payment default either occurs or is probable.
Impairments of mortgage loans are established as valuation
allowances and recorded to net realized investment gains or
losses.
The Company has previously made commercial mortgage loans
collateralized by real estate. The return on and the ultimate
recovery of these loans are generally dependent on the
successful operation, sale or refinancing of the real estate.
The Company monitors the effects of current and expected real
estate market conditions and other factors when assessing the
collectibility of mortgage loans. When, in management's
judgment, these assets are impaired, appropriate losses are
recorded. Such estimates necessarily include assumptions, which
may include anticipated improvements in selected market
conditions for real estate, which may or may not occur. The
more significant assumptions management considers involve
estimates of the following: lease absorption and sales rate;
real estate values and rates of return; operating expenses;
required capital improvements; inflation; and sufficiency of
any collateral independent of the real estate. Management
believes that the carrying value approximates the fair value of
these investments.
Real estate held-for-sale, is stated at cost less valuation
allowances and estimated selling costs.
Policy loans on insurance contracts are stated at unpaid
principal balances.
Income Taxes: The results of operations of the Company are
included in the consolidated Federal income tax return of
Merrill Lynch & Co. The Company has entered into a tax-sharing
agreement with Merrill Lynch & Co. whereby the Company will
calculate its current tax provision based on its operations.
Under the agreement, the Company periodically remits to Merrill
Lynch & Co. its current Federal tax liability.
The Company uses the asset and liability method in providing
income taxes on all transactions that have been recognized in
the financial statements. The asset and liability method
requires that deferred taxes be adjusted to reflect the tax
rates at which future taxable amounts will be settled or
realized. The effects of tax rate changes on future deferred
tax liabilities and deferred tax assets, as well as other
changes in income tax laws, are recognized in net earnings in
the period such changes are enacted. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amounts expected to be realized.
Insurance companies are generally subject to taxes on premiums
and in substantially all states are exempt from state income
taxes.
Separate Accounts: Separate Accounts are established in
conformity with Arkansas State Insurance law, the Company's
domiciliary state, and are generally not chargeable with
liabilities that arise from any other business of the Company.
Separate Accounts assets may be subject to general claims of
the Company only to the extent the value of such assets exceeds
Separate Accounts liabilities.
Assets and liabilities of Separate Accounts, representing net
deposits and accumulated net investment earnings less fees,
held primarily for the benefit of policyholders, are shown as
separate captions in the balance sheets.
Statements of Cash Flows: For the purpose of reporting cash
flows, cash and cash equivalents include cash on hand and on
deposit and short-term investments with original maturities of
three months or less.
Reclassifications: To facilitate comparisons with the current
year, certain amounts in the prior years have been
reclassified.
<PAGE>
NOTE 2. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments are carried at fair value or amounts that
approximate the fair value. The carrying value of financial
instruments as of December 31 were:
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Assets:
Fixed maturity securities:
Securities (1) $ 3,301,858 $ 3,807,310
Interest rate swaps (2) (270) 560
-------------- --------------
Total fixed maturity securities 3,301,588 3,807,870
-------------- --------------
Equity securities (1) 35,977 21,433
Mortgage loans (3) 70,503 121,248
Policy loans on insurance contracts (4) 1,092,071 1,039,267
Cash and cash equivalents (5) 94,991 48,924
Separate Accounts assets (6) 7,615,362 6,834,353
-------------- ---------------
Total financial instruments recorded as assets $ 12,210,492 $ 11,873,095
============== ===============
</TABLE>
(1) For publicly traded securities, the estimated fair value
is determined using quoted market prices. For securities
without a readily ascertainable market value, the Company
has determined an estimated fair value using a discounted
cash flow model, including provision for credit risk,
based upon the assumption that such securities will be
held to maturity. Such estimated fair values do not
necessarily represent the values for which these
securities could have been sold at the dates of the
balance sheets. At December 31, 1996 and 1995, securities
without a readily ascertainable market value, having an
amortized cost of $338,515, and $425,469, had an estimated
fair value of $348,066, and $448,785, respectively.
(2) Estimated fair values for the Company's interest rate
swaps are based on a discounted cash flow model.
(3) The estimated fair value of mortgage loans approximates
the carrying value. See Note 1 for a discussion of the
Company's valuation process.
(4) The Company estimates the fair value of policy loans as
equal to the book value of the loans. Policy loans are
fully collateralized by the account value of the
associated insurance contracts, and the spread between the
policy loan interest rate and the interest rate credited
to the account value held as collateral is fixed.
(5) The estimated fair value of cash and cash equivalents
approximates the carrying value.
(6) Assets held in Separate Accounts are carried at quoted
market values.
<PAGE>
NOTE 3. INVESTMENTS
The amortized cost and estimated fair value of investments in
fixed maturity securities and equity securities as of December
31 were:
<TABLE>
<CAPTION>
1996
------------------------------------------------------------------------
Cost / Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Fixed maturity securities:
Corporate debt securities $ 2,652,225 $ 67,590 $ 11,765 $ 2,708,050
Mortgage-backed securities 503,997 12,447 1,948 514,496
U.S. Government and agencies 54,386 2,303 158 56,531
Foreign governments 18,111 182 140 18,153
Municipals 3,924 434 - 4,358
-------------- -------------- -------------- --------------
Total fixed maturity securities $ 3,232,643 $ 82,956 $ 14,011 $ 3,301,588
============== ============== ============== ==============
Equity securities:
Non-redeemable preferred stocks $ 30,554 $ 2,983 $ 85 $ 33,452
Common stocks 2,434 91 - 2,525
--------------- -------------- -------------- --------------
Total equity securities $ 32,988 $ 3,074 $ 85 $ 35,977
=============== ============== ============== ==============
1995
------------------------------------------------------------------------
Cost / Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------- -------------- -------------- --------------
Fixed maturity securities:
Corporate debt securities $ 2,917,628 $ 138,159 $ 7,526 $ 3,048,261
Mortgage-backed securities 625,866 22,098 717 647,247
U.S. Government and agencies 95,002 6,061 - 101,063
Foreign governments 6,210 280 - 6,490
Municipals 4,277 532 - 4,809
-------------- -------------- -------------- --------------
Total fixed maturity securities $ 3,648,983 $ 167,130 $ 8,243 $ 3,807,870
============== ============== ============== ==============
Equity securities:
Non-redeemable preferred stocks $ 16,937 $ 1,428 $ 113 $ 18,252
Common stocks 2,746 498 63 3,181
-------------- -------------- -------------- --------------
Total equity securities $ 19,683 $ 1,926 $ 176 $ 21,433
============== ============== ============== ==============
</TABLE>
<PAGE>
The amortized cost and estimated fair value of fixed maturity
securities at December 31, 1996 by contractual maturity were:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
------------- -------------
<S> <C> <C>
Fixed maturity securities:
Due in one year or less $ 270,571 $ 271,303
Due after one year through five years 1,486,819 1,521,334
Due after five years through ten years 763,475 781,372
Due after ten years 207,781 213,083
------------- -------------
2,728,646 2,787,092
Mortgage-backed securities 503,997 514,496
------------- -------------
Total fixed maturity securities $ 3,232,643 $ 3,301,588
============= =============
</TABLE>
Fixed maturity securities not due at a single maturity date
have been included in the preceding table in the year of final
maturity. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment
penalties.
The amortized cost and estimated fair value of fixed maturity
securities at December 31, 1996 by rating agency equivalent
were:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
------------- -------------
<S> <C> <C>
AAA $ 716,749 $ 730,513
AA 181,962 185,000
A 910,355 932,417
BBB 1,245,457 1,272,901
Non-investment grade 178,120 180,757
------------- -------------
Total fixed maturity securities $ 3,232,643 $ 3,301,588
============= =============
</TABLE>
<PAGE>
The Company has recorded certain adjustments to deferred policy
acquisition costs and policyholders' account balances in
connection with investments classified as available-for-sale.
The Company adjusts those assets and liabilities as if the
unrealized investment gains or losses from securities
classified as available-for-sale had actually been realized,
with corresponding credits or charges reported directly to
stockholder's equity. The following reconciles the net
unrealized investment gain on investment securities classified
as available-for-sale as of December 31:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Assets:
Fixed maturity securities $ 68,945 $ 158,887
Equity securities 2,989 1,750
Deferred policy acquisition costs (4,630) (17,041)
Federal income taxes - deferred (2,959) (9,100)
Separate Accounts assets 168 (164)
------------- -------------
64,513 134,332
------------- -------------
Liabilities:
Policyholders' account balances 59,017 117,432
------------- -------------
Stockholder's equity:
Net unrealized investment gain on investment securities $ 5,496 $ 16,900
============= =============
</TABLE>
The Company has entered into interest rate swap contracts for
the purpose of minimizing exposure to fluctuations in interest
rates related to specific investment securities held.
The notional amount of such swaps outstanding at December 31,
1996 and 1995 was approximately $9,000 and $30,000,
respectively. The swaps were transacted with investment
grade counterparties. As of December 31, 1996, the Company's
interest rate swap contract was in a $270 unrealized loss
position. There were no outstanding interest rate swaps in a
loss position at December 31, 1995. During 1994, net realized
investment gains of $470 were recorded in connection with
interest rate swap activity. During 1996 and 1995, there
were no realized investment gains or losses recorded.
Proceeds and gross realized investment gains and losses from
the sale of available-for-sale securities for the years ended
December 31 were:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Proceeds $ 834,120 $ 633,824 $ 864,095
Gross realized investment gains 19,078 14,196 11,091
Gross realized investment losses 10,749 10,813 11,026
</TABLE>
During 1994, $7,285 of unrealized holding losses from
investment trading securities were recorded in net realized
investment gains (losses).
The Company owned investment securities with a carrying
value of $27,726 and $28,166 that were deposited with
insurance regulatory authorities at December 31, 1996 and
1995, respectively.
At December 31, 1996 and 1995, the Company had invested
$10,168 and $8,496 in Separate Accounts, including unrealized
gains (losses) of $168 and $(164), respectively. The
investments in Separate Accounts are for the purpose of
providing original funding of certain mutual fund portfolios
available as investment options to variable life and annuity
policyholders.
The Company's investment in mortgage loans are principally
collateralized by commercial real estate. The largest
concentrations of commercial real estate mortgage loans at
December 31, 1996, as measured by the outstanding principal
balance, are for properties located in Illinois ($27,877 or
32%), Rhode Island ($19,291 or 22%) and California ($11,953 or
14%).
The carrying value and established valuation allowances of
impaired mortgage loans on real estate as of December 31, 1996
and 1995 are:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Carrying value $ 44,239 $ 88,068
Valuation allowance 17,652 35,881
</TABLE>
Additional information on impaired loans for the years ended
December 31 follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
Average investment in impaired loans $ 61,891 $ 123,949 $ 112,043
Interest income recognized (cash-basis) 4,848 5,482 6,542
</TABLE>
For the years ended December 31, 1996, 1995 and 1994, $28,555,
$1,300 and $4,652, respectively, of real estate held-for-sale
was acquired in satisfaction of debt.
<PAGE>
Net investment income arose from the following sources for the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
Fixed maturity securities $ 266,916 $ 305,648 $ 368,023
Equity securities 1,876 1,329 2,408
Mortgage loans 9,764 12,250 15,014
Real estate held-for-sale 563 153 406
Policy loans on insurance contracts 56,512 53,576 50,232
Cash and cash equivalents 6,710 8,463 5,936
Other 899 1,753 (447)
----------- ----------- ------------
Gross investment income 343,240 383,172 441,572
Less investment expenses (6,579) (7,006) (8,036)
----------- ----------- ------------
Net investment income $ 336,661 $ 376,166 $ 433,536
=========== =========== ============
</TABLE>
Net realized investment gains (losses), including changes in
valuation allowances for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
Fixed maturity securities $ 4,690 $ 1,908 $ (13,314)
Equity securities 3,639 1,475 910
Investment in Separate Accounts 106 (369) -
Mortgage loans 599 334 (4,967)
Real estate held-for-sale (171) 1,177 2,828
Cash and cash equivalents (1) - -
----------- ----------- -----------
Net realized investment gains (losses) $ 8,862 $ 4,525 $ (14,543)
=========== =========== ===========
</TABLE>
The following is a reconciliation of the change in valuation
allowances that have been recorded to reflect other-than-
temporary declines in estimated fair value of mortgage loans
and real estate held-for-sale for the years ended December 31:
<TABLE>
<CAPTION>
Balance at Additions Balance at
Beginning Charged to Write - End
of Year Operations Downs of Year
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Mortgage loans:
1996 $ 35,881 $ - $ 18,229 $ 17,652
1995 40,070 - 4,189 35,881
1994 45,924 4,966 10,820 40,070
Real estate held-for-sale:
1996 2,200 - - 2,200
1995 5,766 - 3,566 2,200
1994 7,628 - 1,862 5,766
</TABLE>
<PAGE>
The Company held investments at December 31, 1996 of $1,182
which have been non-income producing for the preceding twelve
months.
During 1994, the Company committed to participate in a limited
partnership that invests in leveraged transactions. As of
December 31, 1996, $2,027 has been advanced towards the
Company's $10,000 commitment to the limited partnership.
NOTE 4. FEDERAL INCOME TAXES
The following is a reconciliation of the provision for income
taxes based on earnings before income taxes, computed using the
Federal statutory tax rate, with the provision for income taxes
for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Provision for income taxes computed at Federal statutory rate $ 41,048 $ 41,575 $ 31,459
Increase (decrease) in income taxes resulting from:
Release of policyholders' surplus - 1,991 -
Tax deductible interest - (718) -
Dividend received deduction (3,135) (532) (7,363)
Other (21) (13) (218)
----------- ----------- -----------
Federal income tax provision $ 37,892 $ 42,303 $ 23,878
=========== =========== ===========
</TABLE>
The Federal statutory rate for each of the three years in the
period ended December 31, 1996 was 35%.
The Company provides for deferred income taxes resulting from
temporary differences that arise from recording certain
transactions in different years for income tax reporting
purposes than for financial reporting purposes. The sources of
these differences and the tax effect of each are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Deferred policy acquisition costs $ (5,770) $ (2,179) $ 6,416
Policyholders' account balances 15,004 66 5,322
Liability for guaranty fund assessments 760 249 (153)
Investment adjustments 5,122 5,563 3,276
Other (38) 269 (13,486)
------------ ----------- -----------
Deferred Federal income tax provision $ 15,078 $ 3,968 $ 1,375
============ =========== ===========
</TABLE>
<PAGE>
Deferred tax assets and liabilities as of December 31 are
determined as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Policyholders' account balances $ 79,083 $ 94,087
Investment adjustments 5,671 10,793
Liability for guaranty fund assessments 6,571 7,331
----------- -----------
Total deferred tax assets 91,325 112,211
=========== ===========
Deferred tax liabilities:
Deferred policy acquisition costs 91,092 96,862
Net unrealized investment gain on investment securities 2,959 9,100
Other 3,988 4,027
----------- -----------
Total deferred tax liabilities 98,039 109,989
----------- -----------
Net deferred tax asset (liability) $ (6,714) $ 2,222
=========== ===========
</TABLE>
The Company anticipates that all deferred tax assets will be
realized; therefore no valuation allowance has been provided.
<PAGE>
NOTE 5. RELATED PARTY TRANSACTIONS
The Company and MLIG are parties to a service agreement whereby
MLIG has agreed to provide certain accounting, data processing,
legal, actuarial, management, advertising and other services to
the Company. Expenses incurred by MLIG in relation to this
service agreement are reimbursed by the Company on an allocated
cost basis. Charges billed to the Company by MLIG pursuant to
the agreement were $43,515, $41,729 and $43,497 for the years
ended December 31, 1996, 1995 and 1994, respectively. The
Company is allocated interest expense on its accounts payable
to MLIG which approximates the daily Federal funds rate. Total
intercompany interest paid was $988, $1,310 and $679 for 1996,
1995 and 1994, respectively.
The Company and Merrill Lynch Asset Management, L.P. ("MLAM")
are parties to a service agreement whereby MLAM has agreed to
provide certain invested asset management services to the
Company. The Company pays a fee to MLAM for these services
through the MLIG service agreement. Charges attributable to
this agreement and allocated to the Company by MLIG were
$2,279, $2,635 and $2,732 for 1996, 1995 and 1994,
respectively.
MLAM and MLIG have entered into an agreement with respect to
administrative services for the Merrill Lynch Series Fund, Inc.
("Series Fund") and Merrill Lynch Variable Series Funds, Inc.
("Variable Series Funds"). The Company invests in the various
mutual fund portfolios of the Series Fund and the Variable
Series Funds in connection with the variable life and annuities
the Company has in-force. Under this agreement, MLAM pays
compensation to MLIG in an amount equal to a portion of the
annual gross investment advisory fees paid by the Series Fund
and the Variable Series Funds to MLAM. The Company received
from MLIG its allocable share of such compensation in the
amount of $16,514, $13,293 and $12,600 during 1996, 1995 and
1994, respectively.
The Company has a general agency agreement with Merrill Lynch
Life Agency Inc. ("MLLA") whereby registered representatives of
MLPF&S, who are the Company's licensed insurance agents,
solicit applications for contracts to be issued by the Company.
MLLA is paid commissions for the contracts sold by such agents.
Commissions paid to MLLA were $42,639, $43,984 and $84,231 for
1996, 1995 and 1994, respectively. Substantially all of these
commissions were capitalized as deferred policy acquisition
costs and are being amortized in accordance with the policy
discussed in Note 1.
The Company has entered into interest rate swap contracts with
Merrill Lynch Capital Services, Inc. ("MLCS") with a guarantee
from Merrill Lynch & Co. As of December 31, 1996 and 1995, the
notional amount of such interest rate swap contracts
outstanding was $9,000 and $10,000, respectively. During 1994,
the Company and MLCS terminated certain interest rate swap
contracts resulting in the Company paying a net consideration
of $2,043. Net interest received from these interest rate swap
contracts was $(117), $256, and $782 for 1996, 1995 and 1994,
respectively.
<PAGE>
NOTE 6. STOCKHOLDER'S EQUITY AND STATUTORY REGULATIONS
During 1996, 1995, and 1994 the Company paid dividends of
$175,000, $100,000, and $150,000, respectively, to MLIG. Of
these stockholder's dividends, $175,000, $73,757, and $112,779,
respectively, were extraordinary dividends as defined by
Arkansas Insurance Law and were paid pursuant to approval
granted by the Arkansas Insurance Commissioner.
At December 31, 1996 and 1995, approximately $24,970 and
$30,195, respectively, of stockholder's equity was available
for distribution to MLIG. Statutory capital and surplus at
December 31, 1996 and 1995, was $251,697 and $303,950,
respectively.
Applicable insurance department regulations require that the
Company report its accounts in accordance with statutory
accounting practices. Statutory accounting practices primarily
differ from the principles utilized in these financial
statements by charging policy acquisition costs to expense as
incurred, establishing future policy benefit reserves using
different actuarial assumptions, not providing for deferred
income taxes, and valuing securities on a different basis. The
Company's statutory net income for 1996, 1995 and 1994 was
$93,532, $121,451 and $42,382, respectively.
The National Association of Insurance Commissioners ("NAIC")
utilizes the Risk Based Capital ("RBC") adequacy monitoring
system. The RBC calculates the amount of adjusted capital which
a life insurance company should have based upon that company's
risk profile. As of December 31, 1996 and 1995, based on the
RBC formula, the Company's total adjusted capital level was
403% and 395%, respectively, of the minimum amount of capital
required to avoid regulatory action.
NOTE 7. COMMITMENTS AND CONTINGENCIES
State insurance laws generally require that all life insurers
who are licensed to transact business within a state become
members of the state's life insurance guaranty association.
These associations have been established for the protection of
policyholders from loss (within specified limits) as a result
of the insolvency of an insurer. At the time an insolvency
occurs, the guaranty association assesses the remaining members
of the association an amount sufficient to satisfy the
insolvent insurer's policyholder obligations (within specified
limits). During 1991, and to a lesser extent 1992, there were
certain highly publicized life insurance insolvencies. The
Company has utilized public information to estimate what future
assessments it will incur as a result of these insolvencies. At
December 31, 1996 and 1995, the Company has established an
estimated liability for future guaranty fund assessments of
$18,773 and $21,144, respectively. The Company regularly
monitors public information regarding insurer insolvencies and
will adjusts its estimated liability as appropriate.
In the normal course of business, the Company is subject to
various claims and assessments. Management believes the
settlement of these matters would not have a material effect on
the financial position or results of operations of the Company.
* * * * * *
<PAGE> 107
PART II. OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
The Insurance Company's By-Laws provide, in Article VI, Section 1, 2, 3 and
4, as follows:
Section 1. Actions Other Than by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that he
is or was a director, officer or employee of the Corporation, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 2. Actions by or in the Right of the Corporation. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer or employee of the Corporation, against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the Court in which such action or suit was brough shall
determined upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other Court shall deem proper.
Section 3. Right to Indemnification. To the extent that a director,
officer of employee of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections 1
and 2 of this Article, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorney's fees) actually and
reasonably incurred by him in connection therewith.
Section 4. Determination of Right to Indemnification. Any indemnification
under Sections 1 and 2 of this Article (unless ordered by a Court) shall be made
by the Corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, or employee is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Sections 1 and 2 of this Article. Such determination shall be made (i) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (ii) if such a quorum is
not obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
II-1
<PAGE> 108
Any persons serving as an officer, director or trustee of a corporation,
trust, or other enterprise, including the Registrant, at the request of Merrill
Lynch are entitled to indemnification from Merrill Lynch, to the fullest extent
authorized or permitted by law, for liabilities with respect to actions taken or
omitted by such persons in any capacity in which such persons serve Merrill
Lynch or such other corporation, trust, or other enterprise. Any action
initiated by any such person for which indemnification is provided shall be
approved by the Board of Directors of Merrill Lynch prior to such initiation.
DIRECTORS' AND OFFICERS' INSURANCE
Merrill Lynch has purchased from Corporate Officers' and Directors'
Assurance Company directors' and officers' liability insurance policies which
cover, in addition to the Indemnification described above, liabilities for which
indemnification is not provided under the By-Laws. The Company will pay an
allocable portion of the insurance premium paid by Merrill Lynch with respect to
such insurance policies.
ARKANSAS BUSINESS CORPORATION LAW
In addition, Section 4-26-814 of the Arkansas Business Corporation Law
generally provides that a corporation has the power to indemnify a director or
officer of the corporation, or a person serving at the request of the
corporation as a director or officer of another corporation or other enterprise
against any judgments, amounts paid in settlement, and reasonably incurred
expenses in a civil or criminal action or proceeding if the director or officer
acted in good faith in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation (or, in the case of a criminal
action or proceeding, if he or she in addition had no reasonable cause to
believe that his or her conduct was unlawful).
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
REPRESENTATION PURSUANT TO SECTION 26(e)
Merrill Lynch Life Insurance Company hereby represents that the fees and
charges deducted under the Contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by Merrill Lynch Life Insurance Company.
II-2
<PAGE> 109
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents :
The facing sheet.
Two Prospectuses consisting of 92 and 88 pages, respectively.
Undertaking to file reports.
Rule 484 Undertaking.
Representation Pursuant to Section 26(e).
The signatures.
Written Consents of the Following Persons:
(a) Barry G. Skolnick, Esq.
(b) Joseph E. Crowne, Jr., F.S.A.
(c) Sutherland, Asbill & Brennan, L.L.P.
(d) Deloitte & Touche LLP, Independent Auditors
The following exhibits:
<TABLE>
<S> <C> <C> <C>
1. A. (1) Resolution of the Board of Directors of Merrill Lynch Life Insurance Company establishing the
Separate Account
(2) Not applicable
(3)(a) Distribution Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch, Pierce,
Fenner & Smith Incorporated
(b) Amended Sales Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch Life
Agency Inc.
(c) Schedules of Sales Commissions
(d) Indemnity Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch Life Agency,
Inc.
(4) Not applicable
(5)(a) (1) Flexible Premium Joint and Last Survivor Variable Universal Life Insurance Policy
(5)(a) (2) Flexible Premium Joint and Last Survivor Variable Universal Life Insurance Policy (Incorporated
by Reference to Registrant's Post-Effective Amendment No. 4 to Form S-6 Registration No.
33-55472 Filed December 9, 1994)
(b) (1) Backdating Endorsement
(2)(a) Additional Insurance Rider for Flexible Premium Joint and Last Survivor Variable Universal Life
Insurance Policy
(2)(b) Additional Insurance Rider for Flexible Premium Joint and Last Survivor Variable Universal Life
Insurance Policy (Incorporated by Reference to Registrant's Post-Effective Amendment No. 4 to
Form S-6 Registration No. 33-55472 Filed December 9, 1994)
(3) Policy Split Rider for Flexible Premium Joint and Last Survivor Variable Universal Life
Insurance Policy
(4) Endorsement for Guaranteed Interest Division for Flexible Premium Joint and Last Survivor
Variable Universal Life Insurance Policy
(5) Endorsement for Flexible Premium Joint and Last Survivor Variable Universal Life Insurance
Policy (Incorporated by Reference to Registrant's Post-Effective Amendment No. 4 to Form S-6
Registration No. 33-55472 Filed December 9, 1994)
(6) Accelerated Benefit Rider (Incorporated by Reference to Registrant's Post-Effective Amendment
No. 4 to Form S-6 Registration No. 33-55472 Filed December 9, 1994)
(7) Policy Endorsement (Form No. VULDEC) (Incorporated by Reference to Registrant's Post-Effective
Amendment No. 6 to Form S-6 Registration No. 33-55472 Filed February 29, 1996)
(6)(a) Articles of Amendment, Restatement, and Redomestication of the Articles of Incorporation of
Merrill Lynch Life Insurance Company
(b) Amended and Restated By-Laws of Merrill Lynch Life Insurance Company
(7) Not applicable
(8)(a) Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch Series Fund, Inc.
(b) Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch Funds Distributor, Inc.
(c) Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch, Pierce, Fenner & Smith
Incorporated
(d) Participation Agreement among Merrill Lynch Life Insurance Company, ML Life Insurance Company of
New York and Monarch Life Insurance Company (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 3 to Form S-6 Registration No. 33-55472 Filed April 27, 1994)
</TABLE>
II-3
<PAGE> 110
<TABLE>
<S> <C> <C> <C>
(e) Management Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch Asset
Management, Inc.
(f) Form of Participation Agreement among Merrill Lynch Life Insurance Company, ML Life Insurance
Company of New York and Family Life Insurance Company (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 3 to Form S-6 Registration No. 33-55472 Filed April 27, 1994)
(g) Form of Participation Agreement Among Merrill Lynch Life Insurance Company, Alliance Capital
Management L.P., and Alliance Fund Distributors, Inc. (Incorporated by Reference to Merrill
Lynch Life Variable Annuity Separate Account A's Post-Effective Amendment No. 10 to Form N-4
Registration No. 33-43773 Filed December 10, 1996)
(h) Form of Participation Agreement Among MFS Variable Insurance Trust, Merrill Lynch Life Insurance
Company, and Massachusetts Financial Services Company (Incorporated by Reference to Merrill
Lynch Life Variable Annuity Separate Account A's Post-Effective Amendment No. 10 to Form N-4
Registration No. 33-43773 Filed December 10, 1996)
(i) Participation Agreement By and Among AIM Variable Insurance Funds, Inc., AIM Distributors, Inc.,
and Merrill Lynch Life Insurance Company (Incorporated by Reference to Merrill Lynch Life
Variable Annuity Separate Account A's Post-Effective Amendment No. 11 to Form N-4 Registration
No. 33-43773 Filed April 24, 1997)
(9) Service Agreement among Merrill Lynch Insurance Group, Inc., Family Life Insurance Company and
Merrill Lynch Life Insurance Company
(10)(a) (1) Variable Life Insurance Application
(10)(a) (2) Variable Life Insurance Application (Incorporated by Reference to Registrant's Post-Effective
Amendment No. 4 to Form S-6 Registration No. 33-55472 Filed December 9, 1994)
(10)(a) (3) Variable Life Insurance Application
(b) Application for Reinstatement
(c) Variable Life Insurance Application, Part 1 (Form No. A1016 New 3/95) (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 5 to Form S-6 Registration No. 33-55472 Filed April
28, 1995)
(d) Variable Life Insurance Application, Part 2 (Form No. A1011 Revised 10/94) (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 5 to Form S-6 Registration No. 33-55472
Filed April 28, 1995)
(e) Temporary Insurance Agreement (Form No. A1010 Revised 6/94) (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 5 to Form S-6 Registration No. 33-55472 Filed April
28, 1995)
(11)(a) Memorandum describing Merrill Lynch Life Insurance Company's Issuance, Transfer and Redemption
Procedures (Incorporated by Reference to Registrant's Post-Effective Amendment No. 2 to Form S-6
Registration No. 33-55472 Filed March 1, 1994)
(11)(b) Amended and restated memorandum describing Merrill Lynch Life Insurance Company's Issuance,
Transfer and Redemption Procedures (Incorporated by Reference to Registrant's Post-Effective
Amendment No. 4 to Form S-6 Registration No. 33-55472 Filed December 9, 1994)
(11)(c) Amended and restated memorandum describing Merrill Lynch Life Insurance Company's Issuance,
Transfer and Redemption Procedures (Incorporated by Reference to Registrant's Post-Effective
Amendment No. 6 to Form S-6 Registration No. 33-55472 Filed February 29, 1996)
(11)(d) Supplement to Memorandum describing Merrill Lynch Life Insurance Company's Issuance, Transfer
and Redemption Procedures
2. See Exhibit 1.A.(5)
3. Opinion and Consent of Barry G. Skolnick, Esq. as to the legality of the securities being
registered (Incorporated by Reference to Registrant's Post-Effective Amendment No. 7 to Form S-6
Registration No. 33-55472 Filed April 25, 1996)
4. Not applicable
5. Not applicable
6. Opinion and Consent of Joseph E. Crowne, Jr., F.S.A. as to actuarial matters pertaining to the
securities being registered
7. (a) Power of Attorney of Joseph E. Crowne, Jr. (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 2 to Form S-6 Registration No. 33-55472 Filed March 1, 1994)
(b) Power of Attorney of David E. Dunford (Incorporated by Reference to Registrant's Post-Effective
Amendment No. 2 to Form S-6 Registration No. 33-55472 Filed March 1, 1994)
(c) Power of Attorney of Gail R. Farkas (Incorporated by Reference to Registrant's Post-Effective
Amendment No. 6 to Form S-6 Registration No. 33-55472 Filed February 29, 1996)
(d) Power of Attorney of John C.R. Hele (Incorporated by Reference to Registrant's Post-Effective
Amendment No. 2 to Form S-6 Registration No. 33-55472 Filed March 1, 1994)
</TABLE>
II-4
<PAGE> 111
<TABLE>
<S> <C> <C>
(e) Power of Attorney of Allen N. Jones (Incorporated by Reference to Registrant's Post-Effective
Amendment No. 2 to Form S-6 Registration No. 33-55472 Filed March 1, 1994)
(f) Power of Attorney of Barry G. Skolnick (Incorporated by Reference to Registrant's Post-Effective
Amendment No. 2 to Form S-6 Registration No. 33-55472 Filed March 1, 1994)
(g) Power of Attorney of Anthony J. Vespa (Incorporated by Reference to Registrant's Post-Effective
Amendment No. 2 to Form S-6 Registration No. 33-55472 Filed March 1, 1994)
8. (a) Written Consent of Barry G. Skolnick, Esq.
(b) Written Consent of Joseph E. Crowne, Jr., F.S.A. (See Exhibit 6)
(c) Written Consent of Sutherland, Asbill & Brennan, L.L.P.
(d) Written Consent of Deloitte & Touche LLP, Independent Auditors
27. Financial Data Schedule
</TABLE>
II-5
<PAGE> 112
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT HEREBY CERTIFIES THAT THIS
POST-EFFECTIVE AMENDMENT NO. 8 MEETS ALL OF THE REQUIREMENTS FOR EFFECTIVENESS
PURSUANT TO PARAGRAPH (B) OF RULE 485 UNDER THE SECURITIES ACT OF 1933, AND HAS
DULY CAUSED THIS POST-EFFECTIVE AMENDMENT NO. 8 TO THE REGISTRATION STATEMENT TO
BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED, AND ITS
SEAL TO BE HEREUNTO AFFIXED AND ATTESTED, ALL IN THE CITY OF PLAINSBORO AND THE
STATE OF NEW JERSEY, ON THE 21ST DAY OF APRIL 1997.
MERRILL LYNCH VARIABLE LIFE SEPARATE ACCOUNT
(Registrant)
BY: MERRILL LYNCH LIFE INSURANCE COMPANY
(Depositor)
<TABLE>
<S> <C>
Attest: /s/ EDWARD W. DIFFIN, JR. By: /s/ BARRY G. SKOLNICK
--------------------------------- ----------------------------
Edward W. Diffin, Jr. Barry G. Skolnick
Vice President Senior Vice President
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 8 to the Registration Statement has been signed below by the
following persons in the capacities indicated on April 21, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ---------------------------------------------
<S> <C>
* Chairman of the Board, President, and Chief
- --------------------------------------------- Executive Officer
Anthony J. Vespa
* Director, Senior Vice President, Chief
- --------------------------------------------- Financial Officer, Chief Actuary, and
Joseph E. Crowne, Jr. Treasurer
* Director, Senior Vice President, and Chief
- --------------------------------------------- Investment Officer
David M. Dunford
* Director and Senior Vice President
- ---------------------------------------------
Gail R. Farkas
*By: /s/ BARRY G. SKOLNICK In his own capacity as Director, Senior Vice
----------------------------------------- President, Secretary, General Counsel, and as
Barry G. Skolnick Attorney-in-Fact
</TABLE>
II-6
<PAGE> 113
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBITS PAGE
- --------------- ------------------------------------------------------------------------------------ ------------
<S> <C> <C>
1.A.1. Resolution of the Board of Directors of Merrill Lynch Life Insurance Company
establishing the Separate Account
1.A.3.(a) Distribution Agreement Between Merrill Lynch Insurance Company and Merrill Lynch,
Pierce, Fenner & Smith Incorporated
1.A.3.(b) Amended Sales Agreement between Merrill Lynch Life Insurance Company and Merrill
Lynch Life Agency, Inc.
1.A.3.(c) Schedules of Sales Commissions
1.A.3.(d) Indemnity Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch
Life Agency, Inc.
1.A.5(a)(1) Flexible Premium Joint and Last Survivor Variable Universal Life Insurance Policy
1.A.5(b)(1) Backdating Endorsement
1.A.5(b)(2)(a) Additional Insurance Rider for Flexible Premium Joint and Last Survivor Variable
Universal Life Insurance Policy
1.A.5(b)(3) Policy Split Rider for Flexible Premium Joint and Last Survivor Variable Universal
Life Insurance Policy
1.A.5(b)(4) Endorsement for Guaranteed Interest Division for Flexible Premium Joint and Last
Survivor Variable Universal Life Insurance Policy
1.A.6(a) Articles of Amendment, Restatement and Redomestication of the Articles of
Incorporation of Merrill Lynch Life Insurance Company
1.A.6(b) Amended and Restated By-Laws of Merrill Lynch Life Insurance Company
1.A.8(a) Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch Series
Fund, Inc.
1.A.8(b) Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch Funds
Distributor, Inc.
1.A.8(c) Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch, Pierce,
Fenner & Smith Incorporated
1.A.8(e) Management Agreement between Merrill Lynch Life Insurance Company and Merrill Lynch
Asset Management, Inc.
1.A.9 Service Agreement among Merrill Lynch Insurance Group, Inc., Family Life Insurance
Company and Merrill Lynch Life Insurance Company
1.A.10(a)(1) Variable Life Insurance Application
1.A.10(a)(3) Variable Life Insurance Application
1.A.10(b) Application for Reinstatement
1.A.11(d) Supplement to Memorandum describing Merrill Lynch Life Insurance Company's Issuance,
Transfer and Redemption Procedures
6. Opinion and Consent of Joseph E. Crowne, Jr., F.S.A. as to actuarial matters
pertaining to the securities being registered
8.(a) Written Consent of Barry G. Skolnick, Esq.
8.(c) Written Consent of Sutherland, Asbill & Brennan, L.L.P.
8.(d) Written Consent of Deloitte & Touche LLP, Independent Auditors
27. Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 1.A(1)
UNANIMOUS WRITTEN CONSENT OF
THE EXECUTIVE COMMITTEE
OF
MERRILL LYNCH LIFE INSURANCE COMPANY
The undersigned, being all of the members of the Executive
Committee of Merrill Lynch Life Insurance Company ("Company") do hereby adopt
the following resolutions, by written consent, without a meeting and with full
force and effect as if adopted by the unanimous affirmative vote of the
Executive Committee at a duly constituted meeting:
RESOLVED, That, pursuant to the provisions of the Revised Code
of Washington, Section 48.18A.020, the Company establish a separate account,
designated the Merrill Lynch Variable Life Separate Account ("Separate
Account").
RESOLVED, That the Separate Account be established for the
purpose of providing for the assumption and issuance of individual variable
life insurance contracts ("Contracts"), which shall provide that part or all of
the payments and benefits will reflect the investment experience of one or more
designated underlying securities.
<PAGE> 2
RESOLVED, That the officers of the Company be authorized and
empowered to take all action necessary to: (a) register the Separate Account as
a unit investment trust under the Investment Company Act of 1940, as amended;
(b) register the Contracts in such amounts as the officers of the Company shall
from time to time deem appropriate under the Securities Act of 1933; (c) apply
for such exemptions from, and other orders pursuant to, the Investment Company
Act of 1940 as the officers of the Company shall deem necessary or desirable;
(d) take all other action necessary or desirable to comply with the Investment
Company Act of 1940, the Securities Exchange Act of 1934, the Securities Act of
1933 and all other applicable state and federal laws in connection with the
assumption and offering of said Contracts and the operation of the Separate
Account.
RESOLVED, That, in accordance with applicable law, the
officers of the Company be authorized to allocate from the Company's general
accounts to the Separate Account such amount per sub-account as the officers
deem appropriate to establish such Separate Account.
RESOLVED, That the officers of the Company be authorized and
empowered to perform all such acts and do all such things as may in their
judgment and discretion be necessary or
- 2 -
<PAGE> 3
desirable to give full effect to these resolutions to enable the Company to
establish the Separate Account and assume and issue variable life insurance
contracts, including, without limitation: (a) the preparation and execution of
service agreements, custodian agreements, underwriting agreements and such
other agreements and documents respecting such Separate Account as they may
deem necessary or desirable; (b) the determination of the terms and
conditions of the contracts being authorized; (c) the determination of the
jurisdictions in which appropriate action shall be taken to obtain the
requisite qualification, registration and authorization for the sale of such
Contracts as such officers may deem advisable.
IN WITNESS WHEREOF, the undersigned have executed this written
consent this 16th day of November, 1990.
/s/ JAMES ENTRINGER
-------------------------
James Entringer
/s/ KENNETH KACZMAREK
------------------------
Kenneth Kaczmarek
/s/ ROBERT NEWELL
------------------------
Robert Newell
/s/ EDWARD PILLITTERI
------------------------
Edward Pillitteri
/s/ MCKAY SNOW
------------------------
McKay Snow
- 3 -
<PAGE> 1
EXHIBIT 1.A.(3)(a)
DISTRIBUTION AGREEMENT
AGREEMENT dated as of February 1, 1993, by and between Merrill
Lynch Life Insurance Company ("MLLIC"), an Arkansas corporation, on its own
behalf and on behalf of the Merrill Lynch Variable Life Separate Account (the
"Separate Account") and Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S"), a Delaware corporation.
WITNESSETH:
WHEREAS, the Separate Account is an account established and
maintained by MLLIC pursuant to the laws of the State of Arkansas for certain
variable life insurance contracts issued by MLLIC (the "Contracts"), under
which income, gains and losses, whether or not realized, from assets allocated
to such account, are, in accordance with the Contracts, credited to or charged
against such account without regard to other income, gains, or losses of MLLIC;
WHEREAS, MLLIC has registered the Separate Account as a unit
investment trust under the Investment Company Act of 1940 (the "Investment
Company Act");
<PAGE> 2
WHEREAS, MLPF&S is registered as a broker-dealer under the
Securities Exchange Act of 1934 (the "Exchange Act") and is a member of the
National Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, MLLIC has registered the Contracts under the
Securities Act of 1933 (the "1933 Act") and issues and sells the Contracts
through the Separate Account to the public through MLPF&S acting as its general
agent;
NOW, THEREFORE, MLLLIC and MLPF&S hereby agree as follows:
1. Principal Underwriter. MLLIC grants to MLPF&S the
exclusive right, during the term of this Agreement, subject to the registration
requirements of the 1933 Act and the Investment Company Act and the provisions
of the Exchange Act, to be the distributor and principal underwriter of
Contracts issued through the Separate Account. In that connection, MLPF&S
shall arrange for the offer, sale and distribution of the Contracts by persons
or entities acting as general agents ("GAs") of MLLIC at premium rates to be
set by MLLIC.
2. Sales Agreements. MPF&S is hereby authorized to arrange
for persons or entities qualified to act as GAs of MLLIC in various
jurisdictions to enter into separate written
- 2 -
<PAGE> 3
agreements, on such terms and conditions as MLLIC may determine not
inconsistent with this Agreement, with organizations (including Merrill Lynch
Life Agencies pursuant to sales agreements) which agree to act as GAs of MLLIC
and to participate in the distribution of the Contracts and to use their best
efforts to solicit applications for the Contracts. Such organizations and
their agents or representatives soliciting applications for Contracts shall be
duly and appropriately licensed, registered or otherwise qualified for the sale
of such Contracts (and the riders and other contracts offered in connection
therewith) under the insurance laws and any applicable blue-sky laws of each
state or other jurisdiction in which such Contracts may be lawfully sold and in
which MLLIC is licensed to sell the Contracts. Each such organization shall be
both registered as a broker/dealer under the Exchange Act and a member of the
NASD, or if not so registered or not such a member, then the agents and
representatives of such organization soliciting applications for Contract shall
be agents and registered representative of a registered broker/dealer and NASD
member which is an affiliate of such organization and which maintains full
responsibility for the training, supervision, and control of the agents or
representatives selling the Contracts.
- 3 -
<PAGE> 4
MLPF&S shall have the responsibility for supervision of all
such organizations to the extent required by law and shall assume any legal
responsibilities of MLLIC for the acts, commissions or defalcations of any such
organizations.
3. Life Insurance Agents. MLPF&S is authorized to help
arrange for the appointment of the organizations described in paragraph 2 above
as independent general agents of MLLIC for the sale of the Contracts and any
riders or contracts in connection therewith. MLLIC will undertake to apply for
life insurance agent licenses in the appropriate states or jurisdictions for
the designated agents or representatives of those GAs so appointed by MLPF&S;
provided that MLLIC reserves the right to refuse to appoint any proposed agent,
or once appointed to terminate the same.
4. Suitability. MLLIC wishes to ensure that Contracts
distributed by MLPF&S will be issued to purchasers for whom the Contract will
be suitable. MLPF&S shall take reasonable steps to ensure that the various
agents which it arranges to be appointed do not make recommendations to an
applicant to purchase a Contract in the absence of reasonable grounds to
believe that the purchase of the Contract is suitable for such applicant.
While not limited to the following, a determination of suitability
- 4 -
<PAGE> 5
shall be based on information furnished to an agent after reasonable inquiry of
such applicant concerning the applicant's insurance and investment objectives,
financial situation and needs, and the likelihood of whether the applicant will
persist with the Contract for such a period of time that MLLIC's acquisition
costs are amortized over a reasonable period of time.
5. Promotion Materials. MLPF&S shall have the responsibility
for consulting with respect to the design, drafting, legal review and filing of
sales promotion materials, and for the preparation of individual sales
proposals related to the sale of the Contracts.
6. Records. MLPF&S shall maintain and preserve for the
periods prescribed such accounts, books, and other documents as are required of
it by applicable laws and regulations.
7. Independent Contractor. MLPF&S shall act as an
independent contractor and nothing herein contained shall constitute MLPF&S or
its agents or employees as employees of MLLIC in connection with the sale of
the Contracts.
8. Investigation and Proceedings.
(a) MLPF&S and MLLIC agree to cooperate fully in any
insurance regulatory investigation or proceeding or judicial proceeding arising
in connection with the Contracts distributed
- 5 -
<PAGE> 6
under this Agreement. MLPF&S and MLLIC further agree to cooperate fully in any
securities regulatory investigation or proceeding or judicial proceeding with
respect to MLLIC, MLPF&S, their affiliates and their agents or representatives
to the extent that such investigation or proceeding is in connection with
Contracts distributed under this Agreement. Without limiting the foregoing:
(i) MLPF&S will be notified promptly of any
customer complaint or notice of any regulatory investigation
or proceeding or judicial proceeding received by MLLIC with
respect to MLLIC and/or MLPF&S or any agent or representative
or which may affect MLLIC's issuance of any Contract marketed
under this Agreement.
(ii) MLPF&S will promptly notify MLLIC of any
customer complaint or notice of any regulatory investigation
or proceeding received by MLPF&S or its affiliates with
respect to MLPF&S and/or MLLIC or any agent or representative
in connection with any Contract distributed under this
Agreement or any activity in connection with any such Contract
- 6 -
<PAGE> 7
(b) In the case of a substantive customer complaint,
MLPF&S and MLLIC will cooperate in investigating such complaint and any
response to such complaint will be sent to the other party to this Agreement
for approval not less than five business days prior to its being sent to the
customer or regulatory authority, except that if a more prompt response is
required, the proposed response shall be communicated by telephone or
telegraph.
9. Indemnification.
(a) MLLIC agrees to indemnify and hold harmless MLPF&S
and each officer and director thereof against any losses, claims, damages or
liabilities, joint or several, to which MLPF&S or such officer or director may
become subject, under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact, required to be stated therein or necessary to make the statements therein
not misleading, contained (i) in any Registration Statement relating to the
Contracts or any post-effective amendment thereof or in the Prospectuses or any
amendment or supplement to the Prospectuses relating to the Contracts, or (ii)
in any blue-sky application or other document
- 7 -
<PAGE> 8
executed by MLLIC specifically for the purpose of qualifying any or all of the
Contracts for sale under the securities laws of any jurisdiction, and MLLIC
will reimburse MLPF&S and each such officer or director, for any legal or other
expenses reasonably incurred by MLPF&S or such officer or director in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided that MLLIC will not be liable in any such case to
the extent that such loss, claim, damage or liability arises out of, or is
based upon, an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with information
(including, without limitation, negative responses to inquiries) furnished to
MLLIC by or on behalf of MLPF&S specifically for use in the preparation of any
Registration Statement or any post-effective amendment thereof or any such
blue-sky application or any amendment thereof or supplement thereto.
(b) MLPF&S agrees to indemnify and hold harmless MLLIC and its
directors (including any person named in the Registration Statement, with his
or her consent, as about to become a director), each of its officers who has
signed any of the Registration Statements and each person, if any, who controls
MLLIC within the meaning of the 1933 Act or the Exchange Act,
- 8 -
<PAGE> 9
against any losses, claims, damages or liabilities to which MLLIC any such
director or officer or controlling person may become subject, under the 1933
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon:
(i) Any untrue statement or alleged
untrue statement of a material fact or omission or
alleged omission to state a material fact required to
be stated therein or necessary in order to make the
statements therein, in light of the circumstances
under which they were made, not misleading, contained
(i) in any of the Registration Statements or any
post-effective amendments thereof, or (ii) in any
blue-sky application, in each case to the extent, but
only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity
with information (including, without limitation,
negative responses to inquiries) furnished to MLLIC
by MLPF&S specifically for use in the preparation of
any of the Registration Statements or any such
post-effective
- 9 -
<PAGE> 10
amendments thereof or any such blue-sky application
or any such amendment thereof or supplement thereto;
or
(ii) Any unauthorized use of sales materials
or any verbal or written misrepresentations or any
unlawful sales practices concerning the Contracts by
MLPF&S; or
(iii) Claims by agents or representatives or
employees of MLPF&S for commissions, service fees,
development allowances or other compensation or
remuneration of any type;
and MLPF&S will reimburse MLLIC and any director or officer or controlling
person for any legal or other expenses reasonably incurred by MLLIC, such
director or officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. This indemnity
agreement will be in addition to any liability which MLPF&S may otherwise have.
(c) Promptly after receipt by a party entitled to
indemnification ("indemnified party") under this paragraph 9 of notice of the
commencement of any action, if a claim in respect thereof is to be made against
any person obligated to provide indemnification under this paragraph 9
("indemnifying party"),
- 10 -
<PAGE> 11
such indemnified party will notify the indemnifying party in writing of the
commencement thereof, and the omission so to notify the indemnifying party will
not relieve it from any liability under this paragraph 9, except to the extent
that the omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of the failure
to give such notice. In case any such action is brought against any
indemnified party and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled, to the extent it may wish,
jointly with any other indemnifying party similarly notified, to participate in
the defense thereof, with separate counsel. Such participation shall not
relieve such indemnifying party of the obligation to reimburse the indemnified
party for reasonable legal and other expenses incurred by such indemnified
party in defending himself or herself, except for such expenses incurred after
the indemnifying party has deposited funds sufficient to effect the settlement,
with prejudice, of the claim in respect of which indemnity is sought. Any such
indemnifying party shall not be liable to any such indemnified party on account
of any settlement of any claim or action effected without the consent of such
indemnifying party.
- 11 -
<PAGE> 12
The indemnity agreements contained in this paragraph 9 shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of MLPF&S or any officer or director thereof
or by or on behalf of MLLIC, (ii) delivery of any contracts and payments
therefor, and (iii) any termination of this Agreement. A successor by law of
MLPF&S or of any of the parties to this Agreement, as the case may be, shall be
entitled to the benefits of the indemnity agreements contained in this
paragraph 9.
10. Guarantee. MLLIC undertakes to guarantee the performance
of all of MLPF&S's obligations, imposed by Section 27(f) of the Investment
Company Act, as amended, and paragraph (b) of Rule 27d-2 adopted by the
Securities and Exchange Commission, to make refunds of charges required of the
principal underwriter of Contracts issued in connection with the Separate
Account.
11. Termination. This Agreement shall terminate
automatically if it shall be assigned. This Agreement may be terminated at any
time by either party hereto on 60 days' written notice to the other party
hereto, without the payment of any penalty. Upon termination of this Agreement
all authorizations, rights and obligations shall cease except (i) the
obligation to
- 12 -
<PAGE> 13
settle accounts hereunder, including commissions on premiums subsequently
received for Contracts in effect at the time of termination; (ii) the
agreements contained in paragraph 8 hereof; and (iii) the indemnity set forth
in paragraph 9 hereof.
12. Regulation. This Agreement shall be subject to the
provisions of the Investment Company Act and the Exchange Act and the rules,
regulations, and rulings thereunder and of the NASD, from time to time in
effect, including such exemptions from the Investment Company Act as the
Securities and Exchange Commission may grant, and the terms hereof shall be
interpreted and construed in accordance therewith. Without limiting the
generality of the foregoing, the term "assigned" shall not include any
transaction exempted from section 15(b)(2) of the Investment Company Act.
MLPF&S shall submit to all regulatory and administrative bodies having
jurisdiction over the operations of MLLIC or the Separate Account, present or
future, any information, reports or other material which any such body by
reason of this Agreement may request or require pursuant to applicable laws or
regulations.
13. Severability. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule
- 13 -
<PAGE> 14
or otherwise, the remainder of this Agreement shall not be affected thereby.
14. Applicable Law. This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
Attest: MERRILL LYNCH LIFE INSURANCE
COMPANY
/s/ GRETA L. ULMER By /s/ JOHN C. CIRCINCION
- --------------------------- -----------------------------
Greta L. Ulmer John C. Circincion
(Title) Vice President & Senior
Counsel
Attest: MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
/s/ MICHAEL J. HENNEWINKEL By /s/ CHARLES P. BORKOWSKI, JR.
- --------------------------- -----------------------------
Michael J. Hennewinkel Charles P. Borkowski, Jr.
(Title) First Vice President
- 14 -
<PAGE> 1
EXHIBIT 1.A.(3)(b)
MERRILL LYNCH LIFE INSURANCE COMPANY
GENERAL AGENCY AGREEMENT
This agreement, effective as of the 5 day of January , 1989, is made
between MERRILL LYNCH LIFE INSURANCE COMPANY ("the Company"), a Washington
corporation, and MERRILL LYNCH LIFE AGENCY INC., a Washington corporation, and
the corporations listed together with their respective states of incorporation
on the signature pages hereof (hereinafter referred to collectively as "the
General Agent")
WITNESSETH THAT:
1. APPOINTMENT
1.1 The General Agent is hereby appointed upon the terms and conditions
set forth in this agreement for the purpose of securing applications
for the Company's insurance products or annuities as set forth in the
schedule attached hereto (hereinafter referred to as "insurance").
The General Agent agrees to follow and be governed by the provisions
hereof and by such reasonable rules and regulations for the conduct of
its business as the Company may establish and deliver to the General
Agent while this agreement is in force.
2. APPOINTMENT OF SUB-AGENTS
2.1 The General Agent may recruit persons of ability and good character to
aid the General Agent in the performance of its duties hereunder and
may enter into its own agreements with such persons, herein referred
to as sub-agents. The General Agent shall supervise the activities
and training of such sub-agents, and shall use its best efforts to
insure that all such sub-agents comply with the Company's rules and
regulations referred to in Section 1 of this agreement. No sub-agent
shall have any interest in any compensation from the Company in
connection with sales of any insurance, whether in the form of
first-year commissions, renewal commissions, service fees, bonuses or
otherwise.
2.2 All appointments of sub-agents shall be subject to the approval of the
Company. The Company reserves the right to
<PAGE> 2
withdraw the approval of any sub-agent at any time, whereupon such
sub-agent's right to solicit insurance issued by the Company shall
terminate 30 days from the date of mailing written notice of such
withdrawal to the General Agent and to the affected sub-agent.
2.3 The General Agent hereby guarantees all financial obligations to the
Company of all sub-agents supervised by the General Agent and agrees
to pay the same if not paid when due.
3. DELIVERY OF POLICES
3.1 The General Agent shall not deliver any policy of life insurance
unless:
(a) The applicant, to the best of the General Agent's knowledge,
is in good health and in insurable condition at the time of
delivery;
(b) The first premium has been paid as herein set forth; and
(c) Delivery is made within 30 days from the date said policy is
mailed from the Company's home office.
The General Agent shall return to the Company by the 31st day after
such mailing any policy not so delivered.
3.2 The General Agent shall immediately forward to the Company the whole
of any premium payment, entire or partial, taken with an application
for insurance. The General Agent and each of the sub-agents shall
accept such premium payment only in the form of checks, money orders
or bank drafts drawn to the order of the Company and which shall be
forwarded by the General Agent to the Company as soon after receipt
thereof by General Agent as practicable. Neither the General Agent
nor any sub-agent shall have any authority to endorse checks, money
orders or bank drafts payable to the Company.
3.3 The General Agent shall have no right nor authority to receive or
collect money for or on behalf of the Company at
- 2 -
<PAGE> 3
any time or for any purpose except the initial premium on applications
procured by the General Agent as provided in Section 3.3 hereof and
necessary to put the policy in force. The Company may, however, by
specific written authorization permit the General Agent to collect
deferred first-year premiums and/or renewal premiums as and when they
become due, but then only in the form set forth in Section 3.3 hereof
and only in exchange for the regular receipt of the Company therefor
furnished to the General Agent for the purpose of effecting such
collections.
4. COMPENSATION
4.1 Subject to all terms and conditions of this agreement, the Company
will pay to the General Agent commissions upon premiums for policies
effected through the General Agent. Commissions shall be computed
according to the Compensation Schedule attached to this agreement.
The Company reserves the right to change or add to the Compensation
Schedule at any time by written notice to the General Agent prior to
the effective date of such addition or change. Such change shall not
affect commissions accrued or to accrue according to the schedule in
effect at the time an issued policy was applied for. Commissions
shall become payable only after premiums have become due and have been
received by the Company. Accrued commissions shall be payable monthly
in the month following accrual.
4.2 In the event the Company returns the premium or premiums for a policy
because of a misunderstanding or alleged misrepresentation by the
applicant or by the General Agent or one of its sub-agents, the
General Agent shall repay to the Company all commissions received by
the General Agent on the policy with respect to which premiums were so
returned.
4.3 Whenever, within six months from the date of lapse or surrender of
insurance on any person insured by the Company, new insurance is
issued by the Company on such person, the Company will pay first year
commissions only on that part of the premium for the new insurance
which exceeds the premium for the insurance replaced, unless the
commissions have been charged back in accordance with the current
Compensation Schedule.
- 3 -
<PAGE> 4
If a policy in force for at least two years contains the privilege of
conversion to a different form and the General Agent procures
conversion of such policy to a new policy, commissions on the new
conversion policy shall be paid at the rate specified in the
Compensation Schedule attached to this agreement. In the event of
conversion of a policy prior to its second anniversary, the Company
will pay an adjusted commission on the new policy.
4.4 Except as provided in Sections 4.2 and 4.5 hereof, commissions which
are payable to the General Agent pursuant to Section 4.1 hereof are
vested and shall remain vested, any termination of this agreement
pursuant to Section 8.2 hereof notwithstanding; provided, however, if
any commissions payable to the General Agent in any calendar year are
less than $100, the Company shall no longer be obligated to the
account for or pay renewal commissions. The compensation provided for
in this agreement shall be the full and sole compensation to the
General Agent for all services performed and expenses incurred by the
General Agent under this agreement.
4.5 If the General Agent, at any time before this agreement is terminated,
(a) commits any offense which would be a basis, under the insurance
laws of any state in which the General Agent is licensed, for denial,
suspension or revocation of an insurance agent's license; or (b)
breaches any provision of this agreement or the Company's rules and
regulations referred to in Section 1 of this agreement or either
before or after termination of this agreement, (c) aids or abets
others in any of the acts specified above, or (d) becomes insolvent,
makes an assignment for the benefit of creditors or permits a
voluntary or involuntary petition in bankruptcy to be filed against
it, then, and in any of such events, the General Agent shall be deemed
to have failed to qualify for any further compensation and none shall
be payable thereafter. The forbearance from each of the acts
enumerated in subparagraphs (a) through (d) is a condition precedent
to the right of the General Agent to receive compensation under this
agreement and each of said enumerated acts constitutes an independent
and severable condition.
- 4 -
<PAGE> 5
5. BOOKS AND RECORDS
5.1 Each party hereto shall have the right, during normal business hours
and upon 10 days prior written notice, to inspect the books and
records of the other party relating solely to the business
contemplated by this agreement.
5.2 The Company shall furnish the General Agent with specimen forms
required by regulations, such as replacement analysis forms,
disclosure material, etc., required for use in connection with the
sale of the Company's products.
5.3 The Company shall furnish the General Agent with current customer data
such as names, addresses and policy terms on a monthly basis.
5.4 Any unused policies, forms, applications and other supplies furnished
by the Company to the General Agent shall always remain the property
of the Company and shall be accounted for and returned by the General
Agent to the Company on demand.
5.5 From time to time, the Company may develop and make available to the
General Agent computer software or related materials ("Software"), in
magnetic, written or other form, to be used in connection with the
sale of the policies. The Company hereby grants the General Agent a
non exclusive royalty-free license to use any such Software. The
Company warrants that all such Software is and shall remain its
exclusive property, free from all third-party claims. The Company
shall indemnify and defend the General Agent from and against any and
all claims (including the costs of reasonable attorneys' fees,
investigation and defense of such claims) relating to General Agent's
use of such Software. The General Agent agrees not to copy such
Software, except as required to perform its obligations hereunder, nor
to generate or obtain written copies of Software supplied in magnetic
form and to return all such Software and all copies upon demand or
upon the termination of this agreement.
6. LIMITATIONS
- 5 -
<PAGE> 6
6.1 In performance of all of its duties under this agreement the
relationship of the General Agent to the Company is that of
independent contractor and none other. Neither the General Agent nor
any sub-agent, officer, partner or employee thereof, as the case may
be, shall be deemed to be an employee of the Company for any purpose,
and nothing herein contained shall be construed to create the
relationship of master and servant or employer and employee between
the Company and the General Agent or any sub-agent. Within the
general rules and regulations of the Company respecting the conduct of
business hereunder, the General Agent may exercise its own judgment as
to the time and manner of such performance, and the means and manner
of transportation, if any, used by the General Agent and any
sub-agent.
6.2 The General Agent has no authority to incur any obligation or debt for
or on behalf of the Company without its express written consent; to
make, modify or discharge any contract on behalf of the Company; to
extend the time for payment of any premium; or to waive, alter, modify
or change any of the terms, rates or conditions of the Company's
policies of insurance.
6.3 ADVERTISING APPROVAL: (a) The Company agrees that it will make
available to the General Agent for the General Agent's review and
prior approval any advertising or sales promotional material which
relates to the sale of the Company's products, at least 30 days prior
to the scheduled release of such information or material directly to
the General Agent's agents, sub-agents, employees, or representatives.
(b) The General Agent agrees that neither it nor its agents,
sub-agents or employees shall use in any way, print, publish,
disseminate, or otherwise make available to its agents, sub-agents,
employees or customers any advertising or sales promotional material
relating to the Company or its products without the prior consent of
the Company.
(c) "Advertising or Sales Promotional Material" for the purpose of
this agreement shall include:
- 6 -
<PAGE> 7
(1) printed and published material, audiovisual material,
billboards and similar displays, descriptive literature used
in direct mail, newspapers, magazines, radio and television
scripts;
(2) descriptive literature and sales aids of all kinds
including but not limited to circulars, leaflets, booklets,
marketing guides, seminar material, computer print-outs,
depictions, illustrations and form letters;
(3) material used for the training and education of
sub-agents which is designed to be used or is used to induce
the public to purchase or retain a policy; and
(4) prepared sales talks, presentations, and material for use
by sub-agents.
(d) Neither party shall institute any legal proceedings against a
third party regarding or affecting products marketed or services
rendered under this agreement without first obtaining written consent
of the other party to this agreement. Such consent may not be
unreasonably withheld.
7. INDEBTEDNESS
7.1 Any amounts payable by the General Agent to the Company under this
agreement shall be offset against any amounts payable by the Company
to the General Agent; otherwise payment shall be made by the General
Agent to the Company in cash.
8. TERMINATION
8.1 In the event the General Agent, while this agreement is in force,
commits any of the acts enumerated in subparagraphs (a) through (d) of
Section 4.5 hereof, the Company may terminate this agreement upon
written notice mailed or delivered to the General Agent at its last
known address, such termination to be effective on the date stated in
such notice.
- 7 -
<PAGE> 8
8.2 This agreement may be terminated without cause by either the General
Agent or the Company upon 30 days' written notice mailed to the other
at the last known address.
8.3 In the event of any termination of this agreement, any unused supplies
furnished by the Company and in the General Agent's possession shall
remain the property of the Company and shall be returned upon demand.
9. COMPLIANCE
9.1 The Company and the General Agent agree that during the continuance of
this agreement they will take all action which is required for them to
comply and for each product marketed hereunder to comply, and to
continue to comply with all applicable federal and state laws and
regulations, and the rules and regulations of all appropriate
self-regulatory organizations.
9.2 The Company shall be responsible for notifying the General Agent of
all licensing and appointment requirements of the states in which the
Company and the General Agent will be doing an insurance business
under this agreement.
10. NOTICE AND REQUIRED REGULATORY REPORTS
10.1 The Company will give the General Agent notice in advance of any
changes made with regard to products marketed under this agreement.
If the decision to make changes with regard to such products is not in
response to legal or regulatory mandate, 30 days prior written notice
to the General Agent is required.
10.2 The Company will notify the General Agent within 10 days of its
obtaining knowledge of any actual or impending adverse change in the
Company's financial condition, the financial condition of any
subsidiary, parent company or reinsurer, or if the "Best's" rating of
the Company, any subsidiary, parent or reinsurer has been or is to be
lowered.
10.3 (a) Within 20 days after the Company has sent or delivered the
following reports to the pertinent regulatory agency,
- 8 -
<PAGE> 9
the Company agrees to send or furnish the General Agent a copy of each
such report actually filed. The reports are:
(1) The Annual Statement of the Company filed with the
Company's state of domicile.
(2) The Quarterly Convention Statement of the Company filed
with the Company's state of domicile.
(b) As part of an insurance holding company system under the laws of
its state of domicile and subject to said laws, the Company agrees to
send, within 20 days of delivery to the pertinent regulatory agency,
copies of the following:
(1) Any amendments to the Company's Registration Statement.
(2) The Company's Annual Report describing transactions during
the prior year with entities within the holding company
system.
(3) Any request for approval filed by the Company with said
regulatory agency with respect to any proposed transaction(s)
between the Company and any entity within the holding company
system.
(4) If applicable, the 10-K report of the Company's parent
filed with the United States Securities and Exchange
Commission ("SEC").
(5) If applicable, the 10-Q report of the Company's parent
filed with the SEC.
(c) Subsections (a) and (b) shall not be required if the Company
remains an affiliate of the General Agent.
10.4 Each party will notify the other of any regulatory or administrative
investigation or inquiry, claim or judicial proceeding which may
affect products marketed or services rendered under this agreement
within 10 days of knowledge of such, excluding, however, claims for
benefits under a policy or application or contests regarding the
validity,
- 9 -
<PAGE> 10
enforceability, or construction of any policy or application
issued by the Company.
(a) Within 10 days after receipt by either party of notice of
any such investigation or proceeding, the party in receipt
thereof will notify the other party by forwarding a copy of
all documents received in connection with the matter and will
communicate to the other party additional information it deems
necessary to furnish the other party a complete understanding
of same.
(b) In the case of a customer complaint with respect to the
General Agent, any sub-agent or any company or person
affiliated with the General Agent or any sub-agent, the
Company shall not take any final action with respect to such
complaint without prior consultation with the General Agent.
(c) For the purposes of this agreement, the term "customer
complaint" shall mean a written communication either directly
from a purchaser or his legal representative or indirectly
from a regulatory agency to which he or his legal
representative has written, expressing a grievance.
(d) Each party agrees to cooperate fully with the other in
any regulatory investigation, administrative or judicial
proceeding or customer complaint regarding products marketed
or services rendered under this agreement.
(e) Any change in interest rates for new contracts or
renewals will be confirmed in writing to the General Agent.
(f) All communications under this agreement shall be in
writing and shall be mailed by certified mail, postage
prepaid;
(i) if to the General Agent, to:
Merrill Lynch Life Agency Inc.
- 10 -
<PAGE> 11
P.O. Box 9020
Princeton, New Jersey 08540-9020
Attention: Robert C. McClanahan, Jr.
(ii) if to the Company, to:
Merrill Lynch Life Insurance Company
Park Place Building
Seattle, Washington 98101
Attention: Steele C. Coddington
11. TERRITORY, WITHDRAWAL OF BUSINESS AND POLICY FORMS
11.1 The Company, upon 30 days prior written notice to the General Agent,
may stop doing business in any state or territory and withdraw any
policy forms from the General Agent.
The Company may suspend the sale of any policy or contract upon notice
to the General Agent when such suspension is in response to regulatory
authority.
12. PRODUCT NAMES
12.1 The Company hereby represents and warrants that the Company has
exclusive right, title and interest in any product's name.
12.2 The Company shall indemnify and defend the General Agent from and
against any and all claims (including the costs of reasonable
attorneys' fees, investigation and defense of such claims) relating to
the General Agent's use of any product name.
12.3 Each party shall notify the other promptly in writing of any and all
allegations or claims by others of which it may become aware that the
use of the product name infringes any trademark or service mark,
violates any property right of a third party, or violates or is
contrary to any law, regulation, order, consent, or the like. Company
shall notify General Agent of the settlement or outcome of any such
claim or suit.
- 11 -
<PAGE> 12
13. CUSTOMER CONFIDENTIALITY
13.1 The Company agrees that the names and addresses of all customers and
prospective customers of the General Agent, of the General Agent's
parent company and of any affiliated company which may come to the
attention of the Company or any company or person affiliated with the
Company are confidential. Such customer information shall not be
used, without the prior written consent of the General Agent, by the
Company or any company or person affiliated with the Company for any
purpose whatsoever except as may be necessary in connection with the
administration and servicing of the products sold by or through the
General Agent.
In no event shall the names and addresses of such customers and
prospective customers be furnished by the Company to any other company
or person including, but not limited to, (1) any of such company's
managers, agents or brokers which are not sub-agents of the General
Agent, (2) any company affiliated with the Company or any manager,
agent or broker of such company, or (3) any securities broker-dealer
or any insurance agent affiliated with such broker-dealer.
The Company agrees that neither the Company nor any company or person
affiliated with the Company shall solicit directly any customers whose
names constitute confidential information pursuant to this Section.
The intent of this paragraph is that the Company shall not utilize, or
permit to be utilized, its knowledge of the General Agent, of its
parent company or of any affiliated companies or of the customers of
any of the foregoing for the solicitation of sales of any product or
service.
This Section shall survive termination of this agreement.
14. MISCELLANEOUS
14.1 The failure of the Company or the General Agent to insist upon
compliance by the other party with any terms or conditions of this
agreement or any rule or regulation of the Company shall not
constitute or be construed as a waiver
- 12 -
<PAGE> 13
by either the Company or the General Agent of any rights under this
agreement.
14.2 Neither the Company nor the General Agent shall be bound by any
promise, agreement, understanding, or representation heretofore or
hereafter made relative to the subject matter of this agreement,
except a Compensation Schedule as specified in Section 4.1 hereof,
unless the same is contained in a written instrument signed on behalf
of the parties hereto by the President or one of the Vice Presidents
of the General Agent and of the Company.
14.3 This agreement shall be construed and any questions arising under it
decided according to the statutory and common law of the State of
Washington.
14.4 If any provision or condition of this agreement shall be held to be
invalid or unenforceable by any court, the validity of the remaining
provisions and conditions shall not be affected thereby.
14.5 This agreement may be amended, modified or waived, in whole or in
part, only by a writing signed by the party against whom enforcement
thereof is sought. This agreement may be assigned by either party
only with the prior written consent of the other party. This
agreement shall be binding on the parties' respective successors and
assigns.
Made and executed at Seattle, Washington, effective on the date first
hereinabove set forth.
MERRILL LYNCH LIFE INSURANCE COMPANY
By /s/ STEELE C. CODDINGTON
----------------------------------
Steele C. Coddington
Vice President, Merrill Lynch Marketing
----------------------------------------
Title
January 5, 1989
----------------------------------------
Date
- 13 -
<PAGE> 14
ML Life Agency Inc.,
A Texas Corporation
/s/ RICHARD M. BRANDT
----------------------------------------
Richard M. Brandt
Authorized Officer
1/16/89
----------------------------------------
Date
Merrill Lynch Life Agency Ltd.,
A Mississippi Corporation
Merrill Lynch Life Agency Inc.,
A Washington Corporation
Merrill Lynch Life Agency Inc.,
An Alabama Corporation
Merrill Lynch Life Agency Inc.,
An Arizona Corporation
Merrill Lynch Life Agency Inc.,
An Arkansas Corporation
Merrill Lynch Life Agency Inc.,
An Idaho Corporation
Merrill Lynch Life Agency Inc.,
An Illinois Corporation
Merrill Lynch Life Agency of Maine Inc., A
Maine Corporation
Merrill Lynch Life Agency Inc.,
A Massachusetts Corporation
Merrill Lynch Life Agency Inc.,
A Montana Corporation
- 14 -
<PAGE> 15
Merrill Lynch Life Agency Inc.,
A New Mexico Corporation
Merrill Lynch Life Agency Inc.,
A Puerto Rico Corporation
Merrill Lynch Life Agency Inc.,
A South Dakota Corporation
Merrill Lynch Life Agency Inc.,
A Virgin Islands Corporation
/s/ ROBERT C. McCLANAHAN, JR.
----------------------------------------
Robert C. McClanahan, Jr.
Authorized Officer
1/11/89
----------------------------------------
Date
Merrill Lynch Life Agency Inc.,
An Ohio Corporation
Merrill Lynch Life Agency Inc.,
An Oklahoma Corporation
/s/ WILLIAM A. WILDE
----------------------------------------
William A. Wilde
Authorized Officer
January 6th, 1989
----------------------------------------
Date
- 15 -
<PAGE> 16
MERRILL LYNCH LIFE INSURANCE COMPANY
General Agent Compensation Schedule
Until further notice as provided in the General Agency Agreement dated 1/5/89,
compensation will be paid according to the following schedule for the contracts
and policies listed:
<TABLE>
<CAPTION>
**Percent of Average
Description Percent of Contract Value at
of Contract Each Premium Each Year-End
- ----------- ------------ -------------
<S> <C> <C>
Individual Variable 4% .0625%
Annuity Contract,
Flexible Premium,
Non-Participating,
Form ML-AY-2 1185*
Form ML-AY-2 1185* 5% .0625%
sold as a qualified
Tax-Sheltered Annuity
</TABLE>
*And any state variations thereof.
**Until the Annuity Date.
In the event of full or partial withdrawal of contract value within six months
after date of issue of a contract, the General Agent's Account will be debited
in an amount equal to the lesser of 2% (2.5% if TSA) of the amount withdrawn or
2% (2.5% if TSA) of the sum of all premiums.
* * * *
<TABLE>
<CAPTION>
Description Percent of Each Percent of Each
of Contract Premium Paid During Premium Paid During
- ----------- First Policy Year Subsequent Policy
Years ----------------- -----------------
- -----
<S> <C> <C>
Flexible Premium 5.0% 2.0 %
Deferred Annuity
Form ML-AY-15 486*,
issued in connection
with a qualified plan
</TABLE>
- 16 -
<PAGE> 17
<TABLE>
<S> <C> <C>
Flexible Premium 4.0% 2.0 %
Deferred Annuity
Form ML-AY-15 486*,
issued in connection
with a non-qualified
plan
</TABLE>
*And any state variations thereof.
In the event of full or partial withdrawal of contract value within six months
after the effective date of a premium payment, the General Agent's account will
be debited in an amount equal to either:
1) 5.0% (4.0% non-qualified) of the lesser of the premium(s)
or the amount withdrawn, respecting withdrawal of premiums
paid during the first policy year, or
2) 2.0% of the lesser of the premium(s) or the amount
withdrawn respecting withdrawal of premiums paid during
subsequent policy years.
In the event of full or partial withdrawal of contract value within the second
six months after the effective date of a premium payment, the General Agent's
account will be debited in an amount equal to either:
1) 2.5% (2.0% non-qualified) of the lesser of the premium or
the amount withdrawn, respecting withdrawal of premiums paid
during the first policy year, or
2) 1.0% respecting withdrawal of premiums paid during
subsequent policy years.
The General Agent's account will not be debited with respect to such part of
the first withdrawal in a contract year as does not exceed 10% of the contract
value on the date of withdrawal.
* * * *
- 17 -
<PAGE> 18
<TABLE>
<CAPTION>
On Subsequent Renewals
Description Date of Issue of a 5-Year Contract to
of Contract (Percent of Premium) a New 5-Year Contract
- ----------- -------------------- ---------------------
<S> <C> <C>
Individual Single 4.0% 2.0%
Premium Deferred
Annuity Form
ML-AY-9 286*
Individual Single 4.0% 2.0%
Premium Deferred
Annuity Forms
ML-AY-31*, ML-AY-32*
and ML-AY-33*
</TABLE>
*And any state variations thereof.
In event of full or partial withdrawal within six months after date of issue of
a contract, the General Agent's account will be
debited in an amount equal to 4.0% of the lesser of the original premium or the
amount withdrawn.
In event of full or partial withdrawal within the second six months after date
of issue of a contract, the General Agent's account will be debited in an
amount equal to 2.0% of the lesser of the original premium or the amount
withdrawn.
The General Agent's account will not be debited with respect to such part of
the first withdrawal in a contract year as does not exceed 10% of the contract
value on the date of withdrawal.
<TABLE>
<CAPTION>
Percent of
Description of Policy Premium
- ---------------------
<S> <C>
SPWL (ML-AL-772*)
Single Premium Interest-Sensitive Whole 4.50%
Life Policies
SPWL (ML-AL-790* and ML-AL-792*)
Single Premium Interest-Sensitive Whole 5.00%
Life Policies
</TABLE>
*And any state variations thereof.
- 18 -
<PAGE> 19
SPWL
In the event of full surrender within the first three (3) months after
date of issue of a policy, the General Agent's account will be debited
in an amount equal to 4.50% of the original premium.
In the event of full surrender within the second three (3) months
after date of issue of a policy, the General Agent's account will be
debited in an amount equal to 3.375% of the original premium.
In the event of full surrender within the third three (3) months after
date of issue of a policy, the General Agent's account will be debited
in an amount equal to 2.250% of the original premium.
In the event of full surrender within the fourth three (3) months
after date of issue of a policy, the General Agent's account will be
debited in an amount equal to 1.125% of the original premium.
SPWL (R-Series)
In the event of a full surrender in the first twelve (12) months after
date of issue of a policy, the General Agent's account will be debited
in an amount equal to 5.00% of the original premium.
<TABLE>
<CAPTION>
Percent of Percent of
Description Each Premium Each Reinvested of
Contract Payment Premium Payment
- ----------- ------------ ------------------
<S> <C> <C>
Certificates under .70% multiplied by .30% multiplied by the
Group Modified the number of years number of years of the
Guaranteed Annuity in the Guarantee new guarantee Period
Contract Period selected, selected, not to exceed
Form ML-AY-361 not to exceed 7% 3%
</TABLE>
In the event of a full or partial withdrawal within six months after date of
issue of a certificate, the General Agent's account will be debited in an
amount equal to 100% of the first year commission paid on the lesser of the
original premium or the amount withdrawn.
- 19 -
<PAGE> 20
In the event of a full or partial withdrawal within the second six months after
the date of issue of a certificate, the General Agent's account will be debited
in an amount equal to 50% of the first year commission paid on the lesser of
the original premium or the amount withdrawn.
MERRILL LYNCH LIFE INSURANCE COMPANY
By /s/ STEELE C. CODDINGTON
------------------------------------
Steele C. Coddington, Vice President
Merrill Lynch Marketing
February 22, 1989
--------------------------------------
Date
- 20 -
<PAGE> 21
MERRILL LYNCH LIFE INSURANCE COMPANY
General Agent Compensation Schedule
Until further notice as provided in the General Agency Agreement dated June 27,
1990, compensation will be paid according to the following schedule for the
contracts and policies listed:
<TABLE>
<CAPTION>
**Percent of Average
Percent of Contract Value Net of
Description of Contract Each Premium Loans Each Year-End
- ----------------------- ------------ -------------------
<S> <C> <C>
Individual Variable 4.0% .0625%
Annuity Contract,
Flexible Premium,
Non-Participating,
Form ML-AY-2 1185*
Form ML-AY-2 1185* sold 5.0% .0625%
as a qualified Tax-
Sheltered Annuity
</TABLE>
*And any state variations thereof.
**Until the Annuity Date.
In the event of full or partial withdrawal of contract value within the first
six months after date of issue of a contract, the General Agent's Account will
be debited in an amount equal to the lesser of 4.0% (5.0% if TSA) of the amount
withdrawn or 4.0% (5.0% if TSA) of the sum of all premiums.
In the event of full or partial withdrawal of contract value within the second
six months after date of issue of a contract, the General Agent's Account will
be debited in an amount equal to the lesser of 2.0% (2.5% if TSA) of the amount
withdrawn or 2.0% (2.5% if TSA) of the sum of all premiums.
* * * *
- 21 -
<PAGE> 22
<TABLE>
<CAPTION>
Percent of Each Percent of Each
Description Premium Paid During Premium Paid During of
Contract First Policy Year Subsequent Policy Years
- -------- ----------------- -----------------------
<S> <C> <C>
Flexible Premium 5.0% 2.0%
Deferred Annuity
Form ML-AY-15 486*
issued in connection
with a qualified plan
Flexible Premium 4.0% 2.0%
Deferred Annuity
Form ML-AY-15 486*
issued in connection
with a non-qualified
plan
</TABLE>
*And any state variations thereof.
In the event of full or partial withdrawal of contract value within six months
after the effective date of a premium payment, the General Agent's Account will
be debited in an amount equal to either:
1) 5.0% (4.0% non-qualified) of the lesser of the premium(s)
or the amount withdrawn, respecting withdrawal of premiums
paid during the first policy year, or
2) 2.0% of the lesser of the premium(s) or the amount
withdrawn respecting withdrawal of premiums paid during
subsequent policy years.
In the event of full or partial withdrawal of contract value within the second
six months after the effective date of a premium payment, the General Agent's
Account will be debited in an amount equal to either:
1) 2.5% (2.0% non-qualified) of the lesser of the premium or
the amount withdrawn, respecting withdrawal of premiums paid
during the first policy year, or
- 22 -
<PAGE> 23
2) 1.0% respecting withdrawal of premiums paid during
subsequent policy years.
The General Agent's Account will not be debited with respect to such part of
the first withdrawal in a contract year as does not exceed 10% of the contract
value on the date of withdrawal.
<TABLE>
<CAPTION>
Date of Issue
Description of Contract (Percent of Premium) Renewals
- ----------------------- -------------------- --------
<S> <C> <C>
Individual Single Premium 3.5% 2.4% on subsequent
Deferred Annuity renewals to a 5-year
Form ML-AY-9 286* guarantee period.
Beginning of each
year starting in
year 6,.48% each
year on renewals
to a 1-year
guarantee period.
Individual Single Premium 3.5% 2.4 on subsequent
Deferred Annuity renewals to a 5-year
Forms ML-AY-31*, guarantee period.
ML-AY-32* and
ML-AY-33* Beginning of each
year starting in
year 6, .48% each
year on renewals to
a 1-year guarantee
period.
</TABLE>
*And any state variations thereof.
In event of full or partial withdrawal within six months after date of issue of
a contract, the General Agent's Account will be debited in an amount equal to
3.5% of the lesser of the original premium or the amount withdrawn.
In event of full or partial withdrawal within the second six months after date
of issue of a contract, the General Agent's
- 23 -
<PAGE> 24
Account will be debited in an amount equal to 1.75% of the lesser of the
original premium or the amount withdrawn.
In the event of a full or partial withdrawal within the first six months of the
renewal of a contract to a new 5-year guarantee period, the General Agent's
Account will be debited in an amount equal to 2.4% of the lesser of the account
value or the amount withdrawn.
In the event of a full or partial withdrawal within the second six months of
the renewal of a contract to a new 5-year guarantee period, the General Agent's
Account will be debited in an amount equal to 1.2% of the lesser of the account
value or the amount withdrawn.
In the event of a full or partial withdrawal within the first six months of the
renewal of a contract to a new 1-year guarantee period, the General Agent's
Account will be debited in an amount equal to .48% of the lesser of the account
value or the amount withdrawn.
In the event of a full or partial withdrawal within the second six months of
the renewal of a contract to a new 1-year guarantee period, the General Agent's
Account will be debited in an amount equal to .24% of the lesser of the account
value or the amount withdrawn.
The General Agent's Account will not be debited with respect to such part of
the first withdrawal in a contract year as does not exceed 10% of the contract
value on the date of withdrawal.
<TABLE>
<CAPTION>
Percent of Single
Description of Contract Premium RENEWAL
- ----------------------- ----------------- ------------------
<S> <C> <C>
Single Premium Immediate 4.0% 0
Annuity (Leader)
Form ML-AY-371
</TABLE>
<TABLE>
Percent of Single
Description of Contract Premium RENEWAL
- ----------------------- ----------------- ------------------
<S> <C> <C>
Single Premium Immediate Percent of Renewal
Annuity (Leader) Account Value On
Form ML-AY-371 Subsequent Renewal
</TABLE>
- 24 -
<PAGE> 25
<TABLE>
<CAPTION>
Guaranty New Guarantee
-------- -------------
Period Period
------ -------------
<S> <C> <C>
Group Modified 1 -Yr .70% 1 -Yr .48%
Guaranteed Annuity (ASSET I) 2 -Yr 1.40% 2 -Yr .96%
Forms ML-AY-361 (True Group) 3 -Yr 2.10% 3 -Yr 1.44%
ML-AY-362 (Non-Qual) ML-AY-372 4 -Yr 2.80% 4 -Yr 1.92%
[403(b)t, ML-AY-373 [401(a) (k)] 5 -Yr 3.50% 5 -Yr 2.40%
ML-AY-374 (IRA), ML-AY-375 6 -Yr 4.20% 6 -Yr 2.88%
(Custodial IRA), ML-AY-376(457) 7 -Yr 4.90% 7 -Yr 3.36%
8 -Yr 5.60% 8 -Yr 3.84%
9 -Yr 6.30% 9 -Yr 4.32%
10-Yr 7.00% 10-Yr 4.80%
</TABLE>
In the event of a full or partial withdrawal of the contract value within the
first six months after date of issue of a contract, the General Agent's Account
will be debited in an amount equal to 100% of the first year commission.
In the event of a full or partial withdrawal of the contract value within the
second six months after date of issue of a contract, the General Agent's
Account will be debited in an amount equal to 50% of the first year commission.
In the event of a full or partial withdrawal of the contract value within the
first six months after any subsequent reinvestment of a sub-account, the
General Agent's Account will be debited in an amount equal to 100th of the
renewal commission.
In the event of a full or partial withdrawal of the contract value within the
second six months after any subsequent reinvestment of a sub-account, the
General Agent's Account will be debited in an amount equal to 50% of the
renewal commission.
<TABLE>
<CAPTION>
Percent of
Description of Policy Premium Renewal
- --------------------- ------- -------
<S> <C> <C>
7-Pay interest sensitive Yr. 1 9.8% Beginning of each
year Whole Life (ML-7) Yrs. 2-7 3.5% starting in year 8:
Form ML-AL-1031 .48% x unloaned
contract value.
</TABLE>
- 25 -
<PAGE> 26
In the event of a full surrender prior to the first premium payment in the
second contract year, the General Agent's Account will be debited in an amount
equal to 9.8% of the first year premium.
<TABLE>
<CAPTION>
Percent of
Premium Renewal
---------- -------
<S> <C> <C>
Interest Sensitive Yr. 1 70% Beginning of each year
Whole Life paid up at 95 Yrs. 2-10 3% starting in year 11:
(PRIORITY I) .48% x unloaned
Form ML-AL-1041 contract value
</TABLE>
In the event of a full surrender prior to the first premium payment in the
second contract year, the General Agent's Account will be debited in an amount
equal to 70% of the first year premium.
<TABLE>
<CAPTION>
Percent of
Description of Policy Premium
- --------------------- -------
<S> <C>
SPWL (ML-AL-772*)
Single Premium Interest-Sensitive
Whole Life Policies 4.50%
SPWL (ML-AL-790 and ML-AL-792*)
Single Premium Interest-Sensitive
Whole Life Policies 5.00%
</TABLE>
*And any state variations thereof.
SPWL
In the event of full surrender within the first three (3) months after
date of issue of a policy, the General Agent's Account will be debited
in an amount equal to 4.50% of the original premium.
In the event of full surrender within the second three (3) months
after date of issue of a policy, the General Agent's
- 26 -
<PAGE> 27
Account will be debited in an amount equal to 3.375% of the original
premium.
In the event of full surrender within the third three (3) months after
date of issue of a policy, the General Agent's Account will be debited
in an amount equal to 2.250% of the original premium.
In the event of full surrender within the fourth three (3) months
after date of issue of a policy, the General Agent's Account will be
debited in an amount equal to 1.125% of the original premium.
SPWL (R-Series)
In the event of a full surrender in the first twelve (12) months after
date of issue of a policy, the General Agent's Account will be debited
in an amount equal to 5.00% of the original premium.
MERRILL LYNCH LIFE INSURANCE COMPANY
By /s/ EDWARD M. PILLITTERI
------------------------------
Edward M. Pillitteri
Senior Vice President
6/27/90
--------------------------------
Date
- 27 -
<PAGE> 28
MERRILL LYNCH LIFE INSURANCE COMPANY
General Agent Compensation Schedule
Until further notice as provided in the General Agency Agreement dated June 27,
1990, compensation will be paid according to the following schedule for the
contracts and policies listed:
<TABLE>
<CAPTION>
**Percent of Average
Percent of Contract Value Net of
Description of Contract Each Premium Loans Each Year-End
- ----------------------- ------------ -------------------
<S> <C> <C>
Individual Variable 4.0% .0625%
Annuity Contract,
Flexible Premium,
Non-Participating'
Form ML-AY-2 1185*
Form ML-AY-2 1185* sold 5.0% .0625%
as a qualified Tax-
Sheltered Annuity
</TABLE>
*And any state variations thereof.
**Until the Annuity Date.
In the event of full or partial withdrawal of contract value within the first
six months after date of issue of a contract, the General Agent's Account will
be debited in an amount equal to the lesser of 4.0% (5.0% if TSA) of the amount
withdrawn or 4.0% (5.0% if TSA) of the sum of all premiums.
In the event of full or partial withdrawal of contract value within the second
six months after date of issue of a contract, the General Agent's Account will
be debited in an amount equal to the lesser of 2.0% (2.5% if TSA) of the amount
withdrawn or 2.0% (2.5% if TSA) of the sum of all premiums.
* * * *
<TABLE>
<CAPTION>
Percent of Each Percent of Each
Description of Premium Paid During Premium Paid During
Contract First Policy Year Subsequent Policy Years
- -------------- ----------------- -----------------------
<S> <C> <C>
Flexible Premium 5.0% 2.0%
</TABLE>
- 28 -
<PAGE> 29
<TABLE>
<S> <C> <C>
Deferred Annuity
Form NL-AY-15 486*,
issued in connection
with a qualified plan
Flexible Premium 4.0% 2.0%
Deferred Annuity
Form ML-AY-15 486*,
issued in connection
with a non-qualified
plan
</TABLE>
*And any state variations thereof.
In the event of full or partial withdrawal of contract value within six months
after the effective date of a premium payment, the General Agent's Account will
be debited in an amount equal to either:
1) 5.0% (4.0% non-qualified) of the lesser of the premium(s) or the
amount withdrawn, respecting withdrawal of premiums paid during the
first policy year, or
2) 2.0% of the lesser of the premium(s) or the amount withdrawn
respecting withdrawal of premiums paid during subsequent policy years.
In the event of full or partial withdrawal of contract value within the second
six months after the effective date of a premium payment, the General Agent's
Account will be debited in an amount equal to either:
1) 2.5% (2.0% non-qualified) of the lesser of the premium or the
amount withdrawn, respecting withdrawal of premiums paid during the
first policy year, or
2) 1.0% respecting withdrawal of premiums paid during subsequent
policy years.
The General Agent's Account will not be debited with respect to such part of
the first withdrawal in a contract year as does not exceed 10th of the contract
value on the date of withdrawal.
- 29 -
<PAGE> 30
* * * *
<TABLE>
<CAPTION>
Date of Issue
Description of Contract (Percent of Premium) Renewals
- ----------------------- -------------------- --------
<S> <C> <C>
Individual Single Premium 3.5% 2.4% on subsequent
Deferred Annuity renewals to a
Form ML-AY-9 286* 5-year guarantee
period.
Beginning of each
year starting in
year 6,.48% each
year on renewals
to a 1-year
guarantee period.
Individual Single Premium 3.5% 2.4 on subsequent
Deferred Annuity renewals to a
Forms ML-AY-31*, 5-year guarantee
ML-AY-32* and period.
ML-AY-33*
Beginning of each
year starting in
year 6, .48% each
year on renewals
to a 1-year
guarantee period.
</TABLE>
*And any state variations thereof.
In event of full or partial withdrawal within six months after date of issue of
a contract, the General Agent's Account will be debited in an amount equal to
3.5% of the lesser of the original premium or the amount withdrawn.
In event of full or partial withdrawal within the second six months after date
of issue of a contract, the General Agent's Account will be debited in an
amount equal to 1.75% of the lesser of the original premium or the amount
withdrawn.
In the event of a full or partial withdrawal within the first six months of the
renewal of a contract to a new 5-year guarantee
- 30 -
<PAGE> 31
period, the General Agent's Account will be debited in an amount equal to 2.4%
of the lesser of the account value or the amount withdrawn.
In the event of a full or partial withdrawal within the second six months of
the renewal of a contract to a new 5-year guarantee period, the General Agent's
Account will be debited in an amount equal to 1.2% of the lesser of the account
value or the amount withdrawn.
In the event of a full or partial withdrawal within the first six months of the
renewal of a contract to a new 1-year guarantee period, the General Agent's
Account will be debited in an amount equal to .48% of the lesser of the account
value or the amount withdrawn.
In the event of a full or partial withdrawal within the second six months of
the renewal of a contract to a new 1-year guarantee period, the General Agent's
Account will be debited in an amount equal to .24% of the lesser of the account
value or the amount withdrawn.
The General Agent's Account will not be debited with respect to such part of
the first withdrawal in a contract year as does not exceed 10% of the contract
value on the date of withdrawal.
<TABLE>
<CAPTION>
Percent of Single
Description of Contract Premium RENEWAL
- ----------------------- ----------------- -------
<S> <C> <C>
Single Premium Immediate 4.0% 0
Annuity (Leader)
Form ML-AY-371
</TABLE>
<TABLE>
<CAPTION>
Percent of Single
Description of Contract Premium RENEWAL
- ----------------------- ----------------- -------
<S> <C> <C>
Single Premium Immediate Percent of Renewal
Annuity (Leader) Account Value On
Form ML-AY-371 Subsequent Renewal
</TABLE>
- 31 -
<PAGE> 32
<TABLE>
<CAPTION>
Guarantee New Guarantee
Period Period
--------- -------------
<S> <C> <C>
Group Modified 1 -Yr .70% 1 -Yr .48%
Guaranteed Annuity (ASSET I) 2 -Yr 1.40% 2 -Yr .96%
Forms NL-AY-361 (True Group) 3 -Yr 2.10% 3 -Yr 1.44%
ML-AY-362 (Non-Qual) ML-AY-372 4 -Yr 2.80% 4 -Yr 1.92%
[403(b)], ML-AY-373 [401(a)(k)], 5 -Yr 3.50% 5 -Yr 2.40%
ML-AY-374 (IRA), ML-AY-375 6 -Yr 4.20% 6 -Yr 2.88%
(Custodial IRA), ML-AY-376(457) 7 -Yr 4.90% 7 -Yr 3.36%
8 -Yr 5.60% 8 -Yr 3.84%
9 -Yr 6.30% 9 -Yr 4.32%
10-Yr 7.00% 10-Yr 4.80%
</TABLE>
In the event of a full or partial withdrawal of the contract value within the
first six months after date of issue of a contract, the General Agent's Account
will be debited in an amount equal to 100% of the first year commission.
In the event of a full or partial withdrawal of the contract value within the
second six months after date of issue of a contract, the General Agent's
Account will be debited in an amount equal to 50% of the first year commission.
In the event of a full or partial withdrawal of the contract value within the
first six months after any subsequent reinvestment of a sub-account, the
General Agent's Account will be debited in an amount equal to 100% of the
renewal commission.
In the event of a full or partial withdrawal of the contract value within the
second six months after any subsequent reinvestment of a sub-account, the
General Agent's Account will be debited in an amount equal to 50% of the
renewal commission.
- 32 -
<PAGE> 33
<TABLE>
<CAPTION>
Description Percent of
of Policy Premium Renewal
- ----------- --------------------------- -----------------
<S> <C> <C>
7-Pay interest Yr. 1 Premiums greater than Beginning of each
sensitive $5,000 9.8% starting in year
Whole Life (ML-7) Yr. 1 Premiums up .48% x unloaned
Form ML-AL-1031 to $4,999 & issued contract value.
up to age 49 only 7.0%
Yrs. 2-7 All Premiums 3.5%
</TABLE>
In the event of a full surrender prior to the first premium payment in the
second contract year, the General Agent's Account will be debited in an amount
equal to 9.8% of the first year premium.
<TABLE>
<CAPTION>
Percent of
Premium Renewal
------------- ----------------------
<S> <C> <C>
Interest Sensitive Yr. 1 70% Beginning of each year
Whole Life paid up at 95 Yrs. 2-10 3% starting in year 11:
(PRIORITY I) .48% x unloaned
Form ML-AL-1041 contract value
</TABLE>
In the event of a full surrender prior to the first premium payment in the
second contract year, the General Agent's Account will be debited in an amount
equal to 70% of the first year premium.
<TABLE>
<CAPTION>
Percent of
Description of Policy Premium
- --------------------- ----------
<S> <C>
SPWL (ML-AL-772*)
Single Premium Interest-Sensitive
Whole Life Policies 4.50%
SPWL (ML-AL-790* and ML-AL-792*)
Single Premium Interest-Sensitive
Whole Life Policies 5.00%
</TABLE>
- 33 -
<PAGE> 34
*And any state variations thereof.
SPWL (R-Series)
In the event of full surrender within the first three (3) months after
date of issue of a policy, the General Agent's Account will be debited in
an amount equal to 4.50% of the original premium.
In the event of full surrender within the second three (3) months after
date of issue of a policy, the General Agent's Account will be debited in
an amount equal to 3.375% of the original premium.
In the event of full surrender within the third three (3) months after
date of issue of a policy, the General Agent's Account will be debited in
an amount equal to 2.250% of the original premium.
In the event of full surrender within the fourth three (3) months after
date of issue of a policy, the General Agent's Account will be debited in
an amount equal to 1.125% of the original premium.
SPWL (R-Series)
In the event of a full surrender in the first twelve (12) months after
date of issue of a policy, the General Agent's Account will be debited in
an amount equal to 5.00% of the original premium.
MERRILL LYNCH LIFE INSURANCE COMPANY
By /s/ EDWARD M. PILLITTERI
---------------------------------
Edward M. Pillitteri
Senior Vice President
8/23/90
-----------------------------------
Date
- 34 -
<PAGE> 35
AMENDMENT
to
General Agency Agreement
between
Merrill Lynch Life Agency Inc.
and
Merrill Lynch Life Insurance Company
The General Agency Agreement between Merrill Lynch Life Insurance Company and
Merrill Lynch Life Agency Inc. and the other corporations constituting the
General Agent as defined therein is hereby amended as follows:
1. Section 3.3 is amended by deleting "Section 3.3" therefrom and inserting in
its place "Section 3.2."
2. Section 4.5 is amended by inserting the following after, "any of such
events," and before, "the General Agent,"
",to the extent permitted under federal or state law,"
3. Section 14.3 is amended by deleting therefrom "Washington" and inserting in
its place "Arkansas."
Effective August 30, 1991.
MERRILL LYNCH LIFE INSURANCE COMPANY
By /s/ JOHN C.R. HELE
-----------------------------
John C.R. Hele
Senior Vice President
-----------------------------
Title
August 27, 1991
-----------------------------
Date
ML Life Agency Inc.,
A Texas Corporation
/s/ WILLIAM E. PICKENS
-----------------------------
- 35 -
<PAGE> 36
William E. Pickens
Authorized Officer
-----------------------------
Date
Merrill Lynch Life Agency Ltd.,
A Mississippi Corporation
Merrill Lynch Life Agency Inc.,
A Washington Corporation
Merrill Lynch Life Agency Inc.,
An Alabama Corporation
Merrill Lynch Life Agency Inc.
An Arizona Corporation
Merrill Lynch Life Agency Inc.,
An Arkansas Corporation
Merrill Lynch Life Agency Inc.,
An Idaho Corporation
Merrill Lynch Life Agency Inc.,
An Illinois Corporation
Merrill Lynch Life Agency of Maine Inc.,
A Maine Corporation
Merrill Lynch Life Agency Inc.,
A Massachusetts Corporation
Merrill Lynch Life Agency Inc.,
A Montana Corporation
Merrill Lynch Life Agency Inc.,
A New Mexico Corporation
Merrill Lynch Life Agency Inc.,
- 36 -
<PAGE> 37
A Puerto Rico Corporation
Merrill Lynch Life Agency Inc.,
A Virgin Islands Corporation
Merrill Lynch Life Agency Inc.,
An Ohio Corporation
Merrill Lynch Life Agency Inc.,
An Oklahoma Corporation
/s/ WILLIAM A. WILDE
-------------------------------
William A. Wilde
Authorized Officer
August 27, 1991
-------------------------------
Date
MERRILL LYNCH LIFE INSURANCE COMPANY
ADDENDUM TO GENERAL AGENCY COMPENSATION SCHEDULE
The General Agency Compensation Schedule to the General Agency Agreement
dated January 5, 1989 between Merrill Lynch Life Insurance Company ("MLLIC")
and Merrill Lynch Life Agency, Inc., et al. ("MLLA") is hereby amended due to,
and as of the effective date of, the merger of Tandem Insurance Group, Inc.
("Tandem") into Merrill Lynch Life Insurance Company, such date being October
1, 1991.
This schedule applies to the contracts listed below on and after the
effective dates listed for such contracts, when issued by Tandem, and placed by
agents who were licensed by Tandem who were also agents of MLLA. MLLA agrees
to refund to MLLIC any commissions attributable to policies or contracts NTO'd
or wholly or partially surrendered during the first six months and 50% on any
potion of the premium surrendered during the second six months. For partial
surrenders, the recovery will be based on the amount surrendered less the 10%
free corridor amount. There will be no charge back as a result of the death of
the annuitant.
Policy/Contract Commission Effective Date
- 37 -
<PAGE> 38
Single Premium
Deferred Annuity
1st Year 4% February 17, 1986
Renewal .48% x account July 1, 1989 1/
value x guarantee
period
Merrill Lynch Life Insurance Company
By /s/ BARRY G. SKOLNICK
----------------------------------
Barry G. Skolnick
Title: Senior Vice President
------------------------------
ML Life Agency Inc.,
A Texas Corporation
By: /s/ WILLIAM PICKENS
------------------------------------
William Pickens
Title: Authorized Officer
--------------------------------
Merrill Lynch Life Agency, Ltd., A Mississippi
Corporation
Merrill Lynch Life Agency, Inc., A Washington
Corporation
Merrill Lynch Life Agency, Inc., An Alabama
Corporation
Merrill Lynch Life Agency, Inc., An Arizona
Corporation
Merrill Lynch Life Agency, Inc., An Arkansas
Corporation
- --------------------
1/ The effective date reflects the date on which the parties orally agreed to
the renewal compensation.
- 38 -
<PAGE> 39
Merrill Lynch Life Agency, Inc., An Idaho
Corporation
Merrill Lynch Life Agency, Inc., An Illinois
Corporation
Merrill Lynch Life Agency of Maine, Inc.
A Maine Corporation
Merrill Lynch Life Agency, Inc.,
A Massachusetts Corporation
Merrill Lynch Life Agency, Inc., A Montana
Corporation
Merrill Lynch Life Agency, Inc., A New Mexico
Corporation
Merrill Lynch Life Agency, Inc., A Puerto Rico
Corporation
Merrill Lynch Life Agency, Inc., A South Dakota
Corporation
Merrill Lynch Life Agency, Inc., a Wyoming
Corporation
Merrill Lynch Life Agency, Inc., A Virgin
Islands Corporation
By: /s/ WILLIAM A. WILDE
----------------------------------
William A. Wilde
Title: Vice President
------------------------
Merrill Lynch Life Agency, Inc., An Ohio
Corporation
Merrill Lynch Life Agency, Inc., An Oklahoma
Corporation
- 39 -
<PAGE> 40
By: /s/ WILLIAM A. WILDE
-----------------------------------
William A. Wilde
Title: Vice President
----------------------
- 40 -
<PAGE> 41
MERRILL LYNCH LIFE INSURANCE COMPANY
ADDENDUM TO GENERAL AGENCY COMPENSATION SCHEDULE
The General Agency Compensation Schedule to the General Agency Agreement
dated January 5,1989 between Merrill Lynch Life Insurance Company ("MLLIC") and
Merrill Lynch Life Agency, Inc., et al. ("MLLA") is hereby amended due to, and
as of the introduction of new products, such date being March 17, 1992.
This schedule applies to the policies and contracts listed below on and
after the effective dates listed for such policies and contracts, when issued
by MLLIC, and placed by agents who were licensed by MLLIC and who were also
agents of MLLA. MLLA agrees to refund to MLLIC any commissions attributable to
policies or contracts NTO'd or wholly or partially surrendered during the first
six months and 50% on any portion of the premium surrendered during the second
six months. There will be no charge back as a result of the death of the
insured/annuitant.
<TABLE>
<CAPTION>
% of
Investment Base Effective
Policy/Contract Commission Contract Value* Date
- --------------- ---------- --------------- ---------
<S> <C> <C> <C>
Flexible Premium Variable
Life Insurance
First Year and Renewal May 4, 1992 1/
First $1,500,000 7.10%
Next $2,500,000 5.10%
Excess Over $4,000,000 3.10%
At End of Policy Year One .11%
Flexible Premium Joint and
Last Survivor Variable Life
Insurance May 4, 1992 1/
First Year and Renewal 7.10%
First $1,500,000 5.10%
Next $2,500,000 3.10%
Excess Over $4,000,000 .11%
At End of Policy Year One
</TABLE>
- --------------------
1/ Based on commencement of sales
<PAGE> 42
<TABLE>
<S> <C> <C> <C>
SPIAR Annuity Rider
All $$$ 4.50%
Flexible Premium Variable March 17, 1992 1/
Annuity Initial Premium 5.00%
Internal 1035 Exchanges 2/ 3.50%
Additional Premiums
At End of Policy Year One 5.00% .11%
Upon Annuitization** 2.40%
</TABLE>
* Until Annuity Date
** Paid only on remainder of Contract Value not subject to surrender charge
- --------------------
2/ When one product is exchanged for another within MLLIC
- 2 -
<PAGE> 43
SIGNATURES
Merrill Lynch Life Insurance Company
By /s/ BARRY G. SKOLNICK
-------------------------------------
Barry G. Skolnick
Title Senior Vice President, General
------------------------------
Counsel, and Secretary
------------------------------
ML Life Agency Inc.,
A Texas Corporation
By /s/ WILLIAM E. PICKENS
-------------------------------------
William E. Pickens
Title Chairman of the Board and President
------------------------------------
Merrill Lynch Life Agency, Ltd.,
A Mississippi Corporation
Merrill Lynch Life Agency, Inc.,
An Alabama Corporation
Merrill Lynch Life Agency, Inc.,
An Arizona Corporation
Merrill Lynch Life Agency, Inc.,
An Arkansas Corporation
Merrill Lynch Life Agency, Inc.,
An Idaho Corporation
Merrill Lynch Life Agency, Inc.,
An Illinois Corporation
Merrill Lynch Life Agency of Maine, Inc.,
- 3 -
<PAGE> 44
A Maine Corporation
Merrill Lynch Life Agency, Inc.,
A Massachusetts Corporation
Merrill Lynch Life Agency, Inc.,
A Montana Corporation
Merrill Lynch Life Agency, Inc.,
A New Mexico Corporation
Merrill Lynch Life Agency, Inc.,
An Ohio Corporation
Merrill Lynch Life Agency, Inc.,
An Oklahoma Corporation
Merrill Lynch Life Agency, Inc.,
A Puerto Rico Corporation
Merrill Lynch Life Agency, Inc.,
A South Dakota Corporation
Merrill Lynch Life Agency, Inc.,
A Wyoming Corporation
Merrill Lynch Life Agency, Inc.,
A Virgin Islands Corporation
By /s/ WILLIAM A. WILDE
---------------------------------------
William A. Wilde
Title Vice President
-----------------------------------
Merrill Lynch Life Agency, Inc.,
A Washington Corporation
By /s/ WILLIAM A. WILDE
---------------------------------------
William A. Wilde
Title Senior Vice President
------------------------------------
- 4 -
<PAGE> 1
EXHIBIT 1.A.(3)(c)
ESTATE INVESTOR COMMISSIONS
March 10, 1993
Commission Schedule
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
A. Percent of Premium MLLIC MLLICNY
<S> <C> <C>
On minimum premium 95.00% 55.00%
Above minimum until 10 base premiums paid 3.00% 3.00%
Excess over 10 base premiums 3.00% 1.50%
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
B. Percent of Investment Base (Trail) MLLIC MLLICNY
<S> <C> <C>
Beginning of Policy Year 1 0.00% 0.00%
Beginning of Policy Years 2 and After 0.11% 0.00%
- ------------------------------------------------------------------------------------
</TABLE>
C. Chargebacks
1. Free Look/Surrender/Lapse
Chargebacks are only assessed on the commission paid on the minimum premium.
The chargeback is 100% of the 95% commission (55% MLLICNY) on surrenders in the
first policy year, and 50% on surrenders in the second policy year.
2. Trail commissions
Trail commissions are not subject to chargeback.
<PAGE> 1
EXHIBIT 1.A.(3)(d)
INDEMNITY AGREEMENT
In consideration for the agreement of Merrill Lynch Life Agency, Inc.
("MLLA") to enter into the General Agent's Agreement (the "Agreement") with
Merrill Lynch Life Insurance Company ("Merrill Lynch Life") and other good and
valuable consideration, Merrill Lynch Life hereby agrees as follows:
Merrill Lynch Life will indemnify and hold harmless MLLA and
all persons associated with MLLA as such term is defined in Section
3(a)(21) of the Securities Exchange Act of 1934 against all claims,
losses, liabilities and expenses, to include reasonable attorneys'
fees, arising on or after the date of this Indemnity Agreement 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 on or after the date of this
Indemnity Agreement directly out of the willful misconduct or
negligence of MLLA or its associated persons.
This indemnification shall survive the termination of the Agreement
for any claims arising thereunder for sales on or after the date of this
Indemnity Agreement and prior to such termination.
MERRILL LYNCH LIFE INSURANCE
COMPANY
Dated: 1/27/92 By: /s/ BARRY G. SKOLNICK
--------------- ----------------------------
Barry G. Skolnick
MERRILL LYNCH LIFE AGENCY,
INC.
Dated: 1/27/92 By: /s/ WILLIAM A. WILDE
--------------- ----------------------------
William A. Wilde
<PAGE> 1
EXHIBIT 1.A.(5)(a)(1)
[LOGO] MERRILL LYNCH
Merrill Lynch Life Insurance Company
Home Office: Little Rock, Arkansas
Variable Life Service Center: P.O. Box 9025,
Springfield, Massachusetts 01102-9025
Telephone: 1-800-354-5333
- --------------------------------------------------------------------------------
INSURED NO. 1 RICHARD ROE
INSURED NO. 2 JANE ROE
POLICY NUMBER SPECIMEN
Flexible Premium Joint And Last Survivor Variable
Universal Life Insurance Policy
This policy is a legal contract between its owner and
us. Please read it carefully. In this policy, the
word you refers to the owner shown on the policy
schedule. We, us and our refers to Merrill Lynch
Life Insurance Company.
- --------------------------------------------------------------------------------
Death Benefit We will pay the death benefit proceeds to the
Provided By This beneficiary when we receive due proof of the death of
Policy the last surviving insured. At issue, the death
benefit equals this policy's initial face amount plus
any additional insurance rider face amount.
Afterwards, the death benefit may increase or
decrease on any day, depending on this policy's
investment results, but will never be less than this
policy's face amount. The duration for which the
death benefit is in effect may vary with the
investment results, but will never be less than this
policy's guarantee period. For details on death
benefit proceeds and the guarantee period, see
Insurance Benefits.
- --------------------------------------------------------------------------------
Cash Value Benefits During the lifetime of the last surviving insured
Provided By This while this policy is in effect we provide cash value
Policy benefits and other important rights as described in
this policy.
The cash value may increase or decrease on any day,
depending on the investment results for this policy.
No minimum amount is guaranteed. For information on
cash surrender values, see Policy Benefits For The
Owner.
- --------------------------------------------------------------------------------
Investment Results You may allocate this policy's total investment base
This Policy among the investment For divisions. Each division
invests in a designated investment portfolio. Cash
values and death benefits may increase or decrease
depending on the investment experience of these
investment divisions, the allocation of the policy's
investment base among the divisions and the timing
and amount of all premiums. For details, see How
Variable Life Insurance Works.
- --------------------------------------------------------------------------------
VUL92 SPECIMEN
<PAGE> 2
Right To Examine This policy may be returned on or before the end of
That This Policy the free look period. period ends at the later
of ten days after you receive this policy, 45 days
after you execute the application, or ten days after
we mail or deliver to you the Notice of Withdrawal
Rights. Mail to us or to the agent who sold it.
The returned policy will be treated as if we never
issued it. We will promptly return the premium paid.
<TABLE>
<S> <C>
/s/ BARRY G. SKOLNICK /s/ ANTHONY J. VESPA
--------------------- --------------------
Barry G. Skolnick Anthony J. Vespa
Secretary President
</TABLE>
- --------------------------------------------------------------------------------
Flexible Premium Joint Variable universal life insurance payable upon death
And Last Survivor of the last surviving insured. Death benefit subject
Variable Universal Life to guaranteed minimum during guarantee period.
Insurance Policy Guaranteed minimum is policy's face amount.
Flexible premiums. Non-participating. Investment
results reflected in policy benefits.
VUL92 SPECIMEN - 2 -
<PAGE> 3
- --------------------------------------------------------------------------------
Policy Contents
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Policy Schedule Page 3
<S> <C>
Definitions 4
Introduction to This Policy 5
Premium Payments 7
How Variable Life Insurance Works 9
Policy Benefits for The Owner 13
Insurance Benefits 16
Choosing An Income Plan 18
Other Important Information 21
Appendix 1 23
Appendix 2 24
A copy of the application (s) and any additional benefit riders and endorsements
are at the back of this policy.
</TABLE>
- --------------------------------------------------------------------------------
Policy Schedule The Policy Schedule comes right after this
page. It gives specific facts about this
policy and its coverage. Please refer to it
while reading this policy.
VUL92 SPECIMEN - 3 -
<PAGE> 4
- --------------------------------------------------------------------------------
Policy Schedule
- --------------------------------------------------------------------------------
Insured No. 1 Richard Roe
No. 1 Issue Age/Sex 35 Male
No. 1 Underwriting Class Standard Non-Smoker
Insured No. 2 Jane Roe
No. 2 Issue Age/Sex 35 Female
No. 2 Underwriting Class Standard Non-Smoker
Initial Premium $25,000.00
Initial Face Amount $1,000,000.00
Base Premium $5,636.82
Initial Additional Insurance
Rider Face Amount $500,000.00
Issue Date September 30, 1992
Policy Date September 30, 1992
Policy Number SPECIMEN
Owner Jane Roe
Initial Guarantee Period The Initial Guarantee period is 33.50 years.
((Sales Load (only included if applicable regulations
under the Investment Company Act of 1940
require a reduced sales load) ))
Riders (( Additional Insurance Rider (only if
elected) ))
Policy Split Rider
(( This is a Modified Endowment
Contract.))
VUL92 SPECIMEN - 4 -
<PAGE> 5
- --------------------------------------------------------------------------------
DEFINITIONS
- --------------------------------------------------------------------------------
Owner The owner has the rights and options as described in
this policy. The owner is shown on the Policy
Schedule.
- --------------------------------------------------------------------------------
Beneficiary The beneficiary is the person to whom we pay the
proceeds upon the death of the last surviving insured.
- --------------------------------------------------------------------------------
Base Premium The base premium is the amount equal to the level
annual premium necessary for the face amount of the
policy to endow on the policy anniversary nearest the
younger insured's 100th birthday. We assume a 5%
annual rate of return on the base premium less
premium loading and guaranteed maximum cost of
insurance rates shown in Appendix 1. Once
determined, the base premium will not change. The
base premium is shown on the Policy Schedule.
- --------------------------------------------------------------------------------
Separate Account The Merrill Lynch Variable Life Separate Account is
governed by the laws of Arkansas, our state of
domicile.
- --------------------------------------------------------------------------------
Total Investment The total investment base is the amount that this
Base policy provides for investment at any time. It is
the sum of the investment base in each of the
investment divisions.
- --------------------------------------------------------------------------------
Fixed Base The fixed base on the policy date of this policy
equals this policy's cash value. Thereafter, the
fixed base is calculated in the same manner as the
cash value except that all calculations are based on
the guaranteed maximum cost of insurance rates and a
5% annual rate of interest. The fixed base
calculation does not reflect policy loans and
repayments.
- --------------------------------------------------------------------------------
Cash Value The cash value on any date equals the total
investment base, plus policy debt, less any accrued
net loan cost since the last policy anniversary (or
since the policy date during the first policy year),
plus any unearned charges for cost of insurance and
rider costs.
- --------------------------------------------------------------------------------
Variable Insurance The variable insurance amount equals the cash value
Amount corridor factor for the younger insured at his or her
attained age multiplied by the sum of cash value plus
any excess sales load as calculated under applicable
regulations in effect under the Investment Company Act
of 1940. The variable insurance amount will vary
daily based on the investment results, any premium
payments made, any partial withdrawals taken and any
loans taken.
VUL92 SPECIMEN - 5 -
<PAGE> 6
- --------------------------------------------------------------------------------
Variable Insurance In no event will the variable insurance amount be
Amount (Continued) less than that required to keep this policy qualified
as life insurance under the federal income tax laws.
The table of cash value corridor factors is shown in
Appendix 2.
- --------------------------------------------------------------------------------
Guarantee Period The guarantee period is the period for which the
policy face amount and any additional insurance rider
face amount are guaranteed to remain in effect unless
debt exceeds certain values. It is calculated
assuming the cash value accrues interest at an annual
rate of 5% and guaranteed maximum cost of insurance
rates and rider costs are deducted.
VUL92 SPECIMEN - 6 -
<PAGE> 7
- --------------------------------------------------------------------------------
INTRODUCTION TO THIS POLICY
This policy insures the lives of the insureds listed
on the Policy Schedule. Insured No. 1 is the owner
of this policy unless another owner has been named in
the application. If there is more than one owner,
the owners must exercise their rights and options
jointly. We reserve the right to limit the number of
owners.
- --------------------------------------------------------------------------------
This Policy Is A This policy is a contract between you and us. We
Contract provide insurance coverage and other benefits as
stated in this policy. We do this in return for a
completed application and payment of the initial
premium.
Whenever we use the word policy, we mean the entire
contract. The entire contract consists of:
- the basic policy;
- the attached copy of the initial
application and medical exam(s);
- all attached subsequent applications
and amendments to change the basic
policy; and
- any riders or endorsements.
Riders and endorsements add provisions or change the
terms of the basis policy.
- --------------------------------------------------------------------------------
Dates And Ages The following dates and ages are referred to in this
Referred To In This policy.
Policy DATE OF ISSUE
This is the date this policy is issued at our Service
Center. The contestable and suicide periods are
measured from this date.
POLICY DATE
This date is used to determine policy processing
dates, policy years and anniversaries. It is
generally one business day after the premium is
received by us. See the Policy Schedule. The policy
date may or may not be the same as the date of issue.
The policy processing dates are the days when we
deduct charges. They are the policy date and the
same day of the month as the policy date at the end
of each successive three month period. A policy
processing period is the period between successive
policy processing dates.
ISSUE AGE
For each insured, this is the insured's age on the
insured's birthday nearest to the policy date.
ATTAINED AGE
For each insured, this is the insured's age plus the
number of full years elapsed since the policy date.
MATURITY DATE
The maturity date of this policy is the policy
anniversary nearest the younger insured's 100th
birthday.
- --------------------------------------------------------------------------------
Right To Name A You may name a contingent owner. If you die before a
Contingent Owner death benefit is payable under this policy, your
interest in this policy will then pass to the
contingent owner. If there's no contingent owner,
your interest will pass to your estate.
VUL92 SPECIMEN - 7 -
<PAGE> 8
- --------------------------------------------------------------------------------
The Beneficiary Upon the death of the last surviving insured, we pay
the death benefit proceeds to the primary
beneficiary. If the primary beneficiary (whether or
not irrevocable) has died, the proceeds are paid to
any contingent beneficiary. If there is no surviving
beneficiary, we pay the proceeds to the estate of the
last surviving insured. One or more persons may be
named as primary beneficiaries or contingent
beneficiaries. In that case we will assume the
proceeds are to be paid in equal shares to the
surviving beneficiaries. The owner can specify other
than equal shares. If an irrevocable beneficiary has
been designated, you and the irrevocable beneficiary
must act together to exercise certain rights and
options under this policy.
- --------------------------------------------------------------------------------
Change Of Owner Or During either insured's lifetime, with the consent of
Beneficiary any irrevocable beneficiary, you can transfer
ownership of this policy and change the beneficiary.
to do this, you must send us written notice of the
change in a form satisfactory to us. The change will
take effect as of the day the notice is signed.
However, the change will not affect any payment made
or action taken by us before receipt of the notice of
the change at our Service Center.
- --------------------------------------------------------------------------------
Sending Notice To Us Any written notices or requests should be sent to our
Service center in a form satisfactory to us. The
address is shown on the front of this policy. Please
include your name, the names of the insureds and the
policy number.
VUL92 SPECIMEN - 8 -
<PAGE> 9
- --------------------------------------------------------------------------------
PREMIUM PAYMENTS
- --------------------------------------------------------------------------------
When To Pay Payment of the initial premium is required to put
The Premiums this policy in effect. amount of the initial
premium is shown on the Policy Schedule.
- --------------------------------------------------------------------------------
Where To Pay
Premiums Pay the premiums to our Service Center.
- --------------------------------------------------------------------------------
Additional Premiums After the end of the free look period, if an insured
is alive, the owner may pay additional premiums under
this policy. To make an additional premium payment,
the owner must provide us with notice at our Service
Center. We reserve the right to return any portion
of the additional premiums that would cause this
policy to become a modified endowment contract, under
applicable tax law as interpreted by us, unless you
consent. We may also return any portion of the
additional premium that would cause this policy to
fail to qualify as life insurance under applicable
tax laws as interpreted by us. Any amount of
additional premium beyond that necessary to extend
the guarantee period to the whole of life of the
younger insured will be returned to you.
The minimum additional premium is $100. Unless
otherwise specified by the owner, if there is any
policy debt, any additional premiums paid will be
applied as a loan repayment with any excess used as
an additional premium. See Policy Loans.
As of the policy processing date on or next following
the date of receipt and acceptance of an additional
premium the guarantee period may increase. See The
Guarantee Period.
The variable insurance amount will also reflect this
premium.
- --------------------------------------------------------------------------------
Allocation of As of the date we receive and accept an additional
Additional Premiums premium payment, the increase in the total investment
base will be allocated among the investment divisions
in accordance with instructions from the owner. If no
such instructions are received by us, allocation will
be among the investment divisions in the same
proportion as the investment base in each division
bears to the total investment base as of the date we
receive and accept the premium.
- --------------------------------------------------------------------------------
Premium Loading As of the date we receive and accept any premium:
The investment base will increase by
the amount of the payment less: (1)
a sales load of 46.25% of each
payment through the second base
premium and 1.25% of each base
premium paid after the second; (2) a
premium tax charge of 2.50% of each
premium paid; (3) a charge for
federal taxes of 1.25% of each
premium paid. These charges are
deducted before allocation to
applicable investment divisions.
VUL92 SPECIMEN - 9 -
<PAGE> 10
- --------------------------------------------------------------------------------
Premium Loading We may also deduct a charge for other assessments of
(Continued) federal premium taxes or federal, state or local
excise, profits or income taxes measured by or
attributable to the receipt of premiums. We also
reserve the right to deduct from the separate account
any taxes imposed on the separate account earnings.
If your sales load will be less than the sales load
described above, it will be shown on the Policy
Schedule. In no event will the sales load exceed the
amount permitted by applicable regulations in effect
under the investment Company Act of 1940.
- --------------------------------------------------------------------------------
Grace Period After the end of the guarantee period, we will
terminate this policy at the end of the grace period
if the quarterly charges are greater than the cash
value on a policy processing date.
The grace period will end 61 days after we mail a
notice to the owner that we may terminate this policy
because of insufficient cash value. To avoid
termination, you must pay us an amount which after
deducting premium loading equals at least three (3)
times the charges that were due on the policy
processing date on which we determined that the cash
value was insufficient. However, see POLICY LOANS.
This amount will be specified on the notice we send.
If we do not receive such amount at our Service
Center before the end of the grace period, this
policy will terminate. At that time, we deduct any
charges for cost of insurance and rider costs
applicable to the grace period and refund to you any
unearned charges for cost of insurance and rider
costs. If the last surviving insured dies during the
grace period, we will pay the beneficiary the
insurance benefits as described in PROCEEDS PAYABLE
TO THE BENEFICIARY.
- --------------------------------------------------------------------------------
How To Reinstate If we have terminated this policy at the end of the
This Policy grace period, you may reinstate it provided neither
insured died between the date we terminated this
policy and the effective date of reinstatement if:
- You ask for reinstatement within
three (3) years after the end of
the grace period;
- We receive satisfactory evidence of
the insureds' insurability; and
- You pay us at least the minimum
premium for which we would then
issue this policy based on the
policy year and underwriting class
of both insureds as of the effective
date of the reinstated policy.
The effective date of the reinstated policy will be
the policy processing date on or next following the
date we approve the reinstatement application.
VUL92 SPECIMEN - 10 -
<PAGE> 11
- --------------------------------------------------------------------------------
HOW VARIABLE LIFE INSURANCE WORKS
- --------------------------------------------------------------------------------
The Separate Account The variable life insurance benefits under this
policy are provided through investments made in the
separate account. This account is kept separate from
our general account and any other separate accounts
we may have. It is used to support variable life
insurance policies and may be used for other purposes
permitted by applicable laws and regulations. We own
the assets in the separate account. Assets equal to
the reserves and other liabilities of the account
will not be charged with liabilities that arise from
any other business we conduct. However, we may
transfer to our general account assets which exceed
the reserves and other liabilities of the separate
account.
The separate account will invest in mutual funds,
unit investment trusts and other investment
portfolios which we determine to be suitable for this
policy's purposes. The separate account is a unit
investment trust under federal securities laws. It
is registered with the Securities and Exchange
Commission (SEC) under the Investment Company Act of
1940.
Income, realized and unrealized gains or losses from
assets in the separate account are credited to or
charged against the account without regard to other
income, gains or losses in our other separate
accounts or general account.
- --------------------------------------------------------------------------------
Investment Divisions The separate account is divided into investment
divisions. Each investment division invests in a
designated investment portfolio. The divisions and
the investment portfolios in which they invest are
described in the prospectus.
Each investment division will be valued at the end of
each valuation period. A valuation period is each
business day together with any non-business days
before it. A business day for a division is any day
the New York Stock Exchange (NYSE) is open for
trading or any day in which the SEC requires that the
mutual funds, unit investment trusts or other
investment portfolios be valued.
- --------------------------------------------------------------------------------
Changes To The We may from time to time make additional investment
Account divisions available. These Separate
divisions will invest in investment portfolios we
find suitable for this policy. We also have the
right to eliminate investment divisions from the
separate account, to combine two or more investment
divisions or to substitute a new portfolio for the
portfolio in which an investment division invests. A
substitution may become necessary if, in our
judgment, a portfolio no longer suits the purposes of
this policy. This may happen due to a change in laws
or regulations, or a change in a portfolio's
investment objectives or restrictions, or because the
portfolio is no longer available for investment or
for some other reason. We would get any required
prior approval from the insurance department of our
state of domicile before making such a substitution.
We would also get any required prior approval from
the SEC and any other required approvals before
making such a substitution.
Subject to any required regulatory approvals, we
reserve the right to transfer assets of the separate
account or of an investment division, which we
determine to be associated with the class of policies
to which this policy belongs, to another separate
account or investment division.
VUL92 SPECIMEN - 11 -
<PAGE> 12
- --------------------------------------------------------------------------------
Changes To The When permitted by law, we reserve the right to:
Separate Account
(Continued) - Deregister the separate account as a
management investment company under
the Investment Company Act of 1940;
- Operate the separate account as a
management investment company under
the Investment Company Act of 1940;
- Restrict or eliminate any voting
rights of policyowners or other
persons who have voting rights as to
the separate account; and
- Combine the separate account with
other separate accounts.
- --------------------------------------------------------------------------------
Allocation of Total The owner selects the divisions to which to allocate
Investment Base the total investment base. The maximum number of
divisions to which the total investment base may be
allocated at any one time is five (5).
The owner can change the allocation of the total
investment base among the investment divisions. The
number of allocation changes per year is unlimited.
We reserve the right to charge up to $25 for each
transfer in excess of six (6) per year. No
allocation changes are allowed during the free look
period. To make a change, the owner must provide us
with satisfactory notice at our Service Center. The
change will take effect when we receive the notice.
Our calculations will reflect the change.
- --------------------------------------------------------------------------------
Investment Base In ON THE POLICY DATE
Each Investment On the policy date, your initial premium is reduced
See Division by the premium loading. PREMIUM LOADING. The balance
is your total investment base which is allocated to
the Money Reserve investment division. Then we deduct
quarterly charges. The resulting amount remains in
the Money Reserve investment division at least until
the end of the free look period. After that, upon
notice in a form satisfactory to us, you may allocate
any portion of your total investment base to other
investment divisions. See Allocation Of Total
Investment Base. After the free look period, the owner
may pay allocation premiums under this policy. See
Additional Premiums.
ON EACH SUBSEQUENT BUSINESS DAY
On each subsequent business day, the investment base
in each division is an amount calculated as follows:
(1) We take the investment base in the division
at the end of the preceding valuation period.
(2) We multiply (1) by the division's net rate of
return for the current valuation period.
(3) We add (1) and (2).
(4) We add to (3) any premiums allocated to the
division during the current valuation period
less any premium loading deducted before
allocation.
(5) We add to (4) any loan repayments received
and subtract from (4) any borrowed amounts
which are allocated to the division during
the current valuation period.
(6) We add any amounts transferred to the
investment division and subtract any amounts
transferred from the investment division
since the end of the preceding valuation
period.
VUL92 SPECIMEN - 12 -
<PAGE> 13
(7) If the business day is a policy processing
date, we subtract from (6) the following
amounts allocated to that division for the
next policy processing period (sometimes
referred to as quarterly charges):
(a) cost of insurance;
(b) any other fees we describe in
this policy; and
(c) any rider charges deducted from
the investment base. If a
policy processing date is on
a policy anniversary, we also
subtract:
(d) any net loan cost.
All amounts in (7) will be allocated to each
division in the same proportion as (3) bears
to the total investment base.
(8) If the charges in (7) exceed the amount in
(6), we will notify you of the amount due.
- --------------------------------------------------------------------------------
Charges Deducted COST OF INSURANCE
From Investment Base We will determine the cost of insurance on each
policy processing date as follows:
(1) We determine the policy's net amount at risk
as of the policy processing date, which is
equal to:
(a) the death benefit as of the
policy processing date
adjusted for interest at the
rate of 5% per year, less
(b) the cash value as of the policy
processing date but before
deduction for the cost of
insurance.
(2) We divide (1) by $1,000.
(3) We determine the current cost of insurance
rate per $1,000 based on the policy year, sex
and underwriting class of both insureds.
(4) We multiply (2) by (3).
We may change the current cost of insurance rates per
$1,000 from time to time. Any change in the current
rates will be as described in CHANGES IN POLICY COST
FACTORS. They will never be more than the guaranteed
maximum cost of insurance rates per $1000 shown in
Appendix 1.
OTHER DEDUCTIONS
The net loan cost is described in the Policy Loans
provision. The cost and frequency of deduction of
any benefits from riders are shown on the Policy
Schedule unless otherwise provided for in the rider.
An asset charge at a daily rate of .002466%
(equivalent to .90% annually in advance) and a trust
charge at a daily rate currently of .000933%
(equivalent to .34% annually in advance) are deducted
from appropriate investment divisions in the separate
account.
We reserve the right to increase the trust charge but
in no event above a daily rate of .001373%
(equivalent to .50% annually in advance).
VUL92 SPECIMEN - 13 -
<PAGE> 14
- --------------------------------------------------------------------------------
What Happens On The If part of the total investment base is allocated to
Maturity Date Of An an investment division that has a maturity date,
then, unless otherwise specified by the owner, the
Investment Division amounts in that division as of the maturity date will
be allocated to the Money Reserve investment
division. We will notify the owner 30 days in advance
of the maturity date. To elect an allocation to other
than the Money Reserve investment division, the owner
must provide satisfactory notice to us at least seven
(7) days prior to the maturity date. The allocation
on a maturity date will not be considered a change in
the allocation of the investment base for purposes of
the number of changes permitted before a charge may be
applied.
- --------------------------------------------------------------------------------
Measurement of The investment experience of an investment division
Investment Experience is determined at the end of each division's valuation
period.
INDEX OF INVESTMENT EXPERIENCE
We use an index to measure changes in each investment
division's experience during a valuation period. We
set the index at $10 when the first investments in
that division were made. The index for a current
valuation period equals the index for the preceding
valuation period multiplied by the experience factor
for the current period.
HOW WE DETERMINE THE EXPERIENCE FACTOR
The experience factor for an investment division's
valuation period reflects the investment experience
of the portfolio in which the division invests as
well as the charges assessed against the division.
The factor is calculated as follows:
(1) We take the net asset value as of the end of
the current valuation period of the
portfolio in which the division invests.
(2) We add to (1) the amount of any dividend or
capital gains distribution declared during
the current valuation period for the
investment portfolio. We subtract from that
amount a charge for our taxes, if any.
(3) We divide (2) by the net asset value of the
portfolio at the end of the preceding
valuation period.
(4) We subtract the daily asset charge for each
day in the valuation period. This charge is
to cover expense, mortality and minimum death
benefit guarantee risks that we are assuming.
(5) For any divisions investing in unit
investment trusts only, we subtract an
additional charge equal to the daily trust
charge for each day in the valuation period.
This charge is to cover the actual costs
incurred in the purchase or sale of units of
the trusts.
The net asset value of an investment company's shares
held in each investment division shall be the value
reported to us by the investment company. Such net
asset value will be net of any investment advisory
fees and other expenses of such investment company.
Calculations for divisions investing in the mutual
fund portfolios are made on a per share basis.
Calculations for divisions investing in unit
investment trusts are on a per unit basis.
VUL92 SPECIMEN - 14 -
<PAGE> 15
- --------------------------------------------------------------------------------
Net Rate Of Return Here's how to determine an investment division's net
For An Investment rate of return for a valuation period: Division
(1) We determine the change in the division's
index from the preceding valuation period to
the current valuation period.
(2) We divide this by the index for the preceding
valuation period.
We follow a consistent method for longer periods of
time.
VUL92 SPECIMEN - 15 -
<PAGE> 16
- --------------------------------------------------------------------------------
POLICY BENEFITS FOR THE OWNER
There are important rights and benefits that are
available to the owner of this policy during the
lifetime of either insured. Many of these rights and
benefits are enumerated in this section.
- --------------------------------------------------------------------------------
Partial Withdrawal REQUIREMENTS FOR EACH PARTIAL WITHDRAWAL
Each partial withdrawal is subject to the following
requirements:
The minimum partial withdrawal is
$1,000. The remaining cash value
less any policy debt following a
partial withdrawal must equal or
exceed $5,000. Withdrawals are
permitted once each policy year,
beginning in policy year 16. The
amount of a partial withdrawal may
not exceed the loan value as of the
effective date of a partial
withdrawal, less any existing policy
debt as of such date. A partial
withdrawal may not be repaid.
REQUESTING A PARTIAL WITHDRAWAL
The request for a partial withdrawal must be in a
form satisfactory to us. The effective date of the
withdrawal will be the date the request is received
at our Service Center.
EFFECT OF A PARTIAL WITHDRAWAL ON TOTAL INVESTMENT
BASE, CASH VALUE AND DEATH BENEFIT
As of the effective date of a partial withdrawal:
The total investment base, cash value,
fixed base and, if you have elected
death benefit Option 1, the face
amount of this policy, each will be
reduced by the amount of the partial
withdrawal.
The reduction in the total investment
base will be allocated among the
investment divisions in accordance
with your instructions. If no such
instructions are received by us,
allocation will be among the
investment divisions in the same
proportion as the investment base in
each division bears to the total
investment base as of the effective
date of the partial withdrawal.
The variable insurance amount will
reflect the partial withdrawal.
As of the policy processing date on or next following
the effective date of a partial withdrawal, the
guarantee period will decrease.
EFFECT OF A PARTIAL WITHDRAWAL ON GUARANTEED PERIOD
As of the policy processing date on or next following
the effective date of a partial withdrawal, the
guarantee period will decrease as follows:
(1) We determine the immediate decrease in cash
value resulting from the partial withdrawal.
(2) We add to (1) interest at the annual rate of
5% for the period from the date of the
withdrawal to
the policy processing date on or next
following such date. This is the guarantee
adjustment amount.
(3) We subtract the guarantee adjustment amount
from the fixed base and use the new fixed
base to calculate a new guarantee period.
VUL92 SPECIMEN - 16 -
<PAGE> 17
- --------------------------------------------------------------------------------
Partial Withdrawal WHEN WE WILL PAY THE PARTIAL WITHDRAWAL
(Continued) We'll usually pay the amount of the partial
withdrawal within seven (7) days after we receive a
request satisfactory to us. But we may delay paying
the amount of the partial withdrawal when:
- The NYSE is closed for trading
except for a normal holiday closing;
- The SEC determines that a state of
emergency exists; or
- An order of the SEC permits a delay
for the protection of policyowners.
- --------------------------------------------------------------------------------
Cash Value Benefits SURRENDERING YOUR POLICY
You can surrender this policy at any time and receive
its cash value less any policy debt. This amount may
be paid in cash or under one or more income plans.
See CHOOSING AN INCOME PLAN. To surrender this
policy, the owner must return it to our Service
Center with a signed request for surrender in a form
satisfactory to us. The right to a death benefit
will end on the date the request is sent to us. The
cash value will vary daily. We will determine the
cash value as of the date we receive this policy and
the signed request at our Service Center. We will
usually pay the cash value less any policy debt
within seven (7) days. But we may delay payment when
we are not able to determine the amount because:
The NYSE is closed for trading except
for a normal holiday closing; The
SEC determines that a state of
emergency exists; or An order of the
SEC permits a delay for the
protection of policyowners.
If the policy is surrendered during the first two
policy years, we will refund a part of the sales load
to the extent required by regulations in effect under
the Investment Company Act of 1940.
- --------------------------------------------------------------------------------
Policy Loans You may borrow money from us. The maximum amount you
may borrow is the loan value. This policy will be
the only security we require for the loan. A loan
may be taken any time this policy is in effect. You
may repay all or part of the loan at any time while
either insured is living.
LOAN VALUE
The loan value is 90% of the cash value. The maximum
loan amount that may be borrowed at any time is the
difference between the loan value and the policy
debt. The minimum permissible amount of any loan and
minimum repayment amount are each $1,000.
VUL92 SPECIMEN - 17 -
<PAGE> 18
- --------------------------------------------------------------------------------
Policy Loans INTEREST AND NET LOAN COST
(Continued) Interest accrues (builds up) each day on your
outstanding loan. The sum of all outstanding loans
plus accrued interest is called policy debt. The
amount held in the general account for loans (see
EFFECT OF A LOAN) earns interest. On each policy
anniversary, the investment base is increased by the
interest earned on the amount held in the general
account and decreased by the interest accrued on
policy debt. The difference between the interest
accrued on the policy debt and the interest earned on
the amount held in the general account is called the
net loan cost.
The net loan cost will be calculated as follows:
(1) We determine the policy debt as of the
previous policy anniversary and take into
account loans and repayments made during the
policy year.
(2) We multiply (1) by the loan interest rate
less the annual rate of interest earned on
the amount held in the general account for
loans.
The maximum loan interest rate is 6% per year. The
amount held in the general account for loans earns
interest at a minimum rate of 4% annually.
Interest payments are due at the end of each policy
year. If interest isn't paid when due, an amount
equal to the interest due will be added to your
outstanding loan amount and interest will accrue on
this new loan amount.
The loan interest rate and the annual rate of
interest earned on the loan amount transferred to the
general account are set on each policy anniversary.
EFFECT OF A LOAN
An amount equal to the loan will be transferred out
of the separate account and into our general account.
At the time of a repayment, an amount equal to a
repayment will be transferred out of the general
account and into the separate account. A policy loan
and the net loan cost reduce the total investment
base while repayment of a loan will cause an increase
in the total investment base. Loans, repayments and
the net loan cost will be allocated among the
investment divisions in accordance with your
instructions. You may change that allocation by
sending satisfactory notice to us. If no such
instructions are on record, the loan, repayment or
net loan cost will be allocated in the same
proportion as the investment base in each division
bears to the total investment base as of the date of
the loan, repayment or deduction of net loan cost.
A loan, WHETHER OR NOT REPAID, will have a PERMANENT
EFFECT on the cash values and may have a permanent
effect on the death benefits. If not repaid, the
policy debt will reduce the amount of death benefit
proceeds and cash value benefits.
Loans and repayments during a policy year will affect
our calculations.
VUL92 SPECIMEN - 18 -
<PAGE> 19
- --------------------------------------------------------------------------------
Policy Loans INTEREST AND NET LOAN COST (CONTINUED)
(Continued) If on the policy processing date, the policy debt
exceeds the larger of:
(a) The cash value plus any excess
sales load calculated in accordance
with applicable regulations in
effect under the Investment Company
Act of 1940 less quarterly charges
and
(b) the fixed base,
we will terminate this policy. We will not do this,
however, until 61 days after we mail notice of our
intent to terminate. We will notify you at your last
known address. Upon termination, we deduct any
charges for cost of insurance and rider costs
applicable to the 61 day period and refund to you any
unearned charges for cost of insurance and rider
costs.
WHEN WE WILL MAKE THE LOAN
We will usually loan the money within seven (7) days
after we receive a request in a form satisfactory to
us. But we may delay making the loan when we are not
able to determine the loan value because:
- The NYSE is closed for trading
except for a normal holiday closing;
- The SEC determines that a state of
emergency exists; or
- An order of the SEC permits a delay
for the protection of
- policyowners.
- --------------------------------------------------------------------------------
Assignment - Using You may assign this policy as collateral security for
This Policy As a loan or other obligation. This does not change the
Collateral Security ownership. But your rights and any beneficiary's
rights are subject to the terms of the assignment.
To make or release an assignment, we must receive
written notice, satisfactory to us, at our Service
Center. We are not responsible for the validity of any
assignment.
- --------------------------------------------------------------------------------
Right To Fixed You may elect benefits that do not vary with the
Life Benefits investment results of a separate account. You must
elect to do so within 24 months from the date of issue
while either insured is living and this policy is in
effect. No evidence of insurability will be required.
If you make this election, we will add an endorsement
to this policy and your total investment base will be
transferred to the guaranteed interest division of our
general account. Future premium payments will be
allocated to the guaranteed interest division. Once
transferred to the guaranteed interest division, your
total investment base may not be transferred to the
separate account.
VUL92 SPECIMEN - 19 -
<PAGE> 20
- --------------------------------------------------------------------------------
INSURANCE BENEFITS
- --------------------------------------------------------------------------------
The Guarantee Period ON THE POLICY DATE
The initial guarantee period and initial face amount
on the policy date are shown on the Policy Schedule.
The guarantee period and face amount are not affected
by investment results nor the allocation of the total
investment base among the investment divisions. The
guarantee period will change as described below as a
result of any additional premiums.
WHEN AN ADDITIONAL PREMIUM IS PAID
The guarantee period will increase as follows:
(1) We determine the immediate increase in cash
value resulting from the additional premium
less premium loading. See Premium Loading.
(2) We add to (1) interest at the annual rate of
5% for the period from the date we receive
and accept the additional premium to the
policy processing date on or next following
such date. This is the guarantee adjustment
amount.
(3) If the guarantee period prior to payment is
less than for the lifetime of the younger
insured, the guarantee adjustment amount is
added to the fixed base and the new fixed
base will be used to calculate a new
guarantee period. Any excess amount of
additional premium beyond that necessary to
extend the guarantee period to the whole of
life of the younger insured will be returned
to you.
AUTOMATIC ADJUSTMENT
On any policy anniversary if the cash value is
greater than the fixed base necessary to cause the
guarantee period to equal the whole of life of the
younger insured, the guarantee period will be
extended to the whole of life of the younger insured.
- --------------------------------------------------------------------------------
Proceeds Payable To We will pay the death benefit proceeds to the
The Beneficiary beneficiary upon the last surviving insured's death.
The proceeds may be paid in cash or under one or more
income plans. See CHOOSING AN INCOME PLAN.
In the event of the death of either insured within
two years from the date of issue, proof of such death
should be promptly submitted to our Service Center
since we will pay only a limited benefit under
certain circumstances. See LIMITS ON OUR CONTESTING
THIS POLICY AND SUICIDE.
DEATH BENEFIT PROCEEDS
Death benefit proceeds depend upon the death benefit
option in effect on the date of death.
Option 1. Under this option, death benefit proceeds
are determined as follows:
(1) We determine the policy's death benefit,
which is the larger of the face amount or the
variable insurance amount.
(2) We subtract from (1) any policy debt.
(3) We add to (2) any rider benefits payable.
VUL92 SPECIMEN - 20 -
<PAGE> 21
- --------------------------------------------------------------------------------
Proceeds Payable To Option 2. Under this option, death benefit proceeds
The Beneficiary are determined as follows:
(Continued) (1) We determine the policy's death benefit,
which is the larger of the face
amount plus cash value or the variable
insurance amount.
(2) We subtract from (1) any policy debt.
(3) We add to (2) any rider benefits payable.
The value of the death benefit proceeds will be that
as of the last surviving insured's date of death. If
that death occurs during the grace period, we will
pay the beneficiary the death benefit proceeds in
effect immediately prior to the grace period reduced
by any overdue charges. The death benefit will never
be less than that required to keep this policy
qualified as life insurance under the federal income
tax laws.
CHANGING THE DEATH BENEFIT OPTION
On each policy anniversary beginning with the
fifteenth, the owner may change the death benefit
option. We will change the policy face amount in
order to keep your death benefit constant as of the
effective date of the change.
If the death benefit option is changed from Option 1
to Option 2, satisfactory evidence of insurability of
both insureds will be required. A change in the
death benefit option will not be permitted if it
would result in a face amount of less than $100,000.
In no event will a change be permitted if after the
change, the policy would not qualify as life
insurance under federal income tax laws.
HOW TO CLAIM DEATH BENEFIT PROCEEDS
The beneficiary should contact our Service Center for
instructions. We will usually pay the proceeds
within seven (7) days after we receive satisfactory
proof of the last surviving insured's death and any
other requirements, including due proof of death of
the first insured to die. We may delay payment of
all or part of the death benefit if we have not been
able to determine this policy's cash value as of the
date of death because:
- The NYSE is closed for trading
except for normal holiday closing;
- The SEC determines that a state of
emergency exists; or
- An order of the SEC permits a delay
for the protection of
- policyowners.
If a delay is necessary and death of the last
surviving insured occurs prior to the end of the
guarantee period, we may delay payment of any excess
of the death benefit over the face amount. After the
guarantee period has expired, we may delay payment of
the entire death benefit.
We will add interest to the death benefit proceeds at
an annual rate of at least the minimum required by
state law from the date of death to the date of
payment.
VUL92 SPECIMEN - 21 -
<PAGE> 22
- --------------------------------------------------------------------------------
CHOOSING AN INCOME PLAN
- --------------------------------------------------------------------------------
You may choose one or more income plans under the
policy for the payment of death benefit proceeds.
If, at the time of the death of the last surviving
insured no plan has been chosen for paying death
benefit proceeds, the beneficiary may choose a plan
within one year. The owner may also elect an income
plan under the policy on surrender of the policy.
Our approval is needed for any plan where:
- The person named to receive payment
is other than the owner or
- beneficiary.
- The person named is not a natural
person, such as a corporation; or
- Any income payment would be less
than $100.
- --------------------------------------------------------------------------------
The Income Plans There are six (6) income plans to choose from. They
are:
PLAN 1. INCOME FOR A FIXED PERIOD
Payment is made in equal installments for a fixed
number of years. We guarantee each monthly payment
will be at least the amount shown in the following
table. Values for annual, semi-annual or quarterly
payments are available on request.
Table for Income for a Fixed Period
(Payments for Each $1,000 Applied)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Fixed Period Monthly Fixed Period Monthly
of Years Income of Years Income
------------ ------- ------------ -------
<S> <C> <C> <C>
1 $84.47 16 $6.53
2 42.86 17 6.23
3 28.99 18 5.96
4 22.06 19 5.73
5 17.91 20 5.51
6 15.14 21 5.32
7 13.16 22 5.15
8 11.68 23 4.99
9 10.53 24 4.84
10 9.61 25 4.71
11 8.86 26 4.59
12 8.24 27 4.47
13 7.71 28 4.37
14 7.26 29 4.27
15 6.87 30 4.18
--------------------------------------------------------------------------------------
</TABLE>
VUL92 SPECIMEN - 22 -
<PAGE> 23
- --------------------------------------------------------------------------------
PLAN 2. INCOME FOR LIFE
Payment is made to the person named in equal monthly
installments and guaranteed for at least a period
certain. The period certain can be 10 or 20 years.
Other periods certain are available on request. A
refund certain may be chosen instead. Under this
arrangement, income is guaranteed until payments
equal the amount applied. If the person named lives
beyond the guaranteed payments, payments continue
until his or her death.
We guarantee each payment will be at least the amount
shown in the following table. By age we mean the
named person's age on his or her birthday nearest the
plan's effective date. Amounts for ages not shown
are available on request.
- --------------------------------------------------------------------------------
The Income Plans
(Continued) Tables for Income for
Life
(Monthly Payments for Each $1,000 Applied)
Payments to a Male
<TABLE>
<CAPTION>
Age 10 Years Certain 20 Years Certain Refund Certain
------- ---------------- ---------------- --------------
<S> <C> <C> <C>
0-10 $3.24 $3.23 $3.22
15 3.32 3.31 3.30
20 3.41 3.40 3.39
25 3.52 3.51 3.50
30 3.66 3.64 3.63
35 3.84 3.81 3.79
40 4.07 4.00 3.99
45 4.36 4.23 4.24
50 4.71 4.50 4.54
55 5.14 4.79 4.92
60 5.68 5.10 5.39
65 6.35 5.38 6.01
70 7.17 5.60 6.83
75 8.07 5.72 7.94
80 8.93 5.75 9.48
85 & over 9.54 5.75 ----
------------------------------------------------------------------------------
</TABLE>
VUL92 SPECIMEN - 23 -
<PAGE> 24
------------------------------------------------------------------------------
Payments to a Female
<TABLE>
<CAPTION>
Age 10 Years Certain 20 Years Certain Refund Certain
------- ---------------- ---------------- --------------
<S> <C> <C> <C>
0-10 $3.17 $3.16 $3.15
15 3.23 3.22 3.21
20 3.30 3.29 3.28
25 3.39 3.38 3.37
30 3.50 3.49 3.48
35 3.64 3.62 3.61
40 3.81 3.78 3.77
45 4.04 3.99 3.98
50 4.33 4.23 4.24
55 4.70 4.53 4.57
60 5.17 4.87 4.99
65 5.80 5.22 5.55
70 6.63 5.51 6.32
75 7.64 5.68 7.39
80 8.64 5.74 8.85
85 & over 9.33 5.75 ----
---------------------------------------------------------------------------------
</TABLE>
VUL92 SPECIMEN - 24 -
<PAGE> 25
- --------------------------------------------------------------------------------
The Income Plans PLAN 3. INTEREST PAYMENT
(Continued) Amounts can be left with us to earn interest at an
annual rate of at least 3%. Interest payments can be
made annually, semi-annually, quarterly or monthly.
PLAN 4. INCOME OF A FIXED AMOUNT
Payments of an agreed fixed amount are made annually,
semi-annually, quarterly or monthly. The fixed
amount per year must be at least $60 for each $1,000
of the amount applied. The amount applied will earn
interest at an annual rate of at least 3%. Payments
will continue until the amount applied and interest
are fully paid.
PLAN 5. JOINT LIFE INCOME
This plan is available if there are two persons named
to receive payments. At least one of the persons
named must be either the owner or beneficiary of this
policy. Monthly payments are made as long as at
least one of the named persons is living. We
guarantee the payments will be at least the amount
shown in the following table while both named persons
are alive. When one dies, we guarantee to continue
paying the other at least two-thirds of the amount
shown. By age we mean the named person's age on his
or her birthday nearest the plan's effective date.
Amounts for two males, two females or for ages not
shown in the table below are available on request.
Two of Joint Life Income
(Monthly Payments for Each $1,000 Applied)
<TABLE>
<CAPTION>
Female Age
55 60 65 70 75
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 $4.55 $4.76 $4.99 $5.26 $5.56
55 4.75 4.99 5.27 5.59 5.95
60 4.96 5.25 5.59 5.98 6.42
Male Age 65 5.18 5.53 5.94 6.43 6.99
70 5.43 5.84 6.33 6.94 7.66
75 5.69 6.16 6.73 7.49 8.41
--------------------------------------------------------------
</TABLE>
PLAN 6. ANNUITY PLAN
An amount can be used to buy any single premium
annuity we offer on the plan's effective date.
Annuities combine features of guaranteed income and
payment similar to plans 2 and 5.
VUL92 SPECIMEN - 25 -
<PAGE> 26
- --------------------------------------------------------------------------------
Payments When Named When the person named to receive payments dies, we
Person Dies will pay any amounts still due. The amounts still
due are determined as follows:
- For plans 1, 2 or 4, any remaining
guaranteed payments will be
continued. Under plan 4, any unpaid
proceeds with any accrued values of
the remaining guaranteed payments
may be paid in a single sum. This
means we deduct the amount of the
interest each remaining guaranteed
payment would have earned had it not
been paid out early. The discount
interest rate is 3% for plan 1 and
3.50% for plan 2. But we will use
the interest rate we used to
calculate the payment for plans 1
and 2, if they were not based on the
table in this policy.
- For plan 3, we'll pay the amount
left with us and any accrued
interest.
- For plan 5, no amounts are payable
after both named persons have died.
- For plan 6, the annuity agreement
will state the amount due, if any.
- --------------------------------------------------------------------------------
Limits On Our We rely on the statements made in the applications.
Contesting This Policy Legally, they are considered representations, not
warranties. We can contest the validity of this
policy if any material misstatements are made in any
applications. A copy of any application will be
attached to this policy.
With respect to each insured, we will not contest the
validity of this policy on the basis of statements as
to that insured after this policy has been in effect
during both insureds' lifetimes for two years from
the date of issue. At the end of the second policy
year, we will mail you a notice requesting that you
tell us if either insured has died. Failure to tell
us of the death of an insured during the two years
from the date of issue will not avoid a contest, if
we have basis to do so, even if the policy is still
in force. We will not contest any policy change that
requires evidence of insurability, or any
reinstatement of this policy, after the change or
reinstatement has been in effect for two years during
the lifetime of the insured or insureds living at the
time the change or reinstatement takes effect.
- --------------------------------------------------------------------------------
Quarterly Report We will send you a report four (4) times a policy
year within 31 days after the end of each policy
quarter. The report will show the death benefit,
cash value, any change in the additional insurance
rider face amount and policy debt as of the end of
the policy quarter. The report will also show the
allocation of the total investment base as of such
date and the amounts deducted from or added to the
total investment base since the last quarterly
report. The report will also include any other
information that may be currently required by the
insurance supervisory official of the jurisdiction in
which this policy is delivered.
- --------------------------------------------------------------------------------
Changing This Policy This policy with any benefit riders may be changed to
another plan of insurance according to our rules at
the time of the change.
VUL92 SPECIMEN - 26 -
<PAGE> 27
- --------------------------------------------------------------------------------
Policy Changes For you to receive the tax treatment accorded to life
Applicable Tax Law insurance under federal law, this policy must qualify
initially and continue to qualify as life insurance
under the Internal Revenue Code of 1986, as amended,
or successor law. Therefore, to maintain this
qualification to the maximum extent permitted by law,
we reserve in this policy the right to return any
premium payments that would cause this policy to fail
to qualify as life insurance under applicable tax law
as interpreted by us. Further, we reserve the right
to make changes in this policy or its riders or to
make distributions from this policy to the extent we
deem it necessary to continue to qualify this policy
as life insurance. Any such changes will apply
uniformly to all policies that are affected. You will
be given advance written notice of such charges.
- --------------------------------------------------------------------------------
Error In Age Or Sex If an age or sex for either insured as stated in the
application is wrong, it could mean the face amount
or any other policy benefit is wrong. Therefore,
amounts payable under this policy or its riders will
be what the premiums paid would have bought for the
guarantee period at the true age or sex.
- --------------------------------------------------------------------------------
Suicide If either insured commits suicide within two years
from the date of issue or reinstatement, while sane
or insane, we will pay only a limited benefit and
then terminate this policy. The limited benefit will
be the amount of the premiums paid less any policy
debt.
- --------------------------------------------------------------------------------
Establishing If we are unable to determine which of the insureds
Survivorship was the last survivor on the basis of the proofs of
death provided to us, we shall consider Insured No. 1
to be the last surviving insured.
- --------------------------------------------------------------------------------
Claims Of Creditors The proceeds of this policy will be free from
creditors' claims to the extent allowed by law.
- --------------------------------------------------------------------------------
Non-Participating This policy does not participate in the divisible
surplus of Merrill Lynch Life Insurance Company
("Merrill Lynch Life").
- --------------------------------------------------------------------------------
Authority To Make All agreements made by us must be signed by our
Agreements president or a vice president and by our secretary or
an assistant secretary. No other person, including an
insurance agent or broker, can:
- Change any of this policy's terms;
- Extend the time for paying premiums; or
- Make any agreement binding on us.
VUL92 SPECIMEN - 27 -
<PAGE> 28
- --------------------------------------------------------------------------------
Changes In Policy Changes in policy cost factors (expense charges,
Cost Factors current cost of insurance rates, loan charges) will be
by class and based upon charges in future expectations
for such elements as: mortality, persistency, expenses
and taxes. The policy cost factors are determined
prospectively. We will not recoup prior losses by
means of policy cost factor changes. Any change in
policy cost factors will be determined in accordance
with procedures and standards on file, if required,
with the insurance supervisory official of the
jurisdiction in which this policy is delivered.
- --------------------------------------------------------------------------------
Maturity Date On the maturity date of this policy we will pay the
Of This Policy owner the cash value less any policy debt if either
insured is then living and this policy is in effect.
The cash value may be paid in cash or under one or
more income plans. See CHOOSING AN INCOME PLAN.
- --------------------------------------------------------------------------------
Required Note On Our computations of reserves and fixed base are based
Our Computations on the Commissioners 1980 Standard Ordinary Mortality
Tables and interest at the rate of 5% per year. In
calculating the maximum joint and last survivor cost
of insurance rates in Appendix 1, we use the exact
ages of both insureds and their individual cost of
insurance rates. When making our computations, we
assume that death claims are paid immediately.
Mortality and expense risks of Merrill Lynch Life
shall not adversely affect the dollar amount of
insurance benefits or cash values.
We have filed a detailed statement of our
computations with the insurance supervisor of the
state or jurisdiction where this policy is delivered.
All policy values equal or exceed those required by
the law of that state or jurisdiction. Any benefit
provided by an attached rider will not increase these
values unless stated in that rider.
VUL92 SPECIMEN - 28 -
<PAGE> 29
- --------------------------------------------------------------------------------
APPENDIX 1
- --------------------------------------------------------------------------------
TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES
(Quarterly Rates per $1,000 of Net Amount at Risk)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Policy Policy Policy
Year Factor Year Factor Year Factor
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $0.00062 26 $0.50695 51 $29.50364
2 0.00200 27 0.59735 52 33.76133
3 0.00364 28 0.70806 53 38.38282
4 0.00559 29 0.84492 54 43.31380
5 0.00797 30 1.01203 55 48.61809
6 0.01080 31 1.20971 56 54.32188
7 0.01430 32 1.44039 57 60.54019
8 0.01839 33 1.70448 58 67.48249
9 0.02325 34 2.00341 59 75.52392
10 0.02885 35 2.34693 60 85.75032
11 0.03551 36 2.75356 61 100.49099
12 0.04330 37 3.26880 62 125.24872
13 0.05244 38 3.84120 63 174.86963
14 0.06314 39 4.57483 64 305.59174
15 0.07567 40 5.45962 65 333.33333
16 0.09044 41 6.49574
17 0.10808 42 7.68392
18 0.12936 43 9.03348
19 0.15507 44 10.53512
20 0.18560 45 12.22534
21 0.22169 46 14.16393
22 0.26390 47 16.41144
23 0.31218 48 19.04093
24 0.36695 49 22.11355
25 0.43101 50 25.60401
</TABLE>
VUL92 SPECIMEN - 29 -
<PAGE> 30
- --------------------------------------------------------------------------------
APPENDIX 2
- --------------------------------------------------------------------------------
CASH VALUE CORRIDOR FACTORS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Age of Younger Percentage of Cash Age of Younger Percentage of Cash
Insured Value Insured Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
40 and under 250% 61 128%
41 243% 62 126%
42 236% 63 124%
43 229% 64 122%
44 222% 65 120%
45 215% 66 119%
46 209% 67 118%
47 203% 68 117%
48 197% 69 116%
49 191% 70 115%
50 185% 71 113%
51 178% 72 111%
52 171% 73 109%
53 164% 74 107%
54 157% 75 - 90 105%
55 150% 91 104%
56 146% 92 103%
57 142% 93 102%
58 138% 94 101%
59 134% 95 and over 100%
60 130%
</TABLE>
VUL92 SPECIMEN - 30 -
<PAGE> 31
- --------------------------------------------------------------------------------
Flexible Premium Joint Variable universal life insurance payable upon death
And Last Survivor of the last surviving insured. Death benefit subject
Variable Universal Life to guaranteed minimum during guarantee period.
Insurance Policy Guaranteed minimum is policy's face amount.
Flexible premiums. Non-participating. Investment
results reflected in policy benefits.
VUL92 SPECIMEN
<PAGE> 1
EXHIBIT 1.A.(5)(b)(1)
-------------------------------------------------------
[LOGO] MERRILL LYNCH MERRILL LYNCH LIFE INSURANCE COMPANY LITTE ROCK,
ARKANSAS
-------------------------------------------------------
BACKDATING ENDORSEMENT
- --------------------------------------------------------------------------------
ENDORSEMENT Insured: RICHARD ROE
DATA
Policy Number: SPECIMEN
Policy Date: September 30, 1992
Endorsement Effective Date: September 30, 1992
- --------------------------------------------------------------------------------
Endorsed on This Policy on its Date of Issue:
For the policy processing period beginning on the
policy date we will calculate the net rate of return
for an investment division as follows:
(1) For the period from the policy date
to the Endorsement Effective Date we
will credit interest at the rate
used in our computations shown in
the Policy Schedule.
(2) For the period from the Endorsement
Effective Date to the next policy
processing date, we will credit the
division's net rate of return for
such period.
<TABLE>
<S> <C>
/s/ BARRY G. SKOLNICK /s/ ANTHONY J. VESPA
-------------------------------- ----------------------------------
Barry G. Skolnick Anthony J. Vespa
Secretary President
</TABLE>
<PAGE> 1
EXHIBIT 1.A.(5)(b)(2)(a)
-----------------------------------------------------------
[LOGO] MERRILL LYNCH MERRILL LYNCH LIFE INSURANCE COMPANY Little Rock,
Arkansas
-----------------------------------------------------------
ADDITIONAL INSURANCE RIDER
- --------------------------------------------------------------------------------
RIDER SCHEDULE Insured No. 1: Richard Roe
Insured No. 2: Jane Roe
Owner: Jane Roe
Issue Date: September 30, 1992
Policy Number: SPECIMEN
Rider Face Amount: $500,000.00
- --------------------------------------------------------------------------------
INSURANCE BENEFITS This rider provides additional insurance
coverage to the insureds. It is payable to the
beneficiary at the death of the last surviving
insured. The rider face amount provided by this
rider is shown on the above rider schedule.
- --------------------------------------------------------------------------------
CHANGING THE RIDER The owner may elect to change the rider face
FACE AMOUNT amount prior to either insured's attained age
85. The minimum change in the rider face amount
is $100,000. One (1) such change is permitted
each year. The minimum additional insurance
rider face amount is $100,000. To request a
change in rider face amount, you must provide
satisfactory notice to us. The effective date
of change will be the policy anniversary date
next following underwriting approval of the
change. As of the effective date of change,
the guarantee period will change. See HOW WE
DETERMINE THE GUARANTEE PERIOD.
- --------------------------------------------------------------------------------
INCREASING THE If both insureds are alive, you may increase the
RIDER FACE AMOUNT rider face amount. Satisfactory evidence of
insurability will be required before we will
increase the rider face amount. We will not
allow an increase on the first policy
anniversary if the face amount of the policy
plus the new rider face amount provide a
guarantee period of less than one year from the
effective date of the increase.
AIVUL92 SPECIMEN
<PAGE> 2
- --------------------------------------------------------------------------------
DECREASING THE Beginning in policy year 8, you may decrease the
RIDER FACE AMOUNT rider face amount but not below the amount
required to keep the policy qualified as life
insurance under federal income tax laws.
- --------------------------------------------------------------------------------
HOW WE DETERMINE WHEN A CHANGE IN RIDER FACE AMOUNT IS REQUESTED
THE GUARANTEE As of the effective date of change, we will
redetermine the guarantee period PERIOD as
follows:
(1) We take the fixed base described in
the policy as of such date.
(2) Based on the policy year, the face
amount of the policy, plus the rider
face amount, and the amount in (1),
we will redetermine the guarantee
period.
Our computations are based on an annual interest
rate of 5% and the guaranteed maximum cost of
insurance rates shown in Appendix 1.
- --------------------------------------------------------------------------------
COST OF RIDER The cost of the rider is determined by dividing
the rider face amount by $1000 and multiplying
the result by the current cost of insurance rate
per $1000 based on the policy year and sex and
underwriting class of both insureds. The cost
of the rider is deducted from the investment
base as described in the policy. See INVESTMENT
BASE IN EACH INVESTMENT DIVISION in the policy.
- --------------------------------------------------------------------------------
INCONTESTABILITY The incontestability and suicide provisions of
AND SUICIDE the policy also apply to this rider. We can
contest the validity of any change in the rider
face amount requested by the owner if any
material misstatements are made in any
application required for that change. We will
not contest any change in the rider face amount
requested by the owner after the change has been
in effect during the insureds' lifetimes for two
years from the effective date of such change. If
either insured commits suicide, while sane or
insane, within two years of the effective date
of any increase in the rider face amount
requested by the owner, we will terminate the
coverage attributable to such increase in rider
face amount and pay only a limited benefit. The
limited benefit will be the amount of cost of
insurance deductions made for such increase.
- --------------------------------------------------------------------------------
WHEN THIS RIDER This rider will terminate on the date the policy
WILL TERMINATE terminates or lapses.
- --------------------------------------------------------------------------------
AIVUL92 SPECIMEN
<PAGE> 3
GENERAL This rider is a part of the policy. It has no
cash or loan value. Its benefit is subject to
all the terms of this rider and the policy.
MERRILL LYNCH LIFE INSURANCE COMPANY
<TABLE>
<S> <C> <C>
/s/ BARRY G. SKOLNICK /s/ ANTHONY J. VESPA
-------------------------- ---------------------------
Barry G. Skolnick, Secretary Anthony J. Vespa, President
</TABLE>
AIVUL92 SPECIMEN
<PAGE> 1
EXHIBIT 1.A.(5)(b)(3)
-------------------------------------------------
[LOGO] MERRILL LYNCH MERRILL LYNCH LIFE INSURANCE COMPANY Little
Rock,
Arkansas
-------------------------------------------------
POLICY SPLIT RIDER
- --------------------------------------------------------------------------------
RIDER BENEFIT This rider gives you the right to exchange this
policy for an individual variable universal life
insurance policy on the life of each insured if
the federal tax law is changed and results in
(a) a reduction in or elimination of the
unlimited Federal Estate Tax marital deduction
provision or (b) a reduction in the maximum
Federal Estate Tax bracket rate to a rate below
25%. It also gives you the right to exchange
this policy for an individual life insurance
policy on the life of each insured upon divorce
of the insureds.
To exercise this option, a policy on the life of
each insured must be applied for and issued.
If either insured does not qualify for an
individual variable universal life insurance
policy under our rules then in effect, this
option may not be exercised and the rider will
terminate.
- --------------------------------------------------------------------------------
CONDITIONS FOR The following conditions must be met in order to
EXCHANGE make the exchange:
(1) Both insureds must be living on the
exchange date and be less than age 85.
(2) You must request the exchange in
writing, complete an application for
the new policies, provide satisfactory
evidence of insurability as to both
insureds and surrender this policy.
The owner of each new policy must have
an insurable interest in the insured.
If this policy is assigned, the
assignee must consent to the exchange.
(3) This policy must be in effect on the
exchange date.
(4) If the exchange is a result of
divorce, a final divorce decree
issued by a court of competent
jurisdiction in the United States on
the insureds' marriage must be in
effect for at least six months, but
not more than one year before an
exchange takes effect. Evidence of
such decree must be received by us
within one year after the decree but
prior to the date of exchange. The
insureds must have been married when
the policy was issued. If the
exchange is as a result of either
federal tax law change described
above, you must request the exchange
within six months of the date the
change is signed into law.
PSVUL92 SPECIMEN
<PAGE> 2
- --------------------------------------------------------------------------------
THE NEW POLICY The face amount of each new policy will be equal
to one-half of the face amount of this policy
less any outstanding policy debt on the date of
exchange. One-half of the cash value of this
policy less any policy debt will be applied to
each of the new policies.
The issue date of the new policy will be the
date of exchange. On the issue date we will
refund any unearned charges for cost of
insurance and rider costs previously deducted
from this policy. Sales loads for the new
policy will take into account the sales load
paid under this policy. If two base premiums
have not been paid, then the difference between
(a) the sales load which would have been paid
under this policy had both base premiums been
paid and (b) the sales load paid, shall be
allocated to the new policies. The allocation
to each new policy shall be in the same
proportion as the base premium for each new
policy bears to the base premium for this
policy. This amount shall be deducted from
additional premiums paid at the sales load rate
applicable to the first two base premiums under
each new policy. Thereafter, the sales load
shall be paid at the rate applicable to each
base premium paid after the second under each
new policy. The cost of insurance will be for
each insured's then attained age and for the
same risk class that the insured was classified
as under this policy.
We will not notify you of any tax law changes
which may effect this policy. A policy split
may have tax consequences. You should consult a
qualified tax adviser. This rider is part of
the policy to which it is attached.
MERRILL LYNCH LIFE INSURANCE COMPANY
<TABLE>
<S> <C>
/s/ BARRY G. SKOLNICK /s/ ANTHONY J. VESPA
---------------------------- ---------------------------
Barry G. Skolnick, Secretary Anthony J. Vespa, President
</TABLE>
PSVUL92 SPECIMEN
<PAGE> 1
EXHIBIT 1.A.(5)(b)(4)
------------------------------------------------------
[LOGO] MERRILL LYNCH MERRILL LYNCH LIFE INSURANCE COMPANY Little Rock,
Arkansas
------------------------------------------------------
ENDORSEMENT FOR GUARANTEED INTEREST DIVISION
- --------------------------------------------------------------------------------
ENDORSEMENT SCHEDULE Insured No. 1: Richard Roe
Insured No. 2: Jane Roe
Owner: Jane Roe
Issue Date: September 30, 1992
Policy Number: SPECIMEN
Endorsement Effective Date: March 30, 1993
- --------------------------------------------------------------------------------
This endorsement adds or modifies certain
provisions of the basic policy. It is
effective on the endorsement effective date
shown on the above endorsement schedule.
- --------------------------------------------------------------------------------
GUARANTEED INTEREST Once this endorsement is elected, premiums
DIVISION and the investment base will be allocated
to the guaranteed interest division of our
general account. The guaranteed interest
division is not a part of the separate
account. Our general account contains all
our assets except those in any of our
separate accounts. Subject to applicable
laws, we have sole discretion over the
investments of the assets of our general
account.
Policy provisions applicable to investment
divisions in the separate account also apply
to the guaranteed interest division, except:
- No allocation of the investment base
is permitted from the guaranteed interest
division to the separate account.
- The amount allocated to the
guaranteed interest division will
earn interest at a declared interest
rate. We set declared interest
rates from time to time. For any
amount allocated, we guarantee that
a rate, once set, will remain in
effect for at least one year. The
rate will not be less than 4%.
Different portions of the investment
base allocated to the guaranteed
interest division may earn different
rates.
GIDVUL92 SPECIMEN
<PAGE> 2
- --------------------------------------------------------------------------------
GUARANTEED INTEREST - Amounts borrowed, withdrawn, allocated to or
DIVISION (CONTINUED) deducted from or repaid to the guaranteed interest
division are subject to our current rules. These
rules govern the order in which amounts are
allocated to the portions of the investment
base earning the different declared interest
rates.
- --------------------------------------------------------------------------------
INVESTMENT BASE IN The investment base allocated to the guaranteed
EACH INVESTMENT interest division is calculated as specified in the
DIVISION INVESTMENT BASE IN EACH INVESTMENT DIVISION provision
in this policy except the last sentence in item (7)
is deleted and replaced by: All amounts in (7) will
be allocated to the guaranteed interest division.
- --------------------------------------------------------------------------------
CASH VALUE BENEFITS The CASH VALUE BENEFITS section in this policy is
modified by adding:
We reserve the right to delay payment of any cash
value from the guaranteed interest division for up to
six (6) months after we receive the request for
surrender. We will credit interest at an annual rate
of at least 4% on any payment deferred for 30 days or
more.
- --------------------------------------------------------------------------------
POLICY LOANS The first paragraph of the EFFECT OF A LOAN section
is deleted and replaced by:
A loan will be transferred out of the guaranteed
investment division and into our general account.
The minimum annual rate of interest accrued on the
loan amounts transferred to the general account is
4%. A repayment will be allocated to the guaranteed
interest division.
The WHEN WE WILL MAKE THE LOAN section is modified by
adding the following sentence to the end of the
section:
We reserve the right to delay making the loan from
the guaranteed interest division for up to six (6)
months from the date we receive the request.
MERRILL LYNCH LIFE INSURANCE COMPANY
<TABLE>
<S> <C>
/s/ BARRY G. SKOLNICK /s/ ANTHONY J. VESPA
-------------------------- --------------------------
Barry G. Skolnick, Secretary Anthony J. Vespa, President
</TABLE>
GIDVUL92 SPECIMEN
<PAGE> 1
EXHIBIT 1.A.(6)(a)
ARTICLES OF AMENDMENT,
RESTATEMENT, AND REDOMESTICATION
OF THE
ARTICLES OF INCORPORATION
OF
MERRILL LYNCH LIFE INSURANCE COMPANY
A Stock Insurance Company Redomesticated from the
State of Washington to the State of Arkansas
Merrill Lynch Life Insurance Company (the "Corporation"), by
its President and Secretary, does hereby certify that upon the written
authorization of its sole shareholder on August 6, 1991, the Amended and
Restated Articles of Incorporation set forth below were adopted in order to
effect the redomestication of the Corporation from the State of Washington to
the State of Arkansas, thereby amending and restating in their entirety the
original Articles of Incorporation of the Corporation which became effective on
January 27, 1986 and all amendments thereto. Such Amended and Restated
Articles of Incorporation and such redomestication shall be effective on the
date these Articles are endorsed with the
Page 1 of 8
<PAGE> 2
"approval" of the Arkansas Insurance Commissioner and placed on file in his
office.
The text of the Articles of Incorporation are amended and
completely restated so as to provide as follows:
ARTICLE I - NAME
The name of the corporation shall be Merrill Lynch Life
Insurance Company.
ARTICLE II - LOCATION
The home office and principal place of business of the
Corporation in this state shall be located in Little Rock, Pulaski County,
Arkansas.
The Corporation may establish or discontinue, from time to
time, such other offices and places of business within or without this state as
the Corporation may deem proper for the conduct of the Corporation's business.
ARTICLE III - PURPOSES AND POWERS
(a) The general nature of the business to be transacted
by the Corporation is to act as an "insurer" as defined in A. C. A. Section
23-60-102 for the kinds of insurance identified as life" in A. C. A. Section
23-62-102, including but not limited to, annuities and variable life insurance
and variable
Page 2 of 8
<PAGE> 3
annuities, and "disability" in A. C. A. Section 23-62-103, and to conduct such
other business or perform such other acts as are necessary or incidental to
conducting such insurance business.
(b) The Corporation shall have all of the general and
special powers granted by the State of Arkansas and any other state or
jurisdiction in which it may be authorized to do business.
The Corporation shall also have power to invest and reinvest
its funds; to prosecute suits, actions, and other proceedings to protect its
property, assets and rights; to lend upon, purchase, hold, guarantee, endorse,
mortgage, encumber, pledge, hypothecate, sell, assign, transfer, convey, lease
or otherwise dispose of, mortgage or deal in any personal property, real
property or rights or interests in either, including the establishment of
separate accounts and allocating thereto amounts to provide for life insurance
or annuities payable in fixed or variable amounts or both; to secure, mortgage,
pledge or borrow on any corporate assets or property other than trusts or
fiduciary property; to compromise claims, to lend money, negotiate loans, buy
and sell bonds, debentures, coupons and other securities not prohibited by law,
to issue bonds and
Page 3 of 8
<PAGE> 4
promissory notes either secured or unsecured; and to pay dividends to
stockholders.
The Corporation shall also have power to indemnify the
officers and directors during their term of office or thereafter for actions
arising during their term of office, either directly or through the purchase of
insurance, for expenditures as parties to suits by or in the right of the
Corporation or other than by or in the right of the Corporation to the extent
permitted by the Statutes of Arkansas and as shall be provided in the By-laws.
ARTICLE IV - DIRECTORS
The Board of Directors shall conduct the affairs of the
Corporation and may adopt, alter, amend or repeal By-Laws for the governance
and management of the affairs and business of the Corporation. The number of
directors of the Corporation shall from time to time be fixed by or otherwise
provided for in the By-laws, but shall never number less than three. The
initial Board of Directors of the Corporation consisted of Messrs. Fenwick J.
Crane, Gerald F. Fehr, D. McKay Snow, Robert J. Newell and Dakin B. Ferris.
The current Board of Directors, who shall serve until re-elected or replaced by
the stockholders in accordance with the By-laws are:
Page 4 of 8
<PAGE> 5
David Marshall Dunford John Carroll Ramsey Hele
376 Carter Road 304 Trinity Court, Apt. 6
Princeton, NJ 08540 Princeton, NJ 08540
Kenneth Wayne Kaczmarek Thomas Harold Patrick
89 Lambert Drive 122 Brinker Road
Princeton, NJ 08540 Barrington, IL 60010
Barry Gordon Skolnick
120 Woodview Drive
Belle Mead, NJ 08502
ARTICLE V - DURATION
This Corporation shall have perpetual existence.
ARTICLE VI - CAPITAL STOCK
The authorized capital stock of the Corporation shall be ten
million dollars ($10,000,000), divided into one million shares (1,000,000) of
nonassessable common stock with a par value of ten dollars ($10.00) per share.
The common stock shall have voting rights for the election of directors and for
all other purposes, each holder of common stock being entitled to one vote for
each share thereof held by such holder, except as otherwise required by law.
ARTICLE VII - AMENDMENT
These Articles may be amended by written authorization of the
holders of a majority of the voting power of the Corporation's outstanding
capital stock or by affirmative vote of
Page 5 of 8
<PAGE> 6
a majority voting at a lawful meeting of stockholders of which the notice given
to stockholders included due notice of the proposal to amend.
ARTICLE VIII - MEETINGS OF STOCKHOLDERS
Meetings of stockholders of the Corporation shall be held in
the city or town of its principal office or place of business in Arkansas or in
such other place within the State of Arkansas as shall be designated by the
Board of Directors of the Corporation.
ARTICLE IX - ORIGINAL INCORPORATORS
The names and resident addresses of the incorporators of the
Corporation, which at that time was incorporated under the laws of the State of
Washington, were:
Fenwick J. Crane Gerald F. Fehr
1571 Parkside Drive East 8615 Inverness Drive N.E.
Seattle, Washington 98112 Seattle, Washington 98115
D. McKay Snow Robert J. Newell
13011 N.E. First 16312 Inglewood Lane N.E.
Bellevue, Washington 98005 Bothell, Washington 98011
Craig F. Likkel
23591 27th Place West
Brier, Washington 98036
Page 6 of 8
<PAGE> 7
IN WITNESS WHEREOF, the undersigned President and Secretary of
Merrill Lynch Life Insurance Company do hereby declare and certify that the
statements set forth hereinabove are true and have hereunto set their hands
this 6th day of August, 1991.
MERRILL LYNCH LIFE INSURANCE COMPANY
By: /s/ THOMAS H. PATRICK
--------------------------------
Thomas H. Patrick, President
[SEAL]
ATTEST:
By: /s/ BARRY G. SKOLNICK
----------------------------
Barry G. Skolnick, Secretary
Page 7 of 8
<PAGE> 8
STATE OF NEW JERSEY )
) ss. ACKNOWLEDGEMENT
COUNTY OF MIDDLESEX )
On this 6th day of August, 1991, before me, the undersigned, a Notary
Public, (or before any officer within this State or without the State now
qualified under existing law to take acknowledgments), duly commissioned,
qualified and acting, within and for said County and State, appeared in person
the within named Thomas R. Patrick and Barry G. Skolnick, (being the person or
persons authorized by said corporation to execute such instrument, stating
their respective capacities in that behalf), to me personally well known, who
stated that they were the President and Secretary of the Merrill Lynch Life
Insurance Company, and were duly authorized in their respective capacities to
execute the foregoing instruments for and in the name and behalf of said
corporation, and further stated and acknowledged that they had so signed,
executed and delivered said foregoing instrument for the consideration, uses
and purposes therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal
this 6th day of August, 1991.
/s/ SANDRA K. KELLY
-----------------------------
Notary Public
My Commission Expires: [Stamp]
SANDRA K. KELLY
- ---------------------------------
A Notary Public of New Jersey
My Commission Expires: April 3, 1994
[SEAL]
Page 8 of 8
<PAGE> 1
EXHIBIT 1.A.(6)(b)
AMENDED AND RESTATED
BY-LAWS
OF
MERRILL LYNCH LIFE INSURANCE COMPANY
(AN ARKANSAS CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
OFFICES
Section 1. Registered Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Notice of Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 4. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 5. Notice of Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 6. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 7. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 8. Order of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 9. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 10. List of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 11. Inspectors of Votes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 12. Actions Without a Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2. Number, Qualification, Election and
Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3. Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4. Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 5. Vacancies; Newly Created Directorships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
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MEETINGS OF THE BOARD OF DIRECTORS
Section 6. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 7. Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 8. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 9. Special Meetings; Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 10. Quorum and Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
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COMMITTEES OF DIRECTORS
Section 11. Executive Committee; How Constituted
and Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 12. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 13. Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 14. Quorum and Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 15. Other Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 16. Minutes of Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
GENERAL
Section 17. Actions Without a Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 18. Presence at Meetings by Means of
Communications Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
NOTICES
Section 1. Type of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V
OFFICERS
Section 1. Elected and Appointed Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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<TABLE>
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Section 2. Time of Election or Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4. Duties of the Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5. Duties of the President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6. Duties of Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7. Duties of the Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 8. Duties of the Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 9. Duties of the Controller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VI
INDEMNIFICATION
Section 1. Actions Other Than by or in the Right
of the Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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Section 2. Actions by or in the Right of the
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3. Right to Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4. Determination of Right to Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5. Advancement of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6. Other Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8. Definition of Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 9. Other Terms Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 10. Continuation of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VII
CERTIFICATES REPRESENTING STOCK
Section 1. Right to Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2. Facsimile Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3. Lost, Stolen, or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4. Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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Section 6. Registered Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2. Signatures on Negotiable Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4. Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE IX
AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
<PAGE> 6
ARTICLE I
OFFICES
Section 1. Registered Office. The address of the registered office
of the Corporation shall be such location in the State of Arkansas as may be
determined by the Board of Directors from time to time.
Section 2. Other Offices. The Corporation may also have offices at
such other place or places, both within and without the State of Arkansas, as
the Board of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings. All meetings of the
stockholders for the election of directors shall be held at such time and place
within the State of Arkansas, as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting. Meetings of
stockholders for any other purpose may be held at such time and place within
the State of Arkansas as shall be stated in the notice of the meeting or in a
duly executed waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of stockholders shall be
held on such date and time as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting, at which the
stockholders shall elect by a plurality vote by written ballot a Board of
Directors and transact such other business as may properly be brought before
the meeting.
Section 3. Notice of Annual Meetings. Written notice of the annual
meeting, stating the place, date, and hour of the meeting, shall be given to
each stockholder of record entitled to vote at such meeting not less than 10 or
more than 60 days before the date of the meeting.
Section 4. Special Meetings. Special meetings of the stockholders
for any purpose or purposes, unless otherwise
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prescribed by statute or the Articles of Incorporation, may be called at any
time by order of the Board of Directors and shall be called by the Chairman of
the Board, the President, or the Secretary at the request in writing of a
majority of the Board of Directors. Such request shall state the purpose or
purposes of the proposed special meeting.
Section 5. Notice of Special Meetings. Written notice of a special
meeting, stating the place, date, and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given to each stockholder of
record entitled to vote at such meeting not less than 10 or more than 60 days
before the date of the meeting.
Section 6. Quorum. Except as otherwise provided by statute or the
Articles of Incorporation, the holders of stock having a majority of the voting
power of the stock entitled to be voted thereat, present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at all meetings of the stockholders. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time without notice (other than
announcement at the meeting at which the adjournment is taken of the time and
place of the adjourned meeting) until a quorum shall be present or represented.
At such adjourned meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the meeting
as originally notified. If the adjournment is for more than 30 days, or if
after the adjournment a new record date is fixed for the adjourned meeting,
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 7. Organization. At each meeting of the stockholders, the
Chairman of the Board or the President, determined as provided in Article V of
these By-Laws, or if those officers shall be absent therefrom, another officer
of the Corporation chosen as chairman by those stockholders present in person
or by proxy and entitled to vote thereat, or if all the officers of the
Corporation shall be absent therefrom, a stockholder holding of record shares
of stock of the Corporation so chosen, shall act as chairman of the meeting and
preside
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thereat. The Secretary, or if he shall be absent from such meeting or shall be
required pursuant to the provisions of this Section 7 to act as chairman of
such meeting, the person (who shall be an Assistant Secretary, if an Assistant
Secretary shall be present thereat) whom the chairman of such meeting shall
appoint, shall act as secretary of such meeting and keep the minutes thereof.
Section 8. Order of Business. The order of business at all meetings
of stockholders shall be as determined by the chairman of the meeting or as is
otherwise determined by the vote of the holders of a majority of the shares of
stock present in person or by proxy and entitled to vote without regard to
class or series at the meeting.
Section 9. Voting. Except as otherwise provided in the Articles of
Incorporation, each stockholder shall, at each meeting of the stockholders, be
entitled to one vote in person or by proxy for each share of stock of the
Corporation held by him and registered in his name on the books of the
Corporation on the date fixed pursuant to the provisions of Section 5 of
Article VII of these By-Laws as the record date for the determination of
stockholders who shall be entitled to notice of and to vote at such meeting.
Shares of its own stock belonging to the Corporation or to another corporation,
if a majority of the shares entitled to vote in the election or directors of
such other corporation is held directly or indirectly by the Corporation, shall
not be entitled to vote. Any vote by stock of the Corporation may be given at
any meeting of the stockholders by the stockholder entitled thereto, in person
or by his proxy appointed by an instrument in writing subscribed by such
stockholder or by his attorney thereunto duly authorized and delivered to the
Secretary of the Corporation or to the secretary of the meeting; provided,
however, that no proxy shall be voted or acted upon after three years from its
date, unless said proxy shall provide for a longer period. Each proxy shall be
revocable at will and this provision cannot be waived unless expressly provided
otherwise by statute. At all meetings of the stockholders all matters, except
where other provision is made by law, the Articles of Incorporation, or these
By-Laws, shall be decided by the vote of a majority of the votes cast by the
stockholders present in person or by proxy and entitled to vote thereat, a
quorum being present. Unless demanded by the holders
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of a majority of the shares present in person or by proxy at any meeting of the
stockholders and entitled to vote thereat, or so directed by the chairman of
the meeting, the vote thereat on any question other than the election or
removal of directors need not be by written ballot. Upon a demand of any such
stockholder for a vote by written ballot on any question or at the direction of
such chairman that a vote by written ballot be taken on any question, such vote
shall be taken by written ballot. On a vote by written ballot, each ballot
shall be signed by the stockholder voting, or by his proxy, if there be such
proxy, and shall state the number of shares voted.
Section 10. List of Stockholders. It shall be the duty of the
Secretary or other officer of the Corporation who shall have charge of its
stock ledger, either directly or through another officer of the Corporation
designated by him or through a transfer agent appointed by the Board of
Directors, to prepare and make, at least 10 days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote thereat,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least 10 days
before said meeting, either at a place within the city where said meeting is to
be held, which place shall be specified in the notice of said meeting, or, if
not so specified, at the place where said meeting is to be held. The list
shall also be produced and kept at the time and place of said meeting during
the whole time thereof, and may be inspected by any stockholder of record who
shall be present thereat. The stock ledger shall be the only evidence as to
who are the stockholders entitled to examine the stock ledger, such list or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 11. Inspectors of Votes. At each meeting of the
stockholders, the chairman of such meeting may appoint two Inspectors of Votes
to act thereat, unless the Board of Directors shall have theretofore made such
appointments. Each Inspector of Votes so appointed shall first subscribe an
oath or affirmation faithfully to execute the duties of an Inspector of Votes
at such meeting with strict impartiality and according to the best of his
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ability. Such Inspectors of Votes, if any, shall take charge of the ballots,
if any, at such meeting and, after the balloting thereat on any question, shall
count the ballots cast thereon and shall make a report in writing to the
secretary of such meeting of the results thereof. An Inspector of Votes need
not be a stockholder of the Corporation, and any officer of the Corporation may
be an Inspector of Votes on any question other than a vote for or against his
election to any position with the Corporation or on any other question in which
he may be directly interested.
Section 12. Actions Without a Meeting. Any action required to be
taken at any annual or special meeting of stockholders of the Corporation, or
any action which may be taken at any annual or special meeting of stockholders,
may be taken without a meeting, without prior notice, and without a vote if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereat were present and voted. Prompt notice of
the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers. The business and affairs of the Corporation shall
be managed by its Board of Directors, which shall have and may exercise all
such powers of the Corporation and do all such lawful acts and things as are
not by statute, the Articles of Incorporation, or these By-Laws directed or
required to be exercised or done by the stockholders.
Section 2. Number, Qualification, Election and Term of Office. The
number of directors which shall constitute the whole Board of Directors shall
not be less than three (3) nor more than twenty (20). Within the limits above
specified, the number of directors that shall constitute the whole Board of
Directors shall be determined by resolution of the Board of Directors or by the
stockholders at any annual or special meeting or otherwise
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pursuant to action of the stockholders. Directors need not be stockholders.
The directors shall be elected at the annual meeting of the stockholders,
except as provided in Sections 4 and 5 of this Article III, and each director
elected shall hold office until the next annual meeting of the stockholders or
until his successor is duly elected and qualified, or until his death or
retirement or until he resigns or is removed in the manner hereinafter
provided. The Board of Directors or the stockholders may fix, from time to
time, such qualifications, if any, for elections as a director or the continued
holding of such office as they deem appropriate in view of the Corporation's
business.
Section 3. Resignations. Any director may resign at any time by
giving written notice of his resignation to the Corporation. Any such
resignation shall take effect at the time specified therein, or if the time
when it shall become effective shall not be specified therein, then it shall
take effect immediately upon its receipt by the Secretary. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 4. Removal of Directors. Any director may be removed, either
with or without cause, at any time, by the affirmative vote of a majority in
voting interest of the stockholders of record of the Corporation entitled to
vote, given at an annual meeting or at a special meeting of the stockholders
called for that purpose. The vacancy in the Board of Directors caused by any
such removal shall be filled by the stockholders at such meeting or, if not so
filled, by the Board of Directors as provided in Section 5 of this Article III.
Section 5. Vacancies; Newly Created Directorships. Any directorship
created by an increase in the number of directors or any vacancy resulting from
the removal or resignation of any director may be filled by a majority of the
directors then in office though less than a quorum, or by a sole remaining
director, or pursuant to the affirmative vote of a majority of the shares of
capital stock of the Corporation entitled to vote thereon, either at an annual
meeting of the stockholders or at a special meeting of such holders called for
that purpose. The director so elected shall hold office until the next annual
meeting of stockholders and until a successor is elected and qualified, unless
sooner displaced.
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MEETINGS OF THE BOARD OF DIRECTORS
Section 6. Place of Meetings. The Board of Directors of the
Corporation may hold meetings, both regular and special, either within or
without the State of Arkansas.
Section 7. Annual Meetings. The first meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting to the newly elected directors
shall be necessary in order legally to constitute the meeting, provided a
quorum shall be present. In the event such meeting is not held immediately
following the annual meeting of stockholders, or if the latter meeting is
handled by written consent, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, or as shall be specified in a written
waiver signed by all of the directors.
Section 8. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board of Directors.
Section 9. Special Meetings; Notice. Special meetings of the Board
of Directors may be called by the Secretary at the request of the Chairman of
the Board or the President on 24 hours' notice to each director, either
personally or by telephone or by mail, telegraph, telex, cable, wireless, or
other form of recorded communication; special meetings shall be called by the
Secretary in like manner and on like notice on the written request of any
director. Notice of any such meeting need not be given to any director,
however, if waived by him in writing or by telegraph, telex, cable, wireless,
or other form of recorded communication, or if he shall be present at such
meeting.
Section 10. Quorum and Manner of Acting. At all meetings of the
Board of Directors, a majority of the directors at the time in office (but not
less than one-third of the whole Board of Directors, but in any event not less
than two directors) shall constitute a quorum for the transaction of business,
and the act of a majority of the directors present at any meeting at which a
quorum is present shall be the act of the Board of Directors,
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except as may be otherwise specifically provided by statute or by the Articles
of Incorporation. If a quorum shall not be present at any meeting of the Board
of Directors, the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present.
COMMITTEES OF DIRECTORS
Section 11. Executive Committee; How Constituted and Powers: The
Board of Directors may in its discretion, by resolution passed by a majority of
the whole Board of Directors, designate an Executive Committee consisting of
two or more of the directors of the Corporation. Subject to any applicable
statutes, the Articles of Incorporation, and these By-Laws, the Executive
Committee shall have and may exercise, when the Board of Directors is not in
session, all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and shall have the
power to authorize the seal of the Corporation to be affixed to all papers
which may require it; but the Executive Committee shall not have the power to
fill vacancies in the Board of Directors, the Executive Committee, or any other
committee of directors or to elect or approve officers of the Corporation. The
Executive Committee shall have the power and authority to authorize the
issuance of common stock and grant and authorize options and other rights with
respect to such issuance. The Board of Directors shall have the power at any
time, by resolution passed by a majority of the whole Board of Directors, to
change the membership of the Executive Committee, to fill all vacancies in it,
or to dissolve it, either with or without cause.
Section 12. Organization. The Chairman of the Executive Committee,
to be selected by the Board of Directors, shall act as chairman at all meetings
of the Executive Committee and the Secretary shall act as secretary thereof.
In case of the absence from any meeting of the Executive Committee of the
Chairman of the Executive Committee or the Secretary, the Executive Committee
may appoint a chairman or secretary, as the case may be, of the meeting.
Section 13. Meetings. Regular meetings of the Executive Committee,
of which no notice shall be necessary, may be held on
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such days and at such places, within or without the State of Arkansas, as shall
be fixed by resolution adopted by a majority of the Executive Committee and
communicated in writing to all its members. Special meetings of the Executive
Committee shall be held whenever called by the Chairman of the Executive
Committee or a majority of the members of the Executive Committee then in
office. Notice of each special meeting of the Executive Committee shall be
given by mail, telegraph, telex, cable, wireless, or other form of recorded
communication or be delivered personally or by telephone to each member of the
Executive Committee not later than the day before the day on which such meeting
is to be held. Notice of any such meeting need not be given to any member of
the Executive Committee, however, if waived by him in writing or by telegraph,
telex, cable, wireless, or other form of recorded communication, or if he shall
be present at such meeting; and any meeting of the Executive Committee shall be
a legal meeting without any notice thereof having been given, if all the
members of the Executive Committee shall be present thereat. Subject to the
provisions of this Article III, the Executive Committee, by resolution adopted
by a majority of the whole Executive Committee, shall fix its own rules of
procedure.
Section 14. Quorum and Manner of Acting. One third of the members of
the Executive Committee, but in no event less than two members, shall
constitute a quorum for the transaction of business, and the act of a majority
of those present at a meeting thereof at which a quorum is present shall be the
act of the Executive Committee.
Section 15. Other Committees. The Board of Directors may, by
resolution or resolutions passed by a majority of the whole Board of Directors,
designate one or more other committees, including an Investment Committee to be
charged with the supervision and making of investments and loans of the
Corporation, consisting of one or more directors of the Corporation, which, to
the extent provided in said resolution or resolutions, shall have and may
exercise, subject to any applicable statutes, the Articles of Incorporation,
and these By-Laws, the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and shall have the
power to authorize the seal of the Corporation to be affixed to all papers
which may require it; but no such
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committee shall have the power to fill vacancies in the Board of Directors, the
Executive Committee, or any other committee or in their respective membership,
to appoint or remove officers of the Corporation, or to authorize the issuance
of shares of the capital stock of the Corporation, except that such a committee
may, to the extent provided in said resolutions, grant and authorize options
and other rights with respect to the common stock of the Corporation pursuant
to and in accordance with any plan approved by the Board of Directors. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors. A majority of
all the members of any such committee may determine its action and fix the time
and place of its meetings and specify what notice thereof, if any, shall be
given, unless the Board of Directors shall otherwise provide. The Board of
Directors shall have power to change the members of any such committee at any
time to fill vacancies, and to discharge any such committee, either with or
without cause, at any time.
Section 16. Minutes of Committees. Each committee shall keep regular
minutes of its meetings and proceedings and report the same to the Board of
Directors at the next meeting thereof.
GENERAL
Section 17. Actions Without a Meeting. Unless otherwise restricted
by the Articles of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board
of Directors or committee, as the case may be, consent thereto in writing and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or the committee.
Section 18. Presence at Meetings by Means of Communications-Equipment.
Members of the Board of Directors, or of any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting conducted pursuant to this Section 20 shall
constitute presence in person at such meeting.
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<PAGE> 16
ARTICLE IV
NOTICES
Section 1. Type of Notice. Whenever, under the provisions of any
applicable statute, the Articles of Incorporation, or these By-Laws, notice is
required to be given to any director or stockholder, it shall not be construed
to mean personal notice, but such notice may be given in writing, in person or
by mail, addressed to such director or stockholder, at his address as it
appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given in
any manner permitted by Article III hereof and shall be deemed to be given at
the time when first transmitted by the method of communication so permitted.
Section 2. Waiver of Notice. Whenever any notice is required to be
given under the provisions of any applicable statute, the Articles of
Incorporation, or these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto, and transmission of a
waiver of notice by a director of stockholder by mail, telegraph, telex, cable,
wireless, or other form of recorded communication may constitute such a waiver.
ARTICLE V
OFFICERS
Section 1. Elected and Appointed Officers. The elected officers of
the Corporation shall be a President (who shall be a director), one or more
Vice Presidents, with or without such descriptive titles as the Board of
Directors shall deem appropriate, a Secretary, and a Treasurer, and, if the
Board of Directors so elects, a Chairman of the Board (who shall be a director)
and a Controller. The Board of Directors or the Executive Committee of the
Board of Directors by resolution also may appoint one or more Assistant Vice
Presidents, Assistant Treasurers, Assistant Secretaries, Assistant Controllers,
and such other officers and agents as from time to time may appear to
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<PAGE> 17
be necessary or advisable in the conduct of the affairs of the Corporation.
Section 2. Time of Election or Appointment. The Board of Directors
at its annual meeting shall elect or appoint, as the case may be, the officers
to fill the positions designated in or pursuant to Section 1 of this Article V.
Officers of the Corporation may also be elected or appointed, as the case may
be, at any other time.
Section 3. Term. Each officer of the Corporation shall hold his
office until his successor is duly elected or appointed and qualified or until
his earlier resignation or removal. Any officer may resign at any time upon
written notice to the Corporation. Any officer elected or appointed by the
Board of Directors or the Executive Committee may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors. Any vacancy
occurring in any office of the Corporation by death, resignation, removal, or
otherwise may be filled by the Board of Directors or the appropriate committee
thereof.
Section 4. Duties of the Chairman of the Board. The Chairman of the
Board, if so elected in accordance with Section 1 of Article V, shall be the
Chief Executive Officer of the Corporation and, subject to the provisions of
these By-Laws, shall have general supervision of the affairs of the Corporation
and shall have general and active control of all its business. He shall
preside, when present, at all meetings of shareholders and at all meetings of
the Board of Directors. He shall see that all orders and resolutions of the
Board of Directors and the shareholders are carried into effect. He shall have
general authority to execute bonds, deeds, and contracts in the name of the
Corporation and affix the corporate seal thereto; to sign stock certificates;
to cause the employment or appointment of such officers, employees, and agents
of the Corporation as the proper conduct of operations may require, and to fix
their compensation, subject to the provisions of these By-Laws; to remove or
suspend any employee or agent who was employed or appointed under his authority
or under authority of an officer subordinate to him; to suspend for cause,
pending final action by the authority that elected or appointed him, any
officer subordinate to the Chairman of the Board; in coordination with
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<PAGE> 18
the other officers and directors of the corporation, to develop the
Corporation's basic strategic and long-range plans, including marketing
programs, expansion plans, and financial structure; and, in general, to
exercise all of the powers and authority usually appertaining to the chief
executive officer of a corporation, except as otherwise provided in these
By-Laws.
Section 5. Duties of the President. In the absence of a Chairman of
the Board, the President shall be the Chief Executive Officer of the
Corporation, and shall have the duties and responsibilities and the authority
and power of the Chairman of the Board. The President or a designated Vice
President shall be the Chief Operating Officer of the Corporation and as such
shall have, subject to review and approval of the Chairman of the Board, the
responsibility for the day-to-day operations of the Corporation and long-range
plans, including marketing programs, expansion plans, and financial structure;
and, in general, to exercise all of the powers and authority usually
appertaining to the chief executive officer of a corporation, except as
otherwise provided in these By-Laws.
Section 6. Duties of Vice Presidents. In the absence of the
President or in the event of his inability or refusal to act, the Vice
President (or in the event there be more than one Vice President, the Vice
Presidents in the order or manner designated, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the President and, when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. The Vice Presidents shall perform
such other duties and have such other powers and designations as the Board of
Directors or the President may from time to time prescribe.
Section 7. Duties of the Secretary. The Secretary shall attend all
meetings of the Board of Directors and all meetings of the stockholders and
record all the proceedings of the meetings of the Corporation and of the Board
of Directors in a book to be kept for that purpose and shall perform like
duties for the Executive Committee or other standing committees when required.
He shall give, or cause to be given, notice of all meetings of the stockholders
and special meetings of the Board of Directors, and shall perform such other
duties as may be prescribed by the Board of Directors or the President, under
whose supervision he
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<PAGE> 19
shall be. He shall have custody of the corporate seal of the Corporation, and
he, or an Assistant Secretary, shall have authority to affix the same to any
instrument requiring it, and when so affixed, it may be attested by his
signature or by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his signature. The Secretary
shall keep and account for all books, documents, papers, and records of the
Corporation, except those for which some other officer or agent is properly
accountable. He shall have authority to sign stock certificates and shall
generally perform all the duties usually appertaining to the office of the
secretary of a corporation.
Section 8. Duties of the Treasurer. The Treasurer shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation
and shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the
Board of Directors. He shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, he shall give the
Corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement,
or removal from office, of all books, papers, vouchers, money, and other
property of whatever kind in his possession or under his control belonging to
the Corporation. The Treasurer shall perform such other duties as may be
prescribed by the Board of Directors, the President, or any such Vice President
in charge of finance.
Section 9. Duties of the Controller. The Controller, if one is
appointed, shall have supervision of the accounting practices of the
Corporation and shall prescribe the duties and powers of any other accounting
personnel of the Corporation. He
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<PAGE> 20
shall cause to be maintained an adequate system of financial control through a
program of budgets and interpretive reports. He shall initiate and enforce
measures and procedures whereby the business of the Corporation shall be
conducted with the maximum efficiency and economy. If required, he shall
prepare a monthly report covering the operating results of the Corporation.
The Controller shall be under the supervision of the Vice President in charge
of finance, if one is so designated, and he shall perform such other duties as
may be prescribed by the Board of Directors, the President, or any such Vice
President in charge of finance.
ARTICLE VI
INDEMNIFICATION
Section 1. Actions Other Than by or in the Right of the Corporation.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer or employee of the Corporation,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 2. Actions by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the Corporation to
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<PAGE> 21
procure a judgment in its favor by reason of the fact that he is or was a
director, officer or employee of the Corporation, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the Corporation unless and only to the extent that the Court of
Chancery or the Court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other Court
shall deem proper.
Section 3. Right to Indemnification. To the extent that a director,
officer or employee of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections
1 and 2 of this Article, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
Section 4. Determination of Right to Indemnification. Any
indemnification under Sections 1 and 2 of this Article (unless order by a
Court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, or employee
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Sections 1 and 2 of this Article. Such determination
shall be made (i) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable,
a quorum of disinterested directors so directs, by independent legal counsel in
a written opinion, or (iii) by the stockholders.
Section 5. Advancement of Expenses. Expenses incurred by an officer
or director in defending a civil or criminal action, suit or proceeding may be
paid by the Corporation, in advance of the final disposition of such action,
suit or proceeding upon
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<PAGE> 22
receipt of an undertaking by or on behalf of such director or officer to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
Section 6. Other Rights and Remedies. The indemnification and
advancement of expenses provided by or granted pursuant to the other Sections
of this Article shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
Section 7. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article.
Section 8. Definition of Corporation. For purposes of this Article,
references to "the Corporation" shall include, in addition to the resulting
Corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was
a director, officer, employee, or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as a director,
officer, employee, or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the
provisions of this Article with respect to the resulting or surviving
Corporation as he would have with respect to such constituent corporation if
its separate existence had continued.
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<PAGE> 23
Section 9. Other Terms Defined. For purposes of this Article,
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee,
or agent of the Corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation"
as referred to in this Article.
Section 10. Continuation of Indemnification. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article shall
continue as to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors and administrators
of such person.
ARTICLE VII
CERTIFICATES REPRESENTING STOCK
Section 1. Right to Certificate. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board, the President, or a Vice
President and by the Secretary or an Assistant Secretary of the Corporation,
certifying the number of shares owned by him in the Corporation. If the
Corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the powers, designations, preferences, and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations, or restrictions of
such preferences or rights shall be set forth in full or summarized on the face
or back of the certificate which the Corporation shall issue to
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<PAGE> 24
represent such class or series of stock; provided, that, except as otherwise
provided by any applicable statute, in lieu of the foregoing requirements,
there may be set forth on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock a statement
that the Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences, and relative, participating,
optional, or other special rights of each class of stock or series thereof and
the qualifications, limitations, or restrictions of such preferences or rights.
Section 2. Facsimile Signatures. Any of or all the signatures on the
certificate may be facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the
date of issue.
Section 3. Lost, Stolen, or Destroyed Certificates. The Board of
Directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation and
alleged to have been lost, stolen, or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. When authorizing such issue of a new certificate
or certificates, the Board of Directors may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen, or destroyed certificate or certificates, or his legal representative,
to advertise the same in such manner as it shall require or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen, or destroyed or the issuance of such new
certificate.
Section 4. Transfers. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation, or authority to
transfer, and with proof of authenticity of signature, it shall be the duty of
the Corporation, subject to any proper restrictions on transfer, to issue a new
certificate to the person entitled thereto, cancel the old certificate, and
record the transaction upon its books.
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<PAGE> 25
Section 5. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be less than 10 or more than 40 days
before the date of such meeting or any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 6. Registered Stockholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and to
hold liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not provided by the laws of the State of Arkansas.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, if any, subject to any applicable statutes and the provisions of
the Articles of Incorporation, may be declared by the Board of Directors (but
not any committee thereof) at any regular meeting, pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital stock, subject to
any applicable statutes and the provisions of the Articles of Incorporation.
Section 2. Signatures on Negotiable Instruments. All bills, notes,
checks or other instruments for the payment of money shall be signed or
countersigned by such officers or agents and in such manner as, from time to
time, may be prescribed by
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<PAGE> 26
resolution (whether general or special of the Board of Directors, or may be
prescribed by any officer or officers, or any officer and agent jointly,
thereunto duly authorized by the Board of Directors.
Section 3. Fiscal Year. The fiscal year of the Corporation shall end
on the final Friday of December in each year and the succeeding fiscal year
shall begin on the day next succeeding the last day of the preceding fiscal
year.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of incorporation of the
Corporation, and the word, "Arkansas." The seal may be used by causing it or a
facsimile thereof to be impressed, affixed, reproduced, or otherwise.
ARTICLE IX
AMENDMENTS
These By-Laws may be altered, amended, or repealed or new By-Laws may
be adopted by the stockholders or by the Board of Directors at any regular
meeting of the stockholders or the Board of Directors or at any special meeting
of the stockholders or the Board of Directors if notice of such alteration,
amendment, repeal, or adoption of new By-Laws be contained in the notice of
such special meeting.
Secretary's Certificate
I, Barry Gordon Skolnick, being the duly elected, authorized and
acting Secretary of Merrill Lynch Life Insurance Company, do hereby certify
that the foregoing By-Laws were duly adopted by the Board of Directors as of
the 6th day of August, 1991.
IN WITNESS WHEREOF, I have hereunto set my hand this 13th day of
September, 1991.
/s/ BARRY G. SKOLNICK
-----------------------------
Barry Gordon Skolnick
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<PAGE> 1
EXHIBIT 1.A.(8)(a)
AGREEMENT
AGREEMENT dated as of March 2, 1993, by and between Merrill Lynch Life
Insurance Company ("MLLIC"), an Arkansas corporation, on its own behalf and on
behalf of the Merrill Lynch Variable Life Separate Account (the "Separate
Account"), and Merrill Lynch Series Fund, Inc. ("Series Fund").
W I T N E S S E T H :
WHEREAS, the Separate Account is a separate account established and
maintained by MLLIC pursuant to the laws of the State of Arkansas for certain
variable life insurance contracts issued by MLLIC;
WHEREAS, the Separate Account is registered as a unit investment trust
under the Investment Company Act of 1940 ("Investment Company Act");
WHEREAS, the Series Fund is registered as an open-end management
company organized as a series fund under the Investment Company Act;
WHEREAS, the Series Fund is currently offering shares of ten of its
portfolios to the Separate Account;
<PAGE> 2
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, MLLIC intends to purchase shares in each of the offered portfolios
on behalf of the Separate Account to fund the variable life insurance
contracts;
NOW, THEREFORE, MLLIC and the Series Fund hereby agree as follows:
1. MLLIC, or any other entity acting on behalf of MLLIC pursuant
to a Service Agreement (the "Servicer"), shall pay for the costs of printing
those copies of annual and semi-annual shareholder reports and prospectuses and
statements of additional information of the Series Fund as are distributed to
persons considering becoming owners of the variable life insurance contracts.
2. On each day in which the net asset value of the shares of any
portfolio in the Series Fund is required to be calculated pursuant to the
requirements of the Investment Company Act, the Series Fund shall provide MLLIC
or the Servicer with the net asset value of such portfolio(s) by 5:00 p.m. (New
York time). The Series Fund shall also provide the Servicer with respect to
any portfolio of the Fund which declares dividends daily, with a daily report
of the dividend factor to be applied to shares of such portfolio. This
information shall also be provided by 5:00 p.m.
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<PAGE> 3
(New York time) of each day in which such net asset value is calculated.
3. A redemption of Series Fund shares shall be settled within
five business days after the transaction is effected.
4. This Agreement shall remain in effect until terminated by the
mutual written consent of the parties hereto.
5. This Agreement shall be subject to the provisions of the
Investment Company Act, the Securities Act of 1933 and the Securities Exchange
Act of 1934 and the rules and regulations, and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities
and Exchange Commission may grant, and the terms hereof shall be interpreted
and construed in accordance therewith.
6. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
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<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
MERRILL LYNCH LIFE INSURANCE COMPANY
By: /s/ JOHN C. CIRINCION
-----------------------------------
Name: John C. Cirincion
Title: Vice President &
Senior Counsel
Attest:
/s/ GRETA L. ULMER
- --------------------------
Greta L. Ulmer
MERRILL LYNCH SERIES FUND, INC.
By: /s/ TERRY K. GLENN
----------------------------------
Name: Terry K. Glenn
Title: President
Attest:
/s/ MICHAEL J. HENNEWINKEL
- ------------------------------
Michael J. Hennewinkel
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<PAGE> 1
EXHIBIT 1.A.(8)(b)
AGREEMENT
AGREEMENT dated as of February 1, 1993, by and between Merrill Lynch
Life Insurance Company ("MLLIC"), an Arkansas corporation, on its own behalf
and on behalf of the Merrill Lynch Variable Life Separate Account (the
"Separate Account"), and Merrill Lynch Funds Distributor, Inc. ("MLFD").
W I T N E S S E T H :
WHEREAS, the Separate Account is a separate account established and
maintained by MLLIC pursuant to the laws of the State of Arkansas for certain
variable life insurance contracts issued by MLLIC;
WHEREAS, the Separate Account is registered as a unit investment trust
under the Investment Company Act of 1940 ("Investment Company Act");
WHEREAS, the Merrill Lynch Series Fund, Inc. ("Series Fund") ia
registered as an open-end management investment company organized as a series
fund under the investment Company Act and MLFD, pursuant to a written
agreement, is acting as the principal underwriter for the Series Fund;
<PAGE> 2
WHEREAS, the Series Fund is offering shares of ten of its portfolios
to the Separate Account;
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, MLLIC intends to purchase shares in each of the offered portfolios
on behalf of the Separate Account to fund the variable life insurance contracts
and MLFD is authorized to sell such shares to unit investment trusts such as
the Separate Account at no-load;
NOW, THEREFORE, MLLIC and MLFD hereby agree as follows:
1. MLFD agrees that it will sell to the Separate Account those
shares of the Series Fund which the Separate Account orders, executing such
orders on a daily basis at the net asset value next computed after receipt of
the order for the shares of the portfolios of the Series Fund.
2. All purchases of shares in the Series Fund by MLLIC for its
Separate Account from MLFD shall be at net asset value and no commission shall
be payable to MLFD.
3. A purchase of Fund shares shall be settled within five
business days after the transaction is effected.
4. This Agreement shall remain in effect until terminated by the
mutual written consent of the parties hereto.
5. This Agreement shall be subject to the provisions of the
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<PAGE> 3
Investment Company Act, the Securities Act of 1933 and the Securities Exchange
Act of 1934 and the rules and regulations, and rulings thereunder, including
such exceptions from those statutes, rules and regulations as the Securities
and Exchange Commission may grant, and the terms hereof shall be interpreted
and construed in accordance therewith.
6. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
MERRILL LYNCH LIFE INSURANCE COMPANY
Attest: By: /s/ JOHN C. CIRINCION
-------------------------------
Name: John C. Cirincion
Title: Vice President &
/s/ GRETA L. ULMER Senior Counsel
- ------------------------
Greta L. Ulmer
MERRILL LYNCH FUNDS
DISTRIBUTOR, INC.
Attest: By: /s/ CHARLES P. BORKOWSKI, JR.
-------------------------------
Name: Charles P. Borkowski, Jr.
Title: First Vice President
/s/ CAROLINE J. HENRY
- -------------------------
Caroline J. Henry
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<PAGE> 1
EXHIBIT 1.A.(8)(c)
AGREEMENT
AGREEMENT effective as of February 1, 1993 between Merrill
Lynch Life Insurance Company ("MLLIC"), an Arkansas corporation, and Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), Delaware corporation.
WHEREAS, Merrill Lynch Variable Life Separate Account ("Separate
Account") is a separate investment account of MLLIC registered under the
Investment Company Act of 1940 ("Investment Company Act") as a unit investment
trust, which serves as the investment vehicle for premiums received under
certain variable life insurance contracts issued by MLLIC and the Separate
Account ("Contracts"), and
WHEREAS, The Merrill Lynch Fund of Stripped "Zero" U.S. Treasury
Securities, Series A and any subsequent series ("Trust") is a unit investment
trust sponsored by MLPF&S that will have several portfolios ("Portfolios") and
the Trust is registered as a unit investment trust under the Investment Company
Act, and
WHEREAS, MLLIC seeks a unit investment trust as the underlying
investment medium for certain designated investment divisions of the Separate
Account that will be sold to the Separate Account and
<PAGE> 2
that will be designed to enable the Separate Account to provide contract owners
with a stable rate of return, and
WHEREAS, MLPF&S desires to make the various portfolios of the Trust
available to MLLIC for the investment of amounts allocated under the Contracts
to the designated investment divisions of the Separate Account.
NOW, THEREFORE, in consideration of the mutual promises contained
here, the parties agree as follows:
1. MLLIC shall invest in the Trust assets of the Separate Account
held in investment divisions designated for such investment, provided that
MLPF&S fulfills the obligations set forth in paragraphs 2 through 6.
2. Until the securities of any particular Portfolio of the Trust
mature, MLPF&S will make units representing interests in that Portfolio
("Units") available continuously for purchase by MLLIC for investment of assets
of designated investment divisions of the Separate Account, either by selling
Units currently held in inventory or by creating new Units, except that MLPF&S
shall not be obligated to create new Units if the underlying portfolio
securities are unavailable.
3. Units of the Trust will be sold to the Separate Account at an
offering price that is the sum of the net asset value of the
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<PAGE> 3
Units, uniformly computed on any given day based upon either a daily or weekly
computation, using the offering side evaluation of the portfolio securities,
and the transaction charge as set forth in the current Prospectus of the Trust.
Such transaction charges as set forth in the current Prospectus of the
Trust are subject to change hereafter, by mutual agreement, provided that any
new rate established does not exceed the rate ordinarily paid by a dealer to
acquire similar securities, and provided that the transaction charge shall not
be increased if the staff of the Securities and Exchange Commission expresses
an objection to such change or, if MLLIC believes necessary, unless an order of
the Securities and Exchange Commission providing appropriate exemptive relief
is obtained.
4. MLPF&S will continuously maintain a secondary market in Units
of each Portfolio and will repurchase Units held by the Separate Account at a
price equal to the net asset value of the Units, based upon the offering side
evaluation of the underlying securities of the applicable Portfolios.
5. MLPF&S may, at its discretion, redeem Units of the Trust that
it has purchased in the secondary market, provided that it redeem Units only in
an amount that substantially equal the value
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of one or more securities held in the affected Portfolio, so that uninvested
cash generated by a redemption is DE MINIMIS.
6. The underlying securities of the Trust will be evaluated by a
qualified entity that is not affiliated with MLPF&S.
The terms used in this Agreement shall be construed in accordance with
the investment Company Act, and this Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first written above.
MERRILL LYNCH LIFE INSURANCE COMPANY
Attest: By: /s/ JOHN C.CIRINCION
-------------------------------
Name: John C. Cirincion
Title: Vice President &
Senior Counsel
/s/ GRETA L. ULMER
- ---------------------------
Greta L. Ulmer
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
Attest: By: /s/ CHARLES P. BORKOWSKI, JR.
--------------------------------
Name: Charles P. Borkowski, Jr.
Title: First Vice President
/s/ CAROLINE J. HENRY
- --------------------------
Caroline J. Henry
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<PAGE> 1
EXHIBIT 1.A.(8)(e)
MANAGEMENT AGREEMENT
AGREEMENT made as of this 30th day of August, 1991, by and between
MERRILL LYNCH LIFE INSURANCE COMPANY, an Arkansas corporation (hereinafter
referred to as the "Client"), and MERRILL LYNCH ASSET MANAGEMENT, INC. a
Delaware corporation (hereinafter referred to as the "Manager").
W I T N E S S E T H
WHEREAS, the Client is engaged in business as an insurance company
subject to regulation under the laws of each state in which it does business;
and
WHEREAS, the Manager is engaged principally in rendering management
and investment advisory services and is registered as an investment adviser
under the Investment Advisers Act of 1940; and
WHEREAS, the Client desires to retain the Manager to provide
investment advisory services to the Client in the manner and on the terms
hereinafter set forth; and
WHEREAS, the Manager is willing to provide investment advisory
services to the Client on the terms and conditions
<PAGE> 2
hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Client and the Manager hereby agree as follows:
1. Appointment and Duties of Manager
The Client hereby appoints the Manager as investment manager of such
portion of the Client's investment portfolio as is designated from time to time
by the Client to the Manager in writing (the "Portfolio") and to furnish, or
arrange for affiliates to furnish, the investment advisory services described
below, on the terms and conditions set forth in this Agreement. The Manager
hereby accepts such appointment and agrees during such period, at its own
expense, to render, or arrange for the rendering of, such services and to
assume the obligations herein set forth for the compensation provided for
herein. Except as limited below and in the Statement of Investment Policy and
Guidelines attached hereto, the Manager shall have full discretion, as the
Client's agent and attorney-in-fact, to make purchases and sales of investments
on the Client's behalf and otherwise to act at the Manager's discretion in the
management of the Portfolio.
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<PAGE> 3
The Manager shall provide (or arrange for affiliates to provide) the
Client with such investment research, advice and supervision and written
reports as the latter may from time to time (but no less frequently than
monthly) consider necessary for the proper supervision of the assets of the
Client, shall furnish continuously an investment program for the Client and
shall have full discretion as the Client's agent and attorney-in-fact, to
determine from time to time which securities shall be purchased, sold, modified
or exchanged and what portion of the assets of the Client shall be held in (i)
the various securities in which the Client invests, (ii) options, (iii)
futures, (iv) options on futures or (v) cash, subject only to the restrictions
of applicable law and the Client's investment objectives, investment policies
and investment restrictions as the same are in each case advised in writing by
the Client to the Manager. Without limiting the foregoing, the Manager shall
have authority to approve the restructuring of investments held in the
Portfolio, either through changes in the terms of the security (including
changes in voting rights, dividend rights, interest rates, maturity, conversion
rights or other rights or preferences relating to the security) or through the
substitution of new securities, having such terms and provisions as may be
deemed
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<PAGE> 4
appropriate by the Manager in light of the prevailing circumstances, for
securities held in the Portfolio. The Manager shall make decisions for the
Client as to foreign currency matters and make determinations as to foreign
exchange contracts, foreign currency options, foreign currency futures and
related options on foreign currency futures. The Manager shall make decisions
for the Client as to the manner in which voting rights, rights to consent to
corporate action and any other rights pertaining to the Client's Portfolio
securities shall be exercised and shall have the authority, as the Client's
agent and attorney-in fact, to exercise such rights on behalf of the Client.
The Manager may temporarily invest the Client's cash in a money market fund
which employs the Manager or an affiliate as its investment adviser.
2. Portfolio Transactions
The Client authorizes the Manager to establish accounts in the
Client's name with Brokerage Firms that are members of the National Association
of Security Dealers and/or members of the Regional or National Securities
Exchanges including the Manager's affiliate MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED (MERRILL LYNCH) and to buy, sell or otherwise effect
transactions in stocks, bonds and any other securities for the Client's
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<PAGE> 5
accounts and in the Client's name and the Client empowers such firms to follow
the Manager's instructions.
The Client agrees that, if Merrill Lynch effects investment
transactions for the Client, it may act as principal, or as agent for both
sides of a transaction, in accordance with applicable law. When Merrill Lynch
acts as agent for both sides of a transaction, it may be paid commissions from,
and has duties to, the opposing sides. If Merrill Lynch effects transactions
on the Client's behalf on a stock exchange, it may retain the compensation it
is paid for such services, in accordance with applicable law. The Manager is
required by Section 11(a) of the Securities Exchange Act of 1934 to include the
preceding sentence in this agreement for clients who are companies, governments
and other institutions.
Investment firms, including Merrill Lynch, may be compensated from the
Client's Portfolio at their standard rates for effecting investment
transactions on the Client's behalf.
3. Administration
The Manager is a registered investment adviser under the Investment
Advisers Act of 1940.
The Client acknowledges that it has received the Manager's disclosure
statement. The Client represents that the person
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<PAGE> 6
entering this agreement on the Client's behalf has full power and authority to
do so and that it is binding.
The Client agrees to notify the Manager prior to giving any
instruction to an investment firm or custodian regarding the commitment,
withdrawal or investment of the Portfolio. The Manager is under no duty to
enter into any transaction with respect to assets which are not readily
available for delivery.
The Client will instruct any investment firm or custodian to transmit
simultaneously to the Client and to the Manager all confirmations and periodic
statements.
The Manager will send the Client current valuations of the Client's
account at least four times annually.
Employees of the Manager's affiliates may receive credits or
compensation for transactions effected on the Client's behalf.
The Client acknowledges that the Manager's affiliates may have
investment banking relationships with publicly traded companies and that
employees of the Manager's affiliates may act as directors of publicly traded
companies, which at times may preclude the Manager from effecting transactions
on the Client's behalf in securities of such companies.
4. Limitation of Liability
The Manager will not be liable for the consequences of any
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investment decision or related activities made or omitted in accordance with
Section 1 hereof, except for loss incurred as a result of the Manager's gross
negligence or willful or reckless misconduct. The Manager will not be liable
for loss incurred by any other person or as a result of any person other than
the Manager, whether or not its affiliate. These limitations of liability also
apply to the Manager's directors, officers, employees and agents.
5. Choice of Law
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS MAY BE PREEMPTED BY FEDERAL
LAW.
6. Custody
Seattle First National Bank will act as custodian of the Portfolio.
The Manager will never receive or physically control the Portfolio. The
Client's money market fund shares may be recorded in the Client's name at a
transfer agent.
The Manager will not be responsible for making any tax credit or
similar claim or any legal filing on the Client's behalf.
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<PAGE> 8
7. Fees
In compensation for the Manager's services hereunder, the Client shall
periodically pay to the Manager, upon demand of the Manager (but no less
frequently than annually), a fee equal to the sum of (i) the Manager's costs,
expenses and disbursements incurred during such period in connection with its
services hereunder and (ii) 10% of the amount calculated pursuant to clause (i)
hereof.
8. Termination
This agreement shall remain in force until further notice. The Client
will be entitled to terminate this agreement at any time, effective from the
time the Manager receives written notification or such other time as may be
mutually agreed upon, subject to the settlement of transactions in progress.
There will be no penalty charge on termination. This agreement will also be
terminated on the fifth day after the Manager sends the Client notice in
writing of the Manager's intent to terminate this agreement or such other time
as may be mutually agreed upon,
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<PAGE> 9
also subject to the settlement of transactions in progress. The Manager may
not assign this agreement without the Client's prior consent.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
MERRILL LYNCH LIFE INSURANCE COMPANY
By /s/BARRY G. SKOLNICK
---------------------------------------
Barry G. Skolnick
Senior Vice President
Date of Execution: 8/30/91
-----------------
MERRILL LYNCH ASSET MANAGEMENT, INC.
By /s/ N. JOHN HEWITT
---------------------------------------
N. John Hewitt
Senior Vice President
Date of Execution: August 30, 1991
-----------------
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<PAGE> 10
STATEMENT OF
INVESTMENT POLICY AND GUIDELINES
FOR THE MLIG INVESTMENT PORTFOLIOS
I. Investment Goal
Merrill Lynch Insurance Group policy regarding investments supporting
its insurance in force is currently, and will remain, one of
maximizing value for its policyholders and equity owners, consistent
with concern for the safety of investments over the long and short
term.
MLIG Investment Management group will pursue this objective by
allocating the policy premiums and the investment income among a broad
array of asset types and asset classes and by choosing appropriate
investment management corporations to manage such investments.
Assets will be segregated into individual portfolios, so that the
investments within each such portfolio are optimal to support the
individual product line, and so as to satisfy all legal and regulatory
requirements.
The MLIG Investment Management group will set portfolio policies that
govern such investments; set appropriate risk levels, normal asset
mixes and the ranges within which the portfolio managers can deviate
from those sector levels or risk measures. The MLIG Investment
Management group will take efforts to hedge away any excess risks
beyond the tolerance levels, so that the portfolios achieve the
desired results, while staying within the appropriate risk parameters.
In addition, the MLIG Investment Management group will closely monitor
the performance of the portfolio managers to ensure that there is
appropriate asset/liability match, and that the actions of the
portfolio managers are commensurate with maximizing the value of
owners' equity.
The MLIG Investment Management group will continue to play an active
role in ensuring that the risks and rewards of all available
investment choices are fully factored into the design and pricing of
new MLIG products.
<PAGE> 11
II. Portfolio Risk Levels
A mayor objective in investment management is to have necessary and
sufficient assets to satisfy insurance liabilities at all times.
The investment risks in meeting such an objective can be categorized
as either interest rate risk (duration, convexity and volatility) or
credit risk (default and yield spread risk).
Managing interest rate risk remains one of the key functions of the
MLIG Investment Management group. Significant changes in interest
rates, the shape of the yield curve or in interest rate volatility can
have pronounced impact on the assets of the insurance company.
"Immunizing" the insurance company's wealth against substantial shifts
in interest rates therefore remains a major objective.
Since MLIG insurance products are "customized" liabilities, the
Investment Management group will periodically meet with the actuaries
to assess the key risk attributes of the liabilities (i.e. duration,
convexity) of the MLIG products, the underlying cash flows of the
liabilities and the sensitivity of the liability market values to
changes in interest rates (both parallel and non-parallel yield curve
shifts).
These liability risk measures will be updated monthly, reflecting the
influx of new business and the aging of old policies. Such
information will be provided to the appropriate investment managers by
the MLIG Investment Management Group on a monthly basis.
The risk parameters (i.e. duration and convexity) for the assets will
be established in accordance with the same measures for liabilities,
so that under normal conditions changes in interest rates will have
offsetting impact on the firm's assets and liabilities.
Portfolio managers, however, may be allowed to deviate from the risk
guidelines, depending on their interest rate outlook and yield curve
perspective. Deviations beyond +/-
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<PAGE> 12
1 of the effective duration, however, require the approval of the
Investment Committee and the involvement of the Investment Management
group in adequately hedging the interest rate risk.
The credit risk is to be controlled by adhering to the sector exposure
in accordance with the guidelines established for various asset
classes. The portfolio managers, however, may deviate from those
norms based on their relative value perspective, subject to maximum
limits imposed by the following portfolio guidelines.
III. Asset Classes/Instruments
Federal, State and other local laws that govern insurance companies
stipulate "eligible investments" for insurance companies. Not
withstanding anything listed below, those laws take precedence in what
may be termed as viable investment alternatives for the insurance
company assets:
In general, portfolio managers can invest in following assets subject
to limitations listed in following paragraphs:
- Short-term instruments including Certificates of
Deposits, Commercial Paper, Bankers Acceptances,
Medium-Term Notes, Euro CDs, Treasury Bills,
Repurchase and Reverse Repurchase agreements
- U.S. Treasury and Agency debt obligations
- Mortgage-backed securities (including collateralized
mortgage obligations) and Asset-Backed Securities of
any federal agency or private issuers.
- Both publicly- and privately-placed Corporate Debt
Securities, including convertible bonds, of Domestic,
Euro and Foreign issuers
- Equity securities including preferred stocks, stock
warrants and equity options.
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- Equity and fixed-income derivative securities,
including futures, options, options on futures,
interest rate caps, floors and index-linked
securities.
- Swap agreements including interest rate, currency and
derivative swap products.
- Commercial mortgages including equity interest in
real properties.
IV. Limitations of Investments
Portfolio managers will be allowed to invest in following asset
classes, subject to certain limitations as set forth below. Size
limitations apply to individual issuers in aggregate, irrespective of
the differences among individual issues of the same issuer or their
seniority in claims.
A. Securities issued by the United States Treasury or an agency
of the United States Government which are backed by the full
faith and credit of the United States Government in any amount
are authorized.
B. Mortgage-backed securities issued by the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage
Association or the Government National Mortgage Association in
any amount are authorized.
C. Mortgage-backed securities collateralized by single family
residential mortgage loans (i.e., collateralized mortgage
obligations, private participations) shall conform to the
following size limits per issuer as rated by either Moody's or
Standard and Poors.
<TABLE>
<CAPTION>
Rating Maximum per Issuer
------ ------------------
<S> <C>
AAA $100 Million
AA $ 75 Million
A $ 50 Million
BAA $ 25 Million
</TABLE>
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<PAGE> 14
Federally sponsored agencies' REMIC CMOs, however, are not
subject to such size limits.
D. Interest rate sensitive derivative mortgage-backed securities
such as Interest-Only and Principal-Only securities (IO/PO) or
residual CMO tranches shall conform to a size limit per issuer
of $50 million and shall in no case exceed 5% of the book
value of the portfolio.
E. Commercial mortgages may be included, not exceeding a total of
$500 million. No single mortgage shall exceed $10 million
without prior authorization of the Investment Committee.
Investments in undeveloped or under-developed properties,
investments where the LTV (loan-to-value) ratio exceeds 80% or
investments where the occupancy rate is less than 75% also
require the explicit prior approval of the Investment
Committee.
F. Securities collateralized by other assets (credit cards, auto
loans, mobile homes, and other loans or receivables) may be
purchased only if investment grade. Per-issuer maximums shall
conform to those in place for investment grade securities.
G. Investment grade corporate bond size limits per issuer are as
follows:
<TABLE>
<CAPTION>
Rating Maximum per Issuer
------ ------------------
<S> <C>
AAA $100 Million
AA $ 75 Million
A $ 50 Million
BAA $ 25 Million
</TABLE>
H. Non-investment grade bond size limits are as follows:
<TABLE>
<CAPTION>
Rating Maximum per Issuer
------ ------------------
<S> <C>
BB $ 8 Million
B and lower $ 5 Million
</TABLE>
The percentage of bonds below investment grade should
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be targeted to be maintained at a level below 10% of the book
value of the portfolio.
I. Private placements may be included, not exceeding a total of
$2 billion. Per-issuer maximums shall conform to those in
place for investment grade and non-investment grade holdings.
J. Investments in Convertible bonds or other forms of equity
participation are allowed subject to a maximum of $100
million. Individual investments in excess of $5 million
require prior approval of the Investment Committee.
K. Investments in International bonds, Currencies or Swaps are
allowed subject a maximum of $250 million. Individual
investments in excess of $10 million require prior approval of
the Investment Committee.
L. Investments in Financial Futures, Options, Options on Futures,
Interest rate Caps or Floors are allowed for hedging purposes
only, subject to guidelines approved by the Investment
Committee.
M. Investments with durations longer than 10 years, or those
whose durations change by more than 50% for 200 basis point
change in interest rates in either direction require
notification to the Investment Committee.
N. Notwithstanding the above guidelines, all investments will
comply with the appropriate Federal, State and other legal
regulations.
V. Operating Guidelines
In order to comply with the Portfolio Guidelines and to achieve
efficiencies in controlling the investment function, the following
operating guidelines will apply to all portfolio managers.
A. Available funds must be promptly invested. This
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normally means two weeks, with the exceptions of situations
where securities are purchased with advance settlement dates.
B. Trades must be reported to MLIG no later than the next
business day following the day the trade is made.
C. Mortgage security purchases shall in all aspects qualify as
"good delivery" under Public Security Association standards.
D. The investment managers will notify MLIG of any changes in
ratings of MLIG holdings by established rating agencies, on a
monthly basis.
E. Quarterly review shall be conducted by investment managers
investigating all Watch List issues for continued
creditworthiness. All other credit positions shall be
reviewed annually or as circumstances dictate.
F. All portfolios will be managed with the objective of
maintaining asset/liability duration and convexity within
previously agreed upon bounds.
VI. Hedging interest rate risks
In addition to interest rate risks of the asset portfolios, certain
MLIG products may have embedded options (such as guaranteed renewal
rates) that may expose MLIG to significant changes in interest rates.
To hedge the risks of the overall asset portfolio and those inherent
in MLIG products, the MLIG Investment Management group will, from time
to time, be involved in hedging programs using both exchange-traded
and over-the-counter options, futures, options on futures, interest
rate caps or floors in sizes approved by the Investment Committee.
The hedges will be reviewed by the Investment Committee periodically
for its intended purpose and its cost effectiveness.
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VII. Performance Measurement
The true gauge of the performance of the insurance portfolios should
be its periodic total return, that implicitly and fairly accounts for
all the risks assumed by the portfolio managers. (While yield
enhancement is an important component of successful portfolio
management, it is not a true measure of investment performance.)
Total returns will be measured on a time weighted basis (since
portfolio managers have no control over the timing of cash inflows and
outflows) and will include capital appreciation, paydown return and
income return for the period.
All portfolios will be marked-to-market at the end of each month, and
total returns will be computed for the month. (Monthly returns will
be "chain-linked" to calculate quarterly and annual total returns
performance).
The total return performance of the asset portfolios will then be
measured against a benchmark index, which would reflect the risk and
return characteristics of the liabilities.
The benchmark index will be created by the Investment Management group
with the help of MLIG actuaries and the investment managers, and will
be reviewed monthly to ensure that it continues to reflect the risk
and return characteristics of the firm's liabilities.
VIII. Reporting
Detailed analysis of the periodic total returns and risk attributes
(i.e. duration, convexity etc.) of each portfolio and the overall
insurance investment portfolio will be made available through a
performance attribution report for management reporting by the MLIG
Investment Group each month.
In addition, the following periodic meetings will be scheduled to
monitor investment activities of the investment
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<PAGE> 18
managers.
A. Quarterly Portfolio Status Update
Four conferences per year will be held to review portfolio
structure (interest rate risk, sector diversification etc.)
investment strategy, transactions and portfolio performance.
B. Quarterly Credit Status Update
Four conferences per year will be held to review appropriate
financial and operating data on each credit Watch List issue.
C. Other Reporting as Required
Brief summaries stating opinion about continued credit
worthiness and outlook for an issuer, whenever holding a
position in this company becomes questionable.
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<PAGE> 1
EXHIBIT 1.A.(9)
SERVICE AGREEMENT
BETWEEN
MERRILL LYNCH INSURANCE GROUP, INC.,
FAMILY LIFE INSURANCE COMPANY
AND
MERRILL LYNCH LIFE INSURANCE COMPANY
This Service Agreement is entered into as of the 29th day of November,
1990 between Family Life Insurance Company, a Washington corporation ("FLIC"),
Merrill Lynch Life Insurance Company, a Washington corporation ("MLLIC") and
Merrill Lynch Insurance Group, Inc., a Delaware corporation, for itself and for
its affiliates other than FLIC and MLLIC ("MLIG").
W I T N E S S E T H:
WHEREAS, FLIC is a wholly-owned subsidiary of MLIG, and MLLIC is a
wholly-owned subsidiary of FLIC, and
WHEREAS, each party to this Agreement desires to utilize certain
services to be provided by the other parties in carrying out certain of their
respective corporate functions, and
1
<PAGE> 2
WHEREAS, each party is willing to furnish, or cause its affiliates to
furnish, such services on the terms and conditions hereinafter set forth;
NOW THEREFORE, the parties do hereby mutually agree as follows,
effective as to FLIC and MLLIC respectively, only so long as it is an affiliate
of MLIG:
1. Each party will provide or contract or arrange with any of its
affiliates for the providing of, as available, services as listed in Exhibit I
hereto, if and to the extent requested by the other. Exhibit I may be
modified from time to time by agreement between the parties.
2. For services provided, the service recipient agrees to pay the
service provider:
(a) the amounts as may be specified in one or more
Schedules, pertaining to particular categories of services, as may be executed
by the parties and attached to and incorporated into this Agreement; or
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(b) if not so specified, to pay those charges (direct and
indirect) and expenses incurred by the service provider which, as reasonably
determined by the service provider and demonstrated to the reasonable
satisfaction of service recipient, reflect actual cost of such services to the
service provider, provided that
(1) charges and expenses for personnel shall be
based on a reasonable allocation of the time
spent on service recipient matters relative
to time spent on other matters;
(2) charges and expenses for property or other
services shall be based on a reasonable
allocation of the proportion of and period of
time such property or services is utilized
for service recipient matters relative to
that utilized for other matters, and;
(3) no charges or expenses shall exceed those
charged by the service provider in the
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relevant market for comparable personnel,
property or services as the case may be.
After the end of each month, the service provider will send the service
recipient a bill covering service charges and expenses which have been
incurred, or the amount of which has been ascertained, during such month, and
the service recipient will pay for such charges and expenses upon receipt of
the bill.
3. The books, accounts and records of MLIG, its affiliates
providing services hereunder, FLIC and MLLIC as to all transactions hereunder
shall be maintained so as to clearly and accurately disclose the nature and
details of the transactions, including such accounting information as is
necessary to support the reasonableness of the charges, expenses or fees
hereunder. The service recipient shall have the right, at its own expense, and
at any reasonable time, to make an audit of the services rendered and the
amounts charged therefor.
4. The term of this Agreement shall commence as of the date
hereinabove indicated and continue until December 31, 1990, and thereafter
shall be deemed to be renewed automatically, upon
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the same terms and conditions, for successive periods of one year each, until
any party, at least 60 days prior to the expiration of the original term or of
any extended term, shall give written notice to the other parties of its
intention not to renew the Agreement, provided that, notwithstanding the
foregoing, electronic data processing services will be made available to the
service recipient for up to six months following any such termination, if the
service recipient shall so request.
5. It is understood that (a) MLIG, any of its affiliates or
subsidiaries, will invest for their own account and may act as investment
advisor for others and that MLIG or such others or persons or organizations
affiliated with MLIG could have investment interests adverse to the interests
of FLIC or MLLIC in the same or related investments; (b) MLIG is not obligated
to make available to FLIC or MLLIC any particular investment opportunity which
comes to MLIG or its subsidiaries or affiliates, regardless of whether such
opportunity is consistent with the investment policies of FLIC or MLLIC; and
(C) FLIC and MLLIC shall retain full control over their respective investment
activities, and MLIG or any of its affiliates or subsidiaries shall have no
power or authority by virtue of this Agreement,
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<PAGE> 6
whether as agent or otherwise, to obligate or commit FLIC or MLLIC for the
acquisition or disposition of any investment.
6. All differences between MLIG, FLIC and MLLIC on which
agreement cannot be reached will be decided by arbitration. The arbitrators
will interpret this Agreement in accordance with the usual business practices,
rather than strict technicalities or rules of law. Three arbitrators will
decide any differences. They must be officers of life insurance companies
other than the parties to this agreement, their parents, subsidiaries and
affiliates. One of the arbitrators is to be appointed by service provider and
one by the service recipient, and these two will select a third. If the two
are unable to agree on a third, the choice will be left to the President of the
American Council of Life Insurance or its successor organization. The
arbitrators' decision will be by majority vote and no appeal will be taken from
it. The costs of the arbitration will be borne by the losing party unless the
arbitrators decide otherwise.
7. No assignment of this Agreement shall be made by any party
without the consent of the other parties.
-6-
<PAGE> 7
8. Subject to the foregoing Clause 7, this Agreement shall inure
to the benefit of and be binding upon the successors and assigns of the parties
hereto.
9. This Agreement shall supersede the Management Services
Agreement between FLIC and MLLIC dated April 28, 1986.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
MERRILL LYNCH INSURANCE GROUP, INC.
By: /s/ THOMAS H. PARICK
------------------------------------
Thomas H. Patrick
FAMILY LIFE INSURANCE COMPANY
By: /s/ JAMES W. ENTRINGER
-----------------------------------
James W. Entringer
MERRILL LYNCH LIFE INSURANCE COMPANY
By: /s/ JAMES W. ENTRINGER
-----------------------------------
James W. Entringer
0340CI1
-7-
<PAGE> 8
EXHIBIT I
To Service Agreement
Between MLIG, FLIC and MLLIC
Personnel, Property and Services (except as provided under separate agreements
of Schedules):
1. Accounting and auditing.
2. Actuarial.
3. Administration.
4. Advertising, marketing and public relations.
5. Claims (pursuant to the service recipient's
guidelines and subject to final approval by the
service recipient.
6. Corporate Secretary.
7. Development of software programs.
8. Electronic data processing.
9. Financial and cash advice or management.
10. Investment advisory or management.
11. Legal.
12. Office and general supplies.
13. Payroll services.
14. Personnel.
15. Premium billing and collection.
16. Printing.
17. Product design and development.
-8-
<PAGE> 9
18. Regulatory filings and reports.
19. Storage.
20. Underwriting (pursuant to the service recipient's
guidelines and subject to final approval by the
service recipient).
0340CI1
-9-
<PAGE> 1
EXHIBIT 1.A.(10)(a)(1)
<TABLE>
<CAPTION>
MERRILL LYNCH LIFE INSURANCE COMPANY
Little Rock, Arkansas
[LOGO]
<S> <C>
MERRILL LYNCH ACCOUNT NUMBER POLICY NUMBER
- ------------------------------------------------------------ -----------------------------------
LIFE INSURANCE APPLICATION SPECIMEN
PROPOSED INSURED NO. 1
SECTION 1 - COMPLETE IN ALL CASES.
FULL NAME OF PROPOSED INSURED NO. 1 (FIRST, MIDDLE, LAST) SOCIAL SECURITY NUMBER
X Mr. Mrs. Miss
Ms. Other________ Richard Roe 123-45-6789
PERMANENT RESIDENCE ADDRESS
1234 Anystreet
CITY STATE ZIP CODE
Anytown USA 01234
EMPLOYER (IF EMPLOYED)
Ace Engineering Services
BUSINESS ADDRESS
6789 Somestreet
CITY STATE ZIP CODE
Anytown USA 01234
OCCUPATION & PRINCIPAL DUTIES
Engineer - Drafting
SEX MARITAL STATUS DATE OF BIRTH PLACE OF BIRTH U.S. CITIZEN
Male Married 4-19-57 Anytown, USA X Yes No
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
PROPOSED INSURED NO. 2
SECTION 2 - COMPLETE IF APPLICABLE -
FULL NAME OF PROPOSED INSURED NO. 2 (FIRST, MIDDLE, LAST) SOCIAL SECURITY NUMBER
Mr. X Mrs. Miss
Ms. Other________ Jane Roe ###-##-####
PERMANENT RESIDENCE ADDRESS RELATIONSHIP TO PROPOSED INSURED #1
1234 Anystreet WIFE
CITY STATE ZIP CODE
Anytown USA 01234
EMPLOYER (IF EMPLOYED)
Major Architect
BUSINESS ADDRESS
321 Someplace
CITY STATE ZIP CODE
Anytown USA 01234
OCCUPATION & PRINCIPAL DUTIES
Architect
SEX MARITAL STATUS DATE OF BIRTH PLACE OF BIRTH U.S. CITIZEN
Female Married 6-6-57 Sometown, USA X Yes No
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OWNER
SECTION 3 - COMPLETE IN ALL CASES. (If more than one owner, provide detailed owner information in Section 16 - Additional
Information)
<S> <C>
Proposed Insured No. 1 X Proposed Insured No. 2 Both Proposed Insureds with right of survivorship
Other - If other, complete Individual Trust Corporation Partnership Sole Proprietorship
the following - Owner is:
FULL NAME OF OWNER (FIRST, MIDDLE, LAST) Mr. Mrs. Miss Ms. Other________ SOCIAL SECURITY OR TAX ID NUMBER
PERMANENT RESIDENCE ADDRESS
</TABLE>
A1000 SPECIMEN NEW 11/92
<PAGE> 2
<TABLE>
<S> <C>
CITY STATE ZIP CODE
TELEPHONE NUMBER DATE OF BIRTH OR TRUST DATE RELATIONSHIP TO PROPOSED INSURED #1 RELATIONSHIP TO PROPOSED INSURED #2
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CONTINGENT OWNER
SECTION 4 - OPTIONAL.
FULL NAME OF OWNER (FIRST, MIDDLE, LAST) Mr. Mrs. Miss Ms. Other________ SOCIAL SECURITY OR TAX ID NUMBER
PERMANENT RESIDENCE ADDRESS
CITY STATE ZIP CODE
TELEPHONE NUMBER DATE OF BIRTH OR TRUST DATE RELATIONSHIP TO PROPOSED INSURED #1 RELATIONSHIP TO PROPOSED INSURED #2
BENEFICIARY(IES) DESIGNATION(S)
SECTION 5 - COMPLETE IN ALL CASES - A PROPOSED INSURED CANNOT BE THE BENEFICIARY
Show name(s) and relationship(s) to the proposed insured(s) and provide Social Security or Tax ID numbers (if available). The owner
reserves the right to change the beneficiary(ies) unless indicated below. If the owner wishes to restrict future changes in
beneficiary designations, write the work "IRREVOCABLE" next to the beneficiary's name.
<S> <C> <C>
Primary Beneficiary(ies): Social Security or Tax ID No. Relationship(s) to proposed insured(s):
Frederick Roe ###-##-#### son
Contingent Beneficiary(ies):
Joyce Roe ###-##-#### Relationship(s) to proposed insured(s):
daughter
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PLAN APPLIED FOR
SECTION 6 - COMPLETE IN ALL CASES:
<S> <C>
PLAN DEATH BENEFIT OPTION (IF APPLICABLE OR PLAN APPLIED FOR)
Estate Investor X Option #1 Option #2
BASE POLICY FACE AMOUNT ADDITIONAL INSURANCE RIDER FACE AMOUNT (OPTIONAL) TOTAL FACE AMOUNT
$1,000,000 $ 500,000 $ 1,500,000
OTHER BENEFITS (IF AVAILABLE ON PLAN APPLIED FOR) CHECK OTHER AND INDICATE BENEFIT ON THE LINE PROVIDED
Other:_________________________________________________________________________________________________________________
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
INITIAL PREMIUM
SECTION 7 - TO BE PAID IN ONE LUMP SUM. MODAL PAYMENTS NOT AVAILABLE.
(1) INITIAL PREMIUM AMOUNT: SHOW AMOUNT OF INITIAL PREMIUM THAT WILL BE PAID FOR THIS INSURANCE
$25,000
(2) PREMIUM ENCLOSED WITH APPLICATION: INDICATE AMOUNT, IF NONE, WRITE "NONE".
NONE
PAYMENT METHOD
<S> <C>
Check X CMA Insurance Service
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ADDITIONAL PREMIUM
SECTION 8 - OPTIONAL
Additional premiums are optional and may be made for any duration or frequency desired after the end of the free-look period.
Complete this section if the owner elects to receive reminder notices for additional premiums to be paid by check or for CMA to
authorize an automatic debit to the CMA Account. Specify the premium amount, and the duration and frequency for the reminder
notice. Merrill Lynch Life Insurance Company ("Merrill Lynch Life") reserves the right to refuse any additional premium that would
cause the contract to fail to qualify as life insurance under federal tax law, cause the contract to become a Modified Endowment
Contract without your consent, or cause the guarantee period to exceed the life of the insured or younger insured for joint life
policies.
<S> <C> <C> <C>
ADDITIONAL PREMIUM DURATION (YEARS) AMOUNT OF ADDITIONAL PREMIUM FREQUENCY METHOD OF PAYMENT
Annual Quarterly Check CMA Insurance Service
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SECTION 9 - INITIAL ALLOCATION
<S> <C>
Allocation of initial investment base is limited to the money market portfolio as described in the prospectus.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
PREALLOCATION
SECTION 10 - OPTIONAL (IF AVAILABLE ON PLAN APPLIED FOR)
A1000 SPECIMEN NEW 11/92
<PAGE> 3
<TABLE>
<CAPTION>
Note: Investment Division Name Show the amount in dollars or percentages
(in whole numbers)
<S> <C> <C>
Use this section of the _____________________________ _________% or $__________________________
application to indicate the
desired investment divisions to _____________________________ _________% $__________________________
which Merrill Lynch Life should
allocate the owner's funds. If _____________________________ _________% $__________________________
there are no instructions provided
here, the owner's funds will remain _____________________________ _________% $__________________________
in the money market investment
division. It will the owner's _____________________________ _________% $__________________________
responsibility to allocate the funds
either in writing or by phone.
100% or $__________________________
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
SECTION 11 - COMPLETE IN ALL CASES:
Change to existing policy: #_______________________ Change in Death Benefit Option
X New Application Exercise of Policy Split Rider Option Other_________________________
Change in Additional Insurance Rider, Specify Amount $_____
<S> <C> <C>
Proposed Insured Proposed Insured
Number 1 Number 2
1. Build. (Height/Weight) Proposed Insured Number 1: 5ft.11ins./185lbs.
Proposed Insured Number 2: 5 ft.4ins./125lbs.
2. Occupation Duties. Is the proposed insured now performing his or her
usual occupational duties (or usual daily duties if student, homemaker
or retired) without any disabling impairment?
(If "NO" provide details in Section 12 - Remarks) X Yes No X Yes No
Provide details for "YES" answers to questions 3 and 4 under the Health Care
3. Health History. During the past 10 years, has the proposed insured
consulted a physician, been hospitalized, treated, advised or diagnosed
by a health professional for any heart, liver, lung or kidney trouble,
high blood pressure, stroke, diabetes, cancer, nervous or mental
disorders or any other health impairments? Yes No X Yes No X
4. During the past 10 years, has the proposed insured been hospitalized,
treated, or diagnosed by a health professional for any disorders of the
immune system including AIDS or ARC? Yes No Yes No
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HEALTH CARE PROVIDER INFORMATION If additional space is needed, use Section 12 - Remarks
Proposed
Insured No. Facility/Doctor City/State/Telephone No. Reason/Diagnosis Date
<S> <C> <C> <C> <C>
- ----------- -------------------- --------------------------------- --------------------------- -------
- ----------- -------------------- --------------------------------- --------------------------- -------
- ----------- -------------------- --------------------------------- --------------------------- -------
- ----------- -------------------- --------------------------------- --------------------------- -------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PROVIDE DETAILS FOR ALL "YES" ANSWERS TO QUESTIONS 5-14 IN SECTION 12 - REMARKS.
<S> <C> <C> <C>
5. Family History. Have any of the proposed insured's parents or siblings died Yes No X Yes No X
before the age 60 or been diagnosed before the age of 60 with coronary artery
disease?
6. Tobacco Habits. Has the proposed insured smoked cigarettes or used tobacco
in any form during the past 12 months? Yes No X Yes No X
7. Has the proposed insured ever used tobacco in any form? (If "Yes", indicate
type, frequency and date last used). Yes No X Yes No X
8. Insurance Activity. Has the proposed insured ever been refused life insurance,
been offered a modified or rated policy, or applied for or received disability
benefits from any source? Yes No X Yes No X
9. Does the proposed insured have any applications pending or any life insurance
in force with other companies? (If "Yes", list companies, amounts and dates.) Yes No X Yes No X
10. Will this policy replace or change an existing insurance policy or annuity?
(If "Yes", list all companies and policy numbers). Yes No X Yes No X
11. Avocation/Sports. Has the proposed insured, in the past 2 years engaged in,
or expect to engage in, hang gliding, sky diving, scuba or skin diving, motor
vehicle racing or any other hazardous sports/activities? Yes No X Yes No X
12. Aviation. During the past 2 years has the proposed insured flown or does
the proposed insured expect to fly other than as a passenger on a regularly
scheduled airline? (If "Yes", complete the Aviation questionnaire) Yes No X Yes No X
13. Foreign Travel/Residence. Does proposed insured currently travel or reside,
or expect to travel or reside outside the United States (other than Canada)? Yes No X Yes No X
</TABLE>
A1000 SPECIMEN NEW 11/92
<PAGE> 4
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
14. Driving. During the past 3 years, has the proposed insured been convicted of
any moving violations or has the proposed insured ever had a driver's license
suspended or revoked or been convicted of driving while impaired or intoxicated? Yes No X Yes No X
Driver's License Number(s):
Proposed Insured Number 1: R1234-55737-3546 State USA____
Proposed Insured Number 2: R1234-66356-7891 State USA____
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
REMARKS
SECTION 12 - DETAILS FOR "NO" ANSWER TO QUESTION 2; "YES" ANSWERS TO QUESTIONS 5-14.
Proposed
Insured Number Question Number Details (include dates) If additional space is needed, use Section 16-Additional
Information
<S> <C>
- -------------- -------------- --------------------------------------------------------------------------------
- -------------- -------------- --------------------------------------------------------------------------------
- -------------- -------------- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
SECTION 13 - SUITABILITY, AGREEMENT AND AUTHORIZATION
SUITABILITY
By signing below, the applicant acknowledges receipt of the appropriate
prospectus and understands that the death benefit under the policy may increase
or decrease depending upon the investment results of the policy, but will never
be less than the face amount. The duration for which a policy is in effect may
depend on the investment results of the policy, but will never be less than the
Guarantee Period. The policy's cash surrender value may increase or decrease on
any day depending upon the investment results. No minimum cash surrender value
is guaranteed. The policy is a long-term commitment to meet insurance needs and
financial goals.
AGREEMENT
You agree that to the best of your knowledge and belief, all statements and
answers in the application are complete and true and may be relied upon in
determining whether to issue the policy. The application will form a part of
any policy to be issued, and no medical examiner or registered representative
has authority to modify this agreement or waive any of Merrill Lynch Life's
rights or requirements. If Merrill Lynch Life makes a correction as indicated
in Section 15, it will be approved by acceptance of the policy. You also
understand that unless otherwise provided by the Temporary Insurance Agreement,
no policy will take effect unless, while the proposed insured(s) is (are)
living, the initial premium is paid, the policy is delivered to and accepted by
the owner, the answers and statements in this application continue to be
complete and true at the time of such payment and delivery, and the proposed
insureds' insurability and condition of health remains as stated in the
application. Upon request, illustration of death benefits and cash surrender
values comparing the policy applied for and a fixed life insurance policy of the
same premium will be furnished. We will furnish any information that may be
currently required by the insurance supervisory official of the jurisdiction in
which this policy is delivered.
AUTHORIZATION
I, the proposed insured, authorize any physician, hospital or other medical
practitioner or facility, insurance company, Medical Information Bureau, or any
other organization, institution or person that has any information about my
health or any non-medical information relevant to my insurability or that of my
minor children who are to be insured to release such information to Merrill
Lynch Life and its reinsurers. I authorize Merrill Lynch Life to obtain
investigative consumer reports, if appropriate. I understand that I have a
right to learn the content and receive a copy of any such report. This
authorization is valid for 2 - 1/2 years from the date signed and a photographic
copy is as valid as the original. I acknowledge receipt of the Fair Credit
Reporting Act and Medical Information Bureau Notices.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIGNATURES
SECTION 14 - COMPLETE IN ALL CASES
<S> <C> <C>
SIGNED AT: CITY STATE ON (DATE)
Anytown USA September 15,1992
<CAPTION>
Note: If owner(s) are other than either Proposed Insured(s), each owner must sign below in his/her appropriate capacity. For
multiple owners, the certifications are assumed to apply to all owners of the policy, unless otherwise specified.
Certification: Under penalties of perjury, I certify that:
1) The Social Security and/or Taxpayer Identification Number(s) displayed on the first page of this application are
correct (or I am waiting for a number to be issued to me), and
CHECK ONE:
2) X I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service
(IRS) that I am subject to backup withholding, or the IRS has notified me that I am no longer subject to backup
withholding.
3) I have been notified by the IRS that I am subject to backup withholding.
<S> <C>
PROPOSED INSURED NO. 1 PROPOSED INSURED NO. 2
(PARENT/GUARDIAN IF PROPOSED INSURED IS UNDER AGE 15) (PARENT/GUARDIAN IF PROPOSED INSURED IS UNDER AGE 15)
X Richard Roe X Jane Roe
APPLICANT/OWNER (IF OTHER THAN EITHER PROPOSED INSURED) APPLICANT/OWNER (IF OTHER THAN EITHER PROPOSED INSURED)
</TABLE>
A1000 SPECIMEN NEW 11/92
<PAGE> 5
<TABLE>
<S> <C>
X X
PRINT NAME OF FINANCIAL CONSULTANT/WITNESS SIGNATURE OF FINANCIAL CONSULTANT/WITNESS AND
SOCIAL SECURITY NUMBER
Robert Agent Robert Agent ###-##-####
- -----------------------------------------------------------------------------------------------------------------------
CORRECTIONS
SECTION 15 - HOME OFFICE USE ONLY
<CAPTION>
Minor application corrections (No change will be made in plan, benefits applied for, amount of insurance, age at issue, or
underwriting class unless agreed to in writing).
<S> <C>
_______________________________________________________________________________________________________________________
_______________________________________________________________________________________________________________________
- -----------------------------------------------------------------------------------------------------------------------
SECTION 16 - ADDITIONAL INFORMATION
_______________________________________________________________________________________________________________________
_______________________________________________________________________________________________________________________
_______________________________________________________________________________________________________________________
_______________________________________________________________________________________________________________________
_______________________________________________________________________________________________________________________
_______________________________________________________________________________________________________________________
_______________________________________________________________________________________________________________________
_______________________________________________________________________________________________________________________
_______________________________________________________________________________________________________________________
_______________________________________________________________________________________________________________________
______________________________________________________________________________________________________________________
</TABLE>
A1000 SPECIMEN NEW 11/92
<PAGE> 1
<TABLE>
<S> <C> <C>
EXHIBIT 1.A.(10)(a)(3)
Life Insurance Application
Part 1
Use this form when applying for or requesting a
change to Merrill LynchFunds
- Investor Life-SM
- Investor Life Plus-SM
- Estate Investor I-SM
- Estate Investor II-SM
- --------------------------------------------------------------------------------------------------------------------------
In the questions below, the Merrill Lynch account number Policy Number
terms YOU and YOUR refer to the 0000 1234
policy owner. The instructions
following the question in each
section apply to the Financial
Consultant/Agent. The terms WE, IF YOU ARE REQUESTING A CHANGE TO YOUR EXISTING POLICY, PLEASE SKIP TO
OUR and US refer to Merrill SECTION 14.
Lynch Life Insurance Company.
- --------------------------------------------------------------------------------------------------------------------------
1 WHO WILL BE INSURED BY THIS Title (Mr., Mrs., etc.) Name of Proposed Insured #1 (first, middle, last)
POLICY?
MR. RICHARD ROE
Permanent residence address (street name and number)
234 ANYSTREET
City State Zip Code Social Security Number
ANYTOWN US 01234 123-45-6789
Sex Marital status Date of birth (m/d/y) Place of birth (City, state)
M SINGLE 8/12/61 ANYWHERE, US
Employer's name and address
ACE ENGINEERING, ANYWHERE, USA
Occupation (duties) Annual income Net worth
ENGINEER $200,000 $1,000,000
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
Life Insurance Application
Part 1
- --------------------------------------------------------------------------------------------------------------------------
2 COMPLETE THIS SECTION ONLY Title (Mr., Mrs., etc.) Name of proposed Insured #2 (first, middle, last)
IF THERE IS A SECOND PERSON
TO BE INSURED BY THIS POLICY
Permanent residence address (street name and number)
City State Zip Code Social Security Number
Sex Marital Status Date of birth (m/d/y) Place of birth city,
state)
Relationship to Proposed Insured #1
Employer's name and address
Occupation (duties) Annual Income Net worth
- --------------------------------------------------------------------------------------------------------------------------
3 PLEASE TELL US WHERE AND PROPOSED INSURED #1
WHEN WE CAN CALL Home phone number Business phone number
Please be sure to indicate the (354) 888-2345 (800) 859-7609
time zone in the space provided. The most convenient place to call Best days
X BUSINESS HOME MONDAY - FRIDAY
Best times Time Zone Atlantic Eastern
9:00 - 5:00 Central Mountain Pacific
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
A1022 SPECIMEN Page 2 of 10
(NEW 09/96)
<PAGE> 3
<TABLE>
<S> <C> <C>
Life Insurance Application
Part 1
- --------------------------------------------------------------------------------------------------------------------------
4 WHO WILL OWN THE POLICY? X PROPOSED INSURED #1 TRUST
(Please check a box) PROPOSED INSURED #2 CORPORATION
If the policy has more than one BOTH, WITH RIGHT OF SURVIVORSHIP OTHER
owner, we will send the policy
information to the owner whose IF YOU CHECKED "TRUST," "CORPORATION" OR "OTHER," PLEASE COMPLETE THE FOLLOWING
address appears here. Full name of policy owner (first, middle, last)
If you wish to name a contingent Permanent residence address (street name and number)
owner, please provide details in
Section 15, Comments. City State Zip Code Telephone number
( )
Social Security or Date of birth/trust date (m/d/y)
Taxpayer ID number
Relationship to Proposed Insured #1 Relationship to Proposed Insured #2
If this is a trust-owned policy with more than one trustee, does the trust agreement give
trustees the power to act independently of each other? Yes No
- --------------------------------------------------------------------------------------------------------------------------
5 Who Will be your Primary beneficiaries
beneficiary?
Name of beneficiary Relationship to Proposed Insured #1 and #2
JANE ROE 100% MOTHER
%
Contingent beneficiaries
Relationship to Proposed Insured #1 and #2
%
- --------------------------------------------------------------------------------------------------------------------------
6 COMPLETE THIS SECTION IF YOU Merrill Lynch Funds Investor Life SM
ARE APPLYING FOR INVESTOR
LIFE
Premium amount Face amount (if specifying)
$ $
- --------------------------------------------------------------------------------------------------------------------------
7 COMPLETE THIS SECTION IF YOU Merrill Lynch Funds Investor Life Plus-SM
ARE APPLYING FOR INVESTOR
LIFE PLUS
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
A1022 SPECIMEN Page 3 of 10
(NEW 09/96)
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
Life Insurance Application
Part 1
- --------------------------------------------------------------------------------------------------------------------------
Premium amount Face amount (if specifying)
$ 2,000 $ 56,600
Number of years Payment frequency: Annually Quarterly
7 Semi- Monthly
Annually
The first annual premium must be paid in one lump sum. Future premium may be paid monthly,
quarterly, semi-annually or annually.
- --------------------------------------------------------------------------------------------------------------------------
8 COMPLETE THIS SECTION IF YOU Merrill Lynch Funds Estate Investor I-SM
ARE APPLYING FOR ESTATE Merrill Lynch Funds Estate Investor II-SM
INVESTOR I OR ESTATE
INVESTOR II Base policy face amount Initial premium
Please see the Estate Investor I Additional insurance Death benefit option (please check one)
or Estate Investor II prospectus rider (if any) $ Option 1 Option 2
to find out how to calculate the Total face amount Other benefits (please list them here)
minimum initial premium and for $
details about making additional
premium payments. Additional premium amounts Number of years
$
Payment frequency: Annually Quarterly
Semi-Annually Monthly
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
9 HOW WOULD YOU LIKE TO PAY Check
YOUR PREMIUMS? X CMA copyright Insurance Service
(Please check a box) Other (e.g., SPIAR if available or 1035 exchange, etc. Please provide details in Section
15, Comments.)
If premiums will be paid from a
CMA account that belongs to Are you paying a premium with this application? Yes X No
someone other than the owner or
the owner's spouse, please IF YES, PLEASE COMPLETE THE TEMPORARY INSURANCE AGREEMENT FOLLOWING THIS APPLICATION, AND
complete a Letter of GIVE THE ORIGINAL TO THE POLICY OWNER.
Authorization.
</TABLE>
A1022 SPECIMEN Page 4 of 10
(NEW 09/96)
<PAGE> 5
<TABLE>
<S> <C>
Life Insurance Application
Part 1
- --------------------------------------------------------------------------------------------------------------------------
10 HOW WOULD YOU LIKE US TO Investment division
INVEST YOUR PREMIUM AFTER
THE FREE LOOK PERIOD? 1. INTERMEDIATE GOVERNMENT BOND PORTFOLIO 50 %
While we are processing the 2. HIGH YIELD PORTFOLIO 50 %
application and for the free
look period, the initial premium 3. %
will be invested in the money
market investment division as 4. %
described in the prospectus.
5. %
TOTAL 100 %
- --------------------------------------------------------------------------------------------------------------------------
11 WILL THIS POLICY REPLACE OR X No - go to Section 12
CHANGE AN EXISTING LIFE
INSURANCE POLICY OR ANNUITY? Yes - please tell us the name(s) of the insured(s) and the company that issued
the policy being replaced, and complete all required replacement forms for
If you are buying this policy each insured. Complete all 1035 Exchange form requirements, if there are
using a loan from an existing any.
policy, it is considered a
replacement. Name(s) of insured(s) and company
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
12 CAN YOUR FINANCIAL Do we have your permission to accept telephone or written instructions from your Financial
CONSULTANT ACT ON YOUR Consultant on record to
BEHALF? - make reallocations X Yes No
- take out loans or make partial withdrawals on your behalf? X Yes No
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
13 CHECK A BOX TO TELL US IF X You are not, and have never been, subject to backup withholding tax.
YOU ARE SUBJECT TO BACKUP
WITHHOLDING TAX You were previously subject to backup withholding tax, but the IRS has told you that you
are no longer subject to it.
Backup withholding tax is
implemented when the Internal You have been told by the IRS that you are currently subject to backup withholding tax.
Revenue Service determines that
a taxpayer has failed to report
all interest or dividends on a
tax return.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A1022 SPECIMEN Page 5 of 10
(NEW 09/96)
<PAGE> 6
<TABLE>
<S> <C>
Life Insurance Application
Part 1
- --------------------------------------------------------------------------------------------------------------------------
14 COMPLETE THIS SECTION ONLY Exercise of Policy Split Rider Option
IF YOU ARE REQUESTING A
CHANGE TO AN EXISTING POLICY Change in Additional Insurance Rider
ALSO COMPLETE SECTIONS 15 - 17 Increase by $ _____________________ (Complete Part 2)
OF THIS APPLICATION Decrease by $ _____________________
PART 1
Change in Death Benefit Option
Change from Option 1 to 2 (Complete Part 2)
Change from Option 2 to 1
Decrease face amount of base policy by $ _______________________
A policy change may change your policy's tax status and subject it to the rules
associated with Modified Endowment Contracts ("MEC"). If the change causes your policy
to become a MEC, your Financial Consultant will contact you to discuss the change and
tell us how you wish to proceed.
Other
- ---------------------------------------------------------------------------------------------------------------------------------
15 COMMENTS
--------------------------------------------------------------------------------------------
</TABLE>
A1022 SPECIMEN Page 6 of 10
(NEW 09/96)
<PAGE> 7
<TABLE>
<S> <C>
Life Insurance Application
Part 1
- ----------------------------------------------------------------------------------------------------------------------------------
16 PLEASE READ THIS SECTION Your signature on Section 17 of this application confirms that you have read and understood
BEFORE YOU SIGN THIS FORM the following information.
Both the owner and those being SUITABILITY OF YOUR POLICY
insured by this policy must read
this section. When you buy this policy, you are making a commitment to meeting your long-term insurance
needs and financial goals. The death benefit, cash surrender value and duration of your
policy depend on the policy's investment experience and may change.
We guarantee that the death benefit of your policy will never be less than the face amount
and that the duration of the policy depend on the policy's investment experience and may
change.
We guarantee that the death benefit of your policy will never be less than the face amount
and that the duration of the policy will never be less than its Guarantee Period.
We do not guarantee a minimum cash surrender value. Your cash surrender value could be less
than the premiums you paid, even if there are no policy loans and you make no partial
withdrawals.
AGREEMENT
The information in this application is true and complete to the best of your knowledge, and
we may rely upon it when deciding whether to issue or modify the policy.
Parts 1 and 2 of this application will be included in your insurance policy. We may make a
correction to the application in the corrections section on the last page of this
application, but will not change the plan, benefits applied for, amount of insurance, age at
issue or underwriting class unless you agree to the change in writing. If there are any
changes, you approve them when you accept the policy. No other changes may be made.
Unless otherwise provided by the Temporary Insurance Agreement, you insurance policy will
take effect when you accept your policy, as long as:
- those being insured by the policy are still living
- the initial premium is paid
- the information in Parts 1 and 2 of this application continues to be true and complete
- the health of those being insured is the same as stated in the application.
If you want, we will prepare an illustration for you that compares the death benefit and
cash surrender value of this policy to a fixed life insurance policy. We will furnish any
information that may be required by the insurance supervisory official of the jurisdiction
in which the policy is delivered.
AUTHORIZATION
By signing in Section 17 below you authorize Merrill Lynch Life Insurance Company to:
- obtain information from any physician, hospital or other health care provider, insurance
company, the Medical Information Bureau, or any
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A1022 SPECIMEN Page 7 of 10
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<PAGE> 8
<TABLE>
<S> <C>
Life Insurance Application
Part 1
- ---------------------------------------------------------------------------------------------------------------------------------
PLEASE READ THIS SECTION BEFORE other organization, institution or person with records or knowledge of you or your health,
YOU SIGN THIS FORM including information that is not health-related, that might effect your insurability or the
(continued) insurability of your minor children who are to be insured by this policy.
- share that information with our reinsurers and other insurance companies to which you may
apply for life or health insurance.
- obtain consumer investigative reports, if necessary.
This authorization is valid for 2 1/2 years from the date you sign below. A photocopy of
this document is as valid as the original.
ACKNOWLEDGEMENT
By signing in Section 17 below, you also acknowledge that you have received a copy of the
prospectus, the Fair Credit Reporting Act and Medical Information Bureau notices. If you
are applying for Estate Investor I or Estate Investor II and the Accelerated Death Benefit
Rider is available in your jurisdiction, you acknowledge receipt of the disclosure statement
for the Rider.
CERTIFICATION (FOR NEW ISSUES ONLY)
YOUR SIGNATURE BELOW CONFIRMS THAT THE INFORMATION IN SECTION 13 IS TRUE.
- UNDER PENALTY OF PERJURY YOU CERTIFY THAT THE SOCIAL SECURITY AND TAXPAYER ID NUMBERS IN
SECTION 1, 2 AND 4 OF THIS APPLICATION ARE CORRECT.
- THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS
DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A1022 SPECIMEN Page 8 of 10
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<PAGE> 9
<TABLE>
<S> <C> <C>
Life Insurance Application
Part 1
- --------------------------------------------------------------------------------------------------------------------------
17 PLEASE SIGN HERE AFTER YOU PROPOSED INSURED #1 (or parent/guardian if under age 15)
HAVE READ SECTION 16
Print name Signature
If the owner is signing on RICHARD ROE RICHARD ROE
behalf of a trust or
corporation, the title must PROPOSED INSURED #2 (or parent/guardian if under age 15)
appear after the name (e.g., Print name Signature
Jane Smith, Trustee)
If there is more than one owner, POLICY OWNER (if other than above)
all must sign in this section. Print name (include title if appropriate) Signature
POLICY CO-OWNER
Print name (include title if appropriate) Signature
LICENSED COMPANY REPRESENTATIVE
(FINANCIAL CONSULTANT OR INSURANCE SPECIALIST)
Print name Signature
ROBERT AGENT ROBERT AGENT
SIGNED AT:
City State Date (m/d/y)
ANYWHERE US 11/10/93
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A1022 SPECIMEN Page 9 of 10
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<PAGE> 10
<TABLE>
<S> <C> <C>
Life Insurance Application
Part 1
- -------------------------------------------------------------------------------------------------------------------------------
18 FINANCIAL CONSULTANT/ 1. Has a current prospectus been given to the policy owner? Yes No
INSURANCE SPECIALIST REPORT
2. To the best of your knowledge, is this policy replacing
This section must be completed or changing an existing life insurance policy or
and signed by both the Financial annuity? (IF YOUR CLIENT IS BUYING THIS POLICY Yes No
Consultant and the Insurance USING A LOAN FROM AN EXISTING POLICY, IT IS CONSIDERED
Specialist before the A REPLACEMENT.)
application can be processed.
By signing below the undersigned confirm that they believe the coverage is suitable, and the
Complete this section for new values, benefits and costs of the insurance suit the objectives of the policy owner and
applications only. those being insured by this policy.
Print name of Financial Social Security Number Branch office
Consultant
ROBERT AGENT ###-##-#### HERE
Signature of Financial Consultant Date (m/d/y)
ROBERT AGENT 11/10/93
Print name of Insurance Social Security Number Branch office
Specialist
FRED GREEN ###-##-#### HERE
Signature of Insurance Specialist Date (m/d/y)
FRED GREEN 11/10/93
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FOR MERRILL LYNCH USE
ONLY
This section is for corrections.
A1022 SPECIMEN Page 10 of 10
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<PAGE> 11
AMENDMENT OF APPLICATION
MERRILL LYNCH LIFE INSURANCE COMPANY
Variable Life Service Center, P.O. Box 9025
Springfield, Massachusetts 01102-9025
I, JOHN J JONES, hereby amend my application to the Merrill Lynch Life
Insurance Company, Policy No. CM4000030, dated November 20, 1996, as follows:
- - THE CONTINGENT BENEFICIARY IS JEFFREY J JONES.
- - THE INITIAL FACE AMOUNT IS $10,060,773.00
- - THE PRIMARY OWNERS ARE JOHN J JONES, JANE J JONES.
I hereby agree that these changes shall be an amendment to and form a part
of the original application and of the Policy issued thereunder, if any, and
that they shall be binding on any person who shall have or claim any interest
under such Policy.
If, by the above amendment, I have agreed to any special restriction in the
Policy applied for in my original application, the consideration for such
agreement shall be deemed to be the issuance to me of such Policy containing
such restriction.
Dated at ANYWHERE, US this 5th day of FEBRUARY 1996
Witness ROBERT A. WITNESS JOHN J. JONES
----------------- -------------
To be signed by witness Signature of proposed insured
JANE J. JONES
-------------
Signature of policy owner, if other than the
proposed insured
50700H SPECIMEN 11/95
<PAGE> 1
EXHIBIT 1.A.(10)(b)
Variable Life Insurance Service Center
P.O. Box 9025
Springfield, MA 01102-9025
APPLICATION FOR REINSTATEMENT
This is an application to Merrill Lynch Life Insurance Company, a life
insurance company domiciled in Little Rock, Arkansas for the reinstatement of
life insurance contract number _________________ on the life of
____________________________, the Former Insured.
- --------------------------------------------------------------------------------
TERMS FOR
REINSTATEMENT Except as stated below, the Former Insured:
1. Is presently employed as a(n): ___________________
2. Is in good health.
3. Is free from all disease and deformities.
4. Has not, within the past 24 months, consulted any
physician or practitioner, been a patient in any
hospital, institution, sanitorium or suffered any
illness or bodily injury.
5. Has not applied for, or requested reinstatement of
health or life insurance since the above policy
was issued which has been declined or is now
pending.
If there are any exceptions to the above, please provide
details on the lines below:
---------------------------------------------------------------
---------------------------------------------------------------
- --------------------------------------------------------------------------------
AUTHORIZATION To help determine my insurability, I authorize:
20188 SPECIMEN REV 2/92
<PAGE> 2
- Any physician, hospital, other medical
practitioner or facility, insurance company or
the Medical Information Bureau to release to
Merrill Lynch and its reinsurers information
about my health or the health of any of my minor
children who are to be insured.
- Any employer, business associate, financial
institution, consumer reporting agency or
government unit to release to Merrill Lynch and
its reinsurers any information about my
occupation, avocation, finances, driving record,
character and reputation or that of my minor
children who are to be insured.
- Merrill Lynch to obtain investigative consumer
reports, if appropriate.
- Merrill Lynch to report information about my
insurability or that of any of my minor children to
its reinsurers and to the Medical Information
Bureau.
- --------------------------------------------------------------------------------
REINSTATEMENT SIGNATURES AUTHORIZATION:
I hereby apply for reinstatement I understand that I have the
of the above contract and agree right to learn the content
that the above statements are and receive a copy of any
true to the best of my knowledge information obtained by
and belief. Merrill Lynch pursuant to
this authorization and that a
copy of this authorization
- ---------------------------------- is as valid as the original.
Signature of Former Insured Date acknowledge receipt of the
the Fair Credit Reporting
- ---------------------------------- Act and Medical Information
Signature of Contract Owner Date Bureau Notices (located on
(If other than the Former Insured. the reverse side of this
If jointly owned, both owners must form and that this
sign.) authorization is valid for
2 1/2 years from the date
this form is signed.
20188 SPECIMEN REV 2/92
- 2 -
<PAGE> 3
--------------------------------
Former Insured Date
--------------------------------
Applicant/Owner Date
20188 SPECIMEN REV 2/92
- 3 -
<PAGE> 4
MERRILL LYNCH LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTICES TO THE PROPOSED INSURED
LEAVE THIS FORM WITH CLIENT.
- --------------------------------------------------------------------------------
MEDICAL
INFORMATION
BUREAU NOTICE Information on your insurability will be treated as
confidential. However, we may make a brief report on our
conclusions to the Medical Information Bureau, a non-profit
membership organization of life insurance companies, which
operates an information exchange on behalf of its members. If
you apply to another Bureau member company for life or health
insurance coverage, or submit a claim for benefits to such
company, that company may request the Bureau to provide
information in your file. If you ask, the Bureau will provide
your physician with any information it has on you. If you
believe the information is inaccurate, you may contact the
bureau and seek a correction in accordance with procedures
similar to those set forth in the Federal Fair Credit
Reporting Act. The address of the Bureau's information office
is Post Office Box 105, Essex Station, Boston, MA 02112. The
telephone number is (617) 426-3660.
We may also release information in our files to our
reinsurers and to other life insurance companies to whom you
may apply for life or health insurance or to whom you may
submit a claim.
- --------------------------------------------------------------------------------
FAIR CREDIT
REPORTING ACT In connection with our underwriting of this application, we
may conduct an investigative consumer report on the proposed
insured. This report, if requested, will contain information
on your character, general reputation, personal
20188 SPECIMEN REV 2/92
- 4 -
<PAGE> 5
characteristics, and mode of living. This information may be
obtained through personal interviews with you, your neighbors,
friends and acquaintances, or through telephone interviews
with you or a member of your household. You may ask to be
interviewed in connection with this report.
Any information obtained in this report would be for business
purposes only. No information will be revealed to any person
contacted for the purpose of completing the report. You may
request and receive a copy of this investigative consumer
report. If you would like additional information on the
nature and extent of the investigation, we will be pleased to
provide it to you. Send your written request to Merrill
Lynch's Variable Life Service Center, P.O. Box 9025,
Springfield, MA 01102-9025.
Please be sure to include your full name, date of birth and
any applicable policy numbers.
- --------------------------------------------------------------------------------
AUTHORIZATION
BY PROPOSED
INSURED IN SIGNING THE APPLICATION, YOU'VE AUTHORIZED THE
FOLLOWING TO HELP DETERMINE INSURABILITY:
- any physician, hospital, other medical practitioner
or facility, insurance company and the Medical
Information Bureau (see Notice above) to release to
Merrill Lynch and its reinsurers information about
your health or the health of any of your minor
children who are to be insured;
- any employer, business associate, financial
institution, consumer reporting agency, government
unit, and the Medical Information Bureau (see Notice
above) to release to Merrill Lynch and its reinsurers
information about your occupation, avocation,
finances, driving record, character and reputation or
that of your minor children who are to be insured;
20188 SPECIMEN REV 2/92
- 5 -
<PAGE> 6
- Merrill Lynch to obtain investigative consumer
reports, if appropriate; and
- Merrill Lynch to report information about the
insurability of you or any of your minor children to
its reinsurers and to the Medical Information Bureau,
as described in the statement of Merrill Lynch's
underwriting procedures (see Notice above).
You understand that you have the right to learn the
content and receive a copy of any such report. You
agree that a photographic copy of the authorization
is as valid as the original. You acknowledge receipt
of the Fair Credit Reporting Act and Medical
Information Bureau Notices. You agree the
authorization is valid for two and one half years
from the date the application was signed.
20188 SPECIMEN REV 2/92
- 6 -
<PAGE> 1
EXHIBIT 1.A. (11)(d)
SUPPLEMENT TO MERRILL LYNCH LIFE INSURANCE COMPANY'S
ISSUANCE, TRANSFER AND REDEMPTION PROCEDURES
FOR POLICIES PURSUANT TO RULE 6e-2(b)(12)(ii) AND RULE 6e-3(T)(b)(12)
This document supplements the administrative procedures
that will be followed by Merrill Lynch Life Insurance Company ("Merrill Lynch")
in connection with the issuance of variable life insurance policies (the
"Policies") issued through the Merrill Lynch Variable Life Separate Account or
the Merrill Lynch Life Variable Life Separate Account II (the "Accounts"), the
transfer of assets held under the Policies, and the redemption by owners of
their interests in the Policies.
A. Premium Processing (File Nos. 33-41829 and 33-41830)
Planned payments received on the day prior to a due date
will be credited on the due date to facilitate compliance with the 7-pay test;
planned payments received more than twenty-four hours prior to a due date will
be returned to the contract owner with instructions for timing planned payments
to facilitate compliance with the 7-pay test. This delay in crediting planned
premiums is intended to ensure that the 7-pay test continues to be met by
contracts that are not classified as modified endowment contracts under Section
7702A of the Internal Revenue Code of 1986 (the "Code"); premature crediting of
planned premiums may jeopardize the status of a contract under Section 7702 of
the Code.
B. Payment of Death Benefits (File Nos. 33-41829, 33-41830, 33-55678,
33-55472, 33-43057, and 33-43058)
When Merrill Lynch Life is first provided reliable
notification of the insured's death by a representative of the owner or the
insured (including a Merrill Lynch Financial Consultant), investment base may
be transferred to the division investing in the Money Reserve Portfolio,
pending payment of death benefit proceeds.
<PAGE> 1
EXHIBIT 6
[MERRILL LYNCH LIFE INSURANCE COMPANY]
April 23, 1997
Board of Directors
Merrill Lynch Life Insurance Company
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Re: Merrill Lynch Variable Life Separate Account
To the Board of Directors:
This opinion is furnished in connection with the filing of Post-effective
Amendment No. 8 to the Registration Statement on Form S-6 (File No. 33-55472)
which covers premiums received under certain flexible premium joint and last
survivor variable life insurance contracts ("Contracts" or "Contract") issued by
Merrill Lynch Life Insurance Company (the "Company").
The Prospectus included in the Registration Statement describes Contracts which
are issued by the Company. The Contract forms were reviewed under my direction,
and I am familiar with the Registration Statement and exhibits thereto. In my
opinion:
1. The illustrations of death benefits, investment base, net cash surrender
values, and cash values and accumulated premiums included in the
Registration Statement for the Contract and based on the assumptions stated
in the illustrations, are consistent with the provisions of the Contract.
The rate structure of the Contract has not been designed so as to make the
relationship between premiums and benefits, as shown in the illustrations,
appear more favorable to a prospective purchaser of a Contract for the ages
and sexes shown, than to prospective purchasers of a Contract for other
ages and sex.
2. The table of illustrative cash value corridor factors included in the
"Death Benefit Proceeds" section is consistent with the provisions of the
Contract.
3. The information with respect to the Contract contained in (i) the
illustrations of the increase in guarantee period included in the
"Additional Payments" section of the Examples, (ii) the illustrations of a
decrease in guarantee period included in the "Partial Withdrawals" section
of the Examples and (iii) the illustrations of the changes in face amount
included in the "Changing the Death Benefit Option" section of the
Examples, based on the assumptions specified, are consistent with the
provisions of the Contract.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the use of my name relating to actuarial matters under the
heading "Experts" in the Prospectus.
Very truly yours,
/s/ JOSEPH E. CROWNE
Joseph E. Crowne, FSA
Senior Vice President and
Chief Financial Officer
<PAGE> 1
EXHIBIT 8(a)
[MERRILL LYNCH LIFE INSURANCE COMPANY]
CONSENT
I hereby consent to the reference to my name under the heading "Legal Matters"
in the prospectus included in Post-Effective Amendment No. 8 to the
Registration Statement on Form S-6 for certain variable life insurance
contracts issued through Merrill Lynch Variable Life Separate Account of
Merrill Lynch Life Insurance Company (File No. 33-55472).
/s/ Barry G. Skolnick
-------------------------------------------
Barry G. Skolnick, Esq.
Senior Vice President and General Counsel
April 23, 1997
<PAGE> 1
EXHIBIT 8(c)
[Letterhead]
CONSENT OF SUTHERLAND, ASBILL & BRENNAN, L.L.P.
We consent to the reference to our firm under the heading "Legal Matters" in the
prospectus included in Post-Effective Amendment No. 8 to the Registration
Statement on Form S-6 for certain variable universal life insurance contracts
issued through Merrill Lynch Variable Life Separate Account of Merrill Lynch
Life Insurance Company (File No. 33-55472). In giving this consent, we do not
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933.
/s/ Sutherland, Asbill & Brennan,
L.L.P.
SUTHERLAND, ASBILL & BRENNAN, L.L.P.
Washington, D.C.
April 23, 1997
<PAGE> 1
EXHIBIT 8(d)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 8 to Registration
Statement No. 33-55472 of Merrill Lynch Variable Life Separate Account on Form
S-6 of our reports on (i) Merrill Lynch Life Insurance Company dated February
24, 1997, and (ii) Merrill Lynch Variable Life Separate Account dated January
31, 1997, appearing in the Prospectus, which is a part of such Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.
/s/ DELOITTE & TOUCHE LLP
New York, New York
April 28, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 233,611,621
<INVESTMENTS-AT-VALUE> 250,087,525
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 250,087,525
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11,163,203
<TOTAL-LIABILITIES> 11,163,203
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 238,924,322
<DIVIDEND-INCOME> 12,043,745
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (1,780,360)
<NET-INVESTMENT-INCOME> 10,263,385
<REALIZED-GAINS-CURRENT> (45,179)
<APPREC-INCREASE-CURRENT> 8,986,838
<NET-CHANGE-FROM-OPS> 19,205,044
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 83,403,414
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
